OPPORTUNITIES FOR INDIA DOING BUSINESS WITH GCC

HISTORY• Created on May 25, 1981 • The unified economic agreement between the countries

of the GC Council signed on Nov 1981 in Riyadh • The GCC Patent Office was approved in 1992

• A GCC common market launched on January 1, 2008

• All GCC members and Yemen have since joined the Greater Arab Free Trade Area (GAFTA) when that organization was founded

• Yemen is (currently) in negotiations for GCC

membership, and hopes to join by 2016.

Map Indicating CCASG MembersOfficial languages Arabic

Type Trade bloc

MembershipArab states of the Persian Gulf

LeadersSecretary-General Abdul Rahman Ibn

Hamad Al-Attiyah

EstablishmentAs the Gulf Cooperation Council (GCC)

May 25, 1981 

PopulationEstimate 40,338,196

GDP (nominal)  Estimate

Total $1,103,235 million 

Per capita $22,083 

Key indicators

Name   Capital   Inhabitants  

Sq km  GDP (mil. US$)  

Currency  

Bahrain Manama 1.046.814 716 15.354Bahrain Dinar

Qatar Doha 1.307.229 11.437 52.722 Qatari Riyal

Kuwait Kuwait City 2.460.000 17.818 95.924Kuwaiti Dinar

Oman Muscat 2.534.000 309.500 35.990 Omani Rial

Saudi Arabia

Riyadh 26.417.599 2.240.000 572.200 Saudi Riyal

United Arab Emirates

Abu Dhabi 4.588.697 83.600 163.296UAE Dirham

OBJECTIVE Formulating similar regulations in various fields of

economy, finance, trade, customs, tourism, legislation and administration

Fostering scientific and technical progress in industry, mining, agriculture, water and animal resources

Establishing scientific research centers Setting up joint ventures Encouraging cooperation of the private sector Strengthening ties between their peoples Establishing a common currency by 2010

Business practice and culture

Business week - Saturday to ThursdayWeekend holiday – Friday

Working hours: Govt. - 7:30 am to 2:30 pm (Sat-Wed)Private - 8 am to 1 pm and 4 pm to 7 pm (Sat- Wed) - 8 am to 1 30 pm (Thurs.)

Climate - 35 to 45 °C in summer - 18 to 28 °C in winterTime zone - + 4 hrs GMTTopography - Mountainous with over 1700 kms of coastline

Business practice and culture

Religion - Islam, Other religions are tolerated. way of life is governed by Islamic customs

Petroleum reserve - 5.5 million barrels

Natural gas - Reserves 29 trillion cubic feet

Minerals - Copper mining up to 20,000 tons a year Chromate estimated at about 2 million tons Possible exploration of gold, platinum, sulphides and coal

Official language - Arabic (English is widely used and understood)

Doing Business

Foreign companies can set up business or Industries in by establishing a Limited Liability Company with a minimum capital of US$ 390,000

They can own up to 70% of the share capital in the company and the other 30% is to be owned by GCC entities

Foreign participation is encouraged in all the major sectors of the economy

100% foreign participation is possible with a minimum paid-up capital of US$ 1.3 billion / with the prior approval of the council of ministers

Doing Business

To establish an LLC (Limited Liability Company) with foreign participation, an applicant must prepare a

shareholders agreement setting forth the intentions of the parties

Applicant then must file a constitutive contract signed by

all the members, in a prescribed format, in Arabic with Ministry of commerce and industry (MOCI)

The formation of the company is completed when all the

shares are fully paid up and the company is registered in the commercial register

Business Culture

Do's• Be aware of all favors done for you and prepare to respond in kind.• People are courteous, polite and the traditional Arab forms of

greetings are widely observed• Being Muslim country, visitors should respect local customs.

Don'ts• Avoid unintentional criticism of others• Alcohol consumptions in public other than licensed places are

prohibited• Careful attention has to be paid to ensure that one do not offend

local customs particularly in relation to dress code and alcohol consumption

Establishing a company

Registration procedures – Before business entities start their business in

GCC Countries they must be registered in the commercial register of the MOCI

Time required – The time required to establish a company

depends on the extent of foreign participation

Registration and licensing requirements normally takes between 4-5weeks

STAGES FOR SETTING UP AN ENTERPRISE IN GCC

StagesObjective Action Plan Anticipated

risks and hurdles

End Result

Stage:1Familiarity with GCC

Find a right partner

Non availability of complete information

One location

Stage:2

Demand analysis Get to know more about the production facilities

Demand potential and other player’s strengths

Sure of succeeding

Stage:3

Understand legal formalities and agreements

Appoint specialists to draft

Terms are favorable to local partners

Get ready to setup

Stage:4

Locate and setup Right kinds of people (technical and managerial)

Possible resistance if Indian bosses are appointed

Production at low costs

Stage:5 Markets – local & outside

Develop interior markets and network out of GCC

Local tariff and non-tariff barriers in provinces

Reduced cost and competitiveness

Once the business activity is identified, the following steps leads to the establishment of company

1. Identify the GCC partner.2. Prepare a shareholders agreement setting forth the intentions of the parties.3. Apply for a trade name from the Ministry of Commerce & Industry (MOCI).4. Obtain Industrial license/environment clearance or a No objection certificate from the concerned department, if required; or approval

of the Ministry of Higher Education in the case of setting-up educational institutions. For normal trading activity this may not be applicable.

