Gulf Business | May 2010

THE NEW GUARD: UNPOLISHED OMAN TAKES ON GLITZY UAE TOURISM Vol. 15 Issue 1 May 2010

TOP BANKS IN THE GCC HIGH HOPES

GAME CHANGER

CONSOLATION PRIZE

If YOU BUILD IT...

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

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Cityscape focuses on delivery

Landmark’s Vipen Sethi Gulf financial centres still struggling

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AGMC, Dubai, UAE Tel: 00971 4 339 1555 www.rolls-roycemotorcars-dealer.com/dubai

Ali Alghanim & Sons Automotive Co. WLL, Kuwait Tel: 00965 224 6000 www.rolls-roycemotorcars-dealer.com/kuwait

Rolls-Royce Motor Cars Doha, Doha, Qatar Tel: 00974 447 7577 www.rolls-roycemotorcars-dealer.com/doha

Mohamed Yousuf Naghi Motors, Jeddah, Kingdom of Saudi Arabia Tel: 00966 2 669 5333 www.rolls-roycemotorcars-dealer.com/saudiarabia

Euro Motors, Manama, Kingdom of Bahrain Tel: 00973 17 750 750 www.rolls-roycemotorcars-dealer.com/bahrain

Mohamed Yousuf Naghi Motors, Riyadh, Kingdom of Saudi Arabia Tel: 00966 1 462 7777 www.rolls-roycemotorcars-dealer.com/saudiarabia

www.rolls-roycemotorcars.com Š Copyright Rolls-Royce Motor Cars Limited 2010. The Rolls-Royce name and logo are registered trademarks.

THE DETAILS Vol. 15

Issue 1 May 2010

the COMMENT 12 Investment The future shine of the British sterling depends on who makes it to Downing Street.

14 Inside Track Pruning the family business tree is a difficult but necessary task sometimes.

16 Money When a business cycle grinds to a halt, the only way is forward.

18 Markets 101 Investing in up and coming Mongolia offers a fortune in the final frontier.

20 Guest comment Middle East real estate market opening up following positive legal and cost shifts.

22 Letters

the briefing 24 Regional Briefing

The future of oil, and all that depends on it, is subject to some interesting market fluxes.

32 Bridging the gulf Tapping into African trade for Arab investors a matter of proper facilitation and transparency.

33 Doha bound Qatar’s undiminished growth curb attracts recruitment firms promising to place needed staff.

After two consecutive poor shows in the Gulf Business annual Top 50 Banks report, it seems there is finally some good news. The global-recession-sparked financial freefall has finally stopped and slight recoveries are expected for the region’s banks in 2010.

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34 Unaccustomed change

branding and up their game to draw in big business.

The new electronic registration system of Dubai Customs yet to prove an improvement.

56 Natural selection

35 Stand and deliver

30 Greasing the wheels

Banked ambitions

Cityscape Abu Dhabi wraps up with few launches and many reiterated completion promises.

the BUSINESS 48 Fixing the cracks Islamic finance must address structural weaknesses to push past economic difficulties.

52 A place on the stage Gulf financial centres tighten their

Dubai is no longer the only Gulf tourism destination, with Oman coming out as a strong challenger.

THE People 62 Leading Landmark Vipen Sethi shows how embracing change can take an accountant to the top of a Gulf retail chain.

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

May 2010 gulfbusiness.com

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THE DETAILS Editor-in-Chief Obaid Humaid Al Tayer Group Editor and Managing Partner Ian Fairservice Group Senior Editor Gina Johnson Group Editor-Business Alistair Crighton Deputy Editor Zarina Khan Editorial Coordinator-Business Concessa D’Souza Art Director Cris Domdom Senior Designer B Raveendran Special Contributors and International Correspondents Berlin Wolfram Bielenstein Hong Kong Michael McKay Johannesburg Bill Cain London Robert Bailey/Karen Thomas New Delhi Rahul Bedi Shanghai Gordon Hu Washington Kevin J Kelley Hospitality Guy Standish-Wilkinson Travel Penny Young General Manager Production and Circulation S Sasidharan Production Manager C Sudhakar

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Group Publisher Neil Presland Senior Advertisement Manager Abraham Koshy Advertisement Manager Ajay Mathews

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72 THE LIFESTYLE

THE ESSENTIALS

70 Travel

74 Books

A raft of experiences up Ruak River in Thailand.

71 Art Cairo shines as the true jewel of Islamic architecture.

72 Motoring Laura Collacott tries going green with the hybrid Lexus LS 600hL.

78 Hotels Where to stay in the GCC.

80 Stats & Facts We unpack the data for you.

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

73 Technology Losing Larry and admitting to an internet addiction.

8 gulfbusiness.com

76 Calendar

Head Office: PO Box 2331, Dubai, UAE Tel: +971 4 282 4060, Fax: +971 4 282 4436, E-mail: motivate@motivate.ae

May 2010

Raffaeli Ruggeri discusses the restaurant business at his own Bice Mare.

22,774 copies June 2009 Printed by Emirates Printing Press, Dubai

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THE COMMENT LEADERS [ Policy ]

Bad for business Overnight changes in rules are off-putting for investors – whether they happen or not.

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nyone who has been in the Gulf for longer than a few months knows this script all too well: a sweeping change is announced by a government, out of the blue, with no consultation and, seemingly, no thinking of the consequences. Be it a ban on cars older than 10 years, a ban on cooking with alcohol in hotels, stringent curbs on smoking, or, especially common, a sweeping change in visa regulations aimed at closing loopholes and “visa runs” across borders, they come around every few months. There follows a period of confusion; businesses and residents affected by the change make a few half-hearted complaints; and defenders move in to back the changes on cultural, economic or security grounds (often justified). But, just as implementation is imminent, the laws are suddenly reversed, or even dismissed as a simple misunderstanding.

Last month was Doha’s turn, as Qatar decided to scrap the issuance of tourist visas at the airport. For a state operating in a highly competitive market, with every city aiming to be a hub for this and that, it seemed particularly short-sighted. Arguments that workers and even business people have their own visa regulations, which remain unchanged,

ignore the fact that many people potentially looking at Qatar as a place to do business, or Gulf Cooperation Council GCC residents used to travelling between states for work, used the visa-on-arrival system as a matter of convenience. Rightly or wrongly, it’s the way a lot of companies operate, and ending that convenience would surely mean Doha losing out to rival cities on the business and tourism fronts. Given the economic climate, the lastminute backtrack was inevitable.

Defenders of changes in regulation are often right: loose visa rules are a security nightmare; curbs on smoking should be welcomed by most and even the ban on cooking with alcohol can be easily justified on religious grounds. But the haphazard way these things are announced play havoc with business planning, and can scare off investors used to more predictable legal climates. Old hands in the Gulf tend to be dismissive of controversial government announcements; they can point to a dozen or more proposed changes that never made it onto the books. Even the most hardened cynic, though, would do well to have contingency plans in the event their livelihood is taken away on a whim. n

[ Tourism ]

Muscat’s big ambitions Oman needs to tread carefully if it wants to be a serious draw for tourists.

B

ack in 2007, Dubai was still opening a fivestar hotel every month, Dubailand was still touted as the tourism project to end all tourism projects and the emirate had giants such as Florida in its sights as it moved to transform itself into a global tourism destination. Geoffrey Kent, the chairman of the World Travel and Tourism Council, hinted he wasn’t having any of it. Asked on the sidelines of that year’s Middle East session of the World Economic Forum for

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his three top tips for Middle East tourism, he replied: “Oman, Oman and Oman”. Dubai, he said, was “a burned-out brand”.

Subsequent years haven’t exactly vindicated him. While Dubai has suffered through a property bubble and, arguably, a hotel bubble, it’s far from burned out. In fact, despite the best intentions of fellow emirates and countries, for serious, massmarket tourism, it’s still by far the biggest player in the region. And Oman? Despite its potential, in

THE COMMENT LEADERS

the three years since Kent’s prediction, it hasn’t made quite the inroads it could have.

Dubai brought in 9.3 million visitors last year – though the usual opacity in figures makes it hard to distinguish how many visitors are tourists in the true sense of the word or business visitors staying for a night or two. In contrast, Oman brought in just two million – an 11 per cent increase over the previous year, but a long, long way short of the 20 million it hopes to bring in by the end of this decade. Dubai itself, with more 5-star hotels than anywhere else in region, has set itself the more realistic target of 15 million visitors by 2015.

For that 20 million figure to be reached, Muscat will need to roll out a seriously impressive programme of projects to swell the number of hotel rooms available, and will need to upgrade tourism facilities to world standards. That in itself may be self-defeating for a country that sells itself on unspoilt natural beauty. If, as the tourism pundits say, Oman’s main strength is in drawing visitors weary – or wary – of Dubai’s concrete jungle, it will be lumbering itself with a decade of

construction sites and sub-par infrastructure – one of the main criticisms of Dubai during its own breakneck growth period – all to be just another over-built Gulf destination.

Also on Muscat’s radar should be Abu Dhabi.

The emirate is deliberately targeting exactly the same affluent, well-heeled, big spending travellers that Oman wants. It has launched an impressive array of projects, from the huge Saadiyat Island cultural initiatives to the more family-themed attractions on Yas Island, such as the racetrack and Ferrari World. Against this, Oman can’t, and shouldn’t, try to compete.

If anything, Oman should scale back some of its ambition, and work out how to maximise revenues through exploiting its existing resources and attractions. And, in doing so, there are opportunities for Oman to take advantage of its neighbours’ ambitious plans. The recent focus by Dubai and Abu Dhabi on bringing in more cruise traffic will reap benefits for everyone on the coast, especially Oman. After all, modern Gulf cities can get a little repetitive, and the charms of Muscat will undoubtedly prove a big draw to visitors to the Arabian Gulf. n

[ Banking ]

Fighting the fallout Still waiting for a clear picture on the health of Gulf banks.

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f last year’s view of the Top 50 Banks in the Gulf Cooperation Council came during a time of turbulence, this year’s at least points to recovery.

Our usual comments – too many banks, too little regulation, a lack of needed consolidation to drive value, and a lack of transparency in the balance sheets still apply – but these are tempered by new concerns.

Exposure to the Saad/Al Ghosaibi banking scandal has been mostly absorbed, with Awal Bank and the International Banking Corporation disappearing from our list as a result. But, with Dubai World’s restructuring still mired in talks, there may be a few more nasty surprises ahead.

The wider property depression is still to be properly addressed, both in terms of bad loan

provisions, revaluing property and land assets on the books and coming up with a coordinated strategy to deal with the inevitable repossessions and defaults.

For the year ahead, as decent profitability returns to the sector, banks must also accept that they have wider responsibilities than just to their directors and shareholders. It’s up to them to act in cohesion, and with the direction and support of central banks, to rethink risk profiles and to restore lines of credit to those businesses and sectors that need it most. The halcyon days may be behind us, but the region needs a healthy, supportive banking sector if the Gulf’s economies are to grow and prosper. n May 2010 gulfbusiness.com

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THE COMMENT INVESTMENT

STERLING AND THE BRITISH ELECTION The post-election future of the British currency hangs in the balance, with a bull run on the pound a real possibility.

Matein Khalid

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ollowing Gordon Brown’s announcement to call the next British general election on May 6, sterling bottomed against the dollar at 1.48 as fears about a hung parliament in Westminster were replaced by polls that suggested a widening lead for David Cameron and the Conservative Party against the incumbent on Downing Street. Gordon Brown’s boast that New Labour abolished boom bust cycles during his tenure as Tony Blair’s Chancellor (1997-2007) was cruelly refuted by the financial crisis in 2008 and HM Treasury’s emergency bailout of RBS and Lloyds HBOS. The foreign exchange market has made no secret about its preference for the winner on May 6. A decisive Tory win will be the biggest boost for sterling as Cameron’s policies suggest front loaded fiscal tightening.

A hung parliament in Westminster will trigger a Pavlovian sterling fall but no more than a worst case scenario of 1.45 against the dollar, with the establishment of a fiscal hawkish coalition government the floor. In any case, Chicago IMM positioning data, technical chart patterns and real money trading behaviour suggests cable (sterling-dollar) is grossly oversold at 1.50.

This is all the more true since the UK economy seems to have emerged from its worst recession since the later 1970’s “winter of discontent” that bought down the government of James Callaghan and led to the election of Mrs. Margaret Thatcher. This is the reason sterling has become hostage to the tortuous processes of British politics as Brown’s banking bailouts and public spending largesse has incorporated a risk premium on gilts financed by offshore creditors.

It is ironic that the EU-IMF financial lifeline to Greece, grudgingly agreed to by Chancellor Merkel and the cold monetarist soul of the Bundesbank, could actually make the UK vulnerable to a post-election speculative attack. Sluggish economic growth and a 12 per cent budget deficit to GDP ratio, a fiscal model broken due to the woes of the City of London’s finance revenues and sharply lower housing/capital gain taxes means the British malaise could replace the Greek tragedy as the next obsession de jour of the currency markets.

There is unmistakable evidence of a UK economic recovery.

The Halifax house index, producer prices, a modest but still tangible 0.4 per cent growth in British GDP and even a rise in consumer sentiment have all boosted sentiment on the outlook for the British economy and sterling. This is the reason it is unwise to short the British pound against the dollar below 1.54. It is also unwise to forget that sterling’s trade weighted devaluation since 2007 is greater than the September 1992 ERM crisis under John Major, the 1968 devaluation under Harold Wilson or even Britain’s decision to abandon the gold standard in 1931 under Ramsay MacDonald Britain is the most open, inflation prone economy in Western Europe.

The 2010 election could actually act as a catalyst for a new bull run on sterling if the next government convinces the market that budget deficit reduction will define its policy agenda. Yet structural economic reform is essential as Britain, unlike Japan with its lost decades and its zombie banks, is at the mercy of foreign creditors, with one third of all gilts held by offshore investors. Tax rises, spending freezes, the economics of an aging society, a new banking model, a new social contract will define economic policy and Westminster politics in the proximate future. Labour’s economic growth was a cruel illusion since two thirds of GDP growth derived from finance, housing and government spending. The next British renaissance could be spawned by the sceptred isle’s global competitive advantage in media, life sciences, IT, higher education, merchant banking, insurance and green technologies. The sunrise industries of the future could spawn future bull markets in sterling, as the British empire and the City of London’s role as the securitization alchemist of world finance did in the past.

Meanwhile, the FSA investigation of Goldman Sachs has reinforced the public anger over New Labour’s laissez-faire philosophy towards the City. In short, risk aversion and preelection volatility will inhibit the sterling’s return to grace, at least until the next prime minister kisses the Queen’s hand in Buckingham Palace.

Matein Khalid is a global macro trader, economics professor, fund manager in a royal investment office and writer in finance and geopolitics.

A decisive Tory win will be the biggest boost for sterling as Cameron’s policies suggest front-loaded fiscal tightening.

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THE COMMENT INSIDE TRACK

THE DELICATE ART OF PRUNING THE FAMILY TREE Sacking family members may seem like the hardest thing to do, but it could be the very thing an underperformer needs to reach their potential.

Mishal Kanoo

O

ne of the hardest topics to talk about in any family business is the issue of firing family members. This is a very touchy subject because to most in this region, to sack a family member in your family business is about as appealing as abandoning your relative in a jungle full of wild animals.

While with families, procreation and protection are the order of things, the same is not the case in businesses.

A conventional business is about bottom lines. And as the hybrid of the two – family and business – family businesses have a very fine line to walk in looking after the interest of the family and the business. One mouth is easy to feed caviar. Two is a bit dearer and 50 becomes downright expensive. However, try to convince the person who is used to eating caviar that sardines are enough to fill his hunger. Or even worse, try to convince the 48 other mouths that sardines should be sufficient enough for them when they were taught to believe that caviar is the way to go.

As families grow in numbers, all members believe it is their right, not privilege, to be part of a family business. They see that golden cage that provides them with security and protection even though it limits their abilities and strangles their creativity.

They are unwilling to break free from this stylised picture in their mind because it does just that – protects them. What is hard for them to see is that they are in a cage. And no matter what material it’s crafted from, it is still a cage – gold or not. Sometimes that caged family business member would be better served outside of the confines of the constricting business. And sometimes, the business is better served if the family member was not under its employ.

For the cage keeper, read the family patriarch, he can see no wrong in ensuring that all the members of his family are safely tucked inside this cage. In fact, he sees it as his duty to ensure that all his brood are protected.

He even goes the extra step of boasting about this to society at large and expects kudos from them for doing so. Society sheepishly nods its head and the status quo is preserved. Yet it is this very act that stifles the

society because it forces the creative minds to become dull and wither away. Questioning this in any way is perceived as being ungrateful and not as an expression of dissatisfaction with being imprisoned.

A few decades ago an intelligent man called Maslow put down a law talking about human behaviour. It was depicted in a triangle. The bottom two tiers of the triangle are food and protection - our basic human needs. At the top of that triangle was a theory called self actualisation.

This self actualisation means, in a nutshell, that the person knows who he is and what he wants to do with his life. In other words, while he loves his family and has all his basic needs of food, protection, love and such fulfilled, he longs to establish himself as an individual who has meaning. This cannot happen in a cage. This requires air to breathe and space to soar. This is why he causes disruption in the eyes of the cage keeper.

This lack of understanding of basic human needs is a major concern that our society must acknowledge and families, particularly those who are in business together, must come to grips with. As humans, we strive for the ability to understand what we are and where we come from. If that drive is oppressed, then the idea of attaining self-worth will never happen and thus we fall back on to the idea of food and protection as our main drivers. Moreover, it becomes easy to accept the prison of a status quo and the permanent role in the family business, as it serves both needs.

In this situation, the family, which should be an individual’s protection, becomes his prison. If set free from this prison, who knows what he might accomplish? Kept in the prison, he will either disrupt or corrupt others.

To prune a tree is to allow it to grow stronger. Yes the pruned branches might die but they might be the mulch that allows other strong trees to grow from it.

Isn’t that appropriate, considering all families have a family tree?

Mishal Kanoo is deputy chairman of the Kanoo Group. gb@motivate.ae

As families grow in numbers, all members believe it is their right, not privilege, to be part of a family business.

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THE COMMENT MONEY

From THE BOTTOM, EVERYTHING looks UP Working out where we are in a business cycle is critical to making the most of any situation at any given moment.

PETER COOPER

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rying to work out where we are in the business cycle is seldom as easy as it later looks with the benefit of hindsight.

So it pays to have a little help from an expert like Dr Marc Faber. His book ‘Tomorrow’s Gold’ has a brilliant depiction of the stages of the emerging market business cycle, and it is easy enough to conclude that at the moment Dubai is stuck in the phase six or crash stage.

Beyond that painful period lies phases zero and one, and actually there are signs of the emirate now picking itself up off the floor with its debt restructuring plans but other symptoms are still not that encouraging.

Many of the symptoms of phase zero as characterised

by Dr Faber are apparent: tourism is improving after a big slump in room rates and occupancy last year; the stock market has been moving sideways for sometime and is very undervalued; very few foreign fund managers visit the city; press headlines are still very negative; credit is still tight because of the problems of the previous boom; investment interest is low after big profit falls in 2009; and there was a big outflow of capital last year.

This is all straight out of Dr Faber’s phase zero. It could be worse. There is no unemployment because perhaps 400,000 construction and real estate workers have gone home. And maybe for that reason the city is still safe.

Downtown hotels are struggling but coastal hotels are full.

For this to move on to phase one, or the start of a real recovery, then a ‘catalyst’ is required. This could be ‘a sharp rise in the price of an important commodity, the application of an important new innovation, a sudden rise in exports, or changes in tax and investment laws’ says Dr Faber.

He adds that other catalysts could be the undertaking of large-scale infrastructure projects that improve power supplies, road transportation and port facilities or the privatisation of entire industries.

In the context of Dubai the ‘catalyst’ for a recovery is currently missing. That is not to say that it will not come, perhaps in late 2010 or 2011 or later. Indeed, it is not hard to see what might happen.

Oil prices could boom again in a period of global

inflation as a result of the money printing to combat the recent financial crisis. High hydrocarbon prices would rapidly heat up business in Dubai as the regional trading and logistics hub.

Then again the UAE is presently reviewing its laws on foreign investment and that would help. So too would a move to unify the stock markets of the UAE into a single trading platform.

Privatisation or partial privatisation of the airline, ports, airports and power generation would attract an inflow of capital. Government debt could be repaid.

Then again infrastructure investments are ongoing and creating a more attractive and efficient urban environment for business in Dubai.

Thus the recovery prospects of Dubai are perhaps rather obvious and the city’s future outlook far from hopeless. But all of this will take time, even if – as seems to be the case – the government knows what it ought to be doing to sort things out.

Reading through another book ‘This Time is Different: Eight Centuries of Financial Folly’ by Carmen M. Reinhart and Kenneth S. Rogoff is a reminder that in the investment world mankind is doomed to repeat the mistakes of the past because situations that might be different this time seldom turn out that way. Dubai’s recent boom-to-bust is just another example.

Indeed, with 64 crises for data to draw upon, this message becomes a little wearying as the pages roll on.

You might think people would learn from this historical experience. Yet the constant repetition of this cycle suggests not. If so, then the analysis presented in ‘This Time is Different’ should be able to predict the aftermath of the present crisis.

The authors do posit several conclusions. First, real estate price corrections tend to take an average of six years, while equities bounce back within three. Secondly, all major financial crises are followed by substantial and persistent increases in unemployment. And thirdly, government debt always soars, more because of lost taxes than through stimulus spending. n Peter Cooper is the editor of arabianmoney.net

Thus the recovery prospects of Dubai are perhaps rather obvious and the city’s future outlook far from hopeless.

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THE COMMENT Markets 101

Mongolia: opportunities in the final frontier Still a byword for remote obscurity, the central Asian country is also the most promising emerging market in the world – for now, at least.

Michael Preiss

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ost investors know about Mongolia in the context of Genghis Khan, and the startling history of how one extraordinary man from a remote corner of the world created an empire that led the world into the modern age.

Today, Mongolia is a highly leveraged call option on the mining and China growth story and in 2010 it is the best “carry trade” in the world. China with over 1 billion people and GDP growth of +11.9 per cent is desperate for raw materials.

The Tavan Tolgoi mine is considered by geologists to be the world’s largest untapped coking coal deposit and Oyu Tolgoi is the world’s largest untapped gold-copper deposit.

According to various estimates, Mongolia’s economy could grow +30-35 per cent per year after the mines start operation. The local currency, the Mongolian Tugrik (MNT) is, according to Frontier Securities, forecasted to appreciated by about 10 per cent against the US dollar.

With one year rates at +15 per cent and inflation at +5 per cent, Mongolia has one of the highest real interest rates in the world. Mongolia today is predominately about mining and natural resources. But Jim Rogers, who travelled extensively in the country in 1999 when the Mongolian Stock Exchange was trading at 814, already called it then “Digital Mongolia”.

Today the MSE is trading at 10,300 and many local nomads have mobile phones, internet banking and stock trading accounts.

