Gulf News 4/10/2005

End of monopoly in food sector will benefit customers

By Saifur Rahman, Staff Reporter

Dubai: The UAE’s decision to eliminate the monopoly in the foodstuffs sector will have a profound impact on the economy, according to analysts and businessmen.

The move is considered the government’s first step to deregulate the economy in line with World Trade Organisation (WTO) stipulations. It will pave the way to a free trade agreement with the United States currently under negotiation.

"Not only does it fall in line with the WTO recommendations and the FTA framework that the US has been seeking, it comes as good news to the country’s consumers suffering from the impact of price inflation. They will benefit the most from a competitive environment," Dr. Khalid Maniar, managing partner at AGN MAK, consultants and specialists in company law, told Gulf News yesterday.

"More importers will bring in the same and other products from a company and sell them at lower prices. Earlier the sole distributor dictated choice and timing.

"The government will begin to open other sectors to competition," said one analyst.

However, not everyone agrees. "It won’t be easy for the government to open up other sectors there is a lot at stake."

Essam Al Tamimi, managing partner of Al Tamimi and Co, said, "The government may not open up all the sectors, leaving those to the principal and franchise partners to decide, where the local franchisees invest in developing the infrastructure and back-up service facilities. I do not think all the sectors will be open to competitive environment."

However, the move is expected to shake the foundation companies relying on monopolistic practices and high premiums as a result of the country’s strict control on parallel imports.

For more than three decades, the market has been captive to sole distributorship.

Business leaders have been cautious in welcoming the move.

"It will change the UAE’s business environment. Under the WTO, exclusivity will have to be done away with gradually. Agents usually keep between 30 to 40 per cent margin on products. They will have to be more realistic," said Paras Shahdadpuri, chairman of Nikai Corporation.

"Discipline will be needed to avoid a price war in the market. It is a step towards full economic liberalisation."

Company and agency laws have been a foundation stone of the UAE’s business practices and the success of family-owned businesses.

However, many companies have diversified their businesses in preparation for a more competitive globalised economy.