The following section provides details regarding the economic environment present in the United Arab Emirates. The economic indicators listed below help us conclude what state the economy is in and whether or not a Harris expansion into the UAE is a good business decision. Overall, the UAE has an economy that is comparable to that of the United States. This is beneficial for Harris because there will be less risk moving into a sturdy economic environment. The UAE dirham is pegged to the currency of the US and has not fluctuated in many years. This reduces much of the exchange rate risk that Harris would normally face as a company looking to expand internationally. As demonstrated below, the UAE is an economically stable country that has good trade relations with the US and has a strong and capable workforce. Historical Economic Aspects – The Discovery of Oil
The United Arab Emirates (UAE) formed in 1971 after obtaining its independence from Britain. Before the 1950s’ discovery of oil, the UAE’s economy greatly relied on fishing and was stuck in a declining industry. The oil discovery transformed an undeveloped, impoverished region into an upscale modern state with a high standard of living. In 1962 Dubai became the first of the emirates to begin exporting oil. Since then, the country’s society and economy have transformed (“United Arab Emirates,” 2012). The president of the UAE at its beginning, Sheikh Zayed, was quick to seize the potential of the oil industry. Zayed supervised the emirates and concentrated oil revenues into improving healthcare, education, and the national infrastructure. The growing oil industry affected the population of the UAE by attracting a large entry of foreign workers. Together with the colonials, these foreigners now make up three fourths of the population. The discovery of oil has allowed the UAE to develop into one of the Middle East’s most important economic centers (“United Arab Emirates,” 2012). Description of the Economy
The UAE’s gross domestic product per capita has remained fairly steady since 2009. In US dollars, the GDP per capita was $48,900 in 2009, $47,900 in 2010, and 48,800 in 2011. The 2011 estimate ranks the UAE as number 12 compared to the rest of the world; this is only one spot below the United States with $49,000 GDP per capita. The world’s GDP per capita is estimated at $11,800 for 2011. UAE’s average is well above the world average ("The World Factbook:," 2012). See figure 1 in the appendix for a graph plotting the comparison of GDP per capita between the US, UAE, and world. As one of the primary indicators of economic performance, we can use UAE’s GDP per capita to see that the country is doing very well. By comparing UAE’s GDP to the US’s GDP we can see that the UAE is performing as well as the United States in its endeavors. By ranking 12 out of 226 countries, the UAE is outdoing 214 countries in terms of productivity and economic performance ("The World Factbook:," 2012). With the exception of a few hiccups, the UAE’s GDP has increased steadily since the 1970s. Figure 2 in the appendix shows the increase in GDP from $14.7 billion in 1975 to $360.2 billion in 2011 (Google, 2012). As figure 3 in the appendix demonstrates, the UAE’s GDP is steadily increasing, but the country ranks low on the charts compared to the United States and the world. The sharp decline in GDP in 2009 should not negatively influence the prospects for the UAE’s future success because the world as a whole experienced a decrease due to the global financial crisis (Google, 2012). Various Rates
In 2011, the inflation rate in the UAE was low at 0.9 percent. The UAE ranks at number 8 when compared to the world and has less inflation than the United States who has a 3.10 percent inflation rate. A low inflation rate indicates that there is little decline in the purchasing power of the money in the UAE. Although a low inflation rate is good for a country...
Please join StudyMode to read the full document