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Scope of Growth for the GCC’s B2B E-Commerce

Scope of Growth for the GCC’s B2B E-Commerce

E-commerce in the MENA’s Gulf took off despite certain difficulties to the point where Gulf Business‘ article titled Explainer: What is the scope of growth for the GCC’s B2B E-commerce industry? sustains that

The pandemic has helped boost digital marketplaces in the region, opines Muhammad Chbib, CEO at Tradeling.

7 November 2020

The pandemic has propelled the use of e-commerce in the region and globally. What are the key trends you have seen?
The most significant trend is the growth of homegrown capabilities in e-commerce in the region. Globally, while e-commerce has been recording strong growth – accelerated no doubt by the pandemic – the region has witnessed a transformational growth in the evolution of the digital economy. Not only have our homegrown companies demonstrated strong resolve to meet the needs of the people and support them, we have seen a tremendous amount of entrepreneurship – with new startups entering the market and building their own niche.

The second trend is more consumers warming up to the possibilities offered by e-commerce. While digital commerce was gaining momentum, one of the factors that has stymied its growth in the region is the relatively lower credit card penetration in some markets. There have also been typical concerns associated with conducting everyday business online. However, one thing the pandemic has brought about is the adoption of digital payments and the increased confidence of consumers to shop online and conduct e-commerce transactions.

In the B2B e-commerce space, how high is the penetration in the GCC market? Has it grown significantly this year?
While B2B e-commerce was evolving at a slower pace compared to consumer-oriented digital business, this year has witnessed a real transformation. I believe it is a case of supply and demand. What matters is that in the new reality, business customers too want to access products and services easily, quickly and efficiently. We see a growth in the B2B marketplace – here in the UAE – and growing enquiries from across the GCC.

Which are the verticals within the sector where you see most scope for growth?
It is really a matter of bringing more options to the customer, whatever the vertical. Customers like to shop around and feel they get value for money and exemplary service. But it is also a matter of sourcing new products and services that aren’t in the region yet.

For those entering the digital B2B industry, what are the main challenges?
The main challenges are finding the right talent with expertise and insights into the B2B sector, which is a different terrain compared to B2C e-commerce. An in-depth understanding of the global market is essential in addition to knowledge of the trading dynamics. You must be flexible and agile to overcome any unprecedented situation. It is also a matter of understanding the customer – the B2B customer is very different from the B2C customer.

Our priority is making the customer journey seamless, taking away their pain points and streamlining processes to ensure efficiencies that save them time and money.

Tradeling launched in April, in the midst of the lockdown – how was your experience? Do you have any immediate plans to expand?
We created Tradeling during the pandemic to connect regional and global suppliers to MENA-based business demand. Today, we have close to 400 suppliers from over 25 countries with gross merchandising value increasing from zero to a high two-digit million figure in just three months.

The key to overcoming the challenges was to enhance market confidence and we took decisive steps in this regard. Today, we have gone from a team of 40 to nearly 100 people and we continue to hire.

From logistics to financing support to ensuring a fully secure payment gateway, we are the first of our kind B2B platform across the region. This is our USP and this integrated approach to business has enabled us to address the challenges.

Looking ahead, what is the future of digital marketplaces in the region?
Digital marketplaces constitute the future of retail and in the new reality, they will record a stronger rate of growth compared to brick-and-mortar retail. But the key for success is to define your own unique niche for the marketplace; increasingly, we see online aggregators trying to capitalise on the opportunity, which will only lead to market fragmentation. What we need is bold, innovative ideas that will help accelerate the momentum of e-commerce growth in the region.COVID-19DIGITAL MARKETPLACEE-COMMERCEGCCTRADELING

Euro Auctions reports Rise in Lot Prices in online bids in Dubai

Euro Auctions reports Rise in Lot Prices in online bids in Dubai

Anirban Bagchi Posted on October 21, 2020 in MEConstruction News that Euro Auctions reports rise in lot prices, bidders and online bids at September Dubai sale. What is the meaning of such a movement? Anirban Bagchi explains.

Internet buyers double in number as average lot prices go up 63% while first time bidders grow exponentially

Euro Auctions has reported a year-on-year increase of 63% in average lot prices at its September sale in Dubai while first-time bidder registrations rose by nearly 300%, with 20% of the new bidders placing successful winning bids.

