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Doing Business in the Middle East 

Wednesday, 13 November 2019 19:22 PM | International expansion

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Looking to expand your business to the Middle East? Read for out must know advice and guidance

International expansion is something many entrepreneurs explore; increasingly many people are drawn towards the Middle East. There is a genuine demand for British hertitage and brands this region, and a number of franchising and licensing opportunities to help your business succeed.

With 50 percent of the respective population in this group of countries affluent and under 30, the spending power and potential is huge making this region very attractive to B2B and B2C businesses alike.

Setting up

  • Have a local partner. Presence on the ground is important  
  • Brand London is a big draw. If you are a British consumer goods company, amplify your “Britishness” as a key USP as it is still a compelling differentiator in the Middle East and Africa. If you sell on ‘Manufactured in Britain’ make sure this is authentic when expanding internationally, but note that a strong brand and approach is enough if considering local manufacture as long as you maintain quality 
  • Middle East remains a volatile place, as things can change quite quickly - need to have an appetite for risk 
  • Acquiring a business in the Middle East is apparently an easy process but isn’t the best route to market as it’s so cheap to set up  
  • UKTI are a route in but not recommended by experience in Saudi and China  
  • Most important advice is to get the right local sponsor and the right license 
  • Setup/Sponsorship companies: 
  • Links (operates across GCC): http://www.linksgroup.com 
  • ProPartnership (operates in Qatar & UAE): http://www.pro-partnership.com 

 Finances 

  • Contracts aren't worth paper they're written on 
  • Can try for 100% payment upfront but payment can be an issue. Have cash to support long payment terms and expect 6-9 months 
  • Payment terms tend to be flat 90 days for international firms, local and government companies have their own terms you have to agree to  
  • Payment is bureaucratic – in Saudi you have to have invoices stamped by 4 people   
  • Can get loans but factoring isn't common  
  • There is withholding tax (5% in Saudi, 10% in Qatar) – you can add this on top of your invoices, this is always done by big clients and get certificates from the governments but in reality you can’t get the tax back in the UK (except if you register in the Channel islands) 

Staff 

  • Try organic growth to build teams - recruit into UK office, hire staff for their language skills and build them up to move to international offices  
  • An Arabic speaker helps, but train them to your own culture and control your office that way  
  • Beware of employment laws and legislation to hire own nationals eg Qatarisation or Saudisation where you need to have certain number of locals vs expats. This can be a particular issue when scaling  
  • Visa processing in Saudi is very difficult. Women under 30 difficult to get in and multi-entry visas for females are unheard of. This also acts as a barrier to entry for competitors. Qatar and Dubai are not difficult to obtain visas  

Salaries 

  • Staff costs are high plus you have to provide one flight home and medical insurance (approx. $60 month)  
  • You have to pay one month salary for every year they work for you, paid when they leave  
  • WPS local payments in Dubai – 6% of real salary has to be paid through this system otherwise it’s flagged up and you can be shut down. Designed to protect workers  
  • Important to hire/use a good PRO guy who will organise visas and handle all government paperwork 

Global management companies

Culture 

  • Ramadan is limited to six hours per day, so not much happens (no decisions made) during this month  
  • Can be very seasonal so need to forecast for this  
  • Alcohol is very expensive, you need a permit  

Sales and marketing 

  • Social media, marketing and word of mouth essential in Middle East. Instagram is huge. Facebook has been and gone. Social appetite is huge but be careful what imagery you share  
  • Client referrals are important in winning business

instagram middle east   

ALGERIA 

  • Algeria is difficult to get money out of the country 

DUBAI 

  • Most people doing business in the Gulf transit through Dubai, it acts as a hub  
  • Dubai is exploding in terms of marketing budgets and investment  
  • There is protectionism of industries so stop more businesses setting up once they feel they have enough (eg recruitment)  
  • Dubai is actively trying to attract high tech companies into the area 
  • Business culture revolves around referrals – what goes around, comes around 

 Rents 

  • There are new controls in place around rent reviews to prevent another bubble but still growing sharply  
  • Accommodation is around $2500 in Dubai for nice apartment, you pay in advance with cheques  

Set-up options 

  • To set up in Dubai there are essentially 2 options:  
  • Establish a company in the “freezone” for foreign companies. A free zone license restricts you to setting up in the free zone  
  • Have an Emirati sponsor who nominally owns 51% of the company 
  • The freezone option may sound less complicated/risky but in practice it is very restrictive e.g. creates problems when increasing staff size as you are only allowed a pre-defined number of visas 
  • Moving to having an Emirati sponsor has been a success. The sponsor is paid a fee and has no involvement in the business in return your company is able to operate under far less restrictive conditions 
  • Sponsors can also open some high level doors – he was found after being recommended by 4 different people 
  • Emiratis don’t like businesses that give the impression they are there to make a quick buck, the key is to invest time and you will get it back 
  • Finding the right sponsor is difficult. If your sponsor has issues with his other businesses they can close your on business as they are associated  
  • Costs in Dubai to set up approx 80,000 AED for first license to sponsor and 45,000 AED for the other sponsor. Set up cost around 50,000 

 Recruitment 

  • Dubai is transient so it's good for recruitment agencies. Freelancers struggle to compete with more established companies  
  • Use a management company who can set up visas etc for you and use their space for offices – use a reputable company and don’t do it on the cheap   
  • Government can revoke licenses if you aren't doing the business you say you are on your license - can only have three types of businesses on your license in Dubai  
  • The visa threshold for companies in Dubai limited to 100 max  
  • You can't employ freelancers as this is not legal. Can get freelance licenses in free zones but can't work outside the zone  

business in israel

ISRAEL 

  • People travelling to Israel can get a stamp on paper not in passport or get two passports for this purpose - but there are rumours of checking passport number/mobile phone usage 

QATAR 

  • Qatar has ‘Qatar Financial Centre’ who can sponsor financial organisations, but no other free zones  
  • Pay for office space with 12 advance cheques – be careful because if you bounce a cheque you go to jail  
  • It's Sharia law, so there are some funding nuances 

 TUNISIA 

  • Tunisia seen as a safe haven, despite starting the Arab Spring, and is on the same time zone as the UK. However, some licenses don’t allow trade with local Tunisian companies, only Western companies  
  • In Tunisia there's an abundance of resource, and everyone is very well educated and so lots of choice to recruit people 

UAE 

  • Beware of payment terms – a 30 day invoice could take 6-12 months to pay! Abu Dhabi has tightened this up; however still be aware of Dubai 

 

Like all of our advice and insight we share this in good faith, being the combined wisdoms of our members and others. We cannot however accept any liability in relation to the content of this material, or for the consequences of any actions taken on the basis of the information provided. All parties are responsible for their own actions and decisions and for undertaking their own due diligence prior to entering into any contractual relationships. 

 

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