The interconnection between religion and politics continue to elicit reactions in political philosophy. For some, there is need for distinction between religious belief and the state affairs. However, religion often makes claims regarding people’s allegiance that come as a universal perspective (Ortner, 1989). For instance, the Muslims believe that all people owe their obedience to the Allah. Now, the establishment of the Early Chinese Empire involved the unification of the Qin and Han dynasties. Their imperial structure involved the combination of the Legalist considerations and that of the Confucian. The emergence of Buddhism in China opened up several other trade routes and resulted in the rise of more stable dynasties especially after the disintegration of the Hans.
A legal code was an essential feature in every political system in the ancient times. The earliest ones being the Sumerian Code of Ur-Nammu of c. 2100 to 2050 BCE and the Babylonian Code of Hammurabi of c. 1650 BCE. In most cases, these codifications were limited in scope thereby failing to describe the exhaustive legal systems of the target kingdoms and empires. Nevertheless, most of these codes enhanced ethical behaviors in the societies (Maine, 1906). For instance, the written as well as the oral Hebrew Torah of 200 CE highlighted the penalties on individuals who would breach certain behaviors. Similarly, the Tang Dynasty of ancient China developed the Criminal code that regulated unnecessary acts such as rape, murder and other culturally unaccepted conducts (Maine, 1906). In the United States, there have been significant influences of the Continental legal code that expresses itself through codification and civil law jurisdictions.
Chariot was a light vehicle that moved on two wheels, drawn by one or two horses. Often, the chariot carried two people – the driver and the fighter. The invention of chariots provided a moving platform during battles allowing the soldiers to shoot either the arrow or the javelin at their enemies from a distance. It enhanced movement into and out of the war zones. Thus, it served as a tool through which Kingdoms would conquer new territories while protecting the existing boundaries. For instance, the Hittites developed their first kingdom in the c. 1700 BCE using the chariots (Casson, 1994). Moreover, other ancient people could employ the use of horse-driven chariots in hunting. People would shoot at animals then follow them up using the chariots. Finally, the use of chariots contributed immensely in the establishment of sporting activities such as the Roman Circus Maximus that dominated the empire between c.1700 BCE and 500 BCE.
In today’s world business, execution is amongst the great unaddressed matters by most organizations. Putting an execution environment in business is a hard thing that most organizations are facing. It is a big obstacle to success of the business, and leads to other issues that are mistakenly attributed to other problems that face businesses. A lot of organizations fall victim to the gap between the results they deliver and the promises they have made to their investors. Execution refers to the techniques and behaviors that businesses have to master so as to have a competitive advantage. It is really a discipline that is critical for both small and big businesses for their success (Bossidy et al., 2012).
Execution is important since it helps a manger in an organization to select a more robust strategy. Managers cannot craft a valuable strategy if they do not at the same time make sure their companies has or can afford what they require to execute, including the right personnel and resources. Managers have a responsibility to design strategies that the organizations use as roadmaps to pursue success than the complex paths supplemented in fat arrangement books. That way, the leaders are in a position to respond quickly when anything unusual happens as their strategies are designed to be executed (Bossidy et al., 2012).
Another reason why execution is important is because it speeds up everything. Executions allows a leader to view what is going within the industry and allows the best transition better than the philosophy and culture. The businesses that are execution-oriented changes rapidly compared to their counterparts in the same situation. Businesses survive hard times through making important changes and only succeed if they execute well (Bossidy et al., 2012).
The Execution Difference vs. Building Block
In most cases, mangers might have a mind that all they do within the company is right; however this might not always be the case. At times there exists gap between the leaders goals and ambitions and the realities of the company, and when a mistake occurs they tend to blame other people working under different departments (Bossidy et al., 2012).
In the pursuit of rising to the top, the manager might get caught up in the intellectual excitement of big ideas that comes out and adopt them with a lot of eagerness. However, the might manager fails to consider how to get things done in the right way, but thinks that somebody else would think about it. A lot of people always find it difficult to understand how to correctly convert a vision into specific responsibilities, because of their broad high-level of intelligence. Hence, lack of engagement by leaders deprives them a sound judgment about other personnel within an organization that can only happen through the practice (Bossidy et al., 2012).
It is important for the organization leaders to employ the discipline of execution considering all the set of building blocks to help them in designing, implementing, and operating effectively. The building blocks are essential behaviors by leaders since they help them to fill the execution difference by providing an operational definition of the framework for cultural change and obtaining the right persons for the right jobs. The leader must know their people and business by being present to connect personally with the people hence building intuitive feeling for the business. The leader must put realism as a priority and account for both the weakness and strength of the business at equal level (Bossidy et al., 2012).
The leaders must set clear goals and priorities that all persons can understand and hence allowing them to execute them without any difficulties. Also, it is important for leaders to reward people as they ends up producing only the targeted results. Leaders should also consider training and coaching people to increase their capabilities, which in turn increases their capacity to undertake different tasks. Further, the leaders should create a framework for cultural change that links to improving the company’s outcomes as change of cultural within an organization only gets real if the company’s aim is execution (Bossidy et al., 2012).
According to Colin Powell it is not all actions that the leaders undertakes can make everyone happy as some people ends up getting angry at the leaders’ actions and decisions. Thus, a leader at times has to make tough decisions that might end up confronting certain people, which will not serve them well. As trying to please everyone might result in angering up the most creative and productive persons within an organization (Harari, 2002).
Powell’s perspective on leadership links to Larry Bossidy’s execution idea in a number of ways, especially as outlined in the building blocks. According to the two author’s, leaders should only give reward to the worthy persons in spite of what others might think about. Also, the two belies that leaders should insist on realism, and not to fear challenging pros even at their own departments as this would allow them to learn and make the correct execution. Another similarity pointed out by both is on the need of the leader to know the business and people, as Powell argues that leaders must always remain vigilant even when other people within the organization seems distracted. However, the two disagrees on the execution difference as Powell believes that leaders should keep on trying different capabilities until they get what they want while Larry Bossidy believes that leaders should employ essential behaviors that work within the framework for cultural change to obtain the right persons for the right jobs.
