Dubai Business Survey - Q1 2018
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Dubai Business Survey - Q1 2018
INTRODUCTION AT A GLANCE
The Department of Economic Development (DED) was established in March 1992, with the objective to organize, ■■ A y-o-y comparison shows that the Composite BCI has gained a marginal 5.5 points, increasing from 111.2
regulate and boost trade and industry within the Emirate of Dubai. points in Q1, 2017 to 116.7 points in Q1, 2018
In October 2008, HH Sheikh Mohammed bin Rashid Al Maktoum, UAE Vice President and Prime Minister, and ■■ The Composite BCI has risen from 111.2 points in Q1, 2017 to 116.0 points in Q4, 2017 and 116.7 points in
Ruler of Dubai, issued Decree no. 25 giving full responsibility to DED to plan and regulate the overall economic Q1, 2018.
performance of Dubai, supervise its functions and support the economic development to ensure that the
objectives of the Dubai Strategic Plan are achieved. ■■ Expectations of higher volumes are strongest for the trading sector compared to the manufacturing and
services sectors.
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 ■■ The Composite BCIs for SMEs and large companies is recorded at 110.6 and 120.8 points, respectively.
extended to include:
■■ Dubai’s overall business community is less optimistic compared to exporters with Composite BCI scores
1. Dubai SME 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.
2. Dubai Exports
■■ In terms of the business situation, 50% of the respondents anticipate an improvement in Q2, 2018 versus
3. Dubai Investment Development Agency (Dubai FDI) 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.
4. Dubai Competitiveness Office (DCO)
■■ Plans to expand capacity and upgrade technology have improved on an annual basis. 71% of the firms hope
In line with DED’s new mandate, the Economic Information Division conducts a quarterly Business survey, in to expand their capacity in Q1, 2018 versus 61% in Q1, 2017. 68% of the firms intend to invest in technology
coordination with DED Agencies (Dubai Exports & Dubai SME) and in collaboration with Dun & Bradstreet South upgrade plans in Q1, 2018 compared to 65% in Q1, 2017.
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 BUSINESS CONFIDENCE INDEX CALCULATIONS
the ‘Competitiveness of Dubai’.
In order to gauge the perceptions of the business community, DED conducts a quarterly business survey, to The Business Confidence Index (BCI) is calculated as a weighted average score of the following ‘business
assess the level of current economic activity and the outlook of businesses for the next quarter. outlook’ indicators:
In addition, the survey elicits feedback from businesses on challenges that may impact growth and development ■■ Selling Prices
and assesses their investment outlook for the coming twelve months.
■■ Volumes Sold
■■ Number of Employees
■■ Profits
METHODOLOGY
For each indicator, ‘resulting scores’ are calculated using the net balance method:
(% of positive responses - % of negative responses) + 100
The quarterly business survey for Q1, 20181 was conducted with a total sample of 502 companies across For the Composite Business Confidence Index, the resulting scores are multiplied with their corresponding
the Emirate of Dubai. The sample included a mix of small, medium, and large enterprises and had adequate weights to arrive at a weighted average index score2. This index is finally rebased so that Q2, 2011 = 100. Taking
representation from the manufacturing, trading, and services sectors in proportion to their respective account of the economy’s composition by firm size, the index is weighted by the relative contributions of SMEs
contributions to Dubai’s GDP. and large businesses to Dubai’s GDP. The final result is the following index calculation: Overall Index = 60% *
(Large enterprise Index) + 40% * (SME Index).
Figure: 01
BCI scores are classified in the following three groups:
Survey Sample
■■ BCI < 100, business expectations are negative
Overall Sample 502
■■ BCI = 100, business expectations are stable
Manufacturing (SME) Large Companies 66 ■■ BCI > 100, business expectations are positive
Services (SME) 70
66 Large Companies Manufacturing 7 When expressed with reference to the base quarter Q2-2011, the following interpretations hold (t and t-1
195
referring to two consecutive quarters):
Trading 13
■■ BCI(t)< BCI(t-1): business expectations are declining
171 Services 46
■■ BCI(t) =BCI(t-1): business expectations are stable
Trading (SME)
■■ BCI(t)> BCI(t-1): business expectations are rising
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 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
the period between July and September, and Q4 is the period between October and December of each year. employees) x (Parameter Weight)] + [(Net Balance on Profits) x (Parameter Weight)]
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BUSINESS CONFIDENCE INDEX - Q1, 2018 OVERALL BUSINESS OUTLOOK - Q2, 2018
Dubai’s economic performance is expected to improve in 2018 with firming oil prices, an improvement in global The survey shows that the outlook for Q2, 2018 is less optimistic than that for Q1, 2018 for most parameters,
trade and the expected easing pace of fiscal adjustment. Real GDP, which grew 2.85% in 2016, is projected to backed by lower demand for products/services during the summer months and lack of projects/contracts/
grow 3.5% in 2018 and touch 3.7% in 2019 as infrastructure development and diversification policies continue customers. The outlook for hiring is comparable to the previous quarter and to the level in Q2, 2017.
