Key dates: Consultancy tenders close: 25 August 1999. Expected date of publication:
September 2000

Officer contact details: Mr
James Bloomfield

Objectives

The Middle East includes a number of significant Australian export markets,
with the UAE, Saudi Arabia, Turkey and Egypt among our top 30 export
destinations. Together these economies account for around 5.3 per cent of
Australia's merchandise exports, but annual growth (excluding Iraq and
Libya) has averaged 16 per cent over recent years, double Australia's
average merchandise export growth rate. While around 80 per cent of Australia's
exports to the region are commodities, trade in elaborately transformed
manufactures is growing rapidly, particularly to the economies of the Arabian
Peninsula and Iran.

The study will investigate current trends and future prospects for
Australia's trade and investment with Gulf Cooperation Council members
Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE, as well as Iran. A
prime objective of the report is to provide information for prospective and
existing Australian small and medium size exporters to the region. The report
will focus on the UAE as a trade hub and entry point. It will:

• provide an overview of the regions' economies, their performance and
  future prospects
• analyse the composition of Australia's trade and investment, drawing
  out trends, key determinants and future prospects
• outline the framework for trade relations and business links and assess
  prospects for further development
• analyse competitive challenges and provide a summary guide for small and
  medium size exporters
• consider mechanisms to boost bilateral investment between Australia and
  the region
• draw policy implications for business and government.

Detailed Report Outline

Useful links to economic and
business information on the Middle East

Detailed Report Outline

CHAPTER 1: Economic Overview

The chapter will identify key features of the country economies and
review their economic performance in this context. The chapter will look
forward to anticipate potential medium to longer-term macroeconomic and
structural developments. The chapter will have four main elements:
macroeconomy, sectoral structure, demographics and governance.

Overview of macroeconomic performance and prospects

• Discussion of most recent data on all target economies:
  • GDP per capita, real GDP, GDP expenditure components
  • prime interest rates, inflation; budget balance, oil and non-oil
    revenue sources
  • trade and capital account balances and exchange rates
• Likely future macroeconomic policy approaches and implications for
  growth
  • 5 year plans
• Medium to long term forecasts from Consensus economics, EIU, banks etc
  • OPEC and the prospects for oil prices
  • table of economic growth forecasts by country

Sectoral structure of GDP by industry, highlighting the growth of oil and
non-oil sectors and changes through time

• benefits and costs of oil dependence
• the gap between agricultural demand and production
• a brief discussion of economic diversification efforts
• 2 - 3 potential medium to long term development scenarios for the
  Arabian Peninsula and Iran

Demographics, development of human capital, employment

• population, by ethnic origin for each country
• education and training efforts
• employment and unemployment policies

Governance: institutional arrangements, policy approaches and reform

• influence of politics and religion eg on institutions and reform
  approaches
• strong traditional role of the public sector
  • brief discussion of the role of Government business enterprises
• overview of approaches to governance reform, progress to date, further
  prospects
  • financial sector
  • privatisation and infrastructure
  • other relevant reform developments
    • taxation reform

CHAPTER 2: Australia-the Arabian Peninsula and Iran: Trade and Investment:
Trends

The chapter will assess the current status of Australia's trade and
investment with the economies of the Arabian Peninsula and Iran. In
particular, the performance of Australia's exports to the markets in the
Arabian Peninsula and Iran will be analysed and compared to Australia's
trade with other regions. Bilateral investment flows will be examined and
means to increase them considered.

Trends in Australian exports to the Arabian Peninsula and Iran

• composition and direction of exports
• determinants of Australia's trade
  • impact of specific tariff and non-tariff barriers
    • adequacy of transport links
• assessment of Australian market shares in the region though time
  • comparison with estimates of revealed comparative advantage
  • assessment of Australian export performance to the Arabian Peninsula
    and Iran compared to exports to other regions

Trends in Australian imports from the Arabian Peninsula and Iran

• traditional trade
• identification of new trade
• prospects for growth

Trends in bilateral investment flows

• Australian investment in the Arabian Peninsula and Iran
  • role of Australian banks
• Arabian Peninsula and Iran investment in Australia
  • current and prospective sources, destinations and investment
    vehicles

Potential for joint ventures based on complementarities, in

• Australia
  • mechanisms to encourage investment into Australia
• The Arabian Peninsula and Iran
  • approaches to establishing a joint venture in the Arabian Peninsula
    and Iran
  • opportunities in free trade zones

Australia/ Arabian Peninsula and Iran trading framework

• overview of bilateral consultative arrangements
  • diplomatic and trade agreements
• Australia-Arabian Peninsula and Iran business links
  • Australian Arab Chamber of Commerce and Industry
  • chambers of commerce in the Arabian Peninsula and Iran

CHAPTER 3: Trade and Investment: Prospects, Opportunities and Competitive
Challenges

The two modules that comprise this chapter will analyse the determinants
of trade and investment in the region. The first module will assess the
prospects for growth and the likelihood for change in the regions' trade
patterns. It will identify the region's existing major trading partners,
draw conclusions on the competitive environment in the Arabian Peninsula and
Iran and seek to identify significant trading opportunities. The second module
will seek to understand the drivers of major investment flows into and out of
the Arabian Peninsula and Iran, with a view to encouraging bilateral
investment.

