The Gulf News reported about $41.5bn worth of imports or 32.6 percent of Dubai’s total imports — valued at $85.5bn — were carried out by companies in the free zones in 2009. Dubai houses around 20 free zones with more than 20,000 companies, and major imports, exports and re-exports happen via Jebel Ali Free Zone, Technopark and Dubai Airport Free Zone (DAFZ).

Albeit Dubai does not produce oil as compared to other key trade centers in the Middle East to fuel the economy, it relies solely on various business processes of exim trade. Dubai free trade zones are understood to have grown largely owing to its transit point status between growing economies of Asia and Africa as well as plunging into free zone strategy much early on.

Dubai’s first free zone was launched in the early 1980s when the government commissioned Jebel Ali port — now the main trading hub of the Middle East. The free zones across the globe have prospered mainly due to the possibilities of having controlling stake in investments and repatriable revenue generation opportunities.

And Dubai is case in point to it as foreigners can own 100 percent stake in companies within the free zones. It should be noted the UAE’s Commercial Companies Law restricts foreign investment in private companies to 49 percent and foreigners cannot do business without a local partner except at free zones.

Last week, DAFZ said it had recorded a 63 percent jump in sale during the first half of this year while Ras Al Khaimah Free Trade Zone reported that 785 companies have already registered for businesses during the first half of the year. Hamad Bu Amim, Director General of Dubai Chamber, said, “Dubai’s free zones are a major source of attraction for global companies and firms due to the many advantages they offer to investors looking for all the benefits of operating in the designated free zone areas.”

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A recent research from the Institute of Personal Care Science of Australia finds that the global cosmetics market is worth $334bn (Dh1.2tn) and the global halal cosmetics market is estimated at $13bn. According to another research from Euro Monitor International, the beauty and cosmetics industry is expected to increase globally by 8.5 percent by 2014, representing one of the few sectors that continues to grow despite the global meltdown.

While a Malaysian study described that the global halal business worth $635bn a year, had expanded from the Islamic countries to the Western nations with growing Muslim populations. In France, which is home to about five million Muslims, sales of halal food are set to reach $7.2bn by the end of this year.

Mah Hussain-Gambles, Founder, Saaf Pure Skincare, one of the first halal cosmetics companies in Europe, said “The industry has also benefitted from a rising concern about the use of harmful ingredients in cosmetics and 75 percent of my customers are non-Muslims.” She further added “The principles are the same – they want something that does not harm the body, the purity and that is exactly the same as the halal movement.”

Ahmed Pauwels, CEO of Epoc Messe Frankfurt, organisers of Beautyworld Middle East 2010 apprized that with growing consumer awareness and the drive for quality ingredients, halal personal care products were a high-growth segment with tremendous potential. Similarly, Elaine O’Connell, Senior Show Manager of the beauty trade show opined customers in the prosperous and high-growth markets of the Middle East were becoming increasingly selective of the quality and content of the products they used, and this was reflected in the surge in demand for halal-certified beauty products.

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As per the latest updates on volcano, many of Europe’s busiest airline routes will remain closed until Saturday. Furthermore, if one goes by the volcanologists warnings, the eruptions could continue on-and-off for months, potentially meaning continued delays and closures. It is estimated just three days of air traffic closure alone will take months for the aviation industry to recover from the mammoth losses.

The Centre for Asia Pacific Aviation or CAPA figures show that some six million passengers could be affected world-wide if the closures continued for up to three days. The volcanic clouds spewed above 30,000 feet have forced air travel virtually impossible as the jet engines could be shut down if they sucked in volcanic debris.

High-flying volcanic ash consists of extremely fine silica particulates that could easily enter jet engines, which operate at temperatures of about 2,500 degrees Fahrenheit. Silica melts at about 2,000 degrees, and at that point it fuses to turbine blades, nozzles and other critical engine parts, causing the engine to clog, overheat and eventually shut down.

It is now evident that the losses to the aviation industry and auxiliary ones would run into billions of dollars. London’s Heathrow Airport, which is the worst affected due to the second Iceland’s volcanic eruption, itself clearly supports to that logic since one of the world’s busiest airport manages more than 1,200 flights and 180,000 travelers per day. And any delay to the resumption of air travel and cargo movement is bound to create grievous financial problems to the industry which is showing some signs of revival along with global trade after the meltdown.

