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News & Updates

Results of JETRO’s 2017 Survey on Business Conditions of Japanese-Affiliated Firms in the Middle East

Mar 02, 2018

Business in the Middle East in a mixture of stability and instability

Between September and November 2017, the Japan External Trade Organization (JETRO) conducted its latest survey on business operations of Japanese-affiliated firms in four countries in the Middle East: the United Arab Emirates (UAE), Saudi Arabia, Turkey and Qatar. The survey received a record-high number of valid replies from 254 firms. Below is a summary of the results.

Summary points:

  1. While approximately half of firms forecast business expansion, those expecting "to retain the current level" increased to nearly the same level.
  2. More firms in Qatar have a cautious business forcast than other countries.
  3. The biggest issue in the investment environment is "underdeveloped or unclear legal systems."
Survey period From September 11 to October 16, 2017
Destination of questionnair 426 companies (254 respondent companies including 68 manufacturers and 186 non-manufacturers, Response rate: 59.6%)
Question items (1)Status of operations, (2)Future business outlook within the next one or two years, (3)Attractiveness and challenges in the investment environment

Summary of results:

1.Opetrating profit forecast: Approximately half of all respondent companies in the black. Numerous companies in Qatar expect to remain at the same level

  • Approximately half of total firms in all the target countries reported a surplus and nearly 20% a deficit. While public safety issues and a price slump in crude oil have had an impact, the ratio is almost the same as that of last year. (Page 6 in the attached document)
  • Looking at the results by country, 60% of firms in the UAE and Turky were in the black; only 10% of them were in the red. On the other hand, companies in Saudi Aarabia polarized into either black or red. In Qatar, which has suffered a rupture in diplomatic relations with countries such as Saudi Arabia, only about 30% of companies saw a profit, with 45% "remaining at the same level." (Page 6 in the attached document)
  • Regarding the operating profit forecast for 2018, while approximately 40% of total companies anticipated "improvement," 50% of them expected to “remain at the same level." In Qatar in particular, only 25% anticipated "improvement," 65% "remaining at the same level." "Sales in local markets" had the most impact on both companies expecting "improvement" and "decline." (Page 7 to 11 in the attached document)

2.Future business outlook: Half of all respondents forecast business expansion. Increase in companies expecting to remain the same.

  • While approximately half of total respondents in all target countries forecast business expansion, almost the same percentage of companies are likely to remain at the same level. In comparison with the previous year, the ratio of firms answering “expansion” decreased from 57.1% to 49.8%, and those with a cautious forecast reporting that they are likely to remain at the same level increased from 40.0% to 46.2%. (Page 12 in the attached document)
  • The main reasons given for business expansion were "increased sales" and "high growth potential," with many companies reporting that they would expand their "sales function." (77.8%) (Page 13 to 14 in the attached document)
  • On the topic of human resources, the number of Japanese employees (expatriates) is largely expected to remain at the same level. There are numerous companies which will increase local employees and move forward with localization. (Page 15 to 16 in the attached document)

3. Investment environment: Underdeveloped or unclear legal systems cited as biggest issue. Political and social instability ranked top in Turkey and Qatar.

  • Across the region, “market size and growth potential” was the most cited advantage of the investment environment, with 56.1%. “Underdeveloped or unclear legal system” (61.7%) ranked first among challenges. (Page 17 in the attached document)
  • Looking at the results by country, many companies in the UAE indicated that it has a sufficient investment environment, citing benefits of the taxation system and free zones. Legal systems as well as rising costs for labor and administrative commissions were commonly cited as issues. (Page 18 in the attached document)
  • While an overwhelmingly high number (85.7%) cited “market size and growth potential” as an advantage of Saudi Arabia, numerous companies pointed out administrative aspects, such as slow procedures and an underdeveloped legal system, and labor-related aspects, such as soaring labor costs and a shortage of human resources, as challenges. (Page 19 in the attached document)
  • Companies in Turkey praised its market size and growth potential and the positive image regarding Japan. Political and social instability was the most commonly cited issue (82.6%). (Page 20 in the attached document)
  • In Qatar, market size and growth potential, industrial clusters and the positive image regarding Japan were cited as advantages. Political and social instability was largely pointed out as a issue (50%), in addition to administrative-related aspects, such as slow procedures and an underdeveloped legal systems. (Page 21 in the attached document)

Mr. Yonekura and Mr. Ono
Middle East and Africa Division, JETRO
Tel: +81-3-3582-5180 E-mail: orh@jetro.go.jp