EXCLUSIVE: FOUR-PAGE REPORT ON TOP DEALS AND MARKET DATA Vol. 15 Issue 5 September 2010
Does jail work for debt? Where have all the IPOs gone? The problem with subsidies
HOGAN’S TEST Etihad CEO on breaking even by 2011
&
10 reasons Abu Dhabi is turning heads
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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DETAILS Vol. 15
Issue 5 September 2010
COMMENT 12 Stock slide Property market must bottom to cheer bearish UAE equities
14 Dirty work Companies are not bound to do charity
16 Seven super-sectors Trends that will define the future
BRIEFING 18 Gems disposal Dubai World moots sale of prized assets to cut debt
22 Fiscal flexibility Bahrain credit rating falls to A3 but it remains one of the agency’s highest
23 Bourse discipline Kuwait suspends firms for failing to declare financial results
26 Letters 28 Chequeing in Does jail work for debt?
30 Money managers Wooing the ultra-wealthy is the new business mantra
34 Information overload
PEOPLE
Workers now get interrupted every four minutes
58 Bullish bank
BUSINESS
MENA President says the BoAMerrill Lynch merger was a painless process
48 IPO no-show
62 Board moves
Market volatility dampens appetite of issuers
MBA enrolment rises as recession prompts career-makers to beef up their CVs.
How subsidies stifle true privatisation
James Hogan of Etihad tells Gulf Business how the global financial crisis pushed back break-even by a year. This issue also highlights the 10 top reasons why Abu Dhabi is commanding the world’s attention.
52 Brain gain
32 Power struggle
Defying gravity 38
RESEARCH 65 Data Monitor Exclusive report on top deals and market indicators September 2010 gulfbusiness
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DETAILS
74
Editor-in-Chief Obaid Humaid Al Tayer Group Editor and Managing Partner Ian Fairservice Group Senior Editor Gina Johnson Group Editor Catherine Belbin Editor Alicia Buller Business Editor Karen Remo-Listana Sub-editor Iain Smith Editorial Coordinator-Business Concessa D’Souza Art Director Cris Domdom Senior Designer B Raveendran Contributors Ryan Harrison Michael Gordon
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General Manager Production and Circulation S Sasidharan Production Manager C Sudhakar General Manager Group Sales Anthony Milne Senior Advertisement Manager Abraham Koshy Advertisement Manager Ajay Mathews
76 LIFESTYLE 73 Competition
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74 Travel Kuala Lumpur oozes capitalism and culture in good measure.
ESSENTIALS
76 Cars
79 Books
The new Porsche Cayenne reviewed on the UAE’s mountain terrain.
77 Arts Spotlight on the most coveted Islamic art collections in Italy.
81 Calendar
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
78 Desirables Things to be seen with.
6 gulfbusiness
80 Hotels
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September 2010
Zuma’s Ajaz Sheikh shares his customer service secrets.
22,774 copies June 2009 Printed by Emirates Printing Press, Dubai
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COMMENT LEADERS BUSINESS
People matter Great Places to Work enters the market with Gulf Business magazine.
A
s the days of the boom grow more distant, the recession has brought a cold hard dose of reality to business across the board. Not least, recruitment and employee retention. As today’s companies gaze into their navels and wonder where the profits went, it’s become increasingly clear that business must be built on solid people and solid fundamentals. In a crucial indicator of growing interest in HR, the Great Place to Work Institute has ventured into the Middle East for the first time, in conjunction with Gulf Business magazine, its sole Gulf media partner. The region, with its high-expat population, transient nature and lack of legal rights for employees, is not known for its human resources finesse. But as companies have sized down and slowed down, selecting the right staff has become more of a concern.
Great Places to Work will recognise the 20 best workplaces in the UAE in terms of staff culture, welfare and benefits. The programme is the first annual ranking of the nation’s best employers and the list will be announced in this magazine in January 2011. The Institute publishes similar lists globally, including the Fortune “100 Best” in the US and top companies lists with the Financial Times in the UK and Nikkei Business in Japan. Companies that regularly feature on the Great Place to Work lists in other markets include Google, Coca Cola, Novartis, IBM, Cisco, Telefonica, Kimberly Clark and Microsoft. With this step will come two things: a vehicle of recognition for the companies that are getting HR right, and a platform for raising awareness of just how important people are in a region that sorely needs it. ■
MARKETS
Policing pay Before bonuses can be regulated, SCA needs to get a firm hand on its members.
T
he Middle East is waking up to the fact that pay and incentives demand a strong risk management structure. Saudi Arabian Monetary Agency (Sama) recently charged the CEOs of 11 major banks with personal accountability for risk associated with pay practices. In another nod to Gulf regulation, the UAE’s Securities and Commodities Authority (SCA) has ordered listed companies to set up remuneration committees. The committee comprises three nonexecutive directors, with at least two of them independent. The team ensures that pay arrangements do not encourage executives to make self-interested decisions, spelling bad news for the company overall. While reining in bankers’ bonuses is not yet a major issue in the region, it is right that companies set up the necessary tools to prevent the contagion of the same problem that plagued the developed markets.
With the recession revealing the full extent of banking bonus abuse, western firms are unsurprisingly going heavier on cash-based pay. According to a Towers Watson’s survey of 209 Fortune 500 companies, the pay mix has changed from 44 per cent cash and 56 per cent equity in 2009 to 46 per cent cash and 54 per cent equity in 2010. The compensation practices in the UAE and in the wider Gulf however are difficult to compare with the global norms because there is no regulatory imperative to publish remuneration reports for listed companies. But true Gulf regulation is a long way off. Currently, only 28 per cent of listed companies and banks have remuneration committee and 23 per cent have nominations committee in the Gulf, shows data from a Hawkamah survey. In the mean time, SCA must show more teeth in obliging listed firms to follow its rules. ■ September 2010 gulfbusiness
11
COMMENT EQUITIES
HOW TO HALT THE UAE STOCK SLIDE As the UAE stock market continues to drop, only loan growth and finalising the Dubai World restructure will stem the tide. MATEIN KHALID
T
he bear market in UAE shares has been as painful as it has been protracted. Despite $80 crude oil and renewed investor appetite for risk assets in emerging markets, the UAE stock exchanges have greatly lagged the performance of Asian exchanges and MENA markets. Bank loan growth is a useful proxy for both cyclical economic growth and liquidity trends in the Gulf. While loan growth has exceeded 15 per cent at leading banks in Saudi Arabia and Qatar, it is barely positive in the UAE due to the overhang of distressed property and quasisovereign loans. UAE bank earnings were weak thanks to the financial black death in the property markets. Most commercial banks in the UAE are burdened by rising bad loans, shrinking fee income and sluggish customer deposit bases while they cannot issue Euro debt on the global capital markets or meaningfully reduce some of the highest loan/ deposit ratios in the Middle East. No valuation rerating on UAE bank shares is possible until the end of the rising NPL cycle and the conclusion of Dubai World’s restructuring. Institutional investors have not returned to the UAE stock market after their post-Lehman exodus in late 2008. UAE retail investors, devastated by a four year old bear market, have slashed exposure to the market. The trading volumes on the DFM and ADSM have plummeted to 2003 lows, a testament to investor apathy. Fear, not greed, rules the roost on the two major UAE exchanges Both 1Q and 2Q earnings in the UAE were generally a disappointment, particularly among the bellwether banks and property shares that dominate the local indices. Emaar, for instance, boasts no less than a 26 per cent weight on the Dubai Financial Market. So it was only natural that Emaar’s 2Q 2010 profits miss was a capitulation event on the DFM that ensured bearish psychology remains dominant. However, Emaar trades a third below book value at AED 3.10. This is a distress valuation metric that does not incorporate its recurrent revenues from malls, hotels,
education projects in the UAE, let alone overseas projects that range from Syria to India. Without an improvement in UAE macro metrics, it is difficult to envisage a catalyst to attract international fund managers to the Dubai and Abu Dhabi exchanges, a necessary if not a sufficient ballast to trigger a valuation rerating. The 3Q earnings season is not going to be a catalyst for either a rise valuations rerating or a rise in trading volumes. The number of brokerage firms who have shut down suggests that industry insiders expect a protracted bear market in the UAE. Summer and Ramadan will only accentuate a period of listless trading volumes. The ADSM in Abu Dhabi has hit new lows for 2010 as the delisting plans of Aaabar and the credit rating downgrade of Aldar has hit investor sentiment. Volumes in Abu Dhabi have plunged to 40 – 50 million shares, a fraction of levels three years ago. The recent bout of global risk aversion is also bearish for crude oil prices as Chinese industrial production slumps while the dollar surges on safe haven buying. This macro milieu is bearish for Abu Dhabi equities. Emaar, could trade in a range of AED 2.80 to 4 as 0.6 times book value is a floor when the Emaar MGF IPO in India and recurrent revenues in retail/hotels/education provide a valuation anchor to the franchise. Emaar must convince investors that it can offer earnings growth, as cheap value is not sufficient without EPS momentum or a convincing catalyst. This catalyst could well be a successful restructuring of Dubai World so analysts can begin to model credible haircuts on bank loan growth data. Moreover, most UAE banks need to exhibit convincing loan growth, as NBAD has done. Above all, the property market must bottom and the infrastructure project pipeline must resume. A year end rally in UAE equities might then be something more than a battered bull’s midsummer night dream. Matein Khalid, fund manager in a royal investment office and writer in finance and geopolitics.
Fear, not greed, rules the roost on the two major UAE exchanges Both 1Q and 2Q earnings in the UAE this year were generally weak.
12 gulfbusiness September 2010
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COMMENT CSR
FIRMS SHOULD GET HANDS DIRTY WITH CHARITY Corporate social responsibility is a hollow phrase when there is no genuine feeling involved and individuals should do their personal bit instead. MISHAL KANOO
T
he new in thing in the corporate world is donating to charities. Every company is jumping on the Corporate Social Responsibility (CSR) bandwagon, desperately trying to show how important it is in their value statement. Mostly done for PR’s sake, it is sickening to see how some corporate companies try desperately to outshine each other in showing a false care. In some cases, companies who produce things that kill have the audacity to say that they care for the society. Yet if we really looked at what they produced, we would be appalled. The worst case I can think of is a large Multi National Corporation (MNC) that manufactures tobacco. At the beginning of this decade, the European powers banned tobacco adverts in certain high visibility areas such as the Formula One races, to protect the most defenceless segment of society – children. The guilty company, which I will not name, spent $150 million on charitable works globally to show it cares for the society. If the story ended there, then I would have no argument to make. But then they spent another $250 million on advertising that they spent $150 million on these charitable works. Here is my argument. I don’t believe that companies should be required either legally or morally to give back to society. This is not what they were mandated to do by their shareholders. On the other hand, their shareholders and management have a social responsibility to society on a personal basis. It is they who must spend money on good works and charity from their own and not that of a company. To help bridge this concept in the reader’s mind, let me take the issue of Zakat. From a religious point of view, it is the individual who will be held accountable for paying or holding back the Zakat with the Creator. It is not a collective responsibility but an individual one. The reason I say this is because MNCs are non-entities. We have made the mistake of considering companies as living beings. They are not. We extend human notions to them when they are not. They should never be protected under freedom of speech, which in some countries they
are, or under the freedom of religion as they cannot have one. The people who work in them, by contrast, should be extend these rights as they are living, breathing people. If a company wishes to be charitable, then they must get the consensus of their shareholders and form a foundation. Foundations, in contrast with companies, are set up with the very purpose and consent of the shareholders of giving back. This is the proper way that people who own companies need to give back to society. But this rarely happens for a simple humanistic reason — we are lazy. The ones who support collective out pouring of money on society believe so because it is less of a hassle for them. If people really got off their soft and comfortable sofas to see the pain of others, they would be hard pressed not to take action. But when money is given away and others do the “dirty” work for them, they can still, mentally speaking, continue on their merry way, feeling that they have done some good without really altering their lives. This behaviour can clearly be seen in calls for money where people put money in a plate and go back home not caring whether this money will positively affect the recipient or even reach them. I do believe that we all have a duty to give back to the society that provides us with all that we need as well as to think of the less fortunate ones in it. But I do not believe that the way it is being done these days is done for the right reasons. Some might consider the means is not important because the end result is what counts. I disagree as it is only by making sure that human contact is felt that we can all thrive and prosper. The recipient needs to see that the person, who is kind to him or her, actually cares. If I am wrong, remember this the next time you give your child a gift but never see him or her for days. The child needs to know that the parent gives him or her gifts not to make up for their absence but because of the love that they feel towards them. This is no different for those who are on the receiving end of anonymous charity. After all, no matter how big and strong we grow up to be as adults, we are still children at heart. Mishal Kanoo, deputy chairman, Kanoo Group.
I don’t believe that companies should be required either legally, or morally, to give back to society. This is not what they were mandated to do by their shareholders.
14 gulfbusiness September 2010
COMMENT FUTUROLOGY
SEVEN TRENDS THAT WILL DEFINE THE FUTURE As the world’s demographics shift, the emerging markets will reignite real estate, finance, commodities, luxury, genetics, green energy and IT. PETER COOPER
I
n his new book Supertrends Danish futurologist and entrepreneur, Lars Tvede, looks a decade or more into the future. He thinks the best future lies with seven supersectors: finance, real estate, commodities, alternative energy, luxury, IT and biotech/genomics. Finance is an odd choice as we are still living with the effects of the global financial crisis of 2008, and there is probably a good deal more deleveraging or debt reduction to come. Yet, looking forward, the urbanisation challenges of the emerging markets like China and India surely mean a boom for finance. Even in the UAE, you can imagine housing finance as a new boom sector going forward. The problem is that the financial sector may go through another rough patch before it gets very much better. The recovery from 2008 has been too quick to be true. Real estate comes with a similar warning on timing. That said if you look at the US and UAE real estate markets there are some great bargains now. It is just that the correction may not quite be over. The world’s population will grow by two billion within 40 years, and these folk have to live somewhere. Over the same timeframe Supertrends predicts a wealth explosion, up 200 to 300 per cent in developed markets and 400 to 600 per cent in what today are emerging markets. Massive urbanisation will result. This has been a trend over the centuries after all. Between 2010 and 2050 some 100 million new urban residents will have to be accommodated every year, mainly in low cost units. India and China will see the biggest urban expansions. Then again, as the rich countries get richer, the demand for second homes will mushroom. The best locations are going to be in short supply and the price will go up. Land is not a commodity that can be manufactured, unless you think of Dubai and its famous palm islands. And once the Chinese reach the level of affluence that leads to the buying of second homes, that will unleash a
powerful buying wave. For where to buy real estate you should consider access to transport, low taxes, the rule of law and natural resources, and where people want to work, argues Tvede. The Mobile Wealthy Residency Index rated destinations by 11 factors important to rich people and came up with the following list in 2009: Switzerland, London, Singapore, New York, Hong Kong, Jersey, Cayman Islands, Isle of Man, Monaco, Dubai and Guernsey in that order. Commodities also look a sure thing as China and India grow and the US pushes dollars into the global economy to support its recovery. That is good news for an earlier than expected recovery in the UAE. As investment guru Marc Faber argues, deflation will never be allowed to happen and helicopter drops of US dollars can mean only one thing for commodity prices going forward. They will go up. Alternative energy looks a winner, if only because higher oil prices will make it more and more competitive. In the 1970s this was a boom area despite a poor global economy. On luxury I am less certain. Tvede argues that the emerging markets will unleash legions of new consumers anxious for Cartier watches and Ferraris. But emerging markets are notorious for their own volatile business cycles, and I wonder if this is not getting too carried away with projecting straight lines from present growth rates. Information technology is an obvious yes, given that technology like iPads and iPhones continue to transform our lives. But this will increasingly be dominated by a number of very large and powerful companies, and I think the entrepreneur is going to be squeezed out. There is still too much capacity in some areas of IT for anybody to make a serious profit. Biotech and genomics – the study of the human genome or DNA structure – are again another certainty for a mushroom in business activity, but this is even more highly specialised than IT. You could not imagine researching the human genome on your kitchen table! Peter Cooper, editor of arabianmoney.net
The world’s population will grow by two billion within 40 years and these folk have to live somewhere.
16 gulfbusiness September 2010
BRIEFING UAE
Dubai World moots sale of prized assets Dubai World plans to sell its prized assets over a period of eight years to generate as much as $19.4 billion to pay off creditors, according to a restructuring document obtained by Reuters. The state-owned conglomerate told creditors at a July 22 meeting, held at Dubai’s Atlantis Hotel, that its capital structure was inappropriate and needed “urgent” restructuring, according to the document handed out at the meeting. Dubai World, the conglomerate with investments ranging from luxury hotels to theme parks, said in the document asset disposals over an eight-year period will help generate up to a maximum of $19.4 billion, while similar sales based on current prices would be worth a maximum of $10.4
billion. It projected midpoint disposal proceeds of $17.6 billion. “DW (Dubai World) lender recoveries (will be) significantly enhanced if DW is given time to rebuild and realize value over a five to eight year horizon,” the document said. Dubai World’s document shows the company proposed to dispose of its “investment assets”, including its stakes in luxury retailer Barney’s, Dubai-based Atlantis Hotel, and casino operator MGM Resorts International, over a period of five years. It has identified ports operator DP World, Jebel Ali Free Zone and Dubai Maritime City (DMC) and Dry Docks World as its “strategic assets” which may generate up to $11.8 billion when put on sale over a period of eight years.
DEBT
self-sustainable footing. It said the outlook remains negative due to uncertainties over the timing and success of an ambitious disposal programme for DIFCI. At the end of 2009, the investment arm of DIFC had a $3.1billion debt, which it plans to reduce through a restructuring plan, which will see the divesting of its non-core investments by the end of 2011. S&P believes the government will continue to support DIFCI.
DIFCI to roll-over $3 billion debts Dubai International Financial Centre Investments (DIFCI) is in the hot seat as it struggles to roll-over its more than $3 billion of debts against the backdrop of weak earnings and operating cash flow. Standard and Poor’s (S&P) removed DIFCI from CreditWatch negative but warned that it has to sell more assets to put the company on
18 gulfbusiness September 2010
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UAE AVIATION
Emirates unveils extra US flights Emirates has launched its second daily flights to Los Angeles and Houston. The airline, which recorded a significant increase in revenue for the Americas in 200910, will soon offer over 15,000 seats on 98 return flights per week to the United States. Starting October 31, for Los Angeles and November 1 for Houston,
FINANCE
DEBT
Shareholders in Aabar Investments, the largest stakeholder in luxury carmaker Daimler AG, has approved plans to take the company private and delist Aabar’s shares from Abu Dhabi’s stock exchange. The decision required approval of shareholders representing 75 per cent of the company’s share capital. Aabar, majority owned by the Abu Dhabi government’s International Petroleum Investment Company (IPIC) said in June that it wanted to delist for “greater operational flexibility” for investments.
