Gulf Business| June 2010

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HOSPITALITY SURVEY: DOWN BUT NOT OUT IN THE REGION’S BIG CITIES Vol. 15 Issue 2 June 2010

Action!

How the Gulf’s booming cinemas are throwing the spotlight on local talent NEW FRONTIERS

Opportunities for the brave in Sri Lanka and Taiwan

BACK ON TRACK

Kuwait’s mega projects finally get under way

HOME GROWN

Saudi shrimp farm to make big waves

HEALTHY GROWTH

Western insurers drawn by lure of the uninsured 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 2 June 2010

THE COMMENT 12 Investment High-tech Taiwan is a favourite in the emerging markets’ shooting stars.

14 Money A precious metals boom may be in the works today with silver the potential winner.

16 Inside Track The rationale behind investment and the secret of its irrationality.

18 Emerging Markets

Big screen business

Peace brings savvy investors to emerging Sri Lanka.

20 Guest Column Agriculture is rising from the dry sands of the Middle East as a verdant growth sector.

22 Letters

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40 Ensured growth

THE BRIEFING

The Gulf appears engrossed by cinema, with the debut of the first Emirati-directed feature film in the UAE, ongoing cinema construction, and the launch of the Doha Film Institute in Qatar. But it isn’t all fun and games, with industry insiders warning of challenges ahead and limitations in the market.

26 Regional Briefing

The Gulf’s widely uninsured population attract Western insurers.

34 Do your homework

42 Jumbo shrimp

With the economic upswing underway, Gulf companies must be ready to gain from good times.

Little-known Saudi aquaculture farm aims to take global prawn market by storm.

36 State of the art

44 Sealing the leaks

Christie’s is upbeat about the Middle East’s art market.

The trick to better sales may be in better team training.

38 A helpful push

46 Computing costs

Dubai’s real estate woes could be eased by improving visa protocols.

Dell promises savings with data management systems.

THE BUSINESS 44 Humble hopes Hospitality in the Gulf continues with its more measured growth and budget-friendly expansions.

50 A return to the ring After years of fire-fighting, Kuwait seems back on track for growth with major project investment.

54 On the right track Transport investments are stimulating development and repositioning the Gulf globally.

June 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 Deputy Editor Zarina Khan Lifestyle Editor Claire Hill Editorial Coordinator-Business Concessa D’Souza Art Director Cris Domdom Senior Designer B Raveendran

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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 General Manager Production and Circulation S Sasidharan Production Manager C Sudhakar

72 Motoring

71

Glenn Freeman falls to the siren call of the 2010 Mustang GT.

THE PEOPLE 62 Close up UAE-based film producer Tim Smythe talks about movie making in the Gulf.

66 Competition

73 Technology The difference between innovation and theft is a fine line.

THE ESSENTIALS 74 Books

68 Executive Moves Who is moving up in the GCC business world.

THE LIFESTYLE

76 Calendar 78 Hotels Where to stay in the GCC.

80 Stats & Facts

70 Travel Visit the off-the-beaten-path of Belize for a taste of unspoilt beauty.

71 Art A wave of theft and forgeries reveals the underside of the art world.

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General Manager Group Sales Anthony Milne Senior Advertisement Manager Abraham Koshy Advertisement Manager Ajay Mathews

June 2010

We unpack the data for you.

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

82 Out to Lunch Terry Tyrell of The Brand Union talks advertising over brunch at The Rotisserie.

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THE COMMENT LEADERS [ ISLAMIC FINANCE ]

Sweet dreams? Dubai Islamic Bank’s sugar-backed loan is as vague as it is unusual.

D

ubai Islamic Bank’s (DIB) rollout of its latest product last month, Al Islami Salam Finance, reveals some of the outstanding issues that the growing field of Islamic finance still faces. In trying to replicate conventional financial products – in this case, a consumer loan – Shari’ah-compliant instruments can come over as just plain complicated. The premise of Salam isn’t a simple one to grasp: at the press conference, the FAQ on the product appeared to contradict answers given during the conference itself, and the DIB team spent more time talking up the Islamic bona fides of the product, rather than explain how it works in the real world. And that’s the billion-dirham question (and also the amount the bank is setting aside to capitalise this). Salam resembles a futures contract more than anything else. There is a real underlying asset, in this case, sugar, chosen because of its relative in-volatility. Essentially, a borrower works out how much upfront cash he or she needs (from $6,800 to about $273,000), the bank supplies this, and the borrower then pays back that amount on a monthly basis – in sugar. Through the bank’s commodity account, the physical delivery of sugar is not the borrower’s problem, so bags

of Tate & Lyle aren’t going to gum up the bank’s ATMs. Still, questions remain. According to the FAQ, the bank makes its profit by selling the sugar on the open market. Now, unless the original contract is designed so the borrower is buying his sugar at a significant premium to market rates, to offset any future declines in the sugar price, this looks incredibly risky. Without further clarification, some may wonder – is the bank, in effect, taking a giant, and unhedged, bet on the sugar market? Hussain Hamed Hassan, the head of DIB’s Shari’ah Supervisory Board, insisted at the press conference that analysts know the markets well enough to ensure this isn’t mere speculation – which would be contra to the values of Shari’ah finance – while Adnan Chilwan, the bank’s head of retail and business banking, said that it’s the sugar wholesalers who will carry the risk. But no analyst can reliably tell you what the sugar price will be tomorrow, never mind three years from now – a point brought home by the slump in sugar prices beginning from January this year – and a billion dirhams appears to be a lot to commit to a product that, ultimately, could leave the bank with a bitter aftertaste. These issues must be clarified. ■

[ INFRASTRUCTURE ]

Waiting for a go After watching its neighbours make hay, Kuwait is finally getting its time in the sun.

W

AY, way back in 2006, when Dubai’s economy was storming ahead and infrastructure projects were being signed off left, right and centre, Kuwait’s businessmen were not a happy bunch. Democracy, they said, was holding them back. Indeed, Kuwait’s peculiar form of democratic process was hostage to a number of factors including selfserving MPs and tribal factionalism. On top of that, the whole process of government was

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weighed down by a bureaucratic machine that spewed a constant stream of red tape. So, as towers rose in neighbouring counties, as ports elsewhere were made deeper and larger, and as eight-lane highways cut through bordering deserts, Kuwait stagnated, frequently in the dark as the sclerotic power system failed to even keep up with demand from city residents. Fast forward to 2010, and contractors

THE COMMENT LEADERS

throughout the Gulf, still licking their wounds after the property crash in Dubai left them over-exposed and under-employed, are shifting their focus to Kuwait. That same parliament that was problematic a decade ago has put aside differences to overwhelmingly back a $100 billion development plan to fund more than 1,000 projects – some of them very large indeed. This includes work on an oil and gas infrastructure, a major roads upgrade, a new airport terminal and “Silk City” – a vast urban project destined to be second only to the capital in size. Of course, a lot of this was scheduled to be completed years ago, and spending isn’t going to solve all of Kuwait’s problems. The stock market remains woefully under regulated, and the nation needs to tackle a serious “dependency culture” among its citizens. National Bank of Kuwait aside, the country’s banking sector was hit hard by the financial crisis, and remains weak, and MPs are pushing for these same banks to write off some $6.3

billion of interest on the entire consumer debt portfolio, arguing that corporations were bailed out, so why not individuals? The government has so far resisted these populist moves, recognising that financial stimulation will require much more than cash handouts or debt forgiveness. A constricting bureaucracy remains a serious issue, and Kuwaitis still view government work as something as a right, with 80 per cent of citizens employed in the public sector. For those companies patient enough to deal with the red tape, however, there’s another prize, just across the border. The political links may be lacking, but the state’s proximity to Iraq must be seen as attractive; any contractor looking at taking a slice of the estimated $600 billion in infrastructure work on the cards in the war-torn country would do well to look at projects in Kuwait as something of a dress rehearsal, and, as a logistics base for Iraq development work, it can’t be bettered. ■

[ ECONOMY ]

Deal on Dubai World debt draws near There is light showing at the end of Shindagha tunnel.

T

he acceptance of the Dubai World debt restructuring deal by 60 per cent of lenders last month represents a significant milestone in the emirate’s battle to get itself out of its debt crisis. For the first time in a long while, some positive ink was splashed around about Dubai, with some commentators, notably the Financial Times, even suggesting that Greece could learn a thing or two from how the emirate has handled the negotiations. But that doesn’t mean Dubai is out of the woods yet. Some 66 creditors are still holding out for a better deal, notably, the local banks that are unhappy with the low interest rate on offer. Getting them onside – and actually putting pen to paper on the deal – may still be a month or two off. Then there’s the issue of other indebted government-related entities.

Dubai Holding has, according to news sources, brought in an advisory group to pre-empt its own much-anticipated debt restructuring, and, according to our figures from January this year, there is still some $54 billion in short-term credit to be serviced by 2014 – and that doesn’t include bilateral bank loans that will run to many billions more. Still, and excuse the pun, we must give credit where it’s due. In strictly public relations terms, Dubai has come a long way from the shock announcement of the Dubai World debt standstill in November. In financial terms, it’s playing its hand as well as – or better than – anyone could have expected. If Dubai has been fleet-footed enough to dodge the knock-out blows, there’s still hope it can get itself off the ropes. ■ June 2010 gulfbusiness.com

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THE COMMENT INVESTMENT

THE BULLISH CASE FOR TAIWAN EQUITIES The emerging market has a ripe contender to be the new shooting star in the form of Taiwan – China’s overshadowed sister. MATEIN KHALID

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he Cinderella fairy tale is an apt metaphor for the onset of a secular bull market in emerging markets. It is the moment when a market is cheap, unloved, under-owned and even misunderstood. This was the case with India in 2002 when the Sensex traded below 3,000, the forward valuation was a mere nine times earnings and offshore investors, traumatised by the recent Silicon Valley tech meltdown, had zero interest chasing the corporate Cinderellas of Dalal Street, even though industrial restructuring had created an earnings explosion. Six years later, the Sensex soared to 21,000, a stratospheric valuation of 23 times earnings and India was the darling of the emerging markets. Of course, as we learnt the hard way in the Gulf, it is all too easy to mistake Cinderella (a secular bull market) for the ugly stepsisters (value traps) in the ballroom (a leveraged credit bubble). Amid yet another spasm of risk aversion in the financial markets, I search for the next emerging markets Cinderella, which I believe is Taiwan. Taiwan, demonised as the “renegade province” of the Middle Kingdom by the mandarins of Beijing ever since Chairman Mao founded the People’s Republic of China six decades ago, is one of the world’s true economic and political fairy tales. An impoverished, pariah, dynastic dictatorship at continual risk of invasion from the mainland, morphed into a vibrant democracy with a tech export economy in the span of one lifetime, with some of the highest hard currency reserves in the Pacific Basin and a constellation of world class technology manufacturers. However, despite being Silicon Valley’s foundry and assembly line, Taiwan has not been valued as a growth market by fund managers since the collapse of the tech bubble a decade ago. Taiwan trades at a mere 13 times earnings and twice book value even though earnings will double in 2010 and 2011. The financial markets price Taiwan as a low-end, commodity manufacturer that is hostage to the US and Japanese consumer. Taiwan is the Cinderella of Asian stock markets, a gem on the verge of a significant valuation re-rating. I believe the TAIEX could well rise from the current 7,400 – 7,600 to 12,000 in the next two years. Why?

One, Taiwan’s exports to China are greater than its exports to the US, Eurozone and Japan put together. China will be the world’s largest PC, mobile phone, consumer electronics, plasma TV and network computing market in the next decade, as the Chinese middle class surges from 200 to 500 million people. Chinese and emerging Asian tech exports will lead to a double bagger in Taiwanese earnings per share in the next two years. Two, political relations between the ruling Taiwan KMT (Kuomintang), ironically the party of Mao’s rival Generalissimo Chiang Kai Shek, and Beijing have improved significantly since the election of President Ma Ying Jeou. In essence, unlike his disgraced predecessor, President Ma has abandoned the rhetoric of Taiwanese independence. This has led to the historic China-Taiwan economic cooperation treaty that will significantly boost the island’s financial linkage to the Mainland and incorporate a growth premium in Taiwan equities. Three, Taiwan has the lowest government bond yield in the Asian Pacific, with ten year debt trading below 2 per cent. This means Taiwan’s equity risk premium is excessive at its current modest valuation. This will not last. Four, Taiwan is extremely cheap relative to its own past trading history. Taiwan shares traded at 17 times forward earnings since the 1990s, when the rapprochement with the world’s rising financial superpower across the Straits of Taiwan was not remotely on the geopolitical agenda. Five, China’s WTO promise mean that it will eventually allow Taiwanese banks to open branches in the mainland. This prospect is not priced into current bank valuations. Six, Taiwanese blue chips TSMC, Hon Hai, AO Optronics, Wisteron, China Life, Fubon and Chinatrust are some of the biggest, best managed business in the Far East. And lastly, offshore fund managers and even locals are underweight in Taiwan shares. Excellent. Bull markets climb a wall of worry. It is time investors reexamined the island Cinderella on the edge of China. The Taiwan story is simply compelling to me. Matein Khalid is a global macro trader, economics professor, fund manager in a royal investment office and writer in finance and geopolitics.

It is all too easy to mistake Cinderella (a secular bull market) for the ugly stepsisters (value traps) in the ballroom...

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THE COMMENT MONEY

SILVER TO SHINE BRIGHTER THAN GOLD? There is an argument to be made about a repeat of the 1970s precious metals boom being in the works today, with silver the possible winner. PETER COOPER

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t was the 1970s when we saw the last precious metals boom. In the later part of that decade gold prices rose eight-fold and silver by a factor of 25. Fast-forward to today and you have this columnist predicting a rise in gold prices to $5,000 as the world goes through something like a re-run of the mid-70s. Then, as now, a massive credit expansion produced a huge bust in property and then stock prices, and governments reflated their economies to counter the downswing. Inflation resulted after the initial price deflation, although stock and real estate prices stayed low, and bond prices fell. Even gold prices took a nasty tumble in 1976 as they did in late 2008. But then came the spectacular 1979-80 blow-off in precious metal prices with gold at $850 and silver at $50 an ounce. Is that final spike about where we are today, only to far higher price levels? Note that silver is the only commodity in the world not to have passed its previous all-time high, and that was set three decades ago now. So will history repeat itself again? If we look at what has happened to house prices and stocks (about due for another dip if 1970s volatility is any guide) then things do look very similar. Governments have also been taking desperate measures to counter the financial crash, and signs of inflation are already emerging in places like China and the UK. The next shoe to drop will surely be the bond market as it did over 30 years ago. Interest rates rocketed in the late 1970s and that is bad for bond prices. Today governments around the world need to borrow a lot of money to finance their deficits and the markets are going to exact a higher price for that money. As real estate, stocks and bonds cease to be attractive investments, that leaves the precious metals as a store of value. The silver market is much smaller than the gold market and in the 1970s became cornered by the Hunt Brothers, forcing the price through the roof until the market rules were changed and the price slumped. All over the world governments face mounting

deficits due to their bailout packages and a shortfall in taxation from the worst recession since the Second World War. This means a gigantic governmentborrowing programme is in progress. And what follows increased government borrowing? Higher. This slowly, or not so slowly, devalues the debt burden of high bond issuance over time. Then what happens is that bond buyers wise up and demand higher and higher rates of interest to fund government debt. So you end up like in the late 1970s with high interest rates and high inflation. That also means lower bond prices as interest rates rise. The result is more buyers for gold and silver to beat inflation in a tight market on the supply side, and the price goes shooting up. Interest in buying silver as the precious metal best suited to hedging against inflationary government debt levels around the world is growing among investors. If you look rationally at 10 years of rising precious metal prices then the story to date has been one of slow but sure growth, leaving gold prices four times higher and actually the best performing asset class of the past decade, apart from silver which is up six-fold, albeit with far greater volatility along the way. There is no 80 per cent price spike in the past 13 months like US stocks. Indeed, the fundamental drivers of gold and especially silver prices are still in place. However, life is never that easy for investors. Silver is volatile and fell by more than gold in the 2008 selloff. Will this happen again if industrial commodities fall due to margin calls in a falling stock market? And it was this liquidation of the carry trade that brought precious metals down in 2008. You cannot be sure. Then again if you do not invest now you might miss the best price levels. The market cycle has moved on since 2008 and investors are not so highly leveraged and therefore may well not have to dump their gold and silver in a crash. â– Peter Cooper is the editor of arabianmoney.net

Note that silver is the only commodity in the world not to have passed its previous all-time high.

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THE COMMENT INSIDE TRACK

GREED AND FEAR DRIVE IRRATIONAL INVESTORS A succession of economic bubbles disprove the myth of the rational investor. Emotions are still at the heart of most of our stupid decisions. MISHAL KANOO

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t is a given in any finance class that the investor is rational. The investor, it is taught, makes his decisions based on facts and never allows his emotions to play a role in his actions. What a load of rubbish. Most people have been taught this theory which makes no sense yet we tend to accept it as a reality. As blood-and-guts humans, we are expected to make what is in essence a very personal decision – where to put one’s money – with an impersonal eye - Of course, it is nearly impossible. How did this unrealistic expectation become the standard that people base their investing ideas on? Simple rational is easy to calculate in formulas while irrational is not. This is why you will see that taught in universities as well as in the many books talking about investing. Over the past two decades, just in the US stock market alone, we have had three significant crashes. The first was in 1987. The second was in 2001. The last one was the crisis that the Lehman Brothers’ collapse set into motion. In that same period of time, we have had the same people investing in the market overall with the exception being the new investors who had not experienced these shocks. Had they not learned from these dramatic if not seismic shifts? The clear answer is no because they all played their part in either making it happen or worsening it after it happened. Financial meltdowns keep on happening and will continue to because the old adage “never again” only applies to rational thinkers and not to the people who are driven by greed or by fear. The only ones who will never suffer from these great shifts are those who have allowed themselves to be disciplined enough to take themselves away from the gyrations caused by either greed or fear. In other words, they train themselves to be rational investors. This, I am sad to say, is not the norm. We too have experienced our own irrational behavior in the region. Race, intelligence, religion or political leanings have no bearing on this kind of irrational

behavior. The reason for that is that greed and fear – the two motivators behind it – are shared by all peoples. And those emotions have contributed to making these crises greater in magnitude. Over the last five years we saw what irrational behavior on the part of the investor can do in the long run. We saw a growth in land value at a frightening pace, with 20-50 per cent increases per annum not uncommon. In fact, there was a special phenomenon happening in the real estate industry were people were lining up to buy direct from the developer at exorbitant prices only to immediately sell it to another irrational investor at a mark up but with no added value. This was considered acceptable because people were using the adage of “richer than thou, stupider than thou” without actually knowing that to be the case. Their irrational behavior made it acceptable for them to sell something that they did not actually have to someone else who had, in his mind, already sold it to yet another person at a profit even though nothing physically actually happened. And nearly everyone bought into the scheme because they reasoned quite wrongly that it was a solid investment. Nothing could have been further from the truth. Yet these phenomena keep on repeating themselves time and time again. All we have to do is look back to what the Kuwaitis called “souq al manakh” in the eighties and what happened there or the Saudi stock exchange only recently when it dropped from 20,000 points to 6,000, or there about, in a matter of months, wiping out billions of Saudi riyals that never really existed. The same could have been said for the UAE when in 1998 within a three week period the nascent stock market exploded to new heights a hundred fold and then, for no apparent reason, imploded with the same gusto. Yet these investors are supposed to be rational? The old Arabs used to say that they don’t buy fish in the sea. Now that is a rational investor. Mishal Kanoo is deputy chairman of the Kanoo Group. gb@motivate.ae

Financial meltdowns keep on happening and will continue to because the old adage “never again” only applies to rational thinkers.

