Starting A Business In Uae Commerce Essay

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If you are thinking about opening up and starting a business in UAE there are some things you will want to take into consideration before you take the plunge and try to move to the United Arab Emirates to work on your new business venture.

Before you jump in too deep with your business idea, you should gather as much local knowledge of the region as possible. You should especially look into the industry that you are interested in working in with your business. You will need to develop a viable business plan for your business that includes forecasting and a survey of current market conditions. You should already have investors in place for your venture if possible. The law states that you are required to have a local partner in Dubai that holds the majority interest in the company. This means that the partner can control the business and it can be an individual or a company. The partner does not have to contribute financially to the start up business. You will need to register your business as well. Once it is registered you will have to show proof of sufficient financial resources to invest to the Ministry of Commerce. The amount you need to have tends to vary but it somewhere between $10,000 and $50,000. This amount is used as a guarantee against liabilities; however you are allowed to withdraw it after you have shown that you have it.

The United Arab Emirates (UAE) is a federation of seven Emirates each headed by a ruling family. When we are talking about the political factors the UAE has a unique political system in that it brings a clear view of both traditional and modern structure that have enabled the country to maintain great political stability. As I previously mentioned the country is comprised of seven Emirates each of which is lead by a ruler who inherits this position, and the ruler of the Emirates make up the supreme Council of the federation where the to policy making body the country. The president is elected from within this group by the rulers. Sheikh Zayed bin Sultan Al Nahayan has been president and chief of state since the establishment of UAE.

When we are talking about the judicial system the UAE Constitution provides for a federal court system. But each constituent Emirate they can maintain their own independent court system. Currently the Emirates of Abu Dhabi, Sharjah, Ajman, Fujiairah, and Umm Al Quwain have joined the federal court system.

Talking about the Trading policies the UAE is a generally liberal and increasingly diversified economy, the importance of trade for its economic performance, its relatively low border barriers to trade, and its growing economic power make it an increasingly important supporter of the multilateral trading system. In 1996 UAE was a founding member of the World Trade Organization (WTO) where it had been acting as a contracting party to the GATT since 8 March 1994. As well as the UAE was a founding member of the Gulf Cooperation Council (GCC) created on 25th May 1981 at Summit conference in Abu Dhabi, where it including Saudi Arabia, Kuwait, Oman, Qatar, and as well as UAE. In 1997 UAE was a founding member of the Greater Arab Free Trade Area (GAFTA) signed on 19th February 1997 and in force since 1st January 1998. The GAFTA has contributed modestly to increase inter-Arab trade 8-9% of total Arab trade with the world, from 4-5% in the 1990s.

When we are focusing for the government structure of UAE there are no elections or legal political parties and various government factors which helped Dubai and Abu Dhabi to achieve their status in the Gulf , include where the construction sector, manufacturing sector, trade as well as government policies like no taxation and easy to have bank loans it makes easy for the new investors to attained a new business in UAE as well as have several free zones offering 100% ownership to non-nationals including Jebel Ali Free Zone as a major base for attained for warehousing, regional distribution centre for multinational companies and service companies including many global leaders and the Dubai Air port free zone also offers business opportunities in Information technology products, juwelary,luxery items, aviation industry related business.

Source: UAE Business Structure http://www.economy.ae 2009

The UAE government also provided modern technology in administration and for the business development by taking lead in certain aspect of on-line marketing such as E-commerce business to business (B2B) web marketing of Tejari.com, is a success and well known story as it focus on government and privet sector contracts and tendering procedures enabling for both national and international business investors or the companies make easier access to participate in development projects and make business more easy and efficient. When we are focusing for the Labour Law in UAE is loosely based on the international Labour Organization's model under UAE Law No. 8 of 1980, as amended by Law No.12 of 1986(the Labour Law) governs most aspect of employer/employee relations like hours of work, leave, termination rights, medical benefits and repatriation. Talking about the business freedom in UAE generally the overall freedom to start a operate and close a business is limited, by the UAE regulatory bodies under the legal factors. Starting a business takes less than half the world average of 38 days although the minimum capital requirement remains costly obtaining a business license takes less than the world average of 225 days. On the other hand UAE is weak in business freedom, investment freedom and property rights. Foreign investment remains restricted and the government has tried to streamline the regulatory process and also the judiciary remains more vulnerable to political influence.

