United Arab Emirates and Economics

Institution

United Arab Emirates and Economics

Introduction

The United Arab Emirates is a capitalist country which gives the private investors an opportunity to manage, and maintain commercial and industrial sectors in order to ensure growth and development. The economy has one of the highest Gross Domestic Product (GDP) per capita worldwide. Thus, this allows many people from different parts of the world entering and investing in the economy and also gives them the opportunity to leave whenever they feel like without engaging in various formalities. The country can also be viewed as one that has a liberal market philosophy and which comprises small amounts of corruption in most of the public sectors.

Capitalism refers to a system of raising, spending and conserving a given set of monetary value in a given market. Under this economic system, there are three key markets that are the money or financial market, the labor market and the product market. Labor providers are paid wages and salaries depending on the nature of employment. They make products that are sold by the firms, companies and corporations to the consumers.

Money market is involved in both the supply and demand for money. Money supply is mostly undertaken by the central banks of various countries while demand is determined by the speculative transaction and precautionary motives respectively. The money market operates through various institutions like the banks, stock exchanges and credit-unions among others. These institutions facilitate the transfer of funds and their availability for investment and trading activities. These institutions focus on the macroeconomic analysis which aims at studying and analyzing the aggregate economic units in order to achieve full employment, price stability and stability of the exchange rates among others.

Capitalism can be broken into three broad categories that is comprised of Mercantilism, Free-market capitalism and social market economy respectively. Mercantilism is a protectionism kind of capitalism where national business interests are merged with the state interests and for this case, the state is charged with the responsibility of expanding the business interests abroad. Free market capitalism is where the forces of demand and supply are left to determine the prices and quantities of the relevant products. In this kind of system property and means of production are owned by individuals and the state does not interfere with the trading activities.

Social market capitalism is a type of economic state of affairs when the forces of demand and supply determine the market requirements, and the government plays a minimum role of providing essential services to the citizens like the social security and recognition of labor rights among others. The United Arab Emirates economy is a form of a capitalist economy where there are many private investors who have undertaken various investment initiatives, and the state usually comes in to regulate the business activities to ensure fair competition and adherence to the economic policies. The economy is significantly diversified to cover large areas, and there are substantial numbers of private investors who carry out their activities in order to earn profits.

The economy is considerably opened up to facilitate international trade and integration. There are a large number of foreign investors in the United Arab Emirates. This creates favorable conditions for investors from any part of the world to come in and invest while also being able to exit the economy whenever they feel like. The economic system of the United Arab Emirates is categorized as a mixed economy because it encourages people on their capacity as a producer, consumer and resource owner to engage in the economic activities with a high degree of freedom and the government comes in to regulate the activities. It is evident that in this country, the factors of production are privately owned and managed by concerned individuals.

In the United Arab Emirates, the motive of the entrepreneurial activity is to earn profits. Investors are profit oriented and can only stay in business in order to earn profits. The economy is characterized by high competition coming from both the local and foreign investors. There is a large numbers of buyers and sellers. Sellers under this economic set up are highly motivated by the desire to earn profits but are utterly unable to influence the market decisions in their favor. Therefore, they become the price takers since prices are determined by the forces of demand and supply.

Capitalist economy, just as is the case in the United Arab Emirates is not planned, controlled or managed by the state. The economic decisions and activities respond to the automatic forces of the market determine prevailing market prices and quantities. It can now be argued that bearing the above discussion in mind, the economy of the United Arab Emirates is under a mixed economy regime that exercises capitalism as it obeys most of the requirements of capitalism.

Tourism Goals and Impact of Tourism on the United Arab Emirates Economy

Tourism is one of the leading industries that brings foreign currency into economy. Recently, it has been reported that many tourists have visited the United Arab Emirates. The government has put in place various measures in order to boost this industry that is steadily growing and registering substantial amounts of profits. Like any sector of the economy, the tourism sector has put in place various goals and objectives which it has to achieve in order to remain relevant and significant.

The key goal of the tourism sector in the United Arab Emirates is to make tourism the main income source. This can be achieved due to the fact that there are many tourists’ attraction facilities in the Emirates which can guarantee a large number of tourists in any given financial year. The Emirates also targets to become the finest tourists’ attraction center in the world. This can be achieved through the initiative to invest in nourishing and installation of new and modern tourist attraction facilities. The emirates have reduced the legal formalities required to be undertaken in order for tourists to tour the countries and as a result, this may increase the number of tourists visiting the emirates.

