the united arab emirates: the twenty-first century beckons

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507 The United Arab Emirates: The Twenty-First Century Beckons Jim Grant Fatema Shabbir Golawala Donelda S. McKechnie Executive Summary The United Arab Emirates is quickly making its presence known on the world stage; the country is shifting away from its dependence on oil and diversifying into new business sectors such as real estate, tourism, world-class sporting events, finance, and construc- tion. Development supported and encouraged by government, economic policy reforms, streamlined foreign investment regulations, and the multicultural lifestyle afforded to nationals and expatriates are contributing to exemplary growth. Despite uncertainty in the regional political situation, the country is stable and at low risk. In sum, the United Arab Emirates appears intent on attracting businesses from many parts of the world, now and throughout the twenty-first century. © 2007 Wiley Periodicals, Inc. INTRODUCTION The most lucrative business market in the Arabian Gulf region is the United Arab Emirates. The importance of the UAE in the global arena is a product of its strate- gic location connecting the east and the west, its liberal and competitive business environment, and the government focus on diversifying from its dependence on oil sources. Combined, these factors lead to the making of a country wherein the political environment is stable and the economy is growing. As a result, doing business in the UAE offers opportunities to investors and exporters alike. This article is an overview of key elements that relate to doing business in the UAE in the twenty-first century. Included is information about the changing Jim Grant is a professor of marketing and management at the American University of Sharjah. His interests include sales and sales management, sport marketing, and marketing strategy. In par- ticular, he is interested in the application of marketing activities to the rapidly expanding UAE and Arab business practices. Fatema Shabbir Golawala is currently completing her master’s degree in strategic marketing at Uni- versity of Wollongong, Dubai. Her interests include business development opportunities in the UAE, particularly in relation to the government emiratization initiatives. Donelda S. McKechnie is an assistant professor of marketing at the American University of Shar- jah. Her interests include service encounters research (particularly business-to-business context between organizations/institutions and contract workers) services and hospitality, and any cultur- ally diverse topics within the fast-changing and dynamic UAE environment. Thunderbird International Business Review, Vol. 49(4) 507–533 • July–August 2007 Published online in Wiley InterScience ( © 2007 Wiley Periodicals, Inc. • DOI: 10.1002/tie.20155

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The United Arab Emirates: The Twenty-First Century Beckons

Jim Grant ■ Fatema Shabbir Golawala ■ Donelda S. McKechnie

Executive Summary

The United Arab Emirates is quickly making its presence known on the world stage; thecountry is shifting away from its dependence on oil and diversifying into new businesssectors such as real estate, tourism, world-class sporting events, finance, and construc-tion. Development supported and encouraged by government, economic policy reforms,streamlined foreign investment regulations, and the multicultural lifestyle afforded tonationals and expatriates are contributing to exemplary growth. Despite uncertaintyin the regional political situation, the country is stable and at low risk. In sum, theUnited Arab Emirates appears intent on attracting businesses from many parts of theworld, now and throughout the twenty-first century. © 2007 Wiley Periodicals, Inc.


The most lucrative business market in the Arabian Gulf region is the United ArabEmirates. The importance of the UAE in the global arena is a product of its strate-gic location connecting the east and the west, its liberal and competitive businessenvironment, and the government focus on diversifying from its dependence onoil sources. Combined, these factors lead to the making of a country wherein thepolitical environment is stable and the economy is growing. As a result, doingbusiness in the UAE offers opportunities to investors and exporters alike.

This article is an overview of key elements that relate to doing business in theUAE in the twenty-first century. Included is information about the changing

Jim Grant is a professor of marketing and management at the American University of Sharjah. Hisinterests include sales and sales management, sport marketing, and marketing strategy. In par-ticular, he is interested in the application of marketing activities to the rapidly expanding UAE andArab business practices.Fatema Shabbir Golawala is currently completing her master’s degree in strategic marketing at Uni-versity of Wollongong, Dubai. Her interests include business development opportunities in the UAE,particularly in relation to the government emiratization initiatives. Donelda S. McKechnie is an assistant professor of marketing at the American University of Shar-jah. Her interests include service encounters research (particularly business-to-business contextbetween organizations/institutions and contract workers) services and hospitality, and any cultur-ally diverse topics within the fast-changing and dynamic UAE environment.

Thunderbird International Business Review, Vol. 49(4) 507–533 • July–August 2007

Published online in Wiley InterScience (

© 2007 Wiley Periodicals, Inc. • DOI: 10.1002/tie.20155

governance structure, the investment climate, regional politicalunrest, and the latest hot economic sectors.

The United Arab Emirates—In BriefThe United Arab Emirates is an oil-rich nation; 80% of the nation’srevenues is derived from oil sources. However, the government is try-ing hard to diversify the economy from being oil-dependent (Bhat-tacharya, 2006). Other sectors, such as tourism, real estate, finance,and construction, are playing a more significant role in the country’sdevelopment. Pursuing this strategy is necessary for the whole coun-try to grow as only one of the seven emirates—Abu Dhabi—has vastoil holdings.

The wealth from oil is depicted in the relative affluence of the popu-lation. The 2005 census determined that the UAE population is 4.1million (Salama, 2006); 20% are UAE nationals—51% under 20 yearsof age—and 80% are expatriate. The government is undertaking emi-ratization programs, which are largely intended to provide, regulate,and promote employment for UAE nationals, particularly the young.

Of the seven emirates, Dubai is certainly the most prominent. With acurrent population of 1.3 million (“Dubai Population Soars,” 2006),it is becoming increasingly well known for its world-class sportingevents, shopping festivals, and high-profile tourist attractions like theski hill at the Mall of the Emirates. Dubai’s marketing efforts areattracting global attention to the emirate, while also creating aware-ness about the country.


The United Arab Emirates was constituted on December 2, 1971.The country is set up as a federation of seven emirates or states. AbuDhabi is the capital. The others include Dubai, Sharjah, Ajman,Fujeirah, Umm Al Quwain, and Ras Al Khaimah. The UAE is a par-tial monarchy headed by His Highness Sheikh Khalifa bin Zayd Al-Nahyan. Sheikh Khalifa succeeded his father, the late Sheikh Zayd, inNovember 2004.

The country was principally set up as a Sheikhdom, with establishedpositions of president, vice president, a Council of Ministers, aSupreme Council of Rulers, and a National Assembly. Under theconstitution, each of the emirates holds substantial power to ruleindependently from the other six, and each allocates a portion of its

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The United ArabEmirates is anoil-rich nation;80% of thenation’s rev-enues is derivedfrom oil sources.

revenues to the country’s central budget. The current politicalframework includes five federal authorities: the Federal SupremeCouncil, the president of the union and the vice president, the Cab-inet (Council of Ministers), the Federal National Council, and theFederal Judiciary.

The Supreme Council of Rulers is the highest federal authority in thecountry: “It has the power to decide policy, elect the federal Presi-dent and his deputy, admit new members to the federation, andappoint and dismiss the Prime Minister and the judges of the FederalSupreme Court” (Economist Intelligence Unit [EIU], 2006a, p. 7).

