presents
BUSINESS INTELLIGENCE FOR INTERNATIONAL TRADE www.tradeandexportme.com
Contents
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56 ADVISORY BOARD Key personalities sharing their expertise to ensure that we bring you the latest trends and issues in the field of trade. Hospitality & tourism 58 Building Brand Qatar Noted industry commentator Melanie Mingas evaluates the remarkable opportunities in the Qatari hospitality sector.
Since the turn of the century, Dubai has been rising steadily as the undisputed entrepreneurial capital of the Middle East. Due to its integrated infrastructure and openness to business, it attracts investors, worldclass advisors and, of course, entrepreneurs. p62
TRADE AND EXPORT MIDDLE EAST
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Trade & growth 62 Dubai – the rising financial capital. The Emirate’s role as a key trade hub is well-established, but a subtle transition has taken place, whereby Dubai is earning credentials as a world-class centre of financial services. Associate Editor Zennifer Khaleel investigates… Strategy 66 Culture and Exporting Dr Ashraf Mahate, Head, Market Intelligence, Dubai Exports lays out a simple guide to help you avoid cultural conflicts in doing business with other countries and make your company more globally competitive.. VIP interview 70 A record of achievement Ahmed bin Sulayem, Executive Chairman, Dubai Multi Commodities Centre, in an exclusive interview shares his vision towards attaining greater achievements.
Success has no nationality, just as commodities have no nationality. We service the world and we are focused on competing on the global stage against the biggest multi-nationals and most successful economies of our time. p72
Finance 74 Money in motion The Western Union Business Solutions team gives us their highly polished update on currency movements for the month of July. Event spotlight 78 The SME Evolution Programme The recent SME Evolution Programme event, proved to be a melting pot for entrepreneurial ideas and exciting SME insights. We bring you the highlights of the event. Economic insight 80 Ramadan Economics Find out what the actual picture is when it comes to the financial performance of different sectors during the holy month of Ramadan.
TRADE and export middle east
ADVISORY BOARD Trade and Export Middle East presents a dynamic group of industry experts and leaders as part of its Advisory Board. The following key personalities will help add value to our analysis and ensure that we bring you the latest trends and issues in the field of trade.
H.E Saed Al Awadi CEO, Dubai Exports, Department of Economic Development, Dubai
Dr. Adeeb AlAfeefi Director, Foreign Trade & Export Support International Economic Relations Sector, Department of Economic Development, Abu Dhabi
Khalil Saqer Bin Gharib Corporate Communications Director, Dubai Customs
Lakshmanan Sankaran Chairman, Regional Banking Commission (MENA)- ICC Paris
Moin Anwar Trade & Investment Commissioner (Middle East), New South Wales Government, Australia
Peter Fort CEO, Ras Al Khaimah Free Trade Zone
For more information, please visit www.tradeandexportme.com
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HOSPITALITY & TOURISM
Building Brand Qatar Identifying an “untapped resource” in tourism, Qatar is laying the foundations to diversify from its carbon controlled economy. Support is strong as the largest operators from Hilton to Starwood, vie for prime positioning across the country but with huge increases in supply and a high concentration of corporate guests. Noted industry commentator Melanie Mingas evaluates the true opportunities.
In February of this year, Qatar Tourism Authority chair Issa Al Mohannadi publically pledged the 2030 National Tourism Sector Strategy would receive a cash injection of USD 45 billion to support ambitions to increase international inbound visitor numbers by almost four-fold; create an additional 100,000 jobs; and increase GDP contributions from less than one per cent to eight per cent. With a context of diversification from the Gulf state’s carbon dependent economy, Al Mohannadi referred to tourism as an untapped resource. In the months since, major hotel and resort developments have been
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5.2%
9,251
projected RevPAR increase, 2014
rooms in Qatar currently
1.9% projected occupancy increase in 2015
7.1m target for international tourist arrivals, by 2030
$45bn investment pledged by Qatar Tourism Authority
announced by Kempinski, Hilton World Wide, The Rezidor Hotel Group and others, with many of the largest players naming Qatar as a key focus. The country’s total confirmed pipeline currently stands at 38 properties, with a total of 9,251 rooms according to data from STR Global and with a current stock of 74 properties totalling 13,596 rooms, the impact will be significant. Before the end of 2014, 3,000 keys will enter the market, operated by the likes of Accor’s Pullman, Hilton’s Garden Inn and Starwood’s Westin, among others. By the end of 2015, that number will have surged to 4,759 keys.
However, where other markets with large supply increases struggle to find an equilibrium with demand, Qatar is buoyed by a strong corporate market and growth in the demand for extended stay products. “The growth in the corporate market is largely driven by the growing number of large-scale projects in the country, requiring consultants, project workers and engineers to travel to Doha more regularly,” explains Filippo Sona, International Director and Head of Hotels, Colliers MENA, who quotes a 20 per cent YoY occupancy increase in the suites and serviced apartments sector in 2013.
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HOSPITALITY & TOURISM
Snapshot: The key developments
$274.5m Q1 hotel revenue, 2014
4,759
33.7% mid-market hotel share
keys to be added to stock by 2015 end
17%
YoY occupancy increase in suites and serviced apartments
That’s not to say the market is without concern, as PwC director Alison Cashmore highlights, “Finding that hotels recorded 1.3 million visitors in 2013, which is an increase of 8.3 per cent from 2012, our research has found ongoing rate reductions resulting from high levels of competition led to a decline in ADR over the period 2012 to 2013 by almost 20 per cent, which in turn has driven down the RevPAR by 11 per cent.” It’s a similar tale to that of Abu Dhabi, which unlike its neighbouring Dubai, struggled when experiencing a surge in room keys and delays to anchor projects on Saadiyat Island.
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Curio – A Collection by Hilton • 207-guest room hotel • 19 suites • Co-located with Mall of Qatar • Positioned in new development, Al Rayyan Gate Pullman Doha West Bay • 468 room • 97 apartments • Opening 2015 Westin Hotels and Resorts • To debut in Qatar 2014 • 365 guest rooms • 92 executive suites • 2,900m event space
growth in 5-star market since 2009
20%
Hilton Salwa Beach Resort and Villas • 97Km outside of Doha • 362 keys • 104-hectare development • Surrounded by waterpark, a luxury marina and yacht club, a dive centre, cinemas, a wealth of premier retail shopping and numerous restaurants
35% of hotel stock could be due renovation
A May 2014 report by JLL, found ADR and occupancy declines (of 20 per cent and six per cent respectively) resulted in a RevPAR contraction of 25 per cent, only recovering in the last 12 months. Seasoned General Manager Gordon MacKenzie, who has lived in Doha for 22 years, was at the helm of the city’s largest hotel, currently branded as Radisson Blu, and warns that, regardless of the supply demand dynamic, cutting rates to create the perception of strong performance creates a dangerous precedent. He says, “The market does not dictate that you are going to get
JW Marriott, Qatar • First JW Marriott in Doha • Opening ear marked for 2017 Hotel Missoni • Designed by Rosita Missoni • 200 rooms and 70 apartments • Opening 2015
another 100 or 100,000 bookings because you have cut the rate, or packaged the deal.” Reporting performance was at its highest in 2009, he attributes this to global recession and limited hotel stock locally. He adds, “Qatar is a completely different market to other GCC cities. F&B revenues in Qatar often match the revenue generated by rooms and with 22 outlets in this hotel alone it is always possible to supplement performance.” However, Sona warns that a 17 per cent growth in the 5-star segment since 2009 has increased competition at the top end of the market and created a
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HOSPITALITY & TOURISM
In June 2014, Hilton Worldwide announced the development of Qatar’s largest beach resort, with investors Al-Rayyan Hospitality.
Age of hotel stock
10+ years 17%
7 – 9 years 19%
0 – 3 years 51%
4 – 6 years 13% Source: Colliers International
compression effect that echoes through all segments. “All new hotels in Doha are mostly competing for the same target market of corporate travellers, which has increased the bargaining power of this segment since they have more hotels to choose from.” Staying ahead Concern appears relative. In Q1 2014, hotels generated USD 274.5 million in revenues, with occupancy up from 68 per cent to 75 per cent, supported by the closing of almost two per cent of total stock due to renovations. In an ever competitive market, the need to constantly renew offerings is integral to success, especially for the 17 per cent of Doha’s hotel stock aged 10 years or older (see chart). Working on a standard refurbishment cycle of seven years, it can be calculated that 36 per cent of Doha’s stock could be ripe for renovation today and the iconic, 32 year old Sheraton is the latest to close its doors for such work with upper budget cap of USD 192 million. MacKenzie’s tenure at Radisson Blu coincided with a USD 25 million refurbishment of the hotel’s 324 West Wing rooms. The eighth refurbishment and opening assignment of his career, he reports the key to a successful projects is to pick and mix contractor services. He shares, “We recognised years ago that, if you don’t innovate you die.”
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“We had four contractors and designers create four different mock up rooms and we paid them USD 50,000 each. At the end of that process we selected one supplier but also took the best of each of the rooms and amalgamated it into one,” he recalls. Changing tastes Driven by a rise in the number of mid-market properties, which currently account for a mere 33.7 per cent share of the total market, over the coming decade Sona predicts the mid-market will slowly gain pace against the 46 per cent market share held by luxury, upper-upscale and upscale properties. The evolution will be driven by what Sona refers to as sports tourism, as well as leisure destinations such as Qatar Mall and Doha Zoo. Again the changing guest profile will demand the development of a different hotel product; a diversification he notes is already tangible. But the operators aren’t hedging bets. In June 2014, Hilton Worldwide announced the development of Qatar’s largest beach resort, with investors Al-Rayyan Hospitality. The 362 key Hilton Salwa Beach Resort and Villas will be set on 104 hectares of land, located 97Km outside Doha and colocated with a waterpark, marina, dive centre and retail development. It’s a significant contribution to the product type leisure tourism will demand and
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HOSPITALITY & TOURISM
Doha by class Market Class
Property Count
Room Count
Luxury Class
9
3,051
Upper Upscale Class
14
3,353
Upscale Class
12
2,389
Upper Midscale Class
11
996
Midscale Class
17
2,945
Economy Class
11
862
The phenomenon of planning and constructing mega urban developments may be second nature in the Middle East, but success isn’t without its peaks and troughs.
Source: STR Global
the arrival of other Hilton products such as Garden Inn, back this. However, Hilton has also chosen Doha for the regional debut of its ultraluxury Curio Collection. This 207 key hotel will be co-located with the underconstruction Mall of Qatar and is being developed with investors Al Jaryan Trading and Contracting. Says Hilton VP of development, Carlos Khneisser, “In Qatar we are not looking to 2022, we are looking for sustainable business. Our management contracts can be up to 25 years’ long, so we look at locations and products which we know will be good for growth. We are developing five of our 10 brands in Qatar and that portfolio will also include Double Tree and Waldorf Astoria. “Qatar is one of our three target markets in this region, alongside UAE and Saudi Arabia,” he adds. Hotels and ‘Brand Qatar’ If leisure is the future, or at least an essential diversification from the corporate heavy focus experienced to date, the main growth drivers for this critical sector will stem from the creation, development and maintenance of Brand Qatar. Akin to the strategy implemented in Dubai, it’s an element Sona predicts will come from the growth of Qatar’s key stakeholders namely Qatar Airways, Hamad International Airport and Al Jazeera, in addition to the promise and legacy of major events.
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With an ambition to increase the GDP contribution of tourism from 1.1 per cent to eight per cent by 2030 and the huge financial commitments made by Qatar Tourism Authority, the backing of private sector stakeholders is unlikely to wane. “These factors reinforce the hospitality sector’s positioning as an important economic pillar within the country,” he observes. “Development of hotels and hotel apartments is a key element within the National Development Strategy 2011 to 2016, Qatar National Vision 2030 and Qatar National Tourism Sector Strategy 2030 working in parallel with Qatar Airways, and its expansion plans, to position Qatar as a tourism destination,” he adds. The phenomenon of planning and constructing mega urban developments may be second nature in the Middle East, but success isn’t without its peaks and troughs. In such markets, despite undisputed and unprecedented wealth, exposure to market forces is still a sobering reality. Having observed the rise and fall and rise again of Abu Dhabi and Dubai from across the Gulf, Qatar would benefit from remembering that economic diversification is more than replacing one source of wealth with another. For an online version, please visit: www.tradeandexportme.com/2014/07/ building-brand-qatar/
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TRADE AND GROWTH
Dubai
the rising financial capital
The Emirate’s role as a key trade hub is well-established, but a subtle transition has taken place, whereby Dubai is earning credentials as a world-class centre of financial services. What are the factors influencing this sea-change - and which are now putting ‘clear blue water’ beyond Dubai and the traditional financial centres of the GCC? Associate Editor Zenifer Khaleel investigates… Siddharth Balachandran, Managing Director, UMGA Group
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Since the turn of the century, Dubai has been rising steadily as the undisputed entrepreneurial capital of the Middle East. Due to its integrated infrastructure and openness to business, it attracts investors, world-class advisors and, of course, entrepreneurs. Recently, it has opened the flood gates to investment companies and the banking sector, as it attempts to become the key financial capital of the Middle East. Many global financial institutions are rushing to open regional offices here and
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TRADE AND GROWTH
a number of the major names are already present. Unlike other sectors such as oil or construction, the development of a financial centre is an evolutionary process of strategically building sophisticated human and institutional infrastructure to foster economic growth. It requires the careful management of both the demand and supply of financial services. Participation of domestic and international entities must be encouraged while aggressively improving the financial ecosystem
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in parallel to carefully monitoring and controlling systemic risk. “Dubai has made the transition from a metropolis to a teeming megalopolis, and very smoothly at that. This ease of transition has been facilitated by an unstinting focus on the basic fundamentals of successful commerce and entrepreneurial development,� says Siddharth Balachandran, Managing Director of the BUMGA Group, based in Dubai. “The Dubai government has understood, (with great clarity if I
may add) that for holistic success, it is imperative that the financial service sector be promoted and supported unhindered. Though the development index of any city is generally dominated by improvements in the capital goods, construction and the manufacturing sectors, the glue that binds all these pivotal sectors together is the financial services sector. Dubai has realised this very early and hence established entities such as the DIFC, DMCC and the likes. Naturally, with
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TRADE AND GROWTH
Since the turn of the century, Dubai has been rising steadily as the undisputed entrepreneurial capital of the Middle East. Due to its integrated infrastructure and openness to business, it attracts investors, world-class advisors and, of course, entrepreneurs.
the importance of the financial services sector, it is even more important for this sector to be manned by the right personnel, in terms of mindset, ideals, talent and qualification. I believe that the next decade is going to be a glowing testament to this ‘fundamentals first’ approach very rightfully adopted by Dubai,” he adds. Rise of the banking sector The British Bank of the Middle East was the first bank to be established in Dubai in 1946. Since then, there has been a burgeoning number of leading international and local banks in the Emirate. According to the 2015 Dubai Strategic Plan , financial services is one of the sectors that qualified to be part of the future growth plan of the Emirate. The development of the financial services industry has gone hand in hand with the evolution of Dubai as a trading hub for the region. IIF, the Washington-based global association of financial institutions, recently stated that the soundness indicators of the UAE banking system have further improved this year with strong improvement in capitalisation levels, increase in profitability and further easing of liquidity situation. The renewed interest in establishing Dubai as a financial hub can be attributed to these strong macroeconomic fundamentals. Dubai’s role has progressed immensely, with the government’s timely financial and institutional reforms, including the rehabilitation of bank balance sheets, restructuring of the nonbanking financial sector, tangible improvements in corporate governance and transparency, and strengthening of federal fiscal and monetary institutions. DIFC Established in 2004, the Dubai International Finance Centre
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(DIFC) is a sophisticated enterprise that provides a full range of financial services which evolve to meet, anticipate, and create demand through its financial innovation. The DIFC has meticulously risen to the challenge of placing Dubai to the pinnacle of financial steadiness, by creating an integrated network of banks, securities firms, financial intermediaries, clearing houses, brokers, institutional investors, insurance companies, and mutual funds. DIFC incentives include zero taxes on income and profit, 100 per cent foreign ownership, and no restrictions on foreign exchange and profit repatriation. Secondary benefits include specialised supporting infrastructure and services. It has its own set of civil and commercial laws that are independent from the rest of Dubai and are consistent with the English Common law. DIFC
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TRADE AND GROWTH
also houses its own courts within its premises, facilitating the speedy issuance of licences and completion of legal proceedings. The DIFC’s unique infrastructure, internationally recognised legislative and regulatory framework, and dynamic business environment have positioned the centre to become a self-sufficient financial enterprise.
According to the 2015 Dubai Strategic Plan, financial services IS one of the sectors that qualified to be part of the future growth plan of the emirate. The development of the financial services industry has gone hand in hand with the evolution of Dubai as a trading hub for the region.
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Services and infrastructure Dubai’s policy of investing heavily in its transport, telecommunications, energy and industrial infrastructure has significantly enhanced its attractiveness in the international business scene. The Emirate has seven industrial areas, one Business Park and three highly successful specialised free zones. Its transportation network consists of two world-class seaports, a major international airport and cargo village and the closely connected Dubai Metro. All these assets deliver efficiency, flexibility, reliability and cost-efficiency. Complementing its world-class infrastructure is a sophisticated service sector that features leading regional and international freight forwarders, shipping companies, insurers, international hotels, banks and financial service firms and many more. Islamic finance In a bid to strengthen its inherent Islamic roots, the Dubai government has already undertaken plans to position the city as an Islamic financial hub as well. It is also working to develop international standards of practice for Islamic commerce and industry and will establish a centre for Shariacompliant quality standards similar to the International Organisation for Standardisation. The government is actively promoting Islamic banking and insurance, Islamic financial
products and other areas including the arbitration of Islamic contracts and the setting of quality standards for halal food. Islamic finance, based on principles such as bans on interest and on pure monetary speculation, has grown rapidly around the world over the last several years, although it remains much smaller than conventional finance. Islamic banks now command a roughly 25 per cent share of the banking market in the six countries of the Gulf Cooperation Council, (according to an estimate by Ernst & Young). Visionary leadership, strategic foresight and expedited action in areas of progress, have given Dubai a remarkable edge to achieve its goals of becoming the financial capital of the Middle East. With steady and meticulous planning, the city can also plan a position for itself in the global platform. The factors in its advantage are multinational clientele, excellent infrastructure and geographical position. Add to this lenient government laws and a general ease of business transactions, and the city is a just a few strides away from achieving its goals.
