Business Confidence Index: Upgrade for Dubai

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Business confidence in Dubai is soaring – according the the Business Confidence Index (BCI) which is a quarterly business confidence survey conducted by the Department of Economic Development (DED) of Dubai.

The composite Business Confidence Index (BCI) for the second quarter of 2013 in Dubai reached to 120.7 points, which is a 14.6 points increase over the same period in 2012. BCI has also grown by 6.7 points between the first two quarters of 2013 as seen in the quarterly business confidence survey conducted by the Department of Economic Development (DED) in Dubai.

With more than 83 percent of the businesses in Dubai expecting an increase, or no change, in sales volume during the third quarter of 2013, they plan to add efficiency to their value chain by investing in recruitment or technology upgrades. Technology upgrades are in the agenda for 53 percent compared to 31 percent last year.

Export firms and larger enterprises in general are more confident on sales volumes, profitability and prices compared to small and medium enterprises (SMEs).

H.E. Sami Al Qamzi; “Dubai has placed considerable emphasis on aligning its business environment with the best in the world and such efforts are translated into growing confidence among businesses. As per current estimates, Dubai’s real GDP grew by 4.1% in the first quarter of 2013, followed by 4.7% in Q2 as trade and other non-oil sectors flourished and the prevailing trends confirm that such growth is here to stay.” — His Excellency Sami Al Qamzi, Director General of DED

The survey has yielded significant results:

  • Overall business outlook for Q3 2013 remains steady with 93% respondents reporting either an improvement or stability in business conditions. Businesses in the manufacturing sector are more optimistic with respect to profits; service firms have indicated higher optimism for hiring, while trading firms are most optimistic on volumes sold, especially food traders who expect higher demand in Ramadan. 
  • 43% businesses expect an improvement in their sales revenue in Q3 2013 while another 40% see stable outcomes. The increase in sales revenues will continue to be driven by an increase in real business activity (volumes) as prices are expected to remain largely stable, with 79% businesses expecting no change in their product prices. 
  • 43% of the businesses expect an increase in profitability based on the expectation of winning new contracts with better profit margins. 
  • With respect to volumes sold, 44% of the respondents expect an increase during Q3 2013. It has also led to 40% businesses looking to increase purchase orders in the next quarter in anticipation of new projects and the usual rise in demand after the end of Ramadan. 
  • New purchase orders are expected by 40% of the respondents while a 43% that plan no such changes stated they have sufficient stocks 
  • Sector-wise comparisons of sales volume expectations show that 47% of the manufacturing firms, 45% in trading and 43% in services as upbeat on Q3 2013. 
  • Within the services sector, projected sales volumes are relatively higher for real estate and ICT firms as strengthening market conditions drive expectations on new projects/contracts in the local as well as regional markets. Driven by increased demand from all major sectors during this period, 45% of the transport companies also expect more projects/contracts in Q3 2013.
  • Hotels and restaurants are less optimistic on the next quarter due to families leaving on summer holidays and the seasonal nature of tourism. Around 20% businesses in the sector expect an increase in volumes while a slightly higher proportion (25%) expect a corresponding decrease in their sales volumes.
  • 74% of the respondents said they would invest in expansion compared to 30% in Q2, 2012 owing o ease of doing business in Dubai.
  • 82% of the businesses expect ‘no change’ in their workforce while another 16% to increase their headcount in the next quarter, compared to 11% in Q2 2012. Service firms are more optimistic with respect to hiring compared to their manufacturing and trading counterparts.

External Challenges

Some 21 percent of the respondents say they faced no challenges in Q2 of 2012 which led to their strength growing to 22 percent in Q2 2013. The remaining 79 percent mentioned competition as the biggest challenge in Q2 2013. Other challenges mentioned include slowing demand and government fees adversely impacting profit margins. Larger firms pointed to availability of skilled labour as their second biggest challenge after competition.

Photo: Yron Yang/Flickr

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