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Strategic Business Environment in the Middle East
Although each country has its own specific business
environment, the following common issues significantly
affect regional development and trade:
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Security issues and political instability in the region
are affecting the development of long-term businesses.
This problem has spread from
the North African region, including Algeria, Libya,
Egypt and Sudan, through to Turkey, Iraq, Kuwait,
Lebanon, Pakistan and, of course, the long-term
Israeli-Palestinian conflict. Significant political
changes, peace processes and diplomatic efforts are
always encouraging development in the regional economy
and international business arena.
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The
political developments in Iraq and the War Against
Terrorism have significantly affected international
trade and the costs of logistics and insurance.
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Some countries in the region are extremely rich in
natural resources, with oil and gas being major sources
of income. A number of countries in the region are
diversifying their economies in order to strengthen
prospects for sustainable economic growth and to reduce
vulnerability to adverse oil price movements. Tremendous
investments in the manufacturing sector, tourism and
services have been recorded in recent years. However,
some countries in the Middle East have relatively low
purchasing power.
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The fast growing population of
more than 580 million people (2003 estimate) represents
a tremendous market for food and agricultural
commodities, entertainment, hospitality and tourism.
According to FAO population projections for the Middle
East, the increasing rate of 130 million people per
decade will result in a population of more than 800
million people by 2020.
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The
Middle East accounts for about 8 per cent of the world’s
net imports of agricultural products. Average annual
imports of agricultural products have grown to nearly
US$39 billion over the past 10 years, 70 per cent of
which have been food.
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Climate, lack of water and environmental issues are
limiting factors for agricultural development in the
Middle East. Therefore, there is a strong belief that
the region will have to rely on agriculture and food
imports in the future.
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Trade policies related to market groupings, similar to
the European Union (for example, the Gulf Cooperation
Council, or GCC), and subsidies to the agriculture
industries in the US and EU.
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The
war in Iraq and the War Against Terrorism.
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The
impact of the War Against Terrorism, particularly on the
tourism and hospitality industries.
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A
slowdown in the Egyptian economy.
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Animal health and welfare issues.
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Some trade issues (Halal issues, and compliance with
Sharia Law ) which require more precise regulations.
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Labour and labour costs.
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The
regions capability to form long term economic
partnerships.
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Investment in the regions tourism and hospitality
industries.
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Increase of demand from the region in line with growth
(the FAO estimates the region’s population will increase
130 million people per decade).
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Development of the tourism and hospitality industry,
which is booming in some countries (GCC).
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Political developments, instability and security in the
region, particularly in Iraq.
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Oil
prices.
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Regional development of trade policies including free
trade agreements and market grouping (GCC).
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Development WTO world policies particularly related to
subsides in USA and EU (market access and flexibility).
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Increasing competition from traditional and emerging
countries (India, China).
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More challenges for labour intensive food and
agriculture industries.
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Shifting labour intensive food and agriculture
production to developing countries provedores of cheap
labour and incentive(example carrots to China).
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New
technologies including GMO.
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Biosecurity issues, including bio-terrorism.
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Development of new industry sectors in the region
particularly horse and associated industries.
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Market development, including marketing activities such
as intelligence, promotion and strategic alliances.
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Structure of export industry and export policy within
the region (fragmented trade industry, reliance from
small number of players and in
some case foreign owned/controlled industry).
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Development of rural communities.
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Training and labour availability.
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