#51 - July 2016 by CPI Financial

JULY 2016

WWW.FINANCEMIDDLEEAST.NET ISSUE 51 | JULY 2016

FEATHERS TAKES FLIGHT

Everything I do is associated with my country and I’m very proud of it.” – Khalid Basaeed, CEO, Feathers UAE

FEATHERS TAKES FLIGHT

INSIDE

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I hope you enjoy this issue!

Jessica Combes Read my blog at: http://www.cpifinancial.net/blog/author/112/jessica-combes Follow us on Twitter: @FinanceMidEast WWW.CPIFINANCIAL.NET

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f there was one word to sum up the period from the end of June until now, it would be ‘Brexit’. Regardless of location or industry, it has everyone talking and speculating on its impact. While many members of the ‘vote remain’ camp would have us believe it is all doom and gloom from here, Brexiters are optimistic that Britain will not only save on its EU membership fees, but that it will be free to negotiate its own trade agreements, among other considerations. The arguments have gone back and forth, but what we wanted to know here at FinanceME is how Brexit is going to affect smaller businesses. Not a lot has been said on the subject, with everyone panicking about the big picture, but Hamish Walton, Head of Corporate Middle East at law firm King & Wood Mallesons shared his opinion on what this means for the sector (Pg 12). Another country still in the spotlight is Iran. With nuclearrelated sanctions lifted in January this year, foreign banks and investors have shown an interest in entering the market, however the country’s infrastructure and political landscape are impacting set-up by outside entities. While the matter is quite complex and far-reaching, we got some valuable insight from Hamid Mojtahedi, Head of the Iran Group, Al Tamimi & Co.; Parham Gohari, Partner, Frontier Partners; and Samir Safar-Aly, Associate, Simmons & Simmons. They touched on factors affecting foreign direct investment, the free zones, and protecting the domestic economy (Pg 20). Closer to home, our business licenses feature looks at the free zones in the UAE. Saad Maniar, Managing Partner, Crowe Horwath UAE, Neil Petch, Chairman, Virtugroup, and Murtaza Khan, Partner, Fragomen provide insight as to what business owners have to consider when deciding which free zone to establish their business in, and how SMEs can go about getting their license, and what they need to process the application. We have a home-grown business on our cover this month, which also won ‘Most Improved Company’ at the Business Vision Awards held in March. Khalid Basaeed, CEO of Feathers UAE, talks candidly about leaving the security of employment to make a go of his dream and how the business grew at a rate beyond his expectations (P16).

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PUBLISHED BY

NEWS ANALYSIS ‘Skipping’ back into the UAE

FAST FACTS UAE SMEs unlock Islamic economy gains

5 TOP TIPS Five recruitment tips for startups

OPINION Back to banking basics

LEGAL FOCUS Business after Brexit

CHALK TALK John Martin St. Valery

CEO CHAT Feathers takes flight

20 24

FEATURE In the zone

FEATURE Bang on budget

CASE STUDY Fighting to the front

FACETIME Task spotting

FRANCHISE Running round the region

START-UP Sourcing suppliers

TECH FOCUS Transforming the customer experience

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BEHIND THE SCENES Ahmad Khamis and Iyad Abu Hweij

FEATURE Into Iran?

ADVERTORIAL The Walton Group

FEATURE Highlighting hospitality

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LAST WORD All about people

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NEWS ANALYSIS

‘Skipping’ back into the UAE S

mall business owners that fled the UAE fearing imprisonment due to unpaid debt, have started to return to the country following a debtrestructuring initiative by the government, according to Mark Robinson, CEO of Commercial Bank International (CBI) in early June 2016, adding that he was aware of three or four cases in which people left up to six months ago, and have now come back and are running their companies with the full support of the banks. “We have experienced a number of business owners contacting us from abroad, seeking either reprieve, or to return to their businesses. They have contacted us either directly, or through consultants, legal firms, and power of attorney holders. It is an encouraging sign and we are maintaining an active dialogue with them to analyse their business plans and find a solution which offers flexible terms and conditions for them to return to the UAE,” said Sunando Mukhopadhyay, Head of Emerging Corporates, Noor Trade. SMEs in the UAE came under pressure over the course of the last year as low oil prices slowed economic growth, which affected payments from suppliers and saw a tightening up on lending by

banks. Rather than risk prosecution and potential jail terms over bouncing cheques, many business owners chose to ‘skip’ the country, putting the amount of debt at the end of 2015 at approximately AED 5.5 billion. With bank lending bound by Basel III parametres, good payment behaviour is the key to a good rating, said Massimo Falcioni, CEO Middle East Countries, trade credit management firm Coface, adding that what the company understands from its collected data is that SMEs are making an effort to pay off their debts in the UAE having previously left the country, to avoid legal action. “Nevertheless, they have been encouraged to return by the loanrestructuring plan unveiled by the UAE Banking Federation in March this year. Banks, credit insurers and financial institutions are supporting businesses in difficulties by accepting an extension of payment dates. The 90-day extension is a welcome step towards a comprehensive insolvency law in the UAE,” he said. Department of Economic Development agency, Dubai SME, issued its State of SME Equity Investment in Dubai report in May this year which called for robust insolvency

and bankruptcy management in the UAE, which would allow SMEs to list without complex regulatory pre-conditions related to corporate governance and accounting. Changes to the country’s insolvency law passed in July 2015 are expected to decriminalise bounced cheques and facilitate corporate bankruptcies. During the Article IV consultation with the United Arab Emirates on 20 July, the Executive Board of the International Monetary Fund (IMF) emphasised that the new law should further enhance central bank independence and governance, upgrade banking sector regulation and supervision in line with global standards, strengthen safety nets, and improve the resolution framework. Robinson added that bankruptcy legislation would achieve a couple of important things. It would stay all creditors equally regardless of if they were secured or unsecured. This would give the debtor a chance to present themselves in an organised forum. Defaulting on repayments would be also implicitly decriminalised, giving the SME owner an opportunity to work with the banks, either to resuscitate the company or to wind it down with the full oversight of the court.

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SHUTTERSTOCK

The recent rescue initiative put in place by the banking industry has seen the start of SME owners, who fled the UAE, re-entering the country to settle their debts

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LIGHTHOUSE TO PROVIDE SERVICES TO BANKDHOFAR SMES

UAE SMES UNLOCK ISLAMIC ECONOMY GAINS

BankDhofar has partnered with consulting firm, Lighthouse Consulting Services to provide outsourced accounting solutions to all registered SMEs for a nominal cost. The partnership aims to boost the overall quality of Oman's SME sector, and this collaboration aspires to provide key solutions that serve the needs of BankDhofar's SME customers nationwide, according to Moawiya Al Rawas, Unit Head, Liabilities and Product Development, BankDhofar. By outsourcing their accounting process, entrepreneurs will be able to concentrate on their business growth. This information will help SMEs obtain better financial support from BankDhofar, as it will improve the risk rating for those customers, he added. Ajay Bhati, CEO of Lighthouse Oman, said the services offered will include budgeting, accounting, reporting, profit and loss statements and balance sheet preparation. "SMEs look to maximise their return through investing time and money in their business. Our range of products is designed to give SMEs more time for such activities," he said.

Recent examples of SMEs delivering Islamic Economy innovation include slaughterhouses using apps to better integrate the supply chain with farmers and distributors, smaller banks offering real-time customer dashboards, and Muslim fashion and cosmetic start-ups identifying consumer trends on social media to help scale up in new markets. SMEs are increasingly using cloudbased business applications, bring your own (BYO) device strategies, and social media to remain competitive and cut IT costs. “UAE SMEs are at the forefront of adopting cloud applications to drive new business models. Compared to large enterprises, SMEs cannot afford to go down for any amount of time; a single slip up could wipe out their business,” said Savitha Bhaskar, COO of UAE-based consultancy Condo Protego. He added that with the rapidlydropping cost and rapidly-increasing power of backup, recovery, and high availability solutions, UAE SMEs need to embrace these latest technologies to protect and secure their data and their businesses to keep the country’s Islamic Economy running 24/7.

SHUTTERSTOCK.COM

FAST FACTS

HITCHES & GLITCHES LAUNCHES PACKAGES FOR SMES Dubai-based home maintenance company, Hitches & Glitches, has launched three dedicated cleaning, maintenance and manpower services packages specifically targeted at small- and medium-sized businesses. The packages are designed to suit the needs of SMEs in the UAE, for whom maintenance issues are often handled internally or through ad hoc providers. The company will also work with its SME clients to encourage the uptake of sustainable solutions to reduce energy consumption and save money, which will benefit start-ups or companies trading in today’s challenging economic environment. “These solutions can be as simple as installing aerators on water taps, which reduce water consumption by forcing air into the water flow, without disrupting water pressure; to switching to low energy light bulbs and high efficiency air conditioners to reduce energy consumption by up to 20 per cent,” said Lukas Eigenmann, Operations Director, Hitches & Glitches. He added that some small business owners may regard this as a grudge purchase; however the potential impact of intermittent failures is negated with cost-effective packages.

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23%

FAST FACTS

SHUTTERSTOCK.COM

GROWTH OUT LOO OUS UTI U CA AMONGST AE SMES K

OF SMES ARE STILL EXPERIENCING DIFFICULTY TO COLLECT PAYMENTS

SMES GIVEN EXPO 2020 TENDER OPPORTUNITIES

MASHREQ’S SNAPPBIZ APP TO MOBILISE BUSINESS Mashreq has announced the launch of a mobile banking app for SMEs called ‘SnappBiz’ to provide more efficient and accessible services for SME customers. The app is designed to save business owners’ time, as all transactions initiated through online banking can be authorised from SnappBiz and vice versa. “We understand how time is of essence for business owners and simplifying banking is our goal. We want to develop financial solutions that will help SMEs to develop, evolve and use technology for their benefit. The SME community is rapidly growing and evolving in the UAE which, as a country, has one of the most evolved digital infrastructures on the globe. SnappBiz provides convenience for customers to manage their banking relationship from their smartphones,” said Rohit Garg, Head of Business Banking, Mashreq.

Expo 2020 Dubai, Dubai SME and strategic procurement company, Tejari, have signed a memorandum of understanding (MoU) that will grant access to tender opportunities for the AED 25 billion mega-event to thousands of SMEs in the emirate. As a result of the MoU, businesses registered with Dubai SME will now be automatically enrolled as potential suppliers to Expo 2020 Dubai. The MoU is designed to encourage participation by SMEs in the delivery of Expo 2020 and create a positive impact on the UAE economy that extends beyond 2020. The mega-event is expected to generate a gross value add of AED 71 billion. “SMEs are major economic drivers and provide an important contribution to Dubai’s evolution as a Smart City. By uniting with Dubai SME and Tejari, we are extending our support to this business community, enabling SMEs to play a greater part in the delivery of Expo 2020 Dubai. We look forward to working with them to develop a truly inclusive, SMEfriendly Expo, with a sustainable economic legacy,” said Her Excellency Reem Ebrahim Al Hashimy, UAE Minister of State for International Co-operation and DirectorGeneral Expo 2020 Dubai Bureau. Of the 4,633 companies registered on the Expo 2020 Dubai e-Sourcing Portal, 32.7 per cent are SMEs. Tejari will integrate Dubai SME’s 3,500 member companies into the database. All registered members will be automatically integrated and will be able to participate in the delivery of the World Expo through project tenders.

48% OF SMES SAW AN IMPROVEMENT IN RAISING FUNDS

62% OF SMES SAW AN INCREASE IN SALES

41%

OF SMES ADDED TO THEIR HEADCOUNT IN THE FIRST QUARTER

82%

OF SMES EXPECT THEIR HEADCOUNT TO REMAIN UNCHANGED IN Q2 Source: Gulf Finance SME Sentiment Survey

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TOP TIPS

ASK THE RIGHT QUESTIONS

BE OPEN AND TRANSPARENT At the interview stage, make sure your candidate is briefed about the position and what the work includes. While in the beginning you might be involved in leading new business pitches, researching competitor landscapes and drawing up client proposals, you might have to move on to a more operational level, including managing a roster of existing clients, or getting hands-on experience with hardware and software solutions. Teams tend to be much more fluid in a start-up, designed to adapt to changes quickly. Be clear about how the role might change over time.

