Gulf Business December 2011

years 1996-2011 VOLUME 16 ISSUE 08 DECEMBER 2011

THE

POWER LETTERS

The region’s top business minds predict the year ahead

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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PLANET OCEAN "Standing on the Moon looking back at Earth – this lovely place you just came from – you see all the colours, and you know what they represent.

Having left the water planet, with all that water brings to the Earth in terms of colour and abundant life, the absence of water and atmosphere on the desolate surface of the Moon gives rise to a stark contrast."

– Buzz Aldrin, astronaut

12.2011

CoNTENTS 48

LEAdING BUSINESS mINdS FORECASt thE REGION’S FORtUNES FOR 2012.

years

1 9 9 6 - 2 011

THE

POWER LETTERS WHAT’S IN STORE FOR 2012?

GCC Today 14

Regional news, people, numbeRs and events

oPINIoNS 24

matein Khalid The Arab world needs to rethink its development model.

26

dR tommy weiR People leadership is the need of the hour.

28

taReK miKnas Change is the way forward for the ad industry.

14 COVER DESiGN: ROUI FRANCISCO GULF BUSINESS / 7

CoNTENTS

30

80 BRIEFING 30

banKing UAE’s bankers are packing up their suitcases to head home.

32

libya/gCC Is the Gulf happy with Libya’s rising oil production?

34

aviation GCC airlines went on a shopping spree at the Dubai Air Show 2011.

37

FinanCe The regional Sukuk market enjoyed a record year.

41

Commodities Is gold losing its shine?

45

RaK The Northern emirate draws in foreign investors.

FEaTURES 66

the aRab spRing’s long night It’s been a long road for revolution in the Arab region. Can the Gulf countries help their neighbours during the crucial transition?

74

pRoFile: Flydubai flydubai CEO on why the airline is expanding its horizons.

80

siR RoCCo FoRte hits abu dhabi British hospitality tycoon launches a five-star hotel in the capital.

84

a veRy publiC love aFFaiR Can Emiratisation succeed in the UAE’s private sector?

37

66 8 / dECEmBER 2011

CoNTENTS

104 EdIToR-IN-ChIEF Obaid humaid Al tayer GRoUP EdIToR aNd MaNaGING PaRTNER Ian Fairservice GRoUP SENIoR EdIToR Gina Johnson SENIoR EdIToR Guido duken EdIToR Alicia Buller alicia@motivate.ae BUSINESS EdIToR Jonathan Sheikh-miller jonathanm@motivate.ae BUSINESS WRITER Aarti Nagraj

99

109

EdIToRIaL CooRdINaToR — BUSINESS hilda d’Souza hilda@motivate.ae aRT dIRECToR tarak Parekh tarak@motivate.ae dESIGNER Charlie Banalo charlie@motivate.ae JUNIoR dESIGNER Roui Francisco rom@motivate.ae PhoToGRaPhERS Farooq Salik; Naveed Ahmed; Vikram Gawde; Victor Besa CoNTRIBUToRS Ryan harrison; Rom miclat; Peter Shaw-Smith; thomas Board; Adrian mourby SENIoR PRodUCTIoN MaNaGER S Sunil Kumar PRodUCTIoN MaNaGER C Sudhakar PRodUCTIoN CoNTRoLLER Binu Purandaran

doWNTIME 99

tRavel Explore history at Shanghai’s art deco palace, the Peace Hotel.

102

CRuise Reviewed: BMW 6 Series 650i.

104

aRt Christie’s unveils new sales format in the Middle East.

106

booKs Gulf Business rounds up a selection of business reading. plaCes to be Cantonese restaurant Hakkasan opens its doors at the DIFC.

109

daTa CRUNCh 93

stats Regional mergers, acquisitions and bond issuances.

REGULaRS

GENERaL MaNaGER GRoUP SaLES Anthony milne anthony@motivate.ae SENIoR advERTISEMENT MaNaGER Abraham Koshy abraham@motivate.ae advERTISEMENT MaNaGER Ajay mathews ajay@motivate.ae dEPUTy advERTISEMENT MaNaGER melroy Noronha melroy@motivate.ae GENERaL MaNaGER — aBU dhaBI Joe marritt joe@motivate.ae SENIoR SaLES ExECUTIvE — aBU dhaBI hamdan Bawazir hamdan@motivate.ae

hEad oFFICE: PO Box 2331, dubai, UAE tel: +971 4 282 4060, Fax: +971 4 282 4436, motivate@motivate.ae dUBaI MEdIa CITy: Office 508, 5th Floor, Building 8, dubai, UAE, tel: +971 4 390 3550, Fax: +971 4 390 4845

110

events The Gulf’s top business conferences.

aBU dhaBI: PO Box 43072, UAE, tel: +971 2 677 2005, Fax: +971 2 677 0124, motivate-adh@motivate.ae

112

gulF business pReFeRRed hotels A selection of the region’s top rooms.

LoNdoN: Acre house, 11/15 William Road, London NW1 3ER, UK, motivateuk@motivate.ae

114

in youR shoes Doug Speck, senior vice president, Volvo.

EdIToRIaL SyNdICaTIoN dETaILS tel: + 971 4 2824060, gb@motivate.ae

Printed by Emirates Printing Press, dubai

10 / dECEmBER 2011

UAE TodAy To MaRk ThE 40Th annivERsaRy of iTs founDing, wE havE DEDiCaTED ThE opEning Two pagEs of gCC ToDay To ThE uaE.

The UAE turns 40, but life is just beginning

98 The number of oil barrels in billions that the uaE is proven to have, amounting to nearly 10 per cent of the world’s oil reserves.

in the course of world history, 40 years is a mere blink of an eye. kings and queens have reigned for longer, even wars have been waged for longer and yet the speed of development has been so breathtaking, it is hard to believe the uaE is still so young.

The discovery of oil in abu Dhabi in the early 1960s was a seminal moment for the seven emirates that would eventually form the uaE in 1971 and much of what has been achieved is undeniably on the back of this wealth. But the ambition and vision of the country’s leaders, from sheikh Zayed bin sultan al nahyan onwards, have been vital in driving the nation to a point where its gDp exceeded $300 billion in 2010.

The list of achievements is constantly increasing and it cuts across every sector. Emirates airline will become the world’s largest operator of wide-body aircraft by 2015; the abu Dhabi investment authority is one of the world’s biggest sovereign wealth funds; the country boasts the world’s tallest tower and the largest shopping mall; the Dubai international financial Centre is a major international financial hub; Masdar is a pioneer in the field of renewable energy and the country has become a venue for leading sports events from golf to f1.

Last year, the government set out a vision to become one of “the best countries in the world” by 2021. arguably, the dream could become a reality a lot sooner than that.

14 / DECEMBER 2011

69% The percentage of the uaE’s gDp last year that foreign trade accounted for, according to the country’s Minister of foreign Trade, sheikha Lubna al Qasimi.

100

The area in square miles covered by ajman, the smallest emirate in the uaE, situated between umm al Quwain and sharjah.

76.51 The 2011 estimate in years of the average life expectancy in the uaE, according the Cia world factbook.

UAE TodAy

1985

The year in which Emirates airline, with a start-up capital of $10 million, made its first flight, k600, from Dubai to karachi on october 25.

$600bn

The amount that the uaE’s foreign assets are predicted to be worth by the end of 2012, according to the washington-based institute for international finance.

2,268,000 The number of knots in the world’s largest hand-knotted carpet that covers the floor of the main prayer hall at the sheikh Zayed grand Mosque in abu Dhabi.

Dhs52.2m The selling price of licence plate number 1 auctioned off in abu Dhabi in 2008, which holds the record for being the world’s most expensive number plate.

guLf BusinEss / 15

GCC TodAy

GCC TODAY – REgionaL nEws, pEopLE, nuMBERs anD EvEnTs On the Radar

16 / DECEMBER 2011

Gulf IPO market remains flat

gETTy iMagEs

++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ Kuwait’s Agility Q3 ++++++++++++++++++++++++ ++++++++++++++++++++++++ down 42% ++++++++++++++++++++++++ Kuwait-based logistics company ++++++++++++++++++++++++ ++++++++++++++++++++++++ Agility posted a 42 per cent ++++++++++++++++++++++++ decline in third quarter net profit ++++++++++++++++++++++++ as revenues from its freight ++++++++++++++++++++++++ ++++++++++++++++++++++++ forwarding business dropped. ++++++++++++++++++++++++ Net profit for the three months ++++++++++++++++++++++++ ++++++++++++++++++++++++ ending September 30 amounted ++++++++++++++++++++++++ to a total of $29.4 million, down ++++++++++++++++++++++++ sharply from the $50.5 million ++++++++++++++++++++++++ ++++++++++++++++++++++++ earned a year ago. ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ DDF in 16% sales spike ++++++++++++++++++++++++ Dubai Duty Free (DDF) has posted ++++++++++++++++++++++++ ++++++++++++++++++++++++ a sales total of $1.16 billion for ++++++++++++++++++++++++ the first ten months of the year, ++++++++++++++++++++++++ a 16 per cent increase over the ++++++++++++++++++++++++ ++++++++++++++++++++++++ same period in 2010. Perfumes ++++++++++++++++++++++++ accounted for 14.6 per cent of all ++++++++++++++++++++++++ ++++++++++++++++++++++++ sales, generating $169 million, with ++++++++++++++++++++++++ gold close behind on $133 million. ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ Gemstone bathtub ++++++++++++++++++++++++ ++++++++++++++++++++++++ fetches Dhs6.4mn ++++++++++++++++++++++++ ++++++++++++++++++++++++ The Le Grand Queen bathtub, ++++++++++++++++++++++++ made from the Caijou gemstone, ++++++++++++++++++++++++ ++++++++++++++++++++++++ managed to sell for Dhs6.4 ++++++++++++++++++++++++ million at this year’s Dubai ++++++++++++++++++++++++ ++++++++++++++++++++++++ International Jewellery Week. ++++++++++++++++++++++++ The gemstone is apparently ++++++++++++++++++++++++ known for its strong healing ++++++++++++++++++++++++ ++++++++++++++++++++++++ properties. Organisers claim ++++++++++++++++++++++++ that the luxurious bathtub is the ++++++++++++++++++++++++ ++++++++++++++++++++++++ first of its kind in the world. ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++

The market for initial public offerings (IPO) in the GCC remained sluggish during the third quarter of the year with only two listings in the region, according to PricewaterhouseCoopers (PwC). Both the IPOs were in Saudi Arabia and raised a total of $219 million, with Hail Cement raising $131 million and United Wire Factories raising $88 million.

Steve Drake, head of PwC Capital Markets Middle East, said that IPO activity in Q3 had followed the same sort of flat levels as had been seen in the second quarter. There were just three listings in the region during Q2.

diyAr offErs BAhrAin projECTs aref hagras, the CEo of Diyar al-Muharraq, a kfh-Bahrain subsidiary, has stated the company will announce, towards the end of 2011, several new projects that will include four residential and commercial real estate developments. al-hagras also noted that the projects will provide suitable housing for various segments in Bahraini society as well as provide a boost to the commercial development of the island state which has been a centre of political upheaval as part of the arab spring.

“This is to be expected over the summer months and through Ramadan, with any IPO activity we are likely to see being in the fourth quarter or more likely into 2012,” Drake said, adding that Saudi Arabia was the strongest IPO market in the region.

“The turmoil we are witnessing in Europe and the US is having an inevitable impact on the regional credit markets as investor appetite in the two economic zones for Middle East debt has historically been strong,” Drake said. “It is likely that we will see lower debt issuance volumes or perhaps a shift towards a heavier Asian market bias for issuers,” he added.

SOAPBOX “You can start an airline with one aircraft and i can make moneY for You in one month.”

Ghaith al Ghaith, CEO flydubai speaking at a media roundtable at the Dubai Chamber of Commerce and Industry.

GCC TodAy

The abu Dhabi islamic Bank (aDiB) has priced its $500 million 2016 islamic bond, one of the banks running the deal has confirmed. The sukuk, listed in London, will yield 3.78

per cent. Citigroup, hsBC holdings, nomura, the national Bank of abu Dhabi and standard Chartered were the lead managers on the deal. aDiB held several investor meetings in asia, Europe and the Middle East last month before issuing the sukuk.

The lender is currently looking to shariah-compliant funding sources as more traditional markets dry up due to global financial concerns.

The bank sold a $750 million, fiveyear sukuk in october 2010. sukuk issuance in the gCC region has gone up sharply in 2011 – it increased to $14 billion during the first seven months of the year, as opposed to $4.45 billion in the corresponding period last year, according to Zawya. com’s sukuk Monitor.

MUBAdAlA BUys EMi sTAkE Mubadala Development, the investment arm of the Abu Dhabi government, has taken a stake in British music publisher EMI as part of a consortium led by Sony/ATV. The deal, worth $2.2 billion, will give the investment consortium rights to EMI’s publishing division.

The company’s recording division will be taken over

by Vivendi’s Universal Music Group for $1.9 billion. EMI was auctioned off by Citigroup and includes popular artists such as the Beatles, Coldplay, Katy Perry, Rihanna and Norah Jones.

Norah Jones

Oman Oil joins hands with SAIL Oman Oil has signed an initial pact with the Steel Authority of India (SAIL) to jointly set up a gas-based steel plant in Oman with an estimated investment of $3 billion. The plant will have a capacity of three million metric tonnes a year, according to India’s steel minister Beni Prasad Verma.

The two government-owned firms are still finalising the feasibility report and are planning to sign a final deal in the next six months.

18 / DECEMBER 2011

How to rule the world like...

ToM CrUisE

gETTy iMagEs

ADIB prices $500m Sukuk

Promote yourself Cruise is in Dubai this month for the first screening of Mission: impossible — ghost protocol at the Dubai international film festival. The star ensures that he is always in the spotlight – such as on oprah winfrey’s show in 2005 when he jumped on the couch professing his love for katie holmes.

Do your own stunts from dangling dangerously outside the 124th floor of the world’s tallest tower, the Burj khalifa, to jumping off a car travelling at 60 miles per hour, Cruise insists on doing his own stunts.

Diversify in 1993, Cruise partnered with his former agent paula wagner to form Cruise/wagner productions and the company has since co-produced many of his movies.

love Dubai after shooting in Dubai for Mi4, Cruise praised the city on his blog. “My family and i spent our evenings at the water park, go-karting, indoor skiing, shopping, scuba diving, camel riding, desert dune bashing and we still didn’t fit in all that there is to enjoy!” he said.

brinG in the cash Though he is not the top-grossing actor at the moment, he shares the ninth place with Tim allen in forbes’ 2011 highest paid actors list. Between July 2010- 2011, the actor managed to pocket a cool $22 million.

GCC TodAy

++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ Emke in Saudi expansion ++++++++++++++++++++++++ ++++++++++++++++++++++++ The UAE’s Emke Group is planning ++++++++++++++++++++++++ to expand in the Saudi Arabian ++++++++++++++++++++++++ ++++++++++++++++++++++++ retail sector through its chain ++++++++++++++++++++++++ of Lulu Hypermarkets. Emke is ++++++++++++++++++++++++ looking to open new stores in ++++++++++++++++++++++++ ++++++++++++++++++++++++ several locations in the kingdom ++++++++++++++++++++++++ including Dammam, Jubail, ++++++++++++++++++++++++ ++++++++++++++++++++++++ Riyadh, Makkah and Madinah. ++++++++++++++++++++++++ Emke is already present in Oman, ++++++++++++++++++++++++ ++++++++++++++++++++++++ Qatar, Kuwait and Bahrain. ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ TAQA sees sharp ++++++++++++++++++++++++ rise in Q3 net profit ++++++++++++++++++++++++ ++++++++++++++++++++++++ TAQA, the Abu Dhabi National ++++++++++++++++++++++++ Energy Company, has said its ++++++++++++++++++++++++ ++++++++++++++++++++++++ third quarter net profit more ++++++++++++++++++++++++ than doubled to Dhs537 million ++++++++++++++++++++++++ ++++++++++++++++++++++++ from Dhs218 million during the ++++++++++++++++++++++++ same period a year ago. ++++++++++++++++++++++++ ++++++++++++++++++++++++ The biggest push came from ++++++++++++++++++++++++ oil and gas revenues, which rose ++++++++++++++++++++++++ 68 per cent when compared ++++++++++++++++++++++++ ++++++++++++++++++++++++ to the third quarter of 2010, to ++++++++++++++++++++++++ reach Dhs2.74 billion. ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ Topaz raises $380m ++++++++++++++++++++++++ UAE based oilfield services ++++++++++++++++++++++++ ++++++++++++++++++++++++ provider Topaz Energy and Marine ++++++++++++++++++++++++ has established a $380 million ++++++++++++++++++++++++ ++++++++++++++++++++++++ financing deal with the Standard ++++++++++++++++++++++++ Chartered Bank and the DVB Bank. ++++++++++++++++++++++++ The arrangement involves the ++++++++++++++++++++++++ ++++++++++++++++++++++++ firm’s offshore support vessel ++++++++++++++++++++++++ division, Topaz Marine, and $125 ++++++++++++++++++++++++ ++++++++++++++++++++++++ million of the money will be used ++++++++++++++++++++++++ to fund ships under construction ++++++++++++++++++++++++ or new vessels. ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++

On the Radar

20 / DECEMBER 2011

PROJECT focus adac completes upgrade

The abu Dhabi airports Company (aDaC) has completed the refurbishment and upgrading of Terminal 1 at abu Dhabi international airport. The project included an increase in the number of check-in and immigration counters, in addition to the expansion of the retail and food and beverage space.

The project was carried out over ten months as part of the programme to expand the airport’s capacity and meet anticipated traffic growth.

The airport is presently undergoing a major multibillion dollar expansion plan which has seen the construction of a second runway as well as a third terminal building. as the

emirate’s flag carrier Etihad airways develops, the airport is eventually hoping to be able to handle 20 million passengers a year. as part of the improvements, there has been a 40 per cent increase in the number of counters in the passport control area, while the airport’s hotel and hospitality lounges have been refurbished.

Ford doubles GCC sales Ford saw a 55 per cent sales growth in the GCC this year and has just opened a $53 million spare parts centre in Jebel Ali. “It’s a great year for us,” said Hussein Murad, the director of sales at Ford Middle East. “We are making money, making profits and selling a lot of cars.

“All our new products – Explorer, Taurus and Edge have experienced high demand; almost five times the supply for these products, ” he said.

The firm is putting aside worries about another recession hitting the region and hitting demand.

“We can’t control the economy,” said Paul Anderson, Ford Middle East’s director of marketing. “So we have to focus on the things we can control and that is simply introducing the best products that are available so that when consumers do buy, Ford is their choice.”

GCC TodAy

GCC and the world

UAE BoosT for rolls-royCE Rolls-Royce Motor Cars witnessed a 70 per cent increase in uaE business this year, said the firm’s CEo at the Dubai Motor show. The premium uk carmaker also saw 30 per cent growth across the region this year. “our biggest market is the us, followed by China, the uk and the uaE. The Middle East contributes between 12 per cent to 15 per cent to global RollsRoyce sales,” said Torsten Müller-Ötvös,

CEo, Rolls-Royce Motor Cars. “Dubai is now our biggest market in the world for customisable cars, nearly all the cars in the uaE are tailor-made.”

Last year Rolls-Royce sold 2,711 cars globally, and this year the CEo expects to sell 3,000 cars on the back of heightened consumer confidence and increased emerging markets demand.

“Between 2010 and 2011 people were more comfortable with the economy,

SOAPBOX “i know the difficulties, the negatives, the positives, i will not hang on to power. whoever hangs on to power i think is crazY.” Yemen’s President ali abDullah saleh told France 24 television that he would leave office within 90 days of an agreement with the GCC.

but predicting future developments is difficult as we are not immune to global economic shake-ups,” said Müller-Ötvös.

Rolls-Royce is part of the BMw group, along with Mini. The german holding firm recently posted impressive financial results, claiming the strongest third quarter in its history. BMw’s Q3 pretax profit jumped 21 per cent to $2.26 billion, beating analyst estimates.

STATS

Dhs1 billion

ThE aMounT ThaT wiLL BE invEsTED To RELoCaTE ThE 2013 DuBai aiRshow To a nEw vEnuE aT DuBai woRLD CEnTRaL.

oman oil, gs eps deal

Mideast group buys Uk hotels

The oman oil Company and south korea’s gs Eps have signed an agreement with the korean province of Chungnam to build the fourth phase of the Dangjin power plant at a cost of $536 million. The facility isn’t expected to come on stream until the end of 2014 and it will have an output of 800 megawatts. oman oil holds a 30 per cent share in the plant, while gs Eps owns the remaining 70 per cent and is the operator.

Capital hill hotels, an unnamed Middle East investor with a worldwide portfolio of hotels, has purchased two more in London’s west End – The sanderson and the st Martins Lane hotel for around $300 million.

Morgans hotels group, the 50 per cent owner of the properties alongside an affiliate of walton street Capital, will continue to manage the hotels on a long-term basis as part of the deal.

The deal should be completed before the end of the year.

guLf BusinEss / 21

GCC TodAy

30

King Abdullah City for Atomic and Renewable Energy

seconds on the business of LOGISTICS

is logistics big business in the UAE?

Yes, the UAE’s geographical position enables it to facilitate major movements between the Eastern and Western hemispheres.

And with high quality infrastructure in place, logistics is also a highly competitive business here. how quickly can parcels be couriered around the world from the UAE?

Saudi signs nuclear pact oBAid Al QAhAsh CEo, parzel

The country is a hub for all the largest courier companies in the world – Fedex, DHL, TNT and Aramex. All these companies have frequent connections all over the world on a daily basis. has the rapid development of the UAE’s aviation sector boosted the logistics industry?

Although the infrastructure is in place, I believe that the UAE is yet to witness a positive impact – primarily due to the global economic climate. In the long run, it should prove extremely beneficial. regionally, which countries offer the best growth potential?