The Supreme Council elects the Cabinet that is headed by the primeminister, a position currently held by Sheikh Mohammed bin RashidAl-Maktoum, the vice president of the UAE and the ruler of Dubai.In 1994, Sheikh Mohammed was appointed Crown Prince of Dubai.In 2006, Sheikh Mohammed became ruler after the untimely passingof his brother Sheikh Maktoum, who had held the position previ-ously. Sheikh Mohammed has been a driving force behind the eco-nomic development of the country, particularly Dubai, as the UAEmoves to reduce the level of dependence on oil and diversify intomanufacturing, tourism, trade, logistics, and services. The Cabinet“initiates legislation . . . [and] also approves the federal budget andoversees the federal government” (EIU, 2006a, p. 8).

Before the death of Sheikh Zayd in November 2004, the first Cabi-net reshuffle since 1997 took place. Although the changes wereannounced by Sheikh Khalifa, it has been speculated that they weresuggested by Sheikh Maktoum. Sheikh Maktoum, in his position asvice president of the UAE and ruler of Dubai, had been able to incor-porate liberalization by appointing “younger figures into the higherranks of the bureaucracy” (EIU, 2005, p. 8). One of the most impor-tant changes has been the appointment of Sheikha Lubna Al-Qassimito the cabinet position of Minister of Economy and Planning.Sheikha Lubna continues to “promote a progressive economicagenda, built around economic liberalisation, diversification andenhancing the role of private sector” (EIU, 2006b, p 8). SheikhaLubna’s appointment is a new direction for the traditions that havetypically guided the business environment in the UAE, as well asbeing a step forward for women entering the workforce and takingup key management roles.

Parliamentary elections for 20 seats on the 40-seat Federal NationalCouncil (FNC), the first in the UAE, were held in December 2006.

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One of the mostimportant

changes hasbeen the

appointment ofSheikha Lubna

Al-Qassimi to thecabinet position

of Minister ofEconomy and


The remaining 20 representatives were appointed by the rulers in therespective emirates. In total, Abu Dhabi and Dubai have eight seatseach; Sharjah and Ras Al Khaimah have six seats each; and Ajman,Umm Al Quwain, and Fujeirah each have four seats. According toSheikh Khalifa, the objective is that all members of the FNC will beelected in the future (“Ushering UAE,” 2006). Successful candidatesincluded a woman elected to represent Abu Dhabi.

The UAE Federal Judicial System has three levels—Court of FirstInstance, Court of Appeal, and Court of Cassation. All emirates havethe right to maintain a separate court system, under the UAE Con-stitution. Only Dubai and Ras Al Khaimah have done so. The Courtof First Instance has three divisions—civil, criminal, and Shariah.Marriage, divorce, inheritance, and, more recently, drug offenses andoffenses involving minors fall under Shariah law jurisdiction. Courtsessions are conducted in Arabic. Decisions are made by a singlejudge or three-judge panel rather than a jury (Ahmed, n.d.). TheCourt of Cassation is the highest court and hears cases that have dis-putes based on matters of law. Dubai has a three-tier judicial systemsimilar to the three federal levels (Consulate General of the UnitedStates, 2005).

Despite the UAE having a balanced legislative and judicial system,the most significant policy matters are made by the ruling families ofthe seven emirates. Difficulties potentially result from the “consider-able scope for inefficiency as instances of incompetence, corruptionor excessive red tape are hidden from public view and are rarely opento challenge” (EIU, 2006a, p 8). A democratic process might neverbe fully adopted. Yet, business-state relations will play an increasinglymore important role in continued economic development. The UAEhas learned from Kuwait’s experience not to let politicization nega-tively affect economic growth (Moore, 2004).

Regional ConflictsThe various countries in the area, while mixing to some degree, stillhave a strong population majority in one Muslim branch or another.Additionally, within geographic areas of countries, there arestrongholds of Muslim-faith sects. Current conflicts typically engagediffering branches of the Muslim faith—Shi’ite and Sunni.

The depth of feeling toward ethnocentric behavior is not well under-stood by the average non-Muslim. Quickly hard feelings can breakdown into armed conflicts within some nearby countries. The UAEproximity to nearby volatile nations makes it more vulnerable. Addi-

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Despite the UAEhaving a bal-anced legislativeand judicial sys-tem, the mostsignificant policymatters aremade by the rul-ing families ofthe seven emi-rates.

tionally, any conflict that would threaten the Strait of Hormuz—thenarrow entry point to the Gulf—has the potential to upset the UAEtrade and shipping.

Regional issues such as the situation in Iraq could affect the UAE for-eign policy agenda. The UAE government is pro-America. Any wors-ening of the Iraqi situation could alter foreign investment percep-tions, undermine growth progression in economic sectors such astourism and construction, and/or create unrest within the region.

The recent posturing by the Iranian leadership has fostered concernabout what would happen if armed conflict broke out due to Iran’snuclear development. The aggressive and verbose statements beingreported in the media have generated speculation about Iran’s actualpurpose for continuing its nuclear enrichment agenda despite receiv-ing cautions from the international community. Attracting interna-tional disfavor does not appear to matter to the current Iranian lead-ership. However, change may come from the grassroots levels withinthe country, as the Iranian citizens seem to be expressing a desire forless aggressive behavior. Indicators include the December 8, 2006,election results, where votes for the reformist candidates upset thehardliners. Voter turnout was much higher than in previous years,which suggests the desire for more moderate policies.

Iran, regardless of whether it develops a more powerful weapons baseor builds a perceived greater military force will continue to influencethe region. Other Gulf Cooperation Council (GCC; Saudi Arabia,Bahrain, Kuwait, Qatar, Oman, and the United Arab Emirates) pow-ers are closely watching Iran’s actions, as are the United States andBritain. The UAE continues to maintain its well-equipped internalsecurity structure, which gives assurances to the population that thecountry is protected. However, decisions about suitable investmentin the UAE or, for that matter, the whole GCC area, may be affectedby Iran’s political stance in the long term. In the short term, the Ira-nian issue has not seemed to lessen the investment appetite for theUAE.


Sheikh Zayd and Sheikh Khalifa of Abu Dhabi and SheikhMohammed and Sheikh Maktoum of Dubai, considered exemplaryand visionary leaders by some, have provided the economy withimmense scope for diversification and expansion in the nonoil sectors.

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Iran, regardlessof whether it

develops a morepowerful

weapons base orbuilds a per-

ceived greatermilitary force willcontinue to influ-ence the region.

Industries that are rapidly expanding include tourism and real estate.The country’s estimated gross domestic product (GDP) for 2006 was559.30 billion dirhams (Dhs) (U.S. $152.4 billion), which is thehighest of the Gulf countries. Dubai alone had nonoil foreign tradeof 523.5 billion dirhams (U.S. $143.4 billion) in 2006, a 9% increaseover 2005. This represented 80% of the country’s total nonoil trade(“Dubai’s Non-Oil Trade,” 2007).