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 Forecast Business Performance – Q2, 2018
indicates stable/neutral sentiments). Table: 01
Figure: 02 Q2, 2017 Q1, 2018 Q2, 2018
A y-o-y comparison shows that No Net No Net No Net
Composite Business Confidence Index - Q1, 2018 the Composite BCI has gained 5.5
Parameter Increase Decrease
Change Balance
Increase Decrease
Change Balance
Increase Decrease
Change Balance
points from 111.2 points in Q1, 2017
Sales
to 116.7 points in Q1, 2018. On a Revenue 54% 11% 38%
35% 43% 47% 21% 32% 26% 54% 17% 29% 37%
116.0 116.7 quarterly basis, the Composite BCI is
111.2 marginally up by 0.7 points from 116.0 Selling
11% 9% 79%
80% 2% 36% 8% 56% 28% 13% 11% 76% 2%
Prices
points in Q4, 2017 to 116.7 points in
Q1, 2018. Volumes
50% 11% 39% 39% 40% 18% 42% 22% 51% 16% 33% 35%
Sold
No. of
23% 4% 75%
73% 19% 22% 9% 69% 13% 19% 6% 75% 13%
Employees
Q1, 2017 Q4, 2017 Q1, 2018 Profits 47% 13% 39%
40% 34% 33% 25% 42% 8% 43% 20% 37% 23%
New
Purchase 52% 10% 41%
38% 42% 41% 16% 42% 25% 46% 15% 36% 31%
Orders
Figure: 03 Note: Increase % + Decrease % + % No Change = 100%
Large companies are more optimistic
than SMEs with respect to the Business Confidence Index - Q1, 2018
■■ The net balance for volumes has shown a q-o-q increase but has weakened slightly on a y-o-y basis;
business outlook, with Composite
120.8 from 39% for Q2, 2017 and 22% for Q1, 2018 to 35% for Q2, 2018. 51% of the respondents anticipate a
BCI scores of 120.8 points and
116.7 rise in volumes in Q2, 2018 backed by expectations of new projects/orders and higher demand. On the
110.6 points, respectively. While
other hand, 16% of the firms expect a decline in this parameter due to slowing demand especially during
large companies are more confident
110.6 the Ramadan season.
than SMEs about their outlook for
revenues, selling prices, volumes,
■■ The trading sector is most optimistic regarding its outlook for volumes for Q2, 2018.
hiring and profitability, SMEs have
displayed a stronger forecast for new
■■ The selling prices forecast is comparable to the level seen in Q2, 2017 but is considerably weak in Q2,
purchase orders.
2018 with a net balance of 2% versus 28% in Q1, 2018. Respondents cited lack of demand due to the
SME LARGE COMPOSITE implementation of VAT and competition. The trading sector is most optimistic with respect to its outlook
INDEX COMPANY BCI for selling prices for Q2, 2018.
INDEX
■■ The profitability forecast is in line with projections for volumes and revenues.
■■ Hiring expectations are firm both on an annual and quarterly basis.
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Figure: 04
A comparison of projections among
SERVICES SECTOR
Sectoral Net Balances (Sales Volume), the key economic sectors shows that
Quarterly Outlook - Q2, 2018 the trading sector holds the strongest Firms in the services sector have weaker forecasts for volumes for Q2, 2018 when compared to the previous
outlook for sales revenues, selling quarter and over the year. Sentiments have been dented due to lack of demand during the summer season and
39% prices, volumes, profits and new Ramadan.
32% 32%
purchase orders. The services sector is
most optimistic about hiring during Q2, Figure: 06
2018.
