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ISSN : 1598-7248 (Print)
ISSN : 2234-6473 (Online)
Industrial Engineering & Management Systems Vol.20 No.2 pp.184-191
DOI : https://doi.org/10.7232/iems.2021.20.2.184

Analyzing the Reality of Local Investment and Measuring its Impact on Sustainable Development in the UAE Using the ARDL Methodology

Noaman Mundher Younus*, Bakr Hameed Jassoom, Zuhair Hamid Turki
College of Administration and Economics, University of Tikrit, Sallahaldin, Tikrit, Iraq
*Corresponding Author, E-mail: breathing2233@tu.edu.iq
April 6, 2021 April 19, 2021 May 20, 2021

ABSTRACT


Local investment is a fundamental driver for various economic activities, in addition to being a cornerstone of all development plans, as many evidence indicate its effective contribution to achieving sustainable development by raising the rate of GDP growth, providing job opportunities, stimulating commercial activity and supporting competitiveness the aim of this research is to demonstrate the extent of the impact that local investment can have in order to achieve sustainable development through its social dimension in the UAE for the period (2001-2017) through the ARDL methodology to identify the nature of the relationship between local investment and sustainable development (social indicator) The research found a joint complementary relationship between local investment and sustainable development through its social dimension in the UAE, in addition to the results of assessing the relationship in the short term showed an inverse and moral relationship consistent with the logic of economic theory.



초록


    1. INTRODUCTION

    Local investment is the main driver of various economic activities, and a number of researchers have addressed its various effects, including raising production capacity and achieving profits for production projects. Therefore, its support is among the priorities for the success of development plans, and a fundamental pillar in supporting the national economy and achieving sustainable development in line with the state’s economic interests. This made most countries compete with each other to create an investment climate by creating an appropriate and appropriate environment for it, and granting incentives and appropriate facilities to activate the role of local investment in achieving sustainable development across its many fields by providing job opportunities for local workers and increasing the size of the gross domestic product Successive Emirati governments have taken a set of measures to overcome the difficulties that may face their economic sectors, so an economic and structural adjustment program has been implemented, which aims to reduce the trade balance deficit, control the rationalization of public spending, address inflation, and raise the productive capacity of the Emirati economy by encouraging the private sector to invest in economic sectors Diverse productivity to serve sustainable development and its dimensions.

    The importance of research is part of the vital role that local investment can play in its impact on sustainable development through its social dimension, as explaining the impact of investment in sustainable development is very important in drawing up investment and development policies, due to its connection with capital formation and raising the economy’s capacity in production and thus achieving development Sustainable. The research aims to test the ability of local investment to influence sustainable development in the UAE for the period (2001-2017), and to indicate the nature of the relationship between them.

    The use of computers has created a set of difficulties for control, including “the inability to track the progress of operations, the ease of manipulation and fraud, the possibility of modification or deletion in accounting operations without leaving a trace,” in addition to the weakness of the experience of auditors in the methods of using the computer and the high costs of control devices Hence ignorance in the procedures for monitoring these automated systems.

    The research starts from the hypothesis that local investment plays a prominent role in achieving sustainable development (Mohanty et al., 2019), and then there is a relationship of trust between local investment and sustainable development other than its social indicator, and this directly contributes to its success and acceleration of its steps, through its impact on some of its indicators, including social level. Chairperson.

    2. RESEARCH METHODOLOGY

    The research relied on the descriptive approach of the conceptual framework for local investment as well as sustainable development, and used the analytical approach to analyze the reality of domestic investment and the unemployment rate as one of the indicators of the social dimension of sustainable development in the country of the study. The standard methodology was also followed to measure and analyse the impact of local investment on sustainable development.

    3. THE FIRST AXIS

    Theoretical framework for local investment and sustainable development

    3.1 Local Investment, Its Concept and Its Determinants

    The linguistic concept of investment is (a source of action that invests invested, which is derived from the fruit of the man, and from the fruit it is said, the man will produce his money if he grows it and increases it, then it is said that there is fruit money, meaning a lot of money). The meaning of investing is something that increases and develops, and development is in the principal of money in its various forms, in monetary, financial or commercial forms, as well as in the form of intangible images represented in copyright, patent, insurance right, individual ownership and other intangible rights (Thivagar and Abdullah Hamad (2020), as for investment According to the economic concept, “it is the productive employment of capital towards any use that leads to the production of goods and services” (Vinayakumar et al., 2017), as defined by most economists as the use of savings in order to create new productive capacities while preserving the existing productive capacity or working on Renewed.

