here'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!
Download a pdf of this feature.
= Member Only
