Trade and Export Middle East | May 2014

ISSUE 28 | MAY 2014

BUSINESS INTELLIGENCE FOR INTERNATIONAL TRADE

www.tradeandexportme.com

FLYING HIGH

ETIHAD CARGO SUPERCHARGES REGIONAL TRADE Vice President David Kerr on strategies, results - and the future

Publication lincensed by IMPZ

EDITOR’S LETTER

Of course, you know your markets. Or do you?

Chairman Dominic De Sousa

Over the last two decades, what was traditionally one of the region’s key trading partners has effectively been removed from the scene in many areas of commercial life: Iran. Although of course significant amounts of trade have continued, quite legally, during the era of large-scale embargoes, others have literally ground to a halt. Yet now there is increasing talk about a softening of sanctions, how many trading entities in the UAE would be well-placed to take advantage of the new potential opportunities? This is precisely why, in this edition of Trade & Export, we preview an event called ‘Iran - Economic Sanctions and What’s Next?’, taking place on May 28.

CEO Nadeem Hood EDITORIAL Group Director of Editorial Paul Godfrey paul.godfrey@cpimediagroup.com +971 4 440 9105 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 Commercial Director Chris Stevenson chris.stevenson@cpimediagroup.com +971 4 440 9138 Media Sales Ibrahim Parwaz ibrahim.parwaz@cpimediagroup.com +971 4 440 9161 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 Glenn Roxas glenn.roxas@cpimediagroup.com +971 4 440 9130 Designer Froilan A. Cosgafa IV froilan.cosgafa@cpimediagroup.com +971 4 440 9135 Photographer Jay Colina DIGITAL SERVICES www.tradeandexportme.com Digital Services Manager Tristan Troy Maagma

As the occasion will clearly highlight, one of the problems is that after such a long period of withdrawal, likely trading partners actually forget the diversity and richness of trade that could be on offer. While macro-project supplies for industries such as roads and construction have remained, to a certain extent, on the agenda, hugely important areas such as technology exports and foodstuffs (not to mention fossil fuels and their related infrastructure), have been drastically impacted by the CISADA legislation.

One sector which we forget at our peril is the whole realm of financial services, and the wealth of opportunities that a more relaxed trading environment could open up.

For example, Iran has a number of the largest banks and insurers in the region and these are natural investment partners for businesses looking to expand across the Arabian Gulf - and we should remember that only 35 years ago, these were a more major source of support for the trading community than the financial sector in the Indian Subcontinent. Iran also has a phenomenally varied demographic which makes it ideal hunting territory for sectors such as retail, motor and leisure, and indeed, across these segments it offers a far more expansive market than even that found in Saudi Arabia, for example.

It is likely that if and when we see a softening of sanctions, the UAE will lead the way in pioneering the new trade routes, and there would almost certainly be a cluster of MoUs with leading entities such as the Teheran Stock Exchange - traditionally one of the most vibrant in the world and a prime source of IPO activity. Will you be ready?

Enjoy this issue of Trade & Export.

Web Developer Abey Mascreen online@cpimediagroup.com +971 4 440 9100 Published by

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.

Paul Godfrey Group Director of Editorial

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MAY 2014

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16 31 ISSUE 28

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updates 08

News: International news and trends with domestic trading relevance.

15

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

trade talk

about town

48 4

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16

ANNUAL INVESTMENT MEETING We were a media partner at the Annual Investment Meeting 2014. We bring to you the highlights of the event.

18

STRATEGY Dr. Ashraf Mahate, Head, Market Intelligence, Dubai Exports, sheds some light on the importance of having strategic partnerships in doing business and how to identify them.

22

SECTOR WATCH F&B: Simon Blazeby, Director, Reed Sunaidi Exhibitions organiser of the Foodex Saudi 2014 speaks to us about how we can capitalise on KSA’s food sector.

CONTENTS

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28

32

34

LOGISTICS Tony Snell, Regional Commercial Manager, IAG Cargo, provides valuable insights into trends in the cargo industry.

40

LEGAL Jonathan Silver, Partner and Areefa Govindji, Senior FDI Specialist, Clyde & Co, give us an idea of what to expect when setting up a business in the free zones in the UAE.

44

FINANCE The Western Union Business Solutions team gives us an update on currency movements in May 2014.

Halal: Meat & Livestock Australia gives us an overview of how it deals with the Middle East’s halal food market.

INTERVIEW Etihad Cargo: The year 2013 was a landmark for Etihad Cargo. David Kerr, Vice President, Etihad Cargo speaks to Aparna Shivpuri Arya in an exclusive interview about the strategy behind the business and its plans for continued growth.

INTERNATIONAL TRADE ‘Iran - Economic Sanctions and What’s Next?’

We bring to you a preview of the event that will discuss the potential benefits of the détente with Iran.

INDUSTRY WATCH Will Clark, Head, UK Trade Credit, AIG Property Casualty, explains the benefits of using the Trade Credit Insurance ‘Excess of Loss’ model.

focus

trade talk

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46

48

COUNTRY FOCUS Taiwan: Shyh Perng, Director, Taiwan Trade Centre (TAITRA), Dubai speaks to us about the strong trade and investment relations between the GCC and Taiwan.

India: His Excellency T.P Seetharam, Indian Ambassador to the UAE, speaks to Aparna Shivpuri Arya about the growing economic and commercial cooperation between India and the UAE, and how he sees the future for this relationship.

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ADVISORY BOARD H.E Saed Al Awadi

Dr. Adeeb AlAfeefi

CEO, Dubai Exports, Department of Economic Development, Dubai

Director, Foreign Trade & Export Support International Economic Relations Sector, Department of Economic Development, Abu Dhabi

Khalil Saqer Bin Gharib

Lakshmanan Sankaran

Corporate Communications Director, Dubai Customs

Chairman, Regional Banking Commission (MENA)- ICC Paris

Peter Fort

Moin Anwar

CEO, Ras Al Khaimah Free Trade Zone

Trade & Investment Commissioner (Middle East), New South Wales Government, Australia

For more information, please visit www.tradeandexportme.com 6

MAY 2014

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Updates Regional news

DAFZA supports S.KoreaUAE bilateral relations The trade between the UAE and South Korea has been recently estimated to have hit USD 25 billion (AED 91.8 billion) in 2013 alone. In addition, the scale of mutual investments between South Korea and the UAE is estimated at USD 4 billion (AED 14.6 billion), and more than 300 South Korean firms are currently operating in the Emirates.

South Korea shares strong bilateral relations with the UAE, where trade and investments have always been significant. The UAE is South Korea’s largest export market in the Middle East, and currently the second largest Middle Eastern market for South Korean investments. The volume of mutual investments between the two countries was estimated to have reached USD 3.24 billion in 2013.

Trade between both nations posted a record figure of USD 25 billion (AED 91 billion) in 2008. In 2012, goods worth USD 22 billion were traded between the

Ahmad Al Mulla, Senior Manager, Sales Department, DAFZA

two nations. The UAE-South Korea trade through the free zones areas accounted for USD 2.2 billion of the country’s overall trade in 2012, with promising opportunity for further growth.

To demonstrate their support in this growing bilateral relationship

Dubai Airport Freezone Authority (DAFZA) hosted a seminar in Seoul, South Korea.

The seminar discussed the benefits of investing in Dubai.

Ahmad Al Mulla, Senior Manager, Sales Department, DAFZA, said the freezone is consistently working on facilitating international trade by attracting investors from key primary markets. The seminar in South Korea will work to strengthen the existing relationship between South Korea and the UAE. DAFZA is the ideal choice for businesses expecting integrated solutions through a servicecentric platform.

Seven per cent of Far Eastern companies based in the Freezone are headquartered from South Korea.

Well-known brands, including Sangsin, KNOC and Dongbu Metal, are currently based in DAFZA, which is conveniently located next to Dubai International Airport. Additional to its prime location and attractive investment opportunities, international investors reap the benefits of dynamic growth through DAFZA’s tax exemption and foreign ownership policies.

UAE eyes Iraq for trade and investments The economy of Iraq’s Kurdistan Region is expected to grow at an annual rate of 9 per cent-12 per cent over the 2012-2016 period, making it one of the fast-growing markets in the Middle East region. Iraq is a very important country for the UAE as it was the second largest re-export market for the UAE in 2012.

To help investors capitalise on this growing market further, TradeUAE Iraq is back this year. The event

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will feature B2B Exhibitions and will showcase the latest products and services the UAE has to offer.

This trade event aims to bring focus on the numerous sectors such as tourism, agriculture, manufacturing and transportation among others. It will also be a great platform for the participants to know more about the new trends in the UAE market as well as find out about the new products and services that the UAE has to offer.

To be held on June 10th-12th 2014 at the Saad Conference Centre in Erbil, Iraq, TradeUAE Iraq is the only trade exhibition in the region that delivers the premier quality of buyers and distributors from the UAE.

The event also has a massive backing from the UAE Ministry of Economy and various government agencies which include Dubai FDI and Dubai Exports and the Kurdistan Regional Government.

Updates Regional news

QCC and TRA signs MoU to develop ICT infrastructure standards On the sidelines of the Abu Dhabi Quality Forum (ADQF) 2014 the Abu Dhabi Quality and Conformity Council (QCC), the entity responsible for developing quality infrastructure and raising awareness on quality standards in Abu Dhabi, has signed a Memorandum of Understanding (MoU) with the UAE Telecommunications Regulatory Authority (TRA) for developing telecommunications infrastructure, specifications and standards.

Under the terms of the MoU, QCC and TRA will collaborate in developing and updating

a manual that outlines international quality standards and specifications for Abu Dhabi’s ICT infrastructure.

The MoU was signed by His Excellency Hussain Salem Al Katheeri, Secretary General of QCC and His Excellency Mohamed Nasser Al Ghanim, Director General of TRA. The two sides will work to step up mutual coordination and communication to implement, follow-up and ensure the participation of telecom operators, municipalities as well as other concerned stakeholders and government departments in the development of the manual.

The agreement also mandates the two entities to exchange information and expertise in quality infrastructure and related areas of mutual interest.

Establishing a long term collaborative framework between QCC and TRA, the MoU is expected to accelerate the development of Abu Dhabi’s ICT infrastructure by putting in place relevant standards

KSA, New Zealand seek greater cooperation In the aims of having higher levels of economic cooperation, KSA plans to open an embassy in Wellington and New Zealand will be appointing a resident trade commissioner at its embassy in Riyadh.

Both parties are expecting that this move will bolster ties between the two countries, said Greg Lewis, Deputy Head of Mission, New Zealand Embassy-Riyadh.

According to him the announcement came as the outcome of the just concluded fifth bi-annual Joint Ministerial Commission Meeting (JMC) held in Wellington.

During the event both countries also agreed to increase bilateral trade efforts, encourage investments, enhance co-operation in education including exchange of academic staff, and extend the cooperation in the field of technical and vocational training.

New Zealand shares a strong trading relationship with KSA with over NZD 1.66 billion in bilateral trade.

The Gulf Cooperation Council (GCC) is the seventh largest export market for New Zealand with bilateral trade at USD 4.86 billion in the year 2012 and their exports to the region continue to grow at a rate of over 10 per cent annually.

and specifications for buildings and utility lines. This will enable the Emirate to upgrade its telecommunications infrastructure by conforming to the best international quality standards.

ADQF 2014 was held under the patronage of His Highness Sheikh Hazza bin Zayed Al Nahyan, the National Security Advisor and Vice Chairman of Abu Dhabi Executive Council.

DP World container volume up in Q1 2014 DP World said its consolidated container volume rose 9.1 per cent in the first quarter, because of the addition of new capacity and a pick-up in global trade.

The company handled 6.76 million twenty-foot equivalent units in the quarter, compared with 6.19 million TEU in the corresponding period of 2013.

Gross volumes, which include all terminals in which DP World is involved, not just ones controlled by the company, handled 14.3 million TEU, up 10.5 per cent year-on-year.

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Updates Regional news

Turkey to boost trade ties with Qatar Nihat Zeybekci, Turkey’s Minister of Economic Affairs said his country is willing to boost trade ties with Qatar to USD 1.5 billion by the end of 2015.

In a speech during the Qatari-Turkish Business Forum held in Doha, the Economic Minister highlighted the notable rise in bilateral trade between the two countries from USD 24 million in 2003 to USD 770 million in 2013.

The Turkish minister pointed out that Turkish companies are implementing projects in Qatar worth USD13.5 billion agreed upon within the last decade. On the other hand, Qatari direct investments in Turkey have reached USD 740 million, he added.

It was also highlighted that Turkey is keen on reaching an agreement that would allow it to import liquefied natural gas from Qatar.

Oman looks into African markets to diversify economy According to an Oman Chamber of Commerce and Industry senior official, the Sultanate is seeking to expand into new markets in Africa as the country focuses on reducing its reliance on oil revenues through boosting non-oil exports.

