Using Alternatives of Oil in the United Arab Emirates Economy

Using Alternatives of Oil in the United Arab Emirates Economy

The United Arab Emirates (UAE) economy greatly depends on oil. The UAE’s commercial activities, fiscal income, export revenues, and foreign trade rely directly and indirectly on oil production. The country experiences three-branched policy challenges: generating employment opportunities in proportion to fast increasing population, protecting its economy from the instability of oil prices and guaranteeing sustainable development once oil resources are exhausted. Greater economic diversification will protect the economy from the uncertainty of the global oil market. Diversification will also sustain economic development when oil resources diminish. Ensuring financial survival without depending on non-renewable resources became a driving force to establish alternative tactics for growth in the UAE. The major strategies employed by the country to endure a post-oil world comprise diversifying the economy and global integration. The UAE has channelled its resources into tourism, local investment and investment in alternative energy among others to prevent its economy from relying on oil.


The UAE’s travel and tourism industry is among the main driving sectors of the country’s economy. The sector is anticipated to generate over 5,200 new jobs. Additionally, the World Economic Forum states that the industry contributed Dh56.44 billion to the UAE economy in 2014, which was 4% of the country’s gross domestic product (GDP) and is expected to increase (Abbas, 2015). The Emirates’ plan of attracting more tourists and investing more in tourist-attracting projects will assist in the generation of more business and creation of new employment possibilities in the nation. The World Economic Forum’s 2015 Travel and Tourism Competitiveness Index report reveals that the UAE’s travel and tourism industry hired approximately 291,000 people in 2014, which is 5.3% of the total employment base (Abbas, 2015).

The United Arab Emirates’ Minister for Economy disclosed that tourism contributed approximately AED134 billion ($36.4 billion) to the nation’s GDP in 2015. Additionally, the local tourism industry will be more reliable in the post-oil economy. The sector accounted for 8.7% of GDP to increase by 4.4% in 2016 based on the information provided by the World Travel and Tourism Council. The contribution will increase at a rate of 5.4% each year over the next ten years to reach to AED236.8 billion by 2026 (Black, 2012).

The tourism sector is a significant segment of the national economy and an essential pillar of economic change policy of the state. Pragmatically, the tourism sector is currently a well-developed facet of the national economy, with approaches to advance and enhance its function in the future. The government has put in efforts to offer new ideas and new initiatives to reinforce the function of the tourism sector in economic development (Black, 2012).

Tourism is among the sectors that will become one of the pillars of the UAE’s future economy, one that is presently based on oil exports. Additionally, development plans in tourism show the potential to increase its contribution to the GDP. Tourism will also develop targeted regions, particularly the rural and remote regions that require comprehensive economic growth to establish employment and investment opportunities. The UAE is managing several programs to create museums and heritage sites, tourist lodging, tourism paths, and local employment in the tourism and hospitality trade.

Among the country’s commercial segments, tourism is presently the important sector of the UAE’s economy. In 2011, 8.2 million foreign visitors chose the Emirates as a holiday destination. The hotel and restaurant sector’s contribution to GDP in 2011 was equal to 2% (Black, 2012). Moreover, tourism is closely tied to progress in transport and easy access by air. The UAE is currently able to offer a proper and modern communications infrastructure with the civil aviation industry that has highly advanced. Therefore, a growth model of tourism that goes towards the green economy is consistent with the economic needs and the environment.

The UAE approach to tourism is based on establishing sustainable tourism for economic and social achievement. Such integrated strategy with its three-way subjects of sustainability with both economic and social victory signifies best practice and warrants the ideal range of benefits to the country, its communities, and people. The Emirates are among the global leadership group in the expansion of growth tourism and design innovation, and the home base to two top airlines, with developing universal networks guaranteeing the crucial strategic access alternative for growth, investment, and connectivity. The gauge and influence of the sector can be articulated in terms of its 56.5 billion AED contribution to the economy in 2013 to its anticipated contribution of 80 billion AED by 2024. It can also be stated in terms of its employment impact of 495,000 (direct and indirect jobs) in 2013 and is expected to reach 626,000 by 2024 (Vij, M. & Vij, A., 2012).

