presents
BUSINESS INTELLIGENCE FOR INTERNATIONAL TRADE www.tradeandexportme.com
Contents
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62 ADVISORY BOARD Key personalities sharing their expertise to ensure that we bring you the latest trends and issues in the field of trade. Strategy 64 HAPPY CUSTOMERS ARE LOYAL CUSTOMERS Dr. Ashraf Mahate, Head of Exports Market Intelligence, Dubai Exports, on how you can make your customers the best marketing tool. Trade & Growth 68 Capital Gains: Doing business in Abu Dhabi How does your business fit within The Abu Dhabi Economic Vision 2030, and what are the support initiatives that will help you reap the benefits? Trade and Export ME presents a detailed report‌
Governments, associations and large private companies have set up various centres, programmes and funds aiming to facilitate SME development. p68
TRADE AND EXPORT MIDDLE EAST
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The Real Estate Regulations and Strata Regulations as drafted represent a significant long-term statement of intent for the ADGM and are likely to have a positive impact on the Abu Dhabi property market as a whole. p76
VIP Interview 72 SME success spotlight: Milly Pack FZE We met up with the dynamic team behind Milly Pack FZE – a growthstage business that has not only successfully created a niche for itself in the market but is slowly making its way to the top…. Legal 76 Abu Dhabi Global Market: A new direction for Abu Dhabi Land Law Legal experts from Clyde & Co. give us a detailed overview of the Abu Dhabi Global Market’s (ADGM) Consultation Paper No. 6 of 2015 and provide an analysis of what this means for business owners in the region…
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
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Strategy
Happy customers are loyal customers Making customers the company’s marketing tool
Good business is often attributed to efficient marketing strategies. While there are so many tools and tactics available in the market that promise optimum results, word-of-mouth marketing is still recognized as the most-effective strategy for any product or service. But what if this is simply unachievable due to low customer satisfaction rates? Dr. Ashraf Mahate, Head of Exports Market Intelligence, Dubai Exports, clues us in to this important subject.
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Strategy
SMEs should be wise and focus on exceeding customer satisfaction through developing ‘wow’ factors that can lead to greater client loyalty.
Most SMEs focus on acquiring new customers when actually the key to a successful business is customer retention. Numerous studies have found that acquiring new customers can cost seven times more than retaining the existing ones. So why do customers stop using a particular company or service provider? Studies show that twothirds of customers who turn away are unhappy with the service they receive. A further one-seventh are unhappy with the product or service. And then a further one-eleventh decide to switch to the competitor. This leaves only 11 per cent of customers, which means that for every 100 customers attracted 89 do not return. Such a low performance level does not only increase the costs of the firm, as they are constantly trying to attract new customers, but the dissatisfied ones become a ‘bad advert’ for the firm. While many companies focus on price competitive tactics, they forget that the real winning strategy in keeping customers is always satisfaction. A satisfied customer will not only come back to buy more but they are also likely to become a perfect advert for the
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firm, thereby helping the company to further increase its customer base. It is no news that there is a strong correlation between satisfied customers and sales. However, what is not known by many is the reality that SMEs tend to put most of the focus on prices alone, which results to them paying less attention to all other factors relating to customer experience. What they should keep in mind when it comes to customer satisfaction is that offering low or even the lowest prices in the market does not entirely compensate for good customer service. Any fall in a customer’s experience will in time lead to a damage in the reputation of a firm or brand. Once these aspects are diminished then it is only a matter of time before the company loses its loyal customers and ultimate failure is just one step away. A vital factor to keep in mind when doing business is that while the prices you offer is important, customer satisfaction has no substitute. This is more so the case in global markets where an international firm also competes with domestic producers. SMEs should be wise and focus on exceeding customer satisfaction through developing ‘wow’ factors that can lead to greater client loyalty. Ideally an SME needs to develop strong customer relationships so that clients do not ever think of using the services of another firm. At the same time, a strong relationship like this will result tin the customers becoming ambassadors for the firm in recruiting new clients. The internet age has made all this much easier through the vast host of discussion sites, blog pages and of course social media. In fact, the internet has shown that customers are effective not only in discussing their pleasant experiences but also their bad ones. The scores of parallel sites of major international firms is one example of how disgruntled customers can use the power of the
internet to persuade others away from using the services of the firm. If the goal of an SME is to retain its customers and utilise them to attract new ones then it needs to showcase a ‘wow’ factor to every client. One of the simplest ways of doing this is through under promising and over delivering in all aspects of the product and service. It is better for the SME to exceed the customer expectations than to disappoint or lower their experience. Everyone has experienced the situation wherein a tradesman makes an appointment and either fails to arrive at the agreed time or not at all without a telephone call or an explanation. On contrary, there are also scenarios wherein the firm actually does more than what is expected ahead of time. Both are unexpected situations, and while the first leads a customer to become annoyed or angry, the second results to a pleasant and memorable experience. In terms of customer loyalty we are more likely to reuse the services of the latter firm as well as recommend it to others. The difference between the two situations is that the first made a promise yet did not keep to it while the second made a commitment and not only kept it but exceeded it. The basic idea of under promising and over delivering is to capitalize on the fact that customers are positively influenced by excellent service that they did not initially expect. If the customer expects a certain level of service and receives exactly just that, then there is no unexpected component. In other words there is a huge difference between meeting customer expectations and exceeding it, and more often than not the latter is more valued. Expectations of a particular service are formed or created by the firm through the promises that they make. When I order a pizza and the restaurant informs me that they will deliver it
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Strategy
The concept of under promising and over delivering is not about making false promises at the start and then improving them. The concept is about realising and understanding the business, and what it takes to make a customer happier.
