UAE reaps farmland in Sudan

by Vivian Salama

The National

ABU DHABI // A scheme has been sealed to buy farmland in Sudan and grow crops that will be used to build up the UAE’s strategic food reserves, with the first fields cultivated towards the end of the year, officials from both countries say.

Crops would be planted on a farm of about 70,000 feddans (29,400 hectares) in Northern Sudan. While the deal will undoubtedly provide a much-needed boost to Sudan’s economy, Abu Dhabi officials say their strategy is to shield UAE residents against record high commodity prices, crippling export bans by supplier nations and potential food shortages.

“Within a short time, it will be very hard to secure these kinds of crops worldwide,” said Mohammed al Suwaidi, the acting director general of the Abu Dhabi Fund for Development (ADFD), the government branch heading the project. “Even if you have the money to buy it, you won’t be able to find it.” 

Officials said it was too early to disclose the value of the deal. Only 16 per cent of the nearly 100 million hectares of land in Sudan has been used for farming, according to Sudanese officials. Crippled by poor infrastructure and technology, the government of Africa’s largest country is hoping to exploit this resource as a means of attracting investment.

“Sudan is looking for investors because we are lacking in infrastructure and proper financing, so we give the land at a very low price to attract investors,” said Nurel Huda Fath al Aliem sid Ahmed, the economic adviser at the Sudanese Embassy in Abu Dhabi. “Sudan will give free water, cheap land, exemptions from customs duties and from all the fees that might restrict investment.”

The farm, located in the town of Abu Hamed in the northern Sudanese state of Nahr an Nil, will be used primarily for the cultivation of alfalfa. According to Mr Suwaidi, the price of alfalfa has increased by almost 50 per cent since last year. Officials say that soil studies are under way to determine whether the land will also yield substantial amounts of corn, rice, peanuts and potatoes.

The UAE imports nearly 85 per cent of its food, worth an estimated Dh11.01 billion (US$40bn) annually.

Escalating inflation has driven the Ministry of Economy to consider alternative sources of food to boost supplies, while cutting costs. Co-operative societies have been urged to form partnerships with food producing countries, enabling them to buy produce at source. 

The Ministry of Social Affairs has also recommended that local co-operatives lease farms from similar organisations in countries such as India and Brazil, which would significantly reduce the chain between farmer and retailer.

The Ministry of Economy is considering the purchase of farmland in Pakistan worth US$500 million (Dh1.8bn), as part of a strategy to lower food import costs. Similar farming schemes are under consideration by the ADFD, although no other deals have been finalised. 

A number of GCC states had expressed interest in cultivating Sudanese land, however only the UAE had finalised negotiations, said Dr Ahmed, adding that the Saudi Arabian private sector is also pursuing farmland investments.

“About 300,000 feddans have been bought by Saudi companies but they have not begun to cultivate,” he said. Feddans are the unit of measurement used in Sudan and some other Arab speaking countries.

The Sudanese official said that while talks with the GCC have got off to a good start, his government hopes that these investments will grow in time.

“Seventy thousand feddans is really nothing when you think of how much land we can offer and how much money these governments can spend,” Dr Ahmed said. “We hope to receive investments for one million feddans, not only 70,000.”

The Abu Hamed farm is one of several investment projects headed by the ADFD in Sudan. The Government recently pledged Dh275m to finance dams in the African nation. Mr Suwaidi said the first Dh184m loan would be used to complete the Marawi Dam in Northern Sudan, which the ADFD had previously helped finance with a Dh551m extension.

Dr Ahmed said that such projects were vital to Sudan’s prosperity. “We are really depending on governments here to help us to build our infrastructure, whether paving the roads, or greater construction or better electricity,” he said.

vsalama@thenational.ae

Rice importers call for 25% subsidy

 

by Vivian Salama

The National

Importers, anxious over the rising prices of basic food items, are calling for the Government to subsidise rice by at least 25 per cent.

Importers say their margins are being squeezed and, in some cases, they are making losses as they attempt to reconcile record commodity prices with a demand by retailers to keep costs down.

