Table of Contents

History of Dubai

The economy was initially based on pearl-fishing until oil was discovered about 50 years ago. The economy became heavily reliant on oil that was discovered in various islands, and given the ready market in the world, the country’s economy was boosted. However, this did not last forever. About 20 years ago, the country faced a serious economic shock that threatened to derail its economy. This was caused by the dwindling oil reserves, which were the only pillar of the economy. This incident made the government realize that there was a need to diversify its economy. It transformed it into a free-trade oasis as a way of attracting investors to various sectors of the economy. The country turned to the retail, manufacturing, and information technology industries to boot its economy. The new focus of Dubai is currently the tourism industry (Al-Amine 57). The government has been developing infrastructure in order to promote tourism in this city.

Jebel Ali Free Zone

Jebel Ali Free Zone is a free economic zone in Western Dubai that was established in 1985 as a way of promoting trade within the city of Dubai. The main competitive advantage of JAFZA in Dubai as a trading center is that the government of Dubai has eliminated or reduced tax for the players in this region, something that is not common in any other part of the world. Business entities in this region also enjoy security, good infrastructure in transport and communication, and cordial relationship with government officials, making it attractive to foreign investors. This is the reason why companies are choosing JAFZA in Dubai as their preferred business hub. However, it is important to note that operating in the free zone has the disadvantage of stiff competition as many players will be attracted to it.

The government of Dubai is planning to expand JAFZA to be a major industrial zone in this city in the coming years. JAFZA makes its money majorly from the services offered to business entities in this region (Abdul-Rahman 28). The transport and communication sector is majorly dominated by the government. This model, where the government becomes an active player and not just a mere regulator, is very suitable because it opens more income avenues for the government. JAFZA faces stiff competition from the regional free economic zones such as JLT Free Zone and Dubai Silicon Oasis.

Al Hilal Islamic Bank

Al Hilal Islamic Bank is a large government-owned Islamic bank in UAE. Just like the Sharjah Islamic Bank, this bank offers Islamic banking products to its clients. They both offer personal, corporate, and investment services to their clients. However, the main difference between the two firms is that while Al Hilal Islamic Bank has wholesale banking services, Sharjah Islamic banking does not offer such services. The Islamic banking system has been able to withstand the recent economic meltdown that affected many industries because of the nature of its income. During the economic meltdown, the number of people borrowing from the banks was reduced. Traditional banks rely majorly on the profits earned out of these borrowings, which means that they were affected by the meltdown. However, this does not form the basis of the income of Islamic banks. Some of their main sources of income, such as the foreign exchange, were not heavily affected during this period in the Middle East.

Islamic banking should explore the markets in Canada and Europe because of the increasing number of Muslims in these regions. They have a special niche in these two regions that are not exploited by other firms. In Europe, Samba Financial Group and the Islamic Bank of Britain are the major players in this industry. In North America, the American Finance House LARIBA is the main player in this industry (Kettell 117).

These financial institutions are not able to satisfy the needs of Islamic banking products in these regions, which means that there is room for more of such organizations. Some of the main challenges that the Islamic financial institutions in North American and Europe face are the misconception that Islam is associated with terrorism. These banks have met harsh environments in these regions, and are always shunned by non-Muslims who are the majority in North America and Europe. More challenges lie ahead, especially as financial institutions struggle to expand their sources of income. Given that the system does not allow charging of interests on loans, these banks may have to come up with new means of earning some income if they expect to remain competitive in the market. This may be the right time to establish an Islamic financial institution in Canada because of the growing population of Muslims in this country.

In a contemporary Islamic banking system, profits are not earned by charging interest. The banks earn their profits by sharing the profits that borrowers make out of their investment using a predetermined formula. This means that if a borrower gets money from the bank, the bank will see its operations, and after a set period of time, the borrower will give a fraction of the profits to the bank. These institutions also charge some service fees on withdrawals.

