Economic Boom in Qatar, UAE, and Saudi Arabia - Research Paper Example

of Semester: The Economic Boom in Qatar, UAE & Saudi Arabia Table of contents Introduction page 3 2. The Economic Boom in Qatar : page 3 3. The Economic Boom in UAE : page 5 4. The Economic Boom in Saudi Arabia : page 9 5. Conclusions : page 11 6. Works Cited : page 12 7. Appendix : page 13 Introduction Qatar, United Arab Emirates and Saudi Arabia are three of the rapidly growing economies in the Middle Eastern region. The recent financial crisis caused severe problems to some of the highly developed economies in the world; however, these three countries seem to be unaffected or less affected by the recent recession. Even though the recent political developments in the Middle Easter countries like Egypt, Libya etc are causing some impacts in these three countries, nobody expect a political instability in these countries because of the higher level of standard of living in these countries compared to that in other neighboring countries. Dubai, one of the prominent emirates of UAE faced some financial problems recently; however, Abu Dhabi was able to lift Dubai from the recent financial crisis. In other words, different emirates in UAE are helping each other when any of them face trouble which is the major reason why United Arab Emirates was able to develop properly. Business is the major revenue source of UAE. Saudi Arabia on the other hand is blessed with immense oil resources and their economy is highly dependent on the oil revenues. Qatar has revenues from oil resources, tourism, marine products etc. This paper analyses the economic booms in these three Middle Easter countries; Qatar, UAE and Saudi Arabia. The Economic Boom in Qatar Qatar is one of the prominent Middle Eastern countries which have diverse ranges of revenue sources. While most of the other gulf countries rely heavily on oil revenues for economic development, Qatar is blessed with oil resources, marine products, tourism, real estate revenues etc. According to the 2010 statistics, Qatar’s GDP real growth rate is 19.4% compared to 9.5% in 2009 and 11.7% 2008 (Qatar GDP - Real Growth Rate) (See Appendix for more details). It is evident from the above statistics that the GDP growth doubled in year 2010 compared to that in year 2009. Perhaps, no other country in the world has ever recorded such phenomenal growth rates over a year period of time. Oil and gas account for more than 50% of GDP, roughly 85% of export earnings, and 70% of government revenues. Oil and gas have made Qatar the second highest per-capita income country. Proved oil reserves of 15 billion barrels should enable continued output at current levels for 37 years (Qatar Population) Oil resources are nonrenewable energy sources. It is exhausting day by day because of over exploitation and increase in the number of automobile vehicles which make use of oil resources. In other words, the demand for oil resources is going to be increased in the coming years. Qatar is one country which has higher oil stocks at present. In short, Qatar’s economic progress may not be affected at least for another thirty or forty years of time because of their oil stocks. Business, tourism and marine products are some other revenue sources for Qatar. Qatar’s coastal areas are blessed with some rare species of fishes. About 150 different species of fishes were recorded in the seacoast of Qatar. “Sweet lips, emperors and snappers, goatfish, shark, groupers, barracudas, thread fins, lizard fish and rabbit fish” etc are some of the rare fish species available in the sea coast of Qatar (Qatar, 2005) Qatar has a wide coastal area and historically, fishing is one of the major revenue sources for the Qataris. Another reason for the economic boom in Qatar is the development of good educational practices. Qatar is doing everything possible to give good education to its people. They realized that educated people are one of the major pillars upon which a country can develop. Many American, Canadian and British universities are operating in Qatar. Weill Medical College, Carnegie Mellon University, Georgetown University, Virginia Commonwealth University, Texas A&M University, University of North Atlantic etc are some of the foreign universities operating in Qatar. Moreover, many of the Qatari youths are going abroad for higher education. Even though, Qatar is comparatively a small country in Asia, it hosted the 15 th Asian games in 2006 successfully. The successful execution of this event is a clear evidence of Qatar’s financial strength. The Economic Boom in UAE The UAE budget was Dh 23.8 billion in 2004 and thereafter it increased gradually in every year. It was Dh 42.2 billion in 2009, 21 percent higher than the 2008 budget Dh 34.9 billion. According to Hamad Bu Amim, Director-General of the Dubai Chamber of Commerce and Industry, the significantly higher budget is a clear signal to both the local and international business community that the UAE has the ability and the willingness to pursue the growth path (Augustine). Seven emirates; Abu Dhabi, Dubai, Sharjah, Ajman, Umm