Gulf Business | April 2011

Vol. 15 Issue 12 April 2011

THE

DIGITAL

ISSUE

The Gulf’s tipping point p.40 Companies to watch p.49 Can firms afford not to be on Twitter? p.56 Social networking p.66

INSIDE:

EXCLUSIVE INTERVIEW

ABDULKAREEM ABU ALNASR

CEO of Saudi’s National Commercial Bank PLUS: Will the UAE avoid the turmoil?

MEET S A’ ARABI T MOS NT TA IMPORKER BAN

Small businesses go big Mishal Kanoo: What revolution?

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CONTENTS Vol. 15

Issue 12 April 2011

GCC NOW 14 The round-up News, numbers and people

2011

COMMENT 24 Mishal Kanoo Revolution? But is there any change?

27 Matein Khalid Downside of Gulf real estate investment.

28 Tommy Weir Is your boss a ‘leader in name’ only?

ANALYSIS 30 UAE’s role amid unrest

38

POLITICS Is the country the new safe haven for regional investment?

The region is teetering on the cusp of a digital revolution. To celebrate, Gulf Business has dedicated almost an entire issue to a phenomenon that is – finally – set to transform the way the region lives, works, shops and connects.

33 Chinese churn HR Regional bankers flock to jobs in the Far East.

35 Small is beautiful

30

The Gulf unveils a mega-push for SMEs.

FEATURES 70 The game changer PROFILE Abdulkareem Abu Alnasr, CEO of National Commercial Bank

74 Currency wars FINANCE How the China/US currency tensions affect the Gulf.

70 April 2011 gulfbusiness

11

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Editor-in-Chief Obaid Humaid Al Tayer Group Editor and Managing Partner Ian Fairservice Group Senior Editor Gina Johnson Senior Editor Guido Duken Editor Alicia Buller alicia@motivate.ae Chief Sub-editor Iain Smith iains@motivate.ae Editorial Coordinator - business Concessa D’Souza concessa@motivate.ae

80

Art Director Tarak Parekh tarak@motivate.ae Senior Designer B Raveendran raveendran@motivate.ae Designer Charlie Banalo charlie@motivate.ae Photographers Farooq Salik; Naveed Ahmed; Victor Besa.

Contributors Andrew White; Ryan Harrison; Adrian Mourby; Glenn Freeman; Laura Collacott; Alex McNabb.

General Manager Production and Circulation S Sasidharan Production Manager C Sudhakar General Manager Group Sales Anthony Milne anthony@motivate.ae Senior Advertisement Manager Abraham Koshy abraham@motivate.ae Advertisement Manager Ajay Mathews ajay@motivate.ae Deputy Advertisement Manager Melroy Noronha melroy@motivate.ae General Manager – Abu Dhabi Joe Marritt joe@motivate.ae

82 DOWNTIME

83 Bytes

79 Art

iPad 2 preview, netbook update and iPad app round-up.

Charles Pocock takes an expert peek at this season’s Islamic art auctions.

80 Style Adrian Mourby is a gent for a day in London’s St James shopping area.

82 Cruise The new Range Rover comes at a price, but it’s worth it.

REGULARS 84 Hotels 85 Data monitor

April 2011

Dubai Media City: Office 508, 5th Floor, Building 8, Dubai, UAE, Tel: +971 4 390 3550, Fax: +971 4 390 4845 Abu Dhabi: PO Box 43072, UAE, Tel: +971 2 677 2005, Fax: +971 2 677 0124, motivate-adh@motivate.ae London: Acre House, 11/15 William Road, London NW1 3ER, UK, motivateuk@motivate.ae Editorial syndication details, Tel: + 971 4 2824060 gb@motivate.ae

88 Events 90 In your shoes

12 gulfbusiness

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

Printed by Emirates Printing Press, Dubai

IN THE NEWS TIM CLARK After much speculation, Tim Clark revealed that Emirates has shelved plans for a bond to fund expansion after the regional uprisings made rates too expensive.

The airline had initially instructed banks to pursue a bond issue in February and it was likely to attract strong demand.

But Clark, Emirates’ president, told the ITB travel fair in Berlin in March: “We tested the water and it was pretty muddy. So, we’ve parked it.”

Clark said that the group, the largest customer for the Airbus A380 superjumbo, had no problems financing its expansion, however, and that “cash flows had been mapped”.

Emirates has so far ordered 90 A380s – with a list price of about $375 million each – and has 15 in its fleet already.

The carrier plans to increase its fleet to

Tim Clark, President, Emirates Airline.

eventually include 120 Airbus A380s. It is due to receive five of the planes this year. Emirates recently raised its fares due to higher oil prices and Clark confirmed Emirates was being affected.

“Fuel hits you straight away, so that has adversely

affected us. We don’t lose money, but we’re not making so much,” he said.

Clark said load factors – how full its planes are – were coming back up after being reduced by uprisings in Tunisia and Egypt.

“We were down six to seven percentage points at

F

about 74 per cent, but now we’re back at 80 per cent.”

He said that Emirates’ load factor was usually in the low 80s at this time of year.

The number of Emirates’ cabin crew, for the first time, has risen to over 12,000 as the airline positions itself for continued growth.

Emirates is currently in full recruitment mode across all six continents where it flies, looking to hire 4,000 cabin crew in the 2011/12 financial year.

The airline will have been buoyed by air traffic movements in the UAE in February, which grew by 7.6 per cent compared to the same month last year, according to figures released by the General Civil Aviation Authority.

Middle East carriers are expected to return profits of $700 million, considerably better than the $400 million previously forecast, but down from the $1.1 billion the region posted in 2010.

TALKINGPOINTS Turkey is the fastest growing OECD economy with easy access to 1.5 billion consumers.

It is very well possible that we will buy shares in another airline.

HE Hamad Buamim, director general at the Dubai Chamber of Commerce & Industry, highlights Turkish investment opportunities at a conference for Dubai investors.

We don’t need an alternative race anywhere in Europe. We need a race in Bahrain.

Qatar Airways CEO Akbar al Baker is looking at a stake in a European airline to increase the number of passengers feeding into its network.

Formula One chief executive Bernie Ecclestone backs the Bahrain Grand Prix in 2011 despite a state of emergency being declared.

GCC AND THE WORLD Young people in the GCC rank living in a democratic country as their top priority in life, according to results of the ASDA’A Burson-Marsteller Arab Youth Survey.

The research included

14 gulfbusiness April 2011

2,000 face-to-face interviews with Arab nationals and Arab expatriates between the ages of 18 and 24 in the six GCC states, as well as in Egypt, Lebanon, Jordan and Iraq. The interviews were conducted in December 2010

2000

Number of young Arabs interviewed face-to-face for the survey.

and January 2011.

“During this period of seismic change, it is more important than ever that we understand the hopes and fears of the region’s youth,” said Mark Penn, global CEO of Burson-Marsteller.

UNITED ARAB EMIRATES

iStock

Infrastructure leads 2011 growth

The UAE’s spendto-recover approach will be a key factor driving the real estate sector in 2011, according to Jones Lang LaSalle.

The advisory firm’s ‘Top Trends for 2011’ says that shaping UAE real estate and infrastructure investment will be

paramount for a property bounce back.

“The UAE has over $45 billion of future projects in the pipeline and has one of the highest levels of per capita transport infrastructure spending globally, augmenting its investment edge within the broader MENA region,” it

said in a note.

It is expected that increasing investments in major transport infrastructure across the UAE will fill development gaps, create jobs and ultimately create more demand for good quality real estate in the country.

SPOTLIGHT

Bond pipeline due at Dubai Drydocks The Dubai Drydocks and Maritime World may issue bonds or launch an initial public offering (IPO) to support future expansion plans, but not before next year.

According to Chairman Khamis Buamim, the company is now working on expanding via joint ventures with international partners,

and is proceeding with work at its Dubai Maritime City development, an industrial zone for maritime-

related companies.

Drydocks and Maritime World, the ship repair unit of financially-troubled Dubai World, is currently in talks with its bank creditors about restructuring a $2.2 billion syndicated loan that dates back to 2007. Buamim added he “hopes to reach an agreement with the banks by the end of April.”

INNUMBERS

9 per cent

$35.5 bn

The drop in bonuses that UAE middle managers received between 2008 and 2010, according to Towers Watson.

The volume of new construction contracts awarded in Abu Dhabi last year, figures from Ventures Middle East show.

DIB profit falls 62 per cent

Dubai Islamic Bank, the emirate’s third-largest lender, posted a full-year net profit of AED806 million down from AED1.21 billion in 2009, according to company statements.

The bank’s fourth-quarter net profit slumped 62 per cent to AED33.2 million ($9.04 million), Reuters data shows, down from AED86.55 million in 2009. DIB said provisions amounted to AED864 million in 2010, while assets grew nearly seven per cent to AED90.1 billion.

DIB operates 68 branches across the UAE, six of which opened last year.

No UAE capital outflows

The UAE’s Central Bank governor Sultan Nasser Al Suweidi said he has not seen capital outflows due to unrest in the region, and added that inflationary pressures would not be of concern despite high oil prices. Speaking after a GCC business gathering he told reporters: “There is absolutely nothing unusual.

No capital outflows.”

Property continues spiral

Real estate prices in the UAE are likely to remain under pressure in the near to medium term, according to Al Mal Capital. Dubai property prices are expected to bottom out by the end of 2013, while prices in Abu Dhabi will likely bottom out by end 2014, the firm said in an analysis note. “The UAE real estate sector offers deep value at current levels,” it said.

April 2011 gulfbusiness

15

SAUDI ARABIA

Saudi faces protests home and abroad

Real estate tops oil sector

Reuters

Real estate is the highest valued sector in Saudi Arabia at $347 billion, followed by infrastructure, oil and gas, petrochemicals and power and water, according to the latest research from Zawya. The highest valued project in the Kingdom is the world’s tallest tower, KHC, valued at $20 billion, followed by Ras Al Zour Power and the desalination plant Gosi in the Duhairah District.

Rising tensions.

Saudi Arabia officially entered the regionwide troubles in March after sending thousands of its soldiers into Bahrain to protect government facilities.

The Kingdom had witnessed skirmishes and political protest on its home

soil, but this was the first time troops were sent to help its neighbour stamp out protests.

Bahrain opposition groups condemned the military move, calling it an occupation that pushes the country dangerously close to a state of ‘undeclared war.’

The decision sent shock waves through the country’s stock market and analysts say that the protests may escalate further in Saudi.

In early March, about 500 protesters demonstrated in Al-Hofuf, alongside the country’s major oil field Ghawar.

SPOTLIGHT

HSBC rolls out Saudi expansion HSBC Middle East has signed a $435 million deal to finance a steel plant and rolling mill in Jubail, to be run by a unit of petrochemical giant SABIC. Hadeed, a whollyowned subsidiary of SABIC, aims to produce one million tonnes per year of pellets and half a million tonnes of rebar.

It represents one of the biggest deals of its kind in the region, and adds to HSBC’s ambition to expand into Saudi.

Most importantly for Saudi, Hadeed will now be able to use its rolling mills at full capacity without relying on imported steel.

$267 million $147bn 16 gulfbusiness April 2011

Saudi Basic Industries Corp’s (SABIC) chief executive said he was optimistic on the firm’s outlook this year, with growth expected to come in Asian markets.

Mohammed Al Mady said Asian countries such as China and India were growth drivers despite the earthquake in Japan, while business in Europe was now slightly improving.

SABIC was forced to shut down its plant in Japan after the devastating earthquake and tsunami.

Population to double

INNUMBERS

The amount Prince Alwaleed bin Talal will invest in the Saudi stock market despite recent unrest.

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SABIC upbeat on Asia

Saudi’s FDI in 2010, according to SAGIA.

Saudi’s population is expected to reach 30 million in 2017, double the figure just 30 years ago, new research by Euromonitor International shows. Its analysis of the Kingdom’s population growth to 2030 also shows the number will hit 36.5 million by the end of the period under review, representing a near 40 per cent rise compared to 2010.

KUWAIT

Kuwait battles calls for PM’s resignation Protests across the Arab world spread to Kuwait in March, with hundreds of young demonstrators taking to the streets calling for reform and the replacement of the current prime minister.

Around 1,000 people gathered in a square near government offices

on the seafront amid tight security.

The demonstrators carried banners calling for the resignation of Prime Minister Sheikh Nasser Mohammad al-Ahmad al-Sabah.

Five of the six governments Sheikh Nasser has formed as premier have been forced to resign

and parliament has been dissolved three times.

Protests have since escalated in Kuwait and across the Gulf, which culminated in Gulf officials approving a $20 billion economic aid package for Bahrain and Oman. The UAE and Qatar are the only two Gulf states to be left untouched by unrest so far.

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PROJECTFOCUS

Kuwait lands deal ahead of oil rivals China has approved a $9 billion oil refining and petrochemical joint venture between Kuwait and the China Petroleum and Chemical Corporation.

The project, to be built in the southern coastal city of Zhanjiang, will secure Kuwait a solid outlet for its oil, ahead of competing investors

Reuters

Grapheast

Pay grates in Kuwait

such as Venezuela, Russia and Qatar, all of which are planning refineries

in China. Kuwait aims to more than double its crude exports to China to 500,000 barrels per day, versus last year’s sales at just under 200,000 bpd.

For China, which imports some 55 per cent of its crude requirements, a commitment to lock up long-term oil supplies is essential.

INNUMBERS

6 per cent

KWD32m

The maximum Kuwaiti inflation could reach this year, according to the central bank.

Cost of a gas pipeline project Kuwait Gulf Oil Co. plans to tender this year.

18 gulfbusiness April 2011

Just five per cent of Kuwaiti professionals are highly satisfied with their salaries, according to a recent survey by Bayt.com and YouGov Siraj. More than half of those polled said they had a mild satisfaction with pay, while 40 per responded with a low satisfaction.

The study additionally revealed that 70 per cent of residents felt they have personally been affected by the global economic crisis.

Bogus firms stamped out

Kuwait has cancelled 15 licences belonging to what it calls bogus companies in the country. After completing investigations on the alleged violations of 56 companies, the Ministry of Commerce and Industry said 15 have been proven to be imaginary. Sources said that the addresses of the 15 companies were unknown and their owners had not visited the ministry for a long time. The move forms part of Kuwait’s efforts to tackle corruption.

GBK net income plummets

Gulf Bank of Kuwait (GBK) net profit shrunk to KWD19 million in 2010 from KWD28 million a year earlier, Chairman Ali Abdul Rahman Al-Rashaid Al-Bader announced at the bank’s AGM in March.

Recorded operating revenues stood at KWD135 million in 2010 compared to KWD83 million in 2009.

QATAR

Hope at last for Qatar IPOs in 2011 QInvest breathed some life back into the initial public offering (IPO) market in Qatar, announcing it was working on two deals this year.

The investment bank, 49 per cent owned by Qatar Islamic Bank, is working to conclude two “reasonable size” mandates for IPOs by local companies this year, according to its chief executive officer Shahzad Shahbaz.

“We are looking to conclude one transaction in the second-quarter of 2011, and the other in the second half.” The size of the IPOs is yet to be determined, he said.

IPOs in Qatar generated QR502.5 million ($138 million) in 2010 in one offering compared with QR3.38 billion in 2009 also in a single share sale, data compiled by Bloomberg shows.

Qatar Holdings is to buy more than six per cent of Spanish power utility Iberdrola for just over two billion euros ($2.82 billion). The companies said in a statement that Qatar Holding’s stake will mostly come from shares.

The partner also agreed to work together to develop new electricity-related business projects, mainly in fast growing and emerging markets. Iberdrola also intends to establish its regional headquarters in Qatar.

$170bn planned for projects

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COMPANYFOCUS

Doha Port deal goes to Chinese contractors A Chinese firm has won a QR3.2 billion ($879 million) contract to build the first phase of Qatar’s New Doha Port.

China Harbour Engineering Co (CHEC) will be responsible for digging a 17 metre deep basin, building quays and

wave barriers.

The QR14 billion port will be located near Mesaieed and includes a container wharf, general cargo wharf, naval forces wharf, and breakwater.

It forms part of Qatar’s efforts to upgrade its transport infrastructure

before hosting the 2022 World Cup. CHEC is a subsidiary of China Communications Construction Company, which has 31 overseas branches and offices with business activities covering more than 70 countries.

INNUMBERS

20 per cent QR14.72bn Qatar’s GDP growth this year, according to estimates from the IMF.

20 gulfbusiness April 2011

Qatar powers into Spain

Drop in market capitalisation on the Qatar stock exchange in a single day in March.

Qatar is planning to pump $170 billion into projects in the next 11 years and nearly $140 billion will be allocated for infrastructure, according to the country’s finance minister Yousuf Hussein Kamal. The remaining funds will be channelled into oil and gas projects, which have already received more than $100 billion over the past decade. He said Qatar’s GDP would rise by more than 18 per cent in 2011.

Qatar tops MidEast’s least corrupt

Qatar has been ranked among the top 20 least corrupt countries in the world. According to the Corruption Perception Index 2010 released by Transparency International, Qatar has improved its rank to 19th place globally among the 178 countries last year, from 22nd in 2009. It got the top spot in the Middle East and North Africa and beat the UAE, which ranked 28th.

ADVERTISEMENT

Value of investing above the fray When investors see major markets tumble on news of rising oil prices then bounce back on bullish news from the banking sector, it’s no wonder they are having a tough time regaining confidence in equities.

In this uncertain environment, following a disciplined investment process focused on pure business value can offer a more sensible route to capital preservation.

Investing based on macro themes may work for those with short-term horizons.

But for long-term investors, investing above the fray has its advantages.

At Harris Associates we aim to avoid the price movements that result from daily headlines. Instead, we look to value businesses through the economic cycle and beyond. Of course, investing in this way takes patience and discipline, but we believe that it has been one of the keys to our longterm investment success.