Bossidy, L., Charan, R., & Burck, C. (2011). Execution: The discipline of getting things done. Random House.
Harari, O. (2002). The leadership secrets of Colin Powell. McGraw Hill Professional.
Labor-Management Co-Operation Case Analysis
The previous protocol did not allow the management and union to approach each other directly. However, the Department of Public Works’ Bureau of Management-Employee Services was the intermediary through which the two bodies interacted and was viewed as a protecting agency to the labor relations. The body would listen and watch over for any instances that would result in breaching of the rules that govern the labor-management relations for the city. The need for new work standards was among the reasons that pushed the management and union to working together as any decisions would have impacted the conditions of employment of the workers. The union had interests in ensuring that that new work formula would ensure its members job security while the management had to ensure that the changes would not affect the efficiency of the collection (The Electronic Hallway, 1996).
McGuire faces a number of operational challenges in an attempt to reform refuse collection including dealing with downtime, overtime and vehicle availability. McGuire faced poor vehicle availability which was a major lead to downtime, where a lot of people although remaining at work would not perform any job-related work. Closing of City’s landfill before the collection shift is over resulted in some trucks remaining with the trash up to the following day. Also, there was poor maintenance and servicing of the vehicles which resulted in frequent breakdowns. McGuire argues that regardless of the cause for the poor availability of the vehicles, the overall result was inefficiencies which affected the rate at which refuse was being collected and how the payment of overtime was conducted (The Electronic Hallway, 1996).
The issues contributing to the cost of the agency and the pressure to run more like a business included both economic and political conditions. Economically, the pressure aimed at increasing efficiency by lowering the costs through injecting competition into the delivery of the city services. The city leadership felt that it was paying too much, yet the refuse collection services were not worth what the city was spending. also, during the campaign the mayor had made promise that he would make the city government to run as businesslike, and had viewed that privatization of the refuse collection services would lead to fulfilling part of his campaign promises to increase police protection(The Electronic Hallway, 1996).
The talk of privatization affects David Trowbridge’s considerations and actions in that an assurance that no worker would lose job after privatization was an added sacrifice as workers had gone without a raise since the expiring of the previous contract. The union was under pressure to push for job security by asking the city to refrain from further contracting of under the Local 347 employees. However, he was aware that contract was only going to bring short-term protection of the workers and effective addressing of the present interest that the mayor was intending to solve through privatization would only have happened by dealing with the expenses of the municipal services (The Electronic Hallway, 1996).
Trowbridge responds to the pressure by agreeing to hold a meeting with McGuire and Spencer where they both came to an agreement on the issue of a new work standard that had secured new contract bargaining that would allow him to pursue job security for the municipal works The Electronic Hallway, 1996). It was this way that Trowbridge as a representative of the union and McGuire, representing management developed a viable work standard, which ensured efficiency, and at the same time protecting the municipal workers and eventually overcoming the threats of privatization of municipal services by the Mayor.
The Electronic Hallway. (1996). Labor-Management Cooperation At The Los Angeles Bureau of Sanitation (A).
Based on the Case Study, please answer the following five questions, in essay format, provide facts, details and examples to answer the questions.
- What factors provided an impetus for the union and management to work? Why are they working together, and why didn’t they before?
- What are some of the operational challenges McGuire faces in trying to reform refuse collection and make it more cost effective?
- What were some of the issues contributing to the cost of the agency, and the pressure to run more like a business?
- How is the talk of privatization affecting David Trowbridge’s considerations and actions?
- How is Trowbridge responding to those pressures?
The concept of import and export trade is as a result of the need to improve standards of living since not every economy has the ability to produce all that it needs. The advancement of economic theory that is used to conduct the viability of all these international interactions can be dated back to the invention of macroeconomic theory. In real sense, no country has the ability to produce all that it needs. For instance, despite Zambia being a top producer of copper, it needs the coffee planted and exported from Guatemala and maybe fish from Japan. The import and export trade is as essential as currency itself, and nations have nothing but to comply to the forces of supply and demand that drive international markets.
A recent study of the UAE economy shows that the country is robust, and most economic indicators prove that there is better future for most citizens. The GDP per capita has averaged at $40000 for the past five years, though the 2016 and 2017 figures are not available. Overall, the country is a net exporter with 2016 statistics showing that it exported $299 billion worth of goods against $230 billion (“United Arab Emirates Economy – GDP, Inflation, CPI and Interest Rate”).
The Research Problem
The foreign exchange rate of the UAE has been pegged on the US dollar since 2002 with the midpoint of exchange between the USD and AED fixed at 3.6725 per USD (“United Arab Emirates – Conversion And Transfer Policies: Export.Gov”). In a nutshell, the UAE foreign exchange rate policy is rigid and must rely on the USD’s short term interest targets to steer its own inflationary control actions in the short run. With limited independence on the value of the AED in the international market, UAE loses several points on its economic growth (Karam, Philippe D 39). However, as already noted in the background section, UAE is a net exporter and enjoys relatively stable prices in the international market due to the presence of oil on the list of its top exports. In addition, the Emirate’s GDP has steadily increased over the years due to its robust service industry that mostly comprises tourism and commerce (Hatemi-J, Abdulnasser 39). Despite the positives, there has been a declining trend on the trade performance of UAE posting lower balances on the BOP accounts from the year 2008 to date.
