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Foreign firms face difficulties tapping into Middle East

Red tape and a cascade of other hurdles have hindered efforts by executives to tap into rapid growth in the region.

Foreign firms middle east red tapeEnlarge
French Minister for Foreign Trade Nicole Bricq (R) shakes hands with head of French employers association MEDEF International, Jean Burelle (L), beside Saudi Arabia's Minister of Commerce and Industry Tawfig Al Rabiah (C) on April 11, 2013 at the opening of the 'Saudi French opportunity' forum in Paris. (Jacques Demarthon/AFP/Getty Images)

Chief executives operating in the Middle East and North Africa say they are facing red tape and a cascade of other hurdles as they seek to tap into rapid growth and attractive demographics in the region.

The view was expressed by more than half a dozen CEOs that CNBC spoke to in recent weeks.

Even Saudi Arabia, which was ranked as the easiest country to do business in by a World Bank and IFC report last year, has been criticized for its bureaucracy.

In its recent report on the country, Freedom House said that although "certain regulations and procedures have been simplified, the bureaucracy continues to be slow-moving unaccountable and rather interventionist."

Unlike some of its Gulf neighbors, Saudi Arabia has a strict visa policy that complicates access for foreign investors.

"You cannot get a tourist visa to come into Saudi Arabia," Ali Tabbara, managing director at Saudi-based UTC Nexia International, told CNBC at the sidelines of the 2013 YPO Global Leadership Summit in Istanbul. "It takes one to two weeks to get it done and I don't know if this will change or not, but once you get over this hurdle, the country provides ample opportunities."

Fadi Arbid, the CEO of Amwal AlKhaleej, a private equity firm based in Riyadh, found that a lack of talent was a constraint for expanding business.

"The problem in this part of the world is the growth in a way, ironically. In the context of too many opportunities chasing [few] people. [There are] very few people actually, with the talent, with the right qualifications."

(Read more: Middle East CEOs Worry about Region's Youth Boom )

In the United Arab Emirates — which has recently benefited from redirected flows of tourism and capital as a result of turmoil in other Middle Eastern countries — the experiences were similar.

"I certainly think in terms of setting up companies, in terms of getting immigration procedures done that could be something to work faster," Sunil Lalvani, group managing director at Global Products Group told CNBC.

Yet contrary to its neighbor Saudi Arabia, it was much easier to bring in qualified talent to the UAE, he noted.

"For the Middle East, it's Dubai or nothing," Lalvani, who relocated from Russia to the city, said.

The UAE and Saudi Arabia have avoided the political upheaval that has affected other countries in the region and most CEOs CNBC spoke to said political liberalization was happening at the right pace.

"You know, I take a view that the people in the Gulf are genuinely happy. And I certainly believe that if there's an election tomorrow in the Emirate, the ruling family is going to get voted back in," Lalvani said.

(Read More: Keeping the Lights on in Africa: The Next Opportunity?)

But for Egypt, whose economy has been crippled by political strife in the aftermath of the 2011 revolution, tourism and foreign direct investment, crucial sources of hard currency, have yet to recover.

"It's definitely gotten harder to do business," Islam Mahdy, chairman and CEOof Credence, told CNBC.

Mahdy believes that part of the problem is a lack of clear communication that dispels concerns about how the Muslim Brotherhood government really feels about foreign investors. A successful agreement on an IMF loan that has proved elusive thus far would also give the investment community confidence in the country's economic plans.

"Look at Turkey for example, which is a model, which has an Islamic government. You need to send the message that at the end of the day, you are supporting that industry, you're welcoming foreigners," Mahdy said.

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Original Source URL: 
http://www.cnbc.com/id/100683902

http://www.globalpost.com/dispatch/news/regions/middle-east/130429/foreign-firms-difficulties-investing-middle-east