For more than 30 years we have maintained a steadfast belief that investing in undervalued companies offers attractive profit potential while providing meaningful risk reduction. We construct portfolios on a stock-by-stock basis and follow an investment process based on three key tenets:

Valuations for Japanese securities are, on the whole, very cheap today. A majority of the companies in the Topix Composite trade below their book value, and many also trade at prices below their net cash value.

Profit-wise, we like how more Japanese companies are recognizing shareholders as important stakeholders in their business by sharing profits through increased dividends and stock repurchases. For example, Canon Inc. has grown profits for the past decade and in late 2010 announced a 50-billion-yen buyback program.

• Buy stocks selling at a significant discount to the intrinsic business value

Proximity to some of the world’s fastestgrowing economies is also benefiting Japan. For instance, Toyota Motor now sells more than a third of its vehicles in emerging markets.

• Focus on firms increasing per-share value

Research leads to high conviction

• Invest in companies with owner-oriented management

In today’s uncertain world, there certainly is no lack of value ideas being generated by our team of research analysts at Harris Associates. By operating as generalists, they get to focus on uncovering value wherever they can find it and aren’t restricted to any one sector or industry.

Japanese equities are currently a key component of our global and international strategies. The widespread destruction caused by the recent earthquake and tsunami does not appear to have materially altered what we believe to be the intrinsic value of the companies in which we are invested.

When an analyst believes a stock should be owned by Harris clients, it is brought before the stock selection group, which is led by David Herro, Chief Investment Officer of International Equities. It’s the group’s job to try to find holes in the analyst’s contentions

Robert Taylor is Director of International Research and a Portfolio Manager at Harris Associates, a valueoriented equity investment management firm headquartered in Chicago, Illinois, USA. He joined Harris Associates in 1994 and has more than 16 years of investment experience.

of why the stock is a good idea. In the end, we believe this research and vetting process enables us to have a high conviction on every name we select for a portfolio.

Global equities remain attractive There are several non-earnings-related factors around the world that highlight the attractiveness of equity valuations. First, dividend yields in the U.K. have been more attractive than its government’s bond yields.

Second, dividend yields on high-quality large-cap U.S. equities are higher than on five-year government bonds, and it’s been 50 years since that last happened. Third, roughly 50% of equities in Japan have been trading at less than book value.

Overall, the environment for corporate profitability is good. Global economic growth appears to be on the mend, with the global economy estimated by the OECD to grow at around 4.2% in 2011. This environment should be conducive to profitability of the quality companies in which we are investing.

Harris Associates L.P., a subsidiary of Natixis Global Asset Management, is an investment adviser registered with the U.S. Securities and Exchange Commission (IARD No. 106960) and is authorized to provide investment management services in the United States. The company conducts all investment management services in and from the United States. • This communication is provided by Natixis Global Associates Middle East, a branch of Natixis Global Associates UK Limited, which is regulated by the DFSA. Related financial products or services are only available to persons who have sufficient financial experience and understanding to participate in financial markets within the DIFC, and qualify as Professional Clients as defined by the DFSA. Registered office: PO Box 118257, 5th Floor, Building 8, Gate Village, DIFC, Dubai, United Arab Emirates. • Natixis Global Associates Middle East, a branch of Natixis Global Associates UK Limited, is a business development unit of Natixis Global Associates, the division of Natixis Global Asset Management dedicated to crossborder distribution. Natixis Global Asset Management, a subsidiary of Natixis, is the holding company of a diverse line-up of specialized investment management and distribution entities worldwide. • This communication is for information only and does not constitute an offer of financial services, nor a recommendation or offer to purchase or sell shares in any financial instrument. Investors should consider the investment objectives, risks and expenses of any investment carefully before investing. The analyses and opinions referenced herein represent the subjective views of the portfolio manager as referenced.

ADINT201-0311

BAHRAINOMAN

30

seconds on the business of... luxury watches

Raynald Aeschlimann

Reuters

Vice president, Omega

£20 billion aid pack agreed Bahrain and Oman have suffered the worst of the Gulf’s protests, resulting in an emergency aid package being deployed by GCC members. The $20 billion economic lifeline will be allocated for development projects over the next 10 years in the two Gulf countries. Fighting between protesters and authorities to escalate in the coming months.

Branches shut their doors British banks HSBC and Standard Chartered shut their branches in Bahrain as clashes between security forces and anti-government protesters intensified. HSBC closed its four branches in Manama, citing concerns for the safety of its 334 employees. Standard Chartered, which employs 500 people in Bahrain, shut all seven of its branches. ATM machines are stocked and functioning, HSBC said, while Standard Chartered said its wholesale and private banking clients can call their relationship managers at home.

Credit boost for Muscat Airport Arab Bank, Jordan’s largest lender, will provide credit facilities worth $410 million to three contractors to carry out the third development phase of Oman’s Muscat International Airport.

Arab Bank-owned Oman Arab Bank, Europe Arab Bank and Arab Bank in Bahrain will collectively provide the loan to a consortium of international contracting companies working on the project, the lender said in an emailed statement.

The credit facilities to be provided include advance payment guarantees and letters of credit.

INNUMBERS

50 per cent

How did the luxury watch market fare in the recession?

Recession is a very big word. If you are selling a product which has emotional sentiments attached to it, you’ll be amazed how many people will still go out and buy those products. For example, consumers wouldn’t buy a new car if they already had a nice car, whereas people still buy expensive watches as gifts, or for themselves, because they like to buy into emotion through difficult times.

Is the UAE a key market for luxury watch brands?

Over the last 10 years, the UAE has become one of the top ten markets for companies to invest in – joining cities like London, New York and Paris.

Dubai is particularly attractive as it has some of the best malls in the world filled with fashionable luxury brands.

Outside of the Gulf, which other markets are growing for luxury brands?

If you take Omega, for example, over 50 per cent of our turnover is coming from China. Unlike many other brands that are only starting to look into different markets, we have been established in China for almost 30 years across five major cities. Other increasingly popular markets include Hong Kong, Taiwan and Japan.

How do you research what customers look for in a watch?

Our employee’s talk to our customers all over the world, we want them to feel that they are linked to the brand. When you buy an expensive watch you want to know that in 10 years time it will continue to be a functional product, it may not be fashionable but, at least, you know that it will be in line with the brand.

What do you think has been the main change over the last decade as the luxury market becomes more mainstream?

Luxury is buying a more expensive, better quality product rather than a cheaper alternative. People are getting wealthier and more willing to splash out on a branded watch they trust will last them a lifetime rather than having to replace it every few years.

The reduction in Oman’s budget deficit in 2010 on the back of higher oil prices.

April 2011 gulfbusiness

23

COMMENT

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a ILLUSTRATION: TARAK PAREKH

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llow me to start with a proviso. I am not being negative or positive. I simply want to write based on what I see – and not what I hope will be.

To the everyday Arab what is happening is godsend. A couple of months ago nobody would have thought such sweeping change could happen in the Arab world. As a people, we seemed quite content with our lot in life and ready to bow our heads to the person who wielded the biggest stick. We always thought that politics and social issues were beyond our comprehension and therefore beyond our care. The fact that a few voices in the wilderness were heard meant as much as a shout in the dark. No one knew who was making noises and, more importantly, no one cared.

Now we see Tunisia, Egypt, Libya, Yemen, Bahrain and Oman all going through a rebirth. But as with all births, it is a painful, long and bloody journey. But the problem is not the birth; it is the child that is born who matters as the birth is just the beginning. The hard part starts after the child is born. How we take care of the child, teach him or her and the environment we create will determine to a large extent the type of person that child will grow up into. Like the child, any revolution is defenceless at birth. It is at the beck

24

gulfbusiness April 2011

and call of those who are taking care of it. If they are wise and good, the child has the opportunity to grow well. If not, the child will struggle and resentment can appear. As the child grows older, it becomes more set in its way and less willing to compromise as he or she starts to believe that the world revolves around them. The same ideas swirl in the heads of revolutionaries as they start to believe that the cause and only the cause matters. As the child reaches late adulthood its body starts to deteriorate. Revolutions are the same and start becoming the problem that they tried to eradicate in the first place. Eventually, the child dies and so do revolutions.

It is a circle that must happen. But then, if that is the case, why have a revolution in the first place?

The simple answer is that revolutions are important sparks, but it is the evolution of the revolution that we should all nurture. To transform an ideal from thought to reality takes time and needs many brains, as well as brawn, to help change what was good at one time to what is good now. The reason most revolutions happen is because the old system doesn’t suit the current situation, but certain people who benefit from it are not willing to adapt and will fight change to the bitter end.

Mishal Kanoo is deputy chairman, Kanoo Group

Indeed, it is easy to crack an egg but it takes a cook to turn that simple egg into a meal. We can all break the egg. But how many of us are willing to learn what it takes to make that egg into a meal?

The sad thing is that most of these revolutions are destined to fail.

Some might succeed but history tells us most won’t. Let’s take Egypt for example. Yes Mr. Mubarak is gone but has the system that propped him up changed? Has the military that has ruled Egypt since the 50s changed? That too was a revolution.

How successful was that for Egypt?

Some people loved and adored Gamal Abdul Nasser and still revere him as the leader of the revolution. But has that system changed Egypt for the better or worse? I could bore you with facts that would support my argument that Egypt actually lost ground on all important fronts, but that won’t matter if you believe in the Arab revolution sparked by Nasser.

Today, the Egyptian military owns more than 10 per cent of the country’s GDP and has its hand in every pie.

True, Mubarak is gone but haven’t the military effectively taken over?

They have dissolved the constitution, hung the parliament, did not repeal marshal law, and have not freed the press. So what has changed?

I was proud to see the Egyptians stand up to a tyrant, but was

ÈK?< J8; K?@E> @J K?8K DFJK F= K?<J< I<MFCLK@FEJ 8I< ;<JK@E<; KF =8@C% JFD< D@>?K JL::<<; 9LK DFJK N@CC =8@C%É the company of either. For the immediate future, any country that is in the throes of a revolution can kiss its money flow goodbye. No one considers investing in a war zone.

Bahrain, a leading financial hub of the region and a banking haven for the Gulf with one of the best run central banks in the Arab world, is now reeling from the pressures of destructive forces. Even after King Hamad offered the opposition an olive branch, they decided to spurn it and that whirlwind will have dire consequences. Business is at a standstill and even the shopkeepers are wondering when the situation will return to the status quo. Many SMEs will cease to exist if the situation continues and, as a result, the livelihood of many will collapse.

The irony of this situation is that one of the big demands in Bahrain by the opposition was that the government was not providing enough jobs. Yet now, with all the companies that will shrink and close – and with further overseas investments unlikely in the foreseeable future – this goal is looking more distant by the day.

Revolutions famously eat their children. Evolutions grow them. ■

ISTOCK PHOTO

Mubarak the tyrant, or just the face of the tyrant?

What happens in Tunisia is the best litmus test for me. The country doesn’t have an all powerful military and has credible political parties. It has a very educated population and more importantly, it is showing all the signs of evolving into a true democracy.

Only time will tell whether they have the right formula or not.

Before anyone argues that there are successful revolutions, I’d like to point out the major four examples of revolutions that we know of: the Chinese, Russian, French and American ones. Let’s forget the first two unless you consider killing millions of your own a mark of success and focus on the latter two.

During the French revolution so much blood was spilt that it became ‘the reign of terror’. In the century after the French revolution the country was run by one emperor, Napoleon, and three kings – Louis XVIII, Louis XVII and Napoleon III. It took two world wars and around 150 years for France to finally become a proper democracy. The US won its independence in 1776 but the Civil War followed in 1861, which claimed the lives of at least 600,000 military personnel and countless civilians.

As far as business is concerned there’s no doubt that revolution brings chaos and disruption. Money, being a fickle child, doesn’t like being in

April 2011 gulfbusiness

25

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COMMENT

N?8K @J K?< ;FNEJ@;< I@JB @E >LC= GIFG<IKP6 Matein Khalid is fund manager in a royal investment office and a writer in finance and geopolitics.

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ILLUSTRATION: TARAK PAREKH

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t is ironic that ostensibly ‘conservative’ investors view brick and mortar property as a less risky alternative to the stock market. Unfortunately, property bulls in the Gulf have been devastated by an epic crash that has led to 70 per cent price falls, a glut in properties that could take a decade to clear, and devastated the balance sheets of governments, banks and property developers.

Investors in Gulf property are also saddled with mortgage and bank finance rates that are among the highest in the world, plus stratospheric ‘service charges’ that offset the income available from renters. I can sell my shares of Coca Cola or HSBC with a telephone call. However, owners of unsold apartments and villas have to be patient to find a credible buyer and swallow 30-40 per cent hits on the asking price.

Liquidity risk in GCC property is so huge, financing cost so high, that I believe investing in the world’s major stock markets is a cakewalk compared to investing in properties in countries where the desert, unlike land in Manhattan, Singapore or even London, is limitless.

Property cycles last at least seven years. The formative experience of my youth was the crash in the London property market in 1990 after Saddam’s invasion of Kuwait. London rents did not bottom for five long years. Rents in the Gulf could keep falling for at least a decade as, unlike London, they are no longer magnets for global capital, local demand is minimal, and debt saddled banks cannot provide dollar mortgages at the five per cent range that would ignite owner-occupier demand.

The recent political unrest in Kuwait, Egypt, Oman and Bahrain will make foreigners think twice about making a brick and mortar commitment to countries where they live only on short-

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term visas and where property rights are not enshrined in constitutional law.

The analogy for the GCC is Japan since the 1980s, where property prices literally fell for two decades, with some trophy luxury properties losing 90 per cent of their bubble values. Credit crunches and zombie banking systems only prolong the depth of a property bear market, as Japan proved since the Tokyo real estate market crashed in 1990. The greater the scale of leveraged speculation, the greater the exposure of the banking system to property financing and development, the lower the proportion of end user demand, the greater the time a property crash will take to reach bottom.

That point has nowhere near been reached in the Gulf property market, where 30-50 per cent downside risk still exists despite the epic falls witnessed since 2008. Hong Kong’s property crash between 1997 and 2004 slashed 70 per cent from peak values and left one third of owners in negative equity and this bear market lasted eight years. By any metric of financing, affordability and end user demographics, the property markets of the Gulf are nowhere near as deep or sophisticated as Hong Kong. This suggests the bear market will last longer than eight years and the peak-trough loss in values will be far greater than 70 per cent, closer to Japan’s 85-90 per cent.

The financial system of the Gulf is clogged with bad loans made to developers and speculators at inflated valuations at the peak of the credit bubble in 2007-08. Home prices will continue to fall as long as developers continue to deliver new units in a glutted market and affordability metrics do not attract end user demand. Yet end user demand is meaningless without cheap, reasonable mortgages. Property investors in the Gulf routinely took 90 per cent leverage in an illiquid asset class. The result?

A systemic time bomb of homeowner negative equity and mortgages. Leverage is the toxic ingredient in a property bust as the battalions of jailed ex-flippers in the GCC’s prisons can sadly attest. ■ April 2011 gulfbusiness

27

COMMENT

;F PFL BEFN 8 ÊC<8;<I @E E8D< FECPË6 Dr Tommy Weir, vice president of leadership solutions at Kenexa and author of The CEO Shift.

ILLUSTRATION: TARAK PAREKH

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he deterioration of some of the entrenched regional leadership regimes over the past month can teach us some valuable lessons about every day leadership and the running of our businesses.

As I watched the enraged people on the streets while the leaders remained hidden, it left me wondering, “What type of leaders are they?” What jumped out at me is that they are LINOs – Leaders In Name Only. A LINO is a person who occupies a position of leadership and his/her thinking and actions are determined by that position and the simple fact that they are the leader. Are they?

They are de-facto leaders since they do hold a respected position. But, in reality, they are far from being a practising leader – thus the ‘in name only’. Have you every met a LINO? Or worse yet, worked for one? Yes, we all have had LINO interactions during our working careers. But today’s real question goes to the CEOs and MDs – do you have LINOs in your management ranks?

This past year business leaders have been bravely asking me, “Are my leaders any good?” Each time. I’m questioned, I pause and probe the inquiry. It seems that they are worried that they have the dreaded LINOs. So why do employees follow a leader – only because of their position? The LINO makes up the bottom rung of the five reasons why people follow leaders.

1. BECAUSE OF YOUR POSITION People follow leaders because they have to – until they have an opportunity not to. During the people revolutions in North

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gulfbusiness April 2011

Africa, citizens took to the streets to get rid of their leaders. In the corporate world employees make this decision by changing employers to get a new (and hopefully better) manager.

Employees who have a LINO typically perform at the bare minimum to sustain their role until they cannot take it anymore. Having a title or position does not equate with being a leader.

2. BECAUSE OF YOUR PERSONALITY People follow leaders because they like them.

So if you are a likeable person, you have a decent chance that people will follow you or at least want to be with you. But are you leading them? If you are solely relying on your personality for leadership effectiveness, you are in real danger of not sustaining support and delivering results for your organisation.

3. BECAUSE OF WHAT YOU PRODUCE People like to follow leaders who produce results and do great things for the organisation. Winners have a strong cadre of followers, but what happens when the winning stops? Many fans stop cheering and may even switch teams – just like employees. A question for leaders at this level is: are you producing the results (most likely you are) or are you leading others to produce results?

4. BECAUSE OF WHAT YOU DO FOR PEOPLE People truly engage with leaders who help them to improve. This is the level where real leadership and followership kicks in. The focus here is on helping employees to be the best they can be so that they can succeed individually and collectively.

5. BECAUSE OF YOUR PERSONHOOD This is the ultimate level of followership and very few achieve it. At this level, people follow because of who you are. Interestingly enough, this type of leader is usually very humble and focused on the greater community – think of the likes of Nelson Mandela. ■

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ANALYSIS POLITICS

The UAE’s role amid unrest

Reuters

Surrounded by turmoil, the UAE has reclaimed its mantle as the oasis of opportunity in the desert, although it’s too early to rule out future political unease, writes GULF BUSINESS

I

n stark contrast to the condemnation that was aimed at it during the dark days of the financial crisis, Dubai is attracting little in the way of negative sentiments at the moment. The UAE is currently standing out from its neighbours as a port of calm in a turbulent sea of political and social unrest. Although analysts say the economy is likely to face some blowback from the turmoil engulfing other Middle Eastern states, the UAE’s current state of low political risk is the country’s trump card.

