Trade & Export Middle East - November 2012 by Trade Export

ISSUE 11 | november 2012

A practical guide to going global

www.tradeandexportme.com

Country Focus

Australia

Today's Innovation:

Tomorrow's Legacy

IN ASSOCIATION WITH

Mahmood Al Bastaki, CEO, Dubai Trade, talks about his vision for Dubai as a trading hub PLUS

maritime trade

Bahrain logistics zone

credit insurance

PUBLICATION LICENSED BY IMPZ

EDITOR’S LETTER

Publisher Dominic De Sousa Group COO Nadeem Hood

It’s all about trade...

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

It indeed is – and that’s why it was a pleasure to spend some time with Mahmood Al Bastaki, CEO, Dubai Trade, and to get to know his vision about Dubai’s growth as a trade hub. Dubai Trade is the one-stopshop for the trading community and it’s unshakeable in its mission to make trade simple, easy and quick. So please turn to page 12 to read all about it and more.

EDITORIAL Senior Editor Aparna Shivpuri Arya aparna@cpidubai.com +971 4 440 9133 Contributing Editor Mike Byrne mikeb@cpidubai.com +971 4 440 9105 ADVERTISING Sales Manager Sami Sabbah sami@cpidubai.com +971 4 440 9152 PRODUCTION AND DESIGN Production Manager James P Tharian james@cpidubai.com +971 4 440 9146 Database and Circulation Manager Rajeesh M rajeesh@cpidubai.com +971 4 440 9147 Design Director Ruth Sheehy ruth@cpidubai.com Head of Design Fahed Sabbagh fahed@cpidubai.com +971 4 440 9107 Designer Froilan A. Cosgafa IV froilan@cpidubai.com +971 4 440 9107 Photographer Jay Colina jay@cpidubai.com +971 4 440 9108 DIGITAL SERVICES www.tradeandexportme.com Digital Services Manager Tristan Troy Maagma

In our country focus section, this month we bring you all the details about doing business in Australia. You’ll be surprised with the investment possibilities available and the incentive offered by the government to foreign businesses. So waste no time and explore the opportunity of investing in Australia. Moving on, in our logistics section, we also get talking to the Director General of Bahrain Logistics Zone to know more about this logistics gateway to the country’s industrial zones. We follow this up with another important aspect of logistics- security, and how can companies deal with the increasing costs of securing their goods. Of course, it doesn’t end here as we bring forth interesting features on DIFC, credit insurance and maritime trade along with explaining the concept of shipping guarantee. We had a good time putting this issue together, and we hope you’ll enjoy reading it, in the future. Please don’t forget to let us know your thoughts and what issues would you like to read about. Till then,

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

Aparna Shivpuri Arya, Senior Editor, Trade and Export Middle East 1013 Centre Road, New Castle County, Wilmington, Delaware, USA

Branch Office PO Box 13700 Dubai, UAE Tel: +971 4 440 9100 Fax: +971 4 447 2409 Printed by Printwell Printing Press © Copyright 2012 CPI All rights reserved While the publishers have made every effort to ensure the accuracy of all information in this magazine, they will not be held responsible for any errors therein.

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NOVEMBER 2012

16 12

trade talk

NOVEMBER 2012

updates

ISSUE 11

NOVEMBER 2012

NEWS: International news and trends with domestic trading relevance.

EVENTS CALENDAR: A snapshot of exhibitions and conferences around the world, which can help you spend less time planning and more time attending.

INTERVIEW: Aparna Shivpuri Arya caught up with Mahmood Al Bastaki, CEO, Dubai Trade, to know more about this one-stop institution which has pushed trade to another level in Dubai.

EXPORT: Dr Ashraf Mahate, Head of Export Market Intelligence at Dubai Exports, and Vice Chair of the Economic Policy Committee, Dubai Economic Department, talks to us about how Islamic finance is an important component of the service sector.

LOGISTICS: The Bahrain Logistics Zone (BLZ) is the regionâ&#x20AC;&#x2122;s first boutique logistics area offering a high quality environment to companies that meet its tenancy requirements. We caught up with Hassan Ali Almajed, Director General, to get to know more about this logistics gateway to the countryâ&#x20AC;&#x2122;s industrial zones.

LOGISTICS: The prevailing global security situation places pressure and scrutiny on the logistics industry to ensure freight moved around the globe does not pose a security threat to its stakeholders. Anthony Beckley, Hub General Manager, DHL Express, tells us how to comply with the regulations and to deal with the increasing costs of security measures.

CONTENTS

trade talk

LEGAL: We bring you the details about the role of the DIFC Courts, since understanding the judicial system of every country where executives wish to conduct business is a crucial consideration, long before they become involved in a potential legal dispute or are required to enforce a debt.

INSURANCE: Mahan Bolourchi, Head of Risk Management, Information and Claim responsible for Middle East Euler Hermes GCC, elaborates on the concept of credit insurance and how does it work for an organisation.

MARITIME: Maritime trade has always been an important aspect of trading in this part of the world. Jasamin Fitche, Managing Partner, Fichte & Co Legal Consultancy, talks to us about the maritime law in the UAE and what the traders need to be aware of.

FINANCE: Madhavan Rajagopalan, Executive, Trade Finance Products, National Bank of Fujairah PSC, explains to us the concept of shipping guarantee and how it offers the security needed in doing international transactions.

focus

COUNTRY FOCUS: AUSTRALIA

INTERVIEW: We interviewed Mr Gerard Seeber, Council General and Senior Trade Commissioner for Middle East and North Africa, to get an overview of Australia’s trade relations with the UAE.

Bilateral relations: The Australia Arab Chamber of Commerce & Industry (AACCI) is the top national association for bilateral trade and investment between Australia and the Arab League countries. Cynthia Dearin, CEO, AACCI, speaks to us about her take on these relations.

New South Wales: New South Wales is located in the eastern part of Australia, with Sydney as its capital. Barry O’ Farrell, Premier, New South Wales, talks to us about his opinion on bilateral trade relations between the UAE and NSW and what the future holds.

Victoria: Trade relations between Australia and the Middle East and North Africa are warm, multifaceted and growing rapidly. We take a look at the investment opportunities in Victoria.

Western Australia: Western Australia (WA) has a huge natural endowment of mineral and energy resources and the State’s economic strength is largely built on its mineral resource and oil and gas sectors. It also has a strong agricultural sector and immense tourism potential. The Western Australian Trade Office highlights the business potential for Middle East companies in this part of Australia.

Queensland: Queensland has a strong and growing relationship with the UAE. In addition to the Queensland – Abu Dhabi Memorandum of Understanding, ‘sister city’ ties exist between Brisbane and Abu Dhabi, and between Gold Coast and Dubai. We take a look at the tourism sector and the investment opportunities it offers.

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26 5

Updates global watch

Trade within emerging markets- key to GDP growth Emerging markets will account for upwards of 80% of total global GDP growth in 2012, driven in part by trade within and between these markets. One of the rare bright spots in global economic news, growth in interregional and intraregional trade among emerging markets makes up one-fifth of the world’s total trade and is expected to surpass North-South trade flows by 2030. “Despite an economic slowdown in mature markets, emerging economies have been quite resilient,” said Patricia Francis, Executive Director of ITC. “That resilience is due to the private sector’s increased focus on markets like Indonesia and other growth market across Asia, Africa and Latin America.” Indonesia, the host of WEDF 2012, is now the world’s 15th largest economy (PPP adjusted) and a prominent advocate for increasing trade between emerging economies. Indonesian President Susilo Bambang Yudhoyono addressed attendees at today’s opening of the three-day event.

“Indonesian exports to other emerging markets have continued to grow at a much higher rate than exports to traditional markets like Japan and the U.S.,” said Gita Wirjawan, the Indonesian Minister of Trade. “To continue leveraging trade opportunities with fast-growing emerging markets, we are focusing on export competitiveness and added value product quality.” Indonesian exports of non-oil and gas commodity to other emerging markets such as Côte d’Ivoire, Libya, Guinea, Mauritius, Macedonian Republic, Laos, Haiti, Ethiopia, Nicaragua and Liberia have increased significantly from USD 90.02 million last year to USD 318.2 million this year. “Indonesia is one of the fastest growing economies in Southeast Asia, and one which continues to use trade as a conduit for growth and development,” said Pascal Lamy, Director-General of the World Trade Organization (WTO). “We are pleased that the WTO’s ninth Ministerial Conference will take

place in this beautiful country in December next year. Enhancing and diversifying twoway international trade between Indonesia and its trading partners would certainly benefit the development of all.” Other emerging economies in Latin America and Sub-Saharan Africa also stand to benefit greatly from growth in interregional trade. For example, according to a recent ITC report, sub-Saharan African exports to Asia, including both commodities and value-added processed goods, are expected to increase up to 14% over the next decade. The bulk of South-South trade has traditionally occurred within Asia,” said Supachai Panitchpakti, UNCTAD SecretaryGeneral. “Where this trade is inter-regional, it often involves commodity exports like oil and other unprocessed goods to Asia, but there are significant market opportunities in Asia and Latin America as well as within sub-Saharan Africa for processed African exports, like leather, textile and other value-added goods. Likewise there is a great potential for significant growth in intraregional Latin American trade in goods and services, one challenge being the accumulation of origin for the full exploitation of present Regional Trade Agreements.”

Beyond Doha Qatar Chamber, host of the upcoming ICC WCF 8th World Chambers Congress, announced the launch of a global initiative aimed at bringing the world together to shape a new trade agreement for the 21st century. The ICC Business World Trade Agenda, also known as “Beyond Doha”, picks up where the Doha Round stalled and injects a new vigour in making globalisation an inclusive process. “Qatar Chamber, together with the International Chamber of Commerce (ICC) is playing a pivotal role in ensuring that business and trade are back on the international agenda

as tools of global economic growth. As economies around the world struggle to cope with emerging challenges, the ICC Business World Trade Agenda is a remarkable new effort to advance global trade negotiations,” said Qatar Chamber and ICC Qatar Chairman, H.E. Sheikh Khalifa bin Jassim bin Mohammed Al Thani. Launched by ICC in December 2011 at the World Trade Organization (WTO) Ministerial Conference in Geneva as an answer to an appeal from G20 leaders for new approaches to trade negotiations, the ICC Business World Trade Agenda includes a call on governments to:

NOVEMBER 2012

• Conclude a trade facilitation agreement • Advance the multilateral process under the World Trade Organization (WTO) framework • Liberalize trade in services • Lower barriers to trade in information technology products and services • Work towards a multilateral framework on investment “We are incredibly proud of associating and supporting this latest initiative of the International Chamber of Commerce for three years and look forward to it affecting positive change,” said Sheikh Khalifa.

Since the launch of the Agenda, ICC has been mobilizing international business – representing small, medium and large enterprises that produce the goods and services traded daily throughout the world – to define a practical and forward-looking multilateral agenda, through a series of consultations around the world for regional inputs, including a planned session in Doha in November ahead of the WTA Business Summit to be hosted by Qatar Chamber on the side-lines of the biennial ICC World Chambers Federation (WCF) 8th World Chambers Congress on 22 April 2013.

We are the new AIG

Bring on tomorrow www.aig.com AIG is the marketing name for the worldwide property-casualty, life and retirement, and general insurance operations of American International Group, Inc. For additional information, please visit our website at www.aig.com. Products and services are written or provided by subsidiaries or affiliates of American International Group, Inc. Not all products and services are available in every jurisdiction, and insurance coverage is governed by actual policy language. Certain products and services may be provided by independent third parties. Insurance products may be distributed through affiliated or unaffiliated entities. Certain property-casualty coverages may be provided by a surplus lines insurer. Surplus lines insurers do not generally participate in state guaranty funds and insureds are therefore not protected by such funds.

Updates REGIONAL TALK

Food Logistics Forum to be held in Dubai in November includes valuable interactive sessions for companies on supply chain regulations and operations, engaging market opportunities and global supply chain leadership strategies.” The two day forum will bring together 150 global and regional logistics business leaders to address industry concerns, participate in interactive workshops and discuss market growth opportunities. Discussion topics include: bridging the gap between regulators and the industry, habits that make successful managers, reasons why supply chains fail, benchmarking supply chain performance, advice on importing from emerging countries and efficient inventory control management practices. With the GCC’s logistics market valued at USD27 billion according to a recent report by Booz & Co, global transportation and logistics players regard Dubai, currently the third largest re-exporter of food in the world, as playing a critical role in the future growth of food logistics. The opportunity that food logistics represents in the region and the growing demand to address the critical issues that it faces is demonstrated by the debut of the region’s first Food Logistics Forum, being held on 20 and 21 November 2012 at the Dubai World Trade Centre. The conference runs alongside three of the region’s most highly regarded specialist food industry shows - SEAFEX, Speciality Food Festival, Sweets and Snacks Middle East. Trixee Loh, Senior Vice President of DWTC, organiser of the Food Logistics Forum commented, “The Food Logistics Forum showcases the latest trends and innovations in the industry and

Confirmed speakers at the event include: • Asia Abdulwahab, Head of Studies and Food Planning, Dubai Municipality • Mohsen Ahmad, Director of Stakeholder Relationship and Operation Development, Dubai World Central • Geert Swinnen, Supply Chain Head, Aujan Industries • Michael Fell, Manager Fresh Food, Emarat • Dina Khairo, Scientific Regulatory Affairs and Nutrition, Director, PepsiCo • Aamir Mehdi, Operations Head, Fonterra • Alex Borg, Regional Director and Coordinator, Chartered Institute of Logistics and Transport (CILT) • Jamie Ferguson, Regional Manager MENA, Meat & Livestock Australia • Mike Lee, SVP – Logistics, Al Tayer Group

Brazilian food exports to the region on a rise Brazilian food exports to the Arab world has reached over USD 6.6 billion from January to August 2012 with the Kingdom of Saudi Arabia, Egypt and the UAE emerging as the top markets in the region, according to a new report released by the ArabBrazilian Chamber of Commerce. Brazilian exports to KSA reached over USD 1.5 billion during the period, while exports to the UAE were valued at over USD 930 million. The Egyptian market recorded the biggest jump with exports totaling over USD 1.2 billion, representing a 28.8%

increase over the same period in 2011. According to the ArabBrazilian Chamber of Commerce, Brazilian exports of meat of bovine animals (frozen) accounted for the biggest increase with an export value of over USD 554 million, up by nearly 45 % from the same period in 2011. Cane or beet sugar and chemically pure sucrose (solid form) are Brazil’s top export products to Arab countries with a combined value of nearly USD 2.5 billion, followed by meat and edible offal

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of poultry (fresh, chilled or frozen) with a combined value of nearly USD 1.8 billion. Corn (maize) is another important export product

as export value increased by more than 73%, reaching over USD 554 million from just USD 294.9 million in 2011.

