Arab Spring and UAE

“A single spark can start a prairie fire.”
“Mao Zedong (1930)”.

Due to so-called Arab Spring, waves of change is fiercely going on in many parts of the Middle East presently not confined only to Tunisia, Egypt, Yemen, Sudan, Algeria and Jordan. It is being speculated that even some other important countries in the region would also be in the firing line after some time in the future.

According to many recent reports of international Red Cross federation, World Bank, WTO and FAO sever food insecurity; poverty and unemployment were one of the main reasons for ongoing socio-economic and geo-political changes in the Arab World.

The reports of many prominent regional and international economists and political pundits also endorse that perpetual economic deprivation, social isolation, and above all lack of real political liberties were supposed to be one of the main causes of emerging socio-economic revolutions in Tunisia, Egypt and many more in the Middle East. Moreover, stagnant incomes, high unemployment ratios, inflationary pressure and rising poverty have forced people to start efforts to bring some substantial change not in the political battlefield but also in the prevailing economic systems of wealth and resources distribution in these countries. Many others regional countries are not at bay from these social ills, economic inequalities and political imperfection and may also be heading us towards a socio-economic revolution in the future.

The above table clearly indicates that ratios of inflation, poverty and unemployment were on the rise along with other selected macro-economic indicators which were the driving force behind the change of existing social, political and economic fabrics in Tunisian society.

According to Tunisian Business News (January 2011), the economic situation is getting worse. The government estimates the country has so far suffered around 1.6 billion euros ($2.2 billion) in direct economic losses and lost export revenues equivalent to around 4 percent of its gross domestic product last year. Moreover, 43 banks, 66 shops and 11 industrial plants had been destroyed. Moody’s Investors Service has already downgraded Tunisia’s credit rating.

Egypt’s declining economy
Although change in Egypt is somehow, stabilized but the socio-economic turmoil in Egypt was reverberating around the world, battering stock markets, driving up oil prices and raising questions about the recovery of global economy. According to many world renowned research journals and publications of IMF and World Bank also reflect that Egypt would face many economic, social and institutional challenges undermining its future.

It is feared that Egypt may undergo a severe liquidity crisis caused by the loss of hard currency from few sources: tourism was a key source of foreign exchange and the main engine of growth. Estimated losses in this sector range from $2-3 billion. Airline and shipping: besides the decline of passengers, primarily tourists, the industry was hit by 50 percent increase in insurance premiums.

The above table also shows serious socio-economic ills of the Egyptian economy which may be the decisive factor in toppling of the current regime.

Worker’s remittances have constantly on the decline and further decrease is expected in the future.
Foreign direct investment in fell 17 percent to $6.8 billion in the last fiscal year, may decline further as a result of the upheaval
According to the deputy chairman of the Egyptian chamber of commerce that the foreign exchange reserves have declined from $30 billion to $15 billion in 2009-10.
There are 800,000 new job seekers every year, and the number will rise together with the growth of population. It is estimated the cost of creating one job in industry at 100,000 pounds ($20,000) and in agriculture 50,000 Egyptian pounds ($10,000). The total cost of job creation for 800,000 would be 36 billion Egyptian pounds, or more than $7 billion.
The International Labor Office (ILO) found out that, the number of unemployed people in Egypt climbed to new heights since 2005. Young people aged 15 to 24 comprise almost half of Egypt’s unemployed and are more than three times as likely as adults to be out of work. The biggest challenge facing policy makers in Egypt is the high rate of youth unemployment, estimated at 25.6 percent in 2003, which is the highest in the world.

Five challenges pose the most immediate threats to Egypt.

United Arab Emirates: A Case Study

There are many interrelated reasons for the collapse of a particular institution, system and fall of a country. If we take United Arab Emirates as a case study, we come to know that due to certain policy initiatives, wise leadership vision, constant contacts with the general masses at gross-out level and the last but not the least, paramount socio-economic development pace has been making it safe heavens.