According to El-Gamal (56), the 2008 economic recession was caused by the United States Housing Bubble that reached its peak in December 2008. People borrowed a lot of money to buy homes at high prices, only for the price to fall tremendously in 2008. Some new homeowners preferred forfeiting their collaterals instead of paying the loans, a fact that seriously affected the financial institutions in the country. In the Sponsorship Model in the United Arab Emirates, the government is the ultimate guarantor for the loans taken by its citizens. This means that in case of a failure by the borrower to repay the loan, the government will pay the loan and find its own way of recovering the money from the borrower.

The key competitors of Al Hilal Bank include Samba Financial Group, Sharjah Islamic Bank, Emirates Islamic, Dubai Islamic Bank, and Abu Dhabi Islamic Bank. The Islamic financial system is very beneficial to society. When an individual investor needs some money for an investment, he can easily get help from these institutions knowing that he will only need to give part of the profit earned from the business venture. It is important to understand the difference between loan capital and risk capital. Risk capital is the fund used to finance high-reward high-risk projects, while loan capital is the borrowed funds used to finance the normal operations of a firm.

Al Halal Bank was able to establish its operations despite the recession because it did not focus on the interests earned from loans, which was the worst affected product during this time. Non-Muslims may be interested in using Islamic banks because of the nature of their loans. They do not charge interest on their loans. Just like any other financial institution, Islamic banks operate under clear regulatory policies. Although each of the institutions will need to follow regulations in the specific countries where they operate, just like other banks, they are also expected to follow Shariah law in their operations. This includes not charging interests on their loans.

Abu Dhabi 2030 Vision

The Abu Dhabi Economic Vision 2030 refers to the plan by the Abu Dhabi government to transform the economy of the Emirate. The vision seeks to foster diversification of the economy in order to promote other sectors as a way of reducing the overreliance on the oil sector as the major contributor to the country’s GDP. The reasoning behind the Abu Dhabi Economic Vision 2030 is that as the country continues to exploit its oil reserves, it will reach a time when the reserves will be depleted. When this happens, the country may be faced with a serious economic crisis if it lacks other pillars that support its economy.

The rationale is that as the oil reserves continue to dwindle, other pillars should be developed to support this economy. This vision is based on four key themes that must be realized for the vision to be considered a success. The economic development, social and human resource development, environmental sustainability and infrastructure development, and optimization of operations of the government are the four themes upon which this vision is based. The government of Abu Dhabi will realize this vision even before the panned date. This is so because of the investment that has been directed to the project, goodwill from the government and the society, and the technocrats involved in implementing the policies.

Abu Dhabi and the Banking System in the UAE

A number of factors have made Abu Dhabi more successful than the other Emirates with respect to oil production. The main factor is that Abu Dhabi is the largest of all the emirates, giving it a large geographical location to exploit oil. The government of Abu Dhabi has also invested a lot in this sector, giving it a superior capacity to extract oil as compared to other emirates (Çizakça 72). Many institutional investors have the Middle East on their radar because of the rich oil reserves in this region. They want to control trade in this commodity, which is the most important commodity in the international market.

The banking system in Canada and that of the United Arab Emirates closely compare in terms of policies put in place by the governments. In both countries, this sector is closely controlled by the national government because of its strategic role in the economy. However, the government in the United Arab Emirates, through its sponsorship model, is more integrated into this system than is the case in Canada. It is also important to note that in Canada, most of the financial institutions operate under the traditional banking system, while in the United Arab Emirates, many banks are currently embracing the Islamic banking system.

Many banks in Abu Dhabi are owned by the government, but it is important to note that they favorably compete with one another in the market. Although they are owned by the government, they operate semi-autonomously, with minimal direct control by the government. This means that they can compete in the market. A bank that wishes to be the safest financial institution in the Middle East may choose to operate in a politically unstable country like Egypt because of the opportunities the market presents, and as a means of demonstrating that even in such difficult times, the institution will still be willing to offer its services to all its customers.

Sheikh Zayed Grand Mosque

Sheikh Zayed Grand Mosque has become a tourist attraction center because of its sentimental values to the people and the architectural design that was used in its construction. It is a uniquely beautiful structure that attracts tourists. This tourist attraction site gets its funding directly from the government of Abu Dhabi (Low 63). Such a model for a tourist attraction can be successful in Europe and North America because people like visiting structures with unique designs, especially if they have sentimental values. The grand mosque will help this Emirate achieve its vision 2030 of diversification of the economy. It helps in developing the tourism industry.