Follow a standard process using well thought through interview questions. Your goal is to evaluate candidates for their different work skills, but also their way of thinking. To find out more about their opinions, ideas and perspectives, why not change the standard interview etiquette. Instead of asking a person about their strengths and weaknesses, you could incorporate a question similar to those that Google likes to ask: “If you look at a clock and the time is 3.15pm, what is the angle between the hour and the minute hands?” At this point, the question is about the reaction of the candidate including the ability to think creatively.

Five recruitment tips for startups Sanjay Modi, Managing Director, Monster.com, Middle East, South East Asia and Hong Kong offers advice on how startups can make hiring smarter and more cost-effective

KEEP YOUR PROMISES

PLAN AHEAD

Good recruitment requires planning ahead. A first step in recruitment is talent acquisition, the Invest time in finding the right person to start next is talent retention. While offering your employees working with. The purpose is to find someone a certain percentage of your shares, try to establish who is willing to grow with you and your business, unique company values and make sure to communicate whilst seeking self-improvement along the way. those continuously to all employees. Reward them You will be reaching for much more aggressive through personal development programs, business goals when building up a business from travel, networking opportunities and team scratch, and thus working with a start-up requires more flexibility and energy outings to make them feel valued for the when compared to a We live in a time where the internet allows us hard work they put into making your corporate job. to collect information at anytime, anywhere in the business succeed. world. Social recruitment will expand your candidate reach, while also making hiring much more targeted. In fact, social media can give you many more insights into a candidate’s profile, telling both his professional and personal story. For example, your next industry hire might have a background in working with large, companies but also shares photos of meals on social media–making the candidate a good fit for your techstartup launching a food app.

BE SOCIAL

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OPINION

he blooming of the UAE over the last 50 years–in terms of economic growth and diversification, infrastructure development, and demographics, amongst many others–has been one of the most striking success stories that the world has seen. The role of the financial sector has been key, from helping to raise the equity and debt needed to fund much of that development to the training and employment of thousands of Emiratis and other residents. Tighter liquidity within the banking system is causing banks to take a more conservative lending posture, triggering issues for both individuals and companies as credit lines are restricted. It is quite possible that some long-forgotten lending practises might quickly re-inject confidence into the business environment. A key principle of responsible banking was, is and will continue to be,

Rajesh Prasad

back to banking basics

Rajesh Prasad, Director of Financial Services, KPMG Lower Gulf, looks at how banks can better serve the SME sector to know your customer. This means understanding your customer’s profile, industry and business. It means, wherever possible and necessary, setting up face-to-face meetings; and it means lending based on a clearly understood ability to recover the loan. One key area where this basic adage rings true is with small- and mediumsized enterprises (SMEs).

SMEs form the backbone of the UAE’s economic development, with over 280,000 companies generating the vast majority of revenue and employment opportunities for both nationals and residents. The sector has been particularly dynamic and is industry-agnostic. There are SMEs in every sector of the UAE’s economy, from trading to car repairs. Unfortunately, over the last six months, the

SME sector has reported a rise in ‘skip’ cases. The SME sector has been relatively underserved by banks and other financial institutions for some time. SMEs have always been seen as more likely to fail than larger organisations. Banks are more reluctant, even in good times, to lend to SMEs. But perhaps the biggest issue has been the ability of financial

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SMEs have always been seen as more likely to fail than larger organisations. Banks are more reluctant, even in good times, to lend to SMEs.” – Rajesh Prasad, Director of Financial Services, KPMG Lower Gulf

organisations to accurately assess the risk of financing SMEs. One of the key reasons has been the inability of banks and other financial institutions to understand who their customers are and what they want to do. Some of the banks in the UAE have struggled with the entire customer journey. From onboarding customers through monitoring performance to the (hopefully mutually satisfactory) end of the banking relationship, banks need to understand what customers are looking for, whether this is an inspiring digital relationship or a face-to-face connection and the risks that the customer faces, and therefore exposes

the lender to. Every customer segment and every industry sector faces its own unique challenges. Banks must start interacting with and monitoring their customers on a more regular basis. Not only will this give relationship managers, who have a significant part to play in this process a much better idea of the current and future circumstances of their clients, it will also make it much easier for the relationship manager to cross-sell more of the bank’s services. The role of relationship managers is important. Too often they have been motivated by sales targets with little accountability.

They need to track customer behaviour throughout the tenor of a loan. They also need to learn that similar clients are not the same; lending on experience with similar clients or other banks’ experience with similar clients has nothing to do with a relationship and even less to do with managing the relationship. Not only are SMEs a vital part of the UAE economy, but a recent federal law requires federal authorities and ministries to contract at least 10 per cent of their procurement budgets to purchasing from, consulting to, and servicing SMEs. Banks should also leverage the Al Etihad Credit Bureau (AECB),

which gives lenders a much more holistic view of the loans and other financial obligations of their clients and prospective clients. The AECB is, in fact, a significant pathfinder. No bank can be expected to lead from the front or to act on its own. Banks will need to work together with their customers who are finding it difficult to service their loans. Banks can help their clients by sharing data with each other and by devising clientcentric strategies. Businesses will become more sustainable, looking towards long-term success and we will see more profitable relationships based on trust.

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LEGAL FOCUS

Business after Brexit Hamish Walton, Head of Corporate Middle East at law firm King & Wood Mallesons, looks at the post-referendum impact on business in the Middle East

s the shockwaves from the Brexit vote continue to reverberate globally, the question I am being asked most, as a corporate lawyer in Dubai, is “Will it negatively affect transactions in the Middle East?” What needs to be remembered is the result of the referendum is not legally binding in its own right. Most commentators believe an act of the UK parliament will be required, and in any event the process dictates that at least two years must elapse. However the question about what happens when Brexit finally occurs still needs to be considered and answered, as the event will have wide ranging impact. So what is the direct effect on the Middle East? The short answer is, beyond a general downturn in confidence which might impact on transactions, “not much”. The Middle East is insulated in many respects from the impact of

the Brexit vote. Most of the countries in the region have pegged their currencies to the US dollar, thereby avoiding the wild currency movements we have seen in the British pound in recent weeks. A significant proportion of the region’s revenue is generated from hydrocarbons traded under US dollar denominated contracts, with prices set on international markets. Whilst there is substantial trade between the GCC region and the UK, aside from the impact of currency movements, it is difficult to see how this could be affected. UK-owned SMEs could in fact receive an uplift if they are being paid by Middle East businesses in USD. The inherent non-currency related viability and cost of trade should be unaffected as the GCC region doesn’t have a free trade agreement with the EU. The effects will be more subtle, and mostly driven by the fall in the

pound against the USD, which could last through the medium term.

REAL ESTATE AND REVENUE Investors in the Gulf have always had a love affair with London residential real estate, and that real estate has just got a lot cheaper with the depreciation in the pound versus the dollar. Of course, rental returns will be down in USD terms, but for many Gulf investors, that is a secondary consideration where residential real estate is concerned. Investors may, however, be more wary about investing in commercial real estate until London’s position as the financial hub of Europe is clarified. GCC revenues should increase in sterling terms given the currency differential. Products priced in GBP have suddenly become a lot cheaper and more competitive in the GCC marketplace. However that will be little comfort for expats being paid in GBP. Those expats, living in what is effectively a USD economy, have

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This influx of new talent from the UK could also mean we see an increase in the number of new SMEs launching in the region.” – Hamish Walton, Head of Corporate, Middle East, King & Wood Mallesons

just seen their incomes slashed by around 10 per cent.

EMPLOYMENT OPPORTUNITIES IN THE GCC Expect to see swathes of professionals applying for jobs across the Middle East. Tax free USD salaries have suddenly become that much more attractive. With the future of London as a major financial centre in doubt, with the opening up of Saudi Arabia, which will be a boon for lawyers, investment bankers and consultants generally, Expo 2020 approaching in Dubai and the World Cup in Doha, the need for skilled labour should ensure plenty of opportunities in the region. This influx of new talent from the UK could also mean we see an increase in the number of new SMEs launching in the region. The British expat will suddenly find the decision to return to the UK much harder to make. Hiring in the UK will slow down until the impact of

Brexit is better known, and the UK GBP denominated salary suddenly looks far less attractive, particularly if there is a USD denominated housing loan still to be serviced in the Middle East.

GCC HEADQUARTERS IN LONDON Whilst there are not a substantial number of GCC businesses with a European headquarters in London, there are some–generally financial services–businesses and private equity houses. These businesses may not be able to take advantage of passporting across Europe, dependent on what kind of deal the UK negotiates with the EU, and may be weighing up the future of their London hubs. Of the few GCC business seeking a listing outside the Middle East, we see little change for the time being. While there might be some delays in the decision-making process as a result of the uncertainties, the London Stock Exchange, a favourite for GCC businesses, remains

attractive given the strong cultural ties between the UK and the GCC and the lighter touch regulation compared with the US, with its onerous anticorruption and sanctions laws and Sarbanes-Oxley requirements. We think it is unlikely there will be a change in the choice of English law governing many major transactions. English law is a favoured choice of law in this jurisdiction and clients are familiar and comfortable with it. The choice of law by lawyers and their clients isn’t influenced by whether the UK is a part of the EU or not in the vast majority of cases. Furthermore, most contracts in this region governed by English law avoid the English courts and choose international arbitration as the dispute resolution mechanism. We also think it is unlikely existing contracts will be affected, unless they contain a specific clause describing what is to happen in the event Brexit occurs, or movements in the pound against the USD have an impact.

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CHALK TALK

JOHN MARTIN ST. VALERY

The Founding Partner of the Links Group, Best Small Business winner at the Business Vision Awards, talks about being a ‘bobby’ on the beat, weighing up qualifications versus personality, and paying people what they are worth

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While my greater interest is interpersonal skills rather than qualifications, education can certainly back a person up.” – John Martin St. Valery

I did not take the traditional education route. I decided at about 15 years old that I wanted to join, and complete my secondary education through the Metropolitan Police Cadets. At the end of a two-year period, successful cadets had an opportunity to apply to Hendon, the main training school for the metropolitan police, to join the police service. I was accepted to go to training college at Hendon, when I was 18 years old. Afterwards, in those days, we had an intense 16-week training course, and then every police officer in the Met has to do a minimum of two years of what they call ‘probation services’ which meant being a uniformed ‘bobby’ on the beat in an assigned borough of London. I remember getting on a green police bus after the passing out parade, and being driven through London. Officers were dropped off at varying points along the way, and I ended up in Tooting in South West London; and that area was my home for the next few years as a police officer. The scariest incident was the first occasion someone came up to me to ask the time as I walked down the high street. Around that time the Criminal Investigation Department (CID) was reorganising the division, and they established the South West Regional Crime Squad. After only 15 months of being on the beat, I was asked if I would like to be seconded as a young constable to that squad. It meant making the tea and doing filing, but I got to shadow people, which was really interesting. I was eventually put forward

to attend detective training school and I came back to the crime squad as a Detective Constable; and I remained in the Met Police for 8.5 years. It sounds a bit a bit trite, but interacting with all sorts of people, some pleasant and some not so pleasant, taught me valuable life skills. One of the specialities that I took up in the CID was surveillance, observing people when they do not know they’re being observed is interesting. Learning how people react and behave in certain situations means I can read people, so I do consider myself, at this stage, to be a reasonable negotiator. Obviously I have had vocational training in sales and negotiation over the years. But those early standards and the discipline that were instilled have set me up fairly well. I know that tertiary education and qualifications set an important standard. I’m certainly not one of those people who say just because I did not go to university and get a degree, so there is no need for it. There is a need to study further, and both my children have gone through university and college for that reason. But I do view, from a recruiting perspective, particularly for our business, that it’s about people, we’re a service industry. Looking at education as an initial criterion for employment is important. I must admit, I’ve felt guilty where in the past I have sifted through CVs based purely on qualifications, knowing that these candidates are probably more qualified than I am. But you need a filter. Then it comes down to meeting the person and building a collegiate team.