Its Strategic Vision Abu Dhabi’s 2030 stand for further diversification of economy, better higher education, entrepreneurism, research, development of small to medium-sized businesses and knowledge-based economy would be instrumental to achieve its desired goals in the future. In the following paragraphs we will discuss on selected variables that are supposed to be crucial elements of stability, sustainability and of course change.

(1) Robust Marco-Economic Development
UAE robust socio-economic development has revolutionized the every sphere of its national life i.e. politics, economics, society and general national perception since 1971. Undoubtedly, it has been witnessed unparalleled transformation in terms of achieving Millennium Development Goals (MDGs), higher education (student enrollment in the universities is highest in the region), health care facilities, housing, clean drinking water, and the last but not the least, high ratios of GDP % for the last 40 years.

UAE is the second largest Gulf Arab economy, and among the fastest-growing economies in the world. The GDP growth rate of the UAE over the past years reached record numbers exceeding those of many developed and emerging countries, when the rate of growth over the past five years accounted for 34 per cent. The per capita GDP also increased from Dh100,000 in 1975 to Dh174,000 in 2011. Moreover, it is expected that the UAE achieves a surplus in its current account by up to 10.3 per cent of GDP in 2011 and 9.2 per cent in 2012, compared to 7 per cent in 2010.

Furthermore, the outstanding performance of the UAE’s economy has prompted some international organisations intention to raise the country’s classification to the rank of “emerging market”, along with China, India, Russia, Turkey, Singapore, Malaysia and Brazil.

There is no inflationary threat to UAE and remains non threatening to the UAE economy by virtue of standing at around 1.6 per cent in 2011 and projected to edge up slightly to 2 per cent in 2012. According to the National Bureau of Statistics (2012), consumer price growth in the country was 0.2 per cent on an annual basis in December 2011 after a 0.1 per cent fall of prices in the previous month.

All the above given reports clearly indicate UAE strong socio-economic indicators and its wise leadership strategic vision which has made it a hub of business and investments.

All the regional and international monetary agencies analysis show that UAE has been in the full spring for the last 40 years. It has been achieved with consistence macro-economic policies, institutionalization of financial reforms, good governance and above all influx of business and investment policies in the country since its inception.

2. Unique Evolutionary Economic Development Model
   UAE’s has been following its unique evolutionary economic development model which has achieved elements of sustainability and strength. Now, UAE is the second largest and number one knowledge based economy in the region. UAE has become one of the ideal destinations of foreign direct investment, tourism, re-exports, innovation and above all hub of all kinds of business activities in the region which has gathered momentum even during the ongoing Arab Spring.

Europe Union macro-economic indicators have been at the lowest ebbs since 2008. USA economy remained subdued during 2011. According to Dubai Economic Council study (December 2011) titled “the document of the union era” UAE’s GDP is expected to reach at Dh1.248 trillion in current prices. It was Dh6.5 billion in 1971.

UAE boosted public spending at was highest ever level of Dh289 billion in 2009, massive investments by the government and private sector, and a surge in foreign direct investment because of improved investment laws and strong economic performance. It is also the Middle East’s largest consumer market.

3. Social Development
   Human development has been one of the main pillars of UAE economic prosperity. In every federal budget social development carries importance and substantial allocations too. Even its federal budget 2012 allocated billions of funds for the social services, including health care, education and housing (47 per cent of the total budget i.e. Dh 41.4 billion (US $ 11.2 billion). Higher education, received Dh 8.26 billion (US $ 2.25 billion) or 19.6 per cent, the bulk of which will be spent on plans to build new schools and other educational institutions and to upgrade the educational environment. According to United Nations assessment, UAE would be the first country to achieve Millennium Development Goals (MDGs) in the GCC and MENA region.
   
