Tag Archives: GCC

Developments in Dubai Medical Tourism

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Just finished reading an article in Monday’s Gulf News discussing Dubai’s grandiose plans for attracting medical tourism. Indeed, the UAE is on its way to becoming a hub in many areas, such as logistics, banking, shipping, and even Islamic finance. Medical care must be high on the agenda.

Using its role as a transport hub and a highly desirable place to live, the Emirate has taken steps to realize its ambitious plans to be a health care hub.  This is in line with the Dubai Health Strategy 2013-2025 that was rolled out recently.  This will include three new hospitals and 40 clinics.  With Expo2020 coming its way, it would be expected that this be the case.

One of the more interesting issues I noticed in the article was

What does this mean for health care companies seeking to get a piece of the action?

1. Due Diligence. Do you know who your partner will be? If you are not setting up in the free zones and do need a partner substantial due diligence should be done, as a bad partner can open the door to various types of liability.

2. Territoriality.  Companies seeking to make their first foray into the Persian Gulf region should take care to note territoriality in their contracts.  Irrespective of whether you are are entering into a joint venture, distributorship or franchise, territory is key.  It’s best to make sure contracts outline what territory – this is particularly important in a cash region where duplication and replication in other jurisdictions is quite common.

3. Intellectual Property Law. Particular attention must be paid to IP rights to make sure there is no misappropriation and that all requisite rights are licensed while control stays with the principal.

4. Human Resources Issues.  It is critical to get people on the ground and making sure you are able to have the visas processed and are fully aware of local labor law issues is absolutely imperative.

5. Compliance.  Compliance is the name of the game these days and appears to be taking hold in the GCC as well. Whether you have due-diligence, know your customer (KYC) type requirements or you want to make sure you comply with the US Health Insurance Portability and Accountability Act of 1996 (HIPAA) privacy standards (which may be come the gold standard, even abroad) and potentially applicable data privacy guides. There may be trade-related matters to deal with, such as ensure compliance with US sanctions on Iran and Syria, which are often in flux.

6. Confidentiality. Use Non-Disclosure Agreements (NDAs) where possible. This will help keep your plan under wraps and will help guard against somebody spilling the beans as they say. The cities in the Gulf (Dubai being no exception) tend to a bit small and people can talk!

A good foray will be well-papered, meaning there should be robust, comprehensive contracts in place that protect the parties.  A solid entry is one that takes all the legal issues into perspective to deliver an optimal strategy that will move beyond any type of “gold rush” approach and into one that can create legal stability for the future.

Lessons from last week’s US-Saudi Business Opportunities Forum

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I was in Los Angeles last week, in large part to attend the annual US-Saudi Business Opportunities Forum. This yearly event brings together a wide range of top tier speakers along with business people and government officials from around the world (mainly the USA and Saudi) for 3 days of panels, discussions, and networking meals.  If I had to underscore a single theme, it was that there is a lot more to the Kingdom of Saudi Arabia (KSA) than most in the US probably know.

Ambassador James Smith, the US’ chief diplomat in KSA delivered a very interesting speech outlining the many different facets (and geography) of the Kingdom. Why is this relevant?  Beyond giving us non-Saudis in the audience a better understanding of the country, it highlights the fact that KSA has a very unique economy. Beyond being the largest market in the Gulf Cooperation Council (GCC), I was interested to see that KSA has a significant industrial base and an impressive number of qualified nationals who can help the country move into the new milenium. 

Key areas of interest appeared to be energy, oil & gas (no surprise there) but also health care. I was impressed to see that the country is planning over 100 hospitals in the next few years and will have a shortage of about 80,000 physicians by some measures. How they will make up for this, I do not know. Given that one Saudi legal professional at the conference told me, the country also only has about 2,000 lawyers. This leaves the door wide open to not only skilled experts (more broadly) but also individuals with the bandwidth and capacity to help get big projects running.

This leads me to my next point – the legal landscape. Not surprising, this is often overlooked. It’s amazing how many people still do not know the difference between a branch and a subsidiary, or the type of rights they need to guarantee in a joint venture or franchise agreement.  Often simply wanting to get a deal quick, businessmen commonly overlook these legal implications, even though they can be significant.  Making sure you have the right local partner, do not run afoul of US laws and have recourse locally (and the US arguably) are just among the most basic of concerns one should consider addressing before entering any foreign market, but especially one like that of the KSA. Just another reason why not only contracts should be used but should also be solid.

