The Economic Development Process - the UAE and Norway Economies Comparison - Case Study Example

Name: Course: Tutor: Institution: Date: UAE and Norway Economies Comparison Table of Contents Table of Contents 1 1.0 Introduction 2 2.0 GDP Value 2 3.0 Employment and Unemployment Rates 5 4.0 Balance of Payment 8 5.0 Interests and Inflation Rates 11 6.0 Lessons and Conclusion 13 Works Cited 15 1.0 Introduction The global market is gradually changing. In this case, the last two decades have experienced a series of changes in global market economic realignments with the emergence of new economies. However, the economic growth process is a risky and changing topography as different national and regional aspects impact on nation’s development agenda. Some of the emerging economies globally include the UAE and Norway nations respectively. This report offers a review of the economic development process and trends between the two nations. As such, it evaluates the existing economic similarities and differences between the different aspects, and eventually reviews the conditions and the impacts of the different economic situations to business environments in the respective nations. Among the reviewed economic elements in the study include the GDP value growth trends, per capita income, unemployment rates, interest rates, and the balance of payment respectively. 2.0 GDP Value The Gross Domestic Product (GDP) value is a measure of the value of all the goods and services within the boundaries of a given nation. In this context, the overall GDP values are a representation of all the production activities in a nation, for both the domestic and foreigners in the market. The above measures are used to evaluate the nature and capacity of a nation to develop and grow its economy in the long run period. Figure 1: UAE GDP growth rates Figure 2: Norway GDP Growth rates The above figure develops a clear illustration of the UAE and Norway countries economic GDP growth rates over the years. In this case, the analysis indicates that the GDP growth rate has been changing over years rising and declining effectively. On one hand, an evaluation of the growth trends in both nations indicates a range of similarities. On one hand, both countries have had less that 10% growth rates in the last decade. In this case, although fluctuating over the years, the growth rate has not expanded to over 10% (Zawya, 2015). This is due to the already developed economies in both countries where they are almost actualizing their resource potentials. However, besides similarity, both GDP rates have varied levels of growth. In this case, an evaluation of the Norwegian economy illustrate that the economy has had a marginal 1% growth rate, while that in UAE has had over 5% growth rates over the last decade. The differences in the growth rates could be attributed to a number of factors. One among the factors is changes in the nation’s literacy levels. In this case, a nation’s literacy level is an indication of the number of available skilled workforce in the market. In this case, the more a nation has a skilled workforce, the higher the chances of economic growth. On one hand, an evaluation of the Norway GDP as of 2014 illustrates that the nation had a total GDP of $ 500.10 Billion (World Bank, 2015a). This was a representation of over 0.81% of the total global GDP as computed by the World Bank. However, although a high GDP value, it had a les that 1% growth rate. On the contrary, the UE had a $ 401.65 Billion GDP value with a higher growth rate of 4.65 in 2014 (Zawya, 2015). Thus, the differences could be explained through the respective nation’s differences in available resources such as labour. On one hand, Norway attained a perceived 99% literacy level in 2011. This implies that the workforce has gained optimum skills to enable it produce. To this end, the high literacy level in the Norwegian market is an illustration of the quality of skills in the literate workforce. However, with the fact that the nation has attained its optimum in developing the skills through education, there is a relatively lower GDP growth rates. On the other hand, the UAE market is increasingly raising the literacy levels. In this case, the World Bank notes that the literacy level has increased over the years to 76.9% in 2014 (World Bank, 2015). This is an illustration that the economy has increasingly expanded its potential to prude by increasing the quality of the respective and potential employees in the market. The above analysis indicates that although both nations have differing levels of economic development, the higher economic growth rates at UAE should not be interpreted and perceived as a better economic performance over Norway. Instead, this analysis argues that in the next decade, as UAE actualizes its literacy levels optimum, its economic growth rates will slow down to at per with Norway. Nevertheless, due to the availability of a large resource base, Norway is expected to proceed as the superior large GDP based economy Based on the above critical analysis on both the UAE AND Norwegian economy, this analysis concludes that doing business in both markets is a viable alternative. On one hand, the rising literacy levels in UAE represent a growing workforce experience and quality, able to create a sustainable organisational edge in the long run period. Similarly, the high GDP values in Norway indicate the high potential for high customer purchasing power and products demand in the market. Moreover, although with negative economic fluctuations the two economies are virtually stage, thus creating an investment stability security in such markets. 3.0 Employment and Unemployment Rates The concept of the workforce evaluation measure is a critical component in the examination of the rate and extent of economic development and growth in a nation. In this case, the World Bank considers the populations above 15 years as the viable population for employment. In this case, the metrics evaluate the overall population proportion that is active in the production and economic activities. In the evaluation of these aspects, the World Bank reviews the nature of the workforce and how it is active in the market. On the other hand, the World Bank has the unemployment evaluation system that reviews the number of people over 15 years who are unemployed but ready and willing to offer their services (World Bank, 2015). These are the evaluation measures of the number of independent and dependent society members. On one hand, an evaluation of Norway illustrates that the percentage of the active labour force proportion illustrated that the overall percentage ranged between 65% and 66% between the 2011 to 