presents
BUSINESS INTELLIGENCE FOR INTERNATIONAL TRADE www.tradeandexportme.com
Contents
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64 ADVISORY BOARD Key personalities sharing their expertise to ensure that we bring you the latest trends and issues in the field of trade. Hospitality & Tourism 66 Untapped opportunity – medical tourism We give you a lowdown on medical tourism and the initiatives in the pipeline. Country Focus 70 Hidden Champions, German SMEs Dr. Dalia Abu Samra-Rohte, Deputy CEO, German-Emirati Joint Council (AHK) and Director of AHK Abu Dhabi Office, gives us an overview of the German SME scene‌
The DHA has collaborated with the General Directorate of Residency and Foreigners Affairs (GDFRA) to implement a new rule that will allow overseas patients who wish to seek treatment in Dubai avail visa packages. p66
TRADE AND EXPORT MIDDLE EAST
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SMEs looking to obtain low cost or even free information on foreign markets should first contact the export promotion agency. p72
Strategy 72 Removing export inertia Dr. Ashraf Mahate, Head of Market Intelligence, Dubai Exports, shares top insights on how exporting SMEs can deal with psychological barriers. VIP Interview 76 The gateway to the Gulf Edwin Lammers, Executive Commercial Manager, speaks to Trade and Export ME about SOHAR Ports and Freezone’s growth strategy and the opportunities that this world-class entity offers. Legal 80 The UAE Competition Law Justine Reeves and Rebecca Hilton, legal experts from Clyde & Co. offer a comprehensive outline of the scope of the new law and how it can affect your business.
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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TRADE & GROWTH
Untapped opportunity Medical Tourism
Dubai’s vision to attract around 20 million visitors by 2020 coupled with its growing healthcare infrastructure has created a whole new sector of opportunities – Medical Tourism. What is the ‘X factor’ making this an attractive segment and how can your SME maximise the benefits of this lucrative sector? SME Advisor investigates…
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The UAE, over the past 43 years, has built a reputation as an economic powerhouse. Rich oil and gas reserves may have paved the way for the wealth and development of the nation, but its leaders’ undeniable ambition for further growth led to the ground-breaking diversification of its economy. With the country’s GDP now exceeding USD 1 trillion as compared to USD 1.8 billion in 1971, a rate of growth that exceeded even that of Singapore, it is clear that the UAE has really come a very long way. The impressive progress within the nation occurred in what seems to be just a short period of time, owing it all to the extraordinary efforts and dedication of its people,
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TRADE & GROWTH
The spread of luxurious chain of hotels throughout the country have also been among the main contributors to the development of tourism.
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which has been the key driving force behind the landmark achievements that transformed the UAE into the second largest economy in the Arab world. A premier destination According to World Economic Forum’s Global Travel and Tourism Competitiveness report of 2013, the UAE leads the MENA region in attracting tourists, and ranks as the 28th most attractive destination worldwide. Despite having limited natural tourist attractions, it has created a rich cultural resource base, and has built a reputation as a preeminent business and leisure hub. Highlighting the bright future ahead for the tourism sector in the UAE,
a report by the Dubai Chamber of Commerce and Industry stated that in the long-term, the growth in the nation’s tourism industry will grow at 6.5 per cent per annum between 20112021, with visitors primarily coming in from neighbouring Middle Eastern countries, Europe and Asia. Sentiments reflected in the report prove how vibrant this sector is. Industry experts in the region cited that capital investments in this industry are expected to rise annually by an average of 4.1 per cent to reach AED 143 million by 2023. The spread of luxurious chain of hotels throughout the country have also been among the main contributors to the development of tourism.
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TRADE & GROWTH
the DHA has collaborated with the General Directorate of Residency and Foreigners Affairs (GDFRA) to implement a new rule that will allow overseas patients who wish to seek treatment in Dubai OBTAIN SPECIALIST visa packages.