MENA region shows positive economic outlook The global economic outlook looks more downbeat as major world economies struggle with low real GDP growth. However, prospects for the MENA region have strengthened due to higher oil prices and increased government spending, according to a QNB Group review of the IMFâ&#x20AC;&#x2122;s October World Economic Outlook, released on the occasion of the annual IMF meeting held this year in Tokyo. Global real GDP growth has been revised downwards to 3.3% in 2012 and to 3.6% in 2013. The growth outlook for the global economy has deteriorated as the recovery in the 35 advanced economies has remained weaker than expected. As advanced economies account for 51.1% of global GDP, this has caused a major drag on the world economy.

Meanwhile, growth prospects for the MENA region have strengthened with a forecast growth of 5.3% in 2012 and 3.6% in 2013. Growth in the MENA region is two-dimensional; with a clear distinction between oil exporters and importers. The gap in the growth outlook between them has widened. While growth prospects for oil exporters have improved to 6.6% in 2012 (up from 4.8% in the April 2012 forecast), the prospects for oil importers have substantially declined to 1.2% in 2012 (down from 2.2% in the April 2012 forecast). Higher oil prices and increased government spending have been the key differentiating factor that has brightened the growth prospects for oil exporting countries. The outlook for oil importing countries remains

subdued as political turmoil and change have led to declining economic activity. Looking at oil prices based on the futures market, the IMF has revised downwards its oil price assumptions to USD106.2/b in 2012 and USD105.1/b in 2013, from USD114.7/b and USD110.0/b respectively in

the April 2012 forecast. Supply increases from Saudi Arabia and the US and the worsening outlook for global growth, and hence oil demand, have led to lower expectations for oil prices. Further downside risks to oil prices are posed through weak demand from Asia and Europe according to QNB Group.

Peru signs an economic agreement with the GCC The III ASPA Arab - South American Summit successfully took place in Lima, Peru, on the 1st and 2nd of October, with the participation of several Heads of States and numerous leading business leaders from both regions. The UAE delegation was led by H.E. Dr. Anwar Gargash, Minister of State for Foreign Affairs, and was composed of an important group of Emirati business representatives, from companies such as DP World, ADNOC and Masdar. The Summit concluded with the adoption of the Declaration of Lima, which contains broad coincidences in favor of multilateralism, non-proliferation, the fight against terrorism and support for the Palestinian state, as well as concrete agreements to foster connectivity, trade, investment and technical cooperation

between the members of the Arab League and of the Union of South American Nations (UNASUR). During the Summit, Peru and the Gulf Cooperation Council (GCC), represented by the Foreign Ministers of Peru and Saudi Arabia, signed a Framework Agreement on Economic, Commercial, Investment and Technical Cooperation to develop a feasibility study for a Free Trade Agreement between them, encourage capital flows

and create a Joint Committee to foster exchanges on these issues. The parallel ASPA CEO Summit, for its part, gathered in Lima 500 corporate leaders from both regions, with more than 200 business meetings held during the two days of the event. The Peruvian Ministers of Economy, Energy, Transportation and Trade presented the participants with a wide range of investment opportunities in the country. The official delegations also agreed that the next IV ASPA Summit will take place in Saudi Arabia in 2015 and that several high-level meetings will be convened during 2013, including meetings of the Arab and South American Ministers of Health and Education, to take place in Peru, and the meeting of the Ministers of Energy of both regions, scheduled in January in the UAE.

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Community events calendar

EXHIBITION

DATE

LOCATION

February 2013

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 and around the world, so you spend less time planning and more time attending.

The NAFEM Show 2013

1st

USA

Printpack India

5th - 10th

India

Regional Consumer Goods

15th - 17th

Germany

IDEX 2013

17th - 21st

UAE

EXHIBITION

Australian Oil and Gas Exhibition

DATE

20th - 22nd

LOCATION

March 2013

EXHIBITION

DATE

LOCATION

November 2012

Australia

CeBIT 2013 (IT)

5th - 9th

Germany

Propak Africa

12th - 15th

South Africa

Koplas

12th - 16th

Korea

79th UFI Congress

6th - 9th

UAE

Transinfra

13th - 15th

Switzerland

Oil & Gas Ukraine

1st - 3rd

Ukraine

Motortec

13th - 16th

Spain

The Big 5

5th - 8th

UAE

April 2013

Abu Dhabi International Petroleum Exhibition

5th - 8th

UAE

SMM India 2013

1st April

India

World Hospital Congress

8th - 10th

UAE

Geosynthetics

1st-4th

United States

Dubai International Jewellery Week Exhibition

10th - 13th

UAE

Brasilplast 2013

1st

Brazil

Dubai International Motor Show

10th - 14th

UAE

EMAQH 2013

1st-13th

Argentina

Dubai Air Show

13th - 17th

UAE

Aluminium Dubai 2013

1st

UAE

International Tourism Exhibition (ITE)

14th - 16th

UAE

Intermodal South America

2nd-4th

Brazil

Roadex/Railex 2011

18th - 20th

UAE

Building Material and Equipment

2nd-5th

Russia

Food Logistics

20th - 21st

UAE

International ICT Expo

13th-16th

Hong Kong

2011 World Robot Olympiad UAE

20th - 21st

UAE

May 2013

The Middle East HR Summit And Expo 2011

20th - 24th

UAE

Del Mar Electronics and Design Show

1st-2nd

USA

HR Best Practices in Oil, Gas and Petrochemicals

21st - 22nd

Kuwait

Business4Better

1st-2nd

USA

Gulf a la Carte 2011

21st - 23rd

UAE

India Warehousing Show

2nd-4th

India

SIAL Middle East 2011

21st - 23rd

UAE

Arabian Travel Market

6th-9th

UAE

FM Expo + Big 5 Show

21st - 24th

UAE

Project Qatar

6th-9th

Qatar

Seatrade Middle East Maritime

27th - 29th

Qatar

Hofex

7th-10th

China

Milipol

27th - 29th

UAE

WEPower

12th-14th

KSA

Middle East Manufacturing Exhibition 2011

28th - 30th

UAE

Power Gen India and Central Asia

13th-11th

India

SIM - Signage, Imaging & Media Show 2011

28th - 30th

UAE

Cards and Payment Middle East

14th-15th

UAE

Airport Exchange 2011

29th - 30th

UAE

Instal Middle East

14th-16th

UAE

Global Water and Beverage Technology Congress

29th - 1st Dec

UAE

Distree Middle East

14th-16th

UAE

PALME Middle East

14th-16th

UAE

December 2012 World SME Expo

1st - 3rd

Hong Kong

Aquatech India

14th-16th

India

“China Import & Export Commodities Exhibition“

1st - 4th

Malaysia

Saudi Food, Hotel and Hospitality Arabia

19th-22nd

KSA

World Green Tourism 2011

5th - 7th

UAE

Middle East Event Show

21st-23rd

UAE

Middle East Natural & Organic Products Exp

5th - 7th

UAE

Cityscape Qatar

22nd-24th

Qatar

National Exhibition for Small & Medium Enterprises

5th - 8th

UAE

Trans Middle East Beirut Exhibition and Conference

29th-30th

Lebanon

Middle East Logistics Oil and Gas

7th - 10th

UAE

June 2013

International Real Estate & Investment Show

11th - 12th

UAE

Premiere Orlando

1st-3rd

USA

Airport Suppliers Conference

11th - 12th

UAE

Aluminium China 2013

2nd-6th

China

Abu Dhabi International Motor Show

19th - 23rd

UAE

International Operating Conference and Trade Show

3rd-5th

USA

Hospital Build Middle East

3rd-5th

UAE

January 2013 Tekno Tube Arabia

7th - 10th

UAE

Automotive Interior Expo

4th-6th

Germany

Arab Plast

7th - 10th

UAE

Energy Lebanon 2013

4th-7th

Lebanon

Domotex Hannover

12th - 15th

Germany

Automechanika Middle East

4th - 7th

Germany

Offshore Middle East

21st - 23rd

Qatar

Transport Logistics

11th-13th

UAE

PROMAT

21st - 24th

USA

Go Expo- Gas and Oil Exposition

11th-13th

Canada

Trans Oman

28th - 30th

Oman

Beirut International MediPharma Fair

13th-15th

Lebanon

Road Trans Africa

24th-25th

South Africa

NOVEMBER 2012

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@cpidubai.com

Save the date!

TRADE TALK Interview

Today’s innovation:

Tomorrow’s legacy Dubai’s tryst with trade started with the decades ago from Dubai Creek. And now Dubai is at the forefront of trade, competing with Asian economies, such as Singapore, when it comes to the ease of doing business. Aparna Shivpuri Arya caught up with Mahmood Al Bastaki, CEO, Dubai Trade, to know more about this one-stop institution which has pushed trade to another level in Dubai.

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ow important is trade for Dubai? Can you please give us an overview?

Trade throughout the history of Dubai has been a core for the Emirate. In early 1800s, the foundation for trade was established at the Dubai Creek where goods and shipment from South Asia, Yemen and GCC countries were traded. Dubai was the hub and played the role of a distribution point. The development of Port Rashid in early 1970s followed by the Port of Jebel Ali in 1979 improved the trade scenario. Jebel Ali is the biggest port in the Middle East and more than 70% of the trade cargo goes through it. Imports to the Midde East come through Jebel Ali which is an important entry point for the entire region. Since Dubai is not oil rich, the dependence on trade is huge. Trade, logistics and transportation contribute to almost 30% of Dubaiâ&#x20AC;&#x2122;s GDP and are important for the growth

that is exported or imported from Dubai, the customers have to interact with the ports and the customs. This interaction is facilitated through the portal. So we are the front end of the port and customs to the trading community. For instance vessel arrival, berth booking, offloading of containers and so forth is all organised online through the Dubai Trade portal. Customs declaration and submissions are done through us as we are the single-window for traders from the time of clearance to the time the good reaches the warehouse or leaves the country. We are the catalyst for smooth cargo movement and for a streamlined and integrated process, through all the service providers and the stakeholder. Dubai Trade is the integrator for the trading community. In the past, each stakeholder (DP Wold, Dubai Customs, Jafza) had its own Website but now they are all under one common umbrella which is the Dubai Trade portal - the single window for trade facilitation.

Dubai Trade is a trade facilitator when it comes to the movement of cargo. Any good that is exported or imported from Dubai, the customers have to interact with ports and customs. This interaction is facilitated through the Dubai Trade portal. and prosperity of Dubai. All the big players of the logistics are here because of trade. More than 120 Fortune 500 companies are residing in JAFZA. The entire trade community is herethe freighters, shippers. Emirates SkyCargo and Dnata are responsible for the air transport whereas the port is there for the sea trade. Sea trade is important with 70% of Dubais trade going through the sea, but we, at Dubai Trade, support all the three modes of trade. We have integrated with Emirates SkyCargo to showcase their services on our portal. It is proving successful and itâ&#x20AC;&#x2122;s very important for the well being of the UAE.

How does Dubai Trade fit into all this?

Dubai Trade is a trade facilitator when it comes to the movement of cargo. Any good

Dubai Trade emerged live in 2003 and was launched by the direction of H.E Sultan Ahmed Bin Sulayem (Chairman of DP World). As according to the vision of H.H Sheikh Mohammed, where he mandated the e-government system, which it is not only about the public getting services. It is also for the businesses when it comes to cargo movement to make the process streamlined.

How many shipments and transactions have been carried out so far? Since we started in 2003, until today, the number of companies has increased from a couple of hundred to 67,000 companies. The number of transactions in 2011 were close to 13,000,000. So, it has proven NOVEMBER 2012

TRADE TALK Interview

successful and overall right now, more than 95% of the services are available online.

How has the single window clearance reduced cost and time?

Whatever we do, it is with the bigger aim of making trade easier, faster and more cost-effective to the trading community. Dubai Trade’s single window by default has reduced the time for the approval and processing of documents. Everything can be done anytime, anywhere. You dont have to wait for the office to open – its 24/7. E-services improves the truck-turnaround time- that is how much time a truck takes to go and pick up the container and leave the port premises. When inspection is required all parties involved are well informed ahead of inspection time and date - avoiding delay and unnecessary charges which in return improves efficiency and productivity. Single window also cuts down costs. For instance, a company usually will have a few PROs, who will deal with the custom clearance, ports clearance and so forth. Now you just need one person who is sitting in the comfort of his office and doesn’t need to spend on parking fees, salik, gas and so forth. Therefore, it’s cheaper for the company itself. According to a report by the Emirates Competitive Council on Dubai Trade, the reduction in the number of days required to import or export goods via Dubai ports has gone down from 12 days to seven days and has potentially lead to total savings of AED 148 billion (more than USD 40 billion) over five years ending 2011. The overall outcome and ultimate goal of this trading time and cost efficiency is high potential for growth in international trade via the UAE, which already ranks among the world’s top trading hubs and is continuously improving its global competitiveness record. The report’s 2012 edition indicates that the UAE is now ahead of the Organisation of Economic and Cooperation Development (OECD) countries by a wide margin. In the UAE, it takes only seven days to export a container at a cost of USD 630 and seven days to import at a cost of USD 635, the report says, while in high-income OECD countries it takes 10 days to export and 11 14

NOVEMBER 2012

days to import, with the cost per container exceeding USD 1,000 for import or export. Our aim is to be the best - And as per the World Bank, the top five countries are quite close to each other and in terms of cost. Considering the vast advancements in technology worldwide, we are more advanced in other aspects of trade. Reflecting upon “costs” we are far cheaper than competing countries.

How did you get the blueprint for Dubai Trade?

We observed Hong Kong, Singapore and Spain and how they have done their single window concept. We wanted to be the same, if not better. Here, seven years ago, ports,

If it doesn’t match, you go to another freight forwarder. Our aim is to fully automate this process through our portal- all the shipping lines will submit their schedules to us and we will upload them online so that the traders have all the information at their convenience. The next step will be cargo booking, just like booking a passenger seat. We have already tied up with the big shipping lines for this. Also, we have an online insurance service branded as (TradeShield), which is still at its startup stage. The next step is to have it as a more full-fledged e-service. We are adding more banks to our electronic payment gateway. We have also re-launched the new look and feel of Dubai Trade portal – it has a better user-interface and is easier to

Today’s innovation is tomorrow’s legacy”- so we have to be ahead of the game. Dubai has created the momentum and they say it’s difficult to reach the top but I believe it’s more difficult to stay on the top than to reach it. We have to be competitive, far-sighted and forward looking to be ahead of the game otherwise we’ll miss the boat. customs and free zones were under one umbrella- PCFC (Ports Customs Free Zone Corporation) and this was where the genesis of Dubai Trade took place. That helped in the emergence of the single window.

