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The United Arab Emirates UAE has been prompting diversifying its economy for years. This has opened up numerous private investment opportunities. Through the attraction of direct foreign investments and private national investment, the UAE has been experiencing a considerable growth in investments. As much as business opportunities and incentives in the UAE are on the rise, attention has been given to a positive business environment that has allows best practice methods, appropriate legal frameworks and transparency (Al Abed et. al, 2006.p.94). Many foreign investors have been attracted to the UAE due to the foreign free zones with 100% ownership and the incentives for free tax and custom duties to all forms of businesses except oil and banking industries. This offers a favorable environment for chain store supermarket such as Tesco to be able to open up branches in the UAE especially in Dubai and Abu Dhabi. The World Bank identifies the UAE as one of the least difficult countries to open a business as it only needs up to 29 days to set up a new business. The cost of setting up a business is rated at 24.4 percent compared to 76 percent in the Middle East and North Africa regions (MENA). This paper analyses the business environment in the UAE. It gives recommendation on the viability of Tesco supermarket expanding its branches to the UAE from UK considering the favorable business environment in the UAE (IBP, 2010).
The UAE Business Environment Analysis
There are two ways of conducting business in the UAE; through joint partnership or through the free zones. At least 51% of the business must be owned by the UAE nationals and license application system is easy to follow and varies in every Emirate state. Free Zones have become attractive options for establishing a business for foreign investors and businesses. Business operating within a free zone can be owned 100 percent by a foreigner, exempted fully from any forms of taxation, whether corporate tax or personal income tax. There is less documentation required and assistance is offered in labour recruitment sponsorship and housing (IBP, 2010). Although the restriction of full business ownership has affected foreign investors, the introduction of free zones has made it possible for full business ownership though only within the zones. The creation of the Higher Corporation for Specialized Economic Zones (HCSEZ) is a major step in promoting diversification. The special zones has provided and integrated infrastructure, a suitable business environment and professional services (Al Abed et al. 2006.p.96).
The introduction of the Abu Dhabi Chamber of Commerce and Industry (ADCCI) brought in an interactive online access. This was in order to rationalize UAE’s imports and exports. The trade map is to provide use full information to over 180 countries and over 5000 products. Local importer and exporters will be able to monitor the market dynamics and performance (Al Abed et al. 2006.p.96). The UAE has one of the best infrastructures in the world. Its telecommunication in mobile, fixed telephony and internet access is advanced and using the latest technology to its advantage. The road network is perfect and has world class standards airports. The UAE government has invested well in infrastructure and now opening up for the private sector to also invest into it. Being rich in oil reserves, the UAE has broadened its economic base line and managed to reduce exposure to oils price fluctuations (kothariauditors.com, 2011). The country has a well transformed principality to a modern state with high living standards. The business environment encourages the local and foreign investors with well and simple defined liberal commercial laws and regulations that meet international standards n dimed to protect investors (kothariauditors.com, 2011).
The UAE economy has been on the increase and has expanded largely in for the last 26 years to become the third largest Arabs economy. The government has dedicated over $13.4 billion towards non oil sector, enlarging the telecommunication and information technology and the internet sectors. Entrepreneurs all over the world are seeking favorable business environment and the UAE has been successful in providing a promising environment for establishing and expanding business ventures. The strategic position of the UAE between Asia, Europe and Africa is a great advantage to investors (Al Abed et al. 2006.p.96). The country is near the world largest and fastest growing economies such as India and China. Consumer spending trends in the UAE is ranked very high. Personal spending is high for its rising foreign population due to business expansion. The country being a tourism hub and a center for business worldwide business, spending is high and this calls for even more stable market (IBP, 2010). Doing business in the UAE is easy and time saving. The encouragement of direct trade in establishing dealers and distributors to creates a business friendly environment. Being a leading regional trading hub, the UAE offers access to large market of more than $17billion in domestic import annually. The market has a wide variety f imports from all over the world a great opportunity for suppliers of various products being served with over 170 shipping lines and close to 100 airlines (kothariauditors.com, 2011).
The incentives provided in the UAE business environment are suitable for the UK based Tesco supermarket to open a branch in such a rich environment with vast investment opportunities. The UAE provides an environment with no foreign exchange restrictions, trade barriers and the super modern infrastructure is beneficial to any business. UAE provides a desirable climate that entrepreneur are looking for all over the world (kothariauditors.com, 2011. It’s in the UAE an open market can be found with great incentives that meet any business requirement especially for Tesco supermarkets venturing into opening branches worldwide. The UAE has a rich diversified economy which has very high economic strength that can grant success to any business. Investing in UAE will enable the business to utilize the abundant supply of human resources (IBP, 2010). Professionals are moving to the UAE for greener pastures from all over the world and the UAE nationals also seeking to join the competitive private sector Al Abed et al. 2006.p.96). The UAE government provides efficient services to businesses especially in assisting businesses to be put up, the adjusting of rules and regulations and creation of specific departments that deal with matters in a faster and more convenient way to support the growth of the countries market. Setting up a branch of Tesco chain supermarket in the UAE is a positive decision as the company will be able to tap a large number of resources the country has provided in place o be enjoyed by investors (kothariauditors.com, 2011).
The UAE is the fastest growing economy in the world currently. Its seven states constitution has provided the country with high GDP per capita from its wealth of oil and expansion on non oil businesses. With the growing presence of Asians, and Europeans, is enjoys a wide variety of different immigrants from over 16 countries making it a true cosmopolitan country. The UAE has a vibrant free economy which has been on the increase due to the free market trend. Implementation of good economic policies like the introduction of free zones, tax exemptions and a secure and reliable marketing environment, investors have found the region a better place for establishing their businesses. The UAE is well situated to near fast growing economies like China and India makes it a hub for international business. The region is recommendable for setting up a branch of Tesco supermarket as it will enable the company to utilize the vast resources in the region.