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FORBES MIDDLE EAST

THE WISDOM OF WEALTH

• THE FORTUNATE SON

APRIL 2018 ISSUE 70

MONEY IS A TERRIBLE MASTER BUT AN EXCELLENT SERVANT. -P.T. BARNUM

AYMAN HARIRI

THE WORLD’S

RICHEST ARABS

CO-FOUNDER AND CEO OF VERO

2018

$1.3

31

BILLION

ARAB BILLIONAIRES TOTAL NET WORTH

$76.7 BILLION

AP RI L 2 01 8 IS SU E 70

2,208 BILLIONAIRES WITH A TOTAL NET WORTH OF $9.1 TRILLION UAE ....................................AED 30 SAUDI ARABIA................. SAR 30

BAHRAIN ...........................BHD 3 KUWAIT .........................KWD 2.5

OMAN ............................... OMR 3 OTHERS .................................... $8

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Contents // APRIL 2018

ISSUE 70

ON THE COVER 40 I BREAKING AWAY

Lebanese billionaire Ayman Hariri was raised to work in the family construction business, but his passion for technology beckoned.

COVER PHOTOGRAPH BY CLAY ENOS

BY CARLA SERTIN

APRIL 2018 FORBES MIDDLE EAST 1

APRIL 2018

ISSUE 70

THE WORLD’S

6 I SIDE LINES // MARY SOPHIA DELVING INTO THE NINE ZEROES CLUB

20 RICHEST

10 I FACT & COMMENT STEVE FORBES

GREAT MEDICINE FOR TRADE

LEADERBOARD 12 I THE WORLD’S 20 RICHEST 14 I WOMEN POWER 16 I THE RACE TO THE OUTER SPACE 18 I WHITE HOUSE BLUES

12

20 I THE ARAB WORLD’S RICHEST

FAMILIES 2018

22 I BILLIONAIRES OF ARAB ORIGIN

WITH OTHER CITIZENSHIP

24 I BILLIONAIRES WHO MADE THEIR

FORTUNES THROUGH AUTOMOBILE DEALERSHIPS 26 I THE RICHEST INDIANS

IN THE GCC

28 I CASHING IN ON MENA’S

STARTUP BOOM

THE WORLD’S

BILLIONAIRES 30 I HOW TO BEAT WALL STREET AND

SILICON VALLEY SIMULTANEOUSLY

30

The American Dream is alive and well on Wall Street thanks to Robert Smith, the richest black person in America, who has figured out a way to reengineer both private equity and enterprise software—and used this secret playbook to build $4.4 billion fortune.

BY NATHAN VARDI

36 2 FORBES MIDDLE EAST APRIL 2018

36 I THE FORTUNATE SON For a decade India’s richest man waged a blood feud with his younger brother for control of the subcontinent’s telecommunications industry.

Now Mukesh Ambani shares the inside story of his ultimate triumph—Jio, an ultra-cheap 4G broadband service whose biggest winners will be the millions of ordinary Indians who suddenly consume more mobile data than either the U.S. or China.

BY NAAZNEEN KARMALI

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Š Europe Arab Bank plc 2018. All Rights Reserved. Registered in England and Wales number 5575857. Registered Office: 13-15 Moorgate, London EC2R 6AD. MIDDLE Authorised by the APRIL 2018 FORBES EAST 3 Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Not all products and services are regulated by the Financial Conduct Authority and the Prudential Regulation Authority.

APRIL 2018

ISSUE 70

THE WORLD’S

RICHEST ARABS

48

31 BILLIONAIRES WITH A TOTAL NET WORTH OF $76.7 BILLION

44 I THE WISDOM OF WEALTH Abdulla bin Ahmad Al Ghurair built a fortune from savvy business moves dating back to the beginnings of Dubai’s oil boom, becoming a self-made billionaire.

Then, in a stunning act of philanthropy, he created one of the world’s largest education foundations.

BY SAMUEL WENDEL

THOUGHT LEADERS 56 I REGULATING THE BORDERLESS CRYPTOCURRENCIES NIPUN SRIVASTAVA

58 I HOW TO CHOOSE A WEALTH

MANAGER

TED STEPHENSON

70 I WHY CEOS NEED TO RETHINK

COMPANY HIERARCHY IN THE DIGITAL AGE TUUKKA KONTTINEN

44

4 FORBES MIDDLE EAST APRIL 2018

72 I THOUGHTS ON ABUNDANCE

APRIL 2018 FORBES MIDDLE EAST 5

SIDE LINES Dr. Nasser Bin Aqeel Al Tayyar President & Publisher nasser@forbesmiddleeast.com

Khuloud Al Omian

Editor-in-Chief Forbes Middle East CEO - Arab Publisher House khuloud@forbesmiddleeast.com

Mary Sophia

Deputy Editor for Magazine mary@forbesmiddleeast.com Researchers: Jason Lasrado, Ahmed Mabrouk, Ranju Warrier Translation: Mohammad Albalawani Reporters: Samuel Wendel, Carla Sertin Head of Creative: Soumer Al Daas Graphic Designers: Sally Hoteit, Kashif Baig Head of Sales: Krishna Natarajan krishna@forbesmiddleeast.com Managing Editor- Special Editions: Claudine Coletti claudine@forbesmiddleeast.com Senior Group Sales Manager: Ruth Pulkury ruth@forbesmiddleeast.com Sales Managers:

Arif Abdul arif@forbesmiddleeast.com

Karthik Krishnan karthik@forbesmiddleeast.com Sales & Marketing Coordinator: Mathew George mathew@forbesmiddleeast.com For KSA Sales Manager: Ghousuddin Rizwan Mohammed rizwan@forbesmiddleeast.com Sales Manager: Ahmed Gohar agohar@forbesmiddleeast.com Events Director: Nolie Papa Executive Assistant to CEO & Editor-In-Chief

Kavya Pinto editorial@forbesmiddleeast.com Head of Finance: Daniyal Baig daniyal@forbesmiddleeast.com Operations Manager: Habibullah A. Qadir habib@forbesmiddleeast.com Head of Human Resources: Khizraa Javed khizraa@forbesmiddleeast.com Queries: editorial@forbesmiddleeast.com For Production Queries: production@forbesmiddleeast.com

APRIL 2018 ISSUE 70 IN TOUCH WITH BUSINESS

Forbes.ME forbesmiddleeast

ForbesME Forbes Middle East

6 FORBES MIDDLE EAST APRIL 2018

Delving Into The Nine Zeroes Club

By Mary Sophia

WHEN FORBES FIRST LAUNCHED its list of international billionaires in 1987, just three countries from the Middle East—Saudi Arabia, Kuwait and Lebanon—were included.

As the region flourished on the back of its oil wealth, the Middle East became home to many more billionaires in the ensuing years.

Fast forward 31 years later, the region’s billionaires list continues to have the names that were on the list from the start. While the Arab world’s billionaires have not been immune to family feuds and power struggles, close familial ties and cultural discipline have helped preserve wealth till date despite differences in opinion.

In this issue, octogenarian billionaire Abdullah Al Ghurair spoke to us about how he grew his business empire in the early days of Dubai. On the other end, we had a conversation with the newest tech entrepreneur on the block Ayman Hariri, who is gradually emerging from the shadows of an impactful legacy.

Breaking away from the norm, Forbes has chosen not to include billionaires or billionaire families from Saudi Arabia within this year’s list after reports of asset seizures emerged.

Nevertheless, these billionaires and ones across the region form the backbone of the Middle East’s economy. Forbes takes the task of ranking them seriously as a global team of 13 reporters and many more part-timers along with the licensees (including the Middle East), led by two editors, have worked diligently to collate the details of wealth amassed by billionaires across the globe.

Is this a conclusive list? Probably not. But as Forbes’ Chief Content Office Randall Lane puts it, “free fair markets deserve transparency” and the first step towards it would be to know who controls the vast swathes of wealth. And we hope through our lists we are doing just that.

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Forbes Middle East is published

by Arab Publisher House and licensed by Forbes LLC. Some of the content published in this issue is selected from the Forbes U.S. magazine.

All rights reserved (2015).

Contact us

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APRIL 2018 FORBES MIDDLE EAST 9

FACT & COMMENT “With all thy getting, get understanding”

GREAT MEDICINE FOR TRADE

BY STEVE FORBES, EDITOR-IN-CHIEF, FORBES

HERE’S A HUGELY winning issue for President Donald Trump that will deal with a gross trading abuse and simultaneously advance his goal of reducing the prices of prescription drugs: Insist that foreign buyers of American pharmaceuticals— almost without exception government agencies—pay their fair share of the research and development costs of these medicines. Currently, Americans are subsidizing overseas users of our drugs.

Here’s how that works. The average price of successfully bringing a new medicine to market in the U.S. is about $2.4 billion. The entire approval process takes some 12 years before a drug receives its final green light. The expenses include all the would-be medicines that fail to make it out of the research labs or falter during the Food & Drug Administration’s expensive, time-consuming clinical trials.

Pharmaceutical companies get 20-year patents for their drugs, which means they really have about 8 years of monopoly power (20 years for the patent minus the 12 years for clearing all the hurdles before a particular prescription can actually be sold). No wonder the initial price for a new drug is skyhigh, even though the actual manufacturing cost per pill is minuscule. (Ideally, when a drug goes “off-patent,” imitators rapidly bring copies, called generics, to market, slashing the price. Unfortunately, FDA regulations have gummed up this

process. New FDA head Dr. Scott Gottlieb has been removing obstacles, which is why the rate of drug approvals has more than doubled.) When a pharmaceutical company sells a new drug overseas, buyers demand a price that’s a fraction of what American customers pay. The demand is more in line with a gangsteresque “We’ll make you an offer you can’t refuse” process than normal business bargaining. The implicit—and sometimes explicit— threat is that if a company doesn’t cave the country will allow a knockoff of the medication to be produced by another company.

The U.S. should now make fair pricing of American drugs overseas a top trade priority: If you don’t want to pay for our R&D, you won’t get our pills. Period. And if you try the imitation game, we’ll take painful retaliatory measures. Success with this would mean significantly lower costs for American consumers. The publicity surrounding the issue would also educate Americans about how costly—and antiquated—much of our current approval system is, thus generating political support for the kinds of reforms Scott Gottlieb is pushing at the FDA. A side benefit would be reducing FDA resistance to the president’s desire to let terminally ill patients have the right to take medications that haven’t yet cleared bureaucratic hurdles for approval.

Hoover: an extraordinary Life in extraordinary times Kenneth Whyte (Knopf, $35)

WISE HISTORIANS KNOW BETTER than to pigeonhole notable figures—things are often just too complex—and with no person has this been more true than Herbert Hoover, our 31st president. On one hand, he is one of history’s greatest humanitarians, whose extraordinary and truly innovative efforts literally saved tens of millions of people from starvation in Europe during and after World War I. John Maynard Keynes was not alone at the time in regarding Hoover as one of the most outstanding men of his age. In an era when Washington never involved itself in disaster relief, Hoover, on his own initiative as commerce secretary, undertook and brilliantly directed a massive effort to alleviate the immense suffering wrought by the great Mississippi 10 FORBES MIDDLE EAST APRIL 2018

flood of 1927. Without his decisive intervention, the loss of life would have been incalculably worse.

On the other hand, in 1933 Hoover left the presidency, after one term, as probably the most vilified and hated individual ever to occupy the White House. He was caricatured as cold and indifferent to the unprecedented human hardships brought on by the Great Depression. This greatest of economic disasters began on Hoover’s watch, and he was seen as incapable of successfully dealing with it. His political maladroitness and optimistic statements allowed him to be portrayed—even to this day—as out of touch, overwhelmed and incompetent. His dour personality was in stark contrast to that of his successor, the ebullient,

upbeat, confidence-inspiring Franklin D. Roosevelt.

FDR was no more successful than Hoover at slaying this beast of hard times, as evidenced by the depression of 1937– 1938 during Roosevelt’s second term, when unemployment surged to 20%.

Kenneth Whyte’s comprehensive, well researched and fluidly written biography of this man of many contradictions paints as complete a picture as one could hope for. Thankfully, Whyte doesn’t assume the role of many previous writers—prosecutor or defense attorney. This fair-minded masterpiece will be the standard reference for many years to come.

Hoover’s early life story would have delighted Abraham Lincoln as an example of individual effort overcoming immense obstacles. The son of an Iowan Quaker blacksmith and his wife, Hoover was orphaned at 9, and he and his siblings were shipped off to various relatives. For most of his childhood Hoover was an outlier, always working hard but never receiving any real affection, which helped account for his withdrawn personality and utter lack of social graces, traits that proved to be lethal in the political world and, subsequently, to his reputation.

Always an indifferent student, Hoover nonetheless displayed his amazing organizational abilities early on. He deftly reorganized the head office of his uncle’s business. He was admitted to the first class of the new Stanford University in 1891, even though he flunked the entrance exams (the institution needed students), and won the admiration of the U.S.’ outstanding geologist. Hoover would have taken a post with the U.S. Geological Survey had it not been for a shortage of funds brought about by the depression afflicting the country at the time.

After Stanford, Hoover went to work in the mining business in China and elsewhere, achieving dazzling successes. By the age of 40 he was an immensely rich man, working out of London and looking for a way to enter public service back home.

Then the Great War broke out.

Without anyone requesting it of him, Hoover immediately took charge of getting more than 100,000 stranded Americans back home. It was an amazing

effort in fund-raising, logistics and improvisation. Then Hoover dived into the task of feeding some 9 million people in German-occupied Belgium and northern France. The Germans had stripped these areas of foodstuffs, and the British naval blockade ensured that no food could get through. Hoover persuaded the British to let food be delivered via neutral shipping and the Germans not to commandeer those provisions—and he organized the entire relief effort at minimal cost.

When the U.S. entered the war in 1917, Hoover was made America’s food czar and again performed miraculously. After WWI ended, he saved tens of millions of people in Russia and other parts of Europe from famine in the midst of the Russian Civil War. After an amateurish run for the GOP presidential nomination in 1920, Hoover was named commerce secretary, a cabinet backwater. He turned this sleepy agency into a dynamo of hyperactivity, successfully pushing the development of radio, aviation and even television. He promoted the establishment of market standards and cost saving techniques to help business and make the running of government more cost-efficient. No cabinet secretary had had such a record of achievement since Alexander Hamilton.

No wonder Hoover coasted to the presidency in 1928, winning in a landslide.

But then it all fell apart. The very activism that had made him such a success led Hoover into a series of catastrophic mistakes.

Any discussion of the Great Depression—its causes and what should have been done—is always laded with intense controversy. It is in the world of interpretation that one can debate some of Whyte’s conclusions.

In this reviewer’s mind, Hoover’s biggest disaster was signing the SmootHawley Tariff Act into law. It slapped new or higher taxes onto thousands of import items, precipitating a global trade war that sent economies around the world into a tailspin.

Hoover’s desire to help American farmers, who were suffering from overproduction and inadequate commodity prices, started this hideous ball rolling. He thought that putting tariffs

on imported commodities would help; however, Congress didn’t stop there, and slapped new or higher levies on just about everything under the sun. The prospect of a sweeping, destructive tariff law sent the stock market crashing in the fall of 1929.

Whyte skillfully describes the legislative history of Smoot-Hawley and how Hoover lost control of the process. He could easily have vetoed the resulting monstrosity, yet despite the warnings of hundreds of noted economists, he signed the bill in June 1930.

A global contraction began.

Contrary to myth, Hoover was anything but a do-nothing president as the disaster unfolded. But he responded with a series of measures that either exacerbated the crisis or were ineffectual. Other countries were no better, enacting tax increases as their economies shrank. Germany, in particular, slapped on major hikes, deepening the slump and fueling the rapid rise of the Nazi party. Hoover followed suit with a massive tax boost that overnight raised the top income tax rate from 25% to 63% and hit numerous items with higher excise taxes.

While one may disagree with Whyte’s take on some issues, he is right in that many of Hoover’s policies actually laid the foundation for Roosevelt’s New Deal.

The economic calamity, as well as the public’s disenchantment with Prohibition— the repeal of which Hoover refused to support—led to his crushing reelection defeat and banishment to the political wilderness.

After WWII President Harry Truman called on Hoover to help with European relief efforts. He also appointed Hoover to head a commission on streamlining government.

He did a superb job, and many states created “Little Hoover Commissions” to do the same. These efforts and the passage of time lessened the bitterness and antagonisms of the Depression years, and Hoover’s public standing improved.

The controversies surrounding the Depression will forever arouse debate and discussion, but Whyte’s book is indispensable to understanding the extraordinary man at the center of the storm—and to appreciating how much he did for humanity.

APRIL 2018 FORBES MIDDLE EAST 11

LeaderBoard 14 WOMEN POWER

16 THE RACE TO THE OUTER SPACE

18 WHITE HOUSE BLUES

20 THE ARAB WORLD’S RICHEST FAMILIES 2018

22 BILLIONAIRES OF ARAB ORIGIN WITH OTHER CITIZENSHIP

24 BILLIONAIRES WHO MADE THEIR FORTUNES THROUGH AUTOMOBILE DEALERSHIPS

26 THE RICHEST INDIANS IN THE GCC

BILLIONAIRES

THE WORLD’S

20 RICHEST THE VERY WEALTHIEST people on the planet are worth a staggering $1.2 trillion—a sum roughly equivalent to the annual economic output of Mexico. In aggregate, their riches represent 13% of the total fortune of all 2,208 billionaires worldwide. The minimum figure for admission to this august club: $39 billion, up 28% from $30.4 billion a year ago.

The richest person on earth, Amazon’s chief is the first centibillionaire atop our annual ranking. Shares of his e-commerce colossus rose 59% in 12 months, helping lift his fortune by $39.2 billion, the biggest one year gain ever recorded.

(The $27.6 billion increase he logged in 2017 ranks third.) Bezos also owns the Washington Post and aerospace firm Blue Origin.

12 FORBES MIDDLE EAST APRIL 2018

IMAGES FROM GETTY IMAGES

1. JEFF BEZOS $112 billion U.S.

Russia’s election meddling.

Still, the company’s shares rose 32% in the past year, adding $15 billion to his net worth.

2. BILL GATES $90 billion U.S. Cedes the top spot for only the sixth time since 1995. The Microsoft cofounder’s net worth rose $4 billion in the past year, but that was no match for Bezos’ epic increase.

3. WARREN BUFFETT $84 billion U.S. In January the octogenarian promoted two Berkshire Hathaway executives to vice chairman roles—a step toward a much anticipated succession plan. Buffett, who says he’s in “remarkably good health,” continues to run Berkshire, whose stock is up 16% since last year.

IMAGES FROM SHUTTERSTOCK; GETTY IMAGES

4. BERNARD ARNAULT $72 billion France Record results at his luxury empire LVMH and a deal to buy out nearly all of Christian Dior helped boost Arnault’s fortune by $30.5 billion.

5. MARK ZUCKERBERG $71 billion U.S. Facebook’s CEO faces pressure over his social-media giant’s role in

and his brother Charles made news in November when their investment arm put $650 million toward Meredith Corp.’s $2.8 billion purchase of struggling magazine publisher Time Inc.

10. LARRY ELLISON $58.5 billion U.S. 6. AMANCIO ORTEGA $70 billion Spain Most of his fortune is tied up in inditex, best known for fashion chain Zara.

Its shares have sagged, helping knock $1.3 billion off his net worth.

7. CARLOS SLIM HELU $67.1 billion Mexico Slim is worth $12.6 billion more than a year ago, due mostly to a 39% jump in the stock of his telecom firm, América Móvil.

8 (TIE).

CHARLES KOCH $60 billion U.S. In November his $100 billion (sales) Koch Industries launched Koch Disruptive Technologies, a venture-capital arm run by his son Chase; it has already led a $150 million investment in an Israeli medical device startup.

8 (TIE).

