News update >> Dubai SME and NASDAQ Dubai agree to support SME sector >> Emirates NBD eyes SME loan surge in 2013 >> Ajman: Free zone targeting SMEs >> 1.6m new mobile phone users in 10 months in UAE >> UAE’s first-ever Green Jobs Fair at World Future Energy Summit 2013 >> Dubai Shopping Festival concludes >> VAT GCC at an opportune time >> GCC population to soar by 30% by 2020 >> UAE retail jobs surge 45% >> New firms in Jafza grow by 28% to 347 in 9 months Cash is king: Strategies to manage cash flows Talking Telecoms: Opportunities in the GCC telecoms sector Gulf region real estate prospects in 2013 B.R. Shetty: “You don’t need money to start a business” >> Read more >> Read more >> Read more >> Read more >> Read more FEBRUARY 2013 Vol. 2 - No. 1 enterprise A NEWSLETTER FROM BUSINESS BANKING OPPORTUNITY Goodbye fiscal cliff, welcome debt ceiling 0 200 400 600 800 1000 1200 1400 1600 1800 2000 2Jan12 2Feb12 2Mar12 2Apr12 2May12 2Jun12 2Jul12 2Aug12 2Sep12 2Oct12 2Nov12 2Dec12 DFM IN 2012: A YEAR TO REMEMBER Events and Promotions Register today and make it to the Dubai SME top 100 list Emirates NBD recognised as the Most Friendly SME Bank in the UAE.
Transcript
News update
>> Dubai SME and NASDAQ Dubai agree to support SME sector
>> Emirates NBD eyes SME loan surge in 2013
>> Ajman: Free zone targeting SMEs
>> 1.6m new mobile phone users in 10 months in UAE
>> UAE’s first-ever Green Jobs Fair at World Future Energy Summit 2013
>> Dubai Shopping Festival concludes
>> VAT GCC at an opportune time
>> GCC population to soar by 30% by 2020
>> UAE retail jobs surge 45%
>> New firms in Jafza grow by 28% to 347 in 9 months
Cash is king: Strategies to manage cash flows
Talking Telecoms: Opportunities in the GCC telecoms sector
Gulf region real estate prospects in 2013
B.R. Shetty: “You don’t need money to start a business”
>> Read more >> Read more>> Read more >> Read more >> Read more
FEBRUARY 2013 Vol. 2 - No. 1
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Cash is king: Strategies to manage cash flowsBy Sona Nambiar
Effective cash flow management is one of the key components to ensure smooth running of a business. It is also an essential part of a business’s financial planning.
Yet effective cash management is one of the biggest challenges faced by every entrepreneur. It can make or break your business. Here are the top eight tips for effective cash flow management from the experts:
Fixed operating costs: New and growing businesses in the UAE usually fall into two categories – trading and manufacturing. Everything depends on which stage of the life cycle of business you are in. “To effectively manage your cash flows in the initial phase of setting up, keep your fixed operating costs as low as possible. Basic, but it works,” said Manish Kanthalia, CIO at a
leading UAE business house.
Get a specialist: An entrepreneur usually knows everything there is to know about the industry or sector s/he operates in, but not necessarily about cash-flow management. Having a finance manager or a treasury manager that tracks cash flow on a daily basis helps, according to veteran banker Suresh Kumar, group chairman at Values Group, which offers strategic advisory services, private capital (debt & equity) and investment management. Or outsource your cash collection process to a specialized company, advises Iyad Mourtada, managing director at OpenThinking, a business learning platform for executive development in leadership, entrepreneurship and innovation. “It might cost you a certain fee but the specialists will ensure speedier and faster realization of your money from the market. But the fees are worth it if you have many difficult clients,” he said.
Shared vision: In the initial stages of a business, an entrepreneur is multi-tasking due to the sense of achievement and the circumstances, said Kanthalia. “But when the business expands and adds three to four people, it is advisable to choose staff who aspire towards the same vision and want to grow along with you,” he said. This will make a big difference to the business since such staff will be willing to compromise on salaries in the initial stages, work overtime
and run a tight ship to save costs at a time when the business needs to optimize cash flow.
