Trade and Export Middle East - November 2011 by Trade Export

ISSUE 2 | november 2011

A practical guide to going global

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inside: Event listings Country Focus PERFORMANCE survey Commodity watch Industry insights Policy watch

Saudi Arabia:

Export Powerhouse Ahmed Mohmmed Al-Ghannam Director General, Saudi Export Program

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EDITOR’S LETTER

Publisher Dominic De Sousa COO Nadeem Hood Managing Director Richard Judd richard@cpidubai.com +971 4 440 9126 EDITORIAL

Timing is everything

Group Editor, CPI Business Ketaki Banga ketaki@cpidubai.com +971 4 440 9115

On the heels of a fantastic reception to the launch edition of Trade and Export Middle East, we are proud to present the second issue of the magazine.

Editor Meghna Pant meghna@cpidubai.com +971 4 440 9130 Contributing Editors Mike Byrne mikeb@cpidubai.com +971 4 440 9105 Aparna Shivpuri Arya aparna@cpidubai.com +971 4 440 9133 Ali Koaik ali@cpidubai.com +971 4 440 9140 ADVERTISING Commercial Director Chris Stevenson chris@cpidubai.com +971 4 440 9138 CIRCULATION Database and Circulation Manager Rajeesh M rajeesh@cpidubai.com +971 4 440 9147 PRODUCTION AND DESIGN Production Manager James P Tharian james@cpidubai.com +971 4 440 9146 Art Director Kamil Roxas kamil@cpidubai.com +971 4 440 9112 Head of Design Fahed Alsabbagh fahed@cpidubai.com +971 4 440 9148 Photographer Cris Mejorada cris@cpidubai.com +971 4 440 9108 DIGITAL SERVICES www.tradeandexportme.com Digital Services Manager Tristan Troy Maagma Web Developers Jerus King Bation Erik Briones Jefferson de Joya Louie Alma

Of late, most traders have been talking about Saudi Arabia and its growing importance in the Middle East and North Africa (MENA) region. The acceleration of demand from Asia, particularly China and India, and the recent political turmoil in the MENA region, has led to a boost in oil prices. This has ensured a significant growth in the export value of petrochemicals, especially in Saudi Arabia, which is the world’s top crude exporter, and the most influential member of the Organisation of Petroleum Exporting Countries (OPEC). According to a National Commercial Bank report, by 2015, Saudi petrochemical production will expand to 9.2% of global supply. This, along with the fact that the Saudi government is spending USD 400 billion in the five years to 2013, in order to build universities, hospitals and railways, as well as boost power generation, presents trade partners with a window of opportunity. To bring you the latest on this hot topic, Trade and Export Middle East spoke to Ahmed Mohmmed Al-Ghannam, Director General of the Saudi Export Program, about the importance of KSA’s exports in the Middle East region and the Kingdom’s move towards non-oil exports. Last month we interviewed Her Excellency Sheikha Lubna Al Qassimi, UAE Minister of Foreign Trade, and this time we have featured another important figure in the Middle East trading community. His Excellency Abdul Rahman Saif Al Ghurair, Chairman of the Dubai Chamber of Commerce and Industry, explains why Africa will become a major trade partner for the UAE and how the growth of retail and tourism will create opportunities for traders. As usual, we look forward to your comments and feedback, and will not rest till we have made Trade and Export Middle East your go-to guide for all things exported and imported. We hope you enjoy the read!

online@cpidubai.com +971 4 440 9100 Published by

Meghna Pant, Editor, Trade and Export Middle East

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Branch Office PO Box 13700 Dubai, UAE Tel: +971 4 440 9100 Fax: +971 4 447 2409 Printed by Printwell Printing Press LLC © Copyright 2011 CPI All rights reserved While the publishers have made every effort to ensure the accuracy of all information in this magazine, they will not be held responsible for any errors therein.

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November 2011

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resources

November 2011

updates

ISSUE 2

november 2011

GLOBAL WATCH: International news and trends with domestic trading relevance.

POLICY: A snapshot of updated standards and regulations from government and industry bodies.

snapshotS: A quick look at news and trends that will impact traders in this region.

LOGISTICS: Amidst its most ambitious advertising campaign to date, DHL Express, a leading international express services provider, divulges its expansion plans in the UAE.

LEGAL: It is critical for every trader to know the difference between trademark, patent, copyright and trade secret. Manijeh Khan from Al Tamimi & Company explains these sub-categories and how to apply them to protect your goods and services.

technology: Matt Parker, Market Development Manager at Zebra Technologies, discusses how Radio Frequency Identification is evolving to become more user-friendly, and outlines the benefits of new on-pitch encoding developments for the modern day supply and transport chain.

MARKETING: Social media has given birth to a new breed of customer – the social consumer – and as a trader it’s important to know that marketing to these consumers requires a fundamentally different approach from that of traditional marketing, says Abbas Aldina, Director, Logicks.com.

how to identify foreign markets: Manufacturers who decide to export, face the major problem of identifying an appropriate market for their goods or services, says Dr. Ashraf Mahate, Head of Export Market Intelligence at Dubai Exports, and Vice Chair of the Economic Policy Committee, Dubai Economic Department.

HOW TO ENTER FOREIGN MARKETs: How does a local beverage manufacturer enter foreign markets and generate millions in sales? Hywel Rodrigues, Export Sales Manager at Arab Beverages Establishment, tells us how.

interview: His Excellency Abdul Rahman Saif Al Ghurair, Chairman, Dubai Chamber of Commerce and Industry, discusses the trade opportunities, challenges, sectors and trends for exporters and importers in the Middle East region. trade talk inTERviEw

Interview with the Director General of Saudi Export Program: Ahmed Mohmmed Al-Ghannam

hmed Mohmmed AlGhannam, Director General, Saudi Export Program talks to Trade and Export Middle East about the importance of Saudi Arabia’s exports in the Middle East region, the role performed by Gulf countries in global economics, and how the Saudi Export Program is supporting Saudi non-oil exports and developing trade exchange with friendly countries.

What are the main objectives of the Saudi Export Program and how does it seek to accomplish them?

The Saudi Export Program (SEP) of the Saudi Fund for Development (SFD) was established in 1999 as the official export credit agency of Saudi Arabia. The main objective of SEP is to contribute to government efforts in diversifying national incomes by providing export facilities to Saudi exporters and foreign buyers (importers) of non-crude oil of Saudi product and services. The facilities contain competitive financial, insurance and guarantee instruments. The main objectives of SEP are summarised as follows: l Develop and diversify non-oil exports. l Maximise the competitiveness of Saudi exporters by providing export credits to foreign buyers and banks. BiograPhy of ahmed mohmmed al-ghannam

Ahmed Mohmmed Al-Ghannam is the Director General of the Saudi Export Program since 2005, and

Deputy to the Managing Director of the Saudi Fund for Development since 2008. Ahmed has been involved in a variety of roles with the Saudi Fund for Development, starting in 1980 as an Economic

Specialist. From 1990 to 1994, Ahmed worked at the world Bank in washington D.C. as an Alternate Executive Director. Ahmed has a Master in Economics (1984) from Central Michigan University, USA,

and a Bachelor in Economics (1980) from the King Saud University, Riyadh, Saudi Arabia. Additional information about Saudi Export Program can be found on their website: www.sep.gov.sa.

What are some of the services that the Saudi Export Program offers exporters? SEP offers Saudi exporters a range of services including: l Export funding facilities, which include export facilities prior to shipment of goods and/or postshipment. l Export credit insurance and guarantees, which include various types of insurance policies and guarantees to cover non-payment risks associated with export transactions. l Line of credit to commercial banks and corporations importing Saudi products. l Marketing services, which include introducing the services of the program to all beneficiaries, issuing brochures and newsletters, participating in local and international seminars and trade exhibitions, and providing online information about SEP services.

What are the requirements for exporters to avail of these services? The most important requirements for any export transaction to be eligible for SEP services are: l Exports should be of Saudi origin and contain at least 25% local added value. l The value of an export transaction should not be less than SAR 100,000 (USD 27,000). l All national goods and services are eligible for SEP services, except crude oil. l SEP ‘s financing could reach up to 100% of the transaction value. l Risks associated with export transaction and credit worthiness of beneficiaries and guarantees should be acceptable to SEP.

Does the Saudi Export Program focus on certain key sectors and, if so, why and how is this carried out? Most of the manufacturing and industrial sectors in Saudi Arabia are developing, and therefore require support. SEP services are available to exports and products from all sectors, including emerging sectors like contracting and services, and those sectors with a competitive advantage such as petrochemicals.

Are the financing services offered by the Saudi Export Program Shariahcompliant and, if so, how? SEP offers both conventional and Shariah-compliant facilities. Each facility has its own terms and conditions, and applies specific types of procedures and documentations. Similar to banks and financial institutions, SEP’s financing facilities and instruments are identified as a response to the beneficiary’s requirements.

5 Billion) to finance and insure national non-oil exports. SEP will continue to work hard to support Saudi exports and provide export credit solutions in collaboration with Saudi exporters, local and foreign banks, financial institutions, and other ECAs.

The Saudi Export Program is focused on providing financial support to companies, but some companies also require additional services like trade information, assistance with exhibitions and lobbying. How does the Saudi Export Program deal with these issues? There are institutions in Saudi Arabia, like the Ministry of Trade and Industry, Saudi Chamber of Commerce and Saudi Export Promotion Center, who provide other services to exporters. SEP complements the efforts of these institutions by marketing national exports in local and international seminars, as well as trade exhibitions. In general, SEP assists in the promotion of Saudi exports in many ways: l Providing exporters with various export credit facilities. l Participating in various promotional activities (seminars/conferences) inside and outside Saudi Arabia. l Communicating with the private sector (Saudi and non-Saudi) to introduce Saudi exports and SEP facilities. l Issuing publications such as SEP Newsletter and Saudi Exports Directory. l SEP website.

the main objective of SeP is to contribute to government efforts in diversifying national incomes by providing export facilities to Saudi exporters and foreign buyers (importers) of non-crude oil of Saudi product and services. SeP has approved export credit facilities exceeding Sar 20 billion (more than USD 5 Billion) to finance and insure national non-oil exports.

OCTOBER 2011

TRADE SECRETS: Trade and Export Middle East, with Tickbox Surveys Middle East, conducts a survey to gauge the quarterly performance of traders across the region. Don’t forget to be a part of this!

INDUSTRY INSIGHTS: The consumer healthcare industry is one of the fastest growing fields in the world. With the advent of modern technology, adaptive local regulations, and growing consumer demand there are many potential opportunities. Euromonitor International explores what this industry can mean for you.

SERVICES: In today’s global economy, outsourcing has become a common phenomenon. Many large traders have outsourced some or all of their IT functions. Pallavi Sharma from our group publication Computer News Middle East finds out what challenges and drives this trend and how the Middle East ITO market is keeping up with the trend.

COMMODITY WATCH: Your guide to all things commodity.

community

l Encourage Saudi exporters to sell internationally and penetrate new markets by mitigating risks associated with international trade transactions. SEP works hard to achieve its objectives by increasing awareness of the importance of exporting, and enhancing cooperation with local, regional and international players in the foreign trade arena.

Saudi arabia: export Powerhouse

36 TRADE GURU: Ahmed Mohmmed Al-Ghannam, Director General, Saudi Export Program talks about the importance of Saudi Arabia’s exports in the Middle East region, the role performed by Gulf countries in global economics, and how the Saudi Export Program supports Saudi non-oil exports and develops trade exchange with other countries.

focus

trade talk

CONTENTS

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

50 November 2011

Updates global watch

UAE bolsters trade ties with Morocco Reinforcing the existing relations and strengthening the trade and investment linkages between the UAE and Morocco, Dubai Exports, an agency of the Department of Economic Development (DED), and the Moroccan Centre for Export Promotion (Maroc Export), a public organisation in charge of the promotion and development of Moroccan exports, have entered into a Mutual of Understanding (MoU) to enhance bilateral trade and explore new export opportunities for companies in the two countries. Economic and trade relations between the two countries has seen significant development since 2008, especially with increased UAE exports to Morocco of petrochemicals, metals, foodstuff products, transport equipment, tools and appliances. Investing into Morocco also offers advantages, such as access to European

markets, a skilled low-cost labour force, and a stable economy. The strategic partnership between Dubai Exports and Maroc Exports will promote bilateral trade as well as develop future cooperation by utilising Dubai and Morocco as gateways to Europe, Africa and the Middle East. Dubai Exports aims that through this partnership, UAE and Moroccan companies can increase their exports in various key sectors. According to Dubai Exports, Dubai’s direct exports to Morocco have grown at 19% for the period of 2009 to 2010 and, based on the first half of 2011, is expected to increase to more than 30% by the end of the year. Dubai’s total direct export to Morocco amounted to AED 448 million in 2010, while the total free zone exports were valued at AED 273.66 million. Last year’s top products were oil and fats, preparations

Dubai Airport Freezone, Italian businesses forge bilateral ties In a call to support the growing bilateral trade ties between Dubai Airport Freezone and the Italian business community, the Italian Consul General of Dubai and Northern Emirates, and the Economic Attaché paid a courtesy visit to Dr. Mohamed Al Zarooni, Director General of Dubai Airport Freezone. Commenting on the thriving Italian business presence in the UAE, Luciano Galli, the Italian Consul General said: “Italian businesses are doing exceptionally well in the region, especially in sectors like steel and iron, ship-building, textiles, plastic products, jewelry and chemicals. We are pleased to have Dubai Airport Freezone as a key partner to provide the infrastructure and support for us to succeed.” With more than 32 Italian companies, including Agusta Aerospace Services, Ferrari and Maserati, Italy is among the top 10 countries with a significant presence in the free zone. In addition, European companies make up 37% of total companies operating at the Dubai Airport Freezone.

of meat, cereal preparations, plastics, printed books, ceramics and aluminium and articles thereof. Dubai’s direct export of plastics to Morocco was valued at AED 130.75 million, while aluminium and articles thereof amounted to AED 60.84 million.