DAVID KOCH $60 billion U.S. The Koch Industries executive vice president

Even as Oracle faces competition from Sales Force and Amazon in the cloud market, its stock has risen 13%. Ellison, who owns about a quarter of the company, is $6.3 billion richer.

11. MICHAEL BLOOMBERG $50 billion U.S. New York City’s former mayor continues to run his financialinformation and media firm, Bloomberg LP. A gun-control organization he backs, meanwhile, is forming a new initiative geared toward students in the wake of the school shooting in Parkland, Florida.

13. SERGEY BRIN $47.5 billion U.S. Page’s partner as Google’s cofounder is America’s richest immigrant. Now Alphabet’s president, Brin is reportedly spending over $100 million on the world’s largest airship for both personal luxury travel and delivering aid to remote locations.

14. JIM WALTON $46.4 billion U.S. The youngest son of Walmart founder Sam Walton sat on the company’s board until 2016. He runs the family’s regional bank, Arvest.

The Google cofounder, now CEO of its parent, Alphabet, has reportedly been in talks with Saudi Arabia to build a technology hub inside the kingdom. Page’s fortune grew $8.1 billion over the past year.

18. FRANÇOISE BETTENCOURT MEYERS $42.2 billion France Her mother, L’Oreal heiress Liliane Bettencourt, died in September 2017; Bettencourt Meyers and her family inherited the fortune.

15. S. ROBSON WALTON $46.2 billion U.S. Sam Walton’s oldest son was Walmart’s chairman for 23 years. He’s now one of three family members still involved in the company; he and Steuart Walton, the son of Jim Walton, sit on its board. his son-in-law Gregory Penner is chairman.

19. MUKESH AMBANI $40.1 billion India The Indian tycoon is back in the top 20 for the first time since 2012.

20. JACK MA $39 billion China

16. ALICE WALTON $46 billion U.S. 12. LARRY PAGE $48.8 billion U.S.

thanks in part to his firm Tencent’s WeChat, a ubiquitous social messaging app with nearly 1 billion active users. Tencent also has stakes in Tesla, Snapchat parent Snap and music streaming service Spotify.

Sam Walton’s only daughter has no role in the family business but still holds plenty of Walmart shares, making her the richest woman in the world.

Ma took e-commerce behemoth Alibaba to new heights in 2017, inking its first Olympic sponsorship and scoring a streaming agreement with Disney. Alibaba’s shares have increased 76% since last year, boosting him into the top 20 for the first time.

17. MA HUATENG $45.3 billion China Ma is Asia’s wealthiest person for the first time, APRIL 2018 FORBES MIDDLE EAST 13

LeaderBoard BILLIONAIRES

WOMEN POWER AMONGST THE 2,208 billionaires globally, 256 were women billionaires in Forbes’ recent ranking of the rich. The women had a collective estimated net worth of over $1 trillion—20% higher than last year.

Forbes Middle East lists down the top 10 richest women in the world whose estimated total net worth is $242.9 billion.

This year Alice Walton, daughter of Walmart founder, is the richest woman in the world with a fortune worth $46 billion while L’Oreal’s new Heiress Francoise Bettencourt Meyers came second with $42.2 billion.

Net worth is calculated as of March 6, 2018.

ALICE WALTON, 68

and rebuilt it into a larger empire. Her biggest piece of fortune comes from Hope Downs Mine.

$46 billion Source: Walmart United States

IRIS FONTBONA, 75

The only daughter of Walmart founder Sam Walton, Alice Walton founded Crystal Bridges Museum of American Art in her hometown, Bentonville, Arkansas following her interest in curating art in 2011. She is the richest woman and 16th richest person in the world.

$42.2 billion Source: L’Oreal France

Francoise Bettencourt Meyers is the 18th richest person on the globe. The new L’Oreal Heiress Meyers and family own 33% of L’Oreal stock, post death of mother Liliane Bettencourt.

SUSANNE KLATTEN, 55 $25 billion Source: BMW, pharmaceuticals Germany

The richest woman in Germany, Susanne Klatten owns Altana AG that generates over $2.5 billion in sales annually. She also owns 19.2% of Germanautomaker BMW. 14 FORBES MIDDLE EAST APRIL 2018

The richest person in Chile, Iris Fontbona inherited businesses from husband Andrónico Luksic who made a fortune in mining and beverages and died in 2005 of cancer. She and her sons control Antofagasta Plc. ALICE WALTON

JACQUELINE MARS, 78 $23.6 billion Source: candy, pet food United States

The heiress to chocolate empire Mars, Jacquline Mars owns one third of the world’s largest candy maker that acquired VAC, a pet care company in September 2017 for $7.7 billion.

YANG HUIYAN, 36 $21.9 billion Source: real estate China

Yang Huiyan is the youngest and the richest woman in China. She owns a 57% stake—transferred to her by her father Yeung Kwok Keung in 2007—in real estate developer Country Garden Holdings.

ABIGAIL JOHNSON, 56 LAURENE POWELL JOBS, 54 $18.8 billion Source: Apple, Disney United States

The widow of Apple cofounder Steve Jobs, Laurene Powell Jobs is the founder and chairwoman of Emerson Collective, a nonprofit organization. She also cofounded College Track that helps disadvantaged students prepare for and graduate from college.

GINA RINEHART, 64 $17.4 billion Source: mining Australia

The richest citizen in Australia, Gina Rinehart took over her father Lang Hancock’s—an iron-ore explorer—bankrupted estate

$15.9 billion Source: money management United States

Abigail Johnson chairs U.S.based mutual fund giant Fidelity Investments where she joined as an analyst in 1988 and later in 2014 took over the business from her late father. She owns an estimated 24.5% stake in the company.

CHARLENE DE CARVALHO-HEINEKEN, 63 $15.8 billion Source: Heineken Netherlands

The richest woman in the U.K. Charlene de CarvalhoHeineken inherited a 23% stake in Heineken from her late father and former Heineken CEO Freddy Heineken in 2002.

Her husband sits on the Heineken advisory board.

BY RANJU WARRIER IMAGES FROM GETTY IMAGES

FRANCOISE BETTENCOURT MEYERS, 64

$16.3 billion Source: mining Chile

APRIL 2018 FORBES MIDDLE EAST 15

LeaderBoard BILLIONAIRES

THE RACE TO THE OUTER

SPACE

Jeff Bezos

Net Worth: $ 112 B Company Name: Blue Origin

Founded in 2000, by Jeff Bezos, Blue Origin has a vision of facilitating millions of people living and working in space.

Blue Origin’s engines are designed, developed and manufactured, which will dramatically bring down the cost of space travel dramatically.

Elon Musk

Net Worth: $19.9 B

Company Name: SpaceX

SpaceX designs, manufactures and launches advanced rockets and spacecraft.

The company was founded in 2002 to revolutionize space technology, with the ultimate goal of enabling people to live on other

planets.

16 FORBES MIDDLE EAST APRIL 2018

Paul Allen

Net Worth: $ 21.7 B

Company Name: Stratolaunch

Stratolaunch was founded in 2011 by Paul G. Allen and is developing an air-launch platform to make access to space more convenient, reliable, and routine.

Stratolaunch is the world’s largest aircraft by wingspan and is the largest all-composite plane ever built. Utilizing six Boeing 747 engines for a payload capacity of over 500,000 lbs.

Richard Branson

Net Worth: $ 5 B

Company Name: Virgin Galactic

Virgin Galactic, part of Sir Richard Branson’s Virgin Group, and sister companies, The Spaceship Company and Virgin Orbit are developing and operating a new generation of space vehicles to open space for everyone.

BY JASON LASRADO IMAGE FROM GETTY IMAGES

THE SPACE RACE PICKED up momentum between Russia and the U.S. during the cold war.

But today billionaires are in a race with each other to make space travel cheaper, faster and more accessible to the common man. Below are the billionaires who are looking to mint a fortune through the business of space travel.

LeaderBoard TRUMP

WHITE HOUSE BLUES OVER THE LAST 12 months, President Trump’s fortune has fallen $400 million, to $3.1 billion.

Except for a complete wipeout during George H.W. Bush’s administration, his financial performance has been the weakest during his own presidency. Trump’s most lucrative years? Obama’s, when he added $2.9 billion to his net worth.

DONALD TRUMP –$400 MIL GEORGE H.W. BUSH –$1.7 BIL

RONALD REAGAN +$800 MIL

GEORGE W. BUSH +$1.3 BIL

BARACK OBAMA +$2.9 BIL

BILL CLINTON +$1.7 BIL

WHAT TRUMP OWNS NYC

$395M

▲ $32M 1290 AVENUE OF THE AMERICAS NYC

$391M ▲ $44M 555 CALIFORNIA ST. SAN FRANCISCO

$347M ▲ $27M

TRUMP TOWER NYC

$245M ▼ $41M NIKETOWN NYC

$228M ▼ $137M

TEN GOLF COURSES IN SIX U.S. STATES PLUS WASHINGTON, D.C. $205M ▲ $7M HOTEL MANAGEMENT AND LICENSING $170M ▼ $50M TRUMP PARK AVENUE NYC $161M ▼ $29M MAR-A-LAGO PALM BEACH, FLA.

$160M ▼ $15M

TRUMP NATIONAL DORAL MIAMI GOLF RESORT $149M ▼ $21M

18 FORBES MIDDLE EAST APRIL 2018

CASH/LIQUID ASSETS $134M ▲ $4M TRUMP TOWER PENTHOUSE NYC

$64M

◄►

TRUMP INTERNATIONAL HOTEL LAS VEGAS $57M ▼ $18M TRUMP INTERNATIONAL HOTEL WASHINGTON, D.C. $53M ▼ $51M

ONE IRISH AND TWO SCOTTISH GOLF COURSES $50M ▼ $28M TRUMP PARC/ TRUMP PARC EAST NYC

$47M ▼ $40M TRUMP WINERY CHARLOTTESVILLE, VA.

$30M

◄►

TWO AIRPLANES, THREE HELICOPTERS $30M ▼ $5M TRUMP PLAZA NYC

$28M ▲ $9M

TOTAL NET WORTH: $3.1 BILLION (DOWN $400M)

SEVEN SPRINGS PRIVATE ESTATE BEDFORD, N.Y.

HOME BEVERLY HILLS

$11M

$24M

▲ $500K

TRUMP WORLD TOWER

TRUMP INTERNATIONAL HOTEL & TOWER

▲ $9M

NYC

NYC

$23M

$11M ▼ $19M

SPRING CREEK TOWERS

CONSUMER PRODUCTS LICENSING $6M ▼ $4M

◄►

BROOKLYN, N.Y.

$18M

▼ $14M HOME ST. MARTIN, WEST INDIES

$15M NEWLY INCLUDED ASSET HOMES PALM BEACH, FLA.

$15M ▲ $500K

TRUMP INTERNATIONAL HOTEL & TOWER CHICAGO $6M ▼ $94M WAREHOUSE CHARLESTON, S.C.

$4M

◄►

IMAGES FROM SHUTTERSTOCK

40 WALL ST.

APRIL 2018 FORBES MIDDLE EAST 19

LeaderBoard BILLIONAIRES

THE ARAB WORLD’S RICHEST FAMILIES 2018 IN FORBES MIDDLE EAST’S third year of valuing richest Arab families in the Middle East and North Africa, two families including Kuwait-based Alshaya and U.A.E.-based AW Rostamani family have made the list. Unlike 2017 where we had listed 13 richest families of which 10 were from Saudi Arabia, this year we are excluding Saudi families from the list after Forbes chose to leave off all 10 Saudis given reports of asset seizures after some 200 people, including some billionaires, were detained.

$3.6 billion

Country: Kuwait Source of wealth: Franchises, diversified; inherited and growing

• Mohammed Abdul Aziz Alshaya is the executive chairman of M.H. Alshaya Co., a Kuwait City-based family-owned retailer.

• The group has the license to operate nearly 90 brands, including H&M, Starbucks, Boots and Victoria’s Secret. It operates 3,900 stores in the Middle East, Europe and Russia.

• Mohammed Alshaya’s grandfather, Mohammed Hamoud Alshaya founded the business, originally a trading company, with his brother in 1890.

• Alshaya’s first franchise in 1983 was Mothercare, a British children’s clothing store.

Did you know?

The group’s distribution center in Dubai spans 48,000 square meters—the size of eight football fields.

In 2017, Alshaya opened Kuwait’s first Four Seasons Hotel at the family’s new Burj Alshaya, which boasts two glass towers. The complex will also serve as the group’s headquarters in 2018.

20 FORBES MIDDLE EAST APRIL 2018

Al Rostamani $1 billion

Country: U.A.E. Source of wealth: Investments, diversified and inherited

• Khalid Al Rostamani and his sister Huda are at the helm of Dubai-based conglomerate AW Rostamani.

• They inherited the business from their father, Abdul Wahid Al Rostamani, who passed away in November 2016.

• He began as a bookseller in 1954, before getting the distribution rights for Philips, Platin Batteries and Hunter Douglas, among other companies.

• AW Rostamani also has the exclusive dealership for Nissan and Renault cars in Dubai and the northern Emirates.

• It owns a 17% stake in Dubai Insurance and nearly 6% in Commercial Bank of Dubai.

Did you know?

Abdul Wahid Al Rostamani and his late brother Abdullah were in business together, but parted ways in 2006.

AW Rostamani’s 21st Century Tower on Sheikh Zayed Road in Dubai was the world’s tallest residential building when it was completed in 2003.

BY JASON LASRADO AND RANJU WARRIER IMAGES FROM FOUR SEASONS; WEBSITES OF AW ROSTAMANI AND MOTHERCARE

Alshaya

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APRIL 2018 FORBES MIDDLE EAST 21

LeaderBoard BILLIONAIRES

BILLIONAIRES OF

ARAB ORIGIN WITH OTHER CITIZENSHIP

MICHEL CHALHOUB Source of wealth: Retail, Self-made Origin: Syria Country of citizenship: France Michel Chalhoub founded Chalhoub Group which runs a network of 650 retail stores with brands including Chanel, Louis Vuitton and Christian Louboutin across the Middle East. He started in 1955 in Damascus, Syria as a business licensing foreign brands.

Net worth: $2.7 Billion

Source of wealth: Scaffolding, Cement mixers, Self-made Origin: Syria Country of citizenship: France In 1985, Mohed Altrad bought a bankrupt scaffolding manufacturer in France with a partner. The company—now Altrad Group— records $4 billion in sales and provides construction and maintenance services.

SAFRA LEBANON NetJOSEPH worth: $23.5 Billion

Net worth: $7 Billion

Source of wealth: Shipping, Self-made Origin: Lebanon Country of citizenship: France

Source of wealth: Banking, Self-made Origin: Lebanon Country of citizenship: Brazil

The richest banker in the world

MOHAMMED IBRAHIM

PATRICK DRAHI

Net worth: $1.1 Billion

Source of wealth: Communications, Self-made Origin: Sudan Country of citizenship: United Kingdom Sudan-born Mohammed Ibrahim—also referred to as Mo Ibrahim—founded Celtel International in 1998, which was sold to Zain for $3.4 billion in 2004. He now focuses on Mo Ibrahim Foundation, directed by his daughter, Hadeel.

Net worth: $7.1 Billion

Source of wealth: Telecom, Self-made Origin: Morocco Country of citizenship: France

SUDAN

Origin

22 FORBES MIDDLE EAST APRIL 2018

Joseph Safra is a scion of the banking family from Syria. Safra owns Banco Safra, the eighth largest bank in Brazil and and J. Safra Sarasin in Switzerland. He owns 50% of Chiquita Brands International.

Telecom giant Patrick Drahi owns 60% Altice NV that went public in June 2017. Drahi also owns 75% of France’s largest cable operator Numericable through Netherlands-based Altice NV. Born in Casablanca, Morocco, both his parents were Math teachers.

EGYPT FAYEZ SAROFIM Net worth: $1.5 Billion

Source of wealth: Money management Origin: Egypt Country of citizenship: United States Son of a wealthy Egyptian cotton farmer, Fayez Sarofim is the Chairman and Co-Chief Investment Officer of Fayez Sarofim & Co., a money management firm. Nicknamed “The Sphinx” Sarofim started his own investment firm in 1958.

MOROCCO

BY RANJU WARRIER

Jacques Saadé is the founder of CMA CGM, one of the largest shipping companies in Marseille France. The company operates 489 vessels and serves 420 commercial ports of the world’s 521 commercial ports.

Country of citizenship

MOHED ALTRAD

SYRIA

Net worth: $1.6 Billion

JACQUES SAADÉ

FORBES REVEALED ITS 32nd ranking of the world’s billionaires. Out of the 2,208 billionaires 31 Arabs had a combined net worth of $76.7 billion. But there are some billionaires of Arab origin who hold a different citizenship.

They either immigrated young or were born in these countries. Forbes Middle East lists seven such ultra-rich whose combined net worth is $44.5 billion. The net worth is calculated as of March 6, 2018.

LeaderBoard BILLIONAIRES

BILLIONAIRES WHO MADE THEIR FORTUNES THROUGH

AUTOMOBILE DEALERSHIPS

OUT OF THE 31 BILLIONAIRES on our list, seven have earned and still earns a large chunk of their wealth through automobile dealerships. While many of them have diversified into various sectors, the dealerships still remain an integral part of their portfolios. Below are the Middle Eastern billionaires who made millions if not billions through auto dealerships.

Suhail Bahwan

Net Worth: $3.9 B Country of Origin: Oman Autobrands: Nissan and Infinity automobiles in the Sultanate of Oman Suhail Bahwan Automobiles LLC (SBA) is a flagship company of the Suhail Bahwan Group—the authorized dealer of Nissan and Infinity automobiles in the Sultanate of Oman. In June 2005, SBA opened the world’s largest NISSAN showroom.

Abdulla Al Futtaim

Net Worth: $3.3 B Country of Origin: U.A.E. Autobrands:

Middle East: Toyota, Honda, Jeep, Dodge, Volvo, GAC Motors, Chrysler, Morgan Cars, RAM, Sunwin Buses, Caterham Cars.

Africa: Ford, Suzuki, Eicher, Man Trucks & Buses, Mazda, New Holland

Net Worth: $1.4 B each Country of Origin: Kuwait Autobrands: Honda and General Motors in Kuwait, Lotus Cars Kutayba Alghanim is the chairman of the group while Bassam Alghanim is not actively involved in the management of the group.

Mohamed, Yasseen and Youssef Mansour Net Worth: $2.7 B, $1.9 B and $1.4 B respectively Country of Origin: Egypt Autobrands: General Motors, Opel, Chevrolet, Cadillac, Suzuki, and Isuzu.

Mansour Group entered the automotive sector in 1975 when it was appointed as the official General Motors (GM) dealer in Egypt, selling around 100,000 vehicles a year.

24 FORBES MIDDLE EAST APRIL 2018

South Asia

Africa

Middle East

BY JASON LASRADO

Bassam and Kutayba Alghanim

South Asia: Nissan (Sri Lanka), Al Ghazi Tractors (Pakistan), Piaggio and New Holland Tractors (Sri Lanka), Suzuki (Sri Lanka).

Toyota, one of AlFuttaim group’s brands, has been the market leader in the U.A.E. over the past two decades.