“At the moment we are highly dependent on oil exports, but the strategy of the government and the private sector is to diversify the economy. So we are trying to identify new markets,” Mohammed Ali Al Saleh, Vice-Chairman-Administration and Finance Affairs, OCCI, told local news sources There is great potential for exports to Africa which should be utilised, he said. The OCCI official also said that meetings were already held with officials from a number of African countries, including Tanzania and Kenya.

According to the National Centre for Statistics and Information (NCSI), the Sultanate’s non-oil exports increased by 5.9 per cent by the end of 2013 and reached OMR 3,806.9 million compared to the OMR 3,594.1 million figure registered in 2012 The NCSI statistics showed a growth of the total value of imports in 2013 to OMR 13,201 million compared with OMR 10,811.3 million by the end of 2012, reflecting an annual growth rate of 22.1 per cent 10

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He added that Turkey aspires to become among the top 10 world economies by achieving a GDP of USD 2 trillion, raising the value of its imports to USD 500 billion

and the per capita income to USD 25,000.

Zeybekci predicted that Turkish net exports will increase from USD 151.8 billion in 2013 to USD 500 billion in 2023.

Portugal eyes closer trade ties with Kuwait A delegation from the Arab-Portuguese Chamber of Commerce and Industry previously held meetings with peers from Kuwait Chamber of Commerce and Industry, and discussed cooperation between the two chambers, as well as aspirations for stronger commercial interaction between Kuwait and Portugal.

The visiting delegation was chaired by Chamber President Angelo Correia, while the Kuwaiti side was presided by Deputy Board Chairman of the Chamber

of Commerce and Industry Khalid Abdullah Al-Saqer.

During the meeting it was also discussed that Portugal is keen to become a close trade partner of Kuwait, and that projects and initiatives in the areas of food products, clean energy, and construction material are of particular potential and interest.

Kuwait’s past experiences in several successful enterprises and projects in Portugal, particularly in urban and touristic development were also highlighted.

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Updates GLOBAL WATCH

Ukraine, EU in talks on gas imports Ukraine held emergency talks with neighbouring European countries on the possibility of natural gas importation according to Prime Minister Arseny Yatseniuk. The move followed the sharp increase in natural gas prices by Moscow.

According to Yatsenyuk one possibility was “reverse flows”, wherein the EU countries would send gas back down pipelines normally used in the transit of Russian supplies through Ukraine to the West.

Slovakia, Hungary and Poland were the main

candidates from which Ukraine could get natural gas through the reverse flow approach.

Ukraine, which is in an economic crisis, covers half of its needs with Russian gas.

However, relations between the countries became hostile due political issues.

Yatseniuk said it was possible to send gas down the pipelines in the opposite direction to the normal EastWest flow. “On a technical level, the idea of reverse gas raises no problems, and we hope our European partners make the right decision. If

it will be to reverse, then it means the price for gas will be USD 150 lower than Russian gas.”

Russia has raised the price to USD 485 per 1,000 cubic meters, meaning Gazprom, Russia’s monopoly gas

HKTDC to open more offices in India The Hong Kong Trade Development Council (HKTDC), which is working for promoting trade with Hong Kong as a hub, plans to open more offices in India to boost trading opportunities.

“We are planning more offices in India. In November we will open an office in Delhi and in the future we also hope to open an office in Kolkata,” HKTDC Regional Director (SEA and India) Dannie Chiu said on the sidelines of an ICC organised seminar.

India could harness Hong Kong as a hub to export its products to ASEAN countries

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exporter, charges Kiev about the same as other customers in central Europe. Ukraine will soon get money from the International Monetary Fund under a new loan package but faces large debts as its economy is in chaos.

Share of emerging markets on the rise

and China, she said.

The products that held potential were tea, textile and fresh food. Black tea held a lot of potential for export to China. China’s black tea production was just 6 per cent of its total tea output.

In 2013-14 Indian exports to Hong Kong stood at USD 8.8 billion while imports were at USD 8 billion.

Emerging markets and states in transition in 2013 accounted for 60.5 per cent of the FDI flows and 54.0 per cent of cross-border mergers and acquisitions, FDI Intelligence said in its report.

Global emerging markets are poised to grow by 50 per cent over the next five years, according to the report.

The report, which was launched at the opening of the recently held 4th Annual Investment Meeting in the UAE. It was also highlighted that China would expand its leading role in FDI and foreign trade relations in the emerging world.

7.5% rate of IMF’s economic growth outlook for China

Updates GLOBAL WATCH

Myanmar secures financing support from World Bank The World Bank’s Board of Executive Directors has approved a USD 30 million credit from the International Development Association (IDA) for Myanmar’s Modernisation of Public Finance Management Project. The Australian government (USD 8.5 million) and the UK’s Department for International Development (UKAID) (USD 16.5 million) will co-finance the project through a multi-donor trust fund for Myanmar.

The project aims to support efficient, accountable and responsive delivery of public services through the modernisation of Myanmar’s public financial management systems.

The project will also

help strengthen revenue administration, which will increase the effectiveness of tax and non-tax revenue mobilisation. Enhanced revenues in turn will create fiscal space for increasing expenditure on public services that will help reduce poverty and promote shared prosperity.

The project will also improve the efficiency of public service delivery through a more strategic planning and budgeting process that directs resources to the highest priority areas, and through more credible budget management system that delivers resources as intended. Similarly, the project will help improve accounting and reporting

of budget execution – how public resources are spent – and strengthen accountability for service delivery.

Improvements in tax compliance are expected to make more funds available to finance critical human and infrastructure services while maintaining fiscal discipline. Improved availability and management of public finance data will facilitate better analysis and policymaking and more strategic and transparent use of public funds.

IMF raises China's growth outlook The International Monetary Fund has raised its economic growth forecast for China but warned that its financial system faces risks due to the rapid expansion of debt.

The IMF’s 0.3 percentage point increase to 7.5 per cent in its growth outlook for China may help reassure investors who worry that the world’s second-largest economy might be slowing too abruptly.

The forecast is in line with the ruling Communist Party’s official growth target for the year and would be the strongest for any major economy. But it is well below the double-digit levels of the past decade

and might raise the risk of politically dangerous job losses.

The IMF warned that China faces the twin risks of an unexpectedly sharp slowdown and “rising vulnerabilities” in its financial system. It said both could cause repercussions for the region.

It pointed to the rapid growth of credit from sources other than traditional banks. It said the assets of such lenders have grown to the equivalent of 25 per cent of the country’s annual GDP. Chinese regulators have tried to slow credit growth without causing the economy to stall.

Total credit was 16.8 per cent greater in March

The ultimate beneficiaries of the project will be the people of Myanmar who stand to gain from improvements in both the quantity and quality of public services such as education, health services and water and sanitation.

The USD 30 million IDA credit in support of modernisation of Myanmar’s public finance management is part of the World Bank Group’s rapidly growing programme support for the country. During his visit to Myanmar at the end of January 2014, President Jim Yong Kim announced plans by the World Bank Group’s for a USD 2 billion multi-year development package for Myanmar. This will include projects to help improve agriculture, access to energy and health services, and to provide support for other key development priorities.

than a year earlier.

The IMF’s warning echoed private sector economists who say the rapid increase in China’s debt levels is similar to that of other developing countries that have gone on to suffer financial crises.

The IMF report also urged Beijing to make progress toward its goal of rebalancing the economy toward self-sustaining growth based on domestic consumption and away from reliance on investment.

China’s economic growth in 2013 of 7.7 per cent tied 2012 for its lowest annual rate since 1999 and dipped to 7.4 per cent in the first quarter. Exports and manufacturing have weakened, raising questions about whether growth is slowing too sharply.

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Updates GLOBAL WATCH

South African steel production accelerates

South African steel production accelerated to a 21.1 per cent increase during Q1 of 2014 to 615 000 tonnes after a 19.3 per cent jump in February

according to the Worldsteel Association.

South African steel production is continuing its recovery after a fire at the Vanderbijpark basic oxygen furnace (BOF) plant of ArcelorMittal SA (AMSA) in February 2013 caused a major disruption.

The BOF plant was returned to service in April 2013 and this allowed annual production to rise by 4 per cent in 2013.

This followed an 8 per cent reduction in 2012 to only 6.9 million tonnes, its lowest

French consumer confidence drops in April French consumer confidence fell unexpectedly in April as debt-burdened households grew more wary about their deteriorating finances and high unemployment.

The INSEE state statistics agency said its consumer confidence index dropped in April to 85 from 88 in March. Economists polled by Reuters had expected on average an unchanged reading with the lowest estimate at 86.

The drop was the latest sign that French consumers are reluctant to play their traditional role as the motor of growth in the Eurozone’s second-biggest economy as a recovery struggles to take hold.

INSEE said that households’ view of their personal finances dropped the most in April in more than 20 years, bringing it to its lowest level since December 2011.

Household debt has risen to record levels in France, reaching 83.5 percent of gross disposable income in the Q4 2013, according to data from the Bank of France.

Households’ unemployment concerns rose further in April although monthly jobless claims appear to be stabilising, albeit at record high levels. President Francois Hollande’s Socialist government hopes to bring unemployment down with a plan to phase out EUR 30 billion (USD 41.5 billion) in payroll tax on companies over the next three years in exchange for committing to hiring targets.

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annual production since 1980.

South African steel production is expected to return to the levels of the years 2002 to 2007, when annual production was above 9 million tonnes, in part driven by a growing vehicle export programme.

Steel is a key input to industries such as the automotive, construction, rail, power, consumer durable goods and machinery sectors, so its health or lack thereof, is used as a leading indicator by economists. The increase in the first quarter 2014 from a year ago was 12.4 per cent.

The International Monetary Fund reduced its economic growth forecast for South Africa

No deal for US and Japan According to reports by Reuters, Japan and the United States have found “common ground” to forge a two-way trade deal, but may not be able to resolve remaining sticking points in time for a midMay meeting of top negotiators seeking a broad regional deal, a senior Japanese official said.

In the course of marathon talks during US President Barack Obama’s state visit to Tokyo, the two sides stopped short of announcing a deal vital to the Trans-Pacific Partnership (TPP), a 12-nation bloc that would extend from Asia to Latin America.

However both parties failed to reach a bilateral deal during the US President’s visit to the 3rd largest economy in the world.

A trade agreement between the US and Japan is crucial to

to only 2.3 per cent in 2014 in its April World Economic Outlook from the 2.8 per cent forecast in January. Actual growth slowed to 1.9 per cent in 2013 from 2.5 per cent in 2012 and 3.6 per cent in 2011.

Menawhile, Brazilian steel production rose by 1.5 per cent in March to 2.9 million tonnes from a year ago, while Russian production edged up by 1.3 per cent to 6.0 million tonnes. Indian steel production increased by 3.9 per cent to 7.3 million tonnes, while Chinese steel production, which accounts for slightly less than half of global steel production of 141.3 million tonnes, was up by 2.2 per cent to 70.3 million tonnes.

the Trans-Pacific Partnership, a US-led free trade initiative involving 12 nations. Negotiators from the 12 TPP countries are to meet in Vietnam in mid-May, followed by a gathering of AsiaPacific trade ministers in China on May 17-18. Obama and Abe will likely meet next at an Asia-Pacific summit in China in November.

Both Obama and Abe have domestic constituencies keen to see their leaders stick to rival stances: a US demand that Japan scrap all tariffs and Japan’s pledge to protect politically powerful farmers in five sectors including rice, beef and pork. But, both leaders are keen for a deal Obama because TPP is central to his “pivot” of military, diplomatic and economic resources to Asia and Abe because he has touted the trade deal as a key element of reforms needed to generate economic growth.

