Gulf Business | June 2011

VOLUME 16 • ISSUE 02 • JUNE 2011

years VOLUME 16 ISSUE 02 JUNE 2011

1996-2011

“The American airlines get Chapter 11 protection.

But if I go bankrupt after the IPO, the state won’t support me. So what’s the West’s problem?”

+

Akbar Al Baker, CEO of Qatar Airways on the Gulf subsidies debate pg. 36

Saudi Arabia: The state of the nation

pg. 42

The UAE’s great train journey pg. 48

How Japan’s pain affects the Gulf pg. 54

Bahrain..............BD 1.0 Kuwait............... KD 1.0 Oman................ RO 1.0 Qatar.................. QR 10 Saudi Arabia.......SR 10 UAE.................. DHS 10

!$GB June 2011.indd 1

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06.2011

CONTENTS

years

1 9 9 6 - 2 011

COVER STORY

Fly me to the boom

34 Airways CEO Akbar Al Baker on record 36 Qatar plane orders, Middle East unrest and ‘that’ public transatlantic spat.

GCC Today 8

regional news, people, numbers and events

OPINIONS 19

MATEIN KHALID Bahrain’s fundamental credentials will pull it through the crisis.

21

Dr Tommy Weir Treat employees with dignity and they’ll reward you.

23

Melissa Master Cavanaugh Powerful women believe in themselves and take risks.

24

BRIEFING 24

AVIATION The UAE benefits from Middle East unrest.

26

BANKING Swiss bank boss Raymond Baer on shifting investment East.

28

BUSINESS Around 25 per cent of the Gulf’s CVs are falsified.

30

RETAIL The GCC leads the region’s recession-busting shopping spree.

33

TRADE Dubai picked up on foreign direct investment in 2010.

34

REAL ESTATE How the crisis shifted Oman and Cyprus property cycles.

33 COVER DESIGN: TARAK PAREKH GULF BUSINESS / 5

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CONTENTS

Editor-in-Chief Obaid Humaid Al Tayer Group Editor and Managing Partner Ian Fairservice Group Senior Editor Gina Johnson Senior Editor Guido Duken Editor Alicia Buller alicia@motivate.ae Chief Sub-editor Iain Smith iains@motivate.ae

60

Editorial Coordinator — business Hilda D’Souza hilda@motivate.ae Art Director Tarak Parekh tarak@motivate.ae Senior Designer B Raveendran raveendran@motivate.ae

FEATURES 42

Country report: Saudi Arabia In-depth report on the Kingdom’s economy, oil and demographics.

48

The UAE’s train journey Etihad Rail’s progress and an interview with CEO Richard Bowker.

54

Japan and the Gulf How the tsunami affected the region’s manufacturing and services.

60

Chemical reaction The Gulf must shift gears to claim its share of the petrochemicals industry.

64

Profile: Philip Barnes He’s boisterous. He’s upfront. Meet the regional VP of Fairmont Hotels.

Designer Charlie Banalo charlie@motivate.ae JUNIOR Designer Roui Francisco rom@motivate.ae Photographers Farooq Salik; Naveed Ahmed; Vikram Gawde Contributors Sabah Haider; Dania Saadi; Ryan Harrison; Angela Shah; Mark Atkinson General Manager — Production and Circulation S Sasidharan SENIOR Production Manager S Sunil Kumar Production Manager C Sudhakar General Manager Group Sales Anthony Milne anthony@motivate.ae Senior Advertisement Manager Abraham Koshy abraham@motivate.ae Advertisement Manager Ajay Mathews ajay@motivate.ae Deputy Advertisement Manager Melroy Noronha melroy@motivate.ae

DATA MONITOR 68

Stats Regional mergers, acquisitions and bond issuances.

General Manager — Abu Dhabi Joe Marritt joe@motivate.ae

DOWNTIME 72

Travel Salzburg offers more than Mozart and The Sound of Music.

75

Cars The Aston Martin Virage gets you from A to B in style.

77

Tech Google vs. Apple and the latest app wars.

REGULARS 79

EVENTS The Gulf’s top business conferences.

81

Gulf business preferred hotels A selection of the region’s top rooms.

82

IN your shoes Pandora’s Thomas Nyborg.

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 London: Acre House, 11/15 William Road, London NW1 3ER, UK, motivateuk@motivate.ae Editorial syndication details Tel: + 971 4 2824060, gb@motivate.ae

Printed by Emirates Printing Press, Dubai

6 / JUNE 2011

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GCC TODAY REGIONAL NEWS, PEOPLE, NUMBERS AND EVENTS

Safety in numbers: GCC eyes new Arab states

KUWAIT

KD8.5 billion

Kuwait’s budget surplus in the fiscal year 2010/11, although the country transferred 10 per cent of revenues to a sovereign-run fund for future generations.

BAHRAIN

Jordan’s King Abdullah (R) meets with Saudi Foreign Minister Prince Saud al-Faisal at the Royal Palace in Amman.

GCC leaders are in talks over Jordan and Morocco’s request to join the six-member political and economic bloc, a move that would change the face of business and stability in the region.

Jordan stands to gain from financial aid and potentially discounted oil, helping it manage a record fiscal deficit of $2 billion, swelling foreign debt, rising inflation and rampant unemployment.

GCC members will get greater access to Jordan’s highly respected and professional human resources, as well as security and military expertise at a time of regional instability.

The impact of greater ties with Morocco, however, is still unclear, with analysts emphasising that traditionally the country has been closer to Europe as the main source of exports and tourism.

Still, one short-term benefit for Morocco would be Gulf aid that comes without the same kind of strings attached to European and international funds.

The GCC has already pledged a total of $20 billion to Bahrain and Oman — its two poorest members — to help allay the economic troubles that have fuelled unrest.

By joining the GCC, Jordan’s current account balance is likely to improve as more Jordanians working in the Gulf send money home and investments increase.

So far leaders of the GCC said at a gathering in Riyadh that they “welcome” the requests from Jordan and Morocco. Kind Abdullah of Jordan immediately telephoned Saudi King Abdullah Ben Abdul Aziz to thank him for the support, a Royal Court statement said.

More detailed talks will now centre on the two countries meeting the GCC’s membership requirements.

REUTERS

300

The number of employees that state-run Bahrain Petroleum Co fired for being absent from work during pro-democracy protests, the energy minister was reported as saying.

QATAR

QR500 million

Qatar-based Gulf helicopters’ planned investment in new aircraft over the next four years as it sees demand from the oil and gas sector remaining high.

20%

The earnings increase for Qatar’s luxury hotels in the first quarter of 2011, compared to the same period last year, the Qatar Tourism Authority said.

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GCC TODAY

United arab emirates

DHS53.9 million

Islamic mortgage lender Amlak’s loss for Q1 of 2011 on higher provisions and a sharp drop in revenues. In Q1 last year it lost Dhs3.1m.

180%

ARABIAN EYE

The increase in energy firm Dana Gas’ profit for the first three months of 2011 to Dhs92 million, compared to the same period last year.

SAUDI ARABIA

ARABIAN EYE

$35 million The price for News Corp to increase its stake in Saudi Prince Alwaleed bin Talal’s Rotana Media Group to 14.53 per cent from 9.09 per cent.

OMAN

44,000

The number of jobs civil service officials claim have been created after Sultan Qaboos bin Said ordered the government to create positions to quell protests.

GULF BUSINESS / 9

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s, Qatar in the ational states.

GCC Today

++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ Qatar to launch ++++++++++++++++++++++++ Islamic bonds ++++++++++++++++++++++++ ++++++++++++++++++++++++ Qatar Islamic Bank plans to sell ++++++++++++++++++++++++ Islamic bonds this year to help ++++++++++++++++++++++++ ++++++++++++++++++++++++ reduce debt payments, according ++++++++++++++++++++++++ to acting CEO Ahmad Meshari. ++++++++++++++++++++++++ ++++++++++++++++++++++++ The sukuk will have a maturity ++++++++++++++++++++++++ of more than five years, but it is ++++++++++++++++++++++++ ++++++++++++++++++++++++ unknown how much the bond sale ++++++++++++++++++++++++ could raise or in what currency ++++++++++++++++++++++++ they will be denominated. ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ Dubai hits 500 ++++++++++++++++++++++++ ++++++++++++++++++++++++ property cancellations ++++++++++++++++++++++++ Up to 500 of Dubai’s real estate ++++++++++++++++++++++++ ++++++++++++++++++++++++ developments face cancellation, ++++++++++++++++++++++++ according to the emirate’s property ++++++++++++++++++++++++ ++++++++++++++++++++++++ watchdog, an increase of 200 from ++++++++++++++++++++++++ last year. Rera said the projects and ++++++++++++++++++++++++ their backers are being assessed ++++++++++++++++++++++++ ++++++++++++++++++++++++ for financial viability and a list of ++++++++++++++++++++++++ the terminated developments will ++++++++++++++++++++++++ ++++++++++++++++++++++++ be released imminently. ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ Oman’s biggest telco ++++++++++++++++++++++++ ++++++++++++++++++++++++ suffers profit drop ++++++++++++++++++++++++ Oman Telecommunications ++++++++++++++++++++++++ ++++++++++++++++++++++++ Co, or Omantel, has seen its ++++++++++++++++++++++++ first-quarter net profit fall 19 per ++++++++++++++++++++++++ ++++++++++++++++++++++++ cent to OR26 million ($67 million) ++++++++++++++++++++++++ due to challenging market ++++++++++++++++++++++++ conditions and higher expenses. ++++++++++++++++++++++++ ++++++++++++++++++++++++ The latest decline was largely in ++++++++++++++++++++++++ line with analyst predictions as ++++++++++++++++++++++++ ++++++++++++++++++++++++ the company recorded a 10 per ++++++++++++++++++++++++ cent year-on-year increase in ++++++++++++++++++++++++ ++++++++++++++++++++++++ first-quarter expenses. ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++

DP World remains one of Dubai’s most profitable firms.

ARABIAN EYE

On the Radar

Stake sale in the offing as DP World floats on LSE DP World’s listing on the London Stock Exchange will provide much-needed liquidity and could see Dubai World relinquish some of its ownership of the ports operator, according to a report.

State-owned conglomerate Dubai World owns 80 per cent of the firm, which is considered one of its more profitable assets.

According to investment bank J.P. Morgan,

DP World’s floating on the London Stock Exchange may prompt a stake sale by conglomerate Dubai World.

“This (London listing) remains a key milestone in clearing the path to an improved liquidity through a broader investor participation and/or potential selling by majority shareholder Dubai World,” the report said.

SOAPBOX Middle East dominates Boeing orders The Middle East accounts for 15 per cent of Boeing’s $263 billion backlog of orders, the US aircraft maker has said.

The manufacturer forecasts that airlines in the region will require an estimated 2,340 aeroplanes worth $390 billion by 2029 — a 150 per cent increase.

In terms of long-haul capacity, the Middle East has around 140,000 seats waiting to be delivered, far ahead of Asia (60,000) and Europe (50,000).

The firm also predicted that Middle Eastern travel will grow by an average of 7.1 per cent per year over the next 20 years, outpacing the region’s projected economic growth rate of four per cent.

“My priority and commitment is to facilitate a new sense of confidence in the solid foundations of the firm.”

Sheikh Maktoum Hasher Maktoum Al Maktoum, Shuaa Capital’s new chairman

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Qatar set for region-beating GDP growth Qatar can expect blistering economic growth in 2011 and next year as it races ahead of its GCC rivals, according to Bank of America Merrill Lynch.

Qatar’s GDP will grow 13 per cent this year, the bank’s report said, followed someway behind by Saudi Arabia (4.9 per cent) Oman (3.7 per cent), Kuwait (3.1 per cent), UAE (2.8 per cent) and Bahrain (-2.2 per cent).

Emirates Airlines chairman, Sheikh Ahmed bin Saeed Al-Maktoum

Record profits at Emirates Dubai government-owned Emirates Airline said net profit grew 52 per cent to $1.5 billion in the year to the end of March as passenger demand and capacity on its 111 routes grew. Emirates Group increased revenues to $15.6 billion, up 26 per cent on last year. The results came amid

Saudi Arabia’s public spending spree this year could hit a record SR821 billion, 41 per cent higher than previously thought, according to Riyadh-based Jadwa Investment.

The Saudi Arabian government announced at the end of last year that its budget for 2011 was projected to reach SR580 billion, with revenue at SR540 billion.

But Jadwa expects the recent higher crude prices, boosted by regional unrest, to increase revenue by nearly 70 per cent to SR916 billion.

global passenger growth of 8.2 per cent and a rise in regional travel of 17.8 per cent.

Despite higher oil prices this year, the airline increased its seat factor to a record 80 per cent. Passengers carried rose 14.5 per cent to 31.4 million in the 2010-2011 financial year, which ends March 31. Cargo revenues grew 27.6 per cent to $2.4 billion.

After launching six new routes last year, the airline plans to open four more – Geneva, Copenhagen, Rio de Janeiro and Buenos Aires – in this financial year. Emirates, which has a fleet of 148 aeroplanes and 193 more on order, received eight new aircraft in 2010-11, including seven Airbus A380s.

Clarification In last month’s Gulf Business, Qatar National Bank (QNB) ranked in the ‘Top 50’ rankings, not the National Bank of Qatar, as the article states.

How to rule the world like...

Steve Jobs

REUTERS

Unrest unleashes Saudi’s spending power

Sell experiences It’s widely held that Jobs does not sell computers, he sells experiences. You only have to sit through one of his presentations to realise this — some are more like theatrical productions than product launches.

Ruthless is right Jobs was described recently by Forbes magazine as a “corporate dictator”, which referred more to an inability to suffer fools lightly rather than his penchant for killing those that dare disagree with him.

Prepare or die His Apple team takes months to perfect a presentation that could last only half an hour. As a result, Jobs’ performances are so gripping that neuroscientists say he creates an “emotionally charged event”.

Love your company The Wall Street Journal said recently that when he exits Apple, “it’s not actually possible to replace a leader like Jobs, who loves his company as if it were a person or cherished thing. The 20th century produced only one of him.”

Let your staff lead Managing the world’s greatest tech minds has been fundamental to Jobs’ success.

He once said: “When you hire really good people you have to give them a piece of the business and let them run with it.”

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GCC Today

project focus

On the Radar

Kuwait on track for $7bn metro project Kuwait is to launch the tender for its metro project in early 2012 and will start implementing the project in the first quarter of 2013, according to a Metro executive.

Kuwait Metro Rapid Transport Co. is seeking to form a consortium in order to execute large parts of the project, which is estimated to cost $7 billion.

So far Spain’s Ineco and a South Korean company have been selected, said Saeed Dashti, Kuwait Metro’s chairman, adding that the two firms will act as consultants for the project.

Dashti also said that a project to build truck parking areas and a bus station in Kuwait City will be tendered in September or October this year, costing $108.9 million.

The total value of metro and rail projects completed and underway currently in the region stands at about $10 billion, as GCC governments upgrade their facilities to meet demand for improved public transport.

Saud’ Rajhi says steel plant in the works Saudi-based Rajhi Steel plans to set up a SR15 billion ($4 billion) heavy steel complex in King Abdullah Economic City and will get dry gas from Aramco, according to the state news agency.

The firm will later offer 50 per cent of the new project to the public through an initial public offering.

“The Saudi Ministry of Petroleum and Mineral Resources agreed to allocate 70 million cubic feet a day of dry gas to Rajhi Steel to build a heavy steel complex in King Abdullah

++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ Taqa caught off-guard ++++++++++++++++++++++++ ++++++++++++++++++++++++

by UK tax rise ++++++++++++++++++++++++ A higher tax rate on hydrocarbon ++++++++++++++++++++++++ business in the UK has hit the ++++++++++++++++++++++++ ++++++++++++++++++++++++ earnings of Abu Dhabi National ++++++++++++++++++++++++ Energy Company (Taqa), as its ++++++++++++++++++++++++ ++++++++++++++++++++++++ first-quarter 2011 profit plunged 47 ++++++++++++++++++++++++ per cent year-on-year. Taqa had to ++++++++++++++++++++++++ ++++++++++++++++++++++++ pay 11 per cent more income tax ++++++++++++++++++++++++ than it had accounted for from its ++++++++++++++++++++++++ exploration operations in the UK’s ++++++++++++++++++++++++ ++++++++++++++++++++++++ North Sea. ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ $2billion bill for ++++++++++++++++++++++++ ++++++++++++++++++++++++ Bahrain’s ongoing ++++++++++++++++++++++++ ++++++++++++++++++++++++ protests ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ Dr Essam Fakho, chairman of ++++++++++++++++++++++++ Bahrain’s Chamber of Commerce ++++++++++++++++++++++++ ++++++++++++++++++++++++ and Industry ++++++++++++++++++++++++ ++++++++++++++++++++++++ Political violence has so far cost ++++++++++++++++++++++++ Bahrain $2 billion, according to ++++++++++++++++++++++++ ++++++++++++++++++++++++ the chairman of the country’s ++++++++++++++++++++++++ Chamber of Commerce and ++++++++++++++++++++++++ Industry, Dr Essam Fakho. Not ++++++++++++++++++++++++ ++++++++++++++++++++++++ being an oil rich country, Bahrain ++++++++++++++++++++++++ has seen its major sectors such ++++++++++++++++++++++++ ++++++++++++++++++++++++ as banking, retail and heavy ++++++++++++++++++++++++ industries damaged due to ++++++++++++++++++++++++ unrest. Lucrative events like the ++++++++++++++++++++++++ ++++++++++++++++++++++++ 2011 Gulf Air Formula One Grand ++++++++++++++++++++++++ Prix also been postponed. ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++ Dubai hotel guests ++++++++++++++++++++++++ overlook Gulf unease ++++++++++++++++++++++++ ++++++++++++++++++++++++ Dubai’s tourism sector has ++++++++++++++++++++++++ ++++++++++++++++++++++++ showed resilience in the face of ++++++++++++++++++++++++ the current regional unrest, with ++++++++++++++++++++++++ the emirate’s hotels recording a ++++++++++++++++++++++++ ++++++++++++++++++++++++ 13.6 per cent growth during the ++++++++++++++++++++++++ first quarter of 2011. According to ++++++++++++++++++++++++ ++++++++++++++++++++++++ the Department of Tourism and ++++++++++++++++++++++++ Commerce Marketing, occupancy ++++++++++++++++++++++++ reached 2.38 million up from ++++++++++++++++++++++++ ++++++++++++++++++++++++ 2.09 million recorded in the first ++++++++++++++++++++++++ quarter of 2010. ++++++++++++++++++++++++ ++++++++++++++++++++++++ ++++++++++++++++++++++++

Economic City,” the statement said.

