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Signs of Resurgent Consumer Confidence Seen in 2010

DUBAI - 2009 has been a grim and dismal year for most businesses across the UAE in the backdrop of one of the worst financial crises in history.

The UAE, despite its strong economic fundamentals, progressive and pro-investor policies and strategies, was not immune to the economic turbulence that swept across the globe, wreaking financial havocs to national economies and businesses.

However, an excellent crisis leadership and proactive monetary and fiscal measures helped the UAE economy to withstand the fallout of the financial tsunami more efficiently than most other economies.

As 2010 dawns, Khaleej Times spoke to a cross section of business leaders in Trade & Retail, Banking & Finance, Services & Transport and Real Estate sectors to find out their expectations and concerns about 2010 and also their plans for a year that is widely anticipated to show signs of at least a U-shaped recovery. They were also asked to take stock of one of the most turbulent years in their lives and the steps they took to navigate the crisis. Following are excerpts from their comments compiled by the KT team that includes Haseeb Haider, T. Ramavarman, Rocel Felix and Abul Basit.

Abdul Jabbar Al Sayegh, Chairman of Al Sayegh Group and director of Abu Dhabi Chamber of Commerce and Industry :

The second quarter of 2009 saw 30-35 per cent growth in consumer spending on the electronics and textiles are signs of consumer confidence.

However, luxury consumer segments like watches, jewellery and other items showed decline in sales by 30-40 per cent. I expect the continuation of the same positive trends into the year 2010, in the markets, as development projects announced in the emirate would create more jobs, encouraging people to spend.

Yusuffali MA, Managing Director of EMKE Group & Director of Abu Dhabi Chamber of Commerce & Industry :

Contrary to what was being predicted, the retail sector, especially our supermarkets and hypermarkets have done reasonably well even in the so called dismal year. Yes the consumers have become more cost & value conscious and demand more for their Dirham, which in fact suits our format of business as Lulu has always been perceived as a "value for money" retail chain. As I have always said, these tough times are the litmus test which a company with sound fundamentals and clear growth plan only can pass. We were not unduly worried with all these talks of slowdown and recession, in fact we opened six new hypermarkets in different GCC cities last year and are going full steam ahead with all our planned new projects in the GCC, Egypt and India.

The various timely and effective steps taken by our visionary Rulers has also helped the economy withstand the Global slowdown and boost the sentiment of the local and international business community. I am quite optimistic about 2010 and hope that all these rumours and apprehensions in the market will vanish and we can refocus on further strengthening our market share and continue to play our part in the overall growth of UAE economy.

Paras Shahadadpuri, Chairman of Nikai Group of Companies and President of Indian Business and Professional Council:

I feel that the worst is behind us and 2010 is expected to be certainly a better year than 2009. But we cannot be complacent and we have to be on the ball. While the business community of the UAE is very entrepreneurial, we want Government authorities to continue to support the business environment. It would be desirable to have more transparency of economic situation. Frequent official briefings by authorities to the media would be helpful so that rumours are put to an end, so that the Dubai-bashers do not get an opportunity to spoil the great image of this amazing country which has built its state-of-the-art infrastructure. This beautiful infrastructure alone will play an important role in proving the economic resilience of UAE and what it has done for the past years to bring Dubai and UAE on the world map. I am very confident of the positive attitude of the Dubai and UAE leadership and in its federal structure and their ability to tackle such unexpected economic difficulties.

2009 has been one of the toughest years in the recent history, not only for UAE and Dubai, but for the entire world but with varying intensities. Thanks to the timely interventions of the fiscal and monetory authorities, the high impact was relatively cushioned. Its result is visible that UAE economy has started bouncing back from its lows. I must salute the business community of UAE who never accepted this doom and they have come out with various initiatives and ideas to fight this economic tsunami which hit the entire globe.

Dr. Ram Buxani, President of ITL Group-Cosmos.

The turbulence in the global economy, of which UAE is victim, has obviously affected our business but not really disturbed. Being a trading organisation, the mindset of buying public, which heavily fluctuates in such situations, affects vendors. However, the geographic situation of Dubai gives it inbuilt resilient capacity to sustain such economic typhoons as it has proximity to countries housing billions of people which keeps demand in tact. We have consolidated our activities and put halt to any ambitious plans. It may not still be easy, for most of the organisations to move into positive figures in near future as the severe competition may take time to bring about adjustments in prices to take care of hike in overheads in past few years. Passing through 2010 peacefully is a real test. I feel the new decade starting 2011 should bring in an economic revival.

Joy Alukkas, Chairman of JoyAlukkas Jewellery Group:

Like most entrepreneurs I remain optimistic about the future, but at the

same time, the reality is that we anticipate significant fluctuation in gold price in 2010 too.

There might be some contraction or consolidation in the jewellery supply chain. Like 2009, we will keep our eyes open for new opportunities and at the same time be cautious to the environment and the sentiments of the jewellery buyers.

The UAE has announced that its economy would recover and show growth. We look forward to this.

The global financial crisis has been posing most difficult economic challenges to many business leaders. We have had to shift gears quickly, from expectations of sharply rising inflation and growth early in 2008 to an economic contraction in major economies. It is probably safe to say that no sizeable industry, economy or region has gone unaffected in 2009, and indeed it was an eventful and challenging year.

