Globalization Effect on the Economic Development of the UAE
The globalization of the world economy is a world process that began in the 19th century. It refers to the transition of the world economy to a new level, blurring the boundaries between the states and their unification into one whole for trade and sale of services and goods among themselves. The history traces different stages of world economic globalization, which influenced not only the economy itself but also other spheres of life, including culture, information exchange, and politics.
During the historical development, different countries occupied the positions of economic leaders, changing among themselves and sometimes completely losing their positions. There were progress and setbacks in economic development, mainly due to wars, due to which relations between countries suffered, and financial and trade relations were suspended or completely collapsed. After that, the relationships were sometimes formed in a completely new way. In addition to the influence of external factors, the impact was exerted by the changes in the types of labor and scientific and technical progress.
The active participation of the United Arab Emirates in the world economy began with the export of oil in the 1950s, as before that, the country was dependent on fishing. If comparing the results from 2000 to 2020, the UAE has achieved greater socio-economic development than neighboring countries. The United Arab Emirates, in comparison with other countries, quickly returned to the previous level of economic performance after the 2008-2009 crisis. A feature of the development of the economy in the UAE is also the fact that the profit earned from the export of oil in the Emirates is used for internal development.
Due to the investments in internal development, the country currently has a well-developed tourism services sector and has become one of the most visited and luxurious destinations, with a unique level of hospitality. Along with the availability of world-class 5-star hotels and restaurants, there are also more affordable options for the middle-income class, thus attracting all types of travelers. Additionally, investors and leading companies from different countries are attracted to the UAE due to the taxation system.
The country has allocated Free Zones when registering companies in which the shareholders have the option of 100% ownership of the company and no obligations to pay corporate or personal income taxes. Moreover, in the so-called Mainland territory, the country has also begun to provide preferential terms for leading companies in their industries.
The UAE is gradually becoming an international center of leading directions and companies from all over the world, attracting all the best from the countries that occupy top positions. By providing convenient conditions for registration and company operations, the UAE receives highly professional and reputable representatives of each market in its territory. This allows attracting travelers who come to the country for receiving high-level healthcare or hospitality, shopping, or other purposes, which accordingly has a positive effect on the country’s profit.
The accumulated capital from oil exports has always been directed to the development and modernization of the country and labor processes, as well as to maintain the standard of living of the local population. Having a profit from export, the UAE is distinguished by its attention to local residents. They are provided with optimal conditions for study, work, and other spheres of life. In addition, grants are allocated to support their development and a high standard of living.
Large investments in the development of education in the country are noticeable. Many schools and universities have been established, and professors and training systems from different countries of the world have been attracted to optimize the knowledge gained in all areas. For example, there are American universities in the UAE that focus on leading areas of the US, such as public relations, finance, and business, as well as hospitality universities working under the program or in cooperation with Switzerland, which has leading education in this direction.
The UAE also has a developed banking system. This is due in part to fast economic developments and capital storage requirements. The peculiarity of local banks in the UAE is that they are under a state guarantee, which means that if the bank is closed, then the amounts from the accounts are guaranteed to be returned. This is an addition to the attractive factors for foreign investors. Banks from other countries are also open and successfully operating in the United Arab Emirates, which allows choosing the best option depending on the requirements of a company or individual.
Labor resources made it possible to create the infrastructure of the UAE in the shortest possible time. Most of the workforce in the UAE is drawn from other countries. To attract labor, the state creates all conditions by providing visas at the request of companies. Depending on the sector and position, many industries in the Emirates have attractive salaries that bring talented and educated people to the country. Therefore, specialists from different countries continue to arrive in the UAE to obtain jobs. In 2019, Golden Visas were announced, allowing to obtain residency for ten years for those with special talents or possessing a degree in certain promising areas.
Other sectors are also actively developing in the UAE, including transport, real estate, and alternative energy sources, among others. Solar panels have become one of the most modern sources of energy, allowing to use of inexhaustible sources. In the UAE, they have already been applied in many buildings and are working successfully. The UAE is also becoming an important transport center, with many flights going through the country’s developed airports. The transport system within the country is also developed; the metro is one of the most innovative in the world. There is also public and personal transport, including buses and taxis.
The United Arab Emirates is one of the countries where innovation is highly valued and widely applied. A large number of investments are spent not only on ennobling the appearance but also on the use of innovative technologies. In the modern world, technology is often a decisive factor in the success of a corporation or government. Therefore, the fact that the UAE is a high-tech country is suggesting its positive development prospects.
In the UAE, common types of visas are work, student, family, and investor. Investor visas can be obtained by those who have invested large amounts in the country, for example, in real estate. Moreover, it is possible to obtain a Freelance visa, which is also formally described as an investor visa. This visa is mostly for the representatives of creative professions, in this way supporting the attraction and retention of talents in the country.
The Gulf Cooperation Council (GCC) includes the United Arab Emirates, Saudi Arabia, Bahrain, Oman, Kuwait, and Qatar. Comparing the UAE and Kuwait, both countries have gained significant economic development due to their oil reserves. However, the next steps and the use of the capital received by countries are different. While the UAE began to actively develop various areas to support the economy and move away from dependence on oil exports, in Kuwait, the list of such areas is much shorter.
The UAE has a developed banking system, and Kuwait had a chance to become one of the world leaders due to the upgrade in the world ranking of emerging markets by MSCI, but later this process was put on hold due to the pandemic. The increase in Kuwait among investment-favored countries was also attributed to the inclusion by FTSE Russell in the benchmark indices of emerging markets in 2018. This allowed the country to attract significant investments.
Kuwait also has a Free Zone, but only one, and its functioning is not comparable to that of the UAE, as there are more than 40 Free Zones, and they are rapidly developing and attracting more international representatives. Thus, even in the presence of certain similarities, the UAE is more effectively using world globalization, differentiating its economy, and preparing a backup for the end of oil.
A big indicator that distinguishes the UAE from Kuwait is the decision to hold EXPO2020 on the territory of the country. This is an international event that will entail a tourist flow and interest in the host country itself. At the same time, it may entail investments in infrastructure, which then will not pay off and will not be required with a smaller tourist flow. But the Emirates also applied a preventive approach to this risk, and the pavilions of EXPO2020 will later be used for alternative purposes, as the accommodation facilities for the development of tourism.
Compared to the UAE, infrastructure and areas such as tourism are significantly less developed in Kuwait. While the UAE is trying to attract companies, specialists, and experts from different countries, Kuwait is still more focused on oil exports, which make up the largest part of its GDP. This leads to dependence on international trade, and fluctuations in the price of oil and its reserves.
Summing up, the UAE is currently making better use of economic globalization. While oil reserves will be depleted, contributions to the country’s economic and social development will help maintain a stable level of profitability. The development of the tourism industry, Free Zones, and the banking system, together with the diversification of exports, can become decisive for maintaining and developing the level of the economy.