ISSUE 15 | March 2013
BUSINESS INTELLIGENCE FOR INTERNATIONAL TRADE
www.tradeandexportme.com
PUBLICATION LICENSED BY IMPZ
EDITOR’S LETTER
Publisher Dominic De Sousa
A sigh of relief...
Chief Operating Officer Nadeem Hood
We all know that feeling when we can finally breathe after a major event of our life has been done and sorted. So you know how I must be feeling after the inaugural Trade and Export Middle East Excellence Awards. The Awards were held on the 25th of February at the Habtoor Grand and since I can blow my own trumpet without being interrupted – the event was a huge success with close to 200 people in attendance with the presence of all the top players in the field of logistics, finance, legal, free zones and business support services.
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 Nigel Rodrigues nigel@cpidubai.com +971 4 440 9124 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 Abdul Kader Pattambi DIGITAL SERVICES www.tradeandexportme.com Digital Services Manager Tristan Troy Maagma Web Developer Abey Mascreen
We also honoured Dubai Trade and United Arab Bank for their support to us and the trading community. It was a proud moment for me since the magazine and the event was appreciated by all. You’ll see the winners and some snapshots of the Awards when you turn the pages. I had also mentioned in my previous editorial about my trip to Paris. I was there in February and even though it was freezing, I couldn’t help but fall in love with the city. What made it all the more interesting were the people we interviewed. They all had very interesting stories to tell about how they are working on building the trade and investment relations with the Middle East – whether through the government or through the private sector. So don’t forget to read the country focus on France! February also witnessed another big event- the Gulfood and so we decided to take another look at the food sector and talk to the different stakeholders. I am sure you’ll enjoy reading what they had to say. March also promises to be a busy month as I head to Qatar to cover the World Cargo Symposium and then to Abu Dhabi for the World Port Summit. Next month, we focus on Canada, a very important trading partner for the region. As always, I look forward to hearing from you and working out ways to involve you with the magazine. So don’t hesitate to drop me a line. Till then..
online@cpidubai.com +971 4 440 9100 Published by
Registered at IMPZ PO Box 13700, Dubai, UAE
Aparna Shivpuri Arya, Senior Editor, Trade and Export Middle East
Tel: +971 4 440 9100 Fax: +971 4 447 2409
Talk to us: 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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updates
ISSUE 15
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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 February.
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EXPERT COLUMN: In his column, Raed Safadi, Deputy Director of the Trade and Agriculture Directorate, OECD, discusses pressing trade issues with us, every month.
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INTERNATIONAL TRADE: Dubai Trade gives us an update about Dubai’s status as the trading hub and doles out some interesting bits.
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FINANCE: Western Union Business Solution looks at how small and medium-sized enterprises (SMEs) can protect against foreign exchange fluctuations when making cross-border transactions.
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TRADE AND EXPORT EXCELLENCE AWARDS: We hosted our first Trade and Export Middle East Excellence Awards 2013 to honour the best in the field of trade. We bring you the winners and some snapshots of the very successful event.
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SECTOR WATCH: Since the Gulfood was the talk of the region, we decided to take a more in-depth look into the food sector. We bring you the findings.
trade talk
CONTENTS
COUNTRY FOCUS: FRANCE
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INVEST IN FRANCE AGENCY: Created in 2001, the IFA is responsible for promoting international investments in France. Aparna Shivpuri Arya spoke to David Appia, Chairman to get his expert opinion.
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TOTAL: Aparna Shivpuri Arya met Arnaud Breuillac, Exploration and Production, President Middle East, Total, in their Paris headquarters to get all the interesting details about this fifth largest publicly-traded integrated international oil and gas company in the world
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GREATER PARIS: “Greater Paris”, is a topic that has been going on for over a century in France. The first greater Paris project started in 1920. As part of a press trip to Paris, Aparna Shivpuri Arya caught up with Alexandre Missoffe, Director of the Cabinet, Société du Grand Paris to get a better understanding of the project.
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CDC: CDC Enterprises was set up to develop and support SMEs and industrial services, based on a stable and long term strategy. Aparna Shivpuri Arya met Philippe Braidy, President, CDC Entreprises, to get to know the details about their work and mission.
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VINCI: We caught up with Alain Bonnot, Chairman of Vinci Construction – Grand Project, to know about their operations in the Middle East.
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Updates global watch
Exploring investment opportunities
The two-day 2013 Global Financial Markets Forum (GFMF) attracted 1,300 delegates. Michael Tomalin, the Group Chief Executive of National Bank of Abu Dhabi (NBAD) outlined the economic strengths and prospects of the UAE for investors. Mr. Tomalin said Abu investment to diversifying its economy and transition the
contribution of petroleum from 60% of Emirate’s GDP to 40% offers substantial opportunities to investors. He said Abu Dhabi Vision 2030 would develop Abu Dhabi to a global financial. “Abu Dhabi is an enormous opportunity for all,” said Mr. Tomalin. “Abu Dhabi is a city that is open to investors, open to you.” Following Mr. Tomalin’s speech, James A. Baker III, former US Secretary of Treasury and State and a global statesman, analysed the global economy. “World economy is recovering from the global recession,” said Mr. Baker. The United States, he said, is growing, however, at a slow rate. “At current growth rate, it will take (the US) years to achieve full employment. Mr. Baker called the United States a “ticking bomb.” “The US is broke, if we didn’t have the dollar, we would be Greece,” Mr. Baker said. To bring the debt under control, the US political parties must agree on a “grand bargain” on taxes and spending cuts. The economic and political “dysfunction” has prevented ‘achieving the grand bargain,” he added. Noting that Europe has deeper economic difficulties than the US, Mr. Baker said, “Emerging economies are the bright spots.” Leading bankers and economists participated in panel discussions on financial markets and banking.
Region’s ports vital conduit for Africa-Asia trade development The vast continent of Africa will take centre stage at the 2013 World Ports & Trade Summit, which takes place in Abu Dhabi from 19-20 March, with a special focus session on day two of the event to examine opportunities in the region for both trade and infrastructure development. Growth in seaborne trade between China and Africa is already benefiting UAE ports, as the world’s third largest economy and the emerging African continent rely on the Emirates’ trading gateway status, further boosted by growth in bilateral trade between South Africa and the UAE, which was valued at almost USD 2 billion in 2011. “In the first decade of the millennium, trade between African countries and the GCC jumped by 270% to reach more
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than USD 18 billion per annum, and this shows no sign of slowing down with added impetus – particularly from the UAE - generated by government and private
sector investment interest in West and Central Africa, following successful forays into East, South and North Africa,” said Chris Hayman, Chairman of Seatrade.
Updates REGIONAL TALK
PPPs the way forward for GCC’s health sector In the years to come, growing healthcare spending will impose a hefty burden on Gulf Cooperation Council (GCC)Governments. As we enter 2013, healthcare costs continue to increase in the region – partly due to the high prevalence of chronic diseases. Today, thanks to systemic transformation, strategic planning, and population screening programs, GCC governments recognise that the current model – in which the state shoulders most of the direct healthcare costs– is unsustainable over the long term. In light of this, management consulting firm Booz & Company found that these governments must use a PublicPrivate Partnership (PPP) approach in order to tame expenditure, improve quality of service, and provide further access to expertise. “While expenditure is currently below international benchmarks when compared
to developed countries on a per capita basis, this will undoubtedly change,” explained Jad Bitar, a Principal with Booz & Company. “As a result, governments will logically seek more private-sector participation, but this must be introduced in a controlled manner.” A healthcare sector model indicates that the public sector is responsible for regulation, licensing, and monitoring. In turn, the private sector can provide services with commercial value such as cardiac surgeries and medical equipment manufacturing. Services that are the furthest from patient contact and with the greatest commercial value are well suited for PPPs. Services with mostly social value, such as health education for the population, should be retained in the public sector.
$16 .5
BILLION
revenue for KSA from tourism in 2012
Saudi hospitality sector worth USD 18.1 billion by 2016 A rise in the number of pilgrims visiting the Kingdom for Hajj and Umrah, are boosting domestic tourism growth, with Saudi residents making 22.5 million overnight trips per annum. Tourism receipts for Hajj and Umrah currently account for around 3% of GDP and, according to tourism officials, the country gained a reported USD16.5 billion from tourism in 2012, representing a 10% increase on the previous year. The largest hospitality market in the GCC, Saudi Arabia
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also accounts for the bulk of international tourist arrivals, at 46% according to an October 2012 GCC Hospitality Industry Report from Alpen Capital, representing a 50% year-onyear increase against 2011 figures. Hotel room supply in the Kingdom is expected to increase at a CAGR of 1.5% between 2011 and 2016, increasing from 243,117 rooms in 2011 to 262,049 in 2016, with 69 p r op e r tie s c ur r e ntly in t h e planning or construction phase.
MARCH 2013
AIG launches its trade credit product in the UAE AIG, has launched its trade credit product in the UAE. AIG has been underwriting this class of business globally for over 40 years. AIG’s product suite goes well beyond conventional credit insurance and offers a range of solutions for companies of various sizes. The UAE is seen as the ideal launch pad for Trade Credit insurance in the Middle East due to its accelerated GDP growth, its perfect geographical positioning – making it a thriving export market, it’s reasonably stable economy and political environment. Additionally, the existing local AIG entity, in operation for several years, offers the right infrastructure and support to the organisation’s growing trade credit footprint.
Community events calendar
Save the date! Date
Event
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
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.
Location
March 2-5
Seminar - Convert Natural Gas
Doha
4
Gulf Expo-Qatar
Doha
5-7
Paperworld Middle East
Dubai International Exhibition & Convention Centre
10 - 13
MEOS-Middle East Oil and Gas Show and Conference
Bahrain International Exhibition Centre, Manama, Bahrain
13 - 14
Middle East Geospatial Forum 2013
Qatar National Convention Center
17 - 21
Second Turbine Machines Middle East Symposium
Doha
31- 04 April
Saudi Travel and Tourism Market
Riyadh International Exhibition Centre, Riyadh
31 March - 2 April
World Luxury Expo Doha
Doha
Date
Event
Location 6-9
Project Qatar
Doha
1-4
Kingdom Airports, Aviation and Logistics Summit
Riyadh
6-9
Qatar StoneTech
Doha
2-4
Doha Carbon and Energy Forum 2013
Doha
6-9
Heavy Max
Doha
1-6
Qatar Career Fair 2013
Doha
8-9
Workshop Customer Services
Doha
15 - 16
Business and Investment Forum in Qatar - Berlin (TBC)
Doha
14 - 16
QITCOM Conference And Exhibition
Doha
22 - 25
ICC WCF 8th World Chambers Congress
Doha
15 - 17
The Hotel Show
Dubai
3-6
GITEX Shopper 2013
Dubai
26 - 29
Saudi Energy
Riyadh
16 -17
The Internet Show 2013
Dubai
27 - 29
Cityscape Qatar
Doha
30 - 03 May
Arabian Travel Market 2013
Dubai
June 4-6
CHRVI Qatar
Doha
April
May May
Conference and Exhibition, Qitcom 2013
Doha
11 - 13
Automechanika Middle East
Dubai
6-8
Airport Show 2013
Dubai
13 - 14
34th Session of the Ministerial Council for OPEC Fund for International
Doha
6-9
Energy Qatar
Doha
18 - 23
India Property Show
Dubai
6-9
Makinat Qatar
Doha
18 - 23
India Property Show
Dubai
MARCH 2013
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ABOUT TOWN
Let’s talk finance Exporta, the global financial services information provider, returned to Dubai for the 10th successive year to hold its Annual Middle East Trade & Export Finance Conference, which took place at the Jumeirah Emirates Towers Hotel as part of the Middle East Trade Finance Week. We bring you a synopsis of the discussions.
