The UAE Economic Scenario - Report Example

Name: Course: Institution: Date: Light Rains Scenario Introduction This strategic review offers a summary of the UAE economic scenario and conditions between the year 2007 and 2025. The 2007-2013 Period At its beginning, the global market faced the global financial crisis of 2007 to 2008. The crisis led to declining financial stability across nations, especially in Europe and the UAE (Savona, Kirton and Oldani 73). This decline reduced the growth rates In the GCC countries from over 7.0 to less than 1 between 2005 and 2009 respectively. This is because, the GCC nation’s highest ratio of their incomes was through oil revenues (The Crown Center for Middle East Studies 7). This was an indication that the continued reliance on the oil industry by the nation had lasting negative implications and the potential for a collapse. At this period, the UAE applied a number of strategic approaches to safeguard its economy (Kumaraswamy 78). One, it sought to shift its focus from the Western oil industry to the Eastern and Asian markets. In this case, it allied and developed partnerships with emerging economies such as China, which was drastically developing and thus sourcing more oil form the industry. The shift to China bore fruits in this period as China exceeded the USA and other European nations in terms of overall oil exports from the MENA region by 2014. This can be illustrated in the figure below (EIA, 2013). At this period, the UAE government sought to develop supporting systems for its private sector through policies like the Abu Dhabi vision 2030. This was a strategic roadmap through which the UAE as a nation sought to grow and expand its economy (Low 142). First, it outlined the need for equitable and balanced development across the Emirates, ensuring political stability and inclusiveness among the Emirates. On the other hand, as an economic development tool, it outlined the government policies towards the creation of sustainable easy to operate in business to encourage foreign investors, as well as the liberalisation of the fiscal economy, to create market flexible and befitting strategies (Majlis 133). Thus, internally, the UAE as a nation has a clear economic, social, and political vision that ensured development and political stability within Emirates. This was achieved through the formulation of the Abu Dhabi vision 2030. The vision outlined the economic growth targets, the social justice and equality through resources distribution across the Emirates, and the governance system. However, externally, a new phenomenon was arising. A series of coordinated terrorist attacks such as the 9/11 attack on the USA, Mumbai attack among others led to the perceived risk for the ENA and GCC nations regional instability (Lansford 32). The 2014-2020 Period This is the deciding period for the UAE as a nation, a regional key player as well as an international global key player. The preceding period was characterised with the formulation of a road map to economic and social success, which are expected to be implemented at this period. First, the government initiates the financial and economic reforms. This is aimed at creating and making the UAE a global business hub (Int'L 178). As a result, as Nagraj (2015) intimated, the UAE was ranked first in the MENA region in terms of ease of doing business, as well as 31 globally. This had the resulting effect of increasing FDIs and multinational organizations into the region. The ease of doing business process, as indicated in the Abu Dhabi vision 2030 was effected through a number of policy changes. One of them was the development of a policy to avail the government services through the online platforms. In this case, at this period, the UAE government introduced online services in the market. As such, the application of new venture registration, the payment of corporate taxes among other legal requirements could be processed and acquired online (Al-Khouri 88). Consequently, the period required to start and operations a new venture was significantly reduced at this period. This is an indication that the UAE as a nation is in line to achieving its strategic sustainable development and growth map. However, indications in this period are not all clear and positive (Report: Dubai 19). First, there is still high reliance on the oil industry as the main and major contributor of the nations GDP. As statistics in 2015 indicated, the oil industry led at 38% of the overall GDP value in the market (Al-Tamimi, Alwan and Abdel Rahman 6). This is an indication of the slow progress to apply the Abu Dhabi vision 2030 towards the economic revenue generation diversification. This is a major shortfall to the future of the nation. In this regard, there is the rising risk and potential of oil prices decline into the future with potential global crisis, as well as the depletion of oil as a non-renewable energy source. Consequently, although currently developing, the system at this period remains largely unsustainable (Haouas and Heshmati 83). This is mainly due to a number of issues. On one hand, the global market is increasingly shifting towards environmental sustainability. As such, there is the emerging preference for alternative and sustainable sources of energy in the market. Hence, as the demand for the alternative sources increase, the demand for oil and