Gulf Business | October 2010

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One year on, Gulf Air boss tells all RBS denies Dubai World firesale Will KSA mortgage law save market?


The man who sold the world: RAKIA CEO sells global assets


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


Omega boutiques (BurJuman, Deira City Centre, Dubai Mall, Mall of the Emirates, Mirdif City Centre, Sahara Centre, WaďŹ )

and at select Rivoli Stores. Toll Free: 800-RIVOLI


17th of September 1755. In the offices of the solicitor Mr. Choisy, a young Master Watchmaker from Geneva named Jean-Marc Vacheron is about to hire his first apprentice. This agreement is the first known reference to the founding watchmaker of a prestigious dynasty and it represents the establishment of Vacheron Constantin, the oldest watchmaking manufacturer in the world in continuous operation.

Ever since this agreement, and true to the history that built its reputation, Vacheron Constantin has been committed to passing on its knowledge to each of its Master Watchmakers in order to guarantee the excellence and durability of its craftsmanship and of its timepieces.

Malte Tonneau Moon Phase and Power-reserve Hallmark of Geneva, White gold case, Hand-wound mechanical movement RĂŠf. 83080/000G-9408


RAK in the market

REGULARS 30 Letters 42 Executive moves 107 Data monitor

SPECIAL REPORT: Khater Massaad, CEO of RAKIA and RAK Ceramics on why he is selling his international assets for a double AA credit rating and Sheihk Omar bin Saqr Al Qasimi on the RAK Airways relaunch.

112 Calendar 114 Hotels 116 In your shoes


GCC NOW 10 The round up News, numbers and people from around the region




32 Sitting tight

55 Payback time

FINANCE Region won’t firesell assets says Royal Bank of Scotland.

20 Mishal Kanoo

FINANCE Refinancing dates are looming for the region’s firms.

34 Opec turns 50

60 Medicine man

ENERGY Is it time for the energy body to widen its remit?

AVIATION Gulf Air’s Samer Majali on turning the airline round.

Nawras pricing is too high.

36 Brave new world

66 Saudi’s hot property

24 Michael Burchill

BUSINESS Post-recession, companies need a new approach.

REAL ESTATE How will Saudi Arabia’s new mortgage law fare?

Happy workers make more money.

38 Net gains

72 Future gadgets

UAE must change business laws.

22 Matein Khalid

26 Michael Preiss Indonesia’s growth curve.

28 Phillip Anderson Why do an MBA?

Issue 6 October 2010

RETAIL Online shopping hits the UAE, how will it affect the market?

TECHNOLOGY Gulf Business lists the top ten tech trends.

40 Double act

81 Play time

MARKETS DFSA boss Gerard Santing on DFM and Nasdaq Dubai.

LEISURE Entertainment industry remains strong in the recession. October 2010 gulfbusiness




Editor-in-Chief Obaid Humaid Al Tayer Group Editor and Managing Partner Ian Fairservice Group Senior Editor Gina Johnson Group Editor Catherine Belbin Editor Alicia Buller Business editor Karen Remo-Listana Sub-editor Iain Smith Editorial coordinator - business Concessa D’Souza Art Director Cris Domdom Senior Designer B Raveendran Contributors Ryan Harrison Michael Gordon Robert Bailey General Manager Production and Circulation S Sasidharan Production Manager C Sudhakar General Manager Group Sales Anthony Milne Senior Advertisement Manager Abraham Koshy Advertisement Manager Ajay Mathews

102 103

85 Turkey’s rise COUNTRY REPORT Turkey’s growing economy and UAE relations.

96 Designs for life

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

INFRASTRUCTURE Building cities that people want to live in.

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,

LIFESTYLE 100 Travel

103 Art

Fresh from the World Cup, Cape Town offers the ultimate African adventure.

A guide to the season’s Middle East auctions.

102 Cars

104 Competition

Alicia Buller test-drives the capacious, new-look Audi Q7.

Win a two-night stay at the Fairmont Dubai.

8 gulfbusiness

October 2010

London: Acre House, 11/15 William Road, London NW1 3ER, UK, Editorial syndication details, Tel: + 971 4 2824060

22,774 copies June 2009 Printed by Emirates Printing Press, Dubai


Britain’s Queen Elizabeth II is bringing her royal touch to the UAE next month.

realms. The elder daughter of King George VI and Queen Elizabeth, she was born in 1926 and became Queen at the age of 25, and has reigned through more than five decades. The UK and the UAE


Britain’s Queen Elizabeth II is expected to make a state visit to the UAE next month, her first trip to the country in 31 years. Buckingham Palace first issued a statement in July confirming the visit, after the British monarch accepted an invitation from Sheikh Khalifa bin Zayed, President of the UAE and Ruler of Abu Dhabi. From the UAE, the Queen, 84, will fly to Oman, where she will join celebrations to mark the 40th year of Sultan Qaboos bin Said’s rule. Her visit follows foreign office minister for the Middle East Alistair Burt’s visit to the UAE last month in a bid to strengthen bilateral ties. Burt was the first Minister since the UK election to visit the country. The Queen is the head of state for the UK and 15 other Commonwealth

last year committed to increasing bilateral trade to £12 billion ($18.8 billion) by 2015 – a 66 per cent increase on current levels. According to Lord Davies, UK minister for trade, investment and


small business. UK exports to the UAE have remained steady throughout difficult trading conditions, with the country buying £3.6 billion ($5.6 billion) of UK-made goods and services in 2009. Last year, the Queen received Sheikh Mohammed bin Rashid Al Maktoum, Prime Minister of the UAE and Ruler of Dubai, during the opening ceremony of the Royal Ascot Festival in Berkshire in June. Sheikh Mohammed occupied the traditional royal seat beside the Queen as the guard of honour started the drill lining up in the racecourse. Both have a passion for horse racing. The exact dates and itinerary of the Queen’s trip are being withheld, but the Queen and her husband Prince Philip, will visit the UAE some time in November.

SOAPBOX We’re financing our competitors by providing them with capital. I think this is a significant threat.

The last thing they want to upset is Emirates because we’re the only ones buying aeroplanes.

Willie Walsh, put-upon CEO of British Airways, warns that Europe has failed to recognise the threat of Middle Eastern airlines.

I was surprised by the media campaign size and I have doubts about the real objectives behind it.

Tim Clark, Emirates president, explains that Gulf airlines did not create the export credit rules Willie Walsh is complaining about.

Ahmed Humaid Al Tayer, Dubai International Financial Centre governor, laments the Western and Arab media choosing to paint a negative slant on Dubai life.

GCC AND THE WORLD The GCC states have ordered US weapons worth around $123 billion as they seek to counter Iran’s military power, the Financial Times reported. Saudi Arabia accounts for the largest single

10 gulfbusiness October 2010

component of this military build-up, having ordered a package of US arms worth more than $67 billion. The UAE has signed contracts to buy military equipment worth $35 billion to $40 billion.

$123 billion Total GCC spend on US weapons

Oman is expected to spend $12 billion and Kuwait $7 billion until the end of 2014 on replacing and upgrading warplanes and new command and control systems, according to Blenheim Capital Partners.


Dubai, which was no 12 in the world’s most expensive cities list last year, now ranks 31st in EuroCost International’s Worldwide City Ranking 2010 for Expat Rent Prices. The report attributes this to a “spectacular” decrease of up to 30-50 per cent according to the type of housing. Beirut (10th) is now the most expensive city in the Middle East, just before Abu Dhabi (12th) where ex-pat rents also decreased in 2009. Beirut appears for the first time in the top 20, pushed up by the real estate speculation that has generated a strong increase of high quality housing. Tokyo has maintained its top position while London (2nd) and Hong Kong (3rd) have switched their 2009 places.

HSBC launches airbridge ads HSBC Middle East signed a five-year partnership for the advertising rights to airbridges at Dubai International and Sharjah International Airports. The airbridge campaign is the biggest ever in the Middle East.


Dubai drops in expensive city list

Dubai World gets creditors’ nod Dubai World said 99 per cent of its creditors had agreed to the terms for restructuring $24.9 billion worth of debt, less than a year after the state-owned holding company’s proposal to delay repaying loans sent emerging market stocks tumbling. “This overwhelming support means that the company is well positioned to close the restructuring in the coming weeks,” Dubai World said in a statement. “The proposal puts the


company on a sound financial footing, enabling it to realise value for the benefit of all stakeholders.” Dubai World and its main creditor banks agreed in May to restructure $14.4 billion of bank loans and $8.9 billion of government

$14.4 billion Dubai World Bank loan restructure



Shuaa Capital’s revised GDP growth forecast this year. The UAE-based investment bank has now trimmed its previous estimate of 2.5 per cent saying it predicts a weaker than expected economic recovery.

The value of UAE-based Majid Al Futtaim Properties’ project in Syria. The groundwork of the project, called Khams Shamat, began last month. The project is tipped to be the biggest shopping and leisure destination in the Levant region.

liabilities to resolve a crisis that roiled global markets last year. The company said banks would be paid $4.4 billion in five years and another $10 billion over eight years at belowmarket interest rates supported by assets sales. The agreement also “marks the support of the creditors to the separation,” of real estate developer Nakheel PJSC from Dubai World, Sheikh Ahmad Bin Saeed Al Maktoum, chairman of the Dubai Supreme Fiscal Committee, said.

25 The number of years of Jebel Ali Free Zone (Jafza) success being commemorated by Emirates Post with a special stamp. Jafza has posted more than 320 times growth in the number of companies enlisted since 1985.

October 2010 gulfbusiness



Saudi ranks 13th easiest place to do business


The World Bank has ranked Saudi Arabia as the 13th easiest place to do business in the world, making the kingdom the highest rated country in the Middle East and the Arab world for the fifth year in a row. The country has recently released its five-year plan, which outlines $385 billion of anticipated spending in the kingdom between 2010 and 2014. While a large portion of the budget is dedicated to manpower development, other important areas of the country’s infrastructure will also benefit from the plan. More than 15 per cent of the budget has been dedicated to transport, telecommunications, municipal services and construction.

Regulator fines mobile firms The Communications and Information Technology Commission (CITC), Saudi Arabia’s telecommunication regulator, has imposed fines in excess of SAR5 million on some local mobile service providers for breaching CITC regulations. The mobile service providers violated CITC’s regulations for single network service and similar offers, and did not abide by the ban on free reception of calls during international roaming, the regulator said.

F Kingdom Holding Tower in Saudi Arabia. KSA ranks highest for business in the the Arab world.


$1.46 billion Doosan water deal South Korea’s Doosan Heavy Industries and Construction has won an order to build a water desalination plant in Saudi Arabia. The company said in a statement it had received a letter from Saline Water Conversion Corporation, a Saudi state


body, confirming that it had secured the deal. The plant at Ras Az Zawr will provide drinking water to the capital Riyadh and will be completed in January 2014. It will produce one million tonnes of water a day, enough for 3.5 million

$385 bn

Anticipated spending in the kingdom between 2010 and 2014, based on its five-year development plan.

12 gulfbusiness October 2010

people. The company said it would be the world’s largest such plant in terms of value and water volume, beating the Al Shoaiba desalination plant, also built by Doosan, which produces about 880,000 tonnes of water a day.

$3.8 bn The value of KSA’s consumer electronics devices market this year, according to This is expected to increase to $4.8bn by 2014.

Banks well capitalised Saudi banks adequately fulfill the enhanced capital requirements that have been put forward by the Basel Committee, says Global Investment House. Saudi bank’s Tier 1 capital ratio was more than 10 per cent during 2009 and H1 2010, well above the minimum requirement of four per cent under Basel II and six per cent under Basel III.

IT market to reach $4.6bn Saudi Arabia remains the biggest IT market in the GCC with a forecast value of $3.3 billion in 2010, which is expected to grow to $4.6 billion by 2014, according to recent figures from Business Monitor International. Computer hardware sales including PCs, notebooks and accessories are estimated to reach $1.8 billion this year,

Phantom Coupé The sophisticated Grand Tourer

Abu Dhabi Motors, Abu Dhabi, UAE Tel: 00971 2 677 8884

Al Jenaibi Int’l Automobiles LLC, Muscat, Oman Tel: 00968 2 456 7108

AGMC, Dubai, UAE Tel: 00971 4 339 1555

Ali Alghanim & Sons Automotive Co. WLL, Kuwait Tel: 00965 184 6464

Rolls-Royce Motor Cars Doha, Doha, Qatar Tel: 00974 44 47 75 77

Mohamed Yousuf Naghi Motors, Jeddah, Kingdom of Saudi Arabia Tel: 00966 2 669 5333

Euro Motors, Manama, Kingdom of Bahrain Tel: 00973 17 754 754

Mohamed Yousuf Naghi Motors, Riyadh, Kingdom of Saudi Arabia Tel: 00966 1 462 7777

Every Rolls-Royce motor car is provided with a four year unlimited mileage warranty and service package*. Terms and conditions apply**. Full details can be obtained from an Authorised Rolls-Royce Motor Cars dealership.

* If the motor car is used for commercial purposes (chauffeur service, limo service, hire car, hotels etc.) the warranty period is 48 months or 100,000 miles (160,000 km), whichever occurs first. ** Rolls-Royce Motor Cars Parts warranty is 24 months / unlimited mileage from the date of purchase. © Copyright Rolls-Royce Motor Cars Limited 2010. The Rolls-Royce name and logo are registered trademarks.


Heat no obstacle to hosting World Cup a major sports event with the 2006 Asian Games. ”We will honour our promise to provide airconditioned stadium,” Sheikh Mohammed said in a joint press conference with the head of FIFA’s delegation, Chilean Football Federation president Harold Mayne-Nicholls. ”Climate has never been an issue for Qatar,” the 2022 bid committee’s executive director Hassan al-Thawadi had said earlier. ”We are preparing to start a second generation of airconditioned stages which will be solar powered, he said. ” The cooling will not be restricted to the football fields but will cover the open spaces around the stadiums,” he added.

F Reuters

In a bid to convince a team of FIFA inspectors last month, the Qatar 2022 team said it can overcome the scorching heat by cooled carbon neutral stadiums. The gas-rich state is competing with Australia, England, Belgium, Netherlands, Japan, South Korea, Qatar, Russia, Spain and the United States to host the 2022 World Cup. “All the stadiums presented in our portfolio are environmentally friendly as they use advanced technology with zero carbon dioxide emissions,” president of Qatar 2022, Sheikh Mohammed bin Hamad bin Khalifa Al Thani told reporters. Qatar has already successfully hosted

New official Qatar 2022 ambassador Zinedine Zidane during the tour for the World Cup bid.


Qatar’s Barwa Bank names new CEO Qatari Islamic lender Barwa Bank, a unit of developer Barwa Real Estate, named Steve Troop as its new chief executive officer. The bank said Troop will now be ”responsible for driving Barwa Bank’s strategy and day-to-day management,” adding that he officially

joined the company in September this year. Troop was previously chief operating officer at Riyadh-based Saudi Hollandi Bank and also worked for HSBC in AsiaPacific, Europe and the Middle East. Barwa also named Keith Bradley as head of

banking group and Amgad Younes as chief operating officer. “Our next phase of development will be the rollout of BARWA Bank’s customer services facilities to create “universal Islamic banking group”, said chairman, H.E. Sheikh Mohammed

Bin Hamad Bin Jassim Al-Thani. Barwa Bank, which provides a range of Shariah compliant services including retail, corporate and commercial banking, has said it will acquire Doha-based financial services firms The First Investor and First Finance.


$90,149 7.2 trn $750mn

Qatar’s annual GDP per capita in 2010, according to IMF, making it the world’s richest country for three years in a row.

14 gulfbusiness October 2010

Qatar’s 2009 gas output in cubic feet, which means the country boasts the strongest production growth in the Middle East.

The amount in millions of Islamic bonds that Qatar Islamic Bank hopes to sell to investors in the future.


Islamic banks saturated – CB


Kuwait markets set for first-time regulation by independent body, the Capital Market Authority.

First stock market regulator appointed

The governor of Kuwait‘s central bank, Sheikh Salem Abdul-Aziz al-Sabah, said that with five registered Kuwaiti Islamic lenders and Saudi Arabia’s Al-Rajhi Bank, the country is saturated with Islamic banks. “I believe that with this the Kuwaiti market has reached saturation point for Islamic banks at this stage,” he said.

Kipco sells insurance stake

a special tribunal for the stock market and stipulates hefty jail terms and fines for an array of offences. The Kuwait exchange has been the only one in the Gulf without a market authority as the law took many years to secure parliamentary approval.

The Kuwait Projects Co (Kipco) agreed to sell a 39.2 per cent stake in Gulf Insurance Company (GIC) to Canada-based Fairfax Financial Holdings for KWD59.85 million ($208.6m). Kipco will remain the largest shareholder of GIC with about 43 per cent and Fairfax will own about 41 per cent, Kipco said.

Kuwait to sign $893 million gas deal with Daelim

Kuwait eyes nine new ports

Kuwait has appointed its first independent regulatory body, the Capital Market Authority, to oversee its stock exchange. The managing director of the Kuwait exchange, Saleh al-Falah, was appointed chairman of the new body, which has four

other members. Since its foundation as the region’s first bourse in the early 1970s, the Kuwait exchange has been run by government-appointed administrators who have been criticised by MPs for a lack of transparency. The law also calls for the establishement of



Kuwait National Petroleum plans to sign a KD260 million contract with South Korea>s Daelim Industrial to build a fourth gas production line at its Mina Al-Ahmadi refinery,

Bloomberg has reported. «We already have three trains, this is the fourth gas train with an associated pipeline,» KNPC spokesman, Mohammed al-Ajmi told the news service. The company


KWD30 bn The value of Kuwait’s four-year development plan. A fifth of this is slated to go Kuwait>s ministry of public works, which plans to execute more than 500 projects o ver the period.

16 gulfbusiness October 2010

is to spend KWD410 million on natural gas projects by the end of 2013 including a fourth gas pipeline costing KWD260m with a capacity of 850 million cubic feet per day.

29,000 The number of Kuwaiti citizens currently banned from travelling outside Kuwait due to nonpayment of outstanding debts, according to Ali Al Dhubaibi, the head of the Ministry of Justice

The Kuwait Ports Authority has commissioned Netherlands-based consultancy and engineering firm, DHV to develop plans for nine ports in the country. The project includes the redevelopment of three existing ports in Kuwait City, as well as six new facilities along the 300km-long coastline. The new coastal ports are aimed at providing better facilities for fishing boats as well ferries serving the offshore islands and boats used by government departments.



Seconds to make sense of… 2012 Olympics

Stuart Hill

Vice president and director, BT’s London 2012 Delivery programme

CB clears new bank The Central Bank of Oman has cleared a request by Sayed Asa’ad Bin Tarek Bin Taimour Al Saeed, representative of Sultan Qaboos Bin Said, to set up a new commercial bank in the country. The new entity, Al Izz International Bank, will be the seventh locally incorporated bank after BankMuscat, the National Bank of Oman, Bank Dhofar, Bank Sohar, Oman International Bank and AhliBank.

Nawras launches IPO Oman-based Nawras has opened the subscription period for its initial public offering, which is scheduled to run until October 14, 2010. The offering is open to Omani and GCC retail investors and to Omani and international institutional investors.

Albaraka may spend $200 million on acquisitions Adnan Ahmed Yousif, CEO of Bahrain-based Albaraka Banking Group said the Islamic lender is looking to buy banks in Malaysia and Indonesia and may spend as much as $200 million on the deals, Bloomberg has reported. ”We prefer to either start an Islamic bank or acquire an Islamic bank,” he said. Standard Chartered is advising Albaraka on the Malaysia acquisition and holding meetings about a buy-out in Indonesia.


OR7.18 bn Oman’s expenditure budget allocated for 2010, nearly 63 per cent of this amount has been used in the first eight months.

18 gulfbusiness October 2010

What is the impact of the 2012 Olympics and Paralympic Games on the city of London and the UK as a whole? This is the first major sporting event in the UK since the Commonwealth Games 2002. We are very excited because the Olympics and Paralympics is equivalent to 26 major sporting events. They will feature over 14,000 athletes from more than 200 countries in nearly 700 events. There will be one building to accommodate 20,000 broadcasters, photographers and journalists. This event calls for the largest park development in Europe for over 100 years. Some 7,000 people have worked on the Olympic Park and, of the present workforce of 3,315, 10 per cent were previously unemployed before finding work helping deliver the Games. This event is expected to boost the economy by £21 billion with around nine million tickets to be available. About 800,000 people are expected to use the public transport on the busiest day. About 240,000 people will travel by rail to the Olympic Park every hour.


What new elements can we expect from Olympics 2012? Because we’re such a multi-cultural nation, a lot of people will be coming to the games as if it’s their games. In terms of communication, what has changed is the experience – there is 3D, super-high definition and there will be more interaction with the individual than just watching it on a big screen. You will really see people sweating and catch that moment like never before. What will you do as the official communications services partner for this event? Co-ordinating a matrix of partner organisations, BT will carry every image, every sports report and every visit to the London 2012 Games website, along with countless millions of calls, emails and text messages. With 14,000 cable TV outlets, 20,000 accredited media personnel and Live Site screens in UK city centres, it adds up to an estimated six Gigabytes of multimedia data every single second. Is there a back-up plan for any mishaps? Jamaican athlete UsainBolt set a new 100 metres world record of an astonishing 9.69 seconds in Beijing, but in telecommunications that’s a very long while. What if the signal went wrong for a few seconds, then you just miss seeing that. There is always a back-up plan, but you must do it right the first time. You have to be a super athlete to win a gold medal so you also have to be a super telecom company partner to get this right.


UAE NEEDS TO REVISIT LAWS TO WIN BUSINESS Investors and businesses need to be assured that their money is safe, the only way to do this is to tailor the legal systems to their requirements. MISHAL KANOO


or the longest time, the region has tried to position itself as the alternative to London and Singapore as both the new financial centre as well as the new economic powerhouse to be presented to the world. We did everything possible to make that a reality. We built great universities, infrastructure and roads as well as endeavour the greatest real estate bonanza this side of forever. Indeed, we did everything right for an up and coming place but, one a worthy legal system for this. The issue might seem trivial to some but for those who invested millions in the region, the problem has become paramount. Major issues that are taken for granted in other financial and economic powerhouses, such as precedent setting, a speedy trial, judges who understand the business world, unbiased arbitrators and binding contracts are not guaranteed in the UAE. The most obvious and easy situation to discuss is anything to do with real estate. Those developers who signed papers binding them to performing a certain requirement, found it easy to delay a project without paying the contracted fine, while if the buyer defaulted, he was taken to task. In fact, I even know of one case where a developer used ‘force majeure’ as a rouse when the government changed some laws pertaining to real estate stating that force majeure was not just an act of God but also a change in government policy. This kind of action causes serious money to stay away from the region. This was not evident when the money was flowing, but the moment the global crisis hit, people who were literally throwing away money realised what they had done and took corrective action—they stopped at once. If we were really honest with ourselves, most of the serious money had come into the oil industry and most of those contacts were either government-to-government,

or else the court of judgment was overseas. What signal should we take from this? I don’t want to close this article on a sour note. In fact, when we look at the law books, we see that we have some of the best written laws that one could find. The problem lies with interpreting them and enforcing them. Some of our judges need more training not in the law, in which they are quite proficient, but in life matters. We need our judges to understand the way businesses work they also need to understand the weak, and how to enforce laws that are fair and just. If a contract is absurd, they need to be more understanding when they make their judgments and how are they to do that if they don’t understand the business enough to be able to make such a judgment? The word of the law is what made all those financial as well as economic centres of the world the places that people aim to safeguard their money in. The law is applied to all, fair and square, and that is what makes it attractive. If we ever want to be the centre we aspire to be, we must first understand our laws and why they are there. Once we do that, we need to enforce the law on all fairly and as fast as possible. Then, we might be able to attract the money that we want. The heady days of easy money are gone and the days of taking responsibility for our actions are upon us. There is nothing wrong with having great aspirations. In fact, that is what made Dubai sought after. It is the aftermath of the grand party that we have to be concerned with. If we organise ourselves before the party and plan for the after effects then we can contain most of the problems that will arise after. This way, no matter how grand the celebration, no matter how rowdy it gets, we can all sleep easy knowing that when the party is over, things will not collapse. Mishal Kanoo, deputy chairman, Kanoo Group.