The rise of medical tourism A report by Transparency Market Research released in 2014 indicated that global medical tourism market was valued at USD 10.5 billion in 2012, and is expected to reach USD 32.5 billion by 2019, growing at a CAGR of 17.9 per cent from 2013 to
2019, which does emphasise the great growth potential of the sector. According to the UAE’s National Council of Tourism and Antiquities, the country will be an ideal destination for patients seeking treatment abroad, as it offers internationally recognised facilities
Spotlight on the statistics
Projected growth Medical tourists
107,000
170,000
500,000
Revenue
AED 652 M
AED 1.5 B
AED 2.6 B
USD 1.6 bn
yearly profits generated in the medical tourism market
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10-15%
Increase in the number of medical tourists in Dubai each year estimated by Dubai Health Authority
8.7%
Total health sector revenue of Dubai from medical tourists
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TRADE & GROWTH
and competitive costs. In addition to routine operations and cosmetic procedures, the UAE also hosts specialised centres for oncology, genetic disorders and diabetes and new facilities for rehabilitation, pediatrics and integrated medicine. So, how is the UAE harnessing the potential opportunities in this attractive segment? In 2011, the Dubai Healthcare City recorded a sharp growth in the segment, with 15 per cent of patients received were medical tourists. Recognising the promising growth of this sector, plans have been formulated to develop and promote Dubai as a world-class hub for medical tourism as a part of the Dubai Health Sector Strategy 2013-2025 launched by the Dubai Health Authority (DHA). Under the objectives of the strategy, Dubai plans to attract 500,000 medical tourists a year
and boost the economy by up to AED 2.6 billion over the next five years, targeting travellers from Russia, GCC, CIS countries and South Asia. The medical tourism strategy identifies medical areas such as orthopaedic and sports medicine, plastic surgery, ophthalmology, dental procedures, dermatology and skin care, as part of its offering. Furthermore, the DHA has collaborated with the General Directorate of Residency and Foreigners Affairs (GDFRA) to implement a new rule that will allow overseas patients who wish to seek treatment in Dubai obtain specialist visa packages. Although this type of entry permit in to the UAE has already been in place since 2008, under the Strategy 2013-2025, this will be extended to specialised clinics and wellness centres.
Essa Al Maidoor, DirectorGeneral, DHA, said: “Dubai is the world’s leading destination for tourism and leisure and since it offers excellent health-care facilities, medical tourism is an extension of the hospitality that Dubai is synonymous with. Ensuring that all players work hand-in-hand with us and are aligned with the overall medical tourism strategy will ensure smooth functioning of a dynastic health sector and will benefit both medical tourists as well as the health-care providers.” Additionally, the DHA plans to build 22 hospitals including 18 private and public hospitals in the next few years to support the high volumes of medical tourists. www.tradeandexportme.com/2015/01/ medical-tourism-evolving-landscapeuntapped-opportunities/
Expert’s Corner
Industry trends and prospects -as identified by Euromonitor International • In line with medical tourism in other world locations, a special emphasis will be placed on certain disciplines of medicine, such as cosmetic surgery, general check-ups, dermatology, and dental procedures that are traditionally favoured by health and wellness tourists. • Special attention is also being paid to lifestyle diseases, such as obesityrelated illnesses that are prevalent in the region. Thus, the focus is not only to attract visitors from far afield locations, such as the newly emerging market countries, but also customers from neighbouring countries and local residents. • Medical tourism accounts for the overwhelming majority of activity in terms of value sales within the health and wellness tourism
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category, and makes up an 84% share of the category in terms of value sales. • The largest numbers of customers have come from neighbouring countries that have yet to develop the same standard of sophistication in terms of healthcare facilities; with the most popular treatments sought by these medical tourists to the country being IVF/infertility, cosmetic and dental care treatments. • Overall, the UAE is proving to be an attractive location for medical tourism because of its competitive prices (relative to Western countries), English and multi-lingual speaking staff and the ability to quickly access treatments without long waiting periods • The UAE benefits from being located at the cross roads of three
continents, and thus from being a prime location from which to continue to attract medical tourists to the country. • Having heavily invested in developing a state of the art medical infrastructure and on the attainment of internationally recognised levels of accreditation for its medical facilities, the country can now boast of offering levels of medical services similar to those available in first world economies. • Finally, having extensively invested in its tourism infrastructure, the UAE is able to offer medical tourists premium, luxury accommodation and infrastructure relative to most other locations. • Dubai Healthcare City (DHCC) is the leading hub for medical tourism in the UAE with some 120 medical facilities.
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COUNTRY FOCUS
Hidden Champions German SMEs
Germany arguably has one of the most successful SME sectors. In fact, German SMEs are often referred to as “Hidden Champions”. In the following feature, Dr. Dalia Abu Samra-Rohte, Deputy CEO, German Emirati Joint Council (AHK) and Director of AHK Abu Dhabi office, gives us an overview of the German SME scene...
