Trade and Export Middle East | February 2014 by Trade Export

ISSUE 25 | FEBRuary 2014

BUSINESS INTELLIGENCE FOR INTERNATIONAL TRADE

www.tradeandexportme.com

An eye on

the future In an exclusive INTERVIEW, Mohammed Al Mullaem, SVP & Managing Director, DP World, UAE Region, tell us about his vision for promoting trade.

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EDITOR’S LETTER

Chairman Dominic De Sousa CEO Nadeem Hood

Editor’s note…

Managing Director Richard Judd richard.judd@cpimediagroup.com +971 4 440 9126

So how is 2014 coming along for you? The first month of the year always flies by too quickly. And I feel that the weeks are slipping away much faster also because we are busy working on two events – the Trade Excellence Awards, which will be held on the 25th of February and our first regional focus event, which will be on the 10th of March. The second event will focus on the five economies of Central Asia and the investment opportunities they offer to foreign businesses. We have quite an interesting line up of speakers and are quite excited about it. If you would like to attend it, do drop us a line.

EDITORIAL Group Director of Editorial Paul Godfrey paul.godfrey@cpimediagroup.com +971 4 440 9105 Senior Editor Aparna Shivpuri Arya aparna.arya@cpimediagroup.com +971 4 440 9133 Business Assistant Adelle Louise Geronimo adelle.geronimo@cpimediagroup.com +971 4 440 9160 ADVERTISING Group Sales Director Carol Owen carol.owen@cpimediagroup.com +971 4 440 9110 Sales Manager Vanessa Linney vanessa.linney@cpimediagroup.com +971 4 440 9137 PRODUCTION AND DESIGN Production Manager James P Tharian james.tharian@cpimediagroup.com +971 4 440 9146 Database and Circulation Manager Rajeesh M rajeesh.nair@cpimediagroup.com +971 4 440 9147 Head of Design Fahed Sabbagh fahed.sabbagh@cpimediagroup.com +971 4 440 9107 Designer Froilan A. Cosgafa IV froilan.cosgafa@cpimediagroup.com +971 4 440 9107 Photographer Jay Colina Abdul Kader Pattambi DIGITAL SERVICES www.tradeandexportme.com

Last week was a particularly hectic week because I was busy meeting people for the advisory board that we are putting together. I also got to meet the Abu Dhabi Chamber of Commerce and the Abu Dhabi DED to present our work to them. The meetings went off really well and we are looking forward to working closely with these government entities. Besides all this, I still had the magazine to put together and the focus in this issue is on food – with the Gulfood just around the corner. We are also media partners at the Franchising Conference which will be held along with the Gulfood. So if you happen to be there, please do drop by. Another highlight is that our cover story for this month is about DP World and the amazing work being done by them to promote trade. In an exclusive interview to the magazine, Mr. Mohammed Al Muallem, SVP and Managing Director, DP World, UAE Region, spoke to us in detail about their operations. Please turn to page 22 to read all about it. The next few weeks promise to be very busy as we gear up to the countdown for our Awards. I hope you have taken out the time to nominate your organisation. I promise it’ll be a night to remember! To end on a lighter note, I have been waiting to share with all of you that I ran my first ever 10 KM race in January!! And it was the highlight of my first month of 2014 and I am quite proud of myself! We Editors do believe in making our lives difficult – as if putting the magazine and the events together wasn’t enough. But, C’est la vie Until next time….

Digital Services Manager Tristan Troy Maagma Web Developer Abey Mascreen online@cpimediagroup.com +971 4 440 9100 Published by

Aparna Shivpuri Arya, Senior Editor, Trade and Export Middle East Registered at IMPZ PO Box 13700, Dubai, UAE Tel: +971 4 440 9100 Fax: +971 4 447 2409 Printed by Printwell Printing Press © Copyright 2014 CPI All rights reserved While the publishers have made every effort to ensure the accuracy of all information in this magazine, they will not be held responsible for any errors therein.

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FEBRUARY 2014

18 22 FEBRUARY 2014

updates

ISSUE 25

trade talk

30 36

FEBRUARY 2013

News: International news and trends with domestic trading relevance.

EVENTS CALENDAR: A listing of the exhibitions and conferences in the region, to help you spend less time planning and more time attending.

TECHNOLOGY Using the internet: In September 2013, Google announced that up to 90% small and medium enterprises (SMEs) in the UAE have no online presence, thereby considerably damaging their growth prospects. Dr. Ashraf Mahate, Head, Market Intelligence, DED, remind us about the importance of the internet. BYOD: Mohammad Ismail, Expert in Enterprise Identity & Access Security, Gemalto, talks to us about the concept of BYOD, its impact on security and the dynamic business landscape. STRATEGY How to build partnerships? Bana Akkad Azhari , Head, Relationship Management for the Middle East & North Africa, BNY Mellon Treasury Services discusses how local-global bank partnerships can help corporates in the Middle East overcome these hurdles to maximise the opportunity presented by rising south-south trade flows

CONTENTS

trade talk

INTERVIEW DP World: To get the latest on the emerging markets, the impact of Expo 2020 and trade trends, we speak to Mohammed Al Muallem, SVP & Managing Director, DP World UAE Region. SECTOR WATCH Latest developments: We speak to the Dubai Chamber, the Arab Brazilian Chamber of Commerce, Meat and Livestock Australia, Trade Commission of New South Wales, Global Shipping and Logistics, Euromonitor and Lawand Trade to bring you a 360 degree view on this important sector.

Gulfood: With the population set to rise to 9.5 billion by 2060, how does the regional economy ensure sufficient food supply for all? The Gulfood, which will be held from 23rd-27th February 2014, will try to answer these questions and more.

Malaysia: The total value of the global halal market is estimated at USD 2.3 trillion, which is contributed a number of factors. The national trade promotion agency of Malaysia, MATRADE provides an overview of Malaysia’s halal industry.

focus

LEGAL Iran Sanctions: A historic event took place on 23rd November 2013, when P5+1 and Iran reached an initial agreement with respect to Iran’s nuclear programme. Capt. Anushuman Singh, Admiralty Manager, Fichte & Co, presents an analysis of the impact of this agreement. FREE ZONE twofour54: In an exclusive interview to Aparna Shivpuri Arya H.E Noura Al Kabbi, CEO, twofour54 speaks about this unique media free zone and makes it obvious why twofour54 should be every media company’s choice. FINANCE Currencies: Western Union Business Solutions brings you the currency movements in February 2014. INDUSTRY FOCUS Oil & Gas: In this month’s article Amrita Sen, Chief Oil Analyst, Energy Aspects, explores how KSA might respond to any threat to its market share, when it comes to oil and gas.

COUNTRY FOCUS Cyprus: In part two of our series on Cyprus, Aparna Shivpuri Arya put forth a synopsis of her discussion with the Cyprus Chamber of Commerce, the One-Stop-Shop &PSC, Ministry of Energy, Commerce, Industry and Tourism and the Cyprus Promotion Agency (CIPA). South Africa: South Africa with the unique combination of highly developed, first-world, economic infrastructure and a vibrant, emerging-market economy is the ideal destination for investment. H.E Sudhir Mannie, Consul General of South Africa to the UAE, gives us the details.

38 FEBRUARY 2013

Updates Regional news

Dubai foreign trade robust in 2013

Dubai’s non-oil foreign crossed the AED 1 trillion threshold during the first nine months in 2013, to reach a total volume of AED 1.009 trillion by the end of Q3, compared to AED 918 billion for the same period in 2012.

Sheikh Hamdan bin Mohammed bin Rashid Al Maktoum, Crown Prince of Dubai and Chairman of the Dubai Executive Council expressed satisfaction over the strong results and the steady increase in the volume of Dubai’s foreign trade exchanges, considering the achievement a solid evidence of the effectiveness of the Emirate’s economic policies and will also help boost UAE’s status as a global hub for trade. He then added that with the UAE being voted the host nation of the World Expo 2020 in Dubai, the trade sector will undoubtedly witness tremendous growth over the coming years. Dubai Customs statistics show that Dubai’s non-oil foreign trade growth was the result of the increase in imports till Q3 of 2013; trade in reaching AED 610 billion, exports and re-exports also rose

AED 1.009 trillion value of non-oil foreign Q3 2013

Gulf-US trade to be rekindled According to recent reports the trade flows between GCC countries and the United States, which have dropped by half in the past 20 years because of increased competition from Asia, are set to be rekindled in the next three years amid a flurry of treaties between the partners. Materials needed for a number of infrastructure projects in the Arabian Gulf countries will be the primary

cause for increasing the trade flow. There will be an increase in demand for imports in machinery, equipment and expertise from all parts of the world, including the US, the world’s biggest economy. Baihas Baghdadi, the Head of Trade and Working Capital EMEA at Barclays said that he sees that the trade flows between the GCC and the US will be the most important area of growth. Especially in the sectors of logistics, infrastructure, water treatment, oil and gas. Two decades ago China accounted for 2% of the GCC’s trade, now its about six times as much.

FEBRUARY 2014

to AED 399 billion, compared to AED 372 billion in 2012. His Excellency Ahmed Butti Ahmed, Executive Chairman of Ports, Customs and Free Zone Corporation and Director General of Dubai Customs said that the fast-paced growth of Dubai’s nonoil trade reflects the emirate’s strong economic performance, reinforced by the massive achievements led by HH Sheikh Mohammed bin Rashid Al Maktoum, UAE Vice-President, Prime Minister and Ruler of Dubai Direct trade accounted for 64% of Dubai foreign trade, as it reached AED 649 billion by the end of Q3 2013, up from AED 595 billion for the same period in 2012. While free zones trade share stood for 35%, that is, AED 348 billion, compared to AED 316 billion; customs warehouse trade hit AED 12 billion, up from AED 6 billion last year. It is this diversity in foreign trade elements that boosts Dubai’s opportunities to secure higher positions in global trade rankings.

The GCC and US trade stood at USD 130 billion in 2012 while trade between the GCC and China in the same year was USD 155 billion, according to official figures. Trade between China and the rest of the world is particularly robust, growing to USD 3.87 trillion last year. The performance of the Renminbi trade settlement has also improves, and has grown since its launch three years ago to CNY 5.53 trillion (AED 3.32 trillion) in 2013. He also emphasised that there has been a clear change in the trade corridors worldwide.

Looking back at historical trade corridors, they have been north-south while currently the trade corridors are going south-south. Two decades ago, the flows between the US and the GCC countries accounts for 15% of the entire GCC trade. But now the US is less than half of that, while China, Japan, Korea, India are accounting the same as the US. Trade flows have grown rapidly as GDP in emerging and developing markets expanded by 31.4% between 2008 and 2011, compared with just 5.3% for G7 countries in the same period.

Updates Regional news

Dubai Exports opens India office Dubai Exports has formally opened its overseas office in Mumbai, India as part of enhancing its overseas support in key markets capable of reinforcing Dubai’s position as an export and re-export centre. The Dubai Exports office in India will significantly enhance the visibility of goods and services from Dubai and provide vital on-the-ground services to SMEs in their pursuit of overseas markets. The new office will work in co-ordination with the representative office of the

Department of Tourism and Commerce Marketing (DTCM) in Mumbai. According to His Excellency, Sami Al Qamzi, Director General, Dubai DED, India is the leading trade partner of Dubai and our total bilateral trade during the first nine months of 2013 was worth over AED 111 billion. He also mentioned that Dubai Exports’ presence in India will boost Dubai’s position as an export and re-export hub for Indian companies. A 5%-10%

growth in bilateral trade is also anticipated as a direct result of the office. It will also underline the significance of the Dubai Overseas Promotion Policy, which seeks co-ordinated efforts by

Brazil’s fertilizer imports from Arab countries up in 2013

During the first three quarters of 2013, the Brazilian markets has spent over USD 1.6 billion on fertilizers coming from Arab countries, according to a report. The imported products came from top Arab countries, including Qatar, Kuwait, UAE, Egypt, Morocco and Tunisia. Morocco was the top exporter of fertilizer to Brazil with a spending of USD 933 million. This was followed by Qatar at USD 325 million, Egypt and Tunisia took third and fourth place with USD 133 million and USD 96.49 million

respectively. Bahrain and the UAE supplied fertilizer worth around USD 35 million each to tie a fifth place, while Kuwait is listed in sixth with USD 32 million. In addition to this, fertilizer producing countries are now turning to the Brazilian market due to India’s recent move to reduce its fertilizer imports. The country was once the leading importer of fertilizers, however, the depreciation of the Rupee has prompted the Indian government to remove subsidies to phosphate imports, thereby driving in a reduction in local purchases. Brazil bought a volume figure of around 3.9 million tonnes from Arab countries. The high amount of fertilizer spending is attributed to the growing demand for food, coming mainly from emerging nations, which has prompted Brazil to produce more agricultural commodities and thus needing more fertilizers.

Dubai Government entities in foreign markets. Indian firms being key players in Dubai’s export and re-export sector, the representative office in Mumbai will enable Dubai companies to extend their growing export capabilities to the fastgrowing South Asian markets, said Engineer Saad Al Awadi, Chief Executive Officer of Dubai Exports.

UAE leads in economic diversity in GCC Massive investments in the nonhydrocarbon sector by Dubai and ongoing reforms in Abu Dhabi have turned the UAE into the most diversified economy in the oilrich Gulf, according to a report by the Saudi-based Arab Petroleum Investment Corp (Apicorp). The report has based its findings on three main categories—the oil sector’s contribution to gross domestic product (GDP), its share of total exports and share of government fiscal revenue. The report found that the UAE is the most diversified economy in the six-nation Gulf Cooperation Council (GCC), followed by Bahrain as the second most diversified economy, followed by Oman, Qatar, then Kuwait, while KSA’s economy has been ranked as the least diversified.

FEBRUARY 2014

Updates Regional news

Dubai Trade to finalise the winners for the 6th ESEA

Trade, said that ESEA has become an institution that is truly driving widespread adoption of environmentfriendly and cost-efficient electronic services by national trading and logistics companies. For this award, Dubai Trade will be acknowledging nine of the highest adopters of various key e-Services. The categories are: Importer of the Year, Exporter of the Year, Re-Exporter of the Year, Shipping Agent of the

Year – Containerised Cargo, Shipping Agent of the Year – General Cargo, Freight Forwarder of the Year, Clearing Agent of the Year, Haulier of the Year and Free Zone Company of the Year. Eng. Mahmood Al Bastaki, CEO of Dubai Trade, added that since they initiated the ESEA Award in 2008, the ranks of our loyal customers have expanded and the transactions conducted through our portal have hit record levels.

USD 1.6 billion value Brazil spent on fertilizer imports from Arab countries

H.E Jamal Majid Bin Thaniah, Chairman, Dubai Trade

Dubai Trade, has announced its commencement of finalising the winners’ list for the 6th E-Services Excellence Award (ESEA) after closing the competition by the last day of 2013. The winners will be announced and rewarded in a highprofile ceremony that will be held in February 2014 under the patronage of His Highness Sheikh Maktoum Bin Mohammed Bin Rashid 8

Al Maktoum, Deputy Ruler of Dubai. Under the theme of “Appreciating e-Transformation in Trade & Logistics”, ESEA winners will be selected based on a precise criteria that reflects their preserved growth in e-Services adoption on the Dubai Trade Portal in 2013. Commenting on the award, H. E. Jamal Majid Bin Thaniah, Chairman of Dubai

FEBRUARY 2014

Qatar's 2014 economic growth will continue to accelerate As reported by the QNB Group, Qatar’s GDP growth for 2014 is expected to pick up at 6.8% which will be resulted by the fast growing population that would boost the domestic demand and the implementation of the large infrastructure projects lined up in the Gulf state. Qatar’s economic growth soared at a buoyant 6.2% pace during the third quarter of 2013 as compare to the same period in 2012 as released by the Ministry of Development Planning and Statistics. Major contributors to this robust growth were the double-digit growth in trade, the hospitality sector, construction, transport and communications, financial, real estate, and business services and also domestic services according to QNB Group.

