WHY THE UNITED ARAB EMIRATES?
The UAE market is the third largest market in the Middle East after Iran and Saudi Arabia, is the most important market in the area of re-export to the European companies and is always very interesting for a number of elements are easily understood:
- The UAE economy is very solid, thanks to oil revenues and an economic policy of diversification of investments to decrease the percentage of revenues from the sale of oil and gas than the annual GDP. The market still has a high concentration of HNWIs (High Net World Individual) and a very high tourist flow: Dubai is visited by over 16 million tourists a year. Dubai International Airport ranks 5th in the world for freight traffic, while it recorded the highest number of international passengers in the world, surpassing that of Hong Kong, with an economic impact of over 26 billion dollars on GDP.
- The political system is stable and careful to the development both of startups and existing companies
- Emirates bureaucracy has clear and simple rules, is transparent, does not hinder the development but is at the service of companies, provides quick responses for authorizations and resolutions
- There are real incentives (tax credits, low cost loans, etc) to companies that invest and hire local staff
- The labor market is flexible, oriented to meritocracy
The “Made in EU” for Emiratess it is synonymous with quality, history, culture; for example the Made in Italy is always appreciated, even in areas not strictly consumer as mechanics.
The UAE currency, the Dirham, is secure and can be freely converted to a fixed rate versus the US dollar; there are no restrictions on profit transfer or capital repatriation; low tax rate applied to imports (about 5% for almost all goods) and no taxes are requested for items imported in the free zones.
Moreover, in free tax zones no taxes must be paid by individuals or companies
In addition, the financial risk is minimal (credit rating Aa3 by Moody’s). These factors, combined with a strategic location, excellent infrastructures and and a great and pleasant enviroenment, stable and safe, help to encourage investment.
Not surprisingly, the UAE is among the Middle Eastern and GCC countries considered most interesting for the purposes of foreign direct investment, which in 2020 reached almost 20 billion dollars.
But the country has certainly taken a complacent attitude, and more efforts are done to promote a favorable regulatory environment and challenging for companies.
For example, amendments to the Companies Act to streamline procedures are currently being approved;
Federal Commercial Law, which requires the presence of a local partner with 51% participation for companies located outside the free zones, thanks to a recent law decree of 2020, authorizes the establishment of wholly foreign-owned companies for a substantial group of activities, with the exception of some strategic sectors of national interest; the Ministry of Economy is to complete the draft of the law on competition, which should further help in the fight against cartels; finally, the Government is introducing a foreign investment law that will further increase competition in the private sector and, therefore, will reduce inflation. They have already introduced a number of measures to contain inflation: recently passed a law to protect consumers, and at the level of individual emirates have been undertaken several initiatives to set the ceilings of rents, in order to meet the increase in rents .
Finally, since 1994, the UAE is member of the General Agreement on Tariffs and Trade (GATT) since 1996 and are one of the members of the World Trade Organisation (WTO).
The UAE is also a member of the Great Arab Free Trade Area (GAFTA) in which all the states of the Gulf Cooperation Council (GCC), and are currently negotiating free trade agreements with the EU, the U.S. and Australia, as well as having embarked on negotiations, either individually or within the GCC, with respect to several regional trade agreements.
THE MOST COMMON MISTAKES
– Think of exporting a product and not internationalize the company
One of the common mistakes is to think that send a container of the products in the United Arab Emirates it is enough to easily find a distributor or get an agent to represent their company.
Not only many times you need to change radically the product but adaptation must involve the entire company that needs to get the processes and service levels that meet UAE standards.
– Start activities without careful preparation
Many business owners assume they already know how to move in the United Arab Emirates because they had some contact in the area, no doubt you may have received misinformation or incomplete, albeit in good faith.
Very popular is the illusion to believe that the United Arab Emirates is an easy market because they speak only one language, the rules are simple and the Emiratess are “easy people”. It is completely wrong: the UAE market is “super-crowded” with competitors coming from all over the world; therefore it is expensive, competitive and sometimes has some forms of protection; it is very risky to invest in the United Arab Emirates, without a thorough market research and a solid business plan.
