The Relation Between UAE’s Economy and National Security
Question 1
The United Arab Emirates (UAE) has an open economy that is massively dependent on the nation’s oil and natural gas sector. Oil and natural gas production is the backbone of the UAE’s economy. Sixty years ago, before the discovery of large hydrocarbon deposits in the nation, the UAE was an impoverished region of small principalities whose economy depended on fishing, seafaring, and the pearl industry (“Economy,” n.d.). Using the vast amount of financial resources gained from trading in oil and natural gas, the UAE decided to diversify its economy into divergent sectors, such as transport and agriculture.
The UAE’s economy is supported by a wide range of critical infrastructure that is integral to the nation’s future development. Critical infrastructures are assets that are essential for the maintenance of vital societal functions or processes. According to the Global Competitiveness Report issued by the World Economic Forum 2019, the UAE occupies the seventh position globally in the index of transport infrastructure (“Roadways,” n.d.). The UAE also has other critical public infrastructures, such as hospitals, schools, mosques, and markets that are integral to the nation’s economic development.
The UAE also boasts of impressive critical processes that underlie the nation’s positive economic development. Critical processes are substantive processes that could result in severe social disruption in the event of their failure or disruption (Malek, 2014). The UAE has several critical processes that guarantee social stability in the country, thus, promoting the nation’s economic development. Failure in UAE’s critical services such as healthcare, security, and emergency services would result in chaos and anarchy in the country; thus, inhibiting economic growth (Al Jazeera, 2019). Another critical process in the UAE is the nation’s administrative structure, which ensures order in the nation, thus, guaranteeing economic development.
The UAE’s economic sectors, critical infrastructure, and processes are integral to the nation’s development. The various UAE’s economic sectors, particularly it’s oil and natural gas industry, have provided the UAE with vast financial resources that have funded the nation’s quick transformation into a developed country. The financial resources gained from UAE’s economic sectors also facilitated the nation’s establishment and maintenance of critical processes and infrastructure, such as its impressive transport network. UAE’s critical infrastructure and processes have resulted in social stability in the nation, thus, fostering its further economic development.
Question 2
The long-term economic security of the UAE can only be adequately guaranteed by eliminating the numerous risks vectors to the nation’s critical infrastructure, processes, and economic sectors. Risk vectors are divergent avenues through which national security risks concerning critical infrastructure, processes, and economic sectors can be manifested (Malek, 2014). The UAE can overcome the risk vectors to its economic security in various ways.
Ownership
The risk vector of ownership manifests itself mainly through foreign direct investments (FDI). FDI allows foreign investors to acquire full or partial ownership of domestic companies, thus, enabling foreign entities to gain influence and control over the operations of a nation’s critical sectors and infrastructures. For example, when a foreign entity through FDI owns a company in the UAE that deals in matters of internal security. By the fact that they are owners of the company, the foreign entities will access information and data on the UAE’s critical processes of security.
The risk vector of ownership can be countered by prohibiting FDI in critical sectors, particularly those related to national security. The UAE provides a good example of how nations can secure their critical infrastructure and processes using comprehensive laws and policies. FDI in the UAE is regulated by the Federal Law by Decree No. 19 of 2018 Regarding Foreign Direct Investment that prohibits foreigners from investing in sectors deemed critical to the UAE’s long-term economic security, such as oil and natural gas, national security, banking, and financing activities and insurance services (“Economy,” n.d.). However, UAE’s FDI policies allow foreign investors to own up to 100% of domestic companies that deal in sectors deemed non-crucial to the nation’s economy, such as manufacturing and agriculture.
Espionage
Espionage involves unauthorized access to sensitive and classified information and data by individuals or organizations. Through FDI foreign entities can gain access to data and information on a nation’s critical processes and infrastructure and, therefore, share them with actors having malicious intentions. For example, in the early 2000s, the German government considered changing the operating systems of their IT infrastructure from Windows to Linux as they realized that versions of Windows contained backdoors that could facilitate data espionage (Roston, 2019). Data espionage is currently, conducted through unethical hacking and other forms of cyber-attacks.