Things that are taken for granted in other countries, such as precedent setting, a speedy trial, unbiased arbitrators and binding contracts are not guaranteed in the UAE.

20 gulfbusiness October 2010


NAWRAS IPO PRICING MUST BE REDUCED Oman telco Nawras announced its $600 million IPO amid media buzz, but several factors cast a cloud on the company’s long-term growth. MATEIN KHALID


he IPO of Omani mobile telecom Nawras in October is a significant milestone in the Gulf capital markets. Nawras is the first IPO in the sultanate since Sohar Power’s floatation on the Muscat stock exchange two years ago on the eve of Lehman’s failure. The Nawras deal is significant because the company, a start up financed by Qatar’s Qtel and several Omani state pension funds only five years ago, intends to raise $600 million via a book building process, a huge sum in a year when the entire GCC has witnessed only eight, smallish, low profile IPO’s that have not even managed to raise $1 billion. It is no coincidence that seven out of the eight IPO’s in the Gulf this year were from Saudi Arabia. After all, bank credit growth in the kingdom has been the highest in the Gulf. The absence of bank finance is a huge deterrent to risk appetites, stratospheric valuations and jumbo offerings in the Gulf. Nawras is clearly a compelling argument for startup success, having wrested 40 per cent of the Omani mobile market from the incumbent Omantel and acquired two million subscribers. With its own international gateway and transmission network, Nawras can renegotiate terms with Omantel and generate substantial cost synergies in the next two years. Moreover, unlike GCC mobile telecoms Zain and Wataniya, Nawras is not highly geared, with its net debt/EBITDA ratio at a mere 0.3. The management team of Nawras has demonstrated a stellar strategic track record and taken a humble start up to the position of the second Omani mobile vendor in five years, a period that witnessed the most traumatic economic contraction and credit crunch in the Gulf since the 1980’s. Nawras as a company has demonstrated innovation, operational excellence, a pristine balance sheet and a valuable corporate brand in the Gulf. However, Nawras as a stock investment faces a multitudes of risks. The pricing range for the Nawras IPO is far too expensive. It makes no sense to me to value Nawras up to 550 million Omani riyals (OR) at its listing even though the company earned only 26 million OR in the first half of 2010, flat over the corresponding period in 2009. After all,

the capex expenditure alone of Nawras was a colossal 52 million OR in 2009. Moreover, subscriber acquisition growth is bound to slow in the decade ahead since Nawaras already commands a 40-42 per cent market share and the mobile penetration ratio in Oman is an impressive 149 per cent, offering little prospect for the exponential revenue growth that proved a financial fairy tale for investors in Egypt’s MobiNil or Saudi Arabia’s Mobily, let alone China Mobile, Russia’s Vimpelcom or India’s Bharti Airtel. To quote Godzilla in mobile phone investing, ‘size matters’. I am also concerned that global fund managers may well be reluctant to allocate capital to a mobile telecom IPO in a country that is not included in the Morgan Stanley emerging markets indices, though Nawras is a must own for Omani pension funds because it will have a top five weighting on the Muscat Securities Market after its listing. Competition and regulatory risk for Nawras will rise in the next two years. The Omani government licensed five new Omani mobile resellers in 2009. There is also the possibility that Oman will award a third mobile license once the requisite spectrum is available, a prospect that could well trigger future cannibalistic pricing wars. Mobile voice revenues in the Gulf are also hostage to economic growth and the potential repatriation of immigrant construction workers, the biggest users of prepaid cards. With five mobile resellers and a 149 per cent Omani mobile penetration rate, I doubt it increased usage and data traffic/ video alone can sustain mobile industry growth. I have the utmost admiration for Nawras but I cannot justify the pricing range of the IPO at 704 – 904 baisa. However, if Nawras trades at 600 baisa or lower in the secondary market after retail investors (70 per cent of the allotees) sell their shares, it will converge to my fair value paradigm. As GCC investors have learnt the hard way, patience and contrarian thinking are unquestionably undervalued virtues on the regional stock exchanges. Matein Khalid, fund manager in a royal investment office and writer in finance and geopolitics.

There is the possibility that Oman will award a third mobile licence once the requisite spectrum is available, a prospect that could trigger future cannibalistic pricing wars.

22 gulfbusiness October 2010

IN 2010, WE DID IT AGAIN ! 852




P.O. Box 5106, Al Quoz, Dubai, United Arab Emirates Tel: (+971 4) 347 5550, Fax: (+971 4) 347 5959 E-mail:, Website:




HAPPY FIRMS EARN FIVE TIMES MARKET AVERAGE The Great Places to Work Institute, provider of the Gulf Business top 20 companies list in January, explains why people are a company’s greatest asset. MICHAEL BURCHILL


s companies across the Gulf region emerge from the recent recession and rethink how they will win in the marketplace, the best companies will focus on their workplace as a key element of that strategy. Indeed, not only does focusing on the workplace makes good business sense, it may very well be the largest wellspring of untapped competitive advantage. The Great Place to Work Institute, a global research and management consultancy, has just launched operations in the UAE. The Institute recognizes the best companies to work for in over 40 countries and works with organisations that want to create a great workplace environment. In the near future, operations will expand into the remainder of the GCC. The Institute has been engaged in cutting edge research for over 20 years on great workplaces – who they are, what do they do and why it matters. One of the consistent findings in this research: is that companies with great workplaces tend to do better financially. Why is this? First, employees in great workplaces are more engaged with their work and in the organisation. There is both a higher level of cooperation and stronger commitment in the best workplaces. Eighty eight per cent of employees at the 100 Best in Europe reported high levels of cooperation in order to get work done. When most organisational studies note that upwards of 60 per cent of employees are actively engaged with their job, nine out of every ten employees in these organisations are ready to give their best. The result: 15.4 per cent growth in revenues during the economic downturn across the European 100 Best compared to less than half that in a similar peer group. And the 10-year financial performance of the 100 Best in the US is an average of 10.3 per cent, compared to the S&P 500 stock market indices of 2.95 per cent. In addition, employees in great workplaces are more loyal to the organisation, and are more reluctant to jump

ship just because of a higher salary someplace else. Turnover in the best companies tends to be less than half the industry average. And these organisations also save money in worker compensation (on the job injuries), absenteeism, health care and so on. It turns out that having a great workplace is a smart monetary policy. Why is this? Well, we find that employees in great workplaces believe their leaders to be credible, respectful, and fair – they trust them. They also take pride in what they do, and they share a sense of camaraderie with their coworkers. Without trust, pride, and camaraderie, any measure of business success is diminished. Further, there is a strong commitment from the senior leadership team to having a great workplace, multiple communication forums exist so that leaders are accessible and employees well informed, and a workplace culture is created that sets employees up to succeed. The best companies to work for have a basis on strong relationships in the workplace. And therein lies an important insight. Because the relationships you create matter, as a leader you are the critical difference between a very good company and a very great company. In the best companies, leaders at all levels have a strong commitment to creating strong ties between the employee and the organisation. Indeed, enhancing trust, pride and camaraderie in the workplace is the central task of effective leadership in today’s organisation. As we enter the Middle East, we are excited to partner with companies of all size and industries to create great workplaces, learn from them and recognise the best. ■

Employees in great workplaces believe their leaders to be credible, respectful, and fair. Without trust, pride and camaraderie, any measure of business success is diminished.

24 gulfbusiness October 2010

Michael Burchill, partner and director, Great Places to Work UAE. Gulf Business is publishing the UAE’s first Best Places to Work list in January



INDONESIA’S COMPELLING GROWTH CURVE Indonesia’s vast natural resources and robust domestic consumption have trumped as emerging markets investors scramble for a slice of its success. MICHAEL PREISS


ndonesia is the world’s sixth best performing stock market globally year to date with about +30 per cent return. In 2009, the Jakarta Composite Index rose +86 per cent. The Republic of Indonesia is, with about 230 million people, the fourth largest country in the world. Indonesia, with its 17,508 islands, also has the world’s largest population of Muslims. The country was shielded from risks and China’s slowdown in the second half of 2010 due to Indonesia’s large domestic market and the small contribution of exports to economy. Indonesian exports make up only about 22 per cent of GDP. Domestic driven growth is expected to remain robust, driven by consumption and investment. Indonesia has often been called a nation in waiting, but in 2010, and with the Jakarta Composite Index reaching an all-time record high last month, the time for Indonesia has finally arrived and investors increasingly seem to take notice. In Indonesia you have very sustainable growth of 5.5 per cent to six per cent economic growth, historically low inflation prevailing for some time, a stable currency and bond yields falling to record lows. Foreign buying of Indonesian bonds has driven down the yield on the 10 government issues to around eight per cent. Net inflows into Indonesia’s bond markets are estimated to have been $ 2.1 billion so far this year, making the country second only to Mexico among emerging markets in attracting bond investors. Though Indonesia is doing extremely well these days, it has not always been the case. For many years, the country under-performed most other Asian markets. Indonesia has experienced a net negative outflow of capital every year between 1998 and 2002. For no other country in Southeast Asia was that true, not even for a single year in that period. Since the 2004 election of current president Susilo Bambang Yudhoyono, or SBY, as he is fondly called by Indonesians, and especially after 2008, the country’s fortunes have turned around and witnessed a sustainable economic boom. Net inflows into Indonesian equities in the first half of 2010 is estimated to amount to $971 million. At this rate, net inflows are on track to surpass last year’s record $1.1 billion.

Market capitalisation has more than doubled since 2008 to more than $275 billion today. The goal of the Jakarta Stock Exchange is to take 75 companies public and boost market capitalisation to $300 billion by the end of 2012. Indonesian equities are now valued at an average 17.5 times the consensus price-earnings forecasts and 15 times 2011 profits. While most Western economies are still in or near recession, Indonesia’s vast natural resources and large domestic consumption-based economy demonstrate resilience and the economic outlook remains robust. Indonesian interest rates, with the one-year deposit rate now at 5.75 per cent, are expected to remain steady as investors remain optimistic about the rupiah and sound monetary policies under President Susilo Banbang Yudhoyono. Investors are looking to gain exposure to shares in the natural resources, banks, infrastructure and consumer goods industries. Upcoming IPOs will include mining company PT Berau Coal, telecommunications company Tower Bersama Group, Krakatau Steel and national airline Garuda. Garuda Indonesian Airlines, barred from flying into Europe for six years because of poor safety records, is now the world’s most improved airline globally according to Skytrax 2010 World Airline Awards. Garuda reopen flights to Europe after the European Union’s ban prohibiting Indonesian carriers from operating in European airspace was lifted in July last year. Its planned IPO is expected to raise $300 million to support long-term growth plans of fleet and route expansion. Garuda’s new daily Jakarta to Tokyo flight is regularly full, as Japan recently upgraded Indonesian government debt to investment grade. Japan is also the largest foreign, long-term investor in Indonesia. Not only the Japanese, but increasingly many Middle East investors, realise that Indonesia is the next big emerging market and cannot be missed. Last but not least, Indonesia is also vying to become the market leader in Islamic fashion. While no other Muslim country is capitalising on this, those in the Indonesian fashion field are set to make Indonesia the “Mecca” of Muslim fashion. Michael Preiss, investment advisor and finance professor

Indonesia’s bond markets are estimated to have been $2.1 billion so far this year, second only to Mexico.

26 gulfbusiness October 2010


THE REAL VALUE OF AN MBA LIES IN ITS STUDENTS Aside from books, an MBA is about absorbing experiences from peers and teachers from around the globe. PHILIP ANDERSON


wry joke asserts “Those who can’t do, teach,” and the highly theoretical nature of so much education ought to make one wonder whether business is really something that can be taught. However, graduate management education is quite different to what many of us remember from our university days. The MBA is an experience, with learning at its core, but it is meant to do much more than convey facts and theories. In a single sentence, the MBA degree is designed to round out a person’s skills as a general manager. Most university graduates who enter the business world develop within a functional area. We become experts in marketing or finance, for example, and only later in our careers do we assume general management responsibilities. The MBA’s chief purpose is to give graduates a thorough grounding in the key disciplines of general management. It won’t make an executive an expert in everything, but a graduate should be able to understand, direct and integrate the combined efforts of functional specialists. A good MBA programme will address at least the core areas of accounting, decision making, economics, finance, marketing, operations, people management and strategy. Most top MBA programmes only accept people who have worked for several years, because it is difficult for inexperienced managers to integrate these functional areas. At INSEAD, for example, the typical MBA student is 29 years old and has worked for seven years; an Executive MBA student might be 35 with 12-14 years of experience. It’s important to join a programme where the participants are at similar career stages, because the core of the MBA experience is not sitting in a classroom listening to professors lecture. General management skills and the ability to integrate functional areas are developed through reflecting on your own experience and learning from the experiences of others. An MBA student learns at least as much from his

classmates as from his teachers, and this works well only if the students in a programme are at the same level of maturity. The single most important factor to consider in evaluating an MBA programme is its fit with the other students. The breadth and diversity of their experience and their intellectual ability and preparation will determine how much one learns. The value of an MBA for people who need crossfunctional skills rests on three factors: depth, breadth, and networking. First, an MBA provides depth. For example, a finance professional may learn on the job how his company executes tasks such as valuation, capital allocation and capital budgeting. In an MBA programme, he/she will acquire more advanced tools and will learn techniques that finance professionals in other firms use for these common tasks. An MBA also provides breadth across functions, geographies and sectors. Learning about other functions is just a beginning – learning how to integrate them is the heart of an MBA programme. MBA students learn how to coordinate the contributions of different specialists in order to start an enterprise, change its direction, raise its performance, integrate acquisitions and develop new markets. Students’ knowledge becomes broader when an MBA programme not only brings together people who have worked and lived in different geographies, but guides them through examples so they absorb the experiences of managers from around the globe. They also broaden themselves by mastering insights and lessons learned from many different sectors, ranging from basic industry to high-tech, to services and non-profits. In the longer run, the most important value created by an MBA flows from networking with other professionals. For many, their ability to build relationships with people from other countries, sectors and functions is the most important skill they develop during graduate school. Philip Anderson, INSEAD alumni fund professor of entrepreneurship, Abu Dhabi.

The typical MBA student is 29 and has worked for seven years; an executive MBA student might be 35 with 12-14 years of experience.

28 gulfbusiness October 2010



Does jail work for debt? Where have all the IPOs gone? The problem with subsidies

HOGAN’S TEST Etihad CEO on breaking even by 2011


10 reasons Abu Dhabi is turning heads

GB Regional Sept. 2010.indd 1

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

8/29/10 9:08:57 AM

Port of call Many thanks for your coverage last month of Abu Dhabi Ports Company’s new fully integrated Khalifa Port and Industrial Zone, which is under construction at Al Taweelah, and scheduled to fully open in 2030. However, I would like to correct an error over the cost. For our Q4, 2012 opening of the Khalifa Port and Industrial Zone A, we have budgeted 26.5 billion Dhs ($7.2 billion). I am pleased to report that we are fully on schedule, and on budget, and have had hundreds of enquiries not only from companies, interested in setting up in our exciting and trailblazing Industrial Zone, but also international contractors who are interested in helping us build the dream and achieve the ambition of seeing the Economic Vision 2030 transform the economy of the Emirate. One exciting highlight coming up for us and our anchor tenant Emirates

30 gulfbusiness October 2010

Plane branding I don’t begrudge Hogan for daring to say “our plan is to be the best-in-class airline, and it comes back to getting the segmentation right.” While this is expected of a person in his position, it is worth questioning whether segmentation is really the main issue at stake. What about the branding issue? Emirates that have been in business for over two decades having been launched in 1985, has clearly leveraged its branding that many non-Gulf residents would argue that it is the UAE’s national carrier. That should be the main concern for Etihad – it’s flying in poor visibility! The volcanic ash clouds were unpredictable and while it was cited as having cost Etihad $50 million, the airline was not the only one licking its wounds. It must be pointed out that Europe is a prime destination for most Gulf airlines who were also hit by the freak interruption of the European airspace due to the ash clouds. However, Emirates happens to be the only one of the Three Musketeers to have not only broken-even, but also gone into profitability even in the face of these crises. A main reason is that it has mastered the art of branding – riding on the wings of Dubai’s popularity as a tourist destination and connection hub between East and West. Dr. Nnamdi Madichie Assistant professor of marketing University of Sharjah.

Aluminium is the opening of their dedicated berth this quarter at Khalifa Port. EMAL will now be able to offload cargo by sea, a huge logistical and financial advantage. Michael Vertigans, vice president, corporate communications, Abu Dhabi Ports Company

Stop subsidies As the era of cheap oil comes to an end and Gulf countries search for natural gas to fuel their diversification plans, I think they will be forced to do away with subsidies. Subsidies create unsustainable demand and this hurts the environment. For instance, Dubai’s economy and population significantly shrunk last year, but how come water and electricity usage still went up drastically? Subsidies also create unfair competition. In a world where globalisation is the name of the game, isn’t it about time that we create a

level playing field for everyone? Call me idealistic but the subsidy policy in this region certainly doesn’t make sense anymore. Iain Jackson, Doha, Qatar

Email: Write to the editor, Gulf Business, and the letter of the month wins an Alessi watch.



Holding fire


on’t expect Dubai to dump its prized assets in a fire sale anytime soon despite the fact that it needs the cash. That’s the word from the Royal Bank of Scotland (RBS), which heads up the coordinating committee of banks in Dubai World’s debt restructuring. Simon Penney, RBS CEO for the Middle East and Africa, said all signs point towards Dubai carefully discharging strategic assets over a sustained period of time. The emirate, and Gulf institutions generally, are not as concerned about shedding companies to generate cash as much as previously thought, said Penney.

Group and Standard Chartered PLC. The other two are local lenders Emirates NBD and Abu Dhabi Commercial Bank. The challenge since then has been getting dozens of smaller banks to agree to the plan -- something that appears to now be all but resolved with the latest breakthrough. Momentum has grown in the financial markets and media about Dubai World selling its trophy possessions, including the ports operator DP World and Atlantis The Palm. Although recent documents revealed that this was only a contingency plan, the seed was planted and talk spread of a

Dubai has gone on the record and said there will be no fire sales. Therefore, I think you will witness an orderly programme of sales in the coming years. “There have been a number of minority stakes sold, but nothing significant. Plus, there’s been a little bit of debt trading hands on the secondary markets. But Dubai has gone on the record and said no fire sales. Therefore, I think you’ll see an orderly programme of sales in the coming years; minority positions being sold and the more important UAE positions being held back.” Since Dubai World’s debt troubles surfaced, RBS has performed a dual role in the restructuring: one as the chairman of the coordinating committee of the banks and the other as a lender. In May, the Dubai conglomerate won the support of the seven-strong committee that are owed about 60 per cent of the debt. That group also includes Bank of Tokyo-Mitsubishi UFJ, HSBC Holdings, Lloyds Banking

32 gulfbusiness October 2010


$39.9bn $6.2bn

Total debt owed by Dubai World

Dubai Holding Commercial Operations Group loss for 2009


Unmet asking price for Union Properties’ Jumeirah Ritz-Carlton hotel

Photo: RBS

Gulf Business exclusive: CEO of Royal Bank of Scotland Middle East leads the debate on why Dubai and the region will not panic sell prized assets as predicted.

Simon Penney, CEO, RBS, Middle East.

distressed asset tidal wave that would stretch across the Gulf. Union Properties supported the trend, agreeing to sell the RitzCarlton hotel development in Dubai for less than the asking price of $410 million. However, the deal struck in midSeptember between Dubai World and creditors went some way to subdue any further wild speculation. Still, despite this, the original documents listed key assets that could be up for grabs, including DP World, Atlantis the Palm, MGM Resorts International and the luxury retailer Barneys New York. Reports flooded in that Dubai World could raise up to $19.4 billion over eight years through sales. And that the assets earmarked for possible sale are currently valued at as much as $10.4bn. Asset sales, along with bond issues, are Dubai’s best option to boost revenue because other measures would not generate enough cash on time to plug debt holes, analysts have said. But Bank of America Merrill Lynch offered a bleak note to clients recently stating: “With 2010 public revenues projected at $8billion,

Jumeirah Ritz-Carlton hotel.

