Contribution of Expatriates to the UAE Economy - Case Study Example

Contribution of Expatriates to the UAE Economy Name Course Name and Code Instructor’s Name Date The United Arab Emirates has an open economy that has a high per capita income with a commendable annual trade surplus. The UAE is regarded as one of highly liberal countries in the Gulf and where some cultures and beliefs across the globe are tolerated. After the discovery of oil in the UAE about three decades ago, the region has experienced tremendous economic growth from an impoverished desert region to a modern state comprising of high standards of living. The oil industry triggered the influx of foreign workforce together with expatriates that now make approximately more than three quarters of UAE’s population. Currently, the UAE is undergoing rapid economic development with the focus being to develop new economic sectors including tourism, shopping, business services, real estates and commercial sales. For instance, diversifying and developing the economy of the UAE are the main national goals (Country Profile, 56). The previous incredible economic development relied on the country’s successful capability to import talents and expatriates from other countries. For instance, in 2004, expatriates constituted approximately 2.5 million of the total labour force of 2.7 million; with regard to this it evident, that the latter’s economy has been and still is highly anchored by the contribution of expatriates from other countries (Country Profile, 33). Studies have revealed that, the nationals constitute less than 10% of the employed population. However, according to the country’s profile, nationals make up an estimated 80 % of the federal and emirate-level civil service while only holding 2% of private sector jobs. The private sector is a vital driver and contributor to the UAE economic growth as it provides 52% of the jobs in the UAE (Country Profile, 101). The impact or recent changes in the UAE workforce The emiratization strategy that unveiled by the UAE government in 2007 primarily focused on creating employment opportunities for the UAE nationals thus making sure that the country’s future economic development is driven by the nationals workforce. The UAE government has since been exploring way as to how it can create employment opportunities for the nationals using various ways. In 2006 for instance, the government decreed to replace the private sector expatriates and human resource managers with UAE nationals. Further, in 2007 the government posted online new labour laws that imposed a minimum of quota of UAE nationals to be employed across the private sector (Country Profile, 98). Accordingly, due to the strong drive towards diversification and developing the UAE economy, the country came up with educational policies that aimed at creating graduates with competent skills and knowledge that would enable them to compete favourably with other students and workers across the world. For this matter, the country observed that a key policy and strategic issue for the future was the ability to educate and train emirates for positions of leadership, ownership, and employment and staffing in the new economy of the UAE (Country Profile, 23) . In this regard, the ministry of higher education and scientific research became the basis for the enrolment of Emiratis and their preparation for employment. The recognition of the importance of women participation in the workforce and the provision of a comprehensive framework to ensure highly skilled and knowledgeable females take full responsibility in maximizing economic and social development in the Gulf. For instance, the Gulf Cooperation Council (GCC) has fostered women involvement and participation in the workforce. Owing to these facts, the UAE work workforce has been significantly integrated to comprise of both nationals and expatriates with women making a substantial percentage. Consequently, expatriates percentage working in UAE is gradually being reduced as their employment posts are constantly being taken up by the nationals. Further, nationals are being favoured for new emerging employment opportunities. Positive impact of changes in the workforce on the UAE labour force Improved technological policies that were implemented by the UAE government culminated into production of national workforce that is highly skilled and knowledgeable. These graduates both male and female are currently working hand in hand with expatriates to persistently increase the economic growth of the country. The GCC has also encouraged gender equality in the workforce; women comprise approximately 30% of the UAE current workforce. Consequently, these changes will foster future economic growth of the UAE (Country Profile, 66). E-government and its impact on the UAE economy Diversification from oil-based economy to non-oil sectors has culminated into increased economic development in the UAE. UAE economic report of 2009 revealed that the non-oil sector contributed 71.6% of the country’s GDP (Country Profile, 112). The country is heavily investing