Trade and Export Middle East | January 2015 by Trade Export

presents

BUSINESS INTELLIGENCE FOR INTERNATIONAL TRADE www.tradeandexportme.com

Contents

58 ADVISORY BOARD Key personalities sharing their expertise to ensure that we bring you the latest trends and issues in the field of trade. Logistics 60 Success across borders Frank-Uwe Ungerer, Country Manager at DHL Express, UAE, discusses the logistics provider’s attractive SME proposition, and highlights future opportunities for international growth and development. Trade & growth 64 Trade credit insurance – trends, opportunities and market signals Coface’s Head of Middle Eastern Countries, Massimo Falcioni,

Credit insurance is still in its infancy and we are working to raise awareness of its value through educating companies on alternative credit risk management solutions. p64

TRADE AND EXPORT MIDDLE EAST

on how trade credit insurance can help traders and exporters supercharge their business. Case study 68 SME Spotlight: Eurocap The young SME, set up in RAK FTZ, shares its inspirational success story and agenda for the New Year. Legal 70 Coping with change: the importance of a plan Experts from Clyde & Co. explore the challenges that may arise as a result of improper succession planning. Strategy 72 Out with the old and in with the new Dr. Ashraf Mahate, Head of Exports

Quality, price and delivery time play an important role in attracting and gaining the confidence of customers. p68

Market Intelligence, Dubai Exports, on crucial areas of your business that you need to reassess at the start of the New Yearâ&#x20AC;Ś HR 76 Hiring in 2015 Prominent practitioner Abbas Ali, Vice President, TASC Outsourcing, analyses the changing landscape and offers top tips. Event review 80 The war on waste InSinkErator hosted an exclusive round table event, with the aim to shed some light on various issues on sustainability. We bring you exclusive highlightsâ&#x20AC;Ś

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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info@finessedirect.com | www.finessedirect.com | facebook.com/finessedirect info@finessedirect.com info@finessedirect.com | | www.finessedirect.com www.finessedirect.com | | facebook.com/finessedirect facebook.com/finessedirect 100+ Enterprise Clients | 185+ Professional Team | Global Offices | Strong Domain Expertise 100+ 100+ Enterprise Enterprise Clients Clients | | 185+ 185+ Professional Professional Team Team | | Global Global Offices Offices | | Strong Strong Domain Domain Expertise Expertise

LOGISTICS

Success across borders

As we move into 2015, there is an increased focus on expansion, overseas trade and global connectivity – particularly across the SME sector. SME Advisor met with FrankUwe Ungerer, Country Manager at DHL Express, UAE, who discussed the logistics provider’s attractive SME proposition, and highlighted future opportunities for international growth and development…

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LOGISTICS

Tell us about your role within DHL. I am the Country manager for DHL Express in the UAE, prior to that I was also Country Manager for DHL Express Greece and DHL Express Russia.

What are key products and services that you offer to SMEs? How can SMEs benefit from working with a global brand like yourselves? DHL Express offers SMEs the peace of mind in terms of logistics solutions and reliability each time they ship with us. Our network, which extends to 220 countries, provides SMEs with the international reach they are looking for. More importantly, we ensure that we get this right the first time without any mishaps or problems. We also provide solutions such as Webship which is an online credit card shipping solution without the need of opening an account as well as the MyDHL shipping management platform to name a few.

Are these products and services priced differently, bearing in mind the financial limitations of SMEs? Our range of shipping solutions vary from an extremely critical deliveries on the same day and overnight delivery before 9:00am to less critical deliveries through our road network. Each solution is priced differently depending on how urgent the shipment is and the solutions we can offer our customers to cater for their needs.

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Can they be customised to suit the unique needs of each SME? Having our own dedicated aircraft and our extensive network provides DHL with the flexibility to customise our services to the needs of all our customers. From late pick-ups to earlier deliveries, we can easily adapt to help our customers meet their objectives.

One of the important factors for SMEs to grow is not only focus on the domestic growth of the business but also TO look at international or even regional markets for their expansion.

What would you say is the typical size and profile of SMEs that you currently work with? DHL works with businesses of various sizes to help them reach their potential.

Over the last few years, weâ&#x20AC;&#x2122;ve seen an increasing focus on emerging markets. What according to you are crucial markets SMEs need to look at? One of the important factors for SMEs to grow is not only focus on the domestic growth of the business but also look at international or even regional markets for their expansion â&#x20AC;&#x201C; this is one of the key findings of the DHL Express study by IHS, the global source of information and analytics. SMEs in the UAE should look at exporting or establishing a presence in other GCC markets as well as the wider MENA region such as Egypt or Morocco.

What are some of the biggest challenges to be wary of? Some of the challenges we face here in the region are the changes in customs

LOGISTICS

Southeast Asian economies stand out for their high depth scores relative to what one would expect given structural characteristics such as their size and level of economic development.

clearance processes as well as the congested borders for clearance, which can sometimes take weeks rather than days. That is why DHL – being the market leader – works very closely with the different customs authorities across the region. We are also investing in enhancing our presence and infrastructure through the opening of three new gateways in KSA as well as a new ground operations and land side facility in Egypt to name a few. This kind of forward thinking will definitely help ease some of the current challenges our customers are facing.

How can DHL work with SMEs in their quest to become truly global? We help various SMEs and businesses in reaching out to the international markets and establish growth through supporting their logistics needs and providing solutions that will help facilitate their trade. That is why we have various sales channels to cater for the different customers in a personalised manner and advise them on the right approach and paperwork for shipping to avoid any delays in customs clearances or fines. This way our customers can focus on the other parts of their business.

What are the factors that separate local SMEs from top performers in the world’s leading markets? As I highlighted earlier, the major difference that separates local SMEs from the other top performers is the focus on international and regional markets rather than locally. A DHL Express study by IHS showed that through increased international trading, SMEs can improve their

competitiveness, whereby 26 per cent of the international SMEs were top performers vs. 13 per cent of the domestic only SMEs, out of which 39 per cent of international top-performers have increased share of exports by more than 20 per cent in last three years

You’ve recently released the DHL Global Connectedness Index 2014. What are key takeaways of the report that SMEs need to take note of?