2013 years. On the other hand, an evaluation of the unemployment labourforce proportions indicates that the rates ranged between 3.3% in 2011 to 3.5% in 2013. This is a demonstrated in figure below Figure 3: Unemployment Rates in Norway On the other hand, an evaluation of the UAE indicates that the UAE labour participation rates were between 75 to 77 between 2011 and 2013 years respectively (Zawya, 2015). On the other hand, the number of the unemployed but willing to work population in the society was at 9.8% and 9.9% (World Bank, 2015). Further traditional statistics are as illustrated below Figure 4: Unemployment Rates in the UAE An evaluation of the two nation’s employment and unemployment rates indicate a number of similarities as well as differences respectively. On one hand, a key similarity is the relatively high number of employments in the nations. This is caused by the fact that both nations have enough resources and economic activities allowing for increased employment opportunities in the market. However, a major difference arises in the unemployment rates. In this case, it is imperative to note that although UAE had the highest number of actively employed employees; it also had the highest unemployment rates of over 9% as compared to Norway at less than 4%. The above disparities and mismatch between the high number of the employees and the similarly high number of unemployment rates in UAE could be illustrated through the population structures in the market as well as the social policies applied in both nations. On one hand, an evaluation of the UAE population structure illustrates that the nation has its highest population density in the between 20 to 50 years population (World Bank, 2015). As such, this is a productive workforce, that is highly and willing to offer their services in the market. As such, although there is a high employment rate in the market, the unemployed persons remain productive, creating the high national unemployment rates. On the country, the Norwegian population, similar to other European nations is gradually shifting towards an aged population. In this case, the population is fundamentally aged and is among the senior citizens, who are non-productive and not interested in active employment opportunities. In addition, Norway has a social support system for its senior citizens, ensuring that they receive due care and support. Consequently, the senior and aged citizens are less willing to participate in active employment, resulting to a low unemployment rates in the market. Based on the above analysis, it is apparent that although both nations have shared economic employment rates in the market, there is a higher unemployment in UAE compared to Norway Unemployment means that there are many employees willing and ready to participate in organsiational workforce operations. As such, this creates a larger pool of potential employees in UAE as contrasted to Norway. Further, it allows for the payment of relatively lower wages in UAE as opposed to Norway, where a majority of the available employees are actively employed, implying that they are passive job seekers. Thus, this analysis establishes that starting up a business in the UAE would be relatively cheaper, in terms of labour costs as compared to Norway. 4.0 Balance of Payment The balance of payment is classified as a tool through which the amount of trade in a country is evaluated. In this case, the BOP of a country is evaluated as the amount of trade both outside and inside a country. In this case, it evaluates the total cash outflows as contrasted with the total cash inflows in a country. The evaluation of the BOP in any country is an investment evaluation tool. On one hand if there are excess cash inflows, it is characterized as a positive BOP, and it illustrates the availability of enough finances in a country to support an organization. On the other hand, if there are excess outflows, it is classified as a negative BOP, and indicates that although a nation could have a high GDP value, much of the earned values are mainly by foreigners and end up out flowing to their respective foreign countries. An evaluation of the Norwegian BOP values indicates that the nations have its BOP ranging from $ 66.543 Billion and $ 50.961 Billion in 2011 and 2013 respectively. On the other hand, the UAE BOP values were $7.678 Billion and $ 10.487 Billion in 2011 and 2013 respectively (World Bank, 2015). The above analysis illustrates that both nations have positive BOP values, indicating positive BOP values. As such, the general conclusion derived from the above reviews is that in both nations, there is a surplus of outputs and exports as compared to the overall inputs. Consequently, in both nations, there is a rising economic growth rate, with higher earnings in the long run period. This leads to the assertion that establishing and running business ventures in both of these markets is a viable alternative. In this case, with positive BOP values, the economy will grow crating increased development and potential for long term market profitability. Nevertheless, besides the positive bop similarities, a number of factors are different between the two countries. On one hand, Norway has a higher BOP value that UAE. This means that the overall net exports for Norway are way higher that in the UAE. This could be as a result of a number of factors. First, as already illustrated in the GDP analysis, Norway has a higher GDP value that UAE, which creates a larger export base for the nation. Secondly, this could be analyzed in terms of the market structure. On one hand, Norway encourages domestic production and investments. As such, rather than importing a majority of the products, the nation has encouraged joint ventures and partnerships in the nation, to increase production capacity. On the contrary, although the UAE similarly encourages production, the market mainly relies on oil production. Thus, the government ensures the development of systems for exporting the oil and as such importing other relevant market products. This has led to high importation rates in the market, reducing the net oil export values in the long run period. However, a review of the trend in BOP values indicates that while as Norway is declining in value, the UAE BOP value is on the rise in the last three consecutive years. On one hand, the Norwegian market is facing an increasing market concern for terms of trade balance. In this case, a majority of its trade nations both in Europe and Africa are demanding favorable terms, by requiring that the nation should similarly import products from such nations. Consequently, in the process of creating equal trade opportunities, Norway