How Globalization Impacted Dubai Economy - Essay Example

Name Course Institution Instructor Date Table of Contents 1.0 Executive Summary 3 2.0 Introduction 3 2.1 Definition of Globalization 4 3.0 Globalization and Dubai 5 4.0 Stages of Globalization 7 5.0 Impacts of Globalization 8 5.1 Positive Impacts of Globalization on Dubai economy 8 5.2 Negative Impacts of Globalization 10 6.0 Factors causing Globalization 10 7.0 Globalization Effect on Trade in Goods and Services 11 8.0 Flow of Finance and Capital 11 9.0 Conclusions and Recommendations 12 10.0 References 13 The Impact of Globalization on Dubai Economy 1.0 Executive Summary Globalization has been the subject of academic discussion for many writers today as they try to understand the term itself and its effects. Despite their efforts in trying to understand the term and its effects, it has remained debatable whether Globalization is beneficial or disastrous (Akram et al., 2011: 291). Globalization has been discussed in detail by many writers in its relation to many sectors such as education, security and culture. However, all these discussions are directed towards economic development. Globalization and its effects on Dubai economy will therefore be the subject of discussion for this research work. Dubai is an epitome of Globalization’s effects and this has been depicted by its fastest economic development compared to other nations in the world. The positive and negative impacts of Globalization will be discussed in detail. This will have an implication that flow of capital and finance will be looked into and how it has advanced for a number of years. The main objective of this research study is to understand Globalization and appreciate its effects on the economic development of UAE. 2.0 Introduction A commodity manufactured from a certain country can be found in any state in the world. Similarly, world nations are becoming very close than before. UAE which is the subject of discussion for this research study has had tremendous development in its relation to other countries and trade. It has emerged to challenge world’s economically stable nations such as New York, Singapore and London in terms of trade (Al-Khazraji, 2009:1). Its economic status is as a result of its resources, partnership with other nations and strategic geographic location; southern approaches to Strait of Hormuz, which an important transportation point for world crude oil (Central Intelligence Agency, 2013). The development of UAE’s economy can be attributed to Globalization. Currently, UAE has been identified to be the best place for working, entrepreneurship, shopping and leisure activities (Baburajan, 2011:30). Globalization has bolstered the economy of UAE by improving trade and relationship with other nations worldwide. Akram et al. (2011:291) accentuates the fact the globalization has offered a new thought to commerce industry globally. Perhaps, the best way to understand the effects of globalization in UAE is by defining the term itself. 2.1 Definition of Globalization Many writers have defined the term globalization but using different wordings. Despite the fact that they are using different wordings, they all have the same idea on this term. According to Robertson, (1992: 8) ‘Globalization as a concept refers both to the compression of the world and the intensification of consciousness of the world as a whole’. In the same way Hamilton, (2008:10) defines this term as the global integration of economic, technological, political, cultural and social characteristics between nations. Similarly, Giddens, (1990: 64) defines globalization as strengthening of global social relations linking nations which are far away from each other, such that the events of one country shapes the happenings of another country. Other writers who have contributed in defining globalization are Rothernberg, (2003) and Keohane & Joseph, (2000). Their definitions are centered towards the idea of strengthening relations in terms of economic, technological, political, cultural and social aspects. It is therefore a multifaceted term affecting diverse sectors of a country’s economy either directly or ramblingly. The term Globalization cannot be termed as a new concept owing to the fact it existed long before the time it came into academic focus. For example, the ancient steppe or silk roads played a key role in the exchange of ideas and information. This was a perfect example of globalization in existence. The concept was given recognition in the 1960’s (Waters, 2001). However, much focus was given to it in the 1980’s. It is for this reason that Waters, (2001) highlights the fact that it staggered into academic disciplines. It did not move to academic discipline directly. Currently the term has been given much focus to an extent that it has become a diversified. Research studies are now focusing towards the effects of globalization on various aspects such as culture, economic development and effects on the residents. Dubai has been chosen as a case example due to its rapid economic development since the discovery of oil. 3.0 Globalization and Dubai It cannot be denied that Dubai as a city in UAE has received much attention when it comes to globalization since the discovery of oil in 1966. Sheikh Rashid who was then a ruler was able to use this important resource to develop the city. Dubai has depicted diversification from oil dependency to other sectors such as commerce and tourism. Development has been evident in the realm of infrastructure. The success of this state is owed to the development strategies drawn by its leaders. A perfect example of a strategic plan was that 1980’s and 1990’s whose initiative was to steer tourism and make Dubai a major tourism hub globally (Dubai FDI, 2013). Since the formulation of