15:05: And that's it from the panel - another strong and candid discussion. They leave the stage to warm applause. At this point, we'll be closing this blog; the next presentation is about a banking survey, and you will find the results elsewhere on our site. So that's it for today - thanks very much for staying with us.
15:00: A question about Expo 2020 - what impact will that have if Dubai wins the bid? Plumb says it will have a huge impact on Dubai; JLL is advising PwC (which is advising on the bid) on the impact of the project, but "the numbers are very significant". He also says that areas near to the Dubai World Central site, like Dubai Investments Park and the Green Community, will also be boosted.
The panel are now discussing the fact that - somewhat extraordinarily - Dubai needs to get building again if it is to meet demand by 2016-2020. Otherwise, a lack of supply could create a bubble on its own.
Another feature of the market is the growth of lower and middle income residents - related to tourism, trade and so on. The future lies, Plumb says, in more projects like International City, which caters to the mid-market. It's the same for hotels - demand is now rising significantly for three-star - as opposed to five-star - properties.
A question from the audience now; is the new ruling from Abu Dhabi that all government officials have to live in the UAE capital going to have an impact on Dubai? Maclean says that the growth in employment in Dubai is outstripping that of Abu Dhabi, and that the government needs to be careful not to force government employees to forego Abu Dhabi for what might be a more attractive market in Dubai. Plumb points out that prices are still higher in Abu Dhabi, and that the 25,000 cars making the daily commute between the two cities mean that many might simply be convinced to stay and work in Dubai.
14:45: Title is also an issue, with banks not certain of their ability to foreclose on a particular project. Instead, banks price in risk to their interest rates - it's an area that needs to be sorted out, the panellists agree.
There is still some debris from the bubble, Plumb adds - 37 percent of all commercial space in Abu Dhabi is unoccupied. That figure is 31 percent for Dubai. "So clearly the markets here are very oversupplied - in the residential sector we estimate that 15 percent of the residential units built in the last five years are unoccupied," he says. Many properties were bought by investors who never intended to live in them, but are still not on the market. That's the case of what's going on on The World - the Nakheel project - where all the islands have all been sold, but very few are seeing any development.
Back onto commercial property, and Plumb says that new sites are being developed - mainly legacy properties. That adds to the overhang. However, most of these are being purpose-built for specific companies. "Before the end of this year, we'll see quite a lot of spec commercial property coming back onto the market," says Maclean. The market is also being hit by the strata law - which is seeing companies move out of near empty buildings (where they have to pay a higher proportion of the service charge) and move to more established locations.
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14:30: CBRE's Maclean kicks off the discussion by saying that he's seen a huge amount of demand - that exceeded that of 2007 - over the course of the last year. It's primarily from organisations that are already in the Dubai market, but have been given the go-ahead to expand from their global headquarters. Plumb says that this Q1 was the first time that all sectors of the Dubai market - so residential, commercial, retail and hotels - have all risen at the same time since 2008. "We've turned the corner, we've passed the bottom, but we're still seeing patchy recovery," he says. Some projects didn't work as well as others, and the commercial office sector is still fairly tepid. In some business districts, occupation rates are only at around 60-70 percent, so plenty of overhang still to be solved.
Wani, who runs the biggest mortgage broker in the UAE, say banks have significant liquidity, and are therefore lending. There are 29 banks offering mortgages, and two more are introducing mortgages in the course of the next week or so. So there's clearly plenty of demand. "It's more about end-users than investors now, which is a fundamental shift from 2008," he says. Tarbuck says that he has seen a huge uptick in banks willing to finance real estate projects across the GCC - especially in areas like education (building schools). Then there's the World Cup in Qatar, which will take up a huge amount of property in terms of more hotels, stadiums, infrastructure and so on. And then there's government spending, which is especially high in Saudi Arabia.
14:00: Welcome back to the forum - it's been an excellent lunch and we're ready to go again. After a morning of keynote speeches, we're now going to hear from a panel of expert speakers, who will talk both about the economy in Dubai and the health of the property markets. Sitting with Andrew Neil are Nick Maclean, managing director of CBRE Middle East, Andrew Tarbuck, a partner at Latham & Watkins, Craig Plumb, head of MENA research at Jones Lang LaSalle and Sam Wani, the general manager of Independent Finance.
13:15: The firm also lets people tour their kitchens. "At the end of day, the consumer has a choice. And it's not just about what you eat, it's about what you do. So we're keen to promote healthier lifestyles in terms of exercise, especially for families."
Why is it called junk food, asks an audience member? "We don't like the term junk food - this perception that we put a cow through a grinder and a patty comes out is just not true," Abdulghani says. "It's just beef, with salt and pepper - there are no added preservatives."
After another fascinating discussion, Abdulghani leaves the stage to applause. We're now taking a break for lunch - we'll be back with you at around 2pm.
13:00: Another question - given that McDonald's is a US brand, how do geopolitical concerns affect the firm's decision to enter new markets. Abdulghani says that while the company is based in the US, it is listed and has shareholders all over the world, and is now seen as a global, rather than an American brand. He also says it hasn't been hit by recent unrest, unlike - for example - in France. "In Egypt in 2011, we had three or four restaurants ransacked, but not because they were targeted, but because they were in the vicinity of troubled areas." In terms of further expansion, he says McDonald's is expanding within existing markets, but currently isn't looking at new markets. It still isn't present in many African countries - its presence is focused on Egypt, Morocco and South Africa. He does see potential in areas like Nigeria - but that would rely on partners and a strong supply chain.
Are you still growing, are revenues still rising? 15 percent in the last three to four years, says Abdulghani. Given that that is organic growth, that's pretty impressive. Here's an interesting point; he is also planning to increase restaurants in the Middle East region to 1,400 (up by 500 now) by 2015.
Here's the obvious question - lifestyle diseases. "We have to be transparent and tell the consumer what he or she eats, where it comes from, and be open from day one," Abdulghani says. Labelling is now going on the packaging, from this year. It's 600 calories for a Big Mac, in case you were wondering, with another 300 for French fries, depending on the portion.
12:50: "I believe the future of the region is bright... but at the end of the day, it is up to the local community to judge us," Abdulghani concludes.
It's question time again. Andrew asks about how McDonald's maintains consistent standards. "It's not about owning a business, it's about embracing a value and practising what the company preaches," Abdulghani says. How do you decide who will be a licensee? "It's not about money," he says. "The financial aspect is important, but we look for people who have business acumen, and who are willing to invest in the brand and build it up. It's a very length process - when I went through the process, I had to work in the restaurant for them to feel I was right for the brand."
Do you have 'undercover eaters'? "Yes, we have mystery shoppers, on average they visit every store about twice a month." Abdulghani visits a few of them himself, incognito.
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12:40: McDonald's is synonymous with globalisation, Abdulghani says - a concept that is regarded as both positive and negative. But it has changed the way that everyone dines and shops in the Middle East. "Today we have 375 restaurants, providing 10,000 jobs," he says. "We adopt a unique model to fit every different region." So in the GCC, local partners own 100 percent of the franchise.
Abdulghani says the key to success is leveraging the best of the firm's local and global know-how. At the global level, McDonald's can bring six decades of experience serving 69m people every day to best practice areas like food hygiene and HR in the Gulf. "It is clear that global brands continue to elevate quality and consistency, which is why local people look favourably on global brands. They know they will get the same quality in Makkah that they will get in Manhattan," he says.
The emergence of a shrewder consumer has put pressure on competing brands to deliver the very best every time, he adds. "It is one of the most clear cut and encouraging aspects of globalisation."