The first step taken toward creating a global, liberal, and competitivebusiness environment was in 1995, when the UAE entered the WorldTrade Organization (WTO). The “WTO agreements [have had] adirect impact on domestic services such as insurance, banking, trans-port, tourism, property, brokerage, investment, construction, com-munications and information, all of which will be required toimprove performance to be able to compete globally” (“Doing Busi-ness in the UAE,” 2006). The WTO extended the UAE certainexemptions from the clause that addressed discrimination in invest-ments made by nationals and non-nationals. Particular industriesaffected included financial services and telecommunications. An esti-mated 30 to 40% of garment manufacturers left the UAE as a resultof WTO reduced import quotas that were introduced in early 2005(Qadir, 2005)

Establishing free trade zones has been a significant step taken by thegovernment to diversify the economy (Moore, 2004). The no-taxpolicy and the relaxed rules for foreign ownership within these zones,combined with the strategic location of the UAE, have enabled thecountry to become a business hub for trade and export. In Dubai,organizations such as Microsoft, located in Dubai Internet City, andCNN, in Dubai Media City, have set up their regional headquartersin the UAE. Dubai continues to be proactive about setting up freetrade zones supported by the success of Internet City, Media City,Healthcare City, Sports City, Aviation City, and Academic City.

The UAE is following the strategy that economic strength derivesfrom trade partnerships and free trade agreements with countriesaround the world (“UAE in Intensive Talks,” 2006). In addition topursuing one-on-one partnerships with various nations such as theUnited States, France, Germany, and South Korea, the UAE is work-ing collectively with the GCC countries to set up agreements for theregion. Mid-2007 is the expected date for finalizing the GCC tradedeal with the European Union (Elewa, 2007a). Additionally, theUAE will participate in the GCC talks with China, Pakistan, India,Turkey, and the European Free Trade Association (Iceland, Liecht-

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The first steptaken towardcreating aglobal, liberal,and competitivebusiness envi-ronment was in1995, when theUAE entered theWorld TradeOrganization.

enstein, Norway, and Switzerland). The 2004 export and importrankings reflect the importance of trade. The leading partners for theUAE nonoil exports were India, Iran, Saudi Arabia, and China. Tradewith India represented 21.5% of the nonoil exports and 15.7% of theimports. China imports were second (11.7%), Japan was third (9.8%),and the United States ranked fourth (8.3%).

The UAE is currently negotiating a free trade agreement with theUnited States, although finalizing the document has recently comeunder threat (“US Trade Deal,” 2007). Concerns from the UAE sideinclude the seven emirates’ varying policies for granting concessionsrelated to oil and gas exploration and foreign investment. Any agree-ment potentially may have to include subagreements signed with theindividual emirates. On the U.S. side, the people’s reaction to the DubaiPorts purchase of the American-based shipping/ports assets from P&Owas a blow to the talks. Additionally, the shift in political ideology whenthe Democratic Party gained control of the U.S. House of Congress andSenate, in late 2006 elections, may impact negotiations as the term ofthe supportive Bush administration draws to a close.

Although talks with the United States are facing impediments, dis-cussions with China for a bilateral free trade agreement are movingforward (“Free Trade Agreement with China,” 2007). The UAEexports would include real estate development expertise—concepts,financing, and construction. Imports from China to the UAE arealready significant. The hub for Chinese products in Dubai is the 1.2-kilometer Dragonmart, which houses numerous wholesale and retailestablishments, in International City. Success has followed Dragon-mart since its opening in December 2004. More than just a center forChinese commerce, it has become a landmark and tourist attraction.

The Abu Dhabi government initiated steps toward privatization inApril 1997. Power and desalination projects now operate as Indepen-dent Power Projects (IPPs). Privatization is expected to considerablywiden the investment opportunities for domestic as well as for foreigninvestors even though, to date, businesses outside the free trade zonesstill require 51% ownership by nationals. Undertaking privatizationintroduces considerations about wasta in Arab culture. According to a2006 article in this journal, “Wasta involves social networks of inter-personal connections rooted in family and kinship ties and implicatingthe exercise of power, influence, and information sharing throughsocial and politico-business networks” (Hutchings & Weir, 2006, p.143). The negative connotation applied to wasta is that it is the pref-erence given to family and friends to circumvent rules (Dobie, Grant,

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Although talkswith the United

States are facingimpediments,

discussions withChina for a bilat-

eral free tradeagreement are

moving forward.

& Knudstrup, 2002). Certainly, those who do not understand theimplications of wasta are disadvantaged. The “who you know” prac-tices can take precedence over established laws and regulations. Withprivatization being given the go-ahead, inefficient bureaucracies andcorruption in the public sector that may have resulted from decisionsmade by wasta reasoning, may be moderated or reduced by a gradualinculcation of international business practices. The intent of privatiza-tion is to increase productivity levels as businesses move to operate atoptimum levels, efficiently and effectively.

To encourage foreign ownership prospects, the Dubai InternationalFinancial Centre (DIFC) was established in 2004 to serve Dubai, theUAE, and the region. The financial sectors represented in DIFCinclude banking services, capital markets, asset management, andIslamic finance. Some of the world’s biggest investment firms and bro-kerage houses—JP Morgan and Credit Suisse—have located branchoffices in the DIFC free trade zone, which has added credibility to thestrength of the UAE economy. In September 2005, the Dubai Inter-national Financial Exchange (DIFX) began trading. Regulations are tointernational standards, with disclosure and reporting rules similar toWestern markets. Currently, the market trades in dollars, with theUAE dirham pegged to the U.S. dollar. However, this may change ifone currency is adopted in the GCC, with 2010 being a possible date,or if the dirham is aligned with another currency, such as the euro, fol-lowing concerns that the value of the dollar is weakening.

The branding of Dubai has been economically lucrative. Before2010, U.S. $275 billion will be spent in marketing the emirate(Jones, 2007). The view promoted and typically held is “Dubai as aworld-class tourist destination.” By 2005, 5 million visitors wereattracted annually to the 270 hotels and 30 shopping malls (Lee,2005). Behind the scenes, Dubai has established a strong position inthe business world. Growth has demanded improved infrastructure(Jones, 2007). Almost U.S. $200 million is being invested toupgrade roads. An estimated U.S. $4 billion is the cost of the newmetro transit system, which will be completed in mid-2009. U.S.$5.8 billion is being spent on expanding the Dubai airport, in con-junction with the U.S. $9.8 billion price tag for the new Jebel Ali six-runway airport, which is under construction. Branding Dubai hasbecome big business.

EmiratizationThe UAE government is promoting entrepreneurial activities andemployment among young nationals (Jarrah, 2006). The emiratiza-

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To encourageforeign owner-ship prospects,the Dubai Inter-national FinancialCentre wasestablished in2004 to serveDubai, the UAE,and the region.

tion drive, with the help of organizations like the National HumanResource Development and Employment Authority (TANMIA), isencouraging companies to hire the UAE nationals. Emiratization isnoticeably changing the banking and finance sectors, where 50% ofthe workforce is expected to be nationals by 2007.