this strategic plan, hotel industry has developed extensively. Burj Al Arab hotel is a familiar ‘seven star’ luxury hotel found in Dubai and it was completed in 1999. Palm tree island development project is also another perfect example representing the development of hotel industry in Dubai. It is a magnificent development project that was designed on two artificial islands and contains about forty luxury hotels, amusement parks and other tourist attractions (Sampler & Saeb, 2003: 20). Tourism is another important sector that has boosted economic development in Dubai. In fact, currently Dubai is leading destination in world tourism market (Lis, 2010: 8). Tourism in Dubai has taken a different perspective. It has extended beyond normal tourism to luxury tourism. Magnificent mega-projects of hotels and housing estates are on the rise. Since 1985, the number of hotels has risen from 85 to 258 in 1998 and by then 53% of them were rated third class hotels (Lis, 2010: 8). Ten years later, Dubai’s hotels had increased to 319 (Lis, 2010: 8). This depicts a huge investment in the tourism sector. Apart from tourism; Dubai has developed to be the best center for commerce in the world. Commerce industry goes hand in hand with tourism sector. Exclusive commerce is evident from shopping malls being constructed. These shopping malls display the latest luxury items thus bolstering tourism sector (Fox et al., 2006: 50). A range of events take place in every season in Dubai. They also form major tourist attraction features. An explicit example is the Dubai shopping festival which occurs every year. Its success in boosting trade and economy resulted to it being relocated to the edge of the desert and extended from mid-January to March in the year 2005 (Fox et al., 2006: 49). Various countries attend this event to market their products. The festival attracted over two million visitors from different states in the year 2002 (Sampler & Saeb, 2003: 17-18). This has contributed extensively to the economic development of Dubai by boosting hospitality industry. The slogan for the festival is ‘One World, One Family, One Festival’. It figuratively depicts the willingness to embrace globalization (Davidson, 2005: 252). Combined together, tourism and commerce have bolstered Dubai’s economy. They have contributed greatly to globalization in Dubai city. 4.0 Stages of Globalization Globalization has undergone transformation from the historical times. According to economic historians, modern era globalization is dated back to around 1870 (Asefa, 2010: 6). The 21st century globalization is the third stage of historical globalization. First stage globalization began in around 1970 and extended up to 1914. It was during this period when rail and ship transportation became advanced as well as telegraph communication (Asefa, 2010: 6). Their development boosted the global integration of capital markets which on record high at that period (Goldin & Reinert, 2007: 6). It was also during this period when migration rates soared as a result of development of these transport systems. Second stage of globalization began in the late 1940,s and extended up to 1970’s (Asefa, 2010: 6 & Goldin & Reinert, 2007: 6). This was after the culmination of worldwar II. Much was not experienced during these two stages owing to the fact that a lot was being done to recover what had been lost as a result of world wars I & II and the great depression. An outstanding event depicting integration by world nations was the formation of International Monetary Fund in 1944 and General Agreement on Tariffs and Trade (GATT) (Goldin & Reinert, 2007: 6). Similar to the first stage, there was an upsurge in capital flows especially from United States. The General agreement by different nations under GATT enabled free trading by lessening trade barriers. As a result, multinational enterprises and exportation increased. Subsequently, third stage of modern stage globalization followed the second stage towards the end of 1970’s. It was during this stage when newly industrialized nations such as Japan, Taiwan and Korea emerged (Goldin & Reinert, 2007: 7). Technological development is the most outstanding feature of this stage. Currently, technology has reduced the world to a global village. It has also increased production at the same time reducing its costs. Modern globalization has had far reaching effects that are either negative or positive. 5.0 Impacts of Globalization 5.1 Positive Impacts of Globalization on Dubai economy Globalization has positively impacted on Dubai’s economy. Dubai’s and the entire UAE’s economy has tremendously increased since the discovery of oil. It has enhanced cross-border trade, free flow of capital and flow of information. Dubai FDI (2013) indicates gross Domestic Product of Dubai to be increasing tremendously since 2009 up to 2012. By 2011, Dubai’s GDP had grown by 3.4 and it was being expected to reach 4.6% by the end of 2012 (FDI, 2013). The growth was as a result of diversification from oil dependency. Being a global center of commerce, Dubai has been able to generate revenue for economic building. Similarly, globalization has created more jobs in Dubai. Currently Dubai is rated the best in job creation worldwide. In the year 2011, the overall unemployment rate for Dubai was 4.3 percent (Kawach, 2011). Dubai has remained at the top as the leading in terms of employment since 2006 and the rate of employment has been increasing ever since. Employment of persons will have a direct impact on the economy of a country. Since 1985, Dubai Municipality data indicates a tremendous growth in employment up to 2005 as shown below. Dubai’s population and active labor Force (Dubai Municipality, 2005) It is for this reason that a large number of persons in Dubai are outsiders. Foreigners