How to do business in Dubai

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Dubai

More than 5,000 UK firms operate in the UAE, our fourth-largest export market outside Europe. Its business hub, Dubai, has recovered from recession to map out a dazzling future that will require the help of innovators from around the globe. As the countdown to Expo 2020 starts, British experts in the city’s commercial workings highlight the opportunities on offer

Are you happy at work today? It’s a question that the government of Dubai is encouraging nine-to-fivers to answer by tapping one of three emojis – smiling, frowning or poker-faced – on a mobile app.

If you should wander through one of the city’s opulent shopping malls, you’ll see the same trio of emojis on touch-screen terminals called Happiness Meters, prompting you to share your feelings. The UAE’s concern for people’s wellbeing doesn’t end there, either: it even has a minister of state for happiness.

Cynics will view Dubai’s “smart city” plan to become the world’s happiest metropolis as a typical headline-grabbing ploy to file alongside gold-plated hotels, artificial-island resorts and the world’s tallest building.

Yet there’s a strong focus on nurturing the positivity that can sustain the level of foreign investment that has fuelled Dubai’s rise from a tiny trading post to a glitzy hub of international commerce – in only 50 years.

“Dubai has to be open, as it doesn’t have the oil reserves that the rest of the UAE possesses,” says Joe Hepworth, founder and CEO of British Centres for Business, which provides trading support for UK firms in the UAE.

“Being outward and international has always stood Dubai in good stead. You can see this in its airlines, ports and malls. This is all about attracting businesspeople. It’s in Dubai’s DNA.”

There’s good reason for optimism here. Dubai was hit hard by the 2007-08 financial crisis, which caused the property market to collapse and forced it to go cap in hand to its oil-rich neighbour, Abu Dhabi, and the UAE’s central bank for bail-outs totalling nearly £16 billion.

But today the prodigal city’s swagger is returning. Dubai’s GDP is expected to grow by 3.8 per cent in 2020 and, tellingly, cranes are filling the skyline again. Even The World – the much-maligned artificial archipelago designed to resemble a map of the Earth – is back under construction after a long hiatus.

Dubai is also preparing to host Expo 2020, which is expected to welcome 25 million visitors and attract £6.3 billion worth of trade opportunities over its six-month duration to April 2021.

British companies such as Innovision and Global Infusion Group are already helping to organise the event and there is still time for other UK firms to get involved in ticketing, infrastructure, entertainment and catering, according to Hepworth.

A bold vision

Beyond Expo 2020, Dubai offers plenty more potential for British enterprise. For one thing, there are strong ties between the UK and the UAE, which is home to about 100,000 British nationals and also a popular holiday destination (about 1.5 million tourists from the UK visited last year).

What’s more, the Department for International Trade’s export credit agency, UK Export Finance, has earmarked £9 billion to help British companies do business in what is already our fourth-largest export market outside Europe.

In April, Liam Fox, secretary of state for international trade, revealed that the UAE had purchased UK goods and services worth £10.5 billion in 2018, calling it “a natural home for British business in the Middle East”.

Back in 2010 the UAE’s government published UAE Vision 2021, a wide-ranging development plan under which Al Maktoum International Airport, 23 miles south-west of Dubai’s city centre, is likely to become the world’s largest airport in 2027.

Another goal is for Dubai to become the world’s most sustainable city by 2050 – a particularly bold target, given that a decade ago the city had the world’s biggest ecological footprint per capita.

Renewable energy is key to this, so there are plans to expand the Mohammed bin Rashid Al Maktoum Solar Park, already the world’s largest photovoltaic power station. These and other big infrastructure projects present opportunities for British firms, particularly those in construction and consulting.

Dubai wants driverless cars to form a quarter of all road vehicles by 2030 and also hopes to have the world’s first commercial Hyperloop, which would cut the journey time between Dubai and Abu Dhabi from 80 minutes to 12. To realise such hi-tech goals, the UAE employs the world’s only minister of state for artificial intelligence.