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iscussions centred on a range of topics, including growth forecasts for corporates and banks alike, the changing political risk environment post-Arab Spring, ongoing challenges in maintaining liquidity and optimising working capital, infrastructure and project financing requirements, as well as considering the overarching question as to whether the region’s global influence is still determined by its role as a commodity exporter. “One of the key issues identified over the course of this event is the tremendous will and appetite for doing business, establishing the GCC as a global commodity hub and increasing business flows with thriving markets such as Asia and Africa, whilst still maintaining close ties with traditional trading partners such as Europe and the US,” says Jeff Ando, Head of Conference 10
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Production for Exporta Events. “One of the overriding impressions we believe delegates will have taken away is the desire to drive things forward, to explore the various financing options available for maximising the region’s potential.” The reiterated commitment to Asia and Africa was a central theme, with continued focus on Dubai as a hub from which commodities dominate trade flows, while sanctions were identified as being a major concern for a banking sector keen to avoid falling foul of compliance regulations. Meanwhile, although it was noted that local banks are filling some of the gaps left by European banks leaving the region, further funding options for the corporate sector are still required. “One of the core benefits of hosting such a well established event is the long
standing relationships enjoyed with senior market leaders, with many of the most established and internationally recognised multinationals in regular attendance,” said Peter Gubbins, Managing Director of Exporta. “This combined with the outstanding support provided by the Dubai Multi-Commodities Centre (DMCC) and Dubai Trade (part of Dubai World) further demonstrates the calibre of support this event enjoys.” As a Government of Dubai authority established to drive forward the competitive advantages Dubai enjoys as a global trading hub, the DMCC has been particularly successful with its mandate to stimulate commodity flows, most recently through its central registry of commodity ownership, DMCC Tradeflow. “Our goal is to ensure sustainable regional financial and commodity markets that are both transparent and liquid. The focus is now on fostering the development and growth of trade for those expanding into new markets,” said Malcolm Wall Morris, Chief Executive Officer of DMCC. “Dubai is perfectly positioned at the crossroads of these markets.” The event concluded with the official launch of the ICC Regional MENA Banking Commission on the afternoon of Tuesday February 19, a joint venture between the International Chamber of Commerce and the Dubai Chamber of Commerce & Industry, established to extend the reach of the ICC Banking Commission within the MENA region. Key speakers included H. E Hamad Buamin, Director General, Dubai Chamber of Commerce & Industry and Kah-Chye Tan, Chairman, ICC Banking Commission.
The different flavours Gulfood 2013 was held from the 25th-28th February in Dubai and provided an excellent platform for countries to highlight their food products and explore business opportunities in the region. We bring you a synopsis of the event.
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ulfood Exhibition and Conferences 2013 (Gulfood 2013) was inaugurated on 25th February 2013 by H.H. Sheikh Hamdan Bin Rashid Al Maktoum, Deputy Ruler of Dubai and UAE Minister of Finance, in the presence of H.E. Sheikha Lubna bint Khalid Al Qasimi, UAE Minister for Foreign Trade, country ministers, ambassadors and dignitaries from around the world, highlighting the importance of the world’s largest annual food and hospitality trade event. Spanning over 100,000 square meters of space, the Gulfood 2013 saw the participation of 4,200 exhibitors with the biggest European showcase and the largest South American presence. More than 110 foreign country pavilions were set up at the Dubai World Trade Centre. All of them exhibited different varieties of food items, beverages, restaurant supplies, hospitality services and other related food equipments. The Gulfood 2013 Conferences, a series of four key summits, commenced also on 25th February 2013 with H.E. Sheikha Lubna addressing senior executives of global food and beverages companies, dignitaries and trade professionals at the Global Food Leaders’ Summit. The forums organised during the rest of the conference’s days included Food Packaging & Processing Forum, Food Inspection Conference and Franchising Workshop. The whole exhibition was attended by over 60,000 qualified business visitors. Attendees could also participate in the Baking and Pastry Guild Competition as well as attend the corporate award ceremonies. In addition, many professional chefs used this opportunity to highlight their skills to a large audience. At a press conference organised prior to the Gulfood, H.E. Hamad Buamim, Director General, Dubai Chamber of Commerce and Industry (DCCI) stressed the importance of the food and beverage sector for the growth and development of UAE’s economy. With
H E Hamad Buamim Director General Dubai Chamber of Commerce and Industry speaks at the Gulfood 2013 Press Conference
AED 32.6 billion value of food consumption in 2013 the value of food consumption in the UAE expected to have reached AED 28.2 billion in 2012, he said this was forecasted to increase to AED 32.6 billion in 2013. Adding to this, Rashid Ahmed Al Teneiji, Director of Government Communications at the UAE Ministry of Foreign Trade said, “The UAE’s food exports, which totaled AED 15.8 billion in 2010 increased by 10% to reach AED 17.5 billion in 2011. Gulfood contributes significantly to this growth by not only providing promising business opportunities to the global food industry but also proving to be an excellent platform for UAE companies to do business abroad. The presence of a dedicated UAE pavilion for the first time at the show is an indication of the country’s development in the F&B industry as it moves up the value chain.”
When we asked some of the countries, about the importance of an event such as the Gulf Food, Nawal Benzaid, Agriculture and Agri-food Counselor, MENA region, Trade Commission of Canada, said “Gulfood is important for our Canadian companies which are interested in the Middle East and North Africa market and want access to South Asia market. The food opportunities are growing in this part of the world and with the large expat community, the demand for sophisticated and diversified products is increasing. It is a region that is very dependent on food import and Canada exports over 70% of its agriculture and agri-food. The opportunities are huge from commodities to specialty gourmet products.” The event was a huge success and we hope it will come back bigger and better next year. MARCH 2013
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TRADE TALK Expert Column
Harnessing trade for jobs in the Arab region The Arab region needs to identify new and sustainable sources of growth, create more and higher-paying jobs, and absorb increasing numbers of university graduates into the labor market. Raed Safadi, OECD, speaks to us about how trade can be used for creating jobs in the Arab region.
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he earlier development paradigm that had insulated national economies from world markets has failed to achieve the qualitative and quantitative growth expected by the population. Harnessing the forces of international trade and investment is a key medium to long term policy lever available to policymakers to decisively and sustainably respond to the joblessness problem, especially among the youth. Integration into world markets for goods, services and ideas has proven to be a potent recipe contributing to growth and better employment outcomes in developed, developing and emerging economies alike. Trade promotes production efficiency via specialisation, exploitation of economies of scale, and technology transfer, as well as enhanced competition. Openness helps economies to compete by not only offering new opportunities
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for sales (i.e. exports), but also making available to producers the widest range of inputs at the highest quality and lowest prices (i.e. imports). According to the World Bank, in the 1990s per capita real income grew more than three times faster for those developing countries that lowered trade barriers (5.0% per year) than for other developing countries (1.4% per year). Turkey too managed to create more than three million jobs through a process regulatory reform and free trade agreement with the European Union. Productivity growth is at the heart of economic progress. At the sectoral level, more productive firms expand as trade drives more resources towards them; at the same time, relatively unproductive firms contract or exit from the market altogether. Increased competitive pressures induce organisational change and production upgrading, which in turn
boost within-firm productivity. Overall, the long-term evidence from a broad sample of countries indicates that an increase of 10% in trade exposure (trade as a percentage of GDP) was associated with a 4% increase in output per working-age person. To the extent that wages are linked to productivity growth, greater openness also means a rising standard of living. The opportunities for creating more and better jobs in the Arab appear to be large ,not least, given the fact that the region is the least integrated with the world economy. The region receives only onethird of the FDI expected for a developing region of comparable size, and most is concentrated in a handful of countries. Global financial integration also lags behind that of other developing countries. Portfolio investment is virtually nonexistent because of the poor state of equity markets. The number of Arab countries adhering to IMF Article VIII provisions, which generally signifies full current account liberalisation,
ABOUT Raed Safadi is the Deputy Director of the Trade and Agriculture Directorate of the OECD. Prior to assuming his current position in 2009, he was the Chief Economist for the Government of Dubai. Dr. Raed specialises in the empirical and policy analysis of international trade. Dr. Raed has previously worked for the World Bank and as a consultant for numerous governments, regional development banks and UN agencies.
exports continue to dominate the total from the region, while non-oil exports, on the whole, grew at a slower rate than for all developing countries. As a result, the Arab region’s share in world export markets fell by more than half in the 20year period between 1990 and 2010; the region’s total exports in 2010 amounted to USD 826 billion (of which 72% is oil and gas), an amount comparable to the combined exports of the Netherlands and the UK.
$826 million region’s total export in 2010
is proportionally lower, at one-third of the total, than in other regions. Overall, financial markets in the Arab region remain fragmented and dominated by traditional banking activity. In many cases, banking systems remain under public ownership or control with considerable exposure to government debt, weak regulatory and enforcement capacity, and insignificant links to international capital markets. With minor exceptions, equity and debt markets, insurance, leasing, and longterm financing remain weak and de-linked from the international market. The Arab region’s trade performance is also below that of other regions: oil
It is also the case that intra-regional trade and investment flows have been very limited, at 6% or less of their total trade. Similar figures for the European Union are 60-65%, and, in Asia, about 60%. Furthermore, although the geographical distribution of FDI flows among Arab countries is not well documented, it appears that most of regional investment outflows go outside the area. While openness to trade and investment impacts employment positively, those benefits do not necessarily materialise immediately and tend not to be distributed evenly. This makes it necessary to manage the adjustment costs associated with trade
liberalisation, a point that is especially true for workers, households, and communities that are unable to harness market opportunities because entry costs are prohibitively high. A major factor to take advantage of the opportunities from trade is education. Globalisation and technological progress continue to shift labour demand towards adaptable workers with a high general level of education and the ability to continue learning throughout their professional life. This requires investment and strategies for education and skill policies that take into account the changing labor needs of the world economy. Smooth adjustment requires that an economy have several components in place. Infrastructure needs to be of sufficiently high quality to ensure that the growth of existing and start-up businesses is not thwarted by bottlenecks in transportation and communications. Competition policy and efficient markets are needed to prevent large firms from abusing their market power or obtaining special treatment from the state. Financial markets need to be sufficiently developed to fund new and expanding businesses, and to deal with the high rate of failure among start-ups and small businesses. Regulations should provide appropriate oversight without imposing onerous time and resource costs, either entry or exit. The legal system has to function so that property rights are wellestablished and bankruptcy and business failure can be accommodated. The rule of law must ensure that graft, corruption, and other forms of criminal activity don‘t disadvantage the businesses that play by the rules. MARCH 2013
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TRADE TALK INTERNATIONAL TRADE
Talk to the expert
Dubai’s vast growth and developments have lead to welcoming global trade into its shores due to its unique geographical location, outstanding infrastructure and seamless processes. Dubai Trade gives us an update about Dubai’s status as the trading hub and doles out some interesting bits.
