The University of New York in Prague School of Business

Bachelor of Business Administration Program

FINAL PROJECT

What should foreign investors and companies know about the cultural differences and barriers in the UAE to successfully enter and navigate the market?

Author: Hamza Aboshi Mentor: William Pattison Due Date: Sunday, 28th of April 2019

Acknowledgments

I would like to genuinely to thank my Highschool ex-teachers Mr. Michael Walkoski, and Dr. Paul Dillon for accepting my request to have an interview with me to conduct it in my final project. I will also like to acknowledge the help of my family and peers that have helped throughout this semester and on my Final Project.

I want to thank my mentor personally, and professor William Pattison as he gave me an essential tip on finishing out this Final Project. I want to thank him for tolerating me when coming during breaks asking for feedbacks.

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Abstract / Executive Summary

This project explored many aspects of the Middle-Eastern country United Arab Emirates and addressed what should the foreigner investors and companies know about cultural differences and barriers to navigate the UAE market. The project illustrates the cultural differences in detail and what to expect when coming to the country whether in the workplace or in communicating with people. The main goal of this project is to let foreign companies come and invest in the United Arab Emirates. There is also a list of benefits, incentives, advantages to overcome the cultural challenges and barriers. The project shows an overview of the cultural challenges and differences in the UAE of the business world which exemplified directly to foreigners. This project was illustrated by the help of books, either written in or English, in addition to websites and articles that are relevant. Also, there will be several interviews with foreign people living in the UAE for more than a decade and even an interview with the managing director of Toyota automobile company in Dubai. There are several case studies, which was illustrated throughout this project and a list of recommendations on how to overcome the cultural differences.

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Table of Contents

Chapter 1 – Introduction …………………………………………………………..1 1.1 – Overview ……………………………………………………….1 1.2 – Project objection ………………………………………………..9 1.3 – Project benefit …………………………………………………..10 Chapter 2 – The Theory ……………………………………………………………..10 2.1 – Cultural differences………………………………………………11 2.1.1 – History…………………………………………………..11 2.1.1 – Islam……………………………………………………..12 2.1.3 – Cultural norms……………………………………………12 2.1.4 – Language…………………………………………………..13 2.1.5 – Working hours……………………………………………..13 2.1.6 – Food and drinks……………………………………………14 2.2 – Barriers ……………………………………………………………..15 2.2.1 – Trade barriers………………………………………………15 2.2.2 – Islamic banking system ……………………………………16 2.2.3 – Sharjah emirate …………………………………………….16 2.2.4 – Wasta (Nepotism)…………………………………………17 2.2.5 – Packaging and labeling products …………………………17 2.2.6 – Permits and visas ………………………………………….19 2.3 – Business etiquette and culture……………………………………….20 2.4 – UAE government protocol and censorship ………………………….21 2.4.1 – Internet freedom……………………………………………..21 2.4.2 – Free speech …………………………………………………21 2.4.3 – Prohibition of child labor…………………………………22 2.4.4 – How could it impact foreign companies and investors …23 2.5 – Benefits and Incentives ……………………………………………23 2.5.1 – Free-trade zones ………………………………………….24 2.5.2 – UAE Cabinet changes …………………………………….24 2.5.2.1 – Long-term residence visas ………………………..24 2.5.2.2 – 100% international business ownership…………24 2.5.3 – EXPO 2020………………………………………………..25 2.5.4 – Location…………………………………………………..26 2.6 – Advantages ………………………………………………………..26 2.6.1 – Economic stability ………………………………………28 2.6.2 – Political stability …………………………………………28 2.6.3 – Social security……………………………………………29 2.7 – The cultural impacts on Exports and Imports in the UAE ……….30

Chapter 3 – The Practice ……………………………………………………………30 3.1 – Case studies …………………………………………………….31 3.1.1 – Hofstede Insights ………………………………………33 3.1.2 – Doing Business……………………………………………..35 3.1.3 – Unsuccessful foreign businesses in the UAE………….36 3.1.4 – Successful foreign companies in the UAE……………….36 3.2 – Interviews …………………………………………………………36 3.2.1 – Interview with foreigners living in the UAE ……………38 3.2.1.1 – Interview with Mr. Michael Walkoski………41 3.2.1.2 – Interview with Dr. Paul Dillon ………………42 3.2.1.3 – Key findings ……………………………………44 3.2.2 – Interview with Mr. Saud Abbasi …………………………44

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Chapter 4 – The Findings and Results…………………………………………….. 44

Chapter 5 – The Recommendations……………………………………………….. 45

Conclusion …………………………………………………………………………….. 45

Bibliography …………………………………………………………………………. 47

List of Abbreviations

Abbreviation Stands for UAE United Arab Emirates AEC Alajmi Engineering Consultant VAT Value Added Tax LLC Limited Liability Company FZE Free-Trade Establishment GDP Gross Domestic Product EXPO Exposition, Large-Scale Public Exhibition GPI Global Peace Index GCC Gulf Cooperation Council UN United Nations HNW High-net-worth Human Rights Watch, a non-governmental organization that researches HRW Human rights internationally

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List of Arabic words meanings

Word Meaning Sharia Islamic Law Riba Usury Quran Islamic Holy book Permissible – usually used for (The Islamic way of slaughtering animals or Halal poultry) Haram Prohibited – opposite to “Halal” The ninth month of the Islamic Calendar, where all should fast from dawn Ramadan to sunset Emirati United Arab Emirates’ Demonym Wasta Nepotism Hijab Headscarves Muslim women wear means Chief “for men” (typically used as a title for people in the royal family in Sheikh the UAE) A female member of the Royal family (usually used as a title for people in the Sheikha royal family in the UAE)

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Chapter 1 – Introduction

1.1 – Overview UAE is the abbreviation of the United Arab Emirates, which is a federation of seven Emirates; The United Arab Emirates established in 1971. After Saudi Arabia, the UAE has the largest economy from the Persian Gulf. According to Trading Economics website, UAE has expanded it is Gross Domestic Product (GDP) from 0.80 percent in 2017 from 2016, and since 2000, UAE averaged 4.51 percent of GDP Growth Rate. UAE has seven different states, or in better words, they call them "Emirates," however, foreigners prefer two main cities in the UAE for the business wise. Firstly Abu Dhabi is the capital city, and the second largest city, and responsible for mainly the head office of Administration and the center of the Gas and Petroleum industry. Secondly, Dubai, the largest city in the UAE and the most recognizable city in the where some people think it is the capital city and sometimes mistaken that Dubai is the name of the country instead of UAE. On the other hand, Dubai is known for its fast growth and responsible for the construction and tourism industry. The Locals or Emiratis cover only around 20% of the total population, which makes the country one of the largest countries containing immigrants that are mostly expatriates. To support that, according to Jure Snoj, an author from the BQ Magazine mentioned in his article UAE's population – by nationality "Similarly, to its neighbors in the GCC, UAE is relying heavily on foreign labor to keep its projects and economy running. Alongside Qatar, the country has the highest percentage of immigrants about its citizens, with the latter amounting to about 10% of the total population" (Snoj, 2015).

Culture is a fundamental characteristic of any business, which a lot of people disregard. UAE has a significantly different culture than westerns, which a lot of people do not give importance to. UAE's official religion is Islam, religion in UAE is widely important because Islam shapes many aspects in their culture, like cultural, social and professional life. On the other hand, it also set different rules in financial and investing wise, for example, interest rates are forbidden in Islamic banks. Unlike western countries, religion is not considered as a cultural aspect and religion is not involved in commonly in their culture. As a foreigner, it is crucial having brief information about the UAE's culture and especially about Islam. Nevertheless, freedom of religion is founded in the UAE, and people can practice their beliefs with full respect. As I mentioned above that UAE is, has a fast-economic growth, but firstly I would like to address, why do businesses go to the UAE in the first place? There are many reasons,

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Firstly, UAE's strong economic performance, in terms of UAE's financial performance, the UAE have one of the most successful economies between the Gulf countries, especially in the oil sector. Back in 2009, during the setback due to the recession, the UAE's economy has back much stronger than ever, due to several factors such as logistics, trade (imports and exports) and tourism. Secondly, their location, UAE's place is very strategic. They have straightforward access to the surrounded countries, which they around 2.2 billion consumers, from different time zones. Thirdly, their population, in fact, the UAE have more expatriates than nationals which is abnormal. The UAE nationals are around 170,000 while the expats are more than 2 million in the current year. On the other hand, investors would like to know which industries often go to the UAE for business, and there are several, firstly, the production/manufacturing, automotive industry, secondly, the construction industry, due for the professionals in the building sector such as engineers, and investors of selling raw materials. Thirdly, the travel agencies and tourism, UAE is considered to be a vacation destination for many; also, UAE hosts more than millions of visitors every year. Lastly, the real estate industry, due to the race from construction firms for projects in various segments including housing, industrial and logistics.

