There is no question, business is booming in the Middle-East. Spurred by growing populations, business development and upcoming sporting events like the UAE Expo 2020 and Qatar World Cup 2022, the Middle-East – specifically the Gulf Cooperation Countries (GCC), which includes the UAE, Qatar, Saudi Arabia, Kuwait, Bahrain and Oman – is on the lookout for foreign companies with the latest and greatest technology.
Yet despite the immense opportunities for foreign companies, Canadian companies are not queuing up to bring their products and services to the region. In 2013, imports to the UAE alone equalled nearly $250 billion – of which Canada accounted for just under $1.6 billion. Simply put, the challenges of exporting to the Middle-East are sometimes seen as too great – limiting the number of Canadian companies willing to go for it.
But while challenges are plenty, opportunity is knocking very loudly. Companies that look beyond their own borders to diversify internationally stand to gain a competitive advantage and can reap great benefits as a result. Here are some of the reasons Canadian companies have avoided the Middle-East and what they can do to navigate through the hurdles to find success.
Short term pain for long term gain
Rami Gabriel, EDC’s Chief Middle-East Representative located in Dubai, says the most common complaint he hears from Canadian companies looking to do business in the Middle-East is that they go into the region, make great connections with key local players, and then leave thinking a deal is imminent. In most cases, the deal falls through, leaving the Canadian company wondering where things broke down.
Exporting your product or service to the Middle-East is not a short term goal; business relationships can often take years to cement. Gabriel points out that in order to penetrate the market successfully, foreign companies must put in the time and money required to build relationships, gain a positive reputation, and show potential local partners that they are committed to the region. This is done by becoming a regular fixture in the area, often times setting up an office and hiring a local agent with an established network to help further the firm’s reputation.
Not only can government policies against foreign owned businesses be very complicated, there is a general concern among foreign companies that the Middle-East has an untested legal system that can leave them vulnerable to hostile takeovers.
However, the GCC has made strides to make things easier and more stable. In an effort to encourage foreign businesses to bring their products and services to the region, the GCC has developed Free Economic Zones. These “Free Zones” are designated areas where foreign companies can set up shop under preferential circumstances, such as tax exemption and 100 per cent ownership. Gabriel stresses that free zones provide tremendous opportunities for Canadian exporters. EDC has a network of Canadian lawyers based in the Middle-East that can help guide Canadian companies through the process.
Like any exporting business, shipping products long distances across time zones can be expensive. But depending on the nature of the product, companies can look to using local resources and materials to lower costs, such as setting up a local assembly facility. This enables businesses to focus on providing the value add – such as technology and specialized equipment.
Perception of instability
Often times, Canadian companies are reluctant to export to the Middle-East due to the perception of instability in the region. While this is true in some areas, Gabriel stresses that not all countries should be painted with the same brush. “Reviewing individual countries is important. To get a good sense of which regions are stable, it’s important to look at where businesses are putting their money during periods of heightened instability. The flow of funds is often found going towards the more consistently stable countries such as the UAE, Saudi Arabia and Oman.”
In this region, it is relationships first … business second. Gabriel points out that unlike Western business cultures, you could have a series of three to four meetings before you even talk about anything work related. Once that personal relationship is developed, the partner then decides if they want to do business or not.
Zaineb B. Kubba, Business Development Manager at the Canada Arab Business Council (CABC), agrees. “In order to find exporting success in the Middle-East, companies must establish positive working relationships with government officials and local ambassadors,” she says.
“Having local key players to help you do this, and to help you connect on a cultural level, is crucial to doing business.” The CABC works closely with ambassadors and helps Canadian companies make connections.
Although there are challenges, the immense potential for Canadian companies to find success means exporting to the Middle-East can be a move worth making.
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