Trends June 2010 by MediaquestCorp.

June 2010 • Issue 144 • www.TRenDsMAGAZIne.neT s.C.C. Arabies, 18 rue de Varize, 75016 Paris, France Tel: +(33) 1 476 64600 • Fax: +(33) 1 438 07362 e-mail: editor@trendsmagazine.net

COVeR sTORY

FeRReTInG OuT FAkes

using the Internet’s anonymity and mass audience, purveyors of counterfeit luxury goods hit the big time.

leADInG TRenDs

FAMIlY TIes 10

experts call for new management models as Gulf family firms reach third generation.

FInAnCInG GROwTh 20

GReekInG OuT

MuTuAl ATTRACTIOn

why isn’t the region’s wealthy clientele a boon to mutual fund managers?

After years of stagnation, investors are finally putting money into Iraq’s infrastructure.

GReeCe

leADInG TRenDs 14

The finance minister gives a one-on-one talk on how he plans to fix his economy.

leADInG TRenDs

enGlAnD

sukuk sTAnDARDs

A nATIOn AnD IslAM

Investors flock to these special bonds in their search for financial security.

with wars abroad, the British government now faces anti-Muslim sentiment at home. June 2010 | TRENDS 3

June 2010 • Issue 144 • www.TRenDsMAGAZIne.neT s.C.C Arabies, 18 rue de Varize, 75016 Paris, France Tel: +(33) 1 476 64600 • Fax: +(33) 1 438 07362 e-mail: editor@trendsmagazine.net

woRlD eConoMIC FoRuM

The DohA suMMIT

This conference could be the last line of defense against a world whose leaders have gone haywire.

eneRGY

PeRsPeCTIVes

nukeD uP

seConD skIn

The Middle east turns to nuclear power to meet the challenge of growing energy demand. 138

Zegna has a new model for its boutiques that is as formed-fitting as its suits.

TeleCoMMunICATIons

on The RoAD

Phone FIGhT

VeGeTARIAn oPTIon

egypt’s drawn-out battle over control of telecom Mobinil reaches the end of the line.

144

Can a vintage Mercedes-Benz run on discarded deep-fryer oil?

AuToMoTIVe

lAsT woRD

MoToR RunnInG

RIChARD CooPeR

Its kuwaiti owners may be in trouble, but the venerable Aston Martin is far from extinct.

4 TRENDS | June 2010

154

This harvard economist says that crises are unavoidable but can be managed properly.

2010

TReNDs wATCh sPeCTACulAR The results are in: Our annual guide brings you the finest in swiss haute horology. It’s true that time waits for no man.

INTRODuCTION

FORTIs

A COlleCTION TO eNVY

ARABIC NuMeRAls

why is it that a timepiece strapped to a wrist can bring so many people so much joy?

120

It’s already favored by aviators. But now fans of calligraphy are taking notice.

A.lANGe & sÖhNe

The ReVIews

quesT FOR PeRFeCTION

wATCh eXTRAVAGANZA

The Middle east brand manager tells us how this leading firm maintains its edge.

6 TRENDS | June 2010

132

Our editor tells you what’s hot for the coming year. You might be surprised.

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ManageMent

Family ties By emily Meredith Dubai

ast month, the Abdullah brothers, whose family once owned Damas Jewellery, failed to make promised repayments on company money they had borrowed for personal investments. News in 2009 that Damas chief executive Tawhid Abdullah and his brothers, Tawfique and Tamjid, had used company funds to invest in real estate projects startled the markets and Damas investors. The issue is a major one for more companies than just the Dubai-based

10 TRENDS | June 2010

jeweler. Family-owned firms – even successful ones – rarely make it through to a third generation of family management. Misunderstandings over separation of company and family coffers, and a market inhostpitable to new public offerings, means succession planning in the region’s privately-held firms will be critical in the coming years. In the Middle East and North Africa, family businesses play a greater role in the economy than they do globally.

According to data compiled by economists at the Dubai International Financial Center, family businesses represent more than 90 percent of businesses in the region; in the rest of the world, they count for about 70 percent. In the region, and in the Gulf in particular, control of the economy is in the hands of a few families. In Qatar, 15 families have 55 percent of board seats, according to the D.I.F.C. data. In Abu Dhabi, the 15 biggest families control 40 percent. These boards often have multiple representatives from the same family: more than 35 percent of companies in the U.A.E. have two or more directors who are related. Only 5 to 15 percent of family-owned firms continue to be managed by descendents of the founders by the third generation. Family businesses face a number of challenges. For several years, public offerings seemed to be the way forward as stock markets in the region tried to build up their portfolios and increase liquidity. Also, an I.P.O. seemed to serve as another marker of financial success. For families, going public meant an influx of cash that could be used to distribute to members who wanted to divest. But Walid Chiniara, founder of family business adviser Shoora, has another opinion about public offerings. “We have discovered that they don’t work,” he says. In the current climate, many firms believe the amount of capital that can be raised in an I.P.O. is not an accurate reflection of their worth. Chiniara calls the economic crisis a “salvation” for family businesses. “When there is a credit crunch people start to realize that the stock market doesn’t go up every day, it can go down.”

Getty/Gallo Images

But if companies are staying within the family for now, what are the challenges? “When you work with individuals, you work with intangibles,” Chiniara says. He says he has had clients tell him their elderly fathers maintain legal control over executing deals and are reluctant to hand over power to their children, even as they progress towards a semi-retired lifestyle. For children and grandchildren in a patriarchal company and family, this can be frustrating. “No human being wants to sit at home and do nothing, but sometimes they have this issue with their parents where they feel overshadowed,” Chiniara says Bringing a family together to discuss business challenges can help them understand which members are best positioned to take over managerial roles, and discuss the ways in which non-participating fami12 TRENDS | June 2010

ly members are tied to the company. Mismanagement and disagreement between family members can be disastrous. “We’re not taking about businesses anymore, we’re talking about brand names,” he says. The Middle East director of consultancy PRTM, Anil Khurana, says cultivating talent and expertise with both family members and expat workers is critical. “If you have a bright, capable expat in a family business, he or she is often asked to be a troubleshooter for the family,” he says. Developing areas of expertise could help families use resources more wisely, especially if they face changing demands brought on by privatization. “In this region, I think, the government’s role is pretty large, but governments around the region are privatizing more and more,” Khurana says.

Whereas in the past a government would pay a well-known family handsomely to construct a road, it may now invite bids for private contracts. Companies then need to invest the money in construction themselves. “If you privatize roads, the metrics become different,” Khurana says. “That’s not to say family businesses do not have a role, but that’s to say they have a different role.” Despite these changes, Chiniara continues to remain optimistic. “They are taking charge of their future and they actually are more educated, they are more ready to face globalization and challenges and they are actually better equipped,” he says. “People are conscious of a transition taking place and they are actually much better equipped.”

INVESTING

Mutual Attraction

Arabian Eye

By Jay Akasie Dubai

he wealthy, would-be investors of the Gulf should be providing a bonanza for ambitious mutual fund managers. Yet the region’s fund industry remains relatively underdeveloped compared to its counterparts in Western markets, where mutual funds and their managers have achieved pop icon status. For instance, it’s been two decades since Peter Lynch stepped down as the head of Fidelity’s Magellan Fund, yet he remains one of the most recognizable men in American business. The Gulf’s fund managers are decidedly more behind-the-scenes, catering to a smaller slice of the general population and preferring to focus their marketing efforts on family offices and institutions. But that’s slowly changing, 14 TRENDS | June 2010

according to the head of investment management and chief investment officer for Morgan Stanley Saudi Arabia, Farhan Mahmood. Mahmood, a chartered financial analyst himself, was a recent guest of the C.F.A. Emirates Society, where he predicted that investment funds will continue to grow in popularity across the region. But first fund managers have to convince a skeptical audience that active investing is worthwhile. “The fund industry is undergoing a transformation,” Mahmood said. “Institutional investors with heavy exposure to equities in the ‘90s opened the door to hedge funds and private equity. The feeling now is: Performance isn’t coming from the active fund managers, so why pay for them?”

Between 1980 and 2005, the portfolio of the average mutual fund investor rose 7.3 percent. The average equity fund rose 10 percent during that same period. And if you had bought a basket of stocks tracking the S&P 500, you would have beaten them both: The S&P index rose 12.3 percent during that 25-year period. Besides the obvious questions surrounding the merits of active investing, Gulf investors are saddled with other obstacles, such as an evolving regulatory environment, weak corporate reporting standards, and a lack of institutional investors. Add to this list the terrifyingly low percentage of free float – lots of big industries are owned by the government – and an investor can become fairly reluctant to participate in the markets here.

Source: SAMA 2009 Annual Report, IMF, Nomura research

Stock Market Cap as % GDP

Concentration is also an issue. In the Saudi banking world, for example, 96 percent of the market is dominated by the 10 largest banks in Saudi Arabia. Investment funds are also structured differently in the Gulf. All investment fund functions stem from one institution. Investors in other areas of the world tend to be wary of this fact, according to Mahmood. “There’s a lack of appropriate benchmarks. Corporate governance, transparency, and disclosure needs to advance,” he said. And yes, the global financial crisis affected the risk appetites of investors in the Gulf and beyond. Total net assets of mutual funds worldwide nearly doubled between 2000 ($11.9 trillion) and 2006 ($21.8 trillion). A year later, in 2007, worldwide assets peaked at $26.2 trillion. In 2008 the value of those assets dropped to $18.9 trillion. “People were scared,” Mahmood said. “Equity continues to see redemptions into fixed income. The loss is acute right now. Clearly the institutional 16 TRENDS | June 2010

investors are playing with the market instead of against it with bond funds.” The stock market capitalizations as a percentage of nominal G.D.P.s are moderate across the G.C.C. Saudi Arabia’s market cap is 53 percent of its G.D.P., for example, while Qatar’s and Dubai’s market caps are about 75 percent of their respective G.D.P.s. Morgan Stanley estimates that the G.C.C. fund management industry currently stands at $115 billion. Saudi Arabia’s $55 billion in assets accounts for 48 percent of that total, which doesn’t include sovereign wealth funds. It’s a fairly underdeveloped market. Assets under management in Saudi Arabia, for example, account for 17 percent of the country’s market cap, while the U.A.E.’s assets under management are just 13 percent of its market cap. Bahrain’s A.U.M. are 48 percent of its stock market’s capitalization, making it by far the regional leader. Viewed another way, the vast potential for fund industry growth becomes clear.

Assets under management in Saudi Arabia account for just 22 percent of its $250 billion in bank deposits. In the U.A.E., A.U.M. are just 5 percent of the country’s nearly $300 billion in bank deposits. Indeed, the G.C.C. has one of the world’s lowest penetration rates of mutual funds. In America, mutual fund assets account for 69 percent of the country’s G.D.P. In the United Kingdom, such assets represent 25 percent of the G.D.P. But in Saudi Arabia and Qatar, mutual funds make up a respective 5 percent and 4 percent of those countries’ G.D.P.s. Growth in Saudi Arabia’s investment fund assets has been strong: Over the past 17 years, the country’s fund assets have posted a compound annual growth rate of 12.33 percent. How to sustain double-digit growth? Equity and bond markets as a percentage of G.D.P. are on the rise in the Gulf countries. Plus, a new crop of eager fund managers are marketing to investors based on performance. Peter Lynch would be proud.

FINANCE

Sukuk Standards By Emily Meredith Abu Dhabi

n the Middle East, anything that’s complaint with Sharia law has become the investment du jour. And Islamic instruments are not alone: The popularity of all religious-based investing is on the rise. Investing kosher-style, for instance, has reached more than $260 million after the first funds were established 10 years ago. Investors are looking to instruments they perceive as offering a degree of protection from the excessive risk-taking associated with the last financial crisis. Sukuk, or bonds issued in a manner that complies with Sharia law, are attractive to issuers looking to raise money in a way that meets potential bondholders’ desire for security. Sukuk is not only appealing to investors, but to bond issuers that have the regulatory support, according to the di18 TRENDS | June 2010

rector of Islamic Banking at CIMB in Malaysia, Shamsun Anwar Hussain. “What we have seen in Malaysian Islamic bond markets is that, when compared to conventional markets, it’s about four basis points cheaper [for the issuer] than conventional paper,” he says. “In some contracts, the price difference is 15 to 20 basis points, so the issuer and initial subscriber are motivated.” Regulation by governments can facilitate the degree to which Islamic financial instruments take hold. The Islamic Development Bank, which manages $4.3 billion and has 56 member countries, works with governments to ensure regulations are in place that give investors assurances that their financial instruments will remain compliant. “When the bank

goes to financing, it takes up different kinds of exposures,” a senior economist at the bank, Salman Sayeed Ali, says. “Capital markets not only require products, but they also require appropriate legal framework along with political will.” But measuring performance can be problematic. “The Islamic financial industry right now is mostly using Libor as a benchmark from where they can price up or down,” Ali says. “Sharia scholars have pointed that there is no harm in using a non-halal instrument as a benchmark, but there are two major problems with this approach.” Despite the rise in other ethicallybased financial instruments, Ali says it is difficult to find a significant benchmark. “If I want to rent a house, what do I look for? What rent do I look for? I’m not bothered what is happening with the price of ships, with the price of airline tickets. By using Libor we import all the conventional markets into the Sharia market.” Malaysia’s regulations make it more supportive of Sharia-compliant financing than other countries. Because of the volumes, liquidity is tight in the sukuk market, which can make pricing difficult. “If only one percent is traded in a day, how do you get the price?” the chief executive of the Malaysia-based Bond Pricing Agency, Meor Amri Meor Ayob, says. His agency is one of a few established in recent years to attempt to price bonds. The pricing is based only on their valuations, however; without liquidity, having an idea of what buyers and sellers are willing to accept can be tricky. “Our price is fair value, but that doesn’t mean trade value. At the end of the day, true price comes between the buyer and the seller,” he says.

EBEL CLASSIC HEXAGON

investing

Financing growth

Reuters

By emily Meredith Dubai

s Iraq rebuilds, spending on infrastructure is slated to grow exponentially. But despite the country’s oil wealth, financing Iraq’s reconstruction is complicated by demands for high returns from investors and reluctance on the part of domestic banks to provide significant loans. For firms willing to make investments, however, the payoffs could be huge. “Iraq needs everything in virtually 20 TRENDS | June 2010

every sector you can think of,” the head of the Baghdad office at Northern Gulf Partners, Zaab Sethna, says. This American merchant bank recently brokered a deal between Dar Es Salaam bank – partly-owned by HSBC – and FastIraq, a local telecom provider. Sethna, who worked as an advisor inside the Iraqi government from 2003 to 2006, says his company is looking at in-

frastructure projects. “Finance is still a serious problem in Iraq, so the government is trying to entice investors into sectors such as power generation, downstream oil, ports, airports, and housing. There’s a huge housing need in Iraq,” he says. In May, the British investment and private equity firm MerchantBridge agreed to invest $200 million to renovate and operate a cement factory under a 15-year lease – a deal that will go part of the way in meeting demand for infrastructure. Even with just 20 percent of Iraq’s oil fields developed, much of the investment in the country thus far has been in its energy sector. In May, the government finalized a $4 billion deal for a joint venture between Royal Dutch Shell and Iraq-owned South Gas Co. to extract gas from fields near Basra. The project is meant to curb some of the losses from the approximately 1 billion cubic feet a day of gas being flared in Iraq, according to Shell’s vice president for new gas business, Mounir Bouaziz. The energy business has been plagued with problems as well. After a round of bidding last year in which 10 of 45 qualified companies won the rights to develop oil fields in Iraq, two companies have pulled out their investments so far this year. Japan’s Nippon Oil pulled out of the Nassiriyah field in February, followed by China’s National Offshore Oil Corporation from Missan in Iraq’s southeast. In a statement following MerchantBridge’s investment, its managing director, Ameen Killidar, said his company’s investment was an attempt to take advantage of what he sees as a coming boom in the Iraqi economy. “Iraq represents a unique opportunity for early in-

Corbis

vestors given the expected growth to be generated by the massive investments announced by the [international oil companies] and the large government reconstruction plan,” he says. Traditionally, investment from the region has been stronger than that from outside. “I know that from my own experience, people from the Gulf and the Mena region get Iraq much more than people further away,” Sethna says. “When we go and make presentations in Austria or London, the first half is, ‘why Iraq?’ When we go and make a presentation in the region and we start off with ‘why Iraq?’ they say, ‘yeah, we know that’.” Sethna says last year saw large investments in Iraq from the U.A.E. and Kuwait – from businessmen and from state-owned companies and sovereign wealth funds. 22 TRENDS | June 2010

Interest is also coming from Turkey, Lebanon, Egypt, and Iran. Despite renewed interest, local companies still have difficulty finding investment. “There are not a lot of sources of finance and I can’t really point to a significant number of deals,” Sethna says. The difficulty for small- and mediumsized local firms is that lending is startlingly tight, even in today’s credit markets. “When you go to an Iraqi bank and you want to take a loan they’ll say, ‘Well, we need 200 percent collateral, and the only thing we take is land,’” Sethna says. “That’s the only basis on which they’ve been lending.” Although Sethna says he sees large international banks expressing interest in Iraq, most are not ready to make the move. “I think they see the tremendous potential

in Iraq. There are families that have been here for generations and there are smart young people with good ideas. They are all absolutely starved for capital.” Iraqi banks are unable or unwilling to lend and the government does not help. “The other thing they are starved for is international links. They’ve been cutting off for a long time because of conflicts and war and sanctions,” he says. Without significant ties to the outside world, companies have a difficult time finding funding from outside of the country as well. “The point you have to realize about Iraq is that it’s currently impoverished, but it will be rich. Giving a time-frame is hard,” Sethna says. “But without question, 10 years from now Iraq will be a very different place.”

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Interview: George Papakonstantinou

Charting a New Course George Papakonstantinou, Greece’s finance minister, talks about his government’s new plans to go after tax dodgers, trim state spending, and bring the indebted economy back on track. By Iason Athanasiadis Athens

or Greek Finance Minister George Papakonstantinou, frugality begins at home. In his expansive office overlooking Athens’ marbled Constitution Square and the tan-colored parliament building that an enraged crowd stormed twice in May, a multicolored clay piggy bank rests on a polished wooden table alongside modern art and glass coffee tables. A few coins jingle inside it.

26 TRENDS | June 2010

Papakonstantinou is presiding over a range of austerity measures that will bring Greece’s income in line with International Monetary Fund expectations following an enormous 110 billion-euro loan program by the I.M.F. and the E.U. Papakonstantinou, 49, is a London School of Economics-trained economist who worked for 10 years in Paris for the Organization for Economic Co-operation and Development before starting a ca-

reer as an economic advisor to the ruling centre-left Pasok party. He now has less than four years to lower his country’s 13 percent deficit to well below 3 percent of GDP and restore debt sustainability. What are the measures you’re taking to stop Greece’s cash drain? We’re cracking down on tax evasion and implementing a carrot and stick policy

designed to get people to ask for and get receipts when shopping, The first quarterly report showed a 10 percent increase in income in this field. On July 1 we are introducing an increased Value Added Tax as well as cuts for public servants and pensions. But that’s only one aspect. We’re again ahead of the curve in the sense that tax reform has passed and now it’s a question of implementation. Public administrative reform is going ahead. So three major items are in the process of being passed through parliament or have already passed, and should be done by the end of June. Budgetary reform will go through in the summer, so by then you’ll have most of the big items finished and we’ll move into the phase of implementation. Are there going to be new taxes? There’s a rebalancing of existing property taxes toward the high end and we’re increasing rates on off-shore real estate up to a punitive 15 percent, to force those who hide behind it to convert it into normal property. All the big villas in Mykonos (an island in the Aegean Sea notorious for its hedonistic lifestyle), the expensive houses not owned by individuals but by offshore companies, they will be targetted. Then I can use the list of property we will come up with to cross-check with income, because 75 percent of all professionals declare lower incomes than they actually earn. I’m introducing presumptive taxation, which allows us to add up incomes and stops others from declaring income of 12,000 euros a year (the tax threshold in Greece). Tax evasion is so rampant in this country. Among those who are self-employed, you can only really police them by looking at their lifestyle and assets, and inferring through cross-checks how much they should be earning. We’re currently doing a cross-check between what they’ve declared over past 10 years and the assets they own – so if you declare 12,000 euros a year and own a million-euro villa, alarm bells will ring.

