Investor Debrief | Letters | Special Report | Leaders | Features | Outlook | Style | Wheels | Science & Technology | Events | Travel | Indicators
Banks and Financial
Future Scope :
Faisal Galadari :
Basel Regulations and the Challenge for GCC Central Banks
Image Supremacy of Islamic Economy
Dubai The Capital of the Islamic Economy Opportunities and prospects
CEO of Arab Bank for Investment and Foreign Trade The Success Equation Between Trading and Banking
A special Issue, on the occasion of the Global Islamic Economy Summit
Natheem Sabbah (Chairman, Editor in Chief)
Arab Investor // Welcome
ARAB INVESTOR // Welcome
ubai has always been a city that is distinguished, set apart, exceptional. The world marches on... but Dubai races. Enlightened minds, working day and night, turning the wheels of Dubai’s progress, ensuring that each new success is followed by another.
So much to do! Which conference to attend? Which exhibit to visit? In the Gulf, we are accustomed to going overseas for the summer, but today the world go abroad to us. Dubai has become, even in the summer, a destination for both business and pleasure. Visitors are taking an interest in the history and customs of this land, as well as sampling the local food and enjoying the folk music and songs. Most visitors look forward to spend evenings in the Ramadan tents too, even in the heat of midsummer. Tradition and innovation blend seamlessly in Dubai. From the tents which still adorn the palaces and the resplendent villas, to the towers which soar to the sky amid the finest architectural designs. From the beloved camel, the companion of our lives, to the largest airline fleet worldwide and the most modern airport in the world. Exciting and new sports of all kinds, with large followings and loyal fans, grace our sand, sea and skies and add another dimension to the success of Dubai. I feel that the elements of innovation, distinction and progress flow through the veins of a certain man, a noble knight. No problem is too hard or impossible for him; rather, it is the impossible which yields to his reason and logic. He works tirelessly to bring together minds which will build a bright, progressive future. His goal is humane and noble, productive and empowering. He aims
to safeguard the person and his/her wellbeing. The wheels of development run on his love for the land. Have no fear, for the foundations of the coming generations are being built now so that those generations can stand on them and continue on the same path of progress. They will wake up each day to a new accomplishment and go to bed in the hope of achieving yet another one. Dubai is worldclass in most endeavours; despite its small size it is large in its accomplishments and ambitions. People everywhere are wondering as to who plans, directs and guides all the achievements that can be seen taking shape on these pure sands. His gaze is piercing and far-reaching; it is full of visions for Dubai - visions and embellishments that have a distinctive taste, in an atmosphere of freedom and in the company of people of all races. For Dubai is the meeting place of humanity. Indeed, it is where all manners of different civilizations and faiths congregate. As such, Dubai is preparing to host World Expo 2020 and share with the world the joy of the United Arab Emirates and Dubai - the ornament of the world. We hope to participate in this issue, according to the vision and expectations of the leader of Dubai, in making Dubai the capital of the world’s Islamic economy. This will come about through the first Summit organized by Thomson Reuters and the Chamber of Dubai. This summit will be attended by head figures of the world’s Islamic economy and three thousand researchers involved in Islamic and halal banking, as well as others.
We at Arab Investors Magazine are proud to participate in this historic event alongside its organizers and sponsors. By doing so, we hope to highlight our support for anyone who strives to make Dubai an object of pride for humanity and a centre of serious and effective industry. Meanwhile, Dubai is readying itself to receive the Expo and the readying preparing, accompanied by the joy of every Emirati and Resident. The greatest joy, however, will be in the spirit of unity when we celebrate the forty-second National Anniversary on the second of December. In closing, I would like to say that each of us has in his/her country a capital city which he/ she is proud of and loves. But which city is the capital of the modern world? It is Dubai, without doubt. And this city substantiates the words of our leader who said...”Dubai is number one.”
ARAB INVESTOR // Quick Guide Investor Debrief | Cover Story | Special Report | Leaders | Features | Outlook | Style | Science & Technology | Wheels | Events |
Arab Investor // Contents
Places | Indicators
Printed by Masar Printing and Publishing Co., part of Dubai Media Incorporated Distributed by Taweza, Abu Dhabi Media Company © 2013 Arab Investor Publishing Llc. All rights reserved. Neither this publication nor any part of it may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of Arab Investor Publishing Llc. Where opinion is expressed it is that of the authors and does not necessarily coincide with the editorial views of the publisher of Arab Investor magazine. All information in this magazine is verified to the best of the authors’ and the publisher’s ability. However, Arab Investor Publishing LLC do not accept responsibility for any loss arising from reliance on it. For Advertising, please contact firstname.lastname@example.org For press release, please contact Contactpr@arabinvestor.ae For editorial comments,please contact Editor@arabinvestor.ae Contact Tel: 0097126505797 Gsm: 00971556698811
ARAB INVESTOR // February 2013 THIS MONTH: Future Scope // Dubai The Capital of the Islamic Economy 8-9
Leaders // page 4-7
Wheels // page 56-57
Uncover a heritage of rich local culture, and reminisce over ancient splendour
The Success Equation Between Trading and Banking Interview with :
Hospitality // // page 56-61
Marriott Expects to Become Largest Hotel Company in Africa
Special Reports // page 41-71 44-47
Hospitality // // page 60-63
Uncover a heritage of rich local culture, and reminisce over ancient splendour
Style // page 58-59
Faisal Galadari CEO of Arab Bank for Investment and Foreign Trade
Features // page 34-35
1- Training, alone, is not enough to raise the rateof local workers in UAE banks page 36-39
Vertu revolution gathers pace with constellation launch
2- Consumption Loans of UAE Banking Sector: A blessing or a drag on the Economy? page 40-43 3- UAE Banks Can Contribute to Society page 44-47
Financial Update // page 48-54
Basel Regulations III and the Challenge for GCC Central Banks
Future Scope // page 26-32
Outlook // page 20-24
1-The Objectives And Rationale For Banking Merger In The UAE P 26-29
The latest events and occasions within the MENA region
ARAB INVESTOR // The Team SENIOR MANAGEMENT
2- Distressed US housing: An Opportunity? P 30-32
Natheem Sabbah Chairman, Executive Editor in Chief
26-29 Leadership and Compelling Futures
Dr.Taghrid Abu Salim Research and Devolopment Director email@example.com Eman Azzam Senior Editor ( Egypt ) firstname.lastname@example.org
Legendary leaders open up a spaceinto which people step with energy,motivation, inspiration and commitment
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Gary O’Neal Senior Investment Advisor email@example.com Yazan Abu Hantash Specialist alternative energy firstname.lastname@example.org Hala Sabbh Public Relations Coordinator email@example.com
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LEGAL DEPARTEMENT Mohamad Sabbah Legal Advisor firstname.lastname@example.org Marketing & Sales Hanan Kobeisy CEO NKS & Associates email@example.com ART & DESIGN Ehab Bakr Art Director firstname.lastname@example.org
Arab Investor 3
Arab Investor // Interview
Faisal Kaladari CEO of Arab Investment and Foreign Trade Bank
As a son of Dubai, as well as the son of amerchant Faisal was inclined towards trade, especially foreign trade.
LEADERS // Interview Faisal was born near the location of what is now the Central Bank, behind the Dubai Post Office. This is a bustling area with plenty of shops and is also the crossing point from Ibra to Deira over Dubai Creek. Like today, located on the banks of Dubai Creek at that time were most business and administration offices, especially the office of His Excellency, the ruler of Dubai. The roofed market, which was Dubai’s commercial center at the time, was also located there.
Faisal used to travel back and forth across the Creek cheerfully. Those crossings, amidst the motorboats, made him feel like the happiest person on Earth. Those boats used to pick up goods piled up on the banks and carry them to various destinations such as India, Iran, Pakistan, Oman and the shores of Africa and its islands. Dubai was the undisputed “pearl of the Gulf” and it was also called the “Venice of the Gulf”. It earned those titles because of its beauty and its busy commercial activity. It was also a hospitable place where merchants and visitors from around the world met and were graciously hosted by a populace which loved visitors.
At the end of the sixties of the previous century, like a child who first opens his eyes on the world, Faisal grew up with an optimistic spirit. The location of his home at the time - adjacent to the British Middle East Bank (HSBC), and in the midst of the daily commercial activity - played a role in directing his thoughts. He used to picture himself as a banker who was productive and effective in society. He used to watch the bank’s employees as they went about their daily business and he used to hope that he would become their colleague. He imagined himself among them, dealing with them and having a role in the bank.
Faisal studied at Gamal Abdel Nasser School where he was excited to be in the class of his dreams. His excitement was due to the fact that his classmates where the sons of Dubai’s elites and of the holders of high positions in the State. Those classmates included, but were not limited to: His Excellency Sultan Bin Said Almansouri, the Minister of Economics; His Excellency Dr. Anwar Mohamed Qarqash, the Foreign Minister and Minister of the United National Council; the international referee Ali Bujaseem; Khalifa Al Zafin, CEO of Dubai World Central; Abdullah Al-Shaibani, Secretary-General of the Executive Council of Dubai Emirate; Gamal Bin Thania, Vice President of the Administrative Council for Dubai World Port; Dr. Tareq Al-Tayer; Shaik Mansour Al-Thani; Shaik Maktoum Bin Hashr; Shaik Mohamed Bin Hamdan Al-Nahaian; Dr. Magdi Haleeq; Mohamed Bin Saree alMuhairee; Shuaib Khoury ; and Abdul Nasser Al-Khayat. Truly it was the class of dreams.
His ambition drove him toward Dubai Limited Bank where he entered the banking world as a trainee for a period of three months. This experience further increased his desire to get closer to bank work.
Like all Dubai’s children at the time, Faisal loved soccer. Within the limited means of that time, the kids used to imaginatively emulate the official teams. They used to make teams and Faisal’s team was distinguished by its printing of numbers on the players’ shirts. That innovation was a source of pride for the boys.
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His father (may he rest in peace) worked in Kuwait in a high administrative position at the Port of Ahmadi, in 1972, and was one of the few educated people at the time. On his return from Kuwait, his father worked as a merchant. Faisal and his older brother - Dr. Ibrahim Kaladari, the well-known dermatologist and consultant in cosmetic surgery - used to accompany their father to work, where he would meet with his colleagues and other merchants. The father used to introduce his elder son, Ibrahim, as “doctor” and Faisal as “manager”. It seems as if their father had predicted that his dream would come true; Ibrahim became a famous doctor and here is Faisal now, a chief executive officer for one of the largest and oldest institutions for financial dealings in the region – the Arab Investment and Foreign Trade Bank. Faisal received a degree in business administration from Cairo University, in the Arab Republic of Egypt, in 1981. He immediately joined the Middle East United Bank (Emirates Bank NBD), where he gradually rose up the
ranks. In that period, he learned all the banking transactions and eventually reached the topmost position there. He gained this position through knowledge, competence and experience, but what really drove him was his desire to achieve his childhood dream. As a son of Dubai, as well as the son of a merchant, and as one who spent his childhood among shops and merchants, Faisal was inclined towards trade, especially foreign trade. In particular, he was drawn to Letters of Credit (LC) because they represent an international form of payment which gives an accurate picture of trade and the economic situation of a country. Faisal searches his memory and smiles when he recounts the achievements of the many
Arab Investor 5
Arab Investor // Interview
He achieved his dream and was able to contribute to the success of leadingtrading institutions, which in turn elevated the status of the Emirates in the world economy
Al Masraf opens a new branch in Jumeirah Bank to increase number of branches to 15 in three years
LEADERS // Interview given by His Highness, Shaikh Mohamed Bin Rashed, in converting the country to intelligent systems. In 1984, when he had 33 years of banking experience under his belt, Faisal received a job offer at Dubai Commercial Bank. There, he rotated between the different sections and gradually rose in the ranks until he reached the position of General Manager of Business. He then became manager of the Al-Maktoum branch, where he stayed for twelve years, during which time he worked to improve the branch until it became the largest one. In 2000, Faisal was appointed assistant general manager for individual accounts and then he moved to the position of general manager for individual and company accounts. There, he established the Islamic Trade section, which was duly named as such in 2007. He achieved tangible successes in Islamic banking. Faisal Kaladari joined the Arab Investment and Foreign Trade Bank as CEO. He will implement the plan and the directions of the bank’s founders for the next stage. The bank’s operating strategy will be laid down so as to take it to the level of local banks through providing services at the level of the leading and distinguished banks. The focus will be on companies in the country that are working to facilitate bank operations. merchants who started out small only to become some of the biggest and most famous businessmen on the global level. His smile is full of meaning. He says he smiles because he sees how his family, his folk and many of his friends worked and struggled and succeeded within means which were limited. He says he also smiles because he achieved his dream and was able to contribute to the success of leading trading institutions, which in turn elevated the status of the Emirates in the world economy. He adds that by the grace of Allah and because of
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the guardianship and support of our excellent leadership, any member of our citizenry who aims to succeed will find only support and encouragement from this excellent leadership.
About the crises and difficult times that he faced, Faisal says that he had several of those since the eighties. At first, they had negative effects but then they resulted in good benefits for the country’s economy and the banks in it.
Faisal points to the great progress and the facilitating of transactions that has occurred in the country’s banking sector. He compares the cashing of a check in the past, which used to take hours, to the transactions which occur today by phone and with the push of a button. All this progress is due to the noble directions
Faisal says they were very pessimistic in the wake of the financial crisis which shook the United States and the world. He was one of the most pessimistic ones and those who were scared at first. However, the wisdom and deftness of the country’s leadership ensured that disaster was averted. The result has been evolution and
progress in the economic situation so that the country now enjoys luxury, safety and stability. In turn, this has swung the compass of business and tourism towards us, says Faisal, and this makes him happy. Speaking about customer satisfaction in the country’s banks, Faisal says that no matter how distinguished and developed services are, customers always want more and we have to be receptive to their wishes. As a result, banks are driven into intense competition to improve their programs and introduce distinguished banking products. We have ways, says Faisal, to gauge our customers’ satisfaction, whether by direct or indirect communication, so that we can live up to their expectations. As for loan policy, there has to be caution, Faisal says, and risks have to be spread in a basket of products. One has to be wary of focusing on one product only, such as real estate, real estate loans or shares. We follow the instructions of the Central Bank, says Faisal, to preserve the economic situation of the country. As for loans for residents, Faisal adds, we have to distinguish between, on the one hand, leading companies that some of them own and which are concerned with investment and development for the country, and on the other hand, companies that do not invest in the country. In addition, we have to get to know the owners of these companies closely and investigate the financial solvency of each company and on that basis a decision can be made. Natheem Mohamed Sabbah - Abu Dhabi November, 2013
Al Masraf (Arab Bank for Investment & Foreign Trade), the premium bank for investments and foreign trade in the region, opened a full-service branch at Umm Suqeim, Jumeirah Road, Dubai. To mark the opening of the fourth branch in Dubai and the ninth in the UAE, Al Masraf hosted a launch ceremony at the new branch. With the bank’s headquarters based in Abu Dhabi, it offers a complete line of consumer and investment banking services. Through its relationship based approach, Al Masraf offers tailor-made finance solutions especially to its corporate clientele.
The bank has an asset base of approximately AED 12.5 billion. One of the major revenue drivers of the bank is its foreign trade business, which reached approximately AED 6.2 billion at the end of September 2013. The bank is currently poised for a significant growth achievement. Al Masraf’s cost efficiency and the return on assets is one of the best in market, as more than 45% of its operating income is generated through the non fund based business.
Keeping in mind the business potential of Dubai and knowing it’s demography, Al Masraf has a firm commitment to expand its presence in the region. The branch has a well appointed Corporate Banking unit serving the corporate clients and will soon open a dedicated Corporate Banking branch on Sheikh Zayed Road. The bank has a representative office in Tripoli, Libya and has further expansion plans, moving in to Algerian market.
Al Masraf (Arab Bank For Investment & Foreign Trade) was established in 1976 by the Federal Decree no. 50, issued and signed by HH Zayed Bin Sultan AlNahyan, the president of the UAE. The Bank is owned by the Federal Government of the United Arab Emirates (42.28%), The Libyan Foreign Bank(42.28%), Libya and Banque Exterieure d’Algerie – Algeria (15.44%).
“Al Masraf is proud to bring its 37-year tradition of operating a full service bank to the people and businesses of the UAE offering the entire suite of banking products on corporate banking, transactional banking, SME financing and business banking. We are extremely delighted to announce the opening of our new elegantly designed branch in Umm Suqeim, signaling our special commitment to customers in this Emirate” said Mr. Faisal Galadari, Chief Executive Officer of Al Masraf.
About Al Masraf:
Al Masraf encompasses the vision, wisdom, and ambition of His Highness Sheikh Zayed Bin Sultan Al Nahayan, and rulers of other Emirates. The bank was formed with the purpose of instilling co-operation amongst the Arab countries and in turn promoting joint economic ventures. Al Masraf is proud to be marching towards modernization aimed across all levels of the organization. The dynamic mission and ambition to thrive being the ‘Preferred, Trusted, and Pioneering’ Bank in the region. Al Masraf has developed considerably over the years and continues to enjoys sound correspondent relationships throughout the globe.
