Dubai BusinessSurvey - Q1 2018

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AT A GLANCE

■ A y-o-y comparison shows that the Composite BCI has gained a marginal 5.5 points, increasing from 111.2 points in Q1, 2017 to 116.7 points in Q1, 2018

■ The Composite BCI has risen from 111.2 points in Q1, 2017 to 116.0 points in Q4, 2017 and 116.7 points in Q1, 2018.

■ Expectations of higher volumes are strongest for the trading sector compared to the manufacturing and services sectors.

■ The Composite BCIs for SMEs and large companies is recorded at 110.6 and 120.8 points, respectively.

■ Dubai’s overall business community is less optimistic compared to exporters with Composite BCI scores of 116.7 and 121.0 points, respectively. Exporters have a stronger forecast than domestic-market oriented firms for all the parameters in the survey.

■ In terms of the business situation, 50% of the respondents anticipate an improvement in Q2, 2018 versus 41% in Q1, 2018, while those expecting stability declined from 51% in Q1, 2018 to 40% in Q2, 2018. 49% of the respondents do not expect any negative factors to hinder their business operations.

■ Plans to expand capacity and upgrade technology have improved on an annual basis. 71% of the firms hope to expand their capacity in Q1, 2018 versus 61% in Q1, 2017. 68% of the firms intend to invest in technology upgrade plans in Q1, 2018 compared to 65% in Q1, 2017.

INTRODUCTION

The Department of Economic Development (DED) was established in March 1992, with the objective to organize, regulate and boost trade and industry within the Emirate of Dubai.

In October 2008, HH Sheikh Mohammed bin Rashid Al Maktoum, UAE Vice President and Prime Minister, and Ruler of Dubai, issued Decree no. 25 giving full responsibility to DED to plan and regulate the overall economic performance of Dubai, supervise its functions and support the economic development to ensure that the objectives of the Dubai Strategic Plan are achieved.

DED is still responsible for its traditional activities of business registration, licensing and commercial protection in Dubai. However, with four new agencies offices now under the umbrella of DED, the mandate has been extended to include:

1. Dubai SME

2. Dubai Exports

3. Dubai Investment Development Agency (Dubai FDI)

4. Dubai Competitiveness Office (DCO)

In line with DED’s new mandate, the Economic Information Division conducts a quarterly Business survey, in coordination with DED Agencies (Dubai Exports & Dubai SME) and in collaboration with Dun & Bradstreet South Asia Middle East Ltd., in order to provide a timely and objective assessment of business expectations and performance. This document summarizes the main findings of the survey for the first quarter of 2018.

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The Department of Economic Development (DED) is a Dubai Government entity that has the mandate to help achieve the key strategic objectives of fostering ‘Sustainable Economic Development’ and strengthening the ‘Competitiveness of Dubai’.

In order to gauge the perceptions of the business community, DED conducts a quarterly business survey, to assess the level of current economic activity and the outlook of businesses for the next quarter.

In addition, the survey elicits feedback from businesses on challenges that may impact growth and development and assesses their investment outlook for the coming twelve months.

The quarterly business survey for Q1, 20181 was conducted with a total sample of 502 companies across the Emirate of Dubai. The sample included a mix of small, medium, and large enterprises and had adequate representation from the manufacturing, trading, and services sectors in proportion to their respective contributions to Dubai’s GDP.

In order to gauge ‘business outlook’ or expectations, the quarterly survey focuses on key indicators, such as sales revenue, selling prices, volumes sold, profits and number of employees. Respondents are asked to indicate if they expected an ‘increase’, ‘decrease’ or ‘no change’ in these parameters. The Q1, 2018 survey has captured the perceptions of companies across 30-35 sub-sectors.

1 For the purpose of the survey, each quarter is defined as follows: Q1 is the period between January and March, Q2 is the period between April and June, Q3 is the period between July and September, and Q4 is the period between October and December of each year.

