Gulf Business | January 2012

years VOLUME 16 ISSUE 09 JANUARY 2012

1996-2011

SULTAN AHMED BIN SULAYEM IS DRIVING DP WORLD’S EXPANSION ACROSS THE GLOBE

TOMORROW’S

WORLD

pg. 44

THE PROBLEM WITH HIRING BANKERS pg. 50

HOW THE GULF IS WOOING CHINA pg. 66

WHEN WILL OIL PRICES BREAK EVEN?

Bahrain BD 1.50 Kuwait KD 1.20 Oman RO 1.50 Qatar QR 15 Saudi Arabia SR 15 UAE DHS 15

01.2012

CONTENTS

years

1 9 9 6 - 2 011

COVER STORY

EXPANDING HORIZONS

38

SULTAN AHMED BIN SULAYEM, THE EXECUTIVE CHAIRMAN OF DP WORLD, DISCLOSES HIS AMBITIOUS FUTURE PLANS TO GULF BUSINESS

27

GCC TODAY 8

REGIONAL NEWS, PEOPLE, NUMBERS AND EVENTS

OPINIONS 20

MATEIN KHALID The turmoil in the Arab region has ominous implications for Lebanon’s economy.

22

DR TOMMY WEIR Thorough planning and an engaged workforce will help you succeed in 2012.

24

MARK TIMMS An MBA degree can provide you with a winning edge.

BRIEFING 27

BANKING GCC banks are shutting their doors to US clients.

28

FINANCE The UAE looks to Islamic banks for auto financing.

30

TRADING Forex trading is rapidly gaining popularity in the region.

33

KSA What happened to Saudi Arabia’s New Economic Cities?

35

MINING

30

The Gulf is digging deep to create more jobs and make new profits.

36

TECHNOLOGY Regional CIOs have started shaping business agendas, says IBM.

35 GULF BUSINESS / 5

CONTENTS

44

EDITOR-IN-CHIEF Obaid Humaid Al Tayer GROUP EDITOR AND MANAGING PARTNER Ian Fairservice GROUP SENIOR EDITOR Gina Johnson SENIOR EDITOR Guido Duken EDITOR Alicia Buller alicia@motivate.ae BUSINESS EDITOR Jonathan Sheikh-Miller jonathanm@motivate.ae BUSINESS WRITER Aarti Nagraj aartin@motivate.ae EDITORIAL COORDINATOR — BUSINESS Hilda D’Souza hilda@motivate.ae

FEATURES 44

RECRUITING THE RIGHT BANKERS Why is the GCC’s private banking sector witnessing a frequent staff turnover?

50

THE YEAR OF THE DRAGON The Gulf must prepare itself for a new global economy sooner than expected.

ART DIRECTOR Tarak Parekh tarak@motivate.ae DESIGNER Charlie Banalo charlie@motivate.ae PHOTOGRAPHERS Farooq Salik; Naveed Ahmed; Vikram Gawde; Victor Besa

54

PROFILE: MARK MOBIUS The emerging markets guru urges Gulf countries to explore opportunities in Africa.

CONTRIBUTORS Ryan Harrison; Peter Shaw-Smith; Sara Hamdan; Dania Saadi

58

SMALL CHANGE Has the recovery made it easier for SMBs’ to access credit?

PRODUCTION MANAGER C Sudhakar

63

SHARIAH CARBON CREDITS A Shariah compliant carbon-trading platform could change the region’s bleak environmental record.

GENERAL MANAGER GROUP SALES Anthony Milne anthony@motivate.ae

BREAK-EVEN POINT

ADVERTISEMENT MANAGER Ajay Mathews ajay@motivate.ae

66

Budget break-even prices in the GCC countries are dangerously close to current oil prices.

SENIOR PRODUCTION MANAGER S Sunil Kumar PRODUCTION CONTROLLER Binu Purandaran

SENIOR ADVERTISEMENT MANAGER Abraham Koshy abraham@motivate.ae

DEPUTY ADVERTISEMENT MANAGER Melroy Noronha melroy@motivate.ae GENERAL MANAGER — ABU DHABI Joe Marritt joe@motivate.ae

DOWNTIME 74

TRAVEL From cultural museums to modern malls, London has it all.

76

CRUISE

78

PLACES TO BE Sip tropical cocktails or dance the night away at Dubai’s new bar and club, Mahiki.

SENIOR SALES EXECUTIVE — ABU DHABI Hamdan Bawazir hamdan@motivate.ae

Reviewed: Audi A1.

DATA CRUNCH 70

STATS The Gulf’s top business conferences.

HEAD OFFICE: PO Box 2331, Dubai, UAE Tel: +971 4 282 4060, Fax: +971 4 282 4436, motivate@motivate.ae DUBAI MEDIA CITY: Office 508, 5th Floor, Building 8, Dubai, UAE, Tel: +971 4 390 3550, Fax: +971 4 390 4845 ABU DHABI: PO Box 43072, UAE, Tel: +971 2 677 2005, Fax: +971 2 677 0124, motivate-adh@motivate.ae

REGULARS 80

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

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

81

EVENTS The Gulf’s top business conferences.

EDITORIAL SYNDICATION DETAILS Tel: + 971 4 2824060, gb@motivate.ae

82

IN YOUR SHOES Paul House, executive chairman, Tim Hortons.

Printed by Emirates Printing Press, Dubai

6 / JANUARY 2012

GCC TODAY REGIONAL NEWS, PEOPLE, NUMBERS AND EVENTS

Dubai’s New Year dues

KUWAIT

KD900m Dubai International Financial Centre

As Dubai ushers in the New Year, the emirate looks forward to a stronger economy, a revived financial market, and hopefully, an overall growth trajectory. But there are hurdles.

Dubai, along with its related entities, carries a heavy debt burden — estimated at around $101.5 billion by Moody’s rating agency. In a report, the agency warned that the three Dubai government-related firms that have debt repayments worth $3.8 billion due this year might face refinancing risks. The three companies include Dubai Holding Commercial Operations Group (DHCOG), Jebel Ali Free Zone (Jafza) and DIFC Investments.

Dubai’s problems with debt came to the forefront in 2009, when one of its main holding entities, Dubai World, announced a standstill on its debt repayments. The company was eventually forced to reach a restructuring deal with creditors. But this time around, officials say that they are well prepared to meet their obligations.

Sheikh Ahmed bin Saeed Al Maktoum, chairman of Dubai’s Supreme Fiscal Committee, confirmed that Dubai’s governmentrelated companies would not restructure the debts due in 2012. He added that the debts might be refinanced, and that the government would support its companies through “various options.”

In line with that, DHCOG has confirmed that it would repay its $500 million bond that matures in February 2012 from its internal cash flow. Jafza chairman Hisham Abdullah Al Shirawi also told Reuters that his company would refinance its $2.04 billion bond due in November this year without government support.

The world will be keenly observing how the emirate handles its debt situation. 2012 is Dubai’s opportunity to prove that its finances are back on track.

8 / JANUARY 2012

Estimated cost of the new passenger terminal at the Kuwait International Airport. The Ministry of Public Affairs announced that it would be completed by September 2016.

BAHRAIN

2.4 per cent Bahrain’s GDP growth forecast for 2012, according to Merrill Lynch Wealth Management. The country’s economy witnessed a two per cent growth rate in 2011.

QATAR

QR221bn

Total bank credit given to Qatar’s private sector at the end of October 2011, according to a QNB Capital study. This represents 61 per cent of the country’s total domestic credit.

GCC TODAY

UNITED ARAB EMIRATES

Dhs300,000

The average salary per year pocketed by IT professionals in the UAE, says a report by MyHiringClub.com, a recruitment platform.

SAUDI ARABIA

10.047mn The number of oil barrels per day produced by the Kingdom in November 2011. This is the highest output since 1980, according to reports.

OMAN

OMR17.2bn

The value of Omani banks’ assets at the end of September 2011. The amount marks a 9.5 per cent increase compared to OMR15.7 billion a year earlier.

GULF BUSINESS / 9

GCC TODAY

++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ GE signs $300m ++++++++++++++++++++++++ Saudi deal ++++++++++++++++++++++++ ++++++++++++++++++++++++ The Saudi Electricity Company ++++++++++++++++++++++++ (SEC) signed contracts worth ++++++++++++++++++++++++ ++++++++++++++++++++++++ almost $300 million with GE ++++++++++++++++++++++++ to supply 13 gas turbines and ++++++++++++++++++++++++ ++++++++++++++++++++++++ associated services for the ++++++++++++++++++++++++ expansion of six power plants ++++++++++++++++++++++++ across Saudi Arabia. The ++++++++++++++++++++++++ ++++++++++++++++++++++++ expansions are expected to add ++++++++++++++++++++++++ almost 800 megawatts of power ++++++++++++++++++++++++ ++++++++++++++++++++++++ to the Kingdom’s grid by mid 2013. ++++++++++++++++++++++++ ++++++++++++++++++++++++ Taqa launches $1.5bn ++++++++++++++++++++++++ ++++++++++++++++++++++++ bonds ++++++++++++++++++++++++ Abu Dhabi National Energy ++++++++++++++++++++++++ ++++++++++++++++++++++++ Company (Taqa) announced that ++++++++++++++++++++++++ it has issued two bonds to raise ++++++++++++++++++++++++ ++++++++++++++++++++++++ $1.5 billion, with one $750 million ++++++++++++++++++++++++ bond maturing in March 2017 ++++++++++++++++++++++++ and the other due in December ++++++++++++++++++++++++ ++++++++++++++++++++++++ 2021. The company said that the ++++++++++++++++++++++++ proceeds would be used to repay ++++++++++++++++++++++++ ++++++++++++++++++++++++ borrowings and for general ++++++++++++++++++++++++ corporate purposes. ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ Aramex acquires ++++++++++++++++++++++++ SA firm ++++++++++++++++++++++++ ++++++++++++++++++++++++ Dubai-based logistics firm ++++++++++++++++++++++++ Aramex confirmed that it has ++++++++++++++++++++++++ completed the full acquisition of ++++++++++++++++++++++++ ++++++++++++++++++++++++ South Africa’s Berco Express. The ++++++++++++++++++++++++ company will now introduce all ++++++++++++++++++++++++ ++++++++++++++++++++++++ its services, including integrated ++++++++++++++++++++++++ logistics solutions, international ++++++++++++++++++++++++ ++++++++++++++++++++++++ and domestic express delivery ++++++++++++++++++++++++ and freight forwarding to the ++++++++++++++++++++++++ South African market. The move ++++++++++++++++++++++++ ++++++++++++++++++++++++ follows Aramex’s recent ventures ++++++++++++++++++++++++ in China and Kenya. ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++

On the Radar

10 / JANUARY 2012

MENA countries urged to raise gas prices Countries in the MENA region must increase the price of gas to avoid the risk of shortages in the future, according to Datuk Abdul Rahim Hashim, president of the International Gas Union (IGU).

Speaking at the recent World Petroleum Congress in Doha, he said that subsidised gas pricing, rapid growth in domestic demand and the need for gas reinjection, were all causing concern in the region.

“Despite Qatar being the world’s largest exporter of LNG, and Iran, Egypt and Saudi Arabia having significant gas reserves, there are still countries within the Middle East that are short of gas supply,” he said.

He also expressed concern about the current political situation.

“The region has been engulfed with international conflicts, regional disputes and more recently internal uprising, which have reduced the region’s ability to attract investment, affecting MENA’s supply and export potential,” he added.

STANCHART EYES ISLAMIC BANKING IN OMAN

Standard Chartered plans to start Islamic banking operations in Oman and Nigeria in 2012, even as it expands its Shariah-compliant business offerings in the MENA region.

The bank already has a conventional presence in both the markets, and is waiting for the countries to finalise their regulatory frameworks for Islamic banking, according to Wasim Saifi, Standard Chartered’s global head of Islamic banking. “The opportunity is tremendous. We are in discussions with regulators,” Saifi told reporters.

SOAPBOX “IF WE CONTINUE LIKE THIS, IT WILL BE A COLLECTIVE SUICIDE. IF THINGS AREN’T WORKING OUT WITHIN SIX MONTHS, I WILL SUBMIT MY RESIGNATION.”

MONCEF MARZOUKI, who was elected as Tunisia’s President in December 2012, urged citizens to give up street protests during an interview on state television.

GCC TODAY

Abu Dhabi takes stake in Thames Water Abu Dhabi Investment Authority, the emirate’s sovereign wealth fund, has acquired a 9.9 percent stake in Thames Water from a consortium led by Macquarie Group.

Infinity Investments, ADIA’s subsidiary, bought the stake in the UK utility Kemble Water, the parent company of Thames Water, for an undisclosed amount, Macquarie said in a statement.

How to rule the world like...

Political activist

GETTY IMAGES

AUNG SAN SUU KYI

STAND FOR PEACE

SAUDI’S PROPERTY SECTOR BOOMING

The 66-year-old Burmese activist has become a global symbol of peaceful resistance. Suu Kyi, who won the Nobel Peace Prize in 1991, has championed democracy in military-ruled Myanmar for over 20 years.

BE PERSISTENT Suu Kyi’s party, the National League for Democracy, first won the Myanmar elections in 1990, but was denied power.

Since then, despite spending almost 15 years in detention, Suu Kyi has been persistent in her demand for democracy.

She was finally released from house arrest in November last year, and is expected to stand for a seat in parliament this year.

Saudi Arabia is forecast to become one of the top-ten best performing real estate markets in the world in 2012, according to Damac Properties.

While global markets are struggling– the Eurozone is facing a debt crisis, the US market is still flat, and China and Hong Kong property prices are tumbling– the Kingdom is doing well.

Strong economic fundamentals, rising oil revenues, a younger demographic profile and higher property demand will help boost Saudi Arabia’s real estate market, says Damac.

ADCB sets up $7.5bn medium-term note Abu Dhabi Commercial Bank has set up a $7.5 billion global mediumterm note, or GMTN, programme to raise funds “from time to time,” the bank said in a filing to the London Stock Exchange.

In the prospectus, ADCB said that a difficult macro-environment

12 / JANUARY 2012

had affected and “could continue to materially adversely affect ADCB business, results of operations, financial condition and prospects.”

It also said that the Abu Dhabi government, which owns a majority stake in the bank, would not guarantee the notes.

GARNER GLOBAL SUPPORT During a landmark visit to Myanmar last month, US Secretary of State Hillary Clinton met Suu Kyi in her home, and praised her “steadfast and clear” leadership. Her non-violent democratic struggle has won the Burmese leader support from many international leaders – UK Prime Minister David Cameron has called her an “inspiration,” US President Barack Obama has described her as his “hero,” and German Chancellor Angela Merkel has portrayed her as a role model.

BE FREE FROM FEAR “The only real prison is fear, and the only real freedom is freedom from fear,” the leader has said. “You should never let your fears prevent you from doing what you know is right.”

GCC TODAY

PROJECT focus DEWA GETS BIDS FOR HASSYAN IPP

Dubai Water and Electricity Authority (DEWA) said that it has received four bids from international consortia to construct the first phase of the Hassyan independent power project (IPP) in Dubai.

One of the consortia, led by the Abu Dhabi National Energy Company (Taqa), Japan’s Marubeni Corporation, and South Korea’s SK E&S, has submitted the lowest bid, according to Taqa spokespeople.

Hassyan 1 IPP will have the capacity to generate about 1,600 megawatts of

power, and is located 60 km southwest of Dubai. The project is the first out of six phases of Dubai’s electricity privatisation program, whose target is to produce 10,000 megawatts of power.

DEWA said that experts would study the “technical, financial, commercial studies and environmental impact report to assess the bids,” and that the winner would be announced in February 2012. The selected bidder will own 49 per cent of the project, while DEWA will retain 51 per cent.

New detailed atlas for Abu Dhabi The Environment Agency Abu Dhabi (EAD) has launched the Environmental Atlas of Abu Dhabi Emirate, a 200-page full colour book highlighting the emirate’s natural habitat. The atlas includes graphical and artistic depictions of Abu Dhabi’s geological and cultural history, and cartographic maps of the emirate’s landscape.

Over 100 people have worked on the atlas, and research work has been carried out for about two to three years. “We had the first planning meeting for this almost six years ago and its incredible to see it finally released,” said one of the contributors, Dr. Mark Beech from the Abu Dhabi Authority for Culture and Heritage.

Apart from the hard copy, the Atlas is also available as an interactive platform online. EAD officials hope that the initiative will help create awareness about the environment, disseminate information and involve the community through social learning.

The Abu Dhabi Global Environmental Data Initiative provided the data for the atlas, and Motivate Publishing printed the book.

14 / JANUARY 2012

++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ SBI starts operations ++++++++++++++++++++++++ ++++++++++++++++++++++++ in Qatar ++++++++++++++++++++++++ ++++++++++++++++++++++++ India’s largest lender, the State ++++++++++++++++++++++++ Bank of India, has launched ++++++++++++++++++++++++ operations in Qatar by opening ++++++++++++++++++++++++ ++++++++++++++++++++++++ a branch in the Qatar Financial ++++++++++++++++++++++++ Centre at Doha. The branch will ++++++++++++++++++++++++ ++++++++++++++++++++++++ cater to corporate clients, deal ++++++++++++++++++++++++ in local and foreign currencies, ++++++++++++++++++++++++ and offer products such as ++++++++++++++++++++++++ ++++++++++++++++++++++++ project finance, syndication ++++++++++++++++++++++++ and trade finance. ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ Abyaar sells Dubai ++++++++++++++++++++++++ property for Dhs10m ++++++++++++++++++++++++ ++++++++++++++++++++++++ Kuwait’s Abyaar Real Estate ++++++++++++++++++++++++ Development has sold one ++++++++++++++++++++++++ ++++++++++++++++++++++++ of its real-estate properties ++++++++++++++++++++++++ in Dubai for Dhs10 million ++++++++++++++++++++++++ ++++++++++++++++++++++++ ($2.72 million) and will use ++++++++++++++++++++++++ the proceeds to repay part of ++++++++++++++++++++++++ its debt. The company made ++++++++++++++++++++++++ ++++++++++++++++++++++++ a profit of Dhs1.67 million ++++++++++++++++++++++++ through the sale, which is ++++++++++++++++++++++++ ++++++++++++++++++++++++ included in Abyaar’s fourth++++++++++++++++++++++++ quarter financial statements. ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ Coke pays $980m ++++++++++++++++++++++++ ++++++++++++++++++++++++ for Aujan stake ++++++++++++++++++++++++ Coca-Cola has announced that ++++++++++++++++++++++++ ++++++++++++++++++++++++ it is buying a stake in Saudi ++++++++++++++++++++++++ Arabia’s beverage company ++++++++++++++++++++++++ ++++++++++++++++++++++++ Aujan Industries for $980 ++++++++++++++++++++++++ million. Coke will take a 50 ++++++++++++++++++++++++ per cent stake in Aujan, whose ++++++++++++++++++++++++ ++++++++++++++++++++++++ brands include Rani and ++++++++++++++++++++++++ Barbican. The deal is expected ++++++++++++++++++++++++ ++++++++++++++++++++++++ to be completed during the ++++++++++++++++++++++++ first half of 2012. ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++

On the Radar

GCC TODAY

GCC and the world UAE BANKS ARRANGE PIA’S $90M ISLAMIC FACILITY

Pakistan International Airlines Corporation (PIA) announced that it has raised a $90 million Shariah compliant financing facility. The three-year facility has been arranged by Abu Dhabi Islamic

Bank, Al Hilal Bank, Citibank and United Bank Limited as mandated lead arrangers and joint book-runners.