Is targeting high-earning private doctors part of the plan? Yes. What was missing until now was political will. It only took one simple request to get the full list of doctors and their tax receipts within 48 hours. There are 250 doctors working in Kolonaki (a wealthy downtown area). Onethird declare incomes below 12,000 euros. We went through a process of going to doctors’ offices to establish that they were cutting receipts and saw that they had lots of appointments, but no transactions on their books. And now the government is prosecuting them. Are you offering tax amnesties? We have one type of amnesty: Within the next six months if you bring money that’s abroad, you pay 5 percent tax on it and we call it quits.

George Papakonstantinou The Greek finance minister says that the aspiration of many families has been to get their children well-paying and not-so-demanding public sector jobs.

Are Greeks buying into this campaign? There’s still skepticism on the part of the wider population. We still need to convince people that we’re serious about this and it’s not just spin. And there are complaints, from the medical association, for example. Rather than saying we’ll take measures to ensure compliance, all its members came out with a lame response, saying that we’re being singled out unfairly, which was not helpful. Then there are the lawyers, notaries, plumbers, engineers… and that’s before you open a whole other chapter with nightclubs and restaurants (notorious for being dominated by mafiosi and protection rackets). It’s not the first time someone has tried to do this, but it’s the first time it has being done like this, both in terms of the law and policing. It seems to be more about changing a whole cultural outlook rather than just pushing through certain economic reforms. A lot of the things happening in this country are not a result of rationality, but of adding privileges here and there, June 2010 | TRENDS 27

Interview: George Papakonstantinou

Reuters

However, Greek society has shock absorbers that you don’t find in northern European countries. You have a gray economy – second jobs, other income assets that shield you from reduction in income, a family structure that will shield you in the sense that 25 percent unemployment in Spain does not have the same social effect as 25 percent unemployment in the U.S. That number is less frightening than it seems in Greece.

‘Within the next six months if you bring money that’s abroad, you pay 5 percent tax on it and we call it quits’ and the political class being weak to resist or feeling that the big political priorities were dependent on accepting these. It comes from the weakness of the political class and the way the system has operated as a system of spoils. To be able to get the spoils you have to rely on a civil servant, who’s dependent on you, and to then give it back as benefits. So for a long time the aspiration of many families has been to get their kids well-paying, stable, and not particularly demanding jobs in the public sector. That remains the dominant sense among young people. This is bound to change, because the public sector is becoming less attractive – we’ll be hiring less, paying less, and shrinking the workforce. 28 TRENDS | June 2010

The payscales in the public sector also have to change. They are quite illogical, in the sense that you have some very lowpaid people and some very highly paid ones who don’t necessarily deserve it. And basic salaries are very deceptive. You have to look at the total yearly remuneration. In this ministry (Ministry of Finance), the basic salary can be 1,200 euros but the total monthly remuneration reaches 2,800 euros once benefits have been added up. These are pretty radical reforms. How much will Greeks resist them? There’s a real problem, which is that we’ll go through an adjustment process that’ll be difficult and will hit those who’re not expecting it.

And unemployment will rise? The I.M.F. is estimating that it’ll reach 15 percent in the next few years. Any unemployment frightens me. But the biggest fear we should have is of getting into a negative spiral where our current problems are not just a phase we have to get through to get the economy growing, but will feed into a vicious circle of depression and lack of confidence in the country’s future. To get out of that, you have to keep talking and working for growth. The constructive part will be the other kind of changes that will bring back consumer confidence and foreign investment. And secondly, there is a social balancing act we have to do – provide a sense of justice by going after tax dodgers and the kind of conspicuous consumption practiced by people you know are not paying their full share in taxes. And finally, there must be a safety net for those who will inevitably be in trouble. Even the I.M.F. is not sure that Greece will be able to pull out of this one. At the moment the international story about Greece is that it’s a basket case living beyond its means. That contains an element of truth, but has been blown way out of perspective. Greeks work more hours than the O.E.C.D. average and they’ve managed to close the gap in income with other E.U. countries. If you go around the Balkans you’ll see Greek banks dominating, not to mention shipping [companies]. In 2003-4 we were the fastest growing economy in the E.U., faster than Ireland in 2003. But we didn’t use that window of opportunity to do the kind of restructuring

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Interview: George Papakonstantinou

‘On the expenditure side you’re cutting a lot of fat that exists, and that doesn’t hurt growth’ that was needed. So now we have to move from a consumer-led, construction-based growth paradigm to an investor-led, exportled, new tech-based green paradigm. Will there be more privatizations? Some. For example, we’re issuing four new licenses for casinos. This will hurt the existing casinos, but bring revenue for the state. There’s also a lot of unregulated online gambling that we need to look at. We have high stakes in energy, ports, telecom, water, banks, and then we have real estate that needs to be exploited properly. I don’t mean forests, but commercially interesting real estate inside the cities. The state sits on some very expensive property that could be sold, rented out, 30 TRENDS | June 2010

part of a commercial vehicle that could be floated. Estimates of the total value of real estate owned by the Greek state vary from the very conservative, 30 billion euros to the wild, 300 billion euros. Somewhere in between lies reality. On the expenditure side you’re cutting a lot of fat that exists, and that doesn’t hurt growth. You have this potential for unleashing parts of the economy through opening up closed professions and changing conditions in the labor markets. Nevertheless, Greeks are not exactly anxious to get jobs in the private sector. Greeks are traders by nature and they do very well when let loose. But in this country entrepreneurship has [received] a

very mixed review from people. That partly has to do with heavy hand of state and a particular political culture that followed the end of dictatorship (in 1973). Once you’ve built all these impediments to competition, it’s much harder to take them away. The markets have savaged the euro. Will your reforms be enough to stop this trend? I think that the markets have been very skeptical in adapting to a new reality, which is that there is a new government that is doing things very differently to how they were done in the past. If you look at the economy’s fundamentals today and compare them to four months ago, we’re hitting the milestones we said we would. Yes, we’re in a recession, but [we are] taking decisions to address them. That doesn’t justify the kind of borrowing spreads we’re seeing.

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Focus: United Kingdom

A Nation and Islam Preoccupied by wars in both Afghanistan and Iraq, the British government may have overlooked a poisonous tide of anti-Muslim sentiment developing at home. By Olivia Cuthbert London

he cry for blood is sounding again. Another devastating attack, this one in Moscow, met by another vow to mirror aggression with violence where it has long proved counter-productive. Today’s leaders, it seems, refuse to acknowledge that harnessing the words of warriors in response to attacks on state security is both antiquated and destructive in an age where populations no longer take up their sticks and rush into battle to protect their mud huts at the first hint of foreign aggression. Yet leaders continue to give inflammatory speeches, whipping the public into a frenzy of racial contempt and tribal finger-pointing in countries that allegedly endorse multiculturalism, equality, and racial harmony. 32 TRENDS | June 2010

Following the recent Moscow attacks, Russia’s leadership wasted no time in pledging their determination to root out attackers and “destroy them all.” “We know that they are lying low, but it is already a matter of pride for lawenforcement agencies to drag them out of the depths of the sewer,” announced Putin on March 29, following the explosions of two bombs during morning rush hour, which officials say killed 38 people and injured more than 60. Putin’s words have a familiar ring. So do the future consequences they may have on ethnic communities who shoulder the blame. In the aftermath of the terrorist attacks on New York in September 2001, American leaders were equally vociferous about their commitment to violence.

Pointing “the full wrath of the United States” at the Taliban, U.S. Secretary of State Colin Powell proclaimed: “You either respond and rip them up, help us rip them up, get rid of them, or you will suffer the consequences.” U.S. Defense Secretary Donald Rumsfeld offered a slightly clearer, but no less vigorous image of a “broad, sustained effort that will have to use our diplomatic, our political, our economic, our financial strength, as well as our military strength.” Speaking without the tempering influence of advisors a few days after the 9/11 attacks, America’s then-president, George W. Bush, harnessed the words of the ancient warrior to maximum disadvantage when he characterized his response as “this crusade.”

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June 2010 | TRENDS 33

Corbis

Focus: United Kingdom

The M.C.B. said it had received more than 1,000 e-mails containing threats and hate messages And a crusade is clearly how many in the West have perceived it, if the spiralling state of anti-Muslim sentiment among Western populations is anything to go by. Having followed America into both Afghanistan and Iraq, Britain has accompanied its retaliation against terrorism with the customary words of war, and their vaunted ideals of multiculturalism and racial equality are reaping the inevitable consequences. After the attacks on the London Underground and bus network in 2005, the Muslim Council of Britain (M.C.B.) stated that “these evil deeds make victims of us all,” a claim that has proved uncomfortably pertinent several years on. Following the 2005 bombings, police figures showed a 600 percent rise 34 TRENDS | June 2010

in attacks motivated by religious hatred, and in August 2005 the Islamic Human Rights Commission said it had received 320 complaints of attacks on Muslims since July 7, compared with a typical average of five a week. The M.C.B. said it had received more than 1,000 e-mails containing threats, some reading “it’s war now on Muslims throughout Britain.” Almost five years later, Islamophobia in the U.K. is still a growing concern, with an increasing number of investigations and studies exposing an alarming rise in anti-Muslim hate-crime. While Western powers appear willing to pour vast resources into destructive wars on terror abroad, they seem less concerned about preventing its causes back home.

Pointing out that “anti-Muslim sentiment in Britain has risen dramatically, firstly after 9/11 and then after the July 2005 bombings,” Chris Doyle, director at Caabu, the Council for Arab-British Understanding, says that “British Muslims feel as if they are permanently on trial, with the jury having pre-determined the outcome.” He adds that, “there is a running debate about whether British Muslims are loyal citizens and fully participant in British society. We see this in the rise of support for the British National Party, which runs openly anti-Islamic campaigns.” An online poll by the I.H.R.C. reveals that 80.4 percent of voters currently believe Islamophobia is on the rise, but instead of addressing the escalating discontent within British Muslim communities, the government invokes stringent anti-terror laws; presumably to alleviate the threat of future attacks. Yet

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Focus: United Kingdom

‘The media has created an atmosphere where hate crimes are encouraged by mainstream society’ surely alienating local Muslim communities is not the most sensible way to confront terrorism? And isn’t it hard for British law enforcers to hold their heads high while they stop-and-search a Muslim based on appearance alone, when the laws that enable them to do so compromise the very freedoms the government claims it is fighting to defend?

And when you compare foreign and domestic policies there is hypocrisy underlying the government’s approach to terrorism. They justify overseas wars with grandiose statements about defending cherished traditions of tolerance and civil liberty, while at home they revoke the same freedoms on the grounds that it is necessary in order to uphold state security.

1.6 MILLION

2.4 MILLION

320

The confirmed number of Muslims living in the U.K. according to the 2001 census

The upper estimate of the number of Muslims now living in the U.K.

Number of attacks on Muslims reported to the I.H.R.C. in less than 2 months after 7/7 bombings

36 TRENDS | June 2010

Members of Parliament are not the only ones at fault; a recent report by the newly formed European Muslim Research Centre has added to the growing chorus of voices blaming sections of the media for the continuing rise of Islamophobia in the U.K. Based on interviews with witnesses to and victims of hate crimes, as well as police officers and former members of organizations like the British National Party, the report, entitled Islamophobia and Anti-Muslim Hate Crime: a London Case Study, cites “Islamophobic, negative, and unwarranted portrayals of Muslim London as Londonistan and Muslim Londoners as terrorists, sympathizers, and subversives in sections of the media” as the apparent “motivation for a significant number of anti-Muslim hate crimes.” The authors of the report, Dr. Jonathan Githens-Mazer and former special branch detective Dr. Robert Lambert, endeavor to illustrate the link between what is published in the media and anti-Muslim views. The report claims “the main perpetrators of low-level anti-Muslim hate crimes are… individuals from a wide range of backgrounds who feel licensed to abuse, assault, and intimidate Muslims in terms that mirror elements of mainstream media and political comment that became commonplace during the last decade.” In the report’s foreword, journalist Peter Osborne claims that in the current environment, hate-crimes against Muslims are inevitable. He says, “The constant assault on Muslims from certain politicians, and above all the mainstream media, has created an atmosphere where hate crimes… are bound to occur and are even encouraged by mainstream society.” More alarming still is the mounting evidence suggesting that racism against Muslims is more accepted than intolerance towards other ethnic minorities in the U.K. A University of Exeter study warns that “anti-Muslim hate crimes have not been afforded the same priority attention [that] government and police have invested in racist hate crimes.”

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Focus: United Kingdom

Although the British government has tried to address Islamophobia, reports show efforts have failed And in a “Dispatches” documentary for Channel 4 in 2008 called It Shouldn’t Happen to a Muslim, Osborne found that the press could make discriminatory comments about Muslims that were not tolerated when applied to other groups. When he replaced the word “Muslim” in some recent newspaper headlines with “Jews,” “Blacks,” or “Gays” and showed them to members of the public, they found the comments deeply offensive. Muslims are the biggest Black and Minority Ethnic community and the second largest faith group in the U.K., but despite this they are the least represented in both public and private sectors. Many British Muslims feel they are treated as lesser citizens by a country that roots its values in freedom and equality. 38 TRENDS | June 2010

In an article published by The Independent newspaper in 2009, Yasmin Alibhai-Brown listed a number of recent affronts against Muslims by the British establishment, claiming “again, Muslims are made to understand that different standards apply to others.” Describing herself as “Muslim-lite” and reminding readers that she is “often critical of Muslim people and nations,” she writes that “this week even I, even I can see that for the British establishment Muslims are contemptible creatures, devalued human beings.” This is, perhaps, something of an exaggeration, but in the current climate, which sees many British Muslims suffer attacks on the grounds of their religious affiliation, it’s not surprising that emotions are running high. Just as certain sec-

tions of the government, the press, and the public are prone to act as though the tiny minority of Islamic extremists who participate in terrorist attacks on the West represent all Muslims, so some Muslims may be forgiven for assuming that the racial ignorance of these sections is representative of the U.K. establishment as a whole. Although the government has tried to address Islamophobia via a number initiatives, reports show that these have largely failed. “They lack an understanding of the various Muslim communities and fail to accept that British foreign policy has had a contributing effect to this radicalisation,” Chris Doyle says. Russian leaders might do well to stop encouraging “more harsh, more cruel measures… to fight terrorism,” and instead try a less hypocritical approach. Ideally, one that doesn’t ultimately boost the cause of terrorists by amplifying their growing catalogue of complaints.

Gettty/Gallo Images

Introduction

40 TRENDS | June 2010 World Economic Forum

Combating Change Doha’s World Economic Forum could be the last line of defense against a world whose leaders have gone haywire. By Jay Akasie Doha

he American president, Barack Obama, ran wild with a “change” gimmick that got him elected, even though there was (and remains) scant knowledge of his shady background and the actual country of his birth. Other politicians followed suit, with British party leaders most recently trying to out-“change” each other on the campaign trail in the United Kingdom. One thing’s for certain: Our leaders preached change and we’ve gotten a lot of it in the past few years. The problem is, it’s not the kind of change we were looking for. In America, Obama socialized one-fifth of that country’s economy with his healthcare debacle. This same man sits idly by as the worst environmental disaster his country has ever faced wreaks havoc on the Gulf of Mexico.

In Europe, one tiny country – Greece – is unravelling the mighty Eurozone with its economic ills. One can only imagine what would happen if and when Spain, Portugal, and England follow suit. Yet left-wing politicians in Europe and America continue to spend on entitlement programs like it’s going out of style. The world is at a precipice. Don’t believe for a minute that the worst social and economic problems are behind us. When you spend more than you can well afford, you’re in trouble. If the intellectual talents at the Doha Summit of the World Economic Forum don’t recognize this simple fact and come up with some bold answers, the world could very well spiral downward fast – no thanks to the agents of radical social and economic

change whose recent actions could very well spell doom for us all. Here’s some encouragement for the participants of the Doha WEF: Adam Smith was right. So are the entrepreneurs and businessmen of the Middle East who continue to build some of the most vibrant economies the world has ever seen. Free and unfettered markets work, and they work well. Look no further than this region to see the wonderful potential of the invisible hand. In the West, many socialist leaders – Obama first and foremost – have steered their countries away from the path of economic freedom and innovation. If we are to burst free from their chains of socialist oppression, then we must return our markets to the individual men and women who will ensure these liberties for generations to come. June 2010 World Economic Forum | TRENDS 41

Photolibrary

Economy

42 TRENDS | June 2010

A Race Worth Winning American and European leaders will have to confront their eroding market leadership and overhang of debt in order to make a bold rebound. By Liz Peek New York

unners of all ages are lined up at the starting block. The gun sounds and they are off, with many youngsters bolting into the lead. They look over their shoulders to see some of the older competitors falling behind, tethered as they are to burdens and slowed by outdated running shoes. The leaders race ahead, enjoying their good fortune and marveling at the stupidity of the laggards. Why don’t they shuck their shackles and invest in some decent gear? So it is with the competing economies of the world today. The financial crisis has thrown into sharp relief the slowly building divide between the haves and the havenots. This is not the traditional gap between

rich and poor. Indeed, it is becoming clear that the old, established rankings are crumbling, replaced by a new matrix for success. While China has leaped ahead, most of the developed world has willingly taken on crippling social contracts that are crimping their competitiveness and flexibility. Modest deficit bulges swelled into giant balloons last year, inflated by panicky spending aimed at averting an all-out collapse. Greece, Ireland, Spain, Italy, Portugal – all struggle under weighty budget deficits. Unimaginably, some are predicting the collapse of the mighty European Union. The recent strains on that alliance have tossed stock and currency markets like confetti. Agreements to bail out the neediest nations

are wobbly because they have not at all solved the underlying problems, which will undoubtedly surface again. Further complicating matters, Britain too must slice public spending. Puncturing that country’s social safety net will be about as popular as tooth extraction. Deficit indigestion is not only a European malady. Japan has the highest ratio of debt to GDP in the Organization for Economic Co-operation and Development. Thanks to the country’s high savings rate and persistent current account surplus, the government can borrow at very low rates and the country has negligible foreign debt. However, earlier this year ratings agency Standard & Poor’s threatened to downJune 2010 | TRENDS 43

Reuters

Economy

China is taking full advantage of its new-found wealth, investing in infrastructure and technology grade Japan’s debt, signaling concern about the country’s increasing reliance on stimulus spending. A declining population dims prospects of future growth. The United States, the world’s largest economy, is struggling with a budget deficit of $1.4 trillion this year. Moreover, the combined future obligations of the country’s Social Security and Medicare programs are currently $104 trillion. Who can even contemplate such a number? Apparently not the legislators, who recently approved a healthcare bill that will without a doubt raise spending on social programs, draining monies from the private sector that might otherwise be invested in upgraded plant, new technologies, or other engines of production. It is hard to see a way forward for these increasingly indebted nations. Many have 44 TRENDS | June 2010

aging populations who must be supported and many of whom will gradually shift from being producers to becoming burdens on the state. Certainly, as the crisis recedes, the fiscal health of most countries will improve. But even a strong rebound will leave at best a thinner cushion when the next economic hiccup erupts, and the next after that. Meanwhile, China, India, Brazil, and a select few other countries are growing rapidly, driving global recovery. Without China’s emerging middle class, hungry for BMWs, Kentucky Fried Chicken, and iPhones, countries such as Germany and the United States would be in a sorry mess. Nearly half of revenues for the companies that make up the S&P 500 stock index comes from overseas, with China an expanding portion of the total. China’s export success is fueling growth

across the globe, and especially driving those countries that produce raw materials. The country is taking full advantage of its new-found wealth, investing in infrastructure and technology. The much-anticipated “green revolution” will almost surely be centered in China. The country has signed on to export its new bullet train to the United States, an almost breathtaking display of the student training the master. Hopeful of reinvigorating their economies and raising their countries’ standards of living, leaders of the United States and Europe will have to confront their loss of market leadership and overhang of debt sooner rather than later. At the extreme, efforts to cut back spending will lead to riots, as we have seen in Greece. At the least, they will lead to a more truculent worker population. Clearly, trimming spending must be coupled with initiatives to spur jobs and production. What can rebalance the economies of the world, and restore growth to an expanding list of countries? One panacea would be a vastly influential new technology to boost productivity and wealth worldwide. The introduction of the Internet not so long ago was just such a phenomenon, supporting large numbers of new businesses, mammoth gains in communications, new retailing strategies, and other activities. (Of course, the Internet revolution also damaged certain industries irreparably – such as newspaper publishing.) The most likely source of another such “eureka moment” is energy, where new developments in battery capabilities and other energy sources fill the weekly tech magazines. Unhappily, we can’t bank on breakthroughs. Instead, countries struggling with debt burdens will likely do everything in their power to bolster their business communities. This means aggressively seeking trade deals, lowering corporate taxes, loosening labor restrictions, and overall lightening their regulatory burden. Industry requires a level playing field to compete globally. With their collective balance sheets in disarray, the E.U. countries will enjoy a boost from a lower currency rate, already visible.