4. High Human Development Index
   According to latest report of the United Nations Development Programme (UNDP) “world human development index (2011), UAE has become 30th place in 2011, thus achieving two grades above that of 2010 and becoming the first Arab country for the second consecutive year. The state also got two grades higher in the gender streaming index issued by the World Economic Forum for 2011, as the highest Arab country.

It clearly shows the active people’s participation activating the relationship between citizens and authorities. UAE has achieved the highest per capita income all over the world along with best available facilities of healthcare and education. The average life expectancy for individuals increased from above 14 to 76 years. UAE has also achieved high standards.

Keeping in view, the importance of human resources, UAE dedicated 46 per cent of its 2011 budget to spend on education, healthcare and community, as the government offers compulsory free education and support the citizens through several options in the field of higher education.

Official statistics reveals that the banking sector realizes the highest percentage of Emiratisation, male and female, about 34.6 per cent, followed by the finance sector 9.9 per cent, insurance sector 6.47 per cent, and the banking sector 4.85 per cent.

Moreover, in both primary and secondary education phases the numbers of students were 32800 in 1971 which reached to 800000 in 2011. UAE hosts some world pioneering institutions in higher education such as Sorbonne University, INSIAD, London School of Business, New York University and others.

Women empowerment drive has achieved splendid success. Now, women account for around 70 per cent of all university graduates in the country and fill around two thirds of government jobs. UAE has now four women members of the Cabinet and ambassadors. They are now air force pilots and armed forces recruits. Moreover, it has achieved new skies in advance technologies, development & research and human resource management. It has emerged as knowledge-based economy.

5. Democratization
   The UAE has already secured political mileage through evolutionary approach by successfully conducting 2nd Federal National Council Parliamentary Elections in the country. Consequently, the rest of the region followed this prime example. It was not held out of fear or frustration but to comply with the strategic vision of its leadership which always cares about the aspirations of its people. Majority of the candidates were between 30-35 years category that strived to brighten the future of the younger generation of the country for a better UAE society.

UAE President Sheikh Khalifa bin Zayed Al Nahyan termed the Federal National Council (FNC) elections a perfect opportunity to make a major step towards empowerment and further democratization. Vice President and Prime Minister of the UAE and Ruler of Dubai Sheikh Mohammed bin Rashid Al Maktoum strongly stressed the need to back the “democracy test” by actively franchising in the elections 2011.

The 2nd FNC elections were the turning point in the political history of the UAE which widened popular participation in the process of government. Electoral College increased from 7,000 to 129,000 which verified that the UAE society is a politically sensible, socially dynamic and economically vibrant. Notwithstanding, turn- out was below expectation, but it was right step towards right direction.

6. Diversification Policy
   UAE has been rigorously following diversification policy which would hopefully bring more dividends in the 2012 as percentage of GDP. Oil’s revenue contribution in national GDP was 70 per cent in 1971 and now it has been reduced to only 29 per cent in 2010-2011 which clearly shows the success of its diversification policy in the different fields of economy and production.
   
   Aviation, seaports, and commercial cargos played tremendously during 2011. A record number of tourists traveled in UAE being the most comfortable, service-oriented, attractive and cheapest destination. UAE welcomes more than 13 million visitors in a year which makes its hotel occupancy highest in the region.

Tourism plays a key role in the UAEs’ economic development, the sector’s contribution to gross domestic product jumped from 3.5 per cent in 1995 to 6.2 per cent in 2010. It is now 10.4 percent of GDP. It was just 1 percent of GDP in 1971. Processing industries and financial services and will help the UAE become one of the three largest tourist destinations in the Middle East. According to a World Travel & Tourism Council report, the UAE garnered 41 percent of total tourism investments in the Middle East this year which amounted to 40.5 billion dirhams ($11 billion), representing 20.9 percent of the total investments in the country during 2011. Moreover, according to available data, about 50 million tourists have visited Dubai Shopping Festival (DSF) and they have spent approximately 88 billion dirhams since its inception about 14 years ago.

