ATTEMPTING TO BREAK THROUGH TO THE GULF - 17-Jun-97

ATTEMPTING TO BREAK THROUGH TO THE GULF

(Article by Ora Koren, "Globes", June 17, 1997, pp. 62-3)

MARKETING IN THE MIDDLE EAST: THE POLITICAL STALEMATE IS RETURNING ISRAELI COMPANIES INTERESTED IN DEALS WITH GULF COUNTRIES TO THE ERA OF THE BOYCOTT. HOW, IN SPITE OF THIS, DO THEY PENETRATE THESE MARKETS ? WHERE IS IT MOST DIFFICULT AND WHO IS WORKING TO TORPEDO THE CONNECTIONS?

Despite the stalemate in the political process in the Middle East and the Arab League's enlistment on the side of the Palestinians, businessmen from Oman and the United Arab Emirates are expected to arrive in Israel soon. Their refusal to be revealed and the interests of the business people hosting them in avoiding the limelight, are the primary markers of business with these countries.

Israeli business people who do stand out in their somewhat successful activities with Gulf countries include Olivia Rothman, owner of a subsidiary of a French company; Danny Rothschild, formerly a senior IDF intelligence officer; and Dave Kimche, a former high-ranking member of the Mossad. Alongside them, others attempting to operate in the Gulf region include the Dankner Group, Koor, and the Israel Corporation. Some of these are using the aforementioned as intermediaries. The contacts which were established by the Israel Export Institute, the Israel Manufacturers Association, and the Federation of Israeli Chambers of Commerce have been kept on a small flame and, at the moment, do not enable the development of business links, without additional assistance. Above all of these, a Foreign Ministry official is operating in the Gulf region; he prefers to remain anonymous in order to assure the continuation of his activities in these countries.

Israeli activities in the six Gulf states Oman, Qatar, the United Arab Emirates, Bahrain, Kuwait, and Saudi Arabia are possible due to progress in the political processes a year ago. The political meetings and a number of the business meetings were open. In Kuwait and Qatar, business people began taking market surveys to identify potentials for Israeli exports.

After the change in government in Israel, and especially against the background of the stalemate in the continuation of the peace talks, several of the business contacts, which were being negotiated, were quickly extinguished. The Arab foreign ministers conference, which was held in Cairo a few weeks ago, decided to freeze contacts with Israel, and the Arab boycott mechanisms were resumed in these countries. Against this background, the pattern of activities in the Gulf region entered a new period, with some countries returning to the formats which existed before the start of the peace process, and some adjusting to a different Middle East, which has remained, in spite of everything, as a result of the political changes in the region.

The old business practice which has been resumed is the use of third countries and straw companies in order to export to the Gulf countries; this was intended to circumvent the product's origin in Israel. As opposed to the past, today, products which are identified as Israeli, are being sent to the shelves. Indeed, Oman issued a directive not to be strict in implementing the primary Arab boycott, but the degree of its implementation is influenced by political developments. In any case, Israeli shipments continue to arrive in Oman via air and sea without origin markings, but the buyer knows their origin.

From the attempts of business people, one can learn that the most comfortable countries for Israeli activities to take place in, are Oman and the United Arab Emirates. Following them are Qatar, Kuwait, and Bahrain. Penetration into Saudi Arabia is the most difficult. It is preferable to arrive in the Gulf countries on a foreign passport. Business contacts must receive approval from the highest levels; therefore, it is preferable to become as close as possible to the emir, sultan, or king. Generally, the ruling families are also the owners of the largest industries in the Gulf countries; thus a certain amount of overlap exists between what is desired and is found.

Business connections are based upon trust which is acquired over a long period, and after numerous meetings. Because of this, it is preferable to allot a large amount of time to visits to the Gulf. Due to the current political difficulties, businessmen from the Gulf prefer not to visit Israel; however, a certain amount of flexibility has recently been detected on this issue.

The beginning of business contacts in a certain field are generally transmitted by companies in the Gulf to Israeli business people via their chosen Israeli contact. In Israel, the business contact will identify companies, which answer the needs of the clients in the Gulf, and in accordance with the level of interest, they transfer brochures and explanations to the Gulf. Negotiations are conducted by fax via the intermediaries, and in accordance with level of progress, visits take place. Today, the Gulf countries are primarily interested in joint ventures with Israeli companies in the fields of agriculture, tourism, construction, communications, and consumer products. Israeli companies are interested in becoming involved in large energy projects in the Gulf.

Other ways of penetrating the Gulf are via international conferences for example, specific subject conferences which, during the past year, were held in Qatar and Bahrain on the issues of security and medicine. Representatives of Israel's public and private sector were invited to these conferences. However, contacts of this sort, which generally are not backed up by regular trips to the Gulf to keep up the contacts, do not hold up during periods of political tension. Without an intermediary who can fly monthly to the Gulf, it is preferable to find a local representative to represent the interests of the Israeli firm who will ensure that the connection is maintained during periods of tension. A local representative is preferable to a representative from a foreign firm, but it must be ensured that this person is not a Palestinian or the citizen of a country which is still opposed to Israel's existence.

Recently, it has become clear that Palestinian businessmen in high and mid- level management positions, who live permanently in the Gulf, have torpedoed contacts with Israeli firms. It has also become clear that against the background of the political situation businessmen in the Gulf region prefer to host single business people, rather than large groups. This, for example, is why the trip of a group of 15 senior Koor officials led by Benny Gaon, was recently cancelled. The group was supposed to visit four Gulf countries, yet after they arrived in the Gulf, they were informed that their visit to two countries was cancelled, and it was then decided to cancel the entire visit.

The Middle East/North African Economic Conference is another event during which contacts can be forged. Yet, as opposed to the open processes which characterized the conferences in Casablanca and Amman three and two years ago, respectively contacts that were begun during these conferences have also taken on an element of secrecy. The trend became more marked during the Cairo Conference, and if there is no political change, it will also continue during the conference in Qatar, which is scheduled to take place in November 1997.