C am els,
S heikhs an d
B illion aires Your Guide to Business Culture in the Middle East and North Africa
Cynthia Dearin
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The following is an excerpt from Camels, Sheikhs and Billionaires: Your Guide to Business Culture in the Middle East and North Africa. If you would like to purchase a copy of the book, please visit www.dearinassociates.com, where you can order a copy.
C o n te n t s Foreword Why does cross-cultural communication matter here and now?.................... 7 Introduction .............................................................................................................10
Part One Opportunities are Everywhere – Why the Middle East & North Africa?
Chapter One – The Opportunity .....................................................................14 What is the MENA region?.............................................................................. 14 Why the Middle East and North Africa?...................................................... 18 Chapter Two – Common Misperceptions .....................................................26 It’s too hard for Western companies............................................................. 26 All Arab markets are the same........................................................................ 31 Asia is better....................................................................................................... 31 Women can’t work there.................................................................................. 32 Western brands won’t work............................................................................. 34 All the consumers in MENA countries are Arabs........................................ 35 In summary.......................................................................................................... 36 Chapter Three – Challenges and Considerations ......................................38 Political risk......................................................................................................... 38 Institutional voids and improving business regulations............................ 39 3
C am els, Sheikhs and Billionaires Chapter Four – Which Market? ........................................................................43 The Gulf............................................................................................................... 43 The Levant........................................................................................................... 53 North Africa........................................................................................................ 59
Part Two So What is the Middle East Really Like?
Chapter Five – MENA Region Culture: The Iceberg in the Desert ......71 What is culture?................................................................................................. 73 Chapter Six – Core Arab Values and Beliefs ................................................79 Core Arab values................................................................................................ 80 Core Arab religious beliefs.............................................................................. 80 Tribe and family.................................................................................................. 81 Honour................................................................................................................. 83 Hierarchy and status......................................................................................... 85 Wasta.................................................................................................................... 88 Fatalism................................................................................................................. 88 Approaches to time........................................................................................... 89
Chapter Seven – Language and Communication .......................................92 One language or many?.................................................................................... 93 Western v Arab approaches to communication.......................................... 94 Chapter Eight - Religion ......................................................................................96 Religious co-existence...................................................................................... 97 The basics – the pillars of Islam & other essentials................................100
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C ontents Chapter Nine – Pork, Prostitutes and Poker .............................................117 Halal................................................................................................................... 117 Alcohol............................................................................................................... 119 Gambling............................................................................................................122 Chapter Ten – The Hijab and the Veil ......................................................... 127 What does hijab mean?..................................................................................128 Why do people wear hijab today?...............................................................128 What does hijab look like?............................................................................ 131 Hijab by country ............................................................................................132
Part Three Navigating MENA Business Culture
Chapter Eleven – The First Meeting . ............................................................139 Take a laid-back approach to scheduling................................................... 139 Meeting and greeting......................................................................................140 Business cards................................................................................................... 141 Phone calls, texts and other visitors…....................................................... 141 Business is personal – and relationships are key......................................142 Friendship and wasta at work........................................................................143 Chapter Twelve – Commercial Communication and Negotiation .... 144 Commercial negotiations – understand the cultural overlay................146 Don’t underestimate your interlocutor......................................................148 Be prepared to modify your original ideas................................................149 Commercial terms often come later............................................................150 VIPs in the Gulf usually operate through staff..........................................151 Follow-up – you need to drive the process...............................................151 Contracts...........................................................................................................152
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C am els, Sheikhs and Billionaires Chapter Thirteen – Building teams .............................................................. 153 Criticism .............................................................................................................153 Wasta at work ..................................................................................................155 Chapter Fourteen – Social Etiquette ........................................................... 156 New friends and personal questions...........................................................156 Conversation.....................................................................................................158 Personal space..................................................................................................158 Hospitality . ......................................................................................................161 Clothing..............................................................................................................163 Feet......................................................................................................................165 Left and right hands........................................................................................166 Gifts....................................................................................................................166 Names and how to use them.........................................................................169 Gender bender: interaction between the sexes.......................................171 Weddings........................................................................................................... 174 Funerals..............................................................................................................178 Public displays of affection............................................................................181 Same-sex couples.............................................................................................182 Before you go...................................................................................................185 Appendices............................................................................................................ 186 Appendix 1: Differences between Shia and Sunni ..................................187 Bibliography . ...................................................................................................194 End Notes..........................................................................................................199
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Fo r e w o r d
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Why does cross-cultural communication matter here and now?
