EXCLUSIVE REPORT: TOP DEALS AND MARKET DATA

Vol. 15 Issue 6 October 2010

One year on, Gulf Air

boss tells all
RBS denies Dubai
World firesale
Will KSA mortgage
law save market?

RAK SPECIAL REPORT

The man who sold

the world: RAKIA
CEO sells global assets

KHATER
MASSAAD Bahrain..............BD 1.0
Kuwait............... KD 1.0
Oman................ RO 1.0
Qatar.................. QR 10
Saudi Arabia.......SR 10
UAE.................. DHS 10
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 CONTENTS
Vol. 15 Issue 6 October 2010

REGULARS
30
RAK
Letters
42
in the
Executive moves
107
Data monitor
market
SPECIAL REPORT:
112 Khater Massaad,
Calendar CEO of RAKIA and
RAK Ceramics on
114 why he is selling his
Hotels
international assets
116 for a double AA credit
In your shoes rating and Sheihk
Omar bin Saqr
Al Qasimi on the
RAK Airways
44
GCC NOW
relaunch.
10
The round up
News, numbers and people from
around the region NEWS ANALYSIS FEATURES
32 55
Sitting tight Payback time
COMMENT FINANCE Region won’t firesell FINANCE Refinancing dates are
assets says Royal Bank of Scotland. looming for the region’s firms.
20
Mishal Kanoo 34 60
UAE must change business laws. Opec turns 50 Medicine man
ENERGY Is it time for the energy AVIATION Gulf Air’s Samer Majali
22 body to widen its remit? on turning the airline round.
Matein Khalid
Nawras pricing is too high. 36 66
Brave new world Saudi’s hot property
24 BUSINESS Post-recession, REAL ESTATE How will Saudi
companies need a new approach. Arabia’s new mortgage law fare?
Michael Burchill
Happy workers make more money.
38 72
Net gains Future gadgets
26 TECHNOLOGY Gulf Business lists
RETAIL Online shopping hits the
Michael Preiss UAE, how will it affect the market? the top ten tech trends.
Indonesia’s growth curve.
40 81
28 Double act Play time
Phillip Anderson MARKETS DFSA boss Gerard LEISURE Entertainment industry
Why do an MBA? Santing on DFM and Nasdaq Dubai. remains strong in the recession.

October 2010 gulfbusiness 7

F

100 Editor-in-Chief
Obaid Humaid Al Tayer
Group Editor and Managing Partner
Ian Fairservice

Group Senior Editor

Gina Johnson
Group Editor
Catherine Belbin

Editor
Alicia Buller alicia@motivate.ae
Business editor
Karen Remo-Listana karenr@motivate.ae
Sub-editor
Iain Smith iains@motivate.ae
Editorial coordinator - business
Concessa D’Souza concessa@motivate.ae
Art Director
Cris Domdom cris@motivate.ae
Senior Designer
B Raveendran raveendran@motivate.ae
Contributors
Ryan Harrison
Michael Gordon
Robert Bailey
General Manager Production
and Circulation S Sasidharan
Production Manager C Sudhakar
General Manager Group Sales
Anthony Milne anthony@motivate.ae

102
Senior Advertisement Manager
Abraham Koshy abraham@motivate.ae
Advertisement Manager
Ajay Mathews ajay@motivate.ae

103
85
Turkey’s rise
COUNTRY REPORT Turkey’s
growing economy and UAE relations.

96 Head Office:
Designs for life PO Box 2331, Dubai, UAE
Tel: +971 4 282 4060, Fax: +971 4 282 4436,
INFRASTRUCTURE Building cities motivate@motivate.ae
that people want to live in. Dubai Media City: Office 508,
5th Floor, Building 8, Dubai, UAE,
Tel: +971 4 390 3550, Fax: +971 4 390 4845
Abu Dhabi: PO Box 43072, UAE,
Tel: +971 2 677 2005, Fax: +971 2 677 0124,
LIFESTYLE motivate-adh@motivate.ae
London: Acre House, 11/15 William Road,
London NW1 3ER, UK,
100 103 motivateuk@motivate.ae

Travel Art Editorial syndication details,

Fresh from the World Cup, Cape Town A guide to the season’s Middle Tel: + 971 4 2824060
gb@motivate.ae
offers the ultimate African adventure. East auctions.

22,774
102 104 copies
Cars Competition June 2009
Alicia Buller test-drives the Win a two-night stay at the Printed by Emirates Printing Press, Dubai
capacious, new-look Audi Q7. Fairmont Dubai.

8 gulfbusiness October 2010

 IN THE NEWS QUEEN ELIZABETH II

Britain’s Queen small business. UK exports

Elizabeth II is
expected to make a state
visit to the UAE next
month, her first trip to
the country in 31 years.
Buckingham Palace first
issued a statement in
July confirming the visit,
after the British monarch
accepted an invitation
from Sheikh Khalifa bin
Zayed, President of the UAE
and Ruler of Abu Dhabi.
From the UAE, the
Queen, 84, will fly to
Oman, where she will join
celebrations to mark the
40th year of Sultan Qaboos
bin Said’s rule.
to the UAE have remained
steady throughout difficult
trading conditions, with
the country buying £3.6
billion ($5.6 billion) of
UK-made goods and
services in 2009.
Last year, the Queen
received Sheikh Mohammed
bin Rashid Al Maktoum,
Prime Minister of the UAE
and Ruler of Dubai, during
the opening ceremony of
the Royal Ascot Festival in
Berkshire in June.
Sheikh Mohammed
occupied the traditional
royal seat beside the
Britain’s Queen Queen as the guard
Elizabeth II is bringing

Her visit follows foreign
office minister for the
Middle East Alistair Burt’s
visit to the UAE last month
in a bid to strengthen
bilateral ties. Burt was the
first Minister since the UK
election to visit the country.
The Queen is the head
of state for the UK and
15 other Commonwealth
her royal touch to the
UAE next month.
realms. The elder daughter
of King George VI and
Queen Elizabeth, she was
born in 1926 and became
Queen at the age of 25, and
has reigned through more
than five decades.
The UK and the UAE
iStockphoto
last year committed to
increasing bilateral trade
to £12 billion ($18.8
F The exact dates and
billion) by 2015 – a 66 per
cent increase on current
levels. According to Lord
Davies, UK minister for
trade, investment and
of honour started the
drill lining up in the
racecourse. Both have a
passion for horse racing.
itinerary of the Queen’s
trip are being withheld,
but the Queen and her
husband Prince Philip,
will visit the UAE some
time in November.

SOAPBOX
We’re financing our competitors The last thing they want to upset I was surprised by the media
by providing them with capital. I is Emirates because we’re the campaign size and I have doubts
think this is a significant threat. only ones buying aeroplanes. about the real objectives behind it.

Willie Walsh, Tim Clark, Ahmed Humaid

put-upon Emirates Al Tayer, Dubai
CEO of British president, International
Airways, warns explains that Financial Centre
that Europe Gulf airlines did governor, laments
has failed not create the the Western and
to recognise export credit Arab media
the threat of rules Willie Walsh choosing to paint a
Middle Eastern is complaining negative slant on
airlines. about. Dubai life.

GCC AND THE WORLD

$123
The GCC states have component of this military Oman is expected to
ordered US weapons build-up, having ordered a spend $12 billion and
worth around $123 billion package of US arms worth Kuwait $7 billion until the

as they seek to counter
Iran’s military power, the
Financial Times reported.
Saudi Arabia accounts
for the largest single
billion
more than $67 billion. end of 2014 on replacing and
The UAE has signed upgrading warplanes and
contracts to buy military new command and control
equipment worth $35 Total GCC spend systems, according to
on US weapons
billion to $40 billion. Blenheim Capital Partners.

10 gulfbusiness October 2010

 UNITED ARAB EMIRATES

Dubai drops in
expensive city list
Dubai, which was no
12 in the world’s most
expensive cities list last
year, now ranks 31st in
EuroCost International’s
Worldwide City Ranking
2010 for Expat Rent Prices.
The report attributes this
to a “spectacular” decrease
of up to 30-50 per cent
according to the type of
housing. Beirut (10th) is now
the most expensive city in
the Middle East, just before
Abu Dhabi (12th) where
ex-pat rents also decreased
in 2009. Beirut appears for

gulfpics
the first time in the top
20, pushed up by the real

Dubai World gets creditors’ nod

estate speculation that has
generated a strong increase
of high quality housing.
Tokyo has maintained
its top position while
London (2nd) and Hong
Kong (3rd) have switched
their 2009 places.
HSBC launches
airbridge ads
HSBC Middle East
signed a five-year
partnership for the
advertising rights to
airbridges at Dubai
Dubai World said
99 per cent of its
creditors had agreed to
the terms for restructuring
$24.9 billion worth of
debt, less than a year after
the state-owned holding
company’s proposal to
delay repaying loans sent
emerging market stocks
tumbling.
“This overwhelming
support means that the
company on a sound
financial footing, enabling
it to realise value for the
benefit of all stakeholders.”
Dubai World and its main
creditor banks agreed in
May to restructure $14.4
billion of bank loans and
$8.9 billion of government
$14.4
liabilities to resolve a crisis
that roiled global markets
last year. The company
said banks would be paid
$4.4 billion in five years
and another $10 billion
over eight years at below-
market interest rates
supported by assets sales.
The agreement also “marks
the support of the creditors
to the separation,” of real
estate developer Nakheel

International and Sharjah
International Airports.
The airbridge campaign
is the biggest ever in the
Middle East.
company is well positioned
to close the restructuring in
the coming weeks,” Dubai
World said in a statement.
“The proposal puts the
billion
PJSC from Dubai World,
Sheikh Ahmad Bin Saeed
Al Maktoum, chairman of
Dubai World Bank loan the Dubai Supreme Fiscal
restructure Committee, said.

IN NUMBERS

1.8%
Shuaa Capital’s revised GDP
growth forecast this year. The
UAE-based investment bank
has now trimmed its previous
estimate of 2.5 per cent saying it
predicts a weaker than expected
economic recovery.
$1bn
The value of UAE-based Majid Al
Futtaim Properties’ project in Syria.
The groundwork of the project, called
Khams Shamat, began last month.
The project is tipped to be the biggest
shopping and leisure destination in the
Levant region.
25
The number of years of Jebel Ali
Free Zone (Jafza) success being
commemorated by Emirates
Post with a special stamp.
Jafza has posted more than 320
times growth in the number of
companies enlisted since 1985.

October 2010 gulfbusiness 11

 SAUDI ARABIA

Saudi ranks 13th easiest place Regulator fines

to do business mobile firms
The Communications
The World Bank has and Information
ranked Saudi Arabia Technology Commission
as the 13th easiest place to (CITC), Saudi Arabia’s
do business in the world, telecommunication
making the kingdom the regulator, has imposed
highest rated country in fines in excess of SAR5
the Middle East and the million on some local
Arab world for the fifth mobile service providers
year in a row. for breaching CITC
The country has recently regulations. The mobile
released its five-year plan, service providers violated
which outlines $385 billion CITC’s regulations for
of anticipated spending in single network service and
the kingdom between 2010 similar offers, and did not
and 2014. While a large abide by the ban on free
portion of the budget is reception of calls during
dedicated to manpower international roaming, the
development, other regulator said.
important areas of the
country’s infrastructure Banks well
will also benefit from the
plan. More than 15 per
F capitalised
cent of the budget has been Saudi banks adequately
dedicated to transport, Kingdom Holding fulfill the enhanced capital
telecommunications, Tower in Saudi Arabia. requirements that have
KSA ranks highest for
iStockphoto

municipal services and been put forward by the

business in the the Basel Committee, says
construction. Arab world.
Global Investment House.
Saudi bank’s Tier 1 capital
PROJECTFOCUS ratio was more than 10
per cent during 2009 and
$1.46 billion Doosan water deal H1 2010, well above the
minimum requirement of
South Korea’s Doosan body, confirming that it people. The company said four per cent under Basel
Heavy Industries and had secured the deal. The it would be the world’s II and six per cent under
Construction has won plant at Ras Az Zawr will largest such plant in Basel III.
an order to build a water provide drinking water terms of value and water
desalination plant in Saudi to the capital Riyadh volume, beating the Al IT market to
Arabia. The company and will be completed Shoaiba desalination
said in a statement it had in January 2014. It will plant, also built by
reach $4.6bn
received a letter from produce one million Doosan, which produces Saudi Arabia remains
Saline Water Conversion tonnes of water a day, about 880,000 tonnes of the biggest IT market in
Corporation, a Saudi state enough for 3.5 million water a day. the GCC with a forecast
value of $3.3 billion in
INNUMBERS 2010, which is expected

$385 bn $3.8 bn
to grow to $4.6 billion by
2014, according to recent
figures from Business
Monitor International.
Computer hardware sales
Anticipated spending in the The value of KSA’s consumer electronics including PCs, notebooks
kingdom between 2010 and devices market this year, according to and accessories are
2014, based on its five-year Companiesandmarkets.com. This is estimated to reach $1.8
development plan. expected to increase to $4.8bn by 2014. billion this year,

12 gulfbusiness October 2010

 Phantom Coupé
The sophisticated Grand Tourer

Abu Dhabi Motors, Abu Dhabi, UAE Al Jenaibi Int’l Automobiles LLC, Muscat, Oman
Tel: 00971 2 677 8884 www.rolls-roycemotorcars-dealer.com/abudhabi Tel: 00968 2 456 7108 www.rolls-royceoman.com

AGMC, Dubai, UAE Ali Alghanim & Sons Automotive Co. WLL, Kuwait
Tel: 00971 4 339 1555 www.rolls-roycemotorcars-dealer.com/dubai Tel: 00965 184 6464 www.rolls-roycemotorcars-dealer.com/kuwait

Rolls-Royce Motor Cars Doha, Doha, Qatar Mohamed Yousuf Naghi Motors, Jeddah, Kingdom of Saudi Arabia
Tel: 00974 44 47 75 77 www.rolls-roycemotorcars-dealer.com/doha Tel: 00966 2 669 5333 www.rolls-roycemotorcars-dealer.com/saudiarabia

Euro Motors, Manama, Kingdom of Bahrain Mohamed Yousuf Naghi Motors, Riyadh, Kingdom of Saudi Arabia
Tel: 00973 17 754 754 www.rolls-roycemotorcars-dealer.com/bahrain Tel: 00966 1 462 7777 www.rolls-roycemotorcars-dealer.com/saudiarabia

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

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

Heat no obstacle to
hosting World Cup
In a bid to convince
a team of FIFA
inspectors last month, the
Qatar 2022 team said it can
overcome the scorching
heat by cooled carbon
neutral stadiums.
The gas-rich state is
competing with Australia,
England, Belgium,
Netherlands, Japan, South
Korea, Qatar, Russia,
Spain and the United States
to host the 2022 World Cup.
“All the stadiums
presented in our portfolio
are environmentally
friendly as they use
advanced technology
with zero carbon dioxide
emissions,” president
of Qatar 2022, Sheikh
Mohammed bin Hamad
bin Khalifa Al Thani told
a major sports event with
the 2006 Asian Games.
”We will honour our
promise to provide air-
conditioned stadium,”
Sheikh Mohammed said
in a joint press conference
with the head of FIFA’s
delegation, Chilean Football
Federation president Harold
Mayne-Nicholls.
”Climate has never
been an issue for Qatar,”
the 2022 bid committee’s
executive director Hassan
al-Thawadi had said earlier.
”We are preparing to start
a second generation of air-
conditioned stages which
will be solar powered,
he said.
F
” The cooling will not be New official Qatar
restricted to the football 2022 ambassador
fields but will cover the Zinedine Zidane
during the tour for the
Reuters

reporters. Qatar has open spaces around the World Cup bid.
already successfully hosted stadiums,” he added.

SPOTLIGHT

Qatar’s Barwa Bank names new CEO

Qatari Islamic lender
Barwa Bank, a unit
of developer Barwa Real
Estate, named Steve
Troop as its new chief
executive officer. The
bank said Troop will now
be ”responsible for driving
Barwa Bank’s strategy and
day-to-day management,”
adding that he officially
joined the company in
September this year.
Troop was previously
chief operating officer
at Riyadh-based Saudi
Hollandi Bank and also
worked for HSBC in Asia-
Pacific, Europe and the
Middle East.
Barwa also named
Keith Bradley as head of
banking group and Amgad
Younes as chief operating
officer.
“Our next phase of
development will be
the rollout of BARWA
Bank’s customer services
facilities to create
“universal Islamic banking
group”, said chairman,
H.E. Sheikh Mohammed
Bin Hamad Bin Jassim
Al-Thani.
Barwa Bank, which
provides a range of
Shariah compliant services
including retail, corporate
and commercial banking,
has said it will acquire
Doha-based financial
services firms The First
Investor and First Finance.

INNUMBERS

$90,149 7.2 trn $750mn

Qatar’s annual GDP per capita in Qatar’s 2009 gas output in cubic feet, The amount in millions of Islamic
2010, according to IMF, making it which means the country boasts the bonds that Qatar Islamic Bank
the world’s richest country for three strongest production growth in the hopes to sell to investors in the
years in a row. Middle East. future.

14 gulfbusiness October 2010

 KUWAIT

Islamic banks
saturated – CB
The governor of Kuwait‘s
central bank, Sheikh
Salem Abdul-Aziz
al-Sabah, said that with
five registered Kuwaiti
Islamic lenders and Saudi
Arabia’s Al-Rajhi Bank,
the country is saturated
with Islamic banks. “I
believe that with this
the Kuwaiti market has
Kuwait markets set reached saturation point
for first-time regulation for Islamic banks at this
by independent body,
iStockphoto

First stock market regulator appointed
Kuwait has
appointed its first
independent regulatory
body, the Capital Market
Authority, to oversee
its stock exchange. The
managing director of the
Kuwait exchange, Saleh
al-Falah, was appointed
chairman of the new
body, which has four
the Capital Market
Authority.
other members. Since its a special tribunal for
foundation as the region’s the stock market and
first bourse in the
early 1970s, the Kuwait
stipulates hefty jail
terms and fines for an
F (GIC) to Canada-based
exchange has been run array of offences. The
by government-appointed Kuwait exchange has
administrators who have been the only one in the
been criticised by MPs for Gulf without a market
a lack of transparency. authority as the law took
The law also calls for many years to secure
the establishement of parliamentary approval.
stage,” he said.
Kipco sells
insurance stake
The Kuwait Projects Co
(Kipco) agreed to sell a
39.2 per cent stake in
Gulf Insurance Company
Fairfax Financial
Holdings for KWD59.85
million ($208.6m). Kipco
will remain the largest
shareholder of GIC with
about 43 per cent and
Fairfax will own about 41
per cent, Kipco said.

PROJECTFOCUS
Kuwait to sign $893 million gas deal with Daelim
Kuwait National
Petroleum plans to
sign a KD260 million
contract with South
Korea>s Daelim Industrial
to build a fourth gas
production line at its
Mina Al-Ahmadi refinery,
INNUMBERS
Kuwait eyes nine
new ports
The Kuwait Ports
Bloomberg has reported. is to spend KWD410 Authority has
«We already have three million on natural gas commissioned
trains, this is the fourth projects by the end of Netherlands-based
gas train with an 2013 including a fourth consultancy and
associated pipeline,» KNPC gas pipeline costing engineering firm, DHV
spokesman, Mohammed KWD260m with a to develop plans for nine
al-Ajmi told the news capacity of 850 million ports in the country.
service. The company cubic feet per day. The project includes
the redevelopment of
three existing ports in
Kuwait City, as well as

KWD30 bn
The value of Kuwait’s four-year
development plan. A fifth of this
is slated to go Kuwait>s ministry
of public works, which plans to
execute more than 500 projects o
ver the period.
29,000
six new facilities along
the 300km-long coastline.
The new coastal ports are
aimed at providing better
The number of Kuwaiti citizens facilities for fishing
currently banned from travelling boats as well ferries
outside Kuwait due to non- serving the offshore
payment of outstanding debts, islands and boats
according to Ali Al Dhubaibi, the used by government
head of the Ministry of Justice departments.

16 gulfbusiness October 2010

 BAHRAINOMAN
CB clears new bank
The Central Bank of Oman has cleared a request
by Sayed Asa’ad Bin Tarek Bin Taimour Al Saeed,
representative of Sultan Qaboos Bin Said, to set up a
new commercial bank in the country.
The new entity, Al Izz International Bank, will be the
seventh locally incorporated bank after BankMuscat,
the National Bank of Oman, Bank Dhofar, Bank Sohar,
Oman International Bank and AhliBank.
Nawras launches IPO
Oman-based Nawras has opened the subscription
period for its initial public offering, which is
scheduled to run until October 14, 2010. The offering is
open to Omani and GCC retail investors and to Omani
and international institutional investors.
Albaraka may spend $200
million on acquisitions
Adnan Ahmed Yousif, CEO of Bahrain-based
Albaraka Banking Group said the Islamic lender is
looking to buy banks in Malaysia and Indonesia and may
spend as much as $200 million on the deals, Bloomberg
has reported. ”We prefer to either start an Islamic bank
or acquire an Islamic bank,” he said. Standard Chartered
is advising Albaraka on the Malaysia acquisition and
holding meetings about a buy-out in Indonesia.
INNUMBERS
OR7.18 bn
Oman’s expenditure budget allocated for 2010,
nearly 63 per cent of this amount has been used
in the first eight months.
18 gulfbusiness October 2010
30
Seconds to
make sense
of… 2012
Olympics
Stuart Hill
Vice president and director, BT’s London
2012 Delivery programme
What is the impact of the 2012 Olympics and
Paralympic Games on the city of London and the UK
as a whole?
This is the first major sporting event in the UK since the
Commonwealth Games 2002. We are very excited because
the Olympics and Paralympics is equivalent to 26 major
sporting events. They will feature over 14,000 athletes
from more than 200 countries in nearly 700 events. There
will be one building to accommodate 20,000 broadcasters,
photographers and journalists. This event calls for the
largest park development in Europe for over 100 years.
Some 7,000 people have worked on the Olympic Park
and, of the present workforce of 3,315, 10 per cent were
previously unemployed before finding work helping
deliver the Games. This event is expected to boost the
F
economy by £21 billion with around nine million tickets to
be available. About 800,000 people are expected to use the
public transport on the busiest day. About 240,000 people
will travel by rail to the Olympic Park every hour.
What new elements can we expect from
Olympics 2012?
Because we’re such a multi-cultural nation, a lot of people
will be coming to the games as if it’s their games. In terms
of communication, what has changed is the experience –
there is 3D, super-high definition and there will be more
interaction with the individual than just watching it on a
big screen. You will really see people sweating and catch
that moment like never before.
What will you do as the official communications
services partner for this event?
Co-ordinating a matrix of partner organisations, BT
will carry every image, every sports report and every
visit to the London 2012 Games website, along with
countless millions of calls, emails and text messages.
With 14,000 cable TV outlets, 20,000 accredited media
personnel and Live Site screens in UK city centres, it
adds up to an estimated six Gigabytes of multimedia
data every single second.
Is there a back-up plan for any mishaps?
Jamaican athlete UsainBolt set a new 100 metres world
record of an astonishing 9.69 seconds in Beijing, but in
telecommunications that’s a very long while. What if the
signal went wrong for a few seconds, then you just miss
seeing that. There is always a back-up plan, but you must
do it right the first time. You have to be a super athlete to
win a gold medal so you also have to be a super telecom
company partner to get this right.
COMMENT

UAE NEEDS TO REVISIT

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

F
or the longest time, the region has tried to position or else the court of judgment was overseas. What signal
itself as the alternative to London and Singapore should we take from this?
as both the new financial centre as well as the new I don’t want to close this article on a sour note. In fact,
economic powerhouse to be presented to the world. when we look at the law books, we see that we have some
We did everything possible to make that a reality. We of the best written laws that one could find. The problem
built great universities, infrastructure and roads as well lies with interpreting them and enforcing them. Some of
as endeavour the greatest real estate bonanza this side of our judges need more training not in the law, in which they
forever. Indeed, we did everything right for an up and coming are quite proficient, but in life matters. We need our judges
place but, one a worthy legal system for this. to understand the way businesses work they also need to
The issue might seem trivial to some but for those who understand the weak, and how to enforce laws that are
invested millions in the region, the fair and just. If a contract is absurd,
problem has become paramount. Things that are taken they need to be more understanding
Major issues that are taken for
granted in other financial and
for granted in other when they make their judgments and
how are they to do that if they don’t
economic powerhouses, such as countries, such as understand the business enough to be
precedent setting, a speedy trial, precedent setting, a able to make such a judgment?
judges who understand the business The word of the law is what
world, unbiased arbitrators and speedy trial, unbiased made all those financial as well as
binding contracts are not guaranteed arbitrators and binding economic centres of the world the
in the UAE. places that people aim to safeguard
The most obvious and easy contracts are not their money in. The law is applied to
situation to discuss is anything to guaranteed in the UAE. all, fair and square, and that is what
do with real estate. Those developers makes it attractive.
who signed papers binding them to performing a certain If we ever want to be the centre we aspire to be, we
requirement, found it easy to delay a project without must first understand our laws and why they are there.
paying the contracted fine, while if the buyer defaulted, he Once we do that, we need to enforce the law on all fairly
was taken to task. In fact, I even know of one case where and as fast as possible. Then, we might be able to attract
a developer used ‘force majeure’ as a rouse when the the money that we want.
government changed some laws pertaining to real estate The heady days of easy money are gone and the days of
stating that force majeure was not just an act of God but taking responsibility for our actions are upon us. There is
also a change in government policy. This kind of action nothing wrong with having great aspirations. In fact, that
causes serious money to stay away from the region. This is what made Dubai sought after. It is the aftermath of
was not evident when the money was flowing, but the the grand party that we have to be concerned with. If we
moment the global crisis hit, people who were literally organise ourselves before the party and plan for the after
throwing away money realised what they had done and effects then we can contain most of the problems that will
took corrective action—they stopped at once. arise after. This way, no matter how grand the celebration,
If we were really honest with ourselves, most of the no matter how rowdy it gets, we can all sleep easy knowing
serious money had come into the oil industry and most that when the party is over, things will not collapse.
of those contacts were either government-to-government, Mishal Kanoo, deputy chairman, Kanoo Group.