APRIL 2018 FORBES MIDDLE EAST 25

LeaderBoard BILLIONAIRES

THE

RICHEST INDIANS IN THE GCC

M.A. Yusuff Ali Age 62

BILLION

Micky Jagtiani Age 66

$4.4 BILLION

B.R. Shetty Age 76

$4

BILLION

Ravi Pillai Age 64

$3.9 BILLION

Sunny Varkey Age 60

$2.4 BILLION

Sunil Vaswani Age 54

Joy Alukkas

$2.2

$1.5

Age 61

BILLION

BILLION

Shamsheer Vayalil Age 41

$1.5 BILLION

Residence

Abu Dhabi

Dubai

Abu Dhabi

Dubai

Dubai

Dubai

Dubai, U.A.E. and Cochin, India

Abu Dhabi

Source of wealth

Retail, Self-made

Retail

Healthcare, Self-made

Construction, Self-made

Education

Diversified

Jewelry

Healthcare

26 FORBES MIDDLE EAST APRIL 2018

BY RANJU WARRIER IMAGES FROM SOURCE, AND FORBES MIDDLE EAST

$5

ONE OF THE MOST POPULOUS countries in the world, India is emerging to be a growing super power within the global economy. Out of the 2,208 billionaires world-wide, India has 121 entries putting the South Asian country just behind the U.S. and China with the third largest group of moneyed individuals. Reliance Industries Chairman Mukesh Ambani is the richest Indian on the globe with a net worth of $40.1 billion, making him the 19th richest person in the world. Many of the billionaire Indians have also made their fortunes in the GCC. Eight Indians, featured in Forbes’ Billionaire rankings, set-up their business in the GCC and made it big with operations in several countries across the global. Abu Dhabi-based retail giant M.A. Yusuff Ali now owns a chain of 144-Lulu stores (hypermarkets and supermarkets) in over 21 countries. Sunny Varkey’s GEMS Education is the largest operator of K-12 schools in the world with 250 schools in its portfolio. The combined net worth of these eight billionaires is $24.9 billion.

Net worth is calculated as on March 6, 2018.

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27

LeaderBoard STARTUPS

CASHING IN ON MENA’S STARTUP BOOM THE MIDDLE EAST’S STARTUP ecosystem is booming. Startups from the MENA region are solving problems in almost all industries, from on-demand car hailing to payment solutions to comparing financial products. According to Magnitt, an online platform for MENA based entrepreneurs and investors, startups in the MENA region completed 260 deals, raising about $410 million in funding in 2017. This didn’t include ecommerce giant Souq and on-demand ride hailing startup Careem.

The year 2018 kicked off favorably for many startups in the region as they bagged funding from prominent investors in the first quarter of 2018.

Hussam Hammo, founder and CEO of Tamatem

Mona Ataya and Leena Khalil, founders of Mumzworld

Ahmed Wadi, Founder of Moneyfellows

Founded

Country

Raised

Tamatem

2013

Jordan

$2 M

$3.2 M

Moneyfellows

2016

Egypt

$600K

$800K

Enhance

2015

U.A.E.

$1.5 M

$1.5 M

Pawame

2016

U.A.E.

$2 M

Maliyaa

2016

U.A.E.

$1.3 M

Mumzworld

2011

U.A.E.

undisclosed

CarSwitch.com

2016

U.A.E.

$1 M

$2.3 M

Yumamia

2014

Egypt

$100K

$1.3 M

Moodfit

2016

Lebanon

$420K

$420K

28 FORBES MIDDLE EAST APRIL 2018

Total Funding

$2 M $1.3 M undisclosed

BY RANJU WARRIER IMAGES FROM SOURCE

Startup

FORBES MIDDLE EAST // SKYLINE UNIVERSITY COLLEGE

Transforming The U.A.E. From Desert To Developed Economy Dr. Gouher Ahmed, Professor of Strategic Leadership and International Business, Skyline University College, explores how the emirates have grown from a humble history to a global phenomenon.

E

conomic development is the continuous increase in national and per-capita income over a long period of time, resulting in an increase in living standards and the economic welfare of a country.

According to the American economist W.W. Rostow (1960), the final stage of development, which is the mass consumption or abundance of goods and services, was attained by the U.S. well before the 1960s. Since then many other countries have reached the mass consumption stage. High consumption is very much noted in the U.A.E. today, with super malls, high-percapita income and many super brands, which is indicative of its rapid economic advancement in a tentatively short span of time. It is significant that until 1971 the seven emirates were under British rule, followed by imperial power from the 19th century onwards as trucial states.

Sheikh Zayed’s leadership made all–round economic advancement within a generation, and this year is marked as the year of Sheikh Zayed on his 100th anniversary. The nation is known as a trailblazer in the Arab World, setting pace in the region through innovations and excellence.

The U.A.E.’s aim is not economic development at any cost; it is for economic development that is business, nature and people friendly. It is also rooted in tradition and culture, and provides world-class infrastructure including ports, airports, freezones and industrial cities with law and order and public peace and security. It’s a meeting place between east and west and a safe land of investment.

The transformation of the emirates from an economy reliant on pearl-diving, fishing, trading, small-scale agriculture and animal herding, to a modern agricultural, industrial, services and hightrade business economy of global dimensions, would not have been possible without the prudent leadership of the nation.

The UAE commands a GDP worth $348.7 billion, attracting tourists and shoppers not only from the Arab countries but from across the world.

APRIL 2018 FORBES MIDDLE EAST 29

THE WORLD’S BILLIONAIRES

HOW TO BEAT

WALL STREET AND SILICON VALLEY SIMULTANEOUSLY The American Dream is alive and well on Wall Street thanks to Robert Smith, the richest black person in America, who has figured out a way to reengineer both private equity and enterprise software—and used this secret playbook to build $4.4 billion fortune.

BY NATHAN VARDI

I

t’s a Saturday afternoon, at the height of vacation season, in one of South Beach’s hottest hotels, and Robert Smith, the founder of Vista Equity Partners, is dressed like exactly no one within a 100-mile radius of Miami: in a three-piece suit. His signature outfit—today, it’s gray plaid, accented by an indigo tie and a pink paisley pocket square—apparently doesn’t take a day off, and Smith isn’t taking one now either. He’s gathered dozens of CEOs from his portfolio companies, software firms all, for a Semiannual weekend off -site to drill them in the ways he expects his companies to operate.

It’s not just the suit that’s unusual. Private equity firms almost never treat their portfolio companies, transactional chits by design, like an organic cohort.

And until recently, PE, a field built on borrowing against cash-generating assets, wouldn’t touch software firms, which offer little that’s tangible to collateralize.

Yet Smith has invested only in software over Vista’s 18-year history, as evidenced by the CEOs, like Andre Durand of the security-software maker Ping Identity and Hardeep Gulati of the educationmanagement software company PowerSchool, who have been summoned to Miami Beach, waiting to swap insights about artificial intelligence and other pressing topics. And Smith deploys more than 100 full-time consultants to improve his companies.

“Nobody ever taught these guys the blocking and tackling of running a software company,” says Smith, an engineer by training, as he takes a lunch break at South Beach’s 1 Hotel to nibble on a plantbased burger. “And we do it better than any other institution on the planet.”

Smith includes the likes of Oracle and Microsoft in that boast, and his numbers back up the braggadocio.

Since the Austin-based firm’s inception in 2000, Vista’s private equity funds have returned 22% net of fees annually to limited partners, according to PitchBook data. Smith’s annual realized returns, which reflect exits, stand at a staggering 31% net. His funds have already made distributions of $14 billion, including $4 billion in the last year alone.

Not surprisingly given those numbers, Vista has become America’s fastest-growing private equity firm, managing $31 billion across a range of buyout, credit and hedge funds. Smith is putting all that money to work at a breakneck pace, with 204 software acquisitions since 2010, more than any tech company or financial firm in the world. After finishing an $11 billion fundraising for its latest flagship buyout fund

last year, Smith has already deployed more than half of it, focusing as usual on business-to-business software.

“They recognize it’s a kind of central nervous system,” says Michael Milken, whose bond market innovations basically birthed the modern private equity industry and who has been a co-investor in two Vista deals.

Taken together, Vista’s portfolio, with 55,000 employees and more than $15 billion in revenue, ranks as the fourth-largest enterprise software company in the world.

Smith deploys quickly for a simple reason: While the rest of private equity basically relies on identifying and rectifying inefficient companies, Vista bets that it can improve the operations of even well-run firms— and claims that it’s never lost money on a buyout transaction in its 18-year history. “I am most proud of our system being a loss-prevention mechanism,” Smith says.

Perpetual wins translate into mammoth personal gains. With an estimated net worth of $4.4 billion, Smith has now eclipsed Oprah Winfrey as the nation’s wealthiest black person. Vista has created another billionaire, Brian Sheth, the firm’s 42-year-old president and dealmaker extraordinaire, who has a fortune estimated at $2 billion.

Ever since Forbes outed Smith as a billionaire in 2015, there has been a steady stream of press about him, from the lowest- brow (tabloid interest in his marriage to a former Playboy playmate) to the highest (coverage of his philanthropy, including his Giving Pledge commitment and his stint as the chairman of Carnegie Hall).

But neither Smith nor Sheth has ever before delved into Vista’s secret formula, which has as many or more lessons for entrepreneurs and operators as it does for financiers. “We do something no one else does,” Smith says.

IMAGE FROM GETTY IMAGES

IMAGE FROM GETTY IMAGES

“Nobody ever taught these guys the blocking and tackling of running a software company.”

ON PAPER, ROBERT SMITH’S JOURNEY was a

textbook American success story: A fourth-generation Coloradan, he was the son of two Ph.D.’s who became Denver school principals and put education first at home. “Their father and I stressed the need for both of our sons to persevere once they identified and pursued a goal,” say Smith’s mother, Sylvia. “Robert understood that preparation, hard work and dedication were key to success in his classes.” In 1981 Smith headed to Cornell University to study chemical engineering, spending many nights and weekends in a three-person study group that met in the basement of the engineering APRIL 2018 FORBES MIDDLE EAST 31

THE WORLD’S BILLIONAIRES

ROBERT SMITH

SMITH LANDED IN GOLDMAN SACHS’ mergers-

and-acquisitions department, eventually moving to San Francisco to advise companie s like Microsoft and eBay and becoming cohead of enterprise systems and storage.

He was part of the team that helped Apple recruit Steve Jobs back.

For all his prominent clients, it was a little-known Houston company specializing in software for auto dealerships, Universal Computer Systems, that caught

32 FORBES MIDDLE EAST APRIL 2018

Brian Sheth, a young analyst who worked with Smith at Goldman Sachs, joined him as a cofounder at the new company.

Smith’s eye. Its margins were higher than any business Smith had advised, and he was stunned to learn the company’s owners were plowing its cash into certificates of deposits. Why not acquire other mature software companies, Smith asked, and apply their best business practices there too? Great advice, but the owners insisted that Smith roll up his sleeves and execute the plan for them.

They backed up their offer with a commitment of $1 billion of the company’s cash, as the sole investor, if he started a private equity fund. “I had one of those in-themirror moments,” Smith says. “I looked at myself and asked, ‘If I don’t do this, how will I feel about it ten years from now?’”

The short answer: regretful. And so in 1999 Smith left Goldman and soon began recruiting cofounders, notably a business- school classmate, Stephen Davis, and a young analyst who worked under him at Goldman, Brian Sheth. The son of an Indian- immigrant father with experience in tech marketing and an Irish-Catholic mother who worked as a reinsurance analyst, Sheth would provide the yang to Smith’s yin, focusing on acquisitions and divestitures, so that his boss could concentrate on investors and the companies themselves. Their relationship would become ironclad: “When something is happening with our families we are each other’s first call,”

IMAGE FROM GETTY IMAGES

school’s Olin Hall. During summers, Smith worked at Bell Labs back home in Denver—a college internship he landed as a high school student after persistent coldcalling.

After graduating from Cornell in 1985, Smith took engineering jobs, first at a Goodyear Tire & Rubber chemical plant outside Buffalo, New York, and later at Air Products & Chemicals in Allentown, Pennsylvania. In 1990 Smith moved to Kraft General Foods, where he focused on coffee-machine technology. His efforts won him two patents: one for a stainless- steel filter and another for a brewing process that makes crema, the layer of foam on top of espresso. In 1992 Smith entered Columbia Business School. He was deftly acquiring the kinds of skills that would prove invaluable as the tech revolution exploded.

But Smith’s rise was also incredibly abnormal. Even today, as the 155th-richest person in America and the 480th in the world, he faces constant, if often unwitting, racism. At a recent dinner in New York City with a group of senior Wall Street types, including a high-level executive of an investment bank, Smith moved to pick up the check for dinner, but the senior banker stopped him. “I can’t have a black guy buy me dinner,” he chortled.

The sting of such incidents, whether offhand remarks or doors more overtly shut to him, had an effect on Smith.

“It meant we had to work harder,” he says. “And that’s what we did.”

From his college days, when he joined the nation’s preeminent black fraternity, Alpha Phi Alpha, known for its bookish but professionally ambitious members like Thurgood Marshall and Martin Luther King Jr., Smith had support. A crucial mentor: John Utendahl, who founded a pioneering black-run investment bank and happened to speak at Smith’s Columbia graduation. Soon after, Utendahl, currently a vice chairman at Bank of America, took Smith to lunch and over tuna sandwiches persuaded him to ditch his M.B.A. focus of Marketing to work on Wall Street. “There is a spark, a poise, even a wisdom that you can’t teach or learn. Some people are just blessed to have it,” Utendahl says. “That’s how I felt when I met Robert as a young man.”

says Sheth, who vacations with Smith and served as best man at his wedding.

When Smith quit, most of his colleagues thought he’d lost his mind. He was on a partnership track at Goldman, which meant he was set to receive a multimillion-dollar windfall given the firm’s impending initial public offering.

What’s more, banks didn’t against The Wo r l d ’ s b ilend llion a i r e s software companies because they didn’t have hard assets. How could Smith run a leveraged-abuyout o B e a tbusiness t S m i tin H software without leverage?

The concentration risk also seemed huge—investing in a ed that Smitharoll upinnovative his sleeves and execute the plan for them. single industry where few lines of code from a They backed up their offer with a commitment of $1 billion competitor ofcould make a business obsolete overnight. the company’s cash, as the sole investor, if he started a priBut Smith things differently.

Software was eating vatesaw equity fund. “I had one of those in-the-mirror moments,” the world. Soon would software Smith every says. “I company looked at myself andbecome asked, ‘If Iadon’t do this, will I feeldigitized. about it tenAyears from now?’ ” company, itshow business portfolio of software The short answer: regretful. And so in 1999 Smith left Goldcompanies serving 50 industries would be diversified with a man and soon began recruiting cofounders, notably a busistream of recurring shift toa “software aswho ness-schoolrevenue, classmate,given Stephenthe Davis, and young analyst a service.” Smith’s bet: him Wallat Street would worked under Goldman, Briansoon Sheth.realize The son that of an Indian-immigrant father gushed with experience in tech marketing software companies not only cash but actually hadand an to Irish-Catholic mother who worked as a reinsurance analyst, terrific assets lend against—those ironclad maintenance Sheth would provide the yang to Smith’s yin, focusing on accontracts. quisitions and divestitures, so that his boss could concentrate “Software contracts than first-lienThdebt,” on investors andare thebetter companies themselves. eir relationship “Whenwill something is happening with Smith says. would “You become realizeironclad: a company not pay the interest families are each rst call, ” says Sheth, who vacapayment onour their firstwelien untilother’s afterfithey pay their software tions with Smith and served as best man at his wedding. maintenance or subscription fee. We get paid our money When Smith quit, most of his colleagues thought he’d lost first. Who has the better He can’ttrack runathis business his mind.

He wascredit? on a partnership Goldman, which without ourmeant software.” he was set to receive a multimillion-dollar windgivenopened the firm’sVista’s impending initial offering. What’s In 2000 fall Smith doors in public San Francisco. more, banks didn’t lend against software companies because His first acquisitions were all equity. As the firm went from they didn’t have hard assets. How could Smith run a leverone profitable deal to another, aged-buyout business inSmith eventually got lenders to finance Vista’s of Applied Systems, an insurance softwarepurchase without leverage? Th “Software software maker, ine concentration 2004, Vista’s first leveraged buyout. In risk also seemed huge— 2007 Vista merged software companiescontracts serving utilities and are investing in a single increated Ventyx, increasing the number of products it sold to better than dustry where a few innoexisting customers substantially—a subsequent sale to ABB vative lines of code from first-lien debt.” could make resulted in aa competitor profit of nearly $1 billion. a business obsoleteSmith’s overWhen the dust settled, first buyout fund night. returned 29.2% annually net of fees. Smith raised money But Smith saw things differently. Software was eating the for a secondworld. fundSoon from institutional investors, a every company would become returning a software comnet 27.7% annually.

In 2011, seeking to escape the Silicon pany, its business digitized.

A portfolio of soft ware companiesSmith servingmoved 50 industries would be diversified to with a stream Valley bubble, Vista’s headquarters Austin, of recurring revenue, thecareer, shift to “soft ware as much a service.”

Texas. He could, by this pointgiven in his do pretty Smith’s bet: Wall Street would soon realize that software comanything hepanies pleased. not only gushed cash but actually had terrific assets to “I still experience racismironclad in my maintenance professional life,” lend against—those contracts.

“Soft contracts are better than first-lien debt,” Smith Smith says. But byware being smarter and working harder, says.the “You realize a company not pay the payment Smith proved American Dreamwill extended to interest the finance on their first lien until after they pay their software mainteindustry, where he became the first self-made Wall Street nance or subscription fee. We get paid our money first. Who billionaire who wasn’t a white has the better credit?

Hemale. can’t run his business without our software.”

2000 Smith opened Vista’s doors in Santo Francisco.

His WHEN VISTAInSELLS a company, Smith reverts engineer rst acquisitions were all equity. As the firm went from one mode, oftenfigiving its CEO an expensive Swiss or German profitable deal to another, Smith eventually got lenders to fiwatch. “It isnance not about being generous,” Smith says.

“It is asoftVista’s purchase of Applied Systems, an insurance function of ware the process the detail of finding maker, inand 2004,focusing Vista’s firston leveraged buyout.

In 2007 Vista merged software companies serving utilities and created

44 | FORBES MARCH 31, 2018

the person who is going to be the best at making that one gear.”

To Smith the watch represents that “we created a system.” And it’s that system that has allowed Vista to gobble up enterprise software companies, confident that it can almost always make them better.

When Smith started shopping for software companies, he found that many were run by former programmers and who were not Ventyx, increasing the other numbertechnologists of products it sold to existing customers trained substantially—a subsequent to ABB resulted in formally in business andsale grew rapidly by sheer a profit of of nearly $1 billion. strength product launches, with little analysis of When the dust settled, Smith’s first buyout fund returned whether they made sense.

29.2% annually net of fees. Smith raised money for a secDrawing his background as an engineer ond fund from on institutional investors, returning a net 27.7%and a Goldman writing what amounted annually. In vet, 2011,Smith seekingbegan to escape the Silicon Valley bubble,user Smith moved Vista’s headquarters to Austin, Texas.

He to manuals for running enterprise software

could, by this point in his career, do pretty much anything he pleased.

“I still experience racism in my professional life,” Smith says. But by being smarter and working harder, Smith proved A TO PLAYBOOK PROFITS the NEW American PATH Dream extended to the finance industry, where

There was a time when buyout firms like KKR and Apollo could be successful simply by piling debt on a company, cutting costs and then letting the magic of leverage and compounding do itsbuyout work.firms Butlike what worked thebe past may There was a time when KKR and Apolloincould no longersimply be viable.

There is anow morecutting thancosts $1 trillion successful by piling debt on company, and thenof private equity chasing deals and bidding upBut prices. letting the magic cash of leverage and compounding do its work. what worked in the past no longer private be viable.equity There isfirms now more According tomay DealLogic, did than $58 billion $1 trillion of private equityincash chasing deals of andall bidding up prices. of tech transactions 2016, a third U.S. deals.

According to DealLogic, private equityfrom firms did $58 billion of tech Even Vista has had to pivot buying legacy software transactions into 2016, a third ofhigher-growth all U.S. deals. companies acquiring operations, often at Vista hasvaluations. had to pivot from buying legacy software compabig Even prices and nies to acquiring higher-growth operations, often at big prices and Vista’s acquisition of Marketo, a marketing automation valuations. software leader based in San Mateo, California, is a good Vista’s acquisition of Marketo, a marketing automation software example. After investors became disenchanted with its less leader based in San Mateo, California, is a good example. After inthan stellar 30% to 40% revenue growth rate, Marketo’s vestors became disenchanted with its less than stellar 30% to 40% share plummeted byshare some 50% in earlyby2016.

