Gulf Business November 2011 by Motivate Media Group

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GCC COMPANIES

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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THEREâ&#x20AC;&#x2122;S MORE TO LEXUS. Elegant design is one thing, but combined with the most advanced technology and precision engineering, the result is a high-octane driving experience unlike any other. Created by the harmonious fusion of the skills of master craftsmen and a car enthusiastâ&#x20AC;&#x2122;s passion for driving, Lexus delivers not only a sporty, beautifully designed high-performance vehicle, but also a full sensory experience.

tel: 800 LEXUS (53987)

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WHEN IT COMES TO SPORTS, WE KNOW HOW TO PLAY.

EVERY ROLEX IS MADE FOR GREATNESS. THE GMT-MASTER, INTRODUCED IN 1955, WAS DEVELOPED TO MEET THE NEEDS OF INTERNATIONAL PILOTS. THE GMT-MASTER II HAS PROVEN TO BE EVEN MORE INVALUABLE AS IT FE ATURE S A ROTATABLE 24 -HOUR G R ADUATED BE Z EL THAT ALLOWS THOSE WHO TR AVEL THE WORLD TO RE AD THREE DIFFERENT TIME ZONES. T WO SIMULTANEOUSLY.

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Emirates Trading Agency LLC &

Boubyan Petrochemicals Co. (K.S.C.) US$ 100,000,000

Term Credit Facility

Bukhatir Investments Limited US$ 245,000,000

ETA Star Holding Limited

Syndicated Term Loan Facility & Commodity Murabaha

US$ 200,000,000

Al Khaliji Commercial Bank, QSC

Oman Insurance Co. (P.S.C.)

US$ 100,000,000

Medium Term Credit Facility

Syndicated Working Capital Revolver Facility

Syndicated Term Loan Facility

Berber Cement Company US$ 130,000,000

Musharaka Sukuk

Axiom Telecom LLC with

Union Taxi LLC Pantaloon Retail (India) Ltd Strategic Joint Venture

Al Bannai Group Acquisition of

Strategic Joint Venture

ANC Group of Companies USD 21,000,000 Acquisition Financing

Mohammed Jalal & Sons W.L.L. US$ 65,000,000

Syndicated Secured Term Loan Facility

Al Jazeera Steel Products Company S.A.O.G. (Listed on Muscat Securities Market)

Acquisition of Strategic Equity Stake by

Participants

Acquisition

Al Hilal Bank Commercial Bank International

Connecting you with the right opportunities. Debt Advisory t Mergers & Acquisition Advisory t Equity Advisory

Global Buyout Fund LP

Investment Banking Bahrain | Doha | Dubai | Mumbai Muscat | New Delhi

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1 9 9 6 - 2 011

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GCC COMPANIES

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REGIONAL NEWS, PEOPLE, NUMBERS AND EVENTS

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MISHAL KANOO Is gold really a safe haven?

MATEIN KHALID The future of GCC private equity.

TOMMY WEIR Leading in a family business.

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ECONOMY How will the Eurozone crisis affect the Gulf?

AVIATION Should Emirates order more planes in the current climate?

POLITICS World Economic Forum leaders warn of an altered global balance.

TELCOS Regional firms jostle for growth amid high penetration rates.

FORMULA ONE Abu Dhabi gears up for more race investment.

RAILWAYS The GCC is on track for mega-rail developments.

ENTREPRENEURSHIP Regional animators seek major investment.

CONSTRUCTION Drake & Scull targets Asian expansion.

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INTERVIEW: KHALAF AL HABTOOR Dubai tycoon announces a Dhs1 billion hotel on the Palm.

QATAR’S UNSTOPPABLE JOURNEY Why the tiny Gulf state can currently do no wrong.

PROFILE: THOMAS LUNDGREN, CEO OF THE ONE How the flamboyant furniture boss beat bankruptcy and burn out.

THE GULF SHOPS UNTIL IT DROPS Overall, the region’s retail outlook is booming.

BEYOND THE BRICKS The mood at this year’s Cityscape Global was down but not out.

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HOME TRUTHS Will KIA’s mega cash injection spark the property market?

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TRAVEL Luxurious Geneva is much more than just a banker’s hub.

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ART Local exhibition reveals motivations of Palestinian artists.

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PLACES TO BE Where else to be this month but Abu Dhabi’s big race?

STATS Regional mergers, acquisitions and bond issuances.

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GULF BUSINESS PREFERRED HOTELS A selection of the region’s top rooms.

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EVENTS The Gulf’s top business conferences.

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CRUISE Reviewed: Bentley’s Continental Flying Spur Speed.

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IN YOUR SHOES Ari Kesisoglu, Google MENA boss.

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On the Radar

(+ & EFM<D9<I )'((

SABIC posts record results

Saudi Basic Industries Corporation (SABIC) has announced the best quarterly results in its history, according to vice chairman and CEO Mohammed Al Mady. The worldâ&#x20AC;&#x2122;s biggest chemical producer posted profits of $2.2 billion for the three months ending September 30 on the back of high prices and strong demand. During the same period last year, SABIC earned $1.4 billion. The firm saw its total sales increase by $2.9 billion year-on-year. Al Mady said

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SABICâ&#x20AC;&#x2122;s results were helped by reduced costs and the firmâ&#x20AC;&#x2122;s strong performance in several growing economies like India and China. Al Mady also stated the firm had not experienced any dip in demand as yet due to wider global economic concerns and it had no plans to alter its investment plans. SABIC, which is 70 per cent government owned, lists steel, fertilisers, thermoplastics and polymers among its product range.

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89L ;?89@ @J 8 KFLI@JK ?@K Abu Dhabi has seen a 13 per cent increase in tourist numbers over the first eight months of the year according to the Abu Dhabi Tourist Authority (ADTA). The UAE capital had seen 1.3 million visitors arrive by the end of August, with the ADTAâ&#x20AC;&#x2122;s 2011 target of two million guests still on track. Occupancy rates also rose during the same period with hotels running at about 67% of capacity, a jump of nine per cent when compared to the same period last year.

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$500 million sukuk for Albaraka

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Bahraini Islamic lender the Albaraka Banking Group is looking to generate $500 million in sukuk this year. The bankâ&#x20AC;&#x2122;s Turkish division, Albaraka Turk Katilim Bankasi, is presently gearing up to sell $200 million in Islamic bonds this month, while the Gulf lender itself may

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offer $300 million before the end of 2011. Albaraka, which is eyeing acquisitions, will use the funds raised to further its expansion plans in a diverse range of markets including Egypt, Tunisia, Algeria, Pakistan and Indonesia.

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Muscat airport on track Redevelopment work at Muscat International Airport, which commenced in 2006, is on track to be completed in October 2014. The project is geared up to enable around 12 million passengers to use the airport annually in the first instance, with further construction phases bringing capacity up to 48 million by 2050. One of the main features at the airport will be the Air Traffic Control Tower which, when completed, will be the tallest building in Oman, measuring around 100 metres. Work on the terminal building has commenced and it will be situated between two parallel runways. The facility will have two levels, a 90 room four-star hotel and will comprise a total area of more than 300,000 square metres.

(- & EFM<D9<I )'((

On the Radar

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I can only see Dubai becoming a global hub for cosmetic surgery. Another factor in todayâ&#x20AC;&#x2122;s economic times is the desire to be more competitive in the ;I% 8?D<; 89;LCC8? market place. People tend Jg\Z`Xc`jk to want to look their best, gcXjk`Z jli^\fe# which manifests not only 8\jk_\k`Zj @ek\ieXk`feXc in better dressing and grooming, but also in surgical cosmetic enhancements to look and feel better, which directly translates into elevated self esteem. ;f pfl jg\Z`Xc`j\ `e Xep gXik`ZlcXi gifZ\[li\j6

Yes, my special interest is full surgical facial rejuvenation using endoscopic and short scar techniques, incorporating stem cell fat transfer volume enhancement. The goal is to look like you did 20 years ago and not â&#x20AC;&#x153;windblownâ&#x20AC;?. In fact, I have my clients bring in a picture of when they were much younger, so I can plan and personalise their facial rejuvenation. N_Xk `j k_\ iXk`f ]fi d\e m\ijlj nfd\e6

Approximately 30 per cent of the cosmetic surgery I perform is on men, and most of them are looking at similar rejuvenation procedures as women.

Dubai Bank in ENBD takeover Dubai Bank, the cash-strapped Islamic bank brought under government control earlier this year, has been taken over by the UAEâ&#x20AC;&#x2122;s biggest lender by assets, Emirates NBD (ENBD). The deal came about as a result of a directive from Dubaiâ&#x20AC;&#x2122;s Ruler Sheikh Mohammed bin Rashid Al Maktoum and no financial details have been released. Dubai Bank posted losses of $79 million in 2009, which was the last time it released figures. The government already holds a majority 55.6 per cent stake in Emirates NBD, which came into existence in 2007 after the merger of two local banks, again following an order by the Ruler.

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There needs to be a higher emphasis on building stateof-the-art facilities and better regulation of physician and healthcare personnel qualifications. N_XkĂ&#x2039;j k_\ dfjk gfglcXi gifZ\[li\ ]fi d\e Xe[ nfd\e i\jg\Zk`m\cp `e k_\ L8<6

From the trends I have seen, liposuction and rhinoplasty are popular for men, while non-surgical facial rejuvenation and breast enhancement surgery for women seem to be on the rise. @k j\\dj k_\ Ă&#x2C6;A$CfĂ&#x2030; `j îfnè^ è gfglcXi`kp è k_\ i\^`fe ZXe pfl Zfe]ìd k_`j6

This is definitely true, from what I have observed. An increasing number of fat transfer and implant procedures are being done in the various surgical centres throughout Dubai. @EK<IM@<N<; 9P ?@C;8 ;Ă&#x2039;JFLQ8

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COMMENT

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Mishal Kanoo is deputy chairman, Kanoo Group.

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IN THE PAST, WHENEVER THERE WAS a gold strike somewhere, likes moths to a flame, people flocked to seek their fortunes. Unfortunately, as with many such situations, it was always the first there who benefited most and then the rest eked out a living on the remains of what was left. There were two kinds of people that made the serious money: the ones who sold products and services to the gold-diggers and those who sold a story. I don’t have to talk much about the first type other than to say this was the intelligent way of doing things. The second kind of person was the one who sold hopes and fantasies to those who were looking for them. One of the many stories they sold to the unfortunate people who bought into their lies was that pyrite was actually gold. For those who don’t know what pyrite is, it is a mineral that looks deceptively like gold in colour but it is usually flatter and sharper in construction than the precious metal which is rounder and softer in shape. Pyrite is also duller than gold and this is what allows those who know the difference to tell which is which. Unfortunately those who are blinded by greed are usually too blind to see these distinguishing factors and their overwhelming belief in wanting pyrite to be gold doesn’t allow them to see this fact. This is why pyrite is commonly referred to as fool’s gold. We are now seeing this process repeat itself but ironically the fool’s gold here is actually gold. The hoarding and pushing of the gold price to the extent that it has nearly quadrupled in the past four years is something to note when investing. If you look at the previous six years, prior to 2007, you will see that gold just managed to double its price in that time. So what changed in order to cause gold to skyrocket the way it did? What usually causes a market to move up is greed and what causes a market to crash is fear. In the case of gold, we have a strange anomaly in that the two drivers of fear and greed, normally working in opposite directions, are fuelling this move. These are the best ingredients for a collapse waiting to happen. Just because we are flying, it doesn’t mean we can fly forever as there are constraints that will play a role

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in our collapse which far outweigh our wish for them not to come into play. Like all bubbles, the party is great while things are going up. It is the day we have to pay for that party that we dread. In this case, the factors that will cause this party to come to an end are building up and are not quite there. The problem is, like with every bubble, we are not sure when the factors will come together to end that party. This is why gold is now the new fool’s gold. It looks safe and it looks bright but like fool’s gold, it is not the real thing. The gold price hit an all-time high in September before profit-taking burst that particular bubble and suddenly a peak looked more like a trough. Financial experts who continue to push gold have argued that the yellow metal is a safe haven for investors in these turbulent times with all these wars going on. Actually food is the only safe haven but unlike food, gold doesn’t perish and you can’t eat it. They argue that fiat money is worthless. Really? What is the alternative? Money backed by gold? Let’s investigate this further. If we really wanted to make gold the standard of commerce again, are we willing to have a global economy the size of that which existed at the outbreak of WWI? The reason I say this is because there isn’t enough gold to back all the commerce and financial activity that we are currently enjoying. Even if we took all the gold in the world and melted it into coins, we would still have to create paper money to support these transactions. Even then, economies would have to severely curtail their spending in order to be able to pay for things from their gold stocks. Thus everything will become that much more expensive. These financial experts are playing on people’s fear and their greed as nothing breeds more greed than greed. Seeing the price of gold go up for no real reason is usually a sign of greed. If the number of gold mines that have shut down had doubled or governments had imploded then those would be reasons to accept such a jump in gold prices. What we are seeing is nothing other than financial companies buying and selling gold futures to each other, on a huge scale, and pocketing a commission for every trade. No! The world is not going to implode tomorrow and neither are the governments. We are experiencing a correction no doubt from the madness of the last decade but this too will pass. Those with a level head will always beat those who are pulled by their emotions. Which one do you want to be?

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COMMENT

K?< =LKLI< F= >:: GI@M8K< <HL@KP Matein Khalid is fund manager in a royal investment office and a writer in finance and geopolitics.