In a place where seemingly fanciful projects happen and then get surpassed – Dubai Creek Tower should relegate Burj Khalifa to “world’s second-tallest building” status by 2022 – few people here doubt that these plans will come to fruition.

To achieve such innovations, businesses worldwide have been invited to join the Dubai Future Accelerators programme – and it’s here that UK firms could find an advantage, according to Hepworth. “There has always been a thirst for British creativity here,” he says. “Initially that was in marketing. It’s now moving to tech such as artificial intelligence, where the UK leads the world.”

First-mover advantage

In 2013 the chief executive of PVL, a West Sussex firm supplying high-vis vehicle livery to emergency services around the UK, spotted a gap in the market when he visited the UAE – and acted fast.

“I literally chased an ambulance to Abu Dhabi,” recalls Nick Broom. “We initially kitted out six ambulances, but identified that the fleet could grow to maybe 300. The client liked our products because it couldn’t source them elsewhere.”

Within a year, Broom moved with his family to the UAE, placing his children in local schools.

Emiratis’ fondness for reliable British brands is not news, of course. In 2015, for instance, flag carrier Emirates placed a £6.1 billion engine order with Rolls-Royce.

In recent years there’s also been a sizeable Emirati investment in the UK, from Manchester City Football Club to Gatwick Airport. “Emiratis see London as another state of the UAE,” Broom says, perhaps only half-jokingly.

Hepworth’s advice to other British firms seeking a foot in the door is to “play up your UK credentials. Also remember that, even though Emiratis know London well, they won’t necessarily buy high-street brands. If you’re in that sector, I’d strongly suggest showing your wares in Knightsbridge or Chelsea.”

Shopping is the UAE’s favourite pastime. Retail and wholesale account for more than a quarter of GDP, thanks in no small part to bargain-hungry tourists. (Of the world’s most-visited cities last year, Dubai ranked behind only Bangkok, London and Paris.) British food exporters are doing particularly well here. Recent successes include Ministry of Cake and family popcorn business Joe & Seph’s.

British education providers are highly sought after too: 11 UK universities have established a presence in the UAE over the past 15 years. In 2005 Edinburgh’s Heriot-Watt University was the first of these to set up a campus in the Dubai International Academic City.

“‘British’ is very much a brand here,” says Ammar Kaka, the university’s vice-principal in Dubai. He adds that the appetite for British education has spawned opportunities to deliver related services. Under the UAE government’s “Emiratisation” policy, for instance, citizens are being encouraged to work in the private sector, which is in turn fuelling demand for UK training providers.

Entertainment is another thriving market for British players. “Dubai is known for lavish parties and family entertainment in shopping malls,” says Rebecca Marks, co-founder of Devon-based Scarlett Entertainment, which opened an office in Dubai Media City last year. With a roster spanning dancers, trapeze artists and “Halloween mermaids”, her business serves corporate events around the UAE as well as the F1 grand prix in Bahrain.

Dubai metro

Tax incentives

The number of so-called free zones worldwide, in which businesses are granted exemptions from certain taxes and regulations, is growing, but few can match the incentives available in Dubai’s 20-plus free zones.

Companies operating within their confines enjoy a number of concessions, including exemption from import duty; 100 per cent repatriation of capital and profits; and full foreign ownership. Overseas firms based in a free zone also don’t need to secure the backing of a local sponsor, who would then take a 51 per cent stake in the company’s UAE business.

But Dubai is known as a low-tax jurisdiction in any case, having only just introduced VAT last year – and even then at a rate of five per cent. Only banks and oil companies pay corporation tax here.

This can present a dilemma for incoming ventures. Marks explains that, while “the lack of corporation tax makes our accounting process much easier and enables us to invest more profit in growing our Dubai business, setting up here was pretty stressful. We were torn between becoming a free-zone company or a mainland corporation, where you need the local sponsor.”

