The United Arab Emirates has one of the region's fastest-growing economies. The purpose of this article was to determine the function of tourism in the economic diversification initiatives of the nation. The primary study question was on examining the impact of the tourist sector on the economic growth of the nation. The purpose of the study was to determine the connection between the country's economic progress and the expansion of its tourism industry.
The investigator gathered information from both primary and secondary sources. The quantitative method was determined to be the most suitable for assessing the collected primary data. The findings indicate that tourism currently plays a crucial role in the diversification of the economy of the UAE. It has become one of the most important revenue sources, and future estimates indicate that it will continue to expand.
The United Arab Emirates is one of the world's largest suppliers of oil and natural gas. This country's administration has remained devoted to supporting sustained economic growth, but its heavy reliance on the petroleum industry has been a key cause for concern (Auzer, 2017). As a result, the government decided to diversify the nation's economy in order to reduce overreliance on a single economic sector. Tourism has emerged as one of the strongest options for diversifying the economy of a nation. The government has invested in the nation's infrastructure to facilitate the expansion of the sector. The city of Dubai has become one of the world's most popular tourist destinations as a result of enhanced security, the construction of major tourist attractions, and the government's direct backing of the hospitality industry.
The Burj Khalifa, the world's tallest building, and Palm Island, the largest man-made island, are among the prominent tourist attractions. The purpose of this paper is to analyze the significance of tourism in the economic diversification policies of oil-dependent nations, using the United Arab Emirates as a case study. This investigation will address the following question:
What effect does tourism have on the diversification of the economy of the United Arab Emirates?
The significance of the study lies in the fact that it will aid in elucidating the significance of the tourist industry to the national economy and what can be done to improve it. According to the literature review, the study will employ numerous hypotheses. The research onion in Appendix 1 demonstrates the project's research assumptions. In this investigation, the following important principles were employed:
Economic growth is a rise in the quantity of products (goods and services) produced per person in a country.
Gross domestic product (GDP) is a measure of the monetary worth of a market of all goods and services produced in a country during a specified time period, often a year (Gylfason, 2017).
A public-private partnership (PPP) is a tight collaboration between two or more private and governmental organizations (Weidenfeld, 2018).
Objectives of Study
Determining the role of the tourist industry in the diversification initiatives of the UAE's economy; identifying the steps the government may take to enhance the growth of the tourism industry.
Over the years, the economy of the United Arab Emirates has experienced remarkable expansion. According to Ahmed (2015), the 2008 global economic recession had an impact on the economy, but it has since recovered and is expected to continue growing. The tourism industry is one of the areas of the economy that has experienced exceptional growth. The UAE government has been concerned about the country's excessive dependence on the oil and gas industry. Allahar (2014) says that the country's oil reserves are anticipated to run dry after a specific time frame. When the petroleum sector becomes unsustainable, it would be fiscally hazardous for the nation to lack alternatives.
The government chose to explore several alternatives, including agriculture, commerce, transportation, the real estate industry, and tourism, among others. Each of these industries has increased throughout time, but tourism has emerged as one of the country's most important economic pillars. The growth of tourism is directly attributable to the government's huge investments and assistance, according to Gylfason (2017). The government first funded a number of the megaprojects that would become tourist attractions.
The development of Burj Khalifa contributed to the country's prominence as a tourism attraction. With the world's tallest structure and a distinctive architectural design, the nation now had something special to show the world. Almost immediately thereafter, the government supported yet another massive project, Palm Beach, which became the largest man-made island in the world (Weidenfeld, 2018).
In the areas of transportation, entertainment, and security, the government has also funded a number of significant infrastructure development projects. The action has reassured the world community that the country is secure for tourism. According to Allahar (2014), security is one of the primary concerns that tourists evaluate when selecting a destination. They desire assurance that they won't be targeted by terrorists or criminals in the foreign country. In addition to attracting international investors, the introduction of measures that liberalized the country's business environment has attracted foreign investors. According to Ahmed (2015), it is easy to launch and operate a business in the UAE.
The purpose of the laws and regulations is to protect the business community. This setting has attracted some of the world's most prestigious hotel brands, including Ritz-Carlton, Sheraton, and Hilton hotels, among others. These initiatives have converted Dubai into one of the world's most popular tourist destinations.
The New Growth Theory can be used to explain the country's tremendous economic diversification. The theory posits that people's limitless wants and desires generate perpetual economic expansion and productivity (Gylfason, 2017). As individuals struggled to satisfy their limitless desires, they invented novel methods of creating cash and profits. In the United Arab Emirates, the oil and gas industry was the primary source of income. However, the country's desire for more has compelled public and private actors to find alternate revenue sources. One of them was the rapidly expanding tourism industry over the previous few decades. When all other forces remain constant, the theory predicts that the tourism industry's current expansion will continue for many years to come.
Research Strategy and Methodology
When conducting research, one must have a technique that describes how data will be gathered, evaluated, and interpreted in order to answer the research question. The researcher's primary hypotheses are one of the initial aspects that must be examined. The research onion in Appendix 1 lists four primary research philosophies that can be adopted depending on the study subject and issue. Positivism, realism, interpretivism, and pragmatism are the four. The researcher determined that pragmatism was the best suitable research philosophy for the investigation. It maintains that a concept can only be accepted if it can support action.
