The Gulf region’s transition to a post-oil economy comes with both challenges and amazing opportunities for its various sectors and industries (from consumer goods to health care).
The consumer markets in the Emirates, Saudi Arabia, Oman, Bahrein, Qatar and Kuwait are still in full development, and with their rapidly growing populations and high average GDPs (up to an average of $ 124.000 in Qatar!), they make for exceedingly attractive markets for (foreign) companies to invest in.
Before diving in head first, however, any potential investor would do well to first consider some of the lessons I have learned throughout my 10 years of working with and in the region:
1. Doing business in the GCC is like doing business in Europe 30 years ago:
- Organizations are still very hierarchical, with little delegation of bottom-up decision-making. You better talk to the person in charge, or you’ll be in for a very, very long sales cycle.
- Markets are highly fragmented. When trying to sell a product, you’ll be faced with many wholesalers and other organizations with a strong local/regional focus.
- It is not always about being best-in-class, but about having the right connections. The real power in the Gulf still rests in the hands of a limited number of families. They control the economy through a network of companies, and even when one talks to a company’s top management (who often are non-nationals), the final call may eventually be made by the shareholder family. Building goodwill with some of these influential families is therefore extremely valuable from a business perspective.
- Seniority is more important than skills and competences. Even when the younger generation has studied at a prestigious university in the UK or the US and even if they have all the right arguments, the head of the family will have the final say.
2. The government has a direct impact on many decisions.
- The GCC governments are immensely rich (thanks to the income generated from oil), and their major investments & projects have a direct impact the economy.
- The governments follow a protectionist policy that favors local companies and employees (e.g. through quota, regulations, import duties, …). Local companies have a distinct advantage, so consider a joint venture or a local branch office once you’ve found a reliable, well-connected GCC business partner.
3. Think ‘Asia’.
In the GCC, East meets West. Your competition may differ greatly from the one you are used to as many Indian and Pakistani companies compete in the (often low-end segment of the) market.
4. Do not underestimate the social factor.
Arabs are very warm and proud people. Show genuine interest in their culture, customs and family, and do not immediately jump to business talk. On a related note…
5. Trust is key…
… and Europeans start at the bottom rung of the trust ladder. We are not family and we (generally speaking) do not share the same religion. Building trust takes time, but once you get there, a whole new world will open – one where a handshake or an oral agreement is more valuable than a written contract. Be prepared to take the occasional dive into the unknown…
6. Time has little to no value.
It is not because you were promised a reply by tomorrow that you will also get it. Rather, expect to receive it at some undefined point in the future. And that meeting you had planned today? Do not be surprised if you get a last-minute call to postpone it to another hour or day. Yet once the final ‘go’ has been given, you better move fast to deliver on a very short notice!
7. ‘Yes’ is not ‘yes’.
Arabs are often shy and proud and tend to say ‘yes’ – even when there is no real interest in doing business. You have a real ‘yes’ only once you see the action modus. That is when you can rest assured that you have engagement.
It should be clear by now: navigating through these different traditions, customs and expectations is not easy, especially not without the right network.
Our advice? Take your time to find the right local partner (who must be well-connected and motivated) and assist him (or her) with developing your business. Most of all, don’t try to rush things and invest in a relationship based on mutual respect and trust.