Economics & Policy

In need of a tune-up

by Paul Cochrane
written by Paul Cochrane

The effects of the July 2006 war are still being felt by the country’s industries, and by export orientated businesses in particular. Nizar Raad, managing director of Universal Metal Products (UMP) — a leading manufacturer of collapsible aluminum tubes for pharmaceutical and cosmetic companies that exports 85 percent of its products — said his major customers panicked during the conflict and started looking for alternative suppliers.

“Tubes are an important component in the production system, so if we could not deliver it was a problem for our customers. We lost some market share, around 25 percent since 2006, and have been fighting to get it back,” he said. “We are clawing back, slowly, regaining 10 to 15 percent.”

Tinned and preserved food company Cortas, which also exports 85 percent of its produce, had a rough time during the war as well, but “didn’t really lose clients,” said Ramzi Cortas, its chairman and general manager. “But if the war had not happened we would have progressed more, it was certainly a set back.”

Lights off

In the immediate term, industries have other, more pressing concerns, namely electricity, transportation and customs.

“Energy is the most important issue for us, and our highest expense at 13 cents per kilowatt compared to just 3 cents elsewhere,” said Raad. “Only 50 percent of electricity is provided by the government, and four hours on, four hours off. It would at least help if they were very punctual so we could turn off machines and have a timetable.”

Generators have become essential for everyday business, doubling energy costs when compared to most industrialized nations and placing an extra financial burden on  businesses. Private generators provide an estimated 38 percent of electricity generation in Lebanon, a figure comparable to Bangladesh.

“We’ve requested special rates many times but the government hasn’t helped. Many small industries cannot afford generators. How many businesses can’t take off because of a generator?” asked Raad.

Hauling heavy transport costs

Transportation costs are a further gripe, with a container truck costing $2,500 to go from Beirut to Riyadh, and $900 to $1000 to Damascus.

“If you ship a container from Hong Kong to Dammam it costs $1,000,” said Raad, adding that 1,000 liters of gas in Saudi Arabia costs just $54 compared to a dollar a liter in Lebanon. While Gulf countries have an immediate competitive advantage due to low energy costs, reducing taxation on imports and exports could help Lebanese competitiveness and would take advantage of one value added aspect of the workforce: its higher skill level.

“I’ve said to ministers, ‘Think about exports being tax deductible,’” said Raad. “‘There’s a tax on income, so give a rebate of 50 percent on exports.’ But the government wants to grab everything. It should help by lowering overheads to make us more competitive.”

Cortas wants Lebanon to move towards a more free-market economy to lower import duties.

“Historically, Lebanon has never supported industry and there has always been a very strong lobby from importers to prevent the government from interfering in making it a level playing field,” he said.

Under Lebanese law companies can claim a 10 percent rebate on exports if using imported products. However, Cortas said bureaucratic obstacles make it hard to claim the money back.

“In practice, paperwork is too cumbersome and we can’t take advantage of these savings,” he said.

Customs at the ports are a further bane for Lebanese industrialists. Every week UMP receives a container at the Beirut port, but every time containers have to go through the red and green zones to be checked for a week.

According to customs

“It’s a waste of time, especially as we are a registered and legal company receiving goods from a reputable source, importing just one product, and there is a letter of credit opened against it. So why do we always have to go through the red zone?” lamented Raad. “They know us, but say the product needs to go for analysis, and when we are short on raw material we ask for one or two drums, they can keep the rest, but I can’t get even one drum. Inventory blocks a lot of capital and we’re paying high interest on it.”

But while Raad criticized the customs authority, he said the port was better than ports in Europe in terms of stability. “We’ve had containers arriving three weeks later from France due to strikes,” he said.

 

Breakdown of imports ($millions)

 

Breakdown of Lebanon </p> </div> </div> <div class=

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Economics & Policy

Calm oil prices expected in 2010

by Executive Staff
written by Executive Staff

Crude oil prices are expected to remain stable in 2010 after two years of market fluctuations brought on by the global economic downturn. Barrel prices are expected to remain around the $80 mark, according to the global consultancy firm Control Risks, which accurately predicted oil prices in 2009. “We called the price at $70 for 2009, which people said was crazy at the time, but which turned out to be pretty much on tap,” said Jonathan Wood, global issues analyst at Control Risks. According to Wood, the upper and lower limits for crude prices over the course of the year will  be $100 and $60, respectively, but predicted that this would be improbable. Echoing this sentiment, last month the International Energy Agency (IEA) also announced that it sees demand for oil increasing by 1.4 million barrels per day in 2010, spurred by demand in China and other parts of Asia. The IEA also expects production of natural gas liquids in the Organization of Petroleum Exporting Countries (OPEC) member states to increase by 885,000 barrels per day (bpd) to 5.7 million bpd, with non-OPEC production rising only by 200,000 bpd to reach 51.5 million bpd.

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Business

Generally healthy

by Soraya Darghous
written by Soraya Darghous

Health care is one of the fastest growing industries in the region. As a global leader in health care equipment and technology, GE Healthcare — a $17 billion segment of the General Electric Company and the first GE business headquartered outside the US — is playing a major role in shaping the next generation of patient care. At this year’s Arab Health exhibition in Dubai, Executive had the chance to sit with John Dineen, president and chief executive officer of GE Healthcare and Aziz Koleilat, the general manager for GE Healthcare for the Middle East.

John Dineen, president and chief executive officer of GE Healthcare

E At present, how would you describe the condition of health care in the Gulf?

John Dineen (JD): From a business standpoint, it’s very good. Like most parts of the world, [the region] had a challenging start to 2009, but we saw very good recovery in the second half of the year. It’s one of the better regions in the world for the [health care] business. We think governments in the region understand the importance of the social investment of health care and we don’t think that is going to change.

Aziz Koleilat (AK): From a delivery standpoint of the healthcare systems themselves, there is a need for development. So the potential is there. On top of that, there are a lot of projects coming up, whether in the private or public sector. The whole Gulf Cooperation Council is investing because they need to catch up with delivery ratios. There’s a lot of potential.

JD: There’s a big gap but it’s moving in the right direction. It’s got the right type of leadership with the right commitment. The progress has been good.

E In your opinion, what markets in the GCC will see the biggest growth in health care this year?

AK: The sheer size of Saudi Arabia in any industry in the Gulf makes it the biggest.

JD: It’s moving forward. They’re investing in health care and they’re large; that’s probably the distinguishing factor. There are plenty of countries in the region that are moving forward, in fact most if not all of them are — all in the right direction. When you couple that with size, mathematically Saudi Arabia is the largest and has the most potential.

E  There are many private equity (PE) funds investing in health care in the region. How do you work with PE investors?