“A year and a half ago people looked at the UAE, and Dubai in particular, as the source of the region’s problems.

But they’re now realising that it has real strengths,” says Simon Williams, HSBC’s chief economist for the Middle East and North Africa (MENA) region.

“There have been changes happening in the UAE for a year or more. But my only worry is that they will lose momentum with the agenda so full

30 gulfbusiness April 2011

with other items. In particular, I’m referring to issues around the business environment reforms, like majority ownership rights for foreign firms.”

Williams adds: “If you consider this issue, which has always been a grievance, alongside the stable political and economic environment then it’s a more positive outlook.”

Most agree that no economies in the region qualify as ‘safe havens’ for investors, but the UAE and Qatar stand out as two countries least at risk.

But not all are convinced that the difficulties throughout the rest of the Arab world won’t catch on elsewhere.

David Butter, regional director for MENA at the Economist Intelligence Unit, offered a note of caution: “Your first reaction to events is to ask how far will it spread? With what’s happened in Oman, Bahrain and Saudi Arabia, you think maybe it’s not that outlandish that there could be trouble in the UAE. This idea would, of course,

be laughed out of court.

“You’ve got the presence of Emirati angst; the feeling that you’re not doing as well as others and did we really ask for our country to look like this? But Emiratis are in such a minority and expats are not going to band together in any unified force.”

In the last decade, Gulf states have witnessed the emergence of political debate around more open representative systems.

Only lately though has this led to protests, with the most recent coming from Kuwait where thousands of demonstrators took to the streets calling for sweeping political changes.

The economic impact of the Middle East’s ongoing protests has been fairly benign in the UAE so far. Indeed, there have not been capital outflows, the Central Bank governor, Sultan Nasser Al Suweidi, said recently.

But demand for investment generally could be depressed, says Williams.

UAE to capitalise on the unrest.

Butter says: “Traditionally, the UAE has inadvertently benefitted from conflict for a long time, for example the Lebanese conflict was positive for the economy, as was the Iran-Iraq war, Operation Desert Storm and for that matter the Second Gulf War. “What the Lebanese civil war did was pull back Lebanon as the services centre for the Middle East. Dubai was ready to pick up the slack.”

He adds: “But the same doesn’t apply this time round. It’s not just an armed

they have enough on their own plate at home, particularly in restructuring their debt obligations.

Kinninmont says: “It will also be interesting to see how the North African countries that traditionally relied on European countries for trade treat players in the Gulf.

“We may see some backlash against European partners that were once close with the previous regime. So Gulf investors could play a role on top of the current investment in property and tourism. Countries facing

No economies in the region qualify as ‘safe havens’ but the UAE and Qatar stand out as two countries least at risk.

Egyptians got their first taste of democracy in the March 19 referendum on a package of constitutional changes.

huge upheavals will need capital and job creation.”

The UAE’s small national population and huge national resources stand it in good stead for social and political harmony for the time being.

Most independent analysts agree that, in the longer term, with an educated population, there will be more vocal demands about how the economy is handled. It would be wrong, therefore, to assume that there are no issues in all the Gulf states.

Grapheast

security issue, it’s more to do with problems arising from deep structural issues in Arab society. The idea of changing the way things are done is spreading and because the UAE is like a microcosm of the Arab world, the danger of infection is that bit stronger.”

Meanwhile, commentators have asked whether the UAE has a role to play in the clean-up operation in the post-unrest MENA countries. But UAE real estate firms that were previously keen on Libya and Egypt may find

Grapheast

“It won’t feel the same kind of headwind as affected countries in the Gulf, nor will it be immune. The perception of the region has worsened in the last couple of months and until things become more stable, appetite for Middle East assets remains low.

“Whenever markets panic there will be some investors that can take advantage. In the current scenario this will be where markets are oversold for all the wrong reasons.”

There have been reports that multinational companies with headquarters in New York have delayed plans for senior executives to transfer to Dubai. This could be because of a distorted view of the true risks associated with the UAE compared to the region as a whole – what some call ‘decision-making by headlines’.

Jane Kinninmont, a senior research fellow at Chatham House, a Londonbased think tank, says: “But what does true risk actually mean though?

A year ago analysts were saying Libya and Eqypt’s true risk was low, but look what’s happened. Now, even though everyone assumes Dubai and Abu Dhabi will be ok, we’ve had some reminders that you just can’t predict these things.”

Meanwhile, as sensitive as the issue may be, there are opportunities for the

Bahraini Shiites demonstrate in front of the UN headquarters in Manama.

April 2011 gulfbusiness

31

ANALYSIS HR

Chinese churn The Middle East could lose swathes of its banking talent as Asian firms poach staff in preparation for growth on their home turf, writes RYAN HARRISON.

getty images

I

n the same way that the Gulf financial services job market expanded in the last decade with European and North American senior executives, banks in economic hotspots like Hong Kong and Singapore are recruiting like never before.

In some cases top bankers are being offered more than double their current salary to make the move.

Ally Ho, head of financial services for Middle East and Africa at Pedersen & Partners, said: “There’s a growing trend of people wanting to move to Asia either for financial or lifestyle reasons, or both. Also, there’s a lot of funds in Asia lining up investments, so they need the talent.”

But, although this type of poaching is being touted as the next big threat to Gulf institutions in the coming years, recession-weary bankers are more cautious than they once were

about making a dramatic career change; the days of job-hopping for a quick salary or bonus bump are long gone.

One banker, who last year moved from Dubai to Hong Kong to take up a position at an American-based bank with a large footprint in Asia, said banks in the Far East have the advantage of economic growth and the ability to pay hefty bonuses. “This region is still growing while North America, Europe and Japan continue to slide sideways.

“New hires can still get good packages if they fill important roles.

Otherwise, front office folks only eat what they kill. Back office folks are being squeezed for a number of reasons, including the fact that revenues are slightly up, but not as much as headcount, and Western governments and analysts are pushing to reduce total compensation down back to pre-2007 levels.”

A particular focus for banks has been the enormous personal wealth of individuals in Asia. A growing number of private banks have announced ambitious staffing expansion plans to take advantage of this high net-worth segment.

Africa) and US regions, too.”

The hires come on top of the 130 managing directors the bank added during the last 12 months.

The wealth of Asia Pacific-based individuals with investable assets of $1 million or more outranked Europe for the first time at the end of 2009, according to the Capgemini MerrillLynch 2010 World Wealth Report.

Faced with tougher capital requirements in the wake of the credit crisis and mixed prospects for earnings, many investment banks are expanding their private banking units, a lucrative business where little capital is put at risk.

Barclays Wealth plans to double the number of high net-worth bankers globally over the next five years. And Coutts, the London-based private bank owned by Royal Bank of Scotland, also plans to recruit around 150 people in Asia over the next three years, adding to the 150 people it hired in the last year.

Add to this that HSBC, which has already moved the office of its chief executive to Hong Kong, is expected to decide in the autumn whether to keep its headquarters in the UK. To stem this potential brain drain

Private banks have announced ambitious staffing expansion plans to take advantage of Asian HNWIs. Indeed, recruitment levels at some financial institutions have even risen beyond pre-crisis levels.

Citi said it plans to hire as many as 200 senior staff in its private bank over the next few years Dena Brumpton, chief operating officer at its private bank, told Reuters recently. “We see a lot of growth coming from Asia. But there will be selective hiring pockets in the EMEA (Europe, Middle East and

in the Gulf, banks have offered hefty bonuses this year to retain their best talent, with some prepared to pay up to a 30 per cent increase on 2010 levels, said Cecile Hofer, managing partner at headhunter Taylor Hofer Partners.

“There will have been some large payouts this year, especially in markets like Saudi Arabia, Kuwait and Abu Dhabi. It’s primarily a retention strategy for these banks,” she added.

April 2011 gulfbusiness

33

ANALYSIS BUSINESS

Small is beautiful The Gulf has launched SME initiatives to support its fledgling entrepreneur community, recognising the sector’s power to stimulate and diversify the economy, writes RYAN HARRISON.

I

f Gulf governments and business leaders are looking for swift economic growth in the coming years, then small to medium sized enterprises (SMEs) are a good place to start. In most economies in the region, SMEs make up the large majority of all businesses, employing nearly half of the work force. They are now widely tipped to lead growth as the Gulf emerges from the global recession.

A number of stimulus measures have been announced so far to support the sector and generate further momentum. Most recently, in

Dubai a new ranking system called the Dubai SME 100 hopes to provide benchmarks and potentially provide a platform for a secondary listing for SMEs, while the Department of Economic Development and the Dubai International Financial Centre launched a comprehensive incentives package. Regional private equity firm Abraaj Capital also unveiled its $250 million Riyada Enterprise Development fund devoted to SMEs, followed by Wamda.com, an online knowledge sharing hub for regional entrepreneurs.

In the past the Bank of Baroda, the

Indian bank that has fully-fledged commercial banking operations in the UAE, offered tailored finance to SMEs. It has business financing initiatives such as the SME Loan Factory to cater to the segment.

Michael Burchell, a director at the Great Places to Work Institute, a global consultant and researcher on SMEs, said: “The UAE is coming out of the doldrums and coming back from the economic pummeling.

But this is probably the best time for entrepreneurs to start their own business. It’s happening everywhere from the UK to Brazil, and it can happen in the UAE. “There are opportunities in terms of growth; when you get in at the low point in the market you can rise as the market rises. The federal government is also looking at practices to make sure they are competitive, especially the Dubai Competitive Council,” he added.

SMEs already make up 95 per cent of registered businesses in Dubai, 42 per cent of the workforce and 40 per cent of the emirate’s GDP, according to the Ministry of Economy.

The first official definition of SMEs in Dubai was released by the emirate in 2009 and includes any Dubai-registered company with a turnover of up to Dh250 million ($68.06 million) and employing up to 250 staff.

Meanwhile, last month Saudi Arabia hosted the SME Economic Forum 2011, a gathering of business leaders looking for the key to unlock sustained growth through small business in the Gulf. Analysts say Saudi Arabia is one of the countries least affected by the global economic crisis, in large part because of its commitment to start-ups.

Adel Al Howar, senior executive vice president and head of the individual banking sector at Saudi’s biggest bank NCB, said ahead of the April 2011 gulfbusiness

35

ANALYSIS BUSINESS

conference: “The growing government emphasis on this sector, through a number of financial and educational support programmes, has visibly impacted its growth.”

But, others believe there’s still work to be done. Advisory firm Capitas Group International (CGI) urged recently that a clearer timeline be created around the introduction of a Saudi SME authority.

The firm recommended that a framework should include the authority’s ability to monitor the interests of smaller companies, as well as facilitate the development of policies that encourage SME sector growth, enable accurate evaluation of the sector through regulatory and financial reforms, and help in the collection of data on the sector.

“The Shoura Council recently gave its approval for the creation of an SME authority in Saudi Arabia,” Naveed Siddiqui, CEO of Capitas Group International, said in the analysis note. “This is a critical development for the Kingdom. Today, there is no single body responsible for policy formulation and coordination within this vital sector.

The launch of an SME authority will be the most effective means to enhance the contribution of SMEs to Saudi Arabia’s economy.”

Worryingly, statistics indicate that Saudi’s SME sector yields limited impact on the Kingdom’s overall economy. Despite their vast numbers, and the availability of numerous SME support programmes and initiatives,

Despite vast numbers of SME support programmes, small business contributes only 25 per cent to KSA employment. small business contributes only 25 per cent to total employment and only 33 per cent to the GDP. This places the sector at odds with the majority of advanced economies.

For example, in Spain SMEs contribute to 64.3 per cent of GDP and in Austria they contribute 44 per cent.

Given the size and growth of Saudi Arabia’s economy and the nation’s focus on economic diversification, SMEs should contribute to more than 50 per cent of the country’s GDP,

DUBAI THINKS SMALL FOR A CHANGE Officials last month launched the Dubai SME 100, a ranking of the top fastest-growing small businesses in the emirate.

Fundamentally, it offers companies a benchmark against which they can compare and compete. But the rankings are also a neat tool to steer the conversation in a new direction.

Sheikh Ahmed Bin Saeed Al Maktoum, chairman of the Dubai Economic Sector Committee, said the initiative aimed to recognise and celebrate the SMEs that had made a difference to Dubai’s economic landscape.

He added that the creation of a stock market for SMEs was the next step in the development of the sector, although

36 gulfbusiness April 2011

according to Siddiqui.

Analysts agree that in general SMEs are the seat of the most innovation and creative ideas as far as businesses go in an economy.

Burchell adds that in hubs like the UAE, this is also the case: “There’s what we call the adoption curve, which means about two per cent of all businesses are innovators. Whereas

for the time being it was only at “the idea stage”.

Although little is known at this stage about the criteria for making the ranking, Sheikh Ahmed said SMEs are judged based on their performance across a set of financial and nonfinancial parameters.

Independent entities falling under the official definition of Dubai SMEs and registered in the emirate can apply for the ranking system provided they have at least three years audited financial statements.

The non-financial metrics include innovation, international orientation, human capital development and corporate excellence.

the larger companies have their eye on calculated business risks in line with maintaining their size in the market, SMEs are like mini learning labs or incubators of good ideas.”

So, in the UAE where will that entrepreneurial spark come from in future?

Burchell said for now it will be the foreign workers mainly, but in the coming decades it has to emanate from Emirati talent. “We all know that a huge majority of the UAE’s workforce is made up of expats. I can’t imagine any other country, not even Singapore, that has undergone such a transformation in this regard.

“Therefore in future, innovation and entrepreneurial spirit will likely grow from external investment and creativity. The whole process for Emiratisation is a step in the right direction to help Emiratis take their natural right to lead their country. But, in the long-term there will be a lot more SMEs and entrepreneurial drive coming from nationals. And it has to be that way for sustainability.”

If Gulf governments can identity the catalysts for SME success, then they will have laid the groundwork for robust growth. Indeed, choices that are made now could drastically change the shape of how business is fundamentally done in future. There are some tough decisions ahead.

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38

gulfbusiness April 2011

CONTENTS 40/ THE DIGITAL TIPPING POINT How far has the region progressed with its digital ambitions, relative to the rest of the world?

49/ ONES TO WATCH The pioneering digital companies to watch over the next year in the UAE and the Gulf .

56/ CAN YOUR COMPANY AFFORD NOT TO BE ON TWITTER? Knowing how to exploit â&#x20AC;&#x201C; and protect your brand online is a must for success.

62/ GADGET GALAXY Apple, Samsung and HP tablets are battling for domination globally and in the region. Who will win?

66/ CONNECTING Social networking is revolutionising consumer behaviour and business opportunities.

April 2011 gulfbusiness

39

DIGITAL ISSUE

2011

The Gulf’s

DIGITAL REVOLUTION

PHOTO: ISTOCK PHOTO

Driven by business, entrepreneurs, hungry consumers and a restless youth population, the region’s passion for digital has accelerated past the tipping point. Egypt recently highlighted the internet’s breathtaking power; its unrelenting momentum for driving, assimilating and realising change. The future is here.

Welcome to the other kind of Gulf revolution, writes LAURA COLLACOTT.

40

gulfbusiness April 2011

Raja Trad, CEO of Leo Burnett, MENA

T

he figures say it all.

Today the Middle East is standing on the cusp of a digital revolution. The region boasts around 65 million internet users – fuelled by a webuser growth rate of 1,648.2 per cent between 2000 and 2009.

While North America already has a penetration rate of 77.4 per cent, it is forecast that around 60 per cent of the region’s population will be online by 2020, up from 19 per cent today.

That equates to 260 million users.

In Saudi Arabia alone, 9.8 million are internet users, and 2.5 million are hooked up to Facebook – out of a population of 25 million.

As growth areas go, this is it. But with this gaping opportunity come many challenges.

“Digital marketing looks like a dinosaur in this region,” says Bébhinn Kelly of Hellwa Fashion, an hautecouture blog. “It still shocks me how far behind the vast majority of marketing departments in this region are. Marketers in every sector, but particularly in retail, need to get themselves up to speed. We only have to look at Egypt to understand the kind of impact bloggers and online tools are having on the region.”

And it’s true. Ask anyone and they’ll tell you that the Middle East has long lagged behind the rest of the world in online. Not for much longer.

Sim Whatley, co-founder of online classified site Dubizzle, is enthusiastic about the unexploited potential in the region: “The Gulf region is not Silicon Valley, but there is a great deal of talent and entrepreneurial

spirit here. I meet and am encouraged often by new businesses and websites that have local, creative ideas. There is still plenty of room to grow, and that is the exciting part.”

There are key areas of growth. Social networking is huge in the region; people are turning to the net for career advancement and job searching; mobile phone apps are big business; auction and classifieds sites are gaining traction; digital marketing is the subject on everyone’s lips; e-commerce is a nascent concept with stellar growth potential.

Alexander McNabb of Spot On PR, a veteran in the Middle Eastern digital scene remembers back to 1995 when internet was first introduced to the region, spurring debate on whether it was good, whether it was anti-Islamic, whether it would swamp the Gulf with foreign content. “One journalist thought it was a passing fad,” he smiles, “now we’re having the same debate regarding social media.

“Our relationship with internet content is deeper than with more passively generated content. We choose.

It’s the huntergatherer instinct.

The Tarzan effect.”

“Our relationship with internet content is deeper than with more passively generated content. We choose. It’s the hunter-gatherer instinct. The Tarzan effect.”

Ramzi Nakad, managing partner of Brag, a live marketing agency, is every bit as emphatic about social networking developments. “Social media is no longer a nice to have within a marketing mix but a must. Big advertising and media buying agencies need to realise and accept this or risk going out of business.”

Modern marketers are under pressure from the still relatively small digital sphere. Firstly, they must create dedicated web content to supplement traditional marketing channels.