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Just to name a few success factors which have been published by the German Federal Ministry of Economic Affairs and Energy: In Germany SMEs contribute 52 per cent to the German economy. They are posing 39 per cent of the total turnover by all German firms with an absolute turnover of two trillion Euro, excluding the turnover of foreign subsidiaries. In comparison to that, the turnover of 30 DAX-listed (German stock exchange) companies amounted to 1.19 trillion Euro, including foreign subsidiaries. The positive impact of German SMEs on the German economy is also reflected in the employment statistic. They provide majority of jobs and contribute to maintain a low unemployment rate especially among young people. The relatively low youth employment is due to the strong vocational training, offered throughout
different industries. This goes hand in hand with the dynamic SME structure. Vocational training is key to secure a highly qualified workforce and is a stepping stone to an academic career. It enables young people to get practice and work combined with a theoretical training. Overlooked by the local German Chambers of Industry and Commerce (IHKs), specialised vocational trainers are delivering qualified training. They are instructors and skilled workers at the same time and receive continuous training and qualifications to provide efficient and highly professional competence. Another important factor for the success of German SMEs is innovation. Compared to other European countries 54 per cent of the German so called “Mittelstand” companies brought a product or process innovation to the market between 2008 and 2010. They
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COUNTRY FOCUS
continuously invest in research and development. Their flexibility has managed to grow through the financial crisis. Contrary to a number of countries, German SMEs are world market leaders. The German government offers a number of instruments to support export and internationalization for SME companies. One of the instruments for export promotion are the German Chambers Abroad (AHK), supporting German companies in entering the market. With offices in 90 countries, AHK is also present in the UAE with the German-Emirati Joint Council for Industry and Commerce in Dubai and Abu Dhabi. They are cooperating in several export promotion programmes targeted toward the export of SMEs, offered by the German government. These focus on special industries like
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renewable energy, agriculture, food or health. With the support of the AHKs German SMEs have the opportunity to get the first orientation in a foreign market and support in order to overcome the first obstacles. According to a study done by Deloitte in 2012, every second German SME exports to the Middle East. Today we witness a number of German SMEs in the Middle East. While they have not (yet) considered the Middle East as a production hub a number of them have representative or sales offices and utilize the Middle East and Gulf Region as a profitable export market. Just to name a few, one encounters in the daily life: Würth Group was founded in 1945, producing fastening and assembly material trade. Today, the group counts about 65,000 employees and a turnover of around 10 billion Euro. As they work with trading agents in the UAE you can find them today in numerous situations in life. Another German SME Vossloh has positioned itself very successfully within the rail infrastructure projects in the UAE, winning the tender for the fastening systems. Diehl, a Bavarian family owned company, located in Nürnberg, specialising in cabin equipment, has also managed to gain market shares in the UAE. One is more at ease with a more luxury product like Mühldorfer Betten. A family owned business in the third generation, managed by two sisters, selling high quality bedding and delivering all 5 Star Hotels all over the world. The company enjoys a success story in the UAE with their high quality feather beds. Last but not least the German food sector has numerous internationally active SMEs. Only to mention two, Haribo GmBH, with its sweets “Gummibärchen” are an established brand worldwide. The family owned company was founded in 1920 and has today about 6,000 employees. Dallmayr coffee is also known as a successful coffeehouse which has a well-established distribution network all over the UAE.
The German government offers a number of instruments to support export and internationalization for SME companies.
For an online version, please visit: www.tradeandexportme.com/2015/01/ hidden-champions/
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Strategy
Removing the export inertia Why do psychological barriers hinder SMEs from exporting? Exporting can be a key step towards taking your business to the next level. However, in doing so, most SMEs face several hurdles when penetrating other markets, either physical, financial, political or legal. More often than not exporting SMEs also face intangible barriers such as the behaviour and way of thinking of the decision-makers in the company. In the following article, Dr. Ashraf Mahate, Head of Export Market Intelligence, Dubai Exports, shares top insights on how to address these issues...
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Strategy
Various studies have shown that the real export barriers are the psychological or behavioural attitudes of the owner or manager.
Exporting is a difficult enough a task and more so the case for SMEs with their limited resources. Therefore, it’s not surprising to see that in most countries only a small proportion of SMEs actually earn any revenue from exporting activities. In Dubai where SMEs account for 98.5 per cent of all firms but less than 10 per cent earn any form of export revenues. Most export sales by SMEs are modest in terms of scale with 38 per cent of exporters of goods (as opposed to service providers) generating less than AED 100,000 in export sales per annum. Furthermore, 68 per cent of the firms that export earn less than AED One million worth of exports per annum and altogether these firms account for less than one per cent of total exports and re-exports by value. Statistics show that a little less than 1,200 firms export more than AED10 million worth of
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products a year, yet they account for over 80 per cent of exports and reexports from the emirate. With such a low level of export activity by SMEs leads to the natural question which is why are they not exporting? The importance of this question is underpinned by the fact that exports allow firms to enhance their competitiveness, provide opportunities for growth and innovation as well as technology transfer, diversify their revenue base, benefit from economies of scale and of course increase profits. Essentially, there are two main reasons as to why SMEs do not tend to export namely internal and external barriers. The internal barriers tend to refer to those which relate to the firm and typical examples include: an inability to identify foreign business opportunities, limited information to locate and analyse markets, being unable to contact overseas customers, having difficulty in matching competitors’ prices, shortage of working capital to finance export and so on. On the other hand external impediments are those outside the immediate control of the firm and tend to include the level of export procedures and documentation, tariffs, non-tariff barriers, protection etc. The internal and external export barriers themselves are not sufficient to impede any overseas activity. Various studies have shown that the real export barriers are the psychological or behavioural attitudes of the owner or manager. Unfortunately, due to the control of the owner on the strategy and operations of the firm and lack of specialist managerial resources tend to be more prevalent within SMEs. A typical example of such psychological barriers is whereby the owner or manager is not interested in exporting and hence the internal and external barriers are perceived to be significant and little value is seen in overseas earnings. Where the owner or manager is interested in exporting but not actually exporting one has the opposite effect and barriers are not regarded as challenging. However, these firms
