Search This Blog

Saturday, May 23, 2009

A brief overview of the United Arab Emirates


I. THE FORMATION OF THE UNITED ARAB EMIRATES

Before the oil boom of the early 1970s, the United Arab Emirates (UAE) was a collection of small coastal and desert settlements, precariously dependent on relatively meagre trade, pearling and subsistence farming. From 1853 until 1971, the region was known as the Trucial States, closely bound by treaty relationships with Britain.

The coastal towns of the UAE had been trading ports for hundreds of years, and were well located as transhipment outposts for cargoes from India and Africa, as well as Iran. A number of prominent Emirati merchant families in fact trace their origins to India and Iran. The region was also a major producer of natural pearls until the 1930s, when the advent of Japanese cultured pearls severely undercut the traditional pearl market.

The UAE today is a federation of seven of the former Trucial States: Abu Dhabi, Dubai, Sharjah, Ras al-Khaimah, Ajman, Umm al-Qaiwain and Fujairah. Bahrain, which had also been one of the Trucial States, chose a separate path to independence. The UAE came into existence on 2 December 1971, the day before Britain ended its treaty relationships in the Gulf.

Abu Dhabi is the largest and most affluent of the states of the UAE. It occupies more than 80% of the land area—and controls more than 90% share of the oil wealth. Abu Dhabi is also the national capital of the UAE and the centre for the oil and gas industry.

Dubai is the commercial and shipping hub of the country. It has built on its trading foundation to create the region’s premier port and airport facilities, warehousing, tourism, ICT and financial infrastructure.

Sharjah is the third-largest emirate and a centre for manufacturing. Similar to Abu Dhabi and Dubai, it has an entrepreneurial business culture, and an energetic business community seeking closer links with Australia.

Ras al-Khaimah (RAK)
is the fourth-largest and most northern of the emirates. Education and health care are the two key development initiatives of the RAK government.

Ajman
is the smallest of the seven in physical size, with a total area of 260 sq kms. It has a population of around 207,000 . Despite its small area, it has experienced rapid growth, particularly in the construction sector, spurred by the offer of 100% freehold ownership of real estate for non-Emiratis.

Umm al-Qaiwain
is the least populated of the seven emirates, with an estimated 49,159 inhabitants in 2007. The emirate is known for its beach resorts and a more restful and relaxed lifestyle.

Fujairah
is also small in population with 126,000 inhabitants at the time of the 2005 census. It borders the Arabian Sea and (along with a detached enclave of Sharjah at Khor Fakkan) has well-developed port facilities some 70 nautical miles south of the Straits of Hormuz.

A. The Government of the United Arab Emirates

The UAE is governed by the Federal Supreme Council comprised of the rulers of each of the seven emirates. The President is HH Sheikh Khalifa bin Zayed Al Nahyan, the ruler of Abu Dhabi, and the Vice President and Prime Minister is HH Sheikh Mohammed Bin Rashid Al-Maktoum, the Ruler of Dubai.

The Federal Supreme Council passes federal law and the individual emirates regulate local matters.

The stable political alliance of the seven emirates of the UAE has been the bedrock of the nation’s growth. Distributed oil wealth has been key to its cohesion and prosperity.

II. THE UNITED ARAB EMIRATES ECONOMY


A. Basic demographics

The UAE has a population of around 4.6 million of whom some 82% are expatriates. Expatriate workers are largely drawn from South Asia, the Philippines as well as other Arab countries and Europe, the US and Australia. The Emirati population is very youthful, with 20% aged under 14 years.

B. GDP trends

The governments of the UAE, especially Abu Dhabi and Dubai, have been particularly skilful in blending a combination of oil and gas revenue with strong trading and services sectors to produce amongst the world’s most impressive economic performances. Average real GDP growth (according to Economist Intelligence Unit [EIU] figures) was 9.3% from 2003 to 2007 – a remarkable economic performance.

IMF statistics indicate real GDP growth of 7.4% in 2007, with an estimate of 7% for 2008. (See IMF Regional Economic Outlook for details.)

GDP per capita was estimated at around US$37,000 in 2007, compared with US$37,300 in Australia for the same period.

The EIU expects UAE’s growth rate to slow in late 2008, largely as a result of OPEC-mandated production cuts, as well as a slowdown in Dubai’s construction sector.

The EIU has dropped its 2009 GDP growth estimate for the UAE from 7.5% to 4.9%.

C. Oil and the UAE

The UAE holds nearly 10 percent of the total world supply of proven crude oil reserves and the fifth-largest natural gas reserves. As noted, Abu Dhabi controls more than 90 percent of these resources and is considered to have over 100 years of oil reserves remaining at 2007 rates of production.

Prior to the 2008 global credit crisis, the UAE continued to increase oil production. Upstream oil and gas agencies in the UAE have identified a range of new projects aimed at boosting the nation’s crude oil production capacity to nearly 4 million barrels per day by 2020. This would represent an increase of approximately 40 percent over current production levels.

1. Gas – the Dolphin project

The Dolphin project was launched in March 1999 following an announcement by the UAE and Qatar of plans for a joint venture aimed at transporting gas from Qatar's huge fields to industrial consumers in the UAE, Oman and other countries.

Dolphin is intended to provide a delivery infrastructure that will stimulate investment in a variety of related industries along the value-added gas chain. The gas also supports domestic electricity demands and frees Abu Dhabi’s natural gas supply for crude oil recovery. The project began delivering gas to power companies in the second quarter of 2007.

