During several decades, the UAE underwent rapid economic growth and became one of the world’s most advanced countries. Nowadays, the country has one of the highest levels of income among other industrialized states. All these significant achievements were largely supported by massive oil revenues, which allowed the UAE to short-cut a challenging economic development process and contributed to the evolution of other national industries.
The exploitation of vast oil and mineral resources was one of the major drivers of the UAE’s economic progress. “In 2000, proven oil reserves in the UAE were 98.8 billion barrels, the third largest oil reserves in the world after Saudi Arabia, and Iraq” (Shihab, 2001, p. 250). Additionally, in 2000, natural gas reserves accounted for 6 trillion cubic meters (Shihab, 2001). Although the oil sector’s role in the economy remains crucial, over the past decades, the UAE has significantly reduced its dependence on hydrocarbons. “Oil industries accounted for around 30 per cent of GDP in 2014, down from 79 per cent in 1980” (UAE Government, n.d., para. 3). The UAE has actively supported manufacturing outside the oil sector. Ghanem (2001) observes that rapid industrialization was directly related to the construction boom, which contributed to the development of construction-related industries including machinery and equipment, food processing, textile, metal, and other industries.
Nowadays, the UAE economy is substantially supported by the tourism industry. The national travel, hospitality, and tourism sectors rise due to low-tax policies and the free-market system. A favorable, liberal environment attracts many international investors and facilitates the establishment of long-term partnerships with a great number of global enterprises. For instance, it is observed that the UK tourism sector tends “to expand towards the UAE and as well to ensure trade partnerships with the rapid booming tourism sector of the UAE” (Oil economy to tourism economy, 2016, para. 2). In this way, the country is becoming one of the main destinations for business and leisure visitors. The given favorable position allows it to decrease the dependence on oil manufacturing.
Although there was significant growth in the non-oil sector over the last thirty years, oil revenues were the major funding source for the large-scale development of the public and private sectors’ infrastructure. Based on this, Haouas and Heshmati (2014) suggest that, in the upcoming future, the Emirati economic sustainability will largely depend on prices and demands within the global oil market. At the same time, to maintain its current pace of economic growth in the future, the country should continue to invest in various non-oil sectors, including tourism, air transport, alternative energy, manufacturing, etc. It is suggested that the creation and enhancement of the favorable environment for trade and investment in multiple sectors, including the new ones, such as aerospace and technology, will positively influence the UAE economy (Said, 2016).
The literature review findings reveal that the rapid UAE economic growth was due to a large supply of oil and gas resources. Oil revenues allowed the development of other economic sectors helping the country to decrease its dependence on hydrocarbons. Thus, to stimulate further economic development, the country should strive to attain greater oil revenues and cost efficiency while, at the same time, following the course of economic diversification. The progress within these two directions will foster greater economic flexibility and help avoid possible crises due to a high dependence on oil and gas.
Ghanem, S. (2001). Industrialization in the UAE. In P. Vine & I. Al Abed (Eds.), United Arab Emirates: A New Perspective (pp. 260-276). London, UK: Trident Press.
Haouas, I., & Heshmati, A. (2014). Can the UAE avoid the oil curse by economic diversification?. Retrieved from Institute of Labor Economics. (IZA DP No. 8003)
Oil economy to tourism economy, UAE. (2016). UAE Business. Web.
Said, R. R. (2016). UAE economic diversification record. Trends: Research & Advisory. Web.
Shihab, M. (2001). Economic development in the UAE. In P. Vine & I. Al Abed (Eds.), United Arab Emirates: A New Perspective (pp. 249-259). London, UK: Trident Press.
UAE Government. (n.d.). Economy of the UAE. Web.