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O NICHE OF GULF FINANCE HAS seen as spectacular a reversal of fortunes as private equity, an asset class that was non-existent a decade ago. An industry built upon twin bubbles in the equity and property market, some of the most absurdly valued IPOs on the planet and new issue mania as the equity culture turned into dreams of instant riches among illiterate capital market investors, no less than 130 mostly Mom and Pop new funds and $25 billion in limited partner (LP) commitments, has had a brutal fall from grace since 2008. GCC private equity now faces a Darwinian competitive shake-out and a protracted bear market. The systemic risk in GCC private equity funds was grossly underestimated by investors who assumed that the regionâ&#x20AC;&#x2122;s equity and property bubbles would last forever. In 2008, I was stunned to see regional investors still allocating almost $6 billion to an asset class whose investment case seemed to have already vaporised. Why? For eight main reasons:1) As oil prices plunged from $148 to $40 in six months, it was obvious that the Gulf would face a decline in growth rates, a credit crunch and an outflow of offshore speculative capital. 2) A brutal bear market in GCC equities gutted investor appetites for IPOs, a classic vehicle for private equity exits. 3) An accounting and fraud scandal in a private equity financed, listed jewellery chain raised disturbing issues about the low calibre of regulation, disclosure and due diligence in the region. 4) Several sovereign state-owned private equity funds were forced to sell dismember empires to repay debt or meet bank margin calls. 5) Regional LPs reneged on capital call commitments en masse as they

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faced the worst cash squeeze the region has faced since the banking property meltdowns of the mid 1980s. Fundraising and exits were the obvious victims of the new macro zeitgeist. 6) The Arab spring destroyed the case for a MENA paradigm in investing. Political risk in Egypt meant financial disaster for many private equity financed companies and a bear market in the Arab worldâ&#x20AC;&#x2122;s ultimate growth market. The collapse of the Turkish lira and the Pakistani rupee, down 30-40 per cent since 2008 for dollar investors, has dramatically reduced the potential internal rate of return of Gulf funds which invested in these two key MENA countries. 7) The banking systemâ&#x20AC;&#x2122;s woes in the GCC since 2008 meant acquisition debt finance has become even more expensive and many Western banks have slashed credit lines in the region. 8) The industryâ&#x20AC;&#x2122;s dependence on merchant family LPs has been amplified by the credit crunch faced by their clients as GCC banks slashed corporate loan facilities even as the property asset values plummeted by 60-80 per cent off their peak. Private equity, even on Wall Street, is gripped in a secular bear market. Blackstone, arguably historyâ&#x20AC;&#x2122;s largest, most successful private equity empire, lost 85 per cent of its value after its flotation in New York at the height of the credit bubble in 2007. Strangely enough, valuation multiples (demanded by sellers, not actually paid by buyers. There is a deal freeze now) nowhere near reflect public market comparables where even a major public bank like Emirates NBD trades at six times earnings and a 40 per cent discount to book value. The bear markets in GCC and emerging markets mean high priced IPOs and even trade sales are no longer possible. Funds must meanwhile finance loss-making companies in places like Egypt and cut bloated costs in countries hit by the Arab spring. Fundraising for new funds is virtually impossible and LP family offices have reneged on capital calls. Valuation multiples are nowhere near rock bottom in both the public and private markets. The bear market in MENA private equity will continue.

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C<8;@E> @E 8 =8D@CP 9LJ@E<JJ Dr Tommy Weir, advisor on fast-growth and emerging market leadership, and author of The CEO Shift

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HE EXPAT CEO FAILURE RATE IN FAMILY businesses is aberrantly high across the region. This makes me ask, “How can non-family member (and even some family member) leaders improve their leadership success in family businesses?” The fact is family businesses are the predominant type of business across the region accounting for 90 per cent of all commercial activity in the GCC and generating 70 per cent of regional employment. Many of the brands that fill our households were in essence family businesses as they came to prominence under their entrepreneurial founder and many still are today: Apple and the late Steve Jobs, Ralph Lauren, Bill Gates and Microsoft, the Ford Motor Company, Walmart and Dell Computers to name but a few. There is a lot written about family business, but it is typically from the family’s standpoint and the challenges they face. We need to look from another perspective and understand how to successfully lead in a family business as an outsider. The mainstream entrepreneurs referenced above give a sneak peek into how founders lead their businesses. These leaders are defined by their detail orientation, obsession with quality, clarity of vision for the product or service, and merciless demand for hard work. Stories are told about Bill Gates, while with Microsoft and even in his philanthropic endeavours, displaying an acute detail orientation. He would meet with managers on the ground from different parts of the world and enquire about the number of units sold to date or other relevant data. When the manager could not answer his probing questions,

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Mr Gates would rattle off the information indicating to the manager the need to focus more on the details of the business. Ralph Lauren is so obsessed with quality that he takes an active role in the dye room instructing the team to add more white to the pink dye to make the distinct colour that he envisions for the next season’s polo shirt. While some people say it is too much for a CEO to be this hands-on, we need to remember this business has Ralph Lauren’s name on every shirt and he is unrelenting on quality because it is his reflection. I continue to hear of managers complaining about working in a family business - perhaps this is because of the paradox they find themselves in. As an “outsider” they have questions about control, governance models, delegation of authority and succession. Rather than getting caught up in these matters, leadership success in a family business comes from recognising and focusing on what makes the business the best it can be rather than focusing on trying to change it to operate like a publicly traded company, which it is not. In a publicly traded company rarely do the leaders, including the CEO, know who the owners (investors) are other than the rare representative of an institutional investor. Whereas in a family business it is very clear who the owner is. Yet, most of the teaching on leadership and western expat experience is from the publicly traded model. Successfully leading in a family business requires leaders to understand what the interests of the family are as their family honour is entwined with the business. For the likes of Michael Dell, Ralph Lauren and the Ford Family the name on the placard is synonymous with their name. So this raises the issue of how the name of either is perceived in the community, which is essential for non-family leaders to remember on a daily basis. In the region, many of the family businesses have enjoyed accelerated growth and experimented with different models along the journey but it is important to remember that they are still mainly single investor/ owner models and this requires non-family leaders to make a leader shift in order to succeed.

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HE DEBT CRISIS in the Eurozone, centred on Greece’s inability to service its liabilities of around $500 billion, is moving at a rapid pace which – given its potential impact on the global economy – is no surprise and no bad thing. At the time of going to press, France

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and Germany were edging towards a deal which could possibly see the Eurozone’s rescue fund, the European Financial Stability Facility (EFSF), boosted to more than $2.5 trillion, the banking system recapitalised and the ‘haircuts’ required by Greek bondholders more severe than

initially estimated with rumours of 30-50 per cent being mentioned. Many analysts believe that if the Eurozone cannot find a way of stabilising its debt problems then a global recession is unavoidable. So what does all this mean for the nations in the Arabian Gulf? The damage of the last financial downturn in 2008-9 is still fresh in the mind – not least in those of Dubai’s property owners who saw the value of their homes more than halve in barely a year. The UAE and Kuwait both witnessed negative Gross Domestic Product (GDP) growth in 2009 of 1.4 per cent and 2.2 per cent respectively, while the world’s largest oil producer, Saudi Arabia, almost flat-lined as its economy grew at 0.6 per cent, according to BofA Merrill Lynch Global Research.

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Regional financial experts do not believe that a Greek default on its debts would have any immediate effect on the Gulf although Gary Dugan, chief investment officer, Emirates NBD, sees possible implications. “We don’t believe that the region has any significant exposure to any potential Greek default. The way in which a Greek default may impact the region is through an increase in risk aversion by international investors and a potential reduction in lending to the region by international banks.” The region has already been on the receiving end of a change of heart from investors following the last downturn. In 2008, Saudi Arabia enjoyed foreign direct investment of $39.4 billion but in 2012 the figure is projected to be barely a quarter of this at $10 billion, according to HSBC Global Research in its Middle East Economics Quarterly. Meanwhile, the president of Dubai flag carrier Emirates Airline, Tim Clark, said back in September he had noticed some French banks that had helped fund its aggressive expansion plans over several years were now less keen to be so forthcoming with loans. With hydrocarbon sales such an intrinsic source of revenue for the Gulf states, the fact that a global recession usually goes hand-in-hand with a drop in the demand for oil and thus, its price, is another major worry for the region. In July 2008, the oil price exceeded $145

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a barrel but by February 2009 it was hovering around $35 a barrel. A number of Gulf nations including Saudi Arabia, Qatar and parts of the UAE have established government-led strategic plans to utilise their oil profits in an attempt to ramp up infrastructure and diversify their economies. Paul Gamble, head of research at Jadwa Investment, feels these countries will tap into their reserves to keep these projects on track. “There’s nothing inevitable about the world falling into recession. It is far more likely that we are in for a period of low growth in the major global economies: emerging markets are still doing pretty well. “In the event of a recession, oil prices would fall, but the impact on government spending depends on how far they fall and how long they stay low. Regional governments generally have more savings than they did in 2008, and will draw on these savings to fund spending.” Gary Dugan thinks it is vital that governments keep on track with a number of commitments. “In our opinion we would counsel governments to increase not cut projects should the world face a downturn. As the region faces off to a global slowdown we believe the region’s governments will step in to help the economy by increasing spending to maintain good growth.” If the world does fall into negative growth, many eyes will once again turn to Dubai. The city, with its over-reaching construction projects and uncontrolled lending, was in the eye of the financial fire-storm in 2009 and even now, as it continues to lick its wounds and begins to move forward, it carries a heavy debt burden of more than $100 billion. This year’s Arab spring has brought in welcome unexpected revenue via tourism and investment. Paul Gamble is fairly positive about its prospects. “Dubai is definitely better placed now to absorb a further economic downturn. As we went into the 2008 recession parts of the Dubai economy – property, credit – were in a bubble. This time it approaches it from a much more sustainable position.” But there

could be further pain for homeowners. “If we do see a global slump it would put further negative pressure on Dubai property prices.” The country to suffer most in an impending recession is almost inevitably going to be Bahrain. One of the main hotspots of political unrest in the Arab spring, the island state has seen its hospitality sector decline 17 per cent in the first six months of the year and its GDP growth was 0.8 per cent in Q2 2011, according to HSBC Global Research. Bahrain’s full-year growth is forecast to be less than a third of the 4.5 per cent it managed in 2010. HSBC Global Research noted in its Middle East Economics Quarterly, “What concerns us now is that going into a global economic slowdown, Bahrain’s domestic problems remain unresolved.” With so many Western economies beset by debt worries and stifled growth, Gary Dugan thinks the Gulf states might look more to emerging powers to generate greater trade. “We expect the region to continue its ties with China and India and maybe accelerate them as the crisis in the G7 countries takes hold. However, in the very near term bear in mind that both China and India face their own problems of debt write-offs after their respective housing/lending booms. China and India face slower growth in the coming couple of years.” But one country in the region remains immune to the vagaries of the global economic landscape – Qatar. Its Q2 GDP growth was a staggering 41.8 per cent, year-on-year, as it reaped the benefits of its natural gas production and high energy prices. One theory doing the rounds is that sovereign wealth funds, such as those belonging to Singapore and Qatar, could be approached by the European Union in order to bolster the size of the EFSF. It was no surprise last month when media reports revealed that investors from the nation with the highest GDP per capita in the world are now circling around the various units of Belgian-French banking firm Dexia – one of the first casualties of the Greek debt crisis.

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N THE SECOND half of September, the International Air Transport Association (IATA) released a report containing its predictions for the state of the airline industry in 2012. Tony Tyler, IATA’s CEO, warned of “another year in the doldrums” and profits were estimated to slump almost 30 per cent to $4.9 billion, down from 2011’s better than expected $6.9 billion. With several major airlines scaling

back their own profit forecasts for 2011, in the wake of ongoing high fuel prices and sovereign debt crisis concerns, Tyler’s words might have had a few CEOs reaching for the sick bag. But one person seemingly not feeling the turbulence generated by the financial crisis developing in the Eurozone is Emirates Airline’s chairman and CEO Sheikh Ahmed bin Saeed Al Maktoum. At a time of severe economic uncertainty,

and with Dubai having suffered more than most in 2009’s downturn, Sheikh Ahmed has been hinting that his carrier will be announcing more aircraft orders at the upcoming Dubai Airshow. All airlines need new planes, in good times and bad, but when you already have almost 200 on order, including 90 Airbus A380 superjumbos with a list price of $34 billion, the brink of an imminent global recession might not be

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the best time to buy some more. Aerospace and Defence Practice, Frost & Sullivan, suggested an economic downturn could have an impact on Emirates’ fleet expansion plans. “Due to the sovereign debt crisis in the Eurozone, there could be a severe deterioration in business confidence which would affect the business travellers between Europe and the Middle East. The European market constitutes 27 per cent of total Emirates revenues for the year 2010-11 and is the second largest market. “Emirates’ massive fleet expansion plan may over-ride its capacity and result in the cancellation of orders or the airline may put them on hold in order to stabilise profit margins.” Emirates’ president Tim Clark recently spoke of the need to cut costs and he is well aware of the delicate global financial landscape. But he has been adamant that the Dubai flag carrier will move on with its bold expansion plans. A recent report by the Boston Consulting Group (BCG) ‘Middle East Megacarriers Gaining Altitude’ would have made happy reading for Clark. The airline is expected to grow at a rate of 9-12 per cent per annum over the next five years and become the largest operator of wide-body aircraft in the world by 2015. Indeed, the airline’s own annual figures show that it is making stellar strides forwards. It posted a 51.9 per cent spike in its profits for the year ending March 31, 2011, totalling $1.5 billion, while revenues increased by 25 per cent and passenger numbers by 14.5 per cent. John Scholle, senior economist at IHS Global Insight, believes Emirates can take any downturn in its stride. “I’m not concerned by their order book. Worldwide there has been a bump in orders generally. When any order is made, it takes time for them to come through so it gives an airline the flexibility to re-structure deals or even sell aircraft if necessary. “In the 2008-9 crisis, there was concern that demand for planes would fall but it didn’t become as big a disaster as some were predicting. Boeing and Airbus came through it pretty well and 2012 shouldn’t be as big a problem.”

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One of the biggest issues right now for Emirates, as well as every other airline, is the high cost of oil. IATA predicted that the average price for 2011 would be $110 per barrel and 2012 will see little relief with a current estimate of $100 a barrel. IATA also revealed that each dollar increase in the average annual price of oil costs an airline an additional $1.6 billion. “Little swings in the oil price can make a big difference,” commented Scholle. “But it is a double-edged sword. Oil prices fall because the general economy is in trouble and so there is less demand for air travel. In theory, if there was a sudden drop in oil prices which wasn’t connected to economic factors, that would be great for airlines.” Despite the volatility in the markets in recent weeks and months, the oil price has so far been quite resilient. But a full-blown economic downturn in some of the world’s most developed economies will surely see the price of oil fall significantly. If the world does slide into another period of negative growth, it may not be such bad news for Dubai’s flag carrier as it has some clear advantages over its competitors according to Frost & Sullivan. “The major Middle East carriers like Emirates, Qatar Airways and Etihad save costs on various parameters with minimal airport fees at their respective hubs and low personnel costs with no income tax on salaries in the UAE.

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“These carriers are also closely aligned to the national policies of their home countries making them well positioned to deal with major financial downturns and compete with more financially constrained airlines.” BCG’s recent report also forecast that Etihad Airways and Qatar Airways would be firmly inside the world’s top 20 wide-body carriers by 2015 as they accelerate with their own expansion plans. Etihad has just published its best Q3 results since commencing operations eight years ago, with load factors above 80 per cent, revenues up 39 per cent at $1.1 billion and passenger numbers up 18 per cent. These figures were posted within the context of the upheaval of the Arab spring and the mounting global debt fears. The BCG report does states that one threat to the relentless rise of the Gulf airlines comes from their need to maintain solid profit margins to pay for their aggressive expansion. It’s feasible that greater regional competition, including from low cost carriers, and the possible emergence of new airlines from the likes of Turkey, India and China, might dent their chances of filling their seats and ramping up their revenues. IATA’s Tony Tyler recently stated that the usual state of the airline industry was “crisis” but this has certainly not been the experience of the growing Gulf carriers. According to reports, Emirates could be set to order a further 30 A380s, as well as additional Boeing 777s to replace ageing planes with far more cost-effective aircraft and to help its aggressive push into markets such as the US, which it is targeting with its new superjumbos. John Scholle understands these growth plans. “Emirates’ expansion plans make sense to me. Look at the type of growing market they are serving and geographically the Middle East is a great spot for being a hub as you can fly anywhere. “The government backing also helps Emirates to plan more longer-term, giving it stability. Even if they have a few extra planes as the economy slows up, they can easily weather the storm.”