The UAE is committed to providing the nation’s youth with inter-nationally equivalent education. Currently, there are 1,238 publicand private schools and 48 higher education institutions in the coun-try. The literacy rate for young adults—15–24 years—is approxi-mately 91.4% (Jarrah, 2006). The government is taking steps toestablish a knowledge economy that is intended to become the back-bone of the nation’s economy.

Education and innovation are expected to play a major role inincreasing productivity and competitiveness. Innovation-based initia-tives that assist in the growth of the economy and nationals’ employ-ment include the Dubai Techno Park, Dubiotech and Research Park,Dubai Silicon Oasis, and other technology, commerce, and mediafree (TECOM) zones. The TECOM zones have led to a significantrise in the number of information and communication technology(ICT) jobs, which was expected to be 45,000 by the end of 2005(Jarrah, 2006). The skills required are database development andadministration, technical support, programming and software engi-neering, and network design.

Despite the government programs and best efforts, a major obstacleyet to be overcome is that the national population seeks high wagesand managerial positions while avoiding labor menial jobs. In theinsurance sector, according to TANMIA, factors that impeded emira-tization include the lack of basic English language, communication,and computer competency skills. According to the National Bank ofDubai (2004), “Long hours of work, one-day weekend, foreign workenvironment and availability of better and more attractive workopportunities in other sectors were cited as reasons for the ‘lack ofnationals’ interest’ to work in the sector.”


Four laws that can affect the organization and the operations of busi-ness being conducted within the country are the (1) Federal Compa-nies Law, (2) Commercial Agencies Law, (3) Federal Industry Law,and (4) Government Tenders Law.

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Education andinnovation are

expected to playa major role inincreasing pro-

ductivity andcompetitiveness.

The Federal Companies Law applies to limited liability companies andto branch offices of foreign companies. Business may establish a pres-ence in the country as a limited liability company (LLC), whichrequires a national to have 51% ownership, although profits may bedistributed differently. Alternately, foreign investors may choose to setup a branch or a “representative” office. Either requires the appoint-ment of a UAE national as agent who will have no financial interest inthe business but will be paid an annual fee. Alternately, a company mayset up in a free trade zone. Attractive incentives offered to attract cor-porations to the various FTZs include “100 percent foreign ownershipof the enterprise; 100 percent import and export tax exemptions; 100percent repatriation of capital and profits; no corporate taxes for 15years, renewable for an additional 15 years; no personal income taxes;and assistance with labor recruitment and additional support services,such as sponsorship and housing” (“Getting Started,” 2006).

The Federal Companies Law is regulated by the Ministry of Econ-omy and Commerce. A business being established must register inand follow the regulations of the respective emirate. Procedures forobtaining a business license will vary. Applications made to the AbuDhabi Municipality require approval from other government depart-ments. In Dubai, the Department of Economic Development (DED)handles branch office licensing and exempts certain services/activitiesfrom requiring ministry approval. Dubai has announced an initiativefor easing transaction procedures while increasing DED worker pro-ductivity. The proactive efficiency measure is targeted “customerfirst” to meet the needs of the private sector.

The Commercial Agencies Law applies to the relationship betweenforeign investors and the local agent or distributor. The agent/dis-tributor must be a UAE national or a business wholly owned by aUAE national. The law stipulates terms and conditions such as exclu-sivity of the relationship, compensation, and termination actions. TheJuly 2006 amendment modified the regulations about relationshipfixed terms, termination and registering an agency with the Ministry.According to Sheikha Lubna Al-Qassimi, “a revision of the Com-mercial Agencies Law was required to bring it fully into conformitywith the laws and regulations of other jurisdictions as far as concernscommercial contracts and exclusive agency rights, to improve trans-parency in the agent-principal dispute resolution process through thereferral of disputes to the courts and to ensure that price stability ismaintained through the enforcement of price controls with respect toexclusive agencies” (“Khalifa Issues,” 2006, p. 19). The CommercialAgencies Law also applies to franchise relationships (Ahmed, n.d.).

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Dubai hasannounced aninitiative for eas-ing transactionprocedures whileincreasing DEDworker produc-tivity.

The Federal Industry Law relates specifically to industrial projects.Again, national ownership must be at least 51%. Alternately, shouldthe business have a board of directors, the majority must be UAEnationals. Industries exempted include those that engage in theextraction and refining of oil, gas, and other natural resources. Otherexemptions may be extended to firms with small capital investmentor projects that are convened under special laws and agreements(UAE Investment Guide, 2004).

The Government Tenders Law sets out the regulations for any sup-plier or contractor wishing to tender a bid for public-sector work orto sell to the federal government. The “seller” must be a UAEnational individual or wholly owned business, a foreign businessentity with 51% national ownership or a foreign business entity thatis represented by a national agent. The law is applied federally ratherthan to individual emirates’ contracts. Defense procurement isexempted from the law, as are some specialized goods and servicesthat are excluded on a case-by-case basis (Dark, 2004). Regulationsfor doing business with the Abu Dhabi or Dubai emirates are similarto the federal situation described.

The Consumer Law came into effect in November 2006. It setsdown the regulations and procedures to protect consumers in theUAE from suppliers and manufacturers and provides purchasers withrecourse actions, if necessary (Al Tamimi & Kelly, 2006).

Tax LawAccording to Al Tamimi & Company, “There is no federal tax legisla-tion on the taxation of corporations in the UAE; instead each emiratehas its own tax” (n.d., p. 9). Within the Abu Dhabi emirate, oil and gascompanies are taxed at a rate that is specified in concession agreements,branches of foreign banks are taxed at a flat rate on annual profits, anda flat-rate service tax is applied to hotels and entertainment. Abu Dhabihas a sliding-scale formula for an incorporated business based on tax-able income. This is offset by the credit aggregate of oil entitlement.Dubai has a similar percentage scale formula for businesses. However,in practice, no tax is paid. In Dubai, oil companies are taxed at 55% ofUAE taxable income and according to concession agreements; bankspay 20 percent on UAE taxable income. Personal income taxes are notlevied, and double taxation treaties have been signed with a number ofcountries. Businesses located in the free trade zones are exempted.

Property taxes vary across emirates (Al Tamimi & Company, n.d.)and are generally a percentage of annual rents. In Abu Dhabi, the rate

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The GovernmentTenders Law

sets out the reg-ulations for anysupplier or con-tractor wishingto tender a bid

for public-sectorwork or to sell tothe federal gov-


is approximately 10% for businesses and 5% for residences. Dubaicharges residential tax based on employment status. Banks are levied15% property tax, whereas other business endeavors pay 5%. For res-idential tenants in Sharjah, the annual property tax is 2%.

The UAE joined the GCC Customs Union in January 2003. A 5%tariff was established on 1,500 imported items from nonmembercountries. Imports of liquor, which are available in all emirates exceptSharjah, are subjected to 50% custom duty. Even at that, prices areconsiderably lower than in many Western developed countries.Tobacco is levied a 100% tariff. Duty exemptions are in place formore than 50 food and agriculture items (National Bank of Dubai,2006).