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ubai Trade fore sought the need for trade process simplification through re-engineering the end-toend trade supply chain and application of technology. It has taken the responsibility of facilitating the trade and logistics operations in Dubai in an effort to become the world’s best practice model and present Dubai as their first choice for doing business across the globe. In 2006, Dubai Trade was launched as an independent department under Dubai 14
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World and remarkably evolved into an independent Dubai Free Zone company. This marked the beginning of Dubai Trade’s transformation from an online service provider to becoming a trade facilitation entity aiming to streamline the trade processes in Dubai. The foundation of Dubai Trade was built upon the need of trade facilitation to enhance trade processes for the benefit of all stakeholders. It aims to give visibility to trace the trade logistics chain, link all stakeholders
under a single window to achieve end-to-end trade integration as well as continuously innovative e-transformation initiatives. Dubai Trade’s stated vision is to transform the trade supply chain and make trade faster, easier and more cost effective. After the introduction of e-Services, Dubai Trade Portal paved the way to improve the day-to-day business transactions. The migration from paperwork to online channels has revolutionized processes, eliminated physical visits and contributed
towards a greener environment. Furthermore, the improvement in the adaption of e-services built upon the application of the latest technologies on Dubai Trade Portal is proof of the steadfast execution of the vision of the leader H. H. Sheikh Mohammed Bin Rashid Al Maktoum, Prime Minister and Ruler of Dubai, of a paperless future for government transactions. The Dubai Trade Portal is the single window for trade and cargo movement in Dubai and has been on a continuous growth curve and currently provides services for traders, shipping lines and agents, clearing and forwarding agents, hauliers, and free zone licensees. The portal offers over 750 e-Services that span all key activities ranging from marine services, manifest and cargo handling services, cargo clearance and haulage services to invoicing and payment services and Free Zone services. In 2012 alone, Dubai Trade has welcomed over 21,000 new companies to its fold. The Portal now caters to facilitating the daily operations of over 72,000 registered companies, providing a streamlined flow of online services designed around customer needs and targeted at simplification of trade processes. “Rosoom”, the highly secure, flexible and innovative payment gateway, complements Dubai Trade’s e-Services platform, which allows importers and exporters, shipping agents, freight forwarders, clearing agents and haulers to initiate and complete online all the procedures and processes, including payment, for the various services and facilities offered by DP World, Jafza and DMCC. This is done via a single window which is shared between users and all concerned authorities, allowing for swift, trouble-free and cost effective operations for both clients and authorities. Rosoom offers users multiple online payment options, covering credit, debit and prepaid cards such as e-Dirham, to facilitate payments in a safe and secure environment. Dubai Trade has also integrated Rosoom with the online payment systems of several key banks internationally and locally, making it easier and more secure for trading
ABOUT Dubai Trade FZE has set an important benchmark for excellence in trading for the region as a whole, with its online portal www.dubaitrade.ae offering seamless trade flow for Dubai’s vast trading community. More than 800 e-services of DP World, Economic Zones World, Dubai Customs and Dubai Multi Commodities Centre, in addition to several leading banks are integrated under the Dubai Trade umbrella. For more information, please contact customercare@dubaitrade.ae
clients of these banks to use the solution. Additionally, Dubai Trade has recently developed a highly innovative online payment solution that combines the convenience and ease of use of payment cards with higher security and real-time management of payments. The new, customisable “Rosoom Wallet”, which will be launched soon, will offer managers a high degree of flexibility and security in the management and control of payments. Rosoom became a major success for Ports and JAFZA customers followed by the increased adoption of many key services. Recording over AED 1 billion in online payment collections across 1 million transactions conducted via the payment gateway. The time-saving efficiency of the e-Services developed by Dubai Trade and its stakeholders, is leading to billions of dollars in annual savings for the entire trading community and the economy as a whole. According to a recent independent study
carried out by the Emirates Competitiveness Council (ECC) these process re-engineering initiatives have potentially led to total savings of AED 148 billion (more than USD 40 billion) over five years ending 2011, which accounts about 17% of the UAE’s 2009 GDP. Not only has Dubai Trade saved billions of dollars in the past five years, but it has also climbed up with rankings of The World Bank’s “Doing Business” reports. According to the “Doing Business” report 2008, the UAE was ranked the 24th ‘Trading Across Borders’ topic. In 2013 the UAE ranked 5th and has maintained its global ranking in the top ten in the past four years. As UAE continues to be a world leader in facilitating trade, despite stiff competition from other world economies, the UAE retains its position as number one in the MENA region. Rendering a recent report by CNN, Dubai has transformed trading in the UAE through the construction and expansion of the Rashid and Jebel Ali ports. Dubai has
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TRADE TALK INTERNATIONAL TRADE
Sources: DP World; Britannica; Dubai Trade; Dubai Statistics; World Shipping Council and CNN.
AED 1 BILLION online payment collections across 1 million transactions conducted via the payment gateway leaped up the rankings of the world’s busiest container ports by volume. In 2007, Dubai ports handled a ground-breaking 10 million TEU within a single year and upgraded Jebel Ali’s port to handle a capacity of up to 14 million TEU. Moreover, with the immense growth of the trading community, one of Dubai Trade’s initiatives was to offer training from the experts themselves. The training initiatives cover two distinct areas. One of which is e-Services, where Dubai Trade offers specific training for its customers and users about the services offered by its partners through the 16
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portal. And certification courses, the highly popular CTLP (Certified Trade and Logistics Professional) programme. All training sessions are accredited by the Knowledge and Human Development Authority (KHDA). CTLP is the region’s first comprehensive vocational training program, endorsed by The Chartered Institute of Logistics & Transport (CILT) that covers the end-to-end process of import and export in the UAE and the region. It is a professional development certification course that explains in detail the business concepts and processes related to all stakeholders involved. Traders,
Shipping Agents and other companies and entities have successfully completed the programme with over 200 graduates in 2012. Dubai Trade aims to bridge a knowledge gap of trade and logistics by providing training programmes that compass practical awareness and the skill required for companies involved in the trade supply chain in the UAE and the region. And with the great success that followed CLTP, Dubai Trade introduces the Certified Customs Broker (CCB), a professional development course that covers the Customs laws and procedures that will allow the learners to be conversant in the Customs laws, paperwork and practices which will help them with the import and export processes. With the pace of growth of Dubai as a driver, Dubai Trade will always be on the fast-lane paving towards its vision and continuously dedicating efforts to advancing trade facilitation and streamlining processes in its aim to establish Dubai as the leading trade and logistics hub of the world.
TRADE TALK Finance
Dealing with currency risk Western Union Business Solutions, looks at how small and medium-sized enterprises (SMEs) can protect against foreign exchange fluctuations when making cross-border transactions.
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urrency volatility is a big concern for businesses that need to make international payments, whether for imports/exports, payroll or logistics. A sudden shift in an exchange rate can hit the value of a profitable deal or even in extreme cases turn it into a loss-maker. Attempting to understand and constantly monitor currency markets can be a real headache for business owners; but knowing how to properly manage currency risk – without the headache – is a real asset, any not as difficult as one might think. The importance of managing currency fluctuation can be seen just by looking at the Euro-Dirham exchange rates since the start of 2012. In this period, the exchange rate has varied from a low of AED 4.43 and a high of AED 4.94 to the Euro. These currency fluctuations can have a significant impact on a company’s profit margins. It is for this reason that, after several years of austerity in an increasingly globalised market, businesses and SMEs have had to become savvier in order to minimise costs and remain competitive against their peers.
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So, the question stands, what can you do to hedge against currency risk? There are a number of cost-effective tools and new techniques available for SME that wish to manage their currency risk. By implementing some of these tools, small business owners can build an effective international payments strategy that will help to protect their company’s finances in what looks to be an uncertain market in 2013. Forward contracts A ‘forward contract’ is one of the simplest and most effective tools available for SMEs. It is a very straightforward product that allows you to buy or sell a foreign currency at today’s market price, delaying the settlement of the contract to some future, or forward, point in time. It means that SMEs can lock-in a particular foreign exchange rate for an extended period of time (e.g. 12 months) and settle upon delivery at an agreed date. A forward contract is no different than a standard currency trade, other than the fact that the settlement date is pushed forward into the future. The forward
rate is also adjusted slightly to account for the interest rate differential between the two currencies in question. The ability to set a budget in advance is a key benefit of using forward contracts. Moreover, if you see an attractive exchange rate that is better than what has been budgeted for, there is the opportunity to lock-in that rate for a 12 month period, which means there could be an unbudgeted foreign exchange gain – a great bonus for any business. There is one obvious downside to using a forward contract. On the day of settlement, you are obligated to settle at the predetermined price. This means that there is a chance that the market rate on the day of settlement is more favourable than the predetermined forward rate. Whether or not that risk is worth taking is of course up to individual choice and circumstance. With today’s volatile market showing no
ABOUT Western Union Business Solutions enables companies of all sizes to send and receive international payments and manage foreign exchange, creating unique solutions tailored to suit their FX needs. Western Union is a leading nonbank provider of business payments, operating its Business Solutions services through locally licensed affiliates and partners in 29 countries. Supported by a network of trading offices, strategic banking relationships and a proprietary global clearing network, businesses can send cross-border payments in more than 135 currencies.
market which is fixed at the worst-casescenario price. The chosen payments service will monitor the exchange rate and can automatically sell when the foreign exchange rate hits that price. This will help to ensure that the business’s bottom line is protected, as it will have already budgeted for the least-favourable price. The advantage of a stop-loss is that it allows for some degree of flexibility while insulating against the worst effects of a negative rate movement. It is a product worth considering
A ‘forward contract’ is one of the simplest and most effective tools available for SMEs. It is a very straightforward product that allows you to buy or sell a foreign currency at today's market price, delaying the settlement of the contract to some future, or forward, point in time.
signs of abating, however, many businesses are opting for some level of exchange rate certainty to protect against a sudden and damaging fluctuation. The bottom line is that fixing an exchange rate in advance eliminates exposure to volatility. Whether or not that will be valuable is of course something for each business to determine for itself.
Stop-losses A stop-loss is a tool for an SME that knows what their worst-case-scenario exchange rate would be for a specific payment, and allows them to protect against it. By employing a stop-loss on a particular payment, SMEs can place an order on the
for SMEs that would prefer to monitor the market as it allows them to do so with what is basically a financial safety net that will keep them from hitting the floor should a currency begin a downward run.
Future payments Cash is king in the current financial markets and with credit availability scarce and SMEs need to be aware of alternative sources of cash for when they need it. This is where ‘future payments’ come into play as another useful FX tool. A future payment is rather similar to a short-term forward contract, except it is more payment-specific. For example, by setting up a future payment, an SME can receive a
short-term cash injection. This is then set at an agreed exchange rate and settled within a 90-day period. The big advantage of a future payment is that it both protects against currency fluctuation and boosts cash flow, making it a strong tool for businesses that need access to funds while waiting for stock that they know will be delivered. Making use of some or all of these tools will allow treasurers to develop and execute a robust currency risk management strategy that reduces exposure to currency fluctuations. The three examples outlined above are tools our clients use to manage costs and protect profit margins – two issues with which business leaders will of course be familiar. Some are probably also familiar with at least some of the products mentioned here and may have been using these and similar tools to manage currency risk for a number of years. The nature of market volatility has not changed, but the suddenness and degree of that volatility has certainly become more pronounced since the credit crunch and start of the global financial crisis. The business world has become more globalised and that does not look set to change. By mitigating and minimising their exposure to currency risk, SMEs will help to ensure that they remain competitive. *This article has been prepared solely for informational purposes and does not purport to provide any financial, investment or professional advice. It does not in any way create binding obligations on Western Union Business Solutions, a Western Union Company. Western Union Business Solutions makes no representation, warranty or condition of any kind, expressed or implied, in this article.
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TRADE TALK AWARDS
HONOURING EXCELLENCE IN TRADE The inaugural Trade Middle East Awards were held on the 25th of February at Habtoor Grand, to recognise and honour the best in the field of trade. We bring you the winners who did us all proud that evening.
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rade is the cornerstone of this region and makes a very large contribution to the GDP of these economies. With the motto of “Strive, Achieve and Inspire” the awards were our attempt to recognise and honour those who work towards making trade simpler and faster. It is about those organisations that strive to be the best, achieve it and inspire others through their work. There were 18 awards given in five major categoriesfinance, free zones, legal, business support services and warehouse and logistics. The event opened with a welcome speech by the Senior Editor of the magazine, Aparna Shivpuri Arya. Speaking
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about the magazine, she said, “There has been a lot of interest generated through our country focus events that we started last year and we are looking forward to a packed year ahead. It has given us the opportunity and the privilege to present these countries to potential and existing trading partners & businesses in the region.” The opening remarks were given by Nigel Rodrigues who is the COO of CPI. He highlighted the importance of trade in the region and the roadmap ahead for the magazine. H. E Saed Al Awadi, CEO, Dubai Exports, gave the keynote address and spoke about the importance of trade in the region.