Then revenueprice growth rate, Marketo’s price plummeted some 50% in May2016.

2016, Vista swooped inswooped to buy in the company, in early Then in May 2016, Vista to buy the compaputting upup$1.3 billion in cash in abillion $1.8deal. billion deal.

It was ny, putting $1.3 billion in cash in a $1.8 It was a genaerous generous 64% premium, butthat Vista knew before long 64% premium, but Vista knew before long that an operational overhaul, coupled with the small amount of debt addedamount to its an operational overhaul, coupled with theitsmall of balance turn the cloud-based marketing software comdebt it sheet, addedwould to its balance sheet, would turn the cloudpany into a winner. Recently, Marketo’s cash flinto ow (Ebitda) has turned based marketing software company a winner.

Recently, positive. ÑN.V. Marketo’s cash flow (Ebitda) has turned positive. ÑN.V.

atneWtPatHttotPlayBooatPaoFitS

50

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ThE dEaL CLOSES On aUGUST 16, 2016, SO STOCK STOPS TRadinG.

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30

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2 0 1 6

APRIL 2018 FORBES MIDDLE EAST 33

THE WORLD’S BILLIONAIRES

ROBERT SMITH

neglecting to charge a minimum amount for ongoing companies. The manuals weren’t just about efficiency support. Vista canceled all the contracts and got 100% but also incorporated cost-cutting measures and feeof the customers to enter into new deals with higher generating ideas. Eventually, Smith’s playbook became minimum support payments. the Vista Standard Operating Procedures—VSOPs. These Another set of playbook commandments revolve were later renamed a more generic and user-friendly around sales, including incentives for salespeople crossVista Best Practices. selling and upselling additional products. In one case, a “If you are a soft ware executive, how do you build portfolio company was rewarding salespeople the same your commission structures or run your go-to-market way whether they brought in one-year contracts or strategy? How do you find and train talent? Who teaches longer-term ones. you those things?” Smith asks.

In isolation, many of the To implement his playbook, playbook’s best practices Smith created an in-house seem mundane. But software To implement his playbook, McKinsey: Vista Consulting companies are often rife Smith created an in-house Group. These employees, now with eccentricities and legacy McKinsey—Vista Consulting processes endemic to startup 100 strong, help portfolio Group—to help portfolio companies implement the best culture. Things like weekly dealcompanies learn best practices, also 100 strong, most pipeline meetings, commonplace of which run three to ten pages, at B-school-driven corporations practices. with reams of attachments and like IBM and Procter & Gamble, examples. Printed out, they are often absent. By sticking to fill binders. They are stored in the rules in Smith’s playbook, a password-protected online library, available only to his software companies are transformed. Add some authorized portfolio company managers. modest leverage, and, voilà, Vista got amazing returns.

“I just had an employee get a promotion,” says Smith’s playbook is ever evolving, and Vista Kristin Nimsger, CEO of Social Solutions, a cloud partners and portfolio companies are welcome to make company providing data management software for suggestions. “One of the things I am most proud of is nonprofits like the United Way of Metro Chicago. “He that we are going to add ten new best practices to the was super-excited to get a log-in.” group,” says Reggie Aggarwal, the CEO of Cvent, a The playbook includes exhaustive details on things company that makes software for managing events and like contract administration and steps needed to ensure meetings. a company is being paid for all the code or services its Of course, critics argue that companies swallowed customers use. In one case, a company Vista bought up by Vista are in no way immune to the traditional charged customers only for inbound support calls, private equity slash and burn. Lawrence Coburn, CEO

MR. SMITH’S SOFTWARE EMPIRE Move Over Larry Ellison. Vista Owns 48 Enterprise Software Companies Servicing 20 Industries Ranging From Energy To Law To Higher Education And Live Events.

Tibco Software, which makes businessintelligence software, was purchased by Vista in 2014 for $4.3 billion.

Solera Holdings makes software for auto and home insurers and was purchased by Vista in 2015 in a $6.5 billion deal.

34 FORBES MIDDLE EAST APRIL 2018

Cvent, which makes software for managing and planning corporate events, was purchased

by Vista in 2016 in a $1.7 billion deal.

Finastra makes risk management software for banks and financial firms.

It was created

by Vista in 2017 through the merger of D+H and Misys.

PowerSchool makes education management software. It was purchased in 2015 for $350 million. It’s spent another $1 billion on add on acquisitions.

Marketo is a giant in cloudbased marketing automation software. It was purchased by Vista in 2016 for $1.8 billion.

Ping Identity makes identity security software and was purchased by Vista for $600 million in 2016.

of Cvent competitor DoubleDutch, blasted Vista after WITH THE REST OF THE PRIVATE equity getting the purchase, saying, “They eliminate duplication, slash turned on to enterprise software deals, Vista’s system R&D, optimize for financial performance and raise is about to get a major test. While bargains are much debt.” harder to come by, Vista’s goals for each buyout will Smith’s playbook goes well beyond corporate to-do remain the same: three times its money. Smith expects lists. When Vista buys a company, all employees and to hold on to his portfolio companies longer, identifying recruits are required to take a personality and- aptitude each acquisition target based on how much the Vista test, like one first developed by IBM. The hour long test playbook can juice results. assesses technical and social skills, and attempts to gauge “We don’t underwrite to hope. We underwrite analytical and leadership potential. For Smith the test is based on critical factors for success under our particularly important because control,” Smith says. “What it attempts to bypass inherent we need to change, we have When Vista buys a company, biases, such as where people changed before, so we know all employees and recruits are grew up or went to school, how to do it.” On average, not to mention race or gender.

Vista doubles the Ebitda of its required to take a personalityVista says 35% of the employees companies within five years. and aptitude test. Last year at its portfolio Companies A lot of the responsibility Vista companies administered are women. Last year Vista will fall to Sheth, who has 850,000 tests to hire 6,000. companies administered previously made a practice 850,000 tests to hire 6,000. of racing to the exit door. For “The meritocratic system example, Vista bought Trans creates loyalty,” Smith says. first, a payments processing “People from all over the country from different places soft ware maker, for $1.5 billion in 2014, then sold all take the test. We all know something about each it for $2.35 billion in just over a year, tripling Vista’s other, that we came through this meritocratic system.” money once leverage was factored in. In January, The Vista test also identifies roles that fit personality Vista sold its majority stake in Trintech, which makes profiles. A woman who ran a Domino’s Pizza franchise software for financial professionals, after it doubled in North Carolina was deemed to be a good sales trainer revenues in two years. On average Vista’s exits tend to and was promoted to do so for a Vista company. Another occur 4.7 years after purchase, compared with 5.7 for from the mailroom, for example, scored high on Vista’s Blackstone. test and became a programmer. “To write code you need While it would be easy enough for Smith to fall to be creative,” Sheth says. “How much of that is going to back on his philanthropy—recent pledges include happen if you all have the same background?” $20 million to the new National Museum of African After Vista has people where it wants them, there American History & Culture and $50 million from a are boot camps that train employees, not just for two foundation linked to Vista’s first fund to help Cornell weeks but for six to nine months. In the past three boost the representation of women and minorities years, Vista has put 12,000 new hires through these in scientific research—numbers like that keep Smith boot camps. They start by giving employees the big feeling upbeat, even cocky, regarding Vista. Nearly picture: how the Vista company makes money and two years ago, at the Milken Institute’s annual Global the way customers use its products. The focus later Conference, Smith found himself shoulder-toshifts to specific corporate roles. Vista University shoulder onstage with the old guard billionaires of the provides “nanodegrees,” like one now being offered in buyout business, including David Rubenstein, Leon artificial intelligence. Monthly meetings designed to Black and Jonathan Nelson. Titans he no doubt read cross-pollinate best practices among Vista employees about in B-school and who probably wouldn’t have from different companies in similar roles—from cyber given him a second glance a decade ago. security to HR and product development—are held.

When Carlyle’s Rubenstein said his investors had All of this is run by Smith’s consulting group, which been conditioned to accept lower returns given the high operates like a seasoned special-forces unit. “Financial price of assets, Smith shifted in his chair and parried, “I performance of a company is just a trail in the sand of got to go get some of his [investors].” He then turned to the operational performance,” Smith says. “The more Rubenstein and, with the brio of someone who knows standardized the input, the more standardized the he’s arrived, quipped: “Let me know where you are output. You have to design your system, and you have to flying next. I will go with you.” believe in it.”

APRIL 2018 FORBES MIDDLE EAST 35

THE WORLD’S BILLIONAIRES

THE FORTUNATE

SON

For a decade India’s richest man waged a blood feud with his younger brother for control of the subcontinent’s telecommunications industry. Now Mukesh Ambani shares the inside story of his ultimate triumph—Jio, an ultra-cheap 4G broadband service whose biggest winners will be the millions of ordinary Indians who suddenly consume more mobile data than either the U.S. or China.

O

n a cool, dry evening late last year, 50,000 employees and friends of Reliance Industries, India’s most valuable company, packed into a cavernous temporary stadium 25 miles outside downtown Mumbai to celebrate the firm’s 40th annual “Family Day.” Another 200,000 people dialed in via video link to watch the show, which was hosted by Bollywood mega-celeb Shah Rukh Khan (33.6 million Twitter followers), singer Sonu Nigam (18.8 million likes on Facebook) and veteran actor and game-show host Ambitabh Bachchan, who staged a round of Who Wants to Be a Millionaire? The five-hour event culminated with dazzling fireworks and a midnight feast featuring vegetarian delicacies like chickpea-and-rice-flour dumplings, spicy cottage cheese and lentils.

But the real star of the occasion was Mukesh Ambani, Reliance’s 60-year-old chairman, managing director and largest shareholder and the 19th-richest man in the world, with a net worth of $40.1 billion. “Can Reliance be among the top 20 companies in the world?” he called out to the

36 FORBES MIDDLE EAST APRIL 2018

crowd, which obediently raised their lamps, turning the arena into a moving sea of lights. “Yes, we can! Yes, we will!”

Ambani’s ambition is understandable given the scope of what he has already achieved. Reliance is the 106thlargest company in the world, having earned some $4.6 billion in profits last year on $50.9 billion in sales. The firm is a major player in oil and gas and operates one of the largest oil refineries in the world. It is the largest retailer in India and has important ventures in life sciences, textiles and telecommunications. Its Network18 media subsidiary has partnerships with prominent Western brands like CNBC, CNN, MTV and Nickelodeon (television), Paramount Pictures (film) and Forbes (print).

But what really has Ambani excited–and has set Reliance’s share price on fire–is his $33 billion investment in Jio, a 4G broadband service that has attracted 160 million customers since it was introduced 18 months ago.

More than half those subscribers signed up in the first

IMAGE FROM GETTY IMAGES

BY NAAZNEEN KARMALI

six months, when Reliance jump-started the business by offering the service for free. They stayed because Jio has promised never to charge for domestic calls and its data rates are supercheap. That hypergrowth has boosted Reliance’s stock by over 70% in the past year and added $16.9 billion to Ambani’s fortune. Analysts call it the “Jio effect.”

But for Ambani, Jio is about more than adding 11 figures to his net worth. He believes the firm is igniting a subcontinental data revolution that will help solve some of India’s intractable problems in areas like agriculture, education and health care.

“Can Jio be the first company to transform an entire nation in each one of these sectors?” Ambani continues, whipping up the crowd. “Yes, we can! And, yes, we will!”

Or as he sometimes says more succinctly, “Data is the new oil.”

MUKESH AMBANI IS PROBABLY best known outside

India for building the world’s most expensive privately owned home, a 27-story sky palace that looms above South Mumbai and cost an estimated $1 billion. There, with his wife, Nita, a member of the International Olympic Committee and the chair of one of India’s premier soccer leagues, he frequently entertains luminaries from the worlds of sport, fashion and entertainment. “I have just one home,” he says somewhat defensively, “not 30 or 40 around the world, as some do.”

But within India, Ambani is equally well-known for his decadelong blood feud with his younger brother, Anil, 58, who was pointedly not invited to the Reliance Family Day bash in December.

Their father, Dhirubhai Ambani, was born to a poor schoolteacher and grew up in a remote village not far from Porbandar, the birthplace of Mahatma Gandhi.

Dhirubhai never finished high school, quitting to help support the family. He spent seven years working in a gas station in Yemen–where Mukesh was born in 1957–before returning to India to set up a spice-trading business with his brothers from a tiny 500-square-foot Mumbai office.

Then in the 1960s, the siblings expanded into yarn and began importing a new wonder fabric, polyester.

By 1966 the “Prince of Polyester” had built his first synthetic textile mill in his native Indian state of Gujarat.

The entrepreneur persevered through stifling bureaucracy and endemic corruption until, in 1977, when India’s nationalized banks refused to finance further expansion, he took Reliance public. The offering was marketed to middle-class Indians and heavily oversubscribed. The 58,000 mostly small-town Indians who decided to gamble wouldn’t regret it. Over the coming years, the shares appreciated sharply, placing Dhirubhai firmly on the path to an eventual $6.6 billion fortune as he expanded into petrochemicals, refining and oil-and-gas exploration.

“My father foresaw that India could become globally competitive and always thought in terms of scale. That became the DNA of Reliance,” Ambani says from the company’s 36-year-old downtown offices, surrounded by images of his late father, including a superrealistic 3-D-printed bust.

In 1986, when Dhirubhai suffered a stroke, Mukesh and Anil took more responsibility. The brothers were tight. They worked side by side during the day, and their families lived together on different floors of a 14-story family-owned high-rise. By the time Dhirubhai died in 2002 at age 69 from a second stroke, Reliance was India’s largest family business and arguably its most influential.

Before his death, Dhirubhai had been keen to start a mobile-phone service for the masses that would provide voice calls for less than the cost of a postcard. At the time mobile phones were toys for the rich, with expensive monthly fees. Inspired by their father’s dream, the brothers jumped into mobile telephony.

“Some of us are bigger risk-takers than others,” Mukesh says. “Without taking some risk, there is no fun in life.”

Reliance started a discount telecom service in 2002, shaking up the market and sending mobile rates tumbling from 32 cents a minute to 2 cents. But behind that success an ugly battle was brewing as the brothers began fighting for control of the company. According to an Ambani insider, the power struggle between the brothers had started much before their father’s death. Anil’s conspicuous absence at the telecom launch event in 2002 was the first public indication that something was amiss. A spokesman for Anil refused to comment.

Dhirubhai died unexpectedly, without a will, but the understanding within the family–at least as Mukesh saw it–was that whoever was chairman of Reliance would have total management control. Anil, who was vice chairman, didn’t see it that way and wanted to have more of a say.

Mukesh felt he had done all the behind-the-scenes work of building the big plants and refineries. He was also said to be closer to his father, who was initially furious when Anil decided to marry a Bollywood starlet, which he didn’t feel was an appropriate choice. (Mukesh’s wife had been chosen by his father.) Anil, who is more articulate and extroverted than his brother, was in charge of finance and was the face of Reliance to bankers, investors and journalists. He was closer to his mother.

After prolonged bickering, fueled by the fact that their wives didn’t get along, their mother, Kokilaben, brokered a peace, and the family empire was divvied up in 2005.

Mukesh got to keep the biggest piece, Reliance Industries, the flagship oil-and-gas business; Anil got the newer businesses such as telecom, financial services and the power-generation unit.

The split gave a temporary massive boost to the brothers’ largely public fortunes. By 2008 the brothers’ APRIL 2018 FORBES MIDDLE EAST 37

THE WORLD’S BILLIONAIRES

MUKESH AMBANI combined worth was a staggering $85 billion. Mukesh was the fifth-richest person in the world, with a fortune of $43 billion. Anil was a close No. 6 with $42 billion; his biggest asset was a 65% stake in the telecom company, then worth $20 billion.

The financial crisis, coupled with bad blood, took its toll. It was soon evident that the rapprochement between the brothers was only on paper. When Anil sought to merge his telecom firm with South Africa’s MTN in 2008, Mukesh intentionally stalled the deal, citing the family settlement that gave him the right of first refusal on any stake sale in the telecom unit. In 2009, shares of Anil’s companies plunged, wiping away nearly $32 billion of his wealth.

A year later, after a legal skirmish, the brothers terminated their noncompete agreement.

Suddenly the path was clear for Mukesh to get back into telecom.

MUKESH STARTED SMALL–and

Completing the humiliation, Mukesh bought the remains of his brother’s debt-strapped telecom business for $3 billion..

stealthily–by acquiring a little company in 2010 that had a license to provide only broadband internet. But Ambani knew “voice” was really just another type of data and that the rules would eventually have to change. When they did, in 2013, Mukesh was ready.

He started building at a feverish pace, tapping into Reliance’s construction, regulatory and execution expertise to quickly create a countrywide network that, by end of this year, will number 260,000 towers (some leased) and 186,000 miles of optical fiber. He worked with electronics giants Qualcomm and Spreadtrum to design low-cost 4G handsets, a major leap forward in what was then largely a 2G market, selling them for a refundable security deposit of $22. In all Reliance has spent $33 billion on the project to date, funding it with a mix of debt ($7 billion), equity ($17 billion), plus deferred payments and supplier credits ($9 billion).

Jio was impossibly cheap and impossibly fast and, perhaps most impressive given India’s size, nearly ubiquitous, available in 95% of the country. The incumbent players struggled merely to stay in business.

Telenor and the Tata Group both sold their wireless operations to telecom tycoon Sunil Mittal’s Bharti Airtel, a joint venture with Singapore’s Singtel. Onetime rivals Vodafone India and Idea Cellular, owned by billionaire Kumar Birla, agreed to merge to better withstand the onslaught. And Mukesh, completing the humiliation of his younger brother, bought the remains of Anil’s debt-strapped telecom business for an estimated $3

38 FORBES MIDDLE EAST APRIL 2018

billion-plus. It had once been worth $43 billion.

“It was purely a business decision,” Mukesh says. “It works for us, and we’ll make the most of it.”

Thanks to Jio, India’s annual mobile data traffic has jumped to 28 billion gigabytes from just over one billion a year ago. In mobile data consumption, India now ranks above China and the U.S. Jio alone carries more mobile data traffic than Sprint, Verizon and AT&T combined.

Ambani has grand visions for how all that information can transform his country and lift it out of poverty. He cites the example of Indian agriculture, which is plagued by poor productivity and low quality. “I see all such inefficiencies as opportunities,” Ambani says. Jio has developed a platform for India’s 120 million farmers, most of whom have small landholdings, that offers technical information on sowing and harvesting in addition to real-time market prices and access to top agricultural experts.

Ambani also sees Jio playing a role in transforming Indian education. Within a year, he hopes, Jio will have connected 35 million students attending India’s colleges.

At the same time, he wants Jio to reach the remotest corners of the country, right down to the smallest villages.

Of course, this will all remain a pipe dream if Jio doesn’t find a way to make money. Thanks to some aggressive accounting, the company managed to squeeze out a small profit ($78 million on revenues of $1.1 billion) in the final quarter of 2017. But Jio’s core strength–that it’s cheap–works against it financially.

To succeed, Jio needs to sign up many more subscribers and then upsell them into consuming lots of data through apps like Jio Cinema (6,000 movies) and Jio Music (16 million songs). Once they are hooked, Jio will have to raise data prices without losing too many customers. Its current rates aren’t sustainable.

Ambani seems unfazed by the economics and willing to invest for the long haul. He is grooming his three children to take over the business and is increasingly comfortable with a view of Reliance from 39,000 feet.

“These days I’m in the mind-set of being nose in, fingers out,” he says, meaning keeping his nose in the boardroom and his hands out of operations. A Jio IPO is on the horizon, but for now he’s basking in the glow of having provided millions of ordinary Indians with access to high-speed Internet and all its attendant opportunities.

“This is a race,” he says, “that India is running with the rest of the world.”

