THE FUTURE’S PLASTIC: ABU DHABI’S PLANS TO BE A POLYMER POWERHOUSE Vol. 15 Issue 4 August 2010
SPORTING CHANCE From F1 to Olympic dreams, how Gulf states are positioning themselves as world players
COMING CLEAN Anti-corruption drive continues
TRADING UP
Bahrain’s new exchange aims to be No 1
CAT OUT THE BAG Jaguar boss outlines Middle East plans
SINGAPORE SWING
Secrets behind a stunning success story
Bahrain..............BD 1.0 Kuwait............... KD 1.0 Oman................ RO 1.0 Qatar.................. QR 10 Saudi Arabia.......SR 10 UAE.................. DHS 10
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THE DETAILS Vol. 15
Issue 4 August 2010
THE COMMENT 12 Taking Stock The bullish case for Asian shares.
14 Local Knowledge It’s fantasy football as costs spiral out of control.
16 Money matters Have Gulf shares finally hit the bottom?
18 Emerging markets What’s driving stunning growth in Singapore?
20&22 Guest columns
40 Risk evasion
24 Letters
Islamic solutions for export credit insurance.
THE BRIEFING
41 The Terminal
26 Regional Briefing
Airports are becoming destinations in themselves.
32 Taking off Pharma company first for Dubai World Central.
34 Muslim effect Shari’ah compliant hotels show robust growth.
36 Sent packing? Meat trade with Australia under threat.
38 Big cat diary Jaguar’s boss on his plans for the Middle east.
From the World Cup to the Olympic Games, Gulf states have their hearts set on hosting the world’s biggest sporting events. An impossible dream? We check out the region’s track record as it puts itself on the sporting map.
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Euro troubles and the need for qualified CFAS.
Game on
42 Into Africa Continent offers opportunities for CSR projects.
43 Branching out India’s IDIB sets up shop in Dubai.
44 Legal threats Al Tamimi & Company on doing business in Iraq.
45 Dangerous waters How overfishing is putting crews at risk.
THE BUSINESS 46 Plastic fantastic Oil nations look to polymers for diversification.
58 Trading up Bahrain exchange plans regional domination.
62 Corruption campaign Taking action to clean-up business.
THE PEOPLE 66 Market trader Souq.com’s Ronaldo Mouchawar on kick-starting a digital revolution.
70 Executive Moves August 2010 gulfbusiness.com
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THE DETAILS Editor-in-Chief Obaid Humaid Al Tayer Group Editor and Managing Partner Ian Fairservice Group Senior Editor Gina Johnson Group Editor-Business Alistair Crighton Editorial Coordinator-Business Concessa D’Souza Art Director Cris Domdom Senior Designer B Raveendran
72 74
General Manager Production and Circulation S Sasidharan Production Manager C Sudhakar General Manager Group Sales Anthony Milne Senior Advertisement Manager Abraham Koshy Advertisement Manager Ajay Mathews
75 71 Competition
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THE LIFESTYLE 72 Travel
78 Calendar
73 Art
79 Hotels Where to stay in the GCC.
74 Leisure
80 Stats & Facts
75 Technology
Biggest deals in the Middle East.
THE ESSENTIALS
82 Out to Lunch
76 Books
On Demand Group’s George Dabaghi on the future of television.
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Special Contributors and International Correspondents Berlin Wolfram Bielenstein Hong Kong Michael McKay Johannesburg Bill Cain London Robert Bailey/Karen Thomas New Delhi Rahul Bedi Shanghai Gordon Hu Washington Kevin J Kelley Hospitality Guy Standish-Wilkinson
August 2010
Head Office: PO Box 2331, Dubai, UAE Tel: +971 4 282 4060, Fax: +971 4 282 4436, E-mail: motivate@motivate.ae Dubai Media City: Office 508, 5th Floor, Building 8, Dubai, UAE, Tel: +971 4 390 3550, Fax: +971 4 390 4845 Abu Dhabi: PO Box 43072, UAE, Tel: +971 2 677 2005, Fax: +971 2 677 0124, E-mail: motivate-adh@motivate.ae London: Acre House, 11/15 William Road, London NW1 3ER, UK, E-mail: motivateuk@motivate.ae For editorial syndication details, please call + 971 4 2824060 or e-mail gb@motivate.ae
22,774 copies June 2009 Printed by Emirates Printing Press, Dubai
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THE COMMENT LEADERS [ BUSINESS ETHICS ]
Coming clean on bad business Transparency and corruption aren’t the same thing, but more of the first will mean less of the other.
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usiness leaders, governments and the media – this magazine included – have been banging the drum about the need for far more transparency and openness in the Gulf for years now. That banging will continue for many more years yet, but for the first time it does seem that there is a concerted plan across the Gulf to get their houses in order. As the increasing number of executives taking up residence in prisons across the Gulf testify to, the boom years brought an epidemic of bribery, backhanders, signing fees and a host of other financial malfeasance that’s only now coming to light. These cases also show, however, that transparency and corruption are far from the same thing, and that bad business practices don’t always fall out of the realm of legality. First, transparency. Despite some high profile arrests, details surrounding alleged crimes remain murky in a number of cases. Also, companies – especially banks – are not yet coming clean on their financial health. Given the weakness of the equity markets, this is understandable, but not excusable. For a real recovery in economic activity, we need to at least know when we’ve hit bottom. Looking at balance sheets in the first half results that came out last month, this is far from the case, with many acting as exercises in opacity and obfuscation. Market sentiment will remain weak for some time yet.
Corruption, too, remains a grey area. Business practices once deemed acceptable when everyone made a lot of money, have now been criminalised for some, but not for others. While it’s good that the rule of law is being applied, it needs to be seen to be applied fairly and, excuse the pun, across the board. Then there are the ones that slip through the cracks. Across the region, well-connected businessmen who have, in effect, defrauded their own shareholders, or worse, have been punished with little more than a slap on the wrist. In one notorious case, they’ve even been handed back control of their company despite missing scheduled repayments to those same shareholders they defrauded. The message being sent out is not good, and will do absolutely nothing to reassure the foreign investors who left these shores in droves during the crisis that the equity markets are primed for a recovery. As our Emerging Markets column has shown over the past few months, there are dozens of emerging and frontier markets out there with better governance, better returns and less risk. For those GCC states who see themselves as potential global finance hubs on a par with London, Frankfurt and Singapore, there’s still a long way to go to achieve that dream. Better regulation would be a start, but there needs to be far better, and fairer, enforcement of those regulations if trust is to be regained. ■
[ TELECOMS ]
Brought into the fold The TRA is targeting security risks posed by the humble BlackBerry.
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lackBerry users – probably most readers of this magazine – will remember the hoopla a year ago when Etisalat, the UAE’s biggest telephone operator, attempted to install some unofficial software on users’ devices. The talk at the time was of attempts to gain access to messages and emails that go through the Canada-based servers belonging
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to BlackBerry owners, Research-In-Motion (RIM), and are currently out of reach of Etisalat or the UAE’s Telecom Regulatory Authority (TRA). Now, the TRA once again has BlackBerry in its sights. A wave of media releases in recent weeks have drawn attention to security issues relating to the phone, and the TRA has now
THE COMMENT LEADERS
come out and said it is actively looking at ways to close the threat posed by the devices. “The introduction of BlackBerry in the UAE in 2006 pre-dates the 2007 introduction of the UAE’s Safety, Emergency and National Security framework, which regulates BlackBerry applications in the UAE,” reads the latest TRA release. “Currently, BlackBerry operates beyond the jurisdiction of national legislation, since it is the only device operating in the UAE that immediately exports its data off-shore and is managed by a foreign, commercial organisation. “As a result of how BlackBerry data is managed and stored, in their current form, certain BlackBerry applications allow people to misuse the service, causing serious social, judicial and national security repercussions. “Like many other countries, we have been working for a long time to resolve these critical issues, with the objective of finding a
solution that safeguards our consumers and operates within the boundaries of UAE law.” The TRA does not say anything concrete about how it will bring BlackBerry into the fold, but it is clearly looking at a major shake up in how BlackBerry operates in the UAE. It is not up to this magazine to question the laws of the land regarding security issues, and the UAE obviously takes the security threat posed by BlackBerrys very seriously indeed. What is open to question is exactly how the TRA intends to get its way. RIM is a global company, and how amenable it is to governments demanding changes to the way it operates remains to be seen. Whatever route the TRA takes to bring BlackBerry into its fold, it’s going to require a major shake-up of BlackBerry’s underlying technology, and users should be prepared for big changes to how they use their devices, especially the hugely popular (and resolutely free of charge) BlackBerry Messenger Service. ■
[ SPORTS ]
Game on for the Gulf Why do we spend so much on attracting sporting events to the desert?
T
he Gulf’s love affair with major sporting events can seem a little counter-intuitive. They’re expensive to host, offer limited returns, frequently politically sensitive, and, if organised badly, can backfire on the PR front. Surely it’s much better to focus on established sports that can be done well here (motorsport, horse racing and, to an extent, golf) rather than spending a fortune being little more than a bit player on the wider stage (cricket, tennis) Also, in terms of name recognition and promotion, well, Emirates has done an excellent job in international sponsorship, and the largesse of footballmad Emiratis have done much to endear this part of the world with British football fans (Portsmouth excepted). So, why would Qatar bid for the World Cup? Why is Dubai eying the Olympics? Given that both are summer events, and the Gulf region isn’t exactly known for its temperate climate, do they have the same chance of winning as our aforementioned Portsmouth does of being European champions? The answers are: “prestige”, “recognition”, and “not necessarily”. Given the current
economic climate, and the continuing economic fallout from Greece’s ruinous foray into the Olympic arena, developed countries are going to be a lot less enthusiastic to throw their hats in the ring. Gulf states have the money and desire to host these events, and, as Qatar showed with the Asian games in 2006, and Abu Dhabi with its world-beating Formula One track which opened last year, they do have the ability to put on a world-class spectacle. And, it’s worth repeating, they have the money. Just for once, though, it would be nice to see the region’s propensity for one-upmanship sidelined. Given the tiny size of most of the GCC states, it could start looking ridiculous if we all start competing against each other for the same event. In fact, and with the South Korea/Japan World Cup in mind, the chances of securing a win would be greatly strengthened by a united bid from all the GCC states. Sadly, Olympic rules forbid this: it’s cities that bid, not countries. But would Qatar’s chances of winning the World Cup in 2022 be boosted by a joint bid? Forget a single currency, a single tournament on that scale would be a true symbol of unity and a major achievement to boot. ■ August 2010 gulfbusiness.com
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THE COMMENT LEADERS [ INDUSTRY ]
The future’s plastic It might not be glamorous, but plastics offer Abu Dhabi a winning formula.
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wo years ago, the Emaar subsidiary that is building King Abdullah Economic City (KAEC) in Saudi Arabia hit on the idea of Plastics Valley. Perhaps not the most attractive of names, this economic cluster was supposed to be at the forefront of polymer production; a global centre of excellence. Fast forward two years and one financial crisis, and the project is on hold as more competitive sectors take priority. KAEC may well have been following blueprints from an earlier, Dubai-based project, that has also fallen by the wayside. Despite being major oil producers and, in Saudi’s case, an industrial force to be reckoned with, Gulf states remained net exporters of crude, the raw material for plastic production, seemingly unable to come up with a way to break into large-scale polymer production themselves. That should be about to change. Abu Dhabi Polymers Park (again, not the most original of names) is all set to be the world’s largest plastics park. Launched by the Abu Dhabi
Basic Industries Corporation, it fits in neatly with the emirate’s ambitious 2030 strategy, offering a plausible route for much-needed diversification, and, within five years, hopes to attract $2 billion in investment to the region. Plastics isn’t the most glamorous of industries, but it’s a critical and, above all, realistic one for the region. Highgrowth finance centres, sexy private equity funds, media centres and runaway housing developments may have been all the rage for the past decade, but it’s interesting to note that the real success stories – oil and gas excepted – have been the far more mundane sectors. Logistics, ports, metallurgy, chemicals and aviation have been the region’s real stars, steadily plodding along with only the latter showing a hint of glamour. Adding polymers to that mix will give Abu Dhabi and the wider UAE another strong pillar as it seeks to diversify away from its mainstay of exporting oil. As industries go, it might be plastic, but it’s far from fake. ■
[ INVESTMENT ]
Whatever happened to PE? Once touted as the Gulf’s next big thing, private equity deals are on the wane.
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he greed-ransacked hey-day of 2008 and its accompanying rally-cry of private equity announcements seems ever more distant. And despite bullish public pronouncements from industry figures, deals have remained rare. Last year saw only 19 transactions in the Gulf, totalling $561 million, compared to 55 transactions worth $2.7 billion in 2008. The average deal size decreased to US$30 million last year, compared to $67 million in 2007, according to the Gulf Venture Capital Association annual report. Globally, the picture remains bleak. Private equity fundraising had had its worst year since 2004, with only $246 billion raised; 62 per cent down on the record
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$646 billion raised in 2007, according to research firm, Preqin. From this, it would be easy to surmise that the Middle East’s fledging private equity market was throttled before it had a chance to grow up. However, the good news is that MENA firms raised US$1.25 billion in the first quarter of 2010, an 18 percent increase over all of 2009, as regional economies recovered and investor appetite returned. And, as bankruptcy rates continue to rise dramatically in the US and Europe and firms continue to stem IPOs in the hope that prices will recover, the private equity cards have been unequivocally handed to the emerging countries – whether the Gulf steps up to the plate remains to be seen. ■
THE COMMENT ASIA
THE BULLISH CASE FOR ASIAN EQUITIES As one of the youngest, and yet largest, markets globally, Asia represents tremendous growth potential for the investing crusader. MATEIN KHALID
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sia is the youngest, most populous, highest growth, least-leveraged and most diverse region in the global financial village. Asian shares were range bound in 2010, and several major macro catalysts will determine the return potential in Asian stock markets in the next 12 months. Chinese GDP growth has softened more than one point to 10.3 per cent in the second quarter. Industrial production, car sales, the Shanghai equity index, power consumption, bank loan growth and money supply have all swooned since April. The Middle Kingdom, Asia’s financial superpower, now trades at a modest 14 times earnings for 20 per cent EPS growth. The Politburo in Beijing and the Peoples Bank of China has averted a protectionist backlash from the US Congress with its cautious rise in the yuan and ignited the colossal purchasing power of China’s 1.3 billion consumers. The currency mini revaluation also means China no longer needs to aggressively raise interest rates to combat property speculation, reducing the risk of a hard landing. Asian equity valuations are also cheap because the undeniable soft patch in the US and fiscal austerity in Europe clearly limits Asian export growth. The lukewarm performance of mega IPO’s in Asia, such as China’s Agriculture Bank or Russia’s Rusal in Hong Kong, has also muted the “animal spirits” of Asian equities investors. With $160 billion in Asian equity issuance estimated in the second half of this year, Asian stock markets face an undeniable liquidity drain. Asia (excluding Japan) trades at a modest valuation of 13 times forward earnings. This valuation incorporates the undeniable global macro risk in China, Europe and the US. However, I expect a late summer rally in Asia for five reasons. One, the Agricultural Bank of China, the world’s biggest IPO, is now public. Two, Intel reported record profits and growth, suggesting that Silicon Valley product cycles remain robust, a huge positive for Taiwan, Singapore and South Korea’s high-tech blue chips. Three, the GermanFrench axis in the EU has designed a “shock and awe”
bailout package that has reduced sovereign risk in Spain or Greece. Four, the US economic supertanker will slow but not sink into double dip recession. Five, China’s equity risk premium is now 10 per cent, excessive by any criteria, including its own historical ranges in the past decade. I believe specific themes can make money for Gulf investors in the Asian stock exchanges. One theme is technology, which has the world’s strongest corporate balance sheets, growth prospects and product innovation cycles. Taiwan technology shares trade at 10 times earnings but could well deliver 40-60 per cent EPS growth next year. Chinese equities are another theme that could well bottom at 2300-2400 in Shanghai, which is a compelling reason to buy Chinese megabanks ICBC, Bank of China and China Construction Bank as the central bank eases monetary policy and GDP growth accelerates at 10-11 per cent. The third theme is South Korea, which is often ignored by Gulf investors as an investment destination, even though its companies manage some of the biggest, most complex projects in the GCC. GDP growth is stellar at eight per cent, public spending as a proportion of GDP is a fraction of European, US or Japanese levels, and the won is grossly undervalued. South Korea’s Kospi is a buy below 1700 for a 2200 target in the next year. The index fund that offers the broadest exposure to Korean shares is the MSCI South Korean I-shares (symbol EWY). The recent geopolitical tensions in North Korea have created cheap valuations in Seoul at 11 times earnings. The fourth theme is Asia’s economic superstar, Singapore. It has global trade, shipping, aviation and it has also created one of the world’s most high-tech manufacturing economies. Furthermore, the Singapore dollar is a floating currency, a proxy for the Chinese yuan, Southeast Asia’s most credible hard money. Singapore’s index fund (symbol EWS) is a long-term winner, albeit only if it corrects to the 10-11 range. Matein Khalid is a global macro trader, economics professor, fund manager in a royal investment office and writer in finance and geopolitics.
Several major macro catalysts will determine the return potential in Asian stock markets in the next 12 months.
August 2010 gulfbusiness.com
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THE COMMENT INSIDE TRACK
THE MADNESS OF FOOTBALL FINANCE While I am a fan of football, and the English Premier League in particular, the amounts being flaunted to buy players and teams is sheer madness. MISHAL KANOO
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ast year, Real Madrid Football Club spent over Euro 250 million on players, there was talk of Liverpool FC being up for sale for around GBP 800 million and numerous other tales of money madness, all despite the financial crisis that gripped the world being at its peak. For some strange reason, this small, but ever so significant issue seemed to be oblivious from the minds of the people not only selling football players and teams, but from those who bought them or where even contemplating buying them. While I would love to own a football club, the cost of running and maintaining such a folly is an incredibly expensive exercise. I am sure most people have heard of the Hicks/Gillette debacle involving Liverpool Football Club after they took over and managed to drive it into the ground, not only financially but in football terms as well. Then there is the much publicised Glazer family’s mishap at Manchester United. They have managed to turn the world’s most profitable football club, operationally speaking, into a huge debt-ridden company owing over GBP 700 million. And, of course, who can forget our own home-grown, and very sad, story of Sulaiman Al-Fahim and Portsmouth FC? According to press reports, he invested GBP 60 million into the team only to see it evaporate as the club went into receivership within six months. That was despite three other owners entering the fray with even more money in a bid to keep it afloat. The one story I would like to highlight as a positive of sorts is that of Robert Louis-Dreyfus who owned Olympique de Marseille. He took this team from struggling has-beens to French champions and European contenders. The one caveat in this story is that it cost him about Euro 1 billion of his own money. The difference between his story and that of the ones mentioned above is that he loved the game and, more importantly, he loved the club. Thus for him, it was never a business deal but a matter of funding his passion for the club. Louis-Dreyfus was a self-made billionaire, thus
pumping his cash into his passion was a natural thing for him to do. If the owner has the money and is passionate about his club, then more power to him. But that is just it – you need to have passion for the club. Now I see money from our part of the world is being used to buy stakes in football clubs, and in my opinion the people with this money are doing so because they believe financial gains can be made. Qatar has bought into Spanish football club Malaga FC for Euros 36 million, while it was also reported that DIC was looking to buy a stake in Liverpool FC for GBP 200 million. The problem is that football clubs never make money for their owners. If there is no passion connected with the club and the game of football, then these teams are just cost-laden businesses that will only make a profit if the axiom of richer than thou, or dumber than thou, applies. In other words, unless the present owner find someone who is richer than him and is willing to buy the club from him at a profit, he will never make money. If one were to take a serious look at the costs associated with buying a football team, one’s hair would quickly turn white. From the players’ costs, both purchase and salaries, to the manager, and not just him, but all the staff that assist him, to the stadium, whether it is owned or leased and whether it needs upgrading, to the marketing costs that need to go into making the club a success. But before all of this, you also have to consider whether the club’s players are good enough to win championships and cups and so lure sponsors and season ticket holders, let alone precious TV time. I love football and I love the excitement it brings, but would I ever consider putting my hard-earned money into such recklessness? The simple answer is no. Gone are the days when we had true football players; instead today we have entertainers who make more money for kicking a ball than doctors who save lives. Can this madness continue? Stay tuned for more idiocy to come. Mishal Kanoo is deputy chairman of the Kanoo Group. gb@motivate.ae
If one were to take a serious look at the costs associated with buying a football team, one’s hair would quickly turn white.
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THE COMMENT STOCK MARKETS
IS IT TIME FOR A STOCK MARKET RECOVERY? The Dubai and Abu Dhabi stock markets are close to hitting bottom, and the time to buy stocks again is very close. PETER COOPER
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n late July I gave a presentation to the largest gathering of independent investors in the world in Vancouver, Canada, hosted by Agora Financial, publishers of many financial newsletters. Sometimes you need to go a long way away to gain a sense of perspective. But in essence my presentation focused on the argument that the Dubai and Abu Dhabi stock markets have to be close to an important bottom, and that the time to buy stocks again must be very close. The very fact that so many people reading this column will roll their eyes in amazement and say that things really are bad is one very good reason to be optimistic. For when the consensus is so low that is often the stock market bottom. We have the classic signs of a market bottom: low price-to-earning ratios; negative press; big announcements which make no difference to stock prices; 11 brokers closed this year; a top broker just resigned; volume is down 90 per cent; everybody is talking about how much they lost on Dubai property; capital spending is lower; interest rates are falling; hotel room rates are down; foreign fund managers have given up; there was a capital flight after a property crash; Swiss bankers are very negative. The Dubai Financial Market was the world’s best performing stock market in 2005, and the worst in 2006. There was then a 50 per cent retracement by 2008 before the renewed plunge that year. It looks like a classic double top to me. Surely from these levels a serious recovery is likely. The only question is how long it takes for this breakout. However, the UAE market moves on a seven-year cycle. The previous low was in 1999 post the Asian financial crisis. So on that reckoning we are only two years away from another peak. That might sound incredible, but just look at how steep the upturn was in 2005. There is no reason why history should not repeat itself as it so often does. From my own experience in 2005, this phase can be readily spotted. I bought a mutual fund in the first half
of the year and sold it at a 60 per cent profit six months later. That was too early, but it did take out the sweet spot in the middle. Others made 100 per cent. I think this might well happen again as the result of a sudden and dramatic lift in the oil price when the US gets into its second or third stimulus package and sets off dollar inflation. Or it could be down to some sort of comprehensive peace initiative in the region – rather less likely I admit. You also have to consider the excellent business fundamentals of Dubai. The commercial economics that delivered faster growth than China from 2003 to 2008 have not died, despite the real estate crash. Airport passengers and cargo grew last year by 9.2 per cent and 5.6 per cent respectively against the global downturn. The Jebel Ali super port was one of the least impacted by the recession. Multinational companies and banks continue to choose Dubai as their preferred location in the region. Tourism numbers are holding up even if hotel rates are down sharply. A lot of very wealthy people live in the UAE, both as citizens and as tax exiles, and they continue to spend money. Officials say the population of Dubai is still growing as people move back from neighbouring emirates thanks to lower rental prices. The Dubai debt problem is also well known and being addressed. Indeed, the final sign-off on the $23.5 billion Dubai World debt rescheduling next month could be the trigger for a rally in Dubai stocks, and doubtless Abu Dhabi will move in tandem. Have we not already seen green shoots in the desert? On June 27, the second Dubai airport opened; there was an $11.5 billion aircraft order for Airbus; and two schemes to restart 45 to 60 per cent built construction projects. Now the local stock market is ignoring these catalysts, but if past precedent is any guide they will work. History has a habit of repeating itself, and stock markets do eventually rise again after having fallen. Peter Cooper is the editor of arabianmoney.net
The commercial economics that delivered faster growth than China from 2003 to 2008 have not died, despite the real estate crash.