PIA said that transaction might expand to $100 million with Warba Bank in

SOAPBOX “IRAN IS OUR NEIGHBOUR, THEY ARE MUSLIM AND WE’VE LIVED NEXT TO EACH OTHER FOR THOUSANDS AND THOUSANDS OF YEARS. I DON’T BELIEVE THAT IRAN WILL GET A NUCLEAR WEAPON; I DON’T THINK SO.” SHEIKH MOHAMMED BIN RASHID AL MAKTOUM, Vice President of the UAE and Ruler of Dubai during an exclusive interview with CNN.

Qatar Airways expanding China route Qatar Airways is hoping to double its flights to China to 70 flights per week by 2013, Akbar Al Baker, its CEO has said.

The carrier recently increased its frequency across the country from 25 to 35 flights each week, and also added Chongqing as its fifth Chinese destination.

CLARIFICATION Gulf Business would like to clarify that H.E. Abdul Aziz Abdullah Al Ghurair is CEO of Mashreq and Abdullah Al Ghurair is chairman of Mashreq, this was mistated in last month’s CEO letters issue.

Kuwait joining the facility as a lead arranger. The facility represents the first syndicated commercial foreign currency financing for a Pakistani obligor since 2007, the company said.

“This facility re-introduces the airline in the international financial markets and further develops our banking relationships in the region,” said PIA’s deputy managing director, Salim Sayani.

“This funding will allow the airline to implement its five-year business plan, which includes financial restructuring and a fleet renewal programme through which the airline will add five wide-body and thirty nine narrow-body modern aircraft,” he added.

STATS

30 million barrels

THE NEW DAILY OIL PRODUCTION LIMIT SET

BY THE ORGANIZATION OF THE PETROLEUM EXPORTING COUNTRIES (OPEC) IN DECEMBER. THIS IS THE FIRST TIME IN THREE YEARS THAT THE CARTEL HAS RAISED ITS OUTPUT TARGET.

Fastest rising UAE searches

KSA’s Fastest Rising searches

1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

1.

2.

3.

4.

5.

6.

7.

8.

Facebook Cricket live Dubizzle Samsung Al Jazeera Translate Dubai UAE Etisalat Emirates

SOURCE: GOOGLE ZEITGEIST

16 / JANUARY 2012

YouTube Facebook Hafez Games Twitter Sponge Bob Al Jazeera Qalb Qalb (Heart Heart) Song 9. Al Arabia 10. Al Tasleef Bank SOURCE: GOOGLE ZEITGEIST

GCC TODAY

30

SECONDS ON THE BUSINESS OF INSTANT DEBIT CARDS

Etihad Airways will pay about $94.9 million to become the biggest shareholder in German carrier Air Berlin in an agreement that also includes a code-sharing deal. Etihad will increase its stake in Air Berlin from 2.99 per cent to 29.21 per cent, and also provide the German airline with debt financing of up to $255 million until 2016.

The Abu Dhabi-based carrier is currently on an expansion spree and placed an order for 12 aircraft from Boeing last month, in a deal worth $2.8 billion.

Mashreq has issued machines which dispense banking accounts and pin numbers in 30 minutes.

How popular have they been so far?

We piloted this service prior to the launch and received an overwhelming response in terms of positive customer feedback for this first-inmarket offering. After the launch in two branches (Dubai Internet City and Muraqqabat), we will be extending this additional branches soon.

Etihad raises Air Berlin stake

NIMISH DWIVEDI Head of Personal Banking, Mashreq service to 15

Can you explain the behind-the-scenes process?

How is it possible to create a card and pin number in 30 minutes?

This involves what we call bringing conventional “back-end” technology and making it “front-end and customer-facing.” It also entails building an online real-time automated processes that interfaces with our different systems.

Does the machine have biometric capabilities or can forms be fed into it?

Scanned forms allows capturing customer details and for personalising the debit card.

What security measures have been put in place to ensure Mashreq meets global requirements?

We follow the stringent security standards specified by the global payment networks – Visa and MasterCard.

What led Mashreq to introduce these machines for its customers?

The instant issuance of a bank account and a linked debit card sets a new standard which has tremendous benefits for time-poor customers in terms of convenience and relevance.

Will these machines eventually save on operational costs for Mashreq?

This is an investment Mashreq is willing to make to provide superior customer service and to exceed customer expectations.

INTERVIEWED BY ALICIA BULLER

18 / JANUARY 2012

EMAAR SIGNS DHS3.6BN FACILITY Emaar Properties has signed a new Dhs3.6 billion ($980 million) financing facility with Dubai Islamic Bank, National Bank of Abu Dhabi and Standard Chartered Bank mandated as lead arrangers and bookrunners for the Islamic and conventional financing pact.

“The drawdown of the facility will convert the company’s debt maturity profile from short to longer term,” Emaar said, adding that the facility will initially be used to repay a $300 million facility taken in 2010.

Half of the total debt facility is repayable in a bullet payment after five years, while the rest is amortized over eight years.

The pricing is secured by The Dubai Mall.

Bahrain pushes for bank mergers Bahrain’s central bank has recommended the merger of five Islamic banks in the country to improve the banks’ capital bases, according to a senior official.

Ahmed Abdul Aziz al-Bassam, director of licensing and policy at the central bank, told Reuters that while al-Salam Bank would merge with Bahrain Islamic Bank, CAPIVEST, Elaf Bank and Capital Management House would merge with each other.

The mergers are awaiting approvals by shareholders, he said. “We expect it to take place in the first quarter of 2012.”

OPINION

COMMENT

DARK CLOUDS OVER LEBANESE BANKS Matein Khalid is fund manager in a royal investment office and a writer in finance and geopolitics.

ILLUSTRATION: TARAK PAREKH

t

The fall-out from the Arab spring has reached Beirut’s financial sector.

HE POLITICAL CONVULSIONS OF 2011 ACROSS the Arab world have transformed the nature of economies, spawned capital flight and threatened the stability of entire banking systems. Lebanon is a dramatic example of a small, open economy without oil reserves dependent on tourism and foreign trade, vulnerable to multiple political shocks to its banking system. The assassination of Prime Minister Rafic Hariri in 2005, the Cedar Revolution and the recall of Syrian troops from Lebanon, the 2006 Israeli assault on Hezbollah, the sectarian clashes between Hezbollah and the Druze/Sunni militias, the death of prominent anti-Syrian Maronite politicians and journalists, an Islamist revolt in a Palestinian refugee camp in Tripoli and bitter political fissures in the Cabinet are only a few of the political pathologies of post civil war Lebanon. The current bloodletting in Syria has ominous implications for Lebanon.

The Lebanese economy’s growth rate plummeted in 2011 as exports to the Arab world have plunged after the uprisings began in Tunisia, Egypt, Yemen, Syria and Libya. Beirut can no longer benefit from flight capital inflows from the wider Arab world, apart from Syria’s ruling elite now under US, EU and Arab league sanctions.

Moody’s has placed four Lebanese banks on credit watch for a negative downgrade since it estimates that the Arab spring will hit their business models, as the four leading banks hedged their volatile home country politics by diversifying into a wider regional footprint. Lebanese lenders even acquired banks or opened branches in Egypt, Sudan, Tunisia, Iraq and Syria - all Arab countries whose economies are devastated by political

“THE POLITICAL UNCERTAINTIES IN LEBANON AND THE WIDER ARAB WORLD WILL TAKE THEIR TOLL ON GDP GROWTH RATES, BANK LOAN GROWTH, REAL ESTATE PRICES, CAPITAL INFLOWS, TOURIST ARRIVALS, CAPITAL EXPENDITURE, EXPORTS, FDI AND THE BEIRUT STOCK MARKET.” 20 / JANUARY 2012

convulsions. It is no coincidence that all Lebanese banks have increased their provisions, as nonperforming loans surge. Corporate loan books are Tunisia.

The popular revolt in Syria against the regime of President Bashar al-Assad is a strategic disaster for Lebanese banks as the seven major Beirut money centre banks own subsidiaries, affiliates and joint venture banks in Syria. The endgame for Syria is unknown but the Baathist regime in Damascus has killed an estimated 5,000 protestors in its bid to retain the absolute power it won when Hafez al-Assad seized it in a coup d’état in 1970. Lebanese banks are vulnerable because they own more than half of all private bank branches in Syria and the economic shock will badly hit their retail/corporate loan books.

The political uncertainties in Lebanon and the wider Arab world will take their toll on GDP growth rates, bank loan growth, real estate prices, capital inflows, tourist arrivals, capital expenditure, exports, FDI and the Beirut stock market. An infallible indicator of Lebanese financial risk is the rise in the proportion of dollar deposits in the local banking system, as well as the rise in Lebanon’s sovereign credit default swaps and sovereign dollar Eurobond yields.

Lebanon’s foreign debt/GDP ratio is dangerously high at 140 per cent, while the telecom/electricity reforms and privatisation programmes promised in the Paris II Accords have not come to pass. The Lebanese banking system is hugely exposed to sovereign risk since it owns almost three quarters of all outstanding government debt. Lebanon’s banks are exceptionally liquid, thanks to hot money inflows and deposits from the Lebanese diaspora in the Gulf and Africa.

Yet the nature of sovereign risk in Lebanon has never been more fluid with Hezbollah, designated a “terrorist” organisation by the US, the political kingmaker in the Cabinet. The Lebanese Canadian bank recently failed after it was accused of money laundering and terrorist financing by the US Treasury.

The escalation in US-Iran and Saudi-Iran tensions has ominous potential for Lebanese banking’s Syria risk and local government debt exposure. The storm clouds are darkening in Lebanese finance.

OPINION

COMMENT

LEADING IN THE FAST LANE Dr Tommy Weir, advisor on fast-growth and emerging market leadership, and author of The CEO Shift

An engaged workforce will help you get ahead in 2012

ILLUSTRATION: TARAK PAREKH

a

S THE YEAR GETS STARTED, YOU already need to be driving at full pace.

Much like the well-known ‘pace lap’, 2011 was a year for most businesses across the region to regain their speed. In motor racing the pace lap is the preliminary lap of a race that prepares the drivers for a fast start. Instead of sitting still at the starting line and waiting for the official to signal the start, like you do in track and field, the pace lap allows the racers to have momentum when the race starts. The drivers use this lap to warm up their engines and tyres ahead of a flying start once the pace car pulls off.

In many ways 2011 was a pace year for 2012. Or at least let’s hope it was.

So coming into 2012 with our motors running at high speed, what should we be on the lookout for?

Unfortunately, there is some debris on the track that we all need to be concerned about – the global reach of the Euro debt crisis and the forward effect from the on-going Arab spring. There is very little we can do about the Euro debt crisis other than be mindful and have a trough plan ready if the crisis declines further.

During the boom in 2005, long before the financial crisis, Caterpillar, the manufacturer of multi-tonne earth moving machines, was busy planning for a bust knowing the volatility of their market and the impact it could have on them. Each business unit was forced to build a trough strategy based on the worst trough in their history and demonstrate, if this happens again, how they would react to make money. Then when the recession hit, all they had to do was pull out

“IN 2012, IT WILL BE PRUDENT TO COPY THE PRACTICE OF CATERPILLAR AND HAVE A PLAN READY FOR A BLACK SWAN EVENT. BUT DON’T LET THE CONCERNS IMPACT YOUR DAY-TO-DAY SPEED.” 22 / JANUARY 2012

their trough plans and put them into action. Each business unit went into crisis mode, which resulted in record speed and unparalleled growth.

In 2010, Caterpillar was the best-performing stock among the 30 companies in the Dow Jones industrial average. How did a company that requires huge sums of financial capital, whose products are expensive investments that last for years, outpace all the others?

They planned for the unimaginable so when it was a reality they were ready.

Now, let’s concentrate on the debris from the Arab spring.

In 2012, it will be prudent to copy the practice of Caterpillar and have a plan ready for a black swan event. But don’t let the concerns impact your day-today speed. You need to be like the driver who knows a crash may happen ahead of him but is mature enough to know that he needs to mindfully maintain his speed or risk losing the race.

It is now being reported that the ignition for the Arab spring was a lack of dignity coupled with high unemployment. Regional job creation for Arab nationals should be a focus for every business in the region. In addition to having a broader community interest, the reason to focus on job creation comes down to an economic principle demographic dividend. The demographic dividend happens when young working-age adults comprise a disproportionate percentage of a country’s population and the national economy is positively affected.

Across the GCC, it is true that young adults comprise a disproportionate percentage of the population but they are also the majority of the unemployed, which is robbing the region of the demographic dividend. Collectively, everyone benefits from job creation. So, everyone needs to contribute to it.

Now, what will fuel the speed of your business?

While it is important to have the right business model in place, across the region it seems that the most overlooked dimension of speed is the people. Specifically, engaging the workforce to be productive – employees putting their heart into work, not just hours.

OPINION

COMMENT

WILL I BE A GOLD MEDALLIST WITH AN MBA? Mark Timms, director, Gulf Recruitment Group

Earning an MBA can definitely put an extra spring in your step

ILLUSTRATION: TARAK PAREKH

t

O STAY AHEAD IN RECRUITMENT YOU NEED TO ensure your finger is on the pulse and understand who the movers and shakers are. So as I reflect on the latest trends and initiatives in the marketplace, I am drawn to comparing employees to Olympic gold medallists.

This may sound a little strange but a brand consultancy in the UK has been working with a number of multinational corporations on the fusion of sport and business training to provide a softer approach to developing and nurturing talent outside the conventional classroom. As I read further about incorporating lifelong change to help increase your market understanding, it has occurred to me that everyday in recruiting is like being in a race and not only do I need to be a gold medallist to survive, but so do my candidates. But what is needed to stay ahead?

My first piece of advice is basic – forget what your parents told you when you were young. It isn’t the taking part that counts, it’s only ever about winning. Silver and bronze medals don’t help your career, gold medals do. Everyone knows that Usain Bolt is the fastest man alive but who can recall the line-up that ate his dust in the 100 metres final at the Beijing Olympics?

In a way, the jobs market is made up of many different Olympic events with athletes training and developing their techniques not only to perform well but with the aim of winning the gold medal. So, in today’s cluttered and competitive jobs market, I would like to suggest how you can ensure your employer hums your national anthem and not that of your colleague sitting in the cubicle opposite you.

There are many factors that can make you stand out from your peers yet the biggest question we face on a daily basis is what value will

“FORGET WHAT YOUR PARENTS TOLD YOU WHEN YOU WERE YOUNG. IT ISN’T THE TAKING PART THAT COUNTS, IT’S ONLY EVER ABOUT WINNING. SILVER AND BRONZE MEDALS DON’T HELP YOUR CAREER, GOLD MEDALS DO.” 24 / JANUARY 2012

an MBA give my career? I’m pleased to note that the Middle East is likely to be a hotspot for MBA recruiting, moving forwards, as economies such as Saudi Arabia, the UAE, Kuwait and Qatar steer their economic dependency away from oil and gas towards becoming knowledge based economies.

There are certain trends around MBA recruitment that are both sector and experience specific. Key sectors that truly value MBAs above all others are finance, technology and consultancy. Last year, the UAE alone experienced a 23 per cent increase in MBA hiring with Saudi Arabia experiencing a 22 per cent increase. But the real race winners were those individuals who also had at least five years solid industry experience.

An MBA can help you win the race but the more competitors you face the smaller the chance you have of winning gold.

We are asked daily about the value of an MBA in the promotion race and the simple fact is that the popularity of MBAs has been soaring since 2007. With a number of global academic institutions providing courses in the region and many GCC governments promising to financially support ‘National knowledge seekers’ with their undergraduate, master’s and MBA degrees, both locally and globally, there is a knock-on effect.

To move away from the Olympian tone, the financial benefits are a simple case of supply and demand.

Business schools will lead you to believe that an MBA will automatically increase your salary but this isn’t the common trend in the Middle East. Admittedly, there are always going to be exceptions to the rule but we believe MBA salaries are slowly starting to equalise as a direct consequence of MBA market flooding.

So can an MBA win you a gold medal? Yes, but only if you note the following: ■ The success of an MBA is still very sector specific ■ An MBA isn’t the fast track to more money (but will probably help in the long-term) ■ Work experience is still key but an MBA will add pace to climbing the career ladder ■ Soft skills are still key – be mobile, bright and ambitious and you will win any race

BANKING BRIEFING

BRIEFING REGIONAL TRENDS, ANALYSIS AND VIEWS

BANKING

GULF BANKS SHUT OUT US CLIENTS Obama’s intrusive regulations are simply too much trouble.

TEXT BY RYAN HARRISON

E

MIRATES NBD IS mulling plans to halt its private banking services to American clients to avoid falling foul of new US rules on tax evasion, Gulf Business has learned.

The decision would be the latest snub for wealthy US citizens living abroad.

In July last year, HSBC said it would axe wealth management services to US clients in the Gulf.

Meanwhile, in Europe, private bank Brewin Dolphin early last year became the latest in a list of departures that includes UBS, Julius Baer and Bank Sarasin.

The main gripe for private banks is the sensitivity of information they will have to disclose about their US clients.

Gary Dugan, chief investment officer for private banking at Emirates NBD, told

Gulf Business: “We’re worried about the increasing regulations and disclosure rules for investments in the US and in particular for our US clients [in the Middle East]. It could create more problems than the customers are worth. The US authorities make it very difficult for its citizens to bank abroad. And for us, it may mean that we have to tell US authorities all sorts of delicate details.

“The biggest worry is that is if any of our US clients wants to make an investment in US equities or treasuries what will be the future disclosure rules? For instance, will we have to disclose information on US clients because they hold IBM shares? They might not want to,” added Dugan.

By 2013, all banks outside the US will have to comply with a new act signed by America’s President Barack Obama. The regulations oblige international financial institutions to reveal all accounts held by US citizens that contain more than $50,000.

Banks that do not comply will be subject to a

30 per cent withholding tax on all payments made to them in the US. Credit Suisse last July confirmed it was the target of a US Department of Justice probe while rival UBS was forced to pay a $780 million fine and hand over the information of around 5,000 secret accounts held by US citizens in 2009.

HSBC Middle East said in a statement in the summer: “After a review of services that can be provided to US clients from locations outside of the US, we believe that US clients will be better served by our private banking teams in the United States.” HSBC is based in London but has Swiss-style private banking services around the world.

In the immediate aftermath of the bank’s decision to halt US-focused private banking, analysts predicted few GCC financial institutions would follow suit. However, the Emirates NBD decision could tip the scales, given that it is the UAE’s biggest bank by assets and one of the largest in the Middle East.

It is unlikely to derail the growth of private banking in the region, but will send out strong signals to US authorities.

Experts say over the coming years there will be a shake-out in the industry between those willing to service US offshore clients and those who won’t. And Emirates NBD and HSBC’s moves are perhaps the beginning of this growing division.

At the extreme end, some private banks are exiting US securities entirely. Switzerland’s oldest bank Wegelin & Cie, wrote to clients in 2009 announcing it would no longer trade US securities because of rules changes.

Although Emirates NBD has not made its final decision on whether to wash its hands of US private banking clients, the strain of the changing US policy is starting to show.

How onerous the US authorities’ rules become could determine the extent of financial pain that wealthy Americans have to endure in the Middle East. If the last 12 months is anything to go by, the landscape looks likely to shift dramatically in the next year.

GULF BUSINESS / 27

BRIEFING FINANCE

AFP

Need a car? Try an Islamic loan.

DRIVING LENDING

MUSLIM MOTORING Auto financing in the UAE is beginning to tilt in favour of Islamic banks.

TEXT BY AARTI NAGRAJ

I

N THE CURRENT economic climate, the dynamics of lending in the UAE are predictably changing. And in the process, it seems like an interesting new trend has emerged in the automotive sector.

Experts say that Islamic banks are now seen as the preferred option for auto financing in the country.

“Our funding tends to be split 60 per cent via Islamic facilities and 40 per cent conventional loans,” said Steve Faulkner, the managing director of Al-Futtaim’s Automotive Financial Services. Al-Futtaim Motors, which handles the distribution of international vehicle brands such as Toyota, Lexus and Hino in the UAE, has partnerships with 15 banks in the country, eight of which are Islamic.

“This [trend] has been stable for the past three years – prior to 2008 the mix would have been 40 per cent Islamic and 60 per cent conventional, possibly

28 / JANUARY 2012

mirroring the higher proportion of new expats arriving into the market,” said Faulkner.

Raghu Kondagolathur, senior vice president at the Kuwait Financial Centre, attributes the shift to two main reasons.

“Conventional banks would have stopped new lending to this segment due to their past experience as well as their preoccupation with repairing their balance sheets,” he said. “Secondly, Islamic banks were happy to take up the

“OUR FUNDING TENDS TO BE SPLIT 60 PER CENT VIA ISLAMIC FACILITIES AND 40 PER CENT CONVENTIONAL LOANS.” space left by conventional banks as auto finance is an asset-backed transaction, and hence fits well with the business model of an Islamic bank.”

The Islamic finance industry has grown rapidly in the last few years, and is expected to be worth $1.8 trillion by the end of 2016 – up 90 per cent from $939 billion in 2010, according to a

report by Deutsche Bank. International Monetary Fund figures show that between 2007 and 2009, Islamic banks’ assets grew an average of twice as fast as conventional banks’ assets in major Muslim markets.

But the industry is still looking to break new ground. According to Hussain Al Qemzi, CEO of Noor Islamic Bank, the industry’s pace of development is “too slow”. Speaking recently at the International Islamic Finance Summit in Kuala Lumpur, he urged industry practitioners to challenge the regulators – Central Banks, legal structures and Shari’a scholars – and create new products.

With the Islamic finance industry hunting for new opportunities, the UAE’s automotive sector is emerging as a lucrative target.

A study by the UAE’s ministry of foreign trade found that the country’s automotive market grew by 19.7 per cent in 2010 to reach $11.1 billion, up from $9.2 billion in 2009. Domestic car sales predicted to see a compound annual growth rate of eight per cent until 2014.

Experts from Noor Islamic Bank say that the bank already faces fierce competition with big players in the UAE’s automotive market, both in terms of pricing and product features. The bank hopes to tempt customers with new campaigns. But like conventional banks, Noor has stringent criteria for lending.

Requirements include a minimum salary of Dhs5,000; no defaults on any products from other banks; a debt burden of less than 50 per cent; and three months’ bank statements, among others.

“We have a good portfolio in autos, and losses are minimal,” a Noor spokesperson confirmed.

BRIEFING FOREX

Globally, forex trading sees daily average volumes of more than $4 trillion.

CURRENCY TRADING

SHOW ME THE MONEY As global markets witness a rollercoaster ride, local investors are turning to forex, a rising star on the trading platform TEXT BY AARTI NAGRAJ

T

HE GLOBAL ECONOMY has not had an easy 2011, and traditional equity markets have been witnessing persistent volatility. With investors looking for safer platforms, forex has emerged as the most heavily traded asset class in the world, with daily average volumes reaching more than $4 trillion.

Reflecting international trends, the practice has also grown rapidly in the UAE. The first futures exchange in the region, Dubai Gold and Commodities Exchange (DGCX), saw its volumes increase by 52 per cent year-on-year during the first half of 2011, driven mainly by currency volumes, which rose 80 per cent during the period. In November last year, currency futures volumes increased 200 per cent yearon-year to touch 396,740 contracts, accounting for 90 per cent of total

30 / JANUARY 2012

volumes traded at DGCX during the period.

Abu Dhabi-based ADS Securities (ADSS), which started operations in March 2011, has also seen a swift rise in the number and range of local investors.

“From sovereign wealth funds through to private individuals, many people are seeing the advantage of trading FX,” said Claus Nouveau-Nikolajsen, vice president for sales at ADSS. “The fact that the liquidity in the market allows positions [investments] to be open and closed as required is a major selling point. Investors who historically traded equities often found that their investments stalled and they were unable to exit when they wanted.

FX allows the trader to be in control of their positions,” he added.

According to Iskander Najjar, the CEO of Alpari ME, though the concept behind forex and equities trading is essentially the same - you buy low and sell high - the FX market has one big advantage an abundance of liquidity.

“The popularity of forex trading has increased in the UAE and the wider region over the course of just under a

decade largely due to the fact that in the early 2000s we saw a huge increase in the popularity of local equity trading,” he said. “In today’s climate, local equities have very little liquidity but in the currency markets you have major moves that can drive the market.”

Another aspect of its popularity, according to Najjar, is that there is no reliance on one side of the market. “You can ‘play both sides’, so to speak. You can buy either currency; so if the Euro goes up you are able to buy a Euro, and if the Dollar goes up you can buy a Dollar,” he said.

But trading in FX can be challenging in the current climate; international currencies have been wildly fluctuating – the Euro has been dropping dangerously, fuelled by the ongoing Eurozone crisis; the Indian Rupee managed to reach a historic low, slipping by over 20 per cent in 2011and becoming the worstperforming currency in Asia; and the US dollar, on the other hand, is currently doing well, becoming a ‘safe haven’ for investors.

“Almost all currencies have gone through a period of volatility, which for

FOREX BRIEFING

“THE FX INDUSTRY GLOBALLY IS SOMEWHAT IN ITS INFANCY IN MY OPINION, ALTHOUGH WE’VE SEEN TREMENDOUS GROWTH OVER THE LAST FIVE YEARS AND IN THE MIDDLE EAST IN PARTICULAR WE EXPECT TO SEE THAT GROWTH DOUBLE, TRIPLE OR EVEN QUADRUPLE OVER THE NEXT FIVE YEARS.” many of them is ongoing,” said ADSS’s Nouveau-Nikolajsen. “But in FX trading it is normally about working with one or two currency pairs and developing a detailed understanding of the way these trade and learning how the market data will impact them. Across the GCC there are a number of investors who chose to trade GCC currencies as they have a detailed understanding of local market dynamics.”

Since the UAE Dirham is pegged to the Dollar, there is very little volatility against the dollar and higher volatility against other currencies, said Najjar.

“What we tend to find is people trading currencies as an asset class so as such they are perceived by investors in the same way as an equity share or stock in any of the exchanges around the world,” he said.

In terms of trading volumes, Alpari ME has seen the Euro, Sterling, Swiss Franc, Yen and the Dollar as the most popular amongst currency pairs, with the EuroDollar pair reaching up to 40-50 per cent of total volumes traded.

As the trading volumes in the UAE increase, the company says that it has

seen a diverse range of people and companies participating in the platform.

“For example, we have clients who come in with $2,000 and we also have clients who come in with $5 million or $10 million. We have financial institutions who trade with us, as well as treasuries who take advantage of our liquidity pools,” said Najjar.

With the forex market experiencing a “major growth paradigm,” a new generation of participants is learning to trade FX, stated Nouveau-Nikolajsen.

“This is a watershed moment for FX and in the years ahead we believe it will be a cornerstone component in the majority of serious institutional and professional portfolios. The development of technology, regulation and the issues facing traditional equity markets has created the opportunity and helped develop the markets,” he added.

“The FX industry globally is somewhat in its infancy in my opinion, although we’ve seen tremendous growth over the last five years and in the Middle East in particular we expect to see that growth double, triple or even quadruple over the next five years,” said Alpari’s Najjar.

Iskander Najjar, CEO of Alpari ME

The development of the DGCX in the UAE has been a fantastic step, he added, as it is now well established and seeing tremendous international interest.

But despite the forex industry offering tremendous opportunities, experts warn that investors have to exercise caution.

“Investors need to understand the regulations and environment that they trade under. These umbrellas are extremely important, such as where are the funds being held, how safe the clients funds are, how safe the trading partner is and whether they are dealing with a reputable company,” said Nouveau-Nikolajsen.

In FX, one currency may rise but another will also fall, so there is no specific economic event that would sink value in all currencies, said Najjar. “Access to the best sources of information offers the best way for the management of risk,” he advised.

GULF BUSINESS / 31

KSA BRIEFING

Four of the six original cities are planned.

CONSTRUCTION

SAUDI’S LOST CITIES After the fanfare of the KSA Economic City announcements in 2006, project action has been muted by the credit crunch.

TEXT BY PETER SHAW-SMITH

W

HATEVER HAPPENED TO Saudi Arabia’s New Economic Cities?

Touted last decade as a panacea for a new wave of growth to support the social fabric of the kingdom in neglected areas of the country, little work seems to be taking place six years after the first metropolis, King Abdullah Economic City (KAEC), at Rabigh, was announced in December 2005.

It is not that there is no sign of activity, but that the vision that saw the cities as central to opening up Saudi Arabia’s economy seems to have dissipated. In 2006, officials at the Saudi Arabian General Investment Authority (Sagia) spoke of six new economic cities; now it seems that only four, including KAEC, Knowledge Economic City (KEC) in Medina, Jizan Economic City (JEC) and Prince Abdulaziz Bin Mousaed Economic City (PABMEC) at Ha’il, are planned.

“The vision is... fantastic,” says Ahmed

Al Khateeb, CEO of Jadwa Investment, a Riyadh-based investment bank. “Saudi Arabia is centrally located between east and west, surrounded by sea, and I think the location is just great for this concept.”

Crucially, the cities going ahead are all on or adjacent to the kingdom’s oil-poor western and central regions. Compared to the heavy-industrial and petrochemicals focus of Jubail and Yanbu, the new cities will have a greater emphasis on services, as well as on less specialised job opportunities for the growing ranks of young Saudis seeking work.

KAEC is the most advanced, and is to comprise six sectors: an industrial zone, a port, a central business district, an

“IT IS NOT THAT THERE IS NO SIGN OF ACTIVITY, BUT THAT THE VISION THAT SAW THE CITIES AS CENTRAL TO OPENING UP SAUDI ARABIA’S ECONOMY SEEMS TO HAVE DISSIPATED.”

educational area, residential and resorts.

Work is underway on the port, with Worley Parsons having carried out the initial planning for phase one capacity of 3.8 million TEU a year, a figure set to increase to six million TEU a year in phase two.

Pfizer have announced they plan to build a pharmaceutical manufacturing plant, Al Rajhi Steel is moving ahead with a steel plant while Emaar The Economic City, an affiliate of Dubai-based property developer Emaar, last month received a SR5 billion loan from the Saudi Finance Ministry for phase two construction at KAEC. Emaar The Economic City, the property developer at KAEC, is a joint venture between Sagia and Dubai’s Emaar Properties.

Other than this, distinct signs of progress are difficult to identify at the three other locations Sagia is understood to be promoting. On its website, it is quick to say “the Economic Cities provide a wealth of investment opportunities in all sectors.

There are currently over 600 opportunities in the Economic Cities.”

At Jizan, planners envisage primary industries in metals and petrochemicals acting as feeders to downstream industries, as well as commercial and residential facilities and utilities. At Medina, KEC is to be a centre for tourism and real estate development. PABMEC will focus on agribusiness, commerce and industry, logistics, petrochemicals, and tourism.

A Sagia document lists over 300 projects seeking investment.

Officials at Emaar The Economic City were forced to admit last year that KAEC would undergo a change of focus to affordable housing after a lack of demand for upscale units. The UAE’s The National newspaper said some 15 per cent of homebuyers had defaulted on contracts and several tower projects had been delayed. “[The kingdom] has a young population, a labour force and materials for manufacturing, power and energy,” says Mr. Al Khateeb. “The economic face several immediate financing challenges, but they will definitely overcome them in the near future.”

GULF BUSINESS / 33

INDUSTRIES BRIEFING

Mining accounts for six per cent of Morocco’s GDP.

MINING

TREASURE HUNT The region is doubling its mineral production with the aim of creating jobs and digging up new profits.

TEXT BY DANIA SAADI

F

ROM SAUDI ARABIA TO Morocco, Arab countries are looking at the mining sector as a potential source for economic diversification and job creation.

KSA, the world’s biggest oil exporter, is now undertaking several projects with the aim of making mining its third economic pillar, after energy and petrochemicals.

Morocco, which boasts 75 per cent of the world’s phosphate rock reserves, will spend $8.6 billion in the next decade to ramp up phosphate production from an estimated 28 million tonnes in 2011 to 55 million tonnes by 2020.

State-run Saudi Arabian Mining Company (Ma’aden) has been producing precious and base metals, mainly gold and silver, for over two decades, but this year it began producing phosphate, with a new target of three million tonnes per annum – part of a $5.6 billion joint venture between Ma’aden and SABIC, the world’s biggest petrochemical producer. The mining firm is also undertaking a $10.8 billion aluminum

project to produce bauxite, build an alumina refinery, a smelter and a rolling mill by 2014.

Ma’aden is working in parallel to beef up its precious metals production with two new mines, and is also considering the development of three more mines to double gold production to 400,000 ounces per annum from 2015. The firm is also looking at increasing production of other highly-valued metals such as copper, and possibly diamonds. “There are very initial indications about diamonds, but I will not be over optimistic about it,” said Hany al-Dabbagh, vice-president of precious metals and exploration, Ma’aden, at the MENA Mining Congress.

Meanwhile, Egypt is working to rekindle foreign investor interest despite the ongoing political upheaval and fears over the dishonouring of contracts signed by the fallen regime. Fekry Yousuf, chairman of the Egyptian Mineral Resources Authority, assured attendees of the MENA mining congress that all signatures will be honoured. He also said that the country is still forging ahead with projects to boost the mining sector’s contribution to GDP to between eight and 10 per cent from around one per cent today.

Egypt, which is currently producing gold, is actively seeking foreign investors to assist with the development of copper, phosphate, lead and zinc.

In Morocco, mining contributed around six per cent of the GDP and 27 per cent of the total value of national exports in 2010, attributable in large part to the country’s phosphate production, which reached 26.6 million tonnes in 2010. The phosphate reserves of Morocco and the Western Sahara were recently revised up to 50 billion tonnes, out of total world reserve of 65 billion tonnes, according to the US Geological Survey report published in January this year.

While Morocco’s phosphate production is a state-monopoly, the North African country is seeking foreign investors to help explore and produce other metals and minerals including lead, zinc, copper and silver.

“For the development of its mining sector, Morocco is undertaking the development of a new strategy based on mining concessions and exploration, attracting international investors and increasing local contribution, development of mining and production capacity, strengthening of mining promotion and the adjustment of current mining laws,’’ said Addi Azza, general engineer at the Ministry of Energy, Mines, Water and Environment.

Morocco’s vast mineral wealth is attracting foreign mining firms, including Indonesia’s Earthstone Group, which expects to start commercial production of iron ore next year.

“When we look at all countries [in the Middle East], they are all rich in minerals.

The major variable is the attitude of the government to investors,” said Vladimir Kuznetsov, an Earthstone board member.

“Here in the MENA countries, you need to go to the ministries to ask for all the documents, where is e-government? Once you get this information picture, then you are able to make a qualified decision on where to go.”

GULF BUSINESS / 35

BRIEFING TECHNOLOGY

Gulf IT managers view themselves as ‘pioneers’.

CIOS

SWITCHED ON Gulf techies are way ahead of their global peers according to IBM TEXT BY ALICIA BULLER

T

HE LAST TWO years have been revolutionary for the region’s IT departments. No longer seconded to the corporate sidelines or the office basement, 40 per cent of Middle East and Africa-based CIOs are now sitting at the boardroom table with the CEO. In the West, the percentage of CIOs reporting directly to the boss ranges from just 28 to 40 per cent. Nancy Thomas, a vice president at IBM’s Global Business Services, attributes this Gulf boardroom sea change to a regional need for fast growth and innovation, as well as a lack of legacy – most local IT departments are decades younger than their Western counterparts.

“Now that regional CIOs are reporting to the CEO, they will be CIOs with business leadership and lend their voice to the company. The new 40 per cent of CIOs will shape the business agenda and enable it,” she said.

In fact, the top three concerns of regional CIOs – business intelligence, people development and the ability to get to know

36 / JANUARY 2012

clients better – were identical to that of CEOs, according to the global IBM survey which sampled more than 3,000 IT heads across 71 countries.

Other focus areas for regional CIOs were ‘transformation’ and ‘pioneering’’.

Around 70 per cent of MEA CIOs viewed themselves as pioneers, principally because they are frequently tasked with entering new markets with varying maturity levels.

“We saw that MEA CIOs are ahead of their global peers in the pioneering sense – they are stepping outside of their four walls and creating stronger relationships with their customers and providers; they are

“NOW THAT REGIONAL CIOS ARE REPORTING TO THE CEO, THEY WILL BE CIOS WITH BUSINESS LEADERSHIP AND LEND THEIR VOICE TO THE COMPANY. THE NEW 40 PER CENT OF CIOS WILL SHAPE THE BUSINESS AGENDA AND ENABLE IT. ”

using analytics to share information, maybe in a cloud environment,” said Thomas.

“Also there are many family-owned businesses in MEA, they are willing to be more risky – they don’t have shareholders and boards and they can make decisions much quicker. It’s done at a smaller level.”

As well as leading the business in a pioneering sense, CIOs have naturally come to the fore of organisations due to their role as data gatekeepers; more often than not, the keys to driving the business forward and differentiating the firm in a competitive environment lie in the mounds of information that travel though the organisation daily – email, requisitions, servers, customer relationship software, social networking and databases.

“In a fast-moving environment, there is a real need to take all the big IT data and turn that data into information through dashboards that can be used by the business on a real-time basis. What is the most meaningful data to their business and what is going to make them more competitive? Are they delivering quick enough for the business requirements? It’s a very competitive environment and the speed and volume of velocity is completely different to a few years ago. What are customers saying on your website and what are they saying on others?” added Thomas.

As the CIO and CEO roles continue to become more closely aligned, analytics and cloud computing services will be increasingly leveraged, as well as virtualisation technology.

“CIOs have to be bilingual now, they have to have a technology foundation but they also have to have to have business acumen. They not only have to develop the people and bring in the people to keep up with the pace of change but they have to be engaged and forward thinking. It’s a good piece of news for us to see that Middle East and Africa is ahead in some of the CIO mandates,” said Thomas.

COVER STORY

38 / JANUARY 2012

EXPANDING

HORIZONS Sultan Ahmed Bin Sulayem has spent decades helping to build Dubai’s presence in the international business arena. Now he is racking up the air miles on behalf of one of the world’s largest ports operators. The business veteran tells Jonathan Sheikh-Miller how, today, his sights are set further afield, driving DP World’s global expansion.

PHOTOS: GETTY IMAGES

S

ultan Ahmed Bin Sulayem, the executive chairman of DP World and the former chairman of Dubai World, has seen it all in his long career in Dubai. He oversaw much of the early expansion in the emirate’s commercial sector before taking over the management of one of the city’s major holding companies. He has witnessed the growth and lived through the unforeseen crash in 2009, yet his hunger for the cut and thrust of business remains undimmed.

Prior to our interview, the chairman’s global corporate communications manager spoke of Bin Sulayem’s energy and his frequent travel to all parts of the globe – he had recently returned from Senegal where DP World, the world’s third largest ports operator, had just opened a redeveloped terminal in Dakar, doubling the facility’s previous capacity. Jetlag is unheard of for this veteran of more than 25 years in the service of Dubai.

As the story goes, it was Bin Sulayem who sold the idea of a free-trade zone in Dubai back in the 1980s

after travelling the world studying them. Sheikh Mohammed bin Rashid Al Maktoum, now Dubai’s ruler, told him at the time to go and set one up and run it if he believed in it so much. Bin Sulayem, at the age of 30, became the first chairman of the Jebel Ali Free Zone (Jafza) in 1985. The rest, as they say, is history.

Jafza now extends almost 50 square kilometres and houses well over 6,000 companies. It claims to attract 20 per cent of all foreign direct investment into the UAE. Jebel Ali also includes DP World’s flagship port and the firm has just announced plans to expand its capacity by four million 20-foot equivalent units (TEU) to a total of 19 million TEU per annum by 2014. DP World will invest $850 million over three years, from its existing resources, into creating a new terminal within the port.

But DP World, with a presence on six continents, extends far beyond Dubai’s borders. In 2011, the firm launched new terminal developments in India and Pakistan and bought controlling stakes in companies operating in Suriname. The firm naturally has a significant presence in North Africa and GULF BUSINESS / 39

GETTY IMAGES

The Dubai-based global port operator, has reported a better-than-forecast profit in the first half of 2011 because of cost cuts and higher container volume.

the Middle East, including Egypt and Yemen, but the political unrest in the region has not caused a major impact according to Bin Sulayem.

“Yemen actually, for the past two years, has been a bit unstable. Business and businessmen need stability to be able to trade. But it is a small location.

Since we arrived there, the situation hasn’t got worse as it was already a bit low.

“As for Egypt, the whole country, business in the ports is less. But for DP World, with 60 terminals, it is not that much of an effect for us. But I am confident that as Egypt progresses to new governments, things will go back to normal, as that port is very important for Egypt. It is 90 kilometres from Cairo so it definitely serves a very good purpose.”

Despite the regional tensions, and the wider global financial concerns, DP World enjoyed a very solid performance in 2011, with gross volumes to the end 40 / JANUARY 2012

of September up 11 per cent year-onyear. How much of a factor in these figures was the company’s presence in a number of emerging markets, including India, China and Africa?

“The thing about DP World is we are very experienced in this business.

We’ve been in this business for 45 years, starting from Port Rashid and so on.

we create the demand. We focus on emerging markets naturally but you see we are a customer-driven company.

Customers want us in certain markets.

So we will be in the emerging markets because our customers will have said we need you in emerging markets.”

Oliver Cornock, the Oxford Business Group’s regional editor for the Gulf

“We’ve been in this business for 45 years, starting from Port Rashid and so on. So this knowledge and experience and relationship with customers gives us a better feel about how business will evolve and how much is going to come.”

So this knowledge and experience and relationship with customers gives us a better feel about how business will evolve and how much is going to come.

This helps us to shape our destiny.

“We do get surprised in the markets, ‘oh, wow, we were less in this’, but

and Middle East, believes DP World’s business model has been well targeted.

“Future expansion in world trade will be driven by emerging economies and DP World has shuffled its investments to be a leader of the pack in those parts of the world. Take Senegal, for example,

COVER STORY

where the company has introduced ‘window berthing’ – a system of booking specific times to berth unique to West Africa. Lying at anchor costs ship owners a fortune and this sort of innovation not only enhances the DP World brand but also brings client loyalty.”

DP World is pushing into many parts of the world but one area where it is conspicuous by its absence is the US. In a much-publicised move the firm bought British shipping and logistics firm P&O for $7 billion in February 2006 after outbidding Singapore’s PSA International.

Part of the transaction saw DP World take over the operation of a number of US ports.

But the deal sparked an immediate outcry in the US with conservative politicians and commentators questioning the wisdom of allowing an Arab owned company to control US ports. DP World swiftly sold on the US ports operation part of its P&O acquisition to the AIG Global Investment Group, an American firm, for an undisclosed sum.

Bin Sulayem claims the US ports constituted “only five per cent” of the overall deal. He is also not looking to enter the US ports sector any time soon as such a move no longer fits with DP World’s present strategy.

“When it happened we sold, we were asked to sell, we sold. Really in the US, we have no plans for going because we have developed major ports for big shipping lines, those using very big vessels, vessels that demand 17 metre

quays. That’s where our value is – we are very experienced in equipping and managing deep water container ports.”

For Bin Sulayem the fact the US favours much shallower 12 metre ports means the country is presently not “compatible” with DP World’s core business focus.

One development which is certainly central to DP World’s current plans is the on-going London Gateway project which will have a fully operational capacity of 3.5 million TEU per year and will comprise a vast logistics parks. DP “Bin Sulayem was initially World recently stated the port would sceptical about the merits commence operations by Q4 2013 and of the London Gateway it will commit $1 billion to its greenfield site in Essex construction over the next three years.

But Bin Sulayem was initially sceptical which was part of the about the merits of the greenfield site P&O takeover and readily in Essex which was part of the P&O admits he would have takeover and readily admits he would sold it at the time of the have sold it at the time of the buyout, buyout, regarding it as regarding it as “excess baggage”, but “excess baggage”, but now it is a key project.

“We didn’t understand the significance now it is a key project.” because, to be honest with you, we always like brownfields – a port 55m* TEU that is operating and we expand it. We love that. Why? Because with a brownfield you get 50m TEU experience of the port and then you see how the business is going to move and that reflects in the expansion. The expansion will be exactly what that port needs and 43.4m TEU you are equipped with the experience.”

For Oliver Cornock the long-term appeal * Projected volume based of the London Gateway on the first nine months project is significant. of 2011 “The difference here is geography. The site is just 25 miles from central London and the attractions of having a deep water port so

CARGO VOLUMES HANDLED BY DP WORLD ACROSS PORTFOLIO SOURCE: DP WORLD INFOGRAPHICS: TARAK PAREKH

46.8m TEU

43.3m TEU

2007

2008

2009

2010

2011

GULF BUSINESS / 41

NAVEED AHMED

close to so many people, in London and beyond, are obvious.

“Onward transport costs will be slashed and this is not a port project operating in isolation. Gateway includes an adjacent logistics park that could be the biggest in Europe.”

DP World, which trades on the Nasdaq Dubai stock exchange, also chose to list on the London Stock Exchange last summer and some analysts speculated this might be a precursor to a stake sale by parent company Dubai World but Bin Sulayem pointed to other reasons being behind the decision.

“Many shareholders want to be in an OECD (Organisation for Economic Co-operation and Development) country, also many investors, by their charter, are not allowed to invest outside the OECD which we are not in. So this prompted us to be in an OECD country as a secondary listing.”

Since DP World began trading in London any hopes of additional financial liquidity via a pool of new investors have been hit by the turmoil affecting the markets and Bin Sulayem admitted that, “basically, stock markets don’t reflect the value of companies especially today in the world.”

DP World may be expanding but, longer term, it could face increasing

1972

PORT RASHID, a man made commercial port, opens in Dubai with a capacity of less than 100,000 TEU per annum

1976

Work commences to construct a second port in Dubai at JEBEL ALI, which is inaugurated in 1979

DUBAI PORTS: THE STORY STORY SO FAR INFOGRAPHICS: TARAK PAREKH

42 / JANUARY 2012

COVER STORY

competition in its home market in the Arabian Gulf. In the UAE itself, Abu Dhabi is developing its ambitious Port Khalifa project, alongside a major industrial zone, which should see an annual capacity of 15 million TEU by 2030.

M.R. Raghu, the senior vice president, research at the Kuwait Financial Centre believes the “emerging economies in Asia and Africa” will absorb the extra capacity set to come on stream in the UAE in the years ahead but DP World could see its market share trimmed by infrastructure spending in other Gulf states.

“Kuwait and Qatar have large capacity expansions lined up. Kuwait is expected to invest $2.2 billion for the Bubiyan port project, which will have a capacity of 2.5 million TEU. Qatar is developing a New Doha Port with an estimated investment of $5.5 billion to handle six million TEU when it is fully complete.

Yes, the UAE might see its dominance being reduced because of expansions in other countries.”

Bin Sulayem feels “the beauty of DP World” is that it has always been in

competition with other port operators and this has helped it understand the market and new terminals in the region are a natural development.

“I think all the ports that are created serve a need, an important need. There is a market demand and they will satisfy it. Each port will satisfy it in its region.

No port will take business away from another port.

“Whether it’s Qatar or whether it’s others, a country needs a port. Creating

“Kuwait and Qatar have large capacity expansions lined up. Kuwait is expected to invest $2.2 billion for the Bubiyan port project, which will have a capacity of 2.5 million TEU. Qatar is developing a New Doha Port with an estimated investment of $5.5 billion to handle six million TEU when it is fully complete.”

a port doesn’t mean suddenly there is going to be a shift. We have to be competitive of course but I don’t really look at opening other ports as a threat to DP World because obviously you are looking at growth.”

Bin Sulayem suggested the Gulf Cooperation Council countries were presently witnessing huge growth and substantial development plans. As a man who experienced the ups and downs of the last five years in Dubai at such close hand, his view of the future prospects for the UAE are particularly note-worthy.

“The uncertainties that surround business in many countries are basically attracting people to stable markets. The UAE has shown that it is stable, has shown that it is a pro-business country.

“I believe that with whatever uncertainties there are in the world, including uncertainties in Europe, I believe that investors who have been accumulating cash in the last year of the crisis are looking for places to invest and the UAE is going to be one of the more preferred countries for investment by companies – no doubt about it.”

2011

2005

With a presence on six continents and a portfolio of more than 60 terminals, DP WORLD lists on the LONDON STOCK EXCHANGE

DP WORLD is established through the merger of the Dubai Ports Authority and Dubai Ports International

2010 1985

The JEBEL ALI FREE ZONE is set up with Sultan Ahmed Bin Sulayem, the project’s first chairman

2006

DP WORLD buys P&O for $7 billion but immediately has to sell off several American ports, which were part of the deal, after an outcry in the US

Construction work gets underway at the site of LONDON GATEWAY, which DP World is set to develop into Europe’s largest combined deepsea port and logistics park

GULF BUSINESS / 43

BANKING ON THE

RIGHT DNA Recruiting private bankers in the Gulf is no easy matter.

TEXT BY JONATHAN SHEIKH-MILLER

ILLUSTRATION: TARAK PAREKH

A

ccording to the GCC Private Banking 2010-2011 report drawn up by Booz and Company, the private banking sector in the Gulf Cooperation Council region, is worth around $1.2 trillion. The report suggests that there could be more than 800,000 households in the UAE and Saudi Arabia with $200,000 or more in “stable investable assets”.

If that wasn’t significant enough, the World Wealth Report 2011, published by Merrill Lynch Wealth Management and Capgemini, estimated that 2010 had seen a 10.4 per cent rise in the number of HNWIs in the Middle East (those with financial assets of more than $1 million excluding their primary residence) with

44 / JANUARY 2012

the total now hovering around 400,000.

So the opportunity for private banks in the region is obvious but according to Booz and Company, many wealthy individuals in the GCC lost 30-40 per cent of their net worth in the financial crisis of 2008-2009 partly due to “poor advice”.

One aspect of the problem is that the Gulf’s private banking sector has some of the highest staff turnover rates in the world according to Patrick Thiriet, CEO wealth management MENA, BNP Paribas. He also points to “too much focus on short term remuneration and overall mismanagement of expectations both on the employees’ and on their employers’ sides.”

Elizabeth Hackford, the managing director of Hackford Consulting, an

executive recruitment firm that specialises in the financial sector, sees several factors behind the turnover rates in the Gulf but she too believes money should not be a main reason for changing posts.

“There are many contributing factors and for true private bankers a better salary should not be the key driver. An accomplished private banker is more likely to move because a firm offers a better platform, clearer strategy and more stability – ultimately the real private bankers make these choices based on what their clients want.

“The frequent turnover is caused by poorer performing bankers who reach the end of their guaranteed bonus lockin period and literally move to ‘upgrade’ their package again. It’s staggering how many moves they get away with, but sometimes if they can guarantee the transfer of just two or three large client accounts then the new employer is happy.

“Regular changes in senior management

BANKING

also prompt waves of new recruits and departures, mostly driven by politics. And I have to admit that frequent turnover of staff is of course exacerbated by recruitment agents, whose very aim is to move bankers from one place to another.”

Not surprisingly, some CVs also tend to be “embellished” by applicants trying to make themselves more attractive to employers in the market place, said Thiriet.

Hackford says this does occur. “This is inevitable and is common across all industries in sales roles. In all cases we make every effort to substantiate claims made in CVs especially where numbers are mentioned.”

It isn’t often that you will hear a senior manager in the finance sector referring to an economic crisis in relatively positive terms, but Thiriet, speaking after his keynote speech, thought the downturn in 2008-2009 had its benefits as it allowed for the removal of some of the less talented bankers in the region who had come into

the sector in the onshore private banking boom during the previous few years.

“In any correction, the major beneficial effect is that for the weaker players there is a real ‘come back to reality’ phenomenon. This happened here and I think it normalised the market in some ways and, for me, 2009 was actually the best window of opportunity to get some good people with reasonable conditions and because they had a genuine reason to move and not just being driven by money or greed. So the second wave of the crisis was actually a good move for the industry in the long run.”

For Patrick Thiriet, recruiting the right people revolves around the “wise management of expectations” and “DNA

matching” whereby the new employees share the same outlook and priorities as the bank itself and they subsequently develop into solid, reliable team players. Thiriet has mapped out a set of fundamental questions that he believes any private bank’s management should ask itself after entering the local market and launching a search for new talent.

“The first question is why do we want to be here? Secondly, who are our target clients and do we have a starting base that we can capitalise on? Then, what is our competitive edge and what are our clients’ expectations and what can we provide better than most of the other players? Then, once you have a clear view of all this, you can start recruiting

“Frequent turnover is caused by poorer performing bankers who reach the end of their guaranteed bonus lock-in period and literally move to ‘upgrade’ their package again. It’s staggering how many moves they get away with.”

GULF BUSINESS / 45

BANKING

for bankers in line with this, those who share the same values.

“For me, it is like a good marriage, you need good DNA matching, good management of expectations and then you can go ahead to build something together. Banks first need to have a value proposition in hand before finding the right people to deliver it.”

In 2009, BNP Paribas decided to target private bankers who had at least four or five years in a senior role in their previous position. Thiriet said this level of experience was meaningful because “this is the minimum time horizon that both an employer and an employee should look at when signing a contract in this industry.” He estimates that around 80 per cent of the CVs he saw failed to meet this requirement.

Arnaud Leclercq, head of Middle East, Eastern Europe and Central Asia, Lombard Odier, reveals that experience, particularly in an international environment, is a definite priority.

“Our core focus is on bankers from various nationalities who have some private banking experience with an international institution. We pay special

Elizabeth Hackford, the managing director of Hackford Consulting

“In the various jurisdictions in which I have operated, I’ve never seen so much politics getting in the way of business as I have seen here in the Middle East.

The bigger problem here is poor appointment choices at the senior management level.” attention to bankers with international investment experience, and less on experience in local markets.

“We have a very long selection process for the vetting of bankers, and we hand pick them on an individual basis. To give you an idea, over the past two years, I have interviewed more than 200 people both in Europe and here in the region.”

Elizabeth Hackford does not think every private bank has such a meticulous approach to finding, and then developing, new recruits and the criteria she employs when hunting for talent can differ between institutions.

“It will always depend on what the employer is looking for because – believe it or not – some of them have a very short term view and require delivery within six months of a new joiner starting. In my opinion, what makes a strong private banker is the depth, substance and longevity of his/her client relationships.

“I am impressed by private bankers who focus on the needs of their clients when considering a move. Additionally, I would not expect a strong private banker to make more than two or three moves during his private banking career.”

Patrick Thiriet claims that the recruitment model he follows has helped him in the retention of staff. In the past three years, 16 new employees have been recruited by BNP Paribas Wealth Management - many of them bankers – and only two have left. He feels a major factor in successful recruitment is avoiding what he calls “love at first

sight” appointments whereby the profile of a new employee does not ultimately fit with the bank’s outlook or approach to business. He is also very wary of what he calls “star performer” bankers whose remuneration demands tend to be excessive and who can be “challenging” to manage and adapt to a team.

Elizabeth Hackford feels that while an inadequate and poorly thoughtout selection policy is bound to create problems for banks, other vital issues need addressing within the upper management structure of some financial institutions.

“I see more bogus hires coming from newly appointed senior managers who bring across ex colleagues and friends whilst they build a mini empire. The result is usually a political minefield.

“In the various jurisdictions in which I have operated, I’ve never seen so much politics getting in the way of business as I have seen here in the Middle East. The bigger problem here is poor appointment choices at the senior management level.”

Nevertheless, the concerted attempts by some of the region’s bigger or internationally renowned private banks to raise the bar in the recruitment process is undoubtedly well timed as the widespread finger-burning which occurred among many HNWIs in the region during the 2009 financial crisis has, according to Booz and Company’s report, engendered a new sceptical outlook among investors.

“Clients will be more cautious about, even suspicious of, product recommendations. They will want the GULF BUSINESS / 47

BANKING

selection criteria and process for providers and products explained to them.

“Investors’ new conservatism and their disillusionment with the advice they received previously create a rare opportunity for private bankers to gain market share with an appropriate, clientcentric product and service offering.”

But the fact is many private bankers, regardless of their previous pedigree, still enjoy the possibility of boosting their cut of the revenues they generate by pushing more products on to their clients. Patrick Thiriet thinks effective recruitment is crucial in allaying this risk.

“Fortunately, we select the right people who value their long-term relationship with their clients as the most important asset that they have and the most important asset for the bank as well. So, we do not put ourselves in situations where you have the pressure of commissions leading to abnormal margins or transactions that are not in the clients’ interests.”

Thiriet also emphasised that the majority of his bank’s revenues were recurring and not linked to commissions, with this being “the advantage of the private banking business model versus the brokerage oriented model.”

Arnaud Leclercq strongly believes the allure of commissions can threaten the impartiality of private bankers.

Patrick Thiriet, CEO Wealth Management MENA, BNP Paribas

48 / JANUARY 2012

PRIVATE BANKING SNAPSHOT A third of private banking clients in the GCC prefer Shariah compliant products to conventional ones

Ultra High Net Worth Individuals in the GCC were worth an estimated $380 billion in 2010 50-60 per cent of investors in the GCC keep their investments offshore — one of the highest rates in the world

INFOGRAPHICS: TARAK PAREKH

“But the fact is many private bankers, regardless of their previous pedigree, still enjoy the possibility of boosting their cut of the revenues they generate by pushing more products on to their clients. Effective recruitment is crucial in allaying this risk.

Expatriates in the GCC were worth a total of $265 billion in 2010

(COMPILED FROM BOOZ AND COMPANY, GCC PRIVATE BANKING 2010-2011 REPORT)

“A real private banker’s job is to provide the best services, solutions and investment advice to their clients. This is why our bonuses are discretionary. None of our bankers have targets to push products on to clients.

“Some banks do pay people with commission-based formula i.e. when they generate x money they get y per cent. We do not operate in that way, as we believe that this creates a conflict of interest with the client. A good private banker is the one who proposes what is most suitable for the client at that moment in time.”

