SMEAME_BestPracticeTrade

Success Series

Tricks of the trade

SME Advisor ME recently hosted its first Success Series event in Ras Al Khaimah, in conjunction with RAK Free Trade Zone (RAK FTZ). We bring you complete coverage of the event.

T Joumana Saad CPI Business

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he vibe was energetic as SME owners and managers recently gathered for an informative seminar on Best Trade Practice hosted by SME Advisor ME and presented by ADCB. Many of the RAK FTZ companies were new business looking to enhance their knowledge and skills in the area of trade, and network with industry experts.

RAK FTZ has been dubbed as one of the most SMEfriendly free zones in the UAE, as its setup and operational costs remain lower than its counterparts. In the cover story of the April issue of our magazine, we highlighted the competitive advantages that the free zone offers SMEs. The event began with a welcome address from Nilanjan Ray, Senior Vice President and Head of Business Banking Division, ADCB. Nilanjan reiterated the bank’s commitment to serving the SME segment and creating

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financing solutions that are tailored to their specific needs.

ADCB has invested substantially in SMEs in recent years, and is aiming to double the number of its SME clients. The bank currently services over 30,000 SMEs in the UAE. Krishnakumar Duraiswamy, Head of Trade Finance, ADCB, presented on Trade Finance Solutions for SMEs, and broke down the dynamics of international trade and the best practices used today. He also outlined the most common challenges that SME traders are facing. “Language, laws, customs, regulations and transportation systems; these are all potential barriers to your business, and SMEs should be aware of these before entering foreign markets,” says Krishnakumar. “Buyers want time to pay, while sellers want immediate payment. There are also the issues surrounding the transfer of funds, foreign exchange, tariff barriers, politics and country stability to consider.”

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Krishnakumar’s presentation went into detail about cash flow and how businesses need to ensure their payments are sent and received in an organised and timely fashion.

“What we come across on the SME side, is the instance of open account trade growing much faster than global trade.

Companies are wondering how they can mitigate risk and get their payments faster.” he added. He referenced the turbulent global marketplace in 2009, as an example of how companies were confronted with market risk in dealing with buyers.

Krishnakumar also advised attendees to be mindful of the different legal structures in the UAE when dealing with foreign trading companies.

With regards to banking, the presentation also gave the audience a better picture of how the bank acts as a liaison between the buyer and seller, and faciliates the process from beginning to end (shipping to cash collection). Also known as financing receivables, this solution entails that the seller ships the goods to buyer and then sends an invoice to the bank. The buyer then pays the seller on the due date and pays back the bank.

Krishnakumar reiterated the value added from using

The event attracted a diverse group of SME owners and managers resigistered in RAK FTZ.

Abdul Rehman Jalil, Senior Branch Manager, Vice President, SME Business Banking, ADCB; Mohamed Al-Ali, Vice President and Head of Branch Distribution & Services, SME Business Banking Group, ADCB

Nilanjan Ray, Senior Vice President and Head of Business Banking Division, ADCB, gives a welcome speech highlighting the bank’s commitment to serving the SME segment.

financing receivables including overdraft or short-term loans, and the ability to advance funds up to 90% of the invoice value. In addition, a large number of buyers can be covered and higher limits can be assigned on the basis of quality of receivables, underlying good and services and the management nature of the company.

ADCB assists SMEs with an array of trade advisory services. This is a new methodology with regards to trade finance, as it is a step away from sole balance sheet assesment, and a move towards evaluating the quality of recivables as well as strength of accompany’s relationship with buyers. Such services would prove invaluable for an SME who is still new to the trade business.

John Lincon, Vice President, Enterprise Marketing, du, then presented on Managing International Customers. John has rich global experience, working for a number of multinational companies in various regions. He drew examples from his own career of situations where cultural differences can impact the nature of business. He pointed out how different cultures put a various value on punctuality and business etiquette. He also

noted how it is welcomed in Western nations to show emotion and make eye contact when you are speaking to someone, while in a country like Japan, they make an effort to avoid this when doing business.

John highlighted the various ways SMEs can present themselves as leaders in their category. Before meeting potential clients, they should follow the six Ps: always evaluate the purpose of the visit, have a vision for your profit, plan, process, pace and people to prepare yourself for any potential questions.

The audience then posed the question of how SMEs should go about studying their international target customers before approaching them. John stressed that “SMEs in the UAE are foruntate enough to live in a culturally diverse environment where they can seek insights from the people around them.”

SMEs who have the budget, could also do focus groups or surveys to get a better idea of who they are doing business with.

He also added that there is a wealth of information available on the Internet, that any business can take advantage of.

Gordon Barr, Senior Associate, Employment at Al Tamimi & Co, outlined Key Employment Issues in the UAE, and compared RAK FTZ rules and regulations with the federal law. He pointed out that the RAK FTZ laws are more favourable in comparison, but stressed that the UAE Labour Law prevails over the these with regards to employment.

