Study of the impact of globalization on the economy, society, and culture of the United Arab Emirates
Study of the impact of globalization on the economy, society, and culture of the United Arab Emirates
Executive Summary
In regard to the United Arab Emirates (UAE) economic perspective, it is essential to mention that globalization has had a positive impact particularly through increased foreign investments, promotion of domestic investments, and encouraging free trade between UAE and other nations. As a result of the political stability in UAE, the escalating percentage of foreign investments has led to a boost in the capital stock, allowing UAE to access increased structures and equipment to generate goods and services. The escalating levels of productivity have given rise to UAE’s economic growth, as well as, living standards. In addition, globalization has facilitated the promotion of domestic investments, by means of the establishment of interaction between UAE and industrialized economies such as the USA (Tisdell 2).
The major drivers of the UAE economy are fundamentally its abundant oil reserves, in addition to its international transactions. The exploitation of the abundant oil reserves in the UAE has enabled the UAE government to provide its citizenry with universal access to social services, as well as, healthcare. UAE’s international transactions have opened up increased domestic investment through the establishment of several investment centers for instance the International Petroleum Investment Company (IPIC), the Dubai Port and Abu Dhabi Investment Council (ADIC), among others to encourage international capital market (Annisette 63).
In light of the enormous growth of the UAE economy, this paper recommends that the UAE adopts International Financial Reporting Standards (IFRS) as a result of the manifest globalization. The financial reports that would be organized under the IFRS would present an image of the UAE that would be compatible with that of industrialized nations, as well as multinational corporations. However, it is essential to note that developing nations and emergent economies such as the UAE, in pursuant of the universal economic advantages presented by the implementation of IFRS, would experience challenge in acclimatizing their culture and regulatory infrastructure to western-leaning standards of accounting. This paper recommends that in taking on globalization and implementing IFRS, the UAE, requires developing suitable regulatory framework to prevail over cultural concerns that relate to confidentiality and fraud (Stiglitz 101).
Significance of International Financial Reporting Standards
The financial wellbeing of international financial markets is vital to leading nation-states, in their pursuit of their intended politics and strategies to develop their capital. It is also essential to emergent economies plus developing nations, as they aspire to contribute in the wealth guaranteed by the implementation of globalized business practices, as well as the implementation of globalized standards of accounting. The amalgamation of Generally Accepted Accounting Principles (GAAP), with IFRS guarantees comparable, transparent, and reliable financial data that would guide investors in making suitable decisions that concern investment (Tisdell 30). Emerging economies characteristically enjoy larger capital than developing nations, and consequently do not experience similar financial limitations. On the other hand, emerging economies experience numerous similar challenges in implementing IFRS. This would be evident when taking into consideration the culture transformations and developing structures of accountability and regulation. The UAE is exceptional in that it is an affluent economy with considerable wealth in terms of gas and oil, presently introducing itself onto the global financial arena, with the conception of a stock exchange and aggressive pursuit of foreign direct investment (FDI) (Stiglitz 101).
Challenges to IFRS implementation in UAE
It is however, essential to mention that accounting practices in different countries mirror their distinctive beliefs and culture, and it would therefore be hasty to presuppose one regulatory structure is suitable for the financial reporting requirements of all nations. If the UAE is to embrace IFRS, adequate attention ought to be paid to the concerns that relate to national culture, as well as, the existing regulatory infrastructure. Although emerging economies have larger wealth, they experience implementation complexities as they struggle to regulate their existing frameworks to manage the changing structures of regulation and accountability. Several studies carried out in Papua New Guinea, Bangladesh, and Fiji underpins the intricacy of imposing western-oriented regulation structures on developing nations. Opposition to the implementation of IFRS in the UAE is rather limited vis-à-vis other nations around the globe, attributable to its aspiration to partake in FDI. The major challenge for the UAE is expected to be the secrecy culture, although this is a universal concern in nations that have not beforehand been required to account for financial data to a regulatory body (Tisdell 35).
Conclusion
The UAE has enlarged its business operations with western nations drastically in current years with the founding of zones of “free trade” to institute the UAE as the nerve center for Middle East commerce. This increases the pressure to implement globalized structures of financial reporting and accountability, predominantly those of its dominant trading partners. Beside the aspirations of the UAE to draw FDI, there are requirements for a global structure of accounting standards. Since with zero tax on proceeds, in addition to, 100% foreign ownership, the pull of this onshore capital market is evident and amplifies the need for the UAE to exhibit integrity, efficiency and transparency. This may be realized by implementing IFRS and launching a regulatory regime that would go together with IFRS.
Works Cited
Annisette, D. The World Bank: Decisive Perspectives on Accounting. New Jersey: Prentice Hall, 2009, Print.
Stiglitz, K. Globalization & its Disgruntlements. New Delhi: Penguin Books, 2010, Print.
Tisdell, R. “Transitional Economies & Economic Globalization”, Journal of International
Social Economics, 28(2012):2–35. Print.
