What Are The Three Entry Approaches to GCC Business Market?
The economies in the GCC region continue to recovering rapidly during the post-pandemic era, despite political instability in the Middle East. According to the International Monetary Fund (IMF), in the last two-year following the COVID-19, the GDP of the GCC countries grew both in the non-oil and real oil GDP.
To whom with global aspirations
This impressive recovery in the GCC region was made possible by high oil and gas prices during the last couple years, coupled with a willingness of GCC governments to continue increase spending on non-energy project (as a long-term governments investment) to achieve the diversity and balance in their economies away from the energy-production projects.
Aside of this strong fiscal ground; the rapidly increasing populations, legislations improvement, and the social openness to change, all of that make the GCC market collectively important for any business with global aspirations for the next (20) years.
The GCC governments continue increase spending on non-energy project (as a long-term governments investment) to achieve the diversity and balance in their economies away from the energy-production projects
But.. isn't a choice!
Despite the challenges and opportunities coming of this economic transition in the GCC region for its various sectors and industries. Yet, the entry (as foreign investment) to this business arena is not a choice! it's needed an approach.
All GCC countries impose restrictive rules on the foreign ownership level or controlling the local businesses. These restrictions ordinarily cause a challenge for foreign investors when setting up businesses or investing in the GCC.
Three Entry Approaches
Generally, the foreign investors have three approaches:
1- Direct Entry
the investor pursues the path of foreign investment rules. That requires to choose one of GCC country as location for regional office, and follow its foreign investment rules. Usually, this choice is easy for gaolable well-known brands, that will receive a special facilitation for adding a publicity for investment environment and encourage other competitors of the same level.
2- Joint venture
The investor identifies a local company which will contribute to the business, share any financial risk and facilitate business development and operations on the ground.
3- Hidden Entry
The investor concludes arrangements with a local business partner (entrepreneur or company) who will act as a legal cover to avoid the foreign investment restriction. This choice is convenient for non-known brands, or foreign entrepreneurs who want to invest in GCC region.
Worth to know
Each of these approaches has its own rules, advantages and disadvantages, threats and opportunities. It worth be noted, that there is no preference among these approaches. For example, a direct entry doesn't necessarily increase the chances of success! Contrariwise, it may increase the risk.
The right step
There are other criteria that determine the best approach for entry, these criteria are unique and vary from business to other. However, such an assist can be obtained by a local expert, who has the experience and knowledge to advice with the best entry approach.