Ohio & Dubai in Business - Literature review Example

OHIO & DUBAI (Comparative Essay) in Business This paper will compare the dynamics of doing business in Ohio and Dubai. Specifically, a comparison will revolve in the areas of economic activity, population trends, taxes, and real estate. In the process, it is expected that the better location will be determined in regard to doing business and investment opportunities between this two subjects. I. Ohio Economy: Inward Investment Ohio has been an important player in nearly every growth industry in America. From its farms to the big industrial factory in the more recent years, it had a progressive growth and vibrant economy. Ohio is what one would say a microcosm or representation of America. However, the economic prospects of Ohio today are quite unattractive and that this adversely affect investing or doing business in the state. This is reflected in a study conducted by Bo Carlsson (2002) wherein the firms in Ohio report a lack of regional venture capital firms as well as a lack of venture capital firms based outside the state particularly those interested in Ohio-based startups. (p. 171) All in all, the dismal business environment in Ohio can be seen in the economic activity, population trends, tax and real estate. There is an ongoing competition among US states for a share in investment as they compete with each other in regard to which locale is able to provide the best investment climate. In this landscape of escalating inter-state competition, selective interests within traditional industrial states sough to mobilize governmental powers and resources behind a strategy of inward investment. In Ohio’s case, construction of an inward-led model of economic development consisted of three elements. According to Nicholas Phelps and Philip Raines, these are: a set of economic and political interests that provided the social base for the strategy; formal institutions dedicated to a particular form of economic development; and, a framework for coordinating economic development practices. (p. 84) In Ohio’s economic history, it is clear that development came from the interconnection of these three elements. The first involved the establishment of the Ohio Department of Industrial and Economic Development; the second is the codification of the relationship between State and private interests in the form of Ohio Economic Development Council; and, the third involves the routine practices through which inward investment has been pursued as a policy for the last four decades. (p. 85) Today, however, one fact stands out for Ohio: it is dramatically losing its competitiveness. Since the twenty-first century begun, the per capita personal income, once above the national average, is now below; population growth and job growth are below the national average as well. Population and Labor Population growth in Ohio is stagnant and way below the national average. According to the statistics, from the year 200 to 2002, Ohio ranked forty-ninth among the fifty states in net domestic migration and that when international migration is concerned, Ohio ranked last. (Parker, Sisson and Coil 2005, p. 150) The Ohio Board of Regents, the coordinating body for higher education, regularly cites statistics that demonstrate how Ohio is undereducated state. (p. 150) This means that Ohio falls behind many states in terms of post-high school education, be it community college, bachelor degrees or advanced degrees. Unfortunately, the reason for this lies in Ohio’s industrial history wherein high school education is enough to work in factories. Unfortunately, Ohio has relied too much in its manufacturing and industrial sector. This made Ohio more vulnerable to the changes in today’s global economy, industry is giving way to technology and globalization. Tax Ohio imposes a corporate income tax for both the domestic and foreign corporations in order for them to operate in the state. Tax credits are available for those organizations that would qualify for the Job Creation Tax Credit, Investment Tax Credit, Property Tax Abatement, Goods in Transit, among others. Personal income tax in Ohio has risen since the 1970s. By 1993, income tax rose that state income tax revenue jumped to 7.5 percent due to the state’s changing of its tax code. Real Estate In Ohio, the traditional income-producing properties include apartment and office buildings, hotels, motels, shopping centers as well as industrial properties. In Ohio’s recent history, there is the preference among investors to buy well-located, one-to-four-family homes as favorable investment property. However, today many communities have seen severe overbuilding of office spaces and shopping centers resulting to high vacancy rates. (Galaty, Allaway and Kyle 2001, p. 392) II. Dubai Economy: Outward-Oriented Strategy According to Terry Carter and Lara Dunston, Dubai is now the fastest growing city in the world. After the discovery of oil in 1966, its economy has grown at rapid pace that have created wealth and development to the city up to this day. Presently, the economy is adjusting its policies which sought to diversify the businesses within the city. It is aiming to become less reliant on oil. And so recently, it has become successful as a commercial and trading center in the Gulf region. The life-blood of the present economy, wrote