Middle East - tips for tapping the region of opportunity
OPINION: As the world's producers and manufacturers increasingly turn towards emerging markets in the East to catch the growing economic wave of Asian development, another continent with huge economic potential is largely passing under the radar of many New Zealand businesses -the Middle East.
There is enormous export opportunity in the Middle East. The UAE is a primary entry point into the region for New Zealand, both in terms of people and goods. It has a strong economy and is currently New Zealand's second largest market in the Middle East after Saudi Arabia, and our most diversified market in the area. New Zealand's exports to the UAE have grown significantly over the past decade, reaching NZ$611 million in 2012.
With a liberal business environment and a standard of living that continues to attract expatriates from around the world, the UAE is challenged with managing significant infrastructure growth to support the oil and gas, tourism, health and financial industries. This rapid growth includes major transportation networks (ports, roads, airports) being constructed to support the extraction and movement of oil and gas and the people working on them.
Although New Zealand has a diverse range of companies and businesses tapping into this market, doing business in the region has its challenges. With Middle East countries ranking between 23 and 48 (out of 185) in the global ease of doing business ranking, there is still room to improve and grow.
A number of economies in the region have implemented regulatory reforms making it easier to do business. In the past year, Oman guaranteed borrowers' right to inspect their personal credit data, while the UAE further streamlined start-up requirements, implemented an online system for filing and paying taxes, and reduced the time to obtain an electricity connection. On the flipside, there are tax reforms on the horizon, with the Gulf Cooperation Council (GCC) for example considering the introduction of a GCC VAT which could bring an administration burden with it.
Wynyard Group has established an office in the UAE and continues to rapidly grow its Middle East business with clients from markets as diverse as transportation and financial services. It advises companies wishing to approach the UAE market to undertake research and planning to establish key market information such as validated lists of agents and potential partners, key market players, potential customers and suppliers.
Tips for doing business in the Middle East
Firstly, the four options available for conducting business in the UAE are:
1. Participation in a local company or other commercial entity. There is no such thing as an 'off the shelf' company. Every commercial entity must be specifically established and this is not a simple or quick process.
2. Establishment of a branch office. Consent from the Ministry of Economy must be granted and the office must be sponsored by a UAE national or locally registered company wholly owned by UAE nationals.
3. Establishment of a branch or subsidiary in one of the Free Zones of the UAE offers a variety of benefits and a degree of flexibility including 100% foreign ownership through branches, single or multiple shareholder companies and there is no national agent requirement.
4. Appointment of a commercial agent or distributor. A foreign company wishing to supply goods to Dubai and the Northern Emirates does not need a physical presence but can appoint a commercial agent and distributor which, by law, must be a UAE national or a company 100% owned by UAE nationals.
Apart from the obvious distinct advantages of having a physical presence in the market place, one important consideration is that Middle East business people prefer to meet in person. Personal contact with potential and existing partners and clients and regular visits to the market are of the utmost importance. It is natural for the business relationship to be built with time.
As is true throughout the business world, more than anything it is important to target the right person - the decision-maker. Given that 91% of the UAE population is made up of expats, these decision-makers are a culturally diverse range of people, so research in advance is essential.
It is also preferable to establish new business contacts via an introduction by mutual contact, exhibitions, networking receptions or through the Embassy. For Wynyard, hosting educational events either on its own or in partnership with an industry body has provided excellent platforms for relationship building. These also provide a forum to showcase expertise and build local networks.
Wynyard's experience gleaned from exporting software solutions to Middle East countries is that there has never been a better time for New Zealand companies to sell services, products and ideas to the region. The Middle East, rich in potential, is looking for partners - why shouldn't they be from New Zealand?
Craig Richardson is the Managing Director of Wynyard Group and was previously Chief Financial Officer of Coca-Cola Amatil's pacific operations and Vice President Finance for BlueScope Steel for the region. He is a certified practising accountant and fellow of CPA Australia. He is currently a board member of Crown entity Callaghan Innovation. Wynyard Group develops and produces advanced crime analytics software for government, financial services and critical national infrastructure.