As the Bloomberg World Mining Index is trading close to its historic all time record high, Mongolia is the best performing Asian Stock Market and the second best performing stock market in the world year-to-date.

Mongolia’s mining sector amounts for 28 per cent of GDP and a number of industries like construction, retail and transport are also closely linked to the mining. Since the beginning of January 2010 the MSE (Mongolia Stock Exchange) Top 20 Index has surged 71 per cent.

Remember Dubai and the Dubai Financial Market (DFM) in April 2005? In the spring of that year, the Dubai market had risen about 70 per cent, only to close the year at 190 per cent and finish as the world’s best performing market in 2005.

Singapore’s Temasek and the China Investment

Corporation are scrambling to gain exposure to Mongolia while most other investors still seem to be unaware of the compelling macro economic growth story.

Like Dubai in early 2005, the time to make serious money was when you could easily get parking outside the DFM and not when the parking lot was full and everyone wanted to get in on the action, i.e. mid 2006 and just before a major correction.

Very often the reasons why the investment opportunity exists in the first place is because it is largely overlooked and under-researched and considered boring or too risky or too “exotic” by many.

HSBC as an institution has been in the UAE for over 60 years but funnily enough it did not provide access to local stocks to local nor international clients alike until late 2005.

At this time, the market had already surged 190 per cent and Emaar Properties, the darling of local UAE stock market, had surged from Dh3.80 in September 2004 to over Dh28 in September 2005.

Many Arab and local clients complained that HSBC only wanted to sell international stocks and global markets, when during these years, the real action was in GCC and Arab emerging stock markets. In November 2005, HSBC finally started to offer UAE and GCC local stocks to clients just as Emaar was trading at all time record highs of Dh28.

The real lesson here, however, is that whenever hardly any foreign major bank covers a market it is often time to buy.

Conversely when major international banks start to promote a country or investment theme in earnest and with lots of marketing and glossy brochures, it is often time to sell.

The good news is that there is no international foreign bank present in Mongolia yet. The $4.1 billion Oyu Tolgoi project is expected to produce 450,000 tonnes of copper per year and 330,000 ounces of gold per year when it reaches top productivity around 2018. By that time international banks most probably will have offices in Mongolia and maybe then it is time to sell. But for the next few years, Mongolia is one of the best global macro stories and earlier investors will be richly rewarded over the coming years.

Michael Preiss is an investment advisor and finance professor and can be reached at: Michael@michaelpreiss.net

Mongolia is a highly leveraged call option on the mining and China growth story and in 2010 it is the best “carry trade” in the world.

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THE COMMENT REAL ESTATE

SIGNS OF LIFE FOR DUBAI PROPERTY MARKET The Middle East real estate market block is opening up, driven by a drop in construction costs, legal clarity, and more realistic valuations by the end-users.

Yassan Dalal

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he Middle East real-estate market has undergone a large correction recently. Real estate is often more cyclical than other markets, being at the forefront of bubbles on the way up and crashing more severely on the way down. In more mature markets banks play a larger role in providing construction finance and in down turns, as each project is often individually structured from both a legal and financial standpoint (non-recourse loans), the developer hands the keys to the bank and then walks away, losing whatever equity was provided as well as some of their reputation.

The banks therefore provide the market clearing activity by actively finding new buyers by selling to recover against their loan, at a discount if needed or holding on until prices hopefully recover. In the case of Lehman Brothers, where A&M is managing the wind-down, the $20 billion of real estate assets have been split into good and bad, and in some cases A&M has advised the estate and obtained agreement from the court to invest to complete some projects to maximise recoveries. The Middle East market currently has only a few players with simple financial structures (although often with “name lending”) and relatively untested legal frameworks. Furthermore, both commercial and residential projects have often been financed by multiple endusers on differing payment plans rather than bank provided construction finance. This makes commercial projects unattractive to major international distressed investors, as they cannot handle negotiations with so many parties. In terms of residential space there is too much planned high-end or luxury space on offer based on unrealistic rental rates and end-users have stopped paying as per their payment plans.

Furthermore, governments have been driving the real estate market for their own political and developmental agendas as well as trying to derive income both from land sales and by being master developers. With the current credit pressure on sovereign and semi-sovereign entities this has added yet another layer of complexity.

However the impasse among stakeholders seems to be clearing. Construction costs have dropped by 20-40 per cent, the legal situation is clearer, and developers have started to

shift from avoiding any communication to be active. They are generally pursuing five strategies after they have done the detailed and dispassionate analysis required to assess the true viability of their existing projects and the cost to completion. Firstly, they are trying to consolidate end-users into their own existing viable projects or cancel contracts where possible. This is especially evident between Dubai and Abu Dhabi. Secondly, they are changing the design or use of a project mid-way through construction to make it more viable, which we have seen several times in Kuwait and Saudi Arabia. Thirdly, they have sometimes bought newly completed buildings or partnered with other developers to provide further options. This has often worked for end-users who have already made up front payments of between 25-40 per cent as the market prices per square foot are now 30-45 per cent less, so there is effectively still room for the developer to make some profit. In this case of course the end-user loses what they have already paid but can still obtain a property in a realistic timeframe at potentially a better price than they could achieve individually.

Fourthly, some developers are giving end-users refunds in the form of credit notes and then making a market in these, matching end-users that want to cash out with those that are willing to put in more cash. The market rate for these notes depends upon the quality of the developer and the viability of options available, but they are in the region of a 30-50 per cent discount on the face value. Lastly there remains the do-nothing avoidance of reality option.

Thus from a developer’s point of view it is key to have good visibility on your construction plans and costs and what your customers want and can afford. From an enduser’s perspective there must be a clear assessment of the appetite for more risk, how much more cash you are willing to spend and your realistic position versus the developer.

The Dubai World restructuring is a major factor that should also add clarity and a benchmark across the region. The combination of these factors has led to a more realistic view in the market, more transactions occurring and thus the market is starting to clear.

Yassan Dalal, partner at Alvarez and Marsal.

With the current credit pressure on sovereign and semi-sovereign entities this has added yet another layer of complexity.

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gulfbusiness.com May 2010

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THE COMMENT letters@gulfbusiness.com LETTER OF THE MONTH UPS AND DOWNS I enjoyed reading your report The comeback kid (Gulf Business, April 2010). It seems to me the fate, branding and marketability of the Gulf’s various ‘hubs’ is constantly in flux. And this article showed that. The place that was old fashioned or dull a few years ago - Manama - is now once again looking appealing.

Manama says it has always promoted transparency and good corporate governance – previous scandals notwithstanding.

And at the same time, the place that was the ‘must-have’ location for financial businesses – Dubai – is losing its shine.

The Dubai International Financial Centre was seriously rocked by a number of court cases – the Damas fraud and some of its own executives accused of misconduct – casting into doubt its credibility and security. But at the same time, as an avid business reader, I noted that other media outlets covered the BNP Paribas Economic Outlook panel upon which the article was based, in different ways. It was not all as positive. Some said that despite Bahrain’s attempt to now market itself as the better and more secure financial centre, it will never be able to compete with its cash-flush cousins who are hungry to build their knowledge economies and markets, so it really doesn’t have much of a hope. If not Dubai, then Qatar, or others. The moral of the story is – profit is anyone’s game. Nothing is sure.

The global and regional economies are still in the air and unsettled. And the crown of The Gulf’s Financial Hub is still unclaimed and open to contenders.

Tomas Veet, Doha

WAITING FOR WORD The story Locked in limbo (Gulf Business, April 2010) really touched some nerves for me. I live in one of the properties mentioned in the piece and know first-hand how frustrating the current strata law situation is. Property owners and their tenants are lost at sea right now. Everyone is waiting for some clarity. I heard that the actual Gulf Business article was distributed around by my neighbours when they saw it.

That kind of tells you how little we know about the problem and how we’re grasping at straws for some clarity. I hope you can continue to keep us posted on the strata law issue as it develops.

Many of us live in that limbo state you mention.

Heba Ali Mustafa, Dubai UNTAPPED MARKET I was happy to see your interview with Subroto Bagchi (Gulf Business, April

2010) but I still feel Gulf Business needs to broaden its horizons. There is a very large Indian business community here in the Gulf – indeed we are the biggest and oldest here – and I feel as if more coverage should be given to GCC-India ties. India is the world’s second most populated country. It is an emerging market. And it is a force to be reckoned with in the global economy. More reports on Indian business in your magazine should reflect that.

Samir Patel, Sharjah

Gulf Business welcomes your comments about the magazine or issues regarding business in the region. Please write to: The Editor, Gulf Business, Motivate Publishing, PO Box 2331, Dubai, UAE; Fax to + 971 4 2827593; or email to: letters@gulfbusiness.com. We reserve the right to edit correspondence.

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gulfbusiness.com May 2010

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THE BRIEFING THE REGION

30

Seconds to make sense of… all of life’s mysteries Andrew Meikle

Founder and managing partner of the Question Company

When did you launch?

We launched our SMS service that promises to answer any question you have on 4646 in the UAE on April 3, 2010.

When do you expect to break even?

We expect to breakeven final quarter of the year.

Why doesn’t Tarzan have a beard?

Edgar Rice Burroughs decided he wouldn’t be as attractive a character if he had a hairy face. It also would be to further iterate the distinction between him and the apes he was adopted by.

How many employees will you have?

Depending on how many messages come in, we will have as many employees necessary to try respond to each query in ten minutes or less.

How do you make money from this?

We make some from the customer, but primarily through advertising. The ability to have an advert featured within a specific category gives advertisers a direct one to one medium, promoting their brand to their target audience in a personal way.

Doesn’t this service ruin pub quizzes for clever people?

Definitely! Maybe we’ll start sponsoring pub quizzes and give out one “phone a friend - the Question Company” per game.

Who would win in a fight between Manny Pacquaio and Anderson Silva?

Manny was officially recognised by many as the fighter of the last decade. Even though he is almost eight inches shorter than “The Spider” he is three years younger than Anderson and with such an outstanding record of fights won, my money is on the little guy.

OFF THE CHARTS While much was made of European aviation the travel disruptions and industry related impacts of Iceland’s 344,109 tons Eyjafjallajoekull volcano eruption, this diagram gives another CO2 saved by 206,465 15,000 tons* perspective on the situation – 60% cancelled tons Volcano flights across the environmental impact.

Eyjafjallajoekull Europe Though it is certainly an oversimplification, website InformationIsBeautiful.net extrapolated figures gathered from the 1991 eruption of the Philippines’ Mt Pinatubo, and contrasted them with the estimated daily average CO2 emissions of the European aviation industry, in creating this diagram.

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gulfbusiness.com May 2010

[ INVESTMENT ]

Abu Dhabi’s Aabar scraps stake deal with Arabtec Dubai’s Arabtec Holding and Abu Dhabi’s Aabar Investments have scrapped a plan that would have given Aabar a 70 per cent stake in the UAE’s largest construction firm by market value.

“The parties have agreed that they will no longer pursue the original transaction and will terminate the acquisition documents, effective April 14,” Arabtec and Aabar said in two separate statements posted on the Dubai and Abu Dhabi bourses.

No reason was given for the cancellation of the deal, which was first announced in January.

“I don’t think the deal rationale was very convincing from Aabar’s perspective, however I wouldn’t be surprised if the market reacts favourably today,” Saud Masud, head of research and senior real estate analyst at UBS told the Wall Street Journal.

Arabtec said in January it had agreed to sell a 70 per cent stake worth $1.74 billion to Aabar, the largest shareholder in Daimler AG (DAI.XE).

Arabtec has been hit hard by a severe downturn in Dubai’s property market where prices have slumped close to 50 per cent and many projects are on hold. The construction firm is also one of Dubai World’s biggest trade creditors and at the end of last year it was owed more than $1.25 billion by the conglomerate and other UAE-based developers.

Arabtec reported its first ever quarterly loss at the end of 2009 after making provisions for “doubtful debts”.

The builder is increasingly diversifying away from dependence on contracts in Dubai and the United Arab Emirates where the building industry is under pressure. It recently set up units in Qatar and Saudi Arabia.

In March Arabtec chief financial officer Ziad Makhzoumi welcomed government plans to pump $9.5 billion into Dubai World, saying it removed some of the uncertainty surrounding the builder’s unpaid bills.

“Dubai’s move raised Arabtec’s bargaining power, the management realised this was no longer a good offer,” said Roy Cherry, a real estate analyst at Dubai-based investment bank Shuaa Capital. “Also Arabtec has had a strong 2010 start, the company has captured over 50 per cent of our expected full year backlog additions.”

The Arabtec and Aabar deal is the latest of a number of planned mergers that have been called off in the UAE.

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THE BRIEFING THE REGION n

n n n n

[ KUWAIT ]

US refuses Agility renewal Kuwaiti logistics and transport company Agility will not be given another contract with the US government, it has been announced, following ongoing court proceedings between the two sides.

Agility is under indictment in the US for allegedly overcharging the military on a food supply contract that ran from 2003 to this year.

The company was replaced as “prime vendor” of food to the US government in Iraq and Kuwait by another company on the contract.

Under the indictment, Agility was already barred from winning new US awards.

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[ SAUDI ARABIA ]

Inflation up 0.5% in Q1

Inflation in Saudi Arabia rose 0.5 per cent in the first quarter compared to the previous period, which is far below the central bank’s estimates, the state’s statistics authority has revealed.

This is below the 1.5 per cent the Saudi Arabian Monetary Agency fixed in February as a maximum quarter-to-quarter growth projection for the cost of living index.

[ BAHRAIN ]

New port nets big fish International container shipping line giant APL has been signed on to service Bahrain’s new

deepwater port.

“APL operating from Bahrain is a good, good sign,” said Hassan Al Majid, the director general of Bahrain’s General Organisation of Sea Ports. “It shows we are competing with regard to transshipment.”

Khalifa Bin Salman Port is aiming to replicate the success of major transshipment centres such as Dubai’s Jebel Ali, which serves large oceangoing vessels, unloading containers and reloading them on to smaller craft to serve regional ports.

[ UAE ]

Mubadala shrinks Mina Zayed The strategic investment arm of Abu Dhabi Mubadala Development has downsized its Mina Zayed project in a new design.

John Thomas, the executive director of Mubadala Real Estate and Hospitality, told local media that the company was replacing plans for a 17,000-seat arena and other large structures with lowrise buildings, restaurants and residential apartments.

“We believe that part of the project should be more active and walkable,” Thomas said. “The project is a bit more human scale now.”

[ QATAR ]

Gas shipment

by November Qatargas train six will have its first LNG cargo loaded by November, while the first shipment of train seven could be possible by the year end.

Ahmed Al Klulaifi, commercial and shipping chief operating officer Qatargas, told news wires that: ”We are in the process of starting up train six at Qatargas 3 and at later stage we will start up train seven of Qatargas 4.’’ ”Hopefully the train six will be producing this year, maybe the first cargo is in October or November, maybe two-three months after we will see the first cargo from train seven.‘‘

[ OMAN ]

Amnesty for illegal workers An amnesty period has been extended for illegal foreigners in Oman. The Omani government is allowing undocumented workers to apply for amnesty and be deported without paying penalties for overstaying and fines for working without proper documents. The workers will, however, have to pay for the costs of their one-way ticket to their countries of origin.

May 2010 gulfbusiness.com

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THE BRIEFING THE REGION [ TELECOM ]

[ AVIATION ]

$272m to fund du infrastructure

Airlines lost more than $1.7bn to ash cloud

The UAE’s second telecoms entrant du is seeking a $272.3 million rights issue to fund its mobile and broadband infrastructure plans.

The operator will be holding an extraordinary general meeting on May 11 for its shareholders to approve the rights issue.

Mortgage rates have been slashed in Abu Dhabi to 5.75 per cent as part of an effort to spark a price war among mortgage.

Abu Dhabi Finance says it has seen “huge demand” since advertising its rate, which has been reduced from 8.5 per cent.

“We really hope we can stimulate real estate markets,” Ali Eid al Mehairi, the firm’s chairman told local media.

Airlines around the world lost some $1.7 billion in revenue to cancelled flights caused by a volcanic ash cloud above Europe, while one Gulf airline alone may have lost $70 million to the week-long crisis. ”For an industry that lost $9.4 billion last year and was forecast to lose a further $2.8 billion in 2010, this crisis is devastating,” International Aviation and Transport Authority (IATA) director general and chief executive Giovanni Bisignani said in a statement, adding that it will likely take the airline industry at least three years to recover from the crisis.

Most of Europe’s airspace closed on April 15 after a huge ash cloud from an Icelandic volcano spread out, stranding millions of passengers and paralysing air travel worldwide.

On the three days from April 17 to April 19, when

[ VISA ]

[ DEVELOPMENT ]

[ REAL ESTATE ]

Abu Dhabi cuts mortgage rate

Qatar delays visa rule The widely-criticised plans to scrap Qatari visa-onarrivals for the nationals of 33 countries has been delayed, it has been learnt.

Under the regulations, the nationals of 33 countries, including the US, UK and expat residents of the GCC, would have to apply for a visa prior to arrival in Qatar. But media reported the move had been delayed after Qatar’s Foreign Ministry received requests from some countries to continue with the old system and allow time before the new entry visa rules are enforced.

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the air traffic disruptions were the biggest, lost revenues reached $400 million per day, IATA said.

At its worst, the crisis affected 29 per cent of global aviation and 1.2 million passengers a day.

Ten of thousands of passengers found themselves stranded in the Gulf’s aviation hubs.

Emirates, the UAE’s megacarrier, had said it was losing $10 million a day in lost flight revenue, and has had to pay $1 million a day to put up stranded passengers.

National flagship Etihad

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Airlines said it too was hosting thousands of passengers, though it declined to comment on the cost of the ash cloud’s flight cancellations. Qatar Airways, Oman Air and Gulf Air have also had many dozens of flight cancellations. Budget carrier Air Arabia said it would be difficult for any airline to quantify its losses today.

“Any financial impact estimations right now are just a finger in the air,” Adel Ali, chief executive officer of Air Arabia told local media.

$364bn of UAE construction projects on hold, cancelled The UAE has seen some 842 construction projects worth over $350 billion be put on hold as a result of the economic slowdown, while another 111 worth $14 billion have been cancelled completely, it has been disclosed.

Research company Proleads also said some 1,300 projects were in the works and an additional 303 projects worth $143 billion were in the design, planning and or bidding stage.

The total state of the UAE civil construction market included a total of 2,552 projects with a combined

total budget value of almost $930 billion, Proleads added.

“The construction boom has slowed down in the UAE as it has elsewhere but there is still 1,600 projects worth over $560 billion either in execution or about to start construction in a more sustainable approach to development,” said Graham Wood, group director of CityBuild Abu Dhabi organiser IIR Middle East.

The Proleads investigation considered projects with a budget value greater than $10 million and divided the market into

five sectors - commercial, retail, hospitality, residential, and healthcare and education sectors.

In a sector breakdown, Proleads said the total commercial sector consisted of 462 projects valued at $253 billion.

Although a large proportion of projects were in execution, many have been placed on hold or even cancelled since the fourth quarter of 2008, the research house added.

New project construction starts have also slowed, while those completing are increasing, the report said.

THE BRIEFING THE REGION [ TELECOM ]

[ ENTERTAINMENT ]

An agreement has been signed between Orascom Telecom and France Telecom, ending a long legal dispute over the Egyptian Company for Mobile Services (ECMS), in which they are joint shareholders.

The agreement, brokered by the Egyptian ministry of communications and IT, will not change the ownership or management of ECMS, the parent company of Mobinil Telecom. The settlement ends a three-year dispute.

The first multi-lingual feature film written, produced and directed in the United Arab Emirates premiered in cinemas on April 22. After more than a year in the making, AFM Films and Filmworks released their feature film City of Life. Filmed entirely on location in the UAE, City of Life follows the lives and fortunes of three central characters living and working in Dubai. More than 200 cast and crew were involved

[ MEDIA ]

[ INVESTMENT ]

Yahoo’s Middle East unit has snagged the head of the BBC Arabic Hosam El Sokkari, who has resigned from the British broadcast giant to take on the new role.

El Sokkari is an Egyptian journalist and broadcaster and was the first Arab to lead the BBC Arabic service since its launch in 1938.

He will take a leadership position at the Middle East unit of Yahoo.

The Abu Dhabi government’s investment arm Mubadala Development Company has set terms for a $2 billion revolving credit facility it is renewing with a bank consortium, with the new deal involving about 20 lenders, it has been disclosed. ”We’ve set the terms, it’s [finalisation is] imminently due. We’re almost twice oversubscribed,” Carlos Obaid, Mubadala chief financial officer said. The

[ BANKING ]

[ ECONOMY ]

Dutch government-owned financial institution, ABN Amro Private Bank has centralised its Middle East operations with the opening of its Dubai International Financial Centre (DIFC) headquarters. The bank’s Lebanon, Bahrain, Morocco and other UAE operations will now be run out of the facility. ABN officially split from the Royal Bank of Scotland Group last month.

Business leaders in Saudi Arabia are confident of the Kingdom’s economic recovery, with most executives noting an improvement in the lending attitude of banks, according to Banque Saudi Fransi’s second-quarter Business Confidence Index.

The index drew on the perspectives of 781 company executives in various sectors and recorded a rise in the index

Orascom/France Telecom truce

Maktoob makes BBC hire

ABN Amro consolidates

Film about life in Dubai released

in the film, which has achieved the landmark of being the country’s first feature film to achieve a theatrical release.

The film was written,

produced and directed by Ali F. Mostafa, an awardwinning Emirati filmmaker whose previous works include Under the Sun. The cast includes British actors Jason Flemyng and Natalie Dormer, renowned comedian Ahmed Ahmed, UAE national Saoud Al Kaabi, Indian TV presenter, Jaaved Jaaferi, new-wave Bollywood actor Sonu Sood, Canadian/Iraqi hip hop performer Yassin Aslaman and Romanian/German actor Alexandra Maria Lara.

Mubadala sets terms for $2bn revolving credit facility existing $2 billion loan is priced 17.5 basis points over London interbank offered rate, or Libor.

About 20 banks have signed up for the new loan, which Mubadala expects to sign and conclude within the next few days. The new facility totals $2.5 billion, including a $500 million euro-commercial paper, or ECP, backstop facility, Obaid said.

Mubadala earlier this year set up an ECP programme

to diversify its funding sources. The programme is rated ”Prime-1” by Moody’s Investors Service.

Mubadala, which invests strategically on behalf of Abu Dhabi in a range of sectors, had its long-term credit rating cut in March

by Moody’s Investors Service to ”Aa3” from ”Aa2”. Obaid said at the time that the ratings cut wouldn’t have any major impact on the company’s financing strategy.

Saudi business confidence up

to 100.7 from 99.4 in the first quarter of 2010.

The report on the index said that the majority of business executives see lending attitude of banks improving, a big shift from the Q1 survey, although most note that loan approval requirements are more stringent. Saudi executives are eyeing higher sales and the vast majority of businesses expect revenues to grow, although

almost half still expect inventories and production capacity to stay steady or fall. More than 60 per cent of companies are planning to hire new employees, the report found.

