Dubai Global Economy Table of Contents Table of Contents 2 Question1 3 Source: (Vietor, R. H. K. & Forrest, N. “Dubai Global Economy”, pp. 6) 4 Question 2 4 Question 3 6 Question 4 8 Question 5 10 Question 6 12 Works Cited 13 Question1 Dubai is an autonomous city situated in the southern coastline of Persian Gulf. Dubai is the major city, principal port and industrial centre of confederacy. UAE consisted of multiple emirates, namely Abu Dhabi, Ajman, Dubai, Fujairah, and Ras al (Geospatial Media and Communications Pvt Ltd, “United Arab Emirates: Highway to sustainability”). Besides, Dubai is recognized as the most important emirate of UAE due to its leading reserves of oil and natural gas.
The nominal GDP of UAE in the year 2008 was recorded as 815,318 (mn dirham) and real GDP 453,578 (mn dirham) which depicts a sustainable growth since the year 2002. Notably, the nominal GDP of UAE in 2002 was 272,856 (mn dirham) and real GDP 269,304 (mn dirham). In addition, Dubai is also the main trading area among other emirates of UAE, which offers a significant influence on the GDP of the economy (Sementelli, A, “Toward a Taxonomy of Disaster and Crisis Theories”).
Moreover, due to emergence of free-trade zones, Dubai became one of the imperative sectors of trade for the western producers, which offered significant support for the growth of financial condition within the economy of UAE. However, due to the recession of 2009, Dubai faced substantial challenges which also affected UAE to a significant extent (refer to figure 1) (Vietor, R. H. K. & Forrest, N. “Dubai Global Economy”). Focusing on these aspects, it can be stated that Dubai is among the most important emirates and the strategies should be considered as credible being fair and constitutional. Figure 1 UAE profile (2008) Dubai Profile (2008) GDP: 84% GDP: 152% Reserves: N/A Reserves: N/A Official Reserves: 46 $ billion Official Reserves: N/A External Debt: 211 $ billion External debt: 115 $ billion Source: (Vietor, R.
H. K. & Forrest, N. “Dubai Global Economy”, pp.
6) Question 2 According to Astley (2009), the most important reason which resulted in this financial disorder was the erroneous monetary policies of the United States. The monetary policies mainly concentrated on the activities of the Central Bank or any other dictatorial authorities of the country that significantly helped in determining the extent and rate of growth of fiscal supply (Sibert, “Global Imbalances and the Financial Crisis”). Another cause for the recent financial downfall is regarded as securitization. Securitization is a fiscal procedure of pooling diverse types of contractual debts namely residential mortgages, credit card loans and commercial mortgages (Obstfeld & Rogoff, “Global Imbalances and the Financial Crisis: Products of Common Causes”).
Besides, in the United States, the financial policy was executed in order to enhance the economic growth and immovability of the country. Moreover, the United States offered high attention on short term interest rates rather than on the long term interest rates in order to attain extra benefits from the housing sector, which later proved as quite detrimental. Apart from this, another considerable factor, which led to the emergence of financial crisis, was the sudden rise of housing prices in the United States.
It is a type of economic bubble which magnetized large number of investors (Astley, M., Giese, J., Hume, M. & Kubelec, C, “Global imbalances and the financial crisis”). Notably, the prime purpose of these investors was to augment the cash flow thereby enhancing their individual profit margin which acted as a vital triggering factor in the context of the recent global turmoil. Thus, the probable reason for this fiscal bubble was the level of extreme monetary liquidity in the financial system including sloppy or lending charges which acted in an adverse way leading to global disparity (Obstfeld & Rogoff, “Global Imbalances and the Financial Crisis: Products of Common Causes”).
Therefore, the three prime reasons for the global financial crisis are the erroneous monetary policies of the United States, greater emphasis on short-term interest rates and securitisation. Furthermore, the triggering factors which strongly influenced the financial crisis can be regarded as the role played by the investors to enhance cash flow overlooking the industry perspective and focusing solely on the individual profits. Figure 2 Rate of GDP in 2009 (Financial crisis) and in 2010 (post Financial crisis) (Source: Alphadinar. com.
“Positive Economic Outlook for Qatar and Saudi”) Question 3 In this era of modernization, the countries present in the list of Gulf Cooperation Council tend to offer high prospects of business and investments, which in turn can enhance the revenue rates of these countries to a considerable extent. As a result, the economic condition of these countries has also improved leading to future developments. Thus, the prime reasons which acted as the drivers for the increment of fiscal circumstance of UAE countries can be regarded as the policies of free trade along with huge oil and natural gas reserves.
