The Future of the Past: Reviewing the Stability of the U.A.E. State
From Past to Present
Today’s United Arab Emirates is a result of a charismatic leader, an influential colonial power, and the huge effect of discovering natural resource reserves; an unlikely combination that came together to create one of the most unique states in the Arab region. Authors Richard Lachmann and James Gelvin tell us that state-building is sometimes a long, arduous and even arbitrary process. The founding of the UAE was no different. Its people began at the extremes of borrowing money at unsustainable levels to survive, only to be unable to repay those debts when their diving expeditions during specific seasons of the year led to very little income. Strenuous, exhausting and unforgiving labor, even pearl diving itself was taken away from the tribes that made up the UAE region before the United Arab Emirates was founded. Once innovation across international borders made their essential pearl industry irrelevant, people had to escape to places like Bahrain in order to survive and feed their families. It was only when Sheikh Zayed overthrew his brother’s rule of Abu Dhabi in 1966, with the support of his family and of Britain, did the tide begin to change for the region and to set the course for a new future.
Have you ever visited the United Arab Emirates?
Once Sheikh Shakhbut was overthrown by his younger, more socially-invested brother, the stockpiling oil revenues were no longer to be stored in state coffers. Instead, they were used by Sheikh Zayed as a tool—as a weapon—to fight against the embedded hardships that his people and the people around Abu Dhabi had to deal with. Indeed, as Mohammed A. J. Al Fahim points out in his memoir, From Rags to Riches: A Story of Abu Dhabi, Sheikh Zayed “announced that anyone in need could come to Abu Dhabi from anywhere in the Trucial States to receive money” (Al Fahim, 135) created from oil exports. This change of policy, and in the future of Abu Dhabi, was only amplified once the British Protectorate status of the region became untenable for the British (due to their own financial and political issues at home), who withdrew their troops and removed their Umbrella from the Trucial states in the 1970s. Facing uncertainty from outside threats, Sheikh Zayed “proposed that the Trucial states form a union to prevent the sheikdoms from being swallowed up by one or more of their bigger neighbors” (Al Fahim, 148), who were tribal factions that today make up the UAE.
By placing local tribal leaders in positions of the newly forming government, Sheikh Zayed ensured that their loyalty brought with them the loyalty of their tribes, and he thus slowly began to unify the region into a United Arab one. With a tiny population and growing oil revenues—as well as a newly formed state of cohesiveness, the UAE began to experience a repatriotization of emigrants who previously left to survive, but who also learnt new skills abroad. The UAE was created in this way and was set on the path it has now arrived at: a very wealthy country employing very socialist government policies for its own citizens, and one with hundreds of thousands of available jobs. Indeed, diving for pearls in Abu Dhabi is now a thing for museums and tourist attractions.
Now that we’ve tracked the path of Abu Dhabi’s rags-to-riches story, we can question what the state of UAE nationalism is for a region that was previously partitioned into so many disparate factions, and what that nationalism means for the future of the country given its current state of rising warfare, rising education spending, and rising taxes. Are its current policies sustainable in the long run? Do they benefit its citizens as much as previous government policies have, and how does the UAE’s restricted citizenship affect its future given that there is such a small minority of the population that can call itself Emirati?
Sheikh Zayed had previously built a cohesive feeling of loyalty to Abu Dhabi before the UAE was formed by providing land provisions to citizens, keeping them rooted in the heartland of the region even when they could have taken some of the revenues and fled for the industrialized pleasures the likes of Britain. This policy (which was reinforced further by government assistance to build property on the lands for perpetual income rather than simply selling it) very likely makes people eternally loyal to the state—at least until land runs out, which is has. With the next generation having to share the gains of their predecessors, the question becomes one of how to maintain support and loyalty of the youth for the regime in the face of falling oil prices, and to restrict events such as in Libya—also rich in oil—from repeating themselves. The UAE’s answer may have already shown itself.
The introduction of military conscription in the UAE in 2014 tells us that there are issues in the country’s future that it is trying to address through the loyalty and discipline of military training. Grouping 18-30-year-old males together from all regions of the Emirates eliminates the old tribal style of factionalism that marked the region so well before the 1970s, helping to confirm solidarity in the region and reducing the intercommunal tensions between Emirates—as well as centralizing state policies. Moreover, the more vital issue of preparing for and preventing the type of uprisings seen in other Middle Eastern countries is taken care of by having a loyal military force to suppress protestors. Even the country’s participation in foreign wars is a display of the might and strength that is meant to project the power and longevity of the UAE.
Yet, there is also a cost to sending the few citizens that you have to die in foreign wars. With such a small population, how sustainable is this model? What about the remaining 80-90% of the Emirate population who are not citizens? Will they have to serve obligatorily in order to live and work in the UAE in the future? How long before they are drawn in to fight for the Emirates? And what will their compensation be? What effect will this have on the attractiveness of the UAE, both in terms of desire to live there and to invest in it and serve in its armies? Does the government decide to promise citizenship in return? The right to government revenues? Government housing? Land? If they were citizens of the Emirates as it was brought together, they may have been entitled to these things. But what about now and in the future? How will the UAE provide citizenship to new people, and what rights will they get? Will they ever be able to truly call themselves Emiratis?