Scarlett Entertainment eventually chose the latter option, largely because free-zone firms aren’t allowed to trade in the wider UAE without a local agent. “One of our main reasons to be in Dubai was to win contracts,” says Marks, who is a member of IoD South West. “We didn’t want to chance the free-zone option, because that way we would still be treated as an international company.”

Offering foreign firms tax concessions has been key to Dubai’s development. Although the UAE has the world’s sixth-largest oil reserves, 95 per cent of these lie beneath Abu Dhabi. By contrast, Dubai’s oil is likely to be exhausted within 15 years, making diversification the only sustainable economic model. Dubai keeps its expat residents – 84 per cent of the emirate’s 3.1 million population are immigrants – happy through measures such as funding their medical treatment.

With this in mind, Kaka suggests that there’s less need for British newcomers to bring in more employees from the UK, as there are already plenty of well-educated expats in Dubai who “know the culture, which wasn’t the case 15 years ago”.

Challenges and controversies

Dubai’s location has traditionally enabled British goods to be re-exported to the rest of the Middle East. It’s allowed PVL to make inroads into Kuwait, Oman, Qatar and even Azerbaijan, while Scarlett Entertainment is targeting Saudi Arabia, which is spending billions in the firm’s sector.

But, with new rivals from Asia undercutting them, western firms can’t afford to be complacent. Hepworth explains: “There has been much focus here on attracting Chinese investment – Chinese tourists were given visa-free travel this year. As a foreign company here in the UAE, you have to be globally special, so don’t rest on your laurels.”

Furthermore, the fact that the UAE severed diplomatic ties with Qatar in 2017 has been a real setback for businesses such as PVL, which trades in both countries, especially given that flights between the nations have been suspended.

“It’s a nightmare,” Broom says. “It’s quicker for me to travel from the UK to Qatar than from the UAE, as I now need to go via Kuwait or Oman.”

Life in the UAE isn’t always as easy – or inclusive – as its beach-club sundowner networking sessions would suggest. This authoritarian state has the power to censor publications and websites, blocking content promoting LGBT+ interests, for instance.

“There’s a lot of surveillance,” says one British expat. “You can’t get a mobile phone without having it linked to your passport and you’ll get a ping on your text if you speed on a motorway.”

This heavy-handed approach has been highlighted by a series of recent legal cases involving British expats and tourists. Last year academic Matthew Hedges was handed a life sentence for spying – a charge he denied, claiming that he’d been researching his PhD. He was pardoned after six months of mostly solitary confinement. Dentist Ellie Holman was detained in Dubai for three days after accepting a complimentary glass of wine on a flight, while a British electrician on a stopover was pardoned after initially receiving a three-month jail sentence for public indecency, simply for brushing past a fellow patron in a crowded bar.

Dubai’s happiness project might also want to gauge the views of its construction labourers – mostly from India, Pakistan and Bangladesh – for whom allegations of poor treatment and low pay are no smiling matter.

While the state has drawn international ire for such events, there’s little doubt that its private sector is responsible for many positive and inspiring developments. And, whether working in Dubai has you clicking on a smiley emoji at day’s end or not, there’s no denying the emirate’s golden commercial touch, born of its audacity to dream big.

“What Dubai has done in 50 years would take other countries a century to achieve,” Hepworth says. “Things are only just developing.”

Visit iod.com/information for advice on doing business abroad.

Leading experts in international commerce will be speaking at the Global series of IoD Open House on the Road events this autumn. For further details and to book your place, visit iodopenhouse.co.uk

Case study – click here to find out how IoD member Rebecca Marks set up her business in Dubai

About author

Christian Koch

Christian Koch

Alongside his work for Director, Christian has written features for the Evening Standard, The Guardian, Sunday Times Style, The Independent, Q, Cosmopolitan, Stylist, ShortList and Glamour in an eclectic career which has seen him interview everybody from Mariah Carey to Michael Douglas through to Richard Branson with newspaper assignments including reporting on the Japanese tsunami and living with an Italian cult.

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