ISSUE 18 | JUNE 2013
BUSINESS INTELLIGENCE FOR INTERNATIONAL TRADE
www.tradeandexportme.com
Country focus
Extensive coverage on trade and investment with Malta
in an exclusive interview, Fahad Al Gergawi, CEO, Dubai FDI, talks about what makes dubai the ideal FDI destination
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EDITOR’S LETTER
Publisher Dominic De Sousa Chief Operating Officer Nadeem Hood Managing Director Richard Judd richard.judd@cpimediagroup.com +971 4 440 9126 EDITORIAL Senior Editor Aparna Shivpuri Arya aparna.arya@cpimediagroup.com +971 4 440 9133 Contributing Editors Tamara Pupic tamara.pupic@cpimediagroup.com +971 4 440 9130 Jenny Kassis jenny.kassis@cpimediagroup.com +971 4 440 9116 Business Assistant Adelle Louise Geronimo adelle.geronimo@cpimediagroup.com +971 4 440 9160 PRODUCTION AND DESIGN Production Manager James P Tharian james.tharian@cpimediagroup.com +971 4 440 9146 Database and Circulation Manager Rajeesh M rajeesh.nair@cpimediagroup.com +971 4 440 9147 Head of Design Fahed Sabbagh fahed.sabbagh@cpimediagroup.com +971 4 440 9107 Designer Froilan A. Cosgafa IV froilan.cosgafa@cpimediagroup.com +971 4 440 9107 Photographer Jay Colina Abdul Kader Pattambi DIGITAL SERVICES www.tradeandexportme.com Digital Services Manager Tristan Troy Maagma
The best laid plans… There is no denying that Dubai has been going from strength to strength when it comes to foreign direct investment (FDI) with 16.6% increase in 2012 amounting to AED 18.2 billion. To re-affirm that, we got the opportunity to speak to the driving force behind it – Fahad Al Gergawi, CEO of Dubai FDI, who gave us all the inside details about what makes Dubai the ideal FDI destination and the one-stop-shop for the region. Please don’t forget to read our cover story on page 22 to get all the juicy details. Somehow for me, after the interview Dubai FDI epitomizes the Robert Frost poem…” And miles to go before I sleep. … And miles to go before I sleep...” Well, we also have a lot of miles to cover! It was a busy month for us as we covered the Annual Investment Meeting, the Arabian Travel Market and the WCO Conference and Exhibition. It was interesting to hear the discussions on investment, trade, travel and tourism across these sessions and know the latest trends. Keeping with our aim of providing the trading community with the latest information, we bring to you the movements in the important currencies – the Dollar, the Euro and the Pound Sterling. Adding to this, we also interviewed Kamel Al Ghossaini, who is the regional manager of Span, which provides innovative solutions to the logistics sector. You must read this piece to find out solutions to your warehousing and storage issues. And don’t miss out on our interview with the Chairman and Managing Director of Milaha, the oldest registered company in Qatar (it actually carries Commercial Registration #1 in Qatar). For our country focus feature this month, we have put together an extensive set of features from Malta. Starting with the interview with the Prime Minister, Dr. Joseph Muscat, we got the opportunity to speak to the Minister of Economy, the Minister of Foreign Affairs and the Minister of Tourism. And what Malta has to offer to foreign investors and tourists alike, came as a pleasant surprise to us. We highly recommend checking out Malta – whether for business or for pleasure. As always, we hope you’ll enjoy the read. Please do let us know your thoughts through Facebook, Twitter or our website. Till next month…
Web Developer Abey Mascreen online@cpimediagroup.com +971 4 440 9100 Published by
Aparna Shivpuri Arya, Senior Editor, Trade and Export Middle East Registered at IMPZ PO Box 13700, Dubai, UAE Tel: +971 4 440 9100 Fax: +971 4 447 2409 Printed by Printwell Printing Press © Copyright 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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trade talk
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updates
ISSUE 18
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News: International and regional news which can impact your trade.
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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 April.
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EXPERT OPINION: In her column, Khatija Haque, Senior Economist, Emirates NBD, talks about issues that can impact trade.
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TECHNOLOGY: Aparna Shivpuri Arya caught up with Kamel El-Ghossaini, Regional Manager of SPAN to get a better understanding about the important role that technology plays in logistics.
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INTERVIEW: In an exclusive interview, Fahad Al Gergawi, CEO, Dubai FDI, spoke to Aparna Shivpuri Arya about why Dubai is the ideal destination for foreign investors.
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LOGISTICS: For over half a century, Milaha has been building on its strong regional foothold in transportation and logistics. Aparna Shivpuri Arya spoke to H.E Sheikh Ali bin Jassim Al Thani, Chairman & Managing Director, Milaha to know more about this industry leader.
CONTENTS
trade talk
INTERNATIONAL TRADE ISSUES
focus
EXPORT: Why is that some companies excel and grow very fast and become large corporations, while others stagnate and sometimes even fail? Dr. Ashraf Mahate, Head, Market Intelligence, DED, gives us the reasons.
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CURRENCIES: Western Union Business Solution Team gives us the update about how the major currencies have been performing, to help us trade better.
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LEGAL: Joycia Young, Partner, Intellectual Property and Kellie Blyth, Associate, Commercial, TMT, Clyde & Co, talk about procurement of an ‘IT Solution’, which could be software, hardware or a combination of the two.
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COUNTRY FOCUS: MALta INTERVIEW: As part of a press trip, Aparna Shivpuri Arya got the opportunity to speak to Dr. Joseph Muscat, Prime Minister of Malta about his vision for the country.
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FOREIGN AFFAIRS: The Ministry of Foreign Affairs serves a window to the world that Malta has to offer. We caught up with Mr. George Vella to get a better grasp on Malta’s political relationship with the GCC countries.
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MALTA ENTERPRISE: Malta Enterprise (ME) is the national development agency responsible for promoting and facilitating international investment in the Maltese Islands. We bring you the details about their services.
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ECONOMIC ISSUES: Dr. Christian Cardona, Minister of Economy, Investment and Small Businesses, Malta, spoke to us about the advantages Malta has as an economy, which make it an ideal location for investment.
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FINANCE MALTA: Finance Malta was set up in 2007 as a public- private partnership to promote Malta’s International Financial Centre. We highlight the details of the banking sector of Malta and what options are available to investors.
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TOURISM: Aparna Shivpuri Arya got the opportunity to speak to The Minister of Tourism, Karmenu Vella, and got to know so much more than what meets the eye.
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INVESTMENT: SmartCity Malta is the brainchild of a joint venture between Malta and SmartCity. We visited the facility to get a first-hand experience of this amazing collaboration.
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Updates global watch
What’s going on with the developed nations? Emerging markets have become the engines of global growth as their global influence increases, leaving developed markets in their shade, according to HSBC Global Asset Management. In its latest IQ (Investment Quarterly) global market outlook, HSBC Global Asset
Management indicates that post-crisis growth is likely to remain subdued for the next few years as there will be a structural overhang on growth from developed world leverage and population ageing. Compounding the problem, monetary policy has lost much of its power
$17.8 billion India’s trade deficit
to stimulate in this balancesheet constrained world and the need for fiscal consolidation will also limit the policy response. Specific challenges include the on-going Eurozone crisis, US fiscal adjustment and risks to China’s growth outlook. Dan Rudd, Regional Head of MENA Wholesale, HSBC Global Asset Management, said, “The oil producing countries in MENA are continuing to benefit from triple digit prices in oil, supporting the economic growth and further investment projects. Phil correctly mentions
What’s the future of trade?
The World Trade Organisation (WTO) Panel on Defining the Future of Trade held a special meeting at the Organisation’s headquarters in Geneva in the presence of the WTO permanent ambassadors, experts and representatives of the
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concerned international commissions and media. During the discussion, His Excellency Dr. Talal Abu-Ghazaleh, member of the WTO Panel, presented a number of suggestions to ensure the maximum benefit from the report.
the concerns of asset price bubbles with emerging markets but the GCC expansion is comparing very well against its peers, given the solvency of the local governments and deflation in asset markets could prove more supportive.” The value of investments and any income from them can go down as well as up and investors may not get back the amount originally invested. Many expats are looking to the services of multinational banks as they expand into new markets, from business credit cards to current accounts.
He suggested the need to send the report to ministers of trade in the WTO Member States to provide their feedback, stressing that holding a special ministerial conference for this purpose is also essential. Abu-Ghazaleh’s 22 recommendations in the report represent the deepest reforms to the organisation since it was created, in an effort to rescue the trade body from paralysis and irrelevance. The report also makes a number of recommendations that would improve the WTO’s collaboration with the private sector, and places greater emphasis on public outreach by the WTO Secretariat, in an attempt to cement a healthier and more open rapport with citizens and NGO’s around the globe. The Panel on Defining the Future of Trade was established in April 2012 to examine and analyse challenges to global trade opening in the 21st century.
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Updates REGIONAL TALK
Dubai- Algeria explore ties
The Dubai Chamber of Commerce and Industry, in association with the Embassy of Algeria, organised the Doing Business in Algeria seminar. With the aim of consolidating trading ties between Dubai and Algeria, the seminar introduced valuable information about the
economic synergies existing between the two countries, as well as the availability of investment opportunities for Dubai businesses in Algeria and the law and guidelines on investment in the country. The seminar was presided over by H.E. Rashid Humaid Al Mazroei, Board Member
and Member of the Executive Committee, Dubai Chamber, and was attended by H.E. Dr. Cherif Rahmani, Algerian Minister of Industry, SMEs and Investment Promotion, and Mr. Abdelkareme Mansouri, Director General, National Investment Development Agency in Algeria, as well as businessmen from Dubai and Algeria. His Excellency informed that though Dubai and Algeria shared historical bilateral ties they still needed to take their trade relations to a higher level. He said that Algeria ranked 52nd on the list of Dubai’s top trading partners in 2011, with non-oil foreign trade valued at AED 3.1 billion. In Q1 2012 it
Iraq invests in airport development Held under the patronage of H.E. Hadi Al Ameri Minister of Transport, Republic of Iraq, the Third Annual Iraq Airport, Aviation & Logistics Show will be held from September 25th - 26th 2013 at Baghdad International airport. The event will provide the global aviation industry the opportunity to tap the vast growth potential in the aviation industry in general and Iraq in particular as massive investments are in the pipeline. Significant steps towards the reconstruction of the civil aviation sector have been taken by the state authority. The event will provide an insight about USD 150 billion worth of Airports, Aviation & Logistics infrastructural projects currently underway in Iraq.
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valued AED 654 million. There are presently 272 Algerian companies operating in Dubai and registered at Dubai Chamber, he said. On his part, H.E. Dr. Cherif Rahmani, Algerian Minister of Industry, SMEs and Investment Promotion, stated that the Algerian delegation has come here with a new vision to create a real partnership with the UAE, especially Dubai, as he stressed on putting up a comprehensive plan to build a strong cooperation bridge between the two countries. He also emphasised on the need for the two countries to get away from their dependence on oil and to divert their economies into technology and sustainable development and to get rid of the imbalance.
Qatari Diar gets a project in London Qatar’s sovereign wealth fund has secured local government approval to build almost 900 homes and eight office blocks at the site of Royal Dutch Shell’s London headquarters. Qatari Diar Real Estate Investment, the property unit of Qatar’s wealth fund, has been given the nod for the project by the UK capital’s Lambeth Borough Council. It will be built alongside Canary Wharf Group, which owns the financial district of the same name. The offices part development will be about 76,000 sqm with the towers ranging from five to 37 storeys at the site, which is located on the banks of the River Thames.
Community events calendar
The value of Kuwait’s construction market and its influence on the strength of the GCC’s position as an international hub has been highlighted in a recent report. Currently valued at USD 250.6 billion, ongoing construction projects contribute a growing proportion of the GCC’s USD 2.54 trillion spend on the industry, according to the report from Zawya commissioned by The Big 5 Kuwait 2013.
Brazil exported USD 7.48 million worth of pharmaceutical products to the GCC in 2012, increasing by over 73% compared to USD 4.31 million in 2011 according to figures released by the Arab Brazilian Chamber of Commerce (ABCC). The Kingdom of Saudi Arabia and the UAE accounted for the biggest share of the Brazilian pharmaceutical
exports at 57.02% and 41.61%, respectively. The total pharmaceutical exports to KSA surged by 95.63% in 2012 to reach USD 4.26 million from USD 2.18 million in 2011, while exports to the UAE were valued at USD 3.11 million, up 56.28% from USD 1.99 million in 2011. The top Brazilian pharmaceutical products that are exported to the region include
antibiotics, dental products and vaccines for veterinary use. The Arabian Gulf region ranks 44th among the top export destinations of Brazilian pharmaceutical products, but the Arab Brazilian Chamber of Commerce believes this presents a huge window of opportunity for Brazilian exporters to further expand their trade activities in the region.
Save the date!
