The Links Group specialises in business services for companies and individuals keen to establish a commercial presence in the UAE and Qatar. Founded in Dubai in 2002, the Links Groups helps companies to cut red tape and save valuable time with its streamlined licence, visa and related services. The company recently strengthened its team in Australia with the appointment of a new Sydney-based consultant, David Burgess. In this exclusive interview with Dynamic Export Mr Burgess explains the challenges now facing companies looking to do business in the Middle East …
The Links Group has been highly successful in assisting companies to establish a commercial presence in the Middle East. Would you encourage more Australian companies to target this market?
Yes, indeed. The Gulf region is one of the most promising regions for foreign investors from every corner of the globe. According to Alpen Capital, the GCC countries’ GDP is expected to reach USD1.8 trillion next year, by which time the region’s per capita income is expected to increase three per cent (CAGR) to USD38,150.
The UAE and Qatar are among the hottest growth destinations in the Middle East, particularly in the retail, food, healthcare, education and hospitality sectors. According to the International Monetary Fund (IMF), the UAE’s GDP is expected to climb to USD448bn in 2017. Following Dubai’s successful bid to host the World Expo 2020, the UAE’s economic outlook is expected to remain positive.
Qatar is one of the most prosperous countries in the world and has the fastest growing economy in the GCC. As it gears up to host the 2022 FIFA World Cup, the country is expected to wintness a dramatic growth in all sectors.
What are the main advantages for Australian companies in doing business in the Middle East?
As Australia is strengthening its economic and strategic ties with the Middle East, this is the right time for Australian companies to penetrate the region. Australian companies certainly have the expertise and capabilities to make a significant contribution to the development of the Middle East markets and government and private entities are keen to hear from them.
Among the top destinations for international expansion are the Gulf Co-operation Council (GCC) countries. With their pro-business environments, fast-growing economies and geographical proximity to the rest of the world, the GCC countries present attractive opportunities for Australian businesses wanting to stimulate their home markets. The UAE is well recognised as a trading hub for the rest of the region and many foreign companies choose to establish a physical presence there.
In addition to robust commercial infrastructure, particularly in the UAE and Qatar, Australian companies also benefit from the zero to low corporate tax structures, low custom duties and the ability to repatriate 100 per cent of capital and profits.
How difficult is it for Australian companies to break into the Middle East market? What are the main obstacles?
While the UAE ranks 23rd and Qatar ranks 48th rank on the 2014 World Bank's Ease of Doing Business report, there are some important factors to consider before establishing a market presence.
First, decide on the right legal presence for your business. For instance, if the audience for your company’s product or service is onshore (mainland or outside the Free Zone), then it would be best to establish an onshore entity which, according to the Commercial Companies Laws of both countries, requires a local national to hold a minimum 51 per cent share the company.
But this does not mean giving up ownership control. It is possible, imperative in fact, when setting up a company in the UAE or Qatar to protect ownership interests and identify clear succession planning. Nominee partner structures for onshore trade licenses, a model which
The Links Group pioneered in partnership with Dubai’s Foreign Investment Office, do exactly that. The Links Group can also set up an offshore entity to protect the company’s 49 per cent shareholding, thereby strengthening beneficial ownership.
The ability to enforce contractual arrangements or judgments through an unknown and foreign language court system is another red flag waved by foreign companies wanting to access the Middle East markets. The signing of memoranda between the DIFC Courts and NSW/Victorian Governments to enable reciprocal rights under the internationally recognised and understood English common law system should help strengthen legal and trade relations between Australia and the Middle East, via Dubai as a secure hub.
Can I expect political stability when doing business in the UAE and Qatar?
Yes certainly. Fear of political instability is a natural concern for those companies looking to trade with or invest in the Middle East. While the Middle East economies remain some of the most politically volatile, the UAE has consistently proven itself to be a safe haven within the region.
During the Arab Spring, many regional businesses relocated their headquarters to Dubai to benefit from the robust financial and trade infrastructure. This restructuring work comprised 20 per cent of The Links Group business in 2010. The political unrest is also creating opportunities for exporters, as governments respond by investing more in infrastructure, training and other projects. Working with trusted partners within the region is essential for mitigating these risks and protecting the foreign company’s interests.
Where do you see the growth areas for Australian exporters/investors in the Middle East?
There are plenty of opportunities for Australian companies particularly in the construction, retail, food, healthcare, education and hospitality sector.
Due to water shortage and a lack of arable land in the UAE and Qatar, these countries need to import almost 90 per cent of their food requirements. Their dependence on food imports is expected to increase rapidly due to population growth, increased per capita income and a resulting increase in per capita consumption. According to the Economist Intelligence Unit (EIU), the GCC’s food imports are expected to increase to USD53.1 billion by 2020.
The retail industry has been one of the fastest growing sectors in the UAE and Qatar over recent years and is continuing an upward trend. With demand for luxury and discretionary goods in the UAE and Qatar forecast to grow at an even faster pace in the coming years, the development of these countries’ retail sectors shows no signs of abating. When you add to this picture the increasing popularity of, what remains, a nascent online retail segment, the investment potential in this sector is particularly attractive.