This resulted in enhancement of GDP rate to about USD 270 billion in the year 2008, which is higher as compared to other countries (Moore, “U. S.-U. A.E Business Council”). In addition, the busiest port area of UAE also served as one of the considerable factor thereby enhancing the trade relationships with the United States. Thus, UAE became one of the largest export markets for the United States in the region of Middle East which facilitated both the economies towards better development.
Hence, exports of goods to UAE economy increased to about US$ 52,199 million in the year 2002 to US$ 200,420 million in 2008, which resulted in elevated intensification for both the economies (Vietor, R. H. K. and Forrest, N, “Dubai Global Economy”). Apart from this, deregulation of laws in housing sector also attracted large number of investors resulting in decline of unemployment in UAE (IBQ, “GCC brief”). It also improved the living conditions and per capita income by enhancing its economic scenario of UAE.
Furthermore, the capital inflow of Foreign Direct Investment (FDI) into GCC countries (USD 60.1 billion in 2008) also augmented the normal and real GDP resulting in advancement in annual growth rate of these economies (Shimy, “From Free Zones to Special Economic Zones – The UAE Case Study”). Figure 3 Share of GCC FDI inflow contributions (Source: IBQ, “GCC brief”) Contradictorily, apart from these positive benefits, GCC custom unions and Pan Arab Free Trade (PAFTA) hindered the growth by declining the access to non-preferential markets.
Along with this, dearth of investment law also hampered the GDP and per capita growth of UAE (Shimy, “From Free Zones to Special Economic Zones – The UAE Case Study”).
Along with this, it also hindered the economic growth of UAE economy resulting in downfall of total revenue. It also amplified the debt margin resulting in economic crisis, which offered a substantial influence on the consumer prices lowering the rates of investments (Shimy, “From Free Zones to Special Economic Zones – The UAE Case Study”). Thus, from the above description, it can be revealed that varied economic indicators proved both advantageous as well as unfavourable for the economy of UAE. Question 4 UAE is one of the fastest developing economies in global perspective which can be illustrated from its improvement of GDP by USD 914.3 billion in the year 2009.
This resulted as UAE offered higher chances of investment in its free trade regions. Along with this, good trade relationships between the United States and UAE also offered noteworthy benefits. In addition, import and export of oil and natural gas is another remarkable factor which enhanced the economic viability of UAE and also assisted the economic factors to sustain in long run.
However, the dependency of UAE economy over crude oil and natural gas is lowering at a higher extent due to massive downturn of economic crisis. Hence, in order to retain its position globally, UAE offered higher concentration over services, consumable goods and investment sectors. As UAE is a member of GCC, it shifted its attention over telecommunication services, banking and finance, investment along with transportation in order to reduce the risks of inflation and to improve the condition of the economy (Agriculture and Agri-food Canada, “Agri-Food Trade Service).
Simultaneously, the demand for consumable goods also increased with rapid pace which improved the economic condition of UAE. Although economic tumult declined the rate of expenditure, the steady escalation of population ensured a rising trend in the rates of consumable products thereby predicting a growth overall economic development of 58 percent by the year 2015. Moreover, due to increasing rate of inhabitants, the demand is increasing at a rapid speed resulting in a growth of 9.9 percent in non-alcoholic drinks, 32.7 percent in clothing and footwear, and 37.5 percent in telecommunication services.
Moreover, due to rise in population, the eating habits also altered to a high extent causing substantial impact over the food industry of UAE resulting in rise of per capita rates as well. Apart from this, heavy dependence on cars also encouraged UAE government to invest on varied transportation infrastructures namely subways and water taxis in order to meet the growing need as can be observed from the below figures (Agriculture and Agri-food Canada, “Agri-Food Trade Service).
Thus, from the above discussion, it is confirmed that consumer goods and services sector would result in both short and term growth of UAE economy. Figure 4 Actual Expenditure (US$) and Projected Growth (%) in the U. A.E. by Products (Source: Agriculture and Agri-food Canada, “Agri-Food Trade Service”) Figure 5 U. A.E. Historic and Forecasted Per Capita Consumer Expenditure on Food (Source: Agriculture and Agri-food Canada, “Agri-Food Trade Service”) Question 5 UAE is a confederation, each federation of which is managed by a solitary president.