“Rice is the most basic food item so, of course, it should be subsidised,” said Riaz Hussein Bhojani, the general manager of Rashwell Company, a Dubai-based importer.

Global rice prices jumped from US$650 (Dh2,386) to US$1,000 per tonne in just the first three months of this year, hitting a 25-year high. India’s basmati rice export prices have also gone up from US$1,100 to US$1,200. In response, several retailers, including Baniyas Co-operative Society, Carrefour, the Union Co-operative Society and Lulu hypermarkets have agreed to implement price caps on dozens of basic commodities.

“International rice prices are going through the roof so, by fixing retail prices here at 2007 levels without subsidies, the Government is not taking into consideration what importers will have to face. And [they are] making room for a black market,” an Abu-Dhabi rice importer told Reuters. “I think that asking for only 25 per cent rice subsidy is a fair and modest demand.”

Last year the UAE imported about 750,000 tonnes of rice from countries including India, Pakistan, Thailand and Egypt, traders said. According to Mr Bhojani, one tonne of Pakistani basmati rice now costs his company Dh5,505 to import, up from Dh2,569 last year. A 39kg sack of Pakistani basmati rice costs him as much as Dh230.

“It is difficult for me to understand why the government is giving millions of dollars to other countries and not helping its own people,” Mr Bhojani added.

A senior official with the Emirates Society for Consumer Protection, a branch of the Ministry of Economy, believes that rice subsidies are not a solution to the crisis. 

“Salary subsidies would be a better economic option than rice subsidies,” he said, noting that the Government was not presently considering such a move. The Government is days from announcing a contingency plan to alleviate the burden of inflation on UAE residents, the official added. 

The Abu Dhabi Department for Planning and Economy has reported a 10.7 per cent jump in inflation last year, driven by higher rents, transport and food costs. According to the Emirates Consumer Protection Society, food inflation could rise as high as 40 per cent this year.

While several countries in the region have used subsidies as a way of addressing domestic poverty, high inflation has forced some to reconsider.

In Syria, for example, basic items such as sugar, tea, bread and water are subsidised at a price the country’s poorer residents can afford. However, with the influx of more than 1.5 million Iraqis to Syria since 2003, the country’s lawmakers have considered dropping subsidies as the economic burden becomes increasingly hard to absorb. Food and energy subsidies in the country are predicted to cost US$7 billion this year – almost 20 percent of the country’s gross domestic product, according to government estimates.

Burhan Turkmani, the general manager of Al Rabiah Trading, a Dubai food importer, said he was not optimistic that subsidies would be applied here, despite believing that a 25 per cent subsidy was a reasonable demand. “It is a rich country and the economy is strong, so I believe the Government can certainly absorb such a cost. But I don’t think it will happen because of the high number of foreigners living here,” he said. “I think a government’s first priority is to help its own citizens, so maybe rice subsidies are not on the top of the list.”

Among other measures, the Government is exploring the option of purchasing farms in Pakistan in an effort to boost strategic food reserves. Last month the Ministry of Economy urged retailers to start stockpiling basic food items to prevent shortages caused by export bans in countries such India, Egypt and Brazil. The Government has since recommended that, as a cost-cutting measure, retailers consider eliminating the middlemen when importing commodities.

Sharjah: register or leave

 

by Vivian Salama and Robert Ditcham

The National

Thousands of construction workers being housed in Sharjah may be relocated under a proposal requiring them to be employed by a company registered in the emirate, following several incidents of labour-related strife. 

In a proposed amendment to the labour law, companies that are not licensed to operate in Sharjah will be prevented from using the emirate to cheaply house workers they employ for jobs elsewhere in the country.

The affected companies will be forced to either obtain a trade licence through the Sharjah Municipality enabling their resident workers to stay, or find new accommodation for them in the UAE’s six other emirates.

By way of comparison, the fees for companies obtaining a licence from Hamriyah Free Zone in Sharjah range from Dh12,000 (US$3,260) for a general trading licence to Dh2,750 for an industrial, commercial or service licence.