Labor Law and EmiratizationAs mentioned earlier, the UAE has mandated the hiring of nationalsthrough government emiratization policies. Current regulationshave targeted certain industries—banking and public relations—withother sectors, education being one, expected to follow. Quotas setby the government for employment in various sectors seem bullish,as the national demographic population may not be sufficient to ful-fill the requirements (Golawala, Ganesh, Grant, & McKechnie,2006).

Steps taken by the government to implement emiratization may leadto changes in the ways that companies are managed. For instance,work hours, compensation, benefit plans, and even leadership strate-gies may be altered to accommodate a workforce that has an ever-increasing number of national employees. Currently, national womenbenefit from regulations that shorten their workday and giveextended time off for them to be with their children. Women of otherethnic backgrounds and nationalities do not receive the same conces-sions. The likelihood that emiratization will be successful in “keepingproductivity levels unchanged between migrant [expatriate] andnative workers [nationals]” is considered to be unlikely in the com-petitive sector (Toledo, 2006, p. 25). Toledo concluded that “theprogram has better prospects in the short run if implemented inimperfectly competitive industries, such as telecommunication, con-struction, utilities, shipping, cab services, limousines services and soon” (p. 25). The study led to secondary questions of whethernational business owners would be willing to sacrifice financial gain—revenue and profits—to make jobs available to nationals who do notfulfill the productivity requirements.

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Steps taken bythe governmentto implementemiratizationmay lead tochanges in theways that com-panies are man-aged.

As a result of the ongoing focus on employment issues, the labor lawsin the country have yet to be fully established. The government rec-ognizes the need to institute necessary procedures that will regulateand enforce the laws. In June 2004, the Cabinet approved a memothat would allow initial setup of labor unions and associations. Dubaigovernment employees, nationals and non-nationals, received a boostin late 2006 when new wage standards were introduced: governmentworkers—nationals and non-nationals—will receive equal pay, withthe exception that nationals will also receive a special allowance andtheir employment will be guided by a minimum wage standard of4,250 dirhams per month (Constantine & Al Lawati, 2007).

Intellectual Property Rights The UAE leads the region in the protection of intellectual propertyrights and supports the Agreement on Trade-Related Aspects ofIntellectual Property (TRIPS) as part of its WTO membership. In2002, the government enacted the copyright law and amended thetrademark law. The copyright law includes substantial penalties forinfringement on the rights of a copyright holder (Mackay, 2005).The trademark law protects famous trademarks that may be used inthe country, requiring that original owners grant permission for use(Madi, 2004, p. 25). The government is committed to “amend andexpand the scope of landmark copyright, trademark and patent laws”(UAE Investment Climate Statement, 2006, p. 6).

Dispute SettlementPunwar and Anani (2006) reported, “On 19 November 2006 theUAE formally acceded to the New York Convention on the Recog-nition and Enforcement of Foreign Arbitral Awards and the terms ofthe Convention became law throughout the UAE. The new law con-firms and strengthens the UAE commitment to respecting writtenagreements in which parties have provided that they will refer theirpresent and future disputes to private arbitrators rather than thecourts of the UAE or any other state” (p. 8). This landmark movejoins the UAE with 138 other overseas jurisdictions. Arbitrationawards issued in the UAE will be enforceable in other member coun-tries and vice versa.

Locally, the Dubai Chamber of Commerce and Industry formed theindependent Dubai International Arbitration Center in 2004. Mat-ters of dispute fall under the UAE Civil Procedure Code, as no for-mal legislation guiding the use of arbitration has yet been established.Despite this, the center “aims to bring international standards of arbi-

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The UAE leadsthe region in the

protection ofintellectual prop-

erty rights andsupports the

Agreement onTrade-Related

Aspects of Intel-lectual Property

as part of itsWTO member-


tration to business in Dubai” (UAE Investment Climate Statement,2006, p. 5).


The investment climate, already attractive, will change with the intro-duction of a new Companies Law. Currently in the final stages ofrevision, “the law will provide a general legal framework for estab-lishing businesses in the seven Emirates, while secondary legislationsare to handle the details of the different sectors and geographic loca-tions” (Elewa, 2007b). Of note is the anticipated change from thecurrent 51-49 percent ownership split. A new Competition Law,expected to promote investment, is also under discussion.

The UAE is actively involved in the Middle East and North AfricaOrganisation for Economic Cooperation and Development (MENA-OECD) investment program. The initiative was set up in 2004 withthe objective of improving the investment climate in the participatingcountries. The UAE chaired a workshop in December 2006, toreview its National Investment Reform Agenda (NIRA). The discus-sions focused on “sectorial liberalisation and establishment of a com-prehensive investment law” (MENA-OECD Program, 2006, p. 2).

The investment climate has been positively influenced by the propertyboom in Dubai, which began in 2002 when sales were opened to for-eign investors. Initially, speculation was a driving force behind manyof the transactions. Despite the purchase/sale activity, the legal frame-work to prove ownership remained blurred. This changed with DubaiLaw No. 7 of 2006 announcing that investors of all nationalitieswould be permitted freehold ownership, a 99-year lease or a usufructright—which is similar to a lease (Dale, 2006). Additionally, it set for-mal procedures for issues such as registration, property disputes, andtitle transfer on death or inheritance. The contribution that real estateownership has made, and will make, to furthering an attractive invest-ment climate is evident in the number of property development pro-jects that are currently under way in the other emirates.

The changing telecoms market is creating investment opportunities asreform brings competition to Etisalat, the state-owned telecommuni-cations monopoly. In early 2005, the UAE announced that a secondprovider would be permitted to provide services. The new operator,Emirates Integrated Telecommunications Company (EITC), nowknown as “du,” has been set up with a structure similar to that of Eti-

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The investmentclimate has beenpositively influ-enced by theproperty boom inDubai, whichbegan in 2002when sales wereopened to for-eign investors.

salat. It is 50 percent owned by the government and will pay royaltiesto the government. The push for liberalization of the telecoms marketoccurs at the same time as international trade agreements are beingnegotiated. Connor (2006) writes, “The UAE government has statedpublicly, as well as in its commitments to the World Trade Organiza-tion, that it intends this [opening the market to a second operator] tobe the first step in paving the way toward full liberalisation of the mar-ket for telecommunications services in the year 2015” (pp. 18–19).Additionally, the need for competition has been influenced by con-sumer demand (Irish, 2006). Opening the market will contribute pos-itively to the UAE investment climate if research figures are any indi-cation. In two unrelated studies, one conducted by Etisalat (Irish,2006) and one independent project (Azhar, Chaudhry, Husain, McK-echnie, and Grant, 2006), consumers expressed their willingness touse the new provider for their telecommunication needs. In the latter,expatriate consumers who had experienced multiprovider services inother countries said they are more likely to switch to “du” or at leasthave accounts with both providers and use the respective serviceswhen specials and promotions are offered.