Saudi Arabia offers great growth potential thanks to increasing domestic demand. And with Qatar hosting the World Cup in 2022, demand for logistics services in the country will be high. does parzel offer any special service to its customers?

Parzel offers the automated delivery point system, through which our customers can make bookings online and use our machines to drop off or pick up their parcels. how does it work?

Customers are required to register on the Parzel website, and they are then assigned a unique identification number. They can use this number to book domestic and international shipments online.

interviewed BY jOnAThAn ShEIKh-mILLEr

22 / DECEMBER 2011

Saudi Arabia has signed a bilateral agreement with South Korea to cooperate in the development of nuclear energy. The agreement was signed in Seoul, according to a statement by the King Abdullah City for Atomic and Renewable Energy.

The pact includes scientific, technological and economic cooperation between the two nations, and will involve the design, construction, operation, maintenance and development of nuclear power plants in the kingdom.

Saudi Arabia signed similar agreements with France and Argentina earlier this year, while the kingdom is also in talks with Russia, China, the US, the UK and the Czech Republic regarding further tie-ups.

Qtel raises stake in starhub Qatar Telecom (Qtel) has said that asia Mobile holding, the investment arm it jointly owns with singapore Technologies Telemedia, has increased its stake in singapore’s integrated communications company starhub by 7.45 per cent.

The deal brings asia Mobile holding’s stake in starhub to 56.55 per cent and Qtel’s effective stake to 14.14 per cent.

The move is aimed at taking advantage of growth opportunities to boost its presence in southeast asia, according to nasser Marafih, Qtel’s group CEo.

‫إﺿﺎﻓﻴﺔ‬ ‫ﻣﺰدوﺟﺔإﺿﺎﻓﻴﺔ‬ ‫ﻫﻮاﺋﻴﺔﻣﺰدوﺟﺔ‬ ‫وﺳﺎدةﻫﻮاﺋﻴﺔ‬ ‫وﺳﺎدة‬ ‫ﻣﻜﺎﺑﺢ‬ ‫ﻧﻈﺎمﻣﻜﺎﺑﺢ‬ ‫ﻧﻈﺎم‬

‫‪ABS‬‬ ‫ﻟ ﻧﻐﻼق‪ABS‬‬ ‫ﻣﺎﻧﻌﺔﻟ ﻧﻐﻼق‬ ‫ﻣﺎﻧﻌﺔ‬

‫ﻟﻠﺨﻠﻔﻴﺔ‬ ‫ﺻﻮرةﻟﻠﺨﻠﻔﻴﺔ‬ ‫ﺗﺤﻤﻴﻞﺻﻮرة‬ ‫ﺗﺤﻤﻴﻞ‬

‫‪VSA‬‬ ‫اﻟﺴﻴﺎرة‪VSA‬‬ ‫ﺛﺒﺎتاﻟﺴﻴﺎرة‬ ‫ﺗﻌﺰﻳﺰﺛﺒﺎت‬ ‫ﻧﻈﺎمﺗﻌﺰﻳﺰ‬ ‫ﻧﻈﺎم‬

‫أوﺗﻮﻣﺎﺗﻴﻜﻲ‬ ‫ﻧﺎﻗﻞأوﺗﻮﻣﺎﺗﻴﻜﻲ‬ ‫ﻧﺎﻗﻞ‬ ‫اﻟﺴﺮﻋﺎت‬ ‫ﺧﻤﺎﺳﻲاﻟﺴﺮﻋﺎت‬ ‫ﺧﻤﺎﺳﻲ‬

‫‪i-VTEC‬‬ ‫ﻣﺤﺮك‪i-VTEC‬‬ ‫ﻣﺤﺮك‬ ‫ﻟﺘﺮ‬ ‫‪1.8‬ﻟﺘﺮ‬ ‫ﺳﻌﺔ‪1.8‬‬ ‫ﺳﻌﺔ‬

‫ﻗﻴﺎﺳﻴﺔ‬ ‫ﻣﻮاﺻﻔﺎتﻗﻴﺎﺳﻴﺔ‬ ‫ﻣﻮاﺻﻔﺎت‬

‫ﻧﻈﺎم‬ ‫ﻧﻈﺎم‬ ‫اﻟﻮﻗﻮد‬ ‫اﺳﺘﻬﻼكاﻟﻮﻗﻮد‬ ‫ﺗﺮﺷﻴﺪاﺳﺘﻬﻼك‬ ‫ﺗﺮﺷﻴﺪ‬

‫اﻟﻬﺎﺗﻒ@‬ ‫ﺗﺸﻐﻴﻞاﻟﻬﺎﺗﻒ@‬ ‫أزرارﺗﺸﻐﻴﻞ‬ ‫أزرار‬

‫ﻣﻌﻠﻮﻣﺎت‬ ‫ﺷﺎﺷﺔﻣﻌﻠﻮﻣﺎت‬ ‫ﺷﺎﺷﺔ‬ ‫اﻻﺳﺘﺨﺪاﻣﺎت‬ ‫ﻣﺘﻌﺪدةاﻻﺳﺘﺨﺪاﻣﺎت‬ ‫ذﻛﻴﺔﻣﺘﻌﺪدة‬ ‫ذﻛﻴﺔ‬ ‫ﻓﻘﻂ‪.‬‬ ‫ﻓﻘﻂ‪.‬‬ ‫ﻣﺤﺪدة‬ ‫ﻣﻮدﻳﻼتﻣﺤﺪدة‬ ‫ﻣﻮدﻳﻼت‬ ‫ﻋﻠﻰ‬ ‫ﻋﻠﻰ‬ ‫ﻣﺘﺎﺣﺔ‬ ‫ﻣﺘﺎﺣﺔ‬

OpiniOn

COMMENT

Lessons for ArAb economies Matein Khalid is fund manager in a royal investment office and a writer in finance and geopolitics.

IllusTrATIon: TArAk PArEkh

t

The Asian tigers offer a new way forward for the strife ridden Arab world.

The developmenT model of The AsiAn tigers has created vibrant capitalist enclaves across the Pacific Basin.

The Asian economic miracles emerged from the traumas of war, foreign invasion, revolution, ethnic slaughter and mass poverty. In Asia, historical traumas deliver economic growth.

The Arab world experienced multiple traumas as the colonial era ended. Israel’s creation ended in a military debacle in 1948 and the expulsion of the Palestinian refugees. Syria experienced more than a dozen coups d’état before the Assad regime consolidated power in a nightmarish dictatorship that is now fighting for its survival. Egypt reeled from the 1952 Free Officer coup, the Suez crisis, Nasser’s Soviet alliance, the June 1967 disaster and the loss of the Sinai to the IDF, the assassination of Sadat, an Islamist uprising in Upper Egypt in the 1990s and now the revolution in Tahrir Square.

Iraq’s modern history is terrifying, from the murder of the Hashemite King Faisal in 1958 to Saddam’s wars against Iran and Kuwait, the Baathist genocide against the Kurds and repression against the Shia, the 2003 American invasion and the terrorist/death squad bloodbath of 2004-2006.

Kuwait was invaded by Iraq in 1990. Lebanon survived the 1975-90 civil war. Jordan was almost split apart in Black September. Algeria lost a million people in its anti-colonial war against France and another 200,000 in its civil war of the 1990s. Yemen had multiple civil wars even after unification. Gaddafi’s Libya was just surreal.

Yet trauma did not produce economic miracles in the Arab world.

Why? The answer does not lie in autocracy alone since Taiwan, Thailand, South Korea and Indonesia’s economic miracles occurred under military dictatorships. Why do Silicon Valley’s supply chains for cellphones, laptops and disk drives lie in Taipei, Bangkok, Penang and Pusan, not in Cairo,

“The fall of Three auTocraTs in 2011 by people power uprisings armed wiTh TwiTTer, facebook and al Jazeera have changed The rules of The game.”

24 / DECEMbEr 2011

Amman, Damascus and Algiers? Why did the Arab world not create an Infosys, a Samsung, a Singtel or a Taiwan Semiconductor?

Trauma led to an obsessive focus on economic development in Asia but not in the Arab world.

Why? Firstly, the petrodollar bonanzas since the 1970s have created rentier economies and entrenched dictators. I see Joseph Stieglitz’s oil curse in the rubble of Tripoli and Baghdad. Socialist policies ruined economies, as in Baathist Syria or the FLN’s Algeria. The Arab-Israeli wars nurtured “mukhabarat” states that were run by secret police elites clueless about the capitalist ethos. An Arab intellectual elite did not emerge to persuade the pinnacles of power with a vision for reform, though President Mubarak sought legitimacy in pro-market reforms after the 2004 devaluation of the pound.

Huge state bureaucracies made privatisation dangerous for Arab governments afraid of legions of jobless youths. The education systems in the Arab world were unable to create a Bangalore, let alone a Singapore. The Cold War subordinated economics to geopolitics. Intra-Arab trade was miniscule. Political instability led to the export of more than $1 trillion worth of private Arab capital to the West.

The exceptions to the dismal economic tragedies of Arab history were small Gulf microstates that created trading, logistics or finance hubs, notably Dubai, Qatar and Abu Dhabi. Bahrain replaced Beirut as the offshore banking hub of the Middle East in the 1970s but has now lost its allure after the tragic events of 2011. Kuwait is paralysed due to a continual power-struggle between the National Assembly and the government.

Saudi Arabia leveraged its crude oil windfall to initiate a $130 billion development programme and $60 billion worth of arms purchases. The prices of crude oil and LNG are the most attractive measures of growth, not entrepreneurship or high tech innovation. The Arab world desperately needs to rethink its development model, as the fall of three autocrats in 2011 by people power uprisings armed with Twitter, Facebook and Al Jazeera have changed the rules of the game. History has finally gone fast forward with a vengeance in the Arab world and the stakes are nothing less than regime survival.

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OPINION

COMMENT

are you a people person?

Dr Tommy Weir, advisor on fast-growth and emerging market leadership, and author of The CEO Shift

Following a year of global surprises, being a better leader should be the priority in 2012

i

IllustRatIon: taRak PaREkh

t’s hard to believe that another year is coming to a close. When I reflect over the year it has been exciting, exhausting and definitely unexpected. Coming into 2011 few would have predicted the defining events of the Arab spring, Japanese Tsunami and the escalating debt crisis. The year has raised lots of questions for leaders.

At the end of each year, I pause and reflect on a particular dimension from the previous 12 months. Last year, I pondered insights I gleaned from CEOs. This year I am reflecting on the questions I was asked. Here are a few of them: Repeatedly throughout the year, senior leaders asked, “How can we enhance our culture?” Having rightfully recognised that they did not have the culture that was going to enable their business to achieve its future success, these leaders were ready to embark on creating the future culture.

Some organisations claimed they had no culture, but this is not true. Every organisation has a culture even though it may not be clearly stated or what they want. But they still have one.

The first step was to settle on the vision for the future. Then we worked with these organisations to state what the shared values, attitudes and practices will be. While this was a fun and exciting project for most organisations, it will fall short of the desired outcome unless socialisation happens, bringing the created culture to life through the employees. This happens best through the highly specialised practice of identifying and bringing to life the desired leader behaviour.

Another question was, “What do we need to do to grow greater than the market growth rate?” Numerous times I was asked this. The formula is simple, but putting it into action is very challenging, as it requires a

“Some organiSationS claimed they had no culture, but thiS iS not true. every organiSation haS a culture even though it may not be clearly Stated or what they want. but they Still have one.”

26 / DECEMBER 2011

metamorphosis in leadership actions.

First, you need to understand where your “fail point” is. Most businesses use their existing operating “box” as the measure on how far to push the boundaries. This orientation only allows for incremental growth. If you think of growth as going beyond the outline of the square then you are limiting your opportunity based upon the past. To visualise this, draw a square on a piece of paper representing your current size. Now draw a dotted line around the square that is at least two times the size of the square. Let’s assume this is your fail point. The area in between the square and your fail point is your growth zone. Instead of allowing your growth potential to be defined by yesterday, allow it to go to the fail point.

Second, you need to understand the workforce practice of creating competitiveness through surplus value. This is a very simple concept but ignored daily across the region. Draw an X and Y axis. The X axis is workforce input (hours worked) and the Y axis is sales output (units created, service, products, whatever you sell). Currently there is equilibrium between the two. So the errant thinking is in order to increase the output, then you need to increase the input accordingly. This thinking will keep the equilibrium but to increase your competitiveness you need to move to surplus value, which is the output growing at a greater rate than the input.

A repeat question for 2011 was “What does it mean to lead a multi-national workforce?” Leaders need to be aware of and understand the following realities: first-generation corporate societies, market life stage starting points and adjustments, being multi-lingual in one language and managerial honour and shame. These are the hallmarks for successfully leading a multi-national workforce.

As I reflect back over the year there is one question that I was not asked much about – “How do I become a better people leader?” Surprisingly, the basic of “people leadership” is currently a differentiator across the region. Leaders lead people, not processes or strategies (you create those).

People leadership is the cornerstone of becoming competitive through surplus value and accelerating ahead of the market growth rate.

OpiniOn

COMMENT

The ad indusTry musT change Tarek Miknas FP7 Group CEO

Einstein said the definition of insanity is doing the same thing over and over again and expecting different results.

IllustratIon: CHarlIE banalo

w

e’ve been saying for years that it couldn’t go on like this. We knew it had to change. We knew things weren’t being done right. It was our guilty little secret – something that made us feel constant discomfort. And despite knowing all of this, we just kept doing things the same old way. It was easy, it didn’t make waves, it was the way a lot of powerful people wanted it, and let’s face it – we were making good money.

Am I talking about the Arab world in general? Or am I talking about the Arab world’s advertising industry? It’s not hard to tell. I’m talking about both.

There’s one thing we all know by now, one thing we have to face up to now: the old way of doing things is over. From that slap in the face in Tunisia, through Tahrir Square, the Pearl Roundabout, and on to Algiers, Sana’a, Jordan, Oman, Libya, Syria and elsewhere – it’s all over. And accordingly, for anyone who can’t face up to this - it’s over too.

Clients, creatives, media planners, suppliers – all of us – are going to have to do one thing. And that’s listen. And once we’ve done this, we’re going have to do another thing. We have to change. We have to hear what we’re being told by our people, who are not, and never have been, just “consumers”. They are our partners. They want it done right; they expect accountability and honesty; they expect to be treated with respect; they expect to be told the truth; they expect to be listened to; they expect to be engaged and they always hope to be part of the solution.

So the whole debate about “digital as the way forward” has to become a thing of the past. After we’ve seen the life-altering videos shot on mobile phones, the monumental influence of Facebook and Twitter, any brand that hasn’t got mobile and online at its heart from now on, is

“We’ve got to foster the belief in partnership, mutual respect, education, clear objectives and fair reWards.”

28 / DECEMbEr 2011

taking the same kind of risks as Mubarak.

That said, being present in the right channels isn’t the only challenge – the quality of the work shown across all media, including digital channels, television, outdoor, in print and everywhere else, just has to become better. We all have to do what we should have been doing all along – the good stuff; the work that’s honest; the work that people relate to; the work that’s a conversation and not an order; the work that (oh yes) wins awards for the right reasons.

We’ve also got to do something a lot of us haven’t yet considered. We’ve got to treat one another properly. We’ve got to foster the belief in partnership, mutual respect, education, clear objectives and fair rewards.

We’ve always known we had to change at some point. What we know now is that we won’t survive if we don’t. On the inside, on the outside, in our behaviour, in everything we do.

This includes our motivations – let’s stop looking at short-term profit, and let’s tap into the power of creative communication and its ability to make things better.

Today’s conversations are about solutions.

That’s what our partners want and that’s what our consumers (also partners) want. The briefs we take from clients should be how to help solve a business issue and the result, in any form, be it a television commercial, a microsite or a subtle product placement, should be a good result.

Nobody could have predicted the changes that were to take place in our region and nobody did.

It’s time we question our structures, our recruitment policies, our integration models and most importantly, build a sustainable ethos to keep the faith inside and out.

We know it won’t be easy. We accept that it may be misunderstood and it may well give us problems on the bottom line for a while.

But there’s one thing that’s crystal clear as we look around our region today – it’s time. And it’s our time.

briefing

123RF

REgional tREnDs, analysis anD viEws

cash drought

The reTurn of remoTe bankers shrinking investment fees have forced global firms to send bankers home from the uae. but will they be welcome back? tExt By Ryan HaRRison

B

attered, bruised and growing weaker, the Gulf’s investment banking sector is in a sorry state. in the past few months the signs of alarm have multiplied, with some analysts suggesting that the sky is falling. stock market volumes have sunk to all-time lows and M&a deal activity has almost dried up. Meanwhile, concerns are mounting over the health of the global economy, in particular the

30 / DECEMBER 2011

calamitous eurozone. international investment banks that spent the Gulf’s boom years hiring and the post-recession period firing are now retreating fast. in the past few months, Crédit agricole, deutsche bank and Citigroup have all relocated their top playmakers back to London.

Perhaps the most high profile was deutsche bank’s Christopher Laing, head of equity capital markets for the Middle east and africa, who was moved back to London after three years in dubai. Citi’s regional head of equities adam Key was also sent home to the uK. Others, like nomura and Goldman sachs, have cut jobs in equity-related roles. international banks are growing increasingly tetchy with the outlook for

the region and are unwilling to maintain significant regional teams, recruitment experts say. “You’re going to see the return of suitcase banking, with bankers flying in when a deal emerges,” said ally Ho, head of the Middle east financial services practice at Pedersen & Partners, a dubai executive search firm. “Most institutions in 2008 said we’ll give it two years and make a decision. What we’ve seen over the last year is those decisions being made. Most people have tried to string it out, but last year was extremely difficult for deals and now they don’t have a choice,” she added. suitcase banking worked in the region for a period until around 2007, when it became apparent that banks needed to cultivate relationships with local

BAnking briefing

companies. senior executives were transferred and equities teams expanded in anticipation of a burst of activity and revenue. this failed to materialise. Over recent years the value of stocks traded on Gulf bourses has nose-dived. turnover in the GCC dropped to $296 billion last year compared with a high in 2006 of $1.6 trillion, according to Markaz, a Kuwaitbased investment bank.

Fees earned by investment banks in the Middle east fell 42 per cent to $320 million in the first nine months of the year from $551.1 million during the same period in 2010, according to new York-based research firm Freeman & Co. total fees in 2011 are 71 per cent lower than in the first nine months of 2008, when fees peaked at $1.1 billion. shane Phillips, head of the Mena practice at headhunter stanton Chase, said: “trading volumes and investments in the Gulf are all down, so the size of offices in the region will be contracting. this could also ricochet into other sectors. “there are banks in the region that are suffering because their main revenue stream is equity markets. the only way banks can meet their financial obligations is to decrease costs. Of a bank’s profit and loss, 60 per cent to 80 per cent is made up of salaries,” Phillips added. it’s easy to get carried away though, he says. Cut backs are big news, but there is hiring taking place in investment banking, especially within risk management, compliance and operations. also, there’s buoyant demand for staff in private banking, private equity, personal banking and other stable growth areas. “saudi arabia is seeing a huge boom

“There are banks in The region ThaT are suffering because Their main revenue sTream is equiTy markeTs. The only way banks can meeT Their financial obligaTions is To decrease cosTs. of a bank’s profiT and loss, 60 per cenT To 80 per cenT is made up of salaries.” in personal finance, car loans, credit cards, and home loans thanks to a change in mortgage legislation. there is an increasing number of private equity firms investing in these personal finance companies and as that gains momentum they will naturally be increasing headcount,” said Phillips. analysts argue that there were too many bankers in the region at the height of the boom and the current retraction is also too aggressive. High government spending and oil output is likely next year, which bodes well for economies in the Middle east and north africa. the World bank raised its 2011 growth estimate for the region to 4.1 per cent from 3.6 per cent in september.

Cecile Hofer, co-managing partner of financial headhunter taylor Hofer, added: “Historically, banks have always hired very quickly and let people go very quickly. this behaviour at the moment is nothing new.”she added.

Pressure to make savings at home has left international players with little

closing time • investment bank nomura recently disbanded its Dubai-based equity research team of several people as a result of low trading volumes, although it said some leading regional companies will continue to be covered by London-based analysts.

• France’s Crédit agricole closed its M&A unit in Dubai this year, aiming to manage deals from elsewhere. It came after news that investment banking fees in the Middle East declined 35 per cent to $316.6 million in the third quarter compared with the same period a year earlier, data from Reuters found.

• Zurich-based EFg international said it is closing its offices in Dubai and Abu Dhabi as it conducted a global review of its business.

• HsBC, Europe’s biggest bank, said it will stop offering brokerage services to retail investors in the UAE and focus on institutional clients. The bank will also close its consumer operations in Kuwait as part of a strategic review.

• Meanwhile, four investment bankers from Crédit agricole’s MENA operation • Kanhaiya Rathi, Kawtar Benkhraba, Pravin Chelluri and Rami Barazi – have been hired by UBs in Dubai. They will be working for the Swiss bank’s corporate advisory group, reporting to Albert Momdjian, according to reports on Bloomberg.

• Credit suisse dissolved its Middle East equities research team.

choice but to step back from the region. but it’s hard to imagine that local investors and businesses will welcome back the same banks with open arms when they decide to return.

gUlF BUsinEss / 31

BRIEFING LiBYA/GCC

aFP

Libya has not shown Gulf Arabs preference with awarding oil contracts.

back to black

After GAddAfi Libya’s surprisingly speedy return to oil production could spark mixed feelings in GCC countries.

