For a long time, the Middle East has been a wealthy region as the primary oil producer for so many countries around the world. However, that has not always translated into business opportunities for global brands, but this has changed massively over the last few decades.
Middle Eastern countries have always played host to sizeable expat communities and have a constantly growing middle class. They are routinely exposed to foreign brands, whether it’s through the rising consumption of western-produced media or an increasing number of brands entering the region.
Gulf Cooperation Countries (G.C.C.) have liberalized their economies, allowed for more foreign ownership within its borders as well as instituting free trade zones and low corporate tax rates.
While ongoing geopolitical conflicts and legitimate concerns over workers’ rights have marred the region’s image, it still remains an increasingly vibrant, popular and wealthy part of the world.
United Arab Emirates
The United Arab Emirates is what many imagine when they think of the Middle East. It has a vibrant economy that has diversified and while it still depends on oil revenue, it is less than other G.C.C countries. Oil revenue currently accounts for 25 per cent of GDP; it accounted for 70 per cent in 2015. The U.A.E. has made the most significant strides when it comes to kicking the addiction to petroleum and has established a strong service and tourism sector.
- The U.A.E. has an ease of doing business ranking of 16, a drop from 11 in 2018.
- Some free-trade regions in the U.A.E. allow for 100 per cent foreign ownership
- A high number of expatriate workers across all sectors of the economy that account for 80 per cent of the workforce
- The country has a stable political and banking system
- One of the lowest crime rates amongst developed countries in the world
- Absence of income tax and zero taxes in free-trade regions.
F&B brands are betting on this region; the likes of Happy Joe’s Pizza & Ice Cream plans to build 25 units in the region, with some in the U.A.E. While Subway has been in the U.A.E. for some time and managed to build over 160 stores, the brand signed a new master franchise agreement as it seeks to remain competitive.
Qatar has been on the tip of many tongues in the world with the impending FIFA World Cup in 2022 and the recently concluded Qatar Grand Prix. It’s a country in the process of reinvention and building its image as a premier destination for sports and entertainment. Like many in the region, it’s dependent on oil revenues. Oil and gas accounts for 50 per cent of GDP and 70 per cent of all government revenue, and has consequently resulted in one of the highest GDP per capita in the world of $50,805.
- Qatar’s ease of doing business ranking is 77, an improvement on 83 in 2019.
- Since 2008, the Qatari government has been working for the ‘Vision 2030’, a long-term mission to transform the country’s human, economic, social and environmental development
- The country’s legal system is based on Egypt’s, which in turn is based on the Napoleonic codes of France
- Free trade zones (FTZ) allow for 100 per cent foreign ownership and repatriation of profits. FTZ regulations are based on English law
- There is a flat 10 per cent business tax applicable to all businesses, except for those wholly owned by Qatari nationals. There is no income tax of any kind
- Qatari labor law obligates employers to put forward a plan to employ Qatari nationals, but can employ non-Qataris if there are no Qataris to fill the role.
As a part of Happy Joe’s deal to expand into the Middle East and North Africa, it will open locations in Qatar.
Saudi Arabia has advertised its transformation with ferocity for years now; painting itself as an open country ready to welcome business from the world over. To a great extent, it has been successful; Saudi’s image has shifted slightly and businesses have poured in. So much so, that Saudi Arabia recently announced the companies without local regional offices will not be considered for state contracts.
The likes of Boeing, Google, Ford and many more have set up regional headquarters in the country, with most in the capital, Riyadh. It’s the largest oil exporter in the world and it accounts for 50 per cent of the country’s GDP and 70 per cent of all export earnings. Like Qatar, Saudi Arabia has a ‘2030 Vision’ which encompasses a number of societal, administrative and economic goals.
- Saudi Arabia’s ease of doing business ranking is 62, an improvement on 92 in 2018.
- The Saudi Government is using revenues from the oil and gas industry to subsidize and strengthen the infrastructure, construction, manufacturing, education and tourism sectors
- Saudi’s ‘2030 Vision’ outlines future plans, including raising non-oil exports to 50 per cent from its current level at 16 per cent. The government also plans to lower unemployment to seven per cent from its current level at 11.6 per cent
- Real estate, hospitality and construction are where many opportunities lie. The government is also focused on developing its cities’ healthcare facilities and construction hubs
- Firms who set up in any of the six undeveloped regions of the country will receive tax breaks
- There is no income tax currently, though there are plans to introduce a six per cent tax on the remittance of salaries by expatriate workers in Saudi Arabia.
It’s been a busy year for Saudi franchising, with a number of international brands entering the country. Nathan’s Famous has entered the Saudi market with a number of kiosks alongside the healthy food brand, Muscle Maker, which has committed to opening 40 units in the country. Duck Donuts has entered the Saudi market too, by way of the capital city, Riyadh. Cinnabon recently signed a deal with its existing Saudi franchisee to add 130 units to its current portfolio of 120 locations. It’s not just F&B brands that have expanded into Saudi Arabia; Hyatt Hotels have opened both a tourist-focused resort and a city-based hotel.
Much like its fellow G.C.C. members, Bahrain is another oil-dependent economy. Oil and gas production accounts for 11 per cent of GDP, 60 per cent of Bahrain’s exports and 70 per cent of government revenues. Like many in the region, Bahrain is attempting to shake off its dependency on oil.
During the ‘70s and ’80s, Bahrain established itself as a stable center for financial services and drew in many banks from the region during times of unrest in countries like Lebanon. Alongside its reputation as a growing financial services provider, Bahrain is also a major exporter of aluminum and will soon have the largest single-site aluminum smelter in the world. The country’s aluminum business accounts for a staggering 14.5 per cent of GDP.
- Bahrain’s ease of doing business ranking is 43, an improvement on 62 in 2018.
- Recognized as the banking and financial powerhouse in the region. Bahrain is also gaining international reputation for its financial services
- Foreigners are able to control 100 per cent of a company in service-based companies, however some industries are reserved for Bahraini or G.C.C. nationals
- Bahrain has three economic free trade zones which provide certain advantages, such as electricity rebate of 50 per cent for the first five years of operation, no duties imposed on goods imported/exported into or from the zone. Different trade zones may have different regulations
- Bahrain currently has $32m in infrastructure and real estate developments, creating opportunities for businesses of all types to serve newly built and populated areas.
Bahrain has been trying to attract global franchises for a long time, as many represent the gold standard in their respective fields for consumers. In addition to the opening of Happy Joe’s locations in the country, Chuck E. Cheese has opened its first location in Bahrain in the capital city, Manama. This is likely a sign of the kind of businesses and franchises that will enter the Gulf state in years to come.