Faculty
Professor Diederik Vandewalle
Objectives
Course Overview
This course is meant to provide students with an introduction to the financial, legal, cultural and social contexts of conducting business in the Arab Gulf states, i.e. the United Arab Emirates, Saudi Arabia, Kuwait, Qatar, Bahrain and Oman. The course is primarily meant to provide both the necessary background as well as an introduction to a variety of practical issues that foreign executives and managers will likely encounter while working within one of the six countries that have become fast-growing emerging economies with substantial assets in SovereignWealth Funds. The course is meant as well to blend a combination of academic research and skill sets with the experience and insights of management practitioners working in the region.
The Doing Business in the Arab Gulf States course has a dual focus. The first
is to provide students with the knowledge necessary to understand and function effectively within the different business systems of the Arab Gulf area. The second is to make clear and understand the more specific and unique aspects that underlie these systems: for example, how to deal effectively with informal arrangements, brokerage arrangements, and patronage; how to successfully negotiate gender issues in a business environment that has traditionally eschewed public roles for women; how to navigate within countries that have unique mixtures of state-owned and private enterprises; to understand the scope and role of Islamic finance; and to understand the dilemmas and strategies in dealing with large segments of expatriate labor. In order to anchor the readings and discussions within a real life perspective, guest speakers who either live in the area or who have extensive experience in its business environment and can provide an insightful perspective on these issues will be invited to participate in the course.
Objectives
This course is meant to provide students with an introduction to the distinct manner and variety of ways in which business is conducted in the Arab Gulf states. Part of its objectives is to provide a solid foundation in the cultural, social and political aspects of local business arrangements. By the end of the course students should have a solid understanding of how to deal with the different international business practices in the Gulf, and acquire a solid foundation for dealing with those practices on an everyday level within an environment that is culturally and economically quite distinct from other regions in the world.
For that purpose, this course more specifically will:
Initially explore the different factors, and the differing strategic issues, that companies doing business in the region face. This part of the course will focus on discussions related to religion in the Arab Gulf states, issues of gender, culture, history, and the uneasy mixture of western business practices and local culture.
Compare the different characteristics and institutional set-ups of the economies of countries within the region. In general, the economies of the Arab Gulf have been patronage-driven, with little distinction between public and private economies. As such, they show very distinct patterns of management, different concerns about efficiency, about competition, and about social contracts.
Based on these distinctions, the course will reflect on and discuss the different managerial challenges expatriate business managers face throughout the region. One specific challenge in particular concerns the fact that expatriate labor and management constitutes an overwhelming part of the workforce, introducing distinct challenges for the business environment.
Hear directly from a number of managers who work in the region, and from individuals from the region, who will share their experiences and impressions about doing businees in the Arab Gulf states. (The seqence of sessions may be slightly altered to accommodate visitors).
Students should familiarize themselves with the more general information available about the Arab Gulf (see below). Despite its emergence as a regional economic and transit hub--and potentially as a world financial power--relatively little has been published beyond the academic literature and elementary "how to" manuals on business practices and challenges in the region.
Requirements
Materials
Course materials
For all "Read" sections on the syllabus, students are required to have finished the readings before each class. Each section contains a handful of questions that will form the structure of each sessions. The "Background" section for each session contains additional materials that, while not necessarily focused on business practice in the region, contains some highly relevant readings. Students are encouraged to review these as well before each class session. It is also recommended that students follow economic events in the Arab Gulf on a daily basis during the course. The Financial Times provides the best overall daily coverage of developments in the economies of the local countries. A particularly useful source is the Gulf Research Center in Dubai which publishes, in addition to a daily summary, a wide assortment of economic and financial reports. The quarterly reports of the Economist Intelligence Unit provide in-depth coverage within a longer time frame. Below is a list of additional internet sources that deal directly or indirectly with issues affecting the Arab Gulf economies and local/regional business environments:Arab Reform Bulletin, Carnegie Endowment, www.carnegieendowment.org/publications/index. See also the Carnegie Endowment site for book and occasional publications and country files.