Tourism activities have had tremendous impact on the economies of the individual emirates. The economy itself has grown substantially over recent years. It is estimated that tourism contributed to 22.6% growth of GDP in 2010 and that in the year 2008, it contributed to 18.7%. This means that tourism plays a significant role of boosting the economic growth in the United Arab Emirates. The second key contribution of tourism to the Economy of the United Arab Emirates is creating substantial employment opportunities. As the sector expands, it obviously needs more people to provide various services and to work in that sector. In addition to this, up to 2 million people are estimated to be employed in the tourism sector.

Tourism has profoundly led to the diversification of the economy in the sense that many auxiliary industries have grown along the tourist industry as they provide relative services and goods required by the industrial sector. It has enhanced the advancements in the agricultural and fishing sectors which provide food for tourists. The tourism industry has facilitated trade both locally, and beyond borders. Visiting tourists have increased demand for the goods and services produced in the United Arab Emirates thus making the trading sector to expand as a response to increased demand. This has in turn increased the foreign income which can further be used to import various products.

The above economic contributions have played a part in the acceleration of the economic prosperity in the United Arab Emirates.

Main Reasons for Government Expenditures on the Facilitation and Promotion of Tourism in Dubai

The government of the United Arab Emirates has largely invested into the tourism sector over the years. Majority of these expenditures have been in the capital cities, Abu Dhabi and Dubai. It is evident that of all the emirates Dubai stands out to be the greatest tourist attraction center compared to other emirates. For Dubai to be a prime tourist hub the way it is today, the government must have introduced a discriminative procedure that aimed at favoring Dubai at the expense of other emirates. It is for this case that we must analyze the reasons as to why the government heavily embarked on enhancing and promoting the tourism sector in Dubai.

Many suggestions have been brought forward to explain why Dubai remains to be the greatest tourism attraction center in the United Arab Emirates. One of the reasons is that Dubai attracts many tourists from different parts of the world due to the presence of Dubai Gold souks, Dubai natural beaches, Dubai Desert Safaris, parks, State-of-art buildings, and the tallest building in the world. The above features mean that the government can optimize on the returns obtained from tourism by maintaining and improving those facilities.

The second reason why the government has constantly invested in Dubai, is due to the presence of the good shopping avenues that have turned it into a shopper’s paradise. Some of the most prominent shopping avenues in Dubai include Deira Gold Souk, Dubai Spice Souk, Dubai Twin Towers, Deira City Center and Lamcy Plaza among many others. The government feels that since there are a lot of people coming from all walks of life to shop in Dubai, it will be more significant if the tourist attraction centers are built in Dubai to take advantage of many people who turn up to shop in that emirate.

The other factor that has motivated the government to invest in Dubai tourism sector is the fact that the sector is constantly registering positive results due to the inflow of tourists. The government just like any other investor wants to maximize revenue and profits. This is done by enlarging the tourist facilities in order to carter for the increased demand in the emirate. This demand is comparatively higher than that in other emirates and the government must always invest its surplus resources in a business activity that guarantees higher returns.

The other reason why the tourism industry is growing fast in Dubai is due to the fact that the emirate is an avenue for various sporting activities which brings together people from various parts of the world to participate or watch the sporting activities. The government is responding to this issue of sporting activities by spending substantial sums of money on the tourism related activities in Dubai. The other factor that is contributing to the government expenditures in the tourism sector in Dubai is the presence of hotels and restaurants which are in good and modern conditions. These hotels are able to accommodate most of the tourists and the government is responding by providing additional facilities that help to promote tourism even much better.

Most of the facilities and conductive conditions available in Dubai are inadequate in most of the other emirates. Presence of good hotels and beaches are better attractions of tourists and are mostly located in Dubai. The issue of Dubai being an avenue of various sporting activities gives it a comparative advantage since it can receive many visitors all at once forcing the government to ensure that many facilities are in place to carter for the increase in the number of tourists and visitors. The key issue that has to be realized is that Dubai is the capital center; when people from outside visits the United Arab Emirates, they must be concerned about the capital center. Dubai acts as the heart of the emirates, and as a result, it must be given priority due to its strategic and national significance.

Dubai, therefore, receives a substantial amount of government funding due to its economic, strategic and national priorities that put it on a higher level of development compared to other emirates.