Impact of Economic Factors

It is important for understanding the economic factors in UAE therefore UAE's has an open and free economy system and it has taken advantage for attract more investors and business. Government control and regulation of private sector activities has been kept to be minimum and there are no direct taxes on cooperate profits or personal income [1] (except for oil companies that pay a flat rate of 55% and branches of foreign banks that pay a flat rate of 20% on net profit generated within UAE.) as well as the [2] customs duties are very low showing 4% with many exemptions, 100% repatriation of capital and profits is permitted, and also UAE there are no foreign exchange controls where else trade quotas or barriers and stable exchange rate exits between the US Dollar and UAE Dirham (US$ 1.00=AED 3.678).

The two main cities in UAE are Dubai and Abu Dhabi where the capital city, Dubai has been ranked as the number one business city and Abu Dhabi ranked as the forth position among the top ten business cities in the GCC region. Both the cities were selected on the basis of trade investment project and various other industrial developments in the new millennium, compared to the other Gulf cities like Doha, Kuwait city, Manama, Muscat, Jeddah among others.

There are several advantages to choosing the United Arab Emirates ("UAE"), and in particular Dubai, as the base and field for your joint venture business or project. Some of these advantages have already been touched upon earlier and other advantages will be noted in this section.

When we are focusing for the economic and the political background, the UAE has a stable economy where it provides a unique geographical location for worldwide business opportunities. Many banks and industrial companies have taken advantage of the UAE location most probably the free zone and this location will helping to greatly increase the UAE's skilled working population in coming years. UAE the growing workforce of high income earners results to increased the demand on rental properties. The Dubai, Abu Dhabi and Ajman are the main real estate investment markets each of these regions provide impressive capital growth for potential investors to gain further yield benefits from high rental demand from fast growing population in each emirates. Generally the UAE inflation is high averaging 10.2 % between 2005 and 2007. Where the government influences prices through regulations subsidies and numerous state owned enterprises and utilities, including oil, gas, electricity, and communication.

Annual Data and Forecast

2003

2004

2005

2006

2007

2008

2009*

GDP

    Nominal GDP (US$ m)

87,599

105,237

132,184

163,145

184,111

229,639

248,792

    Nominal GDP (AED m)

321,752

386,535

485,513

599,231

676,239

843,464

913,812

    Real GDP Growth (%)

11.9

9.7

8.2

9.4

7.5

8.3

8.2

Origin of GDP (% real change)

    Agriculture

0.3

9.7

6.0

5.0

2.0

2.0

2.5

    Industry

12.7

7.3

5.0

10.3

4.3

7.9

7.7

    Services

11.8

12.6

12.1

8.7

11.5

9.0

9.0

Population & Income

    Population (m)

4.0

4.3

4.6

4.9

5.2

5.5

5.7

    GDP per Capita (US$ at PPP)

23,080

24,362

25,430

26,818

27,933

29,578

31,542

Financial Indicators

Exchange Rate Dh:US$           

3.7

3.7

3.7

3.7

3.7

3.7

3.7

Exchange Rate Dh:€ (end-period)

4.6

5.0

4.3

4.9

5.4

5.7

5.4

Stock of Money M2(% Change)

15.5

23.8

30.5

23.2

41.7

28.2

19.0

Lending Interest Rate (avg; %)

5.8

5.9

7.2

7.9

7.8

5.3

5.8

Current Account (US$ m)

Current -account balance

7,552

10,589

24,375

35,871

31,569

56,561

46,163

International Reserves (US$ m)

Total International Reserves

15,088

18,530

21,010

27,617

77,239

87,239

95,239

* The Economist Intelligence Unit Forecast

3

.

