Introduction
Historical factors widely affect economic growth and progress in countries in which they occur. The magnitude of such impacts depends on the magnitude of the historical events that cause them and the responses of the affected nations towards the changes created. One of the ways through which historical events impact the economy is through the patterns of business operation. Business organizations and individuals in countries in which significant events occur often learn from those events, adapt certain business cultures, and share their own cultures with others. As such, this sharing fosters change in the general business environment in the country where the change occurs and may result in growth or decline of business performance. One of such historical events is the Expo 2020, which was initially projected to have a strong positive impact on the Dubai and UAE economy through its probable impacts on various business sectors in the countries. Moreover, the corona virus epidemic has tickled the global business environment, and it is expected that there may be shifts in global responses to events such as the economy of the UAE.
Effects of Expo 2020 on the Economy
With the planned execution of Expo 2020 in Dubai this year, both Dubai and the entire United Arab Emirates (UAE) had been waiting with expectation, for the positive outcomes on the event on the economies of the countries in close proximity to the host country. Hosting such a popular event and of global magnitude comes with various benefits not only to the host country but also to all participating countries and businesses (Nadkarni, 2019). The expected outcomes of the event on the economy of the UAE and of Dubai in particular, indicate the extent of impacts that an event of such a magnitude could have on any country. Various scholars provided their opinions regarding the possible impact of the event on the economy of the UAE and of Dubai based on its effects on various sectors of the economy. According to Ernst & Young (2019), the effects of expo 2020 would have spanned the entire economic sector of Dubai including through impacts on communication, construction, technology, retain and agricultural sectors. This event was expected to change how people run businesses, and subsequently the sustainability of those businesses.
The Expo 2020 event was to be carried out with the theme: “Connecting minds, creating the future.” The expo was planned to focus on various sub themes including sustainability, opportunity and mobility, and was to entail the show-casing of infrastructure, commerce and technology (Deloitte, 2014). These aspects created an environment through which the expo would help the hosts and participant countries to identify opportunities for growth in different sectors and to come up with plans for executing growth in the different industries. Overall, the effects of Expo 2020 on the Dubai and UAE economy would span across several industries, with Dubai acting as the agent for international progress in sustainability in energy and resource utilization (Ernst & Young, 2019). Additionally, Dubai would be responsible for connecting people across international markets and also act as a hub for the movement of market participants across the world. Through the development of the spirit of entrepreneurship, it was expected that Dubai and the UAE would be united towards the achievement of economic goals of the individual countries and of the region as a whole (Bhavani & Kukunuru, 2016). Because of the projected impacts of Expo 2020 on Dubai and the UAE as well as on the participant countries, the expo had been described as ‘transformative’ and as an ‘economic catalyst.’
Evidence from other expos that have been conducted in the Middle East and across the world such as the Shanghai Expo has shown the potential economic development that can result from an event of such magnitude. According to Deloitte (2014), the Shanghai Expo attracted more than 73 million visitors. More than 243 governments participated in the expo, indicating the ability of such an event to have far-reaching effects. The lasting legacy that can be created by an event of that magnitude justifies the expenditures that are often associated with them. For instance, Nadkarni (2019) reports that approximately $ 7 billion was to be used for the planning of Expo 2020. It was expected that the benefits of the expo would surpass the costs associated with its planning. The fact that Dubai and the UAE are strategically located in terms of tourism attraction and proximity to most countries in the world also would make the country a central hub for linking global transport industries (Nadkarni, 2019). In particular, it was projected that Dubai would become the bridge that connects the developed and the developing countries in the world by virtue of its proximity to them both in business and in geographical placement (Deloitte, 2014). The Expo 2020 would add greater potential for a wider impact not only in 2020, but also beyond. This is particularly on account of the probable impact of the expo on the international markets through its impacts on various industries.
One of the industries that would be affected significantly by Expo 2020 is the hospitality/tourism industry. Bhavani and Kukunuru (2016) report that the tourism industry is potentially one of the most impacted industries following Expo 2020. Dubai was expected, through its role in hosting Expo 2020, to be a catalyst for the growth of the tourism and hospitality industry. The capacity to host the millions of attendees that would be at the expo implies that the country has to be adequately prepared with resources in the hotel and entertainment industry as well (Ernst & Young, 2019). While Dubai has previously been known as a popular tourist destination, the increase in tourism over the six month period around the expo duration means that the government has to go an extra mile to ensure that there is adequate accommodation for the increased population over the period. In particular, it is expected that there would be a requirement of more than 70 million additional rooms in preparation for the expo. This number of rooms is outside the 16 million rooms occupied in 2019 at a time when there was no expo (Nadkarni, 2019). What this means is that while Dubai will be hosting the expo, even the other cities around Dubai will feel the pressure for accommodation. In this way, this outcome is expected to filter throughout.