Two senior members of the Sharjah Government confirmed that the law was in the final stages of approval and just weeks away from coming into effect. 

They said they were pursuing the amendment to the current legislation to improve law and order following a series of protests and violent skirmishes over the rising cost of living. 

“Most of the companies are in Dubai, but the workers live in Sharjah,” said Sheikh Sultan bin Ahmed, chairman of the Sharjah Commerce and Tourism Development Authority. “The companies will be forced to either register their workers in Sharjah or find new accommodation in Dubai or the other emirates.

“If anything happens, it is usually Sharjah to blame,” said Sheikh Sultan, who added that the number of workers living in the emirate greatly outweighed the number of police officers available to contain labour protests. 

However, the move would be unpopular with workers who commuted from Sharjah to escape Dubai’s high rental rates, said Burhan Turkmani, the general manager of the Dubai-based Al Rabiah Trading company, a food importer.

“Sixty per cent of my employees live in Sharjah,” he said. “It’s far too expensive for certain employees to live in Dubai.

“These people, they live there, they spend much of their income in Sharjah, their children go to school in Sharjah, and they only go to Dubai to work. It may be a bit harsh. Food prices and the cost of living are going up, so people are suffering as it is.”

With a more affordable cost of living than Dubai and lower operating costs for worker compounds, Sharjah has attracted thousands of construction labourers. Many are employed in Dubai or Abu Dhabi, where construction is expanding rapidly.

In recent months, Sharjah has been rocked by violent protests. 

In April, more than 600 Asian labourers were arrested after a protest in the Al Nahda district. Workers from the Tiger contracting company attacked police with stones and bricks from an upper storey of a building under construction, the emirates news agency WAM reported.

Weeks earlier, about 1,500 rioting workers set alight management offices in a labour camp, clashing with police and officials.

Shehab el Orabi, the senior development manager at the Waterfront real estate project in Dubai, said he understood Sharjah’s motive for amending its labour law.

“I fully agree with them. Why would I have to take care of problems arising from labour camps there if they [workers] were not even working in Sharjah or contributing to the local economy?”

Mr Orabi said implementation of the law would likely encourage companies to build more modern accommodation facilities in proximity to the places that the men worked, thereby cutting the travel time to work and reducing the number of vehicles on the road.

About 250,000 vehicles travelled through Sharjah every day to locations outside the emirate, 50,000 of which were trucks, Sharjah officials have reported. 

Mr Orabi said construction companies required to remove their workers from Sharjah would seek to build new sites or lease accommodation at existing facilities. This would create a strong demand for sites such as Nakheel’s Omran worker housing project in Dubai, which had the capacity to house 60,000 workers, he said.

vsalama@thenational.ae

rditcham@thenational.ae

UAE may buy Pakistan farms

 

by Sarmad Khan and Vivian Salama

The National

ABU DHABI // Inflation and the spectre of long-term food shortages have prompted the Government to consider a new strategic investment – the purchase of large-scale farms in Pakistan and other countries.

The aim is to protect the country from the turmoil of soaring wheat and rice prices and export bans by producing countries that could lead to food shortages.

The Government is holding exploratory talks with Pakistan on the proposal, according to a senior Pakistan government official and the Emirates Society of Consumer Protection, a division of the Economy Ministry.

The Government was looking to acquire large land holdings and import food at 20 to 25 per cent less cost, a senior Pakistani government official said. 

There are six parties in the chain between the farmer and the time the product reaches retailers including the farmer, broker, exporter, importer here, wholesaler and retailer. 

According to a Pakistani official each party retains a 5 per cent margin on each transaction, and by eliminating several steps the government can bring the cost of food down by 20 to 25 cent, according to a senior Pakistani government official.

“The talks have been going on between Pakistan’s government and the UAE’s Ministry of Economy for some four months, however no concrete decision is made yet,” he said. The ministry was seeking support and guarantees from Pakistani counterparts before getting into large-scale corporate farming, he added.

Rising inflation is one of the driving forces behind the Economy Ministry’s decision to consider alternative food sources that would secure supplies for the country while cutting costs.