The 10 countries, where global connectedness increased the most from 2011 to 2013, are all emerging economies. However, in terms of their integration into international capital, information and people flows, emerging economies still lag far behind. Europe is the world’s most globally connected region, with nine of the 10 most connected countries. European countries average the highest scores with regard to trade and people flows, and North America is the leading region on capital and information flows. Southeast Asian economies stand out for their high depth scores relative to what one would expect given structural characteristics such as their size and level of economic development. The top five outperformers were Malaysia, Vietnam, Cambodia, Hong Kong SAR (China) and Singapore.

The report also highlights a section called ‘Country’s Connectedness Trends’. How connected do you think SMEs in this region are? While one of the top findings is that the Middle East and North Africa region was the only region to suffer a large drop in its connectedness

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LOGISTICS

TOP

Breaking Borders: a study from DHL & EIU

1. The majority of SMEs expect

WHERE ARE SMES’ OVERSEAS OPERATIONS LOCATED?

2. SMEs expand to

+50%

to derive up to 50% of their revenues internationally

markets that resemble

2014

40% think Africa offers no growth

2019

WHERE IS THE OPPORTUNITY? CHINA‘S MARKET SIZE IS STILL A MAGNET FOR SMES, ALTHOUGH CHALLENGES REMAIN

potential... but GDP growth projected at 5% in 2015

G7 32,5%

America BRICM 18,5%

their own

WESTERN EUROPE

AFRICA OFFERS GROWTH OPPORTUNITIES, BUT THE VAST MAJORITY OF SMES FEAR THE CHALLENGES

KEY FINDINGS

Western Europe

G7 4,6%

BRICM 7%

RUSSIA / CIS

NORTH AMERICA

CHINA CENTRAL AMERICA

EASTERN EUROPE

3. The three biggest barriers for SMEs

All figures are from Breaking Borders, an Economist Intelligence Unit report commissioned by DHL

MIDDLE EAST INDIA SOUTH AMERICA

AUSTRALIA / NEW ZEALAND

AFRICA

Infrastructure challenges

Cultural issues

Political stability

4. Partnerships and networks G7

BRICM

are important expansion considerations for SMEs

between 2011 and 2013, the UAE was able to enhance its global connectedness and jump from the 23rd position to 12th out of 140 countries in the study. With the UAE being one of the most connected regions in the world, SMEs have easier access (infrastructure + capabilities) to other foreign markets.

Mobility, connectivity and the digital revolution are also helping in globalising SMEs. At DHL, how are you integrating technology to improve your SME offer?

With the UAE being one of the most connected regions in the world, SMEs have easier access (infrastructure + capabilities) to other foreign markets. www.tradeandexportme.com

Technology is one of the important and crucial platforms that provide our customers, including SMEs, with the best in class logistics solutions, which is why we constantly invest in enhancing out IT capabilities and offerings. Today, DHL Express UAE holds several ISO certifications including ISO 9001 for Quality management systems, ISO 1401 and OHSAS 18001 for Environmental and safety management systems standards as well as the ISO 20,000 for IT service management, making DHL

Express UAE the first logistics provider in the Middle East to receive the globally recognised accreditation. DHL Express is also GSOP & TAPA Certified elements for the solutions that DHL provides. This is an international standard for the logistics industry in terms of the automation, safety, security etc. for the various facilities.

Finally, what are the top three business, economic or financial trends that will shape 2015? We expect the logistics industry in the UAE to continue expanding. The real estate and retail sectors are also expected to maintain their strong growth in the UAE, especially with the new malls and other real estate projects that will be coming into the market in 2015.

For an online version, please visit: www.tradeandexportme.com/2014/12/ success-across-borders/

TRADE & GROWTH

Trade Credit Insurance trends, opportunities and market signals

Leading trade credit insurance (TCI) expert and Coface’s Head of Middle Eastern Countries, Massimo Falcioni, shares with Trade and Export Middle East how the top-notch industry player is helping traders and exporters supercharge their growth and become globally competitive entities.

Massimo Falcioni, Head of Middle Eastern Countries, Coface

Can you please give us a brief background of Coface? Established in 1946, the Compagnie Française d’Assurance pour le Commerce Extérieur (COFACE) is a global credit insurer, offering companies solutions to protect them against the risk of financial default of their clients, both on the domestic market and for export. Coface is listed on Euronext Paris and its shareholders’ structure is 58.62 per cent public and 41.35 per cent Natixis. Coface is focused entirely on supporting its clients’ growth in their

home markets and with their exports by offering credit insurance services via its operations across 67 countries, made up of 4,400 employees and 72 nationalities Coface has been active in the Gulf since 2007, with its local HQ at Dubai International Financial Centre. The company serves and advises all types of companies and industries trading and exporting in the region, through a team of 25 professionals with local knowhow and global experience. With its 30,000 companies monitored on a daily basis for

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TRADE & GROWTH

their payment behaviours and creditworthiness, we can secure the sales from non-payment for more than EUR six billion exposure in the Gulf region only. Through our worldwide database of more than 65 million companies monitored, we serve 37,000 clients globally, which accounts for a global exposure of insured receivable of EUR 452 billion. Can you please describe Coface’s service and product portfolio? What’s the percentage of big corporates and SMEs you work with? Coface offers adapted risk prevention, monitoring and protection services to companies of all sizes and in all sectors, and in this region, we work with many SMEs spanning various industries. One of the major challenges of SMEs in the region is access to finance. Through our tailored product line, we continually support the SME sector, which represents 30 per cent of our portfolio in the GCC, to improve borrowing power and increase available capital by converting account receivables into a performing asset. How does it work for an SME to access to this facility with Coface? It is very easy. There are three simple steps to follow:

Step One: Request a meeting with one of our Coface experts to evaluate the creditworthiness of the buyer portfolio. Contact details can easily be found on www.coface.ae. Step Two: Request a quotation for insuring against non-payment through our local insurance partners. Step Three: Request a banking facility (account receivables discounting) through Coface’s local bank partners or any of our other local and international partners. The Middle East is increasingly becoming a top performer in trade. In your opinion, which

