International Business Country A -- Essay

Length: 10 pages Sources: 6 Subject: Economics Type: Essay Paper: #18551428 Related Topics: International Business, Telecommunications, International Economics, International Econ
Excerpt from Essay :

The UAE has one of the most open economies in the world. And its vigorous economic partnership with the United States reflects the UAE's function as a regional leader in terms of economic restructuring, openness to international trade and investment, and political stability (UAE-U.S. Economic Relationship, 2011)

The volume of U.S. exports and foreign direct investment into the UAE in recent years has grown considerably and is likely to continue to grow in the future. This growth reflects the progressively more diversified UAE economy as well as the country's leading role as a modernizing power in the Arab world.

The country is the biggest export market for the United States in the Middle East and, in 2010, was the 21st largest export market for the United States internationally.

The UAE buys goods from every state in the United States, as well as the District of Columbia, Puerto Rico, and the Virgin Islands.

UAE customers purchased almost twelve billion in U.S. goods in 2010.

The UAE pegs its money, the dirham, to the dollar.

More than 750 U.S. firms have an existence in UAE (UAE-U.S. Economic Relationship,

2011)

Assessment of the implications of international institutions

The United States and the United Arab Emirates have developed very strong economic ties in recent years, with the growth of trade and investment among the highest of any major U.S. partner. This enhanced economic partnership reflects the UAE's role as a regional leader in terms of economic reorganization, openness to international trade and investment, and political stability. President Bush's choice of the UAE as a potential free trade agreement (FTA) partner with the United States is evidence both to the UAE's economic strength and the U.S. aspiration to deepen this affiliation (U.S.-UAE Business Council, 2008).

This relationship clearly has been distinguished by quickly expanding trade and investment flows. The near total absence of serious bilateral trade disagreements with the UAE is indicative of the health and stability of this jointly beneficial relationship. There have been no cases of either nation bringing the other to the World Trade Organization (WTO) for review by the Trade Dispute Body. This reflects the lack of serious frictions between the two trade partners and that if trade disputes do arise, they can be dealt with without recourse to formal WTO procedures. The only major disagreement to arise between the two countries occurred when Dubai Ports World planned to invest in U.S. port facilities, but the scarcity of such troubles is noteworthy (U.S.-UAE Business Council, 2008).

The UAE presently provides a very open environment for international competition. One demonstration of that commitment is through its multilateral trade policy administration, conducted under the sponsorship of the WTO. The UAE became a contracting party to the General Agreement on Tariffs and Trade (GATT) in 1994 and was an original member when the WTO was founded. Consequently, the UAE has taken on all of the rights and responsibilities of membership in those associations. The UAE's tariff is reflective of the ordinary external tariff developed within the GCC. A recent profile of UAE tariffs released by the WTO indicates the maximum tariff that can be charged under international obligations for all goods is about fifteen percent, compared to a five percent tariff actually imposed by the UAE in practice. For agricultural goods the average bound rate is twenty five percent, while the average applied rate is six and half percent. These differences are a significant reflection of the UAE's commitment to a more open international trade environment than mandated by international agreements. This compares favorably to other countries (U.S.-UAE Business Council, 2008).

D) Foreign Direct Investment

Foreign direct investment (FDI) plays an extraordinary and increasing role in international business. It can offer a company new markets and marketing channels, cheaper manufacture facilities, admission to new technology, goods, skills and money. For a host nation or the foreign firm which gets the investment, it can offer a source of new technologies, capital, processes, products, organizational technologies and management skills, all of which can provide a strong momentum to economic development. Foreign direct investment is defined as a company from one nation making a physical investment into building a factory in another nation. The direct investment in buildings, equipment and gear is the opposite of making a portfolio investment, which is an indirect investment. In recent years, given fast growth and transformation in global investment patterns, the

...