7. Leading Renewable Energy Country
   The UAE is leading the GCC and Middle East and North Africa (MENA), in the development of renewable energy. It pursued comprehensive renewable energy policies in shape of Masdar City, the world’s first carbon neutral zero waste city, the annual World Future Energy Summit, IRENA’s headquarters, the annual Zayed Award for Future Energy, creation of Department of Energy and Climate Change Affairs and environment-friendly legislations along with building codification. Shams 1 solar plant is a remarkable addition.

According to International Energy Agency (2011), the UAE will increase its renewable energy up to 7 percent by the year 2020. UAE has been granted most advanced, transparent, open, reliable and viable nuclear program in the region/world by International Atomic Energy Agency (IAEA).

8. Hub of international conferences, seminars and expos
   According to many international economists and strategic market gurus holding of international conferences, seminars, and expos are also one of the key parameters of a progressive, dynamic and vibrant country and of course, UAE is the hub of all kinds of business and investment activities. It has had been one of the main platforms of human interaction, integration of economies, connecting minds and generating of new ideas throughout the history. It has had been also easiest way of culture promotion, tourism development, and above all interfaith harmony.

Many regional and international conferences and expos have already been held in the UAE. Taking a giant step, UAE submitted its bid for World Expo 2020. A comprehensive media campaign has already been initiated throughout the UAE and around the globe.

Since 1851, World Expos have provided significant opportunities to engage the world community in a shared project. The World Expo is one of the largest international events organised for more than 150 years. The World Expo is the busiest exhibition in the world and is said to attract the largest number of visitors worldwide. If the UAE manages to secure the bid for the 2020 Expo, the exhibition alone is likely to attract at least half a million visitors.

UAE is the home of more than 193 nationalities where peoples live united and enjoy other cultures from across the globe every day. That is why we believe that Dubai is the perfect city to host the 2020 World Expo.”

Since it is mega project due to which Dubai will spend between US$2 billion (Dh7.35 billion) and US$4 billion on infrastructure if it manages to secure the bid for the 2020 World Expo. It is a global, non-commercial exposition (six-month event (January 4 to June 30, 2020). The hosting of it must be applied for by a country and approved by the World Expo committee. The Expo is intended to promote exchanges of ideas and development of the world economy, culture, science and technology, to allow exhibitors to display their achievements and improve international relationships.

It is hoped that under the theme “Connecting Minds, Creating the Future,” the 2020 World Expo in Dubai will serve as a “global hub for ideas and a springboard for creativity. Chief Executive Officer of the Dubai World Trade Centre (DWTC), the UAE is developing is due next year, and will include a full analysis of the actual infrastructure requirement for the bid and the expected revenue”. He elaborated that most host cities in the past have had a “very positive economic contribution”. Income was increased. Inflows of investments were enhanced. Joint ventures were progressed.

UAE has state of the art infrastructure in terms of airports, airlines, marketing companies, soft image companies, vibrant media and so many potential businessmen and investors which will work to its advantage in terms of lowering the overall cost. It is hoped that by connecting people, which lies at the heart of UAE strategic vision as a cosmopolitan nation, UAE can foster greater cooperation and understanding between people and cultures. “By connecting minds, we celebrate our common aspirations and work to create a brighter future. That is our vision for the 2020 World Expo in Dubai.”

The winner will be announced by the BIE in November 2013 following a vote by its 160 member nations.

It has multiplier socio-economic benefits. It is also a project which forms a part of the strategic development plan of a city which will continue to transform that city. It would increase the facilities such as creating jobs and also resulting in better quality of life for its citizens, having a positive effect on the city. On an average, the Expo attracts 30-40 million visitors. Expos are a big dialogue of the international community. It is hoped that the UAE’s bid for the 2020 World Expo, if met with success, could translate into huge gains for the country’s tourism and hospitality sector. Dubai International is poised to become the world’s busiest airport by 2015 and last year alone, 51 million passengers travelled through the airport. The travel and tourism sector, especially, is optimistic about the UAE winning the Expo bid as it could open a huge investment gateway for the sector. Service sector in the UAE will be gaining benefit from the 2020 Expo. It would be a great achievement for the entire region, and the whole services industry stands to benefit from the event if it takes place in the UAE. It would put the country on a global map.

