Analysing The Economic Profile Of Dubai Economics Essay

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Chose a country or region of the world of which you have an interest. A region can be defined as part of a larger country (e.g. Hong Kong) or as a group of countries (e.g. ASEAN). You may not choose a country or region where you originate from or currently live. Provide a basic overview of its development and current economic profile using appropriate statistics wherever possible.

The country which I have chosen for doing the analysis is "Dubai". I have selected this country because this country will fulfill the requirements of this question very well and the data relating to this country will be easily available to me.

Dubai

Overview

There is a federation of seven states in UAE named as Umm al Qaiwain, Fujairah, Ajman, Abu Dhabi, Sharjah, Dubai and Ras al Khaimah. After getting the independence from Britain these states came in to being in 1971, among all Abu Dhabi is considered as the largest state of UAE and is also the capital. The production of oil was first discovered in United Arab Emirates in 1966 which give a boost to the whole economy of UAE. (TipTopJob, online)

In the North East of United Arab Emirates, Dubai located .Dubai shares economic, legal, political and military function with other emirates of UAE with a federal framework.

The largest population among all emirates is of Dubai and in area it is second largest emirate of UAE.The population of Dubai is approximately 970,000 and according to Dubai development and investment authority the population of Dubai will reach 1.4 million by 2010 (John.,2008)

According to the article 7 of UAE provisional constitution Islam is declared as the state religion of the UAE so as of Dubai. But there is also a large percentage of people belong to other religions such as Christianity, Hinduism, Sikhism and Buddhism living in Dubai. But Muslims are in majority. People from all the religions are free to follow their own religions and worship in their own private homes. Every religion is allowed to hold their religious functions freely to avoid any kind of conflicts within the society. (New World Encyclopedia, online)

Arabic is the official language of Dubai but English language is commonly used to communicate internationally. There are many other languages which are spoken by the people of the country they are Urdu, Persian, Hindi, Malayalam, Bengali, Tamil, Tagalog, and Chinese.

Dubai is truly known as a cosmopolitan country which offers a quality life to the people along with lively and modern environment. There are so many modern facilities available to the people of the country, there are modern medical facilities excellent schools, colleges and universities and great entertainment and shopping opportunities. There held an international shopping festival in Dubai which capture so much international attention and made the good international repute. People from different countries come for attending that shopping festival held in the country. (Scribd, online)

Dubai is also planning to develop a hub for service industries which includes finance and IT industry and establish the industry specific free zones through out the country. If this planning got successful with in the defined time period then it will bring so much improvement in the finance and information sector of the country. (Dubai Property Real Estate , online)

"Dubai has been ruled by the Al Maktoum dynasty since 1833. Its current ruler, Mohammed bin Rashid Al Maktoum, is also the Prime Minister and Vice-President of the UAE".The government of the country operates with in the constitutional monarchy framework. (Zimbio., 2008)

The country is also very famous for the organizing the sports functions of a very good level .People from all over the world came to Dubai to take part in those competitions.

Dubai is also famous for mega construction programs. For diversification of Dubai economy, the government wants the construction sector of the country to grow more. It will not be wrong to say that the construction in UAE as well as in Dubai is much faster than the western countries. This high speed of construction is due to the low wage workers employed from Asian sub continent by Dubai who works up to twelve hours a day and work six or seven days a week. (Johann., 2009)

The economy of Dubai is heavily dependent upon oil and its main revenues come from oil but the government doesn't want that their economy only remain dependent upon oil because it is largely believed that the oil reserves of Dubai will become exhausted till the end of 2010.That is why the Dubai government has diversified its economy to attract revenues in the form of expanding commercial and corporate activity. (DubaiLime,2010)

Due to the rapid improvement in the construction plans of Dubai the percentage of tourism in the country also increases because the government is making very new attractive shopping malls, parks, hotels, restaurants, stadiums and resorts to attract more and more tourists to their country. But the basic plan behind all this planning is to reduce the dependency of economy on the revenues of oil. Because the government is scared that if it doesn't develop other sectors of the country and the revenues from oil also goes down then there will become a very critical situation for the country to face. (Colin. et al., 2007)

