The Benefits and Challenges of Entrepreneurship in Dubai and Budapest

This paper outlines the key issues adjacent to Entrepreneurship and Startup businesses and the factors that aid in their flourishing; it focuses more on the growth and development of Dubai in UAE and Budapest in Hungary. It also analyses the effects of lack of adequate incentives in the economic system with an increasing number of clients and constant change in consumerism. With increase in the level of technology globally, the paper analyses the role played by local, national and international laws in making it easier for entrepreneurs to access their target market regardless of the geographical demarcations. Amidst increase in entrepreneurs, the economic system still has lacunas to be filled by new inventions and innovations. Consequently there is need to reduce the cost of starting and running a business. The dilemma falls on the effectiveness of the government policies and the energy of the young people in inventing products for their generation. Additionally the paper seeks to find out the challenges experienced by entrepreneurs and starters and the solutions to mitigate these challenges are explored. Finally a conclusive report is given about the structure and composition of the human capital factor and how effective it is in entrepreneurship.

Significance of international and national policies and their effects on the efficiency of the entrepreneurship is a vast topic and this paper does not claim to cover all the issues involved. Conversely it shares and analyses the key issues that have affected and are currently affecting the system and entrepreneurs by using research from scholars, current facts and figures and mostly data analysis. More research does require to be conducted fully grasp the role in effective performance of the system resources and improvement of the policies.

Entrepreneurship is a process of designing, planning and executing a business idea as a startup, with the prospects of increase in revenue earned, net profit and size of the business through expansion (Wiles, 2012). An entrepreneurial friendly environment is one that allows for the ease to start up a business and for it to grow with high chances of expansion and low chances of retardation.

Dubai is the most popular city in United Arab Emirates due to its increased in business and as a major hub for transportation of passenger and cargo to other parts of the Middle East. The major revenue sources for Dubai are tourism, financial services, aviation and real estate (Leitch et al, 2009). Budapest is the capital city of Hungary and the fastest developing urban economy in Europe. Budapest accounts for 39% of all national income in Hungary and has been on a steady increase in the terms of commercial related activities. As from 2014, Budapest has experienced a 2.4% increase in per capita income and a 4.9% increase in its employment level (Murnan, 2016).

Research Question: Why are Budapest - Hungary and Dubai - UEA on the Top list of most entrepreneurial countries?

Differences Between a Business Man and an Entrepreneur

Entrepreneurs are innovative and inventive and come up with business ideas that are viable and practical and never been seen or heard of before. On the other hand a business man is not original. He can invest in an idea that already exists and earn profit from it. This is the reason as to why entrepreneurs are startup while business men are investors (Murnan, 2016). Entrepreneurs lean towards making a change in an industry using their idea, changing the world as we know it and making it easier for people who are mad to feel inferior. On the other hand the only reason a business man makes an investment is to be able to make profits and when the business does not prove to be profitable they quickly exit.

A businessman will always choose to compete against all other businesses that offer similar products. In this case, his competitors are the people in the same industry as him. An entrepreneur will compete to outdo himself. To always come up with an idea that is original and better than the previous one. A businessman is a manager while an entrepreneur is a leader who has a passion for what he does and knows his business by heart. Most of the businessmen delegate most of the duties and simply ensure that the timelines and deadlines have been met, however an entrepreneur will be part of every aspect of the business and aids in making the idea come to life. A decent illustration of an entrepreneur is Steve Jobs who would be part of every step in making new profits and through his innovation he brought the biggest change in the mobile industry by inventing the IPhone which was later copied by Samsung and other companies in the Smart Phone industry (Wiles, 2012).

Businessmen get a life from their businesses this is because it caters for all aspects of their other part of life. In this case the business is the source of livelihood. Entrepreneurs give life to their business by providing it with the essentials it requires; for instance the right ideas, the right personnel and machinery to id in materializing the idea.