According to Poth (2018), pragmatics "recognizes that there are multiple ways of interpreting the world and conducting research, that no single perspective can ever provide a complete picture, and that there may be multiple realities" (p. 56). As a result, one can evaluate the data using various methods so long as the results are actionable. This philosophy was selected because it permits the researcher to employ either qualitative or quantitative research methodologies, based on their suitability. In accordance with the selected philosophy, a combination of review types was utilized during the research process. In this work, a deductive critical technique was utilized.
This study utilized both primary and secondary sources to collect its data. The technique includes analyzing tourism's contributions to the nation's gross domestic product from 2014 to 2018. The basis of the literature review was secondary data acquired from books and journal articles. These materials also allowed the researcher to comprehend the advancements made by scholars in this field. The original data was collected from a representative sample of participants. The researcher deemed it necessary to conduct interviews with economic specialists and tourism industry professionals. Twenty individuals served as a sample for the collection of primary data from participants.
The sample size was determined depending on the time available for the study and the accessibility of the respondents. Twenty participants were deemed sufficient for the study sample. Using an Excel spreadsheet, the primary data collected from participants was quantitatively examined. This strategy was deemed useful for explaining the country's economic progress and the tourism industry's part in it. The researcher created a Gantt chart to organize the various aspects of this study. The graph can be found in Appendix 2 of this document.
Analysis of Data and Results
Participants were surveyed to determine their perspective on the role of tourism in the country's diversification objectives. The researcher concentrated on determining the function that the tourist sector plays in the economic development and diversification of the UAE as one of the issues she investigated. The researcher asked the respondents if they felt that the tourist sector is crucial to the country's economic success. Figure 1 displays the results of the analysis of the data collected from respondents. Clearly, all respondents concur that the tourism industry plays a vital part in the nation's economic prosperity. None of those interviewed held an opposing viewpoint.
Figure 1: The contribution of the tourism industry to the economic expansion of the UAE.
The researcher studied further the amount of the tourism sector's impact on the country's economic growth. According to Ahmed (2015), the energy sector has historically dominated the country's gross domestic product. It was vital to evaluate the tourist industry's success and how it compares to the nation's other key industries. Respondents were asked to list the economic sectors that, in their opinion, dominate the country. With somewhat more than 30% of the country's gross domestic product, it is apparent that the energy industry is still the dominating actor in the economy. Approximately 20% of the country's GDP is today accounted for by the real estate industry, which has likewise experienced remarkable growth. The tourist industry currently accounts for 15% of the UAE's gross domestic product. As seen in Figure 2, other prominent industries include retail and logistics.
Figure 2: Major economic contributors to the UAE
The researcher was interested in determining the tourist industry's potential to become the largest contributor to the gross domestic product of the United Arab Emirates. Respondents were asked whether they feel this sector has the potential to become the country's major economic sector. Figure 3 displays their responses. It is essential to highlight that respondents' opinions differed.
A slight majority (9 respondents) agreed that the industry had the potential to become the main economic force in the nation. However, they emphasized that other businesses, such as the retail and real estate sectors, are expanding rapidly and have the potential to surpass the energy industry. Significantly fewer than half (8 respondents) feel that the tourism sector has the potential to become the country's largest source of income. Three individuals expressed uncertainty over the issue. Nonetheless, it is essential to highlight that all participants agreed that the business is expanding rapidly, as evidenced by the data in Appendix 4.
Figure 3: The tourism industry's potential.
Based on the analysis of both primary and secondary statistics, it is obvious that the country has experienced remarkable economic growth during the past decade. The country's primary source of income has been the oil and gas industry. However, the company understood that such tactics were unsustainable. The petroleum industry alone could not support the nation's economic expansion over the coming decades. As a result, it was decided to seek out new sources of revenue. As a means of lessening dependency on the oil and gas industry, the government has committed to promoting the growth of a variety of industries in collaboration with private sector actors.
The measures have had a substantial impact on the nation's tourism industry. Appendix 3 demonstrates that the UAE's GDP grew steadily from 2015 to 2018. Negative growth occurred between 2014 and 2014 due to economic pressures and the influence of the raging Arab Spring in the region, even though the country was not directly affected by the civil conflict.
The preceding study of source data indicates that the country's tourist industry has expanded rapidly over time. According to Allahar (2014), the spectacular expansion of the country's tourist industry is largely attributable to the efforts of government and private sector participants. Infrastructure development is one of the primary elements that have led to the sector's rapid expansion. The government has made substantial investments in the development and extension of rail, road, water, and air transportation in the country. Presently, Dubai International Airport is one of the world's major airports. The country's rail network is among the most modern in the world. Thus, tourists are able to go from one region of the country to another.
Massive investments in the development of tourist attraction sites have also contributed to the expansion of the business. People visit this city to see its marvels, tallest structures, and vast islands. Enhanced security is another element that has contributed to the expansion of the tourism industry. The security situation in the Middle East and North Africa (MENA) region has long been unstable.
The problem of extremist assaults has always made tourists hesitant to travel to the area. The security in the Middle East and North Africa has worsened as a result of the recent Arab Spring, which affected various countries in the region. Despite these security risks, the United Arab Emirates has remained a stable country. The government has invested many resources to ensure that all visitors and locals are safe from any form of attack.
The evidence gathered from many sources indicates that tourism has become one of the leading economic sectors in the United Arab Emirates. The government has established an atmosphere in which both domestic and international enterprises can launch and operate without fear of being unfairly targeted. As such, numerous international hospitality industries have started their operations in the country. According to Allahar (2014), the country's tourist business is projected to expand even further. It has the potential to become the country's primary economic pillar, particularly if the petroleum industry becomes less significant and fewer people rely on it.