“We believe that, if we get products directly from the farms, it will encourage market competition,” an official at the Emirates Society of Consumer Protection said, adding that the government was studying similar options in other countries.

Pakistani officials say their government will facilitate negotiations between farmers and UAE representatives but it is not involved in growing food and cannot help the UAE set up government-supported farms.

Last week Pakistan announced the introduction of tax exemptions, duty free import of equipment and 100 per cent land ownership in specialised free zones in its agriculture, livestock and dairy sectors to lure potential investors.

It is expected to announce more concessions to entice investments.

“Agricultural free zones will be set up within the next four to five months, which will open up doors for the nations to own sources of food supply,” the Pakistani official said. “It is a good opportunity, especially for GCC countries which are dependent on food imports.”

GCC countries rely heavily on imported food and the UAE imports nearly 85 per cent of its supplies for an estimated Dh11 billion (US$3bn) annually.

The GCC is the largest importer of food from Pakistan, according to Pakistani officials. A number of GCC-based companies have already turned to Pakistan for alternative resources. Qatar Livestock Company is to invest $1bn in corporate farms in Pakistan, according to Huma Fakhar, an adviser to the Bahraini government. Some Saudi Arabian groups, particularly Al Rabie Group, a dairy company, have expressed interest in buying land in Pakistan.

“There is a global crisis right now,” said Miss Fakhar. “If you do not prepare these reserves now, then three to four years down the line it will turn extremely critical.”

Several UAE-based retailers including Baniyas Co-operative Society, Carrefour, Union Co-operative Society and Lulu hypermarkets have agreed to help the government to curtail inflation by putting price caps on basic commodities.

Last week the Economy Ministry urged retailers to start stockpiling basic food items to prevent shortages resulting from export bans by countries like India, Egypt and Brazil.

The UAE government has also urged retailers to consider eliminating middlemen when importing commodities to cut costs. While executives like José Luis Durán, the chief executive of Carrefour, encourages supermarkets to work directly with farms, others are concerned that this carries a hidden catch.

“If you want to make money as a farmer, go to a place where the farmers are making money, not a place where the land is cheap,” said Jannie Holtzhausen, chief executive of Spinneys in Dubai. “What has now suddenly changed in the world that the economic model drives governments to become farmers?”

Concerned about what the initiative means to their businesses, local importers are speaking out against it.

“Eliminating traders from this process would be a mistake,” said Burhan Turkmani, the general manager of Dubai-based Al Rabiah Trading Company.

“Farmers are not exporters and governments are not importers,” added Riaz Hussein Bhojani, the general manager of Rashwell Company, another trading company

Retailers Seek Relief from Importers

 

By Vivian Salama

The National

DUBAI // Tensions are brewing between UAE-based importers and food retailers over ways to ease the burden of rising commodity prices. Record prices on staple items such as rice and wheat have left supermarkets scrambling for solutions to help customers cope.

“We’re not shying away from our responsibilities,” said V Nandakumar, a spokesman for Lulu hypermarkets, which signed a memorandum of understanding last month with the Ministry of Economy implementing price caps on 32 basic items. “From the wholesalers and importers and suppliers, we hope that they also follow similar price caps or some kind of measures to curb the [impact of] inflation.”

However, according to Burhan Turkmani, the general manager of the Dubai-based Al Rabiah Trading, importers are at the mercy of global exporting countries as market prices on commodities continue to climb.

“We are dealing with exporters and brokers outside this country, so the price is out of our hands and in their hands,” said Mr Turkmani, whose company imports staple foods from countries including Thailand, Vietnam, Pakistan, India and Egypt.

Various factors, including limited water and agricultural land, force countries in the Gulf to rely heavily on imported food items. The UAE imports nearly 85 per cent of its food. However, more than 70 per cent of all UAE food imports, worth Dh11.01 billion (US$2.9bn) annually, are then re-exported to markets around the world, including other GCC countries, the Indian subcontinent, North and East Africa, and the Central Asian Republics.