al-Quwain, Ras al-Khaimah and Fujairah constitute United Arab Emirates (UAE). All these seven emirates have cultural uniqueness which helped UAE to bring all of them under one umbrella. Abu Dhabi is the largest emirate in UAE whereas Dubai is believed to be the business hub in Middle East. Expatriate population is one of the major constituents of UAE population. Like most of the other Middle Eastern countries, oil is one of the major revenue sources for UAE also. However, business plays an important role in the economic development of UAE. Real estate sector is rapidly developing in UAE as a result of the development of business. Huge constructions are going on everywhere in UAE and World’s highest skyscraper, Burj Dubai (later named as Burj Khalifa) in Dubai is the latest ion this list. Prominent international companies like Microsoft, Apple, Toyota, IBM etc have their business units in UAE. Global recession has caused some problems to Dubai’s development. However, the timely interference of Abu Dhabi helped Dubai to come out from the hopeless situations. Tourism is another major revenue source for UAE, especially for Dubai. Dubai shopping festival which lasts for many months every year has caught the attention of the global public. Since Dubai is a place where lots of expatriates are working, many of the foreigners visit Dubai during the shopping festival season in order to visit their relatives and to purchase something. Zacharia et al (2002) have pointed out that “changes in the immigration policy of the UAE government, completion of major infrastructure projects and economic recession in the region have reduced substantially the demand for unskilled and semi-skilled labourers in the UAE. These new policies are part of the demographic balancing or the emiratization process in which UAE has taken steps to ban visas for unskilled Asian workers (Zacharia et al). When we write about the economic development of UAE, nobody can underestimate the contributions of the expatriate workforce. In fact Indians, Pakistanis, Bangladeshis, Sri Lankans etc contributed heavily to the development of UAE. However, at present UAE is facing a problem of demographic imbalances. In other words, the number of expatriates in the country is more than the number of locals which is not good signs for any country. UAE government is confused over the management of expatriate workforce. If UAE government put restrictions on immigration, it will affect the ongoing construction works in UAE. On the other hand, it is impossible for UAE to stay inactive after watching the increasing expatriate workforce in the country. Locals in UAE are not much interested in doing hard works like the works on construction sites, factory works, or any other high labor oriented works. Under such circumstances, it is difficult for UAE to prohibit immigration. Moreover, the entire world is facing severe skilled labor shortage at present. Under such circumstances, the availability of skilled labor from overseas countries is definitely a blessing to the economic development of the country. (Facts and Figures) John and Keith (1998) have argued that immigrants may expand trade with their country of origin, owing to superior knowledge of, or preferential access to, market opportunities. They also pointed out that a 10 per cent increase in immigrants is associated with a 1 per cent increase in exports to the immigrant's home country (John and Keith). In other words, immigration can increase the trade tie up between countries. It should be noted that the biggest trade partners of UAE is India. This is because of the high percentage of immigrant community from India in UAE. Dubai world, Dubai media city like big companies are currently investing in India; same way many Indian companies invested heavily in UAE. “In 2004 Cochin Port granted DP World the permission to operate the existing Rajiv Gandhi Container Terminal and to develop the International Container Transhipment Terminal (ICTT) at Vallarpadam” Kerala, India (India, Vallarpadom). Moreover, recently Dubai Internet City signed an agreement with Kerala government for the development of smart city, an IT project in Kerala. The chart below shows the relative GNI/capita of the UAE, the UK and the south Asian countries, which are home to the UAE's migrant community” (Facts and Figures) The Economic Boom in Saudi Arabia “Among developing nations, as categorized by the United Nations in 2005, Saudi Arabia ranks thirty-second out of 103 countries on the Human Poverty Index, ahead of most of its Middle East neighbors” (Library of Congress – Federal Research Division, 2006, p.9). Saudi Arabia is another country in the Middle Eastern region which develops rapidly. Stronger oil prices are the major reason why economic boom is taking place in Saudi Arabia. The economy of Saudi Arabia is heavily dependent on oil revenues. Nobody expects an oil price dip in future because of the exhausting oil resources. Because of the strength of economy, Saudi Arabia is able to provide lot of social security measures to its public. Saudi Arabia