To Succeed in the Gulf, Offer the Best Price and Be Mindful of Relationships

Jan De Nul Group is a company specialized in dredging and civil engineering works. Launched in 1938 in Belgium, Jan De Nul originally focused on civil works. It began its role as an international dredging company in 1951. In addition to civil engineering, the group offers offshore services to the oil and gas industry; maritime dredging; breakwater and quay wall construction and environmental remediation of sediments and soil. The company now has 5,100 workers all around the world (Europe, Middle East, Asia, Africa, America). Jan De Nul put its first foot into the Gulf region in 1978, for a project on two ports in Iran. Now, 44% of its 2.1 billion euro turnover comes from the Middle East region.

For 10 years, Wim Dhont has been area manager for the Middle East at Jan De Nul. There are advantages for Europeans to do business in the Middle East — decisions are made faster, and there's less administration to be concerned with. But as important as making sure your business offers the cheapest price, Dhont says outsiders cannot ignore the cultural and business ways of the Middle East. "In the Middle East, they don't do business if they don't have a good relationship with you," he says. "They do not disassociate business and personal relationships."

An edited transcript of the conversation follows.

Arabic Knowledge@Wharton: Jan De Nul has been active in the Gulf for 20 years now. How has the work evolved?

Wim Dhont: The upsurge really began in 2002 in Dubai. We were awarded the contract for the dredging and reclamation of Palm Island Jebel Ali. This artificial 4-kilometre-long island, which has the shape of a palm tree, had to be protected from the tides and heavy seas by a 200-metre-wide and 11-kilometre-long breakwater. The development was for real estate and tourism: Luxurious villas, first class hotels, and marinas and other leisure facilities. At that time, our original sector for expansion in the Middle East was land reclamation for real estate. It had been so for five years. Jan De Nul also built the extension of the LNG (Liquid Natural Gas) port at Ras Laffan in Qatar and the land reclamation on Saadiyat Island by Abu Dhabi. We had to build up those islands in the sea. It was nothing beforehand other than water and sand. So you dig up sand from a far point in the sea, and you bring this sand to the site for the island. Both activities grew independently very well till 2007-2008. The crisis came, and everything became quieter in the real estate market. So there was a slow down for that division. In the meantime, we have continued working on infrastructure in oil and gas.

Arabic Knowledge@Wharton: During your decade with Jan De Nul, have you seen a change in the mentality in the Gulf?

Dhont: People in the Gulf haven't changed so much. Of course, the economic boom did a lot for the development of the Gulf Region. Gulf exports increased exponentially. People are maybe more open-minded because of exchanges with the outside world. But from a political point of view, it is very stable. There hasn't been any major governmental change.

Arabic Knowledge@Wharton: Is it easy to work as a European in the Gulf?

Dhont: There are a lot of Western workers in the Gulf. Usually they have managerial positions while Indian or Asians are lower-level labourers. The collaboration between Gulf authorities and European companies is good. Local people are happy with our quality. But China has more and more chance to win bids because Arab people first consider the price, then the quality.

Arabic Knowledge@Wharton: So when you sign a contract you just should be the cheapest?

Dhont: In other sectors it is different. But we construct infrastructure and we are always dealing with the public sector. So the only way for us to get a deal is to respond to public notices of tender in newspapers. If you can meet all technical requirements, you will be allowed to get into the financial competition. The lowest price wins the tender. Local authorities don't really base their choice on relationship, even if you did a good job before. For the first time, you really need to be the cheapest. Every good technical company can try to bid on the tender. Maybe we are in a specific sector and we cannot suggest an extra project. The idea comes from the Sheikh. A project can have a price, but as low as possible.

Arabic Knowledge@Wharton: However, the relationship is important in a Middle Eastern business venture, more than in European business?

Dhont: In general, in the Middle East, they don't do business if they don't have a good relationship with you. They do not disassociate business and personal relationships. Once you have the project and you do a good job, a good partnership could start. But you still need to be the cheapest (laughs). On the other hand, if there is a disagreement during a negotiation, an Arab could fall out with you, while Europeans will close the discussion and go for a drink with you. This can have important consequences. If you do something wrong during a business project in the Gulf, they won't forget it. It will take a lot of time before your partner will consider your failings to be in the past. You will be on a blacklist for a while. So yes, it's important in the Gulf not to neglect the relationship. The emotions can play a role in business.

Arabic Knowledge@Wharton: But when a business decision is made, things move faster than in Europe?

Dhont: Definitely! Gulf authorities or businessmen will proceed quickly. Once the decision is taken, the process begins. While in Europe, there are too many authorizations requested before you can start. Administration takes too much time in Europe. There are too many rules to follow. You have to fill in a formulary for this, get a permit or a license for that. Even for the smallest thing! It slows down business. Regarding the environment, it is important and there is much taken care of in the Gulf, but always with a reasonable approach. In addition, in Europe we have many levels of discussion (regional, national, supra-national). Because of that, we have too much government involvement. So yes, in the Gulf it goes faster, and less administration also makes it cheaper.

