MEA Consumer Electronics Risk/Reward Ratings, Q412


BMI's Risk/Reward Ratings (RRRs) for the 10 countries in our consumer electronics coverage for Middle East and Africa consider the potential for demand for key consumer electronics products such as computers, audio-visual (AV) equipment and handsets. Our analysis incorporates industry-specific, regulatory and macroeconomic factors with the greatest impact on the sector.

There are no changes in the rankings of the 10 countries in BMI's CE RRRs for Middle East and Africa. The only change to our ratings this quarter is the downgrade of the Country Risk score of some countries in the region, resulting in the marginal decrease of the average score in that category.

The UAE remains in first position with no changes to its ratings in any of our four categories. The UAE's highest score is in the Country Rewards category and this reflects a high urbanisation rate, high GDP per capita and a youthful population. The UAE also performed strongly in the Country Rewards category, boosted by strong demand for CE products such as AV devices, handsets and tablet devices. Local media reports, based on a survey of domestic retailers, show there is an increase of up to 35% in the volume of TV sets sold during H112 in anticipation of major sporting events, including the UEFA Euro 2012 and the 2012 London Olympics.

Kuwait retains second position on our table this quarter despite a 0.7pt decrease in its aggregate score to 57.4. The decrease in Kuwait's aggregate score was driven by a downgrade to its Country Risk score to reflect the ongoing political upheaval in the country, which has made it hard to form a stable government in parliament. The most significant consequences of this continuous unrest are economic. In particular, the government's inability to pass legislation has led to persistent delays in the implementation of its four-year economic development plan, a KWD30bn (US$107bn) plan to upgrade the country's transport, energy and social services infrastructure through a combination of state spending and private sector investment.

There is no change to Israel's aggregate score this quarter as it retains third position on our RRR table this quarter. Israel is arguably the most mature CE market in the region, with high penetration of most CE products, including AV devices and computers. As a result, there is slower sales growth for CE products compared to growth in other markets, albeit from lower bases.

Qatar retains fourth position despite a 0.7pts decrease in its aggregate score this quarter. Like Kuwait, Qatar's overall score was affected by a downgrade to its Country Risk score. Qatar remains a regional outperformer in terms of political stability and economic growth. However, its increasingly assertive foreign policy risks damaging relations with some other regional power brokers, notably Saudi Arabia and Iran. Although Qatar's short-term political risk outlook remains stable, the medium-term outlook is less assured.

Saudi Arabia and South Africa remain in fifth and sixth positions on our table, with no changes to their aggregate score this quarter. Both countries have similar scores in our Industry Rewards and Country Rewards categories, reflecting their large and youthful populations. However, South Africa falls behind Saudi Arabia in the Industry Risk and Country Risk categories.

Bahrain and Iran remain in seventh and eight positions respectively, although both countries saw downgrades to their Industry Rewards scores and, consequently, aggregate scores. Iran has the lowest Industry Risk score, a situation that reflects the government's close monitoring of the internet. The US trade embargo still limits many companies from completing business in the country, as well as the grey market for certain devices such as mobile handsets, making Iran a complicated market for international vendors to thrive in.

Oman and Egypt remain in ninth and tenth places respectively. Oman's aggregate score increased by 0.7pnts in this quarter's update, following an upgrade to its Industry Reward. There was no change to Egypt's score this quarter, although we highlight the country's strong growth potential based on its large population. While the political crisis in the country has hit economic growth and demand for high-value products, BMI notes that the completion of the election process and swearing in of a new president improves the outlook for political stability and the return to economic growth.

Middle East And Africa Risk/Reward Ratings, Q412
Rewards Risks
Scores out of 100, with 100 highest. The Consumer Electronics (CE) BE Rating is the principal rating. It comprises two sub-ratings 'Limits of potential returns' and 'Risks to realisation of returns', which have a 70% and 30% weighting respectively. In turn, the 'Limits' rating comprises Consumer Electronics Market and Country Structure, which have a 65% and 35% weighting and are based upon growth/size of the CE industry (Market) and the broader economic/socio-demographic environment (Country). The 'Risks' rating comprises Market Risks and Country Risk, which have a 40% and 60% weighting and are based on a subjective evaluation of barriers to entry and the regulatory environment (Market) and the industry's broader Country Risk exposure (Country), which is based on BMI's proprietary Country Risk Ratings. The ratings structure is aligned across the 16 Industries for which BMI provides Business Environment Ratings methodology, and is designed to enable clients to consider each rating individually or as a composite, which depends on their exposure to the industry in each particular state. For a list of the data/indicators used, please consult the appendix at the back of the report. Source: BMI
Industry Reward Country Reward Industry Risks Country Risks CE Rating Rank Previous Rank
UAE 53.3 80.0 65.0 54.1 61.4 1 1
Kuwait 48.3 77.5 55.0 54.4 57.4 2 2
Israel 53.3 45.0 65.0 78.3 57.2 3 3
Qatar 45.0 75.0 70.0 50.6 56.4 4 4
Saudi Arabia 53.3 47.5 55.0 73.6 55.8 5 5
South Africa 53.3 47.5 50.0 67.5 54.1 6 6
Bahrain 40.0 65.0 50.0 56.6 50.3 7 7
Iran 48.4 52.5 30.0 42.7 46.2 8 8
Oman 39.2 45.0 60.0 51.5 45.3 9 9
Egypt 38.4 22.5 50.0 57.1 39.2 10 10
Average 47.3 55.8 55.0 58.6 52.3

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