dubai chamber economist august 2010 issue 34

8/8/2019 Dubai Chamber Economist August 2010 Issue 34

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Published by: Dubai Chamber Economic Research Department

For information please contact: Ehsan Khoman, Email: [email protected] Tel: +971 4 2028 278

August 2010 Issue 34

UAELeadsRegionalConsumerElectronicsMarketDemandboostedbyexcellentinformationtechnologyinfrastructureThe UAE is a leading global consumer electronics market

not merely on account of its strong growing domestic

demand but also because the emirates role as an

international business hub serving the GCC and the rest ofthe world. Located at the crossroads of Asia, Africa and

Europe, the electronics distributors of the UAE serve a

potential market of almost 2 billion individuals.

In recent years, the domestic market in the UAE hassteadily become more significant in relation to re-export

trade. The UAE is the preferred testing ground for

multinational consumer electronics companies for new

product launches and marketing initiatives. According to a

report by Business Monitor International (BMI), the UAE

was ranked first in the regional consumer electronics market

business environment in 2009 (see table 1). Demand for

consumer electronics in the UAE has been boosted by astrong telecommunications and information technology

infrastructure as well as the large expatriate community,

which have both assisted in driving market development

forward. From this, the BMI have forecast that the UAEs

consumer electronics market is projected to increase toUSD2.77bn in 2010 from USD2.62bn in 2009 (see table 2).

The emirate of Dubai is at the heart of the UAEselectronics sector. It accounted for more than 80% of the

UAEs total exports and around 85% of re-exports in 2009.

Dubai also imported more than two-thirds of the UAEsconsumable electronic goods last year. In essence, Dubais

electronics sector is boosted by the annual shopping

festivals, which accounted for as much as 50% of annualsales for some of the larger distributors in some product

categories. Festivals such as Summer Surprises, GITEX

Shopper, Consumer Electronics Expo and the Dubai

Shopping Festival, as well as a number of trade fairs, have

resulted in a significant increase in sales for electronics

firms.

That said, the UAEs consumer electronics sector does facesome challenges. The countrys low trade barriers

contribute to a growing problem with counterfeit (or grey)

market goods. This illegal import trade is also exacerbatedby the proximity of free trade zone such as Jebel Ali, which

is the centre for the flourishing re-export trade. With low

margins due to the intense competition, parallel imports

present a particular challenge to firms.

Overall, several factors have contributed in making the

UAE electronics market a significant one for the region. In

part, it is on the back of the UAEs central geographic

location, serviced daily by flights from the Middle East,

west Asia, East Africa and the Mediterranean. The country

has a well-organised chain of retailers and wholesalers, a

well-developed sourcing network, extensive logistical

facilities and an excellent general business environment. In

addition, growth has been driven by government policy, inparticular, low import duties which have helped make the

UAE an electronics trading destination for the region and ashop window for the latest consumer goods.

Looking ahead, electronics firms are increasingly seeing the

UAE as a distribution hub of global rather than merely

regional significance. As more firms have established

facilities in the UAE, this in turn has brought more

expatriate workers and this trend acts as another stimulant

to the local consumer electronics market.

Table 1. Regional Consumer Electronics BusinessEnvironment Ratings

Table 2. Consumer Electronics Market Overview

Cons.Electro.Market

Limitsto

Returns

MarketRisks

RatingRegion

Ranking

UAE 52 59 65 59.5 1

Kuwait 43 49 65 54.8 2

Qatar 35 45 70 53.2 3

SouthAfrica

52 50 50 50.5 4

SaudiArabia

45 46 55 48.9 5

Turkey 53 49 60 48.3 6

Bahrain 32 38 50 44.0 7

Oman 31 36 60 42.0 8

Egypt 33 30 50 38.6 9

2007 2008 2009 2010f 2011f

Consumerelectronics devices,

Total Demand(USD, mn)

2,597 2,888 2,620 2,767 3,037

Computers(USD, mn)

1,501 1,732 1,492 1,573 1,765

Audio, Video andGaming (USD, mn)

729 777 797 855 917

Communications

(USD, mn) 367 379 330 339 354

Source: BMI; Note: Scores out of 100, with 100 highest. Source: BMI; Note:f is for forecast.


