United Arab EmiratesBy:Carolina Cano-EspinozaAlyssa CowsetteSolomon HailemelekotNathaniel LevangieKevin SaldanaAllen Schmidt

Cultural Environment● 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○ Pointing with your finger

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 •1) 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• 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– The UAE ranked 23 out of 189 countries in World Bank’s Ease of doing

Business in 2014. •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

•This due to many reforms such as disclosure requirements and shareholder rights

Economic Environment

• Finances, Credit, & Inflation– UAE’s Net Government Net Budget grew from 4.7% in 2010 to 13.0%

in 2013•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

– Public debt in the UAE decreased from 22.1% of total GDP in 2010 to 16.4% of total GDP in 2013

•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– In 2013 the UAE’s Global Competitiveness Index ranking was 19th out

of 148 countries.•This is up from 2012 where their ranking was 24th

– Among Countries within its region (The Middle East & Northern Africa) it is ranked 2nd

•The UAE ranked very highly in the following sub-categories–Infrastructure–Goods Market Efficiency

Economic Environment

• Corruption– The UAE also ranks highly in the Corruption Perceptions Index,

ranking 26th among 177 countries in 2013•This is an improvement from its 2008 ranking of 35th

– 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:

•United Nations Convention against Transnational Organized Crime •International Convention against Corruption •Arab Anti-corruption Convention

Economic Environment

• Tax Environment– The UAE ranks 1st out of 189 countries in the paying taxes category of

Doing Business 2014 •This is largely due to their straight forward tax policy.

– The UAE has a very complex tax rate structure that includes:•No corporate income tax at the federal level•Corporate income tax at the emirates-level •Foreign oil companies are liable for corporate tax

–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

• 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

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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

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Monetary Policy of UAE; Retrived March 8, 2015 from http://thinkman.weebly.com/monetary-policy.html

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"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>.

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