The global machinery auctioneers said the results prove that there “is an appetite for good used equipment in the region” and that Euro Auctions is “fast becoming the auction of choice for buyers and sellers in the Middle East for the disposal of stock to a true international audience”.

According to Euro Auctions the Dubai sale on September 28th attracted increased number of bidders, doubling the number of internet buyers, and also increasing the number of UAE vendors. The one-day sale resulted in 33% of all bids being transacted online proving the success of the marketing reach for this sale.

Bidders for the sale came from 65 countries, of which, 21 countries successfully bought on the day. Online bids came from 19 countries around the globe, with the top bidding countries being the UAE, Saudi Arabia, the Netherlands, the UK and Africa countries as a whole.

Derek Bleakly, general manager of Euro Auctions, Dubai, said: “Euro Auctions has been working hard with consignors across the Middle East over the last three years to build awareness and trust, demonstrating that our auctions are the place to bring good equipment, which in the Gulf, is in high demand. Plant and machinery auctions are no longer seen as the place to dump old, poor quality, low-spec machinery. Quite the reverse in fact, with many rental companies sending entire fleets of good, well-maintained two- to three-year-old machines to auction, making ideal purchases for dealers, contractors, and civil engineering companies.

“In last 12 months since mid-2019, there has been a marked uptake in the Middle East market for good machinery and equipment. Contractors and rental companies in the Middle East have been buying relatively low levels of new machines for the last 4-5 years and, as a result, stocks of plant are aging. Not buying through dealerships, buyers have turned to auctions for good late-year machines as well as new unused stock.”

Euro Auctions added that now with Covid-19 affecting the global economy, the used equipment market could well boom in the next 12 months. The auctioneer projected that with major OEMs pausing production globally, as happened in 2008, it is likely that when demand increases, OEMs will be unable to accelerate production, fuelling a demand for good, late, low-hours equipment. Euro Auctions has several other sale events around the world for the remainder of this year, including another in Dubai on December 14th.


Moody’s negative rating outlook for the 2020 GCC sovereigns

Moody’s negative rating outlook for the 2020 GCC sovereigns

This Moody’s negative rating outlook for the 2020 GCC sovereigns was published after it issued a little earlier, a similar downgrade for GCC corporates. But before we start wondering how relevant and whether, in this day and age, it applies to the MENA region and particularly to the Gulf sub-region, let us see who and what is behind Moody’s. It has by the way in 2018, citing as always, the still on-going and potentially worsening geopolitical event risks that play a crucial role in defining sovereign credit quality, come up with a particular set of ratings.  Moody’s Corporation is the holding company that owns both Moody’s Investor Services, which rates fixed-income debt securities, and Moody’s Analytics, which provides software and research for economic analysis and risk management. Moody’s assigns ratings based on assessed risk and the borrower’s ability to make interest payments, and many investors closely watch its ratings.

ZAWYA GCC on January 9, 2020, posted the following articles.

The image above is used for illustrative purpose. A screen displays Moody’s ticker information as traders work on the floor of the New York Stock Exchange January 20, 2015. REUTERS/Brendan McDermid

GCC sovereigns’ 2020 outlook is negative, says Moody’s

By Gerard Aoun

Negative outlook reflects slow progress on fiscal reforms, weak growth and higher geopolitical risks.

Moody's negative rating outlook for the 2020 GCC sovereigns
Various currency notes from Saudi, UAE, Kuwait and Oman. Image for illustrative purpose.

Moody’s Investors Service said in a report that the outlook for sovereign creditworthiness in the Gulf Cooperation Council (GCC) in 2020 is negative.

The negative outlook reflects slow progress on fiscal reforms at a time of moderate oil prices, weak growth and higher geopolitical risk, the ratings agency said.

“The pace of fiscal consolidation will remain slow in the GCC in 2020 and fiscal strength will continue to erode in the absence of significant new fiscal measures and reforms,” said Alexander Perjessy, a Moody’s Vice President – Senior Analyst.

“This will be exacerbated by existing commitments to limit oil production, which will reduce government revenue,” Perjessy added.

The ratings agency expects a further gradual erosion in GCC credit metrics as oil prices remain moderate over the medium-term. It also pointed that lower oil revenue available to fund government spending will constrain growth in the non-oil sector which will, in turn, discourage governments from undertaking more fiscal tightening.

Moody’s sees the region’s geopolitical risk as higher and broader in nature than in the past, amid ongoing tensions between the United States and Iran.

gerard.aoun@refinitiv.com

Moody’s: 3 factors behind GCC sovereigns’ 2020 negative outlook

GCC’s geopolitical risk is higher in nature than in the past.