Atlantis Resort

Atlantis Dubai is a branch of the original Atlantis resort in the Bahamas. Both resorts have a similar architectural design, and their cuisine also has some commonalities. However, Atlantis Dubai has been forced to introduce some of the Western cuisines because of the cosmopolitan nature of the city. The Kerzner resorts have to understand the needs of the customers before defining the products. The products offered should be in line with the needs of the customers within the local environment.

Atlantis resort has faced a number of challenges in recent times, especially the stiff competition from other leading players in the hospitality industry. Sheraton Hotels have offered stiff competition to this firm, the fact that it has reduced its profitability. Inflation that affected the West in recent times has also been an issue that has reduced the flow of customers into the regional market. The Palm Dubai Project and the World Island Project have a number of common factors. Both were designed to give visitors a clear view of the sea. Their architectural designs also integrated the traditional and contemporary designs in their structures.

There has been a recent change of ownership at Atlantis. Kerzner International Holdings Limited sold its fifty percent stake to its co-owner, the Istithmar World. Kerzner has also given up its ownership of Bahamas One & Only Ocean Club to Brookfield Asset Management, its long time creditor. This deal meant that Brookfield forgave the debt that this resort owed it to a tune of $ 250 million. From this transaction, the researcher believes that this firm’s performance will improve because it will no longer be burdened by the debts. Just like the Atlantis Dubai, the World’s Islands has been successful in the local market. With a collection of about 300 private islands, World’s Islands has attracted both regional and international visitors.

The Atlantis Dubai Project and the World’s Islands Project are on their path towards great success in the future (Low 48). Dubai City is increasingly becoming a major business and tourist hub in this region that is attracting a high number of international visitors. The two projects have been part of the major attraction. This means that they have become part of the developing city, and this gives an assurance of great success in the near future. Atlantis depends on both the local and international customers for its growth. The local tourists have a huge potential that this resort has been tapping on in the recent past.

As Dubai becomes a strategic business hub in the world, international customers have also been making a substantial share of the market for this firm. The key competitive advantage of Atlantis over its immediate competitors is its financial strength and the size of the facility. The recent waiver of its debts means that the resort can now operate without the burden of paying debts. With the luxurious 600-suite Cove Atlantis and 497-room Reef Atlantis, it is one of the biggest resorts in this region. This competitive edge is likely to remain if the management is keen on maintaining the excellent performance that has been witnessed in the recent past because it will be able to expand its financial strength.

Atlantis has some challenges that the management has been forced to deal with within the market. One of the main challenges is the stiff market competition from its competitors. The firm has responded to this by improving its service delivery process. The dwindling customers from the West have been another major challenge that the firm has been facing. To address this problem, it has been expanding its target market to include more of the local tourists. Although Atlantis was affected by the financial crisis, just like any other five star hotels in this region, its unique products enabled it to maintain a steady flow of visitors, especially from other countries in the Middle East, the fact that cushioned it from the impact of the crisis. The key markets for Atlantis still remain visitors from Europe, North America, and the Middle East.

Islamic Finance

There are a number of prohibited transactions in Islamic banking systems that must be obeyed by all firms operating in this system. The first prohibition is on the issue of interest on loans, which this system describes as usury or riba. According to the Shariah law, any loan from the bank, or deposits to the banks should not attract any form of interest, always known as riba. The Islamic banking system also prohibits Gharar, which Visser (52) defines as a deceptive uncertainty. Maisir or gambling is also prohibited under this system of banking. It is also important to note that Islamic banks are prohibited from investing in or loaning businesses that offer products prohibited under Islamic laws such as alcohol or pork.

It is important to understand some of the most common Islamic models that are currently in practice. Mudaraba refers to a contract signed between an investor and a manager, also known as Mudarib. In case the project earns losses, the investor will have to bare it all, while the profits are enjoyed by both parties. Murabaha is an Islamic financial system where a buyer acquires a property through an intermediary. The intermediary purchases the property and hands it over to the buyer, who will agree to pay an agreeable sum of money on installments. When the buyer completes the payment, the property will then be registered under his or her name.