May 2010 gulfbusiness.com

27

THE BRIEFING THE REGION [ INVESTMENT ]

ADIA appoints Sheikh Hamed

Sheikh Hamed bin Zayed Al Nahyan has been selected as the new managing director of the Abu Dhabi Investment Authority following the death of his brother, Sheikh Ahmed bin Zayed, in a glider accident.

In his own right, Sheikh Hamdan has helped guide Abu Dhabi’s economic development during the past decade and oversaw some of the emirate’s first privatisations. One of Sheikh Hamed’s first positions was as the chairman of the Abu Dhabi Department of Planning and Economic Development in 2001 before rising to become the head of the Court of the Crown Prince in 2006.

“From an objective perspective, they couldn’t have found a better strategic thinker,” said Karim Souaid, who is now the managing director of GrowthGate Capital, who worked with Sheikh Hamed on the privatisations of Agthia and Arkan.

Souaid described Sheikh Hamed as a patient man who takes advice from associates and monitors the progress of projects and investments closely.

Sheikh Hamed is the chairman of General Holding Corporation.

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gulfbusiness.com May 2010

[ TELECOM ]

Zain’s African sales challenged Government officials and shareholders of several of the African units that Kuwaiti teleco Zain has sold to Bharti Airtel have disputed the sale, which could force the buyer to forgo ownership rights in the subsidiaries.

On March 30, Zain signed a binding agreement with Bharti Airtel of India to acquire 15 mobile operators in Africa for $9 billion, along with $1.7 billion of debt.

The deal is pending regulatory approvals from the authorities in various African markets.

Thierry Moungalla, the telecoms minister for the Republic of Congo, has said the sale of Zain Congo

was illegal and he would not approve the deal under current conditions.

Moungalla said his government had not been informed of the transfer of the mobile operator and cited an article in the country’s telecoms regulation in which an operator in breach of the law may be fined and have its licence suspended or terminated.

“The Congolese government does not object to the rules of the game of business,” he said. “Someone wants to sell, he is entitled to sell; someone wants to buy it, right to buy. But we are in a particular sector.”

Zain’s Congo subsidiary

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is the fourth-largest mobile operator in the country with 1.5 million subscribers.

There is also a legal dispute with Econet Wireless Holdings, a South African-based telecommunications firm that owns a 5 per cent stake in Zain Nigeria. Econet says it has the right of first refusal to buy the operator if it is up for sale.

[ BANKING]

Emirates NBD receives UK accreditation The Emirates National Bank of Dubai recently received international recognition for its quality management systems, receiving the British Standards Institution’s (BSi) ISO 9001 certification.

The ISO 9001 standard is not specific to the financial industry, relating to quality management, irrespective of industry sector.

While the term ‘quality management’ seems quite arbitrary, defining exactly what ‘quality’ means for Emirates NBD, or whichever organisation is applying for certification, is part of the criteria.

Abdulla Qassem, group chief operating officer of Emirates NBD, explained: “We had to define our service level agreements with our business, we have to respond to any problems

within set timeframes, categorise incidence reports and set how we will react.

We also have to go through our business continuity plans, our disaster recovery, and have to do routine testing of these.”

“In fact, every quarter we run for around two weeks on our back up disaster plan. To reach certification, you have to have that kind of testing,” said Qassem.

When asked whether attaining the ISO 9001 certification was tied

to the greater need for regional banks to partner with foreign institutions, Qassem agreed.

“Absolutely, it improves our credibility in terms of the whole organisation’s ranking. It improves our accountability, and also it improves our efficiencies.

With these processes that we have to define, we have [by necessity] already taken away many unnecessary or wasteful processes– we have streamlined [our IT processes]”.

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the briefing OIL

Greasing the wheels Oil yet again faces an uncertain price future, and ANDREW TAYLOR looks at the cases for peaks and troughs in the Gulf’s biggest export.

I

t is always nice to get an unexpected gift and the news about oil prices over the last few months has been a welcome boost for the oil industry and for the budgets of the oil-producing countries alike. At the beginning of April, prices were nudging up against record levels, and commentators seemed to be competing in their predictions of future rises.

Oil would hit $100 a barrel by the summer, declared analysts in the United States. The famous economist and oil pundit Jeff Rubin went further and said the world should be looking at around $150 a barrel by the end of next year. Oman’s predicted budget deficit for 2010 could be wiped out by the sharp increase in prices, said ministers in Muscat; senior officials in Qatar, who saw a shortfall in their oil income last year, were gleefully predicting a surplus this time of around $2.75 billion.

Even in the oil-importing countries of the west, where motorists get grumpy whenever petrol pump prices go up, and politicians are nervous about oil price rises when there’s an election around the corner, there were plenty of people prepared to point to the silver lining of this particular cloud. Strong oil prices showed the world was fighting its way out of recession, they said.

The optimistic view was that this was not just a sudden and unsustainable price spike. Prices on world markets, after all, had been rising steadily since February, when they stood at just over $70 a barrel, and the current level of $85 was just one step on the way to still higher prices in the summer. After that, the sky was the limit again: the good times were ready to roll.

Well yes, up to a point. In the last quarter of 2009, the figures show that

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gulfbusiness.com May 2010

global oil demand returned to yearon-year growth, after five straight quarters of decline. This was partly due to the cold winter, partly to a general if fragile economic recovery in the industrialised nations – but whatever the cause, many forecasters suggested that demand could be back to the levels of 2007, before the impact of the international financial crisis, well before the end of this year.

No one likes to spoil a party but if prices were particularly strong around the beginning of April, it’s as well to remember that April 1 is popularly known as All Fools’ Day. And behind all the optimism is a sober realisation among many leading commentators that the high prices can’t last.

Tom Kloza, of the Oil Price Information Service, was quoted as saying that traders who were bidding the price up were over-reacting to the information they were receiving, and at Oppenheimer and Co in New York, energy analyst Fadel Gheil

The same speculators that pushed prices up in mid-2008 will keep pushing the envelope until they reach a point at which they all jump. was putting much of the price rise down to financial gamblers. “Demand will never return to 2007 levels. The market is being driven by financial players. The same speculators that pushed prices up in mid-2008 will keep pushing the envelope until they reach a point at which they all jump.”

And in London, Dr Manouchehr Takin, of the Centre for Global Energy Studies, also sounded a note of caution. “I don’t believe that the fundamentals support these high prices. Prices in the mid-eighties

are not sustainable throughout this year,” he said. Gheil suggested that the “real” oil price, once the froth and speculation are stripped out of the market, should be as low as $60 a barrel, rather than the mid 1980s; Takin put it at between $70 and $75.

But what they both agreed on is that there are no long-term increases in the pipeline.

So if that’s true, what has caused the current price bonanza for the oil producers? Gheil’s speculators have certainly played a part, and

THE BRIEFING OIL

better-than-expected unemployment figures in the US, among other positive statistics, have encouraged an optimistic view of the future. There has been record demand for oil from China, more than making up for the still sluggish economies in the west.

But many analysts believe that the Chinese figures could prove to be just a short-term surge in consumption, caused by the drive to build strategic reserves and fill up storage capacity in the new refineries that are coming on stream. In that case, recent high levels of demand are not likely to be sustained.

And employment figures, whether in the US or elsewhere, are a famously unreliable predictor of medium- to long-term economic performance.

Yes, there were other positive

statistics in the US as well, showing sales of houses going up and service industries enjoying a sudden rush of business – but for every economist predicting steady progress towards sustainable growth for the global economy, there are at least two more still warning about the possibility of a double-dip recession, or at best a long, slow and painful recovery.

Either of those scenarios would cut demand for oil and put downward pressure on prices.

And on the other side of the equation, the days of tight OPEC control of oil supply are long gone.

Production from the non-OPEC states increased through 2009, with large projects starting up in Russia, the Gulf of Mexico, and Brazil, where the current production of a few hundred

thousand barrels per day (bpd) is expected to increase to several million bpd within the next five years. Even today, before this growth in supply, world oil production is around 2 million barrels a day above the OPEC ceiling.

So the oil is flowing plentifully and at the same time, there are record stocks in oil-importing countries.

While most economists still believe that OPEC’s discipline should be strong enough to prevent prices from falling rapidly, there are no serious supply-side constraints in prospect to fuel significant price rises. The realities of supply and demand will not go away and there is precious little to suggest that they will be pushing oil prices up indefinitely.

So what does all this mean for the Gulf governments looking to an oil price boom to keep their budgets in the black? Firstly, that though they may strike lucky this year, they should not bank on the oil price continuing to bail them out. “For the oil exporters, there will obviously be good revenue in the short term,” says CGES’s Dr Takin. “But either this year or next year, they will start to see the investment in alternative sources of energy in the importing countries having an effect. And at the same time, the investments of the oil producers outside OPEC will start to increase global supply and put pressure on prices as well.

There will be oil substitution and OPEC substitution.”

The second message is that they should not slacken their efforts to develop other sectors of their economies apart from oil production.

“The crucial thing is that they should diversify, says Takin. “They shouldn’t believe that the oil revenues will continue at their present levels.”

And the third message, which should go not just to the oil producers of the Gulf, but to the industrialised nations of the west as well, is that they shouldn’t believe that they can forget the recession. High oil prices in April don’t mean that any recovery is necessarily going to last through the year. n gb@motivate.ae May 2010 gulfbusiness.com

31

THE BRIEFING Comesa

Bridging the Gulf to Africa With investment and know-how on one side of the Red Sea and raw materials and manpower on the other, there is great unrealised potential for Gulf-African trade, ZARINA KHAN reports.

A

stronger framework needs to be built to connect African businesses with Gulf-based investors, as the current economic and political situation is ripe for mutually-beneficial cooperation, insiders say.

“In the Gulf we have a lot of demand for raw materials that could be tapped

by Africa. The Gulf Cooperation Council members have less industries and lack raw materials. We are always being taken advantage of then in the global economy because of this shortfall. Should a certain investment framework be established whereby raw materials be extracted from Africa at a good competitive rate, Africa and the GCC would be mutually benefited,” said Hisham Al Shirawi, vice chairman of the Dubai Chambers of Commerce and Industry.

Al Shirawi was speaking on the sidelines of the 3rd Common Market for Eastern and Southern Africa (Comesa) Investment Forum held in Egypt in mid April. The forum lead discussions on African sectors of infrastructure, agriculture, financial services, tourism and energy and saw participation from Middle East and African businesspeople and officials, including a some Gulf-based investors looking to the potentially high return projects in developing Africa.

“There are many attractive sectors and potential areas of cooperation, like energy. Agriculture is another area that attracts us and its appeal goes without saying. On a government level, should African states offer a formula of investment that is balanced – I don’t think we’ll be shying away from investment there,” Al Shirawi said of the obstacles to investment in Africa.

“As far as Africa’s own development ambitions, right now, even if Comesa members up their production of goods to where they want it, they don’t have the storage facilities, transportation,

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gulfbusiness.com May 2010

networks, etc, to successfully market those products. Why don’t we have a marriage of convenience to help each other?” the Dubai businessman added.

The forum saw a small number of such ‘marriages’ taking place, ranging from the large – with Abu Dhabi holding talks with the Egyptian government to fund a solar power plant on the Red Sea coast – to the smaller scale.

“We were visited by a Dubai-based investment consultant working on behalf of various investors in the Gulf. We will be submitting a detailed feasibility study and business plan in the next few weeks to this consultant,” revealed Dawit Michael Gebre-ab,

with consistent rules and regulations is what investors are looking for.” the Djibouti-based developer added.

African businesses say they’ve felt the pinch of the global recession from the reduced interest of Gulf partners, with even April’s Comesa event being sparse on the ground when it came to GCC participation. But they are hopeful the gradual economic recovery underway in their well-moneyed neighbours’ economies, paired with African political will, may soon bring back crucial cooperation.

Sindiso Ngwenya, secretary general of Comesa, lashed out at critics of foreign investment in Africa, arguing that

Should African states offer a formula of investment that is balanced – I don’t think we’ll be shying away from investment there. managing director of the Greenwich Properties. Greenwich was seeking partners for its real estate project Ouba-Ville, in Djibouti.

Gebre-ab admitted, however, that there have been challenges to attracting Gulf investors posed by the global economic situation and the continent’s own issues.

“African countries must take this opportunity to create investor friendly environment. Transport and communication infrastructure must be improved to cater for investors. A transparent, accountable governance

today’s business agreements were a far cry from the exploitative arrangements of the continent’s colonial past.

“There is concern that Africa is experiencing new neo-colonialism from Gulf investors and that their only interest is in exploiting Africa’s natural resources. For the first time, these countries are receiving significant investment and help with infrastructure.

This is a win-win partnership,” he said in his opening speech at the conference.

Dubai will be hosting the fourth round of the Comesa forum next year. zarina@motivate.ae

THE BRIEFING EMPLOYMENT SHIFTS

Queuing for Qatar As Qatar’s economy continues to thrive, foreign recruitment firms are recognising the opportunities this represents and shifting shop to Doha, GLENN FREEMAN reports.

W

hile neighbours like Dubai come to terms with predicted population contractions, Qatar is seeing growth on the back of its resilient economy.

With gross domestic product growth in 2010 estimated at 19.5 per cent, Doha is one of the few bright spots in a still damped global economy, and is drawing optimistic job seekers and placement firms alike, scares over visa restrictions not withstanding.

One international recruiter to spot the opportunities in Qatar is multinational executive search firm Kinsey Allen International (KAI), which has made moves to establish a Doha office.

According to James Bridgman, managing director of Kinsey Allen’s new Middle East operations, the financial services-focused business has enjoyed significant growth in Qatar. “Our Qatar operation has more than doubled in revenue over the past 18 months, to the extent that we can no longer function as a satellite operation of one of our other offices.”

The number of mandates Kinsey Allen has taken for Doha-based financial services organisations has increased by more than 15 per cent per quarter over the last two years.

“The number of people working in the financial services sector in Qatar has increased by an average of 35 per cent year on year over the last four years,” said Bridgman.

He believes the trend is set to continue in 2010, with the number of people employed in this sector expected to grow over 7 per cent each quarter. “This wave of job creation is being driven by the overall strength of the economy and the foreign money flooding into Qatar,” Bridgman said.

Recruitment firms that were already established in Qatar are also ramping up operations. UK-based outfit Reed Specialist Recruitment first opened

an office in Qatar three years ago and Steve Williams, regional manager for the Middle East and North Africa, said business is booming. “We have seen an increase of 25 per cent in the jobs released to us in the last quarter, and a 33 per cent [increase] from the previous quarter.” In response, they are expanding operations in Qatar and in the region generally. “We are increasing headcount to support the demand. We had a strong footprint already, so were able to absorb much of that, but yes, we are expanding.”

The biggest growth areas have been the financial services and construction sectors, having both rebounded from a slump in 2009. “There has been a good recovery since the new calendar year,” said Williams.

construction people to Qatar on lower packages,” he said.

Though he warns that this shift may be somewhat short-lived, with signs of recovery in Dubai prompting some candidates to again look for opportunities opening up across the Gulf. “It looks like [employers] will pay the price for this in 2010, as the market recovers in Dubai and the projects being released in the rest of the UAE increase,” said Williams, while conceding that, for the time being, it is too early to see much evidence of this.

In trying to stave off a new exodus of candidates from Qatar back to Dubai, Reed is advising many employers to reassess their remuneration structures, with

We are increasing headcount to support the demand. We had a strong footprint already, so were able to absorb much of that, but yes, we are expanding.

It seems that the downturn, which particularly impacted the flashier emirate of Dubai and left a significant portion of the workforce jobless, in some ways worked in favour of Qatar.

According to Williams, many companies with operations in Qatar were drawing candidates away from the UAE. “In the past, there has been trouble competing with the attractions of Dubai and the high salaries. Last year, many companies [in Qatar] took advantage of being able to attract

financial incentives being the primary motivator for most of the expatriate workforce. “Qatari employers need to look at their reward and remuneration of expatriate workers, such as project completion bonuses and long-term incentive plans. Because if the Dubai market picks up and employers are paying, say, 50 percent more, then of course, I’d expect candidates to go,” said Williams. n gb@motivate.ae May 2010 gulfbusiness.com

33

THE BRIEFING IMPORT EXPORTS

Unaccustomed change The newly launched second generation of Dubai Customs electronic registration system, Mirsal 2, has a lot to live up to, GLENN FREEMAN reports.

D

ubai Customs, which processes billions of dollars in air, sea and land-based freight each year and administers one of the world’s busiest cargo hubs, has rolled out the second phase of its automated declaration system, Mirsal 2. This makes Dubai Customs the first of the emirate’s government departments to implement a fully electronic system, in line with Dubai’s 2015 strategic plan.

Improving security standards was among the key reasons for the major upgrade from the existing Mirsal system, which was first implemented in 1995 and has undergone changes since then. Mirsal 2 brings Dubai in line with World Customs Organisation (WCO) requirements relating to enforcement, compliance and anti-piracy measures.

Speaking at the launch of the new system, Ahmed Butti Ahmed, Dubai Customs director general and executive chairman of the Ports, Customs and Free Zone Corporation, emphasised its security credentials.

“What is unique about the system is the fact that its risk assessment engine links the department with local, regional and international organisations and entities, which provide information to the database,” he said.

“This system is developed to conform with world’s best practice, including the requirements of the WCO,” Ahmed said, adding that it enables the ‘electronic signing’ of transactions using digital signatures.

Mirsal 2 was developed over a three year period, with Dubai Customs, working in collaboration with a number of stakeholders who import, export and transfer goods via Dubai. Comprising a range of customs services including risk management, registration, licensing and e-payment, it electronically links Dubai Customs into other government administrations.

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gulfbusiness.com May 2010

According to Dubai Customs, lodging of documents, which in the past would often take hours or days, can now be completed in a matter of minutes using Mirsal 2. Users can electronically pre-declare goods before they arrive in Dubai, eliminating the

transporters carrying smaller cargoes can now be processed more quickly than those with bigger payloads.

Dubai Customs claims that, for clients, the need for paperwork has been reduced and in many cases eliminated, drastically cutting processing times and enabling roundthe-clock clearance procedures.

However, according to local media reports in the weeks following the introduction of Mirsal 2, there have been some early teething problems.

Many importers of second-hand cars, operating out of the Dubai Cars and Automotive Zone (Ducamz), have complained the new system requires more information than they have readily available. Under the original Mirsal system, automotive traders were required to answer six questions for sales transactions to take place.

Mirsal 2 requires responses to between 25 and 40 questions.

With the automotive sector being one of the industries most commonly associated with large-scale theft and rebirthing, it seems the additional security measures have thrown up some roadblocks. However, this is not

This system is developed to conform with world’s best practice, including the requirements of the WCO. need to manually present paperwork at a customs centre on arrival.

The new system is intended to provide faster processing of freight transported through Dubai, which accounts for around 75 per cent of all UAE cargo. For shipping companies, one of the major benefits is that the new system differentiates between container sizes. In the past, all were subject to the same processing times and manual procedures. Using the paperless system of Mirsal 2,

entirely unexpected, given the broad scope of Mirsal 2, which is undergoing refinements and adjustments on an ongoing basis.

There are currently around 105,000 registered clients at Dubai Customs, including freight forwarders, shipping companies, importers and exporters.

Among these are groups such as Al Tayer Logistics, Aramax and a raft of other large, highly capitalised companies of the region. gb@motivate.ae

THE BRIEFING REAL ESTATE

Stand and deliver Real estate shows are no longer fancy project launch galas, with even Cityscape this year focusing on delivery of older promises, HUGO BERGER reports.

I

n past years, Abu Dhabi’s Cityscape real estate exhibition has seen huge queues of investors surging to get in to the place developers used to launch lavish and ambitious projects.

This year – like last - there was a more restrained feel to the threeday show at the Abu Dhabi National Exhibition Centre (ADNEC).

Although far from being empty, there were clearly less visitors than in previous years - volcanic ash cloud flight cancellations not withstanding.

The world financial crisis and lack of liquidity in the UAE’s banks for investors is still taking its toll, it seems.

Which is probably why the emphasis on this year’s Cityscape was on delivery of existing projects, rather than launching new ones – though some were debuted.

Sorouh used Cityscape to announce the Watani project - a $1.47 billion deal with the Abu Dhabi Urban Planning Council (UPC) to develop 1,370 homes for Emiratis.

Gurjit Singh, CEO of Sorouh, told Gulf Business: “Maybe visitor numbers may seem a bit down, but I think this year we are seeing a more discerning crowd coming in. But this is good, as we want our potential investors to ask the right questions.

“The market has matured a lot over the last 18 months. The people who are coming to Cityscape now are not the general speculators just after making a fast buck. The people here are asking hard questions and they are more discerning before they invest. For reputable investors like us, we are able to answer these questions.”

Despite launching its huge project, Singh said there were still major issues affecting the real estate industry in Abu Dhabi.

Singh explained: “Finance is still a very important issue. A lot of investors

are still interested in Abu Dhabi, but for them to qualify for financing is still quite tough.

“Financial institutions and reputable developers - those with a track record of delivering - need a closer dialogue with each other to help each other out.”

Noaf Tahlak, the spokeswoman for Tourism Development and Investment Company (TDIC), the investment arm of the government-owned Abu Dhabi Tourism Authority (ADTA), also was positive about the Abu Dhabi market.

She said the company’s 55 projects, which are worth more than $37.7

“We want to see our colleagues in the banking sector to, if not match our rate, have similar rates and introduce more competitive products.

“Interest rates need to come down to near six per cent, which will help the whole real estate market.”

With 10,000 housing units due to come online in 2010, Al Mehairi insisted readily available and low cost mortgages were essential to the viability of Abu Dhabi’s growth.

He said: “Liquidity is a problem.

Once the developers deliver their projects, which is happening in Abu

The people who are coming to Cityscape now are not the general speculators just after making a fast buck. billion in total and include the Guggenheim and Louvre museums, were all on schedule.

She said: “Obviously the financial crisis has had an effect in Abu Dhabi.

But we are now confident the worst is over and Abu Dhabi is in a good position to grow.”

Ali Eid Al Mehairi, chairman of the government-owned company, told Gulf Business he hoped that the move would lead to other mortgage providers cutting their rates.

He said: “We don’t want to create a price war, but we are very well aware that we cannot handle the whole of the Abu Dhabi market by ourselves.

Dhabi, I think there will be more confidence from the banks. Then I think liquidity will increase.

“So delivery of projects is the most important factor in our industry at the moment.”

A report released on the sidelines of the conference said that some 15,000 new property units are expected to be ready for delivery in Abu Dhabi this year, which analysts say will push down the sales price and rentals in the capital and Dubai.

Landmark Advisory’s report forecasts rents will fall a further 20 per cent in the two emirates by the end of the year. n gb@motivate.ae May 2010 gulfbusiness.com

35

Outstanding

Qatar National Bank – Quarterly Results Since the establishment of Qatar National Bank (QNB) in 1964, it has become one of the largest and fastest growing financial institutions in the MENA region, with a presence in 22 countries around the world.