On the other hand, with all the positive aspects listed above, doing business in the UAE can let you face barriers or challenges in better words. To begin with, as mentioned above, the UAE have seven states or emirates, however, each emirate, have a unique histories and identities, for example, in Dubai, alcohol is allowed to be sold in specific places, unlike Sharjah, where they are very religious stated, and alcohol is forbidden to be sold in manner. Also, to start your own LLC (Limited Liability Company) in the UAE, you are obliged to require and hire a local sponsor, this sponsor will be your partner as well, and shall own 51% of the ownership. Another challenge is the implications of Value Added Tax (VAT), since January 2018, the UAE introduced a 5% VAT which applied to nearly for all goods and services except necessary food items, education, and healthcare. One more challenge is hiring employees when hiring employees; you have to provide them visas on your company's name; an employee is not permitted to work in the company until they get their permission.

1.2 – Project Objective This project objective and goal is to explain the cultural differences and barriers in the UAE market. The primary purpose of this project is to let foreign companies come and invest in the

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United Arab Emirates. There are many incentives to allow international companies to invest or do business in the UAE. These incentives will let them overcome the cultural differences and barriers in the business culture. Firstly, the United Arab Emirates and especially Dubai, the second largest city, is considered to be a tourist center. To support this, according to Statista website, Dubai's tourism sector is increasing year by year, from 2010 to 2016, Dubai had 14.2 million tourists in 2015 rising to nearly 15 million in 2016. Also, in the same year, Dubai had a record of the first city to reach 28 billion Dollars for international visitor spending. (Stipp, 2016) Also, according to fam Properties website, at the end of 2018, Dubai has reached to 24 million visitors, which shows Dubai's tourism sector is increasing by the years, and which can be an essential aspect for investing in the UAE. Secondly, the EXPO 2020, Dubai was awarded the EXPO in 2013, for the year of 2020, the Expo is an international exhibition to showcase the achievements of different nations, this could be a reason to invest in the UAE because the UAE is looking to increase their economic growth as the UAE are expecting to have more than 25 million visitors for the EXPO. Finally, the free trade zones, the UAE have conducted free trade zones for foreign companies in order to have 100% ownership. Dubai has more than 20 free trade zones which can encourage foreign companies to invest in the UAE. The free zone areas can give the foreign companies full benefits of their business. These incentives can prove my objective of this project that UAE can be a very successful place for investing and to encourage foreigner companies to overcome any cultural differences and barriers.

1.3 – Project Benefit The benefits of this project are to show how cultural differences can be vital and need to consider whether the differences which can morally different or ethically. Also, some differences and which this paper focuses on is the differences and barriers in the workplace of the United Arab Emirates. Many people disregard culture, which could be essential when doing business. This paper will focus on what are the cultural differences and challenges which are barriers when doing business in the United Arab Emirates. The project will provide with different statistical and context references that could be beneficial for foreigner considering of in business in the country.

Chapter 2 – The Theory

For the last nine years, the United Arab Emirates have been one of the strongest Middle Eastern countries and doing business in the UAE have been successful for several international companies. According to Andrew White a writer in the Arabian Business magazine, “The UAE, which scored

10 in the world's top 10 for obtaining construction permits, connecting to electricity services and registering property was ranked 31st overall in the list”. White also added, “Developing economies quickened the pace of their business reforms during the last 12 months to make it easier for local businesses to start and operate, said the World Bank Group’s annual ease of doing business measurement” (White, 2015). However, the project main focus on how culture can impact on business in the United Arab Emirates and how cultural change can be deemed positive or negative. Additionally, this project also, will explain more on the barriers that people could face and mostly like will face, either a cultural change barrier or other barriers including financial systems for example, like the UAE, have the different type of financial system. These barriers will have a huge impact on the people who are willing to come to the UAE for business.

2.1 – Cultural Differences There are many cultural differences to consider when doing business in the United Arab Emirates, such as: 2.1.1 – History According to the official portal of the UAE government website, “The area's history can be traced back to 6000 B.C. The UAE as a federation did not exist then. The area and the surrounding region were referred to as the Arabian Peninsula” (2018). The seven emirates were united in 1971. Before that, the United Arab Emirates was called “The Trucial States”, as the distribution of the country shows in figure 2. This name was from the agreements between the British leaders and the sheiks of tribes when they inhabited the southern coast in the nineteenth century between Qatar and Oman. Back then, the United Arab Emirates dependent economically on trade activities, such as sea trade and particularly pearl diving.

Picture 1 – United Arab Emirates Map before 1971

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Source: Every Culture Website: https://www.everyculture.com/To-Z/United-Arab- Emirates.html

2.1.2 – Islam (Religion) One of the main cultural differences in the United Arab Emirates is the religion, which can also be a barrier. The UAE is an Islamic country, so Islam is the official religion in the country. Religion or Islam plays a huge role in the country whether ethically or financially. However, the country provides freedom of choice of religion to foreigners but on the other hand, Muslims cannot practice or change their religion. For that reason, the government declared all the citizens to be as Muslims since the official religion is Islam. As mentioned before, Islam plays a crucial role in Emiratis daily lives, Islam is also related to business interactions and it implies the cultural norms. Islam is also related to business interactions in different ways. The UAE has a different banking system, which is called the Islamic banking and finance. The Islamic banking and finance system are an activity that complies with the Islamic law (Sharia) in Arabic, it is a different application used in for the development of Islamic economics. For example, in Islamic banking and finance system, it prohibits usury (Riba), which is the interest loans that are paid for the banks when taking

12 a loan. The Islamic way of doing this is returning the same amount of money when loaning from the bank. This system can be found in nearly every bank in the UAE. Nevertheless, also there are specific banks for this system, in “Islamic Banks”, like Dubai Islamic Bank and Noor Bank. Islam can be a barrier ethically as well; The UAE have different beliefs because they follow the religion more than generation changes. Apostasy is the UAE is considered as a crime and it is punishable by death. Kissing (French kiss) in public is illegal and banned by Islam, which can result in deportation if caught more than once. According to Margaret Nydell, the author of “Understanding Arabs” book “The practice of “Islamic banking” is gaining in popularity. The Islamic religion forbids lending money at a fixed rate of interest, viewing it as unfair and exploitative. Islamic banks, therefore, place investors’ money in “shared risk” partnership accounts, with rates of return varying according to profits (or losses) on investments”. Some Islamic aspects are also somehow connected to the cultural norms.

2.1.3 – Cultural norms Another cultural difference is the cultural norms, in the UAE, arriving in time for meetings is not considered as an important thing which a lot of people disregard and have troubles with time management. Also, in business meetings, it is highly important to greet the persons with a senior position first, which might get offended when greeting him/her last or not the first. Arabs or particularly Emiratis are known for offering refreshments in any home or workplace and offices such as Arabic coffee (cardamom flavored) or regular English tea, refusing will be considered rude, as in the Arab world they like serving food or drinks. Moreover, when a meeting is being interrupted, that’s considered as a normal thing and not rude, even when the meeting is running smoothly. Emiratis have a very high level of hospitality, it is just the way in the Arab world, especially in the UAE, they like inviting people either to homes or to a restaurant for lunch or dinner, breakfast is not a consideration as a vital meal for Emiratis. In the UAE, the dress code is very conservative due to Islam. Men should always wear either a suit or the traditional dress (Kandoora), while women should have more conservative dresses and their clothes should be more modest which shows less skin-revealing clothes. A scarf is important for local women but not for expats.

2.1.4 – Language The official language in the United Arab Emirates is Arabic since it is an Islamic country, the country should use the language of the Quran (Islamic Holy Book). Although, English is the second language used in the United Arab Emirates and also in the Middle East. Due to high labor force from Asian countries such as , Pakistan, and the Philippines, the language English is

13 used very often between people. For business-wise, the language will give you a high advantage but would not be the main obstacle or barrier because emails between employees are mostly used in both languages and mostly English. Advertisements are always in both languages, Arabic and English. However, the labeling in the country can be considered to be a barrier because the UAE require for any product which should have a translation label in Arabic language and in addition to the ingredients. Due to the sensitivity to food or drinks that contain pork or alcohol.

2.1.5 – Working hours In the United Arab Emirates, the official weekend differs from other continents like Europe and America, the weekend days are on Fridays and Saturdays, because on Friday, it is the day for Friday prayer, where all Muslims should attend the for worship at around noon, so most businesses close at the prayer timings, especially on Friday noon. Government offices tend to open at around 7:00 A.M and close around at 3:00 p.m., while private offices hours differ. On the other hand, the working hours' change in Ramadan, Ramadan is the month when Muslims are obliged to fast without consuming food or drinks from sunrise to sunset. Basically, in Ramadan, the working hours get shorten by around two hours from regular hours, for both locals and expats.