Dubai Chamber explores Dutch investment opportunities HE Abdul Rahman Saif Al Ghurair, Chairman of Dubai Chamber of Commerce and Industry, urged Dutch companies to take advantage of Dubai’s position as a leading business hub and gateway to growing Middle Eastern, Asian and African markets. His Excellency highlighted the cooperation between Dubai and Dutch business communities in major sectors like trade, transport and logistics, while encouraging businesses to explore new opportunities in renewable energy and agro-processing to boost economic growth. “Since 2006, imports and exports between Dubai and the Netherlands have been increasing, only slightly 6

interrupted by the global financial crisis in 2009. Between January and June this year non-oil trade reached AED 3.3 billion, of which imports totalled AED 2.27 billion, while exports and re-exports were valued at AED 1.03 billion. However, I would like to see this strengthen significantly in order to help drive growth in Dubai’s economy,” His Excellency said. “Lucrative investment opportunities for Dutch investors exist in Dubai in renewable energy, innovative technologies, green products and services, and the rail sector. There is room to bring new products to Dubai’s market and to re-export them within the region with considerable success and we

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need to work with our Dutch partners to help drive this new future growth,” he added. HE Gerard Michels, Ambassador of the Kingdom of the Netherlands, said: “There are about 270 Dutch related enterprises based in the UAE, ranging from large multinationals like Shell, Unilever, Philips, to worldwide dredging companies like Boskalis and Van Oord, and petrochemical tie-ins such as Ten Cate, as well as a host of smalland-medium enterprises.” “At the same time we are working hard to attract Emirati investors to the Netherlands. DP World is investing in the latest Rotterdam port expansion, TAQA is developing a huge gas storage

project, and Emirates Airline has offices in Amsterdam,” Mr. Michels said. Last year, UAE imports from the Netherlands witnessed a remarkable recovery, registering 136% growth, compared to 2009, to reach USD 3.1 billion. Major imports include machinery, boilers, electrical goods and electronic equipment, as well as mineral fuels, oils and distillation products. At the same time, the value of UAE total exports to the Netherlands increased to USD 1 billion in 2010, up from USD 205.9 million in 2009. Major exports included mineral fuels, oils, distillation products, aluminium products and organic chemicals.

Updates policy

DED, Dubai Courts to set up Centre for Amicable Settlement of Disputes The Department of Economic Development (DED), in co-operation with the Dubai Courts (DC), will soon establish a new headquarters of the Centre for Amicable Settlement of Disputes in the Business Village. The new centre will be a one-stop shop offering an integrated package of services for quick and cost-effective settlement of disputes for businesses and investors in the emirate. The initiative is based on a study submitted by Dubai SME, an agency of DED, to Dubai Courts on the development needs of small-and-medium enterprises (SMEs), which account for 95% of all businesses, 42% of the workforce, and 40% of the gross domestic product (GDP) in Dubai. The Centre for Amicable Settlement of Disputes comes in line with DED’s strategy to create a competitive investment environment to attract domestic and foreign investment, and organise businesses in accordance with best international practices. It also aligns with the vision of Dubai Courts to uphold justice through precision and promptness in litigation, implementation of court orders and documenting legal instruments by involving

qualified national cadres and using advanced systems, procedures and technologies. “This initiative reflects our keenness to build bridges of communication and cooperation with the government authorities concerned as a means to further strengthen economic and business standards in Dubai and enhance our customer service levels. There is no doubt that this service will enable speedier and affordable settlement of disputes, compared to what legal firms and offices offer, and that too without the need to go to the court,” said His Excellency Sami Al Qamzi, Director General of DED. Al Qamzi added: “The lack of clarity in implementing provisions included in commercial contracts and the time it takes to resolve trade issues, in addition to higher costs involved are serious challenges faced by SME owners. Dubai needs programmes and initiatives for proper implementation of laws and regulations and for raising commercial and economic awareness, thereby keeping the emirate’s business sector vibrant and prosperous.” “Dubai SME will continue to launch

Dubai Chamber, Saudi’s Al-Ahsa Chamber seek to enhance ties Dubai Chamber of Commerce and Industry received a delegation of high-ranking officials from Saudi Arabia’s Al-Ahsa Chamber of Commerce and Industry as part of efforts to enhance joint relations between the two GCC countries. During the meeting officials discussed some of the administrative obstacles to trade between Dubai and Saudi Arabia. HE Abdul Rahman Saif Al Ghurair, Chairman, Dubai Chamber, said the visit would further enhance cooperation

between Dubai and Saudi Arabia. “Dubai and Saudi Arabia are already strong partners. Saudi Arabia is Dubai’s sixth biggest trade partner and last year nonoil trade reached AED 32 billion, of which Dubai’s exports and reexports valued AED 26.8 billion and imports totalled AED 5.4 billion,” His Excellency said. “Saudi Arabia is also a major growth market for Dubai Chamber members. Our data shows that during the first half of this year our members’ exports

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initiatives and programmes to support the creation of an attractive investment environment for SMEs and encourage young citizens to launch their own business,” said Abdul Baset Al Janahi, Chief Executive Office of Dubai SME. Mohamed Amin Mubashri, Head of the Centre for Amicable Settlement of Disputes in Dubai Courts, said: “The centre works to resolve disputes amicably within a period of one month from the date of the parties presenting themselves with the arbitrators. If reconciliation is reached, it is validated through an agreement signed by the two parties and approved by the competent judge. In case an amicable settlement is not reached, the dispute will be referred to court.” “The centre aims to provide a soft alternative to the judicial process, through facilitating amicable and affordable settlement of disputes before referring them to the prosecution. It also provides a mechanism to document dispute settlement processes,” added Mubashri.

and re-exports increased by 21.7%, compared to the same period in 2010, which shows that there is significant potential for future business growth,” he said. During the visit, HE Al Ghurair also highlighted Dubai Chamber’s commitment to support Saudi Arabian businesses in Dubai, particularly in key economic sectors of trade, tourism, logistics and financial services. The Al-Ahsa delegation said they supported efforts to increase collaboration between chambers of commerce in the region and improve the climate

for businesses. HE Saleh Bin Hasan Al-Afaliq, Chairman of Al-Ahsa Chamber, said: “This visit is part of efforts to enhance the integration of economies in the region of which the private sector is a pillar. It is also part of Al-Ahsa Chamber’s aims to strengthen the experience of business in the region and to adapt to new developments in neighbouring countries.” “In addition, we are seeking to establish partnerships with representatives of the private sector in Dubai, which will help strengthen commercial ties,” he added.

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Updates snapshots

USD 16 billion piracy issue back on maritime agenda Global attacks on ships rose to an all-time high of 266, during the first six months of 2011, up from 196 in 2010 according to the International Maritime Bureau (IMB). More than 117 ships were attacked and 20 seized, by pirates off the coast of Somalia alone since January 2011, holding 28 ships and 518 hostages for ransom as of the end of April 2011. According to a report last year by the Council on Foreign Relations, there is no quantitative research available on the total cost of global piracy. Estimates vary widely because of disagreement over whether

insurance premiums, freight rates and the cost of rerouting should be included with, for instance, the cost of ransoms. Some analysts suggest the cost is close to USD 1 billion a year, while others claim losses could be as high as USD 16 billion. According to IMB’s Piracy Reporting Centre, in 2008, 47 of the 49 successful hijackings globally occurred off the coast of Somalia, although violent attacks against crew members were far more prevalent off the coast of Nigeria than anywhere else in the world. In 2009 hijackings off Somalia increased to 49 despite

fewer ships and an increased naval military presence, while incidents elsewhere in the world, including Indonesia, actually declined. “This highlights that with the use of ‘mother ships’ pirates are now venturing out many hundreds of miles from the East African coastline. This makes it very difficult to predict where pirates might strike and therefore increasingly difficult for naval military to protect cargo vessels. So clearly this is an issue that is not going to go away and needs to be addressed,” said Chris Hayman, Chairman of Seatrade.

DAE delivers third Boeing 777 Freighter to Emirates SkyCargo DAE Capital, the aircraft leasing division of Dubai Aerospace Enterprise (DAE) recently leased the third Boeing 777 Freighter to Emirates SkyCargo. HH Sheikh Ahmed bin Saeed Al-Maktoum, Chairman and Chief Executive, Emirates Airline and Group said: “This delivery brings our Boeing 777 Freighter fleet to three, ensuring we remain well placed to capitalise on the growing global cargo market. This stateof-the-art freighter will be deployed to São Paulo in Brazil where it will provide additional and vital capacity to Brazilian industries.” DAE Managing Director Khalifa H. AlDaboos said: “DAE is very pleased to build on its unique relationship with Emirates and become a partner in Emirates’ growth.” Deutsche Bank and DVB Bank provided financing to DAE for this aircraft.

Dubai Investments Park to house new MAPEI offices MAPEI, a global leader in adhesives, sealants and chemical products for the building industry, is set to base its new offices at Dubai Investments Park (DIP), one of the largest integrated business and residential community in the Middle East. A part of MAPIE’s expansion plans in high-growth markets, the new 12,000 sq. foot office space will help centralise and consolidate operations to cater to the UAE market more efficiently. The relocation of the offices from Al Qouz complements MAPIE’s upgrading of its 40,000 sq. meter state-of-the-art manufacturing facility,

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also housed at DIP, with a wide range of technologically advanced products and services. “We are now fully equipped to manufacture specially developed adhesives and related products that match the requirements of our customers in the UAE and across the region. Going forward, we will continue to aggressively invest in new technology and knowledge to maintain our competitive edge as a global leader in the production of adhesives, sealants and chemical products for building,” said Stefano Iannacone,

Managing Director, MAPEI. In June 2008, MAPEI, through its subsidiary Innovative Building Solutions (IBS), marked its foray into the Middle East and set up the manufacturing facility at DIP at a cost of AED 150 million. The company has been involved in some of the most challenging construction projects in the UAE, including the Armani Hotel in Burj Khalifa, Emirates Palace Hotel, the Grand Mosque, Qasr El Sarab resort, Atlantis - The Palm, Burj Al Arab, Ferrari World, as well as the Dubai International Airport Terminals 1, 2 and 3.

Updates snapshots

UPS announces plans to expand air hub at Cologne/Bonn UPS announced plans to significantly expand its European air hub facilities at Cologne/ Bonn Airport in Germany. The expansion project, due to be completed by the end of 2013, would equip the existing facility with additional state-of-the-art technology and include a major extension to the existing building. This extension would be partially dedicated to processing larger freight shipments. Together, these initiatives will significantly increase the hub’s package sorting capacity from today’s 110,000 to 190,000 packages per hour, ensuring that UPS’s Cologne/Bonn air hub remains one of the most advanced sorting facilities in the world. At an estimated USD 200 million, this expansion will constitute UPS’s largest facility investment outside the United States in the company’s history. Crucially, Cologne/Bonn Airport also offer UPS the possibility to fly at

night until at least 2030. “The Cologne hub has served us well for 25 years and continues to be exactly where we need it in order to best serve our customers on the important trading lanes within Europe, and beyond to the Americas and Asia,” said Jim Barber, President, UPS Europe. “This investment demonstrates our long-term confidence in, and commitment to, the European economy and its businesses that continue to produce goods sought after the world over.” UPS has enjoyed great success in Europe,

Salalah Free Zone to develop global logistics hub Salalah Free Zone (SFZ) has today announced plans to collaborate with the Sultanate’s flagship carrier, Oman Air, and the Port of Salalah in the development and implementation of the Indian Ocean’s first multi-modal logistics hub located on the East to West shipping line. Linking air, sea and land, and in the future rail, to facilitate increased and more efficient trade flows through Oman, the proposed collaboration is set to reduce transit times between Asia and Europe by as much as 48 hours due to Salalah’s strategic location, and decrease handling charges by approximately 20%, or USD 0.15 cents per kilo, when compared to comparative products available

in the market today. “Salalah Free Zone is delighted to pledge our support to the development of the new sea-air cargo corridor with Oman Air and the Port of Salalah. We are focused on creating opportunities that promote international business growth and enhance trade routes by providing competitive connectivity and efficient flow of goods and services. This is an important step in supporting the Oman government’s policy of economic growth and diversification, and in realising our vision of becoming a global logistics hub of excellence” said Awadh Salim Al-Shanfari, Chief Executive Officer, Salalah Free Zone.

with a compound annual export volume growth rate of more than 10% over the past 10 years. With the planned expansion announced today, UPS is positioning itself for continued growth of its international express business. “This announcement is good news for UPS customers in Europe and all over the world,” added Barber. “Increased capacity and efficiency at our Cologne/Bonn facility will ensure they continue to enjoy the highest possible levels of service in today’s highly competitive, fast-moving global economy.”

Ali Tabouk, Salalah Free Zone’s Chief Commercial Officer, said: “The ongoing expansion at the Salalah port and international airport, combined with Salalah Free Zone’s established infrastructure and customer-focused value proposition will provide the favourable elements to attract industrial, trade and logistics activities. We are committed to collectively work together to attract new foreign investment in Oman.” According to Tabouk, talks are underway with a number of international investors from Europe and Asia that have shown a keen interest in SFZ’s expansion to establish regional distribution and logistics centres in Salalah due to its competitive offering and global reach. November 2011

Updates snapshots

Saudi Arabia’s logistics sector on global radar for investment Growing international interest and recognition of the Kingdom of Saudi Arabia as a major investment destination is stimulating both demand and supply of consumer and industrial products, creating the need for a sophisticated logistical infrastructure. Saudi Arabia is currently working on building an infrastructure of multimodal transportation, making it an attractive prospect for investors. The Saudi Arabian General Investment Authority estimates that domestic cargo demand is expected to grow by a 4-5% compound annual rate through 2020,

while international flows are expected to grow at 5% and 7-8% for air and sea cargo, respectively. Current transport and logistics systems are still underutilised and improvements are underway. The growing logistical traffic and economic diversification efforts has sparked the government to commit nearly USD 100 billion of investment in multimodal transportation networks. Several projects have been announced to address this, some of which are already underway such as a USD 40 billion railway project. Agility’s emerging market

logistics index for 2011 saw the Kingdom as the biggest mover in the index rankings climbing four places to sixth position, placing the Kingdom just under the BRIC nations. According to a report by Frost & Sullivan, the sector earned revenues of USD 13.78 billion in 2010 and expects this to rise to USD 20.54 billion in 2015. Being the largest market in the GCC, that also has considerable buying power, the report describes the Kingdom as a ‘happy hunting ground for logistics service providers (LSPs) in the Middle East.’

UAE firms to bolster construction, F&B exports to KSA, Germany Dubai Exports, an agency of the Department of Economic Development (DED), is continuing to spearhead exports from the country by creating long-term valuable overseas opportunities for UAE companies, particularly in the building materials, and food and beverage sectors, by participating at Saudi Build, the Middle East’s largest construction and building material exhibition in the region; and Germany’s Anuga, the world´s leading food fair for retail trade, and the food service and catering market. The participation of Dubai Exports is built on its previous successes at both events last year after achieving record export orders for the exhibiting local companies. This year, Dubai Exports is hoping to set a new record through extensive business matchmaking events that took place on the sidelines of Saudi Build and Anuga. “Dubai Exports is continuously looking 12

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for ways to aid local companies to expand their presence and increase their export opportunities in the Kingdom and Europe, particularly Germany. Through the Saudi Build and Anuga exhibitions, Dubai Exports is able to strengthen the country’s trade relations with the two countries. By enhancing awareness on the products and services, our local companies can provide in the construction and building sector, as well as the food and beverage industry,” said Engineer Saed Al Awadi, Chief Executive Officer of Dubai Exports. Research produced by Dubai Exports showed that Saudi Arabia remains one of the main export destination markets for Dubai-based products and services. In 2010, Dubai’s direct export to Saudi Arabia amounted to AED 2.47 billion, while direct re-export was valued at AED 3.34 billion. Meanwhile, free zone exports posted AED 21.03 billion in the same year. Dubai Exports worked with companies

Parzel Express and Logistics extends UAE reach Parzel Express and Logistics is initiating strategic expansion in the UAE with a wide range of domestic and international services to suit both personal and business needs, and the introduction of a first of its kind delivery model to Parzel delivery points. Upon successful completion of the pilot testing phase, the company will inaugurate a special two months free parcel delivery period for its clients via Parzel machines from 31st October 2011 until 31st December 2012. Parzel is a local logistics company that offers first and last mile delivery, as well as automated solutions for documents and parcels, attestations, baggage, air and sea freight, import and export, warehousing and storage. The company locations include: DIFC, Times Square Centre, Dubai Marina Walk and Dubai Marina Mall. With its range of product offerings Parzel provides logistics companies with greater levels of efficiency, better technology and less complexity.

in the building materials and services sector to assist them in securing the deals. Current estimates showed that over AED 1 trillion is expected to be invested by GCC countries in various construction and infrastructure-related projects over the next decade. Some of these projects are continual projects offering UAE companies long-term opportunities. Similarly, in the food and beverage sector, Dubai Exports has also sought to raise the capabilities and skills of domestic producers so that they can enter foreign markets, particularly Europe. Dubai Exports is showcasing various products from the UAE at Anuga exhibition, which will help raise the global profile of the country as an exporter of high quality products, as well assist firms to penetrate foreign markets. Research from Dubai Exports showed that Germany is an important market for Dubai with its total direct export to the country amounting to AED 1 billion in 2010, while exports from the free zones was valued at AED 1.2 billion.

RESOURCES logistics

Ain’t no mountain high enough Amidst its most ambitious advertising campaign to date, DHL Express continues its expansion plans in the UAE, says Elliott Santon, Marketing Manager, DHL Express UAE.

DHL Express, the international express services provider, launched its most ambitious advertising campaign to date. Called “International Specialist” and covering 42 key markets worldwide, the high-profile initiative is expected to reinforce DHL’s position in the Middle East and worldwide, demonstrate the company’s international capabilities to meet the express shipping needs of all industries, and highlight its global expertise and customer service. The campaign has been making headlines across the world, recently winning a highly coveted International Stevie Award at the International Business Awards held at The Emirates Palace Hotel in Abu Dhabi. “At the same time, the company is also expanding its capabilities and improving customer service through a significant investment program into infrastructure, employees and the brand, around the world

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and the Middle East region,” said Elliott Santon, Marketing Manager of DHL Express in the United Arab Emirates (UAE). DHL has been a pioneer in the Middle East logistics industry over the last 30 years. It currently has eight service centres, 30 service points, one hub and gateway, over 800 employees and 200 vehicles, with dedicated airside facilities in Dubai and Abu Dhabi to further enhance network and connectivity strength. DHL has various customer service offerings in the UAE. Santon explained that in an independent customer interaction survey conducted this year, which measured DHL against major competitors in the market, DHL scored higher than competitors on all customer touch points, specifically customer service, that included initial phone calls, shipment pick-up and delivery. In terms of customer and operational services, DHL offered

competitive transit time and pricing, especially with regard to cash tariffs, and gave customers full visibility of their shipment. Through this innovation, service and commitment to providing customers with superior logistics solutions, DHL has scored significant customer wins over the last three-four months in the region, especially with multi-national corporations. With trade, including logistics, being an indicator of the Middle East economy, and DHL at the centre of exporting and importing goods, the company remains, like most companies around the world, optimistically cautious. Yet, there are no plans to slow down. Leveraging Dubai’s strategic position as a regional logistics hub, DHL is also helping to facilitate increasing bilateral trade activity between China and the UAE, projected to exceed USD 100 billion by 2015. DHL announced the launch of its direct Less than Container Load (LCL) service from Shenzhen to Dubai, making it the second direct LCL service to connect China and the UAE . With a transit time of 13 days, the Shenzhen to Dubai LCL service offers greater cost efficiency and flexibility for small-to-medium enterprises (SMEs) and other businesses that are engaged in trade activities between the two growing economies. UAE and China have significantly expanded their trade relationship over the last decade, with total trade amounting to USD 119.4 billion between 1999 and 2009. According to Dubai Customs statistics, from January to May 2011, imports from China to Dubai reached AED 18.5 billion, or more than USD 5 billion. Dubai is playing an increasingly important role in facilitating trade to and through the UAE, with over two-thirds of import items to the UAE today being directed to Dubai.

ABOUT

As one of the leading LCL freight forwarders in the world, with annual volumes close to 2,000,000 cubic meters, DHL is hoping to be the partner of choice for enterprises that need cost-effective and efficient support along this trade lane. As trade between the two continues to rise, DHL’s direct Shenzhen to Dubai LCL service reflects the company’s commitment to Chinese customers who are entering the UAE market or increasing their business activities here. With this new direct Shenzhen to Dubai LCL service, DHL is also offering a 7% more CO2 efficient shipping option. DHL customers in South China - especially SMEs in Guangzhou, Dongguan, Foshan, Huizhou, Zhongshan and Zhuhai - can benefit from the expanded service portfolio. As one of the global leaders in LCL, DHL carries more than 97% of its total volumes in-house. The in-house systems and strong global network enables the control of cargo flow, information flow, speed, accuracy, cost efficiency and reliability. Going beyond port-to-port, DHL LCL service also offers an end-to-end supply chain management that includes pick-up at origin, consolidation and deconsolidation, delivery at destination and customs clearance. All LCL services are accompanied by DHL’s IT solutions such as DHL Track and Trace, and other tools to allow full visibility throughout the whole supply chain. DHL also provides insurance services to customers as a value-added service. DHL’s Shippers Interest Insurance (SII) covers losses or damages of all cargo transported by DHL, as well as transportation costs. With this move, DHL is adding further important destinations to the existing LCL network originating from Shenzhen. Other direct LCL links from Shenzhen are to the US, Canada, Northern and Eastern Europe, and Scandinavia. The service is operated by Danmar Lines, the in-house carrier of DHL Global Forwarding. Recently, the company also introduced a next-day intercontinental route between the

Elliott Santon joined DHL Express, UAE, as a Marketing Manager in March 2007. He was appointed to oversee and implement pan-UAE marketing strategies, communications and business intelligence. Since joining DHL, Elliott has also been responsible for deploying key marketing initiatives across many countries in the Middle East. Prior to joining DHL, Elliott spent 10 years working with various well-established UK advertising, marketing and branding agencies. DHL is part of Deutsche Post DHL. The Group generated revenue of more than EUR 51 billion in 2010. DHL is present in international express, air and ocean freight, road and rail transportation, contract logistics and international mail services. The company has a global network of 120,000 destinations in more than 220 countries and territories, and about 275,000 employees worldwide, and 4,100 employees in the MENA (Middle East and North Africa) region with regional hubs in Bahrain and Dubai. DHL’s Bahrain hub is a key entry point into Middle East countries and Bahrain serves as a vital connectivity point for DHL’s global network. Each week, almost 100 flights are operated on behalf of DHL to and from Bahrain. These include regional flights and long-haul intercontinental flights. For more information visit: www.dhl.co.ae.

US and Middle East to help meet growing demand for services between the two regions. The route shortens delivery time by one day. As part of the program, DHL also invested in a Certified International Specialist (CIS) training program for all employees designed to improve customer service levels. Designed by the company, the accreditation program is aimed at increasing employees’ knowledge of changing international business and enhancing customer satisfaction. Amongst DHL’s other initiatives, when Dubai Customs rolled out The Custom Reformation and Modernisation Program (RMP), in line with the revised Kyoto Agreement, the logistics company worked with Dubai Customs to develop a new and improved customs clearance program called Mirsal 2, which is aimed at modernising

customs procedures in Dubai and facilitating international trade. DHL has also integrated a full Electronic Data Interface link, which allows clearance applications to be uploaded electronically, thereby enhancing government to business communication and speeding up the customs clearance process. The EDI link allows the existing data in DHL’s Shipment Control Library to be transmitted to Customs, which avoids duplication of data entry and therefore speeds up the entire process. Modelled on guidelines set out by the World Customs Organisation, the new system provides customers with a paperless customs system that is designed to involve freight handling businesses in customs regulation and to improve international trade.

Dubai is playing an increasingly important role in facilitating trade to and through the UAE, with over two-thirds of import items to the UAE today being directed to Dubai. Leveraging Dubai's strategic position as a regional logistics hub, DHL is helping to facilitate increasing bilateral trade activity between China and the UAE, projected to exceed USD 100 billion by 2015.

November 2011

RESOURCES LEGAL

Overlapping IP rights As a UAE-based trader poised to enter the global market arena with a range of products and services, it is critical to know the difference between trademark, patent, copyright and trade secret. These sub-categories of intellectual property have distinct areas of coverage, but there are many situations in this region where these lines will be blurred. Manijeh Khan from Al Tamimi & Company explains how to apply these to protect your business.

A UAE-based company comes up with a new bottle design for their shampoo product. Is the bottle design protected by the laws governing: (a) trademark; (b) patent; (c) copyright; (d) trade secret, or is it (e) all of the above? The correct answer is (e); the bottle design is capable of being protected, at least in theory, under all four areas of law. Trademark, patent, copyright and trade secrets fall under the umbrella of Intellectual Property (IP) law. All IP laws

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have the protection of human innovations as their common denominator. However, the various sub-categories of IP law may be distinguished from each other as follows: ll Trademark law protects any mark, including words, pictures or signs, used to distinguish a personâ&#x20AC;&#x2122;s goods and services from those of their competitors. In lay terms, it refers to branding. For example, the â&#x20AC;&#x153;Starbucksâ&#x20AC;? brand name and mermaid logo are trademarks of the Starbucks coffee company.

ll Patent law protects inventions, particularly those which are useful in an industrial or commercial context. Famous patented inventions include the light bulb and the automobile. Within the patent law category, there are utility models and industrial designs. Utility models are those inventions which cannot meet the inventiveness threshold of a patent and instead provide minor improvements on existing inventions. Industrial designs are inventions of an

ABOUT

Manijeh Khan is a lawyer in the IP IT Department of Al-Tamimi & Company and is based in the firm’s Dubai Internet City office. Prior to joining Al-Tamimi, Manijeh worked for more than four years at the Dubai branch of Shalakany Law Office, one of the oldest and most reputable law firms in the Middle East. During her tenure at Shalakany Law Office, Manijeh gained the opportunity to work closely with several established companies, including the FMCG giant, Unilever, for whom she acted as legal counsel for more than three years.

aesthetic or ornamental kind. ll Copyright law, generally, protects any original work in the areas of literature, the arts or science, whatever its description, form of conveyance and expression, significance or purpose. However, certain types of original work do not qualify for copyright protection for example: (a) ideas and discoveries – these are normally covered by patent law instead; and, (b) names and slogans – which are afforded protection under trademark law rather than copyright. ll Trade secret laws protect any confidential information which belong to a company and give it a competitive edge. For example, the trade secrets of a perfumer would be the unique formula for the perfumes. Although some of the ingredients of the perfume might have to be disclosed due to health and safety or other regulations, the overall formula would be a closely guarded trade secret. For the most part, the above subcategories of IP maintain distinct areas of coverage, but there are many situations in which the lines will be blurred.

Fast facts IP law Trade secret

Availability Yes

Comment Protection available before being released to the public. Reasonable precautions must be taken to safeguard the design from unauthorised disclosure.

Maybe

Possible if highly ornamental design, although very unlikely.

Trademark

Maybe

Application for trademark registration before product is marketed is possible if highly ornamental design, although unlikely. Application for trademark registration after the bottle shape has become established in the market and has acquired distinctiveness is likely to be granted provided there is substantial evidence.

Yes

Very likely to be granted. The key requirement is novelty. Functionality is not an obstacle unless it dictates the design (in which case, a utility model application will be a more suitable option).

Design patent (Industrial design)

ready for patenting. If someone else brings the invention into the public domain before a patent application is filed, the original inventor’s subsequent patent application will be rejected for lack of novelty. There will be no legal recourse against the other

party, unless the original inventor can prove the latter had access to his invention and copied it. Therefore, in the time before a patent application is filed, the inventor will need its secrecy.

If we take the example of packaging design and labels on a consumer product, we note that it consists of artistic and verbal expressions and may therefore be subject to copyright. The packaging and labels will also no doubt include the manufacturer’s logos and the brand name of the product and in this way may be protected by trademark law. Trade secret and patent

Often an inventor will seek to patent his invention. However, it usually takes many months if not years for an invention to be

Trade secret laws protect any confidential information which belong to a company and give it a competitive edge. For example, the trade secrets of a perfumer would be the unique formula for the perfumes. Although some of the ingredients might have to be disclosed due to health and safety or other regulations, the overall formula would be a closely guarded trade secret.

November 2011

RESOURCES LEGAL

ABOUT

Al Tamimi & Company Advocates and Legal Consultants, originally established in 1989, is one of the leading law firms in the Arabian Gulf region. It is the largest local, non-affiliated law firm in the United Arab Emirates with offices in the Emirates of Dubai, Abu Dhabi, Sharjah and Riyadh (KSA), as well as associate offices in Doha, Baghdad and Riyadh. Visit www.tamimi.com for more information. Patent, copyright, trademark and trade secret

If we go back to our original question regarding the new bottle shape, we find that there four potential avenues available to the manufacturer. Firstly, while the bottle shape is under development and prior to its launch to the public, it would need to be kept a trade secret. Secondly, it may also arguably be subject to protection under copyright as a work of applied art. Much would depend on the design in question. In some jurisdictions, such as the US, works of applied art are distinguished from industrial designs. While the former are copyrightable, the latter are not. The difference between the two is whether the design aspect can be separated from the functional aspect of a “useful article”. If the answer is yes, it will be afforded protection by copyright. No such “separability test” has yet been developed in the UAE law, however, it is safe to assume that similar principles would ultimately be relied on in that copyright applications for applied art will be subject to more scrutiny than applications for fine art. Registration is not necessary for copyright but can ease the burden of proof in the event of dispute over who owns the copyright. It would also be possible, although difficult, to register a bottle design as a trademark. The bottle design would have to be inherently distinctive or have acquired distinctiveness over time. Very few bottle shape designs or indeed any other functional product designs can be said to be inherently distinctive to the consumer as a source identifier. The average consumer does not usually regard the shape or other functional aspects of a product as indicative of its origin. Therefore, invariably, functional designs would be registered as trademarks only on the basis of acquired distinctiveness. This is proved by submitting evidence that over the course of time, the functional 18

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Packaging design and labels consist of artistic and verbal expressions and may therefore be subject to copyright. The packaging and labels will also no doubt include the manufacturer’s logos and the brand name of the product, and in this way may be protected by trademark law. design has achieved a distinctive association with the manufacturer in the mind of the consumer through intensive marketing. The most famous example of such acquired distinctiveness is the Coca Cola contour bottle shape which is now a registered trademark (or “shape mark”) in many jurisdictions. The great advantage of a trademark registration over other types of IP rights is that it can be renewed indefinitely, giving the trademark owner permanent exclusivity over the mark in question. The bottle shape could also be registered as an industrial design. Once granted, industrial designs, like others in the patent family, are not permanent; they expire after a certain period of time, whereupon the inventor or designer loses the exclusive right to commercially exploit the design. Unlike copyright or trademark rights, however, the functionality of the design is less of an issue. However, if the design is dictated by functional requirements, it will be more appropriate to register it as a utility model rather than an industrial design. For the purposes of this article, we will assume that our shampoo manufacturer has designed a bottle shape which is not dictated by functionality and is therefore capable of being registered as an industrial design.

The plan of action

The shampoo manufacturer in our case study would be advised to take the following steps: During the design development phase, the manufacturer should take reasonable measures to ensure that the bottle design is kept confidential in order to preserve its status as a trade secret. As soon as the design has been finalised, the manufacturer should apply to register it as an industrial design. This is because functional designs are accorded protection under this area of IP law more easily than under copyright and trademark law. Once the product has been marketed to the public for a significant period of time, and acquired distinctiveness, the manufacturer should file an application for registration of the bottle design as a trademark. It is important to obtain trademark protection since an industrial design has a limited lifespan, while a trademark registration can be maintained in perpetuity (subject to payment of renewal fees and continued use). It is not recommended for the manufacturer to go for a copyright registration, since it is unlikely to be granted or sustained.

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RESOURCES technology

The evolution of RFID Matt Parker, Market Development Manager at Zebra Technologies, discusses how Radio Frequency Identification is evolving to become more user-friendly and outlines the benefits of new on-pitch encoding developments for the modern day supply and transport chain.

According to a recent survey from VDC Research Group, the Europe, Middle East and Africa (EMEA) market for Radio Frequency Identification (RFID) printers and encoders is expected to grow by nearly 20% in 2011. This marked increase can be attributed to heightened demand from sectors such as transportation, manufacturing, logistics and other industries that require item-level tracking to better monitor inventory levels and manage assets. While RFID technology once lagged behind the barcode in terms of its impact on supply chain, it is now increasingly being seen as an effective way to enhance supply chain visibility and flexibility. Industries are now using RFID on high value and high volume items and assets, which require real time monitoring, as a means to achieve efficiency gains and enhance service. Since RFID uses radio waves instead of optical scans of labels to transmit data, it does not require a tag or label to be in view for readable information. Early adopters of RFID have witnessed significant improvements in day-to-day business operations effective almost immediately. Industry sectors, including automotive and defence, are now enjoying increased visibility and tracking abilities that RFID provides with real-time location monitoring of each asset as it goes through the manufacturing and transportation process. Overcoming barriers to RFID adoption

In the past, one of the largest barriers to RFID adoption was the significant media cost. However, advancements in printing technology have brought down the prices of 20

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ABOUT

RFID media by almost 10% in recent years, making it well within the reach of even the average mid-sized trader. The latest printing technologies can detect the RFID inlay position within the label and automatically configure the printer/encoder without having to manually calibrate for the inlay, which ensures tag accuracy and saves significant amounts of time and money. At the same time, RFID has become much more user friendly and a new phase of RFID printing technology known as ‘on-pitch encoding’ now allows advanced item-level tagging from the supply chain right through to the retail floor. This was designed to address a growing market shift from compliance-based tracking to more item-level tracking. This shift has since boosted demand for high-volume item-level tagging tools across manufacturing, retail and distribution channels. Reduced media costs can be achieved by using less printing output in addition to streamlining supplychain management applications such as item-level tracking, inventory control and more. What’s new with RFID?

On-pitch encoding is a major development for RFID printing in supply chain as it allows the printing and encoding of much smaller tags and makes item-level RFID a reality. This offers the ability to print and encode small tags very close together, with a distance as narrow as 16 mm, producing significant savings in media costs. By spacing inlays closer together, label converters use less material which converts to lower

Matthew Parker is the EMEA Market Development Manager at Zebra Technologies, a company that provides the broadcast range of global solutions to identify, track and manage the deployment of critical assets for improved business efficiency to more than 90% of Fortune 500 companies worldwide. Matt joined Zebra in 2005, bringing with him a wealth of sales and managerial experience, which is critical in his current role. Particularly relevant were the previous three years that Matt spent with Xyratex Technologies, primarily working on setting up a product management program and overseeing the entire lifecycle process of all products. Since joining Zebra Technologies, Matt has worked on many projects across multiple departments. Matt spent the first two years of his time at Zebra as a Product Manager in Mobile Printing Solutions. This was followed by three years as Product and Vertical Marketing Manager in Enterprise Mobility. In these roles Matt was responsible for the fastest growing segment of Zebra’s product range and was acknowledged via an ‘Outstanding Achievement Award’ in 2006. Matt holds a BSc Honours Degree in Business and Management Studies from the University of Bradford. He can be reached at mparker@zebra.com.

cost per label, fewer media roll changes and faster printer/encoder throughput.

On-pitch encoding allows discrete itemlevel tagging in positions where traditional passive RFID tags were too big for itemlevel marking – the size of the tag simply being oversize for the item to be tracked. This new development offers a host of benefits over traditional converted passive RFID: ll Tags can be discretely encased within traditional packaging (at point of assembly). ll Tags located inside packaging materials ensure no loss of branding or communication space. ll Tags can be read individually or in bulk lots (UHF). ll RFID can be combined with traditional auto-ID (Linear or 2D) to create a very robust track and trace solution to enhance full e-pedigree of high value items.

While RFID technology once lagged behind the barcode in terms of its impact on the supply chain, it is now being increasingly seen as an effective way to enhance supply chain visibility and flexibility.

This technology has brought significant innovation, functionality and cost benefits to the supply chain industry and made it a smart investment for organisations with high-volume, mission critical or specialty labelling applications. The latest breed of RFID printers now also incorporate rugged durability, consistent outstanding print quality, and fast print speed for demanding applications. In addition, mobile RFID printing/encoding devices allow organisations to take advantage of the many proven efficiency gains that mobility delivers.

Determining the business benefits

For those facing international compliance mandates when doing business in the UAE, the issue at hand is to find a customer who requires RFID shipment tagging. Compliance tagging mandates set a clear requirement for what the RFID system must do. However, the most successful RFID project managers determine what other business value can be derived by leveraging the investment made to meet a compliance mandate. For regional organisations, this involves looking at business processes and limitations, and determining whether things can be improved with available information or by making current information available more quickly. November 2011

RESOURCES technology

Given the UAE’s position as a leading transport and re-export hub, we see two additional areas where there is an opportunity for regional companies in particular to gain value in using RFID technologies. Warehousing - RFID’s unattended, orientation-independent reading capabilities can be highly valuable for warehouse processes. Reading zones can be created to automatically monitor certain areas of the facility – such as shelf locations, secure storage areas, or even a container yard – and automatically record all movements. Business rules can be created to issue alerts if certain conditions are present, such as items being moved after hours, unusual transaction volume, or any movement of items with a certain dollar value. By integrating the RFID system with enterprise networks and applications, monitor and alert data can be automatically communicated to managers or security personnel, plus integrated into warehouse management system (WMS), asset management, and other software applications. Imagine picking operations where workers scan shelves and bins with an RFID reader to automatically detect the storage location of the sought items. Readers would also automatically detect items stored in the wrong location and alert operators to the problem. Using RFID for these applications enables items to “self-report” their locations, rather than requiring workers to find them, thus reducing errors, saving labor and lowering costs. Shipping and Receiving - One of the powerful drivers behind compliance tagging programs in the Middle East is the clear benefits of shipping and receiving processes that are enabled by RFID-tagged shipments. For shipping and receiving, a reader positioned at a dock door can instantly identify pallets of tagged goods that pass through. Shippers can use the data to verify that all the products required for the 22

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shipment have been packed and loaded. The process helps eliminate costly shipping errors and the manual labor associated with order checking. The receiving organisation uses the dock-door read to verify that the shipment matches the order or manifest, and to automatically record the items into inventory. No bar code scanning or other manual labor is required. Because RFID readers can identify hundreds of items per second, portal readers are especially useful for cross-dock applications, where incoming goods must be quickly identified, sorted and redirected.

use of ‘active RFID’ technologies which use an on-board battery to continually broadcast signals (as opposed to ‘passive RFID’ which is only activated by using an RFID reader). These active tags have traditionally been used for applications such as tracking containers, medical assets or monitoring environmental conditions in data centres, but their use is likely to expand over the coming years. A good example is in the recent use of active RFID to provide real-time location information on people working in hazardous environments, such as those within the oil and gas sector. With RFID proving to be flexible across different environments, companies who are testing and piloting the technology are beginning

Reading zones can be created to automatically monitor certain areas of the facility – such as shelf locations, secure storage areas, or even a container yard – and automatically record all movements. Business rules can be created to issue alerts if certain conditions are present, such as items being moved after hours, unusual transaction volume, or any movement of items with a certain dollar value.

A promising future

Moving ahead, we are likely to see RFID use become increasingly pervasive for traders across a wide variety of industries, diverse array of environments and packaging sizes. Since the traditional barrier to adoption, with respect to high media costs, has been addressed with the introduction of new RFID technologies such as on-pitch encoding, this has allowed increased use of discreet RFID printing. We are also likely to witness widespread

to understand its potential across a range of practical applications beyond the traditional. In conclusion, the use of RFID technology is expected to see positive trends within the region, although it’s also important to note that RFID is still a complementary technology to the well-established auto-ID processes which use barcode technology. Despite its strong potential, RFID will always work alongside barcoding, rather than as a direct replacement.

RESOURCES marketing

Introducing the social consumer In a fragmented marketplace that comprises customers around the world, it is imperative for a trader to understand that a massive shift in the media landscape has changed the way customers make purchasing decisions. It has also opened up new markets and geographies in a connected marketplace. Social media has given birth to a new breed of customer â&#x20AC;&#x201C; the social consumer â&#x20AC;&#x201C; and marketing to them requires a fundamentally different approach from that of traditional marketing, says Abbas Aldina, Director, Logicks.com.

Traders who understand and adapt to changes in the marketplace will be able to earn profitable relationships with their customers and prospects. In order to market to social consumers, we first need to understand what differentiates them from other types of consumers. Once we know how they consume information and make decisions, then we can devise marketing plans effectively. The three types of consumers

Three different types of consumers exist in the marketplace today. Each type has specific characteristics, tendencies and preferences. To succeed in marketing, we must approach each of these consumers in a unique manner.

The traditional consumer

Traditional consumers search for information offline. They may browse through the classifieds section of the newspaper or search the yellow pages to find what they need. Generally, traditional consumers are older in age than the other types of consumers and are late adopters of new technologies. Traditional consumers are more likely to make purchasing decisions based on advertising (such as TV, radio or print 24

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advertising) and via word-of-mouth from trusted friends. For the average traditional consumer, most of their connections and networks are offline as well, so there is no significant pressure or motivation to shift their consumption habits to the online domain.

ABOUT

Abbas Alidina is the Founder and Director of Logicks.com, a digital marketing agency that helps businesses across the Middle East to improve their online performance. With more than ten years of marketing experience, he has developed strategies and executed projects for numerous global and regional brands. For more information please visit www.logicks.com or follow Abbas on Twitter @AbbasAlidina.

The online consumer

Online consumers search for information (you guessed it) online. The destination Web that began gaining popularity in the nineties enabled us to turn to the Internet for our purchasing decisions. The online consumer may perform a Google search, read reviews on websites such as Amazon, or browse through online forums before making a purchasing decision. These consumers donâ&#x20AC;&#x2122;t trust advertisements and marketing messages. They place a higher value on the opinions and reviews of other customers. The information they consume online forms the basis for their perception of a brand. Online consumers head to the web to discover, research, learn, compare and buy. It is extremely important to target these consumers at all phases of their online journey when they are researching a company or its offerings. This is best achieved through a comprehensive online marketing strategy, including activities such as search engine optimisation (SEO), paid advertising (PPC) and e-mail marketing. If your business strategy is more B2B, then you can connect with your target audience using specialised portals, directories and online listings. And your media strategy would be more focussed on LinkedIn than Facebook or Twitter.

The social consumer

The social consumer is a new breed of consumer who leverages the wisdom of their social networks to make purchasing decisions. Rather than heading to Google or online forums, these consumers trust the recommendations of people in their networks.

Social consumers play a key role in defining the perception of brands within social networks. They document their experiences and share them with their networks. They check-in to locations, share videos and leave recommendations behind for others in real-time. Social consumers play a key role in defining the perception of brands within social networks. They document their experiences and share them with their networks. They check-in to locations, share videos and leave recommendations behind for others in real-time. Thereâ&#x20AC;&#x2122;s a great deal of camaraderie between social consumers in their mission to define, document and create a better world for each other. Consumers are resorting to social media because they are tired of getting ripped off. Social media helps to keep companies honest. It weeds out companies with poor customer service and shady business practices. From a marketing perspective, social consumers can be our biggest advocates, if we approach social business correctly.

Those who are growing up in the Facebook, Twitter and LinkedIn generation are natural social consumers. They do not rely as much on other alternatives.

Which consumer should you target? In reality, most people are a mixture of the three types of consumers. I am predominantly a combination of the online and social consumer, with a little bit of the traditional mixed in. When developing a marketing plan, it is important to take into consideration the personas of each of these three types of consumers. We must address the needs of traditional, online as well as social consumers to maximise the effectiveness of our marketing efforts.

Online consumers head to the web to discover, research, learn, compare and buy. It is extremely important to target these consumers at all phases of their online journey when they are researching a company or its offerings.

November 2011

RESOURCES how to

Eeny, meeny, miny, moe It’s all about choices. Manufacturers who decide to export, face the major problem of identifying an appropriate foreign market for their goods or services, says Dr. Ashraf Mahate, Head of Export Market Intelligence at Dubai Exports, and Vice Chair of the Economic Policy Committee, Dubai Economic Department.

Selecting the correct market can lead to immediate success, while an incorrect market can lead not only to substantial losses but also long-term damage to the company’s operations. A poorly thought through entry into a foreign market can have negative effects on the company’s future plans as well as morale. Therefore, appropriate selection is an important challenge for the exporter and cannot be left to subjective decision making. In order to make the right decision, an exporter needs to go beyond personal preferences and intuition. The process of market selection requires the exporter to undergo three essential steps namely: data collection, whereby the most recent information on potential export markets is obtained; second, the exporter needs 26

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to make appropriate comparisons between the different markets; third, an exporter needs to appreciate that he cannot enter every single market at the same time and needs to prioritise markets based on current resources and market potential. The first step towards identifying a foreign market is to compile a list of potential countries. There is no golden rule; nevertheless, one can use a number of different methods to compile the list. The main methods used by exporters tend to be the following: ll Enter markets which are “easy” As a first time exporter, it is better to learn in an easy market and, over time, more difficult markets can be considered.

