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)
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
Top Five Global Destination Cities,
2008
DestinationCity
CAPEX($BN)
Dubai 21
London 17
Shanghai 16
Tunis 15
Bucharest 13
Top Five Global Destination Cities,
2008
DestinationCity
New JobsCreated
Bucharest 86, 173
Dubai 58, 161
Shanghai 48, 605
Moscow 44, 985
St. Petersburg
44, 558
Top Five Destination Countries in the
Middle East, 2008
DestinationCountry
Total Projects
UAE 480
KSA 106
Qatar 80
Bahrain 64
Oman 53
Other 186
Top Five Destination Countries in the
Middle East, 2008
DestinationCountry
CAPEX ($BN)
UAE 35KSA 21
Iraq 20Qatar 19Oman 14Other 45
Top Five Destination Countries in the
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
LEADING TRADING FAMILIES
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
LEADING TRADING FAMILIES
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
DOING BUSINESS IN UAE
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
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%
DUBAI DUBAI –– the Worldthe World’’s Fastest Growing Citys Fastest Growing City
• 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
DUBAI DUBAI –– the Worldthe World’’s Fastest Growing Citys Fastest Growing City
DUBAI DUBAI –– the Worldthe World’’s Fastest Growing Citys Fastest Growing City
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
DUBAI DUBAI –– a land of opportunitya land of opportunity
DUBAI DUBAI –– a land of opportunitya land of opportunity
• 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…………..