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DUBAI THE CAPITAL OF THE ISLAMIC ECONOMY?
Arab Investor // Cover Story
Sayd Farook, PhD Global Head Islamic Capital Markets,Thomson Reuters
Arab Investor // Investor Brief Dubai the Capital of Islamic Economy may have implications for global trade far beyond its shores. Dubai’s ambition to be the capital of the Islamic Economy is bigger than what most can fathom. The Islamic Economy is more than Islamic finance and halal chicken; it is a multi-billion dollar industry that will have a monumental impact on global trade. If comprehend with a sound strategy, Dubai has the potential to play a much more significant role in this context than ever assumed. And surprisingly, it has little to do with the city and more to do with its extended commercial organizations.
With 1.6 billion Muslims around the world growing at more than two times the global population, companies operating in industries ranging from food to finance to fashion recognise there is a $4.8 trillion consumer market for Islamic products. Yet, it is not an easily accessible homogenous market due to a multiplicity of standards, local cultural preferences and manufacturing economies. Currently, regulations for halal foods remain in most instances localised and are controlled by more than 300 disparate certification bodies around the world.
What does this have to do with Dubai’s potential as a hub for the Islamic economy? Dubai’s strategic global assets place it in a unique position to rapidly change the landscape of halal product commerce through its tradebased tentacles, igniting the potential of the Islamic organizations. For example, DP World controls more than 65 marine terminals across six continents including new developments underway in India, Africa, Europe, South America and the Middle East. In the UAE itself, DP World operates four ports that manage the largest capacity in the Islamic world. Expansions this year have resulted in significantly more capacity and will continue in 2014. Dubai International was ranked the world’s 6th busiest cargo airport in 2012, handling 2.26 million tonnes of cargo and recording year on year growth of 3.1%. Alone, Emirates SkyCargo, the largest airfreight carrier in the world by tonnage, transported 2.09 million tonnes across its network in the 2012/2013 financial year. Similarly in 2012, Dubai International was
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ranked the world’s second busiest airport for international passenger traffic. The airport’s international passenger traffic hit 32.6 million in the first half of 2013 following seven consecutive months of five million-plus traffic. The UAE and specifically Dubai’s influence on global trade throughout both the Muslim and non-Muslim world provides the Emirate with a unique opportunity to drive a Dubaisponsored, but globally accepted quality standard (inclusive of halal assurance). This standard could be used by all trading and export companies to essentially ‘passport’ their goods across different borders. However, such possibilities are subject to one caveat. If we have learned anything about global standards, it cannot to be a ‘one city only’ initiative. Dubai can lead it, seed it and sponsor its existence, but it needs to be able to work with the key stakeholder bodies around the globe such as the Islamic Development Bank (IDB), the Organisation of Islamic Cooperation (OIC), Standards and Metrology Institute for Islamic Countries (SMIIC) and the key importing countries to ensure maximum global acceptance. Today, Dubai may not be thought of as the hub of Islamic Economy, but this wouldn’t be the first time Dubai has fundamentally changed the landscape of a global industry. When Dubai Airport started out in 1959 followed by the establishment of Emirates Airlines in 1985, no one imagined how it could shift the centre of gravity in global travel routes and the interactions between the world’s economic centres. Owing to its strategic foresight, Dubai is now firmly implanted as the nexus between East and West; developed and developing; North and South; and a slew of other intercontinental relationships.
Dr. Sayd Farook is responsible for leading the Islamic finance value propositions in the Thomson Reuters group. Capitalising on his triple concentrations on law, business and Islamic finance, he oversees Thomson Reuters services to governments and businesses in relation to their strategies related to Islamic finance. Dr. Farook is currently working on a number of ground breaking projects that will revolutionise the development and democratization of the Islamic markets. These include the delivery of knowledge and analytics, research and consulting services.
If done right, we can someday look back to 2013 as the year Dubai began to fundamentally change the Islamic Economy.
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The food sector struggles to keep up with demand from increasingly aware Muslim consumers who are becoming more vocal in terms of what products they want , as well as what they do or don’t consider to be Halal
Food and Finance – common roots, but still growing apart
Arab Investor // Issue file
By Abdalhamid Evans
Arab Investor // Food And Finance Dubai’s recently unveiled strategy to be the capital of the Islamic Economy brings with it a range of exciting opportunities as well as some interesting challenges.
Food and Finance are the two most emergent opportunities. Islamic finance has excess liquidity and limited Shariah-compliant investment opportunities; the expanding Halal food sector is under-supplied and in need of capital. So what is stopping these two from working together for their mutual benefit?
fully engaged with the Halal food market, but they also have strong opinions about what constitutes Halal compliance. Indeed, the expansion of the food sector is driven from both the consumer and producer ends, as consumers become more aware and vocal, and producers look for new opportunities in increasingly saturated markets.
Over the past decades, the Islamic Finance and Halal Food industries have developed in separate, isolated silos. Despite having common roots in the Qur’an, (and specifically even in the same chapter, Surat al Baqarah) there has been very little interaction between these two Shariah compliant industries.
Another point of divergence is that in the Islamic finance industry, Shariah scholars tolerate minor amounts of interest or impermissible income, and the investment can still be considered compliant. In the food sector, any minor trace of haram ingredient, such as pork DNA, would be rejected out of hand by the overwhelming majority of Muslim consumers. While there is zero tolerance among informed consumers, there is – paradoxically – a considerable degree of tolerance of the prohibited among educated Islamic Finance scholars.
One the other hand, there are continued reports of excess liquidity in the Islamic Finance sector, albeit mostly related to institutional funds that are looking for fixed-income investments opportunities. According to data from Thomson Reuters, Islamic finance assets reached $1.32 trillion at the end of 2012; average growth over the past four years has been at 19% and sukuk market is growing at 10%. Overall, growth is 50% faster than conventional banking in many of the core markets and yet, somehow there is the feeling that something is missing; engagement with the real economy has not been achieved. The food sector, on the other hand, struggles to keep up with demand from increasingly aware Muslim consumers who are becoming more vocal in terms of what products they want, as well as what they do or don’t consider to be Halal. One glaring difference between the two is in terms of engagement. Over 70% of the Muslim world is still un-banked in any shape or form, let alone with an Islamic bank. Islamic finance does not have much traction with the average man in the street, and most would not be that familiar with the technical terms of the Islamic finance world. In the food sector, it is a totally different story. Not only is the average Muslim, both men and women,
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The Islamic Finance industry is largely controlled by Muslims, by scholars and senior executives. Yet, the common complaint within the industry is that a high percentage (one bank CEO stated as much as 85%) of Shariah compliant funds get reinvested in the mainstream interest-based markets to earn the profit that is later returned to the investor as being ‘shariah compliant’. In direct contrast, the Halal food industry is largely in the hands of non-Muslim controlled companies, and yet the majority of them are very aware and respectful of the need to be compliant, and will convert their production lines to being 100% Halal in order to secure the trust of the consumers. As these two sectors expand, we can expect to see more avenues of convergence over the course of time. Following the example of Saudi dairy giant Almarai, major corporations in the food, personal care and pharmaceutical sectors could issue sukuk for expansion, and at the same time increase their credibility in the Halal marketplace. Given the real employment shortage within the
Arab world –it is estimated that 60 million jobs will be needed by 2020 – one would hope the increasing focus on the Islamic Economy will be a catalyst to create more overlap between the twin pillars of food and finance. However, until there is greater awareness by governments, more transparent regulatory frameworks in the food sector, and more adventurous capital in the finance sector, one suspects that the silos may remain in place for some time yet. From the perspective of the Islamic economy, these two sectors clearly belong together, but it will take time and some imaginative, bold moves to bring them closer together.
Abdalhamid Evans is an advisor to Thomson Reuters on matters relating to the Islamic Economy and is the editorial director of the Global Islamic Economy Summit – GIES2013.
One gets the feeling that when and where that happens, there will be a real engine of growth kicking into gear.
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The ethical basis of Islamic finance should appeal to non-Muslims
Is it time to stop calling it Islamic Finance? By Russell A. Haworth
Arab Investor // Issue file
Managing Director ,Middle East & North Africa ,Thomson Reuters
Arab Investor // Islamic Finance Islamic finance has enjoyed success as a result of its Islamic identity. But if it wants to make the leap from a niche industry to a strong and bigger component of the global financial system, it will need to broaden its appeal outside of the devout Muslim market. The values that guide the industry should stay, but the limiting name must go.
The Islamic finance industry developed from theoretical conceptions about what form of economic organization was acceptable based on discussion by Islamic economists and Shari’ah experts over several decades. However, it didn’t grow as industry until the 1970s when the increase in oil prices led to surplus liquidity in the GCC. Dubai was the first city to launch an Islamic bank. Other countries like Pakistan and Malaysia saw Islamic finance as an outgrowth of efforts to Islamize the economy in the former and a broader industrialization strategy in the latter. With the initial growth occurring in the Middle East and North Africa, Pakistan and Malaysia, the focus on Muslims and use of the Islamic label was wholly appropriate. According to the Ernst &Young Islamic Banking Competitiveness Report 2013, global Islamic banking assets reached $1.3 billion at year end 2011, and will grow to reach $1.8 trillion by 2013. The top 20 Islamic banks make up 55% of total Islamic banking assets and are concentrated in seven countries, including those within the GCC, Malaysia and Turkey. Islamic banks will have to broaden the marketplace or face destructive competition in increasingly competitive markets. While the industry’s assets are concentrated in Islamic countries its products are becoming increasingly appealing to non-Muslims. In Malaysia more than half of the country’s customers are non-Muslims (albeit due to government incentives that have made Islamic banking there more cost competitive) and in the United States Amana Funds, which include two of the largest Islamic funds in the world, successfully attracted many non-Muslim investors after being recognized for their leading performance by Morningstar. There is most certainly significant opportunity for Islamic finance to reach across faith lines
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Russell A. Haworth Russell was appointed Thomson Reuters Managing Director for Middle East & North Africa in April 2012 and is based in Dubai. His prior role with Thomson Reuters was Head of Strategy & Business Development for Asia, based out of Hong Kong. He began his professional career at Xerox Business Solutions in London and then held various consulting roles in strategy and finance before joining Thomson Reuters in 2000, as Director of Corporate Finance, following which he headed up Corporate Development for the Americas, between 2001–2008. Russell holds a first class Bachelor of Science degree in Mechanical Engineering from Leicester DeMontfort University and an MBA from the Kellogg School of Management, Northwestern University in the United States. He is also a certified management accountant and a chartered member of the UK’s Institute of Marketing by offering compelling financial and economic rationale. This opportunity is even more significant due to broad reaching consumer dissatisfaction following the financial crisis of 2008-09. The ethical basis of Islamic finance should appeal to non-Muslims who feel that banks are operating in their own interests to the detriment to their customers. Islamic banks, in contrast, operate using contracts that strip out much of the uncertainty associated with banking and are intended to put the bank and customer on an equal footing. In the current economic environment, this should be a significant selling point for Islamic banks seeking to gain market share in non-Muslim markets. However, many countries hurt by the financial crisis have majority non-Muslim populations; therefore the use of the ‘Islamic’ label will be a non-starter. In markets like the United States, South Korea, Nigeria and India, the use of the Islamic label provokes a strong response from anti-Muslim groups that is unrelated to the substance of Islamic finance, but on a negative perception
of anything ‘Islamic’. Non-Muslim consumers exploring alternatives might have a knee-jerk reaction that the ‘Islamic’ label signals that the industry is just for Muslims. Notwithstanding the falsity of these claims, the Islamic label can act as barrier to the industry’s goal of explaining the benefits of the product on its merits alone. Not only does this limit the appeal of Islamic finance for non-Muslims, but by limiting the market to mostly Muslim consumers, it also stifles the drive to improve products and make them more competitive with conventional financial products. The counter argument to shifting away from the ‘Islamic’ label is that the industry has succeeded during past decades as a result of, not in spite of, its Islamic identity. Moving away from it
could isolate it from the very consumers who have helped it succeed to this point. So if we dispense of the ‘Islamic’ label, what would best take its place? Turkey calls it participation finance. Others have suggested ethical finance. Not all of the challenges facing the industry will be solved by changing its name to either one, but to live up to its new name inclusivity would have to be improved in the case of the former and matching the merits of the conventional ethical finance sector would be imperative for the latter. These challenges should be embraced, and not avoided as it will make Islamic finance stronger, more competitive and ultimately result in the industry being positioned higher up in the global financial architecture.
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The current chaos provides the best fertile grounds for new ideas
Image Supremacy of Islamic Economy
Arab Investor // OUTLOOK
by Naseem Javed
Arab Investor // OUTLOOK What creates groundbreaking revolutionary movements out of simple ideas? Simplicity, easy access with little or no cost followed by a clear message of powerful image and personality. Islamic economy estimated at $4-8 trillion, servicing 1-2 billion all over the world has most of these key components. In order to become a new global movement, it’s the advanced level granular issues that require calibrated boost so it can claim its image supremacy; it is all possible, and more importantly how will it work?
In the global race for image supremacy, the world of power brokers is clearly divided into two distinct groups, the one that always wins and the other that always loses. The winning teams deploy all the rules of engagement of image supremacy to ensure victory and the losing teams are not even aware that there are such rules that exist. Islamic economy driven by financial services have already demonstrated how to play the game with some level of command and control, while many millions of other enthusiasts are engaged in Islamic commerce still trying to play catchup. Only an advance level of skills will create the required level of perfection and quality required in the mainstream mind share. Such realization will shift the issues into the sophisticated arenas of soft asset management and drive the harnessing of soft power as an ultimate strategy.
Where is the center of gravity of the soft power of Islamic economy? Soft power, is the sum total of innovation, ideas, talent, performance, entrepreneurial energy and tactical wisdom. It must find its hierarchy at every major crossroad and assist in building bridges. Will Islamic economy rest within religious overtones or become fully transparent and grow independently? Will it remerge as a symbol of nationalism country by country or become a global friendly giant? Will Islamic entrepreneurs become legendary examples of their work and open vertical markets? What are the special gateways to enhance all the economical activities to mold into proper hierarchies? How will all this move forward while scoring big on its image supremacy? A new age understanding is essential; the world just evolved rapidly over the last few years, we have already crossed an unknown chasm but have not yet looked down at the deep fathom, the impact and aftershock are all in the making. Where we are and where are we headed under the so-called
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big economy of the west, is an all out upside down model. We are slowly leaving the old world of hard asset centricity, like thinking of putting too much emphasis on having an ultra modern plants bending pipes to make designers furniture and ignoring the mind bending exercises to question why we need to bend the pipes in the first place. American auto industry and the bankruptcy of Detroit prove this disconnectivity based on hard asset mentality and calls for drastic shift in soft power thinking. Soft asset management when combined create the ultimate soft power; the real driver of new age commerce and quality of life. How unique is Islamic economy in its products and services? Last century the world of business enjoyed the ‘age of scarcity’ where anything with enough noise got all the attention and sales, today
in the ‘age of abundance’ for every good product and service there are already a million such things. To stand out clear of the pack there are ultrarefined processes and only deeper understanding and new age literacy will ensure survival of new ideas. How can the solo players and practitioners of Islamic economy dramatically improve their image and identity so that the sum total of their performance will become the next new age tidal wave? How informed is the society to fully grasp new issues? Is Islamic economy a new age idea for the masses? In dark ages it took almost a century to acquire some worldly knowledge and person died by the time one could spell the word encyclopedia,
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Arab Investor // OUTLOOK
The new type of domain names will dominate the global markets. Names like dot halal, dot bank, dot loan will alter the business models.
Arab Investor // OUTLOOK now in the digital age where it only takes the first ten years of life to become an expert at dozens of different fields. When we have the most informed society in the history of civilization, why is it that the world is the most disconnected? Is this the right combination for the germination of new grand solutions? The current chaos provides the best fertile grounds for new ideas, but are the ideas flying on the right wings. Is the knowledge simple
enough to multiply, easy enough to adopt and valuable enough to bring prosperity and distinct advantages. Is Islamic economy bundled as such to become top of mind agenda got the global populace? Anything less would make the ideas struggle. The progression of the current world economy must take some responsibility for creating 100 million skilled people out of work and another 100 million educated youth also out
of work. Both the business modeling and the educationalÂ curriculumÂ are at breaking points. Will the 100 million educated youth become a lost generation or will act as part of the most informed force of the public consciousness and solve global problems? No matter what, such misplacement of masses will end up accumulating at the fringes of old ideologies and create the required centrifugal force to spin out new age revolutions.
Will Islamic economy become
the new-age solution economy? Will it become a simple alternate to global chaos, accessible to all in simple terms and procedures? Image supremacy ideas lies in the hands of new age thinking; global issues and interdependence to form better links, commerce and quality of life. Isolationism will not work as the global consciousness has already started to seek out smart power nations over super power countries. Here are top issues critical for the Islamic economy payers to achieve some level of deeper understanding towards the goal of mastery
New Age Thinking: Systematic and continuous embracing of new age tools and global connectivity to uplift the widely scattered SME engaged in Islamic economy allowing them to boost them into vibrant player on global basis.