2.1.6 – Food and Drinks Emiratis and Muslims have a strict taboo with pork and alcohol, which they cannot consume either food that includes foods and drinks that contain alcohol. Also, the meat should be slaughtered in an Islamic way which is called the halal method. The halal method is a specific Islamic way of slaughtering sheep, chicken, cows, and more. Emiratis do not consider “Breakfast” as an important meal of their lives. Lunch is considered the main meal of the day, where people usually invite people over to their house for lunch and especially on Fridays after the Friday prayer. Emiratis usually have lunch between the times of 2:00 p.m. to 3:00 p.m. and have dinner around the times 9:00 p.m. to 10:00 p.m., the dinner is considered late for westerns and that makes the Arab world different in the meal timings.

However, touching on the cultural changes, are very beneficial to know in order to fit in the community and also to understand what differs from different countries and cultures. To support that, according to Mark Pentecost, an entrepreneur and a writer for The Business Journals, “We live in a society where we want to be part of something bigger; we want to feel like we’re part of a team. When you are out of town and you see someone wearing a jersey from your favorite sports team, you sense an instant connection. You’re unified and part of something bigger than yourself. The feeling of unity is one reason why creating a company culture is an important aspect of your

14 business”. (Pentecost, 2015). Another important factor to take into account is the barriers when doing business in the United Arab Emirates, they are somehow related to the cultural differences because cultural differences can also be considered as barriers, such as the religion for instance. Not everyone is familiar with Islam, or how Islam is connected to every aspect in the UAE locals’ lives.

2.2 – Barriers

2.2.1 – Trade Barriers

Foreign companies face a hard time doing businesses in the United Arab Emirates because of trade barriers, which includes many regulations. For foreigners to do business in the UAE, they should have a local (Emirati) as a national sponsor. When choosing the sponsor, the foreigner will have the right trading products to the UAE, however, they cannot be food-based, because the agency law does not concern food products. For the tariff trade barriers, the UAE’s customs must have five percent on the imported good however it’s a higher rate for luxury goods and tobacco which can reach to 70 percent. On the other hand, for the non-tariff barriers, it differs. The UAE has a lot of restrictions for imports, where companies should have a trade license in order to import products into the UAE. However, the import customs can control the kinds of products to be imported into the country, the UAE has prohibited many products which are related to religion (Islam) or and morals as well. For example, pornographic items or literature, also, any products or goods sent from Israel for diplomatic disagreements. Some other imports should contain special licensing when importing to the UAE, such as alcohol, food that contains pork, and firearms, in addition to any undrinkable products that contain alcohol like methanol for instance.

2.2.2 – Islamic Banking System

Islamic banking is another barrier a foreign company could face when they deal with specific banks in the United Arab Emirates. The Islamic Banking System is basically which is considered as an interest-free system, because it is known to be as “Riba” (Usury). Usury or (Riba) is considered “Haram” (Prohibited). Usury is the interest loans that are paid for the banks when taking a loan. The Islamic way of doing this is returning the same amount of money when loaning from the bank. This system can be found in nearly every bank in the UAE. Nevertheless, also there are specific banks for this system, in “Islamic Banks”, like Dubai Islamic Bank and Noor Bank. 15

According to Institute of Islamic Banking and Insurance website, describes the Islamic Finance system as “The Islamic financial system is not much different from the products and services in the traditional financial system but it operations are essentially based on a certain set of moral and ethical principles that determined what is viewed as morally ‘right’ implying actions and transactions that promote public good, and ‘wrong’ implying actions and transactions likely to be against the public good” (Islamic Financial System, 2019).

2.2.3 – Sharjah Emirate

Sharjah is the third largest city in the United Arab Emirates after the capital city Abu Dhabi and Dubai. Sharjah is only 35.3 km away from Dubai, which is approximately 30 minutes’ drive and 163.3 km away from the capital city Abu Dhabi, which is approximately 2 hours’ drive. Sharjah city or Emirate could be a barrier to the foreign investors and companies because Sharjah is considered to be more conservative and Islamic oriented than Abu Dhabi and Dubai. However, many rules and regulations that were mentioned in the 2.1 section are very similar, but the Emirate of Sharjah follows them strictly. For instance, the Emirate of Sharjah is known to be as a “dry city”, which basically means that Alcohol consumption and selling are strictly prohibited by the governor of Sharjah. Hence, there are exceptions in order consume alcohol in the city, firstly, the person should contain a personal alcohol license1. Secondly, by obtaining the alcohol license, then the person can legally purchase alcohol from a different emirate but still have to consume it in closed doors and not in public, which means at their households. Finally, foreigners could also buy alcohol from Sharjah International Airport, however they cannot sell it in the city and not consume it in public. On the other hand, the Emirate of Sharjah contains a variety of foreign employees, companies and businesses. But foreigners should understand, that every emirate have different cultures and different rules, it could not be an immense difference however it could impact badly if they were not met or understood flawlessly.

2.2.4 – Wasta (Nepotism) One of the main barriers that foreigners and expats could face in the UAE’s business world is the Wasta2 which is the Arabic word for Nepotism. Wasta is not a major problem only in the UAE but also known in other Middle-Eastern countries. However, wasta in the UAE is nothing similar to Nepotism in Western countries, in the west nepotism is considered to be as a corrupt practice, on the other hand, Emiratis view wasta as positive and a helpful method to find jobs, get licenses,

1 In order to purchase alcohol in the UAE, you should hold a personal Alcohol license 2 Wasta is the Arabic word for Nepotism 16 permits and more depending on family and friends. According to Oksana Tashakova, an author in Khaleej Times stated “Cultural intelligence is vastly important in terms of doing business in the Middle East. Nothing exemplifies this more than how Westerns view nepotism and Arabs view wasta” (Tashakova, 2015). On the other hand, Tashakova also explained in article, how wasta is considered to be an advantage in the UAE, he added “Wasta refers to the advantage and benefits one gains from being part of a particular group or having connections. As Charles Adwan of the World Bank explains, wasta can be used to gain jobs or licences, cut through red tape and otherwise circumvent obstacles based on who you know” (Tashakova, 2015). Moreover, this could be a barrier to the foreign investors and companies because they are coming from a background thinking that nepotism is an illegal act however, in the UAE’s culture that is not considered as an illicit act although it is a method for helping others and a kind of interceding. Another reason for being as a barrier in the UAE’s workforce, is that, local people (Emiratis) could have connections and use wasta to take deals over the foreign companies as a result of favoritism, whether for family members, relatives, and friends.

2.2.5 – Packaging and Labeling products

Another barrier related to trading imports is the packaging and labeling, the UAE has also restricted rules for packaging. The Ministry of Health has separate regulations where all products should be protected from the eating since the UAE have high temperatures during both summer and winter. For the labeling, the product should contain the Arabic and English languages for the brand name, ingredients, production date, expiry date, and the country of origin.

2.2.6 – Permits and Visas

According to the UAE government law, in order to have foreign employees work for you or for your business, you should provide them with a working permit and visas under the name of your company or your name. which makes the company or the person, the official sponsor of being in the country even if the company or the person is not local, but the person should have a previous residence permit in order to establish this. The sponsor should also provide the workers with accommodation and health care. This can be a barrier when the working permit gets rejected from the government.

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There are many cultural differences and barriers in the United Arab Emirates, which could let foreigners change their mind to do business in the UAE. However, there are several ways to overcome the barriers. Of course, the option is not to ignore them but to look at the situation from a different perspective. According to Jacqueline Whitmore, the founder of The Protocol School of Palm Beach and an author in Entrepreneur magazine and website “While this may be the new norm, the possible challenges of diversity cannot be ignored. Language barriers may make it difficult to communicate effectively, or cultural differences may inhibit internal and external customers from being comfortable enough to open up, socialize or bond” (Whitmore, 2016)

In fact, another way to overcome the barriers is to look at the country’s statistics. Since one of the barriers is about trade, Figure 1 shows the number of imports made in the UAE for the last decade.

Figure 1 –

The number of imports in the UAE for the last decade

D)

(AE Millions Millions Currency: Dirhams Dirhams Currency:

Year

Source: Trading Economics website: https://tradingeconomics.com/united-arab-emirates/imports

According to Trading Economics website and as it shows in the graph (figure 1), the imports in 2017 increased by 22,300 AED million from the previous year 2016. Also, the average imports in the UAE are around 523,436 AED million from 2000 to 2017, and the highest was also in 2017. Besides the barriers and cultural differences, foreigners could take this opportunity to increase the number of imports in the United Arab Emirates because the country is making a lot of money from

18 the imports, barriers can be prevailed over but making money could let you want to overcome the barriers considering the statistics.