UAE a vibrant and ideal country for interfaith harmony and Dubai is home to more than 193 nationalities who live and work together in harmony.

9. High Ratios of FDIs
   UNCTAD report “the World Investment Prospects Survey” (2012) indicated that UAE is at 30th place for FDI globally. The country was ranked 46 internationally on the economic freedom index, exceeding many countries in the region and the world. Abu Dhabi targets FDI as a key priority in its plans for next 20 years to raise it to 23 per cent of GDP.

Investors are like migratory birds and whenever, there is a slightest fear, they tent to fly in search of safe havens. The Arab World suffered badly in terms of budgetary deficits, lay-off, unemployment, poverty, and outflow of capital i.e. $50 billion during the 2011. Safe heavens fell sharply and the UAE being the one of the ideal destination of investments benefited most of with the crippling situation and received bulk of foreign direct investments (official data of the economic ministry showed that UAE has attracted more than $73 billion FDI since 1971) from other regional countries battling out for their survival during 2011 which shows the high levels of confidence of investors and businessmen towards the UAE. Furthermore, the UAE emerged as the largest capital exporter in the region and the 30th top investor in the world and it has pumped over $53 billion into foreign markets during the last twenty years which again verifies UAE’s financial strength and capability.

According to Abu Dhabi-based Arab Monetary Fund (AMF) remittances by the more than six million foreigners in the UAE were estimated at nearly $49.3bn during 2006-2010 which upholds the UAE claims that it is land of opportunities in the region.

10. International Trade Balance
    Foreign trade turned to be an engine of growth for the UAE economy. Foreign trade accounts for 70 per cent of UAE GDP. According to a international trade agency (December 2010-11) the UAE ranked the 13th largest exporter with exports of around US$235 billion while it came 18th in imports which stood at US$170bn in 2010. The report added that the country’s exports and imports accounted for almost two and 1.4 per cent of the world’s total exports and imports respectively.

UAE products have reached over 198 markets around the world. UAE is one of the most important centers of re-exports regionally and globally. The re-export sector ranked second in terms of relative importance in the of foreign trade structure of the country i.e. 25 per cent.

The preliminary statistics released by the Federal Customs Authority (FCA) verified UAE’s non-oil foreign trade has been achieving new targets during the first seven months of 2011 compared to the same period of the previous year. It indicates that UAE non-oil foreign trade has grown by 23 per cent compared to the same period of the previous year as total non-oil Foreign Trade has grown from Dhs426 billion during the first 7 months of 2010 to Dhs524 billion in the same period of 2011, i.e., an increase of Dhs98 billion. It further elaborated that imports has increased from Dhs276.3 billion to reach Dhs337.1 billion during the first 7 months of 2011. UAE exports witnessed tremendous growth by 45 per cent for the same period with an increase from Dhs44.5 billion to Dhs64.7 billion.

11. Strong and Resilient Banking System
    According to Abu Dhabi Islamic Bank (ADIB), “GCC Banking Competitiveness Report” UAE remains the most competitive banking market in the GCC. The country’s population of approximately 8 million is served by 51 banks with more than 840 branches and over 4,000 ATMs, delivering high levels of service. UAE banks banking spread remains the lowest among the GCC, at an average of 2.9 percent.

According to the figures of the central bank, the combined assets of the country’s 23 national banks and 28 foreign units swelled to an all time high of Dh1,584 billion at the end of September compared with around Dh1,519 billion at the end of 2009 and nearly Dh1,456 billion at the end of 2008. Moreover, the banks also controlled the largest capital base in the region, estimated at nearly Dh255 billion. UAE is now largest banking sector in the GCC with total assets of worth & 465 billion or (Dh 1.7 trillion). UAE banks also dominate in loans and deposits, which stood at Dh1,038 billion and Dh1,013 billion respectively in September 2010.