Forecast Summary

 

 

 

 

(% unless otherwise mentioned)

 

 

 

 

 

 

 

 

 

 

2006

2007

2008

2009

Real GDP Growth

9.4

7.5

8.3

8.2

Oil Production ('000b/d)

2620

2510

2634

2768

Crude Oil Exports (US$ m)

56377

58363

101986

98800

Consumer Price Inflation

13.5

14

16

13

Deposit Rate

5.2

4.8

2.3

2.8

Government Balance (% GDP)

12.1

11.3

20.1

16.2

Exports of Goods fob (US$ bn)

142.5

156.6

210.4

215.5

Imports of Goods fob (US$ bn)

86.1

101.6

125

140

Current Account Balance (US$ bn)

35.9

31.16

56.6

46.2

Current Account Balance (% of GDP)

22

17.1

24.6

18.6

External Debt (year-end; US$ bn)

45.8

57.5

68.4

74.6

Exchange Rate Dh:US$ (av.)

3.67

3.67

3.67

3.67

Exchange Rate Dh:Â¥100 (av.)

3.16

3.12

3.53

3.69 [4] 

Source: Emirates Contribution to GDP (http://www.dorchesterinvestment.net [5] )

Industries in UAE

.

6

Impact of Social Factors

Social factors are the other important factors for the new business venture in UAE such as, numerical strength ratio, gender ratio and the distribution of a population average 4,798, 491(estimate is based on the results of the 2009 census) and these factors will determine the course of its future transformation. So these factors will positively or adversely affect the life of every segment of society, based on their nature and direction. Thus the number of the population and its distribution such as gender and age structure are some of the significant factors that bring about clear view of the social change. And the Education and the Literacy rate are the other important social factors in UAE. UAE the public educational spending is [7] 27.43%, which ranks 7th in the world. But UAE literacy rate is very low out of all the Gulf States at 77.9% compared to the United States rate of 99%. The UAE has a long way to achieve the educational statics of the western cultures. Mostly the UAE high spending in education has paid off for the younger generation where the age between 15-24 and their literacy rate is showing far more better than the overall average rate as I mentioned before where the rate of 77.9% on the other hand their literacy rate is above the average and it makes easy for the whole society as well as the working population to enter to the business world and to attained in their works and as well as it will make easy for the business owners to make their future better.

Impact of Technological factors

Technological factors are the other essential factors for the new business ventures in UAE. In term of technological readiness is average rank for 27th and the UAE enjoys excellent IT infrastructure such as ranking first among Arab countries on internet users rate, first worldwide on mobile telephone call cost. But the prices for telecommunications services are very high and the highest rank around the world. And also there are some restrictions on internet. Above are some important factors in IT infrastructure. In UAE the users of IT include mainly factors of society such as private consumers, business, government, military, and educational facilities. The total internet subscribers on the average to be 300,000, individual 120,000, Universities/Schools 60,0000, companies 90,000 and government 30.000.

Focusing for the transportation factor UAE there is an extensive high quality road network, petrol is very cheap, and traffic regulations are very strict as well as UAE is strategically located for trade and business purposes with both Europe and Asia as well the soviet states, Hong Kong and Japan. In addition the transportation routes to North America are many, unlike many offshore jurisdictions where the business travelers must spend endless hours, multiple connections and limited flights availability to reach the desired destination there is easy access in and out of Dubai and the Emirates. There are over 90 established carriers such as British air ways, Singapore airlines, Air France, KLM, Cathy pacific, Swiss air, Ethihad, Emirates, and Gulf Air and many other international carriers operating daily scheduled flights to over 120 major cities and there are current plans to implement a direct flight on a daily basis from Dubai to New York City. Focusing for the above transportation factors I think it makes easy for the new business ventures to attained their business in UAE because high quality road networks, and the petrol has seen to be very cheap and there are over 90 airways in UAE so these factors clearly figure out some several advantages to choosing UAE as the based on your business venture.