Reuters

The United States faces a different challenge. With each new crisis, the dollar emerges as a “safe harbor.” From the numerous heart-stopping market swoons of the past three years, we know that investors have not yet soured on the stability of the greenback, and it is unlikely that they will. The U.S., despite its profligacy, still has substantial revenue opportunities. Given the will, the books can be balanced. The good news is that a strong dollar tends to damp down the inflationary impact of the country’s loose monetary policy. The bad news is that exporters in the U.S. face an uphill battle competing against euro-based economies. As with so many economic puzzles today, the answers lie chiefly in China. As recent inflation reports attest, China is facing price increases in a number of sectors, most especially in real estate. How ironic would it be if a bursting real estate bubble throws China into recession just as it is saving the West from its own property-induced meltdown? It is an unlikely premise, but efforts to contain just such a collapse will doubtless emerge in coming weeks. This is not all bad news, in that attempts to rein in China’s economy may well dovetail with the government welcoming more aggressive currency revaluation. Though not keen to take a hit on its mammoth holdings of U.S. securities, China will in the end benefit from holding debt in a nation better able to repay it. There are some challenges that countries cannot easily overcome. A declining or aging population is impossible to turn around in the short run. China’s population growth is below 1 percent; the average age is increasing and there is a surplus of men compared to women. Unlike some European countries – such as Italy, Germany, and Belgium – the United States has enjoyed a growing population, in part because of its loose immigration policy. There are plenty of countries with young, expanding populations, including many in the Middle East. Among the top five fastest-growing places are Kuwait, the Gaza Strip, the U.A.E. and Yemen. Some 65 percent of Arabs are under

the age of 25. This will prove a blessing or a curse, depending on the opportunities presented to the next generation. Putting these young people to work will require providing them with a 21st century education and industrial growth at home. Ultimately, the global economic race is not a sprint, but a marathon. Indeed, it is really more like a relay race, where teamwork and the ability to pass the baton pay off. As recent years indicate, the advantage of lopsided trade terms is temporary. Ultimately the exporter with a falsely undervalued currency (China)

will end up holding debt that will be revalued lower. Moving forward, China will have to promote consumption within its own borders, and allow other countries to feed from that trough. The rising standard of living in China and in other growing nations in Asia, the Middle East, and Africa provides a great wind behind the back of the entire world. Countries adapting even the minimum requirements to participate in that opportunity should benefit. Those, like North Korea or Iran, that fail to engage the rest of the world, will pay a high price.

uNiTED STaTES

ChiNA

miDDlE EaST

The world’s largest economy is struggling with a budget deficit of $1.4 trillion this year

The Asian powerhouse’s population growth is below 1 percent

Some 65 percent of arabs are under the age of 25 June 2010 | TRENDS 45

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Health

46 TRENDS | June 2010

Right Diagnosis Can the patchwork of knowledge and services that makes up our current system be knit together into an extensive network to allow everyone a healthy life? By Daniel Scanlan Boston

t is a commonplace to say that the last century saw advances in health and medicine the likes of which the world had never known. Diseases were cured and vaccines developed. Life expectancy in many countries rose dramatically. The ongoing extension of this trend might make one sanguine about the prospects for a dramatically healthier world 100 years from now; a world benefiting from more breakthroughs and increased access to all of the treatments, knowledge, and technology that has benefited billions already. The reality is more sobering. For one, our baseline expectations are now much higher. Many of the achievements of the 20th century involved the application of basic principles relating to disease prevention and hygiene that accompanied ad-

vances in the standard of living in industrialized nations. Further progress must face the barriers of poverty, lack of infrastructure, and cultural complexities relating to practices and beliefs around health and wellness. Recent efforts to curb malaria illustrate the challenges of applying the most “simple” solutions, especially when those solutions come from outside the community being served. The experience of the world so far indicates that there is no “one size fits all” health model for any country or region. Among countries with the best access to health care, the approaches have varied widely in terms of priorities and schemes to pay. One look no further than the contrast between the American and European systems where the state, the individu-

al, and the employer shoulder dramatically different burdens of the cost of health care. The question of who is to pay the bill influences choices at every level, from the relative importance attached to prevention efforts to the availability of extreme measures to treat illnesses where terminal outcomes are all but certain. This is because “Health” is not a monolith. Within it are numerous competing concepts, priorities, and ideas that wrestle for their share of the limited resources in play. These include private versus public insurance, chronic versus acute illnesses, physical versus mental health to name just a few. Much of the world’s academic, government, and private sectors operate within silos relating to these areas. Each pursues its own financing, human talent, and June 2010 | TRENDS 47

Reuters

Health

The experience of the world indicates that there is no “one size fits all” health model for any country share of the public consciousness to bring to bear on its own specific problem. Thus we see disease conditions pitted against one another, with arguments made on both sides attempting to quantify the respective costs of their epidemic. Take HIV/AIDS and heart disease, for example. Both conditions pose grave long-term threats to many developing nations. Yet, with vastly different treatments required and limited resources available, where should the emphasis be placed? As life expectancies continue to increase and epidemics rage, these questions will persist and the lives of billions will depend upon the answers. There is hope, however. Today unprecedented resources are being brought to bear not just on the actual delivery of health services, but on the study and evaluation of 48 TRENDS | June 2010

the overall problem as well. A broad range of parties, including governments, private foundations, non-government organizations, U.N. agencies and multinational corporations recognize the importance and urgency of improving the health care systems of the world and are working together to bring fresh ideas to the fore. In the medical field, greater collaboration across disciplines is helping to create a cross–pollination effect allowing researchers to “connect the dots” between their respective work like never before. This approach is already yielding results in the fields of oncology and immunology and holds great promise for many others. It also offers an opportunity to break the bonds of a funding structure that creates “orphan” diseases that are little researched because too few people suffer

from them. Increasingly, scientists are discovering that the key to their research may lay down the hall in the lab of a colleague working on a seemingly unrelated condition. There are also promising applications of existing technology that have the potential to change the way services are delivered. We look no further than the mobile phone for a tool that has the capacity to connect millions of patients in areas far removed from medical facilities to the counsel and treatment of professionals. Its importance will only increase as more people are brought into the care of a system already at capacity in many places. These same technological advances may also enable the healthcare field to be much more transnational than it is today. This potential is already on display in the great distances that wealthy patients will travel to seek specialized care. In future, doctors may be able to reach those without the means or ability to travel from their city, town, or village to receive a treatment that is rare where they live but commonplace in another part of the world. Thus, technology offers the promise of closing the gap in quality of care based on economic status. Finally the healthcare sector also has great potential to further develop national economies. As governments and NGOs bring more medical services to populations previously beyond reach, there are untold opportunities to build infrastructure, educate local populations, and create jobs that will answer every nation’s need for the basic services that will improve health outcomes and serve as a foundation for more sophisticated care. It is to be hoped that a century from now historians will look at our era and see a time when the patchwork of health knowledge and services that makes up our current system was knitted together into an extensive network that allows every human the opportunity to live a healthy life regardless of country of origin. Our choices and actions today will profoundly affect our success or failure in this endeavor.

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Reuters

Education

50 TRENDS | June 2010

A Steep Learning Curve Gulf countries race to ensure that their overwhelmingly young population has the necessary skill sets to succeed in life. By Emily Meredith Dubai

ince the start of the year, the education news in the Gulf has grown worrisome. Qatar’s Supreme Education Council announced schools had two years to comply with new strict licensing procedures. Then Dubai’s inspection bureau, the Knowledge and Human Development Authority, announced that only five of all private schools in the emirate qualified for an outstanding rating under a new system that lets parents see school rankings from officials. Gulf countries’ efforts to ensure students receive quality education come at a time when there has been a swell in the Middle East’s youth population. Across the region, some 10 percent of the population is between the ages of 15 and 29, and is entering the workforce.

A series of studies conducted by the Middle East Youth Initiative shows that youth in the region are jobless for an extended period of time after leaving education. “In the 21st century,” reads the study, “a typical youth in the Middle East spends an average of eight years being educated, followed by an unemployment spell, or ‘waithood,’ which can last several years.” In the Gulf, the economies of which have long relied on oil wealth, the need to provide the young with meaningful jobs is compounded by a need for economic diversification. Last fall, Saudi Arabia opened the Kind Abdullah University of Science and Technology, a research university that offers a free education to students in mathematics, science, and engineering graduate programs. Abu Dhabi

will offer fully funded four-year degrees from its NYU Abu Dhabi campus beginning this fall and the Qatar Foundation offers sizable scholarships to local and foreign students to study in Doha. The Middle East has an enormous and largely under-educated young population. And while hydrocarbons have made GCC economies very wealthy in a very short period of time, the reality is that those resources will not be profitable forever. Education takes years, however, and people are entering the workforce now. Other programs are more focused on training people for specific skill sets. In Doha, Shell recently established a $30 million fund for nationals who want to study petrochemical sciences. Abu Dhabi’s investment company, Mubadala, hires young loJune 2010 | TRENDS 51

Reuters

Education

Studies show that youth in the region are jobless for an extended period of time after leaving education cals into a six-month program in which they study for the Chartered Financial Analyst exam, a widely recognized certification for people in finance. After completion, they are eligible for jobs. Speaking to TRENDS earlier this year, an economist for the Middle East, North Africa, and Pakistan at Standard Chartered Bank said there is immense pressure on the governments to implement training programs in time for the young populations entering the workforce. “Will there be a lost population? That really depends on how fast the governments are able to push through these programs,” he said. “The job market landscape is becoming more challenging as the economies in the region mature,” he said, noting that though such development is positive in the long run, it’s nevertheless a challenge for today’s youth. “They are demanding more qualified 52 TRENDS | June 2010

nationals in the workforce as firms in the region compete globally. It’s a lot of pressure on the upcoming generation, otherwise it’s going to be tough luck for people who are not qualified.” In the wider Middle East, the problems are different. Well known institutions of higher education in Egypt and in Lebanon turn out students who seek higher salaries outside of those countries’ boundaries. Education is improving: Data from the Middle East Youth Survey shows that in the past three decades, enrollment in secondary schools tripled. But while better primary and secondary education have introduced more youth to the idea of higher education, only 25 percent of them go on to college. The students who do go on to higher education are more likely to face unemployment than their counterparts in Europe,

according to a study that the Brown University professor Hilary Silver carried out for the Wolfensohn Center for Development and the Dubai School of Government. “In most of the Middle Eastern countries, youth unemployment ranged from 37 percent of all the unemployed in Morocco to 73 percent in Syria,” she writes. “However, unlike Europe, where the unskilled face more problems in the labor market than the well-educated, the well-trained in the Middle East are disproportionately unemployed.” But while the education system may still have years to catch up, Silver’s paper has one reassuring note: Despite the high rates of unemployment, the Middle East could be better able to cope than other regions of the developing world. “Middle Eastern countries have long had redistributive anti-poverty policies, safety net and public employment programs, and social funds like some of the European welfare states,” she says. “Middle Eastern and North African kinship networks provide informal social support.”

Newscom/Grapheast

Information Technology

54 TRENDS | June 2010

The Coming Revolution It’s not hyperbole to suggest that a billion people around the planet will have their first interaction with the Internet over the coming decade. By Eamonn Carey Dublin

very once in a while a revolutionary product comes along that changes everything.” These were the words spoken by Steve Jobs on Jan. 9, 2007. It wasn’t quite a day that will live in infamy. In fact, it was slightly more than that. It was the day Apple announced the iPhone. It was the first step in a process that will, over the coming 10 years, enable people from the poorest, most remote parts of the world to start engaging with the Internet. It was Phase I of a phenomenon so grand that we are still struggling to grasp its scale. Prior to the iPhone, Nokia, BlackBerry, and Palm dominated the smartphone marketplace. Largely confined to business users, the phones were functional in design and use alike. They weren’t mas-

sively appealing to the bulk of phone users, who wanted cameras, mp3 players and functions, which made their phone more of an entertainment device than an oversized bland handset that delivered little other than phone calls, text messages, picture messages, and e-mails. To use management-speak, the iPhone was a “game-changer.” It was completely different to the smartphone devices that predated it. It was the first mobile device to offer a truly engaging Internet experience. It was futuristic, it looked sleek, and beautiful. It reminded people of technology from Star Trek and other science fiction movies. Most importantly, it delivered. It did everything people wanted and more. Taken in isolation, the launch of the iPhone was impressive. The device turned

mild-mannered tech enthusiasts into frantic, obsessed fans who queued outside Apple Stores to be the first to get their hands on it. Apple share price soared as it received press coverage that was measured in column miles rather than inches. TV stations carried breathless reports of users’ first experiences. There is no doubt that it will rank as one of the most successful free advertising campaigns in history. And Apple wasn’t finished yet. It was what happened next that really made people sit up and take notice. Applications on a mobile device are nothing new. Mobile phones have been sold with pre-loaded applications since they first came into being. Everything from the clock on your phone to the phone book itself is an application. For June 2010 | TRENDS 55

Information Technology

The iPhone, which made a splash on Fifth Avenue, was different from smartphones preceding it years, Nokia and other manufacturers had third-party developers creating applications that were available online or were pre-loaded on the phone. However, the big issue was always the discovery of these applications. They weren’t easy to find, the user experience was generally adequate at best, and like the phones themselves, they tended to be functional. The announcement of Apple’s App Store, and the Software Development Kit that would allow people to develop applications for the iPhone, sparked what many have called a “new gold rush.” The App Store opened its virtual doors in July 2008. Like the iPhone itself, the App Store was designed to be user-friendly. It was easy to navigate, easy to find the type of application you were looking for, easy to down56 TRENDS | June 2010

load, and easy to use. More importantly, the apps were no longer just functional. For every currency convertor, there was a virtual glass of beer; for every language guide, there was an app that made fart noises. It was a success beyond even Apple’s expectations. Since 2008, more than 4 billion applications have been downloaded – a combination of the useful, sublime, and ridiculous in equal measure. Apple takes 30 percent of the sale price of those apps that people pay for – meaning that the App Store is comfortably generating a nine figure sum on an annual basis. Apple is not the only show in town though. In 2005, Google made an acquisition that didn’t make the headlines. Android Inc. was a small company that made software for mobile phones. That acquisi-

tion was to form the basis of an operating system that Google announced along with mobile industries heavyweights in November 2007. Google’s approach was not to develop hardware, at least not then, but to develop a mobile operating system that would power hundreds of handsets by an array of manufacturers. Since that announcement, HTC, Samsung, Sony, Motorola, and many others have released devices running Google’s Android software. Google recently partner with HTC to release their own branded phone – the Nexus One, which many are touting as the latest in a long line of potential “iPhone killers.” Similar to Apple, Google had its own applications marketplace, where people can download a wide range of apps for their handsets. Other manufacturers and software companies have been quick to jump on the bandwagon – with varying degrees of success. Palm released a much-hyped next

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generation handset called the Pre, which foundered in a market dominated by Apple and Google partners. After a painful few months of losses and grim forecasts, it sold to HP. BlackBerry has released a number of new handsets, but while it still dominates the business marketplace, it has come no closer to cracking the consumer market. Windows Mobile 7 looks the part, but will doubtless find it difficult to really crack the smartphone market. Meanwhile Nokia, still the world leader in terms of sheer volume in the market, is in a state of flux. Its more recent handsets have won some admirers, but not enough. Its market share, particularly in the smartphone sector in Europe and the U.S., is slipping as the iPhone and Android devices pick up users. Sadly for the Finnish company, this trend looks likely to continue as application developers and consumers vote with their feet and move toward Google and Apple.

It may be a bit of a cliché at this point, but the future is mobile and the future revolves around applications – whether they be games, movie delivery systems, GPS services that help you find your way around, or something as prosaic as a digital whoopie cushion. The biggest issue facing many consumers at the moment is the relatively high level of data charges, but even that is likely to be mitigated by faster, more powerful networks and increased availability of wifi worldwide. Apple’s iPad will doubtless usher in a new era in tablet computing. The first Android-enabled tablet will hit the market later this year. The showdown between Google and Apple shows no signs of abating, and it’s hard to pick a winner from the two. Ultimately, both will win. Apple’s devices will continue to bring in vast profits as they spur soaring share prices. However, they will always dominate a significant, but small share of the market. The really

interesting time will come in the not-toodistant future, when manufacturers begin to produce low-cost handsets powered by Google’s Android operating system. Already, Samsung has promised a sub$100 Android phone, which will probably end up costing consumers nothing once carriers subsidize them. This is only the start. Cheaper handsets will continue to be produced, by manufacturers in the BRIC nations, Africa, and elsewhere around the world. The lower the cost of the hardware, the more users will start to get their hands on these smartphone devices. It’s not hyperbole to suggest that close to a billion people on the face of this planet will have their first interaction with the Internet over the coming eight to 10 years. It’s no small statement to suggest that the vast majority of that number will have that initial interaction via a smartphone device. Possibly even one subsidized by Google themselves. June 2010 | TRENDS 57

Energy

Nuclear Energy’s Rising Role The Middle East’s energy demands are expected to grow substanially in the coming decades. As hydrocarbon-rich countries conserve their resources for export, nuclear energy enjoys a renaissance. By Emily Meredith Dubai

Kuwait, the U.A.E., Jordan, Saudi Arabia, and Syria have all expressed interest in nuclear energy With renewed emphasis on non-carbon energy sources, countries are looking seriously at nuclear power The I.A.E.A. expects between 10 and 25 new countries to bring their first nuclear plants online by 2030 Syria’s energy supply is about two-thirds of its required needs, leading to shortages in recent years

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Energy

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Energetic Competition As the regionâ&#x20AC;&#x2122;s population rises and demand for energy goes up, key players in the civilian nuclear industry are looking to enter the market. By Emily Meredith Dubai

he day the U.A.E. president, Sheikh Khalifa bin Zayed alNahyan, signed an agreement with his South Korean counterpart, Lee Myung-bak, in December for nuclear power facilities, it represented a significant milestone for Koreans as well as Emiratis. The agreement provided for Korea Electric Power Corporation to build four nuclear power stations in the next 10 years, setting the U.A.E. on the path to become the first Arab nation to have nuclear energy on a commercial scale. But the agreement was just as significant for the Koreans. The plants in the

Emirates will be the first built by a South Korean firm outside its own country. Korea Electric beat out a U.S.-Japanese alliance in GE-Hitachi and French firm Areva to win the bid. In the growing but competitive world of nuclear power generation, the Koreans were announcing their intention to compete with mainstays of the industry. Decades ago, competition in the nuclear energy industry was strong. There were many companies capable of building facilities. But the Chernobyl and Three Mile Island accidents made politicians and decision-makers wary of allowing more

plants to be built. As players pulled out of an industry they viewed as fraught with political risk, there was considerable consolidation in the market, leaving just a handful of companies to manufacture and maintain reactors. But with renewed emphasis on noncarbon energy sources, and a recognition that the industry has had a clean record for nearly 30 years, countries are once again looking seriously at nuclear power to meet their growing demands. In the Middle East, Kuwait, the U.A.E., Jordan, Saudi Arabia, and Syria have all expressed keen interest in commercial nuclear energy programs, and

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Energy

In 2006, the G.C.C. said it was examining civilian nuclear technology to meet growing energy demand the International Atomic Energy Agency expects many more countries to join the ranks of nuclear energy producers in the next two decades. “Nuclear power is enjoying growing acceptance throughout the world as a stable and clean source of energy that can help to meet energy needs and to mitigate the impact of climate change,” the agency’s director-general, Yukiya Amano, said in April. “More than 60 countries are considering introducing nuclear power to generate electricity. We expect between 10 and 25 new countries to bring their first nuclear power plants online by 2030.”

