Eros Group welcomes UAE trade liberalisation

CEO Deepak Babani discusses the impact of the recent UAE trade agency ruling.

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By  Ronan Shields Published  November 10, 2006

As the chief executive of Eros Group – one of the UAE’s largest consumer electronics distributors – Deepak Babani is well positioned to comment on arguably the biggest shake-up to hit the country’s channel distribution sector. According to a ruling issued on September 7 by UAE authorities, consumer electronics vendors are now legally entitled to prematurely sever links with their channel partners in the country by seeking a court injunction citing their dissatisfaction with the arrangement. Agreements can also be deregistered if the deal is dissolved by mutual consent or has naturally expired – without contractual renewal. Babani claimed the new trade agency laws would provide vendors with an avenue to dissolve unsatisfactory arrangements and pursue their own interests in the UAE. “Principals [vendors] who were underperforming in the market will also now have the opportunity to establish new and more beneficial partnerships,” he said. Some analysts have forecast that the recent ministerial rulings (no. 381/2006) will result in the break-up of many high profile partnerships in the region. Babani suggested the new arrangements represented a culmination of the UAE government’s efforts to liberalise the sector and create a new level of free market thinking to ensure the UAE remained competitive as an international market. “The new regulations are part of an evolving process that has been taking place over a number of years now,” he said. “I believe the government realised that the old policy was not necessarily helpful to the investment climate of the UAE.” Babani claimed strong economic conditions in the UAE and the boom in trade of consumer electronics goods necessitated the government’s decision. “The previous arrangements did have some negative implications for the industry but that applies to many regulations,” he explained. “There is a good and bad side to any arrangement. However, I would say that the old policies had more negatives than positives. “I believe the government wanted to show that the UAE is a progressive nation keen to shed the more protectionist policies of the past.” In regards to Eros, which currently boasts exclusive distribution deals with Samsung Digital and Hitachi among others, Babani claimed the new ruling would have little impact on the company’s existing relationships. “As a distribution business we have an obligation to service our clients equally, and we have always worked to ensure we respond to market trends on their behalf in the UAE,” he said. “I am always keen to stress that our client’s objectives are our objectives also. This point is stipulated in our contracts with them. “In terms of the channel, if retailers and distributors are adding value to their client’s brands then they should have nothing to be concerned by the new ruling.” Commenting on Eros’ reaction to the developments, he said: “For distributors such as ourselves it means that we have increased prospects of expanding our product portfolio so, in that sense, I welcome these new arrangements.” “I believe rising market pressures has prompted these laws. In Dubai, the consumer electronics channel is facing rising operational costs coupled with diminishing margins. Unless a process of rationalisation occurs, the industry will experience a slow down.” “If rising costs are increasingly passed on to the consumer then demand will drop and vendors might start investing elsewhere.”

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