While my greater interest is interpersonal skills rather than qualifications, education can certainly back a person up. In general terms the academic qualifications can be the lowest common denominator. But for specific job roles it’s very important to have the best qualification possible. As my kids were going through tertiary education I told them it’s great to get that degree, but why not go for a first? Then they are further up that sifting process. Unfortunately, I think here in the region, corners are often cut in terms of paying for the right individuals for the right role. My advice would be, where possible, invest in the right people. You do not need to have the brightest, shiniest office to start with, but you do need the brightest and sharpest individuals to work with. Working with the right people is so important. I love the enthusiasm of the young entrepreneurs who say ‘I have a brilliant business idea, so I am going to get a really smart office and I have my nice car outside’ when really they should not worry about that to start with–get the right people. Yes, one has to have an office here, that is a requirement for a trade licence, but they do not have to be in the Burj Khalifa. What this government has been very good at endorsing is the demand for quality services. It must be the best of the best. If the service is premium, you pay premium. It’s the right way for a mature market to behave. In our business, we are so passionate about HR and recruitment that people with right qualifications, experience and demeanour are paid what they are worth.

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CEO CHAT

FEATHERS TAKES FLIGHT

Khalid Basaeed, CEO, Feathers UAE, discusses building and growing the Emirati fashion brand Khalid Basaeed

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Everything I do is associated with my country and I’m very proud of it.” – Khalid Basaeed, CEO, Feathers UAE

eathers UAE, an Emirati fashion brand, was established in 2009 by Khalid Basaeed, CEO, along with his brother and nephew. The purpose of the brand is to develop and carry a full range of products such as bags, perfumes, wallets, watches, pens that international brands in the region also cover. “There was no Arabic brand, never mind an Emirati brand, that carried this range of products. In the GCC and the Middle East, we like to have branded items; but most of these brands are western, so I asked why we did not develop our own, local brand. Also, international brands create products for the whole world and are not customised for a specific region. The same product can be found in Japan, the Middle East, Europe or America. I wanted our products to have an Arabic flavour,” he said. He added that international brands are expensive because they produce very high quality products, and not everybody can afford them. The aim of Feathers UAE is to offer the region affordable luxury. “Since we are a luxury brand we wanted to associate our name with luxury. I am fascinated by the peacock; in my opinion it represents fashion because of its colours and details, and how proud it is of its beauty. In the beginning we had a very big peacock feather as the background of the shop. We also gave a real peacock feather as a gift with each purchase,” he said. Although the idea for Feathers came to him in 2004, while studying

his Master’s in urban planning at the University of Edinburgh’s College of Art, it was only in 2009 that he started the business. In 2014, he quit his job to focus on Feathers full-time. “It was difficult to work and grow my business. I feel I am serving the country better doing this than just going to work every day and doing the same thing. This is helping the country and the economy, and I’m carrying the name of the UAE, even in the brand name. Everything I do is associated with my country and I’m very proud of it,” he said. Raising financing was the main issue when Basaeed began the brand. There were different funds and options available, but the team wanted to prove that they could do it themselves; and once the idea took off, he believed they could apply for extra funding with a proven business plan. The three partners put a total of AED 300,000 into the business, which was a small budget considering the products. With their initial capital and ideas, they started talking to, and finding, the right suppliers for their products one year before the company’s launch. Basaeed said that initially they knew they could not start with the entire range of products, so they started with handbags and the leather products associated with hand bags, such as mobile cases, wallets, and scarves, giving the customer the choice to wear the scarf or use it to decorate the handbag. “Being an Emirati fashion brand is meant that we attracted interviews

with local magazines and TV channels. We also got support from local people coming and buying from us, and for the first year we did not want to make money, we wanted to reinvest into a new range of products, and that is how we overcame any financial problems,” he said. Another key to managing the finances of the business was that they produced a very small quantity of products, took really good pictures, and posted them on Facebook. At that time it was very popular social media platform, the business ran out of stock quickly. Then there was a waiting list, which Basaeed said was a good marketing tool. “We produced the minimum quantity possible, and then gradually increased the quantity and range of products. Within two years we had a very wide range of products, and we started making money and breaking even,” he said.

LOCATION, LOCATION, LOCATION Basaeed wanted the first Feathers store to be in Abu Dhabi, being the capital of the UAE; and in their first year they had a store of 25 square metres in Dalma Mall, the only location that accepted Feathers, given the business was essentially still ideas on paper. The reason for this was that the first questions a mall asks a potential tenant are how many branches they have and where they are situated. Two years later, when looking to expand, the management team looked to Dubai as a hub for trading and cont. overleaf

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CEO CHAT

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shopping and opened their first store in Dubai Festival City. “At this stage we got support for expansion from the Khalifa Fund. We showed them the products and the brand in Dalma Mall, so it was easier to get support because they could see the potential of the brand, and they awarded us AED 500,000 to open the shop in Dubai as well as two kiosks–one in Mirdiff City and one in Mall of the Emirates. Last year we opened Al Ain Mall, so we have six branches the UAE, and soon we will open in Qatar,” said Basaeed. He added that the second biggest market after Dubai and Abu Dhabi is Doha, Qatar. It is a very promising market with the FIFA World Cup coming to Qatar. After hearing about Mall of Qatar, which will be the biggest in the country, the Feathers team decided to approach the mall about retail space. “The Mall management knew the brand and accepted Feathers immediately. In mid-June we went to Qatar to start the process of acquiring the trade licence. This is quite difficult because the UAE market allows GCC residents to invest as locals, without an Emirati business partner. However, in Qatar, GCC locals have to meet the same requirements as expats. We need a Qatari partner to start a business; and like the UAE it is split 51 per cent local ownership and 49 per cent foreign ownership. It has to change if they want investment to come to Qatar. They have to deal with GCC residents as locals,” said Basaeed. The Mall of Qatar is set to open on 29 October 2016, and the Feathers team are looking at Kuwait or Saudi Arabia as the next market. The team is also starting talks with investors to see about franchising the label. But there is no rush. Basaeed added that the Feathers team has invested a lot in the company and it has expanded quite quickly, so it needs a chance to settle before expanding much further. He added that Feathers is doing well in the region, because the team

The product range includes handbags, wallets, cell phone cases, scarves, perfumes, watches, pens, sunglasses, shoes, jewellery, and accessories.

knows the region and its needs better than international brands, although the competition will be very strong once Feathers eventually grows internationally.

QUALITY CONTROL As a small business, Feathers outsources all of its manufacturing, but Basaeed said he still monitors the quality of production closely. If at any point he feels the quality is slipping, he changes the supplier. “The local community wants a product that can last for a long time. It is very important not to fool our customers by taking advantage of their support. We want to produce products which meet the same quality as any international brand,” he said. As a smaller business, it can be difficult approaching these production facilities, because even if they accept the Feathers brand, they may not have the time to produce the line or their minimum required quantity is prohibitive, said Basaeed. Currently all the Feathers sunglasses are produced in the same factory as larger brands such as Cartier and Fendi. Handbags are locally produced, and some products will soon be produced in Italy in a factory sub-contracted by Prada. If that production is

successful, production in its entirety may be moved to Italy. “Prada has its own huge factory which does not produce for anybody else. But they sometimes have to outsource one of their lines to a medium-sized company which has a quality controller from Prada who checks each product. If there is a small scratch the whole product is rejected. So we are using one such medium-sized company that helps smaller companies with production,” he said.

BUSINESS VISION AWARDS MOST IMPROVED COMPANY FEATHERS UAE HAS SHOWN REMARKABLE GROWTH IN A SHORT SPACE OF TIME.

From 2012 to 2015: • The brand went from one branch to six. • Staff went from two sales executives to 16 sales executives, one marketing manager, one PRO and the CEO. • Sales increased from AED1,509,525 to AED 24,926,843. • Net profit increased from AED396,375 to AED 5,988,291. • The product range increased from leathers goods only to scarves, perfumes, watches, pens, sunglasses, shoes, jewellery, and accessories.

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COUNTRY FOCUS

INTO IRAN? Hamid Mojtahedi, Head of the Iran Group, Al Tamimi & Co.; Parham Gohari, Partner, Frontier Partners; and Samir Safar-Aly, Associate, Simmons & Simmons, look at foreign investment in Iran six months after sanctions were lifted

ran is the second largest economy in the Middle East and North Africa (MENA) region after Saudi Arabia, with an estimated gross domestic product (GDP) in 2015 of $393.7 billion. It also has the second largest population of the region after Egypt, with an estimated 78.8 million people in 2015, according to an overview by the World Bank. Iran’s economy is also characterised by a large hydrocarbon sector, ranking second globally in natural gas reserves and fourth in proven crude oil reserves, making economic activity volatile as government revenues still depend to a large extent on oil revenues. The implementation of the Joint Comprehensive Plan of Action (JCPOA) in January this year and the lifting of nuclear-related sanctions against Iran is expected to increase the country’s GDP to 4.2 per cent and 4.6 per cent in 2016 and 2017 respectively. However, this expected growth is considerably lower than the eight per cent projection put forward in Iran’s sixth Five-Year Development Plan formulated by the Expediency Council.

Hamid Mojtahedi, Head of the Iran Group at corporate law firm Al Tamimi & Co. said that this projection by the government needs to be checked against a number of variables. The first is the drop in oil price, given Iran’s reliance on hydrocarbons. Secondly, the government expects close to 20 million business and leisure tourists over the next five years, though that will be contingent on improving the infrastructure in place, which at the moment cannot absorb those kinds of numbers. He cited the need to address the lack of branded hotels as one example.

FOREIGN DIRECT INVESTMENT Mojtahedi added there were a number of considerations to be made in terms of foreign direct investment (FDI) to juxtapose Iran with Dubai, which has a healthy FDI culture, the necessary infrastructure in place, and a clear policy laid out by the Government. “There has been little possibility for investment into Iran, partly due to the crippling sanctions imposed, but also due to the inherent risks in the Iranian economy, as there is a lack of

transparency in both the judiciary and bureaucracy. There are problems with currency fluctuations and inflation, which last year sat officially at 24 per cent,” he said. The financial sector has been further impacted by ineffective lending schemes amid high inflation, which has created significant non-performing loans (NPLs), and sharp profitability declines. There is currently a lack of liquidity in the market and the banks are in need of a re-capitalisation. Furthermore, the banks’ NPL ratios are comparatively high in Iran, indicating the need for more efficient credit provision and best practice risk management practices, according to Parham Gohari, Partner at consulting and investment firm Frontier Partners. The government’s attempt to address the risks associated with attracting foreign investment is a catch-22. The country’s infrastructural needs can be addressed by cash injections into the economy; this cash is not available domestically, and has to come from foreign investment. But foreign investors are hesitant to come in, added Mojtahedi.

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Funding an existing operation is not possible through proper banking channels and the question of how to get money into the country has not been addressed yet.” Hamid Mojtahedi

Gohari said that there are factors that make Iran’s financial sector attractive to potential investors, including the size of the sector, with total assets nearing 150 per cent of the GDP. Also the banking system is 100 per cent Islamic, whereas competitor countries such as Saudi Arabia, Brunei and Kuwait are at less than 50 per cent. Iran also has the second-highest banking penetration rates in the MENA region, with 75 per cent of adults holding an account at a formal financial institution. Mojtahedi added that while the Foreign Investment Protection and Promotion Agreements (FIPPA) protect assets against expropriation and guarantees the repatriation of capital and profit from the country, two guarantees an investor wants, funds still have to leave the country via proper methods, namely banking mechanisms. “In spite of the fact that sanctions have been lifted, we do not have a single UAE bank that is willing and able to transact with Iran because of the lack of direction from the UAE Central Bank. Also, none of the European banks have established the proper corresponding relationship with Iranian banks, so effectively money is not getting in or out of Iran. Funding an existing operation is not possible through proper banking channels and

– Hamid Mojtahedi, Head of the Iran Group, Al Tamimi & Co.

the rudimentary question of how to get money into the country, provided everything else is working, has not been addressed yet,” he said. Several banks across the MENA region have reportedly voiced their interest to re-engage with the Iranian market, given it is the 17th largest country in the world in terms of territory, with a population of 78 million, said Samir Safar-Aly, Associate at law firm Simmons & Simmons. He added that 41 per cent of Iranians are below 25 years of age and many are well-educated, offering a firm foundation for economic growth. Despite operating under sanctions for several years, Iran’s GDP still stands at a sizeable $415 billion, adding to its appeal. Bearing this in mind, there are significant opportunities in the areas of trade finance, wealth management and project finance for banks entering Iran. Mojtahedi added that even if the infrastructural needs are met, the Iranian government has to address its transparency issues as well as its political risks, explaining that for every power in Iran, there is a shadow power, and they constantly compete against each other. This competition is not very healthy as it lacks the checks and balances found in other political systems, and this schism debilitates progress.

“Parliament wants to pass laws and regulations that promote foreign investment and facilitates the entry of capital into the country, but the Supreme Leader’s office, on purely ideological grounds, prevents it from taking place. These political differences invariably affect foreign investment,” he said.

FREE ZONES Iran does not have a foreign ownership restriction, with the exception of some key sectors such as the oil and gas sector, unlike the UAE. One hundred per cent foreign ownership can be allowed both onshore and offshore in the free zones. Assuming the infrastructural issues are addressed, there are benefits to setting up Iran, said Mojtahedi. Although establishing a presence in one of Iran’s seven free trade zones (with an additional six being planned for development) or 13 special economic zones can be an attractive option for some companies, it is important to note that most of these zones are still at the development stage and have thus far not lived up to their full potential to attract investments, said Gohari. “Pursuant to the Law on the Administration of Free TradeIndustrial Zones of the Islamic Republic of Iran, there are seven free cont. overleaf

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COUNTRY FOCUS Parham Gohari, Partner, Frontier Partners

Samir Safar-Aly, Associate, Simmons & Simmons

cont. from pg. 21

trade zones in Iran. Each of these is governed according to special laws and bylaws, and in some respects they are excluded from the laws of mainland Iran. These free trade zones aim to encourage foreign direct investment to help facilitate economic recovery and growth,” said Safar-Aly. He added that the most common legal advantages of the seven zones are to do with streamlined bureaucracy and business friendly rules and regulations. Examples of these include tax exemption for a period of 20 years for all economic activities; legal guarantees and protection for foreign investment; no limitations on transfer of foreign currency to other Iranian free zones or other countries; flexible monetary and banking services; and facilitated regulation on labour relations, employment and social security. Logistically, there are benefits relating to the entry and exit of foreign nationals in free zones, as the visa requirements to enter Iran have changed. With the exception of 11 nationalities, foreigners can get a visa on arrival into the mainland at the Iranian ports of entry. Among the nonexempt are the US, UK, Canadians, Jordanians and Iraqis, said Mojtahedi, adding that all nationalities, with the exception of Israelis, can enter

the free zones without a visa or any formalities, said Mojtahedi.

FOREIGN VS DOMESTIC In Iran, competition is a new concept and is still in its first decade. Previously, Article 44 of the Iranian Constitution confined most of the important industries and economic sectors to a Armitage government monopoly Steve and considered the role of the private sector as only a small contribution to the country’s economy. The Bill of Competition in the market however, which was drafted as part of Amendments to Article 44 of the Constitution, introduced new provisions to govern competition, relating to pricing mechanisms, collusions, abuse of dominant market positions, and mergers and acquisitions; it was formally adopted in 2008. It also sets out the rules for formation of the Competition Committee and its duties, and the sanctions and penalties for possible breaches, said Safar-Aly. While there appears to be no shortcomings on the legislative side, full implementation of such laws in practise has yet to be witnessed, said Gohari, adding that the current administration of President Rouhani is facing a major dilemma. “On one hand, the Islamic Republic is keen to develop domestic capacity

building and the consequent reduction of dependence on imports, and at the same time it seeks to promote foreign investments and fair competition and has ambitions to join the World Trade Oraganisation (WTO) within the next two years,” he said. He added that the strategy to further protect and promote domestic industries in an effort to stimulate private sector growth and job creation, amid a weak labour market and high unemployment rate, seems to be the most plausible course of action in the short-term. “There are clear examples of protectionism measures and anticompetitive behaviours in the market, including awarding public sector contracts exclusively to domestic players as a measure to protect domestic interests and imposing high import tariffs, such as 40 to 75 per cent tariffs on passenger car imports and import bans on luxury vehicles, to further shield national producers from international competition,” said Gohari. Mojtahedi said that in the context of sanctions being lifted in January 2016, time is of the essence, and that there is about 16 months before any palpable change is seen to take place in Iran. This is because the trickledown effect of the easing of sanctions has not actually materialised in the minds of the Iranian public. The price of commodities and the consumer price index has not dropped, Iran still has inflation and unemployment and, the Iranian presidential elections will take place in 2017 with the current administration hoping to secure another term. “Iran’s success is critical at this stage. If it does succeed in addressing its infrastructural and political issues, the UAE will benefit. Many companies will use Dubai with its well-established infrastructure to launch and branch into Iran so it will benefit the UAE economy, and by extension, the Iranian economy,” said Mojtahedi.

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SHUTTERSTOCK.COM

HOSPITALITY The GCC hospitality industry is expected to sustain its growth, supported by the regional governmentsâ&#x20AC;&#x2122; initiatives to grow the sector.

HIGHLIGHTING HOSPITALITY

Contributors discuss the GCC hospitality sector outlook in light of the upcoming mega-events, Expo 2020 and FIFA 2022, and how SMEs can fit into the supply chain

hen developing a new hotel regionally and setting up the supply chain, it is essential that there are structures in place with key responsibilities highlighted so

all parties involved, whether global partners or local SMEs, arrive at the same understanding, said Stephan Vanden Auweele, Area Manager, Dubai, Starwood Hotels and Resorts.

When choosing a local partner, particularly a smaller enterprise, a number of factors have to be considered, since the SME sector has its own features, he said. The sector generally has no information on

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In Dubai alone, hotel projects will benefit from investments worth 7$ billion before Expo 2020, catering to the 25 million people anticipated to visit during the convention.” – Hassan Al-Hazeem, Managing Director, Intercoil

industries, market shares, competition dynamics or a solid management track record; the creditworthiness of these businesses need to be assessed using measures that may differ from those traditionally used for a global supplier. Often the SME’s competence is assessed based on their past performance, which provides insight into its ability to ensure an effective supply chain, integrate with customers, and manage expectations. “In most cases, manufacturers cannot afford to have a supply chain that fails to deliver results. To increase the chances of success, one must fully evaluate the entire supply chain end-to-end. Managing a supply chain effectively has never been more important for businesses than in today’s challenging economic conditions. Effective measurement of a supply chain is impossible without hard data, so having the right physical

and technical systems in place for accessing information is the crucial starting point when analysing the effectiveness of any supply chain,” said Vanden Auweele. Intercoil, a family-owned business established in the UAE in 1974, has grown from an SME that manufactured beds and mattresses to becoming a hotel supplier. The company’s first major contracts were awarded by Dubai-based hotels the Holiday Inn, under the Mohammad Omar Bin Haider Holding Group (MOBH), in 2003 and the Metropolitan Paris, under the Al Habtoor Group, in 2004. Intercoil was awarded the contract to supply beds for all five Metropolitan hotels over the next two years. Similarly, the company was awarded further commissions by MOBH that include contracts with hotels such as the Grand Excelsior Hotel and the Dhow Palace Hotel. Contributing factors to the company winning these contracts include representatives being able to build a rapport with the hotel groups, offering competitive pricing and good customer service, and offering a superior product. Intercoil offered spring bases and mattresses, while the competition mostly offered open coil mattresses. In 2010 Intercoil become the exclusive licensed manufacturer and distributor for top US-based bedding company Simmons. It has since experienced rapid growth in the

hospitality sector due to Simmons’ pre-standing affiliations with leading global hospitality groups such as the Westin, Kempinski, Sheraton and The Four Seasons. Intercoil also manufactures and provides ‘Signature Sleep by Four Seasons’ to Four Seasons Hotels across the Middle East, and over the last three years has supplied an annual average of 12,000 Simmons mattresses to the region’s hospitality sector. The company has expanded to meet the demand of the MENA hospitality sector, by opening a new manufacturing facility in Dammam, Saudi Arabia in May this year, producing a daily capacity of 500 mattresses and 200 bedroom furniture pieces, with plans to double mattress capacity within the next three years. Hassan Al-Hazeem, Managing Director of Intercoil International said that other factors hotel groups consider when choosing suppliers include the quality of their service and products, reliability and lead time, price, terms of payment, track record, and health and safety standards. “Also, if the hotel is particularly eco-friendly, this will play a big role in determining suppliers, based on their manufacturing and sustainability efforts. At the end of the day, companies want to work with suppliers that they know, like and trust,” he added. Economic growth, continued infrastructure spend, and increasing cont. overleaf

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HOSPITALITY

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tourist numbers are likely to support future growth of the GCC hospitality industry, according to Middle East cities hotel forecast for 2015 and 2016, by consulting firm PricewaterhouseCoopers (PwC). The outlook for the industry remains positive in light of the lower oil price, although the difference between the regional markets will vary from country to country. With upcoming events such as Expo 2020 and the Qatar FIFA World Cup in 2022, the region is gearing up for an increase in tourist arrivals, said Mubashar Shahab, Executive Director and Head of Global Procurement for Fairmont Raffles Hotels International. With tourism being a key driver of economic diversification throughout the GCC, growth is bolstered by the investment in airports and infrastructure, events and food and shopping outlets; and as the region continues to emerge as a popular tourist destination, the hospitality industry will enjoy a number of opportunities, said Al-Hazeem. “In Dubai alone, hotel projects will benefit from investments worth $7 billion before Expo 2020, catering to the 25 million people anticipated to visit during the convention. Qatar is investing heavily in its hospitality industry as host to the 2022 FIFA World Cup, while reports in Saudi Arabia suggest global hotel operators will open around 75 new hotels over the next four years, in response to increases in religious and business tourism,” said Al-Hazeem. Currently 10,969 rooms are under construction in Dubai, the highest number in the region, and 3,065 in Abu Dhabi. Among other regional cities, 6,576 rooms are in the construction phase in Doha, 5,936 in Makkah, 5,491 in Riyadh and 2,728 in Jeddah, according to data research firm STR Global.