WAREHOUSING AND LOGISTICS
Warehouse and material handling company of the year
Al Futtaim Logistics Established in the 1930s, Al-Futtaim operates collectively over 85 companies bearing the Al-Futtaim name and encompasses such sectors as commerce, industry and services across the UAE, Bahrain, Kuwait, Qatar, Oman, Saudi Arabia, Syria, Pakistan, Sri Lanka, Singapore, Malaysia and Europe.
Air cargo services provider of the year
Emirates SkyCargo Emirates SkyCargo’s fleet includes ten freighters (one Boeing 747-400F, two 747-400ERF and seven 777Fs) that now serves 129 destinations in 75 countries on six continents. In December 2012 Emirates SkyCargo took delivery of its seventh Boeing 777F. Scheduled freighters now operate to 39 destinations.
Sea port of the year
DP World DP World operates over 60 terminals across six continents, with container handling generating around 80% of its revenue. In addition, the company currently has 11 new developments and major expansions underway in 9 countries. DP World aims to enhance customers’ supply chain efficiency by effectively managing container, bulk and other terminal cargo. Its dedicated, experienced and professional team of more than 30,000 people serves customers in some of the most dynamic economies in the world.
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Logistics best practice firm of the year
DHL Founded in San Francisco more than 40 years ago by 3 budding entrepreneurs - Adrian Dalsey, Larry Hillblom and Robert Lynn - DHL has continued to expand at a phenomenal rate. Today, it stands tall as the global market leader of the international express and logistics industry. A global network composed of more than 220 countries and territories and about 275,000 employees worldwide offers customers superior service quality and local knowledge to satisfy their supply chain requirements.
BUSINESS SUPPORT SERVICES
Company formation firm of the year & Consulting firm of the year
The Links Group The Links Group, established in 2002, is a premier company formation specialist that advises corporations and individuals how to best establish a legal commercial presence in the Middle East. With more than 40 combined years of experience in the region, A Dubai SME 100 company, The Links Group is also the only corporation of its kind to be associated with the Foreign Investment Office (FDI) of the Dubai Economic Department.
Online trade/market information portal of the year
Euromonitor Euromonitor International has established a strong presence in the Middle East over the past 5 years. Their robust research methodology, supported by 800 researchers and in-country analysts across 80 countries has distinguished them as the world leader in strategy research for consumer markets. Their passion for client support combined with the unique capabilities they offer has developed a high profile client base in the region.
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BUSINESS SUPPORT SERVICES
Office set up firm of the year
Regus Regus is the world’s largest provider of workplace solutions, offering the widest range of products and services that allow individuals and companies to work however, wherever, and whenever they need to. Regus operates over 1200 Business centres across 550 cities in 95 countries. Products and services include fully equipped offices, world-class business support services, meeting conference and the largest network of public videoconference rooms.
FINANCE
Foreign exchange house of the year
Western Union Western Union Business Solutions enables companies of all sizes to send and receive international payments and manage foreign exchange, creating unique solutions tailored to suit their FX needs. Western Union Business Solutions is a leading nonbank provider of business payments that offers services in 30 countries around the world. Supported by a network of trading offices, strategic banking relationships and a proprietary global clearing network, businesses can send cross-border payments in more than 135 currencies.
Trade finance bank of the year
Abu Dhabi Commercial Bank (ADCB) ADCB has increased their market share in UAE in the Local Corporates and SME segment focusing on UAE and India Trade flows. Their innovative approach to Trade Finance requirements in terms of product offering covering both Documentary Credit and Open Account provides Clients a complete solution for their working capital requirements. ADCB continues to provide innovative trade products along with their online Trade platform “ProTrade” as a complete trade partner to support their clients.
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FINANCE
Trade credit insurance provider of the year
Euler Hermes GCC They are the world’s leading provider of credit insurance solutions. With over 100 years of experience they have earned trust of their clients around the world. Credit Insurance protects your business from non-payment of commercial dept. It makes sure that your invoices will be paid and allows you to reliably manage commercial and political risk of trade.
Islamic finance bank of the year
Noor Islamic Bank Established in 2008 in Dubai, Noor Islamic Bank is a full service bank delivering the broadest range of products for its customers, with an emphasis on unique and personalized services. Noor Islamic Bank’s products and services are governed by a Shari’a Board, comprising leading Islamic scholars with extensive experience and expertise in legal, financial and banking-related matters.
Marine cargo insurance provider of the year
Zurich At Zurich we have over 140 years’ experience of protecting our customers against the unexpected and we pride ourselves on providing high quality insurance solutions to customers in more than 170 countries. Zurich has been serving customers in the Middle East for over 25 years. Our commitment to the region has seen us expand our business and we now provide General Insurance solutions to customers in Oman, Kuwait, Lebanon, Bahrain and the UAE.
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LEGAL
Excellence in maritime law
Fichte & Co Fichte & Co is an international commercial law firm, with its head office in the vibrant and cosmopolitan Emirate of Dubai in the UAE. Their high expertise in the special field of shipping law as well as in corporate and trade law practice have enabled Fichte & Co to be reckoned amongst the top tier law firms in the UAE. Fichte & Co provides customers with personalised business advisory solutions while constantly bearing in consideration the individualistic needs of our patrons and is therefore able to promote better understanding and prosperity of the different business cultures that constantly come together in the Middle East.
Excellence in IPRs
Clyde & Co Clyde & Co is a global law firm with a pioneering heritage and a resolute focus on its core sectors of aviation, energy, infrastructure, insurance, marine, and trade. With over 1,400 lawyers operating from 30 offices across six continents, the firm advises corporates, financial institutions, private individuals, and governments.
Best International trade law firm
Al Tamimi & Co Established in 1989, Al Tamimi & Company are the largest law firm in the Middle East with offices in the UAE, Qatar, Jordan, Iraq, Kuwait and Saudi Arabia. They are a full service law firm specialising in a range of practice areas and pride themselves on providing their clients with not only professional expertise but superior service and quality commercial advice. They have advised on some of the region’s most complex matters and continue to be at the forefront of market developments.
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Free zone for ease of doing business
FREE ZONES
Ras Al Khaimah Free Zone (RAK) RAK FTZ is a gateway to emerging markets with 6,000 companies from 106 countries. The easy and simple procedures have made RAK FTZ the first choice by SMEs from around the globe. Since 2000 RAK FTZ has grown and they continue to improve our products and services and strengthen their positioning as a business hub geared at helping SMEs connect to emerging economies. Opening their UAE and international offices was another step for us to facilitate ease of doing business for their clients. They no longer have to travel to Ras Al Khaimah to get information or register a company; they come to them to save them time and money.
Free zone for attracting maximum investment
FREE ZONES
Jebel Ali Free Zone (JAFZA) Jebel Ali Free Zone (Jafza) is one of the world’s leading free zones. Established in 1985, Jafza is today home to over 6,900 companies, including over 100 of the Global Fortune 500 enterprises. It is a leading driver of the burgeoning UAE economy contributing over 40% of Dubai’s net FDI. Jafza is the region’s most efficient logistics hub and the only one in the world located between a top container terminal (Jebel Ali Port) and a top international airport (Al Maktoum International Airport), enabling the best multi-modal connectivity.
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Editor’s choice award for promoting trade
Dubai Trade Dubai Trade is the premier trade facilitation entity that offers integrated electronic services from various trade and logistics service providers in Dubai under a single window. It underlines Dubai’s position as the ideal base for trading across borders with its unique geographical location, excellent infrastructure and seamless processes across the private sector and government agencies. It is a subsidiary of Dubai World through the intermediary company, Port & Free Zone World FZE and is incorporated under the laws of the Jebel Ali Free Zone Authority in Dubai, United Arab Emirates. It integrates the major stakeholders in the trade and logistics operations including DP World, Dubai Customs, Economic Zones World, and Dubai Multi Commodities Centre.
Editor’s choice award for contributing to trade finance
United Arab Bank Incorporated in 1975, United Arab Bank (UAB) is a serious player in a competitive market where more than 50 lenders compete for about 7 million customers. Based in Sharjah and operating with 20 offices and branches throughout the UAE, the Bank offers its clients tailor-made financial services in both corporate and retail banking, and has mainly established itself as a leading solutions provider for a growing commercial and industrial base across the seven emirates. Through the provision of a comprehensive range of Corporate Banking, Retail Banking, Trade Finance, SME Banking and Treasury services, UAB is the Bank of choice among major corporate clientele segments in the UAE.
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TRADE TALK Sector Watch
Food for thought B
Gulfood 2013, which concluded on 28th February, gave us an insight into the potential and magnitude of the trade and investment opportunities in the food sector. We bring you an overview of this sector and talk to some of the big trade partners about their opinion.
eyond oil the complex and vitally important trade and investment relationship the GCC has with the world is not that well known. New markets are being sought around the world for a growing range of non-oil goods and services, while, on the investment side, both the well-capitalised sovereign wealth funds and an increasing range of private investors have built up wide-ranging investment portfolios. And one such non-oil sector is the food sector. The global food and beverage production industry is one of the fastest growing sectors worldwide, valued at AED 20.6 trillion in 2013. With demand in the GCC expected to rise significantly – fuelled by population growth, higher per capita income, and increasing tourism numbers – food imports to the region will increase by as much as 100% to AED 194 billion by 2020. At a press conference organised prior to the Gulfood, H.E. Hamad Buamim, Director General, Dubai Chamber of Commerce and Industry (DCCI) stressed the importance of the food and beverage sector for the growth and development of UAE’s economy. With the value of food consumption in 30
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the UAE expected to have reached AED 28.2 billion in 2012, he said this was forecasted to increase to AED 32.6 billion in 2013. When we asked some of the countries, about the importance of an event such as the Gulfood, Nawal Benzaid, Agriculture and Agri-food Counsellor, MENA region, Trade Commission of Canada, said “Gulfood is important for our Canadian companies which are interested in the Middle East and North Africa market and want access to South Asia market. The food opportunities are growing in this part of the world and with the large expat community, the demand for sophisticated and diversified products is increasing. It is a region that is very dependent on food import and Canada exports over 70% of its agriculture and agri-food. The opportunities are huge from commodities to specialty gourmet products.” Gerard Seeber, Trade Commissioner and Consul General, Trade Commission of Australia, Dubai further added to it, “Australia has a long-standing relationship with the UAE as a consistent supplier of quality foodstuffs and beverages. In addition to achieving international reputation for producing
food from a natural environment, Australia has established high levels of food safety and sophisticated food processing systems. All the top 10 multinational food companies have invested in the ideal production environment that Australia has to offer. Australia has also won increasing recognition for its worldclass organic, specialty and innovative foods. Gulfood is a great opportunity to see and network with some of Australia’s best.” For Singapore, Gulfood is the largest launch platform for Singaporean F&B manufacturers looking to bring their latest products to the region. This year, more than 40 Singaporean companies participated at Gulfood and 30 launched new products, said Lester Lu, Regional Director, IE Singapore.