Are there any forthcoming developments?

There are a couple of things we are working on. We’ll soon be launching pre-paid methods of payment under our electronic payment gateway, called Rosoom Wallet. The word “Rosoom” refers to “charges” in Arabic, hence its purpose. It’ll be a new method of payment- a virtual wallet where the user can pay for certain services. The official launch of this new payment method will be within the coming few weeks. Second, the trading community will soon be able to see the vessel schedules. Today when you want to ship something to another country, you go to your freight forwarder and you check which ship leaves on which day.

navigate through. We have also launched the revamped customer registration module which has state-of-the-art technology. My motto is - “Today’s innovation is tomorrow’s legacy”- so we have to be ahead of the game. Dubai has created the momentum and it is said that it’s difficult to reach the top but I believe it’s more difficult to stay on the top than to reach it. We have to be competitive, far-sighted and forward looking to be ahead of the game otherwise we’ll miss the boat. Nature does not like vacuum – if you dont fill it someone else will. Freight business is very profitable. Salalah, Qatar, Bahrain, KSA and AUH- are heavily investing in port infrastructure and in the expansion of their facilities. It is important to know that to attract trade- you need to be competitive. People come to Dubai, because we are probusiness. Our attitude is positive and we are proactive and learn from our mistakes.

VESSEL SCHEDULES FROM MAJOR SHIPPING LINES NOW ON DUBAI TRADE

TRADE TALK Export

Service across

borders

The UAE has always been an important provider of services, initially in the area of trading and then, in the hospitality sector. Organisations such as Dubai Exports play a vital role in assisting the service sector in developing international markets. Dr. Ashraf Mahate, Head, Export Market and Intelligence, Dubai Exports and Vice Chair, Economic Policy Committee, DED and Mohammed Al Kamali, Director, International Export Markets Developed, Dubai Exports, talk to us about how Islamic finance is an important component of the service sector.

NOVEMBER 2012

ithin the Middle East region the UAE is a leading exporter of goods and services. Data produced by the UAE Federal Customs shows that in 2011 non-oil foreign trade jumped AED 12.6 billion to AED 70.2 billion in 2011 from AED 57.6 billion in 2010. The exports and re-exports showed growth rates of over 20% at AED 7.5 billion AED 16.6 billion respectively. However, these trade, and in particular export figures as impressive as they are, hide a much greater story namely the services sector. Essentially, the service sector is all types of activity excluding agriculture, mining and manufacturing. In mature economies the services sector tends to be much larger than the goods sector and accounts for a larger level of full time employment. More importantly, the services sector is at the heart of the SME sector and the innovation process leading to technological advancement and greater competitiveness. The former has also given rise to the country becoming a regional logistics and transportation hub that includes aviation with at least four locally owned carriers, shipping with the sixth largest port and the third largest port operator, trucking, pipelines, intermodal services as well as ancillary and support services. Allied to the growth of trade, logistics has been tourism which includes a diverse range of activities, such as lodging, food and beverages, recreational activities, exhibitions, conferences and expenditure while in transit. With the establishment of the free zones, and the development of the service sector, the UAE now has a comprehensive range of activities in this area which include: banking and finance, education and training, architectural, construction, and engineering services, information services and professional business services. There are key differences between the goods and services sectors, such as the intangibility and customer involvement in the case of the latter. These differences

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. For more information on Dubai Exports, please visit: www.dedc.gov.ae.

Statistics show that global Islamic banking assets have grown approximately 10% per annum from the mid 1990s when they were about USD 150 billion. Today, global Islamic financial assets stand at approximately USD 800 billion. Industry experts claim that over the next decade the sector may reach USD 4 trillion.

imply that exporting services is somewhat different if not a little more difficult than in the case of goods. More often than not services need to meet the exact requirements of the customer. Also, the intangibility of the service

implies that the customer does not have something that he can see but relies on the relationship and reputation of the service provider. However, a typical example of how Dubai Exports has been assisting the NOVEMBER 2012

TRADE TALK Export

service sector is in the promotion of the UAEâ&#x20AC;&#x2122;s capabilities and expertise in Islamic or Sharia compliant financial services to major markets abroad. Dubai Exports was pleasantly surprised by the overwhelmingly positive response to its initiatives and the successful outcomes that have been achieved to date. While the conventional financial system is recovering from the fallout of the international financial crisis Islamic finance on the other hand is growing rapidly. Statistics show that global Islamic banking assets have grown approximately 10% per annum from the mid 1990s when they were about USD 150 billion. Today, global Islamic financial assets stand at approximately USD 800 billion. Industry experts claim that over the next decade the sector may reach USD 4 trillion. In fact, some areas of Islamic finance, such as insurance or takaful, has been doubling in size each year since 2002. The growth of Islamic Financial Services has been driven by a growing Islamic population that is enjoying a rapid rise in purchasing power, due to better education and employment

ABOUT

Mohammed has over a decade of experience at a senior level in the areas of International Marketing, Trade Promotion and large scale Event Management both in the private and public sectors. He is currently, Director International Export Markets Development at Dubai Exports.

gaining widespread acceptance. These new products have increased investor awareness of Islamic products and made them more willing to invest in them. The same is true in the corporate sector whereby Islamic financial innovation has developed products while being Sharia compliant meet the needs of the modern business. The financial innovation has been greatly assisted by financial centers and their regulators who have understood the importance of the sector and its unique structure. In this respect the UAE has become the leader and pioneer with the first recognized Islamic bank being established in the country, the first Islamic stock exchange and not only

The DIFC has allowed a number of Sharia compliant firms to develop their products and services. In terms of regulation Dubai through the Dubai Financial Services Authority has developed an advanced level of regulation to supervise the firms within the DIFC.

opportunities. This has been supported by financial engineering and innovation in the provision of Islamic financial products and services. No longer is Islamic finance limited to simply the provision of interest free bank accounts but includes a whole spectrum of products such as fund of funds, exchange traded funds, hedge funds and real estate investment trust which are all 18

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does it have the greatest number of listed Islamic bonds or sukuks, but also the largest ever sukuk issued. Moreover, with its business clusters, such as the Dubai International Financial Centre (DIFC) and the Dubai MultiCommodities Center (DMCC) have been a catalyst for the development of diverse range Sharia compliant products. The DIFC has allowed a

number of Sharia compliant firms to develop their products and services. In terms of regulation Dubai through the Dubai Financial Services Authority has developed an advanced level of regulation to supervise the firms within the DIFC. Dubai has shown that it can be innovative through the development of new sharia compliant products to meet the needs of an ever increasing and sophisticated investor. The driving forces for the growth of Islamic financial services have largely been an increase in the focus or awareness of the Islamic identity leading to a greater demand for such products. Competition among conventional and Islamic banking has made the latter more attractive. Also, the increased liquidity of Islamic investors has meant that it has created a demand leading to the development of more bespoke and sophisticated solutions. At the same time governments around the world have provided the appropriate support for the development and promotion of Islamic financial services. One such example has been Australia. In this regard Dubai Exports has conducted a number of joint initiatives to promote Islamic finance in the country. The most recent of these was an Islamic Finance Roundtable with the Premier of New South Wales and the Minister for Western Australia, Barry Oâ&#x20AC;&#x2122;Farrell. Initiatives such as those by Dubai Exports go a long way to support not just Islamic finance but the whole service sector as well as to a certain extent also the goods sector.

TRADE TALK Logistics

The boutique logistics zone The Bahrain Logistics Zone (BLZ) is the region’s first boutique logistics area offering a high quality environment to companies that meet its tenancy requirements. We caught up with Hassan Ali Almajed, Director General, BLZ, to get to know more about this logistics gateway to the country’s industrial zones.

Located three kilometers from the KBSP, the BLZ offers integrated services and facilities for import, export, and re-export functions which serve to boost Bahrain’s position for international and regional trade and is perfectly designed to handle logistics requirements particularly for those wanting to reach the Northern Gulf markets of Saudi Arabia, Kuwait and Qatar, as well as the growing areas of Iraq and northern Iran. Additionally, the proximity of many different modes of transport make the site an excellent multimodal hub, which can handle shipping via air, road, and sea. The BLZ plays a key role in the Kingdom’s maritime and ports community occupying a pivotal location within the port’s boundary. It offers an all-encompassing scope for the operation of modern logistics and value-added services for a portfolio of carefully selected client companies that are in a strong position to exploit the special benefits of Bahrain’s focal position in the Arabian Gulf.

lease give us a brief background about BLZ

The Bahrain Logistics Zone (BLZ) was launched as the region’s first ‘boutique’ logistics area following completion of a feasibility study in May 2008. The boutique concept was designed to complement the new state-of-the-art Khalifa Bin Salman Port (KBSP) and accommodate export, re-export and value-adding logistics activities through KBSP and thereby boost Bahrain’s national economy. We developed a brand identity for Bahrain’s first boutique 20

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Logistics is an integral part of trade. How do you see this sector growing in Bahrain and its impact on trade? logistics area because BLZ was perfectly positioned to make the most of Bahrain’s strategic location in the Gulf which includes close road links to Saudi Arabia, Bahrain International Airport and the new KBSP. The unique boutique brand had to highlight these benefits to attract the region’s most respected logistics companies. Falling under the administration of the General Organisation of Sea Ports (GOP), the BLZ is a customs-free logistics area that aims to provide simplified, streamlined and efficient multimodal transfer of cargo.

Developing the logistics services industry in the Kingdom of Bahrain is a key initiative of the General Organisation of Sea Ports which is also in line with the Economic Vision 2030. With major economic initiatives currently underway, Bahrain is well positioned to leverage from the current USD trillion Gulf markets which is expected to double by 2030. We expect the logistics industry, and BLZ in particular, to achieve fast growth in response to increasing demand from businesses as the economies of the

GCC continue to spend large sums on infrastructure developments, economic diversification and industrial programmes.

zone’, unlike elsewhere in the region. In effect, the whole of the Bahrain has free zone status.

warehouses equipped with security and other management services are available from 1000 square metres.

The Bahrain Logistics Zone aims at attracting high-performing and long-term sustainable operations that focus on: • Third Party Logistics (3PL) services • General and specialised storage and distribution activities for export/re-export purposes • Value added logistics services, such as assembly, cosmetics weighing, mixing, filling, packaging and repackaging, de-consolidation/consolidation, kitting, palletising, labeling for distribution, testing and repair, and other value-addedlogistics activities

It is easy to see why the BLZ is the ideal location for a business when you look at the host of unique benefits that come with the zone’s integrated world-class services.

As part of the GOP’s vision to be a catalyst for economic development in Bahrain, The Bahrain Logistics Zone is set up as a pioneering landmark logistics development

What type of companies can set up business in BLZ?

How is the logistics park different from the free zone?

A logistics park offers a centralised location for the entire range of transportation activities and value added services needed by exporters and local traders for the shipment of their goods, acting as a hub for all modes of transport. This kind of park tends to follow the rules and regulations of the country it is set up in to simplify business processes and both the import and export of goods. A free zone is typically a ring-fenced jurisdiction with its own set of rules and regulations that differ from the mainland country it is set in. This concept has evolved recently in the GCC to allow companies to operate in a more efficient manner than if they could on mainland. The Bahrain Logistics Zone was set up to be a multi-modal customs free logistics park, benefiting from the Kingdom of Bahrain’s progressive business environment and legal framework with a mission to leverage KBSP and enhance the volume of export and reexport cargo throughput. In Bahrain, a foreign investor can retain 100% ownership and benefit from the region’s lowest taxes in addition to freely repatriating capital, profits and dividends, meaning there is no such thing as a ‘free

What services does it provide to businesses?

What processes are required for foreign companies to set shop in it?

A logistics park offers a centralised location for the entire range of transportation activities and value added services needed by exporters and local traders for the shipment of their goods, acting as a hub for all modes of transport. The BLZ offers the most cost-effective base for doing business in the Northern Gulf. The main benefits of choosing the BLZ as your business hub in the region include: • 100% foreign company ownership allowed • Multimodal access by land sea and air • Flexible plot options with a range of plot sizes starting from 2000 m² onwards • Purpose-Built Infrastructure with an ample road network and plot entry allowances, designed for lorry traffic needs • Dedicated 24-hour customs services • Dedicated account managers providing one-stop-shop services to assist you with licensing, registration and legal procedures • Seamless end-to-end services • Basic services such as facilities management and special waste management Tenants are offered a choice between building their own build-to-suit facility or renting ready-built state-of-the art warehouses. These options are complemented with a flexible pricing structure, to ensure there is a package to suit every tenant’s needs and set-up budgets. Current plot sizes start from 3000 square metres, while serviced

with the overall objectives of creating adequate and high value added employment, promoting private sector involvement and creating direct and foreign direct investments for Bahrain. In order to ensure that the overall objectives, strategy, and effectiveness of the zone is achieved and maintained, each company application will be evaluated based on its ability to meet the BLZ’s objectives. A comprehensive review of all application and supporting documents will be undertaken by an evaluation and selection committee to ensure that companies accepted for development are able to deliver on the commitments and objectives of the Bahrain Logistics.

What are your future projects and expansion plans?

In preparation for future growth and as part of our strategic objective to be a regional leader, construction of a new 66kV power substation is planned for completion later this year. When completed, the new station at the BLZ will increase power capacity to ensure all current and future power demands are adequately met. Security measures are also being bolstered at the BLZ, with a new perimeter fence and security protocols being drawn up. NOVEMBER 2012

TRADE TALK Logistics

How secure are you? The prevailing global security situation places pressure and scrutiny on the logistics industry to ensure freight moved around the globe does not pose a security threat or hazard to any direct or indirect stakeholders. Anthony Beckley, Hub General Manager, DHL Express, tells us how to comply with the regulations and to deal with the increasing costs of security measures.

/11 was a watershed moment in world history in that it changed the “world” and the “way we do things” not only in the US but around the globe. The logistics industry did not escape its effects in that subsequent to 9/11 and various other notable security incidents, the industry has had to quickly adapt to a new and challenging environment where stringent security requirements are being implemented to enhance border and transport security. Without a shadow of a 22

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doubt the way we do business today has changed and logistics solutions are being defined by security considerations when moving freight by air, sea and road. Ensuring that freight security is a top priority and a common goal for all stakeholders in the supply chain is a necessity. Efficient and effective security measures are of paramount importance and vital to ensure that free trade around the globe can continue unimpeded by the security threats.