Overall, investment in the UAE is viewed as low-risk (“OperationalRisk,” 2004; UAE Risk Summary, 2007). Politically, the country isstable, including through the transition periods when Sheikh Khalifaof Abu Dhabi and Sheikh Mohammed of Dubai succeeded SheikhZayd and Sheikh Maktoum, respectively. The UAE takes security veryseriously, and threats to the physical security of the country and thepeople are very low. The DIFC has attracted foreign investmentfirms. The legal and regulatory environment continues to favornationals. Yet as the country continues to gain prominence in worldmarkets, indications are that these will become more moderate (Pun-war & Anani, 2006). Inflation is recognized as a problem, with muchof the blame leveled at the rental housing sector. Responsibility forrental laws rests with each emirate and in the case of Abu Dhabi andDubai, in particular, regulations to cap annual rent increases havebeen introduced. The success of these caps to slow inflation remainsquestionable (“Can the UAE Tame,” 2007). Instead, as new proper-ties become available, the pressure on occupancy rates is expected toease as early as year-end 2007.


The country’s dynamic economic environment and its encouragingbusiness prospects can be attributed to heavy investments in the phys-

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Opening themarket will con-tribute positively

to the UAEinvestment cli-

mate if researchfigures are any


ical infrastructure. The six international airports—Abu Dhabi, Dubai,Sharjah, Ras Al Khaimah, Fujeirah, and Jebel Ali (currently underconstruction)—make the UAE easily accessible to the world. DubaiInternational Airport is the most successful for passenger services,while Sharjah International Airport is an important cargo hub. Carri-ers operating from the UAE include Emirates Airlines, Etihad Air-ways, Gulf Air, and Air Arabia. They offer extensive services for thosewho seek luxury, as well as those passengers who are price-conscious.They fly to many regional and international destinations.

The strategic location of the country plays a significant role in its eco-nomic development. The UAE today is served by 15 commercialports that export and import goods and raw materials for the localindustries and consumers. These ports are also used as a hub to re-export and redistribute finished goods or materials to neighboringArab and subcontinent (Pakistan, India, and Sri Lanka) countries.The UAE stands among the “top five locations in the world for ship-ping supplies and bunkering” (Al Abed, Vine, & Hellyer, 2005, p.214).

Traffic congestion is a growing problem for the infrastructure of thecountry, particularly in the Dubai, Sharjah, and Abu Dhabi emirates.Attempts to alleviate the strain on the roads are under constant study(Al Abed et al., 2005). The Dubai light rail transit project is expectedto ease some of the emirates’ traffic problems.

Electricity and water supply are vital for economic and social devel-opment of any country. The UAE is not behind in this respect either.In Dubai and Sharjah, for example, the water and electricity depart-ment is a part of the public sector. Abu Dhabi has taken the initiativeto privatize its Electricity and Water Authority by establishing jointventures with Emirates CMS Power Company (ECPC), Gulf TotalTractabel Power Company (GTTPC), and Shuweihat CMS Interna-tional Power (SCIPCO).

The telecommunication infrastructure of the country is well devel-oped and advanced. Etisalat, until its competitor is fully operational,is the only telecom company in the country. Etisalat has “maintainedand developed the national and international fixed-line network,mobile telephony, Internet access, and cable TV services” (Al Abedet al., 2005, p. 194). Etisalat’s customer base includes 3.308 millionmobile phone subscribers, 1.163 million fixed line subscribers, and1.25 million Internet users (Al Abed et al., 2005). Moreover, theUAE ICT Use Index is also the highest among all the Arab nations

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The strategiclocation of thecountry plays asignificant role inits economicdevelopment.

at 1.5 (Al Abed et al., 2005). This index ranks information and com-munication technology through monitoring activities that focus onthe number of Internet users, mobile phones, fixed lines, and PCinstalled base. The total of the values for each category is added. Thesum is divided by the country’s population. The higher the numberthen, the more aggressive is the country’s ICT adoption.


The UAE is a growth nation where infrastructure development ishigh, industries are expanding exponentially, and the culture of con-sumerism is becoming firmly embedded. Virtually every business sec-tor is “hot.”

TechnologyThe UAE seeks IT companies, multimedia businesses, Internet star-tups, service companies, and remote service providers that will drivethe e-commerce revolution. Establishing the TECOM has been sig-nificant for the promising IT-related sector. Dubai Internet City,another free zone, hosts the business operations of companies likeMicrosoft, Dell, Cisco, and IBM. Developments currently in progressinclude Dubiotech and Silicon Oasis.

TourismTourism has also made a significant contribution to the UAE econ-omy. Dubai has ambitious plans to attract over 15 million visitors by2010. Already the emirate has made substantial investments in iconicdevelopments such as Burj Dubai (world’s tallest building), the Mallof the Emirates (with the indoor ski hill), and Madinat Jumeirah(resort complex complete with theatre auditorium and Venetian-stylecanals). Such spectacular growth has led the sector to contribute over2% to the GDP and was recently estimated at U.S. $1.72 billion (AlAbed et al., 2005). Dubai is also to be the home of the world’s largesthotel, along with 31 other themed hotels, on a 10-kilometer stripnear the Disney-like Dubailand. This newly announced hotel projectis valued at 100 billion dirhams (John, 2006). As Al Abed et al.(2005) note, “The industry is benefiting from a wide range of factors,including the country’s development as a financial center, a leisurezone and a prime shopping location” (p. 157). An estimated 88.5million people visited Dubai malls in 2004 (Margolis, 2005).

To meet the expected tourism demand, significant hotel developmentis under way (TRI Hospitality Consulting, 2006). By 2010, it is

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The UAE is agrowth nationwhere infras-

tructure develop-ment is high,industries are

expanding expo-nentially, and the

culture of con-sumerism is

becoming firmlyembedded.

expected that available rooms in Dubai will increase by 232%, andhotel numbers will double from 103 in 2006 to 206. Abu Dhabiroom numbers will increase by 156% when 25 hotels are added to itscurrent 28. Ras Al Khaimah, the most northerly emirate, will have189% more rooms when ten hotels open for business alongside itspresent seven. Fujeirah, on the east coast, currently with seven hotels,will add six more, and increase room availability by 138%.

Adding to the tourism sector is the sporting industry. Dubai hasinvested 7 billion dirhams in the Sports City complex, which is a partof the larger Dubailand project. The emirate has been host to manyinternational sporting events, such as the Godolphin Racing Event,UAE Desert Challenge, UAE Quad Drag Race Championship, Inter-national Power Boat Racing, ATP and WTA Tennis, Rugby Sevens,and Desert Classic Golf. Many of the events are known for the rich-est purse or richest prize monies in the world. Abu Dhabi now spon-sors a world-renowned golf tournament, and Sharjah holds speed-boat races in its sheltered lagoon. Adding to the country’srecognition, now and in the future, is Emirates Airlines’ involvementin the 2010 and 2014 World Cup Football (Soccer) tournaments andthe speculation that a bid may be made to hold the 2016 OlympicGames.

