Trading, Logistics, and Supply Chain is the lifeline to the Global Economic progress. UAE has emerged as a Global Trade hub of the world with its robust logistics and supply chain infrastructure facilitating global trade.
Global Trade and Supply Chain is reviving fast from the COVID-19 Pandemic effect. Businesses are getting back to normal. Shipping and Logistic companies are always on demand as it supports global trade and economic growth.
7 Tips to Know Before Setting Up a Trading, Logistics, or Supply Chain Company in UAE
There are certain parameters export companies must be aware of and must consider having a smooth business operation.
1. Studying the Market Well
US is a major export market for the UAE. Also, a lot of US companies would choose UAE for setting up their base to actively trade in the Middle East, Africa and Asian Markets. Hence partnership with US Companies and setting up a base in UAE will result in profitable business.
UAE – A Major Trade Hub
Goods ranging from Commercial Aircrafts, Power Generating Equipment, Defence Equipment, Computers & Electronics, transportation, etc., are majorly involved in the exporting business. Oil and gas production remains critical to the UAE economy, contributing to about one-third of GDP. UAE is being actively involved in Oil exploration, Crude Oil processing, Storage, transport, etc.
Off late, UAE is diversifying into other sectors to raise the economy and lower the dependence on oil and move to other core sectors like technology, real-estate, smart transportation, digital computing, etc.
2. Market Entry Strategy
For doing business in UAE companies must be having a local distributor or office in the UAE. Being a trade hub of the world, UAE is all set to support international trading and business activities.
The well-connected transport links and geographic location of the UAE make it a perfect place for the logistics business and setting up an export hub.
3. Doing Business in the UAE
The exporters aiming to set up business in UAE must be doing a thorough market study before they sign up for any contract. Conducting business operations in the UAE has its onset of opportunities and challenges similar to any global marketplace.
UAE is a commercial and trade hub of the world and has emerged as a popular logistics & transport hub connecting Asia with Europe and beyond.
Awareness on Trade Regulations, Financing Terms, Customs Clearance
The regulations, credit terms, financing, legal aspects, customs clearance, etc., must be studied in detail. There are certain restrictions in place for shipping to de-listed countries as well as commodities. So the investor must be well aware of the regulations to be met to sustain in the long run.
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4. Financial Barriers Faced by Exporters
The exporters must be aware of the financial requirements and the various options available to conduct trade. In some instances, financial trade would not be possible through banks due to compliance issues, or any regulation in place.
In such cases, alternate financing options and credit insurance must be of choice for the investor.
5. Export Credit Facility and Insurance
Exporters are always at the risk of offering credit facilities to their suppliers and they defaulting or performing any fraudulent activities.
Hence, having credit insurance will save the exporter in such cases of default payments. It is an insurance solution that will mitigate geopolitical and commercial risks in export transactions.
Importance of Credit Facility and Insurance for Exporters
When suppliers are spread across geographies, there is always a risk of unprecedented circumstances occurring. Export Credit Insurance is a solution for the peaceful execution of export business transactions.
Also, entrepreneurs must be well aware of the long payment cycles, associate financial terms with export contracts, and take calculated risks.
6. Trading in International Markets
Trading in the international markets will have a direct impact on the market conditions and changes in the dollar and global oil prices. These are the two major market drivers in international trade.
As hedging for managing the losses due to currency downfall, trading in a single currency the US dollar is advisable for large sipping companies operating large-scale businesses. Also for small-scale logistics export companies exporting to the US, the best option is to trade in US dollars.
7. Company Formation Structure
Before starting an export company, the investors must be aware of the company formation structure in the UAE as well as the Free zones and Mainland Business Setup and benefits. UAE business infrastructure offers the perfect platform for foreign owners and UAE nationals to coexist, coordinate, and conduct business.
There are various partnership options such as forming a Limited Liability Company with shareholders where the major shareholder (51%) will be a UAE national. Then there is a 100% foreign-owned company in the Free zones of UAE.
Investors can choose from a wide range of company formation packages available in the UAE based on the exact business requirements.