Impact of Environmental factors.

The above is the other important factor for the new business ventures in UAE. So given the sharp focus on the environmental factors there are some advantages and as well as disadvantages, when we are selecting the major base for our new venture company or the business I think it is appropriate that the capital city Abu Dhabi and Dubai should be selected as the major base for the new business ventures in UAE as I mentioned before because Dubai has been ranked as the number one business city. In addition when we are focusing for the industries the UAE is one of the most promising steel market in GCC region with production reached to 1.7 million tons in year 2006, construction boom cheap and reliable gas and energy supply besides the geographical positioning are the main driving forces for the steel industry and well as the Oil industry in UAE.

Talking about the global factors the climate of the UAE is generally hot and dry, land use only 0.6 % of the UAE is considered to be arable land and 2.3 % of the land is planted to permanent crops. Focusing for the investor's value factor for many years the UAE has offered investors an efficient base from which to conduct business with the five other GCC states. Many of these investors are international household names. When we are looking for the environment issues, UAE the major environmental issues are urbanization where this factor is dangerously affect for the traditional economy in UAE (subsitence fisheries, oasis agriculture and livestock)for example habitat for wildlife has been lost due to urbarnisation and industrial development, over fishing and overgrazing are affecting the environment as well as the fast urbanization is bringing problems of waste management and pollutions are rising especially from the new industrial complexes, but also due to the oil trade. So when we are looking for the above environment factors as I mentioned before there are some advantages and well as disadvantages. When we are selecting the UAE as our major base for new business venture we have to be more concern about the above factors because when we are concerning about those factors we can easily start up a business in UAE with peaceful way.

Risk Analysis

Political and legal factor

PESTLE Analysis Factor

Great Threat

1

2

3

4

5

Great Opportunities

Trading policies

 

 

 

 

 

5

There are many trading policies in UAE.

Funding, grants and initiatives

 

 

 

 

5

Giving out grants totaling Dh2.5 million in an initiative to encourage social and educational non-profit organizations.

Home market lobbying/pressure groups

 *********************

 

 

 

 

*********************

International pressure groups

Pressure groups are high in UAE

 

 

3

 

 

Wars and conflict

 

 

 

3

 

 

Gulf war 1991

Govt. policies

1

 

 

 

 

Federal govt. policies.

Elections

 

 

 

 

4 

No elections

Terrorism

Terrorism threat is high in UAE

2

 

 

 

 

Political trends

 ********************

 

 

 

 

******************

Governmental leadership

 

 

 

 

 

5

Stable

Internal political issues

No immediate threats

 

 

 

5 

 Favorable

Political Structure

 

 

 

3

 

 

In three levels

Judicial System

 

2

 

 

 

Supreme Court Council

TOTAL

 

Current legislation home market

*********************

 

 

 

 

 **********************

European/international legislation

*********************

 

 

 

 

 **********************

Employment law

Everyparty's rights under the Labour Law but it cannot remove or reduce any.

 

 

3

 

 

Employment under UAE Law No. 8 of 1980 as amended (the Labour Law)

Consumer protection

 

 

 

 

4

 

Consumer protection Law In UAE.

Industry-specific regulations

 *********************

 

 

 

 

***********************

Ecological/environmental Law

 

 

 

3

 

 

TOTAL

48

 

Economical Factor

 

PESTLE Analysis Factor

Great Threat

1

2

3

4

5

Great Opportunities

Home economy situation

 

 

 

 

4

 

Aiming to way out from the recessions.