Alternative Sources of Energy

Another focus point in the UAE is investing in alternative sources of energy. Creating alternative energy solutions has long been a priority for the Emirates, and they are now innovators in the region. The UAE’s most elaborate alternative energy plan is in the area of nuclear energy. The country’s nuclear energy program initially started in 2009 with the establishment of the two major government bodies: the Federal Authority for Nuclear Regulation (FANR), which controls all UAE nuclear activities and the Emirates Nuclear Energy Corporation (ENEC), which manages the plan, building, and processes of the country’s nuclear power plants. In observing its national plan and international commitments, the UAE has invested heavily in constructing renewable and alternative energy infrastructure, especially in the field of nuclear and solar energy (Alnaser, W. & Alnaser, N., 2011).

According to the UAE Foreign Minister, the country’s interest in establishing nuclear energy is driven by the desire to create other sources of electricity to cater for future demand forecasts and enhance the rapid growth of its economy. An examination carried out by formal UAE bodies has revealed that the country’s annual peak demand for electricity might triple by 2020, suggesting an increasing yearly growth rate of approximately 9% from 2007 forward. In assessing different alternatives of meeting this demand, nuclear energy arose as a confirmed, environmentally promising and commercially competitive alternative, which could greatly contribute to the UAE’s economy and future energy surety (Alnaser, W. & Alnaser, N., 2011).

The UAE developed a Nuclear Energy Program Implementation Organization, which created the Emirates Nuclear Energy Corporation (ENEC) (Alnaser, W. & Alnaser, N., 2011). ENEC is an Abu Dhabi public entity, in charge of assessing and implementing nuclear power plans within the UAE. It will also operate as a government investment branch by enhancing tactical investments in the nuclear sector, locally and globally. The Federal Law concerning the peaceful utilization of nuclear energy was signed in 2009. It proposes the creation of a system of licensing and regulation of nuclear material besides establishing the Federal Authority of Nuclear Regulation (FANR). FANR is a sovereign body in charge of managing the regulation of the entire UAE’s nuclear energy sector including choosing the regulator’s board (Callen, Cherif, Hasanov, Hegazy, & Khandelwal, 2014). In effecting the growth of nuclear power in the region, the UAE government intends to provide joint-venture plans to foreign investors for the building and functioning of future nuclear power plants similar to the current IWPP structures, where the government owns 60% of the shares and joint venture partners own the rest.

Such great investment in renewable and alternative energy infrastructure denotes possible profitable contracts in different areas, varying from the sketch and construction of infrastructure, to offering key technologies and training people to run these technologies. It offers openings for contracts in the sections of consultation and legal services. The UAE’s obligation to renewable and alternative energy also provides probable appealing investment opportunities, especially since some of the projects are public-private partnerships. In 2016, eight UAE Banks – National Bank of Abu Dhabi (NBAD), Commercial Bank of Dubai, Dunia Finance, Emirates NBD, HSBC, National Bank of Fujairah, RAK Bank, and Union National Bank – signed the “Dubai Declaration” to extend sustainable financing over the subsequent five years considering what they perceived as an impending 10 billion AED ($2.7 billion) funding disparity for sustainable projects. It took place some months after the National Bank of Abu Dhabi proclaimed that it would give $10 billion in funding over the following ten years to fill gaps in supporting the clean energy sector, with money meant for projects that are worth over $100 million. The country’s interest in alternative energy enhances opportunities for clean tech entrepreneurs and startups. Masdar offers organizations interested in starting operations in the UAE with the advantages of being positioned in a free zone. Such privileges entail the liberty to function with 100% foreign ownership, the ability to freely transfer capital and profits outside the country, and the lack of import levies and corporate or individual taxes (UAE National Bureau of Statistics, 2011).

