To see the photo gallery of the Forum, click here
3.40pm EA: Taking the podium for the last time, Andrew Neil says that Dubai has come a long way, but the next stage of progress is still to come. Human capital and ‘soft infrastructure’ have played a big part in today’s debates, and it’s a sign of where the region needs to go next. “Dubai is over the first phase of development – that’s in the bank,” he says. ““We’re not out of the woods yet, but this year has certainly been better than last year.”
That’s the end of our coverage of the Arabian Business conference for this year. It’s a been a resounding success, and we’re gratefully for the speaker and the delegates for their candid assessments.
From Dr Habib Al Mulla’s call to change the debt laws in the UAE, to Mohammed Alshaya’s plea for more nationals to engage in the private sector, we’ve had a lot of engaging debate. Thanks to you, too, for joining us, and we’ll hopefully see you again next year.
3.36pm EA: Lastly, Sheikh Maktoum says that Dubai’s future success is not up for debate. “Dubai was created because of a vacuum in this region. Why do people go to London and not Paris – London has been that hub for a long time,” he points out. “Anyone who tries to compete with Dubai will fail. Abu Dhabi is approaching this in a very intelligent way, by focusing on culture and other issues. It has excelled in its plans, which is highly, highly commendable.” On that strident note, time is up and the last speaker exits the stage, to yet more applause.
3.32pm EA: Andrew Neil asks Sheikh Maktoum what the major challenges for Dubai over next 20 years. “Dubai is a microcosm of what is happening in the world,” he says. “I see inflation kicking in in the next 24 months. And you will see investors looking at things where they know they’re going to get money back. They need food, water and energy. It’s not just a problem for the Middle East, but also the rest of the world.” Elsewhere, Sheikh Maktoum also says that the imbalance of wealth in some areas of the developed world can result in regime change and instability. “The oil price will rise, which will help us, but then so will food prices, which will not,” he adds.
3.19pm EA: It’s not been easy for anyone in Dubai property, even Al Fajer Properties. Sheikh Maktoum admits that there has been a high default rate on some of his buildings. But he has some advice for developers in a similar situation. “We shifted our customers from five buildings into 2.5 buildings – which means cheaper service charges for everyone,” he says.” The other two buildings, we’re looking at shutting them down until someone buys us out.”
3.16pm EA: Sheikh Maktoum is now talking about Dubai real estate, and it’s an area he knows well as CEO of Al Fajer Properties. He’s taking issue with projections about massive oversupply, pointing to the cancellations of projects reported by RERA. “In 2008, there were 1,280 projects registered in Dubai. RERA is cancelling 490 – so that’s a 35-40 percent reduction in supply,” he says. “Of those remaining ones, only 36 properties in March above 80 percent completion. So expected supply is cut by 80 percent.” Factor in the current difficulties over financing and it’s clear that developers are going to find it hard to complete their projects. “There is excess supply, but not to the degree that people are forecasting,” Sheikh Maktoum says. “I say 24 months is optimistic, but 24-36 and you could have a significant amount of supply eaten up.”
3.07pm EA: Sheikh Maktoum is taking us on a quick whistle-stop tour of the world – America is heavily in debt, but with very strong intellectual property, while Europe is in denial over its rates of debt, despite skill with manufacturing and branding and a hardworking population (except maybe the French, he jokes). Africa has high political risk and Asia’s strong growth is already factored into share prices. Why shouldn’t international investors look at the Gulf’s youthful population and high natural resources, he says. Moving swiftly on, Sheikh Maktoum has a great piece of advice for the investment community – buy phosphates. With countries buying heavily into food security, they’re going to need to grow plenty of crops. You heard it here first.
2.57pm EA:Next onto the stage is the last speaker, His Highness Sheikh Maktoum Hasher Al Maktoum, who’s given a speech called ‘The Road Ahead’. As he points out, it’s almost like a comedy sketch because no-one knows what’s going to happen in the future. “I’ve been relatively lucky and relatively successful, but I’ve made mistakes,” Sheikh Maktoum says. “I invested in Lehman just before it collapsed, but then I also made a lot of money on Nakheel bonds at the depth of the crisis.” He’s also got some strong views on the current state of the world – pointing out that Singapore is the happiest location despite not being a democracy. “Compare that to Africa,” he says. “Dictatorships are flourishing, and competing. The champions of free press and transparency – such as Ireland – are going to need bailouts. It’s a strange world we live in.”
2.52pm EA: Some new photos from the Forum have now been updated to the gallery.