AK: A lot of private equity has moved into health care. They’re investing in the infrastructure because they know there’s space for the private sector to play a role.

We partner with them in many cases, i.e. we can work on solutions with them, we sometimes even pair them up with international operators to put the pieces of the puzzle together — it’s more of a coordination role. We have the contacts in United States and Europe for different hospitals that want to come to the region and we have very good contacts with the investors who want to put money into them. We also have our own construction company and give our own advisory services. So we bring the whole thing together for them.

E  What role does the public sector play in the Gulf in terms of health care? Does it understand the need for health care?

JD: In terms of the basics, there’s a tremendous commitment to health care. In the region most of the governments understand its importance. It’s one of the most basic investments you can make in a society. It has almost unanimously received tremendous support in that area.

I think on the public sector side there is a strong commitment to investing in infrastructure. We’re probably seeing more public interest in health care here than in many places in the world.

Health care is a regulated industry. You’ve got controls in place, with both strengths and some challenges wherever you go. It’s no more challenging in the Gulf than the rest of the world.

E  What is the situation and potential for health care in Iraq or Yemen? These countries are not only facing security issues but are also lagging in health care. Is GE looking into such locations?

Aziz Koleilat, the general manager for GE Healthcare for the Middle East

JD: We have real interest. When you take a long-term view of a market like that, it’s got the resources, it has the need, the infrastructure will be built: the only question in your mind is, ‘When?’ and ‘How fast?’

You don’t have a question as to where it’s going and what it’s going to need. It really has all the makings of a great health care market. We’re hopeful that we’re going to see some investments and building in the future there, and maybe we can play a big role in that.

E  So you have plans in those countries already?

JD: Yes.

AK: We already have contacts, we have deals and we’ve worked on projects. This already happened, whether in Yemen, Iraq, Afghanistan, Pakistan, all these markets. We have a presence, so we work with them. The key challenge is how can we help accelerate in helping them build the necessary infrastructure. Because of the insecurities [there is a risk of] putting investments in and then having to pull out, so we’re trying to find the best way to do it in order to bring in our expertise and work with them to find solutions.

E  What is the best way?

JD: We’ve got to find the right relationships; we have to understand who the first movers are going to be, with regard to infrastructure development.

AK: On top of that, we’re talking directly to the Ministry of Health in Iraq and the same thing with the Ministry of Health in Yemen, to see what their needs are and who they think would be the right partners in that sense. So we’re looking for the best way to get deeper into those countries.

JD: It’s really the next big challenge. We’re spending a lot of time talking about it. We don’t have a simple answer to your question, but it’s really an area that we’re trying to work through as we speak.

E  Do you think your competitors are also looking into the same areas for potential long-term projects?

JD: Yes, the opportunity is obvious. The ‘how’ is going to be the real challenge as people crack the code on how to do it. I think it’s going to be a great opportunity.

AK: The demographics and dynamics are there, it’s not hidden. We all know it.

E  Let’s talk numbers. How much was the region’s health care industry affected by the global financial crisis?

JD: I can speak relatively. It wasn’t as bad as what we saw in the US and Europe; those were the most challenged markets. This market was slow to start during 2009. People were cautious. But at the end of the day it didn’t stop the investments. I still think there were long-term commitments made. It’s a pretty strong market — maybe not as strong as China or India, but still much better than most of the developed markets.

AK: In the first half of 2009, the oil price dropped and the private sector got very worried. There was a shift, it’s not like things completely stopped but it was a shift. We see more projects and more interest going forward; confidence is back in.

E  What are your targets and expectations for 2010?

JD: Our view is that we’re going to continue to grow; we’re bringing more technologies and products to the market, we’re investing in our people in a very big way, developing service needs to support our base, and we continue to create new partnerships — especially with private equity funds. We’re continuing to build more and more capabilities.

E   What are the greatest issues and concerns for the GCC health care industry going forward? How do they differ from 2008/9?

JD: To some extent, the health care industry in the region and around the world is focused on the next generation of technology.

We wait for that technology to trickle down to the more affordable segments. Health care now is about solving problems, it’s not just about building the next great CT [scanner].

It’s about understanding the classic challenges in health care systems, which in many countries is improving access, improving the quality of the health care, improving costs, etc.

So we are really looking to utilise technology to solve those problems and change the way health care is delivered.

 

 

 

 

 

 

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Special SectionYoung Arab Leaders

Rami Makhzoumi (Q&A)

by Executive Staff
written by Executive Staff

At the age of 32, Rami Fouad Makhzoumi is president and CEO of the Dubai-based Future Pipe Industries, one of the largest private fiberglass pipe manufacturing groups in the world, and a member of the board of directors of Young Arab Leaders (YAL). Makhzoumi joined YAL in 2005. Driven by a strong faith in the organization’s mission, he has played a significant role in the leadership and growth of YAL.

E What originally brought you to YAL?

The belief in working for a better future for the youth of our region inspired me to join the organization. The youth of our region have the right to have a quality education and also need to be encouraged to be independent and utilize the education they acquire to establish enterprises to sustain themselves.

E What is your role on the board of directors and what is the purpose of the board?

As part of the Board at YAL, in keeping with international best practices, our role, among other things, is to ensure that the organization is progressing within its defined vision, and mandate. We meet regularly to monitor and evaluate the key non-financial and financial areas of relevance to YAL and the organization’s progress towards its goals including introducing key performance indicators as appropriate. We provide direction and advise on the initiation and implementation of programs. We approve policies and procedures by which YAL is operated, and monitor compliance and ensure YAL has in place effective communication processes with its members and other key stakeholders.

E What have you brought to YAL from your experience as a professional and an executive in the Arab world?

I believe that through business, we indeed can serve and contribute to the society and economy in which we operate through various channels and at different levels and scales. You achieve national goals at a local level. You can become a major employer in any given region, thus creating the ability to multiply your effect through the sheer numbers under your flag. I have always said that the greatest asset we have is our people. Empowering the people, allowing them to grow, benefits not only your immediate business but also the society in which it functions.

E What are the issues confronting Arab youth today?

More than 65 percent of our population is under 24 years old, with the fastest growing workforce of any region in the world. Empowering these youth with the right education and skills to help in the creation of employment — self or otherwise — is the biggest challenge we face in our region. We can either be a great and noble thought in history, or a potent force in the region. To empower our youth we need to educate and truly begin to instill the values of the entrepreneurial spirit, and see a new age be born. [Otherwise], we will see further unemployment, greater gaps and disparity in wealth and education, and ultimately, an increasing opportunity for radicalism to be nurtured.

E How have you been working to help YAL to have the biggest impact on the region?