Updates GLOBAL WATCH

Indonesia aims for 15% more FDI for 2014 Indonesia has set a high target of attracting 15% more FDI in 2014 than in 2013, a challenging goal as its economy struggles. Over the past five years, Indonesia revelled in demand by foreign investors for its vast natural resources and a consumer boom that propelled robust growth in Southeast Asia’s biggest economy. In 2013, though, investors’ ardour declined as the Rupiah weakened more than 20% against the Dollar, commodity prices fell and

the government imposed nationalistic policies, particularly in the vital mining industry. According to the Indonesian Investment Board, in 2013, the total of foreign direct investment (FDI) was IDR 270.4 trillion (USD 28.5 billion), an increase of 22.4% compared with the 2012’s 26% gain. That includes IDR 71.2 trillion in the fourth quarter. This year, the Investment Board said it was targeting FDI of IDR 311 trillion.

US trade deficit smallest in four years The US trade deficit fell to its lowest level in four years in November as exports hit a record high and weak oil prices restrained import growth, 10

FEBRUARY 2014

The International Monetary Fund sees growth slowing to between 5% and 5.5% in 2013 and 2014. But many multinationals see opportunities in the country of 250 million people, the world’s fourth most

the latest evidence of strengthening economic fundamentals. The Commerce Department said on January 7th the trade gap fell 12.9% to USD 34.3 billion. That was the smallest deficit since October 2009. October’s shortfall on the trade balance was revised to USD 39.3 billion from the previously reported USD 40.6 billion. Trade contributed marginally to growth in the third quarter, but abating fiscal headwinds in Europe should lead to a recovery in demand in that region and help boost US exports. The US economy appears positioned to shift into higher growth this year, with data ranging from employment to manufacturing and consumer spending suggesting it ended 2013 on a solid footing. The outlook has been strengthened by a pick-up in domestic demand and diminishing uncertainty over fiscal policy. The trade data appeared to have little immediate impact on US financial

populous. In fact, Japanese investors in December 2013 pledged a total of USD 3.5 billion over the next year and a half in a range of industries, from automotive to electronics, mining, finance and food production.

markets. In November, exports rose 0.9% to USD 194.9 billion. That was the highest on record and marked a second straight month of gains. There were increases in exports of industrial supplies, capital goods and automobiles. Petroleum exports hit a record high in November. Exports to China also were the highest on record. They rose 8.7% in the first 11 months of the year. The trade deficit with China also narrowed in November. There were also increases in US exports to Germany and Japan. Overall imports fell 1.4% to USD 229.1 billion in November. Part of the decline in imports reflects a lower petroleum import bill, which was the smallest since November 2010. The petroleum deficit was the lowest since May 2009. Imports of industrial supplies and materials were also the lowest in three years. But auto and capital goods imports hit a record high.

Updates GLOBAL WATCH

India and Pakistan to boost trade India and Pakistan’s trade ministers recently held a meeting in New Delhi agreeing to allow round-the-clock movement of trucks and containers through their main border crossing, signalling a thaw in relations after a year’s standoff over military tensions on the border. They have also approved on a liberalised visa policy for businessmen to help expand twoway trade, which was barely USD 2.5 billion in 2012/13 fiscal year against a potential USD 10 billion. Through the agreement, both countries hopes for a closer integration of Pakistan with India’s economy will help mend political tensions between the two. The Wagah Attari border will be open 24/7 to cater to the trade operations, said the Indian Trade Minister, Anand Sharma. Pakistan also agreed to provide non-discriminatory market access to Indian companies.

IMF to raise global economic growth forecast Recently IMF Director Christine Lagarde said that they will be raising the global forecast for economic growth. A faster-than-expected expansion in the world economy contrasts with the outlook in October, when the IMF lowered its expectation for the pace of expansion for 2014. Lagarde said in December the fund sees “a lot more

Pakistan’s Commerce Minister Khurram Dastgir Khan said the country’s Central Bank had proposed its Indian counterpart grant banking licences to three Pakistani banks, a move which would be reciprocated by his side. He also mentioned that they are hoping to have the same progress in the banking sector. Both Indian Prime Minister Manmohan Singh and Pakistan’s Nawaz Sharif who took power in 2013 are keen to rebuild ties. A business delegation led by Indian Trade Minister, Anand Sharma will head to Pakistan in February.

certainty” for the US economy in 2014. The US jobless rate, which fell to 7% in November from 7.3% in October, will keep declining as confidence increases that the economy is on a sustainable growth path, she said in December. The IMF currently forecasts global expansion of 3.6% in 2014. Asian stocks climbed on for the first time in 2014. The Federal Reserve said on December 18 th that it plans to trim its monthly bond purchases to USD 75 billion from USD 85 billion starting in

China’s trade deals surpassed USD 4 trillion Recent reports indicates that China’s total exports and imports surpassed USD 4 trillion for the first time to reach USD 4.16 trillion in 2013, up 7.6% year on year, customs data have shown. China’s trade with the Association of Southeast Asian Nations (ASEAN), its third-largest trading partner, rose 10.9% y-o-y to USD 443.6 billion. In contrast, trade with the European Union (EU) rose merely 2.1% year on year to USD 559.1 billion in 2013. Trade with the US, China’s secondbiggest trade partner, rose 7.5% y-o-y to USD 521 billion. Meanwhile, trade with Japan contracted 5.1% y-o-y, to USD 312.55 billion as tensions are high between the two neighbours. The foreign trade surplus widened to USD 259.75 billion in 2013, an increase of 12.8% from a year earlier, said Zheng Yuesheng, spokesman for the General Administration of Customs. Exports, along with retail sales and investment, have been one of the three main drivers for China’s rapid economic growth. January, taking the first step toward unwinding the unprecedented stimulus put in place by Chairman Ben S. Bernanke. There may be knock-on effects for emerging nations as the recovery in advanced economies raises the threat of financial market turbulence, Lagarde said in a speech to business leaders in Nairobi on January 6 th . “As financial conditions in advanced economies normalise, the risk of heightened volatility in financial markets may create new challenges in emerging market economies,” Lagarde said.

FEBRUARY 2014

Updates GLOBAL WATCH

Emerging markets to face obstacles in 2014

During the Country Risk Conference held on 21st January 2014, Coface has forecasted that in 2014 there will be some favourable risk trend in advanced economies, and persistent tensions in large emerging countries After a post-crisis readjustment between advanced and emerging countries, in 2014 global country risks are set to change in line with a more classic model. In advanced countries, risks are stabilising, buoyed by fairly dynamic growth in the US (estimated to be+2.4% in 2014), the start of a recovery

in the Eurozone (+0.9%) and confirmed growth in Japan (+1.4%). As for emerging countries, the rate of growth will increase only slightly (+4.7%) and will remain below the average of 2000-2011.

Advanced countries The recovery in advanced economies is marked by divergences between countries. The business situation in the US (A2 assessment) has considerably improved. “Corporate America” is the strong link in the economy and has a number of strengths: high level of self-financing, record

Oil & gas blocks to be auctioned in India India plans to auction 46 oil and gas blocks by next month as part of the energy-hungry nation’s programme

FEBRUARY 2014

profitability, low debt and strong investment. Clearer budget and monetary policies and growth in household demand boost this positive trend. In Europe, Coface noted risk improvement in Germany and in Austria (+1.7% growth forecast for the two countries in 2014), for which the A2 assessment is now accompanied by a positive watch. Among the European countries to have succeeded in reforming and lowering costs, Ireland stood out: growth of+1.7% is expected in 2014, with a rise in exports (which benefit from US and British growth), retail trade, and increasing business and household confidence, Coface has now upgraded Ireland to A3. The diagnosis is more mixed for the rest of the Eurozone. France has failed to reduce costs significantly making companies still vulnerable to the fluctuations in domestic demand, it is predicted that insolvencies in the country will remain high at 62,000 for 2014. In Southern Europe,

to boost local output and cut its dependence on imports according to Federal Oil Secretary, Vivek Rae. The world’s second-most populous country imports 75% of the energy it needs, something that weighs on its economic growth and contributes to a large current-account deficit. Auctions of oil and gas blocks started in 1999, but have so far failed to attract big overseas investors to tap into

the weakness in domestic demand, the domination of entrepreneurial activity by very small, fragile companies coupled with a lack of innovation, prevent credit risk from improving. In addition, there is a high level of corporate debt, such as in Spain.

Emerging economies In 2014, BRICS countries will shed 2.4 growth points compared to the average growth in 2000-2011. According to Coface, this will be caused by supply constraints, due to high household demands. Investment faces obstacles of a structural nature. Local supply fuels imports will also weaken and thus current deficits will remain high in 2014. Exchange rates will therefore be vulnerable as well. Four countries in SubSaharan Africa are not subject to this new increase in risk. Despite a volatile security situation, Coface places a positive watch on the D assessment of Rwanda and Nigeria and C assessment of Kenya. The Ivory Coast is upgraded to C. Growth should remain strong in 2014, maintained by sector diversification which benefits the consumer.

hydrocarbon reserves because of heavy government regulation, which they say makes India a hard place to operate. Indian officials say they are trying to make the country more attractive to energy investors as they try to cut dependence on energy imports by half in the next six years, partly by developing local resources. Of the 46 blocks up for auction, 17 are on land and the rest are offshore.

Community events calendar

Save the date!

We know that you are a busy trader with a demanding events diary. Therefore, we are providing you with a snapshot of exhibitions and conferences in the region, so you spend less time planning and more time attending.

Date

Event

Location

03-05

IDF Oman

Oman International Exhibition Centre

03-05

Tawdheef - The Recruitment Show Abu Dhabi

Abu Dhabi National Exhibition Centre

04-06

Gulf Industry Fair

Bahrain International Exhibition & Convention Centre (BIECC)

6 E-Services Excellence Award Ceremony (ESEA)

Ritz-Carlton Dubai International Financial Centre

05-06

Maintenance Repair & Overhaul Middle East

Dubai World Trade Centre

05-06

Aircraft Interiors Middle East

Dubai World Trade Centre

05-06

Emerging Airports Conference and Exhibition

GCAS Auditorium, Abu Dhabi

05-08

Beyond Beauty Arabia

Abu Dhabi International Exhibition Centre

09-12

Machinex Arabia

Jeddah International Exhibition & Convention Centre

11-13

Middle East Electricity

Dubai International Convention & Exhibition Centre

11-14

Solar Middle East

Dubai International Convention & Exhibition Centre

16-19

Saudi Pack

Riyadh International Exhibition Centre

16-19

Saudi Petrochem

Riyadh International Exhibition Centre

16-19

SAUDI PLAS

Riyadh International Exhibition Centre

16-20

BUILDEX DHAHRAN

Dhahran International Exhibition Centre

17-20

MAKINAT SAUDI ARABIA

Riyadh International Exhibition Centre

23-27

Gulfood Exhibition

Dubai World Trade Centre

23-27

Ingredients Middle East

Dubai World Trade Centre

26-01

Abu Dhabi Electronics Shopper

Abu Dhabi National Exhibition Centre

Get in touch! Would you like to list your event here? Or better still, list your detailed event profile? If yes, then please contact: aparna.arya@cpimediagroup.com

February

March 04-05

Avionics Europe

Abu Dhabi National Exhibition Centre

04-06

Paperworld Middle East

Dubai International Convention & Exhibition Centre

18-20

Kuwait Medica Conference and Exhibition

Crowne Plaza Kuwait

19-20

Cloud World Forum MENA

JW Marriott Hotel Dubai

04-06

Abu Dhabi Air Expo

Al Bateen Executive Airport

20-22

Dubai International Horse Fair

Dubai World Trade Centre

04-08

Dubai International Boat Show

Dubai International Marina Club

23-25

Cabsat Mena

Dubai World Trade Centre

05-06

International Medical Travel Exhibition and Conference

Dubai International Convention & Exhibition Centre

23-27

Sour Oil Gas Advanced Technology

Beach Rotana Hotel, Abu Dhabi

24-26

ABILITIESme

Abu Dhabi National Exhibition Centre

24-26

GIBTM-International Exhibition for the Global Meetings and Incentives Industry

Abu Dhabi International Exhibition Centre (ADIEC)

25-27

Doha International Maritime Defence Exhibition & Conference

Doha Exhibition Centre

25-27

Agribusiness Middle East Exhibition

Dubai International Convention & Exhibition Centre

25-27

Agra Middle East

Dubai International Convention & Exhibition Centre

25-27

Poultry & Livestock Middle East Exhibition

Dubai International Convention & Exhibition Centre

25-27

Fishing & Aquaculture Exhibition-Middle East

Dubai International Convention & Exhibition Centre

06-07

Australian Arab Businesswomenâ&#x20AC;&#x2122;s Forum 2014

Sydney, Australia

Gulf Expo-Dubai

Dubai, UAE (TBA)

08-09

Datamatix Emiratization Conference

Dubai, UAE (TBA)

10-12

Dubai Pharmaceutical & Technologies Exhibition

Dubai International Convention & Exhibition Centre

Gulf Expo-Qatar

Doha Qatar (TBA)

13-15

Taste of Dubai

Dubai Media City

16-19

INTERIORS & BUILDEX

Oman International Exhibition Centre

16-19

The Big Show

Oman International Exhibition Centre

17-19

Arab Oil and Gas Show

Dubai International Convention & Exhibition Centre

FEBRUARY 2014

TRADE TALK TECHNOLOGY

Exporting through the internet In September 2013, Google announced that up to 90% SMEs in the UAE have no online presence and are thereby considerably damaging their growth prospects. This is an amazing fact bearing in mind that 98.5% of firms in the UAE are SMEs. Dr. Ashraf Mahate, Head, Market Intelligence, DED, remind us about the importance of the internet.

n a short space of time, the internet has changed the manner in which we communicate. The lack of boundaries or restrictions in the use of the internet has meant that it is open to everyone. Studies show that in 1994 there were only 4.8 million websites on the internet. Most of these sites were located in the USA and were of course in English. Today there are over 50 million websites in a whole host of languages and now even with non-English website names. With the advance of technology, the number of internet users has increased from 16 million or 0.5% of the global population in 1995 to current level of 1,661 million or 25% of world population. Current forecasts indicate that the growth in internet usage is expected to continue to increase for the foreseeable future For SMEs these trends bring new opportunities especially as the businessto-business (B2B) trade in goods on the internet is expected to double annually. At the turn of this millennium, B2B sales on the internet were USD 43 billion which only three years later were USD 1.3 trillion and currently run into tens of trillions. Similarly, business-to-consumer (B2C) internet sales were just USD 8 billion in 2000 and today in excess of USD 1 trillion. B2B commerce represents an important avenue for SMEs to capitalise on overseas opportunities. 14

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At the same time, the internet allows SMEs to compensate for their inherent weaknesses in exporting, such as market research and overseas promotion. The internet allows SMEs with their limited financial and human capital to support your export marketing activities in a number of ways which include: • Communication The internet allows SMEs to continually communicate with their suppliers and customers regardless of their location.