    • A: The concept of domestic investment: the World Bank defined it as “gross capital formation, which consists of total expenditures on the increase in fixed assets of the economy and added to it the net changes in the level of stocks (Rout and Mohanty, 2015).” In the case where capital formation there are two opposing decisions, the first is related to determining the level the optimal capital for the capital, while the second is related to the rate of investment flows (Thivagar et al., 2020a, 2020b), and it can also be defined as all the funds invested within the borders of the country by a person or institution residing in the country regardless of the investment tool used, including real estate, gold, currencies. Foreign (Garanayak et al., 2019). It is also known as the investment made by the government or one of its public institutions and bodies in order to reduce unemployment rates and raise sustainable economic growth rates (Bassi et al., 2010).

    • B: Determinants of local investment: The volume of local investment can be affected by several determinants, including (Panda et al., 2017):

      • 1. Financial determinants: represented by fluctuations in exchange rates and interest rates, escalation of external debt, and inefficiency of the banking system.

      • 2. Real determinants: represented by the increase in unemployment rates, fluctuations in economic development, the volume of exports, the domestic saving rate, as well as the increase in government spending.

      • 3. Determinants related to the financial markets: represented in the low turnover of shares, as well as the fluctuation of the performance of local and foreign companies, and also includes the lack of accuracy in the information announced through the market.

    3.2 Sustainable Development, its Concept and Dimensions

    3.2.1 The Concept of Sustainable Development

    sustainable development is defined as development that cannot be in conflict with the environment, it is the example of renewable and sustainable development, and it can also be defined as development that does not lead over time to a decrease in human, natural and environmental capital, whether at the level Local or global (Khalaf et al., 2020). It is defined as the increase in the net benefit of human beings in the long run represented in increasing per capita income as well as reducing the scourge of unemployment and reducing the level of poverty (Hosseini et al., 2015).

    3.2.2 Dimensions of Sustainable Development

    • A: The economic dimension: This dimension focuses on the issue of meeting material needs through production as well as consumption, as most economists believe that the process of sustainable development requires accelerated economic growth to end the poverty crisis, spread the concepts of a sense of well-being and create the necessary resources for development that is based on the use of resources at the present time In a way that does not make him at a level below the level of real income in the future (Winter, 2012).

    • B: The environmental dimension: The environmental dimension is crystallized by preserving the base of material and biological resources as well as environmental systems, and due to the difficulty of managing relationships between social, economic and environmental goals. This dimension faces many challenges, which require decision-makers to prepare policies and procedures that ensure a sustainable environmental balance, and that the process of sustainable development It is often followed by a depletion of the natural environment, such as air pollution, climate change, and loss of biodiversity (Oppl and Alexopoulou, 2016).

    • C: The social dimension: The social dimension revolves around the necessity of caring for people within society and the need for equity between generations through achieving social justice in distribution and providing care services in a way that serves the areas of health, education, gender equality, and participation in decision-making and governance (Bassi et al., 2010).

    4. THE SECOND AXIS

    Analyzing the reality of local investment and sustainable development in the UAE for the period (2001- 2017).

    4.1 Analysis of the Reality of Domestic Investment in the UAE for the Period (2001-2017)

    In line with the economic policy of the UAE, which is mainly aimed at diversifying the production base and sources of income, the country has adopted an investment policy with an encouraging cover for development initiatives through the establishment of free and industrial zones in various regions of the country. The investment policy followed has implemented an economic exchange program (offset), which is One of the pioneering projects that aims at assisting in the transfer of advanced technology, expertise and technical skills in order to benefit from them in developing the service and industrial production base and training and qualifying its citizens .

    It is noted from Table 1 below that the local investment recorded (32.72) billion dollars in 2001, which is the lowest level during the study period, and its volume gradually and progressively increased until it reached (79.22) billion dollars in the year 2009, as a result of the government's continuous efforts to support National strategies aimed at diversifying economic activity and adopting a more open economy that is compatible with re-preference for economic sectors in creating investment opportunities, contributing to increased production and industrialization, and prosperity of the foreign trade structure in order to diversify sources of income and then achieve.

    Sustainable development, and local investment decreased after 2009, reaching (71.54) billion dollars in 2011, due to the repercussions of the economic crisis.

    The global economy, which negatively affected the UAE economy, in particular the rate of domestic savings and the investment climate in general, and local investment increased again during the period between 2012- 2017, as it increased from (72.30) billion dollars in 2012 to reach (86.36) billion Dollars in 2017, which is the highest value during the study period, due to the adoption of a rational financial policy based on controlling and rationalizing the levels of current spending and the continuation of investment spending and allocating it towards the implementation of special projects, the most prominent of which is the preparation of the global event (Expo 2020), in addition to extractive projects and infrastructure projects The infrastructure that will lead to economic diversification and support the process of sustainable growth development .

