UAE’s Air Conditioner Market to Grow at 6.1% CAGR During 2016-22

The United Arab Emirates (UAE) is one of the most attractive countries in the world, all thanks to its luxurious lifestyle, modern facilities, mesmerising skyscrapers and grand shopping centres. One noteworthy thing about this country is that despite being a desert land with extremely high temperatures, UAE manages to attract a large crowd of expats and tourists. It spends heavily on keeping the in-house atmosphere cool and pleasant as many visitors to the country come from cooler regions like the Americas and Europe. As a result, UAE has emerged as one of the leading air conditioner market in the Gulf Cooperation Council (GCC) region. 

The Air Conditioner market in the UAE is estimated to register a CAGR of 6.1% during the forecast period (2016-2022). In terms of revenue share, the UAE AC market was dominated by the centralised AC segment in the year 2015. Latest studies suggest that the ducted AC segment will show a strong growth rate during the forecast period. 

Major factors contributing to the growth of the AC market in the UAE include rising number of skyscrapers (including both commercial and residential complexes), development of the World Expo 2020, heavy traffic of high-end expats and tourists, and growth of the hospitality sector. Moreover, the UAE government is actively working on expanding its dependency on non-oil sectors to 64% by 2030, under the Abu Dhabi Economic Vision 2030. The country is investing smartly in sectors like hospitality, manufacturing, transportation, infrastructure, real-estate, retailing, etc. All these factors are likely to encourage demand for and supply of air conditioners in the UAE. 

However, because of more number of innovative products and services in the AC market, the room AC segment and the window AC sub-segment are estimated to see drop in their growth rate.

Young-Adults Strive to Transform Saudi Arabia into a Modern Land!

Do you think Saudi Arabia is a boring land, which is stuck in traditional systems and is not progressing at all? Well.......that’s not the truth. Saudi Arabia is more than what the media shows you. It is more than an oil exporter; it is more than a conservative Muslim country. It is a nation where you can see spirituality, traditions, luxuries, and modern lifestyle, all at the same time.

No doubt, Saudi Arabia has many problems within and outside the country that threaten its development. The economic weakening, unemployment of Saudi nationals, restrictions on women, and uneven distribution of wealth and facilities are some of the major problems within the Kingdom. However, we cannot deny the fact that the situation is changing slowly, or at least efforts are being carried out to draw a fresh, modern picture of the Arabian land. And the credit goes to.....................the young adult population of Saudi Arabia.

The population of Saudi Arabia is growing and mainly consists of young-adults (aged between 20 and 39). These people are modern, ambitious, mostly educated, tech-savvy (smartphone users) and know what’s happening around the world. They are willing to adopt latest appliances, explore Western cuisines, and earn international fame! It is because of this population that many sectors such as non/low alcohol beer, cafeterias, street-stalls and retail are booming in the Kingdom.

 People of this generation are willing to spend on entertainment, the sources of which are mainly shopping malls, theme parks, hotels & resorts, etc. Young women are no behind. They want to be in sports, hit gyms and wellness clubs, and be successful professionals or entrepreneurs! Many women have already earned fame in fashion designing and similar areas. So, I guess it won’t be wrong to say that Saudi Arabia may soon (over at least 2 decades) transform itself from a "very conservative Kingdom" to a “modern nation”, provided these young adults and the Z generation continue to demand for the better and best.

Saudi Arabia Invites Foreign Investors, But Bids Foreign Workers Goodbye

In a bid to attract more number of overseas investors, Saudi Arabia's Capital Market Authority announced relaxation of restrictions on foreign investments in the country's securities markets, effective from 4 September 2016. As per new reforms, an asset manager holding global assets of at least USD 1bn will be eligible to be a foreign institutional investor in the Kingdom. Presently, the minimum required asset value is USD 5bn. Saudi Arabia was initially planning to introduce these relaxations by middle-2017. But concern over the economy's declining revenues and foreign reserves, falling GDP, unemployment of migrant workers, and weakening production capacity pushed the kingdom to take immediate corrective steps. Saudi Arabia has been facing economic crisis for quite some time because of low oil prices and extreme competition from other oil exporting countries. The country's stock market had opened its doors for Foreign Direct Investments in June 2015. However, it failed to attract a significant number of overseas investors. Currently, only 1.03% of the total market (worth USD 390bn) is being held by foreign investors. 