– Believe that own competitiveness can be based only on the technical level / quality of the product.
Many business owners think it is enough to have an excellent product to sell easily in the EMIRATES: it is wrong; to have a product / service above the average is the minimum requirement to enter in the EMIRATES. market, but not enough; having a great product is only the first step in a long journey that characterizes the development of a commercial development in the EMIRATES.; many efforts are required in the creation of sales networks or in the definition of commercial partnerships, which require time and money; also the more the product is exclusively the more investment is needed in your brand.
It should also be pointed out that the EMIRATES. market is a “PR market” and so it is important not to underestimate the importance of trade shows, seminars, etc., and all your marketing / promotion actions that support the sale of any product / service.
– Behave in the UAE as in their own country
One of the most common mistakes is to think to operate in the United Arab Emirates, as in your country, for example between Italian, German or French. Many times entrepreneurs underestimate the cultural differences between the two countries; it is neededto to be very careful to written rules and especially those that are not written in the culture of Emirates business.
– To assume that set up and manage a branch in the United Arab Emirates involves high costs
The set up of a legal entity with limited liability in the EMIRATES. is a very quick operation that can be done without moving from own country and ay very low cost: the set up of a legal entity, typically a Corp or an LLC, costs a few thousands of dollars (assuming very simple agreements among shareholder) and does not require a minimum share capital; the legal entity may reside at a lawyer, a CPA or an office of their choice.
– Do not operate in full compliance with the law
It is needed to pay close attention to the certifications required for products, to the contracts to distributors and buyers; EMIRATES. lawyers cost a lot, but many times it is useful to guard that run into unpleasant situations. In the United Arab Emirates the rules are clear and simple to follow and it is assumed that you follow. Shortcuts and “cunning” may seem successful the first few times, but in the medium and long run it always pays the bill with interest.
– Think of being able to enjoy the creditworthiness gained in its own country
To operate in a stable and continuous way in the UAE, many times you need to rent an office and / or a wharehouse, buy a car for employees, etc. Unfortunately the new branches does not have a “history of debts paid” for which the credit institutions have not yet been able to verify the creditworthiness. This means that, even for the most solid companies in the EU, are not allowed to get from banks leasing to buying a car or credit cards for everyday purchases. Even suppliers, initially hardly agree to grant extensions on payments to 30/60 days.
– Do not answer correctly to the four main questions that an Emirates buyer addresses to a potential European supplier
- a) Where is your headquarters in the EMIRATES.? you must always have a phone and anEmirates address to be indicated; rarely a buyer buys Emirates products, especially the complex ones, from customers who are not on the territory
- b) do you have your staff in the EMIRATES.? the answer must be yes, as far as possible
- c) are your products certified for the EMIRATES. market? You must have the certification, otherwise your product will have a very small market because the insurance premiums of your customers could increase
- d) where are your warehouse? It is always needed to indicate a warehouse where you have stocks and spare parts; Emiratess are terrified of being abandoned by Europeans after purchase
Only after passing this initial screening, Emirates buyers take into account the non-UAE suppliers.
– Neglecting the after-sales activities
For Emiratess, there is no buying activity if after-sales activity is not assured so it is essential the presence of warehouse, products in stock, spare parts and specialized personnel on EMIRATES. territory that can intervene a few hours; it is equally wrong to think that you have to deal with after-sales assistance only when sales begins.
– Underestimating the laws relating to visas to work in the UAE
Very often companies that sell equipments or machinery in the EMIRATES. must send their engineers for installation or final testing at customers premises; most of times management has not thought about the fact that it is necessary that their staff need a specific visa to enter and work in the EMIRATES. and send their employees with a simple tourist visa; frequently it happens that these technicians are rejected at the security checkpoint and sent back to Italy, with a stamp in the passport “CANCELLED WITHOUT PREJUDICE”; in this case, both the employee and company enter into a “black list” and problems will magnify for both.