In this exclusive interview with Dynamic Export editor Tim Michael, John Martin St. Valery, founding partner of The Links Group explains the benefits and pitfalls for Australian companies trading in the Middle East. He also identifies several new opportunities for Australian companies keen to grow their business in the region …
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?
Definitely. At The Links Group we work closely with both foreign companies looking to establish a commercial presence in the region, and government entities from both the UAE and abroad with a vested interest in broadening FDI into the region. We are well placed to advise and consult on priority sectors, key market developments, and be at the forefront of new business licensing and legislation. The UAE remains a top location for Australian businesses looking to expand their operation internationally not only for its strong internal growth prospects, but also for its geographic position as a regional trade hub with access to the rest of the Middle East, Africa and South Asia.
In addition to this, 2014 saw an agreement signed between the DIFC courts and Federal Court in Australia. According to the agreement, any dispute arising between active companies in UAE and Australia can be resolved within an internationally accredited legal framework such as the DIFC Courts, which is also internationally binding. This provides added assurance to Australian companies unfamiliar with UAE Companies Law, and further enhances the region’s attractiveness for investment.
What are the main advantages for Australian companies in doing business in the Middle East?
Despite the falling oil price, strong internal growth drivers are contributing to economic growth in most Middle East markets. The Gulf countries, in particular, are stepping up their diversification efforts to reduce their dependency on oil and gas revenues and transition to knowledge-based economies. To do so they need to import foreign expertise and know-how and this presents significant opportunities for Australian companies particularly in the tourism and hospitality, education, healthcare, green technologies and renewables sectors.
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. As a tax-efficient jurisdiction with a robust open economy, solid infrastructure and excellent trade links to growth regions, the UAE is now recognised as one of the top countries in the world in which to do business. Recently announced plans to make UAE FDI laws more flexible and relax ownership relating to foreign-owned companies have encouraged even more companies to invest in the region.
In addition to robust commercial infrastructure, 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?
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.
There are also a number of barriers and pitfalls that foreign investors might face when they enter the UAE. 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.
It might also seem quicker and cheaper to set up in a Free Zone in the UAE. However, by doing so the company 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.
Where do you see the growth areas for Australian exporters/investors in the Middle East?
Diversification remains a top priority for the GCC economies. Aligning Australian expertise and high potential businesses to the priority growth sectors of each market will be important as governments look abroad for know-how, skills and labour. 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.
Despite the diversification agenda, the GCC economies remain reliant on exports of commodities. Developing their export industries and manufacturing sectors will become increasingly important in the face of falling oil prices. However, there remains a shortage of labour with the necessary skills to progress their manufacturing sectors. In addition to improving local education, especially in the areas of science, technology, engineering and mathematics (STEM subjects), the GCC economies will need to boost labour productivity and attract more foreign direct investment to assist growth.
While the UAE market remains competitive, this part of the world is very receptive to innovation and values external consultation highly. If your business has a product or service that can support the priority growth sectors identified by the UAE leadership, it would be wise to use this as an opportunity to tap into this burgeoning business hub.
Can the Links Group help to cut red tape and assist with legal requirements and procedures?
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. Because of these close relationships, we have immediate knowledge of any forthcoming changes to company licensing requirements. In cases where the correct activity for a company license does not exist, we work with our government partners to have the new activity introduced. We are also able to expedite the administrative process pertaining to licensing and labour and immigration documentation.
It is vital for companies to do their homework before entering into trade agreements in the Middle East? How can the Links Group assist in this regard?
The Links Group can assist by helping foreign companies to select the right business structure to suit the operation’s growth plans in the Middle East while protecting the foreign entity’s beneficial ownership. 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 region.
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 offers an independent distribution LLC structure, which grants exporters more control over their product distribution and brand.
As the first company of its kind to be endorsed by the Government of Dubai through a strategic alliance with the Foreign Investment Office (FDI) of the Dubai Economic Department, we work closely with the government to allay any concerns foreign companies may have when considering expansion to the UAE.