TExT By Ryan HaRRison

A

s dramatic comebacks go, Libya’s return to oil production stands out as remarkable. the country has left analyst forecasts in its wake to restore vital oil fields in record time. already producing 600,000 barrels a day of oil in late November, Libya is in the process of restarting another giant field to help push the total close to 800,000 by the end of the year, according to the chairman of Libya’s National oil co., Nuri berruien. most analysts, including some at the international monetary Fund, had predicted the country would achieve less than half that amount. it contrasts to iraq’s long struggle to resume production after suffering serious damage to its oil facilities. oil states in the Gcc may have found it difficult to join in the celebrations of Libya’s return to form. earlier this year they unilaterally decided to increase production to compensate for the loss

32 / DECEMBER 2011

of Libyan supplies. but it’s inevitable now that they will face pressure to reduce their output, which means less revenue. relations over oil between the Gcc and Libya have been icy so far, but at a crucial meeting of Gulf arab oPec producers in december things could turn frostier. Libya said recently oPec majors should cut production to make room for its returning marketshare. Production is expected to grow to full capacity by the end of 2012 or early 2013. if the behaviour of Libya’s new government is anything to go by, Gcc oil officials will have a fight on their hands at the meeting. it has not shown Gulf arabs any preferential treatment with the awarding of oil contracts. instead, companies including Western players Halliburton, schlumberger and baker Hughes are making regular trips to the country and are rumoured to be on the brink of returning to fulltime work. meanwhile, according to Uk media, representatives of Libya’s National transitional council called city executives to a central London hotel to drum up british interest in the “massive opportunities” on offer. simon Wardell, director of global oil

at iHs cera, said: “the transitional government wants to move as quickly as possible to get oil back up and running. and as such are not thinking too much about from where they can bring oil companies. in the short term, Libya is looking at companies that have experience, especially service companies that can switch things back on quickly. those firms will go in first. in the longer term there are potential concessions to be had on contracts for Gulf states that were more supportive of the regime that got into power.”

He added that Libya’s strength would displace the Gulf’s revenues from oil as governments are forced to “make room” for its increasing marketshare.

What Libya’s National oil co.’s berruien means precisely when he said in London last month that he would “favour our friends” for new contracts, is still unclear. Unquestionably, it’s likely to cause a stir in the international community, especially given that Libya has 46 billion barrels of untapped oil reserves – the largest in africa and eighth largest in the world. the biggest headache for Gcc oil producers is likely to be if Libya’s continued convalescence coincides with an economic meltdown in the eurozone. if global growth sinks then it could pull oil prices down with it. there’s no doubt that the next few months will see the Gcc carefully eyeing the eurozone crisis, especially how it will be resolved. it could have a huge impact on revenue for oil producers as well as hindering their chances to fight for marketshare with Libya.

AVA A AV VAILA IL BLE AT DU DUBAI BA MA ALL. LL T TO OM MFO FORD. R COM RD

Emirates announced $26 billion worth of orders at the show

Cleared for landing

Dubai’s upbeat air show Last month’s aviation fair surprised the world with a spritely book of orders from Gulf airlines.

TExT By pETER shaw-sMiTh

W

HIlE tHE SuBduEd global macro-economic outlook is giving many international businesses cause for concern, clearly no one has told Emirates or the powers that be in dubai about the scale of the downturn. At press time, orders totalling $63 billion were announced at dubai Air Show 2011, underlining the extent of the regional aviation boom, and making the event a much bigger success in financial and order-book terms than that of 2009.

34 / DECEMBER 2011

In dubai Air Show 2011’s headline, HH Sheikh Ahmed, chairman and chief executive of Emirates Airline, announced a day One order for 50 Boeing 777-300 ERs worth a list price $18 billion, with options on 20 more, worth $8 billion, for a total of $26 billion. this was the biggest single order in the history of the American manufacturer and a boost after its travails with the 787 dreamliner.

“As the largest operator of the 777 in the world, Emirates has played an important role in development of the airplane and its input over the years has been invaluable in the development of the 777 programme,” said Jim Albaugh, president and CEO of Boeing Commercial Airplanes.

In addition to the 50 777-300 ERs ordered, Emirates has 73 Airbus A380s,

70 Airbus A350s, 40 777-300 ERs and six Boeing freighters on order, for a total of 239 wide-body aircraft worth more than $92 billion. However, Emirates was coy about the timing and financing of the Boeing 777 orders, which will likely be spread out over the next decade.

Sheikh Ahmed called the 777 “the backbone” of the Emirates fleet, but of the total global A380 fleet of 60 delivered and 243 on order, Emirates has 16 in service and 74 on order, making it easily the largest operator of the superjumbo. It is not difficult to envisage the threat level perceived by the world’s leading Western airlines from the formidable power Emirates has gained by its access to two of the globe’s most potent aircraft.

aviation BRIEFING

“akbar al baker was said to have ‘humiliated’ airbus with his choice language as he attacked the plane maker for delayed production. ”

GE Aviation won $14 billion of engine orders at the show, some $6 billion of it devoted to the supply and maintenance, repair and overhaul [MRO] of the GE90115B engines to be installed on the new Emirates 777-300 ER jets. the other eye-opening deal to emerge from the air show involved the tactics of Qatar Airways chief, Akbar Al Baker, in facing down Airbus in negotiations over pricing for a its A320neo order. In the end, he chose 50 A320neos, with five A380s thrown in, at list prices of $6.4 billion, and was said to have “humiliated” Airbus with choice language referring to delays in the A350 programme. In addition, Florida-based Spirit Airlines signed a deal for 45 A320neos and 30 A320s worth $6.8 billion. the MRO market in the region looks set to boom with several players hoping to cash in on the boom in regional civil aviation. Emirates Group signed a longterm leadership training agreement with Rolls-Royce, allowing Emirates’ top uAE national managers to take part in Rolls-Royce’s leadership and business management development programme in the united Kingdom.

Abu dhabi’s Mubadala is already an established player in aviation through several joint ventures, including whollyowned Abu dhabi Aviation technologies in the capital, and a 70 per cent stake in Zurich-based SR technics. the Advanced Military Maintenance Repair and Overhaul Centre (AMMROC) is a joint venture for defence aircraft MRO with Sikorsky, to which lockheed Martin entered in January.

Aviation lease and finance company AlAFCO of Kuwait increased its order for A320neos to 50 from the 30 originally signed at the Paris Air Show in summer.

Airbus said the value of the deal at list price was $4.6 billion. the company also took out options on 30 more. It also completed the transfer of six dreamliners to Oman Air. On day five, the Air Show was inundated by 700 Emirati students from uAE colleges and universities sporting colourful scarves and regalia sampling the atmosphere of the show in a ‘Futures day’ designed to underline the appeal of careers in the aviation industry.

With a 25-country office network already in existence, Aircraft broker CB Aviation announced the opening of a new office in dubai, and named Saeed Al Mansouri as its vice president for the Middle East and Africa. “We are focusing efforts on these regions, which, according to global statistics, will see growth rates in local tourism and aviation touching 20 per cent of global figures,” Al Mansouri said.

“It is said that the volume of investment in projects in the Middle East will exceed $330 billion over the coming years.” dubai Airport Expo is to be demolished to make way for another terminal at dubai International and the dubai Air Show 2013 will take place at dubai World Central in Jebel Ali. Sheikh Ahmed confirmed that Middle East Business Aviation 2012 will also take place at the new Jebel Ali complex. With the two events now alternating each autumn, dubai has firmly established itself as one of the world’s leading market places for

Akbar Al Baker, CEO of Qatar Airways

the aviation industry. With a fourth major terminal facility under construction at dubai International, the relocation of the air show looks set to offer the government of dubai the option to build a fifth at dubai International. looking ahead, the contrast between Chapter 11 bankruptcy rumours among uS carriers and the inexorable ascent of the Gulf carriers could not be starker.

Congestion and red tape are not making life for the European carriers any easier either, and governments looking to be on the take from passenger activity in the form of ticket taxes and environmental charges are only making the struggle more difficult. “this is nothing short of a major re-alignment of market shares and of economics of both scale and capacity use, since the new mega airports in the Gulf area suffer no flying restrictions, allowing the best utilisation of the newest and most technologically-advanced fleets found anywhere in the world,” wrote dr. Wolfgang thome in a report for EtN published last month.

GULF BUsiNEss / 35

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finance BRIEFING

Over $5 billion in Gulf Sukuk will change hands in 2012.

Safe aS houSeS?

Sukuk on the riSe the islamic funding tool has enjoyed another record year as Gulf funding needs grow.

TExT By RyaN HaRRISoN

T

he Middle east sukuk market exits 2011 in a jolly mood. Funds raised through sukuk will rise three-fold this year, to heights last enjoyed before the financial crisis. the current problems of non-islamic indebted european nations have contrasted nicely with the emphasis that sukuk, or islamic bonds, place on a balanced, risk-sharing and asset-based approach. indeed, islamic finance fans insist that Western economies could learn a thing or two about the use of the

shariah-compliant debt instruments in GCC countries and other Muslim regions.

Nearly $17 billion was raised through sukuk in the first nine months of 2011, according to saudi arabia bank NCB, an impressive departure from around $7.6 billion in 2009 and $6.1 billion in 2010. in 2007 – the climax of a six-year boom for Gulf states – sukuk issuances hit $18.7 billion. some in the islamic finance world say the big appeal of sukuk is that technically a company is not issuing debt in the

conventional sense. sukuk issuers pay bondholders with the cashflows generated by specific assets, which are put into a special-purpose vehicle as part of the deal. it’s structured this way to avoid the islamic prohibition on interest payments.

With conventional bonds, a business would pay interest to the bondholders, and eventually redeem the bond. “the beauty of sukuk is that they are linked to revenue producing assets, in other words, the real economy,” says Yusuf de lorenzo, an independent shariah scholar. “if the revenue stops, the assets are the backstop.

“More importantly, the concept behind sukuk is that they are not debt instruments, but hybrids that look and perform like bonds when they are actually a form of equity investing. thus, investors buy a share of a business and effectively become the issuer’s, the government’s, partners in a business enterprise,” he adds.

Others say that no matter how you spin it, companies are still on the hook to their islamic bondholders. debt is debt. and in the Gulf, property developer Nakheel has been the cause of a lot of this scepticism. it could be argued that

“The concepT behind Sukuk iS ThaT They are noT debT inSTrumenTS, buT hybridS ThaT look and perform like bondS when They are acTually a form of equiTy inveSTing. ” GULF BUSINESS / 37

BRIEFING Gcc

sukuk pIpElINE 2012 IssuER

CouNtRy

sIzE

aCWa Power International

Saudi arabia

$300 million

Etisalat Sukuk Company

UaE

$1 billion

Saudi Electricity Company

Saudi arabia

$1 billion – 1.5 billion

al Hilal Bank

UaE

$500 million - $1 billion

Dubai Bank

UaE

$500 million (rumoured)

abu Dhabi Islamic Bank

UaE

$544.5 million (rumoured)

abu Dhabi Commercial Bank

UaE

$95 million (rumoured)

Sakana Holistic Housing Solutions

Bahrain

$50 million (rumoured)

Dar al Dhabi Company

Kuwait

$363.1 million (rumoured) Holding 00 million struck since Easter.

“Sukuk iS a Safe play in The gulf becauSe you don’T alienaTe inveSTorS. iT’S open To noniSlamic inveSTorS and Shariah complianT oneS equally. ”

Few would argue that a sovereign issue in a country with the world’s sixth largest Muslim population could be catalytic. Yet globally, Malaysia still accounts for the lion’s share of the sukuk market, by most estimates about two-thirds. in the first nine months of 2011 it issued $43.5 billion, or 69 per cent of the world total. eleven other countries contributed the rest. the six GCC states issued a combined $16.1 billion or 25 per cent of the total. New entrants this year include Yemen, iran and Jordan. the GCC’s total would have been more but experts say it was hindered partly by the unrest in the many parts of the MeNa region. as 2012 arrives, the Gulf is expecting a sprinkling of new issuances. Most surprising perhaps is Bahrain, which is expected to sell a $1 billion sukuk in the international markets, a brave move considering political violence continues to flare up in the Kingdom.

Meanwhile, dubai islamic mortgage firm tamweel has suggested it will consider issuing a multi-million dollar sukuk, hot on the heels of a similar announcement by al hilal Bank in september. if next year turns out to be anything close to the growth witnessed this year, there are plenty of signs for optimism. the contrast between eurozone debt woes and the GCC islamic bond market could get sharper.

sukuk are less risky, up until the point that the issuer defaults. still, sukuk have proved wildly successful among Gulf investors that crave an alternative to speculative, debtleveraged Western banking models.

Many say the islamic finance vehicle’s popularity is drawn from its mass appeal. Jawad ali, law firm King & spalding’s managing partner for its Middle east offices, says: “sukuk is a safe play in the Gulf because you don’t alienate investors. it’s open to nonislamic investors and shariah compliant ones equally.” the prospect of huge construction bills for mass infrastructure projects has forced many Gulf states to turn to sukuk.

Qatar, which faces perhaps the most daunting task, will increasingly use the islamic instruments for project finance. some will be corporate sukuk, issued by individual companies, but there is a stampede of governments looking to issue sovereign sukuk.

Qatar is expected to spend around $100 billion over the next five years to prepare and deliver the infrastructure required to support the huge influx of visitors forecast to attend the 2022 FiFa World Cup. the construction sectors in saudi arabia and Kuwait are estimated to spend $420 billion and $63 billion, respectively, over the next three years.

38 / DECEMBER 2011

sukuk fever has spread beyond the GCC, with rumours that the governments of egypt and libya will be next on the list to take the plunge. Both will use sukuk for their massive rebuild. in the wake of the revolution that toppled egypt’s long-time leader hosni Mubarak, the country faced a serious financial crunch and a funding gap that totalled more than $12 billion. it would be the 80 million Muslim nation’s first sovereign sukuk, after three decades of restrictions from Mubarak’s regime that stunted the islamic finance industry.

Neil Miller, global head of islamic finance at KPMG, says: “it’s a chance to inject new capital into a country that needs new capital.” if egypt did issue a sukuk it would play into the “overall narrative” of Middle east islamic finance strengthening, versus the might of Malaysia, he adds.

BRIEFING commodities

123Rf

The price of gold has risen by 600 per cent over the last decade.

uncertain times

The gold conundrum Is the yellow metal losing steam or gathering momentum?

TExT By yaDullah ITallah

G

Old AppEArS TO have calmed down after a breathless run earlier this year that saw prices run up 22 per cent and promised to cross the $2,000 an ounce barrier for the first time. But the rally stalled the minute the price hit $1,900.16 in August. Since then, the yellow metal has dithered and remained directionless.

Opinion remains divided on where the yellow metal is headed next: gold bugs say that with the world (or at least the EU) going to hell in a hand basket– the legendary ‘safe haven’ metal is just taking a breather before its next incline.

Gold naysayers point to the fact that gold has lost its steam, evidenced by the fact the metal did not break all records after Standard & poor’s downgraded US sovereign ratings and the EU has careered over the edge in the past few months. Instead, gold prices have remained range-bound along the $1,7001,800 band.

41 / DECEMBER 2011

The important point to note is that gold has gone nowhere and that offers some clue as to where it’s headed.

For one thing, let’s put things in perspective: gold has risen by 600 per cent over the past decade. The fact that prices haven’t crashed and are holding steady suggests that this rally has more bite than the gold doubters would like to believe.

Second, there is continued buying of the yellow metal. lots of it. Central banks, often seen as key drivers of gold prices, bought nearly 150 tonnes in the third quarter, the highest in four decades, according to the World Gold Council (WGC). The banks have been net buyers of gold since last year, piling into the metal as a way to boost their foreign exchange reserves.

“Unsurprisingly investment demand for gold was a key driver during the third quarter,” said Marcus Grubb, managing director, investment, at the WGC. To be fair, the WGC is a lobby group for gold producers and it has a tendency to talk up the merits of the yellow metal.

Still, Grubb has a point: “Increasing levels of inflation, the US credit rating

downgrade, a worsening Eurozone sovereign debt crisis and the lacklustre performance of many assets drove investors to increase holdings in gold in order to protect their wealth.

“Given gold’s proven risk mitigation properties, it is likely that investors will continue to seek protection from economic uncertainty, which shows no signs of abating. The long-term fundamentals for gold remain strong with a diverse and growing demand base coupled with constrained supplyside activity.”

Overall, gold demand reached an alltime high in value terms, rising $57.7 billion in the third quarter, with gold bars and gold exchange traded funds also posting robust growth.

Goldman Sachs, the global investment banking giant which usually calls correctly on commodities, has raised its three-month forecast by seven per cent to $1,760 an ounce, six-month forecast by 5.8 per cent to $1,830 and 12-month forecast by 3.8 per cent to $1,930.

“As we expect, gold prices will continue to be driven in large measure by the evolution of US real interest rates

commoditiesBRIEFING

2000 1800 1600 1400 $ once

1200 1000 800 600 400 200 0 18 Nov 06

“Gold buGs say that with the world (or at least the eu) GoinG to hell in a hand basket – the leGendary ‘safe haven’ metal is just takinG a breather before its next incline.” and with our US economic outlook pointing for continued low levels of US real rates in 2012, we continue to recommend long trading positions in gold,” the bank said in a note to clients, adding that the Eurozone debt crisis could further push gold upwards.

US Global Investors, a mutual fund investment company, says negative real interest rates in the US will propel investors to seek gold for its perceived ‘safe haven’ qualities.

Gold and the US greenback are negatively correlated and it’s probably fair to say that much of the commodity price spike is due to the US Federal reserve printing dollars with sheer abandon.

So it’s no surprise that gold prices

18 Nov 07

18 Nov 08

18 Nov 09

have been reined in as the US dollar recently turned into a ‘safe haven’ due to the EU crisis and, paradoxically, the US downgrade.

But French bank Société Générale notes that the dollar’s safe haven tag has limited appeal as the Federal reserve could embark on a third round of quantitative easing by the end of the year or early 2012.

The bank has cut its outlook for gold, but not by much.

“For 2012, we now expect gold prices to average $2,175 an ounce, versus $2,275 in the previous forecast.”

In the short term, analysts expect a burst of central bank buying and the holiday season to boost gold prices.

Toronto domino Bank, Canada’s second largest financial institution, does not sit on the fence when it comes to the prospects of gold: “We expect precious metals to be a top performer in 2012, with gold prices heading towards $2,100. History shows that easy monetary policy and economic/ financial stress are supportive for gold prices – and this environment is likely to persist throughout the next year,” the bank notes.

In addition, the much touted love of the Indian and Chinese consumer for gold should also ensure prices hold up.

18 Nov 10

18 Nov 11

But Indian jewellery demand was down 26 per cent during the third quarter, which sends a contradictory signal that consumers are slowly being priced out, leaving only speculators jumping on the gold bandwagon. We can be certain that these investors will exit at the first sign of trouble.

While it’s tough right now to find analysts who are bearish on gold, investors would do well to move with caution.

First, we are in a new era of global financial market volatility, which makes historical technical charts redundant.

Markets have vacillated from ecstatic highs to depressing lows, and it is possible that a few key decisions in Washington and Brussels could dissipate the dark clouds hovering over the global economy, leaving gold with little cover.

Second, if the global economy continues to meander, investors will be keen to take profits from their gold holdings to compensate for losses elsewhere, keeping prices in check.

Third, as gold has risen 600 per cent over ten years, even a mid-sized correction may not be unwarranted and may not signal the complete and utter decline of the precious metal.

But investors who move in at current prices could find themselves staring down a cliff. ©alifarabia.com

Gulf BuSINESS / 42

RAK BRIEFING

RAK gateway project.

investment

RAK To ThE fuTuRE The northern Emirate’s feisty annual business conferences are drawing in new investors.

TExT By PETEr Shaw-SmITh

W

HEn you LiVE up the road from World Conference Central, trying to attract people to come to your own more modest symposia is a challenge. Resourceful Ras Al Khaimah is undeterred.

Sheikh Saud bin Saqr Al Qasimi, Supreme Council Member and Ruler of Ras Al Khaimah, is nothing if not a canny host. Since taking over management of the emirate’s affairs in 2003, he has presided over a flowering of its economy, now $4.5 billion in size.

Downtown RAK is not for the fainthearted. With poor roads, and little more than a mall and a quaint and dated version of the Hilton Hotel, most people encounter it only if they fancy camping on the Mussandam Peninsula or a chat with one of the struggling cement company CEos. But the Hamra Resort continues to blossom, with several new amenities and the picture postcard vistas are almost a match for the best that Dubai has to offer. The new Palace Hotel is the height of luxury, sumptuous townhouses stretch as far as the eye can see, and a new aqua-park and apartment developments - including an offshore island - are going up along the seashore.

The effort to promote RAK has not

happened overnight. When an Emirates pilot, who was paying for a new villa at RAK Properties, said in 2007 he loved the idea of not having to bother with the traffic and fumes of Dubai in his daily routine any more, you could sense a unique selling point.

Last year, after teaming up with international event promotion group Horasis, Sheikh Saud put on the Annual Global Arab Business Meeting in Ras Al Khaimah.

Led by chairman and one-man team, Dr. Frank-Jurgen Richter, Horasis has been organising events around the world for six years and this year puts on conferences in Valencia, Luxembourg and Zurich. Switzerland-based Horasis has been active since 2005.

GULF BUSINESS / 45

BRIEFING RAK

“RAK’s business model Relies heAvily on inwARd investment: officiAls sAy thAt 39 peR cent of investoRs ARe fRom indiA, 19 peR cent fRom the middle eAst excluding the gcc, And 15 peR cent fRom the gcc itself.” “i chose RAK as the emirate has great potential,” says Dr. Richter. “And we usually chose locations with a ‘resort character’. Ras Al Khaimah is an ideal location to hold our Global Arab Business Meeting. The Ruler is a great supporter.” in truth, the quality of the debate at the conference did not match that sometimes encountered when the bighitters converge on Dubai. The outcome of the discussions seemed to be that the volatility caused by the Arab Spring was no bad thing for resourceful Middle Eastbased entrepreneurs. But as a platform for investment in RAK, it was perfect. “i have attended a number of Horasis meetings, including last year’s event in RAK. They represent a great networking and learning platform,” says Wolfgang Lehmacher, partner and managing director for Greater China and india, of CVA, a global strategy consulting boutique. “They are international and local at the same time, allowing participants to realise … views beyond the snapshot of the regional situation and intentions.”