From previous reports, the hospitality industry alone would result in significant economic growth through the year. Reports on the Shanghai Expo showed that the GDP growth in the period of the expo rose by 13 percent in the 5 years following the expo. This was contrary to the initially planned 4 percent. Therefore, it was expected that for Dubai, the economic growth attributed to the growth in the hospitality industry would be significant (Bhavani & Kukunuru, 2016). This is particularly because for Dubai, there is bound to be the development of additionally business districts, which would expand the productivity of the population and subsequently the economic growth attributed to that productivity (Deloitte, 2014). Dubai is also expected to grow into an international travel hub supporting both leisure and retail. The only factor that Dubai and the UAE will have to start considering seriously is the strategy for maintaining sustainability in the gained economic growth past 2020.
The other sector that was expected to be positively impacted by Expo 2020 is the construction industry. According to Bhavani and Kukunuru (2016), the construction industry will benefit mainly on account of the expected progress in energy and sustainable construction developments that are bound to arise after Expo 2020. One of the major expected outcomes of the expo is increased confidence in the implementation of new technologies in the construction industry. This means that through the construction of the expo infrastructure, Dubai will not only expand its capabilities but it will also create an opportunity for other countries in the world to pursue development in the construction industry. It is expected that the expo will provide the needed stimulus for the growth of the international construction industry through changes in the retail, hospitality, transport and even the commercial sectors. It is also projected that with further expansion in the industry, the construction sector alone with generate up to 30 percent of the expected 300 000 jobs projected to come up as a result of Expo (Deloitte, 2014). With the set plans, it is expected that there will be increasing demand for skills and resources and that effective planning and a phased development strategy especially for the construction industry, will help alleviate the potential escalation of the costs of resources and talents for the industry.
Additionally, the expo is also expected to affect the service and the capital projects industry. Reports have indicated that Dubai has been experiencing economic downturns for a few years prior to 2020. Since the downturns have not been significant in magnitude and have been mostly tied to changing global economic times, the changes caused by the expo are expected to be out of the norm. In particular, Deloitte (2014) reports that the changes in the economic conditions in Dubai may be driven by the government’s direction of available resources to preparation for the expo rather than to capital and infrastructural investments that would be useful over the long term. Dubai must think smart ahead of the plans to host Expo 2020, not only because of the demands of the event, but also because of the history that Dubai has previously had, in that it takes advantage of presenting opportunities to realize progress that would be considered effective and beautiful even in the long term (Deloitte, 2014). As such, Expo 2020 only presents an opportunity for Dubai to expand its infrastructure in various ways that will have long-lasting impacts on the population. One of the ways in which Dubai is expected to benefit from the hosting is through talent development. As the different industries in the country are expanding to accommodate the demands of Expo 2020, it is expected that government will focus on developing internal talent before looking to the outside for the acquisition of additional talent (Bhavani & Kukunuru, 2016). It is therefore expected that besides being the bus for the economic development of other countries through Dubai, Expo 2020 will present more opportunities than challenges for Dubai and the UAE.
Furthermore, the expo is expected to impact on the financial services industry in Dubai and the UAE. Over the past decade or so, changes have been occurring in the global financial market towards greater adoption of technology (Bhavani & Kukunuru, 2016). The application of technology in practices such as personal banking and electronic commerce has gained significance over the years, and it is expected that such development will catapult Dubai and the UAE into the field of financial services. One of the major features of the economic growth that will be realized following Expo 2020 is the increased diversity of the Dubai economy. With economic diversity, there are bound to be changes in the financial services industry. There are expected to be changes in the aviation, financial services and the logistics industries, each of which is an essential player in the financial services industry, particularly through diversification of currency (Deloitte, 2014). The lessons learnt through changes in specific aspects of the Dubai economy and in the economic landscape as a whole are expected to form the foundation for future growth not only in the implementation of policies but also in planning and management or resources. The overall outcome post Expo 2020 is expected to be an expansion of the consulting industry landscape. The expo will have significant social impacts on characteristics such as the national identity, community cohesion and civic pride (Deloitte, 2014). To see the magnitude of value that this expo would add to the Dubai and UAE economy, the celebration associated by winning the bid to host the expo should be considered an indication.