Emaar Economic City, an affiliate to UAEbased Emaar Properties, is spearheading the development of King Abdullah Economic City, one of the kingdom’s most ambitious projects aimed at diversifying its oil-based economy.

The project, aimed at building a new hightech city on the Red Sea coast with businesses, industrial, leisure and residential estates as well as a giant port, has been dogged by delays and lower-than-expected interest from local and foreign investors.

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GCC Today

UAE hits pre-crisis non-oil trade levels The UAE’s non-oil foreign trade growth has returned to rates similar to those experienced before the 2008 financial crisis, according to the Federal Customs Authority (FCA).

Non-oil trade grew 22 per cent in January compared to the same month in 2010, jumping Dhs12.6 billion to Dhs70.2 billion ($19.1 billion).

“This is clear evidence that the UAE economy is on track to recovery and that the production and trade movement is restoring its pre-crisis normal rates,” the

FCA said in a statement.

India, China, the US, the UK, Germany and Japan were the top exporters to the UAE, while India, Singapore, Thailand, Saudi Arabia, Kuwait and Hong Kong were the top importers from the UAE. Saudi Arabia maintained its top position among the GCC region’s trading partners with a total value of Dhs1.75 billion, with Kuwait second, followed by Qatar.

Gold was the number one import, with a value of Dhs7.4 billion, followed by diamonds and cars.

SOAPBOX “None of our staff have been shifted out of Bahrain.”

V. Shankar, Standard Chartered’s CEO for Europe, Middle East, Africa and Americas

Bader Mohammad Al-Sa’ad, The Kuwait Investment Authority’s managing director

No plan for China bank stake sale, says Kuwait fund The Kuwait Investment Authority won’t sell its stake in the Agricultural Bank of China that it has held since the bank’s initial public offering after the lock-up period expires, the fund’s managing director Bader Mohammad Al-Sa’ad said.

The fund agreed in June last year to opt for a share of $800 million in the IPO in Hong Kong.

GCC and the world UK’s Petrofac gets proactive on Saudi oil contracts UK-headquartered oil services firm Petrofac will be more active in bidding for projects in Saudi Arabia, where it sees many opportunities arising in the second half of the year, a senior executive at the company said.

Petrofac, which is listed on the London Stock Exchange, said the second half of 2011 will be “very busy” with bidding activity.

“The EPC (Engineering, Procurement, Construction) market did not recover yet [from the 2008 financial crisis]. We expect that next year probably a reasonable size of business will be available or awarded in Saudi,” said Imad Shanan, senior vice president and general operations for the Saudi operations of Petrofac Engineering and Construction Ventures.

Shanan said his company was not concerned by competition from South Korean companies who have won several EPC deals in the Saudi market over the past couple of years.

State oil giant Saudi Aramco has awarded 39 contracts to South Korean companies worth $11.5 billion in the last five years.

STATs

30 million

The volts of electricity that passed through a passenger A380 flight to London Heathrow thanks to a lightening strike.

Saidi calls for a rebuild bank to tackle MENA’s clean-up Middle East and North African nations need a Bank for Reconstruction and Development to help rebuild parts of the region affected by change recently, according to the DIFC Authority’s chief economist and head

of external relations.

Similar to the bank created to help Eastern Europe after the fall of the Berlin Wall, the MENA region must create a centralised financial institution to cope with the political upheaval and support the ‘Arab Spring’, said Nasser Saidi.

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GCC TODAY

30

seconds to make sense of...

SWIMMING POOLS

Tell us about Belhasa...

Belhasa Projects is now one of the leading swimming pool builders in the world. We have offices in Dubai, Abu Dhabi and Doha, Qatar. Over 10 years ago we started to diversify from pools and now have four main Greg Garner divisions: swimming pools; CEO of Belhasa Projects mechanical electrical plumbing; coatings; and watertech including sewage treatment and dissemination plants. A sewage tank is just like a swimming pool but looks a lot less sexy.

Who are your clients?

We created a lot of Wild Wadi (Dubai) and Dreamland aqua-park in Ras Al Khaimah, as well as some features of the Aquarium at Dubai Mall. For anything water-related and iconic in the UAE, there’s a large chance that Belhasa Projects has been involved in some aspect of it. We also did the tracks at the Commonwealth Games in New Delhi.

What challenges does the UAE’s swimming pool business face?

In the good old days when property was being developed, everyone wanted their own pool. But since the market slowed down, pools aren’t seen as an essential item. We’re continuing to win large orders, but to maintain market share we need to increase our productivity. We’re extending our geographic footprint – hence the office in Qatar. We’re doing more work in Oman and will soon start in Kuwait.

Why did Belhasa diversify from pools 10 years ago?

People were asking us if we knew someone who could build a tennis court or a jogging track and so we thought ‘let’s offer that’. We were satisfying a demand that was there.

What’s the most off-the-wall request or order you’ve had?

There have been many, but what comes to mind is the upward flowing waterfall for a major hotel in Dubai.

There aren’t many of those in the world.

How has the swimming pool market changed since you first started?

The market has changed due to the downturn but the opportunities are still there. We need to go to the markets rather then the demand coming to us.

Dubai’s Deyaar swings back into profit Deyaar, Dubai’s second-largest property developer by market value, returned to profit in the first-quarter, as it handed over new units and reduced provisions.

Deyaar made a first-quarter profit of Dhs26 million ($7.08 million) compared with a loss of Dhs100 million during the same period in 2010, the company said in a statement.

Deyaar’s gross revenues reached Dhs85 million and its shareholder equity is Dhs4.4 billion. Its total assets are worth Dhs8 billion, it said.

The return to profit was down to a combination of profits being recognised on units handed over to customers and reduced provisions.

The developer delivered five projects in the UAE in the first quarter and said it would deliver another two this year.

Deyaar made a huge 2010 loss of Dhs2.3 billion in 2010 on writedown of assets and impairments.

COMPANY focus du to meet its Dhs3 billion debt obligations in June Dubai telco firm du said it will make good on Dhs3 billion of debt due in June.

“Part [of the debt] will be paid in cash and part will be refinanced,” said chief executive Osman Sultan.

He added that du’s expanding subscriber base will likely help fuel a 20 per cent rise in revenues this year, while about Dhs1.7 billion has been earmarked for capital expenditure.

GULF BUSINESS / 17

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OPINION

COMMENT

The tragedy and destiny of Bahraini finance Matein Khalid is fund manager in a royal investment office and a writer in finance and geopolitics.

It’s rare to get a second chance in capital markets, but Bahrain’s credentials will ensure the island survives political unrest

Illustration: Tarak Parekh

b

ahrain emerged as a financial centre in the Gulf in the mid 1970’s just as OPEC’s petrocurrency bonanza hit the Euromarkets, Saudi Arabia’s construction boom created a market for offshore banking and Saudi riyal syndicated lending in Manama and Beirut lost its role as the Levant’s gold trading and foreign exchange hub in the bloody opening round of the Lebanese civil war.

International finance proved to be a windfall for Bahrain. With $217 billion in assets, 27 per cent of GDP, offshore banking was a major generator of high value jobs for educated citizens in the 400 financial institutions based on the island.

Bahrain emerged as a global Islamic banking, asset management and insurance hub, second only to Kuala Lumpur and London in the global league tables. Unfortunately, the last three months have been traumatic for Bahraini finance as international banking hubs cannot coexist with protracted political risks, street riots and military intervention.

Bahrain’s status as the oldest, preeminent financial centre of the Gulf is at risk if social and political wounds do not heal fast.

Standard and Poors and Fitch have both downgraded Bahrain’s sovereign credit risk rating. The credit ratings of the Central Bank and Mumtalakat were also cut. International banks closed branches when the protests reached the Financial District and Bahraini dinar forwards swooned in the foreign exchange market. Political risk is a sword of Damocles in financial markets that recoil from uncertainty.

This is a worst-case scenario for dollar-funded offshore banks and local investment/Islamic banks, where debt restructuring and even default

“While there is no evidence of bank depositor panics, global banks have slashed interbank credit lines to some local banks and Western banks have relocated expats to Dubai until the unrest settles down.”

risks will only escalate. While there is no evidence of bank depositor panics, global banks have slashed interbank credit lines to some local banks and Western banks have relocated expats to Dubai until the unrest settles down.

Bahrain’s $20 billion economy is the first postoil economy in the Gulf. Tourism was a natural victim of the tragic events since March. The Spring of Culture festival and the Formula One Grand Prix motor race, the crown jewels of the social season were both postponed. Several finance and banking conferences and industry exhibitions have been cancelled. Saudi tourist traffic across the King Fahd Causeway has plunged, which affects local hotels, shopping malls, restaurants and cinemas.

The foreign office travel advisory for British citizens not to travel to Bahrain was a cruel blow for an island financial centre that depended on the City of London’s banking, shipping, insurance and brokerage constellation as its umbilical cord in the Gulf. Despite stratospheric prices for crude oil and aluminum, the finance/tourism hit could trigger a Bahraini recession, though the $10 billion GCC reconstruction fund may prevent economic contraction, a banking shock and a credit crunch. However, with a 60 per cent fall in property prices since 2008, Bahraini bank NPL ratios will continue to rise since one third of their loan books are concentrated in property and construction loans.

Bahrain’s economic success was due to its traditional culture of social tolerance and the cosmopolitan values of its merchant elite. Hopefully, the Bahraini government and the protestors will achieve rapprochement, move beyond the tragic past and salvage the island’s future as the Gulf’s financial and services hub. Bahrain has a stellar track record as a host regulator and central bank supervisor that must not be sacrificed lest the current foreign bank exodus from the island reach the point of no return.

In the post-Lehman world of Arab black swans and credit ugly ducklings, hot money moves across the digital netherworld of the global capital market at the speed of light. There are few second acts in international finance but I believe Bahrain can and will make a financial renaissance.

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OPINION

COMMENT

A call for dignity Dr Tommy Weir, emerging markets leadership expert and author of The CEO Shift

Illustration: Tarak Parekh

o

Leaders that ignore dignity in the workplace could be landed with office protests and uprisings.

ver lunch, Sheikh Mohammed Abdullah bin Mubarak Al Sabah of Kuwait shared his view of the problematic spring in the Arab world. He was quick to point out that the issue was not driven by political interference, autocratic rule, or even unemployment, as most commentators conclude. His strong hypothesis is that the uprisings were caused largely by dignity, or, rather, a lack of dignity. The underlying cause for Mohammed Bouazizi of Tunisia setting himself on fire, to Tahrir Square, Bahrain, and even Syria, was a cry to be recognised – and, in other words, a demand to be treated with dignity.

Echoing this insight, a Syrian caller to Al Jazeera news station said: “We don’t want 1,500 Lira, we want 1,500 units of dignity.” Dignity is the innate right to be treated respectfully.

Discussing Sheikh Mohammed’s premise led me to think about what dignity means in the workplace. If dignity is such a fiery issue among the jobless, is it also a hot issue for the gainfully employed? Well, it is.

Employees want to be recognised and treated with respect.

While governments and the private sector are working to create jobs, the issue of dignity needs to be a top priority action item as these young people may release years of pent-up frustration into the workplace.

So, what can employers do to build dignity?

Leaders need to build respectful relationships with their employees – all of them and among the different groups. As hard as this is in a hierarchical environment, the need exists to break down the idea of ‘us

“When dignity is referred to, it is often used to suggest that someone is not receiving a proper degree of respect. The Syrian caller to Al Jazeera news station said: “We don’t want 1,500 Lira, we want 1,500 units of dignity.”

and them’ or ‘suits and troops’. Treating people with respect on a daily basis is one of the most helpful actions a leader can take to offset tension in the workplace. Respect is an action. Leaders must show respect, they need to act respectfully, and they should speak with respect.

How can leaders make respect a forefront topic?

By taking an interest in others – this is more than making statements like, “everyone is important from the tea boy to our senior leaders”. Taking an interest means taking the time to listen to what others have to say and recognising that their insights count.

Additionally, you build respect by allowing your employees to choose their own actions.

Dignity is a state in which all employees have equal opportunity to succeed, but this is only actualised through hard work and performance.

The trio of cronyism, wasta (who you know) and passport hierarchy is the unfortunate elephant in the room standing in the way of equal opportunities.

These practices must be set aside to clear the way for equal opportunities and, therefore, dignity.

Finally, you build dignity by understanding that the face of dignity has a regional look. The perception of dignity is influenced by culture and family, peer and social relationships and, in this region, it is about honour and shame. The secret isn’t to act rightly or wrongly; honour stems from gaining respect for being the kind of person who does things according to group values.

Leaders need to be cautious and not assume that this issue is far from home because they are not located in one of the countries named above.

While it is true that some parts of the GCC are not experiencing direct impact from the uprisings, with the migration of the workforce across geographical borders, soon those embedded feelings may show up and explode.

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OPINION

COMMENT

in a league of their own Melissa Master Cavanaugh, senior editor Middle East, Booz & Company.

Local female CEOs and leaders believe in themselves and take risks; now they’re inspiring a generation of young women to do the same

t

he social and political developments in the Middle East this year have focused the world’s attention on the region.

But another form of change – slower, less visible, and more pervasive – has been under way among women in the GCC. Women’s increasing participation at all levels of social and economic development is widely recognised. As ministers, CEOs, and regulators, women play a crucial role in driving these countries’ economic and social development, they are also opening the door for young women following them to do the same.

We interviewed a representative sample of eight women in senior positions in the public and private sectors in Qatar, Saudi Arabia, and the UAE – exploring their career paths, their motivations, and their recommendations for creating the institutions that will allow more women to succeed.

Illustration: Tarak Parekh

Constant improvement: Women leaders are constantly redefining their society’s expectations of them and pushing themselves to achieve more, personally and professionally, than many people expected. This manifests from a desire to challenge the common wisdom that sometimes constrains them in their organisation or their region.

Studied discomfort: Gulf economies are growing at a breakneck pace, with relatively small populations and an even smaller cadre of qualified people who can maintain this evolution. As a result, the region’s leaders are often called upon to step into roles for which they have not prepared and for which they do not necessarily feel qualified.

To be successful, they must willing to go outside their comfort zone.

Quiet confidence: For women leaders, faith in their own ideas and abilities is essential in the face of frequent skepticism. In many

“Many successful women insist upon the validity of their ideas and insights. A certainty in their own expertise is critical, as is thorough preparation when they are called upon to substantiate the value of their work.”

GCC organisations, the presence of a woman in a senior position is still rare enough that many women need to insist upon the validity of their ideas and insights. A certainty in their own expertise is critical, as is thorough preparation when they are called upon to substantiate the value of their work.

Entrepreneurship: The chance to start a small business can open doors for ambitious, educated young women who want to work but feel that the long hours required for a traditional corporate career path are at odds with their family responsibilities.

But entrepreneurs need support – in particular, access to capital, training in leadership and financial management, and opportunities for networking.

Work-life balance: This issue, pervasive worldwide, is especially challenging in the GCC, particularly because so few provisions are currently in place for flexible employment. Such policies, including regulations that allow for part-time and flex-time work, are crucial.

Education: The challenge now is to make sure that women are pursuing educational paths that will lead to employment. Graduates whose degrees don’t meet the needs of the labour market need ongoing education and training, and universities and the private sector must work together to make sure that students currently completing their education are better prepared.

Mentorship: The fact that there are currently women in positions of power throughout the GCC is an enormous source of inspiration to young women.

But it is not enough for young women to admire their role models from afar; formal mentoring programmes are a must.

Family support: Although this is a very personal issue, governments can make a difference by sending a message – particularly in schools and through the media – that emphasises the essential value of women’s contributions to society and the economy.

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briefing regional trends, analysis and views

Abu Dhabi International Airport

regional unrest

turbulent times It’s been a mixed bag for Middle East airlines as they battle with regional uprisings on the ground, but UAE profits have soared as passengers flock to safer climes.

Text by SABAH HAIDER

Gulf pics

O

n the back of a slew of firstquarter results released last month, it’s clear that economists excitedly spent the past couple of months numbercrunching about what the economic impact of the revolutions of the Arab Spring has been, on both their home soil and on the economies they affect. The UAE has confidently stated that it’s been able to gain from the unrest, due to an increase in traffic and business.

Data released at the Arabian Travel Market, held in Dubai in April, stated that Middle East unrest, particularly in

Libya, Egypt and Tunisia, had boosted tourism in the UAE. Ali Abu Monassar, chairman of Vision Destination Management, told reporters: “So many of the destinations around us are closed because of the current situation. It’s bad for them, but it’s good for Dubai.”

The UAE boasts three of the biggest regional airlines – flagship carriers Etihad and Emirates, and low-cost giant flydubai – which all play a key role in the movement of people and goods around the Middle East and South Asia.

“The political unrest in parts of the Middle East and North Africa region has undoubtedly affected Emirates, particularly from an operational perspective with flights to Tripoli in Libya suspended indefinitely,” says Ahmed Khoory, Emirates’ senior vice president commercial operations, Gulf, Middle East and Iran, when asked how unrest in the

Middle East since January has affected passenger numbers at the region’s biggest airline. “By swiftly adjusting our flight schedules, redeploying aircraft to balance the network and optimise revenue we have been able to keep our other Middle East operations going.”

The situation in Abu Dhabi with Etihad Airways is not very different. James Hogan, the airline’s CEO, says unrest has ultimately contributed to passenger revenue growth. “Etihad announced record first-quarter revenues, despite the challenges presented by unrest in the Middle East and the Japanese earthquake,” he says. “While seat factors fell slightly, passenger revenues grew by 15 per cent on the back of a 10.6 per cent rise in passenger numbers to 1,854,392.”

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AVIATION BRIEFING

“Flydubai has made every effort to operate its flights as normally as possible during the period of turbulence in the region.”