Net Balances on Sales Volume for Key Service Sectors,
Quarterly Outlook – Q2, 2018
Manufacturing Services Trading 75% 76%
63%
55% 55% 53%
49% 46% 45%
24%
-6% -31%
CONSTRUCTION TOURISM & HOSPITALITY
SECTOR-WISE OUTLOOK FOR SALES VOLUMES
56% 52% 47% 49%
41% 42% 39% 39%
27% 34% 37% 32%
TRANSPORTATION & LOGISTICS OVERALL SERVICES SECTOR
MANUFACTURING SECTOR Q1, 2017 Q2, 2017 Q3, 2017 Q4, 2017 Q1, 2018 Q2, 2018
Respondents in the manufacturing sector are confident about their volumes for Q2, 2018 compared to the
■■ Within the services sector, construction firms are bullish about their volumes during Q2, 2018, with a net
previous quarter backed by expectations of new projects. While 51% of the manufacturers expect an increase
balance of 53%. This optimism is due to expectations of new projects.
in volumes, 30% foresee stability in this parameter for Q2, 2018.
■■ Among transportation firms, 60% are optimistic of an increase in volumes during Q2, 2018 with expectations
Figure: 05 of higher demand especially from new clients.
Quarterly Net Balances (Sales Volume) - Manufacturing Sector ■■ 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%.
58% 47% 44% 35% 16% 32%
Q1, 2017 Q2, 2017 Q3, 2017 Q4, 2017 Q1, 2018 Q2, 2018 TRADING SECTOR
Manufacturing sub-segments most optimistic about their volumes for Q2, 2018 are glass, cement and aluminium. 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.
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Figure: 07
IN FOCUS
Quarterly Net Balances (Sales Volume) - Trading Sector
Business Incubators and Accelerators
36% 35% 12% 23% 7% 39% Dubai SME, the agency of the Department of Abdul Baset Al Janahi, CEO, Dubai
Economic Development (DED) in Dubai mandated
to develop the small and medium enterprises (SME) SME, said:
Q1, 2017 Q2, 2017 Q3, 2017 Q4, 2017 Q1, 2018 Q2, 2018 sector, has announced new regulations for ‘Business “The new regulation provides a legal form for
Incubators and Accelerators’ to draw further incubators for the sake of universities, colleges and
support for innovative entrepreneurs, particularly in venture capitalists as well as entrepreneurs who
Key sectors optimistic of higher demand over the next quarter include the following: monitoring and mentoring their business growth. have unique ideas and initiatives,” also “It will provide
The initiative is part of providing greater opportunities an ideal environment for innovation and support
■■ Traders of auto products are more optimistic about their volumes in Q2, 2018. 75% hope to sell higher the digital transformation of projects, in addition
for investment in developing business leaders
volumes during Q2, 2018, while the remaining 25% anticipate stability. None of the respondents in this to providing a hub for technology and innovation
across varied industry sectors through business
segment anticipate a decline in volumes. initiatives.” He added that the regulation launched
incubators, accelerators and shared works spaces,
thus advancing economic growth and the Fourth with ample support from the Government of Dubai,
■■ Traders of construction related products are least optimistic; 19% of these traders expect lower volumes is keen to develop the entrepreneurial environment
Industrial Revolution in Dubai.
due to slowing business conditions in Q2, 2018. and promote a culture of creativity and innovation to
Dubai SME seeks to create platforms that foster accelerate national economic growth. The initiative
entrepreneurship, facilitate access for young will attract local and foreign investment in SMEs as
entrepreneurs into varied industry sectors, and
EXPECTED BUSINESS SITUATION
well as international expertise in business incubation
empower innovative entrepreneurs to translate and enhancing business competitiveness.
their ideas into sustainable, knowledge economy
initiatives that will enhance Dubai’s position among The incubators shall also provide specialized training
Expectations regarding the business situation show that half (50%) the survey respondents anticipate an programs as well as workshops on administrative,
regional and global economies.
improvement for Q2, 2018 versus 41% in Q1, 2018. However, a lower proportion 40% expect the business marketing, financial and economic aspects, in
situation to stabilise compared to 51% in the previous quarter. ■■ Regulations will provide a legal framework addition to strategic alliances with global business
advantageous to creative entrepreneurs partners and support for capability development and
Figure: 08
international expansion.
