Insider View: the United Arab Emirates’ Way of Doing Business

Insider View: the United Arab Emirates’ Way of Doing Business

The United Arab Emirates (UAE) fit “the textbook definition of an emerging market,” says Rami Gabriel, EDC’s Dubai-based chief representative for the Middle East and North Africa since 2013. Due to the tremendous growth across this very wealthy nation, but especially in the larger emirates of Dubai, Abu Dhabi and Ras Al-Khaima, Canadian companies can find numerous opportunities in many sectors. But in order to succeed, they need to be informed, committed to the region and competitive, says Gabriel.

What is the Canadian presence in the UAE and where can Canadian businesses find opportunities?

There is a strong Canadian presence in the oil and gas space, in metals and mining, as well as infrastructure. There is also a lot of potential in telecommunications and the power sector, including alternative energy, such as solar.

What are some of the factors that are driving these opportunities?

The UAE is a textbook case of an emerging market; a vibrant and growing economy with a determination to diversify away from the oil and gas sector. This has opened the door to opportunities in other industries. You see tremendous growth all over the UAE, but especially in the larger emirates of Dubai, Abu Dhabi and Ras Al-Khaima. Already a very wealthy country with a high per capita income and up until recently, budget surplus, economic growth in the UAE is estimated to be around 4.5 per cent from 2015 to 2019, driven largely by household spending and non-oil business consumption. A growing population also brings the need for more roads, schools and hospitals and airports, for example.

What do Canadian companies need to know about doing business in the UAE?

There are various ways Canadian companies can do business here. They can go through an agency or distributor agreement, create a joint venture with a local partner or establish a subsidiary in a Free Trade Zone. In joint ventures, 51 per cent is owned by the local company and 49 per cent by the Canadian company. The key is to find a reputable partner with a similar strategy and common objectives. If a Canadian company establishes a subsidiary in a Free Trade Zone, it can be 100 per cent Canadian-owned. Being registered in a Free Trade Zone is beneficial in situations where a company is looking to set itself up in the UAE and service the region (more information at www.uaefreezones.com).

The disadvantage is that free zone entities have to operate within their zone boundaries – they are not licensed to operate elsewhere in the UAE or bid on local projects there.

 What are the key hurdles Canadian companies can face?

A key hurdle is lead time. It takes a long time to develop both the personal and professional relationships that will ultimately lead to winning business. This means Canadian companies have to be committed to the region for the long haul. If they are looking for a quick win, their efforts will be a waste of time and money.

The second challenge is related to scale. The typical project size here is large – Canadian companies need to think in terms of consortiums in order to collectively offer more complete solutions for potential opportunities.

What else should Canadian companies be aware of?

Projects are awarded through a transparent tendering process. Once the bidders who meet a minimum technical quality requirement have been identified, the winning bid is chosen purely based on the lowest price. At that stage, it doesn’t matter if a product is 20 or 30 per cent better. That means Canadian companies have to be extremely competitive from a pricing perspective.

What cultural practices and sensitivities should Canadians be aware of?

The UAE is an extremely diversified and multi-cultural society, where people from all over the world live and work. For a local company, the senior management team may be made up of local Emiratis and executives from Europe, Asia or other parts of the Middle East, each bringing their own culture to the table. The ability to read the situation and adjust to the people you’re doing business with is key for building successful relationships. Companies also need to adapt their messages and business model to the environment they work in. Many of the companies that failed here are ones that wanted to impose their own culture and way of doing things on local companies.

Any other advice?

This is a hierarchical culture. If Canadian companies send junior business development staff to the UAE, they will not meet with senior executives from a local company. To advance a discussion that involves decision-making, senior engagement is a must.

Categories Middle East

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