YAL is a pan-Arab organization and this strong regional presence is our biggest asset as we look at reaching out to and benefiting the youth of our larger Arab region. Since our inception five years ago, we have been consolidating our network with members that are leaders from different Arab countries, and who share the common goal of creating a better future for our region and our people by passing on the right knowledge and experience and imparting the right education. We have been identifying our programs and initiatives with the YAL mission in mind that we need to benefit as many youth as we can, who will in turn benefit our society and the world community. Our aim is create a positive ripple effect from our programs to create a positive world view.

Many young Arab leaders like myself have been educated and brought up in the West and hold dear the founding principles of YAL, from which we can demonstrate not just to the region but to the world, the significance of the Arab world. Not just in its contributions historically to modern civilization, but its potential in realizing its deserved position as a substantial contributor to tomorrow’s world.

E What particular YAL programs are you involved in?

As a member and part of the YAL board, I consider it my responsibility to involve myself in key programs of the organization in a different capacity for different programs. From offering key internship positions in the Future Pipe Industries group to being in the task force for the creation of YAL’s Entrepreneurship Initiative, I have attempted to be a part of the key focus areas of YAL.

I believe it is vital to pool the next generation of leaders for the benefit of our region. YAL can act as the cornerstone of prosperity for those within, and as the hope and model for those outside.

E What role does YAL have to play in the future? What would you like to see the organization undertake in terms of programs or activities?

As the youth are the leaders of the future, they are the greatest asset of the Arab world. We are committed to ensure that the programs YAL develops will harness the potential of Arab youth, and leverage their contribution to the growth and development in the Arab World. Arab civilization in the past is an inspiration for me and others at YAL, and I believe that the potential is there for a second Arab renaissance and that Arab countries should seize the current opportunities to lay down the infrastructure of a second Arab golden age.

The role of our organization is more significant now as the world is experiencing a transition period and leading global economies are shifting their focus inwards. Individuals, organizations, countries and regions worldwide are rethinking their strategies and focus on sustainability mechanisms for strengthening corporate and national capacities to create a more resilient world for our next generation.

It is important for us as YAL to drive a united vision to empower our youth and offer them the know-how and tools to surge ahead with decisive solutions that complement our leaders’ efforts and aspirations. During times when global economies face unprecedented challenges, the responsibilities of organizations such as ours increase manifold — we have to take on the mantle of being the agents of change that will holistically contribute to the sustainable development of the Arab region.

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Finance

Regional equity markets

by Executive Staff
written by Executive Staff

Beirut SE  (one month)

Current Year High: 1,396.65  Current Year Low: 705.56

The Beirut Stock Exchange (BSE) index witnessed its sharpest downturn since the global equity sell-off in the fall of 2008, dropping 8.31% to 1,002.09 points as of August 24, down from the 2009 peak of 1,109.24 points seen on July 29. The political vacuum created by the stalled cabinet formation took a toll on the exchange’s largest stock and real estate developer, Solidere, whose shares fell almost 11% during the review period. Despite the political stand-off, the country still welcomed a record of number of tourists during the first seven months of 2009 and banks’ assets and loans continued to grow. Growth forecasts for the Lebanese economy ranged between 2.4% and 6%. Still, driven by limited volume, shares of Bank Audi and Byblos Bank fell 2.29% and 10.26%, respectively. BLC Bank led the market with an 11.05% gain. Holcim Liban and BLOM also managed to add market value.

Amman SE  (one month)

Current Year High: 4,405.12  Current Year Low: 2,454.48

Market performance in the past two months has indeed been a stark reflection of the general sense of pessimism in Jordan. After posting a sharp decline in July, the Amman Stock Exchange (ASE) index continued its downward trend into August, losing 5.78% to reach 2,467.33 points on August 25. The Jordanian decline was driven by the Insurance and Service sectors which plunged 9.01% and 6.8% respectively during the review period, while the Industrial and Banking sectors were not innocent, shedding 4.09% and 2.77%, respectively. Leading the downturn were Specialized Investment Compounds with a loss of 53.1%, Arab German Insurance at 45.79% and Al Tajamouat for Catering and Housing at 45.7%. On the other hand, Afaq Energy Comp led the market with gains of 55.91% followed by Contempro For Housing Projects and Jordan Ceramic Industries, which added 54.8% and 33.9%, respectively.

Abu Dhabi SM  (one month)

Current Year High: 4,416.08  Current Year Low: 2,136.64

Like its neighboring Dubai Financial Market, the Abu Dhabi Stock Exchange (ADX) index suffered from the global mood swings of equity markets, which pulled the market down sharply in the middle of August. However, sentiment on the ADX was less destructive as more sectors ended in the positive and the index finished our review period at 2,829.5 points, up 1.02%. The two leading sectors were Energy and Real Estate gaining 9.87% and 8.94%, respectively. Aabar properties posted the best returns with a 21.4% gain during our review period. Gulf Cement and Abu Dhabi Ship Building Company followed with increases of 19.01% and 15.89%, respectively. On the other hand, Banking and Consumer sectors were the period’s laggards with losses of 2.26% and 1.29%, respectively, following the global trend of cyclical underperformance. Banks and Insurance companies suffered the most, but the worst performance came from International Fish Farming Holding, which shed 27.07%.

Dubai FM  (one month)

Current Year High: 4,802.38  Current Year Low: 1,433.14

The mid-month correction at the Dubai Financial Market (DFM) was more pronounced than any other regional exchange, suffering a peak to trough fall of 9.1% before the index finished the review period up 1.58% at 1,847.09 points on August 24. Although Emaar’s earnings were hit by writedowns from exposure to US real estate, the company’s shares still posted strong gains of 14.96%, leading the real estate sector to the top with a 6.95% gain. All other sectors except the defensive Consumer Staples, which rose 4.81%, were in the red, reflecting the markets continued risk-averseness. Trailing the market were Utilities and Materials sectors which lost 5.32% and 2.39%, respectively. Following Emaar in top performance were Emirates NBD and Arab Insurance Group with gains of 11.69% and 11.11%, respectively, after trailing the market in July. Still, some positive news came from a Colliers report that showed a 9% decline in Dubai property prices in the second quarter, a sign of stabilization after a 42% plunge in the first three months of the year.