Significance and Implications
In macroeconomic analysis, domestic performance is primarily measured in terms of GDP, and GDP per capita income. On the other hand, where international analysis is required, prices are matched against those of other countries to bring about the purchasing power parity indices. In essence, national income statistics provide a radical tool of economic analysis that can help forecast future trends and help government initiate corrective measures where necessary. Thus, for the purpose of gaining dominance at the international market, the government must be privy to the facts, and understand how the national income statistics collectively affect economic growth and more so foreign exchange interest rates as an auxiliary parameter. This study performs the role of enabling the central bank understands the dynamics of international trade as far as the nominal and real effective interest rates are concerned. In particular, it will help understand the impact of price fluctuations on the level of national income in UAE.
The Research Objectives
The core objective of this project is to determine the impact of domestic and foreign income, and real effective interest rate on the economic performance of the United Arab Emirates. Secondary objectives include:
- To determine the ration of imports to exports for the UAE for the period starting January 1994 to June 2017
- To determine the impact of real effective interest rates on foreign trade
- To finds out the impact of foreign trade on GDP
Organization of the Research Project
This project begins with an introduction where the background, research problem, significance and implications and research objectives are discussed. The second section of the paper deals with data sources and the methodology employed to make the data useful through analysis. Third, the results are tabulated and analyzed using [insert analysis software]. Lastly, the conclusion, which includes a summary and the policy recommendations, is included.
Data Sources and Methodology
This project depended on three types of data sources. The first source is the peer reviewed journals about the topic of international trade and the UAE. These provided general information on how international trade has affected the national income of UAE and other background information. The second set of information was obtained from the internet. Institutional websites as well as government of UAE department websites came in handy in providing reliable information about facts and figures. Thus, the validity and reliability of the sources is highly guaranteed based on the quality of materials used.
The data spans a period of 23 years from 1994 to 2017. An empirical inquest into the performance of the economy of UAE shows that the government’s capital expenditure has significantly declined with deteroriating terms of trade (Alshahrani, Saad A., and Ali J. Alsadiq 5). The huge span of time allowed for both long term and short run analysis with quarterly averages determining the short run period.
Data mining was done through the internet by visiting several sites and obtaining access to databases. In particular, the quarterly data on economic performance of UAE was obtained from [please insert source]. The important parameters selected for the tabulation were: (1) domestic income in AED; (2) foreign income in AED; (3) effective interest rate; (4) exports; and (5) imports.
Using the data, inter-variable regression analysis was conducted to determine the relationship between interest rates and foreign trade and the performance of the economy. The regression formula below was applied.
To determine the significance of the model, the following hypotheses were tested:
Ho: The ratio of imports to exports depends on domestic income, foreign income and the real effective exchange rate.
H1: The ratio of imports to exports does not depend on domestic income; foreign income and the real effective exchange rate.
Data were analyzed using Eviwes statistical software. Using the least squares method, the ration of imports to exports was taken to be the dependent variable while domestic income (yt), foreign income (yt*), and effective exchange rate (Qt) are the independent variables. C(1), C(2), C(3), and C(4) were determined as the coefficients α, β, γ and θ respectively. In each of the analyses, the standard error, t-statistic and probability were computed for each coefficient. Other statistics obtained are: R-squared, Adjusted R-squared, S.E of regression, Sum squared residual, log likelihood and probability (F-statistic).
Table 1 below displays the results of quarterly figures of domestic income, foreign income, effective exchange rate, imports and exports for the years 1994 to 2017. No data is available for domestic and foreign income for the year 2017 since the values are derivatives of many other transactions that can only be determined after settling national accounts.
From the data, it is apparent that domestic income has been on the rise, increasing from AED 14.9 billion in the first quarter of 1994 to AED 87.2 billion in the last quarter of 2016. However, it is also notable that the value of AED 87.2 is not the highest since in 2014, the domestic income figures hit an all time high of AED 100 billion. Similarly, the foreign income has increased from AED 6364 billion in quarter 1 of 1994 to peak at 11440 in quarter 1 of 2008. The values of foreign income have been unsteady rising and falling between 1994 and 2017.
The effective exchange rate, which generally refers to the weighted value of a countries currency with respect to other global players has continually fluctuated but with an upward trend. The rate was AED 76.4 per USD in the first quarter, and as of now it stands at 107.91 as per the 2017 quarter 3 analysis. The highest value for the effective exchange rate was AED 114.24 in the first quarter of 2017.