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THE COMMENT EMERGING MARKETS
GROWTH IN SINGAPORE CONTINUES TO DAZZLE Singapore may be a small island in the South China Sea, but its economy is one of the fastest growing in the world, even outpacing the giant population of China. MICHAEL PREISS
S
ingapore is booming. Economic growth in the first quarter of this year rose a breathtaking 45 per cent. The economy is on track to be the world’s fastest growing this year after record first half growth numbers. On an annualised basis, gross domestic product will rise between 13 per cent and 15 per cent in 2010 making it the highest in the world. Even if the economy shrinks in the second half, full year growth could still be Singapore’s highest ever and surpass even that of China and India. Both the currency market and the stock market seem to like the ‘Singapore Story’ and they are voting with their money. While the US stock market is flat year-to-date, and Japan is down seven per cent, China is down 26 per cent and Hong Kong six per cent while Singapore is up four per cent. According to Standard Chartered Bank research, the Singapore dollar is expected to surge by 12 per cent against the US dollar by midyear 2011, while the Euro and British pound are expected to stay weak and under the burden of very heavy and record high public deficits for years to come. Singapore is now the fourth wealthiest country in the world in terms of GDP (PPP) per capita, and the 20th wealthiest in terms of GDP (nominal) per capita. Despite Singapore’s small size, it has the world’s ninth largest foreign reserves and hardly any sovereign debt. Sovereign wealth fund, Temasek is said to manage a global portfolio of $186 billion including a stake of about 18 per cent in Standard Chartered Bank. The Economist Intelligence Unit, in its ‘Quality-Of-Life Index’, ranks Singapore as having the best quality of life in Asia and 11th overall in the world. Singapore sees hundreds of thousands of foreign expatriates working in multi-national corporations or running their own companies. Immigration policy is one the reasons for Singapore’s economic success. In Hong Kong it takes seven years to become a permanent resident, in Singapore you can become permanent resident after two years. Yet in Dubai you can have $100 million in the bank and still have no permanent residence. When I lived in Hong Kong during the 1990’s we used to joke that in Singapore you are “Singa-bored”. Nightclubs used to close at 2am and it was more of a sleepy town. Now
in 2010, Singapore is more happening than many other Asian cities put together. Hong Kong in its relevant importance is declining and Singapore is rising. Hong Kong suffers from some of the world’s worst pollution, but Singapore has clean air and much more space. In the late 90s, then Prime Minister Kuan Yew Lee apparently commissioned consulting firm McKinsey to find out what is wrong with Singapore and why Singapore lagged behind Hong Kong. The city was already an important passenger hub, the airport with the IATA code of SIN was one of the busiest cargo airports in the world, handling over 1.66 million tonnes of cargo, but business people somehow thought the place was dull. McKinsey apparently instructed Prime Minister Lee that Singapore was missing the SIN in SIN. The Singapore government dutifully took note and deregulated nightlife, freedom of the press, and even signed a degree to allow casinos, or what they locally call “IR: Integrated Resorts”. In true Singapore spirit, however, the locals have to pay S$100 per visit while foreigners get in for free. According to the Singapore Tourism Board, tourist arrivals are likely to increase to 12.5 million a year, with year-on-year growth of 30 per cent. Tourism receipts are estimated to surge 50 per cent to reach $18.5 billion. In the old days, Switzerland was considered to be the private banking capital of the world. Now in 2010 and beyond, increasingly it is the Island State of Singapore that is becoming the centre for wealth management globally. UBS and even Credit Suisse today employ more staff in wealth management in Singapore than they do in Switzerland. UK taxing bonuses and high income tax means more and more investment bankers, private equity firms and hedge funds are moving from London to Singapore. With regards to portfolios and fixed deposits, however, it is surprising how few investors in the Middle East have savings in Singapore Dollars. Exposure to Singapore equities is also comparatively low in Arabian and Middle Eastern client portfolios, but with Singapore having the highest growth in the world, more and more investors seem to take notice. Michael Preiss is an investment advisor and finance professor and can be reached at: Michael@michaelpreiss.net
Even if the economy shrinks in the second half, full year growth could still be Singapore’s highest ever and surpass China.
18 gulfbusiness.com August 2010
THE COMMENT FOREIGN EXCHANGE
EUROPE’S SINGLE CURRENCY COMES UNDER SCRUTINY Despite its unparalleled success since its launch, the Euro is facing unprecedented skepticism in the world press, but does this spell the end for the single currency? ARJUN MITTAL
M
uch has been said and written about the Euro in the global media over the last few months, as the sovereign debt crisis exploded onto our TV screens and newspapers. Some renowned market commentators have suggested that the crisis unfolding in Greece, which is threatening to spread to other Eurozone members, could spell the end for the single currency. Is this just scare mongering or is the Euro in real danger? At face value, the Euro has been an unqualified success since its launch in 1999. It was adopted by member countries very smoothly, and after initial hiccups, quickly became a recognised alternative to the dollar. The European Central Bank has also largely done a great job in managing inflation across the diverse Eurozone, and refraining from being as populist as the US Federal Bank. Finance students eager to learn the ways of the world are taught that currencies should, in theory, be driven by four key criteria: relative inflation rates, relative productivity rates, trade surplus/deficits and capital flows. The Eurozone scores well on three out of four, with only productivity across the continent a noticeable laggard compared with the US. Furthermore, it is not just Europe that is struggling with high levels of debt. The USA for example is scheduled to go over $14 trillion in government debt this year, a truly staggering number, no matter how you mask it in debt-GDP or debt-asset terms. Japan has debt-toGDP at almost 180 per cent, with an ageing population and no immigration surely leading that nation down a potential default path. The Eurozone has also put in place some impressive defensive mechanisms. The recent Euro 750 billion ($921.2 bn) package to support nations with debt problems is a large war-chest that more than meets the financing needs of Greece, Spain, Ireland and Portugal for the next few years. The European Central Bank has also stepped in to buy small amounts of sovereign bonds
in the last few weeks. And, more recently, many European countries have announced large cuts in government expenditure to rein in budget deficits. So why are some still asking whether the Euro will survive? The issue it seems to me is essentially one of solvency. Financial markets currently just don’t believe that Greece, along with some of its southern brethren like Portugal and Spain, can pay back what they owe. Faced with such circumstances, these countries would normally seek funds from the IMF to cover their obligations, and in return would agree to restructure their economies to make the labour markets more efficient and adopt more prudent fiscal policies to ensure the government started to run budget surpluses. Some form of debt restructuring would also be a possibility. In addition, and most importantly, the respective currencies would also be devalued substantially, to help get the economy moving forward again. Now, here we have the problem. Greece, for example, has to raise taxes and cut back government expenditure, which will undoubtedly slow economic growth, but it does not have the ability to offset this with currency devaluation. So how is Greece going to kick-start economic growth, which is eventually the best way to pay back debt? Well, as long as it stays in the Eurozone, its best options are far-reaching labour and capital market reforms to make the economy competitive. But this takes time and is politically difficult at a time when your people have to cut back on their lifestyle. Can the government stay the course? I hope so, but it would take a brave man to bet they can. In the meantime, the Eurozone and the Euro will face considerable pressure. A weaker Euro, probably close to $1.10 by the end of the year, seems likely. For those with long-term investment horizons, buying shares of German exporters, who will benefit from the weaker Euro, should deliver good investment returns. ■ Arjun Mittal, is managing director of Bank Sarasin-Alpen (ME).
The crisis unfolding in Greece, which is threatening to spread to other Eurozone members, could spell the end for single currency.
20 gulfbusiness.com August 2010
THE COMMENT ACCOUNTING
DANGERS OF SAILING IN UNCHARTERED WATERS Accountants aren’t all cut from the same cloth, and in these troubled times a qualified CFA could be a lifesaver. BINOD SHANKAR
I
get my fair share of weird phone a calls and e-mails. A case in point was one received week ago. A friend called me breathlessly and said she was in a hurry but could I please, please help her. I have always been hopeless at saying ‘‘No” so I mumbled “Yes.” The next thing I know she demanded that I help raise her understanding of portfolio management. To Expert level. In less than a week. Now as requests go, this ranks right along with hoping Dubai property prices pick up quickly and England winning the World Cup; you dearly wish it would happen but you know the chances are very slim indeed. This made me ponder about the need for ramping up financial literacy in this neck of the woods, something other than the usual medley of BBA and MBA courses that are, frankly, very underwhelming. I mean, just how do you label a BBA as majoring in Accounting and Finance when only five of the 60 courses in that BBA cover accounting! So my thoughts immediately turned to something relevant and respected in finance and zeroed in on the CFA (Chartered Financial Analyst) qualification. The CFA curriculum does stand out from the crowd of finance courses. To begin with, it is well structured. It first covers all the tools and techniques such as Economics, Quantitative Methods and Financial Analysis (Level 1). Students then move on from the theoretical to applying these concepts in real life situations, such as Project Evaluation, Mergers & Acquisitions, Valuations of companies and Bond valuations (Level 2). Finally, Level 3 covers Portfolio Management. It’s also fairly up to date – the curriculum is re-jigged annually – and students these days get to learn about exciting, fast growing areas such as Behavioral Finance, Private Equity and Hedge Funds. Increasingly, the qualification is fast becoming a game changer for anyone looking for a career in investment banking, asset management or research. There are numerous MBA and other finance courses, but there is only one CFA globally, and hence it is a passport to get your foot in the door when aiming a lucrative career in these areas.
Zubin Mithaiwalla works in private banking at Emirates NBD. He says the qualification will help him better advise his high net worth clients on how to manage their wealth. There’s also the credibility factor; Zubin says clients tend to trust their money with someone who has a credible qualification such as a CFA. Unlike the MBA degree, it is a self study course, which is good in that you can work and study. The flip side is that you have to be tremendously motivated and disciplined to crack topics that could be as wide as they are deep. The CFA qualification is not a new kid on the block. Far from it. It has been around since 1961 and today there are 90,000 + charter holders globally. It used to be a largely North American qualification, but it has gone global over the last 10 years, so much so that these days 40 per cent of new candidates are from outside the US and Canada. The UAE has the largest number of candidates in the Middle East. Several large companies strongly encourage and support CFA education and at the Abu Dhabi Investment Authority, Mubadala, Standard Chartered Bank and Deloitte, it’s the major criterion for promotion. There are approx 500 CFA charterholders in the UAE and nearly 2,000 students, and these numbers are seeing exponential growth. The exams are notoriously difficult (hideous was the word used by an acquaintance!); the overall global pass rate is an abysmal 19 per cent. Which means that 81 per cent of those who register for Level 1 don’t make it past Level 3. The CFA Institute recommends 300 hours of study for each level, which is easier said than done, especially if you have to balance work, studies and family life. The upshot is that hardly 6,000 individuals get the charter every year. That said, I am yet to come across an unemployed CFA charterholder. So perhaps the demand-supply dynamics work brilliantly in favour of anyone who has the letters CFA after their name! Binod Shankar is a Chartered Accountant and CFA Charterholder. Binod runs Genesis Institute, a financial training company. He can be reached on bshankar@ genesisreview.com. URL: www.genesisreview.com
The next thing I know she demanded that I help raise her understanding of portfolio management.
22 gulfbusiness.com August 2010
Malaysia Contemporary Art Tourism Festival
July 1 – September 30, 2010
"Contemporary art is a passion that unites discerning travellers and tourists alike from all corners of the world..." Dato' Sri Dr. Ng Yen Yen Minister of Tourism, Malaysia Malaysia’s contemporary art scene is a reecƟon of the country itself. It is varied, mulƟcultural and resists stringent deniƟon. Just like Malaysia, a naƟon whose historic sites, towers of modernity and glimpses of nature promise surprises and memories on every visit. For the rst Ɵme ever, Malaysia’s Ministry of Tourism hosts the 1Malaysia Contemporary Art Tourism FesƟval. The fesƟval encompasses exhibiƟons, seminars, compeƟƟons and other fringe events at various locaƟons around the country. Come see how Malaysia’s renowned contemporary arƟsts have expertly woven her history, naƟonal idenƟty, landscapes and people into painƟngs, sculptures, photographs, installaƟons and more. Whether it is abstract works that channel arƟsƟc soul, mixed media art that shows oī arƟsƟc ingenuity or guraƟve works that display arƟst prowess, Malaysia has it all. Fatamorgana #2 The State of Confusion > 2006, oil on canvas, 244 x 150cm
The 1Malaysia Contemporary Art Tourism FesƟval is not to be missed. Visit Malaysia and take part in history.
Events in Kuala Lumpur, Melaka, Johor and Penang | JUL 1 – SEPT 30, 2010 | MCAT ExhibiƟon 2010
Art Seminar
Galeria Sri Perdana 3 July – 30 September 2010 www.arkib.gov.my
Starhill Gallery July – September 2010 www.starhillgallery.com
Malaysia Tourism Centre (MaTic) 15 July – 30 September 2010 www.mtc.gov.my
Galeri Seni Rakyat (Folk Art Gallery) 1 August – 30 September 2010 www.perzim.gov.my
Balai Seni Lukis Negara (NaƟonal Art Gallery) July – September 2010 www.artgallery.gov.my
i-City Contemporary Art ExhibiƟon 11 August – 9 September 2010
Galeri Petronas (Petronas Gallery) July – September 2010 www.galeripetronas.com.my
IMCAS 2010 Danga City Mall July – September 2010 www.dangacitymall.com
MINISTRY OF TOURISM MALAYSIA Menara Dato' Onn, Putra World Trade Centre, 45 Jalan Tun Ismail, 50480 Kuala Lumpur Tel: 603-2693 7111 www.motour.gov.my www.tourismmalaysia.gov.my
The Inuence of Mahathirism on Contemporary Art MaTic, Jalan Ampang 20 – 24 September 2010
The Aliya & Farouk Khan CollecƟon Art Seminar Galeri Seni Rakyat, Melaka 1 – 3 August 2010
IMCAS 2010 –The Aliya & Farouk Khan CollecƟon Art Seminar Danga City Mall, Johor 27 September – 1 October 2010
Malaysia Contemporary Art Tourism Seminar Penang 18 – 19 August 2010
A Curatorial Discourse on the Making of an Artwork 12 Gallery, Kuala Lumpur 8 – 10 July 2010
MALAYSIA’S FIRST EVER ART AUCTION Wisma Bentley Music PJU 7/2, MuƟara Damansara Petaling Jaya 1-8 August 2010
F
THE COMMENT letters@gulfbusiness.com LETTER OF THE MONTH EXCLUSIVE: FRANK KHOIE ON PRISON, PROPERTY AND POWER SUPPLIES Vol. 15 Issue 3
July 2010
THE HIGH COST OF OIL After the Deepwater Horizon disaster, we ask: how prepared is the Gulf for the unthinkable?
THE BIG PRIZE
Iraq, uncertainty, and a $600 billion payday
CLEAN ENERGY
Stability key to the UAE’s nuclear success story
ETFs AHOY
New ways to invest in Saudi Arabian equities
GB Regional_JULY 2010indd.indd 1
Bahrain..............BD 1.0 Kuwait............... KD 1.0 Oman................ RO 1.0 Qatar.................. QR 10 Saudi Arabia.......SR 10 UAE.................. DHS 10
WWW GULFBUSINESS COM
6/28/10 8:39:33 AM
Slick story
What a gripping cover story you had this month. I have been transfixed by the ever-escalating disaster occurring in the Gulf of Mexico, and living in the UAE I have asked myself the same question many times – what if we were next? I must admit you had me reeled in with your Orson Welles’ian introduction and I took a deep sigh of relief when you revealed the truth. But I was truly duped. I went on to read the whole piece and found your balanced analysis offered a tremendous insight into the work that goes on behind the shrouded doors of government. In fact, I was quite surprised how candid the authorities were with you; in detailing the work and research they are undertaking. In light of the American ecological disaster, I feel that every nation that undertakes any oil exploration has a responsibility to research and report their threat levels and contingency plans – the public has a right to know! While it is clear the UAE is prepared for a disaster, it is very disappointing that the disaster could be out of our hands. I find it very disturbing that our neighbouring countries can permit their infrastructure to decay to the point of failure – we need some kind of unilateral enforcement.
Byron Pentecost, Abu Dhabi
Not so sweet dreams I am shocked to hear that Mars Inc is opening a factory in a country that has the highest rate of diabetes in the world. While I appreciate this confectionary firm is taking steps towards creating healthier products out of the sweetness of its heart, surely the solution is not to encourage mass flogging of these products at all? Instead, the government should deter a mass choc avalanche and instead encourage grassroots health and nutrition education. ‘Sugar-free’ products in themselves can be harmful, due to the amount of additives required to make them taste real. And in the case of ‘flavanoid’-rich bars which “help� diabetes 2 sufferers, isn’t this rather like Stockholm syndrome, where the sufferer falls in love with the persecutor. The firm also argues that as
an ‘occasional’ pleasure, sweets consumption is not harmful. If chocolate was an occasional treat, then I wouldn’t be penning this missive as Mars would not be in business. Elasticated waistbands and Frankenstien chocolate bars are not the answer. Wendy Peters, Dubai
Lehman Sisters ‘Lombarded’ Michael Gordon’s Gender Studies (Gulf Business, July 2010) left me rather contemplative of Arnaud Leclercq’s knowledge of the demographic profile of the Middle East. Quoting Leclercq, Head of Swiss private banking behemoth, Lombard Odier, in his presentation to the Dubai Chamber of Commerce on the role of women to preserve and transmit wealth, it was clear that Middle Eastern women had a penchant for the longer-term view
when it comes to investments. That is why I am a bit confused about Lombard’s business model of “two buckets of investment.� While the short-term bucket is linked to bonds and forex, it is the longer-term bucket targeted at the oil and gas sector and the elderly that makes me wonder how knowledgeable this custodian of investments is about this region with the highest youth population in the world. The ascription of Arab Women to the ‘Lehman Sisters’ – with a longerterm view – should, methinks, be geared towards the security of their kids and the future, and hence more focused towards healthcare for the young as well as renewable energy that Arnaud and his peers at Lombard seem to be shying away from. Dr. Nnamdi O. Madichie University of Sharjah
Gulf Business welcomes your comments about the magazine or issues regarding business in the region. Please write to: The Editor, Gulf Business, Motivate Publishing, PO Box 2331, Dubai, UAE; Fax to + 971 4 2827593; or email to: letters@gulfbusiness.com. We reserve the right to edit correspondence.
24 gulfbusiness.com August 2010
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THE BRIEFING THE REGION
30
[ GCC ]
Seconds to make sense of… broadband
Airshow takes big orders
Farid Faraidooni
Chief Commercial Officer, du
How does broadband in UAE compare to EU and US? We offer our customers the best value for money broadband across the region and we are now more favourable than some developed markets such as Ireland and Canada. Unlike some operators across the world, that provide a cap on customer usage, our offering is simple, with no usage limitation. Why has the Middle East lagged globally in connectivity? It wouldn’t be right to say the Middle East has been laggards in terms of internet connectivity. However, the benefit of full competition across all major telecommunications services is a significant and welcomed milestone for the UAE. Households right across the nation will soon start to enjoy improved quality fixed line services, including broadband at higher speeds, innovative TV and entertainment packages. What is the penetration rate of broadband in the UAE? A recent report published by the TRA listed the broadband penetration in the country at 13.2 per cent. Using the ITU assumption of 2.5 users per subscription, the penetration is around 33.1 per cent. In the UAE, the take-up of broadband is now twice as high as it was only two years ago. How far off is a 4G network in the UAE? We are actually well advanced with our rollout of the latest commercial Mobile Technology (HSDPA) and our mobile network is already providing connectivity at 21mpbs. At this stage there is no committed date for the launch of 4G network technology by the operators in the UAE. When will business tariffs and caps be revised? Faster, more cost effective and unlimited business grade broadband for business customers will be available from August 2010. Existing business customers will be upgraded by up to eight times the speed of their current connection, for no extra charge. Existing customers will be able to migrate to ‘uncapped’ services.
OFF THE CHARTS Forecasts for UAE internet and broadband users 4000 Number of internet users (000)
3000 2000
Number of broadband internet subscribers (000)
1000 0
2009
2010
2011
2012
26 gulfbusiness.com August 2010
2013
Source: Business Monitor International
Emirates has placed an order with Boeing for an additional 30 777-300ER aircraft, worth approximately $9.1 billion, while attending the UK’s Farnborough airshow. This order adds to the fleet of 71 777-300ERs previously ordered, of which 53 aircraft are currently in service. Emirates has 86 777s in service – three 200s, six 200ERs, 10 200LRs, 12 300s, 53 300ERs and two freighters. In addition to the Farnborough deal, Emirates has orders for 79 Airbus A380s, 70 Airbus A350s and seven Boeing freighters, totalling 204 wide-body aircraft worth more than $67 billion (Dhs246 billion). During the Farnborough airshow, Emirates also selected Engine Alliance GP7200 engines to power its A380 order.
F The deal includes a $4.8 billion Fleet Management Agreement for the engine maintenance, overhaul and repair. While at Farnborough, Air Arabia selected the CFM565B engine to power its 44 Airbus A320 aircraft order announced in 2007. This deal, valued at more than $620 million, will more than double the airlines CFM56-5B powered A320 fleet. Air Arabia also signed a multi-year Rate per Flight Hour (RPFH) service agreement for its CFM56-5B fleet. Also present at Farnborough was Etihad Airways, celebrating the handover of its first Airbus A330-200. Etihad is the launch customer of the A330-200 freighter aircraft, which will enter the cargo business, Etihad Crystal Cargo, in September. It will allow the airline’s cargo business to increase frequencies and build its presence in the high-growth European and Asian freight markets, in particular China. Etihad will take delivery of its second A330-200 freighter aircraft in September, which will enter service by October, taking the airline’s fleet number to 56 aircraft. Farnborough also welcomed Qatar Airways, which placed orders for two additional Boeing 777-200 Long Range aircraft as part of its continued growth plans. The order is valued at $501 million. The Doha-based airline also revised the delivery schedule of its Boeing 787 Dreamliners, with the first to arrive from the fourth quarter of 2011 to help meet early aircraft requirements. Qatar Airways now has firm orders for 10 Boeing 777s and a further three on option with the US aircraft manufacturer.
THE BRIEFING THE REGION ■
■ ■ ■ ■
■
to come from the Middle East and Africa region. In particular, countries like Syria, Jordan, Tunisia and Morocco are developing a big appetite for wind energy. Currently only about 1.3 per cent of the 22,580 megawatts of installed power capacity in Egypt is from wind, but the supreme energy council has approved plans to increase renewable energy to 20 per cent of total capacity by 2020, with 12 per cent wind powered.
[ SAUDI ARABIA ]
Saudi Arabia capitalises IPO
[ UAE ]
Passenger traffic up 11.7 per cent Abu Dhabi International Airport’s traffic figures, released by the Abu Dhabi Airports Company (ADAC), for the first six months of 2010, showed a strong increase of 11.7 per cent in passenger traffic, when compared to the same period last year. The recent traffic report reflected a growth in cargo performance, with loads increasing by 20.3 per cent and aircraft movements increasing by 11.9 per cent for the first six months of 2010.
