Eddy Abramo on doing business between continents
Brandhome Middle East as hub
Dubai is known for being a cosmopolitan city. But how do you do business in this metropolis, which brings together people from all over the world, who all have their own language, culture, and way of doing business? Eddy Abramo, managing partner of Brandhome Middle East, shares his views on Dubai as hub for the Middle East, Asia and Africa.
We often talk about Dubai saying that it is a cosmopolitan city. How does it impact business and day-to-day work?
Of the 197 different nationalities you have in the world, 130 are represented in the United Arab Emirates, which has less than 10 million people. This is why the country is so different from other countries. You need to learn how to cohabit with different people, different languages, different cultures, different religions, different roots. In Europe, we have Latin, Mediterranean and Germanic roots, among others. So we can roughly anticipate the reaction, the way of thinking of our peers. At least we can understand their reactions. In Dubai, this is not always the case. Cultural differences can be so big that they have a direct impact on how you do business. The risk approach is different, the notion of time is different, the notion of contract is different, the way to negotiate is different. Even the laws change, and for the existing ones, the way they’re interpreted changes according to your nationality!
A “yes” can become a “never” if you say “Yes, Inshallah,” or can become “What is he talking about?” if it is followed by a head-wagging motion called a “nod”! After 10 years based in the country, and after 15 years working with this country, I learned how to integrate all these differences and how to leverage all of them in the right way to do business. Trust is not something you can write in a contract. Trust is something you have to earn over time.
How we can do business then?
The UAE, and more specifically Dubai, is considered a hub. People come to Dubai for a specific reason and they leave when they no longer have a specific reason to stay! So, “Know Your Client” guidelines, the famous KYC, is very important her. In a country where your job title, your way of dressing and your family name give you less information about you than the plate number of your car, KYC is key, more than ever. And you need time, you need experience, you need to fail in order to learn. Only experience can give you the right reading of how to do business in this region.
Even in the way to build your team, your approach has to be different. No need to have only expats with high level studies if you want to do good business. You need to have the right people in front of the right customers. Language is key. Understanding the “who’s who” is important. Don’t try to do a family tree to understand an Indian family. You’ll be lost before you even reach the second generation. Don’t try to understand the Indian caste system when you grew up learning the meaning of liberty, equality and fraternity. Don’t even try to apply your social model when you come from a small country of 60, 70 or even 80 million people when you have in front of you people who succeed in a country with more than one billion people where they learn how to survive, how to fight and how to stay alive.
Having said that, what makes the UAE so interesting as a place to do business?
The location, I think, is crucial. The pressure of regulators in Europe is another part of the answer. Let’s talk about what happened in the financial world these last 7 years. For example: a guy has a bakery business in Africa. Until recently, this guy used to have an account in Geneva or Monaco. Obviously, on a continent where political stability can change suddenly, Switzerland or Monaco seems like a paradise in term of safety and stability. During the last 7 years, all the European banks, in order to avoid any compliance risks or fines, cut their “non-core business” and asked guys like him to close their bank accounts. Today, when you are active in Africa, the Middle East or certain Asian countries, it is quasi-impossible to open an account. KYC is too complicated to establish because of the cross-border policies. So, our baker has to find another solution.
The GCC (Gulf Cooperation Council), meaning the UAE, Qatar, Bahrain, Kuwait, Oman and Saudi Arabia, is an escape route for this guy. Even if he wants to buy a property in Europe, it becomes complicated. How you can justify your wealth when you have no balance sheet, no audited accounts, and when all your business is done is cash? The point is that in order to do business in the countries mentioned above, flexibility and understanding of local specificities is key. The “presumption of guilt” because you have a lot of money is not as heavy as it is in Europe. Dubai, as I said, is a hub for trade. The local economy is so tight that the country has to open up. This is why, when you live in Dubai, you discover that the national sport is traveling! In Europe, when you don’t want to meet someone, you find a common excuse like: “Sorry, I have the flu.” In Dubai, it is more common to say: “Sorry, I will be in Kenya.” The worst excuse would be “Sorry, I have the flu,” especially in a country where the temperature is 25 degrees in winter! Traveling is part of our DNA. Apart from the frequent-flier miles you get from the airline companies (we all are at least gold members, sorry for that), we travel because the local economy is too tight and because we have this exceptional capability to understand how to do business in non-conventional countries. And I did not even mention Iran, which is a market of 80 million people, with an exposure up to 350 million people including the CIS and close neighbors.
