Skyscrapers are not the only structures to tower above the UAE’s golden sands. Dubai, the business hub of the emirates is bracing itself for yet another new media comer: the Arab Media Group (AMG), a Dubai government communication company and part of TECOM (Dubai Technology, Electronic Commerce and Media Free Zone Authority). According to Patrick Samaha, the company’s head of marketing, “AMG was founded in 2005 and currently includes nine radio stations, three newspapers, television stations, printing and distribution activities, an events management arm and outdoor advertising.”

The company was initially launched in 2001 under the name ARN (Arabian Radio Network), which has since morphed into eight radio stations — Dubai Eye, Dubai 92, Pulse, City, Hit, Noor Dubai, Al-Khaleejiya, and Al-Arabiya. The most recent addition is the station Virgin Dubai, a branch of Virgin International.

Today, the company is a full media group. With a workforce of 2,000 employees, occupying four office premises in Dubai as well as other locations in the country, the company has sprawled into various sectors of media activities. “We are not called the Arab Media Group for nothing,” boasts Samaha, “we provide different media across the entire spectrum.”

MTV and Nickelodeon Arabia

Recently, the company has gained wide publicity for its television deals with MTV and children’s network Nickelodeon, through its broadcasting division Arabian Television Network (ATN). The subsidiary will incorporate MTV Arabia as well as four other channels, three of them to be launched before the end of 2007.

The children’s channel, Nickelodeon Arabia, is scheduled to begin broadcasts in 2008. According to AMG, it will reach into a market of more than 36 million TV households and its potential audience is estimated at 190 million people across the region. According to Samaha, “Programming will include a mix of international content from Nickelodeon’s portfolio as well as local Arab productions.” Nickelodeon Arabia is part of a long-term relationship between AMG and MTV Networks International. “It is a great partnership that we are actively building on,” Samaha added. “This cooperation will allow us to produce programs that are reflective of local culture and values, something that also defines our approach to the MTV Arabia station.”

The latter is the first TV music brand to specifically target the youth in the Arab region. The Dubai station features both international and Arabic music combining international content with Arabic productions of popular MTV programs. The station is managed by Arabs for Arabs with the MTV crew currently including people from different nationalities, such as Lebanese, Egyptians, Jordanians, Saudis, and others. The marketing manager also pointed out that MTV programs will be adjusted to local cultures and sensitivities. The channel is showing Hip-HopNa (Our hip-hop), a show that will be co-hosted by a Saudi rapper and Palestinian-American producer Fredwreck (Farid Nassar), who has worked with Snoop Dogg, 50 Cent, and other music industry giants. Farid Nassar was in Lebanon a few months ago hosting a rap contest organized by MTV in Beirut. “We are not only concerned with what is fashionable but also by what is right for our region, and we do not intend on moving away from this philosophy. Today, we are aware of the responsibility that comes with engaging Arab youth. While AMG brings the world to the Middle East, it also brings the Middle East to the world,” explained Samaha. MTV viewers seem to agree: according to the network, 60% of respondents loved MTV Arabia’s new website.

The online division, Arabian Digital Network (ADN), which complements other areas of AMG’s activity is in the process of introducing 18 websites by early 2009 with www.MTVa.com among the first websites to jumpstart the process. AMG has also experimented with ShoofTV.com, a website for posting user-generated content.

Publishing and events

Also falling under the AMG umbrella is its publishing arm, Awraq, showcasing English language newspaper Emirates Today, its Arabic counterpart Emarat Al-Youm, and the Arabic broadsheet Al-Bayan.

Events management has also become a focus of AMG, which has created a subsidiary division, Done Events, which among other things, is bringing world-class shows to Dubai, like the Broadway musical “Chicago” in 2006. 

AMG owns an outdoor advertising company, Shoof. “We are the fastest growing company in this particular segment,” Samaha pointed out. In addition to previously listed segments, AMG operates a logistics and distribution company, Tawseel, and a printing press, Masar. Tawseel will be offering advanced distribution and logistics support to the media industry, comprising retail and direct marketing activities, as well as subscription management facilities for local, regional and international publishing houses.