A New Financial Free Zone in Abu Dhabi?

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I spotted an article today that stated that Abu Dhabi plans on creating a new financial free zone. The Abu Dhabi World Financial Market, created based on UAE Federal Decree No. 15 of 2013 will be located at Al Maryah (also known as Sowwah Island, the new Wall Street of Abu Dhabi). Among the benefits are reportedly 100% foreign ownership. The whole notion begs the question – how will another financial free zone fare in the GCC?

The Dubai International Financial Centre (DIFC) was opened in 2004 with much fanfare. It was soon thereafter followed by the Qatar Financial Centre (QFC). Part of what has made the DIFC a success has been the adoption of comparatively sophisticated laws based on English law. In fact the zone, which houses everything from banks to law firms to consultancies (as well as some great restaurants) is a city or even country within Dubai. 

As one person quoted in the Reuters article aptly points out, a niche will be critical for Abu Dhabi’s financial zone. Abu Dhabi is rich and the presence of sovereign wealth funds (SWFs) like the Abu Dhabi Investment Authority (ADIA) and other quasi-governmental giants like Mubadala will certain help foster some modicum of growth. But what will the Abu Dhabi zone specialize in?

For now, it appears unclear. There is little out there on this new free zone and accordingly details are scant. It will, however, be critical to keep on the lookout to the particulars of this very noteworthy project. 

 

Coming to America: What to Know When Investing in the US

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With all the news of south-south trade and the increasing shift in the Middle East business scene’s focus towards Asia, some would say the United States is becoming a less appealing investment market for MENA family businesses and individual investors. For sure, taxes, complicated laws and regulations, and even distance can discourage some from investing.  However, there is strength in stability and stability is a major part of the United States’ value proposition. So, if you have decided to take the plunge and invest your money in a business or property in the United States, here are some basics to consider:

1. Make sure you create the right legal entity.  Companies are created at the state leval, but they are generally taxed at the federal level as well.  The US’ federal tax administrator, the Internal Revenue Service (IRS), maintains strict definitions on different types of entities (even those abroad) so it is essential that you set up an entity that gives you the tax treatment you need and qualify for. Broadly, there are corporations, which have shareholders, and then “pass-through” entities that are generally taxed only at the personal member  level. Examples include limited liability companies (LLCs), an increasingly popular option since their inception decades ago. Tax treatment is critical and a tax specialist can be an invaluable asset.

2. Know the Immigration Laws. It is not uncommon for foreign workers, particularly executives to come into the GCC region as tourists to work on short assignments, meaning they do not procure work visas. This is frowned upon in the United States. There are multiple types of business-related visas, from the B-visa to the H-visa to the L-visa. Make sure you have the right type – consult with an immigration law expert. If you are a private investor, make sure you pick the right vehicle for yourself – there are business visas such as the E-2 and EB5, the latter which can result in US Permanent Residency (or Green Card). Speaking of which, you may know that having a Green Card can make you subject to US taxation even on foreign income, right?

3. Document Everything. There are many reasons (including the strict tax laws) that effectively require you to keep very organized records as well as solid contracts. Litigation here is common, and it is critical that contracts be used and that they be drafted clearly, regardless of the size. If you are franchising or licensing your brand to a US company make sure the contract is tight and inclusive. 

4. Don’t forget your Intellectual Property Rights. This is critical if you have not considered it already, but you may find that registering your logo, trademarks, and other intellectual property will be critical to maintaining your branding.  This is especially important if you are granting a license or a franchise (even if you own the brand back home!). 

5. Various Other Regulations. Depending on your business, you may need to consider other issues beyond corporate, tax, and immigration law. Whether it’s environmental regulations or US trade compliance (such as Customs laws for bringing goods into the country or sanctions laws) it is critical to be in compliance as fines can be hefty.

Investing the United States offers unique opportunities still not seen in many places in the world. However, as with other more mature economies, it is generally very heavy on laws and regulations.  Being able to navigate the waters is challenging, but some help it will not be so hard and may be rewarding.