Musharaka refers to an Islamic financial system where capital is generated from two partners who will then agree to share profits on the basis of their contributions. Salam is an Islamic financial system where payments are made, but the delivery is done at a future date. It is very common when making purchases of agricultural products that are yet to be harvested. Istisna’a refers to a contract of exchange that is signed between two parties, with the delivery being deferred to a future date.

There is a number of Islamic finance offerings within the Islamic financial system. Some of them are Shariah-compliant, while others are not. Mudaraba, Murabaha are the two clear Islamic finance offerings that are Shariah-compliant because they do not attract any form of interest (Ayub 68). However, some of these banks currently offer some form of interest to the account holders as a way of attracting more customers. This goes against Shariah law.

The banks which offer mortgage loans at some fee also go against the teachings of Shariah. Sometimes two similar transactions can be viewed differently on the basis of their compliance with Shariah law. This is possible based on the terms of the transaction. For instance, a bank may inform the account holder that his or her savings will be used to conduct a specific business, and the profits will be shared. This will not be considered interest, and therefore, the transaction will be Shariah-compliant (Pock 59). However, when such payments are made without such clear clarification, it may be regarded as a riba, which goes against the Shariah teachings. When an organization administering Zakat funds receives funds, it will debit its cash account and debit the Zakat funds account.

Middle Eastern Marketing Perspectives

The marketers in the Middle East and those in North America and Europe share a common factor in that they both have the responsibility of convincing the customers to accept a given brand or product in the market. They both have to use the socio-cultural factors that are appealing to their clients in order to win their trust (Ahmad 39). However, it is important to note that to enjoy the liberty of using gender-sensitive language, the marketers in the Middle East, they must be very careful when using such languages because of the strictness of the Islamic religion.

Marketers in the Middle East face a number of challenges that are not witnessed by those in North America and Europe. One such challenge is the diction they use when developing messages for their customers. Customers in this market are very sensitive to the words used, especially in public, and this means that the marketers must be very careful when developing promotional campaigns — strict adherence to Islamic culture that rigidly defines how people should behave poses another serious challenge. In North America and Europe, a marketer can easily develop a promotional campaign without fear of rejection because a specific Shariah law was ignored.

Marketers face a number of challenges when convincing a customer to buy a given product. In this region, buyer behavior is closely defined by their religious beliefs. A marketer may find it difficult to convince a customer to purchase a given product that goes against the religious teachings. For instance, advertising alcohol in the United Arab Emirates may not yield any positive fruits in the market. It may also be straining trying to convince a consumer to purchase a new product that has just been introduced into the market.

Works Cited

Abdul-Rahman, Yahia. The Art of Islamic Banking and Finance: Tools and Techniques for Community-Based Banking. Hoboken: Wiley, 2010. Print.

Ahmad, Abu. Theory and Practice of Modern Islamic Finance: The Case Analysis from Australia. Boca Raton: BrownWalker Press, 2010. Print.

Al-Amine, Muhammad. Risk Management in Islamic Finance: An Analysis of Derivatives Instruments in Commodity Markets. Leiden: Brill, 2008. Print.

Ayub, Muhammad. Understanding Islamic Finance. Hoboken: John Wiley & Sons, 2007. Print.

Çizakça, Murat. Islamic Capitalism and Finance: Origins, Evolution and the Future / Murat Çizakça. Cheltenham, UK: Edward Elgar Pub, 2011. Print.

El-Gamal, Mahmoud. Islamic Finance: Law, Economics, and Practice. Cambridge: Cambridge University Press, 2006. Print.

Kettell, Brian. Frequently Asked Questions in Islamic Finance. Hoboken, N.J: Wiley, 2013. Print.

Low, Linda. Abu Dhabi’s Vision 2030: An Ongoing Journey of Economic Development. Singapore: World Scientific, 2012. Print.

Pock, Alexander. Strategic Management in Islamic Finance. Wiebaden: Deutscher Universitäts-Verlag, 2007. Print.

Visser, Hans. Islamic Finance: Principles and Practice. Cheltenham: Edward Elgar Pub. Ltd, 2013. Print.

International Business in the UAE

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