has steadily reduced its BOP values. On the contrary, the UAE is among the emerging global markets. In this case, the nation is increasingly seeking to diversify its economy from oil exportation reliance to include other factors such as tourism and production. In this case, as tourism attraction serves as extra service exportation, its exports are rising, creating a rising and increasing BOP value. The trend is expected to project and rise into the future. Based on the above understanding, it is evident that Norway as an already mature economy, is inclined to apply the comparative theory and focus on aspects it is best suited for, while importing other product and services from its trade partner countries, as a means of creating a balance and undemanding. On the other hand, the UAE nation, as an emerging market will increasingly diversify its operations to increase market exportations. Thus, for Norway, only the business ventures that are in line with the nations comparative advantages such as in agriculture would be successful in the long run period. On the contrary, the UAE government is bound to encourage relationships and joint ventures through subsidies and tax holidays to encourage increased GDP and domestic production for exportation. Thus, this analysis argues that based on the expected future trends in BOP terms, UAE presents the most viable business investment opportunity. 5.0 Interests and Inflation Rates An interest rates is described s the amount of money charged to a borrower on a loan. The computation of interest rates is determined on an annual basis. In this case, the interest rates in a nation have a number of far reaching effects. On one hand, they affect the extent to which the different members can access loans form financial institutions for development. Moreover, they impact on money demand and supply equilibrium in the market. Based on this understanding, an evaluation of the Norwegian interest rates are at the lowest ever at 0.75% in September 2015. This and other past data are illustrated in the figure 5 below Figure 5: Norway Interest Rates changes Moreover, an evaluation of the interest trends indicates that the nation interests’ rates have been on a decline in the last decade, with the highest interest rates at 11% in the last one decade. On the other hand, an evaluation of the UAE interest rates indicates that the nation has an average of 1% interest rate, with the highest at 4.5% in 2007. This was especially prior to the 2008 global financial crisis. The disparities and changes in the two nation’s interest rates indicate a relatively low interest rates margin (World Bank, 2015). This is an indication of relatively stable economies, as indicated by the different inflation rates in both countries. On one hand, the Norwegian current inflation rate was at 2.0% in 2014, up from 1.4% in 2011. Similarly, the UAE market inflation rate of 2.35% from 0.67% in 2012. The above inflation rates are in relation to the average world inflation rates of 3.9% in 2013.The above analysis can be used to explain the shifts in the market interest rates as well as the implications of such changes in the overall business market and scenarios respectively. On one hand, Norway has the lowest inflation rates in the market, which is a whole 1% below the global inflation rates (World Bank, 2015). As such, this means that the loss of value for money in the Norwegian market is relatively lower as compared to the average global market rate. Consequently, this lead to lower NPV of loans in the market. Similarly, although slightly higher that Norway, the UAE inflation rates are lower than the world inflation rates. Consequently, the loss of currency and money value and depreciation rate is similarly low, leading to low interest rates. Banks and other financial lending institutions charge interests rates as a means of ensuring that they not only create profits, but also cover the loss of money value and depreciation. A high interest rates market is characterized by a low money supply creating challenges in business financing. However, an evaluation of both economies indicates a suitable financial environment to start up a venture in both markets. However, comparing the two, the analysis establishes that Norway has a lower interest rate as well as low inflation rates, thus minimal prospects of increasing market interest in the future as compared to UAE. This makes the Norwegian market a viable business opportunity more than UAE. 6.0 Lessons and Conclusion In summary, the above report offers a critical analysis and evaluation of the Norwegian and UAE economies. In this case, the report is developed with a strategic aim of evaluating the changing business environments in relation to economic changes, and the most viable market option for business operations between the two. In this context, the analysis reviews a number of economic development and growth factors such as GDP values and growth rate. Employment and unemployment rates, BOP, and interest and inflation rates elements respectively. On one hand, an analysis of the market GDP, illustrate that although Norway has a higher GDP value, the UAE has a higher growth rate, linked to its rising labour market skills and literacy levels. This leads to the conclusion that investment in the Norwegian market creates a higher opportunity for availability of resources. However, it exposes business ventures to high labour costs, making the UAE the most viable option. In addition, the analysis reviewed the concept of employment and unemployment, where the UAE led in both instances. This is mainly due to its high number of productive employees, making it again a viable business market opportunity, due to the availability of a large pool of qualified labour. Further, an evaluation of the BOP terms indicate that the UAE although with a lower BOP value to Norway, its values are on the rise while Norwegian BOP is declining. Hus, this creates a possible opportunity for future exportations from the market, making it ideal for business investment and operations. Finally, a review of interest and inflation rates indicated that Norway has lower rates than UAE and the world average rates. Thus, this reduces the cost of doing business and affording capital, making it ideal for investment and business operations into the future. However, based on the many merits and business success based economic factors in the UAE, the study concludes that businesses in the UAE market have a higher survival opportunity than those in Norway in the long run period. Works Cited The World Bank, The Database, 2015. Web. Accessed 6th October 2015 Zawya, The Database. Web. Accessed 6th November 2015. Read More