Impacts of Globalization and Regional Economic Integration on Abu Dhabi Ports Company - Case Study Example

Name Instructor Course Date Impacts of Globalization and Regional Economic Integration on Abu Dhabi Ports Company Globalization is one of the most significant events that have happened in the recent times. Today, the world is viewed as a global village thanks to the globalization phenomenon that has occurred over the past few decades (Kehoe 1). One of the most significant effects of globalization is that it has resulted in the mass integration of regional economies. These two related phenomena have had a huge impact on businesses. Abu Dhabi Ports Company is an example of companies whose operations have been greatly affected by globalization and integration of regional economies. According to the company executives, globalization and integration of regional economies has affected the operations of the company both positively and negatively as it has not only opened up new market opportunities for the firm but also increased the level of competition in the market. This essay will begin by explaining the concepts of globalization and regional economic integration. It will proceed to discuss the various ways in which globalization and regional economic integration have affected the operations of Abu Dhabi Ports Company's operations. Concept of Globalization Globalization is a complex concept that has different meanings. Different scholars and academicians define the concept differently. Kehoe defines globalization as the integration of work economies, people and the governments (1). Global Security, however, defines globalization as the integration and interaction processes among firms, individuals, and governments of different nations driven by foreign trade, information technology and investments (par. 2). From the two definitions, it becomes clear that globalization is the process by which economies, trade, investment, and finance are integrated as different firms, government and people come together. Although many people think that globalization is a new thing, evidence shows that is a process that began several years ago. According to Kehoe, since thousands of years ago, people and companies have been buying and selling goods to each other in regions that are far apart (2). Kehoe shows that, for thousands of years, companies and individuals have been investing in enterprises in other nations other than their own country (4). All these activities show that globalization is not a new thing as many people might think. However, the only difference is that the recent wave of globalization has been driven by technological advancements. The world has experienced rapid technological advancement in the recent past. For instance, new communication tools, such as the Internet, mobile phones, and computers have transformed economic lives in dramatic fashion. These information communication tools have provided individuals and businesses with valuable tools for pursuing economic opportunities, such as ease of analysis of world economic trends, easy assets transfer, and partnering opportunities. Regional Economic Integration The recent wave of globalization has resulted in increased regional economic integration. Regional economic integration is the process by which governments of different nations come together by adopting agreements that allow member countries to have ease of trade with each other. Since the Second World War, many governments have come together and adopted free-market economic systems to promote trade and open up business opportunities for companies (Global Security par. 2). At the same time, many governments have adopted trade agreements that are geared towards creating a free market by eliminating trade and investment barriers for member states. Such regional and international trade agreements have helped open up new business opportunities for companies that set up foreign factories, as well as establishing production and marketing arrangements for partners in foreign lands. World Trade Organization (WTO) and NAFTA are some of the examples of regional and international economic integration agreements. The WTO is a trade organization that brings together countries from all over the globe. The WTO removes barriers to trade and investments to its member states, thereby encouraging companies from member states to invest and trade freely with foreign countries (Global Security par. 4). NAFTA, on the other hand, is a regional economic integration organization that brings together the U.S. Mexico and Canada. The NAFTA agreement was entered into by the three countries to remove trade barriers and tariffs so as to promote free trade among the three nations. There are four kinds of regional economic integrations in practice namely free trade area, customs union, common market, and economic union. Free trade area is the most common type of regional economic integration. Under free trade area, member states come together with the main aim of removing trade barriers for the member states. However, member states are free to determine their policies with nonmember states. NAFTA is a good example of free trade area agreement that removes trade barriers for the U.S., Canada, and Mexico, but allows these three member states to determine their trade policies with none NAFTA member states (Global Security par. 9). Customs Union is