Background The GCC countries, with a total population of 40 million, are amongst the worlds richest in terms of oil and gas reserves and per capita wealth. However, when it comes to food sufficiency, due to water shortage and lack of arable land (less than 2%) on an average, these countries need to import almost 90% of their food requirements. This backdrop makes the growth and outlook of the food sector a very important issue for the GCC countries. The numbers mean that the region will continue to import from 85% to 90% of its foodstuffs annually. Saudi Arabia would continue to play a key role in terms of volume, accounting for around 64% of GCC’s total food consumption in 2015. Consumption in Qatar, Oman and the UAE is likely to grow at a relatively higher rate as population in these countries is expected to expand at 4.0%, 3.2% and 3.0%, respectively, on an average during 2011–15. Due to the scarcity of arable land and an arid climate, agriculutural food production in the GCC region has been minimal. According to the FAO, of the total area, the land suitable for cultivation is just 1.7% in Saudi Arabia and 3.0% in the UAE compared to 18.4% in the US, 23.7% in the UK, 16.3% in China and 51.6% in India. Nonetheless, Saudi Arabia, which produces cereals (mainly wheat), vegetables, fruits, meat (poultry) and dairy products, leads GCC countries in food production.
Trends So what food products does the region import from countries such as Brazil, Canada and Australia? Talking about these trends, Michel Alaby, CEO, ABCC said, “The GCC countries’ top five food group of products imports range from cereals, meat, dairy products, fruits and vegetable/animal fats/oils. National food industry generally are for food processing, so food products in that line are also always in the import demands. When analysing country by country foodstuff products, the top five according to the last available data from INTRACEN in 2011 are: 1 Saudi Arabia – USD 12,68 billion 2 United Arab Emirates – USD 10,74 billion 3 Kuwait – USD 2,28 billion 4 Bahrain – USD 1,47 billion 5 Oman – USD 1,26 billion 6 Qatar – USD 992,27
To this, Nawal added, “UAE is our top export market in the GCC followed by Saudi Arabia. Last year, our total agriculture and agri-food exports valued USD 704 million. Our main exports are canola seeds, pulses (lentils) and wheat. We also export some value added products such as Canadian lobster, Canadian beef, ice cream, and more” Australia’s main exports would be mostly agricultural products – meat, wheat/ oilseeds and horticulture. For processed foods – major exports include dairy, wine,
cereals, beverages, processed fruits and vegetables. Gerard also highlighted the trade relations between the UAE and Australia. “Australia is now the UAE’s third-largest supplier of food for local consumption as well as for re-exports to other GCC countries, with food imports mainly focused on Australian meat. In 2011, the UAE replaced Egypt as Australia’s number one beef and lamb export market in the Middle East, with red meat imports reaching 28,804 tonnes, according to statistics provided by Meat and Livestock Australia. The trend has continued into 2012, with the UAE overtaking Saudi Arabia as the largest importer of red meat products.” According to Lester Lu, Regional Director, IE Singapore, “Singapore exports its products all around the world, with the GCC being the sixth largest market for Singaporean food and beverage exports. Singapore’s F&B exports to the GCC have grown significantly from USD 57.04 million in 2001 to USD 256 million in 2012. Among Singapore’s top exports to the region are milk and cream products, cooking sauces, seasoning mixes and edible oils. Beyond these traditionally strong exports, Singaporean F&B manufacturers are also eyeing growth opportunities in the health and wellness, convenience and Halal food sectors.” Opportunities for bilateral trade and investment So what does this mean for food exporters? To this, Gerard stated that Dubai’s position as a MARCH 2013
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trading hub in food will increase in importance and commodity products will remain in high demand. For Australian exporters trade opportunities in the GCC exist in most food categories. However, the market is highly competitive given the region’s open trade policies. In some instances consumption is small, so opportunities exist for consolidators of mixed consignments. Further exploring opportunities, the one industry within the food sector that offers opportunities is the Halal industry. The Halal food market — which accounts for 12% of global trade in agri-food products — is estimated at USD 560 billion. The high concentration of wealth in the area, along with rapid infrastructure growth, facilitates international trade, making it highly attractive for business. With increasing demand from 1.8 billion Muslims worldwide, GCC companies are now positioning themselves as major suppliers of the halal food industry, which has been
private domestic and foreign players and is offering financial incentives. The government is also building infrastructure to boost the attractiveness of the sector. In its 2010 budget, KSA allocated USD 12.3 billion, up 30.9% from the 2009 allocation, to the agriculture and water sectors with an aim to develop the required infrastructure for agriculture in the form electricity, irrigation, transportation systems, and mills. The UAE has also been working on vertical farms, a concept farming technique in which crops are sowed vertically on different levels compared to horizontally in traditional farming, to produce vegetables, fruits and grains indoors by using limited quantities of seawater. Challenges Talking about the challenges, we asked Michel what he thought of it, since Brazil is a major trade partner of the region when it comes to food products. To this he said, “MercosurGCC Free Trade Agreement may ease trade flows between regions. Regarding logistics,
AED 20.6 trillion value of global food & beverage production estimated to generate between USD 632 billion and USD 2.1 trillion annually. The GCC, which imports around 80% of its food, will look to Latin America as a vital food source, with investment in land acquisitions likely to increase. Brazil is one of the world’s leading food exporters, with around 11% of food-related exports sold to the Middle East, according to the Arab-Brazilian Chamber of Commerce. Around one-third of Brazil’s poultry exports go to the Middle East and it is a significant exporter of Halal products to the region . Government support and financial incentives in the GCC have encouraged private participation in the agriculture sector. The Saudi government has simplified the bureaucratic process of investment for 32
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maritime lines are increasing routes, but some companies request more frequent lines. Referring to airlines for passengers and cargo, we have today, two companies: Emirates Airlines, (daily flights to São Paulo and Rio de Janeiro) and Qatar Airways, (daily flight to São Paulo). Eithad Airways will open a daily flight beginning June, 2013.” Nawal reiterated the same sentiment and said the distance coupled with high transportation costs make it difficult to trade. As it must be evident by now, while there are challenges there are also a lot of opportunities that this sector offers. We also spoke to Frank Courtney from Barloworld Logistics, to know what are the logistical challenges. According to Barloworld Logistics food security & visibility are the top
challenges for the food logistics industry. Looking at the current horse-meat scandal in Europe; lack of security and visibility are at the root of the scandal. Consumers and all parties involved in a food supply chain need to have greater visibility in order to be able verify the authenticity of the products they make and sell. Greater standards & scrutiny by government agencies is more pertinent to ensure food security, however this can only be effective if the visibility and security is in place and enforced Barloworld Logistics recently concluded a supply chain study with 500 senior management professionals from various industries in the GCC. The greatest challenges faced by the companies surveyed, are related to interpretations of rules & regulations within the country and cross boarder transportation. There is a sizable component of the companies surveyed that form part of the food industry. The challenges mentioned above are more critical when it comes to perishable cargo. However, over the last two decades GCC countries have made substantial investments into infrastructure and facilities specifically for the importation of food into the region. The continual development and investment by governments and private companies has resulted in a robust modern infrastructure availing a myriad of solutions for companies wanting to export to GCC countries. In country infrastructural investments, such as Dubai Flower Centre is an example of an infrastructural investment by government wherein multiple tenants benefit from the cold storage facilities that allows for an unbroken cold chain. There are also a large number of logistics companies with facilities and infrastructure to assist companies wanting to enter this market. Government bodies responsible for food security can ensure the standardisation, reinforcement and communication of rules and regulations to ensure better understanding and compliance which will eliminate many problems faced by companies in this region. We hope our review of the food sector in the region will help you identify some interesting opportunities.
Country
focus FRANCE
FRANCE
BILATERAL TRADE
Industry watch
Interview
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country focus INVEST IN FRANCE AGENCY
Courting suitors Created in 2001, the Invest in France Agency (IFA) is responsible for promoting, prospecting and facilitating international investment in France, and for the economic attractiveness and image of the country. Aparna Shivpuri Arya spoke to David Appia, Chairman of Invest In France Agency, to get his expert opinion on the attractiveness of France as an investment destination.
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avid started the discussion by highlighting two important issues – simplification and stabilisation of the legal and regulatory environment. “Simplification has always been an important objective. Making it easier for companies to operate and do business in France is the motto, so much remains to be done,” was David’s honest opinion. First the notion of stabilising the environment – that is important, particularly, 34
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in the tax field. It is often said by international and French companies that the environment and regulation is too heavy and complex. The tax code is really huge and thick and streamlining the whole thing is important. But more than simplification, stabilisation is important because in France they like new measures and keep changing the laws. “So the government for the first time committed itself not to change a number of tax regimes and they chose five important tax schemes and
procedures benefitting the companies and announced publicly that these five tax regimes will not be modified during the government’s five year tenure. That’s really very impressive – quite an innovation here. It’s a tricky issue because the parliament is likely to change the law but the parliament is supporting the government and the government announced that these five things will not be changed. So it’s fair to assume that there will be no change, and that the government and the
parliament are working together. So that’s an interesting point, introducing more stability in the business environment,” opined David. This is a part of the national pact for growth, competitiveness and employment. Number one measure remains in his view the tax credit to reduce the cost of labour and, as important, probably the stabilisation and simplification of the business environment. Last September, the government convened a large conference on the issue of the way the labour market is organised and the labour laws in general. All stakeholders were invited and joined the conference, and it was decided to ask the representatives of the business community, the professional trade union, and the trade unions representing the employees to discuss together. They were asked to enter into a negotiation to improve the state of play and the existing rules and laws governing the labour market; with two primary objectives – introducing more flexibility into the whole system to make it easier for companies to adjust when confronted with difficult economic environment , more flexibility and for the benefit of workers and employees to introduce more security in the work market or work place. By doing this, David said that companies will gain flexibility and employees will gain more security, in terms of training, in terms of the possibility to go from one company to another without losing anything in terms of rights and experience. So last September the negotiations started , the government gave the roadmap or four different points that had to be covered and this was accepted as a starting point or basis of negotiations by all participants and they were left on their own – they negotiated on their own. They started in October, and the negotiation had to be brought to an end by January 11th that was the decision of the government. They were informed by the government that in the event that they were not able to reach a decision by January 11th, the government would take it as their responsibility and introduce a bill into the parliament. Everyone expected success, and they managed to come to an agreement on January the 11th. “And I am very confident that the new
law will respect this very carefully drafted balance and that the French labour laws will be amended and improved as decided upon by the stakeholders. This is to be achieved by next probably April or May. And this is something very important because as you must have heard, that France was considered as a country where the labour market was too rigid,” pointed David. “I should add one word, as an agency we are very actively involved in attracting foreign companies, one more important step taken in January, was that the government adopted a communication strategy to improve the attractiveness of the country. It was first reiterated by the government that France is keen to welcome new companies, foreign companies, is an open country and wants to remain open to foreign investment. That’s the first element in the strategy and it has to be reiterated in every occasion. Second it’s a matter of interest to all members of the
David Appia, Chairman of Invest In France Agency
Since all European countries are working hard on being more attractive to investors, we asked David, for a GCC potential investor, what will be the advantages of investing in France? David, who was
We have the most supportive research tax credit in Europe- it’s a 30 % rebate in all expenditures in R&D. It’s absolutely unparalleled and it benefits almost 2000 companies in France,” was David’s answer.
government because the attractiveness of a country relies on a large range of elements – education, transportation, tax regime and more,” David highlighted. According to the David, the third initiative by the Government is to ask all stake holders and owners to join their forces and unite and work together to improve the conditions offered by France. That is the third element in the environment which is of great value to them. And they are currently in the process of computing all results for 2012 and they work together with the regions in France. “We get in touch with the head quarters of the companies, we verify and check whether their decision is solid and whether the investment will take place soon and then we compute and include in the new report and we will very soon,” David proudly stated.