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The food imports have considerably risen in the last few years in view of the increase in population as well as water scarcity and hostile land conditions. The UAE and Saudi Arabia are already developing arable lands and food processing units in several Asian and African countries in a bid to overcome the snowballing global food shortages.

Harish Rupani, managing director of Equinox Trading, a food products trading company, told the Gulf News that growing food locally was not a viable option for the UAE as it costed three or four times more to grow local crops than it did to import. Dubai, the UAE’s commercial hub is one of the largest re-exporting centres in the world, and it traded in 2008 about $1.2bn worth of food-related items.

In the recent estimates by the Business Monitor International (BMI) indicate that food expenditure in the UAE reached $6.7bn in 2009. And it has been forecasted that it would grow by close to 3 percent in the current year.

The heavy dependence by the GCC on food imports also makes it the most vulnerable to not only price variations but also to increasingly changing food policies of the exporting countries such as blanket ban on exports of certain food commodities which are scarce in those markets.

The Standard Chartered’s most recent food report claims food prices are at a historic high and rising, around 80 percent higher than the low mid-2002 levels. Rupani said that prices of sugar and rice had tripled over the past five years.

The BMI is understood to have learned that the UAE government is making numerous efforts to increase the number of food processing plants in the country. The government has invested about $1.4bn into the food sector since 1994, and there are 150 food processing plants operational in the UAE today.

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Dubai’s strength comes from the over supply of realty units which in turn reduced prices considerably to make them attractive for investors overseas. Many projects regardless of size those which are either put on hold or shelved will likely factor in on supply and demand quotient to give an edge to the failing real estate firms with higher price and profitability in the near future. “As development projects are temporarily or permanently halted, the oversupply will begin to diminish,” the report said.

However, the challenge for local developers is to confront the coming consolidation wave, review diversification strategies and manage existing assets wisely. The commercial segment may be the most affected as the available office space will jump from 4mn to 6mn square metres by the end of 2011.

AT Kearney report titled “2010 Real Estate Global Opportunity Index” says Dubai’s experience is a cautionary tale for other GCC countries to manage supply in accordance with demand. It also noted that the UAE real estate was cheaper in comparison to its global peers.

In contrast, Abu Dhabi, the UAE’s capital emirate has witnessed increase in tourism and airport traffic, bank lending criteria for residential sales had been relaxed and construction costs were down 30 percent since the end of 2008. Besides, the emirate boasts of $200bn real estate and many high-visibility projects, such as the successful Formula 1 racing event on Yas Island.

A host of luxuries offered by the GCC member states such as, an environment for high style living standards at a lower cost now is likely to attract foreign investors to bet on the future of the region. Nevertheless it is observed that the oil reserves amounting to more than $5 trillion would continue to be central to these economies for many years to come.

Likewise, Saudi Arabia is the largest real estate market in the region with numerous mega projects. Unlike the UAE, Qatar or Bahrain which depends on foreign investors, the Saudi kingdom has its own domestic demands to be fulfilled in its realty domain. It has been forecasted in another study that Saudi Arabia will face a shortage of up to 1mn housing units over the next three years, as residential prices increase nearly seven percent annually.

The GCC real estate is likely to perk up as there are indications of a global recovery ushered in by emerging economies including China and India where reality has started looking up. Millions of new housing units at affordable prices, falling interest rates and job market stability are expected serve as a springboard to a quick rebound for the region.

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Apart from the UAE, Saudi Arabia and Bahrain are also seemed to have impressed by livestock farming opportunities in Thailand. The southern provinces, the Andaman region of Thailand have been chosen for the proposed mega livestock farms.

The climatic conditions and geographic placing of Thailand are claimed to be the most suited in Southern Asia for livestock production and paddy cultivation. However, the UAE’s interest in rice production would not be possible due to shortage in suitable lands.

The UAE already has ambitious plans to establish agricultural production centres in Sudan and Pakistan. The Abu Dhabi Fund for Development aims to develop 70,000 acres of land for food production in Sudan alone.

Similarly, Saudi Arabia has also invested in overseas agricultural farms including Pakistan to ward off any potential food shortage threat like that which confronted the globe last year. The desert nations are showing keen interest in developing agricultural and livestock farms outside their region since engaging in similar activities in the region would require manifold expenditure, and also not sure of the results.