Proximity of the market Markets which are closer to home and are easier to service in terms of logistics, follow up, payments, and so on, compared to markets which are further afield. ll Similarities in language Places which use the same language, be it Arabic or English, are more convenient than one where the language is different. This is because communication with the importer, documentation, product labelling, marketing, and so on, become simpler when the importer and exporter share the same language. ll Common business culture Similarities in business culture between the importer and exporter, be it the manner in which business is conducted or the payment terms that are offered, make the process of exporting much easier. ll Logistics At the end of the day exporters are looking to ship their products to the foreign market in order to receive payment. Therefore, it is better for an exporter to target markets with established logistical links from the home country rather than where the transport routes are yet to be established. ll Past or current knowledge It is easier for an exporter to enter a market in which it has past or current knowledge. Even if the knowledge is superficial it is better than not having any in the first place. Moreover, if the knowledge is firsthand experience of the country, it adds considerable weight to the selection of the market.

ABOUT

ll Overall risk Of course all exporters want to maximise profit, however, they need to take into consideration the level of risk entailed in a particular market. At the end of the day they have to make an assessment of the relative risks of exporting to a particular country in terms of the potential revenue that can be generated against the risks that it faces. ll Over extending exporter resources All exporters have finite resources and this may limit the selection of a particular market, in that certain countries may overstretch the company compared to others. For example, a market with an established legal and business framework will not utilise as much of a company’s resources as, say, an undeveloped market. On the other hand, the distance may mean that the company’s staff is travelling more than is optimal. A common mistake that exporters tend to make is that they do not examine all the necessary data for their list of potential markets. Simply looking at general macroeconomic data will not ensure your success. You also need to look at the level of tariffs, market openness, distribution infrastructure and so on, all of which affect profitability. Moreover, it is important to remember that foreign products compete with domestically produced goods and hence the exporter will need to undertake some level of competitor analysis. Some of the types of data that an exporter needs to identify are listed below: ll Geographic and physical environment ▪▪ Total population, growth and density trends. ▪▪ Distribution of the population by targeted age groups.

Dr. Ashraf Mahate is the Head of Export Market Intelligence at Dubai Exports, which is an agency of the Dubai Economic Department. Dr. Mahate is also the Vice Chair of the Economic Policy Committee with the Dubai Economic Department. He has written a number of journal articles and book chapters, as well as edited books in the areas of economics, finance and banking. He has also presented papers at major international conferences. Dr. Mahate has provided extensive consultancy services to various organisations in the areas of banking, economics and finance. He has been a director of a number of companies including a venture capital company and a private equity fund. Dr. Mahate received his doctorate from Cass City University Business School in London (UK) which was ranked by the Financial Times newspaper as the twelfth best university in the world for finance. 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).

▪▪ Distribution of the population by urban, suburban and rural areas. ▪▪ Climate and weather variations. How will these affect the product or service offered? ▪▪ Shipping distances from the point of export. ▪▪ Age and quality of the transportation and telecommunication infrastructure. ▪▪ Adequacy of shipping, packaging, unloading and other local distribution networks. ll Political environment ▪▪ Whether the system of government is conducive to conducting business. ▪▪ To what extent the government is involved in private business transactions. ▪▪ Government’s attitude to importing. ▪▪ Whether the political system is stable. ▪▪ Government’s attitude towards dismantling of quotas, tariffs and other

trade barriers. ll Economic environment ▪▪ Whether the country is committed to fostering higher levels of imports and exports. ▪▪ Predicted economic growth levels. ▪▪ Gross national product and balance-ofpayments situation. ▪▪ Percentage share of imports and exports in the overall economy. ▪▪ The country’s import to export ratio. ▪▪ Rate of inflation, and foreign currency or exchange regulations. ▪▪ Per capita income of the target country. Are income levels increasing? ll Technological environment ▪▪ High expectations of consumers. ▪▪ System complexity. ▪▪ Increased productivity. ▪▪ Need to spend on R&D. ▪▪ Demand for capital.

Simply looking at general macroeconomic data will not ensure your success. You also need to look at the level of tariffs, market openness, distribution infrastructure and so on, all of which affect profitability.

November 2011

RESOURCES how to

ll Social and cultural environment ▪▪ Percentage of discretionary income spent on consumer goods. ▪▪ Percentage of people who are literate. What is the average education level achieved? ▪▪ Percentage of the population identified as middle class. ll Legal ▪▪ To what extent the target market is similar to the home market. ▪▪ Whether the product or service needs translation or adaptation. ▪▪ Summarise the legal aspects of distributorships for each country. ▪▪ Documentary requirements and the technical or environmental import regulations covering the product. ▪▪ Whether the market is closed to foreigners, despite the appearance of a free and open market. ▪▪ What intellectual property protection laws would affect the product or service? ▪▪ Where a commercial dispute arises, does the judicial system offer a fair and unbiased review? ▪▪ Are tax laws fair to foreign investors? What is the rate of tax on repatriated profits? ll Product potential ▪▪ Whether there is an identified need for the product in the target market. ▪▪ Percentage of the product or service produced in the target market and what percentage is imported. ▪▪ Is the product or service understood and accepted by the target market? ▪▪ Extent of general level of acceptance for imported products. ▪▪ How many foreign competitors are in the market now and from which regions? ▪▪ Your country’s share of products available in the market. ▪▪ Who are the major competitors? ▪▪ What are the key brands in the market? ▪▪ What are the niche market areas? ▪▪ What are the marketing and distribution channels? ▪▪ Whether established agents exist.

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A pilot test can be carried out by participating in international exhibitions where an exporter can obtain immediate feedback on their product. Moreover, Internet-based marketing and distribution can be used as a test mechanism. ▪▪ Likelihood of consumers moving to the exporter’s product or service. Once the data has been obtained the exporter needs to undertake an extensive analysis of each potential market. One main tool an exporter can use to understand and evaluate a potential market is the SWOT analysis which examines the following: ll Strengths These are aspects that the exporter can build on to penetrate the foreign market. ll Weaknesses These tend to be the limitations; however they need not hinder the exporter from entering the market but are areas that need to be managed or covered. ll Opportunities These are aspects that an exporter can capitalise on. For example, a Free Trade Agreement allows an exporter to exploit the lack of tariffs and so on. ll Threats These are the dangers of entering a particular market which the exporter needs to be aware of. Some of the threats may be outside the control of the exporter while others can be managed. In case of the former, political risk is outside the control of a country but exchange rate volatility can be managed through hedging. The SWOT analysis is a detailed examination of the past behaviour of a particular market and country. As such, the analysis is objective in nature and uses the data referred above. A SWOT analysis is

extremely effective in allowing an exporter to do the following: ll Assess the market potential for the product or service concerned. ll Determine the method of entry into the foreign market, such as whether the exporter needs to set up an independent foreign presence, use a distributor, agent, and so on. ll Assess areas where the exporter can create a competitive advantage in foreign markets. ll Shore up areas of weakness. ll Develop a contingency or back up plans for problem areas. ll Develop an export plan. However, the real test of any product or service is its acceptance in the foreign market, which can only be judged through the level of sales. Therefore, an exporter may wish to “dip their toes” in the foreign market through a pilot test that does not require the expensive process of establishing a foreign presence or signing up with a local distributor or agent. A pilot test can be carried out by participating in international exhibitions or fairs whereby an exporter can obtain immediate feedback on their product. Moreover, an exporter can use Internet-based marketing and distribution as a test mechanism. A pilot test will allow the exporter to fine tune the product to meet foreign tastes and preferences, as well as to determine an appropriate marketing and pricing strategy.

December 4th - 5th 2011 Al Faisaliah Hotel Riyadh, Kingdom of Saudi Ar abia www.kingdomentrepreneurship.com

co-organisers

Under the patronage of and to be officially inaugur ated by his royal highness prince Sattam Bin Abdulaziz, Deputy Governor of Riyadh

Entrepreneurs and SMEs: A new er a for the Kingdom’s growth Proposed Speakers H.E. Adel Fakieh

H.E. Ibrahim Al-Assaf

Dr. Ibrahim Al-Hunaishel

Dr Bernd van Linder

Minister Ministry of Labour

Minister Ministry of Finance

Director General Saudi Credit and Saving Bank

CEO Saudi Hollandi Bank

Khalid Al-Jasser

Nabil Abdullah AlMubarak

Chief Executive Officer Bank AlBilad

Chief Executive Officer Saudi Credit Bureau (SIMAH)

About the conference

Format

The Saudi Conference for smes and entrepreneurs is a unique business platform that allows you to showcase your solutions to decision makers and c-level executives representing small and mediumsized enterprises (SMEs). The summit looks at the Kingdom’s business needs and opportunities to support SMEs, family businesses, entrepreneurship and innovation - and contribute to Saudisation.

It combines a cutting-edge conference program with an exclusive exhibition. Interactive panel discussions and keynote addresses are led by national and international key industry leaders. You can promote your latest products and services to pre-qualified decision makers from Saudi Arabia’s SME sector. naseba testimonials

It aims to develop and grow the economy - by elevating and supporting the SME sector in the Kingdom. In addition, the two days highlight the importance of the ‘Job Nationalisation’ program - as required by the Kingdom of Saudi Arabia.

“It is the most successful SME forum that we participated in. The forum provided various solutions to the problems facing the SME sector”

The initiative will attract up to 500 key decision makers from SMEs - looking to source business solutions from national and international solution providers.

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Sponsors & Partners Str ategic Multilater al Partner

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For more information please contact: Syed Qasim | Marketing Manager | Tel: +971 4 433 0689 | Email: syedq@kingdomentrepreneurship.com

trade talk how to

Drink to Success How does a local beverage manufacturer enter foreign markets and generate millions in sales? Hywel Rodrigues, Export Sales Manager at Arab Beverages Establishment, tells us how. Arab Beverages Establishment (ABE), a family business, was started in 1984 by Nils El Accad. With an initial investment of AED 100,000, it was a simple establishment that produced a few containers of fruit juice. But seeing an opportunity to package juices for children, Accad acquired a franchise which eventually became a big success. ABEâ&#x20AC;&#x2122;s business then grew gradually, through strong local sales and distribution networks, during which time the company entered every potential distribution channel and ran below- and above-the-line activities. Following this, Accad built a factory and launched ABEâ&#x20AC;&#x2122;s own brands of Sun Blast and Cool Sun. Accad then saw a huge potential of packaging in overseas markets, and explored these markets by participating in local and international trade exhibitions, making market visits to different countries, conducting market surveys, and gathering market intelligence. Over time, the company opted to sell in these markets using the franchise model that enabled it to compete with local players by avoiding high freight, custom and VAT duties. Its brands Sun Blast and Cool Sun are now sold worldwide. The company, which is now located in Techno Park, Dubai, produces and distributes everything from 10%, 30%, 50% conventional drinks, to 90% juices with no sugar added, to even 100% organic fruit juices. ABE produces orange, mango, mixed fruit, apple and strawberry drinks, including 100% organic fruit juices, for the export market. It is 30

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present in 30 countries, including Oman, Bahrain, Saudi Arabia, Qatar, Lebanon, Syria, Jordan, Africa and Europe. ABE is looking for franchise partners in strategic locations around the world, so it can pack juices locally in those countries, thus making its brands widely available in more countries. The company has aggressive expansion plans to enter new countries with an untapped market and a huge potential demand for beverages. ABE is also looking at expanding its product range with the launch of vitamin water, a health drink targeted at sports people. The company believes that diversifying its product range will give it an edge over competitors. But exporting has not been an easy path for this beverage company. For

instance, ABE decided to sell juices in Saudi Arabia as they had prior experience in that market. The company faced enormous challenges as its local partners demanded big distribution margins, the consumers wanted a cheap price, big retailers asked for exorbitant listing fees, and the required quality standards were not as high as the company was accustomed to. Therefore, ABE reduced its freight costs, selected an ambitious local partner who understood the beverage business, studied the value chain in depth, and made adjustments to raw materials as per local demand. It adopted a pricing structure based purely on a market diligence study, which enabled the company to be competitive while achieving good sales numbers. The

ABOUT

Hywel Rodrigues is an Export Sales Manager at Arab Beverages, a member of the Al Accad Group. An energetic and self-motivated sales and marketing professional, Hywel has 18 years experience in the FMCG industry, working in progressive sales management, distribution, exports and trade/brand activation positions at companies like Coca Cola, Herfy and Arab Beverages in the UAE and Saudi Arabia. He has also managed famous brands for companies like Coca Cola, 3M, SC Johnson and is presently developing the brands Sun Blast and Cool Sun for Arab Beverages. For more information visit: www.arabbeverages.com.

company also developed a long-term strategy to increase its distribution channels by moving from down markets (i.e. groceries) to the upper trade (i.e. key accounts). ABE got an encouraging response from consumers, particularly with regard to its packaging, quality and flavors. This has helped the company entrench in the Saudi market with sustainable consumer demand. Like any rapidly-growing exporter, ABE has identified several challenges – both internal and external – in its quest for global expansion. Most of its internal challenges include timely delivery of raw materials and high freight charges. The company is also facing external challenges that any manufacturer can identify with, especially sky-rocketing raw material prices like sugar. Dealing with competition in foreign markets is another big challenge the company faces. The company has adopted several coping strategies to counter competition, using tactical promotions, below- and abovethe-line activities, and by tackling raw material costs, value chain and freight costs. ABE spends a lot of time and investment in trade shows, market visits, research and development, market intelligence gathering, agency reports, consumer feedback, marketing, MIS reports and competitor evaluation, before entering a foreign market. ABE keeps up-to-date with commodity pricing, explores new options for raw material sourcing, and maximises present resources. Moreover, ABE sells through franchise partners at strategic locations, in order to compete with local players. The company has also built credibility by obtaining certificates of conformity for

organic products from EcoCert SA, BRC and HACCP. ABE has advised other exporters to look at the micro and macro aspects of a business in order to succeed. They recommend using market survey as a tool before exporting to decide which product needs to launched in which market. Though Hywel admits that there is always

room for every product to be launched in a market, an exporter needs to be tactical in choosing the right partners to avoid potential problems and choose the right markets so as not to drain capital. ABE’s success also comes by selling quality products, which the company achieves by following a stringent

production process. All raw-materials are purchased from approved suppliers, taking into consideration their scope of business, market reputation, product quality and supply reliability. On receipt juices are stored at -18 to +5 degrees Celsius. The company currently uses a self developed automatic juice production plant that was set up three years ago. Its entire production is done from that one factory, which is constantly upgraded with better technology to enable better production output in order to meet growing consumer demand. The entire spectrum of operations, such as juice preparation, processing, filling, straw attachments and packing, is done using automatic machines. There are separate stores for raw materials and finished products. The production plant is isolated from these stores using a unidirectional flow model. The natural fruit drinks are pasteurised and packed in special triple-laminated aluminum pouches that protect the drink from physical, chemical and microbiological hazards, keeping the drink free from artificial colors, sweeteners, flavors or preservatives. ABE has an in-house laboratory to check the physical, chemical and microbiological quality of products. Finished products are checked and released only three days after production, if all required parameters are met. The shelf life of ABE products are typically 12 months. ABE’s key channel has been local school sales. November 2011

trade talk interview

Export Growth Chambers His Excellency Abdul Rahman Saif Al Ghurair, Chairman, Dubai Chamber of Commerce and Industry, discusses trade opportunities and challenges, lucrative sectors and trends for exporters and importers in the Middle East region, in particular Dubai, while also highlighting why using this region as a trade hub makes sense. Direct trade between Dubai and the rest of the world, including exports, imports and re-exports, has shown growth in all sectors year-to-date for 2011. What are the factors behind this growth and do you expect this momentum to sustain throughout the rest of the year? There are a number of factors behind Dubai’s trade growth over the past year, including Dubai’s status as a leading trade destination, an increase in the number of Dubai businesses and the strength of our trade partners. Dubai is one of the world’s top destinations for trade. The city’s strategic location, excellent infrastructure and tax-free status make it an attractive place for traders to base their operations. Meanwhile, Dubai’s main trade partners are countries in the GCC, India and China, all of which have strong and growing economies that are fuelling demand for goods. We expect this growth to continue throughout the rest of this year. According to our latest data, our members’ exports and re-exports ABOUT his Excellency Abdul Rahman Saif Al Ghurair His Excellency Abdul Rahman Saif Al Ghurair is the Chairman of Dubai Chamber of Commerce and Industry, as well as a Board Member of Abdul Rahman Saif Al

for the first eight months of this year increased by 17.1% to AED 162.1 billion, as compared to the same period last year. We have also witnessed an increase in the number of members since the start of this year, which is a good indicator of the growth of new businesses in Dubai.

