On regional factors contributing to consumer goods growth
What do you see as being the most important growth drivers for the consumer goods industry in the coming years?
SAMIR: Consumer goods in IMEA have incredible growth opportunities that come from three key drivers. First is young demographics: up to 67% of the population in the IMEA region will be under 30 years old by 2030, according to data from the World Economic Forum. With the right set of policies, a larger share of young people can translate into growth and development for the economy as a whole, which in turn impacts consumption in a positive way since it is a sector that is directly correlated to GDP.
Second is urbanisation. For the first time in history there is a larger share of people living in cities at the global level than in rural areas. From a consumer goods perspective, this means a larger share of the global population is increasing its demand for these products as they develop urban consumption patterns. India and Nigeria will account for 40% of urbanisation in the coming years, which makes these markets especially interesting.
The third driver is digitalisation, which is enabling more efficient production and distribution processes that increase the competitiveness of the industry as a whole.
How can deeper regional integration serve as a catalyst for further economic development in the region?
SAMIR: The IMEA region has the potential to boost its economy by developing and strengthening intra-regional supply chains that allow each country to enhance its competitive advantages in the best way. Currently, intra-IMEA trade is the equivalent of approximately 10% of the region’s total GDP, so it is quite clear that there is plenty of room to grow in this area. To reach higher figures, countries must acknowledge that every nation does not need to develop the exact same industries. In fact, they can enhance each other’s competitiveness by allowing themselves to be more interconnected and interdependent. Some countries, especially those with larger populations, will do better in the agricultural and industrial sectors, while others have more expertise in services.
In the case of Dubai, it has a competitive advantage for being a business centre for the entire region. The availability of highly qualified human capital and the ease of bringing staff from abroad, as well as its regulatory framework and wide network of international trade and economic cooperation treaties, makes it an ideal place for multinational companies to establish their regional or even global headquarters.
What has been the regional impact of e-commerce as a distribution channel?
SAMIR: E-commerce is one of the most important trends that will affect all economic sectors in the near future. However, the speed of the shift will vary from country to country. In the UAE, for example, the move towards e-commerce is likely to be slower than in other countries, as going to malls is not just a necessity, but also an experience for consumers. In nations with lower-quality retail infrastructure, e-commerce will likely experience faster growth. Yet, to achieve sustained structural growth, delivery services in the IMEA region need to become more efficient and companies must adapt their return policies to increase consumer confidence.
How will the implementation of value-added tax (VAT) in Gulf countries impact the consumer goods industry?
SAMIR: The implementation of VAT still presents many uncertainties, especially when it comes to the details. However, 5% is a rather small percentage that the market will be able to handle without many issues – demand shouldn’t be affected in a significant way. This is especially true for the consumer goods industry, as it is a sector that presents a considerably inelastic demand. A positive effect of the implementation is that every transaction will have to be registered, resulting in increased transparency of the market. Overall, VAT will help further secure the sustainability of public finances, which in turn will increase long-term trust in the government’s capacity to implement the right set of economic policies.