20 gulfbusiness October 2010

COMMENT

NAWRAS IPO PRICING

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

T
he IPO of Omani mobile telecom Nawras in October the capex expenditure alone of Nawras was a colossal 52
is a significant milestone in the Gulf capital million OR in 2009.
markets. Nawras is the first IPO in the sultanate Moreover, subscriber acquisition growth is bound
since Sohar Power’s floatation on the Muscat stock to slow in the decade ahead since Nawaras already
exchange two years ago on the eve of Lehman’s failure. commands a 40-42 per cent market share and the mobile
The Nawras deal is significant because the company, a penetration ratio in Oman is an impressive 149 per cent,
start up financed by Qatar’s Qtel and several Omani state offering little prospect for the exponential revenue growth
pension funds only five years ago, intends to raise $600 that proved a financial fairy tale for investors in Egypt’s
million via a book building process, a huge sum in a year MobiNil or Saudi Arabia’s Mobily, let alone China Mobile,
when the entire GCC has witnessed only eight, smallish, low Russia’s Vimpelcom or India’s Bharti Airtel. To quote
profile IPO’s that have not even managed to raise $1 billion. Godzilla in mobile phone investing, ‘size matters’.
It is no coincidence that seven out of the eight IPO’s in I am also concerned that global fund managers may well
the Gulf this year were from Saudi Arabia. After all, bank be reluctant to allocate capital to a mobile telecom IPO in a
credit growth in the kingdom has been the highest in the country that is not included in the Morgan Stanley emerging
Gulf. The absence of bank finance is a huge deterrent to risk markets indices, though Nawras is a must own for Omani
appetites, stratospheric valuations pension funds because it will have
and jumbo offerings in the Gulf. There is the possibility a top five weighting on the Muscat
Nawras is clearly a compelling Securities Market after its listing.
argument for startup success, having
that Oman will award a Competition and regulatory risk
wrested 40 per cent of the Omani third mobile licence once for Nawras will rise in the next
mobile market from the incumbent the requisite spectrum two years. The Omani government
Omantel and acquired two million licensed five new Omani mobile
subscribers. With its own international is available, a prospect resellers in 2009. There is also the
gateway and transmission network, that could trigger possibility that Oman will award
Nawras can renegotiate terms with a third mobile license once the
Omantel and generate substantial cost future cannibalistic requisite spectrum is available,
synergies in the next two years. pricing wars. a prospect that could well trigger
Moreover, unlike GCC mobile future cannibalistic pricing wars.
telecoms Zain and Wataniya, Nawras is not highly Mobile voice revenues in the Gulf are also hostage to
geared, with its net debt/EBITDA ratio at a mere 0.3. The economic growth and the potential repatriation of immigrant
management team of Nawras has demonstrated a stellar construction workers, the biggest users of prepaid cards.
strategic track record and taken a humble start up to the With five mobile resellers and a 149 per cent Omani mobile
position of the second Omani mobile vendor in five years, penetration rate, I doubt it increased usage and data traffic/
a period that witnessed the most traumatic economic video alone can sustain mobile industry growth.
contraction and credit crunch in the Gulf since the 1980’s. I have the utmost admiration for Nawras but I cannot
Nawras as a company has demonstrated innovation, justify the pricing range of the IPO at 704 – 904 baisa.
operational excellence, a pristine balance sheet and a However, if Nawras trades at 600 baisa or lower in the
valuable corporate brand in the Gulf. However, Nawras as secondary market after retail investors (70 per cent of
a stock investment faces a multitudes of risks. the allotees) sell their shares, it will converge to my fair
The pricing range for the Nawras IPO is far too value paradigm. As GCC investors have learnt the hard
expensive. It makes no sense to me to value Nawras up to way, patience and contrarian thinking are unquestionably
550 million Omani riyals (OR) at its listing even though undervalued virtues on the regional stock exchanges.
the company earned only 26 million OR in the first half of Matein Khalid, fund manager in a royal investment
2010, flat over the corresponding period in 2009. After all, office and writer in finance and geopolitics.

22 gulfbusiness October 2010

IN 2010,
WE DID IT
AGAIN !

852 34 1 5
TOP PRINTERS COUNTRIES PRINTER SAPPI
FROM EUROPE INCLUDING FROM THE AWARDS
WITH OVER GERMANY, ITALY, MIDDLE INCLUDING
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Tel: (+971 4) 347 5550, Fax: (+971 4) 347 5959
E-mail: epp@eppdubai.com, Website: www.eppdubai.com
COMMENT

HAPPY FIRMS EARN FIVE

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

A
s companies across the Gulf region emerge from
the recent recession and rethink how they will
win in the marketplace, the best companies
will focus on their workplace as a key element
of that strategy. Indeed, not only does focusing on
the workplace makes good business sense, it may very
well be the largest wellspring of untapped competitive
advantage. The Great Place to Work Institute, a global
research and management consultancy, has just launched
operations in the UAE. The Institute recognizes the best
companies to work for in over 40 countries and works
with organisations that want to create a great workplace
environment. In the near future, operations will expand
into the remainder of the GCC.
The Institute has been engaged
in cutting edge research for over Employees in great
20 years on great workplaces
– who they are, what do they workplaces believe
do and why it matters. One of their leaders to be
the consistent findings in this
research: is that companies with
credible, respectful,
great workplaces tend to do better and fair. Without trust,
financially. Why is this?
First, employees in great
pride and camaraderie,
workplaces are more engaged any measure of
with their work and in the business success is
organisation. There is both a
higher level of cooperation and diminished.
stronger commitment in the best
workplaces. Eighty eight per cent of employees at the
100 Best in Europe reported high levels of cooperation
in order to get work done. When most organisational
studies note that upwards of 60 per cent of employees
are actively engaged with their job, nine out of every ten
employees in these organisations are ready to give their
best. The result: 15.4 per cent growth in revenues during
the economic downturn across the European 100 Best
compared to less than half that in a similar peer group.
And the 10-year financial performance of the 100 Best in
the US is an average of 10.3 per cent, compared to the S&P
500 stock market indices of 2.95 per cent.
In addition, employees in great workplaces are more
loyal to the organisation, and are more reluctant to jump
ship just because of a higher salary someplace else.
Turnover in the best companies tends to be less than
half the industry average. And these organisations
also save money in worker compensation (on the job
injuries), absenteeism, health care and so on. It turns
out that having a great workplace is a smart
monetary policy.
Why is this? Well, we find that employees in great
workplaces believe their leaders to be credible,
respectful, and fair – they trust them. They also
take pride in what they do, and they share a sense of
camaraderie with their coworkers. Without trust, pride,
and camaraderie, any measure of business success is
diminished. Further, there is a strong commitment
from the senior leadership team
to having a great workplace,
multiple communication
forums exist so that leaders
are accessible and employees
well informed, and a workplace
culture is created that sets
employees up to succeed.
The best companies to
work for have a basis on
strong relationships in the
workplace. And therein lies
an important insight. Because
the relationships you create
matter, as a leader you are the
critical difference between a very good company and
a very great company. In the best companies, leaders
at all levels have a strong commitment to creating
strong ties between the employee and the organisation.
Indeed, enhancing trust, pride and camaraderie in the
workplace is the central task of effective leadership in
today’s organisation.
As we enter the Middle East, we are excited to partner
with companies of all size and industries to create great
workplaces, learn from them and recognise the best. ■
Michael Burchill, partner and director, Great Places to
Work UAE. Gulf Business is publishing the UAE’s first
Best Places to Work list in January

24 gulfbusiness October 2010

AVAILABLE AT DUBAI MALL. TOMFORD.CO
COMMENT
INDONESIA’S COMPELLING
GROWTH CURVE
Indonesia’s vast natural resources and robust domestic consumption have
trumped as emerging markets investors scramble for a slice of its success.
MICHAEL PREISS
I
ndonesia is the world’s sixth best performing stock
market globally year to date with about +30 per cent
return. In 2009, the Jakarta Composite Index rose
+86 per cent.
The Republic of Indonesia is, with about 230 million
people, the fourth largest country in the world. Indonesia,
with its 17,508 islands, also has the world’s largest
population of Muslims.
The country was shielded from risks and China’s
slowdown in the second half of 2010 due to Indonesia’s
large domestic market and the small contribution of
exports to economy. Indonesian exports make up only about
22 per cent of GDP. Domestic driven growth is expected to
remain robust, driven by consumption and investment.
Indonesia has often been called a
nation in waiting, but in 2010, and with Indonesia’s bond
the Jakarta Composite Index reaching
an all-time record high last month, the
markets are
time for Indonesia has finally arrived and estimated to have
investors increasingly seem to take notice.
In Indonesia you have very sustainable
been $2.1 billion
growth of 5.5 per cent to six per cent so far this year,
economic growth, historically low
inflation prevailing for some time, a
second only to
stable currency and bond yields falling Mexico.
to record lows.
Foreign buying of Indonesian bonds has driven down the
yield on the 10 government issues to around eight per cent.
Net inflows into Indonesia’s bond markets are estimated
to have been $ 2.1 billion so far this year, making the
country second only to Mexico among emerging markets in
attracting bond investors.
Though Indonesia is doing extremely well these days, it
has not always been the case.
For many years, the country under-performed most other
Asian markets. Indonesia has experienced a net negative
outflow of capital every year between 1998 and 2002. For
no other country in Southeast Asia was that true, not even
for a single year in that period. Since the 2004 election of
current president Susilo Bambang Yudhoyono, or SBY, as he
is fondly called by Indonesians, and especially after 2008,
the country’s fortunes have turned around and witnessed a
sustainable economic boom.
Net inflows into Indonesian equities in the first half of
2010 is estimated to amount to $971 million. At this rate, net
inflows are on track to surpass last year’s record $1.1 billion.
26 gulfbusiness October 2010
Market capitalisation has more than doubled since 2008
to more than $275 billion today. The goal of the Jakarta
Stock Exchange is to take 75 companies public and boost
market capitalisation to $300 billion by the end of 2012.
Indonesian equities are now valued at an average 17.5
times the consensus price-earnings forecasts and 15 times
2011 profits.
While most Western economies are still in or near recession,
Indonesia’s vast natural resources and large domestic
consumption-based economy demonstrate resilience and
the economic outlook remains robust. Indonesian interest
rates, with the one-year deposit rate now at 5.75 per cent,
are expected to remain steady as investors remain optimistic
about the rupiah and sound monetary policies under
President Susilo Banbang Yudhoyono.
Investors are looking to gain exposure
to shares in the natural resources,
banks, infrastructure and consumer
goods industries.
Upcoming IPOs will include
mining company PT Berau Coal,
telecommunications company Tower
Bersama Group, Krakatau Steel and
national airline Garuda.
Garuda Indonesian Airlines, barred from
flying into Europe for six years because of
poor safety records, is now the world’s most improved airline
globally according to Skytrax 2010 World Airline Awards.
Garuda reopen flights to Europe after the European
Union’s ban prohibiting Indonesian carriers from operating
in European airspace was lifted in July last year.
Its planned IPO is expected to raise $300 million
to support long-term growth plans of fleet and route
expansion. Garuda’s new daily Jakarta to Tokyo flight
is regularly full, as Japan recently upgraded Indonesian
government debt to investment grade.
Japan is also the largest foreign, long-term investor in
Indonesia. Not only the Japanese, but increasingly many
Middle East investors, realise that Indonesia is the next big
emerging market and cannot be missed.
Last but not least, Indonesia is also vying to become the
market leader in Islamic fashion. While no other Muslim
country is capitalising on this, those in the Indonesian
fashion field are set to make Indonesia the “Mecca” of
Muslim fashion.
Michael Preiss, investment advisor and finance professor
COMMENT

THE REAL VALUE OF AN

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

A
wry joke asserts “Those who can’t do, teach,” classmates as from his teachers, and this works well only
and the highly theoretical nature of so much if the students in a programme are at the same level of
education ought to make one wonder whether maturity. The single most important factor to consider
business is really something that can be in evaluating an MBA programme is its fit with the other
taught. However, graduate management education is students. The breadth and diversity of their experience
quite different to what many of us remember from our and their intellectual ability and preparation will
university days. The MBA is an experience, with learning determine how much one learns.
at its core, but it is meant to do much more than convey The value of an MBA for people who need cross-
facts and theories. functional skills rests on three factors: depth, breadth,
In a single sentence, the MBA degree is designed to and networking. First, an MBA provides depth. For
round out a person’s skills as a general manager. Most example, a finance professional may learn on the job
university graduates who enter the business world how his company executes tasks such as valuation,
develop within a functional area. We become experts capital allocation and capital budgeting. In an MBA
in marketing or finance, for example, and only later in programme, he/she will acquire more advanced tools and
our careers do we assume general will learn techniques that finance
management responsibilities. professionals in other firms use for
The MBA’s chief purpose is to give The typical MBA these common tasks.
graduates a thorough grounding
in the key disciplines of general
student is 29 and has An MBA also provides breadth
across functions, geographies
management. It won’t make an worked for seven and sectors. Learning about other
executive an expert in everything, years; an executive functions is just a beginning –
but a graduate should be able to learning how to integrate them is the
understand, direct and integrate MBA student might heart of an MBA programme. MBA
the combined efforts of functional be 35 with 12-14 years students learn how to coordinate
specialists. A good MBA programme the contributions of different
will address at least the core areas of experience. specialists in order to start an
of accounting, decision making, enterprise, change its direction, raise
economics, finance, marketing, operations, people its performance, integrate acquisitions and develop new
management and strategy. Most top MBA programmes markets. Students’ knowledge becomes broader when
only accept people who have worked for several years, an MBA programme not only brings together people
because it is difficult for inexperienced managers to who have worked and lived in different geographies,
integrate these functional areas. At INSEAD, for but guides them through examples so they absorb the
example, the typical MBA student is 29 years old and has experiences of managers from around the globe. They also
worked for seven years; an Executive MBA student might broaden themselves by mastering insights and lessons
be 35 with 12-14 years of experience. learned from many different sectors, ranging from basic
It’s important to join a programme where the industry to high-tech, to services and non-profits.
participants are at similar career stages, because In the longer run, the most important value created by
the core of the MBA experience is not sitting in a an MBA flows from networking with other professionals.
classroom listening to professors lecture. General For many, their ability to build relationships with people
management skills and the ability to integrate functional from other countries, sectors and functions is the most
areas are developed through reflecting on your own important skill they develop during graduate school.
experience and learning from the experiences of others. Philip Anderson, INSEAD alumni fund professor of
An MBA student learns at least as much from his entrepreneurship, Abu Dhabi.

28 gulfbusiness October 2010

F COMMENT LETTERS

LETTER OF THE MONTH

EXCLUSIVE: FOUR-PAGE REPORT ON TOP DEALS AND MARKET DATA Plane branding
I don’t begrudge Hogan for daring to say “our plan is to be the
Vol. 15 Issue 5 September 2010

best-in-class airline, and it comes back to getting the segmentation

right.” While this is expected of a person in his position, it is worth
Does jail work for debt?
Where have all
questioning whether segmentation is really the main issue at stake.
the IPOs gone?
What about the branding issue? Emirates that have been in business
The problem
with subsidies for over two decades having been launched in 1985, has clearly
leveraged its branding that many non-Gulf residents would argue
that it is the UAE’s national carrier. That should be the main concern

HOGAN’S for Etihad – it’s flying in poor visibility!

The volcanic ash clouds were unpredictable and while it was cited
TEST
Etihad CEO on
breaking even
by 2011
as having cost Etihad $50 million, the airline was not the only one
licking its wounds. It must be pointed out that Europe is a prime
& 10 reasons Abu Dhabi
is turning heads Bahrain..............BD 1.0
Kuwait............... KD 1.0
Oman................ RO 1.0
Qatar.................. QR 10
Saudi Arabia.......SR 10
destination for most Gulf airlines who were also hit by the freak
interruption of the European airspace due to the ash clouds.
UAE.................. DHS 10

GB Regional Sept. 2010.indd 1 8/29/10 9:08:57 AM

However, Emirates happens to be the only one of the Three

Musketeers to have not only broken-even, but also gone into
profitability even in the face of these crises. A main reason is that it
has mastered the art of branding – riding on the wings of Dubai’s
popularity as a tourist destination and connection hub between
East and West.
Dr. Nnamdi Madichie
Assistant professor of marketing
University of Sharjah.

Port of call Aluminium is the opening of their level playing field for everyone? Call
Many thanks for your coverage last dedicated berth this quarter at Khalifa me idealistic but the subsidy policy
month of Abu Dhabi Ports Company’s Port. EMAL will now be able to offload in this region certainly doesn’t make
new fully integrated Khalifa Port cargo by sea, a huge logistical and sense anymore.
and Industrial Zone, which is under financial advantage. Iain Jackson, Doha, Qatar
construction at Al Taweelah, and Michael Vertigans, vice president,
scheduled to fully open in 2030. corporate communications,
However, I would like to correct an Abu Dhabi Ports Company
error over the cost. For our Q4, 2012 Email: Write to the editor,
opening of the Khalifa Port and Stop subsidies Gulf Business, alicia@motivate.ae
Industrial Zone A, we have budgeted As the era of cheap oil comes and the letter of the month wins
26.5 billion Dhs ($7.2 billion). to an end and Gulf countries an Alessi watch.
I am pleased to report that we are search for natural gas to fuel
fully on schedule, and on budget, their diversification plans, I think
and have had hundreds of enquiries they will be forced to do away
not only from companies, interested with subsidies. Subsidies create
in setting up in our exciting and unsustainable demand and this hurts
trailblazing Industrial Zone, but the environment. For instance, Dubai’s
also international contractors who economy and population significantly
are interested in helping us build shrunk last year, but how come water
the dream and achieve the ambition and electricity usage still went up
of seeing the Economic Vision 2030 drastically? Subsidies also create
transform the economy of the Emirate. unfair competition. In a world where
One exciting highlight coming up globalisation is the name of the game,
for us and our anchor tenant Emirates isn’t it about time that we create a

30 gulfbusiness October 2010

IF YOU LOVE STYLE, YOU’LL LOVE...
NEWS ANALYSIS FINANCE

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

D
on’t expect Dubai to dump
its prized assets in a fire
sale anytime soon despite
the fact that it needs the
cash. That’s the word from the Royal
Bank of Scotland (RBS), which heads
up the coordinating committee
of banks in Dubai World’s debt
restructuring.
Simon Penney, RBS CEO for the
Middle East and Africa, said all
signs point towards Dubai carefully
discharging strategic assets over a
Group and Standard Chartered PLC.
The other two are local lenders
Emirates NBD and Abu Dhabi
Commercial Bank.
The challenge since then has been
getting dozens of smaller banks to
agree to the plan -- something that
appears to now be all but resolved
with the latest breakthrough.
Momentum has grown in the
financial markets and media about
Dubai World selling its trophy
possessions, including the ports

Photo: RBS
sustained period of time. operator DP World and Atlantis
The emirate, and Gulf institutions The Palm.
generally, are not as concerned Although recent documents
Simon Penney, CEO, RBS, Middle East.
about shedding companies to revealed that this was only a
generate cash as much as previously contingency plan, the seed was distressed asset tidal wave that
thought, said Penney. planted and talk spread of a would stretch across the Gulf.
Union Properties supported the
trend, agreeing to sell the Ritz-
Dubai has gone on the record and said Carlton hotel development in Dubai
there will be no fire sales. Therefore, for less than the asking price of
I think you will witness an orderly $410 million.
However, the deal struck in mid-
programme of sales in the coming years. September between Dubai World and
creditors went some way to subdue
“There have been a number of any further wild speculation.
minority stakes sold, but nothing IN NUMBERS Still, despite this, the original

significant. Plus, there’s been a little
bit of debt trading hands on the
secondary markets. But Dubai has
gone on the record and said no fire
sales. Therefore, I think you’ll see an
orderly programme of sales in the
$39.9bn
documents listed key assets that
could be up for grabs, including
DP World, Atlantis the Palm, MGM
Resorts International and the luxury
Total debt owed by Dubai World retailer Barneys New York.
Reports flooded in that Dubai

coming years; minority positions
being sold and the more important
UAE positions being held back.”
Since Dubai World’s debt troubles
surfaced, RBS has performed a dual
role in the restructuring: one as
$6.2bn
Dubai Holding Commercial
Operations Group loss for 2009
World could raise up to $19.4 billion
over eight years through sales.
And that the assets earmarked for
possible sale are currently valued at
as much as $10.4bn.
Asset sales, along with bond

the chairman of the coordinating
committee of the banks and the
other as a lender.
In May, the Dubai conglomerate
won the support of the seven-strong
committee that are owed about 60
per cent of the debt. That group also
includes Bank of Tokyo-Mitsubishi
UFJ, HSBC Holdings, Lloyds Banking
$410m
issues, are Dubai’s best option
to boost revenue because other
measures would not generate
enough cash on time to plug debt
Unmet asking price for Union holes, analysts have said.
Properties’ Jumeirah But Bank of America Merrill
Ritz-Carlton hotel Lynch offered a bleak note to clients
recently stating: “With 2010 public
revenues projected at $8billion,