    The following table shows the development of the volume of local investment in the UAE during the study period:

    4.2 Analysis of the Reality of Sustainable Development in the Emirates for the Period (2001- 2017)

    Sustainable development is expressed through its representation through a set of dimensions and indicators, so the researcher will take one of the most important indicators of the social dimension of sustainable development, which is the unemployment index, whose data development in the country of study will be analyzed according to the following.

    It is evident from Table 2 below that the unemployment rate reached (2.4%) in 2001, and gradually developed until it reached (3.12%) in 2005, which is the highest rate during the study period, as a result of the relative increase in foreign employment, with which the amount of transfers increased. In addition to hindering the progress of the nationalization policy, unemployment rates recorded a relative disparity between high and low, until their rate reached (1.46%) in 2016, the lowest rate during the study period. This came as a result of the effectiveness of the targeted initiatives adopted by the successive Emirati governments from In order to combat this social scourge, which was matched by the increase in the rates of Emiratization and the focus on the issue of harmonizing the outputs of education in proportion to the work environment, and in the year 2017 the unemployment rate suddenly rose to nearly (2.46%). Good, in addition to not seeking to localize upper and middle jobs, as well as because of the severe austerity measures imposed on private sector companies, which prompted them to legalize their spending side and the amount of their contribution to creating job opportunities, and the following table shows the extent of the development of unemployment rates In the UAE during the study period:

    5. THE THIRD AXIS

    Measuring and analyzing domestic investment and its impact on sustainable development for the period (2001-2017).

    5.1 Description of the used form and approved study data

    The Autoregressive Distributed Deceleration (ARDL) method was used within this research and was applied by both (Thivagar and Abdullah Hamad, 2020), as it was developed later.

    In order to determine the nature of the relationship between the volume of local investment and sustainable development according to one of its social indicators (unemployment rate) in the study of the state of the UAE economy and for the period of time (2001-2017 (*). For the following figure:

    Y = F ( X )

    The equation has also been expressed according to the following linear form:

    Y = Bo + B1 X1
    (1)

    Since

    • Y : represents sustainable development expressed as unemployment rate (%)

    • X1 : represents domestic investment (in billion US dollars)

    • Bo, B1: represent the search form parameters

    * The practical side in the research was based on the data used from the World Bank website: (http://data.albankaldawli.org:http).

    5.2 Stability Test of Time Series for Research Variables

    The unit root test aims to ensure the stability of the time series, and despite the variety of stability tests, the choice fell on the use of the Extended Dicke-Fuller test (ADF), which will help in knowing how static the time series of the variables used in the model are according to the following table:

    From Table 3 below related to the results of the stability of the time series of the research variables, it became clear that the time series of the variable (Y), the dependent variable, which represents unemployment rates is not stable at the level, and after taking the first difference of it, it was found that it has stabilized without a break and a general trend at a significant level (5%) As for the static test of the independent variable (X1), represented by the size of the local investment, it is also not stable at the level, but when taking the first difference of its time series it settled with the presence of a breaker and without a breaker and a trend at a significant level (5% and 1%).

    5.3 Results of the integration test using the Bound Test

    In order to test the extent of the existence of a longterm equilibrium relationship (the existence of cointegration) between the unemployment rate (Y) as a dependent variable and the independent variable represented by the volume of domestic investment (X1), the (F) statistic was computed by testing the limits as shown in the following table:

    It is evident from Table 4 above that the value of the calculated (F) statistic reached (5.53) and it is greater than the minimum and maximum tabular value of the significant (10%), which means that the null hypothesis must be rejected and the alternative hypothesis accepted, and this indicates the existence of a common complement. Between the dependent and independent variables, meaning the existence of a long-term equilibrium relationship between domestic investment and the unemployment rate.

    5.4 Results of Long and Short Term Estimation and Error Correction Parameter

    After it has been confirmed that there is a long-term equilibrium relationship between the volume of local investment and sustainable development according to the boundary test, the long and short term capabilities of the model estimation parameters and the error correction parameter must be obtained as follows:

    It is evident from the results of the above table related to the results of estimating the relationship between unemployment rates (Y) as a dependent variable and expressing sustainable development, and the independent variable (X1), which expresses the size of domestic investment in the short term. An increase in the volume of local investment by one unit will lead to a decrease in the unemployment rate by (0.0003) units. It also became clear that the error correction parameter (Coint Eq (-1)) is negative and significant and has reached (-1.078885). This explains that (7%) of Short-term errors will be automatically corrected through time to reach equilibrium in the long term, and we note that the explanatory power (Adj.R2) of the model has reached (0.71), meaning that the independent variable (domestic investment) included in the estimated model (X1) explains about (71% of the changes in the dependent variable (Y) are unemployment rates, while the remaining (29%) are random variables that the model did not take into consideration, and these variables represent the totality of the effects of the random variable on the dependent variable.

