Tran, Al-Abdulwahhab 1
Cynthia Tran, Hussain Al-Abdulwahhab
BUS 366: International Business
Country Project Part B
Italy & the United Arab Emirates (UAE)
Trade & Investment
(Country Comparator, 2018)
1. As you can see in the chart above, Italy has FDI of -13.1, that means that they are
investing more somewhere else than they are in the country itself. They are reaching out
to other countries to expand their operations. There was no statistic available for the FDI
of the UAE as there was not enough information available. As gathered from the chart,
Italy has about $605.5 billion worth of exports of goods and service, in which only
$506.2 billion is actual merchandise exports. This means that $99.3 billion is related to
service-based exports. Therefore, Italy is a predominately merchandise export-based
country, exporting more goods than services. In relation to imports of goods and services,
Italy imports about $546 billion worth, with only $93.3 billion being service based
imports. This means that Italy imports more merchandise than they do services. In
comparison, the UAE imports and exports less goods and services than Italy by almost
half. The UAE exports about $384 billion worth of goods and services, in which $20
billion is service related. That means that they export more goods than they do services.
In terms of imports they import about $277.1 billion worth of goods and services, in
which $9.1 billion is related to services. This means that they import more goods than
they do services as well (Country Comparator, 2018).
2. Italy’s comparative advantages are hides and skins, textiles and clothing, metals,
footwear, food products, plastic or rubber, wood, chemicals and stone and glass (Italy’s
Exports, 2018).
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The UAE’s comparative advantages are tourism, crude petroleum, refined petroleum,
gold, diamonds, jewelry, raw aluminum, broadcasting equipment and technology (United
Arab Emirates, 2018).
3. Italy being a fashion capital for the world explains its comparative advantage in hides,
skins, textiles, clothing and footwear, many of the products stated above. Due to the high
demand of clothing and footwear products from Italy, the Italians have become one of the
largest exporters of these goods. There are a variety of Italian businesses and companies
that specialize in these products, such as Valentino, Gucci, Prada, etc that are
internationally known and sought after (Italy’s Exports, 2018).
The UAE’s unique infrastructure and international standards for hospitality explains its
comparative advantage in the tourism industry. The UAE accounts for 41% of the total
investment in travel and tourism sector in the Middle East. They now have more hotels
per head of population than any other country in the world. Some of the most well-known
hotels are the Burj Khalifa, Burj Al Arab and the Jumeriah Emirates Towers. In addition
to their tourism industry, they also have a comparative advantage in oil/petroleum since
they are sitting on one of the world’s largest oil reserves. There are many large oil
companies based out of the UAE, making up 40% of the country’s GDP output (United
Arab Emirates, 2018).
Political Risk
Tran, Al-Abdulwahhab 3
(The World Bank Group, 2018)
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f. Six Factors of the World Bank’s Worldwide Governance Indicators
1. Voice and Accountability: how openly the country’s citizens can have a say in
their government and voice their opinions through speech and media.
2. Political Stability and Absence of Violence/Terrorism: how unlikely a country
is to encounter politically-motivated violence and terrorism due to political
instability.
3. Government Effectiveness: how well the government does to maintain the
quality of public services and its elected politicians, judicial and military
branches. It also describes the credibility of its government policies and
commitment to these policies.
4. Regulatory Quality: how well the government formulates and implements
policies that help promote the private sector.
5. Rule of Law: how much confidence the citizens can have in abiding by the laws,
also the quality of contract enforcements, property rights, police, court and the
likelihood of crime and violence.
6. Control of Corruption: how well a country does to keep corruption out of their
government, especially for the gain of private interests.
(Canvas, 2018)
g. Political and Legal Risks
Italy and the UAE both have their own sources of political and legal risks. Italy’s prime
political risk is its high amount of corruption between political leaders and business owners. The
corruption, bribery and mal practices are very apparent in their country and has been an issue
Tran, Al-Abdulwahhab 5
that many of its citizens have been unable to agree on. There has been growing tension between
the Northern and Southern Italians on these beliefs. The Northern Italians want to get rid of the
corruption and move towards politically correct business practices while the Southern Italians are
very exercised in these malpractices. The disagreement between the two has cause a large
amount of political turmoil that has been very apparent in its country’s government decisions and
elections (Italy, 2018).
