By Sam Turvey, Partner & Managing Director Bell Pottinger Hong Kong
Companies operating in the tourism, hospitality and logistics sectors are expected to see considerable growth on the back of Expo 2020, as well as construction firms contracted over the next four years to help build and generally prepare the city’s hard infrastructure for the anticipated surge in visitors and associated economic growth.
While Expo is, in itself, an impressive project and a significant commercial opportunity, in reality, it is just one of several government championed initiatives being used to drive the UAE’s ongoing economic diversification away from oil and gas, and towards an innovation-led economy underpinned by robust and enlarged manufacturing and service sectors.
The UAE leads the region’s wider efforts to diversify their economies, which is an imperative made all the more urgent as the price of oil lingers around $40 a barrel, hitting government revenues and forcing a squeeze on public spending to reduce ballooning budget deficits.
It is clear that this particular macro-economic environment is creating considerable economic and social challenges for various Middle Eastern governments, which are used to relatively stable and substantial oil revenues. But, while ministers consider their options, the situation is also starting to frame the future commercial opportunities available to internationally-minded businesses from across the world.
Iran’s re-emergence into the global mainstream only adds to the regional opportunity, although it carries its own distinct challenges and characteristics that all foreign companies will need to carefully navigate through.
There has always been a scramble among foreign businesses for the various commercial tenders and partnerships available in the Middle East. This will remain the case as the current, evolving opportunity is more clearly defined. However, increasingly close links between the Asia Pacific (APAC) and Middle East regions over recent years means APAC firms a likely to be in pole position. They will certainly be at the front of the grid.
Existing trade relationships, particularly in the energy sector, partly explain the reason for this. For example, the Middle East is currently China’s largest supplier of crude oil, which perhaps unsurprisingly is a status the former will not want to put at risk. This is not to say contracts will not be competitive, but it is another incentive to look favourably upon Chinese business proposals.
Meanwhile, South Korea has been entrenching its credentials as the nuclear power operator of choice for the region, with the Korea Electric Power Corporation (KEPCO) already having secured a $20 billion project to build four reactors in the UAE. KEPCO is well aware of the post oil dynamic that is emerging across the Middle East and North Africa.
Countries within South East Asia stand in good stead too. Indonesia and Malaysia’s large Muslim populations share an obvious religious affinity with the Middle East, but more poignantly, this has created substantial links through the growing Islamic finance sector. The same could be argued, although on a far smaller scale, with Islamic fashion.
Tourism and business links have also steadily grown. Thailand and the Philippines both already sit in the top 10 most visited countries for residents from the Arabian Gulf and new flights have recently opened up with Emirates Airline to Myanmar and Vietnam. China is particularly well served with five different airports receiving flights from the Dubai headquartered carrier, in addition to Hong Kong.
The re-establishment of the ancient silk route, as evidenced by President’s Xi Jinping’s ‘one belt, one road’ international development strategy, demonstrates his country’s outbound transcontinental ambitions, with Oman taking on a particular relevance around the 21st century maritime routes.
It has not all been about forging hard commercial ties, however. There are increasingly close cross cultural and social relations being formed. A stark example are the efforts being made by Dubai to associate with the huge Chinese consumer market.
In addition to being Dubai’s second largest trading partner and the city already providing a home to over 200,000 Chinese expatriates, in January 2013 the Emirate took over the official sponsorship of China’s popular table tennis team. The city’s name is now adorned on the team’s shirt as it is watched by around 100 million Chinese people during the World Championships.
Cross-border M&A is on the up too, with the Middle East’s attractive consumer markets, driven by growing youthful populations, enticing several major players from Asia to engage in multi-million dollar deals. Thai Union Frozen Products’ agreement with Saudi’s Savola Group is an excellent example. TUF is expected to continue focusing its M&A effort on the Middle East as it looks to grows sales to a staggering $8 billion by 2020.
The list of initiatives, trade deals, joint venture partnerships and M&A between the two regions grows daily and has been doing so over the last decade, although this closer embrace is not always fully known or understood by the rest of the world.
Some may still assume, given the post First World War history, that there will always be some kind of Anglo-French (or more broadly European) dominance over the MENA region from an influence and foreign trade perspective. That view is rather naïve, as the hard work has already been done by governments, businesses and individuals from across the Asia Pacific region to ensure that is not the case.
That said, being able to assimilate and communicate effectively in a very different part of the world – one with its own firmly rooted language, history, religion and culture – is the key to ensuring a truly dominant and lasting positon from a commercial perspective.
Working with the Arab world comes with distinct challenges, not least the Arabic language, a patriarchal society, and varying skill levels amongst the indigenous populations. Being able to speak the global business language – English – does help. But, real favour will be bestowed on those who make the effort to truly invest in communicating in the local language and trying to learn the social norms and customs. Ingratiating a company’s employees will be key and carefully considered PR campaigns and reputation management will be part of the answer.
There is no doubt that companies and their employees from the Asia Pacific region can do this, if they choose to make the necessary commitments and investments – financial, social and cultural. One thing is clear though, the ground is already well prepared for an era of APAC dominance within the Middle East.
*This article will be published in the August 2016 edition of Communication Director magazine