Home economy trends

 ************

 

 

 

 

*********************

Overseas economies and trends

 ************

 

 

 

 

*********************

General taxation issues

 

 

 

 5

 Not high

Seasonality/weather issues

************

 

 

 

 

 *********************

Market and trade cycles

*********************

 

 

 

 

 ********************

Specific industry factors

 

 

 

 

 5

Industries are high

International trade/monetary issues

*************

 

 

 

 

 *********************

Disposable income

 

 

 

 

 

5

UAE receive the highest disposable income in the world averaging more than US$220,000.

Job growth/unemployment

Unemployment rate unlikely to rise in the UAE

1

 

 

 

 

 

Interests and Exchange rates

 

 

 

 

 

5

The best exchange rates are in UAE

Tariffs

 

 

4 

 

 Tariff rate is not high

Inflation

 

 3

 

 

Inflation rate in UAE will come down to 3.5 in this year.

Consumer confidence index

 ***********************

 

 

 

 

**********************

Import/export ratios

 ***********************

 

 

 

 

**********************

Production level

 ***********************

 

 

 

 

**********************

GDP/GNP

 

 4

 

 

 Stimulus high

Per Capita Income

 

 

 

 

 

5

high

TOTAL

41

 

Social factor

 

PESTLE Analysis Factor

Great Threat

1

2

3

4

5

Great Opportunities

Consumer attitudes and opinions

 

 

 

 

 

5

Extremely high in UAE

Media views

 

 

 4

 

 High media views in UAE

Law changes affecting social factors

************

 

 

 

 

 *********************************

Consumer buying patterns

 ************

 

 

 

 

**********************************

Ethnic/religious factors

************

 

 

 

 

 **********************************

Advertising and publicity

 ************

 

 

 

 

**********************************

Ethical issues

************

 

 

 

 

 **********************************

Demographics (age, gender, race, family size,)

 

 

 

3

 

 

High demographic gap in UAE

Lifestyle changes

 ***********

 

 

 

 

**********************************

Population shifts

 

 

 

 

 

5

Remain very high in UAE

Education

 

 

 

5

Focusing more for the education

Immigration/emigration

 ***********

 

 

 

 

**********************************

Attitudes to work

 

 

 

 

 

5

High in UAE

Attitudes to people doing certain types of work

 ***********

 

 

 

 

**********************************

Leisure activities

 

 

 

 

4

 

In high standards in UAE

Employee attitudes

 

 

3

 

 

 High performance team in UAE

Management style

************

 

 

 

 

 **********************************

Organizational culture

 ***********

 

 

 

 

**********************************

TOTAL

39

 

 

 

 

Technological factor

PESTLE Analysis Factor

Great Threat

1

2

3

4

5

Great Opportunities

Technology development

 

 

 

 

 

5

Willing to built high technology in UAE

Associated/dependent technologies

******************

 

 

 

 

 ***********************

Consumer buying mechanisms/technology

 ******************

 

 

 

 

************************

Technology legislation

******************

 

 

 

 

 ***********************

Innovation potential

 

 

 

 

4

 

UAE has high potential for innovation.

Technology access, licensing, patents

 

 

 

 

 

5

Patents to protect technological innovations.

Intellectual property issues

 *******************

 

 

 

 

************************

Global communications

 

 

 

 

 

5

Internet communication.

Inventions

 

 

 

 

4

 

UAE healthcare inventions 2007

Innovations

******************** 

 

 

 

 

***********************

Communications

 

 

 

 

 

5

Mainly the land phones and mobiles.

Information technology

 

 

3

 

 

 IT infrastructure

Transportation

 

 

 

 

 

5

Availability of transportation.

Waste removal/recycling

 ********************

 

 

 

 

************************

M-learning

 

 

 

 

 

5

M-Learning is in a developing phase.

E-learning

 

 

 

 

 

5

UAE aims for the E-learning

TOTAL

41

 

 

Environmental factor

PESTLE Analysis Factor

Great Threat

1

2

3

4

5

Great Opportunities

Environmental issues

High environment issues

1

 

 

 

 

.