We know that you are a busy trader with a demanding events diary. Therefore, we are providing you with a snapshot of exhibitions and conferences in the region and around the world, so you spend less time planning and more time attending. Date
Event
Location
June 3-5
Mobile Health Middle East
Dubai International Convention & Exhibition Centre
4-6
CHRVI Qatar
Doha Exhibition Centre
11 - 13
Automechanika Middle East
Dubai International Exhibition Centre
11 - 13
Hardware and Tools Middle East
Dubai International Exhibition Centre
Date
Event
Location
July 18 - 31
Ramadan and Eid Fair
Sharjah Expo Centre
August
16 - 18
The Big 5 Kuwait
Kuwait
16 - 19
Saudi Agro-Food Industries
Riyadh International Exhibition Centre
19 - 22
INFDEX
Doha Exhibition Centre
22 - 25
EPICT
Dammam- Dhahran International Exhibition
1-7
Ramadan and Eid Exhibition
Kuwait International Fairs Ground
23 - 25
Power + Water Middle East
Abu Dhabi National Exhibition Centre
19 - 22
FABEX Saudi Arabia
Riyadh International Exhibition Centre
23 - 25
MedHealth and Wellness
Oman International Exhibition Centre
25 - 26
3rd Annual Iraq Airport, Aviation & Logistics Show
Baghdad International Airport
September 2-4
Food and Hotel Oman
Oman International Exhibition Centre
24 - 26
Paper Arabia
Dubai International Exhibition Centre
4
PCI Abu Dhabi
Beach Rotana Hotel
27 - 29
World Luxury Expo Abu Dhabu
Emirates Palace
3-5
Gulf Glass
Dubai World Trade Centre
29 - 01/10
The Hotel Show
Dubai World Trade Centre
3-5
GulfSol
Dubai World Trade Centre
30 - 02/10
Telecoms World Middle East
Jumeirah Beach Hotel
10 - 12
Materials Handling and Logistics
Dubai International Exhibition Centre
30 - 02/10
Iraq Mega Projects
Madinat Arena
Third Annual Iraq Airport, Aviation & Logistics Show
JUNE 2013
9
Get in touch! Would you like to list your event here? Or better still, list your detailed event profile? If yes, then please contact: aparna.arya@cpimediagroup.com
Brazil’s pharmaceutical exports to the region see a rise
Kuwait’s construction boom!
Updates ABOUT TOWN
What’s your next destination?
The 20th Arabian Travel Market (ATM) 2013, which is the annual travel and tourism event unlocking business potential within the Middle East for inbound and outbound tourism professionals, was held from 6th to 9th May 2013 in Dubai. We bring to you coverage of the event and details of Amadeus’s air traffic analysis on the passengers’ trends in Qatar, Saudi Arabia and the UAE.
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he event included more than 3,000 exhibitors from 87 countries, with exhibition floor space covering more than 22,000 square metres. It saw in attendance more than 17, 000 visitors. On 6th May 2013, H.H Sheikh Maktoum bin Mohammed bin Rashid Al Maktoum, Deputy Ruler of Dubai, officially inaugurated the 20th Arabian Travel Market 2013, in the presence of senior government officials, leaders of the regional and international travel industry as well as high-profile participants. We first attended the press conference of Qatar Airways, during which Akbar Al Baker, CEO, Qatar Airways, revealed that the airline will expand its routes across three continents along with a huge increase in capacity in Pakistan by 60% with 28 flights a week. Routes to Addis Ababa and Clark International Airport in the Philippines will also open up later this year while in March 2014 Philadelphia will become the airline’s fifth US gateway. Al Baker also expressed that they are looking forward to moving into new Hamad International Airport later this year, and added, “The delay in the airport opening is costing us heavily as we cannot expand. We are over capacity in terms of our fleet at the current airport. The new airport opening will be a serious game changer as people will soon want to travel to Qatar just to see Hamad International Airport.” Another successful representative of Qatar at the event was Katara Hospitality, which is the global hotel investor, developer, owner and operator. Katara Hospitality exhibited at the ATM 2013 in order to present their significant milestones in 10
JUNE 2013
acquisition, investment, development and operations. “Our new brand was launched last year as a platform for growth,” said Hamad Abdulla Al-Mulla, CEO, Katara Hospitality, and added, “Our goal is to own 30 properties by 2016, with another 30 in place by 2030. Over the last 12 months, we have made important steps towards those targets.” On 7th May 2013, we attended Amadeus’s exclusive press conference during which the company unveiled air traffic trends among passengers from the UAE, Saudi Arabia and Qatar. Antoine Medawar, Vice-President, Middle East and North Africa, Amadeus, revealed the findings of the first-of-its-kind analysis from Amadeus air traffic travel intelligence
solution. The analysis reaffirmed the Middle East as a rapidly growing hub with a growth of approximately 20% in traffic volume between Europe and Asia routed via the Middle East from 2011 - 2012. According to the analysis, the UAE and Saudi Arabia have emerged as the leading countries in the Middle East in terms of air traffic volume while Qatar demonstrated the strongest growth. The three countries together represented over 53% or 52.8 million of the total 99 million passengers, whose point of departure was the Middle East in 2012. Data indicates that Saudi Arabia, the UAE and Qatar enjoyed an average growth rate of 10% in air traffic volume in 2012 when compared to the previous year, thus
outpacing, by a large margin, the 2% growth experienced in the Middle East as a whole. The analysis forms part of a wider insight that identifies the world’s most competitive air travel markets and global air travel trends followed on an annual basis. The findings are based on the calculation of the most accurate air passenger volume for any origin and destination (O&D) worldwide.
The following are the highlights from the findings: • Saudi Arabia leads in absolute terms while Qatar is considered as the fastest expanding Saudi Arabia remains the largest air travel market in the region. The 25 million passengers who started their journey from the country, accounted for 25% of the total passenger traffic in the Middle East in 2012. The UAE followed as a close second, commanding 23% of the regional market share and serving as the point of origin for 23.1 million passengers. Representing 5% of the region`s air traffic market with 4.74 million travellers, Qatar led the way in terms of passenger volume growth. • The UAE emerges as the most prominent point of origin for intercontinental journeys, while Saudi Arabia’s volume is driven by domestic traffic More air passengers began their intercontinental journey in the UAE (15.7 million passengers flew) in 2012 than Saudi Arabia (7.8 million passengers flew) and in Qatar (2.8 million passengers flew) combined. The UAE also has the highest ratio of intercontinental travellers (68%) versus passengers travelling within the country and departing from there to other destinations within the region (32%). Qatar has the second highest ratio (59% of intercontinental passengers). For the UAE, the analysis also highlights Dubai-London as the top route. The intercontinental travellers for Saudi Arabia account only for 31%, as the market topped the list of all Middle Eastern countries in terms of total domestic travellers – 11.1 million passengers flown, representing 44% of passenger volume.
Antoine Medawar, Vice-President, Middle East and North Africa, Amadeus
Jeddah – Riyadh appeared as the busiest route in Saudi Arabia. In terms of regional traffic, the UAE was the most used point of origin for the 7.2 million travellers who flew within the region, followed by Saudi Arabia, which served as the point of origin for 6.1 million travellers within the region. Elaborating on the reasons behind such travel data, Antoine said, “Major factors that feed the demand on certain intercontinental routes, particularly those that connect the GCC to Europe and South Asia, is the growing macroeconomic significance of the region. This includes the large number of expatriates who reside in the GCC, and who need to visit their home countries regularly. The growing domestic routes in Saudi Arabia, on the other hand, are not only supported by the country’s vast geographical size, but also by the thousands of pilgrims who journey within the country.”
• The UAE leads the way in low cost airline market share As indicated by the data, the overall market share of the Middle East’s low cost carriers inched up from 11.7% in 2011 to 13.5% in 2012, a low figure compared to other regions such as Europe, South Asia or North America regions. The data reveals these airlines are making the largest impact in the UAE market,
with low cost carriers commanding 23% of the share of traffic in 2012. Low cost carriers had a 8% share of traffic in the Qatari air travel market and 9% in the Saudi market. “Budget airlines in the region are in a strong position to capture a larger share of traffic, as the ticket price is the universal factor that influences a passenger decision to fly a particular airline – the convenience of schedule and quality of service also being passenger priorities. In the GCC, budget airlines will face greater challenges on account of their non-budget counterparts, given the greater spending power an average person enjoys, and the sense of pride and loyalty that GCC passengers usually attach to favourite, non-budget airlines,” Antoine explained. • Connecting air traffic statistics underscores emergence of Doha, Abu Dhabi and Dubai as global travel hubs In terms of connecting air traffic, the Middle East showed strong performance with the three key airports of Dubai, Doha and Abu Dhabi experiencing high connecting traffic volumes around 50% and growing at 10% per annum, while other major airports in the region (Jeddah, Riyadh or Cairo) showed connection rates of around 10%. Underlining the vast potential the region’s airline industry has on the global aviation stage, Antoine commented, “Over the years, Dubai, Abu Dhabi and Doha have executed strategies that are putting together the world’s finest airports, airplanes and professionals who are re-defining industry standards. The growth figures for these hubs are in line with strategic investments that each country has undertaken in the civil aviation sector.” When quantified as a group, Dubai, Doha and Abu Dhabi airports already serve around 15% of air traffic volume between Asia Europe as well as Europe - South Asia. It is particularly interesting to note that overall traffic volume between Europe and Asia is growing by approximately 7% year over year, but traffic volume between these two locations and routed via the Middle East grew by approximately 20% between 2011 and 2012. JUNE 2013
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Updates ABOUT TOWN
Melting borders- growing trade The 2013 WCO Conference and Exhibition was held in Dubai from the 14th-16th of May. The event aimed at exploring the ways that modern information and communications technology can lead to exciting possibilities for a whole of government approach at the border. This article highlights the discussions that took place during those three days.
W
ith the theme “Effective Solutions for Coordinated Border Management”, the event gathered over 1,000 customs specialists and security technologies and information technology experts. Exploring the importance of information and communication technology in customs operations, enhancing the cooperation among all border regulatory agencies and strengthening partnerships between border agencies and the private sector were the main goals of the conference. On the 14th of May 2013, at Atlantis, The Palm, the conference was inaugurated by H.H Sheikh Mohammed bin Rashid Al Maktoum, UAE Vice President, Prime Minister and Ruler of Dubai. Delegates who attended the event were formally welcomed by H.H Sheikh Saif bin Zayed Al Nahyan, UAE Deputy Prime Minister and Interior Minister. During his welcome note he said that the UAE Government has remained committed when it comes to cross-border trade facilitation and enhancing communications between them and various stakeholders were also a part of their focus.
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H.E Ahmed Butti Ahmed, Executive Chairman of Ports, Customs and Free Zone Corporation, and Director General of Dubai Customs also gave his welcome address during the opening ceremony. He expressed his confidence that the significant exchange of ideas and experiences in the conference will translate to favourable outcomes on setting a new global system for coordinated border management. Also present at the ceremony was Kino Mikuriya, Secretary General of the World Customs Organisation, who in his speech expressed his gratitude to the UAE for its hospitality and their efforts in making the event possible. He stated that the theme of this year’s event is aligned with the WCO’s 2013 slogan, which is “Borders divide, customs connect.” Furthermore, he explained that an effective network of connectivity can be achieved through positive cooperation among trading countries and by enhancing the trust and understanding between all stakeholders. Also, implementing new and innovative techniques will play an essential role towards increasing
effective cross-border coordination and cooperation. Mikuriya also emphasised that such increase in cooperation will help stimulate the global supply chain and improve security at all the borders. The outcomes of such would be beneficial for the world economy by means of promoting commercial development, competitiveness and employment. The three-day conference, organised by Dubai Customs featured three panel discussions, three lectures and three specialised technical seminars. Session speakers included key agency officers, leaders, decision makers and IT experts in the field of customs management in the region and from around the world. Facilitation of legitimate trade to improve the security of borders, ports and customs coordination between countries were amongst the topics the conference focused on. The conference also seeked to increase the communication channels between trade parties and stakeholders through exploring the best solutions there is in facilitating trade and maintain a healthy economy. Advancing the single-window concept through the use of information technology was another subject tackled at the conference. Having an effective single-window solution will improve the coordination between government agencies and stakeholders which will be beneficial in the smooth-flow of trade globally. A single-window system is a trade facilitation idea which enables international trade or cross-border trade to use a single entity in fulfilling the requirements of customs. In the traditional customs procedures, one will be required to visit a number of different government agencies to obtain the necessary documents and permits to complete the trade process. Thus, making it more time and money consuming. The main value of implementing a singlewindow system is to increase cost savings and time efficiencies for all parties involved in trade and in their transactions with various governmental bodies for obtaining the relevant documents during import and export of goods. As the session progress, it has been emphasised that the role
information technology is now very crucial in terms of controlling improving trade facilitation. Utilising modern and intelligent systems will contribute to accuracy and efficiency in customs operations. On the second day of the conference a discussion on Facilitation through Business Integration was held. Success stories from various customs agencies such as the Jordan Customs, Senegal Customs, Dubai Trade, and Southern African Development Community (SADC) were presented, while systems security provider like the Microsoft Corporation shared their experiences on the matter. H.E Ghaleb Kassem of Jordan Customs spoke about how his agency has made tangible progress in facilitating intraregional trade across the Jordan border, through the implementation of a strategic plan of using IT systems in managing customs work. They have already achieved a 25% reduction in customs procedures through the application of these IT systems. On behalf of Dubai Trade, Shabab Al Jassimi discussed the growth that Dubai Trade has undergone upon the implementation of the single window system. Dubai Trade has been established specifically for facilitating trade and business integration in Dubai. It serves as a single-channel that provides online services for its stakeholders and creates a streamlined flow of services translating to customer satisfaction. He also stated that UAE has saved about USD 40 billion over the past four years by using a single window system. Single-window concept is the best solution for developing trade, having better control of the economy and improving the security in the supply chain. A statement made by Mouhamadou Makhtar Cisse, Director General of Senegal Customs. He also highlighted the success of Senegal’s paperless end to end system with which they built a dynamic partnership between the public and the private sector. At present they have experienced 70% reduction in customs procedure time. Although information technology plays a vital role in implementing a successful
border management, Cisse also pointed out the importance of the human element in the process. Professionalism amongst members of the organisation must be practiced. People cannot be replaced by machines, he said. Thus, technology, private partnership and professionalism are the important factors that makes international trade successful. Willie Shumba of SADC underlined how essential the collaboration of customs and private sectors is for further trade growth. On that note, for the collaboration to work, modern customs has to be responsive of the inputs from the stakeholders and engage with them more often. This will then result in a seamless cooperative system beneficial for both customs and stakeholders. John Bescec Director, Global Trade Policy and Standards of Microsoft Corporation discussed that, whilst there are many solutions for effective collaboration between Customs and businesses, what we need to focus on is an effective solution. Effective solutions such as having an Integrated Border Management system and cooperation among private sectors. Also, integration does not only apply to IT but also to other factors of trade including infrastructures such as roads and transport, legal systems and policies and procedures. Having all of these will help governments become more efficient and result in trade growth. An exhibition was also held alongside the conference, creating opportunities for quality networking and marketing prospects for both vendors and participants. The event also paved way for participants to know more about the latest trends, technologies and solutions available specifically for the customs and trade market. At the end of the day, these IT solutions are only as effective as the government agencies implementing them. Which reflects the statement of one of the speakers, that we cannot replace the human factor of trade with machines. In order to be successful and achieve both local and international economic growth, innovation in customs operation and an effective partnership between customs and the private sector is essential. JUNE 2013
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Updates Expert Opinion
Reasons to be optimistic Khalija Haque, Senior Economist, Emirates NBD gives us the macroeconomic view for the GCC countries.
