Thinking of exporting your company to Dubai? There are great opportunities for entrepreneurs with the right ideas, but be patient and seek local expertise
As late as the early 1990s, Dubai was little more than a small desert town, with the nation's primary international trade being oil. However, those in power knew that oil reserves were running low, and took action to attract investment and diversify. Today, Dubai's economy is powered by sectors such as international finance, manufacturing, IT services and media. Moreover, the United Arab Emirate state has undertaken a construction campaign unrivalled anywhere in the world. Despite being geographically small with a population of roughly two million, it's home to a remarkable number of skyscrapers and other impressive buildings, including the world's largest tower, shopping mall and indoor snow park. Dubai lends itself well to be used as a trading hub and Middle East office: the country is between six and seven hours from the UK and is three hours ahead of GMT.
Freezones
Crucial to Dubai's development, freezones are areas where businesses can base their offices independent of most taxation. Outside of these areas, it is still common for businesses working in the Middle East to require the backing of a local sponsor, who take 51% of a company's equity. Thus, gaining entry to one of the freezones is a must for most business. There are currently over a dozen sector-specific freezones in operation, with more on the way. Businesses should expect this process to take several months and be costly. Many firms employ professional advisers to handle the paperwork as the government will want to know all about the company, including its business plans, finances and employees, in specific detail before it grants admittance.
Tax and benefits
Dubai is a small but very rich market and a gateway to the rest of the UAE and the Middle East. Residents say the quality of life is very good, with 11 months of sunshine, good food, shopping and many attractive facilities. There is no income, corporation or capital gains tax accrued by the Dubai government, although businesses in a freezone will pay the authorities for their office rent, utilities and some other services. With regards to taxation, entrepreneurs should take advice on how their companies are organised, and staff who live there should ensure their own financial arrangements don't fall foul of HMRC.
Business culture
Western companies are well established in Dubai and it may be that your company spends more time dealing with Europeans and Americans than it does with locals. More than 80% of the population is from abroad, although nationals tend to occupy most government positions and have a strong foothold in trading businesses and energy. English is widely spoken and is the language of business. Entrepreneurs often attest that patience is a virtue when doing business in Dubai and the Middle East. Relationships and reputation are key and, when doing business with locals, businesses should plan to invest time and effort getting to know them. Making simple deals requires patience as they are often open to seemingly endless bouts of re-negotiation.
Gaps in the market
The business sector in Dubai has emerged so rapidly, it is inevitable that there are gaps in the market. Entrepreneurs should learn about the area, investigating market opportunities and talking to people already entrenched in the area. For British companies, this isn't hard to do, as there is a large expat community in the region which is very accessible. Organisations such as the British Business Group provide a good starting point for networking and finding potential partners.
Two entrepreneurs with very different businesses tell of how they broke into the lucrative market of Dubai:
Gingerlily
Corinne Loric, managing director of £850,000 turnover silk bedding company Gingerlily, began exporting to Dubai following interest from buyers from the Middle East at trade fairs.
Gingerlily has built a name for itself in high-end British retail, with products aimed at those who like to spend a little extra on their home interiors. The London-based company produces silk bedding and accessories, which are also popular in Asian climates as they help regulate body temperature at night. Managing director Corinne Loric says: "We knew we were being bought by people in the UAE and Middle East. People in the region tend to spend a lot of money on their homes and there's a lot of kudos attached to things from Europe." Gingerlily appointed an agent, who works on a commission-only basis, and made deals with three department stores. Loric says appointing an agent was, in her view, essential for business. "The most important thing for doing business in Dubai is to get someone out there who can look after your products. There's a different mentality and culture there, and every deal is going to go through a negotiation. You need someone who has lived there for a long time and understands that mentality, can explain your business and train staff at stores."
Source for Consulting
Fiona Czerniawska, joint managing director of Source for Consulting, heads a business which produces reports for management consultants. Her business saw a growing demand for its services in the region and set up an office there.
"We deal with consulting firms and we knew that their business was growing rapidly in the Middle East, so we believed there would be demand for our services. Many of our customers have bases in Dubai," says Czerniawska. The company has set up an office in the Jumeirah Lakes Towers free trade zone, with little more than a desk space and a computer. Setting up an office in Dubai also proved to be hard work, it took a year to organise and cost the company about £50,000. The business employed BDO Stoy Hayward to help it with the regulations and Czerniawska recommends entrepreneurs employ good advisers as there are so many hoops to jump through. However, having the business address means the company is now in a position to expand across the Middle East. "I think Dubai is a hub for Middle East trade and businesses tend to go there first. We wouldn't have considered moving into Riyadh," says Czerniawaska. "We have had a lot of interest and goodwill from customers and we are definitely in it for the long term."
Jon Card is a freelance writer and journalist specialising in small business and enterprise. He has also interviewed some of the UK's foremost entrepreneurs
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