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

Cityscape Jeddah

Jeddah International Exhibition & Convetion Centre

05-08

Arabian Travel Market

Dubai International Convention & Exhibition Centre

11

SAUDI FOOD, HOTEL & HOSPITALITY ARABIA

Jeddah International Exhibition & Convetion Centre

11-13

Airport Show Dubai

Dubai International Convention & Exhibition Centre

11-13

Travel Catering Expo

Dubai International Convention & Exhibition Centre

12-15

Project Qatar

Qatar National Convention Centre

12-15

Qatar Stone Tech

Qatar National Convention Centre

13-14

The Mobile Show Dubai

Dubai International Convention & Exhibition Centre

13-14

M-Enterprises

Dubai International Convention & Exhibition Centre

13-14

M-Commerce

Dubai International Convention & Exhibition Centre

13-14

M-Health

Dubai International Convention & Exhibition Centre

13-14

Cards & Payments Middle East

Dubai International Convention & Exhibition Centre

13-14

Retail Show Middle East

Dubai International Convention & Exhibition Centre

13-14

Future Bank Middle East

Dubai International Convention & Exhibition Centre

13-14

Ecommerce Show Middle East

Dubai International Convention & Exhibition Centre

13-15

Water, Electricity & Power Generation Exhibition

Dhahran International Exhibition Centre

14

PCI Dubai

Al Murooj Rotana Hotel, Dubai UAE

17-21

GCC eGovernment and eServices Conference

Ritz-Carlton Dubai International Financial Centre

18-21

Middle East Petrotech

Bahrain International Exhibition & Convention Centre (BIECC)

19-21

FM Expo

Dubai World Trade Centre

19-21

SAUDI HEALTH

Riyadh International Exhibition Centre

19-22

INDEX International Design Exhibition

Dubai World Trade Centre

21-22

Trans Middle East

Doha Intercontinental Hotel

26-28

Cityscape Qatar

Doha Exhibition Centre

26-29

Saudi ELENEX

Riyadh International Exhibition Centre

26-29

Saudi Aircon

Riyadh International Exhibition Centre

26-29

Saudi LUMINEX

Riyadh International Exhibition Centre

26-29

Saudi Water Technology

Riyadh International Exhibition Centre

02-04

Hospital Build Middle East

Dubai International Convention & Exhibition Centre

03-05

Automechanika Dubai

Dubai International Convention & Exhibition Centre

03-05

Hardware + Tools Middle East

Dubai International Convention & Exhibition Centre

03-05

TRANS OMAN

Oman International Exhibition Centre

09-11

Gulf Information Security Expo & Conference

Dubai World Trade 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

May

June

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About town ANNUAL INVESTMENT MEETING

Building a better world The Annual Investment Meeting, the region’s leading economic event, was held in Dubai from April 8-10. We bring you highlights of the occasion.

T

his year’s edition of the event brought focus on the foreign direct investments coming into and out of the emerging markets. With the theme Investment Partnerships for Sustainable and Inclusive Growth in Frontier and Emerging Markets, the event was held under the patronage of His Highness Sheikh Mohammed bin Rashid Al Maktoum, UAE Vice President and Prime Minister, and the Ruler of Dubai.

The three-day event gathered ministers, 16

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government officials, industry leaders and delegates from over 120 countries. It presented a great platform for investors, entrepreneurs, decision makers and experts to exchange views on the different FDI challenges, potential and growth in the emerging markets.

UAE Minister of Economy, Sultan Saeed Al Mansouri kicked off AIM 2014 and officially welcomed everyone who are participating at the event. In his welcome speech he said, “The

United Arab Emirates and its highest authorities has attached great importance to this event.

We do believe that together through our joint efforts we can build a better world. Through it also we can improve a lot of our people to have a better understanding of the new partnerships in investment and trade.”

The UAE Economic Minister also acknowledged the presence of the numerous delegates and dignitaries who are present at the event, who came from a variety of sectors all over the globe.

“Having all of you here will make this event fruitful and successful. We have assembled a rich and insightful programme. Experts from various parts of the world are also present to contribute in enriching our discussions and way of thinking.”, he added.

Speeches were also given by the City Mayor of Tangiers, Kingdom of Morocco, H.E Egor Borisov, President, Salha Republic (Yakutia) – Russian Federation, and Prince Mohamed Bolkiah, Minister of Foreign Affairs and Trade of Brunei Darussalam.

It was then followed by a very informative presentation of the AIM FDI Report 2014 given

by Angus Cushley, Publishing Director, FDI Intelligence, Financial Times Ltd. Mr. Cushley discussed that the latest FDI Intelligence Report indicates that during the year 2013 emerging markets increased their global market share across all measures of FDI in 2013. Emerging markets accounted for 74 per cent of greenfield FDI, 60.5 per cent of FDI flows and 54.9 per cent of cross-border M&A in 2013.

In terms of outward FDI, Asia & Pacific dominates as the major source of outward FDI from emerging markets, Africa and Eastern Europe & CIS were the fastest growing regions for outward FDI in 2013.

However, outward investments still mainly come from developed economies.

Although emerging economies shows the strongest growth in FDI, developed

economies remain the main source of FDIs, accounting for around two-thirds of greenfield FDI in emerging markets.

Furthermore, Mr. Cushley discussed that in the future the Middle East and Africa region is expected to have strong growth in terms of inward FDI by at least 10 per cent over the next five years. Also Asia’s importance as a net outward investor will continue to grow and is likely to overtake North America to become the world’s largest overseas investor measured by FDI flows.

After Mr. Cushley’s very interesting presentation, the floor has been opened for the Ministerial Roundtable which was facilitated by Mr. Karl Sauvant, Resident Senior Fellow at the Vale Columbia Center on Sustainable International Investment (VCC), former Director of the Division on Investment and Enterprise, United Nations Conference on Trade and Development (UNCTAD).

Among the panelists were H.E Eng. Sulatan Al Mansouri, Minister of Economy, UAE, H.E yegor Borisov, President, Sakha RepublicRussian Federation, H.E Mustafa Oman Ismail, Minister, Ministry of Investment, Sudan, Ms. Arancha Gonzalez, Executive Director, International Trade Centre (ITC), Switzerland, Khaled Al-Aboodi, CEO, Islamic Corporation for the Development of the Private Sector, (ICD) and Professor Louis Wells, The Herbert Professor of International Management, Harvard Business School.

The roundtable discussion revolved around the panelists’ views, lessons learnt and personal assessments on investing in growth and finding sustainable solutions to further cause the development in times of political and economic uncertainties.

Giving his insights on the matter, H.E Eng. Al Mansouri said that the UAE considers three important factors prior to investing in other countries – political and economic stability, and maturity of financial institutions. Elaborating further on this the UAE Economic Minister said that political stability does not only mean that a country do not experience unrest, but it is about the stability of the government as a whole. While, economic stability also refers to the soundness of the regulations governing the country’s economy.

AIM 2014 also featured various parallel and plenary sessions on the following topics: The Evolving International Regulatory Framework for FDI, New Developments and Implications for Frontier and Emerging Markets; Going for Gold in Frontier and Emerging Markets as Investment Destinations; Investment Partnerships and New Forms of FDI, Strategic Alliances and Greenfield Investment versus M&As; FDI in Agriculture for Sustainability and Food Security; FDI in Tourism and the Hospitality Business in an Age of Greater Accessibility and Low Cost Travel, DI in Infrastructure and Logistics, to Unlock Markets and Facilitate Production and Trade; Investing in Emerging and Frontier Markets: a View from the Boardroom; Expo2020, Unlocking New Opportunities for Potential Partnerships in the UAE and the Region; Political and Economic Risk Management in an Interconnected World; ChinaArab World: Scope for Enhanced Investment and Cooperation in Partnership with CIPA; Ministry of Commerce, China, Best Practices in Attracting Investment from Emerging Markets, Selected Case Studies; How to Market Emerging and Frontier Markets for FDI; New Investment Opportunities in the Energy and Mining sectors, FDI in Manufacturing, the New Landscape in Production Networks; New developments in Financial Services; and China Investment and Cooperation Policies: New Perspectives.

The AIM exhibition, G2B meetings, B2B meetings, workshops and country presentations were also simultaneously held on the sidelines of the conference.

MAY 2014

17

TRADE TALK Strategy

HOW ALLIANCES AND PARTNERSHIPS CAN GROW YOUR BUSINESS Dr. Ashraf Mahate, Head, Market Intelligence, Dubai Exports, sheds some light on the importance of having strategic partnerships in doing business and how to identify them.

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MAY 2014

O

ne of the most important constraints SMEs face is their limited financial and human resources. With these limitations SMEs may still be expected to service their clients to a level that is somewhat comparable to large companies. At the same time SMEs face the competition from new players in their own market. Some of these new companies tend to be foreign owned entities that are expanding their geographical base.

SMEs faced with this situation theoretically have two choices namely to carry on as they have been, focusing on the domestic market or to diversify their own market base. The former option is time dependent in that slowly the firm’s own market share will decline and perhaps come to an end. The latter option is obviously the preferred one but not always followed due to availability of financial and human resources. The real question is how long can SMEs ignore entry into foreign markets especially if sales growth in their own market is limited and their own share is being eroded?

One solution to SMEs looking to find a low cost and resource light entry into foreign markets is through strategic partnerships.

Essentially a strategic partnership (sometimes referred to as an alliances) is a long-term arrangement between two or more companies to position either an existing or new product or service in a defined geographical area. In doing so it is intended that at least one party in the relationship is able to reduce its costs.

Although, cost minimisation is important it is not the only defining factor in a partnership.

Equally important is the objective of longterm value growth. In other words the aim of the partnership is for the firms to come together in order to capitalise on their relative strengths.

Types of Strategic Alliances or Partnerships The term strategic partnership or alliance incorporates a number of different structures some of which include:

• Joint ventures: A joint venture is a partnership between the exporting firm and the importing firm, negotiated to involve one or more of the following, equity, transfer of technology, investment, production and marketing. The partnership contract will define responsibilities for performance, accountability, profit sharing, and marketing arrangements. Joint ventures can spread costs, mitigate risks, offer knowledge and details of local market, and ease market entry. Individual countries may have laws which regulate joint ventures.

• Licensing or Franchising: A firm can contractually assign the rights to certain technological know-how, design, and intellectual property to a foreign company in return for royalties, or some kind of payment.

Licensing offers rapid entry into a foreign

term sustainable competitive advantage through each party being able to contribute what it is best at as well as being able to incorporate partners who are cash rich but lack opportunities. For SMEs this type of partnership offers considerable benefits because they do not necessary have to participate in the day to day management of the operation and their contribution can be based on their resources and level of commitment.

• Non-equity Based Strategic Alliance: this is whereby two or more companies come together in order to share some each other’s resource or capabilities so as to create a competitive advantage. This type of relationship need not be long term: it can be for a fixed time period. A typical example is where Company A may want to use

Although, cost minimisation is important it is not the only defining factor in a partnership. Equally important is the objective of long-term value growth. market. Capital investment is allowed, and the return is usually realised at the earliest, but licensing involves loss of control over production and marketing, and the inevitable sharing of technological know-how by the licensee, unless carefully prescribed in a legal contract. Software licensing rights, branded names in hospitality sector etc are examples of the same.

• Joint Equity Strategic Alliance: is whereby two or more companies come together is through equity participation in order to form a totally new firm. Although, cash based equity can be one type of input it need not always be the case. In other words some of the partners can actually contribute tried and tested research, other resources such as facilities or human capital or it can even be sweat equity. The aim of such a partnership is to create long

Company B’s warehouse and distribution network in a foreign country for a certain time period. This gives Company A the ability to penetrate the foreign market without incurring additional investment in warehousing, distribution network, sales staff etc. In return Company B will offer either the same or different service. The key advantage of such a relationship is that it allows the SME to test a relationship before making it long term.

How to Find Strategic Partners Forming strategic alliances is not an easy task however SMEs can identify an appropriate foreign partner in the following ways: Trade journals: Often, firms place advertisements in trade journals or a listing in a trade directory. Although, these MAY 2014

19

TRADE TALK Strategy

advertisements or listings are unqualified (in other words the firm has not been verified) it nevertheless gives the exporter an idea of the number and type of firms operating in the market. The second stage is for the exporter to carry out its own due diligence.

Participate in catalogue and video exhibitions: Catalogue and/or video exhibitions are another low-cost means of advertising export products abroad. In this way, the export products are introduced to potential partners at major international trade exhibitions. Usually, the embassies show export product catalogues and/or videos to interested agents, distributors and potential buyers.

Exhibit at trade shows: International trade shows are an excellent way of marketing an export product abroad and to locate foreign representatives.

Participate in trade missions: Participating in foreign trade missions is another way to meet foreign representatives. Public and private trade missions are often organized by governments and trade associations.

Arrangements are handled by the organising party so that the process of meeting prospective foreign representatives is simplified.

B2B (Business to Business): This is an electronic market place where exporters and foreign representatives can meet and transact business. The B2B exchange is effective in reducing search cost as well as the provision of information to a large number of potential partners.

Selecting Partners One of the most important decisions that an exporter needs to make is to select an appropriate partner. Selecting the correct foreign partner can ensure that the exporter’s products are successful in the target market.

On the other hand the wrong foreign partner can lead to not only a disastrous entry into the target market but wasted management time and resources. Exporters can minimize the risks of finding a foreign representative through ensuring the following aspects: 20

MAY 2014

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.

• A proven track record or experience in the product in question for the target market; • An extensive geographical coverage with a supporting infrastructure; • An established player in the market with key advantages over its competitors; • Experienced sales team that is well managed with appropriate financial and non-financial incentives; • Ability to provide the exporter with appropriate market information; • Have adequate warehousing, servicing and after sales ;

Although, the above aspects cover the essential qualities that a foreign partner needs to have it is important to bear in mind that there are also other human factors that need to be considered. For example, the exporter and the foreign representative need to have a strong and positive relationship that is built on trust and transparency.

The normal procedure in selecting a foreign partner is to first to identify at least five or six potential partners. The second stage usually involves the exporter meeting the key personnel of the foreign partner.