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Dubai Chamber EconomistAugust 2010 Issue 34

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UAEFoodandDrinksIndustryRemainsStrongandUpbeatHigherconsumptionisexpectedtoboostgrowthintheshort-termThe UAEs food and drink sectors have been undergoing a

period of significant expansion over the past several years.

This has been primarily due to considerable foreign direct

investment as well as government attempts to increase

domestic food production and self-sufficiency, productionfacilities have started to arise rapidly. However, having said

that, the country is still highly dependent on food and drink

imports to fill the gap between domestic production and the

demands of a growing and wealthy population. Demand for

imports continues to be propped up by significant demand

from expatriates for food and drink goods from their home

countries.

According to a BMI report, the UAE places second behind

Bahrain in the region food and drink business environment

ratings (see table 3). Premiumisation (i.e. the process of

meeting customers needs with strong branding)

opportunities have yet to be exhausted despite ongoing realeconomy challenges inflicted since the onset of the

economic downturn.

Going forward, despite short-term weaknesses, food

consumption is expected to increase by a modest 2.3% in

2010 (see table 4) with a promising 4.8% forecasted in

2011. Taking into consideration the ongoing development

of the UAEs mass grocery retail industry, foodconsumption growth will be essentially led by continued

investment into the industry as well as expected population

growth. In the context of the wider GCC, the UAEs food

industry is the most dynamic. For example, on a per capita

basis, some estimates suggest that food consumption in

2009 was USD1,452.8 which is comparable to most OECD

countries.

In terms of drink consumption, some observers suggest that

the UAEs drinks industry is to register modest growth this

year and in 2011 (see table 5). In particular, bottled water

(note that the UAE is the worlds highest annual per capita

consumer of bottled water with more than 100 litres permonth) and fruit juice segments are expected to lead the

way forward. An annual average value sales growth rate of

3.5% is forecast in 2010 with premiumisation remaining a

key driver of growth in the UAE market. This is on the backof investments into product strengthening by leading

players with a particular emphasis on the size and quantities

of bottles.

In addition, an important factor sustaining and driving the

growth of the drinks market (in particular tea and coffee) inthe UAE is the traditional role that these drinks play in

family and social occasions, which are of the utmost

importance in the social structure of the UAE. Given theintegral role that tea and coffee plays therefore in social

traditions, it will continue to be an important part of

everyday life, sustaining high levels of consumption.

Overall, the UAEs food and drinks industry is expected togrow and expand further in the short-term. Most observers

are of the view that UAE based food and drink companies

will step up their investment drive in order to cater for the

growing population.

Table 3. Regional Food and Drink BusinessEnvironment Ratings

Foodand

DrinksMarket

Limitsto

Returns

MarketRisks

RatingRegion

Ranking

Bahrain 54 53 70 57.6 1

UAE 41 51 70 56.5 2

Qatar 44 49 65 54.0 3

Kuwait 34 46 65 52.6 4

SaudiArabia

31 45 60 50.8 5

Egypt 42 48 50 50.5 6

Oman 29 39 60 47.7 7

Lebanon 32 38 45 40.8 8

Source: Dubai Chamber based on data from BMI; Note: Scores out of 100, with 100

highest.

Table 4. UAE Food Industry Indicators Table 5. UAE Drinks Industry Indicators

2007 2008 2009 2010f

2011f

Foodconsumption

(USD, bn)6.1 6.7 6.8 6.9 7.3

Per capita foodconsumption

(USD)1354.7 1441.3 1452.8 1457.3 1467.9

Total foodconsumptiongrowth (%)

9.4 9.4 1.9 2.3 4.8

Per capita foodconsumptiongrowth (%)

3.1 6.4 0.8 0.3 0.7

Foodconsumption as

a % of GDP3.1 2.7 2.9 2.6 2.5

2007 2008 2009 2010f 2011f

Soft drink sales(USD, mn)

588.7 626.3 658.0 681.1 704.1

Soft drink salesgrowth (%)

6.2 6.4 5.1 3.5 3.4

Per capita softdrink spending

(USD)

131.1 132.8 141.0 143.1 142.2

Source: BMI; Note:f is for forecast. Source: BMI; Note:f is for forecast.