Possible Effects of Postponement
Despite the potential benefits of Expo 2020 on the economy of Dubai, the UAE and the participating countries, the expo is under the threat of postponement because of the Corona virus epidemic that is currently ravaging the world. The spread has had negative impacts on various countries across the world, and has occasioned mandatory quarantine in all the affected nations (Kane, 2020). Most of the activities that would have involved social gathering have been cancelled or postponed until a later date. As such, there is a high probability that Expo 2020 may also be postponed. However, the postponement of an event of such a magnitude would most definitely result in negative outcomes both to the social structuring of the event and to the economic activities associated with the event. Dubai Expo 2020 has been closely monitoring the prognosis of the virus, in order to make the right decisions regarding whether to continue with the event or to postpone (Kahn, 2020). According to Kahn (2020), since the expo is not expected to open until October 2020, the Dubai government believes that it is still on track to hosting the event, and that there are deliberate efforts to mitigate risks to all those who would attend the expo.
The most inevitable impact of the virus on the world is economic downturn. Countries across the world have used staggering amounts of financial resources to curb the spread of Corona virus and to treat those who have been affected. Accordingly, these resources have been diverted from other planned utilities, as the disease was unprecedented. Because of this, it is expected that across the world, the economic growth of nations will plummet, affecting their capacities to participate in events such as Expo 2020. Kane (2020) reports that the economic time has stopped across the world yet the financial time is still running as bills still have to be paid and there has to be continuous trading in the stock markets. With increasing financial demands, consumption is grinding to a halt and the situation is becoming worse than anything that has been seen before (Kane, 2020). This means that across the world, recession is inevitable. The impacts of the virus will be far worse in the second half of the year during which Expo 2020 is expected to run. For Dubai and the UAE, this would mean a reduction in the number of participating nations and individual participants. With initial plans to cater for over 70 million participants, a reduction in the number of participants would mean a reduction in the return on investments made to cater for those participants, and subsequently a reduction in the economic impacts of the event.
The effects of the financial recession expected following the virus is expected to be felt on different sectors of the economy. So far, the healthcare and technology sectors are expected to be the only sectors that may benefit from the virus through advancements in research and development. The healthcare sector will be growing significantly as a result of the efforts made to contain and treat the corona virus (Kane, 2020). Similarly with the need across the world for everyone to work in a telecommuting environment except for essential services, it is expected that changes in technology will be realized towards promoting telecommuting as a future workplace design. These benefits notwithstanding, the countries in the Middle East, including the UAE and Dubai, have made significant efforts to curb the disease and the impacts are not felt as much as they are in the Western world (Kahn, 2020). The efforts made by those countries in the Middle East give some discrepancy in the expectations of different countries following the virus. This discrepancy could be the justification for the argument that there is still a possibility to host Expo 2020 after the passage of the virus. With the effects that the virus has had on other countries, it is clear that any other country would have suggested postponement of the expo as early as possible. The optimism of the government in the UAE is an indication of its preparedness and the possibility of success in spite of the virus.
Conclusion
Expo 2020 was planned to be an event of significant economic impact not only for Dubai and the UAE but for the world as a whole. With an estimate of more than 70 million people attending, the event was expected to be impactful both in economic and social outcomes. Economically, Expo 2020 is expected to result in positive outcomes in the construction, technology, financial services, hospitality and tourism industries. Growth in these industries is expected to come with an increase in talent availability both in Dubai and abroad. However, the only probable threat to the expo is postponement due to the outcome of the currently spreading corona virus. The virus has negatively impacted various countries economically, and these economic effects are expected to trickle down to planned events such as the Expo 2020. One possible outcome is a significant reduction in the number of participants to the event, which could result in reduced return on investment measured based on the expenses incurred in planning for the event.
References
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Deloitte (2014). Expo 2020: A game changer for Dubai. A Middle East Point of View. https://www2.deloitte.com/content/dam/Deloitte/xe/Documents/About-Deloitte/mepovdocuments/mepov13/dtme_mepov13_Expo%202020.pdf
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Kane, F. (2020, March 29). Interview: ‘Now is the wrong time to be selling,” says JP Morgan Middle East MD Steven Rees. Arab News. https://www.arabnews.com/node/1649136/business-economy
Nadkarni, S. (2019). Conclusions: Expo 2020 and its impact on Dubai. Worldwide Hospitality and Tourism Themes, 11(3), 341-345. https://www.emerald.com/insight/content/doi/10.1108/WHATT-02-2019-0011/full/html