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HE UAE’S PARTICIPATION in the upcoming G20 summit in Cannes and its hosting of IRENA, the global clean energy body, are clear indicators of the country’s increasing global citizenship, said leading political figures at the third World Economic Forum (WEF) Summit on the Global Agenda in Abu Dhabi last month. Around 800 leading experts in academia, business and government convened in the UAE capital to discuss new models for the world’s most pressing challenges, including public debt, climate change and food security. “The scale of today’s political and economic challenges are outstripping capabilities,” warned UAE minister of economy, Sultan bin Saeed Al Mansouri. “New methods for international co-operation are needed and emerging economies need to be recognised more within the existing system.” The continuing uncertain global economic outlook could drive a wedge between international interests if left

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unchecked. Unstable financial markets combined with rapid globalisation and technology uptake are all new factors stoking the need for urgent global conversations. The rise in global wealth has led to a richer world for many, but many more millions are poorer than ever, explained WEF founder, Klaus Schwab. “There is a global inequality. We must rethink our global competitiveness strategy because we need to address the quality of economic growth. Velocity and country interconnectivity have become so complex at the tipping point that the whole system may collapse. We need new models to survive. The great recession has blinded us to the great revolution,” said Schwab. In addition to increased connectivity across countries and continents, globalisation has been paralleled by a shift in power towards the East, as China continues on its incredible growth trajectory and the US buckles under debt pressure and stagnant jobs data. In the last century, global production

and consumption was heavily weighted to the West, but recent years have seen a dramatic shift as the BRICS consume and produce more global resources than ever before. Gordon Brown, former UK Prime Minister, said: “Only 40 per cent of the world’s production output is in the West, and only 43 per cent of investment goes to the West. The world is changing very fast. Producers and consumers must work together at this historical juncture.” The prolonged indecision on Europe’s debt woes has also set the stage for mistrust and a need for increased global co-operation. Speakers at the WEF urged against a dangerous precedent of protectionist policies, as Brazil introduced import tariffs and several countries implemented currency interventions, against a background of failing Western banks. “Europe is at the epicentre of today’s crisis; it has fiscal, banking and growth problems and the Euro will not survive. The European Central Bank will have to work to find a solution – what happens in one continent affects another,” added Brown. In a recent WEF poll of 1,500 CEOs and academics, less than 10 per cent of respondents expressed confidence in the state of global governance over the next 12 months. The world urgently needs to rebuild trust in leaders, government systems and among countries if the international community is to shape new models to solve global challenges. “Politicians need to garner enough courage to overcome ‘short-termness’ and bias to take long-term structural reform measures,” explained He Yafei, ambassador and permanent representative of China to the UN. The new insights gained at the Abu Dhabi forum will help to shape the agenda of the WEF annual meeting in Davos-Klosters in January next year.

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AUDI TELECOM COMPANY (STC), the country’s biggest telecom operator, is scouring for acquisition targets in the Middle East and Asia and plans to continue to invest in data technology to help beef up its revenue, a senior company official told Gulf Business. The firm, which has operations in 10 markets, is assessing the current

economic climate before investing in new assets or seeking expansion, said Ghassan Hasbani, STC’s CEO of international operations. “We are waiting until the economic situation becomes clearer in the next few months, that will result in a path on decision making in certain acquisitions and expansions because the global economy now is uncertain,” said Hasbani in an interview in Dubai. STC, which has mobile, fixed line and internet operations, was bidding for the third mobile license in Syria, but the process was halted by the government, which is busy battling demonstrations against President Bashar Al-Assad. STC, majority owned by the Saudi government, has over 140 million

subscriptions in mobile and fixed line. Besides Saudi Arabia, the firm operates in Bahrain, Kuwait, Jordan, Lebanon, Malaysia, Indonesia, Turkey, South Africa and India via its licenses, units and stakes, according to its website. Indonesia, India, Bahrain and Kuwait are some of STC’s fastest growing markets, according to Hasbani. In Saudi Arabia, STC competes with Etihad Etisalat, a unit of UAE’s Etisalat, and Zain Saudi, a unit of Kuwait’s Zain. STC generates nearly a third of its revenues from its international operations and is planning to raise the percentage to 50 per cent in the next three years, Hasbani said. “Every single country in the Middle East has the potential for a new

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license or for an existing company to sell its assets; the question is when and at what value,” said Hasbani. “There aren’t any processes that are alive today.” STC’s second quarter net profit rose nine per cent to 2.25 billion Saudi riyals from a year-earlier period. The firm attributed the increase to “strong growth” in fixed line and mobile domestic broadband and higher revenues from international operations. Telecom operators across the Gulf region are venturing beyond their home turf due to high penetration levels, which in some countries exceeds 200 per cent. Subscriptions in Saudi Arabia are forecast to rise by 37 per cent to reach almost 73 million by the end of 2016, from 53 million in 2011, according to Informa Telecoms & Media. Saudi Arabia’s current population is around 25 million. That’s why operators such as STC and UAE’s Etisalat are pooling investments into boosting their networks for data coverage to carve a bigger piece of the telecom pie. According to STC’s six-month income statement, net revenues from data services stood at 3.46 billion riyals or 13 per cent of the 26.9 billion riyals in net revenue from total services. “Income will remain voice-dominated for quite sometime, let’s not overrate data as such,” said Hasbani. “Everywhere, voice is the biggest revenue generator, but data is growing very fast and more data usage on the network also supports voice usage.” The increase in smartphone sales in the region is helping boost data usage. Saudi Arabia is the second-biggest market for BlackBerry smartphones after the UK in the Europe, Middle East and Africa region, according to Patrick Spence, managing director, global sales and regional markets at BlackBerry’s manufacturer, RIM.

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But data usage in the Middle East region as a whole remains low compared to other regions, and will take time to reach the levels enjoyed in developed markets. “The (low data revenue) figures could be skewed by relatively high voice prices. Other mobile broadband prices are also still high, which could be a disincentive

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for people to take that particular type of services,” said Mathew Reed, senior analyst at Informa in Dubai. Keen to cash in on the smartphone trend, STC, Etihad Etisalat and Zain Saudi have scrambled to launch the high-speed mobile network service known as longterm evolution (or LTE) in Saudi Arabia. However, STC does not expect the LTE investment to return a quick profit, given the infancy of the technology in the region and lack of proper infrastructure and handsets. “We do have plans for LTE in other markets, but we are taking it market by market, depending on demand and depending on availability of spectrum for LTE,” said Hasbani. “It is going to be two years before LTE gains the status of wide market acceptance that is driven by the wide availability of handsets, and wide acceptance of applications.” However, Reed warned: “To continue to maintain their position and grow does requires a lot of investment in new technology and networks. But it can take some time before those investments pay off because the uptake of some of these new services is going to be small in the short-term or even medium-term.’’ Informa is forecasting Middle East LTE subscriptions will rise to nearly 14.6 million by 2016 from 96,400 in 2011. “A lot of video traffic is eating up capacity while ARPU (average revenue per user) is waning as competition increases,” said Hasbani. “We are not in the business of simply building dump pipes to carry data traffic cheaply or for free. We are approaching it from smart services, where we create classes of services for data usage, that allow everyone to have access to everything, but also allow people who want a better experience to pay more for that experience.”

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INCE ITS LAUNCH in 2009, the Formula One Etihad Airways Abu Dhabi Grand Prix has been a huge success, drawing hundreds of thousands of visitors to the capital and elevating Abu Dhabi’s strength as a global hub. Abu Dhabi tourism figures showed strong indicators of growth during November 2010. “Abu Dhabi Airport Company reported a 16 per cent increase in arrivals at Abu Dhabi International Airport in the week leading up to the 2010 F1 race and a 17 per cent increase in arrivals at Al Bateen Executive Airport in the days before the race,” said Lawrence Franklin, strategy and policy director at Abu Dhabi Tourism Authority (ADTA). “Our accommodation statistics

point to the substantial impact of the race and other activities in the month of November last year,” he said. “Abu Dhabi hotels recorded a 22 per cent increase in occupancy to 75 per cent, a 23 per cent increase in room revenue and a 35 per cent increase in food and beverage revenue. The total guest arrivals for the year of 2010 were 1.8 million.” ADTA is confident that it will also see higher numbers this year. “We expect the town to be full again in 2011 with very strong ticket sales. Abu Dhabi Tourism Authority has a stretch target of achieving two million hotel guests in 2011. We are on track to achieve this figure by recording a 13 per cent increase year-on-year (January to August 2011

versus 2010) in hotel guests up to 1.34 million,” said Franklin. The entertainment industry has geared up in a big way with a dynamic line-up of events to be held on the Abu Dhabi Corniche, the beachfront and across the city in schools, universities, shopping mall and hotels. Flash Entertainment, the Abu Dhabi based event management company has put together the “Yasalam” programme, which culminates in three nights of postrace concerts featuring Britney Spears, The Cult, Incubus and Paul McCartney. “The 2010 event saw a huge turnout of over 500,000 visitors to the events that we held and that included the movie nights, the concerts on the beach and the concerts on Yas Island. We hope that with more awareness and the given history of the race, it will attract even bigger numbers this year,” said John Lickrish, managing director at Flash Entertainment. “Compared with other events, such as the Guns n’ Roses and Shakira concerts that saw an audience of around 20,000 plus, Formula One is

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a high profile event in itself. But the surrounding activities and free events mean that it’s easy to get most of the people on the island to come to the show. It’s possible to see a 30 to 40 per cent increase in [standard] audience numbers,” said Lickrish. Hotels and clubs rev it up as the F1 weekend fuels demand for after race parties and activities. The star-studded shindigs, ultra-chic club bashes and cocktails parties pull in the big spenders. “If you go by which celebrities and high rollers we have had in Amber Lounge in Abu Dhabi previously, Hugh Grant came to both nights last year, Steve Tyler and Nicole Scherzinger the year before, and this year alone, Kim Kardashian, Jason Statham and Princess Beatrice partied in Monaco. It shows that any celebrity in town chooses Amber Lounge as the place to be post race,” said Sonia Irvine, founder of the high-end Amber Lounge hospitality nights. The club, established as one of the world’s most exclusive party venues following the Grand Prix series across the globe, will host its race weekend parties at a brand-new venue on Yas Island at The Links Golf Club. Events and parties aside, the F&B and hospitalities industries also claim a sizeable chunk of revenues. ADTA statistics showed that hotel occupancies were unusually high during the period. For November 2010 average occupancies were 75 per cent, indicating that during the race period many properties’ occupancies were operating in the high 80s. Giuseppe Cipriani, CEO and president of Cipriani restaurant said: “During the F1 period there is a substantial influx of international guests who fly in from all over the world. The hotels on Yas Island are already full booked, and being central to this F1 craze, Cipriani witnesses quite a large footfall over this period. We believe our customer base will increase by over 100 per cent given the bookings we have already received.” The capital’s city-centre hotels are also primed for a busy season with many of Abu Dhabi’s venues expecting to see full occupancy rate. “With the build up directly following the end of summer and Ramadan, and leading into

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the fifth annual Abu Dhabi Film festival (as official headquarters), the Formula 1 and sponsorship for the Mubadala World Tennis Championship in December, we anticipate very high occupancy until the end of the year. Formula 1 bookings are typically made one year in advance and reach sold out status in a matter of a few weeks,” said Henning Fries, regional vice president and general manager of Fairmont Bab Al Bahr, Abu Dhabi. The significance of the F1 race goes well beyond the direct revenue of the event itself. The high-profile race gives the emirate global visibility and is a key element of its marketing strategy. “It’s a tremendous opportunity to showcase the best of Abu Dhabi to the world. You get a sense of it by just looking at the numbers,” explained Duncan Daines, executive director at Brash Brands. “In a season approximately 600 million people watch Formula One (2010). Each race lasts no more than two hours, with most networks stretching it close to three with the pre-race build up. Add another 90 minutes for qualifying and then live streaming of the practice sessions and you have an unbelievable opportunity to showcase a destination to a mass audience. If this were commercial media space, it would be worth billions,” said Daines.

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N 1900, THE Ottomans began work on a 1,320 kilometre Helaj railway to help pilgrims travel across Syria, Jordan and Saudi Arabia. Labourers grappled with inclement weather and eventually created a network that later became a vital route for ferrying Ottoman soldiers and weapons during World War I. Today there is a sense of déjà vu as the

kingdom’s construction giant, Saudi Binladen Group, flexes its engineering expertise as one of the contractors for a new 2,400 kilometre North-South railway across the Kingdom’s terrain. Saudi Railway Company (SAR), the government company created to build the North-South line, is looking at transporting 100 million tonnes a year

of freight. Just as the famous Hejaz line was ostensibly built to aid pilgrims, but eventually became an indispensable route for carrying goods and weapons, freight is set to eclipse passenger services in the Gulf. While Saudi Arabia may be the only Gulf country with a railway history, the kingdom’s neighbours are now

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embarking on a series of formidable projects that are set to transform the region. In the UAE, Etihad Rail is spearheading a $10.9 billion project, with the first phase of the initiative targeting the transfer of granulated sulphur from the Western Region to Ruwais port for export. Over the next two decades, Etihad Rail expects to transport up to 50 million tonnes of freight per year. Meanwhile in Qatar, the $35.7 billion integrated rail plan is mostly geared towards meeting FIFA requirements in the run-up to the country’s hosting of the 2022 World Cup. “Everybody in the Middle East is talking about freight. If you have large volumes over longer distances, then trucks will lose and trains will win,” said Arash Aghdam, director of rail and transit transportation Middle East at engineering and design firm AECOM. Companies that have long relied on lorries to ferry their goods from ports to cities will now be presented with a new mode of transport thus far untested in the region, except in Saudi Arabia. The basic argument is that if the distance is too short, companies may not yet be persuaded to shift to railways. “It requires a paradigm shift because people are not used to this means of transportation, so it will take some education. It is very challenging for railway investors to compete with trucks and we are facing issues with many business owners. As a government company, we are trying to make it attractive and give incentives for people,” said Rumaih Al-Rumaih, the CEO of SAR, at a MEED rail conference in September. SAR began commissioning the 1,400 kilometre mineral line of the North-South railway in May and is currently working on three other sections: connecting Ras Al-Khair industrial city to Jubail industrial port city; linking Jubail to Dammam; and the internal network