To cater to the burgeoning Middle East market, Thailand has made several plans for investing in the production of halal meat and dairy products in countries such as, Pakistan and Bangladesh. According to Thai government sources, Charoen Pokpand Foods, the largest agri-business firm of the country is preparing to develop mega livestock farms in Russia as part of its expansion plans to fulfil its export shortfalls.

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A large portion of animal imports to the UAE come from the European countries including the UK, Portugal and Austria. There are several cases reported in the last one year from countries such as – Germany, Italy, Norway, Greece, Spain, Israel, Sweden, the Czech Republic, Denmark, Algeria and Austria.

Blue-tongue virus is non-transmittable to humans and non-contagious among animals. The disease is characterised by changes to the mucous membranes of the tongue and nose, and certain types of midges are vectors of this animal disease. The ruminants including camels, cattle and sheep are chiefly susceptible to the virus.

According to new regulation, every animal arriving from blue-tongue affected countries will be individually inspected. Prior to the directive, only a random sample of about 10 per cent of each shipment had undergone inspection.

Besides, the animals should not be stung by the midges for a period not less than 28 days from the date of shipping. Regarding import of sperm, embryos and ova, the donating animals should be immunised against stings of midges for a period not less than 60 days before and during the process of collecting the sperm, ova and embryos.

However, OIE is surprised by the timing of the UAE’s move to clamp restrictions to animal imports particularly because these strains have been reported for more than a decade in Europe and the Mediterranean. Glaieul Mamaghani, deputy director of communications at the OIE asserted that the virus could not be transmitted to humans. The UAE ministry said that the effective date for the new regulation would be made known in a few days’ time.

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Some of the experts argued that the six Gulf nations had planned their 2009-10 budget maintaining oil prices at an average of $45-55 a barrel, therefore, taking into account the month-long stable oil prices at $50/barrel would in fact record marginal surplus rather than deficit budgets. Although EIB had warned of a deficit budget, they had ruled any possibility of 1990’s situation that inflicted heavy debt and low assets among the GCC member states. The reason cited is that they had accumulated huge financial reserves since last five years owing to a steady increase in oil prices, and particularly the first quarter of last year when the prices skyrocketed to reach the all time high of $147/barrel.

In 2008, though GCC member states estimated a budget surplus of $32bn, they amassed about $190bn surplus since the oil prices averaged at $95/barrel throughout last fiscal. Experts pointed out that if at all any member in the GCC to fall short of a surplus would be Saudi Arabia, because it produces almost a third of the total output of the region to make it the biggest loser or gainer while the prices fluctuate. As an OPEC member, Saudi Arabia along with other members had cut oil production several times since last November to halt the slide in oil prices, and the current production stand at 8.2mn barrel/day from last year’s high of more than 9mn bpd.

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Industry observers said though the intra-day trade saw marginal dip in oil prices, however early next month would see further slide before OPEC’s likely production cut on March 15. Nevertheless, they further predicted that the traders were expecting an increase in demand by April in view of lower stockpiles to spark off demand, and a gradual price rise would follow until it stabilized at $60 per barrel by September this year.

Due to the sliding oil prices, most of the companies are reluctant to increase their inventory expecting the prices to fall further and avoid losses. But by April, the depleting stockpiles are likely to prompt the buyers to increase their inventory, and the trend is expected to push oil prices up despite receding global demand.

In its latest monthly report on Wednesday, the Paris-based IEA stated the forecast for global oil demand was revised down by 570 kb/d to 84.7 mb/d in 2009 (-1.1 percent or -1.0 mb/d year-on-year) after the IMF again slashed its GDP growth prognosis to half a percent. The worsening global slowdown was blamed to be the reason for them to crimp the oil guidance further, the report added.

According to sources, the US crude oil inventory unexpectedly fell by close to 2mn barrels.
However, the lower demand due to the US economic crisis has weighed down against their reduced supplies severely. Similarly, the reports from China, the second largest oil consumer after the US have also shown the crude imports dropping by 8 percent, a lowest level in 15 months despite showing marginal increase in domestic demand.

The diminishing demand for naphtha, a by-product of crude which is primarily used as a feedstock for the production of plastic and synthetic fibres has also contributed to the price fall. The IEA warned the lower oil prices were forcing many companies to postpone or cancel many exploration and production projects which would ultimately make a huge dent in supplies when the global economy turned around. Nonetheless, analysts deduce that reaching the high of $147 per barrel once again is most unlikely as governments and companies are investing more on renewable energy sources owing to the fears of higher oil prices and climate change.

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