Real Estate and ConstructionIt may be said that the tourism, leisure, and sporting sectors are fuel-ing real estate and construction as more world attention is focused onthe country. Al Abed et al. (2005) write, “The [real estate] sector isexpected to see the total value of developments rise to more than US$50 billion by the year 2010” (p. 120). It is rapidly expanding, withits competitive forces being quality, reliability, and value for money.Sector leaders include ADDAR in Abu Dhabi and Nakheel, Damac,and Emaar in Dubai. High-profile projects include residential andleisure developments—The Palms, The World, International City,Dubai Marina, and The Greens. The construction sector GDP hasincreased over 20% year after year between 2000 and 2004. With thesurge in property developments, industry analysts fear that the sup-ply-demand dynamics will experience downward pressure. On theother hand, investors are confident that the rapidly growing economyis significantly robust to offset a slump.

Supporting the sector are metallurgy-related businesses, whichinclude iron, steel, and aluminum. The iron and steel industry israpidly developing for two main reasons. First is the rise in construc-tion-related activities and second is the reconstruction in Iraq. Alu-

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It may be saidthat the tourism,leisure, andsporting sectorsare fueling realestate and con-struction asmore worldattention isfocused on thecountry.

minum production is the “largest single non-oil contributor toDubai’s economy” (Al Abed et al., 2005, p. 126).

BankingThe banking sector in the UAE has taken over from many of the tra-ditional centers like Bahrain and Saudi Arabia. In addition to themajor banks from other GCC countries, international banks fromaround the world are represented in the UAE. Presently, the countryhas over 200 banks, and the number is increasing. Profits grow at avery rapid rate year after year. In 2005, alone, Emirates Islamic Bankrecorded U.S. $11.7 million in net profit on U.S. $51.1 million inrevenue income. This represented a profit increase of over 50%.Other banks are having similar success (Banking Bulletin, 2006).

Logistics and ShippingAnother rapidly expanding sector is logistics and shipping. The GCClogistics market is estimated to be worth U.S. $11 billion (Joseph,2005). Dubai Logistics City (DLC), “the world’s first integratedlogistics and multi-modal transport platform” will begin operationsin 2007 (“Dubai Logistics City,” 2005, p. 10). Upon completion,the DLC aims to provide warehousing and cargo handling facilitiesfor distribution and service providers and to become the preferredlocation for businesses that offer services to the “GCC, the widerMiddle East, India, Africa and the CIS—a market of more than twobillion customers” (Joseph, 2005, p. 30).

EducationThe education sector is gaining momentum, with 9.52 billiondirhams allocated by the UAE government in 2006 for “developingthe human capital of the nation” (Fahem, 2006, p. 34). Sharjah Uni-versity City is now well established with a number of universities.Academic City and Knowledge Village are education free zones inDubai. Branch campuses of European (INSEAD) and American(George Mason) universities are accepting students in Abu Dhabiand Ras Al Khaimah, respectively. Locally, the efforts of UAE estab-lished schools, such as the Higher Colleges of Technology (HCT),University of Sharjah, and Zayed University, provide quality educa-tion and training programs.

Sector to WatchThe success of the Dubai Film Festival has opened the door for themovie industry to establish production operations within the newlycreated entertainment-related free zone. Indicators of the sector’sgrowth potential include the UAE being the on-location set for the

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The educationsector is gainingmomentum, with

9.52 billiondirhams allo-

cated by the UAEgovernment in

2006 for “devel-oping the human

capital of thenation.”

acclaimed Syriana, starring George Clooney. When released, therewas speculation that it would not be shown in the country. However,the movie did run in local theaters, as did the controversial moviePassion of the Christ, directed by Mel Gibson.


The level of advertising expenditure in the UAE is estimated at U.S.$80 per person, which is the second highest among the GCC coun-tries (Pearce, 2000). Fifty-five percent of the total advertising expen-diture is spent on newspapers, followed by television, magazines, andradio, respectively. Popular newspapers include Gulf News, GulfToday, Khaleej Times, and Al Khaleej, while television attracts viewersto the Abu Dhabi and Dubai satellite channels. Radio is gaining pop-ularity as an advertising medium, as compared to outdoor billboards,for instance. The Internet is also being used to reach the public, pro-vided that the content is not considered undesirable for a Muslimnation. Filtering software is used to block pornography, gambling,religious conversion, and sites about illegal drugs. Additionally, othermaterial related to homosexuality issues and some dating sites arerestricted (Zittrain & Palfrey, 2005).

Sectorwise, “service industries accounted for almost a third of adver-tising expenditure, worth US $6.17 million, followed by clothing,jewelry and personal accessories valued at US $47.3 million, a further25 percent of the total. Toiletries and motoring were worth 13 and12 percent respectively” (Pearce, 2000, p. 178).

The diversified economy of the UAE, the tolerant and liberal businessenvironment, and the multicultural, multiethnic population hasintroduced complexities into the marketing of products and services.For example, Western attitudes and lifestyle may influence some ofthe population (El Akel, Marouf, El Breidi, & McKechnie, 2006), yetthe culture remains firmly rooted in the Arab traditions of family andcollectivism (where the lives of family generations are more tightlygrouped and intertwined than those of the individualistic cultures likethe United States and United Kingdom).

The consumer culture in the UAE has seen rapid changes in the lastdecade. First, shopping has become more of a mall culture, wherepeople are lured into a one-stop shopping experience that also offersentertainment and dining. Shopping malls usually have a hypermar-ket—Carrefour, Spinney’s, and Geant—as the anchor stores. Second,

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The diversifiedeconomy of theUAE, the tolerantand liberal busi-ness environ-ment, and themulticultural,multiethnic pop-ulation has intro-duced complexi-ties into themarketing ofproducts andservices.

the annual Dubai Shopping Festival (DSF) has made retailers moreaware that consumers are increasingly price-conscious. A familiarphrase among consumers is “wait until shopping festival,” which isforcing shopkeepers to become more competitive to suit people’sdemands. Third, as the majority of the population is below the age of25, brand loyalty is not very high, and counterfeit products can eas-ily be found. The result is retailers become more aggressive with pric-ing and promotional strategies, as well as with their levels of customerservice.


The liberal steps that the UAE has taken toward transformation andmodernization have contributed to its evolution as a country withlarge urban areas in each emirate. Its roots are still strongly embed-ded in Islam—the official religion—and in Muslim culture and tradi-tion. Social behavior and business are still, to a large extent, influ-enced by the religious practices and the cultural norms.

Until recently, the UAE workweek was Saturday through Wednesday.A government decree announced that the country would adopt aSunday through Thursday workweek and a Friday/Saturday weekendeffective September 1, 2006. The UAE business days now align withthe global business environment for at least four days of the week,Monday through Thursday. Friday is the holy day for the Muslims.Stores are expected to close during the midday congregationalprayers. Normal working hours are from 8 A.M. till noon/1 P.M.and then from 4 P.M./5 P.M. until 10 P.M./11 P.M. Increasingly,malls and large corporations remain open throughout the day.