Kuwait SE  (one month)

Current Year High: 14,516.10            Current Year Low: 6,391.50

The Kuwait Stock Exchange (KSE) index was little affected by the fluctuation in oil prices and equity markets abroad as the uptrend maintained strength throughout the month of August. The index ended our review period up 2.97% to 7,907.2 on the back of strong gains in the Industrial and Food sectors, which led market performance with 13.19% and 10.55% gains, respectively. On the other hand, the Real Estate and Insurance sectors suffered from losses of 3.45% and 2.84%, respectively. The leading stocks were National investments Company (116.95%), Gulf Cable and Electrical Industries (47.69%), and Kuwait Syrian Holding Company (47.22%), while the worst performing stocks were Dar Al Thuraya Real Estate (-33.11%), Ajial Real Estate Entertainment (-32.67%) and Nafais Holding (-25.4%). In corporate news, several companies reported weak second quarter earnings results, including National Industries which said its net profit fell 57%, and Jazeera Airways which announced a net loss of $4.4 million. Some of the positive earnings included Wataniya Telecom, which said its second quarter profit surged 139% to $222 million.

Saudi Arabia SE  (one month)

Current Year High: 8,898.97  Current Year Low: 4,130.01

A drop in oil prices and a major global equity correction drove the Saudi Stock Exchange (TASI) index down 2.6% through the middle of August. However, the recovery in oil prices and the flurry of positive reports by international institutions led the index back to 5,789.78 points by August 24, an increase of 0.2% over July. Fears of the possible fallout from the credit-troubled Saad Group and Al Gosaibi took the back stage as the IMF and several international investment banks highlighted the resilience of the country’s banking sector, backed by the government’s vast liquidity. The Petrochemical sector led the market with a 4.84% and the Cement sector came second with a 2.36% return, followed by Insurance, which gained over 10% during the month but ended with a weaker 0.93% increase. On the other hand, after leading the market in July, the Hotel and Tourism sector lagged with a 5.68% drop, followed by Construction at -4.75% and Multi-Investment at -3.66%.

Muscat SM  (one month)

Current Year High: 9,904.68  Current Year Low: 4,223.63

The Muscat Securities Market (MSM) index leapt 6.69% to 6,237.33 points during the review period through August 25, with little interruption from the global equity sell-off that brought down markets all around Oman. Indeed, all three market sectors posted strong gains, led by Banking with a 12.48% increase, followed by Industrial at 11.17% and finally Services, with a still strong return of 3.5%. The market’s leading stocks were Gulf International Chemicals, National Aluminum Products, and Oman National Investment Corporation which rose 59.78%, 36.04% and 35.46%, respectively. On the other hand, Al Ahlia Converting Industries was far down the queue with losses of -45.65%, followed by National Mineral Water Company and Oman Chromite Company which lost 9.71% and 8.82%, respectively.

Bahrain SE  (one month)

Current Year High: 2,696.68  Current Year Low: 1,481.06

After posting major losses in July, the Bahrain Stock Exchange (BSE) index picked up the pieces in August, reaching 1,514.08 points on an increase of 0.61%. In fact, the market traded in the flat band throughout the whole month and unlike other exchanges, the BSE did not witness much of a correction in the middle of the month. The banking sector still managed to lead the month’s performance with a 7.5% gain, far outpacing its nearest competition from the Services sector which added 3.3%. The period’s best stocks were Ahli United Bank, which gained 14.89%. Nass Corporation and Bahrain Commercial Facilities made gains of 14.41% and 13.66%, respectively, while United Gulf Bank and Gulf Finance House posted the steepest losses of 22.2% and 18.24%, respectively. The worst performing sectors were Investments and Hotels and Tourism which were down 5.88% and 1.06%, respectively.

Doha SM  (one month)

Current Year High: 10,550.27            Current Year Low: 4,230.19

The Qatar Exchange index came back from a mid-month foreign-driven 5% correction to end our review period at 6,928.06 points, up 3.28%. The exchange is still benefiting from the banking sector’s strong second quarter earnings, supported by the government’s willingness to help clean up the bank’s balance sheets and free up bank capital for lending. The banking sector continued to lead the market for the second consecutive month with a gain of 4.59%, followed by Services at 2.69% and Insurance at 1.01%. The Industrial sector lost a meager 0.16% through August 24. The uncontested stock leader of the period was Ezden Real Estate Company, which leapt 74.26% despite giving back more than 35% of its early August gains. Zad Holding and Qatar National Bank followed with increases of 14.29% and 10.82%, respectively. The worst performance came from Qatar Cinema and Film Distribution Company with a 17.78% loss, while Al Khaliji Commercial Bank lost 8.43%.

Tunis SE  (one month)

Current Year High: 3,697.32  Current Year Low: 2,836.64

The Tunisia Stock Exchange Index (Tunindex) recovered its July losses and added 1.94% to reach 3,685.64 points as of August 25, as the country’s 27.5% market rally this year still seems to be alive. Leading the only-slightly-interrupted trend in July was Attijara Leasing Company with a gain of 27.18%, followed by Société Tunisienne des Industries de Pneumatique at 15.51% and Compagnie Internationale de Leasing with 14.04%. On the other hand, the market laggards were Société Générale Industrielle de Filtration (-12.81%), Société de Production Agricole de Téboulba (-10.18%), and Industries Chimiques du Fluor (-4.54%). Tunisia moved one step closer in its bid to increase oil refinery capacity after it awarded the contract to build and operate the Skhira oil refinery project to oil and gas services company Petrofac, for a total cost of $500 million and a capacity of 150,000 barrels per day.

Casablanca SE  (one month)

Current Year High: 14,083.91            Current Year Low: 9,405.86

Continuing its weak performance from July, the Casablanca Stock Exchange (CSE) index suffered from a lack of direction during August to finish our review period up 0.85% to 11,064.92 points. Although the country continues to suffer from the fallout in tourism activity, the decline in exports, and the drop in remittances, recent figures showed the overall number of tourists increased 9% during the first six months of 2009 compared to the same period in 2008. However, it was the Telecom sector that lagged behind in 2009, dropping 8.9%, followed by Construction and Building Materials at -6.54%. The best performing sectors on a year-to-date basis are Beverages, Transport and Mining at 76.94%, 67.92%, and 58.71%, respectively. The market was led by Attijariwafa Bank, which added 7.9% through August 24 and M2M Group with a 7.17% gain, while Matel PC Market shed 8.9% and Société Nationale d’Investissement fell 6.99%.

Egypt CASE (one month)

Current Year High: 8,480.53  Current Year Low: 3,389.31

The Cairo and Alexandria Stock Exchange (CASE) pared its losses and led the MENA region with a gain of 7.24% to reach a new 2009 peak of 6,620.38 points. The country signed six oil and natural gas exploration agreements worth $2.3 billion, aimed at exploring oil and gas in the Nile Delta, the Eastern Desert and the Gulf of Suez. Several companies reported increases in net profit in the first half, including Egypt Telecom, El Nasr Transformers, and Oriental Weavers. Leading the market was Arab Land Reclamation which leapt 72.58%, followed by Assiut Islamic Trading with a 72.54% gain and Acrow Misr, which added 55.53% during our review period. On the other hand, Egyptian Real Estate Group posted the sharpest decline with a loss of 21.97%, behind Ismailia National Company for Food Industries with a loss of 21.38% and Nile Company for Pharmaceuticals and Chemical Industries which lost 20.76%.

