Two Gulf economies, the UAE and Saudi Arabia, appear in the 2017 version of the Global Retail Development Index, which is based on an annual survey of the 30 largest developing economies and their attractiveness for retail investments.

The index grants the reviewed economies scores on the basis of performance on four variables, specifically market attractiveness, country risk, market saturation and time pressure. The market attractiveness variable primarily focuses on retail per capita and includes population plus business efficiency. Moreover, the country risk element looks into issues like economic performance, debt, ratings and access to bank financing.

The market saturation variable relates to how advanced the retail sector is, availability of international brands, and market share of leading retailers. The time aspect takes into account retail sales against the backdrop of general economic development.

India tops the index on the back of relatively strong GDP growth rates together with its vast middle-class, and in turn supported by a regulatory environment. Clearly, numerous positives have taken place in the Indian economy, including its attractiveness as a retail destination since Prime Minister Narendra Modi assumed office in May 2014.

China comes in second in this year’s ranking after having to cede the top spot. However, with total retail sales of $3.13 trillion (Dh11.5 trillion), it still remains the largest retail marketplace in the developing world.

Malaysia retained its third best market status in the index, thanks in part to the influx of tourists — including a sizeable number from fellow Muslim countries — besides growth in domestic disposable incomes.

Serious challenges

Turkey, surprisingly, is the fourth best retail market, supported in part by the opening of some 20 malls last year alone. However, the country is suffering from serious challenges, including terrorists attacks and tensions with numerous EU member states. Logically, Turkey should be conceding rather than gaining positions in the retail index.

And then comes the UAE, having advanced by two positions to fifth place. The findings rightly note that some 86 per cent of the population in the UAE lives in urban centres, thus having direct access to shopping complexes.

Dubai in particular is credited for innovation in retail activities, something clearly displayed in the development of new malls and the mushrooming of e-commerce. The GRDI report suggests that new concepts such as The Outlet Village and Boxpark are designed to generate wider tourist appeal.

Not surprisingly, Dubai authorities pay close attention to the retail sector for understandable reasons, with it accounting for more than 10 per cent of Dubai’s gross domestic product.

Oil prices

In addition, the study provides the 11th ranking to Saudi Arabia, down by three notches. This serves as testimony of the adverse effects of the plunge of oil prices and thus of treasury income, which forced the government to cut public spending where possible.

Nonetheless, the prospects are promising, as Saudi Arabia seeks ways to diversify the economy. The measures entail easing restrictions in different aspects of life in the kingdom.

Looking ahead, there is vagueness with regards to the possible effect of the planned value-added tax. Both Saudi Arabia and the UAE have revealed their intentions of implementing VAT in 2018. The change has to be handled with care to avoid causing unintended disruptions to the retail market.

The writer is a Member of Parliament in Bahrain.