16 gulfbusiness.com June 2010

THE COMMENT EMERGING MARKETS

SRI LANKA: AN ISLAND OF INVESTMENT OPPORTUNITY Amid the ruins of Sri Lanka’s civil war lie gems of stock market opportunity and massive investment need. MICHAEL PREISS

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egendary billionaire investor George Soros put it best when he remarked: “the most money is made when things go from terribly-awful to just awful.” That is exactly the situation we see in Sri Lanka today. The war-torn island nation is this year’s sixth best performing equity market with +26 per cent return, and a market where the trend is your friend. Sri Lanka so far was considered the emerging markets in the true sense, but last year’s peace process and the end of the decades-long civil war has investors taking notice. In 2010 the country formerly known as Ceylon is now on top of the list as a market where things are happening. Many investors increasingly believe the country’s time has finally come. The death of the Tamil Tiger’s infamous leader Velupillai Prabhakaran was crucial to ending the civil war. Once the mysterious and powerful Prabhakaran was dead, the Tamil Tiger movement collapsed, paving the way for lasting peace. Sri Lanka is going to be one of the best investment opportunities on the planet for the next two to three years. Re-building after the long civil war and record low interest rates in the developed world is leading to ample liquidity and a willingness among global investors to increase exposure to a market that so far has been only on the radar screen of the most farsighted investors. Sri Lanka has traditionally excelled in tea, tourism, garments and rubber but the new opportunities will not be in the sectors Sri Lanka is known for. They will be in real estate, business process outsourcing, banking, timber, pepper, fisheries, education, healthcare and, of course, infrastructure. It is expected that the Sri Lankan government will soon rebuild infrastructure, social facilities and government offices across the northern regions which were long controlled by the Tamil Tigers. The redevelopment blueprint may be modelled after the one in eastern Sri Lanka, in which the government had begun construction on a series of projects after the military expelled the Tamil Tigers from their former stronghold. Sri Lanka’s long coastline is one of its precious resources. In the past, sandy beaches attracted holiday makers and surfers from around the world.

The decades of civil war have scared away many mainstream tourists, even though the fighting was mostly confined to the north and northeast. Today, however, some observers believe Sri Lanka could become the Thailand of South Asia for tourists. As an investment theme this might attract funds into Sri Lankan Hotel stocks that trade at low valuations and multiyear lows. During the first peace talks in 2005, Sri Lankan Hotel stocks surged +200 per cent. Now we could see a replay of this going forward. The end of the civil war has also sped up the Sri Lankan government’s negotiations with the International Monetary Fund (IMF) for a standby facility of $1.9 billion. An IMF agreement would provide support to reserves and have other positive effects such as improving investor confidence and support for the exchange rate. Just how much money Sri Lanka in total needs to rebuild itself is still unknown. But just the initial investment needed to fix the stalled economy in the north and east is $5 billion, according to government estimates. Roads, bridges, schools, hospitals, power plants and even homes have to be built afresh. So, the final tally will be several times larger. But the sweet spot for the foreign investor is not the war zone. The relatively peaceful Western Province, where Colombo is located, is a ready market waiting to be tapped fully. The infrastructure and a consumer economy are already there, but the war kept away many providers of goods and services. They will come now. The capital, Colombo, which accounts for half of Sri Lanka’s $40 billion economy, will be the first to gain from peace. According to recent World Bank report, increases in foreign direct investment and tourism, along with improved employment and large-scale reconstruction projects, are expected to sustain and accelerate Sri Lanka’s growth throughout 2010. Prospects are positive. Next to just making money, investors in Sri Lanka know that their capital is helping a war-torn nation re-build and giving people and their families a brighter future. This is the true meaning of equity investing. Michael Preiss is an investment advisor and finance professor and can be reached at: Michael@michaelpreiss.net

In 2010 the country formerly known as Ceylon is now on top of the list as a market where things are happening.

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THE COMMENT AGRICULTURE

RENEWED HOPE FOR AGRICULTURE A flagging industry offers new possibilities for economic growth for the Middle East and North Africa. BOOZ & COMPANY

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fter years of neglect, agriculture has re-emerged as a sector to watch. The recent surge in food demand and the associated rise in international food prices have revitalised agriculture. Countries that have maintained a strong sector have benefited in terms of greater opportunities in agricultural and processed food exports. They are also able to ensure that their own people have available and affordable food. Countries with underachieving or limited agriculture sectors may face an upward spiral of shortages and increasing food subsidies. Recent estimates indicate that gross domestic product (GDP) originating from agriculture is at least twice as effective in reducing poverty as GDP from other sectors. These emerging trends and shifts are repositioning the sector for increased investment and innovation, and placing it at the forefront of government policy. As a result, Middle East and North Africa (MENA) countries are redirecting their attention towards the agriculture sector. Their aim is to transform it into an engine for economic growth, job creation, and international trade. MENA countries are encouraged by the example of other countries that have successfully transformed their agriculture sectors. For instance, Brazil adjusted its crop mix to better respond to local and international demand, and as a result tripled its agriculture trade surplus over a period of ten years. In another example, Indonesia reformed legislation, infrastructure, technology and services. It succeeded in realising significant productivity gains; it also increased agriculture’s contribution to national GDP while reducing the percentage of the budget spent on it, since the sector became more attractive to private investors. To replicate such agricultural transformation in the MENA region, policymakers must first evaluate the availability and quality of their basic resources: arable land, water, seeds, fertilisers, pesticides, farm labour, and capital. For many MENA countries, particularly in the Gulf, issues such as water shortages make it unlikely that agriculture will be a viable sector for reform. For countries whose basic resources do offer a strong basis for reform, policymakers should consider three critical steps to capitalise on agriculture’s turnaround.

Assess sector strengths and weaknesses: To seize the sector’s potential, governments must put enablers in place to support and promote it. These include policy and regulations, organisation and sector governance, infrastructure, research and technology, and agricultural services. As policymakers strike a balance between the efficient use of resources and the development of supporting enablers, they should systematically identify areas of strength and opportunity, as well as challenges, threats, and underlying causes of problems. Develop a comprehensive transformation plan: Based on the overview of the sector’s weaknesses, policymakers must develop a transformation strategy by determining their strategic objectives and designing initiatives to reach them. For instance, to realise productivity gains and increase scale, initiatives would include increasing investments in agriculture research and development, revamping farmers’ training programmes and incentivising land consolidation and group farming.

MENA countries are encouraged by the example of other countries that have successfully transformed their agriculture sectors.

20 gulfbusiness.com June 2010

Assess the plan’s economic impact: The final step is to assess how the strategy will affect the critical macroeconomic and sector-specific indicators. Estimating and communicating the impact on indicators such as GDP, employment, trade balance, farmer profitability, productivity and foreign direct investment is pivotal in securing buy-in and commitment from entities. Agriculture’s history of low profitability, stagnant productivity and rising input costs have rendered the sector unattractive to investors, policymakers, and the workforce. It is in need of deep structural reforms. Fortunately, the recently emerging global trends have triggered a major shift in the sector’s economic potential. There are new opportunities for governments and private investors to work collaboratively in transforming agriculture in the MENA region. With combined public and private support and investments, agriculture can shed its reputation as a burden on government resources and reclaim its role as one of the first and most important engines of economic growth. By George Atallah (pictured) partner with Booz & Company, and Bisma Berti, consultant with Booz & Company.

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THE COMMENT letters@gulfbusiness.com THE NEW GUARD: UNPOLISHED OMAN TAKES ON GLITZY UAE TOURISM Vol. 15 Issue 1 May 2010

TOP BANKS IN THE GCC HIGH HOPES

GAME CHANGER

CONSOLATION PRIZE

IF YOU BUILD IT...

Mongolia the new bluechips market Bahrain..............BD 1.0 Kuwait............... KD 1.0 Oman................ RO 1.0 Qatar.................. QR 10 Saudi Arabia.......SR 10 UAE.................. DHS 10

Cityscape focuses on delivery

Landmark’s Vipen Sethi Gulf financial centres still struggling

WWW GULFBUSINESS COM

GB Regional cover May 2010 .indd 1

4/28/10 2:35:07 PM

LETTER OF THE MONTH CLUTTER IN THE MAKING? It is interesting to note the intense competition between Gulf economies in a bid to assume pole position in the region – from the Yas Marina Circuit challenging the Bahrain Grand Prix to the DIFC in Dubai wrestling with $1.5 billion Bahrain Financial Harbour and now a vast $8 billion King Abdullah Financial District brewing in Riyadh. While this might be good for the region, it is worth weighing whether it is equally healthy. Your article ‘A place on the stage’ (Gulf Business, May 2010) raises a very legitimate concern: Bricks and mortar alone will not establish and underpin the solid reputation for financial dealings achieved by the world’s more mature locations. It was just over a year ago in another article titled ‘Cluster clutter’ that a similar concern was noted – ‘Do industrial cluster developments in the Gulf help stimulate innovation as believed?’ (Gulf Business, January 2009). Only time will tell. Gulf Business has been at the forefront of developments in region and little wonder why it is my favourite business magazine, providing an unbiased coverage of critical business and management developments in the region. From your cover pages since 2008 starting with interesting questions such as – GCC Insurance, a pledge too far? (Gulf Business, 14-28 December 2008) To the 13th anniversary issue (Gulf Business, May 2009) on Arab healthcare losing patience to and the big question ‘What next for Dubai World?’ as well as possible merger activities of regional banks ‘Do regional banks want to consolidate?’ (Gulf Business, January 2010) – well done!

Nnamdi O. Madichie Assistant Professor of Marketing University of Sharjah

CELEBRATING CLARITY Thank you for the comprehensive report on banks – ‘Bottomed out’ (Gulf Business, May 2010) I hope the report is a lesson to the Gulf’s banks. The ones that have fallen in the rankings have probably done so because of poor policies. The standard of service and the integrity of investment and analysis all need to be raised. And perhaps the bit on non-performing loans – blamed for much of the region’s weakness in profit performance – means I’ll stop getting

weekly calls from this bank or the other offering me a credit card or a loan. That’s what got us ALL in to trouble last time. Give it a rest! Juan Mendoza, Dubai

GROWING GREEN I am currently looking into buying a car and have been saddened by the lack of ‘green’ options here in the UAE. So you can imagine my pleasure in reading about a hybrid in your last car review (Gulf Business, May 2010). I think the

Lexus LS 600hl is beyond my budget, but it gives me something to aspire to. I can’t wait till buying something less harmful to the environment is not a direct tradeoff on price. One can’t expect the car manufacturers to forego the novelty cost extras that they are privy to with their uncommon hybrids, but I think it would be great if businesses and even the government gave some sort of incentive to buying them. It would help those of us with green aspirations but humble bank balances to be better able to do their bit. Teresa May Allen, 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.

22 gulfbusiness.com June 2010

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THE BRIEFING THE REGION

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[ UAE ]

Seconds to make sense of…football in the Middle East Kevin Keegan

former England manager and co-developer of Soccer Circus

How was your interactive football skills concept, Soccer Circus, conceived and developed? The project has taken over ten years to develop and an investment of $8.7 million in research and development work in the UK. Why did you decide to bring this concept to Dubai? With the strong interest in football across the Middle East I can see lots of visitors enjoying the attraction. It creates a place to go to live and breath football, to play the interactive games and to see what it’s like to be a professional footballer. Visitors can also compare their scores and see how they match up to the professionals. How much local talent have you detected at Soccer Circus Dubai? Even after just three weeks we have seen some very good youngsters who have talent. Who do you favour to win the World Cup and what do you think of the chances of England? I am really looking forward to the World Cup. There are some very good teams, such as Spain, Argentina and, of course, Brazil. There is also the possibility of an African team doing well. England has a talented squad and I can see them going a long way in the competition, perhaps to the semi-finals.

OFF THE CHARTS

Oil spills in context

Deepwater Horizon deepest oil spill ever

In a chart from Information IsBeautiful.net, 450,000 we compare barrels Deepwater Horizon’s estimated oil spill, to past spills.

Amoco Cadiz

1978: largest loss of marine life

Exxon Valdez

1989: Devastating due to remote location rich in sea life

1,600,000 barrels 271,000 barrels

would fill 900,000 cars

*Data from CIA Factbook, International Energy Association and press reports – all figures estimated and rounded.

BY THE NUMBERS

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● In millions of dirhams, the amount Etisalat has been ordered to pay an Abu Dhabi resident for using his invention without permission. ● In percentage points, the estimated increase in Takaful premiums expected globally this year, according to the Kuwait Finance House. ● In millions of dollars, the amount of money spent on gold in the Gulf Cooperation Council during the Hindu Akshaya Tritiya festival.

26 gulfbusiness.com June 2010

Dubai World debt deal ‘is potential model for Greece’ Debt-rocked Dubai World’s agreement with its core bank creditors to extend maturities on loan repayments should be seen as an example of how Dubai and Greece could manage their debt problems, a leading banker has said. ”They started a process, the market is favourable, it’s an indication of how things should be done,” Henry Azzam, Deutsche Bank’s (DB) chief executive in the Middle East and North Africa told Dow Jones Newswires. Azzam said the restructuring deal could be a lesson for Dubai– which roiled world markets last year with its debt crisis – in handling its total debt, which is estimated by some analysts to be above $100 billion. Speaking at an economic forum in Lebanon, Azzam said: “The success of Dubai in restructuring its debt” could also be an example for Greece, whose sovereign debt troubles continue to weigh on global markets, despite a rescue package from the European Union and International Monetary Fund. ”In my personal view, the problems of Greece cannot be solved by just giving them money to pay their maturing debts…They need restructuring,” he said. Azzam added that a continued tightening of fiscal policy in Greece, through reforms, is likely to bring on more social unrest. ”Restructuring – this is what Dubai did: admitting that we cannot repay on time and repaying over a longer period of time at possibly lower interest rates,” said Azzam. Dubai World has agreed in principle with its main creditors on restructuring $23.5 billion of debt, lifting a cloud of uncertainty that hung over the emirate’s economy. The government-owned conglomerate said it would pay $4.4 billion of the loans in five years and another $10 billion over eight years. Dubai’s government, meanwhile, will convert $8.9 billion of its loans to Dubai World into equity. The announced agreement accounts for about 60 per cent of Dubai World’s bank lenders. The remaining creditors holding 40 per cent of the group’s debt still have to accept the deal. ”Once you have 60 per cent of the largest creditors, that is a good indication that others would follow,“ Azzam said.

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THE BRIEFING THE REGION [ QATAR ]

Govt employees get triple the pay

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[ SAUDI ARABIA ]

$10.6 billion in projects approved Saudi Arabia has approved over $10.6 billion in projects in the first four months of the year, its foreign minister has revealed. The approvals of some 652 projects valued at $10.67 billion underscores that Saudi is continuing a policy of spending heavily on infrastructure projects to cushion its economy from the effects of the global economic crisis. Last year, the Kingdom spent $33.83 billion in project investment, an amount it is now on track to surpass.

[ KUWAIT ]

KFH leases planes to Turkey Kuwait Finance House has leased three Airbus

A320s to Turkish Airlines, it announced. In a statement, Kuwait’s largest Islamic lender, which owns an aircraft leasing business, said that its subsidiary, Kuwait’s Aviation Lease and Finance Co, will run the leasing process on behalf of the bank. ”KFH signed an agreement to lease three Airbus A320200 to Turkish Airlines for a period of seven years,” KFH said in a statement. Alafco has previously leased five aircraft to Turkish Airlines and three to Turkey’s Sky Airlines, the statement said.

[ OMAN ]

Al Jazeera Steel doubles revenues Oman-based steelmaker Al Jazeera Steel Products Company generated revenues of $39.8 million in the first quarter of 2010, as

compared to $18.9 million for the same period last year, it has been reported. This growth in revenues was supported by the increase in regional and global demand for steel products. The company’s total production, including its pipe mill and merchant bar mill, surged to 56,023 metric tonnes in the first quarter of 2010, as compared to 20,703 metric tonnes in the corresponding period last year, recording a growth of 170 per cent.

[ BAHRAIN ]

Better ranking for enabling business The Enabling Trade Index 2010 has moved Bahrain up two positions in its latest results, to 22nd place, it has been announced. The index, published by the World Economic Forum, assesses countries across the globe on the institutions and policies they have in place to enable trade. The kingdom was ranked 15th globally on efficient border administration and 27th in availability and use of information and technology. Bahrain also ranked highly in terms of the quality of its port infrastructure (17th), its airport infrastructure (20th) and regulatory environment (25th).

Public sector employees in Qatar earn almost three times as much as those working in the private sector, a survey has indicated. The average monthly pay package in the government sector is $4,018 while the average private sector salary is $1,480, according to the Labour Force Sample Survey conducted by Qatar Statistic Authority. Gulf nationals have invariably favoured the public sector for its association with shorter working hours, longer holidays and lighter workload. According to the study, the average monthly salary in Qatar is $2,142.

[ UAE ]

Masdar investing in carbon Abu Dhabi’s clean energy venture Masdar has jointly agreed with German power giant E.ON to put up $140 million for an enterprise to capitalise on reducing gas emissions. The project aims to end the practice of flaring and to lift energy efficiency for companies across South East Asia, central Asia and Africa, said Frederic Boeuf, the general manager.

June 2010 gulfbusiness.com

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THE BRIEFING THE REGION [ FINANCE ]

Loans sweetened for Islamic market Dubai Islamic Bank (DIB) has launched an unusual offering – personal loans backed by sugar. The country’s oldest Islamic institution is offering the first Shari’ah-compliant personal loan in the Arab world. Under Shari’ah a bank can offer financing only if real goods change hands. DIB’s new product, Al Islami Salam Finance, is based on a centuries-old Islamic custom that gives farmers cash for a later delivery of dates. Instead of using dates as the underlying commodity, DIB’s financing will be based on a sugar futures contract.

[ FINANCE ]

Sukuk offerings rise 24 per cent Islamic bond sales are growing at the fastest pace since 2007 as yields on securities complying with the religions ban on interest fall more than those on emerging-market debt, even as Europe’s debt crisis worsens. Offerings of sukuk climbed 24 per cent to $4.6 billion so far in 2010, the most since a 50 per cent increase in the same period three years ago, according to data compiled by Bloomberg. The spread between the average yield for the debt and the three-month London interbank offered rate narrowed 301 basis points, or 3.01 percentage points, to 437 basis points in the past year, according to the HSBC/Nasdaq Dubai US Dollar Sukuk Index.

28 gulfbusiness.com June 2010

[ ENTERTAINMENT ]

Doha plants seeds of Dollywood The Doha Film Institute (DFI) - Qatar’s first yearround international cultural film organisation – has been launched in Cannes. The institute aims to build a sustainable film industry in Qatar with strong links to the international film community and an education focus for the local community. Martin Scorsese’s World Cinema Foundation has signed a three-year cultural partnership with DFI to restore and preserve international films of cultural significance. The DFI, which is backed by the Qatar Investment Authority, brings the state’s various film initiatives under one banner, including

film finance and production. The launch, on the sidelines of the Cannes International Film Festival, is the latest in the Gulf’s major investment in the cinema industry (see Making movies, page 56).

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Cannes saw the launch of other Gulf film initiatives – including the Abu Dhabi Film Festival’s Sanad, a $500,000 film fund, while the Dubai Film Connection recently announced a $120,000 fund as well.

[ REAL ESTATE ]

Abu Dhabi Hydra issues repossession notices

Repossession notices are being issued to defaulting investors in Abu Dhabi developer Hydra Properties’ flagship project. Letters have been sent to investors in the $545 million Hydra Village project, which has been dogged by controversy over imposed price hikes on properties, construction delays and

masterplan changes, local media have reported. Launched in 2006 and originally scheduled for completion in 2009, the residential community is now slated for delivery in 2011. In response to the delays, some investors refused to honour their original payment plans,

and have now been hit with a letter outlining Hydra’s “unfettered right” over the unfinished units. The letter says defaulting investors are liable for a charge of $136 per unit per day since they first defaulted, according to the developer, which insists the project is on schedule for completion in 2011.

