United Arab Emirates Investments

United Arab Emirates Investments

Institution

Name United Arab Emirates Investments

Introduction

The founder of the United Arab Emirates was His Highness Sheikh Zayed Bin Sultan Al Nahyan. He was highly respected by his people beside which he transformed his country to become one of the top countries in economic growth and development. The United Arab Emirates has been growing in terms of global importance especially due to its oil resources and economic prospects. The future prospects of the UAE economy have seen a massive attraction of foreign investors in various business sectors. This paper aims to outline the development aspects of the United Arab Emirates and the increasing importance of the country because of its economic strength. The paper will also link the growing importance to its influence on the oil sectors alongside the non-oil sectors locally and globally.

Looking at the UAE economy needs a consideration of its position in the MENA region. In the MENA region, the UAE takes the third position after Saudi Arabia and Iran. The country’s GDP reached $360 billion in 2012, it is expected to be higher in 2013 as a good trend in business, and economics remains (Forstenlechner, 2010). The country is today ranked among the fastest growing economies in the world. An evidence of this trend is the growth of the UAE GDP that reached 20.8% in 2012 making the country to attain a $360 billion mark in GDP against $298 billion in 2011.

The United Arab Emirates is increasingly breaking from its reliance on natural resources such as petroleum and natural gas. These natural resources however play a key role in the country’s economy. Cities like Abu Dhabi are marked with massive growth in both economic and infrastructure due to the intensified trade in oil and natural gas resources. The UAE is currently said to have construction projects in progress amounting to over $350 billion (Forstenlechner, 2010). Being a member of World Trade Organization plays an important role in the countries international trade and business relations.

In terms of international trade, the UAE has had increased imports especially in manufactured goods, machinery, transportations equipment, and agricultural goods. Importation industrial goods accounts for 70% of the country’s imports. The export sector is another part of the UAE international trade. A free trade zone exists in which all re-exported goods are freed from any duty. Exporting of goods and services is one other country’s alternatives of sources of revenue. Diversification is also ensured in the search of other revenue sources including tourism as well as international finances.

Development of the UAE

The UAE Domestic Development

The Abu Dhabi government has contributed much on the UAE development and economic growth. Abu Dhabi is the leading government in the UAE. Abu Dhabi initialized its own Vision 2030 under the authority of the UAE president. The Vision 2030 was developed as a way of initiating planned and organized economic growth and development projects. The recent developments have made the country emerge from its position as among the least developed countries in the world to the topmost emerging economies attracting the entire world. The country has reached to a point whereby its income level is comparable to those of developed nations. Unlike most other developed countries whose development is marked by hypothetical development stages, the UAE development abilities are linked to its rich oil and natural gas resources (Government of Abu Dhabi 2008). The revenue obtained from these natural resources is highly considered the main facilitator of economic development in the UAE.

Economic development is usually difficult and lengthy for most countries. These stages of economic development usually involve intense processes of savings as well as capital accumulation. Natural resources within the UAE made the country embrace mainly the resource-based industries as one of the key development strategies. Most of the industries were organized in such a way that they utilize the natural resources. The country also initiated strategies that would develop improvement in income as a way of boosting social welfare and development of economic infrastructure especially in Abu Dhabi (Government of Abu Dhabi 2008). The country economic development is therefore highly integrated with social, cultural, economic, as well as political contexts. Beside all these aspects of economic development, the important human factors in terms of goals, objectives, as well as sources of economic growth are interrelated.

The political context in Abu Dhabi as a government has contributed much on the UAE development. Abu Dhabi creates a center interest in the UAE development efforts since it happens to be the leading government in the UAE. Abu Dhabi has great resources and not only relies on petroleum and natural gas resources but also it relies much on the foreign sector for economic growth. Abu Dhabi has favorable conditions such as a huge shipping port that accommodates ships that would not be accommodated elsewhere in the UAE. Abu Dhabi sets its growth strategies in such a way that its foreign sector has to be advanced (Smeets and Bayar 2012). This aspect is seen through the construction of the Abu Dhabi port under the authority of Abu Dhabi government. The port development project was started in 2006 with the aim of revamping transportation as well as trade within the Abu Dhabi government. The main idea was to enhance the country’s international relations through improvement of trade by sea, by air, and by road. Other than enhancing trade and international relations, the projects was meant to create jobs

In other regions within the United Arab Emirates, oil acts as the main facilitator of economic growth and development. Before oil was discovered in the UAE, the country depended on subsistence agricultural farming, nomadic animal husbandry, as well as extraction of pearls and their trade. The UAE also had aspects of fishing and seafaring as part of its economy. There were limited natural resources until oil resources were discovered that the country broke from relying on substance economic activities to oil related industries (Smeets and Bayar 2012). Its economic development realized a significant change in the 1970s when massive oil productions began as well as an added advantage from the relatively high oil prices in the world at that time.