At a lunch served in two packed adjoining restaurants, a Greek PhD from Cambridge university set out her desire to commercialise her company’s cancer research - and how possibly to involve RAK educational institutions. An indian businessman earnestly entreated a Dubaibased Emirati over his latest business plan. A German iT executive who divides his time between Paris and Hong Kong said RAK, with more information, might be worth a second look. An indian banker and fund manager took Sheikh

46 / DECEmBEr 2011

Sheikh Saud bin Saqr Al Qasimi, Supreme Council Member and Ruler of Ras Al Khaimah.

Saud to one side to impress on him the need to improve local education.

“Recent regional consolidation has corrected unsustainable [projects] and is refocusing business on fundamentals,” says Mr. Lehmacher. “This makes for solid perspectives in the region. Ras al Khaimah offers exactly this perspective. it is a dynamic emirate, intending to invest in knowledge management and education. RAK represents fertile ground for many businesses.”

RAK’s economy has held its own during the downturn and new projects and warehouses spring up regularly. its business model relies heavily on inward investment: officials say that 39 per cent

of investors are from india, 19 per cent from the Middle East excluding the GCC, and 15 per cent from the GCC itself.

Dr. Khater Massaad, who built the largest ceramics company in the world, RAK Ceramics, was on hand to explain that the RAK investment Authority, which he also heads, is home to over 9,800 companies, of which 800 are industrial.

“Total industrial investment in RAKiA to date exceeds $3.5 billion,” he said.

Alex Thomas, general manager, marketing, at RAK investment Authority, pointed to increasing migration from GCC companies as a key to RAK’s recent economic success, although he could not comment on uAE companies moving to the emirate. “Costs are an important factor,” he said.

RAK has proved remarkably adept at attracting foreign investment and has seized every opportunity to sell its brand internationally. Why did Dr. Richter choose RAK over Dubai to host his event? Probably because he realised that, ultimately, more new businesses would be incubated as a result.

“We are not a conference organiser,” says Dr. Richter. “Conference organisers usually invite a few star speakers. And 500 people sit and applaud. We want to involve everybody in an active dialogue; that’s the reason we include so many boardroom dialogue panels. Participants usually stay on during the whole meeting, [as opposed] to conferences where speakers come and leave.”

And as the new enterprises mushroom in RAK’s industrial zone, you can see why.

THE POWER It’s been a spellbIndIng year. as the arab world fought for freedom, the wIder world battled economIc woes and an uncertaIn future of Its own. Gulf Business asked the regIon’s top busIness mInds what the future holds In 2012. compiled BY alicia buller illustrations BY rom miclat

48 / DECEMBER 2011

cover story

LETTERS

GULF BUSINESS / 49

energy

Abdalla Salem El-Badri, Secretary General, OPEC

G

fast facts -

the organisation of the petroleum exporting countries (opec) was founded in Baghdad, iraq, in 1960 by five countries. currently, it has 12 member countries.

-

opec countries supply about a third of the world’s oil.

-

recently, the organisation cut its global economic growth forecast for 2012 to 3.6 per cent from 3.7 per cent.

50 / DECEMBER 2011

iving an assessment of the global oil outlook for the short and medium-term is notoriously challenging.

But offering views on the outlook for investments in the industry, especially given recent economic and financial developments around the world, is even more difficult.

Continuing unemployment and a manufacturing slowdown in the US, as well as a growing sovereign debt crisis in Europe, have recently prompted OPEC to revise down its economic growth forecasts for 2011 and 2012 – and, consequently, oil demand. And despite rapid growth in developing countries, great uncertainties remain about a sustained and broad-based recovery in the major oil-consuming countries of the world.

There is also the ongoing challenge of not having a sufficiently stable crude price environment. Our industry’s growth requires prices that are neither too high nor too low – and which are stable enough to continue to attract investments.

We should not forget the experience of 2008 when extreme volatility resulted in prices rising to nearly $150/b and then falling to around $30/b by the end of the year. This led to the postponement or cancellation of more than 30 investment projects across our Member Countries.

Despite the complex nature of the economic challenges, our Member Countries have an ongoing commitment to capacity investments. According to

our 2011 World Oil Outlook, which was released in November, OPEC Member Countries are expected to invest close to $300 billion in 132 upstream investment projects through 2015.

Moving forward, of course, remains challenging. But such investments are, as I have often said, the lifeblood of the oil industry. Without investments now – in exploration, production and expanded capacity – future supplies may not materialise and future needs may not be met. And this is something neither consumers nor oil producers can afford.

Our Member Countries know this very well. That is why OPEC consistently expresses its interest in ensuring the security of supply to all consumers and, through its Member Countries, maintains a commitment to investments in new projects.

While the current global outlook provides little security to producers and investors, we must remember that future oil supply depends on ongoing and timely investments in capacity expansion. They are central to ensuring future supply.

What motivates us is, of course, an interest in satisfying the world’s energy needs and striving towards stability in the market. This is what our Member Countries always try to keep in mind, in line with our broader organisational mission. It is only in this way that OPEC can continue to be ready to act when necessary – despite what the global outlook may show.

banking and finance

h.e. Abdul Aziz Al Ghurair, chairman, Mashreq

2

011 has been quite an eventful year for the global economy, but the UAE has weathered the turbulence well and largely remained insulated from the impact of the Eurozone crisis. The UAE financial services industry, being the barometer of the overall economic climate of the country, reflected this stability, which is evident from the reasonably good performance posted by UAE banks for the first nine months of the year.

However, during 2011 there was a visible shift in the thinking and strategy of most UAE banks. Having overcome the impact of the 2008 financial crisis, banks in the UAE have shifted their focus internally and have been working to strengthen their systems, processes, structure and risk management policies.

Banks are, in general, looking internally for improvement opportunities.

Most of them are revisiting and re-shaping their medium to long-term strategies, revamping their distribution strategies and identifying areas for future growth. In short, they are spending time and efforts to build strong fundamentals to face the new economic reality.

The after effects of the economic upheaval witnessed in 2011 in the Western economies will impact the fast growing economies of Asia, which are expected to slow down in 2012. This will affect the UAE and I expect flat performance or marginal growth for the UAE banking sector in 2012.

Customers will be more demanding and banks will be under competitive pressure. Margins will compress, customers will demand flexibility, and won't accept a ‘one size fits all’ approach. Banks will be expected to come up with innovative solutions to meet customer demands. To be able to compete effectively in a market, where growth is flat and customers are

“The after effects of the economic upheaval witnessed in 2011 will affect the UAE, with flat performance or marginal growth for the UAE banking sector in 2012.”

fast facts -

mashreq is the second oldest bank in the uae (after dubai islamic Bank), with total assets of dhs70.9 billion and net profits of dhs756 million in the first nine months of 2011. the bank is listed on the dubai Financial market.

-

mashreq introduced the first atms and credit cards to the uae.

-

the bank opened its 54th branch in umm suqeim, dubai, this year, which includes a mashreq Gold centre.

demanding, banks will need reorganise themselves in line with the needs of their customers. Quality customer service will be the major differentiating factor.

Since the financial crisis of 2008, the global regulatory environment has changed forever and this will ensure that banks behave more responsibly. Risk management will take precedence over profitability and considerations. Liquidity and capital management will be the first priority for banks.

Finally, let me add that changes in the banking regulations and fiscal discipline, introduced during the last two years, will make the UAE banking sector stronger and will foster long-term growth in the country.

GULF BUSINESS / 51

real estate

H. E. Mohamed Alabbar, chairman, Emaar Properties

r

fast facts –

uae-founded property titan emaar has built some of the country's most striking landmarks, from the world's largest tower, Burj Khalifa, to the world's largest mall, dubai mall.

–

recurring revenues from the hospitality and shopping malls businesses of emaar accounted for nearly 41 per cent of total revenue in the first nine months of this year.

–

Founded in 1997, emaar is listed on the dubai Financial market.

52 / DECEMBER 2011

eal estate, like just about everything else in life, is cyclical. The eternal challenge – for homeowners, investors and developers – is figuring out which way the cycle is moving, and when it is most likely to shift direction.

Because in real estate, as in life, we all want to be ahead of the curve.

We want to buy when the cycle is down, and sell when it’s up. And, as developers, we want to build for not just current but also future demand.

That sounds awfully simple.

Unfortunately, real estate cycles are complex things, influenced by countless factors, both local and global, that make them hard to predict.

So what do we do? Generally, we study historical trends, current leading indicators and ongoing price fluctuations to assess, as best we can, the direction of the cycle.

That’s one option. Another is to focus less attention on the vagaries of the market and, instead, zero in on underlying demand, asking ourselves: What do people really need, right now and in the future, that they can’t get?

So let’s step back for a moment and look at our region with a bird’s eye view.

What do we see? A lot of young people, including millions who need good jobs and just as many who require quality homes for themselves and their families.

Our region needs sustainable jobs and affordable homes. It’s hard to miss this plain fact.

My belief in fundamentals, in the importance of going back to basics, is one of the reasons why Emaar, which has traditionally focused on affordable luxury developments, recently launched a new subsidiary - Al Dawahi Development, a next-generation developer of value housing projects across the Arab world.

At a time when the housing shortage in some of the fastest growing cities in the Middle East is estimated at over five million units, Al Dawahi Development will address the huge demand for value housing. Creating a new category of homes and communities that provide value to young families, we will create self-sufficient communities that fulfill the aspirations of Arab youth and their families.

A back of the envelope calculation will show that if we can build 40,000 homes annually, it would take at least 100 years to meet pent up demand. Clearly there is room here for not just Al Dawahi, but many more developers to enter the market of value housing. However, it is important for developers to implement the right business model that works on volume and a good supply chain that offers the best prices for building materials.

Three years after the world’s financial system nearly collapsed, we need to go back to basics. After all, as any builder knows, every project must start with a strong foundation.

banking and finance

V. Shankar, ceo, Standard Chartered, EMEA ANd americas

2

011 has been a challenging year for the banking industry.

Banks around the globe have had to contend with changing economics, shifting political winds and a plethora of new banking regulations. The Eurozone turmoil, US sovereign downgrade, the Arab Spring and unprecedented market volatility were just a few of the challenges. Whereas the 2008 post-Lehman crisis was a genuine banking crisis, the current one is arguably a political and sovereign crisis that is stressing the banking system. And it is unclear where this will all end.

Looking ahead, what is clear is that some fundamental shifts are taking place.

The economic centre of gravity is shifting from West to East. While the West contends with an ageing population and high debt levels, the East has favourable demographics and growing financial reserves. South-South trade and investment flows are driving the global economy.

A new Silk Road is being spun from Asia to Latin America. The Middle East is well placed to benefit from this shift as it has a favourable geographic position and trading in its DNA. This should help create millions of jobs. The Arab spring highlighted that a potential demographic dividend can become a debacle if we don’t create enough jobs for our young people. The Middle East needs to diversify away from its reliance on energy and ensure education puts a greater emphasis on employability..

In 2012, I expect the world to remain ‘interesting’. We live in an interconnected world. If the developed West, which still accounts for two-thirds of the global GDP, grows at a low or negative rate, it will impact the developing world as well. The world will also keenly watch events in Egypt, Syria and Iran. Asia will continue to be the fastest growing region, driven by growing consumerism in China, India and Indonesia.

Once Basel III and the panoply of other banking regulations are implemented, the minimum capital requirement for banks will be almost four times as high as before the crisis. Many will respond by deleveraging their balance sheets and retreating to home markets. Banking sector profitability could be under pressure from reduced loan demand and hedging activity.

Standard Chartered’s strategy in 2012 will be much the same as that we have pursued over the last decade. We will maintain our focus on our core growth markets in Asia, Africa and the Middle East. We will stand by our clients. We will continue to be disciplined on costs, capital usage, liquidity and risk management.

These strategies are hardly novel.

However, our sustained performance has proven that focusing on the basics of banking and being true to our brand promise of being here for good delivers results. So expect more of the same from us in 2012 and beyond. In banking it is good to be predictable and boring!

fast facts standard chartered bank is headquartered in london, uK, with over 85,000 staff in 70 countries and around 3,000 employees in the mena region.

-

the bank paid $5.76 billion in salaries last year, a 17.3 per cent increase on 2009.

GULF BUSINESS / 53

aviation

tim clark, president, Emirates airline fast facts –

emirates was launched in 1985 with two leased aircraft. today, the carrier has a 160-plus fleet of airbus and Boeing aircraft. the carrier also placed an order for an additional 50 Boeing 777s during the dubai airshow in november, with the deal being valued at $18 billion.

–

the airline flies to more than 100 destinations in over 60 countries, and employs a cabin crew of around 12,000 people.

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the airline announced that its net profits for the first half of the 2011 fiscal year fell by 76 per cent, thanks to increasing fuel costs and foreignexchange losses.

54 / DECEMBER 2011

H

ere at emirates we are always looking forward. We have a detailed growth plan that will take us many years into the future.

In 2011, the global airline industry took a hit from multiple areas. Shifting global economies, political unrest and soaring fuel prices are factors we cannot always plan for. We do our best to mitigate their effect on our business but the reality is that we do not have the power to stop them; we simply have the resilience and determination to weather them. You cannot plan for adversity but you have to be smart enough to expect it and work your way around it.

2011 was a challenging one for Emirates with the incredible high of our record breaking full-year results in March, followed by a dip in our half year profits in up to September.

The excruciatingly high price of fuel has had a detrimental effect on our half year profits, yet despite this we remain on our strong growth trajectory as one of the fastest growing airlines in the world.

At Emirates we are looking ahead to 2012 with cautious optimism. The world economy is currently suffering from disequilibrium.Next year, we expect the global economy to begin to balance itself out again and we are well poised to capitalise on this. We have the network, the aircraft and, importantly, the drive to do so.

Despite the global slowdown Emirates has not halted our own growth as evident in our recent order for 50 Boeing 777’s, made during November’s Dubai Airshow.

World markets are continuing to develop. Many airlines are still stuck in the 1990’s mind-set and have taken far too long to react to the world’s newest and fastest growing economies.

India, China, Africa and Brazil are fast becoming the global powerhouses of this millennium. Adaptation is the key to survival for any business and we have always been quick to react and take advantage of these global shifts.

In 2012, markets in Africa and South America will further push themselves forward. Africa in particular is a resourcerich land. The business is there, it’s just a matter of being bold enough to go there and grab it. We already have 19 African destinations and in February next year we will launch Lusaka and Harare taking us to 21. The fact that other airlines are only just waking up to this opportunity-rich land is to their own detriment.

There is no great secret to our success.

It is the collective hard work of our employees that has propelled Emirates to become the world’s largest airline.

We are optimistic about the next 12 months as we continue to move forward with implementing our growth plans.

The whole aviation industry has taken a hit this year but with the right planning in place I am certain that 2012 will be a better year for all of us.

banking and finance

Rick Pudner, CEO, Emirates NBD

t

he past year was dominated by a number of significant macro events both regionally and globally, including the Arab spring, the tsunami in Japan, the US debt ceiling issues and, of course, the ongoing sovereign debt crisis in Europe.

The local and regional economies have not been immune to these developments and this was reflected in weaker private sector activity and consumer confidence, while access to international capital markets was affected by heightened global uncertainty and risk aversion.

Nevertheless, the region has been relatively resilient in the face of these challenges as growth has benefited from increased oil production as Saudi Arabia, the UAE and Kuwait stepped in to offset the decline in production from Libya, as well as higher oil revenues.

In the context of this macroeconomic backdrop, the UAE banking system has similarly been resilient with capitalisation and liquidity levels remaining extremely healthy and mid single-digit average operating profitability year-to-date. This was achieved despite relatively subdued private sector loan growth and continued balance sheet de-risking in the aftermath of the 2008 global credit crisis. During 2011 the UAE banking sector also faced additional regulatory tightening from the Central Bank.

Looking ahead to 2012, the macroeconomic environment remains challenging and the global outlook is

still uncertain. Regional private sector activity will depend to a large extent on continued stimulus from government spending, as well as global growth in 2012. In addition, Libyan oil production is expected to revert to more normal levels over the next few months, which suggests that GCC oil production is likely to decline, or at best remain flat, providing a headwind to growth in the region next year.

The uncertain outlook for next year will have implications for the UAE banking system and the evolution of business strategies. Firstly, volatility and uncertainty will likely remain for some time which means that speed of decision making and execution becomes a critical success factor. Secondly, private sector activity and loan growth is expected to remain relatively subdued, which implies greater competition for underwriting opportunities and pressure on banks’ net interest margins. As a result, strategies are likely to focus on building and developing fee-generating businesses, improving customer service and delivery, enhancing credit appetite in selected sectors and refocus to under-penetrated segments. At the same time, optimising operating costs and efficiency as well as balance sheet management will remain high on the priority list. Finally, we may see a pickup in local and regional mergers and acquisitions activity as banks seek diversification and growth or, alternatively, to strengthen vulnerabilities in parts of the banking system.

fast facts –

the bank was formed by a merger between emirates Bank international and the national Bank of dubai in 2007, and boasts the largest asset base in the Gcc – dhs286.2 billion as of the end of 2010.

–

the uae’s largest bank, emirates nBd saw its shares rise 20 per cent this year.

–

the bank has 132 branches and around 700 atms across the uae.

GULF BUSINESS / 55

logistics

Tarek Sultan, CEO, AGILITY

2

fast facts -

the integrated logistics firm employs around 22,000 people in 550 offices spread over 100 countries.

-

agility was created in Kuwait in 1979, and is currently a publicly traded company with close to $6 billion in annual revenue.

-

the company’s commercial business, Global integrated logistics (Gil), is headquartered in switzerland.

56 / DECEMBER 2011

011 has been an extraordinary year and while we hope for more stability in 2012, this by no means looks certain. Against a backdrop of global economic uncertainty, emerging markets continue to offer good prospects.

Agility’s biggest revenue gains came from the Middle East, Asia, Eastern Europe and Latin America. Our strength in such markets is a differentiator for us and is key to Agility’s long-term growth.

The Arab Spring has clearly transformed the Middle East. Over the long-term, I remain bullish on prospects for the region, with new governments hopefully becoming more responsive to the need for growth and development and more private sector oriented than they have been in the past. They will need to create jobs to satisfy the demands of their people. In the shortterm, our industry is focused on getting essential goods and services through.

Even while there is conflict, people need to eat, obtain medicines and so on, and our job is to secure supply chains around those critical items. Having our roots in the Middle East helps – we have experience working under extremely challenging and difficult operating environments so we continue to not only to function but to perform well, delivering for our global customers.

2011 was also marked by the sheer scale of catastrophe that occurred in Japan in March. Compounded by other serious natural disasters across the year

and the massive business disruption they trigger, the logistics industry has really woken up to the need to engineer supply chains which are tougher and more resilient – ‘just-in-case’ supply chains and not merely ‘just-in-time’.

So the industry is looking at factors such as diversified production and distribution that help remove the risk of single-pointof-failure as well as increased flexibility in the flow and routing of goods.

Given the volatility we have seen in 2011, I anticipate a continuation of the mixed global economic picture in 2012 with emerging markets moving ahead and more developed markets continuing to struggle. As a reflection of this, we will see continued trade lane growth in the Far East and in the Middle East – a trend set to continue for several years into the future. Trade lanes will also increase between the Middle East and emerging markets such as Brazil and India. As the Agility Emerging Markets Logistics Index predicted, we will see the continued rise of ‘near-sourcing’ markets like UAE, Mexico and Turkey, while in Asia, economies such as Indonesia, Malaysia, Thailand, Vietnam and Cambodia will continue with their strong development.

But while we have good reason to be upbeat, uncertainty in the global economic picture means that we will remain cautious and conservative, streamlining the organisation to boost efficiency, while looking to grow revenue organically.

aviation

james hogan, CEO, etihad airways

a

t etihad airways we are excited about 2012, concerns about the global economy not withstanding.

Now eight years old, we have established ourselves as one of the fastest growing airlines in the world and as a brand to watch.

We have been named World’s Leading Airline at the World Travel Awards for two years in a row, which is a measure of our commitment to product and service excellence, and we continue to strive to improve our offering both on the ground and in the air.

Importantly, the financial strategies that we put in place as long ago as 2006 are maturing and delivering results, and we expect to deliver sustainable profitability next year, after reaching break-even in 2011.

In terms of the wider industry, 2012 will be a very interesting year as Gulf carriers continue to assert themselves globally in difficult financial conditions, particularly in the West.

It goes without saying that the performance of the industry is closely linked to the health of the global economy.

Historically, when the average global economic growth rate has slowed to less than two per cent, the aviation industry as a whole has struggled to prevent losses.

With the global economic growth rate for 2012 widely forecast to be perilously close to two per cent, the International Air Transport Association (IATA) has recently stated it expects the industry

to make weak net profits: $4.9 billion on revenues of $632 billion, which represents a net margin of just 0.8 per cent.

Although the brunt of austerity is expected to be felt in the Eurozone and North America, with developing economies expected to fare considerably better, airlines in the Middle East are certainly not immune to the effects of slowed growth in the West.

A slowdown in any market into which Middle East carriers operate will inevitably be felt in decreased numbers of passengers travelling for leisure or business. Cargo volumes could also be hurt by slowed international import/export trade.

Oil prices in 2012 are expected to remain volatile. We will continue our policy of hedging, providing a buffer of certainty against price spikes.

As we always have, we will work hard to navigate the economic landscape and to respond quickly to changed realities.

In this respect, we are fortunate that our comparative youth allows us more flexibility and agility than many traditional legacy carriers – we are what I call a new wave carrier, still operating with a clean sheet of paper.