A survey by a credit counselling and debt management company reveals 85 per cent of UAE residents are in debt and landing many in prison. The survey, carried out by the International Swiss Debt Management (ISDM) Consultancy, says, 75 per cent of debtors are male and 25 per cent female.
Aabar holders approve delisting
BANKING
Provisions to increase in H2
Provisions by the UAE banks accounted for half of those taken by the Gulf banks in the second quarter this year, followed by Saudi Arabia, which contributed 23 per cent. Provisions are expected to increase further in coming quarters, which will result in UAE banks witnessing decline in profitability.
Emirates will fly non-stop to both cities twice a day on Boeing 777 aircraft. Since the airline launched its first flight to New York in 2004, the value of trade between the two nations has almost tripled, reaching $12.7 billion in the 12 months to June 2010. Emirates will also add a total of 129 additional services to and from the Kingdom of Saudi Arabia across August, September and October, adding to the
85 per cent of UAE in deep debt
SHIPPING
DPW H1 profit up 10 per cent DP World’s half profit climbed 10 per cent compared with the year earlier period, while seasonal trade flows and the contribution from new terminals will likely contribute to a stronger performance in the second six months of 2010. DP World said net profit in the first half amounted to $206 million, up from $188 million a year ago. Revenues in the six-month period grew five per cent to $1.46 billion, while consolidated throughput increased seven per cent to 13.2 million
carrier’s already robust service schedule. Jeddah and Riyadh will benefit from the extra services put in place to serve the thousands of people travelling to the Kingdom throughout Ramadan and Eid. Emirates received permission from the Saudi Authorities to operate a portion of these flights for Umrah passengers and the remainder of the flights for regular traffic.
twenty-foot equivalent container units or TEUs.
ECONOMY
Job vacancies up 33 per cent in Q2 The UAE has enjoyed a 33 per cent rise in the number of vacancies in the second quarter of 2010 compared with the first quarter of the year, and a 45 per cent rise compared with the same period last year, a new survey shows. According to FiveTen Group, a global recruitment firm, confidence is returning to the economy across the UAE, as global trade increases and rising oil prices benefit the region. A more positive outlook for the region is being reflected by the banking and finance industry hiring again, the survey said. Ongoing government investment in infrastructure is also resulting in more jobs in fields such as IT and telecoms. Continuing progress on the restructuring of the Dubai World debt is also allaying concerns. September 2010 gulfbusiness
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SAUDI ARABIA to stamp out manipulative and speculative trading, and attract more stable institutional and foreign investors. The CMA issued its first prison sentence in August last year, locking up the former chairman of Bishah Agricultural Development Company for three months, and fined Prince Ahmed bin Khaled Al Saud, the chairman of Saudi Chemical Company, for disclosure violations.
ECONOMY
Non-oil exports rise 22 per cent
REAL ESTATE
Moody’s places Dar Al-Arkan on review Moody’s Investors Service placed on review for potential downgrade the Ba2 ratings for Dar Al-Arkan Real Estate Development Company, Saudi Joint Stock Company (DAAR), Dar Al-Arkan International Sukuk Company II (DAAR ISC II) and the $450 million sukuk. Moody’s decision
AVIATION
Sama ceases operations Sama, one of two low-cost airlines in Saudi Arabia, stopped its services from August 24 as the company failed to get government support and find investors after incurring $266 million losses. Government help in the form of fuel subsidies and the removal of price limits on domestic routes failed to materialize, the Dammam-
20 gulfbusiness September 2010
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followed the company’s reporting of weaker operating performance in the first half of 2010 as compared to 2009 and higher shareholder remuneration payments than originally expected by Moody’s. The review, which Moody’s expects to conclude by the end of October, will focus on the year-to-date
operating performance and how changing expectations with respect to how the Saudi homebuilding market is likely to evolve will impact the company’s operating performance, investment and cash flow expectations going forward relative to the guidance the credit agency had originally provided for the rating.
based airline’s CEO Bruce Ashby said. “We also tried to find strategic investors who are ready to invest in the company and pump the necessary liquidity to enable Sama to operate.”
for violating the rules of the Arab world’s largest bourse. Al-Ahli Takaful, Saudi International Petrochemical Company (Sipchem), and Saudi Fransi Cooperative Insurance were each fined SAR50,000 for violating the exchange rules in their 2009 financial statements. In recent months, the oil-rich kingdom’s market regulator has asserted more control over the stock market in an effort
MARKETS
Three firms fined for violations Saudi Arabia’s Capital Market Authority (CMA) fined three firms a total of SAR150,000 ($40,000)
Saudi Arabia’s non-oil exports increased 22 per cent to SAR10.7 billion ($2.8 billion) in June, from SAR8.7 billion in the yearearlier period, data from the Central Department of Statistics and Information (CDSI) showed. The kingdom’s imports in June inched down one per cent to SAR29.2 billion, compared with SAR29.5 billion in the corresponding period in 2009, according to the CDSI data.
INFRASTRUCTURE
Causeway to cost SAR1 billion The preliminary cost for the expansion and development of the King Fahd Causeway – that links Saudi Arabia to Bahrain – is estimated at nearly SAR1.07 billion ($284.8 million), pan-Arab daily Al Hayat reported. The studies are likely to be completed in March 2011. The King Fahd Causeway Authority is expected to award the deal in July 2012. The project is scheduled for completion in December 2015, according to the daily.
QATAR TELECOMS
Qtel Q2 profit falls 45 per cent Qatar Telecom (Qtel), which provides telecommunications services in 17 countries from Asia to Africa, reported a 45 per cent decline in second-quarter profit after a one-time gain from license-fee changes wasn’t repeated. Net income fell to QR571 million ($157 million) from QR1.04 billion a year earlier. Profit in the second quarter of last year “was higher due to one-off items including a reversal of a provision resulting from the positive outcome of the Ministry of Communication license fee decision in Kuwait,” it said. Qtel, which holds a controlling stake in Indonesia’s secondbiggest phone operator, PT Indosat, said consolidated customers jumped 30 per cent to 66.6 million at the end of June. The company also controls Nawras in Oman, Asiacell in Iraq, and Wataniya Telecom, which operates in Kuwait, Tunisia, Algeria, Saudi Arabia, the Maldives and the Palestinian Territories.
BANKING
CB cuts overnight deposit rate Qatar’s central bank cut its overnight deposit rate by half a percentage point to 1.5 per cent, its first such move in two years, after the US repeated its pledge to keep rates low for an extended period. Qatar’s overnight deposit rate was last cut by 25 basis points to two
ENERGY
Qatargas 4 back on track Major construction work at the Qatargas 4 liquefied natural gas facility and at the Pearl gas-to-liquids plant will be completed by the end of the year, with output set to ramp up next year, Shell said. Shell holds a 30 per cent stake in the 7.8 million tonne per year LNG project which, when completed, will per cent on May 1, 2008. The lending rate, which is the key measure used by the central bank to convey signals to the market, was held at 5.5 per cent. Qatar experienced three years of inflation above 10 per cent, peaking at 15 per cent in 2008. Consumer prices declined by 2.8 per cent in June, following one drop of 3.6 per cent in May. The Qatari government has predicted inflation will accelerate to 1 per cent this year from deflation of 5.5 per cent last year.
cement Qatar’s position as the world’s biggest LNG exporter. Late last year Shell said it had delayed the start up of the $8 billion Qatargas 4 project to late 2010 because contractors were struggling to keep up with the pace of developments in Qatar’s booming gas industry, with the first cargo possibly pushed into 2011.
The delay helped reduce oversupply in the global LNG market earlier this year. State-run Qatar Petroleum owns 70 per cent of Qatargas 4. Qatar aims to raise its annual LNG production capacity to 77 million metric tonnes by the end of this year with the start of the final two of 14 production plants. The country has started four of the world’s largest plants since last year.
AUTOMOTIVE
SHIPPING
Mini’s H1 sales triple
Nakilat receives final tanker
Alfardan Automobiles, the exclusive importer for Mini in Qatar, said there was a 200 per cent increase in sales of Mini cars during the first half of 2010 compared to the same period last year. The Mini brand also gained market share against its competitors to lead the automotive segment in Qatar with a 39.6 per cent market share between January-June 2010.
Qatar Gas Transport Company (Nakilat) took delivery of the Rasheedaa Q-Max class tanker, the last of 54 vessels ordered by the company. The Rasheedaa, one of the 14 largest LNG tankers in the world, was constructed at Samsung Heavy Industries Company facility in South Korea and will be used by Qatar Liquefied Gas Company under a long-term charter.
September 2010 gulfbusiness
21
BAHRAIN BANKING
Ithmaar Bank’s provisions for impairment drop Ithmaar Bank, a Bahrainbased retail-focused Islamic bank, said it swung to a net profit attributable to the bank>s shareholders of $332,000 in the second quarter of 2010 from a loss of $35.5 million in the year earlier period. Ithmaar’s overall loss narrowed to $1.9 million from a loss of $36.45 million in the second quarter of 2009.
BANKING
Banking assets drop 10 per cent Assets of Bahrain’s banking system dropped 10 per cent to $211.5 billion at the end of June 2010 from $236 billion a year earlier, central bank data shows. The value of the assets at the end of June 2010, however, was higher than their value in May and April of the same year.The banks’ assets hit record levels of more than $264 billion at the end of the third quarter of 2008 before they started to decline under the impact of the global financial crisis. Bahrain’s banking system’s assets at the end of June 2010 are worth almost 10 times the country’s gross domestic product, which amounts to about $22 billion.
POLITICS
Bahrain says no to Iran attacks Bahrain’s foreign minister has ruled out allowing the US to launch attacks on any country from Bahraini territory. “The presence of a US naval base in Bahrain does
22 gulfbusiness September 2010
ECONOMY
Bahrain’s fiscal flexibility Fdown Moody’s Investors Service downgraded Bahrain’s sovereign ratings one notch to ’A3’ from ’A2’, saying increased spending and a modest level of financial assets has reduced the government’s fiscal flexibility, making it not mean that Manama will allow its use to launch an attack on any country,” Shaikh Khalid Bin Ahmad Al Khalifa said in an interview with the Londonbased Asharq Al Awsat. “The agreements signed by Manama with Washington are exclusively defencebased and we cannot allow the use of our lands to attack other territories. In fact, there are no attack weapons on the base.” The minister said the defence agreements were meant to preserve safety and security in the Gulf as a highly significant water way and vital area for global economy.
potentially harder to meet liabilities from the country’s financial sector. Moody’s outlook on Bahrain’s local and foreign currency government bond ratings is now stable, the ratings agency said. Moody’s said a gradual
but significant rise over recent years in the break even budget oil price, coupled with a relatively modest level of official financial assets, has led to a divergence between the government’s fiscal flexibility and that of rating peers.
MARKETS
Financial Market web site. The board of GFH decided to re-capitalize GFH «by way of issuing equity linked convertible murabahas or similar instruments to raise up to $300 million».
GFH approves capital hike Bahrain’s Gulf Finance House’s board approved a capital hike by $300 million and appointed Deutsche Bank to advise on the investment bank’s restructuring process. GFH, which halved its first half net loss to $47.7 million from a net loss of $92.1 million in the same period last year, said it got necessary approvals to increase its capital to finance the bank’s expansion during the coming period, GFH said in a statement on the Dubai
BANKING
UGB H1 profit doubles United Gulf Bank (UGB) said its net profit for the first six months of the year more than doubled to $31.8 million as the firm offloaded its commercial banking assets and focused on investment banking and asset management.
KUWAIT FINANCE
Bourse suspends firms At least five of the 24 listed firms suspended from trading in the Kuwait Stock Exchange (KSE) have been reinstated, a senior official told Gulf Business. The bourse suspended trading in shares of these firms for failing to declare their second quarter financial results on time. “Companies have started to file their financial results. Five of them have been removed from the suspension list,” Naser Al Nafisi, general manager of Al Joman Centre for Economic Consultancy, said. A statement posted on the KSE website said the companies – 18 of them investment firms hit by the global financial crisis – failed to announce financial results for the April-June period within the stipulated 45 days. Twelve of the firms had already been suspended for not declaring results for previous periods. The suspensions will end once companies announce results, it said. KSE has around 210 listed companies with capitalisation of more than $112 billion.
ECONOMY
Healthy budget surplus expected OPEC member Kuwait is expected to post a budget surplus of up to $19.6 billion in the current fiscal year despite boosting spending by 33 per cent, a report said on Wednesday. The National Bank of
Kuwait (NBK), the emirate’s largest lender, said in the report that the size of the surplus would depend on the price of oil, which contributes more than 94 per cent of the Gulf state’s revenues. The budget surplus for the 2010-2011 fiscal year (April 1 to March 31) is forecast to range between $”3.2 billion and $19.6 billion depending on oil price scenario,” NBK said. The budget, passed by parliament in June, projects a deficit of $22.7 billion at the assumption of an oil price of $43 a barrel while actual price has so far been between $70-80 a barrel.
INVESTMENT
Global narrows Q2 losses Global Investment House narrowed its losses in the second quarter 2010 to KWD20.1 million ($70 million), compared to a net loss of KWD29.7 million a
year earlier. The investment bank’s first half net losses more than halved to KWD35.48 million, down from a loss of KWD99.7 million in 2009. Global’s total assets fell to KWD773.7 million at the end of June 2010, down from KWD832.7 million at the end of 2009.
BANKING
CB sells $348 million bonds Kuwait’s central bank sold KWD100 million ($348 million) of one-year treasury bonds with a coupon of 1.25 per cent. Investors submitted KWD492 million in bids for the bonds, the central bank said on its website. The bond matures on August 10, 2011.
INVESTMENT
Dar not up for liquidation Kuwait’s Investment Dar, which owns half of British carmaker Aston Martin,
is not up for liquidation as it moves ahead with a restructuring plan, its chairman said. ”This company is not up for liquidation. If it were, we would have liquidated it a long time ago,” Adan Al-Musallam told reporters after an extraordinary shareholders meeting. He said the firm invested in hard assets and said he was confident Dar will ”make a strong comeback” after restructuring.
FINANCE
Capital Standards to rate KSE firms Kuwait’s rating company, Capital Standards, said it will issue this month a rating of companies listed in Kuwait Stock Exchange (KSE).The agency’s chairperson, Amani Burisli, told KUNA that Capital Standards, like other rating companies operating in the Kuwaiti market, is supervised by external bodies.
September 2010 gulfbusiness
23
OMAN SHIPPING
Salalah H1 port volumes up 66 per cent
30
Seconds to make sense of… investment banking Suresh Kumar
CEO of Emirates NBD Capital & Emirates Financial Services PSC
What is investment banking? It is the intermediary that connects up the individual, corporate and institutional customers to the market place.
Oman’s Salalah Port Services Co (SPS) has reported a 66 per cent rise in volumes handled at the General Cargo Terminal during the first six months of this year the Oman Daily Observer has reported. The general cargo terminal recorded a throughput of 2.92 million tonnes during the first six months of this year,
compared to 1.762 million tonnes during the same period last year. The port’s container terminal recorded a throughput of 1,751,000 TEUs, a growth of seven per cent for the period. The main drivers of the growth in volumes were increase in direct services by existing customers and volume from a new customer.
ENERGY
DOWNSTREAM
Oman produced less crude and condensate in June and achieved higher prices for both commodities, the government said. Oman’s output of crude and condensate slipped by seven per cent to 25.3 million barrels in June from 27.2 million barrels in May, according to the Ministry of National Economy data.Omani crude prices rose to $83.70 a barrel in June from $77.77 a barrel in May, the data show. Oman produced 155 million barrels of oil in the first half of the year, up from 143 million barrels in the first half of 2009.
Bharat Oman Refineries Ltd. is expected to start commercial production at its 120,000 barrels a day refinery in the central Indian state of Madhya Pradesh in the OctoberDecember quarter, India, a junior oil minister said. “The overall cumulative physical progress of (the) refinery project is 99.7 per cent,” Jitin Prasada told lawmakers in a written reply to the lower house of parliament. “The commissioning of a captive power plant is in progress and the refinery is expected to commence commercial production during the third quarter 2010-11.”
June crude output declines
24 gulfbusiness September 2010
New Oman oil refinery for Q4
How is it different from retail and commercial banking? Retail and commercial banking typically take deposits and lend money. Investment banks generally do not take deposits. They would lend money for working capital, trade finance, purchase of assets and others on a bilateral basis or on a group basis but that would be loans and not in the form of bonds or sukuk. The moment it gets securitised or structured into an offering for an audience by way of specific security then an investment bank comes into the picture.
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How do investment banks make money? For retail and commercial banks, it is the spread between the cost of funds, which is the cost of raising deposits and the cost of lending or the revenue they get from lending the same money. For an investment bank, you get revenues from advisory fees, management fees, underwriting fees so it is generally fee-structured. Some investment banks also trade in and make a market so when I am making a bond issue for a big name, I am prepared to quote a twoway price for this bond in the secondary market, bid an offer price, for which I will take up to 5-10 per cent of the issuance. What kind of impairments do you have? There are no NPLs or loan impairments. However, if you have underwritten a poor issuer and there are no takers of the bond and you end up owning the bonds then you do have value impairment. If you are trading – you bought it at five and now it is trading at four - then you may have price impairments. Investment banks have been tainted by the collapse of Lehman Brothers and Bear Sterns. What really happened? Investment banks leveraged or borrowed heavily compared to commercial banks, which have supervision and capital adequacy rules. Basel 1 expects eight per cent while Basel 2 is on a risk-adjusted basis. Some investments banks – those that have failed – operated with 40 to 60 times leverage so if they have one capital they have a balance sheet of 60. That excessive leverage almost acts like a steroid in a bull market. But in a bear market, it can be a vicious killer.
