With exhibition season well under way, thousands of foreign suppliers are visiting the region to find new markets for their products. The Big Project presents the complete guide to the region’s distribution giants and establishing those all important networks. Still living up to its reputation as a gold mine of work and opportunity, the Middle East continues to attract companies looking to […]
With exhibition season well under way, thousands of foreign suppliers are visiting the region to find new markets for their products. The Big Project presents the complete guide to the region’s distribution giants and establishing those all important networks.
Still living up to its reputation as a gold mine of work and opportunity, the Middle East continues to attract companies
looking to increase their operations and global reach.
While the introduction of free zones and wholly owned subsidiaries has bolstered trade in the region, re-location
doesn’t appeal to everyone. The solution of choice is still to distribute through a local agent, who can sell goods or services on behalf of their client, armed with their local knowledge, contacts and experience of potential bureaucratic challenges — as even where a foreign company has a footprint in the region with a free zone entity, an agent will still be required for distribution of goods beyond the free zone.
It’s not just the suppliers auditioning distributors; for a mutually beneficial trading relationship to grow, both parties must be striving to meet the other’s needs.
“First of all you need a good product. The UAE is not a market for poor products,” asserts chairman of Al
Naboodah Construction Group, Abdulla Saeed Juma Al Naboodah.
“Secondly you need good representation and this is usually through a dedicated sales agent, who will market your product along with other sector specific products. Thirdly you need to ensure that the benefits of your product are known to the designers that will be specifying the products.
Many suppliers add value to this process by assisting in the design,” Al Naboodah adds while warning suppliers not to “parachute into the region” without adequate investment.
“If you promise but don’t deliver because your support structure is not in place then you will find it hard to be given a second chance,” he continues.
“A good supplier is one who can meet the customer expectations, with respect to delivery time, quality of goods, reasonable pricing and dependability,” explains Al Habtoor Trading Enterprises LLC
business development manager, Sara Asmann.
“The supplier’s profile should be synergetic to our group’s portfolio and the supplier’s product should be suitable for the market, with the supplier demonstrating a good knowledge about that market. Financial stability is important,” she adds saying that purchase decisions rely on quality of goods, price and reliability of the trader, and that currently Al Habtoor is witnessing a rising trend in certified ecofriendly products.
“Commercial success in the Middle East relies on three factors: a strong product, a comprehensive market entry strategy and a strong distribution and sales network,” Asmann continues.
“The suppliers have to study the market requirements prior entering the market, including planning their market entry, product launch, sales and customer support strategies. The supplier has to be willing to get established up to the needs of the market
“To establish a strategic partnership with a strong local partner, with an activity in the same field can be very supportive . The pricing has to be suitable to the market levels and the supplier should leverage their competitive advantage . A Successful UAE presence provides an opportunity to explore the whole Middle East Market,” she adds.
“Overall suppliers need the ability to deliver on their promise,” Al Naboodah says.
“By this we mean within specification, on time and within budget or cost. As well, we need to see that the supplier understands the product that they are supplying, and that they can support the operations and maintenance of
the product through its lifetime,” he adds.
“The main problem arises when a foreign company acts in the UAE as if it is a market similar to their home market. Cultural competencies are a very important factor to be studied and achieved. The supplier has to do an in- depth study of the market prior entering the market in order to position themselves successfully,” Asmann adds.
The other side of the coin
The Middle East enjoys strong trading partnerships with a number of other regions, particularly the Far East where the quality of goods has begun to increase, while prices have remained competitive.
“A large number of global companies entered the UAE market to benefit from its promising investment conditions and high capabilities as well as a preference of the consumer to deal directly with commercial agencies in 2010,” says H.E. Humaid Ali Bin Butti Al Muhairi, assistant undersecretary for commercial affairs and Dubai’s Ministry of Economy.
Next year will see the launch of the first Made in Korea exhibition, designed to tap the opportunity that exists due to trade between Korea and the UAE in 2010 reaching US$ 15.7 billion. It’s an opportunity that has been strengthened by the state visits made by South Korean president Lee Myung-bak and the cooperation deals signed during those visits with HH Sheikh Khalifa bin Zayed Al Nahyan.