The development of the UAE could be associated with its high political as well as social stability. The existing political structure perfectly suits the tribal society of the country. The Emirates government ensures that there is uniform distribution of oil resources in terms of social and economic development projects and infrastructure. Equal distribution of resources was also done to ensure salary increments, provision of higher social and economic standards, and improved access to social amenities, such as health facilities and education resources as well as increased living standards (Nytimes.com 2012). The UAE has ensured that there is a high maintenance of human rights traced back to the formation of the state. Establishment of strong human rights is one of the main factors enhancing political and social stability. Political ground in relation to the social aspects of the UAE also brought a great aspect of the country’s economic growth by becoming a member of various associations that are regional and international. These associations brought in the influence of the UAE economic growth and development by the foreign community. Some of the key organizations include the Arab League, the Non-Aligned Movement, and the United Nations. Other organizations in which the UAE trade and promote its business relations include Arab Gulf Cooperation Council as well as Organization of the Islamic Conference.

Foreign Sector Participation in UAE Economic Development

The UAE has significant relations with various countries throughout the world. Many countries depend of the United Arab Emirates for its oil and natural gas resources in all continents of the world. The Western countries are the main players in that UAE international trading relations. The UAE is a politically and socially stable state and this condition calls for a relation with other countries having similar traits especially countries from the west. Western countries are socially, economically, and politically stable and have desirable and liberal trade policies that pave way to industrial development (Propertyshowrooms.com 2013).

The rich oil, natural gas, and mineral resources form a foundation for the participation of the international communities in investment projects in the UAE. Extraction of oil and natural gas was hardly possible without the help of the western technologies. In this case, signing business and contractual agreement could not be avoided given that many western countries wanted to trade with the UAE in order to benefit from the oil resources and mineral resources discovered or found in the country. The United Arab Emirate is endowed with great reserves of oil in both onshore and offshore scopes. In the production of various oil products, associated petroleum gases also happens to be products of use. These oil resources have been attracting a significant aspect of the foreign sector.

As the foreign sector grows, foreign investors bring in new technologies and production methods that are advantageous to economic development. Most of the foreign investors come to utilize the opportunities and resources available in United Arab Emirates. Besides, regional insight as well as awareness of the country’s local landscape forms grounds for attracting foreign institutions to invest in the economy (Propertyshowrooms.com 2013). This kind of landscape in the UAE was facilitated by liberalizing rules governing the foreign investment. The liberalization of the rule was meant to open the economy to as many foreign investors as possible. While foreign investors have developed great aspects in the UAE economic development, investing in the country is faced with a number of challenges.

A major challenge to foreign investors is the navigation from the country’s laws and practices. Most of the business laws favor the state nationals in pursuing business activities within the UAE economy. Some strategic sectors are also protected from invention by the foreign investors. The country’s Commercial Companies Law establish that every company that is incorporated under the law should not have less than fifty-one percent as the shares owned by the UAE nationals. This rule is however subject to certain exceptions and prevents the foreign sector from owning UAE companies at a proportion that exceeds 49% (Mellahi, 2007). The effect of restriction of owning beyond a certain percentage by the foreign sector discourages many investors from foreign countries.

While foreign investors aid in bringing in foreign currency, additional income, creation of jobs through their established foreign investments, and bringing in newer technologies, restrictions available to prevent them advancing beyond certain limits creates fear and dissatisfactions. Regional nuances are also a part of the restriction formed on UAE foreign investment. This theory brings in discriminative consideration of foreign investors whereby those foreign investors within the Gulf Cooperation Council could be termed as part of the nationals and invest under the same freedom given to the nationals (Mellahi, 2007). Tends towards liberalization happens with the UAE having to take steps in facilitating as well as attracting foreign investors in the economy. The key understanding in this case is the foreign sector on the UAE economy including provision of foreign capital, introduction of foreign technologies, and introduction of foreign labor or human capital. On the side of the foreign investors, they make use of the cheaper oil resources whose prices would be relatively low due to the exception from additional costs in shipping and duty charges.

Sustainable Energy Resources

The UAE has high availability of sustainable oil and natural gas resources from which all industries can benefits. The natural oil and gas resources are wide spread and could be found in both offshore and onshore areas within the country. Natural resource availability has seen the country emerge to be one of the top countries economically and the first country in the middle easy to establish and use nuclear energy. Establishment of nuclear energy was done under deliberate steps with the international Atomic Energy Agency (World-nuclear.org 2013). The country accepted bid from South Korea to construct four nuclear plants with the first having been started in 2012. Each one of the seven states is meant to benefit from the nuclear energy. The ambition to improve in nuclear energy is in line with full development by 2020.

To ensure that there is safety in the use of nuclear energy, members of the Gulf Cooperation Council commissioned a study to ensure the peaceful use of nuclear energy. These member states include Saudi Arabia, Bahrain, Kuwait, the UAE, Qatar, as well as Oman. France however accepted on working with the council to ensure that the UAE applied safety strategies in the use of nuclear energy (World-nuclear.org 2013). The nuclear plants are established under environmentally promising grounds to avoid excessive pollution.

To strengthen the safety concerns, license applications were done alongside environmental assessments for every preferred site. This licensing was done by Federal Authority of Nuclear Regulation (World-nuclear.org 2013). Nuclear Safety Review Board has the obligation of reviewing safety as well as the effectiveness of the nuclear plant.

