UAE ruling set to shake up electronics channel
Uncertainty reigns in UAE channel sector following historic government ruling.
The UAE consumer electronics channel sector faces a period of unprecedented upheaval after a ministerial ruling sanctioned the dissolution of previously airtight trade agency agreements.
Resolution no. 381/2006, which was recently introduced by UAE Minister of Economy Sheikha Lubna bint Khaled Al Qasimi, signalled a radical shift in the UAE government’s policy of forcing international consumer electronics vendors to establish partnerships with local businesses.
The new ruling stipulates that principal companies can deregister trade agency agreements if they feel that their UAE partners are failing to meet their expectations.
The ruling comes at a time when trade agency terminations are far outstripping newly registered agreements.
Figures released by the UAE Ministry of Economy showed that 720 trade agencies were deregistered between August and July of 2006, while only 156 were established during the same period.
Dubai’s consumer electronics sector is expected to experience the biggest upheaval, with industry sources suggesting many vendors may abandon existing partnerships due to rising operational costs.
An industry source told ECN: “It will have a major impact on the UAE distribution channel. Many vendors have long claimed the situation was stifling commercial opportunities for their businesses.
“Some South Korean vendors have been actively working to reduce their dependency on local partners.”
The source claimed that multi-brand distributors would face increased pressure from their vendor partners as a result of the ruling.
“When a distributor is dealing with a large number of vendors it cannot provide the same level of support to each of them, particularly if they are direct competitors in marketplace.”
While most agencies contacted by ECN declined to comment, Jihad El Eit, VP of marketing for mobile phone distributor i2, welcomed the ruling.
“The legislation will encourage more brands to enter the UAE without fear of being tied to distribution agents that are not up to standard,” said El Eit, whose company also operates a successful retail chain.