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countries are doing better than the others and why, when it comes to trade? The UAE is a top performing trading country in the Middle East region. The non-oil sector is continuously witnessing high levels of growth, followed by similar performances in KSA, Qatar and Oman. Throughout the GCC region, there is heavy dependence on the hydrocarbon sector for budget revenues. However, we are seeing countries taking progressive steps towards diversification, through developing the necessary infrastructure to cater to non-oil industry growth. The UAE is a key example of this. Other countries including Saudi Arabia, Qatar and Bahrain, are implementing diversification policies with the development of secondary cities as is being witnessed in Saudi Arabia. We are seeing focused development in specific industries, with the aluminium sector in Bahrain seeing growth and Qatari airline logistics receiving investment. While in Kuwait and Oman, there is a government-level push for entrepreneurship through SMEs. With these continued efforts to build diversified business models, the Middle East will continue to develop a framework for sustainable economic growth and active trading portfolios. What steps are you taking in establishing a good relationship with potential trade credit insurance customers? We are listening to our customers’ needs to find the right solutions for their business – whether it is a MNC or SME. We offer advice on all possible practical solutions suited to their business that support their growth and development, and ultimately help expand their business safely. Working with Coface, our customers have access to our valuable database of information

on more than 30,000 businesses in the GCC that allows them to make informed decisions with our advice and expertise. The UAE takes pride on having a very diverse economy; which sectors have the highest growth potential? The hydrocarbon sector is absolutely key to the country’s growth. The UAE produces 3.5 per cent of the global crude oil supply, representing seven per cent of the proven reserves, and it is ranked seventh in the world and fourth among the OPEC countries. The completion of infrastructure projects at existing oil fields will support the country’s strategy to increase its production capacity. However, political and regional developments, rising domestic demand for energy and the need to enhance the security of oil shipments will continue to be the key challenges in this sector. The retail sector is also one of the fastest growing industries in the country on the back of increasing wealth, economic sustainability and higher domestic consumption. The supportive policies undertaken by the government and its positive implication on the private sector has created a favourable environment for the development of this sector. The agro food sector is also becoming increasingly important in the UAE in line with the growing population and per capita income. The country is the second largest food producer in the GCC, after Saudi Arabia. Yet its production capacity is short of the demand as the cultivable lands and water resources are limited, meaning the UAE imports around 90 per cent of its foods. This heavy dependence on food imports is a challenge given the vulnerability to the food price volatility. To counter price hikes, the government balances the price of food produce, however there is risk of narrowing profit margins for businesses within the industry.

TRADE & GROWTH

Credit insurance is still in its infancy and we are working to raise awareness of its value through educating companies’ on alternative credit risk management solutions. Looking at the transportation sector, both Dubai and Abu Dhabi continue to make aggressive investments. In addition, the support from local governments, huge infrastructure investments, the advantage of the UAE’s strategic location and resilient economic growth are expected to reinforce the development of logistics in the UAE. The increasing trade volume in the region and across the world will undoubtedly add to this development. Do you offer tailor-made solutions for SMEs? Of course. SMEs have different needs: they want to have an easy and simple relationship with the insurer and in managing the policy. At Coface, we consider that every customer is unique and needs a different customer experience based on their expectations. Statistics say that in the GCC less than 0.006 per cent of eligible transactions are protected by any type of credit insurance. Why do you think this is? What can be done to increase awareness? It is a fact that the oil & gas sector is the major contributor to the GDP. This sector is not immediately in the scope of credit insurance (except for petrochemical products which

represent a key sector for credit insurance). Credit insurance is still in its infancy and we are working to raise awareness of its value through educating companies’ on alternative credit risk management solutions. Many CFOs still opt for banks’ letter credit tool, despite it being more costly and restrictive and time taking; however credit insurance is quickly gaining traction in the region thanks to this education process. How can TCI benefit an SME – especially when it comes to protecting cashflow and capital? • Reduce the risk of significant losses • Reduce the need of reserves on bad debts • Free up working capital to be invested more productively • Increase the rating/creditworthiness of the SME vs. the banking system as stated by Basel II • Enhance the company’s discipline and compliancy in managing trade credit to improve working capital and financial planning What kinds of risks can SMEs insure using TCI? TCI covers risk of non-payment in B2B trade transactions. The coverage is extended to open account sales (transactions under cash, letter of credit and bank guarantees are excluded). It provides protection against insolvency or protracted default. In the case of export sales, political risks are also covered by TCI. What are key factors to bear in mind when looking for a TCI policy? 1. Coverage provided – The very essence of TCI is to protect your receivables. The coverage provided must be enough to cover your outstanding receivables from a buyer at any point during the year. 2. Risk covered – A company needs to be aware of the risks that the TCI policy covers. Ensure that it covers all the risks of non-payment (protracted

default and insolvency) and political risk for export sales. 3. Countries covered – Another important aspect to consider is which countries are covered by your insurer. In case you are planning to expand your business to new markets the insurer should be able to offer you support and coverage in those markets. 4. The network of the provider – It is important that your insurer is in touch with both your market and your customers’ markets. Only then will they have the in-depth knowledge of the business environment and debtors to be able to prevent risks by closely monitoring their development to act swiftly should they materialise. 5. Premium rate – The most obvious is the premium rate being charged by your insurance provider. It is good to know the prevailing rates from competitors to ensure that you are not overcharged.

What is the future of TCI in the region? I expect the industry to reach USD 70 million in gross written premiums in 2015, with an average industry loss ratio of approximately 50 per cent. The competition is increasing, with the arrival of several operators offering trade credit specialty insurance solutions. If the moratorium of the insurance sector is solved, I would expect the global credit insurance companies to invest capital and resources in the UAE, alongside more offers of sharia-compliant products, proposed by Takaful companies.

For an online version, please visit: www.tradeandexportme.com/2014/12/ trade-credit-insurance/

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CASE STUDY

SME spotlight: Eurocap Manufacturing businesses in the region have reached hitherto unparalleled levels of efficiency, profitability and innovation. SME Advisor caught up with one such business within this powerhouse SME sector that is not only maximising business opportunities, but is leading the pack – Eurocap. The young SME, set up in RAK FTZ, shares its inspirational success story…

Can you please give us a brief background about Eurocap? Eurocap was formed in April 2006, and the company started its manufacturing activities from January 2007. We are located in the Technology Park of RAK Free Trade Zone, which is about one hour drive from Dubai. We are into manufacturing of caps and lids through the injection moulding process. We also carry out vacuum metallisation on plastic caps and perfume glass bottles, lacquering on perfume glass bottles, and hot stamping on plastic caps.

