Final Project Arabia Saudit - LeTourneau University - Longview, TX

By Danielle Walker,2014-05-13 19:52
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Final Project Arabia Saudit - LeTourneau University - Longview, TX


    Final Project

    Group 1

    Christie Dunklin, Liz Hinch

    Broderick McGee, Jamal Moharer & Boyd Sanders

    International Business

    Dr. Juan Castro

    March 23, 2003

    Table of Contents

? Executive Summary

? Situational Analysis

? Financing & Budgeting

? Location

? Labor

? Legal

? Marketing Strategy

? Works Cited


    Executive Summary

    Since we were small children we have been instructed to dial 911 in an emergency. This valuable call can instantly put us in contact with knowledgeable

    personnel to assistance in our times of need and dispatch trained professionals to help us. As Americans, it is easy to take for granted services such the 911 program and

    assume that all countries across the global have similar services. It was brought to our attention that the United Arab Emrites, located in the Middle East, does not

    currently have a nation-wide emergency network like our 911 system. Our purpose is

    to research the various aspects of UAE to determine if 1) there exists a need for such a system, and 2) if such a business could be successful.

    In the following pages, we have examined the many facets of starting a business in the UAE. Armed with knowledge from our International Businesses course we feel

    we have thoroughly exhausted all possible angles from which to view such a venture

    including financing, budgeting, location, labor pool, legal environment, and

    marketing strategy. We feel offering this service will be beneficial to the citizens and foreigners in the UAE, as well as financially rewarding for us.


    Situation Analysis

    In the late 1970’s, the British government granted independence to a tiny nation in the

    Persian Gulf. This was a tribal nation and a part of the country of Qatar that had maintained its

    association under British rule. After the independence, the various tribal elements reunited to

    form a country called the United Arab Emirates, UAE.

The government has established itself strongly in the world market. They have used the past

    experience of all the nations to form its constitution and business practices. During the last 30

    years, the nation has moved from living on the seaside in canopies and tents to one of the most

    sophisticated nations on the planet. They have a great infrastructure of highways, roadways,

    streets, and high-rise buildings. The UAE possesses airports with the most advanced technologies

    and massive construction beyond modern imagination. They have managed to obtain this great


success by educating themselves abroad and then returning to the homeland after their education

    was complete. The leadership has observed countries all over the world to identify what has

    worked for some and what has led to the downfall of many others in order to avoid the same

    pitfalls. As the saying goes, “it takes a smart man to learn from his mistakes, and an even smarter

    man to learn from someone else’s mistakes.”

     The UAE is located north of Saudi Arabia,

    south of Iran, and is located at the tip of the

    69.7% Strait of Hormuz. Geographically, it is located 15-64 Years

    at the narrowest point of the Persian Gulf.

    The UAE is approximately the size of Smith

    Age County, TX, encompassing 32,278 square Structure

    miles. It has about 2.4 million residents, of 27.7% 2.6% 0-14 65+ which 1.4 million are visitors and 1 million are YearsYears

    natives. Of the million natives, 60% are of

    Iranian descent, and the remaining are Arabs,

    Pakistanis, and Indian nationals. The natives are citizens of the UAE and hold the management positions of the firms. Income distribution

    among the natives is fairly equal. Most services are provided to them free of charge by the

    government. The official language is Arabic, although English is widely understood and used.

    Ninety six percent of the population is Muslim, while the remaining 4 percent is Christian, Hindu,

    or other. Of the 1.4 million visitors, 60% are of Persian descent, and the remaining is from

    around the world, primarily from the European nations. Typically, visitors are in the UAE as

    investors. The workforce of the UAE is composed mainly of Indian nationals, those of Pakistani

    descent, and some African nations. The labor force is imported and on work visas.


     The United Arab Emirates has learned not to dilute its small share of land and resources. Ownership is allowed only to citizens of the country, and investors must have local partners of majority interest. Visitors and workers are scrutinized and held accountable by stringent visas. Visas are issued to visitors on a weekend basis or for a specific time, as long as there is a local sponsor for their visit. Even if you plan to go to the UAE for a weekend shopping trip, a local sponsor is a necessity and in some cases the hotel where you plan to stay may be able to fill that role. Therefore, immigration traffic is highly controlled.

     The strict immigration laws have generated some complaints between the nations. For example, local natives have brought their workforce in from another country, and have kept the same workforce for an extended period of time such as 20-30 years. The employees who have been working there under a visa have had children in the UAE. Now, at age 18, the children are being forced to return to their native country,

    regardless of whether the children have actually ever been to their parent’s native country.

    By UAE law, however, they are not citizens and at legal age are forced to leave. This has caused a wave of disturbance because of humanitarian concerns due to the breakup of a family. Because of the strong bond between the UAE and the United Nations, these complaints have fallen on a deaf ear.

     Abu Dhabi is the capital of the federal government of the UAE. Other major cities include Dubai, Sharjah, and Fujairah. The United Arab Emirates, for all economic purposes, is considered a free trade zone. The country is tax-free as all transactions are free from both sales and income taxes. As a result, the entire middle-east shops for its needs, personal or industrial, in the UAE. The UAE has become a clearing house for all other neighboring nations. It is not uncommon to visit an airport and watch Russians, Indians, Pakistanis, and Iranians with a cargo load of goods they have purchased over the


    weekend while shopping. If you go to the seaport, industrial commodities move at the same pace. Both Dubai and Abu Dhabi have major air hubs and are served by 60 major international air carriers from around the globe. It is a busy environment. The busiest time, however, happens to be late evening and all hours of the night because of the high daytime temperatures. Traffic during the day is very slow, and at night they operate at full capacity due to the payload and high passenger traffic. This is a good indication of a thriving economy. The booming economy has been fueled because it is a free trade zone.