The Dubai International airport is the busiest airport of Middle East and known as the one of the fastest growing airport in the world .It caters a large percentage of people currently but every number of passengers increased which are catered in Dubai International airport. It is predicted that Dubai airport will cater up to 30 million people in it till the end of 2010.There is no shortage of investment for Dubai airport that is why they have the plans to have a total passenger handling capacity of 45 million by 2018. (Dubai Property Real Estate , online)

"The country has a sub-tropical climate with mild temperate winters and very hot summers. There is very little rainfall, even in the winter months". People have to wait very long for the rainfall. In short we can say that the country has most of the time hot season. There are hot sunny days through out the year and in summers it has a high temperature up to 40 °C and overnight lows around 30 °C.

Provide a set of scenarios for the future development or your chosen country or region. These should follow the criteria for good scenarios outlined in the course and must be believable in their context.

The scenarios which I will discuss for the future development of Dubai are listed below:

Global Recession

Solar energy Consumption

Change in investment trends

Islamic Financial Banks

Global Recession

As recession has a very bad effect on the world's economy and the recession can be best defined as the global recession. Like many other countries Dubai also become the target of the recession and its whole economy slowed down because of that. Currently Dubai is not that much affected from recession if we compared it with many other countries but the recession will influence the economy of Dubai very badly when the foreign investors in western countries face problems because of recession. Even in the recent time many foreign investors stopped investing because they feel difficulty in that and they are not sure of the amount of profit they can earn from a specific investment. Due to increasing uncertainty in the international markets the investors start becoming scared of making any short term and long term investments. (Martin., 2009)

The economy of Dubai is also facing several problems due to global financial crisis which cause a deficit in liquidity. Due to the short fall in liquidity the private investment sector also got affected very badly. Each sector of the country is facing so many problems due to global recession and financial crisis. A percentage of revenues of the country come from tourism and property but unfortunately the progress of both of these sectors stopped down because of these crisis. The construction sector of the country also faces many difficulties due to the lack of foreign investments. The ratio of foreign investment in the private property and country development plans also goes down which reduces the revenues of the country generated from the revenues of property. (Rivlin., 2009)

The number of tourists coming in Dubai also reduces because people don't feel comfortable to go to other countries while the economical condition of their own countries are not that much good.

An article in the Wall Street Journal in October 2009 reported that "Dubai's economy, heavily dependent on real estate where prices have fallen 50% in a year, has been badly hit by the global financial crisis, unlike its wealthier neighboring emirate, Abu Dhabi. Dubai has $50 billion of debt coming due in the next three years, according to Standard & Poors. But its total debts are estimated to exceed $80 billion" (Chip.,2009)

For overcoming this problem the government is injecting cash deficit in the economy because the whole economy is badly affected from the global recession. This injection of money in the economy will help the economy to come out of the effects of recession and problems caused due to financial crisis. But as I have discussed above that global recession effect many different sectors of the country so will it be helpful for the economy to grow again because of that injected cash deficit. (Paul.,2009)

Dubai is also planning to increase the foreign investment in the country by introducing unified free hold visas to the foreign investors. Such visas will help the foreign investors to visit the country easily and make investments where ever they want. By introducing such visas the foreign relations of the country also become better.

Abu Dhabi which is the largest and the wealthiest country of UAE is willing to help Dubai to get out from the effects of recession and is ready to make investments in it but if at one side it seems like Abu Dhabi is trying to help Dubai but on the other side there are also chances that the Abu Dhabi wants to take advantage from the current situation of Dubai and make investments just to become the leader of the whole region. (Vincent.,2009)

Solar Energy Consumption

As I have mentioned above that it has been predicted that the major oil reserves will exhausted till the end of 2010 but still the country have some of their oil reserves. The country understands very well that the fossil fuels reserves may not last for ever so they start consuming solar energy because in Dubai there are 300 days of sun on average so it is not difficult for the people to get solar energy. Solar power is comparatively so much cheap from fossil fuels and if we talk about Dubai then it is an ideal country to utilize solar energy because majority of days in the country is of sun.( Kearney., nd)

As the country is recently facing Global financial crisis so in such situation solar energy consumption helps the economy to grow because it is quite cheaper and it also reduces energy cost.