Dubai’s fiscal muscle seems weak compared to off-balance sheet guarantees it may have committed itself to under the Dubai World restructuring proposal.” Despite this, and the rumblings across the region of large institutions parting ways with assets, deal flow has been thin, said Penney. “If you use last November as a starting point, financiers thought there was going to be a feeding frenzy on asset sales, including distressed assets. But as of now, significant M&A, asset disposal and the activity of vulture funds hasn’t materialised.” One outcome of the restructuring deal with creditors is it gives Dubai some wriggle room to consider its strategy on distressed sales. Essentially, Dubai World will have more time to sell off assets and repay creditors and it won’t pay punitive rates on this extra time. In early September, Dubai Holding Commercial Operations Group (DHCOG), the main unit of Dubai Holding, said it had agreed with lenders to delay repayment of a $555 million revolving credit facility until the end of November as the two sides

negotiate over a long-term extension. DHCOG said in June that it may resort to asset sales to deal with its debt after posting a $6.2 billion loss for 2009. But, crucially, company crown jewels are unlikely to be disposed of as part of any sales in view of their strategic and financial importance for the company. They include some of Dubai’s most recognized brands in the hospitality and real estate sectors, including the Jumeirah Group. A banker close to the restructuring, who preferred to remain anonymous in line with company policy, said: “If Dubai went down the road of a fire sale of big name items then it would send out the distress flares that we need cash no matter what the loss. The fact that it hasn’t done that is probably good for the image of the emirate and confidence in the region generally. “It stands to reason that minority stakes in non-core assets would be more likely to go first, rather than

State of the Union Once a quintessential Dubai corporate high-flyer, Union Properties has come down to earth with a severe bump since the financial crisis. Its sale of the Ritz-Carlton Jumeirah Hotel at a knock-down price added insult to injury. It also fuelled talk of the extent of this appetite for selling distressed assets. On a positive note, proceeds from the sale will help Union Properties complete other projects such as the Limestone House apartment building and the 80-storey Index skyscraper in DIFC. The firm halted development work after credit dried up in the financial crisis and more customers defaulted. In 2009, the company reported its first full-year loss and suspended work on F1-X, a Formula One theme parkMotorCity development at the Dubai Autodrome race track.

businesses that are more integral to Dubai Inc.” When asked how much pride was at stake for Dubai to consider parting ways with its trophy businesses, he added: “That’s not so much a factor anymore. The world has moved on, and investors and creditors realise that it’s just business. Although there’s always a degree of humble pie.” On the other hand, institutional investors in the Middle East, including divisions of Dubai Holding, are actually chalking up some handsome debt acquisition deals. UAE-based Essdar Capital, which recently bought the senior debt of Oman’s troubled $15bn Blue City project in a distressed transaction, said it’s taking the fight to the market and looking to tap more such opportunities. Essdar, 35 percent owned by Dubai Holding, bought Blue City’s $655.5 million Class A debt via a tender offer earlier in June as part of investment in its Gulf-focused distressed debt fund. The investment remains the fund’s largest so far. RBS’ Penney added: “There’s far more conversations about acquisitions than disposals and greater scrutiny around acquiring business that add value to the local economies.” The evidence to date is that Dubai is steering a cautious path on the sale of its business units. The hard-fought deal with creditors will have depended a large amount on this fact. Meanwhile, cash generation will prove to be king over the coming years as Dubai World fights to meets its obligations. It’s fair to say that neither Dubai World nor the banks particularly want the company to part with prized assets at distressed prices. So, the emirate is hoping that big-name discounted sales that currently form part of the contingency plan do not become unavoidable. ■ October 2010 gulfbusiness 33


Opec celebrates 50 years Having survived a tumultuous history of wars, embargoes and in-fighting, Opec’s next challenge will be keeping up with the world’s changing energy mix. RYAN HARRISON reports.


t 50 years old, Opec is a wise old head. Recessions have come and gone, but the organisation that was founded in Baghdad on September 14, 1960 is still the dominant power in world oil. It will need all its years of experience to tackle the coming threats to its existence though, say experts. The Organisation of the Petroleum Exporting Countries (Opec) is acutely aware of Iraq’s re-emergence as a crude heavy weight, declining oil exports among its members and the inevitability of renewable energy. But for now it’s safe. Opec members still produce about 40 per cent of the world’s oil, meanwhile the group possesses about 60 per cent of the world’s proven crude oil reserves. Oil prices are comfortably near $75 a barrel and above $70 a barrel for all but two weeks of this year. Still, the world is a different place to that faced by founder members Saudi Arabia, Iraq, Iran, Kuwait and Venezuela. “The overarching theme for the next 50 years will be the changing energy mix,” said Helen Henton, head of energy and environmental research at Standard Chartered.

Helen Henton, head of energy and environmental research, Standard Chartered.

could reduce the cost of renewable technologies. How to tackle Iraq’s thirst for oil money is a more immediate threat, said Henton. Figures released recently showed Opec could well see a spike in its production

Despite the deep reserves of Opec’s members, the organisation is still too heavily dependent on what is fundamentally a finite commodity. “The drive to de-carbonisation and energy security is critical for everyone, but particularly Opec. That being said, in the coming decades oil will still be the most important component of the energy mix.” Henton said oil producing nations have been slow to equip themselves for the switch to renewable. Although in their favour the next five to 10 years will bring technological advances that

34 gulfbusiness October 2010

as Iraq seeks to lift output to 12 million barrels a day within six years, up from 2.5 million at present, as the country recovers after years of conflict. That would catapult Iraq to the second largest oil producer in Opec behind Saudi Arabia “They have some ambitious numbers,” said Henton. “Fundamentally though, the world needs more oil so Iraq producing more is a positive

thing. But the challenge will come with incorporating Iraq back into the Opec fold as it’s been outside the quota for some time. “There are a number of countries that would like to produce more but they can’t. Having to involve Iraq in this will be tricky,” she added. Despite the deep reserves of Opec’s members, especially powerhouses like Saudi Arabia that have ensured five decades of continuous oil exporting revenues, the organisation is still too heavily dependent on what is fundamentally a finite commodity. Gail Tverberg, a consultant and expert on peak-oil, and editor of research portal The Oil Drum, said this issue could prove to be the thorn in the side of Opec for the years to come. “Instead of growth, I think the overall theme will be just trying to maintain the status quo, when the natural trend is toward decline. Part of the issue will be declining oil exports (because production remains at most flat, but use by local population continues to rise). But part of the issue will be difficulty in obtaining enough fresh water, and a population unhappy about declining real wealth.” Tverberg said in future because oil reserves are weighted heavily in the hands of Opec, power will shift away from non-Opec nations, which are currently pumping at full pelt just to keep up. “Oil exports from non-Opec countries will likely drop even faster than Opec countries, so this will raise the status of Opec oil exporters. They will be able to pick and choose who they want to export to,” she said. How Opec meets its energy challenges will determine whether it calls itself the dominant player in world oil by September 14, 2060. Its 100th birthday is still some way off, but time is ticking to find a sustainable alternative source of income.

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Brave new world As the Gulf emerges from a long and painful recession, it’s time to think less about lucre and more about longevity. ALICIA BULLER reports.


s the region journeys back to growth, there’s little doubt that things will never be the same again in the business world. The Gulf has waved goodbye to the days of the sales office phones ringing as often as the cash register; just as the UAE has said farewell to the lion’s share of its CEOs. It’s a brave new world out there: an environment that Abdulaziz AlSowilim, new MENA chairman for professional services firm Ernst & Young, terms as the ‘new normal’. “Today you have to be creative and generate new ways to get business, the business doesn’t just automatically come to you,” he says. “There also needs to be a greater focus on corporate governance and hiring the right people.” The chairman adds that Ernst & Young has seen regulation and risk management rise to number one on the client agenda. A year ago the main concern was credit access. The fact is regulation and credit access are increasingly going hand-in-hand as banks demand reassurance from clients. The steep rise in voluntary regulatory activity has risen partly

Abdulaziz Al-Sowilim, Ernst & Young.

Tommy Weir, Kenexa.

emerging market leadership at HR development firm, Kenexa, likens the ‘boom’ times to a harbour that was constantly filling with water (cash) and whether the company was a ‘dinghy’ or a ‘170-foot super yacht’ the water came in and everyone went up. “The businesses came in, they got the lease, they turned on the lights and they grew. We can’t rely on the harbour any more, but we have to

work within their constraints. Like AlSowilim, Weir believes the major focus should be on people. “The first thing should always be: ‘do I have the right people in the right roles doing the right things?’ In the boom days, the growth curve went up so fast that businesses just gave promotions to who was ever there at the time, just to keep up with the growth. They weren’t trained and they had subject knowledge but not management experience,” Weir says. Ernst & Young’s Al-Sowilim adds that his company is pushing a global homegrown recruitment drive as part of its strategy to incubate and develop the best people in their local environments. “It’s about ensuring continuity,” he says. Three months into the job himself, the Saudi-born chairman is the only homegrown GCC boss of a professional services company today. Post-crisis, ‘continuity’ and ‘longevity’ will be the buzzwords of business strategies going forward. Actually they don’t sound that ‘buzzy’. But that’s the point.

It’s possible that you have been left behind if you haven’t fixed your company already. You should have started the process in 2009. from longevity concerns and partly for ‘survival’ reasons. “It’s possible that you have been left behind if you haven’t fixed your company already.” says Al-Sowilim. ”You should have started the process in 2009. Corporate governance is a tool that makes sure everything is under control and gives investors confidence.” Tommy Weir, author of American best-seller The CEO Shift and boss of

36 gulfbusiness October 2010

figure out what to do and where we should focus. If we borrow cash, can we pay it back? It all comes down to cash,” he says. “Before, companies were paying money out of revenues, which is the top line, not the bottom line. People used to say, ‘how do I make the most money out of this’? Now they’re saying, ‘how do I make this last’?” Weir adds that, going forward, companies must know their limits and

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Until my client knows I’ll ght his corner.

Until I know what he’s going through. Really know. Until I can remember everything (without referring to my notes). Until I can nish his sentences for him (not that I ever would). Until I understand all his goals. The ones set in stone. And the ones that change as time goes by … Until he sees that I’m proactive about both. Until he says, “Not bad...” Or shows me a photo of his Grand-daughter on a horse I helped him buy. Until then …

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Net gains


arrefour in the UAE has launched a web shopping initiative, the first of its kind among the country’s supermarkets. The new site, from the world’s second largest retailer, gives customers access to over 3,000 items at the touch of a button – including many items that are not available in-store. The online portal ( allows customers to buy a variety of non-food items, including cameras, mobile phones, printers, gaming products, TVs, home appliances, garden furniture, homeware and some cosmetic items. The service is competitively priced, with free delivery available on all orders over Dhs1,000 and an average of Dhs12 for any orders under this amount.

Photo: Carrefour

As a leading supermarket launches its own online store in the UAE, savvy shoppers ask why has it taken so long? MICHAEL GORDON reports.

Carrefour’s new online shopping site targets the UAE’s internet savvy population.

In the UK, leading retailers, including Sainsburys, Waitrose, Tesco and ASDA (Walmart) have offered online ordering and home delivery for several years. But, crucially, they do not limit deliveries to non-food items. So is this initiative by Carrefour a leap forward, or too little too late? Richard Adams, Datamonitor’s Dubai-based consumer consulting analyst, believes that the industry implications of Carrefour’s online home delivery system are likely to be relatively modest, at least in the short-term.

It is quite an unpredictable market and we don’t expect to change everyone’s shopping behaviour overnight. We are catering for a small group of shoppers Henry Changeux, GCC Country Head of Carrefour, says: “It is quite an unpredictable market and we don’t expect to change everyone’s shopping behaviour overnight. We are catering for a relatively small group of shoppers at the moment but once people become aware of the deals online, we are confident this will shift. “The webstore gives customers the opportunity to browse through thousands of products, while comparing different brands and features at a time that suits them. All items are delivered by UPS to their home.”

38 gulfbusiness October 2010

He says that pilot testing of online grocery home delivery by two of the UAE’s larger consumers goods retailers only met with moderate success. What’s more, internet penetration rates are relatively modest and consumers are still weary of buying online. Adams says: “With internet penetration rates around 60 per cent, online purchasing is not enormously significant. Moreover, those consumers who are online are reticent to purchase. “UAE consumers have trust issues with online sales channels, fearing credit fraud. Datamonitors figures

show that while about 38 per cent of UAE consumers will go online in order to save money (visiting price comparison websites and the like), only about eight to nine per cent consistently buy online to save money.” He adds that out-of-home food consumption is high and outsourced meal prices are competitive. “Because labour inputs are comparatively cheap, the cost of outsourcing meal production is relatively modest. As a result, significant proportions of the UAE consumers in either consume meals out of the home or order home delivery from restaurants,” adds Adams. However, because Carrefour is a scale player, and any action they take will impact the market, Adams believes that as consumers become more used to the idea of online food delivery, and happier to use credit cards online, we will see a gradual transformation. He warns: “There are, however, significant logistical issues. Chilled refrigeration is not cheap and food in such a hot climate spoils quickly if not chilled adequately.” The demographic most likely to use Carrefour’s online service is the 18-34-year-old consumer, according to Datamonitor research. “We saw no statistically significant difference between gender uptake,” adds Adams. Some of the early online success stories in the UAE include Emirates Avenue, EllaMart, Quick Dubai and ■


Dubai’s double act Two months after DFM and NASDAQ Dubai consolidated, investors witnessed a 20 per cent boost in trading, but regulation remains key, writes KAREN REMO-LISTANA.


Photos: Naveed Ahmed

ubai attracted the world’s attention when its two stock exchanges – Dubai Financial Market (DFM) and NASDAQ Dubai – were consolidated in July. Equities value rose 20 per cent in August – its first full month of trading since the bourse doubled up. Going forward, what’s vital is that brokers see it as one platform, says Gerald Santing, managing director, markets, Dubai Financial Services Authority (DFSA), which manages regulation for NASDAQ Dubai. “What happened was a migration of systems and processes to another platform. The regulation itself didn’t change at all,” the Dutch markets veteran said. Santing joined DFSA in June, just before the consolidation was finalised. He first came to Dubai

Equities value rose 20 per cent in August – its first full month of trading since the bourse outsourced its operation to DFM. when the Dubai Mercantile Exchange (DME) was still being set up in 2007, and now he has the overall responsibility for the DME. “All over the world, you try to attract bigger liquidity pools and you could do that by mergers but it’s not always necessary. What is more important is you align the rules and processes,” he said. The migration is expected to beef up retail investors’ interest in NASDAQ Dubai, a significant diversion from its initial strategy. While DFM is more catered to local retail investors, NASDAQ Dubai was created to primarily woo international institutional investors. Yet despite the changes, regulations are set to remain the same for now. “The regulatory environment for protecting retail customers was

40 gulfbusiness October 2010

already in place. Regulation is an evolving thing. If anything happens in this market or we foresee changes, we will adapt to that,” said Santing. But is real consolidation possible for the two bourses? Aside from the investor type, each bourse has its own distinct features. DFM requires companies to sell a minimum 55 per cent stake, while NASDAQ Dubai has a 25 per cent minimum listing rule. DFM uses the fixed price method in valuing shares for IPO, while NASDAQ Dubai uses the book-building method. The regulator of NASDAQ Dubai also appears to be quicker in adapting international standards. For example, SCA mandated listed companies to set up remuneration and nomination committees from April 30, while DFSA has had this rules for years.

The list of differences goes on, but Santing, who has chaired the international regulatory task force that dealt with the approval procedures of the merger of NYSE and Euronext, says a merger is also possible in this part of the world. “Of course you can merge exchanges, but it’s quite a lot of work because it’s not only a legal thing, it’s also a process where you have to create a long-term single liquidity pool,” he said. “Europe has done that but it has taken them at least 10 years.” Despite the recent increase in trading, activity in NASDQA Dubai remains relatively low. The weak trading conditions in the exchange have pushed its flagship firm, DP World, to seek a premium listing on the London Stock Exchange and has caused others to withdraw their listings. “There are always ways to improve and that can be done by getting more primary listings and adding morefree float in the market. And we are definitely after that,” Santing said. ■


EXECUTIVE MOVES The Saudi British Bank (SABB) has appointed Majed Najm as the general manager of personal financial services. Najm has returned to SABB after serving over three years of secondment with HSBC Group, SABB’s global partner, where he was head of International Bank Middle East responsible for 11 Middle Eastern countries. Earlier he held the position of the chief executive officer of HSBC Bahrain. He joined SABB in 1992.

BNP Paribas has appointed Tariq Al Samahiji as CEO of BNP Paribas Najmah and Global Head of BNP Paribas Islamic Finance and Investments. Al Samahiji has been with BNP Paribas since 2002 and was the CEO of BNP Paribas Investment Partners covering the MENA region beginning 2007.

The Abu Dhabi Investment Authority (ADIA) has appointed Ted Chu as chief economist. Chu joins ADIA from General Motors in Detroit, where he has served since 2006 as chief economist and director of global economic and industry analysis. Before joining GM, Chu was a macroeconomist at the Central and Eastern European division of the World Bank in Washington.

Deutsche Bank AG has named Ashok Aram as its chief executive for the Middle East and North Africa, replacing Henry Azzam who will become the bank’s non-executive chairman for the region. Aram joins the bank from Middle East private equity firm Abraaj Capital, where he served as managing director for one year, Zawya Dow Jones reported. Aram had worked at Deutsche Bank for 15 years prior to Abraaj, heading debt and equity markets for central and eastern Europe and Middle East and Africa.

42 gulfbusiness October 2010

Emirates NBD, the Gulf’s largest bank by assets, has appointed Surya Subramanian, a former Standard Chartered banker, as its new chief financial officer. Subramanian, a chartered accountant, has worked in banking and finance in India, Pakistan and Singapore. He joins from the Ministry of Finance and the Accounting and Corporate Regulatory Authority in Singapore. He succeeds Sanjay Uppal who announced his departure in April.

SAP has selected Sam Alkharrat to lead the next wave of SAP’s growth and development in the Middle East and North Africa. Alkharrat has joined SAP MENA after having spent 16 years with Cisco Systems, where he held several leadership roles building Cisco’s business in the MENA region. Most recently, Alkharrat held the position of managing director of the company’s public sector business across the emerging markets.

Crédit Agricole has appointed Albert Momdjian as head of coverage and investment banking for the Middle East and Africa region. He was previously head of Middle East and Africa investment banking. He joined Crédit Agricole from Crédit Suisse back in 2006.

Mohammed Ali Yasin, former head of Shuaa Securities who resigned in June, has joined CAPM Investment, an Abu Dhabi-based investment bank as chief investment officer. Yasin was named chief executive of Shuaa Securities in 2006, and oversaw the firm’s rapid expansion across the Middle East, emerging as the second-largest broker in the UAE by market share.


The man who sold the world

Exclusive: Rakia and RAK Ceramics CEO, Dr Khater Massaad, tells KAREN REMO-LISTANA why he’s selling global assets for an AA credit rating.

44 gulfbusiness October 2010

businessman, Massaad said Sheikh Saud’s focus now is to “make sure that Ras Al Kaimah is on the right track, no defaulting and financial problems.” At the top of the list for divestment is its investment in the Port of Poti in Georgia, which Rakia plans to IPO next year. “We are planning to exit this port with an IPO… in 2011,” he said. “It is not a strategic asset for us. If we can make money from selling something then why should we not do it?” The divestment may also cover other international assets. Rakia has real estate and shipping developments in Georgia, along the Black Sea coast and around the capital, and a 50:50 joint venture between RAK Ceramics and the Trimex Group from India, which is planning a range of investments in the Indonesian province of East Kalimantan. Rakeen, its property development arm, is also investing in Georgia, where it has three mixed-use projects in the capital, Tbilisi, amounting to an investment of some $2 billion. However, the divestment will not dramatically shake up Rakia’s portfolio, the said investment in the Georgia port is “small” and even if all of its overseas investments are summed up, they would not make up 10 per cent of Rakia’s total assets, according to Massaad.

“Our investment outside RAK is less than 10 per cent,” he said. “His Highness has given instruction now to invest only within RAK so all our investments from now on will be in the emirate.” Contrary to popular opinion Massaad says Rakia is not a sovereign wealth fund (SWF) and so is not obliged to invest in various asset

The many hats of Dr Massad The driving force behind RAK Ceramics CEO, Dr Khater Massaad, has guided the destiny of what is now the largest ceramic manufacturing organisation in the world – achieved within 17 years. Massaad was appointed in August 2003 as the advisor to The Crown Prince & Deputy Ruler of the Emirate of Ras Al Khaimah, His Highness Sheikh Saud Bin Saqr Al Qasimi. He plays an important role in the rapid development of the emirate as CEO of the RAK Investment Authority (Rakia), a position he was appointed to in 2005. Rakia has attracted more than $2 billion in industrial investments into RAK. Massaad has also played a major role in the tourism sector as managing director of Al Hamra Fort Hotel & Beach Resort.

Photos: Victor Besa


aturally, Dr Khater Massaad knows the mission of Ras Al Kaimah Investment Authority (Rakia) off by heart: to encourage international investments to the emirate, and not the other way around. And having attracted close to $2.5 billion in investment, no one can say that the Rakia chief hasn’t achieved his aim. Today, there are more than 6,500 companies registered with Rakia, representing investors from diverse non-oil sectors, including industrial, commercial, trading, services, consulting and media companies. But, for Massaad, a deeply ambitious man, it’s just not enough. The emirate is hungry for more investments and is willing to divest all its international assets to get ‘AA’ credit ratings, up from the current ‘A’. This nifty set of moves will put RAK on the same footing as its much wealthier sisteremirate, Abu Dhabi. “For the last two years, Ras Al Kaimah has got an A-rating and His Highness Sheikh Saud Bin Saqr Al Qasimi wants to bring this ‘A’ to ‘AA’ rating,” says Massaad. Describing the deputy ruler as a “very conservative” and “very good”

October 2010 gulfbusiness



Products of RAK Ceramics. The company last year produced 115 million square metres of ceramics from 15 manufacturing facilities located in six countries.

We are planning to exit the Port of Poti in Georgia with an IPO in 2011. If we can make money from selling something then why should we not do it? classes. “We don’t have a fund, we are a company,” he says. “To be honest, I don’t consider Rakia as an SWF. I consider it as an industrial licensing and promotion agency. We have invested in certain industries but we are not RAK’s investment arm.” The emirate’s plans to increase its rating by beefing up investment using capital from its own pocket makes sense, given its current debtfreeze policy. RAK is currently in a deleveraging mood as it looks to reduce its $1.36 billion of debt after funding a development splurge with Islamic bonds. Jim Stewart, chief executive of the Ras Al Khaimah government’s Investment and Development Office, has said previously that the agency would like to reduce the structural debt and then bring in partners later on. Investors will share equity in some of the emirate’s 16 government-related companies, which could also sell shares to the public in a few years,

46 gulfbusiness October 2010

or help develop its major projects, said Stewart. Having weathered the challenges of 2009 quite well, with growth intact and comfortable public finance ratios, RAK is rated ‘A/A’ by Fitch and Standard & Poor’s ratings agencies. However, with the budget deficit and debt ratios having risen sharply since 2006, albeit to finance important infrastructure development, RAK now needs to demonstrate that the projected improvement in public finances will start to materialise this year, Richard Fox, head of Middle East and Africa sovereign ratings at Fitch, said. The deficit had been expected to narrow, with no new borrowing envisaged in the 2009 financing plan. However, the government pressed ahead with capital spending plans and financed the resulting deficit with its first foreign currency sukuk for $400 million, issued in July 2009. This raised the debt burden to 31.4 per cent of GDP at end-2009,

compared with 22 per cent one year earlier. This level remains below the ‘A’ peer group median of 34 per cent. Fox says the compilation of accounts on a public sector-wide basis has served RAK well, with the authorities able to provide detailed data on the performance of public sector agencies and enterprises. It was also able to exert a high degree of oversight and control. “This minimises the risk of a Dubaistyle crisis emerging in RAK”, Fox says. To further beef up its buffers, Rakia plans to IPO RAK Ceramics in India by the end of this year or beginning of next year, following its $250 million Bangladesh IPO. “The size of the issue depends on the laws of India. It may be up to 30-40 per cent and we are probably talking about $40 million to $50 million,” Massaad said. RAK Ceramics supplies up to 75 per cent of the domestic demand for sanitary ware in the UAE and 25 per cent of demand for ceramic tile in Bangladesh. While in India, about three out of every four tiles is from RAK Ceramics. The world’s largest ceramics manufacturer, largely owned by Rakia, is also expecting bigger revenues and profits for this fiscal year. For the fiscal year of 2009, RAK Ceramics posted a 20.2 per cent jump in net profits to Dhs261.9 million compared to Dhs217.9 million in the previous year. Revenues during the same period rose 17 per cent to Dhs3.77 billion from Dh3.23 billion. Massaad can be forgiven a little smugness as he says total revenue is expected to rise 10 per cent to reach $1.1billion this year from $1billion last year. He’s also hoping for the same percentage increase in terms of profits. And judging by his track record, it’s likely he’ll do it. “We have not been squeezed. RAK Ceramics is exporting to more than 130 countries,” he explains. “If you have a recession in one country, it can be compensated in other countries.” ■


RAK attack The emirate is packing a punch with its ambitious no-debt strategy and climbing inward investment. By KAREN REMO-LISTANA.


ome to the world’s largest ceramics maker, one of the major offshore hubs in the Middle East and ruled by the world’s second longest-serving monarch after the king of Thailand, Sheikh Saqr bin Mohammad Al Qasimi, Ras Al Kaimah has a string of accolades to its name. But perhaps its biggest accolade is the fact that while the rest of the world binged on credit, the emirate was prudent enough not to overburden itself. RAK currently owns $1.6 billion of debt, roughly $1 billion of which is sukuk-listed on the London Stock Exchange. The emirate is now aiming to deleverage, while pushing forward with its ambitious tourism and expansion plans. “No bonds,” Sheikh Faisal bin Saqr Al Qasimi, chairman of the RAK finance department, says. “At the moment it depends on the liquidity of the market. We are relying on selffinancing and foreign investors. “For the moment I don’t think RAK needs to issue bonds,” he said, noting that the government has also taken steps to streamline its operational costs. “We have no huge overheads. Our government is very small and efficient. We have no oil, so we have to depend on the service, industries and tourism. That is good because it means we are standing on more pillars rather than depending on only one source of income.” He’s right. And although the emirate did not come out from the crisis unscathed, it was able to manage its

48 gulfbusiness October 2010

Sheikh Faisal bin Saqr Al Qasimi, chairman, RAK finance department.

balance sheet thanks to the diversity of its economy. It has no one dominant economic contributor – in 2008 the largest sector was government services, which contributed 15 per cent to GDP, followed by wholesale, retail and repair services at 14 per cent. Figures from research firm the Oxford Business Group, show real estate and business services, construction, building and manufacturing each contributed nine per cent. Agriculture is also a major contributor, at nine per cent, transport accounts for eight per cent, followed by financial intermediation and crude oil, both at seven per cent, electricity,

gas and water at four per cent and hotels and restaurants at two per cent. According to Zawya financial data, the government has an ongoing $2 billion sukuk programme and sold $400 million of bonds in July last year in the first US dollar sukuk issue by an emirate in the UAE. It sold Dhs1 billion ($367 million) of sukuk in May 2008 while the Ras Al Khaimah Investment Authority (Rakia), sold a $325 million sukuk in 2007. “We are withholding any borrowing plans until we see the picture of the local and world economy. To play it safe is better,” Sheikh Omar bin Saqr Al Qasimi, head of private affairs for

We are withholding any borrowing plans until we see the picture of the local and world economy. To play it safe is better.

getty images

Ras Al Khaimah is the most transparent state in the GCC, says Fitch Ratings.