ROOM RATES Most regional commentators agree that occupancy rates, especially in the UAE,

are likely to remain stable throughout the coming year, said Shahab, adding that the GCC hospitality sector is in a high growth phase while other sectors continue to slow down. There is a focus on budget hotels and commercial tourism feeding into the industry, as Saudi Arabia invests in affordable hotels in the Mecca and Medina regions to cater to its religious tourism demands, as well as Expo 2020 and FIFA 2022. “In terms of hotel rates, it is unlikely that these will change if the demand continues to be met. It does not seem that supply and demand will be 100 per cent aligned on the timeline, but if we are anticipating welcoming 20 million visitors 3.5 years from now, we will certainly need a lot of additional hotel rooms,” said Vanden Auweele. Al-Hazeem added that as long as the Middle East continues to enjoy high occupancy levels, there will not be a need for higher-end establishments to lower their room rates. “Discounting rates at premium hotels might temporarily address occupancy, but the risks to the brand positioning could lead to long-term damage. What is more important is to ensure added value, attention to detail and the best possible service for guests. There will always be a market for exceptional experiences that command a higher price,” said Al-Hazeem. Amruda Nair, CEO and Joint Managing Director, Aiana Hotels and Resorts, added that the sheer number of hotels entering the market and the strategy adopted by the Tourism Board to encourage mid-market brands would mean that there is a well-rounded approach to balance the current segmentation which is heavily skewed towards the luxury sector. “While the market will remain competitive, the wider range of travellers and appeal to new markets will help with rate positioning, particularly in the GCC where occupancies are expected to hold,” she said.

SUPPLIERS–LOCAL VS. GLOBAL When choosing whether to use global or local suppliers, an argument can be made for both.

Global partners

• These partners have been tried and tested and can routinely produce the same high-quality output to ensure customers enjoy the same experience worldwide, every time. • Global partners also carry less of the perceived element of risk than their smaller counterparts. • Global partners often afford economies of scale due to central purchasing.

Local partners and SMEs

• Engaging with local suppliers reduces the carbon footprint of the supply chain. • Local partners are preferred when sourcing perishables, which supports the farm-totable concept. • Supporting local suppliers benefits the regional economy through job creation and spending. Source: Mubashar Shahab, Executive Director & Head of Global Procurement for Fairmont Raffles Hotels International, Hassan Al-Hazeem, Managing Director of Intercoil International, and Amruda Nair, CEO and Joint Managing Director, Aiana Hotels and Resorts

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BUSINESS LICENCES

Business owners should consider their options carefully before selecting a free zone in which to register their business.

IN THE ZONE

Saad Maniar, Managing Partner, Crowe Horwath UAE, Neil Petch, Chairman, Virtugroup, Murtaza Khan, Partner, Fragomen look at what business owners need to consider before registering their company in a free zone

n October 2015 the World Bank released its Ease of Doing Business 2016 report, which saw the UAE ranked as the most favoured business destination, among Arab countries, for the third year in a row. Globally, it came in at number 31 out of a total of 189 countries. Each country was ranked by sorting an aggregate across 10 topics which comprised of

a number of indicators. The higher a country’s ranking, the more conducive the regulatory environment is to starting and operating a local firm. Considered regionally as a safe haven and favourably ranked on its ease of doing business, the United Arab Emirates continues to attract investors, both local and foreign, according to Saad Maniar, Managing Partner of

auditing and consultancy firm Crowe Horwath UAE. “As such, the country’s free zones have attracted various groups of enterprises owing to their connectivity infrastructure, readily available workforce and other trade facilitation services,” he said. He added that companies licensed in certain free zones, such as the

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The country’s free zones have attracted various groups of enterprises owing to their connectivity infrastructure, readily available workforce and other trade facilitation services.” – Saad Maniar, Managing Partner, Crowe Horwath UAE

Ras Al Khaimah free zone, are not authorised to do business within the UAE market–a local agent or distributor or agent has to be appointed for carrying out business activities. When an application is made for a licence for a profession such as a doctor or architect, while ownership can be 100 per cent foreign, a local national must be taken on as a service agent. Each licence is valid for one year from the date of issue and must be renewed annually following a mandatory audit. According to Neil Petch, Chairman of company registration firm Virtugroup, a business owner should be very clear about the company’s direction and goals, they should decide if it will be an independent venture or if it will include multiple shareholders and if so, if they will add value to the company by way of capital, support or a network, before they begin the application process. A business owner should take time to work out which free zone will be right for the business, and take into consideration factors such as if costs need to be kept low initially, if office space would be required, and if they can afford the capital.

While the process of registering a new business in the UAE is generally considered smooth and free of complications, there are stringent procedures to be adhered to in order to qualify for a business licence, he said. “Rigorous permit procedures are intended to ensure that businesses and their premises comply with their respective free zone policies. They are also intended to hamper possible acts of money laundering activities, and ensure compliance with the kind of trade and property use requirements of the zone’s bylaw,” said Petch. Maniar added that prior to entering into any purchase or lease agreements for a business location, owners are required to verify their compliance with the respective free zone. The requirements for setting up a business in the UAE free zones are more or less the same. “The majority of the free zones require that the business owner has a minimum amount of capital if they are establishing a new company or enterprise, as opposed to just opening a branch of an existing company. However, each free zone has different start-up procedures and fees,” said Maniar.

The 30 plus free zones in the UAE each cater to a different industry, though some only require a business owner to provide evidence of having travelled to the UAE by means of a UAE entry stamp in their current passport, according to Petch. He added that a business owner must be 18 years or older to be a registered shareholder of any company in the UAE.

COMPANY REGISTRATION Once the company is registered with the relevant free zone authority, a business owner can then apply for a licence by submitting a completed licence application form, a copy of the title deed/lease contract under the name of the new company, proof of the deposit of the minimum capital and confirmation letter from the bank addressed to the relevant free zone authority, a memorandum and article of association and payment of charges, copies of the business owners’ passports, office fit-out approved by the free zone authority, and a no objection certificate from the Trakhees-Ports, Customs and Free Zone Corporation (PCFC) regulatory arm, Environment, Health and Safety cont. overleaf

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BUSINESS LICENCES

NOT ALL LICENCES ARE CREATED EQUAL There are four types of business licences granted, depending on the type of business the company intends to undertake.

Murtaza Khan, Partner, Fragomen cont. from pg. 29

(EHS) and the Department of Civil Engineering, said Maniar. He added that with the exception of branch entities, all new licence applicants are required to open a bank account within 90 days of receiving the Certificate of Incorporation/Formation. After a licence is secured, only then can a business owner begin the process of applying for visas. The company’s eligibility to sponsor visas for foreign nationals is determined by the location of the sponsor, the type of business licence, and the employment or visa quota the company has secured, according to Murtaza Khan, Partner at corporate immigration firm Fragomen. “In order to be eligible to submit applications, employers are required to register with immigration and/or labour authorities. Upon successful registration, establishment cards are issued by each authority, and that typically occurs immediately after receiving a business licence. The main purpose of the card is to verify the status of the company,

Neil Petch, Chairman, Virtugroup

and to identify its owners and authorised signatories,” said Khan. Maniar added that businesses operating in the free zones are required to sponsor employees with the necessary paperwork and visas to allow them to reside in the country, though establishment procedures vary from free zone to free zone.

• Commercial licence This licence is issued to a company that seeks to engage in any kind of trading activity. Business owners looking to work in insurance require the approval of the Ministry of Economy and Commerce, while licences for medical and pharmaceutical products have to be approved by the Ministry of Health. • General trading licence Companies dealing in imports and exports require these licences, and they will have to involve their respective Chamber of Commerce and Industry, depending on which emirate they intend to set up the business. • Consultancy/Service licence Companies offering services in banking, consulting and contracting have to apply for a licence in this category. Banks and other financial service providers also require approval from the UAE Central Bank. • Industrial licence This licence is granted to companies that intend to carry out industrial production activities. Issuance of licences for manufacturing companies must have the approval of the Ministry of Finance and Industry.

Source: Saad Maniar, Managing Partner, Crowe Horwath UAE

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FINANCIAL MANAGEMENT When using raised capital, business owners needs to make sure outgoing expenses will grow the business.

BANG ON BUDGET

Mahmoud Shehada, CEO, Allegoria Capital, Mike Hoff, CEO, Mike Hoff Consulting, and Radhakrishnan, CEO, Radius Consultants look at how a small business can properly manage funds once extra capital has been raised

major concern for many small businesses is raising capital to continue or grow the business. Good financial management is important for any business, but more so for an SME when an unpaid invoice could hurt the companyâ&#x20AC;&#x2122;s cash flow. Once capital has been raised a business should revisit its budget and set cash flow targets as improper cash flow management is one of the largest mistakes

committed by SMEs and can be the tipping point between success and failure, according to Mahmoud Shehada, CEO of investment firm, Allegoria Capital. Maintaining a rolling 12-month cash flow forecast that clearly identifies where money is coming in, and out of the bank account, is a good way to facilitate managing this capital. It is different from a profit and loss forecast, which does not take in account when monies flow

in and out of the business, said Mike Hoff, Founder and CEO of strategic planning firm Mike Hoff Consulting.

PRIORITIES AND PITFALLS An important consideration business owners have to make, once further capital is raised, is how to prioritise the allocation of funds. Shehada said one of the largest mistakes made by business executives is using capital to further improve existing infrastructure.

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For an SME to develop a good budgeting strategy they would have to include projected cash flow… Once that is done, sticking to the plan will involve a regular review of the budget.” – Mahmoud Shehada, CEO, Allegoria Capital

The priority for any business is to enhance revenues, therefore the capital expenditure should be focused on any expense that will translate into an increase in sales and customer acquisition. Some examples may include marketing and advertising, PR and branding. The prioritisation of expenditure has to be concluded carefully after considering the shortterm and long-term prospects for the business, as well as current and forecast market conditions, according to Radhakrishnan, CEO of consulting firm, Radius Consultants. He added the first thing to consider when deciding on the business’s priorities for fund allocation include whether or not the proposed expenditure relates to, or helps, the core activities of the business and fits into the long-term goals of the business.

“If it relates to a new line of business activity, however attractive it is, the business owner needs to reconsider and focus their energies on the core business, as a number of SMEs stray away from and neglect the core business,” he said. The second factor is whether or not a business owner has done market research to support their idea for any proposed projects, as it is better to follow an objective view rather than simply depending on their intuition. Finally a business owner has to ask if the proposed project would generate enough profit to sustain its viability; and more importantly if it will generate enough cash flow to service the debt and maintain its contribution to the overall business. Hoff added it is essential that a business has a high percentage of A-players who are able to predict and foresee any pitfalls in the business plans.

Business owners must also ensure that they actually have sufficient funds to fuel the business’s planned growth, as well as ensuring that all the internal processes are running effectively. “It is very easy to fall into the trap of drawing down the funds in excess of immediate requirements. A business owner needs to maintain a control over the timing of the withdrawal of funds which will match their needs, and it is quite possible the bank would have also put in stringent conditions to ensure that this does not happen,” said Radhakrishnan. Businesses must ensure that the funds are utilised or invested only for the purpose for which they are intended, many of the SMEs get into trouble by diverting funds to other uses. Shehada said business owners should not take advice from financial advisors that tell them to cut costs as much as possible. cont. overleaf

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FINANCIAL MANAGEMENT

marketing, as well as more fluid costs such as visas, medical insurance, premise insurance and licensing, as well as End of Service Benefits (EoSB), said Shehada. “Great businesses are magnets for A-players. This needs to be planned for as A-players will cost more than B- or C-players; but it has been proven that a business will get three times the productivity out of an A-player than a C-player, so this additional employee cost needs to be planned for, and a possible incentive scheme to retain talent designed,” said Hoff. Planning of physical expansion of premises and associated costs, if applicable, need to be taken into consideration; and having a robust marketing and PR strategy in place is essential, he added. Mike Hoff, CEO, Mike Hoff Consulting

Radhakrishnan, Radhakrishnan,CEO, CEO, Radius RadiusConsultants Consultants

cont. from pg. 33

Issues like these can be avoided using a good budgeting plan as it will show what the financial implication of each pitfall actually is. “Budgeting and forecasting are very much like dieting; you have to select the target that you wish to attain but also set the plan that will help you achieve it. For an SME to develop a good budgeting strategy they would have to include projected cash flow; costs, including fixed, variable and one-off capital costs; and forecasted revenues. Once that is done, sticking to the plan will involve a regular review of the budget,” said Shehada. He added that analysing a business’s actual income versus their projected income will help in identifying any shortfall or reasons for high turnover; as a business owner can make sure their actual expenditure is in line with their projected expenditure, and if not adjust it accordingly. As the business further develops, the

budgeting that is set in place will act as a guideline for where the business is headed. Hoff proposed three considerations in order to execute a business’s action plan, starting with identifying the top three to five priorities of the current quarter and assigning a person to deliver each one. Second, a business owner needs to ensure they have the right metrics in place which will improve the ability to gather the key numbers of the organisation to make sure the business’s performance is in line with the plans. Finally, there needs to be the right communication rhythms within the business to make sure that those responsible for execution of the plan synchronise regularly to flag any issues early. Operational expenses that need to be considered include fixed costs such as rent, salaries, procurement and

TOP TIPS TO PRIORITISE FUND ALLOCATION • Outsource required tasks that could be done cheaper outside of the company such as PR, marketing, and branding etc. • Know the return on investment for every dollar spent on client acquisition. • Initiate a procurement procedure. • Allocate funds to ensure the right people are in the right seats doing the right things to the expected standards. • Allocate funds to remove any restraints within the business that are preventing growth, which can include internal bottlenecks. • Be clear on the marketing and PR strategy. • Reduce any internal wastage.

