The Strategic Growth of TechnoPark, the UAE Macroeconomic Indicators - Case Study Example

Title: Your name: Institution name: TechnoPark is an industrial zone that is located in Dubai and caters for oil and gas, high-tech, research and development, and desalination and water sectors. The strategic growth for TechnoPark largely depends on the manpower (Ghanem 2009). As we know United Arab Emirates (UAE) is endowed with a large pool of human resource that constitute a potential asset to the UAE industrial sector. Yet, most of skills in UAE are not up to the international challenge. It has been found most new businesses in UAE find it difficult to find the skilled labour they require to run their businesses particular in Information technology. The strategic growth of TechnoPark is to make available a wide pool of skilled workers at all levels that will propel the demanded industrial leap in UAE. One such strategy is to provide training system that has been designed to meet UAE’s short, medium and long term goals (Ghanem 2009). Emirates Industrial City Co (EIC) is located in Sharjah. This industrial park has a comprehensive planned industrial and commercial business complex (Ghanem 2009). The strategic growth for this industrial park largely depends on the global market. At present, the domestic market in Sharjah is not enough to achieve the foreseen growth rates in UAE, as the people in UAE still have low purchasing power as compared to people in developed countries. It has been seen when EIC rely n the export markets, it will open new opportunities for export-oriented manufacturing growth strategy (Ghanem 2009). This will encourage domestic companies to join the global value chains where most of business activities take place. The objective of this business park is not only to reinvigorate the technological structure but also increase the level of manufactured exports (Ghanem 2009). The UAE’s sea ports and its related businesses make yearly contribution to the UAE’s economy. The UAE’s ports make substantial investment and significant employers. The results of the Economic Impact Study conducted in UAE state that many local people are employed directly or indirectly as results of UAE’s robust cargo handling operations. Sea ports contribute benefits to UAE’s economy, including generating business development. It is believed activities at various ports in UAE created employment opportunities for more than 2 million people in Emirates, Including nearly 5 million who were employed in importer/exporter related business and support industries throughout the UAE. Economic activities that are related to waterborne commerce in United Arab Emirates contributed approximately 2.5 trillion dollars overall to the UAE’s economy and those organizations that participated in business activities paid approximately 212.5 billion dollars in local taxes. Some of the sea ports are home to cruise ships, which occurs yearly, with more than 2 million revenue passengers on about 250 sailings ship passing through these ports (Ewing 1997). In addition to transport, logistics and distribution, UAE’s ports has been found to have influence on investment and employment in those export and import sectors which rely on the sea ports to ship and receive goods to and from international markets. Therefore, the efficiency of the UAE’s economy is in part dependent on effective and efficient operation of the sea ports, and the capacities of various ports to grow and handle large business volumes (Ewing 1997). Waterborne trade accounts for majority of the global trade in terms of volume and value. Thus, waterborne trade is by far, a competitive mode of transport when you compare it with other modes such as air, rail and road (Ewing 1995). The main advantage of United Arab Emirates’ ports is in its economies of scale, making them the cheapest per unit when you compare them with other mode of transportation, which provide a competitive advantage for heavy industrial activities such as oil companies, steal, automotive companies. The strength of UAE’s ports lies in its coverage and capacity. Road, pipeline and railway transportation are unable to handle such volume dimensions of goods. It much cheaper in term of cost for those industries that imports or export raw materials by water from suppliers that are thousands and thousands of kilometers away than by land or air from suppliers only a few kilometers away (Hoch 1998). In United Arab Emirates (UAE), ports are well managed and the ports benefit every business that use these ports through keeping commerce flowing (Hoch 1998). This will provide a competitive advantage to those industries that use the port through keeping the cost of transportation to be down and ultimately makes products more affordable to the end users (Hoch 1998). PART II Analysis of UAE Macroeconomic Indicators GDP Despite the increase in population, through national birth rate and the immigration, the UAE’s GDP per capital has