I believe that the best tool for the UAE is economic diversification because of various reasons. Firstly, despite making significant steps towards a diversified economy, the UAE has used a largely conservative approach in the past two years. As a result, the nation has not seen the best diversification yet. There is a need to build stronger tourism, agriculture, manufacturing, and service sectors among others. This will help to insulate the country against future slumps as in the economy when the prices of oil and natural gas fluctuate. The country’s conservative approach to economic diversification has seen most of its budget is funded by the oil sector. If this continues, the country’s economic development is likely to perish in the near future. A larger percentage of the nation’s population is also employed in the oil sector.
Secondly, diversification of the economy will result in widening and opening up the economy for investors in different industries to enter the country. This is likely to encourage people to invest in the economy, create more jobs, and improve their living standards. In this regard, diversification of the economy will make it easier for the country to compete with others in the region. In the same spirit, the UAE will have to reinforce its legal framework to create a perfect business environment for investors. The appropriate regulatory framework will address labor issues comprehensively.
Currently, the UAE does not offer the best environment and financial freedom for investors. Consequently, many people with significant capital shun away from investing in the country. Therefore, one of the factors that the UAE will most likely enjoy through economic diversification is capital preservation. The country will be able to protect the amount of capital available in the country, create a good environment for business and foster economic integration with its neighbors to open up more opportunities for its people.
Similarly, diversification helps the country to minimize risks associated with over-reliance on one sector of the economy. Citizens and business people will maximize their returns efficiently by investing in safer assets. Finally, diversification will ensure that only a smaller section of the population relies on the oil sector. Consequently, there will be better management of the oil sector to maximize the sector’s potential since there will no undue pressure on the employees in the oil sector to perform better.