Dubai is the only country all over the world which is utilizing solar energy very well and it reduces over all energy cost of the country. Renewable energy is the best alternative energy and also considered as the cleanest source of energy. "While solar power links in remote desert regions have increased the coverage area of mobile phones, the use of solar power in telecommunications has reduced over 260 tones of carbon dioxide emissions each year as well". Because of solar energy the foreign investments again start up to some extent because foreign investors find these solar energy projects very profitable and they make long term investments on that. (Maurice., 2009)

Solar energy projects and usage also attracts the tourists and the tourism sector of the country also improved up to some extent. And as the tourism sector improved and more and more tourists come in to the country then the foreign investment will definitely increases. (Maurice., 2009)

Solar energy is using in many different areas of the country like there are some hotels in which whole heating system is based upon the solar energy. Solar energy is also using in cars as well as in parking meters. People feel some difficulties while they moved from oil to gas but adopting the use of solar energy is quite easy for them. The scientists are still working on utilization of solar energy and there is also a university in the country which only works on renewable energy development. It has been forecasted that till 2050, the energy needs of half of the UAE will cover my renewable energy which is also considered as the cleanest source of getting energy. (Maurice., 2009)

"Dubai hopes to become a sustainable building pioneer, and has started incorporating green building practices into various new development projects since the beginning of 2008". Dubai is also planning to build biggest solar energy plant which is expected to start producing energy in the last quarter of 2010 and will manufacture photovoltaic panels that can generate 130 megawatts of power annually. (Green.,2008)

So after discussing the progress of Dubai in efficient consumption of solar energy and looking at its future plans ,it will not wrong to say that the solar energy contribute a lot in taking the whole economy on its original track and helped it a lot to grow again. (Meena., 2009)

Change in Investment Trends

As Dubai economy is largely dependent on its oil revenues but it is predicted that its major crude oil reserves will get exhausted till the end of 2010.So the country didn't let its whole economy slowed down if the oil reserves got exhausted .They start investing in their tourism and construction sector.

The country started and planned to start some very mega construction programs .The made huge shopping malls, parks, five stars and seven stars hotels and huge buildings. Recently on 4th January 2010, Dubai launches its highest building consist of 200 storey .It is the tallest building of the world and the country invested a huge amount of money on it. This tallest building of the world attracted the attention of so many foreign investors and also gets the foreign investment too. (RTE., 2010)

So the country is currently improving its construction sectors which will also attract the tourists towards the country. As the tourists sectors get improved then the country will get a major part of its revenues from this sector. The foreign investors also get attracted from these sectors and they also made huge investments in them.

There are many chances that the construction and tourism sector will bring improvements in the economical condition of the country and will help the economy to come out of the effects of global recession. But it has been predicted that this sector will still take a lot of time to get properly develop.

Islamic Financial Banks

There has been a conversion from the western banking system to financial banking system in Dubai. Being a Muslim country there is a trend of Islamic financial banking system in Dubai and and the over all banking of the country is based upon the Islamic system. The main aim behind this Islamic baking system in Dubai is to provide justice and to stop any unfair activity in the country. There was a time when there were western banks in the country but due to some solid grounds there bring a shift from the western banking system to the Islamic banking system. Mainly the banking sector of Dubai boost up because of these four banks named as Dubai Islamic Bank (DIB), Dubai Bank, Emirates Islamic Bank (EIB) and Noor Islamic Bank (NIB).These four are the main Islamic banks which brings a twist in the banking sector of the country (Islamic Bank, 2009 )

Islamic banking bring so many benefits for the Muslims and non Muslim bank customers .Islamic banking is also a way to develop a Islamic culture in the country so that the whole culture reflects the Islamic teachings. Muslims and non Muslims customers, both of them are dealt very ethically. Islamic banking brings a change in the culture of the country. Few years back all the organizations in the country are just concentrated on profit generation but now Islamic banking bring a concept that businesses are ultimately done for profit generation but ethics should also be considered in businesses. Due to this banking system the investors are not scared of making investments they feel safe in investing in the country.