Global rice prices jumped from US$650 to US$1,000 a tonne in the first three months of this year, reaching a 25-year high. Last week, Thai rice surged to a record US$1,000 a tonne, three times its level in January, and India’s export prices for basmati rice rose from US$1,100 to US$1,200. In March, India halted exports of non-basmati rice as a way to curb rising prices and avoid domestic shortages, a move that has attracted strong criticism from UAE retailers, whose customers include the 1.4 million Indian nationals living here.

According to Riaz Hussein Bhojani, the general manager of a Dubai-based importer, Rashwell Company, the landed price of Pakistani basmati rice is now Dh5,505 a tonne, up from Dh2,569 last year. Mr Bhojani said he now paid as much as Dh230 for a 39kg sack of Pakistani basmati rice. Al Rabiah pays about Dh160 for each 38kg bag of Indian basmati rice, up from Dh115 last year.

“There is absolutely no point in putting a cap on anybody without listening to the importers,” said Mr Bhojani. “The Government needs to form a price committee and then take people from the importers and from ministry and maybe some retailers and find solutions.”

This week, Baniyas Co-operative Society followed the lead of larger retailers such as Carrefour, Union Co-operative Society and Lulu hypermarkets by implementing price caps on dozens of basic commodities in an effort to ease the burden of inflation. Many retailers fear that price caps will ultimately result in losses since they are buying their commodity stocks at one price but selling them for less.

“Price caps should be on the suppliers, not the retailers,” said David Berrick, the retail general manager of Abela Supermarkets. “We can lower our prices and use the marketing tool of ‘everyday low prices’, but if supplier costs go up, we have no choice but to raise prices.”

Mr Turkmani said he understood the concerns of retailers. However, suppliers are being faced with similar challenges. “If importing costs go up, then we are left with no choice but to boost our prices,” he said.

This week, the Ministry of Economy urged retailers to start stockpiling basic food items to prevent shortages caused by export bans in countries such India, Egypt and Brazil. The ministry has also urged local retailers to consider eliminating the middlemen when importing 15 basic commodities as a cost-cutting measure.

“It’s cheaper for the hypermarkets to buy from the farms directly because it eliminates the costs from middle agencies plus it encourages greater sales competition, which ultimately benefits the consumer,” said a spokesman for the Emirates Society of Consumer Protection.

Mr Turkmani objects to such alternatives, saying the industry will suffer major consequences. “Retailers don’t have the experience to deal directly with the farmers,” he said. “We know the best locations, have the best contacts, and can find the best quality of food out there. Eliminating importers would be a mistake.”

The chief executive of Carrefour shares the Government’s sentiments. “We are obliged to find new resources,” said José Luis Duràn last month at the World Retail Congress in Barcelona, Spain. “We must ask how we can work directly with farmers to ensure sustainability, good quality, with reasonable prices.”

Ultimately, said Mr Nandakumar of Lulu, dialogue between regional retailers and importers had thus far been counterproductive. “We are having a blame game here,” he said. “We did our part. Now some kind of initiative from the suppliers and importers must be done to gain the confidence of the country.”

UAE emerging as global hub for halal production

 

by Vivian Salama

The National

ABU DHABI//The nation is emerging as a global leader in the rapidly growing halal industry as Muslim consumers look to incorporate more Sharia-compliant products into their daily lives. 

Worth an estimated Dh7.7 trillion, the industry has broadened in scope to include everything from food to Islamic fashion and textiles, pharmaceuticals, lifestyle products such as cosmetics, and Islamic finance. Dubai is a major halal industry hub, importing and channelling an estimated Dh550 million worth of halal merchandise each year.

“In Arabic-speaking countries, [halal] can refer to human behaviour, speech communication, clothing, conduct, dietary laws, finance or anything that is permissible within Islamic law,” explained Michael Hughes, the senior marketing manager of the Halal World Expo, which will take place in Abu Dhabi later this year. “In non-Arabic speaking countries, it just refers to Muslim dietary laws.”

Given the growth of Muslim populations worldwide and greater awareness of health-related issues, the halal food industry could easily account for 20 per cent of world trade in food products by 2025, the Canadian government’s Agri-Food Trade Service has estimated.

