Randa Hudome: How do I get my business over to the Middle East?
SUSTG Analysis | 10.17.12
In addition to featured speakers such as President Bill Clinton and Mr. Abdullah Alireza (whose remarks were reported in this SUSTG Analysis post) the recent C3 Summit in New York City presented a number of compelling panel discussions addressing commercial and trade issues related to doing business in the MENA region. Randa Fahmy Hudome, who heads a government relations and strategic consulting firm based in Washington, DC specializing in international issues and the energy sector, was part of the session focusing on ‘How to Get to a Deal, Make it Happen and Make it a Collaborative Success.’ Ms. Hudome shares insights from her experiences advising clients trying to establish themselves in the MENA region and offers a number of guidelines that she has found useful.
Randa Fahmy Hudome: How do I get my business over to the Middle East?
I thought today what I would do is give a little roadmap for those of you who are thinking about entering the market in the Middle East, or perhaps those of you who are already there and find that you want to increase your activity, or perhaps those of you who have tried but are frustrated by your lack of ability to penetrate that market.
So, I’ll start off by saying that I think you’ve heard quite a bit this morning and this afternoon about the overview of the market in the Middle East. It is an extraordinary place to be doing business right now, especially for American companies that indeed are suffering the effects of the economic downturn here in the United States.
In addition to that, because of the geopolitical factors and the changing nature of the region, including the increase of renewable energies (particularly in the Arab world) the potential for future growth is huge. And by the geopolitical factors – focusing on what I call the “Arab Awakening” countries (Egypt, Libya, and Tunisia) – the reason why the potential for future economic growth is great is because indeed they have had these changes in governments that will lead to a more transparent marketplace, which is not dominated necessarily by the government.
So as far as a strategy goes for market entry, let’s start with the beginning: how do I get my business over to the Middle East?
What I do is encourage my clients to go on the ground and visit the places themselves in which you would like to do business. Go and explore for yourself. Do some initial research, especially with the area of business that you are focused on, but certainly go on the ground and do a visit. I’m not talking about one trip or even two trips; sometimes it’s going to take more than that. And indeed what our earlier speakers said this morning – you must send your senior personnel over there in order to indicate that you are serious about doing business.
I’ve seen throughout my travels in the Middle East and my business in the last 10 years something I call “The White Guy a Week” syndrome. Now, with all due respect to those White Guys in the audience – what this is, is basically is a bunch of guys who fly into Dubai, Abu Dubai…Jeddah…with a suitcase maybe just a briefcase in hand and they’re generally with hedge funds and they’ve got a new business which they need investors and they demand to meet with the top investment advisors of a particular family or sovereign wealth fund, and they ask for investment. And when the question turns on them, “Well, we’d be interested in your project but what about you investing here in the Middle East in our project that we have going?” the White Guy flies out and never comes back.
And so, what you need to do is really get your presence on the ground there and go frequently.
While you’re on the ground, it’s also very important to identify opportunities. What specific opportunities are there for your company or business? And that isn’t as easy as it looks, because you must determine where that country is going, and where the private sector within that country is going and growing.
The third area is that you must consult with in-house legal council that is endemic to that particular country. And with all due respect to American lawyers who practice in particular countries, it is so important to have legal presence and legal council on the ground who are in that country and who understand the laws of that country. Why? For a number of reasons, including the contract you may engage in may be governed generally by the laws of that country, and so you want to make sure that you are not going to bypass any of those laws – but also you want to make sure that your legal presence as a company doing business in that country is actually legal. Are you registered appropriately? And in what nature do you have to register your company in order to do business there? And that goes to, are you going to contract directly with the government of the Arab country for a particular contract? Or, are you going to operate as an independent operator? Do you have to joint venture in a particular project in which the government says that you must JV with one of our local countries…60-40, 50-50, 75-25…Or are you going to conduct yourself as a subcontractor where a larger company perhaps US, perhaps international, has already been in this country and you are going to subcontract to them? Are there any legal requirements within that country in which you must fulfill?
The next step, certainly, is when you are operating in that country, and this is goes to, I think, the heart of the matter for American companies operating in the Middle East. Oftentimes American companies are required to choose to hire an agent or a representative in that country and the first complex problem with hiring that agent is who do we hire? Who is a well-known businessman or businesswoman in that country who can help me advance my business interests? How does one, in essence, vet that person? Who is this person? How many types of this business has he or she done? What do we know about the business, the family, and any possible connections they may have to the government?
And while I won’t go into detail about Foreign Corrupt Practices Act (FCPA)… we all know that is the big elephant in the room, and I’m not talking about the political elephant – I’m talking about foreign corrupt practices act which American companies are so well aware of, but so very afraid to ask about, and the place in which American companies often get in trouble is that they don’t vet their agents appropriately, and they get into FCPA corruption issues because of that.
Finally, of course when you do engage in a contract with the government or the contractor of the joint venture, what are the terms of that contract? You must be very aware of what those terms are in order to be able to legally fulfill those terms.
Now as far as identifying opportunities, this oftentimes is difficult too for many US companies on the ground, and this is a problem in which companies may hear about an opportunity in a particular Middle Eastern company, and they fly over there and they decide is this real? Or is this imagined? Now, what I would caution you to do is certainly due diligence, investigation, hire people who know the country, talk to people, do what intelligence gathering you can about a particular opportunity. But what I would caution you against doing is what I call the “RFP switch-and-bait.” Sometimes the “RFP switch-and-bait” goes something like this: “Oh, American company: come over here, we do have an opportunity why don’t you help us write this RFP or maybe give us an RFP that you’ve drafted before, we’ll work on it and then you’ll get the award.” And sometimes what actually happens is they take your knowledge and your language in that RFP, and then they shop around to your competitors and others throughout the world, if not the United States, so I would be very careful about that.
In addition you have to be able to identify whether there’s an immediate opportunity or a long-term opportunity. And it all depends upon your ability to handle risk in your stomach if you will. For risk and risk factors, you have to be able to identify whether they are immediate or long-term, because that’s going to depend upon how many people you put on the ground, and how much resources you spend leading up to that particular opportunity.
And then there’s always what I call the chicken-and-the egg problem, where I have clients that come to me and say, “Randa, we want to do business in Libya. But should we open up an office first and have an established presence there? Or should we wait to get a contract first and THEN open up our office there?” And of course I always advise them of the former.
If you really are intent on doing business in the Middle East, and in a particular country or in a region or countries, I advise you to set up your presence in a particular country in order to indicate to the country and the people living in the country that you are here to stay. That you’re not just going to fly out and never come back. One of the ways that you can do that is to establish a more permanent presence. And some places all it takes is setting up an office, hiring a local national to answer your phones, putting up your corkboard insignia on the back of the wall, and going to the lawyer and registering your company legally – and you’re up and running.