The UAE is on the cusp of a digital revolution. And Emaar chairman Mohamed Alabbar has already raised $1bn to spearhead it.
There is a story that Mohamed Alabbar likes to tell, about a conversation with his nine-year-old nephew Jumma. He asks him what the three most important things are in the world that he cannot live without. His nephew replies: “Air, water and wi-fi.”
When Alabbar asks him why he didn’t mention food, Jumma points out that he can order it online. When asked about interacting with his parents, he says he can contact them through WhatsApp.
That, Alabbar often says, is proof that not only is the digital world upon us, but it has already taken over the lives of nine-year-olds. And all indications are that is soon to take over a big chunk of Alabbar’s life.
A hint of what’s come to was revealed last week, when it was reported that the Emaar chairman had bought Aramex founder Fadi Ghandour’s stake in the firm, and was buying up additional shares with a view to taking control of the Arab world’s biggest courier.
So what’s his angle? Aramex has recently been focusing on technology as it seeks to bridge the e-commerce spectrum from click to delivery. Right now, its e-commerce business is growing by around 25 percent a year and its reputation as a tech disruptor makes it a good bet as a long-term investment.
But, in truth, the Aramex move is really only the opening gambit in a much bigger plan. Sources have confirmed that the charismatic Emaar chairman has already raised $1bn from investors to spearhead what will be a string of major digital and e-commerce launches in the UAE.
Why is he doing this? While he is clearly savvy enough to realise the digital potential, the figures suggest that when it comes to the Arab world, Alabbar is in the minority. From big business to social media, and digital advertising to e-commerce, everyone talks a good game. But are they really doing anything about it?
Of the 200 technology companies around the world valued at over $1bn, just one (Souq.com) is from the Middle East. For all the excitement generated by forecasts that the e-commerce industry in the Arab world was worth $7bn last year, (and heading to $20bn by 2020) this is a mere 1 percent of regular commerce sector. Alexa’s league table of the 50 most visited websites in the UAE shows 22 have no Arabic content available whatsoever, and just one offering primary Arabic content. Digital advertising revenues in the MENA region are barely $550m a year, representing only 10 percent of total advertising spend — compared to 30 percent in Western markets.
When it comes to digital, success is in the eyes of the beholder. The truth is that while a large number of traditional sectors and business models in hospitality, finance, transport and retail are being disrupted by digital technology, this is usually thanks to imported technology rather than innovation. Talking has been easier than creating.
So where does Alabbar fit into all this? Well, we know two things for certain about him: one is that in between running Emaar, Eagle Hills and a host of other private ventures, he doesn’t have much spare time on his hands. But the other is that when it comes to being at the forefront of innovation and risk taking (who else would open the world’s biggest shopping mall at the height of the crash in 2010?), nobody does it better.
And Alabbar — as seen by his recently taking a 4 percent stake in Yoox Net-a-Porter worth €100m ($110.1m) and the acquisition of food giant Americana for $2.4bn — is not afraid to immerse himself in completely new industries. Friends often describe
Alabbar as possessing a sixth sense — one that instinctively pulls him towards untapped markets.
During Ramadan last month, a series of lectures were hosted by the majlis of HH Sheikh Mohamed Bin Zayed, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the UAE Armed Forces. While all were hugely impressive, it is notable that only one of these lectures was delayed because of a lack of chairs for overflow guests: the one given by Alabbar, headed “Digitisation: Where Do We Stand.”
During that lecture, Alabbar is understood to have suggested that by the end of 2016, the UAE will have seen the launch of an e-commerce company, a social media service, a modern online banking system and an online logistics company.
However, if Alabbar himself is involved, this isn’t likely to be a small operation. Chances are he will be taking his inspiration from the Chinese e-commerce giant Alibaba, that also provides electronic payment services, a shopping search engine and data-centric cloud computing services.
Alibaba’s market value last week was $202bn, and its Q1 revenues came in at $3.7bn, while it has nearly 35,00 employees on the books. That is likely to be the standard and scale Alabbar is eyeing up.
Launching a pan-Arab commerce platform makes sense, as does developing and launching the first integrated payment gateway in the Arab world. In the UAE, this could be extended to a vast number of fields, such as creating an e-wallet through which subsidies are delivered to local citizens. Rethinking every single government service from the digital customer point of view and transforming e-health and e-education services could also be on the cards.
The big question of course is where the funding would come from, as none of this would be cheap, with the $1bn raised so far just the start. Well, Alabbar’s majlis lecture had an impressive audience. Not just the Crown Prince of Abu Dhabi in the front row, but also Deputy Prime Minister and Minister of Interior, Sheikh Saif Bin Zayed, Deputy Chairman of the Abu Dhabi Executive Council Sheikh Hazza Bin Zayed and the Minister of Foreign Affairs Sheikh Abdullah Bin Zayed.
If Alabbar was hoping to attract interest from the Abu Dhabi Investment Authority (ADIA), one of the world’s largest sovereign wealth funds, he couldn’t have picked a better place to make his case. The Abu Dhabi Crown Prince is credited with having a real vision for a digital future, and certain to have been impressed by what he heard.
However, Alabbar’s track record on deal making reveals he likes more than one egg in the same basket. Another interesting taker could be Saudi Arabia. There was talk of the Saudis looking at the second sovereign wealth fund Public Investment Fund soon to be worth $2 trillion to invest in non-traditional projects. Considering that 50 percent of Saudis are below the age of 25 and are internet savvy youths, any Alabbar styled Alibaba would fit the bill perfectly.
Whatever the UAE is planning in the digital arena, it can be certain of strong demand. We spend an average of four hours a day on our smartphones, use them 150 times a day and send and receive an average of 40 WhatsApp messages a day. And when it comes to viewing content on Youtube, the Arab world is ranked number one, with 14.5 million hours of video.
As Alabbar himself knows only too well, his nephew Jumma is not the exception but the rule.