For the UAE their political risk lie less in corruption and business malpractices but more
in territory and resource disputes with other countries such as Iran. The two countries have been
in an ongoing dispute over some islands that both are claiming to have sovereignty over. In
addition, the much sought-after oil/petroleum reserves are also being disputed as well. Both
countries are trying to claim control of both, which is leaving their relationship strained. Because
a large portion of both countries’ GDPs are centered around both of these, it has been an ongoing
issue. There have been many terrorist attacks that Iran has been accused of being behind, which
may lead to an issue in the future for the UAE, especially with the countries close proximities to
each other (The UAE, 2018).
h/i. Six Factors Explained Per Country
Voice and Accountability:
In comparison to the UAE, Italy has a much higher score in voice and accountability.
Due to Italy being a very individualistic society, they highly emphasize their personal ideas and
opinions. In addition, they have a neutral score of 50 in power distance, meaning that they have a
decentralized power and decision-making system, and everyone is treated equally whether
they’re in high positions of power or not. They are often encouraged to voice their opinions.
Tran, Al-Abdulwahhab 6
In comparison, the UAE is a very collective society, so they do not emphasize their
personal ideas opinions like the Italians do. In addition, the UAE has a very high-power distance
score of 90, meaning there is a hierarchal order in their system and everyone knows their place.
Everyone knows their place and will not speak up as their laws may be very strict. Women often
get the short end of the stick as they have less rights then males in their society and often are
unable to voice their opinions (Compare, 2018).
Political Stability and Absence of Violence/Terrorism:
In terms of political stability and absence of violence/terrorism, the UAE has scored
higher than Italy over the past ten years, although both of their scores have declined over the
years. Italy’s decline in political stability may be because their north and south sectors have
drastically different views and have been unable to coincide their differences. For the past few
years they have had differing views that has led to issues with their government (Chiappa, 2018).
In relation to the UAE, their score has declined over the years due to political turmoil with Iran
over oil, and territory disputes. The relationship between the two countries has been leaving the
country strained on the political end as the two are very close to each other in proximity and
business relations (The UAE, 2018).
Government Effectiveness:
Although over the past ten years, Italy’s and the UAE’s scores for government
effectiveness has been on the rise, the UAE has continued to outscore Italy for the past 10 years.
Due to the UAE’s strict laws, many of its citizens abide by the law and trust their government in
leading their lives. Due to their high power distance score, the people often do as their told and
rarely speak out against their government (Compare, 2018). Also, due to their relatively high
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score of 71 on the Corruption Perception Index, their government does not take corruptions or
bribes lightly. If there were to be any malpractices or corrupt leaders or politicians, they would
be quickly fixed or removed (E.V.,T.I., 2018).
In comparison, Italy has a neutral power distance score of 50, meaning their leaders are
more of their equals in comparison to the UAE. This may mean that there may be more
corruption, leading to questionable officials and policies in attempt to benefit the private sector.
For example, business owners may have friends in positions of power that may pull strings to
help their friends, even if it may not be politically correct (Compare, 2018).
Regulatory Quality:
As you can see from the graph, Italy and the UAE have been relatively close when it
comes to regulatory quality of both countries, although UAE’s score has increased over the past
ten years while Italy’s has been declining. The UAE’s score has increased as its government has
made it a priority to become involved in and invest in the private sector, specifically in
education, health, energy and roads. The government has passed many federal laws that promote
growth in the private sector because they believe it will help their country’s infrastructure
(Badam, 2018).
Italy on the other hand, has been investing most of its money outside of the country’s
borders to expand their operations (Country Comparator, 2018). Italy’s economy has been
declining over the past few years due to a variety of factors, including corruption. In order to
remove corruption, they have been implementing laws to protect whistleblowers to first fix their
corruption problems, and then invest in any private sectors. Although, with the high amount of
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corruption, there are many policies that benefit the private sector already due to bribery and
corruption in the country (Home, 2018).