• Networking The whole host of personal and business networking websites mean that SMEs can build a large circle of potential suppliers, customers and even investors. • Market Research The traditional difficulty faced by SMEs was that they lacked an overseas presence and the use of external consultants proved to be either expensive or of little use. However, the internet opens a whole new avenue for SMEs obtain considerable information so as to conduct tailor-made market research studies.

• Improve sales volume The B2B sales on the internet are a clear reflection of the manner in which firms can increase their sales through this channel.

The internet makes the product or the service accessible to new customers who would ordinarily not have purchased from the company. • Image enhancement A traditional disadvantage of SMEs was that due to their financial constraints, the same tools were not available to them as those used by larger firms. However, the internet has changed this and the internet allows SMEs to conveniently and effectively display their portfolio of goods and services to potential buyers. In doing SMEs are able to enhance and develop their image to not only domestic but also international buyers. • Cost reduction There is substantial evidence to show that SMEs can use the internet to reduce their operating costs through obtaining supplies at a lower price. Also, the internet allows SMEs to use alternative and lower cost distribution channels. • Competitive advantage Recent examples have shown that the internet is a valuable tool for firms seeking to differentiate themselves from their competitors. Through readily available tools, the internet can easily and effectively create

product and service attributes which are difficult to imitate.

Although, the internet can be a valuable tool for SMEs it is important to note that real competitive advantage cannot be created by simply obtaining a presence through a web site. The skillful use of technology tends to enhance a firm’s competitive advantage but it cannot create it in its own right. In the case of exporting, the internet cannot make firms exporters overnight, because they have a website and an internet connection. The internet merely allows firms to reach a wider pool of potential customers across the globe. Taking these reality checks into consideration a firm then has to answer the following questions: • Is the company’s business model suitable for globalisation? • Will all services and goods be offered over the internet or will the SME use a phased approach whereby the easiest ones are made available first? • Which countries should the SME target firm through marketing activities that promote the website in the country? • Should the SME work with third party partners in the target countries or build its own resources? • What internal changes need to be carried out so that the SME can effectively meet the needs of its overseas customers? By answering these questions the SME will understand whether their internet presence is purely for domestic customers or will service the needs of overseas markets. If the SME feels that it is ready for exporting via the internet then it needs to develop an appropriate strategy so that real returns can be obtained from the deployment of technology. This strategy should seek to look at how the firm can reduce its overheads through greater use of technology, reduce transaction costs both with customers and suppliers so that the internet offers real financial gains, offer more efficient pricing for consumers so that the firm becomes more competitive and facilitate easy information access so as to reach a wider but more targeted pool of potential customers.

ABOUT Dr. Mahate received his doctorate from Cass City University Business School in London (UK). He read Economics at University College London, followed by a Masters in International Economics and Banking at the University of Wales in Cardiff. Dr. Mahate is a professional educator and received his training at the Institute of Education (University of London). He is a member of the Chartered Institute of Managers (UK) and a Member of the Institute of Commercial Management (UK). He is also a member of the Association of Certified Anti-Money Laundering Specialists (ACAMS). He can be reached at ashraf.mahate@dedc.gov.ae.

SMEs need to bear in mind that its website is now its window to the world and can be viewed by anyone. As such, the website is the firm’s public relations and marketing tool hence its design needs to carefully choose the audience while keeping in mind that the internet is global. Some companies have dealt with this problem by developing language specific websites so that the corporate message meets the cultural norms while reinforcing the aspect of trust, commitment and export performance in a manner that is readily understood. It has long been known that culture is vital to the manner in which an individual gathers uses and analyses information. In essence it forms the basis of what an individual considers to be right or wrong. Therefore, SMEs while seeking to showcase their wares in the global market show be aware of not offending their potential customers. Building trust So what can SMEs do to build trust and confidence among potential overseas customers? This question can only be answered if the SME knows its customers. The first step towards understanding the customers is to map them. This allows the SME to build customer profiles, knowledge and better understand their needs marketing channels, level of support and incentives required before a purchase is made. The second step is to build a website that has value-added, Information with a high level of functionality and interactivity. With over 50 million websites potential customers are really spoilt for choice therefore the

website should seek to differentiate itself. Also, a website rich in information implies that customers are more likely to recommend it to friends and family who in turn over time could become customers. Just because a website has a high level of functionality and interactivity does not mean it needs to be complicated. In fact, the most popular and well used websites tend to be those which are easy to navigate and quick to download. The best way to do this is to view the website from the perspective of the customer i.e. make it customer-driven. Ev i d e n c e s h o ws t h a t c u s to m e r s negatively view websites that have old and outdated content. Therefore, it is important that the firm regularly updates the content so that it is relevant. This also means that products or services that are no longer available are removed from the website or if they are out of stock this is made known to potential customers. SMEs need not spend vast sums of money to keep their content updated and a cheap and convenient solution is to have a Content Management System. SMEs can use a whole host of low-cost ways to market and promote their website site to overseas customers. Typical examples include using search engine optimisation, directory listings, and barter arrangements including reciprocal links, inclusion in industry or trade body websites and so on. Finally, a successful website needs to integrate both the offline and online activities so that there is seamless connection between the two. While seeking to enhance its internet presence the SME should not lose sight of making sure that its product or service is also kept current. FEBRUARY 2014

TRADE TALK Technology

Is this your device?

Mohammad Ismail, Expert in Enterprise Identity & Access Security, Gemalto, talks to us about the concept of BYOD, its impact on security and the dynamic business landscape.

that users are willing to pay for themselves, the BYOD trend will become the norm as time and technology progress.

he use of personal mobile devices in the workplace is an unstoppable trend and the way businesses work and run is changing constantly. The most notable change has come in the past two to three years with the adoption of personal devices such as smartphones and tablets in the working environment. Whether you think of it as bring your own device (BYOD), the consumerisation of IT or enterprise mobility, the trend is pervasive and is set to grow. The latest report from IDC research states that 40.7% of devices used by information workers to access business applications are personal resources, including home PCs, smartphones and tablets such as Apple’s iPad. BYOD is driven by employees who undertake the opportunity to use their own technology in the working environment. At the same time, executives are seeing BYOD as a way to seek higher productivity by granting anytime/ anywhere access and increasing job satisfaction 16

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for their mobile workforces. A BYOD policy has the potential to improve employee productivity and job satisfaction, to lower costs for contractors, temporary workers and consultants, and in some cases even reduce the costs of company-issued mobile devices for employees. This is dramatically changing the way we work and there is no longer that distinct separation between business and personal lives, especially when examining the younger workforce. Every aspect of a person’s life blends together throughout a given day. The mobile device capitalizes on this shift and provides a tool to allow a person to switch from social media to corporate email and back again all from the same platform. These devices give employees the ability to access their corporate data the same way they have done with a corporate laptop, but without many of the security controls. As computing technology becomes smaller, faster, cheaper and can be embedded in devices

Security challenges The rise of mobility and the increase of data and information stored on mobile devices make them a prime target for criminals. Much like the early days of the Internet or PCs, new mobile technologies are introducing new security risks. Hackers are now also targeting mobile phone devices and mobile malware more than doubled in 2011 according to Juniper Research. It grew by 155% across all platforms—Apple’s iOS, Research In Motion’s BlackBerry and Symbian. Hackers are targeting the mobile OS, the web browser, means of communications, client applications and user behaviour. Mobile malware uses all of the same techniques as with desktops or laptops – Trojans, dialers, phishing, malicious sites, spoofing, and man-in-the-middle. The malicious attacks may result in identity theft, unauthorised access to confidential data, altered data, unwanted phone calls or denial of service. The fact that employees can bring their own personal devices in the working environment and choose their own apps, many at no charge, is also a dream for hackers and a nightmare for IT security. Another risk associated with mobile solutions comes from the end user himself, who can lose the device, let an unauthorised user have access to the corporate network through his device, or generally be careless with the access capabilities the device enables. Company information and sensitive data leaks can lead to loss of brand, reputation and potential revenue through customer attrition. It can be months or even years before you know a hacker has gained access to your network. In the case of one significant telecommunications company, hackers enjoyed

nearly a decade of undisturbed access to business plans, company emails, research and development reports and technical papers. The intrusion was caused by the theft of passwords from seven company executives. This is why it is essential for CIOs to have a strategy on how to address these issues to first limit access to a lost or stolen device through embedded mobile security and also ensure that mobile devices are segmented from access to sensitive data. From a CIO’s perspective, enterprise mobility practices need to be a top priority and it’s essential to understand this is one trend that will not go away. Mobility is here to stay and there will be increased use of these devices by corporate workers at all levels. It’s therefore essential for CIO’s to understand the value of leveraging these mobility solutions for implementing stronger controls. This will require IT departments to shift traditional mindsets on what solutions and practices will best protect corporate data and the main challenge will be to balance convenience and end user experience that is present today with the security that is needed to protect the network. PROMOTING SECURITY There are a variety of technologies available on the market to help address the security challenges brought by BYOD and several more that are in the process of being developed. Two notable examples of what is available today are Mobile Device Management (MDM) and OTP apps. MDM technology provides the ability to create a secure area within the device that is dedicated to corporate

ABOUT Mohammad Ismail is the Middle East & Africa Sales Manager for Online Authentication at Gemalto and is leading the Online Authentication Security Division of the company in the MEA region. Prior to working at Gemalto Mohammad also held senior positions in companies like Utimaco, Pointsec Mobile Technologies and APAC, ME & Africa. Mohammad holds a BS and MS degrees in Electrical and Computer engineering from The University of North Carolina, Charlotte.

functions/applications. This separates these applications from other personal apps and potentially dangerous malware on the device. They can also be deactivated immediately in the case of employee termination or device loss. Another technology focuses on providing stronger access controls using the device as an authenticator. This turns the device into an OTP token without the cost of a physical hardware token. On the horizon, we will see more sophisticated and stronger certificate-based identity solutions. Trustonic, a recently introduced joint venture, looks to use components of the mobile phone to create a secure location to store a user’s unique identity. This could be used to strengthen both access control and secure access to apps on the devices itself. While the BYOD trend continues to be fueled by user demand, it presents both opportunities and challenges. The mobile security market has certainly not reached its maturity level yet, but the good news is that because of the maturity of the smart card technology underlying the Secure Element as well as One Time Password (OTP) based

strong authentication technology in the IT space, implementing either OTP or a digital ID is very straightforward today and eliminates many of the implementation complexities and unknowns. All leading IT infrastructure suppliers, including Microsoft, IBM, HP, Computer Associates, Citrix, Adobe and many more are already fully supporting the use of OTP tokens and smart card-based advanced authentication. In fact, many of these IT leaders already use smart card ID credentials internally themselves. Every week brings new stories of leading companies whose reputations— and their customers’ personal or financial information—are damaged by data breaches. It is evident that username and password authentication is simply not a secure way to protect IT systems being accessed from mobile devices. Making an OTP token or certificate-based smart card ID credential part of a mobile protection procedure can prevent data loss and protect confidential information and is becoming an essential layer for information security in every organisation.

SOME PEOPLE ARE ALWAYS EARLY.

FEBRUARY 2014

TRADE TALK Strategy

How to use local-global bank partnerships? A once straightforward business, cross-border trade is now a complex balancing act between managing risk, forging new connections and meeting intricate compliance requirements – challenges that are even greater with respect to “south-south” trade. Bana Akkad Azhari, Head, Relationship Management for the Middle East & North Africa, BNY Mellon Treasury Services, discusses how local-global bank partnerships can help corporates in the Middle East overcome these hurdles and maximise the opportunities.

ith many mature economies still struggling to regain ground lost as a result of 2008’s global financial crisis, corporates in the emerging markets are increasingly looking to fellow emerging economies for commercial growth 18

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opportunities. As a result, the international trade focus is shifting from the West towards developing economies in Asia, Africa and Latin America – and the Middle East is ideally placed, both geographically and economically, to benefit from this trend.

There is no questioning the significance of growing intra-emerging market trade flows to the global economy. According to new figures from the World Bank recently quoted by The Economist, the developing markets’ share of global trade doubled from

16% in 1991 to 32% in 2011 – an average increase of 0.8 percentage points a year. This was accelerated by the global recession: since 2008, the rise has been almost twice as fast, at 1.5 percentage points a year. This increase in south-south trade is turning established trade patterns and practices on their head. Although a concern for companies (and indeed banks) across the globe, it is perhaps particularly challenging for the Middle East – a historically conservative region that favours a traditional approach. While this mentality has stood the region in good stead – and is fast-becoming the mantra of banks and business worldwide as the benefits of “back-to-basics” are more broadly recognised – its merits must now be combined with innovation in terms of both technology and mind-set. Of course, this is not to suggest that the Middle East is a region that has failed to keep up with the times – far from it. But there is little denying that major advances in banking technology – as well as plans for expansion and investment opportunities – have tended to centre on the wealthier Gulf States, where there is a higher concentration of global bank providers. As a result, while corporates in these states may have access to products and services designed to meet modern trade demands, others, who are more dependent on local bank provision, may struggle, leading to regional inconsistencies. This is not to do the region’s domestic banks a disservice. Such institutions have an unrivalled knowledge and understanding of their home markets and historic relationships with their domestic corporate customers

that are greatly valued, and add significant value. But from a technology standpoint – technology being the enabler of international trade –rising costs and complexity mean smaller local banks may have found it difficult to meet the increasingly tough operational demands that come as a result of cross-border trade’s rapid evolution.

Addressing new trade challenges While the rising prominence of emerging markets on the international trade stage may be a relatively new development, the Middle East has already emerged as a key player. Indeed, the region’s trade relationship with China is notably strong, with global management consultancy firm McKinsey & Company estimating that, by 2020, bilateral trade flows between the two markets could reach between USD 350 billion and USD 500 billion – with the Gulf Arab states accounting for the lion’s share. A high-profile example of this Middle East-China trade link is the Sinopec (Chinese Petrochemical Corporation) and Saudi Aramco alliance – a joint venture that has helped cement the Middle East’s energy ties with China, and may be seen as a sign of things to come. Supporting these burgeoning trade flows, now moving beyond oil and commodities to include consumer goods, is a significant challenge for banks, particularly those with a predominately small-medium enterprise (SME) client base. SMEs tend to have more individual business requirements than other commercial tiers, and are therefore likely to find many of today’s transaction banking solutions

ill-equipped for their changing needs. This is because the majority of current solutions, encompassing trade finance and working capital management services, are inevitably geared towards established trade patterns centred around the developed markets, and are less suitable for the unique challenges posed by intra-emerging market trade. The first of these challenges is the increased risk profile. Trade is an industry that depends on counterparty knowledge, trust, and communication – principles that companies will struggle to apply to unfamiliar markets. Second is increased complexity, which comes as a result of intricate and varying regulations and differing degrees of operational sophistication between markets. Both act as barriers to speed and efficiency, making the issue of how to expedite trade settlement, and thereby decrease processing costs and speed up the cash conversion cycle. The third major challenge is the ability to make and receive payments in new currencies – with the RMB key in this respect. Indeed, corporates could find the ability to settle in RMB a competitive advantage, as it would make all trade with Chinese counterparties single currency transactions, thereby enhancing speed and efficiency and removing FX risk and cost.