Legal Takeaways from Gulfood 2013

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Last week I attended Gulfood, an annual event in Dubai where food (and food service equipment) processors and exporters gather to show their wares to businesses from around the world.  This year’s was supposedly the largest and it was truly gargantuan by any measure.  The global nature of the exhibit was impressive, highlighting among many things the increasing trend of south-south trade. Stands in pavilions from the United States, France, South Africa, Iran, Tunisia, and China among others competed for visitors.  What was particularly striking was the truly global nature of the world food industry, especially to those of us from the United States, where imported foods largely remain a luxury. It almost seems as if every country produces soft drinks, potato chips, and biscuits.

From a legal angle, Gulfood highlighted several key concerns – elements that were more highlighted when speaking to some of the people at the trade stands.

1. Everybody wants to trade but not everyone knows what that really means.  My continual observation was affirmed – businesses are often unsophisticated.  Even business people who have traveled across the world to attend a food show often do not really know the ins and outs of international business in their industry.  Simply wanting to “sell” your products is very unclear. Do you even know all the legal structures? Here are some to think about:

  • Exporting to a direct buyer/end-user
  • Appointing an agent overseas who will find buyers
  • Exporting to a local distributor who will sell locally
  • Licensing production and marketing of the product overseas by a foreign party

2. Too much emphasis on getting a deal but little thought to negotiating a solid deal that protects and envisions contingencies. It’s amazing how many of these business people brush aside (or fail to consider) the probability that problems can arise. You can face difficulty when doing business with your next door neighbor, much moreso with a company overseas that is likely operating under a different legal regime and business culture.

Some things to keep in mind:

  • Do you have a contract in place? 
  • How are you going to get paid?
  • What happens if you don’t get paid?
  • Can the foreign counterparty use your logo in its brochures and ads? If so, when and where? What if it uses your brochure on something unrelated or abuses your trademarks and content?
  • What if your foreign distributor underperforms?
  • Can you sue your foreign counterparty? If so, where do you want to sue? A local court where the proceedings are not in English?
  • Do you have a way to secure yourself from a default? 

Doing business overseas is truly an exciting proposition. However, as the above short summary illustrates, it’s best to go in informed and to be familiar with the legal concerns. You may not necessarily want to address every contingency but you should make sure the critical issues are foreseen and papered. Better to plan a way out ahead of time than to try to navigate through a nightmare scenario after the fact. A little bit of planning can help tremendously. 

 

 

 

Setting a Standard in Sharia Finance

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The ArabianBusiness.com website featured an article on Friday stating that Gulf Cooperation Council (GCC) states may move towards a single Sharia-compliant standard for Islamic financings.  This follows another article earlier this month in the New York Times about the rising demand

Dubai International Financial Centre

DIFC - Dubai

and short supply of Sharia Finance Scholars.  This short supply has in some respects led to some consolidation in the Sharia finance sector – by having the same scholars sit on multiple boards, one group is having substantially large influence in determining the industry’s direction.  This helps in turn create a de facto standard for Sharia compliance.

The Sharia finance industry has two primary regulatory authorities at present – the Bahrain-based Accounting and Auditing Association for Islamic Financial Institutions (AAOIFI) and the Kuala Lumpur-based Islamic Financial Standards Board (IFSB) both of which have issued certain standards on Shariah finance.  IFSB is considered by some to be more the liberal standard-bearer and the two organizations have in some way helped bifurcate the industry into a MENA sector and a Southeast Asian Sector.  That said, both of these organizations’ rulings and policy guidelines are non-binding and voluntary.

The challenge of a broad set of Sharia standards becomes more problematic when taking into consideration the introduction of Sharia finance in non-Islamic jurisdictions such as the United States, the UK and France.  The UK Financial Services Authority (FSA) has taken certain initiatives, as have other governments. However, the legal structures in these nations mean that Sharia finance will need to conform to local laws – something that may cause deviation with a standard set in say, the GCC.

Taking the above into consideration, given the high concentration of capital in the GCC, the consolidation of GCC standards in Sharia finance can be a crucial step towards creating a global standard for the industry (a standard that can perhaps be modified slightly to comply with the laws of other jurisdictions as well).  This will help the industry grow in the region first, and that in turn will create competition – perhaps creating a situation where investment entities will have to come up with attractive, high-return Sharia-compliant vehicles to compete.