Social and Cultural Benefits and Disincentives of Tourism

Tourism has a lot of benefits and costs to the United Arab Emirates. Many people from diverse cultures and traditions usually come to the country during different periods of the year. Among the key social and cultural benefits associated with tourism is that interaction of people from various parts of the world, the people of the emirates can adopt the developed or good lifestyles and practices as a result of the interaction brought about by tourism. Tourism has led to the improvement of local life through the improvement of infrastructure and facilities which has led to better health services, education and other social services.

More cultural and social events are witnessed in Dubai. This is due to interaction of people from different cultures that enhance such exhibitions and entertainment. Dubai hosts many sporting activities that bring people together from different cultural backgrounds, local people tend to borrow such sporting activities and incorporate them into theirs. When the impact of tourism is analyzed from the negative point of view some of the below explained defects or weaknesses can be observed. One of the most prominent one is an interruption of the cultural heritage and lifestyles which suffers from intrusion caused by the visitors. Citizens also copy the lifestyles of the visitors through demonstration effect, which seem to be loss of local customs and standards of behavior.

Tourists on several occasions behave in anti-social manners, which seem to offend the local citizens. Dubai as an Arab emirate experiences many problems like addressing the issue of dressing code especially when it comes to visitors from Europe and other western countries. The visitors tend to expose their bodies too much. This is against the Islamic faith, and as a result, it remains a key challenge. It can be concluded that Tourism has many positive effects on the socio-economic set up of the United Arab Emirates and measures formulated in order to ensure that the sector continues performing well.

Conclusion

The study can be divided into four parts where we have to establish the economic system that is prevailing in the United Arab Emirates, the goals and impact of the tourism sector, why the government is spending a lot of money to boost the tourism sector in Dubai more than other emirates, and the critical analysis of the social and cultural effects of tourism.

The economic system in the United Arab Emirates is capitalism where the property and means of production are owned by private investors. All participants in the market activities make decisions guided by rationality, and they are all price takers. Each participant is so small to dictate or determine the flow of events in the market. The economy can be opened up to both the local, and foreign investors and there are few legal formalities required for a given firm or individual to venture into a given business activity.

Tourism is a one of the growing sector in the United Arab Emirates. There are particularly many goals set by the sector which include earning a lot of foreign revenue and being the best foreign hub in the world. Tourism has played various roles in the economic wellbeing of the country that includes enhancing GDP growth, creating employment opportunities, contributing to growth of other sectors like agriculture and fishing so as to feed the visiting tourists.

The study has also concentrated on the reasons as to why most of the government expenditures in the tourism industry majorly benefits Dubai at the expense of other emirates. The reasons are that Dubai enjoys both the strategic and economical advantages that enable it to be given the first priority. These factors include availability of outstanding natural beaches, presence of sporting activities, shopping activities and the fact that Dubai is the capital center, thus it benefits from that privilege.

The study ends by looking at both the negative and positive effects of tourism on culture and the social set up in the United Arab Emirates. It reveals that there are both positive and negative consequences of tourism.

Summary

The study can be divided into four parts where we have to establish the economic system that is prevailing in the United Arab Emirates, the goals and impact of the tourism sector, why the government is spending a lot of money to boot the tourism sector in Dubai more than other emirates, and the critical analysis of the social and cultural effects of Tourism.

The economic system in the United Arab Emirates is capitalism where the property and means of production are owned by private investors. All participants in the market activities make decisions guided by rationality, and they are all price takers; each participant is so small to dictate or determine the flow of events in the market. The economy can be opened up to both the local, and foreign investors and there are few legal formalities required for a given firm or individual to venture into a given business activity.

Tourism is a one of the growing sector in the United Arab Emirates; there are particularly many goals set by the sector which include earning a lot of foreign revenue and being the best foreign hub in the world. Tourism has played various roles in the economic wellbeing of the country that includes enhancing GDP growth, creating employment opportunities, contributing to growth of other sectors like agriculture and fishing so as to feed the visiting tourists.

The study has also concentrated on the reasons as to why most of the government expenditure in the tourism industry majorly benefits Dubai at the expense of other emirates. The reasons put forward are that Dubai enjoys both the strategic and economical advantages that enable it to be given the first priority. These factors include availability of outstanding natural beaches, presence of sporting activities, shopping activities and the fact6 that Dubai is the capital center thus it benefits from that privilege.

The study ends by looking at both the negative and positive effects of tourism on culture and the social set up in the United Arab Emirates. It reveals that there are both positive and negative consequences of tourism.

References

Smith, J., & Warburton, F. (2002). Travel and tourism. Cambridge: Cambridge University

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Ferris, C. (2008). Today in Dubai. New York: Prental Press.