‘Yes’ to Foreign Investors. ‘No’ to Foreign Workers.

Meanwhile, the Saudi government's Vision 2030 aims to fill the private sector with 4.1mn Saudis by 2030. This means employment opportunities for overseas workers will slump. The Kingdom produces 300,000 graduates annually, but Saudis account for just 16% of the total human resource in the private sector. The total number of workers in Saudi Arabia is expected to be around 6.4mn, with 1.6mn in the private sector and 4.2mn in the public. Most of these workers are foreign nationals.

Recently, thousands of foreign labourers were stuck jobless in the Kingdom because of oil crisis' impact on the construction industry. Saudi Arabia is taking efforts to settle the problems of these stranded workers and send them back to their country. 

Saudi Arabia Takes Major Steps to Pull Revenues from Non-Oil Sectors

In a bid to treat the “oil illness” (a 2 year long crisis of low oil prices) and its aftermath, the Saudi Arabian government has hiked visa charges, fines, taxes, and other government fees sharply. The move is part of the government’s action plan which focuses on increasing revenues from non-oil sectors. It targets non-oil income of 530bn riyals by 2020, up from the current 163.5bn riyals.

Know more about the hike:

• The new policy has increased the cost of six-month visas for foreign nationals to USD 800, a six-fold increase. The hike in visa fees will be effective from October 2016.  With this move, it will be an expensive affair for Saudi employers to hire foreign employees and hence, they will be left with the option of employing Saudi graduates. This supports the government’s plan of filling private sector organisations with Saudi nationals.  
• Annual tax of up to 2,300 riyals will be payable by foreign residents.
• Fines for traffic violations including “tafheet” (which means illegally racing, drifting and spinning cars at high speeds on highways) have been raised. Drivers caught for the first time will be charged USD 5,332. 
• Billboard advertisement fees have been increased three times.
• Energy and utilities charges in Riyadh have already been raised.

Other government measures include:

• Plans to cut expenditure on public sector wages by 5%.
• Plans to draw more revenues by means of indirect taxes including value-added tax.

Recently, Saudi Arabia sliced oil prices for exports in Europe and Asia due to competitive pressure from Iran, Iraq and Russia. However, the country is optimistic about its future economic stability, thanks to the new Asian customers it has earned. Also, Saudi Arabian oil company Saudi Aramco is set to continue with its drilling and IPO process.

Demand for High Speed Data Drives Saudi Arabia's Telecom Industry

With increasing popularity of smartphones in Saudi Arabia, demand for higher speed network has surged. To meet this demand, the kingdom’s telecom market is adopting eEnterprise solutions whilst welcoming new players namely Mobile Virtual Network Operators (MVNOs). In 2015, Saudi Arabia was recognised as the biggest MVNO market in the Middle East. 

With penetration rate shooting up to 167.4%, mobile subscriptions increased to 52.8mn in late 2015. During the same time, 3G and 4G accounts made up over 63% of total connections. While fixed broadband subscriptions rose to 3.56mn, mobile broadband reached 20.19mn. Subscribers of wireline voice services increased to 3.8mn. However, in the first quarter of 2016, the mobile market lost 1.9mn connections that were apparently inactive prepaid accounts. 

Good news for the mobile market is the rise of MVNOs and reduction in Mobile Termination Rates (MTRS). Growing at a CAGR of 19.5% in the Middle East, MVNOs have proved to be helpful in offering flexible data plans at reasonable rates. They are encouraging price competition and innovation in the telecom industry. Furthermore, these MVNOs target niche market segments and help MNOs increase their customer-base.

Although the telecom market has the reached saturation point, there is scope for network operators to introduce innovative business models and marketing techniques. The loss suffered by the three senior players, Saudi Telecom Company (STC), Zain, and Mobily, in 2015 suggests that customers want faster, better, and newer data services.