[ SAUDI ARABIA ]
SBG in first shortterm Sukuk deal The Saudi BinLadin Group (SBG) issued a SAR 700million ($187 million) Sukuk Al-Murabaha, to Saudi investors on July 12, 2010. This was the first short-term issuance in Saudi Arabia, and it was over subscribed by more than 2.5 times. It has achieved several notable firsts, including first short-term issuance in Saudi Arabia; first
credit enhanced structure incorporating the sharing of assigned government contract payment and first issuance to be issued on a zero coupon, discount to maturity basis.
PricewaterhouseCoopers (PwC), has found that initial public offering (IPO) activity in Saudi Arabia is leading regional IPO activity in the first half of 2010, with seven of the eight taking place in Saudi. Although the number of IPOs was up slightly on 2009, the total amount raised was $830 million,
[ EGYPT ]
Profits blow in for El Sewedy Egypt’s El Sewedy Electric Company sees plenty of opportunities in the renewable energy space and expects its two-year old wind division to turn a profit by 2011. The demand for wind energy is expected
31.4 per cent lower. The largest IPO in 2010, as of June 30, was for Knowledge Economic City Company, which raised $272 million, the equivalent of 32.7 per cent of total GCC capital.
[ SAUDI ARABIA ]
Big development investment Saudi Arabia’s finance ministry has approved 1,420 contracts for various projects, valued at SAR71.5 billion ($19.1 billion) during
the first half of 2010. Saudi Arabia has drawn on its reserves to fund record budgets and keep its $400 billion, five-year infrastructure development programme on track.
[BAHRAIN]
Bermuda eases GCC business The President and CEO of Bermuda’s Stock Exchange is convinced that Bahrain offers Bermuda’s financial community a remarkable opportunity to develop commercial relationships thoroughout the GCC. Greg Wojciechowski said there were many areas of growth to be pursued in Bahrain, which has recently signed a Double Taxation Agreement with Bermuda in Washington in April.
[ JORDAN ]
Record growth leads expansion Passenger traffic at the Queen Alia International Airport (QAIA), Jordan, for the first half of this year reached 2,445,500 passengers, which translates to a 17 per cent increase over 2009. Aircraft movements for the first six months were strong; totalling 29,600 aircraft – an 11.3 per cent increase over the previous year. In addition to that, Cargo registered 42,850 tonnes year-to-date with a 9.9 per cent increase over the same period last year, according to the Airport International Group (AIG). The $750 million rehabilitation and expansion works at QAIA are underway, including the construction of a new stateof-the-art 100,000 square metre passenger terminal.
August 2010 gulfbusiness.com
27
THE BRIEFING THE REGION [ SOCIOECONOMICS ]
[ STOCK MARKETS ]
The Ras Al Khaimah Government has achieved significant success in its efforts to launch socioeconomic programmes that promote economic sustainability, enhance the quality of life, and preserve the emirate’s abundant natural and archaeological attractions.
Aabar Investments is attempting to delist itself from the stock market by buying out its minority shareholders, but the company came under fire from the market regulators over the share price it offered, which was well below the going rate. In its bid to delist from the Abu Dhabi Securities Exchange, Aabar initially offered a price of Dhs1.45 ($0.39) a share, but it was ordered by the Emirates Securities and Commodities Authority (SCA) to raise its offer to Dhs1.95 ($0.53). If the company is now successful it will be the first local company to delist from the Abu Dhabi bourse. Once delisted, Aabar will be under no obligation to release financial information, as a private joint stock company, and it will no longer be the region’s most transparent sovereign wealth fund.
Northern emirate to boost economy
The Crown Prince and Deputy Ruler of Ras Al Khaimah, HH Sheikh Saud Bin Saqr Al Qasimi, has been widely recognised as the architect of the emirate’s new direction towards a more diversified economy. Under his leadership, the emirate’s GDP, which now stands at $4.30 billion, achieved a remarkable average growth of 14 per cent per year from 2004 to 2008, and nine per cent in 2009. One of the key initiatives undertaken by HH Sheikh Saud was to invite the World Bank to make a series of studies on how to make Ras Al Khaimah a business-friendly and efficient investment destination, which resulted in the establishment of manufacturing, tourism, real estate, construction and services as key growth sectors of the local economy. In the last two years, Ras Al Khaimah has also achieved “A” ratings from S&P and Fitch, primarily through HH Sheikh Saud’s efforts to consolidate the RAK Government’s balance sheet.
Aabar revises price of delist
With no shareholders to account to and no financial information to disclose, analysts believe the company will have more room to manoeuvre. Aabar said the offer period for buyback was valid until August 5, but it was not made clear what would happen if minor shareholders reject the deal as the firm is majority-owned by Abu Dhabi’s International Petroleum Investment Corporation (IPIC), which holds 71 per cent, and supports the delisting.
F
The stock will be fully suspended on August 8, the date when its majority shareholder IPIC purchases all shares tendered during the offer period. IPIC will purchase the tendered shares through the brokers it has appointed. Financial settlement will be effective on August 10, when shares of Aabar will be registered in the name of IPIC. On the back of the proposal, Aabar stock soared on the ADX by 9.88 per cent to dhs1.89 a share.
[ BUSINESS ]
Ladies upbeat about recovery A recent survey by the Heels & Deals network gives an insight into how female entrepreneurs in the UAE have survived the economic downturn so far and how they feel 2010 is shaping up. The survey also found respondents are feeling more positive about this year, with 84 per cent of women saying 2010 will be more profitable for their business than 2009. To survive through the downturn, 13.8 per cent of women said they’d had to downsize their operations, but 25 per cent reported they had raised additional capital to see them through
28 gulfbusiness.com August 2010
the turbulent times.Women attributed their success at staying afloat to negotiating better payment terms with suppliers to help cash flow, or to maintaining the focus on making their offer more attractive to customers. Of those surveyed, 38.8 per cent said they had reduced their pricing and 44.4 per cent had introduced special offers to entice customers. “It’s encouraging to hear that the majority of the entrepreneurs surveyed are positive that their businesses will fare better in 2010 than last year,” commented fellow co-founder Claire Fenner.
“There have been many lessons learnt from the recent challenges and the downturn has forced many of our members to trim the fat from their businesses and to focus on developing a long-term sustainable business model. We’re not being so shortsighted to think there aren’t more challenges ahead; in fact, respondents said their biggest challenge for 2010 was receiving outstanding debt from clients, but if the UAE’s entrepreneurs and the wider business community come together to support one-another and share insights, the recovery will be much quicker.”
THE BRIEFING THE REGION [ POLITICS ]
BP deal linked to early release of Lockerbie bomber Libya’s top oil official has rejected suggestions that a $900 million oil deal awarded to BP in 2007 was linked to the release of convicted Lockerbie bomber Abdel Baset Al Megrahi. “I was leading the negotiations and BP was awarded the deal because it offered the best proposal compared to its competitors,” Shokri Ghanem, chairman of Libya’s National Oil Corp (NOC). BP won the Libyan exploration and production contract and signed the deal in May 2007. The deal, worth at least $900 million, was for the onshore Ghadames and offshore Sirt areas,
covering an exploration area of around 54,000 square kilometres. Ghanem’s comments come as four US senators from New York and New Jersey, seeking an investigation into Al Megrahi’s release from prison last year, are calling on BP to suspend its oil drilling plans in Libya
until it can be determined whether the oil giant played any role in his release in exchange for a contract. Meanwhile, BP is to sell assets in Texas, Canada and Egypt, to part-fund the clean-up cost of the Gulf of Mexico oil spill. A $7 billion deal has been reached with US-based oil production firm Apache Corp.
The company said the assets sold included oil fields and gas processing plants in Texas and south-east New Mexico worth $3.1 billion and BP’s upstream Western Canadian gas business for $3.25 billion, along with oil exploration and production assets in Egypt worth about $650 million. BP’s share of the Prudhoe Bay oil field in Alaska was not included in the sale to Apache, contrary to earlier media speculation. BP has now capped the well but there are mounting fears that the cap must be removed as the pressure continues to drop and leaks are appearing around the well.
August 2010 gulfbusiness.com
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THE BRIEFING THE REGION [ BANKING ]
[ TOURISM ]
Standard Chartered Bank has launched a unique new mortgage facility which offers non UAE residents a customised approach to avail loans of up to $5 million. The mortgage process has been made easier as a result of the bank having developed two UAE first-inmarket assessment criteria specifically tailored to this affluent and high net worth sector.
Dubai Duty Free has retained its position as the single largest airport retail operation in the world, based on 2009 sales of $1.14 billion and analysis released by Generation Research. For the second year running, the announcement places Dubai Duty Free ahead of London Heathrow, while Seoul Incheon International Airport retained the third position. HH Sheikh Ahmed bin Saeed Al Maktoum, President of Dubai Civil Aviation Authority and Chairman of Dubai Duty Free, commented: “Given that 2009 was a difficult
Non-residents get mortgage facility
Customer-based research highlighted that the affluent and high net worth market did not have access to a mortgage offering that met with their needs. Standard Chartered Bank is the only financial institution in the market offering such a high loan amount to nonresidents. The facility is available on either new or existing properties providing they were built by one of the Bank’s registered developers. David Inglesfield, Regional Head of Private Banking-Middle East & North Africa, said: “We have shifted from a product focus to being more customer focused and as a result we have been developing better service and product packages based around our customers’ needs rather than adopting a one size fits all approach. “Through this strategy, we have built up great momentum and are maintaining this growth by continuing to invest in our business and through the development of products like this one.”
Duty free sales take off
[ FINANCE ]
year for the airport retail industry across the board, it is significant that Dubai Duty Free retained its number one position.” In 2009, with the world’s recession at its peak, the global duty free and travel retail business witnessed a
F
6.8 per cent decline in sales to $34.5 billion. However, duty free and travel retail business in the Middle East bucked the trend and rose by three per cent to $2.5 billion, which represents 7.2 per cent of global sales.
Private equity grips Middle East Insead has partnered with Booz & Company to issue a report entitled Private Equity in the Middle East: A Rising Contender in Emerging Markets. The report examines how the industry has evolved over the years deeply impacting the region’s economic development, as well as its current challenges and outlook. Insead and Booz &
Company surveyed private equity firms or general partners (GPs), and their investors or limited partners (LPs) in the Middle East to create the report. Respondents were surveyed for their views on the business, current market sentiment, confidence and expectations. Insead’s Dean Frank Brown, said: “As private equity develops as a sector
it will be a key feature in the landscape of economic recovery. It will continue to be a critical focus for our faculty research and programmes.” The private equity industry in the Middle East has grown remarkably quickly for an industry that barely existed a decade ago. Today, there are some 150 funds in the region with a further 10 announced.
[ NETWORKING ]
Internet highway links EU and Middle East Six of the region’s leading operators have signed an agreement to build the RCN (Regional Cable Network) – a multi-terabit cable system stretching from the UAE through Saudi Arabia, Jordan, Syria and Europe. RCN will provide robust bandwidth connectivity for the region’s growing
30 gulfbusiness.com August 2010
broadband community. It will also provide greater diversity for each of the operators and protect their service from disruption from damage to undersea cable systems. Etisalat (UAE), Mobily (Saudi Arabia), Jordan Telecom (Jordan), Zain – Mada coalition (Jordan)
and Syrian Telecom (Syria) together with other European partners have joined forces to build the mammoth 4,000km diversified cable system which will provide reliable telecommunication and internet connectivity for all users in those countries and the surrounding nations.
THE BRIEFING THE REGION [ ECONOMY ]
Low oil prices pose major risk to GCC – IMF The single biggest threat to the economies of the Gulf Cooperation Council, or GCC, region remains a protracted period of low oil prices arising from a sluggish global recovery, according to economists at the International Monetary Fund (IMF). Countries in the GCC have taken important steps to address the fallout from the global financial crisis with significant progress having been achieved in restructuring the debts of Dubai World, the Dubai governmentowned conglomerate, as well as the restructuring of some of the largest investment
companies’ debt in Kuwait, the economists wrote in a paper prepared by the Middle East and Central Asia department of the IMF. “The short-term priority remains the buttressing of the financial sector without unduly constraining the availability of credit,” they added. Economic growth in the GCC is projected to strengthen in 2010, supported by strong fiscal spending and the global recovery. Non-oil growth is expected to strengthen to about 4.3 per cent, supported by fiscal stimulus in Saudi Arabia, the UAE and more recently Kuwait.
The IMF economists said fiscal stimulus in the GCC has been successful in dampening the impact of the global crisis on nonoil growth, but countries should prepare an exit strategy from current high spending levels, to ensure long-term fiscal sustainability, which would need to be implemented once conditions allow. Countries in the GCC should also improve the governance of staterelated enterprises, with greater attention given to transparency and management of leverage and balance sheet risks.
[ OIL & GAS ]
Iraq boosts domestic refineries The Iraqi oil ministry is talking to several international oil companies about investment in four planned refineries throughout Iraq to meet increasing domestic demand, the country’s deputy oil minister has said. “The estimated cost of these four new refineries, that are designed to produce some 740,000 barrels a day of refining
capacity, is more than $20 billion,” Ahmad al-Shammaa told Dow Jones Newswires. Shammaa said Iraq’s first priority refinery is in Kerbala, south of Baghdad, with a production capacity of 140,000 barrels a day and an estimated cost of $4 billion. The second priority is to build a refinery in Missan in southern Iraq with a capacity of another
150,000 barrels a day, US companies Shaw Group Inc, along with Stone & Webster Inc, are designing the refinery and they are expected to finish the front-end engineering design next year. It will cost around $4 billion. Iraq also plans to build the Nassiriya refinery, near the city of Nassiriya in the south, to process 300,000 barrels a day.
[ SHIPPING ]
Foreign ships threaten to boycott Saudi ports Owners of foreign ships have threatened to boycott Saudi ports and use other Gulf ports if the current crisis in unloading cargo at Dammam’s King Abdul Aziz Port continues unabated. The ship owners said some ships have had to wait up to three weeks, and in some cases an
entire month, to unload cargo, something they say is resulting in huge costs. They, along with shipping agents and businessmen, have called on Minister of Transport Jabara Al-Seraisry, who is also chairman of the General Ports Authority, to intervene and resolve the crisis.
The ship owners are blaming companies engaged in unloading sea cargo for the current stalemate. Most companies at the port are facing labour shortages and have been unable to deal with the sudden increase in workload due to the summer and upcoming Holy Month of Ramadan.
[ OIL & GAS ]
Bahrain oil production leaps The Kingdom’s oil production is expected to increase 81.8 per cent between 2010 and 2019, with crude volumes doubling to 100,000 barrels per day. Oil consumption between 2010 and 2019 is also set to increase by 30.5 per cent, with growth at an assumed three per cent per annum towards the end of the period and the country using 57,000 barrels per day (bpd) by 2019, according to Bahrain Oil and Gas Report Q3 2010, a new market report by companies and markets.com. Bahrain’s real GDP is assumed to have fallen by 0.1 per cent in 2009, followed by a forecast of 1.4 per cent growth in 2010.
[ BANKING ]
Damas extends debt standstill Damas, the Gulf region’s largest jewellery retailer, has signed an extension of a standstill agreement it has in place with the majority of its bank lenders until September 30 as it works to restructure about $872 million in debt. “The standstill agreement has been extended until September 30, 2010 in accordance with its terms in order to allow the company to finalise its restructuring plan and having regard to the Ramadan period,” the company said in a statement posted on the NasdaqDubai Web site. Damas said that it has agreed a term sheet with the steering committee of its bank lenders which has now been sent to the entire lender group for approval.
August 2010 gulfbusiness.com
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THE BRIEFING LOGISTICS
Take-off for pharma distribution Business got off the ground last month at the world’s largest airport complex, as the first tenant set up shop, reports MICHAEL GORDON.
D
ubai World Central (DWC) is one of the most ambitious projects of its kind in the world. This ‘aerotropolis’ comprises the new Al Maktoum International airport, set to be the world’s largest in volume and size upon completion, and the adjacent specialised free zones focused on fast-cycle logistics and aviation industries. DWC will occupy an area of 140 square kilometres in Jebel Ali, next to the UAE’s largest free zones (JAFZA) and the Jebel Ali Sea Port, the sixth largest container terminal in the world. In addition to a dedicated link to the sea port, DWC’s unique multimodal capabilities are supported by links to all main motorways in the country, the upcoming GCC high speed rail network and the Al Maktoum International Airport, which once complete will handle up to 120 million passengers and 12 million tonnes of air cargo per year. Phase 1 of DWC is now fully completed and became operational as of June 27, 2010. The DWC is part of the Dubai Government’s overall 2015 strategy to enhance the emirate’s transport and logistics services and capitalise on its geographical location to make Dubai a regional hub for logistics. Over 30 leading international companies have already committed to establish a base in DWC, with growing interest from a number of multinational companies. As one of the pioneers, Hellmann Calipar will run an international pharmaceutical distribution operation from DWC. The operator is a joint venture between Hellmann Worldwide Logistics of Germany (which has a turnover of $4.3 billion and more than 400 offices in 150 countries worldwide), and Calipar Integrated Services, part of the Parekh Group of India (which has 200 warehouse locations in 42 cities
32 gulfbusiness.com August 2010
Logistics is regarded as a crucial part of the pharmaceutical industry since the cargo is easily perishable. across India). Logistics is regarded as a crucial part of the pharmaceutical industry since the cargo is easily perishable. As a result, the activities are highly time sensitive, and the products require temperaturecontrolled storage and distribution. Jost Hellmann, co-owner Hellmann Worldwide, explains: “Pharmaceutical and healthcare logistics, as a concept, deals with susceptible and time sensitive products that need to be carried through the supply chain in a controlled manner. “As such, it needs to be supported by a highly efficient logistics environment that allows fast-cycle transit, high-quality technological infrastructure and global connectivity through a fast, multimodal transportation network.” The creation of the Dubai Logistics Corridor will shorten the transit
time for companies based in DWC by creating seamless connections between Jebel Ali Sea Port, JAFZA, DWC and Al Maktoum International. These services will allow Hellman Calipar to provide its customers with end-to-end supply chain solutions, including supply chain design, research and development, manufacturing, transport and distribution. The site also benefits from 300 air destinations, 125 shipping lanes and a Gulf-wide road network. Michael Canon, chief commercial officer, Dubai World Central, says: “Today, airports are building cities and we have a unique position here as this airport sits on a Greenfield site. There are no competing interests to use the land, which will allow us to grow to become a true multi-modal logistics platform. “What DWC is trying to do is to
THE BRIEFING LOGISTICS
provide a seamless multi modal logistics platform in terms of regulatory reform, which will allow the likes of Hellmann Calipar to provide a predictable service. “In order to have that platform we need stakeholder alignment because the platform is built on the hard and soft infrastructure. The hard infrastructure is the airport, the roads, the port and soon the Union railway connecting all modes. The soft infrastructure is the regulatory bodies, the rules and regulations, systems in terms of IT, telecommunications, customs and the ministry of health.” In theory, this infrastructure allows DWC to facilitate fast cycle logistics. But the hard and soft infrastructure needs to be operated properly and be predictable over time, because companies like Hellman Calipar need to know exactly what steps they have to go through and what regulatory bodies they must deal with to make their business work.
DWC says it is trying to work with various stakeholders in Dubai, in the UAE and the Middle East to provide a logistics platform that is seamless in regulatory control. So far, 18 cargo operators have signed up with DWC to establish operations before October. However, Canon is not yet mollified, he says: “18 is still not adequate – we need the frequency of flights as well as destinations.” Yet Rajiv Merchant, director and board member, Hellmann Calipar Healthcare Logistics, believes that the company will be able to reach its goal of 60 per cent utilisation by the end of this year. This equates to 9,000 pallet positions. Once the success of the Dubai operation is proven, Merchant says that the joint venture will invest in further satellite sites throughout the MENA region. So far the joint venture has signed up to distribute the drugs of four pharmaceutical producers, including Actavis of Iceland and
three regional players. Merchant says that the majority of interest is coming from the West, regarded as a well established pharmaceutical producing region, supported by a sizeable amount of interest in India, which is a rapidly growing pharmaceutical market. Dnata Cargo, which is already the ground handler for more than 120 airlines at Dubai International Airport, has announced it will provide the ground handling services to all airlines at the Al Maktoum International Airport. Dnata Cargo has the facilities and capability to handle any type of cargo even perishable goods – as it has access to 1,000 cubic metres of chiller and freezer storage. In conclusion, Jost Hellmann stresses that although it is very early days for DWC and the Hellmann Calipar joint venture, he is very hopeful about its success. He says: “We share the vision of DWC, and we believe in it, to make Dubai the logistics hub of the world.” ■ gb@motivate.ae August 2010 gulfbusiness.com
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THE BRIEFING HOSPITALITY
Catering to the crescent Following on the success of Shari’ah-compliant finance and the booming halal food industry, a Singapore-based company is now bringing the ‘Muslim effect’ to hospitality, ZARINA KHAN reports.
H
otels across the world can now be ranked according to how ‘Muslim-friendly’ they are, following the global launch of a halal-focussed hotel rating system. Crescentrating.com, a Singaporebased online ratings company, recently brought its voluntary ratings system to the Gulf to give hotels here the option of appealing to the halal-conscious consumer who today wants more than verbal assurances and unverified claims. “Of the some $944 billion in international tourism receipts in 2009, it can be estimated that six to seven per cent was from the halalconscious market. Considering that the international market will reach $1 trillion in the near future and the halal segment is going to grow to around 10 per cent, you have a potential halal-conscious travel market of $100 billion. What business can afford to ignore that potential revenue?” Crescentrating chief executive officer Fazal Bahardeen told Gulf Business. Bahardeen believes that following the massive global success of Shari’ahcompliant finance and the organised halal food industry, Muslims – who number a significant percentage of the global population – are becoming more aware of their rights as consumers to ask for foods and facilities that are in line with their values. “If you look at the world halal food market, it’s something like 16 per cent of the global food market. Currently, the Muslim population globally is about 24 per cent, and it will reach 30 per cent in a few years. Food and banking for the Muslim consumer has already taken off – travel is following,” he added. To provide the halal-conscious consumer a hotel experience that accommodates and even complements their values, Crescentrating offers a service that rates a hotel in five areas – prayer facilities, halal food
34 gulfbusiness.com August 2010
services, guest bathroom facilities, Ramadan facilities, avoidance of nonhalal activities and Muslim-friendly recreation facilities and services.
to the Muslim world but that shouldn’t be the case,” Bahardeen explained. The negativity is changing. Since its October launch, Crescentrating has seen massive interest and today ranks over 100 hotels worldwide, with another 50 in the Gulf alone reportedly in talks to join the rankings. Hotels that wish to be included on Crescentrating’s approved list must first self-audit against the company’s criteria, which is later verified by an independent inspection from Crescentrating. “Because of the credibility we want with the consumer, we have to have a direct relationship with the hotel. The hotel fills out our forms and agrees to our terms and conditions to provide access to us to verify their rating,” the CEO explained. Halal-conscious customers then have free access to Crescentrating’s list of rated hotels upon which to base their travel plans. The idea came to Bahardeen from his own difficulties as a halalconscious traveller. “Before launching Crescentrating, I spent 20 years in French companies and for the last 10 years I spent 25 per cent of my time in hotels. I’ve had those frustrations that
The Muslim market segment is very strong in terms of spending power but many businesses are not aware of it. “With a rating of 1 being the lowest and 7 being the highest, our criteria for rating includes halal food, prayer direction in rooms and non-serving of alcohol, among other ratings,” he added. “The Muslim market segment is very strong in terms of spending power but many businesses are not aware of it. US Muslims’ buying power is over $190 billion. In the UK it is about 26 billion pounds. There has been some negativity directed towards marketing
Muslim travellers have – where is the prayer direction, what can I eat, etc.” Bahardeen recognised what he believes is a huge underserved market, and left his career to launch the online ratings system. Since its 2009 launch, it has been expanded to cover other sectors, including halal-friendly guides to airports and a halal restaurant directory. The company will also soon be rating amusement parks as well. gb@motivate.ae
THE BRIEFING FOOD IMPORTS
Fleshed out For 30 years meat-exporting Australia and the meat-loving Middle East have enjoyed a comfortable relationship, which is now being put to the test. ZARINA KHAN reports.