in adopting and implementing Information Communication Technology (ICT) in both the government and its private sectors. Currently, it has been established that UAE is leading the gulf region in liberating ICT for increased economic diversification and competitiveness. The Dubai Internet City (DIC) has made Dubai the regional centre for e-commerce as it has attracted major global telecommunication firms. The DIC readily offers incentives to companies located within its environs including 100% foreign ownership rights, tax-free corporate earning, exemption from custom duties, and full rights to repatriate profits (Country Profile, 115). The www.government.ae is the official portal of the UAE government. This portal’s main objective is to provide enhanced online services to the people of the UAE while also involving them in government’s policies, laws, together with public interest initiatives in order to achieve transparency and accountability. The e-government has made it possible for e-services, m-services, and e-participation for UAE citizens. Consequently, through Open Data relevant information is made available to the public where they can access to economic data, and population statistics. This information is of benefit to students, economist and researchers (Country Profile, 117). The current importance of e-government in cutting operating costs From the above discussion, we have established that e-government has increased the avenues through which UAE citizens and the world at large can access information that is essential in making day today decisions. Accordingly, e-government/e-commerce reduces the operating costs of governments and business organizations at large. In this regard, inventory management costs are reduced through e-commerce as the latter replaces the manual business process with automated electronic equivalents that are essential in accelerating ordering, delivery, and payment procedures. Consequently, e-commerce has made it possible for organization to reach global markets something that would have been otherwise difficult. Further, labour costs are reduced; automated order tracking and billing systems cut additional costs; also, if the products or services can be downloaded then distribution costs are abolished significantly. The latter also reduces the advertisement and promotional costs as it easier to update an advertisement using software technology than printing. Contribution of E-commerce to UAE GDP E-commerce has and still is playing a significant role in contributing to the UAE’s Gross Domestic Product (GDP). Following the diversification from an oil-based economy to non-oil sectors has led to significant growth in the country’s GDP. Sectors that are highly facilitated by e-commerce like manufacturing, commerce and hotels, real estate, construction, transportation and finance and insurance have been found to contribute substantially to the overall UAE’s GDP. These sectors’ developments have been necessitated by the free trade zones. According to the United Arab Emirates Economic Sectors, the identified sectors contributes as follows manufacturing 12.6%, Commerce and Hotels 11.4%, Real Estate 9.1 %, construction 8.6%, transportation 7.3%, and finance and insurance 6.4% (Country Profile, 119). The high-profile technology firms have been attracted to the emirates internet city including Microsoft, Oracle, Hewlett Packard, and Cisco systems have made e-commerce a pillar to the regions general economic development. The effect of e-commerce to the aggregate supply Parameters of technology, labour, physical capital, Human capital and natural resources Aggregate supply measures the total volume of goods and services produced within an economy at a given price level; in this case it represents the ability of an economy to produce goods and services either in short-term or long-term. As earlier observed, e-commerce increases productivity and the general efficiency in the stock of capital and labour resources thus improving the aggregate supply (William & Alan 197). For this matter, e-commerce encourages the use of IT in the overall business and government operations. With regard to this, the labour supply is highly expanded thus encouraging more people to join the labour force hence becoming more economically active. It is also essential to note that, the latter also expands the capital stock where by there is an increased level of capital investment and research and development spend by firms (William & Alan, 200). Consequently, it increases the productivity of labour and capital; for instance by investing in training of the labour force and improvement in the quality of management and human resource management. The effect of e-government on investment in UAE E-government /e-commerce have transformed the way business is done within the emirates. In this regard, the latter has encouraged the country to diversify from an oil-based economy to other non-oil sectors by investing in tourism, building and construction, hospitality, finance and insurance and other more profitable sectors (Country Profile, 