P. Haridas, Manager for Sales & Administration, Eurocap

Eurocap specialises in producing customised perfume bottle caps. Can you tell us how the demand in this market is and how big is its share in the manufacturing trading industry in this region?

Eurocap is specialised in developing and producing custom made caps for perfume bottles, deodorant cans etc. We develop packaging based on our customer’s exclusive designs. We have our own standard design caps as well, which many customers buy from us, like they select the standard design bottles from the bottle manufacturer. When the customers go for an exclusive design, it becomes their property. They plan the designs in such a way that it gives rich and unique look. In this region, more customers opt for readily available standard design caps, when they consider the cost involved for designing and developing an exclusive packaging.

What attracted you to setting up base in Ras Al Khaimah? Ras Al Khaimah provides a wonderful business environment to work in. We felt that it is a prime location for

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CASE STUDY

How is the competition in this industry? What can you say is your edge among your competitors? The main challenge to our business is competition from Chinese suppliers. But offering European quality packaging at very competitive prices makes Eurocap appealing.

Do you also invest in the skill development of your employees – providing workshops, trainings and the like?

industrial investors considering the stable utility supplies, a wide logistics network and easy access to suppliers. The main reason for setting up our unit in RAK FTZ’s Technology Park was the convenience of the location, with logistical accessibility to both Sharjah and Dubai.

How has your business grown since your establishment in 2006? There is definitely a growth in our business since we started our manufacturing activities in 2007. Having carved a niche in the Middle East market, we have already entered into the US, Europe and Russian markets. As part of our growth strategy, we are now trying to enter new markets.

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We do have an in-house training system. Every time we bring a new mould, be it our customer’s exclusive design or our own, the technicians and machine operators will be briefed well about the mould construction, method of moulding and other technicalities. Similarly, when a new employee joins our organisation, he or she is given the required training through workshops – this is an integral part of our company policy.

What steps are you taking in terms of promoting the Eurocap brand in an out of this region? And in a larger sense the ‘Made in the UAE’ brand?

Eurocap is known in the market as quality product manufacturers of injection moulded packaging items. We are actively participating in various exhibitions and visiting prospective customers. We do get enquiries from customers when they see our own designs on our website. We participate in the renowned “Beautyworld Middle East Exhibition” that takes place every year in Dubai.

Quality, price and delivery time play an important role in attracting and gaining the confidence of customers.

What are your future plans for further growth? Eurocap has a modern and efficient production unit, where the European-made equipment operates in a tempered and dust filtered environment. We plan to introduce new designs of cap. We are further focusing on providing a complete packaging solution to our customers and make available everything under one roof, which will give them a peace of mind!

What advice would you give to new companies looking to open in the manufacturing and trading sector? We have observed that customers are looking for manufacturers/suppliers who can deliver quality products at competitive prices. Quality, price and delivery time play an important role in attracting and gaining the confidence of customers. Also, customers look for an uninterrupted supply. One should consider these factors in mind to be successful!

For an online version, please visit: www.tradeandexportme.com/2014/12/smespotlight-eurocap/

LEGAL

Coping with change the importance of a plan In the context of family businesses, many of which are run by a single person, failing to plan for change could put the future of the business in jeopardy, especially if the individual who manages the business is no longer able to continue in his role. In the following feature, experts from Clyde & Co. explore the issues and challenges that may arise as a result of lack of proper corporate and succession planning…

“Nothing is constant but change.” A limited liability company that is incorporated in the United Arab Emirates (LLC) is required, pursuant to applicable law, to have two shareholders, one of which must be a UAE national or an entity that is wholly owned by UAE nationals who/that holds shares representing 51 per cent of the capital of such entity (the Local Shareholder). Notwithstanding the Local Shareholder holding the majority shareholding in the LLC, in a number of cases, the minority 49 per cent shareholder (the Minority Shareholder) may assume day to day management control of the LLC. However, in the event that a shareholder dies, is incapacitated or is otherwise unavailable to continue in his/its capacity as a shareholder,

complications can (and often do) arise. Where the shares in the LLC are held by the Local Shareholder in his personal capacity, upon his death, the shares of the Local Shareholder would devolve to his heirs, and may be distributed as part of his estate, in accordance with the principles of UAE inheritance law (which are subject to Sharia law). From the perspective of the Minority Shareholder, this may pose a particular challenge as, among other things, there may be a conflict among the heirs and consequently obtaining a “Certificate of Heirs” (that sets out the names of the deceased’s heirs) from the Sharia court may be delayed. The heirs may also not be willing to cooperate with the Minority Shareholder or share the Minority Shareholder’s vision for the future of the business, and may attempt to

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LEGAL

The relevant commercial parties may have to incur considerable time and expense in resolving issues with the heirs of the individual shareholder, prior to coming to a position from which they can drive the business forward. In light of such challenges, the stakeholders in such enterprises should consider implementing an appropriate corporate structure that permits the business to function whilst mitigating the risks that arise should anything untoward happen to the Local Shareholder or any other individual shareholder. It is often recommended that an individual partner’s stake in an LLC be held through a corporate vehicle and for an LLC to adopt an appropriate corporate governance regime so as to enable, among other things, more than one person to represent the LLC and act as its authorised signatory.

become actively involved in the running of the business, despite any earlier agreement that may have been reached between the Local Shareholder and the Minority Shareholder. In addition, the business of the LLC may be adversely impacted, particularly in respect of any key relationships (whether with business partners, employees or customers) which were led by the Local Shareholder, and in respect of operational issues such as control over the LLC’s bank accounts and dealings with governmental authorities, including UAE Ministry of Labour and UAE Ministry of Interior, which oversee the processes relating to employees of businesses in the UAE. Further, in the event of the death of an individual shareholder, it may not be possible to complete, on an urgent basis, a transfer of shares in an LLC.