32 gulfbusiness October 2010


Jumeirah Ritz-Carlton hotel.
Dubai’s fiscal muscle seems weak
compared to off-balance sheet
guarantees it may have committed
itself to under the Dubai World
restructuring proposal.”
Despite this, and the rumblings
across the region of large
institutions parting ways with
assets, deal flow has been thin,
said Penney.
“If you use last November as a
starting point, financiers thought
there was going to be a feeding
frenzy on asset sales, including
distressed assets. But as of now,
significant M&A, asset disposal and
the activity of vulture funds hasn’t
materialised.”
One outcome of the restructuring
deal with creditors is it gives Dubai
some wriggle room to consider
its strategy on distressed sales.
Essentially, Dubai World will have
more time to sell off assets and
repay creditors and it won’t pay
punitive rates on this extra time.
In early September, Dubai Holding
Commercial Operations Group
(DHCOG), the main unit of Dubai
Holding, said it had agreed with
lenders to delay repayment of a $555
million revolving credit facility until
the end of November as the two sides
negotiate over a long-term extension.
DHCOG said in June that it may
resort to asset sales to deal with its
debt after posting a $6.2 billion loss
for 2009. But, crucially, company
crown jewels are unlikely to be
disposed of as part of any sales in
view of their strategic and financial
importance for the company.
They include some of Dubai’s most
recognized brands in the hospitality
and real estate sectors, including the
Jumeirah Group.
A banker close to the
restructuring, who preferred to
remain anonymous in line with
company policy, said: “If Dubai
went down the road of a fire sale
of big name items then it would
send out the distress flares that we
need cash no matter what the loss.
The fact that it hasn’t done that is
probably good for the image of the
emirate and confidence in the region
generally.
“It stands to reason that minority
stakes in non-core assets would be
more likely to go first, rather than
State of the Union
Once a quintessential Dubai
corporate high-flyer, Union
Properties has come down to
earth with a severe bump since the
financial crisis.
Its sale of the Ritz-Carlton
Jumeirah Hotel at a knock-down
price added insult to injury. It also
fuelled talk of the extent of this
appetite for selling distressed
assets.
On a positive note, proceeds from
the sale will help Union Properties
complete other projects such as the
Limestone House apartment building
and the 80-storey Index skyscraper
in DIFC.
The firm halted development
work after credit dried up in the
financial crisis and more customers
defaulted. In 2009, the company
reported its first full-year loss
and suspended work on F1-X, a
Formula One theme parkMotorCity
development at the Dubai
Autodrome race track.
businesses that are more integral to
Dubai Inc.”
When asked how much pride
was at stake for Dubai to consider
parting ways with its trophy
businesses, he added: “That’s not
so much a factor anymore. The
world has moved on, and investors
and creditors realise that it’s just
business. Although there’s always a
degree of humble pie.”
On the other hand, institutional
investors in the Middle East,
including divisions of Dubai
Holding, are actually chalking up
some handsome debt acquisition
deals. UAE-based Essdar Capital,
which recently bought the senior
debt of Oman’s troubled $15bn
Blue City project in a distressed
transaction, said it’s taking the fight
to the market and looking to tap
more such opportunities.
Essdar, 35 percent owned by
Dubai Holding, bought Blue City’s
$655.5 million Class A debt via a
tender offer earlier in June as part
of investment in its Gulf-focused
distressed debt fund. The investment
remains the fund’s largest so far.
RBS’ Penney added: “There’s
far more conversations about
acquisitions than disposals and
greater scrutiny around acquiring
business that add value to the local
economies.”
The evidence to date is that
Dubai is steering a cautious path
on the sale of its business units. The
hard-fought deal with creditors will
have depended a large amount on
this fact.
Meanwhile, cash generation will
prove to be king over the coming
years as Dubai World fights to
meets its obligations. It’s fair to
say that neither Dubai World nor
the banks particularly want the
company to part with prized assets
at distressed prices.
So, the emirate is hoping
that big-name discounted sales
that currently form part of the
contingency plan do not become
unavoidable. ■
October 2010 gulfbusiness 33
NEWS ANALYSIS ENERGY
Opec celebrates 50 years
Having survived a tumultuous history of wars, embargoes and in-fighting, Opec’s next challenge
will be keeping up with the world’s changing energy mix. RYAN HARRISON reports.
A
t 50 years old, Opec is a
wise old head. Recessions
have come and gone, but
the organisation that was
founded in Baghdad on September 14,
1960 is still the dominant power in
world oil.
It will need all its years of
experience to tackle the coming threats
to its existence though, say experts.
The Organisation of the Petroleum
Exporting Countries (Opec) is acutely
aware of Iraq’s re-emergence as a
crude heavy weight, declining oil
exports among its members and the
inevitability of renewable energy.
But for now it’s safe. Opec members
still produce about 40 per cent of
the world’s oil, meanwhile the group
possesses about 60 per cent of the
world’s proven crude oil reserves.
Oil prices are comfortably near $75
a barrel and above $70 a barrel for all
but two weeks of this year.
Still, the world is a different place to
that faced by founder members Saudi
Arabia, Iraq, Iran, Kuwait and Venezuela.
“The overarching theme for the
next 50 years will be the changing
energy mix,” said Helen Henton,
head of energy and environmental
research at Standard Chartered.
Despite the deep reserves of Opec’s members,
the organisation is still too heavily dependent
on what is fundamentally a finite commodity.
“The drive to de-carbonisation
and energy security is critical for
everyone, but particularly Opec. That
being said, in the coming decades
oil will still be the most important
component of the energy mix.”
Henton said oil producing nations
have been slow to equip themselves
for the switch to renewable. Although
in their favour the next five to 10 years
will bring technological advances that
34 gulfbusiness October 2010
Helen Henton, head of energy and
environmental research, Standard
Chartered.
could reduce the cost of renewable
technologies.
How to tackle Iraq’s thirst for oil
money is a more immediate threat,
said Henton.
Figures released recently showed Opec
could well see a spike in its production
as Iraq seeks to lift output to 12 million
barrels a day within six years, up from
2.5 million at present, as the country
recovers after years of conflict.
That would catapult Iraq to the
second largest oil producer in Opec
behind Saudi Arabia
“They have some ambitious
numbers,” said Henton. “Fundamentally
though, the world needs more oil so
Iraq producing more is a positive
thing. But the challenge will come with
incorporating Iraq back into the Opec
fold as it’s been outside the quota for
some time.
“There are a number of countries
that would like to produce more but
they can’t. Having to involve Iraq in
this will be tricky,” she added.
Despite the deep reserves of Opec’s
members, especially powerhouses like
Saudi Arabia that have ensured five
decades of continuous oil exporting
revenues, the organisation is still
too heavily dependent on what is
fundamentally a finite commodity.
Gail Tverberg, a consultant and
expert on peak-oil, and editor of
research portal The Oil Drum, said this
issue could prove to be the thorn in
the side of Opec for the years to come.
“Instead of growth, I think the
overall theme will be just trying to
maintain the status quo, when the
natural trend is toward decline. Part of
the issue will be declining oil exports
(because production remains at most
flat, but use by local population
continues to rise). But part of the issue
will be difficulty in obtaining enough
fresh water, and a population unhappy
about declining real wealth.”
Tverberg said in future because oil
reserves are weighted heavily in the
hands of Opec, power will shift away
from non-Opec nations, which are
currently pumping at full pelt just to
keep up.
“Oil exports from non-Opec
countries will likely drop even faster
than Opec countries, so this will raise
the status of Opec oil exporters. They
will be able to pick and choose who
they want to export to,” she said.
How Opec meets its energy
challenges will determine whether
it calls itself the dominant player in
world oil by September 14, 2060. Its
100th birthday is still some way off,
but time is ticking to find a sustainable
alternative source of income.
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Private Banking.

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NEWS ANALYSIS BUSINESS

Brave new world

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

A
s the region journeys back to
growth, there’s little doubt
that things will never be the
same again in the business
world. The Gulf has waved goodbye
to the days of the sales office phones
ringing as often as the cash register;
just as the UAE has said farewell to the
lion’s share of its CEOs.
It’s a brave new world out there:
an environment that Abdulaziz Al-
Sowilim, new MENA chairman for
professional services firm Ernst &
Young, terms as the ‘new normal’.
“Today you have to be creative and
generate new ways to get business, the
business doesn’t just automatically
come to you,” he says.
“There also needs to be a greater
focus on corporate governance and
hiring the right people.”
The chairman adds that Ernst &
Young has seen regulation and risk
management rise to number one
on the client agenda. A year ago the
main concern was credit access. The
fact is regulation and credit access
are increasingly going hand-in-hand
as banks demand reassurance from
clients. The steep rise in voluntary
regulatory activity has risen partly
It’s possible that you have been left behind if
you haven’t fixed your company already. You
should have started the process in 2009.
from longevity concerns and partly for
‘survival’ reasons.
“It’s possible that you have been
left behind if you haven’t fixed your
company already.” says Al-Sowilim.
”You should have started the process
in 2009. Corporate governance is a
tool that makes sure everything is
under control and gives investors
confidence.”
Tommy Weir, author of American
best-seller The CEO Shift and boss of
Abdulaziz Al-Sowilim, Ernst & Young.
emerging market leadership at HR
development firm, Kenexa, likens the
‘boom’ times to a harbour that was
constantly filling with water (cash) and
whether the company was a ‘dinghy’ or
a ‘170-foot super yacht’ the water came
in and everyone went up.
“The businesses came in, they got
the lease, they turned on the lights
and they grew. We can’t rely on the
harbour any more, but we have to
figure out what to do and where we
should focus. If we borrow cash, can
we pay it back? It all comes down to
cash,” he says.
“Before, companies were paying
money out of revenues, which is the
top line, not the bottom line. People
used to say, ‘how do I make the most
money out of this’? Now they’re
saying, ‘how do I make this last’?”
Weir adds that, going forward,
companies must know their limits and
Tommy Weir, Kenexa.
work within their constraints. Like Al-
Sowilim, Weir believes the major focus
should be on people.
“The first thing should always be:
‘do I have the right people in the
right roles doing the right things?’
In the boom days, the growth curve
went up so fast that businesses just
gave promotions to who was ever
there at the time, just to keep up
with the growth. They weren’t
trained and they had subject
knowledge but not management
experience,” Weir says.
Ernst & Young’s Al-Sowilim adds
that his company is pushing a global
homegrown recruitment drive as
part of its strategy to incubate and
develop the best people in their local
environments. “It’s about ensuring
continuity,” he says.
Three months into the job himself,
the Saudi-born chairman is the
only homegrown GCC boss of a
professional services company today.
Post-crisis, ‘continuity’ and
‘longevity’ will be the buzzwords of
business strategies going forward.
Actually they don’t sound that ‘buzzy’.
But that’s the point.

36 gulfbusiness October 2010

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The ones set in stone.

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NEWS ANALYSIS RETAIL
Net gains
As a leading supermarket
launches its own online store
in the UAE, savvy shoppers
ask why has it taken so long?
MICHAEL GORDON reports.
C
arrefour in the UAE has
launched a web shopping
initiative, the first of its
kind among the country’s
supermarkets.
The new site, from the world’s
second largest retailer, gives
customers access to over 3,000
items at the touch of a button –
including many items that are not
available in-store.
The online portal (www.ic4uae.com)
allows customers to buy a variety of
non-food items, including cameras,
mobile phones, printers, gaming
products, TVs, home appliances,
garden furniture, homeware and
some cosmetic items. The service
is competitively priced, with free
delivery available on all orders over
Dhs1,000 and an average of Dhs12 for
any orders under this amount.
It is quite an unpredictable market and
we don’t expect to change everyone’s
shopping behaviour overnight. We are
catering for a small group of shoppers
Henry Changeux, GCC Country
Head of Carrefour, says: “It is quite
an unpredictable market and we
don’t expect to change everyone’s
shopping behaviour overnight. We
are catering for a relatively small
group of shoppers at the moment
but once people become aware of the
deals online, we are confident this
will shift.
“The webstore gives customers
the opportunity to browse through
thousands of products, while
comparing different brands and
features at a time that suits them.
All items are delivered by UPS to
their home.”
38 gulfbusiness October 2010
Carrefour’s new online shopping site targets the UAE’s internet savvy population.
In the UK, leading retailers,
including Sainsburys, Waitrose,
Tesco and ASDA (Walmart) have
offered online ordering and
home delivery for several years.
But, crucially, they do not limit
deliveries to non-food items. So is
this initiative by Carrefour a leap
forward, or too little too late?
Richard Adams, Datamonitor’s
Dubai-based consumer consulting
analyst, believes that the industry
implications of Carrefour’s online
home delivery system are likely to
be relatively modest, at least in the
short-term.
He says that pilot testing of online
grocery home delivery by two of
the UAE’s larger consumers goods
retailers only met with moderate
success. What’s more, internet
penetration rates are relatively
modest and consumers are still
weary of buying online.
Adams says: “With internet
penetration rates around 60 per
cent, online purchasing is not
enormously significant. Moreover,
those consumers who are online are
reticent to purchase.
“UAE consumers have trust issues
with online sales channels, fearing
credit fraud. Datamonitors figures
Photo: Carrefour
show that while about 38 per cent
of UAE consumers will go online in
order to save money (visiting price
comparison websites and the like),
only about eight to nine per cent
consistently buy online to
save money.”
He adds that out-of-home food
consumption is high and outsourced
meal prices are competitive.
“Because labour inputs are
comparatively cheap, the cost
of outsourcing meal production
is relatively modest. As a result,
significant proportions of the UAE
consumers in either consume meals
out of the home or order home delivery
from restaurants,” adds Adams.
However, because Carrefour is a
scale player, and any action they take
will impact the market, Adams believes
that as consumers become more used
to the idea of online food delivery, and
happier to use credit cards online, we
will see a gradual transformation.
He warns: “There are, however,
significant logistical issues. Chilled
refrigeration is not cheap and food in
such a hot climate spoils quickly if not
chilled adequately.”
The demographic most likely to
use Carrefour’s online service is the
18-34-year-old consumer, according
to Datamonitor research. “We saw
no statistically significant difference
between gender uptake,” adds Adams.
Some of the early online success
stories in the UAE include Emirates
Avenue, EllaMart, Quick Dubai and
Brownbag.ae. ■
NEWS ANALYSIS MARKETS

Dubai’s double act

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

D
ubai attracted the world’s
attention when its two stock
exchanges – Dubai Financial
Market (DFM) and NASDAQ
Dubai – were consolidated in July.
Equities value rose 20 per cent in
August – its first full month of trading
since the bourse doubled up.
Going forward, what’s vital is that
brokers see it as one platform, says
Gerald Santing, managing director,
markets, Dubai Financial Services
Authority (DFSA), which manages
regulation for NASDAQ Dubai.
“What happened was a migration
of systems and processes to another

Photos: Naveed Ahmed

platform. The regulation itself didn’t
change at all,” the Dutch markets
veteran said.
Santing joined DFSA in June,
just before the consolidation was
finalised. He first came to Dubai
Equities value rose 20 per cent in
August – its first full month of trading
since the bourse outsourced its
operation to DFM.
when the Dubai Mercantile Exchange
(DME) was still being set up in
2007, and now he has the overall
responsibility for the DME.
“All over the world, you try to
attract bigger liquidity pools and
you could do that by mergers but it’s
not always necessary. What is more
important is you align the rules and
processes,” he said.
The migration is expected to
beef up retail investors’ interest
in NASDAQ Dubai, a significant
diversion from its initial strategy.
While DFM is more catered to local
retail investors, NASDAQ Dubai was
created to primarily woo international
institutional investors.
Yet despite the changes, regulations
are set to remain the same for now.
“The regulatory environment for
protecting retail customers was
already in place. Regulation is an
evolving thing. If anything happens
in this market or we foresee changes,
we will adapt to that,” said Santing.
But is real consolidation possible
for the two bourses?
Aside from the investor type, each
bourse has its own distinct features.
DFM requires companies to sell a
minimum 55 per cent stake, while
NASDAQ Dubai has a 25 per cent
minimum listing rule. DFM uses the
fixed price method in valuing shares
for IPO, while NASDAQ Dubai uses the
book-building method.
The regulator of NASDAQ Dubai
also appears to be quicker in adapting
international standards. For example,
SCA mandated listed companies to
set up remuneration and nomination
committees from April 30, while DFSA
has had this rules for years.
The list of differences goes on,
but Santing, who has chaired
the international regulatory task
force that dealt with the approval
procedures of the merger of NYSE
and Euronext, says a merger is also
possible in this part of the world.
“Of course you can merge
exchanges, but it’s quite a lot of
work because it’s not only a legal
thing, it’s also a process where you
have to create a long-term single
liquidity pool,” he said. “Europe has
done that but it has taken them at
least 10 years.”
Despite the recent increase in
trading, activity in NASDQA Dubai
remains relatively low. The weak
trading conditions in the exchange
have pushed its flagship firm,
DP World, to seek a premium listing
on the London Stock Exchange and
has caused others to withdraw
their listings.
“There are always ways to improve
and that can be done by getting more
primary listings and adding more-
free float in the market. And we are
definitely after that,” Santing said. ■

40 gulfbusiness October 2010

DARWIN WROTE ONE
OF THE GREATEST
SCIENTIFIC BOOKS
EVER.
EXECUTIVE MOVES
The Saudi British Bank
(SABB) has appointed
Majed Najm as the general
manager of personal financial
services. Najm has returned
to SABB after serving over
three years of secondment
with HSBC Group, SABB’s
global partner, where he was
head of International Bank
Middle East responsible for
11 Middle Eastern countries.
Earlier he held the position of
the chief executive officer of
HSBC Bahrain. He joined SABB in 1992.
BNP Paribas has
appointed Tariq Al
Samahiji as CEO of BNP
Paribas Najmah and Global
Head of BNP Paribas
Islamic Finance and
Investments. Al Samahiji
has been with BNP Paribas
since 2002 and was the
CEO of BNP Paribas
Investment Partners
covering the MENA region
beginning 2007.
The Abu Dhabi Investment Authority (ADIA) has
appointed Ted Chu as chief economist. Chu joins ADIA
from General Motors in Detroit, where he has served since
2006 as chief economist and director of global economic
and industry analysis. Before joining GM, Chu was a
macroeconomist at the Central and Eastern European
division of the World Bank in Washington.
Deutsche Bank AG has named
Ashok Aram as its chief
executive for the Middle East
and North Africa, replacing
Henry Azzam who will become
the bank’s non-executive
chairman for the region. Aram
joins the bank from Middle
East private equity firm Abraaj
Capital, where he served as
managing director for one year,
Zawya Dow Jones reported.
Aram had worked at Deutsche
Bank for 15 years prior to
Abraaj, heading debt and equity markets for central and
eastern Europe and Middle East and Africa.
42 gulfbusiness October 2010
Emirates NBD, the Gulf’s
largest bank by assets,
has appointed Surya
Subramanian, a former
Standard Chartered
banker, as its new
chief financial officer.
Subramanian, a chartered
accountant, has worked
in banking and finance
in India, Pakistan and
Singapore. He joins from
the Ministry of Finance
and the Accounting and
Corporate Regulatory
Authority in Singapore. He succeeds Sanjay Uppal who
announced his departure in April.
SAP has selected Sam
Alkharrat to lead the next
wave of SAP’s growth and
development in the Middle
East and North Africa.
Alkharrat has joined SAP
MENA after having spent 16
years with Cisco Systems,
where he held several
leadership roles building
Cisco’s business in the MENA
region. Most recently, Alkharrat
held the position of managing
director of the company’s
public sector business across
the emerging markets.
Crédit Agricole has
appointed Albert
Momdjian as head of
coverage and investment
banking for the Middle East
and Africa region. He was
previously head of Middle
East and Africa investment
banking. He joined Crédit
Agricole from Crédit Suisse
back in 2006.
Mohammed Ali Yasin, former head of Shuaa Securities
who resigned in June, has joined CAPM Investment, an
Abu Dhabi-based investment bank as chief investment
officer. Yasin was named chief executive of Shuaa
Securities in 2006, and oversaw the firm’s rapid expansion
across the Middle East, emerging as the second-largest
broker in the UAE by market share.
COVER STORY RAK SPECIAL REPORT
The man who
sold the world
Exclusive: Rakia and RAK Ceramics CEO, Dr Khater Massaad, tells
KAREN REMO-LISTANA why he’s selling global assets for an AA credit rating.
N
aturally, Dr Khater
Massaad knows the
mission of Ras Al
Kaimah Investment
Authority (Rakia)
off by heart:
to encourage
international
investments to the emirate, and not
the other way around. And having
attracted close to $2.5 billion in
investment, no one can say that the
Rakia chief hasn’t achieved his aim.
Today, there are more than 6,500
companies registered with Rakia,
representing investors from diverse
non-oil sectors, including industrial,
commercial, trading, services,
consulting and media companies.
But, for Massaad, a deeply ambitious
man, it’s just not enough. The emirate
is hungry for more investments and is
willing to divest all its international
assets to get ‘AA’ credit ratings, up
from the current ‘A’. This nifty set
of moves will put RAK on the same
footing as its much wealthier sister-
emirate, Abu Dhabi.
“For the last two years, Ras Al
Kaimah has got an A-rating and His
Highness Sheikh Saud Bin Saqr Al
Qasimi wants to bring this ‘A’ to ‘AA’
rating,” says Massaad.
Describing the deputy ruler as a
“very conservative” and “very good”
44 gulfbusiness October 2010
businessman, Massaad said Sheikh
Saud’s focus now is to “make sure that
Ras Al Kaimah is on the right track, no
defaulting and financial problems.”
At the top of the list for divestment
is its investment in the Port of Poti in
Georgia, which Rakia plans to IPO next
year. “We are planning to exit this port
with an IPO… in 2011,” he said. “It is
not a strategic asset for us. If we can
make money from selling something
then why should we not do it?”
The divestment may also cover
other international assets. Rakia has
real estate and shipping developments
in Georgia, along the Black Sea
coast and around the capital, and
a 50:50 joint venture between RAK
Ceramics and the Trimex Group from
India, which is planning a range
of investments in the Indonesian
province of East Kalimantan.
Rakeen, its property development
arm, is also investing in Georgia,
where it has three mixed-use projects
in the capital, Tbilisi, amounting to an
investment of some $2 billion.
However, the divestment will
not dramatically shake up Rakia’s
portfolio, the said investment in the
Georgia port is “small” and even if
all of its overseas investments are
summed up, they would not make up
10 per cent of Rakia’s total assets,
according to Massaad.
“Our investment outside RAK is
less than 10 per cent,” he said. “His
Highness has given instruction now
to invest only within RAK so all our
investments from now on will be in
the emirate.”
Contrary to popular opinion
Massaad says Rakia is not a sovereign
wealth fund (SWF) and so is not
obliged to invest in various asset
The many hats
of Dr Massad
The driving force behind RAK
Ceramics CEO, Dr Khater
Massaad, has guided the destiny
of what is now the largest ceramic
manufacturing organisation in the
world – achieved within 17 years.
Massaad was appointed in August
2003 as the advisor to The Crown
Prince & Deputy Ruler of the Emirate
of Ras Al Khaimah, His Highness
Sheikh Saud Bin Saqr Al Qasimi. He
plays an important role in the rapid
development of the emirate as CEO
of the RAK Investment Authority
(Rakia), a position he was appointed
to in 2005. Rakia has attracted
more than $2 billion in industrial
Photos: Victor Besa
investments into RAK.
Massaad has also played a
major role in the tourism sector as
managing director of Al Hamra Fort
Hotel & Beach Resort.
October 2010 gulfbusiness 45
COVER STORY RAK SPECIAL REPORT
Products of RAK Ceramics. The company last year produced 115 million square
metres of ceramics from 15 manufacturing facilities located in six countries.
We are planning to exit the Port of Poti
in Georgia with an IPO in 2011. If we can
make money from selling something
then why should we not do it?
classes. “We don’t have a fund, we are
a company,” he says. “To be honest,
I don’t consider Rakia as an SWF. I
consider it as an industrial licensing
and promotion agency. We have
invested in certain industries but we
are not RAK’s investment arm.”
The emirate’s plans to increase
its rating by beefing up investment
using capital from its own pocket
makes sense, given its current debt-
freeze policy.
RAK is currently in a deleveraging
mood as it looks to reduce its $1.36
billion of debt after funding a
development splurge with
Islamic bonds.
Jim Stewart, chief executive of
the Ras Al Khaimah government’s
Investment and Development Office,
has said previously that the agency
would like to reduce the structural debt
and then bring in partners later on.
Investors will share equity in some
of the emirate’s 16 government-related
companies, which could also sell
shares to the public in a few years,
46 gulfbusiness October 2010
or help develop its major projects,
said Stewart.
Having weathered the challenges
of 2009 quite well, with growth
intact and comfortable public finance
ratios, RAK is rated ‘A/A’ by Fitch and
Standard & Poor’s ratings agencies.
However, with the budget
deficit and debt ratios having
risen sharply since 2006, albeit to
finance important infrastructure
development, RAK now needs to
demonstrate that the projected
improvement in public finances will
start to materialise this year, Richard
Fox, head of Middle East and Africa
sovereign ratings at Fitch, said.
The deficit had been expected
to narrow, with no new borrowing
envisaged in the 2009 financing plan.
However, the government pressed
ahead with capital spending plans and
financed the resulting deficit with its
first foreign currency sukuk for $400
million, issued in July 2009.
This raised the debt burden to
31.4 per cent of GDP at end-2009,
compared with 22 per cent one year
earlier. This level remains below the
‘A’ peer group median of 34 per cent.
Fox says the compilation of
accounts on a public sector-wide
basis has served RAK well, with the
authorities able to provide detailed
data on the performance of public
sector agencies and enterprises. It
was also able to exert a high degree of
oversight and control.
“This minimises the risk of a Dubai-
style crisis emerging in RAK”, Fox says.
To further beef up its buffers, Rakia
plans to IPO RAK Ceramics in India
by the end of this year or beginning of
next year, following its $250 million
Bangladesh IPO.
“The size of the issue depends on
the laws of India. It may be up to
30-40 per cent and we are probably
talking about $40 million to $50
million,” Massaad said.
RAK Ceramics supplies up to 75
per cent of the domestic demand for
sanitary ware in the UAE and 25 per
cent of demand for ceramic tile in
Bangladesh. While in India, about
three out of every four tiles is from
RAK Ceramics.
The world’s largest ceramics
manufacturer, largely owned by
Rakia, is also expecting bigger
revenues and profits for this fiscal
year. For the fiscal year of 2009, RAK
Ceramics posted a 20.2 per cent jump
in net profits to Dhs261.9 million
compared to Dhs217.9 million in
the previous year. Revenues during
the same period rose 17 per cent to
Dhs3.77 billion from Dh3.23 billion.
Massaad can be forgiven a little
smugness as he says total revenue is
expected to rise 10 per cent to reach
$1.1billion this year from $1billion
last year. He’s also hoping for the
same percentage increase in terms
of profits. And judging by his track
record, it’s likely he’ll do it.
“We have not been squeezed. RAK
Ceramics is exporting to more than
130 countries,” he explains. “If you
have a recession in one country,
it can be compensated in other
countries.” ■
FEATURES RAK SPECIAL REPORT

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

H
ome to the world’s
largest ceramics
maker, one of the
major offshore
hubs in the Middle
East and ruled by
the world’s second
longest-serving
monarch after the king of Thailand,
Sheikh Saqr bin Mohammad Al
Qasimi, Ras Al Kaimah has a string of
accolades to its name.
But perhaps its biggest accolade
is the fact that while the rest of the
world binged on credit, the emirate
was prudent enough not to over-
burden itself. RAK currently owns
$1.6 billion of debt, roughly $1 billion Sheikh Faisal bin Saqr Al Qasimi,
of which is sukuk-listed on the chairman, RAK finance department.
London Stock Exchange. The emirate
is now aiming to deleverage, while balance sheet thanks to the diversity gas and water at four per cent and
pushing forward with its ambitious of its economy. It has no one dominant hotels and restaurants at two per cent.
tourism and expansion plans. economic contributor – in 2008 According to Zawya financial data,
“No bonds,” Sheikh Faisal bin Saqr the largest sector was government the government has an ongoing $2
Al Qasimi, chairman of the RAK services, which contributed 15 per cent billion sukuk programme and sold
finance department, says. “At the to GDP, followed by wholesale, retail $400 million of bonds in July last year
moment it depends on the liquidity of and repair services at 14 per cent. in the first US dollar sukuk issue by an
the market. We are relying on self- Figures from research firm the emirate in the UAE. It sold Dhs1 billion
financing and foreign investors. Oxford Business Group, show ($367 million) of sukuk in May 2008
“For the moment I don’t think RAK real estate and business services, while the Ras Al Khaimah Investment
needs to issue bonds,” he said, noting construction, building and Authority (Rakia), sold a $325 million
that the government has also taken manufacturing each contributed nine sukuk in 2007.
steps to streamline its operational costs. per cent. Agriculture is also a major “We are withholding any borrowing
“We have no huge overheads. Our contributor, at nine per cent, transport plans until we see the picture of the
government is very small and efficient. accounts for eight per cent, followed local and world economy. To play it
We have no oil, so we have to depend by financial intermediation and crude safe is better,” Sheikh Omar bin Saqr
on the service, industries and tourism. oil, both at seven per cent, electricity, Al Qasimi, head of private affairs for
That is good because it means we
are standing on more pillars rather
than depending on only one source of We are withholding any borrowing plans
income.”
He’s right. And although the emirate until we see the picture of the local and
did not come out from the crisis
unscathed, it was able to manage its
world economy. To play it safe is better.