5. Approach the various Government-owned Industrial estates for allotment of land and factory buildings.6. Open bank account in the name of the company under formation and ensure that the amount of RO 150,000/ (US$ 390,000) is deposited to facilitate the issue of bank guarantee.

Once the business activity is identified, the following steps leads to the establishment of company

7. Apply to MOCI for obtaining Commercial registration.8. Apply for the Chamber of Commerce certification.9. Identifying and registering the lease agreements with the Municipal office for setting office and name boards.10. Apply for Import license from MOCI if goods are required to be imported.11. Apply to Ministry of Manpower for labour clearances, if expatriate employees are required.12. Apply for employment visa for expatriate workers on the basis of labour clearances.13. Apply for labour cards/ Residency permits once the employee enters the country.

Documents required for registration of a company in the commercial register

a. Power of Attorney issued to the person authorized to sign on behalf of the companies abroad and a copy of the ID card / passport copy.

b. Certificate from the local bank stating that the company under formation has deposited the required amount in their account showing clearly the percentage of contribution amount by each of the members/partners.

c. In the case of a foreign company, a Letter of Guarantee is required from the Head office stating that it is responsible for all liabilities in particular country. e g: oman

d. Board resolution of investing companies to the extent of their share-holding and amount of investment.

e. Charter documents of the companies like the Memorandum and Articles of Association and business licenses, if the investor is a company.

f. The passport copy of the individual, if the investor is not a company.

Entry visas & work permit –

All foreigners (except GCC nationals) should have a valid entry visa. Foreigners on business visits are generally issued visit visas at the airport, valid

usually for one month. Express visas are also issued before-hand and are valid for 3 weeks.

Multiple entry visas are also issued for one year but the stay each time should not exceed 3 weeks and there should be a gap of three weeks between each visit.

Employment visas are usually valid for 2 years and are issued on the basis of Labour clearances granted to the employers.

Holders of employment visas are issued Labour cards and Residency permits.

Fee structure –

The statutory fees for setting-up companies – For a company with registered capital of RO. 150,000 (US $ 390,000), is not likely to exceed US $1,200.

Each expatriate labour clearance will cost approx. US$ 560 including the fee for labour and residency card and is issued for a period of 2 years which is to be renewed thereafter for a similar period.

The rent for a 3-room apartment in a moderately good locality will approx. range from US$ 500-1000.

Income Tax Business organizations should file a provisional return of income with advance tax

• No personal Income tax.

• Income tax is currently charged on business entities with up to 70% foreign participation @ 12%, if the profit exceeds the basic exemption limit of US$ 78,000.

• For business enterprises with more than 70% foreign participation and branches of foreign companies, tax rate ranges from 5% to 30% (for eg. tax is charged @ 30% on the entire profit, if it exceeds US$ 260,000).

• All business entities having a commercial registration have to file business particulars with the income tax department.

• Exemptions from income tax for 5 Years is granted .in respect of income of industries and fisheries sector which can be extended for another five years.

• Income generated by higher educational institutions and private hospitals will be completely tax free.

OTHER OBLIGATIONS

• Custom duty is charged @ 5 % on imports on most of the items• Tender board registration is a must for Government contracts in

excess of US$ 260,000. • Business entities having banking facilities of more than US$

650,000/ should submit audited balance sheet to the bank within four months of the year end to avoid freezing of bank accounts.

• Public Listed companies should audit the accounts and conduct annual general meeting within 3 months from the year end and should comply with corporate governance practices.

• Expatriates should not be employed unless and until a labour clearance is obtained from the ministry of manpower

• One cannot commence business without obtaining the commercial registration chamber certificate and municipal certificate

• Financial reports to be prepared in accordance with nternational Accounting Standards.

TYPES OF ORGANISATIONLS IN GENERAL

Business may be carried out in GCC in a variety of forms.

1. Sole proprietorships2. General partnership3. Limited partnership4. Joint venture5. Limited liability company (LLC)6. Public joint stock company 7. Closed joint stock company 8. Holding company9. Foreign companies • Branches – Branches of foreign companies may engage only in the following activities: - Carry out government contracts. - Conduct business declared by the council of ministers to be vital to the economic development.10. Foreign commercial representative offices – these offices engaged in trade, industry and service sectors may not import, export or sell its products but can promote products or services.