f you’ve picked up this book you probably have an inkling that the ability to communicate and work cross-culturally will have an impact on how successfully you transact business in the Middle East and North Africa (MENA) region. But why is that exactly? The Economist said in 2012 that the cross-cultural communication has a vital role to play in international commercial success at this particular point in history.i In the wake of the Global Financial Crisis (GFC), with many developed economies in the throes of stagnation or downturn, companies in developed markets began to search the developing world for new customers and new talent. Meanwhile, companies whose ambitions had outgrown their vibrant developing economies were looking for growth through international expansion. Those dynamics create today’s thoroughly international world of business where businesses and employees communicate and collaborate with customers, colleagues, suppliers and partners in other countries. The need for harmonious and productive cross-border relationships that transcend cultural differences has placed new demands on companies and their workforces. The Economist Intelligence Unit survey found that the corporate world recognised that success in global markets was tied to cultural sensitivity and communication skills and also indicated that many 7
C am els, Sheikhs and Billionaires organisations had yet to adopt measures to turn this realisation into practice. In particular, the survey highlighted that:
Effective cross-border communication and collaboration are becoming critical to the financial success of companies with international aspirations. Almost two-thirds of respondents to the survey thought that better cross-border communication had been a critical factor in improving their organisation’s performance over the preceding three years. However, a similar proportion also believed that their organisation encountered difficulties with cross-border collaboration or communication at least “sometimes”. About half of the executives surveyed admitted that ineffective cross-cultural communication and collaboration had been costly and had obstructed major international transactions, inevitably resulting in financial loss. The overwhelming majority (almost 90%) agreed that if cross-border communication were to improve at their company then profit, revenue and market share would all improve as well.
Most companies understand the cost of not improving the crosscultural communication skills of their employees, yet many are not doing enough to address the challenge. Despite acknowledging the direct impact of effective cross-border communication on their fortunes, a significant proportion of companies, by their admission were not taking sufficient remedial action to address the root causes of misunderstandings.
Misunderstandings rooted in cultural differences present the greatest obstacle to productive cross-border collaboration. Respondents to the survey regarded “differences in cultural traditions” (51%) and “different workplace norms” (49%) as the greatest threats to the smooth functioning of cross-border relationships. 8
Foreword To summarise, in the post-GFC world, companies seeking long-term success in an increasingly globalising market need to “go international� more than ever. The success of these companies’ expansion abroad will be significantly influenced by their understanding of the culture of their target market and their ability to communicate with the people in it. Companies, which reject the challenge of understanding and communicating effectively with their foreign counterparts, clients and suppliers, can expect a tough time in the global marketplace.
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C h a p te r On e Th e Op p o r tu n ity
T
What is the MENA region?