Global Nomenclature Issues: The world of global naming complexities is currently passing thru the global mega shift of digital and cyber name warfare. The new type of domain names will dominate the global markets. Names like dot halal, dot bank, dot loan will alter the business models. Less than 5% percent business executives around the world are even aware of such mega naming changes expected later this year. What will the player of Islamic economy do, how will they also handle the religious connotations in their own message for the expanding markets? What are the alternate nomenclature options and can a
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formal Commission come up with a series of solid recommendations for the entire global namebranding usage?
Image Supremacy Protocols: when rules of image supremacy protocols and the three dimensional aspects are applied to the existing business models majority requires dramatic change in thinking and execution while maintaining full force of Islamic values, economical impact and unique trading system. However, image supremacy pursuit and changes require advance level education, and must be scalable country by country and region by region.
Global Friendly Programs: What are the hot buttons to get attention of the global populace and turbo boost activity on all fronts? Will it be Islamic hospitality, halal food or Islamic banking; all of them plus many more ideas? What the world is looking for and what the Islamic economy has to offer, can all this be balanced under the rules of achieving distinct image supremacy?
Naseem Javed, a corporate philosopher and founder of the image supremacy movement is a world recognized authority on global cyber trends, naming complexities impacting business performance. He is founder of ABC Namebank, a world-class speaker, syndicated columnist and author of several books. His new work on Image Supremacy educational program is designed to teach innovative performance and bring large scale education in selected market.
Under the leadership of His Highness Shaikh Mohammad Bin Rashid Al Maktoum, VicePresident and Prime Minister of the UAE and Ruler of Dubai, now provides the centrality to open such debates, to offer elegance and intellectual balance to such complexities and set the stage in Dubai as the best place in the world to lead the innovative charge of image supremacy of the Islamic economy with a new age agenda. The future looks brighter.
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Muslim tourists - Engaging the world’s largest un-tapped tourism market
Arab Investor // Travel
By Rafi-uddin Shikoh
Arab Investor // Travel The holiday experiences this summer of two friends highlights the deficiencies in the global offering for Muslim tourists, as well as the huge opportunity for destinations that can successfully cater to a market worth over $120 billion a year.
Muslim tourists, like any other tourist, will respond to offerings that can check off all their travel considerations
Kahlid, an executive from Saudi Arabia, wanted to treat his wife and pre-teen son and daughter to a dream trip to the United States. They travelled business class and stayed in luxury hotels in New York, Orlando, Disney World and Washington DC. They enjoyed the sights and the differences, but are unsure whether to repeat the trip because they struggled to find halal food and convenient places to pray. His wife and daughter love swimming, but weren’t comfortable swimming in the coed pools offered at the hotels, having previously only attended women-only and modest dress pools at home. Kahlid is now thinking of following the example of another friend, Fateh. Fateh decided against traveling away from his home country, Turkey, opting for a new five-star coastal resort in Didim. On his return, he excitedly recounted how comfortable he and his family felt. There were separate pools and beaches for families, men and for women only. All the food was certified halal. Every hotel room received calls to prayers.
SPECIAL REQUIREMENTS The study shows that Muslims value comfortable seating, friendly airlines, clean rooms, and central hotel locations just as much as other travelers, but a majority express dissatisfaction related to their faith and values. Halal food comes at the top of their list of needs, with prayer rooms and family-friendly environments also ranking highly. Some destinations are already addressing this opportunity. Gold Coast Australia setup a special Ramadan lounge this past season; Thailand offers halal-certified spas; and halal food from immigrant Muslim populations in London, Paris and Munich are being touted by travel promotion agencies. But there is a lot more airlines, hotels and travel destinations can do to attract this audience.
Travel to predominantly Islamic countries is obviously a much easier lifestyle choice for most Muslims -the top three destinations for Muslim travelers are Malaysia, Turkey, and the United Arab Emirates. The next five countries on the list however, have minority Muslim populations: Singapore, Russia, China, France, and Thailand.
Meanwhile, competition from more familiar Muslim markets will continue to increase. Dubai for example is already a top tourism destination for Muslims—offering a blend of modern shopping, family-friendly entertainment, prayer spaces and a full spectrum of global halal cuisine. Dubai will continue on this momentum as the massive Dubai International Airport expansion is poised to take it past London Heathrow to become the world’s busiest hub by next year.
United States, UK, France and Germany).
With the right offering and marketing, there is a huge opportunity for countries to grab a larger portion of the Muslim tourism trade, which is growing faster than any other segment of the travel market. Muslims accounted for just over 12 percent – or an estimated $126 billion – of total expenditure on leisure, business and other
Muslim-majority destinations not yet on the Muslim tourist radar have a tremendous opportunity in front of them. Distinct opportunities also exist for destinations with Islamic heritage (e.g. Saudi Arabia, Uzbekistan, India and Spain) or those with a large Muslim diaspora (e.g. South Africa, India, China,
Muslim tourists, like any other tourist, will respond to offerings that can check off all their travel considerations. Currently they are having to compromise. Given the size of this audience, and given that competition for this audience is heating up—tourism players can only ignore this market at their own peril.
THE RIGHT CHOICE
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travel in 2012, according to the Global Muslim Lifestyle Tourism Market 2012 Study by DinarStandard/ CrescentRating. That is twice the amount spent by Chinese travelers.
Rafi-uddin Shikoh is CEO and Managing Director of DinarStandard, a specialized research, advisory and business media firm empowering niche emerging markets for growth and global impact.
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Leadership and Compelling Futures
Arab Investor // Outlook
By Ibrahim Turaani
Arab Investor // Outlook Great leaders have –throughout history-- played major roles in events and junctures that have made history. In business as in sciences and the arts, in war and peace and in the struggle for freedom and independence, there were men and women who endeared themselves to their cause and their people. There were men and women who transformed nations, written the destiny of people and altered the course of history itself. There were men and women who have restored to companies a sense of purpose and direction. There were men and women who have given companies their road map to greatness. Despite considerable differences in discipline, style or any number of intrinsic qualities among great leaders, there is still an invisible nexus that binds them together. It is the content of their character, the singularity of their purpose, the audacity of their dreams, their ethics, honor, esteem, integrity, prudence, fairness, and wisdom that from a common, DNA-like, signature distinction.
At every opportunity, leaders need to demonstrate what the vision looks like, what it feels like, and how people can live it today as well as in the future.
Leaders by virtue of the word itself are entrusted with a custody and care for others. Leadership—therefore—is inherently about an honor tempered by obligation and duty, an authority tempered by stewardship, power restrained by compassion. In a few days the UAE will celebrate the 42nd anniversary of its union and pay tribute to the late Sheikh Zayed Al Nahyan the revered founder of the UAE who had declared the emirates as a federation. The declaration engendered a vision so invigorating and potent it created the future as we see it today some forty two years ago and it still inspire its people and it still move the country from strength to strength catapulting it to many firsts on many scales.
Powerful declarations move people unwavering to commitment
On May 25, 1961, U.S President John F. Kennedy addressed joint the session of Congress and made a declaration that the U.S should put a man on the moon and return him safely to the earth before the end of the decade. The U.S space agency at the time had the knowledge of what amount to only 25% of how to put a man on the moon. In a speech at Rice University in 1962, Kennedy proclaimed “We choose to go to the Moon in this decade and do the other things, not because they are easy, but because they are hard.” These and other declarations by President Kennedy transformed the whole American nation and their relationship with our silver satellite. On a visit to Houston Space Center on November 16th 1963 a mere six days before he was assassinated and on his way out after he was briefed by NASA scientists about their lunar quest, he surveyed a man dutifully
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mopping the floor across a hallway. Kennedy made a detour towards the man, shook his hands, asked him for his name and asked him— albeit self-evident--what did he do at NASA. “I am working on sending a man to the moon Mr. President” said the man with pride and dignity. There are many stories similar to that of that NASA employee in the corporate world. There are also cultures within organization that rouse people to such commitment and attitude. But what is it about leaders and corporate culture that engenders such attitudes in employees? How can leaders create such a following where people embrace the leader’s vision wholeheartedly? Daniel Goleman described many types of prerequisite leadership qualities that give some clues and answer these questions. “ at every opportunity, leaders need to demonstrate what the vision looks like, what it feels like, and how people can live it today as well as in the future. They use themselves as instruments of discovery and change; get close to the process….. Ideally, in each interaction, each decision, leaders actions are consistent with their own values and with the values of the organization. They lead through coaching, vision, democracy, and respect for the people around them”1. Goleman also addressed the traits of leaders on the opposite side: “Other competencies such leaders lack include the ability to collaborate or communicate effectively.…..the business world is rife with coercive leaders whose negative impact on those they lead has yet to catch up with them.” Throughout history great leaders have exhibited and embodied vision, clarity of purpose, integrity, humility, discipline, courage, justice, oratory, an abiding sense of duty and trustworthiness and
Ibrahim Turaani Leadership Consultant and Executive Coach CEO, Jadara Training and Consulting
many more traits which altogether made up their legacy. The one quality that reveals nearly all of the others and renders them clear is the ability to communicate powerfully and prolifically. This ability combined with the ability to focus on results make a powerful combination. A key issue in achieving extraordinary results is helping people know where, how, and when and having that message delivered in multiple format and time frames.
Declarations create a vivid future Words of vision spoken powerfully and with belief and conviction do not ever relate to “current reality”. Rather they are independent of it and removed from it by virtue of the impending possibilities opening up at the moment they are spoken. The future emerges in the mind of followers as it is “declared”. Consider for example the sheikh or minister who after the exchange of matrimonial vows declares: “in
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Arab Investor // Outlook
Leaders can engender an unwavering commitment in their followers when they speak with total belief and deep conviction about the current reality.
Arab Investor // Outlook Closing the gap does not necessarily mean that the company’s culture and employees collective attitude is changed;
the power vested in me I now pronounce you husband and wife”. It is at that moment that a future—marriage--is created. It is at that moment that a man--who moments before was a total stranger to an entire household--becomes son-in-law. And it is at that moment that an inviolate relationship with the mother of the bride-to-be is launched so that if she covers her head—in Islamic faith—she would immediately and unabashedly remove her head scarf in his presence.
When companies, for example, link satisfaction score to employee rewards, employees often come to see the scores as ends in themselves. Instead of focusing their energy and creativity on improving customer experience and relationships, employees get creative about gaming the system.4 When measure are taken to “fix the problem”, the measures begin to loosen as the intensity of the “problem” is lessened.
The leader primary role is to set the course I frequently ask CEOs if they thinks that their organization provide superior customer service. The answer typically comes emphatically in the positive; “yes” they would invariably say “we are always working on providing our customers with the best service and we encourage all of our employees to do so” they would add.
The Ritz- Carlton Hotel—in its quest to reduce lost customers from 6 to 3 % in 1994 conducted a survey every three months.5 The RitzCarlton used surveys only as a snapshot of what the customers demand at the moment but not as a tool to introduce nor as a reason to implement changes. At the core of how the Ritz-Carlton is able to continually and persistently provide superior customer service is “The Employee Promise”;
When I ask the pointed--“How do you know”— question, their enthusiasm would fade away; “I am not sure” they would say “but it’s part of our culture and vision to be the best in ….”, they fill the blank with ornate language carefully crafted to outdo the next company’s statements. Many would point to their company’s customer survey as proof-positive of their success in providing “quality customer service”.
At the Ritz-Carlton, our ladies and Gentlemen are the most important resource in our service commitment to our guests.
Problem solving is not creative thinking Surveys are only good for measuring where you are in relation to where you want to be. Using surveys as tools to close the gap is delusional.
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Self-deception not only ignores the cause and effect of the gap but it also refuses to draw the obvious inference from them. Namely; that the gap is a moving target and efforts to close it today may fall short of the mark tomorrow; what customers demand today is not what they will demand tomorrow.
By applying the principle of trust, honesty, respect, integrity and commitment, we nurture and maximize talent to the benefit of each individual and the company. The Ritz-Carlton fosters a work environment where diversity is valued, quality of life is enhanced, individual aspirations are fulfilled,
and the Ritz-Carlton Mystique is strengthened.6 You see any time you work on the measurement of something, you do so with two things in mind;
Numerous studies shown howthousands of organization failed in bridging the gap between where they are and where they desire
To measure against a set standard; a “predefined ideal”. To put in place corrective measure(s) to reach the “predefined ideal” when it is not realized.
Becoming is a journey Take this to an establishment that wants to set, measure and achieve a high customer satisfaction. It conducts a survey and if the results are not up to standard it institutes a corrective action plan to do about-face in customer satisfaction; (the ideal). The problem with these objectives is that they are--both by design and in the mind of people involved— focused on the end result. The glitter of the endresult and the gifted language with which it is stated keeps everyone engaged in its pursuit. A destination-focused effort forfeits the pleasure of the journey and abandons what could become of “you” along the way. On the other hand the journey is a process of “Becoming” and keeps you involved in the exuberance of the moment. It keeps you focused on what matters now and keeps all individuals in the organization fully expressed and working in concert. Success in guiding the entire organization and keeping followers engaged in the intrigue of becoming and the sentiment of self-mastery is the hallmark of legendary leaders. There are numerous studies that have shown how thousands of organization failed in bridging the gap between where they are and where they desire to be on various strategic standings. The corporate record is dismal as 70% of business
strategies fall short of full implementation.
prodding and enticement are short –lived because they are tied to something outside the person(s) involved and—therefore—skin-deep and temporary at best.
Here are very important points to consider:
The process vs. the end-result Customer satisfaction become an end by itself and thus becomes the focus of the entire organization. Every one becomes consumed by it and when it is achieved it gives the entire establishment a relief and calls for celebration and rewarding key employees. Because this engagement was tied to an end result, when it is accomplished employees quickly fall back into their old habits, familiar mind-sets and the way they view their dealing and interactions with customers until the next survey comes around.
Have you ever ponder the question of why great companies sustain year-to-year growth and profitability records despite economic downturn and fierce competition? Have you ever been awe-struck by how efficient your stay at a top name hotel from the moment you make your reservation through the expedience of checkingin until the moment your luggage is gently and delicately placed in your waiting car?
A Change in behavior is not a change in the mind-set The employees think they must change themselves, their attitude and the way they deal and interact with customers so that they can live up to this goal; (Ideal) of how they should satisfy the customer. The changes that come out of the (Ideal) and out of the management
Goals achieved merely as a measurement lead to relief. When set as a natural process toward the embodiment of shared values and meaning, they create momentum.
Companies that thrive and survive share many qualities, top among them is a leadership able to articulate, motivate and inspire action and in that order. One of the hallmarks of great leaders is their ability to put in words a laserfocus projection on the screen of the future and in the minds of their followers. It is not suave words and commanding eloquence that create this future rather it is the unmistakable belief on the part of the leader fused with his integrity that when he/she speaks, he/she move people notwithstanding Patrick Henry’s exclamation “Give me liberty or give me death!”
Declaring a future by influential leaders is— in many ways--much like creating in the art, science, or literature. When a work of art is finished and revealed, its creator experience a flow in energy, and an excitement and momentum that becomes a springboard for more creations. Take for example J.K. Rowling or Steve Jobs or Steven Spielberg. When they finish creating one of their masterpieces, they don’t experience “I am glad this thing is over with” kind of relief rather they experience an excitement and momentum that move them onto the next creation.
How do great leaders inspire by declaring a future? The first rule for declaring an inspiring future is that the declared future has to speak to everyone in the organization. It has to move them emotionally and it has to create an urgent and powerful sense of alignment and a keen sense of personal obligation. Leaders can engender an unwavering commitment in their followers when they speak with total belief and deep conviction about the current reality. They address the underlying
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Arab Investor // Outlook
Legendary leaders open up a space into which people step with energy motivation inspiration and commitment.
Arab Investor // Outlook
The paradigm shift begins with the leader
issues of their organization. It is this factual transparency, coupled with a big ‘Why” …a compelling reason, an audacious hope, a vivid picture and an impassioned appeal to tap into a higher purpose within each individual concerned that transforms people and companies. History is rich with examples of great leaders having changed the course of history in politics, wars, adventures and business by envisioning a future, declaring it with words summons the best in their people; Winston Churchill, “The finest hour” speech transformed the moral of the British people during WWII. Martin Luther King, “ I have a dream” speech evoked the human side of all Americans and raised public awareness of racial and civil rights issues that plagued American society. Franklin D. Roosevelt, “The only thing we have to fear is fear itself” which galvanized America’s will to pull itself out of the great depression. Sir Ernest Shackleton taking a stand for the survival of everyone in his expedition team in the most trying and extreme conditions of the South Pole.
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Blazing a trail at Umpqua bank In 1994 Ray Davis became president and CEO of small community bank in Portland Oregon with six branches and $150 million in assets. Davis sent his employees to the Ritz Carlton Hotels and Southwest Airlines to learn about customer service and created a culture of excellence..” the World’s Greatest Bank” became the standard greeting on the phone. He articulated his vision and strategy repeatedly and challenged his employees to create a unique experience for all customers. Today Umpqua Bank has 183 branches stretching from San Francisco to Seattle with assets of $11 billion, and a unique culture and strategy that position it as a lifestyle brand rather than as just another local bank. With its latest acquisition the bank will soon have about $22 billion in assets and approximately 400 branches along the West Coast.
Employees don’t need to change who they are to achieve the highest customer satisfaction for their organization, because this change is not a goal in and of itself. It will only happen as a result of fundamental shift in the way employees view themselves within a cohesive culture designed to promote excellence and create shared meanings and shared values across every single tier of the organization. But—as in the case of Umpqua bank--for employees to make this fundamental shift and be enrolled in such culture, there must be a leader who communicate with vigor conduct with integrity and move with conviction. When such leaders set a new course for their organizations, they effectively indulge others in the empowerment and zest of a declaration that inspires action and immediately creates an alignment between the organization and its employees. It is only then that employees begin to act from and on their own belief in the future generated by the leader’s declaration. Legendary leaders create the space from which the vision, the shared meanings and shared values germinate. Beginning with personal conviction carefully articulated and a vision so distinct and well-defined it creates a future so compelling and inspiring for others. They make the vision ever-present in the minds of people. They engage the rank and file of the organization. They—thus-- open up a space into which people step with energy, motivation, inspiration and commitment.
The Objectives And Rationale For Banking Merger In The UAE
The banking system suffers from a real surfeit by outweighing the needs of a population
Arab Investor // Cover Story
By Dr.Najeeb Abdullah Al- Shamsi Economic Adviser
Arab Investor // Cover Story The current global economic and financial crises portend painful junctures ahead for the various financial and economic structures of the world’s nations, especially those with emerging economies. The economic and financial challenges facing the UAE require the readiness of economic and banking decision makers to tackle a difficult phase, especially in the banking and financial sector, and in light of the following considerations The existence of large banking units
In light of the rapid developments in the financial sector and the economy, and in light of the data for the next phase and the global developments in the banking market, the mergers of some banking units operating in the country mean that there are large banking units which enjoy a capital base and are well positioned to compete with foreign banks operating in the country or those that will operate in the future. Furthermore, the presence of large banking units indicates the ability of good capitalism consistent with the requirements of capital adequacy set by the Basel Committee. Also, the presence of units of big banking assures the protection of the rights of depositors in these banks as shareholders in the capital of these units, and also indicates the strengthening of the financial capacity of these banks, which reflects the satisfaction of investors in shares of the banking units in the presence of the Securities market state. Additionally, the presence of large banking units means that these banks are better able to finance development projects in both the private and the government sectors, especially in light of the emergence of a budget deficit in the federal government and its orientation towards bank borrowing. Also, the demand of the state to the private sector to play a leading role in the development process after the state provided it with a suitable climate and a developed infrastructure requires national banks to be more able to finance projects and meet the requirements of the potential role of the private sector. The local governments that provide continuous support for national banks will not continue to provide this support and thus be a large capital base for banks. Therefore, the merger will make it safe for the depositors in
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these banks and the banks will be more able to attract more deposits because there will be confidence in this sophisticated banking system. On the other hand, the banking merger in the UAE, if large and powerful banking units exist, will not provide jobs for citizens and therefore will not address the demographic imbalance which is one of the development strategies in the UAE.
The need for banking units The large number of banks operating in the country, either the national ones which, until the end of December 2012, were 23 banks with 805 branches and 89 exchange offices, or the foreign banks which were 28 banks with 85 branches, is something that needs to be studied in light of the needs of society and the population. The banking system suffers from a real surfeit by outweighing the needs of a population of 8 million which is largely composed of foreign laborers. These laborers mostly have modest incomes and do not rely on the banks as much as they rely on the money changers to convert their monthly income. Therefore the merger will reduce this number to align it with the actual need which would take into consideration the banking population and the size of economic activity in the state. Statistics indicate that when the number of banks is divided by a population of eight million, we find that each bank serves a limited share of the population. Also, comparing banking units in the UAE with the rest of the GCC countries, we find a real banking glut in the UAE, particularly if those countries are seeking to reduce the number of their banks. Kuwait has 7 national banks without the bank it shares with Bahrain, while the Kingdom of Saudi Arabia is aiming to Saudizize its nine banks despite its relatively large population and geographical area. The case for Qatar is similar in that it has 15 banks of which 6 are national. The Kingdom of Bahrain, as well, contains only 9 banks, while the Sultanate of Oman has only
7 national banks and 9 branches of foreign ones. One of the indicators that call for the reduction of banks in the UAE through mergers is the low gross domestic product of the non-oil sectors in the past few years, which denotes reduced economic activity. Also, the introduction in the country of the service system automated teller which operates through a network of exchange adopted by the central bank will reduce the traditional role played by banks at present. The service system automated teller links the central bank, through exchange devices, to banks operating in the country. The presence of these devices in attraction spots such as markets and commercial centers will reduce the traditional role played by banks and the client will not need to refer to his/her bank except when absolutely necessary and only in limited cases.
Achieve good rates of profitability The ultimate goal of the Commercial Bank as a joint-stock company is to achieve the highest rate of profit in order to boost shareholder and depositor confidence with the annual budget and profit and loss report. This rate of profit is not achieved through poorly constructed banking units which are fragile in their capital base. Integration, however, can achieve this final goal for shareholders, depositors and employees. Through its financial strength, the process of integration allows the bank to expand in its Alantmaúah Policy, taking into account the lack of Alantmaúah concentrations. This expansion, by virtue of the bank’s solvency, will achieve better profits than those before the merger, as well as strengthening the bank’s dealings and
effectiveness with other banks, institutions and companies operating in the country. The merger will expand the bank’s work and will result in significant revenue and thus achieve the final goal which is good profit. After the financial situation becomes stronger under the merger, shares will be highly sought by dealers in the securities market and this demand will bring a good return to the shareholders in the bank. Additionally, strengthening the bank situation in both the banking and financial markets in the country will cause dealers to develop the size of their dealings with the bank, including increasing the size of their deposits and opening commercial and financial accounts for projects inside and outside the country which in turn would create additional revenue, maximize profitability and increase the chance of dealing in domestic and overseas markets alike. If the ultimate goal of the merger is to maximize the profitability of banks, this can only be achieved by cutting costs, especially administrative expenses that drain profits and incomes. Hence, banking mergers in the UAE contribute to profit maximization by reducing staff and members of boards of directors, thereby saving staff salaries and Council member bonuses. The savings in expenditures such as the administrative ones provides substantial financial capacity which can be employed in the development of the technical mechanisms of action of these banks by introducing advanced business technology based on specialized
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Arab Investor // Cover Story
The banking merger movement in the world should encourage UAE totake similar steps to strengthen its banking system
Arab Investor // Cover Story technical expertise. Thus, non-specialized labor will be dispensed with, especially since the UAE market lacks specialty elements which contribute to the development of those banks and enables them to achieve greater growth and more competitiveness.
the completion of the requirements of economic liberalization. The International Convention concerning the liberalization of financial services and banking, which concluded at the end of 1997, will make countries, especially developing countries such as the United Arab Emirates, take a series of measures to reduce interference, open up markets to foreign financial institutions and launch market forces on the basis of free competition.
Contribute to the strengthening of the banking and financial sectors in the UAE
The fourth paragraph of Article V of Federal Law No (10) of August 1980 concerning the Central Bank, the monetary system and the organization of the banking profession stipulates that the purpose of the central bank is “the organization of the banking profession, developing and monitoring the effectiveness of the banking system in accordance with the provisions of this law.” As such, the central bank, as the monetary authority in the country, finds it difficult to develop and monitor the banking profession and organize it with so many banks operating in the country as well as institutions and other companies subject to supervision by virtue of this law. However if the banking units are integrated it would become easier for the central bank to fulfill its role. Commercial banks, as well, will take advantage domestically of the savings offered by the merger to strengthen their financial and administrative capacity and restructure in line with the requirements of the competition. Additionally, they will be able to develop their human capabilities and their employees’ performance. External savings will also be made as represented by relations with banks, institutions and international companies, either those which include lines of credit such as international banks, or those which are handled commercially as investments and financial companies and global financial markets. National banks can strengthen their negotiating positions with global companies under the merger, or they can strengthen them with international banks to open lines of credit with them so that they get better
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preferences and advantages than in the past. Local banks that have branches abroad, such as the Abu Dhabi National Bank, Mashreq Bank, Union National Bank and others, or those that will have branches abroad, will not have the chance to compete in light of this weakness, especially in light of greater openness under international conventions, or openness in the European Common Market or the monetary union. However, when these banks are merged they will have a larger role in the international arena and will also achieve the expansion of banking services in larger geographic areas. The mergers between the national banks in the UAE will make the Central Bank, under the text of the article referred to above, develop the banking supervision mechanism to reduce the emergence of monopolies in the banking sector that are harmful to the national economy and the consumer. The Central Bank contributes to creating a more competitive and realistic banking structure to deal with the financial and banking requirements of the market, especially under competition from foreign banks currently located in the UAE, or those that will enter the market. The Central Bank requires development in the mechanism of banking supervision and tools
so that competition will not be unequal, and in this regard the Central Bank requires the introduction of banking supervision standards that are applicable in the world. Here it should be noted that the General Agreement on Trade in Services emanating from the General Agreement in WTO emphasizes in its banking and financial sections the commitment of the Member States to open their domestic markets to foreign banks to provide financial, banking and advisory services. Hence, the tightening of banking supervision and development is inevitable, and the presence of a specific number of national banks rather than this banking glut would make it easy for the Central Bank to develop the banking supervision tools to tighten controls on banks so as to provide more competitive services before foreign banks.
5- Requirements to adapt to global developments:
Global developments in financial markets and global banking require taking a number of actions to make our banks and institutions more able to adapt to global developments and situations and
This calls for the UAE, like any other ambitious developing country, to have a presence in the market for financial services and international banking and to take appropriate action to make its banking institutions more able to adapt to the requirements of the next stage. At present, this is voluntary, but eventually, under the weight of international institutions and the pressures of the new reality, the UAE will be obligated to take these steps. The banking mergers will constitute one of the steps in the context of the restructuring of the UAE economy in line with the requirements of the global economic powers.
The face of crisis requirements The stifling 1997 financial crisis in certain Asian countries (which had been until then described as “the yellow tigers” and represented a successful example of financial and economic mastery) caused the collapse and closure of dozens of financial institutions, particularly in Indonesia, South Korea and Thailand. In August 2008, the global financial crisis peaked and had disastrous effects on economic and financial conditions and on global banking. Those responsible for economic decision-making and those involved in banking and financial politics were called to study the factors that led to these crises and to learn from them. As stated in the report of the World Bank, one of the main reasons for the crises was the lack of a local market for bonds in the depth and sophistication required for the redistribution of
available financial resources in an efficient manner. These crises caused a lot of problems for many developed countries, including capitalist countries such as the United States and those of the European Union (especially the EURO countries) and led them to external indebtedness, either from international banks and governments or international institutions such as the IMF. These countries were forced to accept the terms of their creditors after their financial institutions lost hundreds of billions of dollars and the value of their currencies decreased, which was reflected in the size and value of their exports and foreign trade. These grave and recurrent crises demand that our financial institutions, including the banks, take concrete steps towards adapting to the requirements of the market in light of international conventions or the recommendations of international institutions. The most important of these steps is to accelerate banking mergers and create services for financial and banking institutions that have the ability to absorb any shock or crisis that may arise. These banks rely on themselves and not on the protection of the state or the support of the local governments that established them. In light of global developments, there will no longer be any form of support and protection, and the slowdown in voluntary mergers at present will result in mandatory enforced mergers when this form of merger becomes inevitable because of the demands of the new reality. We need to learn a lesson from the crisis of the yellow tigers.
The merger movement in the world Global developments in the banking and financial market make countries work hard on the process of restructuring their banking and financial sectors. This restructuring is done through the development of procedures and radical changes, whether in the legislative, legal, financial and administrative or supervisory frameworks. This is done in order to create
a suitable climate and find a banking conglomerate to make the banking and financial sectors more efficient and more capable of innovation and competition. Therefore, bank mergers have occurred at the global level and the merger of the Swiss Banking Corporation with the Swiss Bank Union was the most important of these mergers and formed the largest banking institution in the world. At the Arab level, Byblos and Beirut Trade merged in Lebanon, and the Saudi Commercial Bank merged with Saudi Cairo Bank. These mergers should encourage the UAE to take similar steps to strengthen its banking system and to create competitive financial institutions in order to keep up with the banking merger movement in the world and the Arab world in particular.
Dr. Najeeb Abdullah Al-Shamsi is currently the Director of Studies and Research within the GCC General Secretariat, where he was previously the Director of Commerce and Industry. Before then, he had been Director-General of the Economics Department of Ras Al Khaimah (2003); Manager of the Department of Research and Statistics, UAE Central Bank (1988); Secretary-General of the Board of Directors, UAE Central Bank (1986); and Head of Research and Studies within the Research Department, UAE Central Bank (1981). Dr. Al-Shamsi has participated in various training sessions, conferences, and local, regional and international meetings. In addition, he is a member of many organizations including the Higher Committee for Statistics in the UAE. He is also a founding member of the Emirates Writers’ Union, a member of the General Union of Arab Writers, and a founding member of the Association of Traders and Economists. He is the owner and Director-General of Al Masar company in Sharjah
Arab Investor 29
Distressed US housing: An Opportunity? By Jafer Hasnain and Omer Ahmed
Arab Investor // Real Estate
Co-Founders/Principals at Lifeline Holdings
There is another 2 years of acquisition opportunity in single family residential assets
Arab Investor // Real Estate Homeownership is an integral part of the American Dream. It peaked at 69.2% of all households in June 2006, it currently stands at 65% and is likely to trough to 63%. This decline reflects a systemic breakdown in the US housing market caused by well-documented economic distress, declines in home prices and a reduction in leverage at both the consumer and bank level. The US housing market is critically important to the economy, directly and through confidence related feedback. In its dysfunction lie some highly attractive opportunities. The assets are “real”, housing is always in demand since people need to live somewhere, where even credit impaired households have attractive cash flow, and where buying at lowered prices below current market value gives good rental yields and future price appreciation.
There is a cyclical case for US housing as selectively representing good value after recent price declines. There is an additional secular case for investing in US distressed homes as income generating assets. As individuals, we think of owning a home in the US or elsewhere, possibly renting it out as needed and generating income in the process. What we, and some others, have built are systematic mechanisms to acquire and manage at scale. The market is large, over 100 million dwelling units priced at around $170,000 each, some with mortgages, others not. The mortgage market aggregates to tens of trillions of dollars. In the recent cycle 7-10 million homes were in ‘distress’ in that their owners had mortgages they were not paying or with values oftentimes so much lower than the mortgage loan itself that there is a strong incentive to stop paying and hand over the keys, so to speak. The US has ended up with hundreds of billions of dollars in non-performing loans. Owners who default on their mortgages find access to future credit denied. Other owners are stuck paying their mortgage obligation even though the loan is much more than the value of the house, unable to sell and incentivized to behave badly and default. The answer: socially responsible institutional purchases of homes (bricks-and-mortar not mortgages), at scale, as rental property with professional property management, to generate current income through rents and capital appreciation through prudent purchasing, home value maintenance and future rebound in housing prices. Until recently, while this had been done with apartments in the US (and of course in Dubai, for example), institutional ownership of single family homes in the US is a new phenomenon.
and manage to retain asset value, but it is possible to prudently invest large sums of capital. Moody’s projects that US house prices will rise 4.2% between 4th quarter 2012 and 4th quarter 2015. Nationally, a recovering and stabilizing but not exuberant market, with major pockets of attractive house price and rent rates today. Chicago is a particularly attractive market as rents are expected to rise mid-to-high single digits as are prices. The secular trend is also strong. Between 2010 and 2025, Harvard projects 17.5 million new US households will form of which 7.9 million should be renters. The US has 21 million single family rental units, half of all rental units, with 80% owned by individuals. Institutions are a small part of the investor base and should grow over time. Operational complexity favors institutionalization of property management. Housing is not a discretionary purchase, everyone needs it. While construction has slowed the demand for housing, owned or rented, is asserting itself over even this weak economic cycle. The US has a natural growth rate of households of 1% per year from births and immigration, a million housing units. Another 0.5% of housing stock goes obsolete each year, or 500,000 units. That’s 1.5 million housing units occupied either by owners or renters. Add in a homeownership rate expected to decline from 65% to 63% over the next few years and we have 2 million homes that will transition from owner-occupied to renter-occupied status. Millions of US families will need rental housing. Lifeline (www.lifelineassets.com) and others have developed sophisticated acquisition channels, property management, rental operations and a portfolio management approach to US single family residential
Jafer Hasnain Mr. Hasnain is the Co-Founder of Lifeline, a socially responsible real estate investment fund in Chicago, which acquires and manages single family homes as income-generating assets. Mr. Hasnain began his career at Goldman Sachs in New York, and worked at Citicorp and Merrill Lynch as a strategist. He joined AllianceBernstein in 1994 where he was Senior Vice President, Portfolio Manager and Research Analyst, and built an extensive track-record in growth portfolio management, quantitative portfolio management and research analysis of financial institutions and real estate. He also focused on the complex balance sheet needs of sovereign wealth funds and global central banks. Mr. Hasnain holds an ScB in Computer Science from Brown University, an MPhil in Finance from the University of Cambridge, England, and studied towards a doctorate at the Stanford University Graduate School of Business. Mr. Hasnain serves on the Muslim American Advisory Council of the Governor of the State of Illinois. real estate investing. Lifeline’s solution aligns the interest of distressed homeowners, lenders, investors and the public. The focus is on ‘starter homes’ with values between $100,000 and $200,000 with minor repairs which then rent out. Acquisition is at significant discounts to current value seeking double digit cash on cash returns between rents and future price appreciation. The result is a conservative, real-assets based, single family residential real estate strategy that generates current income and builds in expectations for future
There is another 2 years of acquisition opportunity in single family residential assets. The market is large and attractive. For example, one midsized bank’s distressed inventory in suburban Chicago is over 1800 homes, at an average price of $140,000 that represents a portfolio of $250 million, one midsized bank, only Chicago suburbs. All real estate is local, necessitating local knowledge to acquire across multiple channels
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Arab Investor 31
Arab Investor // Special Report
Millions of US families will need rental housing
Arab Investor // Issue file capital appreciation.