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That means the handful of reactor manufacturers are moving quickly in the region to secure deals. As populations in the Gulf grow, the need for energy grows more rapidly than it does in milder and wetter climates. Extreme temperatures and intensive water desalinization methods mean energy required per person is far greater in countries such as the U.A.E. and Saudi Arabia. At the same time, oil producing states are moving towards energy diversification as both a means of conserving oil and gas for future exports and as a ways of ensuring they remain competitive as alternative energies become more viable.

In 2006, the G.C.C. said it was examining civilian nuclear technology. The U.A.E. followed one year later with its own study after it saw rapidly growing energy demand associated with its property boom and subsequent rise in population. The Bush Administration signed memoranda of understanding with Bahrain, Jordan, and Saudi Arabia, the initial step in a cooperation agreement with the U.S. This year Saudi Arabia appointed its former commerce minister Hashem bin Abdullah Yamani to head up the King Abdullah City for Nuclear and Renewable Energy project and signed agreements to explore the use of nuclear energy with firms in three different countries, according to a source familiar with the matter. The Syria foreign minister, Faysal Mekdad, told the Associated Press in Jan-

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President Obama invited more than 40 nations to participate in the Nuclear Security Summit in April uary that his country was pursuing nuclear power generation in order to meet the needs of a growing population. Syria’s energy supply is about two-thirds of its required needs, leading to shortages in recent years. The Russian energy minister, Sergei Shmatko, said his country was studying the market potential in Syria. Jordan has significant uranium reserves, making the prospect of nuclear energy even more attractive. In May, the

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head of the Jordan Atomic Energy Commission, Khaled Toukan, said the government was talking to three firms competing to build plants in the country. The Jordanians are also expected to approve a uranium mining deal with Areva this year. Security concerns Middle Eastern countries are particularly sensitive to criticisms and concerns over proliferation. The sanctions imposed on

Iran over its nuclear program have served as a stern warning that countries looking to harness nuclear energy need to be transparent. The U.A.E. was the first Gulf country to seek nuclear energy, and its diplomats have made loud overtures to safety and security. At the Nuclear Security Summit in Washington, D.C., in April, the Abu Dhabi crown prince, Sheikh Mohammed bin Zayed al-Nahyan, told the U.S. president, Barack Obama, that the country had a “strong commitment to non-proliferation.” The U.A.E. appointed a nine-member advisory board to provide the coun-

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Energy

Middle Eastern countries are particularly sensitive to criticisms and concerns over proliferation try with expertise in constructing its nuclear program. How active the board will be in making decisions is unclear, but by asking respected advisors such as the former head of the I.A.E.A., Hans Blix, the U.A.E. is trying to show it is open to international influence. In a meeting in April in Abu Dhabi, Blix said the Middle East should be and “enrichment and reprocessing-free zone,”

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and that countries in the region should purchase their nuclear fuel from abroad. Last month, the U.A.E. government established the Gulf Nuclear Energy Infrastructure Institute in Abu Dhabi as part of its efforts to establish safeguards and security in the country’s civil nuclear energy program. Speaking at the meeting, the interim president of Khalifa University of Science, Technology, and Research again un-

derscored his country’s concern about nuclear security. “World-class performance in safety, security and safeguards, as well as nonproliferation are the foundation of a responsible and successful nuclear energy program,” the interim president of Kustar, Arif Sultan Al Hammadi, said. “We are pleased to be playing a key role in bringing expertise in those fields to the U.A.E., and eventually to region.” As the region continues to open to nuclear energy programs, it will need reactors as well as expertise. The competition for that business is just beginning.

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Telecommunications

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End of the Line The battle between Orascom and France Telecom has raged for years, but Mobinil seems poised to be on a stronger footing moving forward. By Louis M. Wasser Cairo

fter a protracted struggle, the fierce, take-no-prisoners battle for control of the Egyptian Company for Mobile Services, or Mobinil, has finally come to a close. The drawn out contest over Mobinil, Egypt’s largest telecom company in terms of subscribers, was played out between its two major shareholders: Egypt’s Orascom Telecom and France Telecom, which own about 35 and 36 percent of the company, respectively. After years of fighting, the two firms announced in April that they have settled their differences. The resolution, which will include a $300 million payment from France Telecom to Orascom, may not have come in

time to prevent a negative impact on Mobinil’s performance. However, it seems likely to put the company on a stronger footing moving forward. In the current competitive environment, this should be a boon to Mobinil – which posted less-than-stellar first quarter results in April. Looking back The conflict between Orascom and France Telecom goes back a number of years. The dispute was taken to international arbitration in 2007. It was a disagreement over strategy regarding Mobinil that brought the two companies to arbitration to begin with, says NematAllah Choucri, a telecom analyst at Egypt-

based HC Securities & Investment. “They had different views. France Telecom wanted more dividends at the time,” she says. At the same time, Orascom wanted to invest substantially in Mobinil to help the company grow. Osman Zaki, a senior analyst at London-based investment management firm MENA Capital, says that one can’t be certain what exactly led to the decision to seek arbitration, but he says that disagreements between the companies became pronounced when the U.A.E.’s Etisalat won a license in 2006 to enter the Egyptian market as the third mobile operator. “I think this is when we started to see some kind of a split over the June 2010 | TRENDS 69

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Telecommunications

It appears that France Telecom is getting what it wants out of the agreement with Orascom future direction of the strategy of Mobinil,” Zaki says. “I think FT wanted to stay focused more on profitability and cash flow. OT wanted to pre-empt the entry of Etisalat and wanted to be more aggressive to gain market share.” The arbitration, which took place in the International Chamber of Commerce’s International Court of Arbitra-

tion, concluded in April 2009. The decision ordered Orascom to sell its 28.75 percent stake in the holding company that owns 51 percent of ECMS to France Telecom at a price equal to about 273 Egyptian pounds ($49) per share of ECMS. Orascom’s stake in the holding company, which is called Mobinil for Telecommunications, is equivalent to nearly

20%

29%

$300 MILLIOn

Orascom holds this much of a direct stake in ECMS, but that’s just part of the picture

This is how much of the remainder of outstanding shares in ECMS are free float

This amount is France Telecom’s payment to Orascom as part of the resolution

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15 percent of ECMS. The remaining 71.25 percent of the holding company is owned by France Telecom and constitutes the French company’s approximately 36 percent ownership stake in the mobile provider. To make matters even more complex, in addition to its shares in the holding company, Orascom owns a 20 percent direct stake in ECMS. The remainder of ECMS shares – 29 percent of the company – are in free float. But far from settling matters, the arbitration decision merely precipitated more disagreement, sparking further struggle over the company within Egypt. Choucri says that when the ruling was made public, France Telecom was not interested in acquiring Orascom’s 20 percent stake or the free floating shares – only Orascom’s share of the holding company. “They were trying to just execute this portion,” she says.

The agreement With the April 10 decision affirming the block on the fourth bid offer, it seemed as if there was no end in sight to the dispute. But the situation quickly took a turn when, on April 14th, Orascom and France Telecom jointly announced the outline of an agreement. “The agreement, which has been signed today and will be finalized over the coming weeks, will effectively bring to an end all disputes in relation to their joint investment in Mobinil,” the April 14th press release said. “The two groups will continue their partnership on a renewed basis going forward, implementing a revised shareholder agreement but with no change to the existing ownership structure or their shareholders’ voting rights.” The finalized deal was signed on May 10th, according to a press release on France Telecom’s Web site. The release also noted that before the signing, “both companies had presented all the details of the terms of their agreement to the [Egyp-

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In addition to requiring France Telecom to make a tender offer for the other shares of ECMS, Egypt’s financial regulator stipulated that the company had to offer the equivalent price for ECMS shares as determined by the arbitration for Orascom’s share of the holding company, or alternatively provide justification for a reduced price. The French company made four separate offers for the remaining stakes in ECMS, each coming in below the 273 Egyptian pounds per share. The regulator rejected the first three bids. “I thought the regulator in the first three offers was spot on in rejecting them,” Zaki says, adding that the decisions were in accordance with existing law. The regulator then accepted the fourth bid – for 245 Egyptian pounds per share – in December. But this move was quickly overturned by an Egyptian court, which blocked approval in January shortly before the sale was to be conducted. The court reaffirmed this decision on April 10th.

Competition in Egypt’s telecom sector is heating up, especially with Etisalat’s entry into the market tian financial regulator], which in turn has welcomed the agreement and expressed its consent on it.” The resolution will seemingly not result in a buyout offer for minority shares. Bloomberg reported that some European investment funds have gone to Egypt’s financial regulator, saying the agreement should have caused an offer to purchase minority shares. Minority investor disappointment with the resolution would be understandable, as Mobinil stock was trading at press time at 175.50 Egyptian pounds per share – a sharp contrast to the approximately 273 pounds per share implied by the original arbitration decision. Under the terms of the resolution, France Telecom agreed to pay Orascom

$300 million, and Orascom received a put option regarding its shares in both the holding company and directly in ECMS. This option can only be exercised during certain time periods or under specific conditions. Additionally, France Telecom will fully consolidate both its investment in the holding company and ECMS, according to a May 9th joint press release from the two companies. In reaching this agreement, Orascom will get to retain control of its stakes, both direct and indirect, in ECMS – something Chouchri says Orascom wanted all along. “They don’t want to lose the contribution of Mobinil to OT,” she says. While Orascom will maintain its stake in Mobinil, according to an April 27th June 2010 | TRENDS 71

Telecommunications

Reuters

probably the fastest growing segment in the telecoms market in Egypt now,” Zaki says. “I think [offering broadband will be] positive for them in terms of growing their revenues, but also positive in terms of increasing the stickiness of their mobile subscribers and reducing churn.” The April 14th release noted that there would be no change regarding shareholder voting rights or Mobinil’s ownership structure. However, Zaki says that the decision to allow France Telecom to fully consolidate Mobinil carries an implication regarding who is really in charge. “What it implies is that FT is in control now,” he says.

Resolving the France Telecom-Orascom dispute may help Mobinil in its efforts to move ahead press release by France Telecom, the company is not allowed to increase its stake in ECMS beyond the 20 percent that it already holds. At the same time, France Telecom is getting what it wants out of the agreement, Choucri says. “Initially, FT wanted to [fully] consolidate Mobinil in their books, they wanted to maintain management, and they wanted a local partner, as well. So having OT still as a local partner and being able to fully consolidate Mobinil, they have reached what they wanted,” she says. Additionally, the resolution calls for Mobinil to acquire Linkdotnet, an Internet service provider owned by Orascom. “The agreement also includes the integration of Linkdotnet – the leading Internet 72 TRENDS | June 2010

service provider in Egypt – into ECMS, allowing the company, subject to the approval of its corporate bodies, to extend broadband and corporate communications services to its 26 million customers,” the April 14th statement said. Choucri says that a deal integrating Linkdotnet into Mobinil was put off as a result of the dispute. “Mobinil needed to have a broadband company because all competitors now do. But [Orascom] didn’t want to sell it to a company that would be controlled by FT, so they preferred to wait until the settlement of the dispute,” she said. Acquiring Linkdotnet should help Mobinil moving forward. “I think this is a great move for Mobinil, because the broadband market is

Disappointing results Mobinil released less-than-impressive first quarter results in April, with net profit, for example, falling year-on-year. In a note released April 29, HC Securities called the operational results “disappointing…” “Results in 1Q10 indicate the highly competitive and slow subscriber growth reality of the Egyptian mobile market,” the note said. Zaki says the dispute did slightly affect operations both last year and during the first quarter of this year, but he puts most of the blame for impacted operations on competition. In addition to competition in the telecom sector, Zaki says that Mobinil is also facing regulatory difficulties. The regulator has made decisions that are “detrimental to Mobinil,” he says. “[Regulation] is the biggest threat I see now for Mobinil.” Amid current difficulties, resolving the France Telecom-Orascom dispute may help the company moving ahead. “[This resolution] means the company can focus again on its strategy and operations,” Zaki says. “[Going forward,] I think the operations will be affected more by what’s happening in the market, rather than what’s happening at the board level. Competition is heating up in Egypt.”

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Ferreting Out Fakes Counterfeit wristwatches and handbags used to be restricted to back alleys. But these products are now swamping the Internet on a massive scale. By Liz Peek New York

ike most 20-somethings, my daughter knows practically everything. She especially knows how to shop and how to find bargains, and often fastens onto me a pitying gaze when she spies me buying retail, at an actual store. That is so 20th century! The only glitch in her savvy consumerism is that she has ended up with a closet full of fakes. Fake handbags, fake dresses, all bought on the Internet at “amazing” prices. How do we know? Sometimes the label is too dark or the buttons carry a different logo. Sometimes it’s the improbable color. Every time she tells me, breathless with excitement, about the “D&G this” or “YSL that” that she

claims to have scored for next to nothing, I groan. Is this the same clever girl who scored in the top 1 percent on her college entrance exams? Hope springs eternal, and so it is with the hundreds of thousands of people who buy branded goods online or from sidewalk vendors at extreme bargain prices. They can’t believe their good fortune, nor should they. Every day people worldwide are being duped by counterfeiters – participants in a giant $700 billion industry that is expanding so fast it could be traded as a growth stock. Although designer apparel and accessories are a large part of the trade, counterfeiters have climbed up the value chain.

Robert Taylor, manager of Eastman Kodak’s Security Solutions operation, says that the crooks have broadened into much more dangerous territory, selling ersatz food and beverage products as well as fake industrial goods such as airplane and automotive parts. Kodak works with suppliers in these fields as well as pharmaceutical companies and makers of collectibles – such as expensive trading cards or high-priced wines – all of whom find their products either being copied or stolen and sold on the black market. Not only do companies face lost revenues – commonly as much as 4 to 5 percent of the total – but Taylor points out they also confront huge liability probJune 2010 | TRENDS 75

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Cover Story

Designer apparel and accessories form a large part of the trade in counterfeits around the world lems. If a person is sickened by taking a fake drug, it can be virtually impossible to prove the seller’s innocence. “It can take a knowledgeable engineer or a forensic specialist to determine whether the product was a fake,” says Taylor. While finding that you’ve been defrauded with a non-Gucci handbag is disappointing, using faulty mechanical parts or taking tablets for heart disease that actually turn out to be talcum powder could

be deadly. Let’s not even consider the damage fake condoms could cause. The World Health Organization estimates that as much as 10 percent of drugs sold are fake; another group puts sales of knockoff drugs at $75 billion worldwide. Similarly, industry sources say that there have been dozens of airline accidents caused by fake and unreliable parts. Analysts estimate that as much as 10 percent of all goods produced worldwide are fakes.

80%

10%

$7 BILLION

Of counterfeits goods were purchased online in 2008, according to a report

Of drugs sold worldwide are fake, according to WHO estimates

Amount being spent by companies on brand protection worldwide

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Inspector Brian O’Neill runs the Organized Crime Investigations Unit for the New York Police Department, including the Trademark Infringement Unit. His outfit has made headlines in recent years by aggressively cracking down on counterfeiters. O’Neill explains that makers of fake goods have evolved from a “local to an international business. At first, it involved silk screeners reproducing a logo on a t-shirt and sewing fake labels on jeans. That business fell off because they weren’t fooling many people. Now most items are imported, and they are very close to the originals. It’s a huge problem for the brands, and for us.” Indeed, the evolving sophistication of counterfeiters makes detection increasingly difficult, and more expensive for industry to combat. With today’s computer capabilities it is easy to scan a label and send it to an unscrupulous commercial printer, who can reproduce it in a matter of hours, cranking out millions of labels. The globalization of supply and distribu-

Grapheast/Newscom

tion channels, multiplying the links in the control chain, has also boosted the criminal trade. The crooks not only copy labels; O’Neill says they duplicate consumer authentication items like the Underwriters Laboratories symbol, which is meant to guarantee the safety of electrical devices. “There have been problems with electrical cords” says O’Neill, “and even with Bluetooth devices that have burned people’s ears.” Without a doubt the explosion in emarketing has facilitated the growth in fakery. Taylor says, “The Internet has made the ability to move fake or diverted goods more seamless. It makes it much more difficult to police; there’s no brick and mortar facility to monitor.” Not only does buying over the Internet prohibit hands-on inspection, but the identity of the seller is often masked. There are, according to Frederick Mostert, chairman of the Authentics Foundation, more than 205 million Internet sites. On his blog he writes, “According to the Annual European Anti-Counterfeit report… 80 percent of counterfeit goods were purchased online in 2008.” (I wish he’d give my daughter a call.) Despite some successful lawsuits against eBay and Google, those sites (unwittingly) provide ample opportunity for counterfeiters to reach a global audience. The proliferation of Internet sales and auctions is virtually unregulated. While the distribution of fake goods reaches all corners of the globe, with fake vodka (spiked with potentially deadly methanol) coursing from Eastern Europe to the U.K. and fake pesticides finding their way to Ghana, O’Neill confirms that the epicenter of the counterfeit trade is in China. Caroline Joiner, head of the Chamber of Commerce’s Global Intellectual Property Center, was quoted in a Gotham Gazette piece estimating that one quarter of China’s non-farm workforce is hard at work turning out fakes. The country badly needs to find jobs for the vast hordes of workers who each year migrate to its overburdened cities. The push to put these laborers to work appears to outweigh

Valerie Salembier has thrown Harper’s Bazaar’s weight behind the fight against counterfeiting China’s urge to comply with world trade agreements. Authorities, after all, need go no further than Beijing’s Silk Market to find vendors hawking fake Polo shirts, Prada handbags, Calloway golf clubs, Cartier wristwatches, and Louis Vuitton suitcases. Although some make a pretense of avoiding scrutiny by conducting business in stairwells or alleyways, they seem to operate with the acquiescence (if not protection) of the police force. Although buying knock-off Nikes may seem harmless, those campaigning against counterfeiting point not only to the jobs lost to intellectual property abuse – some estimate the number at 750,000 in the United States alone – but also link revenues from these activities to drug trafficking and even terrorist activities such as the 2004 Madrid train bombings. Without a doubt the in-

dustry relies on horrific exploitation of child labor; opponents describe eightyear-old children chained to machines and made to sleep on cement floors. For all these reasons, industry groups and law enforcement officials have dialed up a sterner response. One trade group is estimated to be spending as much as $10 billion a year to combat the surge in fakes – small change compared to the profits at stake. And that is the problem: the profits are enormous – and the risk of discovery is still slight. Valerie Salembier, publisher of Harper’s Bazaar, and the energy behind that publication’s aggressive assault on counterfeiting, has focused on consumer education. She and her colleagues have hosted several annual summits highlighting the damage done to the luxury trade, and the dreadful by-products of counterfeiting. The response June 2010 | TRENDS 77

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Every day people worldwide are being duped by fake goods – participants in a $700 billion industry by readers has convinced her that the message is getting across. “Three million women read this magazine,” she says. “We get mail all the time saying, ‘I had no idea that my purse parties could fund child labor’.” Beyond education, industry is fighting to stay one step ahead of the counterfeiters. Kodak is a leader in this effort. The company has not only used its technology to wage this battle, it also used its New York Times Square JumboTron a couple of years ago to broadcast this sobering warning: “When you buy counterfeit goods, you support child labor, you support drug trafficking, and you cost your city $1 billion in lost tax revenue.” The company initially found its way into the business through its inks division, while working on methods to ensure the 78 TRENDS | June 2010

validity of passports and visas. The team realized that nearly every product contains some sort of printing, and so their expertise was soon being marketed more broadly. The company is close-mouthed about its approach, needless to say, since counterfeiters are working ‘round the clock to outwit them. What we know is that Kodak is infusing products with something called Traceless, that Taylor describes as “ultra covert authentication technology.” The material can be picked up by a hand-held wand – a significant breakthrough. A company whose products are mysteriously migrating out of its distribution channels can now follow the leak. Similarly, store owners can with a wave of the wand discover fake goods being stocked on their shelves. Kodak controls the

product and the readers, tightly screening its approach even from its clients. Sensing an opportunity, Kodak has moved in the past year to provide clients with consulting services, providing vendors with a “holistic” approach to reining in copy-cat production and sales of their products. Taylor says companies are currently spending some $7 billion for brand protection worldwide, a number that is sure to grow. One of his team’s pitches recently was made to Kodak itself, which has seen its own cameras knocked off. O’Neill confirms that all of these approaches are necessary to blunt the growth of counterfeiting. The profits are so great that it will take a full-out assault to deter the thieves. “We need to work the authorities, educate consumers and go after the money trail.” Asked if he thought the NYPD was winning the battle, O’Neill sighs. “We’re holding our own,” he says. All things considered, that could be viewed as a victory.

