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Gulf Cooperation Council- United Arabs Emirates
Student’s Name
Institutional Affiliation
 
 
Introduction
United Arabs Emirates is a federation that comprises of seven emirates along the cost of Arabian Peninsula. Abu Dhabi is the largest of the seven and makes up to three fourths of the federation’s surface area. Abu Dhabi is the oil industrial center of the federation bordering Saudi Arabia to the South and Eastern borders. Dubai is the capital of the emirate of Dubai and makes one of the fundamental commercial and financial centers of the federation. The federation has most of the emirates influenced by the Persian culture due to proximity to Iran. The states gained their independence after the end of World II following Qatar and Bahrain declaring their independent. Although the federation still faces rivalry among the member emirates, especially those ruling the larger Abu Dhabi they have been compelled to enhance political cohesion by the territorial disputes with Iran. The emirates geographic are made up of rocky deserts, coastal plains, and waterless mountains. The shores are a haven of birds which attracts the tourists from all over the world. The population consists of a blend of diverse nationalities and ethnicities and has embraced modern technology. The emirates are rapidly modernizing to acquire international status and epicenter of different cultures.
UAE Gross Domestic Product
Gross domestic product measures the value of all finished goods and services produced within a country during a specific period of time. The GDP offers an economic snapshot of the country’s economic growth and the size of the economy. This is calculated using three approaches such as using the expenditure, production and individual incomes. However, certain adjustments have to be made so that it can provide better insights to users of the economic data. GDP is utilized by various economic players such as investors, policy makers, and enterprises for making strategic investment decisions and policy decisions that are directly influenced by economic status of the country (Coscieme et al., 2020). The graph is a graphical representation of  United Arabs Emirates gross domestic product for the period 2015-2019.
Figure 1: UAE gross domestic product in USD billion 2015-2019 (Trading Economics)
The figure above indicates the gross domestic product measures for UAE since 2015 to the year 2019. GDP is a measure of a country’s national income and output of its economy. GDP is equivalent to the total expenditures for all final goods and services within a given period of time. The gross domestic product of the federation has increased steadily since 2015 to 2020, which is an indication of the advanced economic growth of the country. The federation recorded a GDP of $358.14 Billion in 2015, but this declined slightly in 2016 to $357.05 billion. In the 2017 period, there was an increased GDP growth to reach $385.61 which is an indication of a tremendous economic growth during the period compared to the previous periods. There was a further GDP growth in 2018 reaching $422.22 billion which was a significant rise over a period of one year. However, the GDP declined slightly in 2019 compared to 2018 by registering a GDP of $421.14 billion. the annual GDP growth rate over the five year period is indicated in the graph below.
Figure 2: Annual GDP growth rate for UAE (Trading Economics)
The main contributors to gross domestic product of the emirates is made up of services sector which is the largest sector and accounts for over 40 percent of the total GDP. The services industry comprises of segments such as wholesale, retail trade and repairs which are most important in these sectors and contributes 12 percent of the GDP. The real estate is also a significant segment of the economy and contributes 9 percent of the total GDP, while transport and communication comprises 8 percent of the GDP. The oil and natural gas makes up 38 percent of the total wealth of the country. The construction and electricity, water and gas distribution contributes 13 percent of the total output, and the manufacturing contributes 8 percent of the gross domestic product. The remaining 1 percent of the GDP is contributed by agricultural sector, cattle ranching and fish rearing. United Arabs nominal GDP is $95.9 billion on quarterly average basis. The highest was recorded in June 2019 and a record low in 2016, which is attributed to inflation factor.
Exports – Imports
Imports to exports refer to a ratio of value of imports into compared to the total exports out of the country with its trading partners in the international trade (Coscieme et al., 2020). A country with a lower import to export ratio benefits from the international trade because it exports more goods and services than their counterparts. The figures below compare the value of imports and exports that were imported from and export out of United Arab Emirates during the years 2014-2020. An improvement of a nation export-import ratio benefits that country in the sense that it can have more export than its value of imports.
Figure 3: UAE Imports
The imports for the country have been changing over the five year period. The lowest import level was recorded in 2015, while the highest was recorded in 2017. The import level declined in 2018 then rose in the subsequent year. However, in general terms, imports have assumed a upward trend since the year 2014 to year 2019.