This stage allows the SME to discuss its own strategic direction and corporate practices with that of the foreign partner. This will allow the SME to assess if the two entities share the same corporate goals. In doing so the SME will also be able to evaluate the business and non-business aspects of the key personnel in the foreign entity and evaluate whether its own team will be able to work together. The third stage can be a

formal due diligence of the foreign which can cover the various aspects including the following: • Sound financial position with a good reputation for prompt payment, • Ownership structure • HR issues • Trade membership • Ability to deliver a quality service and after sales support.

• Ability to adequately market the product or service • Legal issues

Once the due diligence has been carried out the SME needs to decide which type of partnership to form. There is no golden rule to this and it really depends on the current market situation, the benefits that each partner is able to make available and the long term goals of each party. Then there are also legal aspects that have to be considered before forming a partnership. Most countries have specialised legislation covering the rights and obligations of all parties in a partnership agreement. Therefore, before any formal agreement is entered into the SME needs to seek legal advice.

Although, alliances or partnerships are a slow entry mechanism because of the steps involved in their formation they do however offer a viable alternative for SMEs not wishing to ‘go alone’ in a foreign market. The world of commerce is full of success stories where alliances have made a real difference to SMEs. However, this success does come with a word of caution in that they have to be very careful as to whom they select and what is agreed.

TRADE TALK Sector Watch

KSA’s

F&B Industry Being the largest food producer in the region, the Kingdom of Saudi Arabia offers a lot of opportunities for investors. Simon Blazeby, Director, Reed Sunaidi Exhibitions, organiser of the Foodex Saudi 2014 explains how to maximise the benefits.

C

an you please provide us with some background about KSA’s food sector? The export and imports?

The Saudi Arabian food industry is currently experiencing a boom. Food sales in the Kingdom account for around half of the domestic retail market and are expected to be worth almost USD 70 billion by 2016, with food consumption growing at a CAGR of 2.6 per cent from 2012 to 2017. Despite being the largest food and beverage market in the GCC, the Kingdom relies heavily on imports to meet its growing consumption requirements.

While Saudi Arabia is the region’s largest food producer, representing 74.1per cent of total production in the GCC, it imports more than USD 14.2 billion worth of food and beverage products each year to meet its consumption demands. Affecting all areas of the F&B sector, analysts expect imports will increase further to feed Saudi Arabia’s burgeoning population and expanding domestic market.

Jeddah is KSA’s trading hub for food importers and is an important focus for exporters due to its unique geographical location, along with the immense growth potential that the Kingdom offers. This is the reason we chose Jeddah as the location for the country’s first international exhibition dedicated to the industry. We had over 10,200 food buyers and key decision makers from around the world that made the trip to Foodex Saudi to meet with suppliers and producers.

Who are the main trade partners when it comes to trade in food (in 2012 and 2013)?

Due to the emergence of an increasingly well-travelled local population, the demand for a wider choice of international food

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MAY 2014

has helped shift the focus away from local Arabian foods towards concepts from the US, Asia and Europe. In light of this ever-growing demand, international food companies from all over the world are keen to get a foothold in the Saudi F&B market.

An increasing number of international companies are beginning to enter the Halal foods market, which is broadening the range of foods available to Saudi customers. For example, there has been a rise in Australian

single most important factor affecting the profitability of dairy farms. The dairy industry is expanding to service international demand presenting opportunities for foreign companies to support KSA’s production needs.

Aiming to promote both domestic and international agricultural projects, the Saudi Government established Saudi Company for Agriculture Investment and Animal Production (SCAIAP) with an initial outlay of USD 850 million. In addition, the Saudi

USD 6 billion estimated value of the Saudi halal food market annually red meat exports to the Kingdom with analysts predicting further growth in the market from other countries such as Brazil.

The Kingdom has extensive overseas agricultural projects and land investments in Ethiopia, Sudan, Senegal, South Sudan, Russia, Philippines, Argentina, Egypt, Mali, Mauritania, Nigeria, Pakistan, Zambia, as well as countries in central and Eastern Europe.

What investment opportunities does the food sector in KSA offer?

While KSA is the largest producer of dairy products, cereals, meat, fish and vegetables in the region, it only produces about half of its requirements locally. Due to limited fresh water resources and government initiatives to reduce water consumption, KSA relies heavily on imports for meat, poultry and fish. As cultivation is water intensive, cereal production is very low, despite cereal products accounting for almost 50per cent of total food consumption.

KSA’s bustling dairy industry has been at the forefront of the food industry’s expansion and continues to grow rapidly. However, given the Kingdom’s decision to stop the production of water intensive agricultural practices such as wheat production, producers are highly dependent on imported livestock feed, which, from a purely economic point of view, is the

government is supporting private companies in acquiring land internationally for agricultural production. For instance Planet Food World (PFWC), a private Saudi firm, plans to develop 20,000 farms in Turkey with a total investment of USD 3 billion. The company aims to export the produce from these farms to GCC nations for meeting their respective consumption needs. PFWC also has significant investments in Ethiopia.

How can companies interested in investing in this sector go about it? What are the initial steps in terms of setting up a company, partnerships and so on?

In order to conduct business on a regular basis in KSA, foreign investors need to establish a physical commercial presence in the country.

Ultimately, having an on-ground presence will help companies win more business over the long-term. By committing to the development of the local economy, foreign companies are viewed as serious and trusted players in the local market. It is imperative that F&B companies looking to expand in KSA identify a trusted company formation partner, who can provide expertise on the best license structure to benefit their business.

Having professional legal support is always an essential component for any business. Given MAY 2014

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TRADE TALK Sector Watch

the fluid nature of the legal environment in KSA and the consequences of getting things wrong, it pays to engage and retain legal counsel who can assist your business across the spectrum of company formation, labour law, commercial and contractual matters. Look at it like an investment.

Also, attending events like Foodex Saudi will help build strong relationships and gain valuable insights into the Kingdom’s F&B sector.

Those who want to reap real long term rewards in Saudi Arabia need to start by ensuring that what they offer addresses needs which the Kingdom cannot meet from its own resources, or from lower cost, lower quality, alternative suppliers. That means, first, a quality product. Beyond that, it means being willing to share intellectual property, to create genuine joint ventures with Saudi partners who will take not only profit out of the common enterprise but also the building blocks of future prosperity.

According to you, what are the bottlenecks to investing in the food sector?

Building strong relationships with partners is vital to your success in Saudi Arabia and it will enable you to better understand the needs of the market. But to engage seriously, can mean investing seriously. It means time and money spent on getting to know the country and its markets, assessing the opportunities for export and investment, and above all, identifying the long-term Saudi partners essential for any really fruitful business relationship in or with the Kingdom.

Such loss-leading activity can be discouraging, and can dissuade potential new entrants to the market. But almost always, analysis of the costs and benefits in the long run will show that the scale of the potential rewards more than justifies the risks.

Which food products are KSA interested in importing from abroad? Which industries can be set up in KSA? Even though KSA is the largest producer in the region in some categories of food like dairy, meat or vegetables, it still relies on imports for almost all food categories. Currently, the Kingdom meets 35 per cent of its domestic food demand. However, reliance on imports 24

MAY 2014

Simon Blazeby, Director, Reed Sunaidi Exhibitions

is likely to increase as the Saudi government has mandated to reduce wheat production to conserve water (effective 2016). For this reason some of the most in demand food products would be cereals and meat, but really there is no sector that shouldn’t see potential in the Saudi market.

Saudi consumers are seen as more price conscious than those in the UAE, Kuwait or Qatar, so they will welcome competitive products. As a result of exposure to new foods and flavours, Saudi palates are changing, creating demand for new fast food and restaurant concepts. There is also a growing trend towards health and organic foods among the Kingdom’s younger demographic.

How important is Halal in this regard? Can you elaborate on KSA’s policy on this?

The value of the Saudi halal food market alone is estimated at USD 6 billion annually.

Halal food is big business and the Kingdom takes it extremely seriously to the extent that it has called for tighter regulations on halal importers. These regulations concern halal food production, including stunning and automated mechanical slaughter, control and supervision of halal food, the economic and strategic development of global halal trade and permissible food additives. Halal foods were a key part of the Saudi Food Forum, which was held within Foodex Saudi. During the forum, experts discussed topics including how best to penetrate the global halal markets and food security.

What kind of growth are you looking at in the coming years in this sector?

Saudi Arabia continues to be the singlelargest food market in the Gulf, accounting for more than 60 per cent of the region’s total food consumption. We expect Saudi Arabia’s total food consumption to grow at a CAGR of 2.6 per cent during 2012–2017, driven primarily by increasing population and per capita income.

Traditionally, dairy products and cereals have been the favourite food items in KSA. Put together, they accounted for more than 70 per cent of the food consumed during 2010. According to the latest industry reports, over the five years from 2012-2017, cereals are expected to remain the largest segment, although its growth rate is expected to be slower than other food categories. Further, with the rise in disposable incomes and changing dietary patterns, the growth in meat consumption is expected to outpace the growth in other food categories.

The fast food market is expected to reach a value of USD 4.5 billion in the next three years, while the packaged food market is expected to grow to USD 21.7 billion by 2014 with sales rising by around 5 per cent annually.

Food processing is one of the fastest growing segments in the food industry supply chain and KSA, which relies mostly on imported raw materials, is expanding considerably in this area. This has prompted many international companies to set up licensing agreements with local manufacturers in KSA to produce their brands.

Conversely, the relatively young and educated population in the Kingdom is becoming increasingly health conscious, embracing health and dietary foods and beverages; a market growing at nearly 12 per cent a year. One contributing factor is the medical issues that are seriously prevalent in KSA, such as diabetes, hypertension, cardiovascular disease and obesity.

The GCC is a largely unexploited market for natural and organic products and KSA is one of the largest such markets in the region. The growing demand for natural food products were also reflected at Foodex Saudi where organic companies such as Bio Ice, Organic Bio Free, Darin, Hasad and Organic Campagnola had a presence.

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TRADE TALK Sector Watch

Guaranteed Halal!

Meat & Livestock Australia gives us an overview of how it deals with the Middle East’s halal food market.

I

n the Middle East For Australian meat, the Middle East region is a key market, with over 45 years in the region Australian meat and livestock companies have built long-standing relationships.

MLA has a strong understanding of market drivers and have had the advantage of being in the position to cash in on the various changes that have occurred in the market, such as the expanding hypermarket, and four and five star hotel sectors.

Australia is recognised as a global leader in Halal red meat production and many of the new players are turning to Australian companies as a year-round provider of clean, safe and guaranteed HALAL beef, lamb and goat products 26

MAY 2014

Australia-UAE halal food trade Demand for Australian red meat in the Middle East region has been very strong for many years. The clean, safe and delicious reputation and Australia’s HALAL integrity have meant that year-round supply and long-lasting relationships are apparent. For this reason we believe that Australia is well positioned to continue to supply the MENA market. In this regard, more developed markets, such as the GCC countries, Lebanon and Jordan prove to be the fastest growing markets when it comes to demands for high quality Australian beef and lamb.

In the year 2013, record volumes of Australian meat were shipped to the MENA region for beef,

veal, lamb and mutton. In total over 180,000 metric tonnes were shipped in the past 12 months. It has been a record year and is a result of the market demanding for more high quality product. The UAE imported just under 40,000 tonnes of Australian beef, lamb, mutton and goat in 2013 and in the first 3 months of 2014 the numbers showed an 11 per cent increase on the same period in 2013.

Challenges Any industry doesn’t simply go on without any challenges, and as for Halal, keeping the cost of doing business down requires constant work.

In a world where labour and energy costs are increasing, farmers are constantly working on the efficiencies of their businesses. Also, making sure that the environment and the welfare of their animals is being looked after is of utmost importance. Thus, producing premium, clean, wholesome beef and lamb comes at a cost.

The years to come For the next five years the demand in general for clean and safe protein will continue to increase globally. And the HALAL industry is no exception, particularly in emerging markets where an expanding educated middle class is progressing.

People are now looking out for more options when making purchasing decisions, whether it is at a Hypermarket or at a restaurant. Australia is well positioned to answer this calling both geographically and strategically.

About Meat & Livestock Australia (MLA) is a producerowned company that provides marketing and research and development services for the Australian cattle, sheep and goat industries.

MLA in the Middle East North African region works with retailers, foodservice operators, importers, manufacturers and Australian Exporters to maintain and increase the demand for Australian halal red meat and livestock to the region. The Australian meat and livestock industry is proud to be a key supplier of safe, nutritious, delicious halal certified meat to MENA and assisting in ensuring the food security of the region.

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TRADE TALK Interview

The right mix for success The year 2013 marked a good year for Etihad Cargo. David Kerr, Vice President, Etihad Cargo speaks to Aparna Shivpuri Arya in an exclusive interview about the strategy behind the business and their plans for sustaining success.

