Tuesday, July 31, 2012

Opportunities override risk in the Middle East: exporting to emerging markets


According to economist Jim O’Neil, the next eleven countries to join the top emerging markets of the world [BRICs] include three countries in the Middle East, Iran, Pakistan and Turkey, making the region a potential hot spot for Australian exporters. Though there has been years of instability and conflict throughout the area, the Middle East is already on its way to becoming a global economic growth engine. 

Imports have increased every year since 2009 to the Middle East, according to the World Bank. The activity creating this level of growth in these nations is three-fold. First, there is the young, fast growing population, with high birth rates resulting in an expanding consumer market and increasing demand. Next, the Middle East is home to the most lucrative oil industry in the world causing a heavy production focus on oil and oil products and strong reliance on these exports. Finally, many Middle Eastern governments have budgeted to increase spending on infrastructure projects to boost the economy further. Government and society alike are agreeably developing a more stable and internationally involved economy.

This shift in focus opens up opportunities for Australian exporters. With a growing middle class opportunities lie in the retail sector. Consumers have more disposable income and are keen to spend more on convenience. The young population realizes the importance of education in today’s society presenting opportunities in the education services sector. Due to the heavy focus on the oil industry there is limited local production of horticulture in the Middle East. Australian agribusinesses should seek to supply the 80-90 percent imported food requirements in the region.  A large Muslim population in the Middle East gives Australian meat exporters a chance to provide to the substantial demand for Halal certified meats and animal products. The plan to build infrastructure networks has already created many opportunities for Australian service companies in management, design and construction. However, the various opportunities favorable for Australian exporter’s presents some challenges that must be known in order to achieve success in the Middle East. 

The Middle East is considered a high risk area and precautions must be considered when entering the market. Perhaps the biggest challenge to face when entering the market is the ongoing political risks including the war on terrorism mainly affecting the tourism and hospitality industries. In order to mitigate the risk, safety measures are a must and business managers should avoid political conversation.  Another discretion Australian exporters may face relate to trade barriers such as the requirements for precise regulation. In order to avoid problems, exporters must be well educated on procedures, documentation, rules and regulations in this region. Lastly, Australian exporters will experience strong competition from other nations including China and India. Exporters must understand the circumstances and formulate a general strategy for competitive advantage. 

Overall, the opportunities presented in the Middle Eastern market outweigh the potential challenges. The Export Council of Australian and EFIC will be hosting an Economic Road Show to discuss the potential opportunities in the Middle East and other emerging markets. To find out more or register for the event click here

Join the discussion on Twitter #EconomicRoadshow2012
Follow: @Aussieexport & @EFIC_AU

-Melissa Baker, International Project Co-Coordinator, Export Council of Australia 

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