■■ Forerunner to the ‘Dubai Business Incubator
Expected Business Situation Network’ Regulating incubators and business accelerators is
a first step towards the establishment of the ‘Dubai
■■ Aims to support, guide and monitor Business Incubator Network (DBIN),’ which will act
47% 45% 39% 48% 41% 50% entrepreneurial projects and innovations as a resource to help, encourage and deliver best
practices for business incubator programs in the
UAE. The network seeks to stimulate economic
46% 47% 51% 44% 51% 40% His Excellency Sami Al Qamzi, and development in the UAE, specifically in the
Emirate of Dubai, through the establishment of new
Director General of DED, said:
7% 8% 10% 8% 8% 10%
facilities capable of providing promising investment
“Regulating the Incubators and Business Accelerators opportunities in economic development and job
activity is in line with the Dubai Industrial Strategy creation. The network also seeks to support and
Q1, 2017 Q2, 2017 Q3, 2017 Q4, 2017 Q1, 2018 Q2, 2018
2030. It aims to empower small and medium facilitate innovation by facilitating the exchange
enterprises to play a greater role in the production of information and experience between decision-
Improvement Stability Deterioration process, and contribute to a competitive national makers in incubators and business accelerators
economy based on knowledge, innovation and across Dubai.
technologies of the future,” adding that the regulation
49% of the firms do not anticipate any obstacles to their business operations during Q1, 2018. Competition and
will encourage creativity and promote investment in
the impact of VAT are key concerns affecting Dubai’s businesses.
innovation.
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DUBAI SME OUTLOOK – Q2, 2018 DUBAI EXPORTERS’ OUTLOOK - Q2, 2018
SMEs account for a dominant share in Dubai’s total business composition. 436 of the 502 firms that were The survey included 104 export-oriented manufacturing, trading, and services firms in Dubai. For the purpose
interviewed as part of the survey were SMEs. These included micro, small, and medium enterprises as per of this report, an exporter is defined as an entity with exports accounting for 20% or more of its consolidated
Dubai’s SME definition. Although the Composite BCI for SMEs remained firm at 110.6 points in both Q1, 2018 sales. The business outlook of exporters has jumped on a quarterly basis and is up marginally over the year. The
and Q4, 2017, it was lower when compared to the index value of 117.1 points in Q1, 2017. 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.
Forecast Business Performance (SMEs) – Q2, 2018
Table: 02
Forecast Business Performance (Exporters) – Q2, 2018
Q2, 2017 Q1, 2018 Q2, 2018 Table: 03
Parameter Increase Decrease
No Net
Increase Decrease
No Net
Increase Decrease
No Net Q2, 2017 Q1, 2018 Q2, 2018
Change Balance Change Balance Change Balance
No Net No Net No Net
Parameter Increase Decrease Increase Decrease Increase Decrease
Sales Change Balance Change Balance Change Balance
Revenue 54% 10% 36% 44% 47% 22% 31% 25% 54% 18% 28% 36%
Sales
Revenue 59% 7% 34% 52% 40% 25% 35% 15% 56% 11% 33% 45%
Selling
12% 9% 79% 3% 37% 7% 56% 30% 13% 11% 76% 2%
Prices
Selling
10% 10% 80% 0% 33% 9% 58% 24% 16% 6% 78% 10%
Volumes Prices
49% 9% 42% 40% 39% 18% 43% 21% 51% 17% 32% 34%
Sold
Volumes
53% 8% 39% 45% 35% 26% 39% 9% 58% 13% 29% 45%
No. of Sold
24% 3% 73% 21% 21% 9% 70% 12% 18% 6% 76% 12%
Employees
No. of
16% 4% 80% 12% 12% 10% 78% 2% 19% 6% 75% 13%
Employees
Profits 47% 12% 41% 35% 32% 24% 44% 8% 43% 20% 37% 23%
New Profits 51% 10% 39% 41% 31% 29% 40% 2% 52% 13% 35% 39%
Purchase 52% 9% 39% 43% 39% 16% 44% 23% 47% 15% 36% 32%
Orders New
Purchase 51% 7% 42% 44% 36% 19% 45% 17% 53% 11% 36% 42%
Note: Increase % + Decrease % + % No Change = 100% Orders
Export 55% 7% 38% 48% 40% 15% 45% 25% 57% 8% 35% 49%
Key outlook indicators for the next quarter are summarized below. Sales
■■ A quarterly comparison shows that SMEs are optimistic about most parameters for Q2, 2018 than in the Note: Increase % + Decrease % + % No Change = 100%
previous quarter. However, a y-o-y comparison shows that SMEs are less upbeat for all parameters of the
survey.
