Profile of the United Arab Emirates
The United Arab Emirates (UAE) is a country in Western Asia, located on the eastern side of the Arabian Peninsula bordering Saudi Arabia and Oman, as seen in Appendix 3. The country’s capital is Abu Dhabi, but Dubai is the largest city. The country’s primary language is Arabic, which is the official language taught in schools, as depicted in Figure 1.
The nationality of the UAE is Emirati, and the native people there use the Gulf Arabic dialect that is similar to and widely used in surrounding countries (Al Habbash et al., 2021). Various dialects such as Pashto, Hindi, and Persian are widely used in the UAE. However, the country has witnessed an increased number of English speakers there due to civilization and assimilation.
The UAE has an area of 83600 km2, which is equivalent to 32300 m2, and takes 114th on the list of global countries and their dependency on land, water, and general area (Briney, 2019). The country is one of the most popular nations in the world due to Middle Eastern culture, which gives a glimpse of how Arabian perspectives are practiced. The UAE is a promising country for business expansion due to its economic, cultural, and political elements that enable commercial undertakings as long as they blend in with the country’s existing cultural and business metrics. The presence of oil reserves, English-speaking population, regulation of trade by the government and the Central Bank of the UAE, Existence of imports and export commodities, the hospitality of Emiratis, and the country’s low inflation level guarantee high returns on investment.
The UAE has shown a unique culture regarding contemporary aspects of life. The country has demonstrated distinct and unique traits that represent Arabic culture in terms of culture and traditions. For example, from a culinary perspective, Arab coffee is served in Dallah, a pot used to serve guests as a measure of hospitality (Rizvi, 2018). It is deemed inappropriate if a person declines to be welcomed in a hospitable gesture in the country. The UAE has a falconry culture where Saqr is assumed to symbolize bravery, elegance, and strong will (Rizvi, 2018).
Marriage is essential in the UAE, where marrying outside the same kinship is not recommended. The Laylat Al Henna night is undertaken during weddings, showcasing artistic henna designs to the bride. One of the major marks in terms of cultural affiliation in the UAE is the dress code. The country emphasizes decency, where men wear Kandura traditional dress, mostly white, but others wear brown, beige, and grey (Rizvi, 2018). Gutras and Shemaghs are worn on the head, which protects from sun scorching and aesthetic value, as seen in Figure 2 in part below.
The primary currency in the UAE is the dirham, as seen in Figure 3, which is notated as AED. The dirham is subdivided into various denominations of 1,5,10,50, and 100 (Sunil Kumar et al., 2019). The major controller of currency is the UAE Central Bank, which regulates other banks.
In 1976, the governing board currency in the country minted various commemorative coins that celebrated different occasions and leaders of the country (Sunil Kumar et al., 2019). The coins are frequently used in the UAE, and the currency has an inflation rate of 2.5% and is pegged to the US dollar, where $1 is equivalent to 3.6 AED (Sunil Kumar et al., 2019). The country’s currency is essential in trade and is an important community aspect.
Part of the country’s culture is seen in artistic elements, which are known for integrating Persian, Arabian, and Islamic architecture. Popular buildings such as Burj Khalifa, Souk Madinat, and Dubai Mall show exemplary architecture in the UAE. The country’s top religion is Islam, with more than 76% of the population being of the Muslim faith. Hinduism, Christianity, Judaism, and others are practiced as well (Donnelly, 2023). Table 1 shows the religious distribution of the country’s population.
Table 1 – Religious Demography in the UAE.
Regarding governance, the UAE has a federal presidential elective monarchy protected by the country’s constitution and law. The monarchy is formed from the framework of seven emirates: Abu Dhabi, Ajman, Al Quwain, Umm Quwain, Fujairah, Ajman, Ras Al Khaimah, and Sharjah (Omar et al., 2022). A ruler is in charge of an emirate, where they form the Federal Supreme Council (FSC). The executive and head of government in the UAE is the Ruler of Dubai, Sheikh Mohammed bin Rashid, who serves as prime minister, and the Ruler of Abu Dhabi is the head of state and president (Omar et al., 2022). That shows how the government is structured in terms of its roles in the UAE.
