We all have seen the expensive cars, unbelievable architecture, and luxurious lifestyle in UAE. It is so wonderful to see a country that is built on a desert and still has all the wealth you could ever imagine. But this was not always the case.
In the early days, this region was controlled by sheikdoms, and it was basically a desert with a low population. In those days the pearl industry was a major income source and employment of these sheikdoms. For the British, these kingdoms in the desert were not that important. For them, it was just a strategically important stop that connected the British ship to India. That's why they never invest any money in infrastructure projects. So development never happened in this area. Moreover economic depression of the late 1920s and early 1930s, coupled with the invention of the artificial pearl, wiped out the trade. The remnants of the trade eventually faded away shortly after the Second World War, when the newly independent Government of India, which was one of the biggest markets for pearls, imposed heavy taxation on pearls imported from the Arab states. This was a bit of a problem but fortunately, the discovery of oil gave another chance for this region to grow.
Shortly after the discovery of oil in the 60s, the seven emirates came together to form the UAE and declared independence from the British in 1971. Here the journey of the modern-day UAE started with the help of a massive oil boom in the country. The country's economy increased manifold in the coming years. Oil exports become the driver of their economy. Most of the revenue generated from oil was spent on constructing roads, highways, buildings, and other infrastructure projects. They also invested heavily in the education and healthcare sector, which improved the quality of life of the citizens.
And yes, it all seemed pretty good. Your imports are low and your exports are high just because you found commodities in your country. In one way it is right, but UAE does import things that are not on paper which is manpower. You see, building oil wells with roads and shipping ports to transport that oil, requires a lot of infrastructure, since then the need for foreign labor increased. From 1975 onwards, non-nationals have consistently outnumbered the number of nationals residing within the Emirates. Indian, Bangladeshi, Filipinos, and Pakistani workers make up nearly 90% of the workforce. So it is very common that you might easily find an Indian, a Pakistani or even Bangladeshi people on the streets of Dubai rather than Emirati citizens.
So basically you can say oil, and migrants have built the UAE that we see today. But there is a problem with all the oil rich nations, specifically those countries whose economy is dependent on oil exports. Oil wealth is not forever and the prices of oil in the international market are very volatile. Just a few years ago during the pandemic oil prices reached their lowest value of a decade so dependency on oil is unpredictable and unreliable as well. That is why the UAE is trying to diversify its economy. Beginning in the 1980s, the UAE promoted industrial development by establishing firms in manufacturing industries associated with oil and gas, including refineries, fertilizer plants, and aluminum smelters. The UAE has since made some progress in terms of its economic diversification efforts.
Dubai and Abu Dhabi are front runners in the UAE diversification plan. The Dubai emirate has built modern infrastructure and instituted a business-friendly environment and regulations to promote the city as a trade and finance hub in the region. Dubai has been the most proactive player in its attempt at diversification. Dubai’s GDP is much more diverse in comparison with the emirates. The recent Dubai expo is one of the efforts to diversify and promote Dubai and UAE as a brand to attract global business. The event has recorded more than 24 million visits and promoted the UAEs vision for the future. Abu Dhabi is also on a similar path. Abu Dhabi has been successful in creating a conducive to business environment through infrastructure, and a business friendly environment. Both emirates are also getting a lot of revenue through the tourism sector. The total contribution of the travel and tourism sector to the UAE’s GDP was USD 43.3 billion us dollars, which is 12.1 percent of GDP. It is forecast to rise by 4.9 percent per annum to 72 billion us dollars which would be 12.4 percent of GDP in 2027.
With a little more effort UAE could achieve remarkable growth in coming years. We could see it as the financial hub of the Middle East region and a major economy on the world stage. It has a great future and it is definitely the economy to keep an eye on in the future.
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