The question arises whether homes can be acquired at attractive prices to generate decent rental yields and with an expectation of future price increases, and if so, where, since all real estate is local. No real estate is more local than homes. At Lifeline a proprietary methodology has been developed to evaluate the attractiveness of the top 25 cities and surrounding areas (MSA’s) to buy and rent out single family homes over a 5 year holding period. The definition of attractive includes value measures like price declines across various time periods, operating costs including taxes and maintenance costs and future growth prospects such as job growth, regional economic diversity and certain other measures of geographic attractiveness. Interestingly, our work continues to show that areas like Chicago, much of the Midwest with a few exceptions, New Jersey and places like Portland and Seattle as well as Northern Florida look attractive. Cities like Phoenix, San Francisco, Los Angeles and Atlanta as well as parts of Nevada look attractive on certain metrics but with much higher risk. Lifeline has built a portfolio in the Chicago suburbs as we have found attractive prices, attractive rents and a stable economy, with the capability to deploy nationally but very
As rental ownership shifts away from individual to more institutional, a backdrop of credit rationing, consumer behavior and demographics keeps renting viable and mitigates overbuilding.
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Omer Ahmed,President ABARIS CAPITAL ADVISORS Omer is President of Abaris Capital Advisors, a Chicago-based investment advisory firm specializing in alternative asset management portfolio structuring and advice for sovereign wealth funds, global financial institutions, international private banking operations and family offices. CAREER HIGHLIGHTS As an investment professional, Omer has advised on and allocated to a range of alternative asset portfolios in excess of $2 billion. Prior to Abaris, Omer served as Senior Managing Director at Bear Stearns responsible for the Middle East. Prior to Bear Stearns, Mr. Ahmed was President of Crescent Capital Management. He also held senior management positions at Credit Agricole Indosuez Bank, Merrill Lynch International and ABN AMRO Private Banking in the field of wealth management and alternative investments. In addition, Omer has been Executive member of the Four Star Committee for ALSAC St. Jude Children’s Hospital Charity. Currently, Omer is a board member of the Chartered Alternative Investment Analyst (CAIA) designation licensing program and is a member of the Executive Committee of the Center for Financial Services at DePaul University. Mr. Ahmed is also a Senior Member of the Advisory Board at Vision Brazil Investments; Senior Member Advisory Board at 300 North Capital Management, and a Senior Principal and Chairman of the Advisory Board of Lifeline Assets (www.lifelineassets.com). In 2013, Mr. Ahmed was inducted into the Board of Governors’ of HOBY, an International Youth Leadership program. EDUCATION Omer is a graduate of Washington University in St. Louis and also completed a post-graduate program on investment decisions and behavioral finance at the Kennedy School of Government at Harvard University.
For the GCC countries the new regulations present a serious dilemma for financing future projects
Basel regulations and the challenge for GCC central banks
Arab Investor // Special Report
By Antonio De Gregorio Lecturer, author and consultant specializing in the development of human skills.
Arab Investor // Features
Zawya projects data of projects outstanding in the GCC with maturity over one year, millions of USD
Basel III represents a unique opportunity for GCC countries to harmonize their banking frameworks and integrate closer within the global banking procedures and standards. However Basel implementation will not come without costs, as funding and capital adequacy requirements will have significant implications, Although the 2019 transitional phase appears particularly long, central banks will need to start planning much earlier to allow regional financial market players to meet long term capital adequacy and funding requirements.
For the GCC countries, the new regulations present a serious dilemma for financing future projects. This because of the relative very high size of infrastructure projects in the GCC, and because of the relatively underdeveloped regional capital markets. According to Zawya projects data, as of today there are 2,794 billion dollars worth of projects outstanding in the GCC. All countries have recorded significant growth starting 2011, particularly Saudi and Qatar. At least 70% of all infrastructure projects between 2009 and 2012 have been financed through loans. Because the requirements of Basel III to enforce matching of assets and liabilities, it will be particularly difficult to replicate the current funding structure for most regional banks, and as a consequence the new set of regulations will likely increase the cost for banks to hold long-term project debt. For the GCC countries, Basel III has intensified the urgency to develop regional capital markets, and debt markets in particular as an alternative to loan markets. Debt markets in the region have picked up in the immediate aftermaths of the crises, and since 2009 outstanding bond issuance has been increasing by about 10% every year. Although increases are significant, the absolute values are still relatively small. In particular, issuance of debt with maturity of over one year has been stagnant: (Zawya data on bonds and sukuks with maturity over one year, millions of USD). In relative terms, the UAE has more developed debt markets, with Saudi rapidly catching up. Saudi Arabia is the most active Sukuk issuer in GCC throughout the past 3 years.
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As of Now Sept 2013
Zawya data on bonds and sukukswith maturity over one year, millions of USD
Total outstanding debt still represents less than 20% of GDP in the GCC region, versus significantly higher percentage values (100% of GDP and beyond) of most other economies. As the ultimate institution responsible to provide financial markets stability and economic growth, central banks face important decisions that to some degree are mutually exclusive. Among others they will need to define compliance against regulatory requirements while supporting economic growth. Central banks in the GCC face a particularly difficult trade off, given the importance of infrastructure projects in the region and the difficulty introduced to replicate funding structures. The development of capital markets will substantially ease the challenge. Government and Central Banks will need to work on developing the debt markets in particular, to provide relevant funding mechanisms. Several governors in the GCC, including the governor of the UAE H. E. Sultan Bin Nasser Al Suwaidi, have been advocating the importance of developing debt markets as an alternative to the loans markets since the 2008 market crisis. This is becoming particularly important in considerations of Basel III, under the implementation of which banks will find it difficult to undertake project loans amid the new regulations enforcing matching of assets with liabilities within banks.
Saudi Arabia Qatar UAE Bahrain Kuwait Oman
Total 2010 8,020.20 11,551.25 13,232.31 4,924.30 6,900.00 959.00 45,587.06
Total 2011 3,126.96 18,947.44 21,914.58 3,609.41 7,031.73 418.00 55,048.12
Total Total 2012 2013 11,139.52 13,748.91 10,314.79 6,571.95 21,267.89 13,529.59 5,217.42 5,792.34 7,477.59 3,960.30 787.45 1,110.00 56,204.66 44,713.10
Antonio is the General Manager of Zawya. In his role, Antonio is responsible to set the strategy and to manage the daily operations for Zawya, a premium provider of information that was acquired by Thomson Reuters in June 2012. Over the last nine years at Thomson Reuters, Antonio has worked extensively in a number of locations and in a broad range of roles. He moved to the Middle East in 2008, first as Middle East & Africa Head of Client Training, then as Head of Account Management for Majors and later as Business Manager for Middle East & North Africa. Antonioâ€™s background is in software development. Euroserver, a software company he founded in 1996, developed Testmania.com, one of the first Italian information platforms for consumer electronics. Antonio changed to the financial information industry in 2002, when he joined as Head of Sales the Advanced Information Management Software company, a leading financial information integrator based in Vienna,. Antonio has a Summa cum Laude degree in Economics from Bocconi University and an MBA from the London Business School.
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Training, alone, is not enough to raise the rate of local workers in UAE banks
Arab Investor // Special Report
By Dr.Kefah Fayad
Banking jobs sector has been merely a transit point for many local youth
Arab Investor // Special Report There is no doubt that resettlement in the banking sector in the United Arab Emirates has made a quantum leap in recent years. Banks have attracted a large number of Emiratis in a number of jobs, and if we want to study the reasons that led to this trend we find that the most important of those reasons are the strict laws that compel banks to employ a high percentage of locals.
There is also no doubt that the negative consequences resulting from non-compliance have ensured the adherence of the banks to these laws. Additionally, banks have been spotlighting in the pages of newspapers and magazines the number of locals that they employ, train, qualify and enable to work in their branches and departments.
The challenges to resettlement Although for Emirati youth, banking is among the most attractive jobs in the private sector, the banks themselves face two challenges in light of inter-bank competition. The first challenge is the constantly attracting clients and customers, and the second is attracting qualified local employees in order to fill the required quota. By virtue of my work in the training and consultancy field since 1993, and by virtue of my relations with a large segment of locals in
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the banking and non-banking sectors, I have noticed the inability of the banks to compete with government institutions. The banks underperform in that regard despite providing temptations in terms of salaries, vacations, hours of works, benefits and end-of-service entitlements. There is no doubt that training, vocational rehabilitation and empowerment all increase the effectiveness of young locals in the banking sector, but the important question is: does this training ensure that an employee will continue working in the banking sector for a long time? The answer is no. What must precede training is a deep assessment of the job applicant and a mental preparation of him/her for the job. Disseminating awareness of this type of job, as well as career counseling, will contribute to that. Instilling a good work ethic and a spirit of competition is very important. Otherwise, training will be a waste of time, effort and money. Frankly, any banking job depends directly or
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Choosing skilled trainers to train the locals is more important than the courses taught
Arab Investor // Special Report
An important recommendation is setting up a university that offers certificates in banking
Arab Investor // Special Report indirectly on achieving objectives in terms of customer percentage, and in a small country like the UAE competition can be intense. I am not generalizing here, as the percentage of ambitious local youth is high and many of them would like to work in the banking sector. But there is a big difference between the employee choosing the job or the job choosing him/her. In the end, the nature of banking necessitates working with a large number of customers both inside and outside the bank and the local employee needs to have the skills to work with different types of customers as well as other employees. Many youth dislike this type of work as it is a source of a lot of pressure from both the administration and the customers. This explains the high turnover rate in banking jobs and why this sector has been merely a transit point for many local youth. Continuity in the job is more important than high employment rates, and so long as the government sector still beckons with its advantages and the nature of its work, then job dissatisfaction will prevail among many local youths in the banking sector. Since training in the banking sector is of a specialized type it would prove useless in any other job that the local employee might seek.
Solutions As previously stated, the banking sector requires important competencies for the skills that aim to attract new customers, in addition to keeping the existing ones. One of the most important required skills or tasks is sales and marketing, as well as interpersonal skills, persuasion and gaining customersâ€™ satisfaction. All these can only come out of a distinct, capable and empowered personality. The field of sales and marketing is full of challenges, disappointment and pressure. Banksâ€™ administrations do not tolerate the failure
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other material features from the job title in order to attract local youth who seek banking experience. However, if high salaries remain only for manager and experts, then this will make the local youth reluctant to enter the banking sector since the low salaries compared to the job titles given to new employees do not give good financial returns that encourage entering the industry.
to achieve desired sales volumes (Targets) and this type of pressure is unbearable for many locals. In fact, this failure is not due to the locals but to the constant comparison with the non-profit government sector in general. This does not mean that the government sector is without pressure; only that it pales in comparison with the pressure in the banking sector. If we do not change these conditions, and the lures of banks trying to attract the locals in order to reach their required localization quotas remain unchanged, it does not mean that the situation is hopeless. But if we want to speak openly then we should say that the Emirati society and market rely heavily on foreign labor and this fact is definitely a competitive element when it comes to salaries, advantages and experience. However, the current period is considered a qualifying one where replacement is an important factor in reaching positive results in attracting locals to the banking sector and enabling them to continue working in it. From my point of view, training in the banking sector in addition to specialist banking training should focus on the following courses: selling, persuasion and influence skills, dealing with others, job satisfaction in the banking sector, stress management, emotional intelligence, setting goals and striving to achieve them regardless of the difficulties, in addition to self-confidence and self-esteem development. Other important courses that will improve the UAE nationals and raise their efficiency in banks so that they like their work in all conditions are: dealing with problems and finding solutions, customer service, listening, skills development, teamwork, self-functional motivation development, self-stimulation, dealing with disappointments, empowerment and dealing with managers and superiors at work. This kind of training should be preceded by guidance and a highly professional and accurate assessment which can identify the strengths and weaknesses of each local working in the banking
Dr. Kefah Fayad Holds a Ph.D. in human development and is the founder and general manager of the Brain Power Center for Training and Development. A member of the World Association of the pioneers base and the training of the pioneers of the Arabian Gulf , a member of the ... sector, the applicant as well as the seasoned veteran. This method will not only identify the weaknesses but will enable them to turn into strengths in order to develop the organizational behavior of the banks so as to make them competitive through their local human resources rather than only through the banking products they offer. Another important point is that training is not just a word; choosing skilled trainers to train the locals is more important than the courses taught because quality is more important than quantity in this sector. Unfortunately, banks want to prove that they train locals through the courses and the amounts spent on them instead of through the desired results. Therefore, the Emirati market should rely on trainers knowledgeable about Emirati problems and the Emirati personality, and not on foreign trainers who lack that knowledge. In closing, we offer some recommendations which should contribute significantly to increasing the rate of locals entering the banking sector. In this context, material temptations should be offered which depend on the separation of salaries and
Closing recommendations Another important recommendation is setting up a university that offers certificates in banking similar to the Business Administration College where students receive a bachelorâ€™s degree in banking. Those who apply to this university, then, would have the minimum required amount of interest in this area since a high percentage of graduates work in different area of specialization. There also may be interviews and awareness and polarization lectures within existing universities to discover those who want to work in this area. Also, organizing training courses for undergraduate students by the banks would create an early loyalty to these banks from the students so as to serve the community. The presence of future plans for the actual needs of the banks should extend to five years so as to fill the jobs and rehabilitate the youth to fill these voids early. The plans must also be developed according to the needs of the banks and not aim only to reach a high localization rate regardless of the actual needs. UAE has proven that it is among the best countries in all areas, and there is no doubt that the challenge to raise the proportion of resettlement in the banking sector will take time to be met, but in the end that goal will be achieved. UAE has also proven that there is nothing impossible under a wise leadership that has put the country on the map of the most advanced, civilized and successful countries.
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Personal loans increased from almost 100 billion dirhams in 2005 to a little over 279 billion dirham in 2012
Consumption Loans of UAE Banking Sector: A blessing or a drag on the Economy?
Arab Investor // Features
Dr. Ali Tawfik Al Sadik,Economic consultant
Arab Investor // Features There are 51 banks operating in the UAE, of which 28 are foreign banks. Their combined capital and reserves amounted to 276.4 billion dirham and their loans, advances and overdrafts amounted to 1099.1 billion dirham at the end of 2012 and their total assets amounted to 1791.6 billion dirham.
Thus, banks operating in the UAE offered credit (loans, advances and overdrafts) almost four times their combined capital and reserves and their total assets is almost 6.5 times their capital and reserves. Moreover, there is concentration of assets as ten banks only hold 77% of total banking assets, figure 1. Figure 1:Shares of the first ten largest banks by assets (%)
Emirates Other banks Commercial Islamic 23% Bank of Bank Dubai 2% 2% Al Mashreq Abu Bank Dhabi 4%Union Islamic National Dubai BankIslamic Bank Bank 5% 5% 5%
Emirates NBD 17% National Bank of Abu Dhabi 17%
Abu Dhabi First Gulf Commercial Bank Bank 10% 10%
1. Those who are not versed in finance and banking usually raise the question: how could banks finance their loans and assets if their capital and reserves are relatively so meager? Table 1 displays some useful banking indicators at the end of 2011 and 2012 that shed light on the raised issue. Total deposits at all banks operating in the UAE amounted to 1167.8 at the end of 2012, which are more than the loans, advances & overdrafts banks have at the end of the same year by 6.3%. Loans, advances and overdrafts are a component of banks’ assets while deposits are a component of a banks’ liabilities. Banks use depositors’ money to finance the loans they lend to their customers. Who gets the loans or who are the borrowers?
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Table 1: UAE Banking Indicators (End of period, billion of dirhams)
Loans, Advances & Overdrafts of which
1.Real Estate Loans
2. Bank Loans to Companies
3. Bank Loans to the Government
4, Total Personal Loans
Capital and reserves
deposits: UAE Central Bank, Annual Report 2012, table 10, page 20; IMF, UAE: 2013 Article IV Consultation, Country Report No. ……., July 2013.