“What used to be a repurposed print ad plastered on a website, has become a potential source for a campaign-wide idea,” says Raja Trad, CEO of Leo Burnett, MENA. “There’s still lots of room for improvement, and the contribution of social media to the recent political events are teaching brands a good lesson; digital has the power to impact your business from the onset. It is not just another medium.”

Alexander Rauser, CEO of UAEbased digital agency Prototype, agrees that the medium needs to be more adaptive, “breaking away from the traditional ways of communicating information to consumers” and become more focused on meeting customer needs. “It’s about creating experiences for users that are engaging and result in referrals and recommendations,” he says.

However, at the moment, in this region, referrals and recommendations are as high as

April 2011 gulfbusiness

41

Lex BradshawZanger, Regional Director, Digital Strategy & Innovation

digital marketers need to aim.

E-commerce is relatively tiny compared to developed regions, in large part because of the low penetration level of credit cards.

In a region devoted to the humble cash and cheque book, driving sales online is a formidable task. But one set to change as mobile-phone payments begin to be introduced, hop skipping over the credit card requirement. With practically every Middle Eastern palm clutching a mobile device, it stands to revolutionise online shopping here.

As marketers seek to disseminate their messages and charm customers, they must do so in a more targeted, less ‘scattergun’ fashion.

“Today’s advertisers have budgets that are under much closer scrutiny; they need to ensure their campaigns are hitting exactly the right

(for example, GM’s in-market search program) or adds value, utility and fun to the online experience (Kellogg’s banner games, for example).

In fact, he believes that gaming is another growth area for the Gulf.

“It’s waking up in the Middle East.

Over 38 per cent of online gamers worldwide are located in the region and this can be an enormous platform from which to start. Egypt and KSA in particular have massive populations.” Creating internet applications that serve a function, especially entertainment, will be key in the future to driving traffic and those crucial advertising clicks.

A faster growing sector online has been that of online recruitment and professional networking. Linkedin has 101 million members worldwide, of which 2.6 million are in the Middle

audiences every time, especially as online consumers are ever-more discerning about the relevance of the advertising content presented to them,” notes Ahmed Nassef, vice president and managing director of Yahoo! Middle East.

It’s a requirement well suited to digital. “The beauty of digital is being able to measure precisely who listens and when they listen,” says Steve Pulley, director of ARN Digital. This can mean anything from ROI tracking to syndicated country surveys and sophisticated reports that measure the benefits of digital marketing precisely.

There is a lot of so-called ‘clutter’ that companies should avoid. Lex Bradshaw-Zanger recommends avoiding simple, easily ignored banner ads, and instead develop web tools that either serve a purpose

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East. Curiously, the site seems to have curried more favour with male members of the population, with 77 per cent of Middle Eastern profiles being held by men.

“We have seen tremendous change in the ways and speed with which job matches are being made as enabled by the internet,” says Lama Ataya, chief marketing officer at Bayt.com.

“Jobseekers can reach a wider audience of top employers and vice versa and recruitment matches can be made directly via the jobsite without the need of or interference of an intermediary. They are now able to refer to Bayt.com salaries to compare their salaries to their peers before making job change decisions; they can read the industry’s latest literature derived from our polls and surveys.”

Not only this, the company has also noticed a trend towards greater employment opportunities in the digital realm. Analysts anticipate that digital skills will be very much in demand in 2011 – students take note.

Take note, too, of the demand for Arabic language content. The Arab Media Outlook 2009-2013 report, released by the Dubai Press Club in conjunction with PricewaterhouseCoopers (PwC)

153.3m

number of internet users by languages

points clearly to a demand for Arabic-generated content. “There is undoubtedly a dearth of Arabic content,” says McNabb, pointing out that Wikipedia is said to be opening a regional office to encourage the development of more content.

The report suggests that the ever-increasing internet penetration and use of social platforms will be key mediums of growth. Using the Arabic language, in business, helps to influence the right decisionmakers in the region; socially, it facilitates dialogue between governments and communities.

But this same cultural advantage can also function as a negative factor says Omar Christidis, the vice president of the International Business Alliance Group and founder of ArabNet. He says that an inherent Arabic fear of failure, in a business that has a fairly high risk of failure at the outset, and of losing face is a limiting factor. So, too, are family ties to business and an apparent reluctance to break out alone.

Internet censorship is a barrier of perception, more than practice. Nakad rejects suggestions that it

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discourages innovation by reminding us that it fuels creativity, especially online where political borders almost cease to exist.

“Censorship has its own wellintentioned purpose,” muses Mohammed Areff, managing director, Gulf & Pakistan at Avaya, pragmatically. “Innovation on the other hand allows one to explore new ways of doing things.

As long as this is within certain boundaries, it can flourish.”

Few see why censorship should affect innovation. “It encourages it; life is full of constraints, be they about what we can do, how we can do it, or even with whom,” says Bradshaw-Zanger.

“Alcohol and tobacco marketing the world over is heavily controlled but this doesn’t stop some of the most creative marketers from developing one-to-one programmes that can communicate with consumers.

“The digital landscape has changed a great deal over the last two years,” nods Kelly.

“The change is slow and frustrating but we are getting there.

Twitter used to be blocked and flickr

April 2011 gulfbusiness

43

Omar Christidis, Oraganiser of ArabNet Digital Summit

44

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Doors are already beginning to open.

Christidis is enthused about the level of SOURCE: ARAB ADVISORS GROUP innovation and entrepreneurship visible in the current climate. For the youthful, techsavvy population of the MENA region, there is learning to use the internet for was only unblocked in the UAE in is a great deal of opportunity to break – and the first time on an iPad,” says late 2010. Unblocking them was a exploit – the digital realm. good move.” So censorship barriers Omar Christidis, organiser of He pinpoints the mega-deal of 2009 ArabNet digital summit. “There are arguably being eroded. when Maktoob, one of the region’s most are going to be more than 50 Infrastructure has, however, popular portals, was purchased by million new internet users in the undoubtedly been a barrier to online giant Yahoo! as a pivotal moment next few years. These people will progress. Compared to other in the Arabian online revolution. come through mobile devices regions of the world, bandwidth “The deal energised the private sector,” he because they are comfortable is slow – “far below global says. It certainly demonstrates to young colts with them.” standards”, as Jayant Bhargava what can be achieved with some grit and Observers believe that the of Booz & Company puts it – and determination. region will soon be competitively connections are expensive.

Christidis has nominated 2011 the year of connected. “Changes are going to That is changing, not just the entrepreneur and hopes through his and happen overnight, particularly because the infrastructure is other schemes to incubate more start-ups. in markets that are still heavily being steadily upgraded, but “Interest in entrepreneurship, the web and controlled by monopoly operators,” also with the advent of internetstart-ups has skyrocketed,” he says, “both in says Bradshaw-Zanger. “Rumours enabled smart phones and mobile of upgrade to 3G mobile broadband the public and private sectors. It is critically internet devices. “My grandmother important that we take this opportunity to harness this wave of innovation and optimism, ÈGXik`Z`gXekj [\jZi`Y\[ ]\\c`e^ Ô[^\kp Xe[ b\gk i\XZ_`e^ ]fi k_\`i dfY`c\ to sift out the best ideas and truly get behind g_fe\j \m\e n_\e k_\p n\i\eËk k_\i\%É Ç ;i >\if[`dfj f] 9flie\dflk_ Le`m\ij`kp Zfdd\ekj fe e\n i\j\XiZ_ j_fn`e^ k_Xk jkl[\ekj n_f jkXp\[ them with the financial support and an XnXp ]ifd jfZ`Xc e\knfib`e^# \dX`cj Xe[ g_fe\j ]fi )+ _flij jl]]\i\[ ecosystem that lets the best of these many n`k_[iXnXc jpdgkfdj j`d`cXi kf [il^ X[[`Zkj% ideas thrive and flourish.” ■

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he changes in the way people are behaving have been almost insidious. If you weren’t actually looking for them, you might well have missed them. It’s not across the board, but we have certainly passed the ‘tipping point’ – consumers have moved online in the Middle East and this movement has had a fundamental impact on the way they react to brands, companies and governance.

Today we are looking at the ‘empowered consumer’ – a person who can, and will, Google any new concept, phrase, word or even person they encounter. What they find when they do means they have access to more information, and more sources of information, than we have ever seen before. They also have access to something more powerful than raw information.

They have access to opinion.

Consumer opinion online is a game changer. Before, angry customers would wash up against the high walls of the call centre or the disinterested clerk sitting behind plate glass in the bank’s security-guarded premises.

There was little redress beyond

to interest a journalist in yet another disaffected customer. So many consumers learned to accept things the way they were. You could always vote with your feet, unless of course we’re talking monopoly telco and utility markets, in which case you just had to put up with it.

Now consumers share opinions online with remarkable reach.

That angry customer could have a blog with hundreds, thousands of readers each day, a Twitter account that reaches thousands more (and, through the power of the re-tweet, massively incremental reach) and hundreds of Facebook friends. By sharing their disaffection, anger and disappointment, today’s consumers are able to cause enormous damage to brands.

The brands that are succeeding online today in the Middle East are already creating valuable relationships and ‘first mover advantage’ that their analogue competitors are missing out on.

Digital campaigns are hard to do well. It’s about integrating your website and online public assets with social media platforms – and accepting that you’ve lost control. The tide of opinion means your communication online needs to

be a two-way street. You actually have to talk to those upset customers, take their opinions on board and change the way you do things as a result of their feedback. Because if you don’t, your competitor will.

A recent poll showed that 83 per cent of people in the Middle East are influenced by friends’ recommendations when they purchase – 70 per cent are influenced by online reviews. Over 80 per cent of Twitter users had a preference for brands they had encountered on Twitter. Some 88 per cent of MENA internet users access the medium daily – spending more time throughout the day on the internet than they do with television, radio or print media.

There are more Facebook users in the region (23.8 million) than people who buy a newspaper. And people spend more time updating their social networks than they do reading a newspaper – because increasingly, they’re getting their news, views and sources of information from online sources.

Control of the marketing megaphone has passed to the consumer – they’re the ones with the voice now. Screaming ‘the customer is king’ or slogans about how you’re ‘customer-centric’ at consumers won’t work anymore – you’re only as good as your last engagement with your customers.

You actually have to make sure you are willing to live up to your values, meet your claims of standards and listen to the people you purport to serve.

Because if you don’t, they’re going to do the worst of all things.

They’re going to talk about you. ■

April 2011 gulfbusiness

47

The digital

ONES TO WATCH

They’re powerful, they’re forward thinking and, most of all, they’re digital. Gulf Business lists 10 companies to keep a close eye on as they propel the region’s online industry forward.

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J C Butler and Sim Whatley, founders of Dubizzle

Most people who have lived in the UAE for any amount of time are likely to have had some encounter with Dubizzle. The classifieds ‘portal’ was one of the earliest Dubai-centric community sites to emerge on the scene and has grown and developed with the city over five years. Today, the company has expanded its operations to Algeria, Bahrain, Egypt, Jordan, Saudi Arabia, Kuwait, Lebanon, Libya, Morocco, Oman, Qatar, Syria and Tunisia. Dubizzle is aiming to be the number one classifieds site in at least 80 per cent of them within three years.

Now available in English, Arabic and French, it provides one of the most comprehensive, flexible and easy-to-use services of its kind, anywhere in the region. And it’s expanding aggressively.

April 2011 gulfbusiness

49

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Saif Al Zarouni, CEO of Yadig

P8;@> I\m`\nj&jfZ`Xc e\knfib`e^ Having seen the success of review sites such as TripAdvisor and Amazon, it is clear that there is latent power in public reviews. Tapping into the seam of popular opinion comes Yadig, part social network and part review website. It was established to share wordof-mouth opinion on restaurants, bars, spas, hotels and salons in the online realm. Not only is the bank of opinion easily searchable, you can also share your experiences with friends through the integrated networking tools.

Users can instantly communicate a good review to their friends using the YaPP app on a mobile phone. With consumer behaviour turning increasingly to reviews pre-purchase, Yadig has significant potential to impact corporate behaviour.

N8D;8%:FD 9lj`e\jj e\knfib`e^ The internet and new technologies have created all sorts of new possibilities for entrepreneurs in the region. Launched on the back of the Celebration of Entrepreneurship event, Wamda.com, the region’s start-up content and community hub, is driving trends for both entrepreneurialism and the web with formidable verve. This interactive resource, created by private equity firm Abraaj Capital, facilitates a space for knowledge share and connection, primarily for entrepreneurs as they start their businesses and for business leaders and mentors, whose advice can help SMEs through all the key stages of growth.

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gulfbusiness April 2011

Formed only in January 2010, GoNabit is one of the newer companies in the UAE’s digital domain but has gone from strength to strength. Calling itself a ‘group-buying website’, the company operates across the MENA region in both English and Arabic.

The basic premise is to leverage the numerical power of a loyal, broad customer base to source heavily discounted products and services (although a minimum number of subscribers is required for a deal to be ‘on’).

Users benefit from cut prices and businesses benefit from new customer leads. It’s a Middle Eastern take on a concept popularised in the West during the recession, but it’s one that’s likely to endure long after the crisis has faded.

Dan Stuart, CEO and co-founder of GoNabit

Manage your trade from anywhere, anytime ProTrade is ADCB’s new online trade finance platform, designed to enhance turnaround time and improve productivity. Part of ADCB’s EasyTrade suite of products and services, this fast, efficient and user-friendly finance tool will meet all your trade finance transactions requirements 24X7.

Key benefits: • Apply online for Import and Export Letters of Credit, Bank Guarantees, Collections and Trade Finance Services • Receive information on the status of transactions online or via email • Make real time enquiries via the Internet • 128 bit encryption which means all transactions are fully secure

For more information about ProTrade and how to make your trade finance transactions easier, please SMS ETRADE to 2626 or visit www.adcb.com Terms & conditions apply.

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David Ashford, general manager, Apps Arabia

Founded in June 2010 and supported by Abu Dhabi’s media powerhouse, twofour54, Apps Arabia invests in the best apps from the MENA region. An entrepreneur with an ingenious idea for a mobile app can approach Apps Arabia and the firm will seek and fund a developer to realise the idea and then share the profits. Crucially, Apps Arabia works on an ‘Arabs for Arabs’ premise, which means the company is actively incubating local talent – expat and national, as long as you reside on regional soils. General manager David Ashford says that all mobile app ideas are considered as long as they are commercially viable.

Apps Arabia has already released the multiplayer word game, Kalimat, and has 10 more apps currently in production.

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Social networking on a corporate level is every bit as popular and useful today as leisure networking. And it’s best to keep the two separate.

Alshabaka is an Arabic take on the LinkedIn concept with the glaring advantage of having an Arabic (as well as English) interface. Job hunters and professionals alike are beginning to log into the region-specific site to take advantage of a site specialised in the local career environment. Expect to see it grow, especially in the regional microclimate of a youthful, mobile population seeking employment.

Music Master was established in 1982 in Jeddah, KSA and was the first importer of legitimate music to the Middle East.

Hooking up with Warner Music, Sony Music, EMI and Universal Music, it has long distributed the latest Western music and added to its catalogue a broad selection of Arabic music. This year, the company has also entered the digital world of distribution, acknowledging the changing consumption habits of regional customers. More than three million tracks are available without digital rights restrictions across the GCC, Lebanon and Egypt. Fully digitised, the firm was also the first to incorporate an interactive ‘quick response’ bar code in its adverts, allowing users to scan it with their smart phones for an opportunity to win a free download.

Saeed El-Ajou, managing director, Music Master

April 2011 gulfbusiness

53

@J?FG8?FC@: <$Zfdd\iZ\ E-commerce has yet to arrive in the Middle East as it has in the West, where credit card penetration is much higher and consumers are more comfortable with the security surrounding online shopping. But that’s not to say that digital and retail are divorced. Though companies continue to look for ways to drive e-commerce in the conventional sense, smartphones have enabled apps like iShopaholic to emerge. This is a shopping guide that includes mall directories complete with electronic savings vouchers based on your location (through clever use of positioning technology). In a culture so empassioned by the shopping experience, it’s likely to be very popular.

James Mullan, co-founder, MidEast Posts

8I89E<K J?@=K ;@>@K8C JLDD@K <m\ekj ArabNet is the largest conference for the regional web industry, bringing together over 1,000 illustrious Arab web business leaders and start-ups, including a strong presence from regional entrepreneurs – fed by recruitment workshops held in seven countries. The four-day conference took place in Beirut in March.

To locate digital talent for the ArabNet event, founder Omar Christidis took a road trip in the ‘ArabNet Bus’ across the region, fuelled by the mission of finding promising youth and encouraging them to launch their own businesses.

Omar Christidis, founder of Arabnet

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gulfbusiness April 2011

D@;<8JK GFJKJ :fek\ek Blogging is not a new phenomenon, and it’s as big in the Middle East as it has become elsewhere in the world. ‘Citizen journalists’ risk information overload as everyone seeks to get their voice heard. How do you track down and absorb the information relevant to you? The answer is blog aggregators – common platforms that collect compelling copy together from the most influential content producers in a region. Modelling itself on the US’s Huffington Post, MideastPosts.com hopes to provide the Middle East audience with a pertinent, local voice that sidesteps the limitations of traditional print journalism. “The copy they write is often far more insightful, honest, passionate and relevant than copy you will find in a newspaper,” says the firm’s cofounder, James Mullan.

Can your company afford not to be on Twitter?

Knowing how to promote – and protect – your brand online is a must for your firm’s success.

ILLUSTRATION: ISTOCK PHOTO

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here might be no such thing as bad publicity, but companies have long realised that reputation management can make or break. Rapidly exploiting the niche, PR companies turned media and crisis management into an art form, using traditional media channels to mould and manipulate successes and failures to a company’s advantage.

It’s one thing when you only have print media, TV and radio to manage, but now, with a proliferating number of online channels too, trying to keep track of your brand – and customers – can feel like a Herculean task.

