Page 173 - Aamir Rehman - Dubai & Co Global Strategies for Doing Business in the Gulf States-McGraw-Hill (2007)

A Piece of the Action: Strategies for Entering the GCC Market 157

government paperwork. Free zones have made it easier for
multinationals to enter certain GCC markets than one might have
thought possible only 10 years ago. Especially as GCC states
compete for international presence, free zones will need to
demonstrate even greater appeal to multinationals in order to draw
them in. One prime example of competition among free zones is
that between the Dubai International Financial Centre (DIFC) and
the Qatar Financial Centre (QFC). Both offer state-of-the art
infrastructure and support services, and both boast impressive lists
of multinational firms doing business there. 26
While free zones provide global firms an easy way to establish
a presence, market access is not always complete. First of all, free
zones are not available in every country and are specialized by
sector (e.g., technology, health care, education, etc.). Further, being
registered in a free zone does not give the firm the same status and
privileges as those enjoyed by “onshore” (local) firms. Institutions
registered at the DIFC, for example, are prohibited from taking
deposits, offering credit, or offering direct insurance in the UAE
(although reinsurance and insurance brokerage and management are
27
allowed, perhaps because of the risk involved). They therefore act
more as “offshore” entities or headquarters offices for the region.
While Dubai Internet City has attracted leading firms such as
Microsoft, HP, and Oracle, the offices there are not consumer facing.
Upcoming free zones such as the Dubai Flower Centre Free Zone and
the Dubai Carpet Free Zone promise to be more retail in nature, pos-
sibly with access to the general UAE market. Indeed, WTO require-
ments for greater foreign access to domestic markets may slowly
erode the advantages of free zones.
As multinational firms migrate across the Engagement
Spectrum in the GCC markets, direct market entry and acquisitions
will become more feasible. The ongoing attractiveness of the region,
along with multinationals’ need for increased involvement in
emerging markets, will fuel this growing strategic focus. For the
short- and medium-term future, however, shallow-engagement
and moderate-engagement strategies, when executed well, can
help global firms tap the significant opportunity of the GCC while
limiting risk and allowing an unschooled foreign firm to learn from
highly sophisticated local partners.