2.3 – Business Etiquette and culture In order for foreigner investors and companies to navigate the UAE’s market successfully they should understand that the UAE has a different business culture than the west. There are a range of aspects that foreigners should take into account and pay close attention to. Culture matters the most in the UAE, which means, that locals (Emiratis) expect the foreigners to follow their lifestyle and culture. As mentioned before in sections 2.1 and 2.2 that there are a variety of cultural differences and barriers but not all of them regards the business etiquette and culture. I am going to highlight some important business etiquettes that matters to the UAE culture. Firstly, clothing, clothing in the UAE is considered to be highly important, men and women should always be modest with their clothing as the UAE known to be a conservative country. Men should always be in full professional attire; it should cover knees and having darker colors presumes of being more professional. However, for women it is more complicated, women should still be in a professional attire, short skirts that show a lot of skin are prohibited. As in UAE culture, most women wear the Hijab3, foreigners are not obligated to wear it. Secondly, greetings, in the UAE’s business world greetings is a sign of respect, avoiding greeting your colleagues or partners on a daily basis could mean that you do not respect them or acknowledge them. However, there are different behaviors when greeting men and women; when greeting men, a handshake is usually made and frequently made by the use of the right hand, as locals (Emiratis) fallback the left hand for cleanness issues which is related to religious reasons. Furthermore, locals do not perceive touching body parts as shoulders or another physical greeting any connotations that in the western countries and not implications of sexual signs. On the contrary, greeting women is way more different, handshakes are made only between females, males are not obligated to shake hands with women unless the women approach first for the handshake as in Islam, women are strictly prohibited to have a physical contact with any males besides her spouse, father and brother. Additionally, any physical contact with a woman in the workplace are strictly prohibited as mentioned before. Thirdly, conversations, how you start your conversations is important for the Locals (Emiratis) as asking questions about the health of their the people you are talking to and also their families, however, when having conversations with women, it is unusual to ask private questions about their relationship status as it is considered to be highly sensitive and lack of respect. On the other hand, unlike the west, they address names with last names however, in the UAE, names are addressed by

3 Hijab – The headscarfes Muslim women wear 19 first names. Furthermore, when dealing with people of high status, especially people that are from the royal family of the UAE, designations before addressing their names should be respectively used, Sheikh4 is designation used for a male and Shiekha5 for the women, these titles are highly important for showing respect. Fourthly, meetings, for the most times, the meeting will be with a male, as mentioned before that Islam is a conservative religion. During business meetings, westerns should understand not use westernized habits, like arriving to a meeting 20 minutes prior the meeting as Emiratis are known to be usually late for their meetings and do not consider it as a lack of respect. Also, meetings could be disturbed whether greeting other people, or doing a favor for a different person. Nevertheless, Emiratis are known for their prodigious hospitality, during a meeting, food and drinks should be presented and offered and it is a lack of respect to refuse their compliment. Fifthly, dining, as mentioned in sections 2.1.2 and 2.1.6, the consumption of alcohol and pork are strictly prohibited. Thus, foreigners should understand that when being invited on a business lunch or dinner, it will be considered to be rude to ask for alcohol or a meal that contains pork. As it also applies for the greeting, eating with the right hand is much preferred for the same reason of the handshake. Lastly, as I also mentioned in section 2.1.5, that Ramadan6 working hours changes and usually shortened for the reason of Muslims have to fast from dawn to sunset. Thus, foreigners should understand that during Ramadan that they cannot consume food and drinks in public and restaurants and any business that sells food and drinks should respectively close and cannot sell their products until sunset. Non-Muslims are required to eat at their households or at the assigned food courts in shopping malls where food courts will be under closed doors in respect for the Muslim majority in the UAE. To add, during working hours, foreigners should avoid eating lunch in office in respect of Emirates and other Muslims.

2.4 – UAE Government Protocol and Censorship Foreigners that are coming to the UAE for the purpose of investing should take into account that the UAE have a completely different government protocol and censorship which overlaps some cultural differences and barriers. Unlike the western countries, Internet freedom, Free speech and child labor are considered to be atrocious and verboten. However, in the UAE, these three areas are being monitored and censored by the government. According to Sarah Leah Whitson, an Executive director in HRW7 claimed in her article “The UAE president, Sheikh Khalifa Bin Zayed

4 Sheikh – means Chief “for men” (typically used as a title for people in the royal family in the UAE)

5 Sheikha – used for women (typically used as a title for people in the royal family in the UAE)

6 Ramadan – the ninth month of the Islamic calendar (when usually Muslims fast for 30 days)

7 HRW – Human Rights Watch, a non-governmental organization that researches Human rights internationally 20

Al Nahyan, issued Federal Legal Decree No. 5/ 2012 on combating cybercrimes on November 12, 2012. The decree’s vaguely worded provisions provide a legal basis to prosecute and jail people who use information technology to, among other things, criticize senior officials, argue for political reform, or organize unlicensed demonstrations. Although some provisions are aimed at preventing the proliferation of racist or sectarian views online, the principal effect of the law is severe restrictions on the rights to free expression and free association and assembly” (Whitson, 2015). I will now explain in detail, what are the regulations the UAE have set for these three areas that are monitored by the UAE government.

2.4.1 – Internet Freedom Internet freedom is strictly restricted from the UAE government, where websites that include; pornography, gays, lesbians, sites from Israel and sites that insult UAE rulers, the royal family and the government are been blocked by the UAE government. The UAE government use a proxy server in order to block and monitor sites that are published in the country. On the other hand, these restrictions are also applied in social media usage. Breaking these rules and restrictions could cause people to be jailed or deported from the UAE as it is considered to be a crime. According to Jonathan Frewin, an author in BBC News, tells a story about an American expat that been living in the Abu Dhabi have been arrested for criticizing UAE locals and the company he was working for using Facebook while he was back in Florida. Frewin stated in his article, “Helicopter mechanic Ryan Pate wrote the Facebook post while in Florida after arguing with employer Global Aerospace Logistics (Gal) over sick leave. On returning to Abu Dhabi from Florida, he was arrested for breaking the country's strict cyber-slander laws. His trial is due to start on 17 March and he could face up to five years in jail and a large fine if found guilty” (Frewin, 2015). On the positive side, the UAE criminalizes cybercrimes and offensive sites about religion, specifically sites that are offensive to Islam.

2.4.2 – Free Speech In most Western countries, free speech is considered to be as an ordinary act, however in the UAE, free speech fully proscribed. Similarly, to the internet freedom restrictions, it is proscribed to criticize the rulers of the country or the royal family of the UAE. On the other hand, some books that were stopped from publishing as the content contained criticism on the government. 2.4.3 – Prohibition of child labor Another thing foreign investors and companies should take into account that the UAE government forbids the employment of children within the age of 15 to 18 of any kind of jobs, even if the child has the enough qualifications. Thus, when permitting the resident visa for children or teenagers

21 within the age of 15 till 18, their visas states that this person is not allowed to work and usually registered as a student. as picture 3 shows below.

Picture 3 –

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2.4.4 – How could it impact foreign companies and investors? Since my project objective focuses on letting foreign companies and investors to come and invest in the UAE and usually in Western cultures, these three areas are looked at to be legal and not prohibited. However, most foreign companies and investors that want to come and invest in UAE have no clue about these restrictions which could impact badly on their investment. Adapting to a new culture is always seemed to be the toughest part. Foreigners should not just know the cultural differences and barriers but also the restrictions that leads in the UAE’s culture. For instance, many Westerns have been born knowing that Free speech is ordinary as I stated an example of the American expat, Ryan Pate. Any foreigner could be in his place in if they did not know about these regulations. On the other hand, in many Western cultures, hiring teenagers below the age of

8 Source: http://findingbackroads.com/expat-life/how-to-transfer-uae-visa-sponsorship-for-children.html

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18 is completely illegal for part-time jobs. For instance, In the Czech Republic where I have been living here for last three years and I knew that the minimum age of in the country is 15 years old, but it is prohibited to give them overtime jobs9. Again, there are no internet freedom in the UAE but most countries in the West have freedom to web and publish freely without any protection nor censorship. Foreigners who are willing to invest in the UAE should understand clearly that the Middle-East and particularly the UAE have a different culture and nothing similar what it is in the West.

2.5 – Benefits and Incentives On the other side, there are benefits that will let companies to invest in the UAE. There are a many benefits and incentives which could let foreign companies to neglect the cultural differences and barriers mentioned above. Such as:

2.5.1 – Free-trade zones One of these benefits is the Free-trade zones, it is considered to be one of the best incentives for the foreign investor, the UAE government installed these free zones to offer favorable conditions for foreign investors and companies. According to the World Bank article titled “Special Economic Zones”, they define Free-trade zone as “are fenced-in, duty-free areas, offering warehousing, storage and distribution facilities for trade, transshipment, and re-export operations” (Akinici and Crittle, 2008). There are more than 37 free-trade zones in the UAE across all the seven emirates. Dubai has most of them where 22 of them are located in the largest city. In addition, that there are 9 more free zones in the UAE which are currently under construction. In the UAE, the free zones are distributed as sea port free zones, airport free zones, and mainland free zones.