within 30 minutes then that is what I expect. If the pizza arrives exactly 30 minutes later I am satisfied or even mildly happy. However, if the pizza were to arrive in say half the time I’m expecting it, then my satisfaction will be much higher. The concept of under promising and over delivering is not about making false promises at the start and then improving them. The concept is about realising and understanding the business, and what it takes to make a customer happier. Also, this concept is not about doing things fast without taking notice of any possible errors, instead it requires a business to set systems and processes in place so that their customers receive an excellent product or service. As such the firm needs to rigorously plan various aspects of its operations to ensure that it has all the necessary resources to cater to the needs of the customers. Furthermore, the firm should have an extensive understanding of the needs of the customer and address it accordingly.
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Under promising and over delivering is all about doing a host of little things that the customer does not expect which together make for a great experience. The best part about under promising and over delivering is that it costs the SME nothing to implement yet it is extremely effective. For resource stretched SMEs, the question is – how to develop an under promise and over deliver strategy? Most of the time, SMEs are trying to firefight and deal with yesterday’s problems in the light of today’s circumstances. Nevertheless, SMEs can take simple and cost free steps to ensure that they have satisfied customers.
FIRST, the SME needs to find out what are the issues that customers feel most strong about and which annoys them the most. Such an understanding of customer sentiments does not require a large and expensive customer survey, but it can be done simply by talking to customers at any www.tradeandexportme.com
Strategy
processes so they can do things better. Sometimes, if for whatever reason the promise cannot be met each time then the SME may need to simply just revise their offering.
THIRD, there is little point in
delivering a product that is faulty or does not work properly. Therefore, the SME needs to ensure that it has appropriate quality control procedures to remove product or service defects.
available opportunity and building up a databank. Once these key frustrations have been identified, the SME can now develop or plan a strategy to ensure that they are minimised if not totally removed. Of course the SME must also find out what pleases its customers and enhance that particular component in its product or service. In some cases it also helps to even just subtly mention the fact that aspects which annoy the customer have already been improved or dealt with professionally. For instance, a tradesman can simply mention to a customer that the problem that he has voiced out has already been taken care of and add a positive aspect such as carrying out an additional task that needed doing at no extra cost.
SECOND, the SME should re-evaluate its own promise and know when to compromise to ensure that they deliver each and every time. In some cases in order to meet its promise the SME may need to change its www.tradeandexportme.com
So the lesson is quite simple – under promising and over delivering leads to a strong customer loyalty, referrals and greater sales. On the other hand just under delivering simply makes customers angry and disgruntled customers. Of course in reality things to go wrong and even the best laid plans can fail. In such circumstances the SME needs to just be transparent with the customer and own up to the errors. At the same time the SME needs to make good of the damage through compensating the customer for any inconvenience experienced. But keep in mind that, when the under promise and over deliver concept is correctly implemented, the SME will surely have satisfied customers who will become its most devoted fans.
