Middle East Business Environment

Middle East Business Environment

Prof. Chris AbrahamSr. Vice President

SPJCM – Dubai & Singapore

Countries in the Middle East:

- Turkey - Cyprus

- Iran- Iraq

- Kuwait - Syria

- Lebanon- Israel

- Jordan- Egypt

- Saudi Arabia- Oman - Qatar

- Yemen- UAE

- Bahrain

The Middle East in the Twenty-First Century

• Regional conflicts – Security issues• Bilateral trade agreements with the

US and EU (e.g., Saudi Arabia, Israel, Jordan)

• Gulf Cooperation Council

The Middle East in the Twenty-First Century• Restrictions and trade sanctions (e.g. Iran)

• Dependence on oil revenues and state-sponsored subsidiaries

• Large cultural/economic/political differences among countries in the Middle East. (e.g. Turkey, Israel, Saudi Arabia)

Potential Economic Opportunities

• Policies intended to attract FDI and to diversify economically.

• Privatization of traditionally state owned enterprises.

• Progress on building institutional infrastructure (e.g., Israel, Turkey, Kuwait)

http://www.pbase.com/deep_heart/dubai

Potential Economic Opportunities

• Population growth.

• Regional integration efforts.

• Reconstruction efforts in Iraq.

Key Points

• Middle East is culturally, economically and politically diverse (Arabs, Kurds, Iranians, Turks).

• Resource rich countries with stable governments with high rates of economic development (e.g. Saudi Arabia, Qatar, Kuwait).

• Countries with close trade relationship with the rest of the World (e.g., Turkey, United Arab Emirates).

• Potentially lucrative market but typical developing country market environment.

• Less fortunate countries of the Middle East (e.g., Syria, Iran, Iraq, Jordan).

Key Points

• Region’s rich history, culture and religion, and their implications.

• Critical role of government in the Middle East.

• The role of skepticism in the Middle Eastern World.

Key Points

Key Points

• Islam is the glue of the Middle Eastern social fabric.

• Collectivist, hierarchical and close knit societies.

• The importance of shame / face / honor / consensus / respect for authority / seniority.

Key Points

• GCC Common Currency

• GCC Central Bank

• GCC Customs Union

Some tips…• Who you know is key. Relationships and connections

are vital. • Get personal and understand face.• Invest time in building relationships. • Get used to informal agreements. • Appreciate the intertwining of religion and law.• Speak English when making deals. Speaking English

is a status symbol.• Show compassion for a business in trouble. • Entertainment and hospitality in business dealings.

The Middle East The Middle East –– a region of a region of opportunitiesopportunities

• UAE (Dubai), Qatar and Saudi Arabia are providing senior managers with the highest disposable incomes in the world1

"The high demand and low supply of qualified executive talent is here to stay for at least the next five years“

The Middle East The Middle East –– a region of a region of opportunitiesopportunities

Magdy Al ZeinManaging Director of Boyden Middle East

at the opening of "GCC Executive Talent Shortage Summit“ in Dubai

The Middle East Cultural Context

• Values

• Motivators

• Central management concept

• Importance of status

• Method of change

• Method of control

• Fundamental approach to development of new ideas

• Focus of performance evaluation

• Attitude to inequality

• Conflict resolution

• Emotions

The Middle East Cultural Context

MYTHS ABOUT THE REGION

1 IT’S ALL ABOUT OIL

2 EVERYBODY IS RICH

3 GCC CUSTOMERS HATE “OTHERS/US”

4 WOMEN DON’T MATTER

5 MARKETS ARE ENTIRELY ARAB

REGION’S SUCCESS STORIES- A SAMPLING

LULU GROUPJUMBO GROUPNMC GROUPGEMSSOBHAKHIMJI RAMDAS

DAMASUPARAMEXTHE ONEAME INFOZAWYA HAWAA WORLD

EMIRATESETIHAD AIRLINESQATAR AIRWARS

AIR ARABIAEMARAT

RAK BANKMASHREQ BANK

JUMEIRAH GROUPDU

ETISALAT

UAE – THE REGIONAL HUBiSignificant visitor , and ex-pat marketsiDevelopment of Jebel Ali & Taweelah PortsiGrowth of Emirates & Etihad AirlinesiDubai is world’s third largest re-export

centre

iDubai handled around 73% of UAE foreign trade (2004)