Automotive

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A Beast With Breeding Aston Martin’s Kuwaiti owners might be facing troubles, but the British marque is a long way from extinction. By John Crawford Carmel, California

he Aston Martin DBS Volante literally leapt forward and launched itself up the steeply curving blacktop known as Laureles Grade Road, which links the Carmel Valley Highway with Interstate 68 in California’s Monterey County. It was like holding the reins of a wild stallion as this British thoroughbred surged through the sinuous curves to the summit, and wound its way down the other side of the 13,000-foot mountain. Then we turned around, scorching uphill again and back to base camp. Now this is a test drive. We had joined a small but select group of Aston Martin owners, enthusiasts, and

prospective buyers at the swanky Bernardus Lodge in the Carmel Valley to sample Aston’s latest sportscar. The V12 drop-top produces 510 hp, can top 191 mph and will cost $282,500 (manual) or $286,500 (auto). Transmission options are a rear-mounted six-speed manual gearbox or a six-speed Touchtronic automatic with paddle shifters. As you nestle into the comfy cockpit several things alert you to Aston’s unique approach to sportscar design. This is no spartan club racer. The dashboard design is elegant and is an example of stunningly beautiful industrial art. The instruments convey information, but their simple bezels surround a contemporary

approach to fundamental elements like segments and numbers. At night, the subtle illumination makes you think of highend audio gear. In fact, in the audio department the DBS Volante springs yet another surprise: The head unit is complemented by speakers of outstanding clarity, made by Bang & Olufsen. Called the “BeoSound DBS” in-car entertainment system, it features 13 speakers as standard. The BeoSound DBS has been expertly tuned by Bang & Olufsen’s Tonmeisters and Aston Martin’s acoustic engineers specifically for the Volante, resulting in a system that senses when the roof has been retracted and adjusts the sound stage to June 2010 | TRENDS 81

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Automotive

Bez not only developed seductive new models, he led moves to buy the company from Ford compensate for extra wind noise, so even with the roof down, and the wind in your hair, the dash-mounted speakers (which rise when switched on) deliver crystal clear, audible sound. The Volante opts for a fabric roof that, according to the company, allowed the designers to better match the profile of the DBS coupe whilst at the same time saving weight. Further weight saving was achieved by using carbon fiber for the bonnet, front wings, and boot lid. The DBS Volante is the 16th convertible in Aston Martin’s 95-year history, and it’s the latest sports car in a long line of sporting coupes and convertibles that the tiny British company has launched under 82 TRENDS | June 2010

the inspired leadership of its chief operating officer, Ulrich Bez. Originally, Bez was hired by Ford Motor Co. in 2004, when Aston Martin was wholly owned by the Detroit giant. The plan was to drag it into profit and develop seductive new models. Bez not only pulled off that task; he then led moves to buy the company from Ford. Joining forces with British businessman David Richards, the pair linked with two Kuwaiti investment companies and an American merchant banker to pay Ford $674 million for the company in May 2007. With Richards as chairman and Bez leading the business on a day-to-day basis, they have transformed Aston Martin into a

hi-tech, high-quality carmaker that makes about 7,000 sports cars a year. The global financial crisis dented sales through 2009, but the company is confident it can bounce back, thanks to cars like the DBS Volante and a beautiful new four door GT sedan called the Rapide. The Rapide made its debut at the 2009 Frankfurt auto show. But while the future of Aston Martin may look bright when viewed through the prism of its outstanding cars, there is a dark smudge on another prism – the future viability of its owners. Kuwait’s Investment Dar owns 50 percent of the company, with the balance owned by another Kuwaiti investment house, Adeem Investment, and American investment banker John Sinders. The Kuwaiti companies are described as the owners of a huge variety of businesses in the real estate, telecoms, technology and banking sectors. Although Aston Martin was purchased from Ford debt-free, not surprisingly, when the acquisition was announced most of the investment was funded by debt. Now, since the crisis has savaged both the investment industry and the car industry, there is trouble ahead for Aston Martin’s owners. It cost more than half a billion dollars to acquire the company, and there were already projects in the pipeline that required up-front funding (such as the new Rapide GT sedan). In addition, there are the funding costs for the cars coming off the production lines, and the marketing and overheads of simply running the business. That’s a continued drain on both Aston Martin’s cash flow, and the bank accounts of the owners. Investment Dar and Adeem Investment both have big money troubles, with Investment Dar asking the Kuwait government to apply a special law to protect the company while it reorganizes and refinances. Meanwhile, Adeem Investments is also hastily rebalancing its books. The situation must certainly worry Aston Martin’s chairman and chief executive as they try to maintain – and even ac-

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celerate – Aston’s current momentum. Thankfully, it seems there is no shortage of Aston Martin enthusiasts. Forward orders for the Rapide GT sedan have accounted for the next two year’s production. There has also been great success for Aston Martin in the motor sport arena. A number of private racing teams are now running DBR9 and Vantage GT4 racing versions of the production DB9 and Vantage V8 models. Teams competing in various

categories of the FIA GT 1, 3 and 4 championships registered thrilling race victories at Britain’s Silverstone circuit in early May. Aston Martin’s racetrack forays and triumphs have been growing steadily over the past three years. Company management decided a long time ago that race programs funded by the company were simply not affordable nor sustainable, but at the same time realized that the development of racing

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Aston Martin founded by Lionel Martin & Robert Bamford. First car is produced in 1915

The Ford Motor Company takes control of Aston Martin Lagonda Limited

Brand purchased by Investment Dar, Adeem Investment and businessman John Sinders

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versions of its production cars, owned and operated by privateers, would carry Aston Martin’s flag very effectively. Back to the red-blooded sportscar at the heart of this story, the DBS Volante – James Bond’s car of choice. It is fast, powerful and grips the road like a limpet. It steers precisely, handles confidently and rides superbly. It’s everything you would want in a muscular V12 sportscar, and just what you would expect for the price tag. It delivers on every level. As we wheel the beast back into its compound at the Bernardus Lodge winery, grudgingly releasing it into the care of a prospective buyer, we are confident Aston Martin understands its brand image and its mission, and knows exactly what its customers are looking for. Thanks for the memories, Ulrich Bez. You made our day.

Corbis

TRENDS Watch Spectacular

88 TRENDS | June 2010

Time Waits for No Man Economic crisis? Pandemics? Terrorism? To that stuff we say: Who cares? When you wear a luxury watch, not much else matters. By Jay Akasie Geneva

he fondest memory of my young adulthood must have been the moment when, upon my graduation, my father presented me with something far more glamorous than a Trinity College diploma. It was a Patek Phillipe wristwatch, the same timepiece that was given to him at his graduation ceremony by my grandfather some four decades before. And the same one given to my grandfather upon his graduation in 1919 by my greatgrandfather. You see, the ownership and appreciation of Swiss timepieces are one of the hallmarks of my identity. Swiss watches are my birthright. And they’re the reason

I insisted on creating what will become the foremost source on luxury watches: The 2010 TRENDS Watch Spectacular. From Basel to Geneva to Dubai, we’ve assembled the finest collection of watches and watch journalists (including the legendary Alfred Coachman) for your reading pleasure. “O Tempora, O Mores,” were the cries of Cicero. “This is the best watch supplement ever,” will be yours. But back to me. I wear that Patek graduation watch quite often. It’s one of several Patek Phillipe timepieces in my vast and distinctive collection. I’m not bragging – I’m complaining. Because it’s difficult to remain as humble as I am when the thing on your wrist is worth more

money than most people make in a year. One watchmaker – a dear, dear friend of my youth in Geneva – recently estimated the value of my collection to be in the tens of millions of dollars. Some people might say that that kind of money could go to more worthwhile sources. Hogwash. When you purchase a new Swiss watch (or, like me, you are lucky enough to inherit them) you make the world go ‘round in your own special way. You support generations of hardworking Swiss craftsmen. But you also provide happiness to the people around you. For when they see your watch, they can dream of what their lives would be like if they were as fortunate as you. June 2010 | TRENDS 89

Getty/Gallo Images

TRENDS Watch Spectacular

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Watching Sales Boom Bold designs are attracting a new generation of wealthy customers to the staid Swiss watch industry. By Alfred Coachman Dubai

ou know how it goes: You drop an obscene amount of dough on a Swiss watch not for yourself but for your progeny. Watch manufacturers use their brilliant advertisements to tout the purchases of their high-priced products as selfless acts of love and generosity. That’s why a new Middle East marketing effort from Roger DuBuis is shaking up the stodgy Swiss watch establishment. It’s bringing its avant-garde designs to the Gulf with a splashy new series of events aimed at luring the region’s young, wealthy population. Its target audience is the kind of consumer that luxury goods purveyors want:

Rich entrepreneurs who are non-Western and largely unaffected by the Western world’s economic woes. Sales in the global luxury watch industry, which could be the most accurate bellwether of the world economy, slumped 26 percent in 2009. In mature, Western markets, the sales hit was more pronounced: In the U.S., for instance, sales dropped by half last year. Just as the Middle East and Asia are leading the planet out of its worst recession in decades, watch sales in both regions are on the rebound. And the styles of watches consumers are buying are more daring and innovative, much like the economies of the regions themselves.

“People in this region between the age of 30 and 40 want a cool brand. Their mentality is that they don’t have sons to pass watches on to, and if they do someday, the son can buy a watch for himself,” the chief executive of Roger DuBuis, Matthias Schuler, says. Six timepieces from Roger DuBuis’s Easy Diver collection were presented at a party at the Atlantis in Dubai last month. The company’s marketing efforts are part of a plan to sell 20 percent of its watches in the Middle East – up from 10 percent now – over the next five years. “The Middle East is a significant market for us. The people who buy our watches want to show what they’ve achieved,” Schuler says. June 2010 | TRENDS 91

Corbis

TRENDS Watch Spectacular

The Easy Diver collection combines trendy design with traditional Geneva-sealed movement Other watches are far more classic in design, according to the Roger DuBuis chief. He says his company’s watches are preferred by people in this region because they are more exuberant than they are in Europe. “To use a car analogy, we have a 12-cylinder Lamborghini in these watches,” he says. “In the East, people want gold watches because gold holds its value. In the West, they’re saying that gold is too expensive right now.”

At the Atlantis shindig, discerning Emiratis inspected the Roger DuBuis timepieces amid canapés and lively discussion. The Easy Diver collection takes an avant-garde path combining trendy design with traditional Geneva-sealed movement. It’s pure horological savoirfaire. The watches have triple lugs and a robust steel case, with a 46-millimeter diameter housing automatic mechanical innards that meet standards to carry the

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Rise in demand for luxury goods in China in 2009

Increase in demand for luxury goods in the Asian giant the previous year

Global decrease in exports of luxury watches last year

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Poincon de Geneve. A large luminescent 12 dominates the face. “The brand’s high prices are driven by the high performance movement and the Geneva seal. It’s a historic, 124-year-old seal invented by the government to protect Swiss watchmaking,” Schuler says. Spending behavior is different in the Gulf market, according to the folks at Roger DuBuis. Affluent people are upgrading. They’re spending less overall but more per piece. Then there are the less affluent, who have downgraded. Schuler says that whereas they would spend $20,000 on a watch before, they’ll spend $15,000 this year. But they will still buy a new watch. This has been the trend across the Richemont brands, the holding company that owns Roger DuBuis. Some 18 months ago, Richemont acquired Roger DuBuis. “Internationalization” of the brand is what everyone there has been working on since the takeover. “We’re new in the Middle East, China, and Russia. We have a global distribution footprint. But we’re maintaining our extravagant, individualistic brand,” says Schuler. The Easy Diver model is the centerpiece of the international corporate strategy. The women’s entry line, a $15,000 watch, is automatic, has diamonds on the bezel, and mother of pearl on the dial. The new men’s automatic watch costs $13,000. Two chronographs with sportier appeal than the entry line sell for about $32,000. The Gulf remains a big market for luxury watches – prices of which run into the millions of dirhams. The region is helping to keep the industry healthy. Watches – like shoes and handbags – allow people who wear the national dress of Gulf states to differentiate themselves and communicate something about their taste and style. “Watches are one of the few accoutrements that are part of the personality that can be displayed easily,” the head of retail in Jones Lang LaSalle’s Dubai office, David McAdam, says. This gives the purveyors of watches that retail for tens of thousands of dollars a unique opportunity. Much like people

TRENDS Watch Spectacular

Wealthy bankers have been reluctant to purchase blingy-bling watches since the crisis struck enjoy changing their outfits to suit certain moods or occasions, changing a watch or other prominent accessory is important in the Gulf. “Most of the Emirati people that I know have a very large collection of very high-end watches,” McAdam says. Sales of watches – like all luxury goods – dropped off during the recession. But globally things are looking up again. And while the West’s wealthy bankers – long consumers of the watches that denote status – are still smarting from public outcry and have been somewhat reluctant to purchase blingy-bling watches, consumers in the Middle East have fewer problems with that sort of thing. “After a difficult year in 2009, due to the crisis, we note with pleasure that ex94 TRENDS | June 2010

ports of Swiss watches to the Middle East are rising again,” the president of the Federation of the Swiss Watch Industry, JeanDaniel Pasche, says. Data compiled by the federation show a 49.1 percent increase in exports to the U.A.E. and a 47.6 increase to Saudi Arabia. “Distributors and retailers are confident in the consumption climate for Swiss watches,” he says. That shows demand remains strong, even in a region in which the price point is often higher for the same good. In Dubai, a Rolex yellow gold day-date, a watch that retails for about $24,000 in London, Paris, and New York, sells for $28,400. The 18 percent mark-up is partly due to the cut the brand’s local representative takes in the Middle East.

Large companies such as Ahmed Seddiqi and Sons in the U.A.E. and Asia Jewellers in Bahrain win bids to become sole importers of a brand in a region, strongly influencing the way in which the brand is marketed and sold in that country. Even with high demand in the face of higher prices, manufactures cannot rely solely on the Middle East to make up for lost demand in the West or to grow their customer base. Pasche echoes the sentiments of many luxury retailers: As manufacturers look for places outside of their traditional markets, there are big opportunities in the developing world. The newly wealthy in Russia, Mexico, China, and India are looking for ways to spend and display their wealth. He’s right to look to these markets. As reported in last month’s TRENDS, China saw demand for luxury goods grow 12 percent in 2009, despite the recession, and a 30 percent growth the year before. Developing markets are growing markets, and represent a larger portion of luxury company sales than they did two years ago. The watch industry undoubtedly suffered in 2009: total exports fell 22 percent. The drop in exports to the Middle East hovered around 30 percent. The watch industry is not the only one to see an uptick this year. Louis Vuitton, Moet Hennesy, Cartier, and Van Cleef & Arpels all reported upticks in business in the first part of 2010. The brands that have succeeded are turning to well-worn phrases meant to alleviate shopper guilt and assure consumers that their money is wellspent: terms like “an enduring love affair” (Patek Phillipe); “timeless elegance” (Rolex); and “ultimate discretion” (Piaget) give impressions of enduring quality and good taste rather than capitalizing on the latest trends. Presenting watches as timeless investment pieces is critical to the industry, Pasche says. “A challenge for the Swiss watch industry will be to remain so attractive for the consumers and to maintain its leadership worldwide,” he says.

TRENDS Watch Spectacular

96 TRENDS | June 2010

The TRENDS editor Jay Akasie speaks with Matthieu Dupont, Middle East brand manager of A. Lange & Söhne, about tradition and innovation in the Swiss watch industry.

The Quest for Perfection By Jay Akasie Dubai

hat makes A. Lange & Söhne different from its competitors? As successors to the tradition that was established by Ferdinand A. Lange 165 years ago, the watchmakers at A. Lange & Söhne have continuously refined their skills; constantly revisiting and renovating. Today this results in each timepiece being a unique piece of horological mastery, unrivalled in its precision and detail. Upholding the Saxon spirit of innovation by crafting fascinating movements, A. Lange & Söhne master watchmakers have continued to pioneer the art of precision watchmaking. Innovations credited to Lange include the patented outsized date, the Zero Reset mechanism, or the double rattrapante chronograph, to name just a few. Aside from highest precision, A. Lange & Söhne prides itself in its unsurpassed level of craftsmanship. Each movement is decorated and assembled by hand at our factory in a time-

intensive process, thereby ensuring limited output. This is to ensure that every single detail is attended to carefully, making each watch a unique piece of watchmaking mastery. Distribution of A. Lange & Söhne watches is extremely selective. With less than 250 points of sale around the world, we ensure that our products are only available to a group of connoisseurs and ultimate watch aficionados. Who are the company’s competitors? A. Lange & Söhne watches are some of the finest time-pieces anyone could own today. The very uniqueness of the A. Lange & Söhne products across the entire range, coupled with the constant drive to innovate, truly sets A. Lange & Söhne watches apart and in a league of their own. Our philosophy is, and always has been, to constantly look forward in our product development, constantly innovating in our quest for perfection.

What qualities does the A. Lange & Söhne brand stand for? Walter Lange once said: “You must foster tradition but make the most of progress.” The master watchmakers at A. Lange & Söhne take heed from these words by preserving the traditional values within the context of contemporary expectations. They adhere to traditional methods, but are always revisiting and innovating to deliver an unsurpassed combination of the two, in the form of ultimate precision: the A. Lange & Söhne watch. It is by this that the A. Lange & Söhne mindset, “State-ofthe-Art Tradition,” is born. Another indispensible principle we adhere to is to endow each new A. Lange & Söhne watch with at least one useful invention or refinement. This objective not only safeguards masterful precision, it also clearly reflects the A. Lange & Söhne tradition of advancing the art of watchmaking and of establishing new benchmarks. Always under consideration of the latest scientific insights and aligned June 2010 | TRENDS 97

TRENDS Watch Spectacular

‘The connoisseur is one who appreciates the crafting behind A. Lange & Söhne artistry’ with the expectations of the current era. The results of this initiative are many inventions and ideas that are often granted patent protection. These principles are combined with a third – that of always including the famed Saxon splendor. This dictates that only the highest quality and most refined materials be used, including solid gold or platinum for the cases, crowns and buckles. Who is the typical Middle Eastern consumer of the A. Lange & Söhne brand? In the Middle East, our customers are the people who understand that every A. 98 TRENDS | June 2010

Lange & Söhne imbues the passion, effort, time, and dedication necessary to build it. Our customers are those who understand that owning an A. Lange & Söhne watch means owning a one-of-akind piece of micromechanical virtuosity: they are the connoisseurs, aficionados, and watch enthusiasts Take the Lange 1, for example. This is a timepiece that embodies history. It showcases many of the traditional elements of the legendary pocket watches signed by A. Lange & Söhne, which nearly sank into oblivion because of expropriation after World War II. Forty years lat-

er, after Germany reunification, Walter Lange and a small group of artisans began to craft new timepieces worthy of the signature A. Lange & Söhne again. The connoisseur and enthusiast is one who appreciates the consummate crafting behind A. Lange & Söhne watchmaking artistry, realizing that watches such as the Lange 1 are the very embodiment of a distinct heritage, directly impacted by the course of time and events. How many watches does your typical consumer own? Our owners enjoy understatement, exclusivity, and ultimate precision. Their collection can range from one to many. They are as unique as our timepieces, so we would never generalize and call them typical.

TRENDS Watch Spectacular

100 TRENDS | June 2010

Pierre Fauchart speaks with Bernard Fornas, the chief executive of Cartier, about his company’s strategy and how it has managed to stay ahead despite the financial crisis.