the other type of regional economic integration. Under customs union, member states agree to corporate economically in a free trade zone. Like in free trade area, customs union also ensures that barriers to trade are eliminated for member states to allow member nations to trade freely with each other. The only difference with the free trade area is that customs union allows members to agree to treat trade with other countries, which are not members in a similar manner. The Gulf Cooperation Council (GCC) is an example of customs union (Global Security par. 12). The common market is a type of regional economic integration that allows member states to establish economically integrated markets. Common market agreements are beneficial to member states as it eliminates any barrier to trade, as well as any restrictions that might affect the free flow of capital and labor between member states. Under this agreement, the member countries establish a common trade policy with regards to trade with countries that are nonmembers. The greatest advantage of this type of regional integration is that workers from member states are not compelled to hold visas to be able to work in another country that is a member of the common market. Common Market for Eastern and Southern Africa (COMESA) is a good example of a common market. Lastly is economic union, which is a regional economic integration, created when different nations in a region sign an economic agreement that removes trade barriers by adopting a common trade policy for member nations (Global Security par. 16). European Union (EU) is a good example of an economic union. Effects of Globalization and Regional Economic Integration on Abu Dhabi Ports Company Abu Dhabi Ports Company (ADPC) is Abu Dhabi's leading developer of ports and industrial zones. The principal responsibility of Abu Dhabi Ports is to ensure that efficiency is achieved in the operations of all commercial ports in Abu Dhabi. The company was founded in 2006 and has since grown to become a leader in the Gulf region. The company was started following the restructuring of Emirates assets commercial ports. The first port under the ADPC, the Khalifa Port started operating in September 2012. This was followed by the opening of another port called Kizad and many others. According to a recent economic survey, it emerged that ADPC contributes significantly to Emirates economy. The port is expected to contribute about 15% of the country's GDP by the year 2030. Like many other companies in Abu Dhabi, the operation of Abu Dhabi Ports Company has been affected significantly by globalization and regional economic integration. It is worth noting, however, that some of the impacts have been positive while other has been negative. The first outstanding effect of globalization on Abu Dhabi Port Company is that globalization has opened up market opportunity for the company for expansion (Marasi News par. 2). Currently, the company still focuses on Emirates where it has established some of the world's largest ports, such as Khalifa Port. However, the company's chief executive reveals that the company intends to expand its market reach into other Gulf countries as part of its growth strategy. The company executives argue that globalization has opened up numerous market opportunities that it intends to exploit in the coming years. The fact that Emirates is a member of Gulf Cooperation Council (GCC), which is a regional economic integration is expected to make it easy for Abu Dhabi Ports to invest in other countries since GCC has removed barriers to trade and tariffs that often make it difficult for companies to operate in foreign countries (Global Security par. 3). Other than expanding its market reach to cover the entire Gulf, Abu Dhabi Ports Company has a long-term plan of becoming a global brand. All these market expansion plans are only made possible by globalization and increased regional economic integration in the region and the world as a whole. Secondly, globalization and regional economic integration have affected Abu Dhabi Ports Company positively by enabling the company to get financial support not only from the Abu Dhabi government and local investors but also from international investors. According to the Gulf News report, Abu Dhabi Port Company has received about US$35 million from foreign investors (par. 2). A large portion of these funds came from the Italian government that has partnered with the UAE to ensure the success of the company in undertaking its projects. The report also reveals that the Abu Dhabi Ports recently signed a Memorandum of Understanding with the Industrial Development Bureau of the Department of Economic Development (IDB) that culminated in developing joint programs that aim of help attract investors from all over the world (World Maritime News par. 2). All these have been made possible by globalization that has made it possible for companies to receive investment from foreigners. Similarly, the massive foreign investment flowing into Abu Dhabi Ports from foreign countries has been made possible by regional economic integration, particularly the GCC that has removed barriers to trade and investment from member states (Global Security par. 22). Globalization and regional integration have also had a positive impact on Abu Dhabi Ports Company in the sense that it has made it possible for the company to obtain