The flipside However, according to figures released in March by the International Air Transport Association (IATA), the decline in Middle East traffic led the dip in overall global industry numbers – passenger traffic levels in Egypt and Tunisia were 10-25 per cent below average for the month of March, while the no-fly zone and military action in Libya has halted all air traffic to and from the North African country.

Overall, Middle East airlines experienced a decline in their year-onyear demand as growth slowed from 5.8 per cent in February to 3.8 per cent in March. Illustrating a drop in the number of travellers, compared to February, the demand in March climbed only 0.1 per cent while capacity expanded by 0.8 per cent.

Giovanni Bisignani, IATA’s director general and CEO, told reporters that the tsunami in Japan and the political unrest in the Middle East and North Africa (MENA) both contributed to a loss of demand in the global airline industry in March by two per centage points.

“We continue to closely monitor the situation in other parts of the region and are prepared to act quickly if the situation changes,” Khoory says.

Emirates is the Middle East’s largest airline and the world’s largest carrier measured by international capacity.

The UAE, a hub The UAE’s three biggest airlines also happen to be the Middle East’s biggest.

That means Abu Dhabi and Dubai are both key travel hubs, with the former being the home of Etihad and Emirates and flydubai operating from the latter.

Dubai is also the Middle East’s biggest

Ghaith Al Ghaith, the CEO of flydubai.

travel hub for both regional and international flights.

Asked how Middle East unrest has affected international passenger traffic through the hub for passengers travelling to/within the region, Khoory says it’s been positive for Dubai. “Overall visitor numbers to the UAE have increased over the previous year and statistics from tourism boards and Dubai airport have confirmed such a trend.” During the 201011 financial year Emirates saw a 14.5 per cent growth in overall passenger numbers to 31.4 million people.

According to Dubai Airports, passenger traffic at Dubai Airport – the world’s fourth busiest hub for international passenger traffic – climbed by 5.8 per cent year-on-year in March, to 4.2 million passengers. However, passenger numbers to the Middle East and Africa fell due to regional unrest – dropping by 23,240 passengers for the Middle East, while African routes saw a decline of 24,402 passengers as traffic was affected by political unrest in these regions. According to IATA, Bahrain, Yemen and Syria represent six per cent of Middle East air traffic, and on the back of unrest passenger traffic fell significantly to these countries.

“Unrest in various countries in the Middle East has certainly affected the volumes of people travelling into those markets. That said, our ability to respond to these situations is a reflection of the growing maturity and underlying strength of the business,” says Hogan.

“Flydubai has made every effort to operate its flights as normally as possible during the period of turbulence in the region,” says Ghaith Al Ghaith, CEO of flydubai. The airline’s first-quarter results were not available. “We continued to monitor the situation in the region closely and made any adjustments to our schedule necessary to ensure the safety of our passengers and crew. Our schedule is always subject to change, depending on the demand from our passengers and the availability of new routes and new aircraft.”

Contrary to Etihad and Emirates, Sharjah-based low-cost carrier Air Arabia reported a 12 per cent year-over-year drop in its first quarter net profit, to $12 million, although first quarter 2011 revenue grew six per cent to Dhs513 million, and passenger numbers increased 11 per cent, to 1.2 million, while load factor grew to 85 per cent from 80 per cent a year earlier. The airline has subsidiary operations in Egypt and Morocco, where unrest has also occurred.

The chairman of Air Arabia, Sheikh Abdullah Bin Mohammad Al Thani, said he was satisfied with the result, as Air Arabia had been “adversely affected” by the impact of political uncertainty. He also said the price of oil is an issue. “Though the region has clearly shown positive signs indicating the emergence from the more serious effects of the global financial downturn, the rise in fuel costs continues to challenge regional carriers.”

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NAVEED AHMED

Raymond Baer, Chairman of Julius Baer bank.

Investment

Swiss banks cast their eyes East In the wake of the tax evasion clampdown in the West, Swiss banks are aggressively pursuing the emerging markets, says Raymond Baer, chairman of billion dollar investment bank Julius Baer.

Text by Dania Saadi

T

he world of Wikileaks disclosures, austerity measures in debt-laden Europe and instability in the energyrich Middle East now renders it more difficult for Swiss banks to practice the discretionary skills they are famed for.

“Bank secrecy the way we dealt with it in the past is gone,” Raymond Baer,

the chairman of Julius Baer, which had 173 billion Swiss francs in assets under management at the end of April, tells Gulf Business. “Today, one has to be taxcompliant. The beauty for this part of the world (the Middle East) is that tax is not an issue anyway.”

The issue in the Middle East is the legality of clients, which is changing every day as more members of despotic regimes get toppled or challenged by the freedom wave sweeping the region. The fast-paced political change has caused problems for Swiss banks, which have to deal with Swiss authorities freezing the assets of leaders from Tunisia, Egypt, Libya and Syria.

About a third of the $1.5 trillion of assets held offshore by the wealthy in the Middle East and Africa are in Switzerland, according to Swiss research firm MyPrivateBanking, and at least 15 per cent of the offshore assets or about $225 billion have been obtained through illegal means and transferred out of the home countries.

Despite these challenges, Baer is keen to boost its business in the Gulf in particular, buoyed by the spike in oil prices that promises to fill the coffers of sovereign wealth funds (SWFs) and high net worth individuals (HNWIs).

The number of HWNIs in the Middle East grew 7.1 per cent to 400,000 in 2009, returning to the 2007 levels,

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BANKING BRIEFING

and their total wealth increased by 5.1 per cent to $1.5 trillion, according to Capgemini and Merrill Lynch’s World Wealth Report 2010.

Baer joins the fold of other Swiss banks targeting Middle Eastern clients, including Falcon Private Bank, the unit of Abu Dhabi’s Aabar Investments which opened an office this year in the UAE capital.

Baer, which has an office in DIFC, expects to grow assets from clients in the region by more than six per cent annually over the next three to four years, and plans to add up to five new relationship managers a year for the region over the next two to three years.

“Some of the clients in the region have shifted assets from Egypt to the UAE, or from Bahrain to the UAE, and the same trend has happened into Asia, Singapore, for instance, but also into Europe, London and Switzerland,” says Baer. “Sovereign wealth funds will start buying stakes in internationally-listed companies, they will do more now than before.”

Gulf SWFs, which are amongst the richest in the world, took a break during the recession when their stakes in listed firms took a hit, but in the last two years they returned to the international market snapping up significant holdings in blue chip companies.

Traditionally, HNWIs in the region, like most emerging market investors, have tended to be more trading-oriented and opportunistic with a concentration of wealth in properties and equities. But investors in the region need to diversify their investments, particularly in these politically uncertain times, the Swiss banker says.

“Julius Baer, like its Swiss rivals UBS and Credit Suisse, is venturing into emerging markets not only to take advantage of growing wealth, but also to make up for the potential loss of assets and clients as Swiss authorities negotiate tax deals with the UK and Germany, which are clamping down on tax evaders.”

“The main strategy is investing in anything related to real assets because central banks around the world are printing money, so people want to protect their cash deposits by investing in real assets via commodities and equities,” said Baer.

The Zurich-based bank believes HNWIs in the Middle East should give more attention to foreign currency transactions, given that all Gulf states, except Kuwait, peg their currencies to the US dollar. The greenback is also the largest component in Kuwait’s basket of currencies.

Foreign currency investment was much greater in the Middle East in 2009 than the global HNWIs average of 13 per cent, accounting for 20 per cent of their alternative investment allocations, as the region’s wealthy sought to hedge against local currency fluctuations, according to the World Wealth Report 2010.

Cash-rich Julius Baer is also on the prowl for acquisitions, and recently announced the purchase of a 30 per cent stake in Brazilian wealth manager GPS. Baer is not interested in buying any

assets in the Middle East per se, but would target acquisitions that offer a foothold in a number of emerging markets, similar or larger than its purchase of ING’s Swiss private banking assets in 2009.

Julius Baer, like its Swiss rivals UBS and Credit Suisse, is venturing into emerging markets not only to take advantage of their growing wealth, but also to make up for the potential loss of assets and clients as Swiss authorities negotiate tax deals with the UK and Germany, which are clamping down on tax evaders. To cap the tax cases in Europe, the US has ramped up pressure on Switzerland to reveal tax evaders using Swiss banks, a move that led UBS to hand over some data on US clients and pay a fine to the US in 2009.

“I think the history with Europe could actually be cleaned up, if that happens (tax deals are finalised with Germany and UK).” said Baer. “America is a different issue and our politicians are talking to Americans to see what can be done to solve the history.”

This year, a former Julius Baer banker was arrested after handing over the names of hundreds of clients with offshore bank accounts to the whistle-blowing website Wikileaks. Germany and Italy are Julius Baer’s biggest European clients and any tax agreement with European states is expected to hit bank profitability.

“The most likely impact is that some money that is currently in Switzerland will be paid for the fines etc, so you lose a certain asset base,” said Baer. “But what you win is a clear parameter going forward and, if you have clear parameters for business, you hope the valuation of this business gets higher in terms of the stock price.”

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BRIEFING business

ISTOCK PHOTO

Up to 25 per cent of CVs are fraudulent

HR

STRETCHING the truth Gulf headhunters have warned that widespread CV fraud from finance professionals is jeopardising the industry.

Text by Ryan Harrison

R

ecruiters fear as many as one in four candidates in regional financial services tell serious lies on applications, usually concerning their education and references.

Some bankers even hide criminal records and a history of fraud.

The alert level for serious untruths rose in the aftermath of the Gulf’s economic downturn, as laid off bankers fabricated applications and covered gaps in their CVs to secure a job. But the menace has become a persistent threat and permanent source of annoyance to headhunters hired by banks to search for talent.

The troubles across the Middle East in recent months, that has led some banks to freeze hiring, may have compounded

the issue further as job-seekers frantically chase fewer openings.

Emma McGregor, head of the professional services division at Huxley Associates, says candidates often use online resources to fake certificates relating to IT or accountancy. “They can make up credentials like Bachelor of Arts or Chartered Accountants, but when you check they actually haven’t completed any courses.”

The worry for recruitment agencies like Huxley is that if candidates are taking the time to embellish qualifications they could also be hiding something more sinister. And whereas in more mature Western markets banks have a web of databases to check new recruits’ backgrounds, for Gulf financial services there is no central depository.

One headhunter revealed: “This means that up to 25 per cent of people in the financial services industry are engaging in CV fraud at any given time, in particular in relation to references.

“A popular lie is to put close friends and colleagues at previous companies as references.”

Anecdotal evidence suggests that the group most likely to misrepresent themselves are front office personnel, a probable reflection of the massive pressure to produce sales and investment performance, as well as relationships with clients.

Gareth Clayton, director at recruiters The Charterhouse Partnership, says: “Wealth management is an area where banks might be vigilant, specifically over what a candidate says about his books, assets under management, deal flow and where his clients are based. For instance, private bankers with a good portfolio in Saudi Arabia are hard to come by.”

Clayton says the Gulf job market in general still has a ‘Wild West’ stigma, where candidates punch well above their weight and use bravado to paper over inadequacies in their CV. But candidate dishonesty is a serious business in the Gulf, with those that lie heavily on their CV facing not only termination but being successfully sued by their employer, as well as potentially facing jail or deportation.

The threat hasn’t put some off though and in recent years banks have hit back by hiring independent companies to screen employee applications. Requests for credit checks and certificates of good conduct are at an all-time high.

Still, it’s often hard to pin down exactly who might be least forthcoming with the truth about their past. Magdy El Zein, managing director of Boyden Middle East, a search firm specialising in top level executives says: “At the senior level you wouldn’t expect it to be a common practice or habit to put things in a CV that are not true. That being said, it’s not that it never happens.”

With many employers in the Gulf currently reining in hiring plans in the wake of the regional turmoil, competition for jobs has never been so fierce. The real threat at the moment is as rising numbers of candidates hunt each new job opportunity, more and more are prepared to resort to desperate measures to catch an interviewer’s eye.

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BRIEFING GCC

Gulf pics

The Middle East retail industry is growing at around 13 per cent annually.

RETAIL

GCC leads the retail boom Growing populations in the UAE and Saudi Arabia are fuelling a region-wide, recession-busting shopping spree.

Text by SABAH HAIDER

G

rand malls, vibrant shopping festivals, bargain shopping fairs, international supermarkets and traditional souks. These consumer playgrounds are synonymous with the capitals of the GCC, culturally and economically, and have produced a retail sector that’s growing faster than any other market in the MENA region.

It is expected that the Middle East retail industry will reach $682 billion by 2013, growing at a compound annual rate of around 13 per cent during 20092013, according to a report by research firm Rncos. The total current value of the retail sector in the Middle East is around $425 billion.

According to the report, the GCC is witnessing many positive trends in

consumer demand, a continuing growth in tourism, regional coordination and market access.

The factors strengthening the region’s retail industry include changing market dynamics, rapid economic development, higher crude oil prices, and strong consumer confidence.

“There are initiatives that have helped the industry. Helping, supporting and developing the real estate infrastructure are all initiatives by the government – their proactive investments – which have helped develop the sector,” says Mohammed Al Fahim, chief executive of luxury department store chain, the Paris Gallery, which has over 80 stores in the region.

The report by Rncos identified KSA and the UAE as the regional retail markets with most potential and dynamism – they have sustained their dominance in the retail landscape for over a decade and will continue to do so in coming years.

“We will see retail becoming more organised in coming years and also expect it to grow by 15–18 per cent.

We can definitely see a standardisation of market as well,” says Manu Jeswani, the CEO of Shoe Mart (Landmark Group), which has 110 stores across the GCC. Al Fahim says the great infrastructure put in place in many GCC countries is a major force driving the retail boom – because investment in service areas, airports, entertainment, hotels, restaurants, communications and transport helped tourism to grow in the region.”

“In the past, even if tourists wanted to come they couldn’t because of a lack of facilities,” he explains. “Extreme weather and a vibrant consumer culture based on populations with high disposable incomes drive retail and push more brands to invest in the region.”

While economies such as Kuwait’s slumped during the economic downturn, others, such as Qatar, thrived due to high demand for its gas.

Philip Toledo Limited (PTL) is the UAE distributor of Retail Pro point of sale software to over 400 retailers in the region. David Catania, chief executive of PTL, says he has noticed four specific trends in the GCC retail sector over the past six months: “Business intelligence – which comes from a desire to be more scientific in terms of the way retailers analyse their information; vertical growth – the retail sector is being organised; GCC expansion – even companies that aren’t big are looking to have an operation in KSA, Kuwait or Qatar as part of their strategy; government support for SMEs – a healthy vision and regulatory framework by GCC governments, particularly the UAE, is leading them to stimulate SME growth.

“There’s a growth mindset across the industry,” he says. “It’s good for other GCC countries to emulate what the UAE is doing.”

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DUBAI BRIEFING

istock photo

Dubai FDI rose 13 per cent last year.

Trade

DUBAI’s renaissance Post the property debt pile up, the emirate is once again luring foreign investors with its service-based infrastructure.

Text by DANIA SAADI

D

ubai made its mark by providing the services that international companies needed to set up shop and reach Middle Eastern customers. After the financial crisis and the end of the real estate boom, Dubai is focusing on this core strength again.

“We know three or four years ago the (foreign investment) interest was circulating around real estate, but currently there is a re-focus on the fundamentals of Dubai, which is trade and logistics, but also financial services and green or clean tech,” said Fahad al Gergawi, chief executive officer of Dubai’s Foreign Investment Office.

Dubai’s reversal of fortune is part of a bigger story. Overall foreign direct investment (FDI) in the United Arab Emirates rose 13 per cent to $15 billion in 2010 from a year earlier, according to estimates from the Ministry of Foreign Trade.

Dubai, which expects FDI inflows to rise by up to 30 per cent in 2011, is not the only party that believes the city state is going back to the pillars of its

economic boom, sweeping away investor jitters over its property-induced debt pileup in 2009.

“Dubai is attractive even more now because the balloon has been deflated and we now believe we’re back to the essence, so it’s a good time to come because the financial crisis has taken out the speculative part of the business,” said Linar Yakupov, the chairman of the committee for small and medium enterprise in Russia’s oil-rich Republic of Tatarstan.

While in the past Russians investors were mainly focusing on Dubai’s property market, more and more companies are looking at Dubai as a launch pad to deliver their goods and services to the rest of the region, including Russian technological knowhow, Yakupov added. Russia, which used to have strong economic and political ties with countries in the Middle East prior to the fall of the Berlin Wall, is also looking to re-energise these business links that have drawn closer to the West.

Dubai’s problems may be water under the bridge for now, but the whole region is just starting to deal with a snowball of political unrest that threatens to dampen the region’s strong economic recovery and demand for goods and services.

Amid the political turmoil, the UAE, Qatar and Saudi Arabia to some extent are fast emerging as safe havens for investors looking to make a foothold in this energy-rich region.

Dubai stands to benefit significantly from the turmoil due to its services base and infrastructure which is firmly plugged in to the global economy.

“The UAE is going to profit by virtue of what’s happening in the Middle East,” said Gita Wirjawan, the chairman of Indonesia’s investment coordinating board. “By sheer availability of the hard infrastructure and wherewithal to manage everything that has already been built, it will serve as a very attractive destination.”

Overall, Dubai is attracting more interest from emerging markets such as China, India and Brazil simply because the fast growing BRICs have more money to dole out and are eager to find more markets for their goods.

Brazilian companies are looking at setting up distribution centres in Dubai for their goods, including transportation equipment and parts, as well as agricultural and meat products, which are in high demand in the arid Gulf region, where lack of water and agricultural land is boosting food imports.

“We know the crisis is temporary and when you enter the international market it’s for the long-term,” said Alessandro Teixeira, deputy minister of Brazil’s ministry of development, industry and foreign trade. “The question mark is not the stability of the region and the returns, the question is about who invests. The countries that used to invest in this area are the US and Europe and they are going through a difficult time in terms of economic performance.”

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BRIEFING Cyprus/oman

Villa rendering, The Wave, Oman

REAL ESTATE

A tale of two countries Gulf Business investigates how the global crisis affected Oman and Cyprus, two very different landscapes with similarly challenging property cycles.

F

ive years ago it seemed so easy.

Pick a preferred location. Develop irresistible marketing collateral. Sun, sea and impossibly picturesque backdrops would do the rest. Build it and they would come.

