International Political Economy - the United Arab Emirates - Case Study Example

International Political Economy: United Arab Emirates The UAE is a country that consists of seven emirates such as Abu Dhabi, Dubai, Sharjah, Ajman, Ras al-Khaimah, Fujairah, and Umm al-Quwain. Abu Dhabi is the capital of Dubai and it is the biggest emirate in the country. Even though the size of Dubai is extremely small compared to other major cities in the world, it is considered as the business hub of the Middle East. Each emirate in the UAE is ruled by separate rulers even though the country as a whole is ruled by the President and Prime minister. As per the existing UAE laws, Abu Dhabi ruler will be the president of the country whereas the Dubai ruler will act as the prime minister of the country. As in the case of many other Middle Eastern countries, Islamic dictatorship is prevailing in the UAE. Even though UAE has a cabinet, most of the cabinet members of the ministers are the members of the ruling family from different emirates. The economic growth in UAE is phenomenal during the last 30 years period. The following illustration provides a rough idea about UAE’s GDP growth in last 10 years. (Trading economics) The recent global recession has caused major problems to UAE’s economic growth in 2010 and 2011 period. Since then it is gradually increasing. “GDP Growth Rate in the United Arab Emirates averaged 4.66 percent from 2000 until 2013, reaching an all time high of 9.80 percent in 2006 and a record low of -4.80 percent in 2009” (Trading economics). 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). While most of the other Middle Eastern countries make use of their oil resources for economic growth, UAE has many other channels along with oil resources to streamline its economic progress. For example, business is one of the major revenue sources of the UAE. This paper analyses the last thirty years policies and strategies that helped UAE to become a prosperous country now. “There has been some tension at the federal level, but not of such a kind that the organisation of political power has changed. In addition, the federation is not experiencing any organised political opposition or any immediate threat of invasion” (Aartun) One of the major reasons for the current economic growth in the UAE is its political stability during last 30 years period. Many of the Persian Gulf states have undergone many political changes in the recent past. People in such countries have fought against their administration. For example, UAE’s neighbouring countries such as Libya, Tunisia, Iraq and Egypt had undergone unstable political climate in recent times. The dictator administrations in these counties were toppled by the agitations from the public. Moreover, countries such as Bahrain and Saudi Arabia are facing public protests against the present administrations. However, UAE has never faced such agitations from the public in recent times. The rentier model theory formulated by Hossein Mahdavy in 1970 seems to be applicable in the case of the UAE. This theory is mostly applied to states that have immense natural resources such as oil. The rentier model defines a rentier state as a state in which a substantial portion of the national revenue is derived the rent of indigenous resources to external clients (Hossein). Applying this theory in the UAE’s politics, it can be understood that the political stability in the UAE is created by oil revenues. “There exists a social contract between the ruled and the rulers. The rulers offer the ruled economic welfare in exchange for political support. In this way the government is able to buy off any political opposition that may arise, and the social contract becomes a political strategy to maintain political power” (Aartum). The wealth distribution is even in the UAE compared to that in other Middle Eastern countries. In other words, the gap between the rich and the poor is small in UAE. The UAE government is keen on providing enough financial helps to the poor people in the country. For example, the indigenous UAE residents staying in the deserts are getting a lot of benefits and financial aids from the government. “The oil revenues enabled the government (the rulers) to establish generous welfare programmes, without having to require income tax from its citizens. In addition, the government provides nationals with jobs that the nationals find acceptable, and use foreign labour to fill the gaps in the labour market” (Aartum). As a result of that, they are almost satisfied with the present administration. The inflation rate in the country has reached a record high 12.3% in 2008 and a record low 1.73% in 2010. (ECR) It is evident that the welfare measures and economic reforms implemented by the government are helping UAE to reduce the inflation rates to such a low level. At the same time, unemployment rate in UAE is steadily increasing. (ECR) It is necessary for the UAE government to strengthen its policies to reduce the unemployment problem as much as possible. The major reason for the increasing unemployment problem in UAE is the reluctance of the locals in accepting hard labour oriented professions. They are ready to work only in