A
lmost half way through 2013, the GCC’s economies appear to be enjoying strong growth despite a challenging external environment. Data for the first four months of the year show that although oil production has declined somewhat, non-oil growth remains robust. The non-oil sectors are underpinned by increased government spending, particularly in Saudi Arabia, Qatar and Oman, as well as continued recovery in the private sectors. In the UAE and Saudi Arabia, the Purchasing Managers’ Index (PMI) is a useful indicator of growth in the non-oil private sector. Although the PMI readings eased in April, they continue to show strong growth, especially when compared with PMI readings in Europe and China. However, slower global growth has had an impact on export growth in the UAE, which is the GCC’s most open economy, in the first four months of this year. Nevertheless, domestic demand in the UAE remains strong as tourism and hospitality have enjoyed strong growth, and the recovery in the real estate sector has contributed to increased optimism in the country. Businesses have hired more staff in anticipation of further order growth and staff costs rose at their fastest pace in three months in April.
In Saudi Arabia, growth in the non-oil private sector continued to outpace that of the UAE in April as both domestic and external demand appeared to hold up well. Against this background of robust growth, it was surprising to see consumer confidence in the Kingdom decline sharply in Q1 2013, according to a global survey by Nielsen. Indeed, consumers in the Kingdom appear to have turned outright pessimistic about their prospects, personal finances and spending intentions last quarter. Consumers in the UAE remained optimistic, no doubt buoyed by the evident growth in the tourism and hospitality sectors as well as in the real estate sector with the announcement of more new construction/development projects. Dubai Airport arrivals and hotel occupancy data for the first two months of this year suggest the tourism sector is still enjoying strong growth, even after two years of expansion. Hotel occupancy averaged close to 90% in Q1 2013, and hotels took advantage of strong demand and their pricing power to raise room rates. Passenger traffic through Dubai Airports was 16% higher in the first quarter of 2013, compared with the same period in 2012,
ABOUT Khatija joined Emirates NBD in June 2011 and is responsible for macroeconomic research on the GCC countries. Khatija started her career as an analyst at Deutsche Bank Securities in Johannesburg, South Africa, before taking up a position in the EMEA economics team at Deutsche Bank AG, London in 2001. After moving to Dubai at the end of 2008, Khatija worked as an economic consultant, before joining regional investment bank SHUAA Capital at the start of 2010.
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driven by a sharp rise in the number of regional visitors and the introduction of new flight routes. The number of visitors from Saudi Arabia alone grew over 40% y/y in the first two months of this year as air links between Dubai and the Kingdom expanded and new routes were added. Saudi Arabia is now Dubai International’s third biggest international market, after India and the UK. The recovery in residential real estate prices has also contributed to increased consumer and investor confidence. All sectors of Dubai’s residential real estate market have enjoyed double digit annual price growth year-to-date, according to data from Cluttons. Despite the substantial increase in ‘sold’ prices, the housing component of the UAE’s consumer price index showed a slight decline in housing costs in the first quarter of this year, compared with the same period in 2012. This is mainly because of the consumer price index surveys a broader range of households, many of which have not seen their housing costs change, rather than just the latest real estate transaction data. While we do expect higher housing costs to start to be reflected in the headline consumer inflation numbers in the coming months, we do not anticipate a return to double digit inflation in the UAE this year or next. Imported inflation, including food prices, are likely to remain low as the USD strengthens against a basket of other currencies, and the PMI surveys suggest that manufacturers and service providers are not able to pass on higher input costs to end-consumers, due to competition in the market. All of this makes us comfortable with our 2.5% average inflation forecast for this year.
TRADE TALK Technology
The best of breed! SPAN is a premier third-party logistics (3PL) provider of customised logistics solutions. Aparna Shivpuri Arya caught up with Kamel El-Ghossaini, Regional Manager of SPAN to get a better understanding about the work they do. 16
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amel started our discussion by talking about Span’s history. “Span is a UAE based company since 1989. We found that there is a requirement for logistics and supply chain solutions around 1995-1996. And this is why we partnered with Infor and we represent them in the whole region. Today we have more than 300 sites (customer sites), with companies like DHL, Danzas, Agility, Aramex, and others, who use the Infor supply chain solutions and they are fully implemented and supported by the SPAN team.” He further elaborated on their collaboration with Infor by telling me about how they customised the solutions to suit the needs of the region which helped them overcome the language barrier However, Kamel doesn’t want to call them customised solutions and prefers the term “best of the breed” solutions. Going back in time, I asked him about how technology has evolved in logistics. To this he said, “When we started in 1996 customers were new to barcode, new to these solutions. So we did a lot of training to introduce it to people. Today luckily, if
ABOUT Kamel El-Ghossaini is a Regional Manager at SPAN Group for the last 13 years. Span Group, an Infor partner since 1996, a leading provider of total supply chain solutions to companies operating in the Middle East since 1989. He is considered a leading expert in the Consultation and implementation of Logistics and Supply Chain solutions including Warehouse Management Systems, Demand Planning, Fleet Management and Transport management. His experience is diversified among implementations on both the European continent as well as the GCC region. Kamel has won the 2009 LOG. EO Young Achiever Award for his contribution in the logistics and Supply Chain domain
solutions, warehouse management systems, barcoding, and Araf ID which is similar to the SALIK. I asked Kamel about the different types of solutions they offer. To this he said, “The logistics company take the warehouse management system. They are the ones who are looking at managing the stocks inside the warehouse- from the moment the goods come from the supplier, to where they are stored, expiry date, shelf life, aging. Then you have the transportation part, - which is reaching the customers, proof of delivery, route planning,
Now there is intelligence available to forecast and plan. For instance, during the month of Ramadan, there is high demand and now with all the logistics tools, a company can forecast how much to order, which product, what time and which supplier to work with. I can talk about Dubai, people are aware, they appreciate the need of such solutions. However, in other countries you might still feel that you need to introduce the product and invest time. And this is one of our, I think, success factors - we invest a lot in training and education.” Kamel also pointed out that in today’s world, land and labour are expensive and now shops don’t have a lot of storage facilities which can put pressure on meeting demand fluctuations. And this has given them an opportunity to work with these companies to optimise their logistics by implementing supply chain
optimisation, knowing the road regulations.” “Maybe if you have five trucks, you can do it on excel but if you have 20 trucks, it becomes more difficult. Today if you don’t save on warehouse and you don’t save on transportation, you cannot make money. The margins are very little – you cannot imagine how little they are in all the businesses.” So how does Kamel see the logistics sector in the GCC region? Well, he was extremely optimistic. “I could see a year of double digit growth. The demand is higher, even in areas where labour is still very cheap.
According to Kamel, people are more aware of these solutions. And in the last years they have built a very good knowledge base to translate the customer challenges into successes and benefit from that. Talking about how the global financial crisis changed the outlook of businesses regarding logistics, Kamel said that before the crisis companies used to just fill the warehouses, believing that it will sell. When the crisis came they realised that the warehouses are full and they cannot sell. And this is when they realised the high costs of stocks sitting in the warehouse. This resulted in their cash being locked in these goods, while it could have been invested elsewhere. So this is where the trend changed. “Today we have more customers implementing demandplanning and forecasting, which we didn’t see in the past 10-15 years. The products were there but people felt that they did not need these products. Now, it’s more important for them to implement this, they appreciate it. Because if I don’t have cash and I have a lot of stock in my warehouse and I’m not selling it, this is a bigger problem,” opined Kamel. Now there is intelligence available to forecast and plan. For instance, during the month of Ramadan, there is high demand and now with all the logistics tools, a company can forecast how much to order, which product, what time and which supplier to work with. Span looks at the historical data of its customers and then comes up with a trend about the demand. According to Kamel, JUNE 2013
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TRADE TALK Technology
Today, it’s a knowledge industry you need to see the behaviour of the people, you need to see the trends and then decide on your business and your stocks. today if we see a shop full of goods, we wonder whether it is doing well, while earlier a shop used to look good if it was very well stocked. So times have changed, the way people think has changed. Today, for example Company X has built a warehouse and it thinks that it’s enough for the next two years but after a year and a half it finds out it needs another – that this is not enough. And the company cannot wait before it builds a new one, so it goes and rent. And this is how agile logistics is. That is the challenge. Continuing about his optimistic view on the logistics sector, Kamel said that he is very positive as consumer behaviour is changing and e-commerce is picking up in the region. “For instance, if you’re souq.com and you’re doing e-commerce, you cannot ship to Saudi from Dubai instantly, but you also know nobody will wait two to three days for you. So automatically you need to have stocks in Saudi and so on. All of this means logistics, this means visibility, this means integration between system, this 18
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means data flowing up to the supplier and data flowing down.” “Today, it’s a knowledge industry you need to see the behaviour of the people, you need to see the trends and then decide on your business and your stocks. This is the difficulty – before this was a bit easier. For instance, when you were in clothes [industry] even without the Internet and technology it was easy for you know the trends, but today you don’t know the trend. You don’t know the visitors to Dubai tomorrow. Emirates airlines could sign an agreement with Australian airlines, and I don’t know the taste of the Australians who will come here. I don’t know what they will [like] so there is a lot of change. Its very dynamic and the objective of the software is to identify these changes and alert you ,” highlighted Kamel. Using the example of supermarkets, Kamel said, “Even today if we look at shops like Carrefour or Lulu the products that they have in certain areas are different. If you look at the peanut butter in Jumeirah, its different from the peanut butter in Garhoud. Why?
Because it’s all based on the demography of the people, on the needs. And this means that your warehouse and your logistics need to understand your demand and your sales and suggest.” Kamel also pointed out to the limitation of individuals to know all this. “You cannot expect that a person will understand all the products, the people and the variations - it becomes too costly. Sometimes I can put five people they can do better than two, but if I put more than six I become inefficient. This is where the system will help you, and today there is no limitation on the data size, on how much data you can process. So the more data you have, the more intelligence you can have. But this has to go in a certain system that will allow you to use it and optimise it.” “We are very positive – we can call it a “boom” in logistics. Dubai as a hub for the region, plus KSA, with its growing population. Also Qatar today with the FIFA World Cup 2022, you can imagine, the new hotels that are coming up. All of these are logistics, this all comes back to us and our solutions – the Infor solutions that we implement,” Kamel said with a smile, when I asked him his opinion about the coming years. We ended our discussion by asking him which industries have taken very well to 3PL. The only industry that didn’t pick up as easy, is I would say – oil and gas. They still use material management system, and they don’t optimise but I’m sure it will come. But today we have a lot of customers in retail, we have a lot of customers in spare parts, like Ford, General Motors, Komatsu and others. We have customers in electronics like LG, Samsung and so on. So we have different industries, it’s not limited to the logistics. But I personally think, that oil and gas is still they only area that is closed [to the idea]. They didn’t pick up, but it will be coming. They are doing very well, but there is always room for improvement.” On that note, I finished my chat with Kamel, totally fascinated by the use of technology in logistics and the myriad solutions on offer. Doing business just got a lot simpler!
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TRADE TALK Interview
“We don’t follow the trend, we create it” Says Fahad Al Gergawi, CEO, Dubai FDI, in an exclusive interview with Aparna Shivpuri Arya.
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What is the appeal of Dubai as an FDI destination? What do you think is the reason people want to invest in Dubai? I think, it’s a couple of things. First, it’s a complete service that Dubai provides for the people or to investors. Within that, comes the overall lifestyle – people really love the lifestyle here. This is also a part of the survey that we’ve done towards investors – on why they come to Dubai. The number one [answer] is the lifestyle and of course it is complemented by a visionary government, so that people see the depth of the city rather than just the lifestyle. We can see the clear message of the government about where Dubai is heading. People also know that Dubai is not only connected to the regional market but also to the global markets – this is what really brings the investors to Dubai. They come here and they tap on both, the regional and global consumer, markets that Dubai connects them with. There are over 200 nationalities that live here and when companies come here they want to do business within the region and Dubai does that. Dubai sells the region and Dubai really allows the companies to expand within that. I think, it’s also supported by the strong service industry that we have and the trade mentality of the city itself.
So do you think Dubai serves as a hub, and businesses come here so they can expand in the Middle East through Dubai?
I think this is one of the most important thing – how to cut your cost and have one point of contact to allow access to other markets in no time. For instance, let’s look at the connectivity with the Indian sub-continent – our largest trading partner is India. We have more than 300 flights per week to India. Between any other two countries around the world, this is huge. Also besides the Indian sub-continent there is Iran, Middle East and West Africa. These are all natural markets that we trade
with and we allow visitors to come from. And Dubai is their meeting place, not only because we are what we are but also there are a lot of industries that started from meetings and exhibitions. The MICE industry is very important. We have five of the top ten exhibitions from around the world. To name a few, we have GITEX, which is one of the largest, the Big Five and then we have Gulfood – this year’s largest food exhibition in the world, which topped SIAL in Paris and Anuga in Germany at the same time. It’s not only because there is a backbone of strong industry that supports businesses here in Dubai. Businesses want something more than that. They would love to have a hub or be centralised at a place where they have all the services they want and also visit the next place. For example, we are able to take our companies and the investors to Qatar to get the best opportunity. And actually while Dubai is not an oil and gas producer, we provide the service industry for oil and gas in this region. Dubai is a city where business can find itself moving around the world and the region, have what they want and come back to base. This is what Dubai’s strategy is.
