Back to basics

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Although Kanoo says his priority is now consolidating the group "from within", he says it is looking for takeover opportunities in the sectors in which it operates.

But he adds that external acquisitions carry significant risks: "This is an opportunity for those companies that have the access to finance to consolidate. We are definitely looking for companies to purchase within our fields."

"The problem is there are too many people hurting at the current time. You don't know what you are buying. We are a very conservative company and we don't jump in and take risks. I don't want to be burdened with someone else's baggage. It takes a long time to do proper due diligence on a company. While we are looking to buy, it's not something we will be looking at as a knee-jerk reaction."

Although Kanoo says he is "extremely optimistic", and welcomes the difficulties now facing less scrupulous businesses, he concedes that the region could be in for an extended period of pain. Barring "any substantial global change", he points to the price of oil as the over-riding factor in any recovery: "How deep is this recession? I don't know. We will find out. Assuming no firecrackers it should start to recover somewhat in six months. This is based on the assumption that three things happen. The first is that monetary policy takes effect and banks start to trust each other. The second, more important factor, is that stimulus packages in Europe and Russia start to kick in."

"The third and most important aspect is the US economy. They are the main drivers, no matter what people say. No one will be taking the US' place for a while. For us, the region usually has a lag of three to six months, so whatever happens globally will take that amount of time to be reflected here."

Beyond that, Kanoo says the main variable in the regional economy continues to be the price of its main export: "You can argue about it till the cows come home, but let's face it, we are an oil industry. Our main export is oil and it is the main driver for economies here. If the price of oil tends towards the teens, and the recession is as bad as people are saying, then everyone comes to a shutdown and this recession becomes not a depression, but you will find a lot of people who are depressed."

"If it stays in the US$30s or US$40s [per barrel], some unnecessary projects will come to a standstill but the desalination and power plants will continue. If the price of oil tends to the US$50s or US$60s you won't have a boom, but you will have growth back again."

Kanoo says there are some sectors in the regional economy that "might never recover". "One is property," he says.

"Forget it. You will not see a boom like that for a long, long time. Banks are not willing to lend and unlike some people, they do have a long memory. The high-end luxury items will also start to tend lower and you will see that here as well. Go down to the second hand car market and look at the super luxury cars on sale. Another is advertising. There will always be people that advertise but the boom that happened on the back of the property boom will never happen again. You are never going to see people spending money that way."

However, he says things are unlikely to come to a complete standstill: "The industries that are going to be slightly affected, rather than majorly affected, are things to do with infrastructure, industry, manufacturing - heavy duty industries. Infrastructure needs to continue no matter what. I still need to build roads, but I don't need to build homes anymore because I have an abundance of homes coming up. I still need to construct warehouses. Dubai has not come to a standstill, despite all of this. There might be some pressures on freight forwarding companies, for example, because of over-capacity. But is Dubai going to stop becoming a logistics centre between Europe and the Far East? I doubt it."

So will the economic situation now encourage more caution among firms in the long term? Kanoo has his doubts: "My economics professor always told me that investors are rational. Really? Do you remember 2000? It was the last major crash. If you take the average age of a stockbroker on Wall Street as 30, they were at university when it happened. So as far as they are concerned it didn't exist."

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