    With regard to the special long-term results according to the above table, and by estimating the relationship between the variables, it was found that the relationship between (X1) expressing the volume of domestic investment and (Y) expressing the social indicator of sustainable development (unemployment rate) is an inverse and significant relationship at a significant level. (6%), in addition to the function constant (C) was also significant at (1%) level.

    5.5 Diagnostic tests in ARDL

    The estimated models are tested to confirm that they are free from the problem of self-correlation by using the (Breusch-Godfrey Serial Correlation LM Test) and using the (Heteroscedasticity Test: ARCH) to ensure that the estimated models are free from the problem of heterogeneity of variance at the significant (5%) of the relationship between Variables according to the following table:

    We note from Table 7 that the estimated ARDL model is completely devoid of a self-correlation problem according to the Breusch-Godfrey Serial Correlation LM Test, where we accept the null hypothesis that states that there is no self-correlation problem, because the value of (Prop. F) and Prob Chi-Square) are not significant at (5%) level, and the results also indicate that the estimated model is free from the problem of heterogeneity of variance, as the values of each of the Prob were Chi-Square)) and ((Prop.F) were not significant at a significant level (5%), according to (Heteroscedasticity Test: ARCH).

    5.6 Testing the staticity of the estimated model using CUSUM, CUSUM Squares)

    The (ARDL) static test is an important test in order to ensure that the research data does not contain any structural changes, according to the Cumulative Sum of Remnants (CUSUM) tests as well as the Cumulative Total of Squares of Remains (CUSUM sum of Squares), which show the extent to which there is any change Structural data and strings of the model used, as well as the extent of consistency and stability of long-term parameters with short-term estimates, and then that such tests are always associated and associated with the methodology (ARDL), if the graph of both tests (CUSUM SQ) (CUSUM) within a frame Critical limits and at the level (5%) of significance, this is indicative that all the parameters of the estimated model are stable and there are no structural changes that affected them and vice versa (Adrioche, 2013: 24).

    We note from Figure 1 above and through the form of the CUSUM test) that the cumulative sum of the remainder within the limits of critical values at the level of (5%) and this is indicative of the staticity of the estimated parameters in the short term. The cumulative total of the residual squares, as it was found that it was not within the limits of the critical values at a significant level (5%).

    6. CONCLUSIONS

    • 1. The volume of domestic investment is determined by a set of determinants of a financial nature, as it is determined by real variables (unemployment rate, economic development, domestic savings and the volume of public spending, in addition to its link to determinants related to the financial markets.

    • 2. The sustainable development process is part of an interactive group between different fields and dimensions, most notably the economic, social and technological dimension, as well as the environmental dimension.

    • 3. The United Arab Emirates has adopted an investment policy aimed at encouraging and activating development agreements and initiatives, and this came in line with the country's economic policy that it has always pursued in order to diversify the sources of income, diversify the base and structure of production processes and support the components of the sustainable growth process.

    • 4. The effectiveness of the gestures that have greatly contributed to combating the scourge of unemployment. It is the result of long-term planning adopted by successive Emirati governments by maximizing the rates of Emiratisation and the need to take into account the appropriateness of education outcomes and the actual need for work environment requirements.

    • 5. The study showed a balanced relationship in the long term (co-integration) between the volume of domestic investment and the social sustainable development index (unemployment rate).

    6.1 Recommendations

    • 1. The necessity to establish a Productivity and Efficiency Department that aims to achieve an increase in the total productivity of the UAE economy and to upgrade and improve the quality of the local production volume.

    • 2. Work to enhance the competitiveness of the economic sectors in a way that contributes to increasing the percentage of participation in the to tal capital formation and thus achieving most of the goals of the sustainable development process.

    Encouraging the private sector and providing it with the required support to play its important role in addressing and combating the unemployment problem by providing employment opportunities for graduates and the unemployed.

    Figure

    IEMS-20-2-184_F1.gif

    Results of the estimated model static test.

    Table

    Evolution of the volume of domestic investment in the UAE during the period (2001-2017)

    Evolution of the unemployment rate in the UAE during the period (2001-2017)

    The results of the stability of the time series of the research variables

    Results of the joint integration test for the research variables according to the boundary test

    The results of the assessment in the short term

    The results of the assessment in the long term

    Results of the self-correlation test and the heterogeneity of variance

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