Table 1: The Economy of UAE and Trade Performance
|UAE Imports||UAE Exports||UAE effective exchange rate||UAE Foreign income||UAE Domestic income||Time Series|
|0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0.282 0.337 0.311 0.303 0.206 0.193 0.132 0.097 0.04 0.013 0.006 0.018 0.043 0.075 0.076 0.103 0.108 0.116 0.087 0.082 0.045 0.036 0.034 0.073 0.133 0.209 0.228 0.282 0.196 0.213 0.22 0.247 0.191 0.249 0.239 0.23 0.142 0.135 0.113 0.134 0.14 0.116 0.132 0.154 0.132 0.148 0.155 0.165 0.146 0.145 0.137 0.204 0.159 0.185 0.165 0.168 0.139 0.143 0.137 0.161 0.141 0.175 0.19 0.204 0.16 0.176 0.17 0.171 0.13 0.154||0.227 0.227 0.227 0.227 0 0 0 0 0.227 0.227 0.227 0.227 0.227 0.227 0.227 0.227 0.682 0.682 0.682 0.682 0.676 0.676 0.676 0.676 0.002 0.002 0.002 0.002 0.006 0.009 0.007 0.005 0.004 0.006 0.005 0.004 0.005 0.007 0.006 0.006 0.759 0.889 0.903 1.067 0.331 0.423 0.419 0.405 0.754 0.785 0.791 0.896 0.088 0.126 0.133 0.092 4.864 5.89 7.08 6.433 0.038 0.051 0.062 0.058 0.056 0.072 0.063 0.066 0.079 0.104 0.086 0.068 0.644 0.681 0.726 0.725 0.136 0.159 0.154 0.154 0.055 0.074 0.062 0.059 0.062 0.073 0.073 0.064 0.34 0.375 0.341 0.378 0.355 0.382||76.4 75.48 73.63 73.3 72.26 69.45 71.16 72.25 73.37 73.8 73.98 74.49 77.25 77.92 80.24 83.25 88.51 87.56 88.52 83.81 85.53 87.68 87.5 86.45 87.69 89.7 91.43 93.81 93.75 97.01 96.62 97.3 99.02 96.39 93.56 93.28 90.24 88.12 88.67 86.31 84.46 86.28 86.85 84.57 84 85.92 88.4 91.51 91.99 91.35 92.91 93.86 94.62 93.81 94.77 94.1 94.24 94.43 98.19 108.57 110.58 105.63 102.82 99.86 100.08 101.56 100.82 97.55 95.15 91.58 91.77 95.32 94.46 95.58 96.3 94.26 94.25 95.18 96.73 95.29 95.8 94.92 96.3 100.51 105.93 107.04 109.82 110.73 111.34 109.27 110.57 113.46 114.24 111.4 107.91||6364 6364 6364 6364 6709 6708 6708 6708 7150 7150 7151 7151 7298 7297 7297 7296 6665 6665 6665 6665 7062 7064 7064 7064 8267 8267 8267 8267 7764 7764 7765 7764 7827 7827 7827 7827 8306 8307 8307 8307 9039 9039 9039 9040 9859 9859 9859 9859 10592 10593 10592 10592 10668 10668 10668 10671 11440 11439 11438 11438 8267 8268 8267 8268 8762 8761 8761 8761 10114 10114 10114 10114 10527 10527 10527 10527 10836 10836 10836 10836 11111 11111 11111 11111 9774 9774 9774 9774 9405 9404 9404 9404||14.819 14.819 14.819 14.819 16.428 16.428 16.428 16.428 18.384 18.383 18.384 18.386 19.704 19.702 19.702 19.7 18.916 18.916 18.916 18.916 21.103 21.109 21.109 21.109 26.081 26.081 26.082 26.082 25.825 25.825 25.825 25.825 27.45 27.45 27.451 27.451 31.082 31.083 31.083 31.083 36.951 36.951 36.951 36.953 45.151 45.148 45.149 45.149 55.523 55.53 55.523 55.526 64.478 64.48 64.479 64.497 78.872 78.861 78.857 78.854 63.376 63.385 63.382 63.382 72.464 72.462 72.462 72.462 87.716 87.715 87.716 87.715 93.692 93.691 93.691 93.691 97.593 97.595 97.593 97.594 100.786 100.786 100.785 100.785 89.475 89.475 89.476 89.478 87.176 87.174 87.174 87.175||Q1 1994 Q2 1994 Q3 1994 Q4 1994 Q1 1995 Q2 1995 Q3 1995 Q4 1995 Q1 1996 Q2 1996 Q3 1996 Q4 1996 Q1 1997 Q2 1997 Q3 1997 Q4 1997 Q1 1998 Q2 1998 Q3 1998 Q4 1998 Q1 1999 Q2 1999 Q3 1999 Q4 1999 Q1 2000 Q2 2000 Q3 2000 Q4 2000 Q1 2001 Q2 2001 Q3 2001 Q4 2001 Q1 2002 Q2 2002 Q3 2002 Q4 2002 Q1 2003 Q2 2003 Q3 2003 Q4 2003 Q1 2004 Q2 2004 Q3 2004 Q4 2004 Q1 2005 Q2 2005 Q3 2005 Q4 2005 Q1 2006 Q2 2006 Q3 2006 Q4 2006 Q1 2007 Q2 2007 Q3 2007 Q4 2007 Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017|
Data Analysis and Interpretation
The aim of data analysis was to show the relationship between the ratio of imports to exports with varying interest rates. The results of the data analysis are displayed on table 2 shown below.
Table 2: Analysis of table 1 data using Eviwes
|Dependent Variable: RATIO OF IMPORTS TO EXPORTS|
|Method: Least Squares|
|Date: 12/19/17 Time: 21:41|
|Sample: 1994Q1 2017Q4|
|Included observations: 96|
|R-squared||0.083123||Mean dependent var||8.773281|
|Adjusted R-squared||0.053224||S.D. dependent var||30.99994|
|S.E. of regression||30.16369||Akaike info criterion||9.691928|
|Sum squared resid||83706.01||Schwarz criterion||9.798776|
|Log likelihood||-461.2126||Hannan-Quinn criter.||9.735118|
The decision rule is such that if F – statistic is greater that the F – critical; then all the variables are significant. On the other hand, when using Prob (F-Statistic), it requires that if Prob (F – statistic) is equal or smaller than 0.05, then it can be objectively concluded that all the variables in the model significantly affect the dependent variable.
The purpose of interpretation is to prove the positive hypothesis. It was hypothesized that the ratio of imports to exports depends on domestic income (yt), foreign income (yt*) and the real effective exchange rate (Qt). Thus, the regression model that was used is given by:
In the model yt stands for domestic income; yt* implies foreign income.
From the analysis, the ratio of imports to exports is given by:
Ratio of imports to exports = -34.25223-0.494219*domestic income+0.004126*foreign income+0.356542*exchange rate
The implication of the ratios found from the regression analysis is that when the three independent variables of foreign income, domestic income and effective exchange rate, the ratio of imports to exports will be -34.25223. In this result it is evident that there exists a negative correlation between the value of domestic income and the ration of imports to exports. Furthermore, for any unit increase in domestic income, there will be a decrease of about 0.494219 in ratio of imports to exports. On the contrary, when foreign income increases by one unit, there is a corresponding increase in the ration of imports to exports by 0.004126. Finally, a unit increase in foreign exchange rate maps an increase of 0.356542 in the ration of imports to exports.