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inside Jubail. SAR is currently in talks with SABIC, Saudi Aramco and agricultural firms such as Al-Marai to persuade them to use its network for freight, Al-Rumaih said. “We are very close to finalising a memorandum of understanding with Saudi Aramco; crude oil is not in the early discussions, but the refined products, the diesel and benzene,” the CEO added. In the UAE, state-owned Etihad Rail will begin construction this year, with the national network going live initially by 2013. The first stage will be developed in partnership with ADNOC, the staterun oil company of Abu Dhabi, with the aim of transporting granulated sulphur. “We have already signed agreements with major national companies here who aim to use Etihad Rail as their main method of transportation, such as raw and finished materials of Emirates Steel and granulated sulphur of ADNOC,’’ said Etihad Rail CEO Richard Bowker at the conference. “We are not just building a railway, we are actually building a railway business that we intend to be competitive in.” The second stage of the project will

link Abu Dhabi to the port at Jebel Ali and Dubai, while the third stage will complete connection to the rest of the Northern Emirates. As ponderous as the projects in the UAE and Saudi Arabia may be, they are surely not as logistically complicated as those in Qatar – the tiny Emir state is building a people-mover, a light rail transit, a high speed network for passengers and freight, four metro lines and a railway track on the proposed causeway connecting Qatar to Bahrain. Although not all the Qatar sections need to be finalised by the 2020 FIFA deadline, the majority of the project will need to be ready in order to ferry fans in and out of the World Cup stadiums. Qatar Railways Company (QRC), which was set up by the government to carry out the project, expects construction to begin next year. “The biggest challenge in Qatar is going to be building a railway, while at the same time building a new road network, stadiums and hotels,” said Geoff Mee, QRC deputy CEO. “The logistics are scary. We are going to bring central Doha to a standstill.” Although the integrated rail system is an essential part of preparations for 2022, Qatar will also be gifted with a giant railway system that will need to be filled post-event. With a current population of about 1.6 million, Qatar is counting on population growth data to support its target of one million passenger journeys daily by the time the network is finished. As for freight, Qatar’s prospects will very much depend on the outcome of projects in neighbouring countries. “Freight is heavily dependent on the links to the GCC (Gulf Cooperation Council),” said Mee. “The network needs to connect to something. A railway that just stops at the Saudi border isn’t of any use to anybody.”

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HEN NAIF AL-MUTAWA LEFT New York just over a decade ago, little did he know that he would create a global success story with The 99, his comic book series inspired by Islamic archetypes. References to his characters even made it into one of US President Barack Obama’s speeches and the debut The 99 feature film showed at the New York Film Festival last month. “When I started the idea I gave it global legs, but [I didn’t imagine] this would be something the US President would talk about,” said Mutawa, a Kuwaiti clinical psychologist who quit his job working with survivors of political torture at Bellevue Hospital in New York and began his animation business in 2003. In 2010, Barack Obama commended

Mutawa’s The 99 for its innovation and outreach to the Western world in a speech on entrepreneurship. The comic’s characters, which are based on Islam’s 99 attributes for God, joined forces with DC comic superheroes in an issue published in 2010. “He [Barack Obama] reached out to the Muslim world, in return, my characters reached back to Batman, Superman and Wonder Woman to implement his vision in the fictional world,” said Mutawa, who is the chairman of Teshkeel Media Group, the company behind the series. Mutawa’s comic book series has now been turned into a theme park in Kuwait and his cartoon series will be broadcast in the US, Middle East, Asia and Europe on various channels and in several languages. Mutawa’s crossover success could soon be followed by other productions emerging from the Arab region, which has long suffered from a shortfall of original creations sourced from the local culture and themes.

A more internet-savvy population, rising interest from Arab television stations and the internet-linked Arab revolution are fuelling the animation industry to evolve into something bigger than just an amateur idea. Animation created by Arabs is increasingly featured on stations such as MBC and on websites. Dubai TV’s Freej series, revolving around Emirati women, has also grown into a business, with merchandise and events. Jordan’s Kharabeesh, which means scribbles in Arabic, sees limitless potential for Arab animators to create a market for unique content that appeals to a pan-Arab audience. Wael Attili, the co-founder of Kharabeesh, believes the Arab spring is galvanising the spread of animation online and on television. “Political issues always cross borders and Arab people are very much politicallycharged, especially these days,” said Attili. “If you go to the mainstream media, they will say this will not work and they will judge you before you experiment. They have templates you have to talk about – love and hate and marriage and divorce.” Kharabeesh’s animations spoofing prominent Arab figures, such as Libya’s ousted leader Muammar Gaddafi’s style of speech, are among the most popular on its website. The pressure from people on the street to have more relevant material on television is pushing stations to change their tactics, although the usual staple of Turkish soap operas and other shows will continue to dominate. However, investors in the region are seeing a growing business in animation. Kharabeesh has attracted cash from MENA Venture Investments, while the UAE’s private equity firm Abraaj has led the third round of financing for Mutawa’s Teshkeel. This interest is giving hope to Arab animators to develop their passion into a profitable business that resonates with the Arab population and beyond. “My dream for Kharabeesh is to make it a complete entertainment network, based on multi-platform new media,’’ said Attili.

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AE CONTRACTOR DRAKE & Scull International (DSI) has set its sights on Asia through acquisitions and expansion, and expects to exceed its revenue target in 2011 as the Gulf governments’ spending spree beefs up the company’s backlog. The property market crash in the UAE, where prices plummeted by more than half since 2008, prompted the company to expand into key markets such as Saudi Arabia and snap up assets in key Gulf countries. Although the UAE accounted for almost all of DSI’s work before 2008, now Saudi Arabia represents about 47 per cent of the company’s backlog, followed by the UAE with 27 per cent, mostly in Abu Dhabi, and the remainder in MENA. The company has opened an office in India to gain a foothold in the flourishing

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Asian market and is scouring for targets in countries including India, Sri Lanka, and Indonesia. “We have done all the acquisitions we want to do in the Gulf area and the Middle East in general,’” said vicechairman and CEO Khaldoun Tabari. “We believe Asia is the future. However, for this year and next year, we are not going to make a big breakthrough. It is difficult and it is going to take some time.” DSI, which is currently bidding for projects in Saudi Arabia, Qatar, Egypt, Djibouti, Sri Lanka and others, hopes to reach a backlog of Dhs10 billion by the end of this year, up from Dhs7.5 billion from June this year, he said, but current market conditions may push that target to the first quarter of 2012. The company, which posted a 25 per cent rise in second quarter net profit from

a year-earlier period, believes the fourth quarter will be significantly higher and this year’s best due to KSA market growth and the impact of its acquisitions. The engineering firm expects to exceed its forecast of a 25 per cent rise in revenue this year from last year and is also looking further afield. “Five years from today, I would like Drake and Scull to have an office in Africa. It is an under-developed continent with a lot of money,” said Tabari. The firm is bullish about the Gulf region, Egypt and the potential in markets such as Algeria and Morocco, despite the impact of the Arab upheaval on its business. In Libya, DSI had opened an office and was expecting to win work prior to the revolt, while in Syria the company has halted a project in Homs. Meanwhile. Libya’s uncertain future could also cloud any potential work. “We are waiting to see what happens in Libya,” said Tabari. “The problem with a public shareholding company is that results are quarter-to-quarter and the longterm plan is usually affected by quarter-toquarter results. We have to be good every quarter and can’t afford to just wait.” The company is unlikely to tap the bond market anytime soon, although the firm had discussed the possibility earlier. Banks, which have been reluctant to lend since 2008, are opening up for business due to prodding by governments and central banks, who have stepped in to stimulate the economy. “If you put a bond in the market, not many people will buy it. Right now the cheapest way is to go to the banks,” said Tabari. While vast government spending, a pick up in economic growth and the easing of lending is helping the construction industry back on its feet, the days of fast money are over. Although most governments in the region are flush with oil money, they are not rushing to finish projects, which means income will take time to show up on the balance sheets. “Instead of not having the money to pay, at least they are spreading it over a long period of time. But now the same amount of turnover is taking longer to produce,” said Tabari.

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he region has reeled from a breathless seesaw of economic activity over the last few years. High market activity in 2009 was followed by a relatively quiet and positive 2010, only to be followed by more turmoil and high market fluctuations this year. This year has witnessed everything from natural disasters to ongoing financial shocks – from the Eurozone, to GCC debt issues and the US downgrade – in addition to political unrest. After rising 13 per cent during 2010, the S&P GCC Composite is down 11 per cent so far this year, for reasons not entirely corporate

or economic in nature. The substantial political turmoil that swept the region in the first and second quarters had a high impact on markets, with Arab bourses shedding roughly $45 billon in the last week of January. Unsurprisingly, Egyptian unrest exacted a particularly large impact given the country’s strong ties with GCC companies. Year-to-date, unstable Bahrain has been the worst performer, down nearly 19 per cent, while Qatar has been the best performer, stemming its losses at around five per cent. Liquidity has fluctuated wildly this year; 9M11 value traded came in at $254

billion, 11 per cent higher than 9M10, driven by strong trading in Saudi Arabia and Qatar, while Kuwait saw its trading value halved during the period. The GCC is trading more expensively than Emerging Markets, at 12x (TTM) versus 10x for MSCI EM, which places the region on par with the MSCI World/S&P 500, which are trading at the same level. Within the GCC, there is wide disparity between valuations; Kuwait is the most expensive market, trading at around 14x versus Abu Dhabi and Dubai, which are at around 8x. However, the GCC has a history of strong dividends; overall, the dividend yield is at 3.5 per cent, slightly

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higher than MSCI EM and MSCI World at three per cent.

;<9K D8IB<K Much attention has been paid to the development of regional bond markets, with Qatar and the UAE leading the way towards creating organised markets with benchmark yields and pricing guidance. With banks tending to the short-end of project financing, GCC states need to develop avenues for long-term funding to support large-scale infrastructure and development projects. Bond issuances totalled $26.4 billion in 1H11 compared with $14 billion in 1H10.

lending. The fiscal balance is expected to drop from 11 per cent of GDP in 2011 to two per cent by 2013 as spending grows at about seven per cent p.a. Real GDP is expected to grow 6.5 per cent in 2011 (boosted by high oil prices) only to fall to about 3.6 per cent in 2012 (IMF Data).

BLN8@K I<>LC8KFIP I<=FID 2011 has been all about regulatory reform for Kuwait. The Capital Market Authority (CMA) Law came into effect in March, which had a fairly negative effect on markets as the various concerned parties interpreted and commented on the

K?< IF8; 8?<8; There are too many unknown variables to allow specific insight into market performance over the next year. Lending seems to slowly be inching its way back, boosted by a high degree of public expenditure and development programmes, while provisions are coming down thus freeing up bottom line growth for banks. For telecoms, second and third operators seem to be better picks as they continue to grab market share from incumbents – a notable exception to this is Qtel, where acquisitions are bumping up top line growth. Industrials and petrochemicals continue to perform well on the back of high commodity prices, a trend that may be reversed in 2012 if the US and European economies continue to contract and, therefore, dent demand.

J8L;@ 8I89@8 JG<E;# JG<E;# JG<E; The kingdom has launched a spending spree to boost infrastructure in the face of rising demand as well as ratcheting up social welfare spending to counteract unrest and unemployment. The $385 billion, five-year development plan is expected to spur economic activity by encouraging construction/real estate projects which, in turn, should spur bank

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regulations. The market has also been consumed with the various Zain deals; the telecom company was subject to a proposed 46 per cent stake acquisition by the UAE’s Etisalat (who walked away from the deal in February), this was followed by a proposed acquisition of Zain’s 25 per cent stake in Zain Saudi by Batelco and Kingdom Holding for $950 million (that deal also dissolved in late September). Overall, the Kuwait market has reacted mostly to local cues rather than regional or international ones.

L8< I<:FM<IP 8E; FGGFIKLE@KP The UAE has focused on repairing its image in the international community following the Dubai World debt saga and subsequent restructurings and bailouts. While Dubai’s debt overhang remains high (with $15 billion due in 2011 and 2012), foreign investors have proven themselves willing to particpate in debt restructuring in addition to the various bond issues by the emirate’s entities. While the real estate segment is not yet back to its former health, it is now in a period of consolidation. Moreover, regional political unrest, specifically in Bahrain, has given rise to opportunity for the UAE, with hotel occupancy up at the beginning of the year and some foreign entities relocating their offices from Bahrain to Dubai.

H8K8I JK89@C@KP 8E; >IFNK? Qatar has managed to almost entirely bypass the global financial crisis and remains firmly on its growth trajectory. Real GDP growth is expected at 19 per cent for 2011 (IMF Data). Investment has remained steady at around 30 per cent of GDP while government expenditure has been growing at 15 per cent a year, surging to 24 per cent in 2010. Qatar Central Bank has made a number of directives and regulatory changes to safeguard the banking sector. Qatar is going full-steam ahead with spending plans; epitomised by the $125 billion, five-year National Development Strategy, which aims to expand infrastructure and boost the hydrocarbon sector. Qatar is also planning to invest around $25 billion in tourism over the next decade in preparation for the 2022 World Cup, the majority of which will be in hotels, in addition to the Summer Olympics in 2020 which the state is also planning to bid for.

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J<:KFI =F:LJ 98EBJ Banks continue to be the bedrock of GCC markets, accounting for the majority of market cap and corporate earnings. Lending has remained muted over the last few years as banks became cautious in the aftermath of the financial crisis and the resulting sovereign debt issues in 2010 dampened confidence. Broadly speaking, GCC banks have upped provisions over the last two years to counteract rising non-performing loans, which are hovering at around six to eight per cent. However, a turnaround seems imminent for the sector; 1H11 net income for GCC banks was up 20 per cent while provisions were down 18 per cent. Deposits continue to outpace loans, rising 10 per cent in 1H11 (YoY) versus a six per cent growth in loans. K<C<:FDJ Revenue growth remains weak for regional telecoms as markets surpass saturation points, competition intensifies and ARPUs decline. All GCC markets exceed 100 per cent mobile penetration, with differentiation now coming in the bundling of various services in addition to the broadband segment, which should continue to see positive growth due to the myriad smartphones and tablets that

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are coming to market. Many of the larger firms are flush with cash and have been looking for acquisition targets to boost revenue growth, a practice we expect to continue as competition intensifies. The region’s telecom firms, in general, constitute excellent yield plays, averaging about five per cent.

