Joint Middle East American Trade Center

January 2007 Ms. Verdon chosen to participate in US Women's Trade Mission to Saudi Arabia
At the invitation of the Saudi Arabian Chamber of Commerce in Riyadh, JMATC's President, Ms. Lisa Verdon, will visit Saudi Arabia in mid-January, 2007 as part of the Global Women's Foundation trade mission for US executive businesswomen. Participants will visit high-level Saudi women leaders in government, business and academia to explore business and educational linkage opportunities. Participants will visit Saudi women-owned manufacturing plants and businesses in Jeddah, take a tour of the petroleum plants and other businesses in the Eastern Province, and will visit a women's college in Riyadh. Each US participant represents a particular sector, which includes health care, aviation, entertainment, finance, and environmental engineering. Sector-specific meetings are being arranged for each participant. Ms. Verdon will represent aviation and non-lethal military supplies.

December 2006 JMATC organized and sponsored a private business dinner on December 6, 2006, at Philadelphia's Ritz Carlton for HRH Prince Turki Al-Faisal, Saudi Ambassador to the US
This makes Philadelphia one of the last cities visited before HRH Prince Turki resigned as ambassador. This event provided Greater Philadelphia companies with an opportunity to have an open, round-table discussion with Prince Turki and 7 other leading Saudi media, cultural and business delegates who accompanied him. The US companies attending represented major corporations and SMEs from Greater Philadelphia. Several of the US guests are currently doing business in Saudi Arabia, while the remainder of the companies has expressed a strong interest in penetrating the Saudi market. Topics discussed were how to do business in Saudi Arabia, how to choose appropriate partners in the Kingdom, and Saudi's accession to the WTO. Several issues addressed were how to obtain visas when traveling to the Middle East, the difficulties of Middle Easterners obtaining visas to the US, security in the region, and Saudi's interest in strengthening the long withstanding relationship with the US. Prince Turki was open, honest and very forthright when expressing his concerns about the future of US companies doing business in the region—citing our loss of a recent contract in the oil & gas industry. He also stressed the growing number of contracts being awarded to European and Asian companies. Prince Turki extended an invitation to all the guests to visit the Kingdom of Saudi Arabia, and urges any US company seeking to expand internationally to consider Saudi Arabia as a viable and trustworthy partner. For more information, please contact JMACT.

November 2006 JMATC's President Ms. Lisa Verdon was the guest in Dubai of the chairman of one of the Gulf's "Top Fifty" corporations
Ms. Verdon discussed linking US companies with the needs and demands of Saudi Arabia and the Gulf. The interests of this Saudi company are investments in hotels, hospitals and other real estate, procurement of products and services for hotels and restaurants, hospitals, aviation, non-lethal military supplies, and agricultural-related products. Any US company interested in learning more should contact JMATC at info@jmatc.org.

June 2006 JMATC brings the Bahraini Ambassador to Philadelphia for the 2006 Middle East and Africa Business Development Conference

On June 6, 2006 the U.S. Department of Commerce held its first ever Middle East & Africa Development Conference in Philadelphia. JMATC and other trade development organizations cosponsored the conference with the US Department of Commerce. The conference, which was "sold out," brought in 95 attendees, 160 guests during a special luncheon with Undersecretary of Commerce Lavin, and facilitated 44 one-on-one meetings with companies and the visiting Senior Commercial Officers.

At JMATC's request, Dr. Naser Mohammad Al Belooshi visited Philadelphia to give the opening remarks to the Conference. Dr. Belooshi offered a cogent review of U.S. economic involvement in the region and the many untapped opportunities that result from the U.S. Free Trade Agreements. For U.S. businesses new to the region, Dr. Belooshi highlighted the importance of using sophisticated intermediaries, such as JMATC, to assist in establishing productive business relationships.

