Country Risk Management

In

UAE

Presented by -Sandeep Vaishya 54

Vikas Waghmare 57

Under the guidance of Prof. S.B. Chaughule

Country Risk Management

In

UAE

Presented by -Sandeep Vaishya 54

Vikas Waghmare 57

Under the guidance of Prof. S.B. Chaughule

Project Detail

MH BOUCHET/CERAM-Global Finance

UAE

MH BOUCHET/CERAM-Global Finance

Capital-Abu DhabiLargest city -DubaiEstablishment-December 2, 1971  Population-  2009 estimate 8,190,000 Birth rate: 16.02 births/1,000 population (2010 est.)Death rate: 2.11 deaths/1,000 population (July 2010 est.)Life expectancy at birth: 76.11 yearsReligions: Muslim 96% ,other (includes Christian, Hindu) 4%Languages: Arabic (official), Persian, English, Hindi, UrduLiteracy: male: 76.1%,female: 81.7% (2003 est.)Naturals- peteroleum, gas

Currency-UAE dirham(AED) Exchange rates: Emirati dirham's (AED) per US dollar - 3.673 (2009)GDP (purchasing power parity): $186.8 billion (2009 est.)GDP (official exchange rate): $230 billion (2009 est.)GDP - real growth rate: -2.7% (2009 est.)GDP - per capita (PPP): $38,900 (2009 est.)GDP - composition by sector: agriculture: 1.1%,industry: 48.5%,services: 50.4% (2009 est.)Labor force: 3.152 millionUnemployment rate: 2.4% (2001)Population below poverty line: 19.5% (2003)Inflation rate (consumer prices): 1.5% (2009 est.)

PEST Analysis

UAE

POLITICAL RISK U.A.E. has no political parties. The rulers hold power on the basis of their dynastic position and their legitimacy in a system of tribal consensus. UAE is a Federation comprised of seven separate emirates. Each emirate retains a high amount of political and economic independence within the federal system. Regional political risk is obliviously a major issue here, as foreign capital could well take flight in the event of greater instability Favorable tax laws and political stability also assist in making the UAE a prime business location. UAE government policy recognizes that the private sector is of major importance in the drive for diversified economic growth and full employment for nationals.

Medium Political Risk - B

ECONOMICAL RISK UAE currently has one of the fastest growing economies in the world UAE has a highly industrialized economy that makes the country one

of the most developed in the world based on various socioeconomic indicators such as GDP per capita, energy consumption per capita and human development index.

In 2009, its GDP, as measured by purchasing power parity, stood at US $200.4 billion. The GDP per capita is currently 14th in the world and 3rd in the Middle East

The UAE has an open economy with a high per capita income and a sizable annual trade surplus.

Oil and Natural gas exports play an important role in the economy, especially in Abu Dhabi

The government increased spending for infrastructure and job creation, and there is a greater opportunity for private sector Investment.

>> A massive construction boom, an expanding manufacturing base, and a

thriving services sector are helping the UAE diversify its economy.

Dubai is rapidly growing tourism industry.

UAE's economy, particularly that of Dubai, was badly hit by the financial crisis of 2007–2010. In 2009, the country's economy shrank by 4.00%.

Low Economic Risk - C

Socio & Cultural Risk Rooted in Islamic culture, the UAE has strong ties with the rest of the Arab and Islamic world. Nearly all citizens are Muslims Discrimination in the workplace is common, prospective employers will specify religion, nationality The government is committed to preserving traditional forms of art and culture, primarily through the Abu Dhabi Cultural Foundation Dubai is the only emirate of the UAE with both a Hindu temple and a Sikh gurudwara, Christian churches are also present in the country. Womens are seen as equals and are protected by rights and privileges laid down by Islam

High Social & Cultural Risk - A

Legal Risk UAE does not have any enforced federal income tax legislation for general

business.

The key risk comes from a potential US-Iran military confrontation.

UAE as being less corrupt than almost all of its regional peers.

Medium Legal Risk - B

Logistics risk A challenges is emerging to Dubai and the UAE’s role as the region’s key

transport and logistics hub.

Dubai Logistics City, Jebel Ali international airport will have the capacity to handle 12mn tones of cargo annually.

Strong investment in transport, infrastructure and the global ambitions of companies like Emirates airlines and DP World will be strong positive factors.

For the 2007-2011 forecast period, it is expected that transport and communications sector to continue outpacing the economy as a whole. It will achieve average annual growth of 6.3%, versus 5.8% for overall GDP.

The total value of transport and communications GDP will rise to US $ 18.14 bn in nominal terms by 2011, representing 6.8% of the UAE’s GDP.

No Logistic Risk

SWOT Analysis Strengths

Free Trade Zones, relative ease of business start up Weaknesses

One needs a network of people in order to expand opportunities Trust must be gained before any business transaction occurs

Opportunities Large export market Trade missions

Threats Sandstorms and dust storms occur frequently.

Advantages in doing business UAE At present time the economy is booming – GDP having risen by 20.4

% in 2000

UAE supports a liberal economy and is committed to free trade,

UAE currency is secure and freely convertible

There is no restrictions on profit transfer of capital repatriation.

Import duties are low (i.e. 4%) and in the case of foodstuffs, medicine, agricultural products, and items imported for use in the free zones are non-existent.

UAE has one of the most liberal business environment in the region and foreign investment is actively encouraged in many sectors.

>>

Labor costs are competitive and corporate tax and personal taxes are nill.

BOP- surplus.

Entering the Market A local sponsor or service agent Trade license Register with the local Chamber of Commerce and Industry, the Economic

Development Department, and with the Minister of Finance. Company can function only within the emirate where the license was granted Separate license must be obtained to open a branch in other emirates Free Trade Zones

100% foreign ownership is allowed with no recruitment or sponsorship problems Corporate tax and customs duty exemption on imported raw materials and

equipment No levy on exports and imports The Free Zone Authority gives a questionnaire to assess the company's

requirements and whether it can be met. Once the company submits the questionnaire, it will be given a license

application, a list of invoices required for planning, consumer request for electricity and Form B for environmental concerns (if applicable).

Analysis of risk

Low economic risk – CMedium political risk – BMedium legal risk – BHigh social & cultural risk – ANo logistic risk

Hence, there is medium risk to invest in UAE