Which countries are making the most investment in Dubai? Is there a trend in the FDI?
Last year we received AED 30 billion in FDI. And the majority came from the top three - US, UK and India. Plus there are other investments coming from Japan, Germany and also from Saudi Arabia and Qatar. For a service industry economy like Dubai, trading services are the backbone of the city. In normal cases we get around 80%-90% of investments coming in Greenfield.
Are there any sectors that are attracting investments more than others?
I think the trading services, logistics, financial, IT, tourism are very big and also
there is increasing interest in medical services. Education also - there is a huge room for education development because of the need – Knowledge Village has over 80 universities and has expanded into Academic City. It’s about the place that can give not only to the businesses but also to the people and families The government sets the trend sometimes and the businesses follow that and the investments and ideas come with different opportunities. Also, Dubai has introduced and will introduce more new ideas to the region. This year’s announcement about the vision of Dubai - the Islamic economy, the green economy and the latest strategy for 2020 for global tourism. This is also another thing - we are the clearest destination for investment and trade. And we have a clear strategy about what we are, what we do, where we want to reach and how we will reach it. So people see that the vision is clear, it is repeated and it is present every where. It’s very clear and at the same time it’s an open platform for people to join this vision. This sends clear messages to investors and for people who wants to come [to Dubai] to really understand what they will get, what they’ll be doing, what sort of activities would be there when they come to this place and they see the depth of what they want.
Does that go along with helping you maintain a competitive edge over other countries in the region? Qatar is attracting a lot of investments because of the World Cup 2022, so how do you maintain that competitive edge between these countries?
I think we complement each other. You have to know that investments are an on-going process. The setup of Dubai itself is an ongoing process. We are working on every single way of implementing new strategies and attracting new sectors and businesses. And we have to come back and see the model of competition. We have a model JUNE 2013
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of competition that is already inside the country. It’s within the Emirates and it’s very healthy, it allow us to look for new things and not just wait. At the same time there are a lot of complements happening – we are looking at the same issues within the GCC. Each country has certain strength. Where we are, we are not competing with investments coming there rather we are complementary because we have the services industry. There are industries that are oil and gas dependent. There will be some area of competition but it’s always good. This would bring the whole region- GCC and Middle East to be a magnet for investors where everyone is bringing the best, and then the investors
time they are partners with some of the investors coming in and Dubai as a market is open. From the beginning it was designed to be open. Competition is the name of the game and being strong, active and taking the initiative is what allows businesses to grow. I think family businesses in Dubai are way mature. They are already [themselves] international businesses.
How do you see the situation in the Middle East with all the political unsettlement that is going on in the region? How do you assess the situation in the region for FDI? I think it should settle in some time. But
Competition is the name of the game and being strong, active and taking the initiative is what allows businesses to grow. will decide what to do. But from our point of view, even if foreign investors come here we will still allow them, and even work with them to help them, grow their businesses. Because we focus on three areas within our strategy: • Attraction; • Retention of investors: once they are here, our relationship with them will allow them to navigate the system and get the services they can; and • Growth: this is where Dubai is unique because of our set-up as a market, we grow businesses
Most of the businesses in Dubai are family owned, so is there a tussle between the foreign companies that are coming and the family owned businesses? Is it difficult to strike a balance between them? Family businesses have been here for a long time. But they have grown for many years now and they are getting a lot of partnerships. And they are open for partnerships coming from foreign investors. They are in a very healthy situation to compete and at the same 22
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it would be also important for companies to start taking positions. Once the situation clears there’ll be a lot of opportunities and still majority of the opportunities are not discovered and Dubai would be at the heart of that service sector. Dubai is a good place to shop from, and a lot of people do that. Business come here with one point of view - we are the one-stop shop of the region for businesses, for investors. Currently there are difficult situations with some destinations but this is not the norm and we want the investors to come back, as those markets are important for the region. And I think looking at the region holistically there are a lot of opportunities that would go to people who are well-positioned and present at the right time. So we encourage investors to take their positions and be ready for that and Dubai will allow them to do this.
And so if you were to identify say two or three sectors which, in the coming five years would be ripe for investment, what would those be?
I think the most important, and they would
continue to be, are trade and services. In the region we’ll have the Islamic economy, tourism and green and clean technology. These are areas of the future that people should focus on. Besides these, the other areas will continue to develop. These are the sectors that we think Dubai will continue to embark on.
Are there any strategies you are looking at to promote FDI? Is there a plan that you have?
We have yearly plans that depend on each market’s situation. We are very active in the US, we are re-activating our efforts in Western Europe – there is a strong comeback. In the region we are working with the Middle East, North, East and West Africa. These markets are very interesting and Dubai is very strong in services in such markets. There is of course the Indian subcontinent. The more important areas right now are some destinations in East Asia and Latin America. We have signed with a couple of countries as global partners. And within that, we might open not only government trade offices but also regional government head offices. This the first time for some regions in Latin America to open up trade services office and this is actually a first in history. We did sign a global service MoU with Brazil and with Argentina and we are looking for others.
How do you identify countries or regions for attracting inward FDI?
There are two things: there is a trend that shows you that this is happening but the most important thing is that in Dubai we don’t follow the trend- because that would mean we are late. We create the trend and we try to be ahead. We create the trend when there is something, because the services we offer are always different. It’s so unique that people really see that it is so simple. If there is room for development then we come and put the offering within the said market. So it’s better to be the first than to be late and this is what His Highness taught us.
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TRADE TALK Logistics
Old is gold
For over half a century, Milaha has been building on its strong regional foothold in transportation and logistics. Aparna Shivpuri Arya spoke to H.E Sheikh Ali bin Jassim Al Thani, Chairman & Managing Director, Milaha to know more about this industry leader. Please give us a brief background about Milaha and its inception
As Qatar’s oldest shareholding company, Milaha has a rich history. As the country’s first shipping agent in 1957, it was granted the country’s first ever commercial license (it carries Commercial Registration #1 in Qatar), opened its first overseas branch in Dubai twenty years later, and over the last few decades it has continually expanded to meet the needs of the Qatari economy and a burgeoning energy sector. Today, Milaha is a large, diversified, strategic holding company with core interests in various maritime transport sectors as well as logistics. It consists of six strategic business pillars – Offshore, Gas, Petrochem, Maritime & Logistics, Trading and Capital.
Milaha is a pioneer in Qatar and the region when comes to logistics and trading. How did that take place? What has been your strategy?
The company’s goal is to deliver seamlessly integrated transport and supply chain solutions in sectors that are vital to Qatar’s economy. To achieve this, Milaha continues to invest in fleet expansion, state-of-theart equipment and, most importantly, development of human capital. Milaha has been playing a crucial role across various sectors and projects to support Qatar’s ambitious development agenda – from active participation in the development of the new commercial port and transportation of increasing export cargo 24
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sector plays a significant role in planning and executing mega-projects initiated by the Government. We would naturally expect an expansion in this sector in the coming years. The biggest challenge for the private sector is to attract and retain talent, particularly nationals. Those companies outside the energy and ancillary sectors are most affected by this.
What according to you are the challenges in the shipping and logistics sector? How do you see Qatar’s future as a trading hub?
volumes from the petrochemical sector in Mesaieed to investing heavily in expanding its fully and partially owned fleet of offshore vessels and gas and petroleum product carriers.
What, in your opinion, is the status of the private sector in Qatar? What opportunities and challenges does it throw? The private sector in Qatar plays a critical role in the expansion of Qatar’s economy and will continue to do so. The Government has seen to it that even many of the largest companies that are critical to Qatar’s economy are publicly listed, so that the general population (both nationals as well as expatriates) are actively invited to invest. This helps develop the private sector even further. In addition, the private
Generally speaking, the weakness in the shipping industry is a result of oversupply rather than a lack of demand. The macroeconomic conditions have played a part as well. But this is quite a broad, general view that is not necessarily applicable to all our activities. The Arabian Gulf region per se is not suffering as much from over-supply even if there is a degree of overhang from the global situation. We participate in both regional as well as global trade and across a number of shipping segments. The dynamics vary from one segment to another. Some segments were not impacted as much or even at all during the downturn, e.g. LNG. What we have tried to do at Milaha is to diversify our exposure to the different shipping segments while finding the right balance between generating stable long term cash flows and being exposed to short term market conditions. We believe this is quite healthy for a shipping company.
What is the relevance of 3PL to businesses? 3PL providers are critical to enabling trade in the region. With the exception of a few large companies in the region, building a competitive in-house logistics capability is simply not feasible. It takes valuable time and resources away from the core business. However, in the past, the capabilities and service quality of 3PL providers was considered inadequate by customers, and there was reluctance on their part to cede control over logistics to third parties. Therefore logistics was still largely managed in-house, even when it affected companies’ competitiveness. It is clear now that this is changing across the region. 3PL providers have strengthened their capabilities and are able to provide scalable solutions that can be tailored to individual businesses’ needs, along with performance guarantees. And businesses are recognising the value that these providers can add to their core business and are willing to outsource significant aspects of their supply chain to third parties.
Milaha is involved in a number of areas- how do you manage all these different activities? Milaha is organised as a holding company with several strategic business units that are each focused on the different sectors, in which we participate. The holding company provides core support functions such as Finance, HR, IT and more. In addition to managing the overall strategic direction of the group. Our goal is to allow the business units to focus on their core activities and drive growth across the different sectors.
For Qatari companies interested in availing 3PL services. What would be your advice to them?
3PL services as an industry is still evolving in Qatar and we have seen improvements in the past few years. Local companies are in a better position to understand the specific requirements of Qatari customers, and companies like Milaha are playing a big role in bringing 3PL solutions to Qatari customers, so that they do not need to depend on foreign
companies to support their requirements. Where required, companies like Milaha are partnering with international 3PL operators to provide end-to-end solutions.
What specialised solutions or services do you provide to for end-to-end maritime and logistics services?
Milaha has shifted from individual services to providing complete integrated solutions for their transport and supply chain needs. Positioned in the dynamic region of the Middle East at the historical trading centres of East/West routes, we recognise that global trade is becoming more complex. Our goal is to simplify our customers maritime and logistics needs allowing them to focus on their core businesses. The company is focusing on providing solutions and filling critical gaps in the supply chain for three core customer segments: • Oil, Gas and Petrochem sectors – Milaha is playing a key role in the offshore oil and gas industry value chain from supporting early stage exploration and production activities to transporting end products globally; • Non-energy customers – Milaha provides integrated freight and logistics solutions for Qatar-based customers. Our 3PL services include freight forwarding, warehousing and land transport, complemented by ocean transport services; • Ship owners and operators – Milaha also operates a shipping agency, representing 50 different ship owners, which have regular services operating to Qatari ports. The company’s port management unit manages Doha Port, the main commercial port in Qatar, as well as a dedicated container terminal at Mesaieed Port, the base for the downstream industries sector in Qatar.
How do you see maritime trade in Qatar and the GCC?
Maritime trade has been at the heart of the supply chain in Qatar and the GCC, and will continue to play a critical role. We can see from the level of investment in ports and related infrastructure in the region how
important this sector is to the regional economies. For Qatar, the maritime trade will be extremely important over the coming years as the infrastructure for the 2022 FIFA World Cup is implemented, and the downstream export industries in Mesaieed ramp up production. Milaha is playing and will continue to play a significant role in this sector. In 2012, we expanded our role in Doha Port and, along with Mwani, we’re helping to bring Doha Port up to world class standards. In addition, we continue to support QP in managing different parts of Mesaieed Port as well. We’re actively involved in the planning for the New Port Project (NPP) as well, where we are able to bring our strongly improved port management capabilities.
What are the next steps for expansion for Milaha?
Looking to the future, we believe that Milaha will be able to leverage its reputation, balanced investment portfolio and strong balance sheet in order to increase its growth prospects. Our biggest strength is our ability to provide totally integrated logistics and shipping services to our clients. We need to leverage and build on this unique position. While the market outlook for Qatar itself is almost entirely positive in the short to medium term, we hope to expand Milaha’s global presence. We want to have more of a presence in international shipping, particularly in gas and clean petroleum products, transportation and logistics. We also want to expand our offshore support capabilities by entering neighbouring markets such as Saudi Arabia, the UAE and perhaps beyond. This is a time of enormous change and opportunity. We have developed a new vision and a new focus to capitalise on the benefits of having a much larger company. We are in the unique position of being able to strengthen our local and regional footprint while at the same time targeting growth beyond our traditional borders. There is no time like the present to leverage our strong balance sheet to take the company to the next level. JUNE 2013
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TRADE TALK International trade
What’s your culture? Why is that some companies excel and grow very fast and become large corporations, while others stagnate, and sometimes even fail? Dr. Ashraf Mahate, Head, Market Intelligence, DED, gives us the reasons.
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hat distinguishes the two groups of companies? Obviously the goods or services, prices, promotion and place, make a huge difference but these factors do not take place in a vacuum. Take two IT companies, namely IBM and Microsoft whereby the former spent a great deal of time and resources on being the champion of the OS/2 operating system. On the other hand Microsoft’s only focus was on delivering a better product periodically to meet the demands of changing customer needs. Microsoft spent less time on bureaucracy and more time and effort on actual work related output. The conclusion of these two stories is well known to all of us. The differentiating factor between these two companies is the corporate culture, that was developed by the leaders in each firm was very different and thus leading to separate outcomes. Various academic studies have shown that a firm’s corporate performance can be attributed to its culture. The reason being 26
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that corporate culture allows a firm to strive and achieve its vision, mission and goals. In such organisations employees feel valued and engaged thus fueling growth and leading to higher productivity as well as creativity. More engaged employees also lead to better customer service and relationships thus leading to greater sales. Of course the opposite is also true whereby ‘bad’ corporate culture can lead to failures. This implies that failures such as Enron, WorldCom, Parmalat and Satyam, do not happen simply by chance or coincidence but are the product of a culture that permits greed, deception and fraud. Corporate history shows time and time again that at the heart of every firm is its culture. The corporate culture dictates the way that a company carries out its activities and hence clearly demonstrates its values and ethics. As such the corporate culture becomes the connector that is present throughout all the company’s actions and decisions.
