Doing Business In/With Arab Countries

History of the Region

The Arab world came to prominence with the spread of Islam in the seventh century AD. Arabic, formerly a tribal language of the Arabian Peninsula, soon became the primary language for a large part of the world, as Islamic culture spread across the Middle East and Northern Africa, as far as Spain. Following World War I and the end of 400 years of Turkish rule across much of the Middle East, the Arab states were formed, strongly influenced by Britain, France and Italy.

The Arab world

There are more than 300 million people living in 22 Arab League states stretching across North Africa and the Middle East, from the Atlantic Ocean through to the Red Sea and Gulf regions, and on to the Arabian Sea and the Indian Ocean. Language and culture are key unifying factors, with Islam providing an overarching body of belief and a strong sense of identity and community.

Various Facts About Arab Countries

Total population of the Arab countries is around 300 million people. Arabian countries are: Algeria, Bahrain, Djibouti, Egypt, Iraq, Jordan, Kuwait, Lebanon, Libya, Mauritania, Morocco, Oman, Qatar, Saudi Arabia, Somalia, Sudan, Syria, Tunisia, United Arab Emirates, and Yemen. Population of Saudi Arabia is 16 million people; 60% are under 18 years old, which means that products geared toward younger generations will have a good market. Products related to establishing new homes, such as furniture, electronics, and kitchen wares will also have a good market, since most Arabs get married at young ages.

Various Facts About Arab Countries

The annual food market volume for all members of the Gulf Cooperation council (Saudi Arabia, Kuwait, United Arab Emirates, Qatar, Oman, and Bahrain) is $8 billion; Saudi Arabia's share is 60% of this amount. Total annual retail sales in Kuwait are over $1 billion. The total annual sales of all co-operative supermarkets in Kuwait are over $860 million. Market volume for electronics and electrical goods in Saudi Arabia is estimated at $400 million. Saudi Arabia purchases 400,000 television sets each year. More than 70% of Saudi Arabia's needs are fulfilled through imports.

Various Facts About Arab Countries

United Arab Emirates has a population of 2 million people. Kuwait has a population of 2 million people. Egypt has a population of 59 million and it is estimated it will reach 64 million people in the next 6 years.

The Oil Factor

Oil exploration and production in the Middle East began in Iran before World War I. Saudi Arabia, Kuwait and the Gulf states reached major production only after World War II. The 'oil boom' in 197375 was a watershed. Producer states asserted control over their oil. The introduction of pricing policies, reflecting the economic value of oil, injected unprecedented wealth into the oil-rich Arab countries. Saudi Arabia itself holds 25% of the world's confirmed oil reserves.

Characteristics of the Saudi Arabian Market

It is the largest market in the Middle East, with considerable spending power from its 25% holding of global oil reserves. It has a sound economy, with a fast-growing and young population. It has a well-managed banking system. It has good infrastructure-hotels, air travel and telecommunications. It has generally low import duties and barriers, although strict attention must be paid to documentation and labelling.

Characteristics of the Saudi Arabian Market

Its business community is familiar with Western practices. It is a complex market, with limited transparency in a number of areas, notably government tenders. It is intensively competitive. There is a wide selection of potential agents and distributors, requiring time and care to screen and appoint. Decision cycles can be lengthy.

Practical Advice on Entering Markets

Developing a strategy

Several characteristics of the Saudi Arabian market impact on strategy development: Statistics and market data should be imprecise Transactions tend to take longer than expected Time and care are needed to assess the claims of prospective agents When relationships are established, principals may want to move quickly, sometimes on no more than a handshake More frequent and longer market visits are required, at least initially

Practical Advice on Entering Markets

Components of a successful strategy

A sound business plan for Saudi Arabia will: Include a wide variety of sources of information Take advice from seasoned practitioners Incorporate realistic budgets and allow more time for travel Use a sequential approach to determine 'go' or 'no go' Avoid open-ended commitments (particularly for after sales service) Clearly define each partner's roles and responsibilities.

The Price Factor

Saudi Arabia often exemplifies this more than any other market. Saudi customers will continuosly bring your proposition back to price, no matter how hard you sell the benefits. Price drives most Arab business negotiations. Competition will usually be intense. Re-tendering in the public sector is common. Companies should be prepared for lengthy and protracted negotiations.

Islam and Business

Islam permeates all aspects of life in Saudi Arabia. Some important considerations when planning business are:

On Fridays, the Islamic Sabbath, the community gathers for prayers at noon. Offices and many shops are closed on Fridays. The holy festival of Ramadan occupies the ninth month of the Islamic calendar and the dates vary each year. During this month Muslims observe a period of abstention (fasting during daylight hours), reflection and purification.

Islam and Business

Ramadan and its ending, or breaking of the fast (Id al-Fitr, a three-day holiday) affects all business activities. If visiting during Ramadan, be aware that there may be limited time for business meetings. Check the Islamic calendar when planning business visits.

Standard Behavior Expected

Use your right hand, whenever possible, particularly for eating. If unsure, put your left hand in your pocket or behind your back. Never point with either hand. Avoid postures where you may show the soles of your feet and generally avoid crossing your legs. Avoid displays of anger or impatience. Maintain eye contact with your host. Rapid shifts in eye contact may be construed as a lack of trust. Handshakes may often be a clasp. Do not offer to shake hands with an Arab woman, unless she offers her hand to you. Even then, only a gentle touch is appropriate.

Standard Behavior Expected

When offered tea, coffee or snacks, accept, even if all is not consumed. The offer of strong black coffee is a feature of Arab meetings and should never be refused. The cups are small and when you have enough, a polite 'wiggle' of your cup signifies to the server that you have had sufficient. Learn the art of polite small talk, which will open most meetings, particularly introductory sessions. Don't ask about an Arab's wife-but enquiries about 'family' are appropriate. Avoid comments on politics.