48 gulfbusiness October 2010


Sheikh Saqr Al Qassimi, Ruler of Ras
getty images
Al Kaimah, said.
“Borrowing is not something you
should be afraid of,” he added. “In
development you have to borrow but
you should manage it and see your
ability to pay your debt.”
The main hit to public sector
revenues last year stemmed from
reduced payments by developers
for land purchases. However, with
reclamation for the flagship Al Marjan
Island project largely completed
in 2008, spending also fell sharply,
with the overall public sector deficit
virtually unchanged, albeit at a still
high 10.5 per cent of GDP.
One of the emirate’s strengths is its
increasing attraction as an investment
haven. According to the Chamber of
Commerce, the total number of existing
companies registered at the end of
December 2009 stood at 21,609, up
from 19,697 in 2008 and 17,840 in 2007.
Rakia and RAK Free Trade Zone
(FTZ) are leading the way in bringing
investment to the emirate by forging
partnerships with international
companies. Both offer free zones with
light regulation, infrastructure and
practical support.
Official statistics says there are
more than 6,500 companies registered
with Rakia – 3,030 are on-shore
companies and 500 companies are
registered through Rakia’s off-shore
facility, which recorded a 90 per cent
growth during the first quarter of
2010 over the same period in 2009. In
addition, negotiations are underway
with several more companies from
countries including Belgium, UAE, the
USA, Kuwait, Egypt, Turkey, Italy, India,
Germany, France, Pakistan and Canada
to set up business ventures and
investment activities in the emirate.
RAK is not only reaching out to the
world for business partnerships, but
Ras Al Khaimah is the most transparent
state in the GCC, says Fitch Ratings.
also tourists. Ras Al Kaimah prides itself
on pristine beaches and archaeological
heritage, formed over thousands of years
by nomadic and indigenous Arab groups
and seafaring traders.
By leveraging the emirate’s cultural
attraction and natural landscape,
RAK Tourism officials are aiming to
increase tourist arrivals to 2.5 million
by 2012. In a bid to reach this target,
the emirate has plans for adding
some 3,700 rooms over the coming
years, trebling the current supply. An
estimated $5 billion worth of projects
are currently planned or under way.
For a small emirate, RAK certainly
packs some might. Going forward,
success will unequivocally lie in the
updating of its infrastructure and
continued inward investment.
Whether the emirate’s no-debt
strategy can be pulled off without
hampering its development remains to
be seen. ■
October 2010gulfbusiness 49
PROFILE RAK SPECIAL REPORT
Navigating
the crisis
Whether it’s in the government, aviation or banking sector, officials should
always find time for a reality check, RAK Airways chairman Sheikh Omar bin
Saqr Al Qasimi tells KAREN REMO-LISTANA.
S
heikh Omar bin Saqr
Al Qasimi is multi
talented. He is the
chairman of RAK
Airways, RAK Bank
and Gulf Cement,
and also the head
of private affairs
for HH Sheikh Saqr Muhammad Al
Qasimi, the Ruler of Ras Al Kaimah.
How he juggles all of these
commitments is a matter of time
management, says Sheikh Omar,
who declines to wear a watch. “After
working hours, I leave the office. But
I am on my phone most of the time,”
he says.
One of his biggest tasks is to re-
launch RAK Airways on October 10
and help the airline break even in
its first year of operation. “We aim to
break even as soon as possible,” he
says. “We looked at what we’ve done
in the past. We changed the aircraft
type – we’ve moved to smaller and
more economical Boeing 737s. We also
looked at the cost of the planes and
staffing and it looks positive.”
The Ras Al Khaimah carrier was
created by the emirate’s government
in 2005 and started operations at the
end of 2007. The airline carried about
125,000 passengers in 2008 before
50 gulfbusiness October 2010
suspending services in May 2009 due
to financial difficulties. It has already
invested more than $27 million in
infrastructure development.
Despite the relatively slow economic
growth and stiff competition, Sheikh
Omar – who used to fly microlight
aircraft as a hobby – says they will do
everything to make RAK Airways’ re-
entry a success.
Contrary to some reports, RAK
Airways will not be a low-cost
airline. Sheikh Omar says it will
operate as a “full-fledged airline” but
will not compete on the high-end of
the market.
RAK Airways flights to Jeddah and
Calicut will start at Dhs10, including
one baggage and a meal, but Rak
Airways is not a low-cost airline,
chairman Al Qassimi said. The model
is based on cost-control, he said.
“We are looking at serving Ras Al
Kaimah’s population, a lot of whom
come from Southern India, as well as
people travelling to Saudi Arabia to
take part in the Haj pilgrimage,” he
said. “If we can give them with the
right price and with the right level of
service, I think people will come and
fly with us.”
Currently, observers are focused
on the firm’s recently appointed CEO,
Omar Jahameh, and his team who are
finalising the details of the airline’s
destination list. How long the new
team will stay on board is a question
already being asked by many as RAK
Airways, in the space of just three
years the company has already had six
chief executive officers.
Sheikh Omar’s views on
The UAE economy
“We overestimated ourselves and
we pushed ourselves a little bit too
Freshii over the years
much. When the world economy
went down, it awakened us to the
fact that things will never continue
to go up like a rocket. The recession
is a good wake up call.”
The GCC monetary union
“I think the UAE will join later on.
I see it. The UAE’s backing out
happened at a higher level, they
saw that the UAE deserves to have
the GCC central bank. And why
not? The UAE is the second biggest
economy in the GCC.”
Money
“Money is one of the most important
things in life. But like a car, if you
misuse it and drive it at over 200km
per hour, then it will harm you and
the people around you.”

“Sometimes you have to take a
prudent decision,” says Sheikh Omar
candidly. “When we started, we
were not lucky and we made some
mistakes. We have to admit that the
global situation didn’t help us. It was
boom time and everything was not in
control. The price of oil went up from
$50 to $150 per barrel. Finding aircraft
was difficult and finding people was
also tough. They were very expensive.
With bad luck and with the wrong
people, we had to suspend the airline.
“Hopefully this time, we will
succeed,” he adds. “Sometimes when
you have a disease, you have to cure
it. You cannot stay sick. It may be
Photo: Vikram Gawde
a wrong decision, but you have to
treat it.”
RAK Airways’ re-launch is set to
take place at a time when the airline
industry is consolidating. In August,
Saudi Arabia-based Sama Airlines
stopped operation after sustaining
SAR1 billion ($266 million) in losses.
In June, Bahrain Air announced that
they would exit the low cost carrier
market. Meanwhile, Gulf Air’s full-year
loss rose 21 per cent to $502.9 million
last year.
But Sheikh Omar shrugs off the
possibility of another failure. “The
most dynamic country in this part of
the world is the UAE. You should not
be afraid of competition if you are
doing it right.”
This same outlook applies to the
UAE’s banking sector, which seems
over-stocked. He says banks in the
UAE are still profitable despite the
existence of 24 national banks and 28
foreign banks competing to serve a
population of just five million people.
“We have thought about this. I, as the
chairman of RAK Bank, can say that
even though there are many banks, the
UAE banking sector is growing even in
recession,” says Sheikh Omar.
Despite an increase in non-
performing loans, RAK Bank registered
a 14 per cent increase in net income
from Dhs636 million to Dhs726.1
million in 2009. The bank’s net profit
for the first six months of this year
rose 36.2 per cent to Dhs468.3 million,
compared to Dhs343.81 million in the
same period last year.
“But one day, the market will
consolidate itself,” says Sheikh Omar.
“The weak will shrink and the strong
will grow. I don’t like to say when.
Let the market decide.” Sheikh Omar
says that the UAE, specifically Dubai,
is experiencing cash-flow problems
due to debt issues and the only way to
solve it is, to face up to the issues and
deal with them head on.
As a believer that jail works for debt
defaulters, he says banks should also
be penalised for irresponsible lending.
“Of course, I am with this law,” he
says. ‘To overcome wrongdoing you
need to have stringent regulation for
the debtor and the bank. The central
bank should not allow banks to lend
excessively. The central bank has to
put in place very strict laws to avoid
reaching this stage again.”
Sheikh Omar’s philosophy for life
is to learn from mistakes and look
forward to a good future.
“The danger with the media is
they are with you in good times but
when you have a problem, they push
you to the sea to sink,” he says. “The
media thinks Dubai is dead. But
Dubai is still a surviving place. And
we are thankful because Dubai’s
developments have benefited other
emirates such as ours.” ■
October 2010 gulfbusiness 51

iStockphoto
T
he topic of
refinancing is so
heated it could
explode, much like
the region’s indebted
firms. While the
financing tool
has been used for
decades to take advantage of better
interest rates and to consolidate
other debts into one loan, in today’s
tight times, negotiating the terms
with lenders has become difficult, if
not impossible.
Unrated corporates from the six
Gulf countries have over $67 billion of
total debt outstanding, while the total
for rated corporates is $145 billion,
of which $28 billion, or nearly one-
fifth, will mature in 2012, according
to Moody’s Investors Service. Dubai
and Abu Dhabi-based entities account
for the majority of this debt, with
investment holding companies and
Payback
time
As the $200 billion wall of maturity looms,
the clock is ticking for GCC firms to roll
over their debts. But can they do it?
asks KAREN REMO-LISTANA
real estate developers being the most
exposed sectors.
Dubai’s state-owned companies
are estimated to be sitting on more
than $100 billion of debt, with some
$30 billion worth of loans and bonds
from predominantly state-linked firms
due to mature in 2011-2012. Dubai
World, which leads the emirate’s
debt-ridden enterprises, owes $39.9
billion, according to a document seen
by Reuters, which is much higher than
the widely slated debts of $26 billion.
Dubai Holding – one of the three
largest Dubai master-developers
together with Nakheel and Emaar
Properties – is creaking on liabilities
of $12.8 billion, or about a third
of the Dubai World restructuring.
Dubai International Financial Centre
Investments (DIFCI) is also in the
hot seat as it struggles to rollover
more than $3 billion of debts against
a backdrop of weak earnings and
FEATURES DEBT
operating cash flow.Against this
bleak background, Dubai’s property
companies are slated to face
significant refinancing risks. The
emirate’s real estate market is likely
to remain under pressure until at
least 2012-2013, according to Fitch
rating agency.
“The sector is likely to see a period
of stagnant growth at best and a
double-dip contraction at worst,” says
Bashar Al Natoor, director in Fitch’s
EMEA Corporates team. “Refinancing
is a global issue but it is a more
intense issue, in Dubai. Real estate will
remain under pressure until 2012 and
2013, so sourcing funds to refinance
Dubai’s debts will be a challenge up
until that time, at least.”
Debt restructuring is also common
in Kuwait where some investment
companies, including those with
banking licences and private equity
firms, have defaulted on their financial
October 2010 gulfbusiness 55
FEATURES DEBT

Credit events can cause significant periods

of uncertainty. These are events that can
dramatically shift the credit landscape.
While it looks increasing unlikely, another
large family conglomerate defaulting
would throw spreads out again.
Khalid Howladar senior credit officer, Moody’s.

obligations. And their moves to raise
capital met with far higher resistance
than in the past.
Global Investment House, the
biggest investment bank in Kuwait,
defaulted on most of its debt in
January 2009. Four months later,
its major Islamic rival, Investment
Dar, which owns half of the British
luxury carmaker Aston Martin, also
missed a payment on $100 million
of debt, becoming the first Arabian
Gulf company to default on sukuk, or
Islamic bonds.
“Liquidity is a problem for every
company here,” Naser Al Nafisi, general
manager, Kuwait-based Al Joman
Centre for Economic Consultancy,
said. “The banks are not lending so a
lot of companies cannot rollover their
debts. There is hardly a chance to
raise financing from the banks. A lot
can’t make capital raising a success.
So naturally, some ended up in severe
financial troubles.”
2012 debt maturities
by country/emirate
Kuwait
2%
$560m
Qatar
14%
$3.92bn Dubai
37%
Saudi Arabia
$10.36bn
20%
$5.6bn
Abu Dhabi
27%
$7.56bn
Source: Moody’s
But the scale of Kuwait’s debt
restructuring problem is not
comparable to Dubai’s, Jasem Al
Saadoun, board chairman, Kuwait-
based Al Shall Company for Economic
Consultants, said. “Refinancing is
not an issue in Kuwait as much as it
is in other Gulf states,” he said. “You
cannot compare it to Dubai, not even to
Bahrain and Oman. Kuwait’s liquidity
is even higher than Saudi Arabia.
“Liquidity speaking, I would put
Qatar on the top, then Kuwait and
Saudi. Bahrain and Oman as fourth
and fifth then last is the UAE, unless
Dubai solves its problem, which it is
unlikely to do over the next two years
at least,” Al Saadoun, added.
Saudi, the GCC’s largest economy,
has not been spared. To date, the
legal battle between Ahmed Hamad
Al-Gosaibi & Brothers Co (AHAB)
against Maan Al Sanea of the
Alkhobar-based.
Saad Group is still ongoing. At least
13 UAE banks and seven foreign banks
have exposures to these two groups
amounting to $2.9 billion.
The Dubai World standstill
announcement, the Investment
Dar default and the Saudi family
feud problem may have occurred
sporadically, but the effect is
prolonged market uncertainty.
“Credit events can cause significant
periods of uncertainty,” Khalid
Howladar senior credit officer, Moody’s
Investors Service, said. “These are
events that can dramatically shift
the credit landscape. While it looks
increasing unlikely, another large
family conglomerate defaulting would
throw spreads out again.”
Many types of commercial lending
incorporate balloon payments at
the point of final maturity, often, the
intention or assumption is that the
borrower take out a new loan to pay
the existing lenders.
In refinancing, the first thing to
consider is if the bank itself has the
financial resources. “One must first
ask – do the banks have the funds?”
Howladar said.
“Many do but have become much
more conservative and discerning.
And even if new borrowers have a
good business profile, they may still be
reluctant to lend, as they also may still
have need of their funds given some
uncertainties that remain.”
Fortunately, analysts agree that
the UAE’s banks are strong enough
to absorb foreseeable losses. Shuaa
Capital’s stress test on a sample of
eight UAE banks, which account for
almost 70 per cent of FY09 banking
system assets, suggests that, on
average, the banking sector is
The global debt burden
The world economy is about $61
trillion. Of this, the six Gulf countries
make up $1.1 trillion and within that
the UAE is $228 billion, according to
Standard Chartered estimates.
The region’s total debt is much
less than its Western counterparts.
Based on Standard Poor’s Study,
Europe’s non-financial and financial
debt maturing from the second
half of 2010 through 2013 stands
at $3 trillion. The US has $2.4
trillion corporate debts coming due
through 2013. In comparison, the
GCC has about $145 billion of total
debt outstanding, of which only $28
billion will mature in 2012.

56 gulfbusiness October 2010

sufficiently capitalised to withst
and significant deterioration in 2012 debt maturities
asset quality. by industry
But that leaves banks far from
7%
worry free. Although non-performing $1.96bn
loans have been manageable, ensuing Oil and gas
uncertainty in the market means they
9%
have to keep more capital to keep them $2.52bn
safe. That in turn means less lending Utility and
money and lower profitability. energy
“Ultimately, what is good for the
borrower is good for the bank,” Suresh
Kumar, Emirates NBD Capital and
Emirates Financial Services CEO, said.
“Banks are willing to restructure,
reschedule and re-price debts. The case
depends on every borrower.”
In periods of rising interest rates,
however, the borrower may not have 11%
sufficient income to afford the interest $3.08bn
Infrastructure
rate on the new loan. So after finally
getting his debt rescheduled, the
borrower’s bigger task is to grow more 12%
aggressively in a shrinking economy. $3.36bn
Chemicals
Another worry emerges – that the
business may not fare better and, in the
end, defaults anyhow.
“When you carry out loan
1% 24% modifications on commercial loans,
$28m $6.72bn personal loans or mortgages, you
Conglomerate Investment don’t necessarily solve the problem,”
holding
company Howladar said. “A loan modification
works if a borrower has a short-term
problem. But if the borrower’s status
further deteriorates, then that will only
delay the problem.”
In the absence of lenders, a common
way to repay the debt at maturity is
a fire sales of assets at a low price,
including productive assets.
Dubai conglomerates, Dubai World
and Dubai Holding, raised as much
as $844 million from asset sales over
20% the past year as the emirate seeks to
$5.6bn reduce its debt pile.
Real estate
developer Asset sales, along with bond issues,
are Dubai’s best option for boosting
16% revenue because other measures will
$4.48bn not generate enough cash on time to
Telecommunication
plug debt holes, analysts say. Other

October 2010 gulfbusiness 57

 FEATURES DEBT

Restructuring is almost like a physician

and a patient relationship. The doctor
gives some good advice and prescription
and, in most cases, some bitter pills. If
it’s a malignant case then you cut off
some parts or perform some surgery.
Suresh Kumar, CEO, Emirates NBD Capital.

prized assets that Dubai could sell
in the future are the Jebel Ali Free
Zone and Dubai World’s stakes in the
Atlantis, The Palm hotel and casino
operator MGM Resorts International.
“Fire sale is a case-by-case matter,”
Kumar said. “If it is a sale at a current
price to prevent future losses, then
that is a managed diverse divestment.
Discount is a matter of opinion.
Ultimately, the value of anything is
worth what a willing buyer is willing
to pay. Are you better off keeping
something which you are not using,
which is not core or is not producing
any revenues? Or, are you better off
generating some cash flow by selling it
instead of doing nothing?”
Given this scenario, investment
bankers are increasingly generating
more revenues from remedial
management or rendering services
for debt restructuring. “Some of them
made mistakes so you need to work
with them so that the impact on both
of you is reduced,” Kumar said.
“It’s almost like a physician and a
patient relationship,” he added. “The
doctor gives some good advice and
good prescription and, in most cases,
some bitter pills. If it’s a malignant
case then you cut off some parts or
perform some surgery.” ■

010
ilip o l Qatar 2
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Visit us ha Exh
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Centre
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8th Ed
ition a 7th, 20
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DE FE N D I NG WORLD S ECU RIT Y. *

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*

October 2010 gulfbusiness 59

PROFILE
Medicine
man
It’s been just over one year since Samer Majali was entrusted with
turning round Gulf Air’s fortunes. ALICIA BULLER asks the CEO if he’s
fixed the troubled Bahraini airline.
S
ome would question
the sanity of a man
who became boss
of an airline that
waved goodbye
to four CEOs in
three years. Others
would question the
wherewithal of a CEO stepping into
a deeply entrenched government
company that was losing around
$1 million a day. Yet that’s exactly
what Samer Majali did just over a
year ago.
In the flesh, however, the latest
Gulf Air helmsman is in full
command of his senses. He also
possesses an easy charm: a useful,
if not indispensable, attribute when
attempting to turn round an airline
that was exhibiting all the signs of a
state-owned company that had lost
its edge.
So, a little over one year on, how’s
it been? Majali pauses, smiles, and
says – much as one would imagine
those before him have – “yes, it’s
been tough.”
As former boss of Jordanian’s
national carrier, Royal Jordanian, he
turned $700 million debts into profits
and privatisation in two years after
becoming CEO in 2001. But Gulf Air,
60 gulfbusiness October 2010
the region’s oldest carrier, is proving a
little more difficult.
“I was at Royal Jordanian for 30
years, and for the last eight of them I
was CEO. It’s slightly different being
new, having to establish yourself, your
credibility and gain [staff] trust,” he
says. “Gulf Air has had quite a few
CEOs and each one with a new plan,
so they’re probably a bit sick of it.”
Armed with a mission to claw the
airline back into profitability, with
an eventual aim to privatise, Majali
could be forgiven for thinking he’d
seen it all before. But the challenges
were many.
“All of them were issues. The
aeroplanes, the cost issues, the man
power issues, the psychological
issues – convincing them
[stakeholders],” he says.
“We have a commitment to a huge
number of wide body aeroplanes, but
we need less of them. We need smaller
airplanes,” he continues. “But the
Gulf Air has had quite a few
CEOs and each one with a
new plan, so the staff are
probably a bit sick of it.
biggest challenge is the employees
themselves and changing their
mindset. We’ve designed a training
programme for everyone focused on
customer delivery, being positive
with customers. And, underneath
that, I’m trying to make them feel
better about their company, because
if they feel better about the company,
they will actually do better. But that
takes time.”
Majali adds that he aims to get “19
people out of 20 customers saying
they had a good experience with Gulf
Air”. And what about that last one out
of 20? “Well, they’ll say I had a good
experience but...” he explains.
Formerly jointly owned by the
governments of Abu Dhabi, Oman,
Qatar and Bahrain. Gulf Air celebrates
its 60th birthday this year. Little by
little, as the respective countries
launched their own national carriers
through the years, Gulf Air was left as
a Bahraini owned airline.
Photos: Farooq Salik
October 2010 gulfbusiness 61

In a further blow, James Hogan,
the CEO who brought the airline
back into profit, left to manage rival
Etihad Airways in 2006.
Devastating competition from
shiny new carriers with deep
pockets is essentially what left Gulf
Air bruised and in need of a new
direction. That direction came in the
better-late-than-never form of Majali.
The Bahraini government is said to
have headhunted the CEO following
his success at Royal Jordanian,
hoping he could sprinkle some of
his magic on Gulf Air and ease the
burden of the carrier on the public
treasure chest.
Majali has wasted no time with his
plan of increasing morale, increasing
regional routes, purchasing more
narrow body planes and reducing
headcount.
“We’ve got a plan and it’s quite
a radical plan. We can’t do what
other carriers are doing, which is
essentially buying toys…” he says.
“Within three weeks after joining I
managed to have a session with all
of the management to talk about the
company’s direction. The network,
the fleet and how we want to present
ourselves to our customers.
“I’m trying to get company
energised again after it went through
a bad spell. This company has a
great history but our reputation has
taken a knock,” he adds.
Media reports suggest that Majali
has being doing a very good job
indeed. In July, the head of Bahrain’s
Economic Development Board,
Sheikh Mohammed bin Essa al-
Khalifa, told reporters that Gulf Air
could return to profitability within a
year and be considered for flotation.
Will the airline be privatised
anytime soon?
Majali turns a little thorny for
the first time: “I can’t tell you: one,
because I don’t know. And two,
because it’s not my decision. The
plan is for us to reach a break even
situation by 2012, down from losses
of just under $500 million in 2009.”
How much has he saved the
company so far? “I don’t know – a
lot,” he says. “It’s about making the
operation less loss-making as time
goes on. It’s also about making sure
that we have the right plan for the
future, so that even if we save money
now, we don’t pay it again down the
line. There’s the current situation
which needs to be addressed, but we
need to make sure we don’t shift our
commitments onto somebody else’s
lap so when I eventually leave the
airline, someone is not saddled with
what I am saddled with,” he says
“My benchmark is that, financially
speaking, we are not so much of a
burden on the government, that we
provide a lot of value to Bahrain
with the minimum price tag… and
whether I get fired or not,” he jokes.
A major part of Majali’s plan to
IN NUMBERS
$500
million
Gulf Air losses in 2009
2012
Gulf Air prospective
break even date
PROFILE
save money stems from launching
high yield routes to underserved
destinations. The CEO has introduced
12 routes since he started, more
than any other Gulf Air boss in
such a short time frame, including
destinations in Iraq, Egypt, Syria,
Saudi Arabia and Yemen.
Majali is also trying to hasten the
deliveries of narrow body planes
while delaying those of wide-body
aircraft. Gulf Air currently has 24
Boeing 787s on order, as well as
seven Airbus A320s and 20 Airbus
A330s and the CEO is in ‘talks’ with
the producers.
“Getting smaller planes has been
a hard sell, especially because
everyone likes big aeroplanes. I’d love
to be the boss of a company that has
lots of big planes,” he says. “But it’s
not the question of the size, it’s about
the lightness of the plane – there’s no
point putting an A380 on short route
– you just lose money. Conversely, if
there is a lot of demand on the route,
the idea is to put on a big airplane.
The plane in the end is a tool. And
you choose the appropriate tool to do
the job,” Majali says.
“We will still be a global airline with
global reach, in terms of long-range
destinations. But we’re very critical in
terms of where we fly to long-range –
we are now making a major investment
in the region. Part of the new strategy
is that we want to give everyone the
ability to fly to work and come back
home the same evening. This is about
creating a new market. It was the only
way we thought we could compete
with the larger more-funded carriers
around us.”
The CEO adds that a lot of capacity
is coming online because of the mega
orders that the Gulf carriers have
made over the last five years.
“Within five years, the Gulf fleets
will double in size, that’s huge
growth compared to the rest of the
world. I think capacity will outstrip
demand. It leaves us all in a very
tough situation – prices will fall
and it’s not healthy for the entire
industry,” he says.
October 2010 gulfbusiness 63
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 PROFILE

“This is why we are trying not to

New Gulf Air routes
compete head-to-head with the other
airlines in the region for the same
traffic. It will give us an advantage. “ ● Alepo, Syria
● Isfahan, Iran
As part of Majali’s new strategy, ● Basra, Baghdad, Najaf and Erbil, Iraq
the carrier has also cut nearly
1,000 staff over the past year while ● Alexandria, Egypt
Bahrainisation rates have increased to
an impressive 52 per cent.
“All of the redundancies have been ● Medina,
voluntary. The idea is that Saudi Arabia
the people who are reaching end
of their service leave, as well as
the not-so-good people leave – we ● Aden,Yemen
want good people to stay. We are Colombo, Sri Lanka
now making an assessment of the
company itself and the current
manpower, whether there are still
● Addis Ababa,
Ethiopia
surpluses or not. We will continue to
reduce staff but more slowly as time
goes on,” he says. turnarounds if his performance at They say you’re only as good as
Is Majali good at turning round Royal Jordanian is anything to go by. your last project, but judging by
companies? “Time will tell,” he says Now the pressure is on as Bahrain’s the speed of Gulf Air’s progress in
with a self-deprecating chuckle. powers-that-be hope for a miracle the last year, all signs point to a
The CEO is certainly a master of similar to Majali’s previous job. flying ‘yes’. ■

Success Breeds Success

Our Vision

The Global Advisory Board is comprised of a select team of entrepreneur’s and investors that have an international track
record of success across multiple industry sectors. We have compared and identified the components of our individual
business successes and have leveraged those abilities to create a mutually beneficial and sustainable methodology for
growth and achievement.

