• Friday, March 29, 2024
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UAE points the way to economy diversification as Nigeria sticks with oil  

United Arab Emirates-UAE

Despite running a successful oil economy, the United Arab Emirates (UAE) is not putting all its eggs in one basket and is set to tackle the coming decade with a renewed sense of confidence by intensifying plans for life beyond crude oil, a point Africa’s biggest oil-producing country is yet to come to terms with.

For UAE, building an economy less dependent on the vagaries of the global oil price but more on a skilled workforce in many different industries is beyond lip service.

Organisation of Petroleum Exporting Countries (OPEC) data for 2020 say the UAE pumped around 3 million bpd and exported 2.3 million bpd of oil, which was worth some $75 billion. Emirati government data from the previous year show oil and gas exports accounted for almost 30 percent of GDP.

In Nigeria, oil accounts for less than 10 percent of GDP. It provided over half of all government revenue from 2015 to 2019 and at least 90 percent of export earnings.

Yet, growth in the UAE’s non-oil industries is seen to rise from 1.3 percent in 2018 to 1.6 percent in 2019 and 3 percent this year, according to the International Monetary Fund.

“We have to be ready to celebrate the last export of a barrel of oil,” Yousef Baselaib, executive director for sustainable real estate at Masdar, told Forbes.

A forward-thinking policy of the UAE has involved actively investing its oil money into projects that would ensure the sustainability of its economy in the long run, even if oil demand eventually dies.

The year 2020 for UAE will involve all segments of its society shaping the country for the next 50 years and preparing for the country’s Golden Jubilee celebration in 2021.

The new theme called “2020: Towards the Next 50” comes at a turning point in the country’s history and lays the groundwork for celebrating its golden jubilee in 2021, also known as the 50th anniversary of the union.

“Today, we announce ‘2020: Towards the Next 50’. We shall develop our plans and projects and reinvent new ideas. 50 years ago, the founding fathers shaped our life today, and next year, we will shape the coming five decades for the future generations,” Shaikh Mohammed bin Rashid Al Maktoum, vice president and prime minister of UAE, said in a series of tweets.

“In 2020, we will work on making giant leaps in our economy, education, infrastructure, health, and media to share the UAE’s new story with the world. Together, we will build the Emirates of the future in 2020 with the winning spirit of the union, a spirit that strives for progress. Our development journey has no end,” he tweeted.

The plan aims to strengthen the country’s reputation and investment in future generations, build on basic tenants such as investment in education with a focus on advanced technology, rely less on oil by diversifying exports and imports, enhance cohesion in societies, improve the productivity of the national economy and build on Emirati values for the benefit of future generations.

“Our mandate is about preparing the UAE for its biggest challenge: The post-oil era. For this, we need to complement government and private-sector efforts to empower young talents,” said Mohamed Al Qadhi, general manager, Sandooq Al Watan, about the big ambition and challenge take up to 50 years of work.

In total, about 60 percent of the UAE’s GDP is owed to the secondary sector which is a combination of the petrochemical industry, construction, ship repair, and selected light industries such as textile production, while agriculture and fishing makes a negligible contribution of barely 1 percent. The rest of the country’s GDP comes from its flourishing service sector, such as finance, real estate, logistics, and tourism.

The tertiary sector also provides most jobs in the UAE economy with nearly 78 percent of the labour force working in the service industry while 15 percent are employed in manufacturing and the remaining 7 percent earn their living in agriculture or fishing.

The UAE has 37 free trade zones divided into business categories. The zones have favourable tax and business regulations such as no personal income tax, tax exemptions on imports and exports, and corporation tax exemptions of up to 50 years, a development which has encouraged private capital.

The country is a very attractive market for foreign investment. With a per capita GDP of $43,000, the population is considered wealthy.

UAE is already home to some of the most remarkable luxury real estate, including the world’s tallest building and the Palm Islands, but the UAE is also betting big on technology and renewable. The airports in Dubai and Abu Dhabi as well as the Jebel Ali harbour have made the country a global centre for finance and travel.

“We decided that we will go to the future – we will embrace the future without worry,” Mohammad Al Gergawi, the architect of Dubai’s vision for the next half-century, said last week.

Tourism is also set to generate a large portion of the country’s yearly income. The World Travel and Tourism Council has forecast a 5 percent increase in travel and tourism revenue by the end of this year, totalling $19.7 billion, a marked increase from the year before.

If the UAE is a textbook study for diversification, Nigeria is the opposite. On numerous occasions, Nigeria’s depleting oil reserves have been extensively discussed as the unrelenting reduction without replacement has become worrisome.

“I don’t doubt the sincerity of the FG about lifting 100m people out of poverty but FG is not prepared to make difficult decisions,” said Andrew Nevin, PwC’s chief economist, at a Nigerian Economic Summit Group (NESG) event. “Time is running out.”

Ayo Teriba, CEO of Economic Associates, said at the event in Lagos that Nigeria’s heavy dependence on oil has led to current unfavourable outcomes and with the focus still on the liquid gold, Nigeria is missing out on the opportunity to tap into the much-available cheap global liquidity.

“Nigeria has suffered a steep loss of liquidity which has hindered growth,” said Teriba. “Rather than identify growth as our major priority, raising liquidity threshold should be the focus.”

DIPO OLADEHINDE