Economic Diversification by Boosting Non-Oil Exports (Case of UAE)

After the global oil price has fallen almost 70 % since mid-2014, oil exporting countries have felt the impact of the lower prices on growth rates, trade figures and public finances. Despite the negative impacts of the fall in oil prices, the UAE Government remains positive about the country's economic outlook and diversification policies, which have helped neutralise the impact of the decline in oil prices. The positive side of any crisis is added urgency that comes in the implementation of reforms that help decision-makers reduce economic vulnerabilities in the future. Across the GCC action is being taken in response to the situation through changes in subsidies and fuel pricing, along with efforts for increasing diversification of the economy. Since the UAE was formed in 1971, the diversification of the economy away from petroleum has been a clearly stated government policy. The UAE has become a global financial and major trading centre, a location of choice for multinational operations, along with a heavily desired tourist destination. Investments in non-energy sectors, such as infrastructure and technology, along with a rapidly recovering real estate sector, continue to provide the UAE with a buffer against oil price decline and global economic stagnation. According to the World Trade Organization in its latest June 2016 Trade Policy Review, the UAE has continued its policy of diversifying its economy, which helped it overcome the global financial crisis that began in 2008, and the repercussions of falling oil prices that began in 2014. The UAE continues to pursue a strategy of diversification concentrating on high technology sectors and high growth sectors. The share of non-hydrocarbon in the UAE total GDP has continued to rise to exceed 69% today against 53% back in 2000. Dubai is now a services and a trade hub for the region, while the economic diversification strategy in Abu Dhabi continues to rely on manufacturing, petrochemicals and renewable energy. Economic diversification for sustainable and inclusive growth A report from the International Monetary Fund (IMF) shows that many empirical studies have documented a strong association between economic diversification and the achievement of sustainable economic growth. A diversified economy based on several sources of income is more resilient and

UN Department of Economic and Social Affairs (DESA) Working Papers, 2017

Recent research conclude that the GCC economies have failed to address the oil curse. They are far behind other countries, especially those in the G7, which possess huge reserves of oil wealth but have undertaken economic diversification to correct the ill-effects of an oil curse. This paper takes an in-depth look into the UAE economy as a model but also as a reminder of the struggles ahead. The findings support the fact that the UAE is facing an oil curse. Declining levels of total factor productivity, GDP volatility, negative returns on investment, and a labor force that is too reliant on government's supply of jobs are among the many reasons that support the thesis. The UAE has made good progress in recent years to diversify its economy. However, the drivers of economic growth in the UAE are vulnerable to external shocks outside of the Emirate's control. It is now critical that the UAE take steps to mitigate economic disruptions that might result from these shocks. In this case study the UAE economic performance is examined, and a data-driven roadmap for sustainable growth is suggested. The analysis shows that greater efforts are needed to stimulate the diversification of the production base by encouraging increased domestic, especially private, investment. Well-targeted policies should be adopted to accelerate reform and facilitate the involvement of the private sector in the economy.

One of the major issues before the oil-rich Arab Gulf States in recent decades has been the diversification of their economies from the oil to non-oil sectors. Their heavy dependence (from 70 to 90%) on the oil revenues has prompted these countries to formulate the policies so that other sources of income from the non-oil sector can be enhanced. But the question is how for these Gulf States have been successful in implementing these policies? Moreover, what are the major drawbacks in the diversification their economies in the present time? In this paper, an attempt has been made to understand the rationale behind the diversification of Arab Gulf economies dominated any single rent revenues. This has been discussed in the framework of their overall macro-economic development, taking into consideration the various factors of productions, so that a desired balanced growth can be maintained. The main focus of the paper is on the current initiatives taken these States towards the building of a non-oil economy. While highlighting the Arab Gulf State‘s economic diversification drive, the paper particularly point out the varying degrees of seriousness and success because as this paper concludes, this economic diversification project could be conceived without taking into account the impact of fluctuation in oil prices in the global market as well as on the overall economic and political stability in the region

