Doing business in Dubai

It’s the country where everything has to be the biggest and anything seems possible. Move over America and give way to the new land of opportunity – Dubai

Perched on the shores of the Persian Gulf, looking out at Iran, Iraq and Saudi Arabia, Dubai doesn’t look like an ideal location for international trade.

Less than 20 years ago it was little more than a desert village. But since then its trade barriers have gone, skyscrapers have sprung out of the sand and Dubai has been transformed into a major centre of capitalism.

With the country’s oil on the wane, Dubai’s ruler, Sheikh Mohammed bin Rashid Al Maktoum, realised he needed to diversify his economy and has been actively courting investment. Western companies enjoy zero taxation and entrepreneurs no longer need to find a local sponsor before setting up a business.

There’s also been colossal investment in infrastructure, with new roads, man-made islands and tall towers. Everyone has a different estimate as to the proportion of the world’s cranes that are in Dubai – some say 15%, others 55%.

Big business

Dubai has a fondness for the biggest things. The world’s tallest tower, the Burj Dubai, will be completed in 2008, reaching a stomach-churning 800 metres plus. It is planning the world’s biggest airport and the largest man-made marina is already in place.

The soon-to-be-opened Dubailand will take the crown for theme park size, and other whoppers include a 70km Metro link. The government reasons that world records create publicity and interest which are then followed by investment.

The policy appears to work. More than 200 UK firms now have a base here. Dubai’s population, one of the youngest in the world, is 80% non-indigenous – drawn by the prospect of big bucks. There’s also a buzz in Dubai and optimism that things can be done. The absence of tax oils the cogs and 11 months a year of sunshine does no harm either.

But there are plenty of gaps to fill, so it is a haven for entrepreneurs. Steve Kirrage, senior vice president of banking products company Pistilion, has been in the Middle East for five years and has witnessed huge growth in Dubai: “There’s opportunity in most market sectors because the population is increasing so significantly,” he says. “Whatever your business does, the market is growing exponentially.” Construction and property are the main areas of expansion and UK-based businesses, such as Shooba and Select Property, are enjoying a roaring trade.

“The way to make money abroad is to buy off-plan,” says Hannah Davies of Shooba. “You will only put down 10-15% and a year later that £50,000 property in Dubai will be worth £65,000. If you sell it is called flipping.”

Tourism and leisure are also growing well. Dubai has a bevy of luxurious and opulent hotels and some glorious beaches to match. But the government says it is keen to bring more entertainment into the country. It has hosted some big acts but there’s nothing that could be called a scene – promoters and artiste managers take note.

Dubai is in a good position to do business with much of the world. It’s just three hours from India, six from the UK and three hours ahead of GMT, and as a location for a Middle East office it’s ideal. The world’s blue chips have descended on it and they all have needs to be served.

IT and technology are hungry markets. Markos Symeonides, vice president of IT firm Axiom, says that Arabs are keen to buy into western technologies and ideas. “There’s a big training market out there; they want to know what’s happening in the West and to buy into it,” he says.

Freezones

Previously, if you wanted to do business in the Middle East you required a local “sponsor” who would take 51% of your business for their troubles. Needless to say, this was something of a barrier to inward investment, unless you were there for oil or gas. But with oil predicted to run out by 2010, Dubai’s ruling family set up Freezones, where businesses hold on to the entirety of their company.

The biggest is the Jebel Ali Freezone, dedicated to trade and manufacturing, but there are also zones for most other sectors, including medicine, media and IT. Betty Thayer, chief executive of exec-appointments.com, set up in the Airport Freezone. Her small office costs just £600 per month. But the process was slow – she began in March 2006 and started business in January – and there’s a fair amount of paperwork. The government will want to see a full business plan, previous accounts, tax returns and staff identification before granting a licence or a Freezone office. It is also discerning about who it wants to trade there.

“We had to work really hard to convince the government that we weren’t a recruitment company,” she says. The government apparently feels the area is already sufficiently catered for and isn’t keen to grant more licences in that sector. Don’t be tempted to gain access without all the paperwork in place – you might end up ejected.

“Some companies from the UK try to go over there and set up without going through all the licensing process. It works for a while but you cannot keep going for long,” Thayer warns.

Staff

Attracting employees to Dubai shouldn’t be hard. There’s no personal taxation, the cost of living is lower and there’s near-permanent sunshine. There’s a great buzz and some exciting nightlife. Alcohol is available in hotels, clubs and restaurants and people can generally go about their business as they please. “As soon as my staff have finished their probation we send them out there for a few days and they love it,” says Mark Stott of Select Property.

“It’s a seven-nights-a-week town and the standard of living is great.” House prices are far below London’s, so Dubai could be a place for some young people to get on to the property market. But prices are rising rapidly in the housing sector, as in all others. Stott says a one-bedroom flat in a prime location such as the marina would now sell for about £160,000 whereas three years ago it was closer to £100,000.

The labour market is also becoming more mature. The growing number of jobs has led to the creation of recruitment firms and there is now a considerable amount of exchange taking place. Employees used to remain with one company, but this is not now always the case.

It is important to remember that this is an Islamic country and is run by its royal family, not by a democratic government. So while “guests” are afforded privileges, there are clear red lines. Homosexuality, for instance, is illegal, as is cohabiting for unmarried couples.

Darran McGlinchey, of law firm Norton Rose, says that such laws are seldom used, although any public promotion of homosexuality would not be tolerated. “While Dubai is economically liberal and liberal by Arabic standards, it is still a Muslim country,” he says.

This means that any drug use, even cannabis possession, would mean a minimum four-year-sentence, and there’s zero tolerance on drinking and driving. Crime is very low, although you don’t see much police presence. However, secret police are in operation who, according to some Dubai veterans, “know what’s going on”.

Business culture

English is widely spoken in the Middle East and in Dubai it is the language of business. In many respects, business is conducted in the same way as in most western countries; more than 80% of the population is from overseas, so differences are tolerated. But you should be aware that patience is required, especially when the government is involved.

Strong business relationships, sometimes referred to as the Wasta system, are absolutely key to success (see case study). You must protect your reputation at all costs, as bad news travels far and fast. Mixing business with pleasure is a well-observed practice and meetings can go on long into the night. Remember, one deal tends to lead to many others – so don’t try to rush your counterpart.

Check that meetings are still on immediately prior to schedule; if a meeting doesn’t take place it might be you who is considered rude for not checking. Being respectful of your hosts is important and forgetting a religious period such as Ramadan would be a dreadful faux pas. Nationals will not be eating or drinking during daylight hours.

Getting started

Good information and contacts are essential to success in Dubai and will make setting up easier and faster. UK Trade Invest offers a trading hub to act as a “one stop shop” for all British business concerns. The British Business Group (www.britbiz-uae.com) holds networking and social events for ex-pats and offers help and advice to entrepreneurs looking to get started. Of course, the best way to start making contacts is to start trading – you don’t actually have to be in the region to do business.

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