METHODOLOGY

Figure: 01

Survey Sample

Overall Sample 502

Large Companies 66

Manufacturing 7

Services 46

Services (SME)

Trading 13

Manufacturing (SME)

Large Companies

Trading (SME)

70

195

171

66

The Business Confidence Index (BCI) is calculated as a weighted average score of the following ‘business outlook’ indicators:

■ Selling Prices

■ Volumes Sold

■ Number of Employees

■ Profits

For each indicator, ‘resulting scores’ are calculated using the net balance method:

(% of positive responses - % of negative responses) + 100

For the Composite Business Confidence Index, the resulting scores are multiplied with their corresponding weights to arrive at a weighted average index score2. This index is finally rebased so that Q2, 2011 = 100. Taking account of the economy’s composition by firm size, the index is weighted by the relative contributions of SMEs and large businesses to Dubai’s GDP. The final result is the following index calculation: Overall Index = 60% * (Large enterprise Index) + 40% * (SME Index).

BCI scores are classified in the following three groups:

■ BCI < 100, business expectations are negative

■ BCI = 100, business expectations are stable

■ BCI > 100, business expectations are positive

When expressed with reference to the base quarter Q2-2011, the following interpretations hold (t and t-1 referring to two consecutive quarters):

■ BCI(t)< BCI(t-1): business expectations are declining

■ BCI(t) =BCI(t-1): business expectations are stable

■ BCI(t)> BCI(t-1): business expectations are rising

2 Weighted Average BCI = [(Net Balance on Selling Prices) x (Parameter Weight)] + [(Net Balance on Volumes Sold) x (Parameter Weight)] + [(Net Balance on No. of employees) x (Parameter Weight)] + [(Net Balance on Profits) x (Parameter Weight)]

BUSINESS CONFIDENCE INDEX CALCULATIONS

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Dubai’s economic performance is expected to improve in 2018 with firming oil prices, an improvement in global trade and the expected easing pace of fiscal adjustment. Real GDP, which grew 2.85% in 2016, is projected to grow 3.5% in 2018 and touch 3.7% in 2019 as infrastructure development and diversification policies continue apace. To back this growth, the Emirate is mulling to implement new measures to attract new investments and cut the cost of doing business across sectors from tourism to financial services. The forecast for Q2, 2018 is optimistic, with the Composite Business Confidence Index (BCI) at 116.7 points in Q1, 2018 (A score of 100 indicates stable/neutral sentiments).

A y-o-y comparison shows that the Composite BCI has gained 5.5 points from 111.2 points in Q1, 2017 to 116.7 points in Q1, 2018. On a quarterly basis, the Composite BCI is marginally up by 0.7 points from 116.0 points in Q4, 2017 to 116.7 points in Q1, 2018.

Large companies are more optimistic than SMEs with respect to the business outlook, with Composite BCI scores of 120.8 points and 110.6 points, respectively. While large companies are more confident than SMEs about their outlook for revenues, selling prices, volumes, hiring and profitability, SMEs have displayed a stronger forecast for new purchase orders.

BUSINESS CONFIDENCE INDEX - Q1, 2018

Figure: 02

Composite Business Confidence Index - Q1, 2018

111.2116.0

Q1, 2017 Q4, 2017

116.7

Q1, 2018

Figure: 03

Business Confidence Index - Q1, 2018

110.6

120.8

SMEINDEX

LARGECOMPANY

INDEX

116.7

COMPOSITEBCI

The survey shows that the outlook for Q2, 2018 is less optimistic than that for Q1, 2018 for most parameters, backed by lower demand for products/services during the summer months and lack of projects/contracts/customers. The outlook for hiring is comparable to the previous quarter and to the level in Q2, 2017.

■ The net balance for volumes has shown a q-o-q increase but has weakened slightly on a y-o-y basis; from 39% for Q2, 2017 and 22% for Q1, 2018 to 35% for Q2, 2018. 51% of the respondents anticipate a rise in volumes in Q2, 2018 backed by expectations of new projects/orders and higher demand. On the other hand, 16% of the firms expect a decline in this parameter due to slowing demand especially during the Ramadan season.

