Introduction
In recent years, countries in the developing and developed world have demonstrated a keen interest in improving the business environment as a primary means of promoting enterprise development and growing their national economies (Hindson and Meyer-Stamer 1). The importance of promoting the business environment has also been reinforced by the urge to increase employment, improve welfare, and reduce poverty. Research is consistent that the promotion of the business environment is directly related to the emergence of strong entrepreneurial activities that have the capacity to drive national economies (Wetherly and Otter 258).
Many indicators are used to benchmark the economic situation of a given country against several trends, which in turn determine the explicit relationships between entrepreneurial accomplishments and the local business environment (Krivokapic and Jasko 291). This report compares and contrasts the United Arab Emirates (UAE) and Chinese economies in terms of the roles played by global, ethical, political, physical, and societal (GEPPS) indicators in promoting or hindering the business environment of the two economies.
Country Background: UAE and China
The UAE is made up of seven emirates (Abu Dhabi, Sharjah, Ajman, Ras al-Khaimah, Fujairah, and Umm al-Quwain) that occupy a total land area of approximately 77,700 square kilometers, with Abu Dhabi being the capital center and Dubai being the most attractive emirate for business (“Doing Business” 4). Although the UAE has a population of 8.1 million according to United Nations statistics, it has one of the largest economies in the Middle East and one of the world’s fastest-growing populations helped by the continuous migration of expatriates into the country (“Doing Business” 4).
The People’s Republic of China (PRC) is a communist state in Eastern Asia that has successfully transitioned from an autocratic socialist system to a market-oriented economy. Currently, China “is the second biggest economy in the world behind the United States of America and has the largest population of any country at 1.3 billion people” (Irwin 7). The market-oriented economy coupled with important economic reforms and the growth of the private sector have contributed immensely to China’s economic growth in recent decades as witnessed by key economic indicators such as purchasing power parity and real growth rate (Li 65; Stenstadvold 3-5).
The comparison of the UAE and Chinese economies will follow several themes that are meant to identify the role played by the GEPPS indicators in promoting or hindering the business environment in the two economies. These themes include the size and growth of the economies about capitalism and democracy, the impact of the Internet on the national economies, the definition of capitalism in relation to national political policies, as well as the relationship between economic growth and personal freedoms in the two economies.
Size and Growth of Economies in Relation to Capitalism and Democracy
Undoubtedly, the UAE and China have healthy and business-friendly economies by size and growth trajectories. Both countries have recorded tremendous economic growth in recent decades due to several economic and political reforms targeted at aligning the economy with free-market principles. An inclination towards capitalism and the resultant market-oriented capitalist economy have enabled the UAE to have one of the most liberal trade regimes in the Gulf and also to expand its trade, tourism, and real estate sectors.
Additionally, the country has been able to attract foreign investment due to its attractiveness as a regional and global economic hub (Kotzman 1-3). UAE’s incredible economic growth can be compared to that of China, which transitioned from a Marxist-planned economy to a market-based capitalist economy and proceeded to register a GDP growth rate of at least 8% annually for three decades now (Carrington, Maniam, and Subramaniam 73). Drawing from this exploration, it is evident that the market-based capitalist economy practiced by the two countries has contributed immensely in the rapid growth of the two economies, particularly in terms of opening up trade and investment, encouraging business startups, growing the private sector, and nurturing entrepreneurship (Gillon et al. 415).
It can be argued that the size and growth of the UAE and China’s economies have a direct relationship with capitalism, particularly in terms of supporting individualism over collectivism. Most citizens in the two economies are now not only free to decide where to work and whether to start a business but are also being encouraged through government incentives to accumulate private wealth including ownership of productive assets and residential real estate (Friedman 47).
Although democracy is a significant political indicator in the selection of a favorable business environment, it is important to note that democratic principles have not substantially influenced the growth of the UAE and Chinese national economies. Stable political systems in the UAE and China have played a significant role in the realization of higher economic growth in both countries; however, the systems are not necessarily democratic. In the UAE, for example, the government retains a strong grip of power, though domestic political risk is extremely low because of strong national support for the monarchy and unwillingness of citizens to demand greater political representation due to high living standards (“United Arab Emirates” 7).
situation is similar to that of China, whereby the Chinese government remains a one-party dictatorship nationally and “there is little publicly expressed interest in multiparty politics, broader freedom of expression, or other elements of Western-style democracy” (Friedman 47). Additionally, the boundaries between business and the State in China are unclear as witnessed by the fact that public officials are sometimes required to manage private enterprises (Irwin 7). Drawing from these similarities, it can be argued that nondemocratic politics cannot in themselves hinder economic development if countries are keen enough to adopt a market-based capitalist economy. As has been witnessed, the UAE and China have managed to grow their economies over the last two or so decades using a mixture of market-oriented economics and nondemocratic politics.