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/2015/02/ happy-customers-are-loyal-customers/
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TRADE & GROWTH
Capital gains
Doing business in Abu Dhabi Abu Dhabi has been hailed as one of the world’s most vibrant economies and is set to embark on a new era in which diversification is at the top of the government’s agenda. In fact, this lies at the core of the capital’s blueprint for growth: The Abu Dhabi Economic Vision 2030. How does your business fit within this agenda and what are the support initiatives that will help you reap the benefits? Trade and Export ME presents a detailed report…
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TRADE & GROWTH
SMEs are crucial to the diversification of the capital’s economy, as they face lower risks because of their agility. Recognising this as a huge business prospect, Abu Dhabi is providing an invaluable platform for entrepreneurs to build relationships and do business, while being the premier learning and networking arena for individuals and organisations. The range of licence options and locations, coupled with support infrastructure, simplicity of process and a tax free environment, make Abu Dhabi arguably the most attractive business haven for SMEs in the world today. It is a highly transparent and user-friendly market for budding and experienced entrepreneurs. The expansion of free zone categories and reduction in restrictions on foreign ownership has also helped to stimulate SME growth. Better business banking support, easing of lending restrictions and customer payment options are areas which the government and the industry sector is working on, for promoting significant growth of SME. Providing a support system: Government initiatives The rapid growth of the SME sector can be attributed to government efforts to diversify the economy and create more jobs in non-oil industries. These initiatives are primarily aimed at enabling business owners to reach their full potential, not just by providing capital, but also by forming networks and exchanging information and advice. New legislation was introduced in April last year for raising the contribution of SMEs to the country’s economic output up to 70 per cent by 2020, from the current level of 60 per cent. Governments, associations and large private companies have set up various centers, programmes and funds aiming to facilitate SME development. Education programmes focusing on inculcating entrepreneurship goals in young minds are being perceived as the
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Governments, associations and large private companies have set up various centers, programmes and funds aiming to facilitate SME development.
first step to create awareness and knowledge about SME enhancement. Another major milestone was the new SME draft law approved last year to promote the sector, which allows small and medium-sized firms to use machinery and other assets for securing back loans, in order to improve financing options for the firms. Once there is a formal record of the assets (which includes the machinery and inventory), SMEs will be able to use them as collateral. Other governmental entities transforming the SME sector with their ongoing initiatives include: • Khalifa Fund – A catalyst for growth 2015 has been set as the year for development, improvement of the services and acceleration of the processes at the Khalifa Fund for Enterprise Development which will launch initiatives to promote the culture of entrepreneurship
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TRADE & GROWTH
Abu Dhabi has focused on providing economic freezones and establishing business clusters to help foster industry linkages between companies operating in the region.
and to support the SME sector in the country. It has funding initiatives which include Khutwa, a microfinance programme that provides loans of up to AED 250,000 to support small businesses; Bedaya, which offers loans of up to AED three million for start-ups; and Zeyada, which seeks to support the expansion and development plans for SMEs through loans of up to AED five million. • Abu Dhabi Businesswomen Council – Empowering female entrepreneurs The goal of Abu Dhabi Businesswomen Council’s Mubdiah programme is to enhance the contribution of female nationals to the private sector by ensuring their right to practice business at home, and assisting them in their transition from a home-based business to a full-grown SME. This has proven to be a boon for many female entrepreneurs, particularly those seeking support in areas such as legal permissions, documentation processes and technical advice. • Freezones: a melting pot of entrepreneurialism Abu Dhabi has focused on providing economic freezones and establishing business clusters to help foster industry linkages between companies operating in the region. Twofour54 and KIZAD are great examples of freezones that work to attract the best and brightest companies across a diverse range of sectors. The zone tenants range from internationally established companies to start-ups, where the smaller firms have access to mentoring and support services. Redefining entrepreneurship Creating a ‘culture of entrepreneurship’ is an important concept for competitive economies,
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as it shows the region’s ability to remain dynamic by meeting consumer demands with new business offerings. The government of Abu Dhabi has made entrepreneurship a priority for the Emirate, with a goal of becoming a sustainable, diversified, high-value added economy that encourages enterprises to grow and thrive. Industry linkages and clusters should not be exclusive to economic freezones. To facilitate ease of development, the Department of Economic development (ADDED) has addressed the gap between SMEs and their informational barriers by providing industry linkage and market intelligence services to companies. Connecting small businesses with associated companies in their sector or value chain can help improve firm growth and improve their prospects in the industry. Federal business guidelines, regulations and establishments such as a credit bureau, rating agency and a collateral registry are fundamental building blocks for a nation’s overall economy, market and the development of a SME sector. Access to information and the availability of financial and funding resources to entrepreneurs is critical for the establishment and growth of SMEs. While efforts from government, along with financial institutions, are ongoing to develop these fundamental building blocks, increased focus on public-private sector initiatives will fuel economic growth and promote diversity.