T
he seasoned relationship between Australia’s meat exporters and the Gulf’s meat-lovers, which has been developed over the past three decades, has been going through some tough times lately due to currency fluctuations and supply issues. “The volatile exchange rates and the pricing from our competitor markets, plus undersupply of our product, are the challenges we face,” explained Lachlan Bowtell, regional manager Middle East & Africa with Meat and Livestock Australia (MLA). Asian currencies are pegged to the American dollar, while the Australian currency is not, so fluctuations in the dollar value have been to the benefit of Asian competitor exporters and to the detriment of Australia’s cost-competitiveness. “Prices of our products have gone up due to volatility and lack of supplies,” Bowtell added. On the supply side, while Australia is one of the region’s primary sources of red meat and livestock imports, demand for mutton has recently outstripped available Australian supplies. Farmers down under have been struggling to keep up with the region’s increasing demand for mutton, which lead to a 8.7 per cent drop in their Middle East exports in 2009. The Middle East, and the Gulf in particular, is heavily dependent on food imports – a fact vividly brought to light during April’s volcanic ash disruptions, where local media reported super market shelves going sparse without the daily imports of tens of thousands of kilograms of produce from Europe and North America. The Gulf Cooperation Council’s (GCC) annual food imports are expected to reach $53 billion in 2020. Australia has seen steady growth in its Middle East exports. General shipments to the Middle East in 2009 totalled a record 15,752 tonnes, up 21 per cent in 2008.
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The Middle East was the largest growth market for Australian lamb during the period, taking 35,871 tonnes to be 41 per cent higher than the previous year. The strong results follow similar growth in the previous years. For the financial year 20072008, Australia’s lamb sales increased 18 per cent from 20,122 million tonnes to 23,743 million tonnes and beef increased 130 per cent from 3,356 million tonnes to 7,718 million tonnes. The Middle East, which extends beyond the GCC to include the Levant
economy, the Middle East will always maintain its link to their farms. “Because of the fact that 55 per cent of Australia’s meat produced is exported, we take that industry and its standards really seriously. That is why Australia has never been locked down because of food safety concerns. And for us, halal certifications are not voluntary, they are a requirement,” the MLA manager told Gulf Business. “We are not concerned with undercutting. Our food safety is our priority. We cannot be the cheapest in
We are not concerned with undercutting. Our food safety is our priority. and North Africa, is not surprisingly Australia’s largest live sheep and sheep meat destination – which explains why farmers in sleepy towns down under are well versed in halal requirements and know what cut of meat works best for the Arabian mashawi grill. “Our farmers now specialise in breeding the specific product preferred for this market,” the MLA official said. Bowtell and his colleagues in Australia’s meat industry, however, believe that despite the recession, and the ups and downs of the global
the market because of our standards. We are very focussed on high-quality, safe, red meat products. Our goal is to maintain and defend our portion of the market,” a fact which he believes will continue to earn the Middle Eastern consumer’s trust and loyalty. The Gulf region’s growing population means that demand will continue to grow, and Australian farmers believe Middle Eastern consumers’ preference for quality produce means they will continue to find their lamb, beef and mutton in good demand. gb@motivate.ae
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THE BRIEFING JAGUAR
Jag is cat’s whiskers at 75 As an icon of British motoring, Jaguar the brand had become a little staid, but thanks to a design team change, new life has been breathed into the elegant beast, as MICHAEL GORDON discovered.
F
ar from retiring, the 75-yearold British car manufacturer Jaguar is finding a new lease of life. The company has just launched the latest in its series of new ‘design language’ sports cars, and according to Robin Colgan, the managing director for Jaguar Land Rover Middle East and North Africa, the XJ will be the best car Jaguar has ever built. The company has also rejoined the racing circuit, where historically it has had countless successes, but we will come back to this later. Speaking about the model launch, Colgan says: “This new ‘design language’ started with a desire to make beautiful cars. “We have some very talented designers and when the hugely talented Ed Callum joined us he was given a once-in-a-lifetime opportunity; to develop the latest generation of cars for a venerable brand like Jaguar.” He adds: “This team simply drew cars they thought were beautiful. We were not looking to pastiche the designs of the past. But if you scan back through Jaguar designs they were always sporty. Especially the original XJ, which was a very quick and sporty saloon.” In fact, Jaguar’s sporting credentials have been established since the beginning of the brand. “The words our designers had to triangulate were sporting, contemporary and luxurious,” adds Colgan. In 2007, the first of the new breed, the XK, was launched, followed by the XF in 2008. “When we launched the XF, to replace the S-Type, we went from selling around 600 units per year to selling 1,200 units annually,” boasts Colgan. “Every vehicle we have launched with the new ‘design language’ has given us a huge boost in sales.” The newly launched XJ is claimed to be the best car Jaguar has ever built. With the best performance, design, and
38 gulfbusiness.com August 2010
the best ‘infotainment’, everything you interact with is state-of-the-art. Most of the XJ’s body is made of aluminium, which means you drop 200kg, making it lighter than any other vehicle in its class, and with a 5-litre v8 engine delivering 510 bhp, the powertrain is as good as it gets. Colgan adds: “The XJ outshines the XF by a factor of 10. We believe it will
US, Germany and Italy. To cater to this market, Jaguar runs a full-scale technical support operation in Dubai, with 30 staff to provide support to workshops. It also carries out all of its hot weather testing in Dubai. As a demonstration of the company’s commitment to the region, the director of engineering, Bob Joyse, who is the board member
Our current distribution network throughout this region is the envy of many manufacturers. be one of the best, if not the best, car in its class.” Colgan and his team are particularly excited about the launch of the XJ because of the unique nature of the Middle East market. Everywhere else in the world the largest saloon is outsold by the mid-range and the midrange out sold by the compact, but in the Middle East the reverse is true and bigger is better. So, as the king-size of the fleet, the XJ could do very well. For Jaguar, the Middle East (which covers the GCC and the Levant) is its fifth largest market behind the UK,
responsible for the entire engineering organisation, comes out to Dubai three to four times a year to meet with customers and importers. Jaguar operates in Dubai in partnership with Al Tayer, a long-standing and well-established UAE-based company. “For each market we enter we have separate joint ventures, with Premiere Motors and Al Tayer as our partners in the UAE. “All the way from North Africa to Pakistan, including the Levant and the Gulf, we don’t do any distribution and retailing ourselves. This is
THE BRIEFING JAGUAR
for two reasons – the first is that we believe a local family, that is established and understands the local market, is more suited to local distribution than we are. Secondly, there is a legal framework often
imposed to ensure the partner is a local company… but the key is ensuring you have the right partner. “Our current distribution network throughout this region is the envy of many manufacturers.”
75-YEAR-OLD BOY RACER
J
aguar returned to the starting grid at Le Mans on June 12, with the XKR GT2 sports car lined up alongside the world’s leading endurance racers for the classic 24-hour event. As Jaguar celebrates its 75th anniversary of building and racing cars, it is fitting that the British marque returns to competition at the circuit where it earned seven race wins between 1951 and 1990. Mike O’Driscoll, managing director of Jaguar Cars, says: “It’s good to be back. We aim to make the Jaguar brand synonymous with motorsports once again.” During the 1950s, Jaguar’s founder Sir William Lyons sought to prove his cars were as fast and as strong as far more expensive rivals, with legends such as Stirling Moss and Mike Hawthorn behind the wheel of the iconic C-type and D-type racers. In 1951, the C-type won Le Mans at
its first attempt, with a further victory in 1953. Its successor the D-type took Le Mans wins in 1955, 1956 and 1957. Technical innovations such as the C-type’s disc brakes made their debut on Jaguars at Le Mans, and were rapidly adopted by car makers the world over. After a two-decade absence, Jaguar returned to France with a works team in the late 1980s and once again took race wins in 1988 and 1990 with the V12powered XJR. Jointly developed by Jaguar’s engineering and design groups and the US-based RSR (Rocketsports Racing) team, today’s racing contender is the XKR GT2. This racer features the road car’s lightweight aluminium body structure and a tuned version of its 5.0litre supercharged V8 engine, developing in excess of 500 bhp.
The global financial crisis of 2008, hit all manufacturers very hard. But the Middle East market behaved differently to the rest of Jaguar’s portfolio. Conversely, the manufacturer had a record 2008 right through until the end of the year, then January 2009 was uncertain, but come February there were no orders – the market just stopped. “We witnessed the same in China and neither markets recovered until early 2010,” says Colgan. He explains: “General buyer confidence dropped and people dropped out of their natural buying cycles. Just as severe was the impact from a lack of available credit. Relatively few have the cash available to buy a car or would spend it if they did, preferring to take out loans instead. “Thankfully, the willingness of banks to loan has recovered quite strongly today, and people are a lot surer about their own security. Plus nothing stimulates a market like a new product, so we are hoping for success.” When Tata bought Jaguar from Ford back in 2008, there was a risk that the new owner would come in and look at the cycle plan going forward and the investment required to keep Jaguar viable and begin to make cuts. “To cut down on the cycle plan and production development plan would have been disastrous – but thankfully that never happened,” says Colgan. He adds: “Development is our life blood. If you take any company and stop product development tomorrow you may not notice anything for a few years, but eventually you will hit a wall and that is the company finished. “Today, I can look at the lifecycle plan for Jaguar and know I have a strong plan and strong and relevant product coming through now and for the future.” Colgan says that the best clue as to where Jaguar is going is to look at where it is now and what has been done. “How our vehicles are evolving demonstrates how forward-looking and ambitious the company is. We are looking for continuous growth,” he adds. gb@motivate.ae August 2010 gulfbusiness.com
39
THE BRIEFING ISLAMIC INSURANCE
Islamic finance and risk evasion Political and credit risk insurance can dramatically improve the export capacity of the poorest of nations, as MICHAEL GORDON discovered.
M
any producers in the Third World face an uphill battle, in that they can’t attract buyers for their exports, because of a lack of export credit, and they can’t attract inward investment, because of their country’s perceived political risk or instability. A well-heeled guarantor can often resolve the situation, but when you look at the vast international debts many Third World countries owe, it is clear this comes at a price. Not so in the Islamic community. The solution, it would seem, is The Islamic Corporation for the Insurance of Investment and Export Credit (ICIEC), which offers export credit and political risk insurance to its 39-member Third World countries, which are exclusively members of the Organisation of Islamic Countries (OIC). Dr Abdel Rahan Taha, chief executive officer, ICIEC, said: “We insure the risk of export credits for our member countries and we insure the political risk associated with investments coming into our member countries. “We are essentially a multilateral organisation in that we are owned by 39 sovereign states – similar to the World Bank and different from normal business corporations.” While the ICIEC may be similar to the World Bank, in many ways it is also unique, such as being the only provider of Shari’ah compatible insurance. This means that whatever profit it makes is reinvested into the company to allow it to further stretch its cover. The ICIEC is also unique in the sense that it is part of the larger Islamic Development Bank (IDB) group – which is one of the main regional financing organisations. “Our business model is to support exporters, in our member countries, that export anywhere in the world. We insure on the risk of the default
40 gulfbusiness.com August 2010
of the buyer. This enables exporters to offer their buyers credit facilities. It also allows them to finance their export credits from the bank with the security of our insurance policy.” The insurance covers acts of war or civil disturbances and even government confiscation, but not acts of God. The second element of the ICIEC model is its medium-term business, which is essentially project finance. The ICIEC gives the banks the necessary assurance to lend bridging funds or credit facilities to ICIEC members. “Our clients need the funds to work on a project before they are paid for that work, but the bank will not loan without a guarantee or security, which we provide. “We insure the risk of non-payment by the import-contracting client,” explained Dr Taha. The banks are happy to accept ICIEC as a guarantor because
business opportunities. However, many of our countries are perceived to be high risk and this impedes their inflow of FDI.” FDI flow records show that African and Asian countries make the bulk of ICIEC membership but they receive a miniscule portion of total FDI, maybe three to four per cent. The country risk insurance ICIEC offers covers three basic risks. First is war and civil disturbance; second is nationalisation, confiscation and government interference; and third is a restriction on foreign exchange transfer or the inability to remove profits. Despite the obvious benefits of the ICIEC cover, the Middle East’s insurance penetration rate is low compared to OECD markets in Europe and the US. It is even worse when it comes to political and credit risk insurance. Across the entire
“It is important to stress the role that political and credit risk insurance can play in advancing exports. of the strength of the group’s financial position as certified by its rating. The ICIEC has an Aa3 with Moody’s, and its parent company IDB is rated AAA. “This gives the bank comfort, knowing we can be trusted, and we have a track record from being in business for over 15 years,” he added. The third side of the ICIEC business model is investment insurance, where the group is committed to encouraging the inflow of Foreign Direct Investment (FDI) into its member countries. Dr Taha explained: “Here, the risk we insure is not commercial risk, instead we insure the risk of the country, which the investor is powerless to control.” He added: “All our member countries are very rich in resources, especially in Africa, and they are very lucrative
Islamic world ICIEC provides around $14 billion of credit risk insurance, but internationally it provides $1.3 trillion. Currently the ICIEC is hampered by the size of its capital base in relation to the potential demand for its service. With a capital fund of $250 million the group can do a maximum of $3 billion worth of business. This is clearly an issue Dr Taha is impassioned by: “It is important to stress the role that political and credit risk insurance can play in advancing exports. It enables the exporter to enter new markets; it enables him to expand his business with existing clients and to provide them with credit facilities. These are the main tools for competing in international markets.” gb@motivate.ae
THE BRIEFING AVIATION
Terminal velocity The Gulf is at the forefront of innovation in aviation, with airports switching from processing centres to destinations in themselves, ZARINA KHAN reports.
T
he airport of the future is no longer a bland glorified waiting room for passengers. Airports are evolving into a destination in themselves, and recent issues have highlighted their need to evolve to meet new passenger demands, an insider source said. “Airports are a major player in the aviation industry. The airport is not just where you check-in. It’s somewhere to do business and to spend some time,” said Jihad Boueri, regional director of application services for the Middle East, Turkey and North Africa at SITA. In today’s economic reality passengers have been spending more and more time at airports, agreeing to longer layovers in favour of cheaper ticket prices, and that time in transit is likely to grow further. In April a volcanic eruption in Iceland resulted in an ash cloud that grounded over 100,000 flights and marooned many times that number of passengers in airports across Europe. And with no foreseeable end to the periodic plumes of ash that endanger airplane engines, airports may be finding themselves looked at as a partial destination in themselves for transiting travellers. Time spent in an airport presents many opportunities to provide services to a traveller, and increase the airport’s returns per individual. “Airports are looking beyond air revenue and it is their passenger expenditure during their journey that will count. This will definitely exceed the ticket fees. Now a passenger can fly a local carrier for next to nothing. But they still have to spend time in the airport. To make the most of that time, an airport has to ensure less time in-line and more time on-line. We are helping with infrastructure and applications,” Boueri explained. One of the areas competition savvy airports are exploring is going
wireless and providing seamless services to customers and staff alike. “We are moving into digital travel with everything relating to mobile technology and wireless technology. An airport used to just be a place with immigration and security checks, but now it’s about food, entertainment, etc. That presents the possibility of the information desk becoming a type of concierge. With wireless technology, when a traveller accesses the airport,
arrival points for travellers, which requires sensitive, heavy capacity IT systems and protocols. Another issue that the ash cloud crisis brought to the fore was the need for flexible traveller check-in options to deal with large numbers of passengers needing to rebook at the airport. “We are looking now for mobile check-ins. In times of crisis airlines could have allocated space for specific tasks, creating virtual zoning within the
Airports are looking beyond air revenue. It’s passenger expenditure during their journey that will count. they can receive an SMS welcoming them with an update of their flight. As they move through the airport, they can be sped along with an E-card pass, and biometric data can let them know about products and services available at the airport according to their preferences, which they can pay for with their biometric card,” the SITA official added. Airports that provide speedy passport control and security checks may also find themselves short listed as favourite departure and
airport space,” Boueri explained. The SITA official said that a number of those airport service innovations would be implemented in the Gulf before Europe, which is good news for Middle Eastern travellers. “Compared to Europe we are pioneering, but there is still room for improvement in the Gulf. Last year SITA signed a number of projects in key Gulf airports including Abu Dhabi Airport, Bahrain Airport and Saudi Arabian airports, and more are in the works”. ■ gb@motivate.ae August 2010 gulfbusiness.com
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THE BRIEFING ETHICAL INVESTMENT
Aid across the Sahara Middle Eastern investors are increasingly turning to sub-Saharan Africa for ethical investment opportunities.
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iddle Eastern investors are turning their attention and investments to subSaharan Africa, where the World Bank estimates that the infrastructure project finance needs are more than $36 billion a year. With more than $1 billion in assets under management, the Signature Group says the economic argument for increased investment in Africa is strong. Ram Bhatia, Signature Group CEO and director of Africa, says: “We believe there will be a substantial increase in the flow of funds from Middle East investors into developing areas of Africa in resources, infrastructure and related service industries. “The continent has one-third of the world’s mineral resources and has weathered the global financial crisis in relatively good shape.” Bhatia adds that Africa is now one of the fastest growing regions in the world, followed by Asia and the Middle East. “African governments understand infrastructure is the key to their economic stability,” says Umesh Chandra, Signature Group CEO. He adds: “By deciding to enter the African market we hope to replicate the kind of business prospects we have been undertaking in India where we are working with privatepublic partnerships, private equity, and direct project-based investments in real estate, infrastructure, energy, media and a few other soft sectors.” The group also sees opportunities in mines and minerals as Africa is a continent rich in varied minerals. In the Democratic Republic of Congo (DRC), the Signature Group is seeking prospective investors to be part of a backward integration expansion project involving settingup a Copper Cathode manufacturing
42 gulfbusiness.com August 2010
plant that has ownership in a copper mine. The project is conceptualised and promoted by industry dominant leaders engaged in the manufacturing of various types of copper conductors for over 35 years. The end use markets includes the GCC, India and USA.
with proven experience in their respective sectors. “We also see our role expanding by providing investment opportunities from India to our African investors, and vice versa; and we are starting to offer African investment opportunities to our
We believe there will be a substantial increase in the flow of funds from Middle East investors into developing areas of Africa. Signature has devised a secure investment structure for this project, which will provide stable income along with attractive risk-adjusted returns to investors providing an estimated internal rate of return (IRR) in excess of 20 per cent. Chandra adds: “Our aim is to work on transactions backed by government guarantees and the involvement of promoters
international investors, thereby giving deals from two emerging markets to our prospective investor pool.” The Signature Group is a specialist alternative asset management firm focused on India, the GCC, Africa and other emerging markets, with investment professionals based in Dubai, Delhi and Mumbai. ■ gb@motivate.ae
THE BRIEFING BANKING
Bank on Indian support After 40 years of banking in India, the government owned IDBI felt the need to branch out in a bid to establish roots in recovering and burgeoning markets, as MICHAEL GORDON discovered.
T
he Industrial Development Bank of India (IDBI) has opened its first branch outside of the subcontinent, with operations beginning in Dubai International Finance City (DIFC) in June. As a majority government owned (52 per cent) entity, the IDBI has already concluded six medium to long-term financing deals since its inauguration in the UAE, with a combined value of $400 million. In terms of short-term financing in the region, on the trade finance side, the IDBI has around $100 million of buyers credit on its books. Narasinganallore Venkatesh, CEO of the Dubai branch of IDBI, says: “There is a lot of renewed optimism that we are seeing in the business climate here, and based on this, lots of business proposals have come to us.” Based on the initial success, the IDBI has set a target of $1 billion in assets by the end of its financial year on March 31, 2011. Venkatesh adds: “I think the way things are panning out now this is possible. Things are bouncing back and optimism is there; yet things won’t return to normal for another year.” Venkatesh believes that Dubai is ideally placed for the bank. “It connects the East with the West. Being here will align us with our customers in the region that originate from India, as well as new burgeoning clients. We also believe that the MENA region will grow the fastest once the market improves. “Dubai is also ideally located in terms of time zones, as we have the Singapore market closing in the morning, the UK opening mid-day, and the US opening late in our afternoon – so our entire clients’ needs can be taken care of from DIFC,” adds Venkatesh. The IDBI began life in 1964 as a development financial institution with a mandate to develop Indian industry, and was converted into a full-scale bank in 2004.
BK Batra, Executive Director & Chairman of Credit Committee – IDBI.
Today, the IDBI is the third largest syndicator in the Asia Pacific region, excluding Japan, with mandates in hand worth over $200 billion. The IDBI is not permitted to offer full-scale services in Dubai, and will
open by December, and it is in discussions with Singapore for an overseas banking unit, with hopes the licence will be in place by January 2011 for an opening in June 2011. Furthermore, the IDBI has approached the FSA in London and is in preliminary discussions. Balkrishan Batra, executive director and group head of corporate banking at IDBI, adds: “We see an opportunity to associate with local business at a time when an upturn is happening. “We see the Asian economies, like China and India, doing well and the links to this region could be very handy to boost the local economy. I believe the dependence of this region on Western economies could be slightly moderated.” In addition to new market clients, the IDBI sees a lot of Indian corporations operating in the UAE
We are looking at the Dubai office as a springboard for our overseas forays. instead operate as a wholesale bank – permitted only to lend to wholesale customers and to accept deposits from outside the UAE. Venkatesh says: “We are looking at the Dubai office as a springboard for our overseas forays. “We are here [in DIFC] at an opportune time and we see this as a competitive advantage. Things are beginning to improve and we can build client relations. Also, there is an appetite to look towards banks like IDBI because local banks have less funding appetite, whereas we are looking to increase our exposure to well performing companies.” In addition to Dubai, the bank has a licence for an office in Shanghai, which is expected to
which are in need of support. “Local banks are not in such a strong position to lend the necessary support, but the IDBI is because of its strong resource base, its strong positioning back home and its good balance sheet,” says Batra. He adds: “We are also strong in infrastructure financing, in transaction banking services and FOREX services, which are needed in this region. “There are a large number of infrastructure projects set up, planned or in the process and we see this as a good segment to leverage our expertise and support. The other area we can support is trade flows, where traders need assistance for export or import, and we can offer many services.” gb@motivate.ae August 2010 gulfbusiness.com
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THE BRIEFING LAW
In a dangerous place Husam Hourani tells ALISTAIR CRIGHTON why Tamimi & Partners is on the ground in Baghdad.
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suicide bombing in Baghdad last month that left 43 dead is just the latest in long line of atrocities that show just how fragile the security situation in Iraq is. Some $600 billion of necessary infrastructure may look tempting, but the risks are still very, very high. Aside from security, there are aspects of institutional infrastructure, rather than physical, that need to be built practically from the ground up if real trade is to begin. For Husam Hourani, the recently appointed managing partner at the region’s biggest non-affiliated law firm, Al Tamimi & Company, Iraq is one of the key areas for growth. Having opened its Iraq office four years ago, the firm is seeing steady growth as its four fee earners there established Tamimi as the go-to firm for legal services in the country, especially for US and European multi-nationals looking to test the still murky waters. And the legal waters are very murky indeed, with even the basics, such as learning what new legislation has been passed, proving tricky. “It is difficult to obtain copies, or the online version of the Iraq Official Gazette, which brings into force new Iraqi law and regulation, which can create issues in providing clients with accurate up to date legal advice and opinion,” says Hourani. “In addition, there are significant infrastructure problems with power failures, poor telecommunications and internet access.” This lack of infrastructure, combined with the potential rewards, were the basis for the well-attended “Doing Business in Iraq” conference the firm hosted in Dubai in May. And, perhaps surprisingly, while security may dominate headlines about Iraq, it doesn’t rank that high on
44 gulfbusiness.com August 2010
Husam Hourani, managing partner, Al Tamimi & Company, Iraq.