The federation’s main imports are pearls, precious metals and stones, which makes 31 percent of the total imports into the country. Sound recording systems and machinery, reproducers and parts make 18 percent of the total imports into the country. Automobile importation makes 12 percent of the total imports, while base metals and articles comprise 9 percent. Chemicals and related products make up 6 percent of the imports. Main export partners are India, which exports 17 percent of the total imports to the country, China makes 9.1 percent, and United States makes 9.0 percent of the imports and other imports are contributed by countries such as Germany, Japan, and South Korea.
Figure 4: UAE exports
The main product that makes the main export product from the emirates is the oil and natural gas. The general observed trend is that the country’s export have been declining over the period of the five years, with year 2014 recording the highest level of exports. The exports declined significantly in 2015, and even declined further in 2016. However, an upward was realized in 2017, and slightly increased in 2018.
Over 40 percent of the UAE’s exports are mainly oil and natural gas, which acts as the back bone for the economy.  Other exports comprise of pearl, metals, and precious stones making up 28 percent of the total exports from the emirates. Machinery makes up 9 percent, while transportation vehicles make 6 percent. Export partners are Japan making 16 percent of the total exports, India makes 14 percent of the total exports, while Iran makes 11 percent. Other important importers from UAE include South Korea, Thailand, and Singapore. From the presented data the country has a positive balance of trade because the value of exports is higher than that of imports over the five year period.
Unemployment for comparable Years
Unemployment rate measures the number of actively looking for jobs compared to the total number of workforce for a country. In the United Arabs Emirates, there has been a persistent increase in the rate of unemployment since 2015.
Figure 5: UAE unemployment rate (Trading Economics)
The unemployment rate for the year 2015 was 2.1 percent. In the year 2016 the number of unemployment labor made up 1.64 percent, which was a drop from the previous year by 0.46 points. Besides, the year 2016 was the record lowest for the emirates since 1995. In the year 2017, unemployment rate was 2.46 percent, which was a 1 point increase from the rate recorded in 2016. The rate of unemployment in 2018 was 2.57 percent which was a slight increase of 0.11 points from the rate recorded in 2017. Unemployment rate in 2019 was 2.64, which was an increase from the year 2018 value by 0.07 (Trading Economics).
United Arabs Emirates has a population of 9.89 million people, with a monthly earning of $1977 as of December 2016. The labor force participation rate for the country is projected to be 82.16 percent by December 2020 (Khaleej Times, 2020). People who have permanent employment in UAE accounts for 97.8 percent of the country’s labor force by the end of December 2019, according to data provided by the Federal Competitiveness Statistics Authority. The majority of the country’s working population is engaged in activities that are economically productive. As of the year 2019 the number of labor force for the emirates was 7.388 million people, which was a 2.2 percentage increase compared to 2018, and makes up 2.2 rate of unemployment which is the lowest in the world. Over 82 percent of the total population is comprised of working population, while women make 58 percent of the total work force in the year 2019 an increase from the 2018 record of 57.7 percent. The rate of unemployment among women recorded a decline from 5.9 percent in 2018 to 5.1 percent in 2019, while the employment rose from 94.1 to 94.9 over the same period (Khaleej Times, 2020).
Inflation Rate in UAE
Figure 6: Inflation rate in UAE (Trading economics)
Inflation rate refer to the rate at which the value of a currency is falling and the corresponding rise in the general of prices for goods and services. Inflation is measured in terms of consumer price index which measures the ability of consumers to purchase products and wholesale price index. Inflation might a negative or a positive perception relative to the individual perspective and the prevailing rate of change (Berganza, Del Rio Lopez & Borrallo, 2016). In other words, inflation need to be held at an optimum level to promote spending rather than saving, and nurture economic growth.
The rate of inflation as indicated in the graph has been declining over the period of the five years although there were some fluctuations, with 2020 recording the lowest rate of inflation for the period between 2015 and 2020. Consumer price index of 2.36 was the record lowest in 2020 which continuous decline in the rate of inflation. The information presented in the graph indicates that UAE has been experiencing a deflation, accommodated by a decline in housing prices, transportation prices, and furnishing prices (Trading economics).