The global real estate crisis has forced luxury developers to make difficult decisions about how to sustain their projects into the future, given falling house prices and the negative equity confronting existing tenants. Consultancy firm Jones Lang Lasalle says Dubai property prices will bottom out within about a year, but whether this is the case in other areas is far from clear.

Two real estate developments are

instructive in the manner in which their sponsors have reacted to the real estate crisis of the past two-anda-half years. The Wave Muscat was originally conceived as a high-end luxury community catering to expatriates and Omanis. Conversely, Aphrodite Hills, near Paphos, in Cyprus, has become a fixture on the international conference circuit, and adjacent villas and apartments have managed to attract a very high-end clientele.

The severity of the property slowdown has hit Cyprus hard. Department of Lands and Surveys data to October 2010 show that the general market has fallen between one-third and two-thirds

between 2008 and 2009-10. Still worse, the months up to July 2010 were slightly ahead of the comparable month in 2009, but August, September and October 2010 were below the year earlier month. While this does not necessarily reflect the situation at the high end of the market, the developers of Aphrodite Hills, Lanitis Development, have had their work cut out to progress on new phases. The core selling months of April to July are likely to provide respite in 2011, or perhaps 2012, as the global economy picks up.

Around 700 villas, junior villas and apartments at Aphrodite Hills have been sold at the resort in the past eight years. Today, almost 80 per cent of the 117 villas and apartments in the latest Theseus Village phase have been sold.

A new phase, known as Alexander Heights will bring another 69 units to market. Mortgages are available for up to 40 years with a down payment of 25 per cent. Some 35 investors from Dubai have already purchased properties at the site, with Elysian Group acting as sole agent for Lanitis Development in the UAE since early 2010. Cyprus has 2.5 million tourists a year, and the management seems confident that the location’s charms will rub off on new arrivals.

The Wave Muscat was set up as an integrated tourism complex [ICT] in 2006 and a completed development with some 4,000 freehold properties is now envisaged as the final goal. An ICT is the government’s official designation for areas where the sale of freehold property to non-Omani nationals is allowed. The development took $90 million in revenues last year. Because construction only goes ahead after sale, the project’s owners, the government of Oman and Majid Al Futtaim, have if anything increased the number of units planned on project completion. With such a strategy insulating the Wave from recession, the prospects look bright.

The Wave has seen what its CEO, Michael Lenarduzzi, calls a “broadening of product reach… without a change of overall positioning.” This is designed to increase its appeal across the board while at the same time maintaining the project’s high standards. The vision has filled out, and now, in addition to apartments and

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Cyprus

Total Property Sales, Cyprus 2008-10

Data from Cyprus’ Department of Lands and Surveys shows that the market in unit sales has declined dramatically in the almost three years to October 2010.

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 10-month Year 10-month Year

1,600

2008 2009 2010

1,400 1,200 1,000 800 600 400 200

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2009 458 558 580 603 639 753 902 642 757 723 792 763 6,615 8,170 -50.1% -44.3%

2010 570 704 792 675 803 864 797 554 687 714 7,160 8,592* 8.2% 5.2%

* Full-year estimate Source: Department of Lands and Surveys

Cyprus property market — Unit Sales 2008-2010

2008 1,615 1,581 1,326 1,336 1,366 1,386 1,542 936 1,157 1,016 782 624 13,261 14,667 - -

Cyprus’ property market has been having a tough time of late. 2009 was the poorest year for house sales since 2002. Figures released by the Department of Lands and Surveys, for the period to October 2010, show that, compared to the bumper first half of 2008, the market is down substantially in the period since. Furthermore, in August 2010, monthly sales for 2010 fell below the comparable month sales for 2009. Realtors will be hoping that 2011 brings about a reversal of this trend. Lanitis Development data show that while apartment prices at Aphrodite Hills only appreciated 3.0 per cent in the four-year period to 2010, for a compound annual growth rate [CAGR] of only 0.8 per cent, villa prices over the same period were up 62 per cent [a CAGR of 12.7 per cent].

OMAN The Wave in Muscat was launched in March 2006. It had a good period of success until March 2008, when further phase roll-outs were suspended, in effect for two years. By November 2010, a total of almost 1,200 units had come to market, out of a total now envisaged to reach 4,000 by time of project completion. Prices almost doubled in the period to March 2008 for launch buyers, but are now around 30 per cent from those peaks.

“A three bed townhouse launched for RO 140,000 is now asking RO200,000,” says Philip Paul, Head of Office for Cluttons Oman, a rise since launch of 43 per cent or a CAGR of 9.3 per cent. “The Wave has redsigned subsequent releases with smaller unit sizes to target the resident/working owner-occupier and investor looking for rental returns.”

A Cluttons Oman research note for January 2011 said: “Prices in the re-sales market have declined sharply from the highs of early 2008 but have now stabilised to a degree. We do not, however, feel that the bottom of the market has been reached and foresee a continued but gradual softening of secondary market values over the coming months. The last quarter has

villas clinging to the coast road, several new neighbourhoods, including a 400berth marina, a golf course designed by Greg Norman, for which the first nine holes will be complete this spring, and four new hotels, including the Kempinski and Fairmont brands, will increase the

Roll-out of The Wave Muscat Residential Development – Units by month Phase Date Villas Townhouses Apartments Total Units 1 03/06 133 88 - 221 2 12/06 91 60 - 151 1a 03/07 - 42 - 42 3 05/07 75 - - 75 4 11/07 95 - 132 227 Auction 12/07 17 - - 17 5 03/08 124 - 64 188 7 03/10 NA NA NA 160 8 11/10 70 36 - 106

Total 1,187 seen increased activity in the secondary sales market but it is still relatively quiet. The level of enquires is, however, slowly increasing and we expect the market to start to accelerate during the first quarter of the New Year.”

resort’s appeal. “We are not selling real estate; we are creating a destination,” he says.

Some 1,000 property units have already been sold at the Wave, with 600 handed over by the end of 2010.

Foundations have been laid at another

980, with over 900 reaching rooftop level. “Oman’s challenge is how to become more sophisticated as a tourism market,” says Lenarduzzi, of the need to take on neighbours Abu Dhabi and Dubai. “The issue is how they will compete with us.”

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NOTHING STOP US NOW

Akbar Al Baker, CEO of Qatar Airways, speaks exclusively to Alicia Buller about Western detractors, rising oil prices, and why there’s enough future global demand to fill his record order book.

PHOTOS BY VIKRAM GAWDE

I

t’s no surprise that Akbar Al Baker likes to unwind “by sitting in the office”. When he relaunched Qatar Airways in 1997, the airline operated just four planes. Today the CEO runs a fleet of 97 aircraft, with orders for over 170 more – including five Airbus A380s, the largest planes on earth.

Al Baker cuts a slight frame as he walks through the Arabian Travel Market crowds, trailed by a gaggle of hangers-on and flunkies. After all, this is the man who runs the second largest airline in the Gulf, and forms a part of the ‘superconnector’ trio, along with Emirates’ Sheikh Ahmed bin Rashid Al-Maktoum and Etihad’s James Hogan – the Middle East’s transit carriers with supersized planes and profits to match – much to the chagrin of the West.

Just don’t tell Al Baker. After months of publicly slinging mud at Air Canada and Lufthansa, the mere mention of the

West’s accusation of Gulf fuel subsidies sends him off into a fever-pitched diatribe. “They are inefficient airlines, so they shouldn’t blame other people. They think that we are getting government subsidies, but we are not,” the Qatari tells Gulf Business.

“They got subsidies in 2001, they got them because of the ash cloud, they got so much assistance from their governments at times when we didn’t.

But they don’t like to talk about this – they only like to talk about the ‘level playing field’.”

After decades of protectionism, code sharing and coddling air routes, the West is right to be shell-shocked by the rapid rise of the Gulf’s airlines. But Qatar Airways, like its formidable Gulf peers, is no flash in the pan, and is driven by a shrewd strategy from an even shrewder mind. Al Baker says he will stop

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cover story

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at nothing to be the best airline in the world – across commercial, private jets and cargo. In just a year from now, the CEO will be receiving an aeroplane “every 15 days”.

And the diatribe continues: “Lufthansa became private only 19 years ago; before that, for 70 years, they were a state instrument. It was getting all its cash requirements, and it was always losing, the airline nearly went bankrupt in 1991. British Airways was the same, The new Doha International Airport will open by 2012 with a capacity of 24 million passengers annually.

until it was privatised and wrote off $14 billion. The American airlines get Chapter 11 protection. But if I go bankrupt (after the IPO), the state won’t support me, so what’s the problem?” “(Western airlines) have a very high cost base and their governments are making it difficult for them because they close airports at 10pm and open them at 5am. They should blame themselves.

Once their governments do for them what they do for us because we are economic instruments of our country, then we will have a level playing field.”

While Qatar Airways – owned 50 per

cent by the Qatar Investment Authority, the country’s sovereign wealth fund, and 50 per cent privately – claims not to be given direct financial support, Qatari ruler Sheikh Hamad bin Khalifa Al Thani, like his UAE counterparts, views the national airline as the lifeblood for his vision of economic diversity and sustainability. “Build it and they will come,” said Sheikh Mohammed, UAE vice president, Prime Minister and ruler of Dubai, when creating Emirates airline.

Qatar Airways and the UAE national carrier, Etihad, were not far behind in grasping the reality of his sentiment.

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Like the other major Gulf airlines, Qatar Airways is following a strategy of tapping into markets that have been neglected by Western markets and are consequently relying on inefficient hubs in their regions. “We see growth for the entire Qatar Airways global network – not from any one particular concentrated area – because Qatar Airway’s strategy is not to focus on one area. If there is any international turmoil, we want to spread the impact, so it doesn’t affect us.”

Despite experiencing a revenue drop of six per cent due to the regional uprisings earlier this year, the CEO

Qatar Executive’s Bombardier Challenger 605 and Global 5000.

claims Qatar Airways is “expecting a higher profit this year to the end of March 2011. We are also expecting profits the year after,” he says.

The airline has previously said it made a $205 million profit in the financial year 2009 – 2010 and is expecting $250 million for the following year. In December, the firm said it planned to launch an initial public offering (IPO) in early 2012 after three consecutive years of profit.

“I didn’t say the IPO was confirmed for 2012,” clarifies Al Baker – “what I said was profits will be good by then,

so it could be 2012, 2013, or 2011, for that matter.”

Overall Middle East passenger growth slowed around two per cent between February and March due to the unrest, according to International Association of Air Travel (IATA). On a future view, Air Transport Intelligence (ATI) predicted that Qatar Airways will carry almost 70 million passengers annually by 2020.

But it’s not the long-term figures Al Baker is worried about.

“The biggest threat to my profits is

200

s assenger p , s b u h AST at gulf FOREC Capacity ABI ABU DH

“[Western airlines] have a very high cost base and their governments are making it difficult for them because they close airports at 10pm and open them at 5am. They should blame themselves.”

160

DOHA 120

DUBAI

80

200 2

40

04

06

08

SOURCE: AIR TRANSPORT INTELLIGENCE; AIRLINES’ FORECAST INFOGRAPHICS: TARAK PAREKH

(in mil lions )

10

12

14 16 20

GULF BUSINESS / 39

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the oil price. My biggest worry is the regional conflict, if it gets worse then my business will be severely hurt, and the global aviation industry will be hurt,” he says. “You can’t pass on all costs to the customers as they will be paying 15 per cent every month additionally.

Unfortunately, we have to (absorb the cost), we can only recover a small fraction from our passengers.”

For a man who likes to think big, another major concern has been delayed plane orders. Al Baker has been one of the most vocal critics of 787 delays – saying last year that Boeing would be in for a ‘serious surprise’ if they continued the delays. With over 170 craft on order – including 80 Airbus

A350s, 60 Boeing 787s, 12 Boeing 777s and five Airbus A380s – the first 787 delivery is already a year late for Qatar Airways and, considering that Boeing is currently around two years late with all its customers orders, this would indicate a 2013 timeframe. Today, however, Al Baker has regained confidence in the blighted aircraft-maker.

“We are expecting more than 120 planes in the next two and a half years.

We now have firm dates of delivery for the 787s, though the deliveries were delayed due to technical issues in the past and production delays, this has now been overcome,” says Al Baker. “Boeing is also imminently going to start a second production facility on the East Coast so

we think that there will be a ramp up of production and Qatar Airways will receive aeroplanes earlier than stated to us in the revised delivery schedule.”

With Al Baker’s aggressive plans across commercial, private and cargo, he’s going to need a lot of planes, And he’s going to need them quick.

Just last month, the CEO confirmed to journalists that he expects to sign a deal for a 33 per cent stake in European all-cargo airline Cargolux in a few weeks. The stake in the ninth largest freight company globally will lend Qatar Airways considerable extra grip in the global cargo market. While Al Baker’s warehouse at Doha International Airport has capacity to handle around 400,000

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cover story

tons of cargo annually, Cargolux handled 4,652 million tonnes in 2009.

“It is the right time because the whole business has rebounded and Qatar Airways wants to play a very important role in air cargo. Cargolux is very well established and a strong airline,” says the CEO. “The synergies are appropriate, we want to be a global player.”

Another crucial peg in Al Baker’s plan is the private jet market. The firm plans to double its all-Bombardier fleet to six aircraft by the end of August this year. The incoming deliveries include a Bombardier XRS in May, followed by a Challenger 605 and a Global 5000.

These planes will be housed in a handsome new 6,300 square metres hangar facility. Which brings us to another gripe from Western critics: the plethora of shiny, new infrastructure that’s cropping up and supporting the Gulf’s shiny, new planes.

The $14.5 billion New Doha International Airport – based in Qatar’s

capital, Doha – is Al Baker’s selfprofessed “favourite subject” and another of the airline’s related projects directly under his control. The facility, delayed by two years, is now set to open by 2012 with a capacity of 24 million passengers a year, rising to twice that in 2015.

What will happen to the airline’s old facility? “Why, you want to buy it?” he asks, with a smile – testament to a sense of humour lurking beyond his steely ambition. “It will be demolished,” he says, “to make way for commercial and office space.

“The new airport is due to be complete at the end of 2012 and will be operational after that. We will make sure that we have tested all the systems six to eight months before we open the gates for full operation. For example, cargo will be partly functional this year in July so, part by part, we will take over sections of the airport. The air traffic systems will also be completed before the end of the year. Cargo facilities will be complete

Passengers carried by airline 0 20

emIrAtes 40

60 80 0 20

QAtAr AIrWAys 40

60 80 0 20

etIHAD AIrWAys 40

no. oF yeArs 2005 2009

60

2015

2020

80 (In mIllIons)

SOURCE: AIR TRANSPORT INTELLIGENCE; AIRLINES’ FORECAST INFOGRAPHICS: TARAK PAREKH

“Boeing is also imminently going to start a second production facility, so we think that there will be a ramp up of production, Qatar Airways will receive aeroplanes earlier than stated to us in the revised delivery schedule.”

QAtAr AIrWAys Fleet on orDer 80 Airbus A350s (including options) 60 Boeing 787s (including options) 12 Boeing 777s (including freighters and options) 14 Airbus A320s (Family aircraft) 5 Airbus A380-800s 1 Bombardier Global 5000

by the end of the year,” he adds, clearly proud of what such a mammoth-sized project means for the future capabilities of his country.

“I didn’t achieve anything – I just did my job, which was to have a successful airline. I love all the jobs that are given to me by my government because I serve my country. I have always been in a position of responsibility,” he says. “You don’t call this power; you call this the freedom to do your job the way you like, without outside interference, as long as you deliver.”

The new airport and Qatar Airways represents just part of a grander master plan for Qatar’s development by 2030.

In addition to growing its air transport capacity, the country is spending hundreds of billions of dollars on power, infrastructure, real estate and education.

Last year, the small but boisterous Emir state boasted 19.4 per cent GDP growth – number one in the world.

And there is, of course, the football World Cup to provide for in just over a decade, “The PR value of the World Cup in 2022 is immense and every country that has achieved this so far has leveraged this PR opportunity to show many things that the country would want to portray. This is an opportunity that Qatar will take seriously and in a very successful way,” the CEO says.

And with that, he’s off. “Have I got any more interviews today?” he asks his PR team. Media-friendly Al Baker is clever enough to know that image – along with putting your struggling rivals straight from time to time – means everything.

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KINGDOM, COME Abundant oil resources remain Saudi Arabia’s largest blessing and burden.

Sabah Haider reports on the challenges of rampant unemployment and generating diversified income in the region’s largest economy.

S

audi King Abdullah bin Abdul Aziz’s announcement of billions of dollars of domestic investment in March came amid intense regional unrest and fears that the turmoil would trickle into the kingdom.

An estimated 60 per cent of the population of roughly 26 million is under the age of 25, and the country suffers from an unemployment rate of around 10 per cent.

These factors, combined with a chronic housing shortage, a lack of skilled Saudi workers in the private sector, and an underdeveloped infrastructure in certain areas, all fell into the spotlight as matters for concern.

The government responded fast – and with unprecedented levels of investment – to address the frustrations of its citizens, but also because it needed to turbo-drive its economic aspirations of becoming a top-10 global economy.

Back in 2005, Saudi Arabia was ranked 67th by the World Bank in its annual rankings of 183 economies for “Ease of Doing Business”. That year, the government ambitiously announced its 10x10 programme based on the goal of becoming a top-10 economy by 2010. And it got close – only six years Jeddah cityscape, later, in 2011, KSA is ranked 11th.

Saudi Arabia

The country looks set to further climb the rankings, if only slightly, next year on back of the mega spending which is pushing the kingdom into a bright economic renaissance affecting all major industries and sectors – particularly banking and finance, oil and energy, technology, and infrastructure.

A public private affair The dramatic turn for the better for Saudi Arabia has been steered by the government’s efforts to relax regulations around doing business in the country in order to stimulate the private sector – making it easier for businesses in the kingdom to operate in both the public and private spheres.

One way this has been achieved is through the facilitation of PPPs,

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Saudi Arabia COUNTRY Report

or public-private partnerships. In the past the banking sector has functioned in a sphere where lending has been a challenge, and government efforts to address this have resulted in a stimulation of private investment.