KFG K<EJ Most stocks have performed poorly in 2011 due to wild market fluctuations, economic uncertainty and political unrest. Consequently, all but two large caps are in the red on a YTD basis. The only gainers for the year have been SAFCO and Qatar National Bank, which are up 16 per cent and six per cent, respectively. 9P D8IB<K :8G There was a bit of a shake-up in terms of rankings by size among GCC stocks. The top two remain the same; SABIC at $74 billion (as of September 2011) followed distantly by Al Rajhi Bank at $27.7 billion. However, the third ranking has been usurped by Qatar National Bank, whose market cap surged to $24.9 billion from just under $20 billion at the end of 2010 due to a 25 per cent rights issue in early 2Q11. Also notable is Zain Group, which fell from third place at the end of

2010 to tenth place by September 2011 as the stock took a beating in 2011. 9P I<M<EL<J Chemicals and utilities had a good showing on the back of high commodity prices and market uncertainty in the first half of the year. SABIC retained its top position, bringing in $25 billion in revenues in 1H11 as oil prices soared. Furthermore, seven of the top ten firms are from Saudi Arabia, while the UAE has a showing from two firms. Telecoms also did well, as four of the top players in the sector saw high revenues. 9P <8IE@E>J Chemicals also reigned supreme in terms of bottom-line results; SABIC and Industries Qatar turned in a combined $5.3 billion in net profits for the half year. The remaining eight firms were evenly split between telecoms and banks with Kuwait’s Wataniya taking third on account of extraordinary earnings in 1Q11. Wataniya was also the only Kuwaiti firm to make an appearance; the remaining slots were divided between Saudi Arabia and the UAE. Qatar National Bank was the highest earning GCC bank, with net income of $966 millon in 1H11. 9P C@HL@;@KP Given the trend in liquidity in 2011, Saudi Arabian firms topped the list of most liquid stocks, taking all top 10 spots. SABIC ranked first, with $31 billion traded in 9M11, followed distantly by Saudi Kayan Petrochemicals at $9.7 billion. The majority of trading was in industrials/chemicals, followed by banks and telecoms.

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or a man regularly named in the various rich lists of Forbes magazine, Khalaf Al Habtoor, the UAE national businessman at the head of the Al Habtoor Group of companies, certainly has an office that hints at his status. His anteroom, bedecked with golden wall paper displaying an exotic ancient map of the world as well as a giant flat screen TV, could comfortably accommodate a plethora of waiting business executives, while the spacious office itself with its classic, yet imposing, furniture exudes a sense of statesmanlike authority. Despite these suggestions of grandeur, Al Habtoor’s HQ is in a comfortable mansion on a predominantly residential street in Dubai and, as we commence our discussion, he advises me that he will soon need to go and say his prayers. A short while before, Al Habtoor was holding a press conference to announce the resumption of his group’s hotel project on the Palm Jumeirah following its suspension during the 2008 economic downturn. The property, which is scheduled to open at the end of 2013 and will cost a total of Dhs1 billion, will be known as the Waldorf Astoria

Dubai Palm Jumeirah following a tie-up with Hilton Worldwide. The deal will see the Waldorf Astoria name enter the Dubai hotel scene for the first time. The agreement will also include Hilton re-branding two hotels owned by the Al Habtoor Group in Beirut. Al Habtoor has always been outspoken and passionate in his views, as exemplified by his occasional criticism of US foreign policy, but on this day, his ardour was directed at talking up Dubai’s prospects. “The benefit of this investment for the country is that it is great for the economy. A lot of people are benefitting – this provides for the contractor to hire a lot of people to work, catering providers, utility suppliers, water, electricity and sewerage facilities – all of this is government related, and with the government directly benefitting.” For Al Habtoor, the re-launch is not just a business decision but a clear sign that Dubai is on its way back. “My hope from this announcement is to send a strong message to investors who are hesitant to renew their faith in my country. Our commitment to the country’s growth and improvement is our priority.” Al Habtoor used the press briefing to urge the UAE government to follow his group’s lead and to forge ahead with

vital infrastructure building projects “from the border of Oman to the borders of Saudi Arabia and Qatar”. The Palm Jumeirah has had unfortunate media coverage on occasion due to its scrapped or delayed real estate projects and stories surrounding its debt-laden developer Nakheel, but Al Habtoor only sees opportunity in the man-made island. “The economic crisis affected not only The Palm and its developers, but the rest of the world. Just recently, the US itself was close to default. But this is no longer the issue. The Palm is a unique project, engineering-wise, there is nothing like it and it will be a landmark in Dubai.” But with real estate investment and advisory firm Jones Lang Lasalle (JLL) predicting that around 12,500 further hotel rooms will open in Dubai by 2013, and the Palm Jumeirah already seeing several high-end brands like Jumeirah, Kempinski and One & Only moving in, does the city need another five star hotel? “Look at the number of visitors coming to the country, it is increasing every year. As long as you have a prime site and professional management then you have a good opportunity. I admit there are some hotels now in Dubai which are in a difficult location, such as in Deira, or do not have enough quality in their facilities

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which will suffer when more rooms open.” Business Monitor International stated that Dubai’s hotels enjoyed occupancy levels of 81 per cent in Q1 2011, while JLL revealed that, over the same period, the city’s hotels had received 14 per cent more guests year-on-year. These figures seem encouraging, but with the world seemingly facing up to another period of economic hardship, is now the right time to commit more than $250 million to the hospitality sector? “There are two things that people do – one is eat and the other is education. I’d say the third priority after this is to visit a hotel and take a holiday. Dubai is a very safe destination and for that reason, people will come here. “Our room rates are also very cheap. You go to Istanbul and it’s 500 Euros a night, Paris is 1,000 Euros. You can find some hotel rooms here for $50 a night.

So, a cheap destination, security, it’s well protected – what else do you want?” Al Habtoor’s portfolio of companies comprises a host of other industry sectors including engineering, automobile distribution, real estate and education. Earlier this year, the engineering arm, the Habtoor Leighton Group (HLG), required an injection of $272 million from its Australian parent due to write-downs and delayed payments. Al Habtoor was quoted as saying the firm needed around $1 billion on its operational side for its GCC operations. He admits the collapse of the real estate sector in Dubai took its toll. “The slowdown had the same effect on us as it did on other large companies. A lot of really huge projects in our portfolio were cancelled and, also, we have experienced non-payment from clients – not only from Dubai but other parts of

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the GCC. Leighton Holding, the major shareholder, is executing everything and trying to sort it out.” Nevertheless, HLG has won a number of significant contracts this year, including several in Abu Dhabi, and just recently it was awarded a $290 million deal for a mixed-use shopping mall and office project in Doha. Indeed, Qatar is a market that HLG might look increasingly towards as it is part of the Advance Rail Group, which has linked up with Spain’s Dragados, to seek out railway contracts across the region, with the Doha Metro a major target. Dubai took a mauling in the crisis of 2009 and global markets are now once again on high alert as sovereign debt crises threaten to engulf the world’s major economies. But Al Habtoor remains resolutely optimistic and he predicts double digit growth for his group in 2011 thanks largely to his automotive and hotel businesses. “You have to be positive. I look at Dubai as a jewel and a safe haven for any investor. If you cannot be positive, you die.”

CAN QATAR DO ANYTHING WRONG?

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osting the 2022 FIFA World Cup is not enough for Qatar. Its ambitions are out of this world – literally. For even as the country was rejoicing at the great honour of hosting the world’s most prestigious football tournament, a Qatar-led team was discovering a planet 500 hundred light years from Earth and 20 per cent larger than Jupiter, fittingly naming it Qatar-1b. “The discovery of Qatar-1b is a great achievement – one that further demonstrates Qatar’s commitment to becoming a leader in innovative science and research,” says Dr Khalid Al Subai, leader of the Qatar Exoplanet Survey and research director at the Qatar Foundation. The inter-planetary discovery late last year offers a great insight into the tiny state’s larger-than-life ambitions and how it sees itself among the league of .' & EFM<D9<I )'((

nations: a leader. Back here on Earth, the Qatari economy also appears to be in a parallel universe, posting 16 per cent growth in each of the past four years, and it is set to grow at an astonishing 21 per cent this year, even as Wall Street analysts warn about an impending global economic depression. Qatar appears to benefit from a unique set of circumstances that has made it immune to many of the trials and tribulations of the global economy. Sitting on the third largest gas reserves in the world, with a local population of a mere 238,000, Qatar’s investments in its natural gas fields in the 1990s are paying tremendous dividends. Its gas production has risen 21 per cent on average for the past four years at a time when Asian oil consuming countries are looking for alternatives from expensive oil shipments.

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The country’s natural gas production has risen from around 19 million tonnes per year in 2000 to 119 million tonnes by 2010. Not surprisingly, oil and gas revenues have doubled over the past four years alone, from $32.3 billion in 2006 to $65.9 billion by 2010. According to the Qatar National Bank (QNB), these figures are expected to

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believes prospects for Qatarâ&#x20AC;&#x2122;s gas sector remain very favourable. Meanwhile, the current account surplus is expected to expand to 29 per cent of GDP in 2011-12, thanks to rising export revenues. Years of surpluses have built up Qatarâ&#x20AC;&#x2122;s foreign exchange reserves and holdings of foreign assets â&#x20AC;&#x201C; which could well explain its adventures in outer space.

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Japan has also been buying more LPG (used for heating and vehicles) and naphtha (a feedstock for petrochemicals) from Qatar, and demand for LNG and LPG is expected to continue to grow as Japanese demand resumes. Given that 90 per cent of the countryâ&#x20AC;&#x2122;s oil products go to Asia, Standard Chartered

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further double to nearly $115 billion by 2012 especially as new gas consuming clients come on board. In June, Qatar shipped its first gasoil cargo from the $18 billion joint venture gas-to-liquids (GTL) plant in Ras Laffan. The facility is scheduled to be fully operational by mid-2012 and it will be the largest GTL plant in the world converting 1.6 billion cubic feet of gas into 120,000 barrels of condensate, ethane and liquefied petroleum gas (LPG) and 140,000 barrels per day of gas-to-liquids products. â&#x20AC;&#x153;Qatarâ&#x20AC;&#x2122;s liquidified natural gas (LNG) export prospects have improved as the Japan earthquake has boosted demand for the countryâ&#x20AC;&#x2122;s gas. Earlier this year, Qatar said it would supply an extra 60 cargoes of LNG to Japan,â&#x20AC;? notes Standard Chartered Bank.

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EFE$F@C >IFNK? While Qatarâ&#x20AC;&#x2122;s energy riches are filling the state coffers, the country is looking to make rapid progress elsewhere too. In an international recognition of the countryâ&#x20AC;&#x2122;s rising stature, it was granted the rights to host the prestigious FIFA World Cup in 2022, albeit in controversial circumstances. â&#x20AC;&#x153;Qatar is planning $225 billion of investment in 2011-16,â&#x20AC;? notes the QNB in a report. â&#x20AC;&#x153;This is in the run up to its hosting of the 2022 FIFA World Cup, and rooted in the model of sustainable development envisaged in the Qatar National Vision for 2030.â&#x20AC;? Given Qatarâ&#x20AC;&#x2122;s small size (the UAE is seven times bigger in total area), the $225 billion is an astonishing figure and enough to keep the economy growing for an extended period of time, although there are dangers of overheating and high inflation if the development is not managed properly. But the 2022 World Cup is but a milestone in the countryâ&#x20AC;&#x2122;s grander 2030 Qatar National Vision, which sets out the countryâ&#x20AC;&#x2122;s long-term ambitions. It is also a document that highlights the countryâ&#x20AC;&#x2122;s vulnerabilities to depending heavily upon its energy resources. â&#x20AC;&#x153;The trajectory of Qatar's economy is tightly linked to developments in the hydrocarbon sector. Hydrocarbons still dominate the economic landscape, but Qatar is branching out into new areas,â&#x20AC;? the report notes and it highlights the four pillars of growth which focus on human, social, economic and environmental development. â&#x20AC;&#x153;Qatarâ&#x20AC;&#x2122;s economic prospects in the medium term remain favourable, though >LC= 9LJ@E<JJ & .*

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C8>>@E> 9<?@E; But while Qatarâ&#x20AC;&#x2122;s non-oil plans are aggressive, for now the private sector has been lagging behind the energy sector. Many of the projects, especially for the 2022 World Cup, will take a while to get off the ground and most analysts donâ&#x20AC;&#x2122;t expect its impact to be felt by the private sector for at least another few years. â&#x20AC;&#x153;We believe Qatar will need to step up spending on smaller projects to prevent the private sector from being overwhelmed by hydrocarbons in the coming years,â&#x20AC;? notes Standard Chartered.

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uncertainties loom.... beyond 2011 real GDP growth is likely to shift down as the current programme of investment in hydrocarbons reaches completion, and output plateaus,â&#x20AC;? the document states. â&#x20AC;&#x153;Although the slowing of aggregate growth is sharp, this is not a reversal of fortunes, as income levels will remain high. Healthy growth of the nonhydrocarbon sector is also expected and will help keep overall GDP growth buoyant. Growth of non-hydrocarbon output is expected to average 9.1 per cent during 2011-2016,â&#x20AC;? notes the report. HXkXi`$fne\[ 8c AXq\\iX i\gfikj k_\ e\nj ]ifd C`YpX [li`e^ X c`m\ j_fk fm\icffb`e^ X jhlXi\ Ă&#x201D;cc\[ n`k_ afpflj i\Y\cj%

Citibank, however, feels the impact of the FIFA World Cup on the local economy is exaggerated. â&#x20AC;&#x153;This is because: i) The actual spend on World Cup-specific infrastructure is going to be far less than the reported $50 billion plus. ii) The actual spend on World Cupspecific infrastructure is a drop in the ocean compared with currently ongoing projects. iii) The productivity of the World Cup-

specific infrastructure developments is very low. iv) The beneficiaries of increased expenditure on the World Cup will largely be foreigners, with little valueadded remaining in Qatar,â&#x20AC;? the bank said in a recent report. K?< D8M<I@:B Apart from flexing its financial muscle, Qatar has also distinguished itself with