Finding new solutions In order to gain a more detailed understanding of changing industry requirements in light of new sector developments, such as the boom in intra-emerging market trade, BNY Mellon commissioned and helped conduct an Attitudes to Transaction Banking Survey in

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FEBRUARY 2014

TRADE TALK Strategy

late 2012. The results confirm and quantify anecdotal evidence that mitigating risk, optimising working capital management and keeping pace with technology development, in terms of both meeting compliance requirements and investing in innovation, are the prevailing concerns for all cross-border trade players. When asked about their chief priority in the face of ongoing market uncertainty, 44% of corporates said their primary concern was “mitigating transactional risk”. Broad in scope, minimising such risk requires managing counterparty exposure, meeting compliance requirements and optimally managing the endto-end process – all of which is complicated by “new-market” unfamiliarity. Such concerns can be alleviated by a number of factors. The first is enhanced visibility of – and access to – transactionrelated data and information. Indeed, 30% of total survey respondents agreed that this was the element that would most enhance their existing treasury function. Accurate data is the foundation of counterparty communication and can be used as a reliable indicator of a company’s financial strength, and a way of highlighting potential concerns before they cause damage and disruption to the supply chain. The real challenge in this respect lies not only in establishing data channels but in ensuring that only the right and relevant data, too much being as problematic as too little, is received. As a result, data management is becoming an increasingly specialised activity. The second factor is the use of riskmitigating trade instruments such as letters of credit (LCs). Generally speaking, LCs remain the settlement method of choice for both intra-emerging market trades, and more conservative markets. The only downside to this form of settlement is that it can be inefficient and labour-intensive – a problem that can be rectified if the riskmitigating qualities are combined with increased automation. Certainly, electronic platforms and solutions can drive down costs, enhance visibility and ease the burden of reporting requirements. Yet levels of automation continue to vary significantly between regions – and even within regions, as in the case of the Middle East. 20

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ABOUT Bana Akkad Azhari , Head, Relationship Management for the Middle East & North Africa, BNY Mellon Treasury Services. Prior to joining BNY Mellon in the beginning of 2006, Bana worked for over nine years at Citigroup in Beirut where she held the position of Resident Vice President and was a member of the credit committee. She is also a member of the American Lebanese Chamber of Commerce. Ms. Azhari holds a Bachelor in Business Administration and a Masters of Money and Banking degree from the American University of Beirut.

The third element vital to mitigating counterparty risk is improved visibility over the entirety of the supply chain and transaction cycle. In fact, increased transparency, particularly over cash positions, has the additional benefit of aiding optimal working capital management; revealed by the survey as one of the top three concerns in transaction banking today. Of course, none of these factors – accurate and up-to-date data, automation-enhanced trade settlement, and greater visibility, are possible without investment in technology development, and the ability to ensure consistency of service across borders. It is in these respects that corporates will increasingly turn to their bank partners for support.

The benefits of local-global bank partnership However, banks, particularly smaller regional institutions, face similar concerns to their corporate customers, with respect to funding pressures, working capital and challenges of expansion. As technology and network development can require considerable investment, many local banks may struggle to independently design, develop, implement and update the sophisticated solutions needed by trade entities to capitalise on expanding south-south trade corridors. Domestic banks may also struggle to provide the global understanding, oversight and connections that corporates increasingly require – a major concern given the importance placed on consistency of service across borders. This presents local banks with the danger of losing domestic business to their larger rivals – global banks operating on the same turf and better able to provide the necessary

connections and technology platforms. In fact, 86% of bank respondents to the Attitudes to Transaction Banking Survey rated competition between international banking service providers in local markets as “moderate” or “great”. The solution for local banks looking to minimise this threat, and retain, or expand, local corporate business, is to partner with a specialist non-compete global provider of trade and transaction banking solutions. While international providers may be able to offer best-in-class capabilities and global consistency, they cannot match local banks in terms of understanding of home markets and domestic clients. So what companies really need is a holistic solution that marries local market knowledge with technology sufficiently strong to achieve operational excellence across multiple geographies. This is especially true in the light of growing south-south trade, where greater risk-mitigation, cohesion and efficiency can be achieved by having the same provider act as intermediary for local institutions at both ends of the trade flow. By leveraging the individual strengths of both parties, free from the threat of local client competition, strategic partnerships with global non-compete providers can cultivate flexible, automated solutions that unite the traditional, relationship aspects of trade with the latest developments in technology. With such support, trade entities in the Middle East, and indeed beyond, could decrease their dependency on external funding and better manage new-market complexities. In brief, it can give them all they need to capitalise on the region’s position as both an international trade hub and a major player in burgeoning intra-emerging market trade.

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TRADE TALK Interview

Doing trade the

DP World way!

The pioneering work being done by DP World is no secret. Their core business is container handling with their flagship terminal Jebel Ali Port, being the world’s largest man-made harbour, and the 9th top container port worldwide. To get the latest on the emerging markets, the impact of Expo 2020 and trade trends, we speak to Mohammed Al Muallem, SVP & Managing Director, DP World, UAE Region.

oday, Jebel Ali Port is a premier gateway for over 98 weekly services connecting more than 115 direct ports of call across the world. The poly-functional terminal facilities spread over 20 km of quayside feature 23 container berths and 78 quay cranes, geared to handle next generation vessels. The Port is an integrated multi-modal hub, offering sea, air and land connectivity complemented by logistics facilities which include cool port, container freight station and warehousing. Expansion is underway at the port and will add 6 berths and 4 million TEU capacity, bringing total handling capacity to 19 million TEU with the new terminal expected to open in 2014. Talking about their new facilities in Dubai, Mr. Al Muallem said, “At Mina Rashid’s Dubai Cruise Terminal, we are developing a brand new luxury facility for cruise passengers in line with Dubai’s strategic goal of positioning itself as the region’s leading tourist destination. The new facility will cover an area of 24000m2. Planned to be the best of its kind in the region, the new terminal building will have a world class duty22

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free area, 20 retail shops, a currency exchange, ATM machines and a VIP business centre.” It will also provide office facilities to various authorities and stakeholders including DTCM, Dubai Police, Customs, Immigration, shipping agents and airlines. He also pointed out that DP World is in the process of modernising and upgrading Mina Al Hamriya, to strengthen its traditional capability and leverage the strategic location of the port in the centre of Dubai. In addition to serving the local fishing industry, Mina Al Hamriya plays a key role in facilitating non-containerised cargo movements between Dubai, Arabian Gulf, East Africa and Western India. Moving on Mr. Al Muallem divulged 2014 plans. According to him, the rising domestic demand in China and the increase of intraAsian and South–South trade, were the main drivers of the international seaborne trade in 2012, with volumes increasing by 4.3%, reaching 9.2 billion tons for the first time ever, according to the UNCTAD review of Maritime Transport released in December 2013.

The “UN Conference on Trade and Development” figures shows that a total of 60% of world seaborne trade by volume was loaded, and 57% unloaded, in developing country ports during 2011 when global port throughput expanded at a rate of 5.9%. This remarkable shift away from previous patterns of northern hemisphere East-West trade is reflected in DP World’s sustained focus on largely southern hemisphere emerging markets. “Globally, with the average life of our concessions at more than 40 years, DP World focuses on investing for the long term capacity requirements of its’ customers, whether it is in developed markets, which do not have the efficiencies or capabilities to handle the increasing size of vessels, or in developing markets, which have limited container port capacity to meet their growing needs. Our strategy focuses on expanding our portfolio of world-class infrastructure assets, to strengthen global supply chains and to generate sustainable economic growth and development around the world,” he remarked.

FEBRUARY 2014

TRADE TALK Interview

In addition to the completion of the new 4 million TEU Container Terminal 3 (T3) at Jebel Ali here in Dubai, in 2014 DP World will see their Embraport terminal in Santos, Brazil fully operational, after initial volumes handled in 4Q 2013. Work will also get underway on the new development in Yarimca, Turkey, and construction has also begun on the 330 metre extension to DP World’s Nhava Sheva terminal in India. DP World will continue to focus on the emerging markets of Asia Pacific, South America, Africa and the Middle East, which helped drive its volume growth over the last two years.

Trade sector in the Middle East Moving on to the trade sector in the UAE, Mr. Al Muallem quoted the IMF and Drwery Shipping Consultants and said that according to their reports, there will be sustained growth over the coming years in this region, assisted by mega international events such as the FIFA World Cup in Qatar and the World Expo in Dubai. “Our philosophy is to be ready for the demand ahead of time, and trade and shipping industry should also be ready and invest into the future as we are investing to meet the long term needs of our customers. In Jebel Ali’s case, 1 million TEU of capacity was added last year and another 4 million TEU will be added with the opening of the new Terminal 3, which will not only cater to current demand and enable more efficient running of the port, but importantly will also service future growth of the region,” Mr. Al Muallem remarked. “Our customers need cargo to arrive at the warehouse as soon and as smoothly as possible. In order to meet these needs, this requires transport and logistics aspects of our business to be very efficient. Containers in Jebel Ali can be cleared within a couple of hours. The process is short and we have made sure that we constantly introduce the changes and adjustments necessary to keep up with technological changes in the shipping industry,” he added. He was also quick to point out that once T3 is open for business, Jebel Ali Port will be able to handle 10 of those 18,000 TEU container ships— the largest in the world simultaneously. “We serve more than 170 shipping lines 24

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where more than 98 plus weekly services connecting the Jebel Ali port to over 115 ports worldwide. On land, our advanced Gate Automation RFID supported system enables 20,000 truck movements a day. Moreover, we are 99% online, which means nobody needs to come to the port with papers and documents. Everything is handled electronically. Companies and customers can take care of their goods from their offices. This sort of facility and capability is very rare, but we have it.” Mr. Al Muallem also highlighted that in Jebel Ali they handled 1 million TEUs in 1991, while the figure stands at 13.3 million TEU in 2012 and over 10 million TEU for the first 9 months of 2013, a record. In the boom years until 2008, volumes were growing in double digits every year. That put a lot of pressure on the team in terms of ensuring that they continued to build and expand to avoid congestion and maintain efficiency, speed, and ease. According to him, the on-going economic volatility in developed markets is causing a shift in traditional trade patterns from East-West trade in the Northern hemisphere markets to East-West trade in Southern, emerging markets which will have important implications far into the future. “The downturn has also revealed the potential of emerging markets, and it is those markets we believe will lead growth in the future,” he said. More than three quarters of DP World’s business is in emerging markets and that has been an important ingredient in their continuing to outperform the industry. Elaborating further on this, Mr Al Muallem said that the future regional trade landscape means the transport sector will need to cater for fright movement over sea, road, rail and air. Gateway ports such as Jebel Ali and satellite inland depots and warehousing with freight stations will develop. The need for continued investment in infrastructure developments and Intra-Asia trade in particular are recognised by local governments and incentives are being provided to encourage them.

Expo 2020 impacts Mr Al Muallem believes that with preparation already underway to host Expo 2020 in Dubai there are compelling reasons to believe there is

room for further expansion and growth. ”The hosting of World Expo presents a tremendous opportunity for Dubai, the UAE and the region to showcase not just their ancient culture, but also our established and efficient infrastructure and our unique geographic position as a hub for trade, business and tourism. It will create jobs and cement international relations and friendships.” According to him, experience shows that World Expos transform host cities and nations. They impact economic development, infrastructure, employment and architecture and deliver a cultural and educational legacy for future generations. They support cooperation and the development of new partnerships across different geographies, sectors and institutions. “Dubai Expo 2020 is not just about us. This would be the first World Expo to be held in the wider region of over 2 billion people and contributing to substantial GDP growth, job creation and tourism, with a lasting physical and social legacy for all. Our attention turns now to making sure we have the infrastructure in place to support the building and running of the event, and we will be working very closely with our customers to do that,” he said. As we came to the end of our conversation, I asked him about his vision for DP World and Jebel Ali Port in the coming years and he promptly said, “We believe that sustainability and capacity will be an overriding theme of the industry’s development in the coming years, as we see the next generation of ultra large container ships (ULCS) coming on line. The industry needs to invest in people, technology and the environment to keep pace with the changes we are seeing to global trade patterns.” In conclusion, he remarked, “Focusing on our people, customers and providing quality services, Jebel Ali Port has distinguished itself as the port of choice in the Middle East. Furthermore, we believe in raising our benchmark setting new standards and finding solutions to tackle the challenges facing the industry.” And indeed, those standards and benchmarks are there for everyone to see. DP World has made trade truly faster and simpler.

TRADE TALK Sector watch

What’s

cooking?

With the Gulfood around the corner, the entire region is focusing on the food sector and it’s various verticals. We speak to the Dubai Chamber, the Arab Brazilian Chamber of Commerce, Meat and Livestock Australia, Trade Commission of New South Wales, Global Shipping and Logistics, Euromonitor and Lawand Trade to bring you a 360 degree view on this important sector.

s we all know the GCC has limited arable land coupled with acute water shortage which restricts agricultural production. The region has also been witnessing rising population, which along with insufficient domestic food production has lead to an increased dependence on imports. According to the Economist Intelligence Unit (EIU), population in the GCC region is likely to increase further and cross the 50 million-mark by 2020 from 41.7 million in 2010. Elaborating on the importance of the food sector, H.E Hamad Buamim, Director General, Dubai Chamber said, “Food security is vital for the UAE and GCC. Arid conditions and water shortages across the region mean GCC countries have to import the majority of their food requirements. Meanwhile, rapid population growth is creating additional demand. The UAE’s food industry generates revenues from its strong re-exports mainly due to its strategic location. The UAE imports raw or semi-processed agricultural products for further processing and re-export. The country re-exports nearly 50% of imported food products to other GCC countries as well as Russia, Pakistan, India and East Africa.” According to a report by AT Kearney,consumer spending in the GCC food retail sector is expected to reach USD 106 billion in the next five years. It’s also interesting to note that the demand for processed foods in GCC accounts for more than 50% of the total food market in the region. According to the Euromonitor, the retail value sales of canned food increased by 7% in current value terms to reach 26

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AED 269 million in 2013. The report also pointed out that in the UAE there is a trend towards consuming canned food as compared to chilled processed food. This has been due to rising disposable income, growing expat population and storage period of canned food versus chilled processed food.

