Tuesday, January 25, 2011

Population change and purchasing power dynamics


Population profile change to affect purchasing power

Gulf NewsReport highlights impact on Mideast economic growth
  • By Deena Kamel Yousef, Staff Reporter
  • Published: 00:00 January 25, 2011
Demographic dilemmas
  • A report says the Middle East’s falling fertility rate and rapid ageing will affect the country’s economic output necessitating changes in labour rules. Picture for illustrative purposes only.
  • Image Credit: Megan Hirons Mahon/Gulf News
Dubai: Changing demographics in the Middle East are expected to reduce the public's purchasing power and increase an ageing population's dependency on the working class in the next decade, according to a recent report by a top fin-ancial audit and consulting firm.
A "dramatically" decreasing fertility rate and quickly improving life expectancy in the region will impact its growth rate, says the report titled Consumer 2020: Reading the Signs by Deloitte Touche Tohmatsu.
"The shrinking of a population in the Middle East consequently results in a similar diminishing of the labour force and national consumption power," said Nasser Sagga, Audit Partner at Deloitte. "As a result the growth potential of the country's economic output becomes weakened."
In the UAE, the fertility rate has dropped from an average of seven children per woman in the 1950s to less than two in 2010, the report showed.
The country's old age dependency ratio — the number of people over the age of 64 dependent on working people — is expected to reach almost 20 per cent by 2050, up from one per cent in 2000, the report predicted.
Long-term issue
"Conceptually, growth is a function of a growth in inputs such as labour and productivity. An older population profile suggests slower growth and, therefore, slower economic growth," said Dr Giyas Gokkent, Chief Economist with the National Bank of Abu Dhabi.
But given the GCC countries' relatively young population, oil-based economies and investment in infrastructure, this is a "long-term issue" rather than an immediate one, he added.
The UAE and the Gulf countries are not affected by these changing demographics in the same way as other countries because of the nature of their labour force, analysts say.
"Demographic dynamics at play in the Middle East and specifically in the Gulf are different from a mere observation of the local fertility rate and life expectancy as it is done in most countries," said Philippe Dauba-Pantanacce, senior economist at Standard Chartered. In countries where migrant workers represent up to 85 per cent of the population, the economic and population growth are not related to the traditional analysis of the local demographic pyramid, he said.
The UAE has been able to use the elastic supply of labour available in neighbouring countries in its drive for economic diversification and growth, Gokkent added.
"Dependency on expat labour is a phenomenon that is already an issue for the UAE, but this is also a strength because it provides flexibility and an edge in terms of competitiveness. I do not see an impact beyond current trends," he said.
In future, the government may have to "ease" labour laws to accommodate a greater number of expatriates into the labour market to make up for dependency, said Samer Renno of Echo Trends, the consumer research arm of Renno Communications Group.
Restrictive rules
Restrictive labour rules are now the biggest obstacle facing the business community in the UAE, according to a recent poll by management consultancy Oliver Wyman and market research firm Zogby International. They were a problem for 43 per cent of senior executives in the UAE, according to the poll of C-level executives in the UAE and Saudi Arabia.
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Is Customer Retention a Necessity or a Luxury?

Renno Communications Group taps into Customer Retention Program

As part of its continuous efforts to raise the bar of the communications industry and introduce innovative solutions across the region, Renno Communications Group (Renno CG), a communications consulting agency in the Middle East, announced today the launch of its Customer Retention Program (CRP).

Commenting on the launch of CRP, Samer M. Renno, Chief Executive Officer, Renno Communications Group, said:

'Providing an optimal customer experience is not a luxury but a necessity. The current global financial downturn has uncovered significant flaws among the major sectors, from hospitality to retail and banking, when it comes to customer service, as many companies have become more focused on gaining new customers and neglected the retention of their existing ones.'


Renno added, 'Recent studies of customer experiences indicate that 43% of all customers who defect do so because of service issues, while three quarters of these defectors cite employee attitude as their core frustration. Most serious aspect of these studies showed that 83% of those who have a negative service experience tell at least one other person. With so much riding on employee-to-customer interactions, companies must find new ways to ensure that employees strive to over-serve customers at every opportunity.'


According to Renno, to retain a customer there needs to be proper understanding of how they are being served. 'Our 'Undercover Shopping Program' offers clients the benefit of measuring the abilities of their staff and quality of the customer service they are providing. This provides the clients with the information to analyze the gap in their sales force's performance in order to enable them to make the necessary changes required for the benefit of their customers.'

Renno CG has over the past decade since its inception worked relentlessly to provide its clients with cutting edge communications solutions that are based on 360 degrees (Full Circle) tactics, which are designed to strengthen not only brand positioning but also ensure that the client's image is protected against any internal or external factors.

Renno CG's Customer Retention Program has been implemented in all the Agency's network offices and has already received a positive response from its clients throughout all sectors in the region.