Trade & Export Middle East | January 2013

ISSUE 13 | january 2013

A practical guide to going global

www.tradeandexportme.com

Logistics If you are interested in the Central Asian market, Coyne Air will get your goods there

Sector watch

Country focus

Besides the wildlife, there is a lot that South Africa offers

r a t s five ht g i e r f

Is an economic free zone the answer to tackling high construction costs in Qatar?

Finance

13 outrageous financial predictions for 2013!

Business set-up Important differences between setting up a business offshore or on-shore

Qatar airways ceo, akbar al baker, talks to us about the exponential growth of the cargo division of the airline IN ASSOCIATION WITH PUBLICATION LICENSED BY IMPZ

EDITOR’S LETTER

Publisher Dominic De Sousa

Looking forward...

It’s that time of the year again when we look at the world with rose-tinted glasses and our heart is filled with hope and faith – Happy New Year to our dear readers and friends! We wish you the very best in 2013 in all your endeavours.

Group COO Nadeem Hood Managing Director Richard Judd richard@cpidubai.com +971 4 440 9126 EDITORIAL Senior Editor Aparna Shivpuri Arya aparna@cpidubai.com +971 4 440 9133 Contributing Editors Mike Byrne mikeb@cpidubai.com +971 4 440 9105 Tamara Pupic tamara@cpidubai.com +971 4 440 9130 Jenny Kassis jenny@cpidubai.com +971 4 440 9116 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 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

2012 was an interesting year with its ups and downs and as we turn a year old we have found the strength to get up on our feet. 2013 will be all about taking it forward and finding our space. In fact we have already been working towards it. In mid-January I head to Hong Kong to cover the Asian Financial Forum, the only magazine from the UAE to do so, and I am pretty excited to hear what the experts have to say about the global financial situation.

Then in February we get to highlight trade and investment opportunities in France for the GCC companies. It’ll be interesting to know what the French government has to say.

And then comes the big day- 25th February 2013 – that evening we will recognise and honour the best in the field of trade! So if you haven’t nominated your organisation for the Trade Excellence Awards yet, now is a good time. The nominations will close on the 25th of January.

We start this year with a bang, as we speak to the CEO of Qatar Airways, Akbar Al Baker about the exponential expansion of the cargo arm of the airline and the way forward for them. At the same time, we also speak to Coyne Air and their extensive network in some of the hard-to-reach places in Central Asia.

In our country focus section, we bring you the details on doing business with South Africa as the country slowly and steadily builds its bilateral trade with the region. And in our legal feature we highlight the important difference between setting up company offshore or on-shore. It’s always about the location, isn’t it?

As you may have noticed, 2013 already seems busy and exciting for us and we look forward to the successes and challenges. We hope you’ll be our partner in this journey.

Till then..

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

Aparna Shivpuri Arya, Senior Editor, Trade and Export Middle East Registered at IMPZ PO Box 13700, Dubai, UAE Tel: +971 4 440 9100 Fax: +971 4 447 2409

Talk to us: E-mail: aparna@cpidubai.com

Printed by Printwell Printing Press © Copyright 2013 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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Janaury 2013

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trade talk

48

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January 2013

January 2013

updates

ISSUE 13

18

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News: International news and trends with domestic trading relevance.

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

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ABOUT TOWN: We bring you coverage from the events that took place in the month of December.

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Finance: So what does 2013 hold for us? This year’s outrageous predictions are once again a selection of mainly negative events, any of which can change the financial landscape and in some cases even the political status quo. Steen Jakobsen, Chief Economist, Saxo Bank, takes us through these predictions.

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LEGAL: In October 2011 the world’s population reached seven billion and by 2050 the United Nations expects that number to surpass nine billion. Irvine Marr, Partner, Clyde &Co, throws light on what that can mean for cross border trade.

Sector Watch:

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LOGISTICS: A study by Dubai Chamber of Commerce and Industry, aims to highlight the main challenges that face Dubai’s logistic sector and that need to be addressed urgently to improve the sector performance.

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CONSTRUCTION: Dr. Tarek Coury, Chief Economist, Tanween, advises that creation of an economic zone could be a solution for the impact of high construction costs on the real estate industry in Qatar.

trade talk

CONTENTS

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BUSINESS SET UP: John Martin St. Valery, Founder and CEO, The Links Group, helps us here by explaining to us the difference between offshore and on-shore locations in the UAE and what will be good for our business.

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INTERVIEW: In a short span of time, Qatar Airways Cargo has become a leading service provider of the region. Aparna Shivpuri Arya caught up with its CEO, Akbar Al Baker, and engaged him in a discussion to know more this part of the airline.

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LOGISTICS: Coyne Airways was initially established as a charter broker in 1994, and registered as an IATA carrier with ICAO call sign in 1996. Aparna Shivpuri Arya met up with Darrin Quern, Managing Director, Coyne Airways, to know how they manage to reach the most difficult destinations.

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STRATEGY: How often have you selected to fly on a particular airline despite the slighter higher cost compared to its rivals or even a longer connection? Or have there been moments when you have decided to eat at a particular restaurant despite better options? It seems it has a lot to do with loyalty. Dr. Ashraf Mahate, Head of Market Intelligence, Dubai Exports explains this link to us.

focus

COUNTRY FOCUS: SOUTH AFRICA

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INTERVIEW: South Africa is UAE’s key business and investment partner with bilateral trade growing and diversifying with each passing year. Aparna Shivpuri Arya got to interview H.E Yacoob Abba Omar, Ambassador of South Africa to the UAE, to know his views.

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Bilateral relations: The UAE currently stands as one of South Africa’s core trading and investment markets and is the 24th largest investor in South Africa, along with being the largest trade partner in the GCC region. We bring you an overview of the bilateral trade relations.

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INDUSTRY: The automotive industry is one of South Africa’s most important sectors, with many of the major multinationals using South Africa to source components and assemble vehicles for both the local and international markets. We met up with Dr Norman Lamprecht, Executive Manager, NAAMSA (National Association of Automobile Manufacturers of South Africa), to know more about this strategic industry.

January 2013

5

Updates global watch

Sweden contributes to promoting trade in developing countries Government of Sweden is to contribute 18.3 million Swedish kronor – about USD 2.5 million – to an UNCTAD trust fund that supports efforts to spur durable, broad-based economic growth in developing countries. The contribution, announced by the Swedish Government and UNCTAD, will go to UNCTAD’s Capacity-Building in Investment for Development programme. Managed by the Division on Investment and Enterprise (DIAE), Capacity-Building in Investment for Development is a multi-year, multi-donor

umbrella trust fund that sponsors a comprehensive package of activities aimed at creating an enabling environment for boosting private-sector development, strengthening the productive capacities of poor countries, and promoting investment that leads to sustainable development.

Gunnar Oom, State Secretary of Sweden’s Ministry for Foreign Affairs, said he was pleased to announce the Government’s decision to support the UNCTAD programme.

€17.5

billion bailout requested

by Cyprus

Australia gets bullish on LNG exports Australia’s modest liquefaction capacity of 20 million tons in 2011 is expected to reach 124 million tons by 2017. As of 2011, total LNG trade among 25 active countries stood at 233.1 million tons, from trade of only 157.6 million tons in 2006, when a mere 16 countries were involved in the export of LNG. As of 2011, Qatar, Malaysia, Indonesia, Australia and Nigeria are the top five LNG exporting countries, contributing to around 151 million tons of LNG exports to their major importers. Similarly, Japan, Korea, Spain, UK and China are the top five LNG importing countries, contributing to around 163 million tons of LNG imports from their major exporters. Investments in LNG projects are set to steadily increase during

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JANUARY 2013

the immediate future, with global capital expenditure for upcoming LNG projects estimated to exceed USD 200 billion over the 2012-2017 periods.

124 million tonnes

Expected liquefaction capacity of Australia in 2017

Encouraging development Japan has donated CHF 395,604 to the Doha Development Agenda Global Trust Fund (DDAGTF) and this new contribution brings its contribution up to CHF 9.1 million.

This donation will finance technical assistance programmes and training activities for developing and least developed countries. The aim is to better adapt their practices and laws to WTO rules and disciplines, improve the implementation of their obligations and enhance the exercise of their membership rights.

“I welcome Japan’s contribution that will allow developing countries to expand their markets, find new trading partners and better integrate into the global economy” declared WTO Director General Pascal Lamy.

Japan’s WTO Ambassador, Yoichi Otabe stated “Japan will continue to support developing and leastdeveloped countries in better understanding the WTO rules with the aim of expanding their trading activities. Trade can be used as a tool for growth, development and poverty reduction. Trade is a crucial instrument today given the troubled times we are facing today”.

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

China-JAFZA relations get stronger

$106.9

value of coffee exported from Brazil to the Arab countries

What’s brewing?

The Arab world imported USD 106.9 million worth of Brazilian coffee during the first half of 2012, reflecting a 1.52% increase in revenues compared to the same period last year, according to new figures released by the Brazilian Coffee Exporter Council (Cecafé). Brazil exported 526,464 pieces of 60-kilogram coffee bags to various markets in the region from January to June 2012.

According to the Arab-Brazilian Chamber of Commerce, the Arab world h a s b e e n c o n s i s t e n t ly a m a j o r m a r ke t for Brazi l i an c of fee p rod uc t s . In 2 0 1 1 , Brazilian coffee exports to the Arab region reached USD 214 million, increasing by 35.88% from 2010 according to statistics from the Arab-Brazilian Chamber of Commerce.

China continues to hold a top position among Jafza’s global trade partners. The Asian giant’s trade through Jafza is expected to cross AED 40 billion in 2012, a n i n c re a s e o f a b o u t 10% from its trade of AED 37 billion in 2011.

I n t h e l a s t f ive ye a r s the number of Chinese companies in Jafza has more than doubled to 130 (at the end of Q3 of 2012) from 64 in 2007.

AED 40

Billion JAFZA’s trade with China

Exploring destinations Qatar’s LNG boom has been phenomenal, according to a report from QNB Group. In 2011, 47% of Qatar’s LNG exports went to the Asia Pacific region and 42% to Europe.

Asia ha s been t he prim a r y export destination for some time, and received an even larger share in 2007 of 79%.

This region is characterised by a shortage of hydrocarbon resources combined with rapidly rising demand for gasfired power generation. The l a rg e s t A s i a n d e s t i n a t i o n s in 2011 were Japan (12m

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tonnes), India (10m) and South Korea (8m). According to QNB Group, Qatar is diversifying its LNG export destinations.

In 2007, Qatar exported to eight different countries and in 2011 it exported to 23 different countries. In 2011, export destinations included the Middle East (UAE and Kuwait) and South America (Argentina, Brazil and Chile). Exports to Argentina are set to rise after t h e s i g n i n g o f a n S PA f o r 5m t/y starting in 2014. A new long-term SPA with Thailand is reported to have been signed

JANUARY 2013

and Qatar recently made the first delivery of LNG to Singapore.

Jordan has expressed strong

interest in importing LNG, and Qatar is helping it to build a regasification terminal in Aqaba.

Community events calendar

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!

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.

Date

Event

Location

January 4 - 14

2013 IGLP Workshop

Doha

7-9

Fourth General Conference of the Electricity and Exhibition

Sheraton Doha Resort & Convention Hotel Doha

7-9

World Congress on Engineering Education 2013 (WCEE 2013)

Doha

07 - 10

Arabplast & Tekno Tube Arabia Exhibition

Dubai World Trade Centre, Dubai, UAE

13 - 15

International Forum on Converting Gas to Liquids 2013

Doha

13 - 15

World GTL Congress

St. Regis Hotel Doha

13 - 15

Petrochem Arabia 2012

Dhahran International Exhibition Centre, Dammam

14

Financial Services Taxes Conference

Doha

15 -17

Intersec Exhibition

Dubai World Trade Centre, Dubai, UAE

15-17

Gulf Industry Fair

Bahrain International Exhibition and Centre, Manama, Bahrain

16 - 18

Made in Qatar

Qatar Chamber

20-24

MENA LNG Terminal Summit

The Diplomat Radisson Blu Hotel, Manama, Bahrain

21 - 23

Offshore Middle East Conference and Exhibition 2013

Qatar National Convention Center, Doha, Qatar

22 - 23

Aircraft Interiors Middle East,

Dubai World Trade Centre, Dubai, UAE

28 Jan - 31

Arab Health 2013

Dubai World Trade Centre, Dubai, UAE

31 Jan – 2 Feb

Forum Mobile Phone – ICT Qatar

Doha

Date

Event

Location

February

31-2 Apr.