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its maverick foreign policy, which is often bolder than that of its Gulf counterparts. Brokering deals in Lebanon and supporting Libyan rebels militarily and politically, Qatar has punched above its political weight to emerge as an active player in regional diplomatic circles. It has also used its feisty news channel Al Jazeera to extend its influence and rise above the dull political inaction prevalent among most Arab states. “As Qatar’s elite see it, being at the forefront of popular Arab opinion and

its influence in global financial circles. Qatar’s stakes in Volkswagen, the London Stock Exchange, Barclays Bank, Credit Suisse, Porsche and Harrods, among others, has turned the country, and the Qatar Investment Authority, into a compulsory port of call for many countries and international companies looking to raise capital. The country also invested $1 billion in European Greenfield, which has major operations in Greece, and, apart from investments in two recession-hit Greek

in the region – and the 14th most competitive in the world. N?8K :8E >F NIFE>6 While the planets appear aligned for Qatar, critics argue that political reforms have lagged behind. While Qatar holds municipal elections, where both men and women can participate, the process remains toothless and has no meaningful contribution to policymaking. Some analysts have also noted that Qatar is stretching itself with trophy ;f_X jbpc`e\

defending fellow Arabs against an onslaught from a widely hated dictator is a priceless commodity, both at home and abroad,” wrote David Roberts in an article in Foreign Affairs. Unlike Saudi Arabia, which is hesitant to wholeheartedly support popular causes in the region – lest the 15-17 million Saudis also demand it – Qatar has no such worries. Of the 1.7 million people living in the country, only 238,000 are Qataris, who enjoy free health care and government benefits and find no reason to complain about the rule of the Al Thanis – nor are they acutely interested in political reform, given they have few complaints against their rulers. That’s an enviable position to be in, and one that allows Qatar to pursue other interests, including aggressive and ambitious investments abroad to further .- & EFM<D9<I )'((

banks, is gaining tremendous influence among EU states. @EM<JKD<EK D8>E<K Clearly, the world has started to take notice. In a recent Y/Zen report, Doha upstaged Dubai for the first time as the region’s most prominent financial centre. Of course, it is just one survey, and Dubai remains the unequivocal regional hub, but Doha appears to be closing the gap. Qatar has also regularly eclipsed its regional counterparts in other surveys as well. The country emerged as the most peaceful in the region in the Institute for Economics and Peace’s Global Peace Index; the Fraser Institute’s Global Petroleum Survey ranked Qatar as the best regional jurisdiction for energy development, while the influential World Economic Forum’s annual survey ranked Qatar as the most competitive economy

international assets especially in a global economic downturn. Also, some of these investments are driven more for political reasons, which are always fraught with risks. In addition, Qatar’s active foreign policy could also make it a target for contempt and retaliation. Its Al Jazeera network often finds itself at odds with many of the countries it reports on (including Egypt, Iraq, Yemen and Syria) and that adds a layer of political risk to the country. But it is tough to argue with the sheer volume of gas riches funnelling into the country. Not surprisingly, Qatar is the richest economy in the world in terms of GDP per capita, and with a healthy pipeline of projects under way, there is every reason to think that the country could serve as an oasis of calm in a region full of flashpoints and trouble spots. aliarabia.com research

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THE ONE

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homas Lundgren sits casually at his computer-less desk, legs draped over a chair. “Listen, I hate my portrait being taken. I haven’t had my hair cut for three months,” the Swedish CEO says with trademark honesty. Ruffling his borderline-Bohemian hair, the boss of the region’s coolest furniture store says, “right now, I feel fantastic.” But it wasn’t always this way. The unforgiving global crisis put the brakes on the CEO’s mission to ‘save the world from Ikea’, and Lundgren stood chastened as his firm’s revenues tumbled by 18 per cent in the 12 months to March 2010 to $82 million. The One’s recent fortunes have been very closely tied to the global economy. Before 2009, when the Gulf was flooded with new arrivals armed with even newer credit cards – from places as far flung as Russia, Pakistan and Europe – Lundgren cleaned up on furniture sales. “Before [the crisis] people would buy a whole living room, but now it’s more like the real world where people think about changing their cushions and perhaps buying a sofa later on. You didn’t even

need to do anything then – the customers just came – but after the crisis they disappeared. We were affected badly by the recession because we fell into the trap of getting lazy because nothing seemed to matter.” By his own admission, Dubai’s most flamboyant CEO (AKA Chief Emotional Officer) regrets his complacency. “Just before the crisis I became burnt out. I didn’t take the time out to get my inspiration back. And if you’re on the top and you’re not inspirational, the business is finished,” he says. “I always put so much pressure on myself and I never felt like I did enough. Slowly I’ve started to arrive at this place where I feel relaxed, it seems like the whole team has gelled together in the last six months and things have fallen into place – we are on the same planet.” It helps, of course, that the firm’s revenues have finally reached pre-crisis levels, stabilising at just over $100 million for the financial year 2010. And staff numbers are slowly increasing – back up to over 630 – after Lundgren showed the door to around 100 staff in 2009. >LC= 9LJ@E<JJ & .0

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The One currently has 14 stores (or ‘theatres’ as Lundgren likes to call them) across the UAE, Kuwait, Bahrain, Jordan and Qatar. Most importantly for Lundgren, who calls himself an ‘ideas’ man, the new initiatives have begun to flow again with the launch of a new concept store on Dubai’s Sheikh Zayed Road – “the coolest store in the world. It’s fun. It’s amazing. A whole new

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concept in furniture buying” – and plans for two more stores in Beirut, Lebanon. There’s a zen-like quality to The One office, strewn as it is with quirky, philosophical mantras and random pieces of furniture. “I don’t want to live like you. I don’t want to talk like you. I’m going to be like me.” No, Lundgren didn’t say that, Paul McCartney did – but the CEO has emblazoned the quote across the entrance to his office. “Here,” the CEO says, passing over a gift. It’s a key ring that jangles with a tiny stiletto shoe and the somewhat upfront slogan: ‘Queen of ******* everything’. “We were getting complaints so I had to stop selling it – it’s a shame as I think it’s really cool.” Lundgren possesses an endearing vulnerability and a rare showmanship in a city awash with carbon-copy CEOs. At times, you wonder, is this man the real deal? But when you look at him – his

singular gaze – and around him – at the mini-empire he built from scratch across five, soon to be six, countries, with the aim of ‘rescuing the world from just another retailer’ it’s clear that he’s not finished with his mission just yet. The next stage in The One’s journey will be just one more step in what has been an extraordinary chain of events, laced with serendipity and sheer hard work. In the 1990s, Lundgren landed in Dubai having worked at Ikea in Kuwait as a decoration manager. “I was offered a job in Kuwait, not because I was good, but because no-one wants to go there really,” he says, deadpan. Lundgren was forced to leave Kuwait because of the Gulf War where he says he and his family lost almost nearly everything they owned. But this tragic twist of fate led Lundgren to ponder on what Ikea was doing wrong. “I’d always looked up to Ingvar Kamprad

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(founder of Ikea) and his dream but while working in Kuwait I learned that he didn’t actually stay true to his vision, it was lies,” he says. “Then an angel came to me and I decided that I would save the world from Ikea,” he says, deadpan again. Lundgren moved to Dubai and set about finding funding for his dream of opening his very own anti-Ikea pan-Arab furniture store. Five million dollars and 20 rejection letters later (these take pride of place in his office) the CEO opened his first store in Abu Dhabi, UAE in 1996. The firm quickly moved its store to Jumeirah in Dubai where they found a more ready customer base, from then the business soared and The One became a household name in the Gulf. “When I was walking knocking on doors selling the idea, most people just patronised me and just patted me on the head. The first stage to setting up your own business is all about perseverance. If you can get through those initial stages, you will be able to make it; but the next stage is the hardest part. To be an entrepreneur you need to be naïve, /) & EFM<D9<I )'((

because if you knew what the price was at the next stage – getting your dream to work – you wouldn’t do it. “You dream of this goal of when you become successful everything will be happiness, but that goal doesn’t exist. It’s a nirvana you’re never going to reach. There is always a problem somewhere whether it’s work, your health or your head,” he says. “I’ve come to the conclusion that you can only find peace within yourself. You are what you do. That’s what you are. But the real test to being a good leader is staying authentic and true to yourself, even with all the pressures from outside.” The next test of Lundgren’s authenticity will come as the global economy continues to teeter on the edge of a new crisis. For now, the outlook for UAE retail remains strong, with a 33 per cent growth projection over the next four years. And, this time, come what may, Lundgren will not let his steely focus slip. Today he’s happy with the place he’s in. “Now people care again, things matter again, and that what’s why I loved the crisis.”

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ears about sovereign debt crises and new global recessions seem far removed from the food courts, luxury boutiques and cavernous air-conditioned spaces of Dubai’s mega-malls. The city was badly impacted by the financial meltdown of 2009, but it is still the first stop for any brand looking for a foothold in the Middle East market. A report earlier this year by commercial real estate advisers CB Richard Ellis revealed that Dubai is now on a par with London as the top retail destination in the world, with 56 per cent of top brands maintaining a presence in both cities. But there is no doubt the forwardthinking city that provided much of the inspiration for the economic diversification now taking place across the Gulf faces significant challenges in its retail sector. One vast mall followed another during the boom time and there are now more square metres of retail space in Dubai’s malls (2.6 million) than there are residents in the city (1.95 million). Unsurprisingly then, recent news reports have featured retail analysts suggesting that Dubai is now at ‘saturation’ point with regard to mall development. No major mall projects are in the pipeline for at least the next couple of years and whether the Mall of Arabia, scheduled to be the largest ever built and part of the delayed Dubailand project, ever sees the light of day is open to debate. Matthew Jay, associate director at CB Richard Ellis, sees little point in new,

large-scale mall developments in the city at the present time. “The general attitude is that saturation point has been reached to some extent. Dubai Mall has opened, Mall of the Emirates has been open a while and then you have the likes of Festival City and now Mirdif City Centre. “If another major mall opened, you’d effectively be moving the same people around from one shopping centre to another. From the retailer’s perspective, it costs money to open a new shop and then fit it out, so there is less incentive.” The fact super regional mall development is now on the back burner has been welcomed by some leading retail groups. Vipen Sethi, the CEO of Dubai-based Landmark Group, identifies a sense of stability. “Until 2008, there was tremendous growth in the number of malls in the UAE, however in the last two years we have not seen many new developments and the market has reached a state of equilibrium. This, in our opinion, is good and will help local and international retailers to consolidate their position in the retail market.” But with so many new malls having opened for business in recent years, often on a massive scale and geared towards Dubai’s robust tourism market with restaurants and other leisure facilities, some of the city’s older, smaller shopping centres, perhaps located in more congested or out-of-the-way areas, have suffered severely reduced footfall and it is not uncommon to see a number of boarded-up outlets. The Dubai City Profile report by real >LC= 9LJ@E<JJ & /,

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estate investment and advisory firm Jones Lang Lasalle (JLL), published in September, noted that the city’s higher profile malls had benefitted from an influx of visitors from other parts of the MENA region, partly as a result of the Arab spring disturbances, and these shoppers had boosted the luxury retail sector due to their higher spend levels. Indeed Emaar, the developer and operator of Dubai Mall, reported a footfall of 13.5 million in Q1, its highest quarterly total since opening in late 2008. The report also noted that while rental rates in Dubai’s “major tourist related malls”, had stabilised, other malls were experiencing increased vacancies and falling rents. David Macadam, regional director, MENA, at JLL explained rental values are largely dictated by cash in the till. “Generally the rule for rental values is 'rental levels are a function of the sales achieved in each location'. So when the sales are high in a given shop the rental values can be higher. “When sales are slow or low the retailers may have less capital available to pay higher rental values. Generally rental values in the most successful shopping centres remain robust, particularly in the prime locations with the highest footfall. “ For Matthew Jay, one of the fundamental keys to survival is flexibility. “Clearly, the older malls, which used to attract a good number of customers but have now lost them, face a huge challenge. They really need to adapt their approach. “Take Deira City Centre as an example. In recent times it has altered its tenant mix so that it now looks to a more midrange market and it is still doing well. Basically it has taken a realistic outlook. It has recognised that most high-end shopping is going to be done at places like Dubai Mall.” The Landmark Group manages the Oasis Centre on Sheikh Zayed Road which has /- & EFM<D9<I )'((

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less than a tenth of the number of stores found at the vast Dubai Mall just a few kilometres down the busy highway and Vipen Sethi certainly believes freshening up the retail experience for customers and reflecting their tastes has been integral to their approach. “The group strongly believes that as long as we create value for our customers, we will continue to grow. This philosophy holds true for the Oasis Centre. It is a strong community driven mall and we provide our customers with a comprehensive offering that is cognisant of their changing needs.” Sethi points to the recent launch of a combined spa and café as an example of how the centre is seeking to broaden its appeal. “Community driven” shopping may in fact be the next stage for Dubai’s

congested retail sector. With no new super regional malls on the horizon, the only notable new developments will be two new community centres at Discovery Gardens and Jumeirah Park, both of which will be a fraction of the size of the big beasts of the city’s mall portfolio. In its Dubai City Profile report, JLL suggests that a further community-led retail strategy, commonly known as ‘big box retail’ or ‘power centres’, could become increasingly popular. “Typically, power centres would include an anchor store, several smaller, category-specific tenants, and a limited number of line shops that serve to complement the overall offering of this type of retail.” The report mentions the likes of IKEA or Walmart as examples of the usual anchor stores.

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Better thinking. Together.®

Today the most important portfolio characteristic may be durability. Volatility and uncertainty are taking a toll on investors. In fact, in our recent survey of investors, 48% said their primary investment objective is stability in volatile times.1 We know building the durable portfolio investors crave starts with risk as a primary concern. And adding alternatives investments is an option that can help better manage it. But more than this it means taking a more measured approach to protecting principal and making sound long-term decisions. At Natixis Global Asset Management, we have many solutions to help investors pursue the durability they want from equity to fixed-income to innovative strategies in alternative investments. It’s the result of a process we call Better thinking. Together.

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1 Natixis Global Asset Management, CoreData Research Survey, June 2011, 381 responded to, “The most important thing for my investments is to stay stable in volatile times.” This communication is provided in and from the Dubai International Financial Center (DIFC) by Natixis Global Associates Middle East. It is only available to persons who have sufficient financial experience and understanding to participate in financial markets within the DIFC, and qualify as Professional Clients as defined by the Dubai Financial Services Authority (DFSA). This communication should not be delivered to or relied on by any other type of person. Natixis Global Associates Middle East is the trade name for Natixis Global Associates Middle East, a branch of Natixis Global Associates UK Limited, which is duly licensed and regulated by the DFSA. Registered office: PO Box 118257, Office 603 - Level 6, Currency House Tower 2, DIFC, Dubai, United Arab Emirates. Natixis Global Associates Middle East is a business development unit of Natixis Global Associates, the global distribution organization of Natixis Global Asset Management, the holding company of a diverse line-up of specialized investment management and distribution entities worldwide, including the investment managers referenced herein. The investment management subsidiaries of Natixis Global Asset Management mentioned in this communication conduct any investment management activities only in and from the countries in which they are licensed or authorized. This communication is for information only and does not constitute an offer of financial services, nor a recommendation or offer to purchase or sell shares in any financial instrument. Investors should consider the investment objectives, risks and expenses. ADINT238-1011

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According to JLL, just five per cent of Dubai’s current shopping centres constitute power centres. The only real examples are the out-of-town Dragon Mart, which is currently being hugely extended, and the Dubai Outlet Mall. ‘Power centres’ offer a sharp contrast to the polished sophistication of Dubai’s modern high-end malls. The report states they are constructed on one level, with a ‘no hassle’ design and with ample surface parking giving shoppers the chance to pop in and out very quickly. This ease of access would then appeal to the local catchment area and, in particular, the busy younger expatriate population who want to reduce the time they spend shopping. The no-frills approach of power centres, with their low construction costs, means that rents are cheaper and these savings can then be passed on to shoppers. Tellingly, however, the report stresses that while power centres could find a niche in the city, Dubai’s super regional

across the country, should grow by an impressive 33 per cent over the next four years and Dubai is still the place to be if a retail group seeks to branch out into the region as Matthew Jay confirms. “Brands tend to come to Dubai and then roll out into the wider market from there.” That “wider market” offers some significant growth opportunities and plenty of locations where there is presently no risk of mall saturation. Jay identifies a couple of destinations where retail groups are eyeing a chance to extend their reach. “In the UAE, retailers feel under-represented in Abu Dhabi and they definitely see good opportunities there. The other emirates are not really very high on their list for possible expansion. Elsewhere Saudi Arabia is an obvious potential market given its sheer number of people.”