do not enter the export arena because they perceive lack of information to be a huge problem. Owners or managers with some level of export experience tend to exhibit least level of perceived barriers towards exporting. These firms believe that exporting challenges or hurdles can be overcome and tend to have a positive attitude towards overseas sales. This implies that two SMEs operating with similar internal and external export barriers will not necessarily perceive these barriers to impact their businesses the same way. In the case of the service sector the owner’s or manager’s perception has a far more important impact on export behaviour. The main reason for this is that in the service sector the protection of intellectual property is a key concern and can determine the long term survival of the firm. This is more so the case for SMEs who may have possibly one or at best a few intangible assets. Of course it is relatively easy to obtain some form of intellectual property protection through patents or copyrights. However, in foreign markets the main fear is the difficulty to prove violations to intellectual property. Therefore, the owner or manager perceives a higher risk in exporting to countries where a firm’s intellectual property is vulnerable to imitation. Even if laws exist to protect intellectual property the legal system in the country may be so difficult that it makes any form of legal action useless. Therefore, this argument suggests that the absence of a proper regulatory environment or a deficient legal system discourages the owner or manager from exporting services. The reality of the situation is that the risks of exporting in the service sector are no more than those in the manufacturing sector. Again, surveys of owners and managers show exporting SMEs from the service sector perceive fewer risks in exporting than non-exporting SMEs. It’s fairly conclusive that in both the manufacturing and service sectors exporting firms who may experience identical barriers or risks perceive
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Strategy
SMEs looking to obtain low cost or even free information on foreign markets should first contact the export promotion agency.
them to be less of a challenge than non-exporting firms. This leads us to conclude that exporting is simply an issue of mind over matter. More importantly, the starting point to exporting is for the SME to overcome their initial fear or inertia towards overseas activity. There are a number of ways in which SMEs can start the process of dealing with their initial export fears. In the world of exporting “information is king’ which implies that SMEs need to collect and analyse data on their key target countries. This allows them to have a better understanding of the market environment of their target country and the possible hurdles that they may face. However, with the appropriate information the SME can develop a suitable strategy as well as develop a contingency plan. One has to appreciate that things do go wrong and contingency planning is very important. This is more so the case for less developed countries but can also be equally important for major countries. A case in point is that the recent volcanic ash stopped all flights to Europe and exporters had to find new means of sending their air cargo to the region. In reality information can be very expensive however SMEs looking to obtain low cost or even free information
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on foreign markets should first contact the export promotion agency. In Dubai the source for such information is the Dubai Exports who provide a host of information based services to local firms. There is nothing like a visit to the target country to obtain a first-hand understanding of the consumer as well as government attitudes towards imports. More importantly, a foreign market visit allows the SME itself to make up its own mind regarding the potential hurdles and how it can best deal with them. Of course such foreign market visits also increase the international orientation of owners or managers. In other words the SME may not necessary export to the country where he conducts the first foreign market visit but it allows him to understand the overseas market and compare his experiences with future visits to other countries. A number of surveys show that a greater international orientation of SMEs makes them more likely to carry out exporting activities. Export promotion agencies such as the Dubai Export Development Corporation also conduct foreign market visits and trade missions whereby firms can meet both private sector counterparts as well as government officials. These foreign market visits allow SMEs to meet with
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Strategy
Research and foreign markets are very important change agents as far as owner or manager perceptions are concerned.
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organisations and individuals who they would not normally have access to due to their size or the cost or arranging such meetings. In many cases these foreign market visits are also coupled with a B2B programme whereby firms can connect with potential buyers, agents or distributors. Research and foreign markets are very important change agents as far as owner or manager perceptions are concerned. However, SMEs face the real problem of not being paid once they deliver the good or service. It is very rare for an exporter to be paid in advance and the normal manner is for payment to be made after delivery. Of course this has the risk that the importer may not pay the exporter once delivery has been made. The normal manner to deal with this problem is to ask the importer to open a letter of credit. However, this may be expensive and in some markets not sufficient. An alternative method of ensuring that SMEs obtain their payment is to acquire export credit insurance. This means that exporters can receive the payment due to them in the event that an importer defaults. Of course there is a small premium that needs to be paid and usually this can be incorporated in the price that is charged to the client. In the UAE this type of insurance is offered by the Export Credit Insurance Company of the Emirates which is a government entity. Once SMEs have conducted or acquired the necessary research, carried out a foreign market visit and ensured that they will be paid then there is no reason for them not to get on their bike and carry out export activities. Of course, like anybody who has learnt to ride a bike knows that the process is not complete without a fall or two and perhaps a scratch. Once one has learnt to ride a bike the skills are never forgotten and no bike however large ever becomes a challenge.