The main components of the consumer price index are housing which makes 34.1 percent of the total weight, food and soft drinks making 14.3 percent, and transportation making 14.6 percent. Education accounts for 7.7 percent of the total weight, while miscellaneous goods and services accounts for 6.3 percent. Household goods comprise 5.5 percent and communication accounts for 5.4 percent. Other components include the hotel industry accounting for 4 percent, recreation and culture 3.2, textile and clothing 3.2 percent, medical 1.4 percent, and beverages and tobacco accounting for 0.3 percent of the total weight. These data is based on using year 2014 as the base for calculating the weight (Trading economics).
Transformation in Education, and Health Sector
There are major transformations in both education and health sector aimed at guaranteeing the citizens high quality education and quality care.
Education Transformations
UAE has an illiteracy rate of less than 1 percent for both males and females, which has been attributed to the government strategy of illiteracy eradication by making education accessible to all. The government enacted Federal law No. 11 of 1972 to promote compulsory education, by obliging the parent to take their children to school. There has also been establishment and enactment of laws such as the law enacted in July 2012 to make it compulsory for all children who have reached age six to start schooling and remain in school until they complete grade 12 or are 18 years old. Every parent must submit a personal undertaking to the school to acknowledge obligatory education stage, and undertaking to take their children to school at this education stage (UAE.gov).
The government has also established a national literacy strategy and framework that is aimed at producing a reading generation, making UAE a capital of knowledge and content. Besides, children who have not reached school admission categories are entitled to attend a home schooling program, which also takes care of adult education. The ministry education also provides room for adult education for those who want another opportunity for education. There are centers for adult education such as the Family Development Foundation. Universities such as the UAE University have established continuing education center to institutional needs, individuals and different communities by providing room for skill development, knowledge acquisition, and exploring potential (UAE.gov). The continuing educational center provides training, workshops and conferences in areas such as managerial, administrative, science, technical, linguistic, and social fields.
Health Transformations
The emergence of technology has led to the transformation of the healthcare sector in the recent years. The number of health facilities has increased significantly and have been equipped with more technologically sophisticated equipment. The patient data management system makes it effective for patient to go to different health facilities without having to open a new file because the hospitals has a data base for all patients. The healthcare system also has a system that reminds patients about their appointments.
The government has set the platform for improving healthcare standards inspired by improved quality of care as the primary care objective through rigorous service standards and targets. The healthcare system is shifting to a free market competition where the patients are given the autonomy to choose healthcare services, which is aimed at promoting excellence. Besides, the healthcare is shifting from the public to private providers to enable the private sector service healthcare needs rather than the government, with the government left with the role of developing and enforcing new and world-class healthcare standards. There is new health financing models through implementation of innovative systems of compulsory insurance. All workers including the domestic workers are supposed to have health insurance coverage and are funded by sponsors (Embassy of the United Arabs Emirates). All private workers should also have an insurance coverage across the country. Funding is supposed to be transparent and accessible for all residents.
The ministry of education has initiated partnership with both local and international entities to collaborate in the advancement of healthcare services in the UAE. This is aimed at the achievement of sustainable development through a comprehensive and innovative healthcare that meets international standards. Strategic partnership is aimed at achieving national indicators and strategic objectives through national initiatives. The ministry of health holds joint partnerships with global entities that are associated with health matters. The chief objective of this collaborations is to ensure that quality improvement of health services and provide them in the most effective and efficient manner (UAE Ministry of health and Prevention ).
Diversification from Oil-based to non-oil based sector
The Emirate of Abu Dhabi together with other six emirates established the United Arabs Emirates in 1971. Since the establishment of the federation oil and natural were the main components of the economy, which has consistently made up to 40 percent of the total GDP. The government has been keen to diversify the economy and reduce its dependency on oil and natural gas. The need to have a diversified economy was sparked by the fact the oil and natural gases are finite and their prices keeps fluctuating, and the need to pursue sectors of the economy to ensure high dependency on oil. Establishment of manufacturing industry was motivated by tits ability to create job opportunities, address the issue of unemployment, skills improvement, and more importantly enhance technology transfer.