Facilities and incentives offered by the Government

• Planned and serviced plots are provided for industries in the industrial estates• Ready built factories 25 years (renewable)• Electricity US$ 0.06/ KW/H• Exemption from Customs duty is allowed on Raw materials,

Plant & machinery and spares imported for industrial production

• Local Products are given 10% advantage over imported goods on Government purchases

• Oman is the only country in the whole of GCC which has its own National credit guarantee agency• Foreigners can own properties in designated areas for a lease

period of 99 years

Reasons For Doing Business In GCC

FDI:• Foreign investment into the UAE hit a high of

$19.4 billion in the past three years• Foreign direct investments (FDI) during 2005-2007

were more than eight times the FDI flow into the GCC during the previous nine years

MARKET OPPORTUNITIES:• Construction & Industry: Sharjah plans huge egg

production plant• Technology: HP brings touch technology home • Transportation: $4.5bn Terminal 3 to open • Government Incentives

India’s Export to the GCC: Basmati/Non-basmati rice, tea, manmade yarn,

fabrics, made-ups, cotton yarn, primary and semi-finished iron and steel, chemicals, plastic and linoleum products, machinery and instruments.

India’s Major Import from the GCC: Petroleum and petrochemical products like LPG,

kerosene and others. Saudi Arabia is the largest supplier of crude oil to India.

Infrastructure in GCC

• Infrastructure construction plays a key role• Government is actually a partner in providing

infrastructure• $1.5 trillion is the likely total GCC expenditure on

infrastructure for the next decade• GCC infrastructure spending will be 12 times higher than

the US and 94 times higher than in India• Foreign lenders had increased interest in long-term

infrastructure projects in the Middle East • There are further 300$ billion worth of projects either

planned or under construction in Dubai

Infrastructure in GCC• Dubai has shown the way in developing its ports and

infrastructure.

Communications: Phone, satellite, internet, systems are readily available in

Special Economic Zones. Transportation: Air-- Service available from both local domestic carriers

and most international airlines. Ocean-- Large number of ports and harbours handling

booming export trade. Roads, Highways & Railways have good speed limits.

Opportunities in Major sectors Transportation service:

• Logistics services represent the nerve of Gulf and international businesses

• Transport and logistics services are central to regional trade and to the exchange of goods and services

• GCC States today is the building of road networks, harbors, airports and state-of-the-art transportation networks

• Gross Domestic Product (GDP) reaching approximately 750 billion USD in 2007, double the amount recorded five years ago. (Potential for opportunity)

Tourism and Related Services

• GCC Countries are the exporter and importer of travel services amongst the developing countries

• Ministry of Tourism of GCC has adopted a number of measures to facilitate tourists

• The governments of both countries is providing greater facilitation for enterprises of the counterpart to start business operations

• The two countries are working together to promote and developed health tourism

Construction and Consultancy Services

• India has considerable experience in the field of civil construction, engineering and manufacturing operations

• This provides increased growth opportunities through Joint Ventures and Consortiums

• With $700 billion worth of developments either under way or in the pipeline, the GCC is now the world’s largest finance market

• GCC seeks to forge a stronger and more diversified economic future in construction

Accounting, Auditing and Consulting Services

• In GCC Countries there is a huge demand of accountants, auditors and consulting advisors with rich knowledge in international trade practices

• Under the multi-lateral trade system of GCC Countries, enterprises of India can provide such services to GCC Countries through cross-border supply or commercial presence

Health Services

• Total health-care spending in the region will reach US $60billion in 2025, up from US$12 billion today

The model projects follows by GCC: Treatment demand Hospital beds Cost Population growth Aging populations Health-risk factors

Advertising services• GCC has tied up with Graffiti Marketing

Communications, one of Kuwait's leading ad agencies in order to strategically join hands to provide better services in terms of brand development

• Growing consumerism in GCC has led to an increased demand for advertising services in terms of brand building and marketing.

• Indian advertising industry is very well developed and can provide English-speaking trained manpower in advertising firms or can collaborate with existing firms in GCC to provide these services

• This would benefit the GCC industry and give Indian industry exposure to the GCC market

Education Services

The setting up of Knowledge Village, located in Dubai, UAE is one step towards fulfilling learning and training requirements

“KV” offers many gateways to obtain higher education in the fields of business, IT, Graphics design and even Medicine

Arabian Gulf University located in Bahrain offers a Post-Graduate Diploma and Master Degrees, Scientific Research

Constraints to trade in services

• Connectivity • Lack of transparency • Language barrier • Trade barrier• Service barrier• Lack of knowledge • Lack of recognition of qualifications.