Poems by H.H. Sheikh Mohammed bin Rashid Al Maktoum 40 Poems From The Desert is available in both English and Arabic at all leading retail outlets in the Gulf and at booksarabia.com

CHINA AND GCC

THE DRAGON UNLEASHED

China’s liberation policies have set the stage for the Renminbi to emerge as the world’s third currency by 2015. The Gulf must prepare itself for a new global economy even sooner than expected.

TEXT BY ALICIA BULLER

I

ncreasingly, the world is running in two gears. Amid a backdrop of economic stalemate in the US and the West, the emerging markets are glowing ever more luminous.

In a telling and historic shift last year, the US lost its crown to China as the Gulf’s largest trading partner. The total value of trade between the GCC and China is projected to reach $500 billion by 2020 – with bilateral volumes growing at an average rate of 40 per cent 50 / JANUARY 2012

since 1999, according to the Chinese Ministry of Commerce.

China, which has already surpassed Japan as the world’s second largest economy, is projected to become the globe’s largest economy by 2025, if not earlier.

“The advanced economies run the risk of a ‘lost decade’,” says Dr Nasser Saidi, chief economist at Dubai International Financial Centre (DIFC). “By contrast, emerging market economies will likely

continue with robust growth – 6.1 per cent during 2012. This represents a growing de-linking from the advanced economies.”

China remains the most active market in the world – last year alone, 350 companies went public. And the Gulf’s trading relationship with the red dragon is becoming ever more sophisticated, from traditional products of textiles and electronics, to technology and pharmaceuticals, to clean energy, mobile applications and financial services.

CHINA AND GCC

CHINA EXPORT GROWTH TO 2050 SOURCE: HSBC ESTIMATES INFOGRAPHICS: TARAK PAREKH

In the UAE alone, there are around 4,000 Chinese operating companies and more than 150,000 Chinese residents. The ‘gateway to the Middle East’ boasts a favourable location, tax regime and infrastructure, as well as access to regional and international markets; Africa, in particular, is a continent neon-lit with opportunities for China’s hungry and rapidly expanding corporations. Increasingly, Chinese firms prefer Dubai’s secure

infrastructure to Johannesburg and other African capitals as a springboard for doing business in the continent.

HE Hamad Buamim, director general, Dubai Chamber, says: “China is a major supplier of manufactured goods to the world and with demand for consumer products increasing in India, Central Asia and Africa, there is an opportunity for Dubai to be a gateway for this trade triangle. China already has significant investments in Africa and is

the continent’s biggest trading partner, purchasing more than one-third of its oil.

“Dubai is strategically located close and has a number of investments in the continent, like the Port of Djibouti which is operated and managed by DP World.

Dubai can offer Chinese and Asian traders access into and out of African markets.”

Currently, hydrocarbons, of course, continue to drive the bulk of the GCC and China trade relationship. China now imports 55 per cent of its oil, and GULF BUSINESS / 51

CHINA AND GCC HE Hamad Buamim, director general, Dubai Chamber

half of this is sourced from the Middle East. China’s annual trade relationship with Saudi Arabia alone totals $60 billion, with the Saudis selling not just petroleum, but also chemicals, for the country’s surging manufacturing sector.

Last year, Saudi Aramco, the world’s biggest oil producer, agreed to build two refineries with Chinese national energy companies, China National Petroleum Corp and Sinopec. Aramco CEO Khalid Al-Falih said in a statement in March 2011: “We don’t consider ourselves simply sellers of oil to China, but rather strategic partners whose many relationships in that important country are founded on mutual respect, interdependence and mutual benefit.”

The Chinese are investing heavily, not only in their own domestic infrastructure,

DOING BUSINESS IN…

but international projects that help to guarantee continued access to global resources for its behemoth population of 1.3 billion and counting.

“Chinese growth will come through fixed investment – motorways, construction and infrastructure. We’re predicting six to eight per cent GDP growth over the next five years, and two to four per cent inflation,” says Cesar Perez, chief investment strategist EMEA at JP Morgan.

“They will need more oil, more goods, to drive this growth. China will want to connect with resource-rich countries and this is a great opportunity for the Middle East going forward over the next five years.”

THE REDBACK IS COMING The continued fallout from the global economic crisis of 2008 has fast-forwarded a story that was already unfolding.

According to Dr Saidi, the Renminbi (RMB) currently makes up one per cent of world currency reserves, but will emerge as the third global currency and represent about 18 to 24 per cent of global bank reserves by 2015. In his report The Redback Cometh, Dr Saidi adds that he expects cross-border settlement volume of the RMB to account for between 30-50 per cent of China’s export-import volume, rising to $2 trillion by 2015.

Today, China’s financial markets remain largely domesticated, but the country’s 12th Five Year Plan objectives for capital account convertibility and the removal of internal distortions could soon lead to interest rate liberalisation and the development of debt capital markets and money market instruments.

“There are increasing calls for the RMB to become an international payment, investment and reserve currency,” says Dr Saidi. “However, the move towards internationalisation necessitates the development of an onshore capital market complemented by domestic policy reforms leading to a changed financial structure, with lower dependence on bank financing.”

This year both HSBC and Mashreq have launched China-centric services for its UAE customers, allowing their clients to open accounts to trade directly in the RMB currency, as well as offering trade services and two-way investment advice.

“Twenty months ago there were virtually no offshore trade transactions taking place in RMB. Today approximately 10 per cent of Chinese trade transactions are settled in RMB. The RMB has overtaken sterling as the third most commonly used currency to settle trade transactions,” says Nick Levitt, head of commercial banking, HSBC UAE.

SOURCE: DR. RAYMOND H. HAMDEN, CLINICAL AND FORENSIC PSYCHOLOGIST, HUMAN RELATIONS INSTITUTE

CHINA

ARABIA

n Chinese management style is authoritative and directive, and managers are expected to make decisions on behalf of the group. Yet, relationships are deemed to be unequal and these inequalities are respected.

n The Geert Hofstede analysis for the UAE is almost identical to other Arab countries, the Muslim faith plays a large role in the people’s lives.

n With the great influence of Confucian philosophy, elders automatically receive respect from those who are younger, and the same goes for the relationship between seniors and subordinates. n Open conflict is avoided at all costs, even if upper management is clearly making a wrong decision. Again, the decision making process within Chinese firms is based on respect, evasiveness, hierarchy, and discipline. n When it comes to signing contracts, the Chinese see an agreement as a start of a relationship rather than an official business accord.

52 / JANUARY 2012

n Large power distance and uncertainty avoidance are the predominant characteristics for this region. n Both UAE and China are predominant in power distancing. The UAE was strong in both power distance and uncertainty avoidance, while China was strong in both power distance and long-term orientation.

GLOSSARY n POWER DISTANCE INDEX (PDI) focuses on the degree of equality, or inequality, between people in the country's society. A high power distance ranking indicates that inequalities of power and wealth have been allowed to grow within the society. n UNCERTAINTY AVOIDANCE INDEX (UAI) focuses on the level of tolerance for uncertainty and ambiguity within the society — i.e. unstructured situations. A high uncertainty avoidance ranking indicates the country has a low tolerance for uncertainty and ambiguity. n LONG-TERM ORIENTATION (LTO) focuses on the degree the society embraces, or does not embrace, long-term devotion to traditional, forward-thinking values. High long-term orientation ranking indicates the country prescribes to the values of long-term commitments and respect for tradition.

CHINA AND GCC

A TASTE OF CHINA

GETTY IMAGES

n Chinese tourists in Dubai increased 50 per cent in 2009 and a further 50 per cent in 2010.

The China National Offshore Oil Corporation at the World Petroleum Congress (WPC) in Doha.

“Over 210 billion worth of RMB bonds were issued in Hong Kong alone in 2011, the currency has come so far today and from a very low base. There is a critical mass and the RMB is going to be a great growth story. You will see Chinese banks rapidly growing their presence in the Gulf over the next few years.”

INVESTMENT PLANS While the Chinese government’s most recent challenge was juggling high inflation rates, today the threat of dwindling global demand, caused by a potential Eurozone implosion, adds uncertainty to the country’s growth trajectory. But the knock-on effect

“As Europe and the US buckle under the strain of economic, fiscal and regulatory turmoil, the West will be constrained in its traditional role of investing and co-operating with the Gulf region, leaving a ripe window for the GCC and China to strengthen their links.”

of reduced business from the US is debatably a small matter for a country that is sustaining its own momentum with a globally unprecedented level of domestic infrastructure building. Experts say China’s charging GDP will remain well above the world average; however, even closer attention will need to be paid to liberalisation plans.

“With a growth slowdown overtaking inflation as China’s big risk, such inflexibility may prove dangerous,” says J.P. Morgan’s Perez.

The investment strategist adds that US investment bank J.P. Morgan holds around five per cent of its global funds in the emerging markets, with most of that money in Asia. Perez adds that Chinese private equity and bond options are attractive.

“But there are concerns about the Chinese property market, and many companies are quasi-government entities – they are not for shareholders.

So the equity markets are not the best vehicle for accessing China; some of the corporate entities are heavily regulated and not run for profitability,” he adds.

“We believe in China’s long-term macro-economic plans and growing RMB-denominated markets. We also believe investors have ample means to

n China is the largest foreign investor in Brazil, Laos, Myanmar, Iran, Mongolia and Afghanistan. n China accounts for five of the world’s top 10 biggest container ports: 20 years ago, not one Chinese port was in the top 20. n Riversdale, the Australian-listed company developing coalfields in Mozambique, is eight per cent owned by China’s Wuhan Iron and Steel, 22 per cent owned by India’s Tata and 16 per cent owned by Brazil’s CSN. SOURCE: THE SOUTHERN SILK ROAD REPORT, HSBC

get exposure to the China story through both direct and indirect portfolios.”

At the moment, it’s clear that the world is merely scratching the surface of China’s potential. As Europe and the US buckle under the strain of economic, fiscal and regulatory turmoil, the West will be constrained in its traditional role of investing and co-operating with the Gulf region, leaving a ripe window for the GCC and China to strengthen their links.

“The RMB should be used to finance, clear and settle trade between the Middle East, the GCC and China; it is absurd to use dollars and euros to finance our China trade and investment links,” says Dr Saidi.

He urges the GCC to move towards economic integration with China through accelerating the GCC-China free trade agreement, establishing links between financial markets, financing bilateral trade using the RMB, and establishing RMB swap lines with GCC Central Banks.

“The Redback cometh and we need to prepare for this momentous coming.”

GULF BUSINESS / 53

INTO AFRICA

Emerging markets expert Dr Mark Mobius dismisses Euro troubles, but he’s still taking a long punt on the Southern Hemisphere.

PHOTOS: NAVEED AHMED

TEXT BY JONATHAN SHEIKH-MILLER

s Dr Mark Mobius, executive chairman of Templeton Emerging Markets, walks into the Dubai office of Franklin Templeton Investments, he cuts a smart yet distinctly individual figure in a bold, pinstripe blazer.

Such an image should perhaps be expected of a man who has become a regular ‘go to’ guy for a plethora of rolling news channels and publications for his unique, yet vastly experienced, take on the global economic landscape.

Bloomberg Markets magazine placed Dr Mobius well inside their “50 Most Influential People” list in 2011, while he also boasts a sizeable portfolio of book titles and a very popular online blog.

Mobius’ reputation has been hard earned. He has spent more than 40 years working in emerging markets and he presently oversees around $40 billion worth of assets in his present role with Franklin Templeton. Mobius can also back up his views with some hard figures of his own. According to Bloomberg Markets, his Templeton Emerging Markets Fund has beaten its benchmark with 18.9 per cent annualised returns over 10 years.

54 / JANUARY 2012

The on-going global economic strains have hit most investment funds this year but, with such demonstrable longterm upside potential, it was no wonder Dr Mobius chuckled mischievously when a recent comment made by US economist Nouriel Roubini about the potential severe ramifications if the ‘Eurozone blows up’ was put to him.

Mobius ultimately sees a positive outcome to the dizzying chain of events in Europe that has seen borrowing costs of major European economies such as Spain and Italy drift worryingly close to the levels breached by the likes of Greece, whose debt default has been the main precipitator of the current crisis.

The threat of credit rating downgrades has also been hanging like the sword of Damocles over much of the Eurozone.

But Mobius doesn’t believe the Euro is now fighting for its future.

“I see this whole series of events ending up with the strengthening of the Euro because, first of all, these countries realise the Euro has been an incredible blessing. You must consider how trade has increased among European nations and, more importantly, the transfer of people has improved dramatically. You have people from Poland working in

London and people from London working in Italy.

“When you think about it, in the short period of time the Euro has been in existence, it’s been an incredible success so I just don’t see anyone sitting down and saying ‘hey, I really don’t want the Euro’”.

Mobius feels there isn’t really a direct connection between the currency and the Eurozone’s debts as investors wrongly assumed that, because the debts they bought were denominated in Euros, the European Central Bank would automatically cover them. He pointed to the “mistake” made by those who bought Greek bonds in Euros at a time when the Greeks were “up to their necks in debt”. But the crisis, and rising interest rates, will engender significant change.

“A new discipline is being formed which will be very beneficial in the long-run as these countries will have to reform and the process has already begun. The mere fact the top politicians in Italy and Greece have resigned shows there’s a whole new process taking place and it won’t be easy and there will be some resistance,

PROFILE

GULF BUSINESS / 55

but there is a realisation there has to be reform.”

The European debt crisis is, of course, central to fears that the world will imminently slip back into recession and organisations such as the Organisation for Economic Co-operation and Development and the United Nations have recently issued stark warnings about a possible downturn, with the latter predicting a best

MAPPING MOBIUS n Mobius earned a PhD in economics and political science from the Massachusetts Institute of Technology (MIT) n Mobius joined Templeton in 1987 as the president and portfolio manager of the Templeton Emerging Markets Fund, Inc, which was one of the first emerging markets funds n In 1999, Mobius was appointed joint chairman of the Global Corporate Governance Forum Investor Responsibility Taskforce of the World Bank and Organisation for Economic Cooperation and Development n In 2006, AsiaMoney magazine named Mobius as one of their "Top 100 Most Powerful and Influential People" n Mobius has written a number of books including Trading with China and The Investor's Guide to Emerging Markets

case scenario in 2012 of global growth at 2.6 per cent, with a worst case scenario scaled back to just 0.5 per cent.

If the world does slip back into recession, the countries of the Arabian Gulf will be looking keenly at just how far the oil price falls, bearing in mind their ever increasing break even requirements and the fear that even a relatively minor slump could see the likes of the UAE and Saudi Arabia running budget deficits.

Dr Mobius gave a frank assessment of what is required if the price of oil dips.

“The countries in the Gulf will have to cut back on spending and they are going to have to loosen up on investments and allow more to come in to boost growth.

The same situation applies in the US and Europe. Dubai will do fairly well as it has an open policy but I think other countries will have to follow the same route – most notably Saudi Arabia which is pretty restrictive.

“This is why a place like Hong Kong thrives under the worst circumstances because they just roll with the punches.

They allow things to open up, people come and go, and they adjust to the situation.”

Mobius expects the world’s wealthy to flock to Dubai to avoid taxes.

56 / JANUARY 2012

Mobius acknowledged that the fall-out from the Arab spring could well provide some sort of buffer to the UAE if a global downturn occurs but he also sees additional potential gains for Dubai.

“Looking on a global scale, even in a recession, there are going to be a lot of high net worth individuals. If we get a government reaction during a recession, to raise taxes, put in more restrictions, then there will be a retreat from the developed countries to places like Dubai.

“People will say ‘Why should I be in the US? Why should I be in Europe?

I’m going to go to tax-free Dubai and enjoy my life.’ Dubai has an incredible reputation globally.”

For a man who has spent much of his working life searching for attractive opportunities in emerging markets, Mobius has an astute eye for undervalued stocks.

In recent months, he has espoused the potential of equities in the likes of Brazil, Russia and Turkey, while recently he was quoted as saying Indian stocks looked “interesting” as the BSE India Sensitive Index (Sensex) touched a two year low in late November. Indeed Credit Suisse has predicted further significant negative movement in the Sensex moving forwards.

But the Sensex’s woes are nothing compared to those experienced at the Dubai Financial Market, where a sevenyear low was hit in November 2011.

Many of the Gulf region’s stock markets seem set to end 2011 comfortably in the red and trading activity has also been thin. Surely such conditions must offer some significant upside potential?

“Most definitely. But there is tremendous upside potential globally.

Some stocks now are getting really cheap and particularly in emerging markets.

These markets tend to get hit more when there is gloomy news and therefore there is better opportunity, because things have gone down more than they should.”

Dr Mobius explained the vulnerability in emerging markets stems mainly from the fact many western investors opt out of what they consider “risky” options at the first sign of global uncertainty or change.

PROFILE

He added that this was an instinctive reaction and these investors didn’t “look at the numbers” which indicate emerging markets growing at three times the rate of developed ones and emerging currencies also performing well. He said there was a direct move into the apparent safety of currencies like the dollar.

But gradually these investors are slowly learning to tolerate more of the volatility and new players, with different mind-sets, are also taking on a bigger role.

“The emerging market countries themselves are becoming more predominant in emerging markets. So they are beginning to put money in, and their behaviour is different, although one problem they face is that the very big sovereign wealth funds, like Singapore, have their emphasis on US dollars as that’s where the liquidity is.

“But this too is changing and they are now beginning to think about diversification, particularly the Chinese.”

Mobius predicts that the likes of China, with its large fiscal surpluses, can simply hold on to its present stock of US treasuries and can use new funds to diversify into other areas including promising “frontier markets” in Africaand this is something some of the cashrich Gulf states should look to do too.

“What I would like to see, more and more, in this part of the world is for countries to look south, to Africa, because

The countries in the Gulf will have to cut back on spending and they are going to have to loosen up on investments and allow more to come in to boost growth. Dubai will do fairly well as it has an open policy but I think other countries will have to follow the same route – most notably, Saudi Arabia which is pretty restrictive.”

that’s where the big opportunity is for them. They should do more, spend more, invest more into that part of the world.

“I’m not saying it’s easy, there’s problems with corruption, there’s problems in every direction but I think people have proven that you can make money and you can survive in those environments.”

A number of Gulf based investors have been keen to invest in this rapidly growing region. For instance, Abu Dhabi based telecommunications firm Etisalat has stakes in several operators across the continent, including in Nigeria, Tanzania and Sudan, while Mohammed Ali Alabbar, the executive chairman of Dubai based real estate firm Emaar, is building up a portfolio of industrial investments across Africa through his firm Africa Middle East Resources. Kuwaiti telco firm Zain had a major presence across sub-Saharan Africa until 2010, through Celtel, which it then sold on to India’s Bharti Airtel.

But clearly many opportunities exist and Prince Alwaleed Bin Talal bin Abdulaziz Alsaud, the chairman of Saudi Arabia’s Kingdom Holdings Company, has recently expressed a desire to invest in Nigeria. His private equity firm, the Kingdom Africa Management Company, already has several interests in African countries.

Dr Mobius has significant money invested in Nigeria but he is now looking at infrastructure projects including electricity generation, with demand increasingly outstripping supply in the country.

“These are basic things that these people require and you can reach agreements if you get down and talk. The good thing is, if you really work at it, you can get guarantees from the African Development Bank or the World Bank and so on and you can set up some very profitable operations. We are finding a lot of opportunities in this part of the world.”