APRIL 2018 FORBES MIDDLE EAST 39

THE WORLD’S RICHEST ARABS

BREAKING AWAY Lebanese billionaire Ayman Hariri was raised to work in the family construction business, but his passion for technology beckoned.

BY CARLA SERTIN

40 FORBES MIDDLE EAST APRIL 2018

IMAGE COURTESY OF CLAY ENOS

I

n the span of one week in February 2018, Vero went from being a virtually unknown social media network with 150,000 users, to one of the most downloaded apps worldwide on the Apple and Google Play app stores. On February 26, it took the number one spot, and at last count it had 4 million users.

The surge caught 39-year-old co-founder and CEO Ayman Hariri by surprise. Vero lets users decide who they want to share pictures, books, or movie recommendations with. What started as an Instagram campaign to raise its profile, snowballed, thanks in large part to niche creative communities like musicians and tattoo artists.

It’s a dream come true for any startup, but it’s also a pivotal moment.

Although Vero is registered in New York, Hariri and his team of 30 people are dispersed between the U.S., France, Russia, the U.K. and Italy. They have to quickly capitalize on Vero’s newfound fame and maintain its appeal. For one thing, they have to beef up their servers, which crashed from overload earlier this year.

Hariri, who recently moved from Riyadh with his wife and three children to Italy, says having a team spread out around the globe brings diverse and fresh perspectives, but admits it can present obstacles, especially around communication.

Perhaps equally overwhelming for the low-key Hariri, is finding himself thrust in the spotlight—something he had deftly managed to do, despite his background. With a fortune Forbes estimates at $1.3 billion, he’s an heir to one of the biggest fortunes in Lebanon. His brother Saad is that country’s prime minister and the family’s construction company, Saudi Oger, once one of the largest in Saudi Arabia, was reportedly forced to shut down recently.

APRIL 2018 FORBES MIDDLE EAST 41

THE WORLD’S RICHEST ARABS

Hariri’s father, the late billionaire Rafik Hariri, formed Saudi Oger in 1978, the year Ayman was born. He grew up in Riyadh, moving to Paris at age 12. Occasionally, his father took him along to business meetings and taught him the ropes, with the expectation that he would join Oger.

Hariri wanted to forge a different path. He loved computers, and spent a lot of time tinkering with the latest PC models, taking them apart and trying to figure out how they worked. “I felt like I wanted to go out on my own and learn things, and not be in a place where I’m expected to be,” says Hariri, who struggled between wanting to please his father and pursue his passion for technology.

He recalls his father telling him that people are supposed to use computers, not study them. “The hardest thing is going to your parents, who you love, respect and care for, and telling them that you want to do something that either they don’t understand or is different from what they would like you to do,” he says.

Ultimately with his father’s blessing, as well as his mother’s encouragement, he switched his major from business to computer science at Georgetown University, in Washington, D.C., graduating in 1999. “I remember him sitting me down and saying

42 FORBES MIDDLE EAST APRIL 2018

‘Ayman, irrespective of the fact that I would like you to be part of the business, I want you to follow your dreams, because that’s where you have the greatest chance of finding success.’”

He did. After college, he teamed up with Scott Birnbaum, his friend from junior high school in Paris. They created a data exchange network, but the concept was ahead of its time. In a tragic turn of events, the project was abandoned altogether in 2005, after Rafik Hariri, who was then Lebanon’s prime minister, was assassinated. Ayman, who was living in the D.C. area , dutifully returned to Riyadh to help run Saudi Oger, alongside his brothers Bahaa and Saad. As deputy CEO and deputy chairman, he worked on iconic projects, such as the King Abdullah University for Science and Technology.

During that time, social media network Facebook was taking off, and like many 20-something-yearolds, Hariri signed on. He was shocked to find out that some of his friends showed a completely different persona online than they did in real life. Privacy was lax and users didn’t have the ability to categorize levels of friendships and acquaintances, and decide what to show to whom. “It always felt like a one-sizefits-all, which our relationships really don’t fall into in the real world,” says Hariri.

Spotting an opportunity, he pitched the idea of a social media platform that would address those issues to his Dubai-based cousin Motaz Nabulsi, who studied filmmaking, and Birnbaum, who was by then a venture capitalist in New York.

“We really focused on thinking through the design and defining the functionality,” says Hariri. We wanted to release something that was thought through rather than rush to market with something.”

While Hariri was hatching his new project, oil prices were beginning to slide forcing the Saudi government, Oger’s biggest customer, to embark on budget cuts. The company found itself eventually unable to pay its employees. In 2013, he quit and sold his shares in Oger the following year to Saad to devote himself to Vero.

“This has really been the pursuit of my dream,” he says. “It’s the reason I left all the different businesses and things I was involved in, just to really focus on this.”

Hariri invested his money in Vero, which became available for download in 2015. He won’t disclose the amount, but is the majority owner; Nabulsi and Birnbaum, as well as a few family members and friends, are also shareholders. His wealth is an advantage. He doesn’t have to worry about raising funds, freeing up his team, Hariri says, to build the network.

Vero shuns advertisements and doesn’t sell user data. The startup initially promised that the first one million people to join its network would get free access for life, but it has extended that offer to new members, while it fixes its server issues.

Still, this is a business, not a sinkhole. Vero hasn’t set a date or a price yet, but it plans to charge members an annual subscription

fee. “By being subscription-based, we take away the need to do so many things like thinking about how to monetize data and our users’ behavior,” says Hariri. Perhaps not such a bad move these days, when Facebook is getting hammered for being less than vigilant with user data. In the meantime, Vero makes some money by getting a percentage on sales, when a user buys a product on its site based on a song or movie recommendation.

The startup has forged partnerships with production companies, such as German actor Michael Fassbender’s DMC Film, which has released several short films on Vero—but it doesn’t get revenue from these films.

One unusual claim: Vero says it doesn’t use algorithms to serve up users, say, posts that could be of interest to them. “The thing that we’re targeting is taking the greatest social network that exists, which is the one that exists between people in the real world, and creating an online environment that mimics a lot of the nuances of that network,” says Hariri.

Alexandra Maia, founder of Dubai-based social media consultancy House of Social, questions whether the lack of algorithms is sustainable as the network grows. “From a technology perspective, I’m curious to see how that’s going to go, because when you have a huge volume of content, there has to be a way that that feed finds the content,” she says.

Hariri may have distanced himself from his father’s business legacy— selling his stake in another family holding company last summer. But Rafik Hariri, who was a self-starter, remains his role model. “I always have him in my mind, and the things that he taught me in everything that I do, I apply it in Vero,” he says.

Fighting Digital Addiction

On March 21, Vero released a new feature that allows users to see the time they spend on the app. All social media apps collect that data, but most don’t share it with the users. The company noted in its announcement of the feature that “we don’t view addiction to our service as a measure of success.”

Challengers To The Big Three

These social networks are competing against Instagram, Twitter and Facebook.

Ello Launched: March 2014 Ad-free artist network

Peach Launched: January 2016 Mobile social networking app

Live.ly Launched: May 2016 Video live-streaming

Signal Launched: July 2014 Encrypted instant messaging app

APRIL 2018 FORBES MIDDLE EAST 43

THE WORLD’S RICHEST ARABS

THE WISDOM OF WEALTH Abdulla bin Ahmad Al Ghurair built a fortune from savvy business moves dating back to the beginnings of Dubai’s oil boom, becoming a self-made billionaire.

Then, in a stunning act of philanthropy, he created one of the world’s largest education foundations.

BY SAMUEL WENDEL

I

n a rare interview, Abdulla bin Ahmad Al Ghurair, the 88-year-old patriarch of one of Dubai’s storied merchant families recently agreed to talk to Forbes Middle East to reminisce about his journey from fish monger to richest man in the U.A.E., with a net worth Forbes estimates at $5.9 billion.

His entrepreneurial legacy is quite visible in his hometown of Dubai. He helped found Mashreqbank, the oldest private bank in the U.A.E., his Al Ghurair Centre is one of the first shopping malls in the Middle East, and his construction company had a hand in building Burj Khalifa, the world’s tallest building. Al Ghurair is now intent on making an even longer lasting impact in his country and the wider Arab world.

He’s turned his attention to his educational foundation, one of the biggest in the world.

In 2015, he pledged one-third of his holding company’s assets, or $1.1 billion over 10 years, to create scholarships and educational programs for college students in the U.A.E. and Arab countries.

“To me, education is the true enabler of Arab youth and the backbone for their social and economic development,” says Al Ghurair.

His foundation addresses one of the greatest challenges facing the Arab world: access to quality education. UNICEF estimates nearly 22 million

44 FORBES MIDDLE EAST APRIL 2018

children are either out of school or at risk of dropping out in the Middle East and North Africa, largely due to conflict. Affording higher education is another problem, and a high rate of youth unemployment is another significant issue still.

Under the leadership of Maysa Jalbout, Al Ghurair’s foundation has awarded so far 787 scholarships to underprivileged students from 22 Arab countries; 17% of recipients live in conflict zones or are refugees. Jalbout won’t reveal how much the foundation has spent so far on scholarships, only that the amount is in the millions of dollars.

Seven students have already completed their degrees—early returns on Al Ghurair’s greatest investment. One scholarship went to Laith Mubaslat, a 23-year-old Jordanian pursuing a master’s degree in electrical engineering at Canada’s McGill University. He wants to work in energy or transportation, and is currently interning with Airbus. Without financial aid, he says he probably would have postponed his studies for several years.

Jalbout, who previously was the CEO of the Queen Rania Foundation for Education and Development, hopes to assist 15,000 students by 2025. “The program is unique in

IMAGES FROM ABDULLA AL GHURAIR FOUNDATION FOR EDUCATION

The 88-year old Al Ghurair pledged to give over $1.1 billion over the next 10 years to his educational foundation

APRIL 2018 FORBES MIDDLE EAST 45

THE WORLD’S RICHEST ARABS

that it sends students mostly to regional universities, encouraging intra-regional student mobility, and also giving a boost to local institutions, many of whom are struggling to grow and diversify their sources of revenues while attracting the best qualified students,” says Sally Jeffery, who leads PricewaterhouseCoopers’ Middle East education consulting practice.

The foundation is the culmination of decades of philanthropy devoted to education. In the 1960s, Al Ghurair built a small primary school in Masafi, a rural town in the northern U.A.E. The school still stands today, a squat white building ringed by palm trees. “The impact that he saw directly at this small school in Masafi inspired him to support school children not just in the U.A.E. but also in the region and beyond,” says Jalbout. One of her first meetings with

46 FORBES MIDDLE EAST APRIL 2018

Al Ghurair took place at the Masafi school, where they toured the grounds together and he recounted stories about the students.

Al Ghurair, the billionaire businessman, only completed primary school. He was born the fourth child in a family of nine.

His father Ahmed Al Ghurair owned boats for pearl diving. The pearl trade with India thrived in the 19th and early 20th centuries, anchoring Dubai’s economy.

Still, it was poor. The Al Ghurair family lived in a mud hut in Dubai, and spent the hot, humid summers in tents. They ran their drinking water through mesh, to filter out the worms infesting the water supply. Al Ghurair remembers his mother, Maryam Saif, carrying a weapon around for protection.

Al Ghurair’s older brother Saif was first to enter the family business. At age 6, he

Al Ghurair serves as the chairman of Mashreqbank while his son Abdul Aziz is the CEO

remembers watching Saif, then barely a teenager, sail away, sometimes for months at sea. By the time Al Ghurair came of age, cheaper Japanese cultured pearls had decimated Dubai’s trade.

The family pivoted. Refitting their boats for longer voyages and heavier loads, the Al Ghurairs hauled dates from Iraq to Africa and India, and brought back textiles and teak logs for boat building.

Al Ghurair developed a knack for business. He bought fish in bulk from Jumeirah, a fishing town, and sold it to the crew of Dutch merchant vessels that anchored at Dubai Creek. He also travelled to Oman to sell sardines to ships sailing the busy Straits of Hormuz.

By age 16, Al Ghurair had amassed a tidy sum, and began buying property.

For 500 rupees, he bought his first parcel of land in Dubai. His father initially reprimanded him, figuring his son didn’t know what he was doing, but after seeing the purchase, he was impressed. The praise inspired Al Ghurair to buy more real estate—later worth millions of dollars. He also started a family, marrying at 18, and ultimately raising 29 children.

In 1960, Ahmad Al Ghurair established a holding company, which had interests in manufacturing and real estate. Al Ghurair and Saif, along with their younger brothers Majid, Marwan and Gomaa, managed different parts of the business, with Abdulla overseeing the group’s properties.

The brothers made their mark in 1967 when they founded what was then Bank of Oman (renamed Mashreqbank in 1993). It was good timing. Dubai began exporting oil in 1969, paving the way for an economic boom, and in 1971 it joined neighboring emirates to form the U.A.E. Flush with new oil wealth, the new nation built its infrastructure and commerce, with financing from the Al Ghurair bank helping drive economic growth. Al

Ghurair, who was then president of the bank, remembers visiting New York in the 1970s, where he met with David Rockefeller, who headed Chase Manhattan Bank.

Mashreqbank became the cornerstone of the family’s wealth. Al Ghurair, who still serves as chairman, holds a 31% stake, worth recently $1.15 billion. His son Abdul Aziz is CEO. With the backing of the ruling Al Maktoum family, the Al Ghurairs were also able to establish other businesses that benefited from the boom. They formed publicly-traded National Cement Co. in 1968, and in 1976 founded National Flour Mills—firsts in the country. “Whether it was the flour mill, the printing press or the cement factory that he established, his businesses were both relevant to the times they were established and sustainable,” says Abdul Aziz Al Ghurair.

By the 1990s, Al Ghurair was the largest private landowner in Dubai, but had to sell chunks of property in prime locations to the government for development.

At the time, Al Ghurair and Saif, also a billionaire, decided to split the group, for reasons he won’t comment on. Abdulla Al Ghurair took the food and construction businesses, as well as some properties, including Al Ghurair Centre—all under a newly-created eponymous holding company. The 63-year-old Abdul Aziz, one of the most prominent businessmen in the U.A.E. and the former head of the country’s national assembly, inherited the mantle of chairman. While other sons oversee divisions, the conglomerate’s CEO has been a non-family member.

With the right stewardship at the group, the foundation’s coffers can grow, and education could prove to be Al Ghurair’s greatest legacy. “Providing access to quality education impacts the individual as well as their family and community,” he says.

THE AL GHURAIR FAMILY THROUGH THE YEARS

1960

The Al Ghurair family holding company is established

1967

Mashreqbank is founded

1968

The family forms National Cement Co.

1976

The family forms National Flour Mills

1976

The family starts the Masafi mineral water company

1982

Al Ghurair Centre opens as one of the Middle East’s first malls

1990s

Abdulla and his brother Saif split the family business into separate groups

1991

Abdul Aziz Al Ghurair is appointed CEO of Mashreqbank

2006

Al Ghurair Construction helps develop the Dubai Metro

2007

Al Ghurair Construction starts work on the Burj Khalifa

2007

Abdul Aziz Al Ghurair elected as speaker of the U.A.E.’s Federal National Council

2015

Abdulla Al Ghurair Foundation for Education is founded

APRIL 2018 FORBES MIDDLE EAST 47

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RICHEST ARABS

T

his year Forbes revealed its 32nd ranking of the world’s billionaires. Out of the 2,208 billionaires, 31 individuals from Arab countries made the list. For the first time this list did not include any Saudis. Forbes chose to leave off all 10 Saudis given reports of asset seizures after some 200 people, including some billionaires were detained.

In 1987 Forbes published the first list of world’s billionaires for the first time. The inaugural list included five Saudi individual billionaires and families namely Al Rajhi family, Bin Mahfouz family, Juffali family, Suliman Saleh Olayan and Alireza family. Until the detention by Saudi government, 10 Saudis dominated the Arab billionaires list. Al Waleed Bin Talal had topped the list for several years, becoming the richest businessman in the Middle East. His net worth stood at $18.7 billion in 2017—making him nearly three times as rich as Egyptian billionaire Nassef Sawiris.

The total wealth of the world’s richest Arabs stood at $76.7 billion in 2018. Egyptian billionaire Nassef Sawiris with a net worth of $6.6 billion is the world’s richest Arab, as Prince Al Waleed Bin Talal was excluded from the list. The U.A.E. and Lebanon with seven entries each, have the highest number of billionaires, followed by Egypt with six billionaires.

In 2017, the 10 Saudis had a combined net worth of $42.1 billion. In fact their net worth would have been higher this year—if not for the detention-drive—considering recovery in the oil prices and rise in stock markets globally.

This year also saw entry of two new billionaires from the United Arab Emirates. Both Saeed Bin Butti Al Qebaisi and Khalifa Bin Butti Al Muhairi are largest shareholders in the Abu Dhabi-headquartered healthcare giant NMC Healthcare that was founded by Indian billionaire B.R. Shetty. Abdullah Al Ghurair is the richest Emirati this year with $5.9 billion and Taha Mikati is the richest Lebanese with $2.8 billion.

Egypt has six billionaires, five of whom hail from the Sawiris and Mansour families. The total worth of the Arab billionaires has dropped from $123.4 in 2017 to $76.7 billion this year, and the total number of billionaires dropped from 42 to 31.

SOURCE OF WEALTH Diversified

10

Car dealership

1

Food

1

Construction

4

Hotels

1

Real estate

4

Investments

1

Telecom

3

Jewelry

1

Healthcare

2

Oil

1

Banking

1

Retail

1

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31 BILLIONAIRES TOTAL NET WORTH:

$76.7 BILLION

Methodology: The Forbes World’s Billionaires list is a snapshot of wealth using stock prices and exchange rates from February 9, 2018. Some people will become richer or poorer within weeks—even days—of publication. For example, Jeff Bezos’ net worth climbed more than $12 billion in the two weeks between Forbes’ measuring date for stock prices and when its issue went to press.

Forbes lists individuals rather than multi-generational families who share large fortunes, though it includes wealth belonging to a billionaire’s spouse and children if that person is the founder of the fortune. In some cases Forbes lists siblings or couples together if the ownership breakdown among them isn’t clear, but here an estimated net worth of $1 billion per person is needed to make the cut. Forbes values a variety of assets, including private companies, real estate, art, yachts and more. Forbes doesn’t pretend to know each billionaire’s private balance sheet (though some provide it). When documentation isn’t supplied or available, Forbes discounts fortunes.

Petroleum | Potash | Mining | Energy

www.unisolcorp.com

www.morgangatsby.com

TOP 10 RICHEST ARABS 1 Nassef Sawiris

Age: 57 Source of wealth: Construction, Chemicals $6.6 Billion (+$1 Billion vs. 2017) Egypt Nassef Sawiris is a scion of Egypt’s wealthiest family. His brother Naguib is also a billionaire. Sawiris split Orascom Construction Industries into two entities in 2015: OCI and Orascom Construction. He runs OCI, one of the world’s largest nitrogen fertilizer producers, with plants in Texas and Iowa; it trades on the Euronext Amsterdam exchange. Orascom Construction, an engineering and building firm, trades on the Cairo exchange and Nasdaq Dubai. His holdings include stakes in cement giant Lafarge Holcim and Adidas.

3 Majid Al Futtaim

2 Abdullah Bin Ahmad Al Ghurair

Source of wealth: Real estate, Retail $4.6 Billion (-$6 Billion vs. 2017) United Arab Emirates

Age: 88 Source of wealth: Diversified $5.9 Billion (-$900 Million vs. 2017) United Arab Emirates Abdulla Al Ghurair founded Mashreqbank in 1967, one of the U.A.E.’s leading banks. He remains chairman and his son Abdul Aziz is CEO. His eponymous holding company has interests in food, construction and real estate; a non-family member is the group CEO. Al Ghurair Foods claims to have the biggest pasta factory in the Middle East. Its pasta products are sold under the Jenan brand. His construction company did the exterior cladding of Burj Khalifa, the world’s tallest building, and helped build the Dubai Metro. His brother Saif Al Ghurair is also a billionaire.

