UAE and Globalization - Attracting Foreign Investments

Contents

Introduction

The Importance of Foreign investment

UAE’s importance in the World

Effects of Globalization on UAE in Relation to Capital Movements

UAE investment portfolio

Recommendations and Conclusion

Works Cited

Introduction

The race to attract investment from abroad is equally important for al the Emirates. However, the major problem facing theseEmirates is the strict federal requirement for the foreign firms of forming necessary joint venture with local partners wherein the local partner must at least have a share of 51% of the venture. To remove this obstacle to foreign direct investment and lower the negative image of this requirement, certain free zones have been set up. These free zones allow opportunity to the foreign investors to have 100% ownership of the entire venture or investment. By 2002, UAE had developed about 11 different free zones. Besides offering 100% ownership of the project, these zones also offered 100% tax-free and investment opportunities to the foreign investors. The result was that UAE became one of the most attractive investment point and, consequently, a fast developing country (Encyclopedia of the Nations).

UAE’s fast development pays off:the country becomes one the best choices for overseas expansion. To add to the development of UAE active participation in globalization is one of the most necessary actions required for UAE to attract foreign direct investment (FDI) and thus further strengthen the economy. To do so, UAE has ventured in its well-known real estate in order to increase its wealth. The result of these ventures is that UAE is able to attract huge amounts of FDIfrom the outer world (Ukessays).

At present, the level of FDI in UAE is high coming mostly from Europe, the USA, UK and Russia. Besides, FDI, More and more products, services and workers are moving in due the increasing openness created by globalization. One of the most important factors for these developments is that the legal system in UAE is based on true justice and honesty. There is very little risks facing foreign firms form any political setups and powerful authorities (UKessays).

The result of these factors is that UAE has become the top leader in luring foreign investments. In 2005, UAE managed to attract an amount of $12 billion form the outside world. This huge FDI was recorded to be about 40% greater than the FDI raised in 2004 (MENAFN).

The Importance of Foreign investment

One of the most talked about issues of the modern world is the globalization as it has greatly affected countries and their people. The countries had to develop themselves inline with the ever- increasing demands of the necessity of globalization. As a result, in their efforts to cope up with the global changes some countries are doing well and others are still lagging behind. Nevertheless, Globalization is shaping not only cultures, civilizations, human nature as well as politics and investment opportunities for the countries around the entire globe (Essay-911).

Globalization has connected the entire world and hasultimately resulted in increasing trade of goods and services across borders.The context of business environment and the nature of their operations, ultimately, have been changed.Today one company develops the product and the entire world gets the benefit.Investments are flowing all around the globe leading to greater competition among countries for these investments. The investors are also growing more and more in their knowledge adding further to the escalating competition for investments. Furthermore, technology and management techniques are being encourageddue to this amplified flow of investment and the old methods of production, traditional technologies are disappearing, besides bigger organizations,even at smaller business levels as well(Goliath).

Over the last decade, foreign investmentshave grown with such a pace that was never witnessed before. From 1980 to 1998, international capital flows, as a sign of investment across borders, grew by almost 25 percent annually. This growth has amounted to an equal of 5% of the rate of international trade all around the world(Goliath).Thisgush in the flow of the foreign investment is not only an effect of the globalization process but its cause too. As a matter of fact, the gigantic growth in levels of foreign direct investment (FDI) has surprised the investors as well as fueled the pace of globalization. The global total FDI flow grew from $57 billion in 1982 to $1271 billion in 2000 (nearly 20 times the level two from twenty years earlier)(Goliath).

The pace of the globalization, on one hand, has greatly altered the business practices, technologies and operations in the entire world;it has also raised certain questions too in many minds. Globalization, for example, is accused of altering the nature of human being as well as for transforming economic, cultural and political relationships around the world both positively and negatively. Disregarding this fact, the countries today are measured for their success in the global context by their ability to raise foreign investment. Newer rules for the acquisition of foreign investment are being made which have impacted the share of trade of every country in the global markets. Nonetheless, other economic concernsas economic development, solving the pollution problem, labor standards and economic stabilizing the economy are also mounting especially for the less developed world(Goliath).

The oil and gas rich states of UAE are important members in the changing states-of-affairs of the process of globalization. UAE’s nominal Gross Domestic Per Capita is ranked at the 20th place in the world. In addition to this, its Human development index is it on the 49 place in the world (Essay-911). There is more to it, UAE is rapidly transforming into an ultra-modern and state-of-the-art investment hub through its efforts of diversification of the economy. However, the country has small territory and population;most of the labor-force comprises the expatriates.

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