Both the UAE and Qatar are focused on improving healthcare standards by increasing investment in healthcare technology and introducing measures to promote a healthy way of life. While primary healthcare projects comprise the bulk of government spending, attention is turning towards preventive tertiary services. In line with the economic visions of the UAE and Qatar, both countries are seeking to develop their healthcare workforces. Foreign investors wanting to tap this segment would do well to think about how to train local talent.
As the UAE and Qatar continue to diversify their economies away from dependence on oil and gas, investments in education projects are expected to increase. Both countries recognise robust education infrastructure is the foundation of any knowledge economy and have made education a national priority in their respective national strategies.
The hospitality sectors in the UAE and Qatar are growing significantly as these countries strengthen their reputations as the safe havens for business and leisure in the region. With Dubai expecting to attract 20 million tourists by the end of the decade, according to the emirate’s ‘Tourism Vision for 2020’, investment in hospitality infrastructure and services is a top priority for the government.
Qatar is building 77 new hotels and 42 hotel apartments ahead of the FIFA World Cup in 2022, in a bid to accommodate a flurry of tourists and football fans.
Beyond hospitality, tourism, construction and related services, the UAE has prioritised the growth of its Islamic economy, green technology and finance sectors over the next 10 years.
How important is it for Australian exporters to build relationships in the Middle East when doing business in the region?
Australian businesses are well received in most parts of the Middle East, but it is important to understand the local business and Islamic cultures as they do differ from country to country.
Across the Arab world, a lot of business is conducted through personal relationships so foreign companies will want to look for a partner or advisor who can establish and deepen these connections for them.
The Links Group is a trusted company formation specialist in the UAE and Qatar, with endorsement from the relevant government authorities in every market where we operate.
For more than 10 years The Links Group has been establishing relationships of mutual trust and understanding with lawyers, banks, taxation consultants and other reputable local partners.
How important is it for Australian companies to understand local culture and market customs when dealing with a Middle Eastern business partner?
It is essential to understand local culture and customs before doing business in the Middle East, especially if you have an Arab business partner.
Religion plays a much more important role in business than it does in other countries. However, it is important to keep in mind that not everybody in the Arab world is a Muslim.
There are also differences between the various Muslim sects so you have to be careful not to lump everybody together.
There is no substitute for being present on the ground and getting to know your suppliers, customers, competitors and industry. Doing things at arm’s length from overseas rarely pays dividends and will almost certainly prove to be a ceiling to growth and success.
Do not underestimate the preference for local businesses to deal with other local businesses. Also, having a local presence is the greatest possible affirmation of your own company’s credentials and commitment to the market.
It is vital for companies to do their homework before entering into any trade agreements offshore? How can the Links Group assist in this regard?
We always recommend companies do their homework before doing business in the region.
Foreign companies need to understand the demand for their product or service to determine the market potential. It’s important to research the market you are looking to enter and find out where there is current supply and demand, and then apply your business intelligence to predict what future demand will be.
The Links Group can provide valuable counsel and advice to companies interested in expanding to the Middle East. In addition, we can advise corporations and individuals on how best to structure a legal commercial presence in the Middle East that protects their ownership interests and affords clear succession planning.
Why should Australian companies engage Third Party Consultants before entering into trade agreements in the Middle East?
There are a number of barriers and pitfalls that foreign investors might face when they enter the UAE or Qatar. Do not add to your risk burden by making hasty decisions or taking short-cuts when it comes to establishing your business in the correct jurisdiction with the right company incorporation model.
As trading partners, many Australian companies prefer to establish distribution agreements within the GCC to avoid the expense and hassle of incorporating commercial entities in those markets. However, these exclusive local agent arrangements often present challenges as they do not necessarily give full independence or flexibility to work with other partners. To overcome this issue The Links Group introduced an independent distribution LLC structure, which grants exporters more control over their product distribution and brand.
It might also seem quicker and cheaper to set up in a Free Zone in the UAE. However, by doing so you cannot trade with businesses or consumers based onshore. You would be surprised how often this specific situation occurs, only for the business to find out it is unable to trade where it wants to. It is then saddled with huge costs to unravel their erroneous venture and re-establish their business correctly.
By understanding the regulatory requirements and limitations from the outset, a huge amount of time and money can be saved. While the roadmap may seem complicated, a trusted company formation specialist will be able to set you on the right path and help you avoid potentially costly roadblocks along the way.
Can the Links Group help to cut through the red tape and assist with legal requirements and procedures?
Yes, The Links Group works closely with government partners regionally and internationally to help foreign companies establish the correct commercial presence in the UAE and Qatar and expedite the administrative process.
We also provide an unrivalled portfolio of corporate services including nominee local partnerships, corporate administration and government liaison support. We undertake all company formation activities on behalf of our clients to provide a seamless and stress-free process for establishing a commercial presence in the Middle East.
In 2014, The Links Group introduced a new service called Global Solutions. This offshore fiduciary service allows foreign companies registered in the UAE or Qatar to protect their 49 percent business interest through incorporation of a holding company in the British Virgin Islands.
Finally, what’s the best piece of advice you can give companies trying to break into this market?
There are many routes to setting up a legal commercial presence in the UAE or Qatar, but not all of them will be able to get your business to where it needs to go. Foreign investors that position themselves correctly via the most appropriate means of legal incorporation will be well placed to capitalise on the lucrative opportunities the region offers.