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COMMENT LETTERS LETTER OF THE MONTH THE FUTURE’S PLASTIC: ABU DHABI’S PLANS TO BE A POLYMER POWERHOUSE Vol. 15 Issue 4 August 2010
SPORTING CHANCE From F1 to Olympic dreams, how Gulf states are positioning themselves as world players
COMING CLEAN
CAT OUT THE BAG
TRADING UP
SINGAPORE SWING
Anti-corruption drive continues
Bahrain’s new exchange aims to be No 1
Jaguar boss outlines Middle East plans
Secrets behind a stunning success story
GB Regional AUGUST White.indd 1
Bahrain..............BD 1.0 Kuwait............... KD 1.0 Oman................ RO 1.0 Qatar.................. QR 10 Saudi Arabia.......SR 10 UAE.................. DHS 10
WWW GULFBUSINESS COM
7/27/10 10:00:53 AM
Battle of the bourses I just hope Bahrain’s crossborder multi-asset bourse ends up successful. The region is already swamped with bourses and banks hence what we need is a consolidation and not another entrant in the market. What has happened to Qatar’s International Mercantile Exchange or Imex? We have not heard anything about them since 2008. The bourse would have been the second energy exchange in the Middle East since the launch of the UAE’s Dubai Mercantile Exchange. Frankly, I’m really sceptical. Robert George, Abu Dhabi
Sports without boundaries The GCC may have lots of money to create a new sports haven but they don’t have enough water to sustain it. Who will forget what Doha looked like during the Asian Games in 2006? Thousands of yards of fake Bermuda
26 gulfbusiness September 2010
Corruption clean-up I agree that name lending has got something to do with the defaults. But that problem is not specific to the region. Name lending is a proxy to the West’s overdependence on rating agencies to the extent of ignoring due diligence – a must in every business deal. Such lack of basic corporate best practice paved the way for corrupt executives to finish off their evil agenda easily. White-collar corruption cases have definitely increased in the GCC but the rate does not compare to what we see in other oil-producing states. I remember Archbishop Desmond Tutu, in his speech in Dubai last year, expressing dismay about Africa’s governments equally oilrich region but poverty and war stricken at the same time. The corruption clean-up in the GCC as well as the ‘name and shame’ policy should be applauded. But I just have one concern – the policy needs to be universal and not selective. If we can name a former financial governor as a thief, why can’t we do the same for all the directors and for all the accomplices? A lot of corrupt executives remain. Officials should not stop their efforts in clamping down on these people. Insider trading seems to be a taboo subject in this region but I think more needs to be done to stop this white-collar crime. Unfortunately, the market is still filled with market manipulators. Joy Illustre, Dubai
grass was used to cover up the whole stadium. That’s ridiculous! And the golf courses everywhere – they had to import tonnes of greeneries. That means lots of carbon and a lot of waste, as you have to water them constantly to survive. More evidence of unsustainable hype. Riza Lee, Qatar
Deep water What I don’t understand is why fishermen have to undergo so much trouble just to make a living. Thanks for writing about these people, poor creatures, who are now forced to risk their lives just to meet their quotas. This would have not happened should they have been accorded proper legal protection. My friends and I spoke to some fishermen in Abu Dhabi, and they said they work long hours with a very low salary.
As we savour our Ă la carte grilled hammour, may we remember that this luxurious meal was made possible by our dear brothers, the fishermen. Ravi Kumar, Bahrain
Email: Write to the editor, Gulf Business, alicia@motivate.ae and the letter of the month wins an Alessi watch.
BRIEFING DEBT
Chequeing in Thousands are jailed as they fall into arrears. But is prison really the best solution, asks MICHAEL GORDON.
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he number of expatriates incarcerated for debt is on the rise. Research by RAK Bank last year indicated that up to 2,500 UAE residents were skipping the country each month without settling their debts. The epidemic could worsen further as authorities introduce new regulations, where defaulting debtors could face legal action by banks in the UAE within 90 days. Only last month, the UAE HSBC boss, Abdulfattah Sharaf, caused a furore when he claimed ‘jail works’ for recouping debt, which many argue is ironic because it is the prison-fear factor itself that drives most debtors to flee the country before they’ve paid their dues – leaving banks with vast swathes of non-performing loans. Nevertheless, Sharaf says that the very threat of jail pushes debtees to seek financial assistance from family and friends in a bid to bail them out. Radha Stirling, founder of the London-based charity Detained in Dubai, said that the UAE should instead
Radha Stirling, founder, Detained in Dubai.
“Unfortunately, a number of banks are lodging complaints with the police to prevent debtors leaving the UAE. These banks are sometimes presenting security cheques that are held when a customer takes out a loan. In the event of a default, the banks present these knowing that this will result in a prison sentence. The banks hope that the threat of jail will encourage
HSBC argued that jail works because the threat of prison pushes debtors to seek financial assistance. decriminalise bad debt and force lenders to carry out proper credit checks when giving out loans. She added that if the threat of jail were removed it would force lenders to be more responsible when giving out credit. Sterling added: “I have not a single client who feels that the debt collection methods in the UAE are fair. As a result of the downturn in economy, a plethora of individuals are genuinely unable to repay their loans as agreed and desperately need restructuring and payment plans.
28 gulfbusiness September 2010
the debtor to exhaust all resources to discharge the debt and avoid prison.” Sterling argued that many debtors would prefer to stay in Dubai and seek employment to repay their loans, but when banks act so swiftly and criminalise debtors the individuals are not willing to risk their freedom. “If the lenders stopped criminalising debtors, more customers would be willing to work with the banks in Dubai to repay as much as possible. Surely this is more productive for the banks,” she adds.
“Many of our clients also have little faith in the legal system and the ability to receive a fair trial if, for example, a security cheque was presented.” Sterling adds that, in her experience, the debt is not eradicated after jail, although it is usually not pursued. “Most people who contact us serve a sentence based on bounced cheques rather than the debt itself, so when they leave prison the debt exists. Others have been told they will not be able to leave prison until their debts are paid. It is a grey area and we are seeing conflicting reports,” she says. For those debtors that do persevere in the UAE and attempt to find work to allow them to repay their debts, the authorities recently announced
“JAIL WORKS” Words from an ex-Dubai inmate
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another change in legislation. Those expatriates that have defaulted on bank loans or have other financial issues will no longer be able to renew their residence visas.
Loan defaults per population 19.7 per cent UAE nationals
22.1 per cent expatriates 0
5 Source: Datamonitor
10
15
20
25
According to an Interior Ministry official, the residency departments will not renew the residence visas of expatriates if they are wanted by police for financial obligations. Residency visas of expatriates, their relatives and their employees will be renewed only after the settlement of the financial disputes. According to the report, police have instructed residency departments to arrest these expatriates or send them to the authorities. Sterling adds: “Where is the incentive for debtors to stay and face the music, they are compounded at every turn. They can’t work without a passport or their visa and so they have no means of repaying the debt. The only option is jail or run.”
hen Thomas Smith* landed in Dubai he availed of the numerous credit facilities presented to him. He argues this was the only option as housing rent had to be paid a year in advance. All was well until he lost his job. As an advertising salesman he was unable to meet his work targets and was let go; so his loan payments to the National Bank of Dubai slipped, the bank presented his security cheque, and he was arrested. Upon capture, he was incarcerated in a holding cell in the city centre, were he would wait until his trial. Went it came to his hearing, Dave was surprised at how fast the proceedings advanced and how little interaction was allowed. “There were no mitigating circumstances taken into account. You are simply asked to confirm it is your signature on the cheque, and that is it, you are automatically guilty.” Some of the ordeals he witnessed in jail will scar him for life. Yet, despite the ordeal, Thomas believes that jail works. “Yes I lost four months of my life, and the experience was horrific, but once I was released the debt was clear. If the system was switched from a criminal case to a civil case I would be locked in the country until I cleared the debt, which could be indefinite. “I was lucky. I served my sentence and immediately got out of the country upon my release. If the banks were negotiable people would stay and work it out with them, but with the job market suffering and the banks foreclosing on debt many, like myself, have no choice.” *Names have been changed to protect identity
September 2010 gulfbusiness
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BRIEFING BANKING
Tapping Arab wealth The $2.3bn Qatar Harrods deal spurred private wealth firms to beef up Gulf resources and court demand from the super-rich. RYAN HARRISON reports.
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t the start of 2010 the once thriving wealth management industry in the Gulf had virtually run out of puff, exhausted by the global recession. The two-year slump after the downturn had transformed the region’s uber rich from ambitious investors to cautious bystanders. But in May, the Qatar royal family sealed a landmark deal, buying London department store Harrods for $2.3 billion and offering some hope that services for wealthy local families, the high net worth and royalty were picking up. Smelling blood in the water, banks and asset managers have spent the summer months redoubling their efforts in the region; the likes of Barclays Wealth, HSBC, Standard Chartered and Credit Suisse are among the international players committing to more manpower in anticipation of this resurgence. Craig Stoehr, a corporate lawyer in the Doha office of Latham & Watkins, the law firm that represented Qatar Holdings in the Harrods deal, said banks are right to have high hopes that the market comeback is real.
Left: Qatari PM Hamad bin Jassim bin Jaber Al Thani. Right: Harrods, London.
He added: “I would expect that this trend will continue, as it’s a long-term play and some measured investment by global financial institutions in the private wealth management area would appear to make sense given the vast amount of wealth in the region and the importance of personal relationships.” Generally there is a big movement of staff over the summer, despite the combination of the hot weather and
Growing private wealth teams makes sense given the vast amount of money in the region and the importance of personal relationships. “We have certainly seen a trend of more activity in the private wealth management area in Qatar and elsewhere in the Gulf region, as well as in the area of investment funds. “Although historically these relationships have been managed out of Europe, the importance of client proximity, particularly in the Gulf region, appears to be resulting in the global financial institutions putting more resources to work on the ground,” said Stoehr.
30 gulfbusiness September 2010
Ramadan proving a natural slow time for business. Recruiters say bankers often time their contracts to align with school years, while a lot of jobs in Gulf financial services are two-year contracts or rolling annual contracts rather than “permanent” in the UK definition. Fawaz Baba, a general manager at Barclays Wealth in Dubai, said the bank is in recruitment mode across the Gulf and globally plans to double the number of client facing private bankers over the next five years.
“Our client base spans a spectrum of ultra high net worth individuals ranging from entrepreneurs and millionaires to UHNW billionaires and family offices,” he said. “The Gulf region is expected to grow over the coming years. With that in mind, we expect our business to significantly grow.” Meanwhile, Standard Chartered believes the UAE is still a safe bet after unveiling plans recently to hire as many as 10 relationship managers in the country by 2011, taking its total to 35. The bank’s net profit for the first half of the year rose 11 per cent to $2.15 billion and income from the UAE grew six per cent, “helped by a stronger wealth management performance”, it said in a statement. Many Western investment banks have developed dedicated teams of experts that specifically cater for the distinct client base, including the big sovereign hitters like Abu Dhabi’s Mubadala. Banks that plan to increase their numbers in the Gulf will be quietly hoping that the long-awaited wealth management recovery is not a false alarm and that they can finally put the dark days of the recession behind them and get back to the job of making the rich richer.
BRIEFING BRIEFINGENERGY ENERGY
Power Powerstruggle struggle As the GCC embarks on mass power privatisation programmes, the issue of subsidies remains the elephant in the room. KAREN REMO-LISTANA investigates.
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ubai’s recent decision to open up its power sector to the private sector is an indicator that the government is gradually adapting its policies in response to the changing economic landscape. After the long wait on the deferred Dh20 billion Hassyan power and desalination plant, Dubai Electricity and Water Authority (Dewa) this year finally resolved to privatise the generation part of the project. It has mandated HSBC as financial adviser for its first independent water and power project, or IWPP, in a consortium with Clifford Chance as legal consultant and Mott MacDonald as technical consultant. With banks still conservatively lending and interest rates in capital markets relatively high, pundits welcomed the news. After all, the emirate appears to be the only one who’s been left out of the Gulf’s privatisation drive. In 1996, the Manah project in Oman became the first experiment of privatisation in the electricity sector in the region. Because the idea was nascent, the International Finance Corp – the World Bank’s lending arm to the private sector – funded the project. Since then, all other GCC states – except Kuwait – have followed suit. “Oman is now a successful model for Independent Private Partnerships (IPP). Our role there was to be catalytic, in a way leading and then letting other banks follow,” says Adil Marghub, manager of infrastructure and energy, Mena, IFC. “Not only are we working with the private sector to make a profit, we are also looking at economic development. We want to be the first in doing a certain project and creating a market for that project.” The domino effect is largely due
32 gulfbusiness September 2010
to the Gulf’s unquenchable thirst for energy. Industry estimates show that the GCC’s countrie’s current demand for electrical power is about 70 GW and this is expected to triple over the next 25 years. GCC countries have thus begun to reform their power sectors in order to allow competition at the generation level through the introduction of independent power providers. In Saudi Arabia, the government has permitted the private sector to invest in power generation. It also has developed a reform plan for a three-stage electricity market evolution over the period 2008 to 2016. Unbundling and generation competition started in 2008 while the
side of the sector as well. Qatar, meanwhile, has initiated a programme for the reform and privatisation of the electricity sector by granting licenses to private sector entities to build generation plants. Various estimates suggest different investment figures, but they all point in one direction – that privatisation is here to stay. But what does it really do? Should residential or industrial consumers be concerned at all? “A true privatisation is about lifting the subsidies out,” says Khalid Al Awadi, gas operations manager at Emarat. “But since it
A true privatisation is about lifting the subsidies. What is happening here is not privatisation in its truest sense. Khalid Al Awadi, gas operations manager at Emarat.
wholesale competition is set to run to 2013, and thereafter retail competition will run from 2013 to 2016. Bahrain, on the other hand, is shifting from a vertically integrated model to a single-buyer model, thereby allowing private sector participation in generation.,In the UAE, specifically in Abu Dhabi, more than four-fifths of the production of electricity and water has been sold to IWPPs. Oman has taken a further step by establishing an independent regulator and plans to privatise the transmission and distribution
is not happening here, the kind of privatisation we have will only remove the daily headaches of the government, but it is not privatisation in its truest sense.” The way IWPPs or IPPs work in this region is by selling water and electricity from their production plant to the single buyer of the sector – usually a government-owned entity under long-term power and water purchase agreements. Under this set-up, the purchase price is guaranteed by the government related entity, who also sources out the fuel. Al Awadi surmises that fuel –
Photo courtesy of DEWA
BRIEFING ENERGY
gas, oil or coal comprises 96 per cent of the total cost of generating and transmitting electricity per kilowatt hour. The other four per cent is comprised of generation and transportation cost. “If the power is still sold at subsidised prices, then you only improve efficiency on the four per cent of the equation,” he said. “Privatisation works well if you have access to a cheap source, but there’s not really much here,” a station manager at Sharjah Water Electricity and Authority said. “You see, utility businesses in UAE are not really profitable because of the limited supply. Privatisation doesn’t make any difference.” In Sharjah, where both gas and oil are scarce, subsidies by the government can reach more than 50 per cent. Abu Dhabi and Dubai is a different story because their utility business remains profitable. Al Awadi estimates that, on average, it costs Dewa and Adwea (the Abu Dhabi Water and Electricity Authority) 15 fils to generate and transport one kilowatt per hour of electricity, leaving them a decent profit margin (tariff starts at 20fills per KwH). “Privatisation has done wonderful work in Abu Dhabi,” says Saeed Nassouri, Chairman’s office technical advisor at Adwea. He said profit would also be increased in lieu of the rise in efficiency and foreign investments. Al Awadi agrees. “What privatisation did in Abu Dhabi was to improve the efficiency by maximising the power output. But the price is
still the same for the public.” And this is the problem that international agencies have homed in on. Although there is a privatisation scheme in principle, the end aim of scrapping subsidies is still not achieved. Subsidies may be beneficial to the consumers but they are destructive in the long-run, spurring unsustainable growth, harming the environment and generally creating an unequal playing field with the global business community. The GCC’s power demand, for
over the unsustainability of current subsidy regimes. IEA chief economist, Fatih Birol, says lower subsidies would depress local demand growth, which would make more oil available for export, which in turn means more revenues. Phasing out subsidies in 2011 to 2020, as agreed last year by the G20, would cut primary global energy demand by 5.8 per cent by 2020 and shave 6.5 million barrels per day off 2020 global oil demand, the IEA predicts. Abandoning subsidies would reduce global of GCC by 6.9 per cent by 2020 – or 2.4 gigatons of CO2. This is equivalent to the current emissions of France, Germany, Italy, Spain and the UK combined, the IEA said. The region’s subsidised system is also to be blamed for the slow uptake in investment in clean energy. To boost the share of new energy generation, Dr Nasser Saidi, chief economist at Dubai International Financial Centre (DIFC) suggests that governments consider introducing
Governments must phase out subsidies for petroleum-based energy and increase renewable energy incentives. Dr Nasser Saidi, Chief Economist DIFC.
example, continued to grow by five to seven per cent during the recession whereas growth should only be at 2.5 to three per cent, in line with its economic and population growth. According to the International Energy Agency (IEA), global spending on energy subsidies rocketed by 63 per cent to $557 billion in 2008 from the year before, with oil and gas producers Iran and Saudi Arabia occupying first and third spots respectively among the world’s topenergy subsidisers. The IEA’s report, presented to the G20 summit in Toronto in June, mirrors growing alarm in the region
taxes on traditional sources. “Governments will need to provide incentives for increased consumption and production of renewable energy, as well as phase out subsidies for petroleum-based energy production,” Saidi said. According to the World Bank, subsidies not only hurt government budgets, they are also ineffective. “Energy subsidy is a political choice,” Alex Kremer, senior economist at the World Bank, said. “But the government needs to find alternative measures to address energy efficiency in the absence of a proper market pricing mechanism.” ■ September 2010 gulfbusiness
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BRIEFING OFFICE LIFE
Information overload It takes 20 minutes to start concentrating, but workers get interrupted every three minutes. Time and data management is more crucial than ever, says RYAN HARRISON.
I
n November 2007, author Malcolm Gladwell told business leaders at a Dubai conference that too much information costs lives. He was describing the emergency room at a hospital in Chicago which changed the way it diagnosed heart attacks. The facility encouraged doctors to focus on a few vital facts about those suffering from chest pain. Consequently, Cook County became one of the best places in the US at diagnosing chest pain. In recent years, experts have agreed that the hunt for more information is far less important than was previously thought. But the race for growth in the Gulf has led to a sharp rise in data from international and local sources, leaving workers facing an information overload. Document management firm Xerox says that more than a quarter of an average work day is made up of nonurgent or non-important interruptions and recovery time, 20 per cent in meetings – either in person, by phone, video conferences or online – and just 12 per cent on thought and reflection. What’s more, a lack of management training to cope with the demands of
Hazel Jackson, CEO, Bizability, Dubai.
