Principles of Management
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Business environment has different variations and distinctive features in every country. Some countries have similar economic, political and cultural background which is a prerequisite for having similar regulations and conditions of the macro- and microenvironment in the internal economic market. However, there are some countries that have unique economies based on rules that were set up by ancient cultural and religious traditions. One of such countries is United Arab Emirates. Therefore, the main aim of this paper is to carry out an analysis of the advantages and disadvantages of the business environment in Abu Dhabi, the financial center of UAE.
Short Overview of the Business Environment in the Country
Abu Dhabi is the capital of UEA which is well known for being one of the largest oil producers, tourism center, and a financial center of not only the country, but also the whole region. The success of its economic operations can be confirmed by a big number of financial institutions located in it. Amongst these institutions there are Central Bank of UEA, Abu Dhabi Securities Exchange, and the headquarters of many transnational corporations (Smeets & Bayar, 2011).
The economic system of Abu Dhabi is very different to the ones in the rest of the world. The main distinctive features of the economy are Islamic finance, strong religious bias, and cultural differentials (Department of planning and economy of Abu Dhabi, 2008).
One of the ruling powers in the country is Shariah; it is the code of law which states no separation between the church and state. It plays a crucial part in the development of Abu Dhabi economy by financing a big amount of business projects (Collins & Hills, 2010).
Advantages of the Business Environment in Abu Dhabi
The business environment of Abu Dhabi has a large number of advantages. First of all, during favorable economic times Islamic finance tranches have a dominant role in financing infrastructure projects of the large scale (Collins & Hills, 2010). Moreover, Islamic banks are not allowed to charge interests on the loan, which makes the process of taking loans easier for the business owners (Foster, 2009).
Another important positive aspect of the business environment of Abu Dhabi is working on the basis of fairness and responsibility. Koran does not allow unfair business practices that damage or harm the society (Foster, 2009).
Disadvantages of the Business Environment in Abu Dhabi
Despite having many positive aspects of using Islamic finance system, there are some obstacles which cause certain difficulties in the financial sphere of Abu Dhabi. For instance, Islamic banks quite often have a lack of interest in financing long-term projects. Another disadvantage for Islamic finance tranches is the possibility of delays, additional complexity and increased cost of transactions. Furthermore, the Islamic finance market in Abu Dhabi is not very deep because the number of participants is quite limited (Collins & Hills, 2010).
Abu Dhabi economy is strongly based on religion. One of the times when religion influences UEA economy, is during Ramadan. People fast, limit their travelling including business travelling, work schedules are changed and turned upside down so people can rest during day hours. Thus, during Ramadan national businesses slow down or almost shut down which leads to the downturn in economy (Kennedy, 2010). Furthermore, some critics argue that Islamic finance is driven by cultural traditions rather than by practical economic approach (Foster, 2009).
Therefore, economy of Abu Dhabi has proved itself as a self sustainable and strong system. There are numerous advantages and strengths of the economy and the business environment in the country. However, there are some weaknesses of the economy which can be potential obstacles for companies to develop their business in the country.