■ The trading sector is most optimistic regarding its outlook for volumes for Q2, 2018.

■ The selling prices forecast is comparable to the level seen in Q2, 2017 but is considerably weak in Q2, 2018 with a net balance of 2% versus 28% in Q1, 2018. Respondents cited lack of demand due to the implementation of VAT and competition. The trading sector is most optimistic with respect to its outlook for selling prices for Q2, 2018.

■ The profitability forecast is in line with projections for volumes and revenues.

■ Hiring expectations are firm both on an annual and quarterly basis.

Note: Increase % + Decrease % + % No Change = 100%

OVERALL BUSINESS OUTLOOK - Q2, 2018

Forecast Business Performance – Q2, 2018

Increase Decrease NoChange

NetBalance Increase Decrease No

ChangeNet

Balance Increase Decrease NoChange

NetBalance

Table: 01

54%

13%

51%

19%

43%

46%

54%

13%

51%

19%

43%

46%

17%

11%

16%

6%

20%

15%

29%

76%

33%

75%

37%

36%

29%

76%

33%

75%

37%

36%

37%

2%

35%

13%

23%

31%

Parameter

Q2, 2017 Q1, 2018 Q2, 2018

SalesRevenue

SellingPrices

VolumesSold

No. ofEmployees

Profits

NewPurchase

Orders

54%

11%

50%

23%

47%

52%

11%

9%

11%

4%

13%

10%

38%

79%

39%

75%

39%

41%

35%

80%

39%

73%

40%

38%

43%

2%

39%

19%

34%

42%

47%

36%

40%

22%

33%

41%

47%

36%

40%

22%

33%

41%

21%

8%

18%

9%

25%

16%

32%

56%

42%

69%

42%

42%

32%

56%

42%

69%

42%

42%

26%

28%

22%

13%

8%

25%

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Respondents in the manufacturing sector are confident about their volumes for Q2, 2018 compared to the previous quarter backed by expectations of new projects. While 51% of the manufacturers expect an increase in volumes, 30% foresee stability in this parameter for Q2, 2018.

Manufacturing sub-segments most optimistic about their volumes for Q2, 2018 are glass, cement and aluminium.

MANUFACTURING SECTOR

SECTOR-WISE OUTLOOK FOR SALES VOLUMES

A comparison of projections among the key economic sectors shows that the trading sector holds the strongest outlook for sales revenues, selling prices, volumes, profits and new purchase orders. The services sector is most optimistic about hiring during Q2, 2018.

Figure: 04

Sectoral Net Balances (Sales Volume),Quarterly Outlook - Q2, 2018

32% 32%

Manufacturing Services

39%

Trading

Figure: 05

Quarterly Net Balances (Sales Volume) - Manufacturing Sector

32%

Q2, 2018

16%

Q1, 2018

35%

Q4, 2017

44%

Q3, 2017

47%

Q2, 2017

58%

Q1, 2017

Firms in the services sector have weaker forecasts for volumes for Q2, 2018 when compared to the previous quarter and over the year. Sentiments have been dented due to lack of demand during the summer season and Ramadan.

■ Within the services sector, construction firms are bullish about their volumes during Q2, 2018, with a net balance of 53%. This optimism is due to expectations of new projects.

■ Among transportation firms, 60% are optimistic of an increase in volumes during Q2, 2018 with expectations of higher demand especially from new clients.

■ The hotels & restaurants sub-segment is the least optimistic; 12% of the respondents expect an increase in volumes during Q2, 2018, while 62% project a decrease, resulting in a net balance of negative 50%.

SERVICES SECTOR

The trading sector’s forecast for volumes for Q2, 2018 is stronger when compared to the previous quarter and on par with the same quarter a year ago. While 53% of the traders anticipate selling higher volumes during Q2, 2018, 14% expect a decline in the parameter. The survey shows that traders hold the strongest forecast for most parameters: revenues, volumes, selling prices, profits and new purchase orders.