Understand timing: It is not enough to have cash coming to your business. Understanding when the cash will come will help manage your expenses and plan for your business operations, said Mourtada. “Many businesses close not because they are unprofitable but because it takes them between three to nine months to collect the cash from their customers,” he said.
“Cash is king for any business and having more in your hand is always better. Ask your customers to make online payments or wire transfers instead of cash or checks. Motivate them to pay sooner by giving them a discount, gifts or other incentives,” said Mourtada. On the other hand, slow down payments by paying your bills just before deadline and defer payments of goods until after delivery. If possible, try to request delayed payment (within 30/60 days after the purchase or service).
Approval process: Increased expenses sometimes indicate a lack of spending controls. Compare expenses against the previous quarter and the same period last year. “Institute an approvals process for expenses over a pre-determined amount. Don’t hesitate to periodically question expenses, especially those that don’t support revenue generation. When employees know
that their expenses are being reviewed, they tend to become much more careful about how they spend the company’s money,” said Mehul Dave, chief manager (marketing), GCC operations, at Bank of Baroda.
Compare quotes: Another expense-cutting strategy to manage cash flows effectively involves sourcing quotes from two or three vendors before purchasing supplies, inventory and services. That will give fair chances to get effective quotes and optimally utilize your cash, said Dave.
Manage inventory: Holding a lot of inventory may prove right when there is strong market demand. “But excess inventory can have catastrophic consequences for small businesses. Stagnant stock is a serious and criminal waste of funds and points towards poor cash flow management,” said Dave.
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OPPORTUNITY
Talking Telecoms: Business opportunities in the GCC telecoms sectorBy Jude Hardy
Competition in the telecoms sector is still a relatively new concept, with large government-owned telecoms companies owning a lion’s share of the market throughout the GCC.
Competition isn’t completely absent, however, as a recent report by Booz & Co. states:
“The GCC region recently has seen increases in competition and market fragmentation, as well as a slowdown in growth. Based on the experiences in the other more mature markets, it, too, will soon face added pressure from consumers. In response, operators will need to prepare for constrained growth and compensate by
creating leaner organizations.”
Consumers are also becoming more demanding and the entrance of companies such as Apple, Google and Skype to the market is placing more pressure on large government-owned telecoms operators.
“Consumers are becoming more demanding and sophisticated, expecting operators to provide an ‘all you can consume’ internet model via ubiquitous bandwidth and the latest services at low flat rates,” the report continues.
However, this does not mean that smaller businesses cannot break into the sector – there are more opportunities out there in the form of sub-contracting and supplementary services.
The UAE alone has mobile penetration rates of more than 230% (Q2, 2012), leaving room for smaller businesses to take on contracts and job roles with the large government-owned entities.
According to the 2012 Telecoms Regulatory Authority report, in 2011 the telecoms sector contributed almost 4.9% to the UAE’s gross domestic product (GDP), providing employment for more than 10,000 people. Internet service subscriptions also increased by 10.5% to more than 1.3 million, and the percentage of internet subscriptions connected by fibre technology increased by 70.8%.
However, by 2015 competition may increase in the UAE’s sector with the introduction of another telecoms operator, according to recent news reports. This move, by 2016, will signal increased opportunities for contractors and small to medium-sized businesses in the sector.
Neighbouring Saudi Arabia boasts 54.5 million mobile subscriptions and 4.66 million fixed telephone lines. Kuwait now has three telecoms operators and was the first to open up to competition. The STC-backed company VIVA was the latest to enter its market in 2008.
“The main telecoms industry is restricted here and the licenses are only for Etisalat and Du,” Dr. Khalid Maniar, founder and managing partner, Horwath MAK, says of the UAE market, “so the main business is restricted.”
However, he said, opportunities abound for smaller businesses operating in the Emirates.
“Other than that there are enormous opportunities available in the telecoms sector,” he said, adding that Horwath MAK itself provided training sessions for employees at one of the large telecoms companies.
“There are other solutions required by these service providers, which can be provided by SMEs. There are different items, mobile
phone sales, etc., relating to telecoms. There are opportunities, for example, for import to the UAE and selling on to the GCC and Africa from the UAE,” he said.
With the UAE’s strategic position in the Middle East, import-export companies can make a foray into the sector with telecoms-related business.