Impact of the Internet on the National Economies
The access to, and cost of, the Internet are considered as core physical indicators in efforts aimed at promoting global economies (Gillon et al. 413). Specifically, the Internet is considered as a major driver for economic development in terms of improving the productivity of business enterprises by facilitating the adoption of more efficient business processes, accelerating innovation by introducing novel consumer applications and services, as well as enhancing a more effective functional deployment of business enterprises by optimizing their reach to human capital pools, access to raw materials, and consumers (“Impact of Broadband” 4).
Both the UAE and China have benefited immensely from the use of the Internet and other related information and communication technologies (ICTs) to drive their national economies. In both countries, it is evident that Internet-enabled electronic commerce has played a major role in providing consumers and business enterprises with various advantages that are known to contribute to the expansion of their national economies. In the UAE, for example, electronic commerce has helped business enterprises to grow by lowering barriers to entry, reducing advertising costs, and increasing potential market share (“Country Profile” 19-20).
The same is true for China, as demonstrated by its ascent in the World Economic Forum’s Network index from 59th position in 2006 to 36th position in 2010-2011 due to its employment of Internet-based technologies to drive its economic outlook (Gillon et al. 414). Additionally, the opening up of the Internet for business has assisted the Chinese government is not only shifting the focus of the economy from manufacturing to services but also in creating employment for the local population as well as enhancing domestic innovation.
However, although the use of the Internet has largely remained open and unsanctioned by the UAE government, the Chinese government continues to face criticism and accusations for interfering with the use of the Internet. Indeed, the ethical indicators of government trust, transparency, and accountability are low in the Chinese business environment than in the UAE business scene due to the communist government’s continued interference with the rights and freedoms of people and businesses to access the Internet (Kim 45). Google, for example, threatened to withdraw from China several years after entering the country in 2007 due to what the company executives termed as strict censorship rules from Beijing, hacking of the company’s computer systems by highly sophisticated government operatives, and continued infiltration of Gmail accounts of human rights activists (Einhorn par. 1-2).
Although the situation has slightly improved over the years, a substantial number of international business enterprises are hesitant to operate in the Chinese business environment due to Internet censorship concerns, fear of losing sensitive business information through hacking and other unethical practices, complications in the country’s Internet performance and licensing landscape, as well as unfavorable Internet regulatory processes (Kim 45-46). In sharp contrast, open and transparent Internet licensing agreements and lack of censorship have enabled the UAE to attract a lot of investors to its US$250 million Dubai Internet City, making the emirate of Dubai the regional center for e-commerce (“Country Profile” 19).
Definition of Capitalism about National Political Policies
Political indicators such as political systems, government policies, governmental stability, political ideologies, and trade union activities have a direct bearing on the strategies and operational styles adopted by business organizations (Dawson 481). There is a broad consensus that both UAE and China define capitalism in terms of a decentralized private market that has the capacity to “better deliver efficient production of goods and services, investment in new capital resources, and gains over time in productivity” (Friedman 47). However, the definition varies when linked to the national political policies of the two economies as China uses a socialist system to strive for political, economic, social and cultural rights and rights of all her citizens, whereas the UAE uses a federal presidential monarchy system to progress the development agenda and maintain high living standards for its citizens (Dawson 482).
The relationship between capitalism and the national political policies of both countries is similar and different in various fonts. The main convergence arises from the fact that, although capitalism in both economies is intended to raise the standards of living and also to broadly distribute such an increment across the population at large, the national political policies of the two countries do not advocate for democratic principles. For example, the UAE and China do not engage in open, contested, and democratic elections to decide who controls the levers of power based on the fact that China is a communist single-party state while the UAE practices a monarchy-based government (Friedman 47).
The national political policies of both economies (e.g., federal presidential elected monarchy in the UAE and one-party political representation in China) are also known to impede political rights and individual civil liberties. Such an orientation is not favorable for business and needs to be addressed. Additionally, some national political policies such as the open border policy in the UAE and the social tolerance policy in China have contributed immensely in opening up opportunities for economic and social advancement for national and foreign investors (Katzman 3-4).
Although the two countries maintain that Western-style democracy is not a prerequisite in the growth of the economies, China takes its people as the ultimate goal of development while the UAE is more concerned with establishing a conducive environment for the realization of social justice through elevating the living standards of its people as well as safeguarding the rights and welfare of its population (Morrison 2). Drawing from the definition of capitalism in relation to the national political policies of the two economies, it can be argued that these economies value and uphold social indicators such as customs, traditions, value systems, beliefs, and enhancement of literacy levels as well as life expectancy.