Africa is undoubtedly one emerging market that Mobius has in its sights but “at the end of the day, it’s got to be India and China” where further “big growth” is likely in the immediate future.

Dr Mobius hails from Long Island,

KNOWING NIGERIA

n According to the World Bank, Nigeria’s GDP reached $193.6 billion in 2010 and grew by 7.9 per cent in the same year n OPEC estimates that Nigeria has proven oil reserves of 37.2 billion barrels, representing 3.1 per cent of the global supply n The US State Department estimated that bilateral trade between Nigeria and the US hit $34 billion in 2010, a 51 per cent increase from the year before n Prince Alwaleed Bin Talal bin Abdulaziz Alsaud’s private equity vehicle Kingdom Zephyr Africa Management opened an office in Lagos last year n 54.7 per cent of Nigeria’s population lives in poverty according to the World Bank

New York but his long career has regularly taken him around the world to all manner of developing economies.

What has attracted him to the emerging markets sector for so long? Is it basically the growth prospects and the potential that exists or is there something more?

“Growth is where it’s at and is really most exciting but, to me, I think also the much-used term globalisation. You see the impact of technology in these countries, which is really exciting.

Because you see them leap-frogging all the steps the UK had to go through, the industrial revolution, and they are just jumping from here to there.

“Cell phones are a good example, with communications. Now in Kenya, somebody can send money to his relatives halfway across the country by just going into a shop and depositing it and getting a code. I mean this is an amazing development.”

GULF BUSINESS / 57

SMALL CHANGE

As the UAE climbs into steady recovery, is it any easier for small businesses to access bank lending?

TEXT BY MARK ATKINSON

58 / JANUARY 2012

BANKING

GETTY IMAGES

S

mall and medium-sized businesses in the Emirates have often had their gripes about being overlooked in terms of bank finance – and even when qualifying for a loan, how much red tape they have to cut through in the process. But SMEs have increasingly become a force that’s difficult to ignore.

They are thought to comprise around 80 per cent of the total UAE economy and according to Moneyworks will add $100 billion and two million jobs to the wider GCC over coming years.

This has not escaped the UAE government’s attention. Earlier this year the Mohammed Bin Rashid Establishment for SME Development (Dubai SME) launched the SME 100, for the top hundred small businesses that qualify against a number of financial and non-financial evaluation criteria.

In Abu Dhabi, the Khalifa Fund, with a total capital investment of Dhs2 billion, is designed to foster Emirati entrepreneurship through training, development and consultation.

ZonesCorp, which develops and manages specialised economic zones in Abu Dhabi, will reportedly offer 25 per cent discounts on land for business start-ups via the Khalifa Fund.

The UAE government has recently been in discussions with banks about opening funding facilities for small businesses. Firms that qualify for initiatives such as the SME 100 and Khalifa Fund will likely get easier access to funding from banks and investors.

On the surface this may be a positive.

However, there is the possible cause

and effect that other promising and innovative firms may become starved of finance simply because they are not part of these initiatives. Banks will need to be wary of not skewing the playing field.

Nicholas Levitt, head of CMB, HSBC UAE, doesn’t believe this to be an issue: “There are in the region of 175,000 SMEs in the UAE. If a bank only lends to

“There are in the region of 175,000 SMEs in the UAE. If a bank only lends to businesses involved in these initiatives it will have a tiny market share.”

– Nicholas Levitt, head of CMB, HSBC UAE

GULF BUSINESS / 59

Hameed Noor, Head of SME, Mashreq

businesses involved in these initiatives it will have a tiny market share.”

Tom Smith from United Arab Bank adds: “There are several banks that have launched their SME propositions for the first time. The various government-led initiatives such as SME 100 or the Khalifa Fund have been welcomed by the banks as they give additional impetus to the sustained growth and development of the segment... SMEs are the backbone of any emerging economy in general and the UAE in particular.”

SHIFTING PRIORITIES Lending attitudes certainly seem to be changing – at least when you talk to banks. In recent years many have developed dedicated departments to service small businesses. One of the earliest entrants was HSBC, which launched its dedicated SME department, Business Banking, around eight years ago. In 2010, it signed an MOU with the UAE Ministry of Economy, committing $100 million towards SMEs and extended it by a further $100 million this year.

Yet, concedes Levitt, while the financial crisis impacted all areas of the market, SMEs were one of the hardest hit.

Mona Syed-Mirza, CEO, Biolite Aesthetic Clinic

60 / JANUARY 2012

“More recently there has been a renewed level of interest towards SMEs, with up to 10 banks pushing this specifically,” he comments. “Other international banks have pulled away from the sector. They’ve downsized their footprint in the country and consolidated towards more-specific activities – corporate banking for example. HSBC’s SME loan book has grown faster than its corporate one.”

Another reason for banks to focus on SMEs is the tightening of the personal loan market, with recent stipulations such as a compulsory 20 per cent down payment on vehicle loans and maximum debt burden ratio of 50 per cent of gross income. With a decreased level of consumer lending, banks will need to find sources of interest income from other segments of the economy. One of the beneficiaries, it is thought, will be SMEs. This will be welcome news. Up to now, says one industry source, small businesses have accounted for less than two per cent of bank lending portfolios.

This compares to an average of 12-15 per cent in some more developed countries.

Mashreq Bank’s Majestic SME Finance offers a free business account with no minimum balance, business credit and debit cards, access to its MashreqBusinessOnline internet banking service and a dedicated relationship manager. It also offers Shariah-complaint SME financing.

Hameed Noor, head of SME banking, sees huge advantages in the segment.

“Banks naturally like to diversify their portfolios and SMEs offer a large and diversified base of customers,” he feels.

“This helps in overall risk management of the lending portfolio (within) one of the most dynamic segments of the economy.

“During and after the recent downturn, SMEs were amongst the more resilient entities – primarily driven by the entrepreneurial spirit of their owners,” he continues. “This has resulted in an increased confidence amongst bankers. Banks are equal

“Every bank has its own individual criteria for assessing risk before a loan is given. Banks would like to see the track record of financial and other business performance as part of their credit assessment.

Additionally, banks generally support established businesses.

They are not into venture capital or angel funding.”

BANKING

partners as their role isn’t simply lending but also guidance and continuous mentoring for new start-up SMEs.” Digital electronics supplier, Merlin Digital, operates two retail stores in the UAE, in Sharjah and Dubai. As for SMEs being resilient to the downturn, “It may be due to a lower cost structure and less red tape, allowing decisions (to change) based on shifting market realities almost immediately,” says the company’s director, Suhail Bachani.

“On a broader spectrum it is evident that many SMEs not only survived the global economic crisis but have also witnessed growth,” adds Vikas Thapar, head of business banking, Emirates NBD. “Smaller lending (amounts) to SMEs within diversified industries makes more economic sense from a risk and revenue perspective. Most banks [in the region] have now realised the significance of the lucrative SME segment and it is encouraging to see them start dedicated offerings. ” The growing issue of nationalisation has played its own part in the encouraging the entrepreneurial spirit.

“I don’t think banks were ever a good support to entrepreneurs. It is not about establishing SMEs, it’s about establishing a culture. One returned cheque in your account means the end of your relationship with the bank, while a delayed payment by just days means the end of your record with them. Banks need to start learning the entrepreneur’s language.”

Mohamed Amiri, deputy CEO, Ajman Bank

Emirates NBD’s own initiative, Tomooh, focuses on providing assistance to young UAE entrepreneurs. The bank has also launched its Seed Capital initiative offering up to Dhs2.5 million for UAE nationals to start their own enterprise.

LIP SERVICE? Resilient as some may have been to the downturn, SMEs don’t always agree with bank rhetoric. “I personally don’t think banks were ever a good support to entrepreneurs,” feels Mohammed Johmani, founder of the O2 Network, a marketing communications, PR and branding firm. “It is not about establishing SMEs, it’s about establishing a culture. One returned cheque

in your account means the end of your relationship with the bank, while a delayed payment by just days means the end of your record with them. Banks need to start learning the entrepreneur’s language.”

As Mona Syed-Mirza, CEO, Biolite Aesthetic Clinic recalls: “(Pre-downturn) it was very important to have sufficient start-up capital, as UAE laws for setting up a company as a free zone LLC required a Dhs300,000 cash deposit. Obtaining finance was next to impossible. I needed three years of trading accounts and had to return to the UK to obtain finance to set up in Dubai.”

Even now, start-ups may be out on a limb. As Noor from Mashreq explains, “Every bank has its own individual criteria for assessing risk before a loan is given. Banks would like to see the track record of financial and other business performance as part of their credit assessment.

Additionally, banks generally support established businesses. They are not into venture capital or angel funding.”

Equally, many small businesses that can minimise their debt may certainly choose to do so for as long as insolvency laws remain largely unformulated and default could mean jail.

As Johmani comments, “SMEs are all about risk and making mistakes. I believe there is so much to be done in this area by the banks and they are held responsible for the lack of entrepreneurs in the region.”

As Mohamed Amiri, deputy CEO, Ajman Bank comments, “The SME sector is a huge, untapped opportunity for banks. It is therefore vital they make SME financing simple and accessible so as to nurture the engines of economic growth and employment creation.”

What other measures might allow banks to service SMEs better? “Expand credit bureau ratings, create adequate insolvency laws and introduce more private equity/ venture capital into the market,” offers Levitt. “And, crucially, provide education on how SMEs can incorporate good corporate governance.”

GULF BUSINESS / 61

ENERGY

THE LAUNCH OF SHARIAH CARBON CREDITS

Islam could hold the key to turning around the Gulf’s dismal environmental record TEXT BY RYAN HARRISON

T

here has been a dichotomy at the heart of the rise of local economies over recent decades.

Muslims have a duty to God to take care of the earth, yet the Gulf Arab region’s economic prosperity has meant it is now home to some of the world’s worst polluters.

But this could be about to change.

There are plans in the pipeline to launch the first Shariah compliant carbon trading platform.

According to Advanced Global Trading (AGT), the London-based company behind the idea, Muslim investors in the Gulf will be able to trade carbon credits with a full Islamic stamp of approval. It could transform the local environmental track record and lead to a proliferation of greenfriendly projects.

As it stands, AGT will be the first brokerage firms in the region

to offer the service and has penciled in March 2012 for a launch date. Plans are being vetted by Shariah scholars, but as with most complex financial services products this can take some time.

At present there is no rule book on how to treat carbon trading from an Islamic point of view. Scholars are stepping into unchartered territory.

But, the hope is that by the end of Q1 next year Muslim investors will be able to tap into what is now the fastest growing commodity.

Carbon credits are traded around the world by corporate and private investors looking to profit from the

GULF BUSINESS / 63

ENERGY

Omar Al Jaddou, director for special projects at AGT 64 / JANUARY 2012

The UAE could offset its sizable carbon footprint with Shariah credits.

GETTY IMAGES

carbon market boom. In the Middle East, the market is young but growing quickly in part because of increasing efforts by firms to improve their corporate social responsibility.

“There is perfect synergy between carbon trading and Islam,” says Omar Al Jaddou, director for special projects at AGT. “The UAE is one of the world’s largest polluters so we’re seeing major government backing for green projects across the board.”

The idea is that each Shariah carbon credit bought finances a project that is verified to reduce greenhouse gas emissions. In recent years, the Middle East has witnessed growing demand despite there being few homegrown carbon-credit producing projects. For local political leaders it’s a prime opportunity to shake the unwanted accolade as the world’s worst polluting region per capita.

It’s likely that AGT’s launch could prove to be a crucial catalyst in the Shariah carbon trading industry’s future growth. Investors would buy and sell carbon credits to companies who need to comply with global targets, or to individuals who wish to profit from

predicted price increases.

Al Jaddou says: “We have a few clients [Islamic companies and insurance firms] that would be looking to offer their customers the choice to trading carbon Islamically for CSR purposes. We also expect the approval to filter across all our channels and be received well.

We are initially focusing on the GCC, but within that we are aware of the wider implications of getting success in a country like Saudi Arabia.

“It would open the door to people that are conservative and wouldn’t necessarily go for this type of alternative investment,” he adds.

Mufti Aziz Ur Rahman, an eminent Islamic scholar who is working closely with AGT’s approval process, says the region is crying out for a way to boost its green credentials. “Reducing carbon emissions and cleaning the environment is something that’s needed and very important in the Middle East. The UAE in particular has very serious pollution problems, and we need to provide ways for people to tackle this.

“If AGT’s Shariah carbon trading gets approval from scholars and gets up and running in the UAE then the fatwa will be accepted elsewhere in the Gulf,” he adds.

Many also say that it could strengthen

“There is perfect synergy between carbon trading and Islam. The UAE is one of the world’s largest polluters so we’re seeing major government backing for green projects across the board.” the Gulf’s standing in the world of Islamic finance, which is currently dominated by Malaysia.

Barclays bank estimates the Gulf market is limited to 111 green projects currently, compared to over 5,000 globally. Meanwhile, the non-Islamic carbon trading market is now worth $144 billion globally, and is forecast to expand to over $1 trillion by 2025, according to statistics from the World Bank.

Earlier this year, AGT opened its regional headquarters in Dubai, with its traders attempting to convince increasingly environmentally-conscious investors in the region to consider ethical alternatives and potentially benefit from

ENERGY

strong returns in the process.

The firm said ‘green trading’ is now a hot topic for previously eco-irresponsible companies in the region. High carbon producing firms, including DEWA, Dubal and Enoc, have all announced they are considering carbon-emission reduction quotas as part of a voluntary joint initiative. Meanwhile, Dubai’s Carbon Centre of Excellence recently unveiled plans to offset five million tonnes of carbon annually.

Adding a Shari’ah component will help build on this demand. There are two areas that make up traditional carbon trading: the compliance market and voluntary emissions market.

Compliance hails from the Kyoto Protocol, which as of April 2010 had 191 states signed and ratified including the UAE, Qatar and Kuwait. To comply, businesses buy carbon offsets on the total amount of carbon dioxide they

“The UAE is o “At present there is no rule book on how to treat carbon trading from an Islamic point of view. Scholars are stepping into unchartered territory.” are allowed to emit.

In the voluntary emission reductions (or VER) market, which AGT operates in, firms are purchasing carbon credits for mainly corporate social responsibility motivations as transactions are not required by regulation. VERs co-exist with compliance markets, which are driven by regulated caps on greenhouse gas emissions.

But AGT’s Al Jaddou says the firm is offering an additional service to help companies manage their eco-footprint.

“It’s the same template for our carbon trading business, but we are also providing consultancy services to gauge

companies’ total carbon footprint and how they can minimise this Islamically.”

Plus, he says the lifecycle of green projects is not correlated to international financial markets, so as an alternative investment Shariah carbon credits could help investors side-step the fallout from events like the Eurozone debt crisis.

The only fly in the ointment for AGT is whether they can gain the approval of their Shariah scholars before another brokerage beats them to the punch. Securing firstmover advantage could be critical to capitalising on what looks like an industry with huge growth potential.

ENERGY

150

200

100

FUEL ($)

POINT BREAK Budget break-even prices are perilously close to current oil prices, as governments continue to spend on infrastructure and the Arab spring.

TEXT BY YADULLAH ITALLAH

K

uwait’s recent budget plan for the year displayed one astonishing figure: $75. That’s the price of a barrel of oil it needs to balance its book for the fiscal year in 2011, and the reason it’s astonishing is that only three years ago, it needed a mere $33 per barrel to balance its books.

Kuwait is not alone in watching its breakeven crude prices double, even as oil prices climb.

The cumulative increase in fiscal breakeven estimates for the Gulf has been an eye-popping $42 per barrel on average between 2006 and 2011, underlining the increased sensitivity 66 / JANUARY 2012

of GCC countries, particularly Bahrain, Saudi Arabia and the UAE, to oil prices.

“For the GCC, the average budget breakeven price stands at a manageable $77 per barrel,” notes a Deutsche Bank report. “But this masks a considerable range within the GCC, from a very comfortable USD45 per barrel in Qatar, to USD82 per barrel in Saudi Arabia, and USD103 per barrel in Bahrain.”

Estimates by The Institute of International Finance (IIF) indicate an even more depressing outlook for Saudi Arabia's breakeven oil prices, placing the benchmark at $88 per barrel – a $20 increase from 2010 breakeven prices.

The bankers’ association expects Saudi Arabia's break-even price to rise to $110 per barrel by 2015, as most of the spending increase in the Kingdom is ‘irreversible’.

Indeed, the new breakeven prices hover dangerously close to Brent crude prices, which are currently around the $105-110 per barrel mark. And while the tripledigits offer some respite, it is important to note that even during the past few years of high oil prices, the Brent briefly dropped to $39 a barrel in late 2009.

Gulf states are also worried about economic troubles in the US and Europe, which could see sustained dips in oil prices. Worse, a much-feared ‘hard

landing’ could put the brakes on China’s economic miracle and send crude prices into a tailspin.

SAUDIS PUMP UP THE VOLUME Blame the rise in breakeven oil prices at least partly on the Arab spring. Bank of America Merrill Lynch (BAML) estimates that the Arab spring has cost Gulf governments in excess of $150 billion, nearly five per cent of the six nations’ GDP and around 57 per cent of the current year’s spending.

“We expect the oil boom-led economic diversification programme set up after the lost decade of the 1990s

Saudi Arabia. Based on the Kingdom’s current spending patterns and changes in the global and domestic energy markets, Saudi Arabia’s breakeven price will rise from $90.7 a barrel to a jawdropping $175.1 a barrel by 2020 and an incredulous $321.7 by 2030, according to Jadwa forecasts.

“We think it very unlikely that oil prices would reach these levels even after 20 years,” noted veteran economist Brad Bourland, who was previously chief economist at SAMBA and is a very influential economist in the region.

“Our assumption is that oil prices will ease slightly over the next

“The bankers’ association expects Saudi Arabia’s breakeven price to rise to $110 per barrel by 2015, as most of the spending increase in the Kingdom is ‘irreversible’.”

GULF BREAK EVEN OIL PRICES:

TOO CLOSE FOR COMFORT?

BUDGET BREAKEVEN OIL OIL

BAHRAIN

80 102.8

KUWAIT

60 59.7

OMAN

58 74.6

few years before rising gradually with inflation from $90 per barrel for Saudi export crude in 2014. As a result, we expect that the budget will fall into deficit in 2014 and will not return to a surplus through to 2030.”

QATAR

55 44.8

SAUDI ARABIA

55 81.9

DEMAND TO THE RESCUE

UAE

60 85

GCC AVERAGE

NA 76.5

GETTY IMAGES

COUNTRY

Kuwaiti MP Marzouq al-Ghanem speaks during a session of the Kuwait's National Assembly in which the 2010/2011 budget was passed.

to continue over the next decade, unless oil settles in a marked or sustained manner below the regional breakeven price ($80),” notes BAML. The investment bank forecasts that the Saudi government may start running deficits from the next decade onwards and accumulate domestic debt (12 per cent of GDP currently), increasing the oil breakeven fiscal price.

“In our view, unless current spending is reined in, the introduction of structural reforms (lower subsidies, higher non-oil revenues) will need to be contemplated.”

Riyadh-based Jadwa Investment Bank charts an even grimmer trajectory for

Luckily for the Gulf States, oil remains a scarce and much needed global commodity.

That’s the reason the price of crude has not crashed despite a poor global economic

GULF BUSINESS / 67

ENERGY

The Arab Spring has slowed down investment in energy projects.

outlook, especially as it has been offset by restrained supply.