its prices will decline in the future, reducing the UAE market growth potential in the future. The government resolves to counter this challenge through policies to expand its education system and the IT industry. The government is convinced that a high skilled labour force exportation and prowess in the IT industry would form its alternative revenue sources. Secondly, there is the risk that oil deposits in the UAE oil wells could decline, reducing the only major UAE income source. Finally, at this period, there is a rising challenge on domestic terrorism in the MENA and GCC region. In this case, although the UAE has developed internal control systems such as youth empowerment programs and the prohibition of radicalisation through special anti-terrorism unit, it remains in a region with increasing terrorism threats. This shakes the regional attraction as an investment hub, a trend that reduces the number of FDI and multinational ventures in the UAE region. However, the UAE government develops trade and economic based approaches to counter this challenge. This is characterised by trade expos such as the Abu Dhabi annual expo, which showcases the nation as a trade hub in the region. The 2021-2025 Period This is the actualisation period for the UAE. It is at this period that the Vision 2030 is to be achieved and its reality and effects experienced. On one hand, the UAE has succeeded in the fight against domestic terrorism through the use of inclusive social systems of governance. Under this system, the government ensures that all the social classes and the different Emirate are equally treated in governance and distribution of the national resources. This is achieved through the use of an equal representation and the adoption of rotating governance, where a new political agreement is formulated to rotate the UAE presidency across the Emirates. Due to its domestic terrorism fight success, it is the main hub and peace destination in the GCC region. It plays an active role in helping GCC partners overcome the terrorism threat through technical, tactical, and financial aid to their endeavours (Patterson 3). However, economically, this is a tough period for the nation. In this regard, oil demand continues to flatten with minimal increase as nations use alternative sources of energy such as wind, solar and nuclear energy. In order to mitigate the situation, the government introduces a 5% VAT tax on all goods sold in the UAE market as a means of raising government revenue. Moreover, it reduces subsidies offered to the citizens, as a means of reducing government expenditures. This creates a stable liberal market that competes effectively with other global markets (Alvi 39). This change causes a public uproar. There are staged mass demonstrations especially sponsored by manufactures and branding organisations in the UAE. This is supported by workers unions that see it as a potential for rising costs of living. The UAE government stands by its resolution on economic grounds, a move that creates a disjoint between the domestic business community and the government. Recommendations Based on the scenario analysis, the scenario offers strategic recommendations for policy makers; 1. Develop milestones evaluations on the Abu Dhabi vision 2030 to gauge areas of weakness that need improvements 2. Formulate a structured policy for introducing taxes. This will ensure a gradual process and reduce public resistance. 3. Ensure the passing of anti-terrorism policies in the nation. Works Cited Abu Dhabi Economic Vision 2030: Abu Dhabi Urban Planning Vision 2030. Abū Dhabi: Abu Dhabi Urban Planning Council, 2010. Print. Al-Khouri, Ali M. Critical Thoughts from a Government Mindset. , 2013. Print. Al-Tamimi, Hussein A. Hassan, Ali Abdulla Alwan, and A. A. Abdel Rahman. "Factors affecting stock prices in the UAE financial markets." Journal of Transnational Management 16.1 (2011): 3-19. Alvi, Hayat. "The diffusion of Intra-Islamic violence and terrorism: The impact of the proliferation of Salafi/Wahhabi ideologies." Middle East 18.2 (2014): 39. EIA, China Overview, 2013. Accessed at https://www.eia.gov/beta/international/analysis.cfm?iso=CHN Haouas, Ilham, and Almas Heshmati. "Can the UAE avoid the oil curse by economic diversification?." (2014). Int'L, Business P. U. United Arab Emirates Insolvency Laws and Regulations Handbook: Strategic Information. Place of publication not identified: Intl Business Pubns Usa, 2013. Print. Kumaraswamy, P R. Persian Gulf 2014: India's Relations with the Region. , 2014. Print. Lansford, Tom. 9/11 and the Wars in Afghanistan and Iraq: A Chronology and Reference Guide. Santa Barbara, Calif: ABC-CLIO, 2012. Print. Low, Linda. Abu Dhabi's Vision 2030: An Ongoing Journey of Economic Development. Singapore: World Scientific, 2012. Print. Nagraj, A., UAE ranked first in MENA for ease of doing business – World Bank, 2015. Accessed at Patterson, Molly. "The Shi’a Spring: Shi’a Resistance and the Arab Spring Movement in the GCC States." Mathal 4.1 (2015): 3. Report: Dubai 2014. S.l.: Oxford Business Group, 2014. Print. Savona, Paolo, John J. Kirton, and Chiara Oldani. Global Financial Crisis: Global Impact and Solutions. Farnham, Surrey: Ashgate, 2011. Print. The Crown Centre For Middle East Studies, The Impact of the Global Economic Crisis on Arab Countries: A Year-End Assessment; Author, 2012. Accessed at Read More