KHALEEJ TIMES, Sunday, Mar 21, 2021 | Shaaban 7, 1442
UAE economy has a bright outlook for next 50 years
Emirates:
The UAE economy has expanded 57 times in the last five decades, rising
from Dh6.5 billion to about Dh353.90 billion in 2020, on the back of
bourgeoning services and industries.
In 2021, gross domestic product (GDP) is expected to swell to Dh373.15 billion
as per the estimates of the International Monetary Fund (IMF).
A steady rise in economic activity over the years has allowed the UAE to become
the 35th-largest in the world, up from about 140th half a century ago. While oil
and gas has been the most dominant industry over the decades, propelling the
economic engine of the UAE, its diversification drive has ensured the economy is
reducing its reliance on this space. Trade, transportation, tourism, retail and
real estate have been the five key drivers of growth in recent years.
“Moving away from complete oil dependence half a century ago, the share of
hydrocarbon activity in the economy fell to 65 per cent in 1990 and 29 per cent
last year. The share of services rose to half the economy, while the share of
manufacturing rose to just under a tenth,” said Giyas Gokkent, chief economist
of Mena House.
“The increase in the share of non-hydrocarbon activity to almost three-quarters
of the economy moved hand-in-hand with a more than fifty-fold increase in the
population from 180,000 in 1968 to about 9.5million,” he added.
Another sector that has witnessed commendable growth in recent years is
manufacturing, particularly in sectors such as metal processing, furniture,
industrial preparation of food stuff, aluminium production, construction
materials, fertilisers and real estate. Industry now comprises 46.2 per cent of
GDP and employs 34 per cent of the workforce.
“In the last 10 years, light manufacturing and some heavy manufacturing
activities have taken root and shown signs of maturing and becoming major
players in the non-oil sector. Manufacturing is growing very significantly and
is diversifying into new areas. For instance, if we look at Abu Dhabi, the
emirate is diversifying into aerospace and health equipment,” says Sanjay Modak,
professor of economics at RIT Dubai.
“Health tourism is another sunrise industry, and there is growing interest in
agriculture too,” he added.
Agriculture, for now, contributes merely 0.7 to the economy and gives employment
to 1.4 per cent of the workforce, but it has potential to mature and expand to
emerge as an export sector.
Considering the significant leaps the UAE has made in the past 50 years, it
could be a tough act to replicate the scale and speed of development in the next
50 — and what’s needed is a shift in strategy.
“It will require a shift towards a more manufacturing and knowledge-based
economy, while still nurturing services. Now, this has already been underway
with services and manufacturing doubling their share in activity since 1990,”
added Gokkent.
“The share of hydrocarbon activity will decline further hopefully because of
this steady shift towards increased non-hydrocarbon activity. Changes in
technology and, over time, depletion of hydrocarbon resources make this shift
imperative.
“In brief, the UAE economy needs to continue to open up and invite business and
people to continue along its success story of the previous half a century.”
Khatija Haque, chief economist and head of research at Emirates NBD,
agreed: “Looking ahead, the focus is likely to shift to new technologies and
industries across different sectors, including agriculture [agritech], financial
services [fintech],and clean energy.
“However, the recently-released Dubai 2040 urban development master plan
suggests that there will be continued investment in physical infrastructure as
well, including transport, housing and leisure facilities to improve the quality
of life for residents and to make Dubai a desirable place to live and work in
the coming decades.”
However, building smart cities and adopting new technology won’t be enough.
“The UAE has been adopting new technology and applying it well in various
sectors. But if we want to create a sunrise industry then we will have to build
an ecosystem that attracts new talent and encourages people to innovate and
invent, not just adopt new technologies,” says Modak.
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