resources used in port development easier and cheaper. Because Abu Dhabi not endowed with all the resources it needs in the development of ports, the company has had to import some resources and materials it requires from foreign countries. According to Captain Mohammed Al Shamisi, the company's chief executive, Abu Dhabi Ports Company has benefited a great deal from being a member of the GCC as it has enabled the company to obtain resources from its member states cheaply (Marasi News par. 6). The CEO attributes this to the fact that GCC has removed trade barriers and tariffs. Additionally, regional economic integration has impacted Abu Dhabi Ports positively by allowing it to get cheap labor and skilled workforce from the international market. Regional economic integration has allowed free flow of labor between member states. Since UAE became a member of GCC, this has allowed firms in the country to benefit from the free flow of labor in the region. According to Captain Mohammed Al Shamisi, the fact that UAE is a member of GCC has been helpful to Abu Dhabi Ports as it has enabled the company gets cheap labor from member states, such as Bahrain, Qatar, Oman and Saudi Arabia (Global Security par. 24). On the same note, globalization, and regional economic integration has allowed Abu Dhabi Ports to acquire skilled manpower from foreign countries. Captain Mohammed Al Shamisi reveals that Abu Dhabi Port employees many skilled workforce from America, China, Japan and European countries. This became possible because of globalization and regional economic integration that has allowed free flow of labor from one part of the world to another. Moreover, Abu Dhabi Ports Company to benefit from globalization and regional integration in the future from technology diffusion. The company's CEO has stated that, for ADPC to grow and become competitive, it must adopt the latest technology. This implies that the company must invest heavily on R&D, as well as borrow technology from international markets, such as the United States, Germany, Netherlands, France and the U.K. among others (World Maritime News par. 4). However, this would not be possible in the absence of globalization and regional economic integration that has been facilitating the free flow of labor, capital, and technology. Although ADPC has been impacted positively by globalization and regional economic integration, these two phenomena have also had negative effects on the company. The first major challenge of regional economic integration is that the formation of a new economic and trading bloc may leave a company out if the home country fails to become a member (Marasi News par. 8). These impacts businesses negatively as it make trading with those countries that out of the trading block difficult. The same applies to ADPC that is likely to be impacted negatively in the future by the formation of new trading blocks. In the event that a new trading block is created in the Gulf region, and UAE fails to become a member, this would impact the company negatively from the new rules created under the new trading agreement. Secondly, ADPC is likely to be affected negatively by globalization and regional economic integration in the coming years through loss of human capital to countries that pay better wages for employees (World Maritime News par. 7). Because regional economic integration allows for free flow of labor, the current top-notch-talents that ABPC depends on may leave for other countries in the region and other parts of the world that pay higher wages and offer better-working conditions. The occurrence of such a situation might affect the operations of the company adversely. Conclusion The current wave of globalization and regional economic integration has had profound impacts on Abu Dhabi Ports Company. As demonstrated in the literature, the impacts have been both positive and negative. The positive impacts include promoting trade by opening up new market opportunities for the firm, get financial support through the flow of foreign investment, obtain resources, and labor easily and cheaply as well as technology. However, ADPC is expected to experience the negative effects of globalization and regional economic integration in the coming years through making trading with nonmember countries difficult and expensive, as well as suffer from loss of its human capital to countries that offer better pay and working conditions for workers. Works Cited Global Security. Gulf Cooperation Council [GCC]. Web. 17 February 2016 http://www.globalsecurity.org/military/world/gulf/gcc.htm Gulf News. Abu Dhabi Ports Focuses On Expansion. 15 February 2016. Web. 17 February 2016 http://gulfnews.com/business/sectors/investment/abu-dhabi-ports-focusses-on-expansion-1.1532054 Kehoe, William J. Regional and Global Economic Integration: Implications for Global Business. University of Virginia (2014): 1-7. Print. http://abeweb.org/proceedings/proceedings06/kehoe.pdf Marasi News. Abu Dhabi Ports Company (ADP) Strives To Advance The Economic Expansion. 5 September 2015. Web. 17 February 2016 http://www.marasinews.com/News/marasi-exclusive/abu-dhabi-ports-company-adpc-strives-advance-economic-expansion-abu-dhabi World Maritime News. Abu Dhabi Ports Luring Foreign Investments. 16 June 2015. Web. 17 February 2016 http://worldmaritimenews.com/archives/163894/abu-dhabi-ports-luring-foreign-investments/ Read More