Imports According to estimates of the Economist Intelligence Unit, food imports to the Gulf region, which stood at USD 25.8 billion in 2010, are set to grow to USD 53.1 billion by 2020. Elaborating on UAE’s situation, H.E Buamim remarked, “Due to water shortages and a lack of arable land, the UAE needs to import almost 90% of its food requirements. According to the Economist Intelligence Unit, UAE food imports are expected to mount to USD 5.5 billion by 2015, rising to USD 8.4 billion by 2020. As Dubai’s economy has grown and demands for food increased so has Dubai’s foreign trade in food. Demand for imports continues to be fuelled by significant demand from expatriates. A focus of this expansion has been the dairy industry, which now ranks among the world’s most competitive industries.” According to him, Dubai’s major trade partners for food imports are India, the United States, Brazil, New Zealand, Pakistan, France and Australia. India’s close proximity and the demands of its expat population in Dubai have made it the leading food trade partner. The value of primary (non-processed) food imports from India in the first half of 2012 reached AED 855 million, or 15% of total primary food imports. The US supplied food items worth AED 709 million, or 13%. According to the MLA, Australian beef exports to the MENA region totalled 3,747 tonnes swt in December 2013, an increase of 31% when compared year-on-year. This took total beef exports for 2013 to 61,793 tonnes swt, a record for the region, and up more than 89% year-on-year. Driving the overall growth was strong demand from KSA, with Australian exports to KSA reaching 31,126 tonnes swt, staggering year-on-year growth of 494%. December capped off a positive year for Australian lamb shipments to the region, with December exports at 4,919 tonnes, while

yearly volumes reached 61,250 tonnes swt, an increase of 12% and a record for shipments to the region. The UAE remained Australia’s largest market, with December shipments at 1,435 tonnes, while yearly volumes totalled 15,724 tonnes swt. Strong demand from Bahrain continued in December, with exports totalling 1,001 tonnes swt, taking yearly volumes to 13,351 tonnes swt. Talking about the trends, Nassif Lawand, MD, Lawand Trade, said, “While KSA is by far the largest GCC importer of commodity foods and beverages, purely because of sheer population size, the UAE is the largest importer of Western-style, Westernmade processed and packaged foods and beverages. This is followed by Kuwait and

South Asia. All this means that companies from New South Wales will want to be a part of the GCC food industry initially through exporting to the region and given the opportunities will start local manufacturing. New South Wales exports agri commodities, fruits and vegetables, livestock, food ingredients and processed food items to the GCC region – all of high quality and the finest in the world. “ Adding to this, Mr. Michel Alaby, Director General, ABCC, said, “The latest and largest investment made by a Brazilian company in the GCC was the BRF plant in Abu Dhabi, mainly for processed food. The amount invested is USD 55 million. There are certainly opportunities for other Brazilian companies in the GCC region. The Gulf is a

Owing to its considerably larger population, KSA will continue to be the biggest food consumer by volume, accounting for 59% of GCC food by 2017 (29 million tonnes), while Qatar’s appetite will outpace that of other Gulf countries, increasing by 5% by 2017 to reach two million tonnes, according to a report by Alpen. KSA, then Qatar, whose market has grown significantly over the past five years. Bahrain and Oman are small markets, lagging behind the rest. Industry expectations are that growth will continue for several years, given the strength of the inherent economies, the relative security stability, the opening of more A-class supermarket outlets and the further exposure of the GCC nationals to Western-style foods and beverages.” Talking about the investment and trade opportunities in the GCC, Moin Anwar, Trade & Investment Commissioner, NSW said, “The opportunities for the New South Wales agri and food industry in the GCC region are tremendous. The GCC population is growing, there is greater food manufacturing taking place, the foodservice and catering market is growing at an exponential rate and the region is a hub to countries in Africa, Central Asia and

very dynamic place for business and ROI (Return on Investment) is competitive. Each year more and more Brazilian enterprises are going abroad to experience new markets and GCC may be a destination for them.” He also pointed out that on the other side, there are good opportunities to invest in Brazil by the GCC companies. Several sectors can represent potential for high ROI (return of investment) and all the guarantee to the foreign investors by the Brazilian Law are granted, meaning the national and foreign investment have the same treatment given in terms of incentives, financing and no restriction to work in the Brazilian national market.

The importance of halal With the total food import to the Gulf region set to grow two-fold to hit USD 53.1 billion by FEBRUARY 2014

TRADE TALK Sector watch

2020, the regional halal food industry is poised to grow at a fast pace in the coming years, In a speech by Dr. Rashid Ahmed Bin Fahad, UAE Minister of Environment and Water, it was pointed out that Halal food and products trade in the Middle East is expected to grow from USD 3.6 billion in 2010 to USD 8.4 billion in 2020. According to reports the Saudi Halal food market is estimated to value at USD 5 billion annually. Talking about the importance of Halal for exporting countries, Dr. Alaby remarked,“Brazil has very strict halal procedures and the quality of those products is recognised in many ways. Firstly, the institutions responsible for the halal products in Brazil are often inspected by foreign muslims associations and the Ministry of Agricultural and Veterinary Inspection. The inspections happen in the plants and farms of beef and

significantly over the past decade and offers opportunities for many food and beverage exporters from New South Wales. Complete standardisation of labelling and shelf life requirements across the GCC region would further assist exporters in entering the region with greater ease and would make exporting to the GCC region more attractive. Mr. Nassif further added to this and remarked that the single most challenging hurdle for any foreign food or beverage manufacturer wishing to enter the GCC markets are the listing fees imposed by the retailers. Due to limited shelf space, relatively small markets and high rents, retailers (whether hypermarkets, retailers or convenient stores) demand very high fees for simply listing a product to be placed on their shelves. This listing fee provides an “extra” income for the retailer and a

According to the MLA, Australian beef exports to the MENA region totalled 3,747 tonnes swt in December 2013, an increase of 31% when compared year-onyear. This took total beef exports for 2013 to 61,793 tonnes swt, a record for the region, and up more than 89% year-on-year. chicken producers. Beef and chicken are not genetically modified and present good health conditions at all times. Traceability is also very important and producers are aware of this aspect. The Brazilian Association of Beef Exporters and the Brazilian Association for Chicken keep close relations with Health and Sanitary inspection services from the Ministry of Agriculture of Brazil and foreign keen entities.”

Challenges So what are the road blocks to accessing the GCC food market? According to Mr. Anwar, generally, the GCC market is easy to access when it comes to the food and beverage industry - import duties are low and with world-class logistics infrastructure. The market has matured 28

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handsome one. And it limits the number of new products coming into market. Again, given the relatively small market, it would take a long period for a product to recoup the investment into its listing and this turns away many of the interested exporters. Another challenge is that the import-hungry GCC is basically a platform where food products and beverages from the whole world can potentially be imported and therefore, competition is fierce. From a logistics perspective, according to Muhammed Ali Shah, Supply Chain Manager, Global Shipping & Logisitcs, there are two issues which will ease the challenge of doing business in the GCC: • Quality temp - controlled warehouses: It is highly imperative to store all the perishable food items in a most hygienic, safe

and quality certified warehouses. Safety and health of a consumer should be the prime goal of all food handling companies. In the market not many warehousing facilities are seen to be complying with the global standards set for the food logistics industry. Custom policies/documentation time/border delays: One of the challenges is the frequent changes in the policies. The importer/exporter tends to get confused and misguided by immediate changes in policies and procedures. It can be avoided by having harmonised policies and procedures across the board unifying the business pact with in the GCC countries. Borders delays are highly evident in disrupting the required supply time when the trucks have to stay at the borders for days and sometimes weeks to get the documentation and inspection clearance at the borders especially entering the GCC borders. Last but not least is the unavailability of quality controlled reefer trucks travelling thousands of miles reaching destination across the variation of temperatures. Currently road transportation is the most economical and fastest way of reaching the GCC borders. Improved future is yet to be enjoyed when the upcoming railway network becomes live in coming years. Talking about how to overcome these challenges, Mr. Ali said that it’s imperative to know your local partner as well as the market. “A little investment on understanding each country’s regulation and requirements for food logistics can help the investor understand the different processes while moving food from border to border. It is a worthwhile taking help from an intermediary with extensive knowledge of the target market and markets involved during the transits of the products. Needless to say that calling the local Chamber of Commerce in your country and a trade office can provide if not detailed but an insight of the current businesses and performances.” The road ahead As we all know Dubai will soon launch an international accreditation centre for Halal food as part of it’s drive to become the world’s capital for the Islamic economy. Talking about the future opportunities,

H.E Buamim said, “There are a number of business opportunities within the food sector. In particular, we see opportunities for partnerships with food producers in Africa, using Dubai as a manufacturing and distribution base serving the emirates, GCC and wider MENA region. Dubai Chamber is aiming to facilitate this growth through our strategy of opening a network of representative offices across Africa, the first of which is in Ethiopia.” Owing to its considerably larger population, KSA will continue to be the biggest food consumer by volume, accounting for 59% of GCC food by 2017 (29 million tonnes), while Qatar’s appetite will outpace that of other Gulf countries, increasing by 5% by 2017 to reach two million tonnes, according to a report by Alpen Capital. The global halal food industry holds many opportunities for businesses across the food industry value chain from provision of farming inputs and meat and livestock production to export of meat to final processed food production and sale in grocery stores and restaurants. According to Mr. Anwar, “Broadly, all GCC countries are making efforts to increase

the local agricultural production. Modern farming techniques are being deployed to boost the agricultural output. This is assisting in job creation and supports the food security plans of the region. In this area, there is an opportunity to transfer some of the successful farming practices from NSW to this region and look at research collaboration with our universities. NSW also has similar challenges – salinity, limited water, and more” He elaborated on this and said that food manufacturing has been strong in the region and will continue to grow, contributing to the region’s export capabilities. The local agricultural output can be utilised by the local industry, however, other inputs to the process would need to be imported. As local production becomes stronger, the market for processed food items would become more competitive when it comes to imports. However, there would still be a demand for niche products to be imported and those required by a growing and thriving hospitality industry. Retail sophistication will also continue to grow.” Mr. Nassif added to this and said “Differentiated, good quality, well packaged and reasonably priced foods and beverages

will always find some success in the GCC markets. Global brands will always have an advantage over others. A trend that was triggered a few years ago but which is beginning to get good traction now are specialised products, such as organic, glutenfree and gourmet. Numerous supermarkets in the region are now creating a storewithin-a-store concept, carrying such lines of products. These lines of products are expected to grow over the coming years. Another product segment expected to experience good growth is the on-thego foods and beverages. As the population is becoming busier and time is becoming a more precious commodity, consumers are moving toward convenient and time-saving eating solutions.”

Conclusion There is little doubt that the food sector is one such sector which cannot be ignored because not only does it bring in trade and investment but it is also fundamental to the existence of the GCC economies. With technological improvements and better connectivity among countries, leading to faster movement of cargo, the food sector is poised for a robust growth. FEBRUARY 2014

TRADE TALK Sector watch

It’s all about food! With the population set to rise to 9.5 billion by 2060, how does the regional economy ensure sufficient food supply for all? Answer to this question is a prevailing concern for all in the Middle East food industry. The Gulfood taking place from 23rd-27th February 2014 is hosting the World Food Security Summit, aimed at answering these questions and more.

he World Food Security Summit (WFSS), a Gulfood Leaders event, convening on the 23rd -24th February at the Conrad Hotel, Dubai, is formulated around this crucial question and will deliver solutions to the possible upcoming challenges. While contributing towards developing a sustainable and secure food supply, it will also cover the framework of water security in the UAE. Gulfood has a history of 27 years, and hosts over 77,609 industry visitors. With exhibition participation by 110 international country pavilions, it is the world’s biggest annual food and hospitality show. The World Food Security Summit will mark the opening of Gulfood and is aimed at setting the vision for the future of the regional food industry. 30

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The programme is designed to get senior industry professionals to create strategies that support collaborative efforts between private and public sector to tackle the future industry challenges. The attending 300 delegates will get the opportunity to learn how they can remain compliant with the latest regulations, access new agriculture investment opportunities, hear about the active projects addressing the prevailing food security concerns, amongst others. An impressive lineup of international and regional renowned industry influencers are already confirmed to speak, these include: • Hon. Peter Walsh, Minister for Agriculture and Food Security, Minister for Water, State of Victoria, Australia

• Yves Manghardt, Chairman and CEO, Nestlé Middle East FZE • David J Currie, Fishery & Aquaculture Officer, Food & Agriculture Organization of the United Nations (FAO-UN) • Sanjeev Kakkar, Chairman, Unilever MENA • Y. Bhg. Dato Seri Jamil Bidin, CEO, Halal Industry Development Corporation, Malaysia • Essa Al Ghurair, Group Chairman, Al Ghurair Foods

Key topics that will be covered at the summit include: • Trade Policies and Regulations from a Government Standpoint • How to Ensure A Sustainable Food Security Policy • PPPs and Investment Opportunities in Agriculture • Role of Corporates in Support for Food Security • Trade as a Solution to Food Security - Focus on Global Price Dynamics

Highlights and features of the summit are: • Round table discussions enabling informal discussions to encourage ample interaction between all participants • Two parallel conference streams of dialogue on policy & economy hub, and investment & innovation hub • One-to-one session with the speakers at the speakers’ corner to find answers to burning industry questions • Gulfood Awards held in a glamorous setting to reward the titans in the food business at the end of first day of the conference • Ministerial meet hosted at the summit is an invitation-only event, with global participation to address the topic on ‘working united towards the Global food security challenge’

Further details about the summit can be found on www.gulfood.com If you are interested in attending the World Food Security Summit, you can visit www. gulfood.com/wfss to register and for further information.

TRADE TALK Sector watch

A landscape of Malaysia’s halal industry Halal is among the fastest growing industry in the world. The total value of the global halal market is estimated at USD 2.3 trillion, which is contributed by the growth of Muslim population, economic development in Muslim countries, and the emergence of potential halal markets in non-Muslim countries. The national trade promotion agency of Malaysia, MATRADE provides an overview of Malaysia’s halal industry.

he demand from Muslim markets overseas is expected to expand further in tandem with the growth of population size and per capita income. Besides catering the need of 2.1 billion Muslims worldwide, the Halal industry is also an emerging market force for the nonMuslim countries which offers wholesome, hygienic and contamination-free principles in food production. According to a Euromonitor Report, the global halal industry is composed of processed food and beverages (36%), pharmaceuticals (22%), bakery (12%), primary meat (10%), cosmetic and personal care (9%), nutraceuticals (6%), and confectionery (5%). Apart from food, global demand for halal products and services also include personal care products, cosmetics, pharmaceuticals as well as services covering restaurants, hotels, banking and financing, tourism and logistics. Malaysia has already had a head start in the global Halal market and aspires to be the ‘Global Halal Hub’. Rising up to its global competitiveness, Malaysia has moved up the value chain to a high technology, knowledge-based and capital-intensive powerhouse, incorporating design as well as research and development activities. To strengthen Malaysia’s position in becoming a global halal hub, the ‘Halal Eco-system’ is introduced to focus on the production, manufacturing and supply of halal products and services. The system comprises of all Halal-related matters namely standards development, training, research and development, innovation, logistics, port services and Islamic financial services. The ‘Halal Eco-system’ will ensure the delivery of premium brands of Halal products and services to the consumers and as a platform for the halal 32

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the requirements under the HDC Designated Halal Park Development Guidelines. Among the main Halal Parks in Malaysia are Biotech Halal Clusters, Agriculture Clusters, Halal Industrial Clusters, and SME Halal Clusters. The main objective of its existence is to improve the economic performance of the participating companies while minimising the environmental impacts. There are three major R&D centers for Halal in Malaysia, namely: • Halal Products Research Institute (HPRI), Universiti Putra Malaysia (UPM), • Halal Institute Research Center, International Islamic University of Malaysia (IIUM), and • Institute of Halal and Research Management (IHRAM), Universiti Sains Malaysia (USM)

industry players in venturing into lucrative halal market worldwide. The organisation authorised by the government agency to certify halal products and issue Halal certificates is the Department of Islamic Development Malaysia (JAKIM). JAKIM Halal Hub Division was set to examine, certify and regulate all food and consumer products applicable to Muslim in an efficient and effective manner based on the Malaysia Halal Standard MS 1500 developed by the Department of Standards. Currently there are 13 Halal-related Malaysian standards published by Standards Malaysia for the benefit of the industry. The Halal Park is a community of manufacturing and service business located on a common property. Currently, there are 24 Halal Parks in Malaysia; with 13 of it being HalMas. HalMas is an accreditation given to the Halal Park Operators who complies with

The functions of these centers are to develop technologies to detect non-Halal components in end products, promote research and development in innovation of Halal products, and to analyse Halal authentication. The Malaysian government has undertaken various efforts to promote the production of Halal food and to enhance Malaysian products and services in the international market. It includes the organisation of the Malaysia International Halal Showcase (MIHAS). The 11th edition of MIHAS will be organised from 9th–12th April 2014. Apart from that, the Malaysian government through MATRADE will be participating in Gulfood 2014 together with 70 Malaysian companies exhibiting high quality Halal products that meet stringent standards. For more information on Malaysian Halal products and services please logon to www.matrade.gov.my or contact MATRADE Dubai at dubai@matrade.gov.my or telephone at 04-3355528/ 38.”