So what is corporate culture? Essentially corporate culture is the values, practices and behaviours that are shared by the employees of a firm. Although, the corporate culture of a company may be impacted by its operating environment it is nevertheless determined by the firm specific factors such as leadership style, hierarchy, systems and procedures and more. As such the corporate culture can be negative, neutral, or positive. Also, it’s important to note that although most firms like to believe that corporate culture is static in reality it changes over time as employees leave and others take their place, leaders and owners change and with them come new practices and so on. Transforming corporate culture so that it becomes positive is vital to a firm’s growth and of course financial performance. As argued earlier corporate culture influences the employees’ deepest beliefs and behaviours. When developing corporate culture it is important not to be so focused
on financial performance that it actually leads to a negative outcome. For instance, some firms are so focused on enhancing cost efficiencies that they stifle not only creativity but also the ability of employees to be more customer centric. On the other hand companies can build a corporate culture based on a reward system that it leads to employees working in silos instead of collaborating across departments so as to boost the overall results of the firm. The development of successful cultural change comes about from having a clear idea about what type of behaviours are important for the firm and to identify the specific attributes that go along with it.
How to develop a winning culture? Essentially there are four steps to developing a winning culture that is export oriented. In the modern world it’s not just important to have a positive culture but one that understands the importance of overseas sales as a valuable driver to growth. In any country domestic sales are important but they have a natural limit and hence eventually the company has to go overseas if it has to grow. More importantly, even if the company does not go overseas it does not stop foreign firms from entering the domestic market. Academic evidence suggests that firms that have an exportoriented corporate culture not only have far superior performance but are also more creative. The former is as a result of being more competitive in order to deal with a whole host of other firms. The latter comes about from new knowledge and experience that a firm gains when it trades with foreign customers. The first of the four steps towards developing a winning export-oriented corporate culture is to develop a good vision statement rather than a grand meaningless comment that no-one aspires to or is committed behind. A good vision is something that creates a purpose for the firm and impacts every decision employees, customers, suppliers and other stakeholders make. A vision statement need not be long or complicated and the best are simple yet set the foundational element of corporate
ABOUT Dr. Mahate received his doctorate from Cass City University Business School in London (UK). He read Economics at University College London, followed by a Masters in International Economics and Banking at the University of Wales in Cardiff. Dr. Mahate is a professional educator and received his training at the Institute of Education (University of London). He is a member of the Chartered Institute of Managers (UK) and a Member of the Institute of Commercial Management (UK). He is also a member of the Association of Certified Anti-Money Laundering Specialists (ACAMS). He can be reached at ashraf.mahate@dedc.gov.ae.
culture. Second, a firm needs to adhere to a set of commonly held values which are the core of its culture. Third, there needs to be consistency between the values of a firm and its practices. A firm cannot hold its employees highly and then follow a hire and fire policy. The practices of the firm are the window by which its values are judged and hence reinforce what a company believes. Fourth, at the core of every organisation are its people and hence to share a common and coherent culture the firm needs to ensure that it recruits not only the most talented but also those that are best suited to its corporate culture. As such the recruitment policies need to be aligned to the corporate culture. These four aspects help in shaping a new organisational culture however there is still the difficult task of changing the existing behaviour. Developing and instilling an effective corporate culture is not an easy task. As such the challenge becomes for the firm to stop current established behaviours while developing a motivational system so that employees actively learn new ways of doing things. In order to change the existing behaviour its important for the firm to set the expectations that are necessary for change to take place. As such the firm needs to be very clear about the type of culture that it wants to develop and how this will help it achieve its goals. At the same time the firm needs to examine what aspects of its heritage are still important for its continued strength and what can be removed. Second, the leadership needs to be aligned to the new common culture and
behaviours. Although, the firms can take a number of actions to change behaviours nothing is as powerful as what leaders do and say and whether they are consistent in their actions. Therefore, if change is to come about then the owner or leader needs to be committed to it and demonstrate it in all their actions and words. Third, the firm needs to focus on delivering the business agenda rather than on culture. When a firm focuses on building a culture of accountability and holding people responsible for actual delivery, then cultural change becomes a means to an end and not an end by itself. Fourth, accountability requires individuals to have clear roles and responsibilities along with appropriate performance metrics. Finally, culture change tends to be a very long journey and one where consistent behaviour is important. Therefore, on this long journey its important to celebrate small successes along the way. Like all good things corporate culture is something that a firm needs to invest time and resources. It has to be remembered that corporate culture cannot be formed overnight nor those meaningless speeches but through actions that are backed with passion and honesty. Also, like all good things once achieved the corporate culture cannot be ignored as it can fall faster than it took to build. If a company can build and maintain the right corporate culture not only will it reap the financial rewards but also remain competitive in a highly globalised marketplace. JUNE 2013
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TRADE TALK Currencies
Money talks - II The team at Western Union Business Solutions (WUBS) brings you the movement in four currencies – the USD, the EUR, the GBP and the ZAR. EUR In a 2010 study, Harvard economists Kenneth Rogoff and Carmen Reinhart argued that once a country’s gross debt rose above 90% gross domestic product (GDP), growth begins to slow. Their paper argued in favour of austerity. However, this paper has been recently criticised for its statistical flaws, although the professors argue that the flaws do not alter their premise. Nevertheless, causality is still disputed. Does high debt lead to lower growth or does slower growth cause higher debt? This is really bad news, because policy makers in Europe (lead by Chancellor Merkel) have been working on the premise that austerity leads to higher confidence, which triggers business and consumer confidence and leads the
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way towards higher growth. European policy makers were inspired by the policies put in place in Germany when Schroeder was Chancellor (1998-2005), but that was at a time when there was not a crisis in confidence to begin with. There is no question that there was plenty of room for austerity measures when the debt crisis broke out across Europe, but the German insistence that spending cuts be so deep may now be causing more damage than good. Reforming pension and labour markets in many Eurozone countries will be needed to bring their economies into the 21st century, while at the same time making them more competitive. Trying to increase confidence by cutting spending at a time of a confidence crisis seems in hind sight rather farfetched at best.
Economic data is providing evidence that supports the Keynesians theory of spending your way out of debt. US economic data has shown a slow and moderate recovery, while Eurozone GDP continues to contract. As of the first quarter of this year, even the German economic powerhouse seemed to stumble with a growth rate of only 0.1%. This win-loss of theories is being played out in currency markets, with the Euro’s downside starting to look a little more appealing to investors against the US dollar. The Euro recently tumbled to sixweek lows against the US dollar. The move could find momentum during the month of June, should Germany continue insisting upon austerity. The question is whether Germany’s Chancellor Merkel is big enough to admit the error of her ways just in front of a September election, and if she does whether there is still time to spur growth, which could produce favorable election results for her. If not, her political survival could be challenged, bringing a whole new level of uncertainty to the Eurozone crisis. Stay tuned.. Against other currencies such as the Yen, Swiss franc, and Nordics, another phenomenon seems to be in play. Towards the end of May the Euro rose to four-month highs against the franc, three-year highs against the yen, and three-month highs against the Swedish crown. The move higher for the Euro in these crosses could continue because the yen, franc, and crown were overvalued and distorted (see last month’s monthly report). Upcoming critical events June 3: EUR May manufacturing Purchasing Managers’ Index (PMI) June 4: EUR April Producer Price Index June 5: EUR May services PMI June 5: EUR Q1 2nd Estimate GDP June 5: EUR April retail trade June 6: EUR ECB Monetary Policy Committee meeting June 12: EUR April industrial production June 14: EUR May Final Harmonised Index of Consumer Prices June 17: EUR April trade balance June 27: EUR June business climate index
EUR Economic Indicators Three-Month Deposit Rate: 0.25% Gross Domestic Product (Annualised): -1.0% Inflation (Annualised): 1.2% Unemployment: 12.1% Trade Balance: EUR 22.9 billion
GBP Sterling could face a painful month ahead, as markets anticipate a decisive change in leadership at the Bank of England (BoE) in July—a change that investors fret may have a significant bearing on future monetary policy in the UK. Mark Carney takes over from the departing Mervyn King as Governor, and markets are still unsure as to how far he may or may not stretch monetary easing within the bank’s more flexible framework. The Pound’s solid run since its March lows came to an abrupt end last month, undermined again by speculation about Britain’s EU membership as well as a misaligned central bank. Minutes from the BoE’s monetary policy meeting in May revealed that despite the UK economy returning to growth in the first quarter, some members still felt further monetary support was necessary. The Sterling initially climbed in May, extending its recent recovery to reach multi-month highs against a number of its key counterparts such as the US dollar and euro, supported by strong reports on Britain’s dominant services sector and the manufacturing industry. However, the pound then appeared to lose steam in front of some testing technical price barriers, a point at which traders questioned the currency’s longer-term durability with Carney and a still sluggish economy in mind. May was also the month of the USD, as investors weighed the chances of the Federal Reserve reducing quantitative easing, or tightening its policy amid signs that the US employment market was strengthening. After peaking at two-anda-half-month highs at the beginning of the month, Cable fell away sharply. Despite the BoE’s more upbeat quarterly Inflation Report last month, investors remain
concerned about the British economy’s ability to sustain growth without further monetary easing. Upcoming economic data should prove crucial to that assessment, although recent economic figures suggest additional stimulus is likely. The latest consumer price figures showed a biggerthan-expect fall in inflation to 2.4% (y/y) in April. Another decline towards the BoE’s 2% goal in May’s Inflation Report, which is due for release on June 18th, could be the latest signal that softening price pressure will allow for more central bank activism. Carney underlined his reputation as a monetary activist in his recent comments about Europe, warning the region’s policymakers that they face a long period of stagnation unless they change their game plan and follow Japan’s example of aggressive monetary easing. Fears that Carney will head to the UK with “gamechanging” ideas in mind could be a difficult burden for sterling to carry through the coming weeks. Key Events June 5: GB May services Purchasing Managers’ Index survey June 6: Bank of England Monetary Policy announcement June 11: GB April manufacturing output June 12: GB April unemployment June 18: GB May consumer price Inflation June 20: GB May retail sales Economic Indicators Three-month Deposit Rate: 0.55% Gross Domestic Product: 0.3% Q1 (q/q) Inflation: 2.4% (April) Unemployment: 7.8% (May) Trade Balance: GBP 9.1 billion (March)
USD The brawny gains the greenback enjoyed in May showed few signs of abating in June, the homestretch of the second quarter. The greenback has been on a tear lately, soaring to multiyear highs against a wide swath of rivals, as improving US fundamentals have validated expectations the Federal Reserve may taper the pace of its monthly bond purchases some time later this year. JUNE 2013
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TRADE TALK Currencies
Since late last year, the Fed has been on a spree of buying USD 85 billion each month in bonds to help anchor long-term borrowing rates, with the aim of spurring faster borrowing and spending—and it’s working. Hiring has steadily increased, albeit unevenly, while unemployment has fallen to 7.5%, a four-year low. However, before the Fed dials down on stimulus, officials have said they need to grow more confident that the improvement
the USD last month soared to early-April highs against the common currency. While market players ponder less activism from the Fed, they see pressure building on the European Central Bank to act to help dig the region out of its longest downturn, spanning six straight quarters, by trimming already record-low lending rates further downward. Potential wildcards to consider that might stir currency market volatility would
in the U.S. economy has sustainable momentum. Consequently, investors are waiting with bated breath for the next U.S. jobs report on June 7th. Stronger monthly job creation and a sustained move lower in unemployment would put the Fed on a faster track to cut back on stimulus. Forward-looking investors have started to build that more hawkish outlook into the USD’s value, keeping it well-supported. Other key dates investors have circled in June include the Fed’s next meeting on the 18th and the 19th. This month’s meeting is one of the four during the year that the Fed publishes fresh economic forecasts, and the chairman holds a post-meeting press briefing. In congressional testimony on Capitol Hill on May 22nd, Chairman Bernanke signaled the Fed could dial down on stimulus in “the next few meetings,” providing the economy cooperates. After this month, the next couple of Federal Open Market Committee (FOMC) meetings are set for July 30th–31st and September 17th–18th. With the future auguring less Fed policy, the USD has found another support pillar in relative economic fundamentals. Against the recession-beset Euro zone,
be if Wall Street’s record run were to endure a corrective decline, or if the fiscal headwinds of government spending cuts were to intensify and push harder on the economic brakes. The greenback would tend to react positively to the former and negatively to the latter.
Meanwhile, the South African economy is wrestling with the dual threats of slowing growth and high inflation. The corrosive mixture makes it difficult for the country’s Reserve Bank to cut rates to help shore up the economy, a move that would run the risk of fanning faster inflation.
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Key USD Events June 3 May: ISM Manufacturing Index June 7 May: Non-farm payrolls, unemployment June 18–19: FOMC Meeting June 25: May durable goods June 28: University of Michigan consumer sentiment
Economic Indicators Three-Month Deposit Rate: 0.27% Gross Domestic Product (Annualised): 2.5% Q1. Inflation: 1.5% (March) Unemployment: 7.5% (April) Trade Balance: -USD 719.4 billion (March)
ZAR South Africa’s currency has been in a funk, and the forces that have driven it downward appear potent enough to pull it down further in June.
