Entering a foreign market can be daunting, not least of all when it is fraught with political complications. Ambitious growth companies can succeed in the Middle East.
The first step, says Joe Hepworth, Chief Executive of the Dubai-based British Centres for Business, is to understand precisely who your customers are going to be. There are about 40 free zones in the United Arab Emirates as well as onshore market opportunities, so clearly defining who is going to be buying your product will play a role in where you establish a presence, he says.
Alison Hubbard, a partner at Pinsent Masons in Dubai, says appetite for risk and the nature of a business play a role in determining whether to opt for a direct presence in the region or work through an intermediary. "Typically the route to market would be through some sort of agency or distribution arrangement, through an establishment which may be on the mainland or within the free zones. You may be looking to increase your footprint through an acquisition or joint venture as well so there are a number of routes to market," she says.
Onshore companies require a government-issued licence while businesses operating in the free zone operate under that jurisdiction, says Hepworth. Onshore companies can remain 100 per cent owned by the foreign entity where a foreign branch or representative office is established; 51 per cent local ownership is required for a limited liability company, he notes.
Licences are a legal requirement. In addition, they are required where you are tendering for government contracts, points out Hubbard.
The choice of jurisdiction for your business isn't only dictated by ownership or where your customers are situated. "Certain activities aren't able to be carried out from the free zone; certain activities aren't able to be carried out from a particular legal entity," says Hubbard.
Some sectors are heavily regulated, including education, healthcare, oil and gas. "If you are planning to go outside the scope of your licence you will be required to put that right sooner rather than later," she says.
For Peter Cook, who manages the British Chamber of Commerce in Qatar, identifying the right local partners is a "crucial step in trying to be successful". Take time to find an appropriate, relevant partner, he advises.
Understanding the human being is as important as the contract in the Middle East, says Peter. "These are all quite parochial cultures. They do a lot of business face-to-face and they do a lot of business between friends and family," he explains.
"There are large extended families and you need to understand the family relationships that are often out there. It is not the free competitive market you would meet in the UK," he adds.
The views and opinions within this article do not necessarily reflect those of the HSBC Group.