Relationship between Economic Growth and Personal Freedoms
Available literature demonstrates a direct relationship between economic growth and personal freedoms that have been granted to the people of the two economies in recent decades. In the UAE, for example, the growing economy has coincided with greater freedoms for individuals to improve their economic performance through access to education and the enhancement of living standards (Dawson 487). Although history reveals that women were not allowed to engage in formal employment in the Arab world, the sustained growth of the UAE economy has granted well-educated women entrepreneurs the personal freedom to work in modern businesses that make use of advanced information and communication technologies and up-to-date management practices (Haan 3).
The realization of such personal freedoms, in turn, enhances the economic growth of the UAE as women are now able to use their skills and education to earn a living, employ people, and take care of their families. The trend is similar in China, whereby the country has succeeded in achieving massive economic growth due to the transition from a closed economy to a market-oriented capitalist economy. Indeed, it can be argued that the switch to a market-oriented capitalist economy allowed Chinese citizens greater personal freedoms by enabling them to open up businesses and also by opening up the local economy to foreign investment (Dawson 490). The basic argument is that economic development can raise the living standards in a country, which in turn induce a higher level of personal and economic freedoms (e.g., civil liberties, employment freedom, freedom of expression, and freedom to buy property) to be granted by the respective government (Dawson 480; Gogel 3-4).
However, it is important to underscore that some personal freedoms in China continue to be closely monitored by the Communist government yet the country’s economy continues to outperform the economic growth of the UAE, which guarantees most of the personal freedoms to its citizens. In spite of the economic reforms that were initiated in the late 1970s with the view to changing China’s economic landscape, the central government leaders remain accused of adamantly opposing fundamental political reform, rejecting free speech and representative democracy, imposing lengthy prison terms for political reform advocates, and repressing peaceful protests with brutal force as happened during the Tiananmen student demonstration in 1989 (Minzner 1). The situation on personal freedoms is far much better in the UAE, though the country has refused to entrench representative democracy and security officers infiltrate the social media accounts of government critics to monitor their communication.
The speedy economic growth of China despite the country’s unwillingness to guarantee some personal freedoms to its citizens can be explained in terms of exercising ethical and unethical business practices. Ethical indicators are intended to demonstrate the moral principles used by business enterprises to guide their actions, business activities, and behavior in relation to societal demands. Ethical business practices include “running the business without adopting unfair practices, being honest and truthful about quality of goods, charging fair prices, abiding to laws, [and] paying taxes, duties, and fees to the government” (Wetherly and Otter 480).
Unlike the UAE, the Chinese government has been accused of abetting unfair or unethical business practices that include dumping products to international markets, producing inferior goods to unfairly and dishonestly gain a competitive advantage, manipulating the Chinese currency instead of allowing it to move freely in foreign exchange, as well as fraudulent financial reporting (Carrington, Maniam, and Subramanian 74-76; Lin 65). Although the Chinese government continues to discredit these claims, it is important for business owners wishing to start a business in the country to consider how limitations of personal freedoms in the Chinese economic landscape may hinder their operations. It is also important to investigate if the unethical business practices occur in China as documented in the literature since such practices may have an adverse outcome on their businesses.
Conclusion
This paper has compared and contrasted the UAE and Chinese economies in terms of the roles played by global, ethical, political, physical, and societal (GEPPS) indicators in promoting or hindering the business environment of the two economies. Overall, the paper has demonstrated that the market-based capitalist economy practiced by the two countries has contributed immensely in the rapid growth of the two economies, particularly in terms of opening up trade and investment, encouraging business startups, growing the private sector, and nurturing entrepreneurship.
Although slight variations have been noted in how individuals access and use the Internet in the UAE and China, it is of interest to note that both countries have benefited immensely from the use of the Internet and other related information and communication technologies (ICTs) to drive their national economies. It has also been discussed the definition of capitalism in the two countries varies when linked to their national political policies as China uses a socialist system to strive for political, economic, social and cultural rights and rights of all her citizens, while the UAE uses a federal presidential monarchy system to progress the development agenda and maintain high living standards for its citizens. Lastly, a direct relationship exists between economic growth and personal freedoms that have been granted to the people of the two economies in recent decades. However, China continues to be accused of limiting some personal freedoms and engaging in unethical business practices that are thought to propel its economic growth at a faster rate than that of the UAE.
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