Top Five Global Destination Cities,

2008

DestinationCity

TotalProjects

Dubai 342

London 287

Shanghai 264

Beijing 206

Paris 190


2008

DestinationCity

CAPEX($BN)

Dubai 21

London 17

Shanghai 16

Tunis 15

Bucharest 13


2008

DestinationCity

New JobsCreated

Bucharest 86, 173

Dubai 58, 161

Shanghai 48, 605

Moscow 44, 985

St. Petersburg

44, 558

Top Five Destination Countries in the

Middle East, 2008

DestinationCountry

Total Projects

UAE 480

KSA 106

Qatar 80

Bahrain 64

Oman 53

Other 186


Middle East, 2008

DestinationCountry

CAPEX ($BN)

UAE 35KSA 21

Iraq 20Qatar 19Oman 14Other 45


Middle East, 2008

DestinationCountry

New Jobs Created

UAE 87, 097KSA 28, 763

Oman 21, 034Jordan 20, 035Qatar 18, 254Other 61, 885

LEADING TRADING FAMILIES

Al Futtaim

IKEA, ToysRUs, M&SAl Futtaim MotorsAl Futtaim Electronics -SanyoAl Futtaim Auto & Machinery (FAMCO)Al Futtaim Real Estate

www.al-futtaim.com

Al Ghurair

Gulf ExtrusionsDubai PolyfilmArabian can IndustryBurjuman Shopping CenterAl Ghurair CityMashreq BankDome CaféPrinting & Publishing

www.Algurair-pvt.com

Al Gurg

Al Gurg Tyres, Batteries & Automobile AccessoriesAl Gurg Cigarette DivMac Al GurgArabian Explosive CoAl Gurg Al Laing PaintBenetton FranchiseID Design

www.algurg.com


Al Majid

Al Majid PropertyEMW Lifts & EscalatorsGENAVCOGULFCOTaj HotelSkyline TravelsEPS

www.al-majid.com

Al Habtoor

Al Habtoor Eng. EntAl Habtoor MotorsBentleyAston MartinMack TruckReal EstateHotel Metropolitan GroupPublishing-Al Shindagha

www.habtoor.com

Al Naboodah

Al Naboodah Cont.Al Naboodah CargoTravels & TourismSMKA Electric CoAl Naboodah Laing O’RourkeSwaidan Trading

www.alnaboodah.com


Al Rostamani

Thomas Cook ExchangeArabian Automobiles CoDubai Int’l SecuritiesEmirates Electrical Eng.Federal Bldg IndustriesEnvo Gulf SteelUnited Diesel

www.alrostamani.com

Al Tayer

Al Tayer Motors-JaguarAbb IndustriesFashion & JewelleryAati Contracts CoPerfume & CosmeticsAl Nisr PublishingMotivate Publishing

www.Altayer.com

LEADING TRADING FAMILY

Galadari

Khaleej TimesMazdaBaskin RobbinsGaladari Travel GroupDubai Intercontinental HotelGaladari ColumboGaladari Industrial

www.Gabros.com

Lootah

Lootah IndustriesNational AluminiumLootah Building & ConstructionLootah General TradingNational Readymix

www.lootahgroup.com

Dubailand, with seven fully themed worlds with 45 mega projects, including another massive $1 billion indoor snow park

Palm Island Projects, Healthcare CityDubai International Finance Centre

The World, Dubailand,Airport Expansions & New Airports

Over 100 New HotelsBurj Tower

Business BayYas Island

UAE MAJOR PROJECTS

A new national grid linking all power stations & distribution networks in Dubai & Abu Dhabi (valued at US$164million)