In the UAE, 80 per cent of imported food is halal, with products coming from countries such as Brazil and Australia, the latter exporting 43,071 tonnes of mutton, 17,685 tonnes of lamb and 3,312 tonnes of beef to the Middle East in 2006.

Last year, the Emirates accounted for 7.77 per cent of the world’s lamb and beef imports and 15.38 per cent of all poultry imports, second only to Saudi Arabia.

“Halal products have become mainstream,” said Pamela Pike, a spokesman with the Halal Exchange, an international e-commerce business that assists with the online halal trade. “With the rapid expansion of the industry and widely disparate certification bodies and organisations, there has been an explosion of halal products,” she said.

Worth an estimated Dh2.06 billion, the halal cosmetics industry is burgeoning. “Products are halal because of their quality,” said Ms Pike, adding that much greater care was being taken in the quality of materials used in cosmetics.

A number of the world’s halal industry leaders have moved their production facilities to the emirates, hoping to capitalise on the country’s economic expansion. 

Contributing to the growth of the industry locally is a decision by the Malay Chamber of Commerce Malaysia (MCCM) to set up its marketing centre in Dubai.

Malaysia remains the leading producer of halal products, with Halal Food Park, a Dh66.06m development created to produce 200 metric tonnes of halal products per day, due to open in the country this year.

Other halal producers are looking to the UAE for partnerships. Last year, for example, exporter Canada Agra signed an agreement with Spinney’s to get Maple Lodge Farms’s chicken-based delicatessen products established here. Global food and beverage manufacturer Nestlé also has a number of halal products with regional production facilities based here.

“You’ll be surprised nowadays to know how people are very conscious about this,” said Vinod Ruchani, the general manager of All Needs General Trading, which recently launched a number of Sharia-compliant cooking products in the GCC.

“Customers want products that have quality standards, that are natural and prepared without preservatives and without artificial colours and flavours,” the manager said.

In the past two years, a number of governments have sought to review and control the products that are deemed to be halal, but the lack of a consensus over the definition of Sharia-compliant products has caused a setback to efforts to implement global industry standards.

Industry insiders also point out that a lack of branding is one of the biggest issues hindering further growth. 

While some shops, restaurants and supermarkets here display signs indicating that their products are halal-compliant, they say a lot more needs to be done to promote this growing trade.

“Some of the seminars we conduct try to educate the market on how to promote that they are halal-compliant,” said Mr Hughes. “That’s a very difficult thing.”

vsalama@thenational.ae

Consequences of price controls will ‘bite you’

By Vivian Salama

The National

 

Dubai // Price caps at a number of the country’s largest supermarket chains are sparking scepticism from industry insiders who say “artificial” price adjustments will not reverse the effects of global inflation.

“With costs going up, there will be shortages,” said Andy Barnett, a professor of economics at the American University of Sharjah. “The worst thing you can do is contain prices at an artificially low level.”

Carrefour is the latest hypermarket in the UAE to sign a memorandum of understanding (MoU) with the Economy Ministry, freezing last year’s prices on 52 basic commodities. Last month, the Union Co-operative Society signed a similar pact capping prices on 16 items, followed by Lulu hypermarkets, which agreed to maintain last year’s prices on more than a dozen essential items.

“The UAE is an importing market as far as commodities go, so of course we are going to experience the burdens of inflation,” explained V Nandakumar, the corporate communications director for Lulu hypermarkets. “When we cap prices, we don’t see it as an economic decision, we see it as CSR [corporate social responsibility], because we are conscious of how inflation is impacting the community.”

Dr Barnett warned that whatever the incentive, the consequences of price controls “will jump up and bite you”.

“Good policy, good economics and good politics are not always the same thing,” he said. “If costs go up and some supermarkets hold prices constant, what happens to them? They’re out of business.”

The prices of staple items including cooking oil, flour, sugar and eggs have been affected by the controls. The latest commodities price list released this week by the Economy Ministry revealed a rise in the cost of various items. Short cucumbers at Carrefour in Dubai, for example, went up from Dh1.55 to Dh1.90 in just a week. Similar price rises are being reported at supermarkets across the region.