2. Oil pipelines

Gulf governments are studying the development of oil pipelines that would bypass the Strait of Hormuz. About 40 percent of the world’s traded oil is shipped through this 55 km wide passage.

If built, the pipelines could move as much as 6.5 million barrels of oil per day or about 40 percent of the amount currently shipped through the Strait. Construction of a first pipeline would carry oil from the UAE’s Habshan oil field to the Emirate of Fujairah, located outside the Strait of Hormuz on the Arabian Sea.

3. Bunkering

Fujairah and nearby Khor Fakkan (a coastal enclave of Sharjah) also provide extensive bunkering facilities. These centres represent the world’s second-largest marine fuel market, handling 10 million tonnes of marine fuel oil a year, compared with around 31.5 million tonnes in Singapore.

D. Non-oil sector

The non-oil sector in the UAE continues to show solid growth, fuelled by supportive government programs. Dubai’s non-oil sector, for example, grew on average by 15% p.a. during 2000-05.

Growth in this sector in 2007 was estimated to be 21%, primed by building and construction, retail, entertainment events, tourism, air transport, manufacturing and port operations.

Inflation has become a major concern as a result of such rapid growth, whilst flexibility to respond in monetary policy terms has been limited, given the pegging of the UAE dirham to the US dollar. There is some worry that the 2003-07 average inflation rate of 9.8% may increase further.

1. Jebel Ali Port

In 1976 the ruler of Dubai, the late Sheikh Rashid bin Saeed Al-Maktoum, conceived the construction of the world's largest man-made harbour at Jebel Ali, some 35 kms. southwest of the city of Dubai. The port facility is 134 sq kms. and has capacity for 67 berths.

Jebel Ali Port is part of DP World, one of the world’s largest port operators. Along with nearby Port Rashid, Jebel Ali handled 11 million TEUs (twenty foot equivalent container units) in 2007, an increase of 20% on the previous year. The Dubai ports rank 7th globally in container volumes. This compares with Melbourne (2 million TEUs) and Singapore (27 million TEUs).

Although complementing the port and transshipment facilities of Port Rashid, Jebel Ali is particularly geared to industrial development and has major aluminium, gas and cement plants.

2. Jebel Ali Free Zone (JAFZA)

The adjoining Jebel Ali Free Zone hosts some 5,500 companies from 120 nations, and offers well-serviced facilities, low overheads and the freedom to operate with an offshore status.

JAFZA spreads over an area of 49 square kms, and ranks among the world’s largest and the fastest growing free trade zones (FTZs). There are now about 12 free trade zones in the UAE, with more planned or in progress, all offering attractive establishment and support services to foreign companies. These facilities provide excellent warehousing and distribution facilities, including cold stores, and are described at UAE-FTZ.

E. Transhipment

Dubai has always been a major transhipment port for the Middle East and North Africa as well as European destinations. It has developed sophisticated logistics systems to facilitate cargo transfer – by sea and air. Saudi Arabia is one of the major transhipment destinations for Dubai cargos.

For distribution to other GCC markets, the UAE FTZs provide distribution hubs where products can be reassembled, repacked and labelled for specific markets.

F. Air travel

The UAE has 5 international airports (in Abu Dhabi, Dubai, Fujairah, Ras Al-Khaimah and Sharjah), the major centres being Abu Dhabi and Dubai. This is possibly the tightest concentration of major international airport facilities in the world.

Dubai International Airport, despite its recent expansion, is thought insufficient to cope with the expected influx of travellers over the next few years, so another facility, the Al-Maktoum airport is under construction at Jebel Ali, 35km away. This airport is due to come into full operation in 2017. The first 4.5 kms runway of this airport is already complete, as the first of six runways, designed to handle 120 million passengers a year. This is expected to be the world's largest airport complex.

Emirates Airlines (Dubai) and Etihad Airways (Abu Dhabi) have established high standards of service with modern fleets offering premium passenger facilities. Both UAE airlines offer direct services to Australia, with connecting services to major ports in the Middle East and Europe. The direct flight from Sydney to Dubai is around 15 hours.

G. Tourism

Dubai currently attracts around 7 million foreign visitors per year, and has over 300,000 hotel rooms available, 60% of which are in the 4 to 5 star category. Tourism contributes around 18% to Dubai’s GDP per year.

Abu Dhabi is also investing heavily in tourist facilities and is targeting 2.7 million hotel guests by the year 2012. Currently Abu Dhabi receives some 1.45 million hotel guests annually. Other emirates have also given tourism developments high priority.

Recent forecasts of a further slowdown in demand in key European economies and in the US, however, which together account for some 40% of total arrivals to the UAE, suggest the projections of tourism growth over the next few years may need to be moderated.

H. The property boom

In 2002, the Government of Dubai relaxed restrictions on foreign investment in property, to meet a pent-up demand for residential property from foreigners and spurring a host of spectacular developments. Similar property development is taking place in Abu Dhabi.

Both cities are being reshaped as some of the world’s most prominent architects vie to build ‘signature‘ showcase projects. Notable structures include the Burj Tower, the world’s tallest building, and the visionary Dubai Rotating Tower, a rotating 80-storey complex that constantly changes shape, which has been proposed for construction in the near future.

The 2008 global credit crisis, however, may be expected to have some impact on the phenomenal growth rates experienced by the UAE property sector, albeit that major developers remain confident of the future of the high-end of this market. - Lifted from Business Guide to UAE, http://www.dfat.gov.au/geo/uae/index.html

No comments: