Lebanon

American-Lebanese Partnership – Launches new portal

by Executive Staff
written by Executive Staff

This month, the US-Lebanon Partnership Fund will launch its new e-portal, which aims to promote trade between the Unites States and Lebanon through business matching, enhancing the e-commerce capabilities of local firms and disseminating sector-specific information. The partnership—which was initiated by the White House and a group of American business leaders last September—announced its five ‘work streams’ supporting economic growth in Lebanon at the Paris III donor conference in January.

Although its goals are ambitious, the exceptional caliber of the partners involved adds credibility to the project. The partnership was founded by Craig Barrett, chairman of the Intel Corporation; John Chambers, chairman and CEO of Cisco Systems; Yousif Ghafari, chairman of GHAFARI, Inc.; and Dr. Ray Irani, chairman, president and CEO of Occidental Petroleum; Microsoft CEO Steve Ballner recently joined the partnership as well. According to the partnership website, the project is founded on the idea that, “a stable and secure Lebanon has the potential to become an anchor of stability in the Middle East. And Lebanon’s fundamental characteristics—a skilled workforce, entrepreneurial spirit and commitment to democracy—give us hope that, with support from American citizens and businesses, Lebanon can become this anchor.”

Furthermore, as Intel’s Barrett adds, “Lebanon will only be rebuilt through actions improving the educational and economic infrastructure.”

The five work streams include crisis relief and response, information communication technology (ICT) infrastructure, workforce training, private sector revival and connected government.

The first work stream, crisis relief, joins global efforts in the wake of last summer’s war with Israel. It primarily addresses the needs for housing, schooling, and adequate nutrition, working hand in hand with various NGOs such as Habitat for Humanity, UNICEF, Mercy Corps and American Near East Refugee Aid.

The second work stream promotes innovation, investment and development of ICT infrastructure by assisting the Lebanese Telecommunications Regulatory Authority. “The partnership hopes to contribute in developing the 21st century telecom sector, as studies show that countries with proper IT structures benefit the most from an economic standpoint,” explained an American embassy official. An international gateway and internet exchange point are also scheduled to launch in the month of March. The endeavor, supported by the American Chamber of Commerce, provides a networking and communication platform for American and Lebanese businesses. In addition, it may include the donation of equipment, training and consulting services. “The goal of the portal is to establish commercial dialogue, highlight opportunities in Lebanon and facilitate business partnerships in a result-driven manner. Technical assistance through online resources and seminars will also be offered,” says Aram Zamgochian, project director at the partnership. Phillip Farah, a partner at Cisco, underscores the increased visibility in the US markets offered by the portal to Lebanese companies, which will drive the demand side of the equation.

Tapping Lebanon’s human resources

The third work stream, workforce training, taps directly into the country’s rich human resource pool. 500 Lebanese interns will be placed in Lebanon and the United States over the next three years, with Cisco alone committing to host 100. “The internship aims to significantly improve skills and marketability of candidates and will be either held locally over an 11 month time period, or for 6 months in the States. Candidates will be encouraged to return to Lebanon at the end of the training,” explains Georges Akiki, Cisco’s program manager for the partnership. The company has also pledged to double the number of its networking academies in Lebanon, increasing from 21 to 43.

Private sector revival—certainly the boldest work stream—seeks to create jobs and push Lebanon into the gleaming waters of the 21st century global economy. “The secret of American productivity resides in the ease of doing business, which contributes to our high employment rates. This model needs to be urgently reproduced in Lebanon, where unemployment rates amount to 30 or 40 % in some regions,” reports the embassy official. Through the portal, global companies can reach out to Lebanese businesses by initiating joint ventures, capital injection, co-branding, R&D partnerships and licensing agreements. Six key industries have been identified as priority areas, including technology, tourism—with a focus on eco- and heritage tourism—banking and finance and agribusiness; developing essentially niche markets within sectors such as health care and manufacturing is also on the agenda, with 120 projects already under discussion. “We feel that the business-matching approach is more suitable than any other and can generate a self-perpetuating momentum. We realized that companies are more easily mobilized when they work on specific projects. They can also choose to directly invest in local funds, namely the Bader equity fund or the recent BEI and Byblos fund. Our goal is to set up an ongoing process that can deliver significant value over the years,” says Farah.

According to Mohamad Chattah, an advisor to Lebanese Prime Minister Fuad Seniora, the last work stream—dubbed “connected government”—is still in its nascent stage. “The partnership will enable intra and extra online communications with the government, facilitate access to public e-services as well as the creation of a connected community,” adds Akiki.

Finally, the partnership will be teaming up with Overseas Private Investment Corporation and the Near East Consulting Group, as well as key Lebanese organizations such as Kafalat, IDAL and the AmCham. “Through the efforts of this partnership, we can make a meaningful contribution to help position the country for leadership in the future,” emphasizes Chambers. “The time to act is now.”

For further information, visit the partnership website: www.lebanonpartnership.org
 

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Foreigners in their own country

by Rana Hanna
written by Rana Hanna

This February, the US Democratic Senator from Illinois Barack Obama announced that he was running for the American presidency in 2008. Other than being erudite and bright, the 45-year-old Mr. Obama has attracted the media’s attention because of his very un-WASPish background and the fact that he is genuinely African-American: as his “unpronounceable name” (his words) might suggest, Mr. Obama is half- Kenyan; It is his mother who is the American.

So here we have an African applying for the top job in the world. All very well you might say—it’s all in keeping with the wonderful opportunities afforded by the US to immigrants. However, Lebanese mothers whose children were sired by foreign fathers might not instantly applaud Mr. Obama’s ambitions; in fact they would probably be green with envy. Their children cannot even be Lebanese, let alone run for political office. Furthermore, their kids cannot apply for a passport or benefit from state services, such as free health care and education.

Against human rights and the Lebanese Constitution

This is a blatant breach of human rights and a breach of the Lebanese Constitution, according to which men and women are equal before the law. Unfortunately, this is the same law that declares a Lebanese citizen to be “a child born to a Lebanese man.”

There is no official explanation given as to why only Lebanese men can sire Lebanese citizens. Unofficial reasons include the fear of destabilizing the already delicate sectarian balance due to the many Palestinians who have been residing in Lebanon since 1948. But according to the Collective for Research and Training on Development-Action (CRTD-A), a Beirut-based NGO that contributes to the social development of local communities across the Arab world, less than 1% of registered marriages in Lebanon are to Palestinian men, a statistic that renders that argument null and void. As for the supposedly hair-trigger Lebanese sectarian system, well, that broke down decades ago and has been in constant shift ever since. In other words, there is no “delicate balance” to uphold.

The fact is that all the arguments given are merely excuses. The real issue is that women in this country are not really considered citizens. In fact, Lebanon does not even fully comply with the 1979 United Nations Convention on the Elimination of all Forms of Discrimination against Women.

That we are not alone in this quagmire offers little comfort. Most countries in the Arab world do not grant women the right to pass on their nationality to their spouse or children. However, there have been changes. Last February, Morocco granted women the right to pass their nationality on to their children. Algeria did the same last year and Egypt two years ago. For a country that brands itself as the Switzerland of the Middle East, we are far behind.

It is difficult to pinpoint the social and economic effects of such discrimination against women. Why should the children of foreign women married to Lebanese men, who probably do not even live in the country, be considered more Lebanese than children reared in Lebanon, who speak Arabic and attend Lebanese schools and are, in natural fact, Lebanese in all but name?

Many obstacles to children, society

And get this: While American sociologists and economists ponder the effects of the increasing number of women leaving the workforce, Lebanese women have to worry about their children not being able to enter it. Some progress, albeit very little, has been made (new administrative procedures allow women to give their children the right of abode in Lebanon, although this right also exists for former diplomats to Lebanon who wish to remain in the country). But these children will still have to apply, and pay for, a work permit, putting them at a major disadvantage to their Lebanese peers as employers often think twice about hiring foreigners.

Interestingly enough, if a child is born in Lebanon and declared illegitimate and no foreign link is established, then the Lebanese nationality is theirs. So mothers, don’t take it personally, it’s the father’s fault.

Isn’t it always?

RANA HANNA is the Lebanese mother of three Cypriot children

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Lebanon

One step closer

by Executive Staff
written by Executive Staff

In the past two years, Lebanon’s economic progress has been noticeably erratic, to say the least: after posting promising import and export figures in 2005 ($10 billion and $2 billion, respectively), the heavy burden caused by the recent Israeli conflict and the ongoing political deadlock has been a deadweight on Lebanon’s upward trajectory. However, a promising sign emerged in February 2007, when—in spite of the political turmoil—the Ministry of Economy and Trade and USAID signed a Memorandum of Understanding (MOU), bringing Lebanon one step closer to World Trade Organization (WTO) accession.

The MOU is not the first agreement of its kind for Lebanon. Free trade agreements have been signed by the Lebanese government with the EU, the EFTA States (Switzerland, Lichtenstein, Norway, Iceland) and the GCC; Lebanon is also a member of the GAFTA—the Greater Arab Free Trade Area. However, the country has yet to join the WTO. “The WTO accession would be a certificate of excellence,” affirms Fadi Makki, former director-manager at the Ministry of Economy.

An arduous journey

The journey towards the WTO has been arduous for Lebanon. In 1999, the country first applied for WTO accession. In 2001, it presented a Memorandum of Foreign Trade Regime (MFTR)—a snapshot of the country’s trade, institutional and legal regimes. Four Working Party meetings have since taken place in Geneva, where member states examined and discussed Lebanon’s responses to questions about the MFTR. This essential phase of the negotiation process will determine the long-term structure of Lebanese tariffs and quotas.