The federation has been establishing various industrial development programs through manufacturing industries to manufacture oil and gas and the production of metals by importing raw materials and producing various metal ingots and then exporting them as finished products. Industries were also established to promote industrial activities by adoption of various incentives such as exemption of custom duty on importation of machinery, equipment, spare parts, and other important raw materials that were utilized for production processes. Industrial firms are also exempted from export duties and taxes and were allowed to allow foreign talents into target industries to promote skill diversification among the locals and improve productivity. There has been establishment of industrial zones and establishment of standardization and modification of licensing processes in the industrial sector to appeal the investors in the sector.
The United Arabs Emirates has made significant progress in the manufacturing industry through the economic diversification program which saw the federation become the second highest exporter of manufactured goods in the Gulf Cooperative Council (GCC), which accounted for 69.7 per cent. The manufactured products apart from oil are among the top five exports since 1995 in the UAE. However, the federation is determined to continue economic transformation through enhanced diversification and knowledge based economy. To enhance economic sustainability and development, the government set targets of making non-oil GDP contribution up to 80 percent by year 2021 (Ministry of Economy, United Arab Emirates, 2015).
Economic diversification is an important pillar in economic development and is captured in the UAE vision 2030 through the strategic planning agenda of the industrial sector, which aims at developing the industrial sector by 7.5 percent annually, to promote non-oil trade balance (Government of Abu Dhabi, 2008). This strategy has been adopted across the different emirates to promote the manufacturing sector and to increase the value share in output. Abu Dhabi and Dubai are the most endowed emirates, which have taken different strategies for diversification all intersecting at one point, the diversification from oil-dependent economy to non-oil diversified economy. Abu Dhabi comprises close to 7 percent of the total global oil reserves, but has adopted a resource-based manufacturing, while Dubai employed a proactive approach of creating a service based economy (Government of Dubai, 2016). However, these appro0aches have not been effective since the emirates have experienced the financial crisis as global economy enters recessions affecting the resource-based manufacturing. These emirates are determined to ensuring a break to technological intensity in industries for production of commodities that suit both regional and local markets.
Healthcare and aerospace equipment industries have already been identified as the engines of future economic growth in Dubai together with other industries such as metals, oil and gas, and petrochemicals alongside with education and tourist sectors. Strata manufacturing is one of the projects that was a major progress towards establishment in aerospace industry which engages in the manufacture of airplane parts for companies like Boeing, Airbus, Pilatus, and FACC through collaboration with companies like Siemens and Etihad Airways in the manufacture of 3D-printed spare part s for the aircraft interiors. This also focuses on ship repairs and machinery and equipment as it might be dictated by economic situation. Emirates is one of the largest provider of air travel services between Europe and Asia and owned by government of Dubai, whose main strategy is based on its government strategy of supporting the airline through localization of the manufacturing capabilities aerospace industry and development of other maritime hub like the Jebel Ali Port which offers various navigation services in Asia and other parts of the world. These strategies have seen significant increase in global export market for aerospace and ship repairs increased from 0.3 per cent in 2010 to 0.7 per cent in 2016.
Despite these achievements, the UAE economic diversification is yet to achieve its objective. There are various issues and problems that must be overcome which include processes and regulations in the industrial sector between the Emirates and the lack of industrial standards to govern the quality of imports and exports products 9 Ministry of Economy, United Arab Emirates, 2017). Although there have been huge investments by the state but there is need to recognize the importance of the private sector to foster private investments and expertise. There is a need to interact with other countries within the Gulf region to coordinate interactions in the organization of industries at the regional to refrain from duplication of activities that negatively affect prices and sales from the region and promote balanced economic growth within the Gulf Cooperation Council (GCC).
Localization programmers
The GCC countries have adopted transformation agenda and they are realizing the importance of building local abilities in order to stimulate sustainable economic growth by shifting from an oil dependent economy. UAE is focusing on transforming to a manufacturing economy and enhancement of human capital development and strengthening the private sector, and provision of quality employment opportunities. Localization has been an area that has attracted attention among the GCC member countries following realization of the dangers of entrusting critical positions to foreigners. This has resulted in the adoption of restrictions measures aimed at reducing domination in sensitive position and reducing the number of posts that are available for foreigners. Most of critical posts such as leadership, managerial, and technical areas are entrusted to nationals.
The government employment a local industries promotion program after the high oil prices in the 1970, which aimed at the procurement of products that were exclusively produced by the local manufacturers, which provided them with a competitive advantage over firms. The policies did not cover the scope and were limited by weak governance and lack of appropriate measures to assess their effectiveness. The government of UAE is adopting more comprehensive and dynamic approaches to promotion of local content policy.