The liberalisation of the Gulf countries has introduced international e business practices and transformed academia. But the rate at which the Gulf is morphing into an information economy, against a backdrop of more conservative social customs, is quite unique to this region and that tends to influence information policy at both a government and corporate level,” said Jackson. She added that often in the training environment, participants who are
My recommendation is switch off the update alerts. That’s one interruption that you really can control. working in the Gulf can leave company directors high and dry. In fact, staff that are hit with the latest management theories with no context for the region will find it difficult to apply their newly acquired information, according to Hazel Jackson, CEO of executive training consultant Bizability in Dubai. “Organisations typically invest in training to develop or retool their staff; empowering them with knowledge so they can perform better in their roles.
34 gulfbusiness September 2010
learning in their second or third language struggle to absorb the new information unless the teaching and learning styles are adapted. Information overload is not just about the growing mountain of information. It is also about the growing diversity of information. The old information types never seem to go away – paper forms, documents, emails, faxes and phone messages. Meanwhile, new forms have sprouted, from text and instant messages
to blogs, wikis, social networks, podcasts, digital images and sounds, and even digital “stickies.” Bizability research found that in general it takes 20 minutes to really start concentrating on a topic and we are interrupted every three to four minutes with incoming emails. When this is added to the various social media channels that staff keep open on their computer screens, productivity can be seriously compromised. Jackson adds: “My recommendation is switch off the update alerts! That’s one interruption you can control. Then you need to introduce some discipline and workplace routines. For example, you may make social media management part of an employee’s role – just be very clear on the outcomes they need to achieve for the business.” As business leaders across the region face up to their biggest threat to productivity, experts insist that the test now is to simplify, prioritise and communicate more effectively throughout their organisation. If the recent recession reminds businesses of anything, it’s that deciphering the good information from the bad, or the secure investment from the rotten one, are decisions they can’t afford to get wrong.
Dazed and confused: office tips to stem the data flood 1. Digitise information and eliminate paper 2. Be better organised – such as filing better, for either paper or digital information 3. Reduce copying or unnecessary conversions – including paper or digital copying or sending emails to unnecessary recipients 4. Central repository – keep information in one place (paper or digital) and making it more accessible. 5. Technology upgrades, more staff, better training
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COVER STORY
Defying gravity With the ash cloud, SARS and 9/11, James Hogan has flown through more aviation challenges than most. The Etihad boss tells ALICIA BULLER why breaking even may be his biggest test yet.
J
ames Hogan runs the fastest growing airline in the world. And it shows. It’s a little past 11 am and he’s already dealt with an impromptu office ‘drop-in’ from the Fijian Prime Minister. “Apologies,” he says, “it’s been a busy day.” In the same breath, the CEO says that he’s hosting a delegation from top aviation body IATA. He delivers all this with the cool head you’d expect from a man that, today – like every day – oversees 150 flights to 63 destinations from the Abu Dhabi International Airport hub. Is he stressed? “No,“ he says. With his no-nonsense Australian twang and measured delivery, you’re inclined to believe him. That, and the fact that Hogan, like a very small handful of his Gulf aviation peers, has something to smile about.
38 gulfbusiness September 2010
Perched in his looming, capacious office, there’s little sign of the recession here. Beyond his desk, floorto-ceiling window frames capture shiny new Etihad planes lurching one after another into the sky outside. And despite a tough year in 2009 – “wasn’t it for everyone,” he qualifies – the capital emirate’s national carrier delivered its best half year performance to date in 2010. Etihad transported 3.3 million passengers in the six months to June, an increase of 11 per cent on the first half of last year. And more good news lies in the fact that the global recession appears to be paling for the world’s airlines with IATA’s forecast that carriers will report profits of $2.5 billion in 2010. This is after recording losses of $9.9 billion the previous year and $16 billion in 2008. The Middle East rode the downturn better than most and was one of the few areas of the world to display
consistent growth. During the second half of 2009, as the global industry saw a 3.5 per cent fall off in passengers, the region’s carriers logged an 11.2 per cent increase. And since its start-up in 2003, Etihad has grown to a fleet of 53 aircraft and has plans to operate four times that in the next five years. This expansion is born of the largest aircraft deal in history, with orders for 55 Airbus and 45 Boeing airliners, as well as options on a further 105 aircraft, announced at the Farnborough Air Show in 2008.
GROWING PAINS But despite successfully launching eight new routes during the recession and expanding the airline’s overall capacity by 18 per cent, Hogan admits it’s been a painful time after a succession of aviation crises, from the economic slowdown to the Icelandic ash cloud.
COVER STORY
If we had the same year in 2009 that we had in 2008 we would’ve broken even.
i
“What was significant was the global financial crisis which pushed our break even out to the end of 2011,” Hogan explains. “If we had the same year in 2009 that we had in 2008, we would’ve broken even by now.” Then again, the aviation veteran has been helmsman at the UK’s BMI airline and Bahrain’s Gulf Air in his time, so he knows more than most about cyclical crises. “It’s the cycle of aviation. If you go back over the last 20 years, whether it’s SARS, 9/11 or fuel prices, what you do see is an aviation rebound,” he says. “2009 was tough; it was tough for all airlines. We bought a lot of aircraft which put more pressure on us and we introduced improved frequencies, new destinations. As we moved into 2010, we were doing well, we achieved our first quarter aims, but then we had the ash cloud.” Hogan admits that the singular effect of the ash crisis cost Etihad ”$50 million,” a sum that, combined with the global turndown, put the brakes on breaking even this year. “The fuel crisis and 9/11 were unprecedented, just as the ash cloud crisis was unprecedented when European airspace closed overnight.” By now, Hogan knows what to do in a crisis: manage it, get through it and even make the most of it. “It was a stressful time for our customers. But managing crises is what airline management does best; we run an airline, this is what we do – we look after customers. What was important to me is that our recovery was in place because, at some stage, you do recover. We took the decision to bring customers into Abu Dhabi and house them there, because at the same time you had September 2010 gulfbusiness
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COVER STORY
Etihad aircraft on order Unit
Aircraft
Year
6
Airbus A330
End of 2011
20
Airbus A320
Between 2011 and 2015
10
Airbus A380
From 2014
25
Airbus A350
Between 2017 and 2020
35
Boeing 787
Between 2014 and 2020
10
Boeing 777
Between 2011 and 2013
We didn’t have the same level of seat penetration last year, what’s important to me is that we get people travelling again. the problems in Bangkok. We made sure that we accommodated and we communicated,” the CEO says. “We had people in the hotels 24/7 and within 36 hours of Europe being open again we cleared the backlog. We even had a busload of 40 Irish people saying they didn’t want to go home, they were having a nice time. I am very focused on the journey of my customer.”
SEGMENTATION But Hogan says the biggest issue in 2009, the worst year in history for aviation, was a decline in premium traffic and the consequent impact on yield. “We didn’t have the same level of seat penetration as we had in 2008. And the second thing was the pandemic: it meant that the Middle East market was impacted, our highest yielding market because people travel to Europe, Australia and the United States,” he says. “What’s important to me is that
40 gulfbusiness September 2010
people start travelling, that we get the business travellers. “What’s vital now is that our first class and business class and economy are full, and we are getting the right level of pricing. Across all airlines in 2009, we saw levels of discounting that we hadn’t seen before. We need to get the pricing right to ensure we meet our financial targets. “ Hogan has also previously said
that it takes three years to break even on each route. Bearing in mind the relative youth of the latest eight destinations, brand awareness will be a major priority in the goal to go into profit in 2011. “We’ve achieved so much; we’re only six years old, so we’re continuing to mature as a brand. We’re continuing to invest, a lot of destinations have only been there one
Etihad launches no-frills flights Etihad will introduce its first ‘all economy’ class aircraft into its fleet in October 2010. The two Airbus A320s will be configured to carry 162 economy class passengers, an increase of 42 from the current economy capacity. The all economy cabin aircraft will operate to short haul destinations which have high demand for economy traffic. Initially these will be Alexandria, Calicut, Colombo, Damascus, Doha and Thiruvananthapuram.
COVER STORY
or two years so we’re still maturing in those markets,” Hogan explains. The CEO makes no secret of the fact he is relying on the Gulf’s power as a ‘hub’ to lure in traffic – singularly, one of the most powerful factors behind the continued upspike in UAE airports. “People can come direct instead of going to a European hub and making stops, that’s why you’re seeing a change,” he says. “The product’s good, the timing is competitive, the airport infrastructure is good, and it’s time. We just need to focus on the segmentation.”
CAPITAL GAINS Hogan thinks on only one scale: supersized. Naturally, he is mindful of the continued growth of Abu Dhabi and the positive osmosis this affords the national carrier. Etihad, the world’s fast growing airline, is matched only by the growth of the airport it calls home. The increase in traffic through Abu Dhabi International Airport in the first half of 2010 was 11.7 per cent on last year, while cargo loads increased by 20.3 per cent and aircraft movements by 11.9 per cent. The newest terminal, Terminal 3, opened in January 2009, enabling the airport to handle, approximately, 12 million passengers per annum. It is expected that passenger numbers will reach this level in 2011. Development work has also started on a new passenger terminal, to be situated between the two runways and known as the Midfield Terminal. Upon completion in 2012, the Midfield Terminal will take the airport’s passenger capacity to more than 20 million per year. It’s these vertiginous numbers that feed Hogan with the chutzpah to say he’ll break even in 2011. As the government follows its plan for Abu Dhabi’s Economic Vision 2030 and ploughs cash into more roads, housing, healthcare, education, shipping and industry – the air traffic payback is simply a no-brainer for Hogan.
Abu Dhabi Airport traffic increased 11.7 per cent this year.
“If you look at the aspirations of Abu Dhabi and the 2030 plan, there’s synergy with us. I think the Etihad Airways F1 Grand Prix was outstanding; and if you look at Abu Dhabi tourism, services and education, you see that the race wasn’t just about putting on a show, it was about raising the bar, creating an event,” he says – adding that he’s ”delighted” with the sponsorship deal. “Our hub is Abu Dhabi, so the more focus on Abu Dhabi the better; it’s good for the airline; it’s good for the brand. Yas Island, the golf courses, Ferrari World – these are just some of the things that give me the confidence that Etihad will continue to grow and will also be able to move to profitability.
Abu Dhabi International Airport
passenger numbers
6.9 million 2007 9 million 2008 9.7 million 2009
“Our business is audited every year and we work closely with the 2030 plan, we look at segmentation and we look at business and leisure traffic [in line with the] economy,” he says. “Our plan is to be a best-in-class airline, and it comes back to getting the segments right.” Hogan may have quivered and quaked through every aviation crisis in the last two decades but with the pressures of diminishing yield, competitor discounting and cashstrapped travellers, the Etihad boss is facing the arguably more complex challenge of growing the carrier to profitability in just 12 more months. Careering into the black just eight years after launching is no mean feat; but then neither is launching an airline from scratch and becoming the fastest expanding airline in the world with a litter of global awards. Only time will tell whether Hogan can pull off what will be perhaps his biggest coup yet. The CEO likes to use the word ‘unprecedented’ but, for the first time – unlike SARS, 9/11 or the ash cloud crisis – there’s nothing surprising about this challenge, because it’s one all of his own making. ■ September 2010 gulfbusiness
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BUSINESS ABU DHABI
10
reasons ABU DHABI is turning heads Long-term drivers are fuelling the capital emirate and commanding the world’s attention. ALICIA BULLER reports.
42 gulfbusiness September 2010
BUSINESS ABU DHABI
P
alm-shaped islands versus art museums. Gleaming shopping malls versus long-term plans. Bling and bombast versus conservatism. The clichés of Dubai and Abu Dhabi are well-trodden. But what has forced a greater divergence in the paths of the emirates, and shaped their identities, is the recession. While Dubai nursed its wounds and maintained an uncharacteristic hush, Abu Dhabi threw a little of its legendary caution to the wind and announced international acquisitions, high-profile global partnerships, neighbourly bailouts and billiondollar megaprojects.
Home to seven per cent of the world’s oil supplies and one of the highest per capita GDPs globally, the emirate has continued full throttle with its $500 billion plan to upgrade infrastructure and industry in line with the Abu Dhabi Economic Vision 2030. But it would be churlish to say the capital emirate emerged unscathed from the recession. It didn’t. Like most global markets, the emirate was bruised by the real estate downturn, weakened company profits and tight bank lending. The ambitious Economic Vision targets seven per cent growth through to 2015. But according to
the International Monetary Fund the reality is somewhat damper, with 3.7 per cent growth forecast for 2010. Dubai’s economy is expected to contract by 0.5 per cent this year. For Abu Dhabi, it is not today that matters so much, but tomorrow. It is the combined factors of a proven ability to deliver and strong net assets that lend promise to the emirate’s plan. Where Abu Dhabi excels is in the fuel of its long-term drivers.
September Aaugust 2010 gulfbusiness
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BUSINESS ABU DHABI
CASH Weighing in at an estimated $600 billion, Abu Dhabi boasts the largest combined sovereign wealth fund in the world. And while the government has borne the combined pressure of loans to Dubai, weakened oil prices and ill-fated international investments, the emirate’s overall softly-softly approach to spending has ensured its treasure chest remains the envy of the world’s debt-beleaguered nations. Abu Dhabi posted a growth of six per cent for non-oil activities in 2009, signalling that the plans to buffer the economy are on the right track. Finance levels are no longer confined to the fate of crude. Add that to the fact that oil reserves are valued at $1 trillion, and the long-term cash outlook is buoyant.
INFRASTRUCTURE
ENERGY In 2009, Abu Dhabi’s oil reserves stood at 92.2 billion barrels, while its total natural gas reserves were estimated at 212 trillion cubic feet. Electric power generation grew at 14 per cent on year to 39, 189 gigawatt hours. And despite its natural reserves, Abu Dhabi has unabashedly pumped billions into alternative energy projects, including carbon-free city Masdar. Foreign minister Sheikh Abdullah has also announced the country’s nuclear ambitions with UN backing. “Abu Dhabi has the capacity to lead in nuclear energy, this can’t be ignored. While it might seem ironic, it’s actually the perfect match,” says Oliver Cornock, regional editor for the Oxford Business Group. “It is in line with the emirate’s continued optimisation of the hydrocarbons. Abu Dhabi has a will, it has a way, and a proven ability to deliver.”
A large portion of the $500 billion investment in Abu Dhabi’s future is reserved for infrastructure projects – housing, roads, rail, ports and aviation. “The 2030 strategy demonstrates an understanding of how you need to develop an economy,” CEO of Abu Dhabi Ports Company, Tony Douglas, told Gulf Business. “For any city to be competitive on a global level, you have to have the transport infrastructure in place, seawater ports, air ports and heavy rail, as well as roads. Without any combination of three out of the four, you will never be competitive globally.” Douglas, exboss of Heathrow airport in London, is masterminding Abu Dhabi’s $24 billion Khalifa Port and Industrial Zone. The first phase is set to open in Q4 2012 and, when complete, the port will have a capacity of 35 million tonnes.
GOLD TO GO
FERRARI WORLD
Abu Dhabi’s Emirates Palace hotel has unveiled the world’s first permanent gold vending machine. For the UAE market, a special 1-ounce bar is being offered alongside 1, 5, and 10 grams of gold. All bars are sold according to real-time gold prices. Naturally, the machine is garnished with 24-carat gold leaf.
Ferrari World Abu Dhabi is the world’s largest indoor theme park, set to open on October 28, 2010. Located on Yas Island, the park is set to feature around 20 state-of-the-art rides, the star attraction being the world’s fastest rollercoaster, reaching speeds of up to 240 km/h, emulating the thrilling sensation of being in a Ferrari F1 car.
44 gulfbusiness September 2010
INDUSTRY
BANKING
As part of its ambition to diversify its GDP income away from oil, Abu Dhabi is pumping billions into its industrial city projects, from primaries – such as steel and aluminium – through to glass and polymers, assembly, manufacture and high-tech sectors, such as bio-tech, semi-conductors and green energies. Heavy industry features heavily in the 2030 plan, with the majority of activity centred in the western town of Ruwais, which houses the Borouge polyolefin factory, Ruwais Refinary, the Abu Dhabi Industrial City and the upcoming Abu Dhabi Polymers Park. The billion-dollar industrial sector is pipped to catalyse the emirate’s economy in the coming years, and is pivotal to the diversification scheme.
Exorbitant oil prices and low interest rates propelled the national banking sector to grow at a compound annual growth rate of over 32 per cent between 2003 and 2008. These heady days were curbed somewhat by the recession, but the $35 billion government injection into the system bore fruit by mid-2009. Liquidity issues remain, but the drivers of a growing population, credit-hungry consumers and an upward trend in Islamic finance services hold longterm promise. “Abu Dhabi has a strong banking sector and it is now evolving from the traditional and corporate banking to fee-driven added-value services, such as investment banking and asset management,” says Phillipe De Backer, partner, global financial services, Bain & Company.
ART AND TOURISM Literature competitions, film festivals and classical music concerts pepper Abu Dhabi’s calendar, fuelled by the multi-million dollar Abu Dhabi Tourism Authority (ADTA) and Abu Dhabi Authority for Culture and Heritage (ADACH). The upcoming cultural district, Saádiyat Island, embodies the art and tourism vision and is set to house new Guggenheim and Louvre museums, in addition to 29 planned five-star hotels. “Over the past six months, occupancy levels have fallen by 18 per cent, but are still a relatively healthy 64 per cent,” says director-general of ADTA, Mubarak Al Muhairi. “We are on track to achieve the 2012 targets of 2.3 million hotel guests and 24,000 hotel rooms.”
AL GHARBIA Al Gharbia is the new name for the western region of Abu Dhabi, which makes up 60 per of the land mass and accounts for 40 per cent of the GDP of the emirate. The sprawling region is currently being redeveloped, with an estimated $67 billion worth of industry and tourism projects in the offing. WRDC
iStockphoto
BUSINESS ABU DHABI
September 2010 gulfbusiness
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BUSINESS ABU DHABI
SPORT The scale of Abu Dhabi’s ambitions and, more importantly, its ability to realise them, was evidenced by the on-time completion of the $40 million Yas Marina Circuit, which hosted the inaugural F1 Grand Prix race. Chief developer Aldar has seen troubled days since and sold some of its assets back to the government, but the triumph of the F1 race demonstrated the power that sport has to imbue a nation with success and recognition. Abu Dhabi has hosted many worldclass events including cricket, martials arts, tennis, golf and football. Most recent is the FIFA Club World Cup. The emirate has also been busy snapping up UK Premier League football clubs (Machester City, pictured right). Sport is more than just a game for Abu Dhabi, and is a major tourism and awareness driver.