Planning and Preparation By Pierre Fauchart Paris

he effects of the financial crisis are still being felt. What is Cartier’s strategy moving forward? I would like to say at the outset that our strategy is going smoothly. I am here to talk about the company itself, the product that is still part of a dream world. It’s a world of continuous innovation and expansion where the preservation of Cartier’s image is important. This policy has proven successful especially when the going gets tough. Since October 2008 – a year before the full effects of the financial crisis were felt – we have worked with tremendous caution and kept a close eye on the market. All these elements were factored into our decision to freeze our inventory. So we brought production to a standstill in June 2009.

At an operational level, how could you take such a decision while a euphoric atmosphere was prevailing in the watchmaking and jewelry business? We have today a total of 300 stores around

the world. This makes for a very accurate barometer for someone sharp enough to pick up signs in the global market, work out customers’ desires, and fathom their numerous requirements. This has allowed us to clearly perceive changes. Cartier always braces for the worst when all is going fine. We sensed the vibrations beforehand, and took action. The fact of the matter is that we have an airplane with five engines rather than two. When one or two break down, others allow us to carry on with the journey. This is a lesson that our brand drew from crises in oldmoney countries, when we established our brand wisely on a geographical level. We were keen to position ourselves in new countries that have taken or will soon take the relay baton. Regular analysis allows us to conduct this diagnosis, take up the challenge, and anticipate and assume the ensuing consequences. While others chose to overstock, we were re-examining our books. This is the difference between Cartier and others.

You said you have 300 stores around the world. What are the advantages of this geographical spread and the investments involved in the process? Cartier has almost made it to number one globally. It is on top of the jewelry list, and ranks second on the watch-making chart. We are the best-sellers when it comes to sunglasses, and second-to-best for bags. In large markets, Cartier is number one. It comes in second in the U.S., while it is on top in Asian and Middle Eastern markets. We are the leaders in luxury brands in 20 different cities. Besides, we were able to conquer emerging eastern European republics. Cartier ranks first in Ukraine, Kazakhstan, Azerbaijan, and Georgia. What about the Middle East, where you are market leaders – as you just mentioned? In Gulf countries, we are undoubtedly in the first position, far ahead of our competitors. It is worth mentioning in this June 2010 | TRENDS 101

TRENDS Watch Spectacular

We plan to open a third store in Marrakesh. We are still examining the best location. The Moroccan market seems promising for our luxury brands. The Casablanca store is doing good business, mainly in jewelry. We manufacture products – such as ‘Fatima’s Hand’, which is made of gold and diamond – that satisfy the taste of the local market. Moreover, our prices are very close to those of our French and European outlets. Moroccan people can enjoy the same variety of choices. What about other north African countries, beside Morocco? In Tunisia, we are faced with a jewelry import problem. We are awaiting new laws allowing us to open our first store there. In Algeria, we have one potential representative for watch sales. But as far as opening a new store is concerned, we have no plans yet. The market maturity you find in Morocco is lacking in other parts of North Africa. On the same note, South Africa still has much to achieve to draw level with Morocco.

Success does not come on a silver plate. Innovation is a must for sustainable progress context that we were pioneers in setting up business in Dubai. Today, we have 13 stores for both luxury watches and jewelry, and our outlets are a real attraction for the local population as well as the visitors coming from all parts of the world. We have three stores in Dubai, one in Abu Dhabi, one in Bahrain, one in Kuwait, two in Riyadh, and one in Jeddah in Saudi Arabia, and two in Doha, Qatar. To give you a clearer idea, 60 percent of our customers at the Dubai Mall are Chinese. We are number one in China, where we have 37 stores. To go back to the Middle East, we have been present 102 TRENDS | June 2010

in Beirut for a long time now, as the market there is pretty close to Europe’s. In Istanbul, Turkey, we have a great market, a very elegant one that knows and appreciates the luxurious products made of gold and precious stones. You are well established in North Africa, especially in Morocco. Do you intend to expand your presence in this region anytime soon? First of all, Morocco is a well-developed market. This has prompted us to open stores there – one in Casablanca, one in Rabat – and we have achieved great results in record time.

Have your sales stagnated or dropped because of the crisis? Until March 2010, we maintained a very good record. I never take forecasts into consideration. But I can assure you that we are doing much better than others. This can be put down to many factors: First, we are better equipped in terms of product variety; and we are better distributed geographically with extremely rapid and flexible manufacturing tools. At any given moment, we are capable of starting our five engines and accelerating or curbing our production without seeing our cash flow suffer. Success doesn’t come on a silver plate. Innovation is a must for sustainable progress. It is a key in the process of manufacturing, design, and finishing. To this end, I have set up an innovation committee, whose main mission is to perceive the future of the brand, to look outside the box, to imagine and create, literally, the Cartier products of tomorrow.

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TRENDS Watch Spectacular

104 TRENDS | June 2010

Marc A. Hayek, the chairman and chief executive of Blancpain, tells TRENDS that the brand has been cushioned from the crisis thanks to its highend status – a status that must be protected.

Preserving Prestige By Lila Schoepf Paris

ow did the global financial crisis affect your sales around the world, and in the Middle East in particular? Luck was at our side, or at the side of the entire group. Certainly, due to the crisis, 2009 was relatively far from 2008 (when we achieved record results). Yet, since Blancpain is a high-end product, our clients still had the means to buy it, so the shock was greatly cushioned. [That] goes for well-developed markets such as the U.S., Switzerland, Europe, and the Middle East (mainly the Gulf countries). What do you mean that luck was at your side? In the Chinese market – where the group had proven tough when it settled early on, almost 10 years ago – we had placed a great deal of investments, which partly made up for the fallout from the crisis. We have also been present for quite a long time in Hong Kong, an extreme-

ly strong market. Furthermore, Japan remains a very important market for us, even so before the crisis. What are your expectations for 2010? For both January and February of 2010, the confirmed results are close to the figures of the same months of 2008. I’d like to stress that our collections have gone up a notch thanks to special items, more high-end products, and better refined finishing where no slight detail is left to chance. You can get to explore new materials, and discover never-before-seen marketing aspects. As for our clock-making chapter, we are now using carbon fiber, balanced wheels, and sicilium. But we never forget our eternal Blancpain mechanism that still yields a 100 percent performance. After 275 years, what is new? Blancpain is the only watchmaker that has developed a 60-second rate of revolution

mechanism, a total innovation, fit with a cathedral bell, and combined with a Carrousel “Volant Une Minute.” As it would fit such a sophisticated mechanism, the bridges and the red gold platinum of its movement are richly beveled by hand. The new Villeret collection is a symbol of aesthetics and complications that reflect the essential Blancpain values since the early ’80s, and raise them to a whole new level. We should not overlook the technological advances that were introduced to the L-evolution collection. With regards to the Gulf countries, mainly the U.A.E., how do you assess your market there? I cannot deny that our two stores in Dubai have been widely affected by the credit crisis that has taken its toll on the Emirate. As for our Abu Dhabi market, where we only have one store, it has suffered much less. Yet, generally speaking, the market in this country has seen a serious drop that we hope will be short-lived. June 2010 | TRENDS 105

TRENDS Watch Spectacular

‘This is one market segment that should be preserved by avoiding discounts, no matter what the crisis’ The Christmas season used to be the most important season for selling and receiving timepieces. What has changed over the last few years to make the Yuletide season less important? It hinges on the circumstances, but European and American wristwatch sales in the Christmas season remain significant for our group, mostly our Blancpain watches. Still, one should not fail to notice the growing share of other cultures having their own holidays as well as the means and inclination to offer high-end watches on special occasions. This applies to China, Russia, and the Middle East. 106 TRENDS | June 2010

On the eve of the Basel Fair, the European press, mainly in France, brought up the issue of high-end watches at slashed prices. How do you see this thesis? I don’t believe in this idea. We are selling real values here. I think we ought to counter such policies. This is one market segment that should be preserved, and we can do so by avoiding any discounts, no matter how serious the crisis. We are not willing to compromise on the credibility, nor on the brand’s value. Besides, the use of steel grey, red gold, and grey gold could only change the market entrance price.

Recently, Blancpain collaborated with the prestigious Italian car brand Lamborghini. What is the ultimate aim of this partnership? Together, we created a super trophy. We promoted a sponsorship that we signed with World Champion GTI super cars. The idea of partnering with Lamborghini brought an answer to the high tech requirements of our strategy. The media and marketing activities, where the sports aspect and the high technology of the mechanics are intertwined, ensure superior viability. Here, a close link develops with the watch-making industry. I have personally taken part in a race with the Lamborghini. In fact, there was a Blancpain event in April at the stunning new Yas Island Marina race track in Abu Dhabi.

TRENDS Watch Spectacular

108 TRENDS | June 2010

Marc Michel-Aamdry, the chairman and creative director at Ebel, tells TRENDS his company does not want to deviate from its roots – and that it wants to continue focusing on tradition.

Timeless Tradition By Lila Schoepf Paris

he Ebel brand has always preserved its style. In other words, it didn’t go for radical changes in terms of quality and marketing. How do you explain this ‘traditional’ trend? The Ebel culture was not influenced by the multiple waves of changes that have hit the world of luxurious watches. We neither changed our identity nor the quality of our products. We still produce stylish watches tinged with classic touches. Our strategy for the next couple of years revolves around further competitiveness and better cost-effectiveness for the high brand. We admit going through delicate times, which entails grabbing market share. In other words, we must gain ground on our rivals’ territories. How do you plan to fulfill this objective? It is not a matter of slashing prices or compromising on the quality of our watches. It is just the contrary: By increasing the available choices, launching new models,

and recovering a price range that remains within our commercial boundaries, i.e. varying between $1,500 and $5,000 for a watch. The motto of Ebel should always be luxury and the preserving our roots. What are the assets of the brand? First, we must say that Ebel has an exceptional advantage over its rivals. Seventy percent of our watches are destined for women and 30 percent for men. This is one of our strengths because many are the brands that have focused on male customers to the detriment of women. I think that watches have “more to say to women than anything else”. Many retailers who have invested in top-notch mechanics for men would like to work with Ebel today. Most big watch brands have suffered a lot with the global crisis. How did Ebel deal with the market pressure? Our production, marketing, and sales strategy has always been objective and sensible. So we were better shielded

than others from the effects of the crisis. It is for this reason that, despite revival in the first two months of 2010, we still see this year as a transitory one, and one must never forget that the crisis is still at the doors. However, the current fiscal year seems all the more promising. In fact, we have already drafted competitive schedules while promoting a mixed marketing spirit. How about the Middle Eastern market, which has known your brand for a long time? The Middle East is a key market for us. I am not only talking about the Gulf countries, where we make most of our turnover, but also the Near East, where we have a very loyal clientele. Our brand is highly respected. In Gulf countries, we have a real local market. Such is the case in Dubai, where we have our own team, as this emirate is our center of gravity. It is based on its market that we are able to follow other markets on the region. June 2010 | TRENDS 109

TRENDS Watch Spectacular

110 TRENDS | June 2010

Emily Meredith speaks to Abdul Hamied Seddiqi, vice chairman of Ahmed Seddiqi & Sons, about loyalty to one market and why the renowned company will stay family-owned.

Strength Through Standards By Emily Meredith Dubai

crisis, the first thing that is hit is luxury, because it’s not necessary to life. You need water to drink, but the watch is not necessary. But slowly, slowly the market is picking up.

You’ve said before that the crisis has affected your customers. We are in the luxury business, and in a

Are you offering discounts to meet the needs of your customers? We are not a discount store. Just today my nephew was telling me that, in Qatar, he can get a 60 percent discount on a watch we sell here. And I said, “Okay, what price?” Sometimes people set a higher price, and then they give a “discount.” Sometimes, the people need cash and maybe they have economic pressures forcing them to discount. But we are not giving a discount. If the price is listed at 10,000 dirhams, it’s 10,000 dirhams. If you come into my shop today and if I give you a five percent discount, my competitor will come and give you 20 percent. It’s not good, you know. Sometimes the customers will come back to

ulf-based family businesses are evolving. Given that they face increasing competition from international players, many are eying public listings to fund expansion. But not all family businesses plan to go down the road to an initial public offering. Abdul Hamied Seddiqi, vice chairman at luxury watch retailer Ahmed Seddiqi & Sons, says that he wants his company to remain a family business, for now and the next generation. Speaking exclusively with TRENDS, Seddiqi outlines his views on the future of the luxury retail market in the wake of the financial downturn – and how the company plans to expand to other parts of the U.A.E. This interview followed the launch of his company’s book on the history of watches, called Time for Emirates.

you and say, “In another shop, I get a 10 percent discount, so give me 15 percent.” If it is a discontinued model, an old one, then we can say: “Okay we have a promotion.” But we are at the high end, we are not giving a discount. If the price says 10,000 it’s 10,000. What are your expansion plans? We do not plan to expand outside of the UAE because there is still so much potential out here and we plan to explore this opportunity. As for other markets in the GCC, there are already established retailers in those markets and there is respect between us for each other’s market. There are lots of people from other neighboring countries who know us and they come to Dubai for shopping because everything is available here. The other day I was in Dubai Mall when they opened Bloomingdale’s. You don’t see that in any other market in the Gulf. We have Saks Fifth Avenue, we have Bloomingdale’s, we have Harvey June 2010 | TRENDS 111

TRENDS Watch Spectacular

They offered us a lot to go to India because they need our name, but I want to be strong in the U.A.E. Nichols. You don’t see these things in the other Gulf countries. Abu Dhabi is also a market with a lot of potential; I think we can expand in Abu Dhabi or Sharjah. For the future, I think we need to expand into the other emirates.

is actually good for us, because our customers know our brands will have value later.

Would you look outside the Middle East, to developing markets such as China? I cannot get all the brands [to sell abroad]. For example, if I go to New York and I want to open a Rolex shop, I can’t do that. But if a company from New York comes to Dubai, I can. We want to stay here, our market is our market.

Given the economic downturn, do you think the malls should lower the fees they charge retailers? This kind of percentage charge is new to our market and every day they are coming up with a new idea. As mall management they want to make money. Maybe they have a promotion and bring more people to the mall, but there is now really big competition between the malls. I think maybe the communication is getting better with the mall owners.

Has the success of auction houses selling antique watches affected your business? No, it will never affect our business, because it is not 100 pieces, it is one or two pieces. It

What is the ratio of sales between the corporate and retail sides of the Seddiqi business? We depend on retail. We see corporate

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as a side business; our main focus is on retail, where we need to be strong. Corporations may reduce the budget or say, “This year we don’t have the budget,” so we don’t want to depend on this business. Now we have fewer Russians [in Dubai], but more Chinese – so our target is now going to be Chinese people. With the opening of the Dubai Mall, it’s attracting a lot of people from the GCC, so Dubai is still healthy for retail. How is your real estate business going? We are developing still. Real estate is a small portion of our business, but we go for high end. We have new towers coming on stream, and we will launch the Rolex Tower this year. I think it will be one of the best towers on Sheikh Zayed Road. Have you delivered any villas yet? We have delivered, but we are not selling, we are renting. As the prices have come down, we have still kept the tenants.

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Stephen Urquhart, the chairman of Omega Shareholders’ Company, talks to TRENDS about how the famous brand has gone about recapturing former glory.

The Return of Omega By Lila Schoepf Paris

e noticed that, in the past few years, the Omega brand has made a huge comeback. What do you put this down to? That is true, but it is a long story. Should we remind the public that Omega was a pioneer of the industry for a certain time, before the Quartz took over? We did not follow suit, and decided to stay on track. It may or may not have been a mistake, but such were the requirements of the market back then. Later on, in the late ’80s, [Nicholas G.] Hayek took Omega in hand, and re-vamped the brand by starting investments. The ’90s were the time for revival, and as of 2000, the company came at a crossroads, with a different marketing strategy: “Omega is Back.” This comeback entailed opening further stores in international markets and launching new luxury models. Yes, Omega was able to restore the value of the watch-making industry, while up-

holding the marketing aspect of the business. On this note, we cannot overlook the distribution chapter, mostly with the opening of the brand’s boutiques, which recall the history of the line. Forty years on the moon, and with a comeback to the Olympic Games every two years [Summer and Winter]. [When] our first boutique opened in Zurich in 2000, we had no idea where to go. We needed a store especially for our brand. Since then, the operations started in Paris, New York, and London. We also have stores in Asia: 12 in China, and 80 in cooperation with partners. In Dubai, the number has climbed to five. We also have one store in Kuwait, one in Egypt, and one in Lebanon. How about North Africa, specifically Morocco, where prominent watchmakers and jewelers are present directly through their boutiques? It is not a short-term target for Omega, as nothing is planned in Morocco for now.

So far, things are going strong with our partners in the region. Our sales are increasing, and this will inevitably lead to opening stores, as was the case for other big brands. How is the situation today, mainly in the wake of a harsh international financial crisis? To be totally impartial, I can assure you that our group showed high resilience in 2009, when the fallouts of the crisis were most difficult. The Swiss watch-making business dropped by 24 percent, but we only lost 7 percent. We had to take care of two of our mostly affected markets, namely the U.S. and Japan, where we faced distribution problems. In our own outlets that amounted to 54 stores. We made an additional 15 percent in turnover. This is a transparent figure, reduction-free. Our prices are fixed and our clients accept it. Since the beginning of the year, we have achieved very good performance, June 2010 | TRENDS 115

TRENDS Watch Spectacular

as you could see at the Basel Fair, and as proven with a considerable revival of our Middle Eastern activities. Yet both the American and Japanese markets canâ&#x20AC;&#x2122;t seem to get out of trouble, and the situation there remains dire. Briefly said, we havenâ&#x20AC;&#x2122;t built up much momentum, but we did not fall back. 116 TRENDS | June 2010

The cheapest mobile phone can today give us the time more accurately than the best wristwatch. So what makes people spend so much on your watches? These are two incomparable things you are trying to compare here. First, when buying a prestigious watch brand known for its mechanics, clockwork, material, multicolored-gold or

sometimes diamond-beveled finishing, and of course its design, one is not solely looking for a device that tells the time. On the other hand, time is not a priority for the mind and the taste of a client seeking perfection in a watch. I cannot seem to fathom this collation involving a mobile phone designed for a wholly different purpose.

TRENDS Watch Spectacular

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Walter Von Kanel, the chairman of Longines, tells TRENDS that his company has seen competition come and go. He continues to remain optimistic about the future, crisis or no crisis.

Nothing Left to Chance By Lila Schoepf Paris

as the crisis forced you to alter Longinesâ&#x20AC;&#x2122; strategy? Not at all. We kept our prices between $800 and $3,000. The same goes for our marketing policy, where we followed the same path without making any changes. We never thought of lowering our prices. On the other hand, our sales have exceeded 500,000 all over the world. We even raised our market share between January 2009 and the first two months of 2010. What exactly do you ascribe this strong performance to? For Longines, there is never anything left to coincidence or chance. The company never ceased to strengthen its position around the world. Our watches have been sold since 1867 under the Longines brand. To better clarify the issue of sustainability, I must say that we have been present in the Middle East as well as China. It is a rich heritage for a company like ours.