There is no liquidity crisis in the UAE. Most of the countries faced huge budget deficits around the globe whereas; the UAE secured huge surplus in 2011. According to recently published Dubai Economic Council study, the UAE’s fiscal balance would record a surplus of 10.3 per cent of GDP in the current fiscal year and 9.2 per cent in 2012 against seven per cent in 2010.

12. Public-Private Sector Healthy Contribution
    Moreover, according to latest report of the Abu Dhabi Chamber of Commerce and Industry (ADCCI, 2011), GDP of the Abu Dhabi is expected to grow 4 per cent to Dh750 billion in 2012. It is forecasted that the public sector’s contribution to GDP would rise to Dh133 billion in 2012, up from Dh126 billion in 2011 which is a healthy sign of its macro-economy. ADCCI estimates also suggest that the contribution of the private sector to GDP will increase to Dh232 billion from Dh218 billion in 2011 which again shows the active role of private sector in the socio-economic development of the UAE.

Moreover, more than 3000,000 companies have already been registered in the UAE contributing 60 percent of GDP, whereas, in Dubai alone, the number of these companies amounts to 72,000 companies, about 40 per cent of GDP.

Most recently, the UAE Cabinet granted permission to companies fully owned by Gulf nationals and registered in the other five GCC countries along with equal status. It also reflects the UAE government’s strong commitment to strengthening the private sector by encouraging competition within the GCC.

13. Strong Industrial Base
    According to latest official data (2012), the UAE received nearly Dh13 billion in industrial investments in 2011 as it is pushing ahead with new laws to expand the manufacturing sector’s share from 16 to 25 per cent of GDP. From around Dh101 billion at the end of 2010, total industrial investment surged to a record high of Dh114 billion at the end of 2011. Moreover, UAE wants to expand industrial sector’s share of GDP from around 16 per cent at resent to 25 per cent in the coming years the focus will be on capital intensive and low labour projects.

According to the latest reports, there has been an increase in the number of industrial facilities in various zones of the UAE of about 3567 establishments with investments worth of Dh70.424bn, and a total number of 264,000 workers in 2006 to 4960 establishments with investment amounted to Dh101.189bn by the end of 2010. It reflects the federal and local governments’ vision to develop the industrial sector.

14. Stable Foreign Exchange Parity

UAE foreign exchange parity remained lucrative, stable and strong since its inception. During 2011, where EURO touched its lowest ebbs and US Dollar weakened further along with other reputable international currencies the UAE dirham has been gaining steadily against the euro and South Asian currencies in the second half of 2011.

Argentine, Mexico and other African Countries are the prime examples in this regards, which badly suffered due to weak/poor foreign currency parity and depreciation. Having stable and strong foreign exchange is another indicator of the UAE economic and financial strength.

Concluding Remarks
Arab Spring has its multiplier effects and serious socio-economic ramifications too. There are certain reasons or actors held responsible in the failure of a system, institution or a country. The denial of balanced socio-economic development and absence of social justice always develop elements of deprivation, subjugation and revolt in the societies and our modern human history is full of these kinds of examples.

Moreover, widening gap between the rulers and to be ruled tends to bring elements of distrust and destruction in the societies. The economic meltdown, declining ratios of education, employment, health and the last but not the least, basic necessities of life always become game changer in the societies. High ratios of inflation and poverty are pro-change commodities.

On the other hand, through his wise leadership, immaculate human development, social progress, and gradual democratization process has made UAE immune to these radical changes. It has succeeded to achieve new standards in every field of economy, production and service. Its strong defence doctrine along with balanced foreign policy has made it unconquerable castle in the region. UAE has become icon of inspiration to its people and the region. It has become land of opportunities and miracles.