On diversification and ensuring resilience in uncertain climates
How have local companies adjusted their business strategies to weather the ongoing economic climate?
AHMED RAHMA AL MASAOOD: The past few years have been challenging for the regional economy, particularly in the aftermath of the oil price slump. However, these challenges have presented many opportunities for local companies to think outside the box and pursue diverse goals.
The local economy’s trajectory has in fact been recovering, with Abu Dhabi’s GDP expected to grow by 2.3% in 2018, up from 0.5% in 2017. This growth has largely been driven by government efforts to deviate from its core oil and gas industry into other sectors. These efforts are expected to yield GDP growth of 3% for Abu Dhabi by 2021. Alongside this, the gradual rise in oil prices has provided greater stability in the market.
With regard to diversification, Abu Dhabi’s commitment to expanding its revenue resources can be seen in the deployment of value-added tax (VAT) in 2018. Although this created some initial consternation among the business community, it has been adopted successfully and serves as a prominent income-generating instrument for the local government to reduce its reliance on oil and gas. Given all the benefits available for businesses operating in the UAE – from transport infrastructure to social services – and how low the 5% VAT rate is compared to other developed nations, it represents a minimal outlay for corporates. Another major example of Abu Dhabi’s commitment to diversification is the Abu Dhabi Investment Authority, which is estimated to be the world’s third largest sovereign wealth fund.
Businesses are able to align their objectives with these strategies, as well as the plans detailed in the Abu Dhabi Economic Vision 2030, in order to remain resilient.
What distinct advantages does Abu Dhabi offer as an investment destination for local and international firms?
AL MASAOOD: Abu Dhabi has gained recognition as the world’s safest city, which is a major incentive for any international company to set up operations here. However, the UAE’s benefits are not limited to safety and security. The UAE has one of the lowest Customs duties in the region, its location establishes it as a gateway between east and west, and land is widely available for industrial ventures and business clusters. In addition, a stimulus package is currently being deployed to enhance its competitiveness.
And, most importantly, Abu Dhabi is positioning itself as a centre of knowledge with the ability to capture global talent, as can be seen in cultural investments like the Louvre Abu Dhabi and international universities such as New York University Abu Dhabi and Paris Sorbonne University-Abu Dhabi. The availability and quality of educational institutions enable the UAE to develop talent that corporations can tap into, whether by recruiting or providing additional training.
Abu Dhabi’s attractiveness has also seen the arrival of many multinational companies seeking to add value across economic sectors, with local companies seizing opportunities to collaborate with them and diversify their portfolio. These synergies create opportunities for long-term investments and in-country value (ICV) initiatives. ICV is being emphasised as a major criteria for new projects, not least because it expands the country’s manufacturing base and helps align local standards with international ones.
In what ways are local companies optimising their operations amid cost pressures?
AL MASAOOD: Corporate optimisation is best achieved through internal restructuring, enabling greater efficiency and ensuring internal resources are being utilised in the best possible way. This leads to downsizing and expansions across different departments, effectively pooling all resources for the benefit of the company. Likewise, a local company that has long-standing relationships with international partners must effectively communicate the need to adjust business models to cope with changing market dynamics, and place a greater emphasis on cost optimisation, productivity and efficiency.
Artificial intelligence and ICT are vital tools being harnessed today to improve operational efficiencies across industries. We have invested heavily in various ICT platforms and applications to develop a competitive customer database programme, through which we are able to improve our relationship with end users and build consumer data to improve decision-making processes. Likewise, focusing on niche areas allows businesses to strengthen their competitiveness and delivery capabilities. For instance, we have focused on after-sales services as a critical component of our value proposition. As we saw margins associated with sales diminishing due to a highly competitive market, we realised that after-sales servicing is a critical component of building brand loyalty, raising margins and increasing business volumes.