For an online version, please visit: www.tradeandexportme.com/2015/02/ capital-gains-doing-business-in-abu-dhabi/
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VIP INTERVIEW
SME success spotlight Milly Pack FZE
We met up with the dynamic team behind Milly Pack FZE – a growth-stage business that has successfully created a niche for itself in the market and is slowly making its way to the top….
The packaging industry is a thriving sector in the UAE. Which industries do you cater to and how is the growth in this sector? We target various industries such as food, pharmaceutical, confectionary and automobile. Going by current market trends and expert analysis, the UAE will see massive growth in its packaging industry over the next five years – so it is the ideal time for us to be operating in this sector.
How is the competition in the packaging industry? What gives you an edge over your competitors? Competition is quite healthy in the packaging industry, which is always good for growth. Our core strengths are: quality products and reliable service. Focusing on these, without getting sidelined by competition, is what will keep us on top of the market.
How do you ensure that you are adhering to the right protocols in packaging products from different sectors? Packaging is the backbone of all product industries; every industry has its own protocols and quality benchmarks. For example, the food industry is very specific about the standard of raw materials that we use to make their packaging material. We strictly follow such instructions to ensure highest quality products.
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The company’s state-of-the-art equipment
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VIP INTERVIEW
10-second company profile Milly Pack FZE is the sister concern of Jebel Pack LLC Dubai. Over the last three decades, Jebel Pack has established itself as one of the key players in the corrugation industry of the UAE. Jebel Pack LLC makes outer packaging (Corrugated cartons) for a raft of products in the market. Milly Pack FZE provides duplex or inner packaging for existing and potential clients within the UAE and Africa region.
Kumail Rashid, Director, Milly Pack FZE
Milly Pack FZE is set up in RAK FTZ
Milly Pack FZE plans to multiply its capacity
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VIP INTERVIEW
In the age of the digital revolution, technology has become an integral part of our lifestyle and plays a critical role in industrial production.
What are key trends that will shape the packaging industry in 2015?
What is your vision for the future? Do you have plans of setting up operations outside RAK?
In 2015, there is an increased demand for superior quality products with high-end, sophisticated finishing. As the competition is very tight, manufacturers are investing heavily in state-of-the-art equipment and machinery in order to produce quality products that will meet the needs of the market.
We have massive growth and development plans for the next few years. Following the collaborative support we’ve received from RAK FTZ’s management, we are planning to open few other exciting projects in the near future. Moreover, we are also in the planning stages of multiplying our plant’s capacity to be three times of what it is now.
What attracted you to open your business at RAK FTZ? What’s great about operating our company at RAK FTZ is the continued assistance provided by RAK FTZ in each and every aspect of the business. We are extremely grateful to the RAK FTZ management for their excellent support and very much look forward to sustaining this solid partnership with them.
What advice would you give to fellow SMEs in this region? Definitely consider expanding operations across different Emirates – particularly RAK! With the backing of RAK FTZ’s management and other prominent partners, SMEs can surely flourish and take their businesses to new levels.
How important is technology for you? In the age of the digital revolution, technology has become an integral part of our lifestyle and plays a critical role in industrial production. With rapid advancement of technology, the problems we face in production procedures have significantly reduced. Currently, we’ve implemented several ‘quality control’ mechanisms which enable us to reduce error, enhance product quality and stay on par with international benchmarks.