“If they [large telecoms companies] are looking to complete certain aspects of their work, they will fall back on service providers,” Dr Maniar continued. “They would hire businesses with different levels of expertise. For example, Du sub-contracts to small and medium enterprises, including in the IT sector, amongst others. Sub-contractors have good opportunities.”
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MARKETS UPDATE
Goodbye fiscal cliff, welcome debt ceilingGlobal markets roared as a compromise emerged from Washington in the early hours of the New Year to avoid the dreaded fiscal cliff. After the initial euphoria, global markets soon turned sour as investors realised Washington is gearing up for yet another fight, this time involving the debt limit in a few months’ time.
While the fiscal package clarified the medium-term deficit and debt trajectory of the US federal government, it does not provide a basis for a meaningful improvement in the government’s debt ratios over the medium term, according to Moody’s Investors Service.
The rating agency expects that “further fiscal measures are likely to be taken in coming months that would result in lower future budget deficits, which are necessary if the negative outlook on the government’s bond rating is to be returned to stable.”
Still, the S&P 500 closed at its highest level in five years, suggesting that the worst of the global financial crisis may be behind us.
Regional investors were also comforted by the fact that while the world economy still has major issues, they are not insurmountable. The European Central Bank and key EU players will ensure that
the Eurozone will not deviate too far from the recovery path, while recent Chinese PMI Index data shows further signs of improvement in the world’s second-largest economy.
Amid this mixed global scenario, regional prospects look practically rosy. Saudi Arabia’s expansionary budget and the triple-digit oil price enjoyed by OPEC countries in 2012 will ensure that most oil-exporting regional governments particularly in the Gulf have money to spend on infrastructure and job-creating projects.
“Saudi government spending has been the main impetus behind the strength of the private sector (construction was the fastest growing sector in 2012) and with policy remaining expansionary in 2013, further healthy private sector growth is anticipated,” said Fitch Ratings in a report.
The Dubai government is also planning increased spending to build on the momentum that saw the Dubai Financial Market Index rise 19% last year – the best performer in the Gulf region.
Regional markets, which made a strong start in the New Year, are now focused on corporate news and fourth-quarter results. However, new mortgage rules in the UAE that cap lending to expatriates at 50% of a home’s price could dampen the real estate recovery under way in the UAE.
Oil
Brent crude prices fell to USD 111 per barrel by the first week of January, as global markets appeared well supplied. A Reuters survey showed OPEC oil output had fallen in December as Iranian production fell, and Saudi and Iraqi supplies eased. OPEC output is now down by 1.13 million bpd from its
April 2012 peak of 31.75 million, the survey showed. OPEC output is expected to fall by a quarter of a million in January..
Dollar
The American greenback soared to a near 30-month high of 88.34 against the yen in early January amid speculation of more monetary easing in Japan. Meanwhile, the US currency also rose to a three-week high against the euro which hit a low of USD 1.3006 by the first week of January.
Gold
The US Federal Reserve’s intention of ending its USD 85 billion of monthly bond purchases this year has also negatively impacted gold prices. The yellow metal has already fallen 2% to reach USD 1,648 per troy ounce in the first week of 2013 as many investors sought more lucrative investment instruments.
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Gulf region real estate prospects in 2013The Gulf’s real estate sector largely bottomed out in 2012 and prospects for most countries look promising as governments took measured steps to ease the pain suffered by developers, financiers and investors over the past few years.
New regulations, mergers and greater efforts by the authorities to revive the industry are already paying off in certain jurisdictions.
Regional investors have taken note of the changing real estate landscape. Latest figures from the GCC Secretariat General Information and Statistics Centre showed GCC investors increased their exposure to the regional real estate market by 51.1% in 2012, compared to the previous year.
Kuwaitis led the regional investor march, buying 8,300 property units across the Gulf region, followed by Saudis (2,312 units) and Emiratis (2,267 units) during the year. Not surprisingly, the UAE property market saw the largest influx of Gulf investments.
“Real estate remains a popular asset class among Middle Eastern investors, with more potential buyers than sellers in most markets,” notes a Jones Lang LaSalle report.
Emboldened by the rising prospects in the Gulf’s property market, a majority of investors expect to invest more USD 50 million in the sector over the next 12 months, according to a
recent survey by the consultancy.