Overwhelming consensus among those in the know suggests that online is no longer an optional extra.

“Over the past five years digital has risen from being a ‘shiny cool thing to do’ to an integral part of business strategy

for most consumer brands,” says Jassim Ali, regional director of digital development for Omnicom Media Group.

“It has redefined the entire consumer experience cycle and made companies think harder about ensuring the experience remains positive, from gaining awareness through to purchase and even advocacy. The end-to-end measurability of the medium has given brands the ability to test and learn as they move along.

Business will never be the same again.”

It is, after all, where customers are increasingly found. In the USA between 20072009, there was a 41 per cent increase in the amount of user time spent on social media.

In the Middle East, one of the fastest growing online regions in the world, similar leaps are being reported.

“Reports such as the Arab Media Outlook have

Husam Jandal, senior marketing consultant, WSI

forecasted a significant shift towards online strategies in 2011,” says Alexander Rauser, CEO of UAE-based digital agency, Prototype.

“You don’t have to be a psychic to forecast that digital will play more and more of a role in business strategy. Internet users in the Middle East are very active on social networks as it gives them a way to communicate with each other and the world. This is where consumers can be found now, and brands will have to meet them there.”

Lex Bradshaw-Zanger, regional director of digital strategy and innovation at Leo Burnett MENA agrees: “Today if you are managing a brand then you need to be managing its reputation everywhere – this means not only the product and communication, but all media where it appears and this most definitely includes social media. If you aren’t in control of your brand on Twitter then the chances are that someone else is managing it for you – and this doesn’t always lead to positive results.” If conversations are occurring about a brand, the company should make its voice heard.

IT AIN’T NECESSARILY SO… But it seems it isn’t a ‘must’ to everyone.

Even some of the biggest players have opted out, including global megacompany Apple, which has next to

no presence in social media.

“The power of Apple is the fact that they have so many fans the world over that social media presence is created and maintained by this user base who act as ambassadors for the brand,” continues Bradshaw-Zanger, praising the company for controlled release of information that allows it to manipulate social channels without active involvement.

Social media marketing isn’t for everyone. “It isn’t a miracle strategy,” says Husam Jandal, senior marketing consultant at UAE-based internet marketing firm WSI, who is reticent to deem social media an absolute necessity.

“It is effective for B2C brands depending on their product and services, but B2B companies would have better results from other forms of digital marketing such as search engine advertising, SEO, and display advertising, to name just a few.”

Nate Elliot, principal analyst at research firm Forrester, points out that, for all the hype, social media forms a relatively small cut of the digital marketing landscape; the bread and butter forms of online marketing remain SEO (Search Engine Optimisation), email and online display. He claims that to focus on this smaller segment of online at the expense of the basics is “madness”.

His advice to organisations is to have a presence in this sphere but focus efforts on streamlining efficiency in ‘old school’ digital methods.

But to a greater or lesser extent, an online presence – and a social media presence – is a business advantage. Ali draws a parallel: “Think of it as a cool party to which you’ve been invited but you’re glued to the wall, not daring to make the move and join the others and

have a good time. The brands that will succeed in the future are the ones that evolve in that social space.

Consumers feel validated and treated seriously by brands that engage with them, the rest will eventually fade in the background.”

Seemingly aware of this dynamic, companies are steadily increasing investment in understanding their customers’ online behaviour and tailoring their presence and campaigns accordingly. In the early days of marketing communications, businesses strove to develop reach – quantity of a defined target audience – and awareness – consumer knowledge of branding and messages – through a variety of ‘push’ marketing strategies. Today that is transforming progressively into ‘pull’ mechanisms where consumers choose which brands they interact with and elect to participate in conversations with them.

Research is necessary in such a nebulous, fast-changing environment. The challenge for marketers is understanding the modern audience: the uptake of online media is strongest in the youthful population, a demographic burgeoning in the Middle East.

“Marketers are ‘Generation Xers’, while their younger consumers are so called Millennials (those born in the 1980s); there is a huge gap between the two.”

April 2011 gulfbusiness

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â&#x20AC;&#x153;There is a huge generational dissonance between marketers and their younger consumers,â&#x20AC;? says Ramzi Nakad, managing partner of BRAG, a live marketing agency. â&#x20AC;&#x153;Marketers are â&#x20AC;&#x2DC;Generation Xersâ&#x20AC;&#x2122;, while their younger consumers are so called Millennials (those born in the 1980s); there is a huge gap between the two. Millenials have grown up linked by BlackBerries, Androids, iPhones, computers, iPods, and video games. This is the generation of Wii, Facebook, Twitter, free downloads, access to just about everything.â&#x20AC;?

The question for businesses then, having made the decision, is how to develop an effective social media strategy. The medium does not have just

one business function and it can be unclear who should manage an online presence. It can be utilised for research and product development by seeking consumer opinions, needs and attitudes; for driving marketing messages about new products and promotions; and for customer service, dealing with complaints transparently to boost credibility.

Online networking can serve as an internal tool too. Many companies may choose to prevent access to social sites in the office, concerned of the amount of time squandered by employees during the working day.

But there are roles for social media internally. â&#x20AC;&#x153;An often overlooked aspect is its role in intra-company communication and knowledge sharing,â&#x20AC;? says Ali. â&#x20AC;&#x153;Service-led categories, such as aviation, travel

and telecom, have a massive amount of information potentially worth millions of dollars but that is locked in with a few employees. Unlocking synergies and sharing ideas through social networking will enhance companiesâ&#x20AC;&#x2122; success.â&#x20AC;?

The trick lies in identifying the role you want your online presence to play and building intra-departmental collaboration to support it. And once a role is defined, organisations must build an appropriate brand voice that will appeal to their customers, an area that in itself can be fraught with difficulties.

Surveys have shown that the tone and messages used in communications must be carefully pitched so as to keep consumers involved. Spot On PR is one of the few companies conducting surveys

A regional comparison of cellular penetration

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UAE

205.5%

SAUDI ARABIA

178.2%

QATAR

151.5%

OMAN

132.9%

BAHRAIN

128.1%

KUWAIT

114.1%

JORDAN

101.4%

TUNISIA

93.5%

ALGERIA

92.3%

MOROCCO

80.3%

EGYPT

79.5%

MAURITANIA

67.1%

LEBANON

59.8%

PALESTINE

53.2%

SYRIA

48.2%

YEMEN

35.9%

SOURCE: ARAB ADVISOR GROUP

58

gulfbusiness April 2011

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into online behaviour in the Middle East. In its latest Twitter survey, conducted last year, users criticised brands that spam other users, broadcast impersonal ‘corporate’ messages and fail to listen to their customers. “Don’t sell me anything

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and don’t talk about yourself... build a relationship with me and provide me with value, no strings attached,” said one respondent. “Transparency, genuineness and respect for the customer are more important than the

“Brands are now more aware of the benefits of online marketing.

However, online advertising spend is still on the low side compared to other parts of the world. As per the Arab Media Outlook we should see a four per cent of total ad spend going to onlines by 2013 which is estimated at around $250 million in value.”

Alexander Rauser – Prototype CEO

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gulfbusiness April 2011

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media of communication. If you don’t get these (things) right, no amount of old or new media flogging will fix your image,” commented another.

Companies are getting it right and companies are getting it wrong as they feel their way into a new field. Electronics retailer Bing Lee was recently criticised by experts for its Facebook campaign for the Queensland flood appeal, pledging to donate $1 for every user that became a fan. To many, it was in poor taste but companies internationally, in the Gulf as much as anywhere else, are on a social media learning curve – mistakes are inevitable.

“Yes, operating in the open is a radical change for companies and mistakes have been and will be made,” Ali concedes. “That doesn’t make it right to ignore the trend and keep your head in the sand.” ■

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GADGET GALAXY Apple, Samsung and HP tablets are battling for domination globally and in the region. Gulf Business analyses the regional appetite for on-the-move devices and how continued uptake could change the way we shop, work and play.

ILLUSTRATION: ISTOCK PHOTO

T

he Middle East may have caught the slow train to digital, but it’s catching up rapidly. Especially when it comes to footloose internet technology. “There are 250300 million mobile phones in the Arab world. Fifty to 60 per cent of them are internet ready, even if their owners aren’t necessarily using them for browsing,” says Raghu Venkataraman, head of Anayou, a social platform for Arabia. “Use is growing dramatically.”

According to data from Informa Intelligence Centre, smartphone penetration in the Middle East is set to reach 28.8 per cent by 2015, against a current figure of 13.8 per

62

gulfbusiness April 2011

cent. In a recent MENA-wide survey

by Spot On PR, 45 per cent of those questioned used their mobile phones to access the internet, with 71 per cent citing email as their biggest mobile activity (trailed by social networking and news & weather).

“The mobile platform is highly visible in the Middle East with a high turnover on the release of the latest models,” says Santino Saguto, partner at Value Partners Dubai, noting that consumers in the 15-35 year age group active on multiple media platforms are the key drivers of growth.

The same goes for tablet PCs, the other hottest product on the market.

The same Spot On PR survey revealed that 57 per cent of MENA internet users plan to buy a tablet device.

Currently, the market for tablets is large and scarcely penetrated.

The iPad is expected to remain the dominant product representing the majority (35-40 million) of the 55 million tablets that will be shipped globally this year, according to analysts at Gartner Inc. According to Business Monitor International, an increasing demand for next-generation technologies and growing competition among manufacturers has given rise to a fast-growing, dynamic consumer

Omar Christidis, Oraganiser of ArabNet Digital Summit

electronics market in the Gulf.

The publication estimates that the UAE market alone will increase by $2.8 billion this year. Techsavvy customers are looking for products with better connectivity, performance, speed and convenience.

However, not everyone is as bullish on the Gulf’s gadget market. The Consumer Electronics Association (CEA) predicts that consumer gadget sales will grow just four per cent in the Middle East this year, compared to 23 per cent in Western Europe and 15 per cent in North America and China: A limp projection in a region with such growth potential.

A rise in the popularity of mobile connectivity will have an impact on content development. Venkataraman reveals that in countries like the UAE and Saudi Arabia, eight to 10 per cent of internet traffic already comes from mobiles, adding weight to arguments that companies need to sharpen their online and mobile content advertising strategies.

He isn’t the only observer to have noticed a shift in consumption habits. “Eighty-nine per cent of people with mobile connectivity now consume news online,” says Jayant Bhargava, a Principle at Booz&company. “Mobile devices will be a game changer. The penetration of mobiles in Saudi Arabia is at the same level as the USA, although the penetration of fixed line is much lower. In the Middle East, many people’s first experience of the internet has been on their phone.”

It’s a nascent area. “People are gadget hungry,” says Paul Allen of DLA Piper, “but more needs to be done to turn them into fully-fledged ‘netizens’,” a buzzword used to describe those who are actively

“Developers in the region are rumoured to be in such high demand (and short supply) that they can flip jobs several times in a week, doubling their salary each time. ” involved in online communities.

That means creating interesting and useful sites to entice them.

Logically, digital media – and the way that companies utilise it – must evolve. Saguto believes that the increasing penetration of mobile internet devices will stimulate the growth of the digital media industry.

And for all the traditional players’ efforts, the opportunities found in new media forms require a different set of skills. Enter the next generation and the conspicuous opportunity for local content developers. “Different sites do things differently,” says Venkataraman. “The Arab world doesn’t have such a choice. The opportunity is to create that choice.”

IT boffins are already moving in to fill the gap. Omar Christidis, organiser of ArabNet, a conference for the Arab web industry, cites a voracious local app market.

Developers in the region are rumoured to be in such high demand (and short supply) that they can flip jobs several times in a week, doubling their salary each time.

Media executives have also suggested that there would be an appetite for Arab publications designed specifically for tablet devices, like Murdoch’s recently launched e-paper The Daily. How true this is in a region that is usually slow on the online uptake remains to be seen, although the signs point to a critical mass of vital ingredients – tablets and advertisers. There

is already an increased interest in digital ad spending. Christidis reports an estimated 20 per cent increase in digital spend in the region this year, a figure that equates up to $130 million.

It isn’t simply localised content.

The future lies in the growing convenience of mobile phone devices and the services that they offer. No longer is your phone simply a gadget

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By which he means traditional forms of e-marketing, such as email, SEO and text messages, maintaining that these are the most relevant and widereaching marketing channels in the current climate.

“People keep asking ‘When is the year of mobiles? Is it here yet?’” he explains. “Those who are using mobile internet have been completely revolutionised, but it requires a tipping point. Currently you’ll still be only reaching a maximum of 25 per cent of your consumers, even in the most developed markets.” ■

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for making calls and sending texts; it functions as your alarm clock, camera, internet browser, air ticket and, soon, your credit card.

“The introduction of mobile money will get more people online,” says Allen. “This year a major mobile manufacturer has said that they’re going to embed NFC (Near Field Communication) technology, allowing you to use your mobile phone as an electronic wallet.”

The Gulf has been traditionally reluctant to take up credit cards; persuading consumers to adopt a mobile purse will be a big undertaking. But if successful, it could be revolutionary. “With the high adoption of mobile services, operators see mobile payment services as a cost-effective means to generate revenue streams,” adds Saguto.

But where many commentators are excited and focused on the potential of mobile and digital marketing, others are more conservative in their predictions for the near future.

“You have to be there, mobile ready and consider your outbound mobile marketing for the future,” says Nate Elliot, Principal Analyst at Forrester Research Inc; “but to do so at the expense of the basics is madness.”

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connecting

Facebook and local digital networking sites offer huge potential for engaging hearts, minds and wallets, writes LAURA COLLACOTT.

T

hat the Egyptian government closed down internet and phone networks during the recent uprising is perhaps the most telling sign of the influence the social media medium has garnered in recent years. Today, there are about 200 million accounts on Twitter, a small but growing proportion of them in the Middle East, and more than 15 million Facebook users in the MENA region (according to the latest official figures from May 2010).

The surge of popularity in social networks isn’t just affecting the way we interact with friends, family, colleagues and politicians; it’s affecting how we shop too. No longer bound to rely on company-provided information and printed reviews, customers use social networking to access an enormous vault of user and professionally generated information about products and services before they buy. And the audience accessing these resources in the Middle East is growing apace.

“Look at Facebook,” says Jassim

66

gulfbusiness April 2011

Ali, regional director of digital development for Omnicom Media Group, emphasising the relevance of social media channels in the Gulf. “Its fastest growing audience demographic is people in emerging economies. Twitter is about to localise its interface for the Arab world. It’s no surprise considering the role social media platforms are playing in channelling the aspirations of the region’s populations.”

“The major markets of the Middle East like UAE, Kuwait, KSA, etc. are the fastest growing markets across the world,” elaborates Dilip Kumar Paliyath, co-founder & CEO, YoSpace International, a mobile applications developer.

“A couple of years back, just like in other countries, social networking websites in Middle Eastern countries just appeared as a platform for entertainment and socialising. Today these social mediums have a important role of promoting business among these countries where we have seen a remarkable swift upward trend in its social media.”

WORD OF MOUTH Husam Jandal, senior marketing consultant at WSI, a company that provides digital marketing solutions, believes that it has put the power in the hands of the people, not just on a political level, but also on a consumption level. “Social media marketing and networking has given the upper hand to the consumers, it’s all about word of mouth and the consumer, not the brand.”

Companies can no longer rely solely on one-way broadcast branding to market their products – they have to interact with their evermore-feisty, rights-aware customers.

“Customers are more demanding today,” agrees Paliyath. “They are aware of global standards and expectation is growing accordingly.”

This means changing times for marketers, who have

HONEST COMMUNICATION To take the shopping process chronologically, consumers use social networks to research products prior to purchase. Where formerly potential customers might have asked friends, family and, notably, a company’s (primed and commissionbased) salesman for product advice before making a purchase, today, they ask the online community.

“Fifteen years ago if you had a question about which camera you should buy, you would go down to the store and ask the person selling the camera,” says Sim Whatley, co-founder of Dubizzle. “Nowadays, you either consult the 9.3 million pages on Google when you search for ‘digital camera reviews’ or you ask your 400 Facebook

Sim Whatley, co-founder of Dubizzle

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friends. Social shopping now affects more and more purchases simply because you have access to your networks more readily.

“The socialisation of the web, which describes the addition of features such as comment, blog, community, forum, reviews, etc, has created massive expectations in terms of transparency and democratisation of information amongst consumers,”

says Ali. “Today they can figure out the most suitable products for themselves without intermediaries such as trade media, sales people and catalogues. They inform each other and even buy together to harness the full scale of their combined power.”

The people really have the power.

Nor is it just user reviews. Social media channels are also being used to open up transparent customer service channels in which customers can speak directly to the company, seeking assistance, advice and feedback. It’s been touted as the next big CRM (customer relationship management) tool.

NOWHERE TO HIDE For companies, it means fewer places to hide. Is that a good thing, effectively harnessing public opinion to separate the wheat from the chaff?

Whatley advises caution: in the relative anonymity of the internet, perceived ‘friends’ and anonymous

ISTOCK PHOTO

to ensure they’re at the front end of digital developments. “Consumers today are spoilt for choice and have limited attention. You need to be just as savvy as them if you want to market your brand to them,” Jandal says. “It’s about reaching out to and connecting with them instead of just feeding them slogans.”

The marketers fluff it up, advising companies to build an ‘actively engaged community around its key brand messages’ in the social networking sphere. In real terms, this means engaging customers in transparent, honest dialogue to provide customer service and accessibility. Smart corporates are even using customer forums to tap into their most avid fans to help in developing the next generation of products.

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gulfbusiness April 2011

5 MILLION

MOROCCO

3 MILLION

TUNISIA

2 MILLION

UAE

Morocco

2.7 MILLION

SAUDI ARABIA

reviewers can as easily be a company marketer pushing their product as a genuine fellow shopper. Not to mention the obvious disparities that arise simply as a result of subjective differences of opinion. Caveat emptor, as the Romans had it.

“We are seeing the changes in consumer behaviour everyday,” says Lex Bradshaw-Zanger, Regional Director, Digital Strategy and Innovation at Leo Burnett MENA, downplaying the novelty of the latest marketing phenomenon.

