News
The Arab countries are “a natural space for sharing, cooperation and investment”
Interview with Eduardo López Busquets, General Director of Casa Árabe, published in Empresa Exterior.
March 24, 2015
MADRID
Spain’s commercial and economic relations with Arab countries have gained momentum, increasing by 11% annually on average over the last 15 years. The countries in the region are currently experiencing a notable process of economic, cultural and social growth leading to a series of opportunities in a wide range of sectors in which Spain’s experience has a great deal to offer.
For many Spanish companies, strengthening their relationship with Arab countries is a priority strategy in terms of their international expansion objectives. Therefore, since it was founded in 2006, Casa Árabe has pursued the goal of building bridges and strengthening bilateral and multilateral political relations with the Arab world. Therein lies the foundation of the work performed by this institution led by the Spanish government’s Ministry of Foreign Affairs and Cooperation.
While making a special mention of the growth in Spanish exports to the Emirates, it must be pointed out that exports to the Arab countries, even during the times of uncertainty which may have arisen as a result of the economic crisis, have been rising far above the average of exports to the rest of the world (the latter reaching 4.7%, compared with 13% for the exports to Arab countries) and other emerging regions. So it was pointed out by Eduardo López Busquets, the General Director of Casa Árabe, with whom we conversed about Spain’s current relationship with the Arab countries, in terms of both commercial affairs and various aspects of interest to be considered when committing to the region.
As a strategic center in Spain’s relations with the Arab world, how would you describe the current relationship with these countries?
Spain’s relations with the Arab countries are and have traditionally been very good at all levels. For Spain, the Middle East and North Africa region is of great importance and constitutes one of the priorities in our foreign policy. Beyond just the cultural and historical factors that unite us, these countries are a natural space for sharing, cooperation and investment for Spanish companies and professionals.
How does the complex political and governance situation existing in certain cases affect that relationship?
Spain is aware of the difficulties and problems being experienced by certain countries in the region and is closely tracking the processes of change and transformation that they are going through, as well as the conflicts and events which are taking place, providing its support and experience wherever they may be necessary. This is strengthening our relations with these countries and their societies, as well as our commitment to their stability and economic and political development, with a view to creating freer, fairer and more prosperous societies for all.
How would you describe the current relationship in economic and commercial terms?
Spain’s economic relations with the Arab countries, whether in terms of trade, investment or completing projects, have gained great momentum in recent years.
Exports of Spanish products to Arab countries grew by an average of 11% per year over the last 15 years, a trend which has accelerated since 2007, with growth rates exceeding 20% per year in certain years. In 2013, Spanish exports to the Arab countries grew by 13%, with a 40% increase in those aimed at countries in the Gulf Cooperation Council, in particular.
As a result of the expansion process which many Spanish companies are going through, has the activity in Arab countries increased?
Spain’s economic relations with the Arab countries as a whole have gained momentum, first of all due to the oil boom and the growth experienced by the region in the first decade of the 2000’s, then by the need for new markets which the economic crisis led to, and now by the strong leadership role being played by Spain’s foreign trade sector in the Spanish economy. Having said that, it must be pointed out that exports to the Arab countries, even at times of uncertainty like those which we have been living through in recent years, are rising far above the average for exports to the rest of the world (the latter reaching 4.7%, compared with 13% for the exports to Arab countries) and other emerging regions such as Southeast Asia and Latin America.
The presence of Spanish companies and professionals in the Arab countries has increased, as well, especially in the Gulf countries, attracted by the development projects and large investments which are accompanying economic diversification in these countries.
Why do you believe that Spanish businesspeople should direct their attention towards this market?
Given the needs caused by their demographic growth and young population, the Arab countries as a group are experiencing unprecedented economic, cultural and social development.
In recent decades, they have been growing at an average annual rate of 5% in GDP and, after a bit of a slowdown in certain countries in the last few years, the GDP increase in the region is forecasted to return to more than 4% in 2015. They are countries which now have a great need for products and services at all levels and are undergoing very important growth and expansion processes.
In these countries, the rise of youths and the middle classes are leading to significant changes in their social structures, and therefore in their consumer patterns, as well, towards products with a higher added value and higher-range products, above all in those countries which export hydrocarbons and in the Gulf. Those countries have a higher purchasing power and high income levels. Arab consumer markets have undergone the highest rate of growth worldwide in recent years (6.7% per year). They are also countries which are very complementary to ours in economic terms, where Spanish products, projects and professionals are very highly valued.
Which are the countries we share the greatest trade ties with and why?
Our top trade partners in the region, in terms of total trade volume, or in other words the sum of exports and imports are, in this order, Algeria (12.762 billion euros in 2014, though data are not yet final), Morocco (9.89 billion euros) and Saudi Arabia (7.526 billion euros), followed far behind by the United Arab Emirates (1.871 billion euros).
In this sense, it must be highlighted that, thanks to the increases in Spanish exports to the Emirates, it is the only hydrocarbon-exporting Arab country with which we have a trade surplus.
In much the same way, one must highlight the increase in trade relations with other Gulf countries, especially Qatar, which has risen from being ranked 13th in 2008 to becoming Spain’s 8th most important trade partner in 2014. In the cases of Algeria and Saudi Arabia, hydrocarbons exports play the main role in trade relations, because they are our main suppliers of natural gas and petroleum in the region. The case of Morocco is especially notable, precisely because it does not involve hydrocarbons, but rather is the result of our intense trade relations and the presence of Spanish companies in the country or with business activity in the country, above all small and medium-sized companies.