T

he conversation begins with David Kerr telling me about how 2013 has been for them, “The year 2013 was a successful year for us. We have made some remarkable growth, in what was an extensively flat global market. We were able to bring together various components that contributed to this success.”

According to him a key part of their strategy started with having what he believes to be a world-class team. They have brought together the best people in the business that they can find to be successful. Next is the investments that are coming into the company, having the capability and assets, state-of-the-art technology, and getting new aircrafts operating in and out of the hub.

Also he stated that they were blessed with the geography here in the Middle East, especially with Abu Dhabi being at the centre of significant trade flows.

“We pick our battles carefully in terms of the routes that we operate in and we are highly focused on the types of businesses that we want to carry across our network. We have a lot of options in terms of connectivity that we can offer, but we have been selective about how we do that. We put together good infrastructures, revenue management systems, and technology in general to help us do business better. As we put all that together, it makes a great mix, and the results show how that’s been successful”, he added.

David Kerr also talked about how much their organic network has grown. The bilateral partnerships that they have with various carriers on the passenger side have also extended to the cargo arm.

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MAY 2014

“We have also gathered a significant number of high profile equity alliance partners. Those companies whom we’ve taken investment stakes in, also have a cargo arm which contributes on enabling the top line synergies as well as the cost-synergies right across the business.”

Furthermore, he mentions the alliances that they have with other airlines, “Within the equity alliance we are very close with Air Berlin for example, on the capacity of the flights in and out of Abu Dhabi, and we did the same with Virgin Australia with their operations in and out of Abu Dhabi, and we will do the same with Jet Airways.”

“Outside of the equity alliance we have paired up with DHL on a freighter operations deal, which they operated in January through Abu Dhabi. We have also worked with Singapore Airlines for them to bring their aircrafts through Abu Dhabi twice a week. We do a capacity exchange to commercialise their technical stop in the Middle East.”

Elaborating on the deal that they have signed with DHL, he explains that it is a simple programme wherein a rotation comes to Abu Dhabi from their hub in Bahrain. The deal paved way into linking the two hubs, which is beneficial to both sides. The system works in a triangular rotation operating 5 times a week through the two hubs, therefore providing connectivity between those networks.

“So those are a couple of examples outside of the equity alliance and partnerships that cargo is pursuing independently. The value of the equity alliance and the integration of those partnerships is a key component for Etihad, as cargo brings a significant amount of revenue to the airline. We bring about 20 per cent of the revenues to Etihad Group,” he continued.

TRADE Moving on, I asked David Kerr about the countries that they have focused on in 2013 when it comes to trade, to this he said, “Key markets for us include China, which is the largest market. During the previous year we also focused on the Indian Sub-continent, India being the 2nd largest market that we have. Then we also obeserved that the trade between those two markets, as well as trade from the other markets that goes through the hub here and then into the global networks (Middle East to Africa, Middle East to Europe and then to the US and South East Asia) were also key connecting points of the trade routes.”

According to him they have also been keeping a close watch on the US and Europe trade markets. As these two are now known to be producer markets and they are now feeding newer markets such as China. And they find this trend interesting as Asia is typically seen as a producer market and Europe and the US are seen as consumer markets.

He was also quick to point out that they are looking at expanding their presence in Africa.

They find that there’s a significant capacity for both passenger and freighter operations moving in and out of that continent.

“We’re physically on the land mass that is the African continent, so proximity to those markets is helpful in terms of being able to run efficient operations in what is still a somewhat imbalanced market. And there is more business flowing typically into the African markets,” he said.

Talking about the logistics side, David Kerr said that he thinks that the logistics industry has a tremendous opportunity for growth, especially in the way that the UAE was able to facilitate trade. Free zones, and infrastructures has been built at a phenomenal rate and facilitating all of that is an integral part of Abu Dhabi’s strategy in diversifying its economy.

“Etihad Airways is a key component of that growth, as a company we contribute around 12 per cent to the non-oil GDP. So we give a significant amount to the development of the Emirate in the sectors of trade and tourism.”

David Kerr also stressed their support to the trade sector, “One of our key platforms is developing a new cargo terminal, and as we do that we’re going to seek for it to be as integrated as possible. We will consult our stakeholders and customers about what their requirements

MAY 2014

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TRADE TALK Interview

are. We aim to improve the transit times and cut-off times so that we can offer a competitive service against other modes of transport. In that respect we’ll play a key role in Abu Dhabi’s development.”

DEALING WITH COMPETITION When asked about the competition in the market, he said that air cargo being a worldwide platform will always have tough competitions. They do not only compete with their close neighbours but also on a global scale. Competition is also present amongst other modes of transport, so they have to ensure that air cargo remains as the mode of choice for the type of businesses that they have to compete for.

“We hear a lot of stories from customers about businesses choosing other modes [of transport] as it trades down. New technologies also come into play, and air cargo has to remain relevant. So we’ve got to invest in state-of-the-art integration here in Abu Dhabi to ensure that as air cargo regains its share in the logistics market we’re at the forefront of that in terms of the solutions that are being offered.”

Cost is also one of the main reasons why people are choosing other modes of transport aside from air cargo. But then he also pointed out some other causes, such as the nature of commodities.

“Commodities that used to be carried by air have experienced a down trade in markets and now have less speed requirement. Some products just develop a more sophisticated supply chain and they can afford to move to another mode [of transport] because they don’t need a faster service.”

He mentioned that during the World Cargo Symposium this issue has been one of the key topics that were discussed and findings showed that the share of air freight relative to the air travel mode lost about 1.5 points of market.

“So we need to communicate to the customers about what’s going to work for them to maintain an effective premium service relative to other modes [of transport]. Then we need to retain that edge and maintain the status of being a top choice as the most expedited method. We really have to give value to how we can improve supply chains from 30

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David Kerr, Etihad Airways Vice President Cargo

manufacturing to retail environment. Because the costs of goods are high and the costs of holding goods are high as well, and air freight can massively shrink that,” he said.

I then asked about how he plans on attracting more clients to use air cargo as a mode of transporting their products, and to this he answered, “It’s about the products they need and what they sell to their customers.

We have to make sure that we come up with relevant products and then ensure that they are sufficiently differentiated.”

He then made mention of the product called “Fast-track” that they have recently implemented. It offers quicker connectivity to the hub, later cut-offs, early retrieval times, and it guarantees the premium that customers pay for. It provides better capacity as well. So he highlighted that they develop the kinds of products that enhances the general cargo service that’s out there.

“We’ve also looked at other segments such as valuables –precious goods. We’ve formed a joint venture here with Linfox Armaguard from Australia for a joint venture for valuables transport management. And a key part of that is obviously air cargo business in and out of the UAE. Through it the goal is not to only move valuable

commodities but also connect the global networks. We also aim to provide a product which we call Safeguard, which offers an air freight product to our customers who have a need for door-to-door or air-to-air transit of precious goods,” he added.

So what industries are more inclined to using air cargo? “Natural commodities such perishable goods, produce, flowers and the likes are more inclined to using air cargo as they require speed. Then obviously industries that deals with products that has short lifetimes or those that has very high cycled times. One good example is electronic goods.

They are always in demand and then very quickly go out of fashion. Nowadays, most of them are very lightweight, but at the end of the day the innovation cycles and speed-tomarket requirement will remain a component of that industry and air cargo is well-placed in those terms,” David Kerr answered.

According to him, they are part of a complex supply chain, so it is important that they keep an open line of communication with their customers, the freight forwarders, the 3PL providers up to the manufacturers.

They make sure that they understand the needs right from the factory gates through the supply chain up to the aircrafts until

it reaches the final destination. He added that it is a very ‘joined up’ process which the company embraces fully, because that allows them to provide products that will enable them to compete with other modes of transport and compete within the air cargo industry as well.

Moving on I asked about the top five destinations that Etihad Cargo had in 2013, “Germany was a major destination, the Netherlands is another one. US is also a fastgrowing market. Australia also continues to grow as a market for us. Also the Middle East itself, the UAE in and outbound is continuously a growing a market,” he said.

We also discussed the new routes that they have launched and will launch this 2014, “We have added our second Munich service in February and we’ve started our second JFK service just this March and we commence services to Los Angeles and Perth in June and July respectively. We will also start new services into Rome and we’ll start services in Jaipur and Yerevan this year as well.”

“We’ve also added services in Switzerland, in Zurich. Currently we have operations in Geneva,” he added.

Talking about how they can contribute to further improve the air cargo industry,

David Kerr mentioned that there is an opportunity to continue a high level of communication between them and the customers, but it is a shared responsibility between both parties.

“We need to know what our customers need, and until we get to do that effectively we will always be at risk of providing the wrong products at the wrong price. So it’s important to keep the dialogue open, and we are doing that. Also as an industry we need to adopt more technology and invest in it solidly.”

With this being said, he explained the air cargo industry’s current move to e-freight from being paper based , which they are a key participant in.

“We signed up for the multilateral e-airway bill agreement that will allow us to trade with other signatories to that. The e-airway bill is only the first step into the right direction which is the move to the electronic format,” he added.

As part of their participation in this initiative he mentioned that they have worked very closely with their stakeholders in Abu Dhabi.

They have collaborated with the Customs as well and provided them the risk assessment inputs that they needed. They have also implemented CCN which is a cargo portal

that allows customers to work with them in an integrated fashion.

“E-freight is the right direction that we head towards, being able to move all documents worldwide into an electronic environment is a goal that we must achieve.

We have made big strides in 2013 in terms of creating that platform and 2014 is the year for us to roll that out. So you’ll see a lot of progress in the electronic business within Etihad.”

As we came to the end of our discussion I asked him about the company’s plans for the year 2014-2015, which he gladly shared with me, “Our long term strategy calls for us to be very customer focused. So we’re going to continue with a level of engagement to customers that we have. And develop the teams that we have who are catering to the customer-base. Getting feedback in terms of what our clients require from us, is our key focus. Another one is operational excellence, creating new platforms and infrastructures to operate to the highest levels and stay competitive within the industry and also with the other modes of transport.”

David Kerr also underlined the importance of having partnerships, which he noted to be a key factor for their success. “We’ll work within the integrated alliances programmes that we have within the airline and also look at other partnerships aside from the existing ones and look at investments and cooperation on a global scale. We would also like to expand our networks and be able to offer more network products to our partners and customers.”

And lastly he said, “We’re going to continue to attract and develop the best people we can, to take us forward in performing to the standards that the industry has today. And help us transcend to new standards and new approaches. We will keep on looking for different technologies that will enable us to perform to high levels in the current paradigm that we have.”

One cannot simply be successful by doing one thing only, you have to do everything that you possibly can to achieve and maintain it. And Etihad Cargo has proved that they have and will continue to work hard to attain success.

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TRADE TALK International Trade

Iran: alarm call

for the sleeping giant

The legacy of 25 years of embargoes - especially the most recent curbs on the oil trade - have led to massive under-investment in Iran and denied the region of what was historically one of the most fertile commercial and intellectual exchanges. With the potential for a dramatic sea-change, businesses need to have in mind the nexus of trade opportunities and the vast array of infrastructure projects that could open up substantial benefits not only for corporates but for ambitious SMEs…

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uestion: What do you do if yours is one of the 25 major shipping companies whose vessels were filled with at least 2 million metric tonnes of oil from Iran in mid-June 2010, just a few days before the United States Senate and House of Representatives passed the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 (CISADA)?

Well, your first action might have been to claim on your indemnity insurance - but of course, that is null and void in the case of government sanctions. That fact will not, however, prevent the customers you were going to supply (but could not) from taking you to court. Indeed, there are currently 17 cases of this kind being heard in the Bahrain Centre for Dispute Resolution.

These details are worth mentioning because they show the immense complexity of the commercial and legal ripples that emanate from the various phases of embargoes against Iran. Yet now, it may be the case that a thaw is beginning, and with it we might see a completely new picture.

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The recent suspension of certain sanctions against Iran and the expectation of subsequent suspensions is already opening discussion about the current market situation in Iran and its future opportunities.

Now, in line with these major expectations, a keynote event, ‘Iran - Economic Sanctions and What’s Next?’ will be held in the UAE, on 28th May 2014 in the luxurious setting of the Al Murooj Rotana, Dubai.

The one day seminar is supported by the Iranian Business Council and the International Association of Financial Management (Interfima). Trade & Export Middle East is delighted to be a media partner alongside The Wall Street Journal.

There is no doubt that companies around the world are eager to find out what the temporary relaxation of sanctions, in addition to the future complete lifting of sanctions, could mean for accessing the Iranian market - and this hallmark event promises to provide considerable food for thought.