“The power of connecting people is changing the way that we interact and also make decisions. Not only this but it is also changing the impact that media and advertising can have on forming opinions. Ten years ago you had to believe the ads or try it yourself; today you can connect with a tried and true review before buying anything.”

Ali echoes this. “Beyond brand communications, corporations have had to become increasingly open and transparent to their customers and other key stakeholders. It has opened up an unprecedented flow of information which can potentially lead to better, faster and more consumer-centred decision-making within companies.”

However it will be some time

68

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UAE

SAUDI ARABIA TUNISIA

1.8 MILLION

before traditional media channels lose their majority influence and social media can be wholly harnessed for brand building and marketing.

Bradshaw-Zanger believes it “will probably have to go on for a while before consumers move over to prioritising corporate messages – and let a brand build ‘equity’ – through social networking.”

Regardless, the population is migrating to social media; businesses must be there to meet them.

And they are. Ali Sinaei, head of online advertising at Bayt.com, sees encouraging signs that most mid to large sized corporations, both globally as well as regionally, are

INFOGRAPHICS: TARAK PAREKH

EGYPT

beginning to invest in some form of social media presence to promote their products and services. “The thought, effort and investment that goes into that activity varies from company to company, but the trend is undeniable,” he says.

LOCAL RELEVANCE Catering to business and consumer demand in the region, the major global players are tailoring their products to the Middle East audience, with Arabic interfaces and specific content. “The social media majors, such as Facebook, Twitter, Zynga, YouTube, Quora and Foursquare among others, all started small, catering to a niche or select demographic,” explains Ali. “They eventually gained a solid

“Beyond brand communications, corporations have had to become increasingly open and transparent to their customers and other key stakeholders. It has opened up an unprecedented flow of information which can potentially lead to better, faster and more consumer-centred decision-making within companies.”

Ali Sinaei, head of online advertising at Bayt.com

understanding of their user base and adapted and tweaked their product to appeal to a wider group. This also means that they will go after not only the global hip crowd, but also internet users in faraway countries.â&#x20AC;?

Although the international players are the most common entry points for corporate social networking, Sinaei notes that â&#x20AC;&#x153;some more specialised methods are beginning to creep in.â&#x20AC;? Specialised and, to an extent, localised. Consensus amongst commentators suggests that there is space in the field for localised players.

Especially in a region like the Middle East, where Arabic content could and should dominate, and where cultural sensitivities are more heightened.

â&#x20AC;&#x153;The local players are competitive and smart,â&#x20AC;? says Ali. â&#x20AC;&#x153;Anayou, Watwet, Jeeran and Ikbis, for example, are promising examples with exciting prospects in the region.

They appeal to the burgeoning population of young, educated and increasingly outward-looking Arabs.â&#x20AC;?

The key differentiator, aside from language â&#x20AC;&#x201C; and what is likely to be the deciding factor in success or failure â&#x20AC;&#x201C; lies in providing a uniquely regional answer to Middle Eastern needs, without simply mimicking international sites. And local players are at an advantage in that they boast proximity to the markets and fundamental cultural understanding.

There are substantial untapped

opportunities in the region for online entrepreneurs to exploit, even if challenges exist in the form of resources, infrastructure and breaking the robust relationships that exist in global advertising.

Regional companies are likely to use a combination of international and local sites to develop eminently appropriate channels to market their products, standing, for now, alongside traditional media marketing methods.

As Ali concludes: â&#x20AC;&#x153;The success of local players in China, Asia and France all show that if wielded effectively this could be a powerful trump card to build a sizeable user base and holding their ground against international giants.â&#x20AC;? â&#x2013;

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FEATURES PROFILE

The game changer In a rare and exclusive interview, Abdulkareem Abu Alnasr, CEO of Saudi Arabia’s largest bank, NCB, and regarded as one of the world’s top 50 bankers, opens up to RYAN HARRISON about his hopes for the Kingdom’s economy and why name lending is the region’s biggest fallacy.

If the post-crisis performance of the National Commercial Bank (NCB) is any kind of barometer for the Saudi Arabian economy at large, then there’s plenty of reason for the Gulf’s wealthiest country to be upbeat.

NCB, known in Arabic as Al Ahli, leapt out of the global recession and returned to growth as its competitors battled shrinking profit margins, liquidity levels and market share. The bank’s profit has doubled since 2008 (from SAR2.03 billion to SAR4.7 billion) and its Q4 2010 net income jumped 63 per cent to SAR1.3 billion ($334.9 million) from the year-earlier period.

With assets worth SAR282.4 billion ($75.3 billion), NCB is the biggest financial institution in Saudi and the second biggest in the Middle East, behind Emirates NBD. Last year, NCB trounced its Dubai-based rival, posting $623 million more in profits.

In control of this raging bull is Abdulkareem Abu Alnasr, NCB’s CEO, a veteran business leader in the region and a man known for his risk management, prudence and determination. Having held the CEO post since January 2006, Alnasr was applauded for cautiously guiding the banking group through the worst recession in memory, and successfully re-emerging bigger and stronger.

He’s been hailed as one of the 50 most influential bankers worldwide and in January was named Saudi Arabia’s banker of the year.

Abdulkareem Abu Alnasr successfully navigated NCB through the recession and was named Saudi’s banker of the year in January.

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THE NAME-LENDING FALLACY Within banking circles, Alnasr is known for his straight-talking on hot button issues in the Gulf.

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None more so than the AlgosaibiSaad scandal, which threatened to derail a swift economic recovery for Saudi and the region.

“It turned out to be one of the lessons we’ve learned from the crisis; a clear need for tighter credit standards and disclosure requirements,” he says. “Saudi banks have learned from this very well and globally financial institutions re-measured their risks. The level of comfort to underwrite credit has been significantly changed.”

The dispute between Algosaibi and the founder of Saad Group, Maan al-Sanea, marked the largest default in the Kingdom to come out of the financial crisis. Units of the two family groups borrowed at least $15.7 billion from more than 80 regional and international banks.

Ahmad Hamad Algosaibi & Brothers Co. may owe NCB SAR1.5 billion, according to filings by the lender to Saudi’s Committee for the Settlement of Banking Disputes.

But reports that the scandal came about partly because of the risks associated with so-called ‘namelending’, especially among local Saudi institutions, is nonsense, said Alnasr.

“I disagree with the concept of name-lending, and that it’s suddenly stopped in light of Algosaibi and Saad. The Saudi economy is dominated by family businesses, and it’s the same across the Gulf and many emerging markets. If a bank does business with a family business it’s not name-lending. The notion that banks were writing cheques just because of the name is not true.

“In the years leading up to the financial crisis there was a flood of international entrants into Saudi and the Gulf generally, a change that brought a lot of unforeseen risks.

The exposure to Algosaibi and Saad was not just from Saudi banks, rather a whole host of the world’s largest

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institutions. When they lent to these two groups it wasn’t called namelending, so it shouldn’t be when it involves a bank within the Kingdom.

He added: “Name-lending gives the indication that it was only Saudi banks dealing with these entities and that’s false. We all just didn’t know what we didn’t know.”

Algosaibi and Saad are still facing court battles across the globe to fend off international creditor banks.

REGULATION HERE TO STAY Alnasr says this scandal was one symptom of a much deeper set of problems that existed in the global banking industry; problems, such as poor liquidity and risk management, that the downturn enflamed. As such, he warned banks that financial watchdogs would rule with an even stronger iron fist from now on.

“Globally, I expect a tougher stance from regulators this year. But I’m not surprised they’re taking tougher measures given what the world has been through, the least of which was excessive leverage, inadequate capitalisation and exposure to toxic assets in the large global institutions.

“Fortunately, banks in Saudi have been relatively well capitalised and there’s not been the over-leveraging seen elsewhere. The average capital adequacy ratio of the banking sector in Saudi is 16 per cent. Regulations from Basel III will emphasise liquidity so it’s not a massive challenge for banks in the Kingdom since they are already very liquid,” Alnasr says.

Basel III requires seven per cent tier one capital, but according to NCB documents, the bank has 17 per cent.

Plus, its loan-to-deposit ratio is very strong at 60 per cent.

Regulations have been tightened across the region as a continued high-level of non-performing loans blight bank profit margins. For instance, bad loans at UAE banks

increased 36 per cent to Dh44.3 billion last year compared to Dh32.6 billion in 2009, according to the country’s Central Bank.

Yet, Saudi – and NCB in particular – has deftly avoided the worst of the bad debt, says Alnasr, but regulators are not loosening their grip any time soon.

“The Governor of SAMA said all the banks are expected to maintain non-performing loan coverage of 100 per cent. Coverage at NCB stands at 117 per cent, so we have an added 17 per cent cushion to strengthen our balance sheet. Non-performing loans across Saudi are still relatively low compared to other parts of the region, around four to five per cent.

“There is a strong appetite for lending thanks mainly to the government’s stimulus package and budget numbers for key areas like education, infrastructure and hospitals. For instance, NCB has grown its loans by 12 per cent in 2010,” he adds.

According to NCB data, bank lending in Saudi recovered by 5.2 per cent last year after a fall in 2009 and is expected to continue its climb through this year, as confidence and economic performance picks up.

”Inflation in Saudi is 5.5 per cent now but it’s likely to stay in the range of six per cent in 2011. If it crosses the seven per cent threshold I’d expect some intervention from regulatory authorities.”

FEATURES PROFILE

NCB FAST FACTS fl Established: 1950 fl Saudi’s biggest bank fl No. of employees: 9,225 fl Net profit: SAR4.7bn (2010) SAR4.04bn (2009) fl Total assets: SAR282.4bn (2010) SAR257.5bn (2009)

SAUDI INVESTORS DIVERT CASH HOME Meanwhile, NCB has been riding a crest of a wave of repatriated cash, according to Alnasr, as Saudi-based investors – spooked by the recent years’ turmoil in international markets – divert funds home.

As a result of customers moving investments back to Saudi, the bank’s deposit levels have swollen 13 per cent year-on-year, he says.

“Saudi investors were impacted by the general volatility in global markets in recent years along with the challenges that international banks faced. However, during this time there has also been a flight to quality that has seen investors reach for institutions they trust. NCB has been a benefactor of this trend,” says Alnasr.

The increased demand has led Alnasr to build out his asset management and brokerage division in recent months, including a large investment in headcount.

He adds: “We’ll also be hiring within corporate banking as we believe the drive to modernise infrastructure and projects in the Kingdom will raise demand. The same goes for project finance and wealth management recruitment.”

In a bid not to miss the ‘next big thing’, regional and international banks have set out ambitious expansion plans for Saudi in recent months. The Saudi operation of Dubai’s Shuaa Capital has grown throughout 2010, and the bank says it ”continues to represent a key part of

the group’s growth plans for 2011”.

In September, Barclays said it was set to recruit around 30 people as it formally kick-started its Saudi operation by offering investment banking and wealth management services in the Kingdom. Similar growth plans have been announced by the likes of JP Morgan and Deutsche Bank in the latter part of 2010.

Alnasr seems unfazed by the new competition: “I’ve read about the expansion plans of the big investment banks into Saudi but I don’t see them materialising in such a dramatic way.

That being said, there will be banks that will have a stronger presence this year in the Kingdom.

“The players that have survived the aftermath of the financial crisis and who are interested in the region are looking to come to Saudi for sure. But the shift will be less pronounced than the flood that some are predicting.”

SAUDI’S SHORTCOMINGS For all the positives to come out of the recession for Saudi, there are a number of fundamental socio-economic headaches that refuse to recede. Most notably are the threats of run-away inflation and the menace of a rapidly growing young population.

Analysts worry that a global rise in food prices this year may drive up inflation in the imports-reliant

Kingdom. Meanwhile, a rising unemployed youth could cripple the economy, let alone pose some questions about social unrest.

“The issue of a growing young population is a structural issue and not a new thing and not something to be solved just in 2011. The longterm challenge we face is to create enough jobs to sustain the growing demographic.

“More short-term, there are questions regarding inflation, which seems to be edging up and is being driven by the rise in commodity prices and domestically a rise in things like rent prices. It’s a concern in most of the emerging markets that are growing faster than the mature economies.

He adds: “Inflation in Saudi is 5.5 per cent now but it’s likely to stay in the range of six per cent in 2011. If it crosses the seven per cent threshold I’d expect some intervention from regulatory authorities.”

As a weather mast for the Saudi economy, NCB offers an optimistic outlook for the rest of 2011. Early detection of risk and careful cash and resource management have seen Alnasr and the bank through the worst recession in history. And as the much-sought-after economic recovery gathers momentum, NCB will hope to add to the long-term positioning of Saudi in the wider Gulf region. ■

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ILLUSTRATION: TARAK PAREKH

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FEATURES FINANCE

CURRENCY WARS

The Gulf's central location is not always a good thing, especially if it is lodged in the middle of a currency war between the US and China, writes ANDREW WHITE.

S

ome Gulf countries make a great virtue of being a link between East and West. The geographical location of financial centres such as Dubai and Bahrain is a key selling point when it comes to attracting international business. The region’s position as a stepping stone between New York, London, Shanghai and Tokyo means that it is playing a significant role as the global economic landscape resettles in the wake of the worldwide credit crunch.

By late last year, however, those same countries were discovering that it’s not always best to be stuck in the middle. The US and China – the world’s biggest economy in the 20th century and the one tipped to overtake it this century – are engaged in a brutal so-called currency war that has prompted policymakers in dollar-pegged Gulf economies to brace themselves for punitive tariffs being imposed on China, hindering the global trade upon which Gulf nations thrive.

The trouble stems from the fact that the US and China have

opposing monetary and economic interests. The US runs at a balance of trade deficit, meaning that it imports more than it exports; China has a surplus, and so exports more than it imports. The US Federal Reserve is wary of deflation and is concerned above all with falling prices; China is obsessed with the threat of inflation and committed to job creation in order to keep its rapidly growing population happy.

Washington claims that Beijing’s socalled ‘competitive devaluation’ of its currency gives Chinese exporters an unfair advantage, as well as allowing it to amass huge foreign reserves.

But in China, the government has responded by blaming US policies for a flurry of currency interventions by countries such as Japan, South Korea and Thailand.

“The continued and drastic US dollar depreciation recently has led countries to intervene in the currency market, intensifying a currency war,” China’s commerce ministry said in a report in early November, ahead of the G20 leaders summit in Seoul.

Since the summit, when the US tried and failed to limit trade deficits, America has embarked on a second round of quantitative easing, a move indirectly intended to drive down the value of the US currency.

The US has also cut its interest rates to zero to boost business and consumer confidence, and so the international reserve currency has been undermined – in turn leading investors to pour money into emerging economies like China to benefit from their higher interest rates and stronger economic growth.

As a result, the currencies of emerging economies have strengthened, making their goods and services less competitive on international markets and in turn hindering their economies. For this reason, and despite the fact that any overt intervention will set off a bout of trade subsidisation and protectionism, China is now even more reluctant to let the international market determine its currency’s value. Beijing has shown little sign it will allow a dramatic revaluation of the yuan, and while higher Chinese inflation is helping, in early February 2011 a US Treasury Department report said the yuan remains “substantially undervalued” and that China had made “insufficient” progress in allowing it to rise.

While Fed chairman Ben Bernanke has so far refrained from naming China directly – despite a series of thinly-veiled attacks on “emerging economies that are trying to sustain

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undervalued currencies, with tightly controlled exchange-rate regimes” – he has used charts depicting how the Asian nation has limited the appreciation of the yuan. And when the G20 finance ministers met in Paris in February 2011, the so-called currency war was top of the agenda, even in the shadow of renewed pressure on the euro, and sovereign debt concerns over Portugal.

As the Gulf waits to see whether the two sides will reach a truce in their monetary mudslinging, it has not received the capital inflows it might have anticipated in the wake of a loosening of policy in the US. According to McFarland at Emirates NBD, while capital inflows did increase in late October last year – reflected in a significant drop in Gulf Credit Default Spreads (CDS) prices and bond yields due to overseas interest in higheryielding assets – it has since been quiet and expected investor interest has not been sustained.

“We thought we’d see a big rush of foreign capital into emerging markets and Gulf bonds, particularly the highyield ones, but that hasn’t happened,” he admits. “It happened temporarily, but then came to a sudden halt and stopped dead in its tracks around the middle of November.”

While capital inflows have not

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materialised, Gulf economies have at least kept a tighter lid on inflation than some of their emerging market contemporaries. Due to inflation fears in markets including China, interest rates – particularly in fixedincome bonds – have been rising almost across the board, and yields have been growing too.

“A follow-on from the currency wars is that central banks in most

”As the Gulf waits to see whether the two sides will reach a truce in their monetary mudslinging, it has not received the capital inflows it might have anticipated in the wake of a loosening of policy in the US.” emerging markets have been trying to move away from raising interest rates and finding other ways of tightening monetary policy,” says McFarland. “The Chinese, Russian and Turkish central banks have already tightened policy by

tightening the reserve requirements for banks, which means that banks have to hold a higher proportion of their cash with the central bank, and therefore aren’t able to lend out as much as they would have before.”

China has raised its interest rates three times in less than 12 months, the benchmark one-year lending rate rising 25 basis points to 6.06 per cent in February 2011. The rise was widely anticipated, as is another rise in coming months, while there is also expected to be a further increase in capital requirements. In January, the People’s Bank of China increased the reserve requirement ratio for the country’s biggest banks to 19.5 per cent, its highest level and the eighth such rise since the start of 2010.

In the Gulf, meanwhile, inflation rates have stayed low – and in the UAE the Emirates Interbank Offered Rate (EIBOR), the interest rate charged by banks for interbank transactions, has climbed but at a far slower pace than banks would like.

“Growth rates in most emerging markets have been fairly robust over the last 12 to 24 months, and inflation rates have been above interest rates in most of these countries,” says McFarland. “In the Gulf there is a direct implication in that oil prices have been heading

FEATURES FINANCE

higher, which will eventually filter through into faster credit growth.