QNB has affirmed its leading position by achieving an impressive 25.3% year on year net profit increase for the first quarter of 2010 to QR 1.27 billion.The exceptional quarterly results clearly reflect the Bank's financial strength and outstanding performance.

If you are looking for sustained growth and stability, make QNB your preferred financial partner.

THE BUSINESS GCC Top 50 Banks

Bottomed out?

After a very difficult 2008 and equally painful 2009, it would seem the worst of the banking slump has passed and 2010 should offer a slight recovery, DARREN STUBING reports.

2009

proved to be another difficult year for the Gulf Cooperation Council (GCC) banking sector with the aftermath from the global financial crisis still heavily impacting income lines and balance sheets.

Banking profitability in the region was once again weaker, mainly due to much higher provisioning charges connected to loan assets as well as securities, investments and real estate assets. Loan credit defaults continued to rise due to both corporate and retail exposures whereas asset values for some banks

had to continue to be written down, particularly those linked to the property sector. The latter was again under pressure in 2009, as demand remained extremely weak and many prominent developments remained on hold. In a circular connection, companies could not continue their development activities as many were not able to renew existing facilities or obtain new credit as banks reined in their exposures.

Generally, the economies of the GCC states remained robust, with the price of oil improving from the sharp falls in

the previous year, and the oil price was at a high average level for 2009. This helped to support government and business positions during the year.

For the second consecutive year, net profit for the top 50 GCC banks fell in 2009. The Gulf’s largest banks recorded a fall of 12.5 per cent last year, although the fall was lower than the significant decrease of 26 per cent in aggregated net profit in 2008. Once again, very large losses were notable at a handful of banks, including Gulf Finance House and Ithmaar Bank, as well sharp falls May 2010 gulfbusiness.com

37

THE BUSINESS GCC Top 50 Banks

at a number of banks, including Commercial Bank of Kuwait, Bank Al Jazira, Saudi Hollandi Bank and Abu Dhabi Islamic Bank. Kuwait’s Gulf Bank recorded another loss in 2009 but was much lower than the huge loss seen in 2008, which was due to derivative positions.

Overall, well over one-half of the banks saw a fall in net profit in 2009, and hence any recovery remained on hold.

Despite the much weaker profitability and earnings, generally the financial positions of most banks strengthened as asset growth was moderate with management aiming to either improve and/or maintain asset quality through restricting balance sheet growth and helping liquidity. In addition, increasing capital adequacy was seen through raising shareholders’ equity.

The Gulf’s top 50 banks’ consoli-

in 2009, and now ranks 35th in terms of capital and 42nd in assets.The other new entrant in 2009 was the Albaraka banking group, which has a diverse banking asset base across the region and beyond.

It remained profitable in 2009.

Despite challenges, many UAE banks also saw good rates of growth in assets in 2009. These banks included National Bank of Abu Dhabi, First Gulf Bank, Union National Bank, RAK bank, and Abu Dhabi Islamic Bank.

For the Kingdom of Saudi Arabia, the performance in terms of asset growth was more mixed, with good growth seen at National Commercial Bank, the second largest bank in the GCC in terms of both assets and shareholders equity. However, a number of Saudi banks saw a fall in assets, in part reflecting cautious credit management,

Overall, UAE banks have the most representatives amongst the top 50 list with 13 names in the total assets table. dated assets rose by just 4 per cent in 2009 to fractionally over $1.05 trillion.

The growth compares to 15 per cent in 2008 and 35 per cent in 2007. Total equity for the GCC 50 banks grew by a higher 13 per cent in 2009, to $138 billion. The percentage increase in equity in 2009 was higher than the 11 per cent seen in 2008. Overall, capital adequacy improved for the sector in 2009.

Two high profile casualties of the financial crisis, Bahrain-based The International Banking Corporation and Awal Bank, the two institutions linked to the Saudi-based Saad Group, disappeared from the GCC 50 list in 2009.

Both were caught in the shift and tightening in liquidity and funding markets but the overall collapse of the banks remains under investigation.

By country, Qatari banks enjoyed the best growth in terms of assets in 2009, reflecting the robust performance of the domestic economy. Noted increases in assets were particularly led by the newer Qatari banks, including Al Rayan and Al Khalij Commercial Bank. The latter was a new entrant in the GCC 50 banks

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gulfbusiness.com May 2010

particularly in the light of some high profile corporate collapses in the Kingdom. NCB was the stand out in terms of net profit improvement.

On the back of the fall in net profit in 2009, profitability for the GCC 50 banks was lower once again. The return on as-

GCC 50 Banks – Return on Equity (%) 25

20

15

10

5

0

2005

2006

2007

2008

2009

sets for the top 50 GCC banks in 2009 was 1.51 per cent against 1.53 per cent in 2008 and a higher 2.42 per cent in 2007. However, including the large loss at Gulf Finance House (see chart), the return on assets in 2009 was a lower 13.7 per cent for the overall group.

Return on equity fell more sharply in 2009, in part reflecting the increases in equity at many banks during the year.

The return on equity for the GCC 50 banks was a low 11.1 per cent in 2009, down from a level of 13.7 per cent, and 19.4 per cent in 2007. Previously, the GCC financial institutions were amongst the most profitable banks globally, benefiting from a rampant regional economy and sustained high oil price. However, going forward, banks will need to generate a broader base of core banking income, and, for many, rely less on trading income.

For the first time, the UAE’s Emirates NBD emerged as the largest bank in terms of both assets and equity in the GCC in 2009. Following a 24 per cent rise in equity, Emirates NBD rose to rank first for capital from a previous position of third. Its profitability performance was still more than respectable given the operating environment, but a 9 per cent decline in net profit saw it fall to sixth place from third in terms of net profit.

Once again, Saudi Arabia’s Al Rajhi Banking and Investment Corporation was by far the largest bank in the GCC in terms of net profit, rising marginally by 4 per cent in the year to $1.8 billion.

Its return on assets remained one of the highest at 4.11 per cent. In terms of this yardstick, the most profitable bank amongst the GCC 50 is Qatar’s Al Rayan Bank at a very high 5.25 per cent, followed closely by UAE’s RAK bank at 5.21 per cent. Other very profitable banks included Qatar Islamic Bank at 3.94 per cent return on assets.

Although a good turn around was seen at Bahrain-headquartered Arab Banking Corporation, which achieved net profit of $154 million in 2009 following a loss of $836 million in 2008, a number of other Bahrain-based wholesale banks again experienced difficult years. Gulf Finance House recorded a massive loss

THE BUSINESS GCC Top 50 Banks

Uncertainty around non-performing loans

M

uch of the weakness in the region’s profit performance in 2009 was unsurprisingly connected to sharply higher non-performing loans (NPLs), and asset value writedowns, and connected loan loss provision charges. The deteriorating loan asset quality portfolios were seen throughout the region but there were variations.

Banks saw bad debt increases following a number of large financial collapses, including those of Awal Bank and the International Banking Corporation and, in turn, related exposures to the Saad and Al Gosaibi groups of Saudi Arabia.

GCC bank exposure to the troubled groups was well in excess of $10 billion, including $5 billion to Saudi banks and $3 billion to UAE banks. Dubai World’s debt issues and restructuring added to the

of $728 million, connected to the need to make hefty provisions relating to assets where values have fallen sharply, including those linked to real estate.

Ithmaar bank saw a loss of $233 million in 2009, reflecting provision impairments and also a large fall in income from investment properties. The investment bank Arcapita also recorded a loss of $191 million as at end December 2009, reflecting difficult trading conditions, whilst Gulf International Bank saw its third consecutive year loss. Although much lower than the loss of $396 million seen in 2008, GIB’s loss of $153 million was still hefty, and was due to loan provision charges and weaker net interest income. The latter reflects the bank’s strategy of de-risking the balance sheet and reducing the loan portfolio. Despite the losses, GIB maintains a high capital adequacy ratio and good liquidity.

The dominance of the largest 20 banks remained stable in 2009, with the largest 20 Gulf banks comprising 75 per cent of the combined asset base.

By profit however, the largest 20 represented 96 per cent of total net profit but this was in part influenced by the fact that nine banks in the GCC 50 recorded losses in 2009. The aggregated return on

problems, as did the very sharp downturn in the Dubai property market in general, causing higher non-performing loans for banks in the region.

The significant downturn in the real estate sector in the GCC also raised loan default levels for banks. This included exposures to both real estate companies and developers but also to individuals.

Retail impairments for banks in 2009 also increased. The impact of rising bad loans has been widespread but some have suffered more than others. The Kuwaiti banking sector experienced a very sharp rise in NPLs in 2009, reflecting chiefly commercial and corporate loan defaults linked to investment companies and real estate exposure. Oman and Bahrainibased banks also saw higher NPLs and provisioning. This was the case in Qatar,

but here the government’s decision to acquire real estate financing exposure reduced the overall rise.

Overall, for the GCC sector, NPLs doubled to around 6 per cent of gross loans in 2009 but there is regional variation, with lower levels seen for example in Qatar and higher levels in Kuwait. The 6 per cent level is likely to rise in the first half of 2010 but the flow of new NPLs is expected to slow. The strictness and uniformity of impairment and non-performing classification across banks is an issue and some may still need to classify certain exposures. On the positive side, most GCC banks have made a good level of provisions against bad loans and the coverage level is considered solid. However, as seen, the provisioning hit bank profitability.

assets for the top 20 banks is higher, at 1.78 per cent, than that of the 50 banks, indicating a broader base of banking operations and generally less reliance on wholesale banking activities.

Overall, UAE banks have the most representatives amongst the top 50 list with 13 names in the total assets table. This was also the case in shareholders’ equity and net profit. Through the support of the government, a number of banks, including First Gulf Bank and National Bank of Abu Dhabi, saw strong rises in equity.

For the GCC banking system, 2009 was again a very difficult year and the period over the past two years has been extremely challenging. There have been high profile casualties and a number of other banks have recorded large losses through problematic exposures, both on and off-balance sheets, and some are still going through restructuring in terms of operations and strategy.

Despite the noted fall in profitability, most banks have been able to either maintain or improve their financial

For the first time, the UAE’s Emirates NBD emerged as the largest bank in terms of both assets and equity in the GCC in 2009.

Reflecting still difficult trading conditions, problematic exposures to companies and investment houses, as well as continued weakness in the property sector, Kuwaiti banks had another weak year with all Kuwaiti banks in the GCC 50 seeing weaker net profit in 2009, and many by hefty percentages.

That said, the flagship Kuwaiti bank, National Bank of Kuwait, saw net profit down by only 1 per cent.

profiles through capital injections and de-risking the balance sheet. Liquidity is still tight but has nonetheless recorded some improvement more recently. 2010 certainly will not be an easy year for the GCC banking sector and profitability is a long way off the halcyon period of a few years back, but the worst of the downturn may have passed and this year should be one of recovery. gb@motivate.ae May 2010 gulfbusiness.com

39

THE BUSINESS GCC Top 50 Banks Top 50 GCC BANKS 2009 ranked by Total Assets ($000s) Rank 2009

2008 Rank

BANK NAME

Country

Year Ended

Current Assets 09

Previous Assets 08

1

1

Emirates NBD

UAE

12/09

76,723,837

76,991,815

2

2

National Commercial Bank

S.Arabia

12/09

68,810,650

59,147,193

3

4

National Bank of Abu Dhabi

UAE

12/09

53,636,109

44,888,220

4

3

SAMBA

S.Arabia

12/09

49,594,533

5

8

Qatar National Bank

Qatar

12/09

6

7

Riyad Bank

S.Arabia

7

5

Al Rajhi Banking and Investment Corporation

8

6

9

9

Growth Y-O-Y (%)

Net Profit

09 ROA (%)

-0.35

910,772

1.18

16.34

1,080,012

1.83

19.49

822,871

1.83

47,704,317

3.96

1,217,244

2.55

49,198,605

41,739,527

17.87

1,149,099

2.75

12/09

47,156,751

42,574,007

10.76

810,138

1.90

S.Arabia

12/09

45,641,110

43,981,280

3.77

1,809,073

4.11

National Bank of Kuwait

Kuwait

12/09

44,715,940

43,389,462

3.06

923,735

2.13

Abu Dhabi Commercial Bank

UAE

12/09

43,618,000

40,220,042

8.45

-139,600

-0.35

10

10

Kuwait Finance House

Kuwait

12/09

39,354,110

37,390,574

5.25

250,331

0.67

11

14

First Gulf Bank

UAE

12/09

34,160,800

29,273,539

16.70

901,800

3.08

12

11

Saudi British Bank

S.Arabia

12/09

33,907,547

35,109,518

-3.42

543,288

1.55

13

12

Banque Saudi Fransi

S.Arabia

12/09

32,232,587

33,563,936

-3.97

659,717

1.97

14

13

Arab National Bank

S.Arabia

12/09

29,485,743

32,348,571

-8.85

633,574

1.96

15

15

Arab Banking Corporation

Bahrain

12/09

25,965,000

28,486,000

-8.85

154,000

0.54

16

16

Mashreq Bank

UAE

12/09

25,761,487

25,386,202

1.48

289,828

1.14

17

18

Ahli United Bank

Bahrain

12/09

23,573,983

23,582,727

-0.04

226,086

0.96

18

19

Dubai Islamic Bank

UAE

12/09

22,971,191

23,063,711

-0.40

330,322

1.43

19

20

Union National Bank

UAE

12/09

20,616,831

17,758,038

16.10

315,155

1.77

20

27

Abu Dhabi Islamic Bank

UAE

12/09

17,461,581

13,960,922

25.07

21,260

0.15

21

21

Gulf Bank

Kuwait

12/09

16,434,821

17,542,553

-6.31

-97,256

-0.55

22

17

Gulf International Bank

Bahrain

12/09

16,207,700

25,033,500

-35.26

-152,600

-0.61

23

23

Saudi Hollandi Bank

S.Arabia

12/09

15,801,780

16,382,982

-3.55

23,774

0.15

24

22

Commercial Bank of Qatar

Qatar

12/09

15,724,927

16,836,515

-6.60

417,996

2.48

25

24

Bank Muscat

Oman

12/09

15,196,716

15,657,756

-2.94

191,476

1.22

26

28

Burgan Bank

Kuwait

12/09

14,183,212

13,877,578

2.20

71,381

0.51

27

26

Saudi Investment Bank

S.Arabia

12/09

13,406,050

14,292,364

-6.20

144,029

1.01

28

-

Albaraka

Bahrain

12/09

13,166,277

10,920,288

20.57

167,386

1.53

29

30

Doha Bank

Qatar

12/09

12,620,027

10,712,160

17.81

267,106

2.49

30

25

Commercial Bank of Kuwait

Kuwait

12/09

12,455,559

15,271,812

-18.44

527

0.00

31

32

Qatar Islamic Bank

Qatar

12/09

10,774,403

9,212,622

16.95

362,718

3.94

32

29

Al-Ahli Bank of Kuwait

Kuwait

12/09

10,275,378

10,769,362

-4.59

135,715

1.26

33

31

Commercial Bank of Dubai

UAE

12/09

10,022,630

9,748,181

2.82

218,895

2.25

34

35

Bank Al Jazira

S.Arabia

12/09

8,013,634

7,338,587

9.20

7,352

0.10

35

33

Bank of Kuwait and the Middle East

Kuwait

12/09

7,833,016

7,943,262

-1.39

49,541

0.62

36

42

Al Rayan

Qatar

12/09

6,618,327

4,605,625

43.70

241,607

5.25

37

36

Bank of Bahrain and Kuwait

Bahrain

12/09

6,061,853

5,744,788

5.52

93,145

1.62

38

37

39 40

38 39

National Bank of Bahrain Ithmaar Bank

Bahrain Bahrain

12/09 12/09

5,632,320 5,213,861

5,409,840 5,380,426

4.11 -3.10

113,890 -233,369

2.11 -4.34

Ahli Bank of Qatar

Qatar

12/09

5,061,608

4,888,568

3.54

82,446

1.69

41

45

Bank of Sharjah

UAE

12/09

4,921,486

4,312,985

14.11

129,563

3.00

42

-

Al Khalij Commercial Bank

Qatar

12/09

4,807,709

3,279,702

46.59

45,897

1.40

43

46

Dubai Bank

UAE

12/09

4,739,828

4,296,257

10.32

-79,194

-1.84

44

40

National Bank of Oman

Oman

12/09

4,670,700

4,690,673

-0.43

54,800

1.17

45

49

RAK Bank

UAE

12/09

4,664,201

3,795,443

22.89

197,861

5.21

46

44

Al Bilad

S.Arabia

12/09

4,654,528

4,397,750

5.84

-66,402

-1.51

47

47

Sharjah Islamic Bank

UAE

12/09

4,352,738

4,225,621

3.01

70,881

1.68

48

43

Arcapita

Bahrain

12/09

4,009,970

4,456,525

-10.02

-190,700

-4.28

49

48

Kuwait International Bank

Kuwait

12/09

3,950,584

3,840,426

2.87

-28,529

-0.74

50

-

Bank Dhofar

Oman

12/09

3,862,133

3,437,961

12.34

65,956

1.92

Y-O-Y: year-on year; ROA: return on assets; NR: not ranked; *: Investcorp and Arcapita six months results to end December 2009.

40

gulfbusiness.com May 2010

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THE BUSINESS GCC Top 50 Banks Top 50 GCC BANKS 2009 ranked by Total Capital ($000s) Rank 2009

2008 Rank

BANK NAME

Country

Year Ended

Current Assets 09

Previous Assets 08

Growth Y-O-Y (%)

Net Profit

09 ROA (%)

1

3

Emirates NBD

UAE

12/09

8,711,347

7,023,233

24.04

910,772

10.46

2

1

National Commercial Bank

S.Arabia

12/09

7,834,225

7,342,800

6.69

1,080,012

13.79

3

2

Al Rajhi Banking and Investment Corporation

S.Arabia

12/09

7,683,295

7,208,480

6.59

1,809,073

23.55

4

4

Riyad Bank

S.Arabia

12/09

7,548,171

6,850,787

10.18

810,138

10.73

5

5

National Bank of Kuwait

Kuwait

12/09

6,369,870

5,684,240

12.06

923,735

14.50

6

9

First Gulf Bank

UAE

12/09

6,235,400

4,524,806

37.80

901,800

14.46

7

7

8

11

SAMBA

S.Arabia

12/09

6,015,357

5,349,831

12.44

1,217,244

20.24

National Bank of Abu Dhabi

UAE

12/09

5,569,637

3,913,906

42.30

822,871

14.77 20.97

9

8

Qatar National Bank

Qatar

12/09

5,479,240

4,571,059

19.87

1,149,099

10

6

Kuwait Finance House

Kuwait

12/09

5,458,190

5,655,422

-3.49

250,331

4.59

11

10

Abu Dhabi Commercial Bank

UAE

12/09

5,197,400

4,333,013

19.95

-139,600

-2.69

12

12

Banque Saudi Fransi

S.Arabia

12/09

4,210,918

3,751,770

12.24

659,717

15.67

13

13

Arab National Bank

S.Arabia

12/09

3,870,470

3,379,013

14.54

633,574

16.37

14

14

Saudi British Bank

S.Arabia

12/09

3,487,392

3,102,355

12.41

543,288

15.58

15

17

Commercial Bank of Qatar

Qatar

12/09

3,294,975

2,740,578

20.23

417,996

12.69

16

15

Mashreq Bank

UAE

12/09

3,225,564

2,908,358

10.91

289,828

8.99

17

20

Union National Bank

UAE

12/09

2,904,334

2,095,297

38.61

315,155

10.85

18

19

Ahli United Bank

Bahrain

12/09

2,581,431

2,394,777

7.79

226,086

8.76

19

21

Arab Banking Corporation

Bahrain

12/09

2,581,000

2,088,000

23.61

154,000

5.97

20

22

Qatar Islamic Bank

Qatar

12/09

2,470,536

1,961,794

25.93

362,718

14.68

21

16

Dubai Islamic Bank

UAE

12/09

2,447,084

2,834,149

-13.66

330,322

13.50

22

25

Saudi Investment Bank

S.Arabia

12/09

1,985,759

1,762,293

12.68

144,029

7.25

23

28

Abu Dhabi Islamic Bank

UAE

12/09

1,946,740

1,536,684

26.68

21,260

1.09

24

26

Bank Muscat

Oman

12/09

1,847,575

1,630,053

13.34

191,476

10.36

25

23

Gulf International Bank

Bahrain

12/09

1,779,400

1,925,500

-7.59

-152,600

-8.58

26

-

Albaraka

Bahrain

12/09

1,736,845

1,550,161

12.04

167,386

9.64

27

27

Al Rayan

Qatar

12/09

1,635,598

1,563,126

4.64

241,607

14.77 16.50

28

31

Doha Bank

Qatar

12/09

1,618,656

1,349,287

19.96

267,106

29

24

Commercial Bank of Kuwait

Kuwait

12/09

1,526,953

1,763,805

-13.43

527

0.03

30

29

Saudi Hollandi Bank

S.Arabia

12/09

1,505,820

1,524,040

-1.20

23,774

1.58

31

34

Burgan Bank

Kuwait

12/09

1,483,714

1,263,401

17.44

71,381

4.81

32

33

Commercial Bank of Dubai

UAE

12/09

1,457,755

1,282,185

13.69

218,895

15.02

33

30

Arcapita

Bahrain

12/09

1,429,268

1,401,325

1.99

-190,700

-13.34 -6.88

34

-

Gulf Bank

Kuwait

12/09

1,412,967

131,606

973.64

-97,256

35

-

Al Khalij Commercial Bank

Qatar

12/09

1,326,019

1,247,180

6.32

45,897

3.46

36

35

Bank Al Jazira

S.Arabia

12/09

1,199,214

1,236,480

-3.01

7,352

0.61

37

37

Sharjah Islamic Bank

UAE

12/09

1,161,938

1,145,007

1.48

70,881

6.10

38

38

39 40

39 44

Al-Ahli Bank of Kuwait Bank of Sharjah

Kuwait UAE

12/09 12/09

1,144,937 1,116,267

1,107,837 1,047,651

3.35 6.55

135,715 129,563

11.85 11.61

41

36

Investcorp

Bahrain

12/09

959,976

708,196

35.55

60,193

6.27

Ithmaar Bank

Bahrain

12/09

937,399

1,149,351

-18.44

-233,369

-24.90

42

41

Bank of Kuwait and the Middle East

Kuwait

12/09

821,064

861,702

-4.72

49,541

6.03

43

42

Al Bilad

S.Arabia

12/09

802,572

856,757

-6.32

-66,402

-8.27 25.96

44

49

RAK Bank

UAE

12/09

762,119

566,691

34.49

197,861

45

45

National Bank of Oman

Oman

12/09

650,400

641,301

1.42

54,800

8.43

46

47

National Bank of Bahrain

Bahrain

12/09

641,940

578,150

11.03

113,890

17.74

47

50

Bank of Bahrain and Kuwait

Bahrain

12/09

614,444

555,095

10.69

93,145

15.16

48

46

Kuwait International Bank

Kuwait

12/09

600,045

585,106

2.55

-28,529

-4.75

49

43

UGB

Bahrain

12/09

572,325

815,251

-29.80

23,843

4.17

50

-

Ahli Bank of Qatar

Qatar

12/09

535,686

450,036

19.03

82,446

15.39

Y-O-Y: year-on year; ROA: return on assets; NR: not ranked; *: Investcorp and Arcapita six months results to end December 2009.

