Page 8 - Sept Oct Issue
P. 8
Overview of the United Arab Emirates
The AED is currently pegged to the USD at 3.673 Abu Dhabi Investment Authority (ADIA) has formed
AED to every USD. The peg was established in the late to become the largest sovereign wealth fund (SWF)
1980s; the current peg was established in 2002. This in the world. ADIA has teams of foreign experts
strategy could work well for the UAE because one of that scour the globe for a variety of investment
the country’s major sources of revenue is oil, which is opportunities in the developed world, such as a ive-
denominated in USD. However, this also makes the UAE percent stake in Fiat-controlled Ferrari, Southeast
subject to any and all currency movements in the USD Asian emerging markets, and other developing
relative to other currencies. One of the major drawbacks countries (such as investments in Libya’s tourist
of this exchange rate policy is the effect of high inlation infrastructure) that are expected to have substantial
in the UAE. future growth.
There have been several lessons learned in the UAE Over the next ten or more years, the UAE and GCC
following the most recent global recession. First, members as a whole are anticipated to receive a
leaders in both the public and private sectors took note windfall from a strong demand-side energy stimulus
of the correlation and interconnectedness of global due primarily to the rapid economic developments
market players. Secondly, careful study was undertaken in Brazil, Russia, India and China (BRICs). The
to evaluate the re-recessionary impact on the UAE BRICs were irst recognized by a team of economists
economy of oil price declines. Despite slowing growth, and other researchers at Goldman Sachs and,
the UAE still has one of the fastest growing economies according to their predictions, the BRICs will exert
in the world. One of the main drivers of economic considerable pricing pressure on global energy
growth and employment creation in this country has markets over at least the next decade due to their
been the consistency of ixed capital investment from the rapid economic development. If this takes place, the
government, public institutions, and private entities. Four UAE will be able to sustain high investment levels
primary sectors are attracting investment and providing and strong welfare-enhancing economic growth.
economic expansion in the UAE: hydrocarbons, Due to current regional instability and periods of
manufacturing, transportation and communications and regional violence, which is among the worst in the
real estate. world, the UAE’s full economic potential from this
scenario will unlikely be reached. Nonetheless, the
Dubai plays a strategic role in the future of the UAE. UAE and the rest of the GCC have an opportunity
Since the beginning of the twentieth century, Dubai had in the coming decades to become one of the most
become the premier trading post of the Persian Gulf. prosperous regions in the world.
Today, it is a massive metropolis with a population in
excess of two million people. The initial catalyst for Despite impressive economic growth and
the emirate was oil wealth, which was used to invest development, areas of vulnerability within the
in infrastructure and facilitated rapid socioeconomic economic system of the UAE exist. Social welfare
developments starting in the 1970s and 1980s. A systems have tied the government to burdensome
pioneering model was then introduced to create a post-oil distributive practices, which can bread an
economy based on diverse industrialization and a variety unproductive mentality among the native population.
of specialist free zones. The diverse industrialization Secondly, many new sectors are especially reliant
included such sectors as commercial infrastructure, light on foreign investment and an expanding expatriate
import-substitution, promotion of luxury tourism and a workforce. For instance, Dubai has succumbed to not
freehold real estate market. only globalizing but also appears to be Westernizing.
Taboo industries for the UAE have been established
Abu Dhabi, UAE’s political capital, has at least ten in Dubai to cater to foreign residents. They include
percent of the world’s proven hydrocarbon deposits and night clubs, movie theaters and bars.
over ninety percent of UAE oil exports. Through oil-
based revenues lowing into the country, the The other ive emirates outside of Abu Dhabi and
Dubai lack in economic development and growth
8
The AED is currently pegged to the USD at 3.673 Abu Dhabi Investment Authority (ADIA) has formed
AED to every USD. The peg was established in the late to become the largest sovereign wealth fund (SWF)
1980s; the current peg was established in 2002. This in the world. ADIA has teams of foreign experts
strategy could work well for the UAE because one of that scour the globe for a variety of investment
the country’s major sources of revenue is oil, which is opportunities in the developed world, such as a ive-
denominated in USD. However, this also makes the UAE percent stake in Fiat-controlled Ferrari, Southeast
subject to any and all currency movements in the USD Asian emerging markets, and other developing
relative to other currencies. One of the major drawbacks countries (such as investments in Libya’s tourist
of this exchange rate policy is the effect of high inlation infrastructure) that are expected to have substantial
in the UAE. future growth.
There have been several lessons learned in the UAE Over the next ten or more years, the UAE and GCC
following the most recent global recession. First, members as a whole are anticipated to receive a
leaders in both the public and private sectors took note windfall from a strong demand-side energy stimulus
of the correlation and interconnectedness of global due primarily to the rapid economic developments
market players. Secondly, careful study was undertaken in Brazil, Russia, India and China (BRICs). The
to evaluate the re-recessionary impact on the UAE BRICs were irst recognized by a team of economists
economy of oil price declines. Despite slowing growth, and other researchers at Goldman Sachs and,
the UAE still has one of the fastest growing economies according to their predictions, the BRICs will exert
in the world. One of the main drivers of economic considerable pricing pressure on global energy
growth and employment creation in this country has markets over at least the next decade due to their
been the consistency of ixed capital investment from the rapid economic development. If this takes place, the
government, public institutions, and private entities. Four UAE will be able to sustain high investment levels
primary sectors are attracting investment and providing and strong welfare-enhancing economic growth.
economic expansion in the UAE: hydrocarbons, Due to current regional instability and periods of
manufacturing, transportation and communications and regional violence, which is among the worst in the
real estate. world, the UAE’s full economic potential from this
scenario will unlikely be reached. Nonetheless, the
Dubai plays a strategic role in the future of the UAE. UAE and the rest of the GCC have an opportunity
Since the beginning of the twentieth century, Dubai had in the coming decades to become one of the most
become the premier trading post of the Persian Gulf. prosperous regions in the world.
Today, it is a massive metropolis with a population in
excess of two million people. The initial catalyst for Despite impressive economic growth and
the emirate was oil wealth, which was used to invest development, areas of vulnerability within the
in infrastructure and facilitated rapid socioeconomic economic system of the UAE exist. Social welfare
developments starting in the 1970s and 1980s. A systems have tied the government to burdensome
pioneering model was then introduced to create a post-oil distributive practices, which can bread an
economy based on diverse industrialization and a variety unproductive mentality among the native population.
of specialist free zones. The diverse industrialization Secondly, many new sectors are especially reliant
included such sectors as commercial infrastructure, light on foreign investment and an expanding expatriate
import-substitution, promotion of luxury tourism and a workforce. For instance, Dubai has succumbed to not
freehold real estate market. only globalizing but also appears to be Westernizing.
Taboo industries for the UAE have been established
Abu Dhabi, UAE’s political capital, has at least ten in Dubai to cater to foreign residents. They include
percent of the world’s proven hydrocarbon deposits and night clubs, movie theaters and bars.
over ninety percent of UAE oil exports. Through oil-
based revenues lowing into the country, the The other ive emirates outside of Abu Dhabi and
Dubai lack in economic development and growth
8