With the new MOU, the process’s natural extension, USAID will offer technical assistance to the government, with the support of global consulting firm Booz Allen Hamilton. “The [original] memorandum has been in place since 2000 and extended regularly ever since,” explains Lama Oueizan, project manager at the UNDP. “The memorandum ensures development of the technical capacity of Lebanon’s institutional base for negotiating and implementing the WTO agreements through training and support.”

The MOU’s main objectives are the evaluation of Lebanon’s policies, laws and institutions, problem identification and the introduction of necessary reforms to conform foreign trade regulations to WTO requirements. “In this respect, laws will be abolished and new ones will be drafted. Some will be enacted to fulfill WTO technical requirements. Such reforms are related to animal quarantine, fruit and plant safety, anti-dumping, standards and norms. Other laws will depend on the negotiation process as each country sets its own requirements according to its own trade priorities,” adds Makki. USAID will also provide Lebanon with assistance in preparing documents necessary for the negotiation process. “We will build awareness within the public and private sectors about the accession process as well as its impact on Lebanon’s economy,” says Raouf Youssef, mission director at USAID.

“Accession to the WTO will establish trust for Lebanese commodities, it will increase exports and open markets for local companies which will have to meet new quality standards,” notes Youssef. Companies will also likely focus on niche markets, such as olive oil production. Makki believes accession will help reduce prices, increasing competition and improving the quality of services rendered, and thus have a positive impact on the overall business environment. “Membership will contribute to the system’s transparency and openness, and provide access to dispute settlement mechanisms,” adds Makki. Countries operating outside the WTO may see their exports obstructed for any number of reasons by others: with WTO membership, countries are protected and have the possibility to sue other members for unlawful trade practices. Private and public monopolies are also put to an end.

Paying the price

“Like in any transaction, there is a price to pay,” Makki underscores. Tariff reduction will negatively affect sensitive sectors such as fruits and vegetables, cement, ceramics, cables and clothing, and the government will want to protect some segments. Reforms necessary for WTO accession, such as a restructure of subsidies in agriculture, especially tobacco, will be strongly resented by populations in certain areas. In addition, discretionary measures on trade policies will be removed and traditionally closed service sectors will be liberalized. Nonetheless, Youssef insists that, “If one looks at the overall picture and the country’s best interest, accession to WTO will definitely be supported by the population.”

According to Makki, one possible solution for sensitive sectors could be found by negotiating transitional tariffs, which reduce gradually over time. Trade experts also agree that awareness campaigns are essential to the accession process, in order to win over defiant stakeholders such as businesses and labor unions. “They need to understand that trade liberalization will not only mean increased competition, but also facilitate access to foreign markets,” says Makki.

In light of the recent Paris III conference, which drafted major reforms for Lebanon’s economic and institutional framework, the MOU can be seen as a natural continuation of structural amendments. “Some measures are common to both the Paris III conference and WTO accession. As an example, certain reforms envisioned by Paris III facilitate business ventures by introducing one-stop shops. Joining the WTO completes this endeavor by offering protection to investors through IPR-intellectual property rights and court litigations, hence improving business practices,” explains Youssef.

Of course, the big question still remains: How far is Lebanon from joining the WTO? “Minister Haddad wants to achieve accession in 2007,” states Youssef. Ironically, the Ministry of Economy’s website still schedules accession for … 2006.

Most experts believe, however, that the past year’s ongoing political instability has rendered efforts towards accession largely fruitless. Furthermore, as new laws require parliamentary vote, the institutional and legal standstill in Lebanon means that for the time being, accession to WTO in the near future may be little more than wishful thinking.
 

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Creativity on tap in Lebanon

by Dany Richa
written by Dany Richa

When it comes to discussing Lebanon’s role as the Middle East’s creative hub, it is not merely because of one or two reasons, but rather a series of factors that combine to create an environment conducive to providing a melting pot of ideas and proactive attitudes.

Lebanon is home to probably one of the oldest advertising cultures in the region, one that was creating competitive communication while other Middle East countries were still sloughing off colonialist “tuteledge.” This gave us a head start in honing our creative tools while at the same time being able to offer our talented graduates better job opportunities—Lebanon was the first country in the region to offer advertising at university level—and now we have dozens of universities, graduating hundreds of designers, art directors, copywriters, film producers and composers every year. No other country in the region can rival this. Simply put, we have the human capital and we know how to train it.

Our tradition for creativity also means that our professionals do not have to automatically look to the region—or the world—for work. Should they choose, they can work in Lebanon. This also makes it easier for those who use them. Highly qualifies and highly professional casting agencies, photographers and producers are based here and on tap.

Potential is there

Proof of Lebanon’s advertising potential is clear when one looks at the regional industry as a whole. Lebanon is home to many of the top CCOs and creative directors, who nonetheless provide an inspirational environment wherever they work in the region, nurturing and motivating others to cultivate a productive work ethic and fulfill their creative potential.