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.
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VIP INTERVIEW
The gateway to the Gulf
Costs, infrastructure, ease of doing business and location are among the crucial factors exporters need to keep in mind when looking at setting up base in a port or freezone. Situated outside the Strait of Hormuz, offering premier solutions and one of the fastest growing business hotspots in the region, SOHAR Ports and Freezone (SOHAR) just ticks all the right boxes. Edwin Lammers, Executive Commercial Manager, shares the world-class entity’s growth strategies and opportunities...
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Can you please give us a brief background about SOHAR Port/ Freezone (SOHAR)?
How has the year 2014 been for SOHAR? Are there any industries within you portfolio that did better than others?
SOHAR Port and Freezone is a deep sea port and free zone in the Middle East, situated in the Sultanate of Oman around 200 kilometres northwest of its capital Muscat. With current investments exceeding $15 billion, it is one of the world’s largest port and free zone developments and provides unequalled access to booming Gulf economies while avoiding the additional costs of passing through the Strait of Hormuz.
The year 2014 was extremely successful and was full of historic milestones for SOHAR and Oman. Container terminal operations were relocated and expanded as part of a US$130 million project to increase capacities to 1.5 million TEU at SOHAR. The first ever 10,000 TEU vessel to call at the port was welcomed in May, and a few months later in August, all commercial traffic was shifted from Muscat after 40 years of having served as the nation’s sea trade centre. This
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VIP INTERVIEW
year therefore marks the start of a new chapter in Oman’s long and industrious maritime history, and we are delighted to have welcomed 2,000 ships in a calendar year in 2014 – also a first since SOHAR was established as a joint venture between the Government of the Sultanate of Oman and Port of Rotterdam in 2002. This is remarkable given ten years ago we had just 42 ships. Cargo volumes have increased significantly across all types, with exceptionally strong growth in dry bulk cargo, and with a full year of consolidated container traffic ahead and scheduled ships bringing 1.2 million TEU in capacity, 2015 promises to be even better for SOHAR.
How important is trade for Oman? How much does it contribute to the GDP?
Technology, and especially automation, is an important feature of any modern port and freezone.
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Trade is as important for Oman as it is for any other country in a global economy. Like many countries in the world, China is one of the largest markets for Oman. In the first half of 2011, bilateral trade reached US$6 billion and in just three years this has grown to US$23billion, making Oman China’s fourth largest trading partner in the Middle East. According to economic figures Oman’s economy also benefits from a US$2.5 billion surplus with Japan. This surplus includes imports from Japan of US$3.13 billion, which are offset by exports of US$5.63 billion. And, while oil, gas, aluminium, and fishing produce make up most exports, the fact that SOHAR has signed deals that will increase auto throughput to 200,000 annually bodes well for the development of new revenue streams. Toyota, Daihatsu, and Nissan among already among the global manufacturers that are handled at the port through agreements with national businesses houses.
How do you ensure that the port infrastructure keeps up with the global trade standards?
Technology, and especially automation, is an important feature of any modern port and freezone. It is also something that requires integration with physical infrastructure and is something we strive to maintain at SOHAR. Last year, for example, we announced an agreement with Belgian software developer Phaeros to replace our systems with the latest electronic port management and invoicing application software: ‘Harbour View Plus’ and ‘BillSys’. Harbour View Plus will link to automatic identification systems, while BillSys will also streamline invoicing at the cargo terminals, where billing is considered one of the more difficult processes in the industry due to the complexity of contracts, number of different charges, and availability of data. This year there are also plans to install several new features aimed at further increasing efficiency and productivity.
How are you building connectivity with other major ports in the GCC?
SOHAR has built connections with other ports in the region via sea, air, and road links that are continuing to expand at a rapid pace. Most recently, Sohar Airport opened at the end of last year and brings with it 50,000 tonnes of air freight cargo capacity. At the same time, end-to-end operations in the haulage industry carry on average more than 90 percent of goods in value, with 80 percent of inland freight volumes still moved by road. However, while our vision is to serve the GCC region as its port of choice,
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VIP INTERVIEW
Public-private partnerships like SOHAR are an excellent way of bringing together the vision of the worlds’ leaders with the entrepreneurial nous and business acumen of the private sector. In this sense you get the best of both worlds, and according to the World Bank these types of partnership are increasingly popular in delivering infrastructure and other essential public services. This is because they offers benefits in terms combining risk transfer with the incentives of the private sector, and in many cases are thought of as providing value for money and healthy competition. This is what we seek to emulate at SOHAR, and with US$15 billion in investment we have certainly added value to the economy and will continue to develop strategies that complement Oman’s vision of diversifying its economy away from oil to sustain a modern and prosperous nation. Edwin Lammers, Executive Commercial Manager, SOHAR Ports and Freezone
we also have one eye on our role at the centre of trade routes between East and West through a global network that is being led by Port of Rotterdam. The most recent addition to this network is Porto Central in Brazil, which will mirror many of the industries at SOHAR and will create synergies between Latin America and growth we have seen in the Far East.