On the other hand, there are many exemptions and advantages of these free zones, which will let the foreign investor have full ownership of the enterprise, import and export tax exemptions and repatriation of capital and profits. Also, it gives the possibility for the foreign investor to obtain a resident visa up to 3 years with a possibility for extension. It will open the potential for foreigners to rent and purchase any real estate whether commercial or residential. Correspondingly, foreign investors can establish a new company by using the Free Zone Establishment (FZE), and also, they

9 https://www.refworld.org/docid/48d7488ac.html

23 can launch a branch or an office that will represent their existing company either based in the UAE or even abroad.

2.5.2 – UAE Cabinet Changes According to the UAE Cabinet website, the UAE cabinet approves two major changes which were announced on 20th of May 2018, as the Ruler of Dubai and the Prime Minster of the UAE tweeted. These changes include:

2.5.2.1 – Long-term Residency Visas The new visa regime includes a 10-year residency visas for foreign investors and also to professional talents. This includes also people of all nationalities which are specialists in medical, scientific, technological fields. The cabinet changes also include, a five-year residency visas for international students who are studying in UAE universities and 10-year residency visas for ‘Outstanding Students’. This include benefit foreign investors or companies in having a 10-year residency visas without the need to renew it every year. This could benefit foreign investors

2.5.2.2 – 100% Foreign Business Ownership The second major change is the 100% foreign business ownership. This change was installed by the end of 2018. The idea of this change is to give the opportunity to foreign investors and companies to fully own their businesses without sharing with a sponsor with the distribution of 51% to 49%. However not all the sectors will have this privilege, only investments related to advanced technology and artificial intelligence, also many other sectors that was not announced by the end of 2018. On the other hand, the only way to invest in the UAE with 100% foreign ownership was the “Free Zones” in the UAE before installing this new change. Otherwise, foreign investors were obligated to share it with a national (Emirati), taking 51% of your shares. This new change will open the opportunity for foreign companies and investors to navigate more and try to invest in UAE, knowing that they own their businesses without sharing it with an Emirati and taking full profits as well.

2.5.3 – EXPO 2020 Another benefit foreign investors and companies would benefit from is the next EXPO which will be held in Dubai in 2020. Dubai was awarded the EXPO in November 2013, for the year of 2020,

24 the Expo is an international exhibition to showcase the achievements of different nations, this could be a reason to invest in the UAE because the UAE is looking to increase their economic growth as the UAE are expecting to have more than 25 million visitors for the Expo.

2.5.4 – Location UAE’s strategic location has great advantages and is an incentive for foreign investors and companies. It is considered to be one of the best locations in the Middle East. It is also a great location for Global Trade. UAE has a strategic location because it is between the east and west. That makes it open to major developing economies, connecting shipping courses and facilitating goods transportation between the different continents in the Middle East, Asia, Europe, and Africa. To support this, Picture 2 shows that the UAE is centralized between most of the well-known capitals from all regions, the picture also shows that how many weekly flights go from Dubai to these capitals. This could benefit foreign investors and companies in two ways. Firstly, by making it easier for facilitating goods for transportation between different regions. Secondly, investors would be adjacent to their families and relatives and will it easier to travel between weekends and holidays.

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Picture 2 –

Source: https://image.slidesharecdn.com/dubaieventpresentationsall-140926030745- phpapp02/95/opportunities-dubai-2014-presentations-12-638.jpg?cb=1411700950

2.6 – Advantages There are four advantages for foreign investors and companies to neglect the cultural differences and barriers regarding the stability of the UAE in four different areas. These four areas include: 1. Economic stability 2. Political stability 3. Social stability 2.6.1 – Economic stability As I mentioned above, Dubai was awarded the EXPO in 2013, for the year of 2020. The reason that the UAE was a candidate for the EXPO as they are looking to increase their economic growth as the UAE are expecting to have more than 25 million visitors in 2020. Moreover, the economy of the UAE is growing at a large pace as the country’s GDP have increased tremendously since the establishment of the country back in 1971. In 1971, UAE’s GDP was around 6.5 billion Dirhams which is around 1.7 billion U.S. Dollars10. The following year, in 2018, UAE’s GDP was around 1,580 billion Dirhams which is approximately 432.61 billion U.S. Dollars 11. Moreover, according to UAE’s government official website, “Currently the UAE is implementing policies for a future

10 https://www.statista.com/statistics/297605/uae-gross-domestic-product/

11 https://www.statista.com/statistics/297605/uae-gross-domestic-product/

26 beyond oil. The UAE plans to increase the contribution of the non-oil sector to 80 per cent of the nation’s GDP in the next 10 to 15 years” (Why Invest in the UAE, 2018). As the UAE plans to increase their GDP in the next 15 years, Figure 2 shows the trend the UAE are keen to increase their GDP around the time of the EXPO in 2020 and further to 2022.

Figure 2 – UAE GDP from 2012 to 2022

Source: https://www.statista.com/statistics/297605/uae-gross-domestic-product/

Figure 2 shows the trend the UAE are keen to increase their GDP in 2022. Also, the UAE are willing to stop depending on the oil sector. However, the UAE desires to change their economy to depend more on sustainability and other industries as the UAE are willing to be an International trade hub. To support this, according Waheed Abbas, an author in Khaleej Times said in his article “Non-oil GDP growth will grow at 3.4 per cent in 2019 against 2.6 per cent last year while oil GDP will expand at 3.7 per cent this year versus 3 per cent, the apex bank said. It projects that non-oil GDP economic growth in the first quarter of 2019 will reach 3.1 per cent but will grow faster later. The overall GDP growth for the fourth quarter of 2018 is estimated at 4.4 per cent, driven by non-oil sector real growth, as well as accelerating oil production since October.” (Abbas, 2019). The economic growth of the UAE is an incentive for the foreign investors and companies

27 because UAE are trying to be an International trade hub by not depending on only the oil sector but also other industries which could encourage the foreign investors to come to the UAE and invest. This will open more opportunities for the foreign companies and investors as the UAE government seek for more knowledge-based economy.

2.6.2 – Political stability Since UAE’s formation on 2nd of December 1971, UAE has been following the constitutional monarchy political system12. Subsequently, UAE has been a very peaceful country with many surrounded countries and especially also countries in the West which made them have a very strong political stability and have respectable connections diplomatically. Moreover, according to Mustafa Khalifa, an author of Al Bayan newspaper, claimed in his report “The number of representative missions abroad reached 102, including 80 embassies, 18 consulates and 4 permanent missions, while the number of foreign missions accredited in the country reached 110 embassies, 73 consulates and 16 international organizations (Khalifa, 2016). Khalifa have explained the political strength that the UAE contains with the foreign diplomats, which makes it much safer for foreign investors and companies for investing in the country. Nevertheless, according to Global Peace Index (GPI) 2018 report, the UAE was ranked the second peaceful country in the Middle East and North Africa region13. On the other hand, the UAE is been a member of the GCC, the UN, and the Arab League14.

2.6.3 – Social stability As I mentioned before, the UAE has more foreigners and expats than locals; however, that still makes the UAE as one of the safest countries in the Middle East. According to Peter Cooper, an author from The National newspaper, “It’s a growing trend. According to New Worth Wealth, some 5,000 new HNWs became resident in the UAE in 2017, more than moved to traditional safe havens like Switzerland and Singapore. About the same number of HNW15s left the UK. The 2018 figures will likely be higher.” (Cooper, 2019). Furthermore, UAE is one of the countries with the lowest level of crimes in the world. For instance, in 2015 the UAE had 110 crimes, being ranked

12 https://www.government.ae/en/about-the-uae/the-uae-government/political-system-and-government

13 http://visionofhumanity.org/app/uploads/2018/06/Global-Peace-Index-2018-2.pdf (Appendix)

14 https://www.government.ae/en/information-and-services/business/why-invest-in-the-uae

15 HNW – Stands for High-net-worth, https://acronyms.thefreedictionary.com/HNW

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9th among countries within the lowest crime rates. Nevertheless, the UAE aims to have the lowest crime rate in the world in 2 years. To support that, according to Samir Salama, an associate editor of Gulf News claimed “He said by 2021, the UAE, which boasts more than 3.2 million cars plying the roads and the world’s highest car registration compared to its population, aims to have only three road deaths for every 100,000 people. “The number of road deaths in the UAE is among the lowest in the world compared with western countries. In Sweden, the rate is 3.1, US 10 and the UAE 5, while Denmark is 2.7,” Shaikh Saif said” (Salama, 2016). A country with a strong social stability should be an inducement for the foreign investors and companies as the UAE plans to be the safest country in the world in 2021 and people care about safety whether for their daily lives or even the safety for their businesses.

