Australian companies should do business in the Middle East, here’s why

Australian companies are mad about doing business in Asia, particularly China.

And they should be. Asian markets have shown strong growth over the past few years and East Asian markets continue to grow at above 7%, generating 40% of global growth and one-third of global trade this year – higher than any other region in the world.

Nonetheless, with a China slow-down on the horizon, it is surprising that many of those same companies are not looking at the Middle East and North Africa (MENA) region as a source of new markets. So why aren’t they?

Asia uber alles

The strong performance of Asian markets over the last decade seems to have created a pervasive belief that Asian markets are the definitive answer to the question ‘where will we send Australian goods and services?’, and that they will continue to absorb a very significant quantity of Australia’s exports on an indefinite basis.

Nonetheless, things can go wrong, even in large and apparently secure markets. The Fonterra botulism scare earlier this year and its damaging effect on the Fonterra brand in the Chinese market illustrates this point well. It also underscores how important it is for exporters to diversify across several geographic areas to mitigate the risk of loss in the event that things go sour in a key market.

Too far, too different, too difficult?

Just as many Australian exporters and investors see the Asian markets as a golden goose, many view the MENA region as belonging in ‘the too-hard basket’. For starters, as a nation, we know relatively little about the Middle East. When I first told my friends I was going to work in the UAE in 2002, I was greeted with blanks stares and exclamations of “Abu … where? Is that in Ethiopia?”

More than a decade later, thanks to the internet and expanding global airlinks, courtesy of Emirates, Etihad, Qatar Airways and more recently Virgin and Qantas, things have improved somewhat and Australians have advanced in their regional awareness.

Nonetheless, in the popular imagination, the Middle East remains terribly far away (which has never stopped us from trading with Europe or the United States), too culturally different and too difficult to operate in.

Media coverage which is heavily focused on wars and political strife in countries including Syria, Iraq, Libya and Iran does little to help, and unless you’re able to watch CNN Middle East or BBC Asia, there is little mainstream information available to paint an accurate picture of the Middle Eastern markets.

The truth however, is a little different. The MENA countries are not as close as New Zealand, but a flight to Dubai takes the same amount of time as a flight to Beijing, and a flight to Doha, the capital of gas-rich Qatar, is only 30 minutes longer.

Culturally, the Middle East is very different to Australia, but then so is China and many of the markets we already deal with. These differences can be challenging, but nothing that patience, perseverance and some cultural training can’t overcome.

And yes, Middle Eastern markets are more challenging to deal with than the Australian or New Zealand markets, but no more difficult than other markets with which Australian exporters were unfamiliar 10 years ago.

The difficulties and challenges are the same as those encountered in any emerging market and include red tape, unfamiliar export rules and health and sanitary procedures, and different legal systems and banking frameworks. Once again, these apparent obstacles can be surmounted by education and familiarity with the region.

Why expand your business in the MENA region?

So, if the MENA markets are relatively close enough, familiar enough and comparatively straightforward enough to operate in, are there other good reasons for doing business there? The answer is ‘yes’.

For starters, the MENA region is also home to 60% of the world’s energy resources. Six of the top 15 oil-producing countries and three of the top 10 gas-producing countries are located there. It is therefore a likely source of long-term financial security and purchasing power.

The MENA region is generally considered to encompass 19 countries (a little like Europe) with a population of more than 300 million (roughly the same size as the United States), which is predicted to grow to 500 million by 2050. The average age of this population is just 24 years (the average age in Australia is 37) and 30% of the population is aged between 15 and 29. The MENA’s middle class is burgeoning, driven by increasingly high levels of education in most countries across the region. Its youthful, rapidly expanding and increasingly affluent population is hungry for sophistication and a prime market for goods and services of all kinds (not unlike China).

The MENA countries differ significantly – some of them remain underdeveloped and in need of new infrastructure, education and health systems, agribusiness and food technology, while others like the UAE and Bahrain have become established business hubs that service the region and are centres of innovation and excellence. All of them offer opportunities for Australian companies to ply their wares.

To appreciate how the Middle Eastern markets have evolved in recent years and understand some of the business opportunities available, take a look at the Dubai Means Business films.

So, if you’re considering expanding into a new market, why not consider the MENA?

Cynthia Dearin is managing director of Dearin & Associates, a boutique international market entry consulting firm.