Sheikh Saqr Al Qassimi, Ruler of Ras Al Kaimah, said. “Borrowing is not something you should be afraid of,” he added. “In development you have to borrow but you should manage it and see your ability to pay your debt.” The main hit to public sector revenues last year stemmed from reduced payments by developers for land purchases. However, with reclamation for the flagship Al Marjan Island project largely completed in 2008, spending also fell sharply, with the overall public sector deficit virtually unchanged, albeit at a still high 10.5 per cent of GDP. One of the emirate’s strengths is its increasing attraction as an investment haven. According to the Chamber of Commerce, the total number of existing companies registered at the end of December 2009 stood at 21,609, up from 19,697 in 2008 and 17,840 in 2007.

Rakia and RAK Free Trade Zone (FTZ) are leading the way in bringing investment to the emirate by forging partnerships with international companies. Both offer free zones with light regulation, infrastructure and practical support. Official statistics says there are more than 6,500 companies registered with Rakia – 3,030 are on-shore companies and 500 companies are registered through Rakia’s off-shore facility, which recorded a 90 per cent growth during the first quarter of 2010 over the same period in 2009. In addition, negotiations are underway with several more companies from countries including Belgium, UAE, the USA, Kuwait, Egypt, Turkey, Italy, India, Germany, France, Pakistan and Canada to set up business ventures and investment activities in the emirate. RAK is not only reaching out to the world for business partnerships, but

also tourists. Ras Al Kaimah prides itself on pristine beaches and archaeological heritage, formed over thousands of years by nomadic and indigenous Arab groups and seafaring traders. By leveraging the emirate’s cultural attraction and natural landscape, RAK Tourism officials are aiming to increase tourist arrivals to 2.5 million by 2012. In a bid to reach this target, the emirate has plans for adding some 3,700 rooms over the coming years, trebling the current supply. An estimated $5 billion worth of projects are currently planned or under way. For a small emirate, RAK certainly packs some might. Going forward, success will unequivocally lie in the updating of its infrastructure and continued inward investment. Whether the emirate’s no-debt strategy can be pulled off without hampering its development remains to be seen. ■ October 2010 gulfbusiness



Navigating the crisis

Whether it’s in the government, aviation or banking sector, officials should always find time for a reality check, RAK Airways chairman Sheikh Omar bin Saqr Al Qasimi tells KAREN REMO-LISTANA.


heikh Omar bin Saqr Al Qasimi is multi talented. He is the chairman of RAK Airways, RAK Bank and Gulf Cement, and also the head of private affairs for HH Sheikh Saqr Muhammad Al Qasimi, the Ruler of Ras Al Kaimah. How he juggles all of these commitments is a matter of time management, says Sheikh Omar, who declines to wear a watch. “After working hours, I leave the office. But I am on my phone most of the time,” he says. One of his biggest tasks is to relaunch RAK Airways on October 10 and help the airline break even in its first year of operation. “We aim to break even as soon as possible,” he says. “We looked at what we’ve done in the past. We changed the aircraft type – we’ve moved to smaller and more economical Boeing 737s. We also looked at the cost of the planes and staffing and it looks positive.” The Ras Al Khaimah carrier was created by the emirate’s government in 2005 and started operations at the end of 2007. The airline carried about 125,000 passengers in 2008 before

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suspending services in May 2009 due to financial difficulties. It has already invested more than $27 million in infrastructure development. Despite the relatively slow economic growth and stiff competition, Sheikh Omar – who used to fly microlight aircraft as a hobby – says they will do everything to make RAK Airways’ reentry a success. Contrary to some reports, RAK Airways will not be a low-cost airline. Sheikh Omar says it will operate as a “full-fledged airline” but will not compete on the high-end of the market. RAK Airways flights to Jeddah and Calicut will start at Dhs10, including one baggage and a meal, but Rak Airways is not a low-cost airline, chairman Al Qassimi said. The model is based on cost-control, he said. “We are looking at serving Ras Al Kaimah’s population, a lot of whom come from Southern India, as well as people travelling to Saudi Arabia to take part in the Haj pilgrimage,” he said. “If we can give them with the right price and with the right level of service, I think people will come and fly with us.” Currently, observers are focused on the firm’s recently appointed CEO,

Omar Jahameh, and his team who are finalising the details of the airline’s destination list. How long the new team will stay on board is a question already being asked by many as RAK Airways, in the space of just three years the company has already had six chief executive officers.

Sheikh Omar’s views on The UAE economy “We overestimated ourselves and we pushed ourselves a little bit too much. When the world economy went down, it awakened us to the fact that things will never continue to go up like a rocket. The recession is a good wake up call.”

Freshii over the years

The GCC monetary union “I think the UAE will join later on. I see it. The UAE’s backing out happened at a higher level, they saw that the UAE deserves to have the GCC central bank. And why not? The UAE is the second biggest economy in the GCC.” Money “Money is one of the most important things in life. But like a car, if you misuse it and drive it at over 200km per hour, then it will harm you and the people around you.”

Photo: Vikram Gawde

“Sometimes you have to take a prudent decision,” says Sheikh Omar candidly. “When we started, we were not lucky and we made some mistakes. We have to admit that the global situation didn’t help us. It was boom time and everything was not in control. The price of oil went up from $50 to $150 per barrel. Finding aircraft was difficult and finding people was also tough. They were very expensive. With bad luck and with the wrong people, we had to suspend the airline. “Hopefully this time, we will succeed,” he adds. “Sometimes when you have a disease, you have to cure it. You cannot stay sick. It may be

a wrong decision, but you have to treat it.” RAK Airways’ re-launch is set to take place at a time when the airline industry is consolidating. In August, Saudi Arabia-based Sama Airlines stopped operation after sustaining SAR1 billion ($266 million) in losses. In June, Bahrain Air announced that they would exit the low cost carrier market. Meanwhile, Gulf Air’s full-year loss rose 21 per cent to $502.9 million last year. But Sheikh Omar shrugs off the possibility of another failure. “The most dynamic country in this part of the world is the UAE. You should not

be afraid of competition if you are doing it right.” This same outlook applies to the UAE’s banking sector, which seems over-stocked. He says banks in the UAE are still profitable despite the existence of 24 national banks and 28 foreign banks competing to serve a population of just five million people. “We have thought about this. I, as the chairman of RAK Bank, can say that even though there are many banks, the UAE banking sector is growing even in recession,” says Sheikh Omar. Despite an increase in nonperforming loans, RAK Bank registered a 14 per cent increase in net income from Dhs636 million to Dhs726.1 million in 2009. The bank’s net profit for the first six months of this year rose 36.2 per cent to Dhs468.3 million, compared to Dhs343.81 million in the same period last year. “But one day, the market will consolidate itself,” says Sheikh Omar. “The weak will shrink and the strong will grow. I don’t like to say when. Let the market decide.” Sheikh Omar says that the UAE, specifically Dubai, is experiencing cash-flow problems due to debt issues and the only way to solve it is, to face up to the issues and deal with them head on. As a believer that jail works for debt defaulters, he says banks should also be penalised for irresponsible lending. “Of course, I am with this law,” he says. ‘To overcome wrongdoing you need to have stringent regulation for the debtor and the bank. The central bank should not allow banks to lend excessively. The central bank has to put in place very strict laws to avoid reaching this stage again.” Sheikh Omar’s philosophy for life is to learn from mistakes and look forward to a good future. “The danger with the media is they are with you in good times but when you have a problem, they push you to the sea to sink,” he says. “The media thinks Dubai is dead. But Dubai is still a surviving place. And we are thankful because Dubai’s developments have benefited other emirates such as ours.” ■ October 2010 gulfbusiness





he topic of refinancing is so heated it could explode, much like the region’s indebted firms. While the financing tool has been used for decades to take advantage of better interest rates and to consolidate other debts into one loan, in today’s tight times, negotiating the terms with lenders has become difficult, if not impossible. Unrated corporates from the six Gulf countries have over $67 billion of total debt outstanding, while the total for rated corporates is $145 billion, of which $28 billion, or nearly onefifth, will mature in 2012, according to Moody’s Investors Service. Dubai and Abu Dhabi-based entities account for the majority of this debt, with investment holding companies and

Payback time As the $200 billion wall of maturity looms, the clock is ticking for GCC firms to roll over their debts. But can they do it? asks KAREN REMO-LISTANA

real estate developers being the most exposed sectors. Dubai’s state-owned companies are estimated to be sitting on more than $100 billion of debt, with some $30 billion worth of loans and bonds from predominantly state-linked firms due to mature in 2011-2012. Dubai World, which leads the emirate’s debt-ridden enterprises, owes $39.9 billion, according to a document seen by Reuters, which is much higher than the widely slated debts of $26 billion. Dubai Holding – one of the three largest Dubai master-developers together with Nakheel and Emaar Properties – is creaking on liabilities of $12.8 billion, or about a third of the Dubai World restructuring. Dubai International Financial Centre Investments (DIFCI) is also in the hot seat as it struggles to rollover more than $3 billion of debts against a backdrop of weak earnings and

operating cash flow.Against this bleak background, Dubai’s property companies are slated to face significant refinancing risks. The emirate’s real estate market is likely to remain under pressure until at least 2012-2013, according to Fitch rating agency. “The sector is likely to see a period of stagnant growth at best and a double-dip contraction at worst,” says Bashar Al Natoor, director in Fitch’s EMEA Corporates team. “Refinancing is a global issue but it is a more intense issue, in Dubai. Real estate will remain under pressure until 2012 and 2013, so sourcing funds to refinance Dubai’s debts will be a challenge up until that time, at least.” Debt restructuring is also common in Kuwait where some investment companies, including those with banking licences and private equity firms, have defaulted on their financial October 2010 gulfbusiness



Credit events can cause significant periods of uncertainty. These are events that can dramatically shift the credit landscape. While it looks increasing unlikely, another large family conglomerate defaulting would throw spreads out again. Khalid Howladar senior credit officer, Moody’s. obligations. And their moves to raise capital met with far higher resistance than in the past. Global Investment House, the biggest investment bank in Kuwait, defaulted on most of its debt in January 2009. Four months later, its major Islamic rival, Investment Dar, which owns half of the British luxury carmaker Aston Martin, also missed a payment on $100 million of debt, becoming the first Arabian Gulf company to default on sukuk, or Islamic bonds. “Liquidity is a problem for every company here,” Naser Al Nafisi, general manager, Kuwait-based Al Joman Centre for Economic Consultancy, said. “The banks are not lending so a lot of companies cannot rollover their debts. There is hardly a chance to raise financing from the banks. A lot can’t make capital raising a success. So naturally, some ended up in severe financial troubles.”

2012 debt maturities by country/emirate Kuwait 2% $560m


14% $3.92bn

37% $10.36bn

Saudi Arabia 20% $5.6bn


Abu Dhabi 27% $7.56bn

Source: Moody’s

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But the scale of Kuwait’s debt restructuring problem is not comparable to Dubai’s, Jasem Al Saadoun, board chairman, Kuwaitbased Al Shall Company for Economic Consultants, said. “Refinancing is not an issue in Kuwait as much as it is in other Gulf states,” he said. “You cannot compare it to Dubai, not even to Bahrain and Oman. Kuwait’s liquidity is even higher than Saudi Arabia. “Liquidity speaking, I would put Qatar on the top, then Kuwait and Saudi. Bahrain and Oman as fourth and fifth then last is the UAE, unless Dubai solves its problem, which it is unlikely to do over the next two years at least,” Al Saadoun, added. Saudi, the GCC’s largest economy, has not been spared. To date, the legal battle between Ahmed Hamad Al-Gosaibi & Brothers Co (AHAB) against Maan Al Sanea of the Alkhobar-based. Saad Group is still ongoing. At least 13 UAE banks and seven foreign banks have exposures to these two groups amounting to $2.9 billion. The Dubai World standstill announcement, the Investment Dar default and the Saudi family feud problem may have occurred sporadically, but the effect is prolonged market uncertainty. “Credit events can cause significant periods of uncertainty,” Khalid Howladar senior credit officer, Moody’s Investors Service, said. “These are events that can dramatically shift the credit landscape. While it looks increasing unlikely, another large family conglomerate defaulting would throw spreads out again.” Many types of commercial lending

incorporate balloon payments at the point of final maturity, often, the intention or assumption is that the borrower take out a new loan to pay the existing lenders. In refinancing, the first thing to consider is if the bank itself has the financial resources. “One must first ask – do the banks have the funds?” Howladar said. “Many do but have become much more conservative and discerning. And even if new borrowers have a good business profile, they may still be reluctant to lend, as they also may still have need of their funds given some uncertainties that remain.” Fortunately, analysts agree that the UAE’s banks are strong enough to absorb foreseeable losses. Shuaa Capital’s stress test on a sample of eight UAE banks, which account for almost 70 per cent of FY09 banking system assets, suggests that, on average, the banking sector is

The global debt burden The world economy is about $61 trillion. Of this, the six Gulf countries make up $1.1 trillion and within that the UAE is $228 billion, according to Standard Chartered estimates. The region’s total debt is much less than its Western counterparts. Based on Standard Poor’s Study, Europe’s non-financial and financial debt maturing from the second half of 2010 through 2013 stands at $3 trillion. The US has $2.4 trillion corporate debts coming due through 2013. In comparison, the GCC has about $145 billion of total debt outstanding, of which only $28 billion will mature in 2012.

sufficiently capitalised to withst and significant deterioration in asset quality. But that leaves banks far from worry free. Although non-performing loans have been manageable, ensuing uncertainty in the market means they have to keep more capital to keep them safe. That in turn means less lending money and lower profitability. “Ultimately, what is good for the borrower is good for the bank,” Suresh Kumar, Emirates NBD Capital and Emirates Financial Services CEO, said. “Banks are willing to restructure, reschedule and re-price debts. The case depends on every borrower.” In periods of rising interest rates, however, the borrower may not have sufficient income to afford the interest rate on the new loan. So after finally getting his debt rescheduled, the borrower’s bigger task is to grow more aggressively in a shrinking economy. Another worry emerges – that the

2012 debt maturities by industry 7% $1.96bn Oil and gas

9% $2.52bn

1% $28m

24% $6.72bn

Conglomerate Investment holding company

Utility and energy

11% $3.08bn Infrastructure

12% $3.36bn Chemicals

20% $5.6bn

Real estate developer

16% $4.48bn


business may not fare better and, in the end, defaults anyhow. “When you carry out loan modifications on commercial loans, personal loans or mortgages, you don’t necessarily solve the problem,” Howladar said. “A loan modification works if a borrower has a short-term problem. But if the borrower’s status further deteriorates, then that will only delay the problem.” In the absence of lenders, a common way to repay the debt at maturity is a fire sales of assets at a low price, including productive assets. Dubai conglomerates, Dubai World and Dubai Holding, raised as much as $844 million from asset sales over the past year as the emirate seeks to reduce its debt pile. Asset sales, along with bond issues, are Dubai’s best option for boosting revenue because other measures will not generate enough cash on time to plug debt holes, analysts say. Other

October 2010 gulfbusiness



Restructuring is almost like a physician and a patient relationship. The doctor gives some good advice and prescription and, in most cases, some bitter pills. If it’s a malignant case then you cut off some parts or perform some surgery. Suresh Kumar, CEO, Emirates NBD Capital. prized assets that Dubai could sell in the future are the Jebel Ali Free Zone and Dubai World’s stakes in the Atlantis, The Palm hotel and casino operator MGM Resorts International. “Fire sale is a case-by-case matter,” Kumar said. “If it is a sale at a current price to prevent future losses, then that is a managed diverse divestment. Discount is a matter of opinion. Ultimately, the value of anything is

worth what a willing buyer is willing to pay. Are you better off keeping something which you are not using, which is not core or is not producing any revenues? Or, are you better off generating some cash flow by selling it instead of doing nothing?” Given this scenario, investment bankers are increasingly generating more revenues from remedial management or rendering services

for debt restructuring. “Some of them made mistakes so you need to work with them so that the impact on both of you is reduced,” Kumar said. “It’s almost like a physician and a patient relationship,” he added. “The doctor gives some good advice and good prescription and, in most cases, some bitter pills. If it’s a malignant case then you cut off some parts or perform some surgery.” ■

010 Qatar 2 l o ip il on M Centre Visit us ibition ha Exh 10 t Do ition a 7th, 20 er 25-2 37 b to c O C0 Stand

8th Ed


DE FE N D I NG WORLD S ECU RIT Y. * WWW.CASSIDIAN.COM October 2010 gulfbusiness



Medicine man

It’s been just over one year since Samer Majali was entrusted with turning round Gulf Air’s fortunes. ALICIA BULLER asks the CEO if he’s fixed the troubled Bahraini airline.

60 gulfbusiness October 2010

the region’s oldest carrier, is proving a little more difficult. “I was at Royal Jordanian for 30 years, and for the last eight of them I was CEO. It’s slightly different being new, having to establish yourself, your credibility and gain [staff] trust,” he says. “Gulf Air has had quite a few CEOs and each one with a new plan, so they’re probably a bit sick of it.” Armed with a mission to claw the airline back into profitability, with an eventual aim to privatise, Majali could be forgiven for thinking he’d seen it all before. But the challenges were many. “All of them were issues. The aeroplanes, the cost issues, the man power issues, the psychological issues – convincing them [stakeholders],” he says. “We have a commitment to a huge number of wide body aeroplanes, but we need less of them. We need smaller airplanes,” he continues. “But the

biggest challenge is the employees themselves and changing their mindset. We’ve designed a training programme for everyone focused on customer delivery, being positive with customers. And, underneath that, I’m trying to make them feel better about their company, because if they feel better about the company, they will actually do better. But that takes time.” Majali adds that he aims to get “19 people out of 20 customers saying they had a good experience with Gulf Air”. And what about that last one out of 20? “Well, they’ll say I had a good experience but...” he explains. Formerly jointly owned by the governments of Abu Dhabi, Oman, Qatar and Bahrain. Gulf Air celebrates its 60th birthday this year. Little by little, as the respective countries launched their own national carriers through the years, Gulf Air was left as a Bahraini owned airline.

Gulf Air has had quite a few CEOs and each one with a new plan, so the staff are probably a bit sick of it.

Photos: Farooq Salik


ome would question the sanity of a man who became boss of an airline that waved goodbye to four CEOs in three years. Others would question the wherewithal of a CEO stepping into a deeply entrenched government company that was losing around $1 million a day. Yet that’s exactly what Samer Majali did just over a year ago. In the flesh, however, the latest Gulf Air helmsman is in full command of his senses. He also possesses an easy charm: a useful, if not indispensable, attribute when attempting to turn round an airline that was exhibiting all the signs of a state-owned company that had lost its edge. So, a little over one year on, how’s it been? Majali pauses, smiles, and says – much as one would imagine those before him have – “yes, it’s been tough.” As former boss of Jordanian’s national carrier, Royal Jordanian, he turned $700 million debts into profits and privatisation in two years after becoming CEO in 2001. But Gulf Air,

October 2010 gulfbusiness



In a further blow, James Hogan, the CEO who brought the airline back into profit, left to manage rival Etihad Airways in 2006. Devastating competition from shiny new carriers with deep pockets is essentially what left Gulf Air bruised and in need of a new direction. That direction came in the better-late-than-never form of Majali. The Bahraini government is said to have headhunted the CEO following his success at Royal Jordanian, hoping he could sprinkle some of his magic on Gulf Air and ease the burden of the carrier on the public treasure chest. Majali has wasted no time with his plan of increasing morale, increasing regional routes, purchasing more narrow body planes and reducing headcount. “We’ve got a plan and it’s quite a radical plan. We can’t do what other carriers are doing, which is essentially buying toys…” he says. “Within three weeks after joining I managed to have a session with all of the management to talk about the company’s direction. The network, the fleet and how we want to present ourselves to our customers. “I’m trying to get company energised again after it went through a bad spell. This company has a great history but our reputation has taken a knock,” he adds. Media reports suggest that Majali has being doing a very good job indeed. In July, the head of Bahrain’s Economic Development Board, Sheikh Mohammed bin Essa alKhalifa, told reporters that Gulf Air could return to profitability within a year and be considered for flotation. Will the airline be privatised anytime soon? Majali turns a little thorny for the first time: “I can’t tell you: one, because I don’t know. And two, because it’s not my decision. The plan is for us to reach a break even situation by 2012, down from losses of just under $500 million in 2009.” How much has he saved the

company so far? “I don’t know – a lot,” he says. “It’s about making the operation less loss-making as time goes on. It’s also about making sure that we have the right plan for the future, so that even if we save money now, we don’t pay it again down the line. There’s the current situation which needs to be addressed, but we need to make sure we don’t shift our commitments onto somebody else’s lap so when I eventually leave the airline, someone is not saddled with what I am saddled with,” he says “My benchmark is that, financially speaking, we are not so much of a burden on the government, that we provide a lot of value to Bahrain with the minimum price tag… and whether I get fired or not,” he jokes. A major part of Majali’s plan to


$500 million 2012 Gulf Air losses in 2009

Gulf Air prospective break even date

save money stems from launching high yield routes to underserved destinations. The CEO has introduced 12 routes since he started, more than any other Gulf Air boss in such a short time frame, including destinations in Iraq, Egypt, Syria, Saudi Arabia and Yemen. Majali is also trying to hasten the deliveries of narrow body planes while delaying those of wide-body aircraft. Gulf Air currently has 24 Boeing 787s on order, as well as seven Airbus A320s and 20 Airbus A330s and the CEO is in ‘talks’ with the producers. “Getting smaller planes has been a hard sell, especially because everyone likes big aeroplanes. I’d love to be the boss of a company that has lots of big planes,” he says. “But it’s not the question of the size, it’s about the lightness of the plane – there’s no point putting an A380 on short route – you just lose money. Conversely, if there is a lot of demand on the route, the idea is to put on a big airplane. The plane in the end is a tool. And you choose the appropriate tool to do the job,” Majali says. “We will still be a global airline with global reach, in terms of long-range destinations. But we’re very critical in terms of where we fly to long-range – we are now making a major investment in the region. Part of the new strategy is that we want to give everyone the ability to fly to work and come back home the same evening. This is about creating a new market. It was the only way we thought we could compete with the larger more-funded carriers around us.” The CEO adds that a lot of capacity is coming online because of the mega orders that the Gulf carriers have made over the last five years. “Within five years, the Gulf fleets will double in size, that’s huge growth compared to the rest of the world. I think capacity will outstrip demand. It leaves us all in a very tough situation – prices will fall and it’s not healthy for the entire industry,” he says. October 2010 gulfbusiness


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“This is why we are trying not to compete head-to-head with the other airlines in the region for the same traffic. It will give us an advantage. “ As part of Majali’s new strategy, the carrier has also cut nearly 1,000 staff over the past year while Bahrainisation rates have increased to an impressive 52 per cent. “All of the redundancies have been voluntary. The idea is that the people who are reaching end of their service leave, as well as the not-so-good people leave – we want good people to stay. We are now making an assessment of the company itself and the current manpower, whether there are still surpluses or not. We will continue to reduce staff but more slowly as time goes on,” he says. Is Majali good at turning round companies? “Time will tell,” he says with a self-deprecating chuckle. The CEO is certainly a master of

New Gulf Air routes ●

Alepo, Syria ●

Isfahan, Iran

Basra, Baghdad, Najaf and Erbil, Iraq

Alexandria, Egypt

Medina, Saudi Arabia


Colombo, Sri Lanka ●

Addis Ababa, Ethiopia

turnarounds if his performance at Royal Jordanian is anything to go by. Now the pressure is on as Bahrain’s powers-that-be hope for a miracle similar to Majali’s previous job.

They say you’re only as good as your last project, but judging by the speed of Gulf Air’s progress in the last year, all signs point to a flying ‘yes’. ■

Success Breeds Success Our Vision The Global Advisory Board is comprised of a select team of entrepreneur’s and investors that have an international track record of success across multiple industry sectors. We have compared and identified the components of our individual business successes and have leveraged those abilities to create a mutually beneficial and sustainable methodology for growth and achievement. Our Future Today, The Global Advisory Board is increasing its reach as we expand into becoming the center of excellence in business and investment strategies for diverse industries and geographies. We are looking for like-minded individuals to add to our core group of professionals. Your Opportunity If you believe you are qualified and would like to be considered to join our team, please send an introductory email to the address below. Include a brief summary of your business and an outline of your personal achievements and why you believe you would be a valuable addition to our advisory board. Send your introductory e-mail to:

October 2010 gulfbusiness



Saudi’s hot

property As the kingdom’s mortgage law is ushered in, will it be enough to stabilise the country’s real estate industry? RYAN HARRISON reports. 66 gulfbusiness October 2010

getty images


he sheer size of Saudi Arabia’s population and the lack of access for buyers have been playing havoc with house prices for years, leaving a property market that’s fit to burst. The simple truth is that demand for properties is outstripping those for sale. And there is no mortgage market for a growing young population to get on the housing ladder. Saudi’s population has more than doubled since 1986 to about 25.5 million according to IMF data and is expected to reach 30 million by 2020. For now, economists say at best the future looks bleak and at worst the Saudi property sector is a ticking time bomb. But the highly anticipated and elusive mortgage law that’s been almost a decade in the making could chip away at these fears, say lawyers, setting the kingdom down a path to stability and maturity. So far, GCC investors, banks and potential homeowners have been dripfed a diet of information about what might be included in the legislation. But after years of delays, speculation is rampant and most involved in property investment are fed up. For instance, in January, Saudi central bank governor Muhammad alJasser said the kingdom would issue its first mortgage law “in the next few months”. That hasn’t happened. Some now say it’s more realistically going to be in the first quarter of 2011.




Scott Aitken, a partner at law firm Clyde & Co, and an expert in legal structuring advice to owners, operators and financiers of property, said without a rulebook the housing market can’t go forward. “In the absence of some regulatory regime on mortgages you’ve got three problems. One is the issue of licensing, so there are people providing home financing with no rules. Second, there’s no real registration process, which denies people confidence in the accountability of the system. And finally, it’s very difficult to enforce the payment of mortgages, which is where foreclosures come in. “All this means that to-date financing for the banks, homeowners and investors has been very expensive because it reflects the risk and uncertainty involved,” he added. Installing a central registry for mortgages would transform the market, giving investors an accurate reading on who’s buying what and the true cost of land. Meanwhile, it would help lenders keep precise records of their borrowers. Experts say in the event of a default this could be very handy indeed. For instance, there’s one thing

Early drafts of the mortgage law suggest that the government will tackle the thorny issue of terminating an owner’s right to a property because of default, otherwise known as foreclosure. Industry sources told Reuters that the delay in passing the law was based in part on the reluctance by authorities to accept the idea – common around the world but less acceptable in Islamic law – that defaulters could be evicted from their property. In the Western world, after foreclosure there is typically a forced sale of the property at public auction, with the proceeds being applied to the mortgage debt. If Saudi follows a similar model it could appease lenders that are nervous about jumping into the kingdom’s real estate market. John Hermann, a special counsel for real estate and capital markets at Baker Botts, said: “Banks will use the power of sale like in Dubai and take the cash to pay the debt. The government will likely act as an arbiter in the auction process.” The proposals allow lenders to enforce their mortgages by reporting debtors to a central authority and

Scott Aitken, partner, law firm Clyde & Co.

to know who your debtor is, but it should also be linked to the actual plot of land. This information is currently held by local notaries, who may not be aware of debtors’ details and who have little incentive to track down a bank’s clients.

Gulf pics

Riyadh cityscape, KSA.

68 gulfbusiness October 2010



forcing them to either repay their debt or vacate a property. Under current Saudi mortgage lending practices, a notary public records a title deed that the property is subject to a mortgage. But notary publics are known to refuse to record those rahns, or pledges of property to secure a debt, if they have any concerns over the lender. If reports are accurate, the new law would create a central authority to register the documents, reducing the role of the notary publics and making it easier to validate mortgages. After the mortgage law is passed Saudi can expect a fledging secondary real estate market to develop. Further down the line there is the opportunity for the securitization of mortgages, so they can be packaged and sold to financial markets. Most agree this would not take shape for at least five or 10 years down the road. Still, because much of the housing problem is rooted in the country’s fast-changing demography, there will be millions of people desperate to get on the property ladder. For instance, there’s been a big rise in the number of foreign workers. The country’s population grew almost 20 per cent to 27.14 million between 2004 and 2010, according to a recent census. In total, the country has a deficit of two million housing units, a figure that’s rising by some 150,000 a year,

15 10 5 0


2020 Source: Government census

according to independent economist Saud Jleadan. Should all these people be eligible for a mortgage? What about the lowincome earners? The global economy is still licking its wounds after a subprime mortgage crisis that morphed into a credit squeeze and eventually the worst financial disaster in memory. The Saudi government has therefore built into the draft law a mechanism that addresses concerns over subprime mortgages. A so-called “safety ratio” will prevent lenders from giving financing beyond the means of the consumer. As with most of the law though, specifics regarding the ratio have yet to be established.



ouse prices in Saudi Arabia are on the up and show no sign of stopping as a lack of affordable property stokes demand, research has found. Property prices in parts of Riyadh and Jeddah rose in the past year as a growing population drives demand for new homes, according to the Oxford Business Group. Prices rose by about three per cent in prime and emerging residential areas of Jeddah and Riyadh over the past 12

70 gulfbusiness October 2010

months, with demand for new homes expected to reach an estimated 1.5 million by 2015. The recovery comes after prices fell by as much as 20 per cent last year, separate research from CB Richard Ellis released in April showed. If the turnaround is the start of something big, then time is ticking for the government to act and get a handle on the situation before a Dubai-style bubble starts to form.

“The government is under huge pressure given that there’s massive housing demand,” said Mohammed Al-Ghamdi, a Saudi national and partner in the Riyadh office of law firm Fulbright & Jaworski. “When Saudi real estate matures then you’ll inevitably get into the sub-prime mortgage debate, but not yet. For the time being they should just concentrate on issuing this law. “The Saudi Arabian Monetary Agency will have been the one carefully watching the subprime crisis unfold because when this secondary mortgage market comes here they want to be ready and avoid the mistakes made by others,” AlGhamdi added. Although players in Saudi real estate may hope the mortgage law will be the silver bullet to blast away uncertainty and instability, and usher in a new era of confidence, it is unlikely. At least it’s unlikely overnight. The complex legal spider’s web that surrounds mortgages, including the Saudi courts, shariah boards and foreclosure rulings, will need time to adjust and fine-tune. Plus, most agree that passing the regulations doesn’t necessarily completely resolve the housing deficit, as demand for property continues to dwarf supply. There’s also the burning issue of affordability for mid and low-income Saudis. A number of large-scale projects are planned to help meet housing demand, including a 13 billion riyal (Dhs12.73 billion) urban regeneration project in the centre of Riyadh. The project is being developed by a consortium led by the Arriyadh Development Company. How much protection the law will provide banks and mortgage lenders over homeowners in this brave new world is yet to be seen. But as the Saudi population races ahead, the mortgage law will undoubtedly prove pivotal. For all involved, it can’t come fast enough.


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10 tech trends


From cloud computing to the ‘Arabisation’ of content, this month’s 30th anniversary GITEX event will showcase the latest IT solutions in the region. Gulf Business talks to the experts to find out what’s in for 2010.


72 gulfbusiness October 2010

CLOUD COMPUTING Cloud computing customers do not own any physical infrastructure. Rather, they rent internet bandwidth from a third-party provider, so avoiding capital expenditure on hardware, software and services by renting servers elsewhere. Consumption is usually billed on a utility (like electricity) or subscription (like a newspaper) basis with little or no upfront cost. The growth of this technology is phenomenal. BT Global Services expects that its global revenue from cloud computing will more than double from $17.4 billion in 2009 to $44.2 billion in 2013. “Price competition is everywhere, so more and more people would like to pay for communication like they pay their utility bills, and only pay for what they use,” says Olivier Campenon, EMEA president, BT.

As business activity migrates to the internet and cloud computing, the need to upgrade the security of the client’s experience and the clarification of rights to privacy increases in tandem. Although some argue that high profile incidents of identity theft and credit card hacks haven’t stopped the growth of the internet over the last 15 years, Benjamin Pring, research vice president at IT research firm, Gartner, says it is also hard to argue against the notion that more investment and more regulation is needed to ensure that the next wave of migration to cloud computing has positive outcomes. “The breaches of security and privacy that occur have enormous ramifications – financially and in terms of buyer confidence,” Pring says.


Jyoti Lalchandani



Virtualisation is the creation of a virtual (rather than actual) version of something, such as an operating system, a server, a storage devide or network resources. In the GCC, only 10 per cent of servers are currently used in a virtualised environment, but virtualisation is increasing at a rate of 8.8 per cent annually, says Jyoti Lalchandani, vice president and regional managing director, IT market research firm, IDC Middle East, Turkey and Africa. This is because it brings cost reductions through lower energy consumption and even takes up less floor space. “The region has felt the impact of the global slowdown and this has translated directly into stricter cost control of technology resources,” he says. “Virtualisation addresses these and, in addition, is the foundation for the deployment of cloud computing applications.”

To create the experience of depth, a 3D TV will display two separate but overlapping images of the same scene simultaneously and at slightly different angles, Marco Vocale, senior manager of corporate marketing, Samsung, explains. The technology is so in demand in this region that Nielsen, a marketing research firm, says Middle Eastern consumers are twice as likely to buy 3D TVs as consumers in the rest of the world. And if forecasts by iSuppli, a technology market research company, come true, then that translates to a huge chunk of the shipment pipeline. iSuppli forecasts that global 3D TV shipments will reach 4.2 million by end of this year, 27.4 million units in 2012 and 78.1 million units in 2015 ¬- a compound annual growth rate of 80.2 per cent from 2010.

Marco Vocale


TABLET COMPUTERS The relentless hype around consumer tablet laptops has aroused interest among business customers. Much of this buzz has been generated by Apple’s iPad, with its thousands of apps and slick marketing. Samsung Electronics has also recently unveiled the Galaxy Tab, a new tablet PC powered by the Android 2.2 operating system. However, the weaknesses of iPads and Android-powered tablets remain largely the same as always: security, manageability and compatibility with key business applications have been patchy at best. So after the hype of the iPad’s launch in the first half of 2010, Gitex Dubai will be a chance for businesses in the Gulf to scrutinise the new tablet laptop from Cisco, which has announced the Cius (pronounced ‘see us’), a seven-inch tablet for business use.

ANALYTICS The 2001 real-life-story-turnedmovie A Beautiful Mind featured scenes where John Forbes Nash (played by Russell Crowe) tries to decipher various code mentally. Today, this task can be performed by computer software called analytics, which processes information, looks for patterns and spots codes. This technology is slated to be increasingly important in industrial sectors like telecommunications, retail, wholesale, banking and oil and gas which are rapidly expanding within the various GCC countries, says Lalchandani. “Business intelligence, analytics, pattern recognition, and smart solutions are the new vocabulary of IT’s value,” Pring adds. “New ITrelated initiatives that don’t fit within this framework will be increasingly less attractive to businesses.”

Benjamin Pring

October 2010 gulfbusiness



Untapped potential, the expansion of 3G networks and increasing use of smartphones are leading to a dramatic rise in demand for mobile applications and value added services in the Middle East, Paul Gullett, vice president, Europe, Middle East and Africa of NComputing, a virtual desktop company. “Mobile applications are one of the fastest growing areas of the telecommunication industry and the Middle East represents a major growth market,” he said. According to IDC, the worldwide smartphone market grew by more than 56 per cent in the first quarter of 2010.



DATA CENTRES International connectivity between the GCC, the region and the rest of the world has increased exponentially over the last few years and continues to develop at a fast pace. This has encouraged the establishment of private and “white-box” data centres - a large scale collection of servers - across the region as enterprises realise the need for reliable and legally compliant centres to service GCC or regional operations. “The GCC by nature has a volatile profile, so many companies are ensuring availability while insuring the data by either establishing their own in-house centres or making use of regional facilities,” Lalchandani says.

An often overlooked area in the GCC is the ‘Arabisation’ of services ranging from localisation of international enterprise resource planning functionality, to optimising internet search engines and creating Arabic focused online applications and content. In May, domain names in Arabic for Egypt, Saudi Arabia and the UAE were added to the internet’s master directories – the first major change to the internet domain name system since its creation in the 1980s.“The GCC region is expected to take a strong leadership position in the creation of Arab-centric application services due to its central geographic and cultural position within the Arab world,” Lalchandani says.


Paul Gullett

Corporations around the world are thinking more and more about how to go green. South Korea’s LG Group for one has said it will invest $18 billion to develop environmentally-friendly businesses and reduce emissions by 40 per cent against 2009 levels. However, green IT is not a topic of

74 gulfbusiness October 2010



much interest or debate across the UAE and the Gulf region, Gartner says. “From an IT standpoint, organisations have not shown an interest in green IT projects and, so far, providers are not offering them to clients.” Gartner believes these initiatives will have little or no traction in the years to come across this region.


3D Sony launches

compatible products range

Technology pioneer offers consumers state-of-the-art experience in 3D movies, music, sport and PlayStation games.



12:46:31 PM

Sony Gulf FZE has launched its complete range of 3D-enabled products, offering consumers an immersive experience in 3D movies, music, sport and PlayStation games. Sony’s 3D product range includes the BRAVIA LX900 and BRAVIA HX800, the new Full HD 3D TVs that build on the BRAVIA reputation for picture quality, and the new 3D-enabled Blu-ray player BDP-S470, as well as the 3D compatible Home Theatre Systems and channel sound bars including BDV-IZ1000, BDV-E970, HT-CT350 and HT-CT150 that have been specially designed to align with the 3D BRAVIA LED HDTVs.

October 2010 gulfbusiness



To complement this extensive 3D portfolio, Sony Gulf will also be rolling out a free firmware update for PlayStation 3 consoles, making the hardware 3D compatible to enable 3D gaming. In addition, the company already offers the Alpha NEX-3 and NEX-5 digital cameras that can take 3D panoramic shots. With the new range, Sony now offers consumers the most diverse line of 3D compatible home entertainment products including BRAVIA LED HDTVs, Blu-ray Disc players and home theatre systems, the PlayStation 3 and Alpha digital still cameras with interchangeable lenses. “3D technology in home entertainment is an immersive phenomenon. Unlike the 3D entertainment experiences of the past, which were characterised by objects coming towards the viewer, the emphasis has now shifted to adding an element of depth. Said Osamu Miura, managing director, Sony Gulf “Sony’s 3D world is about 3D_Mag_175x18_Guy2& 9/28/10 12:47:45 PM subtlety and detail, to totally engage the viewer”.

78 gulfbusiness October 2010

With its expertise in 3D from lens to the living room, Sony has assumed a leadership role in the research and development of the technology to drive its growth at every level – from supporting creators of content by providing them with custommade professional equipment to influencing cable network operators into adopting systems that facilitate the relay of 3D content. “Due to our involvement in the development of original content and our efforts over the years to create ‘Good 3D’ content captured on Sony’s professional equipment, we believe this will translate into a superior and seamless visual experience on Sony’s entire range of 3D compatible products,” added Miura. A monolithic design theme has been extended by Sony across its entire suite of home entertainment products launched in 2010. Apart from the new BRAVIA TVs, Sony’s Blu-ray Disc players and Home Cinema systems are all designed to create one seamless home entertainment experience, even in terms of design. Sony’s entire array of 3D products is currently available at all Jumbo Electronics showrooms in the UAE and other major retail electronics outlets across the region.

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Play time

Switch bowling centre, pool hall.

Despite the credit crunch, regional consumers still put recreation at the top of their agenda, writes KAREN REMO-LISTANA.


ld-timers in the business world have traditionally set their eyes on the three Fs – food, fashion and fun. Time and again, these sunshine industries have enjoyed stability, even if the wider economy has grown awry. But because of the sheer force of the current recession, it seems reasonable to ask whether these sectors still remain strong. In fact, it turns out that ‘fun’ is still high on our agenda. Entertainment experts told Gulf Business that while people from every walk of life have been affected by the financial turmoil, the fact remains that we all need a break from time to time. According to the recent MasterCard

Worldwide Survey on consumer purchasing priorities, 58 per cent of consumers in the Middle East and the Levant plan to maintain the same level of discretionary or recreation spending as per the last six months. At the top of the list is dining and entertainment. “Entertainment is a different kind of business,” says Ahmed El Komy, president, of bowling alley operators Switch Middle East. ”A lot of businesses get hurt in a recession, while in entertainment you usually do well. “It’s not greatly affected by the downturn of the economy. People will always want to do something to feel better about themselves. People may temporarily stop spending thousand of dirhams on a new TV, but they will not stop spending money to watch a movie or play bowling or spend some time with their family.”

Switch recently inaugurated its first branded bowling centre which features Pininfarina-designed equipment in Dubai. Pininfarina is an Italian car design firm which has been employed by a wide variety of high-end automobile manufacturers, including Ferrari, Maserati, Rolls-Royce, Cadillac, Jaguar, Volvo, Alfa Romeo and Lancia. “If you look around the centre you will see that the black and red touch of Ferrari is visible in every design,” El Komy says. The $6.8 million (Dhs25 million) investment – which comprises 12 bowling lanes, private karaoke rooms, billiard area, coffee shop and shisha garden – is the first in a series of 10 branded centres to open in the region. El Komy says another $30 million is earmarked for mid-term expansions. “The next one will be in Cairo next October 2010 gulfbusiness



Arif Amiri, CEO, Emaar Retail.

Ahmed El Komy, president, Switch Middle East.

year and then Abu Dhabi right after,” he says. “We are looking at opening 10 centres around the Middle East. We are also opening in Beirut, Libya and Riyadh. We are currently searching for the right location.” Currently, the Middle East amusements industry is estimated at $2 billion, with up to $500 million being re-invested in the region annually. Large scale theme park developments may have been shelved due to the current economic situation, but the market is still showing growth, with family entertainment centres (FECs) proving viable business opportunities for developments and industry suppliers. There are about 70 theme parks in the GCC and about 100 FECs, with new developments such as Kidzania at Dubai Mall and iFly Dubai at Mirdif City centre showcasing new product innovations. Arif Amiri, Emaar Retail CEO, says Dubai’s leisure sector gains impetus from traditional growth drivers, especially tourism. “In addition to the growth in population, which adds to the demand for the leisure sector, Dubai has witnessed robust tourism,” he says. The entertainment arm of property developer Emaar is the face behind SEGA Republic, the first and largest of its kind indoor theme park in the region; and KidZania, the children’s edutainment centre in Dubai Mall. Emaar Retail has also strengthened

the operations of Dubai Aquarium & Underwater Zoo and the Olympicsized Dubai Ice Rink. Amid a shrinking economy, it also opened Reel Cinemas, the 22-screen megaplex in The Dubai Mall and more recently, the six-screen premium boutique Reel Cinemas in Dubai Marina Mall. Amiri says expansion plans are in the pipeline in “key geographic markets across the Middle East and North Africa region”. “Our expansion will be in tandem with the geographic growth of Emaar Properties,” he adds. “We are confident of recording sustained, robust performance of our leisure components as well as further expanding our retail operations in 2011.” MAF Leisure, which operates across the GCC, is also “constantly

82 gulfbusiness October 2010

Kidzania children’s amusement park, Emaar Retail.

undertaking a policy of aggressive expansion,” says Arnaud Palu, chief operating officer of the entertainment unit of Majid Al Futtaim. “Egypt is a particularly important emerging market for us, where we see a lot of potential and will be focusing our expansion efforts.” Palu said Magic Planet has been a staple favourite with families while Ski Dubai has become a well established landmark within Dubai. Playnation, he says, is steadily gaining ground as a popular leisure destination. One of the plus factors in entertainment is it operates in a cashgenerating business. “In this kind of business, we don’t have warehousing so we don’t have to face issues of stock inventories,” says El Komy. “We also work on a cash-basis business. Nobody walks through the door and pays post-dated cheques.” Palu says return on investment (ROI) in the leisure industry typically takes longer than in other industries. However, once a leisure operation reaches maturity, the returns are consistent and usually reliable. “Thus it is important to strike a delicate balance between investment and time of return,” he says. In the case of the new Switch Bowling centre, El Komy says the project will pay back over the next two to three years. “People really don’t like to invest in entertainment. Most people would go for real estate investments,” he says. “In entertainment, the ROIs are magnificent provided you have a partner who has the ability to manage the business right. Management is the key.” Overall, the presence of a significant number of retail complexes in the UAE is indicative of the thriving economy, says Ehsan Khoman, economist at Dubai Chamber of Commerce and Industry (DCCI), says. As the UAE recovers from the effects of the global economic downturn, a pick-up in consumption levels, an easing in credit availability and an expected influx of tourists in in 2011. will encourage cash flow within the entertainment sector. ■

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builds bridges to the Arab world

As Turkey’s economic clout continues to grow, the country is strengthening trade and investment ties with the Middle East, ROBERT BAILEY reports.