Hourani’s concerns: “All our staff and fee earners in Iraq are Iraqi nationals, and have the ability to move and operate without the need of personal security or particular concerns over their personal safety.” While many multinationals set up their main base in neighbouring Kuwait, or Jordan, this isn’t an option for Tamimi. “Our lawyers need to be
Iraq, are international and are often reluctant to travel there, so the Amman base helps us maintain our key client relationships, meeting them in Jordan or elsewhere.” Tamimi is doing robust business in its existing practices, with offices in Iraq, Jordan, Kuwait, Qatar, Saudi Arabia and the UAE, according to Hourani. An emphasis on contract law, lucrative during the boom years, has been replaced by a focus on litigation, as those same contracts now fall into dispute, he says. The company is also reaping the benefits of local knowledge. Hourani says that clients who may have been attracted by bargain basement offers,
Our lawyers need to personally attend the Iraqi courts and this cannot be done remotely. ‘on the ground’ as there are numerous issues that need personal interaction with clients and government or ministry officials,” Hourani says. He adds: “Our extensive dispute resolution work means that our lawyers need to personally attend the Iraqi courts and this cannot be done remotely.” Given the ongoing difficulties of coming and going from Iraq, however, the company has found it expedient to base the practice head in Jordan. “Khaled Saqqaf, the head of our Iraq office, is based in Jordan. This was a strategic decision, which allows him to travel freely throughout the region. “Many of our clients who operate in
from incoming international law firms desperate to attract business, are returning to the fold as those same companies struggle to deliver on their promises. In addition to growing work with existing offices, since being promoted to managing partner in February, Hourani has been tasked with looking at growth opportunities outside Tamimi’s traditional base. So far, Bahrain and Egypt have been identified as key targets. Given the firm’s success across the Gulf to date, Hourani, a 12-year veteran of Tamimi, should not face too many challenges in taking a well-known name into new territories. ■ gb@motivate.ae
THE BRIEFING FISHERIES
The deadliest catch Politicians argue that coastal developments are forcing fishermen to risk their lives by crossing borders to meet their quotas.
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ishermen throughout the Gulf region are increasingly finding themselves in hot water, with several arrested and even shot for crossing international borders. Earlier this year, a Bahraini fisherman was shot by Qatari coastguards for allegedly entering Qatari waters illegally. The confused sailor was taken to hospital with promises he would be released in a few days. However, the authorities later said they would put him on trial for illegally entering the country. The shooting came less than a year after a Qatari coastguard vessel collided with a Bahraini fishing boat, hurling a fisherman overboard into the sea where he drowned. In both instances, the Qatari authorities said they used force because the fishermen refused to stop. While Bahraini fishermen say that they have problems recognising the water delimitations, Qatari officials say they are vigilant over their borders because of an increase in drug smuggling in the area. Only last month, 11 fishermen from Asian countries were taken into custody after they crossed into UAE waters without permission. The Saudi Gazette reported that the fishermen were crossing from the Qatif area in Saudi Arabia. Again the men claimed they were not aware they had crossed international boundaries. The Institute for Near East & Gulf Military Analysis (INEGMA), which is a Middle Eastern think tank, claims it is a common occurrence for fishermen to cross international borders illegally. Furthermore, in recent reports, Bahraini politicians blame government policies regarding sea reclamation for the troubles facing fishermen, and questioned their legality and necessity. Saif Mohamed Al Shara’a, CEO. Water Resources and Natural
Conservation Affairs, the Ministry of Environment and Water, affirms: “Construction on coastlines does affect the habitat of the fish inhabiting the area. Stocks are depleting, that is a fact, but the reasons are many.”
Sector, CNIA, says: “We advise all fishermen to remain in contact with CNIA while they are at sea. “When boats are equipped with the E-Passport device, CNIA knows exactly where they are located,
We advise all fishermen to remain in contact with CNIA while they are at sea. Abu Dhabi’s Critical National Infrastructure Authority (CNIA) works with the coastguard to ensure the safety of all seafarers. Last year the CNIA introduced the E-Passport device which tracks fishing boats and other vessels in the emirate’s waters. The device is a safety measure and allows boats to immediately contact CNIA for help in an emergency. Staff Colonel Ishaq Al Besher, executive manager of Operation
which ensures a more immediate response from rescue teams in emergencies,” he adds. Last year, through its Bihar campaign, CNIA met with local fishermen to hear their concerns and to help them understand the marine safety laws that are currently in place. “We intend to continue this dialogue to ensure that fishermen know that CNIA is here to help them,” adds Al Besher. gb@motivate.ae August 2010 gulfbusiness.com
45
THE BUSINESS PLASTIC INDUSTRY
Plastic fantastic After a number of false starts, the Gulf is finally embarking on an industrial revolution that could see it emerging as a major player in polymer production. MICHAEL GORDON reports.
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n a bid to capitalise on its vast feedstock resources, add value to its production chain and to create jobs in a market of high unemployment, the Gulf region is repositioning itself to become the global hub for the production of commodity petrochemicals. Utpal Sheth, director – Polyolefins & PVC – Middle East / India, CMAI Middle
46 gulfbusiness.com August 2010
East said the need for nationalised jobs is spurring development: “The Middle East has numerous large oil, gas and petrochemical plants, but they are all fully automated and very few persons are required to run them. “The direct employment generated by these large projects is also very small compared to the investment. However,
the plastics converting industry is usually more labour intensive. Thus by promoting plastic converting plants, the regional governments want to provide better employment opportunities for the citizens of the country.” However, Sheth added: “Apart from the basic purpose of providing employment to the local citizens, development
iStockphoto
THE THE BUSINESS BUSINESS PLASTIC ARCHITECTURE INDUSTRY
Aaugust2010 2010 gulfbusiness.com gulfbusiness.com August
47
THE BUSINESS PLASTIC INDUSTRY
Middle East PE and PP Production Growth Trend Million Metric Ton 14 12 10 8 6 4 2 0
2005
2010 MDE PE
48 gulfbusiness.com August 2010
MDE PP
of downstream units also helps in consuming locally the large volume of raw material produced in the country.” The secretary general of the Gulf Petrochemical and Chemical Association (GPCA), Dr Abdul Wahab Al-Sadoun, agreed: “The key component in plastic conversion is cost of raw materials, the labour accounts for only five to seven per cent of the cost, the rest is up to 70 per cent raw material cost. “These developments in Saudi Arabia, Abu Dhabi, Qatar and Kuwait are very positive. The expansions are driven by a need to create job opportunities and more are created here than compared to upstream industries – this is why the government is behind these developments. That is why the government is building the
THE BUSINESS PLASTIC INDUSTRY
facilities, sites and infrastructure. “Furthermore, plastics can be sustainable and an environmentally responsible solution to society’s questions. Although the plastic industry is often a target for not being socially responsible, plastics are necessary to our everyday life as they are used in medicine, packaging, construction and agriculture,” he added. This diversification into plastics is in direct contrast to the situations in Europe and the US. As the leading exporters of petrochemicals in the past, both are now switching from being net exporters to net importers, and none more so prevalently than the US. As one of the largest plastics producers, both regionally and internationally, Borouge supports the development of the Gulf’s downstream plastics industry and the contribution it can make to Vision 2020 and the growth of the diversification of the UAE economy. Craig Halgreen, vice president global communications of plastics company Borealis, said: “With 4.5 million tonnes of polyolefins (PP and PE) annual capacity versus the 600,000 tonnes per year today, we will rapidly become a major player in the Gulf and global markets. “We are confident that more and more companies will play a role in this diversification of the industry, considering the attractive growth potential of the region.” Expansions underway in the Gulf at the moment will see the production of raw materials for plastics double. In 2009, the total output of the Gulf region was 10.1 million tonnes of polyethylene (PE), which will rise to 21 million tonnes by 2015. In 2009, the level of polypropylene (PP) production was 4.8 million tonnes rising to 9.5 million by 2015. Over the next five years, the region’s polymer production will double, allowing the Gulf to claim around 13 to 14 per cent of the total global polymer production. That’s not bad when you consider the region was a major net exporter of raw materials only a few years ago. Yet before the winning formula was struck upon, there were a few failed attempts at establishing competitive plastics production in the region.
Growth Dimension & Future Gulf Position The Gulf industry’s position as a global hub for the production of plastic resin is large and will begrowing markedly over the next five years or so 2009 Product
Gulf
2015 E World
Gulf Share
Product
Gulf
World
Gulf Share
12.6
Ethylene
32.0
156.5
20.5
% 133.5
%
Ethylene
16.8
Polyethylene
10.7
83.0
12.9
Polyethylene
20.3
113.0
18.0
MEG
6.0
23.3
26.0
MEG
10.8
37.9
28.5
Propylene
5.1
87.5
5.8
Propylene
10.1
105.0
9.6
Polypropylene
5.05
54.4
10.8
Polypropylene
10.2
73.0
14.0
Source: GPCA, 2010
The regional governments want to provide better employment opportunities. In July 2008, Emaar, The Economic City (EEC), which is developing the King Abdullah Economic City (KAEC), signed a memorandum of understating (MoU) with StrateSphere Enterprises in collaboration with PolymerOhio, and the Saudi Arabian General Investment Authority (SAGIA) to pursue the development of KAEC Plastics Valley. The goal was to position KAEC Plastics Valley as a global centre of excellence in the plastics sector. Several plastics companies were expected to set base in the Plastics Valley cluster with investments expected from several countries across the world. However, 18 months later, EEC’s approach to the plastics sector is now put on hold whilst focus is given to other sectors that the city has competitive
advantage in, according to a spokesperson. The spokesperson added: “The company is now unsure whether to further tackle this sector given the regional competition.” Earlier still, Dubai dropped its plans for a dedicated plastics park, alongside the well-established JAFZA free zone in Jebel Ali. Eventually Abu Dhabi hit upon the winning formula, and the Abu Dhabi Polymers Park (ADPP) is set to become the world’s largest plastics park. The Abu Dhabi Basic Industries Corporation (ADBIC), a wholly owned government entity, launched the project. Jamal Al Dhaheri, CEO of ADBIC, said: “Abu Dhabi Polymers Park helps to deliver on the government’s 2030 plan by leveraging Abu Dhabi’s competitive advantage and providing August 2010 gulfbusiness.com
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THE BUSINESS PLASTIC INDUSTRY
relevant value-added services to investors. “It will create sustainable economic value by integrating upstream, midstream and downstream sectors. Developing the downstream polymer conversion industry will create regional manufacturing, jobs, local know-how and a sustainable industrial base. “By 2015 we are expecting to attract
“The clustering model, combined with competitive financing options, form additional key ingredients to establishing the park as a globally competitive production hub.” Furthermore, it will be equipped with specialised technical and logistic service centres, zero tax on company and private income and competitive land lease rates.
Plastics can be sustainable and an environmentally responsible solution to society’s questions. up to 50 convertors and an estimated investment of $2 billion into the area.” This 4.1 square kilometre site in Mussafah is only 20 minutes from Abu Dhabi city and 40 minutes from Taweelah port. It will be advantaged by a developed infrastructure, competitive labour costs, utilities and raw materials (PE, PP, PVC and polyester). A spokesperson for ADBIC said:
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The ADBIC spokesperson remarked: “The regional plastics market is growing at approximately five per cent above GDP growth rates and in addition to local consumption, Abu Dhabi offers an excellent base for exporting to regional and international markets. “Abu Dhabi, and the wider GCC, has abundant and competitively priced feedstock, and low investment and op-
erating cost structures. Coupled with a zero tax base, these factors create a compelling case for polymers conversion industries to be based in ADPP.” According to the spokesperson, there is no issue over feedstock availability. He said that the GCC produces 13 per cent of the world’s plastic raw materials. This is expected to increase to 20 per cent in the next five years. Polyethylene, polypropylene, polystyrene, polyethylene terephthalate (PET), polyvinyl chloride (PVC), polycarbonate and acrylonitrile butadiene styrene (ABS) supply in the region is growing, and by 2016 UAE and GCC feedstock supply is set to grow to 43 million tonnes per annum. The ADBIC spokesperson said: “Petrochemical refining capacity in the region is growing, as is the feedstock supply. It makes economic sense to leverage local feedstock supply with low investment and operating costs to create a robust downstream industry within the region.
THE BUSINESS PLASTIC INDUSTRY
“Moving down the petrochemical chain, the polymer conversion industry adds significant value to locally produced feedstock.” Despite the early setbacks, it is this projected growth that makes Dr AlSadoun confident that by the end of 2015 the Gulf will produce around 13 to 14 per cent of the total global plastics output. Dr Al-Sadoun said: “This has emerged from nothing in very short time, doubling in only five years. The Gulf region is emerging to be the global hub for the production of commodity petrochemicals. Subsequently there is a drive to go into high value products downstream into plastic conversion and specialty products. “In contrast, the upstream markets in Europe and the US are struggling because of ageing facilities, a lack of financing and the high cost of maintenance – this is helping new dynamics in the industry. The Gulf region and China are emerging to be the new centres of gravity for the
global petrochemical industry.” Dr Al-Sadoun argued that because the petrochemical industry in the Gulf was export oriented from conception, no matter how much downstream development there is, it will continue to be a net exporter even though the expansion is phenomenal. The ADBIC spokesperson added: “We expect 30 to 40 per cent of the plastics will be for regional markets, with the remainder catering to international markets.” Natural export markets are to the west as the cheap labour costs in Asia feed the Asean (The Association of Southeast Asian Nations) markets. However, there is concern over EU tariffs on UAE plastic exports, which have stoked fears of trade protectionism. Last month, the EU imposed new tariffs on the UAE, Iran and Pakistan for material used in plastic bottles and films, arguing that price undercutting was harming EU producers. If the plastics converting units in the GCC are to succeed, they have to focus on exporting finished products
to major global markets. Thus they will be competing with the low cost converting centres of Asia, who supply the bulk of plastics products to the developed world. Dr Al-Sadoun said: “In certain products we can compete head-on with Asean producers, such as in plastic films. But in blow moulding the products are usually not for export as the cost of shipping is high as they are bulky products. On the film products you can achieve a high density in packing the products. “We have already seen some producers in the Middle East exporting to Europe, the US and even Canada.” Sheth concluded: “There are numerous factors that will make or break this initiative of developing the plastics industry in GCC, and it is still too early to give the verdict. The economic downturn in 2008-09 has considerably slowed down the investment in plastics parks, and it will take at least a couple of years before we have a clearer picture’’. ■ gb@motivate.ae
August 2010 gulfbusiness.com 51
THE BUSINESS SPORTING ARABIA
The Gulf gets its game on Football sponsorship and Formula One have helped put the Gulf on the sporting map, but the ambitious region is now setting its sights on the Olympics, the World Cup and other global fixtures. ROBERT BAILEY looks at the hurdles ahead.
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decade ago major sporting fixtures were virtually unknown in the Gulf, but big-ticket events have now become regular features on the sporting calendar. Much of this has resulted from persistence and big spending, which is making the region’s plans increasingly ambitious. The motive is straightforward, since the Gulf’s administrative elites see sporting events as making an impact on the world stage, with the host gaining an affirmation of status and a demonstrative way of putting their countries on the map. As a consequence the region’s sports developments are pressing ahead in spite of a squeeze on capital expenditure in other areas. Doha, for example, has built on its successful staging of the Asian Games in 2006 and in March this year was the venue for the International Association of Athletics Federations championships.
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Dubai is host to two major tennis championships as well as prominent golf tournaments. The annual Dubai World Cup horse race, now held at the new Meydan racecourse, is ranked as the richest event in the sport with prize money totalling $10 million. From football, rugby, cricket and tennis, athletics to motor sports, golf and horse racing, the list of events continues to grow. Oman is preparing to host the Asian Beach Games in Muscat later this year. An athletes’ village able to accommodate 3,000 participants, grandstands as well as hotels and other visitor facilities are being developed on a one million square metre site for the event. Led by the buying powers of Abu Dhabi, Qatar and Dubai, the Gulf has entered the big league of world sports. At the highend of the spectrum, Formula One has taken root. Bahrain staged its first Formula One Grand Prix in 2004 and as a consequence has developed a number of
other motor-related competitions drawing in visitors and income for the island. Initial costs are huge though. Abu Dhabi’s Yas Marina circuit is thought to have cost close to $800 million, with Formula One franchise holder, Bernie Ecclestone, reported to have received $80 million in fees. The commercial side of this raised profile for sports is also apparent in
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sponsorship agreements entered into by the region’s airlines, including Etihad, Gulf Air and Emirates. The latter has increased its sponsorship budget
substantially in the last decade. Most notably, Arsenal a leading English football team, has renamed its stadium after the airline and the clubs shirts carry
Abu Dhabi’s Yas circuit is thought to have cost $800 million, with Bernie Ecclestone reported to have received $80 million in fees.
Emirate’s logo, but there is also sponsorship deals in motor sports and rugby. Gulf investors are shareholders in some of Formula One’s leading racing teams. Abu Dhabi’s Mubadala Development Company holds a five per cent stake in Ferrari, and Bahrain’s Mumtalakat Holdings has a 30 per cent stake in the McLaren team.The Williams motor racing team, meanwhile, has set August 2010 gulfbusiness.com
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up a centre in Qatar to develop new car technologies. Money is talking big elsewhere as an increasing number of high profile managers, as well as players, from Europe and Latin America are lured to the Gulf’s club football scene. Following last November’s Abu Dhabi Grand Prix, a friendly match was played between a UAE 11 and the English Premiership side Manchester City, now owned by multi-billionaire Sheikh Mansour bin Zayed al-Nahyan. The reward for the football club taking time out from hectic domestic fixtures to play at Qatar’s Khalifa International stadium was a rumoured $7.5 million match fee. The event was a precursor to Abu Dhabi’s hosting of the FIFA Club World Cup, due to be played later this year at the 50,000 seat Zayed Sports City stadium and 42,000 seat Mohammed
We hope that hosting an event like the World Cup will be a catalyst for expanding Qatar’s tourism industry. bin Zayed stadium, with UAE club Al Wahda the local participant. The emirate’s aim to become a regular international sports venue is also illustrated by Abu Dhabi’s Mubadala Real Estate & Hospitality’s plans to invest in a 65,000-seat stadium with a retractable roof. Football is the region’s main sports focus and there are high hopes that Qatar’s bid to host the 2022 football World Cup will be successful. Hassan Al-Thawadi, chief executive of Qatar’s bid committee, said: “We hope that hosting an event like the World Cup will be a catalyst for expanding the tourism industry which
will be a great boost for the economy and Qatar’s diversification plans.” Dubai has also expressed keen interest in staging the Olympic Games in 10 years time. A working group of government officials and private sector representatives to examine a bid has been established by Sheikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai. A prominent element would be a new stadium to accommodate 80,000 spectators. Sheikh Mohammed stated in April: “We will have to take an honest look at our weaknesses as well as our strengths. I can assure you of this
COMPETING FOR THE BIG PRIZES
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btaining major international sports events is a tortuous process with unpredictable outcomes. Things are not all plain sailing, literally, as Ras Al Khaimah found when it was unable to host the America’s Cup yacht competition after last-minute objections, ostensibly on technical grounds, by the US challenger. Doha’s failure last year to make an International Olympic Committee shortlist bidding for the 2016 games was also a bitter disappointment. Officially, the bid’s weakness was put down to the dates in October proposed by Qatar officials in order to avoid the most extreme summer heat and ambient temperatures of up to 50 degrees Celsius. But hosting an Olympics later in the year is not without precedent. Tokyo and Mexico held their games in October and the Sydney games were held in September, while the 1956 Melbourne games stretched into December. The International Olympic Committee said one of the reasons it did not select Doha for the shortlist of four candidates was Qatar’s short sporting legacy.
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However, the bid team’s leader, Hassan Alibin Ali, was quoted as saying: “This is not a technical decision. It is a pity they have closed the door on the Middle East.” In May, it was reported that Dubai had withdrawn from plans to host the 2013 World Swimming Championships. Julio Maglione, President of the Federation Internationale de Natation (Fina), the global governing body for swimming, commented: “We believe that at this stage it is of paramount importance to further improve the impact of aquatic disciplines in this Middle East before staging a Fina World Championship with our five sports.” However, Dubai is to host Fina’s short course swimming championships using a 25-metre pool in December. Saudi Binladen Group was awarded a $300 million contract to design an aquatic sports centre and pool for the event in 2010. Observers sense that politics lurk in the background, not least the thorny issue of the recognition of Israel and admission of the latter’s athletes and officials in any large numbers for major international competitions. In this respect, the Gulf’s ambitions to host
the biggest international sports events face a dilemma. However, difficulties can be overcome. This year Shahar Peer, the Israeli female tennis player, became the first Israeli athlete to compete in the UAE during the Dubai tennis championships. Contests that involve teams and mass participation, with the raising of flags and the playing of national anthems, may provide a sterner test. There is a balance to be reached against perceived benefits and investment costs, as well as political risks. For an established major global metropolis such as London, arguments about raising the city’s international profile seem weak and any legacy gains in terms of developing the east side of London for the 2012 Olympic Games have still to be measured. For the Gulf, and other emerging regions, it is an entirely different ball game. The benefits of hosting an Olympics for a city and country could fully justify the promotional hype by providing a powerful stimulant to economic and social development, as well as raising the national brand and future global competitiveness.
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QATAR PRESSES CASE TO HOST WORLD CUP
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atar was encouraged in its bid to stage the 2022 World Cup in April following backing from FIFA’s President, Joseph Sepp Blatter, when he declared: “The Arab world deserves the World Cup and Qatar has a good chance to become the first country from the region to host it.” In May, Qatar’s 2022 bid committee, headed by chairman Sheikh Mohammed bin Hamad bin Khalifa Al-Thani, delivered Qatar’s 750-page bid book and additional seven binders with over 2,000 pages of supplementary documents to Blatter and FIFA
have been guaranteed for FIFA’s use during the tournament. Al-Thawadi believes Qatar’s compact size could be a major selling point in its bid. By 2022, Qatar will also have a major new international airport in operation as well as a new overground and underground railway system. “Fans would not have to worry about booking accommodation in different cities in order to follow their teams throughout the tournament. Qatar 2022 would be a tailor-made, compact World Cup with stunning stadiums and seamless transportation,” he said.
Secretary General Jerome Valke. Promoted as the first carbon-neutral World Cup, new technologies will be utilised to provide groundbreaking cooling systems for 12 stadiums, fan areas and training grounds. Spectators, players and officials will be able to enjoy cool and comfortable open-air conditions not exceeding 27 degrees Celsius. Qatar 2022 chief executive, Hassan Al-Thawadi said: “People in the Middle East are longing to host such a big football tournament. We are very excited by the challenge. For the World Cup, the cooling systems that Qatar is developing for stadiums could be a real asset for other countries with warmer climates around the world.” Qatar has unveiled plans to build three new stadiums, as well as to upgrade two others, as part of its bid to stage the World Cup. Qatar will also promise to have 110,000 hotel rooms and serviced apartments by 2022, 90,000 of which
Qatar has embarked on research into cooling methods that are effective and environmentally friendly. Three 45,000-seat air-conditioned stadiums will be built employing solar technology to ensure temperatures rise to no higher than 27 degrees Celsius on the pitch. Nasser Al Khater, communications director of the Qatar 2022 bid, says that a cooling system has already been used at the 18,000-seat Al Sadd stadium in central Doha. “It has worked to perfection, so rolling this out to the other stadiums will not be a problem as it is part of our country’s development goal.” Qatar also intends to share its cooling technologies with the rest of the world and work with FIFA to donate 170,000 stadium seats from its modular stadiums to developing countries at the end of the competition. “This is a bid for the region and for the world. Qatar is ready to deliver,” said Al-Thawadi.