The UAE can overcome espionage by developing top-level security measures to protect data and information related to its critical sectors and processes. Contemporary data espionage mainly occurs by hacking or other forms of cyber-attacks, therefore, to protect data related to its critical processes, the UAE has to invest in sophisticated cybersecurity technologies and data encryption systems (DarkMatter Group, 2019). The UAE also imports most of its technology from developed nations, such as the U.S. and China. The UAE can overcome the espionage issues associated with procuring IT infrastructures by developing its own operating systems, software, and hardware.
Natural Resource Dependence
Depending on other foreign entities for essential natural resources poses massive national security risks. For example, most European nations depend on the UAE for oil and natural gas. Dependence on the UAE’s oil and natural gas by several European nations, such as France, put their long-term economic security at risk as a trade embargo between the two nations, for example, can result in unfathomable economic consequences. Overreliance on imports in critical sectors, such as healthcare, energy, and security, can also result in a foreign nation exerting undue influence over the critical sectors of a nation’s economy.
The UAE can overcome its risk vector of natural resource dependency by diversifying its economy. The UAE’s crude oil and natural gas extractive industries contribute more than 29.50 percent to the nation’s GDP (“Economy of United Arab Emirates,” 2020). The fact that the price of oil and gas is determined by market forces and is, therefore, unpredictable makes the UAE’s reliance on the sector a massive challenge to the nation’s economic security. Diversification of the economy will enable the UAE to minimize its risk vector of natural resource dependency on oil and natural gas, thus, strengthen its national economic security.
Supplier Dependence
Depending on a single supplier for vital products and services makes a nation vulnerable and, therefore, economically insecure. For countries to secure their critical infrastructure and processes, they need to have a secure supply of critical products and services. For example, most Third World nations, particularly in Africa, rely on America and Europe for their medicine and military supplies. Africa’s dependence on basic supplies from the West has resulted in the perpetuation of imperialism in the continent.
The UAE can overcome its supplier dependence by addressing the skills and technology gap in its critical infrastructure. Nations only outsource supplies that they cannot produce mainly due to skills and technology gaps. Thus, the presence of both skills and technology gaps in the UAE’s critical infrastructure, sectors, and processes will make the nation dependent on foreign suppliers. To overcome its supplier dependence, the UAE has to identify both technology and skills gaps in its critical infrastructure and processes and address them through innovation and training, respectively.
Government Intervention
National economic security is largely determined by the level of government investment in its critical sectors, processes, and infrastructure. Investing in the development and management of critical national infrastructure, sectors, and processes enables the government to protect against system vulnerabilities. Governments that spend little on developing or maintaining their critical processes and infrastructure have reduced capacities to respond to natural disasters and crises. In 1998 the American government reduced its spending on disaster management services, thus, resulting in unnecessary suffering when Hurricane Mitch occurred later that year (Malek, 2014). Government intervention, therefore, not only minimizes security vulnerabilities but also mitigates the effects of natural disasters.
The UAE can overcome the risk factor of government intervention by regulating the nation’s critical infrastructure, sectors, and process. Through proper regulation, the UAE government can be involved in the day to day operations of the nation’s critical infrastructure and sectors. Regulation of critical processes also enables the government to quickly detect and address vulnerabilities to the nation. Moreover, regulation will also foster innovation that will enable the improvement of its critical infrastructure and sectors, thus, mitigating national security risks.
Corruption and Socio-Economic Inequalities
Corruption and socio-economic inequalities are massive threats to national security. Corruption within critical processes and sectors reduces transparency and distorts political processes hence negatively affecting nations’ economic security. Misappropriation of public funds, for example, weakens the government’s ability to not only invest in critical infrastructure but also deal with natural disasters. Socio-economic inequality, on the other hand, threatens societal stability by pitting people hailing from diverse socio-economic classes against each other. For example, socio-economic inequality sets the poor against the rich, thus, precipitating chaos which is a significant threat to a nation’s economic security.