increased significantly. The Emirate’s real GDP per capital grew 11.19 per cent in just five years, reaching 55,600 dollars in 2010. This growth was partly contributed by businesses found in Industrial zones, making the Emirate to become one of the highest income economies in the world. As a result, Emirate’s residents and citizens enjoy high standard of living in Asia (Jasim Al-Ali 2008). Production in Industrial zones increased more than fivefold from 1995 to 2008 at an average yearly growth rate of 12.5 percent. This consistent growth in the Industrial zones has been as a result of Emirate’s government to promote Industrial zones with generous industrial subsidies and incentives (such as personal income tax exemption, export and import tax exemption, 100 per cent corporate tax exemption and commercial levies exemption). Non-oil sector (industrial zones) increased at a moderate rate that increased comprised about 39.7 per cent of the Emirate’s GDP in 2009 from 22.3 per cent in 1998. The country real GDP grew by 5 per cent, and was partly contributed by businesses in Industrial zones (Jasim Al-Ali 2008). Employment The UAE’s industrial zones created in excess of half a million jobs in just one year and this shows the financial crisis has had minimal impact on the UAE’s labor market (Ghanem 2009). This is according to the statistic from the Ministry of Labour. According to the findings from recent survey carried out by Emirates Business, it has emerged that Industrial zones is the leading contributor in the UAE’s labour market, accounting for almost 40 per cent of the new jobs which were created in 2010 (Ghanem 2009). New jobs recruitment has started picking up in Industrial zones and it is estimated there will be an increase of 17 to 20 per cent as compared to last year. Many Economists analyst argue that, businesses in Industrial Zones are preparing to seize new business opportunities (that has been contributed by many factors such as stable UAE’s economy) by hiring the right kind of employees (Jasim Al-Ali 2008). However, the focus will be on hiring high-caliber and specialist’s staff who will help companies found in these zones in revenue generation and, to fill those positions which were left vacant. Economic analysts believe most companies are encouraged to hire new staff because there has been a 20 per cent decline in wages and salaries, while manpower in Emirate is available at lower costs (Ghanem 2009). Fiscal Policy In United Arab Emirate (UAE) monetary policy is typically formulated by the Finance ministry with consultation of the central bank. Both fiscal and monetary policy has been used to influence the performance of the Emirate’s economy, with regards to the businesses found in Industrial zones (Ghanem 2009). For example, during the financial crisis the Emirate economy had slowed down. The consumer spending was down, unemployment levels were up and businesses in Industrial zones were running at a loss. The Emirate’s government responded by reducing the taxations in Industrial zones, so as to discourage job cuts and encourage investing in these zones. In 2009, the Emirate’s government reduce its interbank interest rate, these action by the government helped to stimulate growth in the face of a slowing economy in the Industrial zone (Ghanem 2009). Trade Balance The Emirate government has pursued free market, and the government has tried to diversify its economy away from over dependence on crude oil. Rapid growth in Industrial zones has reduced crude oil’s share of GDP from approximately 60 per cent in early 80’s to 40 per cent in nominal terms in 2009. For example, Emirates and U.S. government entered into an agreement- Trade and Investment Framework Agreement (TIFA) - in 2004, which establish increased trade and investment between the two nations (Ghanem 2009). In 2010, the Emirate’s economy reported a balance of trade surplus in the tune of 187 billion AED. This was attributed to the increase in investment in Industrial zones. Nowadays, the Emirate’s government is becoming less dependent on crude oil resources as the main source of revenue (Jasim Al-Ali 2008). Through various businesses found in Industrial zones, the country has started importing mostly, chemical and food, machinery and transport equipments. It main trading partners are: China, Japan, India and European countries (Jasim Al-Ali 2008). References Ewing, Reid. (1995)."Measuring Transportation Performance." Transportation Quarterly.. Gordon, Cameron.(1997)."Putting Transportation Investments in Context." Transportation Quarterly. Hoch, L. Clinton. (1998, March). "Find the Best Ways to Your Markets." Transportation and Distribution. Jasim Al-Ali, (2008) "Emiratisation: drawing UAE nationals into their surging economy", International Journal of Sociology and Social Policy, Vol. 28 Iss: 9/10, pp.365 – 379 Ghanem, Shihab. (2009). Industrialization in the United Arab Emirates. The University of Michigan: Avebury Publisher Read More