2.47pm EA: A final question from Andrew Neil concerns retail as a bellwether for local economies. Alshaya counts off the countries on his fingers in terms of their performance so far this year. Most of them are looking pretty positive, although Dubai, Bahrain and Amman are down. With regard to the massive development in some countries, Alshaya is pretty abrupt. “It’s been an expensive lesson. Build it and they will come? Not any more,” he says. “The Avenues [a luxury mall in Kuwait] is over five phases, over 10 years – not over one time. We built it, made it credible, and then expanded it as demand created demand.” Strong words to finish, from Alshaya, and he leaves the stage.
2.41pm EA: An interesting question comes from a delegate, asking whether Alshaya has considered joining other major business leaders to set up a venture capital system that will help local young entrepreneurs. The chairman says that his own company benefits hugely by attracting top-notch talent, incubating them and training them. “But I agree that the private sector has to somehow put a fund in place for SMEs,” he says. “I think the government has to pull its hand from guaranteeing jobs in the public sector. It hires, but it does not fire.”
2.30pm EA: It’s now time for questions, and Andrew Neil is asking Alshaya to expand a little more about the issue of employment of local nationals – pointing out that the region shares with the UK the fact that most young people simply don’t want to work in the services sector. “The government is guaranteeing jobs in the police, army and for teachers, many which aren’t available to others, admittedly,” the chairman says. “I can understand that, but there is a limit – there is a problem in our heritage and culture. They say: ‘if I am a barista in Starbucks, that is not right’. But these guys who work in and manage our stores, they have good pay and an opportunity to progress.”
2.23pm EA: But the biggest looming crisis, according to the Alshaya chairman, is the issue of employment. He quotes some stats from the UN Development Programme, which state that the region will need to create 51 million jobs in the next 20 years simply to keep current unemployment rates, with the GCC alone needing to create another 4 million. “There’s a chilling spectre of under- and unemployment,” he says. “But there is also a culture in our region that it is considered demeaning to serve people. That is sad.” As he points out, that makes recruitment difficult, but Alshaya is keen to point out the benefits if his firm could employ 100% local nationals. “If we didn’t have to employ foreign nationals, imagine how much money would be saved instead of being sent overseas?” he remarks.
It’s tough to disagree with that, even though it would leave many of us out of a job.
2.17pm EA: However, it’s not all goods news, despite the shiny new malls. A major problem, says Alshaya is the huge amount of red tape, particularly with regard to border controls, licensing restrictions and too many layers of paperwork. “Why should regulators look at these areas?” he questions. “Retail is part of the services sector which is typically a country’s largest employment sector.”
2.11pm EA: Mohammed Alshaya has given a quick overview of his business – his brands include Mothercare, Starbucks, Pottery Barn and Boots, and he employs 20,000 people from 18 countries in 20,000 stores around the region. With that out of the way, he believes – not surprisingly that the retail market is looking pretty optimistic. He points out that some of the biggest US brands are choosing to base their first branches outside America not in Europe or Japan, but in Dubai or Kuwait.
2.02pm EA: The delegates have had their lunch and we’re just about to kick off again.
Andrew Neil is taking the stage, and with him is Mohammed Alshaya, the executive chairman of M H Alshaya Co. The firm manages 55 brands across the region, from its base in Kuwait – making it one of the Gulf’s major retailers. We’ve had quite a few UAE executives – so it will be good to hear the perspective from an expert on the rest of the Gulf area.
1.42pm: Shane McGinley (SM) has just filed this: Former DFSA chairman calls for urgent reforms to Dubai legal system
Continued on page 2
12.29pm EA: It’s been a fascinating session from Dr Al Mulla, and he’s certainly answered some sensitive questions with his customary candid replies. With that in mind, it’s time for lunch. The Armani Hotel has – as usual – put on a fine spread and the delegates are now making their way out of the auditorium. Please join us later (from about 2pm) for what should be a cracking afternoon of discussion and debate.
Next up is retail mogul Mohammed Alshaya, followed by His Highness Sheikh Maktoum Hasher Al Maktoum.
In the meantime, why don’t you have a browse through our photo gallery to put a few faces to names?
Click here to view the gallery
12.25pm DR: A question from the floor regarding visas for homeowners or passports for long term residents. Al Mulla says he has long advocated these things, and it has often made him unpopular. “Recently the government has given nationality to people who have been here a long time and have successful businesses, but they are doing it on a case by case basis.” Al Mulla says. He points out the number of expatriates versus the number of nationals – the former far outweighs the latter – makes the issue a difficult and sensitive one.