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THE BRIEFING THE REGION [ TELECOM ]

Virgin Mobile service launched in Qatar British entrepreneur Sir Richard Branson has launched his first telecommunications venture in the region with the start of Virgin Mobile in Qatar in partnership with local telecoms leader Qtel. The new service, available in stores and online, will be wholly owned by Qtel, which licensed the Virgin brand for an undisclosed sum. The deal represents the youth-oriented brand’s first foray into the MENA region. “Qatar will be the first in the region to do this,” Nasser Marafih, the Qtel chief executive said at the launch. “We are focusing on youth and the young-atheart because we believe the Virgin brand offers fun services.” Serving eight countries and 15 million customers worldwide, the UK-based Virgin Mobile offers pre-paid mobile service while piggybacking on a national network. In the US, Sprint Nextel provides the service’s backbone. In the UK, it is T-mobile. Virgin Mobile Qatar officials said locals contributed to the look and feel of the new brand, the outlets and even the SIM cards. “Its about connecting people not just to technology, but to each other and the hottest events around town,” said Ed Jennings, the head of Virgin Mobile Qatar. Virgin Mobile Qatar will only offer a pre-paid service initially at six outlets across Doha. National and international calls will cost the same at all times.

30 gulfbusiness.com June 2010

[ CORPORATE GOVERNANCE ]

Former DIFC governor released from jail other irregularities, the prosecution said in an emailed statement. Bin Sulaiman, who was detained in March in a case of misuse of public funds, is the most senior Dubai official to be involved in a corruption investigation. Bin Sulaiman was not immediately available for comment on the case.

The former governor of the Dubai International Financial Centre has been freed from jail after paying back a total of $13.6 million he was accused of illegally taking as bonuses. Omar Bin Sulaiman, former governor of the financial services centre, is still under investigation and may be implicated in

[ REAL ESTATE ]

Dubai starts to deregister properties Dubai investors who have missed payments on their off-plan properties are being stripped of their titles as Dubai Land Department starts to deregulate problematic properties. Hundreds of letters were reportedly sent to errant investors on behalf of developers that have completed 80 per cent or more of a project. The release on April 15 of Executive Council Resolution 6 of 2010 has allowed developers, including Emaar Properties, Deyaar Development, Omniyat Properties, Al Fajer Properties and Al Mazaya Real Estate, to repossess the properties and retain 40 per cent of their value. Mohammed Sultan Thani, the assistant director general of the Dubai Land Department, said ”some” properties had been deregistered since the procedure began, adding that buyers were agreeing because they ”don‘t want to pay any more”. He referred to one developer, which he declined to name, that had issued about 225 notices, out

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of which 200 investors were willing to have their contracts cancelled. ”It’s mostly happening through mutual agreement ... only a few people are making problems,” Thani told local media. Seized properties will be auctioned by the Land Department, with the funds going to the developer unless the sales generate a surplus, which will be passed on to the original buyers. Thani added that no properties had yet

been put up for auction. Still, there are dozens of investors now considering legal action against a ruling they consider favours developers. Nabil Ahmed, the head of research for the region at Deutsche Bank, said the move to cancel contracts and repossess properties was a last resort for developers whose profits had dwindled since the financial crisis took hold and it was also a way to ”clean out” the market.

THE BRIEFING THE REGION [ AVIATION ]

Emirates to restart A380 to New York

Dubai carrier Emirates will restart its A380 flights to New York on October 31, it announced. The aircraft’s reinstatement on one of Emirates’ double daily JFK routes comes as the carrier reported a significant increase in revenue for the Americas in 2009-10, representing a year-on-year rise of 8.1 per cent. Senior company officials said the airline was looking to add further US destinations to its network. Growth in the Americas helped steer the airline to a net profit of $964 million, the airline said in a statement. Tim Clark, airline president, added: ”We promised to return the A380 to New York as soon as demand recovered and we have been true to our word.” ”Against some of the toughest operating conditions ever faced, the results for the Americas have been hugely encouraging. This achievement reflects our success in maintaining our business-as-usual approach and remaining faithful to our strategy of product and service excellence.”

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[ MEDIA ]

Young Lion winners announced The winners of the UAE Young Lions 2010, honouring advertising professionals below the age of 28, have been selected and announced. Dubai Media City, Motivate Val Morgan and Emirates airline announced the competition winners, who will be flown on an all-expense paid trip to Cannes to participate in the Young Lions Competition as part of the 57th Cannes Lions International Advertising Festival. The UAE winning team comprises Ashraf Majiet, art director, and Dario Albuquerque, copywriter from Tonic Communications. The duo was selected from the ten teams from leading creative agencies that participated. Each year, the participating teams design a campaign for a charitable

organisation based on a creative brief that outlines the campaign objectives. This year’s charitable organisation was Helping Hands UAE, which provides assistance to construction workers. The Creative Club comprising senior creatives from Dubai’s advertising agencies among other distinguished panelists participated in the judging process. Ian Fairservice, managing

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partner of Motivate Group, said: “This is the eighth year that we have hosted this event. We are proud of the young creative professionals from the UAE advertising industry. Their high quality of work is reflected in the outstanding entries at the 2010 Young Lions competition.” The UAE Young Lions Competition was supported by Gallo/Getty Images and Xerox.

[ ECONOMY ]

Dubai Holding nearing needed debt revamp: analyst Debt restructuring for Dubai Holding is becoming more likely due to its exposure to the property sector and cash flow problems, an analyst has claimed. The governmentowned conglomerate is seen as the next subject of the emirate’s debt restructuring programme, which started with Dubai World in November, Saud Masud, head of research for the Middle East and North Africa at bank UBS, was quoted as saying by Reuters Insider.

”We believe Dubai Holding has roughly $15 billion in loans and bonds but this does not include any off-balance liabilities arising from investor or end-user default on properties that have dramatically declined in 18 months,” Masud said. ”There is a clear cash flow risk in Dubai and I wouldn’t be surprised if the same holds true for Dubai Holding.” Dubai Holding holds a substantial portfolio of brands in the property and hospitality sectors,

organised under three main groupings: Dubai Holding Commercial Operations Group, Dubai International Capital and Dubai Group. A debt restructuring of Dubai Holding would further dent Dubai’s reputation following the shock of Dubai World’s difficulties, Masud said. Dubai Holding may struggle to service debt and keep enough working capital at the same time, making a debt restructuring crucial, he added.

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THE BRIEFING ECONOMIC PREPAREDNESS

Catching the wave Now is the time for managers to ready their businesses for the opportunities and growth of the awaited economic upturn, ZARINA KHAN reports.

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ith most analysts saying the worst of the Gulf’s economic downturn is over, the time has come for businesses to ready themselves to take advantage of the upturn lest they find themselves left in the dust by their competitors. “Making the most of the possible upturn is all about being ready. If you wait for the upturn to be upon you, it’ll be too late by the time it happens. Being prepared requires a bit of work and is not something you can do overnight,” Amanda Line, Middle East regional director of the Institute of Chartered Accountants in England and Wales told Gulf Business. “I was in Asia when its massive crisis hit years back and saw that a number of companies that survived the downturn failed when the upturn came because they didn’t have sufficient capital to complete the projects they undertook or the right teams to lead their projects. There is danger in a downturn and in an upturn,” she warned. The Gulf and the greater Middle East and North Africa region are expected to see improvements in economic performance this year. According to the Global Outlook report by the Economist Intelligence Unit, the region’s real gross domestic product is expected to grow by 4.2 per cent, while Emirates NBD has predicted growth of 2.5 per cent. But even the more conservative estimates, like the International Monetary Fund’s expectation that the UAE – one of the Gulf’s hardest hit economies – will grow only 0.5 per cent, is still in the black and offers opportunities to businesses that can capitalise on the growth. Line said that the major challenges businesses will face in capitalising

34 gulfbusiness.com June 2010

on the upturn are securing access to finance to fund projects and expansion, the availability of quality staff to handle the new opportunities and risk management. “One of the opportunities in this part of the world is that there is significant progress that can be made in simple things, like the quality of financial reporting. These things can be easily improved which will improve investor and customer confidence.”

business is critical.” With secure access to funding, businesses can then look to staffing their projects and operations with the type of professionals who will help improve a business’ chances of success. “One of the good things with the downturn is that there is more talent available. We are so much aware of quality today. Before companies were just hiring, they weren’t fussing about who they were hiring. Now they are much more conscious of what they’re

Making the most of the possible upturn is all about being ready. If you wait for the upturn to be upon you, it’ll be too late by the time it happens. A lingering and perhaps permanent impact of the region’s economic crisis is reduced access to finance, particularly from banks, who have seriously tightened lending criteria. “Something businesses can do to position themselves is to make sure they have excellent quality financial information about their company to take to the bank. It inspires confidence in your business not just with banks and investors. Anyone who puts money in a business is going to want to understand much more than they did a few years ago. There are going to be a lot more questions asked. Being prepared to answer those questions with clear information about your

spending on human resources. You can hire better qualified people for the budget you have. It’s a flight to quality.” Line also said the time when chief risk officers were only part of the larger corporations is gone, and most businesses can benefit from hiring or contracting professionals to assess and mitigate risk. A recent survey by the Regus Business Tracker found that business leaders in the Gulf expect a robust local economic recovery to begin in the first half of 2010, with 78 per cent of respondents predicting local economic growth within a year. ■ gb@motivate.ae

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THE BRIEFING ART AUCTION

Painting a positive picture Though deflated greatly by the recession, the Arab art market still has some areas of vibrancy and international auction house Christie’s is upbeat on interest in local art. By GLENN FREEMAN

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he art market in the Gulf is still strong despite a recession-linked deflation in pricing, a senior official from Christie’s claims on the back of its seventh Dubai art auction. “The art market has held up reasonably well, as savvy investors have flocked to tangible assets in which to tie up their money,” said Jussi Pylkkanen, Christie’s president – Europe and Middle East. Christie’s raised over $15 million at its Dubai auction last month, in a sale featuring works by prominent Middle Eastern and Western artists including Picasso, Farhad Moshiri, and Parviz Tanavoli. Among the more notable and highly-prized regionally-produced works to go under the hammer were installations such as Moshiri’s Flying Carpet and Tanavoli’s Poet and Cage, among some 20 works from Middle East artists spanning the Levant and Gulf regions. A number of the best works from Middle East artists were from the collection of Dr Mohammed Said Farsi, former Lord Mayor of Jeddah. One of the highlight sales was Mahmoud Said’s Les Chadoufs, which sold for a record $2,434,500. The market’s viability then, Pylkkanen believes, speaks for itself. As the head of Christie’s impressionist and modern department in Europe, he ticked off a number of reasons why he believes money has continued to circulate within the lucrative global art market. He believes that objets d’art provide greater liquidity and security than property, particularly in light of the buffeting real estate markets took, both regionally and globally. Pylkkanen pointed out that tougher conditions also means that there have been a lot of ‘distressed’ sales of high value artworks at bargain

36 gulfbusiness.com June 2010

Middle Eastern artist Farhad Moshiri’s Flying Carpet.

basement prices. “A lot of art collectors are very wealthy, buying artworks with spare capital. Often – even in times of general economic adversity – the wealthy do become wealthier, and they have capital which is expendable,” said Pylkkanen. “In times of pressure, some collectors are also forced to sell, so some very important works of art can come onto the market, such as Picasso, Cezanne…it’s highly likely that those with capital will chase them [during such times].” One of 500 art auctions held by Christie’s each year, the Dubai auction marks the opening of their seas, and as such, Pylkkanen said it is “very important that it succeeds.” The day before the auction he told

“But that’s not how it works. The pictures hold their value. They might decrease slightly [in price] because there’s slightly less demand at any one given moment, but major works of art, whether here at $250,000 to $500,000, or in New York…they really do hold their value pretty well.” While the picture painted by Pylkkanen is rather of a rosy hue, some attendees at the auction expressed disappointment at its results. Though billed as a sale of masterpieces, one industry source who wished to remain anonymous said there was “too much new work by artists, which should be sold

The art market has held up reasonably well, as savvy investors have flocked to tangible assets in which to tie up their money. Gulf Business that: “The Dubai market now represents the opening race of the card, if you like. And it’s very important that it succeeds and is seen to be successful.” “Sometimes when I speak to Middle East collectors…they don’t see the broader context of what’s going on here. So when the markets dropped because of the financial problems [that started] 18 months ago, when sellers were less confident to put things on the market…people were concerned that artworks wouldn’t hold value and that problems would undermine the market here.

by local galleries rather than big auction houses.” Flicking through the catalogue, he listed off a few highly-rated works that failed to sell, and many others that did sell, but only for the lowest estimates anticipated by Christie’s. With 125 pieces in total, he said it was a “weak sale” overall, with the margins made by Christie’s coming from less than 10 per cent of the pieces on sale. “Many collectors were disappointed, there were many works by key artists that didn’t sell, and many at cost price.” ■ gb@motivate.ae

THE BRIEFING REAL ESTATE

Settle down, people The answer to Dubai’s real estate woes lies in improving freehold visas, insiders say, and they think hope is on the way, ZARINA KHAN reports.

W

ith no immediate abatement to the stagnant and even gloomy forecasts for Dubai’s real estate sector, experts say the time has come for the emirate to consider improving freehold property visa provisions. “We believe a key issue is the residency visa situation. We would suggest that in order to attract more international investment, it would be preferable to have a longer visa. This will allow for more security in the market,” said Steve Morgan, head of Cluttons Dubai and Abu Dhabi, while commenting on staid market predictions. Since late 2008, when the global recession sapped liquidity from the economy, the Gulf’s former boomtown has seen a steady deflation in its former blue-chip sector of real estate, which was noted in Clutton’s Dubai property market overview, Quarter Four 2009. Regarding performance in 2010, Cluttons found that the average residential rent prices in Dubai declined over five per cent in the first quarter of the year. Since the recession kicked off, there has not been much new interest in the Dubai residential real estate market from non-resident investors. Analysts say most of the movement recorded in Dubai property in early 2010 and late 2009 was mainly in the form of existing UAE residents taking advantage of relatively low prices to shift from renting to owning. The fall seen in residential unit pricing – in some developments as high as 50 per cent – had also attracted not only Dubai residents who had been renting, but also those who had been residing in the more affordable neighbouring emirates. But that shift-based growth is not sustainable. The available supply of UAE residents

38 gulfbusiness.com June 2010

with money to buy may not be sufficient to keep the market afloat. And as yet, there have not been significant signs of improvement to hint that the rest of the year will be any better. In fact, Clutton says Dubai’s residential market has yet to

changes in the law that have left uncertainties. While last year there was some progress made on the issue, with an amendment to article 33 of the property law allowing only those foreigners whose property in Dubai was valued at Dhs1 million ($272,242) or more to be issued a six-month renewable residence visa – real estate analysts say it is not enough. They suggest that lengthening the visa term may draw more moneyed foreigners looking for a secure and comfortable place to call home. Mohammed Nimer, chief executive officer of MAG Group Property Development, is another expert in favour of relaxing Dubai’s freehold visa restrictions. Nimer, speaking at the Infrastructure and Property Development MEA Summit, explained that the relaxation of visa rules was a federal issue in the UAE but it needed to be consistent and investor friendly.

We believe a key issue is the residency visa situation... it would be preferable to have a longer visa. reach its bottom. The local real estate research firm is not alone in that assessment. A Reuters poll found that most analysts believed that Dubai house prices and rents would fall 10 per cent more in 2010 and not recover until 2012. But changing the freehold property visa situation may reinvigorate the market. Currently in the UAE, foreigners are barred from purchasing and owning land, save for those in specially zoned ‘freehold’ developments. Originally the law stated that, upon purchase, freehold properties provide the foreign owner with a six-month renewable visa. However, there have been ongoning

“Malaysia and Thailand lead emerging markets in encouraging international property buyers and as such this country could learn from them,” he told attendees of the summit. Though no developments in regulation have been announced in the recent past, it is reported that changes are afoot. A report in local media in January quoted Dubai Land Department sources as saying six pieces of legislation were being looked at this year. “We definitely need some further regulation and I feel like we’re on the verge of that regulation being put into place,” Morgan added. gb@motivate.ae

F

THE BRIEFING INSURANCE

Ensured growth Stagnating growth and a crowded insurance market in the US and the UK is drawing Western insurance companies to the ever-evolving Gulf economies. By GLENN FREEMAN

T

he growing need for insurance in the Gulf is attracting Western firms looking to diversify their services away from the fairly stagnant and oversaturated American and British markets. “The UK market is very competitive, very difficult at the moment…there’s no growth…whereas overseas, even in a place like this, which has had a slow-down, it has wonderful opportunities. We’re very bullish about our overseas business,” said Trevor Matthews, chief executive officer of well-established British insurance company Friends Provident. While health insurance in the West has been around for decades and coverage is widespread, the Gulf region’s still developing economies and modernising policies mean that there are still many uninsured residents and many insured ones still looking for better options. Companies like Friends Provident, which already gets over 50 per cent of its revenue from its overseas operations, are now eyeing the UAE, Qatar and Saudi Arabia in particular, with great interest. According to Matthews, the demand for conventional insurance from within the UAE, and the greater Gulf region, offers significant potential for them. He believes that the business model adapted and refined by Friends Provident over its 178-year history – which he describes as a ‘hub-andspoke’ model utilising the outsourcing of non-core activities – works extremely well in this region. “Other companies with operations in different countries are trying to adopt this model we’re using. The model is quite good, and quite unique. We can get the best ideas from different places and plug them

40 gulfbusiness.com June 2010

in here,” Matthews said, adding that they will also be introducing a locally based team of underwriters to their UAE operations soon. Being first and foremost a conventional insurance business, the UAE forms the core of their focus in the Middle East, given the favourable population demographics, with over 80 per cent of residents being expatriates. Particularly among western expatriates, individuals are

interesting segment of the market,” said Waterfield, though he highlights that “they have a different savings culture. The key to this market is education.” The awareness – or education - of the consumer is one of the challenges to popularising insurance in general in the Gulf. Waterfield says there is also a lack of “drivers” such as taxation breaks and legislative imperatives. In markets such as the UK and US, the tax-deductibility of life insurance and income protection insurance premiums is an additional incentive for clients. For corporations in these regions, the legally mandated provision of pension schemes for employees, which often also incorporate insurance elements, also works in favour of companies such as Friends Provident. Within the GCC, penetration of life insurance only amounts to around 1 per cent of gross domestic product, compared to 9 per

Even in a place like this, which has had a slow-down, it has wonderful opportunities. We’re very bullish about our overseas business. already well aware of the benefits of insurance in protecting wealth and the livelihoods of family members. In addition to westerners living in the UAE, non-resident Indians also hold huge potential, as they are the largest single expat group in many Gulf countries like the UAE. Additionally, there are expatriates from other parts of the Middle East, whom Friends Provident Middle East and Africa general manager Matthew Waterfield believes represent a huge part of the UAE population. “About 23 per cent of the population here are Arab expatriates, which is a very

cent in more developed markets. While there have been reports among the local UAE media that Friends Provident will be moving into Islamic insurance products such as Takaful, Waterfield hosed down such speculation by saying that currently it is only in the idea stage and is being researched. The plan is to grow the scale of their operations in the UAE first, with the aim of then branching out further into other areas of the Gulf – though this also depends largely on whether they decide to introduce Shari’ahcompliant products. ■ gb@motivate.ae

F

THE BRIEFING AQUACULTURE

Prawns in the game A little-known Saudi shrimp farm is doubling its massive capacity to provide premium seafood to gourmet tables across the world, ZARINA KHAN reports.

