How to take advantage of the Multi-billion Israeli-UAE trade deal

Interview of Prof. Laurent Marliere,

Expert in doing business in the Middle East

Which asset classes will benefit from the deal ?

The whole GCC is transforming from an oil economy into a non-oil economy. One of the cornerstones of the ambitious sovereign “Vision plans” operated by those countries rely on digitalization.

On the other side, Israel is the Silicon Valley of the Middle East with a tech and start-ups scene.  Israel punches way above its weight in the digital economy.

The immediate roadmap is thus technology.

The demand from the Emirates implies IT, cyber, IoT, AI, Blockchain and Cryptocurrency, autonomic vehicles, mobile and digital, ad-tech, fintech, insuretech, big data, gaming, life sciences, clean tech, telecommunications, internet and web services, software, hardware, cybersecurity, real estate tech, agro-tech…

UAE investors do not consider technology companies solely as a target for financial investments. Many of them are interested in core technologies to deploy on the ground. The UAE investment landscape is very diverse and sophisticated. It starts with the sovereign wealth funds, through the institutionals, the family offices, VC’s and the HNWI.

Emirati investors, are also extremely interested in sectors sharing  similar challenges, such as, security, desert agriculture, water solutions, energy, healthcare, retail and real estate.

What about  export opportunities ?

Israelis tend to see the inbound potential for investment into Tel Aviv. However, the opportunity really is outbound and export as well.

Israeli corporations could enter the UAE as gateways for gaining access to other Middle Eastern markets. The introduction of commercial flights between the two nations will also create formidable business and tourism opportunities.

The UAE has the freest economy in the region. Israeli corporations have tremendous opportunities in a market that imports goods and services worth nearly $250 billion a year. The country is a popular destination that accommodated 17 million tourists last year. Its liberal lifestyle, especially Dubai, will attract manpower from Israel.

The EXPO 2020, the world exhibition held in Dubai, will be hosted in 2021 and will attract many Israeli corporations willing to showcase their expertise to the Arabic world.

What are the pitfalls ?

On both sides, there are many brokers around without a real track record. They call you up and pretend they know a Sheikh or a Royal and will arrange a connection. Besides, the relationship between Israel and the GCC was mainly build upon security, so there is a flock of former military attachés who will try to leverage their Rolodex.

This can lead to an unfortunate approach because the category of people they involve are not real business professionals or even decision-makers.

Politics should be off the table. The Israeli-Arab relationship was exclusively focused on politics but a new era starts and it is an economic era. Besides, many people around the table from the Emirati side will not be Arabs but Asians or Europeans. Indeed, in the UAE financial sphere, managers are foreigners and report to the UAE board or owner of the company.

The way to do business in Israel is very direct and blunt whereas in the Gulf, things take more time. It will be a disappointment for Israelis to think that they will harvest quick wins. Emiratis are appreciative of a certain formalism even in the language.

Gulf companies like to start with a Memorandum of Understanding (MoU) which for Israeli would be considered like a binding contract, whereas on the Emirati side, it is a first step to enjoy a potential cooperation. A culture clash can be an issue. 

There are three large categories of law. Common law, Civil law and Sharia law. Although the rule of law in the Gulf is often inspired by the business law codes of the West, Shariah law may apply to investments and trade. One needs to fully appreciate that specificity.

What about the entrepreneurial spirit?

The Israeli startup model is based on the US model of entrepreneurship relying on VC’s. In the GCC, the finance to encourage technological initiatives comes from the government and institutional investors.

The UAE is interested in Israel's entrepreneurial culture. Abu Dhabi and Dubai are keen to attract talents and understand how Israel was able to produce such a large number of start ups. 

Although geographically so close, these are two new worlds which finally meet. Peace is often built up on common economic grounds and this is a unique breakthrough for the countries and the people.

What have you learned about doing business in the Middle East in so many years ?

Dealmaking does not have to occur in Tel Aviv or Abu Dhabi. It can take place in common grounds like New York or London. Indeed, it will take time for both regulatory systems to enable concrete business.

Dubai tends to be the capital of the Islamic economy. One of the fastest growing segments of world economy which encompasses one human being out of four. Israel, with its Kosher tradition, is best placed to understand and benefit from the multi-billion Halal economy.

To be successful in market entry, you need to equip yourselves on both sides of the border with reliable professionals to avoid losing incommensurable amounts of time, energy and money…

 

Laurent Marliere is one of the recognized experts of doing business in the Middle East. He is the CEO of ISFIN and lectures strategy for emerging markets in different universities in Europe and the Middle East.

He can be contacted on LM@isfin.net