     The booming economy has attracted high traffic because of shopping. As a result, the citizens of the UAE are primarily landlords and investors that do not hold a regular job with pay. Health care for the citizens of the country is free. Their accommodations are free, as is fuel. The citizens have a surplus of funds, yet the government still provides these services free. To become a citizen, you must be born to a native. You can’t marry

    a native, become a resident, and eventually become a citizen like in the United States. If a citizen marries someone from another country, they will become a resident but never a citizen. Citizenship is a result of bloodline only.

     Healthcare is another high standard service that is offered free to citizens of the UAE, yet costly to the visitors and workforce. A lack of emergency medical services is noticeable because of the need for rapid deployment. Rapid deployment is a comprehensive package necessary to better serve the citizens and enhance medical services. The emergency medical services, (EMS), should be modeled after a successful program in Europe or the United States, and include a 911-system, rolling fleet of ambulances, helicopters, and fixed wing aircraft. Historically, this country buys state of the art technologies and brand new infra-structure. They will not entertain second hand


    equipment even if it has been refurbished to factory specifications. A prime example of this is Emirate Airlines. Some companies buy used aircraft for their fleet. The UAE, however, buys brand new airbuses. This philosophy has also been translated into the citizen’s business practices. Most UAE citizens have there own corporate jets that are

    purchased new from the factory.

     With this purchasing strategy in mind, the EMS infra-structure should allow for the purchase of new equipment, new ambulances, new helicopters and aircraft. It is suggested that the 911-system include a demographic survey of all the citizens and visitors that enter the country. The data will be collected at the point of entry so it can be entered into the 911-data base. If a hotel calls one number, for example, and they need an ambulance for room 204, the computer knows that this room is occupied by John Doe who arrived in the UAE two days ago. According to the questionnaire completed at the airport, he is Type B diabetic with heart disease. All of this information is readily available, and the nearest ambulance will be dispatched to the hotel. The need for helicopters arises due to offshore oil fields and remote travel into the Persian Gulf region. The need for fixed wing aircraft is for rapid deployment to nearby countries when specialists or facilities not available in the UAE are required for the care of a patient. Further elaboration on numbers and budgeting is forthcoming.


    Financing & Budgeting

    Since the 1960s, the UAE has progressed from a largely subsistence economy to a

    developed one that provides one of the world’s highest standards of living. The main engine for the extraordinary growth and development of the economy has been the

    successful marketing of their natural resources, which include oil and natural gas. It was

    reported by the CIA World Fact Book that at present levels of production, oil and gas

    reserves should last UAE for more than 100 years. Although, non-oil trade has played a

    significant role and all the emirates have begun to diversify their economies. The 2002

    gross domestic product-per capita (GDP) was $21,100 with a growth rate of 5.6%. For

    comparison the United States GDP-per capita of the same time period was $36,300 with a

    growth rate of 0.3%. The total workforce of the UAE was estimated at 1.6 million in

    2000, with 78 percent working in services, 15% in industry, and 7% in agriculture. A

    unique feature of the UAE’s economy is its dependence on foreign labor. More than 90 percent of the workforce is made up of expatriates.

    The dirham (pronounced dir-ham) is the official currency of the UAE. Dirham notes

    are in 5, 10, 20, 50, 100, 200, 500, and 1000 denominations. The dirham is divided into

    100 fils, coins include Dh1, 50, 25, 10 and 5 fils (10 and 5 fils are rarely used). The

    value is written in Arabic only. There are no currency regulations and foreign currency

    of almost any denomination is readily exchanged in the UAE. The dirham is index linked

    to the dollar and the official exchange rate is Dh3.671 = US$ 1.00. The best exchange

    rates are generally available at private moneychangers found throughout the UAE.


United Arab

    Emirates Currency and General Information ( UAE )

    United Arab Emirates Dirhams United States Dollars

    1.00 AED 0.272280 USD

    3.67269 AED 1 USD

    The United Arab Emirates boasts a progressive banking system with 21 domestic

    banks and 27 foreign banks. The Central Bank is the governing body that regulates and

    supervises all banks in the UAE. Its duties include formulating and implementing

    banking, credit, monetary and fiscal policy. The central bank remains focused on

    controlling inflation, which was only 1.4 percent in 2002 due to its vast overseas’ assets, and protecting the currency peg with the U.S. dollar. The Currency peg means that UAE

    interest rates will track trends in the United States rates. There also exist two banks in the

    UAE that subscribe to the Shari’ia, or Islamic law, in their banking practices. The

    underlying principle is the forbidding of interest accrual. These banks provide an

    alternative for devout Muslims and are becoming more common throughout the world.

    UAE money supply is directly linked to the oil market and their agreement with OPEC

    on production levels. Each emirate has its own laws on corporate taxation. Foreign

    companies do not pay taxes, except for banks, which are taxed on profits at a rate of

    around 20%, and oil producers, which pay taxes and royalties on their equity barrels.

    Nevertheless, indirect taxes include a 10% tax on hotel services, 5% tax on annual rent of

    residential property, and 10% tax on rent of commercial property.

    Exports equaled $47.6 billion dollars in 2000, while imports were $28.6 billion. The

    UAE is a member of the WTO and imports and exports are subject to few controls.


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