The UAE can overcome both corruption and socio-economic inequalities by enacting stringent anti-corruption regulations and egalitarian policies. The current UAE’s anti-corruption legislation, enacted in 2016, though comprehensive and having an extra-territorial effect, does not impose severe punishment on entities proven guilty of corruption (“Economy,” n.d.). To be useful, in the fight against corruption and fraud, the UAE has to enact laws that impose strict penalties for those accused of engaging in the vice. The UAE should also enact comprehensive egalitarian policies to tame its rising socio-economic levels, particularly the widening gap between the rich and poor.
Question 3
Numerous global and regional geostrategic trends can have both short and long-term implications for the UAE’s national security. Below are how various geostrategic trends can affect the UAE’s critical infrastructure and processes:
Digital transformation and the growth of the industrial internet of things:
Digitization, coupled with the rapid development and widespread adoption of the internet of things, have increased the potential of vulnerabilities for critical infrastructure, systems, and processes. With digitization, systems are becoming more interconnected, and therefore, expose the nation’s critical infrastructure and processes to cyber-attacks and data espionage.
Digitization and the internet of things expose the UAE’s critical infrastructure and processes to data espionage. The rapid digitalization initiative by the UAE government exposes the nation’s critical processes, infrastructure, and sectors to cyber-attacks and data espionage. The 2017 Triton attacks against a petrochemical plant in Saudi Arabia is a perfect example of the risks the UAE faces in its desire to digitalize its processes and systems (Roston, 2019). To mitigate the risks of cyber-attacks, the UAE government should adopt sophisticated cybersecurity technologies, such as blockchain technology.
Globalization and interdependence:
Increased globalization and interdependence within the international plane have made critical infrastructure and processes vulnerable to the impacts of events and activities that occur outside the territorial boundaries of a nation and over which national governments have minimal control. Globalization has made critical national infrastructure and processes contingent on the global public and private sector, thus, creating uncertainties and vulnerabilities for individual nations. Moreover, globalization and interdependence, thus, wrestle control of the critical process from the ambit of national governments, and this weakens national security.
Globalization and interdependence minimize the critical infrastructure, sectors, and processes under the direct control of the UAE government, thus, weakening the nation’s economic security. The increased interconnectedness of nations in the global plane means that both the economic and national security of the UAE is affected by various global factors that the UAE government has no control over. Reduced control of the UAE government over the nation’s critical infrastructure and processes is disruptive, thus, poses a huge security risk to the entire nation.
International economic trends:
The international economy and macroeconomic trends affect national security as they impact the various critical sectors of the economy. For example, high levels of international economic stability enable critical industries to increase their stability, thus, allowing for investments in critical infrastructure. However, low levels of international economic stability suppress investment in critical infrastructure hence affecting national economic security.
International economic trends pose a huge challenge to the UAE, particularly with its economic over-dependence on oil and natural gas. The success of the oil and gas industry, which is the backbone of the UAE’s economy, depends largely on international economic stability as the price of oil and gas are determined by global macroeconomic trends. The uncertainty that characterizes macroeconomic trends on oil and gas prices poses serious challenges to the UAE’s long-term economic security.
The political and economic paradigm of foreign states:
The economic security of nations is also affected by the economic behavior and relative power of potentially hostile nations. Nation-states change how they deal with their critical processes and infrastructure in accordance with the political and economic ideologies of their neighboring states. For example, China and Russia, are supporting en masse state-owned companies that they use for FDI and this has forced several nations to enact legislation limiting FDI into their critical infrastructure and sectors.
The political and economic paradigm of foreign states poses a significant challenge to the UAE’s national economic security. The constant change of the nation’s political and economic paradigm constantly forces the UAE government to not only adapt its foreign policies but also enact policies that can better protect its critical infrastructure and resources. For example, the UAE enacted the Federal Law by Decree No. 19 of 2018 Regarding Foreign Direct Investment to better protect its critical processes and sectors from foreign nations, such as China, which uses FDI and ownership to carry out data espionage.