Turkish Tourism Authority

Topkapi Palace, Istanbul.


nkara is striving to build bridges to the Arab world in an effort to stimulate investment and assert Turkey’s credentials as a regional power. Ahmet Davutoglu, who became Turkey’s Foreign Minister in May 2009 has been strenuously pursuing a policy of “zero problems” with the country’s neighbours holding talks, starting dialogues and lifting visa restrictions. The bold strategy seeks to reclaim Turkey’s regional influence not through political hegemony over former Ottoman territories, but instead leading an informal grouping of Muslim countries bound to Turkey by

closer bilateral ties. By amplifying the voice of the region’s Muslims to the rest of the world, observers see Turkey establishing itself as a power centre in its own right. The policy has already seen enhanced relations with neighbours such as Syria and Iraq, promoted by the offer of greater economic integration with countries with which Turkey has historical and cultural affinities. Northern Iraq, for example, is home to the Turkomen people, a Turkic-speaking group numbering between 500,000 and one million. In February 2010, the railway linking Turkey, Syria and Iraq was re-opened and work continues on a fast rail link between Aleppo in northern Syria and

Gaziantep in southeast Turkey. There are also plans to open a second border crossing between Turkey and Iraq. Turkey is the major supplier of processed foods and consumer goods to northern Iraq, as well as a major source of foreign investment in the region. In June this year, at a meeting of the Turkish-Arab Cooperation Forum in Istanbul, plans for a free-trade zone encompassing Turkey, Jordan, Syria and Lebanon were announced. The zone is designed to form the foundations for what would eventually become a single political and economic bloc consisting of the Muslim countries of the Middle East and North Africa. October 2010 gulfbusiness




Industrial powerhouse

Turkish Tourism Authority

Turkey, already the world’s 16th largest economy, is predicted to be one of the tenth largest economies in the world by 2050. Potential lies not just in the Turkish domestic market, but as an important springboard to export to Central Asian, Middle Eastern and North African markets. With a population approaching 76 million, Turkey is the Near East’s workshop for cars, trucks, TV sets, and other domestic goods, as well as textiles and food. The OECD expects Turkey’s economy to grow by 6.8 per cent in 2010, the fastest rate among its members.

Istanbul, Kanlica.

Although the EU still accounts for more than 40 per cent of Turkey’s foreign trade, its economic ties with Muslim countries have been growing at a fast rate. In his book Strategic Depth published in 2001, Davutoglu argued that Turkey’s long standing proWestern strategic alignment had lost sight of the countries in its immediate neighbourhood, especially the majorityMuslim countries of the Middle East. Last year, Turkey set up a number of bilateral “High Level Strategic Cooperation Councils” with Iraq, Syria,

86 gulfbusiness October 2010

Jordan and Lebanon and drafted a provisional agreement to establish another with Libya. The councils aim to provide an institutional framework in which ministers from each country meet at least once a year to discuss ways of improving bi-lateral co-operation. Tangible progress has been achieved. Last December, visa requirements

Turkey is also a leading shipbuilder, ranking as the fourth largest builder after China, South Korea and Japan. The country’s construction and contracting sector also ranks high in the global order with some 22 companies listed as top international contractors. The US’ Engineering News-Record ranks Turkey’s construction sector the world’s third largest after the US and China. Turkey is the seventh largest automotive producer in Europe and the 15th largest worldwide. The industry, combined with its components sectors, exported some $22 billion of products in 2008. Service industries are growing in importance. The country has expanding high technology industries including computer software and is also the base for a military aerospace industry producing fighter aircraft and helicopters. The Turkish retail sector is the seventh largest in Europe and the tenth largest in the world, while tourism has become a significant foreign currency earner and employer in the last decade.

were abolished for travel between Turkey and Syria, Lebanon, Jordan, Qatar and Libya with the aim of increasing trade and tourism. Turkey has also upgraded its commercial relationships with Syria and Iraq. Although the EU still accounts for more than 40 per cent of Turkey’s foreign trade, its economic ties with Muslim countries have been growing at a fast rate. The global recession, which hit markets in the EU harder than those in the Middle East, has accelerated the trend. In 2009, Turkey’s total exports to the EU contracted by 22.6 per cent, while Turkish exports to Muslim countries rose by 9.9 per cent. As a result, the Turkish government is increasing its focus on Arabia by emphasising Turkey’s extensive investment opportunities in areas such as construction, real estate, agriculture and financial services, as well as IT and retail. According to HSBC economist, Simon Williams, the Gulf has capital and Turkey has capital needs. They are close geographically, there are cultural and religious similarities and Turkey is a good economic story right now.” Compared to Europe, Turkey has emerged from recession quicker. While Western banks were being bailed out by their governments, Turkey’s own financial sector had already been overhauled after a near financial collapse in 2001. Reforms curbed inflation and forced banks to bolster their balance sheets. The increased presence of foreign banks has also spurred locals to improve their performance. Turkey has also welcomed investment and stepped up efforts to become a real player in the global economy. Turkey’s emergence from global recession is underpinned by a large domestic market that offers some insulation against the weakness still seen in euro zone countries. After contracting by 4.75 per cent in 2009, real growth in gross domestic production is expected to expand by around 6.25 per cent in 2010.

88 gulfbusiness October 2010

Turkish Tourism Authority


Istanbul’s Grand Bazaar.

Prime Minister, Recep Tayyip Erdogan, has pushed largely probusiness policies slashing corporate taxes, tightening intellectual property protections and setting up an investment promotion agency. The result has been growing multinational interest in Turkey. Foreign direct investment surged

Real estate entices investors As long as Turkey’s economy maintains its forward trajectory there are likely to be major investment opportunities in new construction projects, not least real estate. Steven Worboys, MD of Experience International, says that Istanbul is proving one of the most successful property investment opportunities this year with clients capitalising on Istanbul’s significant housing shortage. A surging tourism sector is also seeing expanding opportunities. Turkey registered a rise in tourism in 2009 with a total of 27 million visitors an increase of 2.8 per cent compared to 2008. There are plans to increase the number of Arab visitors by promoting health and medical tourism. Many foreigners have bought homes in Turkey in recent years. More than $10 billion is estimated to have been spent by Germans, Scandinavians, Dutch, British, Greek and other nationalities on holiday properties along the coast in places such as Alanya, Fethiya, Didim, Bodrum, Kusadasi. Planned infrastructure developments around Dalaman on the Mediterranean coastline, including the expansion of Dalaman airport and the development of marinas and golf courses are increasing the attraction of the area. Istanbul and Antalya are also seeing an increase in property purchases by foreign buyers.

from $1.1 billion in 2001 to $22 billion in 2007, before dropping back to $18 billion in 2008. Even though the figure fell to $9 billion in 2009, Turkey is expected to bounce back strongly. “We put Turkey in the same category as Brazil, Russia, India, China and South Africa,” says Ali Faramawy, a vice president of Microsoft International in Istanbul. Apart from industrial strength and a growing skills base, Turkey’s trump card is its location. The country is close to Europe but also to the former Soviet Union and the Middle East, all areas with high long-term growth potential. Foreign investors increasingly see Turkey as a success story in the making. Since the acquisition of a 55 per cent holding in Turk Telecom by Dubai-based Oger Telekom for $6.5 billion in 2004, there has been a steady rise in Gulf-based investments into Turkey. Through its UK property arm, St Martin’s, Kuwait Investment Authority has bought a $750 million majority stake in Istanbul’s Cevahir Business Centre. Kuwait Finance House has set up Kuveyt Turk to pursue Islamic banking. Kuwait Alshaya Group is reportedly planning a $100 millionworth of investments in Turkey. Kuwait International Leasing Investment has founded Halic Leasing with $5 million capital and is looking to operate as an investment bank in Turkey. A private equity fund managed by NBK Capital, a unit of National Bank of Kuwait, has bought a 30 per cent interest in the Dunyagoz eye hospital group. The International Investor, a Kuwait investment group, has a $24 million 75 per cent share in Docar a Turkish car rental group. Kuwait

US relations cool Investment Group has bought Adabank. The UAE’s Abraaj Capital is a partner in the Acibadem Hospital and Numarine Yacht company while Emaar Properties has plans for major investments focusing on healthcare, shopping malls, hotels and real estate. Dubai Islamic Bank has opened a representative office in Turkey. Saudi Arabia’s National Commercial Bank has acquired Turkiye Finans. The Bahrain-headquartered Arab Banking Group has also opened a representative officer in Turkey with plans to acquire a local bank. The investments, though are still relatively minor relative to the immense scale of Turkish investment potential. The government has shown it is business friendly and sees this as the firmest foundation for building bridges with the Middle East and other regional partners. ■

Tayyip Erdogan, Turkey prime minister. Turkey’s Prime Minister Erdogan may be the new hero on the Arab street, but many in Washington DC view him increasingly as a populist, leaning to Islamist instincts and abandoning the West. Ankara’s relations with Israel, once close, have worsened as a result of Israeli commandoes seizing a Turkish ship carrying humanitarian supplies

to Gaza that resulted in nine Turkish citizens being killed. The falling out has sparked speculation about a drift away from the West by Turkey’s ruling Justice and Development Party. In 2003, Turkey declined to allow its Incirlik airbase to be used as a springboard for an invasion into the north of Iraq as the US prepared to topple Saddam Hussein. With Iran, Turkey overcame US reluctance earlier this year to its acting as mediator, along with Brazil, on a nuclear fuel swap agreement. When the brokered deal was ignored, Ankara defied Washington by voting no rather than simply abstaining in the UN Security Council over sanctions on Tehran. In spite of Turkey flexing its muscles in the international arena and making it clear it is not to be taken for granted in the region, it remains an active member of NATO with strong political, military and commercial links to both the US and Europe.

October 2010 gulfbusiness


Let’s do business

Turkey’s Deputy Undersecretary for Economic Affairs tells Gulf Business how he works tirelessly to ensure the right incentives are in place to promote trade with the UAE.

90 gulfbusiness October 2010



peaking from the Ministry of Foreign Affairs of the Republic of Turkey, Hakki Akil, Deputy Undersecretary for Economic Affairs, and former Ambassador to the UAE, said that the trade volume between the UAE and Turkey has increased from $817 million in 2003 to $8.7 billion in 2008. However, he added: “The level of trade between our two countries was realised as $3.5 billion in 2009, which is far behind the figure of 2008. This is because of the global financial crisis and fluctuations in oil prices. “There is still great potential for trade and investment between Turkey and the UAE. As the global economy recovers from the crisis, I hope that the bilateral trade between the two countries will start growing again.” Akil adds that he expects trade volume to soon reach $10 billion. The UAE is an important and reliable economic partner for Turkey, offering great trade and investment opportunities for foreign companies; and with its geographical location it serves as a bridge between the Middle Eastern, European and emerging Asian markets, while Turkey has become the gateway to Europe for the UAE. Turkey and the UAE have the potential to further strengthen and diversify their economic and commercial relations in sectors such as construction, tourism, food, energy and agriculture. The key areas of bilateral investments are construction, tourism, energy and food, along with the distribution of oil, natural gas, electricity and water. Akil added: “We observe an increase in foreign direct investments in tourism, ship building and building materials. “The structural economic reforms have paved the way to increase the role of the private sector in the Turkish economy and to enhance the efficiency and resiliency of the financial sector.” With its vast funds and experience, in recent years, the UAE has directed

its interest to investment in foreign markets. The recent privatisation activities in Turkey have attracted UAE business people to invest in real estate, seaports and also capital markets. “We have changed the whole legal system in a liberal manner so that foreign investors can come and invest in Turkey without any hesitation,” said Akil. Turkey attracted foreign capital worth more than $75 billion between 2003 and 2009. Today, Turkey can offer notable opportunities for the UAE firms due to its attractive incentive

Currently, there are 21 Turkish companies, 27 business representatives and 244 trademarks officially operating in the UAE. Aided by the Turkish-United Arab Emirates Business Council, which was established in 2000 as a platform for evaluating business and investment opportunities, these companies are mostly active in the sectors of construction, food, jewellery, textile, tourism and finance. The UAE, with an open economic development strategy and positive macroeconomic figures, constitutes a secure investment environment.

The recent privatisation activities in Turkey have attracted UAE business people to invest in real estate, seaports and capital markets. measures for foreign investors, along with its Customs Union relationship with the European countries. The geographical location is another advantage, with Turkey situated in the centre of a region that hosts onequarter of the world’s population.


$817m $8.7bn $75bn

UAE and Turkey trade 2003

UAE and Turkey trade 2008

Total FDI in Turkey 2003 – 2009

Akil said: “The structural reforms undertaken by the Emirates to attract more FDIs have made the UAE a centre of attraction for investments in several sectors. We invite business groups from the UAE to continue to explore investment opportunities in Turkey. We believe the completion of the legal basis of our economic relations will intensify the investments.” At the political level, Turkey has always promoted economic cooperation between the Turkish and UAE business communities. “We are always ready to facilitate the access firms from the UAE to the Turkish market. Our Investment Promotion Agency and business associations are at the disposal of UAE firms whenever any assistance is needed,” said Akil. He added: “I am glad to witness that there exists political willingness on both sides to further enhance the overall relations between our countries. We believe that we have to exert every possible effort on a longterm vision to diversify and deepen our bilateral trade and economic relations in the future.” ■ October 2010 gulfbusiness


Banking on bilateral trade H端lya Kefeli, executive vice president and head of international banking for Akbank, discusses the current levels of bilateral trade between the UAE and Turkey.

How has the level of bilateral trade changed in recent years? While Western markets remain largely focused on fiscal and monetary policies to support recovery, many emerging market countries have already completed the necessary reforms to recover from the crisis, and, in any case, remained less exposed to financial services than the West. They have successfully navigated the financial crisis thanks to more resilient financial systems, adaptive business practices by corporates and focusing on trade with countries outside the West. To further safeguard against waning demand, many emerging countries have turned to domestic and regional markets. As part of multi-dimensional policy currently

92 gulfbusiness October 2010

implemented, Turkey is giving increasing importance to its relationship with the Middle East. The trade volume to the UAE grew rapidly before the global crisis, especially in construction materials and steel sectors. However, credit and market conditions in real estate temporarily slowed down the bilateral trade with Turkey in 2009.

What is the current value of bilateral trade through your bank and how is it broken down? We have around 10 per cent market share in GCC trade finance but we aim to increase it to 15-16 per cent in the coming three years in line with our new policy.

What are the key areas of investment? The main areas of strategic collaboration and investment between UAE and Turkish banks include the following instruments: syndication loans; Islamic finance; remittances; asset management; private equity and markets, Annual GDP growth for Turkey in 2010 is expected to be around seven per cent. This growth rate, if realised, will reflect positively on investment and collaboration.

What attracts Turks to the UAE? Pre-crisis investments initiated in Dubai and Abu Dhabi provided new employment opportunities in construction, finance and service sectors, sparking a growing demand for Turkish employees with both experience and expertise. There are 6,000 Turkish employees in the UAE, the majority of whom are white collar workers. Vast

employment opportunities and a dynamic social life attract Turks who choose the UAE as a working place.

What attracts Emiratis to Turkey? How has the ongoing privatisation increased investment? Food, energy, health care and real estate sectors offer vast investment opportunities. Turkey will also launch new privatisation deals, especially in energy/transport sectors and these deals will attract considerable investor interest from the region. Turkey’s exports to UAE ($ million)

Turkey’s imports from UAE ($ million)

Share of UAE in Turkey’s total foreign trade per cent




1.30 %




2.50 %




1.40 %



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Turkey’s exports look good The cosmetics sector in Turkey is flourishing as both a domestic and export business, thanks to the assistance of its trade association, IKMIB The Istanbul Chemicals and Chemical Products Exporters’ Association (IKMIB) was established in 1991. Today it has 7,786 members and is a semi governmental and non profit trade association, affiliated to the Prime Ministry Undersecretariat for Foreign Trade. The main goals of the assocation are to assist member companies in their export activities, increase the export volume of the Turkish Chemicals and Chemical Products sector and its global market share. As of 2009, IKMIB represented about 26 per cent of exports from the General Secretariat of Istanbul Mineral and Metals Exporters’ Association (IMMIB) and eight per cent of Turkey’s total exports. The focus of exports is on the cosmetics industry. The size of cosmetics sector in Turkey is about US$2.2 billion. Today, the Turkish cosmetics sector provides attractive opportunities in terms of quality, production capacity and varieties through the increasing domestic and foreign demand. About 1,400 companies operate in the Turkish cosmetics and personal care products industry and 14,000 people are employed in total. The Turkish cosmetics and personal care products market grows on average 10-15 per cent per year. The main products produced by Turkish cosmetics sector are soaps, bathroom and shower products, shaving products, depilatories, lip and eye make-up products, deodorants and antiperspirants, eau de cologne and baby care products.

94 gulfbusiness October 2010

About 70-80 percent of theTurkish cosmetics sector market consists of foreign capital multinational companies. Most of the international companies operate in production and marketing activities together with their local partners. The local producers in the Turkish cosmetics sector are mainly family company SMEs. In recent years, there have been a significant increase in the number of new Turkish companies which are becoming established brands. Turkish cosmetics and personal care products exports have increased exponentially in recent years. The cosmetics and personal care products exports figure, which was $400 million in 2004, rose to


US$2.2 billion

US$795 million


Size of Turkey’s cosmetics sector Value of Turkish cosmetics exports in 2009 Number of companies in Turkish cosmetics industry

$795 million in 2009, achieving an increase of 99 per cent over five years. In the items making up the Turkish cosmetics and personal care products exports, personal care products had the largest share in 2009 with 69 per cent portion of $553 million.

Turkish cosmetics and personal care products are exported to 170 countries all over the world. The top 10 countries with the highest figures of exportation from Turkey in 2009, in descending order, are Iraq, Russian Federation, Ukraine, Germany, Libya, Azerbaijan, Iran, Romania, Poland and Bulgaria. According to 2009 Turkish cosmetics sector export figures, Iraq received the most products with US$119 million and 15 per cent share in total exports respectively. In 2013, the world cosmetics market size is expected to grow to $200 billion. Cosmetics and personal care products markets are expected to grow as products are used for protection rather than treatment. The Turkish cosmetics sector aims to grow exports to $1.635 million by 2012. In Turkey, the improvement in economy and the increase in purchasing power are expected to contribute to the consumption of cosmetics. As cosmetics products are considered requirements for a healthy and happy life, rather than being associated with the concept of luxury, consumption will increase at the same rate.

October 2010 gulfbusiness



Designs for life Cities that are designed for happy living are the destinations that attract the most business and have the most longevity, writes LAURA COLLACOTT.


here’s a new focus in urban planning – liveability, which is possibly about to usurp sustainability as the buzz-word of the moment. It implies a city in which the well-being of inhabitants is foremost and which aims, through ecological and social sustainability, to strengthen community, improve health and increase civic engagement. Architecture ought not to sprawl, but lend itself to healthy human interaction and transportation ought to make it easy to commute via pedestrian and bike networks and public transportation. It is a city that provides a safe environment that is attractive to live, work and do business in. Lofty aims. Three key companies – Mercer, the Economist and Monocle – already publish listings of the world’s most liveable cities, largely based on the same criteria that human geographers use to gauge quality of life internationally. What makes a city liveable? It depends who you ask. The standard factors apply – crime, political stability, economic opportunity etc – but each of the rankings uses a different scoring system. The Economist’s team prioritise healthcare and education, aiming to “quantify the challenges that might be presented to an individual’s lifestyle”; Monocle factors in lifestyle considerations like restaurants and local entertainment as well as emergency service response times; Mercer is more businessminded, giving weight to economic

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factors such as currency exchange, the availability of consumer goods and public transport. Jon Copestake, editor of the Economist’s Global Liveability servey says: “The survey provides a broad indicator of where a city figeres on the global stage; it is not designed to be granular enough to enact or dictate policy, nor would that be our intention. [It] may point to areas that could improve, but how those improvements could be made, or what the specific factors that need addressing will vary substantially.” Why does liveability matter? Is it idealistic? International businesses care because these rankings are used to determine the hardship and benefits packages that their overseas expatriates are entitled to; the higher a city is placed on the scale, the smaller the additional remuneration package. “We work across the world on gathering this data to help companies compensate their expatriate workforces appropriately, and with the relevant and up-to-date allowances included in their benefits package,” says Tom O’Byrne, head of market development at Mercer Middle East. “Companies come to us to get a clear picture of the quality of living in these cities; they then use this for a range of remuneration purposes.” In a market where so many employees are expatriate, these rankings count.

Governments care (or should) because liveable cities align with sustainable cities, set up to be able to power, feed, entertain and educate themselves into the future. Not to mention that a city that is pleasant to live and work in is attractive to business, which equates, at its most basic, with wealth. Parang Khanna, of Foreign Policy magazine, even believes that influence emanated from cities will, in the future, replace national power. Urban living is a big issue. The suggestion that liveability is a political policy issue is a significant one. It suggests that the burden of responsibility – and cost – should lie, to some extent, with government as much as with developers and private enterprise. Indeed, in the Middle East it is often governments that incubate master-schemes and a recent survey by Booz & Company has found that it will fall to national bodies to ensure that the economic cities springing up across the sands are supplied with cost-effective utilities. That goes hand in hand with encouraging (and perhaps funding) sustainable cities. Arabian cities do not tend to feature highly on liveability listings. The environmental challenges faced by Middle Eastern countries are significant, consumption of natural resources is among the highest in the world and the region is not famed for its sustainable approach to natural

Businesses care about liveability because it determines benefits that their overseas staff entitled to.