World Luxury Expo Doha

Doha

April

4-6

Second High Level Forum on Global Geospatial Information Management

Doha

1-4

Kingdom Airports, Aviation and Logistics Summit

Riyadh

4-6

POWER-GEN Middle East 2013

Doha

2-4

Doha Carbon and Energy Forum 2013

Doha

4-6

Water World Middle East 2013

Doha

1-6

Qatar Career Fair 2013

Doha

Dubai

15 - 16

Business and Investment Forum in Qatar - Berlin (TBC)

Doha

Abu Dhabi

22 - 25

ICC WCF 8th World Chambers Congress

Doha

GITEX Shopper 2013

Dubai

05 - 07 5-6

Middle East Rail 2013 Port Management Strategy Summit 2013

7

Qatar Conference Qatar to the Security of Financial Information

Doha

3-6

17 - 19

Middle East Electricity

Dubai

16-17

The Internet Show 2013

Dubai

17 - 20

Qatar Projects 2013

Doha

30-03 Mar.

Arabian Travel Market 2013

Dubai

18 - 20

Machinex Arabia 2013

Jeddah

May

19 - 20

Concepts Middle East

Doha

May

Conference and Exhibition, Qitcom 2013

Doha

20 - 21

Real Estate Fair Qatar

Doha

6-8

Airport Show 2013

Dubai

22-24

Real Estate Fair Bahrain

Manama

6-9

Energy Qatar

Doha

Dubai

6-9

Makinat Qatar

Doha

March

6-9

Project Qatar

Doha

2-5

Doha

6-9

Qatar StoneTech

Doha

Heavy Max

Doha

25 - 28

Gulfood

Seminar - Convert Natural Gas

4

Gulf Expo-Qatar

Doha

6-9

5-7

Paperworld Middle East

Dubai

8-9

Workshop Customer Services

Doha

10-13

MEOS-Middle East Oil and Gas Show and Conference

Manama

14 - 16

QITCOM Conference And Exhibition

Doha

13 - 14

Middle East Geospatial Forum 2013

Doha

15-17

The Hotel Show

Dubai

17 – 21

Second Turbine Machines Middle East Symposium

Doha

26-29

Saudi Energy

Riyadh

31-04 Apr.

Saudi Travel and Tourism Market

Riyadh

27 - 29

Cityscape Qatar

Doha

JANUARY 2013

9

About Town

Walking the tightrope!

In an effort to tackle the challenges of the recent global downturn, some of the world’s leading financiers and representatives of the largest banks gathered in Qatar to attend the Euromoney Qatar Conference “Global Finance: Re-designed”.

We bring to you our coverage from the event.

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eld under the patronage of H.E. Sheikh Hamad Bin Jassim Bin Jabr Al-Thani, Prime Minister and Minister of Foreign Affairs, State of Qatar, the Euromoney Conferences, together with Qatar Central Bank, hosted a high-level international financial conference on 11th and 12th December 2012 at the Ritz-Carlton, Doha.

As part of the international efforts to understand the evolution of global finance, the Euromoney Qatar Conference saw in attendance Qatari government representatives, international regulators and private institutions. At the opening ceremony, the audience was addressed by the following high-profile figures of the Qatari government: ll H.E. Sheikh Hamad Bin Jassim Bin Jabr Al-Thani, Prime Minister and Minister of Foreign Affairs, State of Qatar ll H.E. Yousef Hussain Kamal, Minister of Economy & Finance, State of Qatar ll H.E. Sheikh Abdullah Saoud Al-Thani, Governor, Central Bank of Qatar 10

JANUARY 2013

ll H.E. Zeti Akhtar Aziz, Governor, Bank Negara Malaysia ll Charlie McCreevy, Former European Union Commissioner for Internal Market and Services and Former Minister of Finance, Republic of Ireland In his key note speech, H.E. Sheikh Hamad Bin Jassim Bin Jabr Al-Thani, Prime Minister and Minister of Foreign Affairs, State of Qatar, said, “Qatar has braved the odds of global financial crises with its inflation-adjusted growth surpassing 14% during 2011, while keeping inflation and unemployment rates low. Qatar is working to build a strong and progressing economy through the establishment of advanced infrastructure to serve the various economic sectors.”

His Excellency explained that the country’s well calibrated economic strategy stems from the Qatar National Vision 2030, which aims to achieve sustainable development in various sectors. “This contributed to realising many achievements during the first year of 2011-

16 strategy,” His Excellency added, after highlighting that growth rate surpassed 14% in real terms during 2011 and that budget surplus was 5% of GDP and current account surplus of 30% of the GDP. Pointing out that Qatar’s economy maintained its steady growth pace, despite unfavourable global circumstances, H.E. Sheikh Hamad Bin Jassim Bin Jabr Al-Thani, concluded that such momentum provided diversified opportunities for investment by local, regional and international private sectors.

In his address, H.E. Yousef Hussain Kamal, Minister of Economy & Finance, State of Qatar, opined on the global financial crisis, “I believe that some solutions for crisis were more political than financial. Although the EU crisis has conceded with the Arab spring, the GCC countries were able to tackle all the influences of these crises and made policies which protected their economies and managed to achieve growth. The country’s efforts to

H.E. Sheikh Hamad Bin Jassim Bin Jabr Al-Thani, Prime Minister and Minister of Foreign Affairs

H.E. Yousef Hussain Kamal, Minister of Economy & Finance

achieve the optimum utilisation of energy resources and the diversification of economic activity helped Qatar achieve record growth rates over the past years with the average compound annual growth rate (at constant prices) reaching 14.8% in 2011.” In addition, His Excellency expressed his expectation for Qatar’s economy to grow 5.4% this year and around 5% over the next few years.

Among the national strategies examined at the conference, Qatar was strongly praised by many of the speakers, particularly the recent moves to change legislation in order to position the Qatar Central Bank to oversee all banking, financial and insurance activity. H.E. Sheikh Abdullah Saoud Al-Thani, Governor, Central Bank of Qatar, said the country’s economy grew 18% in the first half of this year. H.E. Zeti Akhtar Aziz, Governor, Bank Negara Malaysia, spoke of the urgent requirements for greater global financial stability, and highlighted the impact of the internationalisation of financial systems on emerging economies, which often feel the global shocks most severely. She also highlighted the growing de-stabilising influence of income disparity, both within local economies and between nations, and urged international co-operation to tackle the issue.

Unquestionably, the global financial system is subject to greater regulation and political scrutiny than ever before. Banks face a new threat of disintermediation and being displaced from their traditional roles.

With the pace of financial innovation, in both products and technology, increasing, the number and type of companies involved in the business of finance is also increasing.

New credit players such as hedge funds, asset managers and specialist non-bank institutions

H.E. Sheikh Abdullah Saoud Al-Thani, Governor, Central Bank of Qatar

H.E. Zeti Akhtar Aziz, Governor, Bank Negara Malaysia

are increasingly involved, and as a result the regulatory complexity is also being magnified.

For sovereign wealth funds, governments and banks within the MENA region, the opportunities for playing an enhanced role will be significant, given the ongoing economic development and increased global profile of the region.

An interesting discussion developed during the opening panel “The Global Financial Crisis and the New Global Economic Paradigm” which aimed to discover the real issues of the global financial crisis.

John Butler, Founding Partner and Chief Investment Officer, Amphora, initiated the discussion by stating, “The global financial crisis pointed out that banks need to limit their global involvement, since the crisis has shown that international banks cannot understand particularities of each of the regions in which they operate.”

Highlighting that point further, Fahad Badar, Executive General Manager, Government and International Banking, Commercialbank, said, “ Project financing is more and more becoming a local matter since the international banks, which were previously quite involved, withdrew themselves after the crisis. For that reason, local banks had to step in.”

Enrico Grino, Assistant General Manager and Group Credit Adviser, Qatar National Bank, added further to this discussion by stating that, “After the crisis international banks exited the market and we faced the lack of financing for projects. Due to many ambitious projects in relation to FIFA World Cup 2022 and Qatar National Vision 2030, banking system in Qatar needs to be supported by the international financial system. Even though local banks have the

Richard Banks, Director, Emerging Markets, Euromoney Conferences

capacity and liquidity, this can become an issue in the long run. Currently, across the GCC region all local banks and financial institutions are internally focused since each GCC country is very ambitious with its plans. For that reason, my concern is how regional governments and banking systems will logistically manage to finish the planned projects.” In connection to this, Fahad Badar, Executive General Manager, Government and International Banking, Commercialbank, also expressed his concern, “My biggest concern is how we will manage both the growth and the inflation in Qatar and the whole region.”

Participants from around the globe aimed to get behind these key issues in a series of addresses, one-on-one interviews, panel discussions and workshops, and with approximately 1000 delegates who attended the event.

The Euromoney Qatar Conference is the first part of a three-year programme to chart the role of nations such as Qatar in the emerging global financial system. “We are delighted to be here in Doha for our first project in this series,” said Richard Banks, Director – Emerging Markets, Euromoney Conferences. “We believe that our partnership with Qatar Central Bank is an important milestone in the development of a more balanced financial system which should underpin global growth.”

Major Qatari banks and financial institutions provided full support for the event, with sponsors including Qatar National Bank, Qatar Financial Markets Authority, Commercial Bank, IBQ, J.P. Morgan, Masraf Al Rayan, QIB, Qatar Financial Centre Authority, Saxo Bank and Qatar First Investment Bank.

JANUARY 2013

11

ABOUT TOWN

The engines of growth The Third Global Entrepreneurship Summit (GES) was held in Dubai on 11th and 12th December 2012. We bring you some interesting snapshots of the event.

H

is Highness Sheikh Mohammed bin Rashid Al Maktoum, UAE Vice President, Prime Minister and Ruler of Dubai, opened the summit by pointing out that entrepreneurship is not an alien phenomenon for the Arabs.

Francisco Sanchez, Undersecretary of the U.S. Department of Commerce for Foreign Affairs, added that entrepreneurial spirit and youth are currently the most important capital of not only Dubai and the Arab region, but also of the whole world. He pointed out that the 21st century offers us a great opportunity to maximise the potential in all markets and with all nations. Elaborating further he stated that the region needs 50 to 100 million jobs within the next phase, and said, “We recognise that our partners in the region will not be able to achieve their ambitions without creating job opportunities for youth. Also, SMEs are an essential part of the solution, since they reflect the future of the economy.”

The exhibition was a business platform for government agencies, public and private entities, and SMEs, their suppliers and funds, to showcase their products, services, initiatives and achievements in regional development of SMEs. In addition, it was useful to a cross section audience including investors, distribution partners and corporate procurement executives.

Moreover, the reason behind the summit was to unify the region’s policy makers who include regulators, entrepreneurs, SME stakeholders, investors and procurement decision makers, through successive sessions and useful discussions held during these two days.

M o re t h a n 9 0 s p e c i a l i s e d ex p e r t s participated in the debates and came through critical topics mainly about the development 12

JANUARY 2013

of financial literacy for SMEs which would enable them to deal with banks more positively. The participants also reviewed the global best practices for SMEs and pointed out some examples from the whole world and the Arab countries in particular.

A panel discussion titled “Global Conversation with Policy Makers: Global Best Practices in Entrepreneurship and SME Developments ” was used for exchange of different points of view on global best practices and benchmarks for entrepreneurship.

In addition, the discussion also focused on important steps to enhance the performance of SMEs, including adoption of the Bankruptcy Law and amendment of the Labour Laws. Referring to the importance of the adoption of the Bankruptcy Code, one of the speakers mentioned that the absence of bank financing is still due to banks’ requirement of submission of personal guarantees by the entrepreneurs. Thus, he called for wider participation and greater support from the major companies to encourage small shareholders.

“SME Financing: How are the Financial Lenders Lightening the Pressure for the SMEs?” was the subject of a panel discussion that stated the fact that banks’ portfolio of SME investments stands at less than 5% in comparison with their counterparts in the d eve l o p i n g wo rl d where it represents almost a quarter of total investments.

Banks and financial institutions are looked upon as unsupportive allies of SMEs who p l a c e c o m m e rc i a l interest before national priority

of developing small businesses. There is, however, a recent surge in small businesses that supports these initiatives.

Satya Jeet Roy, Head of Corporate Services, Citigroup Banking, explained that what matters is the success of the company in putting the action strategy and planning for the next three years at least. He explained, “Banks do not only want to provide loans to the companies, but they are very interested in building long-term partnerships.”