Worries about the outlook for Africa’s biggest economy and labor strife in the key mining sector converged recently to send the rand into a multisession losing streak to its weakest level in more than four years against its resurgent US peer. Meanwhile, the South African economy is wrestling with the dual threats of slowing growth and high inflation. The corrosive mixture makes it difficult for the country’s Reserve Bank to cut rates to help shore up the economy, a move that would run the risk of fanning faster inflation. At 5%, South Africa’s benchmark lending rate is far more alluring than the comparable US yield near zero. During better economic times, that would be a positive for the Rand, but with uncertainty in the region high, yield has taken a back seat to safety and capital preservation, with investors preferring highly liquid assets such as the greenback. Economic and labor instability in South Africa also limits the rand’s appeal and makes investment a riskier proposition. While the near-term may augur steady monetary policy by the South African Reserve Bank (SARB) expectation is building that Fed policy has peaked and may abate in potency in coming months, a discernible positive for the USD. Coupled with falling commodity prices, particularly gold, a key export of the African nation, the Rand’s downward slope may persist for the foreseeable future. Key ZAR Events June 3: May Purchasing Managers’ Index June 11: April Manufacturing Production Index June 12: April retail sales July 16–18: SARB Monetary Policy Committee Meeting Economic Indicators Three-Month Deposit Rate: 5.13% Gross Domestic Product (Annualised): 2.1% (Q1) Inflation: 5.9% (March) Unemployment: 25.2% (Q1) Trade Balance: ZAR 15.3 billion (March)
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TRADE TALK Legal
Managing IT risk in the supply chain Every day businesses, both big and small, can fall victim to the pitfalls of managing IT procurement. We discuss here, how best to avoid making some of the more common mistakes. Joycia Young, Partner, Intellectual Property and Kellie Blyth, Associate, Commercial, TMT, Clyde & Co, refer to procurement of an ‘IT Solution’, which could be software, hardware or a combination of the two.
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Detail what you want at the outset This might seem obvious but it is not always easy to identify exactly what type of IT Solution is appropriate. Failing to set out fully to the supplier what you want to purchase is one of the most frequent root causes of failure in IT contracts. Without a clear set of requirements it will be more difficult to judge whether the supplier has delivered what you requested. Try to set out your basic requirements in as much detail as possible so there can be no doubt as to what the IT Solution should be able to do. This information should be set out both in your request for proposal and included in your final contract. It may not be possible at the outset to detail exactly what the supplier should provide to meet your requirements. In addition, the specification of the proposed
ABOUT Joycia joined Clyde & Co’s Dubai office in 2010 and is a Partner in the Intellectual Property practice. Her principal areas of practice are intellectual property and franchising. Joycia has over 12 years experience across the full range of commercial and contentious intellectual property issues. Joycia was admitted to practice in the Supreme Court of New South Wales, Australia in 1998 and the High Court of Australia in 1999. She also qualified as a Solicitor, England and Wales in 2009.
of the project, having an agreed process to promote regular communication between the two parties and setting out detailed reporting requirements so that you have the information you need to keep up to date with progress. Capturing these requirements in your contract should promote issue spotting and make it easier to resolve problems before they impact
Try to set out your basic requirements in as much detail as possible so there can be no doubt as to what the IT Solution should be able to do. This information should be set out both in your request for proposal and included in your final contract. IT Solution may change over the course of the project, depending on the challenges encountered. However, the success of the project will ultimately be gauged by asking the question, “Does the IT Solution do what I originally stipulated it had to do?” This question can only be answered by referring back to the requirements. Ensure you have a good project governance structure in place While simple procurements may be easy enough to manage, the smooth running of more complex projects will depend on a clear governance structure, for example, identifying someone from both sides who will ultimately be responsible for delivery
on the delivery of the project. In the event a dispute arises, you may wish to have an agreed procedure for managing the dispute with timescales for each stage of escalation. When purchasing software, make sure the rights granted meet your business needs In the majority of cases when procuring software, you will be purchasing a licence. Consider what the scope of the licence is: who is permitted to use the software? Is there a limit on the number of machines it can be installed on or the number of users? Is this sufficient taking into account that the number of users is likely to increase over the term of the licence? Are there different corporate entities within
your organisation which will need to use the software and does the licence extend to them? These questions are important so that you understand the licence restrictions and their practical impact. Generally the software supplier will have a contractual right to carry out an annual audit to ensure that you are complying with the licence terms. Breach of the software licence restrictions could entitle the supplier to terminate the licence and sue you for damages. Alternatively, and more commonly, it will give the supplier the right to charge you additional fees for the unauthorised use of the software. Tie your contractual payments to project milestones For many IT Solution purchases it will be necessary to have some sort of implementation services carried out to integrate the IT Solution with the business’ legacy systems. Once the IT Solution has been implemented, the supplier should be required to carry out systems tests, to ensure that the implementation has been successful and the IT Solution is working correctly. Once the supplier is confident that the IT Solution has passed the systems tests, you, as the customer, should then have the opportunity to carry out your own tests to ensure that you are also satisfied with the end result. For complex IT procurements, it might be appropriate to carry out a variety of different types of acceptance tests. In any event, the trigger for payment of the fees under the contract should be formal acceptance by you, the JUNE 2013
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TRADE TALK Legal
customer. The parties should try to agree in writing in advance what the criteria for acceptance are. Ideally, only once your final written acceptance of the IT Solution has been issued should payment under the contract fall due. While it might not always be possible to withhold payment from the supplier until the acceptance tests have been passed, this is undoubtedly the best incentive to ensure that the implementation is carried out effectively and efficiently. Where payment is made up-front and the implementation is subsequently botched, or the IT Solution proposed is not compatible with your existing systems, there may be little, if any, incentive for the supplier to focus his efforts on resolving the problem. Step by Step: Don’t agree to move on to the next stage of the project until the last stage has been completed Try to keep each stage of the project simple and clearly defined. If the project is large and complex, it may have to be split into separate components so that they are more manageable. Ensure you set out the project timetable in your contract. Agreeing project milestones can be a strong motivation for the supplier to deliver on time and can help ensure delivery on budget. Plan for what will happen if it goes wrong The best laid plans often go awry so always plan for what will happen in the event things do not work out and set this out in your contract. Ideally, if the implementation of the IT Solution is unsuccessful and fails to pass the acceptance tests, you should have the right to require the supplier to repeat the acceptance tests until you are happy with the results. If there is a hard deadline for the integration of the IT Solution, time may be running out by the time the acceptance tests have been repeated several times. Should there be a cap on the number of times that the supplier is permitted to carry out the tests? Is there a final date at which point you would like the supplier to 34
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ABOUT Kellie is a commercial and TMT (technology, media and telecoms) lawyer, based in Dubai, with almost 4 years’ experience. Prior to joining Clyde & Co, Kellie was a senior solicitor at a top tier firm in the United Kingdom. Kellie advises on a wide range of technology, e-commerce and general commercial matters with a special focus on information law. Kellie attained the ISEB data protection certificate from the Chartered Institute of IT in the UK in 2011.
admit defeat? Would you want the right to accept part of the IT Solution for a reduced fee? In any case, if the project over-runs, there should be an agreed date or point at which both parties are entitled to cut their losses. Alternatively, you may want the right to bring in a third party to finish the job at the supplier’s expense.
Make sure you have a warranty period With most IT Solutions it will be appropriate to have a warranty period; a set period of time during which if there is a fault or the solution stops working you will be able to ask the supplier to repair the fault at the supplier’s cost. Make sure the warranty period only begins when the IT Solution has been formally accepted by you. If the warranty period begins running on the day the contract is signed with the supplier, or on another date prior to implementation, it may have expired by the time the IT Solution is up and running. You need to have a fair opportunity to confirm it is working as intended and also to identify any latent defects or faults which are not immediately apparent. Assess your ongoing support and maintenance needs Consider what would happen if the solution were to fail or encounter a serious fault. Once the warranty period for the IT Solution has ended, you are as they say ‘on your own’. A support and maintenance package will provide greater security than having
maintenance carried out on an adhoc basis. Similarly, if the IT Solution is core to your business, you will need to be confident that it will be available at all times with minimum periods of down-time and with software, in order to be entitled to fixes, updates and new versions, you will generally need to sign up to separate support and maintenance contract terms. Where you do subscribe to support and maintenance services, think about what resolution times you will need the supplier to meet. If the IT Solution is business critical, the resolution times may need to be very short. Agree with the supplier different categorisations of issue and the resolution time appropriate for each and ensure there is a contractual obligation on the supplier to meet them. Asking for fault resolution commitments from the supplier may not be appropriate in all circumstances, for example where you are purchasing an ‘off-the-shelf ’ IT Solution, and may come at an additional cost. However, they will help ensure that the support and maintenance services you receive are effective and appropriate for your business needs. Conclusion Each of the risks highlighted should be appropriately addressed in the contract with the supplier of your IT Solution. Doing so will help ensure that the procurement is managed effectively, that the IT Solution delivered satisfies your business requirements and that you have a contractual means of redress in the event that the supplier fails to deliver.
Country
focus
MALTA
MALTA
INterview with the PRIME MINISTER
FOREIGN AFFAIRS
ECONOMIC OPPORTUNITIES
JUNE 2013
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COUNTRY FOCUS Interview
A cut above the rest
During a press trip to Malta, we had the opportunity to meet the youngest Prime Minister in the EU – Dr. Joseph Muscat, and it was a refreshing experience to hear from this dynamic leader, his plan for his country. Malta has been doing much better than some of the European economies. What plans are there to keep that going and to remain sort of out of the fire, so to speak?
I want to reassure you that we are a resilient and strong economy and we will continue heading in that direction. Obviously we have all the challenges that any other country in the world faces because of the global financial crisis. But definitely we must say that we do think of ourselves that we don’t only have our head above the water but we are a cut above the rest. Right now we are going through a situation where we are actually stepping up. For example our anti-money laundering provisions - there’s capital that wants to move to our country and we are very conscious of that. This is not a tax haven - this is a reputable jurisdiction within the European Union and we want to keep it so. I think that the fact that throughout all this financial crisis, none of our financial institutions, none of our banks, have required any sort of government intervention shows that this is a resilient jurisdiction where the investment policies adopted by our institutions are sound. Figures show that we are in a very healthy situation. We’re not after a quick buck so right now we are stepping up our procedures to make sure that all the money here is legitimate money.
Right now in light of recent changes in the Middle East, and also with the Gulf states’ regional-political clout emerging faster and faster. Do you see yourself developing or strengthening
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any ties in the Middle Eastern countries and if so which ones? Yes, definitely. We like to think of ourselves not only as a European country but definitely as a Mediterranean country, so that brings in an African variation to all. We do believe that we have a role to play. That role would be extrapolated within four years when Malta will hold its first ever presidency of the European Union, which for us is a very
important step, because its unprecedented. We have only been a member of the EU for nine years and this happens once every 15 years. It also gives us the opportunity to influence the EU agenda for at least six months, where we can steer a number of policies. And definitely because of our strategic location in the centre of the Mediterranean, I think its natural for us to not only put a Mediterranean dimension but also to put a Middle Eastern dimension to
our presidency. There are a number of issues in which I think Malta can play a role. First of all as an honest interlocutor between different countries, as we’re small enough to be trusted. We’re a threat to no one and we’re proud of that. First I’ll talk about the Mediterranean context and then the Middle Eastern context. If you look around the area we are a stable beacon within an area of instability if you look southwards. And I believe that we can be that interlocutor that helps these new governments, these new states/ state institutions get their acts together. For example, in order to have association agreements with the EU. We have the experience of having been a first candidate of the EU, and now a member of the EU. One of the most successful when it comes to fund absorption and I think we can help when it comes to institutional ties over there. When it comes to the Middle East, we have history. Being very much involved in the Israeli-Palestinian issue, we are one of the first states in the world to recognise them. And we’re proud of those decisions that have been made. We’re very interested in the Gulf region and we also have interests in the new markets, in the new models being promoted over there. The energy sector that’s our top priority as a government. We are totally reliant on fossil fuels which is inconceivable for an EU state. So we’re moving away from oil to gas and then to renewables, and that is where we believe that there can be state-to-state, initiatives, which over the past few years have grown cold. One of the things that this government has put forward is that we have separated European affairs from Foreign Affairs when it comes to Ministry. Until now and over the past 15 to 18 years Foreign Affairs have been Euro-centric because of the exigencies. When we became a member state of the EU it absorbed a lot of energy and a lot of institutional capacity along with most of our efforts. So now, we have separated the European function which actually for us has now become almost a domestic policy.
Because quite a substantial number of laws are coming from the EU. We separated EU matters from foreign affairs function because we want our foreign affairs minister to concentrate more on relations with the Middle East which have been, I wouldn’t say neglected but because of other exigencies, have not been given the necessary focus.
Because of Malta’s strategic location, it is a gateway to Europe. What further steps are you taking to promote relations between Europe and the Middle East in terms of location? Well, I do believe, and I think that experience has shown, that this is a good strategy and that most of the enduring relations between countries are those based from people to people. Let’s say our historic relations with Libya for example- if they were based form government to government, businessbusiness they would have collapsed when the regime changed. Instead, the fact that they were based on a sincere mutual friendship and respect between the two people, nothing has changed for us in the sense that we’re still friendly with [them]. We should make business a lesser priortiy, the first and most important thing is to understand each other and to have a genuine interest in each other rather going to any other country and seeing what contract we can get and what we can sell. I think that can give you some results for some time, but it will be very superficial and it could be counterproductive at the end of the day. So the attitude that we would propose is a more long-term attitude that will see that there is a more genuine understanding of our countries.
Most countries have marginal and annual deficits, it has become a big concern especially in EU. In Malta what are the things you do to handle this? We as a European Union state member, are governed by a number of treaties which don’t allow us to run at a deficit which is more than 3% of our GDP. There might be issue every now and then on whether it is percentage more or
percentage point less. But our perspective is that there should be restraints on government spending but in order to have a realistic and durable deficit reduction programme you need economic growth. Without growth there can be no realistic reduction in the deficit because you can’t cut in the expenses after a certain extent. The real solution is to have new markets to look at growth and to look at new ways of doing things. We cannot just spend everything but we need to generate new markets. And I think Europe is coming around to that sort of attitude.
What are your plans for this country? What are the key areas for growth?
