“Singapore on steroids”

In 2007, Tim Kimber received an unexpected call from a distributor in Dubai interested in stocking the PlasmaCar, the flagship offering of Kimber’s Ottawa-based toy distribution firm, PlaSmart Inc. While PlaSmart was already exporting into several foreign markets, the United Arab Emirates (UAE) were not on its radar. But after several meetings in Dubai, Kimber was sold.

What won Kimber over? First, while the UAE isn’t the biggest market for Kimber’s wares—toy sales in the tiny Middle East nation are less than 2% of what they are in the U.S.—the average spending per child is much higher. But what really attracted Kimber was the chance to use the Emirates as a launching pad to reach other markets nearby: “The UAE services 1.2 billion people in the region.”

PlaSmart isn’t alone among Canadian companies looking for growth opportunities in the UAE, which is composed of the emirates of Dubai, Abu Dhabi, Ajman, Fujairah, Ras al-Khaimah, Sharjah and Umm al-Qaiwain. The UAE is Canada’s largest export market in the Middle East and North Africa, and the trade relationship has been growing strongly in recent years. According to Statistics Canada, Canadian exports to the UAE were $1.1 billion last year, with agrifood products, specialized machinery, professional services, software and telecom equipment leading the charge; that’s up from $787 million in 2006. Imports from the nation were $153 million in 2010, up from $94 million four years earlier.

This blossoming relationship is fuelled in large part by the UAE’s affluence and political stability; even though it is ruled by emirs who actively ban political parties, the country has avoided the unrest of the recent Arab Spring uprisings. It is a place of ripe opportunities for Canadian firms in a wide variety of industries, including health care, education, IT, professional services and infrastructure development.

Beyond stability, a big part of the UAE’s appeal is that locals have plenty of cash to spend. The UAE’s per-capita income of almost $62,000 is 27% higher than Canada’s, and the nation boasts a healthy GDP growth rate of 3.2%. Moreover, the country’s population is young, and growing fast. Less than 1% of Emiratis are older than 65, the median age is just 30 and the UAE’s estimated 3.3% population growth rate for 2011 is the sixth-highest in the world.

That population is also extremely dynamic. Almost 74% of those living in the UAE aged 15 to 64 are non-nationals. Most are professionals from Europe and North America, or labourers from Asia or North Africa. And many of those foreign-born workers have a connection to Canada that makes them receptive to our products or services, by their language (English or French), business ties in their homelands or connections with family members.

At the root, entrepreneurial ideals pervade the UAE. Just 50 years ago, it was a relatively undeveloped, impoverished Persian Gulf nation with weak infrastructure and a feeble economy. That all changed when oil was discovered. The UAE drove forward with massive development, as its newly cash-flush rulers, conscious that the black-gold rush would eventually end, sought to diversify the country’s economy away from the oil and gas sector. The goal: to position the Emirates as one of the world’s business hubs. It has worked. Visitors who take a walk down one of Abu Dhabi’s or Dubai’s main streets now see forests of skyscrapers, shopping malls, luxury cars and six-star hotels where sand dunes drifted and camels plodded just decades before.

For many companies, including PlaSmart, the UAE’s affluence has been paying dividends. In PlaSmart’s first three years selling into the UAE, its sales in the region grew from nothing to about $261,000. While still a small chunk of PlaSmart’s global revenue, Kimber feels the strategic move into the UAE made sense, not just because Emiratis like his toys, but also because the move has put his products on the radar of major international players. “The UAE is such a hub for businesspeople that it has been a stepping stone for us to some other markets in which we didn’t have a presence,” he says.

Of course, opportunities to do business in the UAE don’t stop at the toy sector. Jean-François Croft, Export Development Canada’s chief representative for the Middle East, says the UAE is a natural fit for Canadian firms in many areas, including foodservice (Tim Hortons recently brought the double-double to Dubai), retail, professional services and information technology.

“There’s definitely a software opportunity there because of the strong business demand,” says Lak Chahal, whose Burnaby, B.C.-based firm, Binary Stream Software Inc., has successfully partnered with a Dubai-based reseller to market Microsoft Dynamics GP software add-ons in the UAE.

Canadian oil and gas outfits, ranging from exploration and maintenance firms to consultants and parts manufacturers, will still find plenty of clients in the largely crude-driven UAE economy. But there’s interest in other resources- and power-related services, too. According to Croft, there is high demand for both power and clean water in the region. Canadian firms that specialize in water desalination and treatment, as well as power generation and maintenance, have impressive opportunities for expansion into the desert country.

So do firms in health care, from equipment suppliers to medical-personnel providers. The reason: the UAE government is currently investing billions in the sector, and it needs help to better its system. “Their health-care infrastructure needs to be improved,” Croft says. “The population is growing rapidly, so they’re building a lot of new hospitals and clinics and need people to staff them.”

Another hot area is civil construction, according to Karl Tabbakh, chair of the Canadian Business Council of Abu Dhabi, which assists Canadian companies doing business in the UAE. Why? The UAE’s construction boom has, to date, been focused primarily on dotting the skyline with dramatic skyscrapers, tony hotels and tourist-friendly shopping malls. The country is now playing catch-up to construct more functional infrastructure, such as utilities, hospitals and schools.

Manishi Sagar first noticed opportunities on the education front on a visit to Dubai in 2008. After researching the country’s young demographic profile, the CEO of Candiac, Que.-based Kinderville Learning Centres made some calls to the Canadian Business Council of Abu Dhabi and the Canadian embassy, and hired a local business consultant to help Kinderville break into the market. Sagar ended up successfully bidding on a government contract to become a daycare service provider of choice.

The deal didn’t come without strings. Sagar has had to contend with red tape, a recession-related drop in demand and entrenched gender inequality that has, at times, made things tough for her as a female entrepreneur.

As Sagar has learned, in order to benefit from the UAE’s great promise, you have to clear some barriers. These include the new requirement that Canadians obtain a visa before entering the UAE—the result of a recent diplomatic rift between the two nations over landing rights for airlines.

Or the UAE’s business-ownership rules, which prevent foreigners from owning majority stakes in most companies within its borders. That means Canadian entrepreneurs have to seek out and pay local Emirati sponsors an annual fee—which can range from $5,000 to $500,000—to act as signatories on official documents.

And even though the UAE is a largely tax-free zone (most firms operating in the country pay no taxes on operating income), starting a business there isn’t cheap. “There are a lot of hidden taxes, such as fees for paperwork,” says Amir Farha, managing partner with Dubai-based business consultancy Tandem Partners. These can range from $30,000 to $400,000.

One common way to take on these financial and bureaucratic hurdles is to partner with a local consultant or intermediary to help you navigate the landscape. This has worked for Kimber at PlaSmart; in his experience, such arrangements are more than worth their cost. “A partner on the ground will understand the peculiarities of that market better than anybody else,” he says.

For Sagar’s part, she remains confident in the long-term potential of the UAE. She expects Dubai to be a portal for Kinderville’s expansion into other Middle East nations and India. And she believes that sales generated in the region could easily dwarf those made in Canada. “This is the nearest thing to doing business tax-free. This is Singapore on steroids,” she says. “Every morning, you wake up and there’s something new going on.”