United Arab Emirates
By:
Carolina Cano-Espinoza
Alyssa Cowsette
Solomon Hailemelekot
Nathaniel Levangie
Kevin Saldana
Allen Schmidt
Cultural Environment
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Less than 20% of the population is UAE citizens
Arabic is the official language. Also speak, Persian (Farsi), English, Hindi, Urdu
The official religion is Muslim or Islamic making up about 76% of population
Legal driving age is 18
Follows European standard road system
The UAE is much more conservative than Westernized countries
Revealing clothing worn by tourists is seen as offensive even though nothing is usually said to the tourist
Always accept food and/or beverages from hosts before discussing business matters
Always stand for:
○ New guests
○ Older or higher-ranking people
○ Men always stand when a woman enters the room
Do not offer to shake hands with a member of the opposite sex if they are Muslim unless they extend their
hand first
You should accept food and beverage with your right hand and eat with your right hand
Avoid:
○ Showing the soles of your feet
○ Pointing your foot at anyone
○ Crossing your legs when sitting in front of an important guest
Cultural Environment
● Groups of men are discouraged from hanging out where families and women spend time as
women may be intimidated to visit
● LGBT activities are illegal in the UAE
● During the 29-30 days of Ramadan (which changes every year), eateries are closed during the
day or have very private dining inside behind curtains out of public view
● Muslims fast from sunrise to sunset during this religious time.
● Even non-muslims are prohibited from eating, drinking, or smoking in public during the
fasting hours of Ramadan.
● Failure to comply could result in jail time and/or fines
● Non-Muslims are also expected to dress conservatively during this time.
● Work hours are reduced by 2 hrs for everyone during Ramadan.[AC1]
● Islam strongly disregards the notion that certain individuals or nations be favored because of their
wealth, power, or race.
○ -The differences they see between people are on the basis of that individual's faith alone
Legal Environment
• The UAE uses a combination of Sharia and Civil law
• The UAE uses dual legal courts with the Sharia Courts
and Civil Courts operating in parallel.
• Sharia Courts - Primarily for social laws, family law,
divorce, and succession
•Civil Courts- For use of most commercial matters
Legal Environment
• The UAE has five commercial codes
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Usery or charging of interest - according to Sharia money is not a
commodity that can be traded or have value over time, therefore
interest earned is unjust income
•2) Risk should be shared - Investors should share in profits and losses
of an investment in proportion to the amount that they put into the
transaction
• 3) Uncertainty in a contract is prohibited - Both parties must undertake
a contract with full knowledge of all the terms. The capital or goods
should be agreed upon in advance and stipulated in the contract
• 4) Competence - The parties in a contract must posses the legal
capacity to understand and assume the obligations of the contract
• 5) Consent - Parties must enter contract of their own free will
Social Environment
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Society is divided into 2 social categories:
Nationals-citizens; emirates
Foreign immigrants
Citizens are then divided into 4 social classes:
The ruling Shiekhly families: highest political positions and power, extreme wealth
The merchant class: merchants who sell consumer goods
The new middle class: increasing number of business professionals
The low income groups: farmers, newly settled nomads, etc
Within the immigrants there are different hierarchical groups:
Top professionals: generally earn higher salaries
Middle range professionals
Low paid semi skilled and unskilled workers
Welfare system for nationals is extremely comprehensive
Offering:
High quality healthcare
Free education up through the college level
Social security
Family allowances
Subsidized electricity and water
Housing for low income groups
Men and women have equal rights for advancement within employment
Gov’t Schools and universities are still segregated by gender
There is more opportunity for upward mobility in the UAE than in many other countries with a class system
Economic Environment
• Ease of Doing Business
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The UAE ranked 23 out of 189 countries in World Bank’s Ease of
doing Business in 2014.
