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The United Arab Emirates (UAE) otherwise known as Al Imarat Arabiyah al Muttahidah is a federation of seven states that were formed in 1971 by the then Trucial States after they attained independence from Britain. The federation has grown since then to become one of the Middle East's most important economic centers. This paper will examine the history of the UAE in the 20th century; identify the major events that have had an impact on the development of the country.  We will also look at the current economic status of country and how this has reflected to its history and culture as well as politics in this country.

Background information about the UAE

The UAE is made up of seven states and they include; Abu Dhabi, Dubai, Sharjah, Umm al Qaywan, Ajman, Fajayrah and Ras al Khaymah in order of size respectively. Each of these states maintains their own independence but the UAE in general is governed by a Supreme Council of Rulers which is made up of seven emirs who appoints the prime minister and the cabinet. The UAE gained its independence from the UK in 1968 and in 1971, the UK reaffirmed that it could end its treaty relations with the states. Apart from Ras alKhaymah which joined the UAE in 1972, the others formed the UAE in 1971. The UAE therefore was basically formed from a group of tribally organized Arabian Peninsula sheikhdoms along the coast of the Persian Gulf and to the northwestern parts of the Oman Gulf (Gonzalez G. 2008).  


The UAE is estimated to occupy a total area of 83,600 square kilometers with a population of around 4.1 - 4.6 million.UAE boarders Oman to the north and Saudi Arabia to the south and west. The country is basically a rolling desert and the climate of the place is generally hot and dry. The country has petroleum deposit which is the most important industry and its oil and natural gas as the primary resources.

History of the UAE in the 20th century

The British arrived in this federation in the 18th century. The UK later established closer bonds with the Trucial states in the late 19th century due to reactions of other European nations which were scrambling for a piece of the UAE whereby the sheiks agreed to only dispose only their territory to the UK.  In the early 20th century, the pearling thrived in the relative calm at the sea, and used to provide a source of income and employment to the people of the UAE and the larger Gulf thus a good economic resource for the people.  This was then adversely affected by the First World War which had a severe negative impact on the pearl fishing industry. This was to be coupled by the economic recession of the late 1920s and early 1930s and also the invention of the cultured pearl by the Japanese. This industry was later destroyed during the start of the Second World War when India imposed heavy taxation to the pearls from the UAE; this led to economic turmoil with very little opportunity to build any infrastructure (Gonzalez G. 2008).  

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In the 1950s, there were border disputes between the UAE's Abu Dhabi and Oman over the oasis of Buraimi. The UK later sided with the UAE and in 1974 an agreement was signed between Abu Dhabi and Saudi Arabia to settle the border dispute but the agreement has up to now not been ratified by the UAE and is neither recognized by the Saudi government. The Oman border though delineated, it has never been settled.

After the collapse of the pearl industry, most of the UAE had sunk into abject poverty. However, earlier the sheiks of Abu Dhabi, Sharjah and Dubai had already discussed oil exploration in the area. The first of several oil concessions began in 1939. By the early 1960s, oil was discovered in Abu Dhabi and this led to unification calls by the UAE sheikdoms. The first crude oil cargo left Abu Dhabi in 1962 and Dubai in 1969. In 1966 Sheik Zayed bin Sultan Al Nahayan became the ruler of Abu Dhabi and this signaled the time when the Britons started to lose their contracts to oil companies in the US (Gonzalez G. 2008).

Recently, the UAE has got a multicultural population which has contributed to the region's growth. The UAE is the most a liberal and pluralistic country in the Gulf region with a buoyant economy that is reducing overreliance on oil. During the US led invasion of Iraq, they refused to offer any assistance to their operation but maintained good relations to the US and UK (Gonzalez G. 2008).

Other events like the hospitality sector have led to the country's development. Several billions of dollars have been invested and the infrastructure projects have turned to be a major contributor to the UAE's emerging economy. The hospitality industry has seen booming tourism income and in turn development of the country's infrastructure. The country has established itself as a hub of business and has thus diversified its economic focus. The development of the ICT sector, banking, finance and the robust media has seen the greatest impact on the country's development (Anderson C. 2005).

Current economic system of the UAE

The UAE's open economy has led to higher per capita income and annual trade surplus. In 2007, its GDP stood at   $192 billion which is buoyed by a 10% of the total oil supply in the world and oil exports account for 30% of its total GDP. The UAE apart from being an important supplier of energy, it has launched a diversification and liberalization program aimed at reducing reliance on oil and thus transform its economy to one based on knowledge and technology from the conventional labor intensive (Gonzalez G. 2008).   

Currently, this has led the UAE to move from overreliance in oil and has begun big business constructions with multi-million dollar projects underway like the $ 650 million Burji Al-Arab hotel which is the tallest building in the world. It has built the ambitious World Islands - 300 artificial Islands that form a map of world. The booming infrastructure has seen most economic sectors undergo rapid redevelopment and expansion. According to Khaleej times, these infrastructural developments will amount to $300 billion in the next five years. Some ranks the UAE as the one of the best 20 destinations to conduct global businesses. This has been made possible by a sound recognizable leadership and its TI index on corruption is the least corrupt country (Embassy of the United Arab Emirates in Washington DC. 2009).

Today the UAE has become an important player in the world economy, due to its oil wealth and also due to its efforts to diversify finance and service industry like in tourism. The federation as a member of WTO and OPEC, it takes part in setting economic policies and they take part in regional and international politics as a member of the international bodies like the UN, GC and the Arab League. This has ensured that the UAE has undergone rapid economic growth over a very short time. Due to an agreement among member states, countries like Abu Dhabi which produces about 94% of the oil reserves in the UAE does contribute to the Trucial States development Fund to aid in offsetting the lack of resources in other Emirates thus helping to subsidize infrastructure development projects in other Emirates (Gonzalez G. 2008).

The UAE has a diverse and multicultural society. The Iranians first arrived in 1900s and were later followed by Indians then the Pakistan followed, this has ensured a cordial relation with its neighbors who are also their trading partners. This has also led to minor episodes of ethnic tensions in the confederation contributing to political stability which is conducive to a good business environment. This is also coupled with the unique socio-development that is in the Persian Gulf and has ensured that the UAE is liberal. This has contributed to business growth as although the dominant religion of UAE is Islam, other religions are tolerated. Here, Christian churches can be found alongside mosques and hence making it the preferred region for refugees fleeing religion persecution from neighboring Islamic states (Foley S. 1999).   

Although the UAE is one of the richest economies of the Middle East, it has its own share of challenges in the global arena. The UAE faces a number of economic and demographic challenges. The government has become the largest employer of the citizens who experiences a low labor force participation rate. The country has also a great number of non-national laborer forces this due to the fact that many Emiratis drop out of school thus the federation lacks enough skilled labor force (Gonzalez G. 2008).

The UAE has had border disputes with its neighbors Iran, Oman and Qatar. These disputes have strained relations with its neighbors as well as causing friction among the member states. Although with a lot of wealth, this same wealth is a major source of dispute as returns are not distributed uniformly. Like in 1999, it is estimated that 29% of oil sales did not appear on the national budget, thus the revenues remain to be shared among the royal few. UAE lies in a desert and clean water has been its biggest challenge and its reliance on desalination may be a major cause of tensions within the federation and in turn become a strategic liability as only the wealthy Emiratis can afford desalination. Lastly but not least is the UAE's future security needs. Although the UAE does not have any foreign debts, its strategic importance is being undermined by countries like Iran incase in times of military crisis and cannot deter the enemy unless assisted by outside forces like from America (Foley S. 1999).

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