The UAE is one of the top three most confident countries in the world on trade activity and growth, and traders in the country are bullish on business in the next quarter.
“Importers and exporters in UAE are expected to borrow more to fuel business expansion and UAE traders are confident the government will support them and regulation will benefit them, says HSBC Trade Confidence Index carried by a local paper.
The HSBC index showed the UAE is one of the top three most confident countries in the world on trade activity and growth, scoring 118 points, which is up three per cent from the previous quarter, China is at 121 and Indonesia at 120 points.
The outlook for the global economy was more positive as compared to the most recent survey, with almost half of respondents expecting the global economy to grow and another 34 per cent expecting the economy to maintain the current level, reports Emirates Business quoting the report.
Improved sentiment was also evident in Hong Kong (102 points) and Singapore (110 points), the other two key global re-export centres covered in the survey, where confidence scores rose by about 10 per cent since the last survey conducted in the second quarter of this year.
About 86 per cent of the UAE traders expected trade volumes to increase or stay the same, as compared to 84 per cent in Singapore and 79 per cent in Hong Kong, while three per cent of the UAE traders expect a significant drop in trade volumes, as compared to four per cent in Singapore and seven per cent in Hong Kong.
The HSBC Trade Confidence Index covers a total of 12 markets, including key economies in the Asia-Pacific region, the UAE, Brazil, the UK and the US.
More than 3,500 trade-oriented small and middle-size corporates were asked about their three-month outlook on trade volume, buyer and supplier risks, the need for trade finance, access to trade finance and the impact of foreign exchange on their businesses.
Giving reasons why traders in the UAE are feeling confident, Kersi Patel, Regional Head of Trade and Supply Chain, HSBC Bank Middle East, told the paper: “There are many factors that are boosting the confidence of traders here, the least of them being that trade is the lifeblood of UAE’s economy, with a ratio of trade turnover to gross domestic product (GDP) of more than 150 per cent, which is among the highest in the world.
“Trade and logistics related businesses generated more than 35 per cent of the UAE’s non-oil GDP in 2008, and is therefore a key focus area for the country and its traders.
“The UAE also has a fantastic geographic advantage, and more than half of the global population, which is young and getting increasingly prosperous, is within five hours’ flying distance from the UAE. The other factors boosting their confidence are investments made by the UAE Government over the past many years to build on the locational advantage by investing in trade-related infrastructure. Also, the assurance this investment will not be slowed down even in the current environment gives them a fillip.
“Another factor is that the investments made by the government for providing a secure and comfortable lifestyle have been attracting business people from the region to set up bases in the UAE.” “Traders are also buoyed by the trust the UAE Government will continue to be business-oriented, with no taxes and free remittances. The recent action of the government that involved reducing costs of setting up and doing business in the UAE builds on this.
“The UAE Government has taken swift and decisive steps to bolster trade in this challenging environment and the UAE traders have shown faith in these initiatives with positive results that are much higher than the global average of 22 per cent.” Simon Vaughan Johnson, Regional Head of Commercial Banking at HSBC Bank Middle East, said: “International trade is the foundation of the UAE’s economy. It is pleasing to see growing confidence in the UAE business environment. Clearly traders have been very receptive to the government support.” UAE business sentiment improved further since the first survey in second quarter of 2009. About 46 per cent (34 per cent last time) of UAE respondents expect trade business to increase over the next three months, and a further 40 per cent expect it to remain at current levels.
About 41 per cent of traders in the UAE see government regulations as beneficial to their business, as compared to 26 per cent in Singapore and 11 per cent Hong Kong.
About 30 per cent (39 per cent previously) of the respondents in the UAE said they will need more trade finance in the next three months compared to 24 per cent (30 per cent previously) in Hong Kong and 23 per cent (20 per cent previously) in Singapore.
Nearly half of all respondents in the UAE (50 per cent) and Hong Kong (42 per cent) expect to borrow from banks to fuel business expansion. In Singapore it stood at 39 per cent with 38 per cent of respondents expecting to finance their business expansion plans with their own funds.
The index also takes a look at the impact of foreign exchange rates on business. According to the index, globally fluctuating foreign exchange rates has been identified as the biggest barrier to growth. However, in the UAE, this was not so. About 27 per cent of traders in the UAE expected foreign exchange movement to have a positive impact on their businesses, as compared to 19 per cent in Singapore and 12 per cent in Hong Kong.
