Doing Business in the Middle East
INTRODUCTION:
This document is a useful adjunct to individual country profiles and sector studies for countries of the Middle
East, North Africa and Arabian Gulf, and provides general background information useful for doing business
throughout the Middle East region.
Conducting profitable business operations in a foreign and different culture can at times be frustrating,
confusing and discouraging. On the other hand, knowing something of how your partners or associates and
clients approach commercial and societal issues can help relieve some of the uncertainty and anxiety and
improve your business opportunities.
ISLAM AND THE ROLE IT PLAYS IN BUSINESS:
It is impossible to establish meaningful business relationships in the Middle East without some
understanding and knowledge of Islam.
RAMADAN
Fasting is carried out during the month of Ramadan, which can proof to be very testing in some regions.
The close of Ramadan is celebrated by the festival of Eid al Fitr (Festival of Breaking the Fast). The Eid period
is marked by special community prayers and joyous family celebrations and feasts.
HAJJ
Performance of the Hajj or pilgrimage to Makkah at least once in a lifetime is an obligation of every Muslim
who is fit and can afford to make the journey. The Hajj begins with the twelfth month of the Islamic calendar
called Zul Hijjah. The close of Hajj is marked by the feast of Eid al Adha (Festival of Sacrifice).
The Quran denounces all unearned income, usury and gambling. It establishes the Islamic principles of Sharia
law. In general, the countries of the region are strict Muslim states and the heritage of Islam is deeply rooted in
the character of the people. Islamic customs govern the general way of life in both social and business
practices; care must be taken to respect this, particulary in the area of dress, deportment, language and
behaviour.
THE ROLE OF THE FAMILY:
Second only to the importance of religion is the importance of the family. Once again, the Quran lays out
clearly the importance of the family and the obligations of the parents.
The role of the husband/father as provider and protector, and that of the wife/mother as homemaker,
protector of the children is made clear. Typically women do not work outside the home and in many cases
do not leave the home unless in the company of their husbands or some other male member of the family.
With a male Arab colleague it is usually customary to enquire about his family rather than asking how his
"wife" is doing. It is permissible to single out family members if an intimacy has been established with your
Arab counterpart, agent or partner and you have had the opportunity to meet for example, his wife and
other members of his family.
In general, Arabs place a great deal of importance on family and the family responsibilities will always take
precedence over any business affairs.
These brief sections on Islam and the Family are offered simply as background and to provide information
that may help avoid potential embarrassment to both the Western businessman and your Arab host.
SOCIAL & BUSINESS NORMS:
Understanding usual social and business norms is an important element in gaining the ease and confidence
necessary to function effectively in the region.
Socially, Western businessmen will find the Arab people to be very hospitable. Very often your Arab
associates will invite you to their homes for a dinner.
All of the well-known protocol like eating with the right hand; not showing the sole of the foot, etc. should
be observed. Although strange to the newcomer these evening dinners with your Arab friends and
associates can be very enjoyable and quite a lot of fun.
BUSINESS ISSUES:
Operating a successful business in the Middle East is in many ways like operating a business in the Western
world. The determination of whether the Middle East is an appropriate market to conduct business will
depend on a thorough analysis of several general business related topics.
For example, a thorough knowledge of the regulations governing business activities is necessary. A
knowledge of the legal environment, tax regimes, accepted accounting methods, business structures,
import/export regulations, manpower and labor regulations, restrictions on foreign capital, investment
incentives, the presence, if any, of exchange controls are all important for the businessman. Furthermore, a
sensitivity on how to get things done and an insight into the power structure that operates in a given
country are extremely important.
To name a few examples, some countries in the region have restrictions that only permit locals to trade in
the market, while others permit local/foreign partnerships to trade (trade meaning the buying and selling
of goods for profit). There are differing regulations on the amount of foreign ownership a business may
have. Some countries have requirements on the hiring of local manpower while others have no restrictions.
With all of these factors to consider it is extremely important for companies and businessmen to gain a
thorough knowledge of the country and its particular business characteristics.
The two most common methods of doing business in the Middle East region are by agency agreement or
under some form of joint venture.
However, the manner in which Arabs generally approach issues, think through problems, make decisions,
etc., weave a thread throughout all business dealings. Foreign businessmen who have dealt in the region for
some time learn to anticipate typical responses, likely outcomes and what to do and what not to do
In effect, they start to think somewhat like their Arab colleagues.
It is frequently difficult to obtain accurate business information about the region. The governments of the
region do not release of the kind of data which business people find useful in helping them make decisions.