However, the government lately has moved from the preferential treatment of local companies and adopted more dynamic approach of local value creation. Although most localization programs are focused on energy sector, but there is also possibility of expanding these programs to the public sector. However, there is need to focus on the success of this programs in the energy sector adopt the concepts across the diverse entities which have different objectives, visions, mandates.
Comparison between GCC and Trade Block Performance (G7 United States)
The economies of the United States and the United Arabs Emirates are diversified in various aspects. UAE has a budget of $136.60 billion and is ranked 25^th largest economy globally. The United States has the largest economy globally with budget revenue of $2.45 trillion. The UAE has a budget surplus of 7.2 percent of the GDP, while the United States has a budget deficit of 6.8 percent of the GDP. Unlike the UAE economy which is more dependent on oil and natural gas, the United States economy is more market oriented. The GDP growth in the United States was more threatened by the 2008 economic crisis which resulted from the mortgage market and banking system failures.
UAE ranks 16^th largest exporter globally with an export value of $350.1 billion, while the United States is the second largest exporter globally with a value of $1.56 trillion. The United States has a GDP size of $15.68 trillion, compared to the UAE which has a GDP of $349 billion. When it comes to GDP per capital UAE enjoys $24176.95 and is ranked position 11 globally compared to the United States, which has a GDP per capita $45759.46. The purchasing power parity by consumers in the UAE is $29200 and ranks 32^nd largest globally compared to the United States with a purchasing power parity of $51700. The purchasing power parity in real GDP for the United Arabs Emirates is 23668.68, while the US has a real PPP of 47587. The gross national income is $49.21 billion, while that of the United States is $9.78 trillion and ranks first globally. The inflation rate is 0.7 percent in the United States compared to United States with inflation rate of 2.1 percent. Public debt accounts for 42.6 percent of the GDP in the UAE and 70 percent of the GDP in the US. The unemployment rate in the UAE is 2.4 percent while that for the United States is 8.1 percent (The World Bank). Given the size of its population, UAE is performing better economically which is why it has made in the global scale of best performing economies.
UAE Development AT THE Global Level
United Arabs Emirates has observed positive transformation enhancing its global competitiveness position, which means more than just economic scenarios in the country. This transformation reflects the country’s stable position in the different sectors, which has enabled the economy to compete favorably with other advanced economies that have been global leaders for many decades to become among the top 10 list of best economies globally. Various factors have enabled the federation to become among the best performing economies globally. To begin with, the ease of doing business index is among the highest globally, having taken the lead in the index in the Arab region in the year 2014/2015 according to the World Bank Report. UAE is also one of the best performing economies in the Arab World and retained index lead among the Gulf region countries and 31st globally.
Innovation has been a central indicator in economic development in the UAE. Innovation index for the federation was the highest among the Arab country and ranked 36 globally as of 2015 according to the World Intellectual Property Organization of the United Nations. Global innovation index shows that UAE has done in different factors that determine the global innovation index such as institutions, political, human capital and research, education, research and development, communication and technology, environmental sustainability and business development (Al Hamdani, Lazarova, & Di Maria, 2017). These factors have contributed significantly to the country having of the best economic freedom index, and the global prosperity indices both regionally and globally.
 
 
References
Al Hamdani, H., Lazarova, E., & Di Maria, C. (2017). FDI, Economic Performance and Technological Spillover Effects: Evidence from UAE. Economic and Social Development: Book of Proceedings, 531-544.
Berganza, J. C., Del Rio Lopez, P., & Borrallo, F. (2016). Determinants and implications of low global inflation rates. Banco de Espana Occasional Paper, (1608).
Coscieme, L., Mortensen, L. F., Anderson, S., Ward, J., Donohue, I., & Sutton, P. C. (2020). Going beyond gross domestic product as an indicator to bring coherence to the sustainable development goals. Journal of Cleaner Production, 248, 119232.
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Government of Dubai. (2016) Dubai Industrial Strategy 2030. Dubai: Government of Dubai.
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Ministry of Economy, United Arab Emirates. (2015) Annual Economic Report 2015. Abu Dhabi: Ministry of Economy, United Arab Emirates
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