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though, if we decide to make a bid for the Olympics, we will be in it to win.” Sports events have not been a casualty so far in Dubai’s struggle to reschedule its huge debt mountain. In March this year the $2 billion Meydan horse racing complex was inaugurated and held its first Dubai World Cup event. In Dubai Sports City, managers have said that progress is ongoing on a cluster of major venues due to stage sports events as well as training facilities and specialised academies for golf, tennis, football, rugby, cricket and swimming. In April, the International Cricket Council, which relocated from Lords Cricket ground in London to Dubai in 2005, moved into new accommodation in the sports district. Khalid Al Zaroomi, president of Dubai Sports City, said: “The opening of the ICC headquarters is the first of many projects which are soon to open as Dubai Sports City comes to life.” A cricket academy is nearing completion following last year’s inauguration of a new 25,000 capacity
THE BUSINESS SPORTING ARABIA
cricket stadium which draws large crowds from Dubai’s foreign residents, particularly from India, Sri Lanka, Pakistan, Bangladesh, England, Australia and South Africa. Dubai Sports City has been described as the world’s first integrated sports community. Formally launched in 2004, the $4 billion development is a 4.6 million square metre mixed-use sports
60,000-seat stadium and a 5,000-seat field hockey venue, as well as a 10,000-seat indoor arena will be core elements of Dubai Sports City once fully finished. Various academies to develop young people’s skills in football, golf, hockey, tennis, rugby, swimming and athletics are also central to the development, which will also feature
Sports events have not been a casualty so far in Dubai’s struggle to reschedule its huge debt mountain. development designed to eventually include real estate, commercial property and retail outlets in addition to major sports venues and academies. The first completed project was the Els golf club. Named after Ernie Els, the club boasts an 18-hole championship standard course. In addition to the cricket ground, a
advanced medical facilities for treating sports-related injuries. Saudi Arabia is also seeking to emulate this integrated concept with the King Abdullah Sports City project. The planned $4 billion mixed-use development comprises five major sports venues to be built north of Jeddah on a nine million square metre
site. The main feature will be a 100,000seat football stadium in addition to indoor stadiums as well as a specialist sports hospital. Jeddah’s mayor, Adel Fakiah, describes the planned development as, “a huge cultural landmark and a symbol of comprehensive development in the Kingdom which will boost sports and youth activities in Saudi Arabia.” The Basra Sports City project has also been launched in Iraq at a cost of $550 million. Two stadiums are planned, with the largest able to seat 65,000 spectators and a smaller one able to accommodate 20,000. A range of additional sporting facilities and four hotels are part of the plan, which is aimed at hosting the 2013 Gulf Cup of Nations football competition between the six GCC states, plus Yemen and Iraq. Two American contractors, 360 Architecture and Newport Global, are involved in the construction project with local contractor Abdullah Al-Jaburi. gb@motivate.ae August 2010 gulfbusiness.com
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THE BUSINESS BAHRAIN
New kid on the block Bahrain is once again reinventing its offering to the global financial markets by hosting the very-first cross border multi-asset financial exchange in the MENA region, as MICHAEL GORDON discovered.
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ith its country-wide free zone status, singular regulatory framework, and a financing pedigree dating back to the 80s, Bahrain was the perfect place for the Financial Technologies Group (FT Group) to establish the first cross border multiasset financial exchange in the Middle East and North Africa. Arshad Khan, managing director and CEO of the Bahrain Financial Exchange (BFX), and BFX Clearing and Depository Corporation (BCDC), which are wholly owned by FT Group, has spent the last six months in the Middle East, getting familiar with the nuances of the capital and financial markets of the region. Ever since Bahrain presented itself as somewhat of a safe haven in troubled waters for the banking community in the 1980s the country has continued to diversify its offering to create niche solutions. Most recently this has been Islamic financing. And although Bahrain has had a stock exchange for years, this financial exchange will be the first to be internationally accessible, which has long been a concern of foreigners looking to invest in Middle Eastern markets. Khan was the ideal candidate to set up this exchange, as he was able to deploy a business model he had created and developed from invaluable experience gained in India and the United Arab Emirates. In 2001, the FT Group approached
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the Indian government to set up a full commodities and derivates exchange in there. After a lot of discussions permission was granted early in 2003. In its first three to five years this exchange was ranked in the top 10 worldwide. Today it is placed sixth and does $5billion of trading every day. Furthermore, the FT Group currently has permission to set up a stock exchange in India, and, as part of multi asset profile, BFX will also become a stock exchange sometime next year.
Under his stewardship, FTME successfully rolled out automation solutions for brokers in the regional exchanges and established the Financial Technologies Centre for STP Services (FT-CSS) in the UAE. Khan’s track record and experience in the region helped him build a strong relationship with the Economic Development Board of Bahrain (EDB) and the Central Bank of Bahrain (CBB). As a result, the idea for BFX crystallised and was formally established in 2009
The system we have in place can decide a loan in less than one minute, whereas the conventional method can take from three hours to three days. Khan added: “Upon the success in India, we were invited by Dubai to set up an exchange in joint venture with the government.” In November 2004, Khan set up the Dubai Gold and Commodities Exchange (DGCX), in conjunction with Dubai Multi Commodities Centre (DMCC), using the Indian business model. That model has since been replicated in other parts of the world, and Khan has gone on to establish the FT Group’s business in the Middle East. Financial Technologies Middle East (FTME) is a 100 per cent owned subsidiary of FT India, which was incorporated into the DMCC free-zone in Dubai.
with Khan serving as its first Board Director. BFX is the first multi-asset exchange in the MENA region, which will be internationally accessible to trade cash instruments, derivatives, structured products and Sharia’ahcompliant financial instruments when it opens in October. Khan said: “Currently there is a lot of money in this region but it goes out to Western or Asian markets because there has been no other option. “Our research of user requirements highlighted the index product on the conventional side, and on the Islamic side there was a need for commodity murabaha, which offers a tool to
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THE BUSINESS BAHRAIN
One of the key advantages of working with Bahrain was the flexibility to allow cross border investment. manage the lending and borrowing of money in Islamic markets. “The automated system we have in place can decide a loan in less than one minute, whereas the conventional method can from take three hours to three days, and it can be a very expensive and cumbersome process. “From the UAE we recorded heavy interest in index products – people, really looking forward to trading on the futures market on the index products we will launch. “We are also getting a lot of interest towards commodities, and have come out with an innovative contract called ‘Gold Mini”, which is just 100g compared to the usual 1kg contract,” he added. By being a multi-asset exchange, the BFX can offer market users the benefit of being able to trade multiple products on one environment providing a reduction in trading costs, risk management
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WHAT THE NEW EXCHANGE WILL TRADE Cash instruments: Equities, bonds, notes, certificates of deposit, depository receipts, Exchange Traded Funds (ETFs), Exchange Traded Commodities (ETCs), Real Estate Investment Trusts (REITs)
Derivatives instruments: Swaps, futures, options and swaptions. Underlying can be commodities, currencies, equities, financial instruments or indices
Sharia’ah-compliant financial instruments: Equities, Sukuk, Murabaha, Wakala, Islamic Options, Islamic Repo, Islamic ETFs, Islamic REITs.
synergies and access to deep liquidity pools. Khan said: “When we met the Bahrain government two years ago we convinced them that a single asset exchange would lose popularity in favour of multi-asset platforms. This is largely because investors can split the risk; those exposed to a single asset class in the past got burnt, especially those in real estate. “With a broad-based portfolio you are hedging your risk, and most asset classes are inversely related, so when one goes up the other goes down,” said Khan. Having a multi-asset exchange license the BFX can offer products and services to both the Islamic and conventional markets with the objective of facilitating investment, risk management and raising capital. However, Khan warned: “A multi asset exchange licence can be a virtue and a vice, because the market can expect too much of you and its impossible to make every product a success.” From a commercial viewpoint, the BFX has conducted a needs assessment of the market by visiting over 200 key institutions in the region in order to ascertain the range of products the industry requires. ”The response was exceptionally positive, resulting in a phased roll out plan being adopted with a roadmap of conventional and Islamic cash instruments and derivative products developed,” said Khan. The BFX has chosen the Kingdom of Bahrain as an ideal location to operate in for its well-known reputation in financial market history, and a high banking sector concentration. In addition to that, Bahrain’s market orientated approach toward becoming a regional and international financial centre has made it home to over 400 licensed financial institutions, giving access to a deep and diverse financial community. Khan added: “One of the key advantages of working with Bahrain was the flexibility to allow cross border investments so someone in Jordan can buy into the Bahrain exchange. In most other markets there are many
THE BUSINESS BAHRAIN
restrictions on international trading.” Bahrain is also widely regarded as the best regulated financial centre in the Middle East, with the BFX being established to trade and clear multi assets and regulated under the governance of the Central Bank of Bahrain (CBB), whilst also enjoying the support of the Bahrain’s Economic Development Board (EDB). “Bahrain is a very unique country in terms of its free zone status – with the entire country being free, so you can set up anywhere. “Bahrain also has a single regulatory framework. The Central Bank of Bahrain supervises all of the verticals of financial markets. This gives a lot efficiency as there are many verticals,” said Khan. The BFX platform for multi-asset class trading will offer market participants the ability to trade multiple asset classes on one market. The BFX product portfolio can be split into three main categories: cash instruments; derivatives instruments; and Sharia’ahcompliant instruments. The BFX also plans to have around 200 financial companies as members. The members of the BFX can then offer products and services to end clients giving them access to risk management and investment solutions. “We are targeting 40 to 50 brokers, before we go live in October, throughout MENA and Indian subcontinent,” said Khan. He added: “Consciously, we don’t want to offer everything on day one, so we will launch products in two phases. In October we will start with derivatives, like commodities, currencies, energy products and
innovation indexed products on equities. We have structured out products to encourage both institutions or retail to invest in our market – this is the only way to increase liquidity. “Once this derivatives segment is a success, after six months we will launch our share segment – the equities market – trading in bonds, ETFs, etc.” Although the FT Group has exchanges in India, Singapore, Dubai and now Bahrain, each will operate its own jurusdiction so each has its own clearing corporation. “At this stage what we have is exchange cost listings of products between exchanges. First the exchanges must become established and successful and then there are plans to integrate them,” said Khan. “We expect cross exchange to be available in one to two years so Bahrain could buy Singaporean currency or Singapore could buy Islamic financing.”
In addition to the financing services, the FT Group has also established a training centre in Bahrain. The BFX Training Institute is located within the BFX, and it will offer an extensive course programme to meet the needs of a diverse user profile covering a wide range of financial markets and associated financial instruments with the objective of introducing market concepts to new users as well as enhancing and refining current knowledge. The Institute is partnered with Financial Technologies Knowledge Management Company, which is a key player in the training and education field. The BFX Training Institute also plans to partner with other training Institutes to provide a world class programme of financial services in training and education for the MENA region. Khan said: “Without education this market will not be successful.” BFX is undoubtedly a unique product it seemingly addresses a repeatedly voiced concern in the region. However, the global financial market is still very much in the doldrums, so it will be interesting to see how investors rush to secure membership in the last few months before the exchange throws open its doors. The ultimate goal is 200 members, but a much more moderate target of 40 to 50 has been set for the inauguration. ■ gb@motivate.ae August 2010 gulfbusiness.com
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THE BUSINESS CORRUPTION
Anti-corruption efforts intensify As the Middle East’s economy emerges from the doldrums, several transparency lessons have been learnt, as ROBERT BAILEY discovered.
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he global financial crisis has put the spotlight on the region’s customary lending habits as well as raising the much wider issue of corporate governance. Difficult questions have been raised and they are not going away. More often than not, leading companies in the region are affiliated to prominent families, which are traditionally very wary of public scrutiny. One of the main lessons drawn from the debt defaults by two Saudi family-owned businesses in 2009 was the danger of “name-lending” with loans agreed and based on the strength of a reputation. Absence of disclosure has allowed some conglomerates to accumulate debt with few questions asked, resulting in an overleveraging far beyond any capacity to repay borrowed sums within agreed timelines. Neglect of basic corporate best practice may have been acceptable when the region’s economies were less developed and less integrated with the rest of the world. International lenders are now demanding much more clarity on ownership structures – how money is going to be used and how loans will be repaid. Another serious threat to sound busi-
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ness practice is the ability of corrupt practices to flourish with such a lack of transparency. While eyebrows may have been raised on occasions in the past, few in the region, let alone outsiders, have questioned time-honoured practices involving facilitation payments in order to pursue and conclude business dealings. Insouciance towards sweeteners and inducements are increasingly challenged by much tougher legislation, both within and outside the region.
could destabilise financial systems and efforts to develop as regional and international financial centres, as well as attract foreign direct investment. The intent has been declared but there is a long hard road ahead. The 2008 Corruption Perceptions Index, published by Transparency International (TI), had 13 countries in the Middle East and North Africa region scoring below five points and only five countries scoring above five. The Berlin-based organisation says that points awarded below
There has been an increase in corruption cases in the UAE involving high-level executives. Most of the region has now signed up to international agreements for cooperation against money laundering and corruption. The Arab Administrative Development Organisation’s conference in Cairo in July had as its central theme national anti-corruption strategies and delegates were unanimous in calling for the adoption of national laws to realise good governance and promote transparency. The Gulf has been pushed into stepping up its fight against financial malpractice and bribery, activities that
five should give cause for concern. Yemen is given just 2.1 points while right at the bottom of the nations list, Iran rates a dismal a 1.8 points, barely above Afghanistan with 1.3 points and Somalia with 1.1. The good guys in comparison are New Zealand with a 9.4 score, Sweden with 9.2 and Germany with 8 points. TI’s latest 2009 index records some improvement within the GCC. Bahrain hits the mark with 5.1, Oman 5.5, the UAE 6.5 and Qatar 7. However, Saudi Arabia still only records 4.3 points out
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of a possible 10 and Kuwait just 4.1. The absence of transparency in accounts and decision-making in particular, encourages a perception of corruption in the executive branch. Government procurement remains an area of concern, TI concludes. Saudi Arabia has formed a General
of the judiciary and governors, as well as members of the National Assembly. Any convicted officials will be forced to return illegally obtained funds and barred from public office. The move follows the removal from office of Minister of State Mansour Bin Rajab in March after an investigation
The Gulf has been pushed into stepping up its fight against financial malpractice and bribery. Auditing Bureau as a watchdog over public funds following criticism by the kingdom’s consultative council (Majlis al-Shura) that some $30 billion has been wasted or misappropriated. In 2007, Saudi Arabia’s King Abdullah approved a “national strategy to protect honesty and combat corruption”. Critics observe that the kingdom’s main weakness is its lack of accountability and transparency with the ruling family controlling virtually all-state income, mostly from crude oil sales. Bahrain’s King Hamad recently approved legislation designed to combat corruption in government, nearly eight years after the measure was originally proposed in the National Assembly. Senior officials will now be required to disclose their wealth, including ministers, senior civil servants, heads of Bahraini diplomatic missions, members
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by the island’s anti-money laundering directorate involving sums up to $30 million. He is the highest-ranking Bahraini official ever to be charged with corruption. Oman has seen several high-ranking government officials and a member of the State Council successfully prosecuted in recent years. Kuwait though has seen no conviction for bribery in almost 20 years. This does not indicate an unblemished record and the emirate is set to adopt new laws to promote transparency, and strength its battle against corruption with a proposed Public Authority for Integrity (PAI). According to Salah Al Ghazali, chairman of the Kuwait Transparency Society, the formation of the PAI results from a merger of four separate pieces of legislation, including the anti-corruption
law, the fiscal stability law, the conflict of interest law and the informant protection law. Qatar, along with others in the Gulf, has ratified the UN Convention for Combating Corruption and has also established a National Committee for Integrity and Transparency. However, the emirate still has no independent auditing body outside of the executive. There has been an increase in corruption cases in the UAE involving high-level executives, including local citizens, which has seen a strengthening of the country’s Financial Audit Department. In 2008, Dubai set up a special taskforce to investigate alleged corruption. Several senior executive were detained and several major companies were caught up in the investigations. Nasser al-Naimi, director-general of the UAE Ministry of Interior office is clear that “it is financial crimes that are the big challenge ahead.” Increasingly offences are being made public as financial monitoring intensifies. The chairman of the State Auditing Court, Hareb Al Amini, says: “We are pursuing our monitoring with the support of the supreme authorities. We will exert strenuous efforts to preserve public funds in line with the intensified measures undertaken by the UAE to combat all forms of corruption and other financial offences.”
THE BUSINESS CORRUPTION
However, it remains to be seen whether the various initiatives undertaken and promised in the Gulf are genuinely down to an increased political will to fight corruption, or are largely window dressing to assuage domestic criticism and the adverse perceptions harboured by foreign trading partners. What is certain is that malpractices involving foreign companies are unlikely to go undetected in the future. A new UK Bribery Act became law in April making it easier for large companies to be prosecuted. Until recently, UK prosecution authorities have been seen as considerably less pro-active than their US counterparts who have frequently investigated and prosecuted offences under America’s Foreign Corrupt Practices Act. The scope of the new UK law is deliberately broad and applies not only to cash inducements, but also to gifts and other advantages. No exception is made for small facilitation payments paid to officials to smooth relevant official actions. No matter how small or routine, or expected by local customs, they would be illegal. The act also has extra territorial jurisdiction. International law firm Norton Rose, believes that extra ter-
ritoriality in matters relating to financial crime will become increasingly common throughout the world as time passes. A spokesperson said “It is important to ensure that the third party is aware of and commits itself, to the anti-bribery policies of the principal.” Legal experts believe that any company not actively examining the history of its third-party relationships to determine exposure to bribery and corruption will have significant difficulties in being able to demonstrate compliance with the new law. The legislation is widely seen as a reaction to the controversy surrounding BAE Systems’ Al Yamamah military aircraft deal with Saudi Arabia and subsequent intervention by the country’s Attorney General to drop a prosecution against the company for reasons of “national interest”. BAE subsequently agreed to pay fines totalling $450 million. Over the last 20 years, Al Yamamah is estimated to have brought in $65 billion in revenue for BAE. Reports suggest that $10 billion may have been distributed in corrupt commissions via a web of agents and middlemen inflating the price of military aircraft supplied by more than 30 per cent.
UK sub-contractors for engines, weapons and electronics are also said to have been required to pay commissions, with payments made via an anonymous BAE offshore company known as Poseidon based in the British Virgin Islands, as well as other Panama–based companies. The vastness of the BAE Al Yamamah deal and the lurid allegations of bribery and corruption surrounding it have never drawn any detailed official response, though the former Saudi ambassador to the US, Prince Bandar, described them as “grotesque in their absurdity”. The truth about arms deals is almost impossible to unravel, but large scale contracts, even those involving sensitive areas such as defence, are likely to come under much greater scrutiny. The Arab world is unlikely to be able to ignore corruption in the future. Nevertheless, anti-corruption policies will only work effectively if backed and implemented by legal measures and a fully independent judicial system able and willing to address corruption wherever it emanates, including the top echelons of government. ■ gb@motivate.ae
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THE PEOPLE RONALDO MOUCHAWAR
Market trader Souq.com chief executive officer, Ronaldo Mouchawar, loves using his start-up to help others kick-start their own businesses, ZARINA KHAN reports.
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eing an entrepreneur is a rather demanding job. But when your young business is an online start-up and your portal is one of the Arab world’s liveliest e-commerce sites, it becomes a job that never switches off. So it’s no surprise then that Ronaldo Mouchawar, chief executive officer and co-founder of Souq.com – the region’s major online shopping and delivery service platform – is a man with a lot on his mind. Moucharwar is at the crossroads of small and medium enterprises, evolving technology, social media and economic empowerment, and to keep up with it all he is the kind of man with a laptop open, a smartphone on at all times and an iPad on order. It’s not what the energetic Syrian expected himself to be doing when he first went to university in the US to study computer engineering. But right now, it’s exactly where he wants to be. “I think the internet is amazing! So many companies come out of nowhere and create valuable space out of nothing – like the Twitters of the world. That’s the model and the creativity and interaction that excites me,” Mouchawar said from Souq.com’s new Dubai Media City offices. The self-declared internet-lover had been working as a technical and systems consultant for EDS when he decided it was time to do more. He had always been attracted to computers, the internet and business.
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With his Master’s degree in Digital Communications, a Bachelor’s degree in Electrical and Computer Engineering and quite a few years of experience in the corporate world, Mouchawar decided to move back to the Middle East and put some of his many ideas into practice. The concept of an online auction site attracted interest, and in 2005 Souq.com was launched. But the basic online auction site didn’t seem to be enough. Mouchawar and his team soon realised that onedimensional platform was too basic and too easy. The market had greater demands, and the technology allowed for far more. Soon Souq.com was made into more of an e-commerce site, and since then the portal has evolved even further and is something like the Arab world’s eBay.com.
expanded into the Saudi market to cater to the e-commerce needs of the Gulf’s largest country. Souq’s Saudi platform took the unique needs of the Saudi population into consideration, with Arabic as its standard language, Arabic customer relations managers and a local team in Saudi driving the business. Another year later, a special section on the site called Souq Motors debuted in the region following the runaway success of the original site’s ‘Cars, Motorcycles and Boats’ area. Going beyond the standard Souq.com listing style, Souq Motors was the first Middle Eastern car portal to offer the Best Offer option, which is an online version of bargaining. And two years on from then, in April 2010, Souq.com became the first online
So many companies come out of nowhere and create valuable space out of nothing – like the Twitters of the world. “We started with the internet auction platform and then moved on to fixed price selling, we added stores to cater to businesses, a motor vertical for dealers and users to shop for cars and a property section. Also, with that sheer volume of traffic we have attracted advertising as well. These are all like separate businesses now,” he explained. Only a year after the UAE and Jordan portal launch, Souq.com was
marketplace to launch in the Arab world’s most populous country, Egypt. Despite worries that the less-developed Egyptian market would struggle to understand and capitalise on the e-commerce site, it has already had positive responses. “We’re doing great. Egypt was a new area of geographic expansion for us but it’s exceeded our expectations, particularly regarding market readiness. We tend to think of the Gulf
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THE PEOPLE RONALDO MOUCHAWAR
as being unusual for the Middle East in its uptake of e-commerce. But with Egypt we’ve seen population also plays a role. In Egypt, Souq.com is a business enabler – particularly for small and medium-sized enterprises. There has been a big uptake in that area,” the Souq.com CEO told Gulf Business. It is the growth and development of Souq.com that Mouchawar finds most exciting, and that is why he is still happily part of the portal when many other online entrepreneurs – like partners Maktoob – would have sold it on years ago. Mouchawar said when Yahoo expressed interest in buying Maktoob in 2009, he knew his Souq.com site had not yet reached its potential and needed to grow. Not being included in the Yahoo deal – perhaps the biggest international sale of an Arab portal, and a huge measure of their ‘arrival’ on the global internet scene – was mutually agreed upon. Souq.com stayed with the Jabbar Internet Group and Mouchawar has continued to grow and evolve the site. “For me, the motivation is very basic – it comes from our users, the members. When we talk to our sellers, you get into what they’re doing, their business, and ideas on how we can help them grow. I can’t help but get a shot of adrenaline from it. Just one of those interactions has me buzzing for days,” he said. The portal has made careers, changed lives and earned livelihoods for uncounted thousands since its launch. In a region where getting approval and setting up a distribution network is difficult, if not impossible, for many entrepreneurs, Souq.com has been able to simplify the process and turn dreamers into businesspeople practically overnight. “When we launched in the UAE, only about two per cent of people shopped on the internet. People said Souq.com wouldn’t succeed in that kind of reality. But I thought the opposite. I believed if we built the right platform people would use it. There are so many small and medium business owners and entrepreneurs – and such a need for job
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The recession has actually helped us. There was a big need in the market for this kind of platform and service. creation – and yet it’s actually pretty hard to get a business started in lots of Gulf countries. There are licensing issues, costs, logistics, etc. But with Souq.com, we make it easy. It’s an enabler of business,” he explained with visible pride. That unique position – effectively serving as a business facilitator in developing markets – also helped the site survive the economic shocks seen across the world and even grow its user base.
