Last May, 19th, Felix Santos, gave us a talk about doing business in Arab countries. This talk, included in the MaDI Talks “Doing Business in“, allowed us to understand the peculiarities of these countries. In the following paragraphs you can find more details!
In the western world there is a huge lack of knowledge and stereotypes throughout the Arab countries. Very often, you can hear people say that all Arab countries speak the same language, that all of them are Muslim or even that every Arab country is rich because of their large oil reserves. Regrettably, that is very far from the truth. Each country has its unique culture, different economic activities, distinctive traditions and their own dialects. What kind of characteristics must a country have to be considered an Arab country? The answer is easy. Every country having that has Arabic as its official language is considered Arab. Therefore, being a Muslim country does not automatically mean it is Arab. For instance, Turkey.
This distinction between language and religion is important. Not every Muslim is Arab and not every Arab is Muslim. Over the whole world there are around 1.5 billion Muslims, meaning, 25% of the worlds population, and only 15% of them are located in Arab countries. In the Arab world, religion and language are related because of the Quran. Quran is studied from a very early age at school and it is written in classical Arabic.
Throughout the years every country has developed its own dialect, some of them being more different than others to classical Arabic. Those who only speak the countries dialect might not be able to understand the dialect of other Arab countries. Moreover, many Arabic-speaking countries also have another official language like French and English. In economic terms, the Arab countries can be divided in two big parts. On the one hand, there are the important markets in the Gulf countries and Morocco; countries with growing economies and a lot of wealth. On the other hand, the economic situation in the rest of the Arab countries is very different.
The Arab countries (excluding Morocco and gulf countries)
The rest of the Arab countries have a stunted economic growth mainly due to political and social crises and wars.Libya, Syria and Egypt are examples of this. For these very reasons, there is a lack of international investment in theses countries, making them less relevant to this report. Nevertheless, it is important to emphasize the situation in Egypt, a country that is going through a growth in its economy. Throughout its history, the country has lead huge political and cultural movements within the Arab world. Until the 70’s Egypt had a lot of influence in the Arab world through cinema which allowed the rest of the Arabic-speaking countries to be able to understand the Egyptian dialect. Nevertheless, the country has been going through a politic-economic crisis since the appearance of the “Arab Spring”; a social-political movement that has devalued its currency in only 2016 by 48% of its value, pushing away any economic investment.
Syria’s case is even more complicated. It is a country that is going through a war against its authoritarian regime and the situation is even more complicated due to the guerrilla warfare and radical Islamists. Amongst some of those groups we can find the Kurds. Kurdistan is a region right next to the border of Turkey, a country that Kurdistan gets the majority of its products through. Libya is experiencing a similar situation to Syria. The Palestinian territories do not have great monetary flows and all of the products have to pass through Israel under Israeli regulations. It is important to know that even though these countries are at war, there is still the need to trade. However a very fragile political and economic situation pushes these countries to an internationalization to obtain the the most basic supplies.
Lebanon is an interesting country in that it has a large christian population.It is a country with an emerging and promising financial market with a high level of legal certainty. However, one of the problems that it has, like in the Gulf countries is that the prices are very high due to the absence of taxes.
Morocco and the Gulf countries
Morocco is very attractive for the Spanish investments due to its close proximity and the influence that Spain has mostly in the north, where RTVE (Radio Television Española) has been broadcast for years. Morocco has great political and social stability with 4,5% growth expectation throughout 2017. The export of dairy products can be tricky as the country has tariffs between 100-150%, which has led to an undeclared market between Ceuta and Melilla and the North African country.
The countries of the Gulf have their own particularities; like 60% of the population are foreign. Products that are seen in Europe can also easily be found in the Gulf with the exception of alcohol which is restricted in these countries. However, the country of Bahrain, which can easily be accessed by Saudis, permits the consumption of alcohol which in turn means a lot of people go there to buy it or just to spend some time there. Saudi Arabia has a very important market that is expected to grow at a rate of 6.8% annually. It has the biggest population amongst the Gulf countries, as well as extensive oil wealth and a rule over the Gulf. In order to get into the market easily, the rest of the countries in the area copy the legislations of Saudi Arabia so that if a product is registered in that country, it can easily be commercialized in the other countries. It is also important to remark on the fact that it is very difficult to enter the country or even get the visa. It is necessary to receive an invitation or apply to the foreign ministry of the country of residence. Very often, applying doesn’t mean you will automatically receive the visa. On another note is a country known for its controversial treatment of women in that a woman requires the permission of her father or spouse in any decision she makes and must always be completely covered. Therefore, if a woman goes to do business in Saudi Arabia, it would be necessary to adapt to the dressing requirements and to be fully aware that it is a fairly sexist country and so to expect a certain kind of treatment. Another factor to consider is that it is impossible to open a business in the country without having a Saudi business partner with 51% of the shares and it is also a legal requirement to have a percentage of Saudi employees.
Another big market in the Gulf is the United Arab Emirates, mainly in Abu Dabhi and Dubai. In both places, there are a high number of economically privileged individuals, however it is important to highlight that Dubai has neither petroleum nor gas. Abu Dabhi has both and also has a good business relationship with Spain which is beneficial as there is surplus of 1.411 million euros for Spain. The commercial relationship between Spain and Abu Dabhi is mainly construction and infrastructure. Unlike Abu Dabhi, Dubai is a tourist destination and a place to do business. It is a compulsory stop for those passing through the Middle East or doing business.
Cultural factors to consider in Araba countries
It is important to take into account the cultural factors of the Arab countries before doing business there.
- Patience is key when doing business. Arabs tend not to do business with someone until you have gained their trust. This can be a long process which could take up to years.
- It is important to adjust to the Islamic calendar and be aware of the important dates such as Ramadhan. It is better to do business before or after rather than during this month as business really slows down.
- Arab countries usually have longer business hours but often have a different day of rest – Friday.
- In countries such as Saudi Arabia, the law is based on the Quran and the Sunnah which are the teachings of the prophet, Muhammad. The Sharia Law are religious obligations derived from knowledgable people from the Quran and they relegate private and public life.
- It is different in comparison to western cultures. For example, it is common to see men holding hands in the street. Moreover, it is generally an extremely hospitable culture so you should be careful about mentioning the things that you like as it is likely that they will give it to you as a gift.