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Today, The Global Advisory Board is increasing its reach as we expand into becoming the center of excellence in business
and investment strategies for diverse industries and geographies. We are looking for like-minded individuals to add to our
core group of professionals.

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If you believe you are qualified and would like to be considered to join our team, please send an introductory email to the
address below. Include a brief summary of your business and an outline of your personal achievements and why you
believe you would be a valuable addition to our advisory board.

Send your introductory e-mail to: joinus@bzgab.com

October 2010 gulfbusiness 65

FEATURES REAL ESTATE
Saudi’s hot
property
As the kingdom’s mortgage law is ushered in, will
it be enough to stabilise the country’s real estate
industry? RYAN HARRISON reports.
66 gulfbusiness October 2010
T
he sheer size of
Saudi Arabia’s
population and
the lack of access
for buyers have
been playing havoc
with house prices
for years, leaving
a property market that’s fit to burst.
The simple truth is that demand for
properties is outstripping those for
sale. And there is no mortgage market
for a growing young population to get
on the housing ladder.
Saudi’s population has more than
doubled since 1986 to about 25.5
million according to IMF data and is
expected to reach 30 million by 2020.
For now, economists say at best
the future looks bleak and at worst
the Saudi property sector is a ticking
time bomb.
But the highly anticipated and
elusive mortgage law that’s been
almost a decade in the making could
chip away at these fears, say lawyers,
setting the kingdom down a path to
stability and maturity.
So far, GCC investors, banks and
potential homeowners have been drip-
fed a diet of information about what
might be included in the legislation.
But after years of delays, speculation
is rampant and most involved in
property investment are fed up.
For instance, in January, Saudi
central bank governor Muhammad al-
Jasser said the kingdom would issue
its first mortgage law “in the next few
getty images
months”. That hasn’t happened. Some
now say it’s more realistically going
to be in the first quarter of 2011.
FEATURES REAL ESTATE
LEGISLATE TO REGULATE
Scott Aitken, a partner at law firm
Clyde & Co, and an expert in legal
structuring advice to owners,
operators and financiers of property,
said without a rulebook the housing
market can’t go forward.
“In the absence of some
regulatory regime on mortgages
you’ve got three problems. One is
the issue of licensing, so there are
people providing home financing
with no rules. Second, there’s no
real registration process, which
denies people confidence in the
accountability of the system. And
finally, it’s very difficult to enforce
the payment of mortgages, which is
where foreclosures come in.
“All this means that to-date
financing for the banks, homeowners
and investors has been very
expensive because it reflects the risk
and uncertainty involved,” he added.
Installing a central registry for
mortgages would transform the
market, giving investors an accurate
reading on who’s buying what and
the true cost of land. Meanwhile,
it would help lenders keep precise
records of their borrowers.
Experts say in the event of a default
this could be very handy indeed.
For instance, there’s one thing
Riyadh cityscape, KSA.
68 gulfbusiness October 2010
Scott Aitken, partner, law firm
Clyde & Co.
to know who your debtor is, but it
should also be linked to the actual
plot of land. This information is
currently held by local notaries, who
may not be aware of debtors’ details
and who have little incentive to track
down a bank’s clients.
PAY UP OR GET OUT
Early drafts of the mortgage law
suggest that the government will
tackle the thorny issue of terminating
an owner’s right to a property
because of default, otherwise known
as foreclosure.
Industry sources told Reuters
that the delay in passing the law
was based in part on the reluctance
by authorities to accept the idea –
common around the world but less
acceptable in Islamic law – that
defaulters could be evicted from
their property.
In the Western world, after
foreclosure there is typically a
forced sale of the property at public
auction, with the proceeds being
applied to the mortgage debt.
If Saudi follows a similar model
it could appease lenders that are
nervous about jumping into the
kingdom’s real estate market.
John Hermann, a special counsel
for real estate and capital markets
at Baker Botts, said: “Banks will
use the power of sale like in Dubai
and take the cash to pay the debt.
The government will likely act as an
arbiter in the auction process.”
The proposals allow lenders to
enforce their mortgages by reporting
debtors to a central authority and
Gulf pics
FEATURES REAL ESTATE
forcing them to either repay their
debt or vacate a property.
Under current Saudi mortgage
lending practices, a notary public
records a title deed that the property
is subject to a mortgage. But notary
publics are known to refuse to record
those rahns, or pledges of property
to secure a debt, if they have any
concerns over the lender.
If reports are accurate, the new law
would create a central authority to
register the documents, reducing the
role of the notary publics and making
it easier to validate mortgages.
After the mortgage law is passed
Saudi can expect a fledging secondary
real estate market to develop. Further
down the line there is the opportunity
for the securitization of mortgages,
so they can be packaged and sold to
financial markets.
Most agree this would not take
shape for at least five or 10 years
down the road.
Still, because much of the housing
problem is rooted in the country’s
fast-changing demography, there will
be millions of people desperate to get
on the property ladder.
For instance, there’s been a big rise
in the number of foreign workers. The
country’s population grew almost 20
per cent to 27.14 million between 2004
and 2010, according to a recent census.
In total, the country has a deficit
of two million housing units, a figure
that’s rising by some 150,000 a year,
THE RECOVERY POSITION
H ouse prices in Saudi Arabia are on
the up and show no sign of stopping
as a lack of affordable property stokes
demand, research has found.
Property prices in parts of Riyadh
and Jeddah rose in the past year as a
growing population drives demand for
new homes, according to the Oxford
Business Group.
Prices rose by about three per cent
in prime and emerging residential areas
of Jeddah and Riyadh over the past 12
70 gulfbusiness October 2010
KSA POPULATION JUMPS
30
25
20
MILLION
15
10
5
0 secondary mortgage market comes
2010 2020
Source: Government census
according to independent economist
Saud Jleadan.
Should all these people be eligible
for a mortgage? What about the low-
income earners?
The global economy is still licking
its wounds after a subprime mortgage
crisis that morphed into a credit
squeeze and eventually the worst
financial disaster in memory.
The Saudi government has
therefore built into the draft law a
mechanism that addresses concerns
over subprime mortgages. A so-called
“safety ratio” will prevent lenders
from giving financing beyond the
means of the consumer. As with most
of the law though, specifics regarding
the ratio have yet to be established.
months, with demand for new homes
expected to reach an estimated 1.5
million by 2015.
The recovery comes after prices fell
by as much as 20 per cent last year,
separate research from CB Richard Ellis
released in April showed.
If the turnaround is the start of
something big, then time is ticking for
the government to act and get a handle
on the situation before a Dubai-style
bubble starts to form.
“The government is under huge
pressure given that there’s massive
housing demand,” said Mohammed
Al-Ghamdi, a Saudi national and
partner in the Riyadh office of law
firm Fulbright & Jaworski.
“When Saudi real estate matures
then you’ll inevitably get into the
sub-prime mortgage debate, but
not yet. For the time being they
should just concentrate on issuing
this law.
“The Saudi Arabian Monetary
Agency will have been the one
carefully watching the subprime
crisis unfold because when this
here they want to be ready and avoid
the mistakes made by others,” Al-
Ghamdi added.
Although players in Saudi real
estate may hope the mortgage law
will be the silver bullet to blast
away uncertainty and instability,
and usher in a new era of confidence,
it is unlikely. At least it’s unlikely
overnight.
The complex legal spider’s web
that surrounds mortgages, including
the Saudi courts, shariah boards and
foreclosure rulings, will need time to
adjust and fine-tune.
Plus, most agree that passing
the regulations doesn’t necessarily
completely resolve the housing
deficit, as demand for property
continues to dwarf supply.
There’s also the burning issue
of affordability for mid and
low-income Saudis.
A number of large-scale projects
are planned to help meet housing
demand, including a 13 billion riyal
(Dhs12.73 billion) urban regeneration
project in the centre of Riyadh.
The project is being developed by
a consortium led by the Arriyadh
Development Company.
How much protection the law will
provide banks and mortgage lenders
over homeowners in this brave new
world is yet to be seen. But as the
Saudi population races ahead, the
mortgage law will undoubtedly prove
pivotal. For all involved, it can’t come
fast enough.
�����������
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FEATURES TECHNOLOGY

Top 10 tech trends

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

VIRTUALISATION SECURITY SOLUTIONS

Virtualisation is the creation of a As business activity migrates to
virtual (rather than actual) version the internet and cloud computing,
of something, such as an operating the need to upgrade the security
gulfpics

system, a server, a storage devide or of the client’s experience and the

network resources.
In the GCC, only 10 per cent
of servers are currently used in
a virtualised environment, but
virtualisation is increasing at a rate
of 8.8 per cent annually, says Jyoti
Lalchandani, vice president and
regional managing director, IT market
research firm, IDC Middle East, Turkey
and Africa. This is because it brings
cost reductions through lower energy
consumption and even takes up less
floor space.
“The region has felt the
impact of the global
slowdown and this has
translated directly into
stricter cost control of
technology resources,”
he says. “Virtualisation
addresses these
and, in addition, is
the foundation for the
deployment of cloud
computing
applications.”
clarification of rights to privacy
increases in tandem.
Although some argue that high
profile incidents of identity theft and
credit card hacks haven’t stopped the
growth of the internet over the last 15
years, Benjamin Pring, research vice
CLOUD COMPUTING president at IT research firm, Gartner,
says it is also hard to argue against
Cloud computing customers do not the notion that more investment and
own any physical infrastructure. more regulation is needed to ensure
Rather, they rent internet bandwidth that the next wave of migration
from a third-party provider, so to cloud computing has positive
avoiding capital expenditure on outcomes.
hardware, software and services “The breaches of security and
by renting servers elsewhere. privacy that occur have enormous
Consumption is usually billed on a ramifications – financially and in
utility (like electricity) or subscription terms of buyer confidence,” Pring says.
(like a newspaper) basis with little or
no upfront cost.
The growth of this technology is
phenomenal. BT Global Services
expects that its global revenue from
cloud computing will more than
double from $17.4 billion in 2009 to
$44.2 billion in 2013.
“Price competition is everywhere,
so more and more people would
like to pay for communication like
they pay their utility bills, and only
pay for what they use,” says Olivier
gulfpics

Jyoti Lalchandani Campenon, EMEA president, BT.

72 gulfbusiness October 2010

 3D TV
apple.com
To create the experience of depth,
a 3D TV will display two separate
but overlapping images of the same
scene simultaneously and at slightly
different angles, Marco Vocale, senior
manager of corporate marketing,
Samsung, explains.
The technology is so in demand in
this region that Nielsen, a marketing
research firm, says Middle Eastern
consumers are twice as likely to buy
3D TVs as consumers in the rest of the
world. And if forecasts by iSuppli, a
technology market research company,
come true, then that translates to a
huge chunk of the shipment pipeline.
iSuppli forecasts that global 3D TV
shipments will reach 4.2 million by
end of this year, 27.4 million units in
2012 and 78.1 million units in 2015
¬- a compound annual growth rate of
80.2 per cent from 2010.
Marco Vocale
ANALYTICS
The 2001 real-life-story-turned-
movie A Beautiful Mind featured
scenes where John Forbes Nash
(played by Russell Crowe) tries to
decipher various code mentally.
Today, this task can be performed by
computer software called analytics,
which processes information, looks
for patterns and spots codes. This
technology is slated to be increasingly
important in industrial sectors like
telecommunications, retail, wholesale,
banking and oil and gas which are
TABLET COMPUTERS rapidly expanding within the various
GCC countries, says Lalchandani.
“Business intelligence, analytics,
The relentless hype around consumer pattern recognition, and smart
tablet laptops has aroused interest solutions are the new vocabulary of
among business customers. Much IT’s value,” Pring adds. “New IT-
of this buzz has been generated by related initiatives that don’t fit within
Apple’s iPad, with its thousands of this framework will be increasingly
apps and slick marketing. less attractive to businesses.”
Samsung Electronics has also
recently unveiled the Galaxy Tab,
a new tablet PC powered by the
Android 2.2 operating system.
However, the weaknesses of iPads
and Android-powered tablets remain
largely the same as always: security,
manageability and compatibility with
key business applications have been
patchy at best.
So after the hype of the iPad’s
launch in the first half of 2010,
Gitex Dubai will be a chance for
businesses in the Gulf to scrutinise
the new tablet laptop from Cisco,
which has announced the Cius
(pronounced ‘see us’), a seven-inch
tablet for business use.
Benjamin Pring
October 2010 gulfbusiness 73
FEATURES TECHNOLOGY

MOBILE APPLICATIONS ARAB-CENTRIC

Untapped potential, the expansion APPLICATIONS
of 3G networks and increasing use
of smartphones are leading to a An often overlooked area in the

iStockphoto
dramatic rise in demand for mobile GCC is the ‘Arabisation’ of services
applications and value added services ranging from localisation of
in the Middle East, Paul Gullett, international enterprise resource
vice president, Europe, Middle East planning functionality, to optimising
and Africa of NComputing, a virtual internet search engines and creating
desktop company. Arabic focused online applications
“Mobile applications are one of and content.
the fastest growing areas of the In May, domain names in Arabic
telecommunication industry and for Egypt, Saudi Arabia and the UAE
the Middle East represents a major DATA CENTRES were added to the internet’s master
growth market,” directories – the first major change
he said. International connectivity between to the internet domain name system
According the GCC, the region and the rest of the since its creation in the 1980s.“The
to IDC, the world has increased exponentially GCC region is expected to take a
worldwide over the last few years and continues strong leadership position in the
smartphone to develop at a fast pace. This has creation of Arab-centric application
market grew encouraged the establishment of services due to its central geographic
by more than private and “white-box” data centres and cultural position within the Arab
56 per cent in - a large scale collection of servers world,” Lalchandani says.
the first quarter - across the region as enterprises
of 2010. realise the need for reliable and
legally compliant centres to service
GCC or regional operations. “The
GCC by nature has a volatile profile,
so many companies are ensuring
availability while insuring the data by
either establishing their own in-house
centres or making use of regional
facilities,” Lalchandani says.
Paul Gullett iStockphoto

GREEN TECHNOLOGY much interest or debate across the

UAE and the Gulf region, Gartner
Corporations around the world are says. “From an IT standpoint,
thinking more and more about how to organisations have not shown an
go green. South Korea’s LG Group for interest in green IT projects and,
one has said it will invest $18 billion so far, providers are not offering
to develop environmentally-friendly them to clients.” Gartner believes
businesses and reduce emissions by these initiatives will have little or no
gulfpics

40 per cent against 2009 levels. traction in the years to come across
However, green IT is not a topic of this region.

74 gulfbusiness October 2010


3D
Sony launches
compatible
products range
Technology pioneer offers
consumers state-of-the-art
experience in 3D movies, music,
sport and PlayStation games.
3D_Mag_175x18_Guy2&Woman.ai
SPECIAL PROMOTION
Sony Gulf FZE has launched its complete range of
3D-enabled products, offering consumers an
immersive experience in 3D movies, music, sport and
PlayStation games.
Sony’s 3D product range includes the BRAVIA LX900
and BRAVIA HX800, the new Full HD 3D TVs that build
on the BRAVIA reputation for picture quality, and the new
3D-enabled Blu-ray player BDP-S470, as well as the 3D
compatible Home Theatre Systems and channel sound
bars including BDV-IZ1000, BDV-E970, HT-CT350 and
HT-CT150 that have been specially designed to align
9/28/10 12:46:31 PM with the 3D BRAVIA LED HDTVs.
October 2010gulfbusiness 77
SPECIAL PROMOTION

With its expertise in 3D from

lens to the living room, Sony
has assumed a leadership
role in the research and
development of the technology
to drive its growth at every
level – from supporting
creators of content by
providing them with custom-
made professional equipment
to influencing cable network
operators into adopting
systems that facilitate the relay
of 3D content.
“Due to our involvement in
the development of original
content and our efforts over
the years to create ‘Good 3D’
content captured on Sony’s
professional equipment, we
believe this will translate
into a superior and seamless
visual experience on Sony’s
entire range of 3D compatible
products,” added Miura.
A monolithic design theme
has been extended by Sony
To complement this extensive 3D portfolio, Sony across its entire suite of home entertainment products
Gulf will also be rolling out a free firmware update launched in 2010. Apart from the new BRAVIA TVs, Sony’s
for PlayStation 3 consoles, making the hardware 3D Blu-ray Disc players and Home Cinema systems are all
compatible to enable 3D gaming. designed to create one seamless home entertainment
In addition, the company already offers the Alpha experience, even in terms of design.
NEX-3 and NEX-5 digital cameras that can take 3D Sony’s entire array of 3D products is currently available
panoramic shots. at all Jumbo Electronics showrooms in the UAE and other
With the new range, Sony now offers consumers the major retail electronics outlets across the region.
most diverse line of 3D compatible home entertainment
products including BRAVIA LED HDTVs, Blu-ray Disc
players and home theatre systems, the PlayStation 3 and
Alpha digital still cameras with interchangeable lenses.
“3D technology in home entertainment is an immersive
phenomenon. Unlike the 3D entertainment experiences
of the past, which were characterised by objects coming
towards the viewer, the emphasis has now shifted
to adding an element of depth. Said Osamu Miura,
managing director, Sony Gulf “Sony’s 3D world is about
subtlety and detail, to totally engage
3D_Mag_175x18_Guy2&Woman.ai the viewer”.
9/28/10 12:47:45 PM

78 gulfbusiness October 2010

 16–23 October 2010
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Play time
Despite the credit crunch, regional consumers still put recreation at the top
of their agenda, writes KAREN REMO-LISTANA.
O
ld-timers in the
business world
have traditionally
set their eyes
on the three Fs
– food, fashion
and fun. Time
and again, these
sunshine industries have enjoyed
stability, even if the wider economy
has grown awry. But because of the
sheer force of the current recession,
it seems reasonable to ask whether
these sectors still remain strong.
In fact, it turns out that ‘fun’ is still
high on our agenda. Entertainment
experts told Gulf Business that while
people from every walk of life have
been affected by the financial turmoil,
the fact remains that we all need a
break from time to time.
According to the recent MasterCard
Worldwide Survey on consumer
purchasing priorities, 58 per cent of
consumers in the Middle East and the
Levant plan to maintain the same level
of discretionary or recreation spending
as per the last six months. At the top of
the list is dining and entertainment.
“Entertainment is a different kind
of business,” says Ahmed El Komy,
president, of bowling alley operators
Switch Middle East. ”A lot of businesses
get hurt in a recession, while in
entertainment you usually do well.
“It’s not greatly affected by the
downturn of the economy. People will
always want to do something to feel
better about themselves. People may
temporarily stop spending thousand
of dirhams on a new TV, but they will
not stop spending money to watch a
movie or play bowling or spend some
time with their family.”
FEATURES LEISURE
Switch bowling centre, pool hall.
Switch recently inaugurated its
first branded bowling centre which
features Pininfarina-designed
equipment in Dubai. Pininfarina is an
Italian car design firm which has been
employed by a wide variety of high-end
automobile manufacturers, including
Ferrari, Maserati, Rolls-Royce, Cadillac,
Jaguar, Volvo, Alfa Romeo and Lancia.
“If you look around the centre you
will see that the black and red touch
of Ferrari is visible in every design,” El
Komy says.
The $6.8 million (Dhs25 million)
investment – which comprises 12
bowling lanes, private karaoke rooms,
billiard area, coffee shop and shisha
garden – is the first in a series of 10
branded centres to open in the region.
El Komy says another $30 million is
earmarked for mid-term expansions.
“The next one will be in Cairo next
October 2010gulfbusiness 81
FEATURES LEISURE
Arif Amiri, CEO, Emaar Retail.
year and then Abu Dhabi right after,”
he says. “We are looking at opening 10
centres around the Middle East. We
are also opening in Beirut, Libya and
Riyadh. We are currently searching for
the right location.”
Currently, the Middle East
amusements industry is estimated
at $2 billion, with up to $500 million
being re-invested in the region
annually. Large scale theme park
developments may have been shelved
due to the current economic situation,
but the market is still showing
growth, with family entertainment
centres (FECs) proving viable business
opportunities for developments and
industry suppliers.
There are about 70 theme parks in
the GCC and about 100 FECs, with
new developments such as Kidzania
at Dubai Mall and iFly Dubai at
Mirdif City centre showcasing new
product innovations.
Arif Amiri, Emaar Retail CEO, says
Dubai’s leisure sector gains impetus
from traditional growth drivers,
especially tourism. “In addition to the
growth in population, which adds to
the demand for the leisure sector, Dubai
has witnessed robust tourism,” he says.
The entertainment arm of property
developer Emaar is the face behind
SEGA Republic, the first and largest
of its kind indoor theme park in the
region; and KidZania, the children’s
edutainment centre in Dubai Mall.
Emaar Retail has also strengthened
82 gulfbusiness October 2010
Ahmed El Komy, president, Switch
Middle East.
the operations of Dubai Aquarium
& Underwater Zoo and the Olympic-
sized Dubai Ice Rink. Amid a shrinking
economy, it also opened Reel Cinemas,
the 22-screen megaplex in The Dubai
Mall and more recently, the six-screen
premium boutique Reel Cinemas in
Dubai Marina Mall.
Amiri says expansion plans are
in the pipeline in “key geographic
markets across the Middle East and
North Africa region”.
“Our expansion will be in tandem
with the geographic growth of Emaar
Properties,” he adds. “We are confident
of recording sustained, robust
performance of our leisure components
as well as further expanding our retail
operations in 2011.”
MAF Leisure, which operates
across the GCC, is also “constantly
Kidzania children’s amusement
park, Emaar Retail.
undertaking a policy of aggressive
expansion,” says Arnaud Palu, chief
operating officer of the entertainment
unit of Majid Al Futtaim.
“Egypt is a particularly important
emerging market for us, where we see
a lot of potential and will be focusing
our expansion efforts.”
Palu said Magic Planet has been a
staple favourite with families while Ski
Dubai has become a well established
landmark within Dubai. Playnation, he
says, is steadily gaining ground as a
popular leisure destination.
One of the plus factors in
entertainment is it operates in a cash-
generating business. “In this kind of
business, we don’t have warehousing
so we don’t have to face issues of
stock inventories,” says El Komy. “We
also work on a cash-basis business.
Nobody walks through the door and
pays post-dated cheques.”
Palu says return on investment
(ROI) in the leisure industry typically
takes longer than in other industries.
However, once a leisure operation
reaches maturity, the returns are
consistent and usually reliable.
“Thus it is important to strike a
delicate balance between investment
and time of return,” he says.
In the case of the new Switch
Bowling centre, El Komy says the
project will pay back over the next
two to three years.
“People really don’t like to invest in
entertainment. Most people would go
for real estate investments,” he says.
“In entertainment, the ROIs are
magnificent provided you have a partner
who has the ability to manage the
business right. Management is the key.”
Overall, the presence of a significant
number of retail complexes in the UAE
is indicative of the thriving economy,
says Ehsan Khoman, economist at
Dubai Chamber of Commerce and
Industry (DCCI), says.
As the UAE recovers from the
effects of the global economic
downturn, a pick-up in consumption
levels, an easing in credit availability
and an expected influx of tourists
in in 2011. will encourage cash flow
within the entertainment sector. ■
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COUNTRY REPORT TURKEY REAL ESTATE

Turkey builds bridges to

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

Topkapi Palace, Istanbul. Turkish Tourism Authority

A
nkara is striving to
build bridges to the
Arab world in an
effort to stimulate
investment and assert
Turkey’s credentials
as a regional power.
Ahmet Davutoglu, who became
Turkey’s Foreign Minister in May 2009
has been strenuously pursuing a policy
of “zero problems” with the country’s
neighbours holding talks, starting
dialogues and lifting visa restrictions.
The bold strategy seeks to reclaim
Turkey’s regional influence not through
political hegemony over former
Ottoman territories, but instead
leading an informal grouping of
Muslim countries bound to Turkey by
closer bilateral ties. By amplifying the
voice of the region’s Muslims to the
rest of the world, observers see Turkey
establishing itself as a power centre in
its own right.
The policy has already seen
enhanced relations with neighbours
such as Syria and Iraq, promoted
by the offer of greater economic
integration with countries with which
Turkey has historical and cultural
affinities. Northern Iraq, for example,
is home to the Turkomen people, a
Turkic-speaking group numbering
between 500,000 and one million.
In February 2010, the railway linking
Turkey, Syria and Iraq was re-opened
and work continues on a fast rail link
between Aleppo in northern Syria and
Gaziantep in southeast Turkey.
There are also plans to open a
second border crossing between
Turkey and Iraq. Turkey is the major
supplier of processed foods and
consumer goods to northern Iraq,
as well as a major source of foreign
investment in the region.
In June this year, at a meeting of the
Turkish-Arab Cooperation Forum in
Istanbul, plans for a free-trade zone
encompassing Turkey, Jordan, Syria
and Lebanon were announced.
The zone is designed to form the
foundations for what would eventually
become a single political and economic
bloc consisting of the Muslim
countries of the Middle East and
North Africa.