Environmental regulations

High awareness of regulations in UAE

 

2

 

 

 

Customer values

 

 

 

 

4

 

Positive attitudes towards customers.

Market values

Market values differ from person to person.

 

 

3

 

 

Labor market is highly flexible.

Stakeholder/ investor values

Managers take control over subordinates.

1

 

 

 

 

 

Staff attitudes

 

 

 

 

 

5

Attitudes were excellent

Staff morale

 

 

 

 

 

5

High staff morale in UAE

TOTAL

 

REFERENCING

World Trade Organization. (2006). TRADE POLICY REVIEW: UNITED ARAB EMIRATES (UAE). Available:http://www.wto.org/english/tratop_e/tpr_e/tp263_e.htm. Last accessed 13 September 2009.

Matrix net-on-line Limited. (2000 - 2009). Policies ( Government ). Available: http://www.asiatradehub.com/uae/pol.asp. Last accessed 12 Sep 2009.

Dubai Business Minds. (2004-2005). United Arab Emirates Economy. Available: http://www.dubaibusinessminds.com/artman/publish/united_arab_emirates_econom.shtml. Last accessed 10 July 2009.

(Middle East) Ltd. (1999). Taxation. Available:http://www.infoprod.co.il/country/uae2e.htm. Last accessed 16 Sep 2009.

Trading Economics. (2009). UAE Unemployment Rate.

Available:http://www.tradingeconomics.com/Economics/Unemployment rate.aspx?symbol=AED. Last accessed 23 Sep 2009.

Property Investing Overseas. (2008). the main benefits of investing in property in the UAE. Available:http://www.propertyinvestinguae.com/invest_in_uae_features_and_benefits.asp. Last accessed 20 Sep 2009.

[Online]http://unstats.un.org/unsd/newsletter/unsd_workshops/country/UAE_Country%20Profile.pdf Accessed on 31st August 2009.

[Online],http://www.hsbc.com/1/PA_1_1_S5/content/assets/retirement/2009_for_factsheet_uae.pdf Accessed on 31st August 2009.

[Online],http://unstats.un.org/unsd/newsletter/unsd_workshops/country/UAE_Country%20Profile.pdf Accessed on 31st August 2009.

Referencing

World Trade Organization. (2006). TRADE POLICY REVIEW: UNITED ARAB EMIRATES (UAE). Available:http://www.wto.org/english/tratop_e/tpr_e/tp263_e.htm. Last accessed 13 September 2009.

Matrix net-on-line Limited. (2000 - 2009). Policies ( Government ). Available: http://www.asiatradehub.com/uae/pol.asp. Last accessed 12 Sep 2009.

Dubai Business Minds. (2004-2005). United Arab Emirates Economy. Available: http://www.dubaibusinessminds.com/artman/publish/united_arab_emirates_econom.shtml. Last accessed 10 July 2009.

(Middle East) Ltd. (1999). Taxation. Available:http://www.infoprod.co.il/country/uae2e.htm. Last accessed 16 Sep 2009.

Trading Economics. (2009). UAE Unemployment Rate.

Available:http://www.tradingeconomics.com/Economics/Unemployment rate.aspx?symbol=AED. Last accessed 23 Sep 2009.

Property Investing Overseas. (2008). the main benefits of investing in property in the UAE. Available:http://www.propertyinvestinguae.com/invest_in_uae_features_and_benefits.asp. Last accessed 20 Sep 2009.

[Online]http://unstats.un.org/unsd/newsletter/unsd_workshops/country/UAE_Country%20Profile.pdf Accessed on 31st August 2009.

[Online],http://www.hsbc.com/1/PA_1_1_S5/content/assets/retirement/2009_for_factsheet_uae.pdf Accessed on 31st August 2009.

[Online],http://unstats.un.org/unsd/newsletter/unsd_workshops/country/UAE_Country%20Profile.pdf Accessed on 31st August 2009.

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