The ever-increasing political pressure at global level and the sensitivity of an increasing proportion of citizens on the planet to take immediate measures to slow down climate change for the worse, force the governments of many states which their economies is based on exporting and trading of hydrocarbons to develop alternative industries and markets with the aim of increasing the independence of their economies from oil.
by Thanos S. Chonthrogiannis
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The country of the UAE belongs to this club of countries whose economy is based on oil exports. This export figure was at 20% of the annual GDP (2017), with oil exports totaling 67,3 billion USD with 382,6 billion USD GDP (2017) (Source: WTO, www.wto.org ).
The diversification of the UAE economy as an alternative to oil dependence
The efforts of the UAE government aim to develop two main industries as alternative revenue industries in relation to the export and trading industry of fuels and minerals and outside the manufacturing sector that the last years flourished.
In the given period there is a drastic fall in property prices in the UAE and Dubai due to geopolitical developments, while a large percentage of construction companies are unable to serve their loans so that they become overdue, selling their properties at very low prices in order to survive. More details about real estate prices and red loans read the analysis titled «Strategies to solve the problem in the Construction and Banking sector of the UAE from the fall in prices in Real Estate».
The two main industries to be developed to which the UAE government’s efforts are aimed are the ever-increasing attraction of new business activities and the strengthening of the local tourist product offered.
In the first case to achieve attracting new business, the UAE government has embarked on the ever-increasing time-hosting of international exhibitions with the participation of an increasing number of countries.
Based on this strategy, both the host of international exhibitions, the UAE and the participating countries in these exhibitions with their own promotional kiosks expected to gain access to new markets and the development of channels networks to access new markets.
In addition, all and mainly the UAE are looking to strengthen bilateral relations with the participating countries and create new links with interested companies with a view all to gain short and long-term common benefits. Short-term benefit in the case of the UAE is the cover of costs for the facilities and the hosting of international exhibitions.
International exhibitions such as the Expo 2020 hosted in Dubai, the capital of the UAE, and always based on the views of the organizers that during it will host about 26m visitors, strengthening the revenues from the tourism industry with revenues of 35m USD. The objectives of this report are the linking of ideas and the “Construction of the future” while promoting fair and sustainable development.
The “Vision 2021”
Within this framework the UAE government has set the plan “Vision 2021” for the UAE, in which it will try to lay the foundations for the restructuring of the export sectors of the economy that inject revenues into the state treasury.
The fact that Dubai is a business, financial and cultural centre of the Greater Gulf region, helps to increase traffic to host international exhibitions, making the city a pole of attraction for international business.
For example, the infrastructures of the Expo 2020 International Exhibition in Dubai have been created in such a way so that after the end of the exhibition they are used to establish a new type of business zone, naming it “Region 2020” with its exhibition centre aims to consistently attract a certain number of visitors per year which will feed the UAE hotel industry, except other things.
The weaknesses of this vision are based on external factors that shape and the growth rates of an economy based on industries with seasonal revenues such as tourism and the decisions to install new businesses in the region.
The construction industry is reeling with more and more overdue loans to make their appearance with the passage of time while many properties are neither sold nor rented creating increasing financial distress in construction companies, by trapping an increasing number of sellers due to continuous decreasing demand for the product concerned.
A possible conflict in the Persian Gulf will “vent” the numbers of visitors to the UAE and in general in the countries of the region. This means that the revenues of the UAE State fund budgeted by these industries will suffer.
The alternative industries for development
For all these reasons that determine the decisions of an investment, the UAE should steadily develop other industries in their economy that will ensure them stable and not seasonal revenues in their state coffers.
The UAE should become independent fully in energy terms from the use of oil with the development of Photovoltaics (PV) parks with energy storage devices, nano-solar skin technologies etc. that will give on a continuous basis the necessary electricity for the gradual coverage of their population.
In addition, other countries in the region will have to adapt the same strategy. Here, however, a specific strategy should be implemented to replace the energy that comes from hydrocarbons to clean energy. More specifically,
We need to be realistic in our approach for this reason the whole world must understand that on the wealth generated by all these companies that belongs in the specific oil and fossil fuel extraction industries, etc., millions of people have invested their savings (in the shares of these companies and not only) through the investments made by mutual funds, pension funds, banks, building societies, hedge funds, businesses , etc., without ignoring the hundreds of thousands of workers working in these companies.
For this reason, any type of “correction” in the prices of the shares of these companies will cause a great loss of global wealth and can even reach the point of causing a financial crisis and a profound global recession.
Therefore, the shift towards clean energy should be done in a gradual manner with the minimum possible loss to the existing wealth of these companies. More information on how to make this change in clean energy through these hydrocarbon mining companies read the analysis titled «How to reverse the Climate Catastrophe».
Photo by Carl Steinbeisser
The second industry to be developed by the UAE is the neglected Agriculture and Fishing industry that contributes the humble 0,8% to the country’s annual GDP (Source: World Bank, www.wb.org). In the event of a geopolitical crisis, visitors-tourists and businessmen-will disappear, hotels will be emptied, the red loans will soar and the feeding of the population with basic food products will become highly problematic.
We would therefore recommend the UAE government to use the revenues from oil exports for the development of the Agriculture and Fishing industry.
The government should create Desalination factories which will be linked to underground irrigation networks that will be directed to companies that will have greenhouse facilities in the desert for the mass production of basic dietary agricultural products. The goal should be to fully cover the population by selling these products and then to direct them on exports.
In a similar way aquaculture companies should be created to produce specific types of fish that their production will feed the full coverage of the population and then be able to pass into export activities.
The UAE government’s goal should be the Agriculture and Fishing industry in the coming years to contribute 10% to the country’s annual GDP, due to exports.
With these types of policies both the UAE and the neighbouring countries of the Gulf region will be able to diversify their economies by dismounting them from oil and creating the bases for a stable and not seasonal income stream in their state coffers, while ensuring the internal nutritional viability of their populations.