October 2010 gulfbusiness 85

REAL ESTATE
Istanbul, Kanlica.
Although the EU still accounts for
more than 40 per cent of Turkey’s
foreign trade, its economic ties
with Muslim countries have been
growing at a fast rate.
In his book Strategic Depth
published in 2001, Davutoglu argued
that Turkey’s long standing pro-
Western strategic alignment had lost
sight of the countries in its immediate
neighbourhood, especially the majority-
Muslim countries of the Middle East.
Last year, Turkey set up a number
of bilateral “High Level Strategic Co-
operation Councils” with Iraq, Syria,
86 gulfbusiness October 2010
COUNTRY REPORT TURKEY
Industrial powerhouse
Turkey, already the world’s 16th
largest economy, is predicted to be
one of the tenth largest economies in
the world by 2050. Potential lies not
just in the Turkish domestic market,
but as an important springboard
to export to Central Asian, Middle
Eastern and North African markets.
With a population approaching
76 million, Turkey is the Near East’s
workshop for cars, trucks, TV sets,
and other domestic goods, as well as
textiles and food. The OECD expects
Turkey’s economy to grow by 6.8 per
cent in 2010, the fastest rate among
its members.
Turkey is also a leading shipbuilder,
Turkish Tourism Authority
ranking as the fourth largest builder
after China, South Korea and Japan.
The country’s construction and
contracting sector also ranks high
in the global order with some 22
companies listed as top international
contractors. The US’ Engineering
News-Record ranks Turkey’s
construction sector the world’s third
largest after the US and China.
Turkey is the seventh largest
automotive producer in Europe
and the 15th largest worldwide.
The industry, combined with its
components sectors, exported some
$22 billion of products in 2008.
Service industries are growing
in importance. The country has
expanding high technology industries
Jordan and Lebanon and drafted a including computer software and is
provisional agreement to establish also the base for a military aerospace
another with Libya. industry producing fighter aircraft and
The councils aim to provide an helicopters.
institutional framework in which The Turkish retail sector is the
seventh largest in Europe and the
ministers from each country meet at
tenth largest in the world, while
least once a year to discuss ways of
tourism has become a significant
improving bi-lateral co-operation. foreign currency earner and employer
Tangible progress has been achieved. in the last decade.
Last December, visa requirements
COUNTRY REPORT TURKEY
were abolished for travel between
Turkey and Syria, Lebanon, Jordan,
Qatar and Libya with the aim of
increasing trade and tourism. Turkey
has also upgraded its commercial
relationships with Syria and Iraq.
Although the EU still accounts for
more than 40 per cent of Turkey’s
foreign trade, its economic ties with
Muslim countries have been growing
at a fast rate.
The global recession, which hit
markets in the EU harder than those
in the Middle East, has accelerated
the trend. In 2009, Turkey’s total
exports to the EU contracted by 22.6
per cent, while Turkish exports to
Muslim countries rose by 9.9 per cent.
As a result, the Turkish government
is increasing its focus on Arabia
by emphasising Turkey’s extensive
investment opportunities in areas
such as construction, real estate,
agriculture and financial services, as
well as IT and retail.
According to HSBC economist,
Simon Williams, the Gulf has capital
and Turkey has capital needs. They
are close geographically, there are
cultural and religious similarities
and Turkey is a good economic
story right now.”
Compared to Europe, Turkey has
emerged from recession quicker.
While Western banks were being
bailed out by their governments,
Turkey’s own financial sector had
already been overhauled after a near
financial collapse in 2001.
Reforms curbed inflation and forced
banks to bolster their balance sheets.
The increased presence of foreign
banks has also spurred locals to
improve their performance. Turkey
has also welcomed investment and
stepped up efforts to become a real
player in the global economy.
Turkey’s emergence from global
recession is underpinned by a large
domestic market that offers some
insulation against the weakness still
seen in euro zone countries.
After contracting by 4.75 per cent
in 2009, real growth in gross domestic
production is expected to expand by
around 6.25 per cent in 2010.
88 gulfbusiness October 2010
Istanbul’s Grand Bazaar.
Prime Minister, Recep Tayyip
Erdogan, has pushed largely pro-
business policies slashing corporate
taxes, tightening intellectual property
protections and setting up an
investment promotion agency.
The result has been growing
multinational interest in Turkey.
Foreign direct investment surged
Real estate entices
investors
As long as Turkey’s economy
maintains its forward trajectory there
are likely to be major investment
opportunities in new construction
projects, not least real estate.
Steven Worboys, MD of Experience
International, says that Istanbul is
proving one of the most successful
property investment opportunities
this year with clients capitalising
on Istanbul’s significant housing
shortage.
A surging tourism sector is also
seeing expanding opportunities.
Turkey registered a rise in tourism in
2009 with a total of 27 million visitors
an increase of 2.8 per cent compared
to 2008. There are plans to increase
the number of Arab visitors by
promoting health and medical tourism.
Many foreigners have bought homes
in Turkey in recent years. More than $10
billion is estimated to have been spent
by Germans, Scandinavians, Dutch,
British, Greek and other nationalities on
holiday properties along the coast in
places such as Alanya, Fethiya, Didim,
Bodrum, Kusadasi.
Planned infrastructure
developments around Dalaman on the
Mediterranean coastline, including
the expansion of Dalaman airport and
the development of marinas and golf
courses are increasing the attraction
of the area. Istanbul and Antalya are
also seeing an increase in property
purchases by foreign buyers.
Turkish Tourism Authority
from $1.1 billion in 2001 to $22 billion
in 2007, before dropping back to $18
billion in 2008. Even though the figure
fell to $9 billion in 2009, Turkey is
expected to bounce back strongly.
“We put Turkey in the same category
as Brazil, Russia, India, China and
South Africa,” says Ali Faramawy,
a vice president of Microsoft
International in Istanbul.
Apart from industrial strength and
a growing skills base, Turkey’s trump
card is its location. The country
is close to Europe but also to the
former Soviet Union and the Middle
East, all areas with high long-term
growth potential.
Foreign investors increasingly
see Turkey as a success story in the
making. Since the acquisition of a
55 per cent holding in Turk Telecom
by Dubai-based Oger Telekom for
$6.5 billion in 2004, there has been a
steady rise in Gulf-based investments
into Turkey.
Through its UK property arm, St
Martin’s, Kuwait Investment Authority
has bought a $750 million majority
stake in Istanbul’s Cevahir Business
Centre. Kuwait Finance House has
set up Kuveyt Turk to pursue Islamic
banking. Kuwait Alshaya Group is
reportedly planning a $100 million-
worth of investments in Turkey.
Kuwait International Leasing
Investment has founded Halic Leasing
with $5 million capital and is looking
to operate as an investment bank
in Turkey. A private equity fund
managed by NBK Capital, a unit of
National Bank of Kuwait, has bought
a 30 per cent interest in the Dunyagoz
eye hospital group.
The International Investor, a Kuwait
investment group, has a
$24 million 75 per cent share in Docar
a Turkish car rental group. Kuwait

Investment Group has bought Adabank.
The UAE’s Abraaj Capital is a
partner in the Acibadem Hospital
and Numarine Yacht company while
Emaar Properties has plans for major
investments focusing on healthcare,
shopping malls, hotels and real estate.
Dubai Islamic Bank has opened
a representative office in Turkey.
Saudi Arabia’s National Commercial
Bank has acquired Turkiye Finans.
The Bahrain-headquartered Arab
Banking Group has also opened a
representative officer in Turkey with
plans to acquire a local bank.
The investments, though are
still relatively minor relative to the
immense scale of Turkish investment
potential. The government has shown
it is business friendly and sees this
as the firmest foundation for building
bridges with the Middle East and
other regional partners. ■
Tayyip Erdogan, Turkey prime minister.
Turkey’s Prime Minister Erdogan may
be the new hero on the Arab street,
but many in Washington DC view him
increasingly as a populist, leaning to
Islamist instincts and abandoning
the West.
Ankara’s relations with Israel, once
close, have worsened as a result of
Israeli commandoes seizing a Turkish
ship carrying humanitarian supplies
US relations cool
to Gaza that resulted in nine Turkish
citizens being killed. The falling out has
sparked speculation about a drift away
from the West by Turkey’s ruling Justice
and Development Party.
In 2003, Turkey declined to allow
its Incirlik airbase to be used as a
springboard for an invasion into the
north of Iraq as the US prepared to
topple Saddam Hussein.
With Iran, Turkey overcame US
reluctance earlier this year to its acting
as mediator, along with Brazil, on a
nuclear fuel swap agreement. When
the brokered deal was ignored, Ankara
defied Washington by voting no rather
than simply abstaining in the UN Security
Council over sanctions on Tehran.
In spite of Turkey flexing its muscles
in the international arena and making it
clear it is not to be taken for granted in
the region, it remains an active member
of NATO with strong political, military
and commercial links to both the US
and Europe.
October 2010 gulfbusiness 89
Let’s do
business
Turkey’s Deputy Undersecretary for Economic Affairs tells
Gulf Business how he works tirelessly to ensure the right
incentives are in place to promote trade with the UAE.

90 gulfbusiness October 2010


S
peaking from the
Ministry of Foreign
Affairs of the Republic
of Turkey, Hakki Akil,
Deputy Undersecretary
for Economic Affairs,
and former Ambassador
to the UAE, said that the trade volume
between the UAE and Turkey has
increased from $817 million in 2003 to
$8.7 billion in 2008.
However, he added: “The level of
trade between our two countries was
realised as $3.5 billion in 2009, which
is far behind the figure of 2008. This is
because of the global financial crisis
and fluctuations in oil prices.
“There is still great potential for
trade and investment between Turkey
and the UAE. As the global economy
recovers from the crisis, I hope that
the bilateral trade between the two
countries will start growing again.”
Akil adds that he expects trade volume
to soon reach $10 billion.
The UAE is an important and
reliable economic partner for Turkey,
offering great trade and investment
opportunities for foreign companies;
and with its geographical location it
serves as a bridge between the Middle
Eastern, European and emerging Asian
markets, while Turkey has become the
gateway to Europe for the UAE.
Turkey and the UAE have the
potential to further strengthen
and diversify their economic and
commercial relations in sectors such
as construction, tourism, food, energy
and agriculture. The key areas of
bilateral investments are construction,
tourism, energy and food, along with
the distribution of oil, natural gas,
electricity and water.
Akil added: “We observe an increase
in foreign direct investments in
tourism, ship building and building
materials.
“The structural economic reforms
have paved the way to increase the
role of the private sector in the Turkish
economy and to enhance the efficiency
and resiliency of the financial sector.”
With its vast funds and experience,
in recent years, the UAE has directed
its interest to investment in foreign
markets. The recent privatisation
activities in Turkey have attracted
UAE business people to invest
in real estate, seaports and also
capital markets.
“We have changed the whole legal
system in a liberal manner so that
foreign investors can come and invest
in Turkey without any hesitation,”
said Akil.
Turkey attracted foreign capital
worth more than $75 billion between
2003 and 2009. Today, Turkey can offer
notable opportunities for the UAE
firms due to its attractive incentive
The recent privatisation
activities in Turkey have
attracted UAE business people
to invest in real estate, seaports
and capital markets.
measures for foreign investors, along
with its Customs Union relationship
with the European countries. The
geographical location is another
advantage, with Turkey situated in
the centre of a region that hosts one-
quarter of the world’s population.
IN NUMBERS
$817m
UAE and Turkey trade 2003
$8.7bn
UAE and Turkey trade 2008
$75bn
Total FDI in Turkey 2003 – 2009
COUNTRY REPORT TURKEY
Currently, there are 21 Turkish
companies, 27 business representatives
and 244 trademarks officially operating
in the UAE.
Aided by the Turkish-United Arab
Emirates Business Council, which was
established in 2000 as a platform for
evaluating business and investment
opportunities, these companies
are mostly active in the sectors of
construction, food, jewellery, textile,
tourism and finance.
The UAE, with an open economic
development strategy and positive
macroeconomic figures, constitutes
a secure investment environment.
Akil said: “The structural reforms
undertaken by the Emirates to attract
more FDIs have made the UAE a centre
of attraction for investments in several
sectors. We invite business groups
from the UAE to continue to explore
investment opportunities in Turkey.
We believe the completion of the legal
basis of our economic relations will
intensify the investments.”
At the political level, Turkey has
always promoted economic cooperation
between the Turkish and UAE business
communities. “We are always ready to
facilitate the access firms from the UAE
to the Turkish market. Our Investment
Promotion Agency and business
associations are at the disposal of
UAE firms whenever any assistance is
needed,” said Akil.
He added: “I am glad to witness
that there exists political willingness
on both sides to further enhance
the overall relations between our
countries. We believe that we have to
exert every possible effort on a long-
term vision to diversify and deepen
our bilateral trade and economic
relations in the future.” ■
October 2010 gulfbusiness 91
Banking on bilateral trade
Hülya Kefeli, executive vice president and head of international
banking for Akbank, discusses the current levels of bilateral
trade between the UAE and Turkey.
How has the level of bilateral trade
changed in recent years?
While Western markets remain largely focused on fiscal
and monetary policies to support recovery, many emerging
market countries have already completed the necessary
reforms to recover from the crisis, and, in any case,
remained less exposed to financial services than the West.
They have successfully navigated the financial crisis thanks
to more resilient financial systems, adaptive business
practices by corporates and focusing on trade with
countries outside the West. To further safeguard against
waning demand, many emerging countries have turned to
domestic and regional markets.
As part of multi-dimensional policy currently
92 gulfbusiness October 2010
implemented, Turkey is giving increasing importance to
its relationship with the Middle East.
The trade volume to the UAE grew rapidly before the
global crisis, especially in construction materials and
steel sectors. However, credit and market conditions in
real estate temporarily slowed down the bilateral trade
with Turkey in 2009.
What is the current value of bilateral
trade through your bank and how is it
broken down?
We have around 10 per cent market share in GCC trade
finance but we aim to increase it to 15-16 per cent in the
coming three years in line with our new policy.
What are the key areas of investment? employment opportunities and a dynamic social life
attract Turks who choose the UAE as a working place.
The main areas of strategic collaboration and investment
between UAE and Turkish banks include the following What attracts Emiratis to Turkey? How has the
instruments: syndication loans; Islamic finance; remittances; ongoing privatisation increased investment?
asset management; private equity and markets,
Annual GDP growth for Turkey in 2010 is expected to Food, energy, health care and real estate sectors offer vast
be around seven per cent. This growth rate, if realised, investment opportunities.
will reflect positively on investment and collaboration. Turkey will also launch new privatisation deals,
especially in energy/transport sectors and these deals
will attract considerable investor interest from the region.
What attracts Turks to the UAE?
Pre-crisis investments initiated in Dubai and Abu Dhabi Turkey’s exports Turkey’s imports Share of UAE in
provided new employment opportunities in to UAE from UAE Turkey’s total foreign
construction, finance and service sectors, sparking ($ million) ($ million) trade per cent
a growing demand for Turkish employees with both 2007 3,241 470 1.30 %
experience and expertise.
2008 7,975 691 2.50 %
There are 6,000 Turkish employees in the UAE,
2009 2,899 667 1.40 %
the majority of whom are white collar workers. Vast

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October 2010gulfbusiness 93
SPECIAL PROMOTION

Turkey’s exports look good

The cosmetics sector in Turkey is flourishing as both a domestic and export
business, thanks to the assistance of its trade association, IKMIB
The Istanbul Chemicals and Chemical Products Exporters’
Association (IKMIB) was established in 1991. Today it
has 7,786 members and is a semi governmental and non
profit trade association, affiliated to the Prime Ministry
Undersecretariat for Foreign Trade. The main goals of
the assocation are to assist member companies in their
export activities, increase the export volume of the Turkish
Chemicals and Chemical Products sector and its global
market share.
As of 2009, IKMIB represented about 26 per cent of
exports from the General Secretariat of Istanbul Mineral
and Metals Exporters’ Association (IMMIB) and eight per
cent of Turkey’s total exports. The focus of exports is on the
cosmetics industry.
The size of cosmetics sector in Turkey is about US$2.2
billion. Today, the Turkish cosmetics sector provides
attractive opportunities in terms of quality, production
capacity and varieties through the increasing domestic and
foreign demand.
About 1,400 companies operate in the Turkish cosmetics
and personal care products industry and 14,000 people are
employed in total. The Turkish cosmetics and personal care
products market grows on average 10-15 per cent per year.
The main products produced by Turkish cosmetics
sector are soaps, bathroom and shower products, shaving
About 70-80 percent of theTurkish cosmetics sector
products, depilatories, lip and eye make-up products,
market consists of foreign capital multinational companies.
deodorants and antiperspirants, eau de cologne and baby
Most of the international companies
care products.
operate in production and marketing
activities together with their local
partners. The local producers in the
Turkish cosmetics sector are mainly
family company SMEs. In recent
years, there have been a significant
increase in the number of new Turkish
companies which are becoming
established brands.
Turkish cosmetics and personal
care products exports have
increased exponentially in recent
years. The cosmetics and personal
care products exports figure, which
was $400 million in 2004, rose to

94 gulfbusiness October 2010

 NUMBERS: Turkish cosmetics and personal care products are

US$2.2
exported to 170 countries all over the world. The top 10
countries with the highest figures of exportation from Turkey
Size of Turkey’s
in 2009, in descending order, are Iraq, Russian Federation,
cosmetics sector
billion Ukraine, Germany, Libya, Azerbaijan, Iran, Romania, Poland
and Bulgaria.

US$795 Value of Turkish

cosmetics exports
According to 2009 Turkish cosmetics sector export
figures, Iraq received the most products with US$119 million
and 15 per cent share in total exports respectively.
million in 2009 In 2013, the world cosmetics market size is expected to
grow to $200 billion. Cosmetics and personal care products

1,400
Number of companies markets are expected to grow as products are used for
in Turkish cosmetics protection rather than treatment. The Turkish cosmetics
industry sector aims to grow exports to $1.635 million by 2012.
In Turkey, the improvement in economy and the increase
$795 million in 2009, achieving an increase of 99 per cent in purchasing power are expected to contribute to the
over five years. consumption of cosmetics. As cosmetics products are
In the items making up the Turkish cosmetics and personal considered requirements for a healthy and happy life,
care products exports, personal care products had the rather than being associated with the concept of luxury,
largest share in 2009 with 69 per cent portion of $553 million. consumption will increase at the same rate.

October 2010gulfbusiness 95
FEATURES INFRASTRUCTURE
Designs for life
Cities that are designed for happy living are the destinations that attract
the most business and have the most longevity, writes LAURA COLLACOTT.
T
here’s a new focus
in urban planning
– liveability, which
is possibly about to
usurp sustainability
as the buzz-word
of the moment. It
implies a city in
which the well-being of inhabitants
is foremost and which aims, through
ecological and social sustainability,
to strengthen community, improve
health and increase civic engagement.
Architecture ought not to sprawl,
but lend itself to healthy human
interaction and transportation ought
to make it easy to commute via
pedestrian and bike networks and
public transportation. It is a city
that provides a safe environment
that is attractive to live, work and do
business in. Lofty aims.
Three key companies – Mercer, the
Economist and Monocle – already
publish listings of the world’s
most liveable cities, largely based
on the same criteria that human
geographers use to gauge quality
of life internationally. What makes
a city liveable? It depends who
you ask. The standard factors
apply – crime, political stability,
economic opportunity etc – but each
of the rankings uses a different
scoring system. The Economist’s
team prioritise healthcare and
education, aiming to “quantify the
challenges that might be presented
to an individual’s lifestyle”; Monocle
factors in lifestyle considerations like
restaurants and local entertainment
as well as emergency service response
times; Mercer is more business-
minded, giving weight to economic
96 gulfbusiness October 2010
factors such as currency exchange,
the availability of consumer goods
and public transport.
Jon Copestake, editor of the
Economist’s Global Liveability servey
says: “The survey provides a broad
indicator of where a city figeres on
the global stage; it is not designed
to be granular enough to enact or
dictate policy, nor would that be
our intention. [It] may point to areas
that could improve, but how those
improvements could be made, or
what the specific factors that need
addressing will vary substantially.”
Why does liveability matter? Is it
idealistic? International businesses
care because these rankings are
used to determine the hardship and
benefits packages that their overseas
expatriates are entitled to; the higher
a city is placed on the scale, the
smaller the additional remuneration
package. “We work across the
world on gathering this data to
help companies compensate their
expatriate workforces appropriately,
and with the relevant and up-to-date
allowances included in their benefits
package,” says Tom O’Byrne, head of
market development at Mercer Middle
East. “Companies come to us to get a
clear picture of the quality of living
in these cities; they then use this for a
range of remuneration purposes.” In a
market where so many employees are
expatriate, these rankings count.
Businesses care about liveability
because it determines benefits that
their overseas staff entitled to.
Governments care (or should)
because liveable cities align with
sustainable cities, set up to be able
to power, feed, entertain and educate
themselves into the future. Not to
mention that a city that is pleasant
to live and work in is attractive to
business, which equates, at its most
basic, with wealth. Parang Khanna, of
Foreign Policy magazine, even believes
that influence emanated from cities
will, in the future, replace national
power. Urban living is a big issue.
The suggestion that liveability is a
political policy issue is a significant
one. It suggests that the burden of
responsibility – and cost – should lie,
to some extent, with government as
much as with developers and private
enterprise. Indeed, in the Middle East
it is often governments that incubate
master-schemes and a recent survey
by Booz & Company has found that it
will fall to national bodies to ensure
that the economic cities springing up
across the sands are supplied with
cost-effective utilities. That goes
hand in hand with encouraging (and
perhaps funding) sustainable cities.
Arabian cities do not tend to
feature highly on liveability listings.
The environmental challenges faced
by Middle Eastern countries are
significant, consumption of natural
resources is among the highest in the
world and the region is not famed for
its sustainable approach to natural
 Zurich regularly tops liveable city lists.

resources, waste disposal and energy transport systems, and red tape can efficiently manage resources is greater
Gulf Pics

generation. A wealth of hydrocarbon make doing business difficult. As it than ever. As cities grow, the pressure
reserves means that there is a natural stands, European and North American on their facilities increase, often faster
reliance on the car, depressing scores. cities lead the liveability field. than they can cope. This has a negative
GCC cities have plenty of world-class With the global population swelling effect on the quality of life.
hospitals, education facilities, homes and the swing from rural to urban “Humankind is consuming energy
and restaurants that indicate a good living firmly established (over half the and other resources – such as water,
quality of life for residents, but the world’s population now live in cities), land, forests, even wildlife – at levels
same cities are still developing their the pressure on cities around the world that are not only far beyond what we
cultural institutions and public to improve their infrastructure and need, but are far beyond what the
planet can bear,” says a Masdar City
LIVEABLE CITY RANKINGS spokes person. The high-profile Abu
Mercer Economist Monocle Dhabi project is attempting to take
all the components of a sustainable
Quality of Living Survey World’s most liveable cities Most liveable cities
city and build a liveable model
1. Vienna 1. Vancouver 1. Munich from scratch. The blueprint uses all
2. Zurich 2. Vienna 2. Copenhagen available modern technology and
3. Geneva 3. Melbourne 3. Zurich combines it with historical expertise
to give a pioneering urban area that
4. Vancouver 4. Toronto 4. Tokyo
encapsulates the key principles of a
5. Auckland 5. Calgary 5. Helsinki liveable city.