Our agility, along with the strength of Abu Dhabi and its increasing importance as a business and leisure destination, and the millions of potential travellers on our doorstop – not only in the Gulf, but also the huge markets of India and China – will ensure that in 2012, we are not only well positioned to weather global economic difficulties, but to emerge well placed to kick on when the eventual upturn comes.

fast facts -

abu dhabi’s government-owned national carrier began operations in 2003.

-

etihad plans to break even this year.

-

the airline currently flies to 86 cities, and is planning to add six new destinations over the next six months.

GULF BUSINESS / 57

aviation

Samer Majali, ceo, Gulf Air

i

fast facts -

the airline, the oldest in the region, turned 61 this year, and is fully owned by the Kingdom of Bahrain.

-

Gulf air recently added three new destinations in saudi arabia and is also negotiating with the indian government to launch new routes into the country.

-

Gulf air's falcon logo appeared on the shirts of the premier league club Queens park rangers for three years, after the airline signed a £7 million ($11 million) deal with the team in 2008.

58 / DECEMBER 2011

t is strange, if not unusual, that despite a meagre 1.2 per cent profit margin there is so much competition in the aviation business. It is even more peculiar to see the global interest in this industry despite all the challenges it presents.

It is an industry that is anything but volatile, anything but predictable.

Yes, unpredictability seems to be the name of the game in this business.

From fluctuations in the price of oil over the last decade and the periodic increase in aviation fuel prices pushing up the operating costs, price wars among competitors eating into each other’s revenue, flash strikes by industry workers leading to grounding of entire fleets and creating chaos among thousands of travellers, the industry is in a predicament.

And who would have thought that a sleeping volcano in far off Iceland would erupt and cripple the aviation industry for almost four weeks resulting in millions of dollars loss in revenue? Added to this woe was the recent unrest in the Middle East and North Africa that resulted in hundreds of airlines reducing and cancelling flights, creating a huge dent in their revenue and profitability? The list seems endless.

We have experienced a rollercoaster ride in our business in the last ten years with a mix of economic crises and geo-political events, as well as brief spells of recovery. For the first

time since 1998, the industry achieved an EBIT margin in excess of five per cent in 2010. Last year proved to be fairly a good year for airlines with their profit margin touching 2.9 per cent but, once again, we will see a dip in 2011 with industry pundit forecasts even tougher for 2012.

However, there are booming economies that present huge opportunities for the aviation business to grow, particularly China, India and in Brazil. China, alone, is expecting to increase its number of aircraft to 4,500 in the next five years from its current 2,600, while India's domestic aviation market has tripled in the past five years.

But standing out from this, and standing tall, is the Middle East aviation industry. Though not immune to the above said uncertainties, the Middle East has emerged as the strongest growing region in the global aviation market. Its geographically strategic location, connecting the East and the West enabling easy access to some of world’s largest growing economies, its ‘hub and spoke’ business model of the GCC airlines that connect practically every part of the world through modern airports and, of course, the ability to invest in the latest aircraft have all made the global aviation business take notice of this region.

Yes, the industry may witness turbulence and storms but the future belongs here.

banking and finance

Abdulla Mohammed Al Awar, CEO, DIFC Authority

t

his year will be regarded as a critical moment in the history of the Middle East and North Africa and the development of its economies. 2011 will come to be recognised as the beginning of a long-term process of sweeping social, political and economic reforms that will have far-reaching consequences for every aspect of life in MENA, including business and commerce.

Throughout 2011, DIFC has continued to grow by connecting the region’s emerging markets with the developed markets of Europe, Asia and the Americas. Our role during such an unprecedented year of change has been to provide a stable platform supporting the growth of regional operations of corporations and financial institutions from around the world.

Indeed, Dubai continued to climb the top ranks of international financial centres, and was ranked eighth in both the Banker’s (FT Business) ranking of international financial centres and the Xinhua-Dow Jones International Financial Centres Development Index 2011. Despite the unrest in several MENA countries, DIFC has experienced a 10 per cent increase in the number of companies operating from the Centre compared to last year. The growth of new member firms in DIFC reflects longterm opportunities in the region.

In its latest economic forecast, the IMF has estimated that growth will slow from 3.9 per cent in 2011 to 3.6 per cent in 2012. However, the prospects for longer-

term economic growth in the region remain strong, particularly in the GCC, due to the abundance of natural resources and youthful populations, as well as the benefits of economic integration through the GCC Common

fast facts –

dubai international Financial centre is a federal financial free zone that provides a platform for businesses and financial institutions.

“Despite the unrest in several MENA countries, DIFC has experienced a 10 per cent increase in the number of companies operating from the Centre compared to last year. The growth of new member firms reflects long-term opportunities in the region.”

–

the diFc has independent civil and commercial laws and also runs its own court. the diFc courts are, in fact, witnessing more cases – rising from nine in 2008 to 36 in 2010.

–

the diFc authority also includes a risk-based regulator, the dubai Financial services authority (dFsa), which grants licences and regulates the activities of all the institutions in diFc.

Market and larger Free Trade Area.

DIFC, with its modern infrastructure, free zone status and international legal system, is uniquely positioned to support this growth in the region. in 2011 growth came from the Middle East and Asia, reflecting the continuing global shift in economic focus towards the East.

DIFC’s strategy in 2012 will remain focused on supporting our existing clients with the expansion of their regional business and their presence in the Centre. We will also maintain our global drive to attract new business to the Centre from Asia, Brazil, India, North America and Europe.

GULF BUSINESS / 59

public relations

Sunil John, CEO, ASDA'A Burson-Marsteller

i

f public relations is the art of reputation management, then it seems clear that the industry needs to take its own PR a lot more seriously. Like the proverbial cobbler’s children who go without shoes, public relations firms – worldwide and especially here in the Middle East – ignore the fact that their profession’s own reputation is generally on par with that of ambulancechasing lawyers and used-car salesmen.

Worldwide, the PR industry employs about 60,000 people, generating around $9 billion in annual fee revenues. At a time when related sectors like advertising are suffering a global crunch, our business remains robust.

Yet we remain our own worst client.

Seen as either subservient to media, or as masters of the dark art of spin, we need to address with seriousness of purpose our fundamental image problem.

Our own future depends on it, especially here in the Middle East.

PR is relatively new to the Arab world.

Yet, by 2009, barely a decade after the profession first became institutionalised here, total fee revenues reached approximately $150 million. Today, the overall value of the industry, including work done by in-house communications departments, stands at about $500 million. If current trends continue, there is every reason to believe that the industry will be worth $1 billion annually within a decade.

That may sound like a fantastic growth curve, and in many ways it is. But we

could grow even more rapidly if we more clearly communicated what we actually do, as well as the tangible value it provides the clients we serve.

ASDA’A Burson-Marsteller, the firm I lead, recognised early the importance of managing the image of our industry, and of our own company. That is why, for example, we have been investing in conducting the annual ASDA’A BursonMarsteller Arab Youth Survey since 2008. The largest study of its kind of the region’s largest demographic, this survey is our contribution to the important, ongoing dialogue about the future of the Arab world.

A decade ago, about three-quarters of our clients were multinationals seeking to raise their profile in the Middle East, while the remaining 25 per cent were local firms keen to communicate their success. Ten years later, those numbers have been reversed: this trend, towards localisation, is an important indicator of the health of the regional PR sector, which shows that locally-based firms increasingly appreciate the value such consultancy can provide them. In the Arab spring, at a time communication has never been more critical to regional governments and companies.

Perhaps this is a sign, after all, that our industry is finally on the verge of gaining the respect it deserves – and that, as the one-time cobbler’s children, we will be able to stride confidently into the future.

fast facts –

asda'a Burson-marsteller was founded in 1999, and includes six teams operating in corporate, financial, public affairs, consumer marketing, technology and healthcare sectors.

–

the firm is part of the menacom Group, owned by Wpp, a global communications services network.

–

asdaa'a clients include emaar (Burj Khalifa launch), dubai international Film Festival and Ford middle east.

GULF BUSINESS / 61

Swiss

values form the backbone of our approach to Private Banking. Reliability, attention to detail, thoroughness – these are the essential principles that enable us to offer our clients solutions of lasting

quality.

Ramzi Charaf, Private Banking

Bank Vontobel (Middle East) Ltd. is regulated by the DFSA to provide financial services to Professional Clients within the scope of its Licence.

Persons other than Professional Clients, such as Retail Clients, are not the intended recipients of this communication and must not act upon or rely upon the content of this communication.

Bank Vontobel (Middle East) Ltd. is duly incorporated as a company limited by shares under the laws of the DIFC.

Bank Vontobel (Middle East) Ltd. Liberty House, Office 913 Dubai International Financial Centre P.O. Box 506814 Dubai, United Arab Emirates Telephone +971 (0)4 703 85 70 Telefax +971 (0)4 703 85 01

technology

Enrique Salem, president & CEO, Symantec

a

s we approach 2012, mobility, virtualisation and cloud computing are three big trends driving change in IT. At the same time, organisations are grappling with a growing amount of information and an increasingly toxic threat landscape. These trends are giving IT an opportunity to rethink their approach to make their organisations more efficient, more scalable and more cost effective.

As information becomes more accessible across more devices – such as PCs, smartphones, and tablets – the workforce experiences better productivity. More and more we’re seeing personal devices connected

“Both Saudi Arabia and the UAE have featured in the top five globally for spam and virus levels. We are no longer in a position where we can ignore the threats.” to the business network, creating tension between individuals that want to ensure personal privacy and IT that wants control of the corporate information.

Virtualisation is another trend that continues to accelerate. As businesses move to virtualise business critical applications, there is immense pressure to secure and manage these environments. It is essential to manage

your backups, manage storage and to ensure systems remain highly available as you would with a physical environment.

The need to better secure information and the fact IT organisations have more to do with less money is driving the mindset shift to cloud computing, the third big trend transforming IT. There are significant benefits for organisations looking at Software-as-a-Services (SaaS) solutions like higher availability and reduced CAPEX. Most of the adoption of cloud services today is around email, security or virtual desktops, but that is just the beginning.

While IT is looking at how to leverage these three trends, they are also dealing with explosive data growth. In 2010, we predicted data would grow 40 per cent, in reality it grew 62 per cent. Most of this is unstructured and the challenge comes in getting a grip on the data, ensuring we know what is important, where data is, who is accessing it and how can we eliminate redundant information.

As threats evolve to become much more targeted, no network or individual is immune. Both KSA and the UAE have featured in the top five globally for spam and virus levels. We are no longer in a position where we can ignore the threats.

The truth is businesses can’t afford the cash losses, intellectual property or downtime that result from an attack.

Those firms that start with protecting people and information will be the ones poised for success.

fast facts -

symantec is the largest maker of security software for computers. the company is headquartered in california, and is a Fortune 500 company and a member of the s&p 500 stock market index.

-

the security firm has announced $6.19 billion in revenues so far this year and employs over 18,500 people.

GULF BUSINESS / 63

law

Husam Hourani, Managing partner, AL Tamimi & co fast facts –

established in 1989, al tamimi & company is the largest law firm in the middle east region today.

–

al tamimi employs more than 360 staff, with offices throughout the uae in dubai, abu dhabi and sharjah as well as in iraq, Jordan, Kuwait, saudi arabia and Qatar.

–

the team regularly represents clients such as dubai World and landmark properties

i

n my opinion, 2012 will be an extremely important year for lawyers and law firms in the GCC, UAE and specifically in the emirate of Dubai. It will mark the implementation of a major change to Dubai law that came into effect on 31 October 2011, which is the opening up, to all local, regional and foreign companies, of the jurisdiction of the DIFC Courts, an independent English

“The Commercial Companies law will have a major impact on the capital markets and the conversion of businesses into public joint stock companies, as well as on share option schemes, family businesses and the setting up of investment funds. ” language common law court. In addition, from November 2011, banks and financial institutions will be able to utilise foreign law contracts (or DIFC law) with greater certainty that this choice will be recognised in the UAE through the DIFC Courts. I expect many international law firms will start to encourage their clients to choose the DIFC Courts.

We will also see several new laws and regulations that have been in the drafting or consultation stage come into effect in 2012 which will have a major impact on the Dubai Financial Market, Abu Dhabi Stock Exchange and NASDAQ Dubai. SCA has issued

64 / DECEMBER 2011

consultation papers on short-selling, liquidity provisions, securities lending and borrowing, market-making, investment fund incorporation and marketing of foreign funds in the UAE. I do believe this will generate substantial activities in both local and regional markets.

We also expect the long awaited Commercial Companies Law to be amended and enacted in the first quarter of 2012. This has been under review since 2006 and will have a major impact on the capital markets and the conversion of businesses into public joint stock companies, as well as on share option schemes, family businesses and the setting up of investment funds.

In addition, we expect new laws that will have a significant impact on business in the UAE to include the regulation of the management of investment activity; an additional protocol for IAEA agreement; new guidelines for coastal development; a new energy law; rules regarding cash declarations; new child protection legislation and changes to industrial ownership and consumer protection law.

We also expect the DIFC to enact new legislation covering labour, employment, data protection, real property and nonprofit incorporation.

telecommunications

Osman Sultan, CEO, DU

2

011 has been a year full of milestones for us – big and small. Our focus this year was three-fold – on our customers, to improve their overall communications experience, our employees, to motivate and reward them

“We understand the faith our shareholders and investors have in du, and our team’s focus has always been to continue our growth and efficiency story and thereby create further value for our shareholders and investors. I’m glad to note that we didn’t disappoint them.” for their contribution to the growth of du, and very importantly – to create value for our shareholders and investors.

For our customers, we specifically strengthened our network capabilities by upgrading and rolling-out our HSPA+(4G) network that promises a vastly superior user experience. Apart from significant updates to our existing plans, this year we also launched several plans and schemes that tackle new segments such as one designed for Emiratis and women entrepreneurs.

For our employees, who constitute human capital and are our primary assets, we undertook several initiatives

to maximise their productivity and motivation in our journey to make them feel proud of their work and contribution. We did this by training them, helping them focus on their personal goals, offering them the right resources and work environment to achieve their goals at work. Last but not least, we streamlined benchmarks and processes to reward the high performers.

We understand the faith our shareholders and investors have in du, and our team’s focus has always been to continue our growth and efficiency story and thereby create further value for our shareholders and investors. I’m glad to note that we didn’t disappoint them. Our company’s good will in the market is at a new high and our scrip continues to be among the good performers in the financial markets.

In 2012 I believe we will see a continuation of this year’s trends. Our customers are better informed and demand quality and better value. It is our intention to become the preferred telecommunications company in the country, through constant innovation and delivery of the latest telecom technologies. We will continue to invest in our employees – our biggest assets, and further empower them to bring out the best of their capabilities.

And we will be mindful of the value that we create for our shareholders and investors, for they are the ones we are answerable to.

fast facts -

the emirates integrated telecommunications company, du, began operations in 2006, breaking the monopoly held by etisalat in the uae.

-

at the end of september this year, du held a 45 per cent share of the mobile market in the uae.

-

as of october 2011, the company said that it provided services to over five million people and about 40,000 businesses.

GULF BUSINESS / 65

The long road TO

revolution

TEXT BY jonathan sheikh-miller

66 / DECEMBER 2011

CoRBis

Last year Tunisia lit the fire for uprisings across the Middle East as nations fought for regime change. Now comes the most difficult part. As countries teeter on the brink of transition, can the Gulf help support other Arab nations in the midst of change?

arab spring

T

he familiar hubbub emanating from the busy cafés and eateries at the Dubai International Financial Centre (DIFC) during a typical lunch hour, somewhat belied the fact that a little earlier, in a conference centre just down the corridor, some of the region’s most respected economists had used words such as “challenging”, “dangerous” and “contagion” to describe the current global economic landscape at a time of dramatic upheaval across much of the Arab world.

Those attending the official launch of the International Monetary Fund’s (IMF) latest Regional Economic Outlook were left in little doubt of the onset of major political and social change. But one word that particularly resonated was “transition”, with so many countries in the MENA region either fervently seeking regime change, or having already achieved it.

Speaking after the event, Dr. Nasser Saidi, the DIFC’s chief economist, suggested that those member states of the Gulf Cooperation Council (GCC) presently unaffected by the uprisings could offer stable financial support to those nations in transition and, in so doing, could partially offset the impact upon them of a likely downturn in Europe.

“At a time in which Europe is facing a slowdown, the North African countries of the Mediterranean, for whom Europe is a major trade partner, are going to have even more difficulty in their transitions. Indeed, transition itself already presents economic difficulties, so if Europe enters recession, then the impact on them is going to be more severe.

“If we can create and strengthen links with the GCC that will be to the benefit of creating stability and ensuring a relatively smooth transition. GCC countries can become engines of growth.”

Saidi believes that, in time, the GCC should be expanded and nations such as Egypt and Yemen, both very much in the midst of upheaval, should be invited to

join, along with Jordan and Morocco.

Saidi stressed that the oil importers “In time, in the same way Europe need to find more than $150 billion in turned to greater economic integration, financing requirements between now and where you had the likes of Germany and 2013 and he couldn’t see where that was France driving that, you have to think going to come from. about who will be the drivers of Arab For countries undergoing revolution economic integration and, in my mind, or regime change, generating significant it is the GCC.” amounts of capital can take years. Saidi Masood Ahmed, director of the referred to research undertaken by the IMF’s Middle East and Central Asia World Bank to explain how it can take Department, also sees a close synergy four or five years for a country to move developing between the oil exporters out of the transitory stage and, while of the GCC and the emerging and it does so, output and investment both resource poor nations in the region with decline markedly. How the political investment, remittances from expatriate change comes about also makes a big workers in the Gulf and even from direct difference to a country’s future prospects. budgetary financing.

“Both Saudi Arabia “saidi believes Libya, an oil exporter and the UAE have provided financing and the focus of by far the bloodiest to Egypt, as has and most destructive revolution in the Qatar too. All these region to date, faces severe challenges countries have begun to engage and I as the presence of natural resources and believe the pattern significant social inequality can cause of these links, both additional problems.” in terms of official financing and even more in cross-border investment, is only going to grow in “Countries in which you get peaceful coming decades.” transitions tend to recover faster and The region’s oil importing nations, the recovery tends to be permanent. which include the likes of Egypt, Tunisia And you have a greater restoration of and Syria (each at various points of civil rights, property rights, economic transition or potential revolution), will rights and therefore investment picks up. be hoping the GCC can step up and So peaceful transitions tend to lead to offer genuine assistance. According to substantial increases in the chances of the IMF’s Regional Economic Outlook, economic recovery. the MENA region’s oil importers will see “On the other hand, if you have their GDP growth slump from 4.5 per violent transitions, the outcomes are cent in 2010 to just 1.4 per cent this year, much less protection of property rights, with a prediction of a very modest 2.6 much less protection of civil rights. And per cent in 2012. therefore recovery does not take place The IMF report highlights that, due as quickly as otherwise and it is not to the political uprisings in several of necessarily sustained.” the oil importing nations, tourism and Saidi believes Libya, an oil exporter capital inflows have taken a big hit this and the focus of by far the bloodiest year, while high commodity prices have and most destructive revolution in the eroded external reserves. For the oil region to date, faces severe challenges importing countries as a whole, fiscal as the presence of natural resources and deficits are expected to widen by 1.5 per significant social inequality can cause cent of GDP in 2011-12. additional problems.

GULF BUsiNEss / 67

How the region changed in 2011 This year saw decades of iron rule challenged by the masses.

This tectonic shift in history is not over yet. Gulf Business looks at the unfolding stories of the region's rulers.

2

1

3

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in pOWEr

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in pOWEr

8

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iNFoGRAPHiCs By: RoUi FRANCisCo

TUnisia

in pOWEr

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1. MUAMMAR GADDAFi - LiByA 2. ZiNE EL ABiDiNE BEN ALi - TUNisiA 3. HosNi MUBARAK - EGyPT 4. ALi ABDULLAH sALEH - yEMEN 5. BAsHAR AL-AssAD - syRiA 6. KiNG ABDULLAH BiN ABDUL-AZiZ AL sAUD - sAUDi ARABiA 7. KiNG HAMAD BiN isA AL KHALiFA - BAHRAiN 8. NAssER MoHAMMED AL AHMED AL sABAH - KUWAiT 9. QABoos BiN sAiD AL sAiD - oMAN

68 / DECEMBER 2011

Where it all began. Mohamed Bouazizi set himself on fire, President Zine El Abidine Ben Ali fled and an Islamist party won the recent elections.

STATUS: New elections complete

LibYa Bloody civil war ended when Muammar Gaddafi was caught and seemingly executed by baying mob.

National Transitional Council announced liberation on October 23.

STATUS: Regime toppled

arab spring

sYria Angry protests across the country were met with ďŹ erce crackdown and many deaths. Despite widespread international condemnation, Bashar al-Assad clings to power.

STATUS: Severe unrest

KUWaiT Despite free food rations and gifts of $4,000 per citizen, demonstrations and strikes have occurred as protestors seek removal of Prime Minister amid corruption accusations.

STATUS: Unrest growing

EgYpT Protests centred on Tahrir Square led to the resignation of Hosni Mubarak who is now on trial. Aggressive response to new demonstrations led to resignation of government.

STATUS: Severe unrest

baHrain Demonstrations about political freedom and equality became a call for King Hamad’s overthrow after violent raid on Pearl Roundabout.

New report alleges use of excessive force on the protestors.

STATUS: Moderate unrest

saUDi arabia

YEMEn

OMan

The conservative kingdom has seen protests over labour rights, in support of Shia opposition in Bahrain and by women seeking the right to drive cars.

STATUS: Stable

Protests against President Ali Abdullah Saleh were met with violent resistance and lead to assassination attempt. After reneging several times, Saleh has signed peace deal and will quit.