Birks and Sinclair is two-fold: the flourishing of the import-export business and the commercial and banking community. (p. 79) Indeed, Dubai was able to follow an impressive outward-oriented strategy with large gains. Then, there’s also the growing industry of tourism. People who are watching cable television will not surely miss the advertisement about “brand Dubai” – the city of captivating contrasts. In the advertisement, there is the demonstration of pleasant shopping malls, fine beaches, dining opportunities, sports and other recreational options. Tourism is important in Dubai’s diversification efforts because it makes the city more credible as a prime business location. Government figures in Dubai reported that in 2006, more than 6 million visitors stayed in hotels. (Oxford Business Group, p. 142) This statistics highlight Dubai’s importance today as a regional business and recreational center. In regard to trade and private investment, however, Dubai, along with the other states in the region has not performed well, however. A World Bank study, for example, found that Dubai and the Gulf region was the only location that experienced a stagnant and declining trend in this area. (World Bank 2003, p. 2) Population and Labor The United Arab Emirates and Dubai has a limited supply of national manpower. The country’s population is low and so, as with the national situation, majority of the workforce in Dubai are foreign. The city has to import professional, technical, skilled and semi-skilled workers from Europe, India and the Far East. In UAE the percentage of foreign workers is 75 percent while in Dubai, it is 80 percent. (Leonard 2007, p. 53) Dubai, as with the other Gulf states regulate labor strictly, requiring work permits, residence permits and medical checkups. Also, a non-citizen could do private business in the Dubai in many closely regulated ways, “most of them involving a local agent, sponsor or partner.” (Leonard, p. 53) Tax-Free The good thing about working in Dubai and in the Gulf in general is that workers do not only have high salaries but that the income is also tax-free. (Leonard, p. 53) In addition, working conditions are excellent, with modern facilities and technology, and standard of living as a whole is also good, with cheap and dependable water, electricity, air-conditioning and other facilities. The UAE has no system of governmental taxation. Although Dubai introduced its general income tax decree in 1969 and potentially imposes income tax on businesses that undertake trade or activities in the city at rates of up to 55 percent, Dubai has not generally imposed such policy because only oil and gas-producing companies as well as branches of foreign banks are being required to pay taxes. (Oxford Business Group 2007, p. 237) Real Estate The oil industry and the diversification efforts have sustained Dubai’s real-estate boom particularly during the 2000s. This was a period, according to Peter Cooper (2008), when global property markets soared on the back of US interest rate cuts after the dotcom crash and the 9/11 as oil prices rose and Arabs returned their money to the Middle East. (p. 75) III. Conclusion Being part of the United States, Ohio benefits from partly the same capital market as firms, say, in Massachusetts or California. But besides this, the prospects of investing in Ohio seems very unattractive. This is particularly apparent when the business landscape is evaluated in terms of population, tax, real estate and overall economic health. It is important to understand that Ohio is still struggling to cope with its losing manufacturing and industries. The changes in the trend of global economy no longer need its factories and that the state government is still trying to find ways and models to make the economy perform better. Opportunities may be in the way of incentives in taxes and low-cost properties because of the desire of the government to encourage investment. It is easy to see that today Dubai compares very favorably to cities in the West such as Ohio. The business landscape is favorable both for people and the business organizations. Capital is also available as revenues from oil manufacture are still continuous. Then, there’s the success of diversification in Dubai’s industry particularly in the banking and commercial sectors. However, the culture is certainly non-Western and this may prove as a negative factor for those who see it as restricting. References Birks, J.S. and Sinclair, C.A. (1980). Arab manpower: the crisis of development. Taylor & Francis. Carlsson, B. (2002). Technological systems in the bio industries: an international study. Springer. Cooper, P. (2008). Opportunity Dubai: How I Made a Fortune in the Middle East. Harriman House Limited. Leonard, K. (2007). Locating home: Indias Hyderabadis abroad. Stanford University Press. Galaty, F., Allaway, W., and Kyle, R. (2001). Modern Real Estate Practice in Ohio. Dearborn Real Estate. World Bank. (2003). Trade, investment, and development in the Middle East and North Africa: engaging with the world. Gupta, Dipak and Nabli, Mustapha (Eds.) World Bank Publications. Oxford Business Group. (2007). The Report Dubai 2007. Oxford Business Group. Parker, G., Sisson, R. and Coil, W. (2005). Ohio and the world, 1753-2053: essays toward a new history of Ohio. Ohio State University. Read More