You recently attended Milan Expo 2015 in the lead-up to the UAE Expo 2020 – what parallels do you see between the two shows?
An obvious parallel is sustainability. The core theme of the Milan Expo 2015 ‘’Feeding the planet, Energy for Life’’ addresses the global issue of poverty, sustainable development and nutrition. With sustainable development high on global political and business agendas, Expo 2020 Dubai is certain to continue this theme by “Connecting minds, Creating the future’’ and promoting the three essential pillars for global development – sustainability, mobility and opportunity.
As the UAE gears up to host what is to be the world’s first sustainable Expo, these three pillars will help achieve the national development agenda, with the UAE leadership looking to not only build upon the success of Expo Milano 2015, but ensure lessons learned will be reflected in the build-up and application of Expo 2020 Dubai.
Did you identify any investment opportunities for Australian companies following the Expo?
Following Dubai’s successful bid to host Expo 2020 Australia indicated its commitment to strengthen bilateral relations with the UAE and improve upon its thriving trade, investment and tourism links, strong defence co-operation and collaboration on foreign policy and international security.
Sectors where Australia has strong capability and which could benefit the Expo 2020 development plans are hospitality, design, engineering and construction, products and services for infrastructure and sustainability as well as education and training, food, and event management.
As Australian companies have an innate understanding of sustainable business through their highly developed local knowledge-based and innovative industries, opportunity is rife to apply this expertise to infrastructure projects in the build up to Expo 2020 Dubai. Sustainability is big business and the UAE is committed to transitioning to a green economy so this expertise is likely to be sought long after the expo.
I understand the UAE is looking to relax its companies and FDI laws. How will this benefit Australian companies?
Recently announced plans to relax ownership relating to foreign-owned companies and FDI laws is on a case-by-case basis, and will apply to priority sectors as identified by the leadership. As these priority sectors include infrastructure, knowledge-based and innovative industries in which Australian companies excel, they are well placed to win projects focused on enhancing the local infrastructure in a sustainable way, presenting greater opportunities for engineering, construction, real estate, transportation and logistics, with the UAE looking to almost double its contribution to these industries to nearly 20 percent of GDP by 2020. The region has big plans to provide the infrastructure required to allow further foreign investment from the private sector.
Sustainability is now a key focus in the UAE. Is this a major priority for future infrastructure and construction projects?
The UAE has launched a national long-term initiative to make the country an international leader in the Green Economy and a centre for export and re-export of green products and technologies. Adoption of the Green Economy is an important step towards achieving the UAE Vision 2021 and is accelerating greening efforts in both the public and private sectors. Initiatives to progress energy diversification, renewable energy deployment, resource efficiency enhancement, waste reduction and recycling, green buildings and sustainable transport systems are well underway and are a sign of the future development pipeline. In the coming years, relevant national and local policies are likely to be enacted and industry and citizens will be encouraged to come up with more eco-innovative solutions and to adopt more environmentally sound behaviours.
Finally, what’s the best piece of advice you can give companies trying to break into this market?
It is essential to do your research. Identify the market gap your product or service can fill and then work with a trusted company formation provider to advise on the best structure to support your market entry. There are lots of companies claiming to offer company formation services and not all of them are created equal. Your local trade promotion body should be able to recommend trusted partners you can approach for this information. A good company formation specialist will want to understand your business development plans in order to propose a licensing structure that best supports your long term business strategy.
Established in 2002, The Links Group provides business services for companies and individuals keen to establish a commercial presence in the UAE and Qatar. It advises 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.
The Links Group is the first company of its kind to be endorsed by the Government of Dubai through a strategic alliance with the Foreign Investment Office (FDI) of the Dubai Economic Department and provides an unrivalled portfolio of corporate services including nominee local partnerships, corporate administration and government liaison support.
The Links Group is also recognised as a Dubai SME 100 company, a ranking of the top performing SMEs in the emirate, and an Arabian 500 company.