The banking sector may still need to go through a natural maturation process, but Shady Shaher, Middle East economist at Standard Chartered Bank, says the Saudi government is making credible moves. “In 2008, the world was going through a financial crisis and when that happens you need the government to step in with counter-cyclical policies, and all of that trickled through and helped the private sector grow,” says Shaher. “Long term, I see the government continuing to encourage private sector companies to come in and more public-private

partnerships (PPPs). The Saudi Arabian General Investment Authority (SAGIA) launched a major programme a few years back to stimulate private investment.”

Clearly marketing the country’s credentials as a great place to do business is important – on its website, SAGIA notifies visitors looking to apply for an online business licence, “KSA is the easiest place to do business in the whole of the Middle East.”

Oil and energy Saudi Arabia is the region’s largest economy, fuelled by oil – which has been both a blessing and a thorn in its side because the country’s vast wealth and dependence on oil income has caused a degree of underdevelopment in other industries. Now with only a few more

projected decades of oil remaining, the country, not unlike Abu Dhabi, is rapidly developing other sectors.

Problems caused in the past, such as a dramatically unequal distribution of wealth and a vast, frustrated and unemployed youth population, are being addressed in tandem with developing the public and private spheres, and this investment is possible because the government – especially in recent years – has been able to develop enormous surplus wealth due to the high price of oil.

“Oil prices have been favourable to KSA, It’s able to sustain this type of spending because of high oil prices,” explains Dr John Sfakianakis, chief economist at Saudi Fransi Bank.

“The macroeconomic profile of the country is solid, and given that oil prices GULF BUSINESS / 43

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Left: KAUST Below: Saudi King Abdullah bin Abdul Aziz

are at the level of $100 and above allows the country to appear very healthy on the inside and outside, as well as spend a lot of money. Saudi Arabia has little domestic debt and no external government debt.

That’s important. On top of that, the economy will attain fiscal surpluses this year and next year as long as oil prices remain high.”

While current oil prices are certainly good for Saudi Arabia’s booming economy, Glenn Lovell, senior associate at Al-Tamimi law firm in Riyadh, says the government recognises that its oil won’t last forever and alternative energy sources are being explored. “There are some challenges in the oil sector, and that is the consumption rate internally,” he says. “For example, to supply the country’s electricity generators, there’s a huge internal consumption of oil; the government is addressing this and is looking at alternative power generation methods.”

Addressing the need to safeguard energy supplies and provide for a fastgrowing population, and noting that solar and nuclear power are the best alternative energy options, the government seems to

have responded proactively.

In April 2010, the Saudi leadership announced a Royal Decree to establish the King Abdullah City of Atomic and Renewable Energy in Riyadh, to manage future energy resources. The step was hailed by the president of King Fahd University of Petroleum and Minerals, Khaled Al Sultan, as a “massive step toward securing additional sources of energy and preserving oil for many a decade.”

Overall, the government has committed to spending approximately $100 billion on solar, nuclear and other alternative energy sources in the coming years.

Finance and economy Clearly KSA is enjoying a period of prosperity and stability, “especially when compared to surrounding GCC countries,” says Lovell. “It’s in a unique situation because it had time to build its financial reserves.”

One thing Lovell points to is the King Abdullah Financial District (KAFD), being built 10km from the centre of Riyadh, the country’s financial capital.

The KAFD will accommodate the Central

ARABIAN EYE

“The government responded fast — and with unprecedented levels of investment — to address the frustrations of its citizens, but also because it needed to turbo-drive its economic aspiration to become a top-ten global economy.”

Bank, the capital market authority and a number of other supporting bodies, while all financial institutions in KSA will moved there.

Banks are further set to benefit from new laws on the horizon. “This is the year for banks in KSA,” says Lovell. “We are waiting for the government to issue a number of laws – finance, mortgage, etc.

Once they’re passed, there will be more framework within those regulations.”

“One key challenge in the past was growth of credit and availability of liquidity, but since last year that has improved,” explains Shaher. “The situation would have been different if the government had not spent and focused on key areas of the economy; the private sector would have contracted significantly.”

A key challenge for the banking and finance sector in KSA now is “increasing balance sheet size without compromising

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Saudi Arabia COUNTRY Report

on risk management,” says Julian Johansen, a partner at Allen & Overy in association with Abdulaziz Al Gasim Law Firm, Riyadh. Meanwhile, for the government, Johansen says the major challenge is to maintain the “right balance” between government and private sector funding.

He explains: “A preponderance of government funding tends to diminish the private sector role, which may have an adverse effect on bank profitability. Too much emphasis on the private sector, with banks remaining cautious following the global financial crisis, carries the risk that essential projects may be under-funded.”

Infrastructure Unprecedented levels of infrastructure development have begun in the kingdom.

With the population set to increase dramatically, and on the back of 500,000 new homes to be built in the next few years – as announced by Royal Decree in March – tremendous amounts of infrastructure need to be put in place.

Beyond water desalination, telecommunications, and energy, it also includes technology and transport.

Saudi Arabia has put aside billions to invest in its infrastructure, from power, roads and rail to hospitals and schools.

A huge national and regional GCC rail network is underway, which, when completed, will play a significant role in the cost and energy-efficient movement of goods and people.

Lovell explains that the supply of water and electricity are issues in KSA, firstly as there is major pressure on the current systems to supply electricity, and, with water, the price that consumers pay for a glass is one tenth of its cost of production – “When you have that, it’s very hard to privatise those industries.”

The construction sector is one of the big industries set to benefit from government spending on infrastructure, both residential and commercial, including the development of planned economic cities. A total of SAR624 billion over the next five years has been

earmarked for government expenditure housing the planned six economic cities.

Facilitated by SAGIA, each city, will be developed by the private sector “…around one globally competitive cluster or industry, which will serve as an anchor and a growth engine for the city, around which other businesses will locate” and consequently create infrastructure, real estate and industry opportunities.

Infrastructure and technology firms are set to benefit from investment in infrastructure and across industrial sectors in KSA, says Walid Abukhaled, president and chief executive of GE Saudi Arabia. “The economy has always been good in Saudi Arabia. GE has been there for 80 years and we’ve done this through a strategic partnership with the Saudi government – that is, creating value for the Saudi government and, in return, we get value.”

“In the past 20 years, GE has invested SAP 1 billion in localisation and manufacturing projects. This investment cuts across energy, healthcare, aviation, power and water industries,” explains Abukhaled.

Overall, Lovell notes a challenge for the government is the need to get top quality products for the right price, while

controlling the pace of development: “It must be an enormous task for ministries.” Another challenge, he says, is classification of foreign entities – “Some of these companies are classified as ‘A’ in their own countries, but they may have to change here. This is an issue because certain government tenders require certain classification for contracts and contractors.”

Unemployment and inflation The Saudi American Bank (SAMBA) expects the kingdom’s population to rise to 29.7 million by 2013. Organisations in both the public and private sphere have implemented Saudiisation policies, as industry-specific quotas for the employment of Saudi Arabian nationals have been introduced in order to promote the employment of locals, as well as skill enhancement in the local professional labour market, and, ultimately, decrease the country’s dependence on imported talent.

“Around 140,000 Saudis are currently studying abroad under Saudi government sponsorship,” explains Abukhaled, a Saudi national. “They’ll all come home with the best education in the world and we’ll be looking to recruit that talent.

“We have a vigorous plan for Buildings under construction in the King Abdullah Financial District, on the outskirts of Riyadh.

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Saudiisation – we’re concentrating on bringing in Saudi talent,” he adds.

Most nationals tend to prefer jobs in the public sector where they benefit from better salaries and packages than what is typically available in the public sector.

The wage gap between sectors is an area of concern as private firms often struggle to compete.

However, Shaher explains an estimated five million jobs need to be created by 2025 as the number of Saudi nationals grows from 20 to 30 million in the next decade.

“Currently, unemployment is approximately 10 per cent. I think the

way the Saudis are dealing with it is right in terms of addressing the structural issues that cause unemployment, such as education, and if you look at the big area of spending in past few years, it is education,” he says.

“The population is are very young in Saudi. If you look back 10 years ago, there were 10 universities in the country.

Now there are 25.” says Ali Riza Kucuk, Intel regional retail manager for Middle East Turkey and Africa. This young population has become tech-savvy.

“They are very interested and willing to know about and use technology, so that’s why in this renaissance the King’s

LITERACY RATE:

OIL RESERVES

78.8 PER CENT

UNEMPLOYMENT RATE:

packages are helping; lowering the broadband price is helping,” “Policymakers in the region have been active in dealing with the demographic challenge and that’s why they’ve been investing and diversifying – to create job opportunities,” adds Shaher. “I’m optimistic on the back of all the spending.

In the past two years they’ve spent almost $200 billion on infrastructure investment.”

The next decade will be crucial in building the kingdom’s impact as a truly diversified economy. Key to this will be the country continuing to hold its arms open to investment; and turning its vast youth population into an asset.

RESUME

10.8 PER CENT (2010 est.)

GDP per capita

MEDIAN AGE

$24,200 25.3 MAPS ARE FOR ILLUSTRATION PURPOSE ONLY

(2010 est.)

YEARS

264.6 billion BARRELS POPULATION GROWTH RATE: 1.536 per cent

SAUDI arabia boasts the world’s largest oil reserves

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SAuDI ArAbIA COUNTRY RepORT

ToTAl lAnDMASS 2,149,690 SQ.KM SAUDi ARAbiA

(SliGHTlY MoRE THAn onE-FiFTH THE SiZE oF THE US)

PoPULAtIoN IN CItIES MeDINAH

MAKKAH

MECCA

1.484M MEDINA

1.104M RIYADH

JEDDAh

3.234M eASTeRN ReGION

totAL PoPULAtIoN

26,131,703 5,576,076

RIYADh (Capital)

4.725M

AD DAMMAM

902,000 (2009)

NoN-NAtIoNALS

SoURCE: CIA INFoGRAPhICS: tARAK PAREKh

INCLUDES

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The UAE’s train journey TEXT BY ANGELA SHAH ILLUSTRATION BY TARAK PAREKH

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SPECIAL REPORT

In just over two years, abu dhabi is set to roll out the first stages of its etihad rail plan. ceo richard bowker spills the beans to gulf business on the billion dollar project.

T

he glamour and neon lights of the Yas Hotel made an unlikely tableau for the launch of an idea grounded in the past but with ambitions for the future.

The world-famous venue was chosen

by Abu Dhabi to formally introduce Etihad Rail, formerly known as Union Railways, its ambitious $10-billion, 1,200 km rail network for which it will break ground later this year. The first trains carrying granulated sulphur from new plants in Shah and Habshan, the locations of major oil and gas field

developments, along the 260 kms to Ruwais should roll on the tracks in 2013. Ruwais is the site of the UAE’s major oil refineries, a natural gas liquids fractionation plant and a sulphur handling terminal, among other plants.

“Rail is a great way to transport high-volume goods: commodities, containers, aggregates, cement and sulphur. Railway can do it better than anything,” says Richard Bowker, Etihad Rail’s chief executive officer, in an interview with Gulf Business.

“In most of the places in the world,

you always have to deal with things sorted out 100 years ago,” he adds.

“But here there is an opportunity to learn from the best of the best and apply that in a way for the best possible results in the UAE.” Etihad Rail is a key part of planned investments by Abu Dhabi to shore up its economy to flourish beyond the day when its oil dries up. Its 2030 economic development plan calls for the emirate to boost a number of industries, including alternative energy and tourism, while also spending billions

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SPECIAL REPORT

to beef up infrastructure such as rail.

“The development of an integrated railway network signifies the inception of a new chapter of transport in the UAE,” says Nasser Al Sowaidi, chairman of the board of directors of Etihad Rail. “The rail network will form an imperative part of the country’s infrastructure

become viable in countries like the UAE. Increasing freight traffic to and through the country has made rail necessary to both reduce costs and increase efficiency of moving the goods.

Bowker says one total rail shipment can carry the equivalent freight of 300 trucks. And with coffers flush from

they will split, heading to both Khor Fakkan in Ras Al Khaimah and to Fujairah, where a major oil and gas port is being increasingly used to reach the Indian Ocean by bypassing the Straits of Hormuz.

The trains

and promote integration between various methods of transportation, both current and planned for the future.”

In total, the planned rail network, which is scheduled to be completed in 2018, would stretch from oil and gas fields in the country’s western region and through Dubai’s busy ports and up to the northern emirates and the Omani border. The railway expects to ship 50 million tonnes of a variety of goods in the first few years.

While railways have long been a part of many nations’ transportation systems, such a network has only just recently

escalating oil prices, a rail network becomes a go-to investment choice for Gulf governments.

Etihad Rail’s management says the network will also be better for the environment compared to truck fleets, even though they have decided to use diesel, rather than electric, engines.

The second stage of the network, for which preliminary engineering is being conducted, would lay tracks inside the emirate of Abu Dhabi from Ruwais to Gweifat, which is located on the border with Saudi Arabia, about 240 kms west of Abu Dhabi city. This stage would also include lines from Tarif to the new Khalifa Port and the Kizad industrial zone in Abu Dhabi, ending at Jebel Ali port in Dubai. The third stage would involve tracks from Jebel Ali northward through the emirate of Sharjah, where

REUTERS

“One total rail shipment can carry the equivalent freight of that in 300 trucks. And with coffers flush from escalating oil prices, a rail network becomes a go-to investment choice for Gulf governments.”

Richard Bowker, Etihad Rail’s chief executive officer would have double-decker carriages and travel at speeds of 120 km/h. A planned passenger rail line going as fast as 200km/h for commuters between Abu Dhabi and Dubai has been put on hold for now. Still, Bowker says the rest of the 1,200km network – what he calls the core lines of the rail system – would also be able to accommodate passenger traffic, and would do so.

“There is strong potential demand for passenger service,” Bowker says. “But

RAS Al KHAIMAH PORT SAQR KHOR FAKKAN

SHARJAH

ABU DHABI KHALIFA PORT

FUJAIRAH

DUBAI JEBEL ALI

ABU DHABI MUSAFFAH GHWEIFAT

RUWAIS

ABU DHABI ICAD

TO OMAN AL AIN

TO SAUDI ARABIA

LIWA

SHAH

Etihad rail projected routes

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SPECIAL REPORT

we have a colossal amount of work to do to get the first stage running. It’s all about priorities.”

Putting the priority on freight makes sense, agrees Nabeel Kazerooni, senior executive officer at Injazat Capital in Dubai. “In this part of the world, passenger volumes are not that big, given the size of the populations,” he says.

Etihad Rail is capitalised at Dhs1 billion ($270 million) and is 70 per cent owned by the government of Abu Dhabi, while the UAE federal government owns a 30 per cent share.

“It seems to be on track,” says Marina Petroleka, head of infrastructure analysis, industry research, for Business Monitor International in London. “The contracts are going out; the construction is to start this year.”

There was, however, one misstep last fall when Etihad Rail seemingly abruptly cancelled key contracts with

two American companies and a French firm. In January, the company quietly dismissed major design and management contracts just two months after they had been awarded. The railway cancelled a management contract with a joint venture between Parsons Corp. of Pasadena, California, and the Paris-based SYSTEA. It also dropped a preliminary

“For engineering and construction firms, Etihad Rail’s plans present a lifeline at a time when the global economy was still reeling from the slowdown in residential and commercial construction.”

Money on the tracks The GCC’s burgeoning railway network is one of the biggest Rail projects across the Gulf aren’t technically the first time trains have snaked across the region. The mode of transport actually hails back to the crumbling Ottoman Empire in the early part of the 20th century.

The Hejaz Railway traversed between Damascus and Medina, largely ridden

by Haj pilgrims. But the railway was destroyed during the First World War when it was raided by Bedouin tribes led

by Lawrence of Arabia.

Today, a series of simultaneous rail projects could one day link Omani ports on the Indian Ocean through the Gulf, into the Levant and Turkey, and on the doorstep of Europe’s capitals — recreating, and even going beyond, the Ottoman Empire’s network.

“Rail is the buzzword in the region,” says Nabeel Kazerooni, senior executive officer at Injazat Capital in Dubai.

Flush with cash from oil revenues, Gulf governments are investing the proceeds in large infrastructure projects, including rail.

The individual projects themselves are at various stages of development with Saudi Arabia, the UAE and Qatar having the most advanced plans. The research firm Business Monitor International estimates the total value of rail projects in the region

over the next 10 years at $109 billion. The only other railway market with a similar potential is that of the United States.

The UAE’s railway is being constructed in tandem with similar rail projects in other Gulf countries. Saudi Arabia will soon open a north-south line covering 2,500 kms, while Oman, Qatar and Bahrain are starting rail projects of their own.

“The vision is that you will be able to run a train from Muscat through Abu Dhabi to Saudi right up to the Jordanian border, then through to Turkey and Europe proper,” said Richard Bowker, chief executive officer of Etihad Rail in the UAE. “Then you’re into very exciting visions of transportation of goods.”

Each Gulf country has agreed to comply with the same standards for track gauge, the European Train Control System 2. This will help avoid inefficiencies created because of differences in signaling systems that exist between the UK and continental Europe, for example.

Those sorts of agreements aside, it will be a few years yet before train caravans will be chugging along the Gulf’s desert landscape. “There have been some teething problems,” says

Marina Petroleska, head of infrastructure analysis, industry research, at Business Monitor International in London. “But there is a lot of political backing; the rhetoric is quite positive.”

In the meantime, the private equity industry has found limited success in leveraging the billions being spent on railroad projects. Kazerooni says his firm had hoped to raise about $300 million last year for a transportation and logistics fund, but found slack interest due to the moribund global economy.

Recent political turmoil in the Middle East has thwarted those efforts further. Still, Kazerooni said the sound fundamentals of such a fund should attract investors once stability in the region’s security is achieved and he hopes to market the fund again later this year.

“It’s a fantastic asset class for investors to consider,” he says. “You own the asset as investors and lease it back to the operator. You maintain the value of the investment and also perhaps get a little bit of capital gain as well.”

Saudi Arabia: The way to Mecca and beyond The oid-rich kingdom is building the region’s largest rail network to support

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engineering agreement on the project’s first two phases with Parsons Brinckerhoff of New York.

“A decision was taken and we did it,” Bowker says, declining to detail reasons why the contracts were dropped. “No projects has ever gone from A to Z without difficult decisions that have to be executed and that was probably one of them.”