Lebanon’s quality of life makes it a natural environment for creatives to thrive. Its nightlife, mix of cultures, rich history, its innate ability to absorb positive cultural and social influences make it an ideal milieu in which to work.

Its liberal climate also offers creatives a wider and challenging range of areas in which to can test their talents. Areas such as tobacco, alcohol and politics are not automatically open to the advertising sector in other Arab countries, and the often risque and touchy nature of these sectors offers a fertile environment for the advertiser to plow his creative furrow and ultimately provide a deeper well of experience into which he can reach on future projects.

The Lebanese creative has the opportunity to work on local campaigns, unlike the region’s other creatives who, more often than not, have to work on Pan-Arab accounts. Working with local clients and, more importantly, targeting a local audience, gives the creative a chance to use specific local insights and cultural mores, which can lead to unique and groundbreaking results.

Think, for example, of a British creative who works on a UK campaign rather than a European one. The UK campaign will be able to tap into a more specific and richer cultural vein rather than a bland, safe, culturally unspecific and ultimately toothless campaign for the pan-

European consumer. That said, Lebanese creatives can also work on Pan-Arab advertising, which does give them access to bigger budgets and greater regional exposure for their talents. In fact, they get the best of both worlds.

Many are leaving

It is a shame therefore that many, especially in today’s climate of uncertainty and economic stagnation, are choosing to leave Lebanon in pursuit of work abroad. Undoubtedly, the Gulf offers more competitive packages and gives better exposure, attracting young creatives unburdened by family commitments, but it is also true that the Gulf, where the cost of living is increasing every year and where the daily rat race now rivals Europe and the US, is becoming increasingly expensive and stressful place to live. Ultimately, as they realize that, in the long run, Lebanon can offer just as much in terms of career and quality of life, more Lebanese expats will come home.

The Lebanese will continue to thrive in the creative world as their creative juices will continue to run, acquiring many talents, influences and skills along the way.

DANY RICHA is chief creative office (MENA)-Impact BBDO Group and president of IAA’s Lebanon Chapter

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Banking & Finance

Solidere’s new strategy Extends to Ajman

by Executive Staff
written by Executive Staff

The first deal under Solidere’s new strategy of regional activities in managing urban development projects is with the emirate of Ajman in the United Arab Emirates. Estimated at $13.6 billion, the project is a lot larger than one might have expected for Solidere’s maiden international venture, especially in terms of the 50% share of investment volume that the Lebanese company will reportedly assume. It is also—at least for the time being—a lot more enigmatic than one would expect from a project that wants to ring in a new and larger corporate identity.

The outline of the Ajman development program sounds like it is tailor made for Solidere. The rulers of the 259 km2 emirate—with a population of 250,000, it is the smallest among the UAE’s seven—are in search of a spanking new identity, which they want to achieve by building a new downtown. Sound familiar?

Called Al Zorah (but different spellings are in circulation), the new “unique” urban core on Ajman’s seafront will feature hospitals, hotels, homes, offices, retail, schools, a golf course and marina. The project is unprecedented in size for the emirate and should allow Ajman to attract investment, give it a higher economic profile and allow it to compete with heavyweights Abu Dhabi and Dubai.

Ajman’s development ambitions also include industry and infrastructure, including building a metropolitan rail link to Dubai. Abdel Fatah Farah, head of research and statistics at the Ajman Chamber of Commerce and Industry, told Executive that the emirate’s government focus on infrastructure will involve spending between $13.6 to $27 billion over the next five years.

“This will provide ample opportunities for investments, both foreign and local. We believe the growth in investment in 2007 will be close to 20%, and the lion’s share will go to the real estate sector,” Farah said.

According to the government of Ajman, the emirate has initiated $7 billion worth of real estate development projects since 2004. The Al Zorah project would swallow almost double of that amount in its projected development span of seven to 10 years. Another new project will be the Ajman Marina, with a price tag of $2 billion.

The role of Solidere in the creation of Ajman’s new identity would certainly involve planning and management of the urban development project. This is what the Lebanese company has built its reputation in and what shareholders approved in November as new activity outside of the narrow geographic confines of the Beirut Central District.

Receiving a four-fifth “yes” vote at the general assembly, the Solidere management got the green light to establish a new subsidiary for international activities. Solidere management announced that it would get involved in the Ajman project and assume a fee-based management role in a $1 billion real estate investment fund with Abu Dhabi Investment House.

Solidere would not channel domestic revenues or funds from existing operations into international ventures, the company’s chairman, Nasser Chammaa, said at the time.

Tight-lipped on funding sources

However, after the crown prince of Ajman, Sheikh Rashid Bin Humaid Al Nuaimi, announced that the Al Zorah project would be developed in 50-50 partnership with Solidere, the Lebanese company was tight lipped about the business model under which it will source billions in funding for the project.