Uncertainty related to resource security:
Globalization and integration have resulted in increased uncertainty of resources security with nations keen on preserving their natural resources and adopting renewable forms of energy. The integration of nations has resulted in the transformation of the global supply chain with nations focusing more on outsourcing external sources for their key components, materials, and energy supplies. The uncertainty related to national resource security has resulted in strategic shocks that have increased the vulnerability of critical processes and infrastructure, particularly among countries depending largely on the economic viability of their natural resources.
The uncertainty related to resource security poses a challenge to UAE’s critical infrastructure and processes that are over-dependent on the nation’s oil and gas resources. The global energy system is undergoing numerous transformations with nations currently seeking to switch to clean and renewable forms of energy. Global adoption of clean and renewable forms of energy is destined to negatively impact the global supply and demand for natural gas and oil and hence their prices. With the UAE’s economy heavily dependent on the nation’s oil and gas industry changes in the global energy sector is set to cause massive economic challenges to the nation.
Potential concerns with regard to information integrity and trustworthiness:
The contemporary world is characterized by a massive increase in data flows which have raised concerns about the integrity of information transmitted, its source, nature, and purpose. Currently, there is an increase in the spread of propaganda, fake news, and manipulation of information which have a direct impact on critical sectors and processes particularly by undermining political processes such as elections.
Information integrity and trustworthiness is a huge challenge to the UAE’s national economic security. The increase in propaganda, fake news, and manipulation using information can be used to distort public perception of events and even amplify social divisions and chaos which can negatively impact the nation’s critical processes and infrastructure.
Question 4
The UAE government has done quite well in protecting its critical infrastructure and processes. However, to guarantee long term economic security the UAE has to implement the following recommendations:
Diversify its economy:
Given the fluctuating price of oil and gas products in the international market the UAE has to diversify its economy so as to prevent the nation from descending into a financial crisis whenever the oil market hits a slump. Though the UAE government resolved to diversify the economy after the 2008-09 financial crisis, the UAE’s oil and gas sector still contributes more than 30% of the nation’s GDP. Diversification of the nation’s economy will also enable the UAE government to create additional critical infrastructure and processes that will in turn guarantee social stability in the nation, thus, fostering long-term economic development.
Invest in cybersecurity:
Due to the numerous advantages of digitization most of the UAE’s critical processes and systems are being digitalized. However, digitalization poses several challenges to the nation’s economic security, particularly that of data espionage and cybercrime. To secure data on its critical infrastructure and information I believe that the UAE needs to invest in sophisticated cybersecurity systems that prevent its data from being hacked.
References
Al Jazeera. (2019, December 10). US intelligence agents helped UAE build a secret surveillance unit. Retrieved from https://www.aljazeera.com/news/2019/12/11/us-intelligence-agents-helped-uae-build-secret-surveillance-unit/?gb=true
DarkMatter Group. (2019, June 17). DarkMatter Group Calls for Improved Vigilance as UAE’s Cyber-threat Landscape Reaches Critical Level. Retrieved from https://www.prnewswire.com/ae/news-releases/darkmatter-group-calls-for-improved-vigilance-as-uaes-cyber-threat-landscape-reaches-critical-level-300869316.html
Economy (n.d.). Retrieved from https://u.ae/en/about-the-uae/economy#:~:text=The%20policy%20of%20economic%20diversification,%20its%20economic%20dependence%20on%20hydrocarbons
Economy of United Arab Emirates. (2020, July 27). Retrieved from https://fanack.com/united-arab-emirates/economy/
Malek, C. (2014, November 19). UAE needs better protection of critical infrastructure. Retrieved from https://www.thenationalnews.com/business/technology/uae-needs-better-protection-of-critical-infrastructure-1.469314
Roadways (n.d.). Retrieved from https://u.ae/en/information-and-services/transportation/roadways
Roston, A. (2019, August 26). Why the CIA doesn’t spy on the UAE. Retrieved from https://www.reuters.com/article/us-usa-emirates-spying-insight-idUSKCN1VG0V3