[Teikoku Databank Co., Ltd.] 443 Japanese companies have expanded into the Middle East, 26 have expanded into Iran, and there is a sense of caution over the exchange rate and political/economic situation; close attention is needed as the situation becomes increasingly tense. *Teikoku Databank Co., Ltd.*
Press release: August 21, 2024
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443 Japanese companies are expanding into the Middle East; 26 are expanding into Iran. There is a sense of caution over the exchange rate and political and economic situation; close attention is needed as the situation becomes increasingly tense.
*Survey on the trend of Japanese companies expanding into 13 countries in the Middle East region (2024)*
photo by PIXTA
Teikoku Databank Co., Ltd. uses Teikoku Databank’s company profile database “COSMOS2” (as of August 2024, approximately 1.47 million companies included) and credit report file “CCR” (approximately 2 million companies included). We investigated and analyzed Japanese companies expanding into the Middle East region based on publicly available information.
-Survey results (summary)-
1. A total of 443 Japanese companies have expanded into the Middle East, with the largest number in the UAE and over 20 in Iran. 2. The most common concerns of companies expanding into the Middle East are “exchange rate” and “political/economic situation” – wary of country risk
[Note] Regarding the definition of the Middle East
13 countries: Bahrain, Iran, Iraq, Israel, Jordan, Kuwait, Lebanon, Oman, Qatar, Saudi Arabia, Syria, United Arab Emirates (UAE), and Yemen. Palestine was excluded from the calculations.
A total of 443 Japanese companies have expanded into the Middle East, with the largest number in the UAE and over 20 in Iran.
As of August 2024, a total of 443 Japanese companies have been found to be expanding into 13 countries in the Middle East region, excluding Palestine. Looking at the countries in which companies have expanded, the country in which the largest number of companies have expanded is the United Arab Emirates (UAE), with 289 companies. In particular, there were many expansions into the constituent emirates of Dubai and Abu Dhabi, and in addition to local sales bases, many resource-related companies such as oil and natural gas resource development were also expanding into bases.
The next largest company was Israel (95 companies), where Japanese companies were found to be operating mainly in Tel Aviv. Against the backdrop of increasing economic exchanges between Japan and Israel through various investment agreements and economic partnership agreements, we are expanding into R&D bases for cutting-edge semiconductor and pharmaceutical companies, as well as investing in and making startups in Israel their subsidiaries. was noticeable. “Saudi Arabia” (78 companies) is dominated by major trading companies and financial institutions, and in addition to petroleum-related industries, the number of companies expanding into Saudi Arabia (78 companies) was notable compared to other regions.
Outside of the top three countries, 26 companies were found to be expanding into Iran, where tensions with Israel are intensifying. In addition to being on the same level as Qatar (26 companies), it was the fourth largest number of Japanese companies operating in the Middle East out of 13 countries after Saudi Arabia. Over 60% of companies expanding into Iran were in the wholesale trade, with some companies setting up operations as bases for exporting Iranian agricultural products and handicraft products to Japan. Additionally, financial institutions, trading companies, and other companies have been expanding their bases for the purpose of gathering information. As of August 2024, no cases of expansion into Yemen, which continues to be in a state of civil war, could be confirmed.
Companies expanding into the Middle East are most concerned about “exchange rate” and “political/economic situation” – wary of country risk
In a survey conducted by Teikoku Databank in 2023, of the 17 Japanese companies expanding into the Middle East that responded regarding overseas expansion and transactions, the most frequently cited challenges were “foreign exchange rate fluctuations” and “foreign exchange rate fluctuations” “Gathering information regarding the upcoming political situation.” Continuing to collect information on the “economic situation,” compared to all responses in which worries about securing human resources and cultural issues such as language were the top concerns, companies operating in the Middle East were concerned about political issues in the region, especially tensions between Iran and Israel. There was a sense of caution regarding country risk.
The growing tension between Iran and Israel is spreading throughout the Middle East. On July 31st, the Ministry of Foreign Affairs warned that “the possibility of a rapid deterioration of the situation in the Middle East region cannot be ruled out,” and on August 5th, the Ministry of Foreign Affairs announced that the As fighting intensifies in Lebanon, an evacuation advisory has been issued for all of Lebanon. Some areas in both Iran and Israel have also been raised to a higher risk level, and 10 out of 13 countries in the Middle East have been issued with some sort of danger warning.
Although there is some uncertainty about the impact on Japanese companies expanding into the Middle East, responses are likely to differ depending on the region and type of expansion. Companies operating in countries where the security situation is not currently deteriorating, such as Saudi Arabia and the UAE, may be limited to measures such as strengthening information gathering. On the other hand, companies doing business in Iran, Israel, neighboring Jordan, and other countries are expected to be forced to evacuate their expatriates or postpone business trips indefinitely due to the rapidly deteriorating security situation.