Background to Entrepreneurship in Budapest and Dubai

Dubai in United Arabic Emirates

According to the GEM 2009 Global Report, Dubai has the highest increase in entrepreneurial startups globally with a notable increase of 38% in 2008-2009. This was hastened by a few policies that were put in place, the United Arab Emirates through an improved online platform shortened the time it took to deliver building permits. The application process was made easier and more convenient for entrepreneurs especially those involved in real estates and this saw the beginning of increased business as the building attracted international ad local investors. Additionally this aided in developing the country’s infrastructure in terms of access roads, street lighting, improved security and an improved sewerage system.

The government also scrapped off the capital requirements to start a business enterprise in Dubai. The capital requirement which was held by banks in Dubai as a percent of the risk-weighted assets had previously been set high especially for foreign investors and would easily deter them away from Dubai (Bergmann, 2016). The effect was a reduction in the number of days that it would take in order to have the investment and business procedures in play. It also led to the elimination of auditors and the long process of acquiring auditor’s certificate, submitting a director’s certificate and the standard requirement to show proof of capital registration.

The cost of construction permits was reduced to half. Builders and construction companies could easily get started, as the procedures were reduced to only four short processes and online application would take a maximum of 33 days to be processed and either declined or accepted in accordance to the terms and conditions set. This was the one that gave Dubai a better ranking as it jumped from number 54 to 27 globally as the best place to invest in. trading across the border was also made easier as the number of documents required was reduced and the export time decreased as well. For a country that is in the middle of the dessert, a reduction in imports boosted the agricultural sector. With the implementation of this specific policy, there was an increase in the number of containers imported and exported and it ranked UAE from number 13 globally to number 5.

On August 2009, the President of UAE amended the Federal Law number 8which was focused on company law. The law removed the minimum capital requirement for starting a limited liability company that had been previously set at $40765. This would eventually the cost of conducting business Dubai (Mansoor, 2016). Additionally in 2008, the Federal Law number 2 was amended with respect to National Societies and associations that are catering for public welfare most the NGOs to be able easily work and conduct business with funding from local investors and international donors.

Budapest in Hungary

In Budapest Hungary is also quite profitable for entrepreneurs especially because capitalism is still a new and foreign aspect. Hungary practiced communism where all businesses were controlled by the central government through various channels. However, the post-communist capital of Hungary, Budapest has become a hub for incubation of innovative ideas as a means to allow the economy to grow. This in turn has attracted investors especially with the implementation of the regulations by Central and Eastern Europe CEE regional trade group.

Unlike Dubai, Budapest is a hub for engineering and technological related companies. A decent illustration is the CrypTalk which is a call encryption company that was developed by Swedish firm called Arenim technologies. Basically, the company deals in securing intra and inter-company communication by encryption information and ensuring that one cannot be hacked and sensitive information leaked. Using the same technology that was started in Budapest, the current Watsapp uses it to encrypt information with an end to end basis ensuring that the messages sent using the app can only be accessed by the sender and receiver and is safe. Also in Budapest, is the same place where Prezi, the storytelling company is headquartered. The company is very famous for being used in making quality and seamless presentation for both formal and informal purposes. Additionally, the company also has a website, where for a fee; one can post adverts using the app. With over 75 million users globally the app is java enabled and allows for smooth transition by using both the written text and images as well.

Budapest is slowly coming up due to several reasons. Most of the countries that practiced communism have not properly adopted to capitalism as well as Budapest. This makes it a viable place to invest for many investors in the region of Central and East of Europe. This has allowed the country to rise to number 54 globally as a hub for investment and start p businesses. Additionally there are polices that have been put in place to ensure that startups and investments become easier for entrepreneurs. In 2009, there were business registration reforms that reduced the minimum capital requirement by nearly 80% (Ramadani & Rashii, 2016). There was also the launch of a online registration and application platform that allowed for investors to be able to save on time and money by accessing basic services and information at the comfort of their offices.