Increased regulations and control of in aviation freight movements DHL – along with other integrators and aviation operators principally adheres to the global aviation safety and security rules set out by International Air Transport Association (IATA). As the driving force in aviation security, its guidance is universally accepted but the industry is now also increasingly exposed to additional regulations implemented by global

organisations and for specific markets, with the US and European Union (EU) being particularly stringent and focused on aviation security for passengers and cargo movements. Despite the universal call for the global alignment of regulations, the industry is faced with a real challenge when dealing with specific market aviation security requirements. This is illustrated by the incongruity and nonalignment of US / EU security requirements, which makes compliance expensive, difficult and fraught with complexity. The following example highlights an area of disparity in specific market regulations: the US only accepts x-ray screening when carried out on dual view x-ray machines, whereas the EU accepts single view x-ray screening but requires, under certain circumstances, additional screening that the US does not mandate. In March 2012, in an attempt to redress the imbalance and to implement common global standards for compliance, the International Civil Aviation Organisation (ICAO) and the World Customs Organisation (WCO), which have their own security programme, announced they have agreed to work together at the IATA global conference. The partnership aims to improve collaboration and cooperation amongst their organisations to tackle and manage the threats in the global air cargo security in a unified and cohesive way. They have developed a four-point plan which they hope will become the yardstick for a mutually acceptable solution to authorities across the globe 1. Advance electronic information and intelligence to manage cargo on a risk assessment basis. 2. Physical screening and the use of technologically and advanced equipment to screen cargo at source. 3. Secure supply chain control with operators preserving the integrity of the cargo until departure. 4. Mutual recognition of controls and operators as well as cooperation between them.

ABOUT

Anthony Beckley, a South African national, is the Dubai Hub General Manager for DHL Express. He has been with DHL Express for the past 10 years. During his time with DHL Express, Anthony has carried out and managed various large and diverse projects relating to operations. Prior to joining DHL Express in 2002, Anthony worked for 11 years at the First National Bank in South Africa heading the operations team as Senior Operations Manager in the Remote Payment / Banking division. He has an MBA from ESC Rennes with a major in Management Science. He is also a part-time lecturer at the Emirates Aviation College, where he teaches Management Science on the BA Honors program Project Management, plus two more core modules that pertain to Supply Chain and logistics strategy – all EAC courses are accredited by Coventry University UK.

The hoped-for outcome of this fourpoint plan is to enhance and align global aviation security standards by sharing the accountability and burden among all stakeholders. It also aims to gain acceptance of mutually acceptable risk management and screening standards across the globe, an outcome which would be a very welcome solution by the industry. The World Trade Organisation (WTO), which in principal supports stringent

systems in place to meet the requirements set out by the IATA as well the individual authorities. This is not only more efficient, but also reduces the risk of error. Whilst the industry stakeholders work to achieve unification and compliance, in terms of specific and diverse rules there is no doubt that the measures already put in place have led to a significant increase in air cargo security and the system is stronger and more robust than ever before. It is also

Despite the universal call for the global alignment of regulations, the industry is faced with a real challenge when dealing with specific market aviation security requirements. This is illustrated by the incongruity and nonalignment of US / EU security requirements, which makes compliance expensive, difficult and fraught with complexity. security compliance standards, has raised some concerns that it will jeopardise fairtrade opportunities for smaller countries that are unable to implement such onerous and costly procedures. This is where DHL can help by stepping in to facilitate the process. Like most integrators, we run a ‘Hub & Spoke’ model, making it easier and more efficient for organisations and governments alike by routing shipments through one of our centralised hubs, such as Dubai, where we have all the approved

true that compliance has a cost and it is vital that any regulations put in place take into account the cost and the capability of stakeholders to practically comply with the “rules” in place. Collaboration and cooperation Collaboration is the key to success, and in no area is this truer than security. To this end, effective businesses to government (B2G) partnerships are vital if we are to be NOVEMBER 2012

TRADE TALK Logistics

Collaboration is the key to success, and in no area is this truer than security. To this end, effective businesses to government (B2G) partnerships are vital if we are to be able to negotiate the myriad of challenges facing us on a national and international scale.

able to negotiate the myriad of challenges facing us on a national and international scale. Ensuring on-the-ground success in each of the 220+ countries and territories we operate in across the globe is no by means an easy feat, but one that we are very proud of having achieved. We continue to work closely with the authorities to share our experiences of best practice, and to assist our partners to implement systems locally but which are in line with international specification. An example of this collaboration is the groundbreaking work we as a key stakeholder have been doing with Dubai Customs to launch a new and enhanced customs programme called eMirsal2, aimed at modernising and simplifying customs procedures in the Emirate. In addition to governments, and regulatory bodies the WCO also plays a significant role in supply chain security, not least because it supports our core function by helping to ensure trade flows smoothly. Through its signatories, the WCO is implementing programs with a series of enforced initiatives put in place to streamline and enhance supply chain security. For example, they have specified the need to establish partnerships with stakeholders, profile shipments and shippers through information sharing and importer and exporters registration, supported by robust risk management processes. As a cornerstone of the WCO programme they actively advocate and promote the deployment of EDI interchange systems between the broker (i.e. DHL) and Customs authorities – which is reflected in the eMirsal2 system. But it is not just integrators that need to be forging these partnerships with the 24

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authorities and regulators. Compliance to security is everybody’s responsibility and not something you can delegate – the shipper, the integrator, the carrier and the authorities, all have their role to play in ensuring that the security is a top priority and that the supply chain is safe and secure. Enhancing security and risk management The key to maintaining robust security standards is to ensure that the methodologies in use empower the stakeholders to be proactive in managing the risks posed. The physical processes in place serve a valuable purpose but intelligence gathering and information sharing is the key to creating a safer and more secure supply chain – the challenge is in obtaining the right information at the right time, and then managing it correctly to proactively negate the risks identified. It is imperative that we use the pooled resources of all stakeholders to

move from being reactive to being able to identify the issues and putting in counter measures that are feasible and address the risks posed and key to this is a system of intelligence gathering The response to threats identified must be practical – for example, there has been a lot of discussion recently around the possibility of removing freight completely from passenger aircraft as way of improving security, but this does not fit the economic model of a commercial airline and will have consequence for the aviation industry. Whilst the aforementioned action would possibly have some effect in enhancing security, the focus must be on risk management strategies as opposed to an outright ban, with cargo profiling, known shipper programmes, physical freight screening, carrier and agent accreditation programmes and so forth, all being the basis of a more workable solution. The focus of all stakeholders must be to find the balance between the need for security, whilst facilitating trade and managing cost in the most practical way possible – we have come a long way in improving aviation security over the past 10 years and in time through partnerships, the alignment of strategies and objectives supported by viable physical and information gathering methodologies supply chain security will continue to improve.

ABOUT eMIRSAL 2 The eMirsal2 system employs the latest processing technologies, providing customers with a world-class paperless customs system that is designed to involve freight handling businesses in customs regulation and to improve international trade for businesses across the Middle East. Key activities included the investment and development of a DHL electronic interface, a programme that allows clearance applications to be uploaded electronically, thereby enhancing government to business communication and speeding up the customs clearance process. As a result of the new system, and specifically the information required from customers at the time of shipping, Cleared on Arrival has improved by 1.5% and bond outstanding storage by ½ day. Deployment was also supported by restructuring the Gateway clearance department, resulting in the establishment of a dedicated CS Gateway team with fully aligned service level measurements.

TRADE TALK Legal

The DIFC Courts – at the forefront of dispute resolution The UAE has recently gone through a minor revolution in its commercial legal system. The options now available to businesses in general – and specifically to traders and exporters – have become significantly broader in the past nine months. We bring you the details about the role of the DIFC Courts, since understanding the judicial system of every country where executives wish to conduct business is a crucial consideration, long before they become involved in a potential legal dispute or are required to enforce a debt. 26

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The background This commercial legal revolution began in Dubai in September 2004, when the late HH Sheikh Maktoum bin Rashid Al Maktoum, Ruler of Dubai, announced legislation for the opening of the Dubai International Financial Centre (DIFC) Courts, based on English language common law. The Courts were soon seen as independent, transparent and costeffective for disputants, whose disputes at that time had to be related to companies in the DIFC itself. In October 2011, this success lead H.H Sheikh Mohammad bin Rashid Al Maktoum, Prime Minister of the UAE and Ruler of Dubai, to decree that the DIFC Courts should now serve a fully international jurisdiction, covering the UAE and GCC, and indeed the entire world. Today the DIFC Courts, the nation’s unique English language common-law judicial system, is regarded as the most efficient and modern legal apparatus

ABOUT

The DIFC Courts were established under laws enacted by the late HH Sheikh Maktoum bin Rashid Al Maktoum, Ruler of Dubai in September 2004. The laws establishing the DIFC Courts are designed to ensure that the DIFC Courts provide the certainty, flexibility and efficiency expected by Court users. The DIFC Courts were established to create an independent and world-class courts system in English, based on common law. Today the Courts are recognised as among the leading commercials courts in the world.

on offer in the region can find the process a daunting experience. They begin of course with the need to navigate legislation – putting the right contracts in place, establishing the correct legal framework and enhancing knowledge of Middle Eastern legal systems. The perception that the process of litigation in the Middle East is fraught with uncertainty is common. The root of this fear can be attributed to the fact that many individuals and companies conducting business come from countries with languages, systems and processes that

The new 2011 law allows local and international court users an added element of choice, as it permits them to ‘opt in’ to the DIFC Courts’ jurisdiction. Simply put, this means that under the new rules, any UAE, GCC and global companies can choose to resolve their disputes in DIFC Courts, provided both parties agree to the jurisdiction: contracts should include a simple clause, binding both parties to use the DIFC Courts in the event of a disagreement.

in the region. Based on international best practice, the Courts are every businessman’s best friend for the resolution of commercial legal disputes, as well as the enforcement of judicial decisions. The establishment of the DIFC Courts was seen as pivotal to the development of the DIFC as a global financial hub and the DIFC Courts have played a critical role in attracting business and investors to Dubai. However, small businesses and entrepreneurs conducting business and taking advantage of all the opportunities

are clearly different. Inevitably, most have little or no initial understanding of how the national courts systems work in the Gulf. In the UAE, companies and individuals now have a clear choice – for the DIFC Courts are complementary to the UAE’s established Arabic-language civil law system. This element of choice for companies, in selecting their preferred jurisdiction, strengthens both processes and ensures public access to world-class justice for all. What exactly does the DIFC Courts’ expanded jurisdiction mean for traders

and exporters in the UAE, and how can rulings be enforced?

Flexibility, certainty and efficiency The new 2011 law allows local and international court users an added element of choice, as it permits them to ‘opt in’ to the DIFC Courts’ jurisdiction. Simply put, this means that under the new rules, any UAE, GCC and global companies can choose to resolve their disputes in DIFC Courts, provided both parties agree to the jurisdiction: contracts should include a simple clause, binding both parties to use the DIFC Courts in the event of a disagreement. A model clause to this effect is available on the DIFC Courts’ website. It is also possible for both parties to a commercial dispute to select DIFC Courts as the jurisdiction for dispute resolution after an issue occurs. If the parties agree to take their existing dispute before DIFC Courts in search of speedy and transparent settlement, then the Courts will offer their services. A growing number of companies are following this route. Exporters and traders in the UAE are thus well placed to gain from the option of an English language common-law legal system, which is particularly useful for those that are accustomed to common law rules and procedures internationally. The fact that Dubai hosts two court systems, plus two arbitration centres, as well as various mediation forums, places it firmly at the forefront of dispute resolution in the region. This has freed businesses from the routine of inserting arbitration clauses or foreign jurisdiction clauses in their contracts (for London or New York, for example) to save additional time and travel expense. NOVEMBER 2012

TRADE TALK Legal

Efficient, speedy small claims settlement Not all disputes have to result in litigation. DIFC Courts have always recognised this and have established an innovative and unique resolution mechanism in the form of the Small Claims Tribunal (SCT). The SCT has been instrumental in fast-tracking dispute resolution for many companies with smaller claims, up to AED 500,000 – and over 90 per cent of these cases are resolved within three weeks of a claim being lodged. Small and Medium Enterprises (SMEs) currently employ 42% of the UAE’s workforce and contribute 40% to the Emirates’ GDP (according to Tanmia, the national human resource

The Courts’ Pro-Bono Programme, another regional first, is also at the disposal of Courts’ users. It offers free legal advice and representation to those who cannot afford legal consultation – so that they may receive support from experienced practitioners representing major locally based law firms. In this way, the Courts make world class standards of justice available to all.

Cross-border disputes and enforcement Enforcement is crucial for the security of businesses and the DIFC Courts are fully equipped to deal with cross border disputes.

development and employment authority in the UAE). SMEs therefore represent a critical component in the long-term social and economic development of the MENA region. Platforms like the DIFC Courts’ Small Claims Tribunal are efficient, effective, low-cost options for dispute resolution, for businesses that do not have the high volume cash flows of their larger counterparts. The SCT is often a deliberate choice for SMEs and individuals, especially in matters of debt collection, employment law and breach of contract claims. In the Small Claims Tribunal, all proceedings are confidential, and no lawyers are involved. The proceedings are based on the work of professional UAE based judges, who focus above all on mediation – aiming to resolve matters so that the participants do not need to proceed to trial in the Court of First Instance. 28

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The old adage “justice delayed is justice denied” should not be taken lightly when companies, particularly traders or exporters, decide on a cross-border venture. It is at the precise moment when these contracts are being drawn up that the parties should choose an appropriate forum for future disputes. It might seem premature to many (as nobody envisages the occurrence of future disputes right at the outset). However, this is precisely why joint venture partners should have a suitable jurisdictional clause in their contract. For example, the DIFC Courts provide reciprocal enforcement for awards and judgements between GCC countries through the “Protocol on Enforcement of Judgements, Letters Regulatory and Judicial Notices issues by the Courts of the Member States of the Arab Gulf Co-operation Council” (GCC Protocol)

– other protocols cover the entire Arab World, many European countries and Asia. The GCC Protocol is significant for the Courts – and for regional litigants – because the true authority of the DIFC Courts’ jurisdiction relies on its ability to enforce international rulings in the UAE, as well across the region and in many countries worldwide. Recognition of DIFC Courts’ judgements outside the country brings with it a level of certainty that both the legal community and traders and exporters doing businesses in the UAE can appreciate. To offer a full understanding of the many jurisdictional and enforceability issues, the Courts have recently issued a detailed Enforcement Guide, available on their website www.difccourts.ae. This is essential reading for DIFC Courts’ registered lawyers, businesses and entrepreneurs, to know where they stand in relation to enforcement in the GCC, the Arab World and beyond. Some considerations for dealing with commercial disputes 1. Deal with possible dispute areas before problems arise – put the right clauses in place 2. Try to resolve issues amicably outside court – courts should be the last option 3. Make sure you use a dispute resolution centre that has bilateral agreements in place to ensure enforceability of judgments

The great potential of the DIFC Courts is gradually becoming apparent. It may take time before their full impact is felt across the region, as companies become more aware of the services on offer. But the DIFC Courts are already experiencing a surge in the number of international businesses bringing cases before the Courts of First Instance. As an official court of the UAE, the DIFC Courts clearly understand their vital role in supporting businesses, including traders and exporters throughout the UAE, as they continue to develop a world-class judicial system to serve the needs of the business community.