quite amused with our question, said, that recently the Government decided to launch an internal work and it asked a group of five personalities to work on the idea or notion of a national brand mark / brand name “mark de France” and it was felt necessary to look at that in more detail because we have definitely sort of an image abroad which may vary from one country to another for sure but of course the name France means something to everyone, positive or less positive, related to history, to culture to gastronomy and so forth. And it was asked to these experts to try and find some sort of a brand which might encapsulate all positive elements of the image of France abroad. “I’m starting with this to let you know that we are currently engaged in this MARCH 2013
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country focus INVEST IN FRANCE AGENCY
Change in the number of job-creating foreign investment projects in France (2000-2011)
discussion and this report is to be translated next may ( 1st of May) so I’m not sure what the results are but they are working on that,” remarked David. “We have excellent infrastructure, roads and IT infrastructure, but is it really what makes France different? Well let’s say it’s clearly an asset. It’s a positive element in the whole picture. Then we do have a central location in Europe at the heart of the European market. If I go to the Website of my sister agencies in Europe, most of them argue that their countries are in the heart of the European market, but it’s true that as far as France is concerned we are at the heart of the market. Geographically we are in the centre of Europe, is it what makes France different? That’s debatable. What makes it different that as a country we can offer a lot of elements to make it interesting for a foreign investor? In other words the attractiveness is quite coherent and large and substantial. We can offer a lot – good location, infrastructure, good people, high level of technology, very creative workforce, an excellent environment in terms of R&D and 36
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universities. We have the most supportive research tax credit in Europe- it’s a 30 % rebate in all expenditures in R&D. It’s absolutely unparalleled and it benefits almost 2000 companies in France,” was David’s answer. France also has 71 technological clusters in the country a sort of open eco-systems, in which public and private companies, universities work together and support and develop collaborative. Moving along, David said that in the last two or three years they have been in contact with an increasing number of foreign companies, especially from Asia, which are keen on reaching the Gulf and Africa and they take France as a base. It relates to the historical link that France shares with African countries. He also brought to fore a very interesting aspect- that of demography. He said that the demography of a country tells you about the economy of tomorrow and France is well positioned as far as demography is concerned. Companies do include demographics in their benchmarks. He also added that more and more
companies tell them that they value the position of the country in terms of carbon footprints. “It is not only the companies, but also the country which is involved. Without trust and confidence, no money will come in since money is put in for longterm and unless there is confidence that won’t happen. That is why we would like to reaffirm that we want foreign investment and we’ll work towards making your life easier. We are eager to welcome you,” remarked David. We then moved on to our last point – the EU-GCC FTA. Talks have been going on a long time and we wanted to know whether there will an impact of that agreement on trade and investment? David was quite sure when he said, “Yes, certainly so, though it’s difficult to calculate right now since these sort of agreements promote trade and investment by offering mutual concessions. It will definitely offer a more favourable environment.” It was impressive to know the work that IFA is doing to promote France as “the” investment destination. And there is no denying that it has done a good job!
Supporting your investments We also spoke to Salim Saifi, who handles the Middle East operations of IFA to get some more details. How long has IFA been in the Middle-East?
What regions of France are the easiest to do business in?
While we have formally been on the ground for about five years now, the long standing relationship that France and the GCC have enjoyed has existed for decades. We are privileged to continue this relationship. Our role is to enable local entities that are ready to reach out to the global market to create a European hub and truly become international.
Most generally people are looking at the Paris region. It’s the main economic region of France, above all, companies setting up in the area gain access to vast local, national and European market opportunities, with 495 million consumers. Other dynamic French regions are attracting GCC investors such as Rhone-Alpes (Lyon) and Provence Alpes Cotes d’Azur (Nice and Marseille).
For GCC based companies, I would say the agri-food business has plenty of possibilities. Foreign companies are already highly active in this sector in France, where they account for almost 30% of agri-food output. The turnover of the Halal market is increasing by 10% yearly; the vitality of the market can be explained by demographic factors. There is a very large population of Muslims in France who adhere to the Halal code of practice and therefore constitute a huge pool of potential consumers. In 2010, around Euro 4.5 billion were spent on Halal food products for home consumption, and Euro 1 billion were spent in restaurants. French hotel sector has high potential to welcome GCC investors, the country is a one of the most preferred destination for GCC: we are welcoming approximately 1 million GCC tourists in France. Finally, there is also strong interest from GCC companies to set up their European office in France to use the country as a gateway to Europe and as a bridge to Africa.
We work with businesses that have the potential for expansion globally and interest in European markets. In addition, we work with businesses of different sizes that range from SME’s (Small Medium Enterprises) to SWF’s (Sovereign Wealth Funds). As a government agency, all communications with us are strictly confidential and any assistance we provide is complimentary.
What are the best investment opportunities for GCC investors in France?
Who are your key clients in the region? Can you describe some of the work that you do for them?
also informed them on new policies and incentive plans. Today, there are more than 90 companies from GCC doing business in France, employing 3000 employees.
Can you give examples of the work you have done? Can you describe how this work was transformative for your client?
What metrics do you apply for success?
IFA has played an integral role in helping bridge the two regions. For instance, we have assisted companies in several business sectors (ICT, media, energy, retail, hospitality, food) with office openings in different french region. We helped them get in touch with key local authorities that provided them access to a productive and talented workforce. We resolved all types of business queries and put them in touch with subject matter experts. We
Anytime that we are able to create a relationship where we can help local companies meet their international business needs we have succeeded. France is full of different opportunities for investment across various sectors and we make sure that we engage with companies to ensure that they are leveraging the right opportunities and to their fullest potential. Generally, anytime jobs are created we have succeeded. MARCH 2013
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country focus TOTAL
What lies deep within
Total, the fifth largest publicly-traded integrated international oil and gas company in the world, has shared historic ties with the Middle East and is very bullish on what the future holds for the oil and gas sector. Aparna Shivpuri Arya met Arnaud Breuillac, President Middle East, Exploration and Production Division, in their Paris headquarters to get all the interesting details. Mr Breuillac, can you give us a brief overview of Total’s upstream operations in the Middle East?
Total started its activities in Iraq in 1924 when as part of World War I compensation, France got a share of the Iraq Petroleum Company (IPC) alongside the British and the Americans. In Iraq, the first discovery was Kirkuk in 1927. We then came to Qatar in 38
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1936, Oman in 1937, Abu Dhabi in 1939, and we celebrated last year 25 years of presence in Yemen. Today about a quarter of Total’s worldwide oil & gas production comes from the Middle East – 570,000 barrels per day (b/d) in 2011 - and it is a key region to us both as operator and as partner, one of the pillars of the company.
In Abu Dhabi, our production comes mainly from the onshore concession of Abu Dhabi Onshore Company (ADCO) and from the offshore concession of ADMA-OPCO, plus the Total operated Abu Al Bukhoosh offshore field. In Qatar, through our participation in Qatargas I and II, we have a share of the liquefied natural gas (LNG) business there,
and we are also operator of the Al-Khalij field, which is an offshore oil field. It is worth mentioning that the Al Khalij licence has been extended mid-November for 25 additional years with Total, operator retaining 40% interest alongside Qatar Petroleum. Total is also involved in oil and gas production In Yemen. Our main asset is our 40% interest in the Yemen LNG company, and we are also the operator of Block 10 located in Hadramaout region, which produced upto 86,000 b/d in 2011 – about a third of Yemen’s total oil production. We are the only major working in Yemen and we are very proud of our contribution to the country’s economy. In the Upstream segment, we are also present as a partner in Oman, though Petroleum Development Oman, Oman LNG, and the Mukhaizaina block, but we are not operator.
How about Total’s more recent developments in Iraq?
In Iraq, we are a partner with an 18.75 % interest in the Halfaya field development operated by the Chinese national company CNPC. Production on that field started in June 2012 and we completed Phase 1 of the development, reaching First Commercial Production in September 2012 after 90 days above the contractual production level of 70,000 b/d, thus prompting the beginning of the pay back of the investment. We are now producing around 100,000 barrels of oil per day on Halfaya and the field’s full development is set to reach 535,000 b/d. This project is going on quite well, in spite of a challenging context in Iraq. Regarding Iraq, at first we felt a bit frustrated when we got a relatively modest share of the Iraqi reconstruction activity following the first bidding rounds for the development of fields in the South. But we rapidly saw that contractual conditions were not enough rewarding, especially for exploration in the fourth bidding round, which we did not participate into. The Northern part of Iraq also has significant potential for exploration, and we decided to go for it last summer, acquiring participations in 3 exploration blocks. We hope that we will make discoveries in the coming year and we don’t want to get involved in the political debate. All we wish
to do is contribute to the development of the Iraqi oil & gas industry in the south and in the north.
Total has been having a historical relationship to the Emirate Abu Dhabi which is getting ready to renegotiate the ADCO onshore concession. Where does Total stand today?
The future of the ADCO concession is a subject entirely managed by the Abu Dhabi national company, ADNOC, and the Supreme Petroleum Council. There are a lot of rumors flying around about this, they have made some statements about where they are in the process, and the fact is we do not know yet. This being said, Total has been a partner in ADCO for decades and has contributed to the successful development of the onshore fields of Abu Dhabi. Today, we feel that we still have a lot to contribute to our national partner’s objectives for onshore fields both in terms of technology and human and financial capabilities and we hope to be part of the future of ADCO in a mutually beneficial scheme that will lay the foundation for our relationship in the coming decades.
What is the extent of your presence in Qatar?
Another country where Total is very active in the Middle east is Qatar where we are present all along the Oil & Gas chain from exploration down to LNG production, refining and petrochemicals. We are much willing to further develop our activities in Qatar. Our Qatar success story is definitely the
development of the North Field with the LNG giant Qatargas. Qatar has reached 77 million tonne of LNG per year production level in 2010. In their view to develop their hydrocarbon resources in a sustainable manner, the Qatari authorities have decided on a moratorium on this field but we are expecting sooner or later this moratorium may end and allow for additional developments. In the mean time we are working on an exploration block which is operated by CNOOC of China, Block BC and activities are starting on that block this year. We believe the exploration potential in Qatar is still interesting enough. As mentioned earlier, we have also entered into a new 25 years agreement for the Al Khalij oil field on which we have been the operator since the early nineties. As from January 2014, Qatar Petroleum will hold 60% and we’ll keep 40% retaining operatorship of this challenging field.
What is Total’s plan regarding Yemen in the light of the current security situation in the country?
Yemen is a very important country for Total. We have been present in Yemen for more than 25 years now and we are clearly the only major oil company operating in Yemen today. In 2009, we have started the largest foreign investment ever made in the country, the Yemen LNG plant, with a 40% share. We’re also producing oil from Block 10 which amounts to about a third of the National oil production. We pay a lot of attention to our operations in Yemen and we ensure that security is maintained so that we can continue to operate. The GCC roadmap for the country is ongoing but it’ll take time and Yemen needs support from the international community. We contribute to the country’s economy by maintaining our activities there
In the light of the current political situation, do you see further upstream investment opportunities for Total in the Middle East?
Middle East is clearly a region which has a huge oil & gas potential, probably more than what we know today because until now, non-conventional resources have been MARCH 2013
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under-explored. A lot of wells have been drilled in the region to produce conventional oil & gas reserves but in a way, less effort has been put into exploration. So we believe that the potential in the region is not yet fully identified. We can still see very successful exploration drilling in the Middle East. In the past years, seismic technologies have made tremendous progress and this is partly due to the computing technologies. Another thing is the progress achieved in drilling capabilities which is giving us the possibility to reach very narrow targets in the reservoirs.
How do you assess the impact of the “shale gas revolution” in the US and the fact that some people are saying that the lesser dependency of the US on the Middle East will change the region’s weight on the international oil & gas market? When you look at it from a global perspective, the competitive advantage that the US is getting from the cheap gas is not without consequences to their economy. But we believe that from a geopolitical standpoint
number of LNG export projects that will get approval in the US and how much that will affect the US supply-demand balance and how much would that effect the world market. Oil is a global market and there is one price, for LNG it is different- there are different markets. Unless you come to a situation where you have enough LNG plants so that a significant share of the worldwide production can be arbitrated between the European, US and Asian market, you’ll find that the price might co-relate. But as long as there is a physical constraint, and not enough infrastructure, you will always get a gap that will be dependent on how much gas can be produced locally and how much can be imported. In the Middle East, Qatar and its LNG flagship Qatargas are very well located to arbitrate between the western and eastern market, which is very good for them.