CMY

Source: Mahmoud Shehada, CEO, Allegoria Capital, and Mike Hoff, CEO of Mike Hoff Consulting

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CASE STUDY

FIGHTING TO THE FRONT Jason Smith, the Middle East’s newly appointed VP, Sony Mobile Communications AB, discusses how the brand has had to adapt to survive a volatile market

lowing global demand for smartphones has made a largerthan-expected dent in Sony Corp’s annual profit growth, according to a statement by analyst firm Bloomberg. Operating income was $2.6 billion at the end of March 2016, 9.4 per cent below its January outlook, but it is still a fourfold increase from the last fiscal period. Global sales for the year were about $76 billion, 2.5 per cent above forecast, and net income in the period was $1.4 billion, 3.6 per cent more than projected. The electronics giant has gone through a considerable transformation since 2012, when new President and CEO Kazuo Hirai, came on board and put in place a lot of reforms that resulted in the Group’s profits jumping to its best levels since around 2008, according to Jason Smith, VP, Sony Mobile Communications AB, Middle East. He added that one of the key reforms included restructuring the company completely from a reporting line point of view, as some headquarters were based in London and some were in Sweden. Now everything has been aligned to Tokyo, which enables faster decision making.

“Sony Mobile Communications, one of the company’s subsidiaries, was quite profitable around 2013, and then the world of smartphones changed quite dramatically and the market started to slow down. Many Chinese manufacturers started to become more aggressive, and the whole business became quite volatile almost overnight. So we had to look at how we, as a premium smart phone manufacturer, were going to survive in that environment,” he said. Sony held an investors day in Tokyo at the beginning of July this year, revealing what the company has planned over the coming quarters. In a statement, Sony Mobile has announced that they’re adopting a new regional strategy that diverts its focus from the US and India to East Asia, Europe, and the Middle East, as growth in smartphone revenue for India, China, Brazil, and Indonesia over the coming year is anticipated to be 0.3 per cent, compared to the 8.1 per cent growth estimated in 2015. The decision to shift their focus to the East Asian markets namely Japan, the Middle East and Europe is an attempt to address the mounting

operating loss that the smartphone division is facing in those respective countries. In these regions, Sony is will focus on its premium smartphone range, as the entry-level and mid-tier markets become more competitive. This shift was first mentioned in March this year at the launch of Sony Mobile’s new Xperia range. Hirokazu Ishizuka, Corporate Vice-President of Global Sales Development at Sony Mobile Communications and Middle East and Africa Vice-President said that exiting the market has never been an option and will never happen. He added that the company has an opportunity in the Middle East as Sony is a respected brand in the region, especially in the UAE. Smith said that Sony Mobile looked at each market individually across the region to see which had the biggest mid-range and premium segments; it researched its consumers to see who was buying those phones in each market and what they wanted. The company showed double digit growth Egypt, South Africa and Iran last year. He added that the company was not able to rely on massive volume to achieve profitability and the company,

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The Xperia X’s predictive hybrid auto focus captures fast-moving objects perfectly.

as a whole, had to focus and build on the segments in which it was strong to make the business sustainable. Because of the transformational measures put in place by the new CEO, Sony Mobile as a subsidiary was not profitable in 2015, but it had forecast not to be. It has forecasted to be profitable in 2016. “We’re positive that we still have potential to grow. We focus on the top end of the market, which seems to be more stable in some respects, and it is where we are positioning ourselves and where we intend to fight in the coming years. So we are positive about what we can achieve despite the turbulent global market,” said Smith. Smith said it was difficult to comment on the impact that the current economic climate had on smaller businesses and retail partners the effect was felt differently by each market. He added that the strategy of identifying where people buy their handsets is important. “Even if the situation on the ground changes, the demand is still there even

if it fluctuates, so we are continuously looking to see where these consumers are going. If a retail outlet is there one day but gone the next, we need to know where else they will go, so we monitor consumer shopping trends quite closely,” he said.

EFFECTIVE USE OF RESOURCES He said that Sony Mobile has the advantage of a number of different divisions within the company at its disposal when developing new products, and was able to capitalise on the research and development that goes into all those different divisions by putting a lot of that technology into its smart phones, helping the brand compete in the market. For example, many of the current smart phones have tri-luminous displays, which use television technology and imaging sensors. For example, the Xperia X uses technology that was originally developed for mirrorless cameras, called predictive hybrid auto focus.

“All that means is it tracks the pattern of something that is moving and it predicts where it will be in a few seconds’ time; so when you actually take the photograph the shutter speed is really fast and it captures quick-moving objects perfectly. That is one way we differentiate ourselves,” said Smith. Smith added that market research has shown that consumers aren’t replacing their phones as often, so Sony Mobile has invested in a company called Qnova which makes battery analysis algorithm technology and makes the capacity of the battery last longer, up to two years at its original capacity. This extended battery life will encourage consumers to continue buying Sony’s phones, because one of the biggest complaints for consumers is that the battery capacity deteriorates over time, and battery life generally doesn’t last more than a day. Sony Mobile can promote a battery life of up to two days, depending on how the phone is used. Smith said because the smart phone market is volatile and slowing a bit, it is ripe for disruption–it is a good time for something new to come and Sony Mobile is looking at how to allow consumers to communicate in a better way, without having to stare at their screens continuously, while keeping the brand relevant in the smartphone market. At the Mobile World congress in February this year, Sony Mobile announced a number of products that included wearable technology that is compatible with the company’s Xperia range. They include earpieces, wideangle camera lenses, projectors and a robotic assistant. Sony Mobile has also taken advantage of the strength of the group’s gaming division by making the Xperia range compatible with the PlayStation4 console, allowing for a mobile gaming experience.

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FACETIME

TASK SPOTTING Fiona Swaffield, Managing Director, MYPA and Warsha Joshi, Managing Director, Platinum VA, discuss the growing trend of business owners outsourcing certain tasks to focus on increasing revenue

he UAE ranks comfortably ahead of other major economies in the MENA region on a worldwide human capital index, according to the World Economic Forum's (WEF) Human Capital Report 2016. Ranked at number 69, the UAE has a working-age population of 7.85 million out of a total 9.27 million. The median age of the UAE's population is 33 years and the GDP per capita is $67,674 in purchasing power parity terms, among the highest in the world, though the unemployment rate is 4.2 per cent. Given the present state of the economy, many firms are forced to make a number of difficult job cuts in order to keep costs low and in line with their profit margins, leading to increased workloads and shortage in manpower. However, with the advent of new technology and internet, virtual executive assistants (VEAs) have paved a new trend in the way

businesses operate, according to Warsha Joshi, Managing Director, virtual assistant provider, Platinum VA. She added that VEAs for the middle management in Dubai’s corporate, especially the consulting world, are fast becoming a preferred choice for companies as the promise of talent coupled with cost saving options provide an opportunity for both employers and professionals. A virtual assistant is not the same as a traditional personal assistant (PA). They are not physically present within the office or workspace and tend to work from a fully equipped office. Also they differ from a part-time employee as the client does not have to organise their work visa, health insurance or their work space. With a part-time employee, even if they’re working from home, there are usually some administrative charges or costs for their service, said Fiona Swaffield, Managing Director of virtual PA outsourcing agency, MYPA. “Currently in Dubai, we are hearing about redundancies, and companies

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We are hearing about redundancies, and companies are looking at more flexible and cost-effective solutions when it comes to support.” – Fiona Swaffield, Managing Director, MYPA are looking at more flexible and costeffective solutions when it comes to support,” said Swaffield. She added that it is not just SMEs, although when a business owner sets up an SME or a start-up they are always looking at cost-effective solutions because they do not always have a huge financial reserve or cash flow that allows them to take on a full-time member of staff. Every time they hire stuff, the return on return on investment (ROI) has to be considered, and they have to ask if the associated costs are a good use of company funds. “Traditionally, virtual assistants have fulfilled the roles of transcription services, data entry, database management and event planning to help small business owners and entrepreneurs drive day-to-day operations. In contrast, the core focus of a business offering virtual assistants is corporate level administrative assistance with tasks ranging from calendar management and travel management to recording expenses, helping with presentations, reports, and all the solutions designed keeping the busy consultant or corporate executive in mind,” said Joshi. Outsourcing to a virtual assistant is not a one-size-fits-all solution and a business owner needs to consider their needs and their stress points, because for a business owner it can be very hard to let go and delegate. If they are going to hire a virtual assistant, they need to be clear about what they want

them to do, added Swaffield, because sometimes it might not be a PA they need. It might be an accountant, or book keeper, or an IT specialist. “The other thing a business owner needs to consider is scheduling the time to have a oneto-one briefing with the PA, at the beginning of the assignment, to communicate what the company and service is about, the company’s brand and its tone, and how they like things written. Each company is different, so before hiring a PA, the owner needs to think about how they want the company to be perceived,” she said. She added that by ensuring clear communication from the beginning, the client does not waste precious time nit picking over details that could have been addressed immediately, and the working relationship can be smooth from the beginning. Also, establishing clear communication is crucial since the proximity of the virtual assistant can be a drawback. “As they are not physically in the office, it is important to communicate how you like to work. Some people like to work on Skype, some prefer emails. If a client does a lot of travel they prefer instant messaging systems such as WhatsApp, so they can send a message when they think of something and can get a response as soon as possible. Some clients need the control of having a daily status report, while others are happy to receive a report monthly with their invoice,” she said.

BENEFITS OF OUTSOURCING Save costs on overheads

Outsourcing to a virtual assistant saves companies the costs of making a new hire, not only in terms of salary, visa and health insurance, but also in the time required to advertise the position and conduct the interviews and reference checks.

Gain skilled talent

Outsourcing tasks to the right people means that they can be completed effectively, by someone with the ability and experience. Why fight with a spreadsheet for over an hour, when a virtual assistant with the right skills can do it in 15 minutes?

Dependability

When a full-time employee goes on leave, the company has to accommodate the downtime while they are away. By outsourcing, there is always someone available to take care of the tasks at hand, as one virtual PA can simply hand over the account to another for the duration of their absence.

Increase productivity and drive growth

The purpose of outsourcing certain tasks is to allow a business owner to focus on the activities that will allow them to generate revenue. Delivering invoices or collecting cheques can easily take up half a day when taking into account factors that would not usually be obvious, such navigating traffic and looking for parking. That time is better spent on business development or client meetings.

A wide range of services is offered

Often, when bringing on a new member of staff, a company may have to allocate time to train them on new programmes, apps or industry trends. Outsourcing to a virtual talent pool increases the odds that there will be someone available who is already familiar with these programmes.

