Effect of Globalization on United Arab Emirates Market

Effect of Globalization on United Arab Emirates Market

The phenomenon of globalization is no more new for the majority of people on the Earth. Despite the fact that all countries develop in different ways and with different speed, the world is a one whole that lives according to the common rules. The integration of culture, politics and economy is characteristic for today’s world.
In this paper the effect of globalization on the United Arab Emirates market is researched. To begin, it is necessary to analyze the conditions of development of the country. At first sight, the Middle East may not seem an attractive region for investment if to consider its territory and population. However, regarding its resources of oil and gas that are 62 % and 40 % of the world’s reserve respectively, it becomes clear why these countries take an active part in globalization. The discovery of oil was a great event in the history of the UAE that changed radically its economy. The United Arab Emirates turned from a poor area with desert princedoms into a developed state with high economic indicators. Today according to its nominal gross domestic product per capita the UAE occupies the twentieth place in the world and according to its Human Development Index it is on the forty-ninth place in the world. It is necessary to mention that the country has rather small territory and population. The resources of oil had not been so important without the influence of globalization that touched all corners of the world and developed due to different factors.
First of all, globalization means the cooperation among all countries, particularly in economy. There are several economic ways that conditioned the globalization. The methods of outsourcing and insourcing contributed much into the development of international collaboration. Outsourcing is the relationship between the client and the supplier that bases on a contract, under which the supplier gets the means of production and the client acquires the services of the supplier during the validity of the contract. This model usually reduces the company costs and makes the use of resources, capital and technologies more effective. Insourcing is the opposite model and is even more efficient. In order to cut costs of labor and taxes companies delegate some operations to subcontractors, a formation that specializes in them. It usually helps to control the production of important goods. Today the UAE attracts a lot of corporations and foreign investors because it provides all facilities for the development of business. As an example of a prosperous city that quickly progresses and attracts more and more investors we can name Dubai.
The development of collaboration between the UAE and other countries was conditioned by the international interest in the perspectives of the Arab United Emirates. The government of the UAE realized the importance of creation an open country that can offer investors something new and attractive. Thus, for instance, offshoring, which consists in the relocation of production processes or services from one country to another, also plays an essential role in the globalization, as it is the direct cooperation of countries.
Being at first based only at energy reserves the economy of the UAE now tends to develop other spheres that can bring profit. The policy of the government of the Emirate of Dubai is a bright example of the aspiration for the active participation in the globalization. “Dubai attracts foreign investors and corporations because of the considerable economic opportunities offered to businesses there. The vision of Vice President of UAE and Prime Minister and Ruler of Dubai Sheikh Mohammed bin Rashid al Maktoum is to create an open society where international businesses are invited to actively participate in building a better infrastructure and improving business relations.” (Hollis, 2000, 52)
Trying to move away from the dependence from the natural resources it began to search for other sources of income and therefore, it started to develop the sphere of tourism and international finances. For example, the real estate market underwent certain liberalization, which favored the increase of buying land and construction of buildings for hotels, villas and offices.
Economy of the UAE is based not only on the foreign direct investment but also on the export and import markets. It is obvious that it was globalization that permitted the UAE to expand the market. If to examine its export market, one can see that among its export partners the first place is occupied by Japan where 24,5 % of all UAE’s export goes, South Korea is at the second place (9,8 %), Thailand is the third – 5,6 % and India is the forth - 4,3 %. The main export goods comprise natural gas, crude petroleum, dried fish and re-exports. The import market embraces even a wider range of countries, including Germany, UK, Italy, France, United States, China, Japan and India. Import commodities are equipment and chemicals for the development of inner entrepreneurship. (Sabal, 2002, 156)
Another guarantee of United Arab Emirates success is the application of the latest technologies. The market depends on the compliance to the modern trends, as production function is greatly influenced by the new knowledge. Advanced ideas are efficient in different spheres: in production when more goods are produced; in management, when costs are lowered and the volume of sales increases or in the entrepreneurship itself when performance management is on the high level and the business owner is able to see the perspectives of certain projects.
However, the globalization has its disadvantages and it is not as safe as it may seem. Its effects may also be harmful for the emerging countries. Globalization interferes in the development of the unique culture and mentality of the UAE population. The deep-seated Islam traditions have to be violated if the country wants to attract tourists and investors from all over the world. The country with rigid adherence to rules for both locals and foreigners risks to lose the majority of its visitors, especially tourists. Therefore having entered the process of globalization the UAE had to adapt to a new status of a free country with broad views. It reflected not only in changes of the culture but in the economic reforms as well. Again, here we can give an instance of Dubai. Being surrounded by such conservative countries as Iran and Saudi Arabia, Dubai attracts more businessmen and investors by the possibilities it gives. “Dubai’s free trade zones, which allow companies to work in tax-free shelters, have attracted many corporations.” (Hollis, 2000, 52) Being similar to the Western ones, living conditions in Dubai, as the most liberal city, and in the UAE in general favor the stream of people, who don’t have to change much their way of life. However, such changes have a good influence on the economy and the penetration of globalization into the country but not on its culture and religion. Globalization leads to the assimilation of many countries, in its network it is very difficult to preserve traditions and former way of life. Muslims have to abandon some of their principles for the sake of globalization.
Another danger that is concealed in the process of globalization is connected with international finances. Especially it concerns developing countries that should highly control its free capital flows. The emerging market should meet certain restraints such as the quality of establishments and the level of financial development of the country. Otherwise, such absence of financial control that might be caused by globalization can lead to macroeconomic instability. The fact that the advanced countries largely profit from the process of globalization is undisputable; still the absolute benefit of developing countries is under question. On the one hand, foreign direct investments favor growth of the country; on the other hand, the importance of correct policy and reasonable disposal of the received money emerges. The danger of financial instability due to the incapacity to channel funds emerges. Thus, the essential condition of the openness for the financial globalization is the verification of the country readiness for it. First of all government should check whether the level of institutions and the financial sector of the country can fully benefit from the investments and not bear expenses.
To conclude, today the process of globalization is in full swing. It has involved all the countries and continues to progress. In this paper, we have analyzed the influence of globalization on the Unites Arab Emirates, particularly on their market that greatly developed due to the globalization. The export and import markets have broadened and today include a large number of countries. The government of the country takes an active part in the globalization, adjusting to the latest demands and creating all facilities for foreign businessmen and investors. The flow of foreign direct investments favors the development of economy and contributes much to the development of the infrastructure in the country. Due to certain economic methods as outsourcing, insourcing and offshoring that are the keystones of globalization, the UAE manages to stimulate its cooperation with other countries and turns into am important area of business. Still, the influence of globalization can be also negative as it usually presupposes the openness of country. Hence, the changes in culture, religion and traditions are evident. Assuredly, the control of free capital flows is necessary in emerging countries in order to prevent the instability of economy.
Nowadays we can say that the United Arab Emirates successfully reaps the benefit of globalization and becomes a region of great interest for businessmen.

References
Hollis, Rosemary. 2000. Managing New Developments in the Gulf. Brookings Institution,
Washington, DC.
Sabal Jaime. 2002. Financial Decisions in Emerging Markets. Oxford University Press, USA.