Eminent speaker profiles Chairman and keynote speaker of the seminar is Nasser Saidi, former Chief Economist and the Head of External Relations for Dubai International Financial Center (DIFC). He is on record as saying that détente with Iran would not only be a major change in the geo-politics of the Middle East, but would potentially generate large economic benefits for both Iran and the GCC states. “As a result of more than two decades of sanctions, Iran has not had access to modern technology and investment, and achieved lower overall levels of investment. With détente, Iran will need to catch up and raise investment by up to about USD 60 billion to USD 80 billion for at least 10 years. I believe this seminar can provide the right platform for open dialogue and set the stage towards greater cooperation,” he said.

Other keynote speakers include Farideh Tazhibi, Secretary, ICC Iran Banking Commission, and Sam Bayat, Attrorney-at-Law, Bayat Group.

The event is sponsored by Eren Lawyers, from Washington DC - a major law from specialising in sanctions - and the Bayat Group.

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TRADE TALK INDUSTRY WATCH

TO THE CREDIT OF YOUR BUSINESS… Trade Credit Insurance (TCI) is an important risk management tool for hedging against late-payment or non-payment of receivables, and it therefore plays a key role in buffering a business from potentially disastrous payment shortfalls. Yet there are many different variants on the TCI model. Will Clark, Head, UK Trade Credit, AIG Property Casualty, explains the benefits of using the ‘Excess of Loss’ model,which AIG has rolled out as a powerful international template.

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hances are your organisation has started to think in terms of protecting its receivables - a logical decision, given that at any one time, they can account for up to 40 per cent of the value of the company’s asset base. TCI is a great place to start, because it’s one of the most practical risk management tools for safeguarding turnover and profitability alike. It gives a powerful range of practical benefits, such as: • Protection against late payment or nonpayment, removing any fears on the part 34

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of the seller that the business is living on a knife-edge through the risk of defaulted payments.

• Stronger buyer-seller relationships, since the buyer can expect better terms moving forward; the seller - assured of payment doesn’t need to impose overly-strict criteria and can work with a broad portfolio of preferred businesses.

• Better opportunities for getting finance, given that risk partners and investors alike can see that a potential risk has been taken

good care of and that the business has the stability to entertain and maximize fresh investment sums.

• Ongoing credit data on buyers, informing the oragnisation about the raft of potential risks tied up in its receivables and allowing the business to be proactive in its choice of business partners. TCI insurers have accrued data that can provide detailed and accurate profiling across a vast array of businesses, and can do so on an international basis.

This is very important in the GCC, where

the concept of the credit bureau is still in its infancy.

• Facilitate building of a branch network or a move towards overseas expansion, because new trade agreements can be entered into with fresh confidence, without the need for up-front payments or prohibitively short credit terms.

Will Clark, Head of UK Trade Credit at AIG Property Casualty, comments that, “These are all very popular attractions of Trade Credit Insurance, and it’s not surprising that the market is increasingly looking at this mechanism for regulating its risk. However, one of the factors here is that, since TCI is a relatively new arrival, what we tend to see is one particular type of cover - known in the industry as Whole Turnover Cover. This is in effect a business that is seeking to subcontract out its credit management to an Insurer seeking cover across the complete range of receivables from the very small exposures to the very large; “Yet one of the factors here is that - especially for the more ‘evolved’ business - the company can lose a certain element of freedom and discretion in the way it handles its receivables. This is where an alternative style of TCI cover, known as ‘Excess of Loss’ can play a valuable role. It offers a completely different way of insuring risk, while still giving all the required comfort factor that a business needs.”

Excess of Loss - what are the benefits?

“Locally as well as globally”, Will continues, “the market has been growing for the Excess of Loss product, and AIG has become a true brand leader in this area. The Excess of Loss policy differs from the more widespread Whole Turnover Cover in a number of important ways.

To begin with, the Excess of Loss product seeks to work with the policyholder’s own credit management. The business which takes out the cover retains the strategic and operational management of its credit risks and exposures with the insurer acting as good counsel in terms of optimal credit management practice and astute exposure management. Importantly the insurer takes over the “larger” risks which

to-day exposures. Excess of Loss clicks in when you’re faced with an exceptional or unforeseeable risk that can’t be fielded in the usual way, complementing traditional measures and giving you a 360-degree range of safeguards.”

Will Clark, Head of UK Trade Credit at AIG Property Casualty

could ‘blindside’ the business and jeopardize its cash flow and performance, and - in the worst scenario - its actual survival.

“One of the great advantages here is that your business doesn’t have to deal with imposed credit limits or modify the way it deals with valued customers. The customer can

Ways of working “The fact is”, says Will, “that AIG have been evolving this model for more than 40 years, and we have a good view of which businesses it’s most applicable to. For example, you need a relatively good capital base to work with an Excess of Loss procedure - but note that it can still be very attractive to the smaller businesses, because the potential impact of a wholescale catastrophe is well taken care of. This style of cover also has high discretionary limits which helps to provide a business with the independence it needs to set credit limits but the cover it requires to grow safely. It’s also a great way of helping your business breed confidence, because it will have the chance to really get to know its customers without interference, but with the security of knowing that the extreme risks are taken care of.

Excess of Loss clicks in when you’re faced with an exceptional or unforeseeable risk that can’t be fielded in the usual way, complementing traditional measures and giving you a 360-degree range of safeguards. choose how much or little cover is necessary (and therefore how much the cover will cost), depending on the elements of the risk that are transferred to the insurer, and which risks are retained. The business keeps full responsibility for all its credit decisions under a pre-agreed discretionary limit as well as documented credit management procedure, and you will be free to take on board whatever risks you feel are necessary - there’s no ‘big brother’ watching over you and altering your behaviour.

“There’s also another dimension. You will of course have built up key relationships with credit management partners - like debt collectors, for example - and these probably work well in terms of covering your day-

“It’s a powerful variation on a product which has a great potential market here in the UAE with the region being one that has become such a major export hub. Companies based in the region will so often be looking to export, and TCI is a vital factor in building confidence in those overseas markets. Excess of Loss is also preferable for many businesses, because there’s no sense of surrendering control; it simply lets a business get on with what it does best, walking familiar territory but with an all-important safety net in place as and when required.”

This article was first published in our sister publication SME Advisor Midle East.

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TRADE TALK Logistics

Delivering value Cargo remains and will always be a major component of trade, which is why IAG Cargo continues to deliver the best service in the sector. Tony Snell, Regional Commercial Manager at IAG Cargo, tells us more about their operations and the trends that they see in the cargo industry.

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an you please tell us something about the profile of IAG Cargo?

IAG Cargo was formed following the merger of British Airways World Cargo and Iberia Cargo in April 2011. Our single business is a subsidiary of International Airlines Group (IAG) which has the overview of the senior leadership team. Having recently been appointed CEO from his former position of MD, Steve Gunning has been at the helm of the business, undertaking the challenging task of integrating the British Airways and Iberia cargo divisions into a single business.

Today, we are a business with a number of strong attributes, including a global network that offers more direct flights to key destinations in North America and more flights from Europe to Latin America than any other carrier. IAG Cargo has a mixed fleet of more than 431 long and short haul aircraft including our next-generation Airbus A380s and Boeing 787s. Eventually we will take delivery of the Airbus A350, which will increase the amount of bellyhold capacity we can offer customers.

The Middle East has been an integral part of our operation and we remain committed to serving the region following our 80 years of flying here.

We currently serve eight stations located at each major airport across the Gulf Cooperation Council, providing direct connections to 350 destinations

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worldwide. We also allow our customers to take advantage of our offices, located at each station, for their own business requirements. We have also invested in additional capacity to key markets including Dubai, Riyadh and Jeddah, offering upgraded products and services to offer more of a compelling proposition.

How has IAG Cargo made use of the advances in technology?

IAG has invested heavily in our fleet modernisation programme and has started to take delivery of new, cargo-friendly, fuel-efficient aircraft, a rollout that will proceed over the next decade. We are the first carrier to operate A380s with an improved maximum take-off weight, which allows the aircraft to carry more cargo.

In addition, our A380s also provide specified air conditioning capabilities in the forward and rear holds, which is beneficial to transporting temperature-sensitive goods. Customers can track and trace the progress of their shipments at any time using our online booking tool at iagcargo.com and we are seeing customers make good use of the website which provides greater access to our services. IAG Cargo can now offer a proposition that allows us to be flexible and deliver value to our customers.

The Middle East has been an integral part of our operation and we remain committed to serving the region following our 80 years of flying here.

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TRADE TALK Logistics

Please tell us about the deal you recently signed with Qatar Airways. How will this deal impact the cargo scenario in the Middle East?

There is no doubt this is a major step in the development of IAG Cargo as we will enter into a long term commercial agreement with our Oneworld partner Qatar Airways from May 1st 2014. We will purchase capacity on its Boeing 777 freighter aircraft and the deal allows us to continue serving customers between London and Hong Kong, which is among the world’s most important trade lanes. The freighters will operate between these two major freight hubs five times a week, with these routes supplementing the passenger flights serviced by our new A380s.

We re-assessed our commercial freighter agreements and signed a contract with Qatar Airways that is mutually beneficial as our freighter services have been an integral part of our operation. We can continue to provide customers with flexible capacity on key trade lanes while many other cargo operators have ceased and reduced their freighter operations.

How do you see the cargo trends in the Middle East? With so many prominent national carriers, how is the market divided?

The strong performance of the Middle East market is testament to the fact that it is one of the most competitive in the world. It is also among the fastest growing markets, having expanded 12.8 per cent year-on-year as of December 2013. The market upturn in Europe is benefiting the Middle East and we are seeing Gulf carriers aggressively pursuing the fast-growing African market.

We are able to offer similar connections through our London hub and our global network is most important to customers in the region, serving more of the world’s top 120 airfreight destinations than any other carrier.

However, there is no doubt that competition in the Middle East continues to be tough. The growth in intra-Africa trade and trade from Africa to Asia-Pacific suits the Middle East carriers very well.

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Tony Snell, Regional Commercial Manager, IAG Cargo

Despite this, and through the strength of our products and network offerings, IAG Cargo is managing to hold its own and maintain market share.

Globally, how do you see the cargo trends?

Especially from emerging economies such as China, India and Brazil?

Overall global market conditions have remained challenging despite some areas of growth. We remain cautiously optimistic that trade will continue to pick up in 2014 but encouragingly, economies in Europe are now in recovery and we anticipate that there will be strong consumer demand in these countries. With the pickup in demand we expect that the fashion garments and consumer electronics industries will do particularly well and air freight will be able to offer them a fast route to market, allowing them to effectively manage their inventories as economies recover. However, overcapacity remains a concern for carriers as this was exacerbated by the Eurozone crisis which had a big impact on trade volumes. Today however, we are seeing some positive indicators in European and Asian markets and we are looking

to capitalise on this. An example is the significant growth of online shopping which has resulted in uplift in small shipments across our Mail and Prioritise products.

China, India and Brazil each offer distinct challenges and requirements, but pharmaceuticals are one of the success stories for these markets. These regions have benefitted from high levels of investment and their increased commitment to healthcare. The world’s leading biomedical sciences companies have set up operations in these markets, helping to establish important global research and development hubs. We have identified this trend which has been reflected in our numbers as our dedicated pharmaceuticals shipment solution, Constant Climate, has seen an 87 per cent increase in exports from India to the rest of the world from 2010-2012. Last year, we increased the number of Constant Climate stations in Latin America to benefit from the growth and while China remains a traditional market for garments and consumer electronics, we have also seen a growing presence of pharmaceutical shipments into Latin America.

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TRADE TALK LEGAL

Doing Business in a UAE Free Zone Jonathan Silver, Partner and Areefa Govindji, Senior FDI Specialist, Clyde & Co., give us an idea on what to expect in setting up a business in the free zones in the UAE.

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he UAE is an attractive destination for foreign direct investment, with a stable business environment, advanced infrastructure, excellent trade links and an affluent consumer population.

For these reasons, and many others, interest in foreign direct investment into the UAE has been, and remains, strong.

Foreign investors also view the UAE as a gateway to the wider Middle East and Africa region and a logistical hub between the Americas, Europe and Asia in which the free zones in the UAE play a significant part.

There are many factors for a foreign investor to consider when determining if a free zone is the correct place to establish a presence and, if so, which free zone is best suited to its needs. We set out below an overview of some of the matters with which a foreign investor will need to be familiar

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before commencing and whilst conducting business operations in a free zone in the UAE.

Introduction to the UAE and Free Zones The United Arab Emirates (UAE) is a federation of seven sovereign states, known as Emirates, that was formed in 1971.

Under the Constitution, jurisdiction in relation to certain matters is reserved to the federal government which has passed, for example, the Companies Law, the Commercial Code (which forms the basis of the contract law), the Civil Code and the Civil Procedure Law. Legislation in relation to matters that are not reserved to or legislated by the UAE government are left to each individual Emirate. Examples include planning, building control, traffic regulation and free zones.

There are over 30 free zones in the UAE, the majority of which are in Dubai. Free zones have been purposely established to facilitate foreign investment into the UAE in relation to particular business sectors.