Key outlook indicators for the next quarter are summarized below.
■■ 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 ■■ The survey for Q2, 2018 reveals that exporters are more confident than the overall business community with
and more demand/customers. 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
■■ Hiring trends remain steady on a q-o-q basis. purchase orders.
■■ Large companies continue to be more optimistic than SMEs with respect to revenues, selling prices,
■■ The outlook for export sales has strengthened on a quarterly and annual basis.
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 ■■ 39% of the exporters have indicated plans to export to new markets during Q2, 2018 versus a corresponding
purchase orders. Services SMEs hold a stronger outlook for hiring. 32% in the last quarter. The leading new markets for export diversification are Africa, GCC and India.
■■ 33% of manufacturing SMEs and 43% of services firms forecast an increase in their capacity utilization ■■ The key challenges faced by Dubai’s exporters related to exporting their goods and services outside the
rates during Q2, 2018. UAE are competition (9%), legal & regulatory issues (5%), payments & collection risks (5%) and political
instability in the region (5%).
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OVERALL BUSINESS PERFORMANCE Q1, 2018 ■■ 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
Although the main purpose of the survey is to gauge business expectations for future activity, it also captures in the cost of finance, while 30% reported an increase.
the actual changes in business performance from one quarter to another, as elicited from the feedback given
by responding firms.
Figure: 09
Overall Business Performance – Q1, 2018 Net Balances on Sales Volume for Key Sectors, Quarterly Output - Q1, 2018
Table: 04
Q1, 2017 Q4, 2017 Q1, 2018
No Net No Net No Net
Parameter Increase Decrease Increase Decrease Increase Decrease
Change Balance Change Balance Change Balance -19% -32% -6% -35% -16% -26%
Sales
Revenue 20% 30% 50% -10% 26% 35% 39% -9% 17% 46% 37% -29%
Selling
10% 20% 70% -10% 11% 18% 71% -7% 20% 22% 58% -2%
Prices
Volumes
21% 30% 49% -9% 26% 32% 42% -6% 18% 44% 38% -26%
Sold
No. of
11% 13% 76% -2% 14% 18% 68% -4% 13% 18% 69% -5%
Employees Manufacturing Trading Construction Transportation Tourism & Hospitality Overall Services
Profits 18% 36% 46% -18% 19% 42% 39% -23% 13% 50% 37% -37% (Net Balance = % of respondents citing an increase - % of respondents citing a decrease)
New
Purchase 21% 27% 52% -6% 27% 26% 46% 1% 18% 38% 41% -20% ■■ The weakest sales volumes performance was recorded by trading firms. Within the trading sector, auto,
Orders
computer and food & beverage traders reported negative net balances for volumes.
Note: Increase % + Decrease % + % No Change = 100%
■■ In the services sector, firms in the transportation and the hospitality sub-segments registered negative
performance as denoted by declining volumes.
■■ 18% of the respondents registered an increase in volumes during Q1, 2018, while 44% registered a decline,
■■ Within the manufacturing sector, furniture manufacturers reported a decrease in volumes.
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.
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SMEs PERFORMANCE – Q1, 2018 EXPORTERS’ PERFORMANCE - Q1, 2018
Overall Business Performance (SMEs) – Q1, 2018 Overall Business Performance (Exporters) – Q1, 2018
Table: 05 Table: 06
Q1, 2017 Q4, 2017 Q1, 2018 Q1, 2017 Q4, 2017 Q1, 2018
No Net No Net No Net No Net No Net No Net
Parameter Increase Decrease Increase Decrease Increase Decrease Parameter Increase Decrease Increase Decrease Increase Decrease
Change Balance Change Balance Change Balance Change Balance Change Balance Change Balance
Sales Sales
19% 30% 51% -11% 24% 37% 39% -13% 16% 48% 36% -32% Revenue 22% 30% 48% -8% 14% 41% 45% -27% 24% 46% 30% -22%
Revenue
Selling Selling
10% 20% 70% -10% 11% 18% 71% -7% 20% 22% 58% -2% 6% 23% 71% -17% 10% 25% 65% -15% 24% 20% 56% 4%
Prices Prices
Volumes Volumes
20% 29% 51% -9% 23% 34% 43% -11% 16% 46% 38% -30% 23% 31% 46% -8% 18% 40% 42% -22% 25% 41% 34% -16%
Sold Sold
No. of No. of
11% 13% 76% -2% 13% 18% 69% -5% 13% 19% 68% -6% 10% 11% 79% -1% 10% 19% 71% -9% 15% 13% 72% 2%
Employees Employees
Profits 17% 36% 47% -19% 17% 43% 40% -26% 12% 52% 36% -40% Profits 20% 36% 44% -16% 12% 48% 40% -36% 22% 43% 35% -21%
New New
Purchase 21% 27% 52% -6% 25% 29% 45% -4% 17% 40% 41% -23% Purchase 20% 30% 50% -10% 20% 35% 45% -15% 24% 38% 38% -14%
Orders Orders
Note: Increase % + Decrease % + % No Change = 100%
Export 21% 27% 52% -6% 14% 27% 59% -13% 18% 37% 45% -19%
Sales
Note: Increase % + Decrease % + % No Change = 100%
■■ 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. ■■ Exporters performed better than domestic-market oriented firms for revenues, volumes, selling prices,
hiring, profits and purchase orders.