One notable issue about the statistics is that while domestic income, foreign income and foreign exchange rate have an effect on the ration of imports to exports, there is definitely a stronger relationship created by the value of domestic income. Basically, domestic income is the strongest variable since it creates the largest deviation of approximately negative 0.5 points. The figure of negative 0.5 means that if domestic income increases in the current period, then it is going to cause a decrease in the imports to exports ratio by about half. In the opposite direction, foreign exchange has the greatest impact. An increase of about 0.4 points results in two-fifths increase in the ration of imports to exports.
From the ongoing interpretation, it is evident that the ratio of imports to exports is huge when there are more imports than exports. When the domestic income increases, the ratio of imports to exports is reducing by 0.5, meaning that since imports are the numerator, they are reducing with respect to exports. The real deal for countries as they try to level their balance of payments is that they seek to export more than they import so as to have a surplus on the balance of payments account. In a nutshell, the economy enjoys when the ration of imports to exports reduces and vice versa.
Lastly, both foreign trade and exchange rate increase the ration of imports to exports thereby reducing the incentives of foreign trade. When imports increase, it implies that citizens of a country are spending more to acquire goods and services than they are selling outside the country. In such a situation, it means that the citizens are losing more of their wealth to outsiders.
The overall interpretation of this analysis is that since Prob (F – Statistic) = 0.045462 < 0.05, it is conclusive that the ratio of imports to exports depends on domestic income, foreign income and the real effective exchange rate significantly. The outcomes of analysis and interpretation prove the null hypothesis (H0) to be true while rejecting the alternative hypothesis (H1). Thus, the study proves that the UAE economic performance of between the years 1994 and 2017 was pegged on the values of domestic income, foreign income, and real effective exchange rate in both the short run and long run.
The origin of economic theory as applied in international trade can be traced back to the days of the discovery of macroeconomic theory. In light of this revelation, imports and exports play a vital role in determining the living standards of the nationals of a particular country. Saudi Arabia is one country in the world that is enjoying robust growth characterized by a robust export environment. The problem is that despite having a stable economy based on oil production, commerce and tourism, UAE has had deteriorating BOP within the last decade. The dissertation will help policy makers to make the best decisions as far as dealing with international trade imbalances is concerned. Using data spanning 23 years, the study sought to prove if the import to export ration is related to the value of domestic income, foreign income and effective exchange rate. The study concluded that the volumes of domestic income, foreign income, and effective interest rate have a direct impact on the ratio of imports to exports. In particular, the study explains that Saudi Arabia should strive to increase domestic income since it lowers the import to export ration.
Policy Implications and Recommendations
This study shows that the performance of an economy is partly dependent on domestic income, foreign income and the effective interest rate. UAE being a top oil exporting country can leverage on the information to look into ways of improving the value of exports for the sake of improving its BOP position. The whole aspect of manipulating international markets is not easily achieved, but with a floating exchange rate, it can be achieved.
Secondly, there have been global attempts to try and reduce dependency on fossil fuels, which form a substantial part of the export potential of Saudi Arabia. The fluctuations in effective exchange rates can be linked to the global fluctuations in prices of crude oil which basically affects the terms of trade of Saudi Arabia. If the country has to maintain its high value of GDP per capita, then it has to diversify in the products it exports. Oil revenue may dwindle in the future and leave the country with a deficit BOP.
Directions for future Research
Future studies should consider analyzing the different effects of a nominal exchange rate versus, the effective exchange rate. In addition, a simulated study would give valuable information on the possible performance of the UAE economy if the floating exchange rate is adopted as government policy. In a nutshell, future studies must aim at finding out how the economy of UAE can harness the benefits of an economy organized in a relatively different model as it is at the present.
Alshahrani, Saad A., and Ali J. Alsadiq. “Economic Growth and Government Spending in Saudi Arabia: an Empirical Investigation.” (2014).
Hatemi-J, Abdulnasser. “On the tourism-led growth hypothesis in the UAE: a bootstrap approach with leveraged adjustments.” Applied Economics Letters 23.6 (2016): 424-427.
Karam, Philippe D. Exchange rate policies in Arab countries: Assessment and recommendations. Abu Dhabi: Arab Monetary Fund, 2001.
“United Arab Emirates – Conversion And Transfer Policies | Export.Gov.” Export.Gov, 2017, https://www.export.gov/article?id=United-Arab-Emirates-conversion-and-transfer-policies.
“United Arab Emirates Economy – GDP, Inflation, CPI, And Interest Rate.” Focuseconomics | Economic Forecasts From The World’s Leading Economists, 2017, https://www.focus-economics.com/countries/united-arab-emirates.
Polo is a multinational company with more than 200 operating stores globally, serving their customers with high quality products and generating high profits annually. The company has an ionic even dignified, luxury brand image in Asia, where its proceeds increased 30 percent in the first half year of 2015. Polo had expressed its intention to speed up the process of expanding its business on the America mainland. However, in the recent the company was under pressure after some the former workers from it’s headquarter store revealed information online on unfavorable working conditions and work mistreatment in the company.
On 20th November 2017, a public letter to the Polo Leadership by former employees of the company went viral after they posted it online. The workers had alleged that the Polo workers suffered employment diseases, that there was a miscarriage as a result of long working hours and the company offered no compensation for hardships. Also, that the management exercised unfair restrictions such that the employees had to ask for permission before getting tea or a snack, as well strict limitations on going for human call. Furthermore, the strict rules applied to all junior workers including pregnant women and sick employees, but spared the, managers. Additionally, the letter claimed that the Polo Company required the employees to pay for any lost item in spite of the fact they had already been insured. The workers went ahead to complaint on lack of humane and systematic management and argued that the company violated their dignity and rights.
The online exposure of the Polo Company attracted a lot of reactions by online users who expressed their disappointment by the company. Further exposure happened regarding deception of records on working hours, and the burden of forced, uncompensated overtime hours. The Polo Company applies a one full day work of 10 hours. However, the workers complained that at some point during their shift they had to clock off to identify a falsified electronic record, and then proceed with the shift until three or four in the morning the following day, and company do not pay any compensation.