The military has quickly become a steadfast aspect of the country, with the original service term being nine months for men and with optional service for women, with “those who have not [finished secondary school] [serving] two years” (East, 2014). Although this sudden change in military and defense policy seemed surprising at the time, what we have witnessed since then is the military gaining more and more prominence in the UAE: GulfNews reported in March of 2016 that the compulsory conscription period “will be extended to 12 months for high school graduates” (GulfNews, 2016)—an eerily quiet increase in service time announced not even two years later. It seems that the military will have a very prominent stance in the UAE’s future in 10-20 years’ time, which tells us a lot about the direction—as well as the issues—that the country will take on.
Indeed, a consequence will be increased grievance amongst mothers and families whose sons and daughters are dying in foreign wars that UAE citizens may not even want to take part in. This also comes at a cost to the government, which will have to pay compensation to families; combined with military spending, this is a huge cost. It may be that in one or two decades, the UAE will turn to foreigners residing in the country to supply the soldiers for its battles and protection. The rewards will always remain the question here, however, and there is no guarantee that technological increases within the next few decades do not further suppress the price of oil. This combination of low population, high foreign workforce, and potential budget issues in the future has seemingly also been addressed alongside the introduction of conscription: taxes.
Sources of Growth
With the future of oil at stake for the UAE and with its main production being oil, the country’s economy is very much a consumption one: there is little domestic production and instead heavy imports for most of the goods consumed by citizens, which is a direct result of ‘Infitah’ trade and investment policies. In a way, the UAE suffers from the ‘Dutch Disease’ because of exporting so much oil, but it is trying very hard to combat this through the Abu Dhabi Investment Authority, which invests oil revenues abroad in order to diversify the government’s investment portfolio and spread the risk involved in trading only oil. Nevertheless, there is no guarantee that the AIDA will produce high enough returns in the future to offset potential drops in oil prices and to enable the UAE to maintain its current (and future) government spending. The result is thus what we will see happen in 2018: Younis Haji Al Khoori, Undersecretary at the MoF, “has confirmed that Value-Added Tax (VAT) will be introduced across the UAE and the GCC in 2018,” at a suggested VAT rate of “between 3 and 5 per cent for the various sectors, with the exception of healthcare, education and 94 food items on which there will be no VAT” (Emirates247, 2016). An introduction of a tax of this type is unprecedented for the region, especially since Dubai has built a reputation for itself as being a duty-free zone. Yet, this act is one that helps steer the UAE in a direction away from the type of dependency on singular exports that brought down the likes of Egypt with its cotton industry. And at a relatively low percent with some key public industries being exempted, the jump to taxation may be very digestible for Emirati citizens, who (according to TradingEconomics.com) had a Gross National Income of US$58,090 in 2012.
VAT is just one of the ways that the UAE is tackling the issues of its future finances, though. It is also investing heavily in education. New York University Abu Dhabi is a perfect example of how the government is investing in youth in order to produce innovative minds that will stimulate R&D projects for the future and that will be founding members in successful Emirati business ventures. As Mohammed Al Fahim pointed out himself of foreign minds in the UAE during times of growth: “The use of expatriate expertise was a necessity” (Al Fahim, 142) given the uneducated workforce and high illiteracy rate of the time. Although today the Emirati labor force is much more educated and there is a disincentive through extended military service time to not graduate from secondary school, there is still benefit from having an international student body in Abu Dhabi complementing its youth and bringing foreign ideas and research into the country. New York University Abu Dhabi is therefore similar to many of the joint ventures between international partners in the UAE and stands as a bright beacon for the potential growth that could be experienced in 10-20 years.
Conclusively, the future is unpredictable, but it seems that the steps taken by the UAE government, one which is representative of the 7 states that form it, are ones looking for prosperity in multiple sectors of industry; from foreign purchases of fertile agricultural land, to Dubai Aluminium and oil extraction, to education and foreign direct investment. Thus, compared to other Arab nations in the region, the UAE’s future is bright and stable.
Fahim, Mohammed Al. From Rags to Riches: A Story of Abu Dhabi. Abu Dhabi: Makarem, 2007. Print.
East, M. (2014). Does UAE Conscription Law Signal the End of the Dream? | OilPrice.com. [online] OilPrice.com. Available at: http://oilprice.com/Geopolitics/Middle-East/Does-UAE-Conscription-Law-Signal-the-End-of-the-Dream.html [Accessed 17 May 2016].
GulfNews. (2016). UAE National Service extended to 12 months. [online] Available at: http://gulfnews.com/news/uae/government/uae-national-service-extended-to-12-months-1.1685999 [Accessed 17 May 2016].
Emirates247, (2016). VAT to be introduced in UAE in 2018 @ 3-5%: Official. [online] Available at: http://www.emirates247.com/news/emirates/vat-to-be-introduced-in-uae-in-2018-3-5-official-2016-01-14-1.617264 [Accessed 17 May 2016].