But right now inflation in the Gulf is pretty slow – it’s even dropping in Saudi – and the recovery of the Gulf markets has been much slower than we’ve seen elsewhere.

“We haven’t got to the point in the recovery cycle here where we’ve seen rising food price inflation, for example, despite the weak dollar. The big property downturns in the UAE and Qatar have meant a lot slower recovery than in Asia-Pacific, for example, where the upswing was more exportorientated and founded on much lower levels of personal debt.”

McFarland maintains that Gulf policymakers will not be concerned by the weakened dollar, at least not when the recent fall in value is placed in a historical context.

Of more significance to the Gulf economies is the maintenance – and expansion – of free trade agreements with other emerging markets.

“The movements in the dollar over the last four or five months have been pretty mild compared to the movements we saw five or six years ago,” he notes. “In late 2007 and early 2008 everyone was talking about a weakening dollar and the euro was at

1.60, while sterling was well north of 2.00. Now we have sterling at 1.60 and the euro trading at 1.36. There hasn’t been that big a move in overall terms; what you have had is a weakened dollar against emerging markets.

“What’s more pressing is that the Gulf, and the UAE specifically, maintains and builds on its trade agreements. We don’t like protectionism – it does nobody any favours.”

According to a report published last year by consultancy McKinsey, trade between China and the GCC is expected to more than triple to at least $350 billion by 2020. The GCC already supplies around 35 per cent of China’s crude oil imports, and the China Petroleum and Chemical Industry Federation forecasts that the Asian nation’s demand for oil will grow by 6.6 per cent this year. With this in mind, the UAE has signed bilateral agreements with China – a move that could reap benefits not just for the two countries,

but for the Gulf and wider Middle East as well.

“Things have really been moving forward, and it’s a trend that has been driven by China,” says McFarland.

“If its agreements with the UAE are replicated in other Asian countries and African countries, with the UAE as a middle man, it would be of substantial benefit to the entire Middle East.”

While the US and China exchange hostilities, Gulf policymakers will be hoping that they’re not forced to pick a side. And most of all, they’ll be hoping that the currency war does not escalate into a full-scale trade war – an outcome that would be devastating to the region’s recovering economies. ■

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n late March, the openings in Paris of the Shafic Abboud Retrospective at the Instituit du Monde Arabe and the Mesopotamia show by TDIC really focused attention on some of the finest work of the region, pre-Islamic and modern. Many have said that it has been long overdue that a serious retrospective of Shafic Abboud’s work was held in Paris, where Shafic lived and worked since 1947. The exhibited collection covers the complete range of his work from 1948 until 2003, with work loaned by Mathaf in Doha, the family of Shafic Abboud and numerous private collectors. The Shafic Abboud Retrospective runs from the 21st March until the 19th of June in Paris.

Christie’s has the first of their annual sales of Modern and Contemporary Middle Eastern works. The managing director and the specialist told me that there are no surprises so far for them with the oncoming April sale.

The previous sale in October 2010 was hit by 31 lots being withdrawn and the director of the department resigned.

The sale is on 19th April at Emirates Towers and holds an El Gazzar, which is a true masterpiece and the finest to come to market so far.

Guiragossian’s ‘Madonna and Child’ is a subject matter not often seen and is, therefore, an important example of his work.

Shafic Abboud’s ‘Fleurs de Fevrier’ is also a strong work by the artist, compounding with the retrospective in Paris.

The ceramic plate by Shafic Abboud (lot 17) was previously exhibited at the TDIC exhibition ‘Opening the Doors’ held in 2010 and is listed as being from the collection of Ali Khadra of Canvas Magazine.

The work by Jewad Selim has as in incredible provenance as it was gifted by Jewad to his fellow artist Sheikhly as a wedding present. ■ Jewad Selim (Iraqi, 1921-1961) ‘Standing Figure (Girl)’ Wood, height: 34cm, executed in 1941 this work is unique Estimate: $80,000 – 120,000, Bid Suggestion $80,000

Lot 13 Paul Guiragossian (Lebanese, 1926-1993) ‘Madonna and Child’ Signed, titled and numbered `Paul Guiragossian Madona 4 (a)’ Oil on canvas, 71 x 59cm, painted circa early 1960s Estimate: $50,000 – 70,000, Bid Suggestion: $100,000

Lot 8 Abdul Hadi El-Gazzar (Egyptian, 1925-1965) ‘Fishing’ Signed and dated `El Gazzar 1957’ Oil on board, 85 x 70cm, painted in 1957 Estimate: $250,000 – 350,000, Bid Suggestion: $400,000

Lot 18 Chafic Abboud (1926-2004) ‘Les Fleurs de Fevrier’ Signed ‘Abboud’ Oil on canvas, 120 x 110cm, painted in 1998 Estimate: $50,000 – 70,000, Bid Suggestion: $70,000

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DOWNTIME STYLE

A GENTLEMAN’S AFFAIR

London’s St James offers the very best in blue-blooded, stylish apparel, writes ADRIAN MOURBY.

New & Lingwood Swaine Adeney Brigg

ET STRE N M JERY

EET STR ES JAM ST t tree e’s S m a int J e Sa The Stanfford Littl Hotel

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Berry Brothers & Rudd Lock & Co

B

efore Queen Victoria moved the English royals into Buckingham Palace, the family resided in St James for centuries. This corner of London’s West End sprung up around a brick palace built by Henry VIII. The streets of St James soon filled with courtiers and shops catering to their every need, based on the site of the old royal tennis courts.

Today it’s surprising how many of those shops have survived, both in St James Street and Jermyn Street and in the narrow alleyways that connect them. It may only take five minutes in a taxi from Trafalgar Square to the Ritz but you’ll be travelling past the oldest shops in London, many of them still displaying their royal warrants.

Berry Brothers, Lock & Co and Swaine Adeney can seem rather exclusive if you look in the window. They’re small, quiet shops. Fortunately the Stafford Hotel in St James has a concierge who knows all the shopkeepers and he arranged for me to take a tour with the hotel manager, Stuart Procter. We began with New & Lingwood in Jermyn Street where Stuart buys his socks. We were in good company. Evidently the Duke of Devonshire buys his socks here too, 30 pairs at a time.

Outside New & Lingwood stands a statue of Beau

DOWNTIME STYLE

Brummell, the 18th-century dandy who did so much to improve the standard of dress among English gentlemen. Jermyn Street has always been a place for colourful shirts, extravagant waistcoats and elaborate silk dressing gowns.

Next Stuart took me to meet Sue Simpson, the manager of Lock & Co in St James Street. Lock made hats for Laurence Olivier, Charlie Chaplin and the Duke of Windsor and has the patterns for each head on display.

These are created by a ‘conformitor’

a French machine that’s 150 years old and still used today to map your skull.

It’s not too far removed from wearing an old-fashioned metal typewriter.

As well as showing me one of the Duke of Wellington’s cockaded hats and the order for the hat Lord Nelson was wearing at the Battle of Trafalgar, Sue showed me Lock’s new range of headwear, Lock & Roll, which is very popular with pop stars. Hats have never been more popular, said Sue. So if you want to get ahead these days, you know what to do... ■

New & Lingwood, based in Jermyn Street, is a shirt and shoemaker providing bespoke, tailored and ready made shirts, hosiery and shoes.

NEW & LINGWOOD A sockmaker and shirtmaker began this partnership in 1865 supplying Eton College. They later opened a London shop at 53 Jermyn Street so that their young gentlemen could shop when in town. Today New & Lingwood is a gentlemans’ outfitters supplying everything an Englishman needs to wear in one place.

LOCK & CO The oldest hatters in the world moved into this building in 1764 when George III resided at St James Palace. The first bowler hats were designed for the brother of the second Earl of Leicester by Lock & Co in 1849 and the company still sells them. Price: $500.

BERRY BROTHERS & RUDD Originally an ‘Italian Warehouseman’ or delicatessen, Berry Brothers was founded in 1698 in the reign of William and Mary and used to supply the palace along underground passages below St James. In the 19th century the store graduated to selling spirits and now specialises in wine.

SWAINE ADENEY BRIGG Swaine and Adeney began making saddles and whips for the royal family in 1750 but are now famed for briefcases and luggage. Based at 54 St James Street, the company work in only four colours – chestnut, black, havana and their very distinctive London Town (orange). Mr Brigg personally makes the store’s umbrellas.

Left: Sue Simpson is the manager of Lock & Co, which has made hats for English warriors like the Duke of Wellington and Lord Horatio Nelson.

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DOWNTIME CRUISE

A MODERN CLASSIC

Pedigree comes at a price, but it’s worth it, writes GLENN FREEMAN.

T

here’s no mistaking the Land Rover for anything else.

While 40 years have passed since the first model rolled off the production line, with new materials and high-technology making their way into the marque since then, its slab-sided exterior and classic but modern styling make it instantly and reassuringly recognisable.

No, it isn’t a conventionally stunning vehicle, but it has an impressive stance and presence, possessing something of a military air without being over the top like some of its contemporaries. While its less pedigreed competitors in the luxury off-road SUV segment often fall down in one or more categories, being either sleek, showy vehicles with little off-road ability, or vice versa, the Range Rover is one of the few that delivers on both fronts.

Whether you’re touring the tarmac of Sheikh Zayed Road or negotiating a wadi in Hatta, the Land Rover Range Rover HSE is more than capable.

Power aplenty is delivered by the 5L V8 engine, which produces ample forward momentum for the Range

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Rover’s 2,700kg kerb weight, also providing a decent soundtrack of its own without interrupting the refined quietness of the interior. Equipped with either of its V8 powerplants, the 350-hp naturally-aspirated or 500hp supercharged engine variants, interior noise is kept to a minimum, though a subtle growl is audible when the Rover is driven with intent.

The Range Rover is equally beguiling inside. Seats, hood lining and door trim are all high-quality cowhide, combined with other interior surfaces of polished metal, wood and soft-touch plastics.

It also comes with more features than any original owners of the earliest Land Rover Defenders would ever have dreamed of, with a 12-inch TFT display dominating the centre console. Operated via a central dial rather than a touch-screen, this was somewhat tricky to use at first, with menu options not particularly intuitive and taking some tinkering to master.

Some of the other welcome modern conveniences include the integrated iPod connector port along with USB and other MP3 player compatibility.

Polished metal, wood and soft-touch plastics accentuate the stylish leatherclad Range Rover interior.

Two enhancements for the 2011 model are the Hill Start Assist and Gradient Acceleration Control. The former is quite self-explanatory, an always-on feature preventing roll-back on steep gradients. The latter complements the Hill Descent Control (HDC) system, automatically pressurising the braking system when descending steep hills, even in instances when HDC is not activated.

The two other automatic terrain packages first introduced on the Range Rover in 2010, sand launch control and the rock crawl program, have also been retained in this model.

Priced at $88,500, the Land Rover Range Rover HSE is not quite luxury on a budget, but with such features and quality throughout, you shouldn’t feel overcharged. ■

DOWNTIME BYTES The Motorola Atrix runs on Android 2.2

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+++++++++++++++++++++++++++ +++++++++++++++++++++++++++ +++++++++++++++++++++++++++ +++++++++++++++++++++++++++ \ogfik pfli [fZld\ekj +++++++++++++++++++++++++++ +++++++++++++++++++++++++++ +++++++++++++++++++++++++++ Xj X G;=# %[fZ# %ocj# %ggk# +++++++++++++++++++++++++++ +++++++++++++++++++++++++++ +++++++++++++++++++++++++++ fi Xep f] k_\ fk_\i +++++++++++++++++++++++++++ +++++++++++++++++++++++++++ +++++++++++++++++++++++++++ +++++++++++++++++++++++++++ dXafi Ă&#x201D;c\ kpg\j% +++++++++++++++++++++++++++ +++++++++++++++++++++++++++ +++++++++++++++++++++++++++ N_f `kĂ&#x2039;j ]fi1 K_\ +++++++++++++++++++++++++++ +++++++++++++++++++++++++++ +++++++++++++++++++++++++++ `Nfib Xggj Xi\ ^i\Xk +++++++++++++++++++++++++++ +++++++++++++++++++++++++++ +++++++++++++++++++++++++++ +++++++++++++++++++++++++++ ]fi Ylj`e\jj kiXm\cc\ij +++++++++++++++++++++++++++ +++++++++++++++++++++++++++ +++++++++++++++++++++++++++ n_f nXek kf Yi`e^ k_\`i +++++++++++++++++++++++++++ +++++++++++++++++++++++++++ +++++++++++++++++++++++++++ gi\j\ekXk`fej Xe[ +++++++++++++++++++++++++++ +++++++++++++++++++++++++++ +++++++++++++++++++++++++++ +++++++++++++++++++++++++++ [fZld\ekj n`k_flk +++++++++++++++++++++++++++ +++++++++++++++++++++++++++ +++++++++++++++++++++++++++ cl^^`e^ Xifle[ X cXgkfg% +++++++++++++++++++++++++++ +++++++++++++++++++++++++++ +++++++++++++++++++++++++++ Gi`Z\1 0%00 \XZ_% +++++++++++++++++++++++++++ +++++++++++++++++++++++++++ +++++++++++++++++++++++++++ +++++++++++++++++++++++++++

HARD WORKING IPAD APPS

SECRET DOUBLE LIFE THE MOTOROLA ATRIX runs on Android 2.2 and boasts a high-resolution screen, fast dual core processor and decent battery life. But its real party trick is that it can transform into a netbook.

When docked into the laptop dock or the multimedia dock (which needs a separate monitor, keyboard and mouse), the phone becomes a Chrome OS netbook â&#x20AC;&#x201C; a computer in which youâ&#x20AC;&#x2122;re sandboxed into a browser; in this case Firefox.

Having Firefox lets you do actual cloudbased tasks you canâ&#x20AC;&#x2122;t do as well or at all on a phone. But the real innovation is that your Android phone UI is mirrored in a window.

You can use your trackpad or mouse to click around your phoneâ&#x20AC;&#x2122;s UI, use your keyboard to type and interact with it the same way you would normally. While docked, you can still take phone calls using Bluetooth headset and send texts like normal. Plus it keeps your phone charged.

NETBOOKS WERE TOUTED as the next big thing in computing three years ago. Sales of the small notebook computer with a slender price tag jumped eightfold in the United States in 2009 to 7.5 million devices, and tripling worldwide to 34 million. Yet the torrid growth stalled last year. To some degree, the iPad is to blame.

Still, analysts say, the tablet effect is only part of the answer. Sales of netbooks, they note, were slowing even before the iPad went on sale in April. And the products themselves are hardly substitutes for each other; one is all no-frills efficiency, the other more an appealing luxury, priced at $500 and up.

;FNE 9LK EFK FLK Instead, it is more likely that makers of netbooks oversold a product that underperformed. The netbooks bought by early adopters were underpowered PCs that were sluggish and could not handle many popular software applications. That has been rectified to some extent and the news is not all bad for netbooks.

Although the market research firm IDC predicts that worldwide sales will fall in 2011 by about seven per cent, that still adds up to around 32.9 million netbooks and roughly 10 per cent of the total PC market. In 2005, notebooks on average cost roughly $1,000. Today, the average price is about $465.

iPad 2, Whatâ&#x20AC;&#x2122;s new? ďŹ&#x201A; Better Safari that runs twice as fast, ďŹ&#x201A; Wireless streaming through iTunes Home sharing ďŹ&#x201A; AirPlay improvements to help find your Apple TV with no configuration needed ďŹ&#x201A; PhotoBooth software for both cameras ďŹ&#x201A; FaceTime between most iOS devices (iPhone, Mac, iPad)

Whatâ&#x20AC;&#x2122;s inside? ďŹ&#x201A; A5 dual-core chips: two times faster CPU and nine times faster graphics ďŹ&#x201A; Same power consumption as the previous A4 processor with same 10-hour battery life ďŹ&#x201A; Rear and front cameras ďŹ&#x201A; Sadly, the 9.7-inch screen remains at 1024Ă&#x2014;768 ďŹ&#x201A; 33 per cent thinner: 13.4mmâ&#x20AC;&#x201C;8.8mm, making it thinner than the iPhone 4 ďŹ&#x201A; Lighter: 1.3lbs vs 1.5lb ďŹ&#x201A; White version available ďŹ&#x201A; 16GB, 32GB and 64GB ďŹ&#x201A; WiFi or 3G

Launch prices are the same as the original iPad, so the Wi-Fi-only model will cost you US$499, US$599 and US$699 for the 16GB, 32GB and 64GB models respectively, while the 3G version is priced at US$629, US$729 and US$829.

April 2011 gulfbusiness

83

Hotel Collection Gulf Business Hotel Collection members offer guests complimentary copies of the GCC’s premier business magazine Gulf Business.

United Arab Emirates AL RAHA BEACH HOTEL

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

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

JUMEIRAH EMIRATES TOWERS

PARK ROTANA ABU DHABI

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

Tel 00971 2 6573333 Fax 00971 2 6573000 park.hotel@rotana.com KEMPINSKI HOTEL MALL OF THE EMIRATES

LAYIA OAK HOTEL & SUITES

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

Tel 00 971 4 437 78 88 Fax 00 971 4 437 79 99 welcome.oak@layia.net EMIRATES GRAND HOTEL

MEDIA ROTANA DUBAI

THE FAIRMONT DUBAI

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

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

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

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

LAYIA PLAZA HOTEL DUBAI

MEDIA ONE HOTEL

Al Qusais, Dubai Conveniently located nearby Dubai International Airport Terminal 2. Offers exceptional levels of comfort with 232 rooms & suites, three dining options, temperature-controlled swimming pool and state-of-the-art fitness center.

Tel 00971 4 233 44 44 Fax 00971 4 233 44 45 welcome.plaza@layia.net

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

Tel 00971 4 4271000 Fax 00971 4 427 1001 cu@mediaonehotel.com

Our Location

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

Tel 00971 4 3300000 www.Jumeriah.com

Sheikh Zayed Road, Dubai The truly unique and exciting five stars hotel features 393 rooms, suites and chalets together with Mall of the Emirates shopping centre and Ski Dubai’s alpine themed indoor snow resort.