The Islamic banking also attracts foreign investments in the country because this banking system is also unique in nature and can attract many investors towards the country.

According to a top Shariah scholar "Dubai will soon establish the first academy in the region to teach Islamic banking" .This new institutions will back the Islamic banks and Islamic finance leaders in the country. These institute bachelors, masters and doctorate courses in Islamic finance which shows that now the country is planning to give a better standard to its Islamic banking system and will teach people about it before they enter in to that system. (Islamic Bank, 2009 )

All the investments and transactions in Dubai are done through the Islamic banking system and the finance of the country is also circulated within and outside the country through this system, this fair banking system caught the attention of many western countries and they also tried to adopt ethics in their systems.

Based on your scenarios and any further data that you see as useful highlight the critical factors in determining the future of your country or region and thereby outline the scenario that you think most likely

The scenarios which I have been discussed above are global recession, solar energy consumption, change in investment trends and boom in Islamic financial banks. All of these scenarios are on their part affecting the economy but in actual all of them are interlinked when we relate them with the economy of Dubai.

Firstly we discussed the problem of global recession and explain its effects on the Dubai economy. Because of global recession the foreign investors become hesitant in making that much investments and the economy faces many hurdles in making investments. At this time Abu Dhabi wants to make investments in Dubai to help the economy of the country to grow but if this time Dubai allows Abu Dhabi to make investments in it then there are many chances that after some years Abu Dhabi got dominated over Dubai, already it is the largest and the wealthiest state of the region .So if Dubai becomes ready to take the help from Abu Dhabi at this critical time then it will creates problems for the country in the long term. To prevent the economy from this problem government takes a step of injecting deficit cash in the economy. The decision of the government of injection of deficit cash has been take after doing proper planning. If the government injects too much money in the economy to make it stable then there are chances that the country will face inflation in the future. So one of these steps taken by the government to make the economy stable looks helpful for the economy to grow.

In the next scenario I have discussed about the increasing consumption of solar energy in the country as Dubai is the only country which consumes the solar energy very well and decreases their dependency on the fossil fuels because they realize very well that the fossil fuels reserves will not remain forever. The economy is also reducing their cost which they spent on fossil fuels in the past. And the government is still investing on this sector to make it more improved. They have made a separate university which only deals with the renewable energy and also have a plan to make a very large energy renewable plant. All this efforts made by the people and government will surely help to bring improvement in the economy.

The third scenario which we have discussed is the change in the trends of making investments. The oil reserves of the country are expected to exhaust till the last quarter on 2010 so the government start making investments in the construction and tourism sector to generate the maximum revenues out of it. They have started some very mega projects but again the problem come under this aspect is global recsession.There is very little foreign investment made in these two sectors and already the economy is short of liquid cash because the credit crunch hits the whole Dubai economy very badly. So that is why these two sectors will also take so much time to develop and its slow development will also slow down the whole economy.

The last scenario which I have discussed is the Islamic financial boom .The banking system in Dubai got a shift from Western banking system to the Islamic banking system. The Over all transactions of the country are done through these Islamic banks .These basic principle of these banks is to provide justice to both Muslims and non-Muslims and deal their customers ethically. But the non-Muslim community living in the country doesn't feel that much comfortable to become customers of Islamic financial banks that give rise to conflicts in the society. So if these conflicts rise in the country then it can become a hurdle in the progress of the country.

These all are the different scenarios but there are several assumption that whether the planning relating to all of these scenarios will actually happen or not. As far as I understand the situation of the country I feel that the increasing utilization of the solar energy will definitely bring a good change in the economy because it already help the economy to grow because it reduces the fossil fuels cost and solar energy is quite cheaper than that. The future planning about making a huge renewable energy plant will also help in utilization of more and more solar energy.

Conclusion

After discussing all the above four scenarios and their role in the development of the economy of the country I will say that all of contribution made by all of these scenarios are very useful in making the economy stable and strong .But still work is needed to be done to bring the improvement in the economical conditions of the country.

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