Under the provisions of the country’s constitution, each emirate has considerable powers such as control of minerals, mainly oil, revenue allocation, and order in the society. The FSC has its authority defined under Article 47 of the UAE constitution, which includes formulating general policy, legal statutory, ratifying federal laws, and regulating international treaties, among other key roles (Omar et al., 2022). FSC has 40 members with advisory powers, 20 of whom are indirectly elected by 33% of Emirati citizens who have voting privileges in electoral colleges (Saouli, 2020). The rulers appoint the rest without any specific protocols due to partisan constraints.
There is the federal judiciary, which is constitutionally an independent body. The judiciary has Federal Supreme Courts where five judges are appointed to head the arm of government and mediate disputes that may be inter-emirates. The political parties in the UAE are banned through the constitution. Still, political reforms are welcomed, such as the UAE Government Strategy set in 2007 to protect the country from social, economic, and political sabotage (Saouli, 2020). The strategy is responsible for meeting global financial, infrastructure, and justice standards. The government of the UAE is coordinated to improve the lives of its people.
The UAE and International Business
The UAE is a strategic hub with business-friendly areas that have translated into economic development in the country. As of 2020, the country’s GDP was $359 billion, reflecting its richness in natural resources since it has 10% of the total world oil supply and stands at number five in terms of natural gas reserves (Sharaf, 2023). The role of the UAE in international trade includes global, regional, and bilateral agreements that help regulate business with other countries in the UAE. For example, through the Gulf Cooperation Council (GCC), the country has reached commercial agreements with many countries, boosting international trade (Said, 2018). Other international organizations where the UAE affiliates include the Arab League, United Nations (UN), and Organization of Petroleum Exporting Countries.
The major imports in the UAE are machinery, vehicles, and food. The export includes crude oil, aluminum, natural gas, and many others, and data is shown in Appendix 1 (“United Arab Emirates (ARE) exports, imports, and trade partners, 2021”). Figure 5 shows the UAE’s export and import data, supporting the idea that the country is an important segment in international business.
Barriers to Foreign Ownership in the UEA
The country has experienced trade barriers that include tariff and non-tariff perspectives. As a result, foreign ownership in the UAE has been slow due to constraints in import licensing, government procurement procedures, intellectual property rights, and agent distributor responsibilities. For instance, it remains difficult to trade in the UAE without a local agent. A trader must make comprehensive due diligence on the prospects of commercial agents and choose the agencies that do not lead to any liability.
The country requires that foreign direct investment (FDI) agreements be drafted to comply with Commercial Agency Law (Said, 2018). As a result, foreign ownership has been dragged by these underlying factors that need legal and contractual awareness. Appendix 2 shows the UAE’s growth and compares it with the global perspective.
Other factors hindering foreign ownership include inflation and economic sabotage in the UAE. The inflation rate as of 2023 is 3.61% due to a decrease in oil prices in the global market, whereby the surplus led to skyrocketing of trade value measures (Said, 2018). The economy was sabotaged by the emergence of the coronavirus in 2019, whereby there was low demand for fuel since most people were not traveling, putting the state of trade at stake.
The lack of diversification in the economy has led to a monopoly of oil despite tourism growth in the recent past. Regarding taxation, the UAE has a 9% rate on taxable profits over AED375000 (Al Habbash et al., 2021). As a result, the country has become one of the most competitive in corporate tax rates.
The goal is to meet international standards in taxation factors. In 2003, foreign investors experienced new tax rules that would be effective in June 2023 under Federal Law No. 47 of 2022 (Al Habbash et al., 2021). Foreign companies must prepare for intensive tax reporting occasions in the country. Corruption and lack of ethics are other contributing factors to foreign ownership drawbacks.
Cultural Issues to Consider
Doing Business in the UAE requires the integration of cultural aspects to fit into the country’s heritage. The first factor is respect for religion, which Islam, the official language, must abide by to ensure effective metrics in doing business (Rizvi, 2018). For example, during Ramadhan, a business may be required to have short working hours to pave the way for members to undertake religious customs. A business needs to respect traditions, such as refraining from drinking in public and altercations that may demean someone’s dignity.
Additionally, a business needs to understand the two languages used in the country: Arabic and English. Business is negotiated in formal settings such as the board room, where a company may engage another in collaborative aspects that may yield sales or boost returns. Business etiquette requires addressing people as ‘Mr.’ or ‘Ms.’ during the first meetings (Rizvi, 2018). When discussing formally, men must wait for women to offer a hand for a handshake.