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malls will maintain their place as the main destination for leisure shoppers and tourists alike. The city’s older, less vaunted malls may well face a challenge to maintain their profitability but the Q3 UAE Retail Report, published by Business Monitor International, predicts that retail sales,

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A study at the end of last year by commercial real estate consultants Cushing and Wakefield found that Abu Dhabi would actually overtake Dubai in a matter of five years with regard to gross leasable area per 1,000 population if all its retail developments were seen through. Karl Nader, senior associate at global consulting firm Booz and Company, pinpoints further potential markets for retailers. “Before the Arab spring, Egypt and Syria were considered as primary markets by numerous retailers and developers, with planned investments, >LC= 9LJ@E<JJ & /0

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or ones in progress. It obviously remains unclear how the current instability might delay or alter these plans. “In the meantime, Oman is attracting a lot of attention these days – the current retail market is under-served, and the

government appears to be incentivising foreign investment.” A number of retail groups have announced aggressive regional expansion plans over the past year including Kuwait’s MH Alshaya Company and Retail Arabia as well as Qatar’s Al Meera to name but a few. Dubai’s Landmark Group is certainly in the vanguard of those retailers looking to branch out rapidly in the region. It recently announced plans to spend more than $300 million on its Babyshop brand over the next five years, opening 33 new stores including five in the UAE. But Vipen Sethi sees growth in a variety of locations. “The growth plans are two-pronged, we are going into new businesses and simultaneously penetrating new markets.” With the world teetering on the brink of another major financial crisis, it might seem reckless to launch expansion plans

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È@e dXafi [fnekliej ef dXcc `j `ddle\ kf jl]]\i`e^ ÔeXeZ`Xccp kf X [\^i\\% 9lk _`^_ gif]`c\ dXccj n`cc XcnXpj fg\iXk\ Xk k_\ _`^_\i c\m\c%É at such an uncertain time but Sethi appears unconcerned. “The newspapers are full of talk about the downturn, but this is predominantly centered on Europe and the USA. In the Middle East, the last quarter has been strong and we are on track to achieve our targets. “The emerging patterns are of course very different from the period of high economic growth. Today, consumer needs have changed and it has become essential for retailers to offer a truly competitive product line.” Despite the uncertain political situation in many parts of the region and the financial worries in the wider world, Sethi is looking forward to the winter tourism season and predicts growth of up to 12 per cent per annum in the UAE retail market. Analysts also seem to think the region’s retail sector has the strength to absorb another severe financial downturn although some of Dubai’s less celebrated malls could well be set for further pain as David Macadam explains. “The retail industry fared relatively well in the last downturn for several reasons including the generally high net worth of the consumers in the Gulf, the young demographics throughout the region and the push to more of a value priced offering. “In major downturns no mall is immune to suffering financially to a degree. But high profile malls will always operate at the higher level. Generally, the malls which may suffer more are the malls catering to the lower income demographics.”

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he mood at this year’s Cityscape Global in Dubai was one of cautious optimism from developers as the real estate sector, worth $31 billion at its peak in 2008, shows signs of recovery. Gone was the euphoria of past events – there were no mega-project announcements – and in its place was a realistic business-to-business atmosphere at an event that had reduced a third in size in terms of space and exhibitors. According to Jones Lang LaSalle rental prices in the office and residential sectors are bottoming out and the retail and hotel sectors are already showing a growth buoyed by tourism. This follows a dip of around 18.6 per cent in the real estate sector in 2009 and a recovery by around 2.5 per cent in real terms in 2010 according to the National Bureau of Statistics. The real estate sector’s contribution to real GDP grew exponentially from Dhs95.7 billion in 2006 to Dhs111.1 billion in 2007 and to Dhs114 billion in 2008 before slumping to Dhs92.7 billion

in 2009. The real estate crash saw property prices plummet 60 per cent in Dubai with the ensuing financial crisis hammering the massive unplanned levels of construction leading to many projects being put on hold or shelved. But with factors such as continued government spending on infrastructure, including the Dubai Metro and new roads, and visitor numbers increasing, the real estate sector rebounded to Dhs95.1 billion in 2010 and this is expected to grow by the end of this year. One of the hardest hit developers during the real estate crash was Nakheel, which is currently going through a Dhs16 billion debt restructuring programme and has been handed $8.71 billion by the government and written off Dhs78.6 billion of its real estate assets due to the emirate’s property crisis. Nakheel’s ambitious plans to follow the completed Palm Jumeirah with further man-made palm-shaped islands in Deira and Jebel Ali, as well as other man-made islands including The World, saw it over-exposed during the onset

of the global financial crisis. But CEO Ali Rashid Lootah said he expects the company to post profits in 2011 in line with the Dhs860 million in 2010 and announced the new Palm Residence project consisting of 102 beachside town houses at the Cityscape event. “A new project is being launched, which says that Nakheel is back, alive and kicking,” he said. “We are also building a park on the palm along the golden mile. This is a good time to buy as prices are rising. Our leasing is up to 70 per cent occupancy from 40 per cent in 2010 and this should rise to 80 per cent in a year’s time,” he added. “I am extremely positive about the next 12 months, that’s why we are launching new projects. We are showing we are confident and this is a clear message. The demand is there on The

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Palm and in certain areas the demand is very high.” According to Jones Lang LaSalle’s report Dubai City Profile – September 2011, the Arab spring has confirmed Dubai’s role as a safe haven, resulting in more visitors to Dubai benefitting the hotel and retail markets and investors seeking a home in the emirate. However, the report stated that following a growth period in the first half of 2011 the sovereign debt crisis in some European countries had led to a more cautionary outlook. “The mood has changed. It is no

longer about new project launches, it’s about existing projects,” said Craig Plumb head of research at Jones Lang LaSalle. Absent at Cityscape were the large Abu Dhabi developers such as the Tourism Development and Investment Company, behind the capital’s Saadiyat Island, and there was only a splattering of foreign property firms from Thailand and Malaysia. “There are very few end users at Cityscape; it is now more an event for B2B contractors and suppliers. There has been a transition and it is more realistic with the overall market becoming a lot quieter because sales activity and the projects have slowed with people reassessing prices making it all much more competitive,” Plumb said. “The retail sector is growing because tourism

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chauffeur-driven cars and private yacht charters. “In October 2008 the real estate market fell off a cliff,” McLoughlin added. “Damac Properties quickly realised what we needed to do as an organisation. We went through a consolidation period with no new projects and since 2008 we have completed 30 builds, and 21 of those in 2011, opening up 6,000 units. Our primary focus for the past two years has been construction and delivery. We are one of a handful of Dubai developers that has still been building and delivering to customers even during the downturn.” In the MENA Real Estate Market Overview, a report commissioned by 0- & EFM<D9<I )'((

Cityscape Global and carried out by Ventures Middle East, analysts concluded that while Dubai suffered the most from the global economic crisis it remains a force in the construction world. “The prevailing trend across the various segments of the building construction industry in the UAE, clearly shows that while the country has been the worst hit by the adverse impact of the credit crisis in 2009, it continues to hold its position as the world’s largest construction industry,” the report stated. “The construction sector’s contribution to real GDP expanded from Dhs86.1 billion in 2006 to Dhs94.7 billion in 2007, around Dhs104.4 billion in 2008, Dhs105.8 billion in 2009 and nearly Dhs114.9 billion in 2010. “With projects resuming normalcy gradually on the back of governmentbacked spending programmes and investment in infrastructure and mixed use development on the one hand and the gradual revival of tourism, retail and commercial activities on the other fuelling the growth of the tourism, hospitality, leisure and retail segments

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on a greater scale than other segments and at a more cautious pace than yesteryears,” the report added. Undeterred by the downturn, one of Dubai’s most ambitious projects, Dubai Properties’ mixed-use Business Bay is still forging ahead and is expected to be complete by 2013. With an 80 million square foot area, Business Bay offers an array of individually designed office blocks, apartments and retail space and it has extended the Dubai Creek – the historic waterway and heart of Dubai’s dhow trade – from its roots in Bur Dubai to the edge of Sheikh Zayed Road. “As a developer we go with demand and develop what is required such as Tecom, apartments and villas,” said Khalid Al Malik, Group CEO, Dubai Properties Group. “There’s a positive mood this year and retail growth is tremendous from JBR to Business Bay. We have sold all the components and the second part of Business Bay will open next year. “The downturn was a time for review and it wasn’t really one side it was everyone. It was very difficult to anticipate what was going to happen next. It was related to the banks and finance and that’s what caused a bigger problem for us. But there are three things I would depend on to convince people to invest in Dubai. The first is that Dubai is committed to investing in itself as we have seen with massive infrastructure projects such as the new airport. “The second is stability. During the Arab spring the UAE has remained calm and everyone is here to be happy and make business. “And thirdly, Dubai is always going to bounce back faster than other markets, because the hard work has already been done to lay the foundations of business.” Amid this period of slow recovery, landmarks such as the world’s tallest building, the Burj Khalifa, have been completed and although the emirate’s glory days are unlikely to be bettered in the near future, there is good reason for those at Cityscape Global to look on the bright side of a long, drawn out property slump.

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ight months after Kuwait Investment Authority’s (KIA) $3.6 billion investment in local real estate, the decision may be proving less positive than expected for the Kuwaiti housing market. Despite the $300 billion sovereign fund’s decision in March to launch a real estate portfolio to invest in the local commercial market, it seems many remain unconvinced that it will address systemic risks associated with weak demand from Kuwaitis. KIA said at the time that it hoped to achieve good returns on the back of a “steep plunge” in real estate and that it had hired Kuwait Finance House, the country's biggest Islamic lender, to manage the portfolio. The move was seen as an attempt to rescue the struggling property market, which has suffered similar structural issues to Dubai, such as massive oversupply. Stefan Burch, a strategic consultant for the GCC at Cluttons, says: “Kuwait City has witnessed a large increase in commercial stock over the past five years 0/ & EFM<D9<I )'((

which has resulted in an oversupply. As with many capital cities across the Middle East, occupier markets are currently weak as a result of the general economic downturn that hit the region in 2008. The major risk to the Kuwait commercial market remains a lack of occupier demand which is the main driver of value in difficult market conditions. This will not be addressed through the investment by the KIA in the commercial market.” He added that KIA could inadvertently push property inflation up if it is forced to pay above the odds to entice landlords to sell. Commercial owners are reluctant to sell office space when prices could appreciate in the coming months if regional unrest dies down. Since the global financial crisis, the commercial sector, the market that KIA is targeting with its investment, has struggled to get off the ground. In the first quarter of 2011, the number of investment real estate transactions in Kuwait rose by nearly half, but the market for commercial housing saw a

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measures to support the national population and boost the local economy. Earlier this year, Oman and Bahrain said they were planning massive boosts in state spending aimed at calming popular unrest. Bahrain approved a budget of $16.44 billion over the next two years, a 44 per cent rise from previous years. Hooton added: “I would say there could also be a degree of social benefit in the investment. If KIA can sell these properties at lower prices then it’s a bit of social engineering, plus it will perhaps appease those that feel unsettled by the Arab Spring.” Many Gulf-based sovereign funds were created with the intention of investing income from oil exports, which dominates their budgets, into a diverse range of assets that would guarantee lasting returns for post-oil generations. The funds have increasingly turned away from foreign holdings since the recession in a bid to shore up regional markets that were battered by the downturn. Abu Dhabi-based Mubadala has sought opportunities in its own back yard in recent times, including the launch

of a joint venture company last year with Pramerica Real Estate Investors to raise capital to fund and invest in the UAE capital’s real estate projects. In a separate joint venture launch in 2007, Mubadala struck a deal with CapitaLand to design, build and operate residential developments. The government fund has since bought up units in the project when it was unable to sell properties in the open market. This has typically not happened though in Dubai, sector analysts say, where there hasn’t been the interest by the government to buy up stock that hasn’t been sold for fears of depressing the market further. KIA’s decision is likely to be seen as a tipping point for the property sector in one way or another, primarily because of its sheer size and influence in the market. Many Gulf-based investors will see it as a positive endorsement of the product by a well-respected institutional authority, and perhaps that Kuwait property is at a point to start investing. Nick Clayson, head of real estate for the Middle East at the Norton Rose Group, said a reduction in house prices is throwing up some exciting investment opportunities in general across the region. “KIA’s move seems to be part of a shift we are seeing in the focus of a number of countries in the MENA region in relation to their policy on local real estate and infrastructure development. Many such countries are now focusing on affordable or lower cost housing which has been in short supply, which was not the focus of

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the recent building boom. â&#x20AC;&#x153;The lowering of house prices across all sectors means that existing stock can become a suitable product to fill this need. Other jurisdictions without a surplus are looking at private/public partnerships and legislation to catalyse demand, however, for Kuwait, this seems like an appropriate solution,â&#x20AC;? he added. It is hoped that investments like KIAâ&#x20AC;&#x2122;s will stimulate activity in the real estate sector in general, which has also struggled because of a lack of credit for potential property buyers. Kuwait, which restricts foreign ownership of property, saw property prices slump about 30 per cent after the government also banned companies from investing in real estate to stem inflation. It has suffered from a shortage in both residential and commercial properties as delays in public investments in recent years aggravated the imbalance.

Most recently, mainstream banks in the country have lobbied for a relaxing of the mortgage laws to open up the underserved home loans market. Islamic lenders already offer home financing packages but conventional lenders are restricted from doing so. Investor jitters over this regulatory uncertainty were compounded in the first half of this year by regional political strife, which many warn could haunt Gulf economies for some time to come. But Hooton, from Ashurst, adds: â&#x20AC;&#x153;Now would be a better time than this time last year to start investing in the Middle East property sector. But whether or not all the pain thatâ&#x20AC;&#x2122;s going to be felt in this market has been felt is yet to be seen.â&#x20AC;? It seems KIA still may achieve its goals of capitalising on plunging property prices, but whether there will be a longterm uplift for real estate in Kuwait is yet to be seen.