Gulf Pics

Zurich regularly tops liveable city lists.

resources, waste disposal and energy generation. A wealth of hydrocarbon reserves means that there is a natural reliance on the car, depressing scores. GCC cities have plenty of world-class hospitals, education facilities, homes and restaurants that indicate a good quality of life for residents, but the same cities are still developing their cultural institutions and public

transport systems, and red tape can make doing business difficult. As it stands, European and North American cities lead the liveability field. With the global population swelling and the swing from rural to urban living firmly established (over half the world’s population now live in cities), the pressure on cities around the world to improve their infrastructure and




Quality of Living Survey

World’s most liveable cities

Most liveable cities

1. Vienna

1. Vancouver

1. Munich

2. Zurich

2. Vienna

2. Copenhagen

3. Geneva

3. Melbourne

3. Zurich

4. Vancouver

4. Toronto

4. Tokyo

5. Auckland

5. Calgary

5. Helsinki

efficiently manage resources is greater than ever. As cities grow, the pressure on their facilities increase, often faster than they can cope. This has a negative effect on the quality of life. “Humankind is consuming energy and other resources – such as water, land, forests, even wildlife – at levels that are not only far beyond what we need, but are far beyond what the planet can bear,” says a Masdar City spokes person. The high-profile Abu Dhabi project is attempting to take all the components of a sustainable city and build a liveable model from scratch. The blueprint uses all available modern technology and combines it with historical expertise to give a pioneering urban area that encapsulates the key principles of a liveable city. October 2010 gulfbusiness



Shaded walkways, narrow streets and traditional wind towers, for example, reduce the impact of the sun in the glaring desert heat, having a natural cooling effect and encouraging residents to walk instead of jumping in cars. A diagonal orientation funnels cooling night breezes and lessens the effect of hot daytime winds. Furthermore, the plan involve a facets to manage the city’s environmental impact at the same time as regenerating degraded biodiversity, protecting the local cultural heritage and improving the health and quality of life of its inhabitants. Building from scratch, while on paper the ideal option, is not without its disadvantages. ‘Accelerated community engineering’, as it is known in academic circles, can be unpredictable. Services and institutions normally evolve naturally over time, in line with population expansion and cultural development. It is difficult to flawlessly replicate these conditions in a newly built project. Liveable legacies can also be created in existing city frameworks by integrating new sustainable technologies, although Copestake warns that “a range of factors need to come together before a city registers a tangible change in liveability”. A profusion of technologies are available and up-to-the-minute innovations are being constantly released into the market, though, of course, these do not displace a need for better transport, political stability, cultural wealth and low crime levels. Energy is clearly one of the biggest modern factors. Solar energy is the most obvious power source to tap and many new developments are incorporating photovoltaic technology into roofs and windows to generate energy for the buildings they adorn. In this region in particular, known as the ‘solar belt’ on account of its high exposure to solar radiation, capturing the sun’s power is a pertinent opportunity. According to Abengoa Solar, if just two per cent of the solar radiation in the world’s deserts were used, it would be enough to supply all energy demands. The same company

98 gulfbusiness October 2010

This is a fantasy projection by avant garde design group, Terreform ONE [Open Network Ecology], which promotes innovative, green design in cities. Hypothetically located in Brooklyn, it will supply all its citizens’ needs within its accessible physical borders. Dilapidated structures are replaced with vertical agriculture, housing is merged with infrastructure. Former streets become snaking arteries of livable spaces embedded with renewable energy sources, soft cushion-based vehicles for mobility and productive green rooms.

has developed a system of solar power generation that uses the light reflected from a field of mirrors to heat liquid in a tower and power a steam turbine. Closer to home, scientists in Ras Al Khaimah have been using NASA technology to develop a prototype for a solar island with self-cleaning panels that could be used at the shore or at sea to provide renewable energy to developments. Nissan is to launch its all-electric vehicle, the Nissan LEAF, next year, which has a maximum speed of 140kph and zero emissions. In technology borrowed from current hybrid models, energy will also be reclaimed under braking and coasting and fed back into the battery. Philips has been developing and promoting LED lighting technology that promises to use a fraction of the energy of traditional filament lightbulbs. Municipalities, businesses and individuals could save up to 40 per cent on their lighting bills by switching over. Cities across the Arab world are taking steps and strides towards liveability goals, by this or other names. In Libya, Colonel Gaddafi has

commissioned Foster + Partners to develop a wholly sustainable tourismfocused town on the Mediterranean coast, known as Green Mountain. In Jordan, a Masdar-inspired, zeroemission town is slated for the outskirts of Amman. In Saudi Arabia, the King Abdullah International Garden is to provide a public botanical garden in celebration of botanical diversity and raising awareness about the impact of climate change. In Doha, the government has long been developing world-class cultural and sporting facilities for its residents and guests in its celebrated Museum of Islamic Art and Khalifa International Stadium. Egyptian company, Orascom, is developing an eco-town in the Cornwall region of Britain. The Middle East may be noted for its over-reliance on hydrocarbons, a disposable attitude towards products and heavy dependency on natural resources, but liveability is a tacitly understood and pursued principle in Gulf ambitions for the future. ■


The Cape escape Fresh from World Cup success, Cape Town showcases the ultimate African adventure, writes Alexandra Gouveia


hree times the size of New York and combining rare wildlife, undulating scenery and compelling history, Cape Town possesses an unrivalled sense of energy. Thanks to superb hosting skills during the World Cup 2010, South Africa’s mother city has cast off old perceptions, to become the most exuberant destination in the rainbow nation.

All journeys here must start at the flat-topped Table Mountain, a resounding symbol of the city’s strength, history and hope. For a sense of achievement climb its summit, the views at the peak will be worth all the effort. The less ambitious can opt for the unnerving cable car ride to the restaurant at the pinnacle. For more spellbinding scenery, a drive along Chapman’s

Peak to Cape Point is one for the must-do list. When it comes to beach life, only the fearless locals tackle the freezing Atlantic Ocean hemming Camps Bay and Clifton Beach. These shores are a haven for trendy jet-setters and food connoisseurs, lured by the Michelin-star worthy restaurants and cosmopolitan bars. Alternatively, Boulders Bay is an ornithologist’s

Historical insight

Shark diving

Imprisoned for 27 years on charges of sabotage during his fight against apartheid, Nelson Mandela served time at Robben Island. These days there’s a museum where you can view his cramped cell and the exercise yard where he attempted to cultivate a garden. The three-hour tours are often run by former political prisoners who recall South Africa’s volatile past.

Combining the natural wonders of South Africa with the ultimate in adrenaline-fuelled sports, seize the opportunity to swim with one of the world’s most feared predators – the Great White Shark. Cape Town also boasts a wide range of sea-life tours just off the coast of Gansbaai.

100 gulfbusiness October 2010



dream, occupied by a penguin colony where visitors can tread water among the packs of flightless birds. Beware: they bite! For gastronomes, South Africa’s local farms produce meat so succulent even vegetarians may be turned. Café Royale, on Long Street, is so famous for its burgers that even the friendly locals are reluctant to reveal its location. Kalk Bay’s glassfronted Harbour House serves both spectacular seafood and crashingly beautiful views – during migration season it’s possible to see whales. For elegant fare, Victoria and Albert Waterfront presents world-class cuisine, including Gordon Ramsay’s Maze and Nobu.

Cape Town is also imaginative when it comes to shopping. Greenmarket Square is perfect for souvenirs, fashion and homeware. Its sidestreets boast quaint boutiques stocking original creations by local designers. For something Afrikaans, Pan-African Market on Long Street offers great variety. The African Music store at number 134 has an eclectic array of albums. Pick up something by Mama Afrika, the country’s legendary singer. Thanks to the World Cup, Cape Town stands out as a booming metropolis without pretensions. Finally, South Africa is receiving the lauded reputation that its natural beauty has always deserved.

Factfile Population: 2,890,000. Cape Town is the legislative capital of South Africa and is located on the southwest part of the country on the Atlantic coast. The city was founded in 1652 as a supply station for the Dutch East Indies Company. Cape Town is a commercial and industrial centre. Oil refining, food, chemicals and the manufacture of automobiles, leather and plastic goods and clothing are the chief industries. With one of the world’s largest drydocks, ship-repairing is an important industry. Much of the former dock area is now a commercial and tourist waterfront with museums, craft markets and restaurants.

Helicopter ride

On the grapevine

By far the best way to fully appreciate Cape Town’s natural beauty is from the air, via helicopter. Many tour companies set off from Victoria and Albert Harbour. And while it’s not cheap, it’s not too expensive either, especially when you account for the mesmerising birds-eye-views.

Wine connoisseurs will know that South Africa is famed for its fine grape juices – it produces one million litres annually. Embark on one of the many tours in Stellenbosch, where local estates are only too happy to let you sample their tipples. Surrounded by spectacular mountain backdrops, it’s an enriching experience. constantia

October 2010 gulfbusiness




Weighty wheels Alicia Buller test drives the new-look Audi Q7 and finds it to be a smooth but cumbersome ride.


udi, an auto-manufacturer known for its understatement, shouts a bit louder with this enormous 2.5 tonne Q7 mega-car. It comes in two sizes in the Middle East, the 3.6 FSI engine and the 4,2 FSI engine. I tested the meaner 4.2 FSI Quattro version, which has a fuel consumption of 12.7 litres/100km and a 0-62mph time of just 6.4 seconds. The Audi Q7 looks good; owing in part to its 2010 facelift, both internal and external. On the outside, the sporty design has been revised to incorporate the updated radiator grille and bumpers and the new xenon headlights with LED daytime running lights. The rear has been given a new shape, while inside there’s ambient lighting in the door linings, new inlays and leather. Engine-wise, an efficiency-enhancing energy recovery system has been added for both models, ensuring you get more fuel for your money and save the planet (a little) in the process.

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October 2010

I haven’t driven the Audi Q7 prefacelift, but this model is certainly stylish inside. The leathers are highquality and when dusk comes, the dashboard turns into a very swish, automated disco of lights. Costing around $71,000, this beast comes with all the trimmings you’d expect from an upmarket SUV: sat-nav, assisted parking, four-zone automatic air conditioning, Bosé sound system (I had fun cranking this one up – the

huge speaker that spans the front dash is as loud as it is impressive to look at). But my favourite gadget was the adjustable air suspension, at the touch of a button, you can adjust the car from ‘dynamic’, to ‘comfort’, to ‘automatic’ – these all help with driving what is at times a very heavy ride. This car is large and it’s difficult to escape that. It’s large when you park it, it feels large on corners, and that’s because, well, it’s large. If you want to zip around town, this isn’t the car for you. On the plus side, if you’re looking for space, you could probably throw five kids in the Q7 and still have room for a small elephant. Thanks to its luxurious 300-centimetre wheelbase within an overall length of 5.09 metres, the Audi Q7 has interior room to spare. The seatbacks are divided into three fold-down sections which can create a cargo floor with a volume of 2,035 litres. Overall, the Q7 feels sleek and sturdy. At this price tag, it’s competing with the BMW X5 and the Range Rover, both of which are, frankly, racier models. But where the Audi Q7 could convince buyers is in its safe feel, space, bankability and smooth Audi looks. The disco lights aren’t bad either. ■


Navigating the season’s Middle East art auctions With Christie’s, Sotheby’s and Bonham’s showcasing their wares this autumn, Gulf Business art expert, Charles Pocock, offers vital background knowledge. Charles Pocock runs the Meem Gallery, Dubai.




Modern & Contemporary Middle Eastern & South Asian Art Monday, October 11, 2010 Dubai, One & Only Royal Mirage Hotel

Modern and Contemporary Arab and Iranian Art Wednesday, October 20, 2010 London

International Modern and Contemporary Art Tuesday, October 26, 2010 Dubai, Emirates Towers Hotel

✪ Lot No: 161

✪ Lot 16

✪ Sohrab Sepehri (Iranian, 1928-1980)

This work not only celebrates the female form, but represents an incredible political statement. Until Said’s time, images of women were taboo, particularly the nudes. Said was the uncle of Queen Farida and was, therefore, able to push the boundaries of artistic practices established in his country. Judging from the outstanding quality of this work, it should sell well past the estimate

As a work of art, it is stunning, because it is so far removed from what most people are used to. With the recent retrospective in Tehran and Sohrab Sepehri’s strong following, and taking into account the abstract nature of this work, it should do very well.

Jawad Salim (Iraq, 1919-1961) Mother and Child, fruitwood and mixed media, inscribed with the artist’s name and the title on the base, 43 x 30 x 14cm. (16 15/16 x 11 13/16 x 5 1/2in) max. Estimate: $60,000-$80,000 Constructed out of fruitwood and mixed media, this is a star lot. The work is illustrated in ‘Art in Iraq Today’ by Jabra Ibrahim Jabra, a point which Bonham’s have overlooked in the catalogue. Even at $150,000, this is an incredibly important work as Jawad Salim was foremost a sculptor and this piece is one of his seminal works.

Mahmoud Said L’Endormie (The Dreamer),signed and dated 1933 oil on panel,10H by 76.Hcm $ 156,000–$187,000

Lot No: 157 Ahmed Moustafa (Egyptian, born 1943) Man in a Rocking Chair, oil on canvas, signed in Arabic and dated 1972 upper left, 150 x 135cm (59 1/16 x 53 1/8in). Estimate: $180,000-$240,000

Lot 8 Shakir Hassan Al Said 1925-2004 Untitled signed and dated 1963, oil and plaster on board 67 by 56.5cm. Provenance Private Collection, Europe US$ 28,000–$34,300

A reasonable work but overpriced. I would look at half of what they are asking for: $80,000 max. There is a limited market for non-calligraphic works by Ahmed Moustafa, which is why I believe this work to be overpriced.

A strong work with good provenance. We bought a similar piece at $40,000 recently and would suggest a price around this figure, although it is above the estimate. Anything beneath that amount would be a good buy.

Untitled signed in Farsi (lower left), oil on canvas 40 x 49.1/4 in. (101.6 x 125.1 cm.) Painted in 1970 $200,000-$300,000

Dia Azzawi (Iraqi, b.1939) Untitled, signed and dated in Arabic (lower left); signed, dated and located Dhia Al-Azzawi 1969 IRAK and signed, dated and inscribed in Arabic (on the reverse) oil on canvas 39 x 32in. (99 x 81cm.) Painted in 1969 $12,000-$18,0000 I spoke with Dia about this work. Exhibited at his show in Beirut, where the painting was bought, this work is, in his opinion, one of the best from this series. The estimate is low and one should see it go to $60,000 including commission, $45,000 in the room.


✪ Jawad Salim, Mother and Child

✪ Mahmoud Said L’Endormie (The Dreamer)

✪ Sohrab Sepehri Untitled October 2010 gulfbusiness






airmont Dubai is a five star property located in the financial heart of the city. An award winning business destination, this Middle East flagship hotel has garnered numerous accolades, from Business Traveler Middle East magazine’s ‘Best Business Hotel’ to ‘Top 400 Hotels’ list. Currently in the finishing stages of a $9.5 million capital refurbishment programme, 2010 reflects a refreshed product offering with all 394 guestrooms and suites designed to further meet the needs of the most discerning business traveller. The brand’s exclusive lifestyle offering, Fairmont Gold, provides additional bespoke services, from 24 hour on-call personal butler service to an exclusive lounge, while Willow Stream Spa offers a fully equipped health club, complete with two rooftop swimming pools. With views across the city skyline, each one of its 18 versatile meeting venues offers state of the art technology combined with attentive and engaging service. Fairmont Dubai also presents an exciting dining and entertainment line up, including Spectrum on One specializing in six international cuisines, The Exchange Grill, the award wining steakhouse, and Cin Cin, the chic wine bar. Newly debuted is Bridges Sports Bar, a contemporary sports lounge offering an ‘all star’ food menu, a range of international brews, and large televisions screening a variety of sports.

104 gulfbusiness October 2010




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4 Sports Congress and Exhibition Aspire Dome, Doha, Qatar 15 - 18 November 2010 The Only Sports Business Exhibition To Attend This Year. Aspire4Sport Offers Unrivaled Business Opportunities In A Unique Location.

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Data monitor 108 TOP DEALS

Mergers & acquisitions Public offering Debt offering Private placement

110 GCC ECONOMIC INDICATORS Real GDP & CPI inflation Economic Forecasts Market Overview World Commodity Markets


Equities: GOEs own 30 per cent of GCC markets Cement: Coal prices blacken sector outlook

October 2010 gulfbusiness





Deal Description


Landmark Group

Carluccio's PLC (94.9 per cent stake)

Carluccio’s PLC has agreed to be acquired by Landmark Group. Carluccio’s, the listed UK-based company headquartered in London, is an Italian restaurants and food shops operator. The Landmark Group, the UAE-based company is a retail and hospitality conglomerate, whose majority shareholders are Mukesh Jagtiani and Renuka Jagtiani. Terms: GBP1.42 per in cash per Carluccio’s share not currently owned by Landmark Group. The implied equity value of the target company is GBP84.1 million. The offer provides a premium of 47.9 per cent based on Carluccio’s closing share price of GBP 0.96 on September 1, 2010, one day prior to the announcement. It also provides a premium of 43.4 per cent based on Carluccio’s closing share price of GBP 0.99 on August 2, 2010, one month prior to the announcement. Financing: The transaction will be financed from Landmark’s existing cash resources. Irrevocable Undertakings: Landmark has received irrevocable undertakings to accept the offer for 14,801,137 Carluccio’s shares, representing about 25 per cent of the target company’s issued ordinary share capital. Landmark has also received letters of intent to accept the offer for 3,839,807 Carluccio’s shares, representing about 6.5 per cent of the target’s issued ordinary share capital.

Schoeller-Bleckmann Oilfield Equipment AG

Drilling Systems International Ltd.

Schoeller-Bleckmann Oilfield Equipment AG (SBO), the listed Austria-based designer and manufacturer of drilling equipment for the oil and gas industry, has agreed to acquire Drilling Systems International Ltd, the United Arab Emirates-based provider of specialized equipment for downhole circulation technology for oil and gas wells, for an undisclosed consideration. Drilling Systems International Ltd (DSI) generates annual sales of about $30 million. The acquisition is a perfect addition for SBO’s product portfolio due to DSI’s proven technology and excellent growth potential. The transaction is expected to complete by October 1, 2010.

Praxair Inc

Refrigeration & Oxygen Company Limited

Praxair Inc, the listed US-based company engaged in the production and distribution of industrial gases, has agreed to acquire 49 per cent stake in Refrigeration & Oxygen Company Limited, the Kuwait-based producer and distributor of industrial gases, from Al Khaled Family, for an undisclosed consideration. Refrigeration & Oxygen Company generated annual sales of approximately $80 million in 2009. The acquisition will result in economic expansion and industrialisation. Both of the business are in a distinctive position and their respective strengths will be able to meet the needs and challenges of demanding market requirements.

Sahara International Ventures NV.

Sahara Net LLC (Majority Stake)

Sahara International Ventures NV (SIV), the Netherlands-based investment firm focused on the development of (broadband) Internet businesses and a subsidary of Belgacom SA, the listed Belgium-based company providing both fixed and mobile telecommunication services, and Panthers Investments BV, the Netherlands-based investment holding company having interest in Internet service providing business, has acquired a majority stake in Sahara Net LLC, the Saudi Arabia based-Internet Service Provider, for an undisclosed consideration. Sahara Net currently employs around 100 people. The transaction will allow SIV to expand and strengthen its business in markets within the MENA region and to further support and improve the existing operations.

Notes: Deals are based on the geography of target, bidder or vendor being in the Middle East, for the period between August 21, 2010 and September 20, 2010. 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

12,000 10,000



Value ($m)


Value Volume

50 40







2,000 0

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3









Value Volume


Value ($m)


15,000 10,000


5,000 2004


Pharma/Medical/ Biotech 3%

Construction 2%

TMT 7%

Real Estate 13% Agriculture 0%

Energy/ Mining/ Utilities 5%

Defence 1%

Consumer 2%

Business Services 2%

Industrials and Chemicals 15%

Financial Services 33%

TMT 20,7%

Leisure 2%

Transport 2%

Pharma/Medical/ Biotech 5%

Construction 2% Real Estate 7%




Transport 12%








Number of deals


Leisure 5%

Agriculture 1%

Energy/ Mining/ Utilities 8%

Defence 1% Consumer 8%

Business Services 7%

Financial Services 16%

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

108 gulfbusiness October 2010

Industrials and Chemicals 19%

TOP PUBLIC OFFERINGS Value ($m, Historical rate)


Transaction Status

Transaction comments


Omani Qatari Telecommunications Company


The price range for the IPO is OMR 0.702 to OMR 0.902.The offering opens for subscription on September 15, 2010 and the offer will close on October 14, 2010. The IPO has been reserved for individual or retail investors for up to 70 per cent and the remaining 30 per cent is for institutional investors. About 70 per cent of the offering is open to Category I investors, and 30 per cent is open to Category II investors who can participate in the bookbuilding process. Category I investors can apply for a minimum of 500 shares in multiples of 100 up to a maximum of 500,000 shares, and Category II investors can apply for a minimum of 500,100 shares up to a maximum of 26,037,700 shares.The final price will be determined on the basis of the bookbuilding process and is expected to be announced on October 24, 2010.


Al Jouf Cement Company


“The subscription period was from July 19, 2010 - July 25, 2010. KSB Capital Group also acted as the financial advisor for the offering. Alinma Bank is acted as a receiving bank for the offering.”


National Bank of Kuwait


The subscription period for the offering would commence on October 5, 2010 and end on October 21, 2010.

Closed/Registration Effective Date: [8/6/2010-9/21/2010] Geographic Locations (Target/Issuer): Middle East (Primary) OR North Africa (Primary) Source: Capital IQ

TOP DEBT OFFERINGS Value ($m, Historical rate)


Transaction Status

Transaction comments


Abu Dhabi Commercial Bank


“The notes are a part of the Medium Term Note Programme. The notes are rated AAA by RAM Ratings.The books opened and closed on August 23, 2010. The notes will mature in five years.”


Emirates NBD Auto Finance Limited



Al Omaniya Financial Services


The subscription ratio for the rights offering is 1 bond for every 1.5 existing shares. The subscription period for rights offering is August 15, 2010 – August 30, 2010. The bonds will mature in 10 years. The bonds are convertible into shares at a conversion price of 80 per cent of the average market price of the shares for three months preceeding the conversion date. Interest on the bonds will be paid annually.

Closed/Registration Effective Date: [8/6/2010-9/21/2010], Geographic Locations (Target/Issuer): Middle East (Primary) OR North Africa (Primary) Transaction Primary Features: Public Offering - Fixed-Income Offering. Source: Capital IQ

TOP PRIVATE PLACEMENTS Value ($m, Historical rate)



Transaction Status

Transaction comments


National Petroleum Construction Company Limited

Abu Dhabi Islamic Bank, Asset Management Arm


National Petroleum Construction Company Limited announced that it will raise $100 million in funding from Abu Dhabi Islamic Bank on September 19, 2010. ADIB acted as mandated lead arranger and structured the deal while Waha Capital PJSC advised the company in the transaction.


