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Date: 18.07.2008
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ABSTRACT
From a socio-cultural aspect the UAE, much like other Gulf countries,
has a culture shaped strongly by the Muslim religion. In terms of the
UAE’s regional and international standing, it is an important regional
trading centre and widely held as one of the more progressive
countries within the Gulf region and also has a history of good bilateral
ties with Malaysia.
The most prominent risks and challenges within the UAE are the
competitive retail environment, the high level of demographic
segmentation and escalating inflation. However, in conclusion, the
potential rewards from a well-planned and properly executed business
venture into the UAE strongly outweigh the potential risks.
Table Of Contents
1.Introduction................................................................................................................ 4
3.Governance................................................................................................................. 5
4.Economy ...................................................................................................................... 7
5.Socio-Cultural .......................................................................................................... 10
6.Regional ..................................................................................................................... 12
7.Conclusion ................................................................................................................. 14
UNITED ARAB EMIRATES
1. Introduction
The following report outlines the general business landscape of the
United Arab Emirates (UAE) that seeks to address two key questions:
Is there an opportunity for a Malaysian department store in the
UAE
What are the parameters, risks and challenges in pursuing that
opportunity?
3.Governance
The most recent Governance Matters (Kaufmann et al., 2008) report
has benchmarked the UAE as being in a top quartile position for the
Rule of Law, Government Effectiveness and Control of Corruption and
Regulatory Quality and second quartile for Political Stability.
Many international brands that venture into the UAE market tend do so
under local agents with General Trading Licenses (GTLs) who generally
have very large diversified business portfolios. For example the Al-
Futtaim group manages both the UK brand Marks & Spencers but also
recently acquired the rights to the Singaporean retailer Robinson’s (Al-
Futtaim Website, 2008)
According to the CIA World Factbook (CIA, 2008) , the UAE has a GDP
of USD 192.6 billion (2007 est) and a GDP per capita of $37,300 (2007
est.). In the IMF 2007 World Economic Outlook report (IMF, 2007) ,
UAE was ranked as the second highest GDP among the Cooperation
Council for the Arab States Of The Gulf (CCASG) countries.
However much like the other Gulf countries, the UAE prosperity is
linked to its oil wealth. The government however is cognizant of this
dependency and has focused on boosting non-oil growth. Therefore
the UAE have re-invested the oil wealth into non-oil related sectors as
exemplified by the successful development of Dubai into a tourist
destination.
Since 1996 Dubai has held the Dubai Shopping Festival (DSF), an
annual one-month shopping extravaganza during which goods in
shopping malls are heavily discounted. The DSF has almost doubled its
number of visitors from 1.6 million to 3.3 million in 2006. (Euro
monitor International, 2007).There are also similar festivals at the
other Emirates such as the Sharjah Ramadan Festival, Abu Dhabi
Festival of Sales and the Dubai Summer Surprises. Coupled with
policies such as the “no currency controls”, and “no customs duty on
personal effects”, these efforts have served to attract a sizeable
amount of tourist traffic. UAE is a growing leader in the tourism
industry in the region with 2006 figures of over 7,944,600 visitors that
brought in the revenue of AED 15,929 million (Euro monitor
International , 2007).
Assuming that the target market is the Emirati population and tourists
from the neighbouring countries, the advantage that a Malaysian
brand may have is the relatively shorter cultural distance as measured
by the Hofstede Cultural Dimensions where both Malaysia and the UAE
appear to be closer to each other especially in the Power Distance and
Individualism category.
Supporting Infrastructure
The UAE is as an important regional trading centre and a distribution
hub to much of the West Asia region as a a result of it’s excellent
infrastructure services in the area of telecommunications, ports and
airport facilities, modern transportation as well as logistics support.
For example, it has been reported (FDI Magazine ,2005) that Dubai is
served by more than 170 shipping lines and 86 airlines offering links to
over 100 countries worldwide. Dubai is also an open market with no
exchange controls, quotas or trade barriers. Dubai commands a large
market - more than $17 billion in domestic imports annually and a
gateway to a $150 billion p.a., with a 1.4 billion population regional
import market.
Bilateral Ties
The UAE is Malaysia’s largest trading partner in the Gulf region. In
2006, UAE accounted for 40.4 per cent of Malaysia's total trade with
the GCC countries. Malaysia 's total trade with UAE was valued at
US$3.2 billion, an increase of 19.4 per cent compared with US$2.6
billion in 2005 (Ministry of International Trade and Industry Malaysia,
2008).Both countries had signed five bilateral agreements as a legal
framework to further develop and enhance relations including an
agreement on avoidance of double taxation in 1995.