In 2010, the Hungary government further reduced the time taken to register startup businesses with confirmation being done within one hour. With increase in the companies that come to invest in Budapest, the government increased the registration fee for limited liability companies and also the tax charged in an attempt to increase government revenue earned. The government later on embarked on improving the infrastructure of Budapest in order to ease transport and communication for the investors that had flocked the capital city. Additionally, the ministry of employment invested €235 million to increase employment for the young people who are citizens of the country. There has been the creation of 1500 new companies and opened the door to more potential for the same companies. For instance there has been an increase in the need for stationaries to help in the daily running of the companies.

The vision 2020 set by the country, meant to ensure that the country will the leader in startup businesses in the region also has attracted many investors as there are many opportunities to save cash and start a company in Budapest as opposed to any other country in the region (Kuratco, 2009).

Effects on International Laws on Entrepreneurship in Dubai and Budapest

There are several international trade laws that guide the trade between the two cities and other countries. The UAE does not have a free trade agreement with countries outside the Middles East. The business people in Dubai get to enjoy subsidized imports and export costs from only their neighboring countries but not from the entire world. Currently there are talks with countries like Turkey, China and Japan in an effort to allow for the free trade zone to extent to these countries (Bergmann, 2016). The free trade zone is characterized by eradication of traditional laws and regulations governing licensing, agent requirement and creates conducive business environment that does not hinder business growth and development (Andersson, et al 2009). Basically UAE and the Middle East countries have a free trade zone. UAE and most of the Asian countries have bilateral trade agreements while with the rest of the countries globally; UAE has multilateral agreements that are not friendly to business enterprises.

Budapest in Hungary has different international trade policies that affect the way in which it trades with the rest of the world. With the countries in the Central and East side of Europe, the county has bilateral trade agreements conversely with other countries it has multinational trade agreements. The trade in Europe is governed by the European Union that highly advocates for reduction in tariffs charged for products that require to pass across borders with the minimum set at 5% and the maximum capped at 15% (Ramadani & Rashii, 2016)..

There is nothing new when willing to talk and write about entrepreneurship and its culture.

The defining of culture itself means a group of people sharing the same actions, thinking the same things, and that is what makes a culture. And entrepreneurial is one culture itself. Entrepreneurs tend to have a specified idea on looking to the business differently from the others, they bring innovation, invention, passion, creative thinking and a new era in the cities they evolve.

Even though it is seen or thought that most of them are born with the ability to bring this kind of innovations down to real things, there are also some other factors discovered by researchers that would make a person become an entrepreneur.

It is said that individual factors alone may not explain clearly why people choose to be self-employed and bringing this new ideas to life.

Different factors as their professional background, their education, their personality, the society and religion they belong to and other factors may lead to an individual’s idea on starting a new business, having new brainstorming ideas, wanting to be self-employed more than to work for other people. Their immediate need is also another factor that aids in innovation as most of them seek to solve a problem that is prevailing in a society.

According to Heiko Bergmann (The culture of entrepreneurship by Heiko Bergmann, NA) the innovative idea that the individual wants to bring to life is related with different fields that when brought all together gives meaning why this people belong to this culture, and why entrepreneurship itself, is called a culture.

An individual willing to take the risk of setting his or her own start up in a specific region, might take into consideration different points regarding the region. Some of the points include the structure of the enterprise that they are willing to take, the nature of it, the size, the foundation’s frame condition, the purchasing power, culture of the place and the legal framework that surrounds starting such a business.

Whereas the individual’s information itself would as well effect the enterprise, whether the activity that is planning on coming to life would be the one in accordance with his personality, his professional background and education and all this falls into the capability of having the right one to go through with the starting of the new idea in the region. Additionally, hands on experience is an added advantage as it helps during the implementation phase of the idea as the individual is well aware of what in reality works and what does not.

Entrepreneurship in General Terms

Entrepreneurship, as being one of the most discussed topics nowadays, is the backbone of Europe’s economy. Small and Medium enterprises cover around 99% of the businesses in Europe(Entrepreneurship and small business enterprises,2016), by creating a large number of working positions and as such being a key of bringing innovation, job establishments and economic expansion. In different countries of Europe there are hundreds and thousands of different businesses build either by local entrepreneurs or by foreign ones.