Is the positive trade growth a sign that Dubai has weathered the financial crisis, or is recovery still uncertain, especially with the lingering ambiguity in global markets? Dubai’s economy has rebounded from the initial impact of the global financial crisis, but it is not possible to say that Dubai has completely weathered the financial crisis. Dubai is a world economy and so, like other world economies, it is susceptible to uncertainty in global markets. What I can say is that Dubai’s economy is much better equipped to handle any difficulties arising from current global uncertainty due to prudent policies that have been put in place, as well as the strength of the trade, tourism and logistics sectors.

Ghurair Investments LLC and Dubai Economic Council since 2003. Al Ghurair was elected in March 2008 by the Chamber’s Board of Directors for his valuable efforts and commitment in promoting Dubai as an international business hub. In October 2010, Al Ghurair

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Will oil continue to be the key export from the Middle East region, or are you expecting other sectors to play an increasingly important role? Oil and gas exports are a major source of trade for the Middle East and will continue to be so for some time. For the UAE, this sector is still a major driver of the economy and the source of funding for major investment projects. This is less the case for Dubai, which has succeeded in diversifying its economy away from oil reliance to other sectors including trade, tourism, logistics and financial services. At the same time, there are other sectors that are playing an increasingly important role in the Middle East. One example is food products, which currently make up a large proportion of imports and exports in the region, as the hot climate limits the availability of home-grown agricultural products. Food security is a major issue facing governments in this part of the world. Populations are increasing with a subsequent increase in demand, thus putting an extra strain on supply.

was re-elected in his position as the Chairman of Dubai Chamber of Commerce & Industry. Al Ghurair is also a Board Member for a number of leading organisations, including Commercial Bank of Dubai, OTIS Elevator Company (ME), Mashreq

Bank and National Cement Co. His Excellency also owns Al Ghurair Exchange and is the Chairman of Raqmiyat LLC and Trigon Computer LLC. For more information visit www.dubaichamber.com or contact: aginvest@aginvest.ae.

Which countries do you see becoming important trade partners for the Middle East, and the UAE in particular, and in what specific sectors? In the future we see Africa becoming a major trade partner for the UAE. As African economies grow, demand for goods, products and services will increase and the UAE, especially Dubai, is wellplaced to meet this need. Dubai is located in close proximity to Africa and can act as a gateway for trade in and out of the continent. The city’s excellent business climate also makes it an attractive place for African businesses to base themselves in order to reach markets in Europe, the Middle East and Asia, and for international traders hoping to tap into emerging African markets.

According to a recent study by Dubai Chamber, the UAE has replaced Saudi Arabia as the largest GCC market for US exports. What contributed to this and how long can we expect this to continue? The UAE has been a slightly larger market for US exports in the GCC since 2007. Food and live animal exports, and manufactured goods are two categories of exports that have seen strong growth over this time. We can attribute this in part to the increase in domestic demand, and also due to the increase in the volume of Dubai’s re-exports to the region. We foresee no drastic changes in trade patterns for the US with the Middle East. US imports from the Middle East will continue to be mainly focused on oil, while exports will mainly be manufactured goods. The dominance of machinery and transport equipment is also expected to continue over the next few years as the UAE and other Gulf countries continue investing in transport infrastructure.

US presence in the Gulf region is expected to remain substantial. Do you see US exports into the Middle East region move away from goods and towards services?

The US was ranked Dubai’s fourth largest trade partner in 2010 and trade between the two countries has been strong this year. According to Dubai Chamber’s data, our members’ exports and re-exports increased by 45.1% in the first six months of this year, compared to the same period last year. Looking specifically at trade in terms of goods and services, we don’t foresee competition between these two different types of exports because manufactured goods will continue to make up a large part of US exports to the Gulf. Meanwhile, services are also expected to increase in line with countries’ economic and social development. So we see both goods and services as complementary to one another.

What do you think will be the singlemost important factor that will determine trade in the Middle East region over the next 2 to 3 years? Globally, focus is shifting eastwards as economies in Europe and the United States continue to face uncertainty and slower growth rates. On the other hand, countries in the Middle East, India and China are forecast to see higher economic growth rates both this year and the next. This puts the UAE, and particularly Dubai, in a strong position to act as a bridge to reach these key growth markets. I think this will be reflected in the trade sector with demand for consumer goods increasing in emerging economies and with these countries providing new products and markets for exports.

In the future we see Africa becoming a major trade partner for the UAE. As African economies grow, demand for goods, products and services will increase and the UAE, especially Dubai, is well-placed to meet this need. Dubai is an attractive place for African businesses to base themselves in order to reach markets in Europe, the Middle East and Asia, and for international traders hoping to tap into emerging African markets.

November 2011

trade talk interview

What are the primary challenges that traders will face in the Middle East in the short-term, mediumterm and long-term? The main challenges affecting traders in the region stem from the recent political upheavals. The unrest has impacted trade volumes to certain countries, like Libya and Tunisia, and challenges will continue as countries move towards greater participation in government and transparency. Meanwhile, outside the region, the slowing down of major Eurozone economies will continue to put pressure on the trade sector. However, this can be partly offset by establishing new trade links with emerging markets in Eastern Europe, Asia and Africa.

What are the opportunities that traders can take advantage of when looking to export and import from the Middle East region? Looking specifically at Dubai, there are a number of opportunities for traders operating in the city. Dubai’s close proximity to emerging markets in India, China and Africa offer potential for growth in new markets and products. Issues like food security, healthcare provision, growth of retail and tourism all create opportunities for traders. Demand for certain products is increasing due to these factors, like the tourism industry which is driving retail demand for luxury goods. The increasing population is also adding to the need for more food products and healthcare provision. 34

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The value of exports and re-exports by Dubai Chamber members reached AED 162.1 billion during the first eight months of this year. What do you think contributed to this and what do you expect going forward?

sector and encourages best practice.

This figure highlights Dubai’s strong trade sector which is helping to drive the economy. We expect this upward trend to continue going forward this year and the next, which is supported by our most recent export and re-export figures mentioned previously.

Dubai Chamber has a number of initiatives to assist our members in exploring new markets, including ‘Country Focus Briefing’ events and business networking meetings. The ‘Country Focus Briefing’ examines business opportunities in different markets around the world, and we invite government officials and leading companies from that country to discuss their expertise. This includes a range of different economies, such as Turkey, Brazil, Australia, Ethiopia, Chile and Switzerland. Business networking meetings also form a large part of our operations. These include welcoming foreign delegations, organising local events and attending international conferences.

During the first six months of this year, Dubai Chamber received 49 international delegations with 500 delegates. Where are you seeing the most promising development of bilateral trade relations with the UAE? The majority of delegations we received during the first half of the year were from Latin America, South-East Asia and Africa. I think this is indicative of the potential in these emerging markets and Dubai’s status around the world as a leading international destination for business.

What initiatives has Dubai Chamber taken to support and develop Dubai’s trading community? Dubai Chamber seeks to represent, support and protect the interests of the business community in Dubai by creating a favourable business environment, supporting the development of business and promoting Dubai as an international business hub. Specific initiatives which we have launched to support traders include the implementation of the ATA Carnet earlier this year. As its official guarantor, Dubai Chamber was instrumental in bringing this international customs document into use in the UAE. We are also assisting Qatar to implement this important document and encouraging other GCC countries to do the same in order to facilitate trade. We also have the ‘SME Exporter of the Month’ initiative, which rewards outstanding performance by traders. This initiative helps instil competition in the

What initiatives have Dubai Chamber taken to enable companies from the manufacturing and services sectors to expand to international markets?

Which local industries do you think show the most potential for international growth? The trade sector still has a lot of potential for growth. New markets and products are always in demand and Dubai-based traders are encouraged to explore these new opportunities. Likewise, international traders are urged to look at Dubai and what it offers for their operations, especially to reach strong emerging markets like India, China and Africa. Tourism is another sector that drives Dubai’s economy and can be exported to other countries. Emirates airline is continuing its large-scale expansion plans, with new planes and destinations, including investing in world-class resorts and hotels in other countries. Education and healthcare services in Dubai also provide opportunities for international companies. We have a number of successful international schools, colleges and universities established in Dubai, but there is definitely room for more.

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trade talk interview

Saudi Arabia: Export Powerhouse Ahmed Mohmmed Al-Ghannam, Director General, Saudi Export Program talks to Trade and Export Middle East about the importance of Saudi Arabiaâ&#x20AC;&#x2122;s exports in the Middle East region, the role performed by Gulf countries in global economics, and how the Saudi Export Program is supporting Saudi non-oil exports and developing trade exchange with other countries.

What are the main objectives of the Saudi Export Program and how does it seek to accomplish them? The Saudi Export Program (SEP) of the Saudi Fund for Development (SFD) was established in 1999 as the official export credit agency of Saudi Arabia. The main objective of SEP is to contribute to government efforts in diversifying national incomes by providing export facilities to Saudi exporters and foreign buyers (importers) of non-oil Saudi products and services. The facilities contain competitive financial, insurance and guarantee instruments. The main objectives of SEP are summarised as follows: ll Develop and diversify non-oil exports. ll Maximise the competitiveness of Saudi exporters by providing export credits to foreign buyers and banks. ll Encourage Saudi exporters to sell internationally and penetrate new markets by mitigating risks associated with international trade transactions. SEP works hard to achieve its objectives by increasing awareness of the importance of exporting, and enhancing cooperation with local, regional and international players in the foreign trade arena.

What are some of the services that the Saudi Export Program offers exporters? SEP offers Saudi exporters a range of services including: ll Export funding facilities, which About Ahmed Mohmmed Al-Ghannam

Ahmed Mohmmed Al-Ghannam is the Director General of the Saudi Export Program since 2005, and

Deputy to the Managing Director of the Saudi Fund for Development since 2008. Ahmed has been involved in a variety of roles with the Saudi Fund for Development, starting in 1980 as an Economic

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Specialist. From 1990 to 1994, Ahmed worked at the World Bank in Washington D.C. as an Alternate Executive Director. Ahmed has a Masters in Economics (1984) from Central Michigan University, USA,

and a Bachelors in Economics (1980) from the King Saud University, Riyadh, Saudi Arabia. Additional information about Saudi Export Program can be found on their website: www.sep.gov.sa.

include export facilities prior to shipment of goods and/or postshipment. ll Export credit insurance and guarantees, which include various types of insurance policies and guarantees to cover non-payment risks associated with export transactions. ll Line of credit to commercial banks and corporations importing Saudi products. ll Marketing services, which include introducing the services of the program to all beneficiaries, issuing brochures and newsletters, participating in local and international seminars and trade exhibitions, and providing online information about SEP services.

What are the requirements for exporters to avail of these services? The most important requirements for any export transaction to be eligible for SEP services are: ll Exports should be of Saudi origin and contain at least 25% local added value. ll The value of an export transaction should not be less than SAR 100,000 (USD 27,000). ll All national goods and services are eligible for SEP services, except crude oil. ll SEP â&#x20AC;&#x2DC;s financing could reach up to 100% of the transaction value. ll Risks associated with export transaction and credit worthiness of beneficiaries and guarantees should be acceptable to SEP.

Are the financing services offered by the Saudi Export Program Shariahcompliant and, if so, how? SEP offers both conventional and Shariah-compliant facilities. Each facility has its own terms and conditions, and applies specific types of procedures and documentations. Similar to banks and financial institutions, SEPâ&#x20AC;&#x2122;s financing facilities and instruments are identified as a response to the beneficiaryâ&#x20AC;&#x2122;s requirements.

What do you consider as the major accomplishments of the Saudi Export Program? Although SEP is still emerging when compared to other Export Credit Agencies (ECAs), it has achieved satisfactory results. Since the start of its operations in 2000, SEP has been able to respond to exporter needs by providing various types of financial facilities. So far, SEP has approved export credit facilities exceeding SAR 20 billion (more than USD 5 billion) to finance and insure national non-oil exports. SEP will continue to work hard to support Saudi exports and provide export credit solutions in collaboration with Saudi exporters, local and foreign banks, financial institutions, and other ECAs.

The Saudi Export Program is focused on providing financial support to companies, but some companies also require additional services like trade information, assistance with exhibitions and lobbying. How does the Saudi Export Program deal with these issues? There are institutions in Saudi Arabia, like the Ministry of Trade and Industry, Saudi Chamber of Commerce and Saudi Export Promotion Centre, who provide other services to exporters. SEP complements the efforts of these institutions by marketing national exports in local and international seminars, as well as trade exhibitions. In general, SEP assists in the promotion of Saudi exports in many ways: ll Providing exporters with various export credit facilities. ll Participating in various promotional activities (seminars/conferences) inside and outside Saudi Arabia. ll Communicating with the private sector (Saudi and non-Saudi) to introduce Saudi exports and SEP facilities. ll Issuing publications such as SEP Newsletter and Saudi Exports Directory. ll SEP website.