Do you see a great potential for the development of alternative energies in the region?
I am very optimistic about the work being done in the field of new energies, especially
77 million Tonne
per year production- Qatar’s north oil field of the world, the supply and demand is such, and especially the market is so liquid for oil, that what happens in the Middle East will still be relevant to the global balance. Emerging economies like China or India need oil and this region owns the vast majority of the resources. It is therefore important for the industry and therefore important for Total.
Are the LNG prices factoring in the US “shale gas boom” situation? The big uncertainty in that respect is the 40
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in the UAE which are very keen on developing these. Total as an energy company, believes that new energies are absolutely necessary in the future and will complement fossile energies in the energy mix. We have moved away from the time when oil companies were hostile to anything except oil. Today, oil producing countries and most international oil & gas companies believe that we need new energies. At Total, we are working in two different areas. The first one is solar which has a highly
competitive advantage in the region and is a strong business development line for us. In Abu Dhabi, the Shams project, one of the largest concentrated power plants in the world developed by Total with Masdar and Abengoa will be inaugurated in the next few weeks. Through our affiliate Sunpower – a world leader in solar Photovoltaic – we are also looking into the new projects that countries in the region are looking forward to develop. Saudi Arabia for instance has made clear that it would like to increase its Photovoltaic electricity generation capacity and we expecting announcements at the end of this year. In fact, Middle Eastern countries are using a lot of energy such as diesel oil to generate electricity to feed their industry. These are petroleum products that do not generate export revenue, so for them to invest in solar energy is a very good business, as it is free and abundant once you have built efficient installations. The second aspect in which Total is involved in alternative energies is bio fuels. We believe that these will complement the liquid fuel market in the future and we are investing in this field. We are looking into developing a credible and profitable activity for renewable energy.
How do you see the relationship between International Oil companies like Total and Middle Eastern National Oil Companies?
Today, IOCs and NOCs are more and more working in partnership. Through times, the relationships between the two have gone through successive phases: a somewhat conflicting relationship at the time of nationalisation, then IOCs worked for NOCs, more as service providers and now we work together as partners. In addition, we have an international exposure, which is valuable for these national companies. This model is excellent as it allows combining our strengths including technical, human and knowledge capabilities, in addition to the profitable combination of the skills of the two. The line of business for us in the region is to see where we can contribute more, mutually and profitably with NOCs.
country focus GRAND PARIS
Be on the right track
“Greater Paris”, is a topic that has been going on for over a century in France. The first greater Paris project started in 1920. As part of a press trip to Paris, Aparna Shivpuri Arya caught up with Alexandre Missoffe, Director of the Cabinet, Société du Grand Paris to get a better understanding of the project.
I
n 2007, just a few weeks after his election, Nicolas Sarkozy announced his intentions to have a project for the “Greater Paris” as Paris represents 1/3 of the national GDP. He started a special department in the Government “secretariat d’état” for the development of the Paris region. Christian Blanc was in charge of it with a special focus on the economic impact of the “Greater Paris”. Continuing on that Alexandre said, “The new president Francois Hollande made a public statement and said that
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the project is very important and must go forward, and in our board in Societé de Grand Paris we have got represented from the state and every department in the Paris region, and they all vote for the global skills of the “Greater Paris”. This project actually started with Sarkozy, but it is now shared with everyone else and has political support.” Paris has been constructed around fences to protect against invasion and is denser than other global cities in the world. It has two million habitants inside a very small
area with a great transportation system but outside of Paris, the transport system is less efficient with very few public types of equipment. Compared to London and New York, Paris is much smaller. The Greater Paris territory has: • 12 million inhabitants • 600,000 fellow students (the biggest student metropolis in Europe). • 553 billion Euros GDP (Number 1 economic region in Europe) • 1/3 of the French GDP • 90,000 people working in the research. The goal of “Greater Paris” project is to end this cut between Paris and the suburbs, and organise one unified metropolitan district, and to connect the greater Paris to major transport infrastructure. “We are now in a situation (transport) that carries over one million two thousand people per day, that is an absurd situation, people spend on an average an hour in the transport which is a productivity loss for the economy,” stated Alexandre. The “Greater Paris” project started by identifying the project territories, sort of clusters all around Paris, some of them are already powerful like Paris Saclay on the south west which is already one of the densest research territory in France. On being asked if there is an economic rationale for identifying these clusters, Alexandre said, “We have got to give international visibility to this territory to attract new businesses and companies in these areas. Our aim is also to try and organise clusters where people match and researchers can meet scientific and university private investors to try to organise, like all the areas behind the Stanford they came to Silicon Valley because they planned to manage an ecosystem of innovation.” Alexandre had mentioned earlier that Paris contributes 1/3 French GDP, which got us wondering if the projects will increase this percentage? He gave an example to explain that it’ll increase, “Hitachi wanted a European plant either in London or Amsterdam, then they
heard about the Greater Paris, so they found it interesting. We are competing with the other big cities; it is Paris, New York, London and a few more.” “ We h a d a l a w i n 2 0 1 0 , w h i c h created Société du Grand Paris (a public establishment). we started the big public debate with the population in September 2010, and the region had a big debate with the national government. the region said that the transport is a local liability so we had two projects (more less the same project). We came to the population that had been expecting investment in transport for the last 40 years. The project region was called Arc express, the state project was called Grand Paris, and the two
time 4% interest was paid and everyone was happy with the placing of their savings with the Paris authority to put the investment in a long period of time. Alexandre further added that when the metro starts to work, commercial revenues will come through because they rent commercial spaces in the station and there is a usage fee for the operator that will use the lines. Also, they can construct and do real estate project around the station and make money out of it. The balance is to calculate the debts, so that annual revenues will be in a period of 3540 years. He then highlighted the importance of the Grand Paris project by stating that,
€533 billion GDP of Greater Paris territory
projects merged and are now called Grand Paris Express,” Aleaxandre explained. Going back to the reason for coming up with this project, Alexandre sais that housing is a major issue in the Paris region. While there is no dearth of space, but no one will build there since there is no connectivity. Therefore, if you put together all the hectares together within a rail of 800 meters, you have got 4000 hectares that could change to a small state in the coming years. The idea is to create new attractions for the area around the stations and we move every strategic planning department to empower the population there. That is on the way to answer the housing situation The Paris metro was built very quickly, Paris townhall issued a bond that was paid in 1973, seventy years later. During all that
today it take an hour 26 minutes to go from Issy to another city using 4 different transport system, but tomorrow it will take 27 minutes. For the general economy of the project that is something quite important. “It will also help create jobs in areas which now are not that well connected. As of now, we have an absurd situation, people are looking for jobs, and jobs are looking for employees but we have nobody that matches. The project aims to create a large labor market and give access to hundreds of new jobs for new the population,” remarked Alexandre. The stations of Greater Paris will be real stations like Gare du Nord, Saint Lazare with shops, equipments, and offices and with housing projects above the station, because it has to have a strong identity of the new urban center of this territory. That MARCH 2013
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country focus GRAND PARIS
is also a way for Société du GRAND Paris to finance the public investment in that urban transport. The idea of a metropolis organised around 8-9 big clusters around is unusual. Moscow is working in that kind of direction but the Greater Paris has inspired them, and we have a contract with Moscow authority to sell them our experience in this kind of projects. Moving forth, Alexandre said that there are many projects around the Greater Paris that are linked with the construction of the transport network. “We have investment in international trade center, many projects, new exposition park, one hundred thousand jobs created as a consequence of the Greater Paris project.” The Greater Paris project is not so much about making an impact but as a way to amplify the movement that already exists. That is the global renovation project around the Greater Paris network. The construction of the metro helps the construction of new housing project. The project is 100% state owned. Ta l k i n g a b o u t t h e o r g a n i s a t i o n a l structure, Alexandre said that for each and every of their stations they have steering committees, and once they decide to put the station they meet commercial activity they are going to do and so forth. He proudly pointed out that their project will be bigger and faster than the existing metro, with one metro passing every 90s. He further added, “We have 45 thousand passengers coming from the two airports and using our lines every day. There is a project that will allow passengers to travel straight from the airport to Gare du Nord. We have got special ability, which is new in the French landscape of institutions. One main mission is to construct a new metro line and another one is to assist the representative of the state in the strategic development of the region to make sure that the transport network, the strategic vision of the economic activity and the housing projects are all linked together.” When we asked him about the timeline, he said that even though they have a 44
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Alexandre Missoffe, Director of the Cabinet, Société du Grand Paris
caldendar, the government is debating on making a new calendar. The original plan was to have the first opening in 2018 and the complete opening of the network in 2025. However, according to Alexandre this is going to change – first opening could be around 2018, but the total realisation of the network might be late due to some other projects that might come in the first phase. The decision should be declared in few weeks. “Every transport line went far beyond the initial expectation in traffic, for example when line A was established i n t h e 1 9 6 0 s , t h ey s a i d t h a t i t w i l l provide transportation for 400 thousand passengers a day by 2020 maximum. The day of its opening it was handling 130% over the maximum capacity. So we want to maintain the capacity because once the line is open we can’t change it anymore, we are building the network for the next 100 years,” is Alexnadre’s rationale. When we asked him about the challenges they faced and the best practices, he replied, “We have developed our own software for security in the stations that allows us to enter a great number of parameters and from that you can deduct an efficient way for the architects to construct the station in
order to reduce the unsecured parameters, the quality of lights and things that change from a station to another because the stations are in different environments. But I don’t think that is something that could be exported. We also have an innovation done by the Greater Paris Company for this project which is to manage CO2 emissions. The carbon emissions linked to the construction of the projects can be calculated by entering data and information about the status of the ground (sand, stone, depth, the kind of materials you are going to use and more.) This gives you the carbon emissions compared to the different methods of constructions and it gives you the idea of which methods is going to have the less carbon impact, for engineers that is something quite interesting.” “The financial engineering is very specific to every city, but perhaps the commercial studies we have worked on – which kind of commercial activity will be needed in the station , what are the people’s expectations, what do they want from the stations. We did a lot of studies, trying to figure what people would like to have in the future. This kind of work is common in every country of the world; this could be a source of sharing and inspiration,” Alexandre pointed out. Ta l k i n g a b o u t t h e j o b - c re a t i o n i n the long term, Alexandre said that the construction of the network will need more or less 15,000 people a year for 10 years. The positive impact of being a modern metropolis goes from 100,000 to 600,000 in revenue. They are already seeing an increase in investment due to anticipation but for the moment this is not important because the station will open in 2018. So 3 – 4 years before the opening, big investments will be coming. On this note, Alexandre finished his very detailed presentation which highlighted the work being done by France to attract investment. This also serves as a best practice model for a lot of countries in the Middle East.
country focus FRANCE
Make the right investment CDC Enterprises was set up to develop and support SMEs and industrial services, based on a stable and long term strategy. Aparna Shivpuri Arya met Philippe Braidy, President, CDC Entreprises, to get to know the details about their work and mission.