Exce Awards EXCELLENCE AWARDS2014 25th February 2014 | Ritz Carlton DIFC, Samaya Ballroom, Dubai

Strive, Achieve and Inspire Isnâ&#x20AC;&#x2122;t that what we all work towards? To honour and recognize the best in the field of trade and to inspire others by example, we bring you the second Trade and Export Middle East Excellence Awards on the 25th of February at the Ritz Cartlton Hotel in Dubai. We invite you to nominate your organisation and be recognised in the world of trade and export in the Middle East.

www.tradeandexportme.com/excellence14

In Association with

Strategic SME Partner

Official Port

Business Services Partner

For nomination enquiries:

For sponsorship enquiries:

Aparna Shivpuri Arya senior editor - trade and export me +971 554479585 +971 44409133

Richard Judd managing Director Cpi technology & Business +971 4 440 9126

Country Promotions Partner

Chris Stevenson Commercial Director Cpi Business +971 (0) 50 459 0206

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Vanessa Linney sales manager trade and export me +971 (0) 52 962 2460

TRADE TALK Legal

Iran Sanctions –

Epic move or drop in the ocean?

The P5+1 is a group of six nations, which joined hands in 2006 to promote diplomatic effort with Iran with regard to its nuclear programme. The term refers to the P5 or five permanent members of the UN Security Council, namely United States, Russia, China, United Kingdom, and France, plus Germany. A historic event took place on 23rd November 2013, when P5+1 and Iran reached an initial agreement with respect to Iran’s nuclear programme. Capt. Anushuman Singh, Admiralty Manager, Fichte & Co, presents an analysis of the impact of this agreement.

here was much euphoria and skepticism regarding the agreement which is an initial step towards a more comprehensive agreement between the P5+1 and Iran and reflects the first meaningful limits that Iran has accepted pragmatically with respect to its nuclear programme over the last ten years. The outcome of the initial agreement is to provide limited sanction relief to Iran by lifting of some of the current sanctions. However, the said relief does not affect the sanctions concerning the key areas of oil, banking and financial sanctions which so far remain in place. Additionally such relief is subject to Iran keeping their part of the commitment and the same would be revoked and additional sanctions 34

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added if Iran fails to deliver their part of the bargain. So what exactly is the relief in sanctions? Does it translate to more business with Iran? The agreement has resulted in a specific agreement to • Not impose new nuclear-related sanctions for six months, if Iran abides by its commitments under this deal, to the extent permissible within their political systems. • Suspend certain sanctions on gold and precious metals, Iran’s auto sector, and

Iran’s petrochemical exports, potentially providing Iran approximately USD 1.5 billion in revenue. • License safety-related repairs and inspections inside Iran for certain Iranian airlines. • Allow purchases of Iranian oil to remain at their currently significantly reduced levels – levels that are 60% less than two years

ago. USD 4.2 billion from these sales will be allowed to be transferred in installments if, and as, Iran fulfills its commitments. • Allow USD 400 million in governmental tuition assistance to be transferred from restricted Iranian funds directly to recognised educational institutions in third countries to defray the tuition costs of Iranian students.

Except for the above all sanctions shall remain in place, which are • Sanctions on Iran’s crude oil export • Sanctions on petroleum products which results in a loss of billions of Dollars • Iran’s foreign exchange holdings which remain inaccessible or restricted by sanctions • Sanctions against the Central Bank of Iran and approximately two dozen other major Iranian banks and financial actors

ABOUT Capt. Anshuman Singh joined Fichte & Co in 2012 and heads the Admiralty Department and supports the Maritime Team with invaluable knowledge. He has diverse Claims handling experience having been working with a P&I Correspondent in the UAE for nearly 5 years. He is a Master Mariner with extensive experience in practicalities of shipboard operations, and before moving on-shore he has sailed on all kind of Dry vessels including specialized vessels like self unloaders.

• Broad US restrictions on trade with Iran remain in effect, depriving Iran of access to virtually all dealings with the world’s biggest economy • All UN Security Council sanctions remain in effect • All of the targeted sanctions related to Iran’s state sponsorship of terrorism, its

The outcome of the initial agreement is to provide limited sanction relief to Iran by lifting of some of the current sanctions. However, the said relief does not affect the sanctions concerning the key areas of oil, banking and financial sanctions which so far remain in place. • Sanctions on those who provide a broad range of other financial services to Iran, such as insurance and, restricted access to the US financial system. • All sanctions on over 600 individuals and entities targeted for supporting Iran’s nuclear or ballistic missile program remain in effect • Sanctions on several sectors of Iran’s economy, including shipping and shipbuilding, remain in effect • Sanctions on long-term investment in and provision of technical services to Iran’s energy sector remain in effect • Sanctions on Iran’s military program me remain in effect

destabilising role in the Syrian conflict, and its abysmal human rights record, among other concerns, remain in effect.

Even though the move is termed is historic and Iran does keeps to their share of the bargain how soon could the sanctions be lifted? The sanctions are not only imposed by the US but EU also has its own set of sanctions. Most of the US sanctions have been put in place by a Presidential order and therefore can be revoked by another Presidential order. However not all sanctions are from a Presidential order and therefore would require government approval which could

be faced with delays due to skepticism and non-agreements. The EU Sanctions could take much longer to revoke as all the EU nations need to approve of the sanctions being lifted. Even if a mechanism is put in place to fast track the process it could well take a few months if not years before there is a consensus and changes to the sanctions. Business with the UAE Trade between the UAE and Iran dropped from USD 45 billion to USD 4 billion after the application of sanctions. Even though there has been no official announcement or alterations to the present situation, a diplomatic initiative by UAE seems to have resulted soon after the agreement of P5+1 and Iran whereby a meeting was held between H.H Sheikh Abdullah bin Zayed Al Nahyan, the UAE Foreign Minister and the Iranian Foreign Minister Mohammed Javad Zarif. The agenda for the meeting was a discussion on regional developments and economic relations between the two neighboring states. In addition the UAE foreign minister also inaugurated the new UAE embassy building in the Iranian capital, raising hopes that relations between the two states will further improve. Even though the interest of local businesses would lay in the improvement bilateral trade relationships, any such changes would only be spelt out after six months when Iran delivers as promised whilst being under a constant watch by the world radar. FEBRUARY 2014

TRADE TALK Free zone

Afor hub

CREATIVE TALENT!

Noura Al Kaabi, CEO, twofour54, in an exclusive interview to Aparna Shivpuri Arya speaks about this unique media free zone and why twofour54 should be every media company’s choice.

s. Al Kaabi began our conversation by giving a brief overview of the vision behind setting up twofour54. “As part of Abu Dhabi’s long-term vision for diversification of the Emirate’s economy, media was identified as one key market segment that is central to Abu Dhabi’s continued and sustainable economic growth. As a result of this, twofour54, the commercial arm of the Media Zone Authority–Abu Dhabi, was established in 2008 and is now one of the Middle East and North Africa region’s leading media and entertainment hubs. As part of its mission, twofour54 is driving the development of the creative industries in the region, supporting talent and content development initiatives, creativity and young entrepreneurs,” she remarked. 36

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Ms. Al Kaabi also pointed out that the media zone has been instrumental in driving the growth of the media and creative industries in the region. It encourages foreign direct investment through 100% non-UAE business ownership, has a world class entrepreneurially friendly regulatory structure creating private sector jobs, while offering a clear content regulatory environment which is unique in the region. Talking about the growth of this free zone, she pointed out that a major factor contributing to twofour54’s success is its unique strategy to facilitate organic growth of the regional media industry through its eco-system, made up of a network of media companies operating in Abu Dhabi.

She further added that, “Since twofour54’s launch five years ago, 240+ international, regional and local media and creative companies have set up at twofour54’s campus in Abu Dhabi. A vibrant and dynamic media cluster has been established and recently, the zone was ranked 11th in the Middle East in the Foreign Direct Investment (fDi) Magazine Free Zone ranking, 2013. Local, regional and international companies which have set-up here include Sky News Arabia, CNN, Fox International, Ubisoft, Cartoon Network, Flash Entertainment, Sport 360, Reed Exhibitions, Tahadi and Jawaker.” “When you look at talent development, content delivery and production, we have made major progress: our training academy

has run over 600 courses, training 7,000 delegates so far. We have been very actively in providing business development and funding support to UAE nationals and other Arabs, growing a creative community of over 5,600 members. From a content perspective, twofour54 has generated north of 18,000 hours of content for various broadcasters and production companies. You can really see how things have evolved from that point of view. We also power the Emirates Novel Award other than the Abu Dhabi Film Festival, Abu Dhabi Media Summit, TROPFEST Arabia each year to drive the development of a vibrant film and entertainment industry,” Ms. Al Kaabi highlighted. Moving on to my next question, I asked her about the options available to foreign media companies, to which she explained, “ Setting up at twofour54 is easy. We recommend starting by checking out setting up information on our website: twofour54. com/business and then connecting with twofour54’s business development team. The team will set up a time with you to discuss your plans, check you if meet the relevant criteria and lay out the options available for you. Whether you decide to incorporate a free zone liability company (FZ LLC), establish a branch of an already existing company or license as a freelancer, you will be assisted through the process by the twofour54 Business Development Licensing Manager in completing the necessary documentation.” But why should a company choose twofour54 over other locations? Ms. Al Kaabi’s answer to this was simple –"the incentives." In addition to the fiscal benefits available to companies that become part of twofour54’s free zone, including the tax free environment and the 100% foreign ownership, we help our partners maximise their creative and commercial potential by providing exclusive access to the following,” and she went on to point out the various incentives, which include A comprehensive one-stop shop – three integrated business units, offering worldclass training; project funding and support; HD production, post-production, media asset management, digital archiving,

ABOUT Noura Al Kaabi is the Chief Executive Officer of the Media Zone Authority-Abu Dhabi (twofour54), a Government initiative to develop sustainable media and creative industries for the UAE and for the region. Noura is a member of the Federal National Council (F.N.C.) of the UAE and sits on the board of Abu Dhabi Media, Abu Dhabi Chamber of Commerce, Image Nation and the Abu Dhabi Sports Council. Please connect with the Business Development team at business@twofour54.com for more information.

playout and broadcast facilities enabled with on-the-ground logistical business. A web-based ‘Briefing Room’, which matches partners with new government contracts or regional companies who commission content. Regular connect networking events where partners can meet, share and co-ordinate with other companies. Free on-campus seminars and twofour54 commissioned industry research. An on campus freelance agency, with access to the region’s largest pool of talented media professionals, from cameramen to animators and from copywriters to directors.

Other incentives which may be available include: employment and training incentives; grant incentives; property assistance and investment in local talent content initiatives and facilities. The criteria for offering incentives are assessed on a case by case basis. Besides these incentives, the media zone also provides other support services, through their business enabler, Tawasol, such as Government services Travel services Office services Residential services Hospitality and retail services

We then moved to the specifics of the MZA licence, and according to Ms. Al Kaabi, the MZA licensing team of the Media Zone Authority-Abu Dhabi oversees the incorporation and registration of companies within twofour54, as well as the licensing of their business and activities as necessary. MZA licensing carries out the following:

1. Incorporation and registration of companies and branch offices 2. Licensing of businesses 3. Licensing Dissemination Activities 4. Maintenance of Companies Register 5. License renewals and amendments 6. Ensuring consistent regulatory best practice across the zone

I then wanted to know that with all these incentives and support services available, how long does it take, on an average, for a company to set up business in this zone? Ms. Al Kaabi was quick to answer and stated, “This varies from company to company and largely depends on the individual partner’s requirements. Everything at twofour54’s end is set-up to help partners and potential partners get established as soon as possible. Once all necessary documents are completed and we’ve received proof of bank account opening from an applicant, our internal sign-off on the documents takes no more than 2-3 days.” As we came to the end of our conversation, I raised the usual point about future plans and Ms. Al Kaabi definitely has plans over the next four to five years to expand their operations into a large-scale purpose built world-class media campus within Abu Dhabi, which will embody the creative eco-system that they have been creating during the past five years. She hope that their new media precinct will reinforce their ambitions to be regarded as the home of the region’s creative industries, making Abu Dhabi the lifestyle destination of choice where media professionals aspire to work and live. FEBRUARY 2014

TRADE TALK Finance

Money matters- II The team at Western Union Business Solutions brings us the movement in three major currencies to help us trade better in February 2014. USD Joe Manimbo, Senior Market Analyst, Washington, DC

With the US currency’s fate tethered tightly to the outlook for Federal Reserve (Fed) policy, the greenback may continue a gradual grind higher in February. America’s greenback has found support in the early stages of the year from market forecasts of an ever-shrinking Fed bond buying programme. Since late last year, the Fed, emboldened by steady signs of recovery in the world’s top economy, has signaled a preference to draw down on extraordinary support measures aimed at lowering interest rates and boosting growth. The US economy has recently flashed mixed signals, but underlying fundamentals and momentum appear to be gaining strength. As the Fed slows its pace of support to the economy, it signals a renewed confidence in the outlook, which in turn has nudged US bond yields higher, making the dollar a more enticing investment. February will usher in a historic era at the US Central Bank, as Janet Yellen is expected to be installed as the Fed’s first-ever chairwoman, replacing Chairman Ben Bernanke, whose final term ended in late January. As long as the US. economy appears headed in the right direction, the new Fed chair is expected to continue down the road of tapering central bank stimulus, a compelling narrative that has many betting on a better year for the Dollar, following its more pedestrian performance in 2013, when it finished behind the euro but far ahead of the Yen. 38

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Washington this month may yet pose another potential risk for the Dollar, as well as broader currencies and financial markets. US lawmakers are tasked once again with raising the nation’s borrowing authority, a process that in the past has led to dangerous games of political brinksmanship, fanned fears of default, and undermined confidence in Dollar-based assets. Investors may have to be choosy in betting on a stronger greenback. That’s because sharing the spotlight with US. optimism has been a view that Britain might be first in line to raise interest rates among the world’s major central banks. Mounting signs of recovery in Britain have bolstered the pound, prompting gains that have partly spilled over and lifted the euro. Consequently, the greenback may encounter a lower ceiling against its European rivals, compared to foundering peers from Australia and Canada.