hroughout my career, I have experienced many different reactions when I tell people that I travel to, and occasionally live in, the Middle East and work with Arabs. “Is it safe?” My colleagues ask me. Friends ask, “What’s it like working in the Middle East as a woman?” My clients want to know whether I have to cover up and many assume that I have to wear hijab – the veil traditionally worn by Muslim women to cover their hair and chest in the presence of men outside their immediate family. They are, usually, surprised when I tell them that I have only ever worn hijab in Saudi Arabia and while travelling in low-profile security convoys in Iraq. Some people seem stunned that I have been able to work in the Middle East at all. They think the Middle East is an entirely alien place and too difficult to comprehend, let alone in which to do business. These kinds of beliefs and attitudes highlight a Western confusion about the Middle East and North Africa (MENA). The sources of this confusion are many and varied. Firstly, the MENA region has been a theatre of war and political strife of one form or another for all of this century and significant portions of the last one. As a result, many people associate the region with instability and brutality. These perceptions have been magnified by the 10
The Opportu nity media coverage that subjects the public to consistently negative stories and images about the Middle East and Arab cultures. While instability and brutality is a reality in some MENA countries at some times, it is by no means representative of the region as a whole. Secondly, the meaning of term Middle East has always been somewhat blurry. Definitions of it vary widely, and its perimeter tends to be redrawn as political sentiments shift. As historian Roger Adelson and others have pointed out, the term is an invention of the Western powers – in particular, the UK – whose original purpose was to define a region to the east of Britain but less remote than China and the Pacific. The French coined the term “Near East” for the Ottoman Empire and the term “Middle East” first appeared in an article written by an American military strategist in the UK’s National Review in 1902. A 1903 work used the term in its title – The Middle East Question of Some Problems of Indian Defense – but used it for a broad swath of territory including Tibet, Afghanistan, and other nations near India that would not commonly be regarded as part of the Middle East today. After this use in 1903, the term was no longer novel and ceased to appear with quotation marks.ii Thirdly, the term “Middle East” includes a diverse set of countries that share some common religious, cultural, political and linguistic elements, but are, in many ways, vastly different from each other. Countries in the region vary enormously in terms of size, income, geography, natural resources and, to some extent, even language and traditions. Some, like Saudi Arabia, Qatar, Kuwait and the UAE are mostly desert. Others, such as Oman, Morocco, Egypt, Tunisia and Lebanon have exotic coastlines and rivers and abundant agriculture. Egypt’s population stands at around 84 million inhabitantsiii whereas tiny Bahrain has only about 1.5 million people within its bordersiv. In 2013, Qatar had a Gross Domestic Product (GDP) per capita of USD 96,814, the highest in the world, while Yemen ranked as one of the world’s poorest countries, with a GDP per capita of only USD 2316v. Some of the 11
C am els, Sheikhs and Billionaires MENA countries are riddled with conflict – think Algeria, Lebanon, Iraq and more recently Egypt and Syria – while others are extremely stable, like Jordan, Morocco, Oman, Qatar and the UAE. Some states are poor, while others are wealthy, and natural resource endowments are also a key differentiator among them. Kuwait, the UAE, Qatar, Saudi Arabia and Libya comprise five of the 12 members of the Organisation for Petroleum Exporting (OPEC) and, as a bloc, control some 45% of the world’s proven oil reserves. When compared to these giants, neighbouring countries such as Jordan and Bahrain have little in the way of oil or gas. There are also conflicting definitions of the “Middle East” in political circles. One classic definition is that it includes all Arabic-speaking countries plus Israel. Depending on whom you ask, Iran and Turkey may also be classified as peripheral Middle East states. With the commencement of the “War on Terror” in 2001, the term was further expanded in certain circles to include Pakistan and Afghanistan, though these had long been considered respectively as parts of South and Central Asia. In this book, the phrase “Middle East and North Africa” (MENA) is used to describe the region that extends from Morocco to Iraq and from Oman to Yemen, and includes the majority of both the Middle Eastern and North African or “Maghreb” countries. Camels, Sheikhs and Billionaires deals with the Arab Middle East and North Africa, a region consisting of 16 countries and the Palestinian Territories (highlighted on the following map) and some 350 million consumers.
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The Opportu nity
Italy
Spain
Greece
Turkey
Syria Lebanon Iraq Palestinian Territories Jordan
Tunisia
Morocco
Algeria
Libya
Iran
Kuwait Bahrain Qatar
Egypt
Saudi Arabia
UAE Oman
Mali Niger
Yemen
Chad Sudan Ethiopia
Figure 1: Map of countries in the MENA region
I have chosen not to include Iran, Israel or Turkey, primarily because the cultures of these countries differ significantly from those of the Arab nations. Reflecting the differentiation that is made by people from the MENA, I have also chosen to treat the region as three smaller regions or “clusters” within one: The Gulf – known in Arabic as “Al Khaleej” – consists of the Gulf Cooperation Council (GCC) states – Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, UAE – and Yemen. The Levant – known in Arabic as “Bilad As-Sham” – comprises the Arab countries on the northern edge and northeast side of the Arabian Peninsula – Jordan, Iraq, the Palestinian Territories of Gaza and the West Bank, Syria and Lebanon. North Africa – in Arabic “Al Maghreb”, or “the West” – includes Algeria, Tunisia, Morocco, Egypt and Libya. 13
C am els, Sheikhs and Billionaires As the Arabic language – the glue that binds the Arab world – spread east and west from The Gulf, the three clusters became part of a single but complex cultural entity, while simultaneously evolving their own unique identities.