People from the UAE are punctual when it comes to time management in business operations. Business is open from Monday to Friday, with employees working eight hours from 7.30 to 3.30 pm and 7.30 to 12.00, respectively (Omar et al., 2022). The UAE is ranked as one of the leading countries in the world in terms of gender equality. World Economic Forum 2022 released a Global Gender report indicating that the UAE had given women the capacity to be a fundamental part of businesses and in societal metrics (Sunil Kumar et al., 2019). However, the issue has taken time to get the required attention since males prefer to take on business roles compared to their female counterparts.
Currently, many women entrepreneurs have been empowered through space and time allocated for them to grow their ventures. Examples include Anuscha Iqbal the founder of Spotii, Humaira Khan who founded Walzay; and Mariam Farag (Sunil Kumar et al., 2019). Arabs use liberal gestures more if they are excited by a matter. Men use more gestures than women, and greetings are done respectfully, whereas, after the hands, the right hand is placed on the heart or chest as a symbol of harmony.
However, there are various non-verbal cues to avoid in the UAE. The Arabic social code strictly prohibits the public display of intimacy between males and females. One is not allowed to have prolonged linking of arms or any gesture of affection, such as kissing, while in a public place. Additionally, while speaking, there should be space between people, as that is a sign of respect (Saouli, 2020). Lastly, it is important to avoid pointing at people with a finger, even if one is doing it positively.
In business, education is key, and for that matter, the UAE encourages young people to go to school to get fundamental perspectives that increase their expertise and knowledge power. As a result, the UAE citizens attend government schools without cost (Donnelly, 2023). That applies to public universities such as the UAE University, where enrollment is done every year for students to get a chance to better their knowledge, which plays an integral part in business. There are many graduates in the country who have ventured into technical and non-technical fields.
Analysis of Proposal and Recommendation
Based on what the paper has to enlighten the reader about the UAE, it calls for a holistic approach in determining whether a business can be expanded. Due to the economic, social, and political realms discussed in the paper, it is possible to set up a business and excel in the country. A proprietor is required to understand the requirements keenly to avoid any liabilities in the future (Donnelly, 2023). One of the advantages that makes it possible for a business to thrive in the UAE is the country’s welcoming nature to FDIs through government agencies, as seen in the paper.
Although there may be strict demand before securing space to do business in the UAE, once every stone has been touched, an entrepreneur is expected to make high returns since the country is highly popular when it comes to tourism and exports. The element of oil extraction and the GDP give the country affordable fuel, which translates to a low rate of inflation, as seen in the paper (“United Arab Emirates Trade Statistics, 2020”). The UAE has not been adversely hit by inflation and corruption compared to many countries (Briney, 2019). Therefore, doing business means continued assurance in returns on investment (ROI), which guarantees the sustainability of international trade in the country.
The presence of the English-speaking population in the UAE shows increased adoption of global language standards that facilitate business transactions. It is important to mention that the dollar and dirham have almost similar power in the global economy since the currencies are widely used as a measure of value not only in the Middle East but also in Africa and the world at large (Sunil Kumar et al., 2019). Generally, the country has commendable resources reserved by the Central Bank of the UAE. The global articulation of standards of investments means a foreign business can thrive due to the country’s relationship with giant markets for the commodities transacted every time.
From the understanding of the country, setting up a business there has a high potential for success since the Emiratis are business-oriented people who play a key role in showing foreign investors the way to go regarding product and service development. Thus, despite the underlying barriers on tariff and non-tariff aspects, an entrepreneur is assured of business progress since there are judicial laws that protect commerce under the guidance of the judiciary (Said, 2018). The presence of many commodities for export and import guarantees that a business merchant can align in the market and get significant yields essential for their growth. The proposal should be pursued further by undertaking a benchmark in the country’s top business sites and areas where an entrepreneur needs to go physically and engaging international trade consultants who will help from meeting requirements to the start of the business.
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Appendices
Appendix 1 – UAE Export and Imports Data
Appendix 2 – UAE GDP growth and the world comparison
Appendix 3 – UAE map