On the local side, Abdulghani says that every global brand needs to understand the dynamics of a local market to succeed - and that only occurs through experience with local stakeholders. That experience has come through McDonald's partnerships with a series of big-name business leaders in the GCC. "And it is critical that we create not just jobs but careers," he says. "Rising unemployment is a key concern, but the fast dining sector has been a great employer. We have 1,000 Saudi nationals working for us."
12:30: Another question - how important is engaging with your customer? "It's absolutely vital, as everyone needs to be engaged emotionally. The language has to be right, and the tone has to be right. It all starts with the website - you've got to what that offers to the customer."
Hardcastle is now talking about service recovery - getting back that customer after there has been a negative experience. "You've got to be flexible, and you've got to have a policy in place so the customer knows exactly what path they're going to travel down."
It's been a very involving session - Hardcastle now leaves the stage. Next up is Yousif Abdulghani, the managing director of McDonald's in the Middle East. The Gulf's retail and casual-dining\fast food sector has exploded in recent years, with a huge number of international brands flooding the market. So how does a leader like McDonald's maintain that market share in the face of huge competition?
12:25: Now it's time for questions from Andrew. How is the internet affecting the customer experience? "You need to have someone monitoring social media almost constantly - most importantly, don't promise what you can't deliver."
A question from the audience; what about poor customer service in the region? Hardcastle says she has had two bad experiences in her hotel (the Rotana, as it happens). "Training is important - it's admin-led, and it needs to be led personally, and it needs to be consistent," Hardcastle says.
"It drives me crazy that people don't say sorry any more - Ritz Carlton allowed each staff member a concession to deal with every complaint on the personal level, and that worked," she says.
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12:15: The absolute focus for all businesses is the customer, Hardcastle says. "We need to start thinking about how we engage our customers. So many times I look at P&L and see the huge amounts spent on marketing and advertising - if we engage our customers to be advocates for our business, we can do all that for the princely sum of zero."
Emotional intelligence and engagement are key for the next ten years, Hardcastle says. Don't promise anything you can't deliver. She cites the case of a prominent airline, which despite trumpeting its customer service techniques via a book written by its founder, yet still has a complaints process that takes six to eight weeks to get any results. 24 percent of customers have stopped doing business with an organisation because of a bad experience. And customers now have more power; the internet has provided a forum for airing negative experiences. Incentivise and reward your colleagues, she adds. And "live it - you need a personalised key approach, so you know what the customer wants and why they want it."
12:05: Tonight will also see the official unveiling of Arabian Business's Top 50 Most Influential Brits in the UAE at a gala event in Dubai. Former England footballer Michael Owen is the guest of honour, and will be taking part in a charity penalty shoot out. We can't wait!
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12:00: Welcome back to the forum. The first of our two speakers before lunch is Kate Hardcastle, a UK-based TV business and retail commentator and the co-founder of 'business transformation organisation' Insight with Passion. She's worked with more than 80 companies, advising them on issues as diverse as branding to how to run a family business.
We've got a clean and jargon-free presentation, says Hardcastle, which is good news. She has a couple of quick tips for us; accentuate the positives and eliminate the negatives around your business, latch onto the affirmative. Insight with Passion, she says, is a business transformation team that works with commercial, non-profit and charitable organisations. Around 20 percent of the firm's consulting time is given over to pro bono work for SMEs and charities.
11:30: Another question. Is RERA's rent index effective? "It's a great idea and a good mechanism, but it's a bit dated, and a little bit behind the market. But the idea is a good one. If you speak to landlords, they will generally feel hemmed in by these regulations, but overall it's quite a healthy balance."
What about speculators? "We've seen quite a few on the Palm - these are mainly Indians, Russians and quite a few Brits. A lot of people are saying they don't want speculators any more. But there's a far greater percentage of end-users today, particularly as the selling of offplan properties has been more tightly regulated. Flipping is back."