Mounir Doueidy, Solidere’s general manager and chief financial officer, declined to give any information on the partnership agreement beyond what had been said by Ajman authorities. Citing confidentiality agreements as reason for his reticence, Doueidy confirmed only that “the investment in Ajman is part of Solidere’s plan to leverage its brand name and to export its expertise to the outside. The move has been agreed upon by the general assembly of course and this is one of our projects for expansion.”

The Ajman government has allocated $600 million to the Al Zorah infrastructure development in the next two years. A statement by Nuaimi said that the project would be financed through a mixture of private placement, pre-sales of properties, and government investments. The holding company for the venture will have a capital upward of $1.1 billion, according to the statement.

The emirati partners of Solidere in developing Al Zorah will be the Ajman Development and Investment Authority (ADIA) and Aqaar Real Estate, whose 100% sole shareholder is reported as the crown prince.

While Solidere has not announced new steps in its partnership with Abu Dhabi Investment House since the initial statement in November and while the specifics of the Ajman financial investments are still opaque, the company is still bullish about future regional projects.

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From death trap to gridlock

by Norbert Schiller
written by Norbert Schiller

In the mid 1980s, the 10-kilometer stretch linking Sharjah with Dubai was billed as one of the most dangerous sections of tarmac in the world. Then—like now—there was new money aplenty with which young Emiratis bought fast cars and tested them on the brand new network of open roads fanning out into the desert. There were so many accidents on a daily basis that the authorities would simply leave the wrecks by the side of the road as a warning to other motorists. Then there were the sheik’s camels, who like the sacred cows of India, could go and do as they pleased even if it meant strolling down the center of the highway on a moonless night. Hitting one would cost you dearly, if indeed you survived being crushed.

That said, you didn’t really have to drive that far if you didn’t want to. If you worked in Dubai, you lived there. There was none of this mad morning commuting between the various Emirates that one encounters today, a phenomenon created by the economic success of the 1990s and the influx of more migrant workers, which in turn has seen an increase in demand for affordable housing.

Not an El Dorado for all

The idea of Dubai as a money-making El Dorado, where nest eggs and retirement funds could be fuelled, has stopped ringing true for many. Yes, there was a time in the ’70s and ’80s when salaries were high, rents were low and a good standard of life was well within in everyone’s grasps. With time, salaries began to dwindle and the money that was once saved is now used to keep up with the spiraling cost of living as Dubai morphs at a dizzy rate.

So much has changed over the past 20 years that I find myself getting increasingly lost. Small roads that I remember driving on that wound through Sharjah and Dubai have turned into eight lane thoroughfares comparable to those in Los Angeles, while the small town feel that originally attracted me to this corner of the globe is replaced with bumper to bumper traffic, pollution, over crowding and a high cost of living.

Ten years ago, as a way to cut down on living costs, many people, including my Lebanese friend Rabih, decided to leave Dubai and relocate to Sharjah. He was, if you will, a pioneer of sorts and at first the move made good economic sense in the commute-to-save-money rationale. The trouble was that the idea made such good sense, it caught on.

Only 10 kilometers away, the small emirate has worked overtime to accommodate this new labor surge. Land reclamation projects along the coastline made way for a new corniche with parks, mosques, shopping areas and of course more high-rise apartment buildings. But Sharjah, the once-affordable alternative, has seen rents double in less than ten years, despite plenty of new housing on offer. A decent family apartment now costs Dh80,000 ($22,000) per year.

And then there is the traffic. The commute into Dubai, which use to take 15 minutes, now can take two hours on a good day. The stretch of road linking the two emirates is so jammed with cars at all times of the day and night that it is impossible to predict when is the best time to drive. And to add insult to injury, the government of Dubai is going to introduce a road tax, similar to London’s congestion charge, for those driving into Dubai. It is expected that this will cost the commuter an extra Dh240 ($60) per month. Not only do you have to sit behind the wheel for hours at a time, now you have to pay for the privilege.

Traffic now a real problem

Funnily enough, according to a recent study, traffic fatalities are also on the rise; but how, one wonders, when commuters are forced to drive at a snail’s pace? Are they simply bored to death?

Recently, I had to meet up with a colleague at Dubai International Airport to catch a 12:30 flight. I live in Sharjah and, even factoring in the legendary traffic, I thought I had figured out how long I needed for the 10-kilometer drive: I gave myself three hours. One hour later, I was still in Sharjah while my colleague, on the other hand, traveling from Jumairah, on the other side of the Dubai, had already arrived, checked in and was calling me to ask questions about a duty-free camera purchase.

So, gone are the days of open roads and jaywalking camels. Which brings us to the obvious question, why are so many Lebanese—and other nationalities—still heading to the Emirates in search of work and a better life, when it is in fact one big bundle of financial and mental stress?