October 2010gulfbusiness 97
FEATURES INFRASTRUCTURE
Shaded walkways, narrow streets and
traditional wind towers, for example,
reduce the impact of the sun in the
glaring desert heat, having a natural
cooling effect and encouraging residents
to walk instead of jumping in cars. A
diagonal orientation funnels cooling
night breezes and lessens the effect of
hot daytime winds. Furthermore, the
plan involve a facets to manage the city’s
environmental impact at the same time
as regenerating degraded biodiversity,
protecting the local cultural heritage
and improving the health and quality of
life of its inhabitants.
Building from scratch, while on
paper the ideal option, is not without
its disadvantages. ‘Accelerated
community engineering’, as it is
known in academic circles, can
be unpredictable. Services and
institutions normally evolve naturally
over time, in line with population
expansion and cultural development. It
is difficult to flawlessly replicate these
conditions in a newly built project.
Liveable legacies can also be
created in existing city frameworks
by integrating new sustainable
technologies, although Copestake
warns that “a range of factors need to
come together before a city registers
a tangible change in liveability”. A
profusion of technologies are available
and up-to-the-minute innovations
are being constantly released into the
market, though, of course, these do not
displace a need for better transport,
political stability, cultural wealth and
low crime levels.
Energy is clearly one of the biggest
modern factors. Solar energy is the
most obvious power source to tap
and many new developments are
incorporating photovoltaic technology
into roofs and windows to generate
energy for the buildings they adorn.
In this region in particular, known as
the ‘solar belt’ on account of its high
exposure to solar radiation, capturing
the sun’s power is a pertinent
opportunity. According to Abengoa
Solar, if just two per cent of the solar
radiation in the world’s deserts were
used, it would be enough to supply all
energy demands. The same company
98 gulfbusiness October 2010
This is a fantasy projection by avant garde design group, Terreform ONE [Open
Network Ecology], which promotes innovative, green design in cities. Hypothetically
located in Brooklyn, it will supply all its citizens’ needs within its accessible physical
borders. Dilapidated structures are replaced with vertical agriculture, housing is
merged with infrastructure. Former streets become snaking arteries of livable
spaces embedded with renewable energy sources, soft cushion-based vehicles for
mobility and productive green rooms.
has developed a system of solar power commissioned Foster + Partners to
generation that uses the light reflected develop a wholly sustainable tourism-
from a field of mirrors to heat liquid in focused town on the Mediterranean
a tower and power a steam turbine. coast, known as Green Mountain.
Closer to home, scientists in Ras In Jordan, a Masdar-inspired, zero-
Al Khaimah have been using NASA emission town is slated for the
technology to develop a prototype outskirts of Amman. In Saudi Arabia,
for a solar island with self-cleaning the King Abdullah International
panels that could be used at the shore Garden is to provide a public botanical
or at sea to provide renewable energy garden in celebration of botanical
to developments. diversity and raising awareness about
Nissan is to launch its all-electric the impact of climate change. In
vehicle, the Nissan LEAF, next Doha, the government has long been
year, which has a maximum speed developing world-class cultural and
of 140kph and zero emissions. In sporting facilities for its residents and
technology borrowed from current guests in its celebrated Museum of
hybrid models, energy will also be Islamic Art and Khalifa International
reclaimed under braking and coasting Stadium. Egyptian company, Orascom,
and fed back into the battery. is developing an eco-town in the
Philips has been developing and Cornwall region of Britain.
promoting LED lighting technology that The Middle East may be noted for
promises to use a fraction of the energy its over-reliance on hydrocarbons, a
of traditional filament lightbulbs. disposable attitude towards products
Municipalities, businesses and and heavy dependency on natural
individuals could save up to 40 per cent resources, but liveability is a tacitly
on their lighting bills by switching over. understood and pursued principle in
Cities across the Arab world are Gulf ambitions for the future. ■
taking steps and strides towards
liveability goals, by this or other
names. In Libya, Colonel Gaddafi has
F
The Cape escape
Fresh from World Cup success, Cape Town showcases the ultimate
African adventure, writes Alexandra Gouveia
T
hree times the size of New
York and combining rare
wildlife, undulating scenery
and compelling history, Cape Town
possesses an unrivalled sense of
energy. Thanks to superb hosting
skills during the World Cup 2010,
South Africa’s mother city has cast
off old perceptions, to become the
most exuberant destination in the
rainbow nation.
Historical insight
Imprisoned for 27 years on
charges of sabotage during
his fight against apartheid,
Nelson Mandela served time
at Robben Island. These days
there’s a museum where you
can view his cramped cell
and the exercise yard where
he attempted to cultivate
a garden. The three-hour
tours are often run by former
political prisoners who recall
South Africa’s volatile past.
robben-island.or.za
100 gulfbusiness October 2010
All journeys here must start at Peak to Cape Point is one for the
the flat-topped Table Mountain, must-do list.
a resounding symbol of the city’s When it comes to beach life, only
strength, history and hope. For the fearless locals tackle the freezing
a sense of achievement climb its Atlantic Ocean hemming Camps
summit, the views at the peak will Bay and Clifton Beach. These shores
be worth all the effort. The less are a haven for trendy jet-setters
ambitious can opt for the unnerving and food connoisseurs, lured by the
cable car ride to the restaurant at Michelin-star worthy restaurants
the pinnacle. For more spellbinding and cosmopolitan bars. Alternatively,
scenery, a drive along Chapman’s Boulders Bay is an ornithologist’s
Shark diving
Combining the natural
wonders of South Africa
with the ultimate in
adrenaline-fuelled sports,
seize the opportunity
to swim with one of
the world’s most feared
predators – the Great
White Shark.
Cape Town also boasts
a wide range of sea-life
tours just off the coast of
Gansbaai.
white-shark-diving.com

Photos: SHUTTERSTOCK
dream, occupied by a penguin colony
where visitors can tread water
among the packs of flightless birds.
Beware: they bite!
For gastronomes, South Africa’s
local farms produce meat so succulent
even vegetarians may be turned.
Café Royale, on Long Street, is
so famous for its burgers that even
the friendly locals are reluctant to
reveal its location. Kalk Bay’s glass-
fronted Harbour House serves both
spectacular seafood and crashingly
beautiful views – during migration
season it’s possible to see whales.
For elegant fare, Victoria and Albert
Waterfront presents world-class
cuisine, including Gordon Ramsay’s
Maze and Nobu.
Helicopter ride
By far the best way to
fully appreciate Cape
Town’s natural beauty
is from the air, via
helicopter. Many tour
companies set off from
Victoria and Albert
Harbour. And while it’s
not cheap, it’s not too
expensive either, especially
when you account for
the mesmerising
birds-eye-views.
racmakana.com
TRAVEL
Cape Town is also imaginative Factfile
when it comes to shopping. Population: 2,890,000.
Greenmarket Square is perfect for Cape Town is the legislative capital of
souvenirs, fashion and homeware. Its South Africa and is located on the southwest
sidestreets boast quaint boutiques part of the country on the Atlantic coast.
stocking original creations by local
designers. For something Afrikaans, The city was founded in 1652 as a supply
station for the Dutch East Indies Company.
Pan-African Market on Long Street
offers great variety. The African Cape Town is a commercial and industrial
Music store at number 134 has an centre. Oil refining, food, chemicals and
eclectic array of albums. Pick up the manufacture of automobiles, leather
something by Mama Afrika, the and plastic goods and clothing are the
country’s legendary singer. chief industries.
Thanks to the World Cup, Cape With one of the world’s largest drydocks,
Town stands out as a booming ship-repairing is an important industry.
metropolis without pretensions. Much of the former dock area is now a
Finally, South Africa is receiving the commercial and tourist waterfront with
lauded reputation that its natural museums, craft markets and restaurants.
beauty has always deserved.
On the grapevine
Wine connoisseurs will
know that South Africa is
famed for its fine grape
juices – it produces one
million litres annually.
Embark on one of the many
tours in Stellenbosch, where
local estates are only too
happy to let you sample
their tipples. Surrounded
by spectacular mountain
backdrops, it’s an enriching
experience.
constantia valley.com
October 2010 gulfbusiness 101
F LIFESTYLE CARS
Weighty wheels
Alicia Buller test drives the new-look Audi Q7 and
finds it to be a smooth but cumbersome ride.
A
udi, an auto-manufacturer
known for its understatement,
shouts a bit louder with this
enormous 2.5 tonne Q7 mega-car.
It comes in two sizes in the Middle
East, the 3.6 FSI engine and the 4,2
FSI engine. I tested the meaner 4.2
FSI Quattro version, which has a fuel
consumption of 12.7 litres/100km and
a 0-62mph time of just 6.4 seconds.
The Audi Q7 looks good; owing
in part to its 2010 facelift, both
internal and external. On the
outside, the sporty design has been
revised to incorporate the updated
radiator grille and bumpers and
the new xenon headlights with LED
daytime running lights.
The rear has been given a new
shape, while inside there’s ambient
lighting in the door linings, new
inlays and leather. Engine-wise, an
efficiency-enhancing energy recovery
system has been added for both
models, ensuring you get more fuel
for your money and save the planet
(a little) in the process.
102 gulfbusiness October 2010
I haven’t driven the Audi Q7 pre-
facelift, but this model is certainly
stylish inside. The leathers are high-
quality and when dusk comes, the
dashboard turns into a very swish,
automated disco of lights. Costing
around $71,000, this beast comes
with all the trimmings you’d expect
from an upmarket SUV: sat-nav,
assisted parking, four-zone automatic
air conditioning, Bosé sound system
(I had fun cranking this one up – the
huge speaker that spans the front
dash is as loud as it is impressive
to look at). But my favourite gadget
was the adjustable air suspension,
at the touch of a button, you can
adjust the car from ‘dynamic’, to
‘comfort’, to ‘automatic’ – these all
help with driving what is at times
a very heavy ride. This car is large
and it’s difficult to escape that. It’s
large when you park it, it feels large
on corners, and that’s because, well,
it’s large.
If you want to zip around town,
this isn’t the car for you. On the
plus side, if you’re looking for
space, you could probably throw five
kids in the Q7 and still have room
for a small elephant. Thanks to its
luxurious 300-centimetre wheelbase
within an overall length of 5.09
metres, the Audi Q7 has interior
room to spare. The seatbacks
are divided into three fold-down
sections which can create a cargo
floor with a volume of 2,035 litres.
Overall, the Q7 feels sleek
and sturdy. At this price tag, it’s
competing with the BMW X5 and
the Range Rover, both of which are,
frankly, racier models. But where the
Audi Q7 could convince buyers is in
its safe feel, space, bankability and
smooth Audi looks. The disco lights
aren’t bad either. ■

Navigating the season’s
Middle East art auctions
With Christie’s, Sotheby’s and Bonham’s showcasing their
wares this autumn, Gulf Business art expert, Charles Pocock,
offers vital background knowledge.
BONHAM’S
Modern & Contemporary Middle Eastern
& South Asian Art
Monday, October 11, 2010
Dubai, One & Only Royal Mirage Hotel
✪ Lot No: 161
Jawad Salim (Iraq, 1919-1961)
Mother and Child, fruitwood and mixed media,
inscribed with the artist’s name and the title on
the base, 43 x 30 x 14cm. (16 15/16 x 11 13/16 x
5 1/2in) max.
Estimate: $60,000-$80,000
Constructed out of fruitwood and mixed media,
this is a star lot. The work is illustrated in ‘Art in
Iraq Today’ by Jabra Ibrahim Jabra, a point which
Bonham’s have overlooked in the catalogue. Even
at $150,000, this is an incredibly important work
as Jawad Salim was foremost a sculptor and this
piece is one of his seminal works.
Lot No: 157
Ahmed Moustafa (Egyptian, born 1943)
Man in a Rocking Chair, oil on canvas, signed in
Arabic and dated 1972 upper left, 150 x 135cm
(59 1/16 x 53 1/8in).
Estimate: $180,000-$240,000
A reasonable work but overpriced. I would look
at half of what they are asking for: $80,000 max.
There is a limited market for non-calligraphic
works by Ahmed Moustafa, which is why I believe
this work to be overpriced.
✪ RECOMMENDED
✪ Jawad Salim, Mother and Child
SOTHEBY’S
Modern and Contemporary
Arab and Iranian Art
Wednesday, October 20, 2010
London
✪ Lot 16
Mahmoud Said
L’Endormie (The Dreamer),signed and dated 1933
oil on panel,10H by 76.Hcm
$ 156,000–$187,000
This work not only celebrates the female form,
but represents an incredible political statement.
Until Said’s time, images of women were taboo,
particularly the nudes. Said was the uncle of
Queen Farida and was, therefore, able to push the
boundaries of artistic practices established in his
country. Judging from the outstanding quality of
this work, it should sell well past the estimate
Lot 8
Shakir Hassan Al Said 1925-2004
Untitled
signed and dated 1963, oil and plaster on
board 67 by 56.5cm. Provenance Private
Collection, Europe
US$ 28,000–$34,300
A strong work with good provenance. We bought
a similar piece at $40,000 recently and would
suggest a price around this figure, although it is
above the estimate. Anything beneath that amount
would be a good buy.
✪ Mahmoud Said L’Endormie (The Dreamer)
ART
Charles Pocock runs the
Meem Gallery, Dubai.
CHRISTIE’S
International Modern and Contemporary Art
Tuesday, October 26, 2010
Dubai, Emirates Towers Hotel
✪ Sohrab Sepehri (Iranian, 1928-1980)
Untitled
signed in Farsi (lower left), oil on canvas
40 x 49.1/4 in. (101.6 x 125.1 cm.)
Painted in 1970
$200,000-$300,000
As a work of art, it is stunning, because it is so
far removed from what most people are used
to. With the recent retrospective in Tehran and
Sohrab Sepehri’s strong following, and taking
into account the abstract nature of this work, it
should do very well.
Dia Azzawi (Iraqi, b.1939)
Untitled, signed and dated in Arabic (lower left);
signed, dated and located Dhia Al-Azzawi 1969
IRAK and signed, dated and inscribed in Arabic
(on the reverse) oil on canvas
39 x 32in. (99 x 81cm.) Painted in 1969
$12,000-$18,0000
I spoke with Dia about this work. Exhibited at
his show in Beirut, where the painting was
bought, this work is, in his opinion, one of
the best from this series. The estimate is low
and one should see it go to $60,000 including
commission, $45,000 in the room.
✪ Sohrab Sepehri Untitled
October 2010 gulfbusiness 103
 I N
THE LIFESTYLE COMPETITION COMPETITION

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 4
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Data monitor
108 TOP DEALS
Mergers & acquisitions
Public offering
Debt offering
Private placement

110 GCC ECONOMIC INDICATORS

Real GDP & CPI inflation
Economic Forecasts
Market Overview
World Commodity Markets

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

October 2010 gulfbusiness 107

 TOP M&A TRANSACTIONS
Deal Value ($m) Bidder Target Deal Description
117 Landmark Group Carluccio's PLC Carluccio’s PLC has agreed to be acquired by Landmark Group. Carluccio’s, the listed UK-based company headquartered in
(94.9 per cent stake) London, is an Italian restaurants and food shops operator. The Landmark Group, the UAE-based company is a retail and
hospitality conglomerate, whose majority shareholders are Mukesh Jagtiani and Renuka Jagtiani.
Terms: GBP1.42 per in cash per Carluccio’s share not currently owned by Landmark Group. The implied equity
value of the target company is GBP84.1 million. The offer provides a premium of 47.9 per cent based on Carluccio’s
closing share price of GBP 0.96 on September 1, 2010, one day prior to the announcement. It also provides a
premium of 43.4 per cent based on Carluccio’s closing share price of GBP 0.99 on August 2, 2010, one month
prior to the announcement.
Financing: The transaction will be financed from Landmark’s existing cash resources.
Irrevocable Undertakings: Landmark has received irrevocable undertakings to accept the offer for 14,801,137
Carluccio’s shares, representing about 25 per cent of the target company’s issued ordinary share capital.
Landmark has also received letters of intent to accept the offer for 3,839,807 Carluccio’s shares, representing about
6.5 per cent of the target’s issued ordinary share capital.
– Schoeller-Bleckmann Drilling Systems Schoeller-Bleckmann Oilfield Equipment AG (SBO), the listed Austria-based designer and manufacturer of drilling
Oilfield Equipment AG International Ltd. equipment for the oil and gas industry, has agreed to acquire Drilling Systems International Ltd, the United
Arab Emirates-based provider of specialized equipment for downhole circulation technology for oil and gas
wells, for an undisclosed consideration. Drilling Systems International Ltd (DSI) generates annual sales of about
$30 million. The acquisition is a perfect addition for SBO’s product portfolio due to DSI’s proven technology and
excellent growth potential. The transaction is expected to complete by October 1, 2010.
– Praxair Inc Refrigeration & Oxygen Praxair Inc, the listed US-based company engaged in the production and distribution of industrial gases, has
Company Limited agreed to acquire 49 per cent stake in Refrigeration & Oxygen Company Limited, the Kuwait-based producer and
distributor of industrial gases, from Al Khaled Family, for an undisclosed consideration. Refrigeration & Oxygen
Company generated annual sales of approximately $80 million in 2009. The acquisition will result in economic
expansion and industrialisation. Both of the business are in a distinctive position and their respective strengths
will be able to meet the needs and challenges of demanding market requirements.
– Sahara International Sahara Net LLC Sahara International Ventures NV (SIV), the Netherlands-based investment firm focused on the development of
Ventures NV. (Majority Stake) (broadband) Internet businesses and a subsidary of Belgacom SA, the listed Belgium-based company providing
both fixed and mobile telecommunication services, and Panthers Investments BV, the Netherlands-based
investment holding company having interest in Internet service providing business, has acquired a majority stake
in Sahara Net LLC, the Saudi Arabia based-Internet Service Provider, for an undisclosed consideration. Sahara Net
currently employs around 100 people. The transaction will allow SIV to expand and strengthen its business in
markets within the MENA region and to further support and improve the existing operations.
Notes: Deals are based on the geography of target, bidder or vendor being in the Middle East, for the period between August 21, 2010 and September 20, 2010. Based on announced deals, including lapsed and
withdrawn bids. Where deal value is not disclosed, the deal has been entered based on turnover of target exceeding $10 million. Activities excluded from the table include property transactions and restructurings
where the ultimate shareholders’ interests are not changed. Source: Mergermarket

MIDDLE EAST QUARTERLY M&A ACTIVITY MIDDLE EAST ACTIVITY BY INDUSTRY SECTOR YTD 2010  VALUE
FROM 2005 TO SEPTEMER 21, 2010
Leisure Transport Pharma/Medical/ Construction Real Estate
14,000 50 5% 12% Biotech 3% 2% 13%
Number of deals
Value ($m)

12,000 TMT 7%
Value 40
10,000 Agriculture
Volume 0%
8,000 30
6,000 Energy/ Defence
20 Mining/ 1%
4,000 Utilities 5%
10
2,000
0 0 Consumer Business Financial Services Industrials and
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
2005 2006 2007 2008 2009 2010 2% Services 2% 33% Chemicals 15%

MIDDLE EAST ANNUAL M&A ACTIVITY MIDDLE EAST ACTIVITY BY INDUSTRY SECTOR YTD 2010  VOLUME
FROM 2004 TO SEPTEMER 21, 2010
Leisure Transport Pharma/Medical/ Construction
30,000 200 2% Biotech 5% 2%
Value TMT 2% Real Estate
25,000 Volume 20,7% 7%
150
20,000 Agriculture
Number of deals

Energy/ 1%
15,000 100
Value ($m)

Mining/
10,000
Utilities 8%
Defence
50 1%
5,000
Consumer Business Financial Services Industrials and
0 0
2004 2005 2006 2007 2008 2009 2010 8% Services 7% 16% Chemicals 19%

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

108 gulfbusiness October 2010

 TOP PUBLIC OFFERINGS
Value ($m, Target/Issuer Transaction Status Transaction comments
Historical rate)
609.87 Omani Qatari Announced The price range for the IPO is OMR 0.702 to OMR 0.902.The offering opens for subscription on September
Telecommunications 15, 2010 and the offer will close on October 14, 2010. The IPO has been reserved for individual or retail
Company investors for up to 70 per cent and the remaining 30 per cent is for institutional investors. About 70 per
cent of the offering is open to Category I investors, and 30 per cent is open to Category II investors who
can participate in the bookbuilding process. Category I investors can apply for a minimum of 500 shares in
multiples of 100 up to a maximum of 500,000 shares, and Category II investors can apply for a minimum
of 500,100 shares up to a maximum of 26,037,700 shares.The final price will be determined on the basis of
the bookbuilding process and is expected to be announced on October 24, 2010.
173.32 Al Jouf Cement Company Closed “The subscription period was from July 19, 2010 - July 25, 2010. KSB Capital Group also acted as the
financial advisor for the offering. Alinma Bank is acted as a receiving bank for the offering.”
113.54 National Bank of Kuwait Announced The subscription period for the offering would commence on October 5, 2010 and end on
October 21, 2010.
Closed/Registration Effective Date: [8/6/2010-9/21/2010] Geographic Locations (Target/Issuer): Middle East (Primary) OR North Africa (Primary) Source: Capital IQ

TOP DEBT OFFERINGS

Value ($m, Target/Issuer Transaction Status Transaction comments
Historical rate)
239.96 Abu Dhabi Closed “The notes are a part of the Medium Term Note Programme. The notes are rated AAA by RAM Ratings.The
Commercial Bank books opened and closed on August 23, 2010. The notes will mature in five years.”
222.94 Emirates NBD Auto Announced –
Finance Limited
25.97 Al Omaniya Announced The subscription ratio for the rights offering is 1 bond for every 1.5 existing shares. The subscription
Financial Services period for rights offering is August 15, 2010 – August 30, 2010. The bonds will mature in 10 years. The
bonds are convertible into shares at a conversion price of 80 per cent of the average market price of the
shares for three months preceeding the conversion date. Interest on the bonds will be paid annually.
Closed/Registration Effective Date: [8/6/2010-9/21/2010], Geographic Locations (Target/Issuer): Middle East (Primary) OR North Africa (Primary) Transaction Primary Features: Public Offering - Fixed-Income
Offering. Source: Capital IQ

TOP PRIVATE PLACEMENTS

Value ($m, Target/Issuer Buyers/Investors Transaction Status Transaction comments
Historical rate)
100.0 National Petroleum Abu Dhabi Islamic Bank, Announced National Petroleum Construction Company Limited announced
Construction Company Asset Management Arm that it will raise $100 million in funding from Abu Dhabi
Limited Islamic Bank on September 19, 2010. ADIB acted as mandated
lead arranger and structured the deal while Waha Capital PJSC
advised the company in the transaction.
3.03 MTQ Oil Field Services MTQ Corp Ltd; Closed MTQ Oil Field Services announced a private placement
Mtq Engineering Pte Ltd of for gross proceeds of SGD4,074,000 on September
3, 2010. The funding involved the participation of MTQ
Corp Ltd and Mtq Engineering Pte Ltd. MTQ Corp Ltd has
invested SGD4,033,260 and will hold 99 per cent stake in
the company and Mtq Engineering Pte Ltd has invested
SGD40,740 and will hold 1 per cent stake in the company.
- Newbridge Pharmaceuticals Burrill Venture Capital; Announced Newbridge Pharmaceuticals announced that it will raise
Kuwait Life Sciences Company funding in its series B round on September 20, 2010. On
the same day, the company raised $12 million in its first
close. The series B round was led by Kuwait Life Sciences
Company, a subsidiary of National Technology Enterprises
Company, with participation by the previous investor
Burrill Life Sciences Capital Fund III, L.P. As part of the
transaction, Qais Marafie, Chairman of Kuwait Life Sciences
Company, was appointed to the company’s board of
directors. In addition, Victor A. Hebert, Managing Director,
Burrill & Company, will be appointed as the Chairman of
the board.
- Yebab.com National Net Ventures Closed Yebab.com announced that it has received its first round
of funding from new investor National Net Ventures on
August 23, 2010. The company received the funding in
cash and kind.
Closed/Registration Effective Date: [8/6/2010-9/21/2010] Geographic Locations (Target/Issuer): Middle East (Primary) OR North Africa (Primary) Source: Capital IQ