For an online version, please visit: www.tradeandexportme.com/2014/07/ dubai-the-rising-financial-capital/
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Strategy
Culture and exporting CULTURE IS AN ESSENTIAL ELEMENT IN DOING BUSINESS AND CAN IMPACT THE STRATEGIC DIRECTION OF A COMPANY. IN MANY WAYS IT IS DIFFERENT IN EVERY COUNTRY AND IT EVOLVES OVER TIME. CULTURE ALSO AFFECTS VARIOUS ASPECTS OF BUSINESS SUCH AS MANAGEMENT AND DECISION-MAKING, AND OTHER BUSINESS FUNCTIONS FROM ACCOUNTING TO PRODUCTION. HAVING SAID THIS, IT IS IMPERATIVE THAT ONE IS CULTURALLY SENSITIVE WHEN DOING BUSINESS IN OTHER COUNTRIES. IN THE FOLLOWING FEATURE DR ASHRAF MAHATE, HEAD, MARKET INTELLIGENCE, DUBAI EXPORTS, LAYS OUT A SIMPLE GUIDE TO HELP YOU AVOID CULTURAL CONFLICTS THUS MAKING YOUR COMPANY MORE GLOBALLY COMPETITIVE.
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One important issue that affects a SME’s performance in global markets is cultural differences between countries. More formally, culture is defined as a comprehensive system of behaviour patterns that tend to be learnt as opposed to being inherited. These behaviour patterns differentiate members of a particular society to another. The behaviour patterns can include a range of aspects such as customs, religion, language, material artifacts to those of a psychological nature like attitudes and feelings. Due to the integrated nature of culture it is not always easy to understand all its various aspects. Of course, one would not expect a business owner or manager to be a master of all the cultures across the globe. Nevertheless, it is important to be aware of the key aspects of a country’s culture which a company has selected to target as a potential export market. However, globalisation and increased level of tourism have opened once closed countries thereby making people more aware of different cultures. At the same time the Internet, and media have tended to reduce cultural differences. Even though cultural differences have been reduced, they nevertheless exist and as a general rule exporters should respect the culture and traditions of the country with which they wish to do business with. The golden rule of business etiquette is to be open-minded, non-judgmental, and flexible. While travelling abroad, exporters should keep the following points in mind:
Language All business issues especially financial ones are very much affected by language. At the basic level, business negotiations which include the price, delivery dates, shipping methods, and method of payment can be misunderstood if one of the parties involved is not fluent in the other party’s language. Even if both parties speak a common language misunderstanding can take place based on the general understanding of certain words. For example, English is spoken in the UK, USA, Australia, Canada, South Africa, and New Zealand amongst other countries. However, in each country there are small differences in usage. More important is the interpretation of words that may actually differ from country to country. For instance, the Spanish word “mañana” from a literal context actually means “tomorrow”, however in general business usage it tends to imply “not today”. In other cultures one tends not to use certain words in order to avoid embarrassment. For example, in many Asian countries one would not say “no” directly as it is considered to be rude. In these circumstances the exporter will need to be able to correctly interpret if a “yes” is an actual answer or simply one provided so as not to be rude. Therefore, in many cases it’s important to know and understand the nuances of a culture so as to correctly interpret its meaning.
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Punctuality Being punctual shows respect for a business partner’s time and commitment. Even when it is culturally acceptable to be late, the exporter should always be on time for appointments.
Addressing individuals Different countries have different practices for addressing people. In some countries, using first names is acceptable immediately, in others, this would be seen as highly improper, and interpreted as rude or insulting. An exporter should never use first names unless invited to do so. The correct pronunciation of the names of each business contact should also be practised beforehand in order to avoid embarrassment for both parties. Special rules about addressing women should always be adhered to.
Dress codes Dress codes vary from country to country, in some it is formal, and in others, informal or casual. Special note of dress conventions for women should be taken into consideration. Sometimes formal discussions are followed by informal dinners, or get-togethers. Here again, customs differ on how to dress for different occasions.
Greetings Different forms of greetings are used in different places. Shaking hands may be acceptable in one country, but frowned upon in another, where as bowing
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may be the formal greeting in some countries. Exporters should be sure that they know the right manner or practice for greeting women.
Conversation Some societies are serious by nature and are not in the habit of cracking jokes, or narrating anecdotes during business discussions, while others would consider conversations dry and uninteresting otherwise. It is a good idea to be wellinformed about sensitive topics which need to be avoided (political situation, recent scandals and the likes), and of topics to which it would be polite to refer to (World Cup victory, health of the President and so on).
Socialising In some cultures, business people frequently invite clients to their homes and extend hospitality, while others keep the personal side of their lives away from all business transactions. It is important to be aware of the accepted practice to avoid accusations of attempted bribery. If invited to a social affair, exporters should accept the invitation as a sign of respect. Many countries consider after-hours events a way of getting to know more about the exporter’s background. An exporter can contact embassies, or High Commissions for any country-specific information required on business etiquette.
Gift Giving Many countries practice this custom. The exporter must know whether a gift is expected or not, and to whom the gift
The golden rule of business etiquette is to be open-minded, non-judgmental, and flexible.
should be offered (e.g., the host, the wife of host, the family, the business contact, or the company head). A gift to a government official may appear to be a bribe, therefore it is important to make sure the gift is appropriate and will be well-received before giving it.
Negotiating styles Some countries habitually enjoy negotiating and like to haggle over the terms of any transaction. Others prefer a firm and precise proposal which they can seriously evaluate and respond to. This is an important consideration, when preparing for a visit.
Business Card An exporter should always carry business cards with information printed in the native language on the reverse side. In some countries, business cards are treated quite reverently, as a declaration of the status of that person. It is important not to bend, write on, or put away the business card while in the company of the presenter of the card.
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Strategy
Businesses around the world have lowered barriers to women who now occupy senior management positions.
Religion In a number of countries business and religion are interrelated, both in terms of holidays as well as the legal and commercial contracts. Religion can also make a difference in the way business is carried out as well as in the products that can be sold.
Corruption Generally speaking corruption is defined as any form of financial or non-financial inducement offered by one person to another. The most common example of corruption is bribery which in some countries tends to be the normal order of activities while in others it is punishable offence. There are two aspects to corruption: First the company has to make a decision as to whether they wish to operate or export to a country with ‘high’ level of corruption. The level of corruption can be determined from the Corruption Perceptions Index produced by Transparency International. Second, if the company decides to operate in a country with a high level of corruption then it needs
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to know how to conduct business in such an environment. Of primary importance there are the likely costs of making such “grease payments” as well as ensuring such payments can be made legally.