If you ask Lebanese working in Dubai where they would prefer to live and work, almost all will say they would prefer to return home. But with political and economic uncertainty gripping Lebanon, many are grateful just to be able to live in a place that is stable, knowing that tomorrow will be just like today.

And that apparently is worth any stress.
NORBERT SCHILLER is a photo editor and photographer at large with United Press International (UPI)

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GCC

Dubai aims to buy Liverpool giants

by Executive Staff
written by Executive Staff

Dubai looks set to enter the first division of world football, with news that the state-owned corporation Dubai International Capital (DIC) is closing in on a buyout of English Premier League giant Liverpool.

In a deal worth an estimated $880 million, DIC would acquire the majority stake in the club, winner of 18 English league titles and a number of European trophies, including the 2004-05 Champions League.

Liverpool’s chief executive officer, Rick Parry, said on Jan. 15 that DIC was in the process of putting the finishing touches to the details of its bid and completing the legal work associated with the offer.

“It is a case of finalizing the due diligence and pulling everything together, which we hope will be completed relatively quickly,” Parry said during an interview with British media. “A huge amount of work has been going on from both parts. I imagine we’ll have something to say relatively soon on that.”

Not the first foreign owners in football

If the deal goes through, as all parties expect it to, it would not be the first time that overseas buyers have gained control of one of English football’s icons. Both Manchester United, the current Premier League leaders, and Chelsea, the reigning champions, are foreign-owned, by American and Russian concerns respectively. A number of other teams in the English leagues have large shareholdings in foreign hands.

Owning a football team does not just mean getting the best seats at games. Should the DIC buyout of Liverpool go ahead, the Dubai investor would have a billion-dollar business on its hands and own an internationally recognized brand. Television rights, shirt sales, merchandising and promotional value are all the up side of such a deal.

Of course, football is a high-risk enterprise, and failure on the pitch can bring losses away from the playing field. If it becomes the owner of Liverpool, DIC will be expected to invest heavily in star talent, as well as in the new stadium the Reds have long been planning.

Football is increasingly becoming big business in Dubai, with a number of top European clubs drawn to the emirate during their mid-season breaks. Taking advantage of quality training facilities and the mild weather, teams such as Germany’s Bayern Munich, Benfica of Portugal and Italian outfit Lazio came to Dubai in January to both sharpen their training regime and recharge their batteries. Such visits not only earn money for the local tourism industry but also help promote Dubai in the overseas media, which always keeps a close watch on the doings of their sides.

Dubai is taking the task of becoming a football venue seriously, having poured millions into staging a showcase competition early in the new year. The Dubai Football Challenge 2007, which kicked off on January 8, pitted the national sides of the UAE and Iran and foreign teams such as German Bundesliga Hamburg SV and VfB Stuttgart against each other.

Played at Dubai’s showcase Maktoom Stadium, the three-day tournament drew good crowds and rated highly on television.

According to Jochen Schneider, VfB Stuttgart’s manager and sport administrator, the success of the first Dubai Football Challenge will enhance the appeal of the emirate for leading teams in the future.

High class, global appeal

To get such high class teams for the first tournament is testament to its global appeal, and the attraction of Dubai to big teams, he said. “We came to Dubai in January 2006 and that successful trip has been part of our domestic success throughout last year.”

Increasing the profile of sports such as football in Dubai is part of a wider strategy to expand the economy’s base as well as the emirate’s attraction to visitors. More than $2.5 billion is being spent to develop Dubai Sports City, a sporting and tourism project that aim to offer world-class facilities and act as a springboard for Dubai’s bid to host the 2016 Olympics.

Billing itself as the world’s first fully integrated purpose built sports city, the development will feature four major stadiums, and offer facilities for sports such as football, cricket, tennis, golf, rugby, athletics, swimming and hockey. One of its features will be a Manchester United Soccer School, continuing the strong push towards promoting football in the region.

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GCC

GCC sees insurance industry booming With Dubai leading the way

by Executive Staff
written by Executive Staff

In tandem with the emirate’s development, Dubai’s insurance industry is set to reach new heights over the next few years. Meanwhile, throughout the Gulf Cooperation Council (GCC) the insurance sector is booming.

According to a recent study published by Nexus Insurance Brokers, the region’s largest independent financial adviser, the GCC insurance industry will enjoy a period of strong and sustainable growth, fuelled by a surge in regional demand for insurance products. The sector is expected to grow by some $2 billion by 2010, reaching $7.1 billion. In particular, it seems the UAE insurance sector is currently growing by around 20% per annum.

With over 47 insurance companies, 23 of which are locally owned, the UAE has the largest insurance sector in the region. Most of these companies are based or have an office in Dubai. The sector may appear overcrowded, but a number of small insurance companies have low risk retention and act more as captive agents than real insurance companies. In addition, risk is offset by international reinsurance companies, which play an active role in the region. Meanwhile, some insiders predict mergers between small insurance companies in the near future.