Why the Middle East and North Africa? “So,” I hear you thinking, “I live in Sydney, repeatedly voted the world’s first or second most liveable city, in a state with an AAA credit rating. My company exports to New Zealand and the US and we’re doing well. Why on earth would I want to want tackle the challenges of the Arab world?” Paradoxically, in the early 1990s, people were asking the same questions about the BRIC (Brazil, Russia, India, China) economies. These days, Western companies and Western governments are mad about doing business the BRICS and in Asia, particularly China. This is hardly surprising, given the stellar economic growth of Asia’s economies since the early 2000s. Asian markets have shown extremely strong growth over the past few years and East Asian markets continue to grow at more than 7%, generating 40% of global growth and one-third of global trade in 2014 – higher than any other region in the world. Compared to the size and ease of developed markets, the economy of the MENA markets is very similar to what the BRIC markets were 25 years ago: relatively modest, complex and easily ignored. While the BRIC economies accounted for a little over 10% of world GDP in 1990, today they command a share of more than 25% of world GDP. The BRICS’ share in world trade has also improved significantly over the last two decades, from 3.6% to over 15%. Although the MENA region currently only accounts for about 5.8% of world GDP and 4% of world trade, the high levels of economic and population growth in the MENA region over the last decade suggest strong ongoing growth on several fronts. Given this trend, it is surprising that more 14
The Opportu nity of those companies that trade with the BRIC and Asian economies are not looking at the MENA as a source of new markets. So, let’s take a quick look at why your company should consider expanding to the MENA region.
The MENA is rich in resources The Middle East and North Africa region is a large market, home of 60% of the world’s energy resources in the form of oil and gas and located on the crossroads between Asia, Europe and Africa. The MENA contains six of the top 15 oil-producing countries, three of the top ten gas-producing countries and is, therefore, likely to be a source of long-term financial security and purchasing power.
Promising economic growth In sharp contrast to the world’s developed markets, economic growth throughout the MENA region has remained relatively strong, even during the GFC. Between 2003 and 2013, regional annual economic growth averaged between 5% and 6%, whereas Australia’s economy achieved average annual growth of 3%, the United States 1.7% and the economy of the United Kingdom averaged just 1.3% annual growth. As the table below shows, a number of MENA countries performed extremely well between 2003 and 2013. Qatar was the world leader in economic growth for the decade, achieving a whopping 13.4% and Libya,1 which grew by 11.4%, despite regime change and ongoing political conflict and instability.
1 It is worth noting that although Libya’s average growth over the last decade or so has been positive, its economic performance has fluctuated wildly. For example, Libya’s economy grew by -62.1% in 2011, by 104.5% in 2012 and by -5.1% in 2013. The World Bank, Databank. http://databank.worldbank.org/data/views/reports/tableview.aspx. Accessed 1 July 2014.