KEY USD EVENTS Feb. 7 th: January non-farm payrolls and unemployment Feb. 13th: January retail sales Feb. 19 th: January Federal Open Market Committee meeting minutes Feb. 20th: January consumer price index Feb. 28 th : Q4 gross domestic product preliminary estimate GBP Nawaz Ali, UK Market Analyst, London

Unemployment in the UK is at its lowest rate in nearly five years, consumers are spending, and the services industry is almost running

rampant. Britain’s economy may not be at full velocity yet, but the recovery may have reached more than escape velocity according to fourth quarter GDP results. The first estimate on fourth quarter GDP) for the UK economy is due shortly. If the report strengthens speculation about higher interest rates then the Bank of England (BoE) may have to offer markets more than just forward guidance to halt sterling gains. If it does, then this could turn the Pound’s latest climb upside down. Softer Purchasing Managers’ Index (PMI) surveys at the beginning of January led to a generally disappointing start to the New Year for the Sterling. Profit taking was inevitable, given the UK currency’s 4.5% gain against the US. dollar in just two months through to December, which had taken GBP/USD to a twoyear high. UK consumer price inflation also fell to the BoE’s 2% target level for the first time in four years, which implied looser-forlonger BoE policy. However, after this early pressure, the pound then snapped back, climbing again mid-January after robust UK data gave investors a pretty clear picture to bet on. Britain’s latest unemployment figures revealed a steep decline from 7.4 % to 7.1 %, just shy of the BoE’s 7 % threshold—at which point it says it will start to consider rate hikes. Prior to that, a report showed the UK’s retail spending growth (year-over-year) in December was the strongest in nine years. The economic data was extremely positive and investors’ reaction was bullish, taking sterling to two-and-a-half-year and fresh one-year peaks against the USD and EUR respectively.

Unless the Federal Reserve’s late-January monetary policy meeting and the BoE’s earlyFebruary rate decision uncover any surprises for global markets, sterling strength could become a more frequent headline through February. On a trade-weighted basis, the GBP is now at its highest since November 2008. The volatility in UK government bonds as a result of fluctuating interest rate expectations is another important development. The BoE will respond in its Inflation Report on February 12th, Governor Mark Carney’s quarterly opportunity to communicate directly to investors about monetary policy settings. The question is: how will the bank now respond with almost all economic indicators pointing one way? Previously the BoE pointed towards productivity and other “behind the scene” factors to hold back market expectations about rates. This time, Carney may use inflation levels to push back. If the BoE does not respond, this should be the green light for traders to extend the pound’s recent advance, taking sterling up to new highs. On the other hand, the UK Monetary Policy Committee may just decide to lower the central bank’s unemployment threshold from 7 % to 6.5 %, in a move which could trigger an aggressive sterling collapse. Key Events Feb. 5th: January services PMI survey Feb. 6th: Bank of England policy announcement Feb. 12th: Bank of England inflation report Feb. 18th: January consumer price inflation Feb. 19th: December unemployment rate Feb. 21st: January retail sales Feb. 26th: Q4 gross domestic product (2nd estimate) EUR Tiffany Burk, Senior European Market Analyst, Zurich

Ireland’s debt is no longer graded as “junk” by any of the big three credit rating agencies. That shift occurred towards the end of January and was well deserved rather than luck. Ireland’s government borrowing costs have dropped from 15 % at the height of the country’s debt crisis in 2011, to 3.54 %, which was the yield paid on the government’s most recent auction

that raised half of its EUR 8 billion targeted for this year. Eurozone countries that received bailout funds during the height of the European debt crisis would like to look more like Ireland. Portugal narrowly missed a rating downgrade from S&P, who maintained its negative outlook, saying that it was waiting on a Constitutional Court ruling on public sector wage cuts that is required to meet the government’s 4.0 % deficit-to-gross domestic product target in 2014. That is not to say Portugal is not making progress. There has been a modest decline in unemployment, and we have also seen stronger-than-expected exports. Already a third of debt issuance for the government has been successfully made this year and privatisation plans continue. As for Greece, the jury is still out until April, when the so-called Troika will review the country’s progress. Cyprus has approved a budget that includes deep spending cuts in 2014 in order to achieve bailout targets that have been set out for it. Spain exited the support provided for its banking system at the beginning of this year, and Prime Minister Rajoy recently announced that his government will attempt to cut income taxes next year. So progress has been made in the weaker or peripheral economies, but is it enough to attract the type of demand for European assets that will keep the euro elevated against most major currencies (particularly if “core” economies such as France continue to see weak growth rates)? According to statistics, the Japanese, recently bought the highest quantities of French bonds since 2012. To this end, France’s President Hollande has finally recognised that structural reforms are going to be required to make the French economy more competitive. He has outlined some of his reform plans in what he is calling his “Responsibility Pact.” While the agenda sets to move the French economy in the right direction, there are still many unanswered questions and the devil will not only be in the detail, but also in implementation. As deflationary fears grow, speculation over more monetary stimulus by the ECB will increase. Guidance as to where the Euro will head in February may turn perhaps not

to a recovery in the periphery, nor towards soft core economies, but rather currency markets could be driven by money markets. At the end of January, money market rates shot higher. Tighter monetary conditions threaten already weak demand for credit as banks rush to payback the ECB’s long-term refinancing operation and limited demand has been seen for the ECB’s main refinancing operation. Higher money market rates create tighter monetary conditions and will also increase speculation that the ECB may take policy action at its February meeting. A variety of tools are still left in the ECB’s tool kit, but using any one of these continues to dwindle the remaining supply of policy measures. This could potentially spook markets and keep the euro firmly under the 1.40 level attempted against the dollar at the end of last year. Stretching further to look for drive in currency markets, there are two other loose cannons that investors may want to consider: Ukraine and Turkey. Any spill over from weakened governments in these countries could spook investors out of Europe as well. At the end of January Russia was accusing European politicians for their “role” in encouraging violent protests in Ukraine. Meanwhile Turkey’s lire continued to reach record lows. The lira has lost 17% in six months, as political turmoil heats up in front of local elections in March. The outcome of which could influence whether or not Turkey holds national elections. The Euro’s challenges for February will come in the form of weak price developments, a decline of excess liquidity in money markets, and potentially from fallout from heightened political turmoil in the region.

Upcoming critical events Feb. 3rd: January manufacturing Purchasing Managers’ Index (PMI) Feb. 4th: December Producer Price Index Feb. 5th: January Services PMI Feb. 5th: December retail trade Feb. 6th: ECB Monetary Policy Committee meeting Feb. 12th: December industrial production Feb. 14th: Q4 1st estimate GDP Feb. 24th: February flash Harmonised Index Consumer Prices FEBRUARY 2014

TRADE TALK Industry Watch

KSA or USA â&#x20AC;&#x201C; who leads the pack? In our September 2013 edition we discussed the importance of KSA in the global oil markets thanks to its role as a swing producer with a large cushion of spare capacity. However we also discussed the challenges posed by the emergence of oil supplies from Iraq and the US shale boom. In this monthâ&#x20AC;&#x2122;s article Amrita Sen, Chief Oil Analyst, Energy Aspects explores how KSA might respond to any threat to its market share, when it comes to oil. 40

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acing the Shale Boom In our view, the question of whether the US overtakes KSA as the largest supplier of oil is more than just a red herring – it is can actually have dangerous implications for the future of the market. As US liquids output has now passed 11 mb/d the key question is whether the US, or any country other than KSA, has the necessary discipline to maintain spare capacity. KSA’s discipline goes beyond simply controlling volumes during periods of shortages or oversupply. For a long period, KSA has influenced price levels, aligning its desired price outcome with international oil prices. In 2012, the Kingdom proactively controlled the upside to oil prices since it sees high prices as an additional burden on global growth and detrimental for long term oil demand.

CAPEX requirements. As part of a free market economy, each US company aims to maximise its own profit, rather than champion a national agenda. Given both the high production costs and this individualistic behaviour, US companies cannot be expected to exhibit the discipline to reduce output in order to stabilise prices in a falling market. Part of Saudi Aramco’s response to the changing market is to become the world’s largest vertically integrated energy company, which will see it develop unconventional gas resources, refining and petrochemicals. KSA is also participating in oil processing and storage projects in Asia to improve access to and protect its market share in the region. These steps are entirely aligned with Riyadh which sees a strategic, energy future revolving around becoming a global

Part of Saudi Aramco’s response to the changing market is to become the world’s largest vertically integrated energy company, which will see it develop unconventional gas resources, refining and petrochemicals. KSA is also participating in oil processing and storage projects in Asia to improve access to and protect its market share in the region. In comparison to KSA, where the objectives of the government and Saudi Aramco are aligned, the US oil industry is fragmented, comprising of oil majors, smaller independent companies (the pioneers of US tight oil), midstream operators and downstream refining and petrochemical plants. With environmentalists and regulators actively shaping policy, various groups have different loyalties and priorities. The most significant difference between a lot of these companies and Saudi Aramco is their lack of deep pockets, with many relying heavily on debt markets to raise capital to meet exorbitant

economic and energy power, based on being a dominant global supplier not only of oil but also of other energy-based commodities. Even outside the structure of the industry, the potential for actual recoverable barrels varies significantly between the US and KSA. Although incremental production in KSA today is more expensive than the single-digit marginal cost of the past, it is nowhere near the USD 70-80 price needed by US independents to break even. Also, shale plays, outside Bakken, Eagle Ford and Permian basins, are less rich in liquids and despite the size of potential reserves

most geologists believe only 3.5-4 mb/d of crude oil can be extracted from these shale plays. While that maximum may be reached rapidly, the effort to maintain production at those levels is simply not comparable to any conventional basin given the steep decline rates for shale plays. Put simply, for all the factors discussed above, the US just cannot replicate the influence KSA holds on the oil market today.

KSA – the swing producer Despite these differences, the barrage of reports suggesting that the US will not require Middle Eastern oil and that rising shale production could threaten KSA’s market share, could easily deter the Kingdom from investing to maintain spare capacity. With the political backdrop in key oil producers in the MENA region undergoing significant upheaval, the importance of maintaining spare capacity should not be underestimated. The last time the market got close to eroding its spare capacity entirely, back in 2008, oil prices soared close to USD 140 per barrel. And while non-OPEC supplies were falling at that time, today, North America stands alone in an otherwise extremely weak non-OPEC picture, mostly offsetting the declines elsewhere. In recent months KSA has produced over 10 mb/d to compensate for losses from Libya, Iraq and Nigeria. This reduced available global spare capacity to just under 2 mb/d (excluding the lost output from those three countries and Iranian barrels under sanctions). This is a thin margin for a system as large and complex as the global oil market. Once that spare capacity has been eroded, should the world need spare crude, be it due to supply outages or even upside demand surprises, US production will be unable to respond in the same way as the Saudis. Facing pressing needs in the domestic economy, the Saudis may well start to prioritise these over acting as the FEBRUARY 2014

TRADE TALK Industry Watch

caretaker of the oil market, leaving the market highly susceptible to price volatility and sharp cycles.

Market share is key Elsewhere, growing Iraqi output is also an issue for KSA. However, the response to a low cost OPEC producer seems to be different. While our view is that an all-out price war is unlikely in the current environment, in a falling market, there are limits as to how much KSA is willing to see its output drop, especially if the competition for market share originates from OPEC members with low production costs like Iraq. If the predicted sharp increase in Iraqi output materialises, many analysts anticipate an over-supplied market, especially given US supply growth. While KSA may accommodate the early phase of Iraq’s ramp-up, there might be a point at which the Kingdom will want to bring Iraq back into the quota system to restrain its production.

ABOUT Amrita is the Chief Oil Analyst at Energy Aspects, a research consultancy. She specialises in energy commodities, particularly oil and oil products, and has also covered coal and freight markets and investment flows into the commodities markets. Amrita holds an MPhil in Economics from Cambridge University, a BSc in Economics from the University of Warwick, and is pursuing a PhD at the School of Oriental and African Studies, University of London. She is a fellow at the Oxford Institute of Energy Studies and was formerly a chief oil analyst for Barclays Capital.

pushed for large price increases while at the same time putting additional oil in the market in an attempt to boost revenues. OPEC’s introduction of a quota system proved to be ineffective in preventing production rising above quotas and it became clear by the mid-1980s that OPEC was losing its power to set the oil price. KSA’s attempts to defend the marker price resulted

This is a thin margin for a system as large and complex as the global oil market. Once that spare capacity has been eroded, should the world need spare crude, be it due to supply outages or even upside demand surprises, US production will be unable to respond in the same way as the Saudis. In the past, this has proved a complex process, with serious repercussions on oil market dynamics. Some historical background is useful. Between 1973 and 1985, OPEC exercised the ultimate pricing power by setting the benchmark price. The decline in oil demand in the mid-1980s caused by a worldwide economic recession and the growth in non-OPEC crude oil production saw OPEC’s market share of world oil production fall from 51% in 1973 to 28% in 1985. Disagreements within OPEC began to surface and KSA lost market share with every increase in the marker price and hence opposed them. Other OPEC members 42

FEBRUARY 2014

in a large loss of market share–from 10 mb/d in 1980 to 3.6 m b/d in 1985. The decline in volumes and loss of market share proved to be very costly for KSA. It abandoned the administered pricing system in 1985 and recovered its lost share through netback pricing, which provided oil companies with a guaranteed refining margin. KSA could opt for a strategy that punishes members for producing above their quotas and rewards them for compliance to maintain the cohesiveness of OPEC. Two recent episodes illustrate the Kingdom’s ability to adopt such a strategy: in 1985 when KSA boosted its supply in an attempt

to increase its market share and in 1998 when KSA responded to Venezuela’s increase in production and rapid capacity expansion by increasing its own output. Both these events led to a collapse in oil prices which only recovered when OPEC (with few non-OPEC countries) implemented large cuts. Thus, KSA is unlikely to wave Iraqi increases onto the market without any response and may not be willing to adjust output downwards below 9 mb/d as it looks to retain its market share. In conclusion, we find that as long as the competition for market share is from high cost producers, oil prices should remain at levels close to OPEC’s preferred price range. After all, part of the ‘oil revolution’ in high cost production has been thanks to OPEC policy, which has kept prices high enough by restricting output. Should KSA choose to limit future investments in oil fields, seeing reduced needs to maintain spare capacity, prices are likely to become far more volatile with back end prices supported as the US simply cannot deliver such spare capacity. The global oil market can react aggressively to low spare capacity and a dip in spare capacity below 5% of global oil demand could result in high and volatile prices. Competition from a low cost producer like Iraq is a different matter and could see KSA tolerating lower oil prices for a period in order to retain its market share. Given the plethora of high cost non-OPEC producers today, such a situation could wipe out significant chunks of non-OPEC supply and ultimately raise prices.