In addition, each of seven federations presupposes an individual leader who is in charge of that entire emirate. Thus, the leaders should comprise of all management qualities in order to control the area in a proper way. It is essential for a leader to remain in front of his/her followers in order to provide strength and motivation. Similarly in case of Dubai as well, the ruler or leader should include certain administrative dimensions namely self assurance and inner inspiration in order to encourage the supporters to admire him/her.
This would also facilitate the leader of an emirate along with his/her followers to attain the final objectives in a successful way. These dimensions would further facilitate the emirate of Dubai to retain its image as a business centre. Moreover, the leader should also embrace certain criterion also such as effective and systematic planning, unity of command, channelization of proper discipline and unity of direction in order to maintain the administration of an emirate in an appropriate way (Wren, Bedeian & Breeze, “The foundations of Henri Fayol’s administrative theory”).
All these above specified principles help in augmenting the tactfulness and perception power leading to accurate decisions. Hence, these above described principles are essential for a leader. Therefore, the statement that “A leader should lead, and be able to lead by positioning himself in front of them and not behind them” can be regarded as justifiable with the emirates point of view. Question 6 Dubai is a reputed business hub which plays a vital role as a contributor to the overall GDP growth of the emirates due to which it is essential to retain its efficacy in long run.
Hence, Dubai should follow the process of divesting along with diversification strategies (Bain & Company, “Insights”). In order to prepare a divestiture team, it is essential that the co-workers should follow apparent communication among themselves. It would result in proper sharing of knowledge and ideas leading to improvement in terms of proficiency and effectiveness in the economy of Dubai. In addition, according to Rodamas Group (2009), the team members or partners should also include proper dedication and commitment towards work and appropriate planning in order to achieve the objectives.
Furthermore, team spirit is also necessary to retain a divestiture team (Ivey Management Services, “Rodamas Group: Designing Strategies for Changing Realities in Emerging Economies”). Moreover, in order to retain its image as a leading business place, Dubai economy should also undertake varied mergers and acquisition policies with international companies (Mankins & et. al., 2008). Thus, Dubai economy should attempt to engage itself in partnerships with private sector organizations in order to enhance its profitability and GDP of the economy.
Works Cited Astley, Mark, Julia Giese, Michael Hume and Chris Kubelec. “Global imbalances and the financial crisis”. Quarterly Bulletin, 2009. Web. April 02, 2012. Alphadinar. com. “Positive Economic Outlook for Qatar and Saudi”. Economic Estimates, 2009. Web. April 02, 2012. Agriculture and Agri-food Canada. “Agri-Food Trade Service”. The United Arab Emirates Consumer Behavior, Attitudes and Perceptions toward Food Products, 2010. Web. April 02, 2012. Bain & Company. “Insights”. How the best divest, 2008. Web. April 02, 2012. Geospatial Media and Communications Pvt Ltd. “United Arab Emirates: Highway to sustainability”.
UAE real GDP growth, 2011. Web. April 02, 2012. IBQ. “GCC Brief”. GCC FDI inflows lower in 2009 but outlook remains Optimistic, 2010. Web. April 02, 2012. Ivey Management Services. “Rodamas Group: Designing Strategies for Changing Realities in Emerging Economies”. Indonesia A Promising Economy, 2009. Web. April 02, 2012. Moore, Michael. “U. S.-U. A.E Business Council”. The U. S.-U. A.E. Trade and Investment Relationship, 2009. Web. April 02, 2012. Mankins, M. C. & et. al., 2008. How the best divest. Harvard Business Review. Obstfeld, Maurice and Kenneth Rogoff. “Global Imbalances and the Financial Crisis: Products of Common Causes”.
Santabarbara, 2009. Web. April 02, 2012. Sibert, Anne. “Global Imbalances and the Financial Crisis”. Economic and Monetary Affairs, 2009. Web. April 02, 2012. Shimy, Nermine. EI. “From Free Zones to Special Economic Zones – The UAE Case Study”. The Evolution of Free Zones, 2008. Web. April 02, 2012. Sementelli, Arthur. “Toward a Taxonomy of Disaster and Crisis Theories”. Administrative Theory & Praxis, 29.4 (2007). Print. Vietor, Richard. H. K. and Forrest, Nicole. “Dubai Global Economy”. Harvard Business School, 2009. Print. Wren, D. A, Bedeian, A. G. and Breeze, J. D.
“The foundations of Henri Fayol’s administrative theory”. Management Decision, 40.9 (2002): 906-918. Print.