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Majid Al Futtaim founded retailing and entertainment giant Majid Al Futtaim Holding in 1992. Majid Al Futtaim owns and operates 12 hotels and 21 malls, including Mall of the Emirates in Dubai and the Mall of Egypt in Cairo. It also has the exclusive license to operate hypermarkets for French company Carrefour across the Middle East, North Africa and Central Asia. His son Tariq sits on the board while non-family members manage the conglomerate, which publishes its revenues and profits annually. The group had $8 billion in revenues and $760 million in profits in 2016.

MOROCCO

KUWAIT

OMAN

ALGERIA

U.A.E

4 Hussain Sajwani

Age: 65 Source of wealth: Real estate $4.1 Billion (+$400 Million) United Arab Emirates

Hussain Sajwani is the chairman of Dubai-based luxury real estate developer Damac Properties, which he founded in 2002. He started out in the food services business, catering to the U.S. military and construction giant Bechtel. In 2001, after Dubai allowed foreigners to own property, he shifted to real estate and sold units in a residential building in less than six months. Damac teamed up with Donald Trump in 2013 to develop two Trump-branded golf courses in Dubai developments. Sajwani is known for extravagant marketing, sometimes offering free Lamborghinis to apartment buyers. He has co-branding deals with Versace and Bugatti.

5 Issad Rebrab

Age: 74 Source of wealth: Food $4 Billion (+$900 Million vs. 2017) Algeria Issad Rebrab is the founder and CEO of Cevital, Algeria’s biggest privately-held company. Cevital owns one of the largest sugar refineries in the world, with the capacity to produce 2 million tons a year. Cevital has been buying European companies in distress, such as Groupe Brandt, a French maker of home appliances, and an Italian steel mill. Rebrab has plans to build a steel mill in Brazil to produce train tracks and improve transportation logistics for sugar, corn and soy flour exports. His five children work at Cevital.

5 Naguib Sawiris Age: 63 Source of wealth: Telecom $4 Billion (+$100 Million vs. 2017) Egypt Naguib Sawiris is a scion of Egypt’s wealthiest family.

His brother Nassef is also a billionaire. He built a fortune in telecom, but in 2017 stepped down as CEO of Orascom Telecom Media & Technology (OTMT). In 2011, Sawiris sold Orascom Telecom to Russian telecom firm VimpelCom in a multi-billion dollar stock and cash transaction. Sawiris acquired a nearly 20% stake in Australia-listed gold mining firm Evolution Mining.

He also owns nearly 20% of Toronto-listed Endeavour Mining, which operates gold mines in West Africa.

7 Suhail Bahwan

Age: 79 Source of wealth: Diversified $3.9 Billion (-$200 Million vs. 2017) Oman Suhail Bahwan is the founder and chairman of Suhail Bahwan Group, one of the largest conglomerates in Oman. It is a major producer of fertilizers, generating 1.3 million tons of urea annually. It also owns Nissan and BWM dealerships. He first went into business with his brother Saud in 1965, selling fishing nets and building materials, before scoring the Toyota dealership in 1975. In 2002, he split with his brother, who kept the Toyota dealership and passed it along after his death to his son Mohammed.

8 Abdulla Al Futtaim

9 Taha Mikati

Source of wealth: Auto dealers, Investments $3.3 Billion (-$800 Million vs. 2017) United Arab Emirates

Age: 73 Source of wealth: Telecom $2.8 Billion (+$200 Million vs. 2017) Lebanon

Abdulla Al Futtaim owns conglomerate Al Futtaim Group, run by his son Omar, who is vice chairman.

In 1955, the group became the exclusive distributor in the U.A.E. of Toyota, which now has the leading share of the auto market with around 30%. Al Futtaim also has the license to operate Hertz, Ikea, Toys “R” Us and Zara in the U.A.E. The retailer anchors its malls, which include Dubai Festival City and Cairo Festival City. His cousin Majid Al Futtaim is also a billionaire.

Taha Mikati is the cofounder, with his billionaire brother Najib, of Beirut-based holding company M1 Group. Its investments include stakes in South African telecom firm MTN, fashion retailer Pepe Jeans, and prime real estate in New York, London and Monaco. Mikati and his brother Najib founded Investcom in 1982, selling satellite phones at the height of Lebanon’s civil war. They expanded into Africa where they built cellphone towers in Ghana, Liberia, and Benin, among other countries. In 2005, Investcom went public on the London Stock Exchange, and in 2009, South Africa’s MTN bought the Mikatis’ stake for $3.6 billion.

10 Saeed Bin Butti Al Qebaisi

Source of wealth: Hospitals, Investments $2.7 Billion (newcomer) United Arab Emirates

Saeed Bin Butti Al Qebaisi is chairman of Centurion Investments, an Abu Dhabi firm with investments in healthcare, money exchange and retail.

Al Qebaisi’s most valuable stake is in NMC Healthcare, a London-listed firm that bills itself as the largest private healthcare firm in the U.A.E. NMC Healthcare, which runs hospitals and clinics in a dozen countries, was founded by fellow billionaire B.R. Shetty. He has investment partnerships with Khalifa Bin Butti Al Muhairi, also a billionaire, that include joint stakes in Travelex and UAE Exchange.

10 Najib Mikati

Age: 62 Source of wealth: Telecom $2.7 Billion (+$100 Million vs. 2017) Lebanon Najib Mikati is the cofounder, with his billionaire brother Taha, of Beirut-based investment firm M1 Group. Its investments include stakes in South African telecom firm MTN, fashion retailer Pepe Jeans, and real estate in New York, London and Monaco. Mikati and his brother Taha founded Investcom in 1982, selling satellite phones at the height of Lebanon’s civil war. They expanded into Africa where they built cellphone towers in Ghana, Liberia, and Benin, among other countries. In 2005, Investcom went public on the London Stock Exchange, and in 2009, South Africa’s MTN bought the Mikatis’ stake for $3.6 billion.

10 Mohamed Mansour

Age: 70 Source of wealth: Diversified $2.7 Billion (Flat vs. 2017) Egypt

Mohamed Mansour oversees family conglomerate Mansour Group, which was founded by his father Loutfy. Mansour established General Motors dealerships in Egypt, becoming one of GM’s biggest distributors in the world. Mansour Group also has exclusive distribution rights for Caterpillar equipment.

He was Minister of Transportation under the Hosni Mubarak regime. His brothers, Yasseen and Youssef, are also billionaires.

www.esselgroupme.com

www.geesquare.com

www.esselmediahub.com

THE WORLD’S RICHEST ARABS CAIRO 5

EGYPT GDP: $332.8 Billion Population: 96 Million Billionaires: 6 (-1 vs. 2017) Total Net Worth: $18.2 Billion (+100 Million vs. 2017)

NASSEF SAWIRIS $6.6 BIL NAGUIB SAWIRIS $4 BIL MOHAMED MANSOUR $2.7 BIL YASSEEN MANSOUR $1.9 BIL MOHAMED AL FAYED $1.6 BIL YOUSSEF MANSOUR $1.4 BIL

EXPATRIATE

13. Aziz Akhannouch

Age: 57 Source of wealth: Petroleum, Diversified $2.2 Billion (+$700 Million vs. 2017) Morocco Aziz Akhannouch is the majority owner of Akwa Group, a multibillion-dollar conglomerate founded by his father. It has interests in petroleum, gas and chemicals through publicly-traded Afriquia Gaz and Maghreb Oxygene. Akhannouch is Morocco’s Minister of Agriculture and Fisheries.

15. Yasseen Mansour

14. Bahaa Hariri

Age: 51 Source of wealth: Real estate, Investments, Logistics $2.1 Billion (-$100 Million vs. 2017) Lebanon Bahaa Hariri is the eldest son of slain Lebanese Prime Minister Rafik Hariri; he inherited his fortune from his father, who was a billionaire. In 2008, he sold his stake in Saudi Oger, the family construction business, to his brother Saad Hariri, the current prime minister of Lebanon. Bahaa Hariri founded and chairs Horizon Group, a real estate holding company with investments in Amman, Jordan and Beirut, Lebanon. He helped revitalize an area of Amman, called Abdali. The project, in partnership with the Jordanian government, is worth an estimated $5 billion. He’s the majority owner of Globe Express Services, a logistics company with a presence in more than 100 countries.

15. Saif Al Ghurair

Age: 56 Source of wealth: Diversified $1.9 Billion (+$100 Million vs. 2017) Egypt Yasseen Mansour is a shareholder in Mansour Group, which was founded by his father Loutfy. Mansour Group is the exclusive distributor of GM vehicles and Caterpillar equipment in Egypt. His brothers Mohamed and Youssef are also billionaires. He’s chairman of Palm Hills Developments, one of Egypt’s biggest real estate developers.

17. Mohamed Al Fayed

Age: 94 Source of wealth: Diversified $1.9 Billion (-$200 Million vs. 2017) United Arab Emirates

Age: 89 Source of wealth: Retail, Investments $1.6 Billion (-$200 Million vs. 2017) Egypt

Saif Al Ghurair is the founder of family holding company Al Ghurair Group, which has interests in banking, steel and packaging. Al Ghurair’s six sons hold positions in the group. He owns significant shares in Mashreqbank, a leading U.A.E. bank, and in Dubai-based National Cement Company. Nippon Steel & Sumitomo Metal, one of the world’s biggest steel producers, has a minority stake in Al Ghurair Steel. His company Taghleef Industries is one of the world’s largest manufacturers of polypropylene films, used in food packaging and lamination.

Mohamed Al Fayed was born in Alexandria, Egypt and moved in the mid-1960s to the U.K., where he made his fortune. He’s best known for being the one-time owner of London department store Harrod’s, which he sold for a reported $2.4 billion in 2010. He owns the storied Ritz Paris hotel.

After a four-year renovation, it reopened in 2016.

Suites are named after illustrious guests, like Coco Chanel. In 2013, Al Fayed sold Fulham Football Club to U.S. auto parts billionaire Shahid Khan for a reported $300 million.

GDP and Population as per World Bank’s data.

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OMAN

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U.A.E

APRIL 2018 FORBES MIDDLE EAST 49

THE WORLD’S RICHEST ARABS BEIRUT 3

LEBANON GDP: $49.6 Billion Population: 6 Million Billionaires: 7 (Flat vs. 2017) Total Net Worth: $13.3 Billion (+$800 Million vs. 2017)

EXPATRIATES 4

Taha Mikati $2.8 BIL Najib Mikati $2.7 BIL Bahaa Hariri $2.1 BIL Robert Mouawad & fam $1.6 BIL Saad Hariri $1.5 BIL Ayman Hariri$1.3 BIL Fahd Hariri $1.3 BIL

17. Robert Mouawad

17. Othman Benjelloun Age: 85 Source of wealth: Banking, Insurance $1.6 Billion (-$300 Million vs. 2017) Morocco

Age: 73

Source of wealth: Fine jewelry $1.6 Billion (Flat vs. 2017) Lebanon

Othman Benjelloun is CEO of BMCE Bank of Africa, which has a presence in more than 20 African countries. His father was a shareholder in RMA Watanya, a Moroccan insurance company; Benjelloun built it into a leading insurer. Through his holding company FinanceCom, he has a stake in the Moroccan arm of French telecom firm Orange.

Robert Mouawad inherited the family’s eponymous high-end jewelry business that his grandfather founded in Beirut in 1890.

He turned over the business to his sons Fred, Alain and Pascal in 2010. Mouawad boasts one of the most dazzling gem collections in the world, including the Kimberly Star, a 111.11-carat yellow pear-shaped diamond. Robert Mouawad also owns extensive real estate and has developed luxury residences on a manmade island in Bahrain.

17. Faisal Bin Qassim Al Thani Age: 70

Source of wealth: Hotels, Diversified $1.6 Billion (-$800 Million vs. 2017) Faisal Bin Qassim Al Thani is the chairman of Al Faisal Holding, which he founded in 1964. It owns more than 20 hotels around the world, including the St. Regis in Washington, D.C. and Miami, and the W Hotel in London. Al Faisal Holding also has a majority stake in publicly-traded Aamal, which owns real estate and sells medical supplies and pharmaceuticals. Al Thani started selling car parts at the age of16. He became the sole distributor of Bridgestone tires in the 1960s.

21. Saad Hariri

Age: 47 Source of wealth: Construction, Investments $1.5 Billion (+$500 Million vs. 2017) Lebanon

21. P.N.C. Menon

Saad Hariri is the prime minister of Lebanon.

He assumed the position in December 2016, and previously held the post between 2009 and 2011. He’s the son of the late billionaire Rafik Hariri, who was murdered in 2005 while serving as prime minister.

Hariri inherited a stake in Saudi Oger, a construction company his father built into one of the biggest in Saudi Arabia. Saudi Oger reportedly shut down operations in July 2017 following a cutback in spending by the Saudi government and failed to pay wages to workers. Through Oger Telecom, Hariri owns a stake in Turk Telekom, Turkey’s formerly state-owned telecom company.

His cousin Mohammed Hariri is chairman.

GDP and Population as per World Bank’s data.

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50 FORBES MIDDLE EAST APRIL 2018

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LEBANON

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Age: 69 Source of wealth: Real estate $1.5 Billion (-$100 Million vs. 2017) Oman Property developer P.N.C. Menon left Kerala in south India and migrated to Oman in 1976 to start an interior decorating business with a partner. Seeing an opportunity in real estate back home, Menon started Sobha Developers in 1995, in Bangalore, naming it after his wife.

Sobha Developers is run by son Ravi, an engineer from Purdue University, while Menon lives in Dubai. Sobha’s Middle East operations span the U.A.E., Oman and other Gulf countries.

KUWAIT

OMAN

ALGERIA

U.A.E

APRIL 2018 FORBES MIDDLE EAST 51

THE WORLD’S RICHEST ARABS

KUWAIT

KUWAIT CITY 3

GDP: $110.9 Billion Population: 4 Million Billionaires: 4 (Flat vs. 2017) Total Net worth: $5.2 Billion (-$200 Million vs. 2017)

Bassam Alghanim $1.4 BIL Kutayba Alghanim $1.4 BIL Fawzi Al-Kharafi $1.2 BIL Mohannad Al-Kharafi $1.2 BIL

EXPATRIATE 1

21. Khalifa Bin Butti Al Muhairi

24. Kutayba Alghanim Age: 72 Source of wealth: Diversified $1.4 Billion (Flat vs. 2017) Kuwait

Age: 37 Source of wealth: Hospitals, Investments $1.5 Billion (newcomer) United Arab Emirates

Khalifa Bin Butti Al Muhairi is the chairman of KBBO Group, an Abu Dhabi-based group with investments in healthcare, money exchange and retail. He’s a large shareholder in NMC Healthcare, a London-listed firm that bills itself as the largest private healthcare firm in the U.A.E. NMC, which runs hospitals and clinics in a dozen countries, was founded by B.R. Shetty, also a billionaire. Al Muhairi is a board member. He also has stakes in money transfer firm UAE Exchange, which handles $26 billion in remittances annually, and U.K. money exchange firm Travelex. He has partnered with billionaire Saeed Bin Butti Al Qebaisi to make investments through Infinite Investment and Centurion Partners.

24. Youssef Mansour

Age: 72 Source of wealth: Diversified $1.4 Billion (+$300 Million vs. 2017) Egypt Youssef Mansour is chairman of Mansour Group, which was founded by his father Loutfy.

The Group has exclusive GM and Caterpillar dealerships in Egypt. He oversees the consumer goods division, which includes supermarket chain Metro, and sole distribution rights for L’Oreal in Egypt. Younger brothers Mohamed and Yasseen are also billionaires.

Kutayba Alghanim is the chairman of Alghanim Industries, which his late father Yusuf founded in 1932. His son Omar, who has a Harvard MBA, is CEO. Alghanim sells GM and Ford cars in Kuwait, owns a consumer electronics retailer and Wendys restaurants in the Middle East, among other businesses. Kutayba and billionaire brother Bassam fought for years over the division of assets they inherited. An arbitration to resolve the dispute is pending.

24. Bassam Alghanim Age: 66 Source of wealth: Diversified $1.4 Billion (Flat vs. 2017) Kuwait

Bassam Alghanim inherited a stake in Alghanim Industries, a diversified company founded by his late father Yusuf and chaired by his brother Kutayba.

He’s not involved in the business, which has a stake in Gulf Bank of Kuwait, sells GM and Honda cars, and owns a consumer electronics retailer. Bassam and Kutayba, also a billionaire, have fought for years over the assets they inherited. An arbitration between the brothers is pending.

27. Ayman Hariri

Age: 39 Source of wealth: Construction, Investments $1.3 Billion (+$100 Million vs. 2017) Lebanon Ayman Hariri is a son of the late Rafik Hariri, Lebanon’s prime minister, who was assassinated while in office in 2005. He inherited a stake in his father’s Saudi-based construction company Saudi Oger, and sold it to his brother Saad in 2014. In 2017, he sold his 42% stake in family holding company GroupeMed, with interests in banking and real estate, for $535 million. He invests in startups through New York-based firm Red Sea Ventures; among its investments was smart thermostat Nest, now part of Google. He’s a cofounder and CEO of Vero, an ad-free social media platform that lets users share music, videos and photos.

GDP and Population as per World Bank’s data.

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THE THEWORLD’S WORLD’SRICHEST RICHESTARABS ARABS

27. Fahd Hariri

Age: 37 Source of wealth: Construction, Investments $1.3 Billion (Flat vs. 2017) Lebanon Fahd Hariri is the youngest son of the late billionaire Rafik Hariri, who was Lebanon’s prime minister. He was assassinated while in office in 2005. In 2012, Fahd Hariri sold his shares in the family construction firm Saudi Oger to his brother Saad Hariri, who is now Lebanon’s prime minister. He has invested some of the proceeds in three Lebanese banks, including Bank Audi, and in real estate in New York and Paris. He has also developed three residential buildings in Beirut.

29. Fawzi Al-Kharafi

OMAN

Source of wealth: Diversified $1.2 Billion (-$100 Million vs. 2017) Kuwait

GDP: $66.3 Billion Population: 5 Million Billionaires: 2 (-1 vs. 2017) Total Net Worth: $5.4 Billion (-$1.3 Billion vs. 2017) MUSCAT EXPATRIATE 1

Suhail Bahwan $3.9 BIL P.N.C. Menon $1.5 BIL

Fawzi Al-Kharafi is the chairman of M.A. Al-Kharafi & Sons, a conglomerate founded by his late father Mohammed in 1956. He became chairman in 2015 following the death of his brother Jassim, a former speaker of the Kuwait National Assembly. The Kharafi group owns stakes in several Kuwaiti companies, including Zain, a telecom firm chaired by his brother Mohannad, also a billionaire. In 2016, the group sold its shares in Americana, which operates fast-food chains in the Middle East, including KFC and Hardee’s, for $2.3 billion.

29. Mohannad Al-Kharafi

MOROCCO

Source of wealth: Diversified $1.2 Billion (-$100 Million vs. 2017) Kuwait

GDP: $103.6 Billion Population: 35 Million Billionaires: 2 (-1 vs. 2017) Total Net Worth: $3.8 Billion (-$700 Million vs. 2017)

Aziz Akhannouch & family $2.2 BIL Othman Benjelloun $1.6 BIL

CASABLANCA

Mohannad Al-Kharafi is the vice chairman of M.A. Al-Kharafi & Sons, a conglomerate founded by his late father Mohammed in 1956. The Kharafi group owns stakes in several Kuwaiti companies, including Zain, a telecom firm with $3.6 billion in 2016 revenues. Al-Kharafi is chairman of Zain; his nephew Bader is CEO. In 2016, the group sold its shares in Americana, which operates fast-food chains in the Middle East, including KFC and Hardee’s, for $2.3 billion. His brother Fawzi is also a billionaire.