“AMG is aware of the media’s growing role, and offers an experience of seamless and perfectly integrated services,” added Samaha. According to the manager, the company’s diversified product base facilitates and enhances its market position while adding to its overall strategy. “When you use the name Arab Media Group, you need to feature the full line of media products. When it comes to commercialization, we are definitely more efficient as a group; we work in a full surround sound effect. It also makes more business sense for our clients, since we can reach out to a broader audience by using more than one choice of medium whether, radio, TV or outdoor media.”

The Group’s target market varies also from one sector of activity to the other and, according to Samaha, AMG’s audience differs from a local to a regional one depending on the medium used. While MTV Arabia targets Arab youth, the radio arm, ARN, targets Gulf nationals, other Arabs, Westerners as well as Asians. “You can call us a media solution provider. We create content, write it, publish it, print it, air it, advertise and sell it. I believe we are the only group to offer an A-to-Z approach, across so many vehicles, and this is why we are called the Arab Media Group.”

When asked about Abu Dhabi Media Company, the new rising media star of UAE’s capital, Samaha answered, “Competition is good and allows us to strive for the best. Evidently, there is always a need for new groups. We produce consumer goods, and the UAE’s growing population implies the need for a larger variety.” He believes that AMG has helped shape the industry by offering a large basket of brands under one banner. “We are not launching just any product but a very special one, and I believe that for now growth lies mainly in television, but who knows what tomorrow may hold?”

Several hundred Kuwaiti trucks a day roll over the Abdaly border crossing into Iraq, where the containers are then transferred onto Iraqi vehicles for the onward journey. Meanwhile, at the Safwan border crossing, only 40 minutes away by car, over 1,000 trucks a day pass through the Virginia-Hobari military camp to enter Iraq.

Such a difference is not an indicator of Iraq’s economic particularities or the security situation. Trade with other immediate neighbors — Syria, Turkey, and Iran in particular — is resurging, with Tehran and Damascus benefiting the most.

What this disparity really shows is that nearly five years after the invasion of Iraq, Kuwaiti cross-border trade is still predominantly traffic for the US military and associated dependents.

This reality runs against the grain of one of the expected economic spin-offs of the overthrow of the Saddam Hussein regime, that Kuwait would become the Gulf’s logistical hub to access Iraq’s emerging market after decades of hostility and minimal economic interaction.

But Kuwait’s barriers to foreign investment, negligible sea and air trade due to infrastructure shortcomings, and overly zealous, yet equally lethargic customs officials who create logistical headaches, are all holding back Kuwait’s transit hub potential.

Bolstering relations

“After the invasion there was a flood of companies coming to base themselves here but after several months they pulled out and went home due to the vague tax and investment laws,” according to Hani Mhanna, the chairman of the Iraq Trade Bureau in Kuwait.

By law, Kuwait requires foreign businesses to be 51% owned by a local investor, as all the GCC countries required in the not-so-distant past. But Kuwait is lagging behind other Gulf countries in revoking such measures, which have been dropped by the likes of the Emirates and Qatar, in efforts to attract FDI and diversify away from oil revenues.

With taxes as high as 45%, and foreign companies faced with paying taxes twice, to the government and the company’s local in-company representation, Kuwait’s draconian FDI laws have also resulted in foreign companies entering into illegal practices to bypass regulations to establish a local presence.

“This taxation on foreign investors is stopping companies from setting up here. It’s been a mess and not enhanced since the 1960s,” Mhanna noted, adding that this has affected cross-border trade with Iraq to the benefit of other countries that have inked bilateral trade agreements with Baghdad.

According to vice president of General Trading and Contracting in Kuwait, Lorie Killingsworth, logistics are coordinated through only a few countries. She said, “Foodstuffs are all from Iran and Turkey. I was surprised. But they are pretty much the only countries that will deal with Iraq.”

Iran has seen trade blossom with Iraq over the past five years, with Iraq’s direct purchases standing in 2007 at $2 billion, and a further $2 billion more in ‘exchanges of kind.’ And this, suggest analysts, is only the tip of the iceberg.

The Islamic Republic has numerous plans in Iraq, including establishing a car plant near Baghdad, funding industrial projects, constructing two 300,000 barrels per day pipelines between Basra and Abadan, as well as building electricity generators in the south. The most recent electric generator in Sadr City is worth $150 million and produces 160 megawatts. Tehran has also signed bilateral trade agreements with Iraq’s Kurds, with trade estimated at $1 billion in the past year.

Turkey, meanwhile, accounts for some $4.9 billion of Iraq’s imports, roughly 23% of the $20.8 billion imported a year. This is primarily with Iraqi Kurdistan, with Turkey accounting for 80% of FDI in the semi-autonomous area.

However, Istanbul is mulling selective economic sanctions against the Kurdish area due to ongoing forays by Kurdish rebel groups based in Iraq against Turkish forces, which prompted multiple military incursions late last year. Further political differences could also flare up again between Iran and Iraq, reaffirming Syria and Jordan as primary transit hubs, with Syria accounting for $4.8 billion (26.9% of all imports) and Jordan $1.3 billion (6.3%) of Iraq’s imports. Damascus has also just secured a lucrative contract to transport Iraqi grain imports and Syrian Trade Minister Amir al-Khalil in November said mutual trade agreements would be “activated”.

Other factors that will shape trade with Iraq could be the division of Iraq into three semi-autonomous regions for Shiites, Sunnis, and Kurds out of the country’s 18 provinces, as put forward in the Iraq Federalism Bipartisan Amendment to the 2008 Defense Authorization Bill in the US.

Iraqi federalism would mean that Kuwait would have to move goods through a Shiite-controlled corridor into Iraq.

On the ground however, this is already the modus operandi. “There is an unwritten code, a Shia truck will not go to the Sunni side, and vice-versa,” said Killingsworth. And although security is better, she added, it is still an issue. “It’s an unknown. You don’t know what’s going on. Recently, two housing units our trucks were carrying vanished, just outside of Basra.”

But once the security situation improves — the ever-present gorilla in the room for Iraqi trade issues — it is expected that traffic will shift from Kuwait’s military border crossing to the commercial side.

“That crossing is untapped and we will see a huge increase in business for Kuwait once there is peace,” believes assistant managing director of Global Logistics Services and Warehousing in Kuwait, Ahmad Hammauda.

Signs that this is slowly underway are evident at the border, with the US Camp Naval Star at the Abdaly civilian border closed down in September. Nonetheless, despite the current geopolitical tensions affecting Iraq’s neighbors, Kuwait, with minimal industry or agriculture, has yet to develop its transport hub status or to sink petrodollars into Iraq.

Killingsworth maintains that “Kuwait’s potential is in financial investment, setting up malls and selling processed foodstuffs, as well as partnerships with the oil ministry. I’m sure M.H. Alshaya [a Gulf retailer for clothing giants H&M and Marks and Spencers] will be there. Kuwait has this over Iran.”

Imports into Iraq (2006)

Iraqi Exports (2006)

By sea, by air, or across the desert?

Political animosity between Kuwait and Iraq has been a prohibitive factor in fostering relations, particularly over their turbulent history, the 1990 invasion, and the widely held notion in Iraq and much of the Arab World that Kuwait is a geographical part of Iraq. However, unlike the hostility between neighbors in other parts of the region, Iraq does have a diplomatic presence in Kuwait and Iraqi politicians have visited the country since 2003.

Hammauda thinks, “The hope is to turn cross-border relations into what they were in the 1950s and 1960s, when Kuwaitis went shopping in southern Iraq, and Iraqis came to Kuwait.”

To turn this hope into a reality, in November 2007 Kuwait earmarked $60-80 billion for infrastructure and construction projects, including airport expansion, road extensions and a North-South GCC railway. One major project will be the $1.2 billion port in Bubiyan Island, northeast of the Kuwaiti mainland and close to the Shatt al-Arab waterway that winds inland to Basra.

“Kuwait should focus on logistics, that’s why Bubiyan is being developed and free zones are at the border. Bubiyan’s location is a gold mine for access to Iraq, Iran, and eastern Saudi Arabia,” according to Hammauda.

However, like the overhaul of Kuwait’s foreign investment laws, the Bubiyan port project has been on the drawing board for years. Foot dragging by a government complacent with high oil revenues has prevented Kuwait’s sea cargo sector from developing, with a public-private joint venture inked in 2005 that should have seen the port completed by 2008. Equally, the viability of the port depends on extensive dredging to remove the mud that is washed down from the Shatt al-Arab, a factor that has prevented deep sea vessels from docking, in addition to the ships sunk and scuttled during the 1980-88 Iran-Iraq War. The downed ships continue to block sections of the northern Gulf.

“Kuwait is not doing a very good job, there are hardly any shippers that come here, as mother vessels go to Dubai then to here,” said Hammauda.

Deciding on whether to use land or sea, he said his company chose the three- to four-day land crossing from Dubai rather than use feeder vessels from the Emirates due to the uncertainty of customs and loading times.

This means, however, that for goods to enter Kuwait or Iraq, they have to cross Saudi Arabia, which has its own associated problems.

“Our biggest problem, outside of security in Iraq, is customs, mainly in Saudi Arabia and Kuwait,” Hammauda believed. “Our second problem is over-protection. There are layers of bureaucracy to check that a container is not smuggling in a bottle of Jack Daniels. Instead of investing in technology, they are increasing bureaucracy,” he added.

There is also the rather paradoxical position of two of Iraq’s potentially biggest trade partners, Saudi Arabia and Kuwait, building US-Mexico border style walls to keep Iraqis out (with Saudi’s slated to cost some $7 billion) while at the same time trying to boost bilateral trade. As Hammauda sees it, “Walls are going up in Kuwait and Saudi Arabia. For us, this will make it more difficult to do business.”

It is perhaps no wonder then that Iraqi-Kuwaiti trade is languishing while Dubai, several hundred kilometers from Iraq, is enticing Iraqi businessmen to the Jebel Ali Free Zone, and air cargo operators are opting for the Emirate rather than charter aircraft out of Kuwait, prompting Killingsworth to comment, “You wouldn’t think of it but Dubai is doing well out of Iraqi business.”

As if building the world’s tallest building and investing in projects throughout the MENA region wasn’t enough, Dubai-based property giant Emaar is rolling out its presence in the world’s second most populated country.

Through a 2005 joint venture with Indian development company MGF, Emaar-MGF has been involved in multi-billion dollar real estate projects from Delhi in the north to Hyderabad in the south, and plans to build in India the world’s largest mall and a Giorgio Armani luxury hotel.

But Emaar is not the only Gulf developer in the subcontinent seeking a slice of a burgeoning middle class with extra purchasing power. Nakheel, a subsidiary of Dubai World, is hot on Emaar’s heels, inking deals in 2007 worth $25 billion, along with Dubai-developer Damac Properties announcing they were to invest $5 billion in India over the next five years.

Other private Gulf investors are also to sink $5 billion into developments in a sector analysts forecast will surge by 700% in the next decade.

The sudden foray into India by Gulf investors is not confined to the likes of Emaar and Co. seeking to build real estate and malls. With transactions in the market expected to grow from $14 billion to $102 billion in the next 10 years, $150 billion to be spent on infrastructure, and Indian stock markets riding high — Bombay’s bourse rose above 20,000 points for the first time in late October — Gulf investors are scrambling to get in on India’s boom. Bahrain’s TAB Bank now has two funds in Indian bourses worth over $220 million and Dubai’s Abraaj Capital has a $250 million fund with Mumbai’s Sabre Capital.