The important fabric of Spanish companies doing business in Morocco contributes to both the imports of intermediate goods and Spanish capital goods from Morocco and to the export of products manufactured in Morocco by Spanish companies or in collaboration with Spanish companies.
This is a very broad market. Which are the sectors that offer the greatest opportunities and how can they be identified?
The sectors vary a great deal depending on the countries and situations in each specific place, but in general they are sectors related to the economic and social growth and development of these countries, from transportation infrastructures to city services, water management, electricity, renewable energies and, of course, all of the industry related with hydrocarbons and their by-products, new technologies, health care services, education, tourism, textiles, automobiles, aeronautics, consumer goods, food, etc.
You must bear in mind that Arab countries import 50% of the food they consume, a percentage that rises to as much as 80% in the Gulf countries. In this sense, for example, Spanish exports of beef livestock to Lebanon amounted to 43.5% of the total value of Spanish beef exports in 2012.
What does a knowledge of the Arabic language and Arab culture mean when doing business? What recommendations can you offer Spanish businesspeople in this sense?
The language of business in Arab countries is French when dealing with countries in the Maghreb, or English when in Middle Eastern countries and the Gulf. However, some notions of Arabic are always more than welcome and demonstrate a very positive gesture to demonstrate complicity with a potential partner or client.
The guidelines and ways of doing business are the same as those in any international environment, but certain basic notions about the country’s society and culture, taking into account that the differences between Arab countries may also be quite notable, can help to avoid little misunderstandings and display a sensitivity towards the local culture and society. That always facilitates communication and trust.
Remaining present in the country, showing loyalty to customers and suppliers and seeking long-term commitments beyond just specific business deals are also very recommendable moves.
What are the characteristics of the work being carried out through Casa Árabe to help ensure that these opportunities are being taken better advantage of by Spanish businesspeople?
At Casa Árabe, as a meeting point and platform for analysis which has become a point of reference for Spanish-Arab relations in Spain, we work hard to facilitate exchanges and place the focus on industries and areas which we believe to be of especially great interest to Spanish companies, due to their impact and potential. These topics are not always well-known from inside of Spain but are very important to bear in mind within an international context in which competition is increasing more and more.
We organize meetings with Arab delegations and hold conferences and meetings on specific sectors and fields, in addition to analyzing and studying topics of particular interest in terms of developing Spain’s economic and business relations with Arab countries.
What work is being done to assist the development of small and medium-sized companies, and what niches exist that could be taken advantage of in order to increase their level of internationalization?
Casa Árabe’s activities and publications are available to all Spanish companies and professionals, whether micro, small or medium-size companies. They can follow our activities through our newsletters and social networks, and they can participate in all of our events, whether by attending or by becoming active participants in round-table discussions and debates at our business gatherings. Nowadays, new technologies, above all in high added-value sectors, make it possible to establish internationalization processes that surpass a company’s current dimensions in a wide range of fields. In this sense, there are a large number of niches and lines of business to be explored in all economic and professional sectors.
What sort of legal scene do Spanish companies encounter when they decide to move into the African market, and what factors should they take into consideration?
The legal framework in Arab countries in terms of mercantile affairs and business activity has a notable European influence, and more specifically French or English, depending upon the area of influence in which each country is located.
In this sense, the legal framework is similar to what you can find in any of these countries and, in the final instance, is subject to international arbitration institutions. In any case, it is important to become familiar with the specific factors in each country and industry, and therefore we always recommend getting good professional advice, as in any other international expansion process.
What types of incentives and benefits can be taken advantage of by the companies that decide to commit to this market?
Many Arab countries offer incentives for companies to start doing business, including tax breaks, access to land and services, or the repatriation of dividends. They are incentives which sometimes work at the national level, or in special areas and platforms, whether involving free-trade zones, economic cities or industrial platforms. Each particular country and market must be studied, as well as the incentives they offer to each sector.
What do you believe is the most important factor that makes Spain stand out from other countries?
To Arab countries, Spain is a brother country that shares not only a common history, but also a culture and set of values which they consider to be very close to theirs. This makes it easier to reach understandings, and mutual identification and sympathy are nearly immediate. In this sense, Spain is unique from the Arabs’ viewpoint.
This is a factor which, coupled with the image of modernity and leadership constructed by Spain in recent years, above all thanks to some cutting-edge projects of a large scope carried out by Spanish companies and professionals in the region, may very much benefit the internationalization of Spanish companies, products and professionals in the region. However, this is a level of professionalism and serious work which we must uphold and promote in every one of our projects and activities in these countries. We must not lose our focus, especially given the level of international competition existing at the highest levels within these markets.
What is the perception of Spanish brands and products in the Arab countries?
The image of Spanish brands and products in Arab countries is, in general, one of high quality, trustworthy products and services made by professionals. You must bear in mind that many Spanish companies are already positioned in the region and export top-level services and products to these countries in the fields of technology and engineering, as well as renewable energies and water treatment, or fashion and gourmet foods, just to name a few.
What are the institution’s main goals for 2015?
In 2015, our goal is to maintain our position as a strategic center and point of reference amongst institutions in Spain in everything that has to do with relations involving the Arab countries at all levels, in general contributing to a better and larger outreach for Spain internationally, and in the Arab countries in particular, as well as achieving a better understanding of our societies.
Nahjla Isaacs