29. Hamad bin Jassim bin Jaber Al Thani

ALGERIA

Age: 58 Source of wealth: investments $1.2 Billion (-$100 Million vs. 2017)

GDP: $159.1 Billion Population: 40 Million Billionaires: 1 Total Net worth: $4 Billion (+$900 Million vs. 2017)

Issad Rebrab & family $4 BIL

A prominent gulf-based investor, Hamad bin Jassim Al Thani—also known as HBJ—owns 3% of Deustche Bank—his biggest publiclytraded holding—through an entity called Paramount Services Holdings. According to Panama Papers, Al Thani owns a 436-foot superyacht, called Al Mirqab, worth an estimated $300 million.

ALGIERS

UNITED ARAB EMIRATES GDP: $348.7 Billion Population: 9 Million Billionaires: 7 (+2 vs. 2017) Total Net Worth: $24 Billion (-$3.3 Billion vs. 2017)

DUBAI 5

ABU DHABI 2

Abdulla bin Ahmad Al Ghurair & family $5.9 BIL Majid Al Futtaim & family $4.6 BIL Hussain Sajwani $4.1 BIL Abdulla Al Futtaim $3.3 BIL Saeed Bin Butti Al Qebaisi $2.7 BIL Saif Al Ghurair & family $1.9 BIL Khalifa Bin Butti Al Muhairi $1.5 BIL

GDP and Population as per World Bank’s data.

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APRIL 2018 FORBES MIDDLE EAST 55

THOUGHT LEADERS

NIPUN SRIVASTAVA

Regulating The Borderless Cryptocurrencies IN THE SENATE BANKING COMMITTEE meeting held in February 2018, the U.S. Commodity Futures Trading Commission Chairman Chris Giancarlo began by talking about his kids who are not interested in stocks but are hooked on cryptocurrencies, stating that the government owes it to today’s young generation to develop a thoughtful and balanced response that prevents fraud and manipulation.

A cryptocurrency is a store of value, a means of account and a medium of exchange – in that it is a commodity, a currency-like instrument, and a payment system all rolled into one. And investors, attracted by its charm and aura, are pumping in money. Out of a possible 1,100 cryptocurrencies, more than 50 now boast a market cap of more than $1 billion, with bitcoin alone reaching $300 billion in December 2017. Cryptocurrencies are threatening central bank fiat currencies, the very foundation of the global economy.

However, the recent rise in scams, manipulation, hacking and crimes related to money laundering and sanctions have highlighted their risks to the end consumer. Under current legislation, cryptocurrencies often have no regulatory safeguards and little protection. The situation is further exacerbated by a lack of transparency and understanding. If borderless cryptocurrencies even partially supplant fiat currencies in the formal economy - their ultimate aspiration – the risks of financial crime and tax evasion will only increase.

Governments worldwide are imploring regulators to intervene and impose controls on cryptocurrency providers. However, regulators have been cautious, adopting an overarching approach of “do no harm” – similar to when regulating the internet, leading to the rapid expansion of access across the world.

This is now changing. Armed with information collected over the years, some regulators are starting to intervene.

The first step is imposing a licensing regime ensuring fit and proper checks on crypto-providers. In September 2017, Japan decided to regulate crypto exchanges and authorized 11 companies. US Securities and Exchange Commission (SEC) has adopted the same approach of registering the cryptoexchanges. This is certainly better than ordering domestic crypto-exchanges to close and banning Initial Coin Offerings (ICOs), as China and Indonesia have done.

The next step is regulating “gateways” (exchanges) and “stores” (wallets).

The Financial Action Task Force (FATF) has provided guidance on how a risk-based approach can be applied to virtual currency exchanges (VCEs), as well as wallets. VCEs are required to perform customer due diligence, keep records and report suspicious transactions to the local authority. In the U.S., VCEs are already regarded as “money services businesses” for the purposes of NIPUN SRIVASTAVA, DIRECTOR, FINANCIAL SERVICES REGULATORY ADVISORY, DELOITTE MIDDLE EAST

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anti-money laundering (AML) and combating the financing of terrorism (CFT) legislation.

In 2017, BTE-e, a crypto exchange, was fined $110 million for failing to register as a money transmitter and implement basic know your client (KYC)/AML processes. The European Commission recognizes “custodian wallet providers” as “obliged entities”, requiring them to perform the same checks as VCEs. Data protection is another regulatory focus.

The EU General Data Protection Regulation (GDPR) extends the scope of data protection law to cryptocurrency providers, requiring them to store, manage and protect users’ personal data.

In February 2018, the Swiss Financial Market Authority issued a clear and balanced public guidance on ICOs that can be used as a global template. Russia and Mexico are also working on comprehensive regulation to control the creation and production of cryptocurrencies, treating them as “other properties”. Other regulators, such as the South African Reserve Bank, are creating safe environments, called sandboxes, to let local innovators experiment.

The GCC regulators are yet to announce their cryptocurrency approach even with a number of regional ICOs in 2017 including GCCoin, emCash and Farad as several barriers remain – the key one being definitional. While a central bank may classify a cryptocurrency as a stored value for AML purposes, a tax authority may classify it as property for taxation, and a capital markets regulator may classify it as a commodity to regulate trading and exchanges. This may lead to overlapping regulations, causing further confusion. Lack of international harmonization and coordination is another challenge.

With increasing integration between the conventional financial system and the cryptocurrency world, a comprehensive and standardized regulatory framework is required.

Such an approach should strike a balance between innovation and consumer protection.

Only then can the cryptocurrency dream of an efficient and inclusive financial system be realized.

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THOUGHT LEADERS

TED STEPHENSON

How To Choose A Wealth Manager WHEN LIVES are in transition, money is in motion.

Wealth management is the management of assets and liabilities throughout life by utilizing a variety of philosophies, processes, products, strategies, and solutions that are tailored to each individual or family; based on their various characteristics of income, wealth, age, social status, investment knowledge, and unique psychological differences.

Choosing the right wealth manager depends not only on your current financial situation but also on the level of value-add that is required. As we move up the value chain there is a greater body of knowledge required and both the business model and relationships become more complex.

In the Middle East, it is not uncommon for many High Net Worth (HNW) and Ultra High Net Worth (UHNW) families to have an accountant for advice on tax issues regarding investments outside of the region, an investment manager or private banker to manage a core investment portfolio of traditional assets (stocks, bonds and cash), an insurance agent, a property manager or broker, and a lawyer to assist in various transactions.

At the top of the value chain in wealth management, single and multifamily offices offer to centralize these services in a co-ordinated approach that brings together a team of advisors. In 2008 the Dubai International Financial Centre (DIFC) announced regulations to encourage family businesses to establish Single Family Offices (SFOs) at DIFC. In the GCC, the UHNW families have a long history of having family offices. Now the business model is expanding and there are more examples of multi-family offices becoming accessible to HNW families.

At the heart of all relationships should be a foundation of trust. However, insurance agents, property brokers and most investment advisors or wealth managers in the GCC are primarily compensated through commissions.

The business relationship is, therefore transaction driven. It is important to understand fee structures when choosing a wealth manager at a retail or private bank, insurance company, or asset management company.

Higher value-added wealth management should be client centred, fee based, process driven and focussed on stewardship. “Well-designed client fee structures and manager compensation structures can align the interests of the client and the manager, but poorly designed structures can encourage behavior that is not in the client’s best interest,” according to a report by CFA U.K. CFA Institute has identified five important factors to consider when engaging a wealth manager: 1. Competence is more important than personality to the determination TED STEPHENSON, CFA, EXECUTIVE DIRECTOR OF CFA SOCIETY EMIRATES

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and delivery of valuable wealth advice.

2. Quality advisers view technology as a friend not a foe.

3. Clear communication, integrity, and professionalism are all imperatives.

4. Best-in-class advisers balance IQ (technical expertise) and EQ (emotional intelligence) with a solid grounding in behavioral finance.

5. Credentials matter: Professional qualifications make a difference in competence and expertise.

An analogy to healthcare is sometimes used to highlight these factors. People all want top specialists for their healthcare. Brain surgeons are not selling their services, they are being compensated for their competence and use of cutting edge technologies. When a medical specialist recommends a course of treatment, there is little doubt that the advice is for your own best care and that there are no conflicts of interest. You trust the advice. That is a key difference between an industry and a profession.

A big challenge for choosing a wealth manager in any country is finding a professional that you can trust. A recent CFA publication titled Future State of The Investment Profession states that trust and value in wealth management are interconnected. “For the end investor, value will relate to perceptions of outcome relative to expectations.” The simple equation is Credibility + Professionalism = Trust and Value.

No wealth manager can guarantee a specific result but they should have the expertise and professional acumen to educate you on realistic outcomes so as to minimize the gap between expectations and reality in achieving your financial goals. You should be confident that your advisor represents the right blend of industry competence and professional integrity.

You should be certain that you are being counselled-and not sold.

SPECIAL REPORT

VALUE ADDED TAX (VAT) For the ďŹ rst time in history, VAT is being implemented in the Middle East. Although only at 5% for now, the implications are bigger as businesses and consumers get used to the change.

APRIL 2018 FORBES MIDDLE EAST 59

SPECIAL REPORT

VAT

In Search Of Tax Efficiency

The introduction of VAT in Saudi Arabia and the UAE in January caused some teething problems, but now that it’s in place it’s unlikely to ever be withdrawn. The questions for the future are how quickly will other GCC states follow suit, and how long will it be before governments start to push the tax up from the current low rate of 5%?

By Dominic Dudley

T

he need to develop a more diverse revenue base has long been recognised by governments in the Gulf, but it has been one of those things easier said than done.

That is now starting to change. Over the past few years there have been a series of moves by GCC authorities to introduce charges where previously there were none. The efforts began cautiously but the trend is picking up momentum.

Changes made to date have included the service fees for departing passengers at airports in Dubai and Sharjah, which was announced in the first half of 2016, and the excise duty on tobacco products and sugary drinks introduced by several countries in 2017. Arguably the most significant step so far came on 1 January this year, when the UAE and Saudi authorities took the plunge and introduced a value-added tax (VAT).

The idea of VAT is hardly a new one for the region. As long ago as 2005 the UAE authorities were requesting the IMF’s assistance in designing a VAT system, and over the years it has cropped up on a fairly regular basis. Until now

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however, GCC governments have always shied away from going ahead with it. A fall in oil prices in late 2014 provided the trigger needed and, as oil revenues plunged and budget deficits soared over the following year, the GCC states finally agreed at a meeting in December 2015 to introduce a 5% VAT. In an echo of the sort of caution exhibited by the authorities over the years, however, the deal has only been partially implemented. Although all six countries were meant to introduce it at the same time, only two have done so far. The other four governments have indicated they will follow at some point, but there is no clear timetable at this stage. Announcing his government’s budget for the forthcoming fiscal year, Kuwait’s finance minister Nayef Al-Hajref said on 29 January that it would not impose VAT without first securing approval from the National Assembly (parliament).

Bahrain and Oman have been unclear about their intentions, but there is a general expectation that all will

eventually follow the lead set by the UAE and Saudi Arabia.

“A lot of the framework, the laws, the regulations are drafted, it’s really just putting the final touches and making sure the timing is right,” says one accountant in Muscat.

One aspect of the plan has been adhered to though, with VAT being introduced at a very low level. It is not quite the lowest rate in the world—some French territories such as Reunion Island and St Martin have a levy of just 2.1%— but it is certainly at the lower end of the international scale. It is also lower than anywhere else in the Middle East, where VAT can range as high as 20% in Morocco.

There are a few reasons that explain the Gulf region’s reluctance to introduce VAT. One is that, barring some periods of low oil prices, governments have generally been able to fund their spending commitments via oil revenues.

A second reason is a fear that taxation could provoke domestic opposition. While welcoming the introduction of the tax, IMF director general Christine Lagarde, hinted at these issues in a speech in Dubai on 10 February. She described VAT as “an important step toward diversifying revenue and building tax capacity” but added that “this must be done with equity and fairness in mind—both of which are conditions for the acceptability of taxation.”

To date, any consumer unhappiness towards the tax appears to have been mostly directed at less scrupulous shopkeepers, who took the opportunity to raise prices higher than they should have. The acceptance of the tax is in large part due to the low level it has been set at, but it has been helped by the fact that some other big-ticket items are coming down in price these days, such as school fees in the UAE. “Your cappuccino costs you 5% more than it did, which is insignificant,” says one Dubai resident.

There have been some other signs of difficulty though, perhaps unsurprisingly given the lack of experience the region has in dealing with taxation of any kind. Some 90,000 companies in the UAE are thought to have failed to register for a tax registration number (TRN) in time and there were reports in early January of the UAE Customs Department being unable to verify the TRNs of some importers, leading to goods being held in port.

Both governments have also been relaxed in providing details about how the tax is being implemented. In the UAE, for example, the authorities only named the designated zones where VAT would not be levied on 11 January. In Saudi Arabia, meanwhile, at the time of writing, the General Authority for Zakat and Tax (GAZT) had still not published its promised VAT guidelines for a number of sectors, including transportation, healthcare, the digital economy and financial services, by mid-February.

With the system still bedding down, it is hard to judge the impact on the economy, but there have been some early

signals. In particular, it appears that the tax contributed to a boost in economic activity in December, as companies brought forward some purchasing activity, but that was followed by a slowdown in January as they then worked through their larger-than-normal inventory.

Dubai-based bank, Emirates NBD, said there were a couple of notable trends in terms of prices too. The cost of goods rose in the UAE in January, with overall input costs climbing at their fastest rate since November 2011 and output prices increasing for the first time in five months.

However, the bank’s Purchasing Managers’ Index (PMI) survey suggests that companies in the UAE did not pass on the full rise in costs to consumers.

It was a similar story in Saudi Arabia. “Many firms boosted orders and output in Q4 ahead of VAT implementation,” said Khatija Haque, head of MENA research at Emirates NBD, in a research note published in early February. That was followed by a reduction in orders at the start of 2018. However, he predicts that “the January slowdown is likely to be transitory.”

The longer-term impact of VAT on economic activity will vary from sector to sector, as some areas of economic activity are exempt from the tax and others have been given a 0% rate. Even in sectors that are caught by the new tax, the evidence suggests that companies may well choose to absorb some or all of the costs of VAT themselves rather than pass it on to consumers, due to a mixture of competitive market conditions and subdued demand.

Regardless of that, the tax will provide a fairly significant amount of revenue for the two governments. Oxford Economics predicts the UAE will generate up to AED18bn ($4.9bn) from VAT this year, equal to 1.5% of non-oil GDP, while Saudi Arabia will generate close to SR30bn ($7.9bn), or 1.5% of non-oil GDP. An early test of these predictions will come in late February, when the first VAT filings are due from companies in the UAE. Over the course of the year, inflation is also likely to rise as a result of the tax. Oxford Economics estimates VAT will drive up inflation in Saudi Arabia and the UAE by 2-4 percentage points. However, this will be a one-off impact and the consultancy suggests that it will have little impact on GDP growth for either country.

In the longer term, one thing that is likely is the VAT rate will creep up—something that has happened in virtually every other market in the past. “If you look around the world at countries that have implemented VAT, they all started off at a low percentage and it never went down,” says the Muscat accountant.

Any rises are unlikely to have the same impact as the initial introduction of the tax though. None are expected for at least two or three years.

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FORBES MIDDLE EAST // EFS FACILITIES SERVICES GROUP

Preparation And Education Are Key To Success Taher Jhanjharya, Group Financial Controller, at EFS Facilities Services Group, talks to us about how the introduction of VAT is impacting the business and operations of one of the region’s largest facilities management companies.

Taher Jhanjharya Group Financial Controller, EFS Facilities Services Group

How is the introduction of VAT in the GCC likely to affect the facilities management industry?

Overall, the VAT regime will support the industry. The longterm benefits of the introduction of VAT will overshadow the initial setup requirements, as the market will evolve around the new regime. With the introduction of VAT, industries across the GCC will see an initial impact of increased cost from the implementation and administration of the regulations. However, as the market gets accustomed to the changes, it will be business as usual, with benefits for the larger economy through transparency and unified documentation creating an environment of better governance. The same will

be applicable to the facilities management industry.

The VAT regulations around input credits on capital assets will encourage clients and owners to focus on increasing the longevity of current assets in use rather than replacing them. As a service provider, the VAT will be passed on to the consumers through corporate clients or owners’ associations and will have almost no impact on the service provider itself. The initial impact on the service provider will be through increased costs for administrating and training stakeholders about the process and documentation requirements.

The regulations for payment and invoicing timelines,

which ensure eligibility for input credits, will also enhance the ability of facilities managers to improve payment terms with clients and creditors, further enhancing the working capital cycle and reducing the cost of borrowing for the industry.

The requirement for companies to adhere to VAT regulations will also usher in a compliance regime that did not exist earlier, with companies required to maintain documentation and records as per guidelines for all transactions.

With businesses passing on the recovery of VAT to consumers, how will this affect you, building-owners and renters?

The FTA has exempted residential rents for the purpose of VAT calculation. This will directly benefit the renters, although they may see a marginal increase in rent as owners may pass on the cost of the VAT for expenses incurred for the maintenance and management of the property. The initial impact is being absorbed by the landlords, as the overall market saw a decrease in rental cost in early 2018.

Residential purchases are also exempt from VAT, therefore home-owners may have seen a marginal increase in their service charges as VAT was applied on utilities and facilities management.

For building owners and us, the VAT would be a pass-through cost that will only require efforts for administration. It will impact the cash flow at the initial stage as we pay the VAT before we collect from the clients. There will be limited impact on companies as long as they manage the administration of the same with due diligence. .

partners with their tax invoices and supporting employees to understand how VAT compliance can be checked at a consumer level.

Do you feel the current regulations are clear enough?

What are the challenges you’re facing?

The current regulations are well structured and clear in all respect. Our challenge is coming from the supply chain around the services that we buy, as there has been little or no education amongst the smaller suppliers to understand VAT requirements. We still receive invoices that are not marked as tax invoices or do not carry the necessary TRN details.

The time that we need to spend explaining and educating the supply chain on the changes required has been our initial challenge.

How do you see the implementation of VAT improving the GCC economy at large?

There are multiple direct and indirect benefits of VAT. It has put in force a stronger transaction recording process, which will enhance the regulation of business activities and transparency. Plus, the expected collection of VAT will raise additional revenues by between 1.2% to 1.6% of GDP. GCC governments are expected to invest the funds in new infrastructure, smart and green technology as well as welfare programs, which will further increase jobs in the market and assist in achieving the diversification of the GDP through the growth of new sectors. Significant employment opportunities in finance and accounts have also been created in both public and private sectors.

"THE LONG-TERM BENEFITS OF THE INTRODUCTION OF VAT WILL OVERSHADOW THE INITIAL SETUP REQUIREMENTS, AS THE MARKET WILL EVOLVE AROUND THE NEW REGIME."

As a business leader, how did you prepare for VAT implementation at the beginning of the year?

We started preparing for the introduction of VAT over a year ago. We formed a team to review and manage the process of implementing the new changes. We undertook contract reviews to ensure VAT compliance, updated our processes to ensure necessary information was recorded and maintained, and we updated our ERP systems to record VAT on applicable transactions. Two months before the end of last year, we started discussions with our clients to educate them on the VAT implications and held multiple workshops to educate our staff.

We continued the education and monitored progress on the key steps we had taken last year. This included educating clients on the new tax invoice formats, helping supply chain

Do you think VAT will increase to more than 5% in the next five years?

The basic 5% VAT rate is one of the lowest tax rates applicable in the world. While this may be the case as an introductory rate so that people can get used to the new structure, it will have to increase depending on the revenue diversification of each country in the GCC in the future.

While the IMF forecasts that this may not happen in the next five years, governments will have to review the rate in small incremental values sometime soon after 2020, based on how the oil prices move and the need to reduce dependency on oil revenue in the coming years.