white collar professions. The following illustration provides the employment and unemployment statistics among different age groups. (ECR) Compared to many other countries in the world, the federalism in the UAE is extremely different. Each emirate in the UAE has separate administrations even though they function under the leadership of Abu Dhabi. Moreover, the federation does not have any claim on the revenue sources of its member emirates. The natural resources like oil are the private property and it is utilized by the individual emirates. For example, only Abu Dhabi and Dubai have oil resources in the UAE. That is why they became the wealthiest emirates in the UAE. “The wealthiest emirate, Abu Dhabi, is the major receiver of the oil rent, and subsidies the smaller emirates. In return, the ruling family of Abu Dhabi requires loyalty from the other ruling families. Dubai is the only other emirate with oil, and is therefore a special case. It is the only other emirate that contributes to the federal budget, and thus has some political power” (Aartum). Since all emirates in the UAE are getting many benefits and financial aids from Abu Dhabi and Dubai, they are ready to accept the political supremacy of these emirates in administrative matters. That is why UAE is rules by an Abu Dhabi President and a Dubai Prime Minister all the time. Apart from oil resources, UAE has many other revenue sources. The following graph provides an idea about the non oil exports of UAE from 2005. It is evident that non oil export is increasing gradually in UAE in recent times. (ECR) Another important reason for UAE’s economic progress in the last 30 years is the absence of strict cultural norms. The Constitution of the United Arab Emirates (UAE) upholds the right of the people to get equal treatment in all respects. Even though the constitution has identified the primary role of women as wives and mothers, it stresses the importance of avoidance of gender-based discrimination (Freedom House). As per the 2009 statistics, 62.7% of the UAE population is males while females constitute only 32.7%. (ECR) UAE administration is keen on providing enough liberties to the public. Unlike administrations in countries such as Saudi Arabia or Kuwait, people in the UAE are getting enough liberties and freedom. For example, UAE women can work with men without any problems. Moreover, they can drive their vehicle and go out alone. But in countries such as Saudi Arabia, such things are unimaginable. The UAE ratified the Convention on the Elimination of All forms of Discrimination against Women (CEDAW) in 2004 (United Nations Treaty Collection (UNTC))  “The UAE is considered one of the least corrupt countries in the Middle East. It was ranked 28 out of 183 countries surveyed in Transparency International’s 2011 Corruption Perceptions Index” (Freedom House). It should be noted that corruption is one of the major problems facing by all countries in this world irrespective of whether the country is developed or developing and autocratic or democratic. For example, China and India are two of the most rapidly developing economies in the world at present. However, the corruption rate in these two countries is extremely higher compared to that in other countries. Many economists believe that India and China could have developed even further if these countries were able to identify some mechanisms to stop corruption. The case of UAE is totally different. The country is able to put strong measures in place to stop corruption. The laws against corruption are strong in the UAE. Therefore, people in the UAE are not showing courage to engage in activities related to corruption. Freedom of expression right is limited in most of the Middle Eastern countries. However, UAE’s case is different in this regard also. UAE’s constitution provides provision for giving restricted rights to people in terms of freedom of expression. It should be noted that such rights are totally absent in most of the other Middle Eastern countries. At the same time, it is necessary for the UAE to provide more freedom of expression rights so that the country’s political and economic climates will be benefited from it. The 1980 Printing and Publishing Law applies to all media and prohibits “defamatory material and negative material about presidents, friendly countries, [and] religious issues, and [prohibits] pornography.” Consequently, journalists commonly practice self-censorship, and the leading media outlets frequently publish government statements without criticism or comment. However, Dubai has a “Media Free Zone,” where print and broadcast media is produced for audiences outside of the UAE with relatively few restrictions (Freedom House). Along with freedom of expression rights, UAE is different in terms of religious freedom also. Even though Islam is the official religion in the UAE, “the constitution provides for freedom of religion”(Freedom House). As a result of that it is possible for all people in the UAE to worship their Gods. It should be noted that UAE is one of the major countries in the Middle East in which the services of expatriates are exploited aggressively. In fact, the number of expatriates in the country