The Middle East Market SIS International Research

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Middle East MarketSeptember 2007

Presented By SIS Global Research Media,

a division of SIS International

SIS International

Custom Research

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Presentation Contents

Introduction:

•Demographics

•Stability Report

•Society

•Culture

UAE

Qatar

Bahrain

Economic

Snapshot

Booming

Industries

Opportunities

Barriers

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presentation. Users who base investment, strategic or marketing decisions on the

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Executive

Summary

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Executive Summary

• Given opportunities and emerging economic factors, the Gulf regionis being considered for investment & commerce.

• Although major multinationals are in the region, global midsizedcompanies ($200-800 million) are expanding in the region

• US companies are generally slow in entering region vis-à-visEuropean ones

• Region is currently stable, and governments investing heavily ininfrastructure

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GCC Market

Gulf Cooperation Council,

a customs union involving:

• United Arab Emirates: Dubai, Abu Dhabi

• Qatar: Doha

• Bahrain: Manama

• Oman: Muscat

• Saudi: Riyadh, Jeddah

• Kuwait

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GCC Market Qualities

Characteristics:

• Young societies

• Rapid economic growth

– Strong non-oil businesses and private sector

– Growth in some markets rivals that of China

• Continuous inflow of foreign capital

– Increased liquidity from oil revenues

– Arab reinvestment of profits back into region

• High standards of living

– Wealthy countries

– Consumer economies

• Countries competing with each other

• Economic link between Europe and Asia

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GCC Population

Source: IDB Census Data 2007. Chart produced by SIS International.

14,979,88812,993,24911,769,011Total

201520102007Year

Excluding Saudi Arabia

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UAE Demographics

Source: CIA world factbook. Chart produced by SIS International.

Sex Ratio: 1.48 Males/1 Female

Population Growth: 2.39%

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Bahrain Demographics

Sex Ratio: 1.25 Males/1 Female

Population Growth: 1.4%

Source: CIA world factbook. Chart produced by SIS International.

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Qatar Demographics

Sex Ratio: 1.85 Males/1 Female

Population Growth: 2.39%

Source: CIA world factbook. Chart produced by SIS International.

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Social Snapshot: GCC

• Significance of Family

– Obligations & rules

– Impact on the decisions one makes

• Modern youth

• Importance of Islam in commerce and dailylife

• Increasing familiarity with technology

• Importance of honor and reputation

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GCC: Stability Report

• Stable

• Oasis of stability in an volatile region

• Business interests a major priority for GCCgovernments

Analysis

• Markets heavily reliant on tourism and FDI (e.g.Dubai) could be affected by regional war

• Boycotts against branded products a possibility

• Markets relying on Arab investment more resistant

• Threats: political instability, terrorism, globaleconomic downturns

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Growth

• Strategic business advantages

– Achieve competitive edge

• Location: Trading hub between Europe and Asia

• Currently stable GCC market

• High economic growth

– Large consumer market

– Pro-investment environment

• Fear of falling behind competitors

– Many multinationals have regional presence

– Fear that neglecting region can impair longterm competitiveness

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Economic Snapshot - UAE

Economic Benefits

• Remarkable growth & opportunity

– 8.9% real growth in 2006 [CIA]

• Diversifying towards tourism, media & financialservices

• Modern, English-speaking

• Strategic market: Gateway to KSA, other GCCmarkets

• Ranks 32nd most competitive global economy [WorldEconomic Forum]

– Most competitive Gulf economy

– Strengthening legal system by 2010

– Most industries pay no federal corporateincome tax

Economic Obstacles

•Liberal overall, except for operatingregulations

–Local sponsors

–Labor rules

•Foreign ownership regulations–100% ownership only for …

–professional companies

–branches of foreign companies

–contingent on a local sponsor

•Inflation from construction and housing prices

•Real estate supply fluctuations

•Insufficient urban transportation

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The Dubai Market

• Stable

• Current and future banking & financial hub

• Regional headquarters for many companies

• Internationality, openness

• Large Tourist and Expat market

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Abu Dhabi

• Capitol & Largest emirate

• Significant oil reserves– 10% of the world’s output [FDI Magazine]