■■ Large companies continued to display better performance with respect to all parameters: revenues,
volumes, prices, hiring, profitability and new 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.
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KEY BUSINESS CHALLENGES IN DUBAI INVESTMENT OUTLOOK
The survey addressed key challenges perceived by businesses at the end of Q1, 2018 that may affect near term The survey also gauges the business community’s investment outlook with respect to capacity expansion and
business growth and development. 49% of the participants do not expect to face any hurdles in their business technology upgrade plans over a twelve-month horizon.
operations in Q1, 2018 compared to 36% in the Q4, 2017.
Figure: 12 Figure: 13
Figure: 10 Figure: 11
Do you Plan to Expand the Do you Plan to Upgrade
Key Business Challenges, Q4, 2017 Key Business Challenges, Q1, 2018 Capacity of your Business? your Technology?
No Negative Factors 36% No Negative Factors 49% Q1, 2018 Q1, 2018
Competition 25% Competition 19%
VAT Implementation 12% VAT Implementation 9%
Increase in Operational Expenses 10% Demand/Market Conditions 7% 71% 68%
Demand/Market Conditions 9% Delay in Payments/Receivables 7%
Delay in Payments/Receivables 9% Increase in Operational Expenses 4%
Government Regulations/Fees 4% Government Regulations/Fees 3% 29% 32%
Inflation 2% Cost of Rental/Leasing 2%
Q4, 2017 Q1, 2017 Q4, 2017 Q1, 2017
Availability/Cost of Finance 2% Inflation 2%
Political Uncertainity in the Region 1% Others* 2%
69% 61% 69% 65%
Other Operational Challenges 1% Availability/Cost of Finance 1%
Availability/Cost of Raw Materials 1% Availability/Cost of Labor 1%
YES YES
Availability/Cost of Raw Materials 1% 31% 39% 31% 35%
NO NO
*Others include purchasing power of customers, challenges surrounding pricing strategy
■■ Capacity expansion plans are more bullish on a quarterly and annual basis. 61% intended to expand capacity
A summary of the major challenges facing Dubai’s business community are as follows: 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
1. Competition: 19% of the survey respondents expect to get impacted by competition; 70% of the firms intending to upgrade technology has increased from 65% for Q1, 2017 to 68% for Q1, 2018.
predict that this challenge will intensify.
■■ Key reasons cited by respondents for not considering expanding business capacity include satisfaction
2. VAT Implementation: Out of the 9% which consider this as a hindrance, 43% reported that this concern will amongst applicable respondents related to size and scale of their current operations and/or prioritization
increase. 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.
3. Demand/Market Conditions: 7% of the respondents’ operations are hampered by this challenge.
■■ Companies in the services sector are most optimistic about capacity expansion plans and technology
4. Delay in Payments/Receivables: 7% of the firms face this obstacle in their business operations. 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
5. Increase in Operational Expenses: 4% of the firms are concerned about this challenge. technology upgrades.
The remaining concerns were relatively less important and each affected 3% or fewer of the participants. ■■ Large firms are more confident than SMEs about both investments in business expansion and technology
upgrades.
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. ■■ Intent to invest in capacity expansion plans is stronger among exporters, while domestic-market oriented
firms are optimistic about their plans to upgrade technology.
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