“The recession has actually helped us. There was a big need in the market for this kind of platform and service. Souq.com had 55,000 unique sellers in 2009. That is like 55,000 jobs if you understand that sales provide livelihoods. But with Souq.com, it’s done with a far lower start-up cost, far less investment from our sellers, so it is easier. “The good thing is we only make money on the seller’s success. If they sell, we profit. If they don’t, we don’t.
It’s a zero cost for set up. They don’t have to start with an investment in us,” Mouchawar explained. How to attract more users, improve user experiences, expand into more markets, and improve the quality, security and accessibility of Souq. com’s services are constant challenges for the team. “My pipeline of ideas for Souq.com is so full, we will probably never do them all. But that’s not necessarily a bad thing. You try things, see what works, what doesn’t. It’s a constant process. The success is what drives you. It never ends. I am a person who always looks ahead. I am never satisfied with what I have. Once we have something done, we have to ask what’s next. What can we do better?” Which is why Mouchawar sees himself being indefinitely occupied with the Souq.com brand. He believes every market in the Arab world can stand to benefit from its platform and services and there are many more areas to expand into and more innovations to offer. “Our group goal with Jabbar is to be the first $1billion Arab internet company and we want Souq.com to be part of that milestone. We as a group are more focused on the e-commerce industry in the region. At this stage, we want to grow these businesses. We want Souq.com to be part of every Arab internet user’s day. “We are excited to be part of the shift we’re seeing into e-commerce in the region. The bottom line is the more users, the more they fuel the business. It’s not a one-to-many proposition; it’s many-to-many, which is why they’re crucial.” It would seem then that the CEO and Souq.com cheerleader-in-chief will not be arranging a Maktoob-esque sell off any time soon. “A business like Souq.com, it becomes part of your personality. It’s on all the time and so are you. I almost can’t remember what I did before it and I am not sure what I will do after.” And that suits Mouchawar just fine. ■ gb@motivate.ae August 2010 gulfbusiness.com
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THE PEOPLE EXECUTIVE MOVES Standard Chartered Bank has announced the appointment of Taimoor Labib as managing director and head of private equity for the Middle East, North Africa and Turkey region. The appointment comes as part of the bank’s strategic plan to tap into the promising regional private equity market. Labib will be heading a team that will focus on investing in mid-to-late stage companies across sectors with proven growth-oriented business models, positive net cash flow and earnings generation; backed by highly capable and trustworthy management teams. Labib brings to Standard Chartered over 13 years of direct private equity and mergers and acquisitions experience across a wide range of industries and geographies.
Sabre Airline Solutions, the leading provider of technology solutions for the airline industry has made several appointments to its senior management team, following a period of significant growth. Sanjay Nanda will join the company as senior vice president of Consulting and Solutions Delivery. In this role, Nanda will oversee the implementation and delivery of all Airline Solution projects including the migration of LAN, AeroMexico and Volaris onto the SabreSonic Customer Sales and Service (CSS) reservation suite. Nanda was previously at McKinsey & Company and prior to that The Boston Consulting Group.
Novotel & Ibis World Trade Centre Dubai is delighted to announce the appointment of Christopher McFall as director of sales and marketing. McFall will be directly in charge of sales, marketing, public relations and reservation functions for both hotels. McFall gained operational experience in food and beverage in Thailand with Meridien, in South Africa with InterContinental Hotels and in the United States with Hilton Hotels.
Rezidor Hotel Group has appointed Ersin Manaz as director of sales. Manaz has almost 15 years experience in the hospitality industry. He will drive business on the back of the company profile within the region, raising brand awareness within the market.
Unilever, one of the world’s leading Fast Moving Consumer Goods (FMCG) companies has announced the appointment of Yasser Joharji as managing director for the Unilever KSA Business Unit. Joharji will build on his experience handling all of Unilever’s leading brands. He will continue to be based in Unilever House Jeddah, Saudi Arabia.
James Young has been appointed as general manager of Crowne Plaza Dubai, having transferred from Crowne Plaza Abu Dhabi. Young has more than 20 years experience in the industry and started his career at the InterContinental Park Lane in London, UK. Since then, he has worked in several different countries in Europe.
Khalifa University of Science, Technology and Research (Kustar) announced that Prof Chelsea White has joined its team as the department chair, Industrial Systems Engineering and director of the Logistics Institute. In his new role, Prof White will help establish the curriculum for Kustar’s Systems Engineering programme and recruit systems engineering faculty members. He will also be providing leadership for the Logistics Institute, as well as support in the enrollment of personnel. He will be based at the University’s Abu Dhabi campus. Mark Silagy joins the Sabre Airline Solutions team as senior vice president of Customer Care and Support. In this role, Silagy will be responsible for managing and enhancing all aspects of the airline customer experience from sales support through to day-to-day operations. A Sabre veteran, Silagy was most recently senior vice president of Service and Operations Solutions for Sabre Travel Network where he led global customer service and support, business process consulting, and infrastructure and technology support. Prior to that he held numerous roles at Sabre and also spent 12 years with American Airlines.
At Gulf Business we try to keep you up to date on the region’s movers and shakers. If you know of any new faces or company reshuffles, please write to The Editor, Gulf Business, Motivate Publishing, PO Box 2331, Dubai, UAE; fax to +971 4 2827593; or send an email to theresa@motivate.ae. We reserve the right to edit material.
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THE LIFESTYLE COMPETITION
WIN
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A TWO-NIGHT STAY AT ZIGHY BAY RESORT IN OMAN
ix Senses Hideaway Zighy Bay is located on a headland on the northern Musandam Peninsula in the Sultanate of Oman. It is set between dramatic mountains to the rear and a broad sandy beach in front. Zighy Bay is located 120 kilometres, or less than a two–hour drive from Dubai International Airport. The peninsula’s rugged mountains, which rise up to 2,100 metres above the coast and jut into the Strait of Hormuz, have a spectacular fjord-like look. It is no wonder that Musandam is also called “The Norway of the Middle East�. The site of the Six Senses Hideaway Zighy Bay is a secluded fishing village, with villa accommodation and a private marina located between the mountains and the beach. Guests have the choice of three arrival experiences: a scenic 15-minute
T H E
P R I Z E
Two-night stay in a poolside villa, with full-board, at the Zighy Bay resort, anytime before December 20, excluding Eid.
H O W
T O
W I N:
The Question
Six Senses Hideaway Zighy Bay is located in: a) Salalah, Oman b) Liwa Oasis, Abu Dhabi, c) Musandam Peninsula, Oman. Terms and conditions: t 5IF WPVDIFS DBOOPU CF SFEFFNFE JO DBTI PS XJUI BOZ PUIFS QSPNPUJPO PS EJTDPVOU t 3FTFSWBUJPOT BSF SFRVJSFE BOE TVCKFDU UP BWBJMBCJMJUZ 1MFBTF QSFTFOU UIF PSJHJOBM DFSUJmDBUF VQPO BSSJWBM To enter, log onto www.motivatepublishing.com/ competitions and answer the question.
speedboat trip; a winding drive down from the hilltop overlooking the bay; or travel as a companion passenger with the resort’s professional paraglider. A private butler service has been designed to create a unique concept for villa guests from arrival to departure. Six Senses Hideaway Zighy Bay is managed by Six Senses Resorts & Spas, who have developed and operated unique properties in the Maldives, Oman, Thailand, Vietnam, Spain, Fiji and Jordan. The Six Senses core purpose is: “To create innovative and enlightening experiences that rejuvenate our guests’ love of the slow life.â€? The development has 82 uniquely designed villas, each with its own private swimming pool. All villas offer a spacious, personal environment with rustic, chic dĂŠcor and bathrooms extending to an outdoor shower. August 2010 gulfbusiness.com
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Life’s a beach If beach holidays are your idea of heaven, then you won’t find many more idyllic than Shangri-La’s Villingili Resort and Spa – the first luxury resort in the Maldives south of the equator.
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henever you are asked to picture an idyllic beach location in your head, the chances are you will find the genuine article in the beautiful Maldives isles. One heavenly escape is ShangriLa’s Villingili Resort and Spa, which is set amidst white sandy beaches, lush vegetation, 17,000 coconut trees and towering banyan trees. Located in a boutique-style environment, guests can choose from private ocean retreats to tropical tree
house villas with panoramic views. Situated on a 3km long island, the resort offers guests the luxury of space and a range of recreational activities. Couples can enjoy a relaxing atmosphere and innovative treatments at CHI, The Spa, while children can have fun at the Adventure Zone. For a memorable family moment, guests can choose to explore the neighbouring islands by bicycle, gather around a barbecue lunch in the intimacy of their villa, enjoy a selection of fine dining options, or participate in the many waterborne activities available at the resort. Set over two separate pavilions – one for the bedroom and another for the living room – both accommodation styles offer a
spacious garden, a private infinity pool and a wooden deck designed for dining under the stars. The resort’s Beach Villas, located on the sandy beach of Villingili, provide direct access to the turquoise lagoon, while the Deluxe Pool Villas, nestled in rich vegetation, offer perfect seclusion and views of the gentle rolling waves of the ocean. In celebration of Eid Ul-Fitr, the resort is offering a special four-night stay package valid from September 8 to 18, 2010. The Eid Ul-Fitr promotion includes one free night and a range of complimentary benefits, as well as an exclusive 25 per cent discount on the second villa booked, giving guests the opportunity to enjoy the festivities with friends and family.
SLEEPS&EATS Park Hyatt Dubai DO NOT DISTURB!
Deira, Dubai
The Terrace at the Park Hyatt is a must-visit for its enchanting views. Enjoy the glow of sunset while indulging in the vast selection of premium vodkas or take advantage of summer offers, including a free night’s stay when you spend more than Dhs1,500 in their restaurants.
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Armani Ristorante
Armani Hotel, Burj Khalifa, Dubai Surely one of the world’s most fashionable restaurants, Armani’s Ristorante is an elegant space with a menu to match. Dress smart, order the saffron risotto then finish with nougat semifreddo. It will be a night to remember.
Hakkasan
Emirates Palace, Abu Dhabi Feeling in the mood for some upmarket Chinatown goodness? Home to award-winning chefs and beautifully lit, Hakkasan puts a chic spin on Chinese cuisine, with an extra splash of celebrity. The silver cod in champagne and honey sauce is a highlight.
THE LIFESTYLE ART CHARLES POCOCK CANVAS OPINION
Exhibiting the summer’s attractions
Valid for Beach Villa and Deluxe Pool Villa stays, the resort’s Eid package starts from $1,050 per night and includes: one complimentary night when paying for a minimum of three nights; return domestic flights for two from Malé international airport to the island’s Gan airport; a scenic 70-minute flight over the Maldives’ different atolls; daily breakfast for two in Javvu Restaurant; and one complimentary Arabic dinner for two in Dr. Ali’s Restaurant.
BICE
Hilton Jumeirah Beach, Dubai This famous Milanese restaurant is the favourite of many a Dubai dweller, tempting in lovers of both fine dining and rustic Italian fare. Starched white linens, a piano player and superb staff, not to mention the signature seafood linguine, keeps the patrons loyal and loving.
If you are looking to escape from the GCC because of the heat, then there is an incredible array of events worth seeing in North America and Europe. Here is a small collection of ‘must-see’ exhibitions for your travels. At The Museum of Fine Arts in Houston there is Light of the Sufis - the mystical arts of Islam. Among the outstanding objects on view are late19th-century photographs of Sufi dervishes; various examples of kashkuls, or beggar’s bowls; and the aforementioned manuscripts and album folios containing Sufi poetry. Contemporary work includes Parviz Tanavoli, Mehmet Gunyeli, Sevan Bicakçi, Farhad Moshiri and Pouran Jinchi. This exhibition runs until August 8. A Gift from the Desert: the Art, History and Culture of the Arabian Horse will be held from May 29 through October 15 at the Kentucky Horse Park’s International Museum of the Horse, a Smithsonian affiliate in Lexington, Kentucky. This exhibition, presented by the Saudi Arabian Equestrian Federation, features 400 objects from Egypt, India, Iran, Iraq, Jordan, Qatar, Saudi Arabia, Syria, Tajikistan and Turkey, many of which have never before left their native countries, or been on exhibit in the United States. Exhibition masterpieces include: the 4,500 year-old Standard of Ur, one of the most famous artefacts in antiquity; the robes and dagger of TE Lawrence, the British army officer known for his role in the Arab Revolt and popularised in the 1962 movie Lawrence of Arabia; jewel-encrusted swords and armour from various Islamic dynasties; the Kikkuli Text, and the oldest known treatise on horse training, written in cuneiform script on a clay tablet nearly 3,500 years ago. This exhibition runs until October 15. In Liverpool, England, at The Bluecoat centre, there is the Arabicity: Such A Near East exhibition. Six Arab artists have made up an exhibition that is about representations of the self, projecting and protecting one’s own image and personal iconography. The exhibition addresses contemporary Arab concerns, both conceptual and aesthetic. The manner in which the artists negotiate and mediate between various cultural codes and practices is one full of warmth, humour and poetry. The exhibition is made up of works from Palestinian video and sound artist Basel Abbas and artist/film-maker Ruanne Abou-Rahme, EgyptianArmenian artist Chant Avedissian, Lebanese painter and installation artist Ayman Baalbaki, Sudanese-Egyptian multi-media artist Fathi Hassan and Palestinian photographer Raeda Saadeh. The show runs until the September 5 and is part of the Liverpool Arabic Arts Festival. Closer to home is Witness by Mona Hatoum at the Beirut Art Centre. The exhibition, which follows a five-week residency in Beirut, features recent work as well as a number of new installations and sculptures created specifically for the Beirut Art Centre. Witness (2009) (after which the exhibition is named) is a miniaturised rendition in porcelain of the monument of the Place des Martyres in the centre of Beirut. Despite being turned into an ornament, it faithfully reproduces the monument’s mutilation by the bullets and shells of the civil war that it witnessed. Works produced in Lebanon present a continuation of Hatoum’s work in themes taken up by the artist throughout her career, including a new environment of found objects and furniture that have been transformed to create a personal interior/exterior landscape. The exhibition runs until September 9. ■
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Badge of honour? says the 2011 Phaeton is still an enigma wrapped in a Bentley wrapped in a Passat.
ALISTAIR CRIGHTON
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o, a return trip for me, after four years, to the Volkswagen Phaeton, possibly one of the strangest cars to ever grace the roads. And grace is the right word: after all, this is a technological marvel – the People’s Car engineered for people who are very rich indeed. It’s still one of the best luxury cars out there, easily capable of holding its own against corporate barges from BMW and Mercedes. But it still sports that humble VW badge, and, despite success by expensive offerings such as the Touareg in lifting the car-maker’s status, it still looks utterly incongruous on a car like the Phaeton. That’s not helped by the styling, of course, which, as it follows a shared design brief with other VWs, ends up resembling a Passat that’s had a few Bratwurst too many. That’s not to say it’s not elegant; it has some nice lines. It just doesn’t have the stylish sweep of an S series or the brutish presence of a 7.
Driving it is an absolute joy. The technical design brief could have had the Gulf in mind – a car capable of travelling 500km in 40 degree heat at 180 kmph, all while maintaining the inside temperature at a steady 21 degrees. It works, and extremely well, with the air conditioning being the best I’ve used on any car. Performance is excellent, with, in this model, a 4.2 V8 providing enough power to give the heavy car enough push, while handling has to be experienced to be believed: the laws of physics dictate that hurling two and a half tonnes of metal into a corner at speed should be a terrifying, and probably your final act of stupidity.
Not so in the Phaeton, which takes any bend in its very long stride. This model, a customised ‘Individual’ has every extra and gadget fitted: there’s no room here to list them all, but trust me, if it isn’t here, it hasn’t been invented yet. But it’s still hard to see who the Phaeton is aimed at: a perfect car for desert dwelling oil barons, that badge limits its appeal in lands where bling is king. According to VW, sales have been OK in Abu Dhabi, which makes some sense – Abu Dhabians are renowned for their knowledge of what makes a good car, and are more likely to go the anonymous-luxury route. Even in that regard, however, the Phaeton is undermined by one of its own stablemates, the Audi A8, which does anonymity with a little more kudos and, at the top end, with the same V12 engine that powers the range-topping Phaeton is, impressively, the Bentley Continental GT and Flying Spur. So – bargain Bentley or rip-off Passat? Neither. By now it’s been around long enough, and has earned enough of a reputation to be able to stand its own, rather idiosyncratic ground. We’ve come a long way from the Beetle, but the Phaeton has its own charms, all be it for an awful lot more money. ■
MICHAEL GORDON IN THE SWING
Surprise in Open winner and Ryder selection
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he British Open has been and gone and while the tournament was extremely boring to watch, it did throw up some interesting and unexpected results. First and foremost, the winner, Louis Oosthuizen, was hardly known to anyone, and even fewer people knew how to pronounce his name. But not many will forget the performance the 27-year-old South African delivered at the home of golf to capture the title. Oosthuizen blew away the field at St Andrews, and the über relaxed player looked as at ease as Tiger Woods did when he first won the Open a decade ago. This year Tiger failed to deliver the return to form many had punted. He made two double bogeys on his way
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to a 72 and tied for 23rd, his seventh tournament of the year without a win. Meanwhile, ahead of the European Ryder Cup in early October, captain Colin Montgomerie has announced his selection, which was a surprising three-man team, made up of Darren Clarke, Thomas Bjorn and Paul McGinley. Montgomerie said his vice captains had the qualities to help the team regain the trophy from the United States, making it six wins in the last eight events. United States captain, Corey Pavin, has selected four vice captains in Tom Lehman, Jeff Sluman, Davis Love and Paul Goydos. Then in Dubai this month, the two shortlisted candidates on a globetrotting golf challenge, the ‘Wear
in the World Adventure’, played an exhausting 18-holes at Al Badia course in 48 degree heat. This challenge covers nine countries in 50 days in a bid to find a Social Media Catalyst for Adidas Golf/TaylorMade. The Adventure is probably one of the longest running job interviews. Starting off in Germany on June 26, the finalists, Steve Olsen, 25, and Chris Dukeminier, 26, made their way to Norway, the United Kingdom (Scotland), arriving in the UAE (Dubai and Abu Dhabi) on July 17 onwards to Thailand on July 21, then South Korea, Japan and Canada, culminating in the finale planned at the Old MacDonald course at Bandon Dunes, Oregon, USA, on August 10. ■
THE LIFESTYLE TECHNOLOGY
Objects of desire Motorola Milestone XT720 $tba You used to be able to divide phones into four main sub-categories; fashion phones, music phones, camphones and smartphones. Now, we demand that our mobiles be all-in-one super computers, combining all four attributes perfectly and without compromise. In reality, that’s rarely the case – but Moto’s new Milestone certainly gives it a go. This touchfriendly mobile packs a crisp 3.7in screen, 3.5mm headphone socket, Wi-Fi, GPS and a proper 8MP camera with video recording to boot. www.motorola.com
MB&F Horological Machine No. 3 Frog $poa According to fairytales, if a girl kisses enough frogs, one will eventually turn into a prince and they’ll live happily ever after. The same is true for gadget-lovers, the only difference is that the frog morphs into one of these watches. With its goggle-eyed dials it bears more than a passing resemblance to our long-legged amphibian chums. www.mbandf.com
Canon IXUS 300 HS $580 Light travels at 299,792,458 metres per second. That’s fast. It means you need an equally fleetfooted camera to catch it. Many compacts just aren’t up to the job, though – they’re the Wile E Coyote to light’s Roadrunner. But Canon’s 10MP IXUS 300 HS combines a 28mm wideangle lens with a brand new processor containing all the ACME-style tricks needed to snap high speed shots in gloomy conditions. www.canon.com
THOMAS SHAMBLER GEEK SPEAK
Five brings web alive If you stuck your head deep into the interweb this month, you might have heard the term HTML5 pop up once or twice. Now, if you’re anything like me, you will have probably disregarded that term instantly, after all, anything with four capital letters and a number looks like code (and that stuff’s for geeks). But HTML5 is worth knowing about, it’s why Apple abandoned Flash, Google gave up on Gears – and it might get you to give up web browsing for good. Don’t worry, this won’t be a crash course in coding. Essentially, HTML5 just adds some new words to the language that already powers the web. But it’s amazing what you can do with a few words, audio and video tags will let music and movies be embedded without the need for plugins (meaning they will work on mobiles without destroying your battery). Hence, Apple’s reluctance to allow Adobe’s Flash plugins on the iPhone. And there’s more – combined with the latest version of styling language (called CSS3 for you proper tech swots) – HTML5 will let graphic designers produce magazine-style layouts with a huge variety of fonts and controls. In fact, HTML5 will allow dull website to become juicy web apps that will even work when you are offline (which is why Google ditched Gears). Still with me? Good. To sum up, this means the days of web browsing are coming to an end. And in its place you’ll find full-blown immersion, with your favourite sites (if they can be called that anymore) fully customisable, not only in style but content, too. But be warned, we’re a few years off from that. HTML5 support varies between browsers, and the final spec won’t be agreed upon by all the big players for a while. That gives mavericks like Apple license to add their own features, and that means a surge of new browsers are soon to start appearing. Until then, you’re stuck with a buggy old version of Internet Explorer. Or, if you’re really behind the times, an old school (but nicely designed) magazine that not only works offline, but in the pool too. ■ Thomas Shambler is the editor of Stuff Magazine Middle East. thomas@motivate.ae
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THE ESSENTIALS BOOKS
IT ‘Clouds’: blue-sky or hot air?
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harles Babcock is something of an authority on cloud computing, having been the editor-at-large for InformationWeek for 20 years, reporting on the major trends in computing likes web services, virtualisation and cloud computing. He argues that cloud computing is the “biggest game-changing force in business since the advent of the internet”. Key to its success is lowering and simplifying the cost of operations while proving flexibility and power. But for many, cloud computing is as clear as fog – no more than a buzzword that few understand. In his book, entitled Management Strategies for the Cloud Revolution, Babcock argues that cloud computing is THE future and that those that do not embrace it early will be left behind. Furthermore, Babcock suggests that the fact that cloud computing integrates the latest proven technologies – such as mainframe computing and virtualisation – as well as a number of cultural changes, proves this truly is leading a paradigm shift. In a nutshell, cloud computing is like renting an IT infrastructure over the internet over the cost of developing your own. Babcock suggests that cloud computing can dramatically cut costs, provide ubiquitous access, provide unprecedented agility and steady traffic flows. Although Babcock is an academic, specialising in information technology, he is not entirely sold on the seemingly little fluffy cloud, and he is quite right to point out that, right now at least, there are a number of short-comings. Most worrying is the issue of security.