2008

The paper addresses the issue of economic diversification as a necessary, but not sufficient condition to enhance economic development process in the state of Kuwait, and oil exporting countries alike. A number of diversification indices are calculated, and an InputOutput based diversity index is provided. The latter measured with reference to the Norwegian economy as a benchmark for a welldiversified oil producing country. Moreover, an econometric model is estimated based on pooled analysis. This is important to draw some conclusions on the main determinants of diversification in the group of a selected oil producing countries: Indonesia, Iran, Kuwait, Oman, and Venezuela. Investment, and other few variables, is turn to be one of the most important determinants. The paper concludes by a set of policy

2013

This contribution examines the major features of UAE's economy, its factors of strengths, undelying also its critical aspects. Furthermore, the work focuses on the crucial factors that characterize a diversified knowledge economy and indicates the policies that the economy of the United Arab Emirates must pursue in order to improve its performance and be a competitive economy at a global level. In addition, the paper seeks to identify new business areas for the diversification and development of the UAE's economy.

2013

This contribution examines the major features of UAE's economy, its factors of strengths, underlying also its critical aspects. Furthermore, the work focuses on the crucial factors that characterize a diversified knowledge economy and indicates the policies that the economy of the United Arab Emirates must pursue in order to improve its performance and be a competitive economy at a global level. In addition, the paper seeks to identify new business areas for the diversification and development of the UAE's economy.

Applied Economics and Finance

Countries, such as the GCC countries, that predominantly rely for their income on oil resources face the reality that these sources of their income would not last forever. Thus, being a member of the GCC countries, Bahrain has been pursuing the policies of sustainable and diversified economic growth. This paper uses the share of nonoil real GDP to total real GDP as a measure of diversification to access the extent of diversification in Bahrain. The shares of nonoil GDP increased from 64% in the beginning of this of this century to 80% in 2016 with an average annual growth rate of 6.2% for the period 2002-2016. This success story seems to have an inherent problem. A bivariate structural VAR model with nonoil real GDP and oil price shows that oil prices (indirectly oil sector) have positive impact on the movements of the nonoil real GDP. This means nonoil sector has been very much dependent on the oil sector and neutralizing the dependence is required for the post oil era.

Oxford Energy Forum, 2019

Circular Economy and Sustainability, 2021

A national economy which is dependent on income from just one source is vulnerable, especially when that income comes from non-renewable resources. The sustainable prosperity of an economy thus relies on the successful implementation of economic diversification. Diversification is key to creating an attractive, flourishing environment in a country and improving the quality of its institutions and its citizens' lives. The countries of the Gulf Cooperation Council (GCC) are accelerating their efforts to achieve economic diversification, with their national visions reflecting a shared aim of securing permanent high standards of living for future generations. After the first boom in oil prices in 1970, Saudi Arabia's government introduced primary development plans to diversify its economy. In 2016, it announced its 2030 vision to establish sustainable growth through economic diversification. The economic diversification strategy of Saudi Arabia is founded on several pillars, including investment in human capital and education and investment in non-oil sectors such as tourism. This paper aims to analyze the economic diversification trends in the GCC region with a special focus on Saudi Arabia as a case study. Within this wider context, the paper will concentrate on Saudi Arabia's efforts to achieve diversification by building a knowledge-based economy. Focusing on the quality of education and research improves the human capital available in the country which contributes to the growth of the economy. Results reveal that although Saudi Arabia has embarked on its diversification plans, the current status of oil prices, the deficit in the Saudi general budget, and the country's traditional educational system will hinder and slow this process.

The main objective of this study is to empirically examine the patterns of economic diversification in case of Saudi economy. Using annual data of oil and non-oil sectors for the sample period 1970-2011, the empirical results suggest that there are visible patterns of economic diversification at disaggregated (sectoral level). Sectors like community, finance, retail and transport appear to be relatively less synchronized with oil sector compared to agriculture, manufacturing and construction which exhibit high degree of synchronization. Further, the study attempts to explain sectoral synchronicity using determinants like public spending and volatile oil price. The results indicate that non-oil primary balance along with changes in oil price significantly explain sectoral synchronicity for some sectors, while, fiscal impulse along with changes in oil price does not significantly explain the sectoral synchronicity. The study has strong policy implications for Saudi economy and GCC countries as the outcome of this study is expected to provide important direction for policy makers to undertake necessary measures of economic diversification.