According to you, how important are public and private sector partnerships? On your side, how do you ensure that your strategies are aligned with the vision of the Omani government?
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The much anticipated GCC railway network is expected to further boost cross border trade among the gulf nations. In your opinion, how vital is this project in developing the trade sector of Oman and more specifically how important is it for the growth of SOHAR? Rail is one of the reasons why Oman’s logistics network is projected to grow beyond US$12 billion by 2017, and with US$250 billion allocated for the construction of 67,000 kilometres of railway lines the Gulf Railway will play a major role in turning forecasts into reality. A rail terminal at SOHAR is also central to our own plans of becoming a regional hub for global trade. As this network grows, the value created by transporting cargo by rail
will grow further. At the same time, rail links have the additional benefit of increasing efficiency and reliability, improving road traffic management, increasing transit volumes and cutting costs, and reducing the pressure on the environment.
How is SOHAR different from other free zones? What would you say is your USP? Our partnership with Port of Rotterdam is our USP. When the partnership was created Port of Rotterdam was the world’s busiest port and even now still ranks in the top 10 around the world. The 600 years of logistical and maritime experience on offer through this agreement is unrivalled in the region, and is behind the transfer of knowledge vital for sustaining double-digit growth over the past 12 years. With support from the Omani government, the onestop-shop that makes it easier for businesses to set up in SOHAR and many of the incentives that have been established have been influenced and guided by our colleagues in Holland – 100% foreign ownership, up to a 25 year tax holiday, and access to Free Trade Agreements with the US and Singapore are prime examples. On top of this, SOHAR offers an abundance of competitive land and energy rates, natural resources, and a young workforce that is eager to contribute to Oman’s success.
How important are SMEs for SOHAR and what percentage do they occupy in your portfolio? What kind of incentives do you offer for businesses looking into setting up in SOHAR?
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From global manufactures and major shipping lines to family-run companies, SOHAR has established itself as the place to be for businesses of all shapes and sizes. SMEs are vital to our vision of a balanced portfolio and are given all of the tools they need to succeed from the outset. In addition to the incentives already mentioned, we require low levels of core capital as a prerequisite for trading – an important consideration for any aspiring start-up or SME. At the larger end of the scale, multinational tenants make up around 20 percent of our portfolio and include Al Taman Indsil, Harsco, Dunes Industries, Brazilian iron ore giant Vale, and Indian steel manufacturer, Jindal Shadeed. A growing number of companies are operating at the larger end of the scale on the Freezone too, generally from 11 hectares (110,000 sq metres) to 50 hectares (500,000 sq metres).
For traders and exporters looking in to operating in SOHAR, how can they go about setting up in the free zone? SOHAR Port and Freezone offers a single window through which all licenses, permits and approvals can be obtained. In practice this means that Freezone clients require very little interaction with the various governmental institutions and can concentrate on what they need to accomplish to ensure the success launch of their new business.
What are the trends that you see in the GCC trade scene for 2015? Which sectors do you think will lead the growth of the trade industry in this region, especially in Oman?
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Energy, food, and construction are all areas that we have foreseen growing in the GCC, and are behind our plans for the year ahead. For marine industries and others alike, the pursuit of alternative fuel supplies and increasingly stringent regulations around the use of certain fuels are accelerating research and development in LNG technologies. We will soon begin offering one of the world’s only shipto-ship transfer services based on this trend, and expect this industry to grow in line with increasing global demand. It is also important to remember that 90 percent of the region’s food is imported. Construction of Oman’s first dedicated agricultural terminal, grain storage, refinery, and downstream packaging industries at SOHAR will seek to leverage on this market and bring at least sum of this supply chain closer to its market. Meanwhile, a second construction boom in UAE is driving growth in a region with a 12 million tonne shortfall in steel production.
What is your growth strategy in the next 3-5 years? Which markets will you be focusing on and what kind of investors would you like to attract in the future? During our relatively short history, we’ve kept our KPI’s realistic and measurable and we see no reason to change. Our three main focus areas as the SOHAR Group will therefore be: as a business promoter and enabler; as a port and free zone authority; and as an organisation – how we operate and what can be done to improve this. In terms of markets, what this means is that we will continue to grow our interests in the core clusters set up under the original concession agreement with Port of Rotterdam – metals, petrochemicals, and logistics. Agriculture markets will take on
increasing significance in the coming 3-5 years, with the auto industry also on the horizon.
If I am an SME owner, what are the steps I need to undertake to set up my office in SOHAR Port? What are your basic requirements?
The first thing that we encourage companies to do is to check our website and the types of licenses we are able to offer. The next step is to read guidance notes provided on the site in relation to transforming a prospect into a company, contracts and ground breaking, and labour and visa rules. Once an enquiry is made we can then put businesses in contact with our dedicated commercial team to offer guidance.