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Market Movement Indicators

Dubai Property Transactions, July 2010 Dubai Property Transactions by Land Sales and

Worth (AED, bn), January 2008 July 2010

Type ofProperty

Number

of Sales

Average

Price, AED

Total Worth,

AED

% Value

Change

OverPrevious

Month

Land

Sales143 1,409,834 2,606,337,930 +9.59

Flat Sales 1,054 1,159,638 1,223,418,396 -42.39

Villa

Sales123 1,980,673 243,622,762 -56.23

Source: Dubai Chamber based on data from the Dubai Land Department Source: Dubai Chamber based on data from the Dubai Land Department

Dubai and Abu Dhabi Stock Exchange Indices, July

2010

Dubai and Abu Dhabi Stock Exchange Indices, July

2010

Stock

Exchange

Average

Monthly

Market

Index

High/

Low

% Change

Over

Previous

Month

Dubai 1,503.17

1,531.36

(High)

1,468.45

(Low)

-1.20

Abu Dhabi 2,533.27

2,560.75

(High)

2,509.56

(Low)

-0.16

Source: Dubai Chamber based on data from the Dubai and Abu Dhabi F inancial Markets Source: Dubai Chamber based on data from the Dubai and Abu Dhabi Financial Markets

Dubai Certificates of Origin issued by Dubai

Chamber, March 2010 July 2010

Dubai Certificates of Origin and Value in (AED, bn)

issued by Dubai Chamber, January 2008 July 2010

Date Mar2010

Apr2010

May2010

Jun2010

Jul2010

No. of

Certificates57,144 52,143 55,777 57,306 54,567

% Change Over

Previous Month+18.68 -8.75 +6.97 +2.74 -4.78

Value

(AED, bn)18.741 16.844 17.515 18.010 17.242

% Change Over

Previous Month+15.47 -10.12 +3.98 +2.83 -4.26

No. of Markets 168 161 156 160 165

No. of Exporters 4,802 4,645 4,814 4,863 4,671

Source: Dubai Chamber Source: Dubai Chamber


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Average Commodity Prices and Foreign Exchange

Rates, March 2010 July 2010

WTI Crude Oil Price (USD per barrel) and Gold Price

Per Ounce (USD), January 2008 July 2010

Date

WTI Crude

Oil Price

(USD/pb)

Gold Price

(USD/Ounce)

Euro/UAE

Dirham

Mar 2010 81.10 1,113.24 4.99

Apr 2010 84.21 1,145.99 4.94

May 2010 72.46 1,205.43 4.64

Jun 2010 68.52 1,232.93 4.49

Jul 2010 76.32 1,194.11 4.69

Source: Dubai Chamber based on data from Bloomberg Source: Dubai Chamber based on data from Bloomberg

USA, Japan and EU-27 Monthly Trade with the UAE

(AED mn), December 2009 April 2010

USA Monthly Trade with the UAE (in AED mn),

January 2008 May 2010

Dec

2009

Jan

2010

Feb

2010

Mar

2010

Apr

2010

USA

Imports 213.5 234.9 243.2 270.6 222.7

Exports 2,980.3 2,246.7 2,619.3 2,575.4 2,734.4

Japan

Imports 9,996.4 9,174.5 7,513.7 10,027 9,513.6

Exports 2,396.8 1,922.0 2,119.0 2,932.9 1,991.9

EU-

27

Imports 595.2 619.3 695.0 887.7 979.3

Exports 4,849.9 3,610.7 4,030.8 4,822.0 3,981.4

Source: Dubai Chamber based on data from the US Census Bureau, Eurostat and Jetro Source: Dubai Chamber based on data from the US Census Bureau

Monthly Consumer Price Percentage Changes in

Fresh Foods in Dubai for Selected Commodities

Dubai Quarterly Consumer Price Indices for Selected

Goods and Services, % Averages

Date Fresh MeatFresh

ChickenFresh Fish

Mar 2010 -1.77 -1.79 -6.80

Apr 2010 +3.63 -1.78 -6.39

May 2010 -0.65 -0.11 +7.64

Jun 2010 -7.09 -1.31 -2.66

Jul 2010 +0.59 -0.56 +1.27

Source: Dubai Chamber Source: Dubai Chamber

dubai chamber economist august 2010 issue 34

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