A keynote address was given by Mustafa Abdel Wadood, Abraaj group, UAE, where he described the state of the world by saying, “We are living in the transformational times. Growth is coming from emerging markets which have grown three times bigger since the late 90s.”

Within the same context, additional discussion was explored during the “The MENA’s Youth Phenomenon: The 100 Million Jobs Challenge” which pointed that the youth unemployment rate for MENA stood at around 24% in 2009. According to the World Bank sources, that is more than twice higher than the unemployment rate for all adults and also the highest amongst world regions.

Lastly, within the panel “Establishing a Unified GCC SME Ecosystem”, the leading regional incubators shared their unique successes and efforts in developing SMEs. Furthermore, they assessed the opportunities and uncertainties of establishing a unified GCC/Middle East SME ecosystem. Moreover, they assured that the less the government gets involved in putting policies, the more entrepreneurs can succeed.

This event was a great success and provided a communication platform between experts from the government and the private sector as well as the youth.

TRADE TALK Finance

Believe it or not!

The outrageous predictions for 2013 are a selection of mainly negative events, any of which can change the financial landscape and in some cases even the political status quo. Steen Jakobsen, Chief Economist, Saxo Bank, takes us through these predictions.

14

JANUARY 2013

I

t is always tempting, when making predictions, to call for radical changes to the market landscape, but having produced this publication now for over ten years, we hope the real value on offer to readers is to identify major events and risks that seem out of the box and “outrageous”, but are actually far more probable than appreciated and could have significant (mostly very negative) consequences on investment returns in 2013.

Our biggest concern here on the cusp of 2013 is the current odd combination o f e x t re m e c o m p l a c e n c y a b o u t t h e risks presented by extend-and-pretend macro policy making, while at the same time seeing rapidly accelerating social tensions that could threaten political, and eventually financial market, stability.

Our recent calls for a forest fire-style crisis that would be short and scary, but also establish healthy conditions for moving forward have been met with the historically correct response – Any real change has only come about as a result of the exigencies of war.

Before everyone labels us ‘doomers’ and pessimists, let us point out that economically, we already have wartime financial conditions – the debt burden and fiscal deficits of the western world are at levels not seen since the end of World War II.

ABOUT Steen Jakobsen was appointed to the position of Saxo Bank’s Chief Economist in March 2011. Jakobsen has more than 20+ years of experience within the fields of proprietary trading and alternative investment. In 1989, after finishing his studies in Economics at Copenhagen University, he started his career at Citibank N.A. Copenhagen from where he moved to Hafnia Merchant Bank as Director, Head of Sales and Options.

We may not be fighting in the trenches, but we may soon be fighting in the streets.

To continue with the current extendand-pretend policies is to continue to disenfranchise wide swaths of our population - particularly the young - those who will be taking care of us as we are entering our doddering old age. We would not blame them if they felt a bit less than generous. In other words, the kind of confrontation we risk is not a military one, but rather a struggle between the mistreated young generation and the old fogies, who think they are entitled to all of a society’s wealth and to do everything to defend the status quo All of this leads us to believe that society will tilt increasingly towards more radicalism in Europe in 2013, where the far left and far right will both gain ground by appealing to the desperately disenfranchised voters who have very little to lose in responding to their messages. Current mainstream European politicians are running on ideological empty. And they have never shown that they understand the ‘representative’ portion of a representative democracy.

The macro economy has no ammunition left for improving sentiment. We are all reduced to praying for a better day tomorrow, as we realise that the current macro policies are like pushing on a string because there is no true price discovery in the market anymore.

As you look at our list of ten “predictions”, they may not look particularly outrageous in some cases, but remember that we have extremely low volatility in all asset classes due to the lack of real price discovery. In such an environment, it means that almost any move outside of two standard deviations is becoming outrageous, as it suggests that the totalitarians are losing their grip.

As we must do every year, we also need to underline that these ten events are not Saxo Bank’s official calls for 2013. Ironically,

though, they could prove far more relevant for investors because of the huge impact if any one of these see the light of day in the New Year. Before trading or investing, we all must know the worst case scenario - capital preservation is a must and your portfolio needs to be able to weather a perfect storm, or for that matter any storm.

As we leave 2012 the consensus call is for the S&P 500 to rise 10% next year, and not a single analyst sees the market down in 2013 – I do not remember a similar level of complacency since the year 2000 where everyone I knew quit their job in hopes of making a fortune day trading. One of the things we can learn from history is that we rarely ever take its lessons to heart.

This is our ten “Outrageous Predictions” for 2013:

1. DAX plunges 33% to 5000

China’s economic slowdown continues, putting a halt to Germany’s industrial expansion. This causes large price declines in industrial stocks and low consumer confidence. Approval ratings for Angela Merkel plunge ahead of the German election, and in a weak economy combined with political uncertainty as Germany moves closer to signing up for further EU debt mutualisation, the DAX stock market index declines to 5,000, down 33% for the year.

2. Nationalisation of major Japanese electronics companies Japan’s electronics industry, once the glory of the country, enters a terminal phase after being outmatched by South Korea. With combined annual losses of USD 30 billion for Sharp, Panasonic and Sony alone, creditworthiness deteriorates greatly and the Japanese government nationalises key industry players, similar to the US government’s bailout of its automobile industry.

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3. Soybeans to rise by 50% Bad weather during 2012, which wreaked havoc on global crop production and saw a nine-year low in US soybean ending stocks, leaves the price of new crop soybeans exposed to any new weather disruptions, either in the US, South America or in China.

Increased demand for biofuel will also play its part in exposing the price to spikes, and speculators will be ready to re-enter the market, pushing the price higher by as much as 50%. Food security becomes a buzz phrase.

4. Gold corrects to USD 1,200 per ounce

The strength of the US economic recovery in 2013 surprises the market and especially financial investors in gold. This and a lack of pick-up in physical demand for gold from China and India, both struggling with weak growth and rising unemployment, trigger a major round of gold liquidation.

Gold slumps to USD 1,200 before central banks eventually step in to take advantage of lower prices.

$30 billion

Possible loss suffered

by Sharp, Panasonic and Sony in 2013 6. USDJPY heads to 60.00 The Liberal Democratic Party comes back into power in Japan, with its supposedly JPYpunishing agenda. Only half-measures are introduced however, and at the same time the market has become over-positioned for JPY weakness and Japanese investors repatriate a portion of their trillions of USD invested abroad as risk appetite retrenches. The yen vaults to the fore as the world’s strongest currency, with USDJPY heading as low as 60.00 – ironically paving the way for the LDP

It is possible that Hong Kong may move to un-peg its dollar from the USD, and repeg it to the Chinese renminbi.

Other Asian countries show signs of wanting to follow suit. RMB volatility increases as China loosens its grip on the currency’s movements, and Hong Kong quickly grows to become a major world currency trading centre and the most important centre for trading the RMB. 5. WTI crude hits USD 50 US energy production continues to rise, primarily through advanced production techniques such as in the shale oil sector. US production of crude oil rises strongly, and with domestic inventory levels already at a 30-year high and export options limited, WTI benchmark crude oil prices come under renewed selling pressure and slump towards USD 50 per barrel.

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government and the BoJ to reach for those more radical yen-weakening measures they promised in the first place.

7. EURCHF breaks peg, touches 0.9500 European Union tail risks are re-aggravated – perhaps by the Italian election – or over the nature of Greece’s exit from the European

Monetary Union and the worry that Spain and Portugal will follow suit. This sends capital flows surging into Switzerland once again and the Swiss National Bank and Swiss Government decide it is better to abandon the Swiss franc’s peg to the euro for a time rather than push reserves past 100% of Switzerland’s GDP. As a consequence EURCHF touches a new all-time low below parity before Switzerland is forced to introduce capital controls to stem its strength.

8. Hong Kong unpegs HKD from USD – re-pegs to RMB

It is possible that Hong Kong may move to un-peg its dollar from the USD, and repeg it to the Chinese renminbi. Other Asian countries show signs of wanting to follow suit. RMB volatility increases as China loosens its grip on the currency’s movements, and Hong Kong quickly grows to become a major world currency trading centre and the most important centre for trading the RMB.

9. Spain takes one step closer to default as interest rates rise to 10%

With social tensions in Spain already high, the public sector simply cannot cut its public outlays further. In 2013, Spanish sovereign debt is downgraded to junk and the social strain pushes Spain over the edge, seeing Spain reject the extend-and-pretend policies of EU officialdom. Yields rapidly increase after the downgrade and as an inevitable default is priced in.

10. 30-year US yield doubles in 2013

The Federal Reserve’s zero interest rate policy forces investors to leave fixed income. With no or even negative return, the substitution of bonds with stocks is appealing. The bond market is far larger than the equity market and a 10% reduction of funds allocated to bonds and reallocated to stocks would amplify equity fund inflows by around 30%. This could lead to higher US rates and also be the beginning of decade-long outperformance by stocks over bonds.

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TRADE TALK Legal

At the crossroad of trade In October 2011 the world’s population reached seven billion and by 2050 the United Nations expects that number to surpass nine billion. Feeding, clothing, employing, and housing that growing population represents the largest economic and political challenge facing the world’s leaders, especially as realisation dawns that being “three meals a day from anarchy” is a very real reality. Irvine Marr, Partner, Clyde &Co, throws light on what that can mean for cross border trade 18

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A

s international lawyers with a range of clients involved at all stages of the supply chain, we have seen increasing friction between the commercial imperative (usually securing reliable supplies and deliveries) and national interests (prompted largely by resource scarcity). Over the last several years, both the frequency of government intervention in the markets and the types of direct and indirect tools that they deploy has increased.

Direct action includes export bans. For example the Russian government banning wheat exports in 2010 or, in March 2012, the Indian government banning exports of cotton for the second time in two years.

The political dimension is also wider than any individual nation, as illustrated by the deployment of sanctions. Today, as events in the Middle East demonstrate, sanctions have become a geopolitical tool that governments are more willing to use, and quickly, without obtaining universal international consensus. The upshot is that businesses have to keep track of a much more complex and fast-moving regulatory environment and to understand both the direct and indirect impact. The effect on the price of oil has been clear and immediate, but other sectors have also been affected.

The Middle East secures even greater impact due to the proximity of its Iranian neighbour where historic and important relationships are stymied by the US, EU and UN sanctions. Trading between traditional Middle Eastern/Iranian parties is restricted, not only in relation to the purchase, of Iranian crude, but there is a greater significant reach effecting shipping, insurance and finance as regard to the ability for Middle East trading partners to pay for goods sold to Iran or to receive payment for goods sold by Iran. In effect, the Middle East suffers the impact of the “law of unintended consequences” as it was not foreseen that a prohibition on the purchase of lranian crude would have such an impact to limit trading with Iranian counterparts.

Consequently, companies, traders and banks involved in the commodities sectors are in many cases adapting how they operate. Responding to the real and present threat of resource scarcity in the face of rising demand and the impact and knock-on

ABOUT

Irvine Marr leads Clyde & Co’s Middle East shipping and international trade practice. He specialises in resolving commodities and shipping disputes. Irvine has built up an extensive and impressive client base including major oil traders, steel traders, various P&I Clubs, state owned charterers and first class ship owners. Clyde & Co is an international recognised law firm in the marine services sector, with significant expertise in the area of international trade.Irvine is also a member of the Baltic Exchange and a supporting member of the London Maritime Arbitrators Association (LMAA).

effect of sanctions (especially in the Middle East), businesses are seeking to move both up and down the value chain.

By seizing greater control of activities at the top and bottom end of the supply chain, companies are improving security of supply, securing route to market, locking in pricing discounts and improving efficiency. This strategy, combined with diversification into complementary sectors, both lengthens and widens their position in the chain, enabling companies to create more opportunities and boost bottom line performance.

In this firm’s day to day business, we are

issues and increased competition from the banks - are leading trading businesses to proactively look at new structures and business models, including significant restructuring as businesses seek either to merge for size or shrink for specialisation.

These financing problems are compounded by strong commodity prices, which mean larger volumes of finance are needed to trade the same tonnage as before. This also means higher margin calls or financing requirements for traders to hedge their exposure to the futures market. Larger commodity trading groups

Trading between traditional Middle Eastern/Iranian parties is restricted, not only in relation to the purchase, of Iranian crude, but there is a greater significant reach effecting shipping, insurance and finance as regard to the ability for Middle East trading partners to pay for goods sold to Iran or to receive payment for goods sold by Iran. seeing the results of this shift in strategic thinking both in terms of the advisory work we undertake and in the changing nature of M&A deals and the time, size, nature and length of sale contracts, including the origin and/ or source of the products.

