U.S. Officials Give Advice on Doing Business in Middle East
AQABA, Jordan — It was a tale of two nations at the SOFEX trade show in Jordan in November.
On the north side of the hall was the United Kingdom/BAE Systems booth, which was never occupied during the three-day exhibition.
The medium-sized booth’s chairs were empty as well as the racks set up to hold pamphlets and fact sheets. The forlorn booth became a dumping ground over the course of the event with passers-by leaving their empty coffee cups and water bottles on the desk where a greeter would normally sit.
On the south side of the hall, a cluster of some 27 U.S.-based defense contractors surrounded a speaker’s corner set up by the Association of the United States Army.
U.S. Ambassador to Jordan Henry T. Wooster kicked off a series of talks delivered by embassy personnel who were there to assist the mostly small companies to do business with the Hashemite Kingdom.
U.S. manufacturers have the very best defense products — as the war in Ukraine has proven — and selling them to Jordan helps strengthen security ties, Wooster said.
“As you explore opportunities to do business in Jordan, I encourage you to take advantage of U.S. government resources,” he told the business leaders on hand for his remarks.
And there are a lot of U.S. vendors who needed help, especially among the small businesses.
One of the speakers who came to share his advice was Conrad Bonner, director of U.S. Central Command regional operations for the Army’s Security Assistance Command.
He had just met privately with two of the vendors at the exhibition that had apparently brought their wares and their pamphlets and had set up a booth. They just didn’t have one thing: an export license.
“One of the things I was pointing out was: don’t start selling until you have an export license,” he said.
Bonner is the Army’s point man for foreign military sales in the Central Command region, which spans from Egypt through the Middle East north to Kazakhstan. Bonner’s organization receives requests from friendly governments for certain U.S. manufactured technology, which goes through a six-step process including negotiating the terms of a contract, gaining approval from U.S. authorities — including export licenses — and eventually delivering the product.
The problem is that those six steps can take upwards of five years, he said.
“We are constantly hearing from combatant commanders, from the countries, that the process is too slow,” he said.
The first step goes relatively quickly. That is the part in which the Security Assistance Command is in control. A country requests a certain technology produced by a U.S. vendor. Then, Bonner’s team and the combatant command put together an endorsement. That can be turned around in four to six months. That process once took much longer but has undergone a series of reforms to shorten it, he noted.
Next comes State Department or congressional approval if the contract amount exceeds certain monetary thresholds. The Security Assistance Command then develops a business case and negotiates the contract terms between the vendor and the customer. If the parties agree, the customer makes a deposit. That process normally takes another year, Bonner said.
Then, things tend to get bogged down, he said. “It’s the execution phase we need to focus on, not the development.”
Once the contract is signed, the sale runs into the same red tape that every defense acquisition program encounters, including the Defense Federal Acquisition Regulations. They must develop requirements, undergo Defense Contracting Management Agency audits and inspections, and that doesn’t even include the time to manufacture the product, he said.
As for speeding up the execution phase, Bonner said State Department approvals and regulations like DFARS are “not going to go away.” Congress will maintain its accountability role.
“That’s a dark rail no one has even touched,” he said. “And no one in the Defense Department is going to push Congress to go way too fast. So, we just have to live with it,” he said.
Of course, there is a way to shorten the acquisition timeline for customers and U.S. businesses, Bonner noted. And that is to do a direct military sale. In that case, the company is on its own for negotiating and writing contracts and getting paid and doesn’t enjoy the “protection and security” the government provides.
“The time to do that is when the FMS process will not meet the [customer’s] timeline,” he added.
And there are plenty of foreign and direct sales opportunities in the kingdom, especially for companies with border security technology and cybersecurity services. Bonner said the hot item Middle East customers are looking for currently is counter-drone technology.
There were two major U.S. contract awards announced at the SOFEX show, both direct military sales.
Bell Textron signed a deal with Jordan’s Royal Air Force to provide 10 Bell 505 Jet Ranger X light single-engine helicopters that will be used for training purposes.
Colt’s Manufacturing Co. LLC inked a deal with the government-owned Jordan Design and Development Bureau to co-produce handguns and rifles in the kingdom.
The deal included an offset agreement for Colt — still based in West Hartford, Connecticut, but now owned by a Czech holding company — to manufacture, co-brand and market products to Middle East customers.
Offsets are parts of contracts that require foreign manufacturers doing business in a country to provide expertise and manufacturing agreements in the host country.
They are used by customers to build up domestic industries and create jobs.
And Jordan, like many Middle East countries, is looking to develop its indigenous defense industrial base. The Jordan Design and Development Bureau, which is operated by the Jordanian Armed Forces, is having some success doing just that, especially in the small arms ammunition and tactical wheeled vehicle export markets, said Shaman I. Abdallat, head of sales and commercial activities at the company.
The customers for its lines of military trucks have mostly been neighboring Middle East nations and in North Africa, he said, declining to get into specifics. The bureau sells about 300 to 400 vehicles per year, he added.
The Jordan Design and Development Bureau will seek Colt’s expertise in making its small arms lighter, he said.
Abdallat recommended that other U.S.-based small arms manufacturers follow Colt’s lead and find partners in the region rather than engage in foreign military sales that can take years to deliver the goods.
“Eastern European arms makers and China are selling weapons cheaper than any country — especially China,” he said. An Eastern European-made AK-47 assault rifle, for example, might sell for $600 and a Chinese version for $300.
Of course, U.S.-made small arms are higher quality, but many military customers in the Middle East and Africa have small defense budgets and want lower prices as well as quicker deliveries, he said.
“American companies must cooperate in the Middle East and Africa and go into joint ventures to keep a foothold in the market,” he said.
As for the federal resources available to U.S. businesses that want to purse foreign or direct military sales, the Department of Commerce has personnel stationed in U.S. embassies to pave the way.
They don’t get directly involved in business negotiations but can help U.S. companies find trusted partners, said Janee Pierre-Louise, senior commercial officer at the U.S. Embassy in Jordan.
“While we do not participate in that process, we can help support the identification of local partners that can help your company keep its finger on the pulse of opportunities,” she said in her talk at the SOFEX conference.
The process begins in vendors’ home states where the Commerce Department has some 100 U.S. Export Assistance Center offices in 70 markets. They help businesses understand what federal resources are available to them.
“These individuals can be seen as kind of like your account manager and can help facilitate any sort of connections that you need in markets around the world,” she said.
Assistance from the Commerce Department in U.S. embassies falls into four categories, she said.
One is helping companies get “export ready.” That includes advising on applying for all the documentation and licenses needed, she said.
“They can help direct you to the right resources in the United States so that you can be prepared to actually make an export transaction,” she said.
The next form of assistance is market intelligence in the country in which a company wants to do business.
“We can help conduct due diligence on prospective partners so that you feel greater confidence and assurance that the person you’re doing business with — the company that you’re doing business with — is credible,” Pierre-Louise said.
This third area is business matchmaking, where embassy personnel facilitate introductions to local partners — that can be done virtually or in person, she said. If a company has a product that is getting a lot of “buzz,” Commerce personnel can identify more stakeholders in this market,” she said.
Finally, Commerce staffers work on higher level issues. For example, when there are local roadblocks to making inroads for U.S. products, Commerce experts engage with the host government to help take down the barriers, she said.
“I often hear companies say we’re the best kept secret. So, I encourage you to leverage us,” she said.
Topics: Global Defense Market, International, Contracting