What is New in the Commercial Agencies System in the Gulf
Mohamed Al-Assoumy Al-Hayat - 28/09/06//
I have been following the activities of the commercial agencies in the Gulf since the beginning of the last century. They have taken on a structured and more regulated form since the end of World War II and the subsequent enactment of laws and regulations reflecting the economic and social conditions at the time.
The regulations governing the commercial agencies which are enshrined in the corporate laws in the Gulf Cooperation Council States have granted the agent a monopolistic power. The agent imports a certain commodity through which he can specify the quantity and prices of other imported goods, as well as after-sale services and prices.
The agencies were divided up between the conventional trading houses. But with the expansion of trade relations between the Gulf countries and the outside world in the 1960s, the commercial agencies system has come to dominate commercial traffic in all the countries of the region. In addition to the quality and reasonable price of the product, the agent has acquired a central role in marketing products.
However, with the accession of the GCC States to the World Trade Organization (WTO) since the mid-1990s, a review of some regulations and laws contradicting the requirements of accession to the organization and the WTO laws and regulations, including the anti-monopoly article, has become necessary.
Although there is no article that deals with commercial agencies, the anti-monopoly article laid down in the WTO regulations applies to the commercial agencies system. This has prompted the Gulf States to review and improve this system so that it would be consistent with the developments in international trade relations.
Bahrain was the first Gulf country to review and improve the system. It allowed free import so that the importer pays 5% of the value of imported goods to the original agent during the first five years. Oman then followed in Bahrain's footsteps.
At the end of last August, the UAE decided to strike off commercial agencies that import foodstuffs, and to open the door for importing these commodities in a bold step that aims to put an end to the monopoly of imports and the increase in food prices. This also constituted a first step toward amending the commercial agencies system and the corporate law in general.
These Gulf measures constitute a correct approach that precedes the prospective discussion of the issue at the WTO. Similar measures are expected to be taken in the remaining Gulf countries and the Arab countries that apply this system.
Ultimately, a new system will take shape through the presence of authorized dealers in each country. This system is effective in the US and EU countries. There will be competition between the distributors, to the benefit of the consumer, who will obtain high-quality commodities at reasonable prices. Also, trade will develop and grow in these countries.
The problem is that agency representatives have unjustified fears. In addition to marketing the product, the after-sale service will play a key role in the distributor's control over a significant part of the market. The current agent can take advantage of this characteristic by virtue of his many years of experience and service capabilities.
The experiences of Bahrain and Oman prove the validity of this conclusion. The original agent has even upgraded his services and has begun to adopt modern marketing methods to be able to maintain and increase his share in the market through the quality of service and reasonable prices.
Therefore, we are before radical changes that will contribute, if they continue, to the development of external and internal trade in the Gulf countries, and will provide the consumer with various commodities of good quality and at competitive prices. This will also lead to the development of re-export and the emergence of new business potential.
The end result of this trend is positive by all standards. The agents themselves will start developing their services and marketing tactics to maintain their status. The biggest beneficiary is the end consumer and commercial traffic, which will witness a remarkable improvement in light of the new amendments.
* Mohamed A-Assoumy
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