There have been profound implications for intermediary companies operating in the middle of the value chain. As the commodities trading industry suffered a sharp drop in profitability in the second half of the 2011 amid weaker global demand and trading margins being squeezed.

These pressures – combined with funding

are at an advantage in securing funding for their trading activities, as are those which have physical assets to provide as security to their bankers. In order to access the necessary funds, there is an additional pressure on smaller niche players to consider whether they have to gain scale through mergers or diversification.

All in all, in circumstances of rising demand in the face of resource scarcity, difficulties following sanctions, strong pricing and financial constraints means that the commodity markets are at something of a crossroads.

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TRADE TALK Sector study: Logistics

The logistics of trade A study by Dubai Chamber of Commerce and Industry, aims to highlight the main challenges that Dubai’s logistics sector faces and which need to be addressed urgently to improve the sector’s performance.

O

ver the last two decades, the importance of Dubai’s logistics sector to the UAE economy has been consolidated and this role has been further reinforced during and post the recent global financial crisis and economic downturn.

Over the last few years, Dubai has grown as one of the most important international integrated logistics hub.

That can be attributed to many factors, such as Dubai’s strategic location at the crossroads of major shipping routes, historical economic and trade relations with other strategic locations, world 20

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class infrastructure of ports, airports, transports vehicles, and more According to HSBC’s latest international trade forecast on global and country trade (February 2012), it is projected that the world trade will accelerate from 2014.

The expected growth rate of the world trade is about 86% over the next 15 years (2012-2026).

Based on the same source, UAE trade is projected to grow by 124% to 2026 faster than the average growth rate of the world trade, The substantial growth in the UAE trade will be fuelled mainly by the expansion of trade in industries such

electrical apparatus, jewellry, aircraft as well as trade in oil and related industries. To benefit from the expected and current huge potential of the world trade, Dubai should maintain an efficient and competitive logistic sector relative to other regional logistic and international trade hubs.

Main segments of UAE’s logistics sector The main segments of the UAE logistics sector, based on the highest percentage share in the sector revenue generated are: freight forwarding, transportation, warehousing and value added logistics services.

Freight forwarding constitutes the highest percentage share of the logistics market revenue of about 63.8% explaining the country’s primary focus on international trade. The second highest revenue generating segment of the UAE logistic market is the transportation segment which accounts for about 18.8% of the sector total revenue.

Warehousing segment generated revenue accounts for about 14% and the remaining 4.1% of the UAE logistic market revenue is generated by the value added logistics services activities, such as assembly, packing, labeling and investigation.

The estimated market size of UAE logistic sector in terms of revenue is about USD 7.49 billion in 2011, which represent approximately about 2% of the UAE total GDP and about 4.5% of its service sector GDP. By 2015, it is expected that UAE logistic market revenue will reach about USD 10.1 billion (Figure 1).

The percentage share of the main industries in terms of expenditure on logistics services are: • oil and gas sector about 36% • engineering goods about 30% • food sector 9% • and metal sector 7% • automotive 6% and • the remaining is distributed among textile, cement, consumer electronics and appliances.

UAE logistic sector performance benchmarking The importance of UAE’s logistics sector has been internationally recognised, as evidenced by the high ranking of the sector along most of the international logistics benchmarking indices, such as the Agility Emerging Markets Logistics Index (EMLI), which compares the major emerging

markets on the bases of the key attributes that makes the market attractive from the point of view of logistics, air cargo, shipping lines and freight forwarders. According to EMLI 2012 ranking, UAE took the 5 th position, indicating the attractiveness of the UAE logistic market among other surveyed emerging markets especially in ‘market compatibility’ and ‘connectednesses”.

Based on logistic professional’s percept i on over f rei ght forwa rd i n g performance of a country, the World Bank International Logistic Performance Index (LPI) ranks countries globally. The LPI index provides a comprehensive picture of the supply chain performance.

According to LPI 2012 ranking, UAE is ranked among the top 20 countries taking the 17th position globally.

The number one country in term of the overall index is Singapore, followed by Hong Kong, Finland (3rd) Germany (4th) and Netherlands (5th). UAE is a head of Spain, Taiwan, South Africa and China. Among the Middle East and GCC countries, UAE logistic sector is the best.

The rest of the MENA countries ranked between 33rd position for Qatar and 96th position for Lebanon. UAE scores are consistent across the index six criteria.

However, UAE ranked high in the 13th place globally along the criteria “timeliness” ahead of Switzerland, France, Austria and Finland. Also, UAE ranked relatively high in the 15 th position globally along both criteria of “customs clearance efficiency” and “arranging international competitively priced shipments”.

UAE is positioned in the 17 th place globally along the criteria “quality of tradeand transport- related infrastructure”, and “competence and quality of logistics services”. Finally, for the criteria that assess

Benchmarking UAE logistic sector by LPI

UAE LOGISTICS SECTOR OUTLOOK 2009-2015

2009

2010

2011

2012

2013

2014

2015

6.35 7.03 7.49 8.11 8.78 9.4 10.06 the ability of the sector in tracking and tracing consignment UAE ranked in the 18th position (Table 1).

Challenges Despite the promising outlook of Dubai logistic sector and its current spectacular performance relative to other regional and international logistics hubs, the sector is challenged by some operational and cost factors that need to be addressed if Dubai is to become a world class logistics hub.

The sector appears to suffer from high operational costs relative to other regional logistics hubs, which is expected to adversely impact the competitiveness of Dubai logistic sector. In addition, there appears to be a logistics skill gap amongst the workforce in Dubai that needs to be tackled by providing intensive logistic related training and education.

Despite the impressive developments in Dubai infrastructure, it seems that logistic companies are having issues regarding the connectivity of land transport system which links to warehousing facilities within Dubai. Furthermore, issues related to administrative delays at the borders with other GCC countries are regarded to hinder the flow of trade between the neighbor countries.

Finally, the relatively underdeveloped e-commerce industry in the UAE hinders the streamlining of the trade procedures and flow. Therefore, trade and logistics facilitation can be enhanced by setting up a system that can improve the e-commerce industry within the UAE.

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TRADE TALK Sector study: Construction

Be in the right zone!

The government’s investment in Qatar’s infrastructure in the coming decade will set the stage for the FIFA World Cup 2022 and, more importantly, will contribute to the transformation of Qatar’s economy into a high value added knowledgebased economy. Dr. Tarek Coury, Chief Economist, Tanween, advises that creation of an economic zone could be a solution for the impact of high construction costs on the real estate industry in Qatar.

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C

o s t s re l a t e d t o t h e p l a n n e d investments will however be exacerbated by accelerating input costs, in particular the cost of raw materials.

High construction costs pose significant challenges for all real estate asset classes.

In addition to high government capital expenditures, the effects will be felt at later stages in the lifecycle of real estate projects unless a state subsidy is given or minimal returns are deemed acceptable. In particular, end users will face higher rental prices for residential properties, businesses will incur increased operating expenditures and tourists will face higher costs for hotels and retail products.

Qatar already boasts the highest input costs for raw materials in the GCC region.

This is in part reflected in rental rates that are on average 10-15% higher than sample comparables in Dubai for upscale residential properties and high-end commercial property. Raw material costs are set to escalate as both Qatar and the remaining GCC countries upgrade their infrastructure. Industry sources put GCC investment spend for existing projects at USD 3.3 trillion, about half of which are construction projects. These numbers suggest that already high input costs are set to increase further.

ABOUT

Dr. Tarek Coury is Chief Economist at Tanween, a Qatari real estate developer and development consultancy providing turn-key solutions to investors, developers, land owners and occupiers. Tanween’s unique approach covers all services within the real estate investment value chain from idea creation to market research, feasibility studies, project delivery and asset management. For further information, Tarek can contacted at tcoury@tanween.com.

$225 billion Qatar’s planned investment on infrastructure projects

A solution While the challenge is daunting, the importance of cost control presents a significant investment opportunity for the government. This article argues for the creation of an economic zone dedicated to production, warehousing and logistics services for the provision of raw materials in Qatar through a public private sector

partnership (PPP) with local business partners. Outcomes will include lower raw materials costs, eased supply-chain bottlenecks, a government revenue stream through the build-operate-transfer period, lower government infrastructure investment costs and an opportunity to expand warehousing and logistics services provision to other GCC states.

Minimum Construction Costs in USD per m2 of gross floor area

Source: RLB Data Q4 2011

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TRADE TALK Sector study: Construction

Demand for raw materials is poised for growth in the GCC region. The construction sector, which is the principal user of raw materials, has grown in importance both in Qatar and throughout the region. The sector experienced annual growth of over 20% in the first half of the past decade in Qatar. More recently, annual growth in the construction sector hit nearly 80% in 2008, meeting increased demand from a growing population and investments in the LNG sector. The building and construction sector has also grown in importance in the domestic non-hydrocarbon economy, nearly doubling in size from 9% in 2000 to 17% in 2011.

The sector is poised for further growth.

Several projects are currently either under construction or at the planning stage to meet the requirements of hosting FIFA World Cup 2022 and achieving the longterm objectives of the Qatar National Vision 2030. To achieve these objectives, Qatar is planning to spend USD 225 billion on infrastructure projects with a view of mobilising private investment worth USD 107 billion. Other GCC states will concurrently undertake large-scale investments that will directly result in greater demand for raw materials. On the top among them are UAE with current construction projects valued at nearly a trillion dollars and KSA with construction projects worth over USD 500 billion.

Qatar has the highest construction cost in the GCC according to EC Harris International Construction Costs Report 2012 , which benchmarks building costs in 53 countries.

It ranks Qatar the 13 th most expensive country to build in surveyed countries.

Rider Levett Bucknall (RLB) conducted a survey of construction costs across asset classes in selected cities in the GCC region and reports that minimum construction costs are the highest in Doha across all but one of the asset classes (please see table 1.)

Construction costs have grown continuously over the past six years across the GCC region reaching peaks of 32% growth in 2007 for Qatar. After the onset of the financial crisis, growth in construction costs fell to about 24

JANUARY 2013

1% in 2011, but these are expected to pick up again soon. MEED forecasts an initial increase in construction costs of 4% in 2013 with the work phase starting on the Qatar Metro project, with costs rising overall by 18% by 2017.

In addition to increased demand, the construction sector faces the challenge of limited supply. Qatar currently produces 6.2 million tonnes (MT) of cement annually, which is inadequate to meet expected demand. MEED estimates that cement shortfall will be about 3.3 MT per year from 2015. This limited supply is in part driven by increased competition from other GCC countries on the same regional supply chain for these materials. Other factors include inadequate and inefficient logistics facilities that contribute in driving up costs and a logistics sector that remains highly fragmented, cost inefficient and dominated by small players.

$3.3 Trillion GCC investment on exsisting projects

Strong enough rationale The rationale for an economic zone dedicated to raw materials production, wa re h o u s i n g a n d l o g i s t i c s s e r v i c e s hinges on encouraging productive and organisational synergies among domestic raw materials producers and suppliers and will result in lower raw materials production costs.

Concurrent development of a transportation network servicing the economic zone will result in lower transportation costs.

Integrating the economic zone in the regional

transportation infrastructure, including the upcoming GCC railways network, the new airport and seaport will allow the economic zone to feed into regional supply chains. In addition to lower infrastructure costs, the government will generate revenue from operation of the economic zone and open up opportunities for raw materials export throughout the GCC region. The economic zone will stimulate growth of SMEs and allow for export-oriented economic diversification.

Increased regional demand for raw materials in the coming decade and supply chain bottlenecks suggest significant risks with regard to input costs and project delivery for upcoming infrastructure projects in Qatar. The fragmented nature of the domestic warehousing and logistics sector, along with high rental rates for warehousing in turn suggest an important opportunity for government involvement in the creation of an economic zone dedicated to warehousing and logistics for raw materials.

The economic zone would provide a fully integrated service solution covering warehousing, intermodal handling, freight consolidation and road logistics. Outcomes of the economic zone include: • Lower raw material costs • L o w e r i n f r a s t r u c t u r e c o s t s f o r government-financed projects • Increased revenue from operating the economic zone through a PPP/BOT arrangements • Provision of a stimulus for growth of SMEs within the economic zone, and spillover effects outside it.

