Dateline: Munich, Germany
I’ve spent much of the last week here in Munich meeting with some of the best minds in this cities business sector, including several young entrepreneurs who are bucking the trend here.
These young entrepreneurs have a lot of experience all around the world. Some of them are so-called “third culture kids” who grew up in countries all over the world and gained a rich set of experiences.
Ultimately, having a diverse set of experiences is what will prepare anyone for doing business in the new boom markets.
For example, most German kids wouldn’t dare launching their own start-up company. Here, failure is not an option the way it is in more entrepreneurial countries. In fact, the most plum jobs are those for major Fortune 500 companies including the big German automakers.
One of the most interesting conversations I had was with a young entrepreneur who has lived all over the world, but feels that some of the most interesting opportunities over the next ten years will be in the Middle East.
I tend to agree that doing business in the Middle East is an underrated option for westerners who are all too busy going to China. With increasing sanctions against Russia, the Middle East is a very attractive option.
For example, if you run a services business, you’re likely to get a lot more traction in countries like Qatar, Jordan, or the United Arab Emirates than you might get in countries like China that prefer to keep things in the family.
But the best reason my friend shared for starting a business in an emerging market in the Middle East comes down to pretty simple analysis.
Specifically, a sort of X/Y graph: the level of a country’s development running along the bottom of the graph, with the level of wealth running along the side.
Chances are you imagine these two criteria are somewhat equal. A country like the United Kingdom, for instance, is pretty developed and also seems to be relatively wealthy. Ditto for much of Europe, the United States, Canada, etc.
Of course, many of these western nations are flat broke. Not only are the countries themselves in hawk up to their eyeballs, but much of the population is as well.
Germany is one of the exceptions where people actually store some decent level of wealth. Most US persons, on the other hand, are living paycheck to paycheck. Not exactly one’s idea of “wealthy”.
Take Oman. My friend specifically mentioned investing in Oman as an interesting and high probability business destination.
Economic growth in Oman has been almost unfathomable over the last fifty years. In the 1970s, the place grew by more than 1,000%. The Omani economy is thirteen times as large now as it was in 1980.
This is the country that saw its economy collapse 150 years ago when it refused to serve as part of the slave trade. Of course much of the economy is largely based on oil, and the Oman government has set aside billions in a sovereign wealth fund.
They’re not buying up overpriced real estate on the Las Vegas Strip as their neighbors to the north did.
What Oman has been doing is liberalizing its economy, opening up new markets, and diversifying away from oil. There’s a big copper project going on now, for instance.
Today, Oman has a GDP per capita that is basically half of the United States: $24,700. There is plenty of wealth in the country, especially in the upper middle and upper class.
Half of the population in Oman is immigrant labor from places like India and the Philippines. Like other countries in the Arab world, the locals don’t handle any of the menial tasks.
Yet there are very few businesses actually serving those rich Omanis.
Plenty of money in a small, easy-to-target group of people, yet few services. No Amazon. No Zappos. Not much of anything.
While Oman’s population of roughly 4 million isn’t Germany or the United States, most of that population lives in the capital city of Muscat and the wealthiest people all share a similar profile.
There are plenty of consumers itching for western goods and for a more efficient way to buy things. They have money, but no one is serving them.
I have contacts who are rolling out very simple businesses in the east Asian economies we frequently speak of: Cambodia, Mongolia, and others like them. Others are doing the same in American markets like Colombia and even Haiti.
Not as many are talking about places like Oman, where consumerism is on your side as an entrepreneur. Heck, it would take a lot of growth to get the place to rampant consumerism from where it is now.
I’m not saying starting a business in Oman is the easiest thing you’ll do this year. What I am saying is that for all the effort people put into starting a business in the United States, dealing with tax compliance, hiring people, paying all kinds of benefits, and then going into the marketplace to complete, Oman is a lot simpler.
A lot of markets are.
A willing market with pent-up demand. It’s that simple. Build it and they will come. And in this case, a low 12% corporate tax, zero personal income tax, and an openness to foreign workers.
The world’s little-known markets like Oman offer an interesting opportunity for emerging and frontier market entrepreneurs who want to be a big fish in a small pond and apply simple concepts already working in more developed economies with similar levels of wealth.
Copy. Paste. Rinse. Repeat.
It’s worth considering.