TRADE TALK Insurance

Protect what’s yours In any business, it is important to know that your money and assets are secure. And with the recent uncertain times, it helps to know how an organisation can protect itself against insolvency or non-payment. Mahan Bolourchi, Head of Risk Management, Information and Claim, Middle East, Euler Hermes GCC, elaborates on the concept of credit insurance and how does it work for an organisation.

redit risk management is about protecting the assets of a business. In the GCC, a large part of a company’s assets are trade receivables and businesses are increasingly protecting these assets through credit insurance. Every company is looking to satisfy its clients and its shareholders. Positive cash flow – combined with prudent investment, healthy growth and to control the cost is absolutely essential and needs to be protected. Commercial credit is a business tool that should be used to increase sales, maximise 30

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customer loyalty, enter and expand to new markets. It should not be offered where there is a risk of non-payment. We insure companies against the risk of payment default by their customers as a result of commercial and/or political risks. It is clear that the economic crisis is unprecedented in terms of its severity and simultaneous impact throughout the world; stock markets have shown extreme volatility and investment returns have dwindled across the board. This crisis has had an effect on the region and the level of trade credit defaults has increased.

The recent sovereign credit downgrades announced by ratings agency Standard & Poor’s are a stark sign that global confidence is down. The spreads of credit default swaps within the MENA region are widening, another sign that awareness of credit risk is high on the agenda for the financial world. On a local level, due to an increasing lack of availability of bank credit and a slowdown in the global economy, many companies in the GCC are not as creditworthy as they used to be. Add regional problems triggered by the Arab Spring into the mix and it is evident that credit risk management is increasingly coming to the forefront of a company’s priorities. We consider it our duty to protect our clients’ asset base by informing our clients early when we see a buyer’s financial situation deteriorate. We have noticed that credit management is being taken more seriously as companies increasingly focus on collecting cash and getting paid upfront for their sales. Generally, large multinationals in the region followed the credit risk management strategies of their parent company, whereas the GCC has traditionally been a market where late payment was accepted. However, post-credit crunch, even local companies have become far more stringent about when they will get paid and are less likely to accept long delays in the payment process. In the past, too often credit was provided without assessing the creditworthiness of the buyer and companies then wasted time and resources chasing payment. This would subsequently result in the companies

having to take legal action against customers who were not able to meet their obligations. Today, we are seeing long-established businesses in the region credit insure their trade debts and outsource their credit checking. Credit risk insurers will not only underwrite this trade debt but will minimise risk through offering advice on who to offer credit to. The insurer will also assist with collection in the event of non-payment. In the current turbulent global economic outlook, trading history on its own has become an unreliable guide to present creditworthiness. Therefore, companies are increasingly outsourcing their credit management in order to gain expert advice. As credit management is now been taken more seriously, the sales team should not decide alone which buyer can be given credit. The finance team should also be involved in the decision as there is a risk of payment default involved.

ABOUT

Mahan Bolourchi is the Head of Risk Management, Information and Claims, and responsible for Middle East region at Euler Hermes operation within the GCC. He is a German Graduate in Economics and International Business Management from Hamburg University of Applied Sciences. Mahan has been at Euler Hermes for the past 12 years and began his career as Senior Risk Manager at Euler Hermes Germany in Hamburg. During this time he has been responsible for underwriting Credit Risk and managing Euler Hermes’s SME and Multinational Businesses and Clients in Germany and within Europe. Mahan is based in Dubai since 2007, moving from Euler Hermes operation in Zurich as Head of Risk Underwriting for Switzerland. Mahan can be contacted at Mahan.BOLOURCHI@eulerhermes.com

With intelligent risk management and appropriate insurance cover, companies should still be able to operate despite a challenging economic climate. The GCC is a goldmine of untapped potential for credit risk insurers, as the region wakes up to the need to protect its assets.

Commercial credit is a business tool that should be used to increase sales, maximise customer loyalty, enter and expand to new markets. It should not be offered where there is a risk of non-payment. HOW DOES CREDIT INSURANCE WORK? Credit insurance covers the risk of non-payment when a business offers a trade credit to a corporate customer.

Below is the summarisation of the steps a company needs to undertake to obtain credit insurance coverage: 1. Seller mitigates credit risk by signing a credit insurance policy. 2. The client intends to supply goods or services to his buyer on credit terms. 3. The client sends an application for cover to the insurer. 4. The insurer assesses the buyers, collects information, analyses the creditworthiness of the buyers and finally sets a credit limit for each buyer in the client’s portfolio. A credit limit is the maximum amount outstanding that will be insured. 5. The client will receive cover. The client can then trade with the buyer without having to report anything as long as he is paid within the timeframe. In addition, insurers will offer credit risk protection to the client: buyer insolvency or protracted default. 6. The insurer continues to monitor the buyer’s creditworthiness and will advise the client if further credit can be safely provided or if the buyer’s financial situation is deteriorating and credit should be reduced. 7. The client will report all overdue payments and requests to commence a collection action. 8. The insurer will collect the outstanding payment. If the buyer is still unable to pay, the insurer will indemnify the policyholder for the credit extended. 9. The insurer pays the majority of the insured debt and collection expenses. NOVEMBER 2012

TRADE TALK Maritime trade

On the high seas

Maritime trade has always been an important aspect of trading in this part of the world. Jasamin Fitche, Managing Partner, Fichte & Co Legal Consultancy, talks to us about the maritime law in the UAE and what the traders need to be aware of.

ow has maritime trade changed over the years? What percentage of trade is done through water?

The evolution of global marine transport is the result of a three-variable equation: the intensification and redistribution of international trade, technological progress and its increasing respect for the environment, and the current geopolitical and security-focused context. The large number of infrastructure projects and new marine routes bear witness to the change of scale that has taken place in terms of transport methods, whether marine, air, road or rail. At the same time, technological progress is evolving these “marine hubs” into global industrial and logistical complexes that are creating vast trading areas between countries and regions. The insurance and reinsurance industry is perfectly in line with the economic and commercial dynamics at work here. From the use of bottomry loans, which began in antiquity and were developed by Venice and Genoa in the 14th century, to the prevention of risks through sophisticated observation tools, there have always been links between insurance and the maritime world. On an average 90% of world trade is 32

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done by sea. This trend is not expected to decrease as the sea remains the most efficient, reliable and economically viable method of transporting huge volumes of cargo.

When did UAE first implement the law for maritime trade?

The UAE Federal Law No. 26 of 1981 as amended in 1988 (known as the UAE “Maritime Code”) governs and regulates all shipping practices in the UAE. In addition to the Maritime Code, there are several relevant Ministerial Decrees or local laws regulating registration of vessels, crewing, classification of vessels, restrictions with regards to activities undertaken by foreign flag vessels and other activities in port according to the relevant Port ordinances applicable in the individual Emirates.

Please give us a brief background about the law. Has it been revised or changed over the years?

The law has a number of sections, and deals with many issues of UAE maritime law, including: I. Registration of the vessel II. The vessel’s documents III. Ownership of the vessel

IV.

The right to lien on the vessel’s cargo V. Mortgage of vessels VI. Arrest of vessels VII. Identity of the carrier VIII. The Master of the vessel IX. Crew X. Chartering of vessels XI. Contracts of freightment and carriage of goods XII. Carriage of passengers XIII. Towage and pilotage XIV. Collisions XV. Salvage XVI. General average XVII. Marine insurance and XVIII. Time bar of marine claims.

The law is applicable to all the Emirates of the United Arab Emirates. The law is based on modern international law and maritime principles set out in International Conventions. It is also very similar to the maritime laws of the other Arabian Gulf Co-operation Council (“GCC”) States (other than Saudi Arabia). There have not been any relevant changes from the time it was implemented. However, there has been an effort to change the law and various drafts as amendments to the

same have been presented to the federal body. However, so far there has been no announcement of any change though the same would happen in due course.

What should traders be careful about, w.r.t. documentation and cargo insurance?

Insurance claims and recovery can be very complex and depends on the incident or occurrence which has resulted in the same. The document requirements for substantiating a claim could be very extensive however a general guideline can be provided as follows: • The Original Policy or Certificate of Insurance – These are assignable instruments and in the case of assignment, is prima facie evidence that the person holding the policy, where it has been endorsed on the reverse side of the document by the assured, is entitled to the proceeds of the loss. Additionally the assured needs to be well versed and completely understand the exclusion clauses that may form part of the insurance cover. Many times the exclusion clauses may not be expressly listed and may refer to general exclusion clauses that maybe applicable. As a principle of prudence clarity of the general exclusion clauses and a clear understanding of the same are very important. • A complete set of the commercial invoice and packing list to provide evidence of the value and description of the goods and details of the contract of sale terms. • The airway bill or bill of lading or road way bill with terms and conditions on the reverse side as this will help in determining the package limitation and the amount that can be recovered. • Delivery note-Cargo Irregularity Report or Port Outward Survey Report or relevant documents from the Port Authority showing that subject consignment was cleared from the Custom in damaged condition. To include also, any other cargo discharging records or tally sheets. Repair quotation if applicable. • Original claim bill • Original survey report and photographs • A copy of the claim letter holding the Carriers, forwarders/clearing agents and

ABOUT

Jasamin founded Fichte & Co in 2005 in Dubai. She studied law in Hamburg and maritime law in Southampton and started her career as a maritime lawyer by gaining valuable experience in international law firms in Hamburg and London. Prior to founding Fichte & Co, Jasamin worked at the leading Lloyd’s of London insurance brokerage firm as legal counsel for the Middle East. Besides top class legal work, Jasamin is very active in business networking and she is one of the founders and organizers of the UAE Ship Industry Round Table, a remarkable network event for top management and key persons within the UAE Shipping Industry. Furthermore Jasamin established the UAE Branch of WISTA (Women’s International Shipping and Trading Association) in 2010 and chairs the same as its first president. In addition, she is a member of the DIFC Courts Rules Sub Committee, The International Bar Association, German Maritime Arbitration Association, Women in Shipping and Trade and Chairman of the Legal Council of the German Emirates Club. Jasamin.fichte@fichtelegal.com

Port Authority responsible for the loss or damage to the cargo • Original reply from the carriers, forwarders/clearing agents & Port Authority about their liability for the loss or damage to the subject consignment.

For a cargo insurance not be prejudiced, apart from completing and preparing the documentation the below aspects should always be borne in mind; I. Notify the insurance company within 24 hours. II. In all circumstances do not give a clean receipt when goods are received in doubtful condition except under written protest. For any missing packages, you should claim immediately on the carriers, Port Authorities or other involved parties. III. You should always act as if ‘Uninsured’ and take all measures as may be reasonable for the purpose of averting or minimising a loss. IV. For container cargo, ensure that all seals on the containers are examined. If a container is delivered damaged or with seals broken or missing or with seals other than as stated in the shipping documents, you should clause the delivery receipt accordingly and retain all defective or irregular seals for subsequent identification. V. In the event of any loss or damage, immediate ‘Notice of Loss’ should be given

to the insurance company’s appointed overseas office as stated on the policy schedule or the company’s claims department. VI. If any damage is apparent, you should immediately request for the carrier’s or bailee’s representatives’ presence to conduct a joint-survey with cargo insurers’ surveyor and to claim on the carriers or other third parties for any actual loss or damage found at the time of such a survey. VII. If damage is not apparent but is subsequently discovered after delivery, you should give notice in writing to the carrier or bailee within three days of delivery.

What is a bill of lading and what is its relevance?

A bill of lading is a type of document that is used to acknowledge the receipt of a shipment of goods. A transportation company or carrier typically issues this document to a shipper. In addition to acknowledging the receipt of goods, the document indicates the particular vessel on which the goods have been placed, their intended destination and the terms for transporting the shipment to its final destination. It also includes a description of the goods that are being shipped, their weight and the other shipping details. Inland, ocean, through and air waybill are the names given to bills of lading. An NOVEMBER 2012

TRADE TALK Maritime trade

A bill of lading is a type of document that is used to acknowledge the receipt of a shipment of goods. A transportation company or carrier typically issues this document to a shipper. inland bill of lading is a document that establishes an agreement between a shipper and a transportation company for the transportation of goods over land. Ocean bills of lading specify the terms between exporters and international carriers for the shipment of goods to overseas locations. A through bill of lading is a contract that covers the specific terms agreed to by a shipper and carrier when more than one type of transportation is being used. This document can cover the domestic and international transportation of export merchandise. It provides the details of the agreed-upon modes of transportation between specific locations for a set monetary amount. An air waybill is a bill of lading that establishes the terms of flights for the transportation of goods. The goods could be transported either domestically or internationally. This document also serves as a receipt for the shipper, proving the carrier’s acceptance of the shipper’s goods and the agreement to carry those goods to a specific airport. Inland and ocean bills of lading might be negotiable or non-negotiable. If the bill of lading is non-negotiable, the transportation carrier is required to provide delivery only to the consignee named in the document. If the bill of lading is negotiable, the person who has ownership of the bill of lading has the right of ownership of the goods and the right to re-route the shipment. This is sometimes called a bearer bill of lading.

Please give us some details about the peculiarities of the UAE Maritime Law? There are many peculiarities of the UAE Maritime Law and it may not be possible to highlight all of them within the scope of this article. However, the below would highlight some of the important aspects which are peculiar to UAE Law. 34

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Jurisdiction Clause The UAE Courts will not uphold a foreign jurisdiction clause or a foreign arbitration clause, which is contained on the reverse side of the bill of lading. However, the Court may uphold an arbitration clause if it was signed by both parties and contained in a separate document (for example, a charterparty), and not just printed on the reverse side of the bill of lading.

Clausing of B/L Courts in the UAE normally do not uphold the words “Shipper’s Load, Stow and Count” or “Said to Contain” printed on the front of the bill of lading and will hold the carrier liable for the damage.