*. Net of provision for bad and doubtful debts, interest in suspense as well as general provision ** Exclusive of inter-bank deposits 2. Figure 2 presents the distribution of loans between the different borrowers. At the end of 2012, personal loans amounted to 279 billion dirham, that is about 25% of total loans, advances and overdrafts. Loans to companies accounted for 36% of total loans and real estate accounted for 23%. 3. Personal loans increased from almost 100 billion dirhams in 2005 to a little over 279 billion dirham in 2012. Personal loans are classified into business and consumption laws. In 2012 consumption loans amounted to approximately 87 billion dirhams. In fact, consumption loans in 2005 amounted to 27.8 billion dirhams, that is consumption loans in the UAE increased by more than three folds, while business loans increased by 2.8 folds between 2005 and 2012, figure 3.
Figure 2: Distribution of Loans at the end of 2012 (%) Personal loans 25%
Real estate 23%
Loans to companies 35% Loans to Governme nt 11%
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Arab Investor // Features
Dr. Ali Tawfik Al Sadik An expert financial advisor , who holds a Ph.D. in economy from the United States of America , and a Masters of Science from the American University in Beirut. It has many of the economic literature, he published forty research papers in scientific journals , and fifty under publication , he was the chief economist at the Arab organization of producing and Importing (1976 - 1979) , he worked in the Arab Monetary Fund (AMF) from (1979 - 2004) and was the last director of the Institute of economic policies in the Arab Monetary Fund. He is currently a visiting professor at the UAE University and a lecturer at the American University of Sharjah, and has been the chief economist and director of the project in the Dubai economic Council since 2007
Arab Investor // Features 4. Detailed information on the use of consumption loans is not available. However, eclectic evidence shows that Banks operating in the UAE “lure” residents to borrow for consumption purposes through advertisement in local newspapers or mobile messages inviting employees to get loans to finance a holiday or other consumption activities. Such banking behavior does not augur well with the main functions of banks. 5. Banks are special financial institutions that are supposed to provide a safe channel between savers and borrowers: granting loans to those with ideas and drive to use them in productive and profitable projects while at the same time providing an instrument (s) to those who wish to deposit their money safely. The process of transforming deposits into loans entails risks that are supposed to be managed by banks. If banks fail to manage risks and instead stockpile them, wealth will be wiped out and economies will be depressed as we have witnessed the impact of the global financial and economic crisis that erupted first in the United States of America and from there spread all over the globe with the collapse of Leman Brothers in September 2008. In fact, almost all countries were negatively affected as measured by gross domestic product (GDP). World GDP contracted as well as those of advanced, emerging and developing economies including Arab Gulf Cooperation Council members, figures 4.a,b, c. 6. The global financial and economic crisis also impaired the balance sheets of banks in many advanced and emerging economies. In the UAE, national banks experienced an increase in non - performing loans (NPL) as of 2009 reaching a peak in 2011 and started improving in 2012, figures 5-a and 5-b.
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The bank managers are supposed to be looking at the safety of their institutions rather than short run high unsustainable return
Figure 3 : Evolution of personal loans (billion dirhams) personal loans
7. The profitability of UAE banks, as measured by rate of return on equity (ROE) was negatively impacted by the global financial and economic crisis as displayed in figure 6. The rate dropped from 21.1% in 2007 to a low of 10.9% in 2009 and inched up a little to 11.6% in 2010 and was lower in 2011 and 2012. 8. No doubt the impact of the global financial and economic crisis on the soundness of banks in general and UAE banks in particular was negative as evidenced by the increase in the NPLs and decline in ROE. A consequence of the global crisis is the slowdown in the growth rates of personal loans in general and its consumption component in particular, figures 7a and 7b. 9. Consumption loans finance consumption of goods and services produced in the UAE and imported. In macroeconomic terms, consumption is a component of domestic demand (domestic absorption) which is the aggregate of expenditures on consumption and investment by the private sector government. One important relation in economics is the expenditure on GDP which states:
GDP = private consumption + private investment + government expenditure (consumption & investment) + exports of goods and services minus imports of goods and services.
financing either by borrowing or by using the international reserves or lower surplus in the current account. 10. Banks are trusted with saving of individual of all walks of life and they are required by regulations and by the bylaws of banking institutions to use those savings for the benefit of the economy, owners of the banks and the savers. This means the bank managers are supposed to be looking at the safety of their institutions rather than short run high unsustainable return.
If total expenditure is subtracted from GDP what is left is gross domestic savings. Thus : Saving minus Investment = Exports minus imports (1)
Relation (1) is important for understanding the drag that consumption loans place on the economy. The higher the consumption loans the higher is the expenditure on consumption of goods and services and lower is the saving of the country which translates into lower net exports (exports minus imports). This later result means either negative current account which needs
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UAE banks have always benefited from the overall advantages available to national banks in the UAE. Their non-traditional roles and contributions to society, however, have not been so successful.
UAE Banks Can Contribute to Society
Arab Investor // Outlook
Mr. Ali Al Hashemi Managing Partner at Global International Advocates and Legal Consultants
Arab Investor // Outlook Banks in the UAE play a very important role in the economy and have assisted and contributed towards the country’s reaching its position as one of the best economies in the Middle East and Africa. On their part, banks and financial institutions have undergone rapid growth due to the UAE government’s policies and its direct and indirect support of the banking and financial industry. The question now is whether it is time for banks in the UAE to once again contribute to society in an acceptable and meaningful way.
Growth of the banking sector UAE Banks have experienced great growth in every aspect. Growth in the number of banks has increased rapidly; in 1971, there were only 6 national banks as well as a few other international banks. Today, there are 23 national banks and 28 international and foreign banks. Today, one can see enormous and steady growth in shareholder’s equity, bank’s deposits and bank’s assets which have all occurred in only the past 10 years. The Shareholder’s Equity (Capital + Reserves) jumped from 36.8 billion Dirham in December 2001 to Dirham 276.4 billion, i.e. 7.5 x at December end 2012. The growth in Resident Deposits surged from Dirham 172.8 billion in December 2001 to Dirham 1,033.8 billion i.e. 6X at December end 2012, whilst the growth in Non-resident Deposits increased from Dirham 10 billion in December 2001 to Dirham 134.1 billion, i.e. 13.4x at December end 2012. Also, the banks’ assets jumped from Dirham 299.76 million in December 2001 to Dirham 1,791.6 billion at December 2012. Therefore, by any account, the growth of UAE banks has been tremendous and this is an indicator of a banking and financial industry which has remained healthy even during difficult periods.
Exemptions from levies These healthy signs of the banking industry were driven by prudent policies that the government adopted towards banks in general and national banks in particular. The government has financially backed and supported banks directly and indirectly. National banks, in particular, have
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been heavily supported by the government at a time when such banks were in need of support. National banks were exempted from paying the banking levy, which was, and still is, imposed upon all other foreign and international banks operating in the UAE.
paying such a levy due to being, relatively, smaller and starting entities compared to their peers of international banks that had leadership in the banking industry in all its aspects and around the world, including but not limited to access to cash and liquidity, expertise and diversification.
In hindsight, national banks were exempted from
National banks, thus, were exempted from levies
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Arab Investor // Outlook
It may be prudent to have a hybrid tax system whereby a direct tax is imposed on banks in addition to imposing a very limited banks’ transactions tax.
Arab Investor // Outlook With such a purpose having already been served, the question arises as to whether it is time that banks made their direct contribution towards the well being of society and participated in diversifying the governments’ sources of revenue. Furthermore, the gains that the banks have made are not only derived from their mere economic functions; they are derived from the direct and indirect support, initiatives and directives of the UAE government. The UAE government has played a crucial role in offering the best economic climate for the banks to operate, gave banks room to grow via a liberal approach to a market economy, took a lenient approach to the regulation and supervision of banks (as opposed to the overregulation approach that other countries have undertaken) and the creation of the overall business environments and infrastructure.
in order to be able to find their way and markets alongside international banks operating in the country. This was a sort of indirect subsidy from the government. This indirect subsidization, then, was prudent and justified and the national banks benefitted well from such an exemption for decades.
Current contribution to society limited This exemption, however, has outlived its purpose. Today, the national banks stand tall among other international and foreign banks in the UAE. National banks have the ability, the expertise and the liquidity which allows them to compete with their peers of international banks in the country, as well as to compete both in the region and internationally without the need to be supported by such an indirect subsidization from the government.
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On the other hand, although banks in the UAE have played a vital role in the growth of the economy and the society in general, this role has always been limited to their direct functions and activities as financial institutions; that is, to playing their basic traditional roles. Banks have been acting as financial intermediaries in transferring wealth and working as a money supply system and a backup source of liquidity. The contributions of the banks to society, however, did not go past their conventional functions and roles. For example the contribution of UAE banks in areas such as research, education, healthcare, environment, welfare and sports is almost nil. These are areas of possible contribution to society other than the financial and economic ones. Another example is the creation of work opportunities for UAE citizens. UAE banksnational, international and foreign-have not reached the goal aspired to by the government for creating work opportunities and recruitment for its citizens, despite the fact that the banks have all the tools and requisites for achieving such a goal.
Mr. Ali Al Hashemi Managing Partner at Global International Advocates and Legal Consultants, licensed by all courts in the United Arab Emirates, the Dubai Court of Cassation and the Federal Supreme Court in Abu Dhabi, and the courts of the Dubai International Financial Centre.A certified arbitrator in Dubai International Academic City, a member of the Dubai International Financial Centre and a member of the Committee on Courts of the Dubai International Financial Centre (2008 - 2013).
What can be done In my opinion, the only way that banks can be made to contribute to the welfare of society is through the imposition of levies on profits. The levies to be imposed upon banks could be linked to the government’s overall goal of having the banks actively participate in society. Banks could be given reduced levies, tax deductions or exemptions based on the results they achieve in reaching such set objectives and targets. Therefore, this would drive both the banks and the government to cooperate in achieving the government’s objectives. Some other countries in the region have embraced such directives and their banks are making direct contributions of 1% of their profits to research and development centers. Alternatively, levy revenues could be redirected by the government to society to increase society’s wellbeing in all the areas and directions which require support. Also, levy revenues would strengthen the government’s balance sheet and they would directly benefit the government by diversifying its income from non-hydrocarbon source of revenues. Another advantage is that levies would affect the bank directors’ bonuses by making the directors work harder to achieve better levels of profitability
in order to maintain the same level of pay bonuses. This would, in turn, make banks more efficient in their financial functions. The levies which may be imposed, however, may be of different types since the taxation types imposed upon banks differ. The conventional direct tax which is levied upon the banks profit is one which could be appropriate. One should, however, make the distinction between the bank direct tax and the bank transaction tax. In the bank transaction tax, the tax is levied on one or more types of banks’ transactions. The drawback of such a tax is that the bank transaction tax is levied upon the transaction and is usually passed through to the customer who usually eventually shoulders such tax while the direct tax is imposed upon the bank’s realized profit. It may be prudent to have a hybrid tax system whereby a direct tax is imposed on banks in addition to imposing a very limited banks’ transactions tax. It is important however to note that there are some disadvantages in levying taxes upon banks. For one thing, obviously, no one likes to be levied. Taxing the banking industry may take out the competitive advantage that we have in the UAE. The UAE has always been, and still is, looked upon as a tax haven. Therefore, levying taxes on banks and/or some transactions of banks would eliminate the competitive over regional countries which don’t impose such a levy. UAE banks have always benefited from the overall advantages available to banks in the UAE. Their non-traditional roles and contributions to society, however, have not been so successful. National banks, unlike international foreign banks operating in the country, have been exempted from paying tax as a way of supporting the starting up of financial institutions. Today, such an exemption would be considered a luxury. The question that remains is whether the government should withhold such an exemption so that national banks can actively play a role in giving back to society in the UAE.
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Dinesh Nair is the Dubai-based chief investment
correspondent for the Middle East, North Africa and Turkey at Reuters, reporting on sovereign wealth funds, private equity, asset management, M&A, capital markets and global investment banks. He also runs a five-member team of journalists in Dubai that covers corporate and financial news in the Gulf Arab region. He has been with Reuters for nearly 10 years; before moving to Dubai in 2010, he worked with Reuters in India as a reporter and editor. Dinesh started his professional life as an equity analyst in India, analysing small and mid-cap companies.
Arab Investor // Financial Update
Arab Investor // Financial Update Some old and some new steps to prevent a property market bubble in Dubai
Dubai will strictly enforce existing rules and if necessary set up new ones to prevent another bubble from forming in its property market, while cracking down on abuses by real estate brokers. The emirate’s Land Department does not believe that a bubble is forming and stresses that it continues to further regulate the real estate market. The Land Department does not want a sharp increase in property prices that will exhaust the market, as that is unhealthy and unnecessary. What it is trying to maintain is sustainable growth in the real estate sector over the coming five years. What happens in Dubai’s volatile property market matters far beyond its borders; when a bubble burst in 2008-2010, pushing property prices down by more than 50 percent, the emirate came close to defaulting on its debt and, as a result, financial markets across the world shuddered. The Land Department, which regulates the property market and is involved in planning Dubai’s rapid growth, aims to avert another boom-and-bust cycle. Partly because of inflows of money from elsewhere in the Gulf, Dubai’s housing market is now rebounding strongly, with prices up over 20 percent in the last 12 months, according to analysts. The International Monetary Fund warned in July of the risk of another bubble forming. The latest official statistics suggest Dubai’s dependence on the real estate market - and therefore its vulnerability to any bubble - had not decreased. Real estate transactions in Dubai have totalled 195 billion dirhams ($53.1 billion) so far this year, up sharply from 145 billion dirhams in all of 2012. The construction and real estate markets now constitute 24 percent of Dubai’s GDP (gross domestic product),
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and this percentage is expected to see a slight growth this year.
Bank of Fujairah plans growth as northern emirate prospers
Officials, however, are alert to risks in the property market and are taking a range of steps to reduce them. This week the United Arab Emirates central bank set limits on the size of mortgage loans for housing - although the caps were less stringent than originally planned - after commercial banks complained they could hurt business. Mortgage caps may not have a big impact since many transactions are done with cash, but earlier this month Dubai took a step that will affect those deals as well, raising the registration fee for property sales to 4 percent of value from 2 percent. This decision will not be reconsidered. The measure was taken in order to limit speculation in the market and protect investors. No further increases in fees are planned or being considered. Dubai’s last real estate boom was marred by some shady dealing, with cheques bouncing and some investors paying for properties that were never delivered. As a result, the Land Department is now keeping a tight grip on transactions and preventing deals from going through without proper registration. The focus of the Department is now on regulating the real estate brokers. Various decisions are being taken to prevent bilateral deals that are done at the level of brokerage firms without proper registration at the Land Department. Those kinds of unregulated and unmonitored transactions may cause bubbles, and that is why they are forbidden now.
Are we going to witness a second property market boom if Dubai is going to host the World Expo 2020?
Mirna Sleiman .Senior Equities Correspondent - Middle East Thomson Reuters Mirna is an award-winning business reporter with over 10 years of experience covering corporate and financial markets across the Middle East and North Africa. Mirna joined Thomson Reuters as senior equities correspondent in Nov 2011 after spending 5 years with Dow Jones and The Wall Street Journal as a banking & finance Reporter in Dubai. She oversees the company news file across the Middle East with special focus on news reports that have a direct impact on the region’s economy, the evolution of the financial industry and the role of media in emerging markets.
World Expo In late November, Dubai will learn whether it has won the right to host the 2020 World Expo, which will affect its development plans because of the need to build infrastructure and new hotel space. Dubai is competing with Izmir in Turkey, Sao Paulo in Brazil and Yekaterinburg in Russia for the right to stage the world’s fair; a vote of the 167 member states of the Paris-based Bureau International des Expositions is expected to make the decision at an assembly on Nov. 26-27. Some stock market investors have started speculating that a win for Dubai would push up property prices near the proposed Expo site; if Dubai does not win, that could disappoint investors. The Land Department, however, states that the property market would not be hurt in either case. The Department is taking necessary measures to make sure the market will definitely grow in steady steps and the impact will be more tangible if Dubai wins, as it will boost investor confidence and will attract more investors to the country. Dubai and the rest of the UAE rely heavily on foreign workers, who comprise most of the population, but only parts of the country are open to property investment by foreigners. In coming years, new projects and more areas are expected to be offered for freehold by foreigners, with new rules and laws regulating these new developments. Allowing investors who come to the country to own their property will attract more investors and give them an incentive to stay.
National Bank of Fujairah (NBF) may open trade finance offices in Africa as part of an expansion of foreign business that is taking the bank far from its roots in one of the more remote, less developed parts of the United Arab Emirates. With its home base in the small emirate of Fujairah, one of the seven members of the UAE, the bank does not have the wealthy background that competitors from Abu Dhabi or Dubai do. But the bank is now benefiting from an economic shift within the UAE: as the wealthy southern emirates grow, money is spilling across their borders into the north. Meanwhile, Fujairah, with a population of only about 190,000 people but a port on the Gulf of Oman, is prospering as a trading channel between the other emirates and the rest of the world - a channel which NBF is keen to exploit.
owned by Fujairah’s royal family and 10 percent by Investment Corp of Dubai, is being driven by trade financing revenues, credit facilities and debt advisory services.