Entering the market with an innovative idea shows a characteristic of the personality of the person taking the risk, because the basic idea of entrepreneurship leads to individual’s capability of produce innovative solutions for new situations as stated by Littunen (2000). In this case a business will exist due to the entrepreneur, if he is removed from the equation the whole idea comes tumbling down. Entrepreneurs are recognized as people that bring social creativity, artistic capital and also financial wealth (Thompson, 1999). Being an entrepreneur according to Schumpeter (1949) means that you should be called an innovator and you should carry one of the following 5 tasks; (1) Creating a new good/quality, (2) bringing a new production method, (3) establishing a new market, (4) capturing a new supply sourcing, or (5) creating a new organization. As the word Entrepreneur comes from the French word “ entreprendre” which means “to undertake”, it takes its meaning in business world as undertaking a business venture (Mainzer and Chua,2013).

Inside the idea of being an entrepreneur lies the concept of being a local entrepreneur.

Being a local entrepreneur means undertaking this business venture by carrying any of the tasks mentioned above created by Schumpeter (1949), in your own country of origin. Succeeding at being an entrepreneur, means that you have managed to generate individual and community wealth by developing a business asset and being in an continuous process of redoing it under different circumstances (Norman Walzer,2007).Naming someone a foreign entrepreneur already by the word itself, it means that the individual called an entrepreneur has established a business in another country different from his/her country of origin. At first a licensing agreement has been the most common method of becoming a foreign/global entrepreneur, in order to engage into the international business (Hisrich,2015). This is followed by registration of a business which in most countries is the hard part for foreigners.

Entrepreneurial Culture in Europe

Entrepreneurship is that one culture that every country is trying to embrace, but still they do not have it at the peak point yet. Many of the articles lead by different studies and statistics made, by different researchers being those Europeans or Americans, come to the same conclusion that European culture has lack of entrepreneurial culture into their systems and veins. For Europe it is very important to courage and lead young entrepreneurs on starting their businesses in Europe, bringing innovations that would last a lifetime by becoming big companies. Europe is a continent known for quality production in different industries including the food industry, the technology industry, the pharmaceutical industry and the automotive sector.

As read at one article from The Economist, the reasons onto the lack of entrepreneurs having their ideas onto real projects in Europe is because they are missing the risk-taking personality into their culture. By having this obstacle they will never have the same outcome as people in US and let alone China and Brazil, which seemed to be embracing the entrepreneurial culture better than the Americans themselves.

It is studied that over 500 French founders have their enterprises in San Francisco Bay ( The economist,2012) which leads to the understanding that the culture they are facing in the United States of America, the support and courage they have brings the innovative ideas they have into life.

By having this said, the Europeans have a lot of success stories regarding enterprises with innovative ideas and creativity, but they are still behind in numbers, which makes their culture be discussed as not being the most supportive one to make things happen.

Since the very beginning when the “European Union” became unified, Europe has been the favorite spot for anyone who is looking for favorable business establishment conditions (Corine Moriou,1999). This is mostly because the laws and regulations used by the member states foster for positive commercial activities and an environment that allows for growth and development of ideas. In order for business developers to set up their business in another country of Europe they should make their organization or company in compliance with local legal, tax, labor and financial regulations that are in force (Moriou,1999).

Different from the US venture capital market, if an entrepreneur wishes to set up a business in Europe, it may take him several months, up to a year to establish and have everything within the laws and regulations of the country of Europe it belongs, whereas in the United States of America setting up a business can take more or less 1-2 business days, stated by Vermeulen (2003). The key idea of the restrictions that Europe puts to entrepreneurs when they want to start up their business, stands in the fact that they aim to limit the flow of potential wealth-constrained entrepreneurs ( Vermeulen, 2003).