Earlier this month, officials with the Economy Ministry announced that 15 items – including dry and condensed milk, frozen and canned vegetables, baby food, chicken, edible oil, rice, flour, fish, meat and tea – were to be placed on a free import list. The Government is also studying the benefits of keeping stockpiles of at least 15 essential items.

“We must start educating people that their normal spending or consumption is different than during crisis times,” said Ahmed bin Shabib el Thahari, first deputy speaker at the Federal National Council, which is conducting the stockpiling study. “Not just when something wrong is happening should they rush to consumption – this will create a direct inflation.”

Crop shortages and lower yields worldwide have fuelled recent riots in countries like Egypt, Indonesia, Cameroon and Peru, with the UN World Food Programme comparing the impact of soaring food prices worldwide to a “silent tsunami”.

Many Government officials estimate that inflation of food prices could soar as high as 40 per cent this year, up from last year’s high of 27 per cent. The Abu Dhabi Department for Planning and Economy has reported a 10.7 per cent jump in inflation last year, driven by rents, transport and food costs. Food, beverages and tobacco accounted for 11 per cent of that increase.

“In every country that tries to control prices, shortages develop,” noted Dr Barnett. “We’ve seen it time after time – there’s no mystery here.”

vsalama@thenational.ae

Abu Dhabi poised for shopping boom

By Vivian Salama

The National

Abu Dhabi’s retail industry could soon yield higher sales per capita than Dubai, with spending power in the emirate expected to surpass Dh7.34 billion (US$2bn) by next year, according to research by the property consultant, Colliers International. 

“The outlook for Abu Dhabi is bullish,” John Davis, the chief executive of Colliers, said yesterday at the Middle East Council of Shopping Centre’s (MECSC) annual convention.

Retail sales in Abu Dhabi must increase by 19 per cent for it to sustain its performance per capita, while sales in Dubai must grow at the rate of 35 per cent to achieve the same performance, partly due to the growth in tourist numbers.

Mr Davis said the gross leasable area (GLA) for retail space in the capital was expected to grow by 122 per cent within two years.

Malls account for almost 60 per cent of Abu Dhabi’s total retail GLA, with non-mall GLA representing less than 300,000 square metres. According to the Colliers data, the occupancy rate at malls across Abu Dhabi averages about 90 per cent, while the shopping centres in Dubai are all nearly full.

Several factors are expected to lure more brand names to Abu Dhabi in the coming years. Retailers pay considerably lower rents in the capital, with the average annual cost ranging from Dh3,486 to Dh5,505 per square metre at prime shopping centres such as Marina Mall, Abu Dhabi Mall and Al Wahda Mall. In Dubai, at Mall of the Emirates, Ibn Battuta Mall and Burjuman, rents range from Dh4,404 to Dh6,606.

“The spending power of the Abu Dhabi nationals is obviously very, very high, Mr Davis said. “You’ve also got companies like Etihad, for example, which are really working to bring people from around the world directly to Abu Dhabi, so that will have a positive impact on the retail sector as well.”

The major players in Abu Dhabi’s retail property sector, including Aldar and the National Investment Corporation (NIC), are actively pursuing ambitious new projects throughout the emirate. Several new malls will be opened in the capital in the next few years, including Dalma Mall, scheduled to open next year, as well as the Central Market, Deerfields, and phase III of Marina Mall, all scheduled for 2010.

vsalama@thenational.ae

Aldar starts work on mall for Al Ruwais

by Vivian Salama

The National

 

DUBAI // The developer Aldar has begun work on the first major shopping centre to be built in the remote industrial town of Al Ruwais. 

The new mall, located 220 kilometres west of Abu Dhabi near the Saudi Arabian border, will serve as a community centre, providing a range of activities for residents who now have to drive long distances for shopping and leisure facilities. 

“People in Al Ruwais have to jump in a car, pack the family up, take a picnic and go on a long drive just to shop – it’s a day’s journey,” said Fred Douglas, the leasing director for Aldar. “Why should these people be denied a fully enclosed, air-conditioned shopping mall – the things that people in Abu Dhabi and Dubai have and take for granted every day?”