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Finance

Nabil Sawabini (Q&A)

by Executive Staff
written by Executive Staff

Nabil Sawabini founded MENA Capital in September 2004 and today is the chairman and chief executive officer of the private equity and property company. Before founding MENA Capital, Sawabini was with JP Morgan, where he spent 25 years in high-ranking positions in the United States, Europe and the Middle East. Executive recently sat down with Sawabini to get an insider’s view of the private equity and real estate markets in Lebanon and the region.

E We are still in the midst of an economic downturn and the effects on the regional private equity markets have been significant, leaving funds and investors in a wait-and-see mode. What has your strategy been since October 2008 when we started to see the market nosedive?

The focus we have had in the last few years has been primarily on real estate for a very simple reason: We felt that there is more potential and better reward for the risk we were taking in real estate than in private equity. That is primarily because on the private equity side the valuations were simply too high in every sense. Whether you took valuations based on market multiples, on earnings multiples, on discounted cash; everything didn’t make much sense. So we basically held back on investing. After the crisis began to subside in the spring of this year, we decided that we are going to start getting more involved in private equity and merchant banking, [with] a fine line between the two. Merchant banking is a creation of new businesses that are more or less tried and tested elsewhere but not necessarily in the market where [you invest], or if they have been started, they have done so in a format that has not really been well studied. We are focusing now on three areas in private equity: principally consumables as well as food and beverage and services that basically relate to both.

E So basically you are moving more toward a defensive sector approach as opposed to things like real estate?

We are still in real estate and we are quite big in real estate. [But] we are going to be diverting more and more of our resources over time towards merchant banking.

E This is more of a long-term strategy than a short-term one, no?

Exactly. But the form you do it in and the focus you have on the products is what will make it less defensive and not your pure defensive plays.

E What angle are you playing to bring on a faster return on investment?

It’s basically the way you package, deliver, create and complement the different food and beverage businesses that will help you over time grow the business through economics of scale and efficiency — not just in Lebanon, but regionally and internationally.

E Considering what has happened in the private equity industry since October 2008, we kept hearing about interesting valuations at the end of 2009’s first quarter, and at the end of quarter two some people were even talking about the bottom being reached. Are you looking into those valuations now more than you were before?

To base any investment on just a pure valuation today is not interesting. We are still not interested. If it is in the overall context of a new business or a new direction for the business that we are buying into, then that is really the growth orientation [model] that we are looking into.

E Are you saying venture capital and mezzanine sectors are now the focus, such as your Kababji restaurant venture in the US?

That’s a venture but it’s a tried and tested concept. There are already 14 or 15 similar outlets in Washington, DC which are very successful. It’s not really venture capital where you create a whole new product and service — not quite. We wouldn’t invest in new technologies. We are not interested. Anything we don’t understand we will not do.

E So basically a conservative approach even in light of the valuations we discussed?

Absolutely.

E But why wouldn’t you take advantage of those valuations before they go up?

I didn’t say we are not interested. We are interested but only if it is coupled with a growth model that makes sense to us. It can’t just be the price.

E How have you adjusted your financing now that the large buyout model fell through after the financial crisis?

We never relied on bank debt in our business. We do not believe in leveraging as being the cutting-edge of a transaction. We believe that leverage should always be used prudently, on a margin, as is needed, but never to build our model based on leverage.

E Is this model being replicated across the industry?

Because leveraging has been affected and banks are very reticent to lend for private equity deals, I think that although banks will at some point start to lend for such deals, they are going to be a lot more conservative and a lot more cautious as to what they lend and who they lend to. Which translates into less deals being done, more prudent deals being done, more reasonable valuations and in transactions that really make sense rather than just flipping.

E During the boom phase private equity companies acquired a lot of dry powder, investors were willing to invest and when the financial crisis hit this changed. Today the firms still have this dry powder and now they are under pressure by their limited partners to increase their investment activity. Nonetheless, we haven’t seen a real surge in the market. Do you expect to see it soon?

I don’t think we are going to start seeing that before 2010 when people truly begin to believe that the bottom has been reached. As long as people think we are still in a sliding mode, even potentially a [downward] slide again, they are not going to be very eager.

E What about your capital commitments? How long can you keep the investors at bay while still asking them to deliver on their commitments?

We do have private equity investor commitments and we basically told them: ‘Look, we haven’t done it and these are the reasons we haven’t done it. We are going to do it now at much better valuations and in businesses that make a lot more sense. Just count your blessings that we didn’t do it, because you would have lost your shirts.’

E But this can’t go on forever; something has to give.

We feel very strongly that if we can’t do it in the next year we might as well just…

E Give the money back?

We never took the money. We never drew down the money, we only drew down what we needed.

E But the industry as a whole has a lot of commitments and they don’t have cash in hand. They are under pressure to make investments. When is this going to end and when will we start to see some action?

The next year is very critical. It’s hard to predict. I smile because six months ago I was sitting with someone who was one of the largest players in hedge funds, and he was claiming that the hedge fund business was dead. Now they are going back into it. Never say never.

E How about your investor profile? High-net-worth individuals are important in the Gulf, even more so in Lebanon. Here you don’t have the sovereign wealth funds (SWFs), who have the money. Moreover, those high-net-worth individuals along with the family businesses, have lost a lot of money, as have the SWFs. Which investors are you targeting in light of this?

We continue to target investors who are, in our opinion, professional and have the in-house capacity to determine what is good and what is bad for them, especially on the real estate side. Unless the group or the high-net-worth individual truly appreciates what it takes to do a private equity deal and how to get out of it, how much time it will take and all of that; we are not eager to bring them in as an investor. At the end of the day people have seen a lot of craziness and they stop and say: ‘Fine. We have done what we’ve done because everyone else went crazy, not just us. Now the time has come for us to be a lot more prudent.’

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Finance

Orbital ambitions

by Executive Staff
written by Executive Staff

This summer an Emirati investment firm secured exclusive rights to what may be the next wave in adventure tourism and could place it on the cutting edge of scientific research.

On July 28, Abu Dhabi-based Aabar Investments signed a $280 million deal with Richard Branson’s Virgin Galactic, gaining a 32 percent stake in what is now a $900 million foray into the great unknown.