Government Involvement and Legal Framework The culture of a country also impacts on the involvement of the government in the corporate sector. The culture of a country also determines the level of protection provided to foreign companies through its legal system. For example, in some countries the law is based on code law while in others it is common law. Similarly, the development of law differs whereby in some countries the laws are well established whilst in others it is being created almost daily.
Women in BusinesS
Dr. Mahate received his doctorate from Cass City University Business School in London (UK). He read Economics at University College London, followed by a Masters in International Economics and Banking at the University of Wales in Cardiff. Dr. Mahate is a professional educator and received his training at the Institute of Education (University of London). He is a member of the Chartered Institute of Managers (UK) and a Member of the Institute of Commercial Management (UK). He is also a member of the Association of Certified Anti-Money Laundering Specialists (ACAMS). He can be reached at ashraf.mahate@ dedc.gov.ae.
Discrimination based on gender is, for the most part, no longer made when conducting business negotiations. Businesses around the world have lowered barriers to women who now occupy senior management positions. However, in some cultures, history, tradition and social norms may still deny women true equality in the international business world. Business practices based on gender differences may be more pronounced in the case of SMEs who usually conduct business on a personal level. It is important to note that the treatment of women who are residents of a particular country does not necessarily indicate how foreign business women will be treated.
For an online version, please visit: www.tradeandexportme.com/2014/07/ culture-and-exporting/
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A record of achievement The Dubai Multi Commodities Centre (DMCC) has rapidly become established as one of the leading dedicated trade hubs in the GCC, fulfilling the vision of its Executive Chairman, Ahmed Bin Sulayem - as well as having true ‘landmark’ status with its home in Almas Tower, one of the 10 highest buildings in the GCC. In an exclusive interview with Shane Phillips for Trade and Export ME, we learn more about the vision that is now set on ever-bigger achievements… 70
When asking Ahmed Bin Sulayem, Executive Chairman of DMCC, about how confident he is he can deliver the world’s largest commercial tower - to be named “Burj 2020” - he says, “I’m 100 times more confident about building this tower than I was about building Almas tower. When we started Almas Tower in 2004/2005 no one wanted to finance us. We were a free zone tower and the banks at the time were lukewarm on how DMCC was going to do. Back then we only had 400 members and our revenue model was not proven, whereas today we have 8,000 members. Furthermore, our other businesses have matured, making DMCC a unique global eco-system for commodities. “When we built Almas Tower we created a Sukuk that you could redeem in cash or gold, and we raised $200 million. That was the second government bond to get an A rating by S&P. So that was a big win and to be fair, it was not easy. A lot of people had doubts that Almas Tower was going to be a success, but the results were quite the opposite. So we have gone through the process a few times already with all the towers we have built and we know how to approach the issues at hand. Now we have a track record, we have a history, we are the fastest growing free zone in the United Arab Emirates and people want to invest in us. That was not the story in 2004.” Breaking records “Today we are not just doing well but we are breaking records. In 2004 to
2005 gold trade through Dubai was about US$10 billion and today we are looking at over US$70 billion in gold traded. We also went from US$5 or US$6 million in diamond trading in 2003 to today, when we are ranked as one of the top three largest diamond traders in the world. Also, in tea trading we were not even on the map, and today, we are the world’s largest re-exporter of tea. So in terms of financing the Burj 2020 we are very confident” says Ahmed Bin Sulayem. Making history “The Burj 2020 is already attracting a lot of attention with a few big MNCs vying for 20 to 30 floors at a time. Once we announced that it was going to be the tallest commercial tower in the world, our financing costs went down and everyone’s interest in the project increased. So yes, I am 100 times more confident about this tower than any other tower DMCC has ever made in its history. We have had positive responses from a range of partners, including providers of steel and insurance providers, who are quite willing to underwrite the entire risk given DMCC’s track record. We have only had positive responses from all parties. “We are talking to a company who were primary builders of the Olympic city in London. I like them as they put a real emphasis on health and safety in their projects. They built the entire Olympic City without the loss of one life. I think it is very important to work with ethical
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VIP interview
operators and to continue to ensure that Dubai is a benchmark for professionalism and ethical business in this region of the world.”
Ahmed Bin Sulayem, Executive Chairman, Dubai Multi Commodities Centre
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The finance imperative As Ahmed embarks on what will not only be a landmark moment for DMCC but a milestone for the Emirate of Dubai, one cannot ignore the significance that his financial team will play in the success of Burj 2020. So, what does he look for in his CFO and Financial Team? “There are two types of CFOs, there is the one who sticks to his job description and then there is the one who goes beyond. We at DMCC look for the professional who will go beyond. I see the CFO as the gatekeeper; if a project does not add up it is him or her who needs to shut it down or stop it before it starts. With the size of projects we are doing at DMCC we don’t need a ‘rubber stamp’ CFO.” Ahmed is focused on creating a management team where the members continually challenge each other to raise the bar everhigher, and in this mix, the CFO especially should be the one asking the toughest questions and pushing the team - ensuring due diligence has been executed to the highest standard. “Attitude is a small thing that makes a big difference”, says Ahmed. “Many people think that it is vision and strategy that help catapult the CFO into a CEO, but that is not enough. They need to have passion, they need a fire in the belly, they need to really love the brand and want to push DMCC to the next level. In my opinion that is where the edge is. If you have that type of fire, that kind of passion then you will do whatever it takes to get the skills you need to make that contribution to the team.” “Those may be strategic skills, maybe they are communication skills, perhaps your ability to create consensus, or maybe it is leadership? Whatever it is, your skill set as a CFO is secondary to your attitude and to the spirit of your work.”
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VIP interview
Success has no nationality, just as commodities have no nationality. We service the world and we are focused on competing on the global stage against the biggest multi-nationals and most successful economies of our time.