42

gulfbusiness.com May 2010

THE BUSINESS GCC Top 50 Banks TOP 50 GCC BANKS TOTAL NET PROFIT ($000s) Rank 2009

Rank 2008

BANK NAME

Country

Year Ended

Net Profit 2009

Net Profit 2008

Growth Y-O-Y (%)

1

1

Al Rajhi Banking and Investment Corporation

S.Arabia

12/09

1,809,073

1,739,894

3.98

2

2

SAMBA

S.Arabia

12/09

1,217,244

1,187,690

2.49

3

4

4

13

Qatar National Bank

Qatar

12/09

1,149,099

1,003,171

14.55

National Commercial Bank

S.Arabia

12/09

1,080,012

561,895

92.21

5

5

National Bank of Kuwait

Kuwait

12/09

923,735

933,419

-1.04

6

3

Emirates NBD

UAE

12/09

910,772

1,003,580

-9.25 10.51

7

7

First Gulf Bank

UAE

12/09

901,800

816,010

8

6

National Bank of Abu Dhabi

UAE

12/09

822,871

822,970

-0.01

9

10

Riyad Bank

S.Arabia

12/09

810,138

703,669

15.13 -11.82

10

9

Banque Saudi Fransi

S.Arabia

12/09

659,717

748,176

11

11

Arab National Bank

S.Arabia

12/09

633,574

662,966

-4.43

12

8

Saudi British Bank

S.Arabia

12/09

543,288

778,672

-30.23

13

16

Commercial Bank of Qatar

Qatar

12/09

417,996

464,121

-9.94

14

17

Qatar Islamic Bank

Qatar

12/09

362,718

451,124

-19.60

15

14

Dubai Islamic Bank

UAE

12/09

330,322

471,634

-29.96

16

18

Union National Bank

UAE

12/09

315,155

392,373

-19.68 -38.54

17

15

Mashreq Bank

UAE

12/09

289,828

471,568

18

24

Doha Bank

Qatar

12/09

267,106

259,957

2.75

19

12

Kuwait Finance House

Kuwait

12/09

250,331

619,333

-59.58

20

25

Al Rayan

Qatar

12/09

241,607

250,701

-3.63

21

22

Ahli United Bank

Bahrain

12/09

226,086

309,742

-27.01

22

30

Commercial Bank of Dubai

UAE

12/09

218,895

210,277

4.10

23

32

RAK Bank

UAE

12/09

197,861

173,382

14.12

24

26

25

-

Bank Muscat

Oman

12/09

191,476

243,459

-21.35

Albaraka

Bahrain

12/09

167,386

201,013

-16.73

26

51

Arab Banking Corporation

Bahrain

12/09

154,000

-836,000

NA

27

35

Saudi Investment Bank

S.Arabia

12/09

144,029

141,338

1.90 -16.87

28

33

Al-Ahli Bank of Kuwait

Kuwait

12/09

135,715

163,262

29

39

Bank of Sharjah

UAE

12/09

129,563

111,782

15.91

30

40

National Bank of Bahrain

Bahrain

12/09

113,890

92,390

23.27

31

42

Bank of Bahrain and Kuwait

Bahrain

12/09

93,145

71,645

30.01

32

38

Ahli Bank of Qatar

Qatar

12/09

82,446

116,941

-29.50

33

36

Burgan Bank

Kuwait

12/09

71,381

131,684

-45.79

34

45

Sharjah Islamic Bank

UAE

12/09

70,881

63,139

12.26

35

37

National Bank of Oman

Oman

12/09

54,800

117,922

-53.53 -72.82

36

31

37

-

38

29

Bank of Kuwait and the Middle East

Kuwait

12/09

49,541

182,270

Al Khalij Commercial Bank

Qatar

12/09

45,897

28,455

61.30

United Gulf Bank

Bahrain

12/09

23,843

214,617

-88.89

39

21

Saudi Hollandi Bank

S.Arabia

12/09

23,774

326,331

-92.71

40

27

Abu Dhabi Islamic Bank

UAE

12/09

21,260

232,014

-90.84

41

28

Bank Al Jazira

S.Arabia

12/09

7,352

222,300

-96.69

42

20

Commercial Bank of Kuwait

Kuwait

12/09

527

357,199

-99.85

43

43

Kuwait International Bank

Kuwait

12/09

-28,529

70,213

NA

44

47

Al Bilad

S.Arabia

12/09

-66,402

33,352

NA

45

44

Dubai Bank

UAE

12/09

-79,194

63,253

NA

46

52

Gulf Bank

Kuwait

12/09

-97,256

-1,274,823

NA

47

19

Abu Dhabi Commercial Bank

UAE

12/09

-139,600

369,856

NA

48

49 46

Gulf International Bank Arcapita

Bahrain Bahrain

12/09 12/09

-152,600 -190,700

-396,200 42,741

NA NA

41

Ithmaar

Bahrain

12/09

-233,369

85,162

NA

49 50

Y-O-Y: year-on year; ROA: return on assets; NR: not ranked; *: Investcorp and Arcapita six months results to end December 2009; **: Arab Banking Corporation and Gulf Bank are included in the above table owing to their important size and asset ranking in the Top 50 Gulf banks.

44

gulfbusiness.com May 2010

THE BUSINESS GCC Top 50 Banks Top 50 GCC BANKS 2009 ranked by Country ($000s) Rank 2009

2008 Rank

1 2 3 4 5 6 7 8

1 3 2 5 6 7 8

1 2 3 4 5 6 7 8

1 2 3 5 4 6 7 8

1 2 3

1 2 -

1 2 3 4 5 6 7

2 3 4 5 6 -

1 2 3 4 5 6 7 8 9 10 11

1 2 4 3 5 6 7 8 9 10 11

1 2 3 4 5 6 7 8 9 10 11 12 13

1 2 3 4 5 6 7 8 9 10 11 13 12

BANK NAME Bahrain Arab Banking Corporation Ahli United Bank Gulf International Bank Albaraka Bank of Bahrain and Kuwait National Bank of Bahrain Ithmaar Bank Arcapita Kuwait National Bank of Kuwait Kuwait Finance House Gulf Bank Burgan Bank Commercial Bank of Kuwait Al-Ahli Bank of Kuwait Bank of Kuwait and the Middle East Kuwait International Bank Oman Bank Muscat National Bank of Oman Bank Dhofar Qatar Qatar National Bank Commercial Bank of Qatar Doha Bank Qatar Islamic Bank Al Rayan Ahli Bank of Qatar Al Khalij Commercial Bank Saudi Arabia National Commercial Bank SAMBA Riyad Bank Al Rajhi Banking and Investment Corporation Saudi British Bank Banque Saudi Fransi Arab National Bank Saudi Hollandi Bank Saudi Investment Bank Bank Al Jazira Al Bilad UAE Emirates NBD National Bank of Abu Dhabi Abu Dhabi Commercial Bank First Gulf Bank Mashreq Bank Dubai Islamic Bank Union National Bank Abu Dhabi Islamic Bank Commercial Bank of Dubai Bank of Sharjah Dubai Bank RAK Bank Sharjah Islamic Bank

Year Ended

Current Assets 09

Previous Assets 08

Growth Y-O-Y (%)

Net Profit

09 ROA (%)

12/09 12/09 12/09 12/09 12/09 12/09 12/09 12/09

25,965,000 23,573,983 16,207,700 13,166,277 6,061,853 5,632,320 5,213,861 4,009,970

28,486,000 23,582,727 25,033,500 10,920,288 5,744,788 5,409,840 5,380,426 4,456,525

-8.85 -0.04 -35.26 20.57 5.52 4.11 -3.10 -10.02

154,000 226,086 -152,600 167,386 93,145 113,890 -233,369 -190,700

0.54 0.96 -0.61 1.53 1.62 2.11 -4.34 -4.28

12/09 12/09 12/09 12/09 12/09 12/09 12/09 12/09

44,715,940 39,354,110 16,434,821 14,183,212 12,455,559 10,275,378 7,833,016 3,950,584

43,389,462 37,390,574 17,542,553 13,877,578 15,271,812 10,769,362 7,943,262 3,840,426

3.06 5.25 -6.31 2.20 -18.44 -4.59 -1.39 2.87

923,735 250,331 -97,256 71,381 527 135,715 49,541 -28,529

2.13 0.67 -0.55 0.51 0.00 1.26 0.62 -0.74

12/09 12/09 12/09

15,196,716 4,670,700 3,862,133

15,657,756 4,690,673 3,437,961

-2.94 -0.43 12.34

191,476 54,800 65,956

1.22 1.17 1.92

12/09 12/09 12/09 12/09 12/09 12/09 12/09

49,198,605 15,724,927 12,620,027 10,774,403 6,618,327 5,061,608 4,807,709

41,739,527 16,836,515 10,712,160 9,212,622 4,605,625 4,888,568 3,279,702

17.87 -6.60 17.81 16.95 43.70 3.54 46.59

1,149,099 417,996 267,106 362,718 241,607 82,446 45,897

2.75 2.48 2.49 3.94 5.25 1.69 1.40

12/09 12/09 12/09 12/09 12/09 12/09 12/09 12/09 12/09 12/09 12/09

68,810,650 49,594,533 47,156,751 45,641,110 33,907,547 32,232,587 29,485,743 15,801,780 13,406,050 8,013,634 4,654,528

59,147,193 47,704,317 42,574,007 43,981,280 35,109,518 33,563,936 32,348,571 16,382,982 14,292,364 7,338,587 4,397,750

16.34 3.96 10.76 3.77 -3.42 -3.97 -8.85 -3.55 -6.20 9.20 5.84

1,080,012 1,217,244 810,138 1,809,073 543,288 659,717 633,574 23,774 144,029 7,352 -66,402

1.83 2.55 1.90 4.11 1.55 1.97 1.96 0.15 1.01 0.10 -1.51

12/09 12/09 12/09 12/09 12/09 12/09 12/09 12/09 12/09 12/09 12/09 12/09 12/09

76,723,837 53,636,109 43,618,000 34,160,800 25,761,487 22,971,191 20,616,831 17,461,581 10,022,630 4,921,486 4,739,828 4,664,201 4,352,738

76,991,815 44,888,220 40,220,042 29,273,539 25,386,202 23,063,711 17,758,038 13,960,922 9,748,181 4,312,985 4,296,257 3,795,443 4,225,621

-0.35 19.49 8.45 16.70 1.48 -0.40 16.10 25.07 2.82 14.11 10.32 22.89 3.01

910,772 822,871 -139,600 901,800 289,828 330,322 315,155 21,260 218,895 129,563 -79,194 197,861 70,881

1.18 1.83 -0.35 3.08 1.14 1.43 1.77 0.15 2.25 3.00 -1.84 5.21 1.68

Y-O-Y: year-on year; ROA: return on assets; NR: not ranked; *: Investcorp and Arcapita six months results to end December 2009.

46

gulfbusiness.com May 2010

THE BUSINESS ISLAMIC FINANCE

Fixing the cracks Now that the novelty and the hype has simmered down, the Islamic finance industry must tackle structural weaknesses to grow. GULF BUSINESS reports.

T

he near-default on Nakheel’s $4 billion sukuk Islamic bond in December 2009 has focused attention on the challenges facing the Islamic finance industry as the global economy emerges from its worst recession in decades.

Had Nakheel defaulted on the sukuk, it would have been the largest default on an Islamic bond ever, and the industry would have been in unchartered territory in terms of how the debt would be restructured and what rights (if any) the sukuk holders had over the assets of Nakheel or its parent company, Dubai World. In the event, the last minute $10 billion bailout by Abu Dhabi allowed Nakheel to avoid a default that could have dealt a severe blow to the entire Islamic finance industry, which has seen phenomenal growth in recent years, particularly in the Middle East.

But the questions over how the Islamic finance industry would have dealt with a default, and how any guarantees to sukuk-holders would have been enforced, remain unanswered.

In theory, Islamic banks and financial institutions should have been largely insulated from the financial crisis of 2008-2009. Since Islamic financial institutions are not permitted to use derivatives or indulge in excessive risk taking, they did not have exposure to the high risk sub-prime mortgage market, the collapse of which triggered the crisis and brought the global financial system to its knees last year. In fact, when the extent of the crisis became evident in 2008 many analysts sug-

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gested Islamic finance and banking could be seen as a potential alternative to the conventional system, a new financial world order.

Fast-forward several months, and the picture was quite different. Although Islamic banks were relatively unscathed from the first round of the financial crisis, they were not immune to the knock-on impact the crisis had on other asset and commodity prices and the real economy. Islamic banks, particularly in the Gulf, had large exposures to the real estate and equity markets that suffered major losses earlier this year. In addition, the lack of liquidity in the market affected Islamic banks as much as it did conventional ones.

the Islamic finance industry over the last year have brought several problems to the fore, and forced the industry to deal with some of the structural issues that may be preventing it from becoming a viable alternative to conventional finance. Rating agency Standard & Poors has recently released a report highlighting several of these issues, and noting that these challenges are only likely to increase as the industry grows and evolves.

IN NAME ALONE? One issue is that Islamic financial products have so far attempted to replicate conventional financial products, but in a way that is technically

The restructurings and defaults in the Islamic finance industry over the last year have brought several issues to the fore.

The announced merger of UAE mortgage firms Amlak and Tamweel in November 2008 was perhaps the first high-profile example of restructuring in the Islamic banking sector as a result of the financial crisis and consequent liquidity crunch. In May 2009, Kuwaiti firm The Investment Dar defaulted on a $100 million sukuk, the first ever sukuk default. In July last year, Nakheel announced it had successfully restructured its $750 million five-year Ijara sukuk due in 2011.

The restructurings and defaults in

Shari’ah-compliant. “While Islamic financial products are Shari’ah-compliant in the legal sense, their economic substance and impact is not hugely different from conventional financial instruments,” said Peter Casey, director at the Dubai Financial Services Authority.

In the bond market for example, Islamic sukuks have increasingly been structured to replicate conventional bonds, providing implicit capital guarantees for bond-holders that goes against the risk/ profit sharing con-

THE BUSINESS ISLAMIC FINANCE

cept inherent in Islamic finance. This trend prompted one Shari’ah scholar to reportedly declare in 2008 that 80 per cent of current sukuk structures were not Islamic.

Islamic retail banks, particularly in the UAE, have also followed this model according to Raj Madha, banks analyst at EFG Hermes. “Islamic banks such as Al Rajhi Bank in Saudi Arabia do have

some advantages over conventional banks in that they have access to a low cost funding base. Their clients prefer not to receive interest-like income on their deposits even if this is technically May 2010 gulfbusiness.com

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Shari’ah-compliant and they are less price-discriminatory. This gives the banks a cushion of profitability that is definitely an advantage over conventional banks. However, UAE banks have not benefitted from this phenomenon to the same extent, because they compete with conventional banks in terms of the returns they offer their clients,” explained Madha.

FRAGMENTED INDUSTRY Another key challenge to the further growth and development of the Islamic finance industry is the differing interpretations of Shari’ah-compliance in different parts of the world. According to a recent report by Professor Rodney Wilson at the University of Durham, even within the Gulf Cooperation Council, with the exception of Bahrain, there are no national Shari’ah boards to set standards for Shari’ah compliance and ensure fatwas issued by individual banks and institutions do not conflict. While there is little doubt that there is tremendous opportunity for growth in Islamic banking and finance in the predominantly Muslim markets of South East Asia, Middle East and North Africa, the fragmentation of the Islamic finance industry is a hurdle that must be overcome if the industry wants to compete with conventional banking on a global level.

TRANSPARENCY NEEDS Emerging from the financial crisis, one of the most pressing issues facing the industry is the apparent lack of transparency, corporate governance and regulatory oversight of Islamic banks. The crisis has shown that Islamic banks are not immune to problems such as corruption, mismanagement and bad investment decisions that plague conventional banks. The difference is that Islamic banks tend to be less transparent than their conventional counterparts, so these issues are often not addressed until the bank faces the pressure of an external shock, such as a collapse in asset prices or a major default.

According to Dr Hennie van Greuning, senior advisor at the World Bank

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Treasury, corporate governance and transparency is sadly lacking in Islamic banks across the region. At a recent conference on Islamic finance at the Dubai International Financial Centre, Dr van Greuning said: “Transparency and disclosure are the cornerstones of good corporate governance, but in most Islamic banks’ financial statements this is often lacking. The financial statements are not easy for outsiders to understand and analyse in a meaningful way. Although the principles of Islamic finance include transparency, openness and general good governance, the implementation and reality in Islamic banks today is often quite different, and this is a challenge that the industry needs to address going forward.”

EVOLVING REGULATIONS To some extent, transparency in the Islamic banking industry could be improved by supervision and regulatory authorities, but this seems to be easier said than done. Although there has been good progress in setting regulatory standards in Islamic financial institutions by the Islamic Financial Services Board (IFSB) and the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI), these have so far been non-binding and compliance is voluntary, unless they have been incorporated by regulators such as the DFSA in national legislation.

There are several different approaches to regulating Islamic banking and finance, ranging from regulating the actual Shari’ah ruling on financial products to regulating the system in which Islamic banks operate. The regulator in Dubai – the DFSA – is a systems regulator, and makes no judgement on the fatwas themselves. The DFSA has incorporated the IFSB and AAOIFI standards in its approach to regulation of the sector, but as a risk-based regulator, the DFSA is focussed on whether or not Islamic banks and financial institutions have correctly analysed the risks they face, and taken adequate steps to limit their exposure to these risks. “As a regula-

tor, we are interested in the internal processes and controls that govern the bank’s operations, including the operation of its Shari’ah Supervisory Board. We require a Shari’ah review and audit based on AAOIFI standards, and check that the bank’s disclosure on the Shari’ah rulings are adequate,” says Peter Casey of the DFSA. At the moment, the general consensus among analysts and consultants in the industry seems to be that Islamic banks do not have adequate risk management systems in place, and improving this aspect is vital if the industry is to compete with conventional financial institutions in the long run.

Hari Bhambra, senior partner at Praesidium Consulting, is an expert on risk management and financial sector regulation and supervision. She argues that the same approach that is used to identify and quantify risks in conventional banking can be applied in Islamic banks. “Islamic banks face many of the same risks that conventional banks face, such as credit default and market risk. They also face unique risks regarding Shari’ah compliance and non-compliance, but the methodology used to identify and quantify these risks can be the same as that applied to conventional banks but with due modification to reflect the specific issues which arise in Islamic finance,” says Bhambra. “Once the risks have been identified, there are steps that Islamic banks can take to mitigate these risks within a Shari’ah framework,” she says.

It is perhaps understandable that the Islamic banking and finance industry is playing catch-up in terms of risk management and corporate governance. It is a young industry, and has been developed largely in emerging markets, where standards of corporate governance and regulation generally are probably not as high as in developed Western markets. Nevertheless, if the Islamic finance industry is to continue to grow and expand into these more developed financial markets, these structural issues need to be addressed. n gb@motivate.ae

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A place on the stage The Gulf’s centres of finance – some old and some new – are still struggling to get the recognition and reputation they need to compete in the global arena, ROBERT BAILEY reports.

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or decades, Gulf financial activity was mainly concentrated in Bahrain, a country whose offshore banking industry surged after the demise of war torn Beirut’s regional banking role in the 1970s.

Manama’s long established role as the region’s offshore banking and financial centre was finally challenged, perhaps inevitably, by the opening of rival centres, notably the 110-acre purpose built Bahrain International Financial Centre in 2004 and by the start up of the Qatar Financial Centre a year later.

For its part, the island responded with new facilities and its $1.5 billion Bahrain Financial Harbour. The concrete has been poured, the towers built and the glass-clad monuments of capitalism completed. However, the concept of the Gulf as an international financial centre is still new and the ambition of the region’s cities to join the global big league is being tested.

Nonetheless, some in the region still strive to join this exclusive club with Saudi Arabia investing heavily in the new King Abdullah Financial Centre in Riyadh. When the kingdom announced plans for the vast $8 billion King Abdullah Financial District in Riyadh, which is expected to be opened in 2012, critics were quick to ask whether this was not a financial centre too far in the Gulf region.

However, a sound case can be made for the various centres, particularly their role in assisting regional economic growth and stimulating development and diversification.

Qatar, for example, is a market that

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can become important for the distribution of mutual funds, hedge funds and other collective investment vehicles over the medium-term. The emirate is also well placed to play a key role in the development of Islamic finance, and, perhaps the growth of Islamic investment funds.

Dubai, on the other hand, has been likened to Singapore. In each case the government of a city state is mobilising excess savings, much of which in Dubai’s case comes from neighbouring Abu Dhabi, to develop an economy that revolves around regional trade and services.

Both countries also have geographical location as an advantage as well as the official commitment to promotion of financial services. The development

sound regulatory environment, is conducive to financial innovation and is widely regarded as a pioneer in the development of Islamic finance. Bahrain is also home to the Accounting and Auditing Organisation for Islamic Financial Institutions.

As one of the leading centres for the issuance of Islamic bonds (sukuks) it is highly likely that Bahrain will be able to consolidate its importance as an Islamic asset management centre.

While each of the Gulf financial centres may find its own market niche, the long-term aims of each of the financial centres, and their state sponsors, have the common thread of economic diversification.

The aspirations of Dubai and others to achieve the status of important

Some in the region still strive to join this exclusive club with Saudi Arabia investing heavily in the new King Abdullah Financial Centre in Riyadh. of private wealth management may turn out to be the catalyst for the next stage of growth of Dubai’s financial services industry.

Bahrain is facing strong competition.

However, it still retains one important advantage of having focused on financial services, which now account for 27 per cent of the gross domestic product, for far longer than others in the region. Essentially, this means it has also weathered many economic cycles and unforeseen events intact.

The island has a well established,

international financial centres should also be understood in the context of job creation. Unemployment is high among the indigenous population, 35 per cent among 16-24 year olds in Saudi Arabia, Bahrain and Oman alone.

It has been estimated that every job in the financial sector generates two or more in other related industries including accounting, legal work as well as indirect services such as hotels and travel.

The management consultant McKinsey has estimated that by fostering

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deep and efficient capital markets the region could create two million jobs over the coming decade.

How far this might benefit nationals in a sector that draws extensively on expatriate staff, is an open question but the overall dynamic effect on economies can only be positive.

Dubai International Financial Centre in 2009 accommodated 243 authorised firms, 57 ancillary service providers, 17 registered auditors and two markets, together generating thousands of jobs.

While the pressures of recession and the high cost of maintaining offices in the DIFC resulted in contraction dur-

ing 2009, firms that have left have been replaced by others. Recent entrants include Bank of Nova Scotia, Euram Asia Bank, Russia’s VTM Capital, and India’s Kotak Mahindra Bank.