By Staff Writer, Mubasher

Moody’s Investors Service explained the factors which led to the negative outlook for sovereign creditworthiness in the Gulf area for the year 2020.

A recent report by Moody’s showed that the slowdown in the development of fiscal reforms at a time of reasonable oil prices contributed to the outlook, along with weak growth and higher geopolitical risk.

Further gradual erosion in GCC credit metrics is expected by Moody’s which relied in their outlook on the moderate oil prices over the medium-term.

Moody’s vice president – senior analyst, Alexander Perjessy, highlighted: “The pace of fiscal consolidation will remain slow in the GCC in 2020 and fiscal strength will continue to erode in the absence of significant new fiscal measures and reforms.”

Perjessy added, “This will be exacerbated by existing commitments to limit oil production, which will reduce government revenue.”

Growth in the non-oil sector will be constrained by lower oil revenue available to fund government spending; this will discourage governments from undertaking additional fiscal tightening.

Moody’s noted that “the region’s geopolitical risk is higher and broader in nature than in the past amid ongoing tensions between the US and Iran.”

Geopolitical Tensions Affect Growth in MENA in 2019

Geopolitical Tensions Affect Growth in MENA in 2019

In its World Economic Outlook published yesterday, the IMF cut forecasts for almost all countries in the MENA as the region is going through some geopolitical troubles or as posted by NORTH AFRIC of October 15, 2019, in its article titled ‘World Bank: Geopolitical Tensions Affect Growth in MENA in 2019.’

Economic growth in the region of North Africa and the Middle East is expected to drop to 0.6 pc in 2019 against a 1.2 pc growth posted last year, says the World Bank in its latest report.

The growth forecast for 2019 has been revised downwards due to intensified global economic headwinds and rising geopolitical tensions, explains the WB, noting that the current sluggish growth is due to conservative oil production outputs, weak global demand for oil, and a larger-than-expected contraction in Iran.

On the other hand, a boost in non-oil activities in the Gulf Cooperation Council (GCC) countries (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, the United Arab Emirates), most prominently in construction, partially offset the dampening effect on the region’s average growth numbers as a result of Iran’s economic contraction.

“Countries in the region have implemented bold reforms to restore macroeconomic stability, but the projected growth rate is a fraction of what is needed to create enough jobs for the fast-growing, working-age population,” said Ferid Belhaj, World Bank Vice President for the Middle East and North Africa region. “It is time for courageous and far-sighted leadership to deepen the reforms, to bring down the barriers to competition and to unlock the enormous potential of the region’s 400 million people as a source of collective demand that could drive growth and jobs.

In the medium-term, the World Bank expects real GDP in the MENA region to grow at 2.6 pc in 2020 and 2.9 pc in 2021. The projected pickup in growth is largely driven by increasing infrastructure investment in GCC countries and the recovery in Iran’s economy as the effects of current sanctions wane.

However, the report warns that a further escalation in regional tensions could severely weaken Iran’s economy and spill over to other countries in the region.

While rising oil prices would benefit many regional oil exporters in the short run, the overall impact would be to hurt regional trade, investment, and spending on infrastructure, affirm the WB experts.

They also tackled the issue of unfair competition in the MENA region saying that “countries in the region have an opportunity to transform their economies by leveling the economic playing field, and creating business environments that encourage risk-taking and reward innovation and higher productivity”.

The WB report calls for strengthening competition, streamlining management of state-owned enterprises and promoting the private sector.

Growth in Emerging Market and Developing Economies

Growth in Emerging Market and Developing Economies

Romain Duval and Davide Furceri, authors of this article that obviously elaborates on the currently so-called developing countries. It does not ignore that there is some differentiation between oil and/or other scarce natural resources and the non-exporters of the same. It might as well be talking about these two categories of countries but perhaps along with the character traits described in the image below. Why you might wonder. Simply because How To Reignite Growth in Emerging Market and Developing Economies as developed here, could well apply to all countries in the MENA region, perhaps worldwide not for the same reasons.

Growth in Emerging Market and Developing Economies
NPR quotes the Associated Press, which says that the term ‘developing country’ is more appropriate than Third World when referring to the economically developing nations of Latin America, Africa, and Asia.

Let us, in the meantime, read what they say.