Tel 00971 4 3410000 reservations.malloftheemirates@ kempinski.com www.kempinski.com/dubai

PULLMAN DUBAI MALL OF THE EMIRATES

Mall of the Emirates, Dubai Discover a new attitude hotel directly linked to the region’s ultimate shopping destination amidst Dubai’s sophisticated metropolis.

Elegant 481 guestrooms complemented with chic dining experiences awaits both leisure and business guests.

Tel 00971 4 702 8000 Fax 00971 4 702 8001 H7337@accor.com

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

Tel 00971 4 323 0000 Fax 00971 4 323 0003 reservation@emiratesgrandhotel.com

SHANGRI-LA

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

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

ACACIA HOTEL

FRASER SUITES DUBAI

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

Sheikh Zayed Road, Dubai Rising high above the fringe of Media City on Sheikh Zayed Road, Fraser Suites Dubai enjoys panoramic views with superb 1, 2 & 3 bedroom apartments, lifestyle facilities, relaxed dining in Aqua Café and the exclusive Awazen Spa. Tel 00971 4 4401400 Fax 00971 4 4401401 reservations.dubai@frasershospitality.com

Qatar

GulfBusinessHotels.com

Saudi Arabia

MÖVENPICK HOTEL DOHA

INTERCONTINENTAL DOHA

HOLIDAY INN RIYADH, IZDIHAR

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

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

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

Tel 00974 44844444 Fax 00974 44839555

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

Tel 00966 1 4505054 Fax 00966 1 4505056

Membership information: nayeem@motivate.ae, Tel: 00971 4 2052290

Data monitor 86 87

TOP DEALS Mergers & acquisitions BREAKDOWN Takeover activity by sector and volume

April 2011 gulfbusiness

85

TOP M&A TRANSACTIONS Deal Value ($m)

Bidder

Target

Deal Description

250

Soros Fund Management LLC; Albright Capital Management LLC

APR Energy, LLC (Significant Stake)

Soros Fund Management LLC, the US-based hedge fund sponsor that invests in the public equity and fixed income markets across the globe, and Albright Capital Management LLC, the US-based company that manages a private investment fund that is available to institutional and other accredited investors, has acquired a significant stake in APR Energy LLC, the US-based company engaged in the deployment of power generation solutions for utility, industrial and governmental customers, from Levant Capital Limited, the United Arab Emirates-based private equity firm, for a total consideration of USD250 million.

This investment from Soros Fund and Albright Capital will allow APR Energy to invest in the products and services that will propel the company to a higher level of business operations. In addition, the rapidly growing organisation will be able to grow faster and more vibrantly in the temporary power market and will be even better equipped to serve their customers around the globe. In this transaction Levant Capital will generate an internal rate of return in excess of 40 per cent. In 2009, Levant Capital had acquired an undisclosed significant stake in APR Energy LLC for a consideration of USD30 million.

Source links: APR Energy LLC Deal Announcement (8 Mar 2011)

115

Fastube Limited

Atlantic Maritime Group

Fastube Limited has agreed to acquire Atlantic Maritime Group from Chong Mee Chin and Wong Siew Cheong.

Atlantic Maritime Group, a UAE-based company headquartered in Sharjah, is engaged in providing offshore support vessels, ship repair and maintenance services, and ship chandlery and steel fabrication works.

Fastube Limited, a Singapore-based company, is an investment holding company engaged in development, manufacture, processing, and sale of various precision steel pipes and tubing products. Chong Mee Chin and Wong Siew Cheong, are UAE based private investors.

Terms: 228,125,000 new ordinary shares of Fastube Limited at an issue price of SGD 0.64 per share, valuing the deal at SGD146 million (USD115.1 million) Rationale: The acquisition will strengthen the company’s offshore chartering business for the oil and gas industry and it will also enhance shareholders value and thereby increasing market capitalisation of the Company.

Post Deal Details: Post acquisition, Chong Mee Chin and Wong Siew Cheong will hold 228,125,000 shares representing approximately 93.59 per cent of the enlarged issued share capital of Fastube Limited.

Expected completion: The transaction is expected to be completed on 31 August 2011.

Conditions: Fastube Limited’s shareholders approval Regulatory authority approval SIC Approval Due Diligence Background: The existing shareholders of Fastube Limited have been given one new share for every 10 existing share bringing the total number of shares to 12,500,000.

37

CCI International Holland B.V.

SSG Investment Limited ; The Coca-Cola CCI International Holland B.V., the Netherlands-based beverages firm, a subsidiary of Coca-Cola Icecek Bottling of Iraq FZCO (50 per cent AS, the listed Turkey-based beverages firm, has acquired a 50 per cent stake in The Coca-Cola Bottling of Stake) Iraq FZCO (CCBI), the Iraq-based bottler of Coca-Cola products in Iraq, and SSG Investment Limited, the Iraq-based manufacturer and distributor of Coca-Cola products, from The Coca-Cola Export Corporation, the US-based manufacturer and distributor of soft beverages for a cash consideration of USD36.9 million including debt. The consideration includes a shareholder loan of USD14.61 million. The transaction is part of long term strategies for growth towards future strategic acquisitions. Through this acquisition, CCI International Holland has now gained 100 per cent ownership of CC Beverage, the Iraq based producer and distributor of beverages in Northern Iraq. CCBL was 40 per cent owned by SSG and 60 per cent owned

by CCBI.

28

Close Brothers Private Equity; Kane Group

HSBC Insurance Holdings (Bermuda) Limited; HSBC Insurance SPC Limited ; HSBC Bank (Cayman) Limited (Insurance Management Business And Assets); HSBC Insurance Agency (USA) Inc. (Insurance Management Business And Assets)

17

Kitara Capital International Limited

TVS Automobile Solutions Ltd (Minority Kitara Capital International Limited, United Arab Emirates-based asset management company and the Stake) subsidiary of Halcyon Capital Holding Co SAOC, the listed Oman-based venture capital firm, has acquired minority stake stake in TVS Automobile Solutions, the India based company that is engaged in car servicing, maintenance and on road breakdown service, from TVS Group, the India-based provider of automotive components for a consideration of INR780 million (USD17.31 million). The acquisition will lead TVS Group to expand its business throughout India and increase the number of its garages.

14

Intersun Holding FZCO

Ramstore MMC

Kane Group, the Bahrain-based provider of specialist insurance and risk management services and Close Brothers Private Equity (CBPE), the UK-based private equity firm, have agreed to acquire HSBC Insurance Holdings (Bermuda) Limited, the Bermuda based company engaged in providing insurance services, HSBC Insurance SPC Limited, the Cayman Islands-based insurance company, and the insurance management business and assets of HSBC Bank (Cayman) Limited and HSBC Insurance Agency (USA) Inc., from HSBC Bank (Cayman) Limited, the Cayman Islands-based company that offers bank, trust, and insurance management services, HSBC Insurance Agency (USA) Inc., the US-based insurance company and HSBC Bank Bermuda Limited, the Bermuda-based financial services company that provides banking, fund administration, trust, custody, and asset management services to individuals, small businesses corporate, trusts, and estates, for a cash consideration of USD27.5 million. Kane will retain all employees of the acquired companies. The acquisition is in line with Kane’s growth strategy. The transaction, which is subject to regulatory approvals, is expected to close on 30 April 2011.

SOURCE LINKS: HSBC Holdings plc Stock Exchange Announcement (10-Mar-2011) Kane Group deal announcement (11-Mar-2011)

Intersun Holding FZCO, the UAE-based company engaged in trading of foodstuff, has acquired Ramstore MMC, the Azerbaijan-based owner and operator of supermarket stores, from Migros Turk Ticaret A.S., the Turkey based food retailer chain and group, for a consideration of USD14.25 million.

As per the terms of agreement, USD250,000 will be paid as a down payment and the balance will be paid out in installments.

Notes: Deals are based on the geography of target, bidder or vendor being in the Middle East, for the period between February 17, 2011 and March 16, 2011. Based on announced deals, including lapsed and withdrawn bids. Where deal value is not disclosed, the deal has been entered based on turnover of target exceeding $10 million. Activities excluded from the table include property transactions and restructurings where the ultimate shareholders’ interests are not changed. Source: Mergermarket

86 gulfbusiness April 2011

GULF BUSINESS QUARTERLY M&A ACTIVITY FROM 2004 TO 16 MARCH 2011

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

14,000

60

10,000

Number of deals

25,000

200

Value ($m)

Number of deals

25,000

ValueValue ($m) ($m)

12,000

250

30,000

Number of deals

250

30,000

200

40 20,000

20,000

8,000

150

150

15,000

15,000

6,000

100

20

10,000

4,000

50

5,000 2,000

00

0

2005

2006

2007

2008

2009

0

2010 2011

Value Value Volume

50

0

2004 2005 2006 2007 2008 2009 2010

2011

0

Value Volume

Volume

GULF BUSINESS ACTIVITY BY INDUSTRY SECTOR YE 2011 – VOLUME

GULF BUSINESS ACTIVITY BY INDUSTRY SECTOR YE 2011 – VALUE Business Services 1.4%

10,000

5,000

Q12004 Q2 Q3 2005 Q4 Q1 Q22006 Q3 Q4 2007 Q1 Q2 Q32008 Q4 Q1 2009 Q2 Q3 Q42010 Q1 Q2 2011 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

2004

100

Transport 4.8%

Consumer 0.8%

Financial Services 0.3%

Consumer 4.8% Pharma/Medical & Biotech 25.8%

Real Estate 11.5%

Real Estate 4.8%

TMT 9.5%

Pharma/Medical & Biotech 19%

Business Services 14.3%

Industrials & Chemicals 58.7% Defence 1.5%

Financial Services 14.3%

Defence 4.8%

Industrials & Chemicals 23.8%

Mergermarket tracks all M&A deals of more than $5 million where the target, bidder or parent is a Middle Eastern company.

April 2011 gulfbusiness

87

EXHIBITIONS & CONFERENCES

Cityscape Abu Dhabi Abu Dhabi National Exhibition Centre, April 17–20, 2011 Cityscape Abu Dhabi is an annual networking exhibition and conference focusing on all aspects of the property development cycle.

All eyes will be on how busy the floors are; the ultimate layman’s litmus test for the country’s stressed real estate sector.

The event, now into its fifth year, provides a platform for the real estate industry to showcase projects and services, meet with investors and developers from around the world and participate in discussions with industry leaders.

Cityscape Abu Dhabi is also set to host investor roundtables, bringing together institutional investors and developers to discuss hot topics and partnership opportunities, as well as share strategy.

UNITED ARAB EMIRATES Abu Dhabi April 17-18 17-20 23-25 24-25 25-27 25-27 Dubai April 04-06

Sheraton Hotel, Abu Dhabi Abu Dhabi National Exhibition Centre Beach Rotana Hotel, Abu Dhabi Sheraton Hotel, Abu Dhabi Abu Dhabi National Exhibition Centre Abu Dhabi National Exhibition Centre

marcusevans.com adnec.ae meedevents.com meedevents.com adnec.ae adnec.ae

Dubai Entertainment Amusement and Leisure Show 2011

themeparksdubai.com

17-18 17-19

Dubai International Wood & Wood Machinery Show 2011 Corporate Social Responsibility Franchise UAE 2011 Gulf Education & Training Exhibition and Global Education Technology & Equipment Supply Exhibition 2011 Investor Relations 2011 World Class Airlines

17-19

World Class Airports

18-20 24-25 24-28 26-28

Planet of the APPS Arabia Human Capital Management 8th CSR Summit Professional Audio and Lighting Middle East (PALME) Exhibition 2011

The Arena, Dubai International Convention and Exhibition Centre Airport Expo, Dubai Hyatt Regency Dubai Business Village Deira, Dubai Dubai International Convention and Exhibition Centre Hyatt Regency Dubai Dubai International Convention and Exhibition Centre Dubai International Convention and Exhibition Centre One & Only Royal Mirage Dubai Hyatt Regency Dubai Mövenpick Hotel, JBR, Dubai Dubai International Convention and Exhibition Centre

05-09 24-29

30th Middle East Watch and Jewellery Show The 13th Organisation Islamic Conference Expo

Expo Centre Sharjah Expo Centre Sharjah

mideastjewellery.com expo-centre.ae

04-06

Kuwait Oil and Gas Summit & Exhibition

Kuwait Regency Palace Hotel

cwckuwait.com

17-18

Eco-Buildings

Millennium Hotel, Doha

marcusevans.com

Saudi Healthcare & Hospital Forum 2011 Acoustics in Construction Saudi Arabia Saudi Medicare 2011 Saudi Building and Interiors Exhibitions & Symposium

Jeddah Hilton Hotel Riyadh Marriott Hotel Riyadh International Exhibition Centre Jeddah International Exhibition & Convention Centre

saudi-healthcare.com acousticsinconstruction.com saudi-medicare.com acexpos.com

05-07 10-11 14-16 14-16

Sharjah April

Construction Lifecycle Risks Cityscape Abu Dhabi 2011 Arabian World Construction Summit 2011 Middle East Roads Arabian Sweets Abu Dhabi Middle East Food Abu Dhabi

dubaiwoodshow.com meedevents.com franchiseuae.com dwtc.com marcusevans.com marcusevans.com airports-ise.com terrapinn.com marcusevans.com iirme.com palme-middleeast.com

KUWAIT April

QATAR April

SAUDI ARABIA April

03-05 10-13 10-13 25-28

88 gulfbusiness April 2011

ADVERTORIAL

China Sourcing Fair returns to the Middle East’s business hub Dubai International Convention & Exhibition Centre, Dubai, UAE. May 31 - June 2, 2011 The fair provides an ideal platform for buyers in the Middle East and nearby North African markets to meet potential supply partners from Greater China.

Export-ready suppliers from mainland China, Taiwan and Hong Kong will offer an extensive array of stylish fashion accessories, gifts and premiums, home products, electronics, baby and childrens products and much more to more buyers in the Middle East’s trading capital.

See hot new trends at this year’s China Sourcing shows: Electronics Baby and children’s products Home products Gifts and premiums Hardware and building materials Garments and textiles

April 2011 gulfbusiness

89

IN YOUR SHOES

Into the wild TRACEY SCOTT talks electronics and the environment with Anthony Peter,

Panasonic’s associate director for marketing Middle East, during a trip to Kenya.

A

s our 10-seater safari truck races into Kenya’s Nairobi National Park, Anthony Peter, Panasonic’s associate director for marketing Middle East, boldly goes where no electronics company boss has gone before.

“The year 2018 will be a centenary for Panasonic and our aim is to become the number one green innovation electronics company in the world,” he pledges.

And with less than seven years to go, Peter says the firm’s target of manufacturing 100 per cent ‘eco-friendly’ products is more than achievable. “Contribution to society is one of the basic tenets of our business philosophy,” he says. “From basic green products that form our current portfolio, we aim to double the sales of our superior green products this year.”

To emphasise its green agenda, Panasonic last month launched its Lake Victoria Environmental Education programme in Kenya. The programme, in collaboration with WWF, is designed to empower local communities, schools and regional partners to manage their natural resources while reducing emissions. Under the programme, the electronics giant has invested $45,000 in three African schools in a bid to encourage pupils to develop green solutions to everyday problems. These solutions range from setting up tree nurseries to fish farming, bee keeping and biogas production.

“We have recently collaborated with local bodies in ecoactivities and have also initiated ‘eco diary’ competitions for schoolchildren in Africa,” says Peter. Moving closer to home for a moment, he announces that Panasonic has also partnered with Abu Dhabi University to offer two students a scholarship at the university per year.

With such an emphasis on the environment, it seems only right we should pay a visit to the world famous African safari park. So, armed with a cooler box and a tour guide who fancies himself as Tarzan, ‘Team Panasonic’ set off on its African adventure.

As we sped past some of Kenya’s finest foliage, clusters of impalas, antelopes and gazelles leisurely grazed, seemingly unfazed by our monster truck. Searching for a cheetah and lion, however, was near impossible. But to liven up the search I suggested a free Panasonic TV for the first person to spot a big cat. “Possibly,” a member of the Panasonic party replies. So with the (slight) prospect of a free TV in sight, I held my binoculars and – dare I say it – Samsung camera at the ready. Jackpot!

Less than one hour in and a lion is spotted sleeping behind a mud dune.

90 gulfbusiness April 2011

After patiently waiting 30 minutes for the big cat to move, we reluctantly left it to its slumber and sped off in search of some rhinos and water buffalo – two hefty animals you would not like to cross on foot. With the top down and four of our party hanging out the truck’s roof, we soon spot two rhinos and a herd of buffalo. “Does it charge?” asks Peter before we start slowly driving away.

Not one to pass up a business opportunity, Peter suggests the idea of branding the safari truck with the Panasonic logo. But before the group has a chance to ponder the idea we grind to a halt at a zebra crossing – quite literally. Over 15 zebras block the road on their journey to one of the many waterholes dotted across the 45-square-mile park. “The experience of seeing nature’s ‘traffic’ in the morning – a lone lion, a few other animals and zebras crossing the road – has reinforced the value of protecting nature for a healthy co-existence,” says Peter. “‘My Earth, my responsibility’ has been strongly entrenched in my mind through this experience.”

With our humbling experience drawing to a close, Peter talks future plans. As a leading player in the electronics industry, Peter and the Panasonic team believe it is “our duty to ensure a sustainable future.” The firm has pledged to reduce its CO2 emissions by 15 per cent and double the sales of its environmentally conscious products in the region by 2013. But how many other electronics firms will follow in Panasonic’s wild footsteps?

HELP DOUBLE A COUNTRY’S OIL PRODUCTION IN FIVE YEARS

BY DEPLOYING THE WORLD’S LARGEST WIRELESS FIELD INSTRUMENT NETWORK.

IT’S NEVER BEEN DONE

BEFORE

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