“When Sheikh Rashid opened Jebel Ali port many of the Emiratis in town hated the port. They did not want the port, in fact my Father, Sultan Bin Sulayem worked there, and he was reporting to the CEO who was running it. He was in shock when his boss would say “Bury this port, it is useless!” Today our port business is one of the jewels in the crown of Dubai. We did not know anything about running ports when we started but today Dubai Ports is ranked in the top five if not top three largest port operators in the world. It is the vision and passion that got us there. This is the same for anyone’s career, it is not how good you are, it’s how good do you want to be and how hard you are willing to work for it.” “So to get back to my point about what makes a good CFO, it is not your skill set. Yes, your skill set has to be there but I can show you a hundred highly qualified CFOs who I would not work with if you paid me, because they don’t believe in the vision of His Highness Sheikh Mohammed and they are simply not willing to do what it takes to climb this mountain.” A global race “I would not underestimate the Arab businessman as we are not interested in a national race, we are in a global one. Success has no nationality, just as commodities have no nationality. We service the world and we are focused on competing on the global stage against the biggest multi-nationals and most successful economies of our time. Abu Dhabi has its sights set on much higher and loftier targets, just as Dubai does. No one cares about being the biggest or the best in the UAE, we want to be regionally and globally recognised for our efforts. We want to be the best in the world.” As an expatriate one could not agree with Ahmed more, as Dubai is proven to be a city where the
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impossible becomes possible. It is rumoured that you can go to almost any country in the world, and travel to any backwater village, and the villagers there may not have a TV or any education, but they will know about Dubai and where it is on the map. How many people can say that about their home town? The question that remains, however: is what is it that makes a person move from ordinary to extraordinary? What are the traits required to become the best in the world? “To be successful I think the most important thing is knowing how to prioritize. Knowing what order to do things in and where to put them. This is one very important skill set. The other is knowing your limitations and not over-extending yourself. You have to know what you can deliver. Thirdly I think you need to be agile and you need to be able to develop new skills and new competencies as the market moves and morphs into new dynamics.” “So in closing, whether you want to be a successful Chief Financial Officer, successful business or successful nation, you firstly need the right attitude, the passion to make you go above and beyond, you need to be focused on what your priorities are - and finally, you need to be agile and able to adapt to the changes the 21st Century is bringing us. I like to say ‘don’t look at how challenging the opportunity is but rather look for the opportunity in the challenge’.” Ahmed Bin Sulayem is focused on delivering the world’s largest commercial tower, set to be completed by 2020. Surely, a fitting tribute to his view that: “it’s not how good you are” that’s important, but rather, “how good do you want to be?” That is the real question.
For an online version, please visit: www.tradeandexportme.com/2014/07/arecord-of-achievement/
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19 - 20 NOVEMBER 2014
ENDORSED BY
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Finance
MONEY IN MOTION The Western Union Business Solutions team brings us an update on the movements in the three major currencies the USD, GBP and EUR to help you trade better in the month of July.
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USD The Dollar and its big rivals should continue their manhunt for a compelling catalyst during the course of July. The buck has maintained its mixed faring of late, enjoying sturdy support against the Euro, but enduring pressure against peers from Britain and Canada. What continues to govern the greenback’s prospects is the Federal Reserve and its perceived road ahead for monetary policy. The Fed laid down some USD speed bumps in mid-June when bankers concluded a meeting in dovish fashion by downgrading their growth forecast this year. The Fed now sees a deep hole for the economy to climb out of following the first quarter growth contraction. The bank now predicts mundane growth of around two per cent for 2014, down markedly from previous forecasts of closer to three per cent. As long as the Fed seems in no hurry to deviate from its lowrate policies, the buck’s handle on appreciation could prove slippery, and leave it at risk of a renewed downturn. To gauge the Fed’s next steps, market players will keep close tabs on US employment and inflation, two critical sectors of the economy that bankers are monitoring to decide when to embark on a rate rise. Could fireworks be on the cards for the next jobs report? It actually comes due the day before the Fourth of July holiday. Another
month of robust US job creation in excess of 200,000 would mark the fifth in as many months. That would be a reassuring sign for the economy’s health and help strengthen the case for a Fed rate hike, supporting the Dollar. Will US inflation continue to warm and rob some leeway from the Fed to hold down lending rates? That answer will arrive with the next reading of America’s consumer price index on July 22. The CPI jumped 0.4 per cent in May from April, the fastest since February 2013. In the interim, the Dollar looks stuck at a fork in the road. That may remain the case for a while but lurking near the surface remains an improving US economy. Once growth snaps back, the Dollar should enjoy more lasting appreciation. Upcoming Critical Events July 3: Non-farm Payrolls and Unemployment (June) July 9: FOMC Releases Meeting Minutes (June) July 15: Retail Sales (June) July 22: CPI (June) July 30: Q2 GDP Advance
Economic Indicators 3-month deposit: 0.23%) GDP: -1.0% Q1 (annual growth) Inflation: 2.1% (May) Unemployment: 6.3% (May) Trade balance: -US$ 713.5 (April)
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Finance
The buck has maintained its mixed faring of late, enjoying sturdy support against the Euro, but enduring pressure against peers from Britain and Canada.
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Finance
Sterling touched new multi-year highs in June after unexpected forward guidance from the Bank of England brought forward UK interest rate predictions.
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GBP Sterling touched new multi-year highs in June after unexpected forward guidance from the Bank of England brought forward UK interest rate predictions. With both the US Dollar and Euro still missing strong backing from economic data, the Pound could take another step higher to reach new peaks against its main rivals over the coming weeks. If Sterling continues to struggle to make a sustained break through current levels of resistance, however, profit-taking could be the theme for the Pound in July. If the UK currency won’t go up, it must come down. Despite the BoE’s insistence that low wage inflation and spare capacity will keep interest rates at record lows until next year, Governor Mark Carney shocked markets in June with a surprise speech suggesting that rates could rise sooner than markets expect. The news sent the Pound soaring through key price levels towards six-year highs against the US Dollar. Against the Euro, Sterling climbed to a 19-month peak although much of these gains came earlier following the European Central Bank’s historic interest rate cuts on June 5th. How upcoming UK economic data on employment, inflation, wages and the Financial Policy Committee’s announcement regarding housing market risks influence UK interest rate expectations will be important talking points for Sterling. How the BoE interpret these developments in its July policy meeting will be key. Minutes from the meeting will be published on July 23rd and investors will look for how members are likely to vote on rates come August or September. Britain’s second quarter GDP, set to be released on July 25th, will also influence Sterling trade. UK monetary policy will not be the only focus. Geo-political concerns continue to mount and pose risks to financial market stability, which could easily undo currency
market developments. In addition, Britain’s negotiations with the EU and its problems over the European Commission’s new leadership could be factors to watch. The build-up ahead of the Scottish Referendum could also prove unsettling for the Pound. The Pound has now risen by almost 22 cents against the US Dollar since last summer and many experts believe investors will be looking for reasons to cash-in on this rally. More signals of future interest rate hikes seem more probable at this stage, however, which suggests the possibility of an even stronger Pound in July. Low currency volatility also reduces the threat of a sharp reversal for Sterling unless the Federal Reserve unexpectedly adjusts its position on US monetary policy. This would have a big and potentially aggressive impact on currency markets in the way the Fed’s stimulus taper news did last year. Upcoming critical events July 10: RICS House Price Survey (June) July 10: BOE Monetary Policy Decision July 15: Inflation (June) July 16: Unemployment & Wages (May) July 23: BOE Meeting Minutes (July) July 25: Q2 GDP 1st Estimate
Economic Indicators BoE Interest Rate: 0.5% GDP: 0.8% Q1 (q/q) Inflation: 1.5% (May) Unemployment: 6.6% (April) Trade Balance: GBP -9.6 (April)
EUR The European Central Bank (ECB) threw the proverbial ‘kitchen sink’ at the markets in June. The fallout from the historic change in the Central Bank’s monetary policy should continue to be felt throughout the month of July.