Mr. Antonio Ceballos, our new U.S. Export Assistance Center Director in Philadelphia, was instrumental in coordinating with the U.S. Department of Commerce to bring the Senior Commercial Officers ("SCOs") from sixteen U.S. embassies in the Middle East and Africa to Philadelphia for the conference. The SCOs presented a series of panels, moderated by Ms. Margaret Gatti, Esq. of Gatti and Associates, the Acting Chairman of the Mid-Atlantic District Export Council. Panels discussed the Middle East generally, the Middle East Free Trade Area Initiative, U.S. Bilateral Free Trade Agreements, Compliance and Market Access issues, and India and Africa as a region.

The keynote speaker during the luncheon was Ambassador Franklin Lavin, former U.S. Ambassador to Singapore and current Under Secretary for the International Trade Administration, US Department of Commerce. Ambassador Lavin discussed "How to Win in Foreign Markets." Ms. Margaret Gatti, Esq. gave the conference's concluding remarks.

Overall, the conference was truly "The Mid Atlantic's premier network event to expand your Middle East & Africa knowledge, contacts, and profits," enabling participants to advance business relationships between the US the Middle East and Africa.

June 2006 JMATC President Lisa Verdon authors Middle East business development article that was recently published in a special supplemental edition of MultiLingual Magazine.
Ms. Verdon's introductory article on establishing business relationships in the Middle East provides a general overview to help make the customs and practices of Middle East social and business culture more familiar to U.S. companies interested in working in the region.

“The Third Cup is the Deepest to Business in the Middle East”
By Lisa Verdon, CEO
Joint Middle East American Trade Center (JMATC), Philadelphia, Pennsylvania and Myriam Siftar of MTM.

At the crossroads of Europe, Asia and Africa, the Middle East and North Africa (MENA) is a diverse mix of modern and traditional societies, which use advanced sophisticated technology and biblical methods side by side. The region is a cradle of civilization and birthplace of the world's great monotheistic religions. However, despite general awareness of the area's long and rich history, many in the West are unfamiliar with particular customs and methods of conducting business - many of which are intimately tied to past traditions. Yet, while trying to keep their traditions, MENA countries are at last beginning to fully embrace free market principles.

These evolving regional changes create many opportunities for outside businesses. However, capturing these opportunities is challenging and can be frustrating when one does not understand or appreciate the expectations, behaviors and attitudes of potential business partners.

Therefore, to develop and sustain effective business relationships, it is important to understand how those free market principles have been, and are being, adopted in the local context. A basic understanding of local customs, and the services and guidance of specialist trade organizations with a thorough knowledge of the region, such as JMATC, can be invaluable.

Economic Overview of the Arab World: A Time of Change and Expansion
MENA countries are a mix of modern developed free-market economies, older “command” style systems, and variations in between. There is great demand for imported industrial goods, ranging from small hand held consumer items and household appliances, to larger industrial equipment for development projects. The region has over 320 million consumers, of whom 60% are under the age of 25. To address the social, political, and economic pressures that arise from such a young population, countries in the region are embracing the global economy, joining the World Trade Organization, signing international trade agreements, and embarking on ambitious projects to diversify their economies.

The United States has encouraged and benefited from progressive economic programs in the region by, for example, signing free trade agreements (FTAs) with Bahrain, Jordan, and Morocco. The US is working on FTAs with Egypt, Oman, and the United Arab Emirates. Arab countries once viewed by the US as adversaries, such as Libya and Iraq, are now normalizing diplomatic relations and are starting to become strong economic partners with the US. The European Union is engaged in similar efforts in the region.

Collectively, the regional purchasing power is very strong, especially among the petroleum-exporting nations, which obviously is a benefit from higher oil prices. There is a preference for US brands; in 2005, the US alone exported $36 billion of goods and services to the region (US-Arab Tradeline Sep/Oct 2005). There is also an increase in demand for American educational, medical and language translation services.

