The UAE is one of the most lucrative countries to invest in owing to its favorable economic policies and strong infrastructural framework. Nonetheless, social distinctions may prove difficult for foreigners to handle, if they do not learn about them beforehand.
Political and Legal environment in the UAE
The UAE consists of seven Emirates that operate independently; consequently, the government that one is located governs commercial activity and the use of natural resources. The central government largely decides on immigration and foreign policy issues. A foreign business person will have to familiarize himself with the laws governing a certain Emirate in order to do business legally.
No elections take place in this country, and no political parties exist as the country has a hereditary system of power. Members of royal families in each Emirate have a Sheikh as a leader; these seven Sheikhs then select a President from amongst them.
The UAE has established free trade zones with several nations around the world. If a businessman comes from any of these countries, then he or she can own a UAE-based business fully. The person will pay no levy for exports or imports and he or she will be exempt from taxes. If the equipment or the raw materials in production come from outside the UAE, a person does not have to pay any taxes on them (Rehman, 2009).
The legal system in the UAE is a civil law jurisdiction that has elements of Roman, French and Islamic law. Nonetheless, persons from common law backgrounds may use common principles in creation and management of contracts. In the seven Emirates, federal laws exist to govern commercial transactions, commercial agencies and labor relations. Usually, these laws are passed as local decrees by the ruler of a certain Emirate.
The economy of the UAE rests on its oil deposits. It is the second wealthiest Islamic country owing to these oil resources. Furthermore, economic growth levels are quite promising because, over the past decade, the country has reported growth levels of 2% or more. However, certain parts of the Emirates, such as Dubai, are diversifying their economy. The Emirate is now recognized the tourist and financial hub of the Middle Eastern region.
It possesses artificial Islands such as Jumeirah and also has numerous villas that tourists can enjoy. Currently, Dubai has an International Financial Centre, which allows foreigners to own 100% of their portfolio. It does not charge taxes and allows participants to own freehold space and land. The country’s economic prosperity also stems from the UAE’s reliance on foreign labor. Approximately 80% of the population consists of expatriate workers, most of who come from the Asian continent (Rehman, 2009).
Employers in the UAE have been known for their abuse of workers’ rights. Many of them withhold employees’ passports throughout the duration of their contract. The Human Rights Watch group claims that UAE employers discriminate against Asian workers. Therefore, a business person who partners with locals should expect such mistreatment, but should also plan on how to deal with it.
The UAE government has worked to create a lucrative investment climate. Its regulatory structures are not restrictive for foreigners. Additionally, the country has the infrastructural framework needed to support businesses efficiently. Several Emirates have minimized exchange control such that remittances can be made back to an immigrants’ home country without restrictions. Even taxation laws and tariffs are quite promising.
Almost three quarters of all imports in the UAE are duty free, and one can export one’s products without paying any tariffs. With regard to freedom to trade, the UAE is position 5 in the world; consequently, foreign entrepreneurs would find the country quite appropriate for conducting business.
Social / Cultural
UAE citizens are predominantly Muslim, so their work week ends on Thursday afternoon and commences on Saturday. Nonetheless, certain multinationals may opt to change their working week to coincide with foreign businesses. Additionally, most businesses are closed in the afternoon during the month of Ramadan. The Islamic religion also governs most interactions with Emiratis.
They expect people, especially women, to cover their bodies regardless of the heat. Foreign businesswomen should keep this goal in mind; although wearing traditional UAE clothing may offend locals as it must be worn by members of the Islamic faith. Individuals in this country detest pork or any pig products. Furthermore, men do not shake hands with women, so one must respect their practices (Rehman, 2009).
Business meetings may be conducted unconventionally, according to western standards. First, the person who speaks the most during a business meeting may not be the decision maker. Therefore, foreigners should pay attention to silent individuals in the group. Additionally, an Emirati may nod or say yes when what they really imply is maybe.
Since Emiratis respect ranks and titles, one should endeavor to learn about a business partner’s title prior to the meeting. Many of them will take phone calls, or welcome interruptions during business meetings, so this should be expected. Additionally, some topics are quite sensitive to the typical Emirati; these include: women, Israel or other personal questions.
Citizens of the UAE speak Arabic, so communication with government bodies ought to be written in Arabic. Nonetheless, businesses communicate with each other using English. Foreign entrepreneurs would not heavily rely on translation as is the case with other Arabic countries.
The country has a technology and telecommunications centre at Dubai known as Dubai Internet City. This area offers businesses wireless connectivity and cutting edge technology for offices in the vicinity. Approximately one thousand companies are located in this part of the country alone. Some of the leading technology giants in the world can be found in Dubai Internet City. They include Cisco, Sony Ericson, IBM, Dell, Siemens, Computer Associates and many others. Additionally, several other service-oriented firms do business there.
E-commerce is thriving in the UAE with provisions for online payments and deliveries among many companies. The government as well as its agencies can be easily accessed through the internet. Nonetheless, censorship issues have been reported concerning internet use. Furthermore, internet prices are not as competitive as they are in other parts of the world.
Hofstede country characteristics
The UAE has a high power distance score of 80 out of 100. This implies that inequality thrives in the UAE; leaders’ decisions are accepted without question.
Furthermore a UAE version of the caste system exists in the country; this minimizes upward mobility of citizens (Rehman, 2009). Therefore foreign entrepreneurs should not expect democracy or diplomatic principles to operate. Emiratis have a low tolerance of uncertainty as seen through a UAI score of 68; this explains why they have instated plenty of policies, laws and regulations.
Their goal is to exert as much control as possible over situations. Their masculinity index is 52, which is surprisingly close to the average of 50.2. Consequently, perceived restrictions on women may stem from their Islamic faith rather than their cultural inclinations. The individualism ranking of the UAE is 38, which is quite low. Emiratis are collectivist, and family or kinship links take precedence over individual needs.
Rehman, A. (2009). Dubai & Co.: Global strategies for doing business in the Gulf States. London: McGrawhill.