Doing business in the Middle East and wider Arab world offers a wealth of opportunities for organisations wanting to expand to new territories. But it’s often challenging to get started.
I’ve created this guide to serve as a resource for anyone interested in the nuances of business in the Middle East and the wider Arab world, offering the knowledge and tools needed to navigate these markets successfully. Whether you are an entrepreneur, investor, executive, consultant, or academic, this guide provides a solid foundation for understanding and engaging with one of the world’s most economically and culturally diverse regions.
Understanding the wider Arab world
The Arab world spans two continents and encompasses 22 countries in the Middle East and North Africa (MENA).
This vast area is united by the Arabic language and a shared cultural and historical heritage. Yet each country within it presents unique opportunities and challenges for business. To navigate this landscape successfully, it’s crucial to grasp the nuances of its various regions:
- Gulf Cooperation Council (GCC) countries
- the Levant
- North Africa
Gulf Cooperation Council (GCC) countries
The GCC countries, including Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates, are known for their wealth derived primarily from oil and gas reserves.
However, there’s been a significant push towards economic diversification in recent years, with investments in sectism, finance, and technology growing. The business environment in these countries is generally welcoming to foreign investment, with numerous free zones offering incentives for international companies.
The Levant
The Levant includes Jordan, Lebanon, Syria, and Palestine. And each country offers a distinct business environment.
- Jordan offers political stability and a skilled workforce, making it an attractive destination for investment in the Middle East.
- Despite its economic challenges, Lebanon presents an entrepreneurial spirit and is a gateway to the broader Middle Eastern and North African markets.
- Syria and Palestine, while rich in culture and history, offer more challenging environments for foreign businesses due to political instability and economic sanctions.
North Africa
North Africa comprises Algeria, Egypt, Libya, Morocco, Sudan, and Tunisia.
This region stands out for its strategic location as a bridge between Africa and Europe, diverse economies, and rich resources.
- Egypt stands out as a leading economy in the Arab world, with significant growth in telecommunications, agriculture, and manufacturing sectors.
- Morocco and Tunisia have made considerable strides in attracting foreign investment, particularly in renewable energy, automotive manufacturing, and information technology.
- Algeria and Libya, rich in oil and gas, offer opportunities but face challenges related to regulatory environments and political stability.
Useful Arabic phrases
Integrating Arabic phrases into your conversations can significantly enhance your interactions in the Arab business world. How so? It demonstrates respect and a willingness to engage with the local culture.
Here are some useful Arabic phrases beneficial in business settings:
- Greetings
- As-salamu alaykum (السلام عليكم): “Peace be upon you” – A universal greeting.
- Marhaba (مرحبا): “Hello” – A friendly way to greet someone.
- Expressions of thanks
- Shukran (شكراً): “Thank you” – Use this to express gratitude.
- Shukran jazeelan (شكراً جزيلاً): “Thank you very much” – For expressing deeper appreciation.
- Inquiries
- Kayfa halak? (كيف حالك؟): “How are you?” (to a man) or Kayfa halik? (كيف حالك؟): (to a woman) – A common way to inquire about someone’s well-being.
- Apologies and courtesy
- Asif (آسف): “Sorry” (man speaker) or Asifa (آسفة): “Sorry” (woman speaker) – Use this to apologise or express regret.
- Min fadlak (من فضلك): “Please” (addressing a man) or Min fadlik (من فضلك): “Please” (addressing a woman) – To politely ask for something.
- Closing a meeting or conversation
- Ma’a as-salama (مع السلامة): “Goodbye” – A polite way to end a conversation.
- Ilaa al-liqaa’ (إلى اللقاء): “Until we meet again” – A way to express hope for future meetings.
- Expressing understanding or agreement
- Na’am (نعم): “Yes” – To affirm or agree.
- Fahimt (فهمت): “I understand” (man speaker) or Fahimtu (فهمتُ): “I understand” (man speaker) – To indicate comprehension.
Remember, even a small effort to speak Arabic can go a long way in building rapport and goodwill in the Arab business world. It’s also a sign of respect for the culture and traditions of your Arab counterparts.
Cultural nuances and business etiquette
Navigating the cultural nuances and business etiquette of the Arab world is crucial for establishing strong, respectful, and successful business relationships.
The Arab world is diverse, encompassing many traditions, practices, and norms influenced by religion, history, and local customs.
Understanding the role of Islam
Islam plays a central role in the daily lives of many in the Arab world, influencing social norms, business practices, and legal frameworks.
Respect for Islamic traditions and practices, such as prayer times, Islamic holidays, and dietary laws, is essential. For instance, during the holy month of Ramadan, the Arab world reduces business hours, so you should schedule meetings sensitive to fasting times.
Hierarchical structures
Many Arab businesses operate within hierarchical structures, where age and position command respect.
Understanding and respecting this hierarchy can facilitate smoother interactions. It’s customary to first greet the most senior person in the room and defer to their lead in discussions.
The importance of relationships
Building personal relationships is foundational to doing business in the Arab world. Trust and mutual respect are developed over time, often through face-to-face meetings and social interactions.
Business might not be discussed in initial meetings, as the focus is on relationship building. Showing genuine interest in your Arab counterparts, such as asking about their health and family (within appropriate bounds), can foster a strong foundation for future business dealings.