In the UAE, Dubai’s real estate sector has picked up as investor confidence improved. “Post the 2008 downturn the market was quiet for two years and we saw signs of revival in 2011. 2012 was the best year since in terms of prices strengthening and renewed appetite for investment,” said Helen Tatham, director of residential in Dubai, at London-headquartered Knight Frank consultancy.
Dubai has regained its status as the preferred investment market within MENA region, largely because of the following factors: recovery in prices and rental values; greater transparency; more investment grade real estate than in other Middle Eastern markets; and a developed infrastructure, according to JLL.
“This trend seems to be particularly the case in Dubai, where potential buyers outnumbered sellers by a large margin than in other cities,” notes JLL.
While the UAE real estate market is a Gulf favourite, Saudi Arabia is also emerging as a promising market thanks to new mortgage laws and massive plans to build new real estate
developments across the country.
The kingdom’s total housing stock is expected to rise from 4.6 million units by 2010 to 7 million by 2020, with annual demand rising by nearly a quarter of a million each year.
Apart from various initiatives by the private sector, the real estate development fund is expected to inject a staggering SAR 250 billion (or USD 68 billion) to finance a number of the projects, especially at the low-cost housing level.
Other regional markets are also showing signs of growth.
In Qatar, the value of real estate deals rose 59% in 2012, compared to the previous year, as demand soared thanks to the influx of expatriates in preparation for the 2022 FIFA World Cup.
GCC State Property Contracts % of Gulf TotalUAE 10,873 67.50Oman 3,364 20.89Bahrain 1,190 7.39Kuwait 308 1.90Qatar 210 1.30Saudi Arabia 162 1.00Total 16,107Source: GCC Secretariat's General Information and Statistical Center
GULF BUYERS FAVOUR UAE REAL ESTATE (2011)
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NEWS UPDATES
Dubai SME and NASDAQ Dubai agree to support SME sectorDubai SME, the agency of the Department of Economic Development (DED) mandated to develop the small and medium enterprise (SME) sector, and NASDAQ Dubai, the region’s international exchange, signed an agreement to guide SMEs towards suitable financing options to fund their growth, including carrying out an initial public offering (IPO).
The agreement underlines the commitment of Dubai SME and NASDAQ Dubai to promoting the expansion of high-quality SME companies, whose potential for rapid growth is set to play a critical role in the continuing expansion of Dubai’s economy. - WAM
Emirates NBD eyes SME loan surge in 2013Emirates NBD expects to double the amount of money it lends to small and medium sized enterprises, or SMEs, to over AED 1 billion (USD 272 million) next year, as the Dubai-based lender looks to diversify its lending portfolio to take advantage of the fast expanding sector, an executive said.
“This year the size of our lending to SMEs doubled from last year, and we expect it to double in 2013 from 2012,” Suvo Sarkar, the head of retail banking at Emirates NBD, told reporters. “I’d say it would be above one billion dirhams.” - Zawya Dow Jones
Ajman: Free zone targeting SMEs Officials from Ajman are hoping that investors can be convinced that size does matter when it comes to setting up shop and are taking the message to overseas markets that small and medium-sized enterprises (SMEs) can be a good fit for the Ajman Free Zone (AFZ ).
Established in 1988 and given autonomous status in 1996, the AFZ has expanded steadily and now has some 7,000 companies registered. With an area of one million square meters, the zone has the space to allow for expansion, though most of the companies operating out of the AFZ are relatively small scale, such as office-based service sector firms, light industry, logistics and technical services. This matter of size is by design, as the zone’s management have targeted smaller businesses that may not comfortably fit into larger trade zones. - Oxford Business Group
1.6m new mobile phone users in 10 months in UAENearly 1.62 million new mobile phone users joined the UAE market in the first 10 months of 2012 to push the total number of subscribers to a record high of 13.34 million, official data showed.
Fixed line users increased by nearly 115,000 but the number of internet subscribers through routers and fixed lines declined by nearly 378,000 during that period as many of them switched to smart phone browsers, showed the figures by the Telecommunications Regulatory Authority (TRA). - Emirates 247
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UAE’s first-ever Green Jobs Fair at World Future Energy Summit 2013Masdar Institute of Science and Technology, an independent, research-driven, graduate-level university focused on advanced energy and sustainable technologies, announced that the first-ever Green Jobs Fair in the UAE will be held during the World Future Energy Summit (WFES) 2013.
