the middle east market sis international research
DESCRIPTION
This presentation covers demographics and cultural and societal influences in the Middle East market, as well as opportunities and barriers for growth. Booming markets include healthcare and automotive industries. Learn more in this presentation from SIS International Research.TRANSCRIPT
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Middle East MarketSeptember 2007
Presented By SIS Global Research Media,
a division of SIS International
SIS International
Custom Research
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Presentation Contents
Introduction:
•Demographics
•Stability Report
•Society
•Culture
UAE
Qatar
Bahrain
Economic
Snapshot
Booming
Industries
Opportunities
Barriers
Standard Research Disclaimer: SIS International Research Inc. makes norepresentations about the accuracy or completeness of the information provided in this
presentation. Users who base investment, strategic or marketing decisions on the
information contained in SIS speeches & presentations do so at their own risk.
Executive
Summary
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Executive Summary
• Given opportunities and emerging economic factors, the Gulf regionis being considered for investment & commerce.
• Although major multinationals are in the region, global midsizedcompanies ($200-800 million) are expanding in the region
• US companies are generally slow in entering region vis-à-visEuropean ones
• Region is currently stable, and governments investing heavily ininfrastructure
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GCC Market
Gulf Cooperation Council,
a customs union involving:
• United Arab Emirates: Dubai, Abu Dhabi
• Qatar: Doha
• Bahrain: Manama
• Oman: Muscat
• Saudi: Riyadh, Jeddah
• Kuwait
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GCC Market Qualities
Characteristics:
• Young societies
• Rapid economic growth
– Strong non-oil businesses and private sector
– Growth in some markets rivals that of China
• Continuous inflow of foreign capital
– Increased liquidity from oil revenues
– Arab reinvestment of profits back into region
• High standards of living
– Wealthy countries
– Consumer economies
• Countries competing with each other
• Economic link between Europe and Asia
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GCC Population
Source: IDB Census Data 2007. Chart produced by SIS International.
14,979,88812,993,24911,769,011Total
201520102007Year
Excluding Saudi Arabia
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UAE Demographics
Source: CIA world factbook. Chart produced by SIS International.
Sex Ratio: 1.48 Males/1 Female
Population Growth: 2.39%
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Bahrain Demographics
Sex Ratio: 1.25 Males/1 Female
Population Growth: 1.4%
Source: CIA world factbook. Chart produced by SIS International.
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Qatar Demographics
Sex Ratio: 1.85 Males/1 Female
Population Growth: 2.39%
Source: CIA world factbook. Chart produced by SIS International.
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Social Snapshot: GCC
• Significance of Family
– Obligations & rules
– Impact on the decisions one makes
• Modern youth
• Importance of Islam in commerce and dailylife
• Increasing familiarity with technology
• Importance of honor and reputation
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GCC: Stability Report
• Stable
• Oasis of stability in an volatile region
• Business interests a major priority for GCCgovernments
Analysis
• Markets heavily reliant on tourism and FDI (e.g.Dubai) could be affected by regional war
• Boycotts against branded products a possibility
• Markets relying on Arab investment more resistant
• Threats: political instability, terrorism, globaleconomic downturns
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Growth
• Strategic business advantages
– Achieve competitive edge
• Location: Trading hub between Europe and Asia
• Currently stable GCC market
• High economic growth
– Large consumer market
– Pro-investment environment
• Fear of falling behind competitors
– Many multinationals have regional presence
– Fear that neglecting region can impair longterm competitiveness
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Economic Snapshot - UAE
Economic Benefits
• Remarkable growth & opportunity
– 8.9% real growth in 2006 [CIA]
• Diversifying towards tourism, media & financialservices
• Modern, English-speaking
• Strategic market: Gateway to KSA, other GCCmarkets
• Ranks 32nd most competitive global economy [WorldEconomic Forum]
– Most competitive Gulf economy
– Strengthening legal system by 2010
– Most industries pay no federal corporateincome tax
Economic Obstacles
•Liberal overall, except for operatingregulations
–Local sponsors
–Labor rules
•Foreign ownership regulations–100% ownership only for …
–professional companies
–branches of foreign companies
–contingent on a local sponsor
•Inflation from construction and housing prices
•Real estate supply fluctuations
•Insufficient urban transportation