Virgin Galactic, which vows to be the “world’s first commercial spaceline,” had been shopping for an outside investor for six months when it signed with Aabar at the EAA AirVenture show in Oshkosh, Wisconsin. Branson and Aabar CEO Mohamed Badawy al-Husseiny signed the deal following Branson’s inaugural flight in Virgin’s jet-powered carrier aircraft which will be used to launch the spacecraft.

“This transaction carries multiple potential for the creation of an exceptional platform for space infrastructure, such as research labs, space centre[s] for commercial travel and much more,” a Virgin press release quoted Aabar’s Husseiny as saying at the event.

Until Husseiny came on board, the venture was solely funded by Branson himself. Virgin expects that Aabar’s infusion of new capital will completely fund the project until operations begin.

Credit Suisse was the bank handling the all-cash transaction and served as advisor and placement agent to Virgin throughout the process.

Jeffrey Culpepper, head of the investment banking department in the Middle East and North Africa region for Credit Suisse, said that though investors interested in Virgin Galactic came from all over the world, the final decision to accept the Abu Dhabi proposal came down to chemistry.

Sheikh Mansour bin Zayed al- Nahyan is chairman of the International Petroleum Investment Company, which is Aabar’s largest shareholder, and he is also a member of Abu Dhabi’s ruling family. When Nahyan met Branson, the pair seemed to agree about the potential of Virgin technology.

“It was not the most aggressive bid, but it was the right bid,” Culpepper said.

Branson was particularly drawn to Sheikh Mansour’s hope that Virgin Galactic would further Abu Dhabi’s existing attempts to bring the UAE to the forefront of space research and education.

On a mission

Aabar intends to build a launch facility or “spaceport,” for both manned and unmanned launches in Abu Dhabi. This initiative comes on the heels of several related efforts, which mark a palpable shift in focus toward outer space for the UAE.

In 2006, the country opened the Emirates Institution for Advanced Science and Technology (EIAST). The center lists space research and exploration as one of its four current focuses.

On July 29, the EIAST launched DubaiSat-1, the country’s first satellite from Baikonur Cosmodrome in Kazakhstan and two more like it are in production. The $50 million satellite will take pictures of the region to be used for urban-planning, monitoring climate change and in case of a natural disaster.

DubaiSat-1 was designed and built with the help of South Korean firm SaTReC, but officials intend for its successors to be manufactured completely in the Emirates and should be ready for launch in 2020.

An observation center and “space academy” is also planned for the UAE. The 4C GEOC (Global Earth Observation Center) will at first display images from Italian satellites already in orbit, but the $30 million center will launch its own satellite when it becomes fully operational in 2012.

Culpepper said Sheikh Mansour hopes for Abu Dhabi to be the ultimate destination for studying space and related engineering through the combination of state of the art training and opportunities to experience space through Virgin’s technology.

“They like the idea of having the transfer of knowledge to the Middle East,” said Culpepper. Eventually, Sheikh Mansour also hopes to integrate space technology into the country’s public schools.

Virgin’s launch system may be able to reduce the cost of a ticket to space from $200,000 to $20,000

The ride

The Abu Dhabi spaceport will be home to Virgin’s mothership called “WhiteKnightTwo” and a commercial spacecraft called “SpaceShipTwo,” the original design of which won Virgin a $10 million prize from the X Prize foundation in 2004.

Virgin Galactic has redesigned traditional space travel using a launch vehicle or mothership, which takes off from a runway much like an airplane. The mothership rises to 50,000 feet and then releases a spacecraft containing six passengers and two pilots.

According to William Whitehorn, president of Virgin Galactic, the mothership is currently surpassing expectations in test flights in New Mexico, having so far reached a height of 52,400 feet (50,000 are needed for a successful launch). SpaceShipTwo will be publicly unveiled this December and will begin test flights soon after. The United States Federal Aviation Administration has yet to approve the system for commercial operation.

Despite the pending FAA approval, five SpaceShipTwos and three motherships are currently in production in Mojave, California. The vehicles are being built by aeronautical firm Scaled Composites, and Whitehorn expects to begin operations at Spaceport America in New Mexico in late 2010.

Because the mothership is able to land and be completely reused, the Virgin launch system is more eco-friendly than any space travel system in existence and also uses environmentally responsible materials and bio-fuels. Further more, a reusable launcher means less debris left in space and shorter rocket burn.

This launch system also significantly cuts the cost of space flight by launching the spacecraft when it is already 50,000 feet in the air.

“The more efficient a system is, the cheaper it is to operate,” said Whitehorn. The Virgin system is able to launch a spacecraft 10 times cheaper than traditional ground launches, which may allow Virgin to eventually decrease the ticket price from $200,000 to $20,000.

Whitehorn also insists that this launch system is safer than any other in existence. But, he said, though space tourism will be the first function of the launch system, Virgin Galactic’s priorities are in the more scientific capabilities of the mothership and SpaceShipTwo. And although Aabar Investments is giving no interviews on the subject, Jeffrey Culpepper said the research and satellite launch capabilities of the Virgin system were the main pull for Aabar as well.

“It’s a space launch system, not a tourism business,” said Whitehorn, adding that when the spaceport is fully operational it will contain a mechanism for launching small satellites for the use of the UAE and other parties.

Culpepper said that after the commercial space flights are approved by the FAA and running smoothly in New Mexico, Aabar will hand over an already pledged additional $100 million specifically to improve Virgin’s satellite launching capabilities.

“It’s more than just about tourism and fancy hotels,” said Culpepper.

The suborbital flights can also greatly decrease the price of what Whitehorn calls “human science,” meaning manned space experiments. Experiments requiring microgravity, such as some pharmaceutical experiments, currently demand an expensive trip to the international space station. With the Virgin spaceports, this would no longer be the case.

Take off

Space travel in the UAE is regulated by the General Civil Aviation Authority (GCAA) much as the FAA regulates space travel in the US. However, changes to this system have been suggested.

“It’s time to design and set up the mechanism for a nationwide program for research in all fields, and the immediate aim is for such an authority to define a space policy,” said Ahmed al Mansoori, director general of EIAST at the Global Space Technology Forum in 2008.

Professor Clint J. Wallington teaches a course on commercial spaceflight at the Rochester Institute of Technology. He said all of Virgin’s vehicles will be subject to FAA standards because they are being manufactured in the US. However, the individual governments of the launch locations will oversee the operation of the vehicles.

Despite the fact that not a single paying customer has yet to take a Virgin Galactic flight and the technology has yet to receive government approval, Culpepper said Aabar’s investment was not as risky as it may seem.

“Advance ticket sales made it a profitable business before the first rocket went into space,” Culpepper said.

The “spaceline” has already registered more than 85,000 people who wish to be among the first to take a sub-orbital ride, including Star Trek star William Shatner. Only 300 of the pre-paid passengers have paid in advance, but the total amount of their deposits is more than $40 million, Virgin Galactic said. The deposits range from just $20 to the full $200,000 and determine where the potential astronauts fall in the queue.

Each commercial flight will allow the spaceship passengers to experience zero gravity and see views of the earth below. Whitehorn said that this would be a draw for the Abu Dhabi spaceport.

“With this location, you get a fantastic view. You’d see everything from Lebanon to the Arabian peninsula to Egypt,” he said. Flights will also be available from New Mexico and Sweden, each offering a unique view of the Earth.

Eventually, Virgin would also like to offer orbital commercial flights, which would allow ordinary people to fly from Australia to England in 2.5 hours.

So far in human history, 500 people have been to outer space. Virgin Galactic intends to match that number in their first year of operation.

According to Premjit Bangara, travel manager for Sharaf Travel, the only travel agency authorized to sell spaceflight tickets in the region, demand should match this goal. Bangara said that the partnership “has created quite a stir” in the region, drawing interest from a variety of age groups and professions.

Though Sharaf is contractually forbidden from releasing specific regional sales figures, Bangara says that registration in the Middle East is going strong.

“We see a mix of high net-worth individuals and also young professionals who want a spot of adventure and can afford it. It therefore is a mix of young entrepreneurs and older, wealthy individuals sharing a passion for adventure,” Bangara said.

Operations at the Abu Dhabi spaceport are at least three years away, but Whitehorn said that if anyone wanted to specifically register for an Abu Dhabi Virgin Galactic flight, “We’d be happy to hold the place for them.”

Virgin wants to offer orbital commercial flights able to fly from Australia to england in 2.5 hours

Market Turbulence

After other banks and advisors had told Branson that it was not the right economic climate to seek an investment of this size, Culpepper says that Branson was all the more determined to find an investor.

“It sends a message of optimism to the market,” Culpepper said, adding that he sees the deal as a sign of hope for the global economy.

And with the obvious show of interest in Virgin Galactic from the investing world, multiple sources close to the deal said the company will very likely go public in the future.

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Finance

For your information

by Executive Staff
written by Executive Staff

Iraqi development fund at $180 billion

A report from the United Nations secretary general said the amount of capital deposited in the UN’s Development Fund for Iraq, as of the end of 2008, was some $180 billion. The fund, created after the UN halted its oil-for-food program in 2003, acquires most of its revenue from Iraqi hydrocarbon exports, accounting for some $165 billion of the fund’s total capital.

A further $10.4 billion was deposited into the fund from the balance of the oil-for food program, and $1.5 billion came from the proceeds of frozen assets. The fund is managed by the International Advisory Board (IAB), which is comprised of members from the UN, the International Monetary Fund, the director general of the Arab Fund for Social and Economic Development, the World Bank and the Iraqi government.

The IAB and the UN secretary general have declared the Committee of Financial Experts, created by the Iraqi Council of Ministers, ready to assume oversight of the account. The report also cited “key issues of concern regarding weaknesses in controls over oil extraction and use of the resources,” and said “the International Advisory and Monitoring Board remains concerned that one of its earliest recommendations from 2004 concerning oil metering remains incomplete.”

The report notes that the fund’s external auditor, KPMG, stated total metering systems installed up until the end of 2008 had only reached 33 percent. Nevertheless, the report claimed that the auditor was able to reconcile petroleum quantities received by Iraq’s State Oil Marketing Organization (SOMO) with sales from the country’s petroleum exports.

Equity firm sales jump in the Gulf

A recent report released by Lipper, a Thomson Reuters research company, stated that the number of equity firms in the Gulf Cooperation Council that are registered for sale grew by 21 percent this year, compared with a 12.55 percent loss during the same period last year. The report stated that during the second quarter of 2009, GCC equity funds posted a 30 percent increase in average returns, compared to the second quarter of 2008.

“GCC markets outperformed developed markets but underperformed other emerging markets,” said Dunny Moonesawmy, Lipper’s head of research for the Middle East. “News at the corporate level, the disclosures of payment defaults by Saad Group and Ahmad Hamad Al Gosaibi & Bros, and at the macro-economic level, confirmation of a lighter GCC monetary council, contributed to accrued uncertainties in the market.”

As far as asset classes are concerned, equity led the pack with a near 10 percent gain over the first half of 2009, due mainly to the results of the Emerging Markets Global and Emerging Markets Asia funds, both of which increased by 40 percent, according to Lipper.       

“The market should stabilize itself with the acceleration of government spending programs, which should benefit the whole region,” Moonesawmy concluded in the report.

Dubai debt increases

Dubai’s measureable public debt continued to mount last month, according to the Cairo-based investment bank EFG Hermes. But the total amount of Dubai’s public debt remains uncertain due to a lack of transparency in several Dubai companies such as Limitless and Istithmar.

Estimates of Dubai’s debt have been as high as $160 billion, although these remain unconfirmed.

The bank estimates that the total debt of the emirate amounted to $87.4 billion last month, up from a previous estimate of $80 billion. A total of $60 billion in debt is estimated to be held by the government-owned conglomerate Dubai World.

Nakheel, which is also government owned, revealed Dubai World’s liabilities as part of its mandatory disclosure obligations attached to a $3.5 billion Sukuk, due to expire in December. Nakheel itself already owes $1 billion to creditors, according to EFG Hermes.

“The fact that the government is not sending a message of unambiguous support for Nakheel raises doubt in the market regarding the extent to which the government will relieve investors of the substantial refinancing risks of Dubai Inc. generally,” said Farouk Soussa, an analyst with ratings agency Standard & Poors, to the Wall Street Journal.

UAE spreads the wealth in 2008

The total amount of investment by the United Arab Emirates into fellow Arab League member states totaled approximately $10.7 billion last year, according to the Kuwaiti-based Inter-Arab Investment Guarantee Corporation (IAIGC). The figure places the UAE atop the list of capital exporters to other Arab League members.

According to the IAIGC’s figures released last month, the UAE has injected $5.8 billion into Saudi Arabia, making it the largest contributor of foreign direct investment in the kingdom. In the wake of the global downturn, the Saudi economy is seen as one of the more stable and reliable economies in the region because of its conservative fiscal policy and large hydrocarbon reserves.

The figure dwarfs other investments made by the UAE in other Arab countries, and constituted almost 45 percent of total investments made in the Saudi kingdom by other members of the Arab League, which came to around $12.9 billion. The UAE also invested a total of almost $34 billion in other Arab League member states, accounting for more than one-third of all foreign direct investments regionally.