TRADING SECTOR

Figure: 06

Net Balances on Sales Volume for Key Service Sectors,Quarterly Outlook – Q2, 2018

Q2, 2018Q1, 2017 Q2, 2017 Q3, 2017 Q4, 2017 Q1, 2018

CONSTRUCTION

53%

TOURISM & HOSPITALITY

TRANSPORTATION & LOGISTICS

52%

OVERALL SERVICES SECTOR

32%

46%55%

75%

49%55%

34%42%27%

56%41%

45%

76%63%

-6% -31%24%

37%49%47% 39% 39%

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Key sectors optimistic of higher demand over the next quarter include the following:

■ Traders of auto products are more optimistic about their volumes in Q2, 2018. 75% hope to sell higher volumes during Q2, 2018, while the remaining 25% anticipate stability. None of the respondents in this segment anticipate a decline in volumes.

■ Traders of construction related products are least optimistic; 19% of these traders expect lower volumes due to slowing business conditions in Q2, 2018.

Figure: 07

Quarterly Net Balances (Sales Volume) - Trading Sector

39%

Q2, 2018

7%

Q1, 2018

23%

Q4, 2017

12%

Q3, 2017

35%

Q2, 2017

36%

Q1, 2017

49% of the firms do not anticipate any obstacles to their business operations during Q1, 2018. Competition and the impact of VAT are key concerns affecting Dubai’s businesses.

Expectations regarding the business situation show that half (50%) the survey respondents anticipate an improvement for Q2, 2018 versus 41% in Q1, 2018. However, a lower proportion 40% expect the business situation to stabilise compared to 51% in the previous quarter.

EXPECTED BUSINESS SITUATION

Figure: 08

Expected Business Situation

Improvement Stability Deterioration

Q2, 2018

50%

40%

10%

Q1, 2018

41%

51%

8%

Q4, 2017

48%

44%

8%

Q1, 2017

47%

46%

7%

Q2, 2017

45%

47%

8%

Q3, 2017

39%

51%

10%

Business Incubators and AcceleratorsDubai SME, the agency of the Department of Economic Development (DED) in Dubai mandated to develop the small and medium enterprises (SME) sector, has announced new regulations for ‘Business Incubators and Accelerators’ to draw further support for innovative entrepreneurs, particularly in monitoring and mentoring their business growth.

The initiative is part of providing greater opportunities for investment in developing business leaders across varied industry sectors through business incubators, accelerators and shared works spaces, thus advancing economic growth and the Fourth Industrial Revolution in Dubai.

Dubai SME seeks to create platforms that foster entrepreneurship, facilitate access for young entrepreneurs into varied industry sectors, and empower innovative entrepreneurs to translate their ideas into sustainable, knowledge economy initiatives that will enhance Dubai’s position among regional and global economies.

■ Regulations will provide a legal framework advantageous to creative entrepreneurs

■ Forerunner to the ‘Dubai Business Incubator Network’

■ Aims to support, guide and monitor entrepreneurial projects and innovations

His Excellency Sami Al Qamzi, Director General of DED, said:“Regulating the Incubators and Business Accelerators activity is in line with the Dubai Industrial Strategy 2030. It aims to empower small and medium enterprises to play a greater role in the production process, and contribute to a competitive national economy based on knowledge, innovation and technologies of the future,” adding that the regulation will encourage creativity and promote investment in innovation.

Abdul Baset Al Janahi, CEO, Dubai SME, said:“The new regulation provides a legal form for incubators for the sake of universities, colleges and venture capitalists as well as entrepreneurs who have unique ideas and initiatives,” also “It will provide an ideal environment for innovation and support the digital transformation of projects, in addition to providing a hub for technology and innovation initiatives.” He added that the regulation launched with ample support from the Government of Dubai, is keen to develop the entrepreneurial environment and promote a culture of creativity and innovation to accelerate national economic growth. The initiative will attract local and foreign investment in SMEs as well as international expertise in business incubation and enhancing business competitiveness.

The incubators shall also provide specialized training programs as well as workshops on administrative, marketing, financial and economic aspects, in addition to strategic alliances with global business partners and support for capability development and international expansion.