• Diversifying– Targeting Arab investment

– Encouraging private enterprise

• Limits on foreign ownership

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Key Industries: UAE

• Consumer industries– Automotive

– Retail (e.g. Mobile phone)

• Real Estate & construction– Significant demand for housing

• Tourism services and accommodation

• Transportation infrastructure

• Media

• Information Technology

• Consulting Services

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Economic Snapshot - Qatar

Economic Benefits

• 7.1% growth in 2006 [CIA]– Due to liquidity from oil and the growing non-oil sector

• Diversification– Towards a knowledge & technology based economy

– Gov’t invested $130 Billion into industrialization policy [Qatar Financial Center]

• Aggressive investing policy abroad

• Liberal business environment– Few restrictions on corporate remittances

Economic Obstacles

• Inflation caused by housing prices and construction costs

• Time required to start-up a company

• Similar ownership regulations as in UAE

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Key Industries: Qatar

• Education services– Universities

• Technology– Science and Technology Park

• Media Services

• Financial services

• Consulting Services

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Economic Snapshot - Bahrain

Economic Benefits

• Saudi money

• One of the fastest growing Arab economies

• Liberal economy– 25th Freest economy in the world, according to the Index of

Economic Freedom 2006

– Tax free

• 7.8% real growth 2006 [CIA]

• Effective diversification from oil– Banking & service economy

• Free-trade agreement with US

Economic Obstacles

• High unemployment

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Key Industries: Bahrain

• Islamic banking

• Construction & Real Estate

• Media

• Tourism services– Saudi tourist hot-spot

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Future RegionalEconomic Snapshot

• GCC Common Currency Plan 2010

for all GCC members– ECB has already consulted on this planned currency union

– Economic Benefits:

• Limited Foreign Exchange risk, attracting foreign investors

• Controls on inflation

• Increased competitiveness resulting from integration

• Increased international trade

• Facilitation of trade among existing trading partners (e.g. EU, US)

• Longterm Regional Economic Threats– Threats of political instability, terrorism and global recessions

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Booming Industries

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Real Estate & Construction

Real Estate

• About 25% of world’s cranes in Dubai,according to Gulf News

• Housing demand in UAE exceeds supply

• Residential & commercial rental prices onsteep rise

• Ownership restrictions [e.g. freeholdsystem] exist

• Major developers– EMAAR

– Dubai Properties

– Nakheel

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Developments

• Dubailand

• Universal Studios

• The Palm

• Business Bay

• Sports City

• Media City

• Ski Dubai

• Knowledge Village

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Automotive Market

• Significant Demand

– Due to lack of transportation alternatives,climate

– Wealth

– Inexpensive petrol

• Reselling and exporting

• According to Nissan, Middle East market isstrategically important

• Major sales markets for GM and Toyota

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Healthcare

• Healthcare costs and insurance premiums on therise

• Dubai Healthcare city is to open in 2010 fortreatment & research

– Mayo Clinic Middle East

– Harvard University collaborating with project

– J&J, AstraZeneca, & many others are establishingstrategic partnerships

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Banking & Finance

• Islamic (Shari’ah) banking niche market– Islamic finance industry worth about $1 trillion dollars

– Grew at least 10% each year during the past 10 years

– More resistant to fluctuations in finance market

– Several listings on London Stock Exchange

– European banks already involved: HSBC & BNPParisbas

– High-net worth individuals (HNWIs)

• Currently stable

• Financial centers: Bahrain & Malaysia

• Credit card ownership to rise by 51% by the end of 2007[Lafferty Group]

– High profitability per card in GCC region

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Retail

• Retail spending in UAE estimated toreach $7.6 billion by 2009, according toAME

• Mall culture

• Ubiquitous foreign brands:– Carrefour, Starbucks, Borders, Zara,

H&M, Body Shop, Bally, Aldo, Toys R’Us, Ikea, etc.

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Information Technology & Media

• Local governments updating ITinfrastructure

• New developments require ITinfrastructure

• Bahrain attracting media– MBC

• Dubai Media city– CNN

– BBC

– Reuters

– AP