Hitherto the emirate has been cited as a one of the world’s financial centres that might become significantly more May 2010 gulfbusiness.com

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important over the next two to three years. Clearly that fast pace momentum has been stalled by events.

However, just how much Dubai’s image has been dented by its debt crisis and real estate market collapse will be seen over the next few months and possibly years.

In the meantime, it is clear that far greater attention is going to be paid to the legal and administrative regimes governing the Gulf’s financial dealings and markets. Observers say more work needs to be done to craft a stable financial environment including supervisory processes and strengthening regulatory frameworks.

Viable regulatory regimes are essential to prevent crony capitalism, which observers believe was a significant factor, for example, in the 1997 Asian financial crisis. Here, market mechanisms and controls were thwarted by too close a relationship between government and business. For the GCC, this means focusing heavily on corporate governance, disclosure and transparency.

The Damas scandal has been a reminder that corporate governance standards in the Gulf still lag behind those in established financial centres.

The jewellery and gold trading concern, which is controlled by one of Dubai’s oldest merchant families, has been racked by controversy over alleged unauthorised transactions. These

worldwide. In Bahrain, banks owned by the two groups have been placed in administration.

In 2008, a study by the Dubai-based Hawkamah Institute for Corporate Governance and the World Bank affiliated International Finance Corporation found that there was not a single publicly-listed company in the region that

The level of commitment already made in terms of construction, operations and international partnerships represents a very visible statement of intent. were conducted by the majority owners following its $270 million initial public offering on the DIFC. In Saudi Arabia, lenders are still reeling from a spectacular default by Ahmad Hamad Al Gosaibi & Brothers Company and the Saad group headed by billionaire Maan Al-Sanea who is connected to the Al Gosaibi family by marriage. The two groups may have borrowed up to $20 billion from banks

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followed best practice.

The danger lies in nurturing an environment in which corruption may escape public exposure. Critics of the region’s governance blame the lack of a tradition of participation and of a pluralistic civil society. This stifles development of transparent and open governing structures.

The reality, though, is that no global centre is immune to scandal. One only

has to reel back to the UK and Barings Bank’s collapse in 1995, the Enron scandal in the US and Societe Generale’s near $6 billion losses due to rogue trading in early 2008. Dramatic and damaging as these criminal episodes were, the markets in which they occurred were big enough to recover relatively quickly.

Emerging markets, particularly those with large volumes of foreign money flowing through them, are far more vulnerable, especially in terms of international perceptions of their reliability and competence.

Giving real teeth to the regulators in Gulf ‘s financial centres and instilling a higher degree of transparency and accountability in companies operating within them will enhance the centres’ status, even during a difficult phase of regional and world economic recovery.

The level of commitment already made in terms of construction, operations and international partnerships represents a very visible statement of intent. With regard to long-term plans, developments so far indicate that the Gulf is not simply aiming at a niche

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or local role. Competing with the likes of Singapore and Hong Kong means not just emulating those centres’ wellestablished standards of propriety, but convincing the international financial community that this is the case.

Solid progress is being made. In the City of London’s twice yearly rankings of international financial centres, Dubai was placed 25 out of 65 centres worldwide in 2007. Qatar and Bahrain entered in 47th and 44th place respectively. In the latest 2009 survey, Dubai had risen to 21st place with Qatar placed at 43 and Bahrain at 44.

Analysts believe that the Gulf’s financial centres have the potential to move up further in the IFC rankings. However, a reality check is in order since there are weaknesses in key areas compared to other countries.

The region’s bond markets, for instance, remain underdeveloped with little sovereign issuance, little corporate debt issuance and little secondary trading. In terms of the debt market broadly consisting of government and corporate bonds, and accounting for

35-40 per cent of total world debt, the GCC plays a small role.

However, there are other pivotal factors. The GCC represents a sizeable proportion of world wealth with national domestic wealth at just over $2 trillion. Official external wealth, mainly sovereign wealth funds, is estimated to be worth more than $2 trillion. Taking into account external private wealth, the total probably comes to $5 trillion.

Observers believe that this high level of wealth, combined with the fact that the individual SWFs of the GCC represent some of the largest single fund management operations in the world, endows the Gulf’s fund management business alone with a potentially powerful international role.

The volume of money and deal flow means it is highly unlikely any of the region’s financial centres will fail. But bricks and mortar alone will not establish and underpin the solid reputations for financial dealings achieved by the world’s more mature locations. n gb@motivate.ae May 2010 gulfbusiness.com

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Natural selection As Dubai tries to rebuild its image, the traditional tourism capital of the Gulf faces new threats from a serious competitor. Manik Mehta reports from the International Tourism Bourse in Berlin, and asks, is Oman the next “it” destination?

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OR the Arab tourism trade, participating in the International Tourism Bourse (ITB) in Berlin, touted as the “greatest tourism show on earth”, has become something of an annual ritual. Indeed, a large turnout by Gulf exhibitors at the March event showed that the region is still keen to make its mark in a postrecession tourism market.

This year, however, things were a little different. That post recession landscape is far from a picture postcard scene,

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with Dubai, still the region’s biggest tourism draw, trying to regain some of its former glory after a property crash, debt standstill, and reams of negative publicity. It is going to be a tough pitch, especially as other, less celebrated destinations, wait in the wings.

Thanks to a staple of hyped media reports, Dubai’s malaise became widely publicised in many of its traditional Western markets, including Germany, from where the emirate sources a sizeable portion of its European tourism

traffic. The ITB, though, was considered an effective platform to “put the picture in proper perspective”, according to a representative of Dubai’s Department of Tourism and Commerce Marketing (DTCM), which was present at the show with more than 100 partners and exhibitors.

“Tours of Dubai have never been as attractive and affordable as now. Attractive offers from hotels and airlines make a vacation in the world metropolitan city a unique experience,” claimed

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a representative of the DTCM’s Frankfurt office. In 2009, 283,319 German travellers visited Dubai, staying in hotels and apartments. This was a 3.17 per cent increase over the previous year. On a global basis, Dubai clocked in 2009 a total of 7,583,079 hotel guests, a 1 per cent increase over the previous year.

Besides unveiling its “kids-go-free” programme, a special family-friendly promotion which is supported by 80 partner hotels and will run parallel to the Dubai Summer Surprise from May 14 to September 30, 2010, Dubai highlighted its new modern wonder, the Burj Khalifa, the world’s tallest building with its “At-the-top” viewing deck, recently re-opened after an unspecified fault shut it down, as one of the outstanding attractions.

Apparently trying to dispel any doubts about its financial health, Dubai emphasised that international hotels were expanding and adding new room capacity. New properties such as the Kempinski Hotel Emerald Palace, the

The DTCM responded fast to the crisis by launching a number of campaigns aimed at promoting tourism.

Zabeel Saray Royal Residence, the Movenpick Oceana Hotel & Spa, the Royal Amwaj Resort & Spa at the Palm Jumeirah Island, Rotana Rose Rayhaan and the Dusit Princess City Center Hotel in the city would create an additional 18,000 rooms and apartments.

Dubai’s new cruise terminal is expected to provide a strong impetus to cruise tourism, the latest weapon in its tourism arsenal. Khalid Bin Sulayem, DTCM’s director general, has been describing cruise tourism as a growth driver for Dubai’s overall tourism. A total of 87 cruise ships called on Dubai in 2009, bringing 261,000 passengers.

With the upgraded infrastructure and the new cruise terminal, Dubai hopes to achieve the target of 325,000 cruise passengers this year.

Alpha Tours, a Dubai based destination management company, was confident of the economic rebound in its markets in Europe. “The DTCM responded fast to the crisis by launching a number of campaigns aimed at promoting tourism. It organised familiarity tours for travel agents,” said Samir Hamadeh, the sales and marketing director of Alpha Tours. Meanwhile, Dubai was looking at other regions such as China and Australasia, Hamadeh said.

Asked whether Dubai felt threatened by Oman, which was generating considerable interest amongst foreign tourists because of its culture, history and well-protected natural environment, Hamadeh said that the comparison between the two was not appropri-

May 2010 gulfbusiness.com

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DUBAI In the first three quarters of 2009, Dubai saw its number of hotel rooms grow 19 per cent to 59,372, up from 49,875 in the same period in 2008.

The UAE continued to post the largest number of rooms in the total active pipeline with 52,566, followed by Saudi Arabia with 14,178.

Among the major markets in the region, Dubai ended February with the most rooms in the total active pipeline with 30,139, followed by Abu Dhabi with 14,171. The UAE alone has over 5,700 rooms coming to market in 2010.

Dubai has some 533 hotels and hotel apartments, up from 493 in 2008.

The number of tourists who visit the emirate was estimated to increase to 9.3 million in 2009, from 7 million in 2008. Dubai’s hotels, which saw big declines in both revenues and occupancy rates in 2009, recorded a 15.9 per cent rise in occupancy in February 2010 to more than 86 per cent.

ate. “Oman will never be a competition threat for Dubai because it does not have adequate hotels like Dubai. People interested in culture and heritage visit Oman,” he said.

While both Dubai and Oman stress that they do not compete with each other because they are “as different as apples are from oranges”, both destinations want a larger share of the tourism pie – and that means, invariably, competing against each other given their geographical proximity.

Because of the growing interest amongst Western tourists in Oman’s

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culture, history and pristine natural landscape – some tour operators were privately saying that a certain fatigue had set in amongst tourists over the wild growth of Dubai’s concrete jungle.

Capitalising on that, the Omani government is establishing new tourism promotion offices in several European countries such as Belgium, Netherlands and Scandinavia. Other countries where Oman plans to open offices are Italy, Russia, China, Japan and India.

Oman already maintains offices in France, Germany and the UK. “We are not competing against any

destination. Unlike other destinations, which have prestige projects, shopping malls and other attractions, Oman offers a rich cultural and historic heritage. Our strength is nature. Our policy has been to sustain our natural sites and protect our environment. Oman is not targeting mass tourism; it targets a middle and upper-class tourism segment. Our strength lies in our culture, nature and safety of the destination,” said Haitham M Al Ghasani, the director of tourism in Oman’s Tourism Ministry, in an interview with Gulf Business at the Berlin show. He added that the expansion of Oman Air’s network of direct flights to Frankfurt, London, Paris and Bangkok and several cities in India would attract greater traffic to Oman.

The global economic crisis did not have much of an impact on Oman’s tourism sector because most tourists visit the sultanate from September to February. “Many European tourists had booked their seats for Oman much before the crisis. Also, the other countries of the Gulf Cooperation Council (GCC) provided good traffic. This cushioned

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OMAN Tourist arrivals in Oman in 2009 were estimated to reach 2 million – up some 11 per cent over the year before. The increase is pegged on a high inflow of Gulf tourists who are looking for cheaper destinations in view of the global economic crisis.

The number of tourists from the GCC had surged 6 per cent to 710,000 in the first half of 2009 over the same period a year ago. Oman believes it can increase the number of tourists it receives to 12 million by 2020, despite the global economic crisis.

The small Gulf state also aims to increase its number of hotel rooms to 16,000 by the end of 2010 from 10,000 in 2009. The number of hotels and hotel apartments increased from 30 in 1990 to 195 in 2008, with an average annual growth rate of 10 per cent.

us. Our co-exhibitors here tell me that business was better this year than in 2009,” Al Ghasani said.

Meanwhile, Oman has changed its tourism promotion strategy, albeit only slightly. “We have learnt from the economic crisis that it is unwise to put all your eggs in one basket. We are no longer relying on Europe alone. We are looking at other regions as well,” he maintained.

Musallah Al Habsi, business development executive with Gulf Ventures of Al Azaiba, Oman, explained that Dubai is a “different” product. “Oman, which attracts a lot of leisure tourism in the middle and upper-end category, is the best kept secret, while Dubai’s excessive visibility has created some tiredness amongst tourists for Dubai,” Al Habsi said.

Unlike the uncontrolled construction boom in Dubai, Oman had cautiously opened its tourism sector. A favourite pitch of Oman’s tourism planners is that except for snow, the sultanate offers everything - souks, artworks, over 500 forts and garrisons, medieval desert cities, unique landscape, beaches, reef diving, golf courses, and more.

But Oman is also spending billions of

Oman is not targeting mass tourism; it targets the middle and upper-class tourism segment. dollars on new tourist projects under its “Vision 2020”. With tourism’s share in the sultanate’s GDP rising three-fold in the last decade, the sultanate wants to fully tap the tourism potential. Some of its high-profile projects include the “Blue City”, an imposing new complex being built 100 kilometres west of Muscat, comprising 20 hotels and beach resorts, over 5,500 apartments and holiday villas, a 27-hole golf course, shopping malls and a cruise-ship harbour. The project will cost a whopping $20 billion; its first phase should be completed by 2012.

Another mega project, not far from Muscat, is “The Wave”, an artificial lagoon with yacht harbour, holiday apartments, town houses and beach villas, three luxury beach resorts. “Yiti

Marina”, to be completed by 2013, will include three luxury beach resorts, shopping mall, 18-hole golf course and yacht harbour.

So, while Oman can use existing charms to capture the well-heeled, nature loving culture tourists, it has its eyes on another prize – the mainstream European holidaymakers. Dubai – and the wider UAE – might be pre-eminent for a few years to come, but there’s real competition being built along the shores of the Gulf’s east coast. n gb@motivate.ae May 2010 gulfbusiness.com

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Rising capital It’s not just Dubai that’s bringing in the visitors. Mubarak Al Muhairi, director general, Abu Dhabi Tourism Authority, shares the plans and the appeal behind the UAE capital’s attractions.

What is the profile of the Abu Dhabi visitor/tourist?

We currently do not have a mechanism for tracking visitors/tourists and we talk in terms of hotel guests, as we have a mechanism for tracking and profiling these. Currently 80 per cent of our hotel guests are people who are in the emirate for business purposes – about 10 per cent of these can be attributed to the meetings, incentives, conferences and exhibitions segment.

We are now looking to better balance the equation between business and leisure hotel guests. We view our leisure tourists as those wanting to engage with local heritage, who seek experiences off the beaten track – what we term the cultural seeker.

How is Abu Dhabi hoping to draw in visitors who may be spoilt for choice as the recession makes other Middle East destinations more affordable?

We do this by leveraging on our natural assets and heritage while putting together competitive, value-added packages, which are often luxury-oriented, when compared like-with-like.

Our natural assets are considerable – over 200 islands and 400 kilometres of coastline, stunning desertscapes and ancient oases. Added to this is a vibrant, cosmopolitan capital city. Diversity of offering and terrain is a key advantage. The leveraging of these assets is perhaps best seen in Al Gharbia, the Western region, where Sir Bani Yas Island has been opened up to tourism with the Desert Islands Resort and Spa by Anantara. Guests at this bou-

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tique hotel have the chance to take in 4x4 guided tours of the Arabian Wildlife Park where animals roam free and which has one of the world’s largest herds of Arabian oryx – more than 400 in all. The Tourism Development and Investment Company (TDIC) has also leveraged the natural environment in its Qasr Al Sarab desert resort, which is set amidst the towering dunes of the Liwa Desert where guests can take part in traditional desert pursuits.

Guests at the new Tilal Al Liwa resort from the National Tourism & Hotels Corporation also have the chance to join in desert pursuits.

From a heritage standpoint, Abu Dhabi has much to offer and many authorities in Abu Dhabi are working to better this offering, for instance the Abu Dhabi Authority for Culture &

the famed British explorer Wilfred Thesiger, who we call Mubarak Bin London, who crossed the Empty Quarter in the 1940s.

What is in the works for Abu Dhabi’s tourism development in the next five years - what sort of offerings and positioning can we expect?

The positioning will remain the same but we expect a much expanded offering. Of course, within five years you will see the first museums open in the Saadiyat Island Cultural District – work is already underway on the Louvre Abu Dhabi. These institutions, although not being built solely to satisfy a tourism need, will be considerable visitor draws as much for the very design of the buildings as the works of art they exhibit. The build-

We have, in the past year, attracted a number of offerings from the private sector and entrepreneurs.

Heritage is currently renovating Qasr Al Hosn – the White Palace – in Abu Dhabi city, the former Ruler’s palace, which is to be turned into a museum and will be a considerable tourist attraction. Of course the jewel in our heritage offering is Al Ain – our heritage heartland which I think of as the soul of the emirate. Here visitors can stroll through the ancient oases, visit a former palace and the renovated Al Jahili fort, which now houses a permanent exhibition of the work of

ings have all been designed by eminent architects who are all Pritzker prize winners, by Jean Nouvel in the case of Louvre Abu Dhabi.

We have, in the past year, attracted a number of offerings from the private sector and entrepreneurs. These include: the Big Bus Company which is now doing open top bus tours of Abu Dhabi city; the Yellow Boats which offer speedboat tours along the coastline; a company offering hot air balloon rides over the desert; Sea Cruisers,

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which offers fishing and diving trips and is the project of a UAE national entrepreneur; helicopter tours over the coast and the city which are being run

by Falcon Aviation from a new purpose-built terminal near Marina Mall; a free-to-use Beginners Wakeboarding Park which Flash Entertainment has opened on The Corniche and, more recently, the opening of the Kids Park Zoo. We expect more private sector and entrepreneurial product to enter the market and will actively encourage it.

On the accommodation front you will see more hotels and resorts covering varying price points and the entry into the market of some of the biggest hospitality brands around – JW Marriott, Mandarin Oriental, St. Regis and Le Bristol of Paris for example.

We also anticipate significant movement on the business tourism front with Abu Dhabi already having secured host city status for the World Ophthalmology Congress in 2012, which will bring 12,500 people to the city, and the World Routes Development Congress the same year. We are

bidding on a number of other major international meetings. We are catalysing the business tourism sector through our Advantage Abu Dhabi incentive where meetings organisers can apply for a range of support for new projects which cover one of 12 sectors aligned to the Abu Dhabi Government’s 2030 plan. The World Green Tourism Abu Dhabi conference and exhibition which will be held at ADNEC in December is the first project to emerge from Advantage Abu Dhabi.

What is ADTA focussing on this year to build Abu Dhabi’s tourism base?

This year we are focussing more heavily on activating the leisure segment.

Previously we were limited in our efforts to penetrate this segment by lack of accommodation supply and attractions. These two challenges have now been addressed – there are more places to stay, they are more affordable as supply-and-demand dynamics have come into play, and there are more leisure activities available. Our leisure proposition has made great strides

already this year with the opening of the Saadiyat Beach Golf Club and the Yas Links facility – both 18-hole, all grass, championship-ready courses of truly world-class standing. Over in Al Ain the Palm Sports Resort has completed the expansion of its course into an 18-hole, all-grass facility. These have greatly enhanced our golf tourism proposition. Our leisure offering will take its biggest leap forward later this year with the much anticipated opening on Yas Island of Ferrari World, which will be the world’s biggest indoor theme park.

We are working closely with Abu Dhabi Airports Company to leverage the expanding number of airlines flying to Abu Dhabi and working with Etihad to penetrate the emerging markets that its ever increasing route network is bringing us into contact with.

Improved air access is bringing us additional opportunities and we are working with the industry at large to come up with stop over programmes to entice the many passengers who transit Abu Dhabi International to stay a while and sample the destination – this, we believe, will result in repeat visitation of longer stays.

We have stated our hotel guest targets for this year – we are looking to achieve a 10 per cent rise on last year’s performance which will take us to 1.65 million guests.

What does Abu Dhabi do differently or better than its regional competitors?

Our major events programme is perhaps one asset which sets us apart and which we continue to develop. From motorsport to aerobatics, gourmet festival to the Summer in Abu Dhabi carnival, which this year is expanding to take in Al Ain, the programme is exciting, engaging and entertaining. That, with other events, makes a programme which is hard to beat and means that there is something going on in the emirate almost every week of the main October-May season.

I also believe we are delivering a heritage proposition which is distinctive – though I do not want to say we are better than others – just different. n

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the PEOPLE Vipen Sethi

Leading Landmark From balance sheets in Bombay to retail shops in Bahrain, Vipen Sethi has ignored the path of least resistence to head a major Gulf retailer, GLENN FREEMAN reports.

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hange is a common theme running through Vipen Sethi’s career – changing roles, changing scenery and changing market conditions.

In his 20 years with Landmark Group, Vipen Sethi has gone from retail management, then back to his accounting roots in corporate finance, before rising to chief executive officer four years ago. His career with the retailer has also taken him from the bustling streets of Bombay to the relative quiet of Bahrain and into the unique, developing city that is Dubai.

More recently, the main change Sethi and his management team at Landmark have had to contend with is the global slump. As the economic malady affecting the rest of the world began to infect the UAE in late 2008, particularly Dubai, the previously booming retail sector of the glitzy emirate took a heavy hit. Many retailers in Dubai radically downsized operations or closed altogether, as new malls continued to open and supply of retail space drastically outstripped demand.

According to figures from Jones Lang LaSalle, the total mall retail space across Dubai will reach an estimated 2.5 million square metres by the end of 2010, with an additional 400,000 square metres expected to come online by 2012 – though some projects have been put on hold.

However, as Sethi explains,

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Landmark’s somewhat unorthodox approach, at least by Dubai’s standards, in targeting the middle-tier of shoppers, has paid off. Retailers of luxury brands, such as the Bin Hendi group’s Rivoli, Damas and others, suffered decreased sales and closed numerous outlets across Dubai. By contrast, the value-centric brands sold in Landmark’s Max, Splash, ShoeMart, Home Centre and other stores, enabled them to weather the storm with minimal impact. Today, Landmark is a hugely successful enterprise, not just in Dubai, but also across the Gulf and neighbouring countries. Boasting around 940 stores across a multitude of brands, it employs over 30,000

Middle East. The group, in total, has recorded very positive results.”

“We have not closed down a single store within the group – we’re trying to make things work within the stores which might have been a little bit slow, but have not shut down a single store during the recession,” he says proudly.

Instead, they have focused on cutting costs over the last 18 months. Landmark has done this through measures such as renegotiating rents with landlords and rationalising some of their retail floorspace, which Sethi believes has left them in an even healthier state than they were before the slowdown.

It is in one of the territories that helped sustain Landmark through

We have not closed down a single store within the group – we’re trying to make things work within the stores. people and generates turnover in excess of $3.2 billion.

“As a multi-concept, multi-territory retail company, I would say that most of the heat, on account of the recession, has been felt in Dubai, not so much in the rest of the Middle East, or in the rest of the UAE either,” says Sethi.

“While growth might have flattened because of a lot of [oversupply] of retail space in Dubai, the rest of the group has done very well in other parts of the

the recent tough conditions where Sethi got his start in the retail game, shifting from Bombay with his wife and young family in 1991 to lead the Mothercare chain in Bahrain. Prior to this, he had worked for 10 years as a chartered accountant for a large firm in Bombay called Steel Age Industries.

When asked what prompted the move, Sethi says he wanted to expand his horizons. “Having spent 10 years with my job in India, I made my first

the PEOPLE Vipen Sethi

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the PEOPLE Vipen Sethi

trip abroad to Bangkok, Thailand, and then I decided to look for opportunities abroad,” he says. “Three opportunities came along: one in Africa, one in the Far East and one in the Middle East. I chose the one in Bahrain because I felt comfortable with Micky.”