Reasonable time of delivery If the consignee fails to take delivery of the cargo despite having being notified by the carrier to take delivery, the carrier may place the cargo in the custody of a third party, or in the custody of the local court after obtaining a court order to that effect. The carrier may also apply to the court to obtain an order to sell the cargo for the payment of any costs or freight payable in connection with the cargo. The carrier also has the option of placing the consignee/endorsee on notice, and discharging the cargo in the port authority’s custody until the cargo is auctioned. This is a popular course of action as there is no cost to the carrier or his local agent. Sale of the cargo will occur six months from the date of arrival of the cargo at the port. The carrier may, however, be liable for port charges if the value of the port charges exceeds the amount recovered in the auction of the goods.

Suing of agents Under the UAE law, the shipping agent is not liable for any claim under the bill of lading,

as the agent is not a party to the contract of carriage. The only time a court will find the agent liable is if the agent can be shown personally at fault, or negligent, which fault or negligence caused the damage to the goods. The agent’s liability in such case will be negligence in its personal capacity, and not as agent.

Serving of claim A claimant may serve a court summons on the owner of a vessel if they have a place of domicile in the UAE or a place of business via their shipping agent. Service on the shipping agent acting on behalf of the owners or the charterers will he considered valid service for the purpose of UAE proceedings. There are further peculiarities however those are rather complicated and would be more relevant and understandable when considered in context of a particular matter.

How do you see maritime trade in the coming years and what advice would you give to companies involved in maritime trade?

Maritime transportation is as old as global trade and historically the scope and extent of long distance trade came on par with developments in maritime transportation technology. The role of maritime transportation in the movement of passengers is marginal; it is almost exclusively the domain of freight. International trade and seaborne trade are thus interrelated. As of recent statistics seaborne trade accounted for about 90% of global trade in terms of volume and 70% in terms of value. Today, trade and commerce are tied to the seamless flow of goods and services across national borders and regions. At the core of the international trading system is a diverse maritime industry. It is important that compliance with security protocols and meeting regulatory thresholds must both be included as part of a sound corporate governance strategy. As in any business latest developments in the sector, regulatory requirements and a keen interest in methods to protect your own interest would always remain the most important aspect of Maritime Trade.

TRADE TALK Finance

Whatâ&#x20AC;&#x2122;s the guarantee? Madhavan Rajagopalan, Executive, Trade Finance Products, National Bank of Fujairah PSC, explains to us the concept of shipping guarantee and how it offers the security needed in doing international transactions.

hipping Guarantee (SG) is an indemnity and undertaking given by a bank in which the consignee or importer jointly indemnifies the carrier of goods or the local shipping company, so that the consignee/importer can take delivery of the goods without producing the original bills of lading. The bank, together with the consignee/ importer, jointly undertakes to indemnify the carrier against all liabilities, such as cost of goods, freight charges and legal costs relating to the delivery of goods and surrender the original bill of lading, upon receipt and duly endorsed, to the carrier/ shipping company. 36

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SG is required by the consignee/ importer of goods in circumstances where the bills of lading covering the cargo is not received or when they are lost or misplaced. In the absence of such documents, SG also saves the importer from demurrage charges at the port of discharge and facilitates the quick clearance of the goods from the port. In return, a carrier or shipping company recognises the SG as a form of security in lieu of bills of lading, and issues a delivery order against the SG to the port to release the goods to the importer. In cross border trade, SGs are therefore normally issued against Letters of Credit

and Collection documents to compensate for situations where goods are already at the port but the expected shipping documents are delayed.

Risks for the importer Once a SG is obtained, the importer cannot reject the documents because he has undertaken to accept them in the way they are presented through an indemnity to the bank. This is binding even if the goods received are of inferior quality, not as per the order or deviate from the original merchandise description. Therefore, the importer should ensure the following when they deal with an exporter:

• Adopt a “Know Your Customer” (KYC) policy and understand the exporter and his history before entering into an agreement • Deal with exporters with sound reputations and good track records. • Seek performance guarantees from the exporter to avoid any non-performing risk

Characteristics of Shipping Guarantee: Shipping company does not accept an expiry date and amount in SG for the reasons stated below: • Parties involved in SG, namely the importer, bank and shipping company, do not have control of the bills of lading and would not know when they will be available. The submission dates of such bills for SG retrieval are therefore not easily determined, and the SG will have to remain outstanding and valid until the bills of lading are duly endorsed and submitted. • The shipping company’s knowledge of the value of the cargo is only as accurate as the declaration made by the exporter. Furthermore, container shipments are sealed and their contents are not checked by the shipping company, thereby making it more difficult to determine the actual value of the potential claim by any rightful owner against the bills of lading. Due to the above reasons, banks in most of the countries therefore recognise SGs as evergreen in nature.

PREREQUISITES FOR APPLICATION OF SGs: • A completed application along with an indemnity form • A shipment arrival notification • Authenticated SWIFT message from the exporter’s bank (remitting bank) for collection documents and where the goods are not consigned to Bank (This will not be a requirement if the SG request is against Letters of Credit)

ABOUT

Mr. Madhavan Rajagopalan - Executive, trade finance Products for National Bank of Fujairah PSC has 20 years of Trade Finance experience in the UAE and Qatar, and was previously the Head of Trade Operations for Al Khalij Commercial Bank.

• A copy of the commercial invoice and non-negotiable transport document

THE PROCESS The importer normally receives notice of the arrival of the ship bearing his goods from the local shipping company, and approaches the bank to know whether the relevant shipping documents are received by the bank. If the shipping documents are not received by the Bank, the importer will then request the bank to issue a SG. If the importer is someone who is not known to the bank or has had minimal dealings with it, the bank would normally request for a deposit amounting up to the full invoice value of the imported goods plus a 10% or 20% extra to cover any freight costs and exchange risks. This deposit is commonly known as the margin. It provides the requisite security should the importer turn out to be someone who is not entitled to receive the goods and will serve as payment to the exporter/presenter upon receipt of shipping documents by the bank, or to the shipping company to whom the SG is issued when the latter makes any eventual claim.

A counter indemnity is also taken whereby the importer undertakes to indemnify the bank against all losses, damages and expenses in relation to the issue of the SG and to deliver the dulyendorsed bills of lading on receipt of the shipping documents through any other sources. In such cases, where the shipping documents are directly received, they must obtain a liability discharge letter from the bank by submitting a proof/ confirmation from the shipper/exporter and shipping company stating that bank is no longer liable under its SG. It is upon satisfying all precautions that the bank will then issue the SG, and hence, it is normally prudent for the importer to have an ongoing relationship with the bank that is issuing the SG. In international trade, banks deal with documents representing physical goods, rather than with the goods themselves. As part of the document handling process, banks will have to carry out their due diligence and compliance checks which might inadvertently introduce a level of bureaucracy that may delay the dispatch of documents. Furthermore, non-arrival of shipping documents may result in further

Once a SG is obtained, the importer cannot reject the documents because he has undertaken to accept them in the way they are presented through an indemnity to the bank. This is binding even if the goods received are of inferior quality, not as per the order or deviate from the original merchandise description.

NOVEMBER 2012

TRADE TALK Finance

inconvenience for the importer, who may face a loss or incur huge demurrage charges when he is not be able to receive the goods and sell them in time, especially if they are perishable in nature. That’s why a SG issued by the bank is so handy because it helps the importer take delivery of the goods even in the absence of the appropriate title document. Banks usually require importers to sign application forms that contain indemnity and undertaking clauses discussed above. Such SG applications would

enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby. We shall be responsible for whatsoever damage is caused to the goods at a later date. We confirm that all currency exchange risks and import risks are borne by us and shall immediately take necessary measures to release your Bank from the obligation under this guarantee. While issuing the SG, the bank recognises any potential liability on behalf

While issuing the SG, the bank recognises any potential liability on behalf of the importer towards the shipping company and undertakes contingent liability in the name of the importer in their books as it may also involve a loss of control of the goods for the documents for which the bank has been entrusted to handle.

requires details, such as bills of lading numbers, issue dates, ports of loading and discharging, quantity of the goods, names of the shipping vessels, invoice numbers and values and so on. A typical declaration in the following format would also be signed by the importer: “We hereby indemnify you and hold you harmless against all costs, charges, and actions either direct or indirect of whatever nature, and agree to be bound by the terms as indicated on the Shipping Guarantee, which we agree our representative will sign before delivery to the recipient. We further agree to accept the documents as presented to you. For documents under Letter of Credit, we acknowledge that the Bank reserves the right to, but no obligation to, check the documents against the credit for any discrepancies or missing documents.” In case of any one or more of the provisions contained in this document or in the Shipping Guarantee (SG) shall be invalid, illegal or unenforceable in any respect, the validity, legality and 38

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of the importer towards the shipping company and undertakes contingent liability in the name of the importer in their books as it may also involve a loss of control of the goods for the documents for which the bank has been entrusted to handle. Therefore, the bank issues a SG against cash margin or as per the credit agreement with the importer obtaining indemnity and any other legal documents. In general, a SG is issued only to bills of lading that have been delayed, lost, mislaid, stolen or destroyed. Cancellation of a shipping guarantee Upon receipt of the shipping documents, the bank will extract the bill of lading and after obtaining the required endorsements, forward it to the carrier to redeem the SG. In case the bill of lading is in the hands of the importer he must ensure that it is swapped for the SG and have the latter returned to the bank for cancellation. A SG should not remain outstanding for more than one

or two months from the date of issuance. Importers should also know that most of the banks levy monthly charges for outstanding SGs. When a bank doesn’t receive the shipping documents for a month or more, it is customary practice for the bank to initiate an enquiry. Normally, the SG remains in force until the original bill of lading is submitted to the shipping company.

Risks for the Bank Shipping documents presented to the bank are normally subject to ICC’s Uniform Customs & Practice (UCP) or Uniform Rules for Collections (URC) and both rules do not cover shipping guarantee issuance. Therefore, issuance of a SG is outside the scope of UCP or URC rules. In circumstances where the goods have been released against a bank guarantee, the bank has an obligation to accept the documents as presented including any overdrawing and missing original documents. A bank’s situation worsens when original bills of lading are not presented and only non-negotiable copies are provided (for payment) against which the bank issued a shipping guarantee. This is because the bank would have no choice but to reimburse the presenter since a SG is issued without the exporter’s permission and the goods are already in the importer’s hands. If the original bill of lading is not presented, the SG will never be retrieved from the shipping company and bank will remain exposed against it despite having reimbursed the exporter/presenter. The shipping company will never discharge the SG as the original bill of lading is not surrendered, while the importer may not recognise the SG exposure (in spite of providing an indemnity to the Bank) as they may plead that the exporter has already been paid/reimbursed by the bank for the goods shipped. Therefore, a bank is always cautious when issuing SGs and does so only for long-standing customers.

country

FOCUS AUSTRALIA

AUSTRALIA

BILATERAL TRADE

INVESTMENT OPPORTUNITIES

NOVEMBER 2012

DOING BUSINESS

FOCUS Interview

Connect with Australia

We interviewed Mr Gerard Seeber, Council General and Senior Trade Commissioner for Middle East and North Africa, to get an overview of Australia’s trade relations with the UAE.

lease give us a brief background on the trade relations between the UAE and Australia?

•

The United Arab Emirates is Australia’s largest trading partner among all economies in the Middle East and North Africa, with two-way trade in goods valued at over AUD 6.3 billion in 2011. While there is no concrete data about services trade, it is estimated that it’s valued up to AUD 1.5 billion.

• •

What are the main products exported and imported between the two countries? As you probably know, both countries are major commodity exporters; it should not come as a surprise therefore that in terms of dollar value, main export items are agriculture and mining commodities from Australia and oil from the UAE. However, trade is happening across almost all other sectors too; construction, professional services, food and beverage, automotive, health and medical, training and education, sports, marine, aviation, sustainability and water management, IT and defence are just a few to mention.

How has the trade relation evolved over the decades?

Well, just look at the extraordinary story of Dubai in successfully developing worldclass infrastructure and a truly resilient economy over the same period and the rest is history. As Dubai and Abu Dhabi attempted to diversify their economies and reduce reliance on hydrocarbon, new business opportunities emerged for Australian products and expertise, which were well-placed to contribute to the UAE’s 40

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astonishing economic development and growth, and as a result trade relationship also matured in both size and diversity. What is remarkable about Australia and UAE though is how quickly it has been expanded. Two decades ago, the Australian community and commercial presence in the UAE was of minor scale. Since then it has enjoyed exponential growth to an extent that today some 16,000 Australian call UAE home, many more visit each year and hundreds of Australian-owned companies are based across the Emirates. To a significant degree this has been driven by the commitment of the Emirates Airlines to its Australia routes, which began relatively modestly in 1996. Today, with Etihad, two airlines fly between UAE and four Australian major cities, 90 times each week. Many remarkable things happened on the back of this expansion – • It has furnished a channel through which Australians have discovered the amenity

•

and business potential of Dubai and the UAE. A whole new tourism segment has been established in the Gold Coast, catering to winter visitors from the UAE and the wider Gulf states. Emirates has become a household word in Australia reflecting the success of its sporting sponsorships, such as that of the Melbourne Cup. Emirates has invested substantially in the growth of associated sectors in Australia and now employs thousands of Australians in airport services, flight catering and hospitality (In Dubai alone the airline currently employs around 1500 Australians) The cargo capacity delivered by these airlines commitment of aircraft to the Australian route has given birth to a new avenue to export markets in the UAE.

That said, we should acknowledge the crucial role of both governments, and dedication from the highest level to nurture closer bilateral ties and boosting economic cooperation between the two countries over the past couple of decades.

How many Australian companies are in the UAE/Middle East?

We estimate that currently there are around 300 Australian firms across the UAE. It is worth mentioning that many of these companies offer services or products for the construction industry, and with the sluggish performance of this sector in the UAE in the recent years, some are now leveraging their presence in the UAE to cater other neighbouring markets in Middle East or South Asia.

What kind of investments is Australia making in the UAE? Are Australian companies keen on exploring opportunities in the Middle East?

For Middle Eastern companies, keen on investing in Australia- what advice would you like to give them and which sectors and areas would you highlight?

The bulk of investment in the UAE by Australians, which is estimated to stand around USD 1 billion dollars in today’s prices, aimed at establishing in-market presence for existing Australian companies that wished to do business in the UAE and/ or to capitalise on its position as a regional hub, to tackle other markets in the Middle East and beyond. A recent example I can give you is Austrak. The company is Australia’s largest railway sleeper manufacturer, which started production in its newest factory (their twelfth world-wide) earlier this year in Dubai. With a production target of 1.4 million sleepers per year, the factory will service international markets as well as supplement production for large projects in Australia. Dubai’s lower costs, highly developed infrastructure and the promising opportunities that are presenting themselves by GCC Rail projects have been the main drivers behind the Austrak investment in the UAE. On whether Australian companies are interested in business opportunities that MENA markets have to offer, the answer is yes in general. I have to admit though that the global financial crisis followed by the recent regional events has had short-term impact on the appetite of the Australian companies for business in the Middle East. The Australian Trade Commission’s (Austrade) plan for 2012-13 aims to fully restore the confidence of Australian firms in the region, by identifying and scoping out the opportunities that matches their capabilities. As a matter of priority, we are keen to facilitate Australian companies’ winning business in the Gulf railway projects, in sustainability which includes green building, energy efficiency, and water management and in major sport events. We also seek quality opportunities for Australian firms in agribusiness, aviation, automotive, education and training sectors.