But from Europe, GCC is seen as unstable, with the war in Syria etc. What is your point of view on this?
I will start to answer by referring to a very recent event. President Emmanuel Macron came to the UAE for the inauguration of the Louvre Abu Dhabi. Did you know that France is the 4th largest foreign direct investor in the UAE, with a cumulative amount of 12 billion US dollars in 2016? The UK is in 1st place, with a total FDI of 28 billion US dollars, while the United States comes in second, with 14 billion. So, do you really think these countries would invest such amounts in a country that isn’t stable?
Would you believe me if I told you that Italy or Greece is the same or even closer to Syria than Dubai? But for almost everybody, you’re right: Dubai is riskier than Italy or Greece in terms of its geographical position with respect to the actual situation in Syria. Obviously, I am not saying that everything is perfect and easy in the UAE. Like every other country in the world, it has its strengths and weaknesses.
- No direct taxes for corporations and individuals.
- A solid and profitable banking sector and favorable regulations for foreign investments.
- Its geographical situation, making it a potential platform to influence the Gulf, Africa, Iran, Asia and the Middle East.
- Lastly, it has a cheap foreign labor force, very good transport and production infrastructures and access to low-cost energy.
Among the weaknesses, we can highlight:
- Legal obstacles to foreign investment. Effectively, the prohibition (except for the free zone) of more than 49% of a local company’s shares being in the hands of foreign investors constitutes a significant hindrance. Moreover, the obligation to rely on a local service agent for the branches and representative offices of foreign companies represents a limiting factor.
The country is a travel hub, 100% open to the outside. The political stability of UAE, the efficiency of its infrastructure and the simplicity of its laws really help you to look outside the region. While in Europe it is complicated to organize even a weekend in Lyon when you live in Paris, here in Dubai, we’re used to going to Istanbul for a weekend; we go skiing in Iran or Georgia; we go to Lebanon for a night or celebrate our wedding anniversary in Mozambique. Nothing exceptional. And I’m not talking about the people flying at least 1 week per month to France, Belgium or Switzerland for business reasons. This open-minded behavior is key to doing business in the region. If you think only locally, you’re dead. We all think globally. We all run business in a glo-cal way. We are based in Dubai but we all have global exposure. Dubai has to be seen as a hub for doing business in Africa, the GCC and Asia.
Don’t get me wrong: the UAE is already part of the ODCE chart; we already apply the MIFID 2; it is not an offshore place where everything can be done. Not at all. We strive to understand your business, your needs. Like it was in Europe 20 years ago. Thanks to the dual legislation (free zones or mainland) you can do business with the right legal framework and the right legal protection. Governance of the free zones is close to the European model, while the mainland legislation (meaning sharia compliance) is adapted to local business. You can do business while simultaneously leveraging the COFACE umbrella or using an Islamic bank. You can own 100% of your business under Swiss law and at the same time run a business with a local sponsor under local law. You will be subject VAT for some part of your business with no income or corporate tax. This is what I call business intelligence and flexibility.
One last question: Which sector or company can establish a branch in UAE?
Following a recent discussion I had with Sultan bin Saeed Al Mansouri, the UAE Minister of Economy, the future outlook of the UAE is transitioning to a knowledge-based economy, promoting innovation and research and development, strengthening the regulatory framework for key sectors, and encouraging high value-adding industries. These will improve the country’s business environment and increase its attractiveness to foreign investment.
Sixty-one percent of the UAE’s national investments last year were focused on major industrial sectors along with the food and beverage platform, with 58 percent of GCC investments focusing on non-metallic mineral raw material and the mineral industries, and 58 percent of foreign investments going to the food and beverage industries.
However, for technology companies and waste management companies, this region is a key location to be based.