Micky Jagtiani is the chairman of Landmark Group, and a leader who Sethi greatly admires, particularly in the way he has developed Landmark’s senior management team. “Micky is our visionary and chairman – we’ve learned a lot of good retail lessons from him. He’s very hands-on, and has been able to spend a lot of time with us, to help and to nurture us in becoming great retailers,” says Sethi. And the ability to nurture a business and its executives was especially crucial in the Gulf market then. While even now, the small kingdom of Bahrain is relatively quiet on the retail front, when Sethi first arrived as general manager of Landmark’s then market-leading Mothercare stores, it was much less developed, with few competitors.

“There was competition, but it was nothing like it is today – today almost every single UK-based and local brand in this space is quite prevalent and well spread out [across Bahrain].

in Bahrain, his first experience with Landmark in Dubai wasn’t quite so successful, though he and the Landmark group learned a great deal from this.

“Moving from Bahrain to Dubai, I was involved with a home-grown restaurant business called Superbowl.

A do-it-yourself burger outlet, the ambience, food and service was good, but the size and location were wrong – a big learning experience there.”

“The biggest learning from this early experience in the food business is that you need credibility and that it’s always the big brand names that sell. We tried to do it ourselves and set up the

The biggest learning from this early experience in the food business is that you need credibility.

But in those days, it was Mothercare that was the market leader, a good household name,” he says.

Four thriving Mothercare stores fell under Sethi’s remit – two in Manama, and one each in Riffa and Muharraq – and the company grew from there. After five years in Bahrain, in which time Sethi managed to help build Landmark’s successful retail operations, he then shifted focus to Dubai Landmark first established a presence in the small UAE emirate of Sharjah in 1989-90, with its ShoeMart and Babyshop stores. While Sethi moved from a thriving retail business

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restaurant business with our in-house brand, which wasn’t very successful.

“The proportion of average checkout was too small, the space was too large – we made a few mistakes,” admits Sethi, while explaining they cut their losses very quickly, moving on from this venture after just 12 months.

In its successful forays into the food and beverage sector since then, with The Meat Co, Mango Tree, Food Mark and other brands, they have chosen to partner with established franchises instead. “It’s a much quicker and better way of going forward with the hospitality business,” says Sethi.

From here, Sethi then took up a key role in establishing Landmark’s international business, with India an early target for significant growth.

“We went into India in a big way and signed up three stores very quickly, in Chennai, Bangalore and Hyderabad, in making our entry into the country,” he says, explaining how Landmark expanded throughout the Levant, also opening retail outlets in Lebanon and Cyprus.

Given his own sub-continental heritage, having been born in Delhi, India is a market that Sethi understands well. “Having grown up, studied and worked in Bombay, I know the Indian psyche and the mentality of the people” After firming up Landmark’s international operations, Sethi made another diversion in his career path with the retailer, heading up the group’s corporate finance team for the next five years. While he doesn’t regret this period, looking back, Sethi admits it wasn’t one of his most challenging roles.

“Particularly with a company that was doing well, and with the requirements not all that complex here, because there’s no taxation and no duties as there are elsewhere in the world, the role is far easier than in say UK or India.”

“It was challenging from the point of view of how to manage finances, push growth of the company and balance this while keeping shareholders happy,” says Sethi, but he prefers broader management responsibility.

Speaking of the primary differences he perceives between accountancy and the retail business, Sethi explains that he finds the two industries quite complementary.

“I think retail, it’s very hands-on. It’s not rocket science – you’ve got to keep it simple, and I think the group has great product, and that’s what makes it for its customers,” he says. “Accountancy teaches you to get down to the nuts and bolts of business to see what’s performing, what’s not performing. That experience, coupled with the hands-on experience in retail, has helped us in taking the Landmark group where it is today.” gb@motivate.ae

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THE LIFESTYLE Competition

WIN

T

an overnight stay at The Sofitel Dubai Jumeirah Beach Hotel

he Sofitel Dubai Jumeirah Beach has a prime location just minutes from the Arabian Gulf and The Walk – the city’s stylish promenade and outdoor shopping area. The 438-room hotel is spread over 31 floors including 27 suites, 12 prestige suites and one imperial suite. Each room has a private balcony with unobstructed views.

The interior draws upon the natural elements and Arabic influences, with some vibrant colour tones while the lobby contains a fivemetre high waterfall and a six-metretall acacia tree.

All rooms feature Sofitel’s MyBed concept – an all-feather bed and extra light down duvet,

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through the landscaped gardens and alfresco terraces.

For lazy days around the pool, head to the zen-inspired pool lounge Infini which offers an excellent spot to enjoy cocktails, Arabic treats and to watch the spectacular sunsets. complimented by a pillow menu, L’Occitane and Hermes amenities and WiFi internet access.

A butler service is available for guests staying in one of the 40 suites or 26 Club Millesime rooms. For events there’s a 400-capacity ballroom decorated with marble and precious woods. The hotel is 35 minutes from Dubai International Airport and close to Dubai Media City and Jebel Ali Free Zone.

There are five food and beverage outlets to choose from. French brasserie A.O.C, Italian restaurant Rococo, warm and relaxed Irish bar called The Hub and a colonial style lounge Plantation.

Shopping enthusiasts can browse The Walk’s 400 boutiques, cafes and restaurants and meander

T h e

P r i z e

An overnight stay for two people at The Sofitel Dubai Jumeirah Beach Hotel, Dubai, including breakfast.

H ow

T o

W i n:

Terms and conditions: • The voucher cannot be redeemed in cash or with any other promotion or discount • Reservations are required and subject to availability. Please present the original certificate upon arrival The Question What is the Italian restaurant called? a) Rococo b) A.O.C. c) The Hub To enter, log onto www.motivatepublishing.com/ competitions and answer this question.

THE People Executive moveS Regional real estate company Deyaar Development, has announced the appointment of Saeed Al Qatami as acting chief executive offiver (CEO).

The decision was made by Deyaar following a resolution by the company’s board of directors who also approved the dismissal of the previous CEO, Markus Giebel. Al Qatami, has served at Deyaar since 2007 and most recently held the title of vice president of business development at the Dubai-headquartered property developer.

Carat has appointed Arjan Pomper as its new chief executive officer to manage the growing business in the Middle East and Africa.

Pomper, who is a member of the executive board in Europe, has also overseen a restructure of the regional headquarters. Pomper will lead an agency that works with some of the world’s biggest brands including Kellogg’s, Philips and adidas.

Timur Ilgaz will be the new general manager of Amwaj Rotana Jumeirah Beach Dubai. He brings 25 years’ experience in the field and has worked in Turkey, Canada, the Czech Republic and Kazakhstan.

Timur led the successful renovation project at Jumeirah Rotana in 2007 when he was general manager. During his service, he has been recognised with excellence in managing resorts, leisure and city hotels.

Rixos Hotels has announced the appointment of Kees Hartzuiker as the group’s chief executive officer. Hartzuiker will lead the Rixos team of 6,000 staff in 12 properties across five countries. He brings with him numerous years of outstanding success in hotel management with Hilton Worldwide, where he held several senior positions in Europe, Middle East and Asia.

Four Seasons Hotels and Resorts has announced the appointment of Jane Burnell as new regional vice president of sales for Europe, the Middle East and Africa (EMEA). In her new role, Burnell will provide guidance and support to the Four Seasons regional sales teams that are based in Dubai and Riyadh.

MEMAC Ogilvy, a communications agency in the Middle East, announced the appointment of Saada Hammad as regional director of public relations for the Middle East and North Africa. Hammad began her career in public relations at Bain Communications in Dubai and added value amongst various organisations in the region and most recently was the communications manager for General Motors Middle East.

Etihad Airways has announced Geert Boven has been appointed managing director and a member of the Board of Amadeus Gulf, a joint venture global distribution company owned by Etihad Airways and Amadeus International.

Boven’s appointment follows the decision by the current managing director Ghulam Saleh Al Balooshi, to pursue other opportunities after a very successful career with the company.

International construction and property consultancy Gardiner & Theobald (G&T) has appointed Chris Gunn as its new director. Gunn moves to the UAE from G&T’s Prague office, where he was involved in managing the growth of the firm both within Prague and throughout Central and Eastern Europe. Gunn’s appointmen highlights G&T’s dedication to developing its business in the region.

Emaar Hospitality Group has promoted Amit Arora to vice president of sales and marketing. Amit who has over 14 years’ experience, will oversee all sales and marketing initiatives for the group including developing brand synergies between various individual business units and leisure facilities in addition to driving the launch of Armani Hotel Dubai. Since joining Emaar Hospitality Group, he spearheaded the creation and launch of The Address Hotels and Resorts brand.

At Gulf Business we try to keep you up to date on the region’s movers and shakers. If you know of any new faces or company reshuffles, please write to The Editor, Gulf Business, Motivate Publishing, PO Box 2331, Dubai, UAE; fax to +971 4 2827593; or send an email to theresa@motivate.ae. We reserve the right to edit material.

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THE LIFESTYLE TRAVEL

A raft of adventures Discover the charm of the ancient bamboo raft at this Thai resort and enjoy a taste of life in the slow lane.

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he bamboo raft has been an integral part of South East Asian life for a thousand years. Now guests at Anantara Golden Triangle Resort and Spa, Thailand can hop onboard and cruise down nearby rivers as part of the new Bamboo Rafting Adventure.

The all-natural raft allows guests the opportunity to see exotic flora and fauna at close quarters and to savour the peace and beauty of nature’s gentle voice.

Set on the banks of the Ruak River, Anantara Golden Triangle enjoys a unique location. As the raft meanders along, both banks seem identical – but in fact one side is Burma and the other is Thailand. Used as a

thoroughfare for fishermen from both countries and migratory birds who know nothing of border controls, the river is alive with the timeless culture that stands at the heart of the Anantara experience.

Guests can choose to begin their adventure at dawn when the river begins to awaken or to set off in late afternoon. The 90-minute tour starts with a short to drive the local village

of Wang Laos, where guests will board the bamboo raft, which is designed with comfortable seating and a canopy to provide protection from the sun.

Once on the river, two expert raftsmen will use poles to guide the vessel in perfect harmony with the gentle flow of the water. Guests will have plenty of time to relax over a glass of champagne or enjoy a picnic breakfast on early morning tours.

SLEEPS&EATS The Media One Hotel,

DO NOT DISTURB!

Media City, Dubai

From the second you walk inside this hotel, you’ll realise it’s one of a kind.

From the space-age feel lifts, to the party vibe on the roof top pool, unconventional is the theme. Loud music plays through the futuristic, neon lit lobby while the roof top pool is surrounded by large bed-like sun loungers perfect for lazy afternoons.

The Med restaurant offers imaginative Mediterranean cuisine, the mixed grill and tenderloin steak are recommended.

While it may not be everyone’s cup of tea, this hotel certainly stands out and it’s hip and happening to say the least. www.mediaonehotel.com

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DO NOT DISTURB!

Qasr Al Sarab Desert Resort, near Abu Dhabi

Nestled in the magnificent dunes of the Liwa Desert, in the Empty Quarter, this resort by Anantara embraces the epic adventures of desert culture with luxury. Unwind in private, palatial-style villas, traverse towering dunes and sandy desert trails or relax in the spa. Adventurers can embark on desert-based activities such as camel trekking, archery or nature spotting.

It’s just over 90 minutes from Abu Dhabi and situated in the largest uninterrupted sand desert in the world – a magnificent desert resort, perfect for anyone looking to stay off the beaten path. www.qasralsarab.anantara.com

Seafood Bar by Caviar House and Prunier

Terminal 3, Dubai International Airport

Recognised as pioneers of fine gastronomy and famed for importing and producing the finest caviar and smoked salmon in the world, Caviar House and Prunier has been gaining momentum ever since it set-up shop at the airport last year.

It’s the first of its kind in the Middle East.

Expect the finest imported caviar from the Caspian Sea, Balik salmon, foie gras, flavoured caviars, melt-in-your-mouth sushi and shellfish which can all be enjoyed while waiting for your flight. www.caviarhouse-prunier.com

THE LIFESTYLE ART CHARLES POCOCK CANVAS OPINION

Cairo – The architectural jewel of Islam

Shortly before arriving back at the hotel’s private pier, guests may come upon the residents of the Anantara Elephant Camp as they arrive down at the river for a scrub from their handlersand their daily romp in the water.

This intimate experience can be designed as a romantic event for two or as a great family outing.

Price $245 including champagne. ...

Ping Pong The Dubai Mall

The uber cool dim sum emporium has launched a new menu, with the added delight of an express lunch set menu for those in a hurry. It includes soup, four steamed dim sum and a choice of mocktail it’s available until 5pm.

The express lunch is perfect for shoppers who need to re-fuel but don’t want a two-or three-course meal. The menu comprises spicy prawn and mushroom soup, prawn and coriander dumpling, vegetarian sticky rice and mushroom plus the king of all dumplings, the prawn har gau. www.thedubaimall.com

‘’He who has not seen Cairo, has not seen the magnitude of Islam, for she is the capital of the world, the garden of the universe, the assembly of nations, the beginning of the earth, the origin of Man, the iwan of Islam and the seat of Kingship.’’ Ibn Khaldun (1332 AD–1406 AD) In 749 AD the Abbasids came to Egypt. A building of note from this period is the Nilometer on Roda Island, which is the oldest Islamic monument preserved in its original state. It’s an incredible feat of engineering and one of the most important constructions related to water ever built in Egypt. The monument is ignored by most tourists, which is a huge relief as there are no coach hordes of camera clickers.

By 868 AD the area of Cairo was independently ruled by Ahmad Ibn Tulun, founding the short-lived Tulunid dynasty at Al Qata’i. Ibn Tulun was a soldier and patron of the arts, who first built a hospital and royal palace but perhaps most importantly, the earliest surviving mosque, the Ibn Tulun.

In 969 AD Gawhar Al Siqili (The Sicilian) conquered Egypt, making it the seat of the Fatimid Caliphate and immediately went on to found the capital Al Qahira (Cairo). The most notable Fatimid monuments which can be seen today are the Mosque of Al Azhar, the Mosque of Al Hakim bin Amr Allah, the tombs of Al Sab’a Banat and the sanctuary of Al Juyushi.

The greatest building programme during the medieval period came under the Mamelukes, this dynasty is broken into two parts: Bahri (1250-1381) and Circassian (1382-1517). The Mamluke state was one of the great Islamic powers of the middle ages and its location makes it the architectural jewel it is today. It is the buildings of the Mamelukes that one identifies with in relation to the Islamic architecture of Cairo. The highlights are the Mosque and Madrasa of Sultan Hassan, the Mosque and Madrea of Sultan Qaytbay and the Mausoleums of Barquq, Ashraf Baybars and Qaytbay.

To get a real feeling of medieval Islamic Cairo, a walk through the old city gives you a good perspective. Start by the Fatimid Walls near the Al Hakim Mosque through to Khan Al Khlaili market, then onto the Tent Makers before reaching the mosque of Sultan Hassan. Within the Khan Al Khalili, a stop at Fishawi Café for tea is advisable as well as a visit to Abdel Zaher bookbinding, behind Al Azhar Mosque, the oldest surviving bookbinders in Egypt.

A visit to the newly-opened Museum of Islamic Art will be a perfect way to familiarise oneself with the many movements in medieval Cairo.

The museum was established in 1880 and it moved to its current site in 1903. Masterpieces include a screen from the Madrasa of Sultan Hassan, an ebony and ivory Qur’an case from the Madrasa of Umm Al Sultan Sha’ban, extensive Mameluke metal artifacts from doors, basins, bowls and candlesticks, Mameluke glass mosque lamps, Islamic textiles, coins and an incredible collection of manuscripts. The only international collection that is comparable must be the Topkapi and Islamic Art Museums in Istanbul.

While in Cairo be sure to check out El Mashrabia Restaurant, near the Four Seasons, which serves traditional Cairene food and possibly the best Umm Ali ever tasted. n

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THE LIFESTYLe LEISURE

Deluxe green machine Laura Collacott takes a drive on the green side in Lexus’ hybrid offering, the LS 600hL

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ybrids are, to their proponents, the cars of the future. Or at least a significant step in the green direction. Under the glare of international global warming scrutiny, car makers have been scrambling to make their industry more environmentally friendly.

For those that don’t know, hybrids combine a petrol engine and electric motor, switching between the two depending on your speed and driving style. The battery harnesses energy both as the car moves along and, more crucially, as the brakes are applied.

To look at, Lexus’ flagship hybrid car is barely distinguishable from other luxury sedans. It has the same sturdy physique as regular vehicles, with a long wheelbase and broad width, albeit, in my opinion, with less design finesse than you would normally expect from an executive car.

Powered by a five-litre V8 engine, the LS 600hL accelerates from 0-100kph in a respectable 6.3 seconds. Lexus claims its performance is comparable to a V12 or turbo-charged V8 engine, with the fuel efficiency of a V6.

Internally, it’s everything you’d expect of Lexus: wide, comfortable leather seats are supplemented by all manner of gadgets. Along with recline, massage and heating functions in some of the seats, features include a rear refreshment table, drinks fridge, high quality audio-visual system and even a multi-zone climate control system.

You get what you pay for – a hefty $125,200 for the base model – in

terms of safety too. The LS 600hL has outstanding safety mechanisms, including 11 air bags and a precrash safety system. This alerts you of likely frontal collisions, with a dash display and buzzer alarm, while simultaneously increasing braking power with pre-crash brake assist.

One question the LS 600hL raises, at least in this market, is this: if you’re buying a car to drive mostly on the highways, why would you buy a hybrid, that will then be petrolpowered for the majority of the time?

As luxury hybrid cars go, this one probably leads the market.

The real question is, in an oil-rich region of petrol heads, just who is going to care? n

ROBBIE GREENFIELD IN THE SWING

Abu Dhabi goes old school Yas Links is a nod to tradition in a stunning location

W

hen it comes to Abu Dhabi’s grand masterplan, Yas Links Golf Club is something of an anomaly. You only have to look at the neighbouring structures of Ferrari World, the Yas Marina Circuit and the chameleonic Yas Hotel to appreciate the emirate’s taste for the futuristic.

And yet Yas Links is a tribute to an era where golfers played in plus fours, smoked pipes and answered to names like Old Tom Morris. Let’s face it, that’s not where Abu Dhabi’s at.

The most amazing thing about the course is, simply, that it works. In this hot, desert climate, the concept

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of emulating a seaside Scottish links appears absurd at first, but Yas Links is remarkably authentic, from the wispy fescue grass to the crumpled dunes and the hickory flagsticks.

Yas has traded the bling factor so pronounced in other new golf courses here with a minimalist approach that is both welcome and refreshing.

Credit must go to the developers, Aldar, for having the willingness to attempt such an audacious project, but American designer Kyle Phillips is the star, bringing his vision of a modern links course to life in dramatic fashion on the gently curved

shoreline of Yas Island.

“What makes the course so intriguing is how traditional it is, because nothing like that has ever been attempted before in the UAE,” says Phillips (who is the designer behind instant Scottish classics Kingsbarns and Dundonald).

“There are a lot of very good golf courses in the UAE, but up until now there hasn’t been anything that would feature on a connoisseur’s ‘must play’ list,” Phillips explains. “I suppose that was our aim at Yas, to produce a different course that is complex and varied enough to appeal to the most passionate of golf enthusiasts.”

It’s very early days for Yas Links Golf Club (the full course is scheduled to be open by August) but Phillips looks to have emphatically achieved that objective. n

THE LIFESTYLE TECHnology

Hot stuff Asus Eee PC Prime 1018P $tba It’s easy to forget that Asus invented the netbook. Way back in 2007, the dinky Eee PC 701 caused a serious stir among bulky great laptop.

But with its cheap plastic finish it was handy, but ugly.

But now, Asus have taught us that netbooks can be beautiful and useful, with the 10in Eee Prime. It’s just 18mm thick, clad in a brushed aluminum shell and has a 10-hour battery. www.asus.com

Samsung BD-C8500M $490 We’re not ones to dream about home cinema equipment, but Samsung’s BD-C8500M is exactly the kind of gadget that induces involuntary nocturnal lust. It’s a Blu-ray player (and a 3D-ready one at that) but with a 500GB hard drive, Wi-Fi and DLNA onboard.

Meaning it will stream from your computer or on-demand flicks from the net. www.samsung.com

Panasonic Lumix G2 $800 Back for another shot at the Micro Four Thirds crown, Panasonic’s latest looks to its compact cousins for inspiration. At the G2’s core, you’ll find a 12MP sensor, interchangeable lenses and support for RAW files, which will appeal to more serious snappers. The Intelligent Auto mode makes it less baffling for amateurs, and a 3in Live View touchscreen makes navigation a doddle. www.panasonic.com

THOMAS SHAMBLER GEEK SPEAK

Admission is the first step to recovery Hardcore internet-lovers have been up in arms this month, frothing at the mouth while pumping their fists up in the air. The reason for their anger: an underwater cable known as Sea-ME-We 4. Obvious naming flaws aside (I would have named it Larry), it’s a cable connecting Alexandria to Marseilles, and happens to be the fibre-optic pipeline that feeds the UAE internet’s life-giving bandwidth.

Fortunately for the rest of us, without access to Twitter, Facebook and Blogger, there’s little a budding net-geek can do to be heard. Still, my little Belkin router at home has been on the fritz lately and my service provider’s seemingly trained-tobe-unhelpful customer service reps blame the cable. No-one knows how the cable was severed, although I’d like to think there’s a large crab wandering the Mediterranean snipping at random.

So, for the past two weeks my internet has been on the blink. During one of these periods of internet darkness, I began to wonder if I’m addicted to the internet.

Internet addiction has been getting some press lately and I decided to look into it.

According to Etisalat, more than a quarter of the population in the UAE is online, of which 44 per cent are families. Each member of that connected family go online for at least four hours per day.

I asked the expert, Google: ‘Am I addicted to the internet?’ It led me to the wonderfully-apt netaddiction.com. There, I took a test to evaluate my ‘tumble towards the trouble of addiction’. I was asked: “How often do you fantasize about being on-line?” and “Do you fear that life without internet would be boring, empty, and joyless?” Quite.

The result? I am in the danger zone of addiction, and might ‘choose to spend more time online than going out with others.’

Blast, that was a bit of a shock. Still, at least I’ve always got my best-mate Larry. n Thomas Shambler is the features editor of Stuff Magazine Middle East. thomas@motivate.ae

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THE ESSENTIALS BOOKS

Stating the obvious This month Gulf Business looks at how the right fight can help a business succeed and how the global recession may have been caused by ignoring the shared one.

“

D

ivide and rule” has long been such an important weapon in the arsenal of government administration that one could assume it second nature to any boss.