Austrade is responsible for the promotion and attraction of productive foreign direct investment (FDI) into Australia primarily in four Australian Government priorities for investment - tourism infrastructure, major economic infrastructure, innovation and clean energy - as well as three multi-State and Territory priorities. We therefore encourage any company or institutional investor that is interested in Australia to directly engage us for detailed advice and assistance on wide range of topics, such as business and regulatory environment, investment opportunities, selecting location or searching partners, and Australian government programmes and approvals. I have to mention though that we do not assist with real estate and portfolio investments, sales or representation offices, straight acquisitions, hostile takeovers or investments by individuals. In terms of sectorial priority for attracting investment from Middle East, Austrade Dubai would proactively promote opportunities that exist in major infrastructure (financing) and tourism infrastructure. This compliments a history of successful UAE investment in hospitality infrastructure, ports, and coastal developments in Australia, and also resonates with interest from some of the region’s major institutional investors to accumulate international infrastructure assets in recent years. Emphasising my initial point, Australia welcomes all productive investment projects, and we are keen to speak to any UAE entity that is pondering over an investment decision in Australia.

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

As you know, there are several benchmarking approaches for ranking the ease of doing business in different countries. In recent years, Australia has always been placed in top global rankings across all the major

reports. Strong and open-economy, business friendly-regulatory environment, skilled workforce, liquid financial markets, solid legal regime and corporate governance and quality of life are just some of the advantages Australia has to offer to companies that choose to operate in the country. Despite all these advantages, the fact is that every investment comes with its own set of challenges. Austrade seeks to provide the information required to make good investment decisions and to provide a coordinated approach that saves investors time and money – For starter, I highly recommend interested parties to visit our Website, which provides a wealth of data and facts in regards to investment and doing business in Australia.

Which incentives or benefits do you provide to foreign investors in Australia?

There are incentives, grants and tax breaks that are offered to international investors, depending on the nature and location of the investment project. Our organisation and the representatives of the Australian state government in the UAE work with potential investors to explore these benefits.

How do you see the bilateral economic relation evolving in the coming years? Any agreements being signed?

Australia and UAE are both devoted to enhance their links through commercial, military, cultural and educational relationships, and I can only see the bilateral trade to go from strength to strength. The strategic agreement for supplying uranium by Australia, which was signed in Abu Dhabi by the foreign ministers, is a testament to the positive outlook of the long term relations. It is worth mentioning that Australia’s free trade agreement negotiations with the GCC commence in July 2007. Australia is one of a number of countries negotiating FTAs with the GCC, however the Council has paused its trade negotiations with all partners pending a review of its trade policy. The Australian government is committed to resuming the negotiations with the GCC. NOVEMBER 2012

FOCUS Bilateral relations

Find the right partner The Australia Arab Chamber of Commerce & Industry (AACCI) is the top national association for bilateral trade and investment between Australia and the Arab League countries. AACCI is a member of the General Union of Arab Chambers of Commerce, Industry & Agriculture (GUACCIA) and has fostered strong links with the Australian State and Federal governments since it began in 1975. Cynthia Dearin, CEO, AACCI, speaks to us about her take on these relations.

lease give us some details about Australia and Middle East trade relations. Which countries in the region are the top trading partners of Australia?

The Middle East and North African (MENA) region provides some of the most profitable and rewarding opportunities for Australian businesses and there is enormous potential to expand existing trade links between Australia and the MENA region. Australian firms have established a presence with many of the booming regional players, particularly in the Arabian Gulf. The UAE and Saudi Arabia are Australiaâ&#x20AC;&#x2122;s largest two-way merchandise trading partners in the MENA region, with total trade standing at USD 6.4 billion and USD 1.9 billion respectively in 2011. Diverse opportunities also exist within other MENA markets, including North African economies such as Egypt, Morocco and Tunisia. 42

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What goods are exported and imported?

What is the role of AACCI in promoting bilateral relations?

Australiaâ&#x20AC;&#x2122;s major merchandise exports include aluminium ores, passenger motor vehicles, wheat, meat and livestock, as well as travel and construction services. Key imports from the MENA include crude petroleum, fertilisers, liquefied propane & butane, pearls and gems and mineral manufactures (cement, concrete and artificial stone). Exports of fertilisers and minerals both grew significantly from 2009 to 2011, up 71.9% and 46.7% respectively. Australian companies have also built strong relationships with the MENA region in the mining, construction and agriculture industries and export services in all three areas. Australia also exports education to the MENA region and has about 20,000 MENA students studying at universities and tertiary colleges around Australia.

The Australia Arab Chamber of Commerce & Industry (AACCI) is the peak national association for two-way trade and investment between Australia and the Arab World. Our mission is to assist Australian companies exporting to or expanding into MENA markets as well as Arab companies looking to invest in Australia. We specialise in providing members with commercial intelligence, business matching and networking opportunities. Our many events, conferences and tradevisits provide a unique opportunity for Australian and Arab companies to exhibit their products and services and network with potential clients. Our flagship event, the annual Australia Arab Business Forum and Expo attracts delegates from across the MENA region and industry sectors as well as Australian businesses and

government officials who actively support Australia’s expansion into the MENA. Our Guest of Honour at the 2012 Forum and Expo was Her Excellency Sheikha Lubna Al Qasimi, United Arab Emirates Minister for Foreign Trade. AACCI puts exporters in touch with firms already trading in or providing services to the MENA region, and can assist members to make direct contact with potential clients located in the GCC states. Our business matching service helps export-ready companies search, identify and screen potential MENA business partners. AACCI also conducts trade missions to Arab markets, exposing participants to new opportunities and contacts. AACCI supports its members and exporters to the Arab World by issuing Certificates of Origin and certifying other commercial export documents such as, invoices, health and other government issued certificates, Halal certificates, Letters of Free Sale and Letters of Support for Saudi Arabia visa applications.

If you were to get to talk to Middle East companies, how would you encourage them to invest in Australia? What reasons would you give them for doing business with Australia?

Australia offers a wealth of opportunity for businesses to succeed across a wide range of sectors including energy, mining, agriculture and services. Businesses can expect a stable and efficient regulatory environment, a highly skilled and multi-lingual workforce and a culture of innovation. Australia’s unparalleled economic record, world-class industry capabilities and unique cultural and geographic advantages in the world’s fastest growing region all form part of Australia’s impressive reputation as an investment destination.

On the other hand, Australian companies which are keen on exploring investment opportunities in the Arab countries- how do you help them and what is your advice to them?

AACCI assists Australian companies exploring investment opportunities in the MENA by providing commercial updates, business

Which sectors hold the most promise for Middle Eastern businesses in Australia? Australia offers a wealth of opportunity for businesses to succeed across a wide range of sectors including energy, mining, agriculture and services. Opportunities also exist in the research and development, manufacturing, ICT and travel and tourism sectors.

How do you see the trade and investment relations in the next five years? Cynthia Dearin, CEO, AACCI

matching services and opportunities to participate in trade missions. New exporters to the MENA region should spend time gaining a real understanding of the markets they intend to deal with, before they start trading. This includes familiarizing themselves with the culture, traditions and customs of the target market, understanding the laws and regulations and seeking advice on how business is done in-country. A great way to gain this type of exposure is to join an AACCI trade mission to the region.

If Middle Eastern companies want to set up a branch or office in Australia, how should they go about it? What legal, financial and business support services does the government offer?

Australia has an open business culture that encourages the establishment of foreign businesses. It is possible to enter the Australian market as long as certain regulations and guidelines are followed. The Australian Trade Commission – Austrade – is the Australian Federal Government’s trade and investment development agency and can provide the correct legal, financial and business support for new businesses establishing in Australia. There are also state-level government bodies that can assist new branches and offices by providing regionspecific advice. AACCI can assist MENAbased firms make contact with the relevant Federal and State contacts in Australia or in their home country.

There is enormous potential to expand Australia’s already significant trade and investment relations with the MENA region in the next five years. Whereas economic instability has plagued European and North American markets since the global financial crisis, MENA markets, particularly the economies of the Gulf States continue to grow, providing a relatively secure environment for foreign investment. Countries such UAE, Saudi Arabia and Qatar offer investment opportunities in sectors where Australian firms excel, including energy, infrastructure, agribusiness and education. For example, the emergence of Qatar and Australia as global leaders in the production of Liquified Natural Gas (LNG) suggests that we will see increased levels of technology transfer and interaction between the two countries in the near future. Similarly, the signature of an agreement between the UAE and Australia in August 2012 for the supply of uranium to the UAE looks set to significantly boost trading relations between the two countries on that front. In other parts of the Arab world, rapidly expanding populations, eager for high-quality goods and services also provide ready markets for the export of Australian livestock, food, technology, goods and education. With food security a hot topic across the MENA region, Australia offers a clean, green, transparent and politically stable environment market can deliver secure, sustainable affordable sources of food to MENA populations. Several food security initiatives between Australia and MENA countries are already underway and these look set to expand as more MENA countries begin to pursue food security strategies in foreign markets. NOVEMBER 2012

FOCUS New South Wales

Look East! New South Wales is located in the eastern part of Australia, with Sydney as its capital. Barry O’ Farrell, Premier, New South Wales, talks to us about his opinion on bilateral trade relations between the UAE and NSW and what the future holds.

he United Arab Emirates (UAE) and the Australian State of New South Wales (NSW) enjoy a strong relationship with many opportunities for growth in trade and investment. Talking about this, Mr. O’Farrell said, “I visited the UAE in May this year to personally deliver the message that my Government is committed to strengthening the relationship between NSW and the UAE.I was pleased that the senior government and business officials I met were keen to learn more about NSW and the opportunities for us both. This visit was my first to the region as Premier of NSW and was also symbolic in emphasising the importance of our State’s international engagement.” Bilateral trade between NSW and the UAE was worth almost AUD 504 million in 2010-11, an increase of 151% on 2005-06. NSW’s main merchandise exports to the UAE are iron and steel, office machines, vegetables and fruit, and meat and meat products. Over the past ten years, vegetables and fruit have become more

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significant exports to the UAE. The main imports from the UAE are petrol and petroleum products, natural and manufactured gas, mineral manufactures, other manufactured items and textile yarn, fabrics and made up articles. Elaborating on how they have been working to promote the bilateral ties, he stated “To back this commitment we have a NSW Government Business Office in Abu Dhabi which is working to develop further investment and trade opportunities across a range of sectors. My Government has ambitious plans to rebuild the State’s infrastructure to improve our competitiveness for investment and jobs. We welcome investment in infrastructure. The Government established Infrastructure NSW to shape a 20 year state infrastructure strategy to drive our infrastructure investment.” The final strategy, to be released soon, will identify what infrastructure the State needs to achieve economic growth and how

to activate both public and private sector resources to deliver it. Investor friendly policies have been put in place and there is demand from the public and private sectors for new assets. According to Mr. O’ Farrell, the Government released a 10-year strategic plan for the State – NSW 2021 – which makes clear that infrastructure development is a major focus for their State. “We are taking a proactive approach to privately financed projects, or public private partnerships as we call them in NSW. There are infrastructure investment opportunities in rail, roads, social housing, ports and power generation. There are likely to be more opportunities in motorways, health projects and recycling initiatives,” he explained. NSW is also taking the once-in-a-lifetime opportunity to deliver a new world class financial district in its capital city, Sydney. Known as Barangaroo, the development will see 22 hectares on Sydney’s CBD harbour front become the new financial centre of Sydney and the Asia Pacific. Once completed, Barangaroo will further enhance Sydney’s status as a global city. He is quick to add that he hopes it will be a place where Middle East companies will choose to locate their Australasian headquarters. Mr. O’ Farrell then shifted the discussion to a topic that is of importance to them when dealing with the UAE – Islamic finance. “When I visited Dubai, I was pleased to take part in an Islamic finance roundtable organised by the Dubai Government. Attracting conventional and Islamic finance investment into infrastructure and other sectors in NSW is an important part of my Government’s efforts to enhance Sydney’s position as a leading international financial services centre. As a result of the roundtable, I received some practical ideas on how NSW and Australia can better accommodate this type of investment. The NSW Government is working with the Australian Government to create a level playing field that can accommodate the characteristics of Islamic finance on an equal basis. NSW can be a secure and reliable partner

Barry O’ Farrell, Premier, New South Wales

and supplier to the UAE in a range of sectors including: • infrastructure and construction • financial services and • manufactured food products. Many NSW companies are doing business in these sectors in the UAE. While in Dubai, I oversaw the signing of a Memorandum of Understanding between the NSW Government and the Dubai International Finance Centre Authority which will see NSW and Dubai working together to grow their banking and financial services sectors. The MoU recognises that Sydney and Dubai are both significant regional financial centres, have common interests, expertise and objectives and can work together to achieve their objectives. This agreement will facilitate greater contact between Sydney and Dubai and promote potential investment opportunities in NSW and in the Gulf Cooperation Council region. NSW is rich in mineral resources. Our State produces a diverse range of minerals including coal, metals, industrial minerals and construction materials.” he added. “NSW is a low-cost supplier to world markets and we are consolidating our position as a value-adding centre for processed metals and mineral products. The strength of our mining industry is a result of prospective geology, welldeveloped infrastructure, low-average operating costs, leading-edge mining

technologies and an available and highlyskilled workforce,” Mr. O’ Farell commented. Many international mining companies have already recognised these features of our industry and seen the benefits of establishing in NSW. They include Rio Tinto, BHP Billiton, Peabody and Idemitsu. Australia is the world’s largest exporter of coal, exporting almost 300 million tonnes in 2010. NSW accounts for 39% of Australian coal exports. The Government encourages investment in exploration by domestic and foreign companies, with large areas of the State remaining open to greenfields investment. In addition to coal, opportunities exist in iron ore, copper, gold, zinc and rutile, among others. The NSW Government recently amended legislation to permit exploration for uranium in the State to better understand and evaluate what resources may exist in NSW. The ban on uranium mining remains in place. “One of our State’s greatest strengths is our education sector. Students from the UAE are choosing to study in Australia – with more than 1300 studying in our country last year. While that number is modest, we are honoured that students from the UAE see NSW as the right place in which to gain a high quality education,” he added. NSW also welcomes international tourists. There has also been a strong increase in visitors from the UAE. In the five years from 2002 to 2006, almost 18,000 people from the UAE visited NSW. But in the five years to 2011, just over 44,000 visited – that’s a significant increase. NSW is keen to develop stronger government, business and organisational relationships across the Middle East. There is much potential in trade, investment, tourism and education and further collaboration will bring mutual benefit. As the UAE continues its economic expansion, NSW has the knowledge, expertise and readiness to partner with companies and institutions there to facilitate long term growth. “I am confident that the relationship between NSW and the UAE will continue to grow and prosper,” concluded the Premier. NOVEMBER 2012

FOCUS Victoria

The food bowl of Australia Trade relations between Australia and the Middle East are warm, multifaceted and growing rapidly. The relationship is underpinned by extensive trade relations as well as people-to-people contacts. We take a look at the investment opportunities in Victoria.

ictoria has a strong relationship with the United Arab Emirates and a number of countries within the MENA region. This relationship includes a history of mutual business participation with many countries in the region playing a vital role in the Victorian economy as both a source of imports and as an export destination. 46

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The MENA rates as the third largest regional market for Victoriaâ&#x20AC;&#x2122;s commodity exports behind South East Asia and China and in 2011/2012 the region represented USD 2.5 billion to Victorian exporters. There are several prominent MENA companies currently operating in Victoria that cover a wide range of

sectors. Airline services from the region, including Qatar Airways, Etihad Airways and Emirates airline all have a presence in Victoria. Companies focused on food and beverage and Information and Communication Technology (ICT) continue to strengthen ties to Victoria. The Middle East is now Victoriaâ&#x20AC;&#x2122;s largest market for food and beverage.