A lot of people described Polo as ‘sweatshop,’ and that its labour management practices filed to match its international status. Several days after the exposure, the Asia headquarters issued a statement saying that Polo do not and cannot endorse or withstand the alleged malpractices. The company also stated that it had conducted thorough investigations and is putting measures including employing new managers for their different stores. In the meantime, the Local Human resource management council said that they would conduct further investigations on the case, and give their report later at the beginning of 2018. On, 1st December 2017, Polo and the former workers eventually came into an agreement in conjunction with the local trade union.
The ethical issues arising from the Polo Company case is on violation of labor rights, forced work, non-compensated working hours, cruel restrictions, and long working hours. A lot of multinational companies have in the history accused of operating sweatshop businesses. For, instance Nike Company accused of abusive practices in its stores at Indonesia (Gond et al., 2011).
The complaints against the Polo company involves both factory and retail workers, and interestingly the company is a multinational corporations and such labor abuses are uncommon in most of them especially in the western companies. Furthermore, if it happens it is mostly by local companies who justify their act by claiming the inability of the companies to afford the expensive labor (Gond et al., 2011).
In most regions across the world, the ethical basis of human rights has been incorporated into legal rights with intention of protecting workers against inhuman treatment by their employers. The laws and regulations are well stipulated in favor of labor, which main aim is to advocate and negotiate for fair treatment on behalf of the workers (Greenwood, 2013). Thus, nowadays in most regions workers protection and rights have been institutionalized within the law system and monitored by trade unions. As a result, the ethical conduct by companies both local and international have become increasingly stricter, and although there are cases of labor abuses occurring they are relatively uncommon in the areas, especially the Western nations.
However, in most parts of Asia labor rights are not fully institutionalized and there is less enforcement on legal rights, which makes a lot of employees to exploit their workers (Greenwood, 2013). However, the employees in Asia are also entitled to human rights and dignity just like other workers from the world regardless of their differences in the social context. The fact that the employees in Polo have limited employment choices or almost none, or lacks enough institutional mechanisms to protect their rights and interest, it does not give guarantee to their exploitation by the company. Thus, the practices adopted by Polo Company are unethical as they violate the labor rights of the workers.
To prevent further occurrence of abusive practices in the Polo’s labor management the company would require efforts from various groups including employees, polo and its shareholders, and Asian government. The company’s shareholders would be required to implement positive actions that would help to rebuild its reputation and regain their customer’s trust. The employees require apologies and compensation from the Polo Company and an assurance that the management would change the abusive practices. The Asian government has a responsibility to ensure that it enforces the rights of the employees and ensure that all registered companies comply with the laws (Ching et al., 2016).
In additional to engaging the various groups, Polo Company management should implement code of ethics acceptable at international level, which would allow explicit norms and expectation on ethical standards. The company should also ensure that its managers embrace ethical principles all their management processes. On the part of employees, Polo should challenge them on broadmindedness and endow them with strong consciousness of the labor rights and various ways that they can protect themselves from inhuman acts by the employers (Ching et al., 2016).
Voicing of grievances by the employees can attract more attention and hence get support from relevant bodies as well as government by investigating the raised concern and take necessary measures. Additionally, the company can encourage the employees to form an organization outside the trade unions that would be helping in airing their grievances to the management and help in bargaining power between the employees and employers within the organization (Ford & Richardson, 2013).
There is need by the Asian government to revisit the whole process of monitoring and regulating labor rights by the employers, through institutionalizing labor rights as laws. Also, the government can consider licensing independent bodies to monitor employers operations to ensure they adhere to the laid regulations of protecting worker’s dignity and rights (Ford & Richardson, 2013).
Abusive actions against employees by multinational companies are not a new issue, especially in the less developed nations. The Polo Company abuses its employees by subjecting them to inhuman acts, thus violating important labor rights. It is the responsibility of Polo to adjust its management practices and to achieve this it requires to involve its shareholders, employees and the government.
Ching, S. L., Kee, D. M., & Tan, C. L. (2016). The impact of ethical work climate on the intention to quit of employees in private higher educational institutions. Journal of southeast Asian research, 1-11.
Ford, R. C., & Richardson, W. D. (2013). Ethical decision making: A review of the empirical literature. In Citation classics from the Journal of Business Ethics (pp. 19-44). Springer Netherlands.
Gond, J., Igalens, J., Swaen, V., & Akremi, A. (2011). The human resources contribution to responsible leadership: An exploration of the CSR–HR interface. Journal of Business Ethics, 98, 115–132.
Greenwood, M. (2013). Ethical analyses of HRM: A review and research agenda. Journal of Business Ethics, 114(2), 355-366.
Banks play a very critical role in developing the economy of a country. It contributes to economic development by serving as intermediary connecting deficits and surplus, as well as facilitating funds for productive reasons. Thus, the financial performance of banks is a major concern to economic decision-makers including savers, borrowers, and investors. In most places, there are two types of banks that operate; the Islamic banks, which are interest-free, and the conventional banks, the interest-based, which offers different products and services to their customers. This paper compares the financial performance of the conventional banks with the Islamic banks by looking into the banks regulating conditions, operations and functions , as well as profitability indicators to establish whether there are significant differences in the financial performance of the two banking systems.
Today, banks play a very important role in the society to an extent that it is impossible to think that in this era people can even survive without banks. In all regions across the worlds, banks serve as the backbone of the economy. The stability of a country’s economy to a great extent relies on the stability of the banking system, and hence the performance of the banks is not only a major concern to the decision makers but to the government as well (Johnes et al., 2014, 97)). According to Erol et al. (2014), Profitability is one of the major tools used to assess the financial performance of the banks and it’s reflected through a variety of indicators including Return on Share capital (ROCA), Operating Profit Ratio (OPR), Net Profit Ratio (NPR), Return on Total Equity (ROE), and Return on Asset (ROA). The indicators are used as they help to show the relationship between share capital, total equity, total income, and total asset with the profit (Erol et al., 2014, 120).