MTQ Oil Field Services

MTQ Corp Ltd; Mtq Engineering Pte Ltd


MTQ Oil Field Services announced a private placement of for gross proceeds of SGD4,074,000 on September 3, 2010. The funding involved the participation of MTQ Corp Ltd and Mtq Engineering Pte Ltd. MTQ Corp Ltd has invested SGD4,033,260 and will hold 99 per cent stake in the company and Mtq Engineering Pte Ltd has invested SGD40,740 and will hold 1 per cent stake in the company.


Newbridge Pharmaceuticals

Burrill Venture Capital; Kuwait Life Sciences Company


Newbridge Pharmaceuticals announced that it will raise funding in its series B round on September 20, 2010. On the same day, the company raised $12 million in its first close. The series B round was led by Kuwait Life Sciences Company, a subsidiary of National Technology Enterprises Company, with participation by the previous investor Burrill Life Sciences Capital Fund III, L.P. As part of the transaction, Qais Marafie, Chairman of Kuwait Life Sciences Company, was appointed to the company’s board of directors. In addition, Victor A. Hebert, Managing Director, Burrill & Company, will be appointed as the Chairman of the board.


National Net Ventures

Closed announced that it has received its first round of funding from new investor National Net Ventures on August 23, 2010. The company received the funding in cash and kind.

Closed/Registration Effective Date: [8/6/2010-9/21/2010] Geographic Locations (Target/Issuer): Middle East (Primary) OR North Africa (Primary) Source: Capital IQ

October 2010 gulfbusiness



WTI crude ($/barrel) 84.5 73.7 75.4 76.32 76.60

April May June July August


Gold price ($/ounce) 1148.7 1205.4 1232.9 1194.11 1,217.21

Euro/UAE Dirham 4.94 4.64 4.49 4.69 4.75

Source: Bloomberg, Dubai Chamber

Updated as of: 17/09/2010 S.Arabia UAE Qatar Kuwait Oman Bahrain

GCC ECONOMIC FORECASTS Real GDP Growth (%) CPI Inflation (% avg.) 2008 2009F 2010F 2011F 2008 2009F 2010F 4.3 0.1 3.2 3.4 9.9 5.1 5.7 5.1 -1.4 1.0 2 12.3 1.6 1 15.8 9.0 11.3 9.1 15 -4.9 -2.9 6.4 -2.2 2.5 3.1 10.5 4 3 12.3 3.8 4.6 4.8 12.6 3.5 4 6.1 1.8 2.4 1.6 3.5 2.8 2.5

2011F 4.8 2.8 2.5 4 4.8 3

Source: BoFA Merrill Lynch Global Research, Bloomberg, EcoWin, national statistics offices

Returns Tadawaful (Saudi Arabia) KSE (Kuwait) BSE (Bahrain) MSM 30 (Oman) DFM (Dubai, UAE) ADX (Abu Dhabi, UAE) DSM 20 (Qatar)

GCC MARKET OVERVIEW Value Month to date* 6,106.42 -2.8% 6,688.60 0.5% 1,418.61 1.8% 6,256.81 -0.6% 1,483.67 -1.9% 2,498.52 -1.9% 7,226.15 2.8%

Year to date* -0.3% -4.5% -2.7% -1.8% -17.7% -8.9% 3.8%

Source: Bloomberg; *All returns are latest available end of day August

WORLD COMMODITY MARKETS COMMODITY PRICE DATA, 2010 Commodity unit June July Aug Non Energy 252.4 248.4 254.3 Agriculture 214.1 214.3 219.3 Beverages 243.5 255.0 261.7 Food 200.4 199.2 209.4 Soybean meal $/mt 338.0 356.0 382.8 Soybean oil $/mt 859.0 907.0 1002.3 Soybeans $/mt 408.0 429 456.8 Grains 178.0 192.3 210.8 Maize $/mt 152.7 163.8 175.6 Sorghum $/mt 131.0 132.4 143.4 Wheat, Canada $/mt 261.3 287.5 326.0 Wheat, US, HRW $/mt 157.7 195.8 246.2 Wheat, US, SRW $/mt 182.6 222.3 261.6 Sugar EU c/kg 40.9 42.8 43.2 Sugar US c/kg 72.4 73.3 77.2 Sugar world c/kg 35.0 38.5 40.7 Raw Materials 329.6 305.5 311.1 Fertilisers 248.9 259.4 276.4 Metals and minerals 318.2 350.4 368.7 Aluminium $/mt 1931.4 1988.3 2118.1 Copper $/mt 6499.3 6735.3 7284.0 Gold $/toz 1232.9 1193.0 1215.8 Iron ore c/dmtu 167.0 205.0 205.0 Lead c/kg 170.4 183.7 207.5 Nickel s/mt 19388.6 19517.5 21413.3 Silver c/toz 1853.4 1794.0 1849.3 Steel products index 2000=100 242.1 231.8 230.4 Tin c/kg 1732.0 1819.1 2075.5 Zinc c/kg 174.3 184.4 204.5 Source: World Bank, Commodity price data

110 gulfbusiness October 2010

Aug/July 2.4 2.3 2.6 5.1 7.5 10.5 6.5 9.6 7.2 8.3 13.4 25.8 17.7 1.0 5.3 5.8 1.8 6.5 5.2 6.5 8.1 1.9 0.0 13.0 9.7 3.1 -0.6 14.1 10.9

State-owned firms own 30 per cent of GCC markets In just a year’s time, $118 billion was wiped off the GCC’s government-owned entities’ (GOEs) coffers. According to a study by Kuwait Financial Centre (Markaz), the value of shares held by GCC’s GOEs in the local stock markets dropped by 40 per cent from $300 billion in 2009 to $182 billion this year. Back in April 2008, Markaz’s research showed that GOEs – firms either 100 per cent or significantly owned by the government – accounted for 27 per cent of the stock market holding (as measured by market capitalisation) valued at $300 billion. Today, they hold more or less the same share (29 per cent) though their value has come down significantly to $182 billion. The 51 GOEs under study covered nearly 179 listed companies with the top 25 accounting for 85 per cent of the total. The top 10 GOEs account for 89 per cent of the total with Saudi Arabia’s Public Investment Fund (PIF) accounting for a lion’s share of 40 per cent. The largest is Public Investment Fund of Saudi Arabia that enjoys a 40 per cent share in total, thanks to its 70 per cent investment in Saudi Basic


Coal prices blacken sector outlook The GCC cement sector continued to show a disappointing performance in H1 2010 due to stalled real estate and construction projects. Figures from Global Investment House (Global) show cement companies came out with a 13.8 per cent decline in top line revenue and 12.4 per cent decrease in profits for the period. Gross margins saw a 121.9 basis points decline in the first half as compared to the previous year while net profits decreased from $938.8 million in H1 2009 to $822.1 million in H1 2010, data from the Kuwait-based investment bank indicates. Saudi Arabia was the only GCC country to witness higher sales revenue with 5.5 per cent growth to reach $1.13 billion, compared to Kuwait, Qatar, UAE and Oman which all witnessed severe decreases in sales revenue by 31.6 per cent, 24.5 per cent, 33.5 per cent and 27.2 per cent, respectively. Coal prices are expected to put pressure in the margins. Because most of the GCC cement manufacturers import coal, due to gas shortage, the increasing price of South


Industries Corporation (Sabic), the largest capitalised company in the Middle East, in addition to Saudi Telecom Company (STC). This was distantly followed by Qatar Petroleum with significant holdings in Industries Qatar. General Organisation for Social Insurance holds stakes in 29 listed Saudi companies, nearly 40 per cent of its holdings are accounted for together by Al Rajhi Bank, Riyad Bank, and Samba Financial Group. “It may be surprising to note names like Qatar Petroleum and Sabic figuring in this list. While they may be corporate, they are substantially owned by the government,” a spokesman from Markaz, said. And while Abu Dhabi Investment Authority (Adia) is a well talked about GOE in the global context, their reach in the local market is mainly through Abu Dhabi Investment Council (ADIC), whose prime holding is that of National Bank of Abu Dhabi. GOE: SUMMARY Country

No of GOE’s

No of Market Amount Co. held Universe held in local market ($m)

Share (%)

Local Market Market Capitali Penetration zation ($m) (%)
























































Source: Zawya, Markaz Research. Figures represent data as of July 5,2010

(per cent )

Average realisation prices (U S$/Ton)

African coal is expected to weigh heavily on their expenses. The price of South African coal has been increasing and is expected to cross the $100 per tonne mark in 2010 due to huge demand from Indian and Chinese companies. On top of that, intense competition is slated to further squeeze the margins. Cement prices in the GCC averaged $65.6 per tonne in H1 2010, a 16.4 per cent decrease compared to $78.5 per tonne enjoyed in H1 2009. UAE, the second largest cement producer faces continuous decline in demand while Saudi Arabia is facing contribution as new players enter the markets, causing price wars among the local player. UAE realisation GCC CEMENT SECTOR prices decreased 38.2 0 90 per cent from $86 per 1H-09 1H-10 Change -5 85 tonne in H1 2009 to -10 $53.1 per tonne in 80 H1 2010, the lowest -15 75 price among other -20 70 GCC countries. “In the -25 65 future, cement prices -30 are expected to face 60 -35 downward pressure as 55 -40 capacities of cement -45 50 are increasing in the KSA UAE Oman Kuwait Qatar GCC Average region,” the Global Source: Industry Reports & Global Research. report, said.

DP World

Global operator eyes $1.2bn EBITDA Last month, Gulf Business reported that DP World is well positioned to take advantage of the positive developments happening in the shipping sector. At that time, however, it was presumed that DP World, now the world’s third largest port operator, was “ring-fenced” from Dubai World’s debt restructuring programme. How its financial performance will be affected by the recently revealed fact that it may also be sold is still uncertain. “The fact that Dubai World may eventually consider the sale of strategic assets such as DP world was a key component to the debt restructuring and without it the conglomerate would not

have managed to secure this level of support from creditors,” Ahmad Alanani, Middle East and North African regional director of Exotix, a London-based investment bank, told Gulf Business. He stressed that Dubai World’s recent agreement with 99 per cent of creditors does not mean DP World or any other prized assets have escaped a possible sale in future. And if anything, he said, “the agreement reinforces this notion”. In the meantime, Nabil Ahmed, research analyst at Deutsche Bank, expects that DP World’s second half performance “to be only a touch better than H1” adding that the recovery momentum is losing steam given macro uncertainties.

Deutsche Bank new estimates $m Revenues

2009 2,821

New estimates 2010E 2011E 3,012 3,450

2012E 3,860

Old estimates 2010E 2011E 2012E 3,133 3,572 4,011

% change Adjusted EBITDA % margin Clean EBITDA (ex. JVs) % margin

-14.1% 1,085 38.5% 1,014 35.9%

6.8% 1,210 40.2% 1,078 35.8%

11.9% 1,668 43.2% 1,483 38.4%

11.1% 1,224 39.1% 1,134 36.2%

14.5% 1,438 41.7% 1,282 37.2%

14.0% 1,462 40.9% 1,342 37.6%

12.3% 1,698 42.3% 1,559 38.9%


Performance boost from mid segment Dar Al Arkan’s top-line may have declined 16.9 per cent to SAR2.26 billion in H1 2010 from SAR2.720 billion in the same period last year, but its financial muscles remain strong to weather the slow down. Saudi Arabia’s largest real estate developer still provides the best exposure to the mid-income residential real estate market in Saudi Arabia, according to Sico, a Bahrain-based securities and investment company. It said Dar Al Arkan has the strongest fundamentals in the region buoyed by the young and rapidly growing Saudi demographic. “Additionally, the Key stats

SAR million Revenue EBITDA EBITDA Margin Net Profit Net Profit Margin Adjusted EPS (SAR) Total Assets RoAE

2008A 5,611 2,719 48.5% 2,356 42.0% 2.18 20,164 20.7%

company conducts plot sales on a cash basis (unlike its peers in Abu Dhabi) Dar Al Arkan reduces the overall risk of dependence on plot sales,” a spokesman from Sico, said. The company, which paid out fiscal year 2009 dividends amounting to nearly SAR1.1 billion, had a cash balance of SAR1.3 billion at the end of June 2010. Sico expects the company to generate operating cash flow of nearly SAR500 million each for remaining two quarters in FY10. The company has debt of SAR1 billion due in one year, SAR430 million in two years and SAR6.4 billion after two years.

2009A 5,464 2,383 43.6% 2,123 38.8% 1.97 23,597 16.6%

2010E 5,807 2,410 41.5% 2,198 37.9% 2.04 25,187 15.3%

2011E 7,586 3,130 41.3% 2,911 38.4% 2.70 27,039 18.6%

2012E 7,741 3,174 41.0% 2,951 38.1% 2.73 29,259 17.2%

Source: Dar Al-Arkan Real Estate Development Co.

October 2010 gulfbusiness



Cityscape Global 2010 Dubai World Trade Centre, October 4-7 Cityscape Global hits Dubai for the ninth year running this month, with its new ‘global’ moniker. The largest real estate conference for emerging markets globally, the event brings together international investors, developers, government authorities and architects. Considered a litmus test for local confidence in the industry, Cityscape Dubai suffered a considerable drop in visitors last year amid the economic crisis. So the question is, how busy will the floors be in 2010?


Dubai October

Beach Rotana, Abu Dhabi


Frost & Sullivan's GIL 2010 : The Global Community of Growth, Innovation and Leadership Najah Careers 2010


03-04 03-05 04-07 04-07 07-10 16-23 17-21 24-25 24-26 24-28 25-27 26-27

2nd Annual Compensation and Benefits Middle East Investments Summit 2010 Cityscape Global 2010 Telecoms World Middle East 2010 Dubai International Jewellery Week GITEX Computer Shopper & Consumer Electronics Expo 2010 GITEX Technology Week Strategic Media Communications Internal Auditors Forum The Middle East HR Summit MENA Mining Congress 2010 Business Travel Show

Hyatt Regency Hotel Park Hyatt Dubai Dubai World Trade Centre Jumeirah Beach Hotel Dubai Int’l Convention and Exhibition Centre Airport Expo Center Dubai Int’l Convention and Exhibition Centre Hyatt Regency Hotel Hyatt Regency Hotel Mövenpick Hotel Jumeirah Beach Shangri-La Hotel Jumeirah Madinat Arena

International Education Show International Automobile Show Sharjah World Book Fair 2010

Expo Centre Sharjah Expo Centre Sharjah Expo Centre Sharjah

11-15 13-23

Kuwait International Property Show Arabic Books Exhibition

Kuwait International Fairs Exhibition Centre Kuwait International Fairs Exhibition Centre

31-01 Nov

The Growth of Corporate Governance in the Region

Al Bustan Hotel, Muscat

03-04 17-18

Materials Control & Management Business Continuity & Recovery Planning for OGPs

Millennium Hotel, Doha Millennium Hotel, Doha

Saudi Water & Power Forum 2010 Saudi Agriculture Saudi Food Packaging Saudi Stone Tech 2010 Saudi Arabian Infrastructure Congress 2010 Saudi International Franchising

Jeddah Hilton Riyadh Int’l Convention & Exhibition Centre Riyadh Int’l Convention & Exhibition Centre Riyadh Int’l Convention & Exhibition Centre Four Seasons Hotel Riyadh Riyadh Int’l Convention & Exhibition Centre

Sharjah October 06-08 14-18 26-06 Nov

KUWAIT October

OMAN October

QATAR October


03-06 04-07 04-07 18-21 23-25 26-28

112 gulfbusiness October 2010

Hotel Collection Gulf Business Hotel Collection members offer guests complimentary copies of the GCC’s premier business magazine Gulf Business. United Arab Emirates AL RAHA BEACH HOTEL

Abu Dhabi Al Raha Beach Hotel, created to provide the very best of traditional Arabian hospitality. This unique jewel of luxury and tranquility, offering magnificent services, awaits you for an unforgettable visit to Abu Dhabi. Tel 00971 2 50 80 555 Fax 00971 2 50 80 429




Khalifa Park area, Abu Dhabi Conveniently located adjacent to Khalifa Park, the property offers 318 luxurious rooms and suites, 6 world class dining venues, 6 meeting rooms and spacious ballroom with day light access and outdoor terrace. Tel 00971 2 6573333 Fax 00971 2 6573000 JUMEIRAH EMIRATES TOWERS

Al-Barsha, Dubai Offering 161 furnished units ranging from 81 sqm to 160 sqm, 3 dining venues, 3 multi-purpose meeting rooms, recreation facilities & a majestic landscaped area around the temperature-controlled pool. Tel 00 971 4 437 78 88 Fax 00 971 4 437 79 99


Al Barsha South-TECOM Located in the heart of Dubai’s new business hub and opposite Dubai Media City and Internet City the Media Rotana Dubai has 460 rooms, suites and deluxe hotel apartments, 5 award winning dining venues and 15 meeting rooms. Tel: 00971 4 4350000 Fax: 00971 4 4350011



Mall of the Emirates, Dubai Discover a new attitude hotel directly linked to the region’s ultimate shopping destination amidst Dubai’s sophisticated metropolis. Elegant 481 guestrooms complemented with chic dining experiences awaits both leisure and business guests. Tel 00971 4 702 8000 Fax 00971 4 702 8001

Sheikh Zayed Road, Dubai This 394-room hotel boasts 10 dining and entertainment venues a superb spa and unrivalled meeting facilities. Tel 00971 4 3325555 Fax 00971 4 3324555

Sheikh Zayed Road, Dubai Jumeirah Emirates Towers is a sleek architectural masterpiece of steel and glass. It redefines the business hotel category, seamlessly combining form with function, high technology with unparalleled luxury and elegance with efficiency. Tel 00971 4 3300000

Sheikh Zayed Road, Dubai The truly unique and exciting five stars hotel features 393 rooms, suites and chalets together with Mall of the Emirates shopping centre and Ski Dubai’s alpine themed indoor snow resort. Tel 00971 4 3410000 reservations.malloftheemirates@





Dubai Marina This hotel boasts 240 units, including studios, 2 or 3 bedroom units, and penthouses. There is also one restaurant. a health club, indoor and outdoor swimming pools and 5 meeting rooms. PO Box 215855, Dubai, U.A.E Tel 00971 4 3992500 Fax 00971 4 3993225

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

Doha Located on the Corniche Road, opposite the Museum of Islamic Art, the hotel offers 154 rooms and suites, a business centre and meeting rooms. Recreation facilities are also available. Tel 00974 4291111 Fax 00974 4291100




Jeddah Located a 10-minute drive from the Jeddah International Airport. Offers over 414 rooms including 46 suites. 10th and 11th floors are Executive floors addressing all the needs of a modernday businessman. Tel 00966 2 659 0000 Fax 00966 2 658 2489

Riyadh The first 5 star Holiday Inn hotel in the Kingdom, with 289 new and trendy accommodations, huge lobby with W-Fi access, outdoor pools, sauna, Jacuzzi and health club. Also has state-of-the-art meeting rooms, 24-hour business center with professional secretarial support. Tel 00966 1 4505054 Fax 00966 1 4505056

Jeddah The hotel situated in the heart of the business centre offers 211 rooms, 17 suites and 25 apartments. 5 meeting rooms and 2 reception rooms to accommodate up to 350 people. Tel 00966 2 6602000 Fax 00966 2 6604145


Sheikh Zayed Road, Dubai Offers 301 luxuriously appointed guest rooms and suites, nine restaurants and bars, health club and spa, tennis and squash courts and outdoor swimming. Tel 00971 4 3438888 Fax 00971 4 3438886


Doha Situated in the West Bay area, yet located near the city. With its various dining options, 24 suites, 234 rooms, private beach and state-of-the-art gymnasium, it is an idyllic setting for business and leisure. Tel 00974 4844444 Fax 00974 4839555

Saudi Arabia

Membership information:, Tel: 00971 4 2052290


The high life ALICIA BULLER ponders the ups and downs of indoor leisure attractions with iFLY

and Ski Dubai chief operations officer, Arnaud Palu.


here’s something very exposed about catapulting yourself into a wind tunnel; not literally, of course – I’m all togged up in my pseudo-space suit – but something akin to closing your eyes, falling backwards and hoping somebody catches you. In the iFLY vertical dome, my senses are stripped by what sounds like a million hairdryers and – as is the point of all this – my feet don’t touch the ground. The tunnel, the Middle East’s first indoor skydiving venue, is certainly ‘unique’ as Arnaud Palu, COO of Mujid Al Futtaim Leisure, tells me. The Mujid Al Futtaim Group owns and runs a raft of shopping malls and hotels regionally, including Mall of the Emirates and the City Centre brands, and Palu is charged with running the leisure attractions inside – from iFLY, to kids’ heaven Magic Planet, to the region’s coolest leisure attraction, Ski Dubai. The idea, says Palu, is to offer a selection of pay-asyou-go leisure experiences, targeted at a wide-range of people. And the more adrenaline involved the better. iFLY certainly ticks those boxes Launched in April this year, it’s obvious why the indoor skydiving spot has been a hit at the Mirdif City Centre mall. I’ve never seen, or done, anything like it. After a watching a video and learning some air sign-language, I’m left to fend against the vertical fans that can power wind up to 200km/ per hour. It’s a relief that I don’t feel like am falling; just floating. The instructor has a firm hold of me and I’m only waist-high from the ground. iFLY is used as a training ground for champion skydivers from all over the globe, so after the initial lessons, you can flex some aero-muscle with somersaults and advanced air-borne high-jinks.

114 gulfbusiness October 2010

Palu is a fan of iFLY, but sadly there’s no time for us to fly together on this occasion, so we make do with him watching my air grooves instead. With a CV that incorporates some of the world’s most famous (and infamous) leisure firms, from Six Flags Holland and Disneyworld, to London’s Millennium Dome and the ill-fated Dubailand, the COO is no stranger to leisure. Palu was right-hand man to ex-CEO of the Millennium Dome, Pierre-Yves Gerbeau, as the team attempted to pull the project out of its year 2000 shambles. They succeeded, to some extent. Like Gerbeau (fondly nicknamed ‘Gerbil’ by the UK press), Palu is equally French and equally ethusiastic. That was then, but what’s his biggest challenge today? He says, it’s being able to draw in the crowds, while also keeping Mujid Al Futtaim Leisure a lean and profitable operation. He’s just launched the ‘Playnation’ concept in Mirdif, which he says “is like a lego kit” of various attractions from iFly, to interactive game Soccer Circus and waterpark Aqua Play all in one space. “We offer tailored experiences, and pay-as-yougo works well in a recession,” he says, adding only half in jest that he expects Playnation to benefit from a region awash with ‘guilt-money’ from time-strapped parents. As the Majid Al Futtaim Group continues its unabashed expansion across the region into Syria, Egypt and Qatar, the leisure arm will naturally expand, too. As Palu takes the brand forward, he says he’ll always have the words of his old Disney boss ringing his head – “you’ve got to walk the floor.” “Everything you need to know about your business is with your customers and your employees,” he says. And with that, I’m off to find my centre of gravity.

calibre de cartier 1904 MC MANUFACTURE MOVEMENT