Following the events of September 11, 2001, the region's private sector experienced a significant increase in local investment, as money was repatriated from the West, particularly the United States. The increased availability of funds and recognition of the need to address development and modernization have resulted in a boom in mega-infrastructure projects, thus increasing demand for construction and engineering products and services.

Aside from the obvious sectors - petrochemicals, oil, and gas – the region has other strong sectors, such as financial services (Bahrain, Kuwait, and the United Arab Emirates). As an example of the diversification and development taking place, Saudi Arabia plans to build a major financial district in Riyadh. Several countries, including Egypt and Jordan, are engaged in privatization programs as another means to boost economic performance and modernization. Concomitant with the move into the global economy, information technology is another booming sector in the Middle East, and opportunities exist to establish the networks and infrastructure necessary to provide Internet access and connectivity across the region.

Worldviews and Business Conduct: Contrast and Comparison
Generally, in the West, one's worldview is based on the concepts of “guilt” versus “innocence.” These concepts originate at least as far back as ancient Rome, which announced the principle that no one was above the law, not even Caesar. Thus, for westerners the world is split into those who obey the law – the innocent – and those who break the law – the guilty – regardless of rank or privilege. In the Middle East, the worldview is based on ideas of “honor” versus “shame.” For business to flourish one should recognize that the way we live our lives and the way we interact with others is unconsciously conditioned by our respective worldviews.

In the West, businesses strive to do the “right” - legal - thing. Companies will often seek counsel's advice to ensure that business practices conform to corporate, securities, contract, environmental, and other regulations and laws. Notwithstanding some current initiatives, western business does not expect to look beyond legal parameters for guidance on its activities or relationships.

In the Middle East, business people will often implicitly focus on “honor” and “shame.” To be honorable means to gain power, prestige and to be a noble representative of your tribe or family. Consequently, while business in the Middle East meets legal requirements, it is also heavily influenced by, and will often conform to the unstated mores of, “honor” and “shame.”

In the West, entrepreneurs can be motivated by many things, such as dreams of financial success, or a passion for some particular product or service. For example, Anita Roddick, founder of the “Body Shop” was initially motivated by her interest in organic products. Regardless of motivation, an entrepreneur who has acted legally is not “shamed' if a business fails.

In the Middle East, entrepreneurs may have similar motivations and passions. However, business failure often results in humiliation, and thus “shame” for the individual, and his or her family. Consequently, many businesses, which would be acceptable risks from a western view, are not started for fear of failure - and the resulting humiliation and shame. Therefore, an enterprise will often only be created if there is some degree of certainty that the venture will succeed. Similarly, a transaction may well occur only if the principles can be certain of success. This degree of certainty exists when a businessperson either has a prestigious position in society already, or has otherwise established, through tribal or other affiliation, the personal contacts necessary for business success. Thus, personal relationships have an importance in the Middle East beyond that to which a westerner may be accustomed.

Public Sector Influence: The Brightest and the Best
People in many MENA countries prefer to work in the public sector. Salaries, benefits and vacation schedules are often more attractive than in the private sector, and job security is assured. In addition, many MENA countries are monarchies. Much pride and prestige are attached to public sector positions, as they are viewed as part of the royal household. Thus, working for the government is viewed as honorable, as it is service to the ruling family. Consequently, much effort is expended to secure public sector positions. Hence, what we in the West would regard negatively - as favoritism or nepotism – is viewed as the laudable pursuit of an individual's and a family's honor. Therefore, in the Middle East, family ties and family tribal names carry a significance of which it is important to be aware.

Traditionally, a government's role in the Middle East is to create jobs for its citizens and supporters. Therefore, in many countries foreign workers fill private sector jobs, while the public sector is the preserve of citizens, regardless of status. However, there is a trend, especially in the Gulf Cooperation Council member countries, to encourage citizens to seek private sector jobs – the term “Saudiization,” “Kuwaitiization,” etc. are becoming familiar. For example, a new Kuwaiti law requires private companies to hire Kuwaiti workers in order to receive public contracts.

