Sultan bin Sulayem, chief executive of DP World, on the opening day of the World Economic Forum in Davos, Switzerland. Bloomberg
Sultan bin Sulayem, chief executive of DP World, on the opening day of the World Economic Forum in Davos, Switzerland. Bloomberg
Sultan bin Sulayem, chief executive of DP World, on the opening day of the World Economic Forum in Davos, Switzerland. Bloomberg
Sultan bin Sulayem, chief executive of DP World, on the opening day of the World Economic Forum in Davos, Switzerland. Bloomberg

DP World finds more businesses bringing supply chains closer to home


Deena Kamel
  • English
  • Arabic

An increasing number of companies are bringing their supply chains and manufacturing bases closer to home to reduce risks, avoid disruption, cut transport costs and benefit from government incentives, a report by DP World says.

A total of 96 per cent of company executives surveyed are reconfiguring supply chains because of geopolitical events such as the Russia-Ukraine war and US-China tensions, according to the latest Trade in Transition study commissioned by DP World and led by Economist Impact.

The number of companies shifting their manufacturing and suppliers last year — either to their home markets or nearby — doubled from 2021, said the survey, which was released on Tuesday at the World Economic Forum meeting in Davos.

"By bringing production closer to the final customer, firms can reduce the number of touch points involved in the supply chain and build greater resilience into the flow of cargo around the world," said Sultan bin Sulayem, DP World group chairman and chief executive.

"The next challenge that will alter these trends is an economic slowdown looming over regional markets. Agility, real-time visibility and end-to-end supply chain capabilities will be critical to ensuring companies can continue to find new efficiencies in an increasingly challenging environment."

The changes in operations come as the World Trade Organisation (WTO) expects the volume of world merchandise trading (an average of import and export) to increase by one percentage point this year, compared with 3.5 per cent growth last year.

Despite the shift by companies towards reshoring and regionalisation, diversifying supply is still the main strategy to reduce costs and increase resilience, 47 per cent of executives surveyed said.

"The shift to regionalisation and reshoring has been sharp but unsurprising, given the triple threat of higher costs, increased risks and government incentives or requirements to do so," said John Ferguson, practice lead for New Globalisation at Economist Impact.

"Furthermore, businesses in previous decades have only had to focus on the economic aspects of trade, being price, quality and delivery. Now they have to account for other non-economic factors such as resilience and sustainability, all of which is having a drastic shift in supply chains, which we are witnessing both in the survey results and global trade-pattern shifts."

Companies are also boosting inventory buffers, holding 10.1 weeks of inventories last year compared with 8.9 weeks the year before, the survey showed.

Business executives cited inflation as one of the biggest impediments to growth.

Inflationary pressures are the main reason for pessimism about global trade over the next 24 months, the executives surveyed said.

Average global inflation this year is forecast at 6.9 per cent, compared with 9.9 per cent last year and 6.8 per cent in 2021, according to The Economist Intelligence Unit (EIU).

The impact, both on the demand (in terms of reducing the purchasing power of consumers) and the supply (in terms of increasing input costs for businesses), will "reduce the profitability of businesses severely", the report said.

Thirty per cent of the executives cited rising inflation as the main reason for pessimism about global trade over the next two years — significantly higher than the 20 per cent who cited the recession, the survey found.

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Ten tax points to be aware of in 2026

1. Domestic VAT refund amendments: request your refund within five years

If a business does not apply for the refund on time, they lose their credit.

2. E-invoicing in the UAE

Businesses should continue preparing for the implementation of e-invoicing in the UAE, with 2026 a preparation and transition period ahead of phased mandatory adoption. 

3. More tax audits

Tax authorities are increasingly using data already available across multiple filings to identify audit risks. 

4. More beneficial VAT and excise tax penalty regime

Tax disputes are expected to become more frequent and more structured, with clearer administrative objection and appeal processes. The UAE has adopted a new penalty regime for VAT and excise disputes, which now mirrors the penalty regime for corporate tax.

5. Greater emphasis on statutory audit

There is a greater need for the accuracy of financial statements. The International Financial Reporting Standards standards need to be strictly adhered to and, as a result, the quality of the audits will need to increase.

6. Further transfer pricing enforcement

Transfer pricing enforcement, which refers to the practice of establishing prices for internal transactions between related entities, is expected to broaden in scope. The UAE will shortly open the possibility to negotiate advance pricing agreements, or essentially rulings for transfer pricing purposes. 

7. Limited time periods for audits

Recent amendments also introduce a default five-year limitation period for tax audits and assessments, subject to specific statutory exceptions. While the standard audit and assessment period is five years, this may be extended to up to 15 years in cases involving fraud or tax evasion. 

8. Pillar 2 implementation 

Many multinational groups will begin to feel the practical effect of the Domestic Minimum Top-Up Tax (DMTT), the UAE's implementation of the OECD’s global minimum tax under Pillar 2. While the rules apply for financial years starting on or after January 1, 2025, it is 2026 that marks the transition to an operational phase.

9. Reduced compliance obligations for imported goods and services

Businesses that apply the reverse-charge mechanism for VAT purposes in the UAE may benefit from reduced compliance obligations. 

10. Substance and CbC reporting focus

Tax authorities are expected to continue strengthening the enforcement of economic substance and Country-by-Country (CbC) reporting frameworks. In the UAE, these regimes are increasingly being used as risk-assessment tools, providing tax authorities with a comprehensive view of multinational groups’ global footprints and enabling them to assess whether profits are aligned with real economic activity. 

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The initiative focuses on converting real estate assets into digital tokens recorded on blockchain technology and helps in streamlining the process of buying, selling and investing, the Dubai Land Department said.

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Start-up hopes to end Japan's love affair with cash

Across most of Asia, people pay for taxi rides, restaurant meals and merchandise with smartphone-readable barcodes — except in Japan, where cash still rules. Now, as the country’s biggest web companies race to dominate the payments market, one Tokyo-based startup says it has a fighting chance to win with its QR app.

Origami had a head start when it introduced a QR-code payment service in late 2015 and has since signed up fast-food chain KFC, Tokyo’s largest cab company Nihon Kotsu and convenience store operator Lawson. The company raised $66 million in September to expand nationwide and plans to more than double its staff of about 100 employees, says founder Yoshiki Yasui.

Origami is betting that stores, which until now relied on direct mail and email newsletters, will pay for the ability to reach customers on their smartphones. For example, a hair salon using Origami’s payment app would be able to send a message to past customers with a coupon for their next haircut.

Quick Response codes, the dotted squares that can be read by smartphone cameras, were invented in the 1990s by a unit of Toyota Motor to track automotive parts. But when the Japanese pioneered digital payments almost two decades ago with contactless cards for train fares, they chose the so-called near-field communications technology. The high cost of rolling out NFC payments, convenient ATMs and a culture where lost wallets are often returned have all been cited as reasons why cash remains king in the archipelago. In China, however, QR codes dominate.

Cashless payments, which includes credit cards, accounted for just 20 per cent of total consumer spending in Japan during 2016, compared with 60 per cent in China and 89 per cent in South Korea, according to a report by the Bank of Japan.

Updated: January 18, 2023, 2:38 AM