“Trade activities between the UAE and South Korea remain very strong and have great potential to grow further,” comments Faisal Al Raisi, managing partner at event organisers Ideal Events.
“Korean businesses are particularly paying greater attention to emerging growth prospects in the UAE and across the GCC, which are increasingly becoming more competitive export destinations compared with Europe and other global markets. Moreover, the governments of both countries have played a key role in establishing strong bilateral relations, which is a very important factor in sustaining the long-term trade relationship between the UAE and Korea,” he adds.
It’s an observation that has also been made by World Trade Organisation director general, Pascal Lammy, who recently wrote: “In 2010, Asia’s trade performance was remarkable, contributing significantly to the global recovery.
Asian exports of manufactured goods grew by 30% — more than offsetting the loss incurred during the crisis. In commercial services Asia recorded a stunning 22% growth in exports in 2010, compared with 3% for Europe.”
Asian manufacturers aren’t the only ones looking to establish business relationships in the region, with locally-based embassies hosting trade bodies to facilitate international trading relations between the Middle East and a
number of countries, spanning Europe, the US and East.
Such organisations have an extensive contacts base and local knowledge needed to trade in a new market.
One such organisation is UBIFRANCE, which promotes the specification of French technologies, products and knowledge in the UAE, through B2B networking, seminars and on the ground contacts, specifically for French suppliers.
“The majority of the suppliers and distributors require urgent delivery after the conclusion of any deal,” says the organisation’s communications director, Tarek Solimane.
“The most problematic issue here is that the products are in Europe and it takes time for them to be delivered to the region.
“Every day new solutions are established to avoid this kind of issue but it’s not something that can block a deal and the French companies can provide products that comply with the new green building standards from Dubai Municipality,” Solimane adds.
The small print
Establishing contacts at a trade show and developing a professional relationship may appear to be as easy as one, two, three, but success and failure rests in the legal fine print, according local trading law experts.
“It is important to identify all the risks before entering into an agency relationship, which is why local advice should always be sought and such advice may be required for more than one jurisdiction since many agreements apply across broader regional territories,” says Sara Holder, managing partner in the UAE for In House Lawyer.
“Ultimately, similar principles apply to agency law in the region to those you will find in western jurisdictions, for example the success of any agency relationship will rest largely on identifying an agent the principal feels comfortable working with, and making sure the parties continue to communicate clearly and fully throughout the life of the relationship,” she continues.
“Part of that communication will include entering into a clear, easy to understand agreement, specifying precisely what is expected of both parties throughout the relationship and the consequences if either party fails to meet its
obligations,” Holder adds.
The legislation to learn is Federal Law No 18 of 1981, which also goes under its catchier headline of ‘The Agency Law’. Described by Habib Al Mulla & Co’s Mark Gilligan as “a framework that serves to champion the rights of the local commercial agent, normally at the expense of the (typically foreign) principal”.
“Only UAE nationals or companies wholly owned by UAE nationals are entitled to carry out commercial agency activities in the UAE and this is a strict provision of the Agency Law,” he says, adding that under the Agency Law, commercial agency agreements must be written in order to be deemed valid.
“Once an agency is granted and registered with the UAE Ministry of Economy, the termination of an agency relationship by a principal can be extremely difficult to effect and in most cases such terminations result in significant
compensation awards in favour of the local agent,” he warns.
Aldes has been present locally since 1982 but Aldes Middle East was established in 2002 as a regional base in the UAE.
The idea was to create a strong industrial base as well as a strong commercial base to be closer to our customers and to be able to give them a better service, in term of lead time and reactivity, but also to be able to accompany our customers on a daily basis on the market with all the marketing and technical supports required.
The UAE with a fast growing economy and strategically located in the GCC were and still are a perfect hub for regional operations. Infrastructures are of good quality with easy connection to all neighbouring countries.