In terms of the value of licenses granted by the Saudi Arabian General Investment Authority, the government institution responsible for managing investment and economic liberalization in the country, the UAE again came out on top with $32.84 billion dollars already committed, which is around 40 percent of all licenses approved by the authority since it came into force more than nine years ago.

Yahoo! buys Maktoob

In a bid to weaken the global Internet search-engine leader Google, the alliance between tech giants Yahoo! and Microsoft made its first foray into the Middle East. Last month Yahoo acquired the Jordan-based Arabic Internet portal Maktoob. The specific terms of the agreement were not publicized at a press conference in Dubai where the announcement was made. But several sources have put Maktoob’s price tag at $70 million to $85 million. The deal will provide Yahoo with its first portal dedicated to the Arab world and allow it to take advantage of Maktoob’s more than 16.5 million unique users.

The deal, however, does not include several of Maktoob’s products, such as their auction site Souq and their prepaid card payment system CashU, which will become part of the Jabbar Internet Group.

“Maktoob is a terrific local brand,” said Yahoo’s Senior Vice President and Head of Emerging Markets, Keith Nilsson, at the press conference where the deal was announced. “Yahoo will be combining its global technology and Maktoob’s local Arabic content.”

A substantial share of the company was previously acquired by the Dubai-based private equity company, Abraaj Capital, which sold its share to the American Tiger Global Management, which will now go to Yahoo.

“Yahoo and Maktoob are natural partners and this combination should help energize the Internet market in the region as a whole,” stated Samih Toukan, founder of Maktoob in a press release issued by Yahoo. “We are excited about Yahoo building a stronger presence in the Middle East and bringing its compelling suite of services to Arab users in Arabic.”

The deal comes on the heels of an expected increase in regional online advertising, which is projected to grow by 35 to 40 percent this year according to Madar Research.

Saudi Arabia deals well with low oil prices

The outlook for the region’s largest economy, Saudi Arabia, will “remain broadly positive” despite the ongoing economic downturn, according to an International Monetary Fund executive board report released last month. The IMF expects the Saudi Economy to contract by 0.9 percent this year, down from a 4.2 percent growth in 2008, because of lower oil prices. The Fund praised the kingdom for its leadership in stabilizing oil prices through increasing market supply despite falling oil prices.

According to the IMF, the amount of gross domestic product that is derived from oil revenue in the kingdom is expected to shrink by 10.3 percent, while the non-oil sector is predicted to expand by 3.3 percent due to an increase in government expenditure. The Saudi government has been keen to invest in infrastructure projects since the onset of the global downturn. Accordingly, the kingdom has pledged $127 billion for infrastructure this year, which represents a $18 billion increase on the amount spent in 2008. The report also stated that the Saudi banking industry “remains profitable and well-capitalized with low non-performing loans,” while noting that the Tadawul, the Saudi Stock Exchange, fell 46 percent in the last quarter of 2008.

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Internet & Communications TechnologySpecial Report

The next generation of business applications

by Executive Staff
written by Executive Staff

There was a time when a computer was the size of an entire room and the only people who knew how to use it were the technology buffs at universities. Those days are over. Today almost a billion people worldwide have access to a computer or the Internet. Those billion people have also become accustomed to a flexible and personalized interaction with their computing devices and are today demanding the same from the systems they use in the workplace.

Accustomed to the latest Internet applications available in their homes, technology users at work are asking for more from the standardized information technology systems they use in the office. A recent study carried out by IFS showed that 80 percent of users want to be able to individualize their working environment, as they can on Google, Twitter or Facebook to boost their productivity. The ability to adapt business applications to a specific task, experience level and even the physical environment (on the road, for example), goes beyond simply the look and feel of an application interface and increased productivity. The idea is to design an ergonomic business application that can be truly tailored to the individual’s needs.

Enterprise software companies that manufacture organization-wide IT solutions have been slow to recognize the change in end-user expectations. The ‘20-somethings’ who grew up with the Internet are now taking on management roles and bring with them a level of expectation from software in the workplace that hasn’t been seen before. A total of 64 percent of our survey respondents said that these elements influence their buying decisions.

As such, the “add-on sale” business model that enterprise resource-planning software — the formal name for organization-wide software — offered in the 1990s is no longer up to par with component-based, agile systems that provide a significant level of individualization, which have become commonplace.

Web-based sites and applications, such as MSN, MySpace and Facebook were all designed to be as simple and easy to use as possible, not to mention readily accessible through different browsers and devices. Hence, it’s no surprise that 34 percent of people surveyed believe web-based applications are the most intuitive types of software to use.

With businesses beginning to seek applications which require less training before workers can be proficient users, ‘zero training’ applications such as those designed by Google are becoming the benchmark for the business application industry.

With only 6 percent of respondents to our survey claiming they do not waste any time using enterprise applications, there are clearly many software companies that need to improve the usability of their products in order to help staff do their job better.

So how can things be improved?

First, enterprise resource planning solutions need to provide users with the ability to personalize the user interface, something 80 percent of survey respondents agreed would help them improve personal productivity.

Second, solution providers need to enable their applications to incorporate, share and store information from web-based resources such as maps, travel information, prices and weather reports. These elements will prove essential to providing background information for business activities as diverse as planning work orders, scheduling visits from service engineers or adjusting project-based activities to fit with changes in demand, pricing, costs or available resources. Seventy-eight percent of survey respondents would like to have such capabilities.

The ability to easily search for and find information is also an essential item that has been generally overlooked by solution providers. According to the survey, searching for information was the second largest time-wasting activity for professionals. Integrating an intuitive Google-style search tool would make it easy and quick for users to find what they are looking for within business applications.

Finally, our research also showed that 89 percent of respondents agree that better collaboration with colleagues would improve the productivity of their organization. Today, users are accustomed to multiple channels of communication and data sources. Enterprise applications must also make it easier for workers to enlist the assistance of colleagues, delegate to team members, and follow up on others’ actions, while working with the processes and data held within the application.

Working with different types of information, colleagues and suppliers in a global and mobile market is a business reality we all face. Employees need and deserve a modern business system that they can individualize to enable them to work smarter to meet the demands their company places on them. This gives them the ability to individualize their working environment to fit their role, how they work, where they work, how they like to communicate while integrating multimedia web content to improve productivity and aid collaboration in the workplace. 

A software application with these capabilities will deliver a unique working environment for each member of staff. It will improve their productivity and their relationship with the system, bringing about a sea change in application design and delivering the vision of the ‘individualized’ business system. Solution providers would do well to listen to the call of the market.

Ian Fleming is managing director of IFS, Middle East, Africa and South Asia

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