Education is another pillar in the economic vision and a building block in stimulating non-oil GDP. The UAE federal government allocated $2bn for the sector in 2009 – and a programme of reform that is harnessing private expertise and international models. Under the new education plan, $1.3bn will also be invested in research and development by 2018. Both federal and private universities will be invited to submit proposals to win grants for funding. Four key sectors, which are integral to the emirate’s economic strategy, have been prioritised: health, aerospace, semiconductors and renewable energy.
Getty Images
EDUCATION
HEALTH
A rapidly growing population and an ongoing push to modernise and improve medical services mean investment opportunities in Abu Dhabi’s healthcare sector are on the rise. Demand for inpatient services may require up to 2,000 additional beds
46 gulfbusiness September 2010
SPACE This time last year, state-linked arm Aabar Investments announced its 32 per cent stake in Virgin Galactic, which aims to start flying private passengers into space for $200,000 per ticket. Aabar has since been delisted and folded back into the arms of its owner IPIC. But this has done nothing to quell the emirate’s appetite for the aerospace industry. The IPIC deal included $100 million for the development of a satellite launcher, as well as building spaceport facilities in Abu Dhabi, which will be integrated with a university academy where students can study courses related space. Last year, the UAE underwent a galactic revolution with the launch of DubaiSat1 – the country’s first Earth-seeking satellite system. Abu Dhabi continues to invest heavily in the aviation branch of the aerospace sector.
within 10 years beyond the current 3,642 beds. According to the Health Authority-Abu Dhabi, “aggressive growth” is needed in services related to diabetes and cancer, while low capacity in gynaceology and othropaedics means greater investment is required. What is clear, from the sheer demand, is that the government will require increasing participation from private companies as it forges ahead with both modernising its current health facilities and building capacity for future generations.
BUSINESS INVESTMENT
IPO no-show The UAE has yet to issue an IPO this year and regional activity remains stilted. KAREN REMO-LISTINA explores the reality of GCC pipelines.
P
re-crisis, there was swathes of cash chasing too few assets. So it’s no surprise that in the boom times, oversubscription to IPOs in the GCC was far higher than in western markets. In the 2007, average over-subscription rate for GCC IPOs was 78 times, whereas the global average is five to 10 times. In addition, the average share price appreciation post-IPO was a staggering 446 per cent, according to data from private equity firm Gulf Capital. Today, no matter how bad the markets seem to be, there is still an abundance of money looking for investment havens. The only difference is that investors are
48 gulfbusiness September 2010
cautious and wary that they may burn their fingers again. While there are more than a hundred announced IPOs in the pipeline, only eight have actually happened in the first half of this year and just a handful are expected to come into fruition by the end of this year. “Historically speaking, about 50 per cent of the announced IPOs were IPO’d,” Shailesh Dash, founder and CEO, Al Masah Capital told Gulf Business. But that was then. Economists say the deep recession, has brought the world into an unchartered territory. The first quarter kicked off on a positive note with a five-fold increase in the funds raised. Ernst & Young says Middle East IPOs raised $420.5mn from $83.6mn in the same period last year.
There were oversubscriptions – Saudi’s $110.2mn Herfy Food Services IPO was 4.6 times oversubscribed – but the rate no longer compares with the likes of Aldar (448 times) or the then Aabar Petroleum (800 times). The general consensus in the first quarter was there would be a healthy pipeline throughout the year. It was around this time – March 30, in Emirates Towers – when Shuaa Capital CEO Sameer Al Ansari said that the first IPO in the UAE would be announced in the “next few weeks”, with Shuaa as the lead advisor. The plan, says sources, was to execute the Dh1bn IPO in June. But by May, the depth of the European debt crisis sent major stock markets reeling – dampening Shuaa’s confidence.
Dubai Financial Market.
That’s not to say that the first quarter was much better. Saudi travel agency group Al Tayyar, for example, halted the initial public offering of its 24mn shares on offer (valued at SAR1.2mn) in February after a bookbuilding process failed to attract enough demand. “People are worried about demand,” says Dash. “Nobody wants
to sell their companies at a discount so appetite in terms of pricing and retail demand is in question, especially in the UAE today.” Despite huge market correction, some share prices continue to depreciate due to the lack of liquidity and the high cost of leverage. Investors’ other means of securing funds from banks such as overdraft
Saudi’s $110.2mn Herfy Food Services IPO was 4.6 times oversubscribed – but this rate no longer compares with the likes of Aldar (448 times) or Aabar Petroleum (800 times).
facilities or advances through property or other investments are also restricted. So although the first quarter sprinkled some sweet indicators, the total January to June figures showed a 31.4 per cent decline from $1.2bn to $830mn this year Of the eight issues in the first half, seven were from KSA. Saudi’s Knowledge Economic City Company raised $272million or 32.7 per cent of the total capital raised in the GCC, data from PricewaterhouseCoopers (PwC) showed. The only non-Saudi IPO of 2010 was in Qatar, for the Mazaya Qatar Real Estate Development Company, which raised $144 million in Q1. The GCC IPO activity may return at the end of the year or in 2011 but this outlook still depends on some September 2010 gulfbusiness
49
BUSINESS INVESTMENT
Shailesh Dash, founder and CEO, Al Masah Capital.
Steve Drake, Head of capital markets, PwC.
improvement in valuation, says Steve Drake, PwC Head of Capital Markets. “The first half has been very volatile in terms of valuation therefore it really has not been the right time to go to market,” he said, noting that a significant number of existing GCC issuers posting poor results and
DIFC-based Alpen Capital says they are also in active talks with three family groups who intend to go for an IPO over the next few months. “They plan to list here in the region. We’re talking to people in Qatar, Oman and UAE,” Rohit Walia, executive vice chairman & CEO of
People are worried about demand. Nobody wants to sell their companies at a discount, so appetite is weakened. investors sitting on their cash steady contributed to the fall of GCC markets since March. The appetite to go public is certainly there. It is just the right timing, if not the magic moment, they are waiting for, key industry players confirm. Emirates NBD Capital is advising on three companies that plan to list on the UAE stock exchanges towards the end of this year. “The IPO will possibly happen at the end of the year or early 2011. It could be both in DFM and ADFM,” Suresh Kumar, CEO of Emirates NBD, said.
50 gulfbusiness September 2010
Bank Sarasin-Alpen (ME) and Alpen Capital, said. Many regional and international family offices in DIFC are already in the pre-IPO stage and are upbeat of going public soon, according to the Wealth Management office of DIFC Authority. Driven by the desire to increase visibility, boost transparency and establish the frameworks needed to conduct acquisitions, Gulf companies in fact planning to list on London’s Plus stock borses, Plus Group CEO Simon Brickles said. “What we have found from the
work that we have done with some of our clients is that they recognise the volatility will have an impact on the pricing,” says Drake. “But they also recognise that there is an appetite from investors so it is good to prepare now so that when the market turns around they are in the position to go public.” As the market rebounds, Saudi Arabia is likely to be the first to benefit. Saudi Arabia has the highest number of announced IPOs from the 2010 pipeline (47 out of the total 106 announced issues in the region). Planned IPOs range from various sectors such as telecommunications, construction and real estate. The UAE follows with 25 IPOs, mostly from the real estate sector, whereas Bahrain and Kuwait announced six and five IPOs, respectively. “Saudi has a different story from the UAE because confidence is much higher there,” Dash said. “For the past three years the IPO pipeline in Saudi has been very big compared to other GCC states because the economy is at least three or four times the size of other economies.” “If you look at Kuwait which has 300 to 400 companies listed and Saudi having only 130-140 companies listed then definitely that is something that has to change and people should look at more listings there,” he added. In terms of sectors, finance has dominated the IPO market in the MENA region since 2006. But as the region pursues its diversification plans, this will be mirrored in the capital markets. “Exchanges have been heavy in the financial, retail and construction sectors. While we will continue to see those industries in the market we’ll also see more diversification coming around the leisure, retail, telecoms and general manufacturing sectors,” Drake of PwC, said. The long-term IPO drivers have not disappeared amid the global economic slowdown and appetite is returning along with general regional confidence. But whether the UAE will be host to an IPO at all this year remains to be seen. ■
BUSINESS EDUCATION
Brain gain Education Educationenrolment enrolmentshot shotup upasasthe therecession recessionkicked kickedin.in.Ryan RyanHarrison Harrison explores exploreswhy whythe theMBA MBAhas hasbecome becomethe theCV CVspruce-up spruce-uptool toolofofchoice. choice.
52 gulfbusiness September 2010
G
ulf professionals are flocking like never before to the MBA, the cornerstone of advanced education, in a bid to blast away the recession blues and give their careers a leg-up. The world’s top universities that for years have established outposts in the region are reporting that applications have hit an all-time high. Proving most popular is the part-time study option (or the executive MBA), which targets students holding down a day job. The programme is especially attractive as typically people are nervous about stepping out of a career and a guaranteed job in the midst of a recession. Completing a tough course at a top quality institution can not only boost your business acumen but send your salary demands sky-rocketing, experts say. According to the Financial Times Global MBA Rankings 2010, the London Business School MBA – judged the best currently in the world – increased students’ salaries on average by 124 per cent over their careers. Gulf workers will be hoping to emulate this success
by signing up to one of the rising number of world-class schools, although calculating the salary benefits can often be a tricky business, said Peter Greaves, head of financial markets at headhunter McArthur Murray. “Middle East employers like education but there are so many other factors that still go into hiring people, like nationality and family. So it’s impossible to put a price tag on the MBA certificate. “It forms a lesser part of the overall decision-making process compared to other markets around the world. Plus, if you’re from Asia, companies hiring in the Gulf would expect a certain level of education, which they wouldn’t necessarily demand from locally-sourced candidates.” In these lean times companies trust the MBA quality kitemark to hire staff to inject new thinking into their organisation as firms navigates out of troubled waters. Recruitment across all sectors, especially financial services, has slumped since the recession took hold, as employers lock down their budgets for new workers. Instead they’ve opted in some cases to train up the existing workforce or offer the MBA as a retention tool. Janet Johnstone, managing director and senior executive
September 2010 gulfbusiness
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BUSINESS EDUCATION
Randa Bessiso, director Manchester Business School, Dubai branch.
Rahul Dhadphale, regional director, London Business School, Middle East.
officer of the Dubai Branch at Bank of New York Mellon, said: “Where we wanted to retain employees we offered to pay for their education or at least towards it. “We’re saying it’s our investment in you, if we can’t afford to match your changing salaries requirements. There
ability to connect the dots better in transactions.” Meanwhile, demand for specific courses within the MBAs has changed in line with the Gulf’s financial fortunes and cultural advances. For instance, Manchester Business School, which set up in Dubai in 2005, has seen the global
Demand for specific courses within the MBAs has changed in line with the Gulf’s financial fortunes and cultural advances. are handcuffs on the education though in that they have to stay with the company for two years after the MBA is completed.” Johnstone said the downside to executive MBAs is that during the time staff are studying there is a degree of distraction from the day jobs. “We like to say it’s employee minus 20 per cent,” she said. “That’s in the short term, but once they’ve completed the MBA the benefit to the firm is huge as it gives them a much fuller, sharper view of the world. They begin to challenge senior management and generally have the
MBA course pick up in popularity while the construction stream has witnessed enrolment drop from 20 per cent to five per cent in the last two years. Randa Bessiso, the director at Manchester Business School Worldwide’s regional centre in Dubai, said she has also noticed the number of women at the university has increased to 16 per cent from 11 per cent in the last year. “We have been very active in the market to attract women and there is very strong interest for them to pursue MBAs. I’d expect this number to hit 20 per cent or above by next year.”
Manchester Business School Dubai’s yearly intake is on average between 110 and 120 students. Half come from the UAE and the rest from the GCC. The number of self-funded students has grown from 82 per cent to 88 per cent in the last semester, as corporate sponsorship has tailed off. “There’s always been a rise in application in previous recessions as it provides a natural break for people to upgrade. This one has been no different,” Bessio added. The market for MBA providers like Manchester Business School has intensified in recent years as top universities fight over the spoils from nations with young and wealthy populations. Despite this, demand for education is still outpacing supply in the Gulf. French school Insead opened a campus in January in Abu Dhabi and joins a long list of others setting up in the UAE, including the UK’s Cass Business School and the London Business School. Rahul Dhadphale, the regional director for the Middle East at the London Business School, said: “I see the competition as underlying the demand for top level education in the region. We’re not going to change our faculty in response, such as bringing in cheap professors and lowering our tuition fees. You don’t go to a Bentley showroom expecting to get a big discount. “The challenge is that this area of the economy is still virgin territory as still not a lot of the big schools are here. Plus, the region hasn’t got the stability or maturity of somewhere like London or New York,” he added. The university set up in 2007 at the DIFC, initially offering one MBA stream with a September start time and recently adding a second beginning in January. It allows 40 to 50 students on each module and charges $90,000 in executive MBA tuition fees. “The downturn in the UAE market had an impact across the board and people started looking at their position and selected executive MBAs to keep up their skill sets. September 2010 gulfbusiness
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BUSINESS EDUCATION
CORPORATE SPONSORSHIP FLAGS IN THE RECESSION
A
s the recession began to bite, a lot of Gulf companies took a knife to parts of their budget that couldn’t immediately be justified. Most importantly this included training and the staff tuition fees that went towards MBA courses. Without the support of corporate sponsorship, a rising number of students left paying for courses out of their own pocket. Ehsan Razavizadeh, the regional director for the Middle East and North Africa at the Sir John Cass Business School, part of City University London, said: “When we started in 2007 the majority of students were sponsored by their companies, but now most of the people pay the tuition fees themselves using their personal savings or loans.
“The number of applicants has been tapered in the Gulf because a huge number were expats, who were subsequently made redundant. But in the last few months, as confidence has returned, the figures are looking better,” said Dhadphale. One of the university’s streams currently has 60 students studying, whereas as its peak a couple of years ago that number was more like 75. He added that there were more entrepreneurs on the programme than ever before. For instance, bankers wanting to setup their own businesses go to learn structure and the mechanics of getting firms up and running. “As money is hard to come by, many are here to understand how to put businesses together so they can attract funding.” Facing tough competition for students, international business schools are arriving in the Middle East and securing market share
Five now get corporate sponsorship out of 60 students, whereas 22 did in 2007 when the course accepted 35 applicants.” “During a recession the first thing companies cut is their training and marketing budget. But by reducing funding for training you’re sending a signal to your staff that you don’t have money. Cutting the marketing budget sends the same signal to the world,” he added. This trend was evident particularly among the national population in the UAE, which were primarily sponsored by employers. In 2008, of the Sir John Cass Business School’s 45 students, 10 were UAE nationals. This number dropped to five of the 60 in-take last year.
by offering greater choice. Hult International Business School, which launched its programme in Dubai in 2008, currently offers a oneyear MBA, part-time (2 year) MBA, Pocket MBA and MBA Honors. Plus, it runs a Master of International Business course. Nick Van Der Walt, the executive director and dean of Hult Dubai, said the university is catering to an increasingly diverse alumnus with equally diverse needs. “Hult students are more mature and experienced than other MBAs, with an average age of 29 years old and an average work experience of seven years. They come from a diverse range of industries and the breadth of experience that they bring to the classroom creates an opportunity for extraordinary shared learning and ensures an invigorating social environment,” he said.
He added that 32 per cent of the Dubai campus is made up of women. And overall, the number of students studying at Hult Dubai has increased from 100 in 2008 to 228 this year. Employers in the region have a lot to be excited about as well, as the availability of executive education grows. It means more and more of their job candidates are turning up for interviews with an MBA on their CVs. And it offers the organisation a choice of talent like never before. Many were previously held to ransom by international professionals that turned up expecting huge salaries. But with the number of redundancies in recent years across all sectors, especially real estate and banking and finance, companies have a chance to make a considered choice. They are no longer facing pressure to hire for a specific role to meet an immediate need. Instead, they are able to think about where that candidate might be in two or three years and how he or she can fit into the overall trajectory of the firm. BNY Mellon’s Johnstone adds that there is also an onus on businesses in the region to help nurture the growing number of universities. “Locals companies have to support these schools so that they can bring qualified academics to lecture. You can’t expect them to release a worldclass professor to the UAE to teach a class of one or two students.” Whether it’s Dubai, Doha or Riyadh, Gulf financial centres will inevitably be positioned differently to a London or New York when it comes to the environment for MBA study, but what these local destinations lack in maturity they make up for in demand and the cold hard cash that’s needed to foot the tuition bill. If the current flurry of activity is anything to go by, there are plenty of reasons to be optimistic in future if you’re in the education business. ■
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PROFILE
The bull is back Merrill Lynch’s investment-for-all philosophy backfired when the firm haemorrhaged billions. Saeed Maghdoori, BoA-Merrill Lynch MENA president tells KAREN REMO-LISTANA why he’s shaken but not stirred.
F
or Bank of America Merrill Lynch, the Middle East and North Africa region is the least of its problems. The firm’s capital markets services, wealth management and research units remain profitable; today, and long before the merger took place. And, unlike its peers, there’s no staff trimmings to speak of. In contrast, Bank of America Merrill Lynch (BofA-ML) has beefed up its team to meet customer demand. And while other regional chiefs fought to salve wounded relations, particularly with sovereign wealth funds, Saeed Maghdoori was afforded at least some peace of mind when taking up the Dubai-based role. “I am very happy with the way it worked, and during difficult times we continue to gradually grow our business, our profitability and our franchise,” says Maghdoori. Describing the merger of Merrill
58 gulfbusiness September 2010
Lynch and Bank of America as a “painless” process, the president says the net result was a stronger bank combining Bank of America’s banking and lending strength with Merrill Lynch’s wealth-management expertise. In the US, not only did the bank have to reduce the number of employees across all its businesses in 2008 and 2009, the firm also saw commotion among shareholders who felt cheated in the merger deal. Merrill Lynch was among the many investment banks that were put in the hot seat during the peak of the crisis. The 96-year-old firm that pioneered the idea that everyone, not just the rich, should invest in the financial markets, was blamed for the near-collapse of the financial system. But these negative sentiments seem a world away in the regional headquarters in Dubai International Financial Centre (DIFC) where the looming bull logo seems to imbibe positive vibes on visitors.