Trade in Goods and Services (18 pages)

Broad trade indicators

• brief outline of trade policies in the Arabian Peninsula and Iran,
  including openness of trade regimes, liberalisation moves
• trade performance:
  • most recent data for all economies' exports and imports by major
    sector
  • major trading partners

Determinants of trade

• transport costs
• tariff and non-tariff barriers
  • simple average tariffs
  • non-tariff barriers
  • discussion of regional economic integration
• discussion of impact of government mandated development plans
• brief discussion of the influence of culture, religion, language,
  immigrants on trade

Broad prospects for trade growth

• link with likely medium to long term development scenarios outlined in
  Chapter 1

Prospects for bilateral trade and specific opportunities, identifying
particular sectors and products.

Discussion of current trends and specific opportunities arising:

• in traditional sectors
  • mining and exploration
  • consumer goods
• from economic diversification
  • agriculture
  • manufactures: simply and elaborately transformed: food processing,
    petrochemicals, building and construction etc
  • services: financial, information technology, education, leisure and
    tourism, medical, aged care etc
• from recent reforms
  • infrastructure development and privatisation
  • WTO accession

Investment (12 pages)

Trends in inward and outward investment. Analysis of major determinants and
factors driving growth

Investment mechanisms and impediments

• brief discussion of the major determinants of investment flows
• summary of key mechanisms
  • for inward investment
  • for outward investment
    • regional investment funds
  • impediments to inward and outward investment
    • regulations

Broad prospects for investment growth

• link with likely medium to long term development scenarios outlined in
  Chapter 1

• Detailed analysis of investment prospects
  • levels of inward investment; sectoral prospects and investment
    vehicles
  • levels of outward investment; prospects by source, vehicle,
    destination

CHAPTER 4: The Business Environment

The chapter will provide a summary guide for exporting to the Arabian
Peninsula and Iran. It will include an overview of cultural differences, the
legal environment and regulatory requirements affecting business. Case studies
will provide insight to entry strategies for different product types.
Assessment will be made of the potential for the Internet to facilitate
commerce and market entry. An appendix will cover other introductory
information and contacts for micro and small to medium size exporters.

Politics, culture and religion

• business approaches
• summary on understanding the market(s) and the competition

Entry strategies conditioned by firm size and product type

• using a distributor
• importance of choosing the right sponsor
• using the Internet to convey information, form alliances
• establishing a local presence

Operational environment in the Arabian Peninsula and Iran

• legal and regulatory environment
  • dispute settlement procedures
• taxes
• accounting standards
• financial services and banking
• marketing and advertising
• labour issues

CHAPTER 5: Conclusions

The Chapter will draw conclusions and make policy recommendations for
governments.

• Implications for business
• Implications for governments
• policy recommendations

ANNEX 1: Contacts and links

• Government agencies
• Overseas representatives
• Chambers of Commerce
• Export agents
• Web links

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Useful links to economic and business information on the Middle East

In Australia

• The Australia Arab Chamber of
  Commerce and Industry website contains contact details for the
  organisation, information about member companies and their products. This
  site is an important Middle East portal for any Australian business with
  aspirations to export to the region.
• The electronic guide to Austrade's
  services includes country specific information and contacts, advice about
  going on-line and other support for Australian exporters.
• Details of the Export Finance and Insurance Corporation's services can
  be found at the EFIC site. There
  is also country rating information, advice about common financing problems
  facing exporters and case studies.
• Our home site - the Commonwealth Government Department
  of Foreign Affairs and Trade - has other pages that provide economic
  information on Middle East countries, information for overseas travellers
  and details of trade publications.
• Commonwealth Government Department of
  Industry Science and Resources site contains information on
  Commonwealth programs for business.
• The joint Federal State government Business
  Entry Point provides a service to Australian businesses to make it
  easier to deal with government. The BEP provides access to resources from
  approximately 50 Commonwealth Government agencies, 100 State and Territory
  Government agencies, and 125 industry associations.
• The Australian Electronic Business
  Network (AUSe.NET) is a national, not-for-profit organisation that has
  been formed to encourage small business awareness and adoption of
  electronic commerce. The AUSe.NET seeks to create awareness among small
  and medium enterprises (SMEs) of the benefits and relevance of doing
  business electronically via the Internet, and to assist small business to
  get on-line. The Commonwealth Government's Department
  of Communications, Information Technology and the Arts site also has
  information about the on-line economy.
• NSW State Government
• NT Government
• Qld State Government
• SA State Government
• Tas State Government
• Vic State Government
• WA State Government
• ACT Government

(State government entry points with information about services for
business.)

Overseas

• menic.utexas.edu/menic.html
  - This excellent site covers everything you ever wanted to know about the
  Middle East, from politics to economy. Links to US Government institutions
  (including country reports), other information sources on the Middle East
  and more.
• The on-line version of the Middle East
  Economic Survey - contains timely articles and excellent links into
  the Arab world (see for example www.mees.com/dotcom/economy/links.htm).
• www.1001sites.com - This site
  provides links to Arab businesses' sites.
• www.uaeforever.com - See 'The
  List' for links to all the useful sites in the UAE including the Abu
  Dhabi and Dubai Chambers of Commerce, which provide extensive information
  for business visitors.
• www.gulfbusiness.com - An
  on-line American business magazine about the Middle East.
• On-line site of the weekly Middle East
  Economic Digest from the UK - includes selected articles and country
  data.
• Arabia On-line gives current news on
  business, culture and other topics.
• www.assr.org - An electronic
  clearinghouse for social science research in the Arab world. A virtual
  library specialising in social science resources.
• Middle East Review of
  International Affairs - on-line journal from Israel, mainly about
  geopolitics, with good links and user friendly interface to journal
  articles and books.