Impact of Globalisation on the economy of UAE

From the developments I am observing here, i can state that globalization has turned the UAE into a developed country in many fields, as infrastructure, education, and media have all improved. Nevertheless, the effect of globalization on the UAE economy is without any doubts the most important effect. Globalization has affected the UAE economy positively because it has increased foreign investments, has encouraged domestic investments, and has promoted free trade between UAE and other countries. To start with, globalization has increased foreign investments. According to a survey that was conducted in 2005, Foreign direct investment inflow into the UAE achieved a record US$ 10 billion amounting to nearly 34 percent of the total foreign capital flow into the Arab world (United Arab Emirates 2007, 2007, p.76). The reason for this high percentage of foreign investments is because the UAE is politically stable, not to mention that it preserves working rights for businessmen by allowing them to rent and sell easily without interfering with them or imposing taxes on their products and revenues. For example, 170 licences to branches of foreign firms were issued last year, 20% more than in 2005. British companies were issued the maximum number of licences with 24. Since globalization has turned the world into one small village, it was easy for other countries to know about the economic virtues the UAE grants for businessmen. One might argue that foreign investments flow back to foreign owners and this means no benefit for the Emirates society (Mankiw, 2004). Yet, the UAE economy has experienced an increase in the capital stock due to these foreign investments. This increase in the capital stock has entitled UAE to have more equipment and structures to produce goods and services. Therefore, productivity has increased significantly; as a result, UAE economic growth and living standard have both increased. In addition to that, globalization has encouraged the UAE domestic investments. For instance, The UAE is an important participant in global capital markets through several investment institutions,

including, among others, the Abu Dhabi Investment Council, the Dubai Port, Dubai Holding, and the Abu Dhabis International Petroleum Investment Co. (IPIC) (United Arab Emirates 2007, 2007, p.76). In fact, the reason for the large increase in the UAE domestic investment is because globalization has entitled UAE to deal with developed countries like the and the and learn from them that savings and investments are the shortcuts toward a faster growth rate. Someone might argue that more savings and investments results in less resources available to produce consumption goods; therefore, this will benefit the UAE economy at the expense of its citizens. However, more savings and investments today will increase the production of consumer goods in the future. In other words, although there is a trade-off between present and future consumption due to savings and investments, the UAE will enjoy a higher living standard in the future if it invests and saves more in the present (Mankiw, 2004). For example, Abu Dhabi alone plans to invest over Dh555 billion in the coming five year; Dh320 billion will go to the construction sector, Dh 120 billion for development and expansion of the tourism sector, and Dh80 billion will be spent on expanding the oil and gas sector. Also, the UAE economy has invested heavily in hydrocarbon industries so as to use their revenues to create other income sources that are less dependent on gas and oil. (United Arab Emirates 2007, 2007, p.81) In my opinion, investment is the road toward a bright future although it might affect us in the present because we always look for long run outcomes. Furthermore, globalization is the main reason for the promotion of free trade between the UAE and other countries. Free trade has benefited UAE a lot because it allows it to import goods at a lower cost than producing them domestically. In fact, one might criticize that importing foreign goods hurts domestic producers because of the decline in the demand on their goods. Consequently, they will layoff some workers to compensate for that decrease in demand. Therefore, unemployment rate will increase (Mankiw, 2004). However, importing some goods has created more working opportunities in other UAE industries, as the UAE economy has concentrated more on producing goods that are more profitable; such as oil, gas, and petrochemicals. In other words, the UAE economy can produce on its production possibilities frontier (PPF) which is the combination of outputs that the UAE can produce

at a fixed level of technology and resources; while enjoying consumption beyond its PPF (Mankiw, 2004). Therefore, those who have been laid-off can easily switch to other firms that need workers. Additionally, buying goods at a lower cost than producing them domestically has helped UAE government to save some money and use it in improving roads, cleaning the environment, helping the poor, and increasing wages. In fact, the UAE has implemented the concept of free trade very well, as it imposes no tariff (tax) on exported goods and five percent tariff on imported goods, not to mention that It has signed several free trade agreements and embarked on negotiations either individually or through the GCC. (United Arab Emirates 2007, 2007, P.98) From my point of view, if the UAE keeps trading at this rate, it will not need to trade with other countries in the future since it has begun to produce many goods at a lower cost than before. Cultural industries have come to be included in a distinct sector where the creation, production and marketing of goods and services are combined. Cultural industries include media organizations, film production, audiovisual sphere, the print output, multimedia sector, architecture, performing arts, plastic arts, and cultural tourism ( UNESCO, 2000). Cultural industries produce consumer goods that convey lifestyles and values with both an informative and entertainment function, and cultural services that cover intangible activities such as the promotion of the performing arts, films, and values.

