Doing Business In

8/3/2019 Doing Business In

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Doing Business In/With Arab

Countries


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History of the Region

The Arab world came to prominence with the spreadof Islam in the seventh century AD. Arabic, formerly atribal language of the Arabian Peninsula, soonbecame the primary language for a large part of the

world, as Islamic culture spread across the MiddleEast and Northern Africa, as far as Spain.

Following World War I and the end of 400 years ofTurkish rule across much of the Middle East, the

Arab states were formed, strongly influenced byBritain, France and Italy.


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The Arab world There are more than 300 million people living in 22

Arab League states stretching across North Africaand the Middle East, from the Atlantic Ocean throughto the Red Sea and Gulf regions, and on to the

Arabian Sea and the Indian Ocean.

Language and culture are key unifying factors, withIslam providing an overarching body of belief and a

strong sense of identity and community.


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Various Facts About Arab Countries

Total population of the Arab countries is around 300million people. Arabian countries are: Algeria,Bahrain, Djibouti, Egypt, Iraq, Jordan, Kuwait,Lebanon, Libya, Mauritania, Morocco, Oman, Qatar,Saudi Arabia, Somalia, Sudan, Syria, Tunisia, United

Arab Emirates, and Yemen. Population of Saudi Arabia is 16 million people; 60%

are under 18 years old, which means that productsgeared toward younger generations will have a goodmarket. Products related to establishing new homes,such as furniture, electronics, and kitchen wares willalso have a good market, since most Arabs getmarried at young ages.


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The annual food market volume for all members ofthe Gulf Cooperation council (Saudi Arabia, Kuwait,United Arab Emirates, Qatar, Oman, and Bahrain) is$8 billion; Saudi Arabia's share is 60% of thisamount.

Total annual retail sales in Kuwait are over $1 billion.The total annual sales of all co-operativesupermarkets in Kuwait are over $860 million.

Market volume for electronics and electrical goods in

Saudi Arabia is estimated at $400 million. SaudiArabia purchases 400,000 television sets each year.

More than 70% of Saudi Arabia's needs are fulfilledthrough imports.


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United Arab Emirates has a population of 2 millionpeople. Kuwait has a population of 2 million people.Egypt has a population of 59 million and it isestimated it will reach 64 million people in the next 6

years.


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The Oil Factor Oil exploration and production in the Middle East

began in Iran before World War I. Saudi Arabia,Kuwait and the Gulf states reached major productiononly after World War II.

The 'oil boom' in 197375 was a watershed. Producerstates asserted control over their oil. The introductionof pricing policies, reflecting the economic value ofoil, injected unprecedented wealth into the oil-richArab countries.

Saudi Arabia itself holds 25% of the world'sconfirmed oil reserves.


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Characteristics of the Saudi Arabian

Market

It is the largest market in the Middle East, withconsiderable spending power from its 25% holding ofglobal oil reserves.

It has a sound economy, with a fast-growing andyoung population.

It has a well-managed banking system.

It has good infrastructure-hotels, air travel and

telecommunications. It has generally low import duties and barriers,

although strict attention must be paid todocumentation and labelling.


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Characteristics of the Saudi Arabian

Market

Its business community is familiar with Westernpractices.

It is a complex market, with limited transparency in anumber of areas, notably government tenders.

It is intensively competitive.

There is a wide selection of potential agents anddistributors, requiring time and care to screen andappoint.

Decision cycles can be lengthy.


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Practical Advice on Entering

Markets

Developing a strategySeveral characteristics of the Saudi Arabian marketimpact on strategy development:

Statistics and market data should be imprecise

Transactions tend to take longer than expected

Time and care are needed to assess the claims ofprospective agents

When relationships are established, principals maywant to move quickly, sometimes on no more than ahandshake

More frequent and longer market visits are required,

at least initially Com lex business rocedures are common.


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Practical Advice on Entering

Markets

Components of a successful strategyA sound business plan for Saudi Arabia will:

Include a wide variety of sources of information Take advice from seasoned practitioners

Incorporate realistic budgets and allow more time fortravel

Use a sequential approach to determine 'go' or 'nogo'

Avoid open-ended commitments (particularly for aftersales service)

Clearly define each partner's roles and

responsibilities.


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The Price Factor

Saudi Arabia often exemplifies this more than anyother market.

Saudi customers will continuosly bring yourproposition back to price, no matter how hard you sellthe benefits.

Price drives most Arab business negotiations.

Competition will usually be intense.

Re-tendering in the public sector is common.Companies should be prepared for lengthy andprotracted negotiations.


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Islam and Business

Islam permeates all aspects of life in Saudi Arabia.Some important considerations when planningbusiness are:

On Fridays, the Islamic Sabbath, the communitygathers for prayers at noon. Offices and many shopsare closed on Fridays.

The holy festival of Ramadan occupies the ninthmonth of the Islamic calendar and the dates varyeach year. During this month Muslims observe aperiod of abstention (fasting during daylight hours),reflection and purification.


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Islam and Business

Ramadan and its ending, or breaking of the fast (Idal-Fitr, a three-day holiday) affects all businessactivities. If visiting during Ramadan, be aware that

there may be limited time for business meetings.

Check the Islamic calendar when planning businessvisits.


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Standard Behavior Expected

Use your right hand, whenever possible, particularlyfor eating. If unsure, put your left hand in your pocketor behind your back. Never point with either hand.

Avoid postures where you may show the soles of

your feet and generally avoid crossing your legs. Avoid displays of anger or impatience.

Maintain eye contact with your host. Rapid shifts ineye contact may be construed as a lack of trust.

Handshakes may often be a clasp. Do not offer toshake hands with an Arab woman, unless she offersher hand to you. Even then, only a gentle touch isappropriate.


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Standard Behavior Expected

When offered tea, coffee or snacks, accept, even ifall is not consumed.

The offer of strong black coffee is a feature of Arabmeetings and should never be refused. The cups are

small and when you have enough, a polite 'wiggle' ofyour cup signifies to the server that you have hadsufficient.

Learn the art of polite small talk, which will open mostmeetings, particularly introductory sessions.

Don't ask about an Arab's wife-but enquiries about'family' are appropriate.

Avoid comments on politics.


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Documents

Doing Business In