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C am els, Sheikhs and Billionaires
GDP per capita GDP (US$ billions) (US$)
Average annual real GDP growth %
Country
Population (millions)
Algeria
38.8
215.7
7,500
3.58
Bahrain
1.3
28.36
29,800
5.31
Egypt
86.9
262
6,600
4.37
Iraq
32.6
221.8
7,100
7.53
Jordan
7.9
34.08
6,100
5.75
Kuwait
2.74
179.5
42,100
5.72
Lebanon
5.88
43.49
15,800
5.48
Libya
6.24
70.92
11,300
9.25
Morocco
32.9
104.8
5,500
4.63
Oman
3.22
81.95
29,800
4.9
Palestinian Territories
n/a
n/a
n/a
n/a
Qatar
2.12
213.1
102,100
13.82
Saudi Arabia
27.35
718.5
31,300
6.78
Syria
17.95
64.7
5,100
-2.3
Tunisia
10.94
48.38
9,900
4.25
5.63
390.0
29,900
4.47
26.05
43.89
2,500
1.86
UAE Yemen
Figure 2: Economic overview of the MENA region economies, 2003 – 2013 16
The Opportu nity Relatively strong economic growth and steadily increasing levels of foreign direct investment across the region are reflected in the growing number of MENA multinationals making significant inroads in developed and developing markets. These include Al Jazeera, the Doha-based broadcaster owned by the Al Jazeera Media Network, which is funded by the House of Thani, the ruling family of Qatar; Aramex (logistics and transportation); Emaar (residential and commercial property developers); Emirates, Etihad Airways and Qatar Airways (passenger and freight airlines); Orascom (construction and telecommunications); Bin Laden Constructions (construction); and SABIC (diversified manufacturing including chemicals and intermediates, industrial polymers, fertilisers and metals). Furthermore, in recent years, a number of prominent international sporting events such as the Formula 1 Grand Prix and the Red Bull Air Race have relocated to the region.
The MENA’s population is exploding The MENA is growing in more ways than one. In addition to explosive economic growth, the MENA has the world’s most rapidly growing population after Africa. Over the next 40 years or so, today’s population is expected to increase by about 80%, from 217 million in 2010 to 392 million in 2050.vi If neighbouring Turkey and Iran were included in the definition of the MENA region, its population would approach 600 million people by 2050. The MENA’s middle class is also burgeoning, driven by increasingly high levels of education in most countries across the region. More than half of the region’s population is less than 25 years old, making it one of the most youthful markets in the world. Other key developed or emerging markets can’t boast the same ratio of young consumers. India comes close, with 48% of the population under 25 years old, but only 34% of both the Chinese and United States populations are under age 25.vii 17
C am els, Sheikhs and Billionaires And despite the stereotypes that paint the MENA region in a negative light, its youthful, rapidly expanding and increasingly affluent population is as hungry for sophistication and the same kind of quality products as consumers anywhere else. The average age in the MENA region is just 24 years, compared to 37.5 years in Australia and 36.8 years in the United States.
This trend towards rapid population growth is creating other subtrends. Because of the youthful age profile of MENA populations the rapidest population growth in coming years will be in the working age segment. Youth throughout the MENA region will enter the workforce in unprecedented numbers and will demand meaningful jobs and sufficient income to be able to start families of their own. Because the number of people entering the labour market will rapidly exceed the number of jobs on offer in the public sector, the growth of the private sector and individual entrepreneurship will be increasingly important in maintaining both economic growth and social stability. This trend will provide opportunities for foreign companies to engage with young, ambitious workforces across the MENA region, and to access highly educated staff at competitive rates.