I

t can perhaps be considered one of Saudi Arabia’s better-kept secrets: in a marshy corner of the Saudi Arabian desert there is a high-tech facility growing some of the highest quality edible prawns available around the world. The image may seem a bit scifi Hollywood, but it is true. Just south of Jeddah exists the National Prawn Company’s (NPC) 250-square kilometre farm – the world’s largest fully integrated prawn farming facility and the only one that grows the high-end white prawns known as penaeus indicus. The NPC has been quietly producing premium seawater shrimp since it turned its 18 years of research into a commercial project in 2000 – a fact seemingly known only to a handful of chefs and supermarkets around the globe. But that is set to change, as the privately owned Saudi company works on doubling its capacity with a total of $799 million in investment. It wants the region and the world at large to know the proud fact that they have pioneered a way of growing prawns that promotes food security, sustainability and corporate social responsibility – while also making it easier to get some of the best tasting prawns in the world. Wild-caught shrimp are captured through trawling – a damaging and inefficient way of combing the seabed in hopes of capturing the bottomdwelling animals. The shrimp fishing bycatch – meaning other species captured in the trawling nets – ranges from 5-20 pounds per 1 pound of shrimp. While shrimp trawl fisheries only represent 2 per cent of the global fish catch, they reportedly produce over one-third of the world's bycatch. Shrimp and prawn farming is considered to be an alternative to the high intensity wild fishing, but tends

42 gulfbusiness.com June 2010

to come at its own cost in the quality of the seafood produced. But the NPC has developed a way of growing prawns that are also of the highest food standards. “Where we are different from other prawn farms is that we’re in the desert but raise our shrimp entirely in fresh saltwater piped in from the sea. Currently we’re producing about 14,000 tonnes of white prawns [per annum]. When we complete our current expansion in 2012, we will be producing

raised antibiotics diet and wild-caught environmental exploitation issues. “One of our big pushes is to increase the consumption of prawns. We have to educate the consumer. They should know our prawn is a premium product. We fly it to London four times a week, to individual chefs, Harrods, Waitrose, etc. In addition to that, we offer the only warm water farmed prawn that can be eaten raw. It is sushi grade, which is a very high standard. The fact that you can eat our prawns raw is a testament to the fact that we have not put anything unsavoury in them, and that our processing is very fast. We also keep up to speed with accreditation for standards. We’re EU approved – and possibly the only guaranteed food exporter in Saudi who is,” Cook explained. And while NPC’s communications director takes his show on the road, with participation at Gulf Food and other trade shows, work is underway to double the extent and production

Where we are different from other prawn farms is that we’re in the desert but raise our shrimp entirely in fresh saltwater piped in from the sea. up to 45,000 tonnes [per annum],” said Laurence Cook, corporate communications director of NPC. That is, to put it simply, a massive amount of prawns. Which is why NPC has shifted gears from simple production over the last 18 months, to include marketing. Saudi Arabia, unsurprisingly, is not known as a producer of premium farmed seafood. And the Gulf consumer does not yet have the sophisticated taste to appreciate the quality and sustainability of prawns grown in seawater but free of the usual farm-

capacity of the Saudi farms. NPC is also planning to branch out into other products – farmed fish, sea cucumbers and even phytoplankton. “We produce 60-70 tonnes of prawns a day. But when we finish our second phase of expansion, we will be producing up to 180 tonnes. It means we can’t just be a trader. The focus has to be on developing the market. Our view is to be the largest niche marketer in the world,” said Peter Fraser, NPC director of commercial business. ■ gb@motivate.ae

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THE BRIEFING SALES EFFICIENCY

Sealing sales leaks Companies wanting to improve their efficiency need to look more carefully at their sales teams, a UAE-based company tells ROCEL FELIX.

E

fficiency is a catch-word to be heard in the corridors in most companies today, in this post-recession environment. And in the Gulf, the efficiency of sales teams is often one of the most problematic parts of a business. MaxSale Solutions offers businesses a service to help them increase their sales teams’ productivity and professionalism. The company says the Gulf still has much to adapt to in the new economic reality – particularly with regard to sales. “In the old world of good times in the UAE, especially in 2007 and 2008, it wasn’t necessary to focus on the skills of sales people. The business came to companies, it was a matter of demand, but suddenly the tide has gone out,” said Peter Heredia, managing director of MaxSale Solutions. MaxSales Solutions, which Heredia co-founded, offers sales automation systems, targeting small and medium enterprises (SMEs) in the Gulf. The recession, he said, has exposed glaring ineptitudes in the sales teams of many companies operating in the region. “The SMEs are the ones really hurting from the recession. They do not have the tools to measure the level of efficiency of their sales force. There is no measure of their performance other than the typical route of the number of deals that get closed.” In improving its clients’ sales performance, MaxSale Solutions helps SMEs identify the most critical activities that will have the biggest impact on sales. These activities are then incorporated into a custom automated sales process that provides clear performance visibility. “The key thing is to improve sales efficiency and the core of this pursuit is to raise the output of sales people, especially for SMEs in the region, if they are to keep their bottomline

44 gulfbusiness.com June 2010

healthy,” says Heredia. Raising the level of productivity of sales people is good business sense, not just in boom times, but even more so in a recession, Heredia said. “The pie is smaller, there is less business, but people are still buying. The biggest challenge now for SMEs is to get business from their competitors because the market is not growing. That’s the big difference and that’s why sales efficiencies have to be improved.”

combined key activity areas. We then ensure these areas of shortfall are focused on and our payment structure guarantees these improvements,” Heredia explained. “The solutions that we offer make companies more effective in their corporate planning, they become better in managing opportunities. Our programmes also help companies become better at identifying and targeting new businesses, as well as helping them decide to get rid of

In the old world of good times in the UAE, especially in 2007 and 2008, it wasn’t necessary to focus on the skills of sales people. Unlike some companies that sell online automation tools, MaxSales Solutions are extensive, running a 12-week sales excellence program of workshops, training and one-on-one management support. “It is important to look at every aspect of the sales activity. Once the key activities are defined, it is easier to manage and monitor the sales team’s performance. Every day, a sales person logs in to the system and reports all of the activities done for the day. The information that is captured is important because it tells managers how close or how far off they are from their targets by the progress of the

deadwood, or to simply relegate them temporarily, as future opportunities.” In the UAE, raising sales efficiency through sales automation tools is still a novel concept, although it is catching on. Since it started operations in the UAE 18 months ago, MaxSale Solutions’ clientele has grown. However, even efficiency service providers are feeling the recession pinch, with fewer businesses having the present funds to take on such system studies. Still, the enthusiasm for good service and profitable sales has not wavered, but with the uncertainty, SMEs are buying time. ■ gb@motivate.ae

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F

THE BRIEFING INFORMATION TECHNOLOGY

Co-operating costs A new data management system – built on existing hardware – may be just what the doctor ordered for companies hungry to make savings, Dell tells ZARINA KHAN.

T

rue system efficiency is not just about how quickly new IT networks access information, but also relates to how they are created, with Dell being among very few solution providers who say that they can work with existing and competitor hardware and software to come up with better systems. For organisations mindful of the fiscal conservativism that is the heritage of the recession, throwing out functional hardware and software so a new system can be installed from scratch is no longer a realistic possibility. According to Anthony Dina, Dell’s director of solutions marketing, their Intelligent Data Management solutions are open and untethered, meaning they are compatible with other software and hardware. As such, they do not require a complete razing and reconstruction of an organisation’s data management system. “There is a culture of tear and replace in IT right now. We just don’t think that’s viable. Use what you have. Increase at your own pace,” said Dina. The new range of management solutions claim to help customers facing challenges in storing and managing data, which in its commonly unmanaged and unstructured state, is a huge drain on organisations’ resources and time. “Some 11-17 per cent of a company’s IT budget tends to go into data management. And the cost of it is increasing. Of data in a company, we believe that 90 per cent is unstructured, and 95 per cent is never looked at again. We think we can save 50 per cent on the cost of storage through our tier method – where we file data according to how often it needs to be accessed, to put it simply,” Dina explained. When the data is unstructured, the

46 gulfbusiness.com June 2010

Anthony Dina, Dell’s director of solutions marketing.

IT network of an organisation becomes like a tangled web, full of time- and energy-consuming detours and dead ends to getting information. “In IT spend, two thirds goes to paying for labour. That means 80 per cent is just the routine maintenance

data. Dell’s officials say they can help a company reduce its IT operating costs by 30 per cent. Saving time and resources on data is no longer optional for companies. Now that the recession has begun to wane, many are actively working to strengthen their competitive edge. “Customers are telling us today that they’d held off on upgrading their systems or taking on new IT services because they’d been uncertain about the economy. But now customers are preparing for growth. There is significant pent up demand for upgrading aged systems, bringing in unified communications convergence. There are lots of opportunities out there in businesses to improve communication and decrease operational cost,” Dina said. “An IT organisation that is spending less time on janitorial work can focus on more important services. Being able to fix your own problems doesn’t, to the eye of the customer, differentiate one company from another, but its operational speed does.” Dell is also offering Data Archiving Consulting, Cloud Infrastructure

There is a culture of tear and replace in IT right now. We just don’t think that’s viable. Use what you have. Increase at your own pace. of systems – ‘keeping the lights on’ as we say. There are a lot of IT janitors out there, fixing and cleaning the networks, repairing a deployment that’s gone wrong,” he added. Dell is offering Gulf organisations its new object storage solution, which addresses the attachment of metadata to a file, which then stores the object in an enormous, flat address space – creating a sort of tag-based data filing system, which takes into account the importance of access to a piece of

Solutions and Intelligent Infrastructure and Management products that all potentially contribute to the $200 billion of inefficiency out of the $1.2 trillion in total IT spend each year, as promised by chief executive officer Michael Dell last October. Dell’s visiting officials said the Gulf could see a significant portion of that saving, as the region’s young business community tightens up their operations to edge out the competition. ■ gb@motivate.ae

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THE BUSINESS HOSPITALITY

Room at the inn The recession has taken some of the shine off the Gulf’s glitzy hotels, yet launches, expansions and diversification continue, albeit at a somewhat more humble pace, GUY WILKENSON reports.

D

espite taking some undeniable hits, the Gulf’s hospitality sector is in relatively good form, with this year’s pipeline of new hotel rooms confirmed as being the second largest on record, according to Gulf Business’ 12th consecutive survey of the sector. Conducted by Dubai-based hospitality consulting specialists Viability, the annual survey of chains active in the Gulf Cooperation Council (GCC) confirmed 283 planned hotels with 83,604 rooms as of May 2010, compared with 325 properties and 92,026 rooms at the same time last year (reductions of 20 and 19 per cent respectively) and 295 hotels with 82,357 rooms in 2008 – which was itself an all-time record year. US chain Marriott Hotels & Resorts squeezed out Accor to top the rankings for both hotels and rooms, up from third and fourth places respectively last year, with 29 properties and 9,572 rooms under development. Accor’s pipeline comprises 23 hotels with 6,433 rooms under its Sofitel, Pullman, Novotel, Mercure and Ibis insignia. Other chains in the top ten places were, in order of their confirmed-room pipelines, Rotana, InterContinental, Millennium, Fairmont, Movenpick, Rezidor, Starwood and Golden Tulip. Each of these companies also has multiple brands, and each reported a pipeline of between 3,000 and 5,500 rooms.

48 gulfbusiness.com June 2010

Of some 80 hotel chains surveyed, 55 confirmed future GCC projects, with 19 chains each declaring more than 1,000 rooms under development, compared to 23 in 2009 and 20 in 2008.

DEFINITE DELAYS However, as a direct result of the current economic conditions, the number of hotel projects delayed has increased significantly since last year. “Almost half (48 per cent) of the confirmed hotels that were also contained in the 2009 research have been delayed by between one and four years, compared to 38 per cent in 2009, and as many as 29 per cent of the 2010 projects were

are in addition to a further 33 projects with as many as 9,000 rooms that were cancelled outright last year in the first throes of the recession,” says Wilkinson. “These include projects that could obtain no financing due to the current debt freeze, or have lost their financing due either to overly optimistic balance sheet structures, or the developers’ need to allocate available funds to more pressing ventures. Other losers include hotel projects in poor locations, for example, on remote green field sites or in secondary and over-supplied markets; and those associated with new brands with little or no track record in the regional market.”

Those figures are in addition to a further 33 projects with as many as 9,000 rooms that were cancelled outright last year. behind schedule by a year,” explained Viability partner, Barbara Wilkinson. These delays exclude any that were already reported last year, meaning that a number of projects have experienced several revisions in their programmes. There were also 42 other hotel projects with more than 11,000 rooms that were declared ‘on hold’ with no firm recommencement date and a further 25 projects with more than 5,400 rooms had been cancelled altogether since the 2009 rankings. “Those figures

ROBUST PIPELINES Despite reports from all the chains in the survey regarding delays and cancellations, some were less affected than others. The mighty InterContinental Hotels Group (IHG) experienced only three cancelled projects out of almost 50 in the Middle East and North Africa over the past year. Another chain that remains highly bullish about its regional pipeline is Starwood, which recently opened its 1,000th property worldwide and

THE BUSINESS HOSPITALITY

Future chain hotel rooms in GCC, declared ‘on hold’ or ‘cancelled’, 2010 vs 2009 2010 2009 UAE

2,599 1,255 1,064

Saudi Arabia

6,789

UAE

7,582

Saudi Arabia

5,421 970 220

Qatar

650

Qatar

990 1,030

Oman

672 825

Oman

833 1,072

358 Bahrain

Kuwait

285 578

Bahrain

720

1,324

Kuwait

300 2,000

4,000

6,000

Source: Viability Management Consultants (05/2010)

8,000

2,000 On hold

4,000

6,000

8,000

Cancelled

Confirmed future chain hotel rooms in the GCC, 2010 12,000

10,000 9,572 8,219

8,000 33

6,4

6,000

4,000

2,000

09

5.5

64 1 5 4,9 08 9 4,5 4,23 ,225 4 55 3,6 ,285 7 3 0 8 2,9 2,85 91 2,5 ,100 2 08 0 1,6 1,46 ,331 277 57 1 1, ,0 41 1 9 96 06 51 28 24 5 0 4 7 7 7 7 7 71 65 64

5,1

0

s e H ia n rn oi al k s rs k or d ip x aj n m h ia ki ia tt or a G m nt rio cc otan IH niu rmo npic zid woo Tul Hiltodha eira lor ins var yma T son ame QN Lay n Su ste ber J roc Rixo the A R p G a a t n e e O r i r n i e O m n R rd e R ta de m B C M y u S ille Fa öv he W S ol Ha W J Ke M ut est M ur o o G B S F ar

Source: Viability Management Consultants (05/2010)

June 2010 gulfbusiness.com

49

THE BUSINESS HOSPITALITY

Summary of totals No. Chain

Hotels

Rooms

No. Chain

Hotels

Rooms

1

Marriott

29

9572

26

JAL

2

715

2

Accor

23

6433

27

Hard Rock

2

650

3

Rotana

17

5509

28

Rixos

2

644

Swiss Belhotel

4

653

4

IHG

16

5164

29

5

Millennium

14

4951

30

City Seasons

2

529

6

Fairmont Raffles

8

4508

31

Banyan Tree

3

506

7

Rezidor

15

4225

32

Rocco Forte

2

427

8

Movenpick

12

4239

33

Hyatt

2

459

Confirmed hotel projects in GCC by progress status Delayed 4 years, 3,1% Delayed 3 years, Ahead 1 year, 11,4% 6,2% Delayed 2 years, 39,14% Delayed 1 year, 81,29%

On schedule, 142,50%

9

Starwood

14

3655

34

Coral

3

441

10

Golden Tulip

13

3285

35

ADNH

1

436

11

Hilton

9

2907

36

Tamani

2

421

12

Wyndham

9

2858

37

Dusit

1

401

Ahead 1 year

Delayed 2 years

13

Jumeirah

9

2591

38

Rosewood

3

486

On schedule

Delayed 3 years

14

Gloria

2

2100

39

Hamra Hotels

1

348

Delayed 1 year

Delayed 4 years

15

Kempinski

5

1608

40

Baccarat

1

362

16

Bavaria

4

1460

41

Shangri-La

1

272

17

Citymax

3

1331

42

Oetker Hotel Coll.

1

250

18

Taj

5

1277

43

Viceroy

1

250

19

Four Seasons

4

1057

44

Premier Inn

1

242

20

Ramee

6

941

45

Gulf Hotels Group

1

237

21

QNH

4

796

46

Auris

2

230

22

Layia

3

706

47

Park Plaza

1

220

23

Southern Sun

3

751

48

Sunland

1

215

24

Best Western

4

728

49

Sonesta

1

198

25

Oberoi

3

724

50

Anantara

3

178

will debut in its 100th country later this year. Abu Dhabi-based Rotana, ranked number three in the survey, claims to have been overwhelmed with management opportunities. “We have turned down 35 so far this year alone, compared with 108 in 2009 and 105 in 2008,” states Makram El Zyr, the chain’s director of development. Even local operator Hospitality Management Holdings (HMH), owner of the Coral brand is optimistic. “2010 is set to be a landmark year for our group with a hotel opening practically every three weeks across our four brands. We have 17 new openings lined up this year, taking our existing portfolio of 33 to 50 – thus increasing the group’s total number of rooms by more than 40

50 gulfbusiness.com June 2010

percent,” HMH chief executive officer, Michel Noblet, told Gulf Business. With new properties recently opened as far afield as South Africa and Sudan, the company claims 55 hotels signed, with a target of 100 by 2012.

HOT SPOTS HMH’s incursions into Africa are symptomatic of a new geographical focus by the region’s operators, who are increasingly looking beyond the traditional and now highly competitive GCC markets, to less developed markets such as those of North Africa and Syria. Different chains, however, have widely differing perspectives on the local markets. The big international chains simply go where the opportuni-

Source: Viability Management Consultants (05/2010)

ties lie, as IHG’s Kasselis comments: “As a global company, we are constantly updating our assessment of what we term ‘head-room for growth’ and accordingly if we see one region slowing down and another region picking up, then that influences how we deploy our resources for development.” On the other hand, despite having the largest pipeline, Marriott’s assessment of the region is somewhat downbeat. “I believe the entire GCC market has been affected by the slowdown,” says Aboudi Asali, vice president of international lodging development. “However, we are still seeing some new development in Bahrain, Saudi Arabia and Abu Dhabi.” By contrast, Marc Dardenne, chief executive officer of the Emaar Hospitality Group and Emaar Hotels & Resorts, operators of Dubai’s five upscale hotels of the The Address brand, believes the opposite: “We see positive trends throughout all GCC countries. In fact, The Address Hotels & Resorts launched and built its portfolio during the thick of the financial crisis.” Overall the UAE remains the epicentre of hotel development in the GCC, with 163 confirmed hotel projects containing almost 52,000 rooms, equivalent to 58

THE BUSINESS HOSPITALITY

per cent of the total planned GCC hotels and 62 per cent of the rooms. The majority of these properties are coming up in Dubai, although Ras Al Khaimah and especially Abu Dhabi are also gaining in prominence. However, many consider Dubai to be now dangerously oversupplied, with the worse still to come, while Abu Dhabi and Doha – both now among the current ‘hot markets’ in the Gulf – could also soon reach saturation point, especially at the 4- and 5-star level, as they grow rapidly from a very low base, although the mid-market will remain attractive. Nevertheless, Dubai still has many fans. Christophe Landais, managing director of Accor Middle East echoes a shared sentiment of many: “Dubai is and will remain in my opinion a strategic place as the regional hub for UAE and a centre of expertise in the GCC with so many companies being based there. The satisfactory occupancy rates in all our hotels are evidence of the resilience of Dubai, especially in comparison with other international destinations.” The region’s operators are unanimous in their aspiration to grow in Saudi Arabia, which is perceived to hold enormous potential due to its large and growing population, continuing economic prowess and strong, self-contained domestic travel and tourism market. No less than 20 of HMH’s 33 hotels are in the Kingdom, while Golden Tulip plans to increase its Saudi portfolio from 15 to 30 hotels in the next few years.