Production issues in Libya, the North Sea, Nigeria and Venezuela, and the risk premium over Middle East oil has meant that crude prices remain in triple digit figures, despite fears of an impending global recession. Most of the non-OPEC producers such as Russia, Norway and

Canada are pumping at capacity, and others such as Iraq and Iran are failing to live up to their hydrocarbon potential, leaving crude supplies strained.

The International Energy Agency (IEA) recently noted that the Arab spring has slowed down investment in energy as Gulf governments have diverted funds to social welfare, salary hikes and

non-energy investment programmes such as housing.

According to IEA estimates, the world needs to spend $38 trillion to meet projected energy demand up to 2035, 15 per cent higher than its 2010 forecast of $33 trillion.

While the IEA expects Saudi Arabia and Iraq to lead oil production increases over the next two decades, oil traders can clearly see that the IEA’s level of outlay is not being unleashed by the two governments.

Cynics would also add that Gulf producers are in no hurry to ramp up production, as that will ensure oil prices in triple-digits for the foreseeable future, and plenty of surpluses to stash in their rainy-day funds.

However, there is a major long-term drawback to this approach. Continued high oil prices will mean that Iran is also emboldened and powerful enough to confront the GCC bloc on various political fronts (including Iraq, Lebanon, Syria and Bahrain).

Even more worrisome is that high oil prices make it economically feasible for other countries to start investing in non-conventional fossil fuel, such as the Canadian oil sands, and

JADWA FORECAST: SAUDI ARABIA'S OIL PRICE CHALLENGE 2005

2010

2015F

2020F

2025F

2030F

9.4 7.5 1.9

8.2 5.8 2.4

9.3 6.3 3.1

10 6 3.9

10.7 5.6 5.1

11.5 4.9 6.5

Budgetary indicators (SR billion) Total revenue Total expenditure Balance SAMA net foreign assets Domestic debt

564 346 218 654 475

735 627 109 1,652 167

843 893 -50 1,958 167

961 1,147 -186 1,331 167

1,108 1,620 -512 375 949

1,120 2,453 -1,334 375 5,889

Breakeven oil price ($ per barrel) Saudi export crude

30.3

71.6

90.7

118.5

175.1

321.7

Oil indicators (million barrels per day) Oil production Oil exports Domestic consumption

SOURCE: JADWA INVESTMENT

68 / JANUARY 2012

alternative energies like biomass, wind, solar and nuclear.

Ironically, even Gulf producers themselves are investing in alternative energies for domestic consumption, to wean themselves off fossil fuel-based power sources.

RAINY-DAY FUNDS Rainy day funds are a powerful tool at the disposal of some of the bigger Gulf producers to weather a sustaind period of low oil prices. This is especially true for Saudi Arabia, the UAE, Kuwait and Qatar.

Saudi Arabia, for example, boasts

$562 billion in foreign assets alone. “The Kingdom could run a deficit of 10 per cent of 2010 GDP for the next decade without issuing any debt and still have official reserves of over $110 billion,” says Jadwa.

Similarly, the UAE is home to Abu Dhabi Investment Authority, the largest sovereign wealth fund in the world, with $627 billion, the Kuwait Investment Authority manages nearly $300 billion and the Qatar Investment Authority alone has $85 billion in assets.

Bahrain remains vulnerable though, given its low oil production and scarcity of assets. Estimates show that Bahrain’s

“The Arab spring has cost Gulf governments in excess of $150-billion, nearly five per cent of the six nations’ GDP and around 57 per cent of the current year’s spending.”

breakeven oil price is already at $103 per barrel, which is hardly promising for a country in the middle of massive political unrest. While Bahrain can count on neighbouring Saudi Arabia for financial support, the country remains the most susceptible among Gulf states to a crude price crash.

Even a country such as Qatar should not congratulate itself too much.

Although its breakeven price, at $40-44, is the lowest in the Gulf, the emirate has witnessed the highest increase over the past five years in percentage terms.

“Overall, increasing oil sensitivity for GCC will likely be a source of risk, and although oil prices are expected to remain close to current elevated levels, a potential correction will likely be felt more than ever by the regional countries,” notes Robert Burgess, analyst at Deutsche Bank.

www.max.co.uk

for nearly 25 years Maximizer CRM has been helping businesses: Increase revenues, Generate high quality leads, Raise productivity and Delight customers

!2 1 NVeErsiW n o now ble availa

Visit www.max.co.uk for customer success stories including Bahrain International Circuit.

Successful in: Banking, Financial Services, Manufacturing, Media, IT, Consultancy, Real Estate and many other sectors.

CALL authorised Maximizer Lead Partner : Gnet Computer Systems LLC

Office 702, Al Zahra Technocentre, Khaleed bin waleed road,Bur Dubai, P O Box:51693 Dubai, U.A.E

T: +971 4 355 6124 F: +971 4 355 6128 E: info@gnetsoft.com www.gnetsoft.com

DATA CRUNCH TOP DEALS AND GCC ECONOMIC INDICATORS

TOP DEALS GULF BUSINESS BIDDER

TARGET

456

MAN SE

Ferrostaal AG (70% Stake)

MAN SE, a German manufacturer of commercial vehicles, engines and mechanical engineering equipment, has agreed to repurchase its 70 per cent stake in Ferrostaal AG, a German provider of industrial plant construction and engineering services, from the International Petroleum Investment Company (IPIC), the UAE based company responsible for all foreign investments in the oil and chemicals sectors, for a consideration of $456.3 million. The transaction is part of an agreement in which MAN SE will sell Ferrostaal to MPC Muenchmeyer Petersen Capital AG for $208.6 million as part of a settlement agreement with IPIC.

56

Aramex PJSC

Berco Express (Pty) Ltd

Aramex PJSC, the UAE based provider of logistics and transportation solutions, has acquired Berco Express (Pty) Ltd, a South African logistics and transportation firm, for $55.5 million. The transaction is in line with Aramex’s strategy to enhance its presence in upcoming markets and achieve a significant market share in the global logistics and transportation market.

14,000

Number of deals

DEAL VALUE ($M)

DEAL DESCRIPTION

60

Value ($m)

Notes: Deals are based on the geography of target, bidder or vendor being in the Middle East, for the period between September 19, 2011 and October 16, 2011. Based on announced deals,

including lapsed and withdrawn bids. Where deal value is not disclosed, the deal has been entered based on turnover of target exceeding $10 million. Activities excluded from the table include 12,000 property transactions and restructurings where the ultimate shareholders’ interests are not changed. Source: Mergermarket. All dollar ($) amounts indicated above are in US dollars.

Value Volume 40

10,000

BREAKDOWN: TAKEOVER ACTIVITY BY SECTOR AND VOLUME

8,000

Value ($m)

14,000

20

GULF BUSINESS QUARTERLY M&A12,000 ACTIVITY 4,000 FROM 2004 TO 16 OCTOBER 2011 10,000

Number of deals

6,000

Value Volume

2,000

60

GULF BUSINESS ACTIVITY BY INDUSTRY SECTOR YTD 2011 – VALUE 40

Leisure 0.9%

8,000

2006

2007

2008

2010

2011

4,000

Value Volume

14,000 12,000

8,000

2,000 0

8,000

4,000

6,000

2,000

4,000

40

5.4% 0

40

20

Financial Services 4.1%

0

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 0 0 Q4 Q1Q3Q2Q4Q3 Q1 Q2 Q3 Q42010 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2004 2005 2006 2007 2008 Q1 Q2 2009 2011 2004 2005 2006 2007 2008 2009 2010 2011

Value ($m)

2004

2005

Value

2006

2007

JANUARY 2012 20,00070 / Volume

2008 15,000

10,000 5,000

0 Value Volume

2009

2004

2010

2005

2006

Number of deals

25,000 20,000

100

5,000

Value ($m)

30,000

250 Energy, Mining

Transport 1.7%

TMT 14.8%

& Utilities 200 5.2% 150

2011

50 2007 250 0

2008

2009

2010

250

50

2002011

0

150

Pharma, Medical & Biotech 10.4% Contruction 7.0%

Consumer 10.4%

200

100

150

50

Business & Services 11.3% Financial Services 9.6%

Defence 0.6%

Leisure 4.3%

100

10,000

10,000

200 150

15,000

15,000

5,000 30,000 0 25,000

Value Volume

Number of deals

20,000

250

Number of deals

Value Volume

20,000

Number of deals

25,000

Value ($m)

Value ($m)

30,000

Pharma, Medical & Biotech 10.8% Construction 1.2%

Industrials & Chemicals 38.4%

GULF BUSINESS ACTIVITY BY INDUSTRY SECTOR YTD 2011 – VOLUME

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

25,000

Real Estate 6.0%

Business Services 9.4%

20

2,000

30,000

TMT 15.7%

60Consumer

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2005 2006 2007 2008 2009 2010 2011

Value 2004 Volume

10,000

6,000

0

2009

Energy, Mining & Utilities 20 7.5% Number of deals

10,000

2005

Number of deals

2004

Value ($m)

12,000

Value ($m)

0 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 60 14,000 6,000

Industrials & Chemicals 21.7%

Real Estate 2.6% Defence 0.9%

In association with

HSBC/NASDAQ DUBAI MIDDLE EAST

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

151 150 149 148 147 146 145 144 143 142 141

THE EXPERT’S

13-30 September 2011

3-31 October 2011

1-30 November 2011

1-14 December 2011

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

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

MATURITY 4/08/2014 5/10/2015 5/10/2020 20/01/2015 31/03/2020 29/04/2020 10/5/2020

CURRENCY USD USD USD USD USD USD EUR

MID PRICE 109.25 102.25 103.50 105.00 94.00 87.50 91.50

YIELD 1.40% 5.88% 7.20% 2.3% 6.44% 7.81% 5.76%

MOODYS Aa2 NR NR Aa2 NR B1 NR

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

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

MATURITY 15/09/2014 27/05/2014 01/02/2012 21/10/2016 14/10/2016 21/07/2020 02/11/2015 30/06/2015 15/11/2015 17/10/2016

CURRENCY USD USD USD USD USD USD USD USD USD USD

MID PRICE 104.13 110.00 98.63 102.63 100.88 106.75 100.50 98.25 65.00 106.75

YIELD 3.16% 6.26% 12.47% 5.74% 3.18% 4.06% 2.86% 5.55% 26.04% 7.19%

MOODYS A3 B3 B3 Ba1 A2 Aa2 A1 NR NR Baa3

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

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

MATURITY 08/10/2014 25/03/2015 30/04/2012 21/10/2015 18/11/2014 12/11/2015 28/10/2015

CURRENCY USD USD USD USD USD USD USD

MID PRICE 104.25 104.00 100.00 99.88 104.88 100.88 93.50

YIELD 3.15% 2.95% 5.08% 3.03% 3.23% 2.76% 6.43%

MOODYS A1 Aa3 A3 A1 A1 NR Baa2

S&P A A+ NR NR AA NR

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

MATURITY 21/10/2014 04/11/2015 03/11/2014 13/06/2012 27/11/2012 02/07/2017 03/08/2016 18/02/2015 25/08/2016

CURRENCY USD USD USD USD AED USD USD USD USD

MID PRICE 105.25 101.13 101.50 93.25 92.00 101.50 100.50 91.00 75.00

YIELD 3.00% 3.43% 5.82% 15.59% 12.13% 5.93% 8.33% 14.38% 18.16%

MOODYS A1 A2 NR B3 B2 Baa3 B1 NR NR

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

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

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

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

VIEW

On December 15, MSCI announced the results of their review of Qatar and the UAE. This review took place to decide whether the two markets could form part of the MSCI Emerging Markets Index and therefore benefit from financial inflows from global Emerging Markets tracker funds. It wasn’t good news as both were unsuccessful in their bids, though the reasons were very different.

For Qatar the sticking point remains – as in previous reviews - foreign ownership levels. Qatar hasn’t raised the percentage of stocks that can be owned by foreign institutions. However, for the UAE the story is quite different.

The last review in June wanted to give investors more time to assess how the newly implemented Delivery Versus Payment (DVP) model - where stocks and funds change hands at the same time settles down. The December review accepted that DVP has had a positive effect on the market, but concerns remain about a potential ‘forced sell out’.

A forced sell out is triggered in the event of a broker executing a sale erroneously. When the custodian declines to deliver the stock, and all efforts of the broker to source the stock from the market to meet his delivery obligation fail, the investor will have to deliver the stocks from his account, although he had no desire to sell these shares. While this possibility certainly exists, we are not aware of this actually having taken place since the implementation of the DVP model. So, while it’s a legitimate concern, it’s not one that’s necessarily borne out from investor experience.

This reflects the extremely risk averse sentiment that investors have towards markets now. The next review is in six months and both markets have a clear view on what they need to address if they are going to enter the Index.

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

GULF BUSINESS / 71

SECTOR ANALYSIS

MEN’S GROOMING GROWTH IN PREMIUM VS MASS COSMETICS IN THE UAE

FROM NICHE TO MAINSTREAM

20 18

% GROWTH (RETAIL RSP)

16 17 12 10 8 6 4 2 0 2006

2007

Premium Cosmetics

2008

2009

2010

2011

Mass Cosmetics

Although both premium and mass cosmetics have witnessed healthy growth, the graph is showing a slow-down in growth towards 2009 and 2010 when the economic crisis hit. Thus, mass cosmetics registered higher growth than premium cosmetics in 2010 and 2011.

The full potential of men’s grooming is yet to be realised though, with Euromonitor International estimating sales to register a healthy compound annual growth rate of around 9 per cent over the next five years. This will be fuelled by a number of factors, including the expected recovery in the economy, the rising number of expatriates from western countries in addition to the expected rise in the number of skin care ranges.

TOP FIVE BRANDS IN MEN’S TOILETRIES IN THE UAE- RETAIL VALUE- % BRAND Gillette Adidas 8x4 Nivea T-zone for men

COMPANY NAME (GBO) Procter & Gamble Co. The Coty Inc Beiersdorf AG Beiersdorf AG Henkel AG & Co KGaA

2005 11.0 16.4 10.0 8.3 7.9

SOURCE: Euromonitor International, www. euromonitor.com, 2010.

72 / JANUARY 2012

2006 10.7 16.5 12.1 8.4 7.9

2007 15.0 16.5 13.2 10.1 7.6

2008 16.9 16.7 12.9 11.7 7.2

2009 17.3 17.3 12.5 12.2 6.6

2010 17.5 17.2 12.3 12.1 6.5

As the UAE is becoming more cosmopolitan with over 220 nationalities currently residing in Dubai alone, there has been a growing trend towards buying men’s grooming products. In addition to growing demand for more traditional men’s grooming products such as post-shave and pre-shave products as well as razors, recent years have seen a surge in sales of more modern products such as men’s bath and shower products, men’s skin and hair care products.

According to Euromonitor International, although men’s razors and blades are expected to register the highest value growth by the end of 2011, reaching 9.8 per cent, men’s skin care isn’t too far behind with an expected 8.6 per cent value growth. One factor driving this trend is the rise in the number of men’s salons offering treatments like facials, pedicures and manicures which are slowly shifting men’s perceptions of these products and prompting more men to use them at home.

The whole spa concept is slowly reaching men as the UAE, and Dubai in particular, is emerging as a regional tourist hub.

It is worth noting that most brands within the men’s grooming segment are mass according to Euromonitor research. This is in line with men’s lesser propensity to spend on cosmetics and toiletries compared to women. Nonetheless, premium brands dominate the more traditional categories such as men’s post-shave and men’s deodorants as many people tend to purchase extensions to favourite fragrance brands which usually fall within the premium segment.

SANA TOUKAN Research manager, Euromonitor

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

43 Photographers — Available at all leading retail outlets in the Gulf and at booksarabia.com

DOWNTIME TRAVEL

DOWNTIME

PHOTO LIBRARY

TRAVEL, STYLE, CRUISE, BYTES, HOTELS & SCENE

The London skyline looking towards Canary Wharf

LONDON CALLING From Korean eateries to West End shows, the British capital has it all TEXT BY SARA HAMDAN

D

EPENDING ON WHERE in London you go, it can feel like you didn’t really travel outside the Middle East. The moody weather and green parks are a perfect initial change of pace from desert climates, but the multitude of Arab eateries and trendy shopping options in some parts of town can make holidaymakers from the Gulf feel right at home.

This is particularly true of Knightsbridge and Mayfair, and most concentrated in the shisha bars of Edgware Road. A day of shoe shopping in Harrods – where the sales assistant will tell you that she has the hardest job in the world because she constantly has to resist temptation – can end with tea and macaroons on the department store’s ground floor at the Parisian tea room Ladurée.

To complete a Dubai-like experience, choose Nobu for dinner on Old Park Lane, where waiters shout Japanese welcome-phrases at every customer from the opposite end of the festive restaurant.

74 / JANUARY 2012

Save room for banana split, Japanese style, for dessert after trying signature dishes including sushi and the black cod fish.

Part of London’s charm is in its diversity. So if you’re craving something a little different to what you’re used to seeing, you can easily find it in the vicinity. Hidden among the pubs and bars on funky Great Marlborough Street, you will find hidden gems like Ssam, an authentic Korean restaurant with Korean waiters and clientele. Beef tongue and jellyfish are cooked on a small stove right in front of you, but they have à la carte options like chicken teriyaki for those with less adventurous tastes.

The best way to get to know a city is on foot, so don your boots and scarves and spend a day walking from the neon world of Piccadilly Circus through crowded Leicester Square and into the open Trafalgar Square. Packed with familiar café chains and tourists with big cameras, this area is usually the

TRAVEL DOWNTIME

Edgware Road Covent Garden Knightsbridge

Sloane Square

first stop for out-of-towners.

For those with serious shopping agendas, Conduit Street has upscale boutiques with well-dressed mannequins that beckon like sirens from window displays. Oxford Street is always a good bet, where you will likely spend too much at department stores like Selfridges and then sit at a café in St. Christopher’s Place to slow down.

London can also satisfy cultural cravings. Look into special exhibitions, such as Andy Warhol’s colourful images of Bridget Bardot on display at the Gagosian Gallery. A trip to the Tate Modern or the Saatchi Gallery will not disappoint modern art lovers and neither will a walk around the area. Trendy Sloane Square and the King’s Road are sprinkled with boutiques and cafés like Patisserie Valerie.

West End musicals continue to be crowd pleasers, while true theatre lovers can check out student productions in some

“FOR THOSE WITH SERIOUS SHOPPING AGENDAS, CONDUIT STREET HAS UPSCALE BOUTIQUES WITH WELL-DRESSED MANNEQUINS THAT BECKON LIKE SIRENS FROM WINDOW DISPLAYS. OXFORD STREET IS ALWAYS A GOOD BET, WHERE YOU WILL LIKELY SPEND TOO MUCH AT DEPARTMENT STORES LIKE SELFRIDGES AND THEN SIT AT A CAFÉ IN ST. CHRISTOPHER’S PLACE TO SLOW DOWN.”

of London’s many universities for fresh, off-the-wall material. A night of ballet at The Royal Opera House in Covent Garden – with its red velvet chairs – will make you contemplate a trip to the new opera house opening in Oman that will bring ballet, classical music and theatre to the Arab world.

There is nothing more refreshing than a walk or jog in one of London’s many parks – St. James’s Park, Regent’s Park, Hyde Park. That’s one thing often sorely missed in the Middle East, where there usually aren’t even pavements to encourage walking outdoors. So, take the chance to walk in the streets and lose your way; you may happen upon the ice skating rink by Somerset House, Camden Market, Little Venice or the V&A Museum.