What about rent-to-own? "I think this will be reintroduced in some areas. There's less of a need currently for that. But the banks have a variety of products now that they didn't have when that trend was popular back in 2006," Mahoney says. "Dubai is not London, it doesn't have the same track record - but all things considered, it is relatively cheap. When that changes, then we can start to worry about a bubble."
With that, Mahoney leaves the stage - and it's now time for a coffee break.
11:15: A quick aside. A study by iProspect and Arabian Business published today has revealed that more than half of UAE bank customers are unhappy with their lender, and are looking to switch after suffering poor customer service. You can see the full results of the survey here.
11:10: We're into questions now. Are we going to have a bubble or aren't we? "It is true that property sales values are going much faster in the top end of the market, while rental rates are going much faster at the lower end," says Mahoney. Has the property overhang been sorted out yet? "A lot of that was never built," Mahoney says. "Over the last 12 months we've seen a lot of investors trying to come back and jumpstart delayed projects."
A question comes from the audience about the mortgage cap and cash buyers. "The number of people in a particular price bracket is 50 percent or more, but as you go to a higher price bracket, that dwindles," says Mahoney. "The offering is far more competitive, rates are as low as 4 percent for the first, and up by about 1 percent of that. Two years ago, no bank wanted to lend to the property market. Today, every bank, in spite of all that's happened, is asking us to push borrowers their way."
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11:00: In conclusion, sales prices are increasing faster than rental prices (18 percent versus 12 percent - though that's probably due to the rental cap). "Yields are generally thinning out, but the increasing rents are helping - overall Dubai is still achieving relatively higher rental incomes compared to other major international cities," Mahoney says. "Don't get caught up in the speculative hype and focus on the yield."
10:55: Mahoney's talking about sales prices now. One-bedroom apartments are rising across all areas - with Downtown and JLT seeing a 20 percent increase in price over the last year. But price increases can vary dramatically, even in the same building, depending on which apartment you buy. There also appears to be an undersupply in two-bedroom apartments, Mahoney says. On the villa side, four-bedroom villas on the Palm have risen by a whopping 40 percent in the last year. Rents in one-bedrooms in International City have risen by 70 percent in two years!
So how does Dubai look against other major cities? Comparably cheap, says Mahoney. The average price per square metre is about 75 percent less in Dubai than cities like New York and Singapore. It's a similar story for rents. But that means that gross rental yields are much higher in Dubai than elsewhere around the world, says the Better Homes boss.
10:45: Next up is Ryan Mahoney, the charismatic CEO of Better Homes, one of the biggest realtors in Dubai. The family business, founded by Mahoney's mother, Linda, is now reaching outside the UAE into global markets.
"There seems to be no middle ground when it comes to property in Dubai," Mahoney says. He's right there - everyone has an opinion on the real estate sector. He's now talking about yields on property - a key factor, of course, for investors. He refers to a recent Better Homes survey, which shows that 83 percent of respondents consider Dubai to be their home, despite the transient nature of living and working in the city. A full 88 percent of respondents rented, as opposed to bought accommodation.
Emaar is considered the most reputable developer, and 74 percent expressed satisfaction about where they live. Dubai Marina has the happiest residents, apparently, although Marina residents aren't too pleased about the traffic problems. No surprise there.
10:40: Another question covers the price of oil and the shale gas revolution - how will that play out over the next decade? Saidi points out that the dynamics and structure of the oil market had already changed before the shale revolution, due to the rise of China and East Asia, and the emerging markets. By 2030, 95 percent of exports from the Gulf will be to Asia, Saidi says. That demand is largely due to demographics and the electrification of Asia. "That will outweigh any effects of greater energy efficiency in the advanced economies. And I think you have to be careful about the shale hype," he says. That's due to the fact that extraction is currently economical due to the high price of oil. In addition, the gas transport infrastructure is not yet in existence yet. "The effect is not immediate, it will take five to ten years. And no-one will stand still. And the GCC will start to focus on energy efficiency, you'll also a see a switch to renewables, and you'll also see a reduction in subsidies." He also cites new industries like nano-materials and 3D printing as being gamechangers, especially as the oil-exporting countries move to add more value from their natural resources
And with that, Saidi leaves the stage. It's been a terrific discussion, covering an extraordinary amount of territory in just 45 minutes.
