The Middle East is fast emerging as the most preferred market for multinational companies around the world. Thanks to its strategic location that connects the East and West, as well as its futuristic and technologically advanced infrastructure, the region is becoming the new business and development destination for companies all over the world.
The upcoming events like Dubai Expo 2020, FIFA World Cup in Qatar 2022, and space-age projects like NEOM, a smart city being built in Saudi Arabia and stretching to Egypt and Jordan, have further increased the global attractiveness of the Middle East. Even though the region presents innumerable opportunities for any business to grow, it also throws up several challenges to new entrants. Businesses aiming to establish a strong presence in the Middle East need to watch out for the following five key areas:
Company Structure and Ownership
Gulf countries are slowly moving from being stringent to more welcoming to foreign ownership. The UAE and Saudi Arabia, for example, have allowed foreign investors to own 100% foreign ownership of companies. But in some sectors, these companies still need to hire a local sponsor and share ownership to obtain a business license. Finding the right and reliable sponsors is crucial for a successful venture.
Companies have to pick a trading name carefully and make sure it represents the business accurately and isn’t derogatory. If a person's name is the official name of the venture, it must be used in full in the UAE. Authorities scrutinize trademark applications for prohibited goods or services, and any deviation from the country's policies may result in legal consequences.
Localization of Services
Localization of processes and services might also make it easier for enterprises to successfully integrate into the market. Collaboration with local agencies and experts facilitates crucial connections with consumers and market players. Learning and using Arabic is key to gaining quick access to Middle Eastern markets as well.
Varying Tax and Business Laws
Corporate and tax laws change regularly in the region. For example, Oman recently implemented a 5% value-added tax (VAT), whereas Kuwait has yet to enact it. Understanding the tax regimes and rules governing the hiring of locals/expats in particular markets might aid in greater compliance.
In the case of investor-government entity disputes, FDI legislations require the state’s consent to resolve it. Businesses must keep in mind that the government normally prefers to settle the disputes arising out of their investments via domestic courts, although the laws in individual countries allow international arbitration for foreign investors.
Despite certain challenges, the governments across the Middle East are ushering in rapid reforms and opening up economies to stimulate business activities. Countries like the UAE and Saudi Arabia are already emerging as global examples in this context. There has never been a better time to head to the Arab world than now.
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