2.7 – The cultural impacts on Exports and Imports in the UAE As I have addressed before in this paper, that trade barriers are commonly one of the barriers in doing business in the UAE. However, there are some cultural impacts which leads to regulations that could stop the export or import trade. Again, as I mentioned before, UAE is considered to be a conservative country alike many Middle-Eastern countries because of the religion. On the other hand, GCC countries have a united restrictions and prohibitions regarding of goods that cannot be imported and exported. According to GCC Customs Tariff Codes, there are a list of prohibited goods16.

The list contains17: § All types of Narcotic drugs § Products imported or exported from the country Israel § Products imported or exported from the any boycotted countries (like Qatar) § Gambling playing sets and machines § Statues § Crude ivory § Lithographic limestones § Fishing nets § Any kind of weapons (even if licences is obtained from country of origin), includes swords and

16 https://www.export.gov/article?id=United-Arab-Emirates-prohibited-restricted-imports

17 https://www.export.gov/article?id=United-Arab-Emirates-prohibited-restricted-imports

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§ Products that criticize Islam in anyway § Live swine (Pigs)

Other imports of any alcoholic drink are not prohibited but however, controlled by the GCC Customs Tariff Codes which companies that are importing or exporting alcohol should obtain a licences.

Chapter 3 – The Practice

3.1 – Case Studies

3.1.1 – Hofstede Insights

For this case study I have used Hofstede Insights to compare between the country that I am doing this project on and a Western country. I have chosen the Czech Republic to be the Western country because I have been living in the Czech Republic for the last three years.

Figure 3 –

The Differences between six cultural dimensions between United Arab Emirates and Czech Republic

Source: Hofstede Insights website

Hofstede insights website has a comparison tool of six different cultural dimensions. I have compared the two different countries that I have lived in just as a sample for my results by the difference between Westerns and Middle-Easterns. The first dimension explains the power distance, which means that the individuals in the country’s society are not equal and explains the

30 culture attitude between people. The Hofstede Insights website defines power distance as “the extent to which the less powerful members of institutions and organizations within a country expect and accept that power is distributed unequally” (The Hofstede Insights website, 2018). Nevertheless, figure 1 shows that the UAE has a score of 90 for power distance while the Czech Republic has 57, so the UAE has a very high score for this dimension which touches one of the barriers of doing business in the UAE is the which this number explains, that there is a hierarchy in working in the UAE. However, for the second dimension, which is individualism, which the websites describe it as “the degree of interdependence a society maintains among its members”. Therefore, it means how the country individuals consider themselves as and if they look after themselves and take care of family and this related to loyalty between groups. The UAE individualism scored 25 while the Czech Republic scored 58, this means the UAE has a lower number than the Czech Republic, because, in the UAE’s culture, family is considered highly important and are loyal to their families which makes the UAE a collectivistic society while the Czech Republic is more considered as an individualistic society. The third dimension explains the power of masculine over feminine in the society; a higher score indicates the society is more driven into masculine. The UAE scored 50 while the Czech Republic scored a higher score of 57, UAE’s society has a very neutral society and considered neither masculine nor feminine, while the Czech Republic is considered more masculine than feminine. The fourth dimension is described from the website as “The extent to which the members of a culture feel threatened by ambiguous or unknown situations and have created beliefs and institutions that try to avoid these”, so basically the uncertainty avoidance is the fact of thinking of the future and how society can have any hypothetical thinking of the future which can lead to anxiety in the society. The UAE and the Czech Republic have very close scores and both societies can have a very high preference for avoiding uncertainty. The website described this as “In these cultures there is an emotional need for rules (even if the rules never seem to work) time is money, people have an inner urge to be busy and work hard, precision and punctuality are the norms, innovation may be resisted, security is an important element in individual motivation”

3.1.2 – Doing business Doing Business18 is a project that is conducted from the World Bank group. The study measures the easiness of doing business in the country. Doing Business conduct a study annually for each

18 Doing Business – “The Doing Business project provides objective measures of business regulations for local firms in 190 economies and selected cities at the subnational level”, http://www.doingbusiness.org/

31 country’s economy. I have added this case study because it reflects on literature review sections of the benefits, incentives and barriers. Doing Business focuses on different indices listed below in figure 4.

Figure 4 – Rankings on Doing Business indices

19 As figure 4 highlights advantages and disadvantages, that corresponds on my literature review. The advantages, that the UAE is the 25th country in the world in starting a business according to “starting a business” index. Also, it highlights that the UAE is ranked the 1st to have electricity power. Additionally, the UAE is ranked the second country in the World for paying the amount less taxes. On the contrary, and which is associated with my literature review section, that trade barriers are one of the most challenging barriers in the UAE, being ranked in 98th position for trading across barriers which I have discussed in sections 2.2.1 and 2.7. Another barrier which was conducted in this case study, is resolving insolvency, UAE being ranked in 75th position in the World. As resolving insolvency is a new index which I do not have in my literature review and this explains of this case study.

19 http://www.doingbusiness.org/content/dam/doingBusiness/country/u/united-arab-emirates/ARE.pdf

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3.1.3 – Unsuccessful foreign companies in the UAE In this section, there are a three case studies which will analyzed about and spot out the cultural mistakes they have done. These three case studies will be on three foreign businesses that have failed in the United Arab Emirates because of cultural differences and barriers. One of these companies is Tiz Persian Razor blades company that have started selling their product in the UAE and Qatar back in 2005. They failed to continue in the Middle-Eastern countries because of cultural differences, the main problem they had was the language, the word Tiz in Persian means “Sharp” however, in Arabic it has a different meaning, which it means something unethically, the word Tiz in unformal Arabic means “Buttocks” which made fail and not continue in the UAE market. Airbnb20 is another company that have failed in the UAE market because not understanding cultural differences is Airbnb, it is a global online market that offers housing for a short stay. However, in the UAE, locals do not prefer sharing their property with people who they do not know, as they consider their households to be a very private and the reason behind that is because locals (Emiratis) are very conservative with their women and would not allow an outsider to live with them even if it was for a short stay. Because of that, Airbnb have failed entering the wrong market without studying out the culture of the UAE and how important and private is their households are. Another company that failed in the UAE, is the Mexican Fast Food company called Taco Bell. According to Darren Geeter, a reporter for CNBC, explained why Taco Bell failed in the UAE and more specifically in Dubai. he claimed, “Taco Bell has entered the Dubai market in 2008 within a high competition with other Fast Food companies and sister companies such as KFC and Pizza Hut” (Geeter, 2019). Boorstin also added that “A study was conducted in 2012, that the appetite for Mexican food was not within the first ten cuisines in city of Dubai, as only 0.14% like Latin American food” (Geeter, 2019). Geeter explained why Taco Bell have failed, since it less than one percent of the market in the UAE have Mexican food or Latin American as their favorite. The market in the UAE, prefers more the American cuisine, which consists of Burger and fries and that’s a reason why McDonalds, Hardee’s and Burger King have been successful for the last two decades in the UAE market. Taco Bell have done an immense mistake not navigating the UAE’s market and culture and have not done their research decently which made fail within only 4 years.

20 Airbnb – stands for Air-bed and breakfast 33

Picture 4 – Tiz Persian Razor blades Company

21

Picture 5 – Tiz Persian Razor blades Company

22

21 https://www.badgerandblade.com/forum/threads/tiz-sharp-blade-source.532025/

22 https://www.badgerandblade.com/forum/threads/tiz-sharp-blade-source.532025/

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Picture 6 – Taco Bell company in Dubai Mall

3.1.4 – Successful foreign companies in the UAE Toyota and Nissan Market in UAE Japanese automotive have dominated in the UAE’s market as Toyota and Nissan are the most sold cars in the UAE. According to CarSwitch website, Toyota Corolla and Nissan Patrol obtain 21% of the most cars used in the UAE. Nissan and Toyota have been successful in the UAE because as they have proved that their cars can tolerate many aspects in the UAE, for example, the very high temperatures like heat and dust. The Japanese cars have been very successful in the UAE because they have been the most economic cars in the country, for example the Nissan Patrol, is a car which is made specifically for the desert and which focuses on the hobby of the UAE nationals which is driving in the desert, this has played a very successful aspect of being one of the top cars that were sold in the UAE. Unlike the German manufacture cars that do not tolerate the heat as much as the Japanese. Nissan and Toyota have been clever in approaching the UAE market by applying the customer needs. This case study proves to this project that foreign companies can adapt easily to the UAE market with understanding the UAE cultural difference and barriers perfectly in order to navigate the market successfully.