Country focus Cyprus

Where the

sun always shines In part two of our series on Cyprus, Aparna Shivpuri Arya put forth a synopsis of her discussion with the Cyprus Chamber of Commerce, the One-Stop-Shop & PSC, Ministry of Energy, Commerce, Industry and Tourism and the Cyprus Promotion Agency (CIPA).

haris Papacharalambous, Director General of CIPA began the conversation by giving me a brief about the organisation. “We were established in 2008 as a non-profit organisation limited by guarantee. The organisation is a private entity – sort of a quasi-private government institution and it is run and managed as a private institution as it should be. We have a small and dynamic team. Talking about their mandate he said that they have a threefold mandate. “The first is, as the name implies, the promotion of Cyprus abroad under the brand of Invest Cyprus. We do that in a number of ways, such as advertising, one-on-one contact, meetings, seminars and so on. The second pillar of the organisation has to do with providing services with potential investors as well as existing investors, before, during and after any sort of

FEBRUARY 2014

investment is made. And the third pillar is about having a regulatory framework–reviewing and suggesting changes in tax, legal frameworks and so on. We also undertake some responsibilities on coordinating a number of private and public enterprises and dealing with promoting Cyprus through their companies.” It was obvious that CIPA has its work cut out. But I had to ask if their mandate has been challenged because of the tough times the country has been facing? Charis did agree that it has been tough, but then he was quick to point out that attracting FDI anyways is a tough job. “However, the people of Cyprus and the government, I think, has looked at it as an opportunity. This is what probably differentiates us from other countries, we look at this as an opportunity to build and create new prospects and fix mistakes of

Cyprus is the second largest ship management centre in the world and has the third largest ship registrations in the European Union. A ship financing bank for example would be perfectly positioned in Cyprus as well as banks specialising in financing energy projects. the past. So a lot of things can be changed and improved which at the end of the day could lead to a more efficient, lean and probably more open-minded economy. For me, this clearly indicates a brighter future,” he remarked.

Charis also highlighted that decisions on the political aspect are also being done much faster and it is good in a way because it shows that they are starting to adapt to the competitive environment. According to the Troika and the IMF, they are on track with

the plan and they are also doing well when it comes to the confidence of the people with respect to investing in the country. Talking about the important sectors he underlined the importance of the energy sector in the coming years and pointed out that emphasis is being given on developing new sectors, where Cyprus has an advantage. According to Charis, tourism has the most potential and the industry in general is doing well, however in a lot of cases cash flow is a problem. There are a lot of opportunities in sports tourism and the infrastructure has witnessed significant improvement. The geographical, cultural, weather and other aspects contributes to the growth of the industry. More so, Health tourism also offers a lot of opportunities. “The education sector is also attracting significant interest. We have one of the highest tertiary education in Europe, which promotes a knowledge economy, and R&D and ICT projects are slowly being reviewed. Also, Cyprus is the second largest ship management centre in the world and has the third largest ship registrations in the European Union. A ship financing bank for example would be perfectly positioned in Cyprus as well as banks specialising in financing energy projects. Clearly these sectors that could be developed and we see a great potential in them,” opined Charis. Elaborating on investments from the Middle East, Charis said that currently they have investments from the Middle East or Gulf region in the tourism and real estate sectors. “Cyprus traditionally has a good relationship with these countries. Especially culture wise, we see more things in common with the Middle Eastern and Gulf countries and Cyprus than any other European state,” he further added. He was also quick to point out that foreign ownership is not a problem, since foreign companies can partner a Cypriot company and through it make investments and have full ownership. As we came to the end of our discussion, I asked him to give me reasons why anyone should invest in Cyprus. He smiled and said, FEBRUARY 2014

Country focus Cyprus

There are a lot of opportunities in sports tourism and the infrastructure has witnessed significant improvement. The geographical, cultural, weather and other aspects contributes to the growth of the industry. More so, Health tourism also offers a lot of opportunities. “All I can say is ‘potential’ – people invest because of the potential and the good returns. With everything that is happening in Cyprus it’s all positive. Unfortunately locally things would still be difficult so we just have to bear it and be patient. But for international investors who wants to invest in Cyprus, there are a lot of projects sitting and just waiting for financing. But no matter what happens the sun will always be shining in Cyprus.” On this sunny note, I took his leave and headed to meet Christos Michaelides to get to know all about the One-Stop-Shop at the Ministry of Energy, Commerce, Industry and Tourism. The One- Stop -Shop is an entity that serves businessmen who need any kind of assistance in setting up a business here in Cyprus. They have departments for all the governmental ministries which handles registrations of companies and individuals. Christos elaborated on their mandate and stated that they have a VAT officer, who can register a company for VAT. They also have colleagues who can register a company for income tax, so that a company pays taxes lawfully. They can also assist with all the paperwork that is needed in registering a company, help get name approval and other procedures. “Actually the first thing you need to do in establishing your business here in Cyprus is getting a name approval. You can pay acceleration fees and have it processed in a day. The approval will be valid for six months, entitling the business to you and then you can have your lawyer (lawyer practicing in Cyprus) register your business and that would about three to four days,” remarked Christos. My next question was to know how a foreign company can avail their services, 46

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to which his reply was, “They can contact us directly and also we have the PSC (Point of Single Contact) here, which was established in 2006 under the EU Directive 123/2006 of the European Union. The One-StopShop can serve all business owners from different countries on the other hand PSC’s in charge of providing all the information for providers of services in the EU. So if you are an EU member and interested in providing services in Cyprus, we can give you guidance on the special licenses that you may need. Therefore, you’ll have all the information that you may need in one place and then you have the One-StopShop where we have representatives from different sectors of the government so you

branch must have the same name as the parent company.” He further added that the Partnership Registration Form (OΕ1) should be submitted, by hand or by mail, to the One Stop Shop/PSC Cyprus’ office or Registrar of Companies along with the fee of EUR 120 plus an optional EUR 40.00 for accelerated procedure (payable in cash, cheques or bank transfer). Through them the process would take an average of four days, normal process would take about one month. For the name approval it only takes one day. Talking about the need for any special licenses for specific sectors, Christos said that for specific services, licenses might be required. “Like for example if you are in the food industry and handling perishable goods. You have to obtain approvals from the Ministry of Agriculture. If you want to set up a medical clinic, we can assist you on where you should go and what your staff must have. So here we can help you know and obtain the licenses that you might need because not all are in the importing and exporting industry. Some

The One- Stop -Shop is an entity that serves businessmen who need any kind of assistance in setting up a business here in Cyprus. They have departments for all the governmental ministries which handles registrations of companies and individuals. won’t have to go from one office to another to do the process.” Talking about the legal framework involved with setting up a company, Christos said, “You’ll need a letter from the mother company confirming that this company is going to be a branch of this particular company from this certain country. A branch of overseas companies does not constitute a legal entity different to that of its founding company. Overseas companies registered abroad may establish a branch in Cyprus, provided that they file with the Registrar of Companies and Official Receiver within 30 days of such establishment. Notably, the

may want to establish a consultancy firm so we can answer all the questions that they may have.” My last interview of this series involved meeting Mr Christos Petsides, Director of Trade and Services, Cyprus Chamber of Commerce, who began the conversation by giving me a brief overview of the Chamber’s work. “The Cyprus Chamber of Commerce and Industry belongs to the private sector. It is a non-profit organisation and it represents the majority of the business community in Cyprus. It is a kind of federation, because it has a central chamber and in each town we have a local

chamber. There are five chambers in total and each has their own Board of Directors, and the president of each Board of Director is in the Executive Committee of the Cyprus Chamber of Commerce and Industry.” He further added that their role is to promote the Cyprus economy, the interests of its members and solve their problems. They also have a lot of associations which are under the auspices of the Chamber and they focus on the different sectors of the economy. Christos pointed out that they are also incharge of connecting the members with the Ministries especially with the Ministry of Energy, Commerce, Industry and Tourism. “We also undertake the tasks on promoting Cyprus as a business and investment centre, organising trade missions to other countries. Tourism is a very essential part of

Cyprus’ economy as well as real estate. Now there is a great investment opportunity in land, as there are major projects that are underway which I think will give a new face to Cyprus.” Apart from real estate, Christos pointed out that there is great interest from other companies use Cyprus as their business hub because the country is a member of the European Union. The strategic position of Cyprus is also what attracts them, because they can access Europe, Middle East and Africa. He also highlighted that the tax system is a pull factor as well. “Our tax system is also what attracts investors. Cyprus’ tax system is one of the lowest in the whole of Europe. Aside from tourism and real estate, lately we have been cooperating with the Ministry of Energy, Commerce,

Overseas companies registered abroad may establish a branch in Cyprus, provided that they file with the Registrar of Companies and Official Receiver within 30 days of such establishment.

Industry and Tourism in promoting the energy sector which is very essential.” When I asked him about the Chamber’s relations with the GCC countries he mentioned that there is a Bilateral Relations Association, which looks at promoting cooperation between Cyprus and the GCC countries and organise visit as well. “This year we are looking at including Qatar and the other GCC countries, besides the UAE and KSA.” Christos also reiterated what was pointed out by CIPA, about the importance of the energy sector. “The energy sector provides a great potential in the economy of Cyprus. We are expecting that in the next three years we are going to have our own supply of gas which would be good for exporting. As of now, companies like Noble and Total are here and in the process of looking for not only gas but also oil.” As I concluded my trip and my interviews with the different agencies, it was evident that all of them are in complete synergy with each other when it comes to promoting Cyprus as an investment destination. There is no way, but up, for this island’s economy. It’s just a matter of time. FEBRUARY 2014

Country focus SOUTH AFRICA

South Africa:

AN INVESTOR’S DREAM

South Africa with the unique combination of highly developed, economic infrastructure and an emerging-market economy is the ideal destination for investment. H.E Sudhir Mannie, Consul General of South Africa to the UAE, gives us the details.

ound economic policies Since the advent of democracy in 1994, South Africa’s economy has been undergoing structural transformation with the implementation of macro-economic policies aimed at promoting domestic competitiveness, growth and employment and increasing the economy’s external position outside the country. The government has made it clear that foreign investment is welcome in South Africa and investor-friendly policies support the public state plans. In 2005, the government began formulating a new strategy to boost the country’s economic growth rate to 6% of GDP by 2014 and reduce unemployment. The implementation of the strategy – involving large-scale state investment in infrastructure, small business and skills development, and interventions targeting specific areas of the economy is well under way. South Africa offers investors: • Sound economic policies • Favourable legal and business environment • Access to inter-Saharan markets • Access to the African continent • Trade reform and strategic alliances • Beneficial cost of doing business • Ease of doing business • Industrial capability and cuttingedge technology 48

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• Competitive business environment and new plans to cut red tape for small businesses

Favourable legal and business environment South Africa has a world-class, progressive legal framework. Legislation pertaining to commerce, labour and maritime issues is specifically well developed, while laws relating to competition policy, copyright, patents, trademarks and disputes conform to international norms and conventions. The sanctity of contract is protected under common law, and independent courts ensure respect for commercial rights and obligations.

The independence of the judiciary is guaranteed by the South African Constitution. South Africa’s financial systems are sophisticated, robust and well regulated. South African banking regulations rank with the best in the world, while the sector has long been rated among the top ten globally. Foreign banks are well represented and electronic banking facilities are extensive, with internet banking a growth feature of the sector. The JSE Limited rates among the top 20 stock exchanges in the world through market capitalisation. The JSE’s rules and their enforcement are based on global best practices, while the JSE’s automated trading, settlement, transfer and registration systems are equal to any in the world. World-class infrastructure South Africa has a world-class infrastructure, including a modern transport network, relatively low-cost and widely available energy, and sophisticated telecommunications facilities. The government has identified massive infrastructure projects as key to boosting the country’s economic growth rate and creating employment, and is spending billions of rands on getting the investment ball rolling.

H.E Sudhir Mannie, Consul General of South Africa to the UAE

Access to markets The country is located at the southern-most tip of the African continent, and is ideally positioned

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Country focus SOUTH AFRICA

for business to gain access to the 14 countries comprising the Southern African Development Community (SADC) with a combined market of over 250-million people, as well as the islands off Africa’s east coast, and even the Gulf States and India. South Africa serves as a trans-shipment point, between the emerging markets of Central and South America, and the newly industrialised nations of South and Far East Asia. Major shipping lanes pass along the South African coastline in the South Atlantic and Indian oceans, and its seven commercial ports form by far the largest, best equipped and most efficient network on the continent. These ports are the conduits for trade between South Africa and her partners in the SADC and the South African Customs Union, as well as hubs for traffic to and from Europe, Asia, the Americas and the East and Eest coasts of Africa.

Favourable cost of doing Business South Africa’s exchange rate makes it one of the least expensive countries for foreigners to live and do business: with a first-world infrastructure and high living standards, ensuring good value for money. The country’s energy costs are still among the lowest in the world, and South Africa compares favourably with petroleum prices. Telecommunications costs are beneficial with cheaper and more widely available bandwidth capacity becoming a reality due, to the submarine fibre-optic cables. South Africa’s unit labour costs are lower than those of other key emerging markets, including Mexico, Hungary, Malaysia and Singapore, and the country’s labour productivity has improved markedly in recent years. Since 1994, comprehensive labour legislation has contributed to a marked decline in the lost number of manpower days due to industrial action.

• Starting a business Globally, South Africa stands at 44 in the ranking of 183 economies on the ease of starting a business. • Dealing with construction permits According to data collected by Doing Business, dealing with construction permits in South Africa 50

FEBRUARY 2014

requires 13 procedures, takes 127 days and costs 21.2% of income per capita. Globally, South Africa stands at 31 in the ranking of 183 economies on the ease of dealing with construction permits.

• Getting electricity According to data collected by Doing Business, getting electricity in South Africa requires four procedures, takes 226 days and costs 1651.5% of income per capita. Globally, South Africa stands at 124 in the ranking of 183 economies on the ease of getting electricity. • Registering property According to data collected by Doing Business, registering property in South Africa requires six procedures, takes 23 days and costs 5.6% of the property value. Globally, South Africa stands at 76 in the ranking of 183 economies on the ease of registering property. • Getting credit The South African economy has a score of six on the depth of credit information index and a score of 10 on the strength of legal rights index. Globally, South Africa’s rating stands at one in the ranking of 183 economies on the ease of getting credit.

• Protecting investors The economy has a score of 8.0 on the strength of the Investor Protection Index. Globally, South Africa stands at 10, in the ranking of 183 economies, on the strength of the Investor Protection Index. While the indicator does not measure all aspects related to the protection of minority investors, a higher ranking does indicate that an economy’s regulations offers stronger investor protections against self-dealing in the areas measured. • Paying taxes On average, firms make nine tax payments a year, spend 200 hours a year filing, preparing and paying taxes and pay total taxes amounting to 24.4% of profit. Globally, South Africa stands at 44 in the ranking of 183 economies, on the ease of paying taxes.

Trading across borders According to Doing Business (World Bank), exporting a standard container of goods requires eight documents, takes 30 days and costs USD 1531. Importing the same container of goods requires eight documents, takes 32 days and costs USD 1795. Globally, South Africa stands at 144 in the ranking of 183 economies, on the ease of trading across borders.

SOUTH AFRICA’S TRADE WITH THE UAE South Africa’s Exports to the UAE: Machinery Transport Equipment Chemicals FMCG

ECONOMIC RELATIONS: TRADE UAE is SA’s 21st most important market and largest export partner in ME. South Africa is 31st most important source of goods. SA is 13th most important market for non-oil exports. UAE is 6th highest supplier of oil to South Africa.

UAE’s Exports to South Africa are: Machinery and Equipment Chemicals Petroleum Products Foodstuffs Scientific Instruments

BILATERAL TRADE: SA AND THE UAE USD Million

2007

2008

2009

2010

2011

Exports from SA to the UAE

5,085,532

6,179,222

5,085,038

6,143,629

4,987,734

Exports from UAE to SA

4,884,988

7,478,763

4,056,497

6,504,845

5,095,197

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