Organized in collaboration with Reed Exhibitions, the inaugural Green Jobs Fair at WFES 2013 is dedicated to the renewable and sustainable energy sector, and will offer job seekers an opportunity to connect with potential employers at WFES 2013.
The World Future Energy Summit and the inaugural International Water Summit (IWS) will be part of Abu Dhabi Sustainability Week 2013. The events will take place from January 15-17, 2013, at the Abu Dhabi National Exhibition Centre (ADNEC). - Zawya
Dubai Shopping Festival concludesDubai Shopping Festival - the annual extravaganza of sales and events enjoyed by the emirate’s retail sector - drew to a close after 32 days of discounts.
Organisers said that they “had delivered” on their slogan that the event showed “Dubai at its Best”.
Laila Suhail, CEO of festival organisers the Dubai Events and Promotions Establishment (DEPE), said the event had been a success.
“Dubai Shopping Festival has once again come to a successful conclusion and has helped establish Dubai as one of the world’s best destinations for shopping and tourism.
“DSF has even contributed towards boosting domestic tourism as evident by the tens of thousands of Emiratis and expatriates who frequently visited the festival,” she said.
VAT GCC at an opportune timeThe GCC bloc is looking into the Value Added Tax (VAT) but would be introduced only at a suitable time, according to Oman’s Minister Responsible for Financial Affairs, Darwish Bin Esmail Al Beloushi.
“Introducing VAT in ‘current condition’ was not feasible,” the minister said while presenting the State Budget 2013. - Gulf News
GCC population to soar by 30% by 2020The GCC population will soar by 30% to 53.5 million people who will form an increasing strain on the region’s supplies of electricity, food and water, a report by the Economist Intelligence Unit revealed.
“By 2020, the GCC population is forecast to reach 53.5 million, a 30% increase over the level in 2000. Over the same period, the region’s real GDP is expected to grow by 56% and the nominal GDP, which was USD 341.6 billion in 2000, is forecast to soar to over USD 1 trillion in 2010 and USD 2 trillion in 2020,” the report said. - Gulf News
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UAE retail jobs surge 45%The United Arab Emirates reported an 8% increase in online opportunities with hospitality sector topping the charts.
The UAE’s retail and trade and logistics sector recorded a huge spike in online job opportunities, surging by 45% year-on-year, according to the latest iteration of the Monster Employment Index.
The index is a monthly gauge of online job posting activity in Middle East based companies on a real-time review of tens of thousands of employer job opportunities culled from a large representative selection of career websites and online job listings. - Emirates 247
New firms in Jafza grow by 28% to 347 in 9 months The number of new companies joining Jebel Ali Free Zone (Jafza), the flagship free zone operations of Economic Zones World, grew by 28% to reach 347 in the first nine months of 2012 as compared to 271 in the first three quarter of 2011.
In the third quarter alone, 111 new companies joined Jafza, an increase of 32% in comparison to the same period in 2011, the authority said.
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Truth: He dreams of his business going places
Reality: Business Financing Solutions to empower his dreams
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B.R. Shetty: “You don’t need money to start a business”Dr. B.R Shetty, founder and chief executive of NMC Health, got up close and personal at the Emirates NBD Global Business Series. Here are excerpts from the interactive session moderated by T.Q. Qureishy, chief executive of Vantage Holdings.
On Role Models
It was my parents. They instilled confidence in me and encouraged me to do good for the society where my father was an officer at the municipal council. He did a lot of work in the municipal corporation and my mother assisted him. These two individuals were my role models. They guided me, along with my teachers, friends and well-wishers.
On Career Choices
I always wanted to fly high! Even during my schooling, I joined the National Cadet Corps and this is where I learned discipline. Whatever I did after was done with discipline. I joined college afterwards, and applied to become a pilot. There I got selected, but during the final interview in Mumbai, I was told that I was over the stipulated age by eight days. As for becoming a doctor, unfortunately I was not as brilliant a student as my wife, and therefore I could not join a medical college.
