This report takes a preliminary look at the economy and business prospects in the UAE that is emerging as a financial centre in the Middle East. Businesses are increasingly locating in the UAE to develop greater business opportunities with their proximity to markets close to the Middle East.
Locating in an emerging financial centre gives the added advantage of greater accessibility to markets abroad through facilitating accessibility to those markets that governments are prone to promoting with a keen interest to maintain a robust economy with a strong foundation, long standing business relationships, and providing a back bone in an industry that is essentially 'here to stay'. Incentives used for developing a local manufacturing base and encouraging corporations to locate in the UAE has been a prominent feature of the governments policies. Extensive development in real estate is another significant aspect to this.
Creating opportunities for further interaction with local and international clients is an essential next step forward for business from Europe and the US and also from neighbouring Asian countries. Bringing together local and international business people is a crucial step forward in today's business environment where businesses typically have to respond rapidly to meet changing market requirements.
Positive growth in Asia and the Middle East gives rise to opportunities for businesses to impove their market shares with innovative ideas. An on the ground office presence improves business accessibility between the local and foreign businesses. Dubai is emerging as an important business centre, and its geographical proximity to other Asian economies makes it an attractive alternative to operating businesses that seek to create more business opportunities for themselves.
Information contained in this report gives the broader parameters, of the UAE Economy, and attempts to make it a more familiar market to business clients. It hopes to generate greater interest for business clients in enabling them to formulate specific questions.
Have a business presence by locating in Dubai
Essential characteristics of the Dubai market that this Emirates government has been promoting make it very attractive to businesses to locate there. The facts outlined in this report are the broader parameters within which business would be operating.
Accessibility
Accessibility would depend on specific business requirements. The following factors contained in the report outline essentially how accessible this market really is.
Facilitators
The Local labour market imports labour from Asia and SE Asia; the majority of this labour is absorbed by the construction industry, followed by retail and transport. Business networks play an important role in creating greater business opportunities.
A competitive market Scenario
In a competitive market, everyone faces a similar situation, similar costs and share a robust infrastructure base.
Locating in a market with marked cyclical growth, healthy competition?
Locating in one country could make this difficult to estimate and expose the business to recessionary pressures. Having a business operating in more than one country could give a clearer picture of the business cycle.
How easy is it to get out of the market?
If the business needs to be sold are buyers eager to take over an existing concern priced at market valuation that is, selling a business at a fair market price. This would be a primary concern and we would suggest that in selling existing operations pricing should include value adding included for a proposed one year period.
The Economy
Economic growth and recession cycle make it easier to estimate and manage future business expectations. Finance has been generated through major funds so far and the economy does experience periods of sustained growth followed by slumps that lead to unemployment with labour drive out of Dubai. However, sustained investor confidence and continued investments improve employment prospects with labour flocking back to city.
The Dirham is stable for major currencies with similar currency rates for the US$, Sterling and Euro since 21st June 2007 when this report was first prepared.
Interest Rate
Capital is disbursed through banks and funds. Most of these have their own terms and meet client's requirements through personal banking services. However, banks are the most expensive source of capital and exposure to interest rates are high. Inflation Estimator our estimates based on the price of a basket of goods estimates it at about 2% which compares favorably with other countries. The market is dominated by real estate that contributes 60% of the market GDP followed by construction, and finally oil that contributes 20%. The market is very clearly driven by real estate with a slump in this market driving the economy down. The government has invested very heavily in real estate and made enormous infrastructural investments to foster a business climate conducive to attracting foreign capital, banks and investments from foreign firms, franchises. A lot of businesses operate as holding companies with investments in a number of business concerns.
Economic activity
Economic activity is based on retail, construction, real estate and oil. The Emirates holds about 20% of the oil reserves. This Emirates policy drive has made it a port of imports in the world market. The initial drive to promoting Dubai as a significant trading market has had tremendous success with the government hosting trade promotion shows with very positive foreign contacts, resulting in franchises with foreign and local partnerships. A very clear model of the economy emerges that the government has been successful in fostering and which is working well for existing business. It is a model that encourages a competitive business environment.
Different tax rates on income
There is exemption on corporate taxes
Possible hedging opportunities
Proximity to markets in Asia and The Far East
The UAE has a central location in the Middle East as a thriving market and an emerging financial centre. The government's policy appears to be centered around developing a financial center to draw in more capital into the region, but with the recent political developments in the Middle East, Egypt and Syria and with the Middle East economies closely tied to each other economically, the emphasis would have to be on a larger financial base, offering tax incentives on funds, a well functioning derivatives market and hedging funds.