Globally, 2009 was a year of solid economic changes. We experienced considerable fluctuation in certain factors significant to our business such as gold price, exchange rates and purchasing power and sentiments of our customers. Since we remained consistently concentrated in our core jewellery business, it has not much affected us.

2009 has been a year of flat growth rate; however we are experiencing some positive increase in the bottom line due to our balanced cost reduction plans.

Deepak J. Babani, Chief Executive Officer of Eros Group :

With the cost of doing business, including rentals expected to come down in 2010, we believe that the worse is already over. We expect tomove on a growth path in 2010. Concerns are that we should not have any new financial surprises or shocks in 2010.

At Eros , we are planning to grow by 25 per cent over 2009, and are quite confident that we will meet the objectives set. 2009, as one would expect, was not a great year, but considering the global and regional economic crisis, Eros faired fairly well. While the electronics market as a whole dropped by 15-20 per cent, Eros revenue grew by 15 per cent. The effects of the economic crisis were felt in October 2008, but by April 2009 we saw the market stabilise. From April 2009 we saw sales moving upwards on month-to-month basis.

We limited our expansion plans to the bare minimum required, but did not stop our expansion plans. The general market took the downturn very severely and number of companies cut staff, because everybody was doing so. At Eros , we made calculative moves, did not retrench staff, but did not add staff as well.

Santosh Varghese, Regional General Manager of Computer Systems Division, Toshiba Gulf :

Toshiba is confident of a major turnaround during 2010. All markets in the region will continue to see a reasonable growth fueled by the launch of Windows 7 from Microsoft and a new CPU from Intel. The Toshiba brand has high brand equity within the region. Customers trust us for our quality and reliability. Just recently, independent research has recently honoured Toshiba laptops and notebooks for highest overall quality and reliability in the market.

Most businesses have struggled to maintain sustainability and profitability during the global financial crisis. However for Toshiba, we have seen over 15 per cent growth in sales out regionally, compared to the same period last year, and Toshiba has over 22 per cent market share in the consumer segment across the region, thus demonstrating Toshiba's brand leadership and the trust that consumers place on Toshiba.

Kamal Vachani, Director Al Maya Group of Supermarkts and Department Stores:

We have great hope for 2010 and are very positive about the prospects of an all-round recovery in the coming years. With the major global economies showing signs of recovery, we believe consumer confidence will bounce back in 2010. They will spend more and help speed up the recovery process.

2009 has been an year of slowdown not only for the Middle East but also for the entire world in the backdrop of the global economic crisis. Except for gold, commodity prices had dropped during this period. During 2009, consumer confidence was very low. Consumers spent less triggering a general downturn in retail sector

R.Krishnan, GM of Galadari Automobiles Company Ltd:

2010 is expected to be a better year as all distributors are placing their orders with manufacturers more cautiously. We expect the first half of the year to be sluggish and recovery may start during the second half. If banks can ease the credit squeeze they have imposed, business can recover faster. Consumer confidence suffered a setback recently and job losses are still prevalent across various industries. 2009 was a year of economic upheaval for all sectors of the economy and automobile industry and property sectors were most affected. Consumer confidence had taken aback and did not regain until the second half of the year. Banks had also tightened the credit flow and that added to the woes of the industry. Towards the end of 2008, all distributors were upbeat about the business growth and expected a 20 per cent growth in 2009. Anticipating this growth, they had placed orders with manufacturers. When the downturn happened suddenly, ordered consignments started to arrive in the first few months of the year resulting in very high stock levels for all brands. Panic struck the distributors who resorted to a price war to reduce stock levels. This led to an unhealthy competition in the industry, resulting in heavy financial losses to all brands.

Michel I. Ayat, Chief Executive Officer of Arabian Automobiles Company :

We are projecting approximately a 5 per cent growth during 2010 in the UAE car market. We believe the economic recovery is 'U-shaped', which is a positive sign for the UAE car market although it will take at least until 2012 to see sales volumes come close to their highest point in 2008. I think we should all be grateful to see that our government in Dubai is working in the true spirit of the UAE to navigate us through economic uncertainty and we are confident the nation will emerge healthier and stronger in 2010. From a global perspective, production capacity of automotive companies is 100 million units against the global demand of 65 million units before the start of the economic crisis.

With the onset of recession, the global demand fell to 50 million units that led to manufacturers either closing plants or reducing working days to compensate for the fall in demand. Nissan Motor Company was extremely fast in its response to the global drop in demand for cars and took quick and measured actions to the situation by adjusting the production levels at its factories and other necessary measures to minimise its exposure to the downturn.

Rizwan Sajan, Chairman, Danube Building Materials :

2010 for sure looks promising, as the sentiments and confidence of Investors is much better and with so many ongoing projects. In construction and building materials, when we started 2009 we were very skeptical as how we shall manage this recession as all of sudden everything had come to stand still. But luckily for the UAE, it was not all that bad as there were lot of projects ongoing which kept the momentum going in 2009.

 In UAE we are expecting a sizeable growth.

By Issac John

© Khaleej Times 2010