It will rain on you and you are sure to take a wrong turn at some point, but this vibrant city will always find a way to surprise you.

Tate Modern For the best in international contemporary art, a visit to the Tate Modern gallery is a must. The Tate is open every day and entrance is free except for major exhibitions. From Renoir paintings to Rodin sculptures, hours will fly by while walking through these halls. After all, it was good enough to be featured in the Woody Allen movie Matchpoint.

PHOTO LIBRARY

London Eye

Regent's Park is a pleasant place for a walk.

If you don’t have much time to spare, the London Eye is a great way to see the city – see all of it, that is, with 40 kilometre panoramic views of landmarks like Big Ben, Westminster Abbey and Buckingham Palace. It looks like a giant, futuristic ferris wheel and is perched on the South Bank of the River Thames.

GULF BUSINESS / 75

DOWNTIME CRUISE

NOT SO SUPERMINI The competent Audi A1 lacks a certain thrill TEXT BY IAIN AKERMAN

T

HE AUDI A1 is not short of a rival or two in the supermini stakes. There’s the, err, Mini, the Polo, the Clio, the Ford Fiesta and the Yaris to name but a few.

Some would say it’s a crowded market, but not Audi.

No, Audi believes its concentrated “Vorsprung durch Technik” is just the ticket; that what the market really needs is another small car – one that brings a bit of class to the party. Whether it can beat the Mini at its own game is another matter entirely. BMW’s modern take on Sir Alec Issigonis’s 1959 original has been so successful it pretty much epitomises the supermini boutique car, pumping life

76 / JANUARY 2012

and style back into what can be a rather dull class.

So does the Audi A1, which was launched at the 2010 Geneva Motor Show, cut the mustard? The jury’s out. The great thing about the Mini and the Ford Fiesta, especially the old XR2, is that they are/were incredibly nippy cars that stick to the road like glue. You can throw them around without a care in the world, whilst enviable acceleration and close proximity to the ground provide a real thrill when driving. This thrill is missing from the A1.

It’s a competent fellow, but it won’t get your heart pumping. Handling is okay, but whatever you do, don’t accelerate at speed into a corner and expect to feel wholly confident about the outcome.

What’s more, the steering provides little feedback and the chassis isn’t as alert or adjustable as the class leaders.

Drivers can choose between a number of petrol and diesel engines. Entry-level petrol cars get fuel-efficient 86bhp 1.2and 122bhp 1.4-litre TFSI engines. The 1.4-litre engine will probably be the most

popular on offer and does 0-100km/h in a reasonably impressive 8.9 seconds and tops out at over 200km/h. Drive anything smaller than the 1.4, however, and you’ll feel the urge to get out and push the car yourself in a bid to make it go faster.

On the inside, the A1 is arguably the class leader. Most of what you see and touch is beautifully finished – especially the curved seats, which are supportive and comfortable. There also appears to be a lot of room. In fact, it looks bigger inside than it does from the outside.

However, that opinion is formed by the driver and the front passenger, who are spoilt for space. Not so those in the back, although the twin rear seats look good, are left with little room, especially if they are over six foot tall. The boot, however, is spacious and can easily accommodate weekly shopping, skateboards, fold-up bikes and the like.

Aesthetically, the bubble-shaped A1 is not marriage material. Nevertheless, it is a reliable and robust car that will get you from A to B in comfort. And there’s a lot to be said for that.

3 men, 7 camels, 1,600 km, 66 days In December 2011, Adrian Hayes, Saeed Al Mesafri and Ghafan Al Jabri reached Abu Dhabi having followed Wilfred Thesiger's Footsteps across the Empty Quarter.

Inspired by Thesiger's Classic Book, Arabian Sands, the team covered more than 1600km with their camels.

Along the way they experienced true Arabian hospitality and were told countless stories of Thesiger's original crossings.

presented by

An epic recreation of Wilfred Thesiger’s Empty Quarter Journey

w w w. f o o t s t e p s o f t h e s i g e r. co m For information regarding Footsteps of Thesiger Expedition presentations and speaking engagements, please contact Emma Kettle on emma@profsports.com

Official Partners

Organiser & Media Management

DOWNTIME PLACES TO BE

1 Volvo Ocean Race, Abu Dhabi Considered the world's toughest sailing event, the Volvo Ocean Race is coming to Abu Dhabi for the first time, and will have a two-week stopover, from December 31 to January 14, at the emirate’s port. So watch the adrenalinepumping race or check out the specially designed ‘Destination Village’ – around the size of eight football pitches – that has been built on the Abu Dhabi Corniche breakwater to entertain visitors during the event. www.volvooceanraceabudhabi.com

2 Dubai Shopping Festival 2012 If you are a shopaholic, it’s time to hit the malls. The annual Dubai Shopping Festival (DSF) is back in the city, with its usual array of discounts, competitions, prizes, fireworks and entertainment.

The event, which runs from January 5 to February 5, will see more than 6,000 retail outlets taking part this year. www.mydsf.ae

MAHIKI

3 Chinese New Year at Long Yin

TEXT BY AARTI NAGRAJ

M

AHIKI, THE LATEST addition to Dubai’s bar and club scene, promises to be a Polynesian paradise. With a laidback ambience, exotic drinks and a tropical grill food menu, Mahiki, which translates to ‘the entrance to the underworld’, is now open at the Jumeirah Beach Hotel.

The brand was conceived in 2005 by ‘The Kings of Clubs’ Nick House and Piers Adam and, since then, has grown rapidly; it has developed partnerships with fashion brands Quicksilver, Roxy and PPQ, and also conducts several outdoor events.

Mahiki London has played host to several celebrities including Rihanna, Jay Z, Beyonce, Madonna, the Kings of Leon and Kate Moss.

It’s also a favourite with the royals, and is often frequented by UK princes, William and Harry.

1

78 / JANUARY 2012

Mahiki is open to anyone who is hoping to unwind with a few cocktails, lounge around, or looking to dance the night away. The club, which describes itself as a “fun, unpretentious place”, serves tropical cocktails with an original flamboyant flair.

Mahiki Dubai is open everyday from 6pm to 3am, with a reduced-price ‘sunset’ cocktail menu from 6pm to 9pm. If you fancy a late night, the bar also offers a moonlight menu from 9pm to 3am everyday. You can grab a table at the relaxed Lanai Lounge or head out to the Aloha Room, where dance and pop music pumps out at full blast.

The club’s weekly signature event – ‘Mahiki Mondays’ – will include theatre and special events, while ‘Pin Up Tuesdays’ is a special night for the ‘tiki’ girls of Dubai.

2

4

Welcome the Chinese New Year with a special meal at Le Meridien’s Long Yin restaurant on January 22-23. This is the year of the Dragon, and Chef George has prepared a special four-course set menu for the occasion. The menu, available on both days for lunch and dinner, costs Dhs280 per person. Guests will also receive a red ‘lucky’ envelope with a surprise gift. www.diningatmeridiendubai.com

4 Standard Chartered Dubai Marathon

It’s time to put on your running shoes and hit the road as the yearly Dubai Marathon is back. The world’s richest long-distance running event, the race offers $250,000 to the winners of the men’s and women’s races. The event on January 27 also includes a 10km road race and a 3km fun run and will start and end in Downtown Dubai. www.dubaimarathon.org

5 Drift – an exploration of urban and suburban landscapes For the modern art lover, Drift offers an opportunity to check out the ways we understand the world around us through a selection of works from the Sharjah Art Foundation’s (SAF) collection. The exhibition suggests new and imaginative means of exploring the urban and suburban landscapes we encounter in our daily lives. It runs until January 14 at the SAF. www.sharjahart.org

“JOIN MY TEAM …and help me WIN the Abu Dhabi HSBC Golf Championship Pro-Am.”

Gulf Business has teamed up with the Abu Dhabi Tourism Authority and Golf In Abu Dhabi to offer our golfing readers a oncein-a-lifetime experience that money can’t buy.

The winner of this sensational prize will: • Play the Abu Dhabi HSBC Golf Championship Pro-Am with teenage golf sensation, Matteo Manassero, already a two-time European Tour winner at just 18 years of age.

• Bring a partner to mingle with the biggest stars in golf at the Championship Pro-Am cocktail reception and prize-giving • Receive one night’s accommodation for two at the stunning Emirates Palace hotel on January 25.

• Receive TWO VIP Hospitality passes to the Abu Dhabi Tourism Authority chalet overlooking the 18th green for Round One of the Championship, on January 26.

Have you got what it takes to be a Member of Team Matteo?

For your chance to win, all you have to do is email us at gb@motivate.ae with 'Golf' in the subject-line and the answer to the following question: Q) In golf, what is an eagle? a) 1-under par

Email gb@motivate.ae to enter

b)2-under par

c) 3-under par

Entries close on January 20th. Remember, you must put 'Golf' in the subject line and include your answer to the question. Entrants must have a golf handicap of 24 or below to be eligible.

REGULARS GB PREFERRED HOTELS

GULF BUSINESS HOTELS COLLECTION HOTEL LOCATION KEY

MILLENNIUM PLAZA HOTEL

UAE

QATAR

THE FAIRMONT DUBAI

SAUDI ARABIA

CRISTAL HOTEL ABU DHABI

JUMEIRAH EMIRATES TOWERS

EMIRATES GRAND HOTEL

OUR LOCATION

DUBAI Strategically situated on Sheikh Zayed Road just opposite to the Dubai International Financial Centre, this hotel will provide one of the finest accommodations and associated services to the business and leisure traveler.

Tel +971 4 387 7777 Fax +971 4 387 7778 reservations@mill-plazadubai.com

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

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

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

DUBAI Located on Sheikh Zayed Road, this hotel is a sleek architectural masterpiece of steel and glass. It redefines the business hotel category, seamlessly combining form with function, high technology with unparalleled luxury and elegance with efficiency.

Tel +971 4 330 0000 jumeirah.com

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

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

MEDIA ONE HOTEL

PULLMAN DUBAI MALL OF THE EMIRATES

SHANGRI-LA

ACACIA HOTEL

FRASER SUITES DUBAI

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

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

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

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

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

Tel +971 4 343 8888 Fax +971 4 343 8886 sldb@shangri-la.com

RAS AL KHAIMAH This is a superbly designed four star hotel complete with Al Nakhla restaurant, the stylish Flamingo bar, the vibrant Club Acacia, a pristine pool serving as a backdrop to varied and exciting Theme Nights, the luxurious O-Zone Spa, and high-energy Oxygen Gym. Tel +971 7 243 4421 Fax +971 7243 4429

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

LAYIA OAK HOTEL & SUITES

HOLIDAY INN RIYADH, IZDIHAR

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

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

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

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

Gulf Business magazine is available in all of these exclusive GCC hotels

IS YOUR HOTEL LISTED ON THIS PAGE? Become one of Gulf Business’ Preferred Hotels and benefit from the exposure to our extensive GCC readership.

Contact: nayeem@motivate.ae Tel: +971 4 205 2290, Fax: +971 4 2827593 80 / JANUARY 2012

EVENTS CALENDAR REGULARS

WORLD FUTURE ENERGY SUMMIT ABU DHABI, 16-19 JANUARY 2012 TEXT BY HILDA D’SOUZA

T

HE FIFTH EDITION of this annual event will see global pioneers in developing sustainable energy solutions congregate in Abu Dhabi. The summit has become a mustattend event for anyone in the business of renewable energy, carbon capture or energy-smart technologies. More than 26,000 attendees, including 3,000 delegates, 650 exhibition companies and 20 national pavilions are expected to participate. Despite the economic downturn several oil rich countries, including the UAE, and fast growing economies, such as China, are continuing to invest in renewable energy. China has earmarked $200 billion as a stimulus fund to reduce its carbon emissions by 17 per cent by 2015 as well as ramp up its non-fossil fuel energy generation.

Chinese Premier Wen Jiabao will be delivering a speech at the summit emphasising China’s role in the renewable energy sector.

UNITED ARAB EMIRATES Abu Dhabi January

Dubai January

Sharjah January

16-19 31-Feb 2 31-Feb 2

World Future Environment Exhibition 2012 Emiratisation Summit Tawdheef

Abu Dhabi National Exhibition Centre Abu Dhabi National Exhibition Centre Abu Dhabi National Exhibition Centre

reedexpo.com iirme.com informaexhibitions.com

5-Feb 5 15-17 23-24 23-26 23-26 29-30 31-Feb 2 31-Feb 2

Dubai Shopping Festival Intersec Exhibition 2012 Middle East Hedge Funds Investors Summit 2012 Health Care Management Forum 2012 Arab Health Private Banking and Wealth Management: Client Relations 15th Annual Sign & Graphic Imaging Middle East UAE International Dental Conference and Arab Dental Exhibition - AEEDC Dubai

Across Dubai Dubai International Convention & Exhibition Centre Jumeirah Beach Hotel Dubai International Convention & Exhibition Centre Dubai International Convention & Exhibition Centre Hyatt Regency Dubai World Trade Centre Dubai International Convention & Exhibition Centre

dubaievents.ae uae.messefrankfurt.com iqpc.com iirme.com informaexhibitions.com marcusevans.com ecdubai.com dwtc.com

9-12

Steel Fab 2012

Expo Centre Sharjah

expo-centre.ae

1-10 25-28 29-30 29-30 29-31

Doha Trade Fair 2012 Qatar Motor Show Strategic Business Decision Making Sponsorship - Evaluation and Measurement Advanced Cost Engineering for Project Managers

Doha Exhibition Center Doha Exhibition Center Millennium Hotel, Doha Millennium Hotel, Doha Millennium Hotel, Doha

qatartourism.gov.qa qatartourism.gov.qa marcusevans.com marcusevans.com marcusevans.com

16-21

Enjazat Oman

Oman International Exhibition Centre, Muscat

trifoil.com

23-25

First Oman Renewable Energy 2012

Oman International Exhibition Centre, Muscat

wnexhibitions.com

Global Competitiveness Forum

Four Seasons Hotel, Riyadh

gcf.org.sa

QATAR January

OMAN January

SAUDI ARABIA January

21-24

India . . .+91 99 1000 4383 Jordan . .+962 6 5684 771 Kuwait . . .+965 2473 5419 Lebanon . .+961 1510 100 Libya . . .+218 21 3332 230

Morocco .+212 522 540 022 Oman +968 2448 9248/9648 Qatar . . . . . .+974 4666 655 Seychelles . . .+248 225 862 Turkey . . .+90 212 465 3156

UAE Dubai +971 4 224 5404 UAE Abu Dhabi +971 2 599 8989

GULFBUSINESS / 81

REGULARS IN YOUR SHOES

Tim Hortons sells over 60 per cent of Canada’s coffee.

MAKE MINE A DOUBLE DOUBLE Alicia Buller catches up with Paul House, executive chairman of iconic Canadian cafe, Tim Hortons.

I

F YOU’RE CANADIAN, then you’ve probably been to a Tim Hortons Café at least once or twice. If you’re not Canadian, then a Canadian has probably told you about Tim Hortons at least once or twice. The Ontario-founded eatery has even made it into the Oxford English Dictionary with the term ‘double double’ – its proprietary slang for a coffee loaded with two shots of sugar and cream. The no-frills yet wildly successful brand holds a special place in the hearts of Canadians – but will the North Americans be able to replicate their magic formula in the Gulf?

After nearly half a century of feeding coffee and baked goods to North Americans across 3,871 outlets, Canada’s largest publicly traded food firm is launching 120 stores across the UAE,

82 / JANUARY 2012

Oman, Qatar, Kuwait and Bahrain within the next five years.

“There’s a big brand loyalty, the Canadians have located us in Dubai already,” says Paul House, executive chairman of Tim Hortons, sipping a coffee in the firm’s inaugural Sheikh Zayed Road branch. “They don’t just call it Tim Hortons, they call it ‘my’ Tim Hortons,” he says with grin.

But, back at Motivate towers, when I goad my Canadian friends to elaborate on what gives Tim Hortons its je ne sais quoi, the normally garrulous lot are at a loss for words. “It’s, erm, cosy… it’s, um, I meet my friends there…” said one usually verbose colleague and ardent Hortons ambassador, adding that her husband “nearly drove off the road” when he saw one of the firm’s new and sizeable billboards on the UAE roads.

The firm’s executive chairman is equally whimsical when I ask him what gives Hortons its pull. “It brings the community together, it’s where friends bring other friends. It’s comfortable, the coffee and the food are equally important. We are more of a restaurant than Starbucks,” he says.

On closer inspection, the price points are slightly lower than Starbucks and Tim Hortons provides a fuller range of food, from soups to sandwiches. And the fact that Tim Horton himself was a legendary Canadian ice hockey player who tragically died in a car crash in 1974 only adds more weight to the café’s patriotic clout.

House says Tim Hortons is targeting the Gulf for its first international expansion outside Canada and the US because of its growth opportunities and its exceptionally strong local partner, Apparel, which has already successfully brought brands such as Tommy Hilfiger and the Cold Stone Creamery to the region.

“For the next 24 months we are focused on this market, then we will start to look at more international markets,” says House. “Our expansion plans weren’t delayed by the recession.

Sometimes in the recession people trade down, and a lot of our regulars come to Tim Hortons everyday, even in a downturn.

People will cut out other things out of their budget to come here, so we are totally safeguarded in some ways. We’re targeting all age groups from 18 to 65 years – the kids and the grandparents, the Ferraris and the pick-up trucks.”

Indeed, Tim Hortons is in a good position to expand, with an enviable cash profile. The firm reported third-quarter revenues of $726.9 million this year compared to $670.5 million in 2010, an increase of 8.4 per cent, with sales to date this year topping $2 billion. That’s a lot of coffee and sandwiches – 62 and 76 per cent of the entire Canadian market to be precise.

House adds: “Our challenge is to educate our people about our brand, educate our staff to deliver our Canadian standards and build our supply chain. We are confident in our partner and the reception has been fantastic. We’re very excited about being in Dubai.” Not as excited as the Canadians in my office.

cartier.com

rotonde de cartier ASTRORÉGULATEUR CALIBRE 9800 MC

CARTIER CALIBRE 9800 MC INTRODUCES A MAJOR INNOVATION IN THE QUEST FOR WATCHMAKING PRECISION: THE ASTRORÉGULATEUR MOVEMENT. THIS LATEST COMPLICATION, DEVELOPED BY CARTIER MANUFACTURE, PREVENTS CHRONOMETRIC ERRORS LINKED TO GRAVITY, THANKS TO A MICRO-ROTOR IN WHICH THE ESCAPEMENT, OSCILLATOR AND SMALL SECOND HAND ARE EMBEDDED. THE OSCILLATOR’S POINT OF GRAVITY REMAINS FIXED IN THE VERTICAL POSITIONS, AVOIDING ANY DISTURBANCE OF THE OSCILLATION FREQUENCY. NIOBIUM-TITANIUM CASE, TITANIUM CIRCULAR-GRAINED CROWN ADORNED WITH A SAPPHIRE CABOCHON, ASTRORÉGULATEUR MANUFACTURE MECHANICAL SELF-WINDING MOVEMENT, CARTIER CALIBRE 9800 MC (43 JEWELS, 21,600 VIBRATIONS PER HOUR, APPROXIMATELY 54 HOURS POWER RESERVE), HOURS, MINUTES WITH ROTOR SUPPORTING THE ESCAPEMENT.

FROM UAE: 800 CARTIER (800-2278437) OUTSIDE UAE: +971 4 236 8345