Obstacles cited to business in EU and Gulf

Companies in the European and the Arabian Gulf have highlighted a raft of obstacles to a greater flow of foreign investment between the two regions.

Companies in Europe and the Arabian Gulf have highlighted a raft of obstacles to a greater flow of foreign investment between the two regions.

European businesses cited restrictive foreign ownership as a barrier to investing in the Gulf, according to a survey of investors from both regions. Limitations on hiring women in certain areas and visa regulations were also raised by respondents to the survey.

"One third of respondents commented that it was largely local ownership constraints and staff costs that affected their investment decision," said Maximilian Bossdorf, the manager of business development in Abu Dhabi for the German Emirati Joint Council for Industry and Commerce, which conducted the survey.

"There are some regional differences. Female workplace participation has been a major concern, especially for those participants investing in Saudi Arabia," he added.

"For some of the GCC states foreign ownership rules, especially the 49 per cent/51 per cent foreign rule, has been an issue"

In the UAE, foreign investors establishing companies outside of a free zone must have a majority local partner.

GCC investors highlighted cumbersome visa policies for business travellers as one of the challenges facing investors in the European market, according to the survey of 84 European and GCC companies with investment interests in the respective regions.

Overall, investors on both sides viewed the investment environment in the respective regions as favourable.

It comes as both regions seek to reinvigorate commercial ties against a backdrop of stagnant economic growth in the euro zone, the single currency project used across many EU countries. The rate of growth in bilateral trade between the EU and the GCC slipped to 6.3 per cent last year to reach €122 billion (Dh5.83bn). It followed growth of 63.7 per cent the year before.

Delegates at a EU GCC Invest conference in Abu Dhabi yesterday echoed some of the findings of the report.

"It's relatively easy to start a business in a free zone but if your business becomes more mature you will have more assets, more people, revenue will grow and free-zone entities are a limited option," said Menno Douwes Dekker, the managing director of Hoyer Middle East & India, a German logistics group. "We as a business have to be operating outside a free-zone entity and have offices outside the free zone as when you're a free-zone entity you're limited to free-zone activities."

The UAE has been one of the pioneers of the free-zone model, starting with the opening of Jebel Ali Free Zone in 1985. Outside such areas, foreign companies are limited to a 49 per cent ownership of operations they establish.

But other parts of the GCC operate more open foreign ownership rules. Sebastian Gerlach, the manager of business development at Bahrain Economic Development Board, said foreign companies there were able to operate freely across the kingdom.

Other business executives said not enough focus was being given to foreign small and medium-sized businesses investing in the GCC.

"SMEs are the sustainable foreign direct investment for any developing country," said Mazdak Rafaty, the managing partner of Ludwar International Consulting, a consultancy based in Ras Al Khaimah. "But in all the foreign direct investment strategies you don't include SMEs as they all focused on multinationals. But for SMEs the problems start with registration, who are the suppliers and who are the legal entities you can go to?"