While Dubai may be a stopover for some, for others it is a market awash with possibility. This emirate is booming and could be your ticket into the emerging markets of the Middle East.
More than 80 percent of Dubai dwellers are foreigners, but the attraction of this emirate is hardly a mystery. Flush with money from oil reserves, the United Arab Emirates (UAE) is fast becoming a centre of commerce and Dubai, its most populous emirate, the focus of the world.
Although revenue from oil and natural gas have been historically responsible for the country’s great wealth, other industries now account for about half of the UAE’s gross domestic product. Sectors such as financial services, property and construction have grown, with others like tourism developing rapidly.
Dubai is the most westernised of the UAE’s seven emirates, making it a softer landing than other areas of the Middle East. Not only are there several expatriates from the United Kingdom and the United States, it is a common stopover and holiday destination for European travellers.
As an Islamic country, the UAE has a number of restrictions that new exporters should note when conducting research. This includes special permission required for the importation of alcohol and drugs, including substances for medicinal use such as pharmaceuticals. Food products must be labelled carefully with information in English and Arabic, including the origin of all animal fats.
You will also need to be aware of their business hours, which differ from ours. Businesses either operate in a ‘split’ shift form (8am–1pm and 4–7pm) or in a ‘straight’ shift form (8am–6pm). Businesses close on Friday for the Islamic holy day, so the working week is generally Saturday to Thursday. Government offices open from 7.30am–2pm Saturday to Wednesday. It is not uncommon for business to pause during prayer times.
Chris Gibbs Stewart, general manager of Australian Business International Trade Services, visited Dubai as part of the inaugural NSW Women’s Business Mission, organised by the Department of State and Regional Development (DSRD). She says exporters need to prepare themselves for the cultural differences as well as the business differences because relationships are an important part of doing business: “Understand that the relationship might not be built as quickly with potential buyers as in some other markets. Don’t expect to make a deal overnight, expect to go back several times before a deal can be done.”
The best thing an exporter can do is to figure out how the market works by examining the market structure and finding out who makes the decisions. “You need to understand the supply chains into the various outlets, whether you’re selling at a commercial, industrial or consumer level, and you need to do your research and talk to people,” she says. “If you’re selling to a retailer and they don’t buy direct, you should ask them who their distributor is or who their agent is. It’s a matter of investigating.”
If you aim to set up premises in Dubai, you need to look into zoning. Free trade zones have been set aside for foreign-owned enterprises and most of these attract certain industries; for example Dubai Internet City positions itself as the place for ICT companies. Outside of the free trade zones, you must have a local partner to trade.
Having lived in Dubai for six years, Phillip Waite, business adviser with Enterprise Connect, sees both benefits and drawbacks in engaging a local partner. “If you choose a local partner, they obviously know how the business environment works, they generally have lots of good contacts,” he says. “The bad thing is there are a lot of locals who make a living out of being a partner. There’s no shortage of would-be partners because they all make a little bit of money out of each of their 400 businesses and do nothing for it.
“If you want a local partner, take your time to select the right one, build trust and get to know them properly. If you do that, it’s certainly worthwhile having a local partner.”
Existing exporters should note that while affluence has made shopping a pastime, the market is quite brand conscious, so it is difficult to break into the established consumer market if you’re not already there.
Waite says the booming industry is construction: “Any allied industry of construction is huge. They’re going mad with construction and it won’t stop or slow in the foreseeable future.” He also lists services and technology for the oil and gas industry, and education, which is becoming “quite prominent”.
Gibbs Stewart suggests smart exporters could match consumerism with the boom areas. “There are a lot of apartments being built, a lot of hotels being built, so there are opportunities in lifestyle products: interior design or furniture, pottery or art,” she points out.
Tourism is another emerging area with which Australians could assist. “Because Dubai is increasingly becoming the stopover between Europe and Asia, and also a destination for Europeans, they’re developing their waterfront, so the boating and marine industry and tourism activities around that [is an opportunity],” she says.
Gibbs Stewart believes Australians have an inherent advantage in the market because we’re “less controversial” than exporters from the United States. “There are opportunities, where there might have been an American supplier doing business, to also offer a valid business proposition,” she suggests.
Established exporters are already doing a good job consolidating Australia’s high standing. “There’s a growing constituency, ex-pats and Australian businesses over there that bode well for us because we’re interested in the market and people see us being interested in the market,” she says. “It sets a good reputation for others.”
And while Dubai is a great starting place for exports to the Middle East, it is essentially a small, competitive market compared with its appeal as a gateway to other markets that might pay more attention to Australian exports.
“Dubai gives you great grounding for the UAE and other Middle Eastern countries because it is quite liberal. It gives you an understanding of how business operates in the Middle East,” says Waite. He recommends looking into Abu Dhabi—”because they’re the ones with the real money”—and then Qatar: “They’re probably about five years behind Dubai; they’re about to really take off.”
Apart from the competition, some cultural differences may hinder trade, particularly for female exporters. Gibbs Stewart says it’s about understanding and accepting the culture and then working around it.
“When a woman goes there, more than likely she’ll be doing business with a man. Sometimes there are cultural things that might not allow good communication or the development of a relationship that you might develop in other cultures,” she notes. “You have to understand that they won’t go out to dinner with you, because it’s not the appropriate thing to do. Sometimes they won’t shake your hand. In any culture there are the more conservative and the more liberal, and those who are more conservative have a different interaction with women.”
The Australian Government recognises the value of trade with the Gulf Cooperation Council, which includes Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates, and the two parties began free trade negotiations last year.
Since the UAE is quite an open market already, a free trade agreement will most likely affect the rules for foreign direct investment, allowing foreign-owned entities to trade outside the current free trade zones. Earlier this year, UAE Minister of Economy Sultan Bin Saeed Al Mansouri indicated the law would follow that course when he announced that the Companies Law will be altered slightly where foreign investment is required: “We will allow 100 percent foreign ownership wherever it helps the economy.”
Austrade Middle East & North Africa site: www.austrade.com/ME-Home/default.aspx
Australian Arab Chamber of Commerce & Industry (AACCI): www.austarab.com.au
Australian Business Council Dubai: www.abc-dxb.com
Department of Foreign Affairs: www.dfat.gov.au/geo/uae
Middle East & Gulf Australian Alumni (MEGAA) Network: www.megaanetwork.com