The industry, he says, has taken the reversal in its stride. “The evidence of how keen the market is and how serious we are can be seen in the fact that the

tenders for the main ETC contract due March 1 had over 20 bidders. This tells us the interest is overwhelming,” he adds.

For engineering and construction firms, Etihad Rail’s plans present a lifeline at a time when the global economy is still reeling from the slowdown in residential and commercial construction.

Last September, Al Habtoor Leighton formed a joint venture with John Holland, the Advance Rail Group, specifically to target opportunities in the rail sector. Al Habtoor Leighton has been particularly hurt by the crash in the construction

sector with many projects cancelled or delayed. The diversification into rail is an astute way to insulate the company from further weakness in that core sector, according to research firm, BMI. The political unrest in the Middle East has not deterred Abu Dhabi from pursuing its aggressive plan of development. It hired Bowker, a former vice chairman at British Waterways, in 2009 and has aggressively partnered with engineering and design firms to build the network.

“We are dead, dead serious” Bowker says. “This is all-systems go.”

beneficiaries of the rising oil price Bay People Mover in Doha, Lusail City’s light rail system and the overall Qatar Railways project which will integrate all of the networks.

Qatar is also doing the heavy financial lifting to build a long-planned $3 billion bridge linking the island emirate to Bahrain about 40 kms away. First announced in 2001, the project has been beset by delays.

Qatar Railways Company

both religious and commercial purposes.

In total, Saudi has almost $20 billion in rail investments, including four major projects: the Haramain High Speed Railway, the North-South Railway, the Saudi Landbridge Railway and the Jeddah Monorail.

Saudi plans a 950 kms line from the Red Sea to the Arabian Gulf, connecting with the North-South Railway and serving to haul commodities such as bauxite and phosphate.

The $1.8 billion Mecca Metro opened for partial service last autumn in time for the Haj. Scheduled to be complete this year,

the 20-kms project is expected to carry half a million pilgrims every six hours.

Qatar: World Cup fever and ambition The natural gas exporter is undergoing a massive spending programme on infrastructure in preparation for hosting the World Cup tournament in 2022, and that includes rail projects.

Earlier this year, the tiny island emirate founded the Qatar Railways Company which will oversee the management and construction of $17 billion in rail projects including the West

Oman: Linking Asia with the Gulf The Sultanate is planning a $10-billion, 1,600 kms network that hugs the Omani coastline from Salalah in the south through the capital of Muscat and on to the port city of Sohar. The first phase is construction of the 1,000 kms linking Sohar, which is the site of the country’s steel and aluminium plants, to the capital and on to the border with Abu Dhabi.

Construction on what’s being called the National Freight and Passenger Railway has not yet begun. Oman plans on appointing contractors and design consultants from a short list of 10 firms in June, according to Salim Al Affani, the head of planning for the Supreme Committee for Town Planning. Services are expected to start in 2017.

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what japan's pain means for the gulf With a long history of trade, Japan and the Gulf are closely linked. The ripples of the tsunami and halted production are directly affecting the Middle East.

TEXT BY RYAN HARRISON

illustration: roui francisco

W

hen an earthquake and tsunami struck the north east coast of Japan in March it started an economic chain reaction that is now being felt on the shores of the Gulf.

The Great East Japan Earthquake, as named by the Japanese government, and resultant nuclear-plant disaster disrupted the supply chain of industries that have supported Gulf growth in technology, engineering and automotives.

Japan, after decades of strong, steady growth in the region, has been knocked off track.

Car and electronics manufacturers have been hit by a slow down in production, leaving companies like Toyota – the world’s largest producer of cars in 2010 – announcing a drop in sales in the UAE as it fails to meet demand at showrooms.

To make things worse, the escalation in the Yen during the crisis has put Japan at an export disadvantage.

Japanese firms in the region will likely shelve any ambitious growth plans for up to 18 months, according to Lindsey McDonald, a consultant for the information and communication technologies practice at Frost & Sullivan.

“Electronics companies are perhaps the most impacted and they’ve had to either rethink or realign expansion plans. Typically this would mean that the expansion plans have been delayed.

There are also thoughts of outsourcing and/or moving manufacturing facilities to other production destinations to offset the impact of a halt in Japanese production.”

Japan has a long history selling its goods in Dubai, and offering expertise in engineering and technology. The Dubai Metro, for instance, was built by a consortium led by Japanese firm

Mitsubishi Heavy Industries, while the Dubai Chamber building was designed by Japanese architectural firm Nikken Sekkei.

The UAE is also home to over 300 Japanese companies that use Dubai as their regional headquarters for the MENA region, which translates to 41 per cent of all Japanese companies based in the Middle East.

The engineering and retail sectors can expect delays in the coming months as power outages in Japan hamper manufacturing plants, choking off supply to the Gulf. This is especially important given that Japan’s exports to the UAE are the highest in the Middle East and the share of Japanese cars in the country over the last 10 years has reached close to 70 per cent, according to the Japan External Trade Organisation.

To compound matters, GCC governments have introduced restrictions to prevent the sale of Japanese food tainted with radioactive contaminates.

Japanese businesses in the Gulf have gained a reputation for methodical and prudent decision-making in recent times, so few predict any knee-jerk withdrawals from markets in the region. Instead, expect some regional manoeuvring to capture stable growth and avoid the political unrest that’s engulfed countries like Bahrain.

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THE COSt of disasters Japan recently passed a $49 billion emergency budget to help fund reconstruction.

Asia suffered the highest economic losses of $75 billion over 2010, equivalent to 0.28 per cent of GDP. Natural catastrophes exceeded man-made disasters for the first time in 2010 with 167 compared to 137 man-made disasters.

Earthquakes accounted for almost one-third of all insured losses in 2010.

In terms of economic losses, natural catastrophes and man-made disasters cost $218 billion in 2010, more than 60 per cent higher than the $68 billion in 2009.

2010 ranked as the seventh highest year for insured losses at $43 billion since 1970, although its still lower than the $83 billion of insured losses in 2005 with $78 billion triggered by natural events such as Hurricane Katrina.

Getty images

The cost to private insurance of the March earthquake is estimated at $14-33 billion, compared with $783 million in 1995.

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Getty images

A worker checks radiation levels on a Nissan car produced in Japan.

Jane Kinninmont, senior research fellow for MENA at Chatham House, said: “If you’re selling cars and consumer goods then Saudi is a pretty good bet out of all the GCC states. A lot of the huge rise in government public spending has found its way to salaries, and with credit conditions being tight recently you’d expect this trickle down to support consumers’ spending power.

“Whereas if you’re looking at a long-term loan to a state company institutions banks have been asking questions about government stability in Saudi, especially in light of the protests in Bahrain. You will look at the transparency of Saudi as well and

that will feed into your risk perception.

Bahrain has raised concerns about Saudi, especially in the Eastern Province,” said Kinninmont.

She added that the Gulf market is unlikely to see a long-term shift in strategy from Japanese firms, but rather a short-term revision of tactics. “This is driven largely because demand for products, especially Japanese cars, depends on trust. At the end of the day the tsunami was an act of god,” she said.

Recruitment experts have reported that Japan’s appetite for hiring has been scaled back in the Gulf, a region it has traditionally dominated in terms of offering candidates long-term job security.

Ian Giulianotti, associate director of human resource management consulting at NADIA recruitment, said: “Hiring is going on but Japanese firms are taking longer to make decisions. They’re now taking a longer-term view and because they’re feeling the pinch the decision time on average has doubled from eight weeks to 16 weeks.

“They’re facing a reduction in power across Japan, so the predicament they have is: do we have enough power to produce things? They don’t want to commit to expansion they can’t deliver or make promises they can’t keep.”

Giulianotti said that because longterm relationships are the lifeblood

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JAPAN

of the Japanese corporate world, businesses will take the dip in activity as a chance to foster ties with new partners in the Gulf.

The unfolding crisis at home, which latest estimates forecast could cost Japan between 2.5 and four per cent of GDP this year, is likely to severely crimp the growth of Japanese firms overseas.

Most will at the very least take a more cautious stance on expansion in the Gulf as fears linger about their ability to deliver popular exports.

Most analysts agree that the rest of 2011 will likely be a deceleration rather than an emergency stop, but it does present opportunities for Korean and Chinese engineering firms to dislodge Japan’s foothold in the Middle East.

Kinninmont added: “Japan has been highly respected in the Arab world for some time, partly because it doesn’t have the colonial baggage of the Western

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“The unfolding crisis at home, which latest estimates forecast could cost Japan between 2.5 and four per cent of GDP this year, is likely to severely crimp the growth of Japanese firms overseas. Most will at the very least take a more cautious stance on expansion in the Gulf as fears linger about their ability to deliver popular exports.” world. It’s been viewed as a successful non-Western power, but as its economy has floundered in recent times it has lost some standing.”

One perhaps unexpected hard truth that Japan’s multinational manufacturers are facing in the aftermath of the tsunami disaster is the degree to which

they continue to depend on domestic suppliers for parts.

While many Japanese companies already have vast production facilities in other countries, that investment is likely to increase to guarantee the smooth flowing of the supply chain to critical regions like the Gulf.

5/25/11 5:43:24 PM

CHEMICAL REACTION The global petrochemicals industry is diversifying and the Gulf must shift gears to claim its share.

TEXT BY MARK ATKINSON

I

t is hard to imagine a world without petrochemicals – as the name suggests, chemicals derived from petroleum. From the technology in our computers and mobile telephones, to the medicines we take, personal care products we use, the plastics contained in most everyday items, the coolant we put in our engines or the de-icer used for aircraft, the downstream products of petrochemicals are ingrained into every aspect of our daily lives.

“We all use products of the petrochemical industry every day without thinking about it,” says Tony Potter, managing director at CMAI Middle East, a petrochemical market consultant.

“Food in the supermarket is wrapped in polyethylene film, we drink milk out of polyethylene cartons, while water and soft drinks are sold in polyethylene terephthalate (PET – a form of polyester) bottles. More than half of the global fibre used is polyester (there isn’t enough natural cotton in the world to clothe us all), so without the petrochemical industry, our wardrobes would be severely depleted.”

With its rich oil and gas reserves, the GCC is a major source of raw petrochemical materials. These are then typically shipped to countries in Europe and Asia where they are converted into

downstream consumer products.

Future demand looks promising – most notably through polysilicone, the petrochemical used in memory chips, high-performance processors and solar technology. According to Filippo Fantechi, CEO of energy business advisory firm Contax Partners, the region is forecast to supply 20 per cent of raw petrochemicals by 2015 – up from 16 per cent in 2009.

Much of this demand will be driven by Asia, particularly China and India.

“Petrochemical projects will constitute 20 per cent of all energy project expenditure between 2010 and 2013,” Fantechi forecasts.

Sitting on around 23 per cent of the world’s gas reserves, and with natural gas feedstock supplies heavily subsidised by governments, the GCC has so far had an advantage compared to its Western counterparts.

According to an Alpen Capital industry report, markets such as the US may be paying more than 2.5 times as much.

This has helped the region expand its global petrochemicals capacity by more than 50 per cent.

gas (ethane) based. In some ways gas is preferable to oil, which is more subject to price volatility. Yet, according to an Alpen Capital report, the industry’s cheap supply of ethane is becoming more restrictive, with reduced exploration/ production activities and increased energy demand – primarily, electricity.

“Project owners in the region will not be able to rely on subsidised pricing for feedstock to achieve a significant competitive advantage,” confirms Fantechi. “Historically, project owners in countries such as Saudi Arabia received gas feedstock at highly subsidised prices, which enabled them to obtain a much more attractive project IRR and operate their plants more competitively in the long run.”

Due to the shortage of ethane, Fantechi forecasts that project owners in Saudi Arabia will struggle to obtain these subsidised rates (the Kingdom is already looking at increasing the

CHALLENGES AHEAD But the days of subsidised gas may be numbered. Feedstock for petrochemicals can be either oil or

Filippo Fantechi, CEO of energy business advisory firm Contax Partners

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PETROCHEMICALS

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Terneuzen Polyurethane Plant

THE CHIPS ARE UP price) and will need to look at alternative liquid feedstock. One alternative is naphtha, a light version of crude oil.

“We understand that petroleum ministries are wary of gas allocation,” says Vishnu Sankaran, chemicals and materials manager at business consulting firm, Frost & Sullivan. “(They now) evaluate projects based on the diversified products for which they can be used, and on value addition over and above what is being made in the region today.”

Furthermore, other territories may now be developing cheaper feedstock advantages. “Shale gas developments in the US have brought their gas prices down dramatically, improving the competitive position of the US and making it newly attractive as an investment location,” he adds.

The US is not the only contender.

“Competitive threats for petrochemical products are expected from China, Iran and African countries, such as Nigeria, Angola, Ghana and South Africa,” says Sankaran.

Fantechi explains that utilisation rates have improved at many petrochemical plants and supply currently outweighs demand. By 2015, this is likely to change with increasing demand from China and India. Still, pressures on demand will remain as the latter countries develop their own internal capacity.

As the GCC plans to step up its production of downstream petrochemical products, WACKER Chemie AG, one of Europe’s leaders in the field, highlights how the demands of new technologies and emerging markets will, is increasingly driving the downstream petrochemicals market.

Founded in 1914 and headquartered in Munich, Germany, WACKER Chemie AG operates 26 production sites worldwide, supplying more than 3,500 products to more than 3,500 customers in over 100 countries. Its products are found in various sectors such as pharmaceuticals, household/personal care products and electronics.

More recently, the fastest emerging market has been in polysilicon wafers – primarily used for the production of semiconductors – an area of the business that increased by more than 60 per cent in 2010.

“We expect silicon-wafer demand to increase (further) during this year” says Rudolf Staudigl, the company’s president and CEO. “New devices, such as tablet PCs, and smart phones, and the growth of image and video applications, will fuel demand for memory chips and high-performance processors…(our) main investment focus will be our polysilicon division.”

Another fast emerging area is the photovoltaics market (the convertion of solar power into electricity using semiconductors) which currently accounts for around 15 per cent of the company’s polysilicon division, and is expected to grow into the future.

Finally, research and development remains a crucial part of the industry, often long before markets emerge. As Staudigl points out, the company has been researching polysilicons for years, but only 10 years ago did the market really start. “If we hadn’t done the research we wouldn’t be in the market right now,” he asserts. The same applies to current research in the biosolutions market with its increasing focus on the agricultural and pharmaceutical industries.

In terms of the company’s business plan for the GCC, “There is a high level of construction in the region, so we are very interested in that side,” concludes Staudigl. “Another issue is how business in North Africa is going to develop.”

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PETROCHEMICALS

DOW CHEMICAL Gulf Business discusses sustainability with Dr Anne Wallin, director EH&S and sustainability, EMEA, The Dow Chemical Company.

Can you provide us with some best practice sustainability examples from Dow? Sustainability requires making decisions with the future in mind. It is all to do with our relationship with the world — creating economic prosperity and social value while protecting our planet. Dow has four sustainability pillars: innovations for tomorrow, smart solutions for today, partners for change, and responsible operations. In terms of specific examples, advances in chemistry have allowed us to down-gauge film stretch by more than 25 per cent, saving over 450 million kg of polyethylene annually — the equivalent of 293 million gallons of gasoline, or heating and cooling for 643,000 average homes. We have also discovered a new way to produce propylene oxide (used in products such as seat covers, toothpaste, cough syrup, and aircraft de-icing fluids), which uses less capital, reduces wastewater by 70 per cent and energy by 35 per cent.

How seriously is the chemical industry adopting sustainability practices?

I would say the chemical sector is a leading industry in sustainability. There is a movement towards sustainability around the world, including the Middle

CHANGING TIMES Pressure on gas feedstock prices and increasing global competition are now compelling GCC petrochemical giants to look at their business model. “The GCC is moving downstream into intermediates and more specialised chemicals, and is also developing polymer conversion parks,” says Potter.

“At the moment, plastic is exported to China where it is converted into finished and semi-finished goods for export

East. Often sustainability is taken to mean only the environment. Equally important aspects are the community, harnessing employee creativity and engaging the next generation of leaders. The Middle East has adopted a forward-thinking approach with initiatives such as Young Arab Leaders and LoYAC (a Kuwaiti nonprofit organisation empowering youth through creativity). The world has no shortage of challenges, including raising standards of living and providing clean drinking water. Companies should ask themselves, how can we minimise our footprint and deliver solutions that help customers and society do the same.

and technology will also lead you to opportunities. First, look at your footprint and then some of these trends. What we did was look at some of the UN Millennium Development Goals which gave us a great place to start. Who would have thought that the cellphone would change the way you do business in Africa and India?

Sustainability makes business sense. Our 2005 sustainability goals delivered savings of $5 billion on an investment of $1 billion.

That’s aside from the environmental impact such as reduced water use by 83 billion kilograms.

How can businesses benefit from implementing sustainable practices and standards?

As well as being good for the environment, sustainability is a competitive advantage — not just philanthropy. Look at what your company is doing. Water, greenhouse gasses and energy are some of the first places to look. Mapping mega trends to your business

How do you envisage the future of ecodevelopment in the Middle East?

I would expect it to be driving the efficient use of resources, such as ways to reuse water. There are also technologies that can improve the energy efficiency of buildings. I would expect Gulf countries to continue diversifying their economies — and in the petrochemical industry, to find more sustainable ways to produce higher value downstream products. Consumers don’t want to give up the value of the products they are used to — they just want to see that they’re delivered more sustainably.

to developed regions such as Europe and North America. Not all polymer conversion is labour intensive and some of the conversion could be done locally to add value and, ultimately, contribute to the manufacture of more finished goods in the region.”

Sankaran agrees. “Today, many primary petrochemical products are exported, which are then converted into more value-added products and sold back to the GCC region,” he says.

“I think it is time that governments, as well as private companies, looked at investing further along the downstream chain through forward integration or diversification. This will help create higher value products which, in turn, will generate further employment and higher revenues.”

With such a huge and diverse range of downstream products, the potential benefits for the manufacturing sector and wider economy are clear.

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BE MY GUEST

Philip Barnes’ indomitable get-up-and-go has taken him to every corner of the globe in his 30-year career. Having established the Fairmont Dubai and Abu Dhabi, the chain’s regional vice president is now set to bring his unique brand of common-sense hospitality to three new UAE hotels. All he asks is that each guest leaves a happy one.

