It may be another three calendar quarters before Iraqi demand for PC components starts to have an impact on Dubai's market, according to a senior industry source.

The local IT industry's current exposure to the Iraqi IT market is extremely limited, with a variety of factors contributing to the situation.

Many of the multinationals operating in Iraq are importing fully assembled computers from their domestic markets rather than from suppliers in the region.

The other major buyer of IT equipment is the Iraqi government, but it has more pressing issues to deal with.

"The demand in Iraq is for the basic requirements of life rather than PCs. It will change, but it is bound to be a very gradual process," said Dhruv Srivastava, Business unit manager for PC components at Tech Data, the leading IT distribution house.

"We have extensively researched the opportunities in the Iraqi market and it is our assessment that any significant and consistent business will not really happen until the first or second quarter of 2005."

While Iraq simmers in the background, from the IT perspective, demand in the Saudi Arabian and Kuwaiti markets has brought a lot of cheer to the industry.

"The GCC customs union, which reduced import duties from 12 per cent to a standard 5 per cent in the Saudi market a couple of years ago, as well as other streamlining in the rest of the GCC, has been of immense help.

"Some of the unethical practices that were prevalent before the union, such as under-invoicing of goods, have declined and this helps to keep Middle East business in the Middle East," said Srivastava.

"But there is still more education to be done by the channels. Tech Data, for its part, has planned door-to-door delivery in the Kingdom since this will help to bring about a better way of doing business there."

Demand in the Dubai market, and in its key re-export markets, is growing at a strong rate, and market sources are unanimous that the momentum can be sustained well into the medium term.

The African markets in particular are proving to be a significant end-user market for Dubai's IT trade.

On the pricing side, prices of IT components have been stable in the recent past, in contrast to the same time last year when key product lines were experiencing sharp fluctuations, primarily on the higher side.

There were also problems with insufficient supplies.

"The market expects to see some action on the hard drive category, as Seagate and Hitachi introduced a five-year warranty for its products just two weeks ago.

"The leading vendors were offering a one-year warranty earlier - with Seagate changing tack, it would be interesting to note how the other two majors Western Digital and Maxtor will react as the Big Three control major market share globally," the official added.

"Hard drive prices did go down in the second quarter, but that had to do with high inventory levels with the manufacturers."