The bank has consistently seen over this year a 30 percent range of year-on-year growth in net profit and it sees that growth continuing because it is not coming from a one-off.
NBF’s net profit for the first nine months of this year jumped 31 percent from a year earlier to 286.4 million dirhams ($78.0 million). Loans and advances rose to 13.9 billion dirhams at September-end from 12.2 billion dirhams at the end of 2012.
Earnings growth at the bank, which is 40 percent
Fujairah became strategically more important for the UAE last year when the emirate opened an oil pipeline with a capacity of up to 1.8 million barrels a day, bypassing the Strait of Hormuz and Iranian threats to block that shipping route if geopolitical tensions worsen. Officials have said the pipeline will carry most of Abu Dhabi’s oil exports. A string of projects has begun
to expand oil storage facilities and possibly build a second refinery in Fujairah. Also, the UAE’s non-oil foreign trade is growing rapidly, particularly with Asia and Africa; Dubai’s nonoil trade rose 16 percent from a year earlier in the first half of 2013. Fujairah can profit by serving some of that business. Trade is a relatively high percentage of the bank’s overall business and the bank believes that more growth will come from trade. Supporting Fujairah’s interests - particularly in the marine, oil and gas activities, plus precious metals, in particular the gold business - will feed into some elements of the bank’s trade finance business. NBF has recently opened a company in Hong Kong to process trade deals and facilitate letters of credit into the Far East, and is looking at opening similar offices in Africa. The bank would like to increase its coverage in Africa - what is sometimes called the south-south channel of trade.
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Arab Investor // Financial Update
Arab Investor // Financial Update Branches
Barwa Bank profit to be boosted by Qatar infrastructure spending
NBF also plans to expand its current network of 14 branches in the UAE with a couple of new ones next year.
Barwa Bank, a sharia-compliant Qatari lender, expects a sharp increase in its 2013 net profit, driven mainly by billions in infrastructure spending by the Gulf state and growth in its debt advisory and asset management business.
The bank expects to step up its financing advisory services and debt capital market activities given the high funding needs for projects in Fujairah, particularly expansion of the port, bunkering facilities and an airport, and development of the arid coastline.
For the first half of 2013, the bank was 85 percent up on the same period last year. And for the full year it has been moving along very strongly and expects a positive and material improvement in net profit over 2012.
The bank is looking at starting a capital markets programme next year to diversify its sources of funding.
It is predicted that non-performing loans would shrink to about 5.0 percent by year-end from the current 5.7 percent, and then gradually fall to “normal” levels of 2-3 percent.
Dubai bank ENBD eyes Turkey buy amid foreign expansion
Emirates NBD, Dubai’s largest lender, is looking for acquisition targets in Turkey as it scouts for opportunities beyond its home market, despite an improving economic environment within the emirate. ENBD, which completed in June the purchase of BNP Paribas’ (BNPP) Egyptian assets for $500 million,
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Barwa Bank is 37.3 percent owned by Barwa Real Estate Co (BRES), while Qatar Holding, the investment arm of the Gulf state’s sovereign wealth fund, has a 12.1 percent stake. The remaining shares are owned by several individuals and corporations, according to the bank’s results statements.
has been looking to diversify beyond Dubai after a real estate market crash in 2008-2010 severely impacted the bank. The lender aims for 20 percent of its revenues to come from overseas markets in five years - up from 8 percent after the Egyptian acquisition and while organic growth will play a part, another acquisition will probably be needed to meet the target. $300 million of capital is need to open a branch in Turkey, which would be a worthy purchase for ENBD should the opportunity present itself. The bank has looked at a number of options in Turkey but nothing has come to fruition. The problem is that all available options are either too big or too small. The bank is not currently examining any specific asset in Turkey. After ENBD’s profits were buffeted by soaring
bad loan provisions linked to Dubai’s problems, earnings have improved in recent quarters as the emirate’s economy has recovered, aided by growth of Dubai’s key tourism and logistics industries and booming house prices. Net profit for the first nine months of this year, at 2.6 billion dirhams ($707.9 million), exceeded ENBD’s entire 2012 net profit of 2.55 billion dirhams. ENBD will repay the remaining 4.8 billion dirhams of crisis-related support, which it received from the United Arab Emirates Ministry of Finance, by the middle of 2014. The bank received 12.6 billion dirhams as part of system-wide support, in the form of capitalboosting bonds, but UAE banks have been repaying the money this year as the value of the instruments has diminished.
The bank in June set up an education company in Qatar and is now developing two private schools at a cost of 230 million riyals, yielding 8 percent annually. The bank also manages a sharia-compliant Gulf equities fund, with 113 million riyals in assets. The fund has returned 19 percent to investors since its inception in late 2012. Barwa continues to see AUMs (assets under management) grow as Gulf equity markets are more attractive for investors compared to money market products and the sukuk space.
Bahrain in early stages of bank merger wave
The unlisted lender is awaiting regulators’ approval for a public floatation as part of two share sales planned to raise more than 2.05 billion riyals. It posted a profit of 345 million riyals ($94.75 million) for 2012, a 41 percent increase from the previous year.
NBF has traditionally had one main bank syndication that it has relied upon for its medium-term funding needs and that syndication matures next year. Going forward, the bank will probably break that into smaller transactions and maybe more bilateral transactions with partner banks, and then maybe do a capital market programme starting sometime next year that will enable it to issue paper on an orderly basis.
want to manage the runway and make sure that everyone is not trying to go public on the same market at the same time, so it is waiting for the appropriate time slot. The bank is in contact with the authorities to liaise on the perfect timing.
Bahrain is still in the early stages of a series of bank mergers designed to strengthen the sector in the face of regional competition.
The company’s biggest shareholder, Barwa Real Estate (BRES), by contrast, reported a 40 percent drop in profits for the first nine months of 2013, having drawn on state aid earlier this year.
This small kingdom’s banking industry, once the most vibrant in the Gulf, was hit hard by the global financial crisis and, since 2011, by political unrest which has deterred some foreign investment.
The four-year old bank, effectively controlled by an arm of the state’s sovereign wealth fund, Qatar Investment Authority (QIA), is seeing a pick-up in infrastructure development in the country after a slowdown in the last two years.
But there are signs of recovery in the sector, which would be aided by a Central Bank policy of encouraging mergers and acquisitions.
The tiny gas-rich state of Qatar launched plans to spend about $140 billion over the next decade on a rail system, a new airport, a seaport, and hundreds of kilometres of major new roads, in addition to stadiums that will host the 2022 World Cup soccer tournament. Barwa outlined a fundraising plan in April that includes the public issue and a similar sized rights issue to existing shareholders. The bank understands that stock market regulators
New funds, ventures
Barwa Bank, through its fully-owned investment banking arm, The First Investor (TFI), plans to partner with local investors in Qatar to invest in the healthcare sector. TFI is focused on Qatar and is looking to replicate its venture in the education sector into the healthcare sector.
Islamic lender Al Salam Bank (SALAM) agreed in September to merge with fellow Bahraini lender BMI Bank, an affiliate of Oman’s Bank Muscat (BMAO), through a share swap. The deal is expected to create the kingdom’s fourth-largest commercial bank. In June, Khaleeji Commercial Bank, 47 percent owned by Gulf Finance House (GFHB), was evaluating a potential merger with local lender Bank Al Khair. And in March, National Bank of Bahrain (NATB) and a local pension fund bought a 51.6-percent
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Arab Investor // Financial Update
Arab Investor // Financial Update stake in Bahrain Islamic Bank (BISB) from Kuwait’s Investment Dar, in a deal worth around 34.9 million dinars ($92.6 million).
mass protests led by the mostly Shi’ite Muslim opposition were suppressed by the Sunni-led government.
The merger wave is still in the beginning stages but would eventually have a bigger impact on the sector.
This, along with damage to the international banking system from the global financial crisis, contributed to a drop in the combined assets of wholesale banks in Bahrain from $156.7 billion at the end of 2010 to $118.3 billion in August this year.
What has evolved to date is the beginning of what the CBB believes will eventually be a structured, focused, and properly implemented series of mergers and acquisitions which are designed to enhance both the specific institutions and the overall health and strength of the financial industry. By doing this, Bahraini banks will be better equipped to compete in the regional markets. The Central Bank lists 75 conventional bank licensees and 24 Islamic bank licensees in Bahrain, a large number for a country of just 1.3 million people.
In the wake of the global crisis, banks in Bahrain had restructured their businesses by shifting focus towards relatively stable activities and reducing their real estate exposure. Most international banks were focusing on their domestic markets at the time. However, growth has returned to the industry, with the aggregate balance sheet of Bahrain’s entire banking system rising from $190.7 billion in August 2012 to $193.5 billion in August this year. There has been a small reduction in the balance sheet of the wholesale banks since 2011 but, recently, there has been a steady recovery in the total assets. As a financial centre in the Gulf, Bahrain faces tough competition from Dubai and Qatar. In particular, Bahrain is a top centre for Islamic banking; however, Dubai announced this year that it aims to become a hub for that industry. Bahrain is the base for a key standards-setting body in Islamic finance, the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI); however, it is prepared to cooperate with Dubai.
Bahrain has faced sporadic political unrest and demonstrations since February 2011, when
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The evolution of the Islamic financial industry in Dubai and elsewhere complements that which is underway in Bahrain. As such, it is welcomed and encouraged. The region can only benefit from enhancements to the current level of expertise in Islamic finance, and these enhancements can be used as a foundation to further the goals of the industry.
mainly on emerging economies - the rest of the Arab world, Turkey, Africa and parts of East Asia - rather than developed and slow-growth markets in Europe and the United States.
Gulf banks in expansion push as recovery kicks in
ENBD, Dubai’s top lender, is eyeing acquisition targets in Turkey as the bank aims for 20 percent of its revenues to come from overseas markets in five years, up from the 8 percent level which it hit after buying BNP Paribas’ Egyptian business last year.
Having weathered the global financial crisis and local debt restructurings in the last few years, Gulf banks are expanding their regional footprint and venturing into business lines previously targeted only by their global rivals.
Bahrain-based Ahli United Bank (AUBB) is scouting for acquisitions in its existing markets and in new ones as it tries to build a network across the Middle East.
A slowdown in regional banking activity, coupled with large restructurings of state-owned entities, stymied profits around the turn of the decade as banks set aside billions of dollars to meet loan losses and restrained their lending appetite.
Acquisitions typically come in feast and famine cycles – sometimes a deluge and at other times a dry spell in the market – but AUBB is known as an acquirer and thus tends to attract approaches and it is proactive in soliciting interest from potential parties.
However, backed by a recovery in their home economies and strong capital positions, the banks are now drawing up regional growth plans and gaining shares in businesses such as debt advisory services, private banking and brokerage activities, areas previously dominated by Western banks. The crisis left Gulf banks with an opening, as some Western banks downsized regional operations to focus on repairing balance sheets back home and meet stricter capital and liquidity standards being imposed globally under the Basel III regulatory regime - a much easier task for cash-rich Gulf lenders. The major Western players are still present but are facing a different set of issues as well as seeking to consolidate in certain areas and both factors have opened up an opportunity for the local banks. Several major regional lenders expect profits to rise by around 20 percent or more this year as state spending on infrastructure and social welfare bolster their balance sheets, and as they obtain higher fee incomes from new revenue streams. Barwa Bank, a sharia-compliant Qatari lender, posted an 85 percent leap in net profit for the first half of 2013 and expects fast growth to continue, driven mainly by billions of dollars worth of infrastructure building in Qatar and growth in debt
advisory and asset management business. Barwa has invested heavily in its markets capabilities, in fixed income, sukuk origination activity in the Islamic capital markets, foreign exchange and market activities generally. The bank helped arrange a $1 billion five-year sukuk for multilateral lender Islamic Development Bank this year. Meanwhile, net profit growth at commercial banks in the United Arab Emirates is expected to grow to about 20 percent in 2013, the chairman of the UAE’s banking federation said in September. Even smaller names such as National Bank of Fujairah (NBF) are benefiting from economic growth in the UAE; the bank may open trade finance offices in Africa after setting up a financial
advisory business in Dubai’s tax-free financial zone this year. Throughout this year NBF has consistently seen a 30 percent range of year-on-year growth in net profit and that it sees that trend continuing because it’s not coming from a one-off.
A key result of the regional banking revival has been a renewed appetite for acquisitions among Gulf lenders, who want to lower their reliance on home markets. Outside the Gulf, these lenders are focusing
The bank, with operations in six Middle East and North African states as well as the United Kingdom, wants a presence in three Gulf countries where it currently has no base - the United Arab Emirates, Saudi Arabia and Qatar - plus Turkey. Large lenders such as Qatar National Bank (QNB) have bought banking assets in Egypt, Libya and Iraq in the past couple of years, eyeing a pan-Arab footprint. For those not wanting to go the acquisition route, organic expansion is very much on the cards. National Bank of Abu Dhabi, with a presence in 14 countries and assets of about $100 billion, plans to expand in cities from east China to West Africa as part of a push to beef up its presence in emerging markets. Assets in the Gulf banking sector, two-thirds of them held by the 20 biggest local banks, increased 11 percent in 2012 to $1.47 trillion, according to an estimate by QNB.
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Arab Investor // Financial Update
Arab Investor // Financial Update Morgan Stanley sees worst over for Middle East investment banking
Morgan Stanley Inc is seeing a resurgence in investment banking activity in the Gulf Arab region and expects large-scale retrenchments by global lenders to end as financial markets improve. As the market for mergers and acquisitions (M&A), equity and debt offerings in the Middle East picks up after years of sluggish activity, the bank is targeting clients looking for advice on complex transactions that require global expertise beyond just a financial commitment such as underwriting. The bank wants to lead with ideas rather than with the value of its balance sheet and tries to bring real value in areas that involve complexity - especially across international borders. The bank’s focus is on return on equity and that is the element it aims to constantly improve. Finding a business model for the Middle East has long been a challenge for global banks that flocked into the region during the early part of the century, lured by the region’s oil reserves, cash-rich sovereign wealth funds and fast economic growth. However, in the wake of the global financial crisis, the multi-billion dollar deals dried up, while the sector got increasingly crowded, forcing the banks to sharply reduce their staffing and reassess regional business strategy. Several senior bankers at many global lenders were laid off or relocated to other regions where business prospects were better, while some banks stopped operating business lines such as commodity trading, fixed income business or M&A advisory. Morgan Stanley itself made tweaks to its business in the region, shifting MENA commodities coverage to London and equities trading to
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Riyadh last year. Deal activity is now showing signs of revival as a consequence of improving financial markets and strong economic growth. Investment banking fees for banks operating in the Middle East reached $535.9 million during the first nine months of 2013, a 22 percent increase over the same period last year - the best first nine months for fees in the region since 2009. The markets are looking better, volumes in exchanges are higher, the investment banking mix is better and the appetite of investors for different asset classes is growing. If this trend continues, industry reductions such as those in the past are unlikely.
Consolidation, debt markets Morgan Stanley is the top M&A adviser in the region, mainly thanks to its role in the $15 billion state-backed merger of two aluminium producers in the United Arab Emirates. The bank expects to see more such consolidation in the region as companies look for economies of scale and better efficiency in their operations. The bank is seeing real, fundamentally strategic
transactions such as industry consolidations or other transactions, which were previously put on hold amid the financial crisis and the impact of the Arab spring. This in-market consolidation is very healthy as it has not been as pronounced in the past. Morgan Stanley was one of the advisers on a merger between Abu Dhabi’s Aldar Properties (ALDR) and Sorouh Real Estate early in January, another transaction where the government stepped in to consolidate struggling property firms. Abu Dhabi and Dubai have also hired banks to provide advice on a possible merger of their two main stock exchanges. In debt capital markets, Morgan Stanley is seeing increased sophistication among clients who are looking for innovative deals such as hybrid offerings - debt issues with an equity component - as well as high-yield bonds and other capitalraising instruments such as perpetual bonds. The bank was an adviser on a $1 billion shariacompliant hybrid Islamic bond, or sukuk, by Abu Dhabi Islamic Bank (ADIB) in November last year, the first such sale in the region which triggered a wave of such offerings.
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The hybrid space is finally opening up, not just in banking, but also in the corporate space. Morgan Stanley is also seeing high-yield bonds coming to the market, which provides a new financing avenue especially for newer and non-government companies. Topaz Marine, a unit of Oman’s Renaissance Services (RSC), priced its $350 million debut bond last week in a high-yield transaction from the Gulf Arab region. UAE mall operator Majid Al Futtaim raised $500 million from a hybrid bond earlier this month, while dairy producer Almarai sold a 1.7 billion riyal Islamic hybrid bond in September, the first such issue in the Gulf.