We are definitely looking at revamping our energy sector. The sector that has not allowed us to grow as much as possible in the non-financial services sector. It has undermined our cost-base so having a better energy mix would help us attract more investments. Apart from that we are very much interested in creating new jobs in the tourism sector, when it comes to quality tourism. The numbers are quite healthy over here. We are interested in penetrating new markets and not being solely dependent on mostly European markets, which is one of our challenges. Because of the visa regime, we want to try to find out new markets be it in the Middle East or elsewhere. We are also very much interested in the green jobs, mainly environment-related jobs. Finally, but not solely, education and health. I think we can say, and reports show, that the health technology used in this country is one of the most cutting-edge in the Mediterranean. I think we have some of the experts in various fields in the Mediterranean, operating from here. And that’s what we can promote for this region. I think we have some of the best health service in the Mediterranean. Also when it comes to education, many people from around Europe come to Malta to learn English rather than go to the UK or Ireland, because it’s a safer and cheaper place. I think that is a model that we can build up on. JUNE 2013
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COUNTRY FOCUS Foreign Affairs
At the crossroads of civilisations The Ministry of Foreign Affairs serves a window to the world on what Malta has to offer. We caught up with Dr. George Vella, Minister of Foreign Affairs to get a better grasp on Malta’s political relationship with the GCC countries.
Malta can be considered as a gateway for GCC countries. At a policy level, what has been the strategy to engage GCC countries and is there a particular interest in the country? I have to say that, theoretically one would have expected and hoped that our relations and context with these countries would have been much deeper and much more fruitful. We’ve had relations established practically in the 70’s. I wouldn’t say that nothing much has happened, because there was a connection since there are a lot of these people who settled in these countries for work. With the Emirates - there are professional people who went there to exercise their profession, people who are in the financial sector and who have made a name for themselves. And today I know, that there’s quite a bit of community which gives a good name to Malta. And what I plan to do is try to build on these relations. We have an Embassy in Saudi since the 70’s. Infact we have an Embassy in Dubai since 2003 – that’s only 10 years ago, and we opened an Embassy last year in Kuwait. People who are as old as I am know that our country benefitted a lot from what was then known as the Kuwaiti fund, from which we got a lot of money to develop agricultural methods and irrigation methods in my country.
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Then there was a period when relations was not as fruitful and hopefully now we are trying all we can to work on those relations, see what the opportunities are. This is why I said in the beginning that as a Foreign Minister we have more time in our hands to dedicate to these relations. Today, our integration into the EU is settled, it is something that has happened practically 10 years ago in 2004. And thus, we move from there to discover, to try to find what opportunities we can work on and enhance between our country and this region.
Are there any political areas in particular you wish to strengthen with the UAE or more widely Gulf countries or Middle Eastern countries? Any countries in particular you want to focus on?
Well, when we have to explore the possibilities. Talking about BRIC countries is very in today. There’s no country in particular we are aiming at. Our relations with China have been growing from strength to strength. That is one country that we definitely have to explore all possibilities of cooperation plus, the connection is long standing, and there are many things happening already. I would also say Russia, because Russia today is a very
economically oriented and we have to use our Embassies to promote Malta’s culture, interests, investments, and traits. Because after all that’s what we’re after. We want to bring money to the country to make it peaceful and prosperous. But then again this has to be tied up with the foreign policies which will contribute to stability and security in the Mediterranean and the regions around us. Because, however wealthy you are, however good your finances are, if the environment around you is unstable then you’ll end up being affected by that. We’ve all had experienced what happened in North Africa these last three years, and whether we like or not, I mean I wouldn’t say that we are on the same boat, but the waves that they were creating were rocking our boats as well. Because people keep away from investments when they see that there is instability and we all know that investments need a stable political environment. So this is the basis of what we are doing. We’re trying to translate our relations, our foreign policy and our new connections into trade, into export opportunities and economic development. One thing which I have to say with the GCC countries is that, you have to understand
We’re trying to translate our relations, our foreign policy and our new connections into trade, into export opportunities and economic development. important country with whom we have to explore all the possibilities (but at the same time being careful not to have an impact like Cyprus had), because of its dominance in the banking sector. They are establishing their own strength on economic prowess around the globe. I mean, Malta is a small country, and we’re not thinking big, we’re not talking about influencing the world trade but being a small country, even a small drop or a small percentage of change is important for our economy. And this is the trust that we intend to give to foreign policy. We have to make it
that we are seen as a good interlocutor between the EU and Arab countries. In Malta we have set up also a European Union-Arab League Liaison office which was intended to try to facilitate the bringing together of EU Ministers and Ministers from the Arab countries. I cannot say that it has actually fulfilled its mission. I’m still critical that it could have delivered more, but then again we have to take it into the context of what happened. The current situation in Europe and the Arab spring sort of tipped the balance, and things couldn’t move on as smoothly as expected to. That office is still
Dr. George Vella, Minister of Foreign Affairs, Malta
open and we plan to use it to bring these two worlds together. We don’t believe in any clash of cultures or civilisations. We believe the Mediterranean is actually what tradition call as the ‘melting pot’ of these cultures, where they meet. Malta, has got the benefits today of being a member of the EU but at the same time it is also very much respected by Arab countries because we do understand the mentality. Malta is actually built on being at the crossroads of shipping civilisations and developments. So we still hope to keep and enjoy the respect of these countries. As I said this EU-Arab League Liaison office is very interesting instrument which could be used and hopefully if it is revived and given a certain amount of push we will see to it that we bring them closer and have more frequent contact between this two sides. Aside from that, I also have to say that Malta has participated very actively in any parliament reform that brought together countries from the North of Africa like Libya and Egypt with the EU. And Malta is very active, we have the history of being amongst the first people to speakup in this forum and we hope to keep that. So hopefully, we see more interest from gulf countries come to Malta. As we have investments, including the SmartCity, and also investments in the telecomm industry. Because as I said, it all boils down to creating wealth, creating prosperity stability and a happier population [nation]. JUNE 2013
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COUNTRY FOCUS Economy
The path to prosperity Dr. Christian Cardona, Minister of Economy, Investment and Small Businesses, Malta, spoke to us about the advantages Malta has as an economy, which make it an ideal location for investment
D
r. Cardona started the discussion by highlighting the interests of Malta, “We are chiefly interested in creating more jobs in our country, and to create more jobs we need to have more networking internationally. And that is one of the first things that we embarked upon in these two weeks of coming into government – the structuring of government entity which works in the field of accepting foreign direct investments into Malta. We know that at this time, the climate internationally in the European Union and the Eurozone is not a very 40
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healthy one. But we believe that we can help Malta achieve more even at this time.” He further added, “I am sure that you know that Malta is a very friendly nation – As a new government, we have political stability, we have an army of people who are ready to work. And they are very skilled people, we also have language proficiency which gives us a competitive edge. We are working on our infrastructure. We are working on digital economy.” He also pointed out that the government believes in letting the private sector work. In the last five years, people from the
private enterprise have been telling us “Our problem is that, we don’t need subsidies, we don’t need your help. We need the government to let us work.” Dr. Cardona said that they are trying to decrease bureaucracy by 25%, and in the coming days they are going to appoint a specific person who is going to act as a commissioner for the simplification of government administration. According to him, the biggest concern businesses have is not finance and people but the bureaucratic challenges (duplication of work) which needs to be tackled.
Dr. Christian Cardona, Minister of Economy, Investment and Small Businesses, Malta
“Our message to the media, is mostly we are concerned with how Malta is seen at the moment by the international media. As you know, there was and there still is the Cyprus problem. Dominantly we have to distract and detach ourselves from the problems that they have in Cyprus at the moment. There was also a comment by the Central Bank Governor of Malta to the media, where he said that the two
resources, skills, friendliness and education which can make Malta excel as Malta. Out national identity is there and we cannot change it, so the fact that we would like to emulate what you did in your country, is a good comparison. But we have to keep our national identity.” He further added that every country has its own history and culture and therefore Malta needs to identify its sectors where it can excel. So what sectors can be attractive to Gulf investors? To this Dr. Cardona said that Gulf investors could be interested in large scale investments, such as the SmartCity Malta. Also, according to him manufacturing sector might not be of much interest to Gulf countries because of tax and labour laws in Malta, which are not as lenient as the Middle East. Secondly, investments coming from the Middle East could be those that could tap into the EU and use Malta as a base. “That is one of the examples, in retrospect I think is a typical example of what you are mentioning, it’s a huge pharmaceutical company and they intend to get into the EU. How? By using a jurisdiction which is in the EU already – Malta. To the Gulf we can offer our jurisdiction to a number of sectors. SmartCity Malta is a particular example of a larger side of investment (Dubai Holdings, SmartCity Malta and also the Telecom of Malta),” remarked Dr. Cardona.
Dr. Cardona said that they are trying to decrease bureaucracy by 25%, and in the coming days they are going to appoint a specific person who is going to act as a commissioner for the simplification of government administration. countries have different portfolios so you cannot compare Cyprus to Malta,” Dr. Cardona was clear to point out. When asked if Malta aspires to be the Dubai of EU, Dr. Cardona said that it’s good to be compared to success stories. “Geographically we have our unique location and we have our own natural
“I agree that we need to try and get our people here to open factories. But we can also serve as a jurisdiction leading to the European zone, and not only into the global and international markets. It’s one of our targets that we have to work on. Another thing that we have to focus on, is – we need to have people in our diplomatic mission,
who are there not only for diplomacy, they have to get their networking done. It is sensible for our country to have our diplomatic missions focused on trade, investments and on how they can attract people to our country,” was Dr. Cardona’s opinion. He also said that the Double Taxation Avoidance Agreement (DTAA) with the UAE, which was signed in 2009, has helped promote business and trade between the countries. However, he was honest enough to point out that setting up a business takes more time in Malta, than, say Germany or Singapore. For instance, it takes four times more time than Germany to get licences and more. As a result the parent company ends up taking the business to another country. “The unprecedented fight against bureaucracy has to start now and continue. There are too many steps and departments to start and expand a business and all this needs to be synchronised. We need to centralise and have a one-stop shop. We need an entity which will do this work in one go. We have to stop the duplication of work. Time is money. It’s a long-term plan,” something the new government intends to do according to him. It was pointed out that according to a report by HSBC, Malta’s trade is supposed to grow by 83% by 2020. Are there any other economic indicators which could highlight the growth for Malta? To this, Dr. Cardona said that Malta needs to achieve the European target for labour employment by 2020, which means it needs to have 75% of the working population to be employed. “We need to encourage female participation. 50% of our graduates are females but they do not join the workforce because they have to take care of the house. So we’ll work on providing them support, such as child care, so that they can come out to work.” On that note, we came to the end of our discussion with Dr. Cardona and it was easy to get positively influenced by his optimism and plans for the coming years. There is no denying, doing business in Malta will be easier and faster soon. JUNE 2013
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COUNTRY FOCUS Tourism
The melting pot of cultures With its Middle Eastern and North-African influences, Malta is an amalganation of cultures and history. Aparna Shivpuri Arya got the opportunity to speak to the Minister of Tourism, Mr. Karmenu Vella, and got to know so much more than what meets the eye.
W
e began our conversation by asking him his opinion on how the Eurozone crisis has impacted Malta. To this the Minister said, “Even though there is pressure, I would say that Malta is the country with the safest and most progressive economy and we haven’t been hit that bad by the crisis. However, apart from pressure, there’s always a bit of anxiety while we wait to see what’s going to happen. Because although we are not directly affected by the crisis, indirectly obviously we will be affected as Malta depends a lot on external trade, whether its incoming tourism, or it’s outgoing exports. So, if our partner countries Germany, UK, Italy, and France and even the smaller countries [like] Greece are not performing well, indirectly we are affected.” Mr. Vella further elaborated on this and stated that Malta has one of the best financial regulations in Europe. “I wouldn’t say it’s a purely conservative approach but, it’s a cautious approach and we’ve always done things in a cautious manner because we’re a small economy. Perhaps a small mistake in a big country will not affect anything, but a small mistake in a small country might have disastrous effects. So that’s why we’ve learned over the years to tread cautiously wherever we go.” 42
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Karmenu Vella, Minister of Tourism
Moving on to the tourist influx, when we asked Mr. Vella how important is the Middle East to Malta as a tourist partner, he was quick to point out that even though in terms of numbers they are still at an early stage, there has been a steady growth. “I would say it’s very important, because we would like to have a mix of incoming tourists. And having tourists coming from the Middle East and the Gulf, would add to the mix of what we really want. In terms of the existing numbers, it’s still small but steadily growing. In terms of importance for us, I would say it
would be good if we would have more and more tourists coming from those areas,” he remarked. The Middle East market is also interesting for them for the number of expat families living over there as well. “So once we are marketing Malta in the Gulf and Middle East we would be targeting even those Europeans who are living there,” Mr. Vella highlighted. His colleagues at the Ministry added to this and said that Emirates is increasing its flight capacity to Malta and now with daily flights it has made it easier for people from Malta to get to the Gulf and beyond and vice versa. “The success of what’s happening in Dubai is important to us, because of the addons that we get beyond Dubai. Obviously, if we don’t have a successful operation with Emirates [airlines], then we risk losing the UAE. This means we will lose the Middle East market and the market beyond that, so we are looking at it in a much more global way. And the MICE business is an area that is particularly interesting, and in the last few months the visa situation has improved. There’s now a much simpler way for people to be able to come to Malta, so again that will facilitate traffic in terms of tourism and MICE business,” they stated. One cannot help but notice the Arabic influence in Malta, so obviously we were tempted to ask if there is a specific strategy for targeting the Gulf families visiting Malta? To this Mr. Vella smiling said, “Lately, I had some friends come over and the first thing that impressed them was the language culture and they started picking up Maltese. The reason is that, because our language is the only language which has an Arabic origin and written in Roman letters. I would say that grammatically our language is still 95% or even more Arabic.” “And as a destination we are a safe destination. We have extremely low crime rate so people feel safe here. And what we’ve noticed as well is that the Muslim families tend to travel even with children and families. And they want to feel that it is safe for them to bring their children so that notion of safety is very important.”