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As the book suggests there are mounting concerns that competitors could access information stored in the cloud, and also that information could be lost all together as end users are unable to pinpoint exactly where there data is stored. This book provides the tools every manager needs to create a new business strategy and to harnesses the power cloud computing has to offer. Overall this is a well balanced and informative book that clearly defines cloud computing and outlines the impact it is likely to have.
Motivation over money
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ave you ever felt totally disinterested in your job? Would a pay rise solve the problem? Dave Ulrich argues that ‘throwing money at the problem’ is not the solution. In his later book, The Why of Work, Ulrich argues that employees are actually motivated more by a sense of worth, a sense of purpose, or of contribution. Owning a project is often more rewarding than the salary.
According to the renowned management expert, employees who find meaning in their work are more competent, committed, and eager to contribute – and their contribution will result in increased customer commitment, which delivers a winning performance on the bottom line. Ulrich attempts to prove that aspirations can be turned into action through a series of targeted checklists and questionnaires, amongst other tools. He believes that by using the proven principles of abundance, you can coordinate your needs with those of your employers, your employees and your customers, which ensures a coherent approach to the task in hand. In these times of economic decline and uncertainty, it is all the more important that you get 100 per cent performance out of employees. Those that are distracted or disinterested will de-motivate the entire team. This book clearly demonstrates how to empower your employees to ensure they are totally engaged in their work. This is an inspirational book, filled with meaningful and useful anecdotes and case studies. It will help you understand what drives you and your workforce and will ensure you are all heading in the right direction.
Invest in the French Riviera Exclusive Holiday Homes Perched on a hillside 300 metres above the sea, these holiday homes in Vence, between Monaco and Cannes, offer breath-taking panoramic views of the spectacular surroundings. Only 15 minutes from Nice Côte d’Azur Airport, they are easily accessible while providing the ultimate in holiday pleasure.
Panoramic views of the sea, the old city and the mountains can be enjoyed from the 2,500 square metres of landscaped gardens of the villa located on a hillside just 1.5 kilometres from the city centre. A mirror swimming pool outside and approximately 300 square metres of exceptional quality living space inside make this a truly spacious and luxurious four bedroom, four-bathroom home. 1,650,000
Designed to harmonize with their environment, the two bedroom penthouses feature large terraces facing the south for viewing the sea and the Cap d’Antibes. A lovely garden with swimming pool and underground parking will complete the new construction for a 2011 delivery date. It is situated only 500 metres in a very quiet area from the shops. 1,070,000
The Provençal style villa is a private retreat featuring gardens and terraces overlooking the sea with additional views of Cap d’Antibes and mountains, yet close to the city centre. Enjoy summer evenings in the pool or dining in the summer dining room complete with fitted kitchen. Perfect for entertaining with four bedrooms, including a massive Master suite, and brilliant lounge, dining room and more. 1,380,000
Located in a peaceful residential area facing the south with open views spanning from Cap Ferrat to Lerins Islands, the villa was built in 1987 in the Provençal style, offering the cosy warmth of solidarity. With three bedrooms, three bathrooms and garage for three cars, it also features magnificent views from the landscaped grounds and the tiled 12 X 8 metre swimming pool. To be restored. 1,650,000
To view our full portfolio of exclusive residences from Monaco to Cannes visit: realimmo06.com
4 Place Du Mal Juin, B.P. 24, 06141, VENCE, FRANCE Tel +33 (0) 4 93 58 11 03 Fax +33 (0) 4 93 58 29 84 realimmo06@orange.fr
THE ESSENTIALS CALENDAR
Exhibitions, conferences & seminars Gulf Business presents a comprehensive listing of business-related exhibitions, conferences, events and seminars in the GCC for the forthcoming month. LOCATION
ORGANISER
Family Expo
EVENT
Jul 29-Aug 10
DATE
Kuwait International Fair, Kuwait
KIF
Ramadan Food Exhibition
Jul 29-Aug 10
Kuwait International Fair, Kuwait
KIF
Kuwait Household Exhibition
Jul 29-Aug 13
Kuwait International Fair, Kuwait
KIF
Al Alayam Bahrain on tel: +973-17-725111, fax: +973-17-723300.
Certificate in Fast Closing Monthly and Year End Accounts
Aug 1-4
Dusit Thani Hotel, Dubai
IIR
Alshaam For Organizing Exhibitions & Festivals, LLC on tel: +968 24797800/ +968 24791502.
Budgeting and Budget Control of the HR Function Effective Manpower Planning
Aug 1-4
Dusit Thani Hotel, Dubai
IIR
DSF (Dubai Shopping Festival) on tel: +9714 600545555.
Strategic Information Security Management
Aug 1-4
Hyatt Regency Hotel, Dubai
IIR
ECS (Expo Centre Sharjah) on tel: +9716 5770000, fax: +9716 5770111.
Certificate in Financial Skills for Management
Aug 1-4
Hyatt Regency Hotel, Dubai
IIR
Advanced Maintenance Masterclass
Aug 1-4
Hyatt Regency Hotel, Dubai
IIR
Advanced Financial Statement Analysis
Aug 1-4
Hyatt Regency Hotel, Dubai
IIR
Strategic Marketing Planning
Aug 1-4
Hyatt Regency Hotel, Dubai
IIR
Contracts Management Principles and Practices
Aug 3-5
Dusit Thani Hotel, Dubai
IIR
Successful Energy Management and Auditing
Aug 9-11
JW Marriott Hotel, Dubai
IIR
Making Strategy Happen
Aug 7-10
JW Marriott Hotel, Dubai
IIR
Human Resources Week
Aug 15-19
Hyatt Regency Hotel, Dubai
IIR
Expo Centre Sharjah
ECS Al Ayam
Homes Middle East
Aug 19-4 Sep
KIF (Kuwait Int’l Fair) on tel: +965 5387100, fax: +965 5393872. IIR Middle East on tel: +9714 3365161, fax: +9714 3352682. Marcus Evans Kuala Lumpur on tel: +603 27236604, fax: +603 27236699. Terrapinn on tel: +44 20 72421548, fax: +44 20 72421508
Al Ayam Cultural Fair
Sep 14-23
Bahrain International Exhibition & Convention Centre
The Internet Show Middle East 2010
Sep 21-22
ADNEC
Terrapinn
ADIHEC
Sep 22-23
ADNEC
Terrapinn
Social Media World MENA
Sep 20-21
ADNEC
Terrapinn
Shopper Marketing
Sep 26-27
Hyatt Regency Hotel, Dubai
Marcus Evans
Gulf Business and Motivate Publishing accept no responsibility for errors and omissions, date and location changes or cancellations. Please contact the organisers directly for further information.
If you are organising or know of an event taking place in the GCC, please send full details to: Exhibitions, Gulf Business, Motivate Publishing, PO Box 2331, Dubai, United Arab Emirates, or fax to +9714 2827593, or email gb@motivate.ae.
Contracts Management Principles and Practices
The Ramadan Food Exhibition
Strategic Marketing Planning
To be able to work effectively with contracting managers, purchasing professionals and subcontractors, it is important to have a solid understanding of the contracting process. The Contracts Management Principles and Practices course can give you an overview of all phases of contracting, from requirements development to closeout, and to see how incentives can be used to improve contract results – exploring these vital issues from the project manager’s perspective.
The Ramadan Food Exhibition in Kuwait is the seasonal centre of innovation in food, foodstuffs and beverages. Local and international exhibitors not only source the latest products available but can keep abreast of industry trends, future developments and benefit from networking with key names from all sectors of the food and drink industry. Some of the exhibitors include supermarkets and multiple retailers, delis, convenience stores and independent grocers/retailers.
Strategic Marketing Planning will help to answer the challenges facing your business as a result of financial turmoil, climate change, globalisation of markets, scarcity of natural resources and rapid technological developments. It provides a powerful, formalised, market-led planning methodology to guide and give confidence to meet the challenges. The course is designed for managers who have direct or indirect responsibility for determining their organisation’s marketing strategies.
78 gulfbusiness.com August 2010
THE ESSENTIALS WHERE TO STAY
AL RAHA BEACH HOTEL
Abu Dhabi Al Raha Beach Hotel, created to provide the very best of traditional Arabian hospitality. This unique jewel of luxury and tranquility, offering magnificent services, awaits you for an unforgettable visit to Abu Dhabi. Tel 00971 2 50 80 555 Fax 00971 2 50 80 429
SHANGRI-LA
Sheikh Zayed Road, Dubai Offers 301 luxuriously appointed guest rooms and suites, nine restaurants and bars, health club and spa, tennis and squash courts and outdoor swimming. Tel 00971 4 3438888 Fax 00971 4 3438886 Email: sldb@shangri-la.com
LAYIA OAK HOTEL & SUITES
Al-Barsha, Dubai Offering 161 furnished units ranging from 81 sqm to 160 sqm, 3 dining venues, 3 multi-purpose meeting rooms, recreation facilities & a majestic landscaped area around the temperature-controlled pool. Tel 00 971 4 437 78 88 Fax 00 971 4 437 79 99 Email: welcome.oak@layia.net
MEDIA ROTANA DUBAI
Al Barsha South-TECOM Located in the heart of Dubai’s new business hub and opposite Dubai Media City and Internet City the Media Rotana Dubai has 460 rooms, suites and deluxe hotel apartments, 5 award winning dining venues and 15 meeting rooms. Tel: 00971 4 4350000 Fax: 00971 4 4350011 Email: media.dubai@rotana.com
SOFITEL AL HAMRA JEDDAH
Jeddah, Saudi Arabia The hotel situated in the heart of the business centre offers 211 rooms, 17 suites and 25 apartments. 5 meeting rooms and 2 reception rooms to accommodate up to 350 people. Tel 00966 2 6602000 Fax 00966 2 6604145
PARK ROTANA ABU DHABI
THE FAIRMONT DUBAI
TAMANI HOTEL MARINA
ACACIA HOTEL
HOLIDAY INN RIYADH, IZDIHAR
Khalifa Park area, Abu Dhabi Conveniently located adjacent to Khalifa Park, the property offers 318 luxurious rooms and suites, 6 world class dining venues, 6 meeting rooms and spacious ballroom with day light access and outdoor terrace. Tel 00971 2 6573333 Fax 00971 2 6573000 Email park.hotel@rotana.com
Sheikh Zayed Road, Dubai This 394-room hotel boasts 10 dining and entertainment venues a superb spa and unrivalled meeting facilities. Tel 00971 4 3325555 Fax 00971 4 3324555 Email: dubai.reservations@fairmont.com
Dubai Marina This hotel boasts 240 units, including studios, 2 or 3 bedroom units, and penthouses. There is also one restaurant. a health club, indoor and outdoor swimming pools and 5 meeting rooms. PO Box 215855, Dubai, U.A.E Tel 00971 4 3992500 Fax 00971 4 3993225 Email sales@tamanimarina.ae
Ras al Khaimah The Acacia Hotel is a superbly designed four star hotel complete with Al Nakhla restaurant, the stylish Flamingo bar, the vibrant Club Acacia, a pristine pool serving as a backdrop to varied and exciting Theme Nights, the luxurious O-Zone Spa, and high-energy Oxygen Gym. Tel 00971 7 2434421 Fax 00971 7 2434429
Riyadh, Saudi Arabia The first 5 star Holiday Inn hotel in the Kingdom, with 289 new and trendy accommodations, huge lobby with W-Fi access, outdoor pools, sauna, Jacuzzi and health club. Also has state-of-the-art meeting rooms, 24-hour business center with professional secretarial support. Tel 00966 1 4505054 Fax 00966 1 4505056
JUMEIRAH EMIRATES TOWERS
KEMPINSKI HOTEL MALL OF THE EMIRATES
INTERCONTINENTAL DOHA
MÖVENPICK HOTEL DOHA
JEDDAH HILTON
Sheikh Zayed Road, Dubai The truly unique and exciting five stars hotel features 393 rooms, suites and chalets together with Mall of the Emirates shopping centre and Ski Dubai’s alpine themed indoor snow resort. Tel 00971 4 3410000 Email reservations.malloftheemirates@ kempinski.com Website www.kempinski.com/dubai
Doha, Qatar Situated in the West Bay area, yet located near the city. With its various dining options, 24 suites, 234 rooms, private beach and state-of-the-art gymnasium, it is an idyllic setting for business and leisure. Tel 00974 4844444 Fax 00974 4839555
Doha, Qatar Located on the Corniche Road, opposite the Museum of Islamic Art, the hotel offers 154 rooms and suites, a business centre and meeting rooms. Recreation facilities are also available. Tel 00974 4291111 Fax 00974 4291100 www.moevenpick-doha.com
Jeddah, Saudi Arabia Located a 10-minute drive from the Jeddah International Airport. Offers over 414 rooms including 46 suites. 10th and 11th floors are Executive floors addressing all the needs of a modernday businessman. Tel 00966 2 659 0000 Fax 00966 2 658 2489
Sheikh Zayed Road, Dubai Jumeirah Emirates Towers is a sleek architectural masterpiece of steel and glass. It redefines the business hotel category, seamlessly combining form with function, high technology with unparalleled luxury and elegance with efficiency. Tel 00971 4 3300000 www.Jumeriah.com
IS YOUR HOTEL LISTED ON THIS PAGE? To become one of Gulf Business’ Preferred Hotels and benefit from exposure to the extensive readership of Gulf Business throughout the GCC contact Circulation Department on 00971 4 2052497
Gulf Business magazine is available in all of these GCC hotels
August 2010 gulfbusiness.com
79
THE ESSENTIALS STATS & FACTS MERGERMARKET TOP DEALS OF THE MONTH Deal Value ($m)
Bidder
Target
Deal Description
545
International Petroleum Investment Company
Aabar Investments PJSC
International Petroleum Investment Company, the Abu Dhabi sovereign investment vehicle, has launched an offer to acquire out the minority shares in Aabar Investments, the listed Abu Dhabi-based investment group.
74
Depa Interiors LLC
Design Studio Furniture Design Studio Furniture Manufacturer Ltd has signed a definitive agreement to be acquired by Depa Manufacturer Ltd (75.27% Stake) Limited via a scheme of conditional cash offer.
28
United Industries Company K.S.C
Kuwait National Industrial Projects Co. (50% Stake)
United Industries Company K.S.C, the Kuwait-based investment holding company having interest in dairy products, oil, gas and petrochemical sectors, seafood products, paints products and restaurants management companies, has acquired a 50% stake in Kuwait National Industrial Projects Co, the Kuwait based company making investments in industrial companies, for a consideration of KWD 8.24m (USD 28.4m).
13
Fawaz Abdulaziz Al Hokair Company
Retail Group Egypt SAE; and Retail Group Jordan Co Ltd
Fawaz Abdulaziz Al Hokair Company, the listed Saudi Arabia-based company engaged in retail business consisting of Arabian centers, fashion retail, food & entertainment and real estate, has acquired Retail Group Jordan Co Ltd and Retail Group Egypt SAE, the Jordan and Egypt-based fashion retail firms, for a net consideration of SAR 48.32m (USD 12.91m).
7
HCL Infosystems Limited
NTS Group (60% Stake)
HCL Infosystems Limited, the listed India-based hardware, services and ICT systems integration company, has acquired 60% stake in NTS Group, the United Arab Emirates-based IT services and solutions company, for a consideration of USD 6.5m.
5
EFG-Hermes Holding Company
Tadawol Securities and Financial Services
EFG-Hermes Holding Company, the listed Egypt-based company engaged in investment banking, securities brokerage, asset management services and a private equity firm, has agreed to acquire Tadawol Securities and Financial Services, the Jordanian brokerage firm, for a total consideration of JOD 3.85m (USD 5.47m).
-
Investcorp
Veritext LLC
Investcorp, the Bahrain-based private equity firm, has agreed to acquire Veritext LLC, the US-based court reporting business which provides integrated deposition and associated litigation activities, from The Riverside Company, the US-based private equity firms, for an undisclosed consideration.
-
MB Holding Company LLC
MB Century Drilling Limited (49% Stake)
Mohamed Al Barwani Holding Company LLC (MB Holding), the Oman-based investment holding company engaged in oil and gas exploration, mining and providing drilling services, has acquired the remaining 49% stake in MB Century Drilling Limited, the Australia-based provider of oil, gas and geothermal drilling services, from Downer EDI Limited, the listed Australia-based company engaged in comprehensive engineering and infrastructure management services, for a undisclosed consideration.
Notes: Deals are based on the geography of target, bidder or vendor being in the Middle East, for the period between June 18, 2010 and July 20, 2010. Based on announced deals, including lapsed and withdrawn bids. Where deal value is not disclosed, the deal has been entered based on turnover of target exceeding $10 million. Activities excluded from the table include property transactions and restructurings where the ultimate shareholders’ interests are not changed.
12,000 10,000
MIDDLE EAST ACTIVITY BY INDUSTRY SECTOR YTD 2010 VALUE Number of deals
14,000
Value ($m)
MIDDLE EAST QUARTERLY M&A ACTIVITY FROM 2004 TO JULY 20, 2010 Value Volume
50 40
8,000
30
6,000
20
4,000
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2004
2005
2006
2007
2008
0
2009 2010
MIDDLE EAST ANNUAL M&A ACTIVITY FROM 2004 TO JULY 20 , 2010
Energy/Mining/ Utilities 5%
TMT 10% Leisure 7% Transport 15%
25,000
150
20,000
100
15,000 10,000
50
5,000 0
2004
2005
2006
2007
2008
2009
2010
Defence 1%
Agriculture Real Estate Pharma/Medical/ 1% 17% Biotech 3%
MIDDLE EAST ACTIVITY BY INDUSTRY SECTOR YTD 2010 VOLUME 200
Value Volume
Industrials and Chemicals 15%
Transport 3% Leisure 3%
0
Number of deals
30,000
Value ($m)
Consumer 1%
10
2,000 0
Financial Services 24%
Business Services 1%
Pharma/Medical/ Biotech 3%
Construction 1%
Real Estate 9%
Defence 1% Industrials and Chemicals 18%
TMT 22% Energy/ Mining/ Utilities 7%
Agriculture 1%
Consumer 8%
Business Services 8%
Financial Services 16%
Mergermarket tracks all M&A deals of more than $5m where the target, bidder or parent is a Middle Eastern company. For further details, call +9714 4376482.
80 gulfbusiness.com August 2010
OUT TO LUNCH GEORGE DABAGHI
TV dinner ALISTAIR CRIGHTON finds out about the future of television from the man bringing
video on demand to the masses.
T George Dabaghi
he world of television, and especially how we consume it, has changed immeasurably over the past five years. Linear TV schedules are an anachronism these days, with TiVOs and similar devices putting control firmly in hands of the viewers, while rendering TV guides redundant. While that’s a challenge for the plethora of terrestrial and satellite broadcasters in the region, struggling to cope with declining ad revenues amid ever more competition, it’s been a golden opportunity for George Dabaghi, the general manager of video on demand (VoD) company On Demand Group. On the back of a deal with Du late last year, the company is expanding its unlimited Video on Demand service in the UAE, so it’s fitting our lunch is in the Radisson Blu’s Certo, the Italian restaurant that has long been established as the power lunch venue of choice for Dubai Media City’s communications gurus. On Demand is the content management subsidiary for SeaChange, a global player in VoD which last year delivered more than four billion programmes and movies to TVs, mobile phones and PC screens. In the UAE alone, VoD is estimated to grow by more than 65 per cent by 2012, according to a study by SNL Kagan. Over fresh-baked bread, Tuscan bean paste and olive oil, Dabaghi, an electrical engineering graduate, is careful not to plunge into too much technobabble when explaining how the service works, though he still loses me at times. All customers need to know, he says, is it does work, and on whatever platform you want. “We offer content across platforms,” he says, “Mobile phones, television and PC, we hook up with content providers.“ So, he’s something of a middle man, I ask. “I suppose so, but we have strong relationships with studios, with the TV companies. So we provide the content at the best rates.” His company also provides the underlying technology that allows seamless transition of content to multiple platforms, he says –
82 gulfbusiness.com August 2010
something that telcos could struggle to do by themselves. (Rather unfortunately for Du, however, on the day of our lunch, it announced its VoD service would be free for subscribers until September, as a result of a problem that cut off TV services to a large number of subscribers). Over an adventurous choice of Pizzocheri – buckwheat pasta served with cubed potatoes, cheese and green beans that would have an Atkins Diet follower fainting – Dabaghi explains it’s not just mainstream broadcasters whose traditional business models will be challenged by IPTV and VoD. Pirates – the scourge of the entertainment industry since the dawn of the internet and cheap DVDs – will also feel the pressure. “Think about the Chinese DVD lady,” he says. “She’s charging Dhs10 for a disc that you probably watch only once. And you can’t guarantee the quality. VoD supplies the same service, for the same price, and is more convenient.” That convenience factor, Dabaghi says, could also lure computer users away from torrent sites such as The Pirate Bay, where advert-free downloads of all the latest movies and TV shows are readily available. Those snubbed advertisers, potentially the hardest hit in an IP-driven TV world where viewers can simply skip the ad breaks, will welcome the ability to “bookend” VoD programmes. It is, says, Dabaghi, a win-win situation. “Advertisers love this service,” he says. “It’s got great potential for them.” So far, getting Du has been the biggest success in the Middle East for London-based On Demand. But, over espressos, Dabaghi admits the UAE’s population is something of a limiting factor, and, for future growth explains he’s in talks with broadcasters and mobile phone operators throughout the region. “Saudi Arabia and Egypt are the real prizes,” he says. A history buff in his spare time – with his native Lebanon being a specialist subject – in his working life, it seems, Dabaghi’s eyes are firmly on the future. ■
Rolls-Royce Like nothing else on earth A unique presence in every form. Effortless acceleration with power in reserve. Space to experience inner calm. Each created by masters of their crafts. When a Rolls-Royce drives by the world stands still.
Abu Dhabi Motors, Abu Dhabi, UAE Tel: 00971 2 677 8884 www.rolls-roycemotorcars-dealer.com/abudhabi
Al Jenaibi Int’l Automobiles LLC, Muscat, Oman Tel: 00968 2 456 7108 www.rolls-royceoman.com
AGMC, Dubai, UAE Tel: 00971 4 339 1555 www.rolls-roycemotorcars-dealer.com/dubai
Ali Alghanim & Sons Automotive Co. WLL, Kuwait Tel: 00965 184 6464 www.rolls-roycemotorcars-dealer.com/kuwait
Rolls-Royce Motor Cars Doha, Doha, Qatar Tel: 00974 447 7577 www.rolls-roycemotorcars-dealer.com/doha
Mohamed Yousuf Naghi Motors, Jeddah, Kingdom of Saudi Arabia Tel: 00966 2 669 5333 www.rolls-roycemotorcars-dealer.com/saudiarabia
Euro Motors, Manama, Kingdom of Bahrain Tel: 00973 17 754 754 www.rolls-roycemotorcars-dealer.com/bahrain
Mohamed Yousuf Naghi Motors, Riyadh, Kingdom of Saudi Arabia Tel: 00966 1 462 7777 www.rolls-roycemotorcars-dealer.com/saudiarabia
Every Rolls-Royce Motor Car is provided with a four year unlimited mileage warranty and service package*. Terms and conditions apply**. Full details can be obtained from an Authorised Rolls-Royce Motor Cars dealership.
www.rolls-roycemotorcars.com
* If the motor car is used for commercial purposes (chauffeur service, limo service, hire car, hotels etc.) the warranty period is 48 months or 100,000 miles (160,000 km), whichever occurs first. ** Rolls-Royce Motor Cars Parts warranty is 24 months / unlimited mileage from the date of purchase. Š Copyright Rolls-Royce Motor Cars Limited 2010. The Rolls-Royce name and logo are registered trademarks.