Despite these recent programs encouraging citizens into the private sector, the demand for expatriates remains high in many countries. For example, in Kuwait approximately 86 percent of Kuwaiti citizens work in the public sector, while only about 8 percent work in the private sector. Moreover, non-Kuwaitis fill 90 percent of the private sector jobs, and foreign workers outnumber Kuwaitis by 3 to 1. (Kuwaiti Ministry of Planning, June 30, 2005).

Many countries are engaged in reform aiming to encourage private sector investment and growth. In Jordan, King Abdullah II has launched a very progressive 5-year economic plan designed to complement extensive political reforms. The plan includes privatizing state assets, building on free trade agreements with the US and Europe, promoting liberal investment legislation, and drafting a comprehensive socio-economic transformation plan.

Consequently, one should always be mindful that, although governments are encouraging more private sector dynamism, a successful transaction in the Middle East may still require involvement of a ministry, department, or official that one may not otherwise anticipate as being necessarily connected to the business at hand.

Patience in Relationship Building: the Key to Success
In the West, personal relationships are an important part of business success. In the free market, however, price conveys much information and is often the ultimate determinant of whether or not a transaction goes forward. In the Middle East, the personal relationship between business people generally remains as important as price, and in more traditional environments personal relationships may be significantly more important than price in determining whether or not a deal occurs and with whom it occurs.

Hospitality: The First Cup
Hospitality is a hallmark of Muslim and Middle Eastern tradition, so be prepared to share meals and social time with business partners from the Middle East. It is said that if you want to develop a relationship with an Arab, be prepared to drink lots of coffee and tea. Although this is a generalization and oversimplification, in the Middle East it is honorable to be hospitable. It is best not to refuse anything offered, as refusal may deeply offend a Middle Eastern host. For example, when drinking coffee, it is wise to accept two cups in anticipation of being offered the third. Traditionally, the first cup of coffee represents an offer of peace, or “salam.” The second cup represents friendship, or “sadiq.” The third represents loyalty and protection, or “saif,” meaning the “sword.” With the third cup, your host shows acceptance of your honor and loyalty to him.

Getting to Friendship, Trust and Yes: The Second Cup
In Middle Eastern business practice, friendship is most important, as it generally forms the basis for trust. Friendship is important for business in the West also. However, Westerners often try to keep friendship separate from business as our affiliations can be viewed as fraternization, or as being part of the “good ol' boy network.” In the MENA region, friendship is a crucial element in building a business relationship. A Middle Easterner will take a long time to develop a friendship, and when this is done in the region, offers of coffee, tea, and food are important expressions of generosity during meetings or personal interactions.

Potential business partners may spend considerable time discussing family and other “personal” matters during meetings, which a Westerner may find disconcerting. Arabs enjoy talking about family because they are very proud of their spouses and children. While we in the West are equally proud, we are unlikely to focus on these personal matters during business meetings. Similarly, Westerners are accustomed to try to keep to a schedule and an agenda. A conversation in the Middle East may be more informational and personal, with substantive business discussed at the end while wrapping up a meeting.

In the West, often we engage in business luncheons and dinners in order to gauge the trustworthiness and reliability of our partners. We expect promises to be executed in a timely manner. We can become impatient or “pushy” if action is not taken within the agreed time frame, or if it is not at all. We judge people based upon how hard they work, or their work ethic. Often we will value work ethic over status. In contrast, in the Middle East, a friend will ask many favors, but will not blame you if nothing is done. The friend wants to know that one has at least tried. Thus, in the Middle East, custom remains that one never says, “I can not do it.” Instead one states, “I will try, insha'Allah.” To openly refuse to do something for a friend, or acknowledge that one cannot do it, or even worse, that one does not have the time to do it, is most dishonorable.