As such, it may take many appearances, such as a direct acquirement of a foreign company, construction of a facility, or investment in a joint venture or strategic coalition with a local company with assistant input of technology and licensing of intellectual belongings (Understanding Foreign Direct Investment (FDI), 2005)

In the past decade, FDI has come to play a main role in the internationalization of business. Reacting to changes in technology, growing liberalization of the national regulatory framework governing investment in ventures, and changes in capital markets intense changes have taken place in the size, scope and methods of FDI. New information technology systems, turns down in global communication costs have made management of foreign investments far easier than in the past. The sea change in trade and investment policies and the regulatory atmosphere globally in the past decade, including trade policy and tariff liberalization, easing of restrictions on foreign investment and attainment in many nations, and the deregulation and privatization of many industries, has been the most important catalyst for FDI's extended role (Understanding Foreign Direct Investment (FDI), 2005).

U.S. foreign direct investment into the UAE has augmented four-fold in the last few years, which reflects a strong vote of assurance by U.S. multinational firms in the UAE's future financial and political stability. In particular, the U.S. Bureau of Economic Analysis reports that the stock of U.S. foreign direct investment (FDI) in the UAE rose from just over eight hundred million in 2001 to at least four and half billion in 2006 on an historical-cost basis. This increase in the stock of U.S. investment in the UAE in fact far surpassed that of Saudi Arabia, where U.S. FDI increased by only twenty two percent, from almost four billion in 2001 to over four billion in 2007 (U.S.-UAE Business Council, 2008).

Political Risks of Doing Business in the UAE

There are many risks for companies that chose to do business internationally. In the UAE there a few things that a company should be aware of before setting up shop. Bribery is illegal and has no place in the UAE. It is an offence for UAE nationals and bodies incorporated under UAE law to bribe anywhere in the world. UAE enforcement is increasing, with a number of nationals and companies recently fined or imprisoned for their involvement in overseas corruption. Overseas corruption also hurts honest companies and raises the expenses of doing business. Surveys regularly show that a significant number of companies have lost business to a bribing competitor or turned down overseas opportunities due to overseas dishonesty (Overseas Business Risk -- United Arab Emirates, 2011).

The geographical location of the UAE in the Persian Gulf and the threat of the al-Qa'ida looking to target Western interests in the Gulf serve to raise the threat of terrorism in this region. Al-Qa'ida continues to make public statements calling for the removal of western interests from the Gulf, and it is believed that the UAE is viewed as a viable target for an attack. The association with Western commercial interests, the use of the UAE as a regional transit hub between east and west, and the large expatriate population all contribute to the potential threat (Overseas Business Risk -- United Arab Emirates, 2011).

UAE business is also at risk of being targeted and exploited by serious organized criminals, with the prospective loss from fraud and money laundering alone running into billions every year. The first step towards combating organized crime and reducing its impact is to understand the various threats involved.

Recommendations

When looking at the current relationship that the U.S. has with the UAE it would be highly recommend that business be done in that country. There is a long tradition of good relations between the two nations especially when it comes to trade. It appears that the UAE has a very open economy that is set up to foster good relationships with foreign companies. Their goal is to make it as easy as possible for foreign companies to either invest in or do business in their country. They have very friendly policies when it comes to foreign companies, which attracts a lot of different countries to do business there.

When looking at the telecommunications industry it can be seen that it is currently growing and is expected to continue the growth pattern that it is in. There is an especially large market for mobile phones as it appears…

Sources Used in Documents:

References

Doing business in the UAE. (2009). Retrieved from http://www.pkf.com/media/131854/doing%20business%20in%20the%20uae.pdf

Hill, Charles W.L. (2007) International Business: Competing in the Global Marketplace

(6/E), Irwin publishers, London.

Overseas Business Risk -- United Arab Emirates. (2011). Retrieved from http://www.ukti.gov.uk/export/countries/asiapacific/middleeast/unitedarabemirates/ov erseasbusinessrisk.html


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