In 2011/12, food exports to the region totalled approximately AUD 988 million. Automotive is the State’s largest export to the region, with 88% of Victoria’s manufactured passenger vehicles exported to the MENA region from Toyota and Holden. Victoria is also a major service provider to the area with a large number of Victoria’s leading developers, architects, project managers and education providers operating in the region, many with representative offices. International education continues to be a key service export to the region and Victorian university enrolments from the MENA region grew by 12% in 2011 from 2010. On the other hand, total imports from the Middle East and North Africa totalled AUD 879 million for FY12, representing an 18% growth from FY11. Key imports from the region were crude petroleum, fertilisers and aluminium (Bahrain) and confidential items. The largest market for imports was Libya (AUD 439 million of crude petroleum).

Which sectors offer investment opportunities?

Food and beverage Victoria is the food bowl of Australia, accounting for only 3% of Australia’s land mass, and 30% of Australia’s total food output. Victoria has been investing in infrastructure projects to boost the supply and security of water to Victoria’s food bowls. With the enhanced irrigation system there will be numerous opportunities for investment, exports and partnerships with Victorian food producers. Victoria is also the home of various research and technology organisations, such as CSIRO, Division of Food and Nutritional Sciences – the largest provider of food industry R&D in Australia. The CSIRO can assist with R&D on every stage of food processing. Victoria is the preferred location for advanced food and beverage processing. Victoria’s dairy production accounts for 86% of Australia’s national dairy

About The Victorian Government Business Office (VGBO)

Established in 1997, the Victorian Government Business Office, Dubai (VGBO) is operated by the State Government of Victoria to help promote Victorian trade and investment in the Middle East and North Africa region. For more information, please contact Kassem Younes at kassem.younes@iird.vic.gov.au

exports. It produces a range of high quality consumer products, including fresh milk, UHT, specialised milk powders. Murray Goulburn Cooperative, Australia’s largest dairy producer, and a world leader in dairy innovation, has announced plans to immediately establish a strategic business unit based in Dubai to develop strong relationships

Victoria works with investors to ensure that establishing their business in Melbourne is as simple and cost-efficient as possible. Invest Victoria guides potential investors on a confidential basis through any statutory assessments or approvals their business needs, including,Municipal planning permits, Building Permits,

Victoria has been investing in infrastructure projects to boost the supply and security of water to Victoria’s food bowls. With the enhanced irrigation system there will be numerous opportunities for investment, exports and partnerships with Victorian food producers.

with key customers and market the Devondale brand to consumers in the region. Dairy brand Bega and its wholly owned subsidiary Tatura Milk Industries will also spend AUD 7.8 million on expanding their Tatura facility to accommodate increased demand from the Middle East for dairy products.

The next step Australia is rated number two in the world for the shortest time needed to set up a business - just two start-up days, ahead of Singapore (three) and Canada (five). That’s because the regulatory framework underpinning key institutions and Victoria’s business environment is solid, straightforward and simple. The State’s investment promotion agency, Invest Victoria provides free confidential services and professional advice to international investors, as well as connecting potential investors to an extensive network of contacts to create investment opportunities. Invest

Environment Protection Authority (EPA) approval for certain industrial projects and so forth. As part of its dedicated Trade Engagement Program, the Victorian Government has identified the Middle East and North Africa as a market with significant trade and investment opportunities for Victorian businesses. In February 2013 the Victorian Government will take a Super Trade Mission to the Middle East – a mission of more than 150 companies to the United Arab Emirates, Turkey and Saudi Arabia. This will be the largest ever trade mission to visit the Middle East from Australia. The mission will position Victoria as a clean, safe and reliable market for Victorian goods and services, and build on the success of previous smaller, sector-focused activity in the Middle East, including a mission in February 2012 which yielded estimated export outcomes of AUD 235 million over two years. NOVEMBER 2012

FOCUS Western Australia

Under the western sun Western Australia (WA) has a huge natural endowment of mineral and energy resources and the State’s economic strength is largely built on its mineral resource and oil and gas sectors. It also has a strong agricultural sector and immense tourism potential. The Western Australian Trade Office highlights the business potential for Middle East companies in this part of Australia.

A produces over 50 different mineral and resource products in commercial quantities, most notably iron ore, crude oil & condensate, LNG, alumina, nickel, limonite, gold and salt. Record investment levels pushed the value of the State’s mineral and petroleum industry to a record AUD 138 billion in November 2011. In March 2012 there was AUD 167 billion of resource projects under construction or committed in WA, and a further AUD 151 billion under consideration. WA is in the roughly the same time zone as China and most of South East Asia - and over half the world’s population. It is a prime location for Middle Eastern businesses looking to explore the Australian or Asian markets, and it is Australia’s gateway to Africa. It’s well established relationships with these regions are an added benefit for those companies seeking a base to move into those markets. The Government of Western Australia is proactive in initiating and supporting 48

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Western Australian trade to international markets and in promoting inward investment to the State.

Some key figures: • State economy valued at AUD 217 billion in 2010-11 • Accounted for 16% of the Australian economy in 2010-11, above its 10.4% share of the population • Contributed 46% of Australia’s merchandise exports in 2011 - more than Queensland, New South Wales and Victoria combined • Contributed 24% (AUD 49 billion) of Australia’s business investment in 201011, which rose 13% from the previous financial year • WA had 52% of Australia’s total value of resource projects under construction or committed in April 2012 The United Arab Emirates emerged as one of Western Australia’s top ten export markets last decade, a position it has held for most

of this decade. It is currently ranked as the State’s 11th largest market for goods exports valued at AUD 836 million. There is a wealth of trade opportunities available in a number of sectors, including: • Agriculture • Building and construction • Mining and petroleum services

Top five commodities exported from Western Australia to the UAE include: alumina, heavy mineral sands, barley and meat, gold coin, vegetable and inorganic chemical elements. Top five imports from UAE to Western Australia include: crude petroleum oils, sulphur and iron pyrites, civil engineering plant and equipment and glassware. Open to investment Western Australia welcomes foreign investment and business migration. The State offers a great climate for investors. The local economy is growing strongly -

despite remaining economic troubles in many other parts of the world. Strong export growth is predicted for Western Australia’s resources industry and medium and long term prospects appear good. In addition, and most importantly, Western Australia is a secure place to invest. It has very low levels of sovereign risk and an independent judiciary that ensures property rights are protected.

Resources With an abundance of natural minerals and resources, Western Australia has seen the development of huge resource projects and many global companies including Rio Tinto, Chevron, AngloGold Ashanti and BHP Billiton have regional headquarters in the state. Western Australia is keen to attract exploration, development and value‐adding processing in the resources and energy arena, together with the relevant supporting industries and technologies associated with some of these major resource projects. The multiplicity of projects underway or planned also provides significant business opportunities for infrastructure companies to support the developments taking place, particularly in the areas of engineering construction, transportation and power supply. The value of engineering construction rose 32% (AUD8 billion) to AUD 32 billion in Western Australia in 2011. While the mineral and energy resources sector is the predominant focus of activity and attention, the Western Australian economy has increasingly diversified to allow it to cushion itself from fluctuations in the international commodities market. Oil and gas Western Australia is set to become the world’s second largest exporter of Liquefied Natural Gas by 2020. The state is home to an estimated 126 trillion cubic feet of natural gas and the volumes from new discoveries are far outstripping current production levels. In 2010 more than eight trillion cubic feet of gas was discovered in WA, and of this only one trillion cubic feet was produced, providing for extensive future stockpiles. Western Australia is also home to the world’s largest LNG Project, Gorgon, which is

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The Western Australian Trade Office (WATO) assists in identifying, promoting and facilitating export and business growth opportunities in the areas of resources, agrifood, fisheries and wine. Facilitating relationships between industry groups, the Government of Western Australian and private enterprise, WATO is here to assist Middle East and African investors interested in pursuing commercial opportunities in Western Australia. For further information about what assistance the Western Australian Trade Office can provide in the areas of resources, agrifood, fisheries and wine, please contact, pankaj.savara@wato.ae

located on Barrow Island off the north coast of the state. The Gorgon Project will produce 15 million tonnes of LNG per year. That’s enough to fill Wembley stadium 17,000 times. Western Australia has a strong track record for implementing multi-billion dollar oil and gas projects. The State dominates Australian petroleum production, in 2011 accounting for 85% of the nation’s LNG and 77% of oil and condensate production. In September 2011 Chevron Australia made its final investment decision on the AUD 29 billion Wheatstone LNG project off the Pilbara coast near Onslow, and construction began in December 2011. There are more than 20 international oil and gas companies with offices in Perth. They include Chevron, Woodside, Shell, ExxonMobil and Total. Key facts • Value of mineral and petroleum industry 2011: AUD107 billion • Value of crude oil and condensate production 2011: AUD12 billion • Value of LNG production 2011: AUD9 billion • Value of committed oil and gas projects as of March 2012: AUD 105 billion • Value of planned oil and gas projects March 2012: AUD 83 billion

Agribusiness Western Australia has one of the most innovative and successful agriculture and food industries in the world. Its location puts it in broadly the same time zone as 60% of the world’s population. Western Australia is primed to meet the growing demand for food from Asia and the Middle East, and to further develop seasonal market opportunities into the northern hemisphere.

The state’s agriculture and food businesses are already making major inroads into international markets and have a reputation for quality produce. In 2010-11, agrifood and forestry exports remained strong in challenging global market conditions, reaching a value of AUD 5.2 billion. Western Australia is a world leader in dry land farming, and now exports this expertise. It is also one of the most pest- and disease-free agricultural production areas in the world. To maintain Western Australia’s competitiveness, the Government works to continually cut red tape and promote investment in world-class research and development. This includes leading on new technologies, farming techniques and processing – and ensuring on-going sustainability and competitiveness.

Tourism Confidence in Western Australia’s tourism industry is strong with tourism development and infrastructure improvements planned around the State in the next few years. In particular, the Perth hotel market has experienced the strongest sustained period of room rate growth and occupancy out of the ten major Australian hotel markets and continues to enjoy double digit RevPAR growth anticipated to continue over the next five years. Landbank is a Tourism Western Australia initiative which has been created to ensure that there is an adequate supply of tourism development sites to meet the future needs of the tourism industry in Western Australia. The Landbank initiative will make it easier for the right developer with the right development philosophy to invest in tourism accommodation development in Western Australia. NOVEMBER 2012

FOCUS Queensland

Explore a new destination Queensland has a strong and growing relationship with the UAE. In addition to the Queensland – Abu Dhabi Memorandum of Understanding, ‘sister city’ ties exist between Brisbane and Abu Dhabi, and between Gold Coast and Dubai. We take a look at the tourism sector and the investment opportunities it offers.

ueensland’s Gold Coast has been known for many years as a popular tourist destination for Emiratis escaping the intense summer heat for a relaxing and fun-filled family holiday. The recent announcement of Etihad Airways increasing flights between Brisbane and Abu Dhabi from three times a week to a daily service is supported by an invitation to the UAE to explore more of what Queensland has to offer. Brisbane, the third-most populous city in Australia, offers a gateway to the natural wonders of the World Heritage-listed Great Barrier Reef and Fraser Island, all of which contribute to Queensland’s booming tourism industry. Tourism is the state’s second largest export earner, contributing USD 17.56 billion to Queensland’s gross state product and employing over 221,000 Queenslanders. More than 18 million domestic and international overnight visitors are attracted 50

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to Queensland each year with a collective spend of USD 17.2 billion. Queensland boasts a safe, friendly and culturally diverse lifestyle attracting migrants from both within Australia and overseas, contributing to the state’s population and economic growth. Queensland is forecast to grow at a faster rate than the overall Australian economy, due to a strong contribution from business investment, reflecting increasing investment on resources sector development. The Queensland Government is contributing more to infrastructure than any

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other Australian state, continuously upgrading transport, energy and water infrastructure while also supporting the development of telecommunications, innovation and research. International education is an important component of the Queensland economy. International students contribute to both the supply of tourism through employment in the industry and demand for tourism through personal and family investment in the Queensland tourism experience. In addition to its natural beauty, desirable lifestyle and strong economy Queensland offers business advantages for investors in Queensland’s tourism and services sectors. The Queensland Government has an active pro-business attitude that encourages entrepreneurship in the tourism sector, particularly investment into innovative tourism product development in iconic locations to offer distinctive experiences to national and international visitors. Urban and regional investment opportunities exist in the South East, Whitsunday Islands, Cairns and many other regional centres. Strong government support for Queensland’s thriving tourism industry combined with competitive operating costs, a highly-skilled workforce and strategic Asia–Pacific location makes Queensland an attractive environment for investment.

Trade and Investment Queensland is the Queensland State Government’s export and investment agency. They work closely with national and international companies looking to relocate, expand or develop their businesses. Trade and Investment Queensland has representative offices in Abu Dhabi, UAE and Riyadh, Kingdom of Saudi Arabia. For more information, please email susan.rae@trade.qld.gov.au