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Family businesses A number of family businesses in the UAE are structured in a similar manner, whether through an LLC or otherwise. Family businesses tend to be run by a single person or group of persons. In the event that the individual who controls the family business dies, the future of the business is put into jeopardy. It is therefore imperative that a robust corporate structure and succession plan is implemented during the lifetime of the patriarch, in order to ensure continuity of the business during a generational change. Depending on the size of the family and the nature of its interests, such structures may include the ‘corporatization’ of business lines and ring fencing of liabilities, and hardwiring the provisions of a family protocol document or family constitution into the constitutive documents of the LLC or all the entities that comprise the group. A G1 family’s requirements in this regard may be substantially different to that of a G4 or G5 family, which would have several stakeholders, who may have competing interests and goals. However, irrespective of the longevity of the business or the constitution of the

It is therefore imperative that a robust corporate structure and succession plan is implemented during the lifetime of the patriarch, in order to ensure continuity of the business during a generational change. family, it is never too soon to consider the needs of a business and implement an effective corporate structure and succession plan that will ensure a smooth running of the business, irrespective of the circumstances of each shareholder, and a transition of the business to future generations. Further information If you would like further information on any issue raised in this update please contact: Prarthna Chaddha Partner E: prarthna.chaddha@clydeco.com Raeesa Chowdhury Associate E: raeesa.chowdhury@clydeco.com Clyde & Co LLP PO Box 7001 Level 15, Rolex Tower Sheikh Zayed Road Dubai, United Arab Emirates T: +971 4 384 4000 F: +971 4 384 4004 Clyde & Co accepts no responsibility for loss occasioned to any person acting or refraining from acting as a result of material contained in this summary. www.clydeco.com

For an online version, please visit: www.tradeandexportme.com/2014/12/ coping-with-change//

Strategy

Out with the old and in with the new Running a business is a very time consuming activity, especially for resource constrained SMEs. Often there is little time to reflect on past activities and reassess the corporate performance so as to make those very important changes. Despite the shortages of time it’s always important for an entrepreneur to understand what has worked well and what needs to be changed. What better time to reflect and assess the company’s performance than the New Year? In the following article, Dr. Ashraf Mahate, Head of Exports Market Intelligence, Dubai Exports, highlights crucial areas that every business should look into… 72

Better at planning If a business is going to succeed then it needs to plan effectively. All firms need to ensure that they have sufficient liquidity to meet their day to day costs. Therefore, cash becomes the life blood of any business. The common belief among entrepreneurs is that they need to just focus on profits. The reality is if a SME focuses on simply profits at the expense of cash flow planning and management then it has a higher probability of going out of business. All SMEs should prepare a cash flow projection (or budget) on a monthly basis at the start of each year. Then each month the SME needs to evaluate

the budgeted figures with actuals. Of course, in reality there are often differences between the actuals and budgeted figures but the important aspect is to understand the reasons. The usual reasons for variations tend to be increased prices, increased usage or a combination of both. If prices have changed suddenly then the SME needs to understand the impact of this on their bottom line and whether they may need to enter into some type of hedging strategy. If the variation is due to increased usage the SME may need to understand whether it’s as a result of greater sales or wastage. Whatever the reason for the variation the process of analysing

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Strategy

The simple lesson of increasing sales is to have a more engaged customer base.

it allows the SME to gain a greater understanding of its business. Increased sales through better customer engagement. The simple lesson of increasing sales is to have a more engaged customer base. So the question then becomes how to engage with existing and potential customers. As difficult as it is there are still some companies which still do not have a website. Therefore, if a firm does not have a website it needs to develop one that is useful and relevant to the target audience. For businesses that have a website they should seek to regularly update their website with current information. More often

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than not SMEs set up a website thinking that is the end of their online presence without updating it and making it relevant for their target audience. In the modern electronic world, social media is an important tool that companies can use effectively to engage their customers as well as to increase sales. SMEs need to get onto Twitter, Facebook, LinkedIn and the other social media platforms to talk directly with existing and potential customers. SMEs tend to be passionate about their companies and they need to go out and talk about it directly to customers. Anecdotal evidence shows that when firms have a

Strategy

direct line of communication with customers it tends to increase their level of loyalty and allows them to see that the firm personally cares about their customers. Improved accounts receivables Sales are of course important for all firms but so is the ability to collect accounts receivable. It is normal practice for firms to offer credit to its customers however it is important that they are collected on time and in a friendly manner. Therefore, the SME needs to constantly have its eyes on how its customers are making their payments. As such the SME needs to produce regular aging schedule of its accounts receivables. The SME can also look at alternative ways of speeding up its accounts receivables such as allowing customers to pay through their website. Several case studies show that when firms provide their customers the facility of paying via the website it tends to reduce the length of accounts receivables and the level of bad debts. Alternatively, the SME can use invoice discounting or factoring as a means of obtaining immediate cashflow on goods delivered or services provided through a third party such as a bank. The key difference between factoring and invoice discounting is that in the former the third party company takes control of the sales ledger which includes chasing customers for settlement of invoices and managing the credit control of the business. In the case of invoice discounting, the SME maintains responsibility for the sales ledger, payment chasing and invoice processing. Typically, a firm tends to receive 80 per cent to 85 per cent of the invoice value at the time of submission to the third party company. Once the client of the SME has paid the invoice value, the reminder is paid to the firm minus the administrative costs. A SME can fully insure against a client

not paying through entering into a non-recall agreement whereby the third party takes full for nonpayment. Better inventory management Inventory is important for all firms as the cost of running out may mean not only a lost sale but a customer who may not return. At the same time high inventory costs are a huge burden for a firm in terms of working capital tied up, cost of warehousing and of course the threat of goods becoming obsolete. The general rule is that 80 per cent of sales are generated by 20 per cent of the inventory investment. The rest of the inventory tends to be either slow moving or even “dead”. SMEs need to regularly go through their inventory to make it more productive and in the process sell items which have a high risk of becoming obsolete. This may involve the firm biting the bullet through deep mark downs but the positive aspect is that it allows it to generate cash which can be utilised more profitably. 2015 – Time to implement change At the end of the day New Year’s resolutions are only as good as the commitment that backs them. Therefore, it’s important for SMEs to make small changes that improves their business and makes them more competitive especially on a global scale. The New Year is the perfect time for companies to start making the changes.