I went to Udupi, and studied in the fisheries school where I was in the first matriculation batch. The fishermen community elected me as the school people leader. And this was an honor because the fishermen wanted to elect a non-member of their community for this position. I got a great chance to experience leadership, and this quality along with discipline taught me governance, public speaking among others.
On Leaving Home
Everybody in the community was against my leaving Udupi. The people kept telling me not to go. But I had a choice to make and had started evaluating my financial situation. Without money, my reputation was at stake because the debt was piling up. People did not know about the debt. I thought it was a good decision to go the UAE, a new country that had just got its independence. I thought I should try my luck, and that’s why I came here.
On The First Job
By profession I am a clinical pharmacist. At the time I came, I applied for many jobs. The government jobs required knowledge of Arabic to dispense medicine, which I did not know. That is the time I was searching, and I could not get a job. So I went to a shop which I knew did not have a vacancy. I went to their warehouse, and I saw piles of medicines. Seepage from the nearby local houses was flowing into the warehouse and drenching the cartons at the bottom. They company was throwing these cartons out. I
saw an opportunity here: I told the company decision makers that I would sell these medicines in the market. They were shocked. I’m glad to tell young entrepreneurs today, that I was the first outdoor salesman as a medical representative in the whole country. Having started something new in the industry, I reaped the benefits. I got to know the people involved such as distributors, stockists and so on. I sold Nivea cream too. I remember loading the carton by myself and taking it to my car. This is how everything started and changed the wholesale business.
On Doing Business
My dear young entrepreneurs, you don’t need money to do business. If anybody says that you can do business without money, I am an example. It is a case study for anybody to understand. I went to Harvard and even here I was met with questions: Without money you did business? How? I’ve had dozens of MBA students asking me the secret. The answer is, have full faith in yourself. Be straightforward, and loyal to yourself, and take a good proposal to a banker. I am one of the beneficiaries of a bank. As long as you are loyal to yourself, and have the strength to face anything, a strong will, and a passion to do business, bankers will support you. I’d like to thank my bankers, as they are the real partners.
On Doing an IPO
Let me be frank here. We had a tough time. We were not spared by the local and global
recession. Liability increased and we had a cash crunch. So the banks were also worried on how to fund this company. Another good bank valued us at AED 1.6 billion, but they were scared to fund us, although they promised us the bridge finance. So that’s where we had a challenge. When we were going to give the mandate to a party, they could not pay the bridge financing that they had promised, I had to cancel it and I had no other choice than to go for IPO.
Then we went to London with prequalification documents for NMC and we were lucky to be the first company in the GCC to become a constituent of the FTSE 250 Index.
On Leaving a Legacy
I would like to be remembered as a great human being and a philanthropist.
Watch out for the next Global Business Series event featuring Mishal Kanoo, deputy chairman of Kanoo Group, on 28 February 2013 at the Samaya Ballroom, Ritz-
Carlton DIFC. For a chance to attend this exciting and informative evening, please register on .
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Truth: Not every business makes it to the Dubai SME Top 100 List
Reality: Register today and get the recognition you deserve
Starting an SME is hard work. Maintaining a successful one is ever more so.
If you have modeled your business on the following lines, then you may want it featured on to the Dubai
SME Top 100 list:
> Being a financially sound SME with a consistently high growth trajectory
> Owning innovative concepts with the potential to attract international investors
> Encouraging Investment of human capital that leads to corporate gains
> Adhering to the principles of sound corporate governance
Top ranked SME’s benefit from a wide range of capability development programs and market exposure.
If you’d like your business to be recognized in the Dubai SME Top 100 list, register today and give your enterprise the opportunity to turn into a bigger one.
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Visit www.dubaiSMErankings.com
Call 04 702 7383
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Emirates NBD recognised as the Most Friendly SME Bank in the UAE.
Thank you to all our SME customers for helping us
become the ‘Most Friendly SME Bank in the UAE’
at the Mohammed Bin Rashid Awards for Young
Business Leaders in December, 2012.
Our comprehensive suite of Business Banking products and solutions include:
> Equipment Financing
> Letters of Credit & Guarantees
> Working Capital & Term Loans
> Preferential Pricing
> Overdrafts
> Dedicated Relationship Managers
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