Note: The Arabic expression, “insha'Allah,” which means “if God Willing.” This is often said after someone, especially a Muslim, makes a commitment whose outcome he or she believes rests not within oneself, but with God. This is often used to pardon one from an unanticipated or undesirable outcome.

Sustained Success: The Third Cup
Once the friendship is built and trust established, barriers to commitment and active business transactions might remain – how do you get the commitment you need to do the deal? Patience, perseverance, and time are essential.

Modern Middle Eastern countries, including Saudi Arabia, have adopted many of the business methods and styles of the West. However, significant differences remain. It is important that both sides understand each other in order to avoid potential pitfalls and misunderstandings. Considerable time may be spent exchanging courtesies, and several visits may be needed to secure business.

In the US, risk taking is highly valued. Similarly, in the US appointments are often scheduled well ahead of time, meeting deadlines is crucial, and following through on written and spoken agreements is expected. Lengthy formal agreements and contracts are often required to formalize a transaction and counsel can become an integral part of the negotiation process. Similarly, the head of an organization does not necessarily do budgeting. In contrast, meetings in the Middle East are often not scheduled ahead of time. A Western visitor may have to arrive in country before a meeting is set. On average, Middle Easterners are risk averse – failure is dishonorable - and what is “committed to" verbally may not always be what is actually done. Statements may be made to maintain honor, and may not be reliable from a western perspective. In order to get a solid commitment, one that will lead to a deal, it is vital to understand the hierarchy of the organization one is dealing with, and where, and how your contact fits into that structure.

Legal Systems
Islamic law, as set forth in the Shari'a, is used as the basis for the regulatory, legal, and juridical structure in many MENA countries. Shari'a will apply to a greater or lesser extent depending on the specific country. For example, Saudi Arabian business and banking practices are heavily influenced by Shari'a, while Jordan is codifying its commercial laws along more clearly western lines. Therefore, once one has an agreement for transaction one will need special advice in both reducing the business agreement to written format and understanding how and when the document may be enforced and exactly what enforcement means.

Building and Rebuilding Relationships and the Region
The “War on Terrorism,” invasion of Iraq and American domestic politics have intensified friction between the Middle East and the US. The affect on business relationships is most clearly seen in the recent Dubai World Ports controversy, sanctions on aid flows to the Palestinian Authority, and provisions in the Patriot Act that leave Middle Easterners visiting the US feeling they are automatically suspect. The Arab World remains one of America 's best customers despite these and similar actions. The estimated sales of US goods to the Middle East and North Africa is expected to reach $26.7 billion by the end of this year, an increase of 38 percent from last year.

The mission of the Joint Middle East American Trade Center and others is to maintain existing, as well as develop new relationships, between Americans and Middle Easterners, at a time when, paradoxically, we are seeing a great decline in people-to-people connections, just when Middle Eastern governments are making determined efforts to embrace both free market principles and the global economy. The less we understand each other's cultures, the greater the chance for minor acts or omissions to be interpreted as conscious insults or slights. In 1981, there were over 10,000 Saudis studying in US colleges and universities. By 2005, that number had dropped to 3,035. Over 60% of the Arab population is aged 25 years or younger, and many young Arabs are looking to Europe and Asia for higher education. The long-term effects of this can be devastating. Overall, the Middle East and United States, as do democracy and Islam, share much in common. The Arabs want to do business with their American counterparts, but are frustrated by the lack of interest from the US, especially from American small to medium sized enterprises (SMEs). In contrast, US SMEs view the MENA region as enigmatic, if not impossible, or a dangerous place in which to do business.

The challenges of creating functioning, free-market economies in a traditional society should not be underestimated. Middle Eastern governments and societies are changing, but at a cautious pace. Leaders and governments want to allow a natural balance between long withstanding tribal values and modern ideas to emerge. Middle Eastern countries want to modernize without necessarily westernizing. Understanding and respecting this, as well as learning a little Arabic, will certainly help you reach that third cup of coffee.