31 May Getting down to Middle East Business
Turmoil may open business opportunities overseas
We’re all watching historic developments in Middle East North Africa (MENA) countries.
Citizens have been protesting in the streets in defiance of their governments; Egypt’s Hosni Mubarak was forced out of office. Other changes may be coming. All of it is on camera, computer screens and cell phones. The whole world is watching.
So it’s wise to ask what all this means regarding business challenges and opportunities in that part of the world. Does it mean new markets for our products? As Baron Rothschild (of the famous Rothschild family) said in the 18th century, “The time is to buy when there is blood in the streets.” While this may be timeless wisdom, and many companies will invest in the MENA region now, most of us will be hesitant for the following reasons:
• We don’t know if the laws will change — This is primarily because we aren’t sure who will be in charge. There’s a possibility that foreign-owned properties could be nationalized, or that current insurers of property and assets in any given country could suspend or eliminate coverage. We still haven’t seen the peaceful transitions we’re hoping for, so investments could be very risky.
• We don’t know if the business community will change — Since there’s a connection between business and government in most MENA countries, top business people who Westerners currently deal with could be replaced. Industrialists who are well-connected with current officials could go out of business.
• We aren’t really sure what will happen to the economies — The optimists feel that in many cases, growth is inevitable. However, there could be a pulling back of business transactions, and potentially a nationalism or xenophobia in certain markets. This is in addition to the looming possibilities of military skirmishes or all-out wars, both civil and against other countries.
Are there business opportunities Western firms can start to embrace, despite the uncertainty? These ideas come to mind:
• The region is notoriously low in its ability to export — According to the CIA World Factbook, there are only two MENA countries among the top 30 exporters (Saudi Arabia and United Arab Emirates). Most of those exports are petroleum products. Many of these countries lack a diversified economy. Firms that offer services to facilitate direct exports (consulting, shipping, export finance, importing and distributing) could position themselves well once the MENA region calms down.
• The region has embraced technology — We hear of social-networking sites such as Facebook and Twitter making much of the uprising possible. Whether or not you accept that, it’s clear that the new social-networking media has had a significant role, and the popularity of these sites (and the Internet as a whole) presents opportunities.
Beyond the obvious new apps that can developed, there are opportunities for digital storage, offsite data centers, cloud computing, higher-speed connectivity, content development and management, and new social-networking and funding websites.
• The basics in lifestyle — Citizens of MENA countries are going to demand clean air and potable water. Imagine the new markets available to firms that can provide low-cost electricity, inexpensive medicine or fresh produce.
Companies that can start to tackle the needs of hundreds of millions of people will benefit greatly. They should build their business plans and prove their technology now, so that when it’s time to make the business connections, they’ll be ready to sell their products and services.
• Market-entry assistance for foreign firms — We’re about to see a deluge of consultants, trading companies, distributors, market-entry specialists and importers on the scene, willing to help foreign companies get a foothold into one or more of these markets.
Banks may start to realize financing opportunities never before available. And Western funds that were restricted from investing in firms in the region may get more courageous.
• Arab brands — Hopefully, we’ll soon start to see new brands from the MENA region that previously were unavailable to us. If new governments give the economies a green light, entrepreneurs and companies in the MENA area may be able to sell their own wares to a greater degree. Firms that help manufacture, ship, market and distribute those new brands may find business opportunities they never dreamed of.
While this list isn’t all-encompassing, it does mention some potential prospects for new business. We know this won’t happen quickly; that change takes time. However, the MENA region has many relationship-based cultures where one has to really know their business partners.
New market entrants will need time to wait for stability and to get to know their business counterparts.
So the only question left is: Who do we deal with?