Regulating incubators and business accelerators is a first step towards the establishment of the ‘Dubai Business Incubator Network (DBIN),’ which will act as a resource to help, encourage and deliver best practices for business incubator programs in the UAE. The network seeks to stimulate economic and development in the UAE, specifically in the Emirate of Dubai, through the establishment of new facilities capable of providing promising investment opportunities in economic development and job creation. The network also seeks to support and facilitate innovation by facilitating the exchange of information and experience between decision-makers in incubators and business accelerators across Dubai.

IN FOCUS

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SMEs account for a dominant share in Dubai’s total business composition. 436 of the 502 firms that were interviewed as part of the survey were SMEs. These included micro, small, and medium enterprises as per Dubai’s SME definition. Although the Composite BCI for SMEs remained firm at 110.6 points in both Q1, 2018 and Q4, 2017, it was lower when compared to the index value of 117.1 points in Q1, 2017.

Key outlook indicators for the next quarter are summarized below.

■ A quarterly comparison shows that SMEs are optimistic about most parameters for Q2, 2018 than in the previous quarter. However, a y-o-y comparison shows that SMEs are less upbeat for all parameters of the survey.

■ The outlook for selling prices has weakened over the quarter with a majority 76% of the respondents expecting stability in the parameter. 13% expect selling prices to increase on the back of implementing VAT and more demand/customers.

■ Hiring trends remain steady on a q-o-q basis.

■ Large companies continue to be more optimistic than SMEs with respect to revenues, selling prices, volumes, hiring and profitability, while the latter is confident about their new purchase orders.

■ Trading SMEs hold the strongest outlook for sales revenues, selling prices, volumes, profitability and new purchase orders. Services SMEs hold a stronger outlook for hiring.

■ 33% of manufacturing SMEs and 43% of services firms forecast an increase in their capacity utilization rates during Q2, 2018.

DUBAI SME OUTLOOK – Q2, 2018

Forecast Business Performance (SMEs) – Q2, 2018

Increase Decrease NoChange

NetBalance Increase Decrease No

ChangeNet

Balance Increase Decrease NoChange

NetBalance

Table: 02

54%

13%

51%

18%

43%

47%

54%

13%

51%

18%

43%

47%

18%

11%

17%

6%

20%

15%

28%

76%

32%

76%

37%

36%

28%

76%

32%

76%

37%

36%

36%

2%

34%

12%

23%

32%

Parameter

Q2, 2017 Q1, 2018 Q2, 2018

SalesRevenue

SellingPrices

VolumesSold

No. ofEmployees

Profits

NewPurchase

Orders

54%

12%

49%

24%

47%

52%

10%

9%

9%

3%

12%

9%

36%

79%

42%

73%

41%

39%

36%

79%

42%

73%

41%

39%

44%

3%

40%

21%

35%

43%

47%

37%

39%

21%

32%

39%

47%

37%

39%

21%

32%

39%

22%

7%

18%

9%

24%

16%

31%

56%

43%

70%

44%

44%

31%

56%

43%

70%

44%

44%

25%

30%

21%

12%

8%

23%

The survey included 104 export-oriented manufacturing, trading, and services firms in Dubai. For the purpose of this report, an exporter is defined as an entity with exports accounting for 20% or more of its consolidated sales. The business outlook of exporters has jumped on a quarterly basis and is up marginally over the year. The Composite BCI for exporters has registered a score of 121.0 points in Q1, 2018 versus 103.7 points in Q4, 2017 and 119.2 points in Q1, 2017.

Key outlook indicators for the next quarter are summarized below.

■ The survey for Q2, 2018 reveals that exporters are more confident than the overall business community with Composite BCI scores of 121.0 and 116.7 points, respectively. Exporters also holder stronger predictions than domestic-market oriented firms for sales revenues, selling prices, volumes, hiring, net profits and new purchase orders.

■ The outlook for export sales has strengthened on a quarterly and annual basis.