10:30: But don't more established countries have similar barriers to starting up SMEs, Andrew asks? Saidi agrees but says that traditional economies are already well diversified - the main problem that SMEs find in some countries is the impossibility of competing against state-backed giants. That's been different in the UAE, Saidi says. While there are large state-backed firms, the establishment of free zones has truly allowed smaller businesses to flourish.
A question from the floor asks about keeping intellectual property rights on crowdfunding sites. Saidi says that ideas should be registered, but start-ups can also limit the amount of information they can divulge online - further discussions can be undertaken offline if necessary.
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10:25: It's question time now. Andrew asks whether the revolutions are still ongoing - bearing in mind that revolutions historically have taken decades. Saidi agrees;"Egypt has some 800,000 people coming into the job market every year. We've had two years of zero growth, so that's 1.6m angry young people out of a job. You're creating the grounds for a continuing revolution." In Tunisia and Morocco, young people who emigrated to Europe have been forced to return due to the Eurozone crash - leading to the kind of pressures that led to the self-immolation of Mohammed Bouazizi.
"We need an Arab bank for reconstruction and development - we're the only region that doesn't have that," Saidi says. "If you look at the sums that are required across the region, it's in excess of $1 trillion. Unfortunately, that is not happening. There is a lack of leadership at the moment, which is troubling. And we've allowed outside parties to intervene, and they have their own interests."
10:20: Saidi ends with a warning; the process that the Arab Spring countries are going through now are similar to revolutions that occurred in the same countries in the 1950s and 1960s. The same promises were made then - erasing corruption, greater democracy and so on - but those countries ended up with military dictatorships. "We spend more on oil subsidies than we do on education - our priorities are clearly wrong," he says.
Saidi also points out that Saudi Arabia consumes more oil than Germany, a far larger economy, with a much larger population. "We need the SME channel, and we need massive infrastructure spending across the region. Not in Dubai, but if you've ever been to Yemen, Egypt and so on, you'll know what I'm talking about." Saidi concludes by saying that aspirations in the region are high, with calls for dignity and inclusiveness. "Growth cannot just be for the elite - if we're going to move forward, growth must be much more inclusive," he says.
10:15: Saidi is personally working on two ventures in the SME field. Launched last week, Eureeca is a crowdfunding start-up based in the UAE. He refers to the launch of Kickstarter in the US, which has revolutionised the film industry in the US. Eureeca has taken that platform, allowing firms 90 days to pitch to website users. During that period, any potential investors can ask questions, which have to be answered online, thus adding to transparency. It's also a global platform, allowing investors from all over the world to tap MENA start-ups. "We're hoping it will be a gamechanger for the region," he says. "I call it democratic capitalism, as it was meant to be. We've forgotten about that in the race to fast trading, exchange traded funds and so on".
Nextspand is the second initiative, which focuses on regional bourses, allowing more SMEs to list by amending the regulatory model. Costs for SMEs to enter bourses here are astronomical - around $4.5m just to list, with more funding required to remain compliant in the future. Saidi is talking to six governments in the region to establish this venture; it will involve setting up a second-tier operation within existing bourses.
10:10: Saidi says that this issue puts the focus on SMEs, which is a key part of any country's economy. It also means that the state will have to stop focusing on employing nationals in the public sector - "that's a dead end". Steps are being taken, especially in the UAE, with the removal of capital barriers to set up companies. Governments are also coming into incubation and they are encouraging banks to give out more loans. But Saidi says this gives the banks mixed messages; lenders have to conform to Basel III, which restricts lending to smaller companies. In addition, banks pay the same in terms of risk analysis to approve small loans as they do for significant loans for much larger companies. In addition, credit bureaus are not fully in place yet. "Loan guarantees play an important role, and you need a law that provides incentives for SMEs," Saidi says.
