Wednesday, July 22, 2009

PEST Analysis of Dubai Market

Political Environment

  • Dubai is one the seven emirates that comprises of United Arab of Emirates. Although UAE’s political environment is stable; the structure of government at both the national level and in each of the emirates is relatively immature and dynastic in nature. At the national level, the UAE operates as a loose confederation of seven emirates. Since Abu Dhabi is the largest oil producer the ruler of Abu Dhabi typically claims the presidency, while the ruler of Dubai typically occupies the vice-presidency.
  • Dubai shares legal, political, military and economic functions with the other emirates within a federal framework, although each emirate has jurisdiction over some functions such as civic law enforcement and provision and upkeep of local facilities (Government of Dubai Website, 2009).
  • Dubai's government operates within the framework of a constitutional monarchy, and has been ruled by the Al Maktoum family since 1833. The current ruler, Mohammed bin Rashid Al Maktoum, is also the Prime Minister of the United Arab Emirates and member of the Supreme Council of the Union (SCU).
  • The UAE has one of the most open trade policies within the GCC region with no protective duties and minimal import restrictions.
  • UAE has been a WTO member since 1996, giving it access to newer markets and helping removal of the barriers to exports.
  • Jebel Ali Free Zone is a free economic zone located in the Jebel Ali area of Dubai. It offers a set of products and services such as: Business centers, ready to use offices, Warehouses, factories, and infrastructure ready plots.
  • There is a well defined, sound legal framework for business and a clear set of ownership rules. Foreigners are permitted ownership rights of up to 49% for limited liability companies established within the Emirate of Dubai and up to 100% for professional companies, branches and representative offices of foreign companies and free zones enterprises (Government of Dubai Website, 2009).
  • The government has a long, consistent commitment to pro-business and liberal economic policies including the protection of intellectual property rights (Government of Dubai Website, 2009).

Economic Environment

  • Dubai’s main revenues are from tourism, real estate and financial services. Revenues from petroleum and natural gas contribute less than 6% of Dubai's economy. Real estate and construction, on the other hand, contributed 22.6% to the economy (Arabian Business, 2009).
  • As of February 2009 Dubai's foreign debt is estimated at apprx. USD 100 billion.
  • There are no direct taxes on corporate profits or personal income except for oil companies that pay a flat rate of 55% and branches of foreign banks that pay a flat rate of 20% on net profit generated within Dubai (Government of Dubai Website, 2009).
  • Customs duties are low at 4% with many exemptions, 100% repatriation of capital and profits is permitted.
  • No foreign exchange controls, No trade barriers or quotas,
  • Competitive import duties (4% with many exemptions)

Social Environment

  • A large expatriate population (more than 80%).
  • Crime Rate is almost Zero.
  • Male comprises of more than 70% of Dubai population.
  • More than one marriage is allowed.
  • Traditional dress of men in Dubai is a dishdash or khandura - a full-length shirt-dress that is worn with a white or red chequered headdress (gutra) and secured in place with black cord (agal). Women wear a black abaya - a long, loose black robe that opens from the front. (Go Dubai, 2009)
  • There is no dress code and tourists and residents are free to embrace any fashion as long as it does not offend anybody’s sensibilities.

Technological Environment

  • Dubai has a network of seven industrial areas, one business park and three highly successful, specialized free zones of international distinction, two world class seaports, a major international airport and cargo village, a modern highway network, state-of-the-art telecommunications and reliable power and utilities all of which deliver efficiency, flexibility, reliability, reasonable cost and size (Government of Dubai Website, 2009)
  • Dubai is served by over 120 shipping lines and linked via 85 airlines to over 130 global destinations (Government of Dubai Website, 2009).


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