Scotland makes its case for GCC investment

Two thousand and fourteen has been a big year for Scotland – the Commonwealth Games, the Ryder Cup and the independence referendum have attracted unprecedented interest from all corners of the globe. But long before the hot debate in the political arena on the potential of Scotland as an independent country and on the euro-zone debt crisis, GCC companies have been looking to Scotland as an attractive investment location.

Of course many “home-grown” brands would like to expand beyond the GCC, but targeting a new global territory can be daunting. However, with Europe’s wealthy consumer base, skilled labour force and well-developed technological and innovative clusters, the region cannot be ignored despite the multiple languages, time zones, currencies and political outlooks. Armed with the proper resources and tools, companies are faced with bountiful opportunities.

Companies don’t have to act by themselves when breaking into Europe. In fact, a company based in the GCC that is hoping to expand its research and development, manufacturing, finance or back office operations into Europe will be greeted with open arms from Europe’s inward investment agencies, which can be an important resource to any business person who needs to better understand the ins and outs of foreign direct investment.

There are already strong links between the UAE and Scotland, with the UAE importing US$807 million from Scotland in 2012, according to the most recent survey by Scottish Development International (SDI).

Contributing to trade from the GCC to Scotland are family-owned businesses, such as the Al Tajirs, who own the UK’s largest producer of naturally sourced bottled water, and government-related entities such as the GCC airlines, which facilitate trade with their direct flights. Emirates celebrated 10 years of routes between Dubai and Glasgow in April and Qatar launched direct flights between Doha and Edinburgh in May.

The main concerns that GCC companies usually voice about overseas expansion relate to employment law, availability of industry clusters, transport links and the overall cost of doing business in Europe (salary costs, property costs, tax, etc).

Scotland’s advantages include outstanding infrastructure, a highly educated workforce and a shared language.

Access to skilled labour is also a key consideration. One example in the city of Dundee is the Al Maktoum Institute, the patron and sponsor of which is Sheikh Hamdan bin Rashid, UAE Minister of Finance. This investment was launched in February 2013, when 48 female Emirati students received training from the institute designed to prepare them in the key contemporary issues of multiculturalism, leadership, cultural engagement and global awareness.

Availability of experts in the education field in Scotland was a pre-requisite for the UAE’s government investment decision. This fact was a strong draw for Sheikh Hamdan. The high and historical educational level and the financial support from local governments also played a part in the decision.

Apart from practical concerns, GCC companies looking to do business in Europe are often concerned about intangible cultural differences. This is an area where local government agencies, like SDI, can help investors better understand the business landscape in which they might be operating as well as the cultural issues they might not have considered.

Support from SDI allows GCC corporations to de-risk a potential investment. We can provide key due diligence information that may not have been available to executives otherwise including salary costs, property choices and availability of talent as well as intelligence about the overall business environment. We are also able to facilitate introductions to businesses that are already established in a market so that prospective investors can learn from the experiences of others.

Taqa (Abu Dhabi National Energy Company) is one such business that benefited from SDI’s expertise. Through this relationship, the company expanded its operations to five platforms from 13 fields in the North Sea, directly employing around 600 people in Aberdeen along with a further 1,500 contractors.

The benefits of building relationships with local partners extend far beyond the settling-in period. SDI conducted an independent evaluation of its activities and found that almost 50 per cent of investors reported that because of the support received from us, they had met customers and partners that they would have otherwise not have been able to. Our analysis also showed that investor companies that were assisted by government agencies displayed higher wages, higher employment numbers and higher labour productivity figures, and that most of these companies were conducting more R&D and had broadened their product range.

The best advice for a GCC company considering investing in Europe is first and foremost to do what is best for your business. Spend time considering and prioritising your criteria for overseas investment, and work closely with local agencies to map what the country or region can offer against these criteria. Developing strategic alliances with GCC companies that have successfully entered the European market, or even with Scottish companies that have successfully developed relationships with GCC businesses, can also pay dividends in learning from those who have gone before you.

Tom Marchbanks is Middle East regional manager at Scottish Development International

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