According to the Islamic lunar calendar, the two major holidays cel-ebrated are Eid-al-Fitr (at the end of the holy month of Ramadan)and Eid-al-Adha (marking the end of the Hajj pilgrimage). A peakconsumer-buying period is experienced during the holy month ofRamadan and the two Eids. It is during these festivities that retailingstores and malls remain open till around 2 A.M. and promotionalactivities—events for children, drawings for cash and cars, and pricediscounts on merchandise—are initiated to drive purchase.

The Dubai Shopping Festival, introduced by the Dubai Departmentof Tourism Marketing and Commerce, has become an important cul-tural and tourism event in the country. Often held near the Eid-al-Adha date, it is an opportunity for businesses to sell their products at

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The liberal stepsthat the UAE has

taken towardtransformation

and moderniza-tion have con-tributed to itsevolution as a

country withlarge urban

areas in eachemirate.

discounted prices and to indulge in promotional activities. Last yearwas the eleventh year for the event, which now attracts shoppers fromaround the globe.

The social and business culture in the UAE is highly collectivistic andhigh in power distance (where power distribution is expected andaccepted by leaders and followers to be unequally distributed). Thismeans that business negotiations and dealings are typically made withfamily relationships, social contacts, and social status in mind.

One of the most crucial factors for a foreign company setting up inthe UAE is the interpersonal skills of the manager. The local busi-nesspeople expect to deal with senior-level managers who are able tomaintain professionalism and personal contacts. Another importantfactor is that business meetings are conducted in a social settingwhere managers are first expected to start with small talk and askabout the family and kin of the local businessperson—but withoutspecific reference to a man’s wife. Only after a personal level of inter-action is reached can the business deal later be negotiated.

The time factor is another area where the local people are very flexi-ble. Businesspeople are expected to arrive late at meetings and take aconsiderable amount of time arriving at a decision before signing thecontract. Comparatively, Western practice is governed by the punctu-ality of appointment times. Although Arab time and Western time arenot yet one and the same, the trend appears to be that there is moreemphasis on punctuality for business meetings than for social andpersonal events (McKechnie & Grant, 2005).

Since religion and tradition are the roots of the culture, women stillremain mostly separated from their male counterparts. Increasingly,women are taking their place in the workforce of the UAE, althoughin many social and business gatherings, they continue to be notice-ably absent. An important point for foreign businessmen to remem-ber is that when dealing with women in the UAE, they should main-tain and observe sufficient physical distance. The woman will indicateher willingness to shake hands with a man by extending her hand.Should she not, the gentleman should only nod his head in greeting.


There are a number of ways in which a foreign business may enter theUAE market, including direct exporting, franchising, licensing, joint

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One of the mostcrucial factorsfor a foreigncompany settingup in the UAE isthe interpersonalskills of themanager.

ventures, and limited liability companies. The business culture placesmore importance on establishing trade relationships, networking andliaising with customers. The premise is that having an on-the-spotpresence and dealing with an associate who can be trusted is moreimportant and, thus, gives the business a distinct advantage.

The business environment also benefits from the country’s geo-graphical location. The UAE is strategically located on the worldmap, between the Western and Eastern world. Its place on the Gulfwaters makes it a regional hub for the GCC countries. According tothe World Bank Report, the UAE has been identified as one of theleast cumbersome countries for setting up a business. The cost of set-ting up a new business is comparatively lower than anywhere else inthe MENA region (Al Abed et al., 2005).

The free trade zones in the UAE have not only proven to be a mag-net for attracting investment, but they have also facilitated opportu-nities to make concessions and to relax regulations for both nationaland international businesses. The benefits of 100% foreign owner-ship, corporate tax holidays, no personal taxes, freedom to repatriatecapital and profits, no import duties, and currency restrictions areattractive enticements.

The innovator looking to enter the UAE market may be assisted byvarious national and individual emirate government agencies. Theseare usually called municipality services—Dubai Municipality, AjmanMunicipality, and Sharjah Municipality. There is also a large, well-developed Chamber of Commerce. Many world embassies and com-mercial conciliates have offices in the emirates and encourage busi-ness activities between their country and the UAE. Many developednations have private groups of businesspeople that have organized inone or more of the emirates to support trade. Largely acting in a vol-unteer capacity, these organizations also contribute to the social andcultural climate in the country. For Americans, it is the AmericanBusiness Council of Dubai (, American BusinessGroup in Abu Dhabi (, and AmericanWomen’s Association ( For Canadians, it is theCanadian Business Council ( and Club forCanadians (

Franchise markets are open to food outlets, fashion apparel retailing,dry cleaning services, hotels, and sporting goods, just to name a few.The shopping mall culture and the burgeoning consumerism have ledto more than 2,000 shop units whose business roots can be traced to

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The innovatorlooking to enterthe UAE market

may be assistedby various

national andindividual emi-

rate governmentagencies.

franchise development. For the Middle Eastern region alone, the fast-food franchise market growth is estimated at 27% annually, while 80%of the UAE demand for total food service is in two emirates, Dubaiand Abu Dhabi (Chaudhry, 2006). Factors that are contributing togrowth include the changing lifestyle, more women entering theworkforce, and greater earning power, thereby increasing consumers’disposable income.


In conclusion, the business environment of the United Arab Emirateshas many more positives than negatives. The political situation issolid, proactive, and progressive for furthering economic growth andinnovative new business ventures. The current ruling government,while not democratic, is generally supportive of the individual or theorganization that is looking for risk capital placement. Commerce isbecoming more economically significant in each emirate. This is par-ticularly true in Dubai, where economic growth through trade andcommerce rivals oil for prominence.

The laws of the country, although influenced by Islamic values, arepro-business. Arguably, the biggest impediment may be the 49-51percent ownership split when companies are established outside offree trade zones. Until this law changes, the issue can be overcome byestablishing a company within one of the well-run free trade zones.However, many knowledgeable people will say that the 51% issue isoverrated as a concern.

The current robust economy, combined with the price of oil, from anhistorical perspective, means the availability of money for capitalexpenditures and a wealth of discretionary funds for luxury goods.Tourism, real estate investment, retail shopping, and the pleasing cli-mate for most of the year are quickly turning the country into thenew place to live and to vacation. Media, cultural events, movies, andmusic, for example, are largely the same as those enjoyed in manyother parts of the world.

Although there are various “hot sectors” in the UAE, almost anyproduct or service can be offered successfully with a reasonableamount of planning, effort, and continuous ingenuity. Thus, entryinto the UAE market is virtually wide open. The UAE government,the investors’ home government, and many UAE citizens are lookingfor partners with the ideas and the knowledge to bring another win-

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The currentrobust economy,combined withthe price of oil,from an histori-cal perspective,means the avail-ability of moneyfor capitalexpenditures anda wealth of dis-cretionary fundsfor luxury goods.

ning business to the country’s shores. The United Arab Emiratesappears set to become the next business hub of the world.


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