Business Expansion in the Middle East market

Businesses expand into new markets due to the attractiveness thereof and the opportunities available to them. With these factors in mind, it is no wonder that the Middle East is becoming one of the world's greatest regions to tap into when growing your business. Here’s a look at some of the key insights to consider, challenges to prepare for and tips for best practices.

Key Middle East Insights

The Middle East generates various stereotypes and perceptions from both sides of the spectrum. On one hand, it is considered to be a region with political tension and instability. On the other, it is looked as a home to affluence and exuberance. While there can be truths unearthed for each of these scenarios, the main point to note is that the Middle East is complex and diverse. Thanks to various global events taking place, the region will become more and more visible and potentially more attractive to businesses currently located outside of the region. Examples of these events include the Dubai Expo 2020 (delayed by 12 months because of the COVID-19 pandemic), the G20 2020 Summit in Saudi Arabia and the FIFA World Cup in Qatar 2022.

The region has gained its wealth in large due to its oil trade. However, many of these states are taking proactive steps in order to diversify their economies. This opens up the field of opportunity to various industries which generally have low entry barriers. One of the priority industries is technology, which is being used to drive growth. The GCC (six nations along the Gulf who long since formed a political and economic union) in particular represents some of the world’s wealthiest states - it holds approximately one third of the world’s per capita GDP rates.

Previously, the region had a reputation for being difficult for businesses to enter. However, the goal of diversification has led several governments to ease regulations for foreign ownership and investment. Laws have been introduced to facilitate foreign business in the Middle East, along with access to funding from the government as a supportive measure.

The Middle East presents local businesses with several opportunities too. One of these is in the development of top quality education, to ensure that the future generations are well equipped for the technologically advanced future. To give you an idea of the extent of the technological developments happening in the region, consider this example: NEOM, a smart city is currently being built in Saudi Arabia, which stretches to Egypt and Jordan as well. This is a $500 billion dollar investment by the Public Investment Fund of Saudi Arabia and international investors.

While the Middle East is home to many expats, especially in the UAE, it is continuing to attract others to move to the region. This is being done by offering various visa options which include lifetime visas, as well as long term visas for investors and skilled workers.

As various states in the Middle East continue to develop as emerging markets, so too is online shopping. This has already attracted ecommerce giant Amazon who join a number of marketplaces that have seen continued growth rates in online sales. Since there is a large population of conservative consumers in the Middle East, online shopping is favourable as a pastime, as opposed to entertainment common in the West. While adoption has been on the slow side, this growth is certainly taking off, aided by extensive internet connectivity, high mobile device rates and high levels of growth and sharing via social media channels.

Barriers to the Middle East

Trademarks: There are trademark policies required for various e-commerce activities and cross-border sales. You will be required to submit an application (stating what your goods or services are, noting that some products are prohibited) and await approval.
VAT: There are framework agreements for VAT depending on the market you’re dealing with. This ensures tax compliance on taxable commodities and requires the application of a VAT number. There are hefty consequences for those who are in violation of these regulations and while this shouldn't strictly be classed as a barrier to entry, it's important to take this into consideration before launching your business in the region.

A guide to expanding your business in the Middle East

Research: You need to thoroughly research the specific market you’re entering to learn all of the localisations and traditions for targeting and integration purposes.
Patience: You need a long term expansion mindset as relationships are crucial to the region. These take time to build and develop in order to gain trust and entry into the market.
Partner up: With a heavy focus on relationships, local connections are paramount to helping your business. Work with local agencies, experts and firms for deeper market understanding and access to these connections. Nexa, for example, was launched in the UAE in 2005 by a small group of expatriates and have since helped many other businesses break into the market, passing local experience, expertise and know-how to help the transition be as smooth and cost-effective as possible.
Communicate: Negotiations are part of business in the Middle East which one needs to be prepared for. Communication also plays a big role in developing business and consumer relationships. This does not only apply to the manner in which you conduct business, but to the actual language too - pay careful attention to variations of Arabic spoken in various Middle Eastern markets.

The new region for opportunity

Based on the insights above, it is clear that the Middle East is a prime area for innovation and investment. This is being supported by governments and private sector investors who are funding startups, technology and infrastructure in order to grow economies within the Middle East. The region is set to become a business and financial leader on a global scale. With business reforms easing the market restrictions for businesses, it is a wise move for businesses to consider expanding here. The plan of action for your business’s expansion in Middle Eastern markets is:

Determine the specific countries you’d like to expand in and the various markets thereof. Then, develop individual strategies for these markets. You’ll need a comprehensive strategy to determine the competition, targeting plan, forecasts, marketing, compliance and requirements, investments needed and so on.