MID-MARKET POTENTIAL “Saudi Arabia is a market of huge potential,” agrees IHG’s Kasselis. “We have been there since the 1960s so we know the market well. Some of the investors there are becoming less focussed on 5 stars and recognise the potential for mid-scale hotels – and that’s where Holiday Inn is ideally positioned right now, as well as Holiday Inn Express. The GCC in general has made a major shift from 5-star palaces, as investors are becoming more savvy and return-focused.” In a bold move, Accor has also decided to introduce franchising for the first time in the region, a formula previously

Confirmed future chain hotels in GCC by state, 2010 vs 2009 200

193

180

160

160 140 120 100

2010 2009

80 60

46

40 20 0

20 16 Bahrain

10 13 Kuwait

18

29

24

Oman

52

27

Qatar

Saudi Arabia

UAE

Source: Viability Management Consultants (05/2010)

We have turned down 35 management offers so far this year alone, compared with 108 in 2009 and 105 in 2008. only undertaken successfully by Golden Tulip and Wyndham’s Ramada brand. According to Landais, the French operator will franchise its Mercure brand on hotels of 100 rooms or less, including conversions of existing operations, which previously had been non-viable for the big chain. Indeed, most operators perceive mid-market and economy brands to represent the next great opportunity for hotel development in the GCC. Starwood, which had some years ago been active solely in the luxury segment, is this year pushing its so-called ‘select service’ brands – Aloft, Element and Four Points by Sheraton. Louvre Hotels, owned by Starwood Hotels & Resorts offshoot Starwood Capital, will soon be rolling out its economy brands Campanile and Premiere Classe via an alliance with Flamingo Hotel Management, the Middle East representatives of Golden Tulip, which was recently purchased by Louvre. Even Marriott is making its midscale Residence Inn

brand available for the first time in the region, and already reports strong interest from investors. In Dubai, the first of a new midscale

ABOUT THE SURVEY t12th continual year of survey. tAll chains active in the GCC are canvassed directly. tRanking based on numbers of rooms and suites only. tRanking includes only chain hotel projects that are firmly committed. Excluded: tAll rumoured projects. tAll unsigned projects. tAll projects for which opening dates have yet to be confirmed. tAll single owner-operated properties. tAll serviced and residential apartments, chalets and villas (but any true ‘all-suites’ hotels are included).

June 2010 gulfbusiness.com

51

THE BUSINESS HOSPITALITY

Future chain hotel projects in GCC, declared ‘on hold’ or ‘cancelled’, 2010 vs 2009 2010

2009

UAE

27

17

Saudi Arabia

UAE

5

2

Qatar

5 5

Oman 0

Kuwait Bahrain

6 6

Saudi Arabia

4 4

Qatar

0 2 3

Oman

3

Kuwait

0

1 2

Bahrain

1 1

0

10

20

30

5 6

0 On Hold

Source: Viability Management Consultants (05/2010)

26

11

10

20

30

Cancelled

Confirmed future chain hotels in the GCC, 2010 40 35

34

30 29 25 20 15

23 17 16

15 14 14 13

12 9

10 5

9

9

8

6

5

5

4

4

4

4

4

3

3

3

3

3

3

3

3

0

e al d ra rs tt or a G or m d ip k n h m nt e ki aj ia rn s H el x ia n oi rio cc otan IH zid niu woo Tul npic Hilto eira dha rmo ame ins T var ste son QN lhot yma Lay n Su ber Tre Cor woo nta the A R p a a n t n e e r i r n i e e O m n R B W Se R ille ta lde öv m M se Ana O B C ya he Ju Wy Fa Ke Ro st our M S Go M an ut ss i e o B B F S Sw ar

Source: Viability Management Consultants (05/2010)

brand called Citymax, part of the successful Landmark Gulf Group retail empire, is opening imminently beside the Mall of the Emirates with two more properties coming up soon in Bur Dubai and Sharjah. “The timing couldn’t

52 gulfbusiness.com June 2010

be better,” states the company’s general manager, Michael Weyland, who claims that his budget has altered little since he first drafted it three years ago, on the basis of an average room rate well below $100. “It’s a fact that midmar-

ket and economy hotels have proven themselves resilient in times of economic turmoil.” A number of the chains surveyed reported remaining on target with their regional or global expansion

THE BUSINESS HOSPITALITY

plans, regardless of the economic conditions. For some operators, the only way to beat the recession is to take on ever more management contracts. Take Singapore’s Banyan Tree chain, for example: “As part of our diversification strategy, we are already managing properties across the globe – in the Middle East, Asia Pacific and the Americas – and with close to 40 more projects in the pipeline, we fully expect to be on track to fulfil our global aspirations,” states Ho Kwon Ping, the company’s executive chairman. HMH’s Noblet explains: “It takes a few years to develop a new property so you cannot afford to slow down the pace of expansion. Rather you have to accelerate to boost your portfolio and stimulate your business.” Others take a slightly different approach, like Neil George, vice president of acquisitions and development at Starwood EMEA, who says: “We do not believe in expansion for the sake of it. Our growth is deliberate and thoughtful. We will grow in the right places, with the right partners and the right properties.”

GETTING BACK TO GOOD? Most operators were cautiously optimistic about future growth prospects, although few were prepared to state exactly when growth would resume. “We believe that pipeline growth will return once the markets have settled, new supply is absorbed and some visibility on macro-economics returns,” says George of Starwood. “Debt markets need to come online again for the pipeline to re-start and that may take some time yet.” Many, however, were resigned to playing the waiting game, while acknowledging that the hotel sector of the Middle East as a whole has been less impacted than many other regions, and remaining cautiously optimistic about future potential. ■ Guy Wilkinson is a partner of Viability, a specialist hotel and real estate consulting firm in Dubai. Email him at guy@viability.ae.

MANAGEMENT CONTRACT TRENDS

M

ost branded hotels in the region are operated under a management contract. Effectively, the operator runs the hotel for the owner, incurring costs and generating revenues and profits on his behalf, in return for management fees typically equivalent to about 7 to 8 per cent of total revenues. Gulf Business asked operators whether the recession had affected their bargaining position when negotiating contracts. The larger chains admitted to devoting a lot more time to their hotel owners, not least in helping them get troubled projects off the ground, but not to lowering their fees or charges, as Accor’s Landais comments: “The brands as well as all the support systems of Accor have a value, a real cost, as they represent an upstream investment for the hospitality group and as such must be remunerated at their right value.” Banyan Tree’s Ping also speaks for many when he says: “We have always sought to align our interests with our owners for the long term, and because of this, a specific short-term event such as a recession, a natural disaster or health epidemic, does not affect our management terms.”

Nevertheless, most operators, including the major international chains, admitted to becoming more flexible with regard to performance provisions and geographical protection areas. The provisions range from accepting sliding scales of incentive fees (dependant on profit levels) to accepting an ‘owner’s priority return’, meaning they get paid their incentive fees only after owner commitments such as loan repayments are first honoured. Geographical protection areas are defined as regions in which the operator is prevented from opening a hotel of the same brand. Most operators prefer to accept them only for a limited period, which is known as a ‘burn-off provision’. On the flip side, the larger operators like IHG felt that their services and ‘value added’ had come into sharper focus during the recession. According to Kasselis, IHG also feels able to demand termination provisions favouring them in the event of an owner not performing or complying with its brand standards (as can happen when costs are being cut), and also when it becomes clear that a particular development is not going to be completed.

June 2010 gulfbusiness.com

53

THE BUSINESS LOGISTICS

Trains, planes and automobiles The Gulf’s long road to better logistics continues, though there will be a few detours along the way, ROBERT BAILEY reports.

D

riven by the need to market its hydrocarbon and petrochemical products and satiate development and import requirements the Gulf has invested more than $40 billion in ports and related infrastructure in the last decade. The multi-billion dollar spending spree has stimulated extraordinarily rapid development but it also reflects the region’s advantageous location on the Europe-Asia transport lane as a stopover for air cargo, sea freight and sea-to-air cargo conversion. However, the region’s transport and logistic industry remains heavily dependent on the global economy and trade flows. Last year was bleak, with the World Bank estimating a 9.7 per cent contraction in global trade volumes, the worse decline since the Second World War. Middle Eastern ports experienced an average drop in volumes of between 5-10 per cent in 2009. Dubai, for example, saw handling volumes decline 6.1 per cent. There continues to be severe pressure on margins for every player in the sector and few believe there will be an early return to the sort of double-digit growth seen in recent years. London-based shipping consultant Drewry expects there will be little or no growth this year and that it will be 2011

54 gulfbusiness.com June 2010

before a modest recovery in demand will return and not until 2012-2013 before most regions see their throughputs regain pre-recession levels. In spite of recession, investment decisions are being made on a longterm basis. US management consultant Booz and Company estimates that the Middle East transport and logistics market will be worth $27 billion by 2012 compared to $18 billion in 2008 much of it accounted for by projects in the Gulf.

jor new capacity with King Abdullah Economic City’s Port at Rabigh. When completed the port is planned to have a handling capacity of up to 10 million TEUs a year. Jebel Ali has long-term plans to expand its container handling capacity to 50 million TEUs by 2030. However, plans to build a third container terminal to raise capacity in the medium term from 11 million to 15 million containers are being reviewed. Abu Dhabi’s new Mina Khalifa Port is

Middle Eastern ports experienced an average drop in volumes of between 5-10 per cent in 2009. Even during the worse of last year’s downturn expansion projects still went ahead on schedule. These included Bahrain’s new $362.5 million Khalifa Bin Salman Port officially opened in late November 2009. After the opening of its third container terminal, Jeddah Islamic Port is already planning a fourth with a feasibility study already submitted by PSA Singapore. The expanded port would then be able to handle up to 11 million containers by 2020 compared to 7 million twenty-foot equivalent unit (TEUs) at present. The kingdom will also have ma-

being developed over five stages. The target is for the new facility to handle up to 15 million TEUs and 35 million tonnes of general cargo by 2030. An adjacent 51 square kilometres industrial zone is also being created on a site 35 kilometres north east of Abu Dhabi City. Qatar is pushing ahead with plans for a new Doha port on a 20-square-kilometre site with four container terminals able to handle 2 million TEUs. Kuwait’s Bubiyan Island container terminal is also moving forward. The port’s initial 1 million TEUs annual capacity is planned to increase to 2.5 mil-

THE BUSINESS LOGISTICS

TAKAFUL CONTRIBUTIONS AS % OF TOTAL PREMIUMS WRITTEN

lion TEUs by 2016 when a total of four container terminals will have been completed. The port could play a significant role in Iraq’s reconstruction. Oman too is set to continue on a path of ports development. Minister of National Economy Ahmed bin Abdulnabi Macki recently confirmed that the Sultanate’s new port at Duqm, 700-kilometres south of Muscat, would include a crude export terminal and dry dock and will be ready by 2012. Later stages will see a free zone complex and an airport developed nearby. Oman’s southern port at Salalah bucked the regional trend in 2009

with throughput up 14 per cent to 3.5 million TEUs at the port, which has an annual handling capacity of 5 million containers. An important element for Oman and the GCC is the introduction of railways. Tenders are expected this year for the initial phase of a Gulf-wide railway system. An early phase involves construction of a 574-kilometre line from Ghuweifat, on the borders of Saudi Arabia and Abu Dhabi to Jebel Ali port in Dubai. The new UAE railway, budgeted at between $6-8 billion will be a significant part of the planned 2,000 kilome-

tres GCC-wide rail network planned to connect Kuwait, Saudi Arabia, Oman, the UAE, Qatar and Bahrain by the end of 2017. Railways will generate new economic opportunities as a result of improved capacity and faster transport chains along the Gulf coast and a strong transSaudi Arabia transport flow. Each state has its own national rail strategy and Saudi Arabia’s is epoch-making. The Kingdom’s planned east-west line will enable shippers to avoid the long sea route through the Gulf of Aden, delivering cargo instead to ports such as Dubai and Dammam, June 2010 gulfbusiness.com

55

THE BUSINESS LOGISTICS

There has been serious thinking towards mass transit in the Gulf and broader Middle East region. to be delivered to western ports such as Jeddah for onward shipment to Europe. The biggest problem is how to fund the projects. Originally conceived as a 50-year build-operate-transfer scheme, financed mainly by debt, the east-west Landbridge project has not proved to be bankable. Last year the Saudi Railways Organisation finally acknowledged the private sector’s lack of appetite and announced that the estimated $7 billion project would be funded by the Public Investment Fund and re-tendered as an engineering, procurement and construction (EPC) contract. The problems have yet to be fully resolved and the tender process has lurched from one state of paralysis to another with bids and re-bids, a preferred bidder announced only to be suspended and then merged with the reserved bidder. “When you have a project that costs $1 billion or more, the smallest change in your calculations can cost millions. It is hardly surprising that schemes in the region have taken so long to build,” says Nigel Harris, managing director

56 gulfbusiness.com June 2010

of the UK’s Railway Consultancy. The Landbridge and other major planned rail schemes in the region are huge undertakings and some question whether the targeted delivery schedules are feasible. Perhaps the most positive factor is the fact that every Gulf state has a stated intent to develop railways. “It is not only on paper, these are projects that will see the light. There has been serious thinking towards mass transit in the Gulf and broader Middle East region,” says Ramiz al Assar, senior transport analyst at the World Bank and advisor to the GCC on its railway strategy. Some big schemes are already moving ahead. The main civil works package for the 444-kilometre Haramain high-speed rail link has been awarded to Al Rajhi Alliance involving France’s Alsthom and China Railway Engineering. The $5 billion link is designed to connect Makkah and Medina via Rabigh and Jeddah. Meanwhile work on the first phase of the Kingdom’s north-south railway is proceeding at about one kilometre a day under a contract awarded to a joint

venture of Australia’s Barclay Mowlem and Japan’s Mitsui. The track’s primary purpose is to transport phosphate and bauxite for processing at Rasa Az Zour. The line will link mines at Al Jalamid and Al Zabairah to Rasa Az Zour via Al Jawf, Hail and Al Zubairah. Later stages envisage passenger and general cargo services and an extension of the line to the Jordanian border. Both the Haramain link and northsouth minerals railway were first planned as a build-operate-transfer projects but this financing model had to be abandoned and the projects taken under the wing of the Ministry of Finance’s Public Investment Fund. Elsewhere in the Gulf, rail projects are also being mobilised. Last November, the state-owned Qatari Diar Real Estate Investment Company and Deutsche Bahn International established a joint venture, Qatar Railways Development Company (QRDC), to build a national rail network. The German concern has a 49 per cent stake in the venture, which will develop 650 kilometres of track and 98 stations. Later stages allow for a rail link with Bahrain across the proposed 45-kilometre causeway between the two Gulf states. Oman has invited bids for the first phase of its planned rail network. This involves a 260-kilometre long line linking Barka with Sohar Port and the UAE border at Khatmat Alhar. A rail network of some 2,000 kilometres is envisaged, that will eventually link Salalah on the Sultanate’s southern coast with Kuwait’s border with Iraq. The region’s rail strategy is ambitious and progress may be slow since some railways make no sense in terms of pure profit and have very little attraction for private investors. But there does seem to be commitment to a strategy that will have considerable strategic benefits for the wider economy, from encouraging trade to linking regional economies and creating jobs. Such benefits may seem obvious but the economics of these schemes will take time to become clear. ■ gb@motivate.ae

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SPECIAL REPORT: KUWAIT

Back on track

With mega-projects on hold across the GCC, how is Kuwait, until recently a byword for stagnation and corruption, finally managing to get its own ambitious plans off the ground? ROBERT BAILEY reports

T

here is a growing sense that Kuwait’s big ticket projects are firmly back on the agenda. Optimism has taken hold following agreement on a $102 billion national development plan that was approved in February by a 95 per cent majority in the National Assembly. Sheikh Ahmed Fahad Al Sabah, deputy prime minister for economic affairs and minister of housing and administrative development, has even dubbed 2010 as the year of the mega projects. The plan includes many familiar, but delayed schemes, such as the Subiya causeway, Silk Road City, Bubiyan seaport, a metro system and railway network as well as major investments in new residential areas, hospitals and roads. Mustafa Al Shamali, the finance minister, has said that the government could increase spending to as much as $52 billion in the 2010-2011 budget alone. The plan embraces up to 1,100 projects, many of them very large scale. Significantly, it represents the first development plan agreed to in almost 25 years and is part of a longer-term programme, designated Kuwait Vision 2035, which is to be executed in fiveyear phases. In truth many of the projects should have been long completed. Money has never been the problem. Kuwait had a budget surplus of $20 billion in 2008-2009, marking the tenth consecutive year of multi-billion dollar budget surpluses.

58 gulfbusiness.com June 2010

Kuwait also has vast sovereign funds and assets available. According to Randa Azar Khoury, chief economist at the National Bank of Kuwait, these amount to $500 billion. The most intractable problem has been the country’s political infighting. This has reflected administrative weaknesses, not the least of which is the state’s inability to deploy its plentiful funds to deliver long-promised improvements in social and physical infrastructure and projects to diversify the economic base. The turning point came in May 2009 when the country’s parliament took on a different shape, including the inclusion of women members for the first time.

had been some input from former British Prime Minister Tony Blair who was recently revealed as being a consultant on “sound governance” to the Kuwait government for a fee of $1.5 million. Nevertheless a daunting challenge still lies ahead even though most of the necessary moves are pretty obvious. Fundamentally, there needs to be a change to the way the country is run which has nothing to do with elections and personalities. Kuwait’s government is bloated with bureaucrats. Eighty per cent of the working population is employed by the state. There are perhaps 300,000 on the state payroll, by some estimates at least five times more than required. Many

Kuwait’s government is bloated with bureaucrats. Eighty per cent of the working population is employed by the state. Rola Dashti, one of the women MPs, says: “There is no question that people want to see the country move forward. Progressives have won the vote to chair committees and we will vote through new legislation which I think will give the country the momentum it needs.” The much improved atmosphere was shown when Prime Minister Shaikh Nasser Al Mohammed Al Ahmed Al Sabah agreed to face parliamentary questions last December. This was the first time in the GCC that a Gulf leader had agreed to address open criticism from elected politicians. Perhaps there

civil servants reportedly owe their positions to social or clan affiliations, rather than to skills or abilities. Part of the cure requires the private sector and an end to the population’s dependency culture. In the wake of the collapse in stock and real estate values many so-called ordinary citizens burned their hands while speculating on the country’s stock market. The latter incredibly still lacks the independent regulation that has been in place in other parts of the region for decades. Apart from a consistently robust

June 2010 gulfbusiness.com

59

SPECIAL REPORT: KUWAIT

LAYING GROUND

V

irtually every aspect of Kuwait’s transport infrastructure is scheduled for major development in the coming term. At Kuwait International Airport expansion involves building a new terminal building and extending the existing two runways by 600 metres each. A third runway is to be built as well as new hangars and access roads. Contracts for electrical infrastructure have already been awarded to Germany’s Siemens. Road schemes are also a critical part of Kuwait’s development plan. Roads in Kuwait City are heavily congested and links to neighbouring countries need upgrading. A trans-Kuwait national highway network is planned which will run from the Iraqi border to Saudi Arabia. The plan is to build four or five main segments each of about 100 kilometres, according to Glen Thorn, regional head of transport for Halcrow, the UK consultant that is working on the feasibility study for the first phase of the project. Improved roads will enhance Kuwait’s ports sector. Goods unloaded at the twin ports of Shuaiba and Shuwaikh will reach their destinations quicker with faster,

performance by the National Bank of Kuwait, the country’s largest financial institution, the banking system in general has remained weak in the aftermath of the 2008 global credit crisis limiting its ability to help businesses or individuals. Assembly members have called for the government to buy up the entire consumer loan portfolios of local banks and cancel $6.3 billion interest on money owed by consumer borrowers. They argue that a financial stability law, decreed after parliament was dissolved in April 2008, helped large corporations but not struggling individuals. The government, so far, has resisted these demands. Some think that a compromise solution may involve a cash handout to all Kuwaiti citizens. While avoiding the

60 gulfbusiness.com June

2010

wider highways to the rest of the GCC, cutting transport times. Studies are also being reviewed on a proposed rapid transit system linking Kuwait City to outlying areas of the capital. This is expected to be implemented on a build-operate-transfer (BOT) basis through a shareholding company where the public will own 50 per cent, a strategic investor 26 per cent and the government 24 per cent. Work on the metro will involve construction of a 171-kilometre network

involving four lines across Kuwait City including 60 kilometres of them built underground. A new national railway system is also projected to extend 518 kilometres and be integrated with the GCC’s planned 2,000 kilometres long railway system. Kuwait’s tracks are planned to connect with the Saudi Arabia border in the south and the border with Iraq to the north as well as linking communities east and west. The project will cost around $6.2 billion.

