Contracting abroad: five likely hotspots in 2016

Aside from the ‘hottest’ overseas working destinations like the USA, Germany and France, there are a number of economies that go under the radar when UK contractors explore contracting overseas, writes Michelle Reilly, managing director of CXC Global.

And they shouldn’t do. Because these frontier; emerging markets are actually creating exciting and potentially lucrative opportunities for contractors across a range of industries. But where are they located and what should contractors be aware of when operating in them?

Bulgaria

While Bulgaria was affected by the financial crisis, it fared a lot better than many of its neighbouring economies, such as by recovering more quickly than they did.  Some commentators have suggested that corruption and a weak judicial system prevent further expansion but, in fact, there are a number of sectors that are currently thriving and contributing to its growth. The main industries in the Bulgarian economy are agriculture and manufacturing. It also produces a significant amount of raw materials including iron, gold and coal. The electronics and oil refinery sectors are also strong.

At the same time, Bulgaria has also become a destination of choice for many Western-based businesses as a new IT outsourcing destination. While the UK is suffering from a well-documented shortage of these experts, Bulgaria appears to be thriving, although it does lack the managerial and senior level talent that the UK contracting arena can provide.  

Operating in Bulgaria is relatively straightforward and regulations are similar to those in France and Germany. Both personal and corporation tax currently stand at 10%. However, as with the aforementioned nations, social security costs are higher than the UK which can make utilising a limited company or a Bulgarian umbrella extremely expensive, not to mention challenging due to language restrictions. The most tax efficient and convenient solution is to, again, utilise a service provider with local knowledge and expertise to ensure that you are registered with the most suitable status based on your circumstances.

Kazakhstan

For a country the size of Western Europe, and with truly enormous mineral resources underneath its feet (exports of which make up a large chunk of its GDP), Kazakhstan doesn’t get a great deal of media attention. It’s somewhat surprising because last year its economy grew by an impressive 4.1% in real terms. Yes the country has been going through something of a slump in the past few months, but this is likely to be directly linked to falling oil prices and should correct itself in the near future. The ongoing crisis in Russia hasn’t helped matters.

For contractors looking to operate in Kazakhstan – and there’ll be a fair few because it is home to the Baikonur Cosmodrome, currently the major global spaceport, there are a few things to be aware of. Some quotas are in place to ensure that companies employ a certain number of Kazakh nationals, so approaching firms directly may not be the most effective strategy. Instead, look to engage with an agency that specialises in placements in the area. In addition, the domestic tax system can be complicated to manage so either brush up on your knowledge of Kazakh tax law or enlist an expert.

For those contractors looking to take their family with them, the Kazakh education system is regarded as one of the world’s finest. It topped the 2011 UNESCO ‘Education for All Development Index’ by achieving near-universal levels of primary education, adult literacy and gender parity.

What it’s also known for, when it comes to local laws, is its zero-tolerance policy towards drink driving – just a single drink can set you over the limit so make taxi arrangements  before attending a client’s social event.

Oman

When weighing up your next contracting destination of choice, the Middle East probably doesn’t currently rank that high. But Oman has steered clear of much of the turmoil affecting the region and is expected to grow by 3.2% this year and 3.4% in 2016. Like many other Middle Eastern nations, Oman could be affected by wavering oil prices. However in the long term these should be set to rise again. In addition to the oil and gas market, expertise in the utilities and construction sectors has also been actively sought after.

Professionals wishing to operate in Oman will require a sponsorship partner based in the country to process their application. It should also be remembered that anyone looking to operate here will have to contend with the ‘Omanization’ quotas which currently mean firms’ workforces must be comprised of at least 72% Omani nationals. For this reason, it may be more effective to approach these firms through a UK based specialist rather than the employer directly.

As with other Middle Eastern nations, there is no income tax and while there is a 17.5% social security contribution, this only applies to Omani nationals, not to expatriate employees.

Finally, aside from the searing heat, UK contractors in-bound to its capital Muscat should be well aware of the need for travel insurance, particularly related to kidnap and ransom. While the country is safe, it’s better to be over prepared.

Bahrain

In its latest global outlook, the IMF reported that the Bahraini economy is set to expand by 3.9% in 2015, considerably above the average for the Middle East (2.7%) and indicative of its position as one of the world’s growth markets. Like Oman, the country does rely on oil and gas reserves for some of its strength; however it’s not completely centred on the industry. Much of the predicted growth for this year is expected to stem from government-backed infrastructure developments with around $4.4bn being allocated exclusively for this.

According to the country’s transport minister, Kamal bin Ahmed, these developments will “supplement existing growth levels and also strengthen the economy’s base for longer-term development.”

Operating in Bahrain is relatively similar to Oman. There is a 0% income tax rate and while Bahraini nationals pay 19% social security, expats only pay 4%. Again, while businesses in the country are relatively easy to approach, the best option to secure work is to partner with a specialist agency in the UK. As with Oman, the heat will play a factor and it’s advisable to keep well updated with the situation in Iraq and Syria - not to mention Yemen - in case things do take a turn for the worse.

Kenya

Kenya is one of the more interesting potential destinations for consultants, and one that many may not consider as a fast-growing economy. However, the country is now listed as one of Africa’s major markets having grown by a stellar 5.4% last year. This is expected to increase even further with estimates suggesting further growth of 6% this year and 6.6% in 2016. This expansion has been supported by lower energy costs as well as significant investment into major infrastructure, agriculture and manufacturing, among other industries.  Further developments are also in the pipeline, not least the Mombasa-Juba railway that will eventually connect the capitals of Kenya, South Sudan and Ethiopia with the Lamu Port and will likely require the skills of overseas specialists.

One potential threat to the country’s ongoing growth is that terrorism and security risks could affect the popular tourism market, a major contributor to its GDP. However, while there have been well-documented attacks in recent years, these have been few and far between.

It is still advisable to check the security situation in Kenya before committing to a move as it can change very quickly. It’s also worth noting that the government is generally protective of roles that nationals could fill, so securing a position before departing is a must. In fact, work permits usually aren’t granted if it can be proved that a Kenyan could occupy the role in question.  This means that, generally, it is the responsibility of the employer in the country to secure the necessary documents and visas, although any agency versed in dealing with the market will be well aware of this.

Finally, it should be taken in account that, like many African nations, there is a considerable amount of bureaucracy and red tape to pass through, so factor potential delays into your planning before committing to a move.

Final thoughts

Unless otherwise advised by the UK government or its website for foreign travel advice, there is no safety reason that you should not travel to any of the above destinations provided you take the proper precautions.

As well as safety and compliance, there are other, more personal factors UK contractors must consider before moving overseas to work. These extend to you having to maintain your own personal wellbeing and fulfilment – something that you’re likely to achieve in the five countries listed here if you want either a challenge or a break from the norm. However it’s not just these five; there are actually 33 countries which are widely recognised as frontier markets or potentially lucrative investment alternatives to more developed, yet slower-growing traditional economic hubs.

Wednesday 19th Aug 2015