Islamic Banking system
The operations and procedures of the Islamic banking are different from those of the conventional banks. The Islamic banks follow the guidelines outlined in the religious laws of Islam and conduct its operations strictly adhering to the principles of the Sharia law (Haque, 2014, 3). The sharia law prohibits payment or receiving of interests (riba) and provides a clear direction on the earning of profits through its permissible compliant transactions. Additionally, apart from providing a wide range of services and products, the Islamic banks focus on the principles of the Sharia law in promoting economic as well as the social welfare of the society (Erol et al., 2014, 125).
Nowadays, Islamic banks are available in most nations and serve as part of the recognized viable and competitive substitutes to conventional banks not only in Muslim nations but also in other nations. According to World Bank report is one of the fastest growing financing organizations in the last four decades with the growth rate of around 25-30 % yearly (Haque, 2014, 6). In terms of share and growth, Islamic banking has been performing remarkably well in most countries globally (Johnes et al., 2014, 103). It strikes a balance between oversight and flexibility. Thus, the proponents of Islamic banking system prohibits credit crunch since the system functions based on a partnership between the bank and customer and believes that interest-free banking system is invariant to the shocks that emanate from interests (Haque, 2014, 7 & 7).
Conventional Banking System
The conventional banks have all along the history been in existence before the emergence of the Islamic banks and hence occupy’s greater portion of customers and deposits in the banking industry. The banking system prevails across all regions in the world. The main reason for the start of conventional banks was as a profit-oriented investment with the main purpose being making money through interests. The conventional banking system is a purely financial intermediation model where banks goals are to generate profits from the margins made from saving deposits and demands deposits by borrowers (Erol et al., 2014, 116-120).
The conventional bank receives money from depositors at a certain rate of interest and then gives it to the borrowers at an interest rate on top of the principal money. The banks operate under the rules and regulations frameworks that govern the banking system of a country and as stipulated by global financial institutions such as IMF and World Bank. Thus, conventional banks abide by man-made principles and aim at maximizing profits without any restrictions (Johnes et al., 2014).
General Comparison Overview
Operations and Functions
The conventional banking approach business origin can be traced back to the innovation of western banking, while the origin of Islamic banking origin can be traced back to the Middle East banking. The Islamic banking modes of operations are different compared to the conventional banks. The modern Islamic banks are promoting service-oriented operations, as a Zakat collection center (Johnes et al., 2014, 105). the Islamic banks operate more as a partnership business with the main purpose being understanding the client’s need well and only aims at ensuring equity and growth for all parties. The banks do not penalize defaulters, instead, they ask for small compensation fee that the bank gives out as charity to the society (Haque, 2014, 10).
The Islamic banks give great emphasis on developing project assessments and appraisal with great attention to the viability of the projects due to the fact that it shares profit and losses. In relation to the status of the clients the Islamic bank values them as investors, partners, buyers, sellers and investors (Ho et al., 2014, 112). The guarantee under the Islamic bank only happens to the deposit account based on the al-wadiah principle which promotes guarantee of repayment of depositors’ fund. However, under the mudarabah principle, no guarantee and the customer can only share in a loss position (Haque, 2014, 12).
On the other hand, the conventional banks generate profit from the spread among the interest rate charged to the borrowers and the interest that they give to depositors (Islam et al., 2014, 89). Also, the modern conventional banks are engaging in other activities including depositing and lending activities. In this case, the conventional banks earn through activities such as selling loans and charging a fee to the buyers. The banks assure the investors of an interest rate that is usually pre-determined (Bourkhis & Nabi, 2013 67& 68).
Also, the conventional banks apart from charging interests they at times charge extra money as compounded interest or penalty for the borrowers who default terms of payment. The deposits in the conventional banks must be guaranteed and the status of relationships with its customers is that of debtor and creditors. The conventional bank operations give more emphasis on credit-worthiness of its customers and only give modest relevance to developing expertise in project assessment and appraisals (Ho et al., 2014, 113-115).
The Islamic banking system abides by the values and ethos system governed by Islam law. Furthermore, the bank operates under the conformist good governance risk management rules by the Sharia law (Hunjra & Bashir, 2014, 197). The Islamic law condemns the payment and collection of interest based on the argument that money is not a commodity to use and make a profit, instead people should earn it on goods and services only, and not through the control of money itself. The characteristics of Islamic banking are based on the ethical practices, which only allow all economic activities on the basis of protecting and safeguarding the public interest. Although the laws allow one to make money through conducting business, when it occurs against the provisions of the Islamic ethics and values, the practice is outlawed (Erol et al., 2014, 126).
The Islamic banking restricts a person from involving in any operations that bear interest (Hunjra & Bashir, 2014, 200). Also, the banks should only operate in trading activities that are only allowed by the Islam region teachings and refrain from those that the law prohibits. The banks follow the principle of interest-based mobilization of finances and lending. The banks charge interest as the price of credit and indicate the opportunity cost of the capital. That is, the bank operations are about a creditor-debtor relationship that exists between the bank and the depositor, and that of bank and borrower (Haque, 2014, 12).
Financial Performance Indicators
The financial performance of can be best unanalyzed through the profitability indicators including the return on assets and return on equity. Also, the performance of the banks can be determined through the assessing of other influencing factors such as the quality of assets, efficiency, liquidity and capital adequacy (Hunjra & Bashir, 2014, 204).