There is little in the way of population statistics, demographics, or financial information related to either the
government or private sector. As a result, the business community hums with rumours of events that have
happened or of events that are about to happen. People who have worked in the region for a number of
years learn to sift this information and to confirm what they hear from three or four different reliable
sources.
Annual telecommunications statistics for the countries of the region published by the ITU in Geneva .
Projects in the Middle East are generally put out to tender. In some cases, a government ministry or industry
will want all bidders to be prequalified. This means your company must be registered with the client before
hand to ensure your name is on the bidders list.
Specifications are usually issued for all projects of any consequence. These specifications will include the
general terms and conditions, special terms and conditions as well as the technical requirements of the
project.
Compliance to the specifications is of major importance; especially compliance to the general and special
terms and conditions.
To prepare an offer that is attractive will require significant effort and cost on the part of your company.
Many times site visits will be necessary to properly understand the requirements of the project. Possibly a
host of local or foreign suppliers will be needed to fulfil all the requirements of a turnkey project. They will
be supplying prices to other bidders as well, thus, good market intelligence is required to know if they favour
one company over another. Additional market intelligence can be of great benefit. For example, what is the
customer's budget, is there a preferred supplier, who are the competitors agents and are they more
powerful than yours, do your competitors have someone on the inside of the client organization, etc? Your
contacts with people inside the client organization can be very important and helpful. Often they can
provide insight into the project that can only be obtained by discussing issues with them. Therefore, they
must know you and both of you have to have trust in each other before this can occur.
Winning projects in the Middle East is not an easy task. There is plenty of competition from both competent
and incompetent businesses in the same field. Organizations are extremely price conscious.
In cases like this it is extremely important to have your agent and his connections do their part to secure the
contract. Often a low bidder does not succeed either due to non-compliance or weak representation inside
the client organization.
In some cases, offers will be evaluated by a central tender committee of either the government or the client
ministry. If this is the case it is important to know someone on this committee who may provide guidance
and information. Sometimes your proposal will have to submitted in two separate envelopes, one technical
and one commercial. The evaluation committee will usually open the technical package first and perform a
full evaluation of the technical offers. Then the commercial package would be opened and evaluated in the
light of the technical proposals.
In all cases, bidding for work in these countries involves the active presence of your agent, a lot of
involvement of staff, and considerable time and expense. This is an undertaking that should not be
embarked upon in a haphazard manner and which requires your company's presence in the region to be
strong enough to allow you to compete.
Contract awards can take a variety of forms. In the case of simple supply contracts, your company will
receive a notice of award and will then be required to execute relatively simple contract documents. The
customer will likely open a Letter of Credit (LC) in favour of your company. Make sure the terms of the LC are
agreeable to you. If not, they must be corrected prior to you completing the work.
In the case of more complex supply or turnkey projects the negotiating phase is an important part of the
process. The client organization will usually have a team of negotiators. It is critical in the first meeting with
them to determine who is the leader or strongest person on the team, as ultimately you will have to satisfy
that person that you can handle this project. If you have a commission agent involved, it is also critical that he not only be active at this time but, that he provide you with guidance on how to handle the issues the
committee raises. Additionally, you will encounter issues that were not apparent in the specifications. There
may be some extras requested at no additional cost to the client, there may have been traps in the
specification that were not clear at the time of bidding, or their team may expect a discount in the prices.
This team will also confirm your understanding of what they expect and all the terms and conditions that will
apply. It is also a good time for you to clear up any issues that may be of concern to your company and to
confirm you approach to project execution.
Building your Reputation:
This important process is greatly affected by the successful completion of projects.
Customer satisfaction and your good reputation is attained by completing projects on time and in a manner
that instils in the customer a sense of confidence that your company has performed well, provided excellent
products at competitive prices, and that your company has kept at all times the customer's needs and
wishes uppermost.
This process cannot be completed with one project, however the time and investment on your part will pay
off handsomely as your business in the Middle East grows.
SUMMARY:
The factors mentioned above will all have an impact on your approach to doing business in the Middle East .
Depending on the country and the people involved, some may have more of a bearing than others but they
will all come into play to some degree in your business activities in the region.
The Arab countries in general are an excellent place to do business. They are all developing into modern
nation states and are seeking modern technology; most have the financial ability to pay for quality services
and they are all very receptive to doing business with especially if there is local representation.
Arabs and their counterparts to be friendly, hospitable, receptive to new ideas, trustworthy and very
professional, if the time is taken to establish good working relationships with them in an environment of
mutual respect and trust.