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This is an improvement from its 26th ranking from 2013
The UAE, which did not have the greatest confidence among
investors, is improving its protection of investors ranking. Going from
135th to 98th in 2014
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This due to many reforms such as disclosure requirements and
shareholder rights
Economic Environment
• Finances, Credit, & Inflation
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UAE’s Net Government Net Budget grew from 4.7% in 2010 to 13.0%
in 2013
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Public debt in the UAE decreased from 22.1% of total GDP in 2010 to
16.4% of total GDP in 2013
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This was due largely to the increase in oil revenue
Oil prices went from $78.1 per barrel in 2010 to $105.4 per barrel 2010
According to the World Bank this was also due to increased oil revenue
There are currently 23 Domestic Banking systems in the UAE
There are also 28 Foreign Banking systems in the UAE
Economic Environment
• Global Competitiveness
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In 2013 the UAE’s Global Competitiveness Index ranking was 19th out
of 148 countries.
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This is up from 2012 where their ranking was 24th
Among Countries within its region (The Middle East & Northern Africa)
it is ranked 2nd
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The UAE ranked very highly in the following sub-categories
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Infrastructure
Goods Market Efficiency
Economic Environment
• Corruption
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The UAE also ranks highly in the Corruption Perceptions Index,
ranking 26th among 177 countries in 2013
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This is an improvement from its 2008 ranking of 35th
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The governments ability to produce prompt service has helped reduce
the UAE perception of corruption
– The government of the UAE also adopted many anti-corruption policies
such as:
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United Nations Convention against Transnational Organized Crime
International Convention against Corruption
Arab Anti-corruption Convention
Economic Environment
• Tax Environment
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The UAE ranks 1st out of 189 countries in the paying taxes category of
Doing Business 2014
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This is largely due to their straight forward tax policy.
The UAE has a very complex tax rate structure that includes:
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No corporate income tax at the federal level
Corporate income tax at the emirates-level
Foreign oil companies are liable for corporate tax
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For the oil industry this corporate tax is 55% of operating profit
But taxes paid is based on an agreed amount
The UAE’s current total tax rate is 14.9%
Monetary Environment
• Currency system
• Monetary policy
• UAE employs an expansionary monetary policy that is in favor of
growing economy and producing desired economic stability.
• The idea is that since they have more money in hand they are
looking to improve overall GDP and increase government spending
for given infrastructure, especially in aviation market.
• Looking to buying and selling bonds, looking to create lower
unemployment and also more stable pricing.
• Monetary exchange conversion
• With 1 USD=3.67AED
• 1AED=.27US
• With the current exchange rate we can consider that UAE is
exporting more than importing.
Monetary Environment
• Issues
• Since 1997 AED has been pegged to the USD at the
rate given before
• Not much flexibility in their currency since under the
current regime they want to keep the currency pegged
to the dollar at a fixed rate
• This is an issue since their economy depends heavily
on their oil
• In addition with UAE current regime ideal of expanding
economic growth and stability, fiscal policy possesses a
possible threat, that might create possible problem
Monetary Environment
• Advantage to Prospective US businesses
• Fixed exchange
• No major currency risk
• Even if UAE natural resources produce less for UAE,
US is unaffected by the issues.
• Because UAE is looking to grow, high assumption that
USD might become more of the standard than the AED
Trade Environment
• World Trade Organization member since 1996
•Supports open trade
•Trade balance
•Surplus of 503694 Million AED in 2013 (137134.23 US)
•UAE has had a trade surplus since 2000
Trade Environment- Imports
• Main imports:
• Pearls and other precious metals and stones
• Machinery and transport equipment