May 2010 gulfbusiness.com
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PROFILE
“We have been fortunate on the consolidation, especially in this region,” Maghdoori says. “It’s given us that balance sheet, banking credential and corporate banking capability that BofA has. Once you do growth gradually, you will have a strong base for your future because you are not acting based on a three-month market movement.” Its relationship with Sovereign Wealth Funds (SWF), which he says is “good source of business” for the investment bank, is indeed in an upbeat swing. With no dispute on record and nothing brewing, the bank has established a smooth and stable relationship with the world’s emerging powerhouses. “What I can tell you is that, from our side, we work closely with a number of sovereign wealth funds in the region,” he said. “We’ve done that in a number of years and we’ve done that successfully. Some of the SWFs have been our shareholders for many years. We’ll continue to work with them.” BofA-ML is right to keep SWFs happy. Despite the uncertainty, global SWFs increased their direct investments, a report from the USbased SWF Institute, showed. SWFs pumped in $92.8 billion, a 32 per cent increase from the $69.9 billion channelled by the SWFs in 2008. Nearly 44 per cent of the world’s SWF assets are controlled by Middle East funds, mostly Abu Dhabi Investment Authority, the Kuwaiti and Qatari investment authorities and the Saudi Arabian Monetary Agency. “I believe we are highly respected in the industry,” he said. “We have a very strong history in the region. Our name is very well known – both Merrill, as well as Bank of America.” Maghdoori says the firm – with a team of 40 equity analysts covering about 40 equity stocks in the region – is looking at increasing its equity research coverage. The bank has already doubled its equities and research team from 2008 to 2010 and is looking at expanding the scope of
60 gulfbusiness September 2010
Bank of America Tower, New York.
Back in business
T
his year marks the return of Bank of America to profit, thanks to Merrill Lynch. Healthy profit from trading at Merrill Lynch helped to cover continued losses from consumer loans, propelling the bank to a first-quarter profit of $3.2 billion after two consecutive quarters of losses. And although the second-quarter net income dropped three per cent to $3.12 billion from $3.22 billion in the same period a year
earlier, Merrill still played a big part in attaining these profits. According to Dealogic, BoA-ML ranked first in US net investment banking revenues with a 13 per cent market share. The firm also ranked number one in global leveraged loans, global investment grade corporate debt and in global syndicated loans. Bank of America’s average retail deposit balances also rose three per cent from a year ago to $649.6 billion.
PROFILE
We work closely with sovereign wealth funds in the region. We’ve done that successfully for a number of shareholders for many years. business in Saudi Arabia, where it set up an office 18 months ago. “We have institutional brokerage that goes hand-in-hand with our research product. We are in Nasdaq Dubai, DME and we are expecting that we will also be able to provide access to the Saudi market later on this year,” he said. Maghdoori is also hopeful that, with a merged entity, they will fare better in the fixed income and corporate banking business. “We can actually provide corporate banking services, which we were less able to do with Merrill Lynch alone,” he says. Currently most of its mandates in the capital markets business are on debt and related securities. BofA-ML managed two of the six bank bond issues in the region since September
2009. But in terms of assisting clients in raising capital through underwriting and private placements of equity, business remains weak due to dampened demand by investors and issuers to access the Initial Public Offering (IPO) market. “We talk to our clients in terms of potential market opportunity and as you know, the Shuaa IPO was postponed. When market conditions are encouraging and suitable then the IPO business will start,” Maghdoori explains. “You look at the actual business and you look at investor demand, the market conditions in terms of pricing. You see, we talk to our clients holistically… I don’t really want to go into details,” he says. To date, the industry is waiting on
BoA Merrill Lynch revenues
Dream team
T
35 30
31,812.0 24,368.0 23,723.0
$ million
25 20 15 11,250.0
10 0
2006
2007
2008
2009
2010
-10 (12,764.0)
-15
the first UAE IPO this year, but with the European and Dubai World debt crisis still to be resolved, Maghdoori opts not to speculate on when the uptake will actually start. “Dubai is taking positive steps in addressing the issues and ultimately those steps will have a beneficial effect on the market,” he said. “You’ll see over time that the steps the government takes will have a positive effect on the market. In fact, you can already see it in the market. Compare today versus last year, obviously, the spreads are narrowing.” Over the next five years, and under his guidance, the industry should not expect a drastic change in the way BofA-ML does business. The president intends to err on the side of caution. And who can blame him as we cast our minds back to the bloodshed of 2008? Maghdoori says: “We’ll continue to take a long-term view in what we want to do in MENA, as well as in the UAE, and specifically in Dubai. As a consequence, you will not see a major shift in terms of our approach.” ■
Source: Capital IQ
he BoA-ML merger rattled Wall Street even more than the news of Lehman’s bankruptcy. But on the side of buyer, it was taken as a brilliant move. Then Bank of America chief, Kenneth D Lewis, even called Merrill’s 17,000 financial advisers the “crown jewel” of the company. Maghdoori, on the other hand, likes to think they have the dream team – something that no other wealth management company has. In terms of wealth management we are unbeatable,” he says. “We have financial advisors that have been with us for decades and they stay with us for decades. The reason is because nobody can match our platforms – it’s really unbeatable.”
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BOARD MOVES Robert Kay has been appointed managing director for communication company TBWA\RAAD, Abu Dhabi. Kay previously managed marketing for a large region for Coca-Cola. More recently, he was chief executive of Batey advertising. He has managed large, culturally diverse staffs, multimillion dollar budgets and P&Ls.
French car manufacturer Renault has named Benoit Turibe as marketing director for the Gulf region. Turibe brings over 10 years of experience working with Renault in Europe, across the product marketing, events communications, public relations and advertising fields. Prior to this position, Turibe was based in Boulogne, France and oversaw Central Marketing for the worldwide advertising strategy of the Renault and Dacia Brands.
Rocco Forte Collection has appointed Karim Naffah as managing director. Prior to joining The Rocco Forte Collection, Naffah gained more than 18 years of experience in strategy and finance roles in the leisure and hospitality industry. Naffah will enable Sir Rocco Forte, founder and executive chairman of the group, to devote more time to spearheading the expansion of the business primarily via management contracts.
Saffana Michael was appointed communications manager for Boeing commercial airplanes unit in the Middle East, India and Central Asia. In this role Saffana will support Boeing’s growing presence and business objectives across the region and will work closely with Marty Bentrott, Boeing Commercial Airplanes’ vice president – sales for the Middle East, India and Central Asia. She will be based at Boeing’s Middle East headquarters in Dubai, UAE.
Rabih Feghali was named business development director of One to One Hotels and Resorts. Feghali has more than 15 years of experience in the hospitality industry.
62 gulfbusiness September 2010
Gulf Finance House (GFH) has named Esam Janahi as executive chairman to lead the next stage of recovery and the return to growth of the bank.
Steve Metcalfe has been appointed as managing director of the Middle East region, Scott Wilson. In this position, Metcalfe will be responsible for operations in 14 countries across the region. Prior to this appointment Metcalfe directed the close-out design for the US$2.5bn Khalifa Port project in Abu Dhabi. From 2006 to 2009 he was the director for Scott Wilson North East England operations based in Newcastle. Prior, he was a partner of Ferguson McIlveen LLP, a 2006 Scott Wilson acquisition.
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GULF BUSINESS TOP DEALS OF THE MONTH
Data monitor 52
54
TOP DEALS Mergers & acquisitions Private placement Debt offering Public offering GCC ECONOMIC INDICATORS Real GDP & CPI inflation Nominal GDP & population Fiscal balance & current account balance GCC inflation and central bank watch COMPANIES DP World: Eyes $1.2bn EBITDA Etisalat: BlackBerry effects in Q4
September 2010 gulfbusiness
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TOP M&A TRANSACTIONS Deal Value ($m)
Bidder
Target
Deal Description
542
EFG-Hermes Holding SAE
Credit Libanais SAL (65% Stake)
EFG-Hermes Holding SAE, the listed Egypt-based company engaged in investment banking, securities brokerage, asset management services and private equity. The company was formed as a result of merger of Egyptian Financial Group (EFG) and Hermes has acquired 65 per cent stake in Credit Libanais SAL, the Lebanon-based bank, from Capital Investment Holding and Capital Investment Holding SAL, for a consideration of $542 million.
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Argus Capital Partners; and Qatar Investment Authority
Memorial Health Group (40% Stake)
Argus Capital Partners, the UK-based private equity firm and Qatar Investment Authority, the Qatar-based investment arm of the government of Qatar has agreed to acquire a 40 per cent stake in Memorial Health Group, the Turkey-based hospital group, for a minimum estimated consideration of $120 million. Memorial Health Group has an enterprise value of more than $300 million. The acquisition is subject to approval from competition authorities.
69
Dabur International Limited
Hobi Kozmetik AS; Zeki Plastik; and Ra Pazarlama
Dabur International Limited, the UAE-based company with interests in health care, personal care and food products and a subsidiary of Dabur India Limited, the listed India-based global ayurvedic and natural health care company, has agreed to acquire Hobi Kozmetik AS, Ra Pazarlama and Zeki Plastik (Together the Hobi Kozmetik Group), the Turkey-based companies engaged in providing hair and body care products, for a consideration of $69 million.
47
Electricity Holding Company SAOC
Dhofar Power Company (30.58% Stake)
Electricity Holding Company SAOC has made an offer to acquire the remaining 30.58 per cent stake in Dhofar Power Company. Dhofar Power Company, a listed Oman-based company headquartered in Salalah, engages in the generation, transmission, distribution, and supply of electricity. Electricity Holding Company SAOC, the Oman- based state-owned electricity company.
31
Qatar International Islamic Bank QSC
Islamic Bank of Britain Plc (78.54% Stake)
Qatar International Islamic Bank QSC has agreed to acquire 78.54 per cent stake in Islamic Bank of Britain Plc. Islamic Bank of Britain Plc, a UK-based company headquartered in Charlotte, North Carolina, is a provider of banking services. Qatar International Islamic Bank QSC, a Qatar-based company headquartered in Doha, is a financial institution engaged in providing banking, financing and investment activities.
30
Actis Capital LLP
Mediterranean Smart Cards Company
The management of Mediterranean Smart Cards Company (MSCC), the Egypt-based smart card payment processing services to banks, backed by Actis Emerging Markets 3 fund, the UK-based fund of Actis Capital LLP, the UK-based private equity firm, has acquired the company in a management buyout transaction, for a total consideration of $30 million.
-
Bank Audi sal Audi Saradar Group
Arabeya Online Brokerage (90% Stake)
Bank Audi sal Audi Saradar Group, the listed Lebanon based bank offering commercial and corporate banking, retail banking, private banking and investment banking products and services, has agreed to acquire 90 per cent stake in Arabeya Online Brokerage, the Egypt based online securities trading firm, from Naeem Holding, the listed Egypt-based investment bank and Hisham Tawfiq, the Egypt based private invest with an interest in securities trading firm, for an undisclosed consideration.
Notes: Deals are based on the geography of target, bidder or vendor being in the Middle East, for the period between July 21, 2010 and August 20, 2010. Based on announced deals, including lapsed and withdrawn bids. Where deal value is not disclosed, the deal has been entered based on turnover of target exceeding $10 million. Activities excluded from the table include property transactions and restructurings where the ultimate shareholders’ interests are not changed. Source: Mergermarket
12,000 10,000
MIDDLE EAST ACTIVITY BY INDUSTRY SECTOR YTD 2010 VALUE Number of deals
14,000
Value ($m)
MIDDLE EAST QUARTERLY M&A ACTIVITY FROM 2005 TO AUGUST 20, 2010 Value Volume
50 40
8,000
30
6,000
20
4,000
10
2,000 0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
2005
2006
2007
2008
2009
0
2010
MIDDLE EAST ANNUAL M&A ACTIVITY FROM 2004 TO AUGUST 20 , 2010 25,000
150
Value ($m)
20,000
100
15,000 10,000
50
5,000 0
2004
2005
2006
2007
2008
2009
2010
Real Estate 14.9% Agriculture 0.4%
Energy/ Mining/ Utilities 5.4% Consumer 2.5%
Defence 0.7%
Business Services 1.1%
Financial Services 29.3%
0
Pharma/Medical/ Biotech 4.9%
Construction 1.2%
Industrials and Chemicals 13.8%
Real Estate 8.5%
Industrials and Chemicals 17.1%
TMT 20,7% Energy/ Mining/ Utilities 7.3%
Agriculture 1.2% Defence 1.2%
Consumer 9.8%
Business Services 7.3%
Mergermarket tracks all M&A deals of more than $5m where the target, bidder or parent is a Middle Eastern company.
66 gulfbusiness September 2010
Construction 0.1%
MIDDLE EAST ACTIVITY BY INDUSTRY SECTOR YTD 2010 VOLUME 200
Value Volume
Pharma/Medical/ Biotech 3.1%
TMT 8.6%
Transport 2.4% Leisure 2.4% Number of deals
30,000
Transport 13.8%
Leisure 6.3%
Financial Services 15.9%
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TOP PRIVATE PLACEMENTS Value ($m, Historical rate)
Target/Issuer
Buyers/Investors
Transaction comments
994.31
Akbank T.A.S.
–
Akbank announced a private placement of notes for gross proceeds of $994,310,000 on July 15, 2010. The notes have a coupon of 5.125 per cent, mature on July 22, 2015. Interest will be paid on the 22nd of each July and January. Banc of America Securities LLC, Citigroup Global Markets Limited, J.P. Morgan Securities Ltd., and Standard Chartered PLC served as lead managers for the transaction. Simon Porter, Laurence Pettit, Nicolas Rogivue, and Natasha Izmaylova of Baker & McKenzie, LLP and Cerrahoglu Law Firm served as legal advisors and Ernst & Young LLP and PricewaterhouseCoopers LLP served as accountants to the company. Allen & Overy LLP and Paksoy & Co. served as legal advisors to the managers. Each initial purchaser will purchase $250 million amount of notes.
800.0
AMMROC LLC
Sikorsky Support Services, Inc.; Abu Dhabi Aircraft Technologies PJSC
AMMROC announced that it has received $800 million in equity funding from new investors Abu Dhabi Aircraft Technologies PJSC and Sikorsky Support Services, Inc. on July 19, 2010. Each investor purchased 50 per cent stake in the company.
40.0
Metito Utilities Ltd
International Finance Corporation; Watani Investment Company, Private Equity Arm; GSC Group, Private Equity Arm
Metito Utilities announced a private placement of series A preference shares for gross proceeds of $40 million on June 27, 2010. The round included participation from NBK Capital-GSC Mezzanine Fund LP, a fund managed by GSC Group, Private Equity Arm and Watani Investment Company, Private Equity Arm and returning investor International Finance Corporation. Both the investors will invest $20 million each. The funding will be raised in two tranches. Gibson, Dunn & Crutcher LLP served as legal advisor to the company. Creighton Smith of Vinson & Elkins LLP served as legal advisor to NBK Capital-GSC Mezzanine Fund LP.
15.0
eXelate Media LTD.
Menlo Ventures; Carmel Ventures
eXelate Media LTD. announced that it has raised $15 million in its second round of funding led by new investor Menlo Ventures and returning investor Carmel Ventures on August 3, 2010. As a part of the round, Mark Siegel, Partner at Menlo Ventures joined the company’s board of directors.
9.0
Pentalum Technologies Inc.
Evergreen Venture Partners; Cedar Fund
Pentalum Technologies Inc. announced a private placement of equity for gross proceeds of $8.7 million on July 6, 2010. The company will issue the securities pursuant to Regulation D in the transaction. The round will remain open for more than a year. As of July 19, 2010, the company has raised $2.2 million from four investors.
8.5
Solido Ltd.
Fortissimo Capital
Solido Ltd. announced a private placement for minimum proceeds of $6 million and maximum proceeds of $8.5 million on August 2, 2010. The investment was made by Fortissimo Capital.
2.0
Nephera Ltd.
Evergreen Venture Partners; Aurum Ventures MKI Ltd.; Misgav Venture Accelerator
Nephera Ltd. announced that it has raised $2.85 million in its second round of funding on August 11, 2010. The round saw participation from existing investor Misgav Venture Accelerator and other investors Evergreen Venture Partner and Aurum Ventures MKI Ltd.
Closed/Registration Effective Date: [7/17/2010-8/17/2010] Geographic Locations (Target/Issuer): Middle East (Primary) OR North Africa (Primary) Source: Capital IQ
TOP PUBLIC OFFERINGS Value ($m, Historical rate)
Target/Issuer
Transaction comments
1,030.21
Republic Of Turkey
Interest on the notes will be payable each year on March 30 and September 30 of each year, commencing on September 30, 2010. Listing fees has been converted at the rate of €1=$1.3063 taken from www.oanda.com as on July 29, 2010. The company intends to list the notes on Luxembourg Stock Exchange.
173.32
Al Jouf Cement JSC
The subscription period was from July 19, 2010 - July 25, 2010. KSB Capital Group also acted as the financial advisor for the offering. Alinma Bank is acted as a receiving bank for the offering.
33.05
DD Konut Finansman A.S. The term of the bonds is three years with quarterly coupon payments. The bonds were issued through Akbank and Ak Investment & Securities.
4.64
Gedik Investment Securities Inc.
The bookbuilding for the offering took place from July 21, 2010 to July 22, 2010.
8.16
Muscat Finance Co. Ltd.
Muscat Finance Co. Ltd. (SAOG) (MSM: MFCI) is undertaking a rights issue wherein it is offering one new share for every 2.89 shares held by the shareholders as on record date, June 15, 2010. The company has reserved two million shares for its employees. The trading of rights starts on June 22, 2010 and ends on June 28, 2010. The subscription of shares starts on June 21, 2010 and ends on July 05, 2010. The company has secured private placement undertakings from Mechanical Services Company Ltd. LLC, Fincorp Investments LLC, Al Siraj Investment Holding LLC and HBG Holdings who have committed to take up the shares which are not subscribed in the rights issue. Said Al Shahry Law Office is acting as legal advisor for the rights issue.
Closed/Registration Effective Date: [7/17/2010-8/17/2010] Geographic Locations (Target/Issuer): Middle East (Primary) OR North Africa (Primary) Source: Capital IQ
TOP DEBT OFFERINGS Value ($m, Historical rate)
Target/Issuer
Transaction comments
1,030.21
Republic Of Turkey
“Interest on the notes will be payable each year on March 30 and September 30 of each year, commencing on September 30, 2010. Listing fees has been converted at the rate of €1=$1.3063 taken from www.oanda.com as on July 29, 2010. The company intends to list the notes on Luxembourg Stock Exchange.”