SPECIAL REPORT

VAT

Key Questions Answered For Business Leaders

By Keith Donegan

F

or business leaders the serious question is, what have you done to familiarize yourself with arguably the largest regulatory change to be implemented in the Middle East?

VAT is a bit more complicated than any text book definition so you should invest some time in understanding the concepts. The key points you should be aware of are that it is a transaction-based tax that will encompass most aspects of your business in some way. As a tax-registered business, your main obligation is to collect and account for the tax appropriately, acting as a middle man for the tax authority.

From a business leaders’ perspective, VAT increases your risk profile, particularly financial and reputational risks.

Financial risk will come in the form of under payment and/ or penalties for non-compliance. Of more significance will be the reputational risk of potentially being identified as a tax defaulter. The main role of business leaders and Boards will be that of risk oversight and working with management to ensure that adequate governance and risk management frameworks are in place.

Is a VAT implementation project mostly about an IT upgrade?

There is a lot of misunderstanding around the scale of the task at hand in terms of preparing for VAT. Many people might think they can simply get an upgrade to their ERP system or some other software solution to solve the

problem—unfortunately it is not that easy.

Business leaders should view this as akin to a business transformation project. When you start to plan what is involved you will begin to realize why. It is likely that businesses will have to hire specialist staff, upgrade existing IT systems and/or implement new systems, educate staff, suppliers and customers, and develop a risk framework. There will also be supply chain considerations, contract reviews, awareness sessions and potential changes to your pricing strategy.

Start planning early. IT will have an integral role to play but it is not the solution itself. VAT is a challenge for software developers due to the number of variables that can determine the treatment of basic transactions. As your organization becomes more comfortable with VAT, technology will become increasingly more relevant to managing VAT efficiently.

What effect is the introduction of VAT likely to have on profitability?

This can be considered through revenue and cost. In the longer-term VAT should not impact top-line revenue. There may be some industries where pricing strategies around passing on VAT could bring some short-term gains, but these are unlikely to be permanent.

On the cost side of the equation, VAT will bring

Keith Donegan is an international tax professional with over 13 years “Big Four” experience in Europe and Australia and most recently in the UAE. He currently works as an in-house tax adviser for the Kanoo Group, leading the VAT implementation project for the UAE and Oman.

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additional downward pressure on profitability. You will hear that VAT will not be a cost to businesses as it will only be borne by the end consumer. This may be true in the longer term when the additional costs eventually flush through the system to consumers, but here and now businesses will be faced with additional compliance, human resource, IT and adviser costs that will have to be absorbed, impacting net profit. There will also be some businesses (e.g. banks, residential landlords) that will not be able to recover all of the VAT they incur, which will hit the bottom line.

On the positive side, VAT is going to bring increased amounts of data in relation to sales, purchases and cash collection, among other things. In mature VAT jurisdictions, many businesses are using this data to drive greater financial performance. Businesses in the GCC that get to grips with extracting value from the additional data will obtain similar competitive advantages.

How will VAT impact existing and future contracts?

For existing contracts that are silent on VAT, provisional rules should be contained within your jurisdiction’s legislation, protecting both suppliers and customers from inequitable

outcomes. In the UAE and Saudi Arabia, typically this has resulted in suppliers not having to bear the cost of VAT where prices have been agreed under a contract. However, you may wish to review your contracts to ensure your position is protected.

When entering new contracts in a VAT regime, there are some basic clauses that you might consider including.

One is to ensure that all prices agreed under the contract are exclusive of VAT—you do not want any nasty surprises if there is a dispute and the contract is silent on VAT. It would also be standard practice to include a “VAT gross up” clause, allowing the supplier to pass on VAT if it is subsequently determined that the transaction should have been subject to VAT. You would also expect to see clauses in relation to record keeping, and the provision of supporting documentation, including valid tax invoices and reimbursing counter parties on a net of VAT basis (i.e. where they are entitled to recover the underlying VAT relating to an expense).

This is only a flavor of the contractual considerations.

Each industry and agreement will have its own nuances that will have to be specifically addressed, and commercial leverage will come into play.

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SPECIAL REPORT

VAT

How will VAT impact pricing and pricing strategies?

In a B2B context, VAT should not particularly impact pricing, as the additional VAT charged should be recoverable by the recipient business in most cases.

Although in the early days customers’ perceptions will have to be managed through education.

However, in the B2C space VAT will be a real consideration when it comes to pricing strategies, as well as when supplying to businesses such as banks or unregistered entities (e.g. overseas principals) that may not be able to recover all of the VAT. Basic economics tells us that if you are in a market with fixed price points and low switching costs, any kind of arbitrage in pricing will result in loss of customers.

When it comes to VAT you really have two choices: pass on the VAT or absorb some or all of it. Things become more complicated when you start to factor in what your competitors will do. If you decide to pass on the VAT but your competitor does not, how will this impact sales?

Is there an optimal amount of VAT to pass on that will increase both sales volume and revenue?

In many circumstances your margins simply will not allow you to absorb the VAT. With the VAT rate at only 5% the scope for significant arbitrage in pricing is limited and it is likely that most businesses will pass on the full VAT. However, there is no harm in considering the best strategy for your business or whether you have the data available to undertake some basic scenario testing around pricing.

How might the introduction of VAT impact your supply chain?

As most goods and raw materials are imported into the GCC, VAT will have an immediate impact on an organization’s supply chain. For starters, there will be additional clearance documentation to be completed and import VAT to be declared on most goods.

This will create additional work for logistics teams to track, retain and record the relevant documentation, which will be integral to supporting any reclaim of import VAT. In some instances, import VAT must be paid on arrival, which may create cash flow issues. However, for most businesses payment should be deferred until submission of the VAT return. We will have to wait and see how this is managed in countries that have not implemented VAT. For cost savings, businesses in the region often consolidate orders from overseas suppliers and transship them, typically through the UAE or Saudi Arabia, where these orders are disaggregated at hubs and then distributed to smaller markets in the GCC. In this model there may be circumstances where import VAT has to be paid in the UAE (or another GCC country), which may

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be difficult to recover for recipients based in other GCC countries. A solution might be to avail of the special designated zones in the UAE that should not give rise to import VAT, but this may require changes to your current supply chain.

Alternatively, you may have to undertake a costbenefit-analysis, comparing the additional cost of shipping directly to the end market versus leaked import VAT in another GCC country that may be irrecoverable.

How should businesses tackle resourcing?

The decision about whether to build in-house capability or to outsource the entire tax function to a third-party service provider will largely depend on the scale of the organization in question. At this early stage, it is hard to see how large organizations would cope without a dedicated in-house tax function to provide support and address problems in a fast-paced environment.

For large organizations it is about getting a balance between building an in-house tax function and using external advisers. Very large organizations may even need to consider adding dedicated resources along divisional lines to meet their specific needs. Smaller organizations will have to lean more towards upskilling in-house finance teams and leveraging external support due to resource constraints.

Will the introduction of VAT be positive or negative from a cash flow perspective?

It should have a very positive impact on the cash flow cycle. The rules and timing around invoicing and payment of VAT will bring greater transparency and discipline to how businesses undertake cash management.

One reason for this is that the VAT reporting cycle, particularly for larger businesses, is likely to be monthly.

Therefore, regardless of whether you have received payment from your customer, if you have made a sale in the period, you will be obliged to pay the related-VAT to the authorities.

For entities on monthly returns you would typically expect to have to pay the related VAT within four to eight weeks of the transaction. This will increase the pressure on businesses to obtain payment, as failure to do so will be 5% more expensive for each day the amount remains outstanding after payment of VAT. There are also provisions around bad debts, which allow entities to recover VAT paid to the authorities for a sale that later goes bad. This may encourage some businesses to write off outstanding debts sooner and realize the loss rather than leaving the amount sitting as an outstanding receivable if they know they are unlikely to recover the debt.

SPECIAL REPORT

VAT

Transfer Pricing, VAT and Customs:

Implications for the GCC

By Bruce Hamilton and Adil Rao

T

he GCC is currently undergoing significant taxation reform, with value added tax (VAT) introduced in the UAE and Kingdom of Saudi Arabia (KSA) on 1 January 2018, and the rest of the member states following over the next year.

With the issuance of the final recommendations of OECD on the 15 Base Erosion and Profit Shifting (BEPS) action items, the importance of transfer pricing has further increased as it dominates the BEPS agenda for taxpayers and tax authorities across the world.

Following the global trend, many countries across the region have also committed to introducing BEPS recommendations in domestic legislation, which is likely to further sharpen the focus on transfer pricing in the region.

The introduction of VAT, with the existing customs duty regulations, could also have significant transfer pricing (TP) implications. The three sets of rules—VAT, customs duty and transfer pricing—with different administrative bodies dealing with them, could also have an impact on multinationals’ cross border trades.

Transfer pricing (TP) TP is primarily concerned with transactions between connected parties (i.e. between group companies) preventing the artificial shift of profits from one tax regime to another more favorable tax regime. As an international best practice, companies are required to act in accordance with the “arm’s length” standard. Simply put, the price should be what an independent buyer would pay an independent seller in the marketplace for the same item/s under the same terms and conditions.

Local transfer pricing approaches across the world are typically based on the OECD Transfer Pricing Guidelines (“Guidelines”). Under transfer pricing rules, taxpayers are obliged to demonstrate, using appropriate TP methods prescribed in the Guidelines, that any transactions they are engaged in with connected parties comply with the arm’s length standard.

Bruce Hamilton is Partner for the indirect tax practice at Deloitte.

Adil Rao is Middle East Transfer Pricing Leader at Deloitte

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All intercompany transactions are subject to TP. For example: • transfer/sale of goods (e.g. raw material or finished goods) • provision of management and other services (e.g. technical support, corporate front/back office support, IT, procurement) • provision of loans and other financial arrangement (e.g. guarantees, cash pooling, debt factoring) • transfer or use of intangible property (e.g. trademarks, patents, know-how, software, database)

VAT interaction with transfer pricing VAT, as a consumption tax, is levied at every stage of the supply chain and is designed so the cost ultimately rests on consumers, as businesses are generally able to recover VAT on the supply of goods and services.

The interaction between VAT and TP typically arises when “taxable supplies” are made to related parties. This is because the price charged for a transaction between two related parties not only determines the amount of VAT payable on that transaction but will also affect the taxable profit of both entities that may be subject to corporate tax.

Generally, the taxable amount for the supply of goods or services is represented by the consideration actually charged by the supplier. However, in the case of related party transactions, VAT rules require that the supplier accounts for VAT on a transaction based on its market value, rather than the consideration actually charged.

This rule reflects an approximation of the arm’s length standard (the cornerstone of transfer pricing) in the context of VAT. One practical example of the interaction between VAT and TP can occur in the case of TP adjustments, which may have VAT consequences. Such TP adjustments are aimed at achieving an arm’s length price in order to compute the right amount of taxable profit and can be made either by tax administration (after the taxpayer has filed a tax return)

or by the taxpayer itself (before the return is filed). Such item-specific price adjustments, depending on the relevant facts and domestic rules, could lead to an increase (or decrease) in the value of the taxable amount of that supply for VAT purposes and if not addressed appropriately may lead to an incorrect VAT return and penalties.

In practice, problems arise at a number of different levels—for example, if the value of the supply of imported services is adjusted, this will likely impact on a reverse charge that has been accounted for. If it relates to specific goods, this could impact on the VAT on importation (which would likely also have an impact on any customs duties due).

Customs duty interaction with transfer pricing Customs duty is generally imposed on the importation of goods from other customs jurisdictions. The duty is calculated on individual transactions at the time of import and based on the value of goods at that time.

TP adjustments become even more complex where the transaction involves cross-border movement of goods, which will give rise to similar issues for customs (as discussed for VAT).

In addition, there is an inherent tension between customs and transfer pricing when it comes to determining the arm’s length price of a transaction. From a TP perspective, a higher transfer price may reduce the taxable income in the country of import, whereas from a custom’s perspective, a higher transfer price would result in a higher applicable customs duty in the country of import.

This is an area that is already gaining significant attention globally. The WCO and OECD in particular have encouraged discussions around potentially aligning the valuation of related party transactions from a TP and customs perspective, but it is still not clear as to how and when the gap will be bridged.

Key takeaway The interaction between TP, VAT and customs is one of the key areas for potential tax audits across the world. Tax authorities in the GCC seem to be aware of this and are already seeking to align different internal administrative bodies to ensure easy access of the relevant data and take a more integrated and joined up approach to tax audits.

Clearly this is a complex interaction of rules requiring expertise in all areas. Businesses should consider their internal expertise levels, proactively manage potential exposures based on a holistic approach to transfer pricing, VAT and customs, and seek expert advice in case of any uncertainty, given that the new VAT laws are largely untested.

GCC Unsure But Positive How are businesses feeling about VAT? There are some common themes at the moment, according to a recent study by Loginext, “Business Report on VAT Implications in the GCC”.

In general, the introduction of VAT is being perceived as a positive move that could help governments to become oil-revenue independent, as well as bridge fiscal deficits and help fund some of the more ambitious infrastructure projects.

Impact on Customers As a variety of consumables become liable for tax, businesses are aware that the spending capacity of consumers may decrease, but although consumerism may be affected in the short-term, it will adapt quickly.

Tax Grouping With many parts at work to enable the final product, some businesses are considering how each would play-in towards tax claims or payments, including where ‘tax grouping’ is a possibility.

Intra-GCC Movement As tax is based on transactions, the country of consumption is mostly considered as the ‘place of supply’. However, the place where the tax is finally collected might be different from where the manufacturer might reclaim the tax. The import VAT would be on top of custom duties and would be payable by the recipient in the destination country. For export, there appears to be less clarity.

Impact on Working Capital Uncertainty over actual points of cash-flow has some businesses thinking about how it will affect their working capital. Credit cycles might be affected, and the working balance might need to be increased, affecting balance sheets.

Tech Preparedness Many businesses are in the process of designing an automated system of tax-filing and claims to keep their go-to-market times fast and uninterrupted. In general, businesses agree that technology can be an accelerator in this transition.

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THOUGHT LEADERS

TUUKKA KONTTINEN

Why CEOs Need To Rethink Company Hierarchy In The Digital Age THE DIGITAL REVOLUTION has essentially been like any revolution—forcing change and establishing a new way of doing things. There are always winners and losers in a revolution.

Those that don’t change to fit the new order soon lose their place in it. We’re now a decade into the digital revolution and while most traditional organizations have accepted the need to change, not all have fully embraced the new way of doing things.

A key challenge for traditional organizations is that they’re wedded to business practices deeply rooted in the industrial era. Complex hierarchies, with a clear top-down chain of command, were essential to allow businesses to scale up in the industrial revolution and are still commonplace today. While these practices are efficient at getting workforces to follow orders and processes, they simply aren’t designed for the new business challenges today—innovation and agile development.

While hierarchy itself isn’t a killer in the digital age, it can be the enemy of innovation in many ways. Hierarchy creates a culture of asking permission to get things done. Getting an idea off the ground often entails a slow, uphill struggle of seeking permission through a lengthy process of approvals.

Agile innovation won’t come easy in an environment structured to be so risk averse. People are actually pretty good at taking risks but organizations can be terrible at it. We make some complex, risky decisions on our own like buying a home, yet at work people often need to seek permission on the simplest of tasks—like ordering a new office chair.

So what are the alternatives? You could perhaps opt for a flatter structure from the start. Such a structure does not need to have silos, or lots of bosses, instead can have autonomous teams with members that represent all the skills required. This approach gives people the freedom to pursue ideas with speed, without constantly seeking approval or fearing what their bosses think. The absence of a rigid hierarchical structure means most decisions get made by the people and teams closest to the issue at hand. In our experience, this approach really helps attract and retain creative talent.

Having said that, switching to a flatter structure across the organization probably isn’t realistic option for many but you can do it on a smaller scale to improve innovation. Some of the biggest innovations TUUKKA KONTTINEN, CEO, REAKTOR - MIDDLE EAST AND AFRICA

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in the world have happened in ‘sandbox environments’, where people can freely share their ideas and drive them forward, without worrying what the boss thinks.

Even the most traditional and hierarchical organizations are beginning to use this approach, giving teams autonomy to develop ideas outside of the normal business structure. The U.S. military, arguably one of the most hierarchical organizations, switched to smaller autonomous teams, operating outside the normal chain of command to improve their response to militant threats.

Aiming for the ‘right first time’ approach can also be a big obstacle to keeping pace with digital innovation. People tend to chase perfection too early when they have lots of bosses to impress. This can slow development. At Reaktor, we’ve found experimenting with solutions as soon as possible, validating them with actual users and iterating quickly leads to a better product in a shorter time. Early prototyping can shave months off your development time.

To succeed in the digital age you need to create a safe work environment where it’s alright to experiment. People need to be given freedom in order to be creative. There’s a pretty simple solution to this; hire good people and trust them. If you hire people who are extremely competent in their respective fields, there’s no reason why you shouldn’t trust them—they simply won’t thrive otherwise. If you don’t trust someone, don’t hire them.

To truly enjoy the spoils of the digital world, businesses need to embrace it fully and be part of it. This may mean making a few uncomfortable changes. Be brave, after all business is all about taking educated risks—the digital world just forces us to take some new ones.

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THOUGHTS ON

Abundance “LIKE THE RAIN, EVERYTHING COMES IN BUCKETSFUL— OR NOT AT ALL.”

“You never find people laboring to convince you that you may live very happily upon a plentiful fortune.”

—SAMUEL JOHNSON

“The thankful receiver bears a plentiful harvest.”

—WILLIAM BLAKE

—HENRY MILLER

“I’VE GOT ALL THE MONEY I’LL EVER NEED— JUST SO LONG AS I DIE BY FOUR O’CLOCK.” —HENNY YOUNGMAN

“Right now, for the first time ever, a passionate and committed individual has access to the technology, minds and capital required to take on any challenge.”

—PETER H. DIAMANDIS

“If we command our wealth, we shall be rIch and free.”

—EDMUND BURKE

“I WAS SO GOOD AT BEING A MAN, WITH SUCH PLENITUDE AND SIMPLICITY, THAT I THOUGHT I WAS SOMETHING OF A SUPERMAN.” —ALBERT CAMUS

“MY LORD. IT IS TOO MUCH, AND NOT ENOUGH.”

“GOD DOESN’T MEASURE HIS BOUNTY, BUT OH, HOW WE DO!”

—JACQUELINE CAREY

—MIGNON MCLAUGHLIN

“It was a rich place. as rich as plumcake.”

—C.S. LEWIS

“Wealth comes from industry and the hard experience of human toil. To dissipate it in waste and extravagance is disloyalty to humanity.”

——PSALM 65:11

—PETER H. DIAMANDIS

SOURCES: TROPIC OF CANCER, BY HENRY MILLER; ALBERT CAMUS OF EUROPE AND AFRICA, BY CONOR CRUISE O’BRIEN; BOLD, BY PETER H. DIAMANDIS; LETTERS ON A REGICIDE PEACE, BY EDMUND BURKE; THE LIFE OF SAMUEL JOHNSON, BY JAMES BOSWELL; THE MAGICIAN’S NEPHEW, BY C.S. LEWIS; THE AUTOBIOGRAPHY OF CALVIN COOLIDGE; KUSHIEL’S CHOSEN, BY JACQUELINE CAREY.

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FINAL THOUGHT “An abundance of money can bless as well as curse. The latter is to be vigilantly guarded against.”

—B.C. FORBES

IMAGES FROM WIKIPEDIA

“YOU CROWN THE YEAR WITH YOUR BOUNTY, AND YOUR CARTS OVERFLOW WITH ABUNDANCE.”

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Senator Chronograph

Beijing · Dresden · Dubai · Geneva · Hong Kong · Macau · Madrid · Nanjing · Paris · Shanghai · Shenyang · Singapore · Tokyo · Vienna 74 FORBES MIDDLE EAST APRIL 2018