Family businesses in the Gulf may be driven to greater corporate governance due to increased wariness by banks and a resulting greater scrutiny on finance. moral hazard of total debt forgiveness this in turn could prove divisive since a significant number of Arab Kuwait residents do not have the qualification of full citizenship granted only to those with documents proving continued residence since at least 1965. Inevitably the emirate’s broader progress will be measured by practical actions to stimulate the economy and institutional reforms rather than handouts. After a troubling 18 months there is now greater confidence that the finan-

cial sector’s crisis is over. A bill has been passed creating an independent Capital Market Authority. The planned five-member committee will supervise listing and trading on the Kuwait Stock Exchange, which is oldest bourse in the Gulf. A crucial element in attempts to accelerate development is encouraging increased public participation in the economy. The government aims to kickstart this through five new publiclylisted companies. Each firm will develop a different

SPECIAL REPORT: KUWAIT

OIL & GAS

SILK CITY

T

he new found consensus in Kuwaiti public life may have positive consequences for the country’s vital hydrocarbons sector both up and downstream. This year is very much a year of decisions. The Kuwait Oil Company is planning investment of up to $2 billion to raise pressure levels in its giant Burgan Oil Field in southern Kuwait. The project is one of the largest planned in the region’s oil industry and will require a water treatment plant, water storage tanks, pumps and a 700-kilometre pipeline network linking the field to northern oil fields. Much more problematical is the fate of the emirate’s planned downstream ventures to develop new refining and petrochemicals capacity. In December 2008 the country’s Supreme Petroleum Council cancelled a $17 billion joint venture with US petrochemicals major Dow Chemical Company after pressure from parliament. Unless there is an out of court settlement, international arbitration on a $2.5 billion compensation claim by Dow is due to take place in London this summer. Plans for a 615,000 barrels-a-day refinery at Al Zour have also been scuppered. The project was derailed after National Assembly critics questioned the way five earlier EPC contracts had been drawn up.

K

uwait’s hugely ambitious Madinat Al Hareer “Silk City” project is expected to become the emirate’s second biggest urban community. Located in Subiya in northern Kuwait the 250-square-kilometre project will see four principal areas developed involving hotels, retail and recreational facilities as well residential areas. A financial district will be a prominent feature. One of the centre pieces is intended to be the “Burj Mubarak Al Kabeer”, competing to be the tallest structure ever built. An Olympic size stadium is also planned. The target date for completion has been put at 2023 when Silk City will have a planned population of 750,000. Kuwait’s Public Works Ministry is inviting contractors to bid by June 8 for a deal to design and build the longdiscussed $3.7 billion Subiya causeway

sector of the country’s economy, with the government starting the process in the banking sector. In September 2009, the creation of Warba Islamic Bank was announced. The bank’s start-up capital of $349 million is being provided from the sovereign wealth fund, with the Kuwait Investment Authority retaining a 24 per cent shareholding. The remaining shares will be distributed among Kuwait’s estimated 1.1 million citizens. There are to be companies for power developments, construction of real estate and housing, ports and health-

which is pivotal to the new city’s development. The causeway, designated the Sheikh Jaber Al Ahmed Al Sabah Bridge, will cross Kuwait Bay, linking Kuwait City with the Subiya promontory and Bubiyan Island, where major residential and port projects are proposed. Danish consultant COWI has completed a feasibility study for the link which would half the travel time by road between the area and Kuwait City. Bids are expected from local contractors in consortium with a number of foreign companies. These include Germany’s Bilfinger & Berger as well as Hochtief, France’s Bouygues and Vinci, South Korea’s Hyundai Engineering & Construction Company, Denmark’s MT Hojgaard, Japan’s Obayashi Corporation and the Saudi Binladen Group.

care in addition to banking. These are designed to act as part of a wider plan to use public-private partnerships to develop the country’s economy and attract foreign investment. Adopting the build-operate-transfer (BOT) model will allow the private sector to become more involved in the ongoing development of Kuwait. The government is said to be examining regulations to permit more flexibility in awarding concessions from the initially envisaged 20-year timeframes. International consultant firms are waiting for decisions on their bids to June 2010 gulfbusiness.com

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SPECIAL REPORT: KUWAIT

OUT OF THE DARKNESS

ISLAND LIFE

I

S

n spite of the severe power cuts experienced since 2006, the Ministry of Electricity and Water has so far been slow to implement vitally needed new schemes. Projects in the pipeline involve new power plants in Al Zour, Al Subiya, Al Jalai’ah and Al Shuaiba in addition to developing existing facilities and building new water desalination plants. The most ambitious project is the long-delayed Al Zour North Power and Water Project. However, a tender has been issued on the basis of a designbuild-operate and maintain for the first phase of development to provide 1,500 MW of power and 102 million gallonsa-day of desalinated water. Subsequent developments could result in a further tripling of power and desalinated water output from the proposed plant. A number of consortiums have been pre-qualified. These include the US’ General Electric with the local Abdulaziz Abdulmohain Al Rashed Sons Company, Japan’s Mitsui with Thuwainy Trading Company, Germany’s Siemens, the local Matajer Al Khaleej United Trading & Construction Company, Saudi Arabia’s Allied Technical General Trading with Spain’s Iberdrola, and the local Heavy Engineering Industries & Shipbuilding Company with Canada’s SNC Lavalin.

eparated from the mainland by the Subiya channel, Bubiyan is the largest of the offshore Kuwait islands. Together with Al Warba island it lies in a strategic position at the mouth of Iraq’s port of Umm Qasr opposite the Faw peninsula. Plans to develop a major new seaport and associated facilities on the 530-square-kilometres Bubiyan island have been on the drawing board for several years. The project calls for a commercial seaport to be built on the island in five phases with the government financing the building of infrastructure and the port, dredging works and land reclamation as well as roads and bridges, port infrastructure and ground improvements. When completed the port is expected have a handling capacity of 2.5 million containers a year. A number of international groups together with local partners have been linked with the project. They include South Korea’s Hyundai Engineering & Construction Company, Turkey’s Tadamon Company and STFA Marine, and Belgium’s Jan de Nul, Genevaregistered Archirodon Construction Services and Egypt’s Arab Contractors. The Public Works Ministry has already tendered marine works for the new port which involve the design and

assist the Finance Ministry’s Partnerships Technical Bureau to oversee BOT projects including the emirate’s first independent water and power project. The government is keen to develop public-private partnerships. However, experience elsewhere shows these are very difficult to implement in practice and participants from the private sector are going to need real incentives and a strong legal framework to take part. Kuwait faces more than just internal challenges with Iraq still viewed with suspicion. There are simmering tensions with Baghdad principally concerning Iraqi requests for a write off of $24 billion of outstanding reparations for the occu-

pation owed to Kuwait as well as long standing disputes over the two countries land and sea borders. But not everybody is looking to the past. Kuwait is the logical and viable route for the massive reconstruction effort that Iraq desperately needs. Jasem Al Sadoun, chairman of Alshall Investment, believes: “We should try to be the gateway into Iraq. Iraq will not continue to be a mess forever, and given its economic potential and oil reserves it could in the future be the largest Arab economy.” There is a growing sentiment in Kuwait that there is going to be change for the better and that planned mega projects will allow Kuwait to play an

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construction of a container terminal, four berths and a 1,300 metre long quay, plus port buildings and utilities. A further tender is due this year for dredging work at the port. In addition to the seaport, various tourism ventures are also planned for Bubiyan as well as Failaka Island, 20-kilometres off the coast of Kuwait. Al Mal Real estate Company has already embarked on plans to build a 100-room luxury hotel, chalets, sports facilities including golf course and health spa on Failaka Island. Observers believe that Failaka, with its heritage of Hellenic and Dilmun era antiquities, could eventually become one of the Gulf’s best known tourist areas as plans for hotels, marinas and other visitor attractions are taken forward.

increasing role in regional trade and development. While major projects will take time to evolve, the coming months are likely to see the green light given to projects to enhance oil production, build infrastructure and improve education, health care as well as build more homes. Both the government and the National Assembly want to be credited with achieving results. As a result spending on medium-sized capital projects during 2010-2011 is likely to speed up because they are likely to have the most immediate impact on boosting the economy and employment after the recession. ■ gb@motivate.ae

THE BUSINESS GULF CINEMA

Making movies With the region’s film making beginning to take off, Gulf Business examines the infrastructure, investment and interest in local cinema. GLENN FREEMAN reports

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fatal taxi accident on Dubai’s Sheikh Zayed Road; a troubled Emirati youth and a tempestuous relationship between an air hostess and an advertising executive: all sub-plots of City of Life, the first locally-produced feature film directed by an Emirati, Ali Mostafa. Following its May debut the film has been attracting strong interest locally. This is the first large-scale production of its kind for Dubai and it could be just the first drop of a waterfall, as investment in films and the screens they show on builds momentum across the Middle East. Massive investments are being poured into establishing some semblance of a local film industry, with Abu Dhabi’s ImageNation the most notable of these. The all-important infrastructure for this industry has gone through interesting times in the last few decades, particularly within the last 18 months. Cinemas and the distributors that deliver the films to their customers are now jostling for position in what has been a tough environment. Films – even without a highly developed film-making sector – are big business in the region in the form of cinema viewing. In the UAE, the cinema market has grown rapidly in recent years, fuelled by a boom in shopping mall construction and

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population growth. Figures from UKbased Dodona Research show that number of screens has grown to more than 200, up from just 140 in 2003. Gross box office revenue has also risen rapidly year-on-year. From a base of $22.8 million in 2003, this climbed to $49.2 million in 2006 and pushed beyond $71.3 million in 2009. Driven by a number of factors, including overwhelmingly young demographics across the region and a climate that forces most people to seek indoor entertainment for much of the year, cinemas form a large part of the modern lifestyle for both the local and expatriate populations.

split between other foreign-language films. Other Gulf markets have their own demographics, with Mitchell generalising that the bulk of Kuwaiti audiences are Arabic, along with a smaller mix of Indians and Westerners, with a similar breakdown in Bahrain. Given the relative youth of the UAE as a nation, and the still-emerging economic centres across the GCC, the significant opportunities are offset by a number of difficulties. One of these is the uneven playing field. Along with wealth, much of it comes down to wasta – an Arabic word that is most closely interpreted as ‘influence’ in English. Powerful, well-connected, highly-

Along with wealth, much of it comes down to wasta – an Arabic word that is most closely interpreted as ‘influence’ in English. According to Cameron Mitchell, general manager of the UAE’s well known entertainment provider CineStar, in terms of audience nationality demographics, all the GCC countries have their own unique make up, “but I think the UAE is definitely the most diverse... with the most content and the most film releases.” In the UAE, around 70 per cent of films shown are Western, 15 per cent Hindi, 10 per cent Arabic and the remainder

capitalised local family corporations trading on reputation and financial clout still dominate the business. So says Gianluca Chakra, managing director of Front Row Filmed Entertainment (FRFE), a Dubai-based film distributor concentrating primarily on independent cinema. A fast-talking Lebanese-Italian with an American accent, Chakra has been based in the UAE for years and has carved out his own niche within the local film industry.

THE BUSINESS GULF CINEMA

A still from newly-released film City of Life.

But it hasn’t come easily. Chakra speaks frankly about the early situation of the film business in the Middle East, particularly the Gulf countries and more specifically the UAE. Talking about what he describes as a monopoly situation, he says that a tie-up between trail-blazing regional distributor Gulf Film and Grand Cinemas created something of a vacuum for those seeking to operate within the local cinema industry. “It lasted for quite a long time. I’ve been here for seven years now and trust me, releasing a film is a constant battle,” he says.

According to Chakra, the business relationship between Grand Cinemas, the UAE’s first and largest cinema company, and dominant distributor Gulf Films, effectively controlled which films where shown in which cinemas. Of the UAE’s screens, Grand Cinemas operates 133, CineStar 40, Al Massa Cinemas 34 and the remaining 32 divided among smaller, independent. Gulf Film, a partnership between Ahmad Golchin and Salim Ramia, has been operating in the region for around 30 years. It also owns Grand Cinemas, the largest chain of cinemas in the Middle

East. Sitting alongside Grand Cinemas, which concentrates on the distribution of western blockbusters, are its wholly-owned subsidiaries Phars Film and Al Nisr Cinema and Film distribution, which cover the distribution of English and Hindi ‘Bollywood’ titles within the UAE and broader Gulf region. As the dominant player, Chakra says that Gulf Films had access to first screening nights for Hollywood blockbusters, which are the highest-ticket sellers in this market. “The rest of the films were then left for the other distributors and exhibitors,” he says. June 2010 gulfbusiness.com

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THE BUSINESS GULF CINEMA

Emirati director Ali Mostafa on the set of City of Life.

A lot of cinemas in the UAE lose money…It is very much a low-margin business. If you don’t get to a certain level, you lose money. The difficult business environment Chakra encountered in the UAE prompted their 2005 alliance with Kuwait National Cinema Company (KNCC). Kuwait has the second-largest film industry in the Gulf, after the UAE, with the small Gulf country bordering Iraq accounting for around 45 per cent of movie ticket sales in the Middle East. At the time of the partnership for-

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mation, KNCC owned all the cinema screens in Kuwait. Chakra says this relationship enabled his company to wrest back some control of the UAE film industry from Gulf Films, using its influence in the Kuwaiti film market to offset that of its UAE competitor. By bartering access to Kuwait cinemas in exchange for similar access to more UAE cinemas, Chakra says they were

able to create a more tenable situation in this market, but it is still difficult. “In the US for example, there are anti-trust laws that prevent an exhibitor from distributing titles in his cinema [only], as it would not favour competition. This is a major point that the US government has taken into consideration, giving everyone a chance to compete.” “Unfortunately, the UAE and GCC governments [and] the National Media Council do not know this, and I don’t think they will ever give it consideration,” he says. Though difficulties continue, Chakra believes the situation here has improved since the entry of CineStar which in 2006 heralded a more open and competitive environment. CineStar in the UAE is a joint venture between Australian cinema giant Greater Union and Majid Al-Futtaim (MAF), a local company with an extensive portfolio of companies including some of the biggest malls across the Gulf. MAF owns a 51 per cent stake in the venture, but Mitchell emphasises that it is managed by Greater Union, “and we pay market rent, we don’t get any favours.” He alludes here to MAF’s ownership of Mall of the Emirates and the newly opened Mirdif City Centre, two of CineStar’s main UAE revenue centres. From the group’s newest cinema inside the palatial retail development, Mirdif City Centre, Mitchell spoke generally about the cinema industry, and more specifically about the opportunities and challenges within the Middle East. “We have massive costs and overheads…it is tough, without food and beverage, cinemas wouldn’t be feasible,” he says. “A lot of cinemas in the UAE lose money. Sixty per cent of box office revenue goes to film distributors, you’re paying massive rent, with massive overheads in regards to electricity and water. It is very much a low-margin business. If you don’t get to a certain level, you lose money,” he says candidly, but concedes that, “overall, the right cinemas, matched with the right mall in the right area, they make a bit of money.”

THE BUSINESS GULF CINEMA

Though costs across the board continue to increase – the price of electricity and water alone have risen sixfold in the last few years – ticket prices have remained at the same level for over a decade, at around $8 for adult admission to a film. “If you look at anything in the UAE, what’s the same price [today] as it was 11 years ago?” asks Mitchell. However, this is both a curse and a blessing. The relatively low cost has meant that the entertainment industry has, in some ways, weathered the recession better than others. Mitchell makes the interesting point that, during the recession, the travel and aviation industry’s losses have been the cinema industry’s gain. When people choose to either spend their holidays at home or to travel domestically, they are more likely to visit cinemas and shopping malls. The spacious floor plans of the UAE’s malls provide an ideal environment for cinemas. According to Mitchell, this enables them to continually ramp up their offerings to stave off the ever-present threat of home cinema technology and film piracy. “We need to constantly revise our offering to ensure we offer an experience above and beyond what people can get in their own lounges: the drinks, the digital surround sound, the snacks and so forth,” he says, mentioning its various packages including Premium Gold Class and executive class and standard seating. The danger of an over-abundance of cinemas in the UAE is another threat Mitchell raises. Drawing comparisons with the effect of residential property oversupply on the local real estate market, he describes the potential impact if too many cinema screens flood the market in the UAE. He says that if some developers had followed through with plans in 2007 and 2008, at the height of the boom, “they would have killed the business here. We had developers coming in saying they were going to build individual cinemas with 200 screens.” The flip side of that glut situation can be found just next-door in Saudi Arabia. The largest and most populous of the GCC nations, with a population pushing beyond 28 million, is unusual in that

SHOOTING THE GULF

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hile local film production slowly gathers pace and the cinema sector continues to play whatever it can, wherever it can, the greater Middle East is seeing its popularity as a backdrop for international films rise. Over the past few years a number of films have shown stories taking place in the Gulf, with some of the more notable recent films being Syriana (2005) and The Kingdom (2007). Both films were shot in various Middle Eastern locations, including Morocco, Abu Dhabi and Oman. There have also been a number of stillborn attempts of international producers attempting to film in the region. The most notable example of this was the multi-million dollar Sex and the City 2 film. According to various sources, scenes of the film were originally going to be filmed in

Dubai, but ultimately approvals were not granted. Instead, the desert scenes from the film were shot in Morocco, which were referenced as Abu Dhabi. “What Dubai has been holding out for is the right film to promote the city… they’ve always wanted the James Bondtype film to be associated with Brand Dubai,” says Tim Smythe, who produced maiden Emirati feature film City of Life after much difficulty. “That’s one of the main reasons Dubai has really held back on permissions for a lot of films, because they didn’t feel the calibre or the exposure would be big enough.” Smythe, who is also chief executive and executive producer at Dubai’s Filmworks, estimates that the international exposure a film like Sex and the City 2 generates would be worth at least $100 million in abovethe-line promotion.