For example, the Jebel Ali Free Zone, in Dubai, caters to businesses involved in import, export manufacturing, processing, assembling, packaging, distribution, consolidation, storage and logistics.

Dubai Media City caters for broadcasting, advertising and public relations. Dubai Internet City provides web based services, IT support and software development.

Dubai Healthcare City serves as a hub for healthcare related business.

The main attraction of setting up in free zones is that doing so allows a foreign investor to own fully and retain management control of its business without

the requirement to find and engage with a UAE national partner.

Other key advantages include: (a) 100 per cent foreign ownership; (b) corporate tax of zero per cent for a fixed period (generally a 15 – 50 year tax holiday depending on the free zone); (c) free zone companies can hold a UAE bank account to conduct routine operational transactions; (d) no import or export duties (custom duties may be payable by the importer when products are imported into the country in which the importer is based); (e) repatriation of 100 per cent of capital and profit; (f ) no withholding tax; (g) one-stop shop administration and licensing facilities;

(h) no current requirement to hire UAE nationals; and (i) flexible regime in terms of sponsorship and obtaining UAE residence visas.

W i t h t h e exc e p t i o n o f t h e D u b a i International Financial Centre (which has its own civil and commercial laws and its own court system), most other UAE Federal Laws apply in the free zones, including the UAE Labour Law (although the free zone authority may also have emp l oymen t regul at ion s which supplement this legislation, e.g. the Dubai Technology and Media Free Zone Employment Regulations), and other UAE Federal Laws. There are specific regulations in place in each free zone which enable free zone entities to be formed and regulated. The courts in

the Emirate in which the free zone is situated are likely to have jurisdiction over disputes arising in relation to companies that operate within that free zone.

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Setting up in a free zone Typically, a free zone entity will take the form of either a free zone establishment (FZE) or a free zone company/limited liability company (depending on the free zone) (two or more shareholders) (FZC).

However, it is also possible to register a branch office of the foreign (corporate investor). The minimum paid up share capital required for an FZE or FZC varies from free zone to free zone, from around AED 50,000 to AED 1,000,000.

Foreign entities within a free zone are generally treated as being ‘offshore’ and are therefore restricted to operating within that

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TRADE TALK LEGAL

free zone and outside the UAE. However, in certain limited circumstances, a free zone entity may provide services to third-party customers ‘onshore’ from its office in the free zone.

A recent UAE Ministerial Decision, 377 of 2010, resolved, amongst other things, that companies established in the free zones can register branches onshore in the UAE. Those companies are required, amongst other things, to register with the UAE Ministry of Economy and obtain an appropriate licence from the Competent Authority of the Emirate in which the branch office is to be established, in order to conduct business onshore in the UAE. Although the Ministerial decision limits the activities that can be undertaken, it provides additional flexibility to companies established in the free zones that was not, historically, available.

LicenCing options and process A foreign investor wishing to establish a presence in a free zone is required to obtain a licence (FZ Licence) from the relevant free zone authority regulating the operation of businesses in that free zone. The FZ Licence will specify the activities that the foreign investor is permitted to undertake.

The types of FZ Licence granted by the free zone authority will depend on the type of industry serviced by the free zone.

FZ Licences that are available include commercial, industrial, retail, service, warehousing and professional licences.

Annual fees are payable to the relevant free zone authority for those FZ Licences together with a one-off set up fee. There will be other incidental fees relating to immigration and the rent that the licence holder will be required to pay for the commercial premises that the licence holder will occupy in that free zone.

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Licence Process Applications for establishing a presence within a free zone generally must be accompanied by a number of supporting documents such as, but not 42

MAY 2014

Jonathan Silver, Partner, Clyde & Co

Emirate of the UAE. Certain free zones also offer leasing of virtual offices.

As part of the application process, a manager (to be named on an FZ Licence) will need to be appointed to operate and manage a free zone entity. The manager, and other employees, will need to be sponsored for work and residence purposes by the free zone authority, at the request of the free zone entity. In this respect, a personnel secondment agreement is signed between the free zone entity and the free zone authority. These agreements are usually in a form prescribed by the relevant free zone authority and essentially act to ensure that any employee liability vis-à-vis sponsored employees rests with the free zone entity and not with the free zone authority.

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Import and export in a free zone Importing goods into a free zone is free of customs duty. However, the import of certain items, including alcohol and pork products, is prohibited without specific approvals and restrictions also apply in relation to goods imported from Israel.

Customs duties are normally payable by an importer, in the UAE, when it imports products from a free zone at the rate of five per cent of the CIF value of those products.

There are currently no duties levied by the UAE/free zone authorities on exports.

Areefa Govindji, Senior FDI Specialist, Clyde & Co

limited to, a detailed business plan. The exact documentary requirements vary from one free zone to another, though usually not in a significant way.

It usually takes, approximately, one to two months to establish an entity in a free zone but the timescale largely depends on how quickly the foreign investor(s) can produce the supporting documentation.

To apply for a licence the foreign entity’s premises must be within a designated geographical area as goverened by the free zone. Generally, the yearly cost of maintaining a licence and leasing premises in a free zone will be higher compared to onshore in an

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Practical considerations As the Middle East’s top trading economy, the UAE is a natural home to international investors across various sectors and corporates looking to headquarter their regional operations.

However, before deciding how and where to establish a presence in the UAE, it would be prudent for a foreign investor to consult experienced advisors who have the capability and resources to stay abreast of legislative developments and give advice on the potential impact those developments may have on the foreign investor’s business.

Clyde & Co has the local and international expertise and resources required to assist foreign investors in establishing and successfully doing business in the UAE.

TRADE TALK Finance May 13: Retail sales (April) May 15: Consumer price index (April) May 21: Federal Open Market Committee meeting minutes (April 29th–30th) May 29: Gross domestic product—second estimate (Q1)

Money matters- IV The Western Union Business Solutions team gives us an update on currency movements in May 2014.

USD Joe Manimbo, Senior Market Analyst, Washington, D.C. The Dollar hasn’t deviated much against a currency basket, which is keeping it on a narrow, well-trodden path. Market players, though, should not let their guard down in light of the lower volatility, which doesn’t look sustainable with the weather and the US economy expected to soon heat up.

Many expect the Dollar to strengthen this year but that narrative has been slow to materialise.

Part of the Dollar’s lackluster start to 2014 has stemmed from a winter of severe weather that closed businesses and kept the consumer homebound, which held back growth and kept the Federal Reserve’s (Fed) super low-rate policies in place.

Still, many retain bullish aspirations for the Dollar over the balance of the year. The economy has already shown remarkable resilience following the winter slowdown. Companies are hiring workers at a steadier clip, while manufacturing has picked up, as has inflation.

The economy has reached a firm enough footing that the Fed has embarked on an ongoing campaign of paring back on monthly stimulus.

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The more the Fed tapers its bond purchases, currently at USD 55 billion, the more it reduces a headwind on the greenback, since the measures aim to hold down long-term borrowing rates.

What it’s really going to take for the Dollar to take flight is Fed rate hike expectations. Investors currently have a US rate hike penciled in for around the middle of 2015. To strengthen the case for a Fed rate hike, the economy would need to shift into a higher gear to help drive unemployment lower and inflation upward.

Consequently, investor sights this month will be squarely on jobs and inflation, and although the Fed isn’t scheduled to meet this month, minutes from its late-April meeting will come under close scrutiny when they are released on May 21st. Forecasts for the April employment report on May 2nd are expected to show a gain of 205,000 new jobs. That should be enough to lower unemployment to 6.6 per cent from 6.7 per cent. Investors this month will also eye inflation on May 15th and the second of three estimates on first quarter growth on May 29th.

So where the economy heads this month, the Dollar should follow.

Critical data May 2: Employment (April)

Economic Indicators 3-month deposit rate (LIBOR): 0.23% (April 24) GDP annual growth rate: 2.60% (Q4) Inflation: 1.50% (March) Unemployment: 6.70% (March) Trade balance: -USD 4.23 billion (February) GBP Nawaz Ali, UK Market Analyst, London

Sterling strength reached a new high in April, reflecting expectations that the Bank of England (BoE) is quite clearly moving out in front of its rival central banks towards raising interest rates.

Yet for much of April, the Pound continually ran into a wall of resistance against the USD near a four-year high. Market experts have been calling for a correction lower for sterling for a number of months now. That risk will remain a strong possibility in May, with investors eyeing some key UK economic updates.

The highlight for sterling in recent weeks came following Britain’s latest unemployment report, which blew away market forecasts. UK unemployment plunged to a five-year low in February. Crucially, the new 6.9 per cent unemployment rate came in just below the 7 per cent threshold that the BoE had originally set last year in its first version of its forward guidance policy—the level at which it said it would start to consider hiking rates.

In addition, separate data showed wage growth in the UK rose above consumer price inflation for the first time in four years. In the update version of the BoE’s forward guidance policy, launched in February, Governor Mark Carney said that policymakers will now focus much more on a variety of indicators measuring the recovery in the labour market, such as real wages, before tightening monetary policy.

Robust UK economic data took sterling to a new four-year peak against the USD, helped along by more dovish comments from the Federal Reserve last month hinting at looser US monetary policy for longer. Adding to the Pound’s allure was the European Central Bank,

which has become increasingly vocal about an overvalued Euro and the potential for launching Euro-negative quantitative easing in the Euro area. A significant sales tax increase in Japan also raised question marks about Bank of Japan policy, keeping the yen close to multi-year lows against sterling.

On a trade-weighted basis, sterling is now trading near five-year highs before Britain publishes its latest economic growth data on April 29th. A strong gross domestic product (GDP) report, which will increase the chances of the BoE raising rates sooner than it predicts, could be the signal traders need to take the British Pound to even loftier heights in May. However, the further currencies stretch, the greater the risk of an aggressive correction.

At such heights, a disappointing GDP number could produce an outsized negative reaction towards sterling.

Looking further ahead, central bank guidance on future rates will remain a key feature for currency markets, especially for the Pound. The BoE will publish its Inflation Report on May 14th, giving Governor Mark Carney his quarterly opportunity to communicate directly to the market about UK monetary policy. Carney launched the bank’s new version of forward guidance policy in February’s Inflation Report. Another big shift in policy communication from Carney in May, on the same day markets will examine Britain’s latest unemployment data, could make sterling a much more volatile currency in the coming weeks.

Key Events May 6: Services purchasing managers’ index Survey (April) May 8: Monetary policy decision (May) May 9: Manufacturing output (March) May 14: BoE quarterly Inflation Report (May) May 14: Unemployment (March) May 20: Inflation (April) May 22: GDP—second estimate (Q1)

Economic Indicators: 3-month deposit rate (LIBOR): 0.53% (April 24) Gross domestic product annual growth rate: 2.70% (Q4) Inflation rate: 1.60% (March) Unemployment rate: 6.9% (February) Trade balance: -GBP 2.06 billion (February)

EUR In April, a list of events and economic data were generally Euro-supportive. Laws that were required to form a banking union passed the European parliament, Greece returned to the debt market for the first time in four years, and the outlook for the rating of Portuguese debt was revised higher. Economic data continued to reveal a gradual recovery was underway, yet the International Monetary Fund (IMF) and World Bank sent warnings to the European Central Bank (ECB) about downside price risks. The central bank responded with clearer and more precise verbiage about what the policy-making committee was prepared to do, but there was still no action taken by the bank.

While the ECB talked about concerns over weak price pressures and related risks, the central bank did not take action, which explains the single currency’s movement for the month of April. The Euro dropped nearly a per cent after the ECB’s press conference on fear that the ECB would embark upon a quantitative easing (QE) programme, but then markets realised that the ECB was in no rush to take extraordinary measures and the single currency rose 2 per cent from its lows to achieve a one-month high against the US Dollar.

That sets the stage for May. The single largest event occurring in the Eurozone is the election of EU parliamentary members. There have been many articles written that predict an upset during the election, where right-wing parties take a bigger majority given the general malaise Europeans have towards these elections.

Consequently, it may be only after the results are in that a negative market reaction could take place, but that won’t be until late in the month.

Until then, the Euro could potentially see more appreciation and here’s why: growth figures continue to reveal a gradually healing economy. The purchasing managers’ index (PMI) surveys for the manufacturing and service industries point towards growth, but at such a weak pace that demand-pull inflation is not expected to develop. That’s a problem because declines in cost-push inflation will not go away until the Euro weakens.

Intuitively this would suggest Euro weakness, as markets continue to price in the possibility extraordinary policy measures by the central bank. Here’s the catch, the central bank has made the threat and until the bank follows through

with actions, investors are going to be inclined to challenge whether or not they really intend on going through with a QE programme, knowing that asset purchases have been frowned upon by the German constitutional court in Karlsruhe.