■ 39% of the exporters have indicated plans to export to new markets during Q2, 2018 versus a corresponding 32% in the last quarter. The leading new markets for export diversification are Africa, GCC and India.

■ The key challenges faced by Dubai’s exporters related to exporting their goods and services outside the UAE are competition (9%), legal & regulatory issues (5%), payments & collection risks (5%) and political instability in the region (5%).

DUBAI EXPORTERS’ OUTLOOK - Q2, 2018

Forecast Business Performance (Exporters) – Q2, 2018

Increase Decrease NoChange

NetBalance Increase Decrease No

ChangeNet

Balance Increase Decrease NoChange

NetBalance

Table: 03

56%

16%

58%

19%

52%

53%

57%

11%

6%

13%

6%

13%

11%

8%

33%

78%

29%

75%

35%

36%

35%

45%

10%

45%

13%

39%

42%

49%

Parameter

Q2, 2017 Q1, 2018 Q2, 2018

SalesRevenue

SellingPrices

VolumesSold

No. ofEmployees

Profits

ExportSales

NewPurchase

Orders

59%

10%

53%

16%

51%

51%

55%

7%

10%

8%

4%

10%

7%

7%

34%

80%

39%

80%

39%

42%

38%

52%

0%

45%

12%

41%

44%

48%

40%

33%

35%

12%

31%

36%

40%

25%

9%

26%

10%

29%

19%

15%

35%

58%

39%

78%

40%

45%

45%

15%

24%

9%

2%

2%

17%

25%

Note: Increase % + Decrease % + % No Change = 100%

Note: Increase % + Decrease % + % No Change = 100%

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Although the main purpose of the survey is to gauge business expectations for future activity, it also captures the actual changes in business performance from one quarter to another, as elicited from the feedback given by responding firms.

■ 18% of the respondents registered an increase in volumes during Q1, 2018, while 44% registered a decline, resulting in a net balance of negative 26%. Factors that contributed to the decline in volumes included lower demand for goods/services, reduced number of customers, poor market condition and the impact of VAT on businesses.

■ Selling prices remained firm for 58% of the respondents, while 22% recorded a decline due to competition and VAT implementation.

■ Nearly 70% of the participants kept their headcount numbers intact, while 18% reduced their staff count in Q1, 2018 due to slowing business conditions, lack of demand/projects.

■ In line with the overall trend, firms reported a weaker performance with respect to new purchase orders both on a quarterly and annual basis.

■ Labor costs increased for 41% of the firms mainly due to a rise in the cost of accommodation and other overheads such as wages & salaries.

OVERALL BUSINESS PERFORMANCE Q1, 2018

Overall Business Performance – Q1, 2018

Increase Decrease NoChange

NetBalance Increase Decrease No

ChangeNet

Balance Increase Decrease NoChange

NetBalance

Table: 04

17%

20%

18%

13%

13%

18%

17%

20%

18%

13%

13%

18%

46%

22%

44%

18%

50%

38%

37%

58%

38%

69%

37%

41%

37%

58%

38%

69%

37%

41%

-29%

-2%

-26%

-5%

-37%

-20%

Parameter

Q1, 2017 Q4, 2017 Q1, 2018

SalesRevenue

SellingPrices

VolumesSold

No. ofEmployees

Profits

NewPurchase

Orders

20%

10%

21%

11%

18%

21%

30%

20%

30%

13%

36%

27%

50%

70%

49%

76%

46%

52%

50%

70%

49%

76%

46%

52%

-10%

-10%

-9%

-2%

-18%

-6%

26%

11%

26%

14%

19%

27%

26%

11%

26%

14%

19%

27%

35%

18%

32%

18%

42%

26%

39%

71%

42%

68%

39%

46%

39%

71%

42%

68%

39%

46%

-9%

-7%

-6%

-4%

-23%

1%

■ The cost of raw materials increased for 27% of the respondents, while 32% reported stability in these costs. Rental costs were stable for 65% of the respondents.