Dr. Mahate received his doctorate from Cass City University Business School in London (UK). He read Economics at University College London, followed by a Masters in International Economics and Banking at the University of Wales in Cardiff. Dr. Mahate is a professional educator and received his training at the Institute of Education (University of London). He is a member of the Chartered Institute of Managers (UK) and a Member of the Institute of Commercial Management (UK). He is also a member of the Association of Certified Anti-Money Laundering Specialists (ACAMS). He can be reached at ashraf.mahate@ dedc.gov.ae.

For an online version, please visit: www.tradeandexportme.com/2014/12/outwith-the-old/

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Hiring in 2015

strategies to get you ahead of the curve The last couple of years have seen the areas of recruitment and talent management evolve rapidly. With factors such as globalisation, mobility and Generation Z coming into play, it is imperative for SMEs to rethink their strategies and implement fresh initiatives in the New Year. We ask leading expert Abbas Ali, Vice President, TASC Outsourcing, to analyse the changing landscape and offer top tips… Abbas Ali, Vice President, TASC Outsourcing

According to a report released by global IT research firm, CompTIA, 68 per cent of employers in the Middle East are primarily looking for network and infrastructure experience, 58 per cent are seeking helpdesk and IT support, 53 per cent are looking for office IT equipment maintenance and 51 per cent require storage and data back-up capabilities.

Can you please give us a brief background of TASC Outsourcing? Established in November 2007, TASC Outsourcing is a contract staffing and talent management company that outsources professionals to prominent companies across the country. With a large resource base of professionals, from over 53 countries, TASC Outsourcing is the partner of choice to more than 200 companies in the region. The contract staff, employed and compensated at par with industry standards by TASC, are qualified across a range of 75 job functions in diverse verticals, including Information technology, Customer service and Call centres, Banking, Oil and gas, Sales and marketing, Administration and Support, and Retail. TASC takes an innovative and proactive approach that is driven by market insights. A dedicated research

team closely monitors market and industry trends and conveys the findings to the recruitment team. This, in turn, enables TASC to stay ahead of the competition by sourcing candidates to meet forecasted demand. Leveraging its expertise in HR practices, TASC also supports clients by managing their day-today transactional activity related to attendance, payroll, sales, MIS monitoring, and more. TASC’s forward planning and customer focused strategy has proven to help companies on the growth path. It also provides a quick start to companies that are in the formation stage, helping to reduce clients’ time to market by deploying contract staff for their on-ground operations.

What would you say were major hiring trends in 2014? How do you see them changing in 2015? www.tradeandexportme.com

The UAE job market on the whole has improved in 2014 with a lot of opportunities opening up across various sectors. Dubai’s vision to become a smart city by 2020 has seen an exceptional boom in demand not only for talent in the IT sector but also for technology talent across all industries. The focus for 2015 is shifting to hiring senior level talent. On the other hand, firms are also realising the need to cater to generation Z – the younger, connected youth. India and other Asian countries will continue to be top sources of talent for the Middle East. However, the popularity of the new Indian administration and India’s subsequent healthy economic outlook, may affect the size of the exportable talent pool in the subcontinent. Pay-scales will see a gradual but consistent upward movement in the New Year, especially in sectors such as Hospitality, Banking and Construction.

What do you hope to do differently in the New Year? How has your strategy evolved? Our strategy has evolved to reflect the hiring needs for 2015. We currently hire from 47 countries, and have expanded our presence to many new target countries. We have also hired new sector specialists to reflect industry needs. Given the economic growth predicted for the region next year, we hope to expand ever further across business lines and geographies.

For businesses looking to hire in 2015, what are key factors they need to bear in mind? The economy is going in to a growth cycle that will prompt job-seekers to look for better jobs elsewhere. Before hiring, the foremost concern for firms in the New Year should be to retain their best talent. More employee engagement activities and trainings help relative increases in pay

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For firms looking to hire, the factors to bear in mind include forecasted industry performance in 2015, global influences and talent accessibility at a macro level. scales and benefits, and meeting other employee needs. For firms looking to hire, the factors to bear in mind include forecasted industry performance in 2015, global influences and talent accessibility at a macro level. The firm’s financial performance will play a huge part in determining recruitment targets. We would recommend that firms practice more caution in the hiring process to avoid wastage of resources. A number of companies approach TASC to hire contract staff that may or may not be made permanent based on performance. This type of ‘test and hire’ approach can help reduce the chances of ‘mis-hiring’. As work flows expand, businesses should have ready access to a strong candidate base for potential openings in the future. Some tips that can help employers in this regard are keeping a record of resumes, encouraging employees to participate in trade forums and become members of trade associations, where there is a good chance of meeting qualified talent, and implementing internship programmes that provide direct access to young talent.

With the Expo 2020 in the pipeline, it has been predicted that 300,000 jobs will be generated in the UAE. When do you see this

kicking in? Which sectors will have the highest demands for new staff and which positions?

We expect the construction, IT, retail and hospitality industries to have the highest demand for new staff in the lead up to Expo 2020. Recruitment towards the event has already been initiated in these industries, although hiring will continually increase based on demand starting from 2015. While there will be a need for senior level talent to pioneer new divisions and lead projects, there will be a demand for trained midlevel and junior staff as well. The hospitality industry will need trained service professionals or those who are willing to learn quickly on their feet. All industries will need IT professionals as Dubai moves towards realising its goal of being a smart city by 2020. We expect a 15-20 per cent growth in IT sector staffing leading up to Expo 2020, going up to even 20-25 per cent in 2017.

What are the hiring trends that you see in years leading up to the Expo?

Did you know? In 2014, TASC reported year-onyear increase in contract staffing in the UAE from approximately 15 per cent to 20 per cent. The government sector, telecom and IT, large retail companies, and the oil and gas sector have been first to embrace contract staffing, with engineering and trading companies lagging behind. With the lead up to Expo 2020, contract staffing will become even more important as firms will look to hire on a large scale, or for project-based work.

How do you ensure that you adhere to the legal regulations in the markets that you are sourcing people from? TASC is licensed to outsource global talent as contract staff to clients across the country. In this respect, we provide end-to-end support from sourcing to selecting and finally on boarding. Every country we source from has its unique requirements. We work with the embassies, government authorities and local partners in those countries to ensure full compliance and seamless transition of our new recruits into the UAE. Our field experts are aware of the legal regulations of each of our source countries and ensure compliance standards are met with each contracted employee.