In your experience of working with SMEs across different industry sectors, what are some key challenges that they are faced with? While we ensure SMEs are supported, there are some challenges that are generic to the sector. These include funding, recruitment, and costs. However, while we cannot control these or intervene in day-to-day business operations, we have created links with schools and education facilities that provide skilled graduates and trainees and remain committed to offering additional support in order to ensure SMEs’ success – after all, the success of SOHAR ultimately depends on our ability to create an environment where entrepreneurship, innovation, and growth can flourish. www.tradeandexportme.com/2015/01/ the-gateway-to-the-gulf/
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The UAE Competition Law The Executive Regulations in relation to the UAE Competition Law came into force recently. Justine Reeves and Rebecca Hilton - Legal Experts from Clyde & Co. - offer a comprehensive outline of the scope of the new law and how it can affect your business...
Following previous updates on the UAE Competition Law, we know that the legislation regulates certain anti-competitive practices and M&A activity. In the following feature, we focus on the merger control provisions. While the Regulations clarify a number of areas, they do not set out the market share percentage which will trigger notification; this is to be specified at a later date by the Council of Ministers. When fully implemented, the requirement to pre-notify mergers and acquisitions creating potentially anti-competitive ‘economic concentrations’ will be a new step in corporate regulatory control in the UAE. Scope of the regulations The Regulations deal with procedures relating to: exemptions from the rules on restrictive agreements and dominant position (Chapter 1); economic concentrations (Chapter 2); and the examination
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of complaints (Chapter 3). In each case, the relevant party should apply to the Competition Department of the UAE Ministry of the Economy (Department). The Department will consider the application and make recommendations to the Minister of Economy who issues a resolution on the relevant matter. Economic concentrations The concept of ‘economic concentration’ is widely drafted to capture not only traditional share acquisitions but also transfers of assets and liabilities from one entity to another. Where a proposed economic concentration may affect competition in a ‘relevant market’, particularly to create or enhance a dominant position, an application for preapproval should be submitted to the Department at least 30 days prior to ‘the date of concluding the contract or the agreement concerning the economic concentration’.
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An application must be made where the market share of the parties participating in the economic concentration exceeds a specific percentage of the total transactions undertaken in the relevant market. As noted above, the Regulations state that such percentage is to be specified by the Council of Ministers. Various supporting documents must be submitted with the application, including in particular a report on the economic effects of the economic concentration, stating the advantages thereof on the relevant market, and including suggested obligations and procedures to eliminate any potential disadvantages. Note also that any information submitted which the parties wish to be treated as confidential must be clearly marked as such, and the applicant should also submit a non-confidential summary of such information. The parties to the transaction must authorise one of their number to submit the application. We expect that in most cases, the buyer will wish to run the process. The authorised party must act under a notarised special power of attorney. When considering any application, the Department will consider: • The level of actual and potential competition in the relevant market • The ease with which new participants can enter the relevant market • The potential impact on prices of the relevant commodities/services • The extent to which regulatory impediments may affect access to the relevant market • The potential for the creation of a dominant position in the relevant market • The potential effect on creativity, innovation and technical efficiency • The extent of contribution to investment promotion, export promotion or supporting the capacity of national Establishments to compete on an international level. Note that this factor may have particular significance where
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the strategic importance of the business to the economy outweighs competition concerns, particularly in relation to locally important industries and sectors • The effect on consumers’ interests The Department may request additional information from the applicants and also consult with any third parties which it considers may be affected. The Department prepares a report on the proposed economic concentration, evaluating in particular the impact on competition in the relevant market, and makes a recommendation on the proposed resolution. The Minister must issue his resolution within 90 days of receipt of the application, although he may extend this for an additional 45 days if he sees fit. He must issue a reasoned decision and can issue an approval, a rejection or an approval subject to conditions. If he fails to issue a resolution within this time frame, the economic concentration shall be deemed to have been approved. The approval of an economic concentration may be revoked in certain circumstances e.g. for non-compliance by the parties with any stipulated conditions. The parties are expressly prohibited from carrying out any disposal or procedure concerning completion of the economic concentration until the Minister has issued the resolution. This contrasts with, for example, the competition process in the UK, where the parties may elect to complete the transaction and take the risk of adverse findings should the merger be investigated. Complaints, appeals and settlement Chapter 3 sets out the process whereby any ‘stakeholder’ (which appears to capture any interested third party) can file a complaint with the Department in relation to a violation of the Competition Law. Complaints shall be filed in writing or electronically
in accordance with a process to be specified by the Department. The Department may also conduct investigations on its own initiative. A party subject to a complaint shall have the right to submit a defence and to contest the allegations. The Department may request any data, documents or statements which it deems of assistance in examining the complaint from the parties to the complaint or other parties and may hold meetings and take any other measures it deems necessary. The Department prepares a report for the Minister, who in turn must issue a reasoned resolution on the matter within 30 days of receipt of the report. The risk of complaints by third parties, potentially leading to lengthy periods of dispute and negotiations, may encourage parties to make a clearance application even if there is doubt around whether such an application is required. The Regulations allow a party to seek a re-examination of any resolution issued by the Minister. Any such application must be filed within 14 days of the resolution being notified, setting out the grounds for re-examination and supporting documents. The Committee then has 10 days within which to make a recommendation to the Minister, who in turn makes a ruling within 30 days of the application The Minister or his deputy may also seek a written settlement with the parties in breach at any time prior to the filing of a penal case. Any party in breach must pay a settlement amount of not less than twice the minimum applicable fine. If a party fails to comply with the settlement terms, the Department may refer the violations to the competent court. Practical implications It remains to be seen how the processes described above will work in practice. In particular: • The Council of Ministers decision on the relevant percentage in relation to market share will be crucial in
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The concept of ‘economic concentration’ is widely drafted to capture not only traditional share acquisitions but also transfers of assets and liabilities from one entity to another.