123). E-government has enhanced transparency, inclusiveness, and accountability both in the public and private sectors. Owing to this, UAE is viewed to offer investment opportunities by both regional and international firms. Foreign investment is largely observed in energy, infrastructure, and hospitality sectors. Accordingly, the latter has also encouraged foreign direct investment; the Dubai Internet City for instance, firms like Microsoft, Cisco systems, and Oracle has directly invested their resources (Country Profile, 126). The effect of e-commerce on employment in UAE Electronic commerce together with the internet in governments and private sectors are posed to stimulated trade and economic development by lowering costs of gathering and generating information, creating global access to specific goods and services, and enabling virtual transactions. E-commerce directly and indirectly creates jobs thus increasing employment opportunities (Al-Maolla & Dong Li, 65). Direct employment can be in the new jobs generated in the information and communication technologies sector while indirect jobs occur through increased demand and productivity. UAE e-government/e-commerce has significantly increased employment opportunities in the country. The effect of e-commerce on the UAE monetary policy Through e-commerce, various technological innovations have come into play particularly in the retail payments. E-money; the banking industry across the world has increased the use of pre-paid card, e-purse, and e-wires of money orders, e-banking, and e-loans (Al-Maolla & Dong Li, 77). These innovations have substantially enhanced retail transactions making it cheaper for consumers and merchants. Regardless of this improved efficiency in customer transactions, they also raise a number of policy issues for central banks due to the possible implications for central bank and monetary policy coupled with its general interest in the payment systems. It has been established that if electronic money is issued via conversion of banknotes or sight deposits it does not change the money supply and price stability (Al-Laham & Al-Tarawneh 47). However, if it is issued because of credit the private issuers earn incentives by supplying additional amount of electronic money given that the difference between the interests charged on credit and the one paid on electronic money covers the credit risk premium, provision of payment services, and the cost of refinancing (Tak 80). This has an implication of lowering interest rates that could eventually endanger the maintenance of price stability. Fiscal policy effect on the e-commerce Fiscal policy is generally the use of government expenditure and taxation to influence the level of economic activity; it is reducing the levels of direct or indirect tax and increasing government expenditure (Tak 85). The UAE fiscal policy is a favourable one; for instance, the government has encouraged huge spending to boost the economy. The huge investment in the telecommunication sector has significantly accelerated the overall economic growth. The telecommunication sector has made e-commerce/e-government a success (Tak 67). The influence of e-commerce on UAE trade balance Trade balance is the difference between the monetary value of exports and imports in an economy over a given period of time (Trading Economics, 5). Trade surplus is the positive balance of trade, which is means that the country is exporting more than it is importing. The trade balance forms part of current account that includes income from internationals investment as well as international aid. In the advent of e-commerce in the UAE, the economy has been diversified and the country has since been experiencing trade surpluses (Trading Economics, 7). The UAE has become less dependent on natural resource as the main source of revenue; however, petroleum and gas exports still contribute significantly to the country’s economy. In essence, trade balance is the difference between the country’s output and its domestic demand. Works Cited Al-Laham M. and Al-Tarawneh H. Development of Electronic Money and Its Impact on the Central Bank Role and Monetary Policy. Retrieved on 16/1/2012, from http://iisit.org/Vol6/IISITv6p339-349Al-Laham589.pdf Al-Moalla A. and Dong Li. Organisational Issues with Electronic Government Procurement: A Case Study of the UAE. Retrieved on 16/1/2012, from http://www.ejisdc.org/ojs2/index.php/ejisdc/article/viewFile/669/316 Country Profile: United Arab Emirates (UAE) Library of Congress – Federal Research Division, 2007. Keith T. Economic Terms. Retrieved on 16/1/2012, from http://www.economywatch.com/indianeconomy/glossary-of-economic-terms.html Tak, S-H. A study on the effects of the development of electronic money on monetary policy in Korea: Economic Papers. Seoul: Bank of Korea, 2002. Trading Economics. United Arab Emirates Balance of Trade. Retrieved on 16/1/2012, from http://www.tradingeconomics.com/united-arab-emirates/balance-of-trade William Baumol, and Alan Blinder. Macroeconomics: Principles and Policy. London: Cegage Learning, 2011. Read More