12.18pm DR: The FT’s owlish Simeon Kerr is asking Al Mulla from the floor what it would take to make the government of Dubai to hurry its reforms. He cites the lack of bankruptcy law reform. Al Mulla says it is difficult because during the good times there seems to be little need for reform, but during the bad times everyone feels the opportunity has been missed. “Until the government realises legal reform plays a vital part in economic growth, I don’t think we will see reform,” he says.
12.15pm DR: Andrew Neil is asking Al Mulla about bankruptcy laws and bouncing cheques. Al Mulla says there are banks in the UAE that like the system just the way it is and are lobbying to to keep the status quo, despite the wishes of the government to implement a bankruptcy law. Are the police being used as debt collectors, Neil asks. “Exactly,” answers Al Mulla.
12.13pm: We’ve just updated our photo gallery from the Forum to include all the action from this morning.
12.12pm DR: Al Mulla is growing philosophical towards the end of his speech. He says Dubai needs to come up with a new business model. One way forward would be to build on its core strength. “We invented the concept of the hub – we could further exploit it.” He adds, somewhat darkly, that others are trying to copy it. He mentions no names.
He says, too, Dubai needs a better way of rewarding and punishing risk. At the moment, in his view, ridiculously petty decisions are being made at too high a level throughout the emirate.
12.08pm DR: Here we go – Al Mulla getting stuck in on the personal debt issue. He says: “We must stop detaining businessmen at airports for civil debts.”
He cites a businessman on way to NYC for a debt of AED152, after 15 years living in the country. It was one of his staff who had run up the bill. He gives other ludicrous sounding examples, too, of wealthy businessmen stopped for petty debts they were not responsible for. “The law on personal debt must be changed,” he says.
12.05pm DR: Al Mulla says Dubai is trying to deal with the crisis head on. Some may disagree with the severity of the anti-corruption drive, but the drive in itself shows the seriousness of the government’s intention, he says.
“Our agencies have to be run on a professional basis, with competent staff.” He cites the Dubai Financial Services Regulatory body, which he says had staff members with no regulatory experience. He says they were “forced in”, and their presence was a hindrance.
12.00pm DR: Al Mulla’s on stage, straightaway ironically pointing out the benefits of hindsight.
“This summer sitting in Carlton hotel in London – a mini Dubai – people were talking about real estate in the emirate. One guy comparing Dubai prices to Florida – he said Florida was cheaper. He seems to know his stuff, until he started talking about how much money he had lost in Dubai. Everyone got hurt… You have to go with the crowd, that’s the real estate story.”
Al Mulla says the story of Dubai is far from over. Yes, he says, many labourers have left, but bank deposits are still healthy, bank loans are not being defaulted on the way there were last year, hotels are still full, and work permits are still being issued at a healthy lick.
However, that is not to say mistakes were not made, he says. Human resources are too stretched now. Emiratis qualified for high office in the private sector are too few. And those that are are made to wear too many hats, he says.
Continued on page 3
11.50am KL: Neil says recovery has been the top of everyone’s agenda, but that Dubai’s challenge is now becoming a knowledge economy.
Big round of applause, and we’re onto the next.
11.45am KL: Your blogger asks about local recruitment of students – at an NYU Dubai, for example, would the student body be mostly comprised of students culled from the region or flown in from the West?
Neil: “Would it be fair to say the best Emirati students go abroad for education?”
Boulos: “Many of them go abroad. Some stay here as well. We’re starting to see a combination… two million students from within this region will need jobs by 2020 – can we put the right education in place so we can leverage it for what we need by 2020?”
11.40am KL: We have our first “Rome wasn’t built in a day,” from the audience. “For many of us, Dubai was built in a day,” Neil says. Touche.
11.30am KL: The panel is deep into discussion on education and “knowledge economy.” Dubai’s come a long way and has a long way to go. What Qatar has done in terms of bringing major institutions there is fantastic. I think building institutions here is essential – it brings the culture that is needed here. In building a “knowledge economy,” it’s important to build locally and not just import talent from Western schools.
Bhatia rankles Neil (“do you read the newspapers?”) with the suggestion that Dubai and its neighbours missed an opportunity to pursue a knitted infrastructure, including a Euro-style unified currency.
Neil: “Do you think the European Union is a model for this region at the moment?
Bhatia: “The model should be better.”
Why has Dubai not got a decent university, Neil wants to know.
Bhatia: People are busy building the infrastructure, building other things. But I think it’s time [to focus on education]. Worldwide universities today are struggling with budget and there’s an opportunity to bring them here.” Neil argues that without schools, a knowledge economy isn’t an attainable goal.