The constitutional court failed to issue a ruling on the matter of asset purchases by the ECB, but passed on that responsibility to the EU. Not only is the German judicial system sceptical of QE measures, but the head of the German central bank, or Bundesbank, is also disinclined to embark upon such measures, although his stance has recently softened. Without the fullon support of the German central bank and the judiciary branch of the German government, ECB QE measures will not be a matter to be taken lightly. That could delay actual execution, allowing markets to get the better part of the ECB’s threat, such as, more Euro strength.

The food for May’s last thought comes out of the US The Federal Open Market Committee’s Yellen was considered to sound less dovish at the March policy meeting. She quickly replaced that less-dovish tone in April with comments, not once, but twice that suggested the US is going to maintain a loose monetary policy.

Her comments came after the USD surged in March—suggesting the US central bank also does not want to see a strong Dollar interfere with its exports and inflation outlook. Ergo, with a weak Dollar, the Euro is bound to steady or continue in its current uptrend.

Upcoming critical events May 2: Manufacturing PMI (April); Unemployment (March) May 5: Producer price index(March) May 6: Services PMI and retail trade (April) May 8: ECB Monetary Policy Committee meeting May 14: Industrial production (March) May 16: Trade balance(March) May 22: European Parliament elections May 22: Flash PMI surveys (May) May 28: Ifo Business climate Index (May) EUR Economic Indicators Three-month deposit rate (Euribor): 0.337% (April 24) Gross domestic product annual growth rate: 0.50% (Q4) Inflation rate: 0.50% (March) Unemployment rate: 11.9% (February) Trade balance: EUR 13.6 billion (February) MAY 2014

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Country focus Taiwan

Talking to the Taiwan tiger Shyh Perng, Director, Taiwan Trade Centre, Dubai speaks to us about the strong trade and investment relations between the GCC and Taiwan.

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lease give us a brief background on the trade relations between the GCC and Taiwan.

Taiwan had medial, construction and agriculture teams in Saudi Arabia back in 70’s, since then the trading activities between the GCC and Taiwan have grown steadily. The bilateral economic relations between the GCC and Taiwan are based on the trust and with open attitude.

Which countries in the GCC are your biggest trading partners?

Saudi Arabia is one of our biggest trading partners last year (2013) in the GCC, and is followed by the UAE. How has the trade relation evolved over the decades?

Until the mid-1960s Taiwan’s economy was dominated by agriculture, especially rice and sugar production. One of Asia’s ‘Four Tigers’, the development of export-oriented manufacturing transformed Taiwan’s economy and labour force into one defined by urban and industrial production. By the 1980s Taiwan began exporting its technology manufacturing offshore, especially to China.

More recently there has been a trend for some of Taiwan’s more advanced, high-tech 46

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industries to follow suit. Today Taiwan is also increasingly a tertiary economy, with services accounting for almost 70 per cent of national output and over half of all employment.

Taiwan’s 2013 GDP is estimated at USD 484.7 billion, with a population of 23.3 million and estimated per capita GDP of USD 20,706.

Nowadays, Taiwan has become a hub in East Asia for doing business as well as a gateway to Mainland China.

What are the industries that you are promoting for trade and investment?

Half of Taiwan’s trade is in the high tech sector, and the country’s international trade reached USD 600 billion in 2013. Taiwan is a key link in the global ICT supply chain. It houses a complete industry chain encompassing upstream parts and components, midstream OEM assembly and downstream brand marketing.

For GCC companies, keen on investing in Taiwan what advice would you like to give them and which sectors and areas would you highlight?

As I mentioned earlier, half of Taiwan’s trade is in the high tech sector and the country’s international trade reached USD 600 billion in 2013, so it would be an optimal choice for them to invest in this market.

Are there any issues that foreign companies need to be aware of when they decide to set shop in Taiwan?

Doing business like anywhere else, you have to make sure your partners are reliable and you have enough capital to invest in a place. In addition, understanding the working culture of a country is very important as well.

What kind of investments is Taiwan making in the GCC? One of the well-known Taiwanese companies, Tatung Company Co, a leading power

Taiwan imports nearly 70,000 barrels of oil from the UAE daily, which accounts for 6% of its total oil purchases.

transformer manufacturer in Taiwan, has collaboration with Oman based company, Voltamp Power LLC. Tatung, a well respected and diversified company, is the leader in several technologies including digital consumer products like LCD TVs and industrial products like cables, gas insulated switchgear, motors and transformers. Tatung has been making transformers for 46 years and has an ongoing collaboration with Toshiba Japan for the higher voltage classes. Their transformers are known for their quality,

reliability, as well as for rugged construction.

Another case, one of the well-known Taiwanese construction groups “Farglory Corp.” also brought USD 1 billion worth of investments in the UAE real estate market.

How do you see the bilateral economic relation evolving in the coming years?

Being the 3rd largest trade partners of Taiwan in the middle and near east region, the UAE has established a strong relation with Taiwan in the industrial development in multiple aspects.

Shyh Perng, Director, Taiwan Trade Centre, Dubai

The UAE is Taiwan’s 18th largest partner in terms of trade. Taiwan imports nearly 70,000 barrels of oil from the UAE daily, which accounts for 6 per cent of its total oil purchases.

Taiwan-UAE trade reached USD 6.28 billion in 2012, up 7.14 per cent from the year before. In 2013, this growth was more than 4 per cent.

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Country focus India

A multidimensional partnership His Excellency T.P Seetharam, Indian Ambassador to the UAE, speaks to Aparna Shivpuri Arya about the growing economic and commercial cooperation between India and the UAE, and how he sees the future for this relationship.

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ou have come to the UAE at a time, when trade between the UAE and India is reaching new heights.

What are your thoughts on that?

India and UAE have shared trade links through the centuries. The trade, which was dominated by traditional items such as dates and fish, underwent a sharp change after the discovery of oil in UAE, with India starting to import a sizeable quantity of oil from UAE. At the same time, with the emergence of UAE as a unified entity in 1971, our exports also started growing gradually over the years. The real impetus, however, started after Dubai positioned itself as a regional trading hub

investments. How can UAE businesses take advantage of that?

According to estimates from the Planning Commission, India will need to invest over USD 1 trillion in infrastructure during the Twelfth Plan period (2012-17). The figure is roughly double the sum invested in the sector during the Eleventh Plan period (2007-2012). Of the estimated USD 1 trillion, at least 50 per cent will have to come from equity and debt (from commercial banks, Non Banking Financial Companies (NBFCs), insurance companies, and external resources), with the balance being funded through budgetary support (central and state government).

On 23rd April 2013, Etihad airlines announced its decision to invest USD 379 million in Jet Airways for a 24% stake in the shareholding. by early 1990s and about the same time, the economic liberalisation process started in India.

Growing India-UAE economic and commercial cooperation contributes to the stability and strength of a rapidly diversifying and deepening bilateral relationship between the two countries.

Both sides are striving to further strengthen these ties for mutual benefits.

India-UAE trade, valued at USD 180 million per annum in the 1970s, is today over USD 75 billion making India and UAE largest trading partners for each other during the year 2012-13. India exported USD 36 billion worth of goods to UAE and UAE had exported USD 39 billion worth of goods to India. It is going to be challenging, as the momentum has to be maintained despite the general economic slowdown.

It is said that India currently seeks close to USD 1 trillion in infrastructure

In February 2013, at a High Level Task Force on Investment meeting in Abu Dhabi, co-chaired by Chairman, Office of The Crown Prince Court, Member of the Supreme Petroleum Council, Managing Director of the Abu Dhabi Investment Authority HH Sheikh Hamed bin Zayed Al Nahyan and Minister of Commerce, Industry & Textiles, Government of India Mr. Anand Sharma, both counties agreed to expedite an accord to boost two-way trade and investment, and UAE allocated USD 2 billion for investments in infrastructure projects in India. Both sides also agreed to establish strategic oil reserves in India and to speed up the resolution of issues associated with existing investments and opportunities for new cross-border investments across a range of sectors. At the second meeting of the High Level Task Force held in Mumbai on March 3rd 2014, UAE announced investment of USD 1.6 billion in the hydro-electric sector in Himachal Pradesh while it was agreed to

set up a Joint Working Group to explore the possibility of UAE participation in India’s strategic Petroleum Storage programme, in a mutually beneficial and time-bound manner.

What sectors in bilateral trade are you looking to highlight in your tenure as the Ambassador?

There are prospects for increasing our exports in the following areas, mainly: (i) Oil & Gas sectors and its related industries (ii) Construction and infrastructure fields (iii) Renewable energy sector (iv) Food products and its related industries (v) Power generation (vi) Services sectors (tourism, healthcare etc.)

What kind of investments are UAE businesses making in India?

There is an estimated USD 8 billion UAE investment in India of which around USD 2.6 billion is in the form of foreign direct investment, while the remaining is portfolio investment. UAE is the tenth biggest investor in India in terms of FDI. UAE’s investments in India are concentrated mainly in five sectors: Power (15 per cent), Metallurgical Industries (12 per cent), Construction Development (11 per cent), Services Sector (10 per cent), Computer Software & Hardware (5 per cent). On 23rd April 2013, Etihad airlines announced its decision to invest USD 379 million in Jet Airways for a 24 per cent stake in the shareholding.

How important do you think is BIPPA to promoting the bilateral trade relations.

UAE and India signed the Bilateral Investment Promotion and Protection Agreement (BIPPA) in December last year.

The treaty was under negotiation since 1997. BIPPA would be crucial in redefining the investment and trade cooperation between the two countries, as it gives guaranteed safeguards to investors. It will MAY 2014

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Country focus India

investment of USD 17.5 million in Rainbow Hospitals in Andhra Pradesh. Mohebi Logistics (a supply chain management company in Dubai) is setting up a subsidiary in Pune.

Ra s A l K h a i m a h Fre e Tra d e Zone(RAKFTZ) and Khalifa Industrial Zone of Abu Dhabi (KIZAD) have all opened their offices in Mumbai to attract investments/businessmen from India. On the other hand, Dubai Exports and Dubai’s Department of Tourism and Commerce Marketing with their Mumbai office are boosting the visibility of goods and services from Dubai while providing on the ground services to small & medium enterprises.

His Excellency T.P Seetharam, Indian Ambassador to the UAE

significantly boost investments in Indian infrastructure projects by the UAE and will help enhance investor confidence.

Can you tell us something about the organisations/companies active in India and in which sector?

EMAAR, a real estate company of Dubai Government, is active in the real estate sector having already set up a major township, an international convention centre and a golf course in Hyderabad. Emaar and India’s MGF Development Limited, joined together to form India’s largest FDI in real estate and constructed flats for the Commonwealth Games (2010) Village.

Dubai Ports World is now operating 6 major Ports in India at Nhava Sheva, Navi Mumbai, Chennai, Mundra, etc, following its acquisition of the UK’s P&O. DP World constructed the International Container Transshipment Terminal (ICTT) at Vallarpadam in Kochi (Kerala).

Abu Dhabi’s National Petroleum Construction Company (NPCC), has won a major engineering and construction 50

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contract to build offshore platforms from India’s Oil and Natural Gas Corporation(ONGC). NPCC will build the WO-16 cluster and SB-14 wellhead platforms project at the offshore Mumbai High Field, valued at Dh550 million.

Abu Dhabi National Energy Company (TAQA) has a presence in India, through a company called “ST-CMS Electric Company Pvt Ltd.”, operating 250 MW lignite- fired power plant in Neyveli, Tamil Nadu. TAQA is also in the process of tying up with the private sector in India for hydel power projects in North India, with an investment of USD 1.6 billion.

Abu Dhabi Investment Authority (ADIA), which is a sovereign fund owned by the Abu Dhabi Government has around USD 700 billion in investible funds. Most of the investments made by ADIA in India are in portfolio investments. It owns a 12 per cent stake in the Indian Company Infrastructure Leasing & Financial Services (IL&FS).

Dubai-based private equity firm Abraaj Group has announced (in August 2013) an

How do you see the future of the bilateral trade relations in the coming years?

UAE and India have a multi- dimensional partnership. While trade and oil continue to lead the economic ties between the two countries there exists emerging synergy in the new investment areas like infrastructure, ICT, and food processing.

With the liberalisation of key sectors in India like telecommunications, housing and real estate, construction, petroleum and natural gas, there are increasing opportunities for UAE investment into India. The recent reforms in India to boost FDI into the retail and aviation sector also offer huge potential for the UAE. Abu-Dhabi based Etihad Airways is already in the process of acquiring stakes in Jet Airways.

Additionally, UAE- based retail giants like the EMKE Group and Landmark Group are expanding their presence in India. Indian exporters regularly take part in all the major exhibitions held in UAE and also conduct buyer-seller meets, exclusive product specific promotional events. The signing of UAE-India Bilateral Investment Promotion and Protection Agreement (BIPA) on December 12th 2013, the regular meetings of High Level Task Force on Investment and the signing of an India-UAE MoU on cooperation in renewable energy, (especially solar and wind energy) on January 18th 2014 will really further boost our trade relations in the coming years.