Containing construction costs is therefore likely to save the government billions of dollars and increase the financial viability of government investment projects. Following the moratorium on investment in the LNG sector, successful economic diversification in the short term will hinge on government efforts to identify and tackle challenges facing the non-hydrocarbon sectors.

* The article was first carried in our sister publication, Private Sector Qatar.

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TRADE TALK Business Setup

Are you at the right place?

Well, we know one thing for sure - to be at the right place for your business is definitely the most important. John Martin St. Valery, Founder and CEO, The Links Group, helps us by explaining the difference between offshore and on-shore locations in the UAE and what will be good for our business.

T

he United Arab Emirates is one of the most attractive investment destinations for foreign companies in the world.

The country ranks 26th on the 2013 World Bank’s Ease of Doing Business report having invested heavily in infrastructure to create one of the most pro-business environments in the Middle East. With its consistently positive economic outlook, excellent international connections and strong and stable leadership, the UAE continues to attract foreign investors.

In 2012, the UAE’s GDP is expected to climb to its highest level of around USD 385 billion to maintain its position as the largest Arab economy after Saudi Arabia, according to the Federation of GCC Chambers of Commerce and Industry (FGCCI). At that level, the UAE will account for more than a fifth of the combined GDP of the six-nation Gulf Cooperation Council (GCC), forecast at around USD 1.46 trillion this year, its highest ever.

According to the 2012 International Monetary Fund (IMF) Report , the UAE’s imports are expected to reach USD 281.6 billion by 2017 with onshore businesses accounting 63% of total import volume and

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free zones representing 37%. The report is expecting the UAE’s GDP to increase 16% by 2017 to reach USD 448.3 billion.

To conduct business in UAE on a regular basis, foreign investors are required to establish a legal commercial presence. If you’ve got UAE in your business development sights, the most important decision you will need to make is choosing the right legal presence for your business. Currently, foreign investors can set up either in free zones or as onshore entities. To know which option is best for your business, the first and key question to ask is ‘where is the audience for my company’s product or service?’.

Onshore vehicles If the audience for your company’s product or service is onshore (mainland or outside the Free Zone), then it would be best to establish an onshore entity. Under the Commercial Companies Law, Federal Law No. 8 of 1984, UAE nationals must own a minimum of 51% of all public and private shareholding companies and limited liability companies.

There are 11 different types of onshore companies that can be established in the UAE. They include: 1. Limited Liability Company (LLC) 2. General partnership company (UAE nationals only) 3. Limited partnership company (UAE nationals only) 4. Joint venture 5. Sole proprietorship 6. Branch of a foreign company 7. Representative office of a foreign company 8. Public shareholding company 9. Private shareholding company 10. Partnership limited by shares 11. Partnership-en-commandite (UAE nationals only)

Limited Liability Company (LLC) A limited liability company (LLC) is an onshore entity which most foreign investors opt for. This is because establishing a limited liability company requires a relatively small amount of capital, offers access to the whole of the market, unlimited amounts of projects and can be established reasonably quickly.

The company can be formed by a minimum of two and a maximum of 50 persons whose liability is limited to their shares in the company’s capital. The minimum equity participation by a UAE national is 51%.

The legal minimum share capital is USD 41,000. However, in Dubai, the minimum capital is currently USD 82,000 contributed in cash or in kind. While foreign equity in the company may not exceed 49%, profit and loss distribution can be prescribed.

Responsibility for the management of a Limited Liability Company can be vested in the foreign or national partners or a third party. The shares of this company are not open for subscription by the public and they do not issue negotiable shares.

General Partnership Company Another type of onshore entity is a general partnership, which is a company formed by two or more UAE nationals who are jointly and severally liable for the partnership’s debts. No names other than those of the actual partners may be included in a partnership’s name.

ABOUT Having founded The Links Group, the company formation specialists in 2002, John has spearheaded the growth of a Partnership into the corporate structure that now exists. More than thirteen years living and working in the UAE and Qatar has given John a unique and unrivalled insight into the commercial opportunities in this rapidly developing region.

Today John advises many group companies at board level, particularly in the areas of entrepreneurship, corporate governance and business development.

Partnership companies are confined to UAE nationals only because partners are responsible towards the liabilities of the firm by all their assets. This type of company may not be applied to foreigners as in most of the cases their assets are usually aboard.

A partnership interest may be transferred only with the approval of all partners or in accordance with conditions stated in the partnership agreement. The management of the partnership must rest with one or more managers who must be natural persons and who may or may not be partners.

A partnership is dissolved on the death, insanity, bankruptcy or withdrawal of one of its partners, unless the remaining partners decide unanimously to continue the partnership and their decision is registered in the commercial register.

Limited Partnership Company The third type is a limited partnership company, which comprises one or more general partners who are jointly and severally

liable for the partnership’s debts and one or more limited partners whose liability for the partnership’s debts is limited to their contribution to the partnership’s capital.

All general partners must be UAE nationals.

A limited partner may not participate in the management or act in the name of the partnership. No minimum capital contribution is required by the law.

Joint venture A joint venture company is a contractual agreement between a foreign party and a local party licensed to engage in the desired activity. This type of onshore company is seen as a suitable structure for companies working together on specific projects.

The local equity participation in the joint venture must be at least 51%, but the profit and loss distribution can be prescribed. There is no need to license the joint venture or publish the agreement. The foreign partner deals with third parties under the name of the local partner who bears all liability.

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TRADE TALK business setup

Sole proprietorship Under the Commercial Companies Law, foreign investors are permitted to practice certain types of professional activities without having a national partner. However, it is a condition that the firm must have a local service agent (UAE national) who has no direct involvement in the business and is paid a lump sum and/or percentage of profits or turnover. The role of the local service agent is to assist in obtaining licenses, visas, labour cards, and more.

majority of shareholders and the chairmen must be of UAE citizenship. However, these types of companies are suitable primarily for large projects or operations, since the minimum capital requires is USD 2.7 million for a public company and half million for a private shareholding company.

If your business engages in banking, insurance and financial activities, the law stipulates to operate under a public shareholding company.

$ 13,612 minimum start-up capital for setting up office in Dubai Media City

Branch of a foreign company Establishing a foreign branch office is another popular route to incorporating an onshore commercial presence in the UAE. Under the format of a foreign branch, the international party retains 100% ownership of the branch.

In this case, companies must appoint a local service agent (UAE national) to liaise with government departments and aid in obtaining licenses, visas, and more.

Representative office of a foreign company

Foreign investors can also choose to set up a representative office in the UAE. This format, however, significantly limits the company’s business activities as they are only permitted to promote the activities of their parent company in the foreign market; in essence, the representative office acts as an international marketing office for the parent company.

As in the case of a branch office, it is necessary when establishing a representative office to appoint a local service agent.

Public and Private shareholding companies In the UAE, shareholding companies are not favoured much by foreign businesses since the

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Partnership limited by shares Another type of onshore entity is a partnership limited by shares company, which has both general partners with unlimited liability and partners whose liability is limited by the value of the share capital for which they have subscribed.

The company must have a minimum capital of USD 136,000. General partners in partnerships limited by shares must be UAE nationals. In addition to this, an annual audit is required.

Partnership-en-commandite Last but not least is a Partnership-encommandite company, which is a firm consisting of one partner or more who is liable with all his money for the firm and another incommandam partner or more who shall not be responsible for the liabilities of the firm except the value of his share in the capital.

Free Zones The second option to establish a legal presence in the UAE is via one of the 37 free zones. If the audience of your business is within that free zone, regionally or internationally, then the free zones offer a great opportunity for foreign investors such as 100% foreign ownership and tax exemption.

A free zone entity is more preferable to companies who do not sell their products directly to the end users in the UAE. For instance, companies that sell to wholesalers and traders or companies that wish to use the UAE as a hub to reach out to other markets in the MENA region.

In the UAE, each free zone is governed by an independent free zone authority which is responsible for drafting and implementing the zone’s regulations, policies and strategies and for issuing the necessary operating licences for operating within zone.

Start-up capital requirements differ from one free zone to another. For instance, setting up a company in Dubai Media City requires a minimum start-up capital of USD 13,612. On the other hand, operating in Dubai’s Jebel Ali free zone - a logistics and manufacturing hub - requires a minimum start-up capital of USD 272,500.

The main limitation of establishing in a free zone is the restriction in the free zone company’s license to operate and trade onshore in the UAE (mainland). For those free zone companies wishing to do business onshore, they need some form of legal presence either through an agent or a branch of their business.

Most recently, the Department of Economic Development (DED), Government of Dubai, reiterated that no free zone company can conduct business within Dubai unless it has a DED license or chose to open a branch in Dubai in accordance with the conditions stated in Law No. 13 of 2011 on business registration and licensing in the Emirate.

The law, which was issued in 2011 by His Highness Sheikh Mohammed Bin Rashid Al Maktoum, UAE Vice President and Prime Minister and Ruler of Dubai, is meant to enable free zone companies to open branches in Dubai while maintaining their presence in the free zone.

There are many routes to setting up a legal commercial presence in the UAE, but not all of them will be able to get your business to where it needs to go. Foreign investors that position themselves correctly via the most appropriate means of legal incorporation will be well placed to capitalise on the lucrative opportunities the UAE offers.

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TRADE TALK interview

The five star airline

In a short span of time, Qatar Airways has become a leading airline of the region.

One of its most important components is cargo. Qatar Airways Cargo has also ramped up its expansion which according to the CEO, Akbar Al Baker, is an extension of the airline’s strategy to develop its global air transport business.

We engaged with him in a discussion to know more this part of the airline.

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Q

atar Airways is the national airline of the State of Qatar and one of the aviation industry’s big success stories. Operations began in 1994 when the airline was a small regional carrier servicing a handful of routes. The airline was re-launched in 1997 under the mandate of the country’s leader The Emir, His Highness Sheikh Hamad bin Khalifa Al Thani, who outlined a vision to turn Qatar Airways into a leading international airline with the highest standards of service and excellence. Freighter operations started in the year 2003.

Elaborating further on this, Akbar Al Baker said, “Qatar Airways has since become one of the fastest growing carriers in the world with unprecedented expansion averaging double digit growth year on year that industry peers can only admire with envy. Qatar Airways has matured into a leading force in regional and global aviation, earning many admirers around the world for its excellent standards of service. From only four aircraft in 1997, the airline grew to a fleet size of 28 aircraft by the end of 2003 and a milestone 50 by October 2006. Today the airline operates over 100 aircraft. By 2015, the fleet size will rise to more than 170 aircraft covering a global network of destinations that will also increase to over 170. The freighter fleet consists of 3 A300 freighters and 4 Boeing 777 freighters. A fifth B777 freighter will join the fleet next year. From a small number of freighter destinations in 2003, today the airline operates to 42 freighter destinations worldwide.”

Talking about the global network of the cargo division, he said, “In terms of capacity, Hong Kong, Chennai, Amsterdam, and Frankfurt are our big freighter destinations.

We recently stepped up freighter frequencies on Middle Eastern destinations, adding a third freighter to Kuwait and fourth to Bahrain including new freighter destination Abu Dhabi and Sharjah. The airline’s dedicated cargo network provides customers with more options and flexibility. While we already serve established freighter markets, such as the US, we look forward to developing smaller markets and expanding into niche areas that are currently underserved by the industry.”

At present, crude petroleum and natural gas make up the major commodity exported.

The imported goods are mostly related to liquefied gas industry. Other commodities include vehicles, electronic devices, foods, luxury items and other required goods to meet the population growth.

He continued by stating that special facilities and well-trained personnel ensure expert handling over a wide variety of product categories. These include express products, livestock, dangerous goods, valuables, vulnerable goods, automotives, perishables, oversized cargo and general

The Cargo Complex is made up of seven facilities covering over 292,000 m2 and will have the capacity for processing 1.4 million tons of cargo per year, making it amongst the largest cargo terminals in the world.

When asked how he maintains the competitive edge, he quickly pointed out that, “We keep a close eye on market d e ve l o p m e n t s a n d s t ay c o n s t a n t ly i n c o n t a c t w i t h o u r c u s to m e r s . We definitely benefit from the progressive thinking behind the passenger airline with an increasing portfolio of passenger destinations. With the technological advancements in new passenger aircraft, the ability to carry revenue generating cargo via Doha to all corners of the globe is a huge plus for QR Cargo.”

cargo that require air freight carriage.

Facilities available are temperature-adjusted chillers to suit the cargo, valuables security storage areas, a special vulnerable goods area, dangerous goods holding area and special livestock area to ensure animals have the most comfortable arrival or stopover possible. For cargo booked with minimum transshipment times, the staff will ensure the correct cargo is transferred to the connecting aircraft. Tight security is maintained at all times, ensuring all cargo deliveries are handled and stored in secure areas.