What are the main issues that you face in terms of finding talents and keeping up with clients’ demands? It has been said that the UAE is in a “talent crisis” right now, as there is a mismatch between the demand and supply of talent. In some specialised sectors it is increasingly difficult to find the right talent to match the job profile. However, this is the case with all booming economies. Based on our evaluations at TASC, companies are more wary of the issue of talent mismatch. Our clients trust us to provide them with the correct fit for their needs, and in effect help them safeguard their business goals, revenues and growth. In some cases, companies wait for months before finalising a candidate for a specialised role. Additionally, there are age constraints for senior positions as these are mostly filled by expats and hence transient in nature. It is a challenge to find sufficiently senior and experienced

expats for top management roles, who are still capable of putting a few good years into the organisation. Turnover is also a big challenge. The struggle to retain good talent will always be present, however with improved retention strategies employee turnover can be lessened.

core offering rather than administrative worries. We also offer project-based hiring, which caters to clients who have a ‘try-before-you-buy’ mentality. SMEs can benefit from hiring a group of people for a short period of time before they hire them as permanent staff to ensure they are a right fit for the company.

Is employee retention a core part of your services? If so, what kind of initiatives do you have in terms of building loyalty among staff?

How do you plan to go about this anticipated increase in demand for recruitment and hiring management?

Our employee satisfaction scores at TASC are in fact higher than those of our clients, so we do have a very strong focus on retention strategies and building loyalty among our own employees. For clients, we provide HR capabilities that include employee engagement strategies. Our recommendations include recruiting people that fit in the culture of the company, regular employee development programs and trainings, team-building exercises, biannual, occasionally quarterly reviews, open forums to discuss employee challenges and grievances and review of managerial staff, including evaluation of the mentorship processes.

We have expanded into many other regions where talent is available and willing to move to the UAE. We have also hired more sector specialists to cater to the growing needs of the local economy. Additionally, we use technology to be more efficient in our practices. Our recent adoption of new processes and technology, to manage thousands of our employees who are contracted to companies in the UAE, has helped us manage our processes efficiently. A progressive combination of technology and innovation is essential to the growth of any business today. Specifically in the staffing industry, it is important to ensure transparency in processes in order to build long-term engagement between the two most important stakeholders – the employee and the customer.

Do you think SMEs can gain an edge to be globally competitive by collaborating with outsourcing agencies such as yourself? We are an SME and therefore are no strangers to the challenges SMEs face when trying to scale their business. Since start-up costs are very high in the initial stages, we recommend outsourcing at a later stage when the business is in a steady state of success. At that point, we are able to come in and help the business with recruitment or day-to-day HR processes which takes away the stress and cost of in-house HR inefficiencies. This allows the business to focus on its

Currently your operations are mostly focused here in the UAE, do you plan to expand to other markets in the near future? We are focused on the UAE given the growth in the economy here. However, we do intend to expand into other markets in 2015.

For an online version, please visit: www.tradeandexportme.com/2014/12/hiringin-2015/

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Event review

The war on waste

Spotlight on food waste management and the role of the hospitality industry

Held on December 7, 2014 at the Ritz Carlton, DIFC, InSinkErator, the leading manufacturer of residential and commercial waste disposals, in collaboration with CPI Media Group, hosted an exclusive round table event, with the aim to shed some light on various key issues of sustainability.

Upcoming industry relevant event EcoWASTE 2015 (January 19-22, Abu Dhabi National Exhibition Centre) is an exhibition that aims to become the leading specialised event for sustainable waste management and recycling, bringing together prominent local and international technology and service providers, local and regional buyers, and industry professionals from both the private and public sectors. EcoWASTE is designed to cover the entire solid waste management services and solutions required to address the dramatic increase per capita of waste production in the region. (For more information visit: www.ecowaste.ae)

The rapid economic expansion of the UAE has been accompanied by a growth in population as well. The significant progress of various sectors in the nation triggered by industrialisation has also resulted in increased waste generation. Records from the Dubai Municipality indicate that, in Dubai alone an average of 8,000 tonnes of waste every day is generated with each resident contributing about 2.7 kilograms, which translates into almost 1,000 kilograms per person a year. With several of waste management systems in place, what more can we do to address this growing dilemma? Present at the event were leaders in the fields of architecture, consultancy, facilities management and hospitality gather to put focus on waste management systems tapping on a major element – food waste management solutions. Paul Godfrey, Group Director of Editorial, CPI Media Group, moderated the powerful and enthusing afternoon of dialogues and insights. Kicking-off with a warm welcome to the panelists, he opened the table to discuss over the key challenges faced by the region and UAE in particular when it comes to sustainability and waste management. Throughout the first half of the discussions it seemed that major bottlenecks in the UAE, when it comes to sustainability, include the lack of openness among local businesses. A call for a legislation mandating the inclusion of sustainability agendas to an entity’s business model was also made prevalent by the participants. “In the past we have implemented projects for most of the multinational corporations eyeing this region. We were increasingly being pushed by these corporations to look at areas suitable for green buildings, but the problem was that the local property developers were not really keen, because they felt that no one was really focusing on green buildings. So there’s always been a separation between multinational and local property developers,” said Ulysses Pappadopolous, Founder & Managing Partner, Green Emirates Consultancy.