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the practical application of the Competition Law and Regulations. At the time of drafting, there is no set timeframe for this decision to be issued • No further guidance is set out in the Regulations to explain what will constitute a ‘relevant market’ in any given case. Again, this is important to the practical application of the law and the Regulations. The way in which a market is defined may vary and affects whether any economic concentration is captured. For example, the market in luxury leather goods is significantly more restrictive than the market in leather goods or the market in luxury goods and more likely to trigger a notification requirement • It is unclear whether the parties to an economic concentration may proceed to sign a sale and purchase agreement which provides that completion is conditional upon clearance. The Regulations seem to require that only a draft agreement should be submitted with the application; but the parties may not wish to commence a formal approval process without a signed agreement in place • The parties will need to ensure that the requirements to draft the application, in particular the report on economic effects, and to put in place the special power of attorney are factored in to the timetable for the transaction • The implication of the 30-day notice period in respect of economic concentrations is not entirely clear. The Minister has a maximum of 135 days from the date of submission to issue a decision and until a decision is issued the relevant transaction must not proceed. However, if he issues a decision earlier than 30 days after the submission date it is unclear whether the parties would be free to complete • No specific process has been set out to allow for preliminary discussions between parties and their advisers with the Department to help parties to determine whether an approval is needed in relation to a specific transaction. It is unclear whether in
practice the Department will issue informal feedback to allow parties to determine whether or not they must make a formal application in any given case. Given the potentially lengthy time periods involved, it would be useful to allow for a fast-track process • The parties must be careful to mark all information they do not wish to be shared with third parties as confidential; it is also difficult to know how the requirement for a nonconfidential summary of confidential information will be applied in practice. This could have potentially unwelcome implications for parties dealing with highly sensitive commercial information • There do not appear to be any specific sanctions against making a complaint which is later rejected. This may encourage tactical complaints by third parties seeking to derail transactions involving their competitors
Further information If you would like further information on any issue raised in this update please contact: Justine Reeves Head of Knowledge Management E: justine.reeves@clydeco.com Rebecca Hilton Corporate Professional Support Lawyer E: rebecca.hilton@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
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The only event designed FOR the restaurant investment community The Global Restaurant Investment Forum (GRIF) will be THE business conference of the Dubai Food Festival 2015, making it the place to do all your deals in 2015. The event provides a unique platform which brings together key stakeholders in the restaurant investment community in one place to share best practice, innovation, knowledge and address current issues that face the sector. The GRIF programme has been built on four key pillars:
Creating successful concepts Generating growth through franchising Internationalizing your business Innovation and inspiration to improve your existing operations
GRIF
GLOBAL RESTAURANT INVESTMENT FORUM 16-18 February 2015 Conrad Dubai
Informative event where you can interact and understand the players in the industry, a unique forum for all that service the Restaurant industry. Tariq Sanad Managing Director, Lime&Tonic
KEYNOTE SPEAKERS 2014
Through an educational and actionable agenda you can learn how to mitigate the challenges faced when expanding internationally, learn from those with their feet already firmly planted in different markets, tap into their local knowledge, and learn how to roll-out your product without selling its soul.
Nicholas Lander – Author of “The Art of the Restaurateur” (Phaidon) and FT Restaurant Correspondent Brian Johnston Managing Director, International, Wagamama
THE EVENT FOCUSES ON HIGH ENERGY FACE-TO-FACE NETWORKING OPPORTUNITIES, ALLOWING YOU TO FORGE NEW AND EXCITING GLOBAL PARTNERSHIPS IN ONE PLACE!
Farah George General Manager Food & Beverages, AKI Group
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HOSTED BY
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Three Starred Michelin Chef Heinz Beck – Waldorf Astoria, Dubai Palm Jumeirah
SILVER SPONSOR BRONZE SPONSOR
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Levent Veziroğlu Chief Executive Officer, D.Ream
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