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3.2 – Interviews 3.2.1 – interviews with foreigners living in the UAE I have interviewed two foreigners that are currently living in the UAE for around 10 years. And have taught me in the past in Highschool, where I know them personally. The purpose of interviewing Mr. Michael Walkoski and Dr. Paul Dillon that both are them are in place of power which they had enough experience in the UAE’s culture which they have dealt with homesickness, UAE’s cultural changes and barriers. Both of them were asked within the same questionnaire. Nevertheless, the objection of this project, is to build a great knowledge for foreign companies and investors to know about the cultural differences and barriers, foreigners would like to hear the outcomes from expats who already lived there and have faced some cultural differences and challenges because they would trust their people more than anyone else. 3.2.1.1 – Interview with Mr. Michael Walkoski This interview was held in Mr. Michael Walkoski’s office on January 16, 2019, this interview conducted around 30 minutes of time as Mr. Walkoski’s time was limited due to his busy schedule that day. Mr. Walkoski answered 15 questions in total. I was the one writing notes while he was answering the questions.

§ Mr. Walkoski’s Answers

⇒ Interviewee name: Michael Kevin Walkoski ⇒ Nationality: Canadian ⇒ Occupation: Educator ⇒ Position: Deputy Head of 6-9 (Middle-School)

» Question #1:

For how many years have you been in the UAE? 10 years

» Question #2:

What made you stay in the UAE? Lifestyle; travel opportunities; excellent job with benefits not given in home country (ie airfare home, accommodation, end of contract gratuity); friends.

» Question #3:

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What cultural challenges did you face while living in the UAE? Public displays of affection are not accepted; stipulations on type of clothing allowed (men must wear shorts below knees); muscle shirts not really accepted; women not allowed to show shoulders.

» Question #4:

What barriers did you face while living in the UAE? UAE is an extremely modern place to live with Western ideologies. English is spoken everywhere. Some barriers that I faced where difficulties opening up a banking account; obtaining a resident visa

» Question #5:

What are the cultural differences you realized in the UAE (businesswise)? I am unable to comment on this as I have no connection with any business currently.

» Question #6:

Do you think the UAE's official religion (Islam) has a big impact on the citizens and why? I personally don’t think UAE’s official religion has had any impact on the citizens. Instead, it has made UAE into a more multi-cultural country that accepts tolerance and diversity.

» Question #7:

Do you think the bank systems in the UAE are different than the west? I believe the banking systems are much better in the UAE then the west. For example, you are notified via text messaging all transactions that you make whereas this does not exist in the west. Also, great offers on loans and interest of borrowing money is low.

» Question #8:

When dealing with banks, where you obliged to follow the Islamic banking system, or you had the option to use the normal banking system (with interests)? Please describe your experience. I have never taken out a loan with the bank so unable to comment.

» Question #9:

In your opinion, do you think foreign companies would face a hard time dealing with the UAE market? Not at all. The UAE is becoming the forefront for global business and real estate.

» Question #10:

Would you recommend the UAE for a friend or family member? excluding the incentives (High paid salaries, Housing, etc.. etc) Definitely. UAE is the safest country in the world which makes living here much easier. No worries about crime, theft, drugs or gangs. Multiple opportunities exist for all individuals who come from any country.

» Question #11:

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Do you think the corporation/company/school working for, is dealing or overcoming with the cultural differences effectively? I believe the company I am working for has definitely dealt with cultural differences effectively as we ensure we incorporate international and local events within the calendar of the school to ensure all clients cultural needs have been met. An example is adapting the school timing schedule during Ramadan for all our Emirati clients.

» Question #12: (optional)

In your opinion, what is/are the best foreign company/companies currently in the UAE? Rental car companies (Hertz, Thrift, Alamo etc) ; hotel chains (Fairmont, Hilton, Radisson etc); restaurant chains (ie McDonalds, KFC, Pizza Hut);

» Question #13:

Would you open a business in the UAE knowing that a citizen would be taking 51% of your shares? I personally would not open up a business as that percentage of share that the UAE would be taking is very high and it would prove to be difficult to keep my business running with such a loss.

» Question #14:

Please describe the first year in the UAE as a foreigner (businesswise). The first few months moving into this country was a different experience as business was conducted differently than in other countries, I have lived in. For example, in order to be employed, we had to have vaccinations completed for Hepatitis A and Hepatitis B; a medical check-up had to be completed (blood and urine test, x ray) and a lawyer had to attest all working documents and certifications prior to being employed in the country. However, once this was completed, it allowed me to obtain residency, a driver’s license, and a national identification card.

» Question #15:

Did you face any cultural differences with any of your colleagues, customers, clients and/or people you work with in your workplace? Understanding the language, the national dress, and the Sharia Law was very important in associating with people not only in the workplace but also within the country.

3.2.1.2 – Interview with Dr. Paul Dillon This interview was held in Dr. Paul Dillon’s office on January 23rd, 2019, this interview conducted around 55 minutes of time as Dr. Dillon answered 16 questions in total regarding cultural challenges and barriers that he has faced in the UAE.

Þ Interviewee name: Dr. Paul Dillon Þ Nationality: Australian Þ Organization / Company / School: The Australian International School Þ Occupation: Educational Administrator

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Þ Position: Head of Senior School

» Question #1:

For how many years have you been in the UAE? 10 years

» Question #2:

What made you stay in the UAE? I stayed for both professional and personal reasons. Professionally the job is very interesting. Personally, the travel opportunities presented by living in the UAE.

» Question #3:

What cultural challenges did you face while living in the UAE? It is hard to remember because I have been living here for so long and the challenges have become the normal! Some issues that I have come to accept: • The racial imbalances between all levels of workers and the Emiratis • The idea that everything is negotiable in an Arab world • The time that it takes when investigating an issue to find the truth and find a resolution • The language barriers • In the settling-in phase establishing phone, financial and other necessary life structures

» Question #4:

What barriers did you face while living in the UAE? • From a personal perspective a limited range of social and cultural activities to fill in my weekends. • Limited promotional opportunities within my organization. • The isolation from my family and friends.

» Question #5:

What are the cultural differences you realized in the UAE (businesswise)? • The significance of building and creating relationships and trust. Contracts and opportunities could be based on existing relationships rather than cost/benefit. • Variation in the quality of work completed.

» Question #6:

Do you think the UAE's official religion (Islam) has a big impact on the citizens and why? • Yes, at a macro level because it permeates all levels of government policy and culture.

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• Variable at a micro level the Islamic belief system is not always demonstrated e.g. honesty in efficiency of work, treatment of workers and payment of accounts.

» Question #7:

Do you think the bank systems in the UAE are different than the west? • From a domestic consumer’s perspective, the banking system has rapidly aligned or even exceeded the Australian Banking system e.g. messaging when credit card used. It is slower in areas such as payway. • From a business perspective the use of cheques and particularly postdated cheques is far more evident in the UAE banking system.

» Question #8:

When dealing with banks, where you obliged to follow the Islamic banking system, or you had the option to use the normal banking system (with interests)? Please describe your experience I did not take any bank loans in the UAE hence I cannot comment.

» Question #9:

In your opinion, do you think foreign companies would face a hard time dealing with the UAE market? I understand that foreign companies must take extra efforts during their initial investigation phase and their Establishment Phase. There is a long history of international companies failing in the establishment of their business.

» Question #10:

Would you recommend the UAE for a friend or family member? excluding the incentives (High paid salaries, Housing, etc.. etc)

Yes, I would recommend the UAE as a workplace, but I would certainly preface this recommendation with a range of warnings.

Significantly the UAE is no longer seen by employers as a hardship posting and the benefits that you have mentioned are no longer as significant and are being impacted by the high costs of living in the UAE e.g. education, power and medical.

» Question #11:

Do you think the corporation/company/school working for, is dealing or overcoming with the cultural differences effectively?

In my first nine years at the school cultural understanding was an important facet of induction and ongoing life. However, the new administration has explicitly stated that cultural understanding is not a significant HR focus.

» Question #12: (optional)

In your opinion, what is/are the best foreign company/companies currently in the UAE?

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Cannot answer.

» Question #13:

Would you open a business in the UAE knowing that a citizen would be taking 51% of your shares?

No, I would not open a business in the UAE especially under the current challenging financial situation.

» Question #14:

Please describe the first year in the UAE as a foreigner (businesswise)

It was not easy, as I come from a different background and learning that religion (Islam) is part of the culture was the hardest challenge.

» Question #15:

Did you face any cultural differences with any of your colleagues, customers, clients and/or people you work with in your workplace? Yes, as previously outlined. But other issues were associated with different cultural expectations between a multitude of nationalities e.g. UAE, GCC, English, New Zealand and India. Equally as significant were the different educational backgrounds and expectations of Australians from different states e.g. Queensland, Western Australia, Tasmania.

In summary I made assumptions based on my experience and expectations which often did not take into account a diversity of personal and professional differences.