The Arab World Competitiveness Report, World Economic Forum, www.weforum.org
The Program on Governance in the Arab Region (POGAR) at www.pogar.org contains a wealth of data on Arab governance, much of it drawn from the World Bank.
The World Banks very useful Middle East and North Africa website is at http://web.worldbank.org/WBSITE/EXTERNAL/COUNTRIES/MENAEXT/0,,menuPK:247603~pagePK:158889~piPK:146815~theSitePK:256299,00.html
The most recent in the series of World Bank reports on MENA development prospects can be found at http://web.worldbank.org/WBSITE/EXTERNAL/COUNTRIES/MENAEXT/0,,contentMDK:21483969~pagePK:146736~piPK:226340~theSitePK:256299,00.html
Arab Human Development Reports are available on http://www.arab-hdr.org/reports.asp?rid=2
World Bank World Development Reports are at http://econ.worldbank.org/
World Economic Forum Arab Competitiveness Reports are at http://www.weforum.org/en/initiatives/gcp/Arab%20World%20Competitiveness%20Report/index.htm
The useful Gulf 2000 website is at http://gulf2000.columbia.edu/
The Arab Reform Initiative, which publishes intermittent reports, is at http://www.arab-reform.net/
The International Crisis Group, which prepares position papers on key issues in the region, is at http://www.crisisgroup.org/home/index.cfm
Grading
Class participation 50%
The final grade for the course will reflect your overall performance, constrained by Tuck's grade distribution policy as shown in the Student Handbook. Your grade will represent the overall judgment of the instructor, taking into consideration graded assignments and class participation.
Class participation includes attendance, discussion, and readings. Wherever possible, one or more students will be called upon to lead the discussion by preparing case studies and actively participating.
8-page research paper 50%
Using the framework and ideas learned in class, each student is required to prepare a short and concise paper on some aspect of (a) either doing business inn a specific country the course covers, or (b) a specific business issue a foreign company faces in any of the countries studied in this course. In particular, the paper should pay attention to the particular challenges arising either from the culture of the region or from other aspects of the business environment in the country you're using as a focus for your paper. It should analyze as well the firm's (or country's) strategies and options. Your paper topic needs to be approved by the instructor; your paper will be due the last day of class
Schedule
Session 1 - September 14
The Realities of Business in the Arab Gulf
Questions:
What is so unique about the economies of the Arab Gulf and about local business?
What key challenges and decisions do foreign companies face in this environment?
What insights about "local cultural content" are needed to navigate successfully in local economies?
"Oasis Economies" - Strategy and Business, 50, Spring 2008
"Oasis Economies" - Booz &Co. - strategy-business issue 50
NYT, "Car-Free, Solar City in Gulf Could Set a New Standard for Green Design" at http://www.nytimes.com/2008/02/05/science/earth/05city.html?_r=1
Greg Gause, "The Gulf Monarchies: Uncomfortable Pivots" - PDF
Interview with Kito de Boer: http://www.mckinseyquarterly.com/A_strategy_for_the_Gulf_2205
Background: (on reserve in Feldberg)
Margaret Nydell, Understanding Arabs: A Guide for Modern Times (Intercultural Press, fourth edition, 2006)
Aamir Rehan, Dubai and Co.: Global Strategies for Doing Business in the Gulf States (McGraw Hill, 2008)
Tim Niblock, The Political Economy of Saudi Arabia (Routledge, 2007)
Pete Moore, Doing Business in the Middle East: Politics and Economic Crisis in Jordan and Kuwait (Cambridge: 2004)
Session 2 - 15 September
Culture and Business in the Arab Gulf
Questions:
How does culture impact business decision-making in the Gulf?
Of what importance are family and tribal ties for business in the Gulf?
What happens--and how are dilemmas solved--when expatriate culture, business practices, and local culture clash?