P
hilippe started the conversation by giving us a brief overview of the plans of the organisation. “We are building a new bank – Public Investment Bank. It is a merger between FSI (Strategic Fund for Investment) and OSEO which is a bank that provides loans for SMEs. It is a new organisation that has been discussed between shareholders, but that’s not definite yet.” “For all investments in the Middle East region CDC is a direct partner. Our company is a management company which has no assets; we invest in banks, insurance companies, industry and more. We are a small society, now we have around 200 people –130 employees in France and others in our two subsidiaries,” Philippe added. Going back to the roots, Philippe said, “Historically, we started investing in France and not directly in SMEs. Progressively, we have started investing in companies, especially during the crisis in 2008. When FSI was created a lot of money was transferred to us in order to invest in SMEs, but directly.” He further added, “We experienced good growth. When I arrived two years ago we had only 70 employees and now we have 130, which mean that we have approximately doubled the number of employees who should support investments in SMEs. SMEs now need investment in equity.” Continuing on that note he said that their job is to invest in equity and in SMEs. FSI also invests in big companies. They also invest in SMEs in the region and in innovation (early stage investment in companies which have new processes and which are startups). When we asked about their modus operandi, Philippe remarked, “We do not invest directly in R&D
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– we are not financing research, but we are investing in startups. For example, we are a limited investor partner in INOBIO– 37% stake in this fund which is in the field of biotechnology. Biotechnology is a key area, and there are no short-term results, but we are very much interested in these new products/innovation. We don’t invest directly in labs, but we have been very successful.” CDC doesn’t look for funds directly, but through partnerships with major businesses – they look directly for other investors. Philippe is presiding over a special committee for infrastructure. So, CDC talks to sovereign funds to adopt global strategy approach. If that fund has some investments in SMEs, they contact them in that case. So which sectors are identified for long-term investment and what is the period for long-term investment? To this, Philippe went back into history and said that the aim in the 90s was to invest in funds and the idea was to help startups to structure offers. It was like a Silicon Valley approach. “We are partners in 250 funds – 1/3 in innovation/ early stage companies; 1/3 for capital development growth; and 1/3 are sectorial investments, like INOBIO in biotechnology. Recently, we have invested in AEROFLON which is in the field of aeronautics. We also have funds for investment in the food sector, environmental technology, and so on. So, we have some funds and some teams which are specialised,” remarked Philippe. Therefore, they have industry focused funds and general funds and venture funds. They don’t invest directly in ventures – for that they have partners/ groups which manage ventures for them.
“We invest about EUR 400 million per year and our ambition is to increase it to 600. We have a programme approved by the government for the following eight years – EUR 5 billion. That is public money which is coming from FSI and the government. The government calls it “big loan”, because the French government in 2012 has decided to launch a EUR 3 billion loan for investments in the future. We have been allowed a part of this money, EUR 1 billion, for investing in SMEs,” he replied when we asked for more details about the investments. “We are working with private investors, we try to invest more money together – our
infrastructure/ in major companies and not necessarily SMEs,” he added. Philippe also said that it depends on the outcomes the businesses are looking for. They may be looking for companies which would serve as entrance points for different projects, maybe for partnerships in various technological areas. So, it goes on case by case basis. Their role is that of a management company, so if you have an SME with projects they could be involved in management of funds. Soon they will have a merger with FSI and OSEO. Because of this merger, they will have the entire range – from loans to investors’ equity –
€400 million investment per annum by CDC leverage is that we invest EUR 1 and collect EUR 3 from the private sector. The aim of our group is to mix public and private investment in order to have massive impact on the economy.
Where are the investors from? Philippe said that it is very difficult to say because part of this money is coming from banks and insurance companies which collect money themselves from various investors. He also was unable to comment on how much investment in coming from the Gulf region. He however did say that they are working with the Gulf countries because they are interested in investing with them. “We are also working with China. Recently, we have created a fund with China (50%-50%). It’s a fund which tries to invest in boats in China and France. We are trying to make a win-win strategy to help French companies to invest/develop in China and vice versa, Philippe remarked. “We are also working to create a partnership in Qatar. It’s not totally discussed yet. There are also discussions under way with other countries of the Gulf region and also in South America (for example, in Brazil). Our initiatives depend on the aims and ambitions of their partners – so, it varies. For example, we have different sectors and funds; we invest in
they will cover the whole scope. This merger will have 800 staff which will cover the whole French region since they know very well the French companies and businesses. That is very important because they are knowledgeable and can add value to the projects. We asked him about how difficult is to think long-term in the current environment. To this he said, it is a little difficult since they work with banks and insurance companies they have constraints, they need to manage risk and be cautious. The EU has funds for ten years – five years investment period, and the following five years for divestment. That’s because the financial partners want to get added value. Philippe also pointed out that it is very important to follow up, because if you have the partner who wants to divest then new investors can come in and provide new momentum. It’s hard to have long term vision with the funds, but because they have this global approach they can support businesses. There are different factors, like capital risk. “We try to be sure that the funds we work with have enough money to invest long term. We also invest directly and then we don’t have the same approach, because we try to stay as long as the company needs. Once the company has developed/reached the size which was
Philippe Braidy, President, CDC Entreprises
aimed, then we exit. That’s why we have a range of tools which enables them to help these businesses not only with investments but with other services as well.” When we asked him if other countries can follow this model, Philippe was quick to point out that it’s very similar to American SBA because they feed into these funds and the private companies actually manage these funds. There are similar structures in other European countries, but in France the size is much bigger. Another difference is that in France their staff is placed throughout the country. Because they are investing in businesses similar to private investors, they can choose the sectors in which they want to invest and that is a guarantee that they will invest in businesses which have potential for growth. They compel themselves to be minority shareholders/in the funds as well. That’s why they are obliged to look for private partners. It’s done by CDC for sovereign funds. Because of the context – economic crisis – their regulators are becoming stricter, like Basel III. This also creates an opportunity to look for foreign investors. This is a whole new area for them, because if you want to attract foreign investments you have to invest in foreign countries as well. With this we came to the end of our interesting chat. CDC is an extremely important component of France’s endeavour to encourage business and investment and offers foreign businesses an interesting opportunity. MARCH 2013
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country focus VINCI
Taking technology to the next level! As part of the press trip, we caught up with Alain Bonnot, Chairman of Vinci Construction – Grand Project, to know about their operations in the Middle East.
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e started the discussion by asking Alain about the kind of work they are doing in the Middle East and what strategy do they have for the region. To this Alain said, “Vinci is a ten years old company but it comes from many old French companies that are originally more than 100 years old. All those companies were well known especially in the Middle East like: SGE, GTM, Chantier Moderne and more, and all these companies have been consolidated into one company - Vinci.” The reason for consolidating was that everybody thought, that 10 – 15 years ago they had many groups in France and the main reason was not the foreign market, but the internal market and it was necessary to combine these companies. In the construction sector, 48
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the external market has been the same. “We are the most important group in the world in terms of construction, two Chinese companies are bigger than us but they are state- home companies. We are the biggest private group in the world in terms of construction, but it doesn’t mean that we are very big and that we can take everything we want. In the past we have worked a lot in the Middle East especially in Saudi Arabia, Today, we think that Middle East is very important for us but we can’t go too fast. Five years ago, we had an opportunity so we decided to try to work in Qatar. About ten years ago we had made LNG tanks and one man from our company had and made good links with Qatar. His name is Serge Mollen and 5 years ago Serge signed a shareholders
agreement with the state Qatari, with Qatari Diar,” remarked Alain. And they decided together to launch a company QDVC. This company was made for the huge projects of Qatar. The sharing of the activities was very clear, VCGP had to operate and QD had to bring the projects. “We have got a lot of nice projects, the timing was good and we are finishing today some projects and we are continuing with some others. We have started in a special type of contract which is ECI- early contract involvement. in Qatar, we have started the LRT four light rail operation lines, the light rail tramway network transportation of Lusail. We have finished the studies, and the tunnels. We are finishing the stations and waiting for the contracts of own trail finishing. With Qatari Diar we are mainly the
country focus VINCI
Alain Bonnot, Chairman of Vinci Construction
only one in the power supply and it’s a very big side.” “Therefore it is possible to launch a company in very few years and with good success, I think we have very good relationships with Qatari Diar and the Qatar state,” opined Alain. With the FIFA World Cup, is there greater pressure to expedite projects?To this Alain said, “I don’t know any company in the world that is not under pressure. We are under pressure. I think that Qatar is a good client. We have a good relationship with Qatar and we hope to stay involved and progress our activities there. We hope to participate in the new project of Doha Metro which is very big and after that there are other projects especially one which is very interesting for us. Doha bay crossing, which is a big bridge to cross the bay of Doha. We have also made studies for the next bridge between Qatar and Bahrain (40 km). All our studies are done, we have made it with COEHE, but we have time to do this before 2022 and if it has to start one day we will be ready.” “We are preparing this company to succeed. Our last project is going to initiate what we haven’t done before - a flow business. We want Qatari people to progress in smaller contracts. I would say that perhaps today we focus on this market but we don’t want to be reduced to this market and are also interested in Oman. We have history in Oman have built a dam. 50
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We hope to keep going on with Oman with different contracts for dam constructions,” according to Alain. Highlighting Saudi Arabia, he said, “I want to speak about Saudi Arabia; we know that Saudi will be in the next years the most important market of the region. I was in Riyadh few days ago and we know that this market will increase a lot, but we don’t want to go too fast. There is a huge plant for the metro, we are in one consortium, but it is very big and if we were awarded we would take just a small part.” “We want to remain prudent in Saudi Arabia but our target is to develop a real presence in this country, because it is growing a lot. When we are in a new country, the most important thing is that we want to settle in it, to train, to live here, to hire native people, to create what we have created in many places in France – we want to become a company of the country. The governments of these countries, expect from us to transfer the “know how”, and the best way for transferring the “know how” is that they give us a contract and we commit to take native people and train them to participate to the universities and training programmes, and to be able to show that all the sides put this in act, “remarked Alain. When we asked him about their competitive advantage, Alain said, “Our technology is recognised all over the world, but when we work in a country we know the good way to hire workforce, the good way to buy iron, the good way to everything. Once you do all that, and put your design, you become very competitive. And this will hold true for other contracts in the future.” Talking about the cost of doing business in the Middle East, Alain was quick to point out that In Vinci, they don’t go to the Middle East or elsewhere to lose money, but to earn money, and if they can’t then they leave. “Our specialty is complex projects (big bridges, big tunnels, big parking) and our work is to simplify what is complex. We have to choose the world that we want to build, and that is the case in Qatar – it has been possible for us to do what we wanted with our shareholders. I think this is a reason of success, but every day is different and
we could fail tomorrow. We have to be very professional and we have to choose our targets with the respect of our people, staff, and our local people. First aim is safety, when you organise a site around the safety, you organise it well, and we don’t want to face failure in terms of safety,” were Alain words of wisdom. “Secondly it is also very important’ to respect the environment, the client, even if one is in the most difficult negotiations and discussions. At the end sustainable development is important. What we want is to settle in the country and remain in the country not because we go to the client but because the client comes to us. That is what we are trying to do, and sometimes it works,” Alain said. Talking about their modus operandi, Alain said that they go in for joint ventures sometimes. “A local company is completely invested in the country and the government will never kill a local company, but when we are in front of the government, it will not hesitate and when we are in default, we might be finished. However, the government will save the local company. That’s why, it is absolutely necessary in Qatar to work with great local companies and in the Middle East we work with all the great companies,” opined Alain. Lastly, talking about their strategy, Alain said that a good strategy is not to go to the client, but to let the client call them. “On the simple sites, there will be nothing we can do; we will always be more expensive than the Turkish / Chinese companies. But when it is complex, when designers draw something and we are able to draw something different less expensive, then we are very interested and we go for it.” What makes this market very special is that they have plenty of money. The issue is not the money, the issue is a good engineering and our strategy is to bring that in and then anything is possible. “We don’t want to go everywhere. We want to develop relations – like Qatar, Oman and KSA. Today we are not in Kuwait and UAE, but if there are opportunities, we will explore.” With a very clear focus and a niche, it is no surprise that Vinci leads the pack.
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