UAE a strategic Trading Stop of IT goods

Prior to the glamorous Dubai, we all know or have heard of packed with impressive skyscrapers, artificially manmade islands and effective infrastructure, the emirate was already one of the top trading hubs in the world.

A significant amount of products valued at billions of dollars pass through the emirate before being exported to diverse countries. The main reason most products pass through Dubai is due to its ideal location, which links suppliers and consumers from countries such as Asia, Africa, Russia and many more.

Therefore, as aforementioned, Dubai is not only a preferred stopover for travelers, but also for products that are shipped to Dubai before being exported to a variety of other countries. Besides, from its ideal location, Dubai offers a tax-free jurisdiction with beneficial state laws as well as a variety of trade embargoes. All of these features have aided the emirate to make its mark as an international trade hub.

After completing a research on Dubai’s trading activities, the International Data Corporation (IDC) concluded that there are two essential features that characterize Dubai’s trading trends. The IDC underwent a research to develop a better understanding of the emirate’s trading trends as well as how these influence the trade of IT products.

The first feature the IDC noticed is that Dubai engages in the so-called grey market movement, which essentially describes the action of exporting goods via a country without using the official designated route. In such circumstances, the vendor is unaware of the channels the products take and the shipment usually goes through countries whereby traders purchase and sell goods from a diverse variety of countries. the majority of grey shipments the UAE receives are immediately sent off to their final destination. Nonetheless, a small proportion are left behind of which are either introduced in to the local market or exported again.

The second noticeable feature is re-exporting the goods. This includes products that have already authoritatively been shipped to the UAE or shipments the UAE has received through grey shipment markets, which are then re-exported to a variety of other countries. The shipments, which are re-exported from the UAE, are of considerable volume, therefore these influence the amount of products that UAE consumes in contrast to what was actually imported. Thus, it is incredibly significant to understand this trading pattern, since the seller’s international headquarters usually assumes the demand arises from the UAE market.

The IDC research also revealed how the amounts of goods, which are re-exported, vary according to brand and technology. In general, the research has shown that up to 30%-50% of goods that have officially been shipped to the UAE end up being re-exported.

There are several reasons that explain the cause of these trading trends. First, Dubai seeks to satisfy demand. Dubai has always been regarded as a trading centre and a jurisdiction where many IT products are available for purchase. Therefore, there are always wholesalers who seek to buy these goods from Dubai, even though the same goods are available in their own countries.

Another reason goods are re-exported from the UAE is when specific good are not obtainable or offered in another jurisdiction. Either this is due to the fact sellers have not yet established direct trading channels to export their products to specific jurisdictions, like Asia or Africa, or they have made specific products unavailable to certain countries. Therefore, demand of these goods is met through grey channels.

The final reason is due to the cost of goods and products. Not all goods and products are priced the same, therefore a specific product may be cheaper to purchase in one country than in another. Thus, buyers prefer to import the specific good from a country that offers the cheapest price. Due to the large amounts of shipments the UAE receives, in comparison to other jurisdictions, the price of goods tends to be much lower. In addition, Dubai is within the vicinity of many countries, thus accessibility of goods is made easier.