is more than that of the locals. The expatriate working force is instrumental in streamlining UAE’s economic progress. It should be noted that locals are not much interested in working in hard labor oriented professions. For example, more than 90% of the professionals working in the constructions sectors of UAE are expatriates. According to Aswathappa & Dash (p.262), people working in the multinational companies in UAE belong to different countries, backgrounds and socio-cultural origins. These people have different religions, customs, traits and beliefs. Unlike many other Middle Eastern countries, UAE does not have any problems in allowing its diverse workforce to worship their Gods. One of the major reasons for UAE’s economic progress at the moment is its ability to exploit the services of expatriate workforce. “With 80% of the UAE’s population being foreign born, the country is often considered an expat’s paradise” (Krehmer). Just like developed countries such as America and European countries, UAE is also struggling because of the lack of manpower. The available local workforce is incapable of fulfilling the manpower requirements required for the UAE at present. Considering the huge volumes of construction works and business activities going on in the UAE, it is impossible for UAE to think about neglecting the services of the expatriates. Even though opportunities are more, shortage of locally available talents forced both domestic and international companies in UAE to hire human resource from all over the world including America, Europe, China, India, Pakistan, and so on (Roberts, et al., p. 93). As per the 2009 statistics, “There are around 3.2 million multinational employees working in 260,000 companies in the UAE” (AME Info). At present, UAE is trying to strengthen its local workforce. Many of the UAE firms have already started offering pre-employment training programs, for UAE school leavers and other qualifying nationals (Kelly). As part of the strengthening of the local workforce, UAE is presently increasing the quality of education in the country. Moreover, many of the locals are currently seeking better education from US and UK universities. All these efforts are helping UAE’s economic growth in one way or another. The following illustration provides an idea about the educational status of UAE in 2009. (ECR) It is evident that literacy percentage (94.7%) in the country is considerably high at the moment. At the same time, only 21.1% of the population had a university degree and 3.8% had post graduate degree as per the 2009 statistics. UAE has to improve this statistics further in order to streamline its economic progress. To conclude, UAE has developed rapidly in the last 30 years mainly because of its ability to maintain political stability. While many of its neighbouring countries have undergone drastic political changes, UAE was able to resist such changes. The political leaders in the country were able to reduce corruption rate as much as possible and they were able to reduce the income gap among the rich and poor in the country. UAE has no problem in allowing its expatriate workforce to practice any religious beliefs. Moreover, freedom of expression rights is given restrictively to the public. Above all, UAE is one among the few countries in the Middle East that have good statistics in terms of avoiding gender discrimination. All these factors helped UAE to develop properly in the last thirty years. Works Cited Aartun, Anne Louise. “The Political Economy Of The United Arab Emirates: An Analysis Of The UAE As An Oil Rentier State”. 2002. Web. 24 December 2014. Aswathappa, K & Dash, Sadhna. International Human Resource Management, Tata McGraw-Hill Education, 2007, Print Augustine, Babu Das. “UAE Cabinet Approves 2009 Budget of Dh42.2 Billion”. Gulf News. 31 October 2008. Print AME Info. “UAE multinational workforce reaches 3.2 million in 206,000 firms”. 2009. Web. 24 December 2014. http://ameinfo.com/blog/company-news/a/al-hanoo-holding-co/uae-multinational-workforce-reaches-million-in-firms/ ECR. United Arab Emirates. Web. 24 December 2014. http://www.euromoneycountryrisk.com/Wiki/United-Arab-Emirates Freedom House, “United Arab Emirates”. Web. 24 December 2014. Hossein Mahdavy, "The Pattern and Problems of Economic Development in Rentier States: The Case of Iran", in Studies in the Economic History of the Middle East, ed. M.A. Cook (Oxford University Press, Oxford 1970). Print Kelly, John. “Rethinking Industrial Relations: Mobilization, Collectivism and Long Waves”. Routledge: 1998. Krehmer, Peter, B. “Living in the UAE”. Web. 24 December 2014. http://www.internations.org/uae-expats/guide/living-in-the-uae-15537 Roberts, K., Kossek, E., & Ozeki, C. “Managing the Global Workforce: Challenges and Strategies,” Academy of Management Executive 12(4),1998, pp. 93-106 Trading economics. “United Arab Emirates GDP Growth Rate 2000-2014”. Web. 24 December 2014. http://www.tradingeconomics.com/united-arab-emirates/gdp-growth United Nations Treaty Collection (UNTC). “United Nations Treaty Conventions: Convention on the Elimination of All forms of Discrimination Against Women, countries ratified” 2013. Web. 24 December 2014. Read More