Keliehor: “What drives education is money.” He says that there needs to be more focus on research and development, which would lead to greater investment. Sovereign wealth funds would see that the Harvard brand, for example, would be a good investment, he adds.
11.20am KL: William C. Keliehor’s turn. He’s the Mid East CEO for American Express, and aptly focuses on economic education and spending. “The consumer-spend side has been slow to recover,” he says. “On the corporate side, the spend velocity has been that much healthier. Money’s beginning to move and that’s a very good sign for the economy.” Keliehor says Dubai’s centrality “is a huge selling point. Dubai is “strategically placed among 300 million people, and no other city state in the world can say that,” he points out.
The question, from Neil: “Is Abu Dhabi competing or complementing Dubai?”
Keliehor says it’s “absolutely accentuating” Dubai, not competing with it. “It’s a brother-brother thing.”
Keliehor on Dubai’s competitors: “Six months ago I would have said they were looking at themselves. I think they are competing with the likes of Singapore, competing with the likes of China, to foster this demand and this demand for technology.” In this region, “India is this biggest competitor.” He stresses the need for economic education.
Combined, the infrastructure of Dubai and imagination of India “would be a powerful thing,” he says. The GCC has been moving towards economic education and this 360 degree approach of educating the masses. By 2016 over 100 million people [will be] entering the job market in the MidEast and North Africa. That is “staggering,” he adds.
11.15am KL: Accenture’s Middle East managing director, Omar Boulos, says many organisations and governments have started the journey of assessing what they need to be doing to be taking advantage of the growth here. “What’s fueling some of that – maybe even a lot of that – is confidence in the region. When we see activities in the region from our multinational clients, it’s an indication of confidence.”
Will supply and demand will get to an equilibrium in the next few years? He thinks it’ll take some time – “it could take 20 months, it could take a few more. I don’t know.”
11.10am KL: Hi, I’m Karen Leigh (KL). And I’ll be taking you through the panel debate on ‘The Real State of the Economy‘.
Mohamed Haji Mejaj, managing director and CEO of Oryx Capital, says there’s a “clear convergence” between emerging markets in terms of growth rates: “a clear indication that the world is looking East”. While everyone is looking at China, he says, China is looking at South Africa. “Economic growth – is creating social issues — there is still growth, there is still positive view towards investments. In terms of sectors, a lot of interest in energy now. India is the first trading partner, then China and Europe. This created some opportunities in logistics sector to service this mood trading. [There are] More Chinese in Dubai, more South Americans. [This] Provides more opportunities to support the tourism sector. A lot of deals flowed in health care [and]education.
“The population is young, it’s growing. It’s a matter of restructuring the economy.”
11.00am: It’s coffee and networking time at the Forum right now, but stay online for our panel debate on ‘The Real State of the Economy‘
The speakers are:
Omar Boulos, Managing Director, Accenture Middle East
William C. Keliehor, Chief Executive Officer, American Express Middle East
Dr Tejinder Singh Bhatia, Director and CEO, Spanco GKS
Mohamed Hadi Mejai, Managing Director and CEO, Oryx Capital
10.50am: The first batch of photos from the Forum are now live.
10.47 SM: Shane McGinley (SM) has just filed this: ‘Dubai will never stop taking risk’ – Emaar chief
10.33am EA: The last question is from an audience member, who asks if there have been any decisions that the Emaar chairman regrets. “I’ve made a lot of mistakes – mainly my management style – I could have done better with that,” he says, candidly. Alabbar points out that some people have accused him of being too hands-on with his management style, but that “without watching the house for every single second, I don’t think you can survive.” He also admits that some bad hiring decisions were made, and that Emaar should have gone to India much faster. Where does he see Emaar in five years time? “I see a map that starts in Casablanca and ends in Shanghai – the most interesting part of the world,” he smiles. Alabbar then leaves to the stage to a hefty round of applause.
10.22am EA: Another good question – would Alabbar prefer it if Emaar had stayed as a private company instead of going public. “I don’t like being public – I don’t like quarterly results, and I don’t like having to stand up in front of you every three months and explain myself,” he prefers, to laughter from the audience. “But at the same time it also teaches you discipline, so I love it,” he adds, more seriously. “Is running a private company easier, well, definitely? As a human being, my body would like to be private, but my brain likes the fact that we are public.”