» Question #16:

What are the incentives that make you stay in the UAE? Please list them? • A capacity to save money • Experiencing living in a very different culture • The travel opportunities • Doing something significantly different in the later phase of my professional life

3.2.1.3 – Key findings on Mr. Michael Walkoski and Dr. Paul Dillon interviews Mr. Walkoski and Dr. Dillon have been living in the UAE for the same time which is 10 years, a decade is enough to decide if the culture is suitable to cope with. For question #2, both of them claimed that staying in the UAE was an advantage by travelling opportunities, by that, that makes UAE business culture as beneficial in some way. They both had challenges, Mr. Walkoski claimed that the dressing code was one of the challenges he noticed in the UAE. However, for Dr. Dillon, the language and negotiation method were his cultural challenges he has faced in the UAE. They both have claimed that the banking systems in the UAE are much better than the ones in the West, however both of them also had no comment on dealing with Islamic banks as foreigner tend not to take loans in the United Arab Emirates when asking them the question. For question #10, both of

41 them had a very similar answers however, Dr. Dillon have stated a new headline, which he said “Significantly the UAE is no longer seen by employers as a hardship posting and the benefits that you have mentioned are no longer as significant and are being impacted by the high costs of living in the UAE e.g. education, power and medical”, as he highlighted that the cost of living in the UAE are rising and the benefits are not sufficient as before. For question #6, they both had different answers regarding the impact on Islam in the UAE, Mr. Walkoski have stated Islam have “made UAE into a more multi-cultural country that accepts tolerance and diversity”. On the other hand, Dr. Dillon thinks that Islam has a large impact claiming, “Variable at a micro level the Islamic belief system is not always demonstrated e.g. honesty in efficiency of work, treatment of workers and payment of accounts”. In question #13, they both refused to have a partnership business with a local sponsor which will be taking 51% of your shares and profits. When I asked them, how can foreigner overcome the cultural challenges and barriers and other restrictions since they have been there for a decade now. However, they had different answers on that, Mr. Walkoski stated, “If cultural differences in the UAE are that bad, I wouldn’t have stayed for 10 years, as incentives, I would say, again, traveling opportunities and high benefits such as free housing, free car which leads to extra pocket money” and Dr. Dillon said, "A capacity to save money, Experiencing living in a very different culture, the travel opportunities, doing something significantly different in the later phase of my professional life" which he had a more personalized answer. But, both of them had incentives that include money and savings.

3.2.2 – Interview with Mr. Saud Abbasi The third interview I had was more business-oriented unlike the previous two meetings, that were more personalized. This interview was with Mr. Saud Abbasi, the managing director in Toyota motors in Dubai. As I mentioned before in this project that Toyota is one of the best automotive company being sold in the United Arab Emirates. I have asked him questions regarding the cultural challenges that Toyota faced in the UAE, how did Toyota adapt with the cultural differences and what did Toyota do to be on the top of the most selling cars in the UAE.

This interview was held in Al Futtaim Auto Centers Corporate Office23, which is located in Marsa Plaza, in the city of Dubai. The interview was on the 24th of January 2019. The Interview conducted around 25-30 minutes as Mr. Abbasi was in a rush and had to leave for a meeting.

23, is Toyota's headquarters in the UAE 42

Scheduling another meeting with him was difficult. Mr. Abbasi approximately answered 3-4 questions which I was writing notes while him answering the questions.

During the interview, I have asked him, what has Toyota challenged when dealing with the UAE’s culture, he said “Toyota had to be sponsored by Al Futtaim group to be the local sponsor and have the majority of our profits and have the end word in our business. However, Toyota and Al Futtaim have a great partnership, and I describe the Al Futtaim group as the best local sponsor in the United Arab Emirates". And when I asked him why did Toyota is one of the successful automobiles in the UAE, he said, “Toyota have understood the cultural needs of the Emiratis (locals) here, as an example, Toyota 4x4 cars like the Prado and Land Cruiser is sold here more than in the country of origin, which is Japan because here driving the deserts is a hobby, we have focused on that more than anything else”. According to him, “Toyota did not only focus on only one penetration, however, but we have also focused on different social classes, UAE is one of the countries that contain a variety of social classes, the company needs to adapt the company for everyone and not just for the upper-class. As many people know Toyota also owns Lexus which is a luxurious model for Toyota, and which is focused on upper-class.” I have asked him if Toyota faced any restrictions from the government, he claimed, “Toyota and Lexus are always following the rules, and we try never to break them as we will get in big trouble if we did." And finally, I asked if someone would like to lease a car, are they required to deal with an Islamic banking system, Abbasi stated "Yes, since the final word is for Al Futtaim Group, he only prefers to deal with Islamic banks which means, dealing with no interests in return as it considered to be as a usury and which is considered haram (prohibited) in the Islamic finance rule”. What if foreigners want to lease a Toyota car, are they obligated to use the Islamic Banking system, Abbasi said, “our main market is on locals but for foreigners “we have connection with other banks, but it is very exceptional because as I told you before, the final word is for Al Futtaim Group”.

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Chapter 4 – The Findings & Results

Foreign companies and investors that are willing to invest and navigate successfully in the UAE should take into consideration that the country is nothing like the west, religion has a giant impact on the country as they follow the religion steps, when dealing in basically everything. Islam is not just a religion for worshipping in the UAE. However, it is the moral and ethics for business traits. In most Western countries, culture is widely separated than religion but, in the UAE, it is the opposite: the religion (Islam) is their culture. Moreover, the cultural differences in the UAE can also vary from different Middle Eastern countries, they are similar in some way, but assuming that this project connects all Middle Eastern countries could cause a misconception and misunderstanding. The main goal for this project is for foreign companies and investors to understand that culture in the UAE plays an important role and could impact severely in their businesses. To navigate the country widely, cultural differences should be understood and explained before going to invest there.

My project objection to let foreign investors and companies invest in the UAE and have more foreign corporations as the UAE are willing to make their country a global business hub for everyone and not just locals. I have also included benefits and incentives in investing in the UAE, and there are many of them, regardless, how many are there, culture is a crucial element that should be understood even though if the incentives could motivate the foreigners to go and invest. On the other hand, the UAE has a different government protocol and censorship, and it is also nothing like the West. Free speech is not strictly prohibited in any kind, and all websites are strictly monitored for the safety of the country.

I think the UAE is a great business hub for everyone if you have enough capital and willing to invest in a place, and looking for massive profits, then the UAE could be your preferred place for a successful investment. I have included case studies of successful and unsuccessful foreign companies that either failed or succeeded. The companies who failed should be the lessons not to repeat and avoid culture. Tiz, Airbnb, and Taco Bell got motivated by the incentives without overlooking on cultural differences and barriers which made fail and leave the country without any profits. On the other side, Nissan and Toyota have been successful because they have adapted their products to the market by understanding the main aspects of the UAE culture. On the other hand, I have also added three interviews that were made with professional foreigners that have been there

44 for a decade now, they faced cultural differences and challenges, but the only way to overcome them is to adapt with the culture and not to neglect them.

Chapter 5 – The Recommendations

I have a set of recommendation to add for foreign investors and companies that are willing to invest in the United Arab Emirates and overcome the cultural challenges; Þ Have a background check up on your chosen local sponsor before partnering Þ That Islam means culture for the UAE Þ Understand the meaning of Islam in the UAE culture Þ Understand that the UAE has a different government protocol and control Þ Avoid cultural mistakes like Tiz, Airbnb, and Taco Bell Þ Overlook on what Toyota and Nissan case study Þ That there are many benefits, incentives, and advantages in the UAE Þ Based on my literature review and according to Mr. Walkoski that the UAE, one of the safest countries in the World. Þ Doing Business case study explains that the UAE the best country in starting a business in the Middle East and 25th ranked worldwide. Þ UAE has a different business etiquette than the West

Conclusion

The objection and goal of this project are to address the cultural differences and barriers for foreign potential investors and companies and understand the material that was discoursed in this project to invest successfully in the Middle Eastern country United Arab Emirates. I have undertaken the main cultural differences and barriers, then went into depth on what the foreigner will need to know when investing in the country. I have shared my experience on elements that I know about and also read books, lectures, videos, and case studies that helped more to understand how to address the cultural differences for the foreigners in a more straightforward way. Also, I had to translate some Arabic words that were related to culture to explain to the reader the translation and what it means, as I have included a table with all the meanings of the Arabic words used in this project. I had to look at case studies and to find businesses that have failed and succeeded to show the importance of culture, which means, disregarding culture could lead you to failure.

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I believe that I have covered the most important cultural elements that a foreign investor and company will need to enter the market successfully. I have interviewed two foreigners that have been living in the UAE for a decade now and have shared their experiences with different cultural differences and challenges they have faced throughout their time in the country, which will be very useful for the foreign companies and investor to look at and take recommendations from. I have also added a list of suggestions above this section that foreign investors and companies should be looking at to navigate the market successfully and not make the same mistakes the unsuccessful three companies in my case studies section. To conclude, this project is made to address the cultural differences in the United Arab Emirates which means, it does not apply to be a way of knowing a different countries' cultural difference upon this project as each countries' cultural differences and barriers can vary. Last words, foreign companies should consider in navigating the market of the UAE. However, they should consider understanding the cultural differences and barriers fully and then find the incentives.

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