Political Economy Analysis of Dubai and FDI Attractiveness

This report provides a comprehensive analysis of Dubai's attractiveness for foreign direct investment (FDI), considering its political economy. It begins with an introduction to globalization and its impact on Dubai, highlighting the city's appeal through tourism and construction. The report then delves into a political economy analysis, examining Dubai's political, economic, and legal systems, and their influence on FDI. The political system analysis covers government policies, initiatives, and potential risks, while the economic system analysis focuses on Dubai's mixed economy, FDI inflows, and key sectors. The legal system analysis explores the legal framework supporting local and international enterprises. The report concludes with recommendations for potential investors, suggesting investment in industrial, IT, and tourism sectors, and emphasizes the importance of considering Dubai's legal and administrative processes. The document also includes references to books, journals, and online resources used for the analysis.

GLOBALISATION

EXECUTIVE SUMMARY
Dubai is considered as the most popular City in United Arab Emirates. It is best known
for Tourism sector and it is attracted through sports events and construction projects. The
international trade is rapidly growing in Dubai. Thus, it creates opportunities for Foreign Direct
investors. The Report had covered the Political Economy analysis of Dubai. This includes,
Political, Economic and Legal Systems and the attractiveness of FDI in Dubai. Lastly, the
assignment had provide necessary recommendation and conclusion.

Table of Contents
EXECUTIVE SUMMARY.............................................................................................................2
Table of Contents.............................................................................................................................3
1. INTRODUCTION.......................................................................................................................1
2. Political Economy Analysis.....................................................................................................1
2.1. Political System..........................................................................................................1
2.2 Economic System........................................................................................................2
2.3 Legal System...............................................................................................................4
3. Recommendations....................................................................................................................5
4. CONCLUSION............................................................................................................................5
REFERENCES................................................................................................................................6