33.05
DD Konut Finansman A.S.
“The term of the bonds is three years with quarterly coupon payments. The bonds were issued through Akbank and Ak Investment & Securities.”
Closed/Registration Effective Date: [7/17/2010-8/17/2010], Geographic Locations (Target/Issuer): Middle East (Primary) OR North Africa (Primary) Transaction Primary Features: Public Offering - Fixed-Income Offering. Source: Capital IQ
68 gulfbusiness September 2010
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GOLD PARTNERS:
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02 44 181 22
COMMODITY PRICE DATA AND FOREIGN EXCHANGE
PRIVATE EQUITY
Month
WTI crude ($/barrel)
Gold price ($/ounce)
Euro/UAE Dirham
April
84.21
1148.7
4.94
May
72.46
1205.4
4.64
June
68.52
1232.9
4.49
July
76.32
1194.11
4.69
Source: Bloomberg, Dubai Chamber
GCC ECONOMIC FORECASTS Updated as of: 29/07/2010
Nominal GDP ($ billion)
Population
2008
2009F
2010F
2011F
2008
2009F
2010F
2011F
S.Arabia
476
370
417
457
24.9
25.5
26.2
26.8
UAE
261
223
239
253
4.8
4.9
5.1
5.2
Qatar
100
85
107
124
1.4
1.6
1.7
1.8
Kuwait
158
118
133
144
3.4
3.5
3.6
3.7
Oman
59.9
49.7
56.7
62.5
2.8
2.8
2.8
2.9
Bahrain
21.2
19.6
20.9
22.2
0.8
0.8
0.8
0.8
GCC
1077
867
975
1064
38.1
39.2
40.2
41.2
GCC ECONOMIC FORECASTS Updated as of: 29/07/2010
Real GDP Growth (%)
CPI Inflation (% avg.)
2008
2009F
2010F
2011F
2008
2009F
2010F
2011F
S.Arabia
4.3
0.1
3.2
3.9
9.9
5.1
4.8
5.4
UAE
5.1
-1.4
1.0
2
12.3
1.6
1.0
2.8
Qatar
15.8
9.0
11.3
9.6
15
-4.9
1.2
3.4
Kuwait
6.4
-2.2
2.5
3.1
10.5
4.0
3.0
4.0
Oman
12.3
3.8
4.6
4.8
12.6
3.5
4.0
4.8
Bahrain
6.1
1.8
2.4
2.8
3.5
2.8
2.5
3.0
GCC
6.4
0.6
3.6
4.2
11.1
2.8
3.1
4.2
Updated as of: 29/07/2010
Fiscal Balance (% of GDP)
GCC ECONOMIC FORECASTS
2008
2009F
2010F
2011F
2008
2009F
2010F
2011F
32.6
-3.2
2.9
6.2
27.8
7.2
8.4
10.5
UAE
21.7
5.4
9.7
12.1
8.5
-3.4
6.7
6.9
Qatar
10.6
13.0
8.0
9.0
33.0
16.0
21.9
30.0
Kuwait
26.9
23.0
20.0
23.0
40.9
25.4
31.5
34.7
Oman
22.6
-0.7
3.3
5.1
9.1
0.8
2.6
3.2
Bahrain
7.7
-5.7
-0.4
0.9
10.6
0.9
5.0
6.0
GCC
26.0
4.2
7.3
10.0
24.1
7.2
12.2
14.8
Source: BoFA Merrill Lynch Global Research, Bloomberg, EcoWin, national statistics offices
GCC INFLATION AND CENTRAL BANK WATCH LATEST OFFICIAL FIGURES Updated as of: 29/07/2010
CPI Inflation (% YoY, avg)
Policy Rate (%)
S.Arabia
Jun-10
5.5
O/N reverse repo rate
0.25
UAE
May-10
0.9
O/N repo rates
1.00
Qatar
May-10
-3.6
O/N deposit rate
2.00
Kuwait
Apr-10
2.9
O/N repo rate
0.75
Oman
Apr-10
3.1
One-week repo rate
2.00
Bahrain
May-10
2.4
One-week deposit rate
0.50
70 gulfbusiness September 2010
Private equity firms in MENA suffered a substantial decline across all activities from fund-raising, investing the capital raised and exiting investments. According to Gulf Venture Capital Association’s 2009 annual report, the sector has only raised 20 per cent of what it raised in 2008. What is more alarming is that of the six new funds in 2009, only two were able to make a first close and this barely makes up a quarter (23 per cent) of the announced amount. And of the $32.6 billion announced from 2005 and 2008, only 55 per cent has been raised. GVCA warns that further closes from funds announced prior 2009 are already unlikely to happen given to current market conditions. The report opines that some of the funds may never reach financial closure. Other funds may just reduce their target size such as Abraaj Buyout Fund 4, which lowered its intended target size from $4 billion to $2 billion. Despite the many speculation of 2009 being a stellar vintage year – with a supposed abundance of dry powder (reserved cash) in the region – it still ended with a 75 per cent decline in the total size and 65 per cent drop in the number of investments. Investment deals were even less than those recoded in 2005. One of the major reasons TISSUES & HYGIENE
Current Account Balance (% of GDP)
S.Arabia
Source: Bloomberg, EcoWin, national official data
When powder goes dry
Recession hits sales growth Tough economic conditions this year have reshaped consumer shopping trends in terms of higher demand for private label and nonbrand substitution. First, low consumer confidence helped private-label brands rise to the mainstream, as they gained consumer trust. According to Euromonitor International, the growth of private label has also been supported by increasing availability in most supermarkets/ hypermarkets and rising consumer awareness of private-label products, particularly the fact that they are often produced by the same manufacturers as branded ones. Second, the trend of shifting to cheaper product alternatives has been reinstated in 2009, with some consumers using tissues or cloths instead of kitchen towels or household cleaning wipes. Multinationals have historically elicited strong customer loyalty and led home care tissue and hygiene, however they face growing competition from regional players and private label operators. Consumers in 2009 has helped
Fund raising cycle 12000 Fund raising cycle 10000 12000 8000 10000 6000 8000 4000 6000 2000 Fund raising cycle 40000 12000
2006 2007 2000 2005 10000 Announced ITS 80000 2005
6000
2006
2007
Announced ITS
4000 2000 0
2005
2006
2007
Investments Announced ITS 80 70 Investments 60 80 50 70 40 60 30 50 20 40 10 300 Investments 20 80 2004 2005 2006 10 700 No of deals 60 2004 2005 2006 Total 50 No of deals 40 30 Total 20 10 0 Exits
80 70 60 80 50 70 60 40 30 50 20 40 80 10 30 2008 2009 70 20 Yet to be raised10 60 2008 2009 50 Yet to be raised40 30 20 10 2008
2009
Yet to be raised 5000 4000 5000 3000 4000 2000 3000 1000 2007
2008
02000
2009 1000 5000
Average size 0 4000
2007 2008 value ($mn)
2009
3000 Average size 2000 value ($mn) 1000
COMPANY WATCH
is the limited access to and increased cost of financial leverage, which impaired the ability of large funds to complete major transactions. In fact only two transactions were greater than $50 million. In terms of exit, the significant decrease in multiples and lack of stock market liquidity restricted exit opportunities. There was only one exit – the trade sale of Reliance Petroleum – by the Global Opportunistic Fund 2 for a value of $49 million against a purchase price of $33 million. Historically, the most popular options have been public market offering and trade sales. Both avenues, however, are expected to remain scarse in the coming year.
0 3500 Average size 3000 No of deals Exits 15 Total value ($mn) 2500 20 3500 2000 3000 10 15 1500 2500 1000 2000 5 10 Exits 500 1500 01000 2005 3500 2004 2005 2006 2007 2008 2009 3000 500 Total value ($mn) No of deals 150 2500 0 2004 2005 2006 2007 2008 2009 2000 10 Total value ($mn) No of deals 1500 1000 5 500 regional players advance and private-label 0 0 20
2004
2005
2006
2007
2008
2009
products to rise 2004 mainstream, 2005 2006 2007as 2008 2009 to the low consumer confidence fuelled Total value ($mn) Regional manufacturers of dealsto cheaper tradingNodown brands. have started to copy some of the multinationals’ valueadded benefits, such as Fine Hygienic Paper FZE launching a premium range of nappies/diapers, while private label operators have even started launching seasonally themed ranges, such as MAF Hypermarkets’ Carrefour No.1. TISSUE AND HYGIENE IN THE UNITED ARAB EMIRATES Forecast Retail Sales of Tissue and Hygiene by Sector: Value 2009-2014 AED million 2009 2010 2011 2012 2013 2014 Retail Hygiene 394.7 442.8 498.9 566.2 637.8 708.3 Sanitary Protection 122 134.7 149.7 167.8 186 203.5 Nappies/Diapers/Pants 260 294.8 335.3 383.8 436.7 489 Incontinence Wipes 7.8 8.2 8.7 9.2 9.7 10.2 Cotton Wool/Buds/Pads 5 5.1 5.3 5.4 5.6 5.7 Retail Tissue 107.8 116.7 127.2 140.9 154.5 167.9 Toilet Paper 32.5 35 38 41.7 45.2 48.2 Tissues 70.1 76.3 83.7 93.4 103.3 113.2 Kitchen Towels 0.6 0.6 0.7 0.7 0.7 0.8 Paper Tableware 4.5 4.6 4.8 5.1 5.4 5.7 Retail Tissue and Hygiene 502.5 559.4 626.1 707 792.3 876.1 Source: Official statistics, trade associations, trade press, company research, trade interviews, Euromonitor International estimates
DP World
Global operator eyes $1.2bn EBITDA DP World, despite being associated with its debt-laden parent company, is well positioned to take advantage of the positive developments taking shape in the global container terminal industry. DPW CEO Mohammed Sharaf, told Gulf Business that the world’s fourth-largest container terminal operator is confident it would meet analyst forecasts of $1.2 billion EBITDA for 2010, a 23 per cent increase from last year. “We are happy with that expectation and we are confident that we will meet that,” Sharaf said. The company recorded $974 million EBITDA in 2009, a 9 per cent drop from $1.07 billion in 2008. DPW remains the single most diversified operator globally in terms of geographic coverage, with a portfolio that is heavily weighted Key stats Revenue ($m) EBITDA ($m) Net profit ($m)
2005 675 348 240
towards origination and destination traffic. In addition, the mix retained by the world’s fourth-largest container terminal operator implies more stability and higher yields than comparable operators that focus on specific regions or those that cater primarily to transhipment traffic. Although DPW 2009 revenues shrank 10.8 per cent to $2.9 billion and net profits dropped 30 per cent to $333 million, the company still performed better than its peers. While global container volumes fell 12 per cent, the firm reported only 6 per cent decrease in gross volumes. The global operator reported it handled 23.7 million TEU across its portfolio of 50 operating terminals in the first six months of 2010, an increase of 16 per cent against the same period. 2006 3,487 736 192
2007 2,731 925 1,105
2008 3,283 1,075 482
2009 2,929 974 333
Source: Exotix Ltd
Etisalat
BlackBerry effects to show in Q4 Etisalat’s net profit of Dhs1.9 billion for Q2 is well below the Bloomberg consensus estimate of Dhs2.025 billion. The telecom’s consolidated net profit for 1H10 was Dhs3.9 billion, a 15 per cent drop from Dhs4.6 billion during the same period in 2009. But analysts are opting to wait the release of full financial results before reviewing their forecasts and target price. Moody’s warns that the financial impact on Etisalat of the announced ban on all BlackBerry data services in the UAE will not become apparent until the announcement of the company’s Q4 results, which Etisalat is likely to release in March 2011. Although BlackBerry services are thought to be one of Etisalat’s key Key stats Revenue (Dhsm) EBITDA (Dhsm) Net profit (Dhsm)
FY08(A) 29,360 9,036 8,511
generators of revenue and profitability, Moody’s believes that the conversion rate of customers to permitted data services and the industry’s ability to maintain the momentum for mobile data services will be more important than any short-term dips in revenue in determining the impact on Etisalat. The credit agency says the majority of the estimated 500,000 BlackBerry users in the UAE will over time make the switch to other alternative permitted mobile data devices. According to the ITU, mobile broadband subscriptions in UAE reached a penetration rate of 40.3 per cent at the end of 2008, equivalent to approximately 1.8 million users.
FY09(A) 30,831 11,349 8,836
FY10(F) 32,017 11,660 8,361
FY11(F) 33,399 12,206 9,055
FY12(F) 35,050 12,695 9,875
Source: Company data, Rasmala forecasts
September 2010 gulfbusiness
71
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Panoramic views of the sea, the old city and the mountains can be enjoyed from the 2,500 square metres of landscaped gardens of the villa located on a hillside just 1.5 kilometres from the city centre. A mirror swimming pool outside and approximately 300 square metres of exceptional quality living space inside make this a truly spacious and luxurious four bedroom, four-bathroom home. 1,650,000
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N I W
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COMPETITION
A TWO-NIGHT STAY AT THE RITZ-CARLTON, BAHRAIN HOTEL & SPA
he Ritz-Carlton, Bahrain Hotel & Spa, situated on the north coast of Bahrain, is located within a 20-acre urban resort complex on the seafront of Manama. It is only 11km from the airport, 3km from Manama City Centre and close to the Bahrain International Exhibition Centre. The hotel features 245 rooms and suites, each with unparalleled views of the city or sea, and 23 villas. The Sports Club & Spa offers an extensive menu of treatments and facilities, such as an indoor and outdoor swimming pool, four tennis courts, an indoor squash court and a magnificent Turkish bath. Tailor-made resort offerings, complemented by state-of-the-art technology and facilities for personalised business meetings and functions, make this unique venue an exclusive yet energising destination. There are four restaurants, one lounge, one bar, a poolside cafÊ, a gourmet shop and 24-hour in-room dining. The Ritz-Carlton, Bahrain has some of the region’s finest conference facilities with a large selection of rooms suitable for every occasion, hosting up to 1,000 guests at any one time.
T HE
P R I Z E
Two night stay in a clubhouse with access to the club lounge and complimentary food and beverages throughout the day.
HOW
T O
W I N:
To enter, log onto www.motivatepublishing.com/ competitions and answer the question below.
The largest conference room at the Ritz-Carlton, Bahrain can hold: a) 800 people b) 900 people c) 1,000 people Terms and conditions: This voucher cannot be redeemed in cash. Reservations are required and subject to availability.
September 2010 gulfbusiness
73
F
LIFESTYLE TRAVEL
Malay foray Kuala Lumpur oozes capitalism and culture in good measure.
A
s global businesses hop into the Islamic finance bandwagon, decision makers increasingly find themselves setting their feet in Kuala Lumpur, one of the world’s fastest growing countries and now the largest issuer of Sukuks. Kuala Lumpur is a melting pot of Malaysia’s key political, commercial and social features. From mosques to mega-malls to mega-bucks, the city boasts a vibrant cultural and business tapestry. For shoppers, Kuala Lumpur offers a fusion of traditional Asian cultures and cutting-edge panache across more than sixty shopping malls. For a more authentic experience, head to Jalan Petaling Stree in the city’s downtown district, this thriving Chinatown hub is one of the places to rub elbows with locals, as well as visitors indulging in authentic Chinese dishes at reasonable prices. Merdeka Square is also worth a visit – a former centre of British administration for the region, businessmen and politicians rubbed shoulders and sealed deals here once upon a time. The square will lead you to the Central Market, which first opened
as a wet market a century ago but has now broadened to become home of all things exotic and Malaysian. Amongst the hustle and bustle of the city, it is not difficult to become lost in the streets and Menara KL telecommunication towers is an ideal place to get your bearings. The views from the observation deck and the city’s famed revolving restaurant stretch miles into the distance. Once the sun goes down, catch a cab south to the area known as the Golden Triangle, with Jalam Bukit Bintang and Jalan Sultan Ismail at its core. Shuffle a move or two with the smartly dressed youth of the city at bars and nightclubs as intense as any in New York or Berlin. Factfile r The Malaysian GDP per capita in 2009 was $14,800 r Malaysia’s economy grew 8.9 per cent year-on-year in Q2, with growth expected to exceed six per cent in the full year (Central Bank) r Malaysia is a prime source of the world’s rubber and palm oil r The country is the world’s largest exporters of semiconductor devices.
Feast Village
The Pavilion
Feast Village is an enticing mini-metroplis of restaurants representing a panorama of the world’s cuisine. From tapas to Thai to Texas steaks, this is no ordinary mall food court, but rather multifarious gourmet dining in unique individual settings. Be sure to stay after dinner to enjoy the live nightly entertainment.
Spread over 1.3 million square feet, the Pavilion is the Rodeo Drive of Malaysia with brands such as Gucci, Versace, Bulgari and more across a total of over 450 stores. It is also home of the Pavilion Crystal Fountain, the tallest Liuli Crystal Fountain in the country according to the Malaysian Book of Records.
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Batu Caves
Spa Village
The focal point of the Hindu festival of Thaipusam in Malaysia, the cave is one of the most popular Hindu shrines outside India. Rising almost 100 metres above the ground, Batu Caves temple complex consists of three main caves and a few smaller ones. To reach it, visitors have to climb a steep flight of 272 steps.
Indulge in a rejuvenating or relaxation therapy at the peaceful Spa Village located on the fourth floor of the Ritz Carlton. Whether you choose an individual treatment or treat your colleagues to a Group Sensory Exploration that will erase the stresses of tense negotiations, you will float from the spa in a state of bliss.
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LIFESTYLE LEISURE
All-terrain luxury Michael Gordon vrooms across Jebel Hafeet in the new Porsche Cayenne.
