International trade is a crucial part of the German economy. Therefore, growing economic ties with emerging markets such as the Middle East and North Africa are important to assure an increase of exported goods and services. This article explores the trade opportunities for companies in these geographical areas, foreign direct investment and industry networks as well as examples of German companies increasing their presence in the Middle East.
Global Foreign Direct Investment in the Middle East and North Africa
According to the world bank, in 2019, foreign direct investment (FDI) in the Middle East and North Africa (MENA) region accounted for US $57.8 billion. The countries which have received the largest investment were Israel with US $19 billion, the UAE with US $13.8 billion, Egypt with US $9 billion and Saudi Arabia with US $4.5 billion.
Economic experts have predicted that as a result of the Covid-19 pandemic, foreign direct investment in the MENA countries has dropped by more than 30% in 2020. This is largely due to the effect of the pandemic on the manufacturing sector as well as the oil price drop. The two countries that have experienced the strongest economic decrease were Libya with a 58% decline in GDP and Lebanon with a 12% GDP reduction. In both countries, the pandemic further increased political and social instability and conflicts from the last few years. Nevertheless, economic experts predict a V-shaped recovery in the next year and a growing investment in the future.
Germany’s exports and imports from the Middle East and North Africa
Turkey is the largest export market for Germany in the MENA region, followed by Saudi Arabia and the UAE. In 2019, Germany’s exports to Turkey were estimated to be valued at US$17 billion and the main exported goods were machinery, vehicles and apparel.
Germany sold goods to the second largest export destination in the Middle East, the UAE, worth US$7.88 billion. The majority of exports to the UAE were aircraft, cars, machinery, electrical goods and chemical products. The peak of exports to the UAE was in 2015 with a volume exceeding US$16 billion.
Conversely, German imports from the UAE were primarily aluminium and petrochemical products and are valued at around €1 billion.
The third-largest export location for Germany in the MENA region, Saudi Arabia, imports German goods worth US$7 billion in 2019, which is a strong decrease compared to 2015 with an export peak of US$12 billion. The most popular imports were machinery, vehicles and pharmaceutical products.
Businesses Activities in the Middle East and North Africa
According to a study by EY, the most popular investment destinations in the MENA region are Saudi Arabia, the United Arab Emirates, Kuwait, Oman and Egypt. Even though the Covid-19 pandemic has significantly impacted businesses in the MENA region, more than 71% of managers predict that at the end of 2022 economic activities will reach pre-covid levels. As a result of the pandemic, businesses in the MENA area have questioned their current strategies, implemented changes for the future and reviewed their current portfolio. These companies will continue to invest in new technologies and expand digital customer services. Moreover, 84% plan to make small acquisitions in the same sector to increase their market share and assure that their business is growing. Economic experts from EY predict that the industries which are the most likely to see an increase in M&A activities in the MENA region are the automotive sector (45%), manufacturing (41%), financial services (39%), real estate (36%), and oil and gas (28%).
German Companies are increasing their presence in the Middle East
Siemens, Germany’s largest industrial group, has decided to increase their engagement in the Middle East as a part of its 2020+ vision. They aim to play a major part in the energy transition of the MENA countries towards digital energy systems and the decarbonization of fossil fuels.
In accordance with this strategy, they have signed a 10-year lease agreement for offices at Dubai’s District 2020. This district is the main site of the Dubai Expo, which is scheduled for Oct 1, 2021, to Mar 31, 2022. About 1,000 Siemens employees will be based in this 11,000 square metre office. This move will likely attract more German and international companies to set up their businesses in the UAE or invest in other countries in the Middle East.
Business Associations and Networking Initiatives in the Middle East and North Africa
- The German-Near and Middle Eastern Business Association (NUMOV) promotes bilateral business relationships between the countries of the Near and Middle East and the Federal Republic of Germany.
- The Northern Africa and Middle East Initiative of German Business (NMI) also connects businesses from Germany, the Middle East and North Africa through organising visits of business delegations across different sectors. The association further publishes policy papers to advocate for the reduction of trade and investment barriers between the European Union, Africa and the Middle East.
- The MENA Business Angel Network (MBAN) initiative started in the UAE in June 2014. The initiative helps emerging start-ups across the MENA region to find suitable business angels or early stage investors from Europe and worldwide. The network ensures economic growth through recently founded businesses for the Middle East and North Africa.
To find out more about business angels in Berlin read this article (link).
Trade and Investment between the North African, European and countries from the Middle East represents a wealth of opportunities across different sectors. Whether you are a European investor wishing to do business in North Africa or the Middle East and need legal support, or an entrepreneur in the MENA region looking for investment from Europe, Centurion Plus has a strong record of expertise and experience in Africa and the Middle East. Our pool of internationally trained lawyers can give you legal advice concerning immigration, taxes or IP issues and support you in the process of expanding or relocating your business.
Contact us today for an initial consultation.