STATUS: Severe unrest

Protests about salary levels and jobs were largely focused on Sohar, with several deaths alleged. Private sector pay has been boosted and 50,000 government jobs promised.

STATUS: Stable GULF BUsiNEss / 69

arab spring

Dr. Nasser Saidi, chief economist, DIFC

The immediate outlook for Libya appears daunting and its success in getting oil production up and running has been vital. Its output was virtually idle for many months and yet hydrocarbons make up 70 per cent of the country’s GDP and a massive 95 per cent of its exports.

International sanctions, which were in place while Muammar Gaddafi resisted the desire for change, hit the non-oil segment of the economy and, according to the IMF, real GDP is expected to contract by more than 50 per cent in 2011.

On-going political uprisings are occurring in Syria and Yemen, while Bahrain has been the scene of numerous protests and demonstrations and is far from pacified. The significant loss of life in Syria and Yemen suggests problematic

“Countries in which you get peaceful transitions tend to recover faster and the recovery tends to be permanent. And you have a greater restoration of civil rights, property rights, economic rights and therefore investment picks up.”

transitions, as and when there is regime change, and already both are suffering economic contraction. The IMF predicts that Yemen’s GDP growth, which was eight per cent in 2010, is likely to move into negative territory this year while its rate of inflation will spike to 18 per cent in 2012, by far the worst in the Arabian Gulf.

Bahrain, another oil exporter and a GCC member, has suffered a severe slump in its hospitality sector due to the political tensions and its fiscal balance is well in the red at beyond minus seven per cent. But Masood Ahmed sees a distinct difference in its economic situation when compared to that of Libya.

“The events in Bahrain earlier this year have had an effect on economic activity and continue to do so. But, at the same time, the oil part of Bahrain’s economy, which is a large part of GDP and an even larger portion of government revenues and exports, has continued to function.”

But the wider global economic worries could create extra challenges for the island state as its fiscal break-even oil price is now approaching $100 a barrel,

CoRBis

Hope seems a long time coming for the region's protestors.

70 / DECEMBER 2011

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arab spring

a rise of around $25 a barrel since 2008, and it is close to present spot oil prices.

“In terms of a global slowdown, if there is a reduction in oil prices, that would naturally translate into budgetary consequences for Bahrain as it would for other countries.”

The fiscal break-even oil price could represent a worry for those MENA countries affected by political transition and seeking the anticipated substantial financing from the cash rich Gulf.

The UAE, for example, now has a fiscal break-even oil price of around $80 a barrel and this is a massive leap of $60 in just three years and if oil prices tumble for an extended period, as they may well do in a severe global downturn, the country may become less inclined to channel investment to needy regional partners at a time when it would need to tap into its own reserves.

Irrespective of the potential for investment from the likes of the GCC, the key requirement right now for countries in transition is to carefully manage the expectations of the general population and keep them anchored.

Masood Ahmed explained that a big challenge moving forwards is to balance “social cohesion on the one hand with maintaining macro-economic stability on the other”.

72 / DECEMBER 2011

“The key requirement right now for countries in transition is to carefully manage the expectations of the general population and keep them anchored”.

A common theme among all emerging markets in the region, whether in transition or not, is the need to generate employment opportunities.

The expansion of the private sector and effective infrastructure development projects can be ways of doing this but Dr. Saidi sees a huge task ahead.

“We have countries in which 60 per cent of the population is below 25 years of age and the unemployment rate is reaching 30-40 per cent and at the same time we know that we need to be creating some 80 million jobs over the next decade. That’s about as many as we’ve created since the 1950s.”

One of the panellists at the IMF launch, V. Shankar, the CEO of Standard Chartered

Oil importing nations, such as Syria, will be hoping the GCC can offer genuine assistance.

Bank, Europe, Middle East, Africa and Americas said “quick, precipitate action” was needed in the countries in transition to placate the population – and this effectively meant job creation.

“It is nice to talk about diversification, improving governance and all the good things you need to do, improving education, improving healthcare. But remember all of that is long-term stuff. It is going to take 15-20 years for the benefits of all that to actually come through to the vast majority of the population.”

For Shankar, if the new governments of the nations in transition do not provide these “quick wins”, then the Arab spring could rapidly become a “winter of discontent”.

GETTy iMAGEs

V. Shankar, CEO, Standard Chartered Bank, Europe, Middle East, Africa and Americas

74 / DECEMBER 2011

profile

DEFYING

GRAVITY flydubai CEO Ghaith al Ghaith tells Jonathan Sheikh-Miller why even a potential global double dip won’t spoil his bold expansion plans.

GEtty IMaGES

A

s Ghaith Al Ghaith, the CEO of flydubai, one of the world’s fastest-growing low cost carriers (LCC), laid out his views on his airline’s rapid ascent at the Dubai Chamber of Commerce and Industry, row-upon-row of trading dhows rocked rhythmically just outside on Dubai Creek – a reminder that much of the city’s development has stemmed from transportation and trade. flydubai is barely 30 months old and it is as modern as the wooden dhows are traditional but just like these vessels, Ghaith’s airline is looking to span large areas of the Arabian Sea, Indian Ocean and beyond. Recently, the carrier has been targeting the Commonwealth of Independent States and the former republics of the Soviet Union, with four routes into Russia and three into the Ukraine, but Ghaith’s vision is spread far and wide.

“We are growing at 360 degrees and we are growing into different regions.

But at the moment, at the start of

their winter holiday season, when their traffic is at a peak, Russia is particularly important and it does have huge potential because the cities we are serving have had very little link to this part of the world, unless you travel via the capital, so our direct flights are both essential and unique.”

Ghaith suggested as many as 12 further Russian cities could be added to flydubai’s route map in time but the four presently served comprise 11 per cent of Russia’s 143 million strong population.

Peter Grimsditch, editorial director of the Oxford Business Group, says Al Ghaith’s present focus makes sense.

“The growing Russian middle-class is a fertile market for Dubai. Many are staying away from one of their favoured destinations – Egypt – until they see it settling down more.

“This leaves Dubai and Turkey to mop up the extra traffic because of the Egyptian fallout. There is certainly a lot of seats to be filled with Russian tourists and flydubai's targeting of

non-traditional cities in the former Soviet Union has a very good chance of producing good business.”

Al Ghaith believes the airline’s coverage of the Middle East is well developed but he has pinpointed other tempting markets including the Indian sub-continent and Africa where the LCC “is not in enough places”.

A recent “Middle Eastern Megacarriers” report by the Boston Consulting Group highlighted the growth of regional LCCs as a possible threat to the seemingly relentless success of the likes of Emirates Airline and Qatar Airways. But Al Ghaith does not think his carrier, or any other budget airline, is a threat to the short-haul ambitions of the full-service airlines.

“I think we supplement all the airlines that are sharing this market. In this part of the world, we look at competition positively and it is an open market, so the more the merrier. The more services and airlines there are, the better it is for the customer.”

GULF BUSINESS / 75

profile

However, Al Ghaith did well not to bristle at the suggestion that Air Arabia is the largest LCC in the region with its 70 destinations and 29 A320s in operation. flydubai is fast approaching it on the rails, with its 45 destinations and 20 Boeing 737-200s, and some aviation experts predict Al Ghaith’s carrier will not take long to surpass its Sharjah-based rival – and in less than half the time it took Air Arabia to build up its own impressive fleet and network. Al Ghaith was suitably diplomatic about the neighbouring emirate’s budget carrier.

“We are always striving to be the number one airline, you always want to be the best. What Air Arabia has done over the past eight years has been fantastic and they have definitely encouraged other airlines, as have Emirates and Etihad. We actually go forward on each other’s success.”

Air Arabia has just posted a 26 per cent dip in its Q3 profits as the Arab spring disruptions and higher oil prices have eaten into its revenues. Does Al Ghaith think an eventual merger of these

Ghaith’s view. “Emirates and Etihad manage to coexist. And like southeast Asia, eastern Europe and India have seen in the past decade or so, there's money to be made catering to the vast population of people whose wealth has advanced to the point where they can afford to fly. Lower fares plus rising wealth equal a lot of new customers.”

Al Ghaith also emphasised there is plenty more growth potential in the Gulf region’s LCC sector, pointing to the fact that budget airlines have cornered up to 50 per cent of the market in the likes of the US and Europe, while in the Gulf market share is less than ten per cent.

Peter Grimsditch sees the Arabian Gulf’s location as a considerable advantage to Air Arabia and flydubai’s prospects. “There is a vast population within four hours flying distance of Dubai and certainly there is plenty of room for these two to expand a lot more yet.”

Just as the Arab spring has hit the fortunes of one of the Gulf’s two most dominant LCCs, it has also impacted on the other, and with flydubai having a

flydubai is on course to make a profit by the end of 2012.

two budget airlines, which are based just a dozen kilometres or so apart, is likely?

“I cannot foresee a consolidation in the future. I mean in the time there has been an aviation sector in our region how many consolidations have there actually been? So I don’t think so.”

John Scholle, a senior economist at IHS Global Insight concurs with Al

total of six routes into Egypt and Syria, Al Ghaith admitted things have not been entirely straightforward.

“It has worked both ways. First of all, we are in the airline business and the safety of our customers, aircraft and staff are our number one priority. So you only operate if that is secure. Secondly, it has to make sense economically, so if there are

“In this part of the world, we look at competition positively and it is an open market, so the more the merrier. the more services and airlines there are, the better it is for the customer.” any on-going problems you reduce your capacity and that has affected everyone across the board, including flydubai.

“But it is easy to take away capacity and put it somewhere else. There is no doubt there has also been a positive effect due to these unfortunate problems and the UAE has directly benefitted because it has been seen as safe.”

The regional geo-political tensions and crises have also played their part in keeping oil prices at high levels and Al Ghaith was frank about how airlines need to deal with the issue.

“Fuel is the most important cost for any airline, in fact it makes up about 40 per cent of costs, so any changes, up or down, affect everyone’s bottom line, so you cannot manage it, or escape from it, without taking some drastic action. So if it goes up, you have to raise your prices because if you don’t, you are not respecting your business and you are not being honest with yourself.”

Speaking at an earlier roundtable event, alongside the Russian Business Council to promote the newly launched routes into Russia, Al Ghaith revealed that flydubai was close to breaking even, less than three years after its launch, and in the context of its aggressive expansion policy and plane acquisitions. Al Ghaith said 2012 would be the year in which the carrier would actually make a profit.

With the whole world braced for a potential downturn, Al Ghaith feels Dubai is now better equipped to deal with a recession in the likes of the Eurozone and the US due to the GULF BUSINESS / 77

profile

Middle east air traffic dynaMics

2% 2% 2%

All flights departing to, from or within the Middle East

4%

SOURCE thE BOEING COMpaNy

4% 6%

7%

7%

11%

30%

Emirates Qatar Airways Etihad Saudi Arabian Airlines Low Cost Carriers Egyptair El Al Gulf Air Royal Jordanian Oman Air Others

25%

“rehabilitation” it went through in 2008-9 and he predicts positive growth.

“My personal opinion about the situation, I think we will have a strong economic outlook in this part of the world.

I think what’s happening now, especially with the European situation, that’s making people careful and the outlook for the rest of the world has to be very cautious.”

Nevertheless, Al Ghaith insists flydubai will keep to its bold expansion strategy “regardless of whatever the outcome is” in terms of any economic slowdown as the airline still has a way to go in order to reach the scale needed to fulfil its potential. At the recent Dubai Airshow, Al Ghaith revealed flydubai is weighing up additional orders and is considering the A320neo and the Boeing 737 MAX. “I think the future as far as the airlines are concerned is positive because we are in a country that depends on transportation as part of our DNA.”

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SIR ROCCO ABU DHABI

looks to

The famous hotelier is taking talk of over-supply in his stride, writes Jonathan Sheikh-Miller

L

aunching a new five-star hotel in the very week one of the key property developers in your chosen destination decides to scale back one of the city’s main future tourist attractions is pretty unfortunate timing.

But that was the fate which befell British hospitality tycoon Sir Rocco Forte last month when he launched the Rocco Forte Hotel Abu Dhabi. However, Sir Rocco isn’t alone in opening a new property at a time when the UAE capital is seemingly adopting a cautious approach to building up its tourism sector. New hotels such as the Monte Carlo Beach Club, the $250 million Park Hyatt, Jumeirah at Etihad Towers and Starwood’s St.Regis have all either already opened their doors or are about to greet their first visitors.

The Abu Dhabi Real Estate Overview Q3 2011 by real estate services firm Jones Lang Lasalle predicts that around 2,000 new hotel rooms will be added to supply in Abu Dhabi either by the end of this year or early in 2012. At present there are around 12,000 hotel rooms in the city and this is expected to grow by 50 per cent to around 18,000 by late 2013.

The fact the Tourism and Development Investment Company (TDIC), the joint 80 / DECEMBER 2011

profile

GULF BUSINESS / 81

owners of Forte’s new hotel along with the Al Farida Investment Company, has decided to delay large aspects of its Saadiyat Island development is also far from ideal. The TDIC is to push back the opening of the three blue-chip museums earmarked for a project intended as the capital city’s cultural centre. The Louvre Abu Dhabi will open first but that is unlikely to happen before at least 2014.

But Sir Rocco remains unfazed by the competition emerging in the hotel sector.

“The expansion in luxury bedrooms in Abu Dhabi over the next six months is significant and there is no doubt that there will be a supply/demand imbalance in the short-term.

“But inbound tourism is growing at a very rapid rate and occupancies in the current year have been extremely high.

It will not take long for a more balanced market to return.”

The Abu Dhabi Tourism Authority has released figures that back up Sir Rocco’s argument. The city has targeted receiving a total of two million visitors in 2011 and by the end of September more than 1.5 million guests had checked in, a 14 per cent increase yearon-year, and this has generated a six per cent rise in revenues to $838 million.

Similarly, Forte’s prediction of an oversupply issue in the immediate future also appears accurate. A recent survey

by TRI Hospitality Consulting revealed that while demand is moving in the right direction, average room rates (ARR) most certainly are not. In the 12 months to September, ARRs plunged more than 20 per cent in the UAE capital, even while demand rose by a solid 7.1 per cent in the same period. Jones Lang Lasalle has estimated that so far this year the current ARR across the city is Dhs 570.

Bugra Berberoglu, the GM of Abu Dhabi’s Emirates Palace, stated the hotel was enjoying “steady occupancy and room rates” and he pointed to events such as last month’s F1 Grand Prix and the Volvo Ocean Race as attractions which will help boost levels in forthcoming months and he regards the 82 / DECEMBER 2011

opening of new hotels as a positive sign.

“We are seeing continued growth in the number of visitors each year, and we are attracting more and more visitors from new markets.

”The expansion in luxury bedrooms in Abu Dhabi over the next six months is significant and there is no doubt that there will be a supply/demand imbalance in the short-term.“ “The opening of new hotels by leading hotel brands is a great indicator of the strength of Abu Dhabi as a destination and will help to boost interest in the city.”

Sascha Bartz, the GM of the Park Rotana and the Park Arjaan by Rotana, which opened at the end of 2009, revealed that while his hotel’s rates had dropped, revenues and occupancy rates were both increasing. But Bartz still foresees issues for some of the city’s The wave-shaped Rocco Forte Hotel Abu Dhabi was designed by W.S. Atkins and Partners.

hotels due to the delays on Saadiyat Island cooling the continued growth in the number of visitors to Abu Dhabi alongside an on-going increase in the number of new hotels.

“In light of the delay of the Saadiyat Island cultural centre, and the increase in rooms available in town, competition amongst hotels will be fierce. However, the major adverse impact will be for the older hotels since they will have challenges competing with new products coming to the hospitality market.”

The world is on the brink of a possible recession and the potential spillover effects could impact upon several markets. For Bartz, the present financial situation would give him pause for thought if he were contemplating a new hotel in Abu Dhabi. “I would not like to open a new hotel now due to the pressure to perform and the potential downturn of business as it will be very difficult to establish a quality hotel operation in such economic conditions.”

Sir Rocco Forte, with his hotel’s official opening on November 7 aimed squarely at cashing in on the F1 Grand Prix the following weekend, recognises that the global situation presents a further challenge to his new project but understandably he sees plenty of upside potential.

profile

“These are unprecedented times and they required an unprecedented response. Of course we keep a close eye on regional and international developments and travel trends, but we remain committed to the expansion strategy in the Middle East.

“We are pleased to see a healthy economy in Abu Dhabi and to see both leisure and corporate hotel business continuing to grow with 70 per cent occupancy in the city, year to date. We expect this to remain similar in the forthcoming year.”

Forte sees the Middle East and North Africa (MENA) region as offering serious potential for his Rocco Forte Hotels group. Sir Rocco is planning to open hotels in Jeddah, Marrakech, Cairo and Luxor in the next few years.

The new hotel in Abu Dhabi may be Forte’s first venture in the Gulf but well-heeled Arab visitors to Europe

are already familiar with what he has to offer. “Although we have not yet completed our growth in Europe, opening properties in the Middle East is a natural progression for us. This is especially the case given that we are seeing so many of our current guests travel from the MENA region and our brand is increasingly well-recognised in the region.”

Although Abu Dhabi’s growing tourism sector may be experiencing a few teething problems, with project delays and hotel room over-supply, hospitality analysts such as Chiheb Ben Mahmoud, executive VP – head of hotel advisory, Middle East for Jones Lang Lasalle, can see positive benefits.

“Abu Dhabi, as a destination, might be facing the challenge of the luxury/ upscale perception, and positioning, which would not help to place it on the general leisure travel market map. The

softening of the rates should help to make it more affordable and budget-wise more tourist friendly.”

The issue for high-end hotels such as Forte’s in the medium term, while supply is plentiful, could be whether to open up to a wider market to bolster occupancy rates and revenue or attempt to maintain a level of exclusivity.

But Mahmoud believes Abu Dhabi’s layout, comprising an array of distinctly separate locations, will help hotels and destinations to create their own niche in a competitive market place.

“When it comes to location, the unique configuration of Abu Dhabi makes it rather a collection or constellation of micro destinations rather than a uniform one. The Corniche, Saadiyat Beach and Yas Island, for example, all have unique characters and could soon develop their own followings.”

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pushing the private sector Can Uae nationals be enticed to join private businesses asks Jonathan Sheikh-Miller.

84 / DeCemBeR 2011

getty images

A

s Gulf Business hits the newsstands, the UAE will be in the throes of celebrating its 40th anniversary. There is little doubt the accelerated growth of many of the fledgling country’s business sectors, from ultramodern free zones to aviation, is highly impressive as it utilises the leverage provided by its oil revenues.

But like some of its older and resource-poor cousins in the Arab world, mounting unemployment among its younger generations is becoming increasingly troubling for the UAE. When the country’s Labour Minister, Saqr Ghobash, chooses to tell a G20 Labour and Employment Ministerial Meeting in Paris in September that dealing with local employment issues takes precedence over the on-going fall-out of the 2009 economic downturn, then the scale of the problem is clear.

There are presently close to 40,000 unemployed UAE nationals, according to the Ministry of Economy, and last

jobs

Local employment issues remain at the top of the government’s agenda.

gULF BUsiNess / 85

year the overall unemployment rate hovered at around 12 per cent, with the figure significantly higher among those aged 15-24.

A familiar debate centres around nationals having a reticence about taking up jobs in the private sector and this argument was seemingly borne out by statistics released earlier this year by the Abu Dhabi Department of Economic Development, which revealed that Emiratis make up only 6.1 per cent of private sector employees in the city.

Ghobash has stressed that he believes unemployment in the UAE is fundamentally ‘optional’ and if an Emirati cannot find the right post in a public sector job then that individual might not immediately seek a comparable post with a private sector firm.

But opportunities exist. Major Emiratisation drives by a host of firms take place regularly and they have had some positive results. Etihad Airways now has 143 UAE national cadet pilots and 58 graduate managers, while the Abu Dhabi Islamic Bank states that 44.5 per cent of its workforce is made up of local talent.

Lama Ataya, the chief marketing 86 / DeCemBeR 2011

“What the private sector needs to do is start focusing on high knowledge jobs for UAE nationals and, in a way, not take the easy route to their emiratisation needs, for instance via secretaries and public relations officers.” officer at recruitment consultancy Bayt. com, said such policies are slowly having an impact and a sizeable number of firms are keen to recruit more nationals right across the region. “The findings in our July 2011 poll ‘Localisation Hiring Policies in the GCC’ show that 33 per cent of respondents reported having senior Emirati citizens working in their companies. In the same survey, 31 per cent of respondents said that their companies plan on hiring more Emiratis in the coming year.”

Ataya also pointed out that Bayt. com’s Job Index Survey for October 2011 revealed 49 per cent of employers are looking to hire by the start of next year “which is positive for anyone seeking employment, whether local or expatriate.”

So with jobs available and UAE

getty images

33 per cent of respondents to a recent Bayt.com poll said that senior Emiratis worked in their firm.

nationals being actively encouraged to get involved why have relatively few thus far taken up the opportunity?

Dr Jasim Al Ali, human resources director at the Dubai Department of Economic Development, explained that family circumstances were a key factor.

“There are a number of young people from mostly middle ranking families who don’t feel they necessarily have to work because their families have resources. So they can be less motivated to work and their expectations are very high so it’s hard for them to find what they want.”

Dr Al Ali also stressed that peer pressure can play a part and so taking what might be generally perceived as a lower level job, with its associated limited benefits, could act as a barrier to some UAE nationals joining the private sector.

Ahmad Al Shaikh, the chairman of Ducab, a Dubai based cable manufacturer, was recently quoted as saying it was difficult to attract UAE nationals into semi-skilled or blue-collar positions.

Dr Al Ali believes some Emiratis will presently seek to pick and choose the job opportunity that appeals to them and challenging roles on the factory floor

jobs

were unlikely to be an option. “This type of work involves difficult physical conditions and so it is less attractive. So you’d need to put in a rewards system that will attract national employees. If not, there are many office-based jobs which will have better working conditions or environment and better pay, so these will be more popular.”