The UAE has rich cultural heritage influenced by Islam and Arab traditions. The Emirate of Sharjah, in particular, has been recognized by UNESCO as a fascinating emirate that has taken important steps to protect the rich Arabian cultural heritage. In fact, all other emirates in the UAE have taken steps to protect all aspects of the Arabian culture in the emerging scenario of globalization. For instance, the Dubai Shopping Festival which seeks to

attract tourists from various parts of the world is anchored in the local traditions and cultural values. .Being an open economy, the UAE has witnessed the imports of a wide range of cultural products and services in 2 recent years. These products and services have certainly affected the lifestyles of people in the country. The main conclusion that emerges is that it is possible to protect national culture and traditions in the emerging scenario of globalization with the help of carefully designed policy tracks. The Dubai Media City is anchored in the value system and the regulatory framework of the Gulf Co-operation

Council (GCC) countries. It is likely to uphold the cultural order of the region. However, some of the cultural products and services have universal 5 appeal and they can of course be used anywhere in the world to enrich culture. The media and communications market in the developed world has

witnessed a remarkable rate of growth, reaching 400 percent of growth between 1980 and 1998 (UNESCO, 2000). The potential wealth of the sector couldnt have gone unnoticed by a dynamic country such as the UAE. The Dubai Media City is surely likely to be in the business of generating wealth, but it would also have to grow in line with the socio-cultural values of the Arab world.

Another way that globalization has affected Dubai's economy is through international sports. The city has become increasingly known for its hosting of sporting events that offer large monetary prizes (that are often won by foreigners). For example, Dubai's Nad-al-Sheba Racecourse hosts the Dubai World Cup, the world's richest horse race with a $6 million purse. Since 1995, the race has attracted horses from the United States, England, France, Australia and Southeast Asia. Dubai also hosts renowned tennis and golf tournaments. (To promote the tennis tournament, Andre Agassi and Roger Federer, two of the highest-ranked players in the world, played on a tennis court built on a helipad at the Burj-Al-Arab. Similarly Tiger Woods, the No. 1-ranked golfer in the world, drove golf balls off the helipad prior to Dubai's golf tournament.) When Montreal, Canada, announced in January 2005 that it would not be able to host the 2005 FINA World Swimming Championships, Dubai immediately submitted its bid to stage the event at its new aquatics center. Montreal has since been able to pull together resources to host the event in July 2005, but Dubai was ready if necessary. Through sporting events, the United Arab Emirates has emerged as a global player, and Dubai has become a world city. Dubai has also become "an emerging global city" through its involvement in global commerce. The city constructed the Dubai International Airport and added a runway extension that could accommodate any type of aircraft. Emirates Airwaysis based in Dubai. In addition, the largest manmade harbor in the world was built at Jebel Ali, and a free zone was established around the port. By having a free zone, Dubai provides an alternative for global corporations to operate without restrictions. In conclusion, globalization has positively influenced the UAE economy because it has increased foreign investments, has encouraged domestic investments, and has promoted free trade between UAE and other countries. According to last statistics UAE impressive economic performance during the year led to a GDP growth rate of 26.3 percent at current prices while real GDP growth is estimated at 8.2 percent (United Arab Emirates 2007, 2007, P.76). However, it is important to mention that in addition to improving the UAE economy, globalization has had a great role in developing the UAE infrastructure, media, education, and social relations. In other words, globalization has turned UAE

into a developed country in many fields. Finally, I believe that if the UAE continues to follow these economic strategies, it will secure a prominent position in the world.

References

http://portfolio17683.tripod.com/id9.html http://www.ukessays.com/essays/economics/uae-economy.php http://www.worldpublicopinion.org/pipa/articles/btglobalizationtradera/446.php? lb=btgl&pnt=446&nid=&id http://plasticnation.wordpress.com/cross-cultural-experience/united-arab-emirates/