Comprehensive Country Evaluation - Research Paper Example

UNITED ARAB EMIRATES The United Arab Emirates consists of seven states termed as Emirates, which include Dubai, Abu Dhabi, Ajman, Sharjah, Fujairah, Umm al-Quwain and Ras al-Khaimah. The second largest and the capital city is Abu Dhabi which is the centre of industrial, cultural and political activities. The UAE has the world's sixth largest oil reserves and is among the most developed economies especially in the Middle East. It is currently the 36th largest economy in the exchange rates and has a very high per capita gross domestic product, and a nominal per capita GDP of $46,584. It is the 14th largest in purchasing power per capita and ranks 35th globally because it has a high Human Development Index for Asian continent. UAE is a developing economy and also of high income (IMF). According to Country Analysis Briefs, oil reserves in the UAE are like 98 billion barrels (15.6×10^9 m3), almost like Kuwait's claimed reserves. Abu Dhabi the capital city producing 92 billion barrels (14.6×10^9 m3), Dubai having 4 billion barrels (640×10^6 m3) and Sharjay has 1.5 billion barrels (240×10^6 m3). The UAE produces 2.9 million barrels per day (460×10^3 m3/d) of total oil liquids, and has recently stated that it wants to increase it to 5 million barrels daily (790×10^3 m3/d) by the year 2014. Based on a variety of socioeconomic indicators, UAE is among the much developed countries in the whole world. These indicators include energy consumption per capita income, GDP per capita income and HDI. As measured by IMF, the GDP per capita is 3rd in the whole world and as measured by CIA World Factbook it is rated 14th position in the world and 3rd in Middle East next to Qatar and Kuwait. With a small population of about four million, their GDP of $168 billion in the year 2006 ranked second in the CCASG next to Saudi Arabia, 38th in the whole world and 3rd in Middle East North Africa (MENA) region next to Iran and Saudi Arabia again. According to a recent description by their Ministry of Finance and Industry, the GDP went up by 35 % in the year 2006 to $175 billion, in comparison with $130 billion in 2005. There are various differing estimates regarding the real growth rate of the nation’s GDP. All available statistics show that UAE is among the fastest growing economies in the whole wide world. The figures above confirm these statistics and its real GDP is also growing very fast. UAE is now less reliant on natural resources as a source of income because natural gas and petroleum exports still take a good and important part in the economy mostly in Abu Dhabi. The UAE is also diversifying its economy through a huge construction boom, an enlarging manufacturing baseline and a prosperous service sector. There is a current $350 billion in an active construction project. Examples of these include the Buri Khalifa that is slated to be the tallest building in the world, Dubai World Central International Airport slated to be the most expensive ever built airport when it is completed and the three Palm Islands slated to be the largest artificial islands in the whole world. Other projects are the Dubai Mall slated to be the largest shopping mall in the world and some man made archipelago named The World that aims at increasing Dubai’s tourism industry that is also growing fast. In the entertainment sector, the construction of Dubailand that will be twice the size of Disney World and also the construction of Dubai Sports City that will provide homes for the local sports teams and will be part of the future Olympic bids. The United States companies can be interested in these construction opportunities. The UAE must be a first-mover in the creation and use of new machinery, which could be done with help from U.S. firms through the licensing and exporting of existing technology from the states. There is a major increase in the imports especially of manufactured goods, transportation equipment and machinery, altogether accounted for 80% of the total imports. Abu Dhabi Investment Authority controls investments in Abu Dhabi which is the wealthiest emirate and it’s a foreign exchange earner and manages $360 billion in abroad investments and $900 in assets. Over 200 factories function at Jebel Ali complex that is located in Dubai and has a deep water port and free trade area for distribution and manufacturing where all goods for transshipment or re-export have a 100% duty exemption. Also in the complex we have a chief power plant having a connected water units, a steel fabrication unit and some aluminium smelter unit. The complex is undergoing an expansion; a large global passenger and a cargo airport named Dubai World Central International Airport which has connected logistics, hospitality and manufacturing industries are also planned in the complex. In