Rule of Law:
As you can see in the graph, Italy and the UAE’s rule of law scores have been similar for
the years of 2007-2012 but Italy’s score has remained the same as the UAE’s score has continued
to increase over the years. Regarding Italy, the courts do enforce contractual and real property
rights, however, their procedures may take a long time. This may be due to the corruption and
organized crime that leaves the country vulnerable to political interference. Although the country
has tried to fix these issues, the amount of corruption and political interference have just been too
much to correct in that amount of time (Italy, 2018).
The UAE has been very diligent in maintaining and developing their laws to help protect
the citizens as well as their country’s growing infrastructure. In addition, their citizens are very
loyal to their government and strictly abide by their country’s laws. They follow in complete
confidence without any questions. Due to their high power distance and collective outlook, they
know that their leaders want what is best for them and follow their instructions diligently
(E.V.,T.I., 2018).
Control of Corruption:
Italy is known to have a score of 50 on the Corruption Perception Index in comparison to
the UAE’s score of 71. This means that in terms of corruption, Italy is much more prone to being
corrupt with bribes and other malpractices in comparison to the UAE. As you can see in the
graph, the UAE has a much higher score in control of corruption in comparison due to their strict
laws and business practice. There are very strict consequences when breaking the law in the
Tran, Al-Abdulwahhab 9
UAE, so many people often abide by them. For Italians, that is not the case since there are often
bribes and other mal practices, especially in the southern region (E.V.,T.I., 2018). The Italians
have been implementing laws to stop corruption by protecting whistleblowers than may speak
out against any of these corrupt companies (Home, 2018).
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References
Badam, R. T. (2018, January 16). Private sector investment in infrastructure key to UAE growth,
says Government. Retrieved October 26, 2018, from
https://www.thenational.ae/uae/private-sector-investment-in-infrastructure-key-to-uaegrowth-says-government-1.695949
Canvas. (n.d.). Retrieved October 25, 2018, from
https://barry.instructure.com/courses/1578776/assignments/6660664
Chiappa, C. (2018, April 18). Breaking Down Italy’s Persistent Political Instability. Retrieved
October 25, 2018, from https://psmag.com/news/italy-continues-to-face-political-strife
Compare countries. (n.d.). Retrieved September 27, 2018, from https://www.hofstedeinsights.com/product/compare-countries/
Country Comparator. (n.d.). Retrieved October 25, 2018, from
https://globaledge.msu.edu/comparator/home/results?year=&field=TX-VAL-MRCH-CDWT&country=177
E.V., T. I. (n.d.). Corruption Perceptions Index 2016. Retrieved September 27, 2018, from
https://www.transparency.org/news/feature/corruption_perceptions_index_2016
Home. (n.d.). Retrieved October 26, 2018, from https://www.ethic-intelligence.com/en/expertscorner/international-experts/44-new-law-on-whistleblowing-in-italy.html
Italy. (n.d.). Retrieved October 26, 2018, from https://www.heritage.org/index/country/italy
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Italy’s Exports vs. Revealed Comparative Advantage: Italy Should Export Less Machineries and
Export More Skins, Footwear, Textiles and Clothing. (2015, June 24). Retrieved October
25, 2018, from https://yassinsabha.wordpress.com/2014/09/16/italys-exports-vs-revealedcomparative-advantage-italy-should-export-less-machineries-and-export-more-skinsfootwear-textiles-and-clothing/
The UAE: Key economic and socio-political challenges. (2014, February 25). Retrieved October
26, 2018, from https://www.erutledge.com/comment/key-challenges-for-the-uae/
United Arab Emirates. (n.d.). Retrieved October 25, 2018, from
https://atlas.media.mit.edu/en/profile/country/are/
The World Bank Group. (n.d.). Worldwide Governance Indicators. Retrieved October 25, 2018,
from http://info.worldbank.org/governance/wgi/index.aspx#reports
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