Return on Assets (ROE)
It helps to indicate the efficiency of management to converting bank’s assets into profits (Beck, 2013, 433). The conventional banks enjoy high ROE compared to the Islamic banks due to the fact that the banks collect interests which is the main source of the banks’ revenue enables the banks to maximize profits easily, do not spread losses to customers, and usually asks for collaterals in most of its lending operation makes the banks to enjoy huge capital with spread interests on borrowing and savings (Beck, 2013, 433).
Additionally, the Conventional banking system is efficient due to the banks’ capacity to own and afford highly developed technologies. Also, Conventional banks have been in operation in quite a long time hence have long history and experience, this has made most of these banks afford the purchase of high-quality assets, which promotes efficiency in service delivery. However, in most regions, the Islamic banks accessed the market in the last fifty decades thus making it lag behind in terms of capital accumulation and management capability to assist the bank to generate profits. Furthermore, Islamic banks are not a profit-motivated business but as a profit-loss sharing investment (Islam et al., 2014, 85).
Return on Equity (ROE)
It helps to indicate the profit that the banks can generate through the capital invested by the shareholders (Beck, 2013, 435). Conventional banks enjoy high ROE compared to the Islamic banks, as the bank’s shareholders of the conventional banks invest huge capital with intention of making profits. However, the Islamic banks operate under sharia law which believes that money should be earned through the exchange of goods and services (Beck, 2013, 435).
NET INTEREST INCOME (NIM)
It measures the variance that exists between interest income earned by lending or through investment and interest costs paid to depositors relative to the bank’s total assets (Beck, 2013, 436. The sharia law prohibits Islamic bank to engage in interest charging business hence denies the banks to enjoy any kind of interest related income. However, conventional banks spread the bank’s interest revenues through loan investment which attracts high NIM (Islam et al., 2014, 87).
The capital adequacy measures the financial strength and practicality of the banks of capital versus assets such loans and investments (Beck, 2013, 437). The conventional bank enjoys a high proportion of assets financed by shareholders as they aim at maximizing profits by offering loans. Sharia law restrictions control the capital investment by the Islamic banks and hence deny the shareholders capacity to maximize total assets invested in the banks.
Under banking system loans forms the greatest proportion of assets and their quality is very crucial for banks, investors as well as depositors since they form the main sources of revenues for the bank (Beck, 2013, 439). The conventional banks in most cases provide high-value loans so as to attract investors and depositors who always tend to look at the bank’s creditworthiness in terms of upholding bad loans and low provision. Islamic banks, on the other hand, abide by sharia law that the banks must not involve in transaction activities that involve speculation and should follow the accounting and financial standards that abides by Sharia law (Erol et al., 2014, 120).
There are differences in operations and functions between Islamic banks and the conventional banks. Eventually this leading to the financial performance of the two banks, with the conventional bank performing better based on the various indicators of profitability due to its flexible nature. However, the financial performance of the Islamic banks is limited due to restrictions by the Sharia law. The start of Islamic banks relates to the need of reviving the Islamic financial system which was riba (interest) free, and establish banking systems that would operate on the basis of profit-and-loss sharing. The Islamic bank’s advocates for sharing of risk between the investor and the user of the money and maximizing of profits but emphasizes on abiding by the restrictions under Sharia law. Also, the Islamic law condemns the payment and collection of interest based on the argument that money is not a commodity to use and make a profit, instead people should earn it on goods and services only, and not through the control of money itself.
Beck, T., Demirgüç-Kunt, A. and Merrouche, O., 2013. Islamic vs. conventional banking: Business model, efficiency and stability. Journal of Banking & Finance, 37(2), pp.433-447.
Bourkhis, K. and Nabi, M.S., 2013. Islamic and conventional banks’ soundness during the 2007–2008 financial crisis. Review of Financial Economics, 22(2), pp.68-77.
Erol, C., F. Baklaci, H., Aydoğan, B. and Tunç, G., 2014. Performance comparison of Islamic (participation) banks and commercial banks in Turkish banking sector. EuroMed Journal of Business, 9(2), pp.114-128.
Erol, C., F. Baklaci, H., Aydoğan, B. and Tunç, G., 2014. Performance comparison of Islamic (participation) banks and commercial banks in Turkish banking sector. EuroMed Journal of Business, 9(2), pp.114-128.
Haque, A., 2014. COMPARISON OF FINANCIAL PERFORMANCE OF COMMERCIAL BANKS: ACase STUDY IN THE CONTEXT OF INDIA (2009-2013). Journal of Finance, 2(2), pp.01-14.
Ho, C.S.F., Rahman, N.A.A., Yusuf, N.H.M. and Zamzamin, Z., 2014. Performance of global Islamic versus conventional share indices: International evidence. Pacific-Basin Finance Journal, 28, pp.110-121.
Hunjra, A.I. and Bashir, A., 2014. Comparative Financial Performance Analysis of Conventional and Islamic Banks in Pakistan. Bulletin of Business and Economics (BBE), 3(4), pp.196-206.
Islam, K.A., Alam, I. and Hossain, S.A., 2014. Examination of profitability between Islamic banks and conventional banks in Bangladesh: a comparative study. Research in Business and Management, 1(1), pp.78-89.
Jones, J., Izzeldin, M., and Pappas, V., 2014. A comparison of the performance of Islamic and conventional banks 2004–2009. Journal of Economic Behavior & Organization, 103, pp.S93-S107.
Read an article on how strategy needs to change when it is not working. It is from the Harvard Business Review. I have uploaded the article under “Cours Documents,” it is under “HBR article on changing your strategy.” The article makes six very interesting points, note them.
Then focus on a story.
Satya Nadella became CEO of Microsoft in 2014. It was not considered a plum job. But in a relatively short period, Nadella has achieved enormous success. Microsoft is now considered a very important element of the tech future, not just a company with a glorious past. Its market capitalization is $650 b on today’s date, making it the third most valuable company in the world.
What did Nadella change in Microsoft’s strategy to transform it? Which of those six points from the HBR article do you think he used most effectively?