■ 36% of the participants availed bank finance during Q1, 2018. Of these, 66% did not experience any change in the cost of finance, while 30% reported an increase.

(Net Balance = % of respondents citing an increase - % of respondents citing a decrease)

■ The weakest sales volumes performance was recorded by trading firms. Within the trading sector, auto, computer and food & beverage traders reported negative net balances for volumes.

■ In the services sector, firms in the transportation and the hospitality sub-segments registered negative performance as denoted by declining volumes.

■ Within the manufacturing sector, furniture manufacturers reported a decrease in volumes.

Figure: 09

Net Balances on Sales Volume for Key Sectors, Quarterly Output - Q1, 2018

-19% -32% -6% -35% -16% -26%

Manufacturing Tourism & Hospitality Overall ServicesTrading Construction Transportation

Note: Increase % + Decrease % + % No Change = 100%

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■ 16% of the SMEs reported an increase in volumes, while 46% experienced declines in this parameter.

■ Hiring remained firm for a majority of the SMEs.

■ Large companies continued to display better performance with respect to all parameters: revenues, volumes, prices, hiring, profitability and new purchase orders.

SMEs PERFORMANCE – Q1, 2018

Overall Business Performance (SMEs) – Q1, 2018

Increase Decrease NoChange

NetBalance Increase Decrease No

ChangeNet

Balance Increase Decrease NoChange

NetBalance

Table: 05

16%

20%

16%

13%

12%

17%

16%

20%

16%

13%

12%

17%

48%

22%

46%

19%

52%

40%

36%

58%

38%

68%

36%

41%

36%

58%

38%

68%

36%

41%

-32%

-2%

-30%

-6%

-40%

-23%

Parameter

Q1, 2017 Q4, 2017 Q1, 2018

SalesRevenue

SellingPrices

VolumesSold

No. ofEmployees

Profits

NewPurchase

Orders

19%

10%

20%

11%

17%

21%

30%

20%

29%

13%

36%

27%

51%

70%

51%

76%

47%

52%

51%

70%

51%

76%

47%

52%

-11%

-10%

-9%

-2%

-19%

-6%

24%

11%

23%

13%

17%

25%

24%

11%

23%

13%

17%

25%

37%

18%

34%

18%

43%

29%

39%

71%

43%

69%

40%

45%

39%

71%

43%

69%

40%

45%

-13%

-7%

-11%

-5%

-26%

-4%

■ Exporters performed better than domestic-market oriented firms for revenues, volumes, selling prices, hiring, profits and purchase orders.

■ The net balance for volumes for exporters stood at negative 16% compared to negative 29% for domestic-market oriented firms.

■ In terms of economic activity (volumes), manufacturing exporters performed better with a net balance of 7% compared to negative 17% for traders and negative 38% for services exporters.

EXPORTERS’ PERFORMANCE - Q1, 2018

Overall Business Performance (Exporters) – Q1, 2018

Increase Decrease NoChange

NetBalance Increase Decrease No

ChangeNet

Balance Increase Decrease NoChange

NetBalance

Table: 06

24%

24%

25%

15%

22%

24%

18%

46%

20%

41%

13%

43%

38%

37%

30%

56%

34%

72%

35%

38%

45%

-22%

4%

-16%

2%

-21%

-14%

-19%

Parameter

Q1, 2017 Q4, 2017 Q1, 2018

SalesRevenue

SellingPrices

VolumesSold

No. ofEmployees

Profits

ExportSales

NewPurchase

Orders

22%

6%

23%

10%

20%

20%

21%

30%

23%

31%

11%

36%

30%

27%

48%

71%

46%

79%

44%

50%

52%

-8%

-17%

-8%

-1%

-16%

-10%

-6%

14%

10%

18%

10%

12%

20%

14%

41%

25%

40%

19%

48%

35%

27%

45%

65%

42%

71%

40%

45%

59%

-27%

-15%

-22%

-9%

-36%

-15%

-13%Note: Increase % + Decrease % + % No Change = 100%

Note: Increase % + Decrease % + % No Change = 100%

ded.ae ded.ae

16

The survey addressed key challenges perceived by businesses at the end of Q1, 2018 that may affect near term business growth and development. 49% of the participants do not expect to face any hurdles in their business operations in Q1, 2018 compared to 36% in the Q4, 2017.