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TRADE TALK interview

100 42 55 aircrafts Freighter thousand operated by Qatar Airways

destinations covered

Sq.m of cargo terminal

The cargo handled at Doha International airport has been consistently increasing each year. This capacity will further increase once the airline moves to the NDIA. The cargo complex is made up of seven facilities covering over 292,000 m2 and will have the capacity for processing 1.4 million tons of cargo per year, making it amongst the largest cargo terminals in the world.

Elaborating on the infrastructure available to support such an operation, Akbar Al Baker said, “ A main feature of the Cargo Complex is the 55,000 m2 cargo terminal building which houses the Air Cargo Handling System. The Air Cargo Handling System will have the capacity to accommodate over 1,000 main deck ULD’s

workstations in the ULD build/break Area, special cargo areas, hazardous cargo areas, high value cargo area, and perishable cargo areas. All these features contribute to create a world-class cargo facility.

KEY FEATURES: Cargo Complex ll Cargo capacity: 1.4 million tons handled per year ll Aircraft parking facilities: Up to 11 Boeing 747 – 8 Freighters ll ULD capacity Up to 1,000 main deck containers ll Cargo Complex Area 292,000 m2 ll Cargo Terminal building 55,000 m2 ll Cargo Agent building 5,000 m2 ll Live Animal Centre 4,200 m2

as the country continues to develop in terms of economical and political stature – FIFA World Cup is just one of them. This in turn will require an increased focus on the logistics sector since Qatar’s geographical position ensures it truly is global. The GCC is commonly perceived as being a major logistics market in the future.”

Talking about the future plans for Qatar Airways Cargo, he said, “We have recently revamped our charter product to cater to the increasing demands for special charters or part-charters. QCharter is a product that allows agents, brokers and forwarders the ability to request special loads or diversions on the company’s fleet of 4 x B777Fs and 3 x A300-600Fs. It features a direct contact to Qatar Airways Cargo charter team. In recent times, the company has chartered consignments of horses, bank notes, oversized oil and gas items as well as humanitarian cargo. Benefiting from huge synergies with the growing worldwide network of Qatar Airways passenger aircraft, as well as the increasing portfolio of freighter destinations, there is much potential for the provision of creative combined-solutions.”

At the end of our conversation, he said that their move to the NDIA airport will present QR Cargo with further ability to enhance and improve its product portfolio to customers. As befits the World’s 5-Star Airline, QR Cargo is also looking at destinations around the world where customers may forward cargo with one single stop via Doha.

The IATA World Cargo Symposium is being held in Qatar in March next year. This is the first time, it is being held in the Gulf region which only emphasises the growing importance of logistics and trade in the Middle Eastern region.

and over 5,000 individual consignments.”

He also stated that the Cargo Warehouse Information System (CWIS) will ensure that the locations of all the cargo in the cargo terminal, whether stored in the Air Cargo Handling System or in the various special cargo handling areas, are tracked so that the cargo can be processed quickly, thereby ensuring efficient handling. Other major features of the cargo terminal building are the elevating 32

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He was also quick to acknowledge the impact of the upcoming events and the FIFA World Cup. “ The IATA World Cargo Symposium ” is being held in Qatar in March next year. This is the first time, it is being held in the Gulf region which only emphasises the growing importance of logistics and trade in the Middle Eastern region. We expect to continue to see many infrastructure projects in the state of Qatar

TRADE TALK Logistics

Going where no one has gone before Coyne Airways was initially established as a charter broker in 1994, and registered as an IATA carrier with and ICAO call sign in 1996. Aparna Shivpuri Arya met up with Darrin Quern, Managing Director, Coyne Airways, to know how they manage to reach the most difficult destinations.

D

arrin started by taking us back in time, “We cut our teeth as a carrier pioneering scheduled air freight services into the Caspian Sea region, primarily for the project forwarders of the oil and gas industry. This support shaped our route map as today we continue to serve Tbilisi, Baku, Yerevan, Ashgabat, Turkmenbashi, and various destinations in Kazakhstan, including Aktau, Atyrau, Uralsk, Aktobe, Aksai, Astana, Kzyl-Orda and Chimkent.”

He further added, “Following the conflict in Iraq, we anticipated that many of our longstanding clients would turn their attention to the huge reserves of oil and gas there. In 2004, we moved quickly to try to provide them with reliable lift on a

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scheduled service, with the capability to handle heavy and outsize loads and land at unprepared airfields.

However, their regular clientele were more hesitant and it was several years before they began to see the kind of volume from them that Coyne Air had expected.

In the meantime, they found new sectors of support, particularly from the Iraqi and allied military forces and their contractors.

It was demand from the same military forces and contractors which prompted them to commence scheduled services into Afghanistan from 2006.

Well, with so many service providers, what makes them stand out? “We can move virtually any type of freight our clients ask us to, provided we can get the proper

paperwork and permissions and load it safely on the aircraft! We have, for example, moved everything from live dogs, urgent medicine and aircraft parts, sensitive diplomatic items and heavy, outsize goods. We pride ourselves on being able to develop solutions to provide the services that our clients require. For example, we have one client who needed to move temperature-controlled, urgentlyrequired blood for transfusions from Washington DC to Bagram, Afghanistan. We made special arrangements with United to provide guaranteed lift into Dubai and we could get it to the hospital base within 48 hours of it being tendered. Our client couldn’t be happier and we are now expanding this 48 hour service to other customers on selected lanes for certain types of cargo.”

TRADE TALK Logistics

He further elaborated that their clients can track the progress of their shipments on their website and they can also send them daily alerts to update them of all their shipments in their system. And for those who prefer to talk to a real person, they can call Coyne Air 24/7.

Answering my question about the routes they cover, Darren pointed out, “From our hub here in Dubai, we are active on routes to Iraq, Afghanistan and selected destinations in Africa. Our London office currently handles the routing into the Caspian Sea region, although we are hoping to join up our hubs in Dubai and in Tbilisi in the near future so that it will be possible to better serve more of Central Asia from here.”

But it all hasn’t been a walk in the park.

Speaking about the challenges, Darren said, “I think that anything that inhibits trade presents a challenge for the logistics sector. In an ideal world, countries would agree on the various documents that were required for security purposes and for the import and export of any particular item. It would also be possible transmit those documents electronically and in advance to weed out any particular issues and ensure fast clearance and delivery so the wheel of commerce wouldn’t need to slow down so much. In the real world, we remain reliant on the valiant efforts of organisations like IATA, GACAG, WCO and TIACA to help harmonise requirements, as well as shining examples like Dubai Trade.

Aside from that, he pointed out that the past few years have seen tightened belts together with a shift in some of the traditional trading patterns. There is simply no room for complacency at any level. To survive, businesses have to look carefully at what they are doing and how they are doing it – that means a variety of things, from looking at new markets in previously unexplored territories to considering modal shift, and how many fixed costs and assets are really required. In some ways, it is actually a tremendously exciting time for the industry as these kinds of challenges will 36

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ABOUT

Darrin began his aviation career with Northwest Airlines where he spent 14 years in ground operations, capacity planning and latterly as manager for Government/Military/Interline Cargo Sales and Manager, Alliances & Charter SalesCargo. For the past 12 years prior to joining Coyne Airways, Darrin worked for TNT, first as Director of TNT Airways and, since 1999, as Director, Global Networks-Asia.

breed innovation and tend to favour the best in class.

So what should businesses remember when it comes to cargo? “One of the most important things for businesses which want to export is to find a logistics partner that they can trust. That means someone who does not just provide the lowest price, but someone who understands the particular demands of their customer and can navigate around some of the ever-

present pitfalls on their behalf. However, I would also advise against total reliance on a partner as it is also important for exporters to get up to speed on the requirements themselves in order to ensure a timely and efficient process flow,” opined Darren.

Darren ended our conversation on an optimistic note and said that now is the right time for companies to avail of some of the incredible business and trade opportunities that Central Asia offers.

There is simply no room for complacency at any level. To survive, businesses have to look carefully at what they are doing and how they are doing it – that means a variety of things, from looking at new markets in previously unexplored territories to considering modal shift, and how many fixed costs and assets are really required

TRADE TALK strategy

What’s your How often have you selected to fly on a particular airline despite the slightly higher cost compared to its rivals or even a longer connection? Or have there been moments when you have decided to eat at a particular restaurant despite better options? It seems it has a lot to do with loyalty. Dr. Ashraf Mahate, Head of Market Intelligence, Dubai Exports explains this link to us.

I

t seems surprising that rational consumers opt for second best and in some cases even level solution despite the existence of first best option. In the airline industry it is well known that consumers are strongly influenced by the loyalty programmes that are attached to many of these purchases.

The success of these loyalty programmes is that they are able to actively engage customers through a series of rewards, such as flight upgrades, access to business class lounges, privileged check-in areas, free 38

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flights, and more. Similarly, the restaurant schemes whereby a certain number of purchases entitle the consumer of a free meal are equally addictive.

The design of these loyalty programmes is based on “ gamification � techniques which have been developed as a result of employing the same techniques and mechanics from the electronic gaming industry in a non-game situation.

Today, gamification is used in a whole range of non-gaming situations from

marketing consumer goods to business to business transactions. More importantly, there has been a greater awareness among smaller companies of the benefits of gamification as they can see a significant increase in customer engagement, repeat business, higher revenues and greater brand loyalty. The success of gamification is its incredible ability capitalise our understanding of human psychology when it comes to playing games or in a game environment. Psychologists have long

known that humans behave differently in gaming environments whereby certain emotions are either triggered or intensified.

The real difference of gamification is that it is able to harness these positive aspects or emotions to uses outside of games.

The electronic games industry is one of the global success stories whereby in a short space of time the global hardware and software computer games industry is now worth in excess of USD 25 billion.

This figure includes social games which are played within sites such as Facebook and are expected to generate more than USD 6.2 billion in revenue in 2012.

In many developed countries the gaming industry is the single largest component in the entire entertainment industry. The gaming industry has been able to impact a large segment of the population through free to play games such as Rovio’s Angry Birds and Zynga’s Farmville whose business model is based around generating advertising revenue to paid games such as Call of Duty Modern Warfare which sold more than six million units in its first few days. All types of computer games share one basic quality which is their ability to attract the attention of consumers (or players) and thereby inducing them to part with their money. Informal studies have shown that on average gamers spend 140 hours per month carrying out the same tasks on a game. This addictive ability of games is what interests firms and the ability to transfer it into their business model.

In the non-gaming context gamification has been found to create a more engaged customer through delivering a more entertaining and appealing context. In essence gaming seeks to combine two very opposing concepts namely work and play.

The former is traditionally associated with being monotonous (at least in many cases) especially where customers have to deal with call centres and data processing units.

On the other hand play is associated with fun and enjoyable experiences. Through gamification a business is able to combine the two so as to create an environment whereby work can be as exciting as play.

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.

From a consumer view point this can allow businesses to design experiences that make tedious tasks seem exciting and thereby increase the level of customer engagement and loyalty. In practice a business can develop different layers of customer engagement through gamification. The simplest level is the connection with a particular product brand or the whole firm itself through interaction.

The second level is individual engagement which allows for self�exploration and

offer businesses an excellent opportunity to engage with their target customers.

Over the next three years it is predicted that more than half of the Global 2000 organisations will be using one or another form of gamification within their marketing and retention initiatives. The success of gamification raises the important question as to how small and medium sized firms can utilise its benefits in the world of international trade?

In the global marketplace consumers

All types of computer games share one basic quality which is their ability to attract the attention of consumers (or players) and thereby inducing them to part with their money. Informal studies have shown that on average gamers spend 140 hours per month carrying out the same tasks on a game. This addictive ability of games is what interests firms and the ability to transfer it into their business model. expression. Then one has the third level of engagement which is communal and allows for interactions with others. The third level also allows a dialogue between users and creates a community that goes beyond just the brand or the company.

The ability of a business to understand the three levels of engagement provides it a powerful tool to impact consumer behaviour and thus influence purchase decisions as well as the brand or product perception. Gaming technics and mechanics

are not homogeneous and this poses a considerable problem for exporters.