During the crisis in Europe, Entrepreneurship was seen in different perspectives regarding their position in helping Europe get out of it (Andreea-Oana, Oana Ramona,NA). The mindset were that some of the authors saw the downturn of the economy as an opportunity for the entrepreneurs to help on busting the economy, and growing their roots in the European Countries even more, whereas the other side saw it as an obstacle to the entrepreneurs who were willing to set up their startups in Europe. ( Barlet,2008)

After further researching, the European Commission stated that the Entrepreneurs would be the ones that were going to help their economy to higher levels of employment and economic growth (European Commission, 2013).

As it is understood from the statement above, Entrepreneurship as a culture was more than welcomed, and approved from the majority of countries and their people, which helped entrepreneurs in having the confidence and the necessary support to continue growing their circle of new ideas and innovation.

Entrepreneurship culture in United Arabic Emirates

United Arabic Emirates Government has the most supporting appeal towards Entrepreneurial culture since a numerous of years back. They recognized that the backbone for any developed and innovative economy would be the Small and Medium enterprises, usually new, creative, startup businesses. While being aware of the benefits, the government has created a decent legislative environment, while promoting the entrepreneurial mindset all around the place. (Constance, et al,2011)

The most appealing part on setting up a business in UEA, is when considering establishing your business in the free trade zones. This is mostly done with the neighboring countries in the Middle East. Usually this sector is found attractive by the foreign investors and entrepreneurs. Some of the benefits they have are mentioned as below: 100% of the ownership is their own, they do not have any obligations with the government, the income and profit goes directly to them, they have reduced and different barriers of trading, tariffs and quotas and no personal income tax. Even though they have a several industries where the people can come and invest or create something in these areas. Industries vary from manufacturing, logistics and trade, across a number of sectors that offer unique opportunities for efficiency into the market. (UAEInteract,2016)

One of the key cases that United Arabic Emirates are promoting and working to improve is the motivation of youth people to join the entrepreneurial culture and mindset. Several laws have been put in place to ensure that young people are able to participate in the economy has also helped in the cause. The UEA government is working on different projects in order to achieve this goal, and one of their initiatives is involving universities where people can join different events, to get the right knowledge and in the meantime to increase the families support. They have declared themselves the point of family support as being on their weak points, key gaps to improve. Since 2011, this project is ongoing and has increased the families engagement and has changed their mindset.(Youth and Entrepreneurship in UEA,2011)

Entrepreneurship in Budapest and Dubai

Entrepreneurship is a widely discussed topic throughout different perspectives of different writers. In the existing literature it is found that different entrepreneurs doing businesses in Europe have had distinctive experiences according to laws and regulations, being those entrepreneurs foreigners or local (Smallbone et al,2012). The co-relation of the existing literature with the aim of this research study is already having the background information on how the process of establishing a startup business in Europe works, and having a closer look to what are the factors that made Budapest and Dubai cities to be chosen for setting up an entrepreneurial business idea.

In different countries of Europe there are hundreds and thousands of different businesses build either by local entrepreneurs or by foreign ones. Budapest, the capital city of Hungary is seen in different articles as one of the top entrepreneurial cities that entrepreneurs are willing to set up their businesses. Correspondingly, this research study aims to discover what makes Budapest one of those cities for Europe (Coleman,2015) and continuing furthermore later on what makes Dubai one of the most favorable city or emirate to start an entrepreneurial idea(Bootstrapping Startups In Dubai,2014). Taking into consideration what might be the main benefits, supports and factors that affect this differentiation could be a clarifying reason for future entrepreneurs to have a clearer idea why is best for them to settle their business in Budapest or Dubai.

According to different articles and researches, one of them being Forbes, Budapest is in the top list of one of the 5 entrepreneurial cities in Europe, most preferable to start up a new innovative business. One of their specialties happens to be the engineering expertise in Telecom security and other different success stories as Prezi, LogmeIn and Ustream. Budapest has been the most convenient place for entrepreneurs to come and explore their opportunities or bring their ideas to life. One of the most known entrepreneurs in Budapest and in all Hungary is Peter Zaboji and his European Entrepreneurship Foundation (EEF), which has been running for 8 years now. Different programs and investor events have echoed the Hungarian entrepreneurial culture (Alison,2015). Through his innovative works and passion to involve more and more young people, Zaboji has captured the mind of entrepreneurs and challenges them to bring forth their ideas.