Photo: NAVEED AHMED

TEXT BY ALICIA BULLER

When Dubai won the best global Fairmont hotel award last year, I said to my staff ‘well done’… and then I said ‘now, get over it’.” This sums up Philip Barnes, regional vice president at Fairmont Hotels. He’s so straight-to-the-point that it momentarily takes you aback, but after a second or two, you can’t help but agree.

It’s Barnes’ flat-out inability to accept anything as ‘good enough’ that has ricocheted him across four continents in 30 years, where he has managed hotels at regional level for some of the world’s top five-star chains – including the Four Seasons, Shangri-La and, of course, the Fairmont. “The biggest mistake you can make in a hotel is the same one that you can make in any business – complacency.

When you start thinking you’re good, that’s when you’re in serious trouble and you’ll fail,” he says.

When Barnes decided to hop on a plane to the States as a young man with

the Lex Service Group, which has hotels in the US and the UK, it was a brave and unusual move for the time – “you don’t get anywhere unless you do things other people don’t do,” he says. By his own admission, the north-east England terrace he grew up in bares scant resemblance to the five-star enclaves he now resides in. “I mean look at it,” he says, pointing to his palatial office in Fairmont Dubai, where he is also the hotel’s general manager – “I have to pinch myself.”

When Barnes landed in Dubai amid the gold rush in 2007, it must have seemed every hotelier’s dream: a city awash with credit-rich punters and a haze of speculative euphoria. Most businesses were bent on cashing in on the bubble.

Not Barnes. “It’s better now, it’s more realistic, when the crunch came, that’s when you got to see who really knew what they were doing,” he says of the crash that battered the local hotel industry in 2009. Barnes rolled up his sleeves and faced the recession head-on because “if it was easy – anyone could do it.”

“There was a danger of oversaturation in the old days; everyone thought ‘I’ll build a hotel and I’ll fill it’. There’s been a real awakening since 2009, no – you can’t just build a hotel. You’ve got to look at what makes a hotel work,” he says. “We went through a major change in 2009, I had to shift our entire strategy – our rooms and F&B. We also went after the corporate groups, which we hadn’t done before.

We now take in groups for the exhibition centre. We had to go cap in hand and say we haven’t done justice to you.”

Loyalty and retention became the Fairmont’s key words during the recession and Barnes staked everything on giving customers a reason to come back. He offers the small but telling example of the Christmas brunch at the hotel’s Spectrum on One restaurant: “Everyone wants to maximise the price they get, but with customers that have been with you for years, you just can’t do that. We kept our prices the same for the Christmas brunch. Why? Because the people who were coming to us over the

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“The first thing you have to do is do something that you’re passionate about. If you’re not doing that, then forget it. You’ll never be good at it.” festive period were the same people who were coming to us all year round. Why would we charge them more just because everyone else was? For a party hat?”

Barnes’ plan worked. The Dubai hotel’s occupancy rates grew from 55 per cent in 2009 to 71 per cent in 2010, making his hotel the strongest performer in Fairmont’s global portfolio last year. However, the VP is not expecting growth on last year’s rate for now, in part because of his new neighbours on the Sheikh Zayed Road – the adjacent Jal Hotel and the RitzCarton across the road at the Dubai International Financial Centre.

“Dubai has become very much a neighbourhood destination, divided into

the hotels on Sheikh Zayed Road, Dubai Mall hotels, the beach hotels, Bur Dubai hotels,” he says. “Demand is still strong but there is increased supply so people can pick and choose where they want to be.”

Surprisingly, Barnes says the glut of new hotels has yet to bring down room rates; a trend he attributes to the Middle East unrest. While the group’s two Egypt hotels have suffered from the regional uprisings, the UAE hospitality industry has benefitted from a comparatively safe climate amid its more turbulent neighbours.

“We’re seeing a lot of Saudi Arabian guests who would normally go to other destinations in the region. There’s also a lot of business that’s being done in Dubai as a result of the unrest. We were

running at about 83 per cent occupancy through the first five months of the year and the figure last year was in the 70s. Is that growth all about unrest in the region?

Well, it’s hard to say,” says Barnes.

It’s possible he’s right. A recent report by Citi Investment Research and Analysis revealed that Dubai was the only tourism destination in the region in March that saw an increase – of 7.9 per cent – in revenues per available room. The emirate also recorded a 4.4 per cent increase in room rates.

“Middle East customers may be more likely to come to Dubai for the summer for an alternative to their usual holiday, Europe is further away and a more expensive option. This demand could mean the UAE hotel industry sees a better summer than usual,” he says. “In Q4 we’re expecting to see a fairly fast uptick on business travel, after Ramadan ends the business will stream back in as there is a desire to get on with things – which will be much more prevalent this

The world according to Philip Barnes…

Rise and shine My day starts at around 6.30am. Get up and get going is my motto – I’m a morning person. Whereas, later in the day – forget it.

Staff I refuse to use the word empowerment. It’s a buzzword. I say to my staff, just do the right thing. Use your heart and use your brain.

Time I am very disciplined about managing my time and how I handle things. I hate it when I go back to something in my inbox. If I have already looked at it, why haven’t I dealt with it? Most of the time I deal with stuff as soon as it hits my desk and just keep it moving.

Curiosity I drive the accounts and research guys crazy trying to work out trends. I ask questions about everything from airport arrivals to office vacancy rates.

Dreams If I didn’t do this, I’d be a rock star.

66 / JUNE 2011

64-67 Philip Barnes.indd 66

5/25/11 6:31:06 PM

Profile

year after the unrest.”

The next two years are going to be busy for Barnes. Along with handson duties at the Fairmont Dubai, he’s masterminding the launches of Fairmont Palm and Fairmont Fujeirah (2012) and Fairmont Abu Dhabi Marina (2013). But he’s looking forward to the challenge.

“I’ve been blessed. I’ve been doing things I love all my life. I get as much fun out of it today as I did 30 years ago,” he says. “The first thing you have to do is do something that you’re passionate about. If you’re not doing that, then forget it. You’ll never be good at it.”

Along with loving what you do, Barnes insists you’ll never get far without a team approach and common goals. “You have to really understand it’s all about the people you work with. At this stage in my career it’s not about what I’ll be doing 10 years from now, it’s about what my team will be doing 10 years from now. That’s how you create an environment that people want to be in and be a part of,” he says.

“I hire the best people and I say, right, here’s the expectations. They’re in charge, not me. I hold them accountable, I am not going to sit on their shoulder and tell them

what to do but I am going to challenge them and push their buttons. After all, I’ve never met anybody who has come to work and said ‘I want to do a lousy job’.

“I’ve been in this business too long,” he says, followed by his trademark chuckle. But it’s difficult to believe him when he adds: “I always say that if I got hit by a truck, I’ve lived all over the world, I had the luck of a wife that put up with me and transported the family all over the world for decades. No one is going to write a book about me, no one is going to put a statue up, but I had a party, I had a ball.”

Fairmont, Dubai

GULF BUSINESS / 67

64-67 Philip Barnes.indd 67

5/25/11 6:31:12 PM

DATA MONITOR TOP DEALS AND GCC ECONOMIC INDICATORS

TOP DEALS GULF BUSINESS DEAL VALUE ($M)

BIDDER

TARGET

DEAL DESCRIPTION

114

ExxonMobil Corporation; and Qatar Petroleum (QP)

Terminale GNL Adriatico Srl (2.7 per cent stake)

Exxon Mobil Corporation, the US based listed company that engages in the exploration and production of crude oil and natural gas and Qatar Petroleum, the Qatar based state owned oil and gas company, have together acquired a further 2.703 per cent stake in Terminale GNL Adriatico S.r.l, the Italy based company engaged in designing, building, and operating liquefied natural gas (LNG) terminals, from Edison International, the listed Italy based company engaged in the supply of electric energy, for a consideration of EUR 78.2m.

This transaction will result in a capital gain of EUR 5.1m for Edison. ExxonMobil and Qatar Petroleum had acquired 90 per cent stake in Terminale GNL in May 2005. Post sale, Edison will be left with a 7.29 per cent stake in Terminale GNL.

112

Qube Logistics

POTA Holdings Pty Limited (47.3 per cent stake)

Qube Logistics, the listed Australia based investment fund focused on infrastructure and logistics, has agreed to acquire remaining 47.3 per cent stake in POTA Holdings Pty Limited (POTA), the Australia based operator of landside port service logistics business, servicing import and export marine container provisions, from DP World Limited, the listed United Arab Emirates based marine terminal ports operator, for a cash consideration of AUD 106m ($111.76m).

The consideration of AUD 106m ($111.76m) includes shares and related loans of DP World. The transaction is funded by Qube’s existing cash. The transaction is in respect of POTA’s exercise of the call and the put options agreed during initial investment in 2007.

Qube Logistics along with POTA’s management had acquired 50 per cent stake in POTA from DP World in 2007. Post acquisition, Qube will own around 94.5 per cent of POTA along with management owning approximately 5.5 per cent. The transaction is expected to be completed by the end of April 2011.

42

Broadcom Corporation

SC Square Ltd

Broadcom Corporation, the listed US based company providing semiconductors for wired and wireless communications, has agreed to acquire SC Square Ltd, the Israel based company engaged in the business developing security software and providing security chip and communication solutions, for a total consideration of $41.9m net of cash assumed.

The transaction is a part of Broadcom’s strategy to acquire innovative technologies and high quality teams in order to strengthen its business. The transaction which is subject to closing conditions is expected to close in second quarter ending 30 June 2011.

30

Frigoglass SAIC

Jebel Ali Container Glass Factory Fze (80 per cent stake)

Frigoglass SAIC, the listed Greece based manufacturer of commercial refrigerators and frozen products’ packaging, has agreed to acquire 80 per cent stake in Jebel Ali Container Glass Factory Fze, the UAE based producer of glass bottles, for a cash consideration of $29.8m.

The consideration paid included net debt of $23m. Jebel Ali Container Glass Factory Fze had revenues of approximately $41.6m for the year 2010 and employs 340 people.

The transaction was funded through new debt. The acquisition is in line with Frigoglass strategy to expand its glass operations. The acquisition will enhance Frigoglass position in Europe as well as in East and South Africa and Asia.

68 / MAY 2011

DATA MONITOR NEW.indd 68

5/25/11 6:08:02 PM

DEAL VALUE ($M)

BIDDER

TARGET

DEAL DESCRIPTION

19

SATS Ltd.

Adel Abuljadayel Flight Catering Company Limited (40 per cent Stake)

SATS Ltd., the listed Singapore based provider of integrated ground handling and inflight catering services, has acquired a 40 per cent stake in Adel Abuljadayel Flight Catering Company Limited (AAFC), the Saudi Arabia based in-flight catering services company, for a cash consideration of $18.5m.

AAFC had revenues of about USD 11m in 2010. The consideration was fully paid using internal resources in cash. The acquisition leverages SATS’ core competencies and expands its offerings in the Middle East. This acquisition is not expected to have any material impact on the consolidated net tangible assets per share and earnings per share of SATS for the year ending 31 March 2012. As a part of the agreement, SATS has appointed three executives for the positions of chief executive officer, chief financial officer, and executive chef at AAFC.

–

Government of Dubai

Dubai Bank

The government of Dubai has acquired Dubai Bank, the United Arab Emirates based commercial bank, from Dubai Holding LLC, the United Arab Emirates based diversified investment company and Emaar Properties PJSC, the listed United Arab Emirates based company engaged in property investment and development, property management services, education, healthcare, retail and hospitality sectors, as well as investing in financial service providers, for an undisclosed consideration.

After the completion of acquisition Government of Dubai will make a capital investment in Dubai Bank in order to improvise the financial position of the bank.

Post acquisition the management of the Dubai bank will be retained. Prior to acquisition Dubai Holding held 70 per cent stake in bank whereas Emaar properties held 30 per cent stake.

Notes: Deals are based on the geography of target, bidder or vendor being in the Middle East, for the period between April 18, 2011 and May 17, 2011. Based on announced deals, including lapsed and withdrawn bids. Where deal value is not disclosed, the deal has been entered based on turnover of target exceeding $10 million. Activities excluded from the table include property transactions and restructurings where the ultimate shareholders’ interests are not changed. Source: Mergermarket. All dollar ($) amounts indicated above are in US dollars.

BREAKDOWN: TAKEOVER ACTIVITY BY SECTOR AND VOLUME

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Real Estate 4.9% Defence 2.4%

GULF BUSINESS / 69

5/25/11 6:08:14 PM

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.

145 144 143 142 141

THE EXPERT’S

140

VIEW

139 138 137

February 2011

March 2011

April 2011

May 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 08/04/2014 05/10/2015 05/10/2020 20/01/2015 31/03/2020 29/04/2020 05/10/2020

CURRENCY USD USD USD USD USD USD EUR

MID PRICE 109.81 105.38 103.50 105.19 98.13 96.50 90.38

YIELD 1.99% 5.31% 7.23% 2.51% 5.77% 6.27% 5.86%

MOODYS Aa2 NR NR Aa2 NR Ba3 NR

S&P AA NR NR AA BBB /*BB 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 105.88 112.50 95.50 103.13 98.75 101.50 99.38 99.25 101.50 110.00

YIELD 2.89% 6.16% 7.10% 5.70% 3.63% 4.80% 3.15% 5.20% 10.82% 6.65%

MOODYS A3 B1 /* B3 Ba2 A2 Aa2 A1 NR NR Baa2 /*-

S&P NR B NR NR A AA A+ BBB /*B+ 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 103.75 104.38 101.75 98.38 106.25 99.25 96.25

YIELD 3.57% 3.04% 2.92% 3.40% 3.10% 3.18% 5.46%

MOODYS A1 Aa3 A3 A1 A1 NR A3 /*-

S&P AA+ NR NR AA NR

ISSUER P.D.A* TDIC 4.949% ADIB 3.745% Dubai Govt 6.396% DIFC L+37.5bps JAFZA L+130bps DP World 6.25% Emaar 8.5% RAK 5.2392% Dar Al Arkan 10.75% *periodic distribution amount

MATURITY 21/10/2014 04/11/2015 03/11/2014 13/06/2012 27/11/2012 02/07/2017 03/08/2016 28/01/2016 18/02/2015

CURRENCY USD USD USD USD AED USD USD USD USD

MID PRICE 107.38 102.50 105.13 93.75 94.63 103.88 104.88 107.88 99.25

YIELD 2.68% 3.14% 4.77% 6.62% 7.16% 5.50% 7.35% 3.41% 10.99%

MOODYS A1 A2 NR B3 B2 Baa3 B1e NR NR

S&P AA NR NR B+ B BB BB A BB-

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

Bond prices ended the month on a year-to-date high as the impact of regional unrest started to subside. While it’s clear that international investors remain concerned about regional events, the initial sell-off this caused in prices has, to some degree, been reversed. What’s perhaps more interesting is where investors have started allocating funds, with Dubai government bonds the main beneficiary.

When we look at the CDS levels — the cost of insuring a bond against default (and one measure of the confidence markets have in a particular credit) — Dubai appears to be seen as a regional safe haven for investors. The cost of insuring Dubai debt has actually dropped 46 basis points year to date — compared to an increase of 115 basis points for Egypt. Qatar and Abu Dhabi have shown more stability, nudging just a few basis points higher. What we can conclude from this is that international investors looking at the GCC are increasingly comfortable with Dubai as an investment choice.

But what else has been driving this upturn?

Primary issuance of bonds has been slow this year, especially when we look at this in the context of the glut of issuance last year (more than $30bn).

This scarcity of new issues has actually helped secondary spreads to tighten. Regional bond issuers have largely remained on the sidelines over the last few months, largely due to the regional uncertainty caused by geo-political events.

However, there are strong signs of improvement.

Over the last few weeks, HSBC has announced three new deals to come to market soon. More are expected as issuers take advantage of the current low rate environment to tap the market before the quiet summer months. After a tough start to the year, we are now seeing investors returning to the region, and that can only be a good thing.

JAMES MILLIGAN, Head of credit trading, 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.

70 / JUNE 2011

DATA MONITOR NEW.indd 70

5/25/11 6:08:19 PM

DOWNTIME ART, STYLE, CRUISE, bytes, HOTELS & SCENE

The Mirabell palace and garden with the Festung Hohensalzburg in the background.

Backstage in Salzburg

Salzburg needs little introduction. Yet the birthplace of Mozart offers a lot more than The Sound of Music and arty festivals, reports Guido Duken.

W

e all know that Salzburg was the birthplace of Wolfgang Amadeus Mozart and the setting for The Sound of Music. These twin attractions draw thousands of tourists annually, so working for the Salzburg marketing department must be a pleasant job. But what’s left when you take Mozart and the musical out of the picture? Plenty!

Salzburg is an incredibly picturesque place. This city of 150,000 inhabitants is situated between the 1,972-metre Untersberg – the closest Alpine peak – and two smaller mountains, the Mönchsberg and Kapuzinerberg. At the heart of Salzburg is the Altstadt (Old Town) that is bisected by the meandering Salzach river.

The Altstadt’s famous baroque architecture largely survived World War II intact and was listed as a UNESCO World Heritage Site in 1997. Towering over this festive medley of roofs, church spires and towers is the impressive Festung Hohensalzburg, one of Europe’s largest medieval castles.

Thanks to the river, fortress and mountains it is virtually impossible to get lost, even if you try.

I armed myself with a tourist map and, more importantly, the Salzburg Card (€25.00 for 24 hours) that gives you one time free entry to the city’s attractions plus a host of other goodies including public transport. I was staying at the fivestar Sheraton Salzburg (sheratonsalzburg.com), right next to the famous Mirabell palace and garden, within easy walking distance of the Altstadt. And so it was that on a bright spring day I set off on foot.

The Mirabell palace has an intriguing history that would do any soap opera proud with its cast of princes, archbishops, mistresses and villains. But the beautiful garden is far more famous than the palace as it provided the perfect Hollywood setting for Maria (Julie Andrews) and the children to sing ‘Do-ReMi’ in The Sound of Music. I got a live performance when some schoolgirls, probably on an outing, burst into an impromptu rendition of that very song. A typical Salzburg moment?

Most of Salzburg’s attractions are crammed into the Altstadt on the left bank, so I crossed the Salzach river on the Mozartsteg pedestrian bridge. That landed me right in Mozart

72 / JUNE 2011

72-73 Downtime.indd 72

5/26/11 11:57:47 AM

DOWNTIME BYTES

The Mirabell palace and garden with the Festung Hohensalzburg in the background.