So one is not sure who The Right Fight: How Great Leaders Use Healthy Conflict to Drive Performance, Innovation and Value (HarperCollins), by Saj-Nicole Joni and Damon Beyer, is aimed at. The blurb says conventional wisdom points to alignment, shared goals etc, being at the core of any company. However, any but the most naive businessman or cubicle slave is already well aware how the different tensions in a workplace can be used as a force for good as well as bad, and that surrounding yourself with a coterie of yes-men isn’t as flattering to performance as it is to your ego.

Not only is the premise perhaps a little obvious, the writing is also clichéd, laboured and unfocussed.

“Don’t fight the wrong fights, fight the right fights,” is a core message. Sadly, the right fights aren’t bare-knuckle displays of corporate machismo fought between accounts and marketing out in the parking lots, but have rules, equally matched opponents and even referees. Sun Tsu would be very disappointed, Examples come from Shell and a dozen other blue-chips, but most stories seem to be simply shoehorned into the theory, rather than oh-wow-

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never-thought-if-it-that-way revelations. Take Dell for example. The “wrong fight”, according to the authors, is that Dell insisted on too much alignment, the management strategy was all wrong in insisting that everyone be focussed on the company’s core strategic aims, and knew exactly where they stood in relation. But could it be that the company had simply grown too big for the mail-order-computer business it was in, was as efficient as it could be, and simply made the wrong decisions by entering new markets in a hurry amid pressure from shareholders? Over focus on alignment, and lack of dissent internally, may have added to Dell’s woes, but they didn’t cause them.

Ultimately, The Right Fight does move a little beyond teaching a wily chief exec to suck eggs – but not much. This is just another mid-tier management self-help book that will be left to gather dust as soon as a better buzz phrase comes to market.

T

o many ‘economic civilians’, the recession that hit the world in 2008 seemed to come out of the blue, turning everything upside down without warning or preparation. But those in the know say recession was long in the making, and its origins traceable.

At least, that is what David Smith portrays in his new release The Age of Instability: The Global Financial Crisis and What Comes Next (Profile Books).

The author conducts an exhaustive investigation into the causes and contributions to the economic downturn, starting as far back as the 1980s. The book also spans the globe, jumping between Gordon Brown’s chambers in the UK, over to Hong Kong and staying long in the US – where the biggest collapses took place.

Smith then addresses some of the niggling questions that were asked as the world surveyed the economic wreckage. Namely - if these things were so large, how were they missed?

The fault lies in a combination of hubris and ignorance, plus the complexity of economic mathematics, he alleges. Those charged with keeping an eye on things were lulled into a false sense of security, believing that illiquidity in a market on such massive scale was improbable, if not downright impossible.

There was also an element of belief that ‘things will right themselves’.

The author then goes on to detail where he thinks the global economy stands today – smack dab in the midst of the New Age of Instability from which the book draws its name, where some structural flaws remain to be addressed.

THE ESSENTIALS CALENDAR

Exhibitions, conferences & seminars Gulf Business presents a comprehensive listing of business-related exhibitions, conferences, events and seminars in the GCC for the forthcoming month.

EVENT

PhotoWorld Dubai Exhibition Heavy Oil World MENA 2010 Arabian Travel Market Exhibition gulfBID 12th Global Businesswomen and Leaders Summit Middle East CFO Middle East SME Banking DOMOTEX Middle East 2010 Middle East Rail 2010 Infrastructure Investment World Middle East 2010 Health & Wellness Bahrain Expo Bahrain International Travel Expo Cards Middle East 2010 MECOM 2010 Middle East Communications Mobile Money World Middle East 2010 The Hotel Show 16th GCC eGovernment and eServices Forum 2nd GCC Job Localisation Challenges and Talent Management Conference PABME & PHARMA 2010 GCC Educational TV Channels Forum Middle East Petrotech 2010 Arabian Construction Week 2010 Civil Engineering Middle East Greenbuild Middle East World Summit & Expo Futurebuild Middle East GCC Young Women Leaders Summit Property Arabia 2010 Healthcare Financial Management Heavy Oil World MENA 2010

Date May 03-05 May 03-06 May 04-07 May 04-06 Mar 08

LOCATION

ORGANISER

DIEC, Dubai Bahrain DIEC, Dubai BIEC, Bahrain

Channels Terrapinn Reed IFP

Burj Al Arab Hotel, Dubai

Datamatix

May 09-10 May 09-10 May 10-12 May 10-13

Hyatt Regency, Dubai Hyatt Regency Hotel, Dubai DIEC, Dubai Al Bustan Rotana Hotel, Dubai

Marcus Marcus Deutsche Messe Terrapinn

May 10-13

Doha, Qatar

Terrapinn

May 12-14 May 13-15 May 17-19 May 17-19 May 18 May 18-20 May 22-26

BIEC, Bahrain BIEC, Bahrain Al Bustan Rotana Hotel, Dubai ADNEC, Abu Dhabi Al Bustan Rotana Hotel, Dubai DIEC, Dubai Al Bustan Rotana Hotel, Dubai

BECA Magnum Events Terrapinn IIR Terrapinn DMG Datamatix

Al Bustan Rotana Hotel, Dubai

Datamatix

DIEC, Dubai Al Bustan Rotana Hotel, Dubai BIEC, Manama, Bahrain ADNEC, Abu Dhabi ADNEC, Abu Dhabi ADNEC, Abu Dhabi ADNEC, Abu Dhabi Al Bustan Rotana Hotel, Dubai BIEC, Bahrain Hyatt Regency Hotel, Dubai The Gulf Hotel Bahrain, Manama, Bahrain

IIR Datamatix AEM MECOM Clarion Events Clarion Events Clarion Events Datamatix AEM Marcus

May 23 May 23-25 May 24 May 24-26 May 24-26 May 24-26 May 24-26 May 24-26 May 25 May 26-29 May 30-31 May 31-02 Jun

Terrapinn

ADNEC (Abu Dhabi National Exhibition Centre) on tel: +9712 4446900 fax: +9712 4446135.

AEM (Arabian Exhibition Management) on tel: +973 17550033, fax: +973 17553288.

BECA (Bahrain Exhibition & Convention Authority) on tel: +973 17558826, fax: +973 17555513.

Channels on tel: +9714 2824737, fax: +9714 2825757.

Clarion Events (MECOM) on tel: +9714 33565330, fax: +9714 3351109.

Datamatix on tel: +9714 3326688, fax: +9714 3328223.

Deutsche Messe on tel: +9714 3376072.

DMG (DMG World Media Dubai Ltd) on tel: +9714 3319688, fax: +9714 3319480.

DIEC (Dubai International Exhibition Centre) on tel: +9714 3321000, fax: +9714 3318034.

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

Magnum Events & Exhibition Management on tel: +973 17200001, fax: +973 17212088.

Marcus Evans Kuala Lumpur on tel: +603-2723-6604, fax: +603 27236699.

Gulf Business and Motivate Publishing accept no responsibility for errors and omissions, date and location changes or cancellations.

Please contact the organisers directly for further information.

If you are organising or know of an event taking place in the GCC, please send full details to: Exhibitions, Gulf Business, Motivate Publishing, PO Box 2331, Dubai, United Arab Emirates, or fax to +9714 2827593, or email gb@motivate.ae.

Arabian Travel Market

Cards Middle East 2010

Middle East CFO 2010

This event is the most comprehensive exhibition of its type in the Middle East. It aims to unlock the potential of inbound and outbound tourism professionals in the Middle East.

Exhibitors include: national tourism boards, accommodation and venue providers, airlines, cruise companies, and tourism technology companies.

The four days of the event include business networking, focus on careers & travel agents and consumer day.

The region’s annual cards and payments conference and exhibition is dedicated to providing a definitive payments marketplace in the Middle East.

Cards Middle East 2010 is the biggest smart cards show in the Middle East. It is a two-day event offering an opportunity to meet and network with the entire cards and payments value chain. The participants will be part of a one-stop event where banks, retailers, operators and payments all gather under one roof.

The role of the chief financial officer has broadened in recent years beyond the traditional finance function – as they are responsible for the financial health of an organisation. This forum goes beyond the customary CFO role expansion to strategic planning and people issues. It is focused on using and developing appropriate resources, enhancing leadership skills and recognising and managing risks and guiding CFOs to excel in both strategic and tactical roles.

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gulfbusiness.com May 2010

THE ESSENTIALS WHERE TO STAY

Al Raha Beach Hotel

Abu Dhabi Al Raha Beach Hotel, created to provide the very best of traditional Arabian hospitality. This unique jewel of luxury and tranquility, offering magnificent services, awaits you for an unforgettable visit to Abu Dhabi.

Tel 00971 2 50 80 555 Fax 00971 2 50 80 429

Shangri-La

Sheikh Zayed Road, Dubai Offers 301 luxuriously appointed guest rooms and suites, nine restaurants and bars, health club and spa, tennis and squash courts and outdoor swimming.

Tel 00971 4 3438888 Fax 00971 4 3438886 Email: sldb@shangri-la.com

Layia Oak Hotel & Suites

Al-Barsha, Dubai Offering 161 furnished units ranging from 81 sqm to 160 sqm, 3 dining venues, 3 multi-purpose meeting rooms, recreation facilities & a majestic landscaped area around the temperature-controlled pool.

Tel 00 971 4 437 78 88 Fax 00 971 4 437 79 99 Email: welcome.oak@layia.net

Media Rotana Dubai

Al Barsha South-TECOM Located in the heart of Dubai’s new business hub and opposite Dubai Media City and Internet City the Media Rotana Dubai has 460 rooms, suites and deluxe hotel apartments, 5 award winning dining venues and 15 meeting rooms.

Tel: 00971 4 4350000 Fax: 00971 4 4350011 Email: media.dubai@rotana.com

Sofitel Al Hamra Jeddah

Jeddah, Saudi Arabia The hotel situated in the heart of the business centre offers 211 rooms, 17 suites and 25 apartments. 5 meeting rooms and 2 reception rooms to accommodate up to 350 people.

Tel 00966 2 6602000 Fax 00966 2 6604145

Park Rotana Abu Dhabi

The Fairmont Dubai

TAMANI Hotel Marina

Acacia Hotel

Holiday Inn Riyadh, Izdihar

Khalifa Park area, Abu Dhabi Conveniently located adjacent to Khalifa Park, the property offers 318 luxurious rooms and suites, 6 world class dining venues, 6 meeting rooms and spacious ballroom with day light access and outdoor terrace.

Tel 00971 2 6573333 Fax 00971 2 6573000 Email park.hotel@rotana.com

Sheikh Zayed Road, Dubai This 394-room hotel boasts 10 dining and entertainment venues a superb spa and unrivalled meeting facilities.

Tel 00971 4 3325555 Fax 00971 4 3324555 Email: dubai.reservations@fairmont.com

Dubai Marina This hotel boasts 240 units, including studios, 2 or 3 bedroom units, and penthouses. There is also one restaurant. a health club, indoor and outdoor swimming pools and 5 meeting rooms.

PO Box 215855, Dubai, U.A.E Tel 00971 4 3992500 Fax 00971 4 3993225 Email sales@tamanimarina.ae

Ras al Khaimah The Acacia Hotel is a superbly designed four star hotel complete with Al Nakhla restaurant, the stylish Flamingo bar, the vibrant Club Acacia, a pristine pool serving as a backdrop to varied and exciting Theme Nights, the luxurious O-Zone Spa, and high-energy Oxygen Gym. Tel 00971 7 2434421 Fax 00971 7 2434429

Riyadh, Saudi Arabia The first 5 star Holiday Inn hotel in the Kingdom, with 289 new and trendy accommodations, huge lobby with W-Fi access, outdoor pools, sauna, Jacuzzi and health club. Also has state-of-the-art meeting rooms, 24-hour business center with professional secretarial support.

Tel 00966 1 4505054 Fax 00966 1 4505056

Jumeirah Emirates Towers

Sheikh Zayed Road, Dubai Jumeirah Emirates Towers is a sleek architectural masterpiece of steel and glass. It redefines the business hotel category, seamlessly combining form with function, high technology with unparalleled luxury and elegance with efficiency.

Tel 971 4 3300000 www.Jumeriah.com

InterContinental Doha

Doha, Qatar Situated in the West Bay area, yet located near the city. With its various dining options, 24 suites, 234 rooms, private beach and state-of-the-art gymnasium, it is an idyllic setting for business and leisure.

Tel 00974 4844444 Fax 00974 4839555

Mövenpick Hotel Doha

Jeddah Hilton

Doha, Qatar Located on the Corniche Road, opposite the Museum of Islamic Art, the hotel offers 154 rooms and suites, a business centre and meeting rooms. Recreation facilities are also available.

Tel 00974 4291111 Fax 00974 4291100 www.moevenpick-doha.com

Jeddah, Saudi Arabia Located a 10-minute drive from the Jeddah International Airport. Offers over 414 rooms including 46 suites. 10th and 11th floors are Executive floors addressing all the needs of a modernday businessman.

Tel 00966 2 659 0000 Fax 00966 2 658 2489

IS YOUR HOTEL LISTED ON THIS PAGE? To become one of Gulf Business’ Preferred Hotels and benefit from exposure to the extensive readership of Gulf Business throughout the GCC contact Circulation Department on 00971 4 2052497

Gulf Business magazine is available in all of these GCC hotels

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gulfbusiness.com May 2010

Anything is possible ‌ an opportunity is all it takes

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Your monthly contribution can be that opportunity

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Here at Al Noor we’re in it for one reason: To help. We’re a non-profit organisation, working under the Ministry of Social Affairs, and we’re dedicated to the nurturing and development of the special needs community of Dubai.

The training programmes we offer are heavily subsidised, making them more accessible to more people, so we can reach out and help as much of the community as we can.

But training is expensive, and with no regular funding, we’re left to raise the money ourselves. That’s where you come in – your contribution, however big or small, can make a huge difference, and the money you give could be the opportunity a child has been waiting for.

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Please, dig deep, give what you can and help make a difference – you could change a life forever.

™’FbÂ’E%b@( @@ ‘xÂŒD' 'wG l'v-%' ÂŻ )v9b~z´'H ¤†~zD' ÂŻ fDHbp´' ™’›E ÂĄ,xF –~}A#°' ÂĄpF –Œ7 )bÂŁ- ĂŒÂŁÂ‰*

To make a contribution call +971 4 323 4993 or visit www.alnoorspneeds.ae

@( ˜c }*Âą' ÂšÂ“ÂœÂ“Ăƒ š“*c9Ă…hD H#' ÂŽ*cG www.alnoorspneeds.ae ¼“d |D' ˆB¢¾' )1cJ2

For more information on Al Noor Training Centre or to make a contribution call +971 4 323 4993, fax +971 4 341 7275, visit www.alnoorspneeds.ae. You can also send your contribution directly to:

Al Noor Training Centre for Children with Special Needs, PO Box 8397, Dubai, UAE

ADVERTISEMENT PLACED COURTESY OF MOTIVATE PUBLISHING

THE ESSENTIALS STATS & FACTS MergerMarket Top Deals of the month Deal Value ($m)

Bidder

Target

Deal Description

10,700

Bharti Airtel Limited

Zain Africa BV

Bharti Airtel Limited (Bharti) has signed an agreement to acquire Zain Africa BV (Zain Africa), excluding the operations in Morocco and Sudan, from Mobile Telecommunications Company K.S.C. (Zain) for a cash consideration of USD 9bn.

991

Olayan Group; and Spyros Theodoropoulos (Private investor)

Chipita International SA

Spyros Theodoropoulos, the Greece based private investor having interest in companies engaged in Baked food business and Chief Executive Officer of Vivartia S.A, the listed Greece based food group operating in dairy products, frozen foods and food ingredients industries and Olayan Group.

917

Qatar Navigation Company Q.S.C.

Qatar Shipping Company QSC

Qatar Navigation Q.S.C., the listed Qatar based shipping operator, has agreed to acquire Qatar Shipping Company Q.S.C., its Qatar counterpart.

878

Qatari Diar Real Estate Investment Company

Veolia Environnement SA (5% stake)

Qatari Diar Real Estate Investment Company has agreed to acquire 5% stake in Veolia Environnement SA (VE). Qatari Diar Real Estate Investment Company, the Qatar based company headquartered in Doha, is a real estate investment company.

51

Jordan Phosphate Mines Company Ltd

Indo-Jordan Chemicals Company (52.17% stake)

"Jordan Phosphate Mines Company Ltd, the Jordan based mining company, has agreed to acquire a 52.17% stake in Indo-Jordan Chemicals Company, the India and Jordan based company involved in producing chemicals, from Southern Petrochemical Industrial Corporation (SPIC), the India based agricultural fertilizers producing company, for a consideration of USD 50.6m.

30

Al-Madina for Finance and Investment Company KSCC

Sarh Al-Madina Real Estate (50% stake)

Indo-Jordan Chemicals Company was a three-way joint venture between Southern Petrochemical holding 52.17% stake, Jordan Phosphate Mines holding 34.8% stake and Asia Investment Company SAA holding the remaining 13% stake.

28

Infrastructure Developments Corporation

Intelspec International Inc

As per the agreement, Al-Madina for Finance and Investment will issue 43,137,130 shares of its common stock at a value of KWD 0.198 (USD 0.68) per share. This acquisition will provide enhanced growth opportunities for Al-Madina in the real estate industry.

22

Tadhamon Capital

Consolidated Services Company

Tadhamon Capital, the Bahrain based investment company and a subsidiary of Tadhamon International Islamic Bank, the Yemen based bank, has acquired Consolidated Services Company (CSC), the Saudi Arabia based owner and operator of labour accommodation, for an minimum estimate consideration of USD 22m.

20

Capinnova Investment Bank

Ebla Computer Consultancy Company KSCC (36% stake)

Capinnova Investment Bank, the Bahrain based provider of investment products and services and subsidiary of Bank of Bahrain and Kuwait, the Bahrain based bank, has acquired a 36% stake in Ebla Computer Consultancy Company KSCC, the Kuwait based company engaged in providing IT solutions, IT consultancy and professional services, for a consideration of USD 20m.

Notes: Deals are based on the geography of target, bidder or vendor being in the Middle East, for the period between March 20, 2010 and April 19, 2010. Based on announced deals, including lapsed and withdrawn bids. Where deal value is not disclosed, the deal has been entered based on turnover of target exceeding $10 million. Activities excluded from the table include property transactions and restructurings where the ultimate shareholders’ interests are not changed.

12,000 10,000

Middle East Activity by Industry Sector YTD 2010 – Value Number of deals

14,000

Value ($m)

Middle East Quarterly M&A Activity from 2004 to April 19, 2010 Value Volume

50 40

8,000

30

6,000

20

4,000

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

2004

2005

2006

2007

2008

0

2009 2010

Middle East Annual M&A Activity from 2004 to April 19 , 2010

TMT 4%

Real Estate 7%

Industrials and Chemicals 5%

25,000

150

20,000

100

15,000 10,000

50

5,000 0

2004

2005

Transport 7%

200

Value Volume

2006

2007

2008

2009

2010

Transport 67%

Pharma/Medical/ Biotech 12%

Middle East Activity by Industry Sector YTD 2010 – Volume

0

Number of deals

30,000

Value ($m)

Consumer 1%

10

2,000 0

Business Services 4%

Pharma/Medical/ Biotech 12%

Industrials and Chemicals 20%

Real Estate 13%

TMT 13%

Consumer 20%

Business Services 20%

Mergermarket tracks all M&A deals of more than $5m where the target, bidder or parent is a Middle Eastern company. For further details, call +9714 4376482.

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gulfbusiness.com May 2010

OUT TO LUNCH Raffaeli Ruggeri

Made in Italy Raffaeli Ruggeri talks celebrity chefs and recessions with Alistair Crighton at his Bice Mare restaurant in Dubai’s Souk Al Bahar.

R Raffaeli Ruggeri

82

affaeli Ruggeri’s suit, watch and designer stubble is more Miami than Milan, which is apt as the restaurant president hails from the Sunshine State, although Bice, the restaurant chain he runs, traces its roots back to Milan.

Ruggeri is in town to check on his latest offering, in the exclusive Souk Al Bahar, adjoining Dubai Mall and Palace hotels in the city’s new downtown region. It’s perhaps too exclusive. Since opening, the collection of shops and boutiques haven’t been quite the draw that the food and beverage outlets had hoped for, something that concerns Ruggeri.

“My impression is that Dubai Mall has picked up and is drawing in tourism, but it stays a lot on that side,” he says.

“Stores are closing, and they now have ideas of converting this whole atrium here into bars and restaurants, which would completely shut this area down for a year. Will it be a positive thing? It can be, because they want to attract the nightlife, which is the right thing to do.

But I ask: ‘which restaurants do you want to bring in? Which bar?’ It’s a positive direction, but an uncertain one.”

For now though, Ruggeri is unconcerned.

He has a loyal customer base, drawn in by the international brand’s reputation for quality, contemporary Italian cuisine.

Certainly, what’s on show today is very impressive. In the antipasto selection, salmon tartare on a bed of mango chutney adds an eastern twist to a European classic; the mozzarella with vine-ripened tomatoes shows just how wonderful that classic combination is when the ingredients are first rate, and the highlight, a tuna and avocado tartare is buttery, fresh and clean.

Is it not hard to keep up the quality, I ask?

The business has come a long way from the family-atmosphere of the restaurant opened by his grandmother, Beatrice (or Bice, for short) so many years ago?

Times changed when Milan became the centre of the fashion world in the 1970s – and the family’s humble restaurant become the place to be. “Then, in 1987 we took it to New York, when there were only maybe 15 great

gulfbusiness.com May 2010

restaurants in the city. Italian restaurants were dark, mom-and-pop-style. We created a bright restaurant and opened the door, and it was a hit.”

Since the New York opening, it’s been a quest for world domination. In addition to around 30 restaurants in the US, there are another 10 branches around the world.

Bice is run as a licensee operation, rather than traditional franchise, which allows greater flexibility. While all the restaurants have a few fixed, signature items, chefs are free to come up with their own dishes, influenced by local flavours. There’s not too much local influence in our entrees, though: Dover sole baked au gratin is light and flavourful, with a satisfying crunch from the toasted breadcrumbs, but the highlight of the whole meal is a delicate asparagus risotto, brought to a whole new level of sophistication by the simple but inspired addition of grated black truffle.

And despite the impact of the recession on his restaurant and all others, Ruggeri still feels the Bice brand has a lot more going for it than some other household names. Celebrity chefs, he feels, are trading on a commodity that is spread too thin – themselves.

“When you eat at a Gordon Ramsay restaurant, you want to know that he’s in the kitchen. That’s the thing about being a celebrity chef. They’ve created great concepts, and they’ve launched in London, but by going out and franchising their name around the world, well, they’re never there!

In Bice, there is no face. I represent Bice because I’m the third generation family, and I’m the spokesman, but at Bice, you’re expecting an experience that isn’t associated with any one person.”

Over espresso and tiramisu (velvety and luxurious) I go back to the question of location. Is he thinking of moving if Souk Al Bahar does become a construction site? “No, no, no. This place will stay here, and we’ll go through what it takes. We have a loyal clientele. I’m not going to tell you it’s always an easy ride. We have our challenges, but we’re going to stay here, that’s for sure.”

cartier.com

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