Other developments are also afoot, with Dubai-based developer ETA Star Properties to develop a $923 million ‘infotech’ park in Chennai, and the Gulf Finance House to back the $395 million Energy City India, cementing Delhi’s energy links with the GCC.

And at the end of the year, RAKEEN, a property arm of the Ras Al-Khaimah government, formed a joint venture with India’s Trimex mineral group to spend $5 billion on developing residential, commercial and office space.

As Mohammed Ali Alabbar, chairman of Emaar Properties, told the press, “India is only an hour away from us, it is our true China and with the size, population, culture, economic policies, and growth that exist in India, it’s a great opportunity.”

Top 10 cities worldwide for office space

Bullish market

Property and mall developers are riding high on India’s 7% annual economic growth and a middle class that is expected to surge over 10-fold, from 50 to 587 million by 2025, according to a McKinsey Global Institute study, propelling 5% of the population in the middle class bracket to some 40%.

But with an economic boom as well as a rising population — 1.1 billion and growing — property prices are spiking. And the rush to develop real estate in India, as for any emerging market, is also about the scramble for land.

Mumbai is now the second most expensive city globally for office space, with rent rising 55% in the last year, and New Delhi in the eighth slot, up 34.4%. Such rising costs were reflected in a $10 billion Nakheel development last year, with land accounting for some 40% of the price tag. As a result, Emaar-MGF has embarked on a $12 billion pan-India program that will include special economic zones, hospitals, residential units, hotels and malls.

“We have a pan-India presence, and will have a presence in all 22 states through the land we have acquired and are in the process of developing that,” said Anupama Chopra, head of corporate communications at Emaar MGF Land Limited.

In bulging-at-the-seams cities like Bombay with 12.6 million people and Greater Delhi with over 14 million, developers are focusing on the tried-and-tested in the Gulf ‘integrated township’ model of residential and retail space.

“This is something that is prevalent in the rest of the world but not in India,” said Chopra.

Utilizing the same model as in the Gulf, most of Emaar’s architectural designs for Indian projects are the same, “trying to replicate here” what worked in Dubai, said Beedisha Chakrabarti, corporate communications manager at Emaar-MGF. One of the projects, in Gurgaon, a satellite city of Delhi, is to be called Palm Springs.

To raise funds for such projects, Emaar-MGF plans to sell a 10% stake this year through an IPO, which bankers suggest might raise some $1.5 billion. When Nakheel’s joint venture partner DLF listed on the Bombay stock exchange in July, $2.25 billion was raised in India’s biggest IPO, and shares have since gained 30% in the past six months.

Retail dreams

Part of the land Emaar and Co. are investing in land is for the growing retail market, which is expected to grow by 14 times by 2012 and retail chains to expand 25% a year, currently at only 5% of the market. Indicative of growth is the surge from 150,000 square meters of retail space and 30 malls back in 2001 to 2.5 million square meters of space and 230 malls last year. But compared to China, the country has some way to go to match its neighbors superpower retail space growth, which surged to 222 million square meters between 1995 and 2003.

Negating the retail space difference, however, will be Nakheel’s joint venture partner DLF’s 300,000  square meter Mall of India. And not to be outdone, Chakrabarti said Emaar wants to replicate the Dubai Mall in India. “We are looking at doing India’s biggest mall, as we cannot compete with our own product by having the biggest in the world,” she said.

However, at 583,000 square meter the Indian version will out trump Dubai Mall’s retail space of 520,000 square meter.

In India’s current boom climate — the dream of Dubai super-sized — it would therefore not seem overly farfetched to imagine Emaar building India’s tallest building some time soon. But what is more probable is the creation of development icons that have made the Gulf famous: offshore residential island projects, like the World and the Palm. “It’s on the drawing board somewhere but not right now,” said Chopra.