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THE BUSINESS GULF CINEMA

CAPITAL FILM INVESTMENT

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bu Dhabi’s tilt at building a film industry in the UAE, ImageNation, has gradually gathered momentum since it launched two years ago. A well-funded initiative entirely owned by the UAE capital’s media giant, Abu Dhabi Media Company, has the raison d’etre of working with directors and producers to boost both locallyproduced and international film production in the emirate. ImageNation’s first project was announced at the end of May, during the Cannes Film Festival. This is an Emirati film called Sea Shadow, from directorial debutante Nawaf Al Janahi. A coming-of-age story, it revolves around two friends growing up together in a small village, and it is due to shoot in October/November 2010. According to Stefano Brunner, chief operating officer, ImageNation, their two-pronged approach is weighted towards encouraging the grass roots growth of local films, but it will also look to bring more foreign, independent films to Abu Dhabi. “Everything we do, we do with generating revenue in mind,” he says, but stresses that the cultural

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imperative to build a local film industry is a driving force. “We’re doing this through coinvestments with international production companies in Los Angeles, but also India and Singapore. Through this, we’re looking at increasing the exposure of those industries in this region, paired with local talent,” says Brunner. “We take our responsibility to focus on the local film-making industry very seriously, so we try to maximise those local elements and pair them, where necessary, with the international expertise we’ve acquired through our partnerships.” Through this approach, he says they are looking to facilitate three or four locally-made movies per year, and six to eight international productions. He stresses that they aren’t looking at bigscale Hollywood productions, instead eyeing mid-sized, independent films, “but if we can help bring parts of production into the region, and produce them here, we’re happy to do so. Very often, we’re just looking at the commercial side of these projects. Sometimes it makes sense, sometimes it doesn’t.”

there are no commercial cinemas, with the display of films forbidden by the Kingdom’s religious authorities. So far it seems that reality is unlikely to be changed any time soon. A trial run of film screening last November did not go down well. A limited screening of Menahi, a locally-made comedy about a young Saudi Bedouin who moves to the city, saw an angry reaction from conservatives. Though a poll of Saudi nationals showed some 90 per cent were in favour of the opening of movie halls in the Kingdom, the screening of Menahi evoked an outcry from some clerics who issued fatwas against watching the film, claiming it would lead to forbidden activities, such as the free mixing of men and women, and listening to music. Given such opposition, industry insiders have mixed feelings on the future of cinema in Saudi Arabia, despite persistent rumours that it will one day allow the opening of cinemas. Mitchell is non-committal, referring to speculation that Saudi Arabia may soon move away from the strict ban, but airing uncertainty as to whether it will ever eventuate. However, he does mention that most of the new malls built there have the construction ‘shell’ necessary for cinemas to be added at a later date. Chakra is less optimistic when speaking about the future of film in Saudi Arabia. “It’s doomed,” he says. He feels that although Saudi Arabia’s demographic does represent so much potential, with the strict censorship and religious aspects counting against it, there will never be a film industry there. “I’ve been hearing it will be opened up for about five or six years,” he says, but doesn’t place much stock in these rumours. For neighbouring Bahrain, however, Saudi Arabia’s lack of cinemas seems to works in its favour. According to various sources, one of the reasons Bahrain’s cinema market is so strong is that Saudi Arabian nationals can drive across the causeway into Bahrain to watch films. And for the rest of the Gulf, the interest, and thus the investment potential, of film remains strong. ■ gb@motivate.ae

THE PEOPLE TIM SMYTHE

Screen test UAE-based film producer Tim Smythe talks about the country’s maiden English feature film and the challenges of the country’s movie business. GLENN FREEMAN reports

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n his 25 years in the film business, Tim Smythe, founder and chief executive at Filmworks Dubai, has worked on feature films, television productions, commercials and everything in between, across the Middle East, South Africa and the United States. After 12 years in Dubai, Smythe has just wrapped up the emirate’s first big-budget feature film directed by a UAE national – City of Life. Lauded by audiences and critics for its honest and multi-faceted look at life in the glitzy emirate, City of Life is the only significant film catering to a global audience to come out of Dubai. With some describing the film as a Middle Eastern melange of US blockbusters Crash and Babel; City of Life opened in late April to mixed reviews. Its plot revolves around three intersecting lives – an Indian taxi driver with Bollywood ambitions, a Western couple and a young Emirati man from a privileged background. “For a first time director, it was a very ambitious film. It had 80 actors [and was filmed in] 42 locations, which is massive for a first-time film. Not only with the cast and the locations, but also the three different stories happening at different times – it’s one of the most complex schedules I’ve ever worked on,” says Smythe. This is a significant statement, given some of the high-profile films, directors and production companies Smythe has worked with. Both as a freelancer

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and through his company, Filmworks, Smythe has worked on a number of big budget films while in the Middle East. These include Syriana, which starred George Clooney and Matt Damon and The Kingdom, whose cast included Jamie Foxx, Jason Bateman and other notable actors. On City of Life, Smythe worked closely with the 28-year-old Emirati director Ali Mostafa, who made his directorial debut with the film. Though he describes Mostafa as being “remarkably confident” given it was his first feature film, Smythe says he was on hand to provide the necessary encouragement and input throughout production. “I’ve worked with quite a number of first-time directors, and Ali’s quite

in 14 to 15 hour days, which for him started before sunrise and often didn’t end until late in the evening. “Normally, if I’d budgeted that film as I would for one of the Hollywood films we’ve worked on, I would have had double the budget, and two to three weeks more shooting time. What that comes down to is how much you have to fill the day to stay on schedule,” he says. Smythe explains that the goal for most Hollywood films is to shoot two to three minutes of ‘screen time’ – which refers to edited footage – per day. The actual amount of film produced per day is necessarily many times bigger than this, with much of it ending up on the cutting room floor. For City of Life, they needed to shoot at least five minutes

For a first time director, it was a very ambitious film. It had 80 actors [and was filmed in] 42 locations, which is massive for a first-time film. a confident young man. But [with producing you have to] give advice, support, encouragement, make suggestions, criticise at times, bounce ideas around. It still weaves, and you’ll try different things, different camera angles and so on.” Filming on the movie – which was written by Mostafa over a four-year period – took place over a 15-week schedule. According to Smythe, on most days, he and other cast and crew put

of screen time per day, which put the director, producers and whole crew under considerable pressure. However, it seems that Smythe thrives in this type of intense environment and enjoys keeping busy. Having grown up in South Africa’s largest city, Johannesburg, Smythe explains how his career trajectory was initially quite different. Before breaking into the film industry, he worked in organisational consultancy,

June 2010 gulfbusiness.com

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THE PEOPLE TIM SMYTHE

assessing client’s companies against productivity and other benchmarks. “I basically was in management. My younger brother, who’s now one of my partners and is a director of photography [with Filmworks], went into the film industry and he kept trying to lure me into it,” says Smythe. “I was 28 years old and had been promoted as high as I could be, before you begin to backstab your boss, and I just didn’t like it…it was giving me financial returns, but no rewards. So I joined the film industry and had to start at the bottom, as a production assistant, and then just worked my way up. I was quite lucky that I could work my way up reasonably quickly.” In South Africa, he worked primarily in filming for television, including commercials and features, but soon found his work as a freelance producer was taking him to parts of the Middle East. Once his career began to take off, he moved his base of operations to Dubai 12 years ago, and soon after he established Filmworks. At the time, there were around five or six other production companies in the UAE, “a combination of Lebanese, British and some Emirati – it was a real mixture,” says Smythe, who

When asked why he has chosen to focus on the film industry here in the Middle East rather than his home country, Smythe explains that he just doesn’t see the same opportunities in the African continent. However, that’s not to say he hasn’t faced difficulties working in film here. “When I opened here…I thought I could really change the landscape here. The first thing I did was shoot a pilot version – an Arabic version of a programme similar to friends,” says Smythe. With a multi-national cast of characters including a Kuwaiti, a Saudi Arabian, a Pakistani and an Emirati, all making fun of each other, the UAE television channels Dubai TV and Abu Dhabi TV loved the programme. But constraints inherent in the television industry here

I was 28 years old and had been promoted as high as I could be, before you begin to backstab your boss, and I just didn’t like it... spotted the opportunities available in this market. “Generally, production standards were low and there was a common belief that you couldn’t produce good work in Dubai. Because of the standard of the work we produced, we grew very quickly.” Defining what he means by the term ‘production standards’, Smythe says: “Really, it’s about the approach you have to production and the type of people you employ to execute it. It’s the skill-sets you keep around it – the cameraman, the type of video editor – all the visual ingredients you put behind the production.”

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eventually scuppered what was an extremely promising concept.” His frustrations with the local industry almost prompted him to leave just before the financial crisis. “I’ve had a number of job offers from Hollywood, and nearly moved to Santa Monica just before the crunch, and the reason for that is because, after we had all these films blocked, I got to the stage where I didn’t think there was ever going to be a film industry here. So I set up an office in Santa Monica and was about to buy a house there.” Somewhat fortuitously, given the battering real estate markets around

the world have taken, he eventually decided not to give up on working in this region. One of the main reasons for his frustration was the last minute cancellation of permission for the prominent Ridley Scott production, Body of Lies, by the Abu Dhabi government. Having worked for six months in attracting Scott to film in the region and on all the preparation this involved, Smythe was left feeling deflated by the experience. “That’s when I felt that there was no future in the industry [here]… having worked so hard, having had a feature film division set up for three years, with 40 projects coming across our table, we just managed to do one, City of Life,” says Smythe. “The potential to get a lot of those other projects done all existed, but they were either not allowed, or there was no tangible interest in attracting the film [to the region].” He is much more upbeat these days, with encouraging signs coming out of the UAE, particularly Abu Dhabi, which has now also established a film commission – a move Smythe believes is crucial in building a local industry. “Abu Dhabi has been more proactive when it comes to film. There are a lot of positive signs. I no longer want to move. I can see a resurgence of film, because eventually, there are levels of support that are going to help develop film and allow film to come into the country, so I’m quite positive about the next few years,” he says. With the UAE’s first locally-produced feature, City of Life, achieving strong ticket sales locally and set to show at Cannes, Smythe’s renewed optimism seems well-founded. He hints at further reasons for his more positive outlook on film here, referring somewhat cryptically to a current Filmworks project as “another big Hollywood production that’ll come out later this year.” However, in true showbusiness fashion, he refuses to ‘spoil the ending’ by giving further details. We will just have to wait and see. ■ gb@motivate.ae

THE LIFESTYLE COMPETITION

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THE PEOPLE EXECUTIVE MOVES Emaar Hospitality Group’s fivestar premium hotel brand, The Address Hotels + Resorts, has appointed Thomas Norberg as the general manager of The Address Dubai Mall. An experienced hospitality professional, Norberg will be responsible for further strengthening the hotel’s brand attributes in line with the philosophy of The Address Hotels + Resorts to ensure tangible benefits for guests. BMI Bank has announced the appointment of seasoned Bahraini banker Jamal Ali Al Hazeem as its new Bahrain chief executive officer. BMI is the Bahrain-based associate of BankMuscat – the largest financial services provider in Oman. In reporting to Andrew Bainbridge, who becomes the group CEO, Al Hazeem takes on the responsibility of overseeing the banks expansion plans and its international operations. National Bonds Corporation has announced the appointment of Omar Subhi as its chief financial officer. Subhi fills this newly created post following a distinguished career in finance spanning more than 13 years. Prior to this appointment, Subhi was executive director, finance and treasury with National Bonds Corporation. Building on the recent successful launch of its mobile telephone service, Wataniya Palestine has announced the appointment of Dr Bassam Hannoun as its new chief executive officer. Dr Hannoun brings to this role strong regional and international experience. His experience in the mobile industry cuts across 2G and 3G systems, both in technical and commercial capacities.

Etihad Airways has appointed Roy Kinnear as the new senior vice president of Etihad Crystal Cargo. Kinnear, who will be based at Etihad’s headquarters in Abu Dhabi, will be responsible for the strategic development and growth of Etihad’s cargo division, which offers a range of cargo services linked to the airline’s expanding route network and fleet.

Damas International, a leading retail jewellery company in the Middle East, has announced the appointment of Anan Fakhreddin as chief executive officer of the company. He is also a member of the Board of Directors of Damas International. Recently, Fakhreddin served as the Dubai-based managing director for the Middle East and Turkey at the World Gold Council. Nicolas Kahale has joined DB Advisors – Deutsche Bank’s global institutional asset management business – as head of the Middle East, Africa and Central Asia. Kahale has more than 16 years of relevant experience and will be responsible for introducing institutional investors in the Middle East, Africa and Central Asia to DB Advisors’ global investment capabilities, and for creating investment solutions for clients across the regions. In his previous roles he covered sovereign wealth funds, central banks, government organisations and other institutions in the Middle East, Africa and Central Asia. DNV, a classification and certification company that focuses on managing risk, has appointed Antony DSouza as its regional manager for the Middle East and Indian Subcontinent. He will lead the strategic direction for DNV’s efforts in the expanded region Middle East and Indian Subcontinent.

TECOM Investments has announced the appointment of Badr Al Gergawi as the new chief executive officer of TAMDEEN, its specialist firm in technical project management and a member of TECOM Investments. Al Gergawi was formerly the chief operating officer of TAMDEEN and played a key role in its foundation and growth.

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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F

THE LIFESTYLE TRAVEL

Becoming one with nature Finding a holiday destination that has not been ruined by overdevelopment can be tough, which is why simple Belize offers so much charm.

B

elize is not on the beaten path for nature-loving travellers, but perhaps it should be. For starters it has a long barrier reef, vast areas of unspoilt rainforest, a friendly, English-speaking population, stable democratic government and exemplary conservationist approach to its natural and Mayan cultural heritage. In particular, the waters around Glover’s Reef at Long Caye, Belize are thought to be some of the most stunning the country has to offer.

The reef comprises an 82-square mile shallow lagoon surrounded by deep waters of the open sea. Within this there are more than 700 pristine patch reefs brimming with the richest variety of marine life in the Caribbean – from the delicate fan coral and spiny urchin to the colourful stoplight parrot fish and elegant southern sting ray. Snorkellers and divers are often enchanted by the spectrum of sea life, in particular ‘The Wall’, which is known as a world-class dive site off

the back of Long Caye. The island has its own dive centre for those who wish to discover the underwater world. The resort at Long Caye is as rustic as it gets and there are cabanas available for hire – although don’t expect luxury here. It’s fairly simple and unpolished with its solar-powered water pumps, no maid service, no airconditioning and no flush toilets – this is a place to be at one with nature. For wildlife viewing, the June-July period can be the best time because the fresh rains bring out the wildlife after

SLEEPS&EATS Embers

The Address, Dubai Mall When a hard day’s shopping leaves your feet weary and your stomach hungry, why not skip the food court? With direct access from Bloomingdales, ‘Ember’, is the Address Dubai Mall’s signature restaurant, which unapologetically exudes style. The open kitchen serves grill cuisine (Japanese robatas, seafood, Australian ribs, vintage beefs, rotisserie) and in keeping with the design, the food is sophisticated and interestingly constructed. www.theaddress.com

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Al Muna,

Jumeirah Beach Hotel This international restaurant has an Arabic decorative style with beautiful details and culinary options that range from traditional Arabic fare and extend to the rest of the world. Watch the world go by from an expansive outdoor seating area that overlooks the harbour on which busy abras (water taxis) transport guests around the complex. Lovers of seafood flock to the restaurant on Wednesdays for the Seafood Harvest Night while oriental foodies enjoy over 40 dishes from regions such as Malaysia to Japan every Thursday. www.jumeirah.com/hotels-and-resorts

Al Samadi Cafe and Sweet Shop, Downtown Burj Khalifa

A new flavour is being offered to the popular business lunch format with Al Samadi’s FrancoLebanese cuisine. The restaurant’s location on The Boulevard in Downtown Burj Khalifa makes it a convenient location for a working lunch. Relaxed, yet elegant, Al Samadi offers customers a quiet atmosphere at lunchtime in which they can also entertain clients – the underground car park makes the venue very accessible. www.alsamadicafes.com

THE LIFESTYLE ART CHARLES POCOCK CANVAS OPINION

The dark arts

the stifling heat of May. During the rainy season, a ‘mauger’ which translates to ‘little dry’ occurs but due to the fact the overall precipitation only varies a little between the seasons, Belize can be seen as a year-round destination. Only avoid September and October when the hurricane season can strike.

Left Bank, Souq Madinat, Dubai Set amongst the swish Madinat Jumeirah, this venue has a beautiful waterfront location. Billed as a chic lounge, bar and restaurant – it’s a lively spot at the weekends. With its funky décor, it’s ideal for an intimate dinner for two, special occasions or a night out with friends. The new menu offers some mouthwatering dishes such as meat skewers, juicy lamb cutlets with tomato and onion salad and crumbled feta and the pea and leek risotto. During the day, it’s the ideal setting for business lunches, dinners and even corporate events. www.leftbank.com

Recent thefts from museums and collections have brought the darker side of the art market into the spotlight again. In May this year there were high profile cases with the multiple thefts from the Museum of Modern Art in Paris and from a collection in Marseilles the following day. The works were by Pablo Picasso, Henri Matisse, Georges Braque, Amedeo Modigliani and Fernand Leger and had an estimated market value of $150 million. The problem is not contained to Europe. The continued looting of treasures from Iraq and Afghanistan has been noted by the US Federal Bureau of Investigation as being carried out “on a massive scale”. And then there are forgeries of Middle Eastern modern masters. We have lately witnessed the appearance of several highly-questionable modern pieces. Two forged works by Dia Al Azzawi were discovered, one on Ebay.com in the US and the other at a London Gallery. The work from the US made its way to the Gulf and was dealt with there. The other piece was dealt with by Scotland Yard. Here in the region one continues to see questionable works in private collections, galleries and art fairs. During Art Dubai, for a second year running, a London Gallery displayed problematic works by the Egyptian artist Adam Henein. Maliha Tabari of Artspace Gallery, noting the problem, called a meeting with John Martin, Henein and Salma Feriani of Le Violin Bleu/ Salma Feriani Gallery. There Tabari raised the issue that Henein’s sculptures, being sold by Le Violin Bleu Gallery, were signed by someone other than the artist. Henein confirmed on site that they were not signed by him. Feriani has confirmed to me that the questioned works were signed by employees of the Bocqeul Foundry in France, where the sculptures were cast and not signed by the artist, as the artist could not hold the electric pen to sign the work. But Henein has no problem signing his works at his studio in Cairo, which puts the provenance of the sculptures in question. The gallery has told buying clients that the works are signed by the artist, although they have now been proven not to be. If they had said the works were signed by the foundry on behalf of the artist then there would be no issue, but since they did not, that is an issue. This brings to light the need for more due diligience when it comes to buying high value items. I suggested to Ben Floyd of Art Dubai the need for a vetting committee at fairs here in the Gulf, like they have in Europe and North America, giving patrons more security. He agrees. With regard to works by Middle Eastern modern masters, there are so few experts and resources available that one can rarely investigate a work and its provenance thoroughly. At Meem Gallery, with the Al Noor Library, we have 8,000 titles and in excess of 20,000 images in the picture library, making the job at hand a little bit easier. ■

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F

THE LIFESTYLE LEISURE

Muscle that hustles Quick enough to outrun the fastest margin call, the 2010 Ford Mustang GT puts a smile on the dial, writes Glenn Freeman.

W

ith its striking bright blue paintjob, a broad, muscular stance and a gloriously guttural V8 roar, there’s a lot to love about this vehicle. Sliding into the black leather driver’s seat, twisting the key and revelling in the sound of the 315 horsepower engine, one can’t help but smile. It doesn’t even matter that the 2010 model of Ford’s pony-car is slightly down on power compared to some others in its class, including the 2011 Mustang. While the 2010 model I drove had a 4.6L V8, next year’s release has a new 5.0L V8 that produces 540horsepower. But that knowledge did nothing to dent my enthusiasm.

The predominantly straight roads of Dubai provide the perfect playground for the ‘stang. Its hefty 1611.16 kg bulk and 1877 mm width, paired with a steering system with a little too much play for my liking, mean that, as always, the Mustang is still mainly a vehicle for straight line fun. The brakes, which are adequate but don’t quite provide enough bite, also add to its slight aversion for corners. Inside, the 2010 Mustang gets the SYNC entertainment and navigation system rolled out across other new model Ford vehicles. Though it isn’t

the most intuitive I’ve used, after a few minutes of head-scratching and button-pressing, it’s not too hard to figure out. Another more handy feature is the reversing camera. Cleverly inset within the drivers’ rearview mirror, this gives you a clear perspective on what’s happening behind you when backing up. Given the postage-stamp size of the rear window, this is a very welcome addition – though it has no sensors, just the camera. If you’re looking for a sporty twodoor and bang for your buck, the 2010 Mustang is hard to go past. ■

ROBBIE GREENFIELD IN THE SWING

Reinvention too far afield

T

here’s a joke from British comedy Only Fools and Horses that strikes a relevant chord in golf today. Dopey Trigger tells Sid that he’s just received a medal for using the same broom for the past 20 years. “That old broom’s had 17 new heads and 14 new handles,” he announces. Sid looks confused, and replies: “Well how can it be the same broom then?” After its radical overhaul, you could ask the same of Wentworth’s West course. The most famous inland course in Britain was at the heart of such a heated debate at last month’s BMW PGA Championship that it was difficult to focus on the golf. Ernie Els and Richard Caring, the wealthy Wentworth owner, have transformed

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this English institution into a course that is unrecognisable from the classic track first laid out by Harry Colt in 1926. According to Els, the goal was to make it a test-worthy of hosting what he refers to as the tour’s ‘fifth major’. “When players learn to master this golf course they will have a lot of confidence going forward into events like the US Open,” he insisted. But in achieving this aim, the charming old West course now looks like it belongs on the PGA Tour – with its raised greens, enormous bunkers and made-for-TV water hazards. “Wentworth has lost its English feel,” said Chris Wood, one of a number of players to publicly criticise the changes.

