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Moves to the Middle East, Remote Locales on the Rise

Multinational companies looking for the next opportunity have decided that, despite the political uncertainties, the Middle East is ripe for investment.

May 18, 2007
Related Topics: Relocation Services, Relocation Management, Workforce Planning
There's an ongoing war in Iraq and continuing unrest between Israel and its neighbors. Iran is developing nuclear capability despite international objections. It’s enough to make a multinational corporation head for safer shores.

But that’s not the case. Instead, the Middle East has become a hotbed of corporate investment, with relocations to the region on a steady increase. Geoffrey Latta, executive vice president of ORC Worldwide in New York, says the sudden surge in transfers to the Middle East from companies based elsewhere in the world is one of the most striking recent trends in international relocation.

In its latest survey of international relocation trends, ORC, an international relocation consulting company, found that transfers to the Middle East have doubled since 2000, rising from 5 percent of all relocations to 10 percent. According to ORC, the countries of the Middle East combined now account for as much worldwide relocation activity as China.

"The Iraq war and the investment that comes from that is part of the reason," Latta says. "But even if that hadn’t occurred, the Middle East would be growing. Dubai is booming. Dubai and the Gulf states have seen quite an expansion."

Multinational companies looking for the next opportunity have decided that, despite the political uncertainties, the Middle East is ripe for investment. Companies from the U.S., Europe and Asia are setting up sales and regional operations headquarters in the Middle East, Latta says.

The current focus on the Middle East represents a return to a region that was a major focus of international investment in the 1980s, based largely around expansion in the energy industry. In the 1990s, the former Soviet Union and China opened to foreign investment and drew attention away from the Middle East. Now companies are rediscovering the Middle East as a place for business activity and expansion.

The rise of the Middle East as a corporate relocation destination is part of a larger movement of companies into more remote and sometimes less hospitable locales. In the 1970s, a corporate relocation often meant a posting to Paris or London. A few years ago, the destination might have been someplace like Hong Kong or Shanghai, China. Today it’s more likely to be somewhere like Chongqing (formerly known as Chungking).

"There are huge shortages of talent in Asia," says Cris Collie, executive vice president of Worldwide ERC, the organization for relocation professionals. "We just had a meeting in Shanghai and over 400 members attended."

One consequence of the increased relocation activity to the more remote parts of Asia and to the Middle East is that companies find they must offer more generous relocation packages to persuade skilled employees to transfer. Most companies offer a pay premium for relocating to a place deemed hazardous or particularly remote and difficult.

Now companies are looking at ways of controlling the rise in extra incentives. At some companies, the extra pay incentive that once continued indefinitely is now being capped at five years. After that, the employee has a choice of staying on without the extra pay or returning home.

Another tactic: offering short-term assignments of up to one year rather than permanent transfers that typically last at least three years. With short-term assignments, companies don’t usually relocate families, but rather give the transferred worker a housing allowance and some trips home during the assignment.

"It’s an effort to limit costs but still make sure you can put the resources where they are needed," says Kathy Morris, director of global consulting for Prudential Relocation.

Despite the challenges and costs, international relocation, which according to ERC is already growing faster than domestic relocation, is expected to continue expanding as companies move employees into ever more remote areas.

Workforce Management, May 7, 2007, p. 26 -- Subscribe Now!

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