The Middle East has significant opportunities for Australian SME exporters thinking of taking that next step in their growth strategy.
However, the region is often seen as being shrouded in mystery when it comes to doing business – largely due to its distinct cultural difference to Australia.
Breaking down the misconceptions around doing business in the Middle East, while understanding the opportunities that exist, will give Australian SME exporters the confidence to capitalise on opportunities in the region.
A strong market for export
The Middle East is a diverse region covering a range of different cultures and economies. Rapid population growth and strong economic performance present strong opportunities for Australia SMEs in certain markets.
Two such markets are the United Arab Emirates (UAE) and Saudi Arabia.
The UAE is a major hub for Australian companies looking to do business in the Middle East. The UAE was Australia’s 15th largest export market and largest export destination in the region in 2014.
Australian exports to the UAE were worth A$3.7 billion in 2014, coming mainly from transportation services, cars, meat, oilseeds and office machines.
The UAE generally has a favourable business environment, and is ranked 22 out of 189 economies on the World Bank’s ease of doing business gauge, outperforming the regional average on most metrics.
Saudi Arabia is Australia’s 18th largest export market and second largest export destination in the region. In 2014 alone, Australia’s exports to Saudi Arabia were worth A$2.6 billion. Service exports to Saudi Arabia were worth A$344m in 2014, mainly driven by Australia’s education exports.
Saudi Arabia’s expanding middle class is creating demand for higher quality proteins and grains that Australia’s agriculture industry is well placed to meet.
Saudi Arabia’s solid population growth, projected at 1.6 per cent per annum over the next decade, will present further opportunities for Australia’s dairy, animal feed, beef and sheep industries.
Understanding the risks
As with any export market, the Middle East has some distinct ways of doing business compared to Australia. Understanding how these could impact your business is crucial before making a decision to enter the market.
First, understand the cross-cultural differences before doing business in the Middle East to avoid making a mistake that could damage a potential partnership.
One example is the business culture in the Middle East, which tends to be more flexible and relaxed when it comes to time and schedules.
Pushing for meeting at a specific time may not be well received, while negotiations are often likely to take longer than in Australia.
Second, understand the political pressures. A number of countries in the region have experienced political instability in recent years, which can impact on the business environment.
For example, a trade embargo could affect delivery of goods, and political instability could result in blockages in transfers of earnings.
Overcoming the export barriers
Australian SME exporters shouldn’t be deterred by some of the risks because there are a number of steps they can take to significantly reduce these risks, and make their transition into the Middle East as smooth as possible.
First, carry out research. Many of the cultural barriers can be overcome by conducting comprehensive research prior to entering the market.
SME exporters should read widely, talk to peers who have already entered the market and engage professional advisers who have experience in operating in the market.
Second, build relationships. A strong personal relationship is key to doing business successfully in the Middle East. SME exporters should commit significant time and resources to investing in building relationships.
To do so, SME exporters should conduct a number of visits to the target market to get to know potential customers, partners, and suppliers before signing any contracts.
For SME exporters who choose to service the market remotely, it is crucial to have established strong relationships with distributors.
Third, seek professional help. Receiving professional advice can reduce the risk in any export decision. SME exporters should seek out advice from organisations like Austrade.
Austrade is the Australian Government’s trade and investment agency and can assist with introductions and navigating the business environment.
Austrade has strong relationships with government and business across the region and can link Australian SME exporters with key decision makers.
Andrew Watson is the Executive Director, Export Finance at Efic