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SECTOR ANALYSIS

UAE RETAIL INCOMING TOURIST RECEIPTS BY SECTOR

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SANA TOUKAN Research manager, Euromonitor

In 1945, Wilfred Thesiger travelled 1,500KM across the hottest region on earth...

In 2011, Adrian Hayes, Saeed Al Mesafri and Ghafan Al Jabri will follow in his footsteps, inspired by Thesiger's classic book Arabian Sands. presented by

An epic recreation of Wilfred Thesigerâ&#x20AC;&#x2122;s Empty Quarter Journey

w w w . f o o t s t e p s o f t h e s i g e r. c o m Official Partners

Organiser & Media Management

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AMED FOR ITS chocolate, cheese and watchmaking, Geneva is a city with many faces. Sitting pretty at the south-western corner of Lake Geneva, the sleepy Swiss metropolis is bursting with culture, culinary genius and couture. Set against a backdrop of mountains, clear skies and Mont Blanc (on a clear day), Geneva offers something for everyone. If you find yourself in Geneva on business then set some time aside to explore the city’s many parks, galleries and cobbled passageways. Being relatively small in size means much of Geneva can be covered by foot in less than a day. So once you have checked into your hotel – the Mandarin Oriental is perfectly located near the financial district – pull on some comfortable shoes and head straight to Geneva’s old town. The cobbled streets, quirky boutiques, intimate restaurants and famous St Peter’s Cathedral make the old town one of Geneva’s top attractions. Fitness enthusiasts should soak up the great outdoors by bike.

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The concierge at the Mandarin Oriental have a series of electric bikes on offer, which are fitted with batteries to make your city cycle less strenuous. Sitting comfortably on your saddle, head straight for one of the city’s scenic parks. The Parc La Grange, located along the Quai Gustave Ador, is a good choice. This popular park is opposite the Geneva Plage (beach) and is the ideal spot for a late breakfast or early lunch. Famous for its rose garden and Romanesque features, this park boasts two theatres, an 18th century villa and numerous rare tree species. Your next stop should be a trip to one of the many galleries or watchmaking museums. Luxury watch brands such as Patek Philippe have their own galleries showcasing watches designed and created by them. For a more generic insight into horology, head to the Musee de l'Horlogerie, located in a small park close to the centre of Geneva. If you are pushed for time then a great way to experience all that Geneva has to offer is by boat. Head to the cruise boat

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station near the Jardin Anglais for the ‘Swiss Boat Tour’. For 15 Swiss francs, you can power up the lake passing popular landmarks as you go, such as the famous Jet d’eau water fountain. For globetrotters visiting Geneva purely to take in the fresh air, scenery and world class shopping then splash out at the Four Seasons Hotel des Bergues. This former royal palace is luxury at its best. Oozing palatial grandeur and French luxury, this popular hotel knows exactly what the high-flying traveller needs. And with its own private road outside, this Genevan landmark is a must-stay. Located on Quai des Bergues, overlooking Lake Geneva, the shopping district seems the obvious first stop from here. Depending on your budget, head to the Confédération Centre and Rue du

Marche area for high-street or to Rue du Rhone for high-end. Luxury haunts such as Chanel, Hermes and Louis Vuitton line this lakeside shopping district. When the sun sets, if it’s nightlife you’re after, then hop on a train to nearby Zurich. But for good food, Geneva has it in abundance. The restaurant scene in Geneva is buzzing with exclusive eateries (usually found in hotels) and classic brasseries, which are popular in the Carouge and Old Town area. Head to the Brasserie Lipp in the Confédération Centre for al fresco dining or to the Four Season’s very own Il Lago restaurant for Italian cuisine on a secluded terrace. But with the Swiss ski season fast approaching, maybe pencil in a postwinter city break.

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THE ART OF OCCUPATION

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UBAI’S MEEM GALLERY has been the setting for an exhibition by three artists for whom injustice, displacement and occupation are pivotal motivations for their work. The Art Palestine exhibition, which opened on 5 October and runs until 5 November, showcases the talents of Nabil Anani, Tayseer Barakat and Sliman Mansour. With the Arab spring protests on the streets of so many cities across the MENA region over the past six months, the exhibition of such politically motivated and inspired artists, who all live in the Occupied Territories, is particularly well timed. Sliman Mansour is considered by critics of Palestinian art to be an artist who expresses the concept of ‘sumud’ – which is the Arabic word for a ‘steadfast perseverance’ in the face of the Israeli occupation of Palestinian land. In 1988, he produced four paintings of Palestinian villages that had been destroyed. Meanwhile, Tayseer Barakat has been quoted as saying that the uprisings on Arab streets have given new vigour to his desire to return home.

These three Palestinian artists each developed their talents within the Middle East according to Rula Alami Zaki, who has co-curated the exhibition alongside the gallery’s managing director, Charles Pocock. “Sliman Mansour studied Fine Arts at Bezalel Academy of Art and Design, Jerusalem, while Nabil Anani studied at the Fine Arts College in Alexandria and then did an MA in Jerusalem. Tayseer Barakat also studied at the Fine Arts College in Alexandria. All three artists have exhibited both regionally and internationally.” If their artistic background appears similar, then the central theme of these artists’ work is even more closely aligned, as Zaki explained. “Nabil Anani’s work is a myriad of Palestinian symbols, linking the land, the house and the people. His recent works focus on the olive tree as a symbol of national identity that the occupation is trying to obliterate. “Mansour’s work focuses on the land and its symbols; he portrays the relationship between the people and their land, showing conflicting experiences of people on their occupied land. His most recent works emphasise the

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great olive tree as the symbol of the land of Palestine. “Tayseer Barakat’s work captures a mystical atmosphere based on the old history of Palestine that developed from ancient regional cultures. He conceives history as a mosaic of images, a liberating force of a scattered soul.” Mansour’s use of charcoal and oil on canvas or linen generates a tangible sense of shade and subdued colours in his work. His ‘Watch Tower’ displays a darkened hillside of olive trees, which is partially obscured by a sombre military outpost. Anani, also an accomplished sculptor and ceramicist, utilises acrylic on canvas to produce occasionally bold colours within an often dark and menacing backdrop – his ‘The Olive Intifada’ being a good case in point. Barakat’s use of mixed media and acrylic on canvas allows him to create a highly individual and striking mosaic tiled effect. Distorted human and animal representations as well as a form of lettering or calligraphy punctuate his work. Intriguingly Anani, quoted in the impressive catalogue, which accompanies the exhibition, states that he employs a scalping knife to evoke “a more tangible sense of violent winds or

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feelings of anguish and rage.” Mansour uses mixed elements to indicate “the beginning and the end”, thus combining charcoal and brush drawings. Both Anani and Barakat depict human forms in a silhouetted, even unworldly manner. “The human elements in Tayseer’s work are inspired by regional mythology and the ancient history of Eastern cultures. He tries to depict the philosophical nature of our culture and not only what is directly seen. He attempts to deeply understand our roots and therefore the human figures on his canvas are rather abstract, like in a dream. “In Nabil’s work the focus is on the occupation, the people in revolt, where all endure the same oppression, the same history, the same destiny. The human forms are silhouettes that reflect the common revolt against injustice. Hence human details become insignificant,” commented Zaki. The paintings in this exhibition are for sale with prices ranging between $7,000 and $14,000. “There has been strong interest, especially since the three artists come from Jerusalem and Ramallah. Art collectors, particularly those from the Palestinian community were very interested,” observed Zaki.

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SMOOTH OPERATOR

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XUDING BRITISH CLASS and sophistication, Bentley’s Continental Flying Spur Speed has sleek body lines, a refined interior and a 600 brake horsepower engine that send a tingle down the spine when fired up. The four-door luxury saloon even looks good in purple – a hue usually reserved for the more flamboyant driver who, like a peacock, wants to be noticed and admired by all. Easy on the eye the Flying Spur may be, but is there more to this aesthetically

pleasing luxury car? The attributes of this 12-cylinder, six litre twin-turbocharged engine saloon will no doubt become more apparent during an afternoon drive from Nantwich, England to North Wales and back. On narrow country lanes the car handles well, negotiating tight corners with relative ease and you never feel out of control. Getting a measure of the car’s speed is difficult without hitting the highway, but a heavy foot on the accelerator will see you tearing through the gears in no time. The

Flying Spur does 0-100km/h in 4.8 seconds or 0-60 mph in 4.5 seconds and maxes out at 322km/h, ideal for any stretches of straight road. Driving an automatic in the English and Welsh countryside makes for a smooth ride, allowing you to enjoy long trips without having to continually shift gears when reaching sharp corners. The Adaptive Cruise Control (ACC) function will no doubt prove a blessing for anyone covering long distances. As you would expect, ACC allows the driver to set a particular cruise speed but it also comes with a nifty long-range radar that senses whether the car is getting too close to other vehicles. The brakes and accelerator are automatically adjusted to maintain the driver’s pre-selected time gap from the car in front, so all you have to worry about is steering. Adding to the smoothness of the drive are the 19-inch Pirelli P-Zero UHP tyres and suspension, made from lightweight aluminium, resulting in light precision steering when gliding along relatively flat surfaces. Whether the car handles as well on rougher terrain is unclear, but then Bentleys were never built for offroad pursuits. Comfort is a big feature in any luxury car and the Flying Spur doesn’t disappoint, with its hand-stitched leather seats, which can be manipulated into all sorts of positions at the click of a button. The electronic massage feature, sending pulses through the driver’s back, is particularly helpful if, like me, your shoulders and neck tighten up on long journeys. The interior is what you’d expect from a Bentley – a rich walnut veneer, moulded leather seats and all manner of digital displays and buttons to fiddle with when on the open road or stuck in a traffic jam. Among the inbuilt entertainment options, the Flying Spur has the customary radio and CD player, navigation system, MP3 and iPod interface, and seven-inch headrestmounted LCD screens thrown into the mix for backseat passengers. A traditional yet contemporary luxury car, the Flying Spur drives and handles well, looks good both inside and out and offers extreme levels of comfort. Anyone in the market for a Bentley should seriously consider this stylish saloon.

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ABU DHABI’S YAS MARINA CIRCUIT

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NE OF THE highlights of the UAE’s sporting calendar, the Formula 1 Etihad Airways Abu Dhabi Grand Prix, is back in the nation’s capital on November 13. Last year half a million F1 fans descended on Yas Island for the race weekend and the futuristic Yas Marina circuit is one of the memorable highlights of the racing season. The 5.5 kilometre long circuit cost $1.3 billion to construct and features the first hotel to be built over an F1 track – the five star Yas Hotel. The hotel, with its colour-changing ‘Grid Shell’ roof design, becomes a spectacle as the sun goes down on the day-night race. Although Germany’s Sebastian Vettel has already secured his second straight World Driver’s Championship and his team, Red Bull

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Racing, have snared the World Constructor’s Championship, the drivers’ runner-up position is far from decided with former champions Jenson Button, Fernando Alonso and Lewis Hamilton all in the mix. Vettel himself will complete a hat trick of titles in Abu Dhabi, and remain the race’s only ever winner, if he manages to take the chequered flag in first place. Practice gets underway on Friday, November 11 with the official qualifying sessions the very next day. Vettel will also be keen to secure pole position – just as he did last year. Hotels on Yas Island are filling up ahead of the race weekend and while the circuit has a capacity of around 50,000 fans, recent reports indicated that tickets were selling out fast.

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OW IN ITS 22nd year, the biennial Dubai Airshow 2011 is expected to be the biggest yet, with up to 1,000 exhibitors from 50 countries participating â&#x20AC;&#x201C; an increase of 12 per cent over the 2009 event â&#x20AC;&#x201C; and 55,000 trade visitors attending. One in five of the exhibitors will be first time visitors while regular participants such as Australia, France and the US have extended their floor space to optimise their presence. As usual, the Dubai Airshow is likely to witness the unveiling of multi-billion dollar aircraft orders and other major aviation tie-ups and agreements. One of the showâ&#x20AC;&#x2122;s main features this year will be marking the 40th anniversary of the foundation of the UAE. The Dubai Airshow is the cityâ&#x20AC;&#x2122;s largest trade show, with a total exhibition area of more than 325,000 square metres.

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8c`Z`X 9lcc\i Xkk\e[j k_\ k\Z_$^`XekËj îflg`\ [Xp è ;lYX` Xe[ Z_Xkj kf dXeX^è^ [ì\Zkfi# 8i` B\j`jf^cl GOOGLE’S FIRST ‘G DAY’ in Dubai is sold out. Young webwizards, developers and IT managers convene around the theatre eager to hear the latest news from the tech giant. “There needs to be more content, products and services online but we cannot solve all these problems alone. We want to share what we know,” says Ari Kesisoglu, managing director for MENA. Around 90 per cent of Google products – from Google Chrome, to Google + and Google Android – are funded by advertising revenues, and the success of its business is directly proportionate to the number of savvy users and consumers online. “There’s a heavy push on our investment in the region. This year has been the tipping point,” says a youthful, energetic Kesisoglu. Naturally, there are far more trainers and t-shirts in evidence at the event than shiny shoes and suits – and there’s also debatably more Mohawks and ponytails than at last month’s Metallica concert. This is Google after all, the IT firm that is repeatedly voted best place to work for its focus on quirky ideas and revolutionary spirit. Kesisoglu says the region is host to a wave of nascent web talent, particularly in Egypt. “We’ve got a big focus there. The country always had the talent but now they’ve got hope too.” Because all of the firm’s decisions are made based on data, the Google MD is something of a self-proclaimed ‘statmachine’. And, in this case, the figures really do say it all. Currently there are 85 million web users in the MENA region out of a population of 350 million – Kesisoglu’s calculator totals that to be around 25 per cent of the populace so far. Each year, 40 per cent more people come online in MENA. In the coming years, these growth trends will accelerate as the region becomes more affluent and new technologies are made available, including 3G and 4G. “As prices go down, adoption will go up 200 per cent over the next two or three years,” says Kesisoglu. While the regional growth potential for technology is astronomical, there are hurdles in the way that Google wants to address – with the help of its G-Day groupies, of course. “There is a severe lack of Arabic content online, only 1.5 per cent of Google-indexed content is in the Arabic language, even though Arab speakers account for five per cent of the global population. We have not been able to fill that gap so far.” The region’s online ad market also lags behind the Western world. Of around $6.5 billion invested in MENA advertising annually, only

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two per cent of this sum is placed into online ads, compared to around 25 per cent in the US and up to 15 per cent in other emerging markets. “This gap will close in the next three or four years,” says Kesisoglu. Google itself plans to double its number of staff across the region this year as it pushes to make the internet more relevant to users with more local services. While the MENA region has a newfound fondness for social networking and online videos, partly through the catalyst of the Arab Spring, the next big step is the creation of a viable e-commerce market. Currently just ten per cent of regional companies have a web presence. But Google’s G-Day is alive with an infectious optimism and the potential for growth. “The region has the vision and the funding, now we need the ideas.”

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