“Although the government structure here in the UAE is somewhat similar to that of some European countries there are significant differences when it comes to sustainability. I find that between countries like the UK and in the GCC is that sustainability agendas are written on the legislation. Whether you are building a residential property or a hotel, there are design specifications that are mandated by law. In this region however, property developers keep the sustainability solutions in check but it is not necessarily followed. I’m sure that will change in the coming years, but right now here in this region there’s still no written legislation that serves as the core that developers follow,” said Simon Dickason, Regional Manager, Tangram Gulf. Steven Miller, Vice President for Business Development, Shapoorji, said: “The region definitely follows certain sustainability standards which is often followed by property developers. However, we don’t have benchmarking certifications in place for these standards which begs the question of ‘how far will it go?’ There

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Event review

are architects and engineers who design their projects around these standards but whether the client agrees to those specifications or not is a different story.” Stuart Harris, Support Services Director, Emrill: “From my personal point of view, it mostly comes down to the money. In the past whenever I approached companies about implementing sustainability systems the initial thing they asked was ‘how much is it going to cost them’ and that is usually the challenge. Considering the initial expenses that they would have to incur on a sustainable technology solution or system usually influences their decisions. Most of the time they fail to consider the long-term value of investing in these solutions. So if sustainability practices are somehow part of the legislation then that would change things immensely.” Ivar Krasinski, Design Director, L+B Design Group, thinks otherwise. According to him a legislation is not entirely necessary to tackle the issues of sustainability. With ample

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communication between architects and other stakeholders of a property being developed goals of sustainability can be achieved with great success. “I don’t think legislation is the only solution. Just because the standards exists doesn’t mean that they are the right standards for the long-term. I believe that incorporating efficiency in the design is generally the best way. You can actually have better solutions than what is mandated with proper building design. If there are ways that can significantly impact our designs to make the buildings more efficient then that is something that we are keen to know about.” Waste-to-energy has quickly emerged as one of the most attractive sustainability options for the UAE, given its cost competitiveness and ability to ease the UAE’s pressing waste disposal challenges. Food waste makes up to 38 per cent of Dubai’s total waste and is known to have a lot of embedded energy in it. Putting the spotlight on this subcategory that comprises a significant proportion of waste in the Emirate, the discussion steers to the initiatives being implemented to reduce and make good use of food waste. Eng. Mohammad Jarar, Compost Plant Manager, Tadweer, highlighted the work that they do to optimise the increase of food waste in landfills. “Out of the 1000 tonnes of waste we receive a day 300 tonnes of that is food waste. What we do is convert that waste to compost which can be transformed

to energy. Quite frankly is not an easy job and is very costly. Being a privately owned company we often face issues when it comes to expenses since production costs are high while the demand for that compost product is low. We have been working on a proposal that entails converting 400 tonnes of food waste into biogas which can support around six megawatts of electricity per hour. We are now trying to get the municipality on board with this project and have part of it subsidised by the government. We also endeavour to establish a waste management and sustainability standard that is suitable for the GCC region in the near future. What works in the US or in Europe does not necessarily work here in this region because of various factors such as the weather conditions.” Joe Ferrara, Vice President International, InSinkErator, said: “We educate people in selling our innovations via food service consultants and they demonstrate the benefits of our products for commercial kitchens. We also participate in various trade shows and exhibit our latest products and that’s how we spread awareness on food waste management. 70 years ago when we created food waste disposers we initially did it for two main reasons which are hygiene for the kitchen and the convenience for the users. When issues on environment came to light we did a lot of research and came

Event review

What a waste! 1.3 billion tonnes of food is wasted every year

198 million hectares of land are used to produce food that is lost or wasted each year — the size of Mexico.

5,600 megatonnes of greenhouse gases are associated with producing food that is ultimately lost or wasted.

250 kilograms of food is discarded on average by individuals annually in the Middle East and North Africa region at a cost of over USD 60 billion

39%

38%

of the 1.1 million tonnes of municipal waste generated in Abu Dhabi each year is leftover food discarded by residents

of food is wasted every day in Dubai, which goes up to 55% during Ramadan.

Sources: United Nations’ Food and Agriculture Organisation (FAO)| Abu Dhabi Municipality| Dubai Municipality| World Resources Institute|

up with ways on how we can fit our product to this environmental story. We can help divert food waste away from landfill and harvest the energy embedded in food waste. We don’t see ourselves as the solution to these environmental dilemmas but we are part of the solution in the management of food waste.” As a thriving metropolis Dubai has undergone several transformations turning the city into an urbanised investment hub. The glamorous skyline of the city glitter with hotel buildings and high-rises. There is no doubt that the hospitality sector plays a key role in the development of Dubai. Entities such as the Jumeirah Group proved to be keen investors on best practices relevant to sustainability and food waste management within their organisation. Elaborating on this further Sarah Saha, HSE Manager, Jumeirah Group, underlined different incentives that they take on as a key player in the industry. “We believe sustainability is something that anyone and everyone should be involved in. Within the Group we engage with all our stakeholders whether it be suppliers, colleagues or guests and we get them on board with the initiatives that we have. These include practices like recycling and portion-control. As an example, Jumeirah as a luxury brand, our buffet food stations may appear to have large quantities of food but in reality it is just a matter of presentation that they seem that way and it is continually being replenished. For food waste management, we do have facilities like food composter machines. We also implement a system that automatically reduce the amount of food and organic wastes. Apart from that we also have energy saving protocols that we administer in our building management systems.” Reiterating on the leading significance of the hospitality industry in the waste management scenario, Sandrine Le Biavant, Director of

Consultancy, Farnek said: “The more sustainability is embedded in the hotel chains the more it cultivates passion that can actually create a culture within the organisation. I can see more and more chefs, and people in F&B at hotels making sure that they review their menus and look at ways to minimise the amount of food wastage when cooking and also save water and energy when preparing food. That is a very ideal way of changing the culture in the industry, but that would require the re-engineering of the processes in the hospitality sector.” As the challenges and opportunities has been recognised, the discussions leaned towards identifying the next steps moving forward. The panelists were unanimous in saying that the way to progress sustainability and improve the waste management industry is to increase educational initiatives and awareness across the UAE. Public and private sector liaisons is still not in an optimum level but with the upcoming Expo 2020 serves as a great motivation to boost the cooperation of the two. People are also increasingly becoming more mindful of their responsibilities when it comes to the environment. Mohamed Karam, Business Development Manager, Middle East and Africa, InsinkErator: “Moving forward I think the best step to take is educate people on a personal level and get them interested on the importance of proper waste disposal. Then we can speak with the developers and get them on board. Then have a dialogue with government entities and come up with a solution that can be implemented in this market. We can also adapt the programmes that we have in other markets and make them suitable for this region. Finally, we are always open to suggestions may it be from operators, developers, residents or other stakeholders.”

For an online version, please visit: www.tradeandexportme.com/2014/12/ the-war-on-waste/