Arabic Knowledge@Wharton: There are other administrative obligations in the Gulf. For instance, should you hire local people?

Dhont: This is a separate story. In some countries you should hire 10% local workforce, for example in Saudi Arabia and Qatar. The Sultan of Oman required the highest rate (30%) while the United Arab Emirates (UAE) doesn't have this legal obligation at all. Usually, local workers are drivers or, more often, work in the administration. They are really useful for all visa or permit issues. As regards other positions, it is more annoying in our sector, because they tend not to like manual labour, so we need to hire two local persons to accomplish one manual-labour job.

Arabic Knowledge@Wharton: And for other administration issues, like visas, are there business difficulties in the Gulf?

Dhont: It varies from one country to another. For instance, it is really difficult to have a working visa or any other permits in Saudi Arabia. Administration in Iran is very slow. But in the UAE, it goes really fast, and you can sometimes have an answer in a day. The Sultanate of Oman is also really professional. The first step into a new market is always difficult. But Jan De Nul is an international company. So we are used to starting from scratch on rules, taxes or visa issues. We are pioneers and we succeed in that.

Arabic Knowledge@Wharton: Do you face security issues in the Gulf?

Dhont: No. Really, it is safer to work in the Gulf than in Europe. The police are stricter and sanctions can quickly mean a jail sentence. But it makes the region extremely safe. You have hardly any crime. So it is not difficult for us to attract people into the Gulf.

Arabic Knowledge@Wharton: Your firm signed a 52-million-euro contract to dig up the Umm Qasr port in Iraq in February. Isn't the security risk bigger there?

Dhont: We first did an evaluation beforehand. Sure, Iraq is coming out of a war, but the risk is limited now to the south of Iraq. In addition, we won't send our workers to a place we don't want to go ourselves. Jan De Nul doesn't take that kind of risk.

Arabic Knowledge@Wharton: As a region the European Union is a combination of 27 countries. How does that compare to the Gulf?

Dhont: It is the same. There are also differences in the mentalities, similar to how every country is different in the EU. You can quickly recognize someone from Saudi Arabia versus a guy from Qatar. They have the same language and a very similar culture. But it is like in Europe between a Dutchman and a Fleming, or between a Frenchman and a Walloon; even though the language is similar, people remain different. In the Gulf, nationality plays an important role. The Gulf countries can work together, but they will always prefer to deal with people from their own country. They understand each other very well, but they negotiate in a different way. Legal and economic conditions in a contract vary from one country to another. There are nuances. But this is exactly the same as in Europe!

Arabic Knowledge@Wharton: Does the Gulf Cooperation Council's organizations provide facilities to help do business in the Region?

Dhont: The customs market, set up in 2004, allows companies to import machines or products into one country and to transfer them easily to other countries in the GCC. So from an importation aspect, yes the GCC is helpful. But they have still different currencies. A single currency could reduce the need of keeping different currencies in our basket. In addition, most of the GCC members' currencies are pegged to the dollar. Kuwait is an exception. Currently, the dollar is low, and this is a disadvantage for a European company because of the exchange rate.

Arabic Knowledge@Wharton: What would you recommend to change in the GCC to increase the attractiveness for business?

Dhont: The GCC and the EU are again quite similar. From a business perspective, a union of countries is a good thing. But differences remain under this Union. The GCC is only a common tool. Mentalities are still different. As a business matter, the next step in the GCC construction should be a common agreement on borders. To pass a frontier, for goods or persons, always takes a lot of time. In Europe, we have had Schengen for two decades now. And this is really helpful, not to be stopped at the border and so avoiding a lot of time-consuming administration work. And as I said before, a single currency would be great here.

Citing Knowledge@Wharton

Close


For Personal use:

Please use the following citations to quote for personal use:

MLA

"To Succeed in the Gulf, Offer the Best Price and Be Mindful of Relationships." Knowledge@Wharton. The Wharton School, University of Pennsylvania, [16 November, 2011]. Web. [25 July, 2014] <http://knowledge.wharton.upenn.edu/article/to-succeed-in-the-gulf-offer-the-best-price-and-be-mindful-of-relationships/>

APA

To Succeed in the Gulf, Offer the Best Price and Be Mindful of Relationships. Knowledge@Wharton (2011, November 16). Retrieved from http://knowledge.wharton.upenn.edu/article/to-succeed-in-the-gulf-offer-the-best-price-and-be-mindful-of-relationships/

Chicago

"To Succeed in the Gulf, Offer the Best Price and Be Mindful of Relationships" Knowledge@Wharton, [November 16, 2011].
Accessed [July 25, 2014]. [http://knowledge.wharton.upenn.edu/article/to-succeed-in-the-gulf-offer-the-best-price-and-be-mindful-of-relationships/]


For Educational/Business use:

Please contact us for repurposing articles, podcasts, or videos using our content licensing contact form.

 

Join The Discussion

No Comments So Far