move to Dubai in search for employment. Globalization has also encouraged free trade which encourages increased foreign direct investments. Dubai and United Arab Emirates provide a good ground for trading to foreigners. According to United Arab Emirates (2007: 76), a survey conducted in the year 2005 indicated foreign direct investment hitting a record high of US$ 10 billion. There are so many reasons for this upsurge in foreign direct investment such as zero rating the taxes on business persons. Policies in Dubai city are business-friendly and foreigners are moving in for new opportunities (Mun, 2010: 161).Increase in foreign direct investment will have an impact on capital stock of a country. Human and financial capital resources will be brought in and a result, more infrastructures will be built to facilitate production of goods. As a result, economic growth occurs. On the other hand globalization has led to domestic investments through the good relationship with other countries. 5.2 Negative Impacts of Globalization Despite the fact that Globalization has had positive impacts on Dubai’s economy, it has also come along with negative attributes. One of the major negative impacts of globalization is increment in job insecurity due to influx of foreigners as a result of free trade. Similarly, globalization has impacted on environment due to emergence of new companies (Mun, 2010: 160). With globalization, Dubai has grown to be a more industrialized city than before. 6.0 Factors causing Globalization There are a number of factors that have pushed various countries towards globalization. Factors do vary depending on the country. Dubai being an epitome of globalization is no exception. One of the major factors that have pushed Dubai towards globalization was the need to diversify due to predicted diminishing oil. Dubai leaders shifted their focus towards diversification in other fruitful sectors such as tourism and commerce. They used the limited oil resource in infrastructural development to attract foreign investors. In addition to this, compared to other Gulf States, Dubai had the least amount of supply. Globalization has also been enhanced by free trade and favorable trade environment set by Dubai (Mun, 2010: 161). Free zones have been set to attract foreign investments which in turn increase human and capital resources. Foreign investors have also been attracted by the political stability of Dubai. 7.0 Globalization Effect on Trade in Goods and Services Globalization has had a direct impact on trade in goods and services. In a quest towards globalization, states such as Dubai have liberalized trade. This has enhanced smooth transition of goods and services from one market to another (Mubiru, 2003: 2). In addition to this, globalization has enhanced free movements of factors of production such as labor and capital. These factors affect the production of goods and services. Exportation and importation has increased in the recent past. Multinational companies from developed countries are also on the rise especially in developing countries. Therefore, globalization has enhanced competition and hence the quality of goods being traded on. 8.0 Flow of Finance and Capital Flow of finance and capital has been impacted by globalization that provides favorable conditions for trade. A good example is Dubai whose policies are business friendly and they have been formulated with an objective of attracting foreign investors. Inflow of foreign direct investment will have an implication on foreign capital and finance flow. A survey conducted in 2005 indicated that foreign capital flow to UAE resulting from foreign direct investments accounted to 34% of the total flow into Gulf States (UAE, 2007: 76). Therefore, globalization has a positive impact on the flow of finance and capital to a country. 9.0 Conclusions and Recommendations In conclusion, despite the fact that globalization has both positive and negative impacts on the economy of a country, Dubai being a perfect example of globalization has benefited. The benefits of globalization outweigh the negative impacts. It is for this reason that the economy of Dubai has been constantly rising. Globalization has created new jobs in Dubai. Foreigners have moved to Dubai to look for employment opportunities due to this. Therefore, nations should embrace a move towards a globalized economy in order to meet the current demands of citizens such employment opportunities. 10.0 References Akram, C. M., Faheem, A. M., Dost, M. K. & Abdullah, I. 2011. Globalization and its Impacts on the World Economic Development. International Journal of Business and Social Science, 2(23): 291-297. Al-Khazraji, N. B. 2009. The Culture of Commercialism: Globalization in the UAE. Washington, D. C.: Georgetown University Press. Asefa, S. 2010. Globalization and International Development: Critical Issues of the 21st Century. W.E. Upjohn Institute. Baburajan, P. K. 2011. Impact of Globalization of Higher Education in the UAE. Delhi Business Review, 12(1): 29-35 Central Intelligence Agency. CIA World Factbook. Retrieved from [7 March 2013]. Davidson, C. M. 2005. The United Arab Emirates: A Study in Survival. Boulder: Lynne Rienner Publishers, Inc. Dubai FDI. An Agency of the Department of Economic Development. 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London: World Scientific. Robertson, R. 1992. Globalization: Social Theory and Global Culture, Vol 16. New York: SAGE. Rothernberg, L. E. 2003. Globalization 101 The Three Tensions of Globalization. New York: The American Forum of Global Education. Sampler, J. & Saeb, E. 2003. Sand to Silicon. London: Profile books, Ltd. UAE. United Arab Emirates 2007. London: Trident press Ltd. Waters, M. 2001. Globalization (ed 2). New York: Routledge. Read More