Backstage in Salzburg Salzburg needs little introduction. Yet the birthplace of Mozart offers a lot more than The Sound of Music and arty festivals, reports Guido Duken.

W

e all know that Salzburg was the birthplace of Wolfgang Amadeus Mozart and the setting for The Sound of Music. These twin attractions draw thousands of tourists annually, so working for the Salzburg marketing department must be a pleasant job. But what’s left when you take Mozart and the musical out of the picture? Plenty!

Salzburg is an incredibly picturesque place. This city of 150,000 inhabitants is situated between the 1,972-metre Untersberg – the closest Alpine peak – and two smaller mountains, the Mönchsberg and Kapuzinerberg. At the heart of Salzburg is the Altstadt (Old Town) that is bisected by the meandering Salzach river.

The Altstadt’s famous baroque architecture largely survived World War II intact and was listed as a UNESCO World Heritage Site in 1997. Towering over this festive medley of roofs, church spires and towers is the impressive Festung Hohensalzburg, one of Europe’s largest medieval castles.

Thanks to the river, fortress and mountains it is virtually impossible to get lost, even if you try.

I armed myself with a tourist map and, more importantly, the Salzburg Card (€25.00 for 24 hours) that gives you one time free entry to the city’s attractions plus a host of other goodies including public transport. I was staying at the fivestar Sheraton Salzburg (sheratonsalzburg.com), right next to the famous Mirabell palace and garden, within easy walking distance of the Altstadt. And so it was that on a bright spring day I set off on foot.

The Mirabell palace has an intriguing history that would do any soap opera proud with its cast of princes, archbishops, mistresses and villains. But the beautiful garden is far more famous than the palace as it provided the perfect Hollywood setting for Maria (Julie Andrews) and the children to sing ‘Do-ReMi’ in The Sound of Music. I got a live performance when some schoolgirls, probably on an outing, burst into an impromptu rendition of that very song. A typical Salzburg moment?

Most of Salzburg’s attractions are crammed into the Altstadt on the left bank, so I crossed the Salzach river on the Mozartsteg pedestrian bridge. That landed me right in Mozart

72 / JUNE 2011

72-73 Downtime.indd 72

5/25/11 5:47:06 PM

TRAVEL DOWNTIME

“After that cholesterol overdose it was perhaps fitting that I walked through St Peter’s cemetery. Mozart’s sister is buried here, as is Paul Fürst who invented the Mozartkugel” Salzburgerland Daytrips

Salzburg

Gastein Valley Großglockner

Square that, naturally, features a statue of the famous composer. For many tourists this is also the starting point of a variety of guided tours.

Not that you need a guide. The Residenzplatz (another Sound of Music location), Old Residenz Palace, the Festival Hall Complex, Mozart’s Birth Place and Mozart’s Residence all appeared in quick succession. And I wasn’t even looking for them!

It was at this point that I started getting cultural overload, and the Grünmarkt on Universitätsplatz with its fresh fruit, smoked meats and tourist knick-knacks provided the perfect antidote. The Salzburgers are a jovial lot as I discovered when I joined the throng at a sausage stand for a Käsekrainer (a sausage with bits of cheese) and mustard. The etiquette is to eat your sausage at the counter, wash it down with a cold one, and then make space for the next customer.

After that cholesterol overdose it was perhaps fitting that I walked through St Peter’s cemetery. Mozart’s sister is buried here, as is Paul Fürst who invented the Mozartkugel, that ubiquitous chocolate ball that is found in every shop window.

The cemetery also featured in The Sound of Music as a hiding place for the Von Trapp family.

Duly inspired by eight centuries worth of gravestones I took the Festungbahn (Funicular), which take you up to the Hohensalzburg Fortress. The views are stunning from up there and the 1.2 kilometre hike along a wooded path to The Museum der Moderne Salzburg (museum for modern art) made me forget about graveyards and fatty sausages.

From the museum there’s an elevator that takes you down to city level and lands you pretty much at the beginning of the Getreidegasse, Salzburg’s famous shopping street. If you have the urge to buy Mozartkuglen, Louis Vuitton or a Salzburg fridge magnet, it’s all here.

As are a multitude of shoppers.

I decided to end my day with another famous Austrian institution, the coffeeshop. Salzburg is peppered with them, their clientele overflowing into the many squares to have a good kaffeeklatsch (gossip over a cup of coffee). Relaxing with my cup of Joe I came to the conclusion that Salzburg really has it all. Culture, history, friendly people, beautiful buildings and a striking natural setting give Mozart and The Sound of Music a run for their money.

illustration: roui francisco

Krimmler Waterfalls Hohe Tauern National Park

The Gastein Valley This side valley in the scenic Hohe Tauern range is home to the quaint villages of Bad Gastein and Bad Hofgastein plus Sportgastein. Have a spa experience at the new Felsentherme Gastein, Alpen Therme Gastein or the Spa & Rehabilitation Centre. Sportgastein is a famous skiing centre in winter and offers fabulous hiking in summer.

National Park Hohe Tauern This 1,800 square kilometre park is Austria’s largest and Europe’s second largest national park. It encompasses Austria’s highest mountain, the Großglockner (3,789 metres), as well as one third of Austria’s plant species and some 10,000 animal species. The largest visitor centre is found in Mittersill, which offers a fun and educational experience for kids.

The Krimmler Waterfalls This is Austria’s highest waterfall at 380 metres.

The three cascades are stunningly beautiful and there’s a hiking path next to them. Besides the healthy hike, ongoing research by the Paracelsus Private Medical University Salzburg has proven that the fall’s fine atomised water has a healing effect on allergic asthma.

Scenic Beauty In Salzburgerland the journey is often as interesting as the end destination. High Alpine peaks, dazzling green valleys and villages with their picture-book wooden houses just keep rolling past. Pop in at a local inn for an Austrian specialty while enjoying the view.

GULF BUSINESS / 73

72-73 Downtime.indd 73

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cruise DOWNTIME

Style, Beauty, Power

The Aston Martin Virage is designed to get you quickly from point A to B in comfort and style. That it does with aplomb.

TEXT by GUIDO DUKEN

T

he Andalusian town of Ronda, about 100 kilometres northwest from Málaga, is as historic as it is beautiful.

The Guadalevín River runs through the city, dividing it in two and carving out the steep 100-metre deep El Tajo canyon upon which the city perches. Looking out from this lofty perch all you see is rolling hills and roads that snake, carve and hug the countryside like mad pieces of spaghetti.

In other words, if you want to seriously drive a car and test its limits, this is the place to do it.

The Islamic poet Salih ben Sharif al-Rundi was born in Ronda, and if he had laid his eyes on the Aston Martin Virage it might have inspired some epic verse. The Virage is a moving work of art with its clean lines, muscular stance and aggressive front. The attention to detail is immaculate both inside and outside and the Aston Martin team was beaming like proud parents as they showed off their latest addition to the family.

Under the bonnet the Virage has a V12 6.0-litre engine that delivers 490bhp and 570Nm of torque that propels the Aston

from 0-100km/h in 4.6 seconds. The top speed is a sizzling 299km/h. Keeping control of all that speed and power are huge carbon ceramic brakes, a very sweet six-speed Touchtronic 2 automatic transmission and a new Adaptive Damping System.

Those winding Spanish B roads didn’t know what hit them. The Virage is perfectly well behaved, tackling corners confidently and cruising with ease. But when you push the accelerator the V12 barks with excitement and the unleashed torque slightly lifts the nose and pushes you back in your seat. Stuck behind a caravan of cars with only 30 metres of straight road ahead? No problemo! The Virage accelerates so quickly it might as well be a kilometre.

That, in a nutshell, is the beauty of the Virage. It is an extremely comfortable GT (gran turismo) with the body and brawn of a finely honed athlete. You can drive it any which way you want and it always delivers exactly what you want, when you want it. That’s what

The Virage combines outright sports car performance with luxury, comfort and refinement.

More than 70 man hours of expert craftsmanship is lavished on the Virage to create a stylish but simple interior.

makes driving it so much fun. The only downside is that all that pedigree will set you back around $240,000.

GULF BUSINESS / 75

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BYTES DOWNTIME

DUAL POWER C

ONSUMERS HAVE been crying out for a dual-core smartphone and LG and Nvidia have delivered the first one (Samsung’s Galaxy S2 and the HTC Sensation are in the pipeline). Key to the LG Optimus 2X is the impressive dual-core Tegra 2 1GHz CPU, coupled with an impressive low-power GPU from graphics specialist Nvidia. Video is the main beneficiary of the dualcore processor, which is why LG has outfitted the Optimus 2X with 1080p video recording on the eight-megapixel camera, 1080p playback over a mini-

HDMI port (cable included) and DLNA media streaming.

The processor makes the user interface noticeably quick and smooth when, for example, you’re switching from portrait to landscape view while looking at a web page or photo. It also shows what Google’s Android operating system is capable of on the Optimus 2X’s four-inch 480 x 800 WVGA touchscreen. There’s also a 1.3MP front-facing camera, Wi-Fi and 3G connectivity, and a microSD card slot to compliment the 8GB of built-in memory.

Good

Bad

 Very fast  Flash runs very smoothly  Slick scrolling and zooming  Packed with Android features  Tonnes of available apps

 Chrome-trimmed case looks fairly ‘80s  User interface could be more attractive  Some widgets are temperamental

ROUND 1 GOOGLE VS. APPLE

ROUND 2 APP WARS

Google’s Android operating platform is grabbing market share.

According to the latest Nielsen research, Android has grown from a 29 per cent share in the US last autumn to 37 while the iPhone has remained a steady 27 per cent. BlackBerry has been the biggest loser.

If current trends persist, Google could take Apple’s application crown in July according to market research firm Distimo.

Google has already made headway on attacking Apple on the volume front with 134,342 free applications versus the App Store for iPhone and iPod Touch’s 121,845 free applications.

The firm estimates that Google will be 40,000 applications short of levelling out with Apple’s overall volume (around 350,000 currently) by the end of June, and will catch up completely in July.

KEY Symbian OS Palm/Web OS Microsoft Windows Mobile/WP7 Rim Blackberry OS Apple iOS Android OS

2% 3% 37%

27%

SMARTPHONE MARKET SHARE

FUTURE DEVELOPMENTS IN THE APP STORE ECOSYSTEM Forecast first half 2011 — United States 371,675 10%

303,113 332,114 151,036

MARCH 2011, NIELSEN MOBILE INSIGHTS, NATIONAL

Winner Apple — the market share remains steady, there’s a new iPhone due later this year and its profit margins are the best.

Apple App store for iPhone Google Android Market

INFOGRAPHICS: TARAK PAREKH

KEY 22%

Winner It’s a tie, but the more applications there are for Android, the more people might consider buying the products it powers. That could affect Apple’s bottom line.

GULF BUSINESS / 77

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EVENTS REGULARS

Middle East EVENT Show 2011 DUBAI INTERNATIONAL CONVENTION AND EXHIBITION CENTRE, JUNE 1-2, 2011

T

HIS MONTH, DUBAI will play host to the Middle East Event Show, bringing together the region’s events and entertainment suppliers and buyers under one roof. A wide range of service providers, including event management and equipment rental will also be on display. The event offers one of the year’s best networking opportunities for marketing and PR agencies, events organisers and MICE companies. To wrap up, the show will also feature the fourth edition of the Middle East Event Awards, a recognition of innovation and achievement in the events industry in the region.

UNITED ARAB EMIRATES Abu Dhabi June 3-4 6-8 12-15 19-22 Dubai 7-8 7-9

ICICI Bank Home Utsav 5th Middle East Energy Security Forum SCADA MENA Summit 2011 National Security Summit 2011

Abu Dhabi National Exhibition Centre Park Rotana Hotel Le Royal Méridien Le Royal Méridien

gulffinancialconferences.com messefrankfurtme.com

16 20-21 20-21 26-29 26-29

Shangri La-Hotel Dubai International Convention and Exhibition Centre, Halls 1-8 Hospital Build Middle East Exhibition & Congress 2011 Dubai International Convention and Exhibition Centre, Sheikh Rashid Hall GCC Job Localisation Challenges Conference Al Bustan Rotana Hotel 15th Annual Compensation & Benefits Forum Dusit Thani Hotel Market Insights Summit 2011 Mövenpick Hotel Jumeirah Beach Click 5.0 — The Digital Marketing Event for the Middle East Arjaan by Rotana Pricing Strategies and Revenue Optimisation Summit Grand Millennium Hotel

May 30 - June 2 19-22 20-21

Underground Infrastructure and Deep Foundations Qatar 2nd Annual Marine and Coastal Engineering Middle East Middle East Contract Management Conference

InterContinental Hotel, Doha Oryx Rotana Hotel, Doha Oryx Rotana Hotel, Doha

iqpc.com iqp.com iirme.com

4-7

3rd Annual Saudi HR Summit 2011

Riyadh Marriott Hotel

iirme.com

4-7 11-13 12-15

Saudi Brand And Communications Summit Cityscape Jeddah Horeca 2011

iirme.com iirme.com semark.com.sa

12-13

4th International Cloud Computing

Riyadh Marriott Hotel Jeddah Centre for Forums & Events Riyadh International Convention & Exhibition Centre Riyadh Marriott Hotel

13-15

Bonds & Loans Middle East Automechanika Middle East 2011

fairexhibitionorganisers.com fleminggulf.com iqpc.com iqpc.com

iirme.com datamatixgroup.com iirme.com iirme.com iqpc.com iqpc.com

QATAR June

SAUDI ARABIA June

iirme.com

GULFBUSINESS / 79

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GB preferred hotels regulars

GULF BUSINESS HOTELS COLLECTION HOTEL LOCATION KEY

UAE

QATAR

SAUDI ARABIA

Al Raha Beach hotel

PARK ROTANA ABU DHABI

THE fairmont dubai

cristal hotel abu dhabi

Layia plaza hotel dubai

ABu dhabi This hotel is created to provide the very best of traditional Arabian hospitality. This unique jewel of luxury and tranquility, offering magnificent services, awaits you for an unforgettable visit to Abu Dhabi.

Tel +971 2 508 0555 Fax +971 2 508 0429

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

Tel +971 2 657 3333 Fax +971 2 657 3000 park.hotel@rotana.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 t 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 Conveniently located nearby Dubai International Airport Terminal 2.

Offers exceptional levels of comfort with 232 rooms & suites, three dining options, temperature-controlled swimming pool and state-of-the-art fitness center.

Tel +971 4 233 4444 Fax +971 4 233 4445 welcome.plaza@layia.net

JUMEIRAH EMIRATES TOWERS

KEMPINSKI HOTEL MALL OF THE EMIRATES

Emirates grand hotel

media one hotel

Pullman dubai MALL OF THE EMIRATES

Our Location

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

Tel +971 4 341 0000 reservations.malloftheemirates@ kempinski.com kempinski.com/dubai

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

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 Fax +971 4 702 8001 H7337@accor.com

SHANGRI-LA

Acacia hotel

Fraser suites dubai

Layia OAK HOTEL & SUITES

mÖvenpick hotel doha

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

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

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

Recreation facilities are also available.

Tel +974 4429 1111 Fax +974 4429 1100 moevenpick-doha.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

intercontinental doha

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

Tel +974 4484 4444 Fax +974 4483 9555

Holiday inn riyadh, izdihar

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 GULF BUSINESS / 81

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REgulars in your shoes

“my wife stops to have conversations with strangers about their charms. Women collect them for special occasions – births, anniversaries and graduations.

Each bracelet tells a personal story and this is the secret to Pandora’s success.”

Jewels of the East Alicia Buller takes a peek behind the scenes at Pandora jewellery’s Thailand factory

B

efore I jumped on a plane to Bangkok to look at Pandora’s factory last month, I hadn’t really heard of the jewellery brand – but my 21-year-old sister had. “What, you haven’t seen the Pandora charm bracelets?” she said – with a customary roll of her eyes – “you’re so old.” As it turns out, Pandora produces around 60 million units a year across over 10,000 points of sale in 55 countries. At my sister’s school near London, UK, the charm bracelet’s popularity reached near melting point, because of its relative affordability and personalisation options.

“They’ve become a real ice-breaker,” says the factory’s managing director, Thomas Nyborg, “my wife stops to have conversations with strangers about their charms. Women collect them for special occasions – births, anniversaries and graduations.

Each bracelet tells a personal story and this is the secret to Pandora’s success.”

The factory itself, which is fast monopolising Bangkok’s Gemopolis park as it spreads in size, is as far removed from a

Hard Times, Dickensian-style factory as you can imagine. Rows of neatly dressed workers in brightly-lit rooms diligently concentrate on the task at hand – personally making each facet of Pandora’s bracelets and other jewellery.

Around 4,000 people work at the factory and only four of them are non-Thai, says Nyborg. Every few months the firm holds a recruitment open day and it’s not unknown for 2,000 people to queue up for interviews in a day. The wages are competitive, he says.

Pandora, which was founded by Danish goldsmiths Per Enevolden and Winnie Enevoldsen in 1982, is now the world’s third largest jewellery brand by retail value and raked in around $1.3 billion revenue last year.

Steen Bock, the company’s Dubai chairman, tells me that the firm relocated its production facilities to Thailand in 2003 because of the high-quality craftsmanship. The country also boasts a highly developed infrastructure for jewellery production and is one of the world’s largest jewellery exporters.

Pandora is firmly rooted in the ‘affordable luxury’ segment, but as the firm ramps up its Middle East presence, with five stores in Dubai, the question is: will the brand be glitzy enough for the region?

Steen says that Pandora offers a breadth of range – up from Dhs200 to ten of thousands of dirhams – stacked with enough gold and diamonds to satiate even the most extreme appetite for bling.

Without being inside the factory, it would be difficult to imagine just how handmade the bracelets are – at every stage, with real gold, silver and gems.

Pandora’s director invites me to try my hand at shaping one of the gorgeous Murano glass beads over a flame. The jeweller, whose seat I’ve usurped, looks at me with a mix of curiosity and pity as I melt bead after bead into an oblong-shaped monstrosity.

This is expert’s work, indeed.

82 / JUNE 2011

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