Early this year, the Philippines welcomed a top level business delegation from the United Arab Emirates (UAE) headed by UAE Minister of Economy Sultan Bin Saeed Al-Mansouri. During that visit, both parties agreed to increase trade between the two countries from its current level of $1.359 billion.
Of the $1.359-billion two-way trade in 2013, the trade balance heavily weighs in UAE’s favor which enjoys $1.04 billion worth of exports to the Philippines as against imports of only $315 million. The Philippines imports from the UAE products like petroleum oils, LNG, butane and propane while the UAE imports from us Philippine bananas, electronics and condiments, among other things.
While a return visit to the UAE is still in the offing, the DTI has prepared a list of priority exports to the UAE. These include fresh and processed food, beverages, garments, consumer electronics, footwear, garments, personal care and metals.
But how can your company successfully trade in the Middle East? Atradius Regional Manager for Southeast Asia Michael Frigo provides some clues which can assist you when trading in the UAE.
1. Choose the right route into the market. There are essentially three ways to get into the UAE market: direct exporting, via an agent or agents in the Emirates or by establishing a physical presence in the market. The first of these, while simple, may not be the best solution if you’re looking to achieve high growth. Engaging a distributor, franchisee or licensee may be a better option, but the laws contain a high level of protection for local ‘agents’. (In UAE law, the term ‘agent’ encompasses all of the above, as well as ‘agent’ in the usual sense). Agents may be able to register their agreements with the Ministry of Economy in certain circumstances and that places added obligations on principals. Rights conferred on the agent by registration include a right to receive compensation on termination (even where that occurs in accordance with the contract) and a right to block imports of the principal’s products of which the agent is not the consignee. Most foreign principals appointing local agents take steps to avoid the application of this law. Establishing a physical presence in the UAE can take several forms: usually by setting up one or more branch offices, or a limited liability company. A branch of a foreign company must have a sponsor—called a national agent – who must be a UAE national or a company wholly owned by UAE nationals. Similarly, a UAE company must be at least 51% owned by UAE nationals (although these rules are relaxed for the nationals of other Gulf Cooperation Council countries, namely the Kingdom of Saudi Arabia, Qatar, Kuwait, Oman and Bahrain).
2. Check that there’s demand for your products and services. Unless you’re in the business of supplying crude oil, which the UAE already has in abundance, there’s a very good chance that your products and services will be in demand in the UAE. The UAE economy has gained momentum since 2011, and this has given a boost to many construction projects, its appetite for foreign goods and its tourism industry.
The main imports are consumer goods, machinery and transportation equipment, chemicals and food. But the UAE is also committed to high quality education and health care, and is investing heavily in its infrastructure and information and communication technology (ICT), creating opportunities for many areas of foreign expertise and partnership.
3. Take time to understand the importance of Islam. The UAE’s culture is rooted in Islamic tradition: Islam is the official religion of the UAE and pervades all aspects of life, both social and business. And, while there is a level of acceptance of other faiths and cultures—after all, the population of the UAE is made up largely of “expat” foreigners – it is essential to show respect for Islam and courtesy in the way that you act when visiting the Emirates and when conducting business dealings there. Indeed, that word—“respect”—neatly sums up the way that you will be expected to present yourself in negotiations. Dress modestly, but do not try to adopt the UAE’s traditional clothing as this may be perceived as offensive.
Emirati companies tend to be extremely hierarchical, so bear this in mind at meetings and greet the most senior person first. Always use the right hand to shake hands, to eat or to distribute documents. Business in the UAE is usually conducted between Sunday and Thursday, with rest days on Friday and Saturday. The initial meeting will serve to build trust, so don’t try to hurry negotiations. Arab coffee and pastries are a traditional accompaniment to meetings, and it would be rude not to accept. Having an agent or other Emirati business acquaintance will be helpful in making the introductions to your potential customers or business partners.
4. Respect local regulations when advertising. This is in many ways connected to the previous principle. Advertising standards in the UAE place great emphasis on the need for respect for religious and political institutions, and for the cultural and social values prevalent in the UAE. For example, they prohibit any advertising of alcohol and tobacco, or the use of content that breaches public morals. Advertisements for medicines, pharmaceutical and food products all require the prior agreement of the relevant authority. Advertisements must use standard Arabic or the local Emirati dialect.
Permits are required for most types of outdoor advertising, as well as for prize draws or promotions. Despite its strict advertising laws, media advertising in the UAE is a thriving business.
5. Comply with customs laws. The UAE is a member of the Gulf Cooperation Council (GCC), which has established the main structure of the UAE’s import regulations. This in some ways simplifies the import of goods into any GCC country, because of the “single port of entry” principle which states that imports into the UAE or any other GCC country are subject to customs duty only at the first GCC port of entry.
The GCC’s Common External Tariff of 5% of the value of goods is levied on most imports, except for imports destined for the UAE’s free trade zones. Alcohol and tobacco attract a higher rate, while some categories of goods, including certain agricultural products, printed material and pharmaceuticals are exempt. Goods imported for industrial or manufacturing purposes may also be granted exemptions.
The ports in Dubai and Abu Dhabi are the main ports of entry into the UAE. In general, customs clearance would require the foreign exporter to provide an import goods declaration, delivery order, original bill of lading, invoice, certificate of origin, and packing list with harmonised system (HS) code.
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