Why are Arab Countries Increasingly Seen as the Best Places to Start a Business?
By: Pamela Dimitrova/Arab America Contributing Writer For the past few years the popularity of the Arab countries as among the people, wanting to start their own business, is increasing. More and more people consider moving there to realize their ideas and international brands and firms hurry to open new branches and daughter companies in the region. The reasons for that are many – from government support to Arab’s natural vision of prospect, the list continues to get longer and longer every year. Here are the few factors that make the Arab countries so attractive to young entrepreneurs and also make them the perfect place to start your own business.
Government-Backed Vision Plans
It is no secret that the states in the region are one of the most ambitious in terms of innovation and economic growth. Plans such as Vision 2030 (Saudi Arabia), Expo 2020 (the UAE), Egypt 2030, Oman Vision 2040 and Morocco’s 2020 Vision bring economic and social reforms designed to diversify the economy away from oil, attract foreign capital, and create jobs for citizens.
For example, in Saudi Arabia, the Kingdom has launched multiple government initiatives to spur entrepreneurship and innovation in order to become the hub for entrepreneurship in the region. These include government-backed initiatives such as licensing opportunities for venture capital firms and startups, investment in local VC funds, funding platforms for SMEs, as well as incubators and accelerators.
The government’s support seems to be the most attractive feature in the Arab countries – from the ease in legislation and regulation to new visa rules permitting extended stays or even permanent residencies for ex-pat entrepreneurs, it is clear why everyone is clamoring to set up a business there.
Arab countries have some of the least demanding tax systems in the world which makes the region attractive for foreign businesses. An example of this is Qatar, where investors who open a limited liability company in Qatar are subject to a 10% corporate tax rate for all activities apart from petroleum-related ones. For these companies, the tax is 35%. There is no surtax and no alternative minimum tax. Dividends are not subject to tax in Qatar. Companies fully owned by Qataris as well as nationals from the countries in the Gulf Cooperation Council (GCC) are exempt from corporate taxation.
In Bahrain, companies are not subject to corporate income tax if they activate in business fields that do not include the exploration, production, and refining of oil, gas and petroleum. For these sectors, the taxation rate is 46%. First-grade restaurants and hotels are subject to a 10% levy on their gross turnover. There is no withholding tax on dividends, interest, royalties, no technical service fees, no payroll tax, no real property tax, and no capital duty.
Only oil and gas companies are taxed in the UAE at a progressive rate of up to 55%. Branches of foreign banks are also subject to tax and the general rate is a flat one – 20%. There are no withholding taxes in the UAE, no payroll tax, no capital duty or real property tax.
Skilled Labor Force and Affordability
The other best reason that enjoyed by investors from other countries is the presence of a qualified and affordable labor force.
Doing business in many of the Arab nations is more cost-effective than setting up a project in a Western country. Easy accessibility of reasonably priced raw materials and plenty of labor force in the Arab region make investments in these countries an advantageous scheme. The price of setting up industrial plants and securing offices is also much lower in many of the Arab countries as compared to other countries. In addition, increased market demand, the presence of many funding groups in the Arab world, well-developed infrastructure facilities, and the huge market size are also some of the major compensation that one could gain.
Quickly Modernizing International Market
Most of the Arab countries traditionally relied on oil and petroleum to drive their economies. While the oil trade still makes the greater percentage of their GDPs, there is still a huge chunk left for other forms of business. Foreign countries are coming into this market in a bid to tap into the un-utilized resources. More and more tech companies are setting camp in the Middle East which is not only beneficial to them but also to the local countries.
Today, modernized countries are scrambling for a piece of the region. The states have grown out of their oil cocoon and are looking to tap into other forms of trade including trading on an international level for a commodity other than oil.
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