offers a wide range of social welfare programs such as support for workers or their families in cases of disability, retirement and death. Moreover, plan to cover employees who suffer occupational hazards, social security pensions, benefits and relief assistance to the disabled, elderly, orphans and widows without income, monthly stipends depending on individual status and need etc are some other social welfare policies in Saudi Arabia (Social Services Network, 2010). Saudi Arabia is the largest country and the largest economy in the Middle East region. Apart from oil resources, industrial growth also contributes heavily to the Saudi Arabian economy. No other country in the Middle East has the same amount of industrial units in Saudi Arabia. “Saudi’s manufacturing base is almost three times that of the neighboring countries” (The Economic Boom in Saudi Arabia, p.1).Political stability is one of the major reasons for the economic development of Saudi Arabia. Islamic administration is strictly implemented in Saudi Arabia and it is impossible for people to engage in any attempts to destabilize the country. America is one of the biggest trading partners of Saudi Arabia. The problems in Libya opened many opportunities to Saudi Arabia as a far as oil revenue is concerned. Libya is unable to export enough oil products because of the current internal agitations. The Libyan government is more focused on fighting against the agitators rather than increasing the oil production for reaping the benefits as a result of the higher oil prices at present. Saudi Arabia is utilizing this opportunity very much and they already increased the oil production in order to fill the gap created in oil supply by Libya. KSA GDP growth is now projected to be 5.6% in 2011. This is the highest growth rate since 2004-2005. The two recent Royal decrees mean this oil windfall is going directly into the economy. The two announced decrees total over $133B in new government spending (without any deficit spending). This is about 30% of the entire economy (GDP approximately $430B in 2010). Increases in government salaries (the majority of employed Saudis work for the government) mean that consumer spending is also going to increase. This will fuel the non-oil economy, which is expected to grow at 4% in 2011(Towson) “GDP (purchasing power parity) of Saudi Arabia in 2010 was $622.5 billion which was 23 rd in the world. In 2009, it was $599.7 billion whereas in 2008, it was $599.1 billion” (Economy Overview). The above statistics clearly shows that the Saudi Arabian purchasing power parity is increasing every year. 2010 showed significant positive changes from the statistics of 2009 and 2008. In other words, Saudi Arabia is developing in the right direction and it is reflected in the higher living standards of the people. Conclusions Qatar, United Arab Emirates and Saudi Arabia are the rapidly developing economies in Middle East. United Arab Emirates economy is dependent on oil revenue, tourism revenue and business revenue whereas Saudi Arabian economy relies mainly on the oil revenue and the revenue from the manufacturing sector. Saudi Arabia is by far the biggest industrialized country in Middle East. On the other hand, Qatar is blessed with oil resources, marine products, tourism revenues, real estate revenues etc. Even though the economy of these countries are heavily dependent on oil resources, business, tourism, industrial revenue, revenue from marine products, etc are other major reasons for the economic boom in these countries. Works Cited 1. Augustine, Babu Das. “UAE Cabinet Approves 2009 Budget of Dh 42.2 Billion”. 2008. Web. 12 April 2011 2. “Economy Overview”. 2011. Web. 12 April 2011. 3. “Facts and Figures”. Web. 12 April 2011. 4. “India, Vallarpadom” Web. 12 April 2011. 5. Library of Congress – Federal Research Division. “Country Profile: Saudi Arabia” 2006. Web. 12 April 2011 6. “Qatar Population”.2009. Web. 12 April 2011 7. “Qatar”. 2005. Web. 12 April 2011 8. “Qatar GDP - Real Growth Rate”. 2010. Web. 12 April 2011. < http://www.indexmundi.com/qatar/gdp_real_growth_rate.html> 9. Riess John and Head Keith. “Immigration and Trade Creation: Econometric Evidence from Canada”. 1998. Web. 12 April 2011 10. “Social services network”.2010. Web. 12 April 2011 11. “The Economic Boom in Saudi Arabia”. 2010. Web. 12 April 2011. 12. Towson, Jeffrey. “Saudi Arabia's Economy Is Experiencing Its Largest Boom In Years”. 2011. Web. 12 April 2011. 13. Zachariah K C, Prakash B A and Irudaya Rajan S. “Gulf migration study: Employment, wages and working conditions of Kerala emigrants in the United Arab Emirates”. 2002. Centre for Development Studies, India, Web. 12 April 2011 Appendix Year GDP - real growth rate Rank Percent Change Date of Information 2003 3.40 % 88   2002 est. 2004 8.50 % 15 150.00 % 2003 est. 2005 8.70 % 20 2.35 % 2004 est. 2006 8.80 % 22 1.15 % 2005 est. 2007 7.10 % 47 -19.32 % 2006 est. 2008 8.40 % 30 18.31 % 2007 est. 2009 13.40 % 3 59.52 % 2008 est. 2010 9.50 % 2 -29.10 % 2009 est. 2011 19.40 % 1 104.21 % 2010 est (Qatar GDP - real growth rate) Read More