Khaled Al Maskari, senior training officer at the Abu Dhabi Statistics Centre, feels that more Emiratis are now engaging in what might be seen as less ‘glamorous’ positions. “Many UAE nationals who reside in the Northern Emirates are working in the oil and gas sector in Abu Dhabi as technicians and foremen and these are essentially lower skilled positions.

One of the key attractions is that after five years of service, they are given an opportunity to pursue their education.

“I know of many cases where UAE nationals, who hold a higher diploma, have accepted work in lower skilled positions. This was because they were struggling for several years to find suitable jobs which reflected their educational qualifications.”

“a Uae national will not always choose the public sector for their perceived benefits, it is in part the fact that a UAE national will want to support the continued growth of their country.”

Al Maskari added, however, that while more Emiratis are moving into a host of positions, at various levels, the private sector can still present a challenge to female local job seekers.

“Female nationals can have a particular problem with private sector jobs because they can have long hours into the evening and with a strong sense of family tradition and family values, they are not really encouraged to pursue this type of work.”

Khalid Al Ameri, a writer on social, emiratisation and youth development issues, thinks the increasingly well-worn argument that UAE nationals simply look to government jobs for their personal benefits is now beginning to lose credence as the public sector begins to evolve and modernise, offering new recruits the chance to develop and grow – and this is proving popular.

“In all honesty, I think the real barrier to the private sector isn’t the private sector itself but the increasing attractiveness of the government sector and the new age government sector companies that are run as private organisations like Mubadala for example. A lot of these government organisations now have a strong, internationally educated workforce, global operating best

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jobs

“many government ministers have conceded that the public sector only has a finite amount of opportunity and it is becoming overloaded with nationals seeking suitable posts.” practices and work environments that are both competitive and offer good development options.”

But many government ministers and public servants have conceded that the public sector only has a finite amount of opportunity and it is becoming overloaded with UAE nationals seeking suitable posts. The bottom line is that the private sector is a major part of the future for Emirati employment and the challenge is to encourage more to take the plunge.

Khalid Al Ameri suggests a way in which the private sector can look to adapt its recruitment policy. “What the private sector needs to do is start focusing on high knowledge jobs for UAE nationals and, in a way, not take the easy route to their emiratisation needs, for instance via secretaries and public relations officers. This may require more effort and costs on their side but in the end it will be worthwhile for them to play a core part in creating a talent pool of UAE nationals that are graduates of their organisation.”

Another key initiative, according to Mark Timms, a director at the Gulf Recruitment Group, could be translating the

jobs

ideology of why an individual might choose to work for a government entity into the private sector framework. “A UAE national will not always choose the public sector for their perceived benefits, it is in part the fact that a UAE national will want to support the continued growth of their country.

“Create more roles in the private sector around corporate social responsibility (CSR) and you may have the right platform to start attracting more UAE nationals.”

Overcoming social issues which are partially linked to cultural tradition is an obvious challenge but more and more Emiratis are assessing their career paths and development more intensively and Khalid Al Ameri thinks the private sector also needs to evaluate the local work force more adeptly.

“The private sector has always been somewhat of a second option as one would always question the culture of an organisation, as in how it has adapted to the UAE, and one would always choose where you feel most comfortable, especially for fresh graduates starting their careers. The private sector needs to spend more time learning about the people and how best to approach them, and where to appoint them in the organisation.”

ReUteRs

Firms with strong CSR agendas may find it easier to attract UAE nationals.

DATA CRUNCH TOP DEALS AND GCC ECONOMIC INDICATORS

TOP DEALS GULF BUSINESS DEAL VALUE ($M)

BIDDER

TARGET

DEAL DESCRIPTION

2200

Sony Corporation of America; Sony/ATV Music Publishing LLC; Mubadala Development Company PJSC; David Geffen; GSO Capital Partners LP; and Jynwel Capital Limited

EMI Music Publishing Limited

A group of investors led by Sony Corporation of America, has entered into a definitive agreement to acquire EMI Music Publishing Limited from Citigroup, for $2.2 billion.

Citigroup Inc, the listed US based company headquartered in New York, is a financial services group. EMI Music Publishing Limited, also US based and headquartered in New York, is a music publisher. The bidder group consists of Sony Corporation of America, a US based subsidiary of Sony Corporation, the listed Japan based manufacturers of video and audio products; Sony/ATV Music Publishing LLC, the US based joint-venture between Sony and the estate of Michael Jackson; Mubadala Development Company PJSC, the listed United Arab Emirates based investment vehicle of the Government of Abu Dhabi; Jynwel Capital Limited, the Hong Kong based investment company; GSO Capital Partners LP, the US based fund of the Blackstone Group, a US based private equity house and David Geffen, a US based private investor.

Terms: The group will pay a total of $2.2 billion. Sony Corporation of America will invest approximately $325 million in EMI Music Publishing and will own a 38 per cent stake in conjunction with the estate of Michael Jackson.

Financing: The acquisition will be funded by senior credit facilities arranged by USB Investment Bank.

Rationale: The transaction is in line with Citigroup’s strategy of maximising EMI’s value and Sony’s objective of having access to entertainment content.

Post-completion: Sony/ATV Music Publishing and its management team will help oversee EMI Music Publishing on behalf of the group.

Background: On November 11 2011, Citigroup announced the sale of the Recorded Music Division of EMI Group Limited to a group of investors including Universal Music Group Inc, the US based producer and distributor of music and video CDs and DVDs, and Vivendi SA, the listed France based provider of media and telecommunications services, for $1.9 billion.

8

Aker Solutions ASA

X3M International Inc (Well intervention technology business)

Aker Solutions ASA, the Norway based company engaged in the provision of engineering and construction services, technologies and product solutions, has agreed to acquire the well intervention technology business of X3M International Inc, the United Arab Emirates based provider of down-hole intervention service tools and technology products, for a consideration of $8 million. This acquisition will grow Aker’s well intervention technology and service portfolio worldwide as well as increase its presence in the Middle East market. This acquisition will also expand Aker’s product portfolio and customer base.

–

Specialist Services Group

Labtech Services Ltd and OIL Engineering Middle East LLC

Specialist Services Group, the UAE based company engaged in supply modular buildings and packaging for the hydrocarbons industry, has acquired OIL Engineering Middle East LLC, a UAE based provider of pipe work, pressure vessel and steel structure fabrication engineering and manufacturing facilities and services, and Labtech Services Limited, a UK based company engaged in designing, engineering, hiring and manufacturing offshore fire and blast protected modular enclosures and skid mounted process equipments, from Global Energy Group Inc, a UK based contracting and service based company supporting the international energy industry, for an undisclosed consideration. The acquisition will enable Global to consolidate its UAE operations and further focus on resource management, site services and rig repair or refurbishment services. Also, the acquisition will enable Specialist Services to enhance its engineering skills and manufacturing resources in key global oil and gas centres.

GULF BUSINESS / 93

DEAL VALUE ($M) –

BIDDER

TARGET

DEAL DESCRIPTION

Metito

Berlinwasser China Holdings (49% Stake)

Metito, the United Arab Emirates based water management solutions provider, has announced it is to acquire a 49 per cent stake in Berlinwasser China Holdings (BCH), the Hong Kong based company operating wastewater concessions in China, from Berlinwasser International AG (BWI), the Germany based water supply and disposal services company, for an undisclosed amount. BCH, with annual revenue of $40 million, is a joint venture of Metito and BWI, who have 51 per cent and 49 per cent stakes in BCH respectively. Metito funded the deal from preference shares issued in 2010 and with debt financing from HSBC. The deal will result in Metito catching the opportunity for further business expansion in China where there is a high demand for wastewater treatment management.

Notes: Deals are based on the geography of target, bidder or vendor being in the Middle East, for the period between September 19, 2011 and October 16, 2011. Based on announced deals, including lapsed and withdrawn bids. Where deal value is not disclosed, the deal has been entered based on turnover of target exceeding $10 million. Activities excluded from the table include property transactions and restructurings where the ultimate shareholders’ interests are not changed. Source: Mergermarket. All dollar ($) amounts indicated above are in US dollars.

BREAKDOWN: TAKEOVER ACTIVITY BY SECTOR AND VOLUME

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Business Services 9.7%

Construction 1.2% Real Estate 6.2%

Real Estate 6.2%

Industrials & Chemicals 39.3%

' H) H* H+ H( H) H* H+ H( H) H* H+ H( H) H* H+ H( H) H* H+ H( H) H* H+ H( H) H* H+ H( H) H* H+ ' ' H( )''. )''/ )''0 )'(( H( H) H* H+ H( H) H* H+ H( H) H* H+ H( H) H* )'(' H+ H( H) H* H+ H( H) H* H+ H( H) H* H+ H( H) H* H+

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Pharma, Medical & Biotech 11%

TMT 16%

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Energy, Mining & Utilities 7%

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Financial Services 4.2%

Defence 0.6%

GULF BUSINESS ACTIVITY BY INDUSTRY SECTOR YTD 2011 – VOLUME

MIDDLE EAST ANNUAL M&A ACTIVITY FROM 2004 TO 16 NOVEMBER 2011

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94 / DECEMBER 2011

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Pharma, Medical & Biotech 11.2%

Contruction 5.6%

Industrials & Chemicals 21.5%

Real Estate 2.8% Defence 0.9%

In association with

HSBC/NASDAQ DUBAI MIDDLE EAST

TOTAL RETURN INDEX 151 150 149 148 147 146 145 144 143 142 141

The HSBC/NASDAQ Dubai Middle East Total Return Index tracks the total return of an emerging Middle East sukuk/bond portfolio. Total return takes into account the income from coupon payments, in addition to any appreciation/depreciation in the price of the security.

THE EXPERT’S

18-31 Aug 2011

1-30 Sept 2011

3-31 Oct 2011

1-18 Nov 2011

MAIN REGIONAL BONDS: CURRENT PRICES SOVERIGNS ISSUER Abu Dhabi Govt Dubai Govt Dubai Govt Qatar Govt Bahrain Govt Egypt Govt Morocco Govt

COUPON 5.5% 6.7% 7.75% 4% 5.5% 5.75% 4.5%

MATURITY 4/08/2014 10/5/2015 10/5/2020 1/20/2015 3/31/2020 4/29/2020 10/5/2020

CURRENCY USD USD USD USD USD USD EUR

MID PRICE 109.50 102.25 103.50 105.75 94.38 97.25 90.63

YIELD 1.41% 6.04% 7.21% 2.10% 6.38% 6.17% 5.89%

MOODYS Aa2 NR NR Aa2 NR Ba1 NR

S&P AA NR NR AA BBB BBBBB-

COUPON 4.75% 10.75% L+37.5bps 6.375% 3.375% 5% 3% 5% 11.25% 8.875%

MATURITY 9/15/2014 5/27/2014 2/1/2012 10/21/2016 10/14/2016 7/21/2020 11/2/2015 6/30/2015 11/15/2015 10/17/2016

CURRENCY USD USD USD USD USD USD USD USD USD USD

MID PRICE 104.38 109.50 97.75 103.25 101.13 107.75 100.75 98.38 83.50 108.75

YIELD 3.11% 6.58% 13.00% 5.61% 3.12% 3.93% 2.80% 5.50% 17.14% 6.74%

MOODYS A3 B3 B3 Ba1 A2 Aa2 A1 NR NR Baa3

S&P NR B NR NR A AA A+ BBB B+ BBB-

COUPON 4.75% 4.25% L+450bps 3% 5% 3% 4.5%

MATURITY 10/8/2014 3/25/2015 4/30/2012 10/21/2015 11/18/2014 11/12/2015 10/28/2015

CURRENCY USD USD USD USD USD USD USD

MID PRICE 104.50 103.88 100.00 99.38 105.25 101.00 93.75

YIELD 3.10% 3.02% 5.00% 3.17% 3.14% 2.73% 6.32%

MOODYS A1 Aa3 A3 A1 A1 NR Baa2

S&P A A+ NR NR AA NR

P.D.A* 4.949% 3.745% 6.396% L+37.5bps L+130bps 6.25% 8.5% 10.75% 10%

MATURITY 10/21/2014 11/04/2015 11/03/2014 6/13/2012 11/27/2012 07/02/2017 08/03/2016 02/18/2015 08/25/2016

CURRENCY USD USD USD USD AED USD USD USD USD

MID PRICE 105.63 101.88 100.63 93.50 92.00 102.00 100.75 90.63 72.50

YIELD 2.91% 3.23% 6.16% 13.15% 11.48% 5.82% 8.30% 14.47% 19.03%

MOODYS A1 A2 NR B3 B2 Baa3 B1 NR NR

S&P AA NR NR B+ B BB BB BBNR

CORPORATES ISSUER Taqa Aldar Dubai Holding DEWA Qtel Qatari Diar SABIC Mumtalakat MBPS KIPCO

BANKS ISSUER ADCB NBAD Emirates NBD HSBC Bank ME CBQ Saudi British BBK

SUKUK ISSUER TDIC ADIB Dubai Govt DIFC JAFZA DP World Emaar Dar Al Arkan Nakheel

96 / DECEMBER 2011

VIEW

On closing a primary bond or sukuk issuance – i.e. where they are first sold to investors - an active trading period begins. Investors look to buy and sell in the secondary market to ensure they end up with the credit exposure they initially intended.

When acting as a joint lead manager on a new issue, we are expected to act as market makers providing two-way executable prices to both buyers and sellers.

However, what we’ve seen recently is the emergence of two themes. Firstly, as the macroeconomic environment causes banks to re-assess their business strategies, some international banks have pulled their regional trading teams out of the region. This has impacted their ability to trade MENA bonds ‘on the ground’ with the same degree of local knowledge, presence and focus.

Secondly, by not being in the local flow of bonds, the direct sales relationship with regional investors starts to taper off. This will inevitably start to impact on the reach of a bank when placing a bond in primary issuance.

The danger is that, with no regional support, the securities risk becoming illiquid and languishing at wide levels, which would form a poor benchmark and impact the issuer when they come back to the market. Additionally, with a reduced regional presence banks risk focusing on too narrow a range of buyers.

How can the market manage this? There is little that can be done to influence the global strategies of the international financial institutions.

However, the remaining active participants will now need to work harder to maintain a level of active engagement bridging the flows between the regional and international issuer community to ensure regional bonds remain relevant in a global market place.

GEORGES ELHEDERY, Head of global markets, MENA, HSBC Issued by HSBC Bank Middle East Limited. Regulated byJersey Financial Services Commission. All figures quoted are sourced from Bloomberg and HSBC and are correct at the time of publication. Past performance is an not an accurate guide to the future. This information is general and does not take into account your circumstances, objectives or needs. You should consider these matters and consult your financial advisor prior to making any investment decisions. For professional assistance, contact HSBC on 800 40 4443.

SECTOR ANALYSIS

UAE INFANT RETAIL SECTOR DISPOSABLE INCOME / NO. OF BABIES IN UAE 1,200,000

525

1,000,000 800,000

515

600,000 510

400,000

505 500

Dhs

No. Babies (Thousands)

520

200,000 2011 No. Babies (0-4yrs)

2012

2013

2014

2015

Annual disposable income

Like many of the GCC markets, the UAE is very much a “label me” environment, where brands are regarded as a symbol of social status and success. More than a third of residents in the UAE are likely to purchase a luxury product at least once a year, a proportion that is much higher than in many other markets across the world. This is mainly due to high disposable income levels in a country made up of a majority of young working expatriates. The UAE population’s demand for luxury has brought all major luxury brands to this market, many of which entered the GCC region for the first time through Dubai.

For instance, designer clothing and footwear is very much driven by the country’s business environment, where, amongst the higher rankings, all employees are expected to be impeccably dressed during meetings and working hours, and where designer clothing and footwear is the standard work attire. The UAE, and especially Dubai, is also very much characterised by its “bling” aspect, making personal appearance very important.

LUXURY CLOTHING

SALES GROWTH IN SAUDI ARABIA AND UAE GEOGRAPHIES Saudi Arabia Saudi Arabia United Arab Emirates United Arab Emirates

CATEGORIES Designer clothing and footwear Infants’ designer clothing Designer clothing and footwear Infants’ designer clothing

SOURCE: Luxury Goods: Euromonitor from trade sources/national statistics

2010-15 CAGR 4.1% 6.3% 4.3% 3.7%

THE LUXURY BABY BOOM In 2011, designer clothing and footwear including infant designer clothing remained the largest category covered by Euromonitor International’s luxury goods research, with women’s designer dresses and skirts leading the way. Valued at Dhs3.5 billion in 2010, designer clothing and footwear accounted for an impressive 42 per cent of overall luxury goods sales. Nonetheless, the UAE designer clothing and footwear category was the second worst hit out of the 26 countries covered by Euromonitor International’s luxury goods research, after Japan, which saw a real terms decline of 30 per cent. Despite the crisis, Dubai Fashion Week took place in 2009, 2010 and 2011, after the success of the 2008 edition.

On the other hand, children’s clothing and footwear in the UAE remained recessionproof, recording very high growth between 2005 and 2010 including 15 per cent value growth in 2009 when the financial crisis was at its peak. With high disposable income in the country, coupled with a large availability of designer brands for children, Emirati families continued to spend on designer brands for their children, in particular babies, whilst trading down on other products.

This trend is expected to continue well into the future, with Euromonitor International expecting an 18 per cent compound annual growth rate over the next five years, with sales estimated to reach Dhs17 million by 2015 for infant designer clothing.

This trend extended to the food industry where organic premium baby food is gradually becoming mainstream especially in Dubai and Abu Dhabi. Hipp

by Hipp GMBH & Co. in particular is leading the segment with significant shelf space.

SANA TOUKAN Research manager, Euromonitor

GULF BUSINESS / 97

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TRAVEL DOWNTIME

DOWNTIME

PHOTO LIBRARY

TRAVEL, STYLE, CRUISE, BYTES, HOTELS & SCENE

Peace Hotel at night

CHANGING SHANGHAI A very modern city where tradition still survives TExT BY AdRIAN MOURBY

I

f ever a hotel has seen history, it is the Peace Hotel in Shanghai. Built in 1929 by Sir victor Sassoon, this art Deco palace hosted Charlie Chaplin and Marlene Dietrich. Noel Coward wrote his play Private Lives during a stay at the Peace Hotel although in those early days, when Sir victor lived in his suite below the hotel's famous triangular green roof, it was known as the Cathay.

Nowhere was the Jazz age celebrated in such style than on the Bund, Shanghai’s waterfront, and the old Cathay was at the centre of the fun. victor Sassoon saw the hotel as a place to celebrate - as well as accumulate - his wealth. In the ballroom, lined with priceless Lalique glass, he threw fancy dress parties. One event required Shanghai's expats to come dressed as castaways. another time the theme was ‘circus’ with Sir victor as the master of ceremonies. The city’s best jazz band played downstairs in a bar which Sir victor had

decorated with beams and panelling to look like an english pub. elsewhere the hotel gleamed in geometric marble, lacquer and chrome, a true masterpiece of art Deco extravagance.

But history caught up with the old Cathay Hotel in 1947 when a reuters correspondent staying at the hotel woke early and saw soldiers working as a chain gang loading gold bullion from the Bank of China next door on to a waiting ship.

General Chiang Kai Shek was giving up the fight with Mao’s communists and was fleeing to Taiwan. With Communism the hotel gained a new name, the Peace Hotel. Sassoon fled to the Bahamas and much of his palace on the Bund was divided up into offices. fortunately very little of the art Deco original was actually destroyed. When the hotel reopened last year, guests were amazed to find they were stepping back into Shanghai in the 1930s.

The hotel’s Dragon Phoenix restaurant now looks exactly

GULF BUSINESS / 99

DOWNTIME TRAVEL

North Korea

“Shanghai haS Succeeded in retaining moSt of the colonial buildingS from the 1920S and 30S along the bund. in thoSe dayS thiS waS the third biggeSt financial centre in the world.” as it used to, although twelve layers of paint had to be meticulously removed to get down to the original pale green ceiling with its embossed red Chinese dragons. all that’s missing is the emperor’s Table, a long wooden structure at which Sir victor hosted his guests as they ate overlooking the Huangpu river. The biggest thing that has changed is the view. When Sir victor used to look across the river to Pudong, he gazed down on a poor marshy area of farms and fishing boats.

Now the same view rears up with more and more skyscrapers every year.

Nevertheless, Shanghai has succeeded in retaining most of the colonial buildings from the 1920s and 30s along the Bund. In those days this was the third biggest financial centre in the world. The stately Hong Kong and Shanghai Bank was said to be the

South Korea

CHINA Shanghai East China Sea

Macau

Taiwan Hong Kong

Hainan

most beautiful building in asia when it opened in 1921. The Customs House has a clock face based on Big Ben, the old Bank of Taiwan looks like a Greek temple and the North China Daily News office could have stepped out of 1930s New York. all these buildings are framed by new development that is going up at a staggering rate. No guidebook to Shanghai stays accurate for long.

Nevertheless the city is now protecting what remains of the Shanghai Sir victor knew. The buildings of the colonial era french Concession have all been turned into trendy boutiques. The old shops and restaurants around Yu Yuan Garden are a major attraction for Chinese and foreign visitors alike, and outlying towns like Zhouzhuang have been restored to offer tourists a bucolic day out. Glamour has definitely returned to Shanghai.

Huangpu river A restaurant boat on the Huangpu river. At night the river is lit up with highly decorated boats that sail north from the ferry terminal, along the length of the Pudong shore and then change course in front of the Peace Hotel to return along the Bund.

Yu Yuan Garden Bazaar In the Yu Yuan Garden Bazaar, visitors can see Layang Pian, a form of Chinese peep show, being performed. Dating from the mid-19th century, Layang Pian was very popular in the 1920s and 30s but declined under Communism. The puppeteer Weitian Shi has revived this art form in the bazaar and provides all the voices himself.

