Middle East – the uprising consumer market

What comes to your mind when you think of the Middle East ? Gold? Oil? Luxurious yachts? An exotic vacation destination? Intense political tensions? Or all of the above?

Situated between northeastern Africa and southwestern Asia, the Middle East is a region rich in history and diverse culture, consisting countries such as Turkey, Lebanon, Israel, Jordan, Iraq, Saudi Arabia, Yemen, Oman, Iran, UAE (United Arab Emirates), Kuwait, Qatar, Bahrain, and Afghanistan. Once a region renowned for its exports of cotton, silk and grains, the Middle East has become the world’s leading oil provider since the mid-20^th century, currently accounting for 65 per cent of the globe’s oil reserves. Countries such as Iran , UAE, Kuwait , Saudi Arabia , and Iraq have been taking advantage of their rich oil and gas resources, hence being able to dominate the region’s economy as well as political development.

Dubai & Saudi Arabia – A bigger than ever consumer market

The top city benefiting from the oil hype is Dubai – a city viewed as the heart of UAE. Once famous only for its gold, the city economic future has never looked better ever since oil was discovered back in 1966. Foreign investments began flooding in since then. Thanks to the free trade and low taxes executed by the local government, foreign investors stepped in to unearth the huge opportunities lying underneath the city’s soil. The fact that Dubai is a duty free zone not only makes it easier to do business, it is also boosting the retail sector by making it a shopping paradise. Today, Dubai ’s position as a financial hub and a popular tourist destination in the Middle East is boosting the city’s domestic economy and its image in the world of business. UAE as a country currently has a population of 2.4 million, producing a GDP of USD 40 billion per capita.

Saudi Arabia is another Middle East country with much growth potential from a business standpoint. Situated west of UAE with an estimated population of 24.2 million people, Saudi Arabia is also another major financial centre in the Middle East , as it shares a dramatic economy turnaround in the mid-20^th century. Apart from being the world’s largest oil supplier, Saudi Arabia also produces and exports steel, cement and wheat to countries such as the U.S.A. , India , Japan , and other European countries in the neighborhood. Similar to Dubai ’s outlook on the economy, Saudi Arabia has been making much effort to further expand its business scope. Starting from the summer of 2000, the local government has passed an investment law that permits full ownership of business projects carried out by foreigners, while loosening up the rules for sponsoring foreign employees as well.

Both Dubai and Saudi Arabia have been emerging like two rising stars as some of the fastest growing economies in the world in recent years. Low taxation systems and favorable exchange rates continue to attract investors, which, in return, have transformed the regions into sophisticated and wealthy economies. Ever-growing trade activities are now filling up the region’s trade show calendar, giving them a unique vibe that cannot be found anywhere else. For instance, the International Jewellery and Accessories Fair, held in Dubai annually, has been receiving much international recognition over the past few years. It is provoking more and more curious international exhibitors and buyers to the show just to see what they can find, while learning more about the city and its lucrative domestic consumer market.

It is evident that the Middle East’s retailing industry and surging demand for luxury goods will gradually mature in the foreseeable future (e.g. trendy malls will eventually replace all the traditional outdoor markets), as disposable income continues to increase. According to official statistics, the active spenders come from the younger demographic sector, whose desire for trendy, branded products is unlimited with their escalating spending power.

For example, 40 per cent of the Saudi Arabia ’s population is below the age of 14. Also, because families in the Middle East tend to be quite big, with a typical Saudi Arabian family usually making up by as many as eight members, spending power coming from them are not to be underestimated (it has been estimated that a typical Middle East worker earns an average of USD20,000 per year). Main imports currently dominating the Middle East retail market include: stereos, clothing, accessories, home appliances, jewelry, watches and toys.

( Source: CIA World Factbook, Dec 2003 )

Most of the imports are from Asia , with China , Taiwan , Korea and Hong Kong being the leading suppliers. As an attempt to further explore the Middle East ’s surging consumer market, many Asian manufacturing companies have begun to set up branches in the region, so that their target customers can have easy access to them. Many business and trade veterans in the region have learned their lesson by entering the Middle East Market through Dubai , where they can promote their branded products and quality designs to the consumers with solid spending power.

Dubai ’s snowballing popularity as a business hub is obviously due to the sunny city’s duty-free trade policy and liberalised trading environment facilitated by the government. On the other hand, to add to its favourable appeal, the recently-signed FTA (Free Trade Agreement) between the U.S.A. and Jordan is expected to encourage even more overseas investments while giving the region much publicity.

The aspiring business potential lying ahead for the Middle East is flying. Apart from ambitious exporters who gear up to tap into the Middle East market, various international trade associations have also established branch offices in the promised land. For instance, HKTDC (Hong Kong Trade Development Council), a semi-official trade organisation based in Hong Kong, has recently t o expanded its office and operation in Dubai after 20 years of presence in the city as a bid to capitalise on the rich business potential in the Middle East and Dubai is considered as the springboard for Hong Kong companies to reach the UAE and regions nearby.

While members of the industry and market players are eager to dive right into the market to snap up a piece of the cake, it is also crucial for them to be aware of the region’s unique culture and its way of business thinking and practices. Some market veterans have suggested that the domestic importers in Dubai can act as trade brokers to help Hong Kong and other Asian exporters in promoting sales more effectively to the region.