Communication style
Indirect communication is standard, with an emphasis on politeness and avoiding confrontation. It’s important to read between the lines and understand that reluctance or refusal may not always be directly stated. Similarly, saying “yes” can sometimes mean “maybe” or “I’ll consider it”, so patience and clarification are key.
Negotiation practices
Negotiations in the Arab world can be lengthy, with significant time dedicated to haggling and discussion. Patience and respect for this process are vital. High initial offers and gradual concessions are common strategies, reflecting the region’s bazaar-style negotiation culture.
The concept of “face”
Maintaining dignity and avoiding public embarrassment (saving face) is paramount. It’s essential to never criticise or refuse someone openly in a business setting. Offering criticism in a private, gentle manner and using intermediaries for delicate matters can help preserve relationships.
Attire and physical contact
Dress codes tend to be conservative, especially for women. Men should opt for suits or long-sleeved shirts and trousers, while women should dress modestly, covering shoulders, arms, and legs. Physical contact, such as handshakes, may vary; it’s respectful for men to wait for a woman to extend her hand first. Understanding these norms is crucial to making positive first impressions.
Hospitality and meetings
Hospitality is a cornerstone of Arab culture. Accepting offers of coffee, tea, or snacks is polite and contributes to relationship building. Meetings may start later than scheduled and be interrupted—flexibility and adaptability are key. Business cards should be given and received with the right hand or both hands and taking a moment to read them before putting them away shows respect.
Gift-giving
Gift-giving can be a part of establishing business relationships but should be done with sensitivity. Gifts should be thoughtful, not overly extravagant, and given privately. Avoiding alcohol and pork products is advisable due to Islamic dietary laws.
Market entry strategies and steps
Entering the markets of the Arab world requires a nuanced approach tailored to the region’s unique cultural, economic, and regulatory landscapes.
Step 1: Research and understand the market
In-depth market research is the cornerstone of a successful entry strategy. This involves understanding the consumer demographics, economic conditions, cultural nuances, and competitive landscape. Identifying gaps in the market, consumer needs that are not being met, and areas where your products or services can stand out is crucial. Tools such as SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis can be instrumental in assessing your market potential and the challenges you may face.
Step 2: Choose the right entry mode
Selecting the most appropriate market entry mode is critical and can include franchising, joint ventures, direct investment, or establishing a local entity. Each has its advantages and considerations:
- Franchising is often a lower-risk option that can be especially effective in countries with strict regulations on foreign ownership.
- Joint ventures with local companies can provide valuable local knowledge and access to established networks but require careful selection of partners and clear agreements to avoid conflicts.
- Direct investment in establishing a local presence may offer the most control but involves navigating local regulations and significant initial investment.
- Exporting directly to distributors or through e-commerce platforms can effectively test the market with lower risk and investment.
Step 3: Navigate legal and regulatory frameworks
Understanding and complying with the legal and regulatory requirements is essential for any business looking to enter the Arab world. This includes company registration, investment laws, labour laws, and industry-specific regulations. Hiring local legal experts can help navigate this complex landscape, ensuring compliance and protecting your business interests.
Step 4: Build local partnerships and networks
Establishing strong local partnerships and networks is particularly important, where business often relies on personal relationships and trust.
Local partners can provide invaluable insights into the market, facilitate introductions to key stakeholders, and help navigate cultural and regulatory challenges. Participating in local trade shows, industry events, and business councils can also effectively build these networks.
Step 5: Adapt marketing and sales strategies
Marketing and sales strategies should be adapted to the local context, considering cultural sensitivities, language, and consumer behaviour. This may involve tailoring advertising messages, choosing appropriate sales channels, and even adjusting product features. Digital marketing can be particularly effective, given the high internet and social media penetration in many Arab countries. Still, it should be executed with an understanding of local online behaviour and preferences.
Step 6: Plan for the long term
Success in the Arab world often requires a long-term perspective, emphasising building relationships, brand recognition, and trust over time. Patience and persistence are essential, as is a commitment to understanding and adapting to the market’s evolving needs and conditions.
Networking
Participate in local events and forums
Attending trade shows, industry forums, and local business events is a crucial strategy for networking in the Arab world. These venues offer opportunities to meet potential partners, clients, and local influencers. Participation also signals your commitment to the local market and can be a valuable source of market insights and trends.
Leverage social media and professional platforms
While face-to-face interaction is preferred, social media and professional networking platforms like LinkedIn are increasingly essential for making initial contacts and maintaining relationships. Many business professionals in the Arab world use these platforms to network, share insights, and stay connected. However, always follow up online connections with personal meetings whenever possible.
Utilise business councils and chambers of commerce
Business councils and chambers of commerce can be invaluable resources for networking. They often organise events, workshops, and meetings to help you connect with key business figures. Additionally, they can provide support, advice, and introductions to help navigate the local business landscape.
Understand the importance of wasta
Wasta refers to using connections and social networks to accomplish objectives, including facilitating business deals. While it’s a concept that might be unfamiliar or uncomfortable to some, understanding and respectfully navigating wasta is essential in the Arab business context. However, it should be approached with sensitivity and integrity, ensuring that professional and ethical standards are upheld. Click the link to learn more about wasta.
Learn from every interaction
Each business interaction in the Arab world, regardless of its outcome, is an opportunity to learn and grow. Be open to feedback, be willing to adapt, and always look for ways to improve your understanding of the local business culture and practices.