ﻧﺪﺭﻙ ﻓﻲ ﺑﻨﻚ ﺃﺑﻮﻇﺒﻲ ﺍﻟﺘﺠﺎﺭﻱ ﻟﻠﺼﻴﺮﻓﺔ ﺍﻹﺳﻼﻣﻴﺔ ﺃﻫﻤﻴﺔ ﺍﻟﺘﻮﺍﺯﻥ ﺑﻴﻦ ﺍﻟﻘﻴﻢ ﻧﺪﻋﻢ ﻃﻤﻮﺣﻚ ﻓﻲ ﺗﺤﻘﻴﻖ ﻣﺎ ﺗﺼﺒﻮ ﺇﻟﻴﻪ.ﻭﺍﻟﻄﻤﻮﺡ ﺑﻤﺎ ﻳﻤﻨﺤﻚ ﺍﻟﻄﻤﺄﻧﻴﻨﺔ ﻭﺍﻟﺮﺍﺣﺔ ﻋﺒﺮ ﺑﺎﻗﺔ ﻣﺘﻜﺎﻣﻠﺔ ﻣﻦ ﺧﺪﻣﺎﺕ ﺍﻟﺼﻴﺮﻓﺔ ﺍﻹﺳﻼﻣﻴﺔ ﺍﻟﻤﻌﺘﻤﺪﺓ ﻣﻦ ﻫﻴﺌﺔ ﺍﻟﻔﺘﻮﻯ Arabﻭﺍﻟﺮﻗﺎﺑﺔ Investor 55 adcbislamic.com ﻟﻤﻌﺮﻓﺔ ﺍﻟﻤﺰﻳﺪ ﺗﻔﻀﻞ ﺑﺰﻳﺎﺭﺓ ﻣﻮﻗﻌﻨﺎ.ﺍﻟﺸﺮﻋﻴﺔ
Arab Investor // Wheels
BMW Group Middle East Registers Record Growth in Third Quarter of 2013
Arab Investor // Wheels
BMW Group Middle East is confident of achieving another record year after the company posted a 19% increase in sales for the third quarter of 2013 compared with the same period last year. The company’s impressive year-to-date numbers demonstrate the continued growth of the region’s premium automotive industry and also highlight Middle East customers’ appetite for luxury cars. Continuing a trend, which has seen double digit sales in the majority of its Middle Eastern markets during 2013, and a record 18,835 BMW and MINI cars sold to customers. Across the region, the world’s most successful premium automotive brand performed well with Bahrain and Kuwait leading the charge recording increases for the first nine months of 36% and 33% respectively. Qatar also performed strong with a 25% increase in sales while Dubai chalked up an 18% increase; Saudi Arabia was up 15% and Abu Dhabi grew by 13% over the same period. “Our team of professionals on the importer side of our business as well as in our regional office have worked successfully together and I’m extremely pleased to say that the results show that we are well on our way to outperforming our 2012 success,” said Dr. Joerg Breuer, Managing Director, BMW Group Middle East. “With the recent launches of the BMW 4 Series Coupé, BMW 5 Series, BMW 3 Series Gran Turismo and all-new X5 we are confident we will close out 2013 with an even more impressive performance than 2012.”
BMW: Continued demand for premium high-end models The biggest seller across the product range, has continued throughout the year to be the 5 Series which aside from being the world’s best-selling vehicle in the executive saloon segment, it accounted for 4,409 cars sold and marked a 12% increase in registrations. The recent launch of the new BMW 5 Series is expected to continue to drive sales for the executive saloon. The successful launch of the latest generation BMW 7 Series late last year has continued to flow through into the first nine months of this year and be a positive contributor to the BMW Group’s overall outlook for 2013 in the region. With a sales increase of 24% compared to the same period in 2012, the BMW 7 Series continues to lead the luxury segment in the region delivering 3,440 cars to customers.
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the Sports Activity Vehicle segment.
Commenting on BMW Group’s flagship 7 Series model, Dr. Breuer said: “The absolute embodiment of the modern luxury sedan, it comes as no surprise that our flagship BMW 7 Series continues to be a market leader and main growth driver of the BMW brand. With the launch of the latest BMW 7 Series last year, blending the prefect balance of luxury, elegance and technological innovation, we are confident that the BMW 7 Series will continue to raise customer expectations in this segment.” Even as the popular X5 Sports Activity Vehicle was gearing up for the introduction of the third generation model, interest in the outgoing X5 remained exceptionally strong with a 4% increase in sales resulting in 3,076 cars sold across the region. With the launch of the more luxurious, more comfortable, more spacious and more powerful vehicle, the third generation BMW X5 is poised to have an extremely successful year ahead and continue its absolute leadership positioning in
The ever-popular 3 Series continues to maintain its position as the world’s best-selling premium car with a 68% increase in sales as more supply of the new model filters through to the region, recording 2,119 sales while the X6 Sports Activity Coupé chalked up an impressive 1,804 sales. Following the launch of the latest generation of both models in 2012, the BMW 3 Series and BMW X6 continue to be best-sellers and witness robust growth across the region. MINI: continues to garner interest from growing customer base MINI kicked off the year with the introduction of the seventh model to the brand’s portfolio, the allnew MINI Paceman which contributed towards the sale of 1,147 cars sold as of the third quarter 2013, an 11% sales increase. The most popular selling model was the MINI Countryman – the first MINI with four doors with four wheel drive option – which accounted for 44% of total regional sales. Meanwhile the MINI Hatch, MINI Cabrio and MINI Coupé were also strong contributors to the brand’s on-going 2013 success.
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Arab Investor // Style
Arab Investor // Style VERTU REVOLUTION GATHERS PACE WITH CONSTELLATION LAUNCH
Constellation is a modern smartphone that combines all of Vertu’s expertise in fine materials, craftsmanship, technology and services. Its sleek, contemporary form has been designed and engineered to appeal equally to male and female customers. Vertu Chief Executive Officer, Massimiliano Pogliani, said: “This is a vibrant time for Vertu. This is our second major product launch of 2013 and it helps define a clear segmentation strategy which identifies distinct product lines in the Vertu portfolio. This will broaden Vertu’s appeal, attracting new customers to the brand as well as increasing the choice for our existing global customer base.” Vertu’s Head of Total Product Offering, Ignacio Germade, said: “Constellation moves Vertu design into a contemporary realm. When we created VERTU Ti, we used a very elegant, design language that visually connects to our heritage and that gives the product
a timeless quality. Conversely, in Constellation, we have designed a modern, minimal phone that is sleek and understated. While Constellation takes Vertu in a new design direction, materially it embodies everything that the brand has become renowned for – tactile materials, outstanding engineering and craftsmanship and modern technology.” Sapphire crystal is a well-established part of the Vertu story. Constellation uses a 5.1 inch piece – weighing more than 100 carats – to cover the entire front of the phone and under which sits a 4.3 inch 720p high definition screen. The sapphire is resistant to scratching from anything other than diamond, ensuring that the screen remains virtually flawless throughout the life of the phone. Surrounding the sapphire crystal is an engineered grade 5 titanium casing, a material two and a half times stronger than stainless steel yet only half the weight. It is the durability and lightweight nature of grade 5 titanium, coupled with its immaculate finish once polished, that makes it a perfect material for Vertu handsets. Constellation is swathed in high quality calf leather.
Vertu has carefully selected the finest hides available from the Alps region of Europe, working with a tannery with more than 150 years’ experience. Constellation will launch in five exquisite colours that make stunning use of the single piece of leather used - Cappuccino, Black, Orange, Mocha and Raspberry. Technically, Vertu Constellation offers everything for the modern smartphone user: Android™ 4.2 Jelly Bean, Qualcomm® Snapdragon™ dual core 1.7 GHz CPU, 32GB of internal memory, 13MP rear-facing camera with full HD video (1080p), a front-facing Skype™ compliant 1.3MP camera, Wi-Fi, Bluetooth and NFC. Constellation also features a portfolio of melodic ringtones especially composed for Vertu and performed by the London Symphony Orchestra. The portfolio also includes a set featuring English bird song. All of these ringtones benefit from Vertu engineers’ meticulous approach to mobile audio engineering, resulting in unparalleled acoustic clarity. Constellation also features uplink noise cancellation software, as well as aptX® support, which guarantees superior playback quality when streaming audio to Bluetooth® headphones or speakers. Alongside Constellation’s comprehensive technical offering, sits Vertu’s range of exclusive services, grouped as Vertu LIFE and Vertu CERTAINTY. Vertu LIFE offers customers a personalised selection of exclusive privileges and unrestricted access to elite events available directly on device. Features include complimentary entry to the most exclusive Private Members’ Clubs around the world, access to invitation-only events and closed-door shopping experiences. Vertu CERTAINTY protects the customer, their Vertu phone and their data through best-in-class technology and expert partners. This includes encrypted communications in partnership with Silent Circle, global Wi-Fi access via iPass, personal and corporate security with Protector Services Group and anti-virus by Kaspersky.
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From City financier to the “King of Cufflinks” and jewellery trendsetter: it seems a mighty leap for anyone to make – but for Robert Tateossian, a man whose international upbringing and love of travelling the world over has provided design inspiration, the transition was natural. Born in Kuwait and educated at French schools in Rome, Tateossian (who is fluent in seven languages) studied international finance at the prestigious Wharton School of Finance in Pennsylvania, before embarking on a successful career with Merrill Lynch on Wall Street and in the City of London. After seven years of investment banking, Tateossian was ready to fulfil his ambition to start his own business. His creative flair, love of luxury and keen eye for detail led him to jewellery and accessory design, setting up offices in London and initially a workshop in Birmingham - in the heart of England’s silversmith industry. Tateossian seeks the finest craftsmanship available globally and capitalises on the best techniques and quality for price. His goal has always been to create a line of jewellery and accessories for men and women that reflected his own ethos: stylish, unique and of uncompromising quality. In 1990, Tateossian Ltd was created.
Inspired by everything from travel and religion to art and fashion, the seasonal collections for men and women provide a distinctive and unique product. With no limitations on materials, silver and gold are combined with precious jewels such as diamonds, sapphires and rubies, as well as fibre optic and crystals. While still creating the ultimate range of handcrafted, contemporary and unique cufflinks for discerning businessmen, the brand is now much more than a purveyor of stylish shirt sleeve fasteners for bankers and brokers. The men’s collection features a wide range of accessories: from watches to money clips, rings, necklaces and bracelets all in keeping with the Tateossian trademark use of innovative and striking materials.
Tateossian’s range of women’s jewellery epitomises stylish elegance: all materials used are hand-finished using only the finest materials. Each piece is a statement, using eye-catching materials like fresh water pearls, precious metals and semi-precious gems in a myriad of colour combinations. Robert Tateossian lives in - and runs the business from – London; but he still spends 70% of his time travelling around the world sourcing suppliers, meeting clients and gaining inspiration for his latest collections.
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Arab Investor // Hospitality
Arab Investor // Hospitality
Become immersed in a world of cultural wonders at Qasr Al Sarab Desert Resort by Anantara
Qasr Al Sarab Desert Resort by Anantara is a scenic retreat located in an astounding, unique environment, encompassing authentic aspects of desert life and capturing the true heritage and culture of the region
Escape to Qasr Al Sarab Desert Resort by Anantara and let the stresses of everyday life melt away. Uncover a heritage of rich local culture, and reminisce over ancient splendour. Take in towering red sand dunes that glimmer in the desert sun for as far as the eye can see. Glimpse free roaming sand gazelles and captivating Oryx, and explore a landscape of breathtaking natural beauty.
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Launched in Oct 2009, Qasr Al Sarab Desert Resort is located just 90 minutes from Abu Dhabi, set within the famed Liwa Desert an area steeped with tradition and bursting with legacy. Step back into traditional Arabia and journey into the fabled desert from this magnificent 206 room resort. Designed to absorb the regionâ€™s distinctive custom, guestroom interiors are inspired by the simple grandeur of an old desert fortress and boast locally hand-crafted furnishings, rich carpets and embroidered fabrics to evoke ambient warmth and an inescapable sense of romance.
private palaces benefit from two bedrooms with King beds, one bedroom with Twin beds, a common lounge area, pantry, private pool, sundecks, oversized terrazzo bathtubs, rain showers and complimentary WIFI. Qasr Al Sarab Desert Resort also offers 29 one bedroom Villas, 10 two bedroom Villas and a range of comfortable rooms all exuding sensual Arabian touches. Adorned with hints of Bedouin tradition and exquisite reminders of timeless culture, guests are assured of feeling a million miles away from the fast pace of city life.
For the ultimate in lavish experiences, guests are invited to retreat to one of three Villas, each featuring three bedrooms and reflecting a splendid regal retreat. Promising the finest five star services, including a 24/7 butler, these
Unveiling a series of gastronomic adventures, the resort offers a variety of enticing dining choices. Relax in comfortable chairs at Suhail Qasr Al Sarab - Rooftop Bar and Grill, where guests can feast on the finest grills and seafood
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Arab Investor // Hospitality
A tapestry of colour, culture, luxury and ingenuity are just waiting to be discovered at Qasr Al Sarab Desert Resort by Anantara
Arab Investor // Hospitality After a day of enthralling activity, let the beautiful and supremely intimate Anantara Spa become the perfect oasis of privacy and serenity. Relax in one of five spacious desert view treatment rooms, from which to enjoy a wide range of divine indulgences. The highlight of the spa is an exclusive Moroccanstyle Hammam with the calming sound of running water echoing from ornately tiled walls. Double heated marble beds, Jacuzzis, steam rooms and an exclusive Ice Cave pamper those who indulge in the ornate Hamman. Take pleasure in signature experiences, richly inspired by the region and fused with the finest local ingredients. Choose from a soothing selection of Thai-themed treats for overall rejuvenation, and reap never-ending pleasures with luxurious facilities such as a Vichy treatment room, whirlpool bath, steam and sauna.
whilst taking in sweeping views of the starlit dunes in the distance. Or indulge at Al Waha Qasr Al Sarab restaurant, where the finest Middle Eastern and international delights await. Ghadeer Qasr Al Sarab is a poolside restaurant where guests can enjoy two different ambiances - a relaxed atmosphere during the day, and dinner by candlelight at night, with delectable cuisine hailing from the local area, complemented by flavours of the Mediterranean. For light bites or treats at anytime Al Liwan Qasr Al Sarab lobby lounge is an idyllic rendezvous spot for friends and family, offering traditional blends of tea or
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rich Middle Eastern coffee. Qasr Al Sarab unfolds a gateway of cultural discovery to the mesmerising traditions of the Liwa Desert. Be prepared to stand in awe at the sight of amazing natural phenomenon, such as the crystallised sand formations known as ‘Desert Roses’ that embellish some of the largest dunes in the world. Traverse the undulating landscape by traditional means atop a camel with an experienced guide, and live out epic Arabian experiences as you soak up the region’s fascinating history. Glimpse at the Arabian
wildlife as they roam in their natural habitat, a 9000 sq km protected nature reserve. Or simply pass an evening in the style of centuries gone by, gazing at a starry sky from the desert’s natural vantage point of a beautiful ochre red dune. Reveal the true spirit of Arabia with a visit to the Bedouin Tent by the Falaj. Become immersed in the local way of life and savour a string of authentic Arabian customs, against the backdrop of vast dunes and enchanting desert surroundings.
For those with lots of energy to burn, the fitness centre offers a variety of different classes held outdoors, in the main pool and aerobics studio including Kinesis, yoga on the dunes, pilates, Zumba, BLT, Aquafit, core conditioning, step aerobics, weight limited training, cardio kickboxing classes, tennis, basketball, volley ball, along with a weights and cardio room available for those looking to work off extra steam. Qasr Al Sarab Desert Resort by Anantara is a scenic retreat located in an astounding, unique environment, encompassing authentic aspects of desert life and capturing the true heritage and culture of the region. A tapestry of colour, culture, luxury and ingenuity are just waiting to be discovered at Qasr Al Sarab Desert Resort by Anantara.
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Arab Investor // Hospitality
Arab Investor // Hospitality
Expects to Become Largest Hotel Company in Africa [**]
MARRIOTT SIGNS LETTER OF INTENT TO ACQUIRE PROTEA HOTEL GROUP’S HOTEL OPERATIONS AND BRANDS
Marriott International, Inc. (NASDAQ: MAR) today said it has signed a letter of intent with Protea Hospitality Holdings of Cape Town, South Africa to acquire Protea Hotels’s brands and its management business that operates or franchises 116 hotels across three brands with 10,184 rooms in South Africa and six other Sub-Saharan African countries. The transaction would nearly double Marriott’s distribution in Africa to more than 23,000 rooms, and would also provide Marriott with a proven operational platform and leadership team to accelerate Marriott’s expansion plans and solidify its leadership position in the dynamic and growing African hotel market.
Protea Hotels, founded in 1984, manages, franchises and leases hotels across the Protea Hotels brand (104 hotels), comprising a full and diverse range of outstanding hotels and resorts; the award-winning lifestyle boutique Protea Hotel Fire & Ice! brand (2 hotels); and the superior deluxe African Pride Hotels collection (10 hotels). In addition to its industry-leading 80 hotels in South Africa, Protea Hotels has a significant presence in Malawi, Namibia, Nigeria,Tanzania, Uganda and Zambia.
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As part of the transaction, Protea Hospitality Holdings would create a property ownership company to retain ownership of the hotels it currently owns (and enter into long-term management and lease agreements with Marriott for these hotels). It would also retain a number of minority interests in other Protea managed hotels. At closing Marriott would manage approximately 46 percent of the rooms, franchise approximately 40 percent of the rooms, and lease approximately 14 percent of the rooms.
supplement - Commercial Guide