I
have been sceptical of Porsche’s off-road offering for some time; doubting that the performance that makes the company’s sport cars special could be transformed into a two and a half tonne SUV. But having test-driven-one I am compelled to eat my words. Once you have the seat set right (with 18 levels of correction available), the air-con adjusted (which goes as low as a chilling 1600C), your destination punched into the touchscreen sat-nav and your tunes selected it is a decidedly comfy drive and quite akin to a normal saloon. There is a dazzling array of buttons to adjust every road-handling technology and once sports mode is selected the 4.8-litre biturbo-V8 engine truly comes to life. This SUV will fly from 0 – 100 km/h in 4.7 seconds, with a top speed of
278 km/h (172 mph). However, there is a considerable turbo lag. The engine is complemented by an eight-speed Tiptronic S gearbox, with active all-wheel drive, which is quite amazing on winding roads. We took the Porsche on one of the windiest roads in the Gulf, up the UAE’s Jebel Hafeet mountain pass and it accelerated through every bend effortlessly, although its sheer weight made the downhill run a lot more challenging, as it would plough on nose first, away from the apex, in the tightest of bends. So it has the grunt but not the
finesse for racing and it lacks the space of many SUVs, but give it a long straight open road and little will pass you by and the ride comfort will leave you shocked at the speed you are doing. Note: For those adverse to speeding fines, switching the automated cruise control on is the best option. Few could argue that this is undoubtedly the ugly duckling of the Porsche stable, but taste is very subjective, and the sales figures prove that more than a few consumers have a soft spot for the Cayenne. ■
ROBBIE GREENFIELD IN THE SWING
Monty takes a swing at Ryder Cup
E
uropean Captain Colin Montgomerie knows better than most that the Ryder Cup has always been a curious anomaly. Back in Monty’s heyday, the biennial matches offered a chance for the less heralded players on the European Tour to beat their heavyweight counterparts in an event that drew the US stars out of their comfort zone. Next month the Scot will take what he describes as the ”strongest European side ever assembled” to Celtic Manor. But on-paper advantages will matter little by the time the first ball is struck in Wales. Times have changed, and so have Europe’s chances of success. Although Monty would never admit as much, the matches at Celtic Manor no
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longer constitute the highlight of the European Tour stars’ season. Padraig Harrington, Paul Casey and Justin Rose confirmed this by snubbing their captain’s plea to play in the final qualifying event at Gleneagles, in favour of lucrative US Tour events. The most successful European sides of the past have all played with a fighting underdog’s spirit that will be impossible for Monty to replicate come October. In something of a role reversal, the opposite applies to Corey Pavin, who could have all the motivational skills of David Brent and still fire up his team into a frenzy. Whether it be the ignominy of so many heavy defeats, or simply the diluting of egos, there is no doubt that America
has fallen back in love the Ryder Cup. Bubba Watson’s reaction to his painful playoff loss to Martin Kaymer at the US PGA echoed the sentiments of other US rookies: “I made the Ryder Cup and that’s all that matters.” As the PGA Tour becomes an everhappier hunting ground for Europe’s stars, so their appetite for the Ryder Cup diminishes. With home advantage and a team compromising almost solely of the world’s top 25, Monty will be heavily tipped to reclaim the Cup. But he of all people should remember that reputations count for nothing in an event where David always seems to get the better of Goliath. ■ Robbie Greenfield is the editor of Golf Digest Middle East. robbie@motivate.ae
LIFESTYLE ART CHARLES POCOCK ART EXPERT-AT-LARGE
Little Italy Tuscany houses some of the world’s most coveted Islamic art collections The majority of Islamic art is held in Tuscan and Venetian Collections, secular and ecclesiastical, due partly to trade and conflict, this being for both states. Within this feature we look at Tuscany, specifically the cities Florence and Pisa. Pisa is famous for its leaning tower within the Campo dei Maricoli complex, containing the Campanile (Leaning Tower), Duomo, Baptistery and Camposanto. On the roof of the Duomo was placed a Bronze Griffin, half-lion, half-bird; booty from a Pisan battle in the 11th/12th Century
Bronze Griffin, inscription: 1. Perfect benediction, complete wellbeing 2. Perfect joy, eternal peace and perfect 3. Health, happiness and good fortune for the owner
in the southern Mediterranean, in either Spain, Sicily or Tunisia and the original is now held within the Museo dell’Opera del Duomo, within the Miracoli complex. This incredible object is recognised as one of the most important and famous Islamic art objects held in any international collection. Its origins have been discussed heavily, being either Fatimid from Sicily or Tunisia or from Al-Andalus, with a number of art historians still undecided as to its origins. The common consensus is that the Griffin was made in Spain and looted by the Pisans from Sicily. In the 18th century it was regarded
as a mediocre antique and in the late 19th century it was finally identified as Islamic. Its date of production has been placed in the 11th century. The upper part of the Griffin is covered with engraved decoration, following a typically Islamic decorative syntax, the breasts of the object carry a frieze of calligraphy in Kufic script. A replica has been placed on the roof of the Duomo, the original being held in the Museum. The tragedy is the work is poorly displayed, placed in the corner of poorly lit room and there is limited information relating to the piece. Pisa also houses the Museo Nazionale de San Matteo, which holds one of the most important collections of Fatimid ceramics held within Italy. These ceramic bowls have a lustre-painted decoration, produced in Fatimid Egypt in the second half of the 11th century and are known as ‘bacino’’. Moving to Florence, the Medici collections of Islamic art are spread over a number of institutions, with the bulk being held at The Bargello; The Laurentian Library holding Arabic, Ottoman and Persian manuscripts and a few pieces at the Museo degli Argenti at The Palazzo Pitti. The Bargello holds ‘La Sala Islamica’; a room devoted to Islamic art, with the exhibited collection containing textiles on the walls and cases containing a variety of objects including ceramics, ivory, textiles and metalwork. The Museo Stefano Bardini, recently reopened, holds an impressive collection of Oriental carpets, which is definitely worth a
visit and is held in the southern part of the city, in the area where I used to study in 1992. Moving to the north of the city, one of the undiscovered treasures of Florence is the Museo Stibbert. It contains one of the greatest museum collections of Islamic weapons in the world. The museum was founded by Frederick Stibbert (1836 - 1906). The Stibbert family’s extreme wealth came from Frederick’s grandfather, Giles Stibbert, who was the commander-in-chief for the British East India Company at the end of the 18th Century. Frederick Stibbert inherited the entire estate from his grandfather and instead of working dedicated his life to collecting various objects and turned his villa into a museum. In 1906, when Stibbert died, his collection was given to the city of Florence and was opened to the public. Stibbert’s collecting of Islamic arms commenced in 1860 and is predominately made up of Ottoman arms and armour, with the highlight of the collection being a dagger from the collection of Suleiman The Magnificent (stolen in 1977, found on the art market in 1998). With the closing down of the Ottoman Arsenals in 1839 by Sultan Abdulmecid, Stibbert (18381906) was in a position to build this incredible collection on this body of pieces. Stibbert built an incredible collection that is nearly unmatched, with The Furusiyya Art Foundation Collection coming very close. ■ Charles Pocock runs the Meem Gallery, Dubai, a leading specialist in the Arab art world. September 2010 gulfbusiness
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LIFESTYLE DESIRABLES
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Cape Cod Tonneau from Hermes Tel: +9714 330 8385 www.hermes.com
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1 Million aftershave by Paco Robanne www.pacorabanne.com
Gucci’s Men’s shoes from Autumn Winter 2010 Collection Tel: +971 4 339 8712 www.gucci.com
78 gulfbusiness September 2010
ESSENTIALS BOOKS
Who to blame for the crash?
This month Gulf Business ponders the multiple factors that caused the global financial crisis.
W
ho caused the recession? Charles Dumas’s attempts to answer one of the world’s most potent questions in Globalisation Fractures (Profile Books). He fleshes out hard-economic theories into real-life situations. The financial crisis was actually a debt crisis. But who to point the finger at? It’s difficult to tell. Is it China who fuelled the debt boom or is it the US policymakers and their inadequate regulation? Perhaps it’s the banks themselves for irresponsible lending, but bankers – especially investment bankers – pass the blame to the rating agencies, which gave AAA ratings to securities that were subsequently sold at 25 cents in the dollar. And the list goes on. Dumas offers a blow-by-blow
account of exactly how the world’s worst recession, the one we’re in now, started. He proffers that the “fundamental shock” of globalisation created imbalance through its ‘no rules, no limits’ freedom. Just like a lye and hydrochloric acid fusion – two harmful substances – where the result of the amalgamation is not harmful, but, instead, neutralised into salty water, the recession was the unexpected result of uncontrollable forces – namely, free markets. Dumas concludes that the interaction of individual country policies and behaviours is the root of the problem. What happened, as Dumas put it, was impossible to stop. Just like watching a slow-motion car crash.
Syrian Arab Republic Ministry of Electricity Public Establishment of Electricity for Generation & Transmission (“PEEGT”) Al-Nasserieh 180-250MW Independent Power Producer (“IPP”) Notice of Request for Qualifications (“RFQ”) The Government of the Syrian Arab Republic is committed to develop Public-Private Partnerships in order to promote private sector investment in infrastructure. The Ministry of Electricity intends to diversify its sources of power generation in the country and meet growing electricity demand through the development of a new HFO and/or Gas fired 180-250MW IPP at the Al-Nasserieh power complex (the “Project”). The Project is promoted by PEEGT, an entity under the control of the Ministry of Electricity, who is solely responsible for planning, development, operation and maintenance of Syria’s generating plants and transmission networks. PEEGT appointed the International Finance Corporation (“IFC”), a member of the World Bank Group, as Lead Advisor to assist in the structuring and implementation of the first IPP in Syria. IFC is being assisted by technical consultant, Mott MacDonald, and legal counsels Allen & Overy and Sarkis Law of Syria. PEEGT now invites interested parties with experience in design, financing, construction, operation and maintenance of IPPs to submit Qualification Statements in accordance with the Al Nasserieh IPP Round II RFQ document. The document can be requested from one of the contacts listed below or downloaded from www.syriaippproject.org or www.peegt.gov.sy. Applicants are required to submit their Qualification Statements together with a non-refundable processing fee of 500 Euros (or Syrian Pounds 30,000) on or before September 27, 2010 at 13:00 Hours (Damascus time). Any requests for additional information and/or questions concerning the RFQ document may be submitted to the contacts listed below: PEEGT
IFC – Lead Advisor
Eng. Hisham Mashfej Director General Public Establishment of Electricity for Generation and Transmission PO Box 3386, Damascus, Syria | Fax: +963 11 222 9062 dg@peegt.gov.sy
Stefano Giacomino | John Leber | Marwa Al-Nasaa International Finance Corporation PO Box 118071, Dubai, United Arab Emirates Tel: +971 4 360 1000 | Fax: +971 4 360 1010 sgiacomino@ifc.org | jleber@ifc.org | malnasaa@ifc.org
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Hotel Collection Gulf Business Hotel Collection members offer guests complimentary copies of the GCC’s premier business magazine Gulf Business. United Arab Emirates 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
THE FAIRMONT DUBAI
PARK ROTANA ABU DHABI
LAYIA OAK HOTEL & SUITES
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 park.hotel@rotana.com JUMEIRAH EMIRATES TOWERS
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 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 media.dubai@rotana.com
KEMPINSKI HOTEL MALL OF THE EMIRATES
PULLMAN DUBAI MALL OF THE EMIRATES
Mall of the Emirates, Dubai Discover a new attitude hotel directly linked to the region’s ultimate shopping destination amidst Dubai’s sophisticated metropolis. Elegant 481 guestrooms complemented with chic dining experiences awaits both leisure and business guests. Tel 00971 4 702 8000 Fax 00971 4 702 8001 H7337@accor.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 dubai.reservations@fairmont.com
Sheikh Zayed Road, Dubai Jumeirah Emirates Towers is a sleek architectural masterpiece of steel and glass. It redefines the business hotel category, seamlessly combining form with function, high technology with unparalleled luxury and elegance with efficiency. Tel 00971 4 3300000 www.Jumeriah.com
Sheikh Zayed Road, Dubai The truly unique and exciting five stars hotel features 393 rooms, suites and chalets together with Mall of the Emirates shopping centre and Ski Dubai’s alpine themed indoor snow resort. Tel 00971 4 3410000 reservations.malloftheemirates@ kempinski.com www.kempinski.com/dubai
SHANGRI-LA
TAMANI HOTEL MARINA
ACACIA HOTEL
MÖVENPICK HOTEL DOHA
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 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
Doha 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 HILTON
HOLIDAY INN RIYADH, IZDIHAR
SOFITEL AL HAMRA JEDDAH
Jeddah 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
Riyadh 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
Jeddah 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
Qatar
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 sldb@shangri-la.com
Qatar INTERCONTINENTAL DOHA
Doha 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
GulfBusinessHotels.com
Saudi Arabia
Membership information: nayeem@motivate.ae, Tel: 00971 4 2052290
EXHIBITIONS & CONFERENCES
Qatar’s new exhibition centre The Qatar National Convention Centre (QNCC), an iconic building designed by Yamasaki Architects and RHWL, will be the largest of its kind when opened in 2011. QNCC will cater for regional and national conventions, exhibitions, galas, concerts, weddings and banquets. The awe inspiring main facade will resemble two intertwined trees. In keeping with its organic design, QNCC is the first of its kind being build to the gold certification of U.S. Green Building Council’s Leadership in Energy and Environment Design (LEED). The sprawling 177,000m2 centre development will cost around $1.2bn on completion.
UNITED ARAB EMIRATES Abu Dhabi September
19-22
5th Annual Corrosion Mangement Smmit
Le Royal Meridien
iqpc.com
21-22
The Internet Show Middle East 2010
Abu Dhabi National Exhibition Centre
terrapinn.com
22-25
ADIHEX - Abu Dhabi Int’l Hunting & Equestrian Exhibition
Abu Dhabi National Exhibition Centre
turretme.com
26-29
Vertical Transportation Middle East
Radisson Blu Hotel Golf Plaza
iqpc.com
Acoustics in Construction 2010
Le Royal Meridien
iqpc.com
2nd Annual Hotel Technology Middle East
Amwaj Rotana
iqpc.com
2nd Annual Process Safety Management Summit
Amwaj Rotana
iqpc.com
Telecom Fraud Prevention and Revenue Assurance
The Movenpick Hoel Jumeirah Beach
iqpc.com
Shopper Marketing Conference
Hyatt Regency Hotel
marcusevans.com
Retail Management Conference
Hyatt Regency Hotel
marcusevans.com
Dubai September
19-22
26-27 26-28
Gifts & Premium Dubai
Dubai Int’l Convention & Exhibition Centre
channelsexhibitions.com
Middle East Pool & Spa Exhibition
Dubai Int’l Convention & Exhibition Centre
reedexpo.com
Paper Arabia 2010
Dubai Int’l Convention & Exhibition Centre
alfajer.net
Middle East Cleaning Exhibition – CLEAN 2010
Dubai Int’l Convention & Exhibition Centre
reedexpo.com
26-29
Private Label Middle East Show 2010
Dubai Int’l Convention & Exhibition Centre
channelsexhibitions.com
28-Oct 2
Watch & Jewellery Exhibition
Expo Centre Sharjah
expo-centre.ae
23-Oct 2
Beauty & Wedding Expo 2010
Kuwait International Fairs
kif.net
14-23
Al Ayam Cultural Fair
Bahrain Int’l Exhibition & Convention Centre
bahrainfair.com
27-29
Gulf VIP on Board Designs
Bahrain Int’l Exhibition & Convention Centre
bahrainxhibitions.com
26-27
Urban drainage, sewerage & Irrigation Conference
Intercontinental Hotel, Muscat
marcusevans.com
Urban drainage, sewerage & irriigation
Intercontinental Hotel, Muscat
marcusevans.com
Oman Capital Markets Forum
Al Bustan Palace Continental, Muscat
omancapitalmarkets.com
Sharjah September
KUWAIT September
BAHRAIN September
OMAN September
28-29
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OUT TO LUNCH AJAZ SHEIKH
See and be seen ALICIA BULLER dines with Ajaz Sheikh, director of Zuma’s Middle East operations,
and learns the secret of keeping tables busy day and night.
I
know who he is as soon as I see him. Ajaz Sheikh, Zuma’s regional boss of operations, is slick and considered, just like his undulatingly cool restaurant chain. Decked out in an immaculate, well-cut suit, replete with pocket hankie, he’s paid attention to the small stuff. Likewise, it’s the attention to details that ensures the highend Japanese brand continues to lure glitterati from across the globe. The DIFC-based restaurant launched two years ago, joining its sister outlets in London, Hong Kong, Istanbul and Miami. What do the four cities and Dubai have in common? A social set that likes to be noticed. “In this city, people go out to be seen,” says Shiekh. “Zuma pulls in the aspirational people. Without them, we’d be nothing. We offer an exclusive feel, our customers want to mingle with the who’s who of the city.” Sheikh himself is no stranger to the stars. Working at the Lanesborough in London, he rubbed shoulders with some of the world’s most famous people. “Michael Jackson was a lovely guy,” he says, with more nonchalance than most of us could muster. While Sheikh regales me with stories of celebs and the art of high-end hospitality, I set to work on an extraordinarily well-presented set of dishes. As the flavours burst onto my palate, I’m particularly pleased with the seared tuna with chilli daikon and ponzu sauce; it’s fresh and striking. One of Zuma’s Japanese concepts is to keep the food flowing to the table, mounds and mounds of gloriously colourful food. Among the starters are the traditional edamame beans (fresh and crunchy) and salads, including the house offering with asparagus, tomatoes and maple shichimi dressing. It’s inventive but simple; a difficult balance to strike and one that Zuma does well. The restaurant plans to open up in Abu Dhabi – “in the city centre though, not those islands” – and Beirut.
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Sheikh says he will also launch the company’s younger, more informal sister chain, Roca, in Dubai. “We can’t open another Zuma here as we don’t want to cannabilise our market.” It’s Sheikh’s unforgiving drive to keep the clients happy that has catapulted the manager from the Mandarin Oriental to the Lanesborough to Zuma. As I bite into the restaurant’s famously tender and sweet black cod, I’m treated to a passionate and encyclopedic knowledge of what makes customers tick. It comes out like a stream of consciousness: “It’s about the experience, it starts with the reservation, first impressions when you walk in, the valet, how welcoming the hostess is, how they read you. What kind of a client are you? Are you in business? Are you old or young? Are you with kids or without kids?” he says, barely pausing for breath. Crucially, while the eatery is home to the stars, one thing the Zuma manager never forgets is value for money. “Don’t rip people off. People are smart, don’t underestimate them. Read them, and offer the drinks you’ll think they want. I never want to hear from a customer that we’ve oversold, because that means they’ve lost and I’ve lost,” he explains. “Something I learned in the Lanesborough is that rich people care about value for money. It’s the people like you and I who get the money and blow it all at somewhere like Zuma,” he says. To keep the tables busy, Zuma offers a four-course lunch for AED120, and, as a result, the crowd is eclectic. For those that have money, or for those that don’t, there’s something authentic about Zuma. It’s honest in what it’s trying to achieve: a unique experience, attention to the details, and that’s what Sheikh personifies. In a country where credit-card penetration is high and service is notoriously uninspiring, the tables should stay busy for sometime yet.
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