Prices of basic food staples such as bread and sugar will be heavily cut across the UAE for one month - by up to 40 per cent - despite escalating global food prices pinching retailers' profit margins.
The cuts come even though some businesses say they will have to increase their losses on certain products to comply with the deal, agreed between retailers and the Ministry of Economy.
Prices of food staples ranging from wheat to cocoa have surged in recent months. The combination of bad harvests and a global economic rebound have fed supply pressures. As a result, consumer protection officials have stepped up their monitoring of prices.
"We want to protect consumers from any price rises," said Hashim al Nuaimi, the director of the Ministry's consumer protection department, on the sidelines of the launch of Gulf Consumer Protection Day in Abu Dhabi yesterday.
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As part of the initiative, Lulu, Union Co-operative Society and other retail chains have agreed to lower prices of staples such as rice, sugar, cooking oil and bread by between 20 and 40 per cent for one month from yesterday. In all, more than 1,000 varieties of food items will be lowered across the major retailers.
While the initiative is an annual arrangement, this year's action comes against a backdrop of particularly acute price pressures facing consumers.
World food prices were reaching "dangerous levels" and could hinder political reform in Egypt, Tunisia and the Middle East and Central Asia, Robert Zoellick, the president of the World Bank, warned. Prices in January were 29 per cent higher than in January last year and 3 per cent below their previous peak in 2008, according to the World Bank.
Global sugar prices reached more than 32 US cents a pound in January, nearly 73 per cent higher than their level of last August, according to Sugar, Free Market, Coffee Sugar and Cocoa Exchange data.
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Lulu has made a loss on sugar sales and a number of other products since last year, said Abu Bak'r, the regional manager of retail operations at the chain.
For example, it sells samoon, a type of Middle Eastern bread, for Dh1 (27 US cents), even though it costs Dh1.10 to produce.
"We don't want to disturb the customers so we try to absorb the cost of certain items," Mr Bak'r said. "We try to make sure that price increases are not 100 per cent passed on to consumers." He said the supermarket pushed up prices only after consultation with suppliers and the Ministry's consumer protection unit.
Inflation is picking up across many markets as the cost of food surges. Rising prices prompted protests by tens of thousands of people in India last month.
In the UK, food producers and supermarkets were this week blamed for prices rising at more than justified levels. The Swiss bank UBS said UK prices were increasing more than in most developed economies.
In contrast, in the UAE, lower food and housing costs helped to push inflation down to 1.6 per cent on an annual basis in January, data from the National Bureau of Statistics shows. Inflation reached a peak of 12.3 per cent in 2008.
tarnold@thenational.ae
The specs
Engine: 2.0-litre 4-cyl turbo
Power: 247hp at 6,500rpm
Torque: 370Nm from 1,500-3,500rpm
Transmission: 10-speed auto
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Roll of honour
Who has won what so far in the West Asia Premiership season?
Western Clubs Champions League - Winners: Abu Dhabi Harlequins; Runners up: Bahrain
Dubai Rugby Sevens - Winners: Dubai Exiles; Runners up: Jebel Ali Dragons
West Asia Premiership - Winners: Jebel Ali Dragons; Runners up: Abu Dhabi Harlequins
UAE Premiership Cup - Winners: Abu Dhabi Harlequins; Runners up: Dubai Exiles
West Asia Cup - Winners: Bahrain; Runners up: Dubai Exiles
West Asia Trophy - Winners: Dubai Hurricanes; Runners up: DSC Eagles
Final West Asia Premiership standings - 1. Jebel Ali Dragons; 2. Abu Dhabi Harlequins; 3. Bahrain; 4. Dubai Exiles; 5. Dubai Hurricanes; 6. DSC Eagles; 7. Abu Dhabi Saracens
Fixture (UAE Premiership final) - Friday, April 13, Al Ain – Dubai Exiles v Abu Dhabi Harlequins
The White Lotus: Season three
Creator: Mike White
Starring: Walton Goggins, Jason Isaacs, Natasha Rothwell
Rating: 4.5/5
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NO OTHER LAND
Director: Basel Adra, Yuval Abraham, Rachel Szor, Hamdan Ballal
Stars: Basel Adra, Yuval Abraham
Rating: 3.5/5
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
The Gentlemen
Director: Guy Ritchie
Stars: Colin Farrell, Hugh Grant
Three out of five stars