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Finance
Reserve diversification out of USD and into EUR, banks repatriating in preparation for the Asset Quality Review (AQR) in the third quarter, an improving growth outlook and yield appeal for peripheral Euro Zone bonds has helped the Euro maintain higher levels, much to the dismay of the Central Bank.
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To review, the ECB not only cut all three of its interest rates, but also took its deposit rate into negative territory, basically charging banks to hold reserves at the ECB above the minimum reserve requirement. In additional to cutting interest rates in an effort to fight against deflationary forces, the ECB announced it would offer targeted longer-term refinancing operations. These will be offered in September and December of this year. Lastly, the Central Bank said policy makers are paving a path towards asset-backed purchases, suggesting that the possibility of outright quantitative easing measures, such as the ones that have been used in the UK, US and Japan, could be around the corner. The head of the Central Bank, Mario Draghi, said that the ‘lower bounds of interest rates have been achieved.’ That would suggest that the Central Bank has reached their limits in using interest rates to control price stability and are now moving towards extraordinary measures such a quantitative easing. When we take a step back and look at the pillars that have supported the currency so far this year, the direction that the Central Bank is now taking to maintain price stability seems likely to have negative consequences for the Euro. Reserve diversification out of USD and into EUR, banks repatriating in preparation for the Asset Quality Review (AQR) in the third quarter, an improving growth outlook and yield appeal for peripheral Euro Zone bonds has helped the Euro maintain higher levels, much to the dismay of the Central Bank. These pillars are slowly starting to crumble. The repatriation by banks for their AQR in the third quarter could mostly be completed soon. After the ECB June decision, yield appeal for peripheral Eurozone bonds has waned as demand has slipped. In addition, the improving Eurozone outlook continues to be hampered by very soft growth figures. The flash PMI manufacturing and services survey
released for June suggests that the second quarter growth came at a weak 0.4 per cent quarter-on-quarter. That more or less leaves diversification flows that have been seen coming out of the Middle East, Korea and China supporting the Euro. Given the ECB’s ‘prepared’ direction and the mix of geopolitical instability that has started to intensify over the second quarter, the aforementioned diversification process by sovereigns could take a bit of a pause over the summer months, in which case the Euro’s ability to hold onto higher levels is likely to diminish. Upcoming Critical Events July 01: Manufacturing PMI and May Unemployment (June) July 02: PPI (May) July 03: Services PMI and May Retail Trade (June) July 03: ECB Monetary Policy Committee Meeting July 14: Industrial Production (May) July 16: Trade Balance (May) July 17: HICP (June) July 24: Flash PMI Surveys (July) July 30: Business Climate Index (July)
Economic Indicators 3-Month Deposit Rate: 0.11% GDP: (annual rate) 0.90% Inflation: (annual rate) 0.70% Unemployment: 11.7% Trade Balance: EUR 15.7 billion
For an online version, please visit: www.tradeandexportme.com/2014/07/ money-in-motion/
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EVENT SPOTLIGHT
Innovation... a key component of success FOR your business a look at the sme evolution program
The audience enjoyed an insightful session
THE RECENT SME EVOLUTION PROGRAM EVENT, HELD AT THE FANTASTIC VENUE OF RITZ CARLTON JBR DUBAI, PROVED TO BE A MELTING POT OF ENTREPRENEURIAL IDEAS AND EXCITING SME INSIGHTS. WITH KEYNOTE PRESENTATIONS BY LEADING EXPERTS ACROSS DIVERSE INDUSTRY SECTORS, THE EVENT WAS SUCCESSFUL IN HIGHLIGHTING CURRENT REGIONAL TRENDS AND SHARING USEFUL GUIDELINES FOR SME GROWTH…
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Held on June 10, 2014, the SME Evolution Program event was powered by Potential, in partnership with Etisalat, Aramex and Dell. Business owners and General Managers who attended, had the chance to learn from leading international experts, interact with like-minded business leaders and access exclusive business offers and funding opportunities. The event was themed “Innovation – a key component of success to your business” and commenced with the announcement of the innovation challenge and welcoming speeches delivered by top experts from Potential and Aramex. This was followed by a powerful lineup of speakers, who led several inspiring presentations underlining key SME topics such as – “Telecom innovations that help you save and grow”, “Innovation design thinking”, “Leadership role in driving innovation in organisations”, “How does the SME toolkit help with developing
innovative skills”, “Observations from innovative start-ups” and so on. Shadi Banna, Potential’s Managing Partner, captured the attention of the audience with an inspirational talk on “Innovation Design Thinking”. As part of his paper, he spoke about a very interesting topic called ‘open innovation’. He said: “Traditionally, companies have focused on their internal efforts to produce innovation. Open innovation helps organisations tap into the ‘wisdom of the crowd’.” Potential is a leading international business catalyst developing entrepreneurs, SMEs and established organisations, and accelerating their growth through innovative and interactive programmes. For more information on the event, please visit: https://www.facebook. com/PotentialCom or https://twitter. com/PotentialCom. For an online version, please visit: www.tradeandexportme.com/2014/07/ the-sme-evolution-programme/
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EVENT SPOTLIGHT
Viza Rizq, Founder, Aflamnah
Attendees maximised all the networking opportunities
Shadi Banna, Potential’s Managing Partner, captured the attention of the audience with an inspirational talk on “Innovation Design Thinking”. www.tradeandexportme.com
The dynamic team during the successful event
During the event
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ECONOMIC INSIGHT
Ramadan economics how different businesses adapt to the holy month
Despite the appearance that many aspects of the economy slow down during Ramadan, what is the actual picture when it comes to the financial performance of different sectors? The reality is a little more complex than even the most seasoned financial pundit might imagine - and we asked Associate Editor Zenifer Khaleel to investigate… 80
The onset of Ramadan brings a complete turnaround of economic activities in the country, affecting different sectors in different ways. Symbolically, it is the time of the year to reflect over your lifestyle and abstain from materialistic pleasures. Financials of the past year are reviewed and ‘cleansed’ by giving the obligatory ‘Zakat’ (charity). Officially, the country is in ‘stand by’ mode. Office timings are shortened, official phone calls unanswered, tourists stay away and major deals are put on hold. But despite the impression created of
lower economic activity, the reality is rather more complex. While many businesses experience a severe meltdown, some areas, such as spending on food and other consumables show a significant increase in activity. In effect, the character of the economies changes, with a rise in consumer spending helping to make up for the fall in other areas. The Ramadan effect on different sectors Ramadan has changed from a religious ritual to a festive season marked by
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ECONOMIC INSIGHT
Ramadan promotes heightened social awareness. As a fundamental shared experience, it brings about a sense of solidarity among Muslims, enhances their satisfaction with life and encourages optimistic beliefs.