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For an online version, please visit: www.tradeandexportme.com/2015/02/ sme-success-spotlight-milly-pack-fze/
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LEGAL
Abu Dhabi Global Market
A new direction for Abu Dhabi Land Law
Land, who owns it and how that ownership is exercised, plays a central role in dayto-day business discussions across the UAE. It is in this context that real estate professionals across the region have looked with great interest to the publishing of Abu Dhabi Global Market’s (ADGM) Consultation Paper No. 6 of 2015 (the Consultation Paper). Legal experts from Clyde & Co. give us a comprehensive outlook and analyse what this means for business owners in the region…
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The Consultation Paper (which forms part of a wider consultation process with respect to ADGM’s system of regulation as a whole) contains two draft regulations – one dealing with the general principles of real estate law in ADGM (the Real Estate Regulations), and another dealing with real estate development and strata titling (the Strata Regulations). The most striking aspect of the wider consultation process is the proposed direct application of English common law into ADGM to deal with areas of law such as contract and tort. As will be appreciated by those familiar with the real estate sector
in the UAE (and in particular Abu Dhabi), land law and land ownership was always a potential area for a “stand-alone” or more tailored approach when it comes to reform or introduction of new law. The result is a codified approach with stand-alone regulations applying to all property matters within the free zone. Globally, the basis of all but a few systems of land tenure begin with the establishment of a central land register in which to record the real estate interests of stakeholders. Under the current proposals, ADGM will be given its own register of real estate interests (the Register) and an authority empowered to regulate the
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LEGAL
system (the Registrar). Where the system proposed differs from other similar regimes is that it retains Abu Dhabi’s nationality-based restrictions on holding of title to freehold property assets. The practical impact of this is that the same restrictions that apply to non-GCC nationals holding freehold title “onshore� in Abu Dhabi, will apply to real estate assets within the freezone itself. This effectively restricts freehold ownership rights within Investments Zones to entities and individuals with UAE or GCC nationality. On reviewing the Real Estate Regulations (as published) it is still unclear as to the exact
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requirements for the registration of freehold interests. The proposals still contemplate that the land register maintained by Abu Dhabi Municipality will be the principal land register with respect to freehold (as opposed to leasehold) registration. It is, as yet, unclear from the current draft how this will interact with interests registered by the Registrar in the new system. That said, the actual process for registration (in ADGM) under the proposed law is relatively clear and comprehensive. As a rule, the act of registration (of any instrument) under the Real Estate Regulations is the highest form of protection possible for an investor and a deed produced by the Registrar will be a recognised confirmation of ownership of a real estate right. Taking account of the restrictions on foreign freehold ownership of land, the treatment of the leasing of real estate assets will be of most interest to the target clientele of ADGM i.e. the global financial services community. Leases in ADGM can be registered against title and may have a term of up to 99 years. Further, they are not subject to the nationality restrictions inherent with freehold interests. Mortgages are permitted over leasehold interests (when registered) and combined with their potential long term nature may make leases an attractive investment for market participants. The contractual provisions of leases under the Real Estate Regulations are free to be negotiated between landlords and tenants however there are certain mandatory implied terms dealing with termination for non-payment of rent and breach of contract. Taken together, there is much greater flexibility of treatment for leasehold interests (as opposed to freehold) under the proposed system and this would be consistent with the existing cultural and political position of the Abu Dhabi authorities relating to land tenure.
The most striking aspect of the wider consultation process is the proposed direct application of English common law into ADGM to deal with areas of law such as contract and tort.
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LEGAL
the Real Estate Regulations and the Strata Regulations as drafted represent a significant long-term statement of intent for the ADGM and are likely to have a positive impact on the Abu Dhabi property market as a whole.
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Going beyond the headline issues of leasehold and freehold interests, the Real Estate Regulations set out to establish a comprehensive system of land tenure within the ADGM. A system of registerable mortgages is proposed with rights of sale and foreclosure. The treatment of mortgages may permit creditors (in certain circumstances) to take possession of real estate assets in the event of borrower default. The treatment of easements is also considering including provision for certain implied entitlements, for example in relation to rights of way and rights with respect to utilities. Investors or other interested parties looking to carry out due diligence on the holder of a registered real estate right will be interested in the Real Estate Regulations’ treatment of searches. To date, undertaking a public open search against title has not been possible in Abu Dhabi. Under the proposals “a person� may apply for a search against the Register. The key reform here is not necessarily that a search will now be possible (although this is welcome) but rather that as the Real Estate Regulations stand, the consent of the title owner is not required. If this is reflected in the enacted regulation, this would be a major step forward for transparency within the market. Together with the Real Estate Regulations, the Consultation Paper proposes introducing a system of strata title to deal with multiple owners of property interests within a project and related ownership of common property. The regime set out in the Strata Regulations will be familiar to anyone practising in the field with its utilisation of strata plans and a compulsory system of ownership associations to administer common property. Commendably, the Strata Regulations also include a requirement for developers to establish escrow accounts when
looking to construct and market a project for multiple ownership. This protection, familiar in neighbouring Dubai, will be a welcome introduction to the legal regime in Abu Dhabi. When considering the Consultation Paper, it is important to remember that the regulations described in this article are in draft format and have not been enacted. The final form of regulation is expected to be released following the consultation period. Further, the physical area of land subject to the new regime is limited when looking at the full extent of the Emirate itself. However, the Real Estate Regulations and the Strata Regulations as drafted represent a significant long-term statement of intent for the ADGM and are likely to have a positive impact on the Abu Dhabi property market as a whole. Further information If you would like further information on any issue raised in this update please contact: Andrew Thomson Senior Associate Real Estate 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/2015/02/ abu-dhabi-global-market-land-law/
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