The differences in taste and preferences, marketing communication, and more. from country to country make it rather difficult for new and small firms to penetrate foreign markets. More importantly, the geographical distance of the customer from the company may imply that more innovative solutions are required to regularly engage with customers. Also, in the international sphere the firm JANUARY 2013

39

is competing against a host of other competitors some of whom may be positioning their product in terms of being the cheapest while others may even have a superior product. In this sense the firm is seeking to convince rational consumer to opt for a second best choice in the presence of the first best solution.

Firms are able to use gamification to engage with potential customers so as to learn about their particular preferences prior to launching a product or service.

Even after a product is launched in a foreign market firms need to use social networks and aggregators such as Facebook, Twitter to influence and drive consumer behaviour.

The use of social networks can be further strengthened through designing activities that allow consumers to obtain some type of accomplishment or rewards. In essence these rewards need not have a financial value and can be simply seen as symbols of success that acknowledge and respect the customer within the social network.

Second, those who are familiar with computer games are aware that there needs to be different levels of play so that the consumer can progress to the ultimate goal through incremental accomplishments. The ability to reach the ultimate goal is what

$25 billion value of the electronic games industry to the product or company in order to go up the ladder or maintain their position.

More importantly, these leaderboards also develop through word of mouth whereby leaders brag about their position and hence driving new users to join in. This is a very cost effective manner in which to recruit customers and quickly build brand loyalty.

Firms seeking to use gamification to build up an overseas market need to ensure that they undergo some basic steps in planning and preparation. First, the firm needs to have a clear goal as to why they wish to use gamification . For instance it could be to build market awareness of the

Firms are able to use gamification to engage with potential customers so as to learn about their particular preferences prior to launching a product or service. Even after a product is launched in a foreign market firms need to use social networks and aggregators such as Facebook, Twitter to influence and drive consumer behavior.

keeps the customer or player to return back hence sustaining interest and participation.

The success of games such as Angry Birds has also shown that customers like to play against others in a competitive context. Some firms have even developed a visual display that allows consumers to track their performance relative to others.

These leaderboards can be an effective tool to ensure that consumers return back 40

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company or a particular product; it could be to impact the sales of a competitor and so forth. Whatever, the goal of the firm it has to be consistent with it vision and mission and linked to some long term return on investment. Second, the firm needs to define the target audience that it seeks to attract.

It may be the case that one form of gamification can be used for the whole

target audience or that each segment can have a different type. What is important here is for the firm to understand the activities that appeal to each target group or sub-group. Third, each target group is triggered by different types of rewards for instance some are motivated by financial rewards while others are seeking recognition and status. Fourth, the firm needs to decide whether it will follow a particular existing trend or take the risk in developing its own. Finally, the firm needs to design enough flexibility in its game or activity so that it can evolve and be fined tuned with changing consumer needs and patterns.

What the successful use of gamification, in both domestic and international business environment, teaches us that it needs to be part of the firm’s long�term strategy. Only a long term commitment by the firm provides the target audience with the incentive to dedicate to the activity. For instance very few of us will participate in a reward scheme which has a shorter term life. In fact, research shows that the longer the life of the activity the greater the level of engagement as well as the bonds between customers in the community. For long term success firms need to go beyond simply the marketing use of gamification. Firms that have a large following tend to be those that have spent time and resources researching and planning their entry into gamification.

The least successful firms have been those that have jump into the world of gamification on the back of its hype. Finally, firms also need to appreciate like all business decisions gamification also has risks attached to it.

Although, trial and error is an important component of almost all games the firm should nevertheless carry out a risk assessment. For instance, inappropriate use of gamification can actually alienate customers. Despite the risks gamification offers all firms regardless of their size to effective enter and become successful in both domestic and foreign markets.

Gamification allows the firm to constantly communicate with its customers regardless of distance and develop stronger bonds and increase its long term revenues.

Country

focus

South Africa

South Africa

BILATERAL TRADE

Industry watch

Interview

JANUARY 2013

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FOCUS Interview

Exploring new possibilities South Africa is UAE’s key business and investment partner with bilateral trade growing and diversifying with each passing year. Aparna Shivpuri Arya got to interview H.E Yacoob Abba Omar, Ambassador of South Africa to the UAE, to know his views.

Please give us a brief background on the trade relations between the UAE and South Africa?

South Africa and the UAE’s relationship is a strong, growing and developing one, presenting mutually beneficial and attractive opportunities. The UAE currently stands as one of South Africa’s core trading and investment markets, which we look forward to increasing with the help of South Africa’s pledges on investment stated in its Vision 2030 Plan. The UAE is the 24 th largest investor in South Africa, and is the largest trade partner in the GCC region.

What are the main products exported and imported between the two countries?

The UAE is South Africa’s 21st largest export market. Oil is the biggest import from the UAE, whilst fast moving consumer goods (FMCGs) continue to dominate South Africa’s exports, with machinery and metal related products also growing in exports to this region. Agriculture is also a notable exporting sector to the UAE.

How has the trade relation evolved over the decades?

The UAE is the largest trade partner in the GCC region to South Africa and the 21 st largest export market globally, with total bilateral trade equating to approximately USD 2 billion.

UAE is considered one of the top ten countries in South Africa’s global exporting network, ranking as the 6th largest source of imports in the Middle Eastern region in 2011.

The UAE is an economically strategic alliance to South Africa’s export network, aligning 42

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South Africa’s allegiance with emerging economies such as China and Russia.

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

The first and foremost step that any prospective investor should follow if interested in investing into South Africa is to directly get in touch with the South African Mission in their country. The Mission will then be able to put you in touch with the correct contacts and facilitate creating the relationship with that contact as well as advise how to successfully get the best out of the opportunities and locations available.

The key sectors for investment in South Africa would be: Agro Processing, Renewable Energy, Automotive & Components, Power generation and distribution.

Why invest in South Africa: • Close proximity to major markets by sea • Diversified Industrial sectors • Open economy • Sound business case for investment and profit • Gateway to Africa and markets of more than 200 Million consumers • Africa is the next big emergent after China and India • S o u t h A f r i c a i s o n e o f t h e m o s t sophisticated and promising emerging markets, offering a unique combination of highly developed first world economic

• • • •

infrastructure with a vibrant emerging market economy.

South Africa is one of the world’s 26 th industrialised nations & 27 th largest economy South Africa has the largest economy on the African continent, accounting for approximately 25% of the continent’s GDP. According to the World Bank, South Africa ranked 35th out of 183 in the world for the ease of doing business in 2012.

The JSE Securities Exchange is Africa’s largest and most developed Securities Exchange and one of the world’s top 20 exchanges

How many South African companies are in the UAE/Middle East?

South Africa companies are flourishing in the UAE. We can see this from the increasing number of business that have set up here and the ever growing interest of South African companies to attend trade shows, exhibitions and B2B events in seeking opportunities to set up and invest in the UAE. Stability in the UAE economy continues to encourage South African companies and individuals to invest and work in the UAE. We currently have over 200 South African businesses operating in the UAE, in sectors including: • Finance (FirstRand and Standard Bank) • Manufacturing (Denel) • Retail (Woolworths) • Construction (Murray & Roberts) • Hospitality (Southern Sun) • Logistics (Barloworld) • Aviation (South African Airways) • Energy (Sasol) • Food (Nando’s, The Meat Co, Butcher Shop & Grill)

What kind of investments is South Africa making in the UAE?

South Africa is the 19th largest investor in the United Arab Emirates (UAE), having invested 1.6 billion AED (USD 435 million) since 2003. The largest investments were made in the financial services sector, followed by investments in the communications and pharmaceutical sectors.

South Africa is the 19th largest investor in the United Arab Emirates (UAE), having invested 1.6 billion AED (USD 435 million) since 2003. The largest investments were made in the financial services sector, followed by investments in the communications and pharmaceutical sectors.

Which sectors offer potential for South African companies in the UAE and for Middle Eastern business in Sout h Africa?

Of the 200 plus South African businesses operating in the UAE, the largest sectors include: oil, agriculture, energy, automotive, and fast moving consumer goods (FMCGs).

Opportunities in these sectors within the UAE are increasing allowing South African businesses to create trading relationships. On the other hand, the energy sector within South

Africa is considerably growing thus creating a great opportunity for the UAE to work with South Africa in regards with renewable energy and sustainability, a pledge the UAE is keen to progress in the coming years.

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

The 3 rd Meeting of the IRENA Council in the UAE was attended by the South African Deputy Minister of Energy – Barbara Thompson, who gave a unique perspective on the progress of the renewable energy sector in South Africa, its view on the leadership role being taken on by the UAE, and where they can both work together. We see this relationship further developing in the near future.

The agreements already signed include: Air Services; Economic, Trade and Technical Cooperation; Police Cooperation; Defence; Joint Commission Agreement; Political Consultation; and Information Sharing on Money Laundering.

Agreements in the pipeline include: Double Taxation, Protection of Investment, Mutual Legal Assistance, Extradition, Industrial Relations, and Higher Education.

Mutual Recognition of Drivers’ Licenses.

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FOCUS Bilateral trade

The gateway to Southern Africa

The UAE currently stands as one of South Africa’s core trading and investment markets and is the 24th largest investor in South Africa, along with being the largest trade partner in the GCC region. We bring you an overview of the bilateral trade relations.

T

he 3rd Meeting of the IRENA Council in the UAE was attended by the South African Deputy Minister of Energy – Barbara Thompson, who gave a unique perspective on the progress of the renewable energy sector in South Africa, its view on the leadership role being taken on by the UAE, and where they can both work together.

South Africa remains the world’s top producer of minerals such as gold, platinum, rhodium, chrome, manganese and vanadium.

South Africa holds 80% of global manganese reserves, 72% of chrome, 88% of platinum-group metals (PGMs), 40% of gold and 27% of vanadium.

South Africa is ranked No.1 for the regulation of securities exchange, strength of auditing & reporting standards by WEF’s Global Competitiveness Report 2011/12.

South Africa scored well in various categories according to the 2011/12 WEF’s World Competitiveness Report (138 countries ranked) with overall competitiveness we ranked 50th in place.

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Of 14 emerging markets; Australia, Canada, Russia, Mexico,China, Poland, Spain, India, Korea, Brazil, SA, Colombia Chile & Argentina South Africa is: • 2nd most sophisticated financial market • 2nd lowest effective business tax rate • 4th ranked for ease of accessing capital • 4th ranked i.t.o. the cost of capital • 6th ranked for infrastructure • 7th for FDI as a % of GDP (2008) • 8th ranked i.t.o labour productivity

South Africa is the 19th largest investor in the United Arab Emirates (UAE), having invested 1.6 billion AED (USD 435 million) since 2003. The largest investments were made in the financial services sector, followed by investments in the communications and pharmaceutical sectors.

Of the 200 plus South African businesses operating in the UAE, the largest sectors include: oil, agriculture, energy, automotive, and fast moving consumer goods (FMCGs).

Opportunities in these sectors within the UAE are increasing allowing South African businesses to create trading relationships.

On the other hand, the energy sector within South Africa is considerably growing thus creating a great opportunity for the UAE to work with South Africa in regards with renewable energy and sustainability, a pledge the UAE are keen to progress in the coming years.

The UAE is South Africa’s 21 st largest export market; oil is the biggest import from the UAE, whilst fast moving consumer goods (FMCGs) continue to dominate South Africa’s exports, with machinery and metal related products also growing in exports to this region. Agriculture is also a notable exporter to the UAE. There are, in principle, no restrictions on foreign investors acquiring businesses or companies in South Africa. The introduction of capital or the acquisition of shares does not require the South African Reserve Bank approval, but the acceptance of foreign loans

FOCUS Bilateral trade

by South African residents (including a South African subsidiary or branch of a foreign company), is subject to prior approval being obtained. Approval is required for the repayment of foreign loans by South African residents.

The requirements for a visa to be issued are as follows: • Passport valid for no less than 30 days after the expiry of intended visit • The passport must have at least two blank visa pages (one to endorse the visa and one for entry stamps). The original passport + one copy of all relevant pages must be submitted.

• Identity photographs, application form to be fully completed, A vaccination certificate, if required, proof of financial means in the form of - bank statements, salary advices, undertaking(s) by the host’s) in the Republic, bursaries, medical cover, or cash available, including credit cards statements or travellers’ cheques to cover envisaged living expenses during

$435 Million South Africa’s investment in the UAE the South African host (with full contact details and South

All importers and exporters in South Africa are required to register with the Commissioner of the South African Revenue Services (SARS). A number of products are subject to export control and licensing.