Malta also scores over other tourists hotspots like Cyprus and Turkey, with its “year-round” perfect weather. Also when people come here for business, they are able to cover a lot of meetings in a day because of the short distances, something that won’t be possible in a big European city. The Minister also spoke about education tourism, “We’ve got a good number of English schools. We’ve got one of the best Universities in Europe and a good number of incoming students who actually stay on the island for months, and those who take full-time courses here as well. I think that is one area where people and families from the Middle East and the Gulf would feel safe, sending their children over here.” He also pointed out that Malta offers good value for money and always scores very high on product, quality and standards. He also agreed that Malta is an untapped destination.
“In fact believe it or not, there are even some European countries where awareness about Malta is still a big question.” Malta also scores over other tourists hotspots like Cyprus and Turkey, with its “year-round” perfect weather. Also when people come here for business, they are able to cover a lot of meetings in a day because of the short distances, something that won’t be possible in a big European city. Moving on to the government’s priorities for the tourism sector, Mr. Vella said, “Tourism in Malta has always been a top priority mainly due to the fact that
tourism contributes directly about 30% to our economy. Added to that is the fact that the effects of the tourism industry are immediate. Because the tourists are spending in souvenir shops, in restaurants, so the interaction between the tourists and the Maltese in economic terms is much faster. That’s why we give a lot of attention. Plus the fact that most of the investment in Malta, when it comes to hotels especially, are all 100% Maltese investments. So again, that’s why it is a top priority.” Also Malta they has a fully-fledged Ministry of Tourism incorporating amongst other things aviation, national airlines, tourism institutes, culture and heritage under one umbrella. The government is doing a lot to entice more investments from the private sector, to be channeled into this sector. It does a lot and spends a lot to market the Maltese products overseas with so much effort being put, it’s time to explore this mystic country. JUNE 2013
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COUNTRY FOCUS Malta Enterprise
The right investment destination Malta Enterprise (ME) is the national development agency responsible for promoting and facilitating international investment in the Maltese Islands by offering investors excellent business opportunities and tailored services. As part of a press delegation, we got the opportunity to know in detail about the work being done by the organisation.
M
alta Enterprise is also responsible for the growth and development of Maltese enterprises both locally and beyond their shores. The government tasks Malta Enterprise to do all that needs to be done to attract more investments in Malta. That means, it administers the incentives that the government of Malta provides. Additionally, it also allocates industrial space in Malta, such as factories as well as industrial space within the Aviation Park and other parks dedicated to other sectors. Also, apart from managing the incentives, they also manage all the industrial properties in Malta, such as factories and also the 44
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Safi Aviation Park and all the other parks dedicated to various sectors. Malta’s interest in the Gulf region is on two points. First, the general value proposition - the general investment climate in Malta is cheaper than most European Union countries, and provides an interesting proposition for companies who are coming from the Gulf. But it is also because Malta is developing certain areas. For instance, the SmartCity Malta, which is being developed by TECOM, is a 100% private investment. Malta Enterprise is also interested in investment houses, particularly situated in the Middle East, to engage with them on their interests in these kinds of specific
developments. Malta has a commitment to develop the life sciences sector. Basically in in the last 15 years, the country has already become a center for manufacturing of generic pills and manufacturing of medical devices. So, the tubes used in drip sets for incubators for babies, in a lot of Middle Eastern countries, are actually designed and manufactured in Malta. Why Malta? Top ten reasons to invest here • Pro-business government with easy access to decision makers; • Nimble economy; • Political and social stability;
• • • • •
Highly skilled English-speaking workforce; International finance centre; Excellent ICT infrastructure; Advantageous corporate tax system; Strong work ethic and high productivity levels; • Easy access to and strong diplomatic and trade relations with North Africa and the Middle East; • Safe and pleasant lifestyle. While tourism and manufacturing take the major chunk of GDP, financial services and ICT sector are very important to Malta. Manufacturing still accounts for about 13% of their GDP.
ICT A lot of development has happened in the ICT sector in the last 15 years. Among others, Malta has 10% of the global players in online gaming. This is in itself a demonstration of the good connectivity of Malta. Given that players have very low tolerance towards slow and unreliable connection. The fact that such companies are in Malta, demonstrates the advanced of the ICT infrastructure. But apart from that, Malta has major companies that have come from the Middle East. For instance, TECOM, the operators of the Dubai Internet City are heavily present in Malta. They have built the SmartCity Malta which is a self-sustained town in IT and media industries. This also demonstrates the kind of value proposition Malta has for companies based in the Gulf. Companies based in the Gulf can use Malta as a Eurozone stable economy to tap not only the European market but also to serve as a hub between Europe and North Africa. Malta is looking for companies in payments and financial services such as, e-commerce and so on. Among others, Malta Enterprise is trying to combine the strength of Malta as a financial services center and the strength of Malta as an IT hub to try to go for companies that are involved in this area.
Maritime sector There is no denying that Malta is known internationally mostly for the maritime sector. It has the largest ship register in
the EU and one of the largest globally. That means that their presence on the maritime landscape in general, including their participation in the International Maritime Organisation, is very active. Again, Malta happens to be in the middle of a very busy area, of not only for commercial vessels but also, for passenger ones. From the maritime area Malta Enterprise will now aim to go to the next step by trying to attract activities such as – designing, testing and manufacturing of nautical instruments. Malta is a good base for these things not only because of the location but also because of the education system and how it is set up. Besides shipping companies, such factors are also important when targetting companies involved in the oil and gas industry. In fact the other sector in which Malta Enterprise is trying to attract investment in is energy – mostly oil. The strategic location of Malta and the availability of skills at a good price would position the country favourably for maintenance and servicing of equipment that is typically used in the oil and gas sector. With what is happening in North Africa, Malta has an emerging market practically on its doorstep. So, while Malta Enterprise is also keen about Brazil, China and other emerging markets, they have not forgotten that they have an emerging market that is very close to them and which can offer a wide range of opportunities, particularly thanks to the good diplomatic and commercial relationships Malta has with its neighbours in North Africa. Aviation Aviation is an interesting area as well. Lufthansa has built around a cluster in aviation which besides a number of small operators also comprises operators such as Medavia and SR Technics. The latter is owned by Mubadala (majority ownership). Malta Enterprise is also talking to conversion facilities – companies that do conversions on aircraft. And, they are also trying to develop Malta as a manufacturing base for aviation components. Of course training, is also an interesting area because of the huge demand for training for pilots and so on. It is evident
that Malta is strategically located to be able to offer good courses on international standards with prices that are substantially cheaper than that in Europe. So to summarise, Malta’s value proposition: • Malta has the stability but also, in Malta Enterprise’s opinion, the most competitive tax system in the European Union. Through this system, which is fully sanctioned by the European Union, companies do pay a corporate tax rate of 35%, but then upon distribution of dividends they receive refunds which effectively means that international shareholders only pay 5% tax in Malta, which is cheaper when compared to other European countries. • The fact that people in Malta are skilled and speak English • And at the same time the competitive cost structure of operating in Malta in general tends to be cheaper than that in Europe.
There are no restrictions on the number of foreigners who can be employed. As Malta is a part of the EU, there is free movement of people from the entire region. People coming in, from third countries not from European Union would typically require visas and actually one thing that Malta Enterprise is trying to do is to facilitate as much as possible the issuance of visas. But in terms of policy rather than procedure. Malta is very much aware that in certain sectors it cannot sustain by employing locals only. So the government has adopted this approach of being as open as possible towards expats. Experts from Malta Enterprise highlighted the GCC countries are mostly interested in IT and Education. The challenge is that a lot of times in GCC countries you have companies that are let’s say, not indigenous. So they will be international companies with an important regional sector in the GCC, and with those companies Malta struggles, because of decision makers in those companies. And Malta Enterprise is after indigenous companies who can decide themselves and they can engage with. After getting to talk to Malta Enterprise, it was evident that Malta is serious about business! JUNE 2013
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COUNTRY FOCUS Finance Malta
Secure your investments:
Look at Malta! F
Finance Malta was set up in 2007 as a public- private partnership to promote Malta’s International Financial Centre. We bring you the details of the banking sector of Malta and what options are available to investors.
inance Malta is a member based organisation with 200 corporate members from various financial services sectors and 53 affiliate members from other complementary economic sectors. The organisation has a two-pronged remit: • Strengthen Malta’s financial services brand through a comprehensive communications programme • Create networking opportunities for its members. Finance Malta aims to: To assist practitioners to market the Malta concept and advantages (financial or otherwise) in order to attract foreign direct investment in the following areas: • intra group financing operations (group treasury); 46
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• international trading operations - managing the administration/logistics of a company’s exports; • holding companies for EU/non-EU subsidiaries; • location for intellectual property so that royalties flow to and from Malta; • holding overseas immovable property; • investment portfolio/trading; • back office operations and call centres; • services connected with the aviation sector such as private aircraft management, aircraft leasing operations, aircraft financing; • the attraction of Malta to captive insurance companies, insurance companies, back-office insurance services and insurance out-sourcing;
COUNTRY FOCUS Finance Malta
Professional Investors Fund: Key Features Experienced
Qualifying
Extraordinary
Leverage
100% of NAV
Unlimited
Unlimited
Minimum investment
Euro 10,000 or currency equivalent
Euro 75,000 or currency equivalent
Euro 75,000 or currency equivalent
Investor Eligibility Criteria
Yes
Yes
Yes
Investment Restrictions
Yes
None
None
Regulatory Reply Timeline
7 days from submission of full documentation
7 days from submission of full documentation
3 days from submission of full documentation
Self-Managed Scheme Structure
Yes
Yes
Yes
Source: Finance Malta presentation
• the attraction of Malta as a domicile for investment funds in the provision of administration and investor services • the promotion of the local capital market by attracting overseas companies/ institutions to list their financial instruments on the local market and the provision in Malta of trading, clearing, settlement and custody services in respect of financial instruments; • other services offered by the financial services sector; and • Other consultancy, management, planning, estate agency and other ancillary services in support of and conducive to the practical needs of operators within the financial services sector in Malta.
According to Finance Malta, the country has a fast growing funds sector. Kenneth Farrugia, Chairman, Finance Malta, said that there are 530 funds, 109 investment service licences, 27 fund administrators and six custodians. He further added that Professional Investor Funds are very flexible in Malta. Funds can be set up as an investment company, a limited partnership, contractual fund or a trust. Investors have the option to choose from three classes of PIFs aimed at various investor profiles ranging from quasi-retail to institutional investors. It is evident from the graph above that financial services and tourism remain the key sectors driving Malta’s growth. Talking about the key operational factors that contribute to Malta’s success, Kenneth said, “Comprehensive regulatory and 48
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Source: Malta’s Attractiveness Survey 2012
Kenneth Farrugia, Chairman Finance Malta
legal framework, strong presence of legal, audit and accounting expertise coupled with highly developed infrastructure has contributed to Malta’s growth.” He also
pointed out that Malta is very committed to making investments in a strong national educational system, which has resulted in a highly qualified workforce having a very strong work ethic. It is interesting to know that Malta is not dependent on any one country, when it comes to the banking sector. It does have a large banking sector, now boasting 27 units. But domestically it is dominated by two relatively large banks, Bank of Valletta and HSBC Bank Malta, and both these banks have a very extensive deposit and asset base. The two banks’ overall conservative approach, much encouraged by the regulator, has paid dividends in terms of maintaining the stability of these institutions. So it is unfair to compare Malta to Cyprus because the similarity ends with both being islands and members of the EU.
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COUNTRY FOCUS Investment
Make a “smart” move!
SmartCity Malta is the brainchild of a joint venture between Malta and SmartCity. We visited the facility to get a first-hand experience of this amazing collaboration.
I
nvesting in SmartCity Malta translates to investing in a powerful global network of knowledge-based townships, which gives enterprises unprecedented access to a variety of important global markets. SmartCity Malta empowers businesses with reliable state-of-the-art ICT and social infrastructure, a host of IT, media and production services and partnership opportunities across all SmartCity sites. SmartCity is a conglomerate promoted by Dubai Holding member, through TECOM Investments, to develop and manage Knowledge Industry Townships worldwide. In Malta, SmartCity is the country’s largest knowledge based cluster. It forms a part of the ambitious vision of positioning Malta as centre of excellence for companies aiming to operate in the European and North African regions. 50
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Software firms from various countries like China, and the US, that require sophisticated sales engineers from regional European businesses have flocked here, leveraging on the English-speaking workforce at a cost significantly lower than other English-speaking countries. SmartCity Malta, in conjunction with the Government of Malta will also be providing the services of the Government Services Unit (GSU), a single window clearance for business partners to benefit from. This Unit will provide a comprehensive range of administrative services required for setting up and running a business at SmartCity Malta. It will also help in fast tracking the process of procedures such as work permits, residence visas, trade licenses and more. SmartCity Malta also leverages on the network of business parks in Dubai such as
Dubai Internet City, Dubai Media City and other global networks to get to know their experiences and share it locally. No other business park can pride itself for having such an international network of business clusters and with such a wide array of industry groups - media, technology and education among others. SmartCity made a direct investment of EUR 35 million in SmartCity Malta, which now brings up the company’s capital to EUR 66 million confirming the company’s commitment to the Malta project. On completion of the second phase, the lagoon area and retail buildings will provide a perfect setting with the Mediterranean Sea as a magnificent backdrop to be enjoyed by all those who visit and connect with SmartCity Malta That would be a smart move indeed!
Find out why 9 out of 10 clients would recommend our services... Access to the best candidates Working with Robert Half opens the door to a global network of over three million finance and accounting professionals and teams dedicated to the specialist areas you require. Fulfilling your business needs We get to know your organisation and exact requirements from the moment we start working with you. More than just recruiters We also provide a full consultancy service, giving advice on recruitment strategies. Each year we publish a free salary guide specifically for the region which provides a forecast of salaries for accounting and finance staff.
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