Value for money

Outsourcing an hourly rate means that business owners, particularly of SMEs and start-ups, are better able to budget, as they only pay for the hours they use. Source: Fiona Swaffield, Managing Director of virtual PA outsourcing agency, MYPA

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FRANCHISE

RUNNING ROUND THE REGION

Cengiz Kiray, General Manager, ASICS Middle East LCC, discusses the opening the brand’s subsidiary in Dubai and expanding across the GCC

Cengiz Kiray

SICS Middle East LLC, a subsidiary that will operate a franchise model for ASICS brand stores alongside retail partners, opened a fullyowned sales and marketing organisation for the brand in Dubai in May 2016. This subsidiary is the first in the Middle East. ASICS Middle East LLC replaced the current distributor, Falaknaz Sports Group LLC, which has represented the ASICS brand in the Gulf region since 2003. Wholesale business will be undertaken by ASICS Middle East LLC,

in partnership with retail associates in the GCC region, in order to build the brand’s presence, according to Cengiz Kiray, General Manager, ASICS Middle East LCC. He added that sell-in will start immediately, with a focus on products for the Spring/Summer 2017 season, and the first deliveries will arrive in December 2016. ASICS stores will be opened via a franchise model in time for Autumn/ Winter 2017 and the company is currently in the process of discussing potential franchise partnerships, though the criteria for these partnerships are yet to be determined for the Middle East region, with marketing plans to be shared in the near future. Ultimately ASICS aims to imitate the success of the brand in Europe and the US, where ASICS is a leading brand in both the running market as well as various core performance sports. “The challenge in the Middle East is ensuring that we build the brand in a manner which meets the needs of GCC consumers, and not simply replicating our approach in Europe and the US.

We will look to our colleagues in Europe, the Middle East and Africa (EMEA) for best practise and support, whilst ensuring our approach is tailored to serve the different markets needs across the region,” he added. ASICS Middle East LLC will be offered strong management and service support by ASICS EMEA headquarters across key business areas including sales, marketing, finance, strategy and operations. This support will include marketing toolkits, best practise sharing on processes across specialisms and agency networks, amongst others. He added that as with ASICS’s other subsidiaries across EMEA, specialists from the region’s headquarters in Amsterdam will visit Dubai frequently to support the team. This will include providing advice during sell-in to retailers, attending internal and external strategic meetings, and sharing projects from Europe and the US. In addition to this, the company will work with local partners including advertising agencies, media agencies, HR administration support networks and legal practises.

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The challenge in the Middle East is ensuring that we build the brand in a manner which meets the needs of GCC consumers…not simply replicating our approach in Europe and the US.” – Cengiz Kiray, General Manager, ASICS Middle East LCC

In terms of building the team, ASICS EMEA HR specialists based in Amsterdam will be on-hand to assist the new ASICS Middle East LLC in staff training and recruitment. “We are currently hiring via a specialist recruitment company in Dubai and are focusing on candidates with broad sports experience in the region. The ASICS EMEA HR specialists from headquarters will support the team in Dubai by providing input on candidates and assisting in the interview process,” said Kiray.

BRAND SUCCESS Kiray said the ASICS brand is built on technological leadership across products as well as customer service. Products feature the latest technologies developed by the ASICS Institute of Sports Science in Kobe, Japan; while in-store services include Foot ID, which offers customers 3D foot measurements to ensure staff can advise them on the right model of running shoe for their specific needs. He added these services will ensure customers receive the latest products coupled with personal customer service at every touch point. ASICS has been received very positively following a number of initial meetings with retail partners who have

welcomed the brand’s decision to open a subsidiary, which will invest in marketing and sales and grow the brand, service and retail relationships across the region, said Kiray. In the next five years, ASICS aims to reach the number one or two market position across its different categories. The company plans to ensure that its brands, ASICS (performance), ASICS Tiger (sports lifestyle), and Onitsuka Tiger (fashion lifestyle), are positioned in a premium way. The ASICS team is confident the new organisational structure will enhance the growth of the brand in the Middle East region. The brand is currently in the top three sports footwear brands in Europe, and is a market leader in both performance running and in tennis. ASICS Tiger has been especially wellreceived by sports-fashion consumers, as reflected in its triple-digit growth. “Initially the focus will be on increasing market share in key performance categories such as running, training and tennis, mimicking the position of the brand across Europe or the US. Ultimately we hope to provide customers across the Middle East with a wide selection of premium ASICS products, matched with premium ASICS service, with attention to regional differences,” he said.

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START-UP

SOURCING SUPPLIERS

Farah Hindiyeh and Ghida Idriss, co-founders of events platform, SILLISS discuss creating a new concept to streamline the industry Should the supplier not deliver to the client, then the blame falls on SYLLISS too, and this is why each supplier/ partner has been selected through an evaluation system.

Money and paperwork

Farah Hindiyeh and Ghida Idriss

ILLISS, an online events sourcing platform, was established in June 2014, and went live in April this year. Co-founders Farah Hindiyeh and Ghida Idriss, each have an events management background. They wanted a brand that reflected the Arab community but also connected to the expat and foreign community, along with any future expansion outside of the MENA region. “We wanted to create a brand that was fun, quirky, represented who we are and most importantly a name that would be easy for anyone to pronounce. In the end we opted to hire a graphic design agency that understood our requirements and personality and helped us in the creation of the brand. The funny thing about the online world is that not only do you need to find the perfect brand; you need to find its matching domain name. This isn’t easy,” said Idriss. The platform is designed to streamline the process of finding the right events suppliers within a set budget. Once users log in they can input their needs, or create a basket of their required items by browsing

a list of categories. Once their inquiry is received, the SILLISS team will get back to them with up to three quotes from different suppliers. From there they can make a booking via the portal or request more options until they find the right company that suits them best, said Hindiyeh. It was during their time working in event management that Hindiyeh and Idriss noticed clients would ask for assistance in searching for suppliers for their additional requirements; and supplying them with a selection of quotes from suppliers in their network would help them. “We wanted a smooth process where end users can trust the suppliers on our portal meet a certain criteria of standards. We also direct potential new clients to suppliers and event management companies who are searching for their exact services or products. It’s a win-win solution for both parties,” she added. Once a user has made their selection, they are put in contact with the supplier, and both parties can liaise directly.

Hindiyeh and Idriss bootstrapped the business and injected capital of around $80,000. They also took their time to get an accurate feel of the market’s response, since this is a new model. Licencing the business was complex. As an online business the co-founders hold an offshore licence, however they are finalising the move to an onshore company, as they will soon offer clients the option to hire SILLISS team members to manage booked suppliers on-site, as well as event management should they need further assistance. As a virtual company the team works remotely but is in the process of selecting an office, added Hindiyeh. “To say it has been challenging is an understatement. I think many entrepreneurs will agree that starting your own business is far from glamorous, and I feel people on the outside have this misconception of it all. The reality is you are faced with constant obstacles and there are no breaks, and you have to stay focused and continue to inspire your team. It is also ironically one of the best things you can experience,” she said.

Looking forward

The SILLISS team aims to expand into the region, having tested the waters in Qatar, Saudi Arabia and Egypt, and eventually abroad, though no firm timelines have been set. “Times are changing fast and the future holds many great things in innovation and technology. We would like to be part of it,” said Hindiyeh.

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A track record of long-term growth. An award-winning reputation.

Since launching in 2006, Gulf Capital has become one of the region’s largest and most successful alternative investment ﬁrms. Today, we celebrate 10 years of delivering long-term returns and industry leading results. Our award winning performance has made us the ﬁrm of choice for regional and global investors. Gulf Capital – Celebrating 10 years of achievements and proven results. www.gulfcapital.com

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SHUTTERSTOCK.COM

TECH FOCUS

TRANSFORMING THE CUSTOMER EXPERIENCE

As the number of fintech start-ups increase, Mamoun Alamouri, Regional Director for Customer Engagement Solutions Sales, Avaya MEA, discusses how leaders in the financial services industry need to improve their service offerings

hile the financial services industry (FSI) is pouring millions of dollars into providing digital customer service platforms to supplement the contact centre, there is still an inherent missing link in these digital strategies. Typically, the platforms remain disparate, with no brokering mechanism to create a seamless experience between each of them. The FSI is a tooth-and-nail battlefield for customer retention. The landscape is expanding, too, with small and adaptable online-only players presenting new

challenges for the more established bricks-and-mortar banks, lenders, insurers and so on. We are witnessing a growing community of fin-tech startups who have adopted the approach of innovation which begins from the outside-in with a strong technology core and the result of effortless customer experience. This clearly signifies that the digital revolution has arrived in the financial services sector leading bankers to revisit and evaluate their current traditional business model. As such most, if not all, FSI leaders are exploring new avenues to bolster

their customer experience capabilities in today’s global marketplace. It was one thing to compete with a downtown rival two decades ago, and it’s another to take on a global powerhouse extending its conglomerate into your market. As a result, the contact centre alone is not enough. Instead it has been augmented with web portals and call back services. In more recent years, social media and mobile applications have also thrived. This has been triggered by an ‘anytime, anywhere’ digital culture driven by consumers

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The landscape is expanding with small and adaptable online-only players presenting new challenges for the more established banks, lenders, insurers and so on.” – Mamoun Alamouri, Regional Director for Customer Engagement Solutions Sales, Avaya MEA

and businesses that demand financial management on their own terms. But simply providing an app and social media account is neither sufficient, nor innovative–customers expect it at the very least. The organisations leading their respective FSI fields are those taking the next step and using analytics and automation to create value from the data generated through customer interactions across all media. Put simply, they are tying various platforms together so they can not only respond and resolve issues more quickly, but take a proactive approach through predictive data sets that are constantly working in the background. Say for example a bank or insurer’s customer wants to query a certain change on their account, but doesn’t have the time to call the bank/insurer during business hours. While the company’s mobile app provides some information on the charge, a more personal experience is required so that the customer is assured their account security is upheld. The app should therefore provide the capacity to request an after-hours call back. Once a representative makes contact, they need to have enough information to respond to the enquiry quickly, without a lengthy identification or clarification process. Similarly, the provider should know whether the customer has previously posted about the issue on social media.

Achieving this with yesterday’s technologies is extremely difficult; the FSI industry cannot rely on old processes to achieve new results as outdated contact centre and communications platforms weren’t built for modern interactions. While the data surrounding these interactions may be stored, it cannot be qualified to inform intelligent decision-making. This is why digital transformation becomes a critical differentiator. The FSI needs to go beyond the omni-channel. While there are benefits in deploying digital services to provide customers with options, these need to be brokered to increase value for consumers through using analytics and automation. Today, it is no longer about meeting a customer at his need but also including the essential element of personalisation into the process. Keeping this in mind, two leading banks in UAE and KSA have adopted dynamic interactive voice response (IVR) personalisation where they leverage realtime analytics to determine the profile of a customer and cater to his or her patterns of behaviour which are revealed over time. For example a customer who frequently checks their balance will receive their available balance immediately after authentication when a call is placed to the bank. Taking the customer experience one step further, a leading bank in UAE also caters to its customers using natural-

language call steering combined with artificial intelligence. In this case, when a customer calls the bank and expresses interest in a new home loan plan to the bank virtual assistance, they are steered directly to the right agents with relevant information who go on to sign up the customer and close the sale. These techniques not only improve customer experience dramatically but also increase self-service IVR containment rate which translates into millions in savings. Another leading bank in the UAE leverages analytics to automate and optimise processes such as compliance and risk issues, identifying quality issues, sales verification and obtaining market intelligence. These analytics, when combined with other interaction analytics from social media and online listening, provide for the emergence of real actionable insights. A UAE bank was able to identify the correction of an agent-training process by connecting with customers on social media after a call with the call centre to evaluate whether information was aptly and well communicated. It is these advantages which allow for players in the FSI to go beyond their KPIs to get to the root cause of a matter and address the actual issue at hand. This takes the bank from average to product and service improvement at a superior level, giving it the edge it requires.