•Main import partners:
1. India 17.50%
2. China 14.00%
3. United States 7.70%
4. Germany 5.60%
5. Japan 4.82%
Trade Environment- Exports
• Main exports:
• Crude oil & natural gas (40%)
•Main export partners:
1. Japan 17.10%
2. India 13.60%
3. Iran 6.90%
4. South Korea 6.10%
5. Thailand 5.10%
Trade Environment- Barriers
• Tariffs
• General tariff rate- 5%
• Alcohol- 50%
• Tobacco-100%
• Simple average applied tariff- 6.6 percent for agricultural
goods and 4.7 percent for non-agricultural goods
• UAE registered companies must have at least 51 percent
ownership by a UAE national
Trade Environment- Agreements
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2009: Gulf Cooperation Council for the Arab States of the Gulf (GCC)
• Free-trade agreement with the European Free Trade Association States (Iceland,
Liechtenstein, Norway and Switzerland)
• Duty-free trade of many industrialized goods and products
Great Arab Free Trade Area (GAFTA)
• Positive economic relationships among Arab states
• Improve trade between Arab states
• Promote economic advancement and positive trade with non-Arab states
Economic Cooperation Agreements
• Agreements with states throughout South America, Africa, Asia, Europe and
Australia
• Some degree of trade allowances
Trade Environment- Foreign Domestic
Investment
• 2005: MENA-OECD Investment Program
• Middle East and North African (MENA) governments
• Support investment policy reforms for growth and
employment in the region
• Provide investment incentives to attract FDI
Political Environment
• UAE is a collection of seven monarchies
• Executive, Legislative, and Judicial
branch
• Ruler of Abu Dhabi, Khalifa bin Zayed Al
Nahyan is President of UAE
• Ruler of Dubai, Mohammed bin Rashid Al
Maktoum, is Prime Minister of UAE
• Emirates reserve considerable power
including mineral rights (oil) and revenues
• Dual System of Sharia and Civil courts
Political Environment
• Political Risk Assessment
•Corporate financial information is not always available
•Intercompany transactions provides difficulties in
establishing a secure business environment
•Complicated relations with Iran
Political Environment
• Vision 2021 - UAE’s Long Term Goals,
To be among the best countries by 2021
•Social Responsibility
•Remain founded on progressive and moderate Islamic
values
•Continue to empower women
•Encourage strong families and marriages
•Safe & Prosperous Nation
•Enhance international standing
•Protect nation through advanced warfare
Political Environment
• Vision 2021 (continued…)
• Competitive Economy
•Focus on innovation, research, science and technology to
form knowledge-based economy
•Encourage entrepreneurship
•Nurturing and Sustainable Environment
•World-Class Health Care
•First-Rate Education
•World-Class Infrastructure
References
Cultural:
Living in Dubai - Dubai Expats Guide. (2014, January 1). Retrieved March 15, 2015, from http://www.livingindubai.org
(n.d.). Retrieved March 15, 2015, from http://www.government.ae
The Official Portal of Dubai Government. (n.d.). Retrieved March 15, 2015, from http://www.dubai.ae/en/pages/default.aspx
United Arab Emirates. (n.d.). Retrieved March 15, 2015, from http://wikitravel.org/en/United_Arab_Emirates
Social:
Online Education Portal with lists of accredited universities, colleges, schools and training institutes in MENA (Middle East and North Africa). (n.d.).
Retrieved March 15, 2015, from
http://www.arabiancampus.com
Countries and Their Cultures. (n.d.). Retrieved March 15, 2015, from http://www.everyculture.com/Africa-Middle-East/index.html
Latest and breaking news | thenational.ae - The National. (n.d.). Retrieved March 15, 2015, from http://www.thenational.ae
Economic:
Passport Global Market Information Database (GMID)
Monetrary:
UAE Central Bank chief says to keep currency peg to Dollar; Retrived March 15,2015 from http://www.reuters.com/article/2014/11/30/emirates-cenbank-peg-idUSL6N0TK03520141130
Monetary Policy of UAE; Retrived March 8, 2015 from http://thinkman.weebly.com/monetary-policy.html
Trade:
"Investment Programme." OECD.org. N.p., n.d. Web. 17 Mar. 2015. <http://www.oecd.org/mena/investment/>.
"Trade & Export." Embassy of the United Arab Emirates. N.p., n.d. Web. 17 Mar. 2015. <http://www.uae-embassy.org/business-trade/trade-export>.
"United Arab Emirates Balance of Trade." Trading Economics. N.p., n.d. Web. 17 Mar. 2015. <http://www.tradingeconomics.com/united-arab-emirates/balance-of-trade>.
"United Arab Emirates." United States Trade Representative. N.p., n.d. Web. 16 Mar. 2015. <https://ustr.gov/>.
Political:
“The Political System of the UAE.” <http://www.hziegler.com/articles/political-system-of-the-uae.html>
“United Arab Emirates: Risk Assessment.” <http://globaledge.msu.edu/countries/united-arab-emirates/risk>
“POLITICAL SYSTEM.” <http://www.uaeinteract.com/government/political_system.asp>