Dolphin Gas Project linking Qatar , UAE & Oman

Light Rail system throughout Dubai

Dept for Economic Development-New Projects to encourage the development of manufacturing industry over the next 5 years

UAE MAJOR PROJECTS (Contd…)

Don’t forget the growing Northern Emirates & Abu Dhabi

Niche opportunities for companies

Have a Middle East Strategy (and beyond?) not just UAE

Understand the wider pricing issues

Take legal advice with M.E knowledge

Research , research , research

KEY ISSUES

DOING BUSINESS IN UAEDirect Export - Agent/Distributor

Representative Office

Branch Office

Limited Liability

Joint Venture/Participation

Freezone or Sponsor/Partner?

Direct Export - Agent/Distributor

No distinction between agent & distributor

Cultural aspects – research , research , research

Registered or Unregistered agent ?

Exclusivity can be via product line / specific service

Dubai and Abu Dhabi separate agencies ?

Agreement subject to UAE law ?

Ensure “getoutability” of contract

DOING BUSINESS IN UAE

DOING BUSINESS IN UAE Representative Office

Branch Office

Sponsor generally needed – registration/formalities

Sponsors – no liability , investment , management

Fees are fairly established

Specialist UAE firms offer matching service

Termination may be difficult

Limited Liability Company - LLC

At least 51% to be held by UAE national/company

Initial share capital 150k dhs/300k dhs for Dubai

Profit share may be disproportionate to shares

All or most share capital provided by foreign Investor

Vast majority of profits passed to foreign investor


Joint Venture/Participation

UAE Companies Law permits joint participation

2 or more partners agree to share profits/losses

Does not need to be formally registered

Establishment immediate

JP would use name/trade license of local registered

Disadvantage – independent financing limited ?


DOING BUSINESS IN UAE Free Trade Zones

40+ FTZ’S – existing & proposed

No customs duties

No restrictions – profit transfer / capital repatriation

Exemption – corporate , withholding , inheritance taxes

No personal income tax or currency restrictions

BUT need local agent to trade in UAE

ICAD may circumvent this – with Executive Council

iResearch , research , researchiUnderstand cultural issueiDevelop a regional strategyiMaintain personal contactiPlan for the long term , not a quick fix

DUBAI DUBAI –– Located in the Center Located in the Center of Future World Economyof Future World Economy

Dubai, UAE

Within 8 hours flight distance Dubai can reach:

The world’s 2nd strongest economy‐ Western Europe

3 out of 4 “Golden BRIC” countries*‐ Russia, India, and China

2 of the newest emerging economies‐ Eastern Europe and South Eastern Asia

The future star of world economy ‐ Africa

DUBAI DUBAI –– the Worldthe World’’s Fastest Growing Citys Fastest Growing City

• From 1996 to 2006, Dubai's GDP has grown 270%


• The ongoing construction projects cost around 700 billion USD, including:

– The tallest building in the world- Dubai Tower

– The largest airport in the world

– World’s 3 largest manmade islands (Palm island)

– The eighth miracle in the world- the World Island

– The world’s largest shopping mall- Dubai Mall

– The world’s largest theme park- Dubai Land



s

DUBAI DUBAI –– a land of opportunitya land of opportunity

• International professionals can easily get a working visa in Dubai

• 90% of population in Dubai are expatriates

• No income tax- what you earn is what you get

• No foreign exchange control• UAE is the most liberal country in the

middle east



• Global companies in existing andforthcoming free zones are aggressively hiring talents

•Internet City

•Media City

•Knowledge Village

•International Financial Center

•Investment Park

•Business Bay

•International Academic City

•Outsourcing Zone

•Health Care City

•Silicon Oasis

•Technology Park

•Media Production Zone

•Airport Free Zone

•Car and Automotive Zone

•Maritime Zone

•Biotechnology Zone

• Companies in UAE are booming and they are seeking MBAs in large numbers.

The Middle East is looking for The Middle East is looking for future business leadersfuture business leaders……..

Enjoy the experience & make use of Enjoy the experience & make use of the opportunitythe opportunity…………..