Written by Shoaib Bajwa, CEO CTD Advisors
Regionalism has become an important trend globally, particularly in areas of increasing importance to international commerce such as the Middle East.
Discussions, policies and actions are now being led by regional alliances rather than countries themselves. It is important to remember that areas like the Middle East are not always homogenous cultures. Each sub-region, country, tribe and company has its own way of doing things.
When considering Eastern expansion, corporates must therefore delve deeper into the details of each individual country in order to unlock the opportunities available and manage their reputational risk.
For investors and corporates interested in business in the region, several challenges present themselves. Beyond the serious security issues that dominate the agenda, the politics and dynamics both within and between each country have become significantly more complex.
Recent events such as the murder of journalist Jamal Khashoggi inside Saudi Arabia’s consulate in Istanbul, the Saudi-led blockade on Qatar and subsequent diplomatic crisis and the ongoing war in Yemen illustrate this point. In all cases, it is crucial to understand what some of the underlying forces are; shifting alliances (loyalty to the House of Saud and the Old Guard vs the New Guard), inter-country and family rivalries (the Qatar blockade), sectarian tensions (the war in Yemen as a proxy for the regional war against Iran), and strategic interests (the UAE and Saudi Arabia prioritising the ideological threat of moderate political Islam). These forces have added an additional layer of complexity for foreign businesses in that they must be taken into consideration when it comes strategic decision making.
Compounding these issues are many cultural considerations. A number of traditional and religious customs are tied to Arab culture, which ultimately influence the way business is conducted.
In Saudi Arabia for example, loyalty to family, House of Saud and divine Islamic law is key to understanding Saudi’s corporate mentality – thinking is collective, oriented around family and tribe and has a strong sense of divine will, meaning most people are happy to accept the status quo. Other cultural considerations across the region include the manner in which negotiations are reached, the use of contact-sponsors as a vouchsafe and the importance of trust in business relationships.
In certain Middle Eastern countries, such as the UAE, many traditional attitudes and business practices are evolving towards a more modern, westernised approach. However, Arab societies in many ways remain traditional trading societies – hard bargaining is common, trust and personal relationships play a critical role in business and religion continues to pervade many aspects of life, including laws, education and conversations.
In order to successfully navigate such geopolitical and cultural sensitivities, businesses must move away from adopting standardised risk mitigation strategies and relying on publicly available information. Such an approach is increasingly proving to be inadequate for understanding the nuances of region. Rather, it is crucial that businesses employ Strategic Intelligence (SI) in order to reach informed business decisions.
While it may not be possible – nor practical – to conduct such an in-depth analysis for every potential business transaction, it is imperative to adopt this approach for strategic business decisions, where knowledge-based advisory is of paramount importance. Without this, it is near impossible to obtain valuable insight into how certain geopolitical and cultural complexities can be leveraged to achieve a business advantage.