an attempt to place their citizens into some leadership positions, the UAE takes 51% home citizen ownership in all the businesses undertaken in country except in the free trade zones. Nevertheless they are reconsidering this law and it might be scrapped off in order to be in accordance with the regulation of the World Trade Organization. Another industry in which U.S. companies could pursue business is that of the construction of communication and energy facilities. Since there is such a large population in UAE, there is a need for these people to communicate. There is also a need for conversion of energy sources, such as natural gas and coal, into usable energy. Along with energy production, there is also a need to make the energy production process more environmentally-friendly. U.S. firms, as long as they are aware of and abide by UAE’s environmental policies, should be successful in direct investment in this field. The UAE participates in the broad range activities of the Gulf Cooperation Council (GCC) of which it is a member especially on the economic issues. These may include regular consultations and the expansion of general policies including investment, banking, finance, telecommunication, trade, transportation and defense of the intellectual property rights. UAE uses the currency Emirati Dirham. It has an open economy which has a high per capita income and a very great yearly trade surplus. Triumphant efforts have made small the portion of GDP based on gas and oil output to 25%. The efforts are at economic diversification. Oil was discovered over 30 years ago and since then UAE has been through a reflective transformation to a recent state which has a high standard of living from the poor region of small arid principalities. The government of UAE has improved the spending on job creation and the expansion of the infrastructure in the country and has opened up the utilities to even higher private sector engagement. The UAE has signed a Trade and Investment Framework Agreement in the year 2004 in April with Washington and in the same year in November the state agreed to commence negotiations towards a Free Trade Agreement with the US but the negotiation have not moved forward. This can be made fast enough so that the US companies can have access to the emirates at even a cheaper deal therefore making bigger profits. UAE has Free Trade Zones that offer 100% foreign ownership and zero taxes and help to attract more foreign investors. In 2009 the GDP dropped to almost 4% due to the global financial calamity, decreasing oil prices and the tight international credit and also deflated asset prices. UAE is trying to counteract this by increasing the spending and in the banking segment they have boosted liquidity. Dubai was hit hard due to being heavily exposed to low prices in real estates. It also lacked enough money to satisfy the debt obligations in its country and this prompted world’s concern about its solvency. Dubai in February 2009 launched a $20 billion bond plan in order to satisfy the debt obligations of Dubai. In this case Abu Dhabi banks and the central bank acquired the most shares. Then in December 2009, Dubai acquired an extra $10 billion loan from Abu Dhabi emirate. Reliance on oil and a very big expatriate workforce lead to trivial long- term challenges. The five year strategic plan of UAE focuses on creation of more job opportunities for the locals and also diversification. This can be achieved through enhanced education and improved private sector involvement and employment. This is also a part that the US companies can take part in. The GDP or the purchasing power parity in the year 2009 was estimated to be $200.4 billion and was ranked number 52 in the whole world, ad in the year 2008 it was $208.7 billion and in 2007 it was estimated to be $194.3 billion (“Factbook”). One important issue when undertaking international business and trade is the exchange rate of the country in which one wishes to invest. The exchange rate of Emirati dirhams (AED) per each US dollar was 3.673 in 2009, 3.6725 in the years 2005 till 2008 (“Factbook”). The GDP official exchange rate in 2009 was estimated to be $228.6 billion (“Factbook”). The GDP real growth in 2009 was negative 4% and was ranked at position 173, 7.4% in 2008, 6% in 2007 (“Factbook”). The GDP per capita was estimated to be $41,800 in 2009 and was rated position 17, $45,200 in 2008 and $43,700 in 2007 and the data given are in US dollars of 2009 and the GDP composition depending on the sector was estimated to be as follows, agriculture being 1.1 percent, industry being 48.6 percent, services being 50.2 percent in 2009 (“country facts”). The agricultural products that are produced in this area include vegetables, watermelons, poultry, eggs, fish, dates and other dairy products. The industries in the United Arab