Can you narrate to us this journey, mainly in the Middle East? I have personally lived this experience. I worked with Longines for 50 years before I became chairman. I have witnessed its breakthroughs in this region, where competitiveness is not to be taken lightly. Turkey ranks first on the list of our points of sale, and has seniority. It was followed by Lebanon, Syria and Jordan, where we were the providers of King Hussein. Iran has also been a market of ours for quite a long time. Afterwards, came Kuwait, Saudi Arabia, Qatar, Egypt and Dubai. We have a big market in Algeria. As for Libya, we have proven our strength throughout the years in its market. Are we talking about exclusive stores or dealership outlets? We have adopted dealerships, corporate shop and mono boutiques. These are formulas that have proven successful for a number of reasons. First, the location, the business, the neighbors, and the

costs; second, it is due to the after-sales service, where we are still pioneers. Our brand is everywhere, in Europe, the United States, Asia, and the Middle East. It is a risk-free trademark. How do you see the future of Longines over the medium-term, with new brands in the same price range and with an almost similar material quality rapidly burgeoning? At this period of time, we have no fears. Since its inception in 1867, Longines has seen tides and tides of competitiveness. Some rivals survived without overshadowing Longines or snatching any of its market share. Others, however, went out of business as they were unable to stay the course. It is not an easy job to stay on top of the class like Longines did. This is very rare. As for our future, that has to be taken seriously. Longines is henceforth, as of 2010, part of the Swatch Group. This ought to further promote its position in its category. June 2010 | TRENDS 119

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TRENDS Watch Spectacular

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Arabic Numerals A new Fortis wristwatch highlights a booming appreciation for Islamic calligraphy among the world’s leading collectors. By Jay Akasie Dubai

llustrations from Islamic manuscripts became so sought after in the 1990s that art collectors were known to buy mediaeval texts at auction and rip out the pages in order to frame the drawings within each book. But tastes change over time. Many of those same collectors began to realize that the calligraphy within the manuscripts was itself an art form. No longer were they tearing up old texts to get to the images – the writing itself became the prize. It’s no wonder, then, that the most sought after wristwatch in the Arab world is the only off-the-shelf model that features full Arabic calligraphy – right down to the date information. The new Fortis

B-42 Al Tayer is the result of a two-year collaboration between the Swiss watchmaker and Mahesh Shahani, a multi-lingual, U.A.E.-based watchmaker who has an affinity for the Arabic language. “I noticed there was a lack of watches that reflected the Arabic culture and language, and so I was always keen to try and produce one,” Shahani said. A renewed appreciation for Islamic calligraphy is only part of the story. Al Tayer is Arabic for “the aviator,” an appropriate moniker for a Fortis watch. The brand has been a favorite of pilots, astronauts, and cosmonauts for decades. These flying aces are hardly the effete types who enjoy bidding on manu-

scripts at Sotheby’s auctions. These are aviators who continually push the limits of speed. In fact, Fortis uses many of the same tools that simulate the harsh conditions of space used in astronaut training programs. These distinctions include building the world’s first factory to produce automatic wristwatches and becoming the official watch of the Russian space program in 1994. Fortis also claims the world’s only chronograph automatic alarm, as well as being chosen as the official crew watch of the Mars 500 program. Indeed, if Howard Hughes were alive today, we imagine the Fortis would be his watch of choice. (We mean the young, June 2010 | TRENDS 121

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TRENDS Watch Spectacular

Emirati and Saudi businessmen with an appreciation for aviation will no doubt relish this new Fortis swashbuckling Hughes who set speed records in his state-of-the-art airplanes, not the older, eccentric Las Vegas recluse.) The Arabic numeral model by Fortis is yet another first for the company. Emirati and Saudi businessmen with an appreciation for aviation will no doubt relish

this new Fortis. But so will any aesthete who studied Arab history and literature. What’s so distinctive about the Al Tayer model is thorough blending of tradition with cutting edge technology. The Al Tayer is a Fortis through and through. This is the company, for instance, that

1912

1954

Fortis watch factory is founded in Grenchen, Switzerland

Fortis begins manufacturing mechanical alarm watches

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claims the patented and award-winning mechanical alarm function. The chronograph alarm model has two spring barrels and guarantees the power reserve of both the watch movement and the alarm. The special rotor cleverly uses the motion of the owner’s wrist for winding both the spring barrels at the same time. The sound spring utililzes a potent tuning fork that makes for a 25-second-long alarm. That’s enough to wake even the groggiest of pilots when it’s time to land. Fortis executives and Shahani recently launched the Al Tayer at a reception at the Dubai Creek Golf Club. Fortis’s Max Peter said: “We believe this watch will become very popular not only with discerning admirers of highend watches throughout the Arab world, but collectors of exclusive timepieces globally.”

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For the Next Generation Designers and manufacturers are realizing they can attract new customers and second-hand buyers by appealing to their sense of style. By Alfred Coachman Dubai

uxury watches and accessories are making a recovery from the downturn thanks in part to marketing campaigns that convince buyers they are making an investment, both for themselves and for their children. But at the same time, watchmakers are introducing styles with details aimed at attracting youth with quirky and unexpected style details. A tie-up with Ferrari appeals to young fans of sportscars. Campaigns with leading designers appeal to fashion-conscious women. But labels are no longer the only way young customers have to distinguish themselves. As designers and manufacturers have realized, they can attract new

customers or second-time buyers by appealing to their sense of style, particularly in the Gulf where timepieces are one of few accessories that stand out against the monochrome national dress. As testament to the degree to which trends are influencing the look of expensive timepieces, one only has to look at the region’s boutiques and on the wrists of their customers. Where once young women wore oversized watches in black and metal – roughly the horological equivalent of blazers with shoulder pads – today they are turning to smaller watches with colorful bands and unexpected details. Because accessories are relied on so heavily by customers in the region to dif-

ferentiate themselves, sales of antique pieces at auction houses have been strong. Boutique1, a store based in Dubai with a clientele throughout the Gulf, carries just a few timepieces. Where the company once carried brands with oversized faces and fluorescent bands, it has opted for somewhat more discreet watches this season, ones with small butterflies or skulls. The company also carries customized Rolexes. “Our Middle Eastern clients are fans of the Evil Eye and Hand of Fatima designs, as they appeal to their tastes and are a way of expressing their roots and culture,” says senior buyer Alexandro Gnjatovic. Carrying Rolexes with such designs allows the store to appeal to its customJune 2010 | TRENDS 125

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Because accessories are relied on so heavily, sales of vintage and antique pieces have been strong ers’ desire for craftsmanship and design. “Rolex is a famous brand name and is a key player in the watch industry, so our customers can be safe in the knowledge that they are buying into quality. These watches have the style and quality of a classic Rolex, but are fun and cool at the same time as each watch has its own individual signature,” says Gnjatovic.

Boutique1 recently began carrying John Isaac, a brand known for watches with unexpected detailing. One displays a simple gold butterfly on a navy background; another more surprising one has skulls in place of numerals on the face. “Skulls have been a lasting trend for a number of seasons now, with brands including Thomas Wylde and Aurelie

50% Rise in sales of luxury watches in the U.A.E. in the first quarter of 2010 126 TRENDS | June 2010

Bidderman all backing it. Skulls are a soft way of adding rock chic appeal to an outfit,” says Gnjatovic. “With John Issac customers know they are getting a quality, classic watch with a twist. They like the fact that these watches are vintage and one of a kind,” he says. The trend towards distinctive items filters down to the non-luxury market. Diesel, a premium brand with a presence in the Middle East, only introduces the line’s most atypical shapes, according to the retail buyer Uranio Overseas, which operates the brand’s regional stores. Buyer Sebastien Coryn says he avoids introducing any timepieces that are too conventional or simple in appearance. The brand’s more traditional models just do not sell in the Middle East, he says. Coryn adds that he has noticed a greater interest from consumers in colorful and interestingly shaped timepieces.

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Appreciating the Poetry of Time The images in Van Cleef & Arpels’ new book showcase the best of 20th century haute horology. But the accompanying literature comes up short. By Jay Akasie Dubai

ou immediately know you’re in for a bumpy literary ride when one of the book’s authors lists herself as a leading authority on mechanical singing birds. Yet the lavishly illustrated “Van Cleef & Arpels: The Poetry of Time” (Editions Cercle D’Art) is a lot like any literature devoted to high-end timepieces; its essays are superficial and hastily thrown together. But such writing gets the job done, if only because the words on the page are there simply to supplement the full-color photographs of some of the world’s most beautiful watches. Indeed, the book is a lot like the world of haute horology it aims to explore. That

is: Flash trumps substance. Appearance counts most. Looks are everything. The world of luxury timepieces is an eccentric one, to say the least. For no more than $12, anyone can buy a digital Casio at the corner store that tells time more accurately than the finest Swiss mechanical watch. Those who fork over hundreds of thousands of dollars for Swiss-made chronometers buy into the notion that their appreciation of all things Swiss and mechanical justifies paying such an inflated price. But Van Cleef & Arpels uses “The Poetry of Time” to take things in a different direction. The venerable Dutch-Belgian-

French jeweller refuses to allow its timepieces to exist merely as mechanical eccentricities. To be sure, the devices themselves are made with precision. But they’re first and foremost pieces of jewellery, meant to be elegant – not eccentric – expressions of their owners. The book shows how Van Cleef & Arpels draws from a century of enduring designs to create watches that say more about what it means to have good taste than it does to have enormous wealth. The luxury watch market is filled with gaudy baubles that showcase the latter. These timepieces have become badges of honor among the nouveau riche. June 2010 | TRENDS 129

Corbis

TRENDS Watch Spectacular

These days it is a rare thing to possess an ability to discern the best in the world of haute horology According to the book, it’s a rare thing these days to possess the former; that is to say, an ability to discern the best in the world of haute horology. Much like haute couture, if you possess such a knack for discernment, then the creations of Van Cleef & Arpels – as well as this book – are for you.

Some of the best chapters in the book are devoted to how the jeweller goes about interpreting its designs into a thoroughly modern idiom. It’s apparent from the very first pages of “The Poetry of Time” that the jeweller’s design heyday was the Roaring ’20s. It displays a

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double-page close-up, for example, of a 1928 Art Deco necessaire with red jasper, green, red, and black enamel, and diamonds that served as the inspiration for a 2008 Midnight Turbillon Jardins Suspendus watch with platinum, diamonds, and enamel. Then there’s the Fee Libellule clip commissioned in 1944 by the American industrial heiress Barbara Hutton who, with her friend Doris Duke, made up the infamous “Gold Dust Twins.” Van Cleef & Arpels used the diamond encrusted fairy on which to base an entire line of turbillon watches in 2008. Perhaps the most exquisite of these watches is the Folie des Pres Lady Arpels watch, with white gold, high-fire enamel, diamonds, and white mother-of-pearl. It’s a good thing that the history of the Van Cleef Maison and photographs of its finest products are so enthralling, because the essays included in the book fall short of the firm’s distinguished lineage. Writing on the subject of wristwatches often tends to be bottom-of-the-barrel; for example, one of the essays in the book attempts to analyze Virgil’s lament in Georgics: Sed fugit interea, fugit irreparabile tempus. “But meanwhile it flees: time flees irretrievably.” It’s another way of saying time flies. Yet the author’s pseudo-analytical drivel is unsophisticated and fails to grasp the completeness of the time treatise in Georgics. Interestingly enough, the clumsy watch essay in “Poetry of Time” fails to include the next line from Virgil’s passage: Singula dum capti circumvectamur amore. “While we wander around, prisoners of our love of detail.” (Blame us for our classical education for drawing out this point.) Time does fly when appreciating such beautifully wrought timepieces, exactly because we have such a love of detail. Thank goodness that Van Cleef & Arpels possesses that same love of detail in putting together their timepieces and this visually stunning book. It’s just a shame about the words that go with it.

TRENDS’ 2010

Watch Extravaganza So many wristwatches, so little time. Short of hiring a personal shopper, the best way to find the best timepieces of the modern world is, of course, to read the following review. The TRENDS editor Jay Akasie, who has been known to stroll the hallowed halls of the World Economic Forum in Davos, Switzerland, with one of several fine Swiss watches on his wrist, has become the region’s leading authority on haute horology. Forthwith are his picks for the 2010 model year.

BaumE & mERciER Time is a luxury for busy executives. That’s why Baume & Mercier offers its new Classima Executives XL model in 18-karat red gold. The silver-colored dial boasts a grain d’orge guilloche décor that is graced with circular snailed and sun satin-finished counters. It’s a mechanical self-winding model, so the decision-maker who’s on the run knows that his watch won’t peter out before he does.

BlaNcpaiN The designers at Blancpain had a problem: How best to devise a new way to produce an extrarich sound when the watch’s gong is struck? That’s because the sound often doesn’t travel well outside the case of a tightly wound watch. Their solution was to attach cathedral gong rings to the inside of the watch case. The end product is the Carrousel Répétition Minutes Le Brassus, a testament to an innovation that achieves remarkable volume and clarity.

BEll & RoSS Aviation buffs will appreciated the limited edition BR 01 RADAR watch by Bell & Ross. The reasoning behind this watch goes something like this: An aircraft radar screen gives experts a quick read on what is often a complex situation. This watch plays on the concept of a simple display of a radar screen so that its wearer can tell the time with the quickest of glances. We suppose this watch would come in handy during emergency water landings.

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caRTiER Can a watch truly strike a balance between raw power and finesse? Cartier thinks so. Their new Calibre de Cartier men’s watch retains the classic styling queues of the brand wrapped within a smooth and polished exterior. Inside the case, however, there’s a different story. A 28-degree freefall towards the dial culminates in a fluted ring marker with 120 notches. Few watches have a more masculine design.

chaNEl One of the contributors to the 2010 TRENDS watch spectacular – the irrepressible Alfred Coachman – says that this particular watch is his hands-down favorite. The watch oozes Chanel style and class. We could imagine Coco herself wearing one just like it. Then there’s the craftsmanship underneath the glamorous face. It’s got style and substance.

cERTiNa The mark of a modern woman is to be as comfortable in a sporty, outdoor setting as she is while sharing quiet moments with her husband. That’s why the folks at Certina have designed the DS First Lady Ceramic watch. You don’t have to be a first lady to wear one, of course. This sporty chronograph has a rose-colored PVD finish and shiny black accents on both the bezel and the crown tip.

chRiSTophER RoaD This brand’s name was inspired by the explorer Christopher Columbus. We can only wonder what the 15th century navigator would have thought of these beautiful timepieces. Perhaps the most stunning of their models is the Contessa line. “Conte,” you see, is a title in Italian nobility. So the watch is a tribute to feminine nobility throughout the march of history. Let’s just say that the Contessa made a timeless impression on us.

DaviDoff The Very Zino collection from Davidoff offers the ideal watches for the cosmopolitan man. The collection is named after Zino Davidoff, who ran the company that bears his name throughout much of the 20th century. Never once did he skimp on quality. These Swiss watches compliment the other fashion items in the Very Zino collection: writing instruments from Germany and leather goods made in Italy.

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hySEK

GiRaRD pERREGaux

There are certain people who place importance on the essential things in life: the air we breathe, the food we eat, and the relationships we make. Add to that list a handsome wristwatch. The Hysek IO is an aesthetically perfect timepiece with lustrous surfaces and sparkling diamonds. Its combination of black and silver adornments, along with its elegant strap and sapphire center, makes this watch the ideal gift for the man who has everything and wants for nothing.

The idea for a Tourbillon with Three Gold Bridges goes back to the 1860s, when young Girard was amazing the crown princes of Europe with his mechanical watches. The 2010 version takes the same design as the watch that won him the prize at the Neuchatel Observatory in 1860. Today’s watch is a testament to the same high quality that won awards back in the 19th century: The bridges are hollowed out and carefully polished by hand. It takes a whopping seven days to obtain this impeccable finish.

iSSEy miyaKE Who says a luxury watch has to come from Switzerland? One of our favorite brands is Issey Miyake, the Japanese creator of innovative timepieces. Over the past decade, Miyake has selected the very best designers from Europe and Asia in order to fashion some of the world’s most visually stunning watches. The idea here is to combine the very best elements of tradition and modernity for both guys and dolls.

iWc One of the most famous names in luxury watches is the Portuguese Yacht Club line of chronographs from IWC. Their latest watch has been upgraded technically to make it the perfect sailing companion. It’s water-resistant to six bar and is the only Portuguese to have both luminous hands and indices. It has a large, clear dial with an analogue display of the long stop times via two hands on an inner dial. Perfect for that evening sail.

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JaEGER lEcoulTRE What makes a sports watch a sports w atch? How about coming up with the idea for the watch on a polo field in India? That’s what happened to the designers at Jaeger LeCoultre – the result is the Reverso Squadra Chronograph GMT Palermo Open. Of all of Jaeger’s reversos, it’s the most avant-garde yet. We were struck by the beauty of the famous swivel case and the exceptional movement featuring additional functions that are must-haves for the professional elite. This reverso is a sports watch par excellence.

moNTBlaNc The watchmaker Nicolas Rieussec registered the world’s first chronograph for a patent in 1822. Montblanc took elements of that significant watch and incorporated them into an open date model in which the dial and elapsed time discs are partially skeletonized to offer unobstructed views of the watch’s innards. The new Montblanc Nicolas Rieussec Chronograph Silicon Escapement will be available in October of this year and just 25 will be made. You better head to Le Locle and get in line soon.

paNERai Nothing tells the world that you wished you could be a member of the Italian Navy then wearing the new Luminor Marina 1950 3 Days Automatic by Panerai. Apparently, not only does Italy have a navy, but its officers get to wear these really cool watches. This particular model is protected by an antireflective 2.6 mm sapphire crystal. The luminescent substance that covers the hour and minute hands has the same ecru color of the Panerai military models of the 1940s, when the substance yellowed with age.

piaGET We’re jazzed up by the new Piaget Polo Tourbillon watch. Designers made this one-of-a-kind timepiece a fitting a tribute to the world of music by substituting notes for numbers on the black enamel dial. The number 9 is an F clef and the dial recalls the metronome that keeps the pace of any swinging tune. Very clever.

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RaDo Simply precious. That’s what you’ll exclaim when you place Rado’s new eSenza Blue Jubile on your wrist. They started with a satin strap and an oval case of perfect proportions. Then they encircled the dial with sapphires in various shades of blue. They set the jewels in what’s known to mathematicians as a Fibonacci spiral, which brings a refreshing harmony of hues. The watch is finished with two slim, silver hands that float serenely under the sapphire crystal with a metallic blue finish.

SpRouT Hour Choice, the hip line of watch boutiques from the Rivoli Group, recently introduced an entirely eco-friendly timepiece – the Sprout. Made of 100 percent biodegradable materials for belts and buckles, mercury free batteries, and natural ingredients like corn resin, bamboo, and 100 percent organic cotton, Sprout watches spread the message of a greener world. Hour Choice even goes so far as to package Sprout in an eco-friendly box, which when ripped open and watered will ‘sprout’ into your own patch of grass.

Ralph lauREN The American fashion designer’s recent collaboration with the watch giant Richemont has produced on of the most readily identifiable luxury watch designs: the stirrup watch. We like the new medium white gold model in diamond pave. Each paved timepiece is encased in cut diamonds set in staggered rows. Attached to a black alligator strap, is there any wonder it’s become an instant classic?

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vaN clEEf & aRpElS TRENDS is based in the awe-inspiring city of Dubai. One of the many pleasant aspects of Dubai life is the beautiful night sky. Which is why the designers at Van Cleef & Arpels decided to capture this view in a watch. The Midnight in Dubai timepiece is perfect for the man who wants to wear the universe on his wrist. The dial is positioned to show the exact appearance of the night sky in Dubai on any given time of year. There’s even a piece of a meteorite set into the back of the watch. All that for only Dh286,500!

2010

gemas

mena

Prove it deadline for entries: 19th sePtember, 2010

Gala awards ceremony: 4th november 2010 - madinat Jumeirah, dubai For more inFormation, please contact: basma@mediaquestcorp.com www.Gemaseffie.com EffiE® and “E Logo” arE rEgistErEd tradEmarks of EffiE WorLdWidE, inc. and arE usEd undEr LicEnsE by mEdiaquEstcorp. aLL rights rEsErvEd.

Perspectives

Second Skin Ermenegildo Zegna’s new global store concept fuses high-end architecture with the brand’s deeply held values. By Jay Akasie Dubai

f you’re lucky enough to own a suit by Ermenegildo Zegna, you’ll know that it fits like a second skin. But beyond considering the comfort of the garment and how it makes you look, you probably won’t think about it much. And that’s exactly the point of having a second skin – the suit is so well tailored to your body that it becomes an extension of it. This kind of thinking has dominated Zegna’s corporate philosophy for the past 100 years: If you begin with the finest textiles and materials, quality menswear will follow. Lucky for architecture aficionados that Zegna didn’t stop with just fabrics.