Read:
"Partnering in the Middle East: An Expatriate Challenge" - USD - Case 402-011-1
Patrick McDonald, How to Succeed in the Gulf: Living and Working in an Arab Culture (BookSurge, 2006) (on reserve in Feldberg)
Background:
Margaret Nydell, Understanding Arabs: A Guide for Modern Times (Intercultural Press, fourth edition, 2006) continue (on reserve in Feldberg)
Michael Herb, All in the Family: Absolutism, Revolution, and Democracy in the Middle Eastern Monarchies (State University of New York, 1999) (on reserve in Feldberg)
Gregory Gause, Oil Monarchies: Domestic and Security Challenges in the Arab Gulf States (Council on Foreign Relations, 1994) (on reserve in Feldberg)
Timothy White and J.E. Winn, Islam, Animation, and Money: the Reception of Disneys Islam in Southeast Asia, Kinema (Spring 1995), (http://www.kinema.uwaterloo.ca/white951.htm)
Interview with Arif Naqvi of Abraaj Capital:
http://www.mckinseyquarterly.com/Business_beyond_oil_in_the_Middle_East_2206
Session 3 - September 21
Islamlic Finance and Investment
Questions:
What is the likely future of Islamic finance in the Arab Gulf?
Where specifically is Islamic finance likely to pose challenges and opportunities for international business?
How can business managers cope with requirements to include Islamic finance in local projects?
Read:
"Introduction to Islamic Finance", Harvard Business School, Case 9-200-02
"The International Investor: Islamic Finance and the Equate Project," Harvard Business School, Case 9-200-012
Mohammed El Qorchi, "Islamic Finance Gears Up", Finance and Development (December 2005, Volume 42, Number 4)
Robert Hefner, "Islamic Economics and Global Capitalism" Society, no. 1 (November/December 2006)
Booz&co., "Competing Successfully In Islamic Banking"
IFSL Research, "Islamic Finance 2009" See url below and click on "Islamic Finance 2009" in the right-hand box
Background:(on reserve in Feldberg)
Muhammad Ayub, Understanding Islamic Finance (Wiley, 2008)
Clement Moore and Rodney Wilson eds., The Politics of Islamic Finance (Edinburgh University Press, 2004)
Session 4 - September 22
Gender, Education, Labor and Business in the Arab Gulf
Questions:
What are the particular challenges foreign female managers face in the Arab Gulf business environment?
What challenges do local educational systems and employment of nationals pose for international business in the Gulf?
To what extent should foreign managers attempt to "integrate" socially and culturally in Arab Gulf society?
Read:
McKinsey Quartely, "Improving Education in the Gulf"
Ellen Moore, "Living and Working in Bahrain" Ivey School of Business, Case 90C019
Dubai School of Government, "Missed by the Boom, Hurt by the Bust"
World Bank, MENA Development Report, Unlocking the Employment Potential in the Middle East and North Africa; Toward a New Social Contract (World Bank: Washington, D.C. 2004) - chapters 3 and 5. (on reserve in Feldberg)
Background:(on reserve in Feldberg)
Janet Landa, Trust, Ethnicity, and Identity: Beyond the New Institutional Economics of Ethnic Trading Networks, Contract Law, and Gift-exchange, (Ann Arbor, MI: University of Michigan Press, 1994
Session 5 - September 22 - SPECIAL SESSION
Sovereign Wealth Funds, Oil Revenues, and Changing Investment Patterns
Questions:
What has the impact of rapid financial inflows been within the economies of the Arab Gulf in the last decade?
What opportunities and challenges have these rapid inflows created for foreign businesses present or entering the Gulf?
What are the likely repercussions for foreign labor and businesses of the more recent economic down-turn in the Arab Gulf?
Read:
"The Coming Oil Windfall in the Gulf," McKinsey&Company, January 2008
"Where Oil-Rich Nations are Placing Their Bets", Harvard Business Review - Case R0809K
Brad Setser and Rachel Ziemba, "Understanding the New Financial Superpower; the Management of GCC Official Foreign Assets", RGE Monitor, December 2007
Booz&co., "The Rise of Economic Zones in the MENA Region"
Booz&co., "The Vital Role of Sovereign Wealth Funds in the GCC's Future"
Background:
Daniel Yergin, The Prize: The Epic Quest for Oil, Money, and Power (Free Press, third edition, 2008) - particularly Part V, "The Battle for World Mastery" (on reserve in Feldberg)
Rachel Bronson, Thicker Than Oil: America's Uneasy Partnership with Saudi Arabia (Council on Foreign Relations, 2006) (on reserve in Feldberg)
Paul Aarts and Gerd Nonneman eds., Saudi Arabia in the Balance Political Economy, Society, Foreign Affairs (New York University, 2005)
Session 6 - September 29
Dubai and Abu Dhabi
Questions:
What unique opportunities does the United Arab Emirates hold for international business?