The latest official figures on the insurance sector in 2005 released by the Ministry of Economy and Planning indicate that premiums rose from $1.29 billion in 2004 to  $1.85 billion in 2005, accounting for a healthy increase of 30%. A breakdown of premiums by class of insurance reveals that the non-life segment made up more than 74% of premiums. However, the life segment is expected to grow faster over the next few years.

While local firms dominate the non-life market and collect 75% of premiums, foreign firms control the life insurance market with a similar share with giants such as Arab Insurance Group, American Life Insurance Company (Alico), Axa-Norwich Union or Allianz. Their products are mainly sold to Western expatriates.

In the non-life or general insurance market, a breakdown of segments indicate that accidents and liability account for 61.8%, fire 16.9%, the land, sea and air transport 16.7% and medical 7.6%.

Despite this, UAE market is underdeveloped

Overall, the insurance market in the UAE remains underdeveloped by international standards. Indeed, although one of the highest in the region, the insurance premium density per capita, or the average amount of money spent on insurance products per person per year, stood at $444 in the UAE, compared to $4,508 in the UK or $5,716 in Switzerland.

The GCC governments have played an instrumental role in promoting the benefits of insurance policies. In July this year, the UAE introduced a new health insurance scheme in Abu Dhabi, a move which many say will undoubtedly boost and revitalize the insurance industry for years to come. This new product is finally becoming more acceptable in the GCC. Under the scheme, companies with a staff of more than 1000 will have to provide health insurance for their employees and their close families. An estimated 500,000 people will benefit from the plan, including low-wage workers. The scheme is set to be introduced in Dubai in early 2007.

The insurance industry as a whole is already starting to reap the benefits of this rejuvenating plan, set to expand given the predominantly young population.

Aside from health insurance, a new regulator will also emerge in 2007. Although still under the auspices of the Ministry of the Economy, the new authority will work to improve relations between insurance brokers and companies, as well as consider new solutions for motor insurance and professional indemnities for each sector.

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GCC

UAE’s ‘du’ service Tackles foes

by Executive Staff
written by Executive Staff

This year saw new UAE telecoms operator Emirates Integrated Telecommunications Company, branded as du, secure its customer base ahead of its expected launch of operations in February.

Du, which launched a campaign allowing customers to book their phone numbers with the company in November, has received approximately 500,000 subscribers booking 750,000 numbers. Under the campaign, customers are allowed to keep their old phone number but must change the prefix from ‘050’ to ‘055’. The ease of switching operators and the option for customers to retain their mobile number seems to have had a positive impact on du’s efforts to build a substantial customer base.

Etisalat and du square off

However, the imminent launch of du’s operations has led the existing operator, Etisalat, and the newcomer to adopt aggressive marketing strategies to showcase their new products, services and pricing. The mobile penetration rate in the country is extremely high, with estimates placing it at 125%—the highest mobile penetration rate in the Arab world. It also has internet penetration levels of 60%. Against such a backdrop, competition between du and Etisalat is set to be fierce.

Some analysts fear that this will not dramatically impact prices. Osman Sultan, CEO of du, said that the company will be looking to grab a 30% market share within three years of launching operations. However, this will not be achieved through a price war. According to Sultan, “We have a great deal of respect for Etisalat as a strong regional player with a very deep pocket. We will not be getting into a price war with them as such cut-throat competition would not be in the interest of either company.” However, Wisam Francis, BIS Shrapnel’s project manager for the Middle East telecom sector believes that du will struggle to achieve its ambitious targets, suggesting that it will only achieve between 10-20% market share up to 2009.

Du has been investing heavily in its infrastructure and human resources in preparation for the commencement of operations. The company has also been keen to make its mark ahead of the launch, highlighting its next-generation network and pricing structure. Particular areas of emphasis for both Etisalat and du are broadband and mobile television, both of which are expected to gain prominence in 2007. Du has also stressed its per second pricing strategy that distinguishes it from its competitor Etisalat. All customers will have the option to be charged on a second by second basis on all mobile voice calls. Sultan said that this was a particularly important development because, “It is only fair that our customers pay for precisely what they use.”

Etisalat is also preparing for the arrival of the new operator by readjusting its pricing structure. One key area that Etisalat is looking to address is international calls. The company is going to offer off-peak rates to business customers on their international calls, constituting a 35% discount on current rates. Ahmad Abdul Karim Julfar, the chief operating officer at Etisalat, seemed to concede that this decision was driven by the changing nature of the market in the UAE and recent developments. He argued, “In light of the current market environment we have reviewed our services and rates to ensure that the true cost of the service is more accurately reflected in the charges.”