Neighbouring markets are also growing Immediately adjacent to the MENA region are a number of huge emerging markets such as Turkey, India and Iran. Each of these countries merits some consideration in their own right; given their size and unique characteristics. Nonetheless, their rapid growth and their challenges provide great opportunities for the Middle East as a supplier and hub for the wider region. All these characteristics underpin the huge business potential offered by the MENA region.viii 18
The Opportu nity The MENA markets are diversifying and liberalising Traditionally known for their abundant natural resources and petrodollar wealth, the MENA markets, and particularly the members of the Gulf Cooperation Council (GCC), are beginning to move away from the rentier state model. Over the last couple of decades, a number of states including the UAE, Qatar, Saudi Arabia, Qatar, Bahrain and Oman have embraced liberalisation with the aim of reducing their reliance on natural resources – and exposure to fluctuating resource prices – and stabilising their economic performance as their oil and gas reserves dwindle. The trend towards liberalisation has helped to stimulate growth in sectors such as construction, financial services, health, tourism and renewable energy. It has also created opportunities for foreign companies from all sectors to capitalise on growing markets in already wealthy economies. For example, Qatar plans to transform itself from a gas-producer into a high-wage private sector economy, with a particular emphasis on developing small and medium enterprise. This policy has created a growing need for financial, management and business services and is particularly exciting for foreign professional services companies, many of which are already established in the capital Doha. Qatar’s desire to grow its nonhydrocarbon economy will also require it to significantly develop its education, research and health industries, presenting opportunities for education providers and medical, technological, scientific and business research firms to enter the market. Meanwhile, Bahrain, Saudi Arabia and the UAE have focused on making it easier for foreign companies to operate within their borders by easing restrictions on foreign investments, providing tax breaks for investors and creating free trade zones to facilitate foreign investment. The result is that it is now well within the realm of the possible – even for small firms – to 19
C am els, Sheikhs and Billionaires establish a business in the MENA when it would have been difficult or impossible only a decade ago.
The MENA markets are globally interconnected To the uninitiated, the Arab world may seem like a closed and inhospitable society. But as those who have spent time in the region will tell you, the reality is very different. The MENA region is globally interconnected and open to companies and visitors from around the world. The UAE, for example, is a centrally located hub for international travellers and freight. Traveling by air, you can reach London in seven hours, Shanghai in eight and Delhi in just over two-and-a-half. This natural advantage is reflected in the rapid expansion of the country’s airports. In 2013, Dubai International Airport became the world’s seventh busiest airport, handling 66,431,533 passengers, up from tenth place and 57,684,550 passengers in 2012.ix By comparison, the world’s busiest airport, Hartsfield-Jackson Atlanta International Airport handled 94,430,785 passengers in 2013x. With double-digit growth rates in passenger traffic for 2013, Dubai is likely to move up several spots again in the 2014 rankings, solidifying its status as the major hub connecting the east and west xi and, when it is completed at some point between 2019 and 2021, Dubai’s new Al Maktoum International Airport is expected to have an annual capacity of up to 160 million passengers and 12 million tonnes of freight.xii The enormous growth in passenger air traffic is not restricted to the UAE. According the International Air Transport Association, Oman and Saudi Arabia respectively rank as the world’s fifth and eighth fastest growing markets for international passenger traffic.xiii These statistics demonstrate that the MENA markets are both globally interconnected and attracting expanding numbers of visitors. 20
The Opportu nity Customers demand high-quality goods and services The markets of the MENA are increasingly consumer driven, and MENA customers have become increasingly demanding of the products and services that they purchase. You only need to drive down Dubai’s Sheikh Zayed Road, lined with billboards for all the latest brands to realise that, like consumers elsewhere, consumers in the MENA aspire to the best that they can afford. Typically, they spend their money on high-quality products supplied by companies that make an effort to understand their wants and needs.xiv In response to these trends, the Arab world is developing its own leading, local brands, including Emirates and Aramex in the travel and logistics space, Al Baik in the fast food industry and Almarai in the dairy sector. A diverse and profitable business opportunity awaits foreign companies that enter the MENA markets and seek to understand the Arab consumer. Meantime, local entrepreneurs are capitalising on the region’s boundless opportunities.
To order a copy of Camels, Sheikhs and Billionaires: Your Guide to Business Culture in the Middle East and North Africa, please visit www.dearinassociates.com
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C am els, Sheikhs and Billionaires
Have you ever considered working or doing business in the Middle East and North Africa region and decided that the cultural differences made it all too difficult? Or perhaps you already work there and are finding that cultural misunderstandings are spoiling the experience. If so, Camels, Sheikhs and Billionaires is for you. Camels, Sheikhs and Billionaires demystifies the cultures of the Middle East and North Africa and takes you through the process of how do business there, step by step. Written by former Australian diplomat and management consultant, Cynthia Dearin, Camels, Sheikhs and Billionaires is full of unique insights from a businesswoman who has successfully navigated the cultures of the Middle East and North Africa for more than a decade.
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