October 2010 gulfbusiness 109

 COMMODITY PRICE DATA AND FOREIGN EXCHANGE EQUITIES
Month WTI crude Gold price Euro/UAE
($/barrel) ($/ounce) Dirham
April 84.5 1148.7 4.94
State-owned firms own 30 per
May 73.7 1205.4 4.64 cent of GCC markets
June 75.4 1232.9 4.49
July 76.32 1194.11 4.69 In just a year’s time, $118 billion was wiped
August 76.60 1,217.21 4.75 off the GCC’s government-owned entities’
Source: Bloomberg, Dubai Chamber (GOEs) coffers. According to a study by Kuwait
Financial Centre (Markaz), the value of shares
GCC ECONOMIC FORECASTS
held by GCC’s GOEs in the local stock markets
Updated as of: Real GDP Growth (%) CPI Inflation (% avg.)
17/09/2010 dropped by 40 per cent from $300 billion in
2008 2009F 2010F 2011F 2008 2009F 2010F 2011F
2009 to $182 billion this year.
S.Arabia 4.3 0.1 3.2 3.4 9.9 5.1 5.7 4.8
Back in April 2008, Markaz’s research
UAE 5.1 -1.4 1.0 2 12.3 1.6 1 2.8
showed that GOEs – firms either 100 per cent
Qatar 15.8 9.0 11.3 9.1 15 -4.9 -2.9 2.5
or significantly owned by the government –
Kuwait 6.4 -2.2 2.5 3.1 10.5 4 3 4
accounted for 27 per cent of the stock market
Oman 12.3 3.8 4.6 4.8 12.6 3.5 4 4.8
holding (as measured by market capitalisation)
Bahrain 6.1 1.8 2.4 1.6 3.5 2.8 2.5 3
Source: BoFA Merrill Lynch Global Research, Bloomberg, EcoWin, national statistics offices valued at $300 billion. Today, they hold more or
less the same share (29 per cent) though their
GCC MARKET OVERVIEW value has come down significantly to $182 billion.
Returns Value Month to date* Year to date* The 51 GOEs under study covered nearly 179
Tadawaful (Saudi Arabia) 6,106.42 -2.8% -0.3% listed companies with the top 25 accounting
KSE (Kuwait) 6,688.60 0.5% -4.5% for 85 per cent of the total. The top 10 GOEs
BSE (Bahrain) 1,418.61 1.8% -2.7% account for 89 per cent of the total with
MSM 30 (Oman) 6,256.81 -0.6% -1.8% Saudi Arabia’s Public Investment Fund (PIF)
DFM (Dubai, UAE) 1,483.67 -1.9% -17.7% accounting for a lion’s share of 40 per cent.
ADX (Abu Dhabi, UAE) 2,498.52 -1.9% -8.9% The largest is Public Investment Fund of Saudi
DSM 20 (Qatar) 7,226.15 2.8% 3.8% Arabia that enjoys a 40 per cent share in total,
Source: Bloomberg; *All returns are latest available end of day August
thanks to its 70 per cent investment in Saudi Basic
WORLD COMMODITY MARKETS COMMODITY PRICE DATA, 2010
Commodity unit June July Aug Aug/July
Non Energy 252.4 248.4 254.3 2.4 CEMENT
Agriculture 214.1 214.3 219.3 2.3
Beverages 243.5 255.0 261.7 2.6 Coal prices blacken
Food 200.4 199.2 209.4 5.1
Soybean meal $/mt 338.0 356.0 382.8 7.5
sector outlook
Soybean oil $/mt 859.0 907.0 1002.3 10.5 The GCC cement sector continued to show a
Soybeans $/mt 408.0 429 456.8 6.5 disappointing performance in H1 2010 due to
Grains 178.0 192.3 210.8 9.6 stalled real estate and construction projects.
Maize $/mt 152.7 163.8 175.6 7.2 Figures from Global Investment House
Sorghum $/mt 131.0 132.4 143.4 8.3 (Global) show cement companies came
Wheat, Canada $/mt 261.3 287.5 326.0 13.4
out with a 13.8 per cent decline in top
Wheat, US, HRW $/mt 157.7 195.8 246.2 25.8
line revenue and 12.4 per cent decrease in
Wheat, US, SRW $/mt 182.6 222.3 261.6 17.7
profits for the period. Gross margins saw a
Sugar EU c/kg 40.9 42.8 43.2 1.0
121.9 basis points decline in the first half
Sugar US c/kg 72.4 73.3 77.2 5.3
as compared to the previous year while net
Sugar world c/kg 35.0 38.5 40.7 5.8
Raw Materials 329.6 305.5 311.1 1.8
profits decreased from $938.8 million in H1
Fertilisers 248.9 259.4 276.4 6.5 2009 to $822.1 million in H1 2010, data from
Metals and minerals 318.2 350.4 368.7 5.2 the Kuwait-based investment bank indicates.
Aluminium $/mt 1931.4 1988.3 2118.1 6.5 Saudi Arabia was the only GCC country
Copper $/mt 6499.3 6735.3 7284.0 8.1 to witness higher sales revenue with 5.5 per
Gold $/toz 1232.9 1193.0 1215.8 1.9 cent growth to reach $1.13 billion, compared
Iron ore c/dmtu 167.0 205.0 205.0 0.0 to Kuwait, Qatar, UAE and Oman which all
Lead c/kg 170.4 183.7 207.5 13.0 witnessed severe decreases in sales revenue
Nickel s/mt 19388.6 19517.5 21413.3 9.7 by 31.6 per cent, 24.5 per cent, 33.5 per cent
Silver c/toz 1853.4 1794.0 1849.3 3.1 and 27.2 per cent, respectively.
Steel products index 2000=100 242.1 231.8 230.4 -0.6 Coal prices are expected to put pressure
Tin c/kg 1732.0 1819.1 2075.5 14.1 in the margins. Because most of the GCC
Zinc c/kg 174.3 184.4 204.5 10.9 cement manufacturers import coal, due to
Source: World Bank, Commodity price data
gas shortage, the increasing price of South

110 gulfbusiness October 2010

 COMPANY WATCH

Industries Corporation (Sabic), the largest capitalised company DP World

in the Middle East, in addition to Saudi Telecom Company (STC).
This was distantly followed by Qatar Petroleum with significant
Global operator eyes $1.2bn EBITDA
holdings in Industries Qatar. General Organisation for Social Last month, Gulf Business reported have managed to secure this level of
Insurance holds stakes in 29 listed Saudi companies, nearly 40 that DP World is well positioned support from creditors,” Ahmad Alanani,
per cent of its holdings are accounted for together by Al Rajhi to take advantage of the positive Middle East and North African regional
Bank, Riyad Bank, and Samba Financial Group. developments happening in the director of Exotix, a London-based
“It may be surprising to note names like Qatar Petroleum shipping sector. At that time, however, investment bank, told Gulf Business.
and Sabic figuring in this list. While they may be corporate, it was presumed that DP World, now He stressed that Dubai World’s recent
they are substantially owned by the government,” a the world’s third largest port operator, agreement with 99 per cent of creditors
spokesman from Markaz, said. was “ring-fenced” from Dubai World’s does not mean DP World or any other
And while Abu Dhabi Investment Authority (Adia) is a well debt restructuring programme. prized assets have escaped a possible
talked about GOE in the global context, their reach in the local How its financial performance sale in future. And if anything, he said,
market is mainly through Abu Dhabi Investment Council (ADIC), will be affected by the recently “the agreement reinforces this notion”.
whose prime holding is that of National Bank of Abu Dhabi. revealed fact that it may also be sold In the meantime, Nabil Ahmed,
is still uncertain. research analyst at Deutsche Bank,
GOE: SUMMARY “The fact that Dubai World may expects that DP World’s second half
Country No of No of Market Amount Share Local Market Market eventually consider the sale of strategic performance “to be only a touch
GOE’s Co. held Universe held in local (%) Capitali Penetration
market ($m) zation ($m) (%) assets such as DP world was a key better than H1” adding that the
KSA 10 47 140 109,718 60 314,556 35 component to the debt restructuring and recovery momentum is losing steam
UAE 10 29 110 28,255 16 97,247 29 without it the conglomerate would not given macro uncertainties.
Qatar 8 18 45 26,001 14 97,746 27
Deutsche Bank new estimates
Kuwait 10 42 194 11,717 6 90,871 13
New estimates Old estimates
Bahrain 9 20 44 3,518 2 16,386 21
$m 2009 2010E 2011E 2012E 2010E 2011E 2012E
Oman 14 23 127 2,735 2 16,733 16 Revenues 2,821 3,012 3,450 3,860 3,133 3,572 4,011
51 179 660 181,994 100 633,544 29 % change -14.1% 6.8% 14.5% 11.9% 11.1% 14.0% 12.3%
Source: Zawya, Markaz Research. Figures represent data as of July 5,2010 Adjusted EBITDA 1,085 1,210 1,438 1,668 1,224 1,462 1,698
% margin 38.5% 40.2% 41.7% 43.2% 39.1% 40.9% 42.3%
Clean EBITDA (ex. JVs) 1,014 1,078 1,282 1,483 1,134 1,342 1,559
% margin 35.9% 35.8% 37.2% 38.4% 36.2% 37.6% 38.9%

African coal is expected to weigh heavily on their expenses. DAR AL ARKAN

The price of South African coal has been increasing and is
expected to cross the $100 per tonne mark in 2010 due to Performance boost from mid segment
huge demand from Indian and Chinese companies. Dar Al Arkan’s top-line may have declined company conducts plot sales on a
On top of that, intense competition is slated to 16.9 per cent to SAR2.26 billion in H1 cash basis (unlike its peers in Abu
further squeeze the margins. Cement prices in the GCC 2010 from SAR2.720 billion in the same Dhabi) Dar Al Arkan reduces the overall
averaged $65.6 per tonne in H1 2010, a 16.4 per cent period last year, but its financial muscles risk of dependence on plot sales,” a
decrease compared to $78.5 per tonne enjoyed in H1 2009. remain strong to weather the slow down. spokesman from Sico, said.
UAE, the second largest cement producer faces Saudi Arabia’s largest real estate The company, which paid out fiscal year
continuous decline in demand while Saudi Arabia is developer still provides the best 2009 dividends amounting to nearly SAR1.1
facing contribution as new players enter the markets, exposure to the mid-income residential billion, had a cash balance of SAR1.3 billion
causing price wars among the local player. real estate market in Saudi Arabia, at the end of June 2010. Sico expects the
UAE realisation according to Sico, a Bahrain-based company to generate operating cash flow
GCC CEMENT SECTOR prices decreased 38.2 securities and investment company. of nearly SAR500 million each for remaining
90 0
1H-09 1H-10 Change
per cent from $86 per It said Dar Al Arkan has the strongest two quarters in FY10. The company has
85 -5 tonne in H1 2009 to fundamentals in the region buoyed debt of SAR1 billion due in one year,
-10 $53.1 per tonne in by the young and rapidly growing SAR430 million in two years and SAR6.4
80
Average realisation prices (U S$/Ton)

-15 H1 2010, the lowest Saudi demographic. “Additionally, the billion after two years.
75
price among other
(per cent )

-20
70 Key stats
-25 GCC countries. “In the SAR million 2008A 2009A 2010E 2011E 2012E
65
-30
future, cement prices Revenue 5,611 5,464 5,807 7,586 7,741
are expected to face EBITDA 2,719 2,383 2,410 3,130 3,174
60 -35 EBITDA Margin 48.5% 43.6% 41.5% 41.3% 41.0%
downward pressure as Net Profit 2,356 2,123 2,198 2,911 2,951
55 -40
capacities of cement Net Profit Margin 42.0% 38.8% 37.9% 38.4% 38.1%
50 -45 are increasing in the Adjusted EPS (SAR) 2.18 1.97 2.04 2.70 2.73
KSA UAE Oman Kuwait Qatar GCC Total Assets 20,164 23,597 25,187 27,039 29,259
Average region,” the Global RoAE 20.7% 16.6% 15.3% 18.6% 17.2%
Source: Industry Reports & Global Research.
report, said. Source: Dar Al-Arkan Real Estate Development Co.

October 2010 gulfbusiness 111

EXHIBITIONS & CONFERENCES

Cityscape Global 2010

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

UNITED ARAB EMIRATES

Abu Dhabi
October 05 Frost & Sullivan's GIL 2010 : The Global Community of Beach Rotana, Abu Dhabi www.gil-global.com
Growth, Innovation and Leadership
19-21 Najah Careers 2010 ADNEC www.iirme.com
Dubai
October 03-04 2nd Annual Compensation and Benefits Hyatt Regency Hotel www.marcusevans.com
03-05 Middle East Investments Summit 2010 Park Hyatt Dubai www.marcusevans.com
04-07 Cityscape Global 2010 Dubai World Trade Centre www.iirme.com
04-07 Telecoms World Middle East 2010 Jumeirah Beach Hotel www.terrapinn.com
07-10 Dubai International Jewellery Week Dubai Int’l Convention and Exhibition Centre www.dwtc.com
16-23 GITEX Computer Shopper & Consumer Electronics Expo 2010 Airport Expo Center www.dwtc.com
17-21 GITEX Technology Week Dubai Int’l Convention and Exhibition Centre www.dwtc.com
24-25 Strategic Media Communications Hyatt Regency Hotel www.marcusevans.com
24-26 Internal Auditors Forum Hyatt Regency Hotel www.marcusevans.com
24-28 The Middle East HR Summit Mövenpick Hotel Jumeirah Beach www.iirme.com
25-27 MENA Mining Congress 2010 Shangri-La Hotel www.terrapinn.com
26-27 Business Travel Show Jumeirah Madinat Arena www.businesstravelshowdubai.com
Sharjah
October 06-08 International Education Show Expo Centre Sharjah http://www.expo-centre.ae
14-18 International Automobile Show Expo Centre Sharjah http://www.expo-centre.ae
26-06 Nov Sharjah World Book Fair 2010 Expo Centre Sharjah http://www.expo-centre.ae
KUWAIT
October 11-15 Kuwait International Property Show Kuwait International Fairs Exhibition Centre www.kif.com
13-23 Arabic Books Exhibition Kuwait International Fairs Exhibition Centre www.kif.com
OMAN
October 31-01 Nov The Growth of Corporate Governance in the Region Al Bustan Hotel, Muscat www.hawkamah.org
QATAR
October 03-04 Materials Control & Management Millennium Hotel, Doha www.marcusevans.com
17-18 Business Continuity & Recovery Planning for OGPs Millennium Hotel, Doha www.marcusevans.com
SAUDI ARABIA
October 03-06 Saudi Water & Power Forum 2010 Jeddah Hilton www.thecwcgroup.com
04-07 Saudi Agriculture Riyadh Int’l Convention & Exhibition Centre www.recexpo.com
04-07 Saudi Food Packaging Riyadh Int’l Convention & Exhibition Centre www.recexpo.com
18-21 Saudi Stone Tech 2010 Riyadh Int’l Convention & Exhibition Centre www.recexpo.com
23-25 Saudi Arabian Infrastructure Congress 2010 Four Seasons Hotel Riyadh www.iirme.com
26-28 Saudi International Franchising Riyadh Int’l Convention & Exhibition Centre www.recexpo.com

112 gulfbusiness October 2010


Gulf Business Hotel Collection members offer guests complimentary copies of
the GCC’s premier business magazine Gulf Business.
United Arab Emirates
AL RAHA BEACH HOTEL
Abu Dhabi
Al Raha Beach Hotel, created to
provide the very best of traditional
Arabian hospitality. This unique jewel
of luxury and tranquility, offering
magnificent services, awaits you for
an unforgettable visit to Abu Dhabi.
Tel 00971 2 50 80 555
Fax 00971 2 50 80 429
THE FAIRMONT DUBAI
Sheikh Zayed Road, Dubai
This 394-room hotel boasts 10 dining
and entertainment venues a superb
spa and unrivalled meeting facilities.
Tel 00971 4 3325555
Fax 00971 4 3324555
dubai.reservations@fairmont.com
SHANGRI-LA
Sheikh Zayed Road, Dubai
Offers 301 luxuriously appointed guest
rooms and suites, nine restaurants and
bars, health club and spa, tennis and
squash courts and outdoor swimming.
Tel 00971 4 3438888
Fax 00971 4 3438886
sldb@shangri-la.com
Qatar
INTERCONTINENTAL DOHA
Doha
Situated in the West Bay area, yet
located near the city. With its various
dining options, 24 suites, 234 rooms,
private beach and state-of-the-art
gymnasium, it is an idyllic setting for
business and leisure.
Tel 00974 4844444
Fax 00974 4839555
GulfBusinessHotels.com
Hotel Collection
PARK ROTANA ABU DHABI
Khalifa Park area, Abu Dhabi
Conveniently located adjacent to Khalifa
Park, the property offers 318 luxurious
rooms and suites, 6 world class dining
venues, 6 meeting rooms and spacious
ballroom with day light access and
outdoor terrace.
Tel 00971 2 6573333
Fax 00971 2 6573000
park.hotel@rotana.com
JUMEIRAH EMIRATES TOWERS
Sheikh Zayed Road, Dubai
Jumeirah Emirates Towers is a sleek
architectural masterpiece of steel
and glass. It redefines the business
hotel category, seamlessly combining
form with function, high technology
with unparalleled luxury and elegance
with efficiency.
Tel 00971 4 3300000
www.Jumeriah.com
TAMANI HOTEL MARINA
Dubai Marina
This hotel boasts 240 units, including
studios, 2 or 3 bedroom units, and
penthouses. There is also one restaurant. a
health club, indoor and outdoor swimming
pools and 5 meeting rooms.
PO Box 215855, Dubai, U.A.E
Tel 00971 4 3992500
Fax 00971 4 3993225
sales@tamanimarina.ae
Saudi Arabia
JEDDAH HILTON
Jeddah
Located a 10-minute drive from the
Jeddah International Airport. Offers over
414 rooms including 46 suites. 10th
and 11th floors are Executive floors
addressing all the needs of a modern-
day businessman.
Tel 00966 2 659 0000
Fax 00966 2 658 2489
Membership information: nayeem@motivate.ae, Tel: 00971 4 2052290
LAYIA OAK HOTEL & SUITES
Al-Barsha, Dubai
Offering 161 furnished units ranging
from 81 sqm to 160 sqm, 3 dining
venues, 3 multi-purpose meeting
rooms, recreation facilities & a
majestic landscaped area around the
temperature-controlled pool.
Tel 00 971 4 437 78 88
Fax 00 971 4 437 79 99
welcome.oak@layia.net
KEMPINSKI HOTEL MALL OF
THE EMIRATES
Sheikh Zayed Road, Dubai
The truly unique and exciting five stars
hotel features 393 rooms, suites and
chalets together with Mall of the Emirates
shopping centre and Ski Dubai’s alpine
themed indoor snow resort.
Tel 00971 4 3410000
reservations.malloftheemirates@
kempinski.com
www.kempinski.com/dubai
ACACIA HOTEL
Ras al Khaimah
The Acacia Hotel is a superbly designed
four star hotel complete with Al Nakhla
restaurant, the stylish Flamingo bar, the
vibrant Club Acacia, a pristine pool serving
as a backdrop to varied and exciting
Theme Nights, the luxurious O-Zone Spa,
and high-energy Oxygen Gym.
Tel 00971 7 2434421
Fax 00971 7 2434429
HOLIDAY INN RIYADH, IZDIHAR
Riyadh
The first 5 star Holiday Inn hotel in the
Kingdom, with 289 new and trendy
accommodations, huge lobby with W-Fi
access, outdoor pools, sauna, Jacuzzi
and health club. Also has state-of-the-art
meeting rooms, 24-hour business center
with professional secretarial support.
Tel 00966 1 4505054
Fax 00966 1 4505056
MEDIA ROTANA DUBAI
Al Barsha South-TECOM
Located in the heart of Dubai’s new
business hub and opposite Dubai Media
City and Internet City the Media Rotana
Dubai has 460 rooms, suites and deluxe
hotel apartments, 5 award winning
dining venues and 15 meeting rooms.
Tel: 00971 4 4350000
Fax: 00971 4 4350011
media.dubai@rotana.com
PULLMAN DUBAI MALL OF
THE EMIRATES
Mall of the Emirates, Dubai
Discover a new attitude hotel directly linked
to the region’s ultimate shopping destination
amidst Dubai’s sophisticated metropolis.
Elegant 481 guestrooms complemented
with chic dining experiences awaits both
leisure and business guests.
Tel 00971 4 702 8000
Fax 00971 4 702 8001
H7337@accor.com
Qatar
MÖVENPICK HOTEL DOHA
Doha
Located on the Corniche Road, opposite
the Museum of Islamic Art, the hotel
offers 154 rooms and suites, a business
centre and meeting rooms. Recreation
facilities are also available.
Tel 00974 4291111
Fax 00974 4291100
www.moevenpick-doha.com
SOFITEL AL HAMRA JEDDAH
Jeddah
The hotel situated in the heart of the
business centre offers 211 rooms, 17
suites and 25 apartments. 5 meeting
rooms and 2 reception rooms to
accommodate up to 350 people.
Tel 00966 2 6602000
Fax 00966 2 6604145
IN YOUR SHOES

The high life

ALICIA BULLER ponders the ups and downs of indoor leisure attractions with iFLY
and Ski Dubai chief operations officer, Arnaud Palu.

T
here’s something very exposed about catapulting Palu is a fan of iFLY, but sadly there’s no time for us
yourself into a wind tunnel; not literally, of course to fly together on this occasion, so we make do with him
– I’m all togged up in my pseudo-space suit – watching my air grooves instead.
but something akin to closing your eyes, falling With a CV that incorporates some of the world’s most
backwards and hoping somebody catches you. famous (and infamous) leisure firms, from Six Flags Holland
In the iFLY vertical dome, my senses are stripped by and Disneyworld, to London’s Millennium Dome and the
what sounds like a million hairdryers and – as is the ill-fated Dubailand, the COO is no stranger to leisure. Palu
point of all this – my feet don’t touch the ground. was right-hand man to ex-CEO of the Millennium Dome,
The tunnel, the Middle Pierre-Yves Gerbeau, as the
East’s first indoor skydiving team attempted to pull the
venue, is certainly ‘unique’ as project out of its year 2000
Arnaud Palu, COO of Mujid Al shambles. They succeeded, to
Futtaim Leisure, tells me. some extent.
The Mujid Al Futtaim Like Gerbeau (fondly
Group owns and runs a raft nicknamed ‘Gerbil’ by the UK
of shopping malls and press), Palu is equally French
hotels regionally, including and equally ethusiastic. That
Mall of the Emirates and was then, but what’s his
the City Centre brands, and biggest challenge today?
Palu is charged with He says, it’s being able
running the leisure to draw in the crowds,
attractions inside – from while also keeping Mujid Al
iFLY, to kids’ heaven Magic Futtaim Leisure a lean and
Planet, to the region’s coolest profitable operation.
leisure attraction, Ski Dubai. He’s just launched the
The idea, says Palu, is to ‘Playnation’ concept in Mirdif,
offer a selection of pay-as- which he says “is like a lego
you-go leisure experiences, kit” of various attractions
targeted at a wide-range from iFly, to interactive game
of people. And the more Soccer Circus and waterpark
adrenaline involved the Aqua Play all in one space.
better. iFLY certainly “We offer tailored
ticks those boxes experiences, and pay-as-you-
Launched in April this go works well in a recession,”
year, it’s obvious why the he says, adding only half in
indoor skydiving spot has jest that he expects Playnation
been a hit at the Mirdif City to benefit from a region
Centre mall. I’ve never seen, awash with ‘guilt-money’ from
or done, anything like it. time-strapped parents.
After a watching a video As the Majid Al Futtaim
and learning some air sign-language, I’m left to fend Group continues its unabashed expansion across the
against the vertical fans that can power wind up to 200km/ region into Syria, Egypt and Qatar, the leisure arm will
per hour. It’s a relief that I don’t feel like am falling; just naturally expand, too.
floating. The instructor has a firm hold of me and I’m only As Palu takes the brand forward, he says he’ll always
waist-high from the ground. have the words of his old Disney boss ringing his head
iFLY is used as a training ground for champion – “you’ve got to walk the floor.”
skydivers from all over the globe, so after the initial “Everything you need to know about your business is
lessons, you can flex some aero-muscle with somersaults with your customers and your employees,” he says.
and advanced air-borne high-jinks. And with that, I’m off to find my centre of gravity.

114 gulfbusiness October 2010

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