a strong sense of materialism and significantly higher consumer spending. The holy month has a pervasive effect on the spending habits of Muslims. Stock markets across the Gulf region show returns of up to nine times higher in predominantly Muslim countries. Traders use simple market timing strategy to encash on the goodwill of the season. Ramadan promotes heightened social awareness. As a fundamental shared experience, it brings about a sense of solidarity among Muslims, enhances their satisfaction with life and encourages optimistic beliefs. This optimism affects
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investor sentiment and decisions leading to the price run-ups. Shortened working hours may spell doom for some sectors. But for CLEANCO, the premier cleaning service company in the region, it is business as usual. Their working hours for Ramadan are from 9am-3pm. However, being in the service industry, some projects are operational round the clock. “Overall business is affected during the holy month due to the reduced working hours and on this occasion, the fact that it takes place during the hottest month of the year’, says
Samer Hani, General Manager of Business Development and Operations at Cleanco. “The working hours are reduced to six, and we have to complete our whole operations during these hours. Normally, the overall business decreases by 20-30 per cent. But we consider Ramadan the time when we prepare the annual budget, and revise our business strategy accordingly.” “Personally my productivity during the holy month doesn’t decrease as Ramadan is the best month to work and control my food and health. The positive side of the less working hours is that it gives more time to our staff to enjoy the holy month, be with the family and to pray in the evening time. So after Ramadan they are back with rejuvenated spirits (even if they are not Muslims).” Farah World LLC is a freight forwarding and logistic company based in Dubai. In their five years of establishment, they have witnessed an increase in export, mainly of foodstuff and clothes, predominantly to Muslim populated countries. “This increases our revenue considerably,” says Fairuz Basheer, Business Development Director of Farah World. “However, the main
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ECONOMIC INSIGHT
Though some sectors experience a slowdown you will find that, because of the social habits during the month of Ramadan, spending on food is in fact higher than in the normal months.
issue we face during Ramadan is with the labour force who works outdoors. With longer hours of fasting plus the heat, it becomes quite a task to manage outside jobs. The sea freight container loading becomes quite tedious. We shift the pending work to night hours for which we are required to pay overtime.” “Another issue is the lag in communication. Since most of our suppliers work shorter hours, response time increases. This in turn affects our service to end customers. Being in a world network many countries are yet to understand the shorter working schedule and sensitivity of Ramadan in the Gulf. We have to constantly remind them of the same to avoid unhappy clients.” “Despite these challenges, we hope to make this our most operationally efficient Ramadan with the experience garnered during the years,” she adds. The booming sectors Though some sectors experience a slowdown you will find that, because of the social habits during the month of Ramadan, spending on food is in fact higher than in the normal months. Although during the daytime things can get a little slow, in the evenings, particularly in the malls, there is a lot of activity. The food and catering industry is one which undergoes a drastic change in Ramadan. Essentially night and day activities are interchanged during the month. The lull that is prevalent in the daytime is more than compensated by frenetic activity during the evening. Sugata Bakshi, Brand Operations Manager at the SFC Groups, states that productivity of workers sees a remarkable increase during the renewed rush hour at night as they have ample rest during the afternoons. “Most of our outlets are open till 2:30 am. Though we lose our corporate lunch clients, we are amply compensated by Iftar clients and other diners. Delivery and take away improves by 15 per cent. We focus on
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staff training during this period, to make up for the long day time.” Clothing retailers, jewellers, electronics shops, mall operators and online stores, have all been reaping significant profits during Ramadan. The scorching heat outside makes people resort to the air-conditioned convenience of malls, which are open till the wee hours of the morning. To add to the spending pressure, there are promotions, sales and offers which last throughout the month. The sales are high on gifting items across all categories especially perfumes, cosmetics, delicatessen and confectionary. The sales of Arabic sweets and dates are noteworthy during Ramadan when compared to rest of the year. This rise in consumer spending can create its own problems, however, in particular leading to an increase in inflationary pressures. This happens both during Ramadan itself and in the months leading up to it, as households build up their stocks of food and other supplies. According to last year’s online YouGov Ramadan Survey, (which surveyed 1,520 Muslims living in the MENA region), 80 per cent of online respondents in the UAE prefer to break their fast at home, with another seven per cent preferring to eat at a family member’s home. For many families, this translates to a sharp increase in their weekly grocery budget. The UAE government has responded to unwarranted price increases with a mix of formal price caps and informal pressure on retailers to dissuade them from raising prices too much. Last year the government reached an agreement with more than 20 outlets to discount the prices of over 200 commodities by 30 per cent.
For an online version, please visit: www.tradeandexportme.com/2014/07/ ramadan-economics/
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