10.17am EA: The questions are coming thick and fast now. One gentleman asks the Emaar official whether the significant sums invested in the firm’s overseas markets could not have been spent building much-needed social infrastructure at home. “We haven’t been hurt in any markets, they are all still healthy,” Alabbar says. “Morocco may not be as healthy as Egypt but they all have incredible value – all our overseas investments have at least doubled.” When questioned whether Emaar will ever invest in schools and hospitals in Dubai, he says that while he would love to, the company will focus on what is does best, which is building master-planned communities. Does Alabbar feel that Emaar has been too dependent on Dubai. “Yes, we started looking overseas eight years ago, but it could have been earlier,” he says.
10.12am EA: Onto the questions, and Andrew asks whether Alabbar thinks the Dubai market has bottomed out. “Yes, without a doubt,” the Emaar chairman fires back. “But it matters where you bought – certain areas and neighbourhoods have been affected differently. But I stand by what I said last year in that I would still advise my son to buy property in the city.”
10.06am EA: “What have we learned in the last three years?” asks Alabbar. “It’s only human nature that under unimaginable heat and pressure, that’s when diamonds are created.” The Emaar chairman says that Dubai has been criticised for taking too much risk, but those risks should be celebrated, particularly as risk should be celebrated. Alabbar is frank about what has happened to the real estate industry in the Gulf, but says that Dubai is smart enough to learn the lesson. “I think we are learning the hard way…it is in the spirit of the city to move on and take risk – that’s how we are.” He ends his speech with a very interesting point – if you had been given $100bn in 2006, where would you have invested that money? If that investment had been made in AIG or Lehman Brothers – as no doubt many financial advisers might have advocated – that entire sum would have been lost. If you had invested in Dubai real estate, the story would have been different.
10.00am EA: The Emaar chairman is thanking Andrew for his welcome and for the invitation to what he refers to as a “fabulous gathering”. Pleasantries over, Alabbar dives straight into the nitty gritty by asking where the Middle East region is post-crisis. Apparently, it’s looking pretty good, driven by healthy budgets, strong demographics and a healthy banking system. In Dubai, specifically, recent bonds from both the government and Emaar have been six times oversubscribed, Alabbar reminds the packed audience. Moving onto his own industry, real estate, the Emaar chairman accepts that there is still an oversupply situation in Dubai, but that the market will need to balance itself and move on.
9.47am: Good morning all, I’m Ed Attwood (EA) and I will be taking you through Mohammed Alabbar’s keynote speech. The Emaar chairman really needs little introduction – as you will all be aware, we’re in fact sitting in just the most famous of his creations, the Burj Khalifa.
Andrew Neil, ITP chairman and the conference host, is now on stage and welcoming the guests – particularly His Highness Sheikh Ahmed, who is officially opening the forum. As Andrew says, the presence of Sheikh Ahmed is proof that the Dubai government welcomes frank debate about the state of the current and local economy. The ITP chairman is giving a quick overview of the world economy – and it’s not a cheerful outlook. In the Eurozone, the Irish bail-out and the looming difficulties for Portugal – and possibly Spain – make particularly gloomy reading for everyone around the globe. As Neil says, economic growth is coming from emerging economies, rather than the developed West. That has to spell out some good news for the Gulf region, but what are the actual implications? Let’s hear what Mohammed Alabbar has to say.
9.30am: Good morning and welcome to the 3rd Arabian Business Economic Forum. I’m Damian Reilly (DR) and along with the rest of our editorial team, I will be with you live throughout the day from The Armani Hotel in Dubai.
So what’s in store: absolutely loads. Very shortly, His Highness Sheikh Ahmed will be officially opening the forum, and after that, we’ll get straight into the action: Here’s what planned for the day.
First off, around 10am, our keynote speech will be delivered by Emaar chairman Mohamed Alabbar. Having had a sneak preview, this is well worth waiting for and sure to make headlines across the region if not the world. After his speech, Mr. Alabbar will be debating the economic issues of the day with our moderator Andrew Neil.
We will then, after 11am, move on to our debate “Where the region is headed”, featuring four panelists:
Omar Boulos, Managing Director, Accenture Middle East
William C. Keliehor, Chief Executive Officer, American Express Middle East
Dr. Tejinder Singh Bhatia, Director and CEO, Spanco GKS
Mohamed Hadi Mejai, Managing Director and CEO, Oryx Capital
After that comes our second big speech, from the founder of the DIFC Dr. Habib Al Mulla.
And then after lunch, two more big speeches. First, Alshaya Group founder Mohammed Alshaya, and later HH Sheikh Maktoum Hasher Al Maktoum.
We will be bring you all the news and pictures from the day – so don’t go anywhere!
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