WWW.FINANCEMIDDLEEAST.NET

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BEHIND THE SCENES

Behind the scenes Ahmad Khamis and Iyad Abu Hweij, Co-Founders, BLOOVO

IYAD ABU HWEIJ â&#x20AC;&#x201C; CO-FOUNDER

What is the best way for a business owner to implement strong leadership? Leadership is very importantâ&#x20AC;&#x201C;good skills can make companies and bad skills can break companies. Leadership is not only about creating companies, it is also about creating a second line of management of a qualified team that can take your business to the next level, by being capable of creating subsidiaries or even their own companies. This is what I gained form my bosses in the past. They were very skilled at leading a team, and I acquired my skills from them. Everyone should take the time to build their leadership skills. My previous bosses very highly qualified people and I always looked up to them and I learned a lot from them by interacting with them on a daily basis. I learned their approach to problems and how they resolved their problems. They gave us the chance to find our own solutions to problems. We were held responsible for the success of the company.

Sarah Jones

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ADEEL SIDDIQI – BUSINESS DEVELOPMENT MANAGER

What is the difference between doing business development in a start-up versus a larger corporate? First, you realise quickly that you need to do a lot of things on your own, and that includes taking on different responsibilities that you may not have had to in the past. If you’re one of the first five or 10 people in, it is mostly unchartered territory–you have no concrete idea of how many calls need to made or exactly what the targets are. Secondly, it is a lot more rewarding. The sense of achievement is a lot stronger when you go out and win a client. Start-ups also offer more chances to learn because they offer more interaction with the people who are actually running the business.

AHMAD KHAMIS – CO-FOUNDER AND CEO

How important is hiring the right person? Every single business founder has to have a vision of where they want to be after five, 10 years. Once that objective is clear, they need to work backwards in executing their strategy. One of the biggest challenges facing the owner of a startup is finding the right calibre of person to help them drive the business. A lot of small businesses fail because they do not hire the right team. The team is then unable to perform. The owners are distracted from the bigger picture of growing the business. Hiring the right people is crucial in making sure that that your business heads down the right track. Don’t rush into hiring because if you make the wrong decision, it will be a mess and the probability of your company failing goes up drastically. So take your time and try to convince whoever you want to recruit of the bigger picture, to make sure everyone is on the same page.

CHAMI HUE AVENO – EXECUTIVE ASSISTANT TO THE FOUNDERS

What are some of the administrative challenges of working for a start-up? The major challenge is starting everything from scratch, even something as simple as a filing system. You have to have your own system and make your own records of everything from the licensing paperwork for the business to personnel records, and you have to make sure they are really organised. Maintaining it is really the easy part. But it has its advantages because it is organised the way you want it, instead of having to follow other systems that you have to learn and maintain.

ROBERT SALAMA – SOFTWARE DEVELOPMENT MANAGER

What are the pros and cons of working in a start-up? I’ve learned that that the business side and technical side go hand-inhand. You can have the best application in the market, but if you don’t have users, it counts for nothing. The development in start-ups is more agile and making changes has to be done almost daily, so you have to prioritise your time and multi-task. In a start-up, you have your space and for software engineers that is really important. It gives you a chance to innovate. We have a lot to do and it is a really good opportunity to learn how to do it in the right way, first time, with a small team. The challenge of working in a start-up is you always have to be aware of the scalability of your application. You also have to work with tight deadlines when implementing changes.

TO SEE MORE FROM OUR DAY ‘BEHIND THE SCENES’ WITH THE BLOOVO TEAM, VISIT WWW.CPIFINANCIAL.NET FOR OUR VIDEO INTERVIEW WITH THE TEAM. WE ARE ON INSTAGRAM, @FINANCE_MIDDLE_EAST

WWW.FINANCEMIDDLEEAST.NET

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ADVERTORIAL

Formerly Pilot Sound Phase 1 & 2, exited in 2007, now McConachie Community, Edmonton, Alberta, Canada

THE WALTON GROUP Creating Shari’ah-compliant wealth from the ground up

n times of global economic uncertainty, asset security becomes of greater concern, with traditional instruments becoming of much greater relevance to investors. Over recent years, retail investors have begun to move towards alternative, real asset classes, following portfolio allocations that pension funds and family offices started to make years before. The Walton Group of Companies (Walton) reveals the beauty of its predevelopment land offerings.

WHERE OPPORTUNITY LIES Vast amounts of capital have poured into Canada, the United Kingdom and the United States real estate markets over the past few years

from international investors. ‘Trophy assets’ in these markets have become the go to option for investors seeking capital growth and income. Much less understood is the longer term, absolute return strategy of ‘path of growth’ land investment which has traditionally been the reserve of institutions, developers, pension funds, family offices and tycoons. The US has provided significant opportunities within all sectors of real estate since the housing crash in 2007/8. During this time, based on market fundamentals focusing on population, employment and housing growth, as well as a disciplined research methodology, Walton has acquired over 78,000 acres of pre-

development lands in high growth corridors within the United States. Walton believes the US will continue to experience long-term growth in the foreseeable future, which is expected to be driven by projected increases in population, household formation and job creation, as well as by changing technologies. In turn, the anticipated growth is expected to generate significant new demand for a multitude of real estate uses, including new residential units to satisfy the housing needs of the increasing population and new commercial and industrial buildings to accommodate new industries and the changing needs of existing industries.

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PARTNERING WITH AN EXPERT When it comes to real assets, The Walton Group of Companies, one of the leading land-based real estate investment and development groups in North America, has been extremely successful despite the credit crisis and global economic weakness in recent times. With over 35 years of experience in the research, acquisition, administration, planning and development of strategically located land in major North American growth corridors, Walton has over 103,000 acres of land under administration, and currently administers over $4.2 billion assets. Walton has more than 96,000 clients globally and provides mediumto long-term land-based investment opportunities to qualified investors. The thoroughness of research is one of the significant variables affecting the success of a pre-development opportunity. Walton spends a minimum of two years on extensive due diligence of each property. The team begins by assessing the fundamental factors that contribute to a city’s growth, with key questions surrounding its economic health, population growth forecasts, employment opportunities, housing stock and affordability, from state level to city level, and then onto target areas and specific land parcels.

PROVEN TRACK RECORD Investing in raw land is not without risk, but through a methodical and disciplined research process, Walton believes that many of the risks can be mitigated. The primary risk is that of time and Walton‘s average holding period has been around eight and a half years. Although the duration of projects are medium- to long-term in nature, the opportunity for attractive returns appeals to many investors. Walton boasts a long, audited track record with 81 exited pre-development projects, and an average IRR of 12.47

per cent p.a. ranging from 4.75 per cent p.a. to 28.51 per cent p.a., mostly in Canada but increasingly in the US.

INSTITUTIONAL EXIT PARTNERS As well as a proven track record, the Walton Group of Companies, the Canada Pension Plan Investment Board (CPPIB) and WAM Development Group (WAM) announced a joint venture to develop a 250-acre industrial site in northwest Edmonton, Alberta in 2014. The development project will transform the current land into approximately four million square feet of distribution and logistics warehouse–Henday Industrial Park, where it is located within the Winterburn Industrial Park, a full service industrial development comprised of approximately 2,500 acres. In 2015, the joint venture secured the first Tenant–Brock White Canada Company that will be leasing 112,130 square feet in the Henday Industrial Park for its main warehouse and distribution facility. CPPIB, Walton and WAM will share in the ownership structure of the development projects; with CPPIB initially committing approximately $200 million for phase one representing an 85 per cent interest in the joint venture.

classes due to its stability and benefit to community. Overall, choosing a firm with the right credentials is vital. Walton is excited about the relationships that we have built with all business partners, clients and local stakeholders, and we are also proud of the Shari’ah compliant endorsement, as it is another testament to the strength of Walton’s business approach.

To learn more about Walton, please visit Walton.com

Yellowhead Industrial Phase 2, 2005 (Year of Pre-development Land Offering)

SHARI’AH-COMPLIANT INVESTMENT PRODUCT Recently, the Singapore Financial Shari’ah Advisory and Consultancy has endorsed the Walton Group of companies’ pre-development land investment product as Shari’ah compliant in 11 regions in the US, where Walton-administered lands are located. The Shari’ah endorsement was given on the basis that Walton’s pre-development land investment is compliant with the Islamic principles for a socially responsible and ethical investment product, Walton’s products are structured in a fair and transparent manner, and land is a preferred asset to own compared to other asset

Yellowhead Industrial Phase 2, 2011 (Year of Exit)

Henday Industrial, Current (Formerly Yellowhead Industrial Phase 2)

WWW.FINANCEMIDDLEEAST.NET

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LAST WORD

All about people

Khaled Fathi, Managing Director of HR consultancy, Inspativity, talks about juggling time, working with people, and racing Elon Musk to Mars WHAT DOES YOUR COMPANY DO AND WHAT IS YOUR ROLE?

Inspativity, short for inspiring creativity, is an HR consultancy based in Dubai, focused on providing cost-efficient value solutions to organisations to identify and address performance gaps for organisations’ most important asset, people. My business card says Managing Director; however the role ranges from establishing relationships with prospective clients, to overseeing the delivery of current projects and analysing the challenges presented to us by our clients; and working with the team to figure out a cost-efficient approach to addressing these. The role also entails setting the strategic outlook for the company in terms of growth, expanding the team and scouting technologies and methodologies that could assist us in delivering better service to our clients.

HOW DO YOU EFFECTIVELY MANAGE YOUR TIME? My first rule is never to arrange backto-back meetings or tasks, rather allow at least half an hour in between which allows me to respond to changes that happen during the day and gives breathing space to reorganise the tasks for the day as it progresses. An outlook calendar is an excellent way to keep track of what needs to be done, but the good old notebook and pencil are the best time management tools ever

invented. Also, I am a morning person, so I make sure I finish as much as I can before the rest of the world wakes up.

WHAT IS THE BEST CAREER ADVICE YOU WERE EVER GIVEN? In 1999 I just graduated from high school and I wasn’t sure about where life would take me. I went to the dentist and met a trainee there and told her about my ambitions and how clueless I was on where to start. She got out her notepad that looked like a tooth, and wrote on it “Two roads diverged into a wood, and I took the road less travelled by, and that had made all the difference”. I still have it to this day, and it guides me whenever I am thinking about my next career step.

WHAT PLANS DO YOU HAVE FOR YOUR BUSINESS OVER THE NEXT 12 MONTHS? We are looking to expand our services to Europe, Asia and beyond. We are also planning to double our team in size by early 2017, provide more HR-focused services and solutions, but most importantly, we want to contribute to society, by getting more involved in probono activities for charity organisations in the UAE. We are also looking into conducting regional-based research on successful organisations and how integrating people from various backgrounds, cultures and nationalities drives exceptional results.

Khaled Fathi

What are you currently reading? Work Rules! by Google’s CHRO, Laszlo Bock.

Who is your favourite author? No one in particular; fresh ideas and perspectives come from various authors and topics.

Who is your mentor? I do not have one single mentor, but I learn something new from everyone I meet. Everyone has valuable advice to give, I just need to ask.

What is the first movie you remember watching? The NeverEnding Story (1984) by Wolfgang Petersen.

Where is one place you’d like to visit that you have not as yet? I would like to race Elon Musk and get to Mars first. He has his spaceship, I am yet to build mine.

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Issued by HSBC Bank Middle East Limited U.A.E Branch, P.O.Box 66, Dubai, U.A.E, regulated by the Central Bank of the U.A.E for the purposes of this promotion and lead regulated by the Dubai Financial Services Authority. CRN 160471. ÂŠ Copyright HSBC Bank Middle East Limited 2016 ALL RIGHTS RESERVED. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of HSBC Bank Middle East Limited.

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