Melting of Black Gold

DHANUSH VYDYAM

The United Arab Emirates. Tall skyscrapers, fast cars and luxury lifestyle. But what led to it becoming one of the most sought after destinations to live in?

The single and most direct answer to that question would be petroleum. But it wasn’t all oil. Before the independence of the UAE from the British empire in 1966 and the unification in 1971, each emirate was responsible for its own state of the economy. The main income for those emirates was pearl diving, seafaring and fishing, until 1950, when oil was discovered. Since then they have nothing but capitalised on it, with H.H. Sheikh Zayed bin Sultan Al Nahyan (the then president of the UAE) using all the revenue from the oil exports to make necessary development to the country. Since then, oil has been the biggest income to the UAEs economy, accounting to almost 85% of the economy in 2009.

There’s no need to ask what the UAE government has done with the huge load of money they received from the exports of their oil wells, it’s pretty evident. With Dubai splashing billions into its infrastructure, its no mystery as to why it’s ranked among the best locations to invest in

Infrastructure. It is said that the UAE plans to spend AED 6 Billion (almost $2 b i l l i o n U S D) o n i n f r a s t r u c t u r e a h e a d o f t h e W o r l d E x p o 2020. T h a t j u s t s h o w s t h e e x t e n t t o w h i c h t h e y g o t o m a k e t h e i r e c o n o m y s t r o n g e r a n d m o r e i n t e r n a t i o n a l l y c o m p e t i t i v e . A d d i t i o n a l l y, t h e 45 f r e e z o n e s t h a t D u b a i b o a s t s, i n c r e a s e i n v e s t m e n t f r o m f o r e i g n i n v e s t o r s, t h e r e f o r e l e a d i n g t o a r i s e i n i n j e c t i o n i n t o t h e E m i r a t i e c o n o m y a n d a l s o l e a d i n g t o a n i n c r e a s e i n a g g r e g a t e d e m a n d, w h i c h f u r t h e r i n c r e a s e s t h e i r r e a l G D P p e r c a p i t a w h i c h c u r r e n t l y s t a n d s a t$ 40,698.85 USD, making it the 26th largest in the world. That along with the lack of income tax in the country provides the Emirati citizens with more disposable income to spend which keeps the consumer confidence and business confidence high and keeps the economy healthy.

However, the Arabs’ petroleum dream will end, after all, fossil fuels are renewable. So for a country that has built its foundation on petroleum and oil, what will their future hold once petroleum has run out?

One of the many answers to this looming problem is investment. UAE might be in the top fifty for the Foreign Direct Investment inflows (37th at $144 b i l l i o n U S D), b u t t h e y a r e i n t h e t o p t w e n t y f o r t h e F D I o u t f l o w s (20 t h a t$ 18 billion USD). What do they invest in? During the 2008 housing crash, it was the Emiratis who bailed out some of the US banking firms. Abu Dhabi became the biggest shareholder in Citi Bank, investing around $7.5 b i l l i o n U S D . N o t o n l y b a n k s b u t T h e U n i t e d A r a b E m i r a t e s a l s o i n v e s t h e a v i l y i n t o t h e s p o r t i n g i n d u s t r y, h a v i n g o w n e r s h i p o f m a n y h u g e f o o t b a l l c l u b s s u c h a s M a n c h e s t e r C i t y a n d P a r i s S a i n t G e r m a i n . U A E, p l a n n i n g t o b e c o m e l e s s d e p e n d e n t a n d r e l i a n t o n t h e o i l i n d u s t r y, a r e b e g i n n i n g t o d i v e r s i f y t h e i r i n d u s t r i e s . T h e b i g g e s t i n d u s t r y a f t e r p e t r o l e u m i s T o u r i s m . W i t h D u b a i b o a s t i n g t h e w o r l d^{'} s t a l l e s t b u i l d i n g - T h e B u r j K h a l i f a - a n d s o m e o f t h e m o s t l u x u r i o u s h o t e l s i n t h e w o r l d, i t a t t r a c t s t o u r i s t s f r o m a r o u n d t h e w o r l d . R e c e i v i n g a l m o s t 15.92 m i l l i o n t o u r i s t s i n 2018, t o u r i s m r a i s e d$ 58.4 billion USD in GDP to the Gulf Corporation Council and is estimated to rise to $120 billion USD in 2027. Apart from tourism, the UAE is also expanding its industries into IT and Finance, with Dubai developing into a major hub for both. Major firms such as Microsoft, Oracle, IBM, and sage software have now invested in the city, alongside huge banking firms such as Citi, and HSBC.

The Emiratis seem to have a plan, and it has the potential to work, and in the next few decades, there is a possibility that UAE will become a less typical Arab country and maybe even boast the biggest and most sought after economy in the world.

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Melting of Black Gold