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The Dubai Market
• Stable
• Current and future banking & financial hub
• Regional headquarters for many companies
• Internationality, openness
• Large Tourist and Expat market
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Abu Dhabi
• Capitol & Largest emirate
• Significant oil reserves– 10% of the world’s output [FDI Magazine]
• Diversifying– Targeting Arab investment
– Encouraging private enterprise
• Limits on foreign ownership
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Key Industries: UAE
• Consumer industries– Automotive
– Retail (e.g. Mobile phone)
• Real Estate & construction– Significant demand for housing
• Tourism services and accommodation
• Transportation infrastructure
• Media
• Information Technology
• Consulting Services
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Economic Snapshot - Qatar
Economic Benefits
• 7.1% growth in 2006 [CIA]– Due to liquidity from oil and the growing non-oil sector
• Diversification– Towards a knowledge & technology based economy
– Gov’t invested $130 Billion into industrialization policy [Qatar Financial Center]
• Aggressive investing policy abroad
• Liberal business environment– Few restrictions on corporate remittances
Economic Obstacles
• Inflation caused by housing prices and construction costs
• Time required to start-up a company
• Similar ownership regulations as in UAE
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Key Industries: Qatar
• Education services– Universities
• Technology– Science and Technology Park
• Media Services
• Financial services
• Consulting Services
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Economic Snapshot - Bahrain
Economic Benefits
• Saudi money
• One of the fastest growing Arab economies
• Liberal economy– 25th Freest economy in the world, according to the Index of
Economic Freedom 2006
– Tax free
• 7.8% real growth 2006 [CIA]
• Effective diversification from oil– Banking & service economy
• Free-trade agreement with US
Economic Obstacles
• High unemployment
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Key Industries: Bahrain
• Islamic banking
• Construction & Real Estate
• Media
• Tourism services– Saudi tourist hot-spot
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Future RegionalEconomic Snapshot
• GCC Common Currency Plan 2010
for all GCC members– ECB has already consulted on this planned currency union
– Economic Benefits:
• Limited Foreign Exchange risk, attracting foreign investors
• Controls on inflation
• Increased competitiveness resulting from integration
• Increased international trade
• Facilitation of trade among existing trading partners (e.g. EU, US)
• Longterm Regional Economic Threats– Threats of political instability, terrorism and global recessions
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Booming Industries
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Real Estate & Construction
Real Estate
• About 25% of world’s cranes in Dubai,according to Gulf News
• Housing demand in UAE exceeds supply
• Residential & commercial rental prices onsteep rise
• Ownership restrictions [e.g. freeholdsystem] exist
• Major developers– EMAAR
– Dubai Properties
– Nakheel
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Developments
• Dubailand
• Universal Studios
• The Palm
• Business Bay
• Sports City
• Media City
• Ski Dubai
• Knowledge Village
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Automotive Market
• Significant Demand
– Due to lack of transportation alternatives,climate
– Wealth
– Inexpensive petrol
• Reselling and exporting
• According to Nissan, Middle East market isstrategically important
• Major sales markets for GM and Toyota
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Healthcare
• Healthcare costs and insurance premiums on therise
• Dubai Healthcare city is to open in 2010 fortreatment & research
– Mayo Clinic Middle East
– Harvard University collaborating with project
– J&J, AstraZeneca, & many others are establishingstrategic partnerships
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Banking & Finance
• Islamic (Shari’ah) banking niche market– Islamic finance industry worth about $1 trillion dollars
– Grew at least 10% each year during the past 10 years
– More resistant to fluctuations in finance market
– Several listings on London Stock Exchange
– European banks already involved: HSBC & BNPParisbas
– High-net worth individuals (HNWIs)
• Currently stable
• Financial centers: Bahrain & Malaysia
• Credit card ownership to rise by 51% by the end of 2007[Lafferty Group]
– High profitability per card in GCC region
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Retail
• Retail spending in UAE estimated toreach $7.6 billion by 2009, according toAME
• Mall culture
• Ubiquitous foreign brands:– Carrefour, Starbucks, Borders, Zara,
H&M, Body Shop, Bally, Aldo, Toys R’Us, Ikea, etc.
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Information Technology & Media
• Local governments updating ITinfrastructure
• New developments require ITinfrastructure
• Bahrain attracting media– MBC
• Dubai Media city– CNN
– BBC
– Reuters
– AP