Entities behind the UAE Development

The tremendous development in the UAE is initiated with a collaboration of internal factors and external factors. The issue of labor and working conditions could be marked as having a great impact on economic development. High returns by firms were sometimes back realized as workers were being exploited. Workers worked for long hour without adequate compensations. They also had poor living conditions because of the poor wages. To get a significant income, they had to work for long hours hence generation more income for the firms or companies they are employed in (Varietyarabia.com 2012). Poor working and living conditions by workers in the UAE saw negative publicity from western media. The least of the consideration in these publicities is that these workers were employing efforts that would change the UAE image forever.

Working in the nuclear plants and oil manufacturing plants is termed as difficult due to the health implications. The compensation may not be adequate for the risks involved and health degeneration. These employees however support a significant part of the UAE populations in form of the non-working family members (Varietyarabia.com 2012). The money also goes to the establishment of various projects facilitating development of economic activities in the country.

Other than workers, foreign companies and investors have contributed much to the economic growth. Foreign companies bring in new technologies, more income useful in economic development, and a source of government revenue (Forstenlechner, 2010). The development of some projects in the UAE are however possible under the support of the international community. This means that economic growth is highly linked to the international participants who also form a ready market for the country’s oil and natural gas resources.

Conclusion and Recommendations

The economic development of the UAE is analyzed in parts with the first part concerning domestic development within the recent past in the country. It is established that the development of UAE was independent to a certain extent as initiated by internal factors such as workers and natural resource. The influence and participation of the foreign sector is also found to be significant. The motivational factors of the foreign investors include the disadvantages of investing in the UAE as a foreigner (Shihab, 2010). While foreign investors are found to be attracted by the availability of natural resources and cheaper factors of production, restrictions discourage many foreign investors from entering the market.

Future trends in the foreign sector seem to be favorable as restrictions in the foreign sector are being minimized. Development of the United Arab Emirates also looks at the Countries Vision 2030 and it is important to the Emirate of Abu Dhabi government. The second section of the development is viewed from the analysis of the country’s foreign investments. In this case, the contribution of Abu Dhabi investment Authority to economic growth and its significance to the world economy happens to be a key aspect of analysis with respect to UAE economic development (Kerr, 2009).

Sustainable energy also exists in the UAE and contributes much to the economic growth. The factors making UAE become the first country to have nuclear energy and make use of the energy within the Middle East region have contributed to economic development in the UAE. For any course of development action and industrialization, consideration of safety measures should be ensured (Thenational 2009). This is especially when using nuclear energy to ensure environmental conservation as the growth of industrialization and economic growth are initiated. Incorporating these aspects of economic development with who is behind the tremendous economic growth and development in the UAE would establish the whole scope of economic development in the UAE.

Annotated bibliography

Forstenlechner. (2010). Workforce localization in emerging Gulf economies: the need to fine-tune HRM. Personnel Review Vol.39 No.1 , 135-152.

Government of Abu Dhabi (2008) the Abu Dhabi Vision 2030. [Report] Abu Dhabi:Government Printer, p.1-17.

Kerr, S. a. (2009). UAE to safeguard jobs of nationals. London: Financial Times.

Mellahi, K. (2007). The effect of regulations on HRM: private sector firms in Saudi Arabia. International Journal of Human Resource Management, Vol. 18, No.1 , 85-99.

Nytimes.com (2012) The New York Times. [Online] Available at: HYPERLINK “http://www.nytimes.com/2012/11/29/world/middleeast/a-port-to-keep-up-with-growth-in-” http://www.nytimes.com/2012/11/29/world/middleeast/a-port-to-keep-up-with-growth-in-abu-dhabi.html?_r=1& [Accessed: 16 Feb 2013].

Propertyshowrooms.com (n.d.) Why Invest In The United Arab Emirates? [Online] Available at:http://www.propertyshowrooms.com/united%20arab%20emirates/property/investent/why-invest-in-united%20arab%20emirates-property.asp [Accessed: 16 Feb 2013].

Shihab, M. (2010). ECONOMIC DEVELOPMENT IN THE UAE. UNITED ARAB EMIRATES: A NEW PERSPECTIVE , 249-260.

Smeets, B. and Bayar, A. (2012) Sustainability of economic growth in Abu Dhabi – aDynamic CGE Approach. Topics in Middle Eastern and African Economies, 14 p.1-48.

Thenational.ae (2009) Minimum standards for labour camps – The National. [Online] Available at:http://www.thenational.ae/news/uae-news/minimum-standards-for-labour-camps [Accessed: 16 Feb 2013].

Varietyarabia.com (2012) The labour camp you know a little about. [Online] Available at:http://varietyarabia.com/Docs.Viewer/77b9785a-77eb-402b-b4aa-9b7282a7dcc4/default.aspx [Accessed: 16 Feb 2013].

World-nuclear.org (n.d.) Nuclear Power United Arab Emirates | UAE Nuclear Energy | Abu Dhabi |Dubai. [Online] Available at: HYPERLINK “http://www.world-” http://www.world-nuclear.org/info/UAE_nuclear_power_inf123.html[Accessed: 16 Feb 2013].