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As the company begins its second century, it’s gradually rolling out a new series of showrooms that reflect the dynamism of this luxury brand. Later this year, Zegna’s “Global Stores” will open in Las Vegas and Shanghai, joining the showrooms that are already getting rave reviews in New York City, Tokyo, Dubai, and Hong Kong. “Ermenegildo Zegna is a historic brand, known for the unrivalled quality of its woven textiles. I used this imagery throughout the design,” the American architect of the new showrooms, Peter Marino, says. Marino’s idea to pattern the stores with intertwining stainless steel threads

came from weaving machines. The color palette dominated by sky blue and alpine green reflects the Zegna family’s strong commitment to nature that is evident in their Oasi Zegna in northern Italy. When members of the Zegna family first sat down with Marino, they told him that a store represents the spirit of a company. It’s an integral part of the image of the brand, and the frontline in communications. A store’s architecture, therefore, has to be in line with the principles that characterize that brand. The architecture must highlight those principles and create an inviting, inspiring, and welcoming retail environment.

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Perspectives

The glass walkways are reproductions of the overhead passageways in the Zegna woolmill in Italy Marino set out to design a store that would reflect the spirit of the brand and project a coherent image between the product and the environment where the product is displayed. His vision was for the space and the products within it to create a brand’s “world” that would be familiar to existing customers and easily recognizable to potential customers. “Tradition, elegance, style, masculinity, quality, and innovation – these are key words when thinking of Zegna,” a director of the Zegna Group, Anna Zegna, says. “What characterizes every Zegna store is an understated and masculine style where elegance, tradition, and innovation live together in harmony.” 140 TRENDS | June 2010

If you’ve even so much as walked past one of these new stores on Manhattan’s Fifth Avenue or at the Dubai Mall’s Fashion Avenue, you will have noticed that natural light and large street facing windows are vital to the overall design. Marino says that the height of the rooms and dimensions of the space are also important to allow a good proportioning of the space and a proper “zoning” of the products. In the world of design, harmony is derived from the right proportions. Marino then began to think about the rich selection of materials that would mark out the different areas of the store – natural stone, wood, metals, stucco. Each boutique is a harmonized score of

decorations, textures, and colors, where backlighting is used to interpret the main themes underlying Zegna: nature, culture, art, tradition, and innovation. The entrance door’s sculpted handle, for example, was created by the American artist Jeremy Sarantitis and represents bolts of fabric. The lower part shows the typical selvedge with the Ermenegildo Zegna brand name stamped onto it. The metal work recalls the texture of the Cashco corduroy. The textile-inspired metal stairs are made with steel and glass rods and connect different areas of the store thanks to their see-through effects. Marino applied the same concept to the suspended glass walkways, which are conceptual reproductions of the overhead passageways linking the different departments in the Zegna woolmill in Trivero, Italy. The wooden staircase, which takes cus-

Perspectives

tomers to the Couture and Made-to-Measure departments, is made of oak that’s been hand-treated to provide greater resistance and uniformity of color. The ornamental, hand decorated plaster of the stairwell walls takes up the color, material, and light of the Aviana stone floor, giving continuity between the upper and the lower floors. Stucco decorates the passages between the rooms inspired by Zegna’s CashCo fabric, a corduroy blend of cash-

mere and cotton. Traversing from floor to wall, the golden yellow radica marble stripe refers to the selvage on Zegna fabrics, the signature line on the edge of fabric bolts that guarantees authenticity. These architecture features and visual merchandising tools help the customer to live the full Zegna experience. “This is an exciting time for the Zegna Group and this further reinforces our position as a leader and innovator in global luxury,” the

1910

1938

2007

Ermenegildo Zegna founds the company in Trivero in the Biellese Prealps

The company, now boasting 1,000 employees, makes its first sales in the U.S.

There are 525 boutiques in operation, of which the company controls 252

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chief executive of the Zegna Group, Gildo Zegna, says. “Peter Marino has successfully designed the store to echo our brand values and history, with all the styles and personalities of our brand evoked in the ideal House of Zegna.” Another architect, Antonio Citterio, designed Zegna’s new Milan headquarters. Citterio had to design a work environment where all the company departments could live and work together in harmony. “All the great architects who worked with us brought to our company their own knowhow and expertise, but only thanks to a deep knowledge and understanding of our philosophy were they able to create architecture that reflected both Zegna’s DNA and modernity but also their own personal design ethos,” says Anna Zegna. Entering from Via Savona, the glassframed entrance to the global headquarters conceals a secret garden that epitomizes the values of Ermenegildo Zegna, who believed that “with fine fabrics we must respect nature’s gifts.” The fourth generation, now at the helm of the company, is committed to upholding these values. The building blends Zegna’s sophisticated and understated elegance with classic modernity; polished stone floors greet the visitor, spanning throughout the ground floor, with northern skylights projecting light throughout the space. Glass and steel walls encase the building in a futuristic case. Suspended glass walkways and bridges of steel girder construction connect the space with Passerelle corridors inspired by the bridges of the Lanificio Zegna in 1910. These walkways allow visitors to view wool being transformed through spinning, dying, and weaving, into finished Italian fabrics. Zegan’s headquarters also boast the hallmarks of an intelligent building, such as a lighting system that automatically switches on and off, as well as a glass roof that ensures the maximum amount of natural light. Plus, there’s an architectural “second skin” that retains heat during the winter and keeps the air circulating during the summer. Kind of like a Zegna suit.

On the Road

The Vegetarian Option Dan Scanlan takes to the highway in a car that runs on vegetable oil.

have always had a soft spot for diesel cars. It’s probably down to the fact that my father had one when I was a small child, and its sounds and smells are some of my first automotive memories. His was a dark blue, 1966 MercedesBenz 200D sedan. Back then, diesel automobiles were still something of an oddity in America, and not every mechanic knew how to fix them. In fact, a number of diesel owners like my father banded together to form a diesel club. At meetings, (held at various members’ homes) they would exchange tips on maintaining their machines, getting the best fuel economy, and helping each other find parts. I still remember some of those evenings when a dozen or more Mercedes sedans would be parked in my family’s driveway. I wonder what the neighbors must have thought as the group departed, engines clattering, leaving behind a cloud 144 TRENDS | June 2010

distinctive fumes more usually associated with trucks and buses. That was diesel’s main province in the United States in those days; high mileage commercial applications where economies of scale came into play. In the rest of the world, meanwhile, Mercedes-Benz had little trouble convincing drivers of the benefits of a diesel engine’s efficiency, durability, and reliability. To this day there are Mercedes taxis the world over, in both giant metropolises and small villages, dutifully ferrying their passengers with little fanfare. In fact, one such humble example, a 1976 240D, is on display in the Mercedes-Benz Museum in Stuttgart. It logged a staggering 4.6 million kilometers working as a taxi in Greece over a period of nearly 30 years. I ran across a similar specimen recently in my hometown of Boston. It’s a 1975 300D owned by Shanti Taylor, a diesel en-

thusiast of a sort I hadn’t encountered before. Her Mercedes runs on vegetable oil. Not biodiesel; I mean vegetable oil, reclaimed from restaurants’ deep fryers. To understand that, you have to know the origins of the diesel engine. It was designed by Rudolph Diesel in the late 19th century; he sought to create a more efficient internal combustion engine that could be run on a variety of fuel sources. In fact, the example that he unveiled at the Paris World’s Fair in 1900 ran on peanut oil. However, the availability and economy of petroleum soon made it the preferred fuel for that type of engine, the fundamental mechanics of which have changed surprisingly little in the past century. It still relies on compression, rather than a spark, for ignition, and it can still burn vegetable oil of nearly any kind. Taylor acquired her Mercedes from a seller in Florida, where the combination

of a good climate and single careful owner had maintained the car’s condition. She then set about converting it to run on vegetable oil in a cold weather climate – the major stumbling block in the endeavor. In places like Boston, where the temperature dips below freezing for several months of the year, vegetable oil becomes an uncooperative gelatinous goop. The challenge is how to elevate and maintain the temperature of the fuel so that it can flow freely into the engine. The solution is quite ingenious, but involves a compromise: a two-tank system. The first tank is the existing one that holds ordinary diesel fuel and is used to start the car and warm the engine. Heat from the engine is then transferred to a second tank containing the vegetable oil. Once the engine has reached a temperature of about 75°C, the vegetable oil is warm enough to be used as fuel, and with the flick of a switch next to the gearshift

the engine seamlessly begins burning the alternative fuel. “When you get on the highway,” says Taylor, “and the needle on the diesel gauge doesn’t move, that’s when I know I’m carbon neutral. It’s a good feeling.” The theory here is that the carbon being released into the atmosphere is roughly equivalent to the carbon the plants (that the oil is made from) took out of it. And that desire to cancel out the carbon emissions is Taylor’s goal, rather than any gains in economy or efficiency. When running on vegetable oil, the Mercedes 300D is not more efficient; it still gets about 32 kpg. This may not sound very impressive by modern standards, but it is respectable for a car of its weight and its era. The oil itself is quite affordable – at about $0.50 per liter – and is delivered to her home by the same mechanics who converted the engine. They source it from area restaurants and filter out the cook-

ing impurities to make it suitable for fuel. Taylor used to collect and filter the fuel herself from a local Cuban restaurant, but now she lets the professionals handle it. “I used to have more time on my hands back then,” she says with a laugh. In a brief drive around town, I noticed no deterioration in the performance of Taylor’s car while it was running on vegetable oil. Although some diesel cars of late have been coaxed into feats of acceleration, the 300D, with its 80 horsepower, is not likely to burn up the road. Taylor says the car tops out on the highway around 130 kph. Yet as I finished my stint behind the wheel and switched the fuel system back to diesel, it occurred to me that this car, while exotic in its way, is just part of the broader trend toward flexibility. Whether through hybrids or flex-fuel vehicles, we have reached a point where it’s preferable to have options. Vegetable oil is just one more. June 2010 | TRENDS 145

style that fits.

Shoptalk

Ferrari 458 italia There are two types of drivers when it comes to Ferrari’s 8-cylinder range. The folks who prefer the Ferrari California enjoy a versatile sports car as a way to satisfy their concerns about practicality. Then there are the drivers of the new Ferrari 458 Italia. These guys only care about speed and Formula 1-style performance. Ferrari has designed an all-new road car for them – new engine, styling, electronics, and even a steering wheel with all the controls built in so that they get a pure, focused driving experience. The 458, which made its recent Middle East debut in Dubai, goes 0-100 km in 3.4 seconds and pumps out 570 horsepower. “It’s the integration of style, creative flair, and passion,” the sales manager for Ferrari Middle East & Africa, Reno De Paoli, said. -Jay Akasie

packard Bell

omputing is becoming a lot more personal thanks to the folks at Packard Bell. Their laptops and desktops allow those of us who lead mundane lives to break free of the computing pack and go a little crazy. “Poco loco” as the Spanish would say. The company told us that their Dot S2 computer, for instance, is inspired by Ernest Hemingway’s Moleskine notebook. With built-in wireless, Web cam, Bluetooth, and 3G, you’ve got a high-speed connection to the Internet that Papa himself would envy. Speaking of high speeds, we’re especially fond of Packard Bell’s Dot VR46, which sports the sun and moon graphics from the helmet of the grand prix motorbike legend Valentino Rossi. So take a Packard Bell for a spin today. Just make sure you wear a seat belt and that you save your drinking for Sloppy Joe’s. -Jay Akasie

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Shoptalk

piaget & Sienna Miller

eternity aqua

ew actresses can match the tour de force performances of Sienna Miller in such heavyweight films as Factory Girl, G.I. Joe: The Rise of Cobra, and Alfie. Which is why watchmaker to the stars Piaget recently hired the lovely actress to model its 20-year-old Possession jewellery collection. The first image the jeweller and watchmaker has released to the public is a tantalizing photograph of Miller posing in sleek leather pants, a sleeveless white top, and a ransom in Possession baubles: chains, bracelets, and rings all in yellow gold. Piaget isn’t stopping there. It is going to release a steamy “making of” video that shows never-before-seen clips of Miller’s photo shoot at New York City’s Hudson Studios. That’s one video that will be sure to burn up the lines at YouTube. -Jay Akasie

alvin Klein says that the Eternity Man is someone who lounges outdoors with an effortless elegance. He sits by the pool, gin and tonic in hand, relaxed and confident. Even more interesting is the description of the company’s latest fragrance, Eternity Aqua: It’s a “modern aquatic woody fragrance that leaves a lasting impression with a watery surge of chilled cucumber.” After picking up hints of sandalwood, the Eternity Man will send off scents of “the drenched green leaves” that “run throughout the fragrance adding an aquatic depth.” Eternity Aqua also gives a sniff of water lotus, Szechuan pepper, white cedarwood, and patchouli. All they left out was the gin and tonic. -Jay Akasie

Molton Brown

e’ve loved this British line of skin and hair care products ever since a fun-filled stay at a certain five-star hotel in London a few years back, when we were introduced to this brand for the modern gent. Molton Brown is raising the bar with its new men’s grooming collection that calls for a three-step regime towards younger skin. Let’s face it: All those years of drinking, smoking, and sun have wrought havoc on your epidermis. The luxury collection from Molton Brown remedies all that wear and tear by recommending a daily wash, shave, and moisturizer. Our favorite: The power-boost zinc anti-fatigue hydrator. The worst hangover or most dehydrating jetlag is no match for this mineral complex that restores cell vigor and boosts your skin’s vitality. -Jay Akasie

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LETTERS TO THE EDiTOR 18 rue de Varize – 75016 Paris Tel: +(33) 1 47 66 46 00 Fax: +(33) 1 43 80 73 62 www.trendsmagazine.net E-mail: editor@trendsmagazine.net

LETTER OF THE MONTH Transparency’s the Key Re. “Cashed Out: Are U.A.E. Banks Broke?”: As I see it, there are two problems that the U.A.E. is going to have to primarily handle. I am no financial whiz nor indeed any kind of economic analyst, and would not dare to presume such a position. However, as a layman who has been a resident of the United Arab Emirates over the last 15 years on and off, I have to say that transparency of the country’s financial institutions has become its biggest Achilles heel when it comes to attracting long-term foreign investment. So is detracting long-term debtors from bolting into the blue, causing millions of dirhams to disappear, which could in any country with legitimate and transparent financial rules have been retrieved through bankruptcy procedures. Most international investors with very systemic procedures would hesitate before investing in such a country. Let us be realistic in examining our flaws here. It is also a bit of a Catch-22 trying to be transparent in the U.A.E., where the tradition of declaring things upfront has never really been valued.

Anupama V. Chand (by email)

Lessons from Columbia Re. “Risky Business”: If it’s true that your editor Jay Akasie has an M.B.A. from Columbia Business School, then he should know more than anyone that Graham & Dodd, the Columbia professors who taught Warren Buffett and authored “Security Analysis,” warned long ago about the dangers and disappointments of risky investing. The same holds true for supply chain management. That fact that this all seems to be a revelation for Akasie should be, well, somewhat embarrassing for TRENDS.

Jack McLaughlin (by email) Stop the Excuses Re. “Cashed Out: Are U.A.E. Banks Broke?”: Delaying the paying of contractors and/or consultants by government or semi-government entities has been endemic in this area for as long as I have been there (35+ years). Often on the flimsiest of excuses. Now, of course, we have the mother of all excuses: the world economic situation.

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Managing Editor: Jay Akasie jay@mediaquestcorp.com Business Editor: Emily Meredith emily@mediaquestcorp.com Copy Editor: Salil Kumar Creative Director: Aziz Kamel Art Director: Janett Kheil Art Contributor: Alvin Cha Contributors: Sarah Abdullah, iason Athanasiadis, Tanya Goudsouzian, Orly Halpern, Liz Peek, Daniel Scanlan Correspondents: Abu Dhabi: Edmund Sheen – Beirut: Nathalie Bontems – Istanbul: Bill Sellars – Jeddah: Alex Malouf – Jerusalem: Ben Lynfield – Kuwait: Jamie Etheridge – London: Clare Dunkley – Kabul: Helena Malikyar – Washington: Afshin Molavi ADVERTISING sales@mediaquestcorp.com

What is conveniently ignored is that many of these mega-projects should never have been awarded in the first place because their finance to enable completion was not properly arranged. That being said, I sincerely hope all will be sorted out somehow and soon because the U.A.E. is still a great place.

Baker (by email) Building on Credit If I were a bank, I’d be very wary about loaning anyone any money right now, whether it’s a big company or an individual. So many projects in Dubai were built on credit and won’t be completed anytime soon. That had to stop, as does the rampant offering of higher and higher credit limits on cards for personal customers. Encouraging debit card usage instead of harassing customers with irresponsible credit card offers would be a step in the right direction, too.

Anne (by email) Or Maybe Let’s Call It Off

Have something to say? Email us your thoughts at editor@trendsmagazine.net; send a letter to: The Editor, TRENDS, S.C.C. Arabies,18 rue de Varize, 75016 Paris, France; or a fax to: +(33) 1 4380 7362. Be sure to include your name and location

Founder: Yasser Hawari

Re. “Placing Value On a Name”: How about a name like the Gulf of Salaam? I’m pretty sure most people in the Gulf, whether they are Muslim or not, whether they speak Arabic or not, know that Salaam means “peace.”

Anne (by email)

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The LasT Word WiTh richard cooper Economic crises aren’t always avoidable, and a few of them are downright necessary. The key is to manage all the fall-out properly, according to Richard Cooper, the Maurits C. Boas Professor of International Economics at Harvard. Besides participating in the recent summit of the World Economic Forum in Qatar, where he caught up with TRENDS, Professor Cooper has served as chairman of both the National Intelligence Council and the Federal Reserve Bank of Boston. He was also the Under-Secretary of State for Economic Affairs in the Carter administration.

ow viable is the proposal for taxing the banks and what impact would that have on the industry? That depends entirely on the banks. Taxes have many, many possibilities. I can imagine a tax that’s extremely onerous and one that’s hardly noticed. So I think details are all important. I know people are worried about the competitiveness of banks, and it’s something that no one country could do alone. Several countries acting in consort – if they were really serious about it – they could make it stick as long as it includes the major countries. It may involve blackballing countries that do not enforce the tax or try to exploit the tax. So I think the details are all important – the levels of the tax, who implements the tax, and how it is implemented. I think there’s a bigger issue, and that is: What exactly is the tax for? What is the purpose of the tax? And if it’s to raise revenues to deal with future contingent financial crisis in which banks have to be rescued, then there’s a whole serious issue about who holds the revenues and how are they shared. Maybe the tax is, in contrast, designed to reduce inter-country bank flows. First, that calls for a different kind of tax; and secondly, I think one has to think very clearly about what exactly it is one is trying to do. I’m not in favor of a punitive tax just because the banks 154 TRENDS | June 2010

are on the defensive at the moment. The mood that governments are in at the moment makes a tax much more viable than it would have been five years ago. But it’s going to require a lot of discussion and clarity of purpose. Is there still room in the industry for innovation? Well, I think the appetite just at this moment – I think the financial community is licking its wounds on the one hand and wary of new innovations that would court public disfavor. So I think on both counts innovation is on the back burner at the moment, but in the longer run I suspect that we’ll discover that as new opportunities arise, we’ll discover innovation in the financial community. For my part, I think that’s a good thing. Speaking in very general terms I think that’s a good thing. The regulators have to be alert to innovations that carry systemic risks and try to limit them, and if they get big enough to be serious risks for the system as a whole. But if you just think, historically we would be much, much worse off today without innovations in the financial community than with them. Just to take one case that should be obvious but isn’t: the limited liability corporation. It made possible regime capital on a much, much bigger scale, [something] that hadn’t been possible be-

fore. So I don’t think we want to throttle innovation; we just want to be careful. What is the single best thing to have happened to finance in the past 10 years? I think the crisis itself, actually. I think the people in the financial community got extraordinarily cocky. They thought that nothing could go wrong, because nothing had gone wrong in recent times. And sadly, we human beings don’t learn very well from reading history. Each generation has to make its own mistakes. We made a really big one this time around and I think it will influence the behavior of people in the financial community for at least a decade. And then we’ll have to make some more mistakes, so the next generation has to make its own mistakes. I actually think the financial crisis in that peculiar sense was a necessary crisis. I think it’s too bad that it did as much damage as it did to national economies, to real economies, to real output and employment, and we need to figure out how to limit the damage. I’m of the view that crises are not avoidable, and I would even, in my perverse moments, I would argue that they are necessary for a healthy system. I think the challenge to the system as a whole is to limit the damage and, of course, in this current crisis that’s where we failed very, very badly.