The 30,000-square-metre centre will feature a still-unnamed hypermarket, a wide range of retail shops and a Warner Brothers cinema. Aldar is currently reclaiming land at the site and is expected to start the leasing phase within weeks. 

Aldar officials expect the population of Al Ruwais to grow from 16,000 to 20,000 by the mall’s scheduled completion date of 2010. 

By factoring in communities around Al Ruwais, they believe the new shopping centre will serve as many as 40,000 people, many of them expatriates working in the oil industry.

According to Phillip Vaughan, the director of retail development for Aldar, the company is the UAE’s only real estate developer actively pursuing projects in outlying areas of Abu Dhabi. 

Aldar has no plans to expand to the other emirates, but it does plan to open shopping centres in other towns.

“There is potential for further facilities and amenities in due course, but if you consider the point of oversupply, Al Ruwais really only needs one strategic retail offer, and that’s what’s being supplied,” Mr Vaughan said.

Aldar already has a number of schemes under construction in Abu Dhabi city, including the five-hectare Central Market and the Dh1.2 billion (US$327 million) Noor Al Ain development, which will complement the existing Al Jimi Mall. 

Both are scheduled for completion in 2010.

Carrefour to cap basic food prices

by Vivian Salama

The National

Carrefour, a subsidiary of Majid Al Futtaim (MAF) Hypermarkets, is the latest UAE retailer to cap food prices in response to growing inflation fears. 

Officials with the region’s largest retailer are due to sign a memorandum of understanding (MoU) this morning with the Emirates Society for Consumer Protection, a division of the Economy Ministry, to maintain 2007 prices on various basic commodities.

A similar agreement was signed last month between the Government and the Union Cooperative Society, placing ceilings on more than 16 staple items, including cooking oil, flour, sugar and eggs, in an effort to ease the burden of skyrocketing food prices.

The country’s largest domestic retailer also announced that it would import goods directly from source, whenever possible, bypassing intermediaries when stocking its shelves and thus eliminating another layer of cost.

Lulu, the supermarket chain operated by Emke Group, signed a memorandum of understanding with the Economy Ministry earlier this month, agreeing to price caps on 32 products.

“These agreements are basically a goodwill gesture between our supermarkets and the Government of the UAE,” said V Nandakumar, a spokesman for Lulu, who said that the motivation for capping prices was very different from competitive price-cutting. “We are trying to play a part in curbing the inflation of prices, which is really hurting the people.”

Last week, officials with the Economy Ministry announced that 15 items — including dry and condensed milk, frozen and canned vegetables, baby food, chicken, edible oil, rice, flour, fish, meat and tea — were to be placed on a free import list. The Government is also conducting a study on the benefits of stockpiling at least 15 essential food items.

Time will tell whether smaller, domestically-based supermarkets will follow the lead of Carrefour, Union Cooperative and Lulu.

“It’s very difficult for me to say we’ll do the same because [the big groups] purchase tons of containers of rice and other products directly from the countries of origin,” said David Berrick, general manager of retail at Abela Supermarkets. “We buy from the local market so we are governed by [importers’] prices.”

Abu Dhabi’s Department for Planning and Economy reported a 10.7 per cent jump in inflation last year, driven by higher rents, transport and food costs. Food, beverage and tobacco accounted for 11 per cent of that rise. Food retail in the UAE was worth an estimated Dh12.8 billion (US$3.5 billion) in sales last year.

Soaring food and fuel prices have been at the heart of recent riots in countries including Egypt, Indonesia, Cameroon and Peru, with the head of the International Monetary Fund recently warning that the surge in food prices could push 100 million people into deeper poverty.

However, some industry analysts warn that price caps may exacerbate this growing crisis, as farmers turn to more profitable commodities, such as biofuel crops.

“When you create a price ceiling, you will have shortages at some point,” said Andy Barnett, a professor of economics at the American University of Sharjah. “These devices will only make the impact of inflation worse, not better.”