How is the UAE distinct, in both culture and business practices, from the remainder of the Arab Gulf?
How distinct are business opportunities in Dubai, a "post-oil" society?
Is the "Dubai model" a harbinger of business in the Arab Gulf expatriate managers should understand?
Read:
"Dubailand: Destination Dubai," Harvard Business School, Case 9-207-005
Background:(on reserve in Feldberg)
Christopher Davidson, Dubai: the Vulnerabilities of Success (Hurst/Columbia University Press, 2008)
Christopher Davidson, The United Arab Emirates: A Study in Survival (Lynne Rienner, 2005)
Session 7 - October 5
Brokerage and Corruption
Questions:
How does corruption and family ties affect international business in the Gulf?
How do international managers deal with the uncertainty of expected pay-offs and lack of transparency in the Arab Gulf?
How do international managers deal with brokers, and when to circumvent them?
Read:
"Medical Equipment Inc. in Saudi Arabia", Ivey School of Business, Case 907C42
Steffen Hertog, "The sociology of the Gulf rentier systems: societies of intermediaries" - PDF
Background:
"The Gulf Centre for Excellence in Ethics" - PDF
Pranab Bardhan, Corruption and Development: A Review of Issues, Journal of Economic Literature 35 (1997): pp. 1320-1346
John Owens, Stroi Service: Dealing with Bribery in Central Asia, and Conflicts Between US Law and Local Cultural Rules, Tuck School of Business case study
John McMillan, Private Order Under Dysfunctional Public Order, Michigan Law Review, (Aug. 2000), Vol. 98, No. 8, pp. 2421-2424
David Kang, Transaction Costs and Crony Capitalism in East Asia, Comparative Politics, 35(4) (July, 2003): pp. 439-458
Session 8 - October 6
Family Businesses, Private Equity, Public Finance and Going to Market
Questions:
What particular challenges are the Gulf's growing social problems likely to pose for international business and local managers?
What opportunities are education and health care providing for foreign firms in the Arab Gulf?
How can foreign managers and business navigate between family businesses, state-owned firms, and private business in the Arab Gulf?
Read:
"Ithmar Capital", Harvard Business School, Case 9-908-032
Dirk Vandewalle, "Social Contracts, Institutional Development and Economic Reform in Middle East Oil Exporters" - PDF
"Saudi Arabia: Getting the House in Order" - Harvard Business School, Case 9-702-031
Background:
World Bank, MENA Development Report, Unlocking the Employment Potential in the Middle East and North Africa; Toward a New Social Contract (World Bank: Washington, D.C. 2004), chapter 2.
Session 9 - October 13
Doing Business in the Arab Gulf: What Have We Learned and What Does the Future (Likely) Look Like?
Questions:
What is unique and, despite the uniqueness of local society, not so unique about doing business in the Arab Gulf states?
To what extent will a growing local sense of nationalism affect international business in the Arab Gulf, and how should international managers respond?
What strategies and business approaches are likely to be successful as the Arab Gulf becomes a globalized economy?
Read:
Eckhart Woertz, "Impact of the US Financial Crisis on GCC Countries," Gulf Research Center, October 2008
"The Dubai Ports World Debacle and Its Aftermath" - Harvard Business School, 9-707-014
Booz&co., "Weather the Storm and Prepare for the Future"
Economist Intelligence Unit, "The GCC in 2020: Outlook for the Gulf and the Global Economy"
Background:
Paul Dresch and James Piscatory eds., Monarchies and Nations: Globalisation and Identity in the Arab States of the Gulf ((Tauris: 2005) (on reserve in Feldberg)
C.K. Prahalad and Kenneth Lieberthal, The End of Corporate Imperialism, Harvard Business Review, August, 2003, pp. 109-117