The most common employment issues, Godon says, stem from rejected visa applications from free zones for various reasons including the fact that paperwork is not filled out in

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Success Series

John Lincoln, Vice President, Enterprise Marketing, du presented on the challenges of managing international customers.

Gopi Devraj, Trade Sales, ADCB; Nirmil Varshney, Area Manager, ADCB; Nasir Saleem, Unit Manager, ADCB

both Arabic and English, salary may not be set in dirhams and the lack of complete company name and stamp.

“It is advisable that SMEs create their own internal employer contract that is more detailed, in addition to any free zone contract. This allows the employer to set more specific policies that provide more clarity to both parties,” says Gordon. He also outlined the practicalities for terminating an employee, which requires that the employer submit cancellation of the work permit and residence visa within 30 days of the termination date. Questions addressed after the presentation touched on the difficulties faced by RAK FTZ companies to bring in employees to work for a short period of time to complete a task.

Gordon explained that under UAE law, there exists a Mission Visa, which is a one-time visa that can cover someone for up to six months. He also stressed the potential implications of abusing visitor visas, which is prevalent in the UAE. Gordon says that such violations put employers at risk, as free zone authorities regulate and monitor this activity.

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Putting international trade into a historical content, Sanjay More of Barlow World Logistics spoke about innovations in supply chain management that have changed the way the world trades. He defined innovation as the development of new customer value through solutions that meet new needs, unarticulated needs, old customer and market needs in new ways.

“Innovation and improvement are not the same. Businesses need to have a better undertstanding in this category. It can be doing the same thing but in a different way,” said Sanjay.

He highlighted examples of supply chain management innovations that took place in recent years including DP World’s 20-foot box container which redefined capability of ships. Today, it is estimated that 70% of world’s trade happens through sea freight. Other innovations include pallets and forklifts, which made for easier movement and storage of goods; the production line, which led to development of auto; and computer and web technology. In recent years, he explained how the advancement of mobile communications is speeding up trade with shorter processes, proof of delivery, less paperwork, data conversion and quick analyses.

Sanjay then defined supply chain management and showed the audience what a typical supply chain model really looks like.

“When you talk about supply chain its not just one company or party, there are so many international organisations involved.

Like the port that handles your shipments, or the free zone that offers you a space for manufacturing; these organisations all play their part in your supply chain.”

The final presentation of the day by Amro Abu-Hmaidan, Communities Development Manager, Tejari, touched on the rise of online trade communities and the various benefits to SMEs in this area. The company has become a pioneer in the industry over the past decade for promoting online trade.

Earlier this year, Tejari launched BizTrumpet.com, which is portal specifically designed for SMEs who want to promote their services and find buyers and sellers online.

The takeaway from the presentation is that the face of e-commerce is fast changing and online spending is forecast to see a big increase. Therefore, SMEs cannot afford to miss out on this opportunity. Recent research by Tejari estimates that 40% of SMEs have been able to increase their revenues by 15% by using online trade communities. Focusing on the

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L - R: Anser Qayum, Ocean International speaks with Krishnakumar Duraiswamy, Head Trade Finance, ADCB

Middle East, Amro pointed out that the users in this region for the most part don’t handle most of their business online, as Internet penetration as a whole remains low compared to other regions. In the UAE, however, the big is very different as this has become an area of fast expansion.

Amro also outlined the main benefits on both the buyer and supplier sides for joining online trade communities. Advantages to the buyer include: more options, better prices, higher quality of products and versatility. Meanwhile, suppliers can get better exposure to bigger markers and improve business maturity and agility. Another important benefit is the ability for SMEs to minimise risk by diversifying their portfolios, and shifting their focus to more than one market. “Billions of dollars worth of trade happens online in the MENA region, and 75% of C-level executives are using the Web on a daily basis. This makes for the right conditions for SMEs to boost their exposure and expand their opportunities,” says Amro.

L - R: Kathrin Lemke, Regional Office Coordinator, RAK Free Trade Zone; Elena A. Lazareva, Ithara Group

Panel of speakers Krishnakumar Duraiswamy, Head of Trade Finance, ADCB “What we come across on the SME side, is the instance of open account trade growing much faster than global trade. So, companies are wondering how to mitigate risk and get their payments faster.”

John Lincoln, VP, Enterprise Marketing, du “SMEs in the UAE are foruntate enough to live in a culturally diverse environment where they can seek insights from the people around them.”

Gordon Barr, Senior Associate, Employment, Al Tamimi & Co.

Sanjay More of Barlow World Logistics “Innovation and improvement are not the same. Businesses need to have a better undertstanding in this category. It can be doing the same thing but in a different way.”

Amro Abu-Hmaidan, Communities Development Manager, Tejari “Billions of dollars worth of trade happens online in the MENA region, and 75% of C-level executives are using the Web on a daily basis. This makes for the right conditions for SMEs to boost their exposure and expand their opportunities.”

“It is advisable that SMEs create their own internal employer contract that is more detailed, in addition to any free zone contract. This allows the employer to set more specific policies that provide more clarity to both parties.”

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