The main objective of SEP is to contribute to government efforts in diversifying national incomes by providing export facilities to Saudi exporters and foreign buyers (importers) of non-oil Saudi products and services. SEP has approved export credit facilities exceeding SAR 20 billion (more than USD 5 billion) to finance and insure national non-oil exports.

November 2011

trade talk interview

Some countries have established an export development bank in order to provide finance to importers, and thereby assist exporters. Does the Saudi Export Program envisage establishing a similar organisation? SEP aims to support development of national exports by providing competitive export credits to both exporters and importers. SEP deals with importers either directly for large transactions or indirectly through lines of credits established by SEP for foreign banks and financial institutions, who in turn provide the necessary facilities to importers. Therefore, SEP can be considered an export bank.

How does the Saudi Export Program aim to create diversified exports which are not reliant on oil? Diversification has played an important role in promoting exports, as Saudi exporters have been able to provide their customers a variety of products with different specifications. SEP enhanced such initiatives by providing exporters several export credit facilities (funding and non-funding), thus making Saudi exports more competitive. These facilities include pre-shipment credits which can be utilised by Saudi exporters to be innovative and expand production as well as sales to international markets. Also, by

making trade information easily available to exporters, SEP has encouraged them to seize export opportunities and manufacture products required by other markets. We believe that enhancing an external demand for Saudi exports, not related to crude oil, will help Saudi industries export and develop.

What is the relationship between the Saudi Export Program and the Saudi Export Development Centre? SEP and the Saudi Export Development Centre both aim to support and develop national non-oil exports. While SEP focuses on export credit facilities, the Saudi Export Development Centre focuses on export promotion activities. Both organisations frequently participate together in local and international promotional activities.

What key plans does the Saudi Export Program have over the next 5 to 10 years? SEP is planning to continue its efforts to support national exports and increase the resources available to finance these exports. In coordination with institutions from the public and private sector, SEP aims to enhance exports by focusing on industrial sectors with high export potential and high competitive advantages, such as petrochemicals and services.

Saudi exports play a major role in the Middle East, representing about 25% of Arab countries total foreign trade. Saudi Arabia is one of the leading countries in the production of petroleum and petrochemical products, while other industries and sectors, such as agriculture, medicine, transportation and contracting are also in the advance stages.

november 2011

How do you see bilateral trade relations between Saudi Arabia and other GCC countries developing over the next 2 to 3 years? GCC countries have acknowledged that foreign trade has become one of the important engines for economic growth. In this regard and in line with the on-going development of political, social and economic relations among GCC countries, trade between Saudi Arabia and other GCC countries has grown dramatically over the years, and is expected to continue growing in the coming years. Currently, exports from Saudi Arabia are the highest to the UAE. It is worth mentioning that Saudi exports play a major role in the Middle East, representing about 25% of Arab countries total foreign trade. Saudi Arabia is one of the leading countries in the production of petroleum and petrochemical products, while other industries and sectors, such as agriculture, medicine, transportation and contracting are also in the advance stages.

What is your outlook on trade relations between the Middle East and the rest of the world over the next 2 to 3 years? I believe that foreign trade has been getting a lot of focus and momentum in recent years. The private sector in the Middle East is becoming increasingly mature and powerful, driven by political changes, access to human resources, and the continuous efforts of public and private institutions to encourage free trade and exports. In this context, I believe that a relaxation in investment rules will make the export sector even more attractive to investors, while encouraging local firms to export and invest in other countries. Moreover, as a result of globalisation and the establishment of multi-national firms, trade between the Middle East and the world will grow, with stronger trade relations across various sectors.

TRADE TALK

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Focus industry insights

Healthy Trading Consumer healthcare is one of the fastest growing fields in the world. With the advent of modern technology, adaptive local regulations, and growing consumer demand there are many potential opportunities. Trade and Export Middle East, with Euromonitor International, explores what this industry can mean for you. Consumer healthcare remains challenging Consumer healthcare continued to see growth in 2009, although progress was more restrained as the United Arab Emirates (UAE) continued to work through its recession. Healthcare was expected to achieve lower growth than that seen in years of robust economic growth in the UAE and the region as a whole. Nevertheless, whilst there was an undoubted impact on the economy in the UAE, influencing levels of consumer spending and wider investment, consumer healthcare registered steady value growth in 2009 as the country was spared the worst of the fallout from the global credit crunch.

Government encourages self-medication Consumers in the UAE remain cautious of self-medication though there are signs that this is changing, particularly with the 40

november 2011

government promoting this in order to reduce healthcare spending. Penetration of over-the-counter (OTC) products increased alongside this rising demand, which fed further interest, particularly as consumers became more knowledgeable and confident when selecting products. There were increased warnings about the use of certain products, as well as other controversies surrounding some medicines and the health ministry, and while these factors hindered growth in some parts of consumer healthcare, the movement towards more self-medication is expected to remain a key factor. Local pharmaceuticals on the rise The UAE, alongside other Middle-Eastern countries, is reported to be moving towards a more local focus in terms of the manufacture of its prescription and OTC medicines, as more local players enter consumer healthcare to compete

with dominant multinationals. Perhaps in light of this, consumer healthcare overall remained extremely fragmented, favouring multinational players such as Novartis AG, GlaxoSmithKline Plc and Bayer AG, although local player Julphar Gulf Pharmaceuticals emerged as an important and leading contender, attracting heavy government investment to promote the development of its portfolio.

Chemists and pharmacies hold onto consumers Chemists and pharmacies continued to be the most important retail channel in consumer healthcare, with many OTC products available only through this channel. Despite the range of products and growing importance of supermarkets and hypermarkets, similar to many other developed economies, this channel managed to make good headway in wound treatments, medicated skin care,

vitamins and dietary supplements. This channel is also expected to become increasingly important as consumers become more accustomed to purchasing their OTC products alongside groceries, helped by the emergence of full-service pharmacies located in hypermarkets.

Healthier forecast expected Despite the recession witnessed in 2009 and declining consumer confidence, consumer healthcare in the UAE showed stable growth. As the economy recovers, more buoyancy is expected to come to categories, with forecasts suggesting a good compound annual growth rate (CAGR) performance. The key drivers for future growth will likely remain high prices, wealthier consumers and a preference for branded products, though growth rates stand to see some moderation as the government moves to import cheaper generic OTC products and pushes local production in order to bring prices down.

OTC registration and classification All pharmaceuticals sold in the UAE must be registered. Importers must have a registered local agent, with distribution agreements registered with the Ministry of Economy and Commerce, and the Ministry of Health. Product details must also be registered with the Ministry of Health in the UAE, and also with the relevant authorities in their country of origin. The Ministry of Health also mandated pre-registration for food supplements in January 2009. The Ministry of Health decides whether pharmaceuticals are classified as OTC, prescription (Rx), or herbal or uncontrolled products, although the Ministry follows World Health Organisation (WHO) and International Conference on Harmonisation of Technical Requirements for Registration of Pharmaceuticals for Human Use (ICH) guidelines. These classifications involve differing registration requirements. The Ministry of Health generally favours Western medicines when

Counterfeiting is an increasing problem, as the UAE is used as a transit point for those seeking to distribute counterfeit medication in Asia and the Middle East, with counterfeits estimated to account for over 10% of pharmaceutical trade in the country. considering registration requests. However, it is increasingly accepting Indian medicines in the country due to growing demand for affordable products. In November 2009, the government announced plans to form an independent federal body to regulate the quality and safety of food and drugs entering the country. This is expected to make the country a more attractive option in the eyes of multinational pharmaceutical companies. Counterfeiting Counterfeiting is an increasing problem in the UAE, although chiefly impacting Rx medication. In July 2007 Dubai customs seized AED 5 million worth of Plavix, while in 2008 counterfeit Lipitor was found in the country. The UAE is used as a transit point for those seeking to distribute counterfeit medication in Asia and the Middle East, with counterfeits estimated to account for over 10% of pharmaceutical trade in the country. A number of chemists and pharmacies in the country are also believed to be distributing counterfeits. Despite recent efforts undertaken to curb illicit drug trade it remains a notable problem. The revision of medicinal prices expected in the early part of the forecast period, is predicted to increase the profit margins of pharmaceutical companies and retailers, after they were severely hit by the dirhamâ&#x20AC;&#x2122;s weakness against the Euro from the end of 2008. This is expected to ease the situation for pharmaceutical companies, and discourage retailers from counterfeit medication trading to help fight the illicit drug trade. Inactive lifestyles and unbalanced diets are causing more health

problems for the population, with the incidence of diabetes, hypertension and cardiovascular diseases showing a marked increase. This is contributing to the growth of medication and food supplements, leading to advancements within the consumer healthcare industry. Given this, it is clear that important sources of counterfeit products are medication and food supplements. In January 2009, a committee was established to monitor counterfeit drugs, as well as medical devices and food supplements. This led to the formation of new policies, including custom inspectors reporting any suspicions to the police and drug inspection department, as well as the ban of repackaged drugs to curb the negative impact on its reputation abroad.

De-listing or de-reimbursement In 2007, the government introduced compulsory health insurance for expatriates in the country, in order to reduce healthcare costs, which saw strong growth during the review period, and to make employers provide expatriate workers and their families with health insurance.

November 2011

Focus industry insights Advertising For much of the review period, the rule for advertising of medicines was lax. The only requirements were that any advertising had to be registered with the Ministry of Communication and the Ministry of Health, and that it should not be misleading. From January to September 2009, the Gulf Co-operation Council (GCC) region was reported to have spent USD162 million on advertising within healthcare, with total spending for 2009 expected to reach USD 215 million. Since various reforms have been passed in this category and there is increasing promotion of medical tourism, this spending is expected to increase over the forecast period. The government tightened the legislation covering medical advertising in July 2007. Under the new legislation, the Ministry of Health must approve all healthcare advertisements prior to publication, with publishers or advertisers paying a fee in order to receive a license enabling advertising. Licenses indicate the date of issue, the length of time that an advertisement can run and which media source can be used. In addition, the Ministry released a set of guidelines for medical advertising. The use of billboards, roadside banners, posters and stickers on transportation and electronic posters was prohibited, as was advertising on plastic shopping bags for release via retailers and murals. These advertising channels may only be used with specific government approval and

unlicensed advertisements attract a fine of up to AED 20,000. The National Media Council also issued a warning in mid-2007 against the use of misleading and unlicensed medical advertising. Tobacco advertising was also banned in September 2007 with the government carrying out several inspection campaigns targeting forecourt retailers, supermarkets and hypermarkets, independent small grocers and shopping centres. Packaging and labelling Information on packaging and labelling must be accurate and list the ingredients contained within the products. All information on packaging and labelling must be written in both Arabic and English. Leaflets must also be included within the packaging for pharmaceuticals, and show: ▪▪ User information ▪▪ Dosage ▪▪ Active ingredients

Distribution Outlets wishing to retail pharmaceuticals in the UAE must be registered with the Ministry of Health and provide a complete list of the medicines they offer. Consumers in the UAE continued to prefer pharmacies as a source of medication, with people trusting their doctors to prescribe the appropriate medication and dosage. Consumer healthcare is more accessible to self-

Inactive lifestyles and unbalanced diets are causing more health problems for the population, with the incidence of diabetes, hypertension and cardiovascular diseases showing a marked increase. This is contributing to the growth of medication and food supplements, leading to advancements within the consumer healthcare industry.

november 2011

service retailers such as supermarkets, hypermarkets and discounters, who are permitted to sell certain types of consumer healthcare products, as long as they are registered with the Ministry of Health as a pharmaceutical retailer, and there is a pharmacist present on the premises. Some OTC healthcare products may also be sold without the presence of a pharmacist, such as the acetaminophen brand Panadol from Glaxo Wellcome SA, though these channel sales remain small as self-medication remains a relatively rare activity in the country. As a result of the government’s interest in promoting self-medication and consumer healthcare, the local pharmacy chain Bin Sina on behalf of multinational player Carrefour opened the first pharmacy within a supermarket in February 2009. This marked the beginning of this style of pharmacy, which fed into consumer healthcare. In 2005, the Ministry of Health imposed a fixed exchange rate of AED 4.3 to the Euro for drug importers, to limit profits made from healthcare products and ensure a flat resale price for a number of drugs. However, the exchange rate shifted to AED 5.15 to the Euro in 2007, with importers and distributors suffering diminishing profit margins. This resulted in shortages of imports from Europe, with many distributors unwilling to continue imports, particularly for products with a low profit margin and generics. Consequently, in November 2007, the government revised the exchange rate for healthcare importers, resulting in a 10% increase of retail drug prices. In January 2009, the Ministry of Health published a list of exchange rates to purchase and sell imported drugs. The Euro was determined at AED 4.965, the Swiss franc at AED 3.1996, the Canadian dollar at AED 3.3361, the Australian dollar at AED 2.6266, the Norwegian krone at AED 0.5877, the Swedish krone at AED 0.5096 and the Danish krone at AED 0.6653. The introduction of rules and regulations within the consumer healthcare industry has made the market attractive for traders in the UAE.

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Focus Services

Sourcing success In today’s global economy, outsourcing has become a very common phenomenon. Many large traders have outsourced some or all of their IT functions. Pallavi Sharma from our group publication Computer News Middle East finds out what challenges and drives this trend and how the Middle East ITO market is keeping up with the trend. We are all aware of the way information technology (IT) has not only transformed the way traders operate and interact with their customers but has also become a key enabler for strategic growth. But what happens when trading organisations grow, and the complexities associated with building, managing and improving their existing IT infrastructure to meet the demands of a rapidly evolving market increases exponentially? The answer for many organisations might lie in outsourcing. As most experts point out, the definition of IT outsourcing has yet to be agreed upon. However, outsourcing is often viewed as the “contracting out” of a business function – commonly one previously performed in-house – to an external provider. In this sense, two or more organisations may enter into a contractual agreement involving an exchange of services and payment. In recent years, businesses across the world have been spending increasing

amounts of money to outsource both critical and non-critical IT operations to meet their individual requirements, be it reducing costs or achieving greater flexibility. Following a recent survey covering 47 ITO (IT outsourcing) providers representing all major geographies and all types of services, including infrastructure (data centre, desktop, storage and network), applications and cloud services, IT research company Gartner predicted that the ITO services market will reach USD 313.2 billion in 2011, a growth of 6.9% from 2010. The survey also found that growth is the top strategic goal for ITO providers this year, with aggressive marketing plans and investments in cloud, utility and “as a service” offerings. “Many ITO providers intend to commit serious marketing funds and target new accounts to outgrow the market,” said Bryan Britz, Research Director at Gartner. “The survey found that at least 50%

In the case of offshore outsourcing situations, it is recommended that both parties work out price changes that may arise due to fluctuations in forex rates; again this may be a fixed percentage change in price after a decided duration or vary based on forex rates.

november 2011

of outsourcing providers said they’ll be spending 2 to 5% of revenue on marketing in 2011, which is higher than the historical norm for marketing expenditure as a percent of revenue,” he added. According to Antonio Antonuccio, COO, Injazat, enterprises in the Middle East contribute heavily to the growth of the global ITO market. “Outsourcing industries have already been flourishing in Asia and Africa; and Middle Eastern organisations are looking at this success as they accelerate their adoption of outsourced service provision,” he says. “ITO in the region began with a small base in the UAE that eventually grew to entire establishments like the Dubai Outsource Zone. Now the Emirates’ ITO industry is clearly amongst the most mature in the region as demonstrated by the incidence of IT Services revenues on UAE total IT spend (more than 50%),” Antonuccio adds. “In the Kingdom of Saudi Arabia, the region’s largest IT market, the number of organisations opting for third-party IT managed services grew from 6.5% in 2008 to 22.7% in 2009, accounting for 18.4% of corporate spend on IT services. This is indicative of how the region’s enterprises have taken a strong liking to ITO as a means to enhance business. Some trends that are dictating the regional market are the rising legitimacy of offshore outsourcing and demand for service oriented architecture (SOA),” he points out.