VoIP still a controversial technology

However, it would appear that the rationale behind cutting prices on international calls is not simply driven by the imminent arrival of a new mobile operator in the UAE. Etisalat is also taking into account the potential changes to regulation on Voice over Internet Protocol (VoIP) in the emirates. This issue continues to dominate the telecommunications sector in the country. As it stands, the technology is still illegal with services such as Skype blocked in the UAE.

It has been rumored that the national regulatory body, the Telecommunications Regulatory Authority (TRA) is set to legalize VoIP. However, it has issued a rebuttal this week saying that the technology is still under review. The TRA’s manager for administration and public relations, Adnan al-Bahar told the local press, “Until the regulatory framework is in place VoIP is illegal.”

Nevertheless, it would appear that it is only a matter of time until the regulatory framework is put in place issuing in the legalization of VoIP. This is seen as a particularly important growth area in the telecommunications sector in the Middle East and North Africa region. According to Luke Kabamba, the Dubai-based ESM business unit head for IT software management company CA’s Europe Middle East and Africa eastern markets, The Middle East market has witnessed a huge surge in the last couple of years and many companies today have plans of investing in VoIP, which not only helps increase customer satisfaction and staff efficiency but also simplifies and reduces the cost of managing voice communication systems.

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UAE, Oman link exchanges

by Executive Staff
written by Executive Staff

In early January, the Abu Dhabi Securities Market (ADSM) signed a cross-listing agreement with the Muscat Securities Market (MSM), reflecting its will to attract foreign investors, improve its performance and strengthen its links with regional markets.

The agreement between the ADSM, the MSM and the Muscat Depository & Securities Registration Company allows for the listing of Omani companies in Abu Dhabi. Oman and Emirates Company will be the first Omani company to list in the UAE.

According to Abdullah al-Nabhani, the general manager of Muscat Depository & Securities Registration Company, the establishment of an electronic link between the two Gulf markets has fostered greater interest in the UAE markets. “Since MSM established the electronic link with ADSM, we have seen a huge increase in demand for UAE securities in Oman. We hope this agreement will help to not only meet this demand, but also offer investors the opportunity to diversify their risks by having more choice.”

The ADSM currently has 54,000 Omani investors registered making up 7% of the total and contributing $62.62 million to the market. The agreement with Muscat is part of a wider strategy on behalf of the ADSM to broaden its investor base and the number of foreign companies listed on the market. According to Rashed al-Baloushi, the ADSM’s acting director general, “As long as we continue to bring international companies and more diverse investment opportunities to the UAE local markets, we are helping investors to spread their risks, contributing to long-term market stability and ultimately furthering economic growth in the UAE.”

Similar agreements

Qatar, Pakistan and Jordan already have similar agreements with the ADSM, facilitating cooperation and dual listing on their respective markets. Pakistan was the first non-Gulf country to sign such an agreement with the Abu Dhabi market. As a result of the memorandum of understanding between the ADSM and the Central Depository Company (CDC) of Pakistan, 10 Pakistani companies have already received approval for cross listing.

This agreement paves the way for further investment between the two countries. There are currently 2,200 Pakistani investors registered on the ADSM, with investments worth $13.61 million. However, investment from the UAE to Pakistan is seen as a key consideration in this agreement. Al Baloushi believes that this agreement will help to consolidate Emirati investment into Pakistan. “Abu Dhabi is a significant investor in Pakistani companies so it is important for us to cement close ties between our markets. We also look forward to working closely with the three Pakistan stock exchanges as we implement our best practice program and continue to improve the regulation and governance standards in the UAE financial markets,” he said.

Hanif Jakhura, the chief executive of the CDC, also pointed out that the agreement would facilitate investment from the Pakistani expatriate community into their home markets.

Similarly, the agreement between the Securities Depository Center of Jordan and the ADSM is a step forward for facilitating investment relations between the two markets. Arab Bank is likely to be the first Jordanian company listed on the Abu Dhabi market. The presence of Jordanian investors in the UAE is already well established with approximately 7000 investors registered and investments amounting to $168.8 million.

Seeking more arrangements

Al-Baloushi said that the ADSM is seeking out more agreements along the same lines. Khaled al-Suwaidi, the manager of ADSM’s listed companies department, also recently told a conference in Singapore that attracting foreign investment is a strong priority for Abu Dhabi’s stock market. He further laid out the measures taken by the ADSM to bring the market into line with international best practice. The ADSM has suggested a corporate governance code for all listed companies as well as a UAE trust and custody law.  

These measures are seen as particularly important to attract foreign and institutional investors. Currently, foreigners can invest in 38 out of the 61 listed securities on the ADSM and account for 40% of investors in the market. Al-Suwaidi believes that this figure will increase because of the positive economic development prospects for the emirate.

In spite of the current slump in the market, al-Suwaidi believes the economic conditions of Abu Dhabi are conducive to investment. “Abu Dhabi’s progressive economic agenda, promoting diversification, liberalization and an enhanced role for the private sector, demonstrates that the long-term fundamentals for growth are in place,” he said. 

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