Emirates include petroleum and petrochemicals, aluminium, fertilizers, construction materials, fishing, cement, business ship repair, boat building textiles and handicrafts. All these led to the country being rated position 120 in the world in the year 2009 and its industrial production growth rate being -6.7 percent (“Factbook”). According to UAE government the cumulative expenditure on healthcare was US$436 million and also according to WHO (World Health Organization) in 2006 they constituted 2.6% of GDP. The life expectancy in UAE at birth is now at 78 and half years. It is ranked position 44 in the whole world in regard to health care. Major causes of death in UAE include cardiovascular disease which constitutes 28% of all deaths, accidents, malignancies, congenital anomalies, diabetes, cancer, and injuries. The government is in the process of adding more health facilities and the US companies could also come in to help in the same. It also attracts some medical tourists who visit seeking plastic surgery and other advanced procedures like spinal and cardial surgery, dental treatment. This is so because their facilities are of high standards (Federal Research Division 34). The UAE has a very diverse and multicultural culture. With the coming of other nationals and ethnic groups, the UAE ethnically homogenous community was changed. The Iranians arrived first in early 1900s followed by Pakistanis and Indians in the 1960s. Dubai has always been criticized of so many classes in the society where all migrant workers lie in a lower class. The major holidays include the Eid al Fitr that is the culmination of Ramadan and the National Day that comes every 2nd December when the UAE was formed. It revolves around the Islamic religion and the very traditional Arab and also the Bedouin culture. It has a vibrant and diverse culture. Their weekends begin on Friday which is the most holy day of the Muslims and follow the every day call to prayer for five times. It is liberal due to the socioeconomic development and some Christian churches are found near the mosques (Abed and Peter 78). Exports in the year 2009 were estimated to be $174 billion and rated position 21 in the whole world and in 2008 was estimated to be $239.2 billion. The exported commodities include natural gas, crude oil, dates and dried fish. Their export partners in 2008 included South Korea taking 10.9 percent, Japan taking 26.5 percent, India taking 10.7 percent, Thailand taking 6.1 percent and Iran taking 7.5 percent (“Factbook”). Imports as estimated in 2009 was $141 billion and rated position 24 and $176.3 billion in the year 2008. The commodities of imports include chemicals, transport and machinery equipment and foods. Its partners include China taking 12.9 percent, India taking 12 percent, US taking 806 percent, Germany taking 6.4 percent, Japan taking 6 percent, Turkey taking 4.4 percent, Italy taking 4.2 percent as estimated in 2008 (“Factbook”) The reserves of gold and foreign exchange were estimated to be $33.7 billion as at 31 December 2009 and the country rated position 28 and $31.69 billion as at 31 December 2008. The debt in the external segment was estimated to be $128.6 billion as at 31 December 2009 and rated position 31 in the whole world, $134.7 billion as at 31 December 2008 (“Factbook”). There are disputes that make UAE to discourage other outside countries to trade business in the region and these include the boundary dispute with the Iran over Abu Musa Island which is occupied by the Iran and Tunb Islands. There is no publication of the detailed map which should show the alignment of the signed and ratified agreement with Oman showing the whole border with inclusive details of Al Madhah and Oman’s Musandam Peninsula enclaves. UAE is known to be a drug transshipment area for traffickers because it is near Southwest Asia countries which are well known for producing drugs. Also UAE is well known because it is major financial area and this makes it prone to money laundering, the anti cash laundering takes care of improving and the informal banking continues being unregulated. These factors may make the US companies to stay away from doing business with UAE. Works Cited "United Arab Emirates Oil". Country Analysis Briefs. US Energy Information Administration. 2007. Retrieved 2010-03-01, from http://www.eia.doe.gov/emeu/cabs/UAE/Oil.html “The World Factbook – United Arab Emirates.” Central Intelligence Agency. 27 July 2005. Abed, Ibrahim and Peter, H. United Arab Emirates: a new perspectives. Trident Press Ltd, 2001. Federal Research Division. United Arab Emirates: A Country Study. Kessinger Publishing, 2004. http://www.cia.gov/cia/publications/factbook/geos/ch.html International Monetary Fund. United Arab Emirates: Selected Issues and Statistical Appendix. International Monetary Fund, 2005. Read More