A summary of the major challenges facing Dubai’s business community are as follows:

1. Competition: 19% of the survey respondents expect to get impacted by competition; 70% of the firms predict that this challenge will intensify.

2. VAT Implementation: Out of the 9% which consider this as a hindrance, 43% reported that this concern will increase.

3. Demand/Market Conditions: 7% of the respondents’ operations are hampered by this challenge.

4. Delay in Payments/Receivables: 7% of the firms face this obstacle in their business operations.

5. Increase in Operational Expenses: 4% of the firms are concerned about this challenge.

The remaining concerns were relatively less important and each affected 3% or fewer of the participants.

Competition and the implementation of VAT continued to be the top concerns affecting both large companies and SMEs. The exporting community also cited these concerns.

KEY BUSINESS CHALLENGES IN DUBAI

Figure: 10 Figure: 11

49%19%

4%3%

2%1%

No Negative FactorsCompetition

VAT ImplementationDemand/Market Conditions

Delay in Payments/ReceivablesIncrease in Operational Expenses

Government Regulations/FeesCost of Rental/Leasing

InflationOthers*

Availability/Cost of FinanceAvailability/Cost of Labor

Availability/Cost of Raw Materials

*Others include purchasing power of customers, challenges surrounding pricing strategy

Key Business Challenges, Q1, 2018

7%7%

9%

2%2%

1%1%

36%25%

9%4%

2%1%

No Negative FactorsCompetition

VAT ImplementationIncrease in Operational Expenses

Demand/Market ConditionsDelay in Payments/ReceivablesGovernment Regulations/Fees

InflationAvailability/Cost of Finance

Political Uncertainity in the RegionOther Operational Challenges

Availability/Cost of Raw Materials

Key Business Challenges, Q4, 2017

9%10%

12%

2%

1%1%

The survey also gauges the business community’s investment outlook with respect to capacity expansion and technology upgrade plans over a twelve-month horizon.

■ Capacity expansion plans are more bullish on a quarterly and annual basis. 61% intended to expand capacity during Q1, 2017 and 69% during Q4, 2017 versus 71% for Q1, 2018. While plans to upgrade technology have strengthened on an annual basis, it has weakened slightly over the quarter. The proportion of respondents intending to upgrade technology has increased from 65% for Q1, 2017 to 68% for Q1, 2018.

■ Key reasons cited by respondents for not considering expanding business capacity include satisfaction amongst applicable respondents related to size and scale of their current operations and/or prioritization towards achieving stability and profitability, over and above market expansion. Additionally, some businesses did not want to expand amid poor market conditions or lack of new projects.

■ Companies in the services sector are most optimistic about capacity expansion plans and technology upgrades. 73% of services versus 65% of manufacturing and 70% of trading firms have capacity expansion plans. 74% of services firms versus 60% of manufacturing firms and 63% of traders expect to implement technology upgrades.

■ Large firms are more confident than SMEs about both investments in business expansion and technology upgrades.

■ Intent to invest in capacity expansion plans is stronger among exporters, while domestic-market oriented firms are optimistic about their plans to upgrade technology.

INVESTMENT OUTLOOK

Figure: 12

Do you Plan to Expand theCapacity of your Business?

Q1, 2018

71%

29%

Q4, 2017

69%

31%

Q1, 2017

61%

39%YESNO

Figure: 13

Do you Plan to Upgradeyour Technology?

Q1, 2018

Q4, 2017

69%

31%

Q1, 2017

65%

35%YESNO

68%

32%

ded.ae

Economic Information DivisionEconomic Studies & Policy Sector

P.O. Box: 13223, Dubai, United Arab EmiratesTel: +9714 445 5555 | Dir: +9714 445 5881 | Dir: +9714 445 5884 | Fax: +9714 445 5830