Past Present And Future Of Dubais Economy Economics Essay
United Arab Emirates is a very important country of Southwest Asia. The official language of UAE is Arabic. It is formed with seven states. They are Dubai, Abu Dhabi, Ajman, Fujairah, Sharjah, Ras al-Kahimah and Umm al-Quwain. Abu Dhabi is the is the largest city as well as the capital of UAE. Dubai is one of the largest cities of UAE. At the start there were only five emirates that formed United Arab Emirates. Later two other states joined and UAE was formed. The country shares its borders with Persian Gulf and gulf of Oman. UAE shares its border with Saudi Arabia on west, south east and south. It also has border with Qatar and Oman. 87% of total area of UAE is covered by Abu Dhabi. Most of the country is desert. UAE has a population of 8.19 million. But it is expected to rise. Only 1.3% of the population is aged over 60. Rest are between 15 to 59 years of age.
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The current president of UAE is Khalifa bin Zayed Al Nahyan. The country follows a democratic political structure. The president of UAE is president of all the seven states. The climate of the country is very dry and hot. During the summers the temperature rises up to 48 C. the area has mountains as well as beaches. A mix of both climates. But mostly the climate is hot and it is not very pleasant.
The country operates mainly on oil but there are other factors too that contribute in its GDP. The GDP of the country was very low in 2002. But as the country invited foreign investments the GDP growth rate increased. It was the highest in 2006 i.e. 30.68%. During 2008 when recession hit the country faced a low GDP rate of 17.8%. Since then the GDP of the country has been increasing. In 2009 the GDP of UAE was $201 billion. The UAE's economy is famous for being the fastest growing economy. The UAE was involved in export of oil from the beginning. But as the time has passed the focus of economy has shifted towards construction. The country has a very diversified economy now with different sectors contributing towards its GDP.
Dubai is one the biggest metropolitan city around the world. Also one of the largest cities of UAE. The population of Dubai is 2.2 million. Out of which 4% are Europeans and other nationalities. Whereas 65% people are Asians. Only 18% are UAE nationals and 13% are Arab expatriates.
Dubai holds a very central position in UAE. The most diversified city of UAE. The population statistics shown above are a proof of its diversity. The area of Dubai is 3900 sq.km. The local currency of Dubai is UAE dirham. The literacy rate of females is 79.8% whereas its 78.9% for males. Dubai has a total literacy rate of 79.2%. Around 185 different nationalities currently live in Dubai. The life expectancy is as high as 75 years. It is higher than most of the Arab countries. Since there is a lot of diversity therefore good services are provided to the people which increases the life expectancy. The government of Dubai has spent around $1.8 billion on healthcare. Different projects have been started to attract more foreign investment in the country. The projects related to healthcare and constructions are in high demand these days. The chart below shows the fields in which the government is investing. And those fields are health, education and income (Martin 2010).
The human development index graph shown below gives a proof of how the human development index has been improving over years. UAE has the highest among other Arab states. A rise of 0.9% occurred between 1980 and 2010. Currently UAE ranks 32 in Human development index out of 196 countries. Dubai has many of the world's tallest buildings including Burj ul Arab and Burj Dubai tower. Also Burj ul Arab is listed as a 7-star hotel. The new Metro in Dubai is also the first metro in that region (Matty & Dillon, 2007).
Economy of Dubai
The economy of Dubai is one of the fastest growing economies of the world. The economy has changed from the way it used to be. At start the economy of Dubai was focused on oil export. Most of the GDP had its contribution from selling natural resources. As the world entered the 20th century, the economy of Dubai started changing. The GDP of Dubai had a growth of 29%. That was in 2009. Since Dubai has less oil reserves as compared to the other six states therefore the head of the state of Dubai planned a Dubai vision 2010. According to this vision Dubai was going to be transformed into a global village and it did (Basit, 2010).
The investment was invited from around the world. Focus was shifted from oil to other sources of income. The image below shows the sectors that are contributing in Dubai's economy. Oil and gas sector has only 3% share. The biggest contribution in economy is from industry and manufacturing sector. Since Dubai is considered a global village therefore tourism contributes about 18% in economy. The retail sector has a 22% share whereas construction sector has a 13% share which is expected to increase in the next few years since a lot of construction has been going on.
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The hotels in Dubai are also contributing in the economy by inviting tourists from around the world. The palm islands created on the coast of Dubai are also a source of income since they are expensive and attract tourists. The Dubai government has also given thought to allowing non-UAE residents to buy property in Dubai.
When recession hit in 2008 the economy slowed down a little but recovered very fast. The graph below shows the GDP trends of Dubai. The GDP has been growing since 2005. In 2008 it stopped a little due to recession. The growth slowed down. But the trends show that GDP is expected to grow to AED 250 billion by 2012. If the trend follows the economy will face an extreme boom. Because most of the construction projects are planned to be completed by 2012. Keeping that in mind the GDP will increase and the economy will strengthen.
The tourism sector is also contributing a lot in the economy of Dubai. Every season Dubai has festivals which attract a number of tourists. The construction industry has a huge impact on Dubai's economy. During the last decade there has been all sorts of contraction in the state. During 2008 a slum came and the economy slowed down due to recession. Unemployment rate became high. People started moving out of Dubai thinking that it was the end of Dubai. In 2009 the unemployment rate was 0.8%. But this rate has further dropped in 2010. And due to the new economy and laws it is supposed to drop more (Martin , 2010).
In 2010 the inflation rate slowed down. This was seen as a positive sign since it was going to attract more competition and new businesses were willing to invest in Dubai. The inflation was 1.56% in 2009. Which compared to 12.3% in 2008 is very less. Btu as forecasted the inflation became high and increases 0.9%. Since the price of commodities increased and more transportation cost was included the inflation had to rise. Even though the prices fell in January by 0.1% but they increased in February by 0.2%. Due to this much uncertainty the inflation increased. Due to extreme unrest in the Arab countries the oil prices became high. This increased the transportation cost. The inflation can be controlled if the oil sector has less unrest. If the political situation of other Arab countries remains stable then the unemployment rate will fell and the economy will suffer less since inflation will be low and GDP contribution will become high. Soon real estate and construction sector will make Dubai's economy the fastest growing economy in the world and help contribute towards its GDP (Fattah, 2010).
The world economy changes every day. With political unrest in different countries it is hard to predict the future of any economy. The above report shows how the economy of Dubai was bad and it gradually improved itself. When recession hit the economy became slow and inflation became high. But since Dubai changed its focus from oil sector to other sectors of the economy. The economy faces a boom and falls down. The recession hit Dubai really hard. The construction and real states sectors are providing much needed help to the economy. With the Dubai coast line still under development. Once developed will contribute a lot to the GDP as well as the economy.
Dubai is looking at a very uncertain future right now. With world economy changing every day it has become hard to predict what Dubai will face in the future. A lot of criticism is in market that Dubai is focusing too much on three major sectors that are tourism, construction and housing. The last year was not a good year for Dubai. The growth slowed down so much that it became hard to keep people employed. A lot of people lost their jobs and had to move out of the country. Even though some sectors of economy are showing stability still many businesses are waiting for next year to invest in Dubai once the construction projects are completed. The reason is that economy around the world is unstable and people are scared to invest. The property is on rise these days in Dubai. In 2010 its prices dropped. At one point every week hundreds of new businesses were opening up in Dubai. When recession hit the whole scenario changed. Up till today Dubai has not been able to come back to its previous position even though it took the hard hit and survived. 2010 will bring more hopes for Dubai as new projects will be completed and there is a chance of revival for the state(Martin, 2010).
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