Apart from the entrepreneurial culture that its said to be found in Budapest, one other reason for foreigners to come down to Hungary’s capital city in order to give life to their creative idea is the simple fact of having lower costs then the Western part of the Europe according to the article “Get involved in Budapest Start Up scene” (Davison,2015). The article gives a general information on how to easily get information and help if you are willing to start up a business in Budapest, and apart from the bureaucracy dealings with the government, all the other procedures, such as being an expat, having a co-office, joining events, getting a mentor to help with guidelines, are described and linked as a very easy procedure. Saying this, it is partly mentioned why entrepreneurs choose Budapest. But from the other point of view, in the same article it is mentioned that the profit is modest compared to the Western part of the Europe (Shuttleworth, 2009). Is the easiness of entering the market worth it? Is this THE reason why? It’s doubtful.

A different perspective is seen in the United Arab Emirates, whereas starting from 2010 the Start-up Businesses have been easy and quicker to establish, indicated by the Doing Business report (Doing Business Report,2016).

Dubai, one of the seventh kingdoms of the United Arabic Emirates, is the emirate which is embracing entrepreneurship the most, while being in emerging state of the market. The government strongly supports entrepreneurs, and during the past years it has been an influx of different new residents from all around the world, coming to Dubai and expanding their market, while bringing innovation and change. Also the Dubai’s government is working on constructing a favorable amount of funds to support any innovative ideas to make Dubai one of the smartest city by 2017 according to Mansoor,2016.

Two of the most famous success stories, based in Dubai are LocoMotion, a social enterprise that employs videography to bring the social issues onto the people’s attention and a tech start up Lumba, that develops mobile games which can be reached domestically and internationally.

Due to a study of INSEAD and HSBC, Dubai is the second best city in the world, where expats wish to establish their businesses or to start their creative ideas ( Mansoor,2016)

Dubai is planning to go even further with their plan, as they have already constructed an Expo for 2020, where they plan to open the doors for creativity, innovation and technology to anyone willing to set up their start up in Dubai.

The willingness of the expats, which they count to 83% in Dubai, to locate their ideas and businesses in Dubai is surprising and yet satisfactory for UEA government, which is doing their best effort on increasing this percentage of people whether local or foreigner to have the entrepreneurial mindset.

According to one article called “ Success in the city… Dubai’s entrepreneurs share their stories” in most of the stories, you can read that Dubai is the land of opportunities, is the international land itself. Every entrepreneur, whenever they start their businesses, their main goal is going viral, going international, expanding global. One of the Entrepreneurs called Dina Hamzeh in this article said it right “It is easier for us to go international from Dubai than anywhere else.” This clearly makes a point that one of the reasons why Dubai is in the top list of being an entrepreneurial country. But still, it cannot be everything.

By looking at different businesses in Europe and in United Arabic Emirates that are owned by different origin-based entrepreneurs or even local entrepreneurs, rises the curiosity on knowing what is their motivation in opening something of their own in another country where they have to face different laws and regulations. Some points were figure out above by some articles read, but still different people share different stories, different perspectives and hold different ideas.

Surprisingly, when it comes to digital entrepreneurship we check the European Digital City Index of 2015, and we notice Budapest on being ranked the 23rd.

Chris Haley, Head of Start-ups and New Technology Research at Nesta, comments: “Entrepreneurship, particularly digital entrepreneurship, is vitally important for innovation and growth but not all cities provide equally fertile ground for these businesses.” Found in the article of Robin Wauters,2015. Having stated that, it gives a clear understanding that one of the points why Budapest is in the top list of the entrepreneurial cities, is not the fact of being digital. As checked in different articles and researches, London, holds the first place of being the most entrepreneurial city regarding the Digital entrepreneurship, followed by Berlin, with their success stories as