Diversification of oil economics

Abstract

This thesis is an empirical study of the diversification of the United Arab Emirates (UAE) and its neighboring Gulf Cooperation Council (GCC) member-states. Using several quantitative analysis methodologies from the field of regional economics, this report will investigate whether the UAE has a diversified economy, and if so, how and why it has achieved this feat. This report will also make recommendations for further diversification attempts in light of the competitive landscape of the Middle East. We start by defining the term "diversification" and other key related terms such as, "growth' and "stability' in order to help us classify previous empirical theories into two categories: (i) hypotheses relating diversification to stability, and (ii) hypotheses relating diversification to growth. Next, we apply these hypotheses to the key economic indicators of the UAE in order to determine if, according to each hypothesis' definition, the UAE economy can be classified as diversified. Next, we apply the same hypotheses to other GCC states, and compare the results, to see the UAE's standing relative to similar economies. Finally, this report will make recommendations of strategies the UAE government needs to adopt in order to improve their diversification drive. This thesis will find that between 1996 and 2000, the UAE has had an unstable, but rapidly growing, economy compared to other GCC countries. However, since 2000, realizing that such rapid growth is unsustainable, the UAE government has tried to regulate and streamline its economic growth by channeling its resources (national budget and labor force) into the services (e.g., financial services, travel, and tourism, etc.) sector. We will also see that as of 2005, compared to other GCC states, the UAE has adopted relatively conservative growth strategies to ensure economic stability and longevity