Local Investment

The UAE has made major transformations and investment to meet the educational needs of an ever-increasing population. A lot has been attained, but much more should be done. According to the country’s Vision 2021, education is a top government priority and developing human capital is regarded to be a significant element in the nation’s determination to develop a diversified knowledge-based economy. The emphasis on education is reinforced by 21% or nearly AED 10 billion shares in the 2016 federal budget. In 2015, the UAE opened the world’s first store for smart government applications using Android and iOS platforms. The store contains more than 100 smart applications created by local and federal agencies that were initiated in collaboration and harmonization with Google and Apple (Shediac, Abouchakra, Moujaes, & Najjar, 2008).

Additionally, hosting the Expo 2020 in Dubai is consistent with the UAE’s vision 2021 strategy. Furthermore, it would be important for the country as it remembers its Golden Jubilee that marks 50 years of growth and success. The standards and goals of World Expos are in line with the attitude of the UAE citizens. The country recognizes that World Expos offer important opportunities for best minds in the world to get together to address issues and give solutions to the world’s main challenges of today and tomorrow (Peterson, 2009). The organized Dubai Expo 2020 will be a commemoration of advanced new alliances for global advancement, providing lasting benefits for the future generations. More than 25 million visitors are anticipated during the six month period and the occasion will fund approximately 277,000 employment opportunities to be created. The UAE’s strategic position between the longitudes of east and west, as well as its stability and improved infrastructure, such as harbors, roads, and aviation has made it a universal business center and an important trade gateway. The Dubai government announced the world’s largest wholesale city that covers 500 million square feet. The city will contain everything varying from banks and consignment centres to markets, granaries and residential houses. It plans to accommodate over 15,000 wholesale traders. This will enhance the international wholesale sector from the present value of $4.3tn to $4.9tn in the subsequent five years. The city will be the hub of global wholesale in addition to having the world’s largest e-commerce platform for wholesale trade.

Trade facilitation has been essential in enhancing the non-oil trade. Effectively functioning ports and customs with less administrative procedural and logistical hindrances have resulted in the development of trade and trade-related services by offering good quality support services like transportation, finance, and information and communication technology. The high-quality infrastructure and effectual operations of the ports and airports have minimized operations cost in trade-related activities, clearance of goods in customs, and shipment of goods abroad. The processing time for re-exports is short in Jebel Ali port (Fasano & Iqbal, 2003).

The launch of free zones for media, knowledge, and technology services has enhanced the services sector. The latter is a free zone involving information and communications technology (ICT) infrastructure intended for fostering media, e-commerce, software development and back office operations for the area. It provides ready-to-operate office spaces with developed infrastructure. The creation of Dubai Industrial City, a free industrial region scheduled largely for production activity, is anticipated to enhance the international law of the non-oil economy (Schiliro, 2013).

The UAE has been determined to provide a stable, economic and effectively performing business environment. Therefore, an efficient regulatory environment has boosted the “efficiency premium” that the country has increased, and promoted an effectual organization of the manufacturing process, the supply of goods, and reaction to the client base. Additionally, the UAE’s quality of electricity supply is tremendous. A national electricity network will also improve the present situation and prevent any possible demand issues from the highly developing economy and population. The United Arab Emirates have the best transportation infrastructures in the world that deliver outstanding ports and airports.

The flexible labor policy implemented in the country has played a significant role in the diversification of the UAE economy. The policy has enabled the Emirates to have sufficient supply of labor at global competitive salaries. Nearly 90% of the labor force in the UAE are emigrants who work mostly in the private sector. The labor policy has played a major role in sustaining the competitiveness of the non-oil economy (Shihab, 2001).


The UAE’s economy depends on oil as the major source of export and fiscal revenues. The Emirates’ government has augmented public sector employment and expenditure on transportation, health, and education. This has assisted in raising the standards of living and supporting private sector activity, especially in the non-tradable sector. However, the present growth model has limitations, and it is vital to increase economic diversification. Major diversification will minimize exposure to instability and uncertainty in the global oil market, assist in generating private sector jobs, enhance productivity and sustainable growth, and create the non-oil economy that will be required in the future when oil incomes begin to diminish.



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