Wentworth is by no means alone in a modern era where golf course architects are continually fighting a losing battle against ever-improving technology but surely things have gone too far down in Surrey. Like famous historical buildings and landmarks, classic golf courses are institutions that should be protected from the whims of experimentally creative owners. As Paul Casey pointed out in one of the more damning criticisms of the new Wentworth, “Ernie Els owns that house by the 16th hole, but that doesn’t give him the right to paint it pink and put a tin roof on it.” If Caring wanted a ‘US Open’ course perhaps he could made one elsewhere. As it is, the world of golf has lost a Colt classic and introduced a worrying precedent for the future. ■

THE LIFESTYLE TECHNOLOGY

Hot stuff

THOMAS SHAMBLER GEEK SPEAK

Theft or innovation?

Sony Walkman A845 $215 Sony makes some fantastic-sounding media players. Pity then, that most in its range have been dwarfed by Apple’s marketbusting iPods. Still, it soldiers on, this time with a new Nano-baiting A845. With a 2.8in OLED screen, 16GB of memory and noisecanceling EX headphones it has everything but an Apple logo. www.sony.com

Asus N61 from $900 It might look like your bog-standard lap-friendly PC from the outside, but stick a microscope at its insides and you might spot a few differences. It’s one of the first computers to sport super-speedy USB 3.0 tech. How speedy? Well it will shoot through a typical MP3 song in a flash 0.1 seconds or a 25GB Blu-ray in just over a minute. www.asus.com

Philips Sound Sphere MCi900 $1,385 You won’t find a more high-tech hi-fi than this. They promise 100W of wide-open sound for your tunes, whether that’s from the MCi900’s removable 160GB hard disk, USB input, CD/DVD player, net radio or streamed from a Mac or PC. They even look snazzy too. www.philips.com

Did you ever see the film, Pirates of Silicon Valley? It ranked quite high on the geekometer for some. For those who didn’t make the docudrama leap though, here’s the gist: young Steve Jobs and young Bill Gates go through life building, coding and somewhat stealing their way to the top. But my opinion on a semi-decent film does not a good column make. And it wouldn’t be worth bringing up in this world of blueclad aliens and CGI effects, except for this one scene. In it, Jobs and the rest of Apple has just discovered that Bill Gates has been ripping off the original Macintosh software for what would become Microsoft’s DOS. A deplorable act of thievery of course, that is, if Apple had not already nicked it from Xerox. It’s this theme, some call it borrowing (others say piracy) that echoes throughout the film, and dare I say it, our tech trade in general. It comes from a quote of Pablo Picasso’s “good artists copy, great artists steal.” Of course, where do you draw the line? Every car in the world has a steering wheel, yet no manufacturer claims it’s theirs alone. Move that analogy into the gadget world, and you might say every touchscreen mobile has an on-screen QWERTY keypad, but no one can say that something so generic is theirs (although most do try). Right now, some of the biggest names in technology are currently sat on this fine line. When the iPhone became popular, a host of iPhone-clones appeared, from the illegal Chinese knock-offs to the legit handsets. And we’re on the cusp of another gadget revolution with the iPad. This hugely popular bit of tech is still outselling demand in the states, let alone the rest of the world where it hasn’t even been properly released. Give it a few months, and there will be a host of look-alikes, similarly-specced tablet PCs looking to cash in on Apple’s popularity. Of course, Apple’s design philosophy lends itself well to copycats. Its products are unlike any other. But don’t think that makes Steve Jobs and Co. any less likely to jump on a digital bandwagon. Whether or not these tech companies steal is without question. What you should be asking, is whether that makes them a good artist, or a great one. ■ Thomas Shambler is the features editor of Stuff Magazine Middle East. thomas@motivate.ae

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THE ESSENTIALS BOOKS

Free or easy? This month Gulf Business examines the viability of the free content model and explores the serious organisational renewal needed to ride out the recession.

C

hris Anderson’s first book, The Long Tail, explained how retail businesses would be transformed by online models that cut the cost of inventory and distribution to near zero and allowed companies to reap fortunes from niche interests. Free: the Future of a Radical Price (Hyperion) is the same, but different. Still looking at how online models have caused a seismic shift in the economics of inventory management and distribution, Anderson argues that the new price point for many goods and services is a revolutionary one: nothing at all. The book, out for a year now, garnered lukewarm reviews on publication, with the Free concept he espoused being criticised as too compromised. However, many critics are reassessing it now, especially in the wake of the newspaper “paywall” arguments and the fact that laws outlawing music sharing are being criticised for criminalising mainstream consumer behaviour. While perhaps not as fully formed as The Long Tail, Free is better as the concepts Anderson discusses are still ongoing: free content isn’t, as yet, a done deal, but it’s certainly where we’re headed. Anderson offers a vague roadmap to where this will end up, and it’s increasingly clear that even a vague map is better than no map at all.

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At the heart of Free is the idea that, while marginal costs of creating new copies of something are essentially zero, the costs of making the content are still the same; and in the online world, the initial investment in servers and computers and infrastructure can be very, very high. That’s where the difficulties start. Of course, nothing is free. A Facebook user doesn’t pay an annual fee, but their opinions, interests and friends are still a valuable commodity as information to be sold on. Recent criticisms of Facebook’s privacy policy reveal that for some, those costs are just too high. It remains to be seen just how much privacy consumers are willing to barter for their ostensibly free entertainment and news, and this book as an essential read for anyone looking at a digital model for a new or existing business.

B

eyond Crisis – Achieving Renewal in a Turbulent World (Wiley) is the book for the serious manager seeking to lead his organisation out of the recession stronger. Written by three strategists – Gill Ringland, Oliver Sparrow and Patricia Lustig – it is unsurprisingly a very technical read but one that aims to provide real answers and direction to

the manager in a crisis. Chock full of diagrams, case studies and practical suggestions – it would seem that by pulling no punches – beginning with a detailed cause-focussed narrative on the global recession, then moving in for a closer snapshot on the specific impacts it has had on the culture and psychology of business and management, to the structural weaknesses the crisis exposed on an individual business level – the authors are very methodically attempting to fix problems from the bottom up. As the jacket reminds us – after the turmoil of the recession, there is no return to business as usual. Viable and successful entities in today’s economic reality need to be Purposefully Self-Renewing Organisations – the core focus of the book. The authors lay out what they believe senior managers need to do to help their employer become that through renewal, correction and strengthening of their organisation’s business models, foundations and operational structures. Beyond Crisis is potentially a lifechanging book for a senior manager, one that prompts the examination of every layer of his organisation’s functions, its goals and its actual output. As such, it is also at times an exhausting read and not one that can be adequately done without a good amount of time and introspection.

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. EVENT HR in Healthcare

DATE Jun 01-02

LOCATION

ORGANISER

DIEC, Dubai

IIR

Beauty World Middle East and Wellness & Spa Exhibition

Jun 01-03

DIEC, Dubai

Epoc Messe

Hospital Build Exhibition & Congress - Middle East

Jun 01-03

DIEC, Dubai

IIR

Saudi Brand and Communications Summit

Jun 05-08

Marriott Riyadh Hotel,

IIR

Anti-Money Laundering Conference

Jun 06-07

Hyatt Regency Dubai, Dubai

Marcus

WEPOWER 2010

Jun 06-08

Dhahran International Exhibition Centre

BME Global

China Sourcing Fair

Jun 08-10

DIEC, Dubai

Global sources

Future Museums Congress

Jun 07-09

ADNEC, AbuDhabi

Turret

Bahrain Society of Engineers, The on tel +973 17727100, fax +973 17729819 BME Global on tel +442075119582, fax +442070221722 Datamatix on tel +9714 3326688, fax +9714 3328223. ECS (Expo Centre Sharjah) on tel +9716-5770000, fax +9716-5770111. EPOC Messe Int’l on tel +9714 3380102, fax +9714 3380041.

Middle East Desalination Summit

Jun 07-09

Abu Dhabi

Fleming Gulf

Cityscape Jeddah

Jun 07-09

Jeddah Center for Forums and Events

IIR

2nd GCC Job Localisation Challenges and Talent Management Conference

Jun 08-10

Dubai

Datamatix

Global Sources on tel +65 65472800, fax +65 65472888

Façade Design and Engineering Saudi Arabia

Jun 12-15

Radisson Blu Hotel, Riyadh, Saudi Arabia

IQPC

Cost Effective Sustainable Design and Construction Saudi Arabia Summit

Jun 12-15

Hilton Garden Inn Riyadh Olaya, Riyadh, Kingdom of Saudi Arabia

IQPC

IIR Middle East on tel+9714 3365161, fax +9714 3352682.

Fertilisers MENA Summit 2010

Jun 13-15

Hilton Hotel Abu Dhabi, United Arab Emirates

IQPC

National Security Summit Middle East 2010

Jun 13-16

Le Royal Meridien, Abu Dhabi, UAE

IQPC

Gas Processing MENA

Jun 13-16

Beach Rotana, Abu Dhabi, UAE

IQPC

Energy & Water Conservation Expo 2010

Jun 14-16

BIEC, Bahrain

BSE

Submarine Networks MENA 2010

Jun 20-23

Arjaan Rotana Hotel, Dubai, UAE

IQPC

Marine & Coastal Engineering Middle East Summit

Jun 20-23

Millennium Hotel, Doha, Qatar

IQPC

4th Annual Click Digital Marketing Summit Middle East

Jun 20-23

Grand Millenium Hotel, Dubai

IQPC

14th Annual Compensation & Benefits Forum

Jun 20-24

Dusit Thani Hotel, Dubai

IIR

Customer Service Forum

Jun 21-24

Park Rotana, Abu Dhabi

IIR

Fleming Gulf LLC on tel. +971 4 390 2764, Fax: +971 4 366 1048

IQPC ME on tel +9714 3602800, fax +9714 3631938. MARCUS EVANS Kuala Lumpur on tel +603-2723-6604, fax +603-2723-6699 Turret ME on tel ++9712 4446011, fax +9712 4443987 Terrapinn on tel +44 20 72421548, fax +44 20 72421508. 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, Box 2331, Dubai, United Arab Emirates, or fax to +9714 2827593, or email gb@motivate.ae.

WEPOWER 2010 WEPower 2010 will bring together the biggest clients in the water and power industries under one roof, combining an industry-led conference and exhibitors from across the globe showcasing their latest products and services. Water continues to be a basic need and one that attracts major investment in the Gulf. This event is an opportunity for sector players to become a part of Saudi Arabia’s developing water and power industries and will be a good networking event for professionals in water and power sectors.

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National Security Summit Middle East 2010

14th Annual Compensation & Benefits Forum

The theme this year for the summit is Counter Terrorism & Border Security. The event offers a comprehensive agenda to address the emerging threats and critical strategies that will overcome the barriers to informationsharing between government agencies and international security agencies. The agenda will also identify the latest technologies and solutions for border security and control and how you can enforce these cutting-edge measures within your organisation.

As corporations struggle to navigate the current economic storm, compensation professionals are challenged with developing reward philosophies that support corporate strategy but at the same time contain costs. The 14th Annual Compensation & Benefits Forum will address those challenges by focusing on ‘Managing Your Employee Expectations By Keeping Benefits Innovative In A Changing And Cost-Contained Environment’. Sector professionals are invited to attend.

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

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 971 4 3300000 www.Jumeriah.com

INTERCONTINENTAL DOHA

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

MÖVENPICK HOTEL DOHA

JEDDAH HILTON

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

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

86 gulfbusiness.com June 2010

THE ESSENTIALS STATS & FACTS MERGERMARKET TOP DEALS OF THE MONTH Deal Value ($m)

Bidder Company

Target Company

Deal Description

2150

Qatar Holding LLC

Harrods Limited

Qatar Holding LLC, the Qatar-based investment arm of Qatar Investment Authority, the Qatari sovereign wealth fund, has acquired Harrods Limited, the UK based operator of the upper market department store Harrods, from Mohamed Al Fayed, the UK based businessman, for a total consideration of $2.15 billion.

1300

TPG Capital LP

American Tire Distributors Holdings Inc

TPG Capital LP has agreed to acquire American Tire Distributors Holdings, Inc from Investcorp SA, Berkshire Partners LLC, and Greenbriar Equity Group LLC for an enterprise value of approximately $1.3 billion. American Tire, the US-based company headquartered in Huntersville, NC, is a replacement tyre distributor. TPG Capital, Berkshire Partners, and Greenbriar Equity Group, the US based companies headquartered in Fort Worth, TX, Boston, MA, and Rye, NY, respectively, are private equity firms. Investcorp, the listed Bahrain based company headquartered in Manama, is an alternative fund manager.

7

Astra Polymers Compounding Co Ltd

Constab Middle East Polimer AS

Astra Polymers Compounding Co Ltd, the Saudi Arabia-based producer of masterbatch additive systems, thermoplastic compounds and liquid based or paste colourants, and a subsidiary of Astra Industrial Group, the listed Saudi Arabia-based Conglomerate, has agreed to acquire Constab Middle East Polimer AS, the Turkey-based producer of masterbatch, additive and thermoplastic compounds, for a total consideration of $7.37 million.

-

MIC

STME Limited

MIC, the Saudi Arabia-based investment house, has acquired, STME Limited, the Saudi Arabia-based provider of advanced enterprise IT solutions, for an undisclosed consideration. This acquisition compliements MIC’s operational strengths and other investments. Post acquisition, MIC will add STME to its current ICT portfolio.

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Tamin Telecom

3G License (Iran)

Tamin Telecom, the Iran-based telecommunications company, has been granted the 3G mobile license ownership, from the Iranian government, for an undisclosed consideration.Tamin Telecom becomes the third mobile operator in Iran to offer 3rd generation mobile services.

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Qatar Electricity & Water Co QSC

AES Ras Laffan Operating Company WLL (70% stake); and Ras Laffan Power Company Limited QSC (55% stake)

Qatar Electricity & Water Co QSC, the listed Qatar-based power and desalination company, has agreed to acquire 55 per cent stake in Ras Laffan Power Company Limited QSC, the Qatar-based owner of an independent power and water desalination plant and 70 per cent stake in AES Ras Laffan Operating Company WLL, the Qatar-based operation and maintenance service provider, from AES Corporation, the listed US-based company engaged in power generation, distribution, supply and other intermediaries, for an undisclosed consideration.

Notes: Based on announced deals, including lapsed and withdrawn bids. Based on geography of target, bidder or vendor being Middle East. Based on period betwewen 20 April 2010 and 19 May 2010. Includes all deals valued over USD 5m. Where deal value not disclosed, deal has been entered based on turnover of target exceeding USD 10m. Activities excluded from table include property transactions and restructurings where the ultimate shareholders’ interests are not changed. Data correct as of 20 May 2010. Source: mergermarket

MIDDLE EAST QUARTERLY M&A ACTIVITY FROM 2004 TO MAY 19, 2010 * 14,000

GULF BUSINESS ACTIVITY BY INDUSTRY SECTOR YTD 2010 – VOLUME

Value [$m]

12,000

Energy, Mining & Utilities 12.5%

Volume

Business Services 12.5%

Consumer 12.5%

Number of deals

10,000

40

Value [$m]

8,000 6,000

20

4,000

Technology, Media & Telecom 50.0%

2,000 0

Leisure 12.5%

60

0

Q104 Q204 Q304 Q404 Q105 Q205 Q305 Q405 Q106 Q206 Q306 Q406 Q107 Q207 Q307 Q407 Q108 Q208 Q308 Q109 Q209 Q309 Q409 Q110 Q210*

MIDDLE EAST ANNUAL M&A ACTIVITY FROM 2004 TO MAY 19 , 2010* 30,000

GULF BUSINESS ACTIVITY BY INDUSTRY SECTOR YTD 2010 – VALUE 250

Value [$m] Volume

25,000

200

Technology, Media & Telecom 80.7%

Numbers of deals

20,000

Leisure 19.3%

Value [$m]

150

15,000

100

10,000 50

5,000 0

2004

2005

2006

2007

2008

2009

0

YTD 2010*

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.

88 gulfbusiness.com June May 2010 2010

OUT TO LUNCH TERRY TYRRELL

All things to all men GLENN FREEMAN gets a peek into future changes in the advertising and branding

sectors with Terry Tyrrell of The Brand Union over a buffet at The Rotisserie.

T Terry Tyrrell

raditional advertising agencies are being left behind by multiservice agencies that are hybrids of marketing, branding, advertising and business consultancies. So says Terry Tyrrell, global chairman of The Brand Union, over breakfast in the plush surrounds of The Rotisserie, in the Arabian Court at Dubai’s The One and Only Royal Mirage. In town for The Brand Union’s annual general meeting – their first held in this region – Tyrrell took some time out for a chat about his branding agency and the business in general, which is extremely bullish in its approach to the entire Middle East/North Africa. While waiting for our coffees to arrive, before we ventured over to the buffet, Tyrrell spoke about his vision for the future of the branding business. “Now, the brand and business strategy are becoming more closely linked…brand sits in the boardroom now. And that’s great for us, because more and more, we are dealing not just with the marketing guys, but with the CEOs,” he said, just as a smiling waitress arrives with two steaming cappuccinos. “It means that we’re no longer seen as second-cousins to the ad agencies…we’re all that they are, plus the strategic umbrella,” he said. “I can see that in 18 months to two years, The Brand Union will become a sort of hybrid between a management consultancy and what used to be called a brand agency, because increasingly we’re being asked to solve business problems through the lens of the brand.” Having piled our plates with a selection from the buffet – I had pancakes with maple syrup, glazed, fruit-filled Danish pastries and stillwarm miniature croissants – our conversation turns to The Brand Union’s operations within the Middle East. The branding company has two offices in the UAE – one in Dubai, which opened in 2002, and another that opened in Abu Dhabi in 2008. Motioning around the room, Tyrrell points out that The One and Only Royal Mirage was among the first clients of its

90 gulfbusiness.com June 2010

Dubai office, having helped them re-create their visual identity for the region. He conceded that the economic slowdown has impacted their offices globally and in the UAE, where they shed a number of staff amid shrinking marketing and advertising spend from local companies. However, Tyrrell’s outlook for the future of the branding business in the Middle East is extremely upbeat. In particular, he believes that The Brand Union’s association with the behemoth that is WPP – the world’s largest communication services group – stands them in good stead relative to smaller competitors with fewer friends in such high places. “One of the good things about being part of the global WPP group is that we can tap into the different national offices,” Tyrrell explained. While he accepts that clients are no longer committed to working with any particular company purely on the strength of their reputation – pointing to the failures of such venerable banking names as Goldman Sachs and Merrill Lynch as prominent examples – it certainly doesn’t hurt to be associated with a brand like WPP. “Being part of a stable, international group actually helps us enormously. We can go into a business as little old Brand Union – we’re not a big business at all – but to say we’re part of WPP is a tremendous competitive advantage. It says to the client ‘these guys are going to be around for a bit, they’re not going to disappear overnight’. Particularly during a period where many companies have severed ties with existing marketing agencies, or held off on hiring them, due to budgetary constraints, they have been able to leverage this partnership to their advantage. “Now that we’ve been living through difficult times…we’ve been using the WPP ‘glue’, if you like, more prominently than we have in the past,” Tyrrell said. Such glue could come in handy for many more businesses across the UAE, as they look to pick up the pieces following the global economic downturn. ■

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