Zhouzhuang

The lobby at the Peace Hotel

100 / dECEMBER 2011

An old industrial canal through Zhouzhuang has now become a major tourist attraction. Visitors can shop the length of the town, eat at a waterside restaurant and then take a boat back to the coach park. China’s 13th-century canal system originally reached as far north as Beijing.

43 Photographers features captivating images of the UAE from Motivate Publishing’s rich archive of published photographers, and also from new talent discovered through a nationwide competition. The product – an unconventional collection of images documenting this thriving land on its fortieth anniversary.

43 Photographers — coming soon to all leading retail outlets in the Gulf and at booksarabia.com

DOWNTIME cruise

Stately power The turbo-packed 650i is ideal for a corporate racer TEXT By AliCiA BullER

L

aunched in March this year, the BMW 6 Series 650i convertible feels more corporate, more grown-up than its predecessor. a sturdy, regal frame replaces its former chassis – which was sporty but divisive. at over 16-footlong and two tonnes in weight, the new model is wieldier than its former incarnation, but the Bavarians have still scored a winner with extremely seductive styling. The car’s long lines, muscular 19-inch wheels and updated ‘shark nose’ all hint at the power and engineering that lies beneath. unlike BMW’s more obviously sporty models – the Z4, for example – the car feels smoother, heavier and more

102 / DECEMBER 2011

controlled but, at the same time, more automated. depending on your feelings about being a ‘real driver’, your answer to this will determine whether the 650i is right for you. This highend, automated car yields the fruits of decades of German r&d with a swish eight-gear responsive automatic gearbox and powerfully-assisted steering – and, frankly, there isn’t a gadget or gizmo this wonderful car doesn’t possess. (can you guess which side i’m on?)

The over-riding uSP of the 650i lies in its sheer, belting power. Make no mistake – this stately-looking car is a 400bhp+, turbocharged, rear-wheel-drive V8 road monster. even the smallest push on the accelerator pushes hard on the G-forcemeter. add to this the satisfying burble of the frequently shifting gearbox and you’re in for a fast, race-like drive. This car’s oomph is staggering, with a speed of 0-62mph in 5.0 seconds.

The 650i also offers the dynamic driving control option, allowing you to customise the drive to your own settings – including ‘classic’, ‘comfort’,

‘dynamic’ and ‘sport’. These four options will dramatically alter the parameters, such as accelerator pedal response, the shift points of transmission and power steering response (as well as fuel consumption). in conjunction with the optional active drive chassis control system, you also have the option of selecting individual settings for the shock absorbers.

The 650i possesses a high-quality interior anchored with burnt-red leather upholstery and a cockpit-esque range of buttons and griddles. But while this car is relatively comfortable (for the front seat passengers, at least – the backseat space is minimal), it’s not the ideal everyday car. The thrill of the 650i lies in its painstaking attention to detail, its horsepower and its head-turning beauty, not in its boot space or versatility. as you might expect, this car is not cheap, in terms of its fuel consumption (26.4mpg) or initial cost. But if you’ve got cash to burn, literally, and you’d like to cover longish distances – al-fresco style with the wind in your hair – then this is the fast and safe car for you. according to BMW market research if you’re shopping for the 650i model, this is likely to be the third or fourth car in your garage. congratulations.

Price: Dhs 490,000

Dubai

an aerial tour

Dirk Laubner

DOWNTIME ART

Sohrab Sepehri’s highest grossing piece goes up for sale.

under the hammer Christie’s auction house has unveiled a new sales format to lure younger buyers, writes Jonathan Sheikh-Miller.

T

he inTermiTTenT sound of gavel on lectern was heard recently at dubai’s Jumeirah emirates Towers hotel when global auction house Christie’s conducted its modern and Contemporary Arab, iranian and Turkish Art sale.

The event was particularly noteworthy as it marked the launch of a new sales format for the middle east with the regular part i sale featuring renowned regional artists such as mahmoud said, Charles hossein Zenderoudi, Fateh moudarres, mohamed ehsai and Parviz Tanavoli among the higher value lots, being supplemented by a new part ii sale. michael Jeha, md of Christie’s middle east, explained that the new approach gave a platform to new artists. “This was the first time that we had divided our sales into a part i and part ii format.

This allowed us to offer a much greater diversity of works, with estimates from $1,500, and to include artists who had never been offered for sale at public auction before.”

Another part of the rationale behind the new format was that the lower prices in the part ii sale, when compared to some of the six figure estimates in the part i portfolio, would enable younger collectors to begin securing valuable pieces of art at more affordable levels.

Jeha said that the part ii sale was a success on the night and the work of several uAe national artists was well received. “There was such a great buzz before the sale as new collectors came to see what we had on offer. on the night of the sale it was really

104 / DECEMBER 2011

gratifying to see some of those new faces bidding in the sales room, often sitting alongside some of the artists themselves. i was particularly pleased to see a group of five works by young emirati artists sell so well – all setting new records for their work.” one particularly striking piece by an emirati, The Last Look by Lateefa bint maktoum, achieved a price more than 30 per cent above its upper estimate, when it sold for $12,500. other local artists featured included Lamya Gargash and saeed Khalifa.

But, of course, it was in the part i sale where the big money changed hands as $5 million worth of sales were concluded – more than double the amount raised in the part ii sale. The highest grossing piece was an untitled oil on canvas work by the iranian artist sohrab sepehri from his Tree-Trunks series, which flew past its initial estimate of $250,000-$300,000 and sold for $662,500 – a world record at auction for the artist. mahmoud said’s oil on canvas piece Petite Fille D’Assiout was not far behind sepehri, with the egyptian’s work fetching $650,000. Both of these lots were sold to private middle eastern investors. overall, the auction achieved good results with 83 per cent of lots selling despite the present economic worries and more than $7 million was raised. But for michael Jeha, one of the most satisfying aspects was the reaction to the part ii sale. “Thirty-nine of the artists represented in the sale were under 35 years of age and this dynamic was reflected in the audience.”

DOWNTIME BOOKS

Ideas and InnovatIon

Thomas Board reviews one title that aims to harness new ideas and another which explores one of the most creative thinkers of modern times.

T

he TiTle of the book promises a lot. But will it deliver? Belsky provides no guidance for judging the

f

irsT leT’s pick up on the title’s reference to secrets. Very little about this book is a true revelation to anyone who followed Jobs’ career until his recent untimely demise. likely readers of this book will presumably be amongst his many admirers.

As such, many will have at least watched online as Jobs presented product launches or followed Apple’s press coverage, bought Apple products or perhaps seen his now famous 2005 commencement speech at stanford University. The so-called secrets might be more

106 / DECEMBER 2011

quality of your ideas, but instead focuses on why most ideas never happen. he cites examples of arguably poor ideas, well executed, that have made their impact regardless. it’s actually a rather encouraging thought and as he says, “the most potent forces that kill off new ideas are our own limitations.”

Belsky soon draws you in with his insights into the forces that drive creatives, and their creations, forward. he ushers us through a commendably practical collection of views about managing ideas, harnessing resources and community, as

accurately described as analysis.

This takes nothing away from the book, however. carmine writes in a highly engaging style that provides a compelling and fast-paced read. he introduces us to his distillation of seven principles underpinning Jobs’ approach to business and life. from the start, we are immersed in stories that illuminate carmine’s opinions, drawing on a wide range of sources. innovation is clearly a big topic. so rather than trying to create an innovation blue print, carmine wisely settles

well as leading others and oneself. having tried many productivity and time management systems, i found his Action Method for prioritising and managing projects striking in its simplicity. his set of leadership principles for turning ideas into reality are refreshingly straightforward and you can’t really argue with them. however, you may be disappointed by the superficial skim over some of these topics. Belsky’s writing is so task-focused that even developing self-awareness and reflection is tagged as an important to-do!

in conclusion, he is provoking us to commit, driving us towards action and focusing our attention on what will make the difference. so if you have a habit of having ideas rather than implementing them, this might be the wake-up call you need. if, on the other hand, you are battling your inner self’s excuses and doubts about self-expression, try “The War of Art” by steven pressfield. or if you want quick-result solutions for psychological barriers like procrastination and motivation you might enjoy “59 seconds” by richard Wiseman.

each chapter he then reflects on what can be learned and applied by us mere mortals.

The 7 principles are: • Do what you love • Put a dent in the universe • Kick start your brain • Sell dreams not products • Say no to 1000 things • Create insanely great experiences • Master the message

for exploring Jobs’ philosophy and approach. At the end of

The book is a starting point for understanding the Apple story and Jobs’ leadership.

But, if you want insight into Jobs’ thoughts and personal experiences, you will not find it here.

PLACES TO BE DOWNTIME

1 European Tour: Dubai World Championship Golf fans should take some time out to watch the finale of the European Tour as it unfolds at Jumeirah Golf Estates from December 8 to 11.

Players ranking in the tour’s top 60 will play in the $7.5 million Dubai World Championship, after which just the top 15 players will share in The Race to Dubai’s additional $7.5 million prize fund.

2 Sade, Live on Yas Island British singer Sade turns back the clock in the UAE capital on Friday, December 16 as she performs songs from her back catalogue spanning the last three decades.

Concert-goers can expect to hear some of the pop vocalist’s early hits including ‘No Ordinary Love’, ‘Sweetest Taboo’, ‘It’s a Crime’ and ‘Smooth Operator’.

hakkasan

3 Triple your indulgence

TEXT By JoNaThaN ShEIkh-mILLEr

M

ichelin-starred cantonese fine dining restaurant hakkasan opened its doors on november 17, in the Jumeirah emirates towers hotel in the heart of the dubai international Financial centre. located in the Boulevard, on the ground level of the hotel, hakkasan is approached via an impressive slate stone corridor. one of the restaurant’s most attractive features during the city’s cooler months is its outside terrace, which features wooden pavilions surrounded by a wall of vegetation, creating the feel of a luxuriant, luscious garden. designed by Gilles and Boisseur, the venue also includes two private dining rooms inside as well as the ling-ling lounge with its distinctive black, gold and white styling. abu dhabi based property investment company tasameem owns hakkasan, which was originally founded in london in 2001, and a restaurant opened in the Uae capital in June last year. ceo niall howard is confident

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the new location in dubai will prove just as popular and heading the hakkasan dubai kitchen is chef de cuisine Pang Pin lee from hakkasan abu dhabi, who boasts more than ten years experience in gourmet cantonese cuisine and the art of dim sum. lee has crafted several dishes specifically for the Uae market which complement familiar hakkasan signature dishes such as Peking duck with royal Beluga caviar, steamed dim sum platters and grilled Wagyu beef with king soya sauce. despite only opening last year, hakkasan abu dhabi has attracted a loyal following and the likes of Morgan Freeman and Uma thurman have enjoyed its cuisine, while the restaurant picked up three gongs at the What’s on awards 2010. although the hakkasan brand can be found in a varied number of locations including Miami and Mumbai, plans are in place to open yet another eatery in new York early next year.

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Although the Christmas holiday season can get expensive, with presents to buy, The Spa at The Address Dubai Marina is offering a special deal. On booking three treatments, you’ll get 30 per cent off your first spa treatment, 40 per cent off the second and the third will be half price.

4 Nothing, Nobody You don’t have to leave Dubai’s business hub to unwind. The Ayyam Gallery at the Dubai International Financial Centre has several exhibitions throughout December, including the large-scale ink paintings on paper and video installation by Iraqi artist Sadik Kwaish Alfraji. His anonymous everyman figure illustrates the artist’s philosophical musings on life and the plight of humanity, in a manner that is both thought provoking and quietly beautiful. The exhibition runs until December 15.

5 Christmas Day, Traiteur “Brunch at the Park” If you happen to be in the business quarter of Dubai on Christmas Day, with a craving for turkey and all the traditional trimmings, then head to Traiteur at the Park Hyatt, Dubai where there will be a spread of seasonal choices alongside free-flowing champagne and live entertainment.

GULF BUSINESS / 109

REgulaRs EvEnts calEndar

INDIAN PROPERTY SHOW aIRPORT EXPO, 15-17 DECEMBER, 2011 TExT By hilDa D’souza

W

hile international demand for property has slowed down, the indian property sector is booming. real estate in india has seen growth at a rate of 10 per cent per annum and with it there’s been an ever-increasing demand for property shows from non-resident indians in the Uae. the show is now bi-annual and June’s eighth edition recorded a footfall of 17,000 visitors as 50 leading indian developers featured 250 projects and generated business worth $58 million.

Unitech limited, the hiranandani Group and Godrej Properties are some of the real estate firms amongst the 60 plus exhibitors. the show offers plenty of opportunity for acquiring a general know-how of the different investment options, financing sources and legal guidance to buying property in india.

unITEd aRab EmIRaTEs Abu Dhabi December

Dubai December

Sharjah December

4-7 5-7 5-8

Le Royal Meridien, Abu Dhabi Abu Dhabi National Exhibition Centre Abu Dhabi National Exhibition Centre

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11-13

e-Tagging for HSE and Asset Management in Oil and Gas World Green Tourism The National Exhibition for Small & Medium Enterprises (SME 2011) World Health Care Congress Middle East 2011

Abu Dhabi National Exhibition Centre

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4-7 4-7 5-7 12-14 12-14 12-14 13-14

The Mobile Commerce Forum Rotate 2011 Middle East Industrial Gas Conference 2011 Gulf Traffic Future Concrete 2011 Invest Nigeria Financing the Middle East: a Loans Market Perspective

Le Royal Meridien Beach Resort & Spa Dusit Thani Hotel Jumeirah Beach Hotel Dubai International Convention & Exhibition Centre Ritz Carlton, DIFC The Address Dubai Mall JW Marriott Hotel

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12-14

Gulf Maritime

Expo Centre Sharjah

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4-7 4-8

Sustainable Construction Qatar 2011 20th World Petroleum Congress

Oryx Rotana, Doha Qatar National Convention Centre, Doha

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5-7

Food & Hotel Oman

Oman International Exhibition Centre, Muscat

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Saudi Water & Power Forum

Hilton Hotel, Jeddah

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QaTaR December

Oman December

saudI aRabIa December

4-6 4-7

Saudi Broadcasting Business Forum

Holiday Inn, Riyadh, Al Qasr

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11-13

Cityscape Riyadh

Riyadh International Convention & Exhibition Center

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11-14

Saudi Infrastructure

Jeddah Centre for Forums & Events

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11-15

The 29th Riyadh Motor Show

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110 / DECEMBER 2011

Saudi Arabia. . . . . . . . . +966 1 257 3030 Turkey . . . . . . . . . . +90 212 465 3156/54 UAE Dubai . . . . . . . . . . . +971 4 3365065 UAE Abu Dhabi . . . . . . . +971 2 6419055 ©2011 Lcensees of Dollar Rent A Car, Inc.

FIND OUT WHAT WE HAVE IN THE BAG THIS FESTIVE SEASON Fairmont Dubai and Fairmont Bab Al Bahr, Abu Dhabi, have you on the guest list with a bag full of festive surprises this season. From Fairmont Brunch specials and take home roast turkey with all the trimmings, to extra special goodies in all of our dining venues, this festive season is sure to be jolly.

Visit any of Fairmont Dubai and Fairmont Bab Al Bahr’s exclusive restaurants and lounges or enjoy a night’s stay in one of our luxurious guest rooms from 3 - 31 December and enter the ‘What’s in the bag?’ raffle draw and you could be winning a five night safari at three luxurious Fairmont resorts in Kenya or five nights at the renowned Fairmont Singapore.

For more information please visit Fairmont.com/uae Fairmont Dubai +971 4 311 8316 Fairmont Bab Al Bahr +971 2 654 3333

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GULF BUSINESS HOTELS COLLECTION HOTEL LOCATION KEY

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Al RAhA BeAch hotel

PARK RotANA ABU DhABI

the fAIRmoNt DUBAI

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ABU DHABI This hotel is 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 +971 2 508 0555 Fax +971 2 508 0429

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 +971 2 657 3333 Fax +971 2 657 3000 park.hotel@rotana.com

DUBAI This 394-room hotel boasts 10 dining and entertainment venues a superb spa and unrivalled meeting facilities.

Tel +971 4 332 5555 Fax +971 4 332 4555 dubai.reservations@fairmont.com

ABU DHABI offers 192 spacious rooms and suites, state of the art conference and business center, as well as, a multipurpose gym, indoor pool, and the exclusive Cristal Spa. Tel +971 2 652 0000 Fax +971 2 652 0001 res.auh@cristalhotels.ae cristalhotelsandresorts.com

DUBAI Located on Sheikh Zayed Road, this hotel 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 4 330 0000 jumeirah.com

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meDIA oNe hotel

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DUBAI Located in the centre of Dubai’s business district and just five minutes away from DIFC, Jumeirah Beach, Burj Khalifa and Dubai Mall, this 500-room hotel offers you a convenient access the must see and must go places in the emirates.

Tel +971 4 323 0000 Fax +971 4 323 0003 reservation@emiratesgrandhotel.com

DUBAI Tailored to the savvy business traveller, with large comfortable beds & hi tech facilities. A vibrant collection of cafes, bars & restaurants; state-of-the-art conference facilities, a fully equipped gym with ample parking.

Tel +971 4 427 1000 Fax +971 4 427 1001 cu@mediaonehotel.com

DUBAI Discover a new attitude hotel directly linked to the region’s ultimate shopping destination amidst Dubai’s sophisticated metropolis. Elegant 481 guestrooms complemented with chic dining experiences awaits both leisure and business guests.

Tel +971 4 702 8000 H7337@accor.com pullmanhotels.com

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

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DUBAI Rising high above the fringe of Media City on Sheikh Zayed Road, Fraser Suites Dubai enjoys panoramic views with superb 1, 2 & 3 bedroom apartments, lifestyle facilities, relaxed dining in Aqua Café and the exclusive Awazen Spa. Tel +971 4 440 1400 Fax +971 4 440 1401 reservations.dubai@frasershospitality.com

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 temperaturecontrolled pool.

Tel +971 4 437 7888 Fax +971 4 437 7999 welcome.oak@layia.net

DOHA Located on the Corniche Road, opposite the Museum of Islamic Art, the hotel offers 154 rooms and suites, a business centre and meeting rooms.

Recreation facilities are also available.

Tel +974 4429 1111 Fax +974 4429 1100 moevenpick-doha.com

DOHA Superbly located in the prestigious West Bay area and within easy reach of the city centre. With its various dining options, 257 guest rooms and suites, private beach and a 24-hour state-of-the-art gymnasium, it is an idyllic setting for business and leisure.

Tel +974 4484 4444 Fax +974 4483 9555

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

Tel +966 1 450 5054 Fax +966 1 450 5056

Our lOcatiOn

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RAS AL KHAImAH This 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 +971 7 243 4421 Fax +971 7243 4429

REgulaRs in your shoes

“abu dhabi hospitality will be welcomed as sailors recover from life on the edge: no fresh food is taken on board; temperatures vary from -5 to +40 degrees celsius and only one change of clothes is allowed.”

AND WE’RE OFF...

Alicia Buller sails into the sunset with Volvo senior vice president, Doug Speck

J

ust off the shores of Alicante, spain, the fortunes of six world-class sailing teams were cast to the ire of the sea last month. the Volvo ocean Race remains the most challenging water rally on the planet, and is often the only race an olympian athlete would dream of conquering next. In nine months, the sailors are tasked with mastering 72,000 kilometre of the world’s most treacherous oceans from Cape town, to Arabia, to China, to America, and finally to Ireland.

As usual, the Volvo ocean Race departed from a pleasant part of europe in Autumn; but rather less usual this year was the smaller number of competitors. As companies around the world reined in marketing spend, the race lost a number of sponsored boats. But in a nautical nod to the world’s shift from the West to east, for the first time in history, an Arabian boat joined the fray.

‘Azzam’, Abu Dhabi’s sleek black yacht, led by double olympic silver medallist Brit Ian Walker, also carries Adil Khalid, the first emirati sailor to join the race.

While Azzam experienced some boat-build challenges and has resigned from leg one of the challenge, some consolation lies in the fact that Abu Dhabi is set to provide the first Middle east stopover in the race’s history this year. the sailors are expected

114 / DECEMBER 2011

to reach the emirate’s balmy climes just in time for a spectacular New Year’s party, along with the teams from Camper, Groupama, Puma, team sanya and team telefonica. the Arabian hospitality will be welcomed as crews recover from life on the edge: no fresh food is taken on board; the temperature varies from -5 to +40 degrees Celsius; and only one change of clothes is permitted.

It’s an expensive business – owning a race. so expensive that Doug speck, senior vice president for marketing, sales and customer service at Volvo Cars, said he’s keeping those figures close to his chest.

“We think it’s good value for us – we look at what we contribute, but we also look at what we get back from a media perspective. If we didn’t think there was a good return from it, we wouldn’t be contributing. this is the biggest sponsorship initiative that we’re involved in,” he says, surveying the glittering Alicante port from the spectator boat.

As well as the considerable cash involved, Volvo contributes technological insight, global operations and hR expertise to the race, which happens once every three years. the investment in technology is often carried back into the cars.

“We share a lot of technical findings, including communication.

It’s a very complicated thing – keeping in touch with the boats, and keeping in touch with the media. We’re learning a lot about how we can connect to the boats and, ultimately, how our cars can become more connected as well. It’s all part of the package,” added speck. the dent in Volvo’s marketing budget from the race is salved somewhat by the amount that each host destination contributes along the way. In addition, Volvo enlists a host of secondary sponsors to help support the race costs. however you split it, the potential for visceral brand association is unlimited. the drive, the expertise and the boundary-breaking bravery of the sailors is rare and astonishing – something that reaches right into the well of our deepest aspirations. And, for even a little of that gold dust to stick to a brand, is priceless. or, at the very least, worth a few tens of millions of dollars every three years, as a certain automaker knows.

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