Although its security and defense industry shares many similarities to other countries across the globe, the UAE’s security and defense industry is complex. Companies should keep in mind that as a general rule of thumb, in order to sell to the UAE government, a US company must have a local UAE commercial representative or distributor, and the agreement with them must be registered with the UAE Ministry of Economy.
Selling to the UAE defense sector is possible through several types of business relationships: as a subcontractor to a prime contractor, through a third party integrator, through a commercial representative/distributor, or on the rare occasion, as a direct sale.
- The easiest and softest market entry point to become a supplier to the UAE Armed Forces is to become a subcontractor to a US prime contractor that is already doing business in the UAE.
- Engaging with a strong UAE third party integrator or commercial representative can be the most important relationship the US defense company will make. This is because these integrators have longstanding relationships with the procurement arm of the UAE military and police general headquarters. It is often the case that when the military or police are interested in purchasing a specific item, they will reach out first to the third party integrator to source the product on their behalf.
- Another alternative is to engage with a commercial representative or distributor. This may prove to be the best market entry model for your goods or services because they tend to have a broader customer base, and are not just reliant on General Headquarters or Ministry of Defense purchasing.
- As a more mature step and a greater commitment to the customer relationship, some US companies choose to set up a local office in UAE. Note that the rule of law in the UAE dictates that company ownership requires a 51% share by a UAE National or UAE National Company when registering a business. This ownership can take the form of sponsorship in exchange for an annual fee; an annual fee plus a percentage of profits; or active partnership participation.
The following are some guidelines and basic dictates that extend across the security and defense industry sector in general:
- Due to the business culture norms of the UAE, understanding how organizations and individuals are interwoven is critical to understanding how the security and defense industry functions. UAE security and defense is a big business, but it is one where “small town” relationships matter. One need only look to a specific individual’s bio to see that the heads of UAE government and industry sit on overlapping, interwoven boards and company hierarchies. This makes specific individuals and their relationships a key factor to a company’s success in this market.
- Although the majority of business is conducted in English, the security and defense industry sector is the single sector where Arabic language capabilities are a must-have on your business development team.
- Being aware of the geo-political position between the US and the UAE, and sensitivity to that relationship will serve a company well.
- The UAE prides itself on its technical military superiority, therefore “best in class” is an important purchasing differentiator. They do recognize the quality and superiority of American made goods and services, and a respectful, humble approach despite the awareness of the quality and superiority of American made goods and services is a must for success.
- The Emirati customer is a shrewd negotiator, so take this into consideration when preparing bids and proposals in terms of pricing, servicing, and incentives.
- Because the tendency will always be to favor purchasing goods and services from a UAE national company, partnerships and commercial agency agreements are important for a US company to have and should be entered into cautiously after thorough vetting. Tread cautiously and do your due diligence before committing to an exclusive agreement.
- The sales cycle in general is lengthy in the Middle East, keep in mind that security and defense purchasing and or government procurement can be even slower. There is a general hurry-up-and-wait pace that can be frustrating if US companies aren’t accustomed to it.
VEDP assists Virginia companies in increasing their international sales through a wide range of international trade development programs. Programs include market research available in 70+ countries, international business trips for Virginia companies, and VEDP’s Going Global Defense Initiative for defense contractors, which helps Virginia’s defense companies diversify into new international markets. Our experienced team of professionals are here to help Virginia companies increase their international sales.