Only 20 percent of SMEs in the region actually have a credit line from the bank - in the UAE only 4 percent of loans go to SMEs. That figure drops to 2 percent in Saudi Arabia. But, Saidi argues, loan guarantee programmes in Morocco and Lebanon means that number rises to 25 percent.
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10:00: Saidi is speaking now; he begins with a wider appreciation of the regional economy. Oil production won't help the region in 2013 as much as it did last year, but the non-oil sector - a major policy platform for GCC governments - are doing better. "Overall, you can expect growth in the GCC to be 3.6-3.8 percent in 2013," he says - significantly better than the more established economies. That growth will be even higher in the UAE, and especially in Dubai. Saidi says that key sectors such as hospitality, tourism and trade, make up more than 40 percent of the Dubai economy, and that will grow further as Dubai continues to turn itself into an aerotropolis.
Saidi is now referring to the 'Arab firestorm' countries, rather than the Arab Spring or 'transition' countries. "When the forest is very dry and the leaves have fallen, the fire can transmit itself anywhere," he says. "You can expect four to five years before foreign direct investment coming back to any of those countries." This is shocking, Saidi says, especially given the huge unemployment figures in the MENA region, and the youth bulge in those countries. Even in Saudi Arabia, job creation is a significant challenge. '"This is a persistent structural problem - we have had these problems for 10-15 years," he says.
09:40: Right, we're off. Andrew Neil takes to the stage and welcomes the audience. "There's no question that the Dubai economy is on the way back - there's even the signs of another property bubble, so be careful," he says. Not everything is perfect, Andrew says; Dubai still has debt issues to address. And in the wider region, plateauing oil prices and the shale gas revolution in the US could have huge implications.
And on that note, Andrew leaves the stage, leaving the floor to Dr Nasser Saidi. When it comes to the Gulf economies, there aren't many more prominent experts than Saidi. He is the founder and president of Nasser Saidi & Associates, and is the vice-chairman of crowdfunding start-up Eureeca. In a long and varied career, he has also served as chief economist of the DIFC, and as a minister covering both the economy and trade and finance portfolios in his native Lebanon. Saidi is also a member of the IMF's Regional Advisory Group for MENA, among several other positions.
09:20: Good morning, and welcome to the 8th Arabian Business Forum. My name is Ed Attwood and I'll be liveblogging today's proceedings from the flashy new JW Marriott Marquis Hotel in Dubai.
In keeping with previous forums, we'll be discussing the health of the Gulf economy, with a focus on Dubai. As usual, we have a great line-up of keynote speakers, who will be addressing our audience of 200 business leaders. First up, we will hear an opening speech from Andrew Neil, the renowned BBC television presenter and former editor of the Sunday Times, who is also the chairman of ITP.
And then we'll launch straight into our keynote speakers. Top of the bill is Dr Nasser Saidi, a well-known face in these parts due to a lengthy stint as the chief economist of the Dubai International Financial Centre (DIFC). Next up is Ryan Mahoney, the CEO of Better Homes, one of Dubai's biggest property brokerages, who'll be giving his opinion on one of the biggest topics in the UAE right now - the supposed real estate boom in Dubai.
After a short networking break, we'll hear from Kate Hardcastle, the British consulting expert and co-founder of Insight with Passion. And our last speaker before lunch promises to be an interesting one; Yousif Abdulghani, who heads up McDonald's operations in the region, will talk about franchising and the hugely competitive casual dining industry in the Gulf.
After lunch, a panel of prominent property experts will again discuss the state of play in Dubai's real estate market. Finally, we'll hear from Fredrick Schauman, the managing director of iProspect, who will announce the results of a specially commissioned banking survey.For all the latest industry news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
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