1. INTRODUCTION
Globalisation means interaction between the people, communities, government belongs
to different nations. It includes foreign direct investment (FDI) which emphasis on business
operating on wider level and on international scale. This Assignment will describe the impact of
FDI in UAE- Dubai. It is one of the most popular city in United Arab Emirates. Dubai is
attracted through sports events and construction project. Thus, making FDI in Industrial sector
will be more profitable. The international trade is growing from early 20th century. Hence,
Dubai economy has growing due to globalisation.
The Project report will determine the attractiveness of FDI for Dubai. Furthermore, it will
conduct political economy analysis in which Political, Economic and Legal System will be
covered. Lastly, it will provide conclusion and recommendations.
2. Political Economy Analysis
It is a tool that identifies the influence of practices of international business through
considering political, economic and legal systems. It put emphasis on distribution of resources in
different context that results in developed outcomes. Industrial sector of Dubai is growing at its
peak. According to statistical data it has attracted Dh38.5 billion FDI in the year 2018. Thus,
this provides chance for potential investors to make FDI in Dubai.
2.1. Political System
The political system of UAE is consisted of seven emirates which are dominated by Abu
Dhabi. The local government of Dubai is ruled by sheikhs who belongs to Royal family and
based on conventional patriarch autocracy (Robertson, 2017). The constitution of Dubai is
considered above the authorities. According to the federation the ruler of Dubai is called as
Prime minister of United Arab nations.
Benefits
The government of UAE has passed various laws in order to attract FDI in the country as
they want to reduce the dependency on the oil. They have introduced new polices which are
flexible and had created opportunities for the investors to look into it (Kollman, 2016). They also
have taken various initiatives through focusing on technological up-gradation by introducing
artificial intelligence and block-chain system in their industries as E-commerce. The government
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of the country is also allowing the flexible management across the businesses (Jones and Wren,
2016). Thus, the industrial sector is at boom and this support the foreign direct investors in the
country's economy.
Risk
One of the most negative impact of political system on Dubai is that Abu Dhabi as the
largest producer of oil has claiming administration over Dubai. Henceforth, UAE has political
debate over oil refineries as there is no support from countries nearby (Krugman, 2017). There is
argument over ownership of reserves.
2.2 Economic System
The Dubai economy is mixed type, as its productive asset is owned by Emirates and
considerable opportunity is given to private enterprise. This is the 2 largest economy of Arab
nations and its 20 % of Gross domestic product (GDP) is generated through tourism sector. It has
generating revenue moreover from the oil industry. The unemployment rate is also low in
country's economy.
Figure 1: FDI in UAE
[Source: UNITED ARAB EMIRATES: FOREIGN INVESTMENT. 2016]
From the above image it could be noted that FDI inflow within country is increasing from
2015-2017 which is largely concentrated in sectors like real estate, insurance, manufacturing,
construction and trade as well. There are certain strength of UAE which could be included very
easy access to low energy cost, oil resources and high purchasing power as compared to other
countries. There is also absence of direct business taxation within country especially in sectors
like that of telecommunication, oil and banks other than this there are also existence of stronger
and profitable banking sector. In year 2018 Council of Ministers included that there should be
100% foreign investors for owning their companies and due to this only inflow of FDI increased
to 15-20% into the coming year. It was also added that UAE is ranked one of the best country
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into world with ensuring access to electricity for paying taxes and new business. So this new law
will be marking up new growth rate into country with having business friendly climate in UAE.
UK is regarded to be the main foreign investor in UAE in year 2016 which is 16.2% of total FDI
then next is India which is investing 5.4% of total investment. Other countries include like that of
USA 4.2%, France 4%, Saudi Arabia 3.6%, Austria 3.4% and Japan 3.2%. According to the
same report it could be included that wholesale, retail trade and car repairs are among main
sector which is having highest contribution into increasing FDI of Dubai that is about 24.9%.
Another sector which is having more FDI inflow is real estate that includes 23.8%, financial and
insurance is 19.3%, manufacturing is 9.2%, mining is 8.8% and construction is 3.9%.
Figure 2: FDI INFLOWS BY COUNTRY
[Source: UNITED ARAB EMIRATES: FOREIGN INVESTMENT. 2016]
Figure 3: FDI INFLOWS BY INDUSTRY
[Source: UNITED ARAB EMIRATES: FOREIGN INVESTMENT. 2016]
Benefits
In UAE Dubai holds 2nd wealthiest position. In the year 2004, International Financial
Centre has allowed Dubai to make improvement in service industries such as Finance and
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Information technology. Foreign trade is being growing up to 11 %. There are no trade barriers
and quotas in Dubai (A PESTLE Analysis of The UAE, 2016). Thus, these elements create
opportunity for the investors. As real estate and construction sector has contributed 22.6 to Dubai
economy (Iamsiraroj, 2016). Therefore, this creates opportunities for investors to make
investment in construction sector.
Risk
In Dubai rules and regulations of governments are strict on labour force and also they are
not allowing person who stay in Dubai beyond the time limited allotted by the authorities. Thus,
this can be difficult for foreign direct investor to set up their business in Dubai (Rupert and
Smith, eds, 2016). Due to globalization there is mixture of diverse culture which sometimes
create problem for foreign direct investor.
2.3 Legal System
The Legal System of the UAE is consisted of the Civil and British Law system. It is
based on constitution of Arab Emirates. The laws of UAE is comprises both of federal and local
courts of the supreme court in Abu Dhabi.
Benefits
The legal laws and regulatory framework of the Dubai in today's globalization world has
supporting the local and international enterprise. The international businesses in Dubai are also
in growing stage. Thus, this creates opportunity for the investor. The Local jurisdictional is also
supporting the FDI (Mowforth and Munt, 2015). The firms can easily set up their business in
Dubai. Ruler governance of the Dubai has also identified that in dynamic world, laws and
regulations needs to be flexible. Thus, they have introduced laws that have significant comfort to
the investors. The legal framework of UAE-Dubai has also supporting innovations and providing
job possibilities. Therefore, this makes easier for the foreign investors to take investment
decisions.
Risk
There are strict laws and regulations in UAE- Dubai. Thus, it is considered as the safest
city of the world. They give strict punishment to those who break laws (Tang and Tan, 2015).
Therefore, the investors who are going to make investment in the country have to consider those
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laws before taking any financial decisions (Wright, 2016). They have to consider the intellectual
property and administration process of Dubai. The Licensing process is also rigid. They require
to fulfil all the criteria and procedures before doing any investment.
3. Recommendations
On the basis of the outcomes of political economy analysis. It is considered that UAE-
Dubai is an attractive marketplace for Foreign Direct investment. This is because the economy is
fostered by favourable political environment, progressive economy and legal reforms. This study
suggests that Potential investors should invest in the industrial, IT and tourism sector due to
significance of globalization and favoured economy of Dubai. As it could be noted that country
is regarded to as one of the most influential economy of world. In addition, the investor can take
advantage of political polices that are overwhelming investment in UAE. As the government has
taken initiatives in technological advancement. As the Council of Minister has indicated to
increase their foreign direct investment to about 100% in certain industries. Thus, there is
opportunity in IT sector for doing foreign investment and there are no trade barriers and quotas
in Dubai.
4. CONCLUSION
It has been concluded from the above project report that Globalization promotes trading
from one nation to another. The organizations can run their business operations on an
international scale due to globalization. It has been summarized that the government is also
supporting Foreign Direct investment in UAE-Dubai. Thus, these create opportunity for foreign
investors but they have to consider the intellectual property and administration process of Dubai.
This assignment has determined that Potential investors should invest in the industrial, IT
and tourism sector due to progressive economy and legal reforms in Dubai. As real estate and
construction sector has contributed 22.6 to Dubai economy. Therefore, this is also another option
for potential investors.
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REFERENCES
Books and Journals
Iamsiraroj, S. (2016). The foreign direct investment–economic growth nexus. International
Review of Economics & Finance.42.116-133.
Jones, J., & Wren, C. (2016). Foreign direct investment and the regional economy. Routledge.
Kollman, K. (2016). Same-sex unions: the globalisation of an idea. In The same-sex unions
revolution in western democracies. Manchester University Press.
Krugman, P. (2017). Crises: The price of globalisation?. InEconomics of Globalisation.(pp. 31-
50). Routledge.
Mowforth, M., & Munt, I. (2015). Tourism and sustainability: Development, globalisation and
new tourism in the third world. Routledge.
Robertson, S. (2017). A class act: Changing teachers work, the state, and globalisation.
Routledge.
Rupert, M., & Smith, H. (Eds.). (2016). Historical materialism and globalisation: Essays on
continuity and change. Routledge.
Tang, C. F., & Tan, B. W. (2015). The impact of energy consumption, income and foreign direct
investment on carbon dioxide emissions in Vietnam. Energy.79.447-454.
Wright, S. (2016). Language policy and language planning: From nationalism to globalisation.
Springer.
Online
A PESTLE Analysis of The UAE. 2016. [Online]. Available through :
<https://pestleanalysis.com/pestle-analysis-of-uae/ >.
UNITED ARAB EMIRATES: FOREIGN INVESTMENT. 2016. [Online]. Available through:
<https://en.portal.santandertrade.com/establish-overseas/united-arab-emirates/foreign-
investment?>.
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