Growth in Emerging Market and Developing Economies
(photo: Kacper Pempel/Reuters/Newscom)

Emerging markets and developing economies have enjoyed good growth over the past two decades. But many countries are still not catching up with the living standards of advanced economies.

At current growth rates, it would take more than 50 years for a typical emerging market economy to close half of its current income gap in living standards, and 90 years for a typical developing economy.

Our research in Chapter 3 of the October 2019 World Economic Outlook finds that implementing major reforms in six key areas at the same time—domestic finance, external finance, trade, labor markets, product markets, and governance—can double the speed of income convergence of the average emerging market and developing economy to the living standards of advanced economies. This could raise output levels by more than 7 percent over a six-year period.

Structural reforms can yield sizable payoffs.

More room for reforms

Policies that change the way governments work—known as structural reforms—are difficult to measure. They often involve policies or issues that are not easy to quantify, such as job protection legislation or the quality of supervision of the domestic banking system.

To address this, the IMF recently developed a comprehensive dataset covering structural regulations in domestic and external finance, trade, and labor and product markets. The data cover a large sample of 90 advanced and developing economies during the past four decades. To the five indicators, we added the quality of governance (for example, how countries control corruption) from the World Gov­ernance Indicators.

The new indicators show that, after the major wave of reforms in the late 1980s and—most importantly—the 1990s, the pace slowed in emerging market and developing economies during the 2000s, especially in low-income developing countries.

While this slowdown reflects the prior generation of reforms, as in advanced economies, there remains ample room for a renewed reform push, particularly in developing economies—notably, across sub-Saharan Africa and, to a lesser extent, in the Middle East and North Africa and the Asia-Pacific region.

Reforms can boost growth and living standards

Based on our empirical research of reforms in 48 current and former emerging markets and 20 developing economies, we find that reforms can yield sizable payoffs. But these gains take time to materialize and vary across different types of regulations. For example, a domestic finance reform of the size that took place in Egypt in 1992 leads to an increase in output of about 2 percent, on average, six years after implementation. We get a similar result for anti-corruption measures, whose effects are sizable in the short run and stabilize at around 2 percent in the medium term. In the other four reforms areas—external finance, trade, product markets, and labor markets—the gains are about 1 percent six years after the reform.

For the average emerging market and developing economy, the results imply that major simultaneous reforms across all six areas considered in this chapter can raise output by more than 7 percent over a six-year period. This would increase annual per capita GDP growth by about 1 percentage point, doubling the average speed of income convergence to advanced-country levels. Model-based analysis—which captures the longer-term effect of reforms and provides insights on the channels through which they affect economic activity—points to output gains about twice as large as the empirical model over the longer term (beyond 6 years).

One channel through which reforms increase output is by reducing informality. For example, lowering barriers to businesses’ entry in the formal sector encourages some informal companies to become formal. In turn, formalization boosts output by increasing companies’ productivity and capital investment. For this reason, the payoff from reforms tends to be larger where informality is pervasive.

Getting the timing, packaging and sequencing right

Some reforms work best when the economy is strong. In good times, reducing layoff costs makes employers more willing to hire new workers, while in bad times it makes them more willing to dismiss existing ones, magnifying the effects of a downturn. Similarly, increasing compe­tition in the financial sector at a time of weak credit demand may push certain financial intermediaries out of business, further weakening the economy.

In countries where the economy is weak, governments may prioritize reforms—such as strengthening product market competition—that pay off regardless of economic conditions, design others to alleviate any short-term costs—such as enacting job protection reforms now with a provision that they will take effect later. These reforms can also be accompanied with monetary or fiscal policy support where possible. 

Reforms also work best if properly packaged and sequenced. Importantly, they typically deliver larger gains in countries where governance is stron­ger. This means that strengthening governance can support economic growth and income convergence not just directly by incentivizing more productive formal enterprises to invest and recruit, but also indirectly by magnifying the payoff from reforms in other areas.

Finally, to fulfill their promise of improving living standards, reforms must be supported by redistributive policies that spread the gains widely across the population—such as strong social safety nets and programs that help workers move across jobs. For reforms to be sustainable and therefore effective, they need to benefit not just some, but all.

About the IMF Blog

IMFBlog is a forum for the views of the International Monetary Fund (IMF) staff and officials on pressing economic and policy issues of the day. The views expressed are those of the author(s) and do not necessarily represent the views of the IMF and its Executive Board.