Experts point out that the key drivers for the adoption of IT outsourcing are associated with cost reductions, increased flexibility, reduced time to market, optimal allocation and utilisation of resources, and the ability to allocate key resources to an organisation’s critical business operations. “The cyclical and secular changes that businesses have been facing over the last few years have provided further momentum to outsourcing. Besides searching for cost savings to fund growth and innovation, businesses are required to complement the benefit from labour arbitrage by the improved efficiency and effectiveness that third-party providers can deliver. They need to focus more intensely on operational efficiency. As a result, firms must closely examine what activities are core to their business and what should be done by someone else. They must therefore look at driving more work and corresponding budget to a global delivery model,” explains Stephen Fernandes, Country Manager, Middle East, Cognizant. Proactive planning As is the case with any technology trend, IT outsourcing in the Middle East is hindered by a number of risks that experts believe can be mitigated with the clever use of communication and planning. Fernandes says, “To mitigate any risks associated with outsourcing, organisations must clearly identify their objectives for outsourcing as these business drivers would determine the nature and efficacy of outsourcing models.” Understanding the underlying need to outsource an operation would help decide what core knowledge an organisation wants to protect to avoid becoming too dependent on the vendors. Such dependence affects the ability to negotiate budgets and outsource contracts. Parag Sule, Regional Head, GCC, Tech Mahindra adds, “Another risk associated with ITO is security and the ability to trust the vendor with your confidential

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Computer News Middle East For more than a decade and a half, Computer News Middle East has been the link between regional IT players and their key target markets. It has driven the messages of local relevance, business benefit and technology into focus for IT decision makers. The magazine covers all the important market sectors in depth, combining interviews, best practice case studies, news analysis and market trends through focused sections. Add to this analysis of global news and exclusive interviews with global IT players from Silicon Valley to Taipei, and you have an authoritative route to market. For more information visit: www.computernewsme.com.

data and organisation’s integrity. The best way to deal with this is to enquire about the vendor’s security infrastructure and provisions, analysing these policies and parameters to ensure that they meet the organisation’s internal standard of security. This is especially so in the case of offshore contracts, where decision makers should ideally visit the vendor’s site to get a better idea of the infrastructure the outsourcer has in place. Organisation’s can also place access controls to enable granular access to sensitive data.” Antonuccio says, “Governance and communication is critical. The success of an outsource project depends on the ability to clearly assign roles and responsibility and define the scope of accountability for outsourced operations. In addition to which, both parties must clearly outline the expectations and requirements that are ultimately embedded into a set of SLA metrics to ensure that they are being met. Without these basic measures, the relationship could be jeopardised by misunderstandings and possible disappointments associated with not meeting or understanding unsaid

expectations.” According to Sule, senior management must explain the firm’s strategy to all its employees, and must tie this strategy to the current business environment. He recommends that organisations invest in training their employees to work in an outsourced environment that often involves different technology, in addition to involving them in educational seminars and training programs at regular intervals. Analysts point out that one of the biggest challenges associated with ITO is the ability to choose the right partner or outsource service provider to work with. Fernandes advices, “Across industries, enterprise decision-makers must look for partners that bring deep domain and industry expertise, strong onsite presence, and well-honed relationship management capabilities, coupled with a seamlessly integrated global delivery network that provides access to the best talent at an appropriate price point.” He opines that organisations must look for service providers that can deliver significant value in re-architecting business models and technology footprints to reduce costs and implement

The cyclical and secular changes that businesses have been facing over the last few years have provided further momentum to outsourcing. Besides searching for cost savings to fund growth and innovation, businesses are required to complement the benefit from labour arbitrage by the improved efficiency and effectiveness that third-party providers can deliver. November 2011

Focus Services

tailored solutions that address the changes in their industries and help them become more competitive. “Organisations must ensure that they work with a partner who has significant experience working with the vertical in question. This will not only guarantee that they have the right expertise and skill to meet business requirements, but also that they understand the underlying business and operational needs,” explains Manish Mishra, VP, Middle East Head, HCL Technologies. Settling scores With so many elements challenging the success of an outsourced IT operation, it is only natural that decision makers pay careful attention to the content of an outsource contract to make sure that both parties clearly understand the mutual expectations and eventually gain from a win-win situation. Antonuccio says, “The contract should ensure that the needs and expectations of the client are clearly defined and that stated requirements are equitable, cost-effective and ultimately beneficial for both parties. Second, the Objective Service Levels and Key Performance Indicators (KPIs) should be measurable, realistic and aligned with business needs and priorities.” According to him, this must be followed by a clause covering the right governance and change management structures. Mishra largely agrees but adds, “The contract must clearly define the outsourcing model, whether it is managed services, project-based outsourcing, built operational transfer or out-tasking. Based on the model, the contract must then clearly mention the pricing model that both parties have agreed upon. This may be a fixed price model or a time and material based initiative. In the case of offshore outsourcing situations, it is recommended that both parties work out price changes that may arise due to fluctuations in forex rates; again this may be a fixed percentage change in price

november 2011

after a decided duration or vary based on forex rates.” Sule believes that ITO adoption in the Middle East region is only just maturing. “I think the most basic thing is to generate awareness about IT outsourcing, how it works, how to go about deciding on a model and the benefits. This will help address the fear of loss of control and other apprehensions that organisations may have. Also, outsource partners and the government can work together to build a regional domain focused on outsourcing, to help develop relevant skills and contribute to building a subscriber and supplier base,” he says. Antonuccio believes that although the Middle East ITO industry is showing great growth prospects, there is room for more. “Providers must ensure that the ITO proposition has a sound business rationale with clear benefits for the company, ultimately helping it implement its strategy and successfully compete in the market,” he explains. Most vendors agree that the government can play a huge role in driving both the public and private sector to evaluate and embrace ITO, as this will benefit and encourage the development of knowledge-based digital societies. Decision makers share an optimistic outlook towards the future of the ITO market the world over. “In this virtualised, globalised environment where new technologies like cloud

computing and social networks intersect with the millennial generation, clients are looking for better ways to organise teams, cultivate innovation, allocate resources, and reinvent knowledge processes. The next few years will be characterised by transitions in technology, industry structures, and business and technology architecture. In achieving higher thresholds of business performance, businesses will continue to look beyond cost optimisation and aim for incremental efficiencies from existing technology investments, and operational excellence,” says Fernandes. Gartner in its recent survey found that between 60% and 64% of providers nominated cloud investments in the top three ITO investment priorities for 2011. The average percentage of deals expected to include cloud services and utility services, or “as a service” delivery models is 18% for data centre deals in 2011, and expected to grow to 24% in 2012. “There is no going back to business-asusual for ITO providers,” said Allie Young, Vice President at Gartner. “Traditional business models are being turned inside out: it has started with the new business models and cloud ecosystem, and these trends will continue to impact the outsourcing business. Providers that ignore those trends could find themselves stuck with yesterday’s delivery models and high cost structures as the market moves on around them,” Young concluded.

By the numbers 6.3% growth expected in worldwide BPO market in 2011 5%

growth expected in worldwide BPO market in 2012

3.8% growth in North American BPO market in 2011 14.7% growth in Latin American BPO market in 2011 8.9% growth in Western Europe BPO market in 2011 17.9% growth in Asia-Pacific BPO market in 2011 Source: Gartner BPO Estimates, March 2011

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Focus commodity watch

Commodity prices witnessed a steady increase in the month of October as traders anticipated positive cues to arise from the Eurozone summit to be held between 3rd-4th November in France.

NATURAL GAS

After a month of gains, commodity prices dropped on 31st October. This was driven by Japanâ&#x20AC;&#x2122;s intervention to weaken the Yen that led to a subsequent appreciation of the dollar. For investors holding other currencies, commodity prices in dollar terms became more expensive, thus reducing the demand for commodities.

BRENT

Similar to the trend seen in gold and silver, oil prices rocketed by more than USD 4 and reached USD 111.7 on 28th October compared to USD 106 a week earlier, but slipped to USD 109 by 31st October.

november 2011

Data provided by Zawya

Focus commodity watch

GOLD

Gold started October on a flattish note, but by the third week of the month prices augmented steadily upwards. Gold reached a one-month high on 28th October touching USD 1,747.2 an ounce from USD 1,653 the previous week. Due to dollar appreciation, gold dropped by 2% to USD 1,714 in the last day of the month.

Silver

Silver started the month with timid variations before soaring to a one-month high on 28th October to touch USD 35.28 an ounce. Due to general weakness in the markets the precious metal shed 5% to reach USD 34.33 on 31st October.

Data provided by Zawya

November 2011

Community events calendar

Save the date!

EXHIBITION

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 around the world, which could help you spend less time planning and more time attending. DATE

LOCATION

World SME Expo

1 - 3 December

Hong Kong

China Import & Export Commodities Exhibition

1 - 4 December

Malaysia

World Green Tourism 2011

5 - 7 December

Abu Dhabi

Middle East Natural & Organic Products Exp

5 - 7 December

Dubai

National Exhibition for Small & Medium Enterprises

5 - 8 December

Abu Dhabi

International Real Estate & Investment Show

7 - 10 December

Abu Dhabi

Airport Suppliers Conference

11 - 12 December

Dubai

Abu Dhabi International Motor Show

19 - 23 December

Abu Dhabi

Silicon Valley International Auto Show

5 - 8 January

USA

Arab Health

23 - 26 January

Dubai

World Ophthalmology Congress 2012

16 - 20 February

Abu Dhabi

International Defence (IDEX)

20 - 24 February

Abu Dhabi

Facility Management

22 - 24 February

Germany

Middle East Exclusive 2012

27 - 29 February

Dubai

DECEMBER 2011

LOCATION

October 2011 Business, Franchise & Investment EXPO

1 - 2 October

Canada

Middle East Workboats 2011

3 - 5 October

Abu Dhabi

Saudi Arabian Infrastructure Congress 2011

8 - 10 October

Saudi Arabia

GITEX

9 - 13 October

Dubai

Middle East Coffee & Tea Convention

12 - 14 October

Dubai

Power + Water Middle East 2011

16 - 18 October

Abu Dhabi

Middle East Chemical Week

16 - 19 October

Abu Dhabi

International Jewellery & Watch Show Abu Dhabi

17 - 21 October

Abu Dhabi

Abu Dhabi International Wood and Wood Machinery Show

18 - 20 October

Abu Dhabi

2nd Annual Global Petrochemicals Technology Conference

18 - 20 October

Doha

Financial Services Trade Mission

19 - 21 October

Indonesia

MARCH 2012

INDEX

22 - 25 October

Dubai

LogiPharma Europe

1 March

USA

Abu Dhabi Medical Congress 2011

23 - 25 October

Abu Dhabi

CeBIT 2012 (IT)

6 - 10 March

Germany

15th Annual MEGAS Summit

24 - 26 October

Turkey

International Security National and Resilience

19 - 21 March

Abu Dhabi

BETT Middle East 2011

25 - 26 October

Abu Dhabi

APRIL 2012

Building Future Education MENA 2011

25 - 26 October

Abu Dhabi

Motexha

1 - 3 April

Dubai

Arabian Travel Market

30 April - 3 May

Dubai

2011 UFI Congress

1 November

Abu Dhabi

May 2012

AutoRomania

1 November

Romania

Multimodal

1 - 3 May

England

Oil & Gas Ukraine

1 - 3 November

Ukraine

Arab Market 2012

1 - 12 May

Abu Dhabi

Abu Dhabi International Petroleum Exhibition

5 - 8 November

Abu Dhabi

Cards and Payments Middle East 2012

15 - 16 May

Abu Dhabi

World Hospital Congress

8 - 10 November

Dubai

The Hotel Show 2012

15 - 17 May

Dubai

Dubai International Jewellery Week Exhibition

10 - 13 November

Dubai

Made IN Korea (MIK) UAE 2012

21 - 23 May

Abu Dhabi

Dubai International Motor Show

10 - 14 November

Dubai

June 2012

Dubai Air Show

13 - 17 November

Dubai

The Franchise and Business Opportunities Expo

2 - 3 June

USA

International Tourism Exhibition (ITE)

14 - 16 November

Abu Dhabi

World Gas Conference & Exhibition

4 - 8 June

Malaysia

Roadex/Railex 2011

18 - 20 November

Abu Dhabi

COMPUTEX Taipei

5 - 9 June

Taiwan

2011 World Robot Olympiad UAE

18 - 20 November

Abu Dhabi

AIBTM 2012

19 - 21 June

USA

The Middle East HR Summit And Expo 2011

20 - 24 November

Dubai

July 2012

HR Best Practices in Oil, Gas & Petrochemicals

21 - 22 November

Kuwait

CIS Travel Market

27 - 28 July

Russia

Gulf a la Carte 2011

21 - 23 November

Abu Dhabi

Ramadan & Eid 2012

29 July - 19 August

Abu Dhabi

SIAL Middle East 2011

21 - 23 November

Abu Dhabi

AUGUST 2012

FM Expo + Big 5 Show

21 - 24 November

Dubai

ACBW 2012

2 - 4 August

Australia

Middle East Manufacturing Exhibition 2011

28 - 30 November

Abu Dhabi

September 2012

SIM - Signage, Imaging & Media Show 2011

28 - 30 November

Abu Dhabi

Furniture Manufacturing & Supply China

11-12 September

China

Airport Exchange 2011

29 - 30 November

Abu Dhabi

Private Label Middle East Dubai 2011

23-25 September

Dubai

Global Water and Beverage Technology Congress

29 Nov - 1 December

Dubai

Paper Arabia

23-25 September

Dubai

November 2011

november 2011

JANUARY 2012

FEBRUARY 2012

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