Most goods can be imported into South Africa without restrictions. However, the importation of certain goods specified

Most goods can be imported into South Africa without restrictions. However, the importation of certain goods specified by government notice is only permitted subject to the issuance of an import permit. All second hand goods including waste and scrap require an import permit. the sojourn in the Republic, applicants travelling by air must be in possession of a provisional return or onward flight booking. No fixed travel arrangements must however be made prior to the issuing of the visa.

• F o r b u s i n e s s v i s i t s ( m e e t i n g s , negotiations, workshops, seminars, conferences and training) letters from both the UAE and the South African host company/organisation should be submitted. The letters should confirm the nature and duration of the visit. For tourist visits, a provisional hotel booking or travel itinerary is acceptable. For family visits, an invitation letter from 46

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by government notice is only permitted subject to the issuance of an import permit.

All second hand goods including waste and scrap require an import permit. For goods subject to restriction, an importer will need the appropriate import permit before the goods are shipped. The International Trade and Administration Commission (ITAC) control the issuing of permits.

Trade and Investment South Africa (TISA), which is a division of the Department of Trade and Industry, is responsible for the smooth facilitation and aftercare to investors and potential investors.

The following are services that are provided by TISA to investors:

a) Investment Marketing – Marketing of investment opportunities and the promotion of packaged investment projects. TISA undertakes various local and foreign marketing initiatives where projects and opportunities can be presented to investors. b) Investment Information – For decision making and planning, foreign and local investors can obtain the following information: Information on the local economic and business environment; Information on investment opportunities within South African sectors and industries; Information on incentive packages; Information on the local regulatory and legal environment c) Business Facilitation and Aftercare Investors - especially foreign investors require assistance when exploring investment opportunities or when setting up operations in the country.

TISA can assist with the following: Facilitation of investment missions, including travel itineraries; Introduction of i nves tors to key s t akehol d er s in private and public sectors; Introduction of investors to potential joint venture partners and black economic partnerships; Guidance with plant/site locations; Facilitation in the obtaining of finance and incentives; Assistance with work permit applications, company registration and environmental impact studies; Logistical support for relocation; Business linkages and partnership with local and foreign companies; and Provision of specific solutions to any problems that may arise after the initial investment.

World renowned accounting and auditing firms such as Price Water House Coopers, Ernst & Young, and Deloitte amongst others have a significant presence in South Africa and do provide a range of business services to potential investors in South Africa. Besides these big names, a number of South African companies, i.e. Edward Nathan Sonnenbergs, Werksmens, Eversheds as well as a number of smaller medium sized companies offer these business services as well.

FOCUS Industry Watch

Top gear

South Africa The automotive industry is one of South Africa’s most important sectors, with many of the major multinationals using South Africa to source components and assemble vehicles for both the local and international markets. We met up with Dr. Norman Lamprecht, Executive Manager, NAAMSA (National Association of Automobile Manufacturers of South Africa), to know more about this strategic industry.

D

r. Norman started by giving me a brief overview of the sector. “South Africa’s vehicle production is set to double to 1.2 million vehicles by 2020 under the new Automotive Production Development Programme (APDP) to be introduced in 2013. From this long term automotive policy development numerous investment opportunities for the world to focus on South Africa, as a key investment destination, will arise.”

“Total automotive industry exports (vehicles and components) increased by AEDs 5.6 billion or 18.3% to AEDs 36.2 billion in 2011 from AED 30.6 billion in 2010.

Expectations are that the total automotive export value could test the AED 50 billion level in 2012,” he further added.

South Africa’s automotive industry is its largest manufacturing sector equating to 6.8% of the country’s GDP in 2011. Going forward under the APDP this figure could 48

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rise to 10%. Being the largest manufacturing for South Africa the automotive sector is regarded as strategically significant by the South African government in view of its growth prospects.

In 2011 South Africa exported vehicles and components to 130 countries around the world with export value to 27 of these countries more than doubling from 2010 to 2011. The South African automotive industry enjoys significant advantages compared with many other exporting countries. Its flexibility in producing short runs, abundance of raw materials combined with expertise, advanced technology and established business relationships of parent companies ensures that the South African industry increasingly adds value to the global strategies of parent companies.

South Africa produces 80% of Africa’s vehicle production and in particular for the automotive industry the country is

regarded as the trading gateway into the African continent.

Recognised globally for its manufacturing craftsmanship and engineering prowess, the South African automotive sector currently accounts for 11.8% of South Africa’s total exports. Despite the current economic environment dominated by intense competition for exports, automotive exports increased by 18.3% in 2011 following the bolstering effect of South Africa’s significant ascension to the BRICS economic coalition as well as the free trade arrangements the country enjoys with the EU, the US and the 15-member Southern African Development Community. Currently South Africa has eight major OEM’s based in the country, namely BMW, Ford, General Motors, Mercedes-Benz, Nissan, Renault, Toyota and Volkswagen as well as various manufacturers of trucks and buses and over 400 automotive component suppliers.

Talking about investment opportunities, Dr. Norman is quick to point out the MIDP programme. “The Motor Industry Development Programme (MIDP) was implemented in September 1995 to entrench the outward orientation of the domestic automotive industry, thereby restructuring it to achieve international competitiveness.

The programme ended on 31 st December 2012 and is succeeded by the Automotive Production Development Programme (APDP). The APDP aims to double vehicle production in the country to 1.2 million vehicles by 2020 and will reflect a quantum leap in terms of processes, technologies and the scale on which the industry currently operates.”

“The emphasis under the APDP will seek to shift away from an export focus to one that emphasises scale in the production of vehicles as well as being supportive of the further development of world-class automotive component manufacturing.

Numerous trade and investment opportunities will arise following the introduction of the APDP from 2013 onwards. The APDP includes a very attractive investment incentive for automotive investors consisting of cash grant of up to 30% and along with increased volumes will enhance the viability of investment projects in the country significantly,” he remarked.

The exporting link for the majority of the multinational automotive components manufacturers in South Africa consists of the South African based OEMs (Original Equipment Manufacturers) and parent companies. Some of the locally owned component manufacturers have also been successful in obtaining OEM business, while many others focus on exports of replacement parts.

In addition to the investment opportunities, the sector is further seen as appealing through the extensive technology, research, expertise and skills the South African automotive industry has to offer investors.

So why should foreign companies invest in this industry? According to Dr. Norman, investing in South Africa not only gives investors access to the extensive

6.8% Contribution of the automotive sector to GDP in 2011 South African automotive sector but the opportunity to access various investment markets from the African continent. South Africa applies a no- restriction- on- foreigninvestment policy in its automotive sector, allowing investors to invest as much as they can afford into the sector.

Additionally, South Africa’s admission into the BRIC grouping of emerging nations clearly gives the country an advantage in leveraging investment that are intending to flow through to the rest of the sector. In addition, South Africa’s seven commercial ports have expanded facilities to handle automotive exports and imports, enabling the country to act as a trading hub in and out of Sub-Saharan Africa. This allows the meeting of logistical requirements to service Europe, Asia and the USA. South Africa’s free trade agreements with the European Union and the European Free Trade Area (EFTA), the African Growth and Opportunity Act (AGOA) with the USA, as well as the preferential trade agreement with Mercosur, enable the country to position itself as the privileged link between these regions and Africa. The country’s consideration as a sub-contracting hub for automotive industry investments includes the following: • World class logistics suitable for import and export operations; • Excellent infrastructure; • Abundant and cost competitive labour; • First world business sector; • High quality office and business park facilities; • S u p e r i o r q u a l i t y p r iva te s c h o o l s , sophisticated cosmopolitan cities and unmatched quality of life;

• The common use of English; • Internationally competitive incentives and support measures; • Policy certainty and predictability with appropriate levels of support and investment incentives.

And how does one go about availing these facilities? There is a wide range of investment incentives available to South African-based companies, foreign or domestically owned. Incentives are administered by the Department of Trade and Industry (DTI) and are uniform throughout the country. Incentives are generally in the form of tax holidays, rebates and accelerated depreciation while cash grants, relocation grants and other incentives are available under prescribed circumstances.

Dr. Norman then went on to elaborate about the set up of the automotive industry.

“South Africa’s vehicle manufacturing industry is concentrated in three of the country’s nine provinces, namely Gauteng, the Eastern Cape and KwaZulu-Natal, and in close proximity to its suppliers. However, increasingly some automotive development is also taking place in the Western Cape and North West provinces. Provincial and local governments have trade, investment and tourism offices to promote economic activity in each region, many of which have their own Industrial Development Zones (IDZs) and development programmes.

There are 283 municipalities focused on growing local economies and providing infrastructure and services.”

“The first and foremost step that any investor should follow if interested in investing in the South African automotive sector is to get in touch with the South African DTI directly or via its foreign office representative at the South African Consulate in their country. The DTI will then be able to put you in touch with the correct contacts and facilitate creating the relationship with that contact as well as advise how to successfully get the best out of the opportunities and locations available,” he remarked.

JANUARY 2013

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FOCUS Industry Watch

In view of the South African automotive industry’s trade pattern, many opportunities of mutual benefit exist for foreign companies to collaborate with South African automotive component suppliers. The new Automotive Production Development Programme’s (APDP’s) vision to double vehicle production in the country to 1.2 million units by 2020 will ensure a major increase in business opportunities as well as enhance the viability of projects in the country significantly. The integration into the global groups of the South African subsidiaries provides opportunities for business, produces synergies in several areas and accelerates the exchange of knowledge, which will enable the domestic subsidiary to be more competitive in the global automotive environment .

Consequently, component manufacturers using South Africa’s competitive advantages seek contact with outside partners for market access, technology, process knowhow, production rationalisation and other joint venture benefits.

Opportunities also exist in collaborating with South African owned companies for similar reasons. Collaboration not only exists in the areas of Greenfield (new investments) or brownfield (joint venture) operations but various other types of industry co-operation to pursue include: • Technical collaboration in design of products, systems or production methods/layouts • Research and development • Supplier/customer relations • Joint production • Technology transfer • Licenses and patents • Marketing and co-operative promotion of projects and market sharing • Commercial representation • Franchising • Financing • Strategic alliance • Third country collaboration When I asked him about which particular sub-sectors within the industry offer investment opportunities, Dr. Norman answered, “The South African automotive 50

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Dr. Norman Lamprecht, Executive Manager, NAAMSA

industry, as everywhere else in the world, is strongly influenced by the OEMs. The industry’s structure and evolutionary path are therefore closely aligned with OEM strategies in both domestic and global markets. The increasing orientation o f O E M s towa rd s ex p o r t s h a s t h u s fundamentally changed the structure of their own operations as well as those of the automotive component industry. Key decisions about South Africa’s automotive business are made in Europe, the USA and Japan. South Africa’s participation in the World Trade Organisation (WTO), its competitive advantages and its special relationships with the EU and other trading regions has facilitated the industry’s integration into the global sourcing strategies of the multinational automotive corporations.”

With the largest economy in Africa, South Africa is a key investment location, both for the market opportunities that lie within its borders and for the ability to use the country as a gateway to the rest of the continent. There are several factors that underpin the choice of South Africa as a “gateway”.

• First, South Africa has for many years been one of the largest sources of foreign direct investment (FDI) for the African

continent. This experience in investing in the continent is one critical strength, leading other countries to engage with South Africa when considering investment decisions in Africa.

• Second, South Africa has for many years adopted a developmental approach towards the African continent due to its awareness that its own development is intrinsically linked to that of the continent as a whole. Countries that are genuinely interested in the sustainable development of the continent therefore see South Africa as a partner, given its various interventions and programmes on the continent.

• Third, South Africa is the biggest economy in the continent and is the most developed in terms of industrial economy, regulatory framework and financial sectors, to name but a few. South Africa also offers an excellent economic infrastructure that links it with the rest of the continent. It also has political and economic influence in Africa.

Several global companies have accordingly chosen to locate their African headquarters in South Africa and have used the capabilities developed in the country to expand in the region. South Africa therefore serves as a platform to access the broader African opportunity.

In addition, the country is increasingly being used as a shared services hub for companies’ African operations, especially for sub-Saharan countries.

Dr. Norman concluded the interview by re i t e ra t i n g why S o u t h A f r i c a i s the ideal trade and business partner.

“South Africa’s improved ranking in the World Economic Forum’s latest Global Competitiveness Index, climbing four places to 50 th out of 142 countries s u r veye d , w i l l f u r t h e r e n h a n c e t h e country’s competitiveness in attracting FDI, including from those countries that want to use South Africa as a base for their African operations.”

I hope all this information will definitely prove useful to businesses in the Middle East looking at doing business in South Africa.