By Ed Attwood
Read all the breaking news and speeches live, as the Middle East's top business leaders answer the key economic questions of the day
Time's up, says Andrew Neil. The panel gets a strong
round of applause, and that's it for another day. Thank you all for joining us,
and we hope you enjoyed the coverage of the 5th Arabian Business Forum
A question from the floor. A delegate asks about the
difficulties with financing that the healthcare sector has faced. BR Shetty,
was experienced this problem last year, says that banks and other investors
need to see these facilities as an opportunity.
Neil asks about the issue of Indian construction workers
in the UAE. Verma says that the embassy works closely with workers on the
issues of payment and benefits. "But there's no pattern emerging to
suggest that there's concern or exploitation - I wouldn't classify it as
Neil is questioning the healthcare in the UAE - is it the
quality, or the quantity? "The quality is excellent, but there are just
not enough facilities," says Shetty.
Verma also warns that Indian medical professionals are
not being attracted to the Gulf in the ways they once were, due to the
opportunities now available in India. Shetty says that a solution to this
problem is to start a medical college in the UAE - for expatriates. He's
currently in meetings with the authorities here, but is calling for other local
entrepreneurs to invest as well.
Another self-made man, Shetty gives a brief speech at the
integrated medical facilities and services he has introduced into the UAE. He
also makes a call on local banks to investment more into healthcare
infrastructure in the country.
All three men are now taking questions from Andrew Neil
and the floor. Neil asks about the trade balance, which Verma says is more or
less equal. Isn't India a tough place to do business?
"India's investment needs are primarily met by
domestic capital...but over a period of time, doing business in India has got a
lot easier over the last decade. There's no such thing as a free lunch in the
business world," says Verma.
"I'm not asking for a free lunch - what
about a level playing field?" asks Neil.
"There's no doubt there are certain difficulties,
but at the end of the day, there is a very handsome return on your investment
in India," says Shahdadpuri. "India is a place where you have the
rule of law and a large democracy. It's a great opportunity."
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Our last speaker for the day is BR Shetty, the managing
director and CEO of the Abu Dhabi-based New Medical Centre (NMC) Group. Shetty,
who initially trained as a pharmacist, moved to the UAE in 1973 and quickly
spotted a gap in the market for providing healthcare services.
He opened his first pharmacy in the UAE in 1973 before
establishing the New Medical Centre in 1977.
Today, the group has diversified investments across a
wide range of sectors including financial services, retail, real estate and IT.
Shettys contributions to the fields of trade and industry have not gone
unnoticed back home in India.
Shahadpuri takes a brief look at his career in the
diplomatic service, which included spells in Jeddah and Tripoli. He also
recalls his first - accidental - trip to Dubai, which sowed the seeds for
setting up his business in the emirate. Turning to the issue of the ease of
doing business for Indian investors in the UAE, the Nikai chairman says that
the infrastructure is as well developed as anywhere in the world.
banking system is fairly robust, there is rule of law, and the UAE has a vast
hinterland, including India. And you cannot expect a better lifestyle than in
Dubai," he says.
That's the good news. But Shahadpuri says that there are
areas for improvement. "This is not flawless - it still has to work on
facilitating 100 percent ownership outside the free zones. Investors have lived
here for decades are still on two or three years, and still have to have their
blood tested frequently. But no place is perfect."
Sanjay Verma steps down and one of the UAE's most
prominent Indian businessmen comes to the rostrum. As chairman of the Nikai
Group, Paras Shahdadpuri started with trading in commodities in 1988 and chose
Dubai to be the headquarters of his business activity. His group now has
interests in electronics, home appliances, IT, FMCG and retail food chain.
Nikai has a range of around 400 products with over 15 million consumers in
about 60 countries.
Moving onto India itself, Verma says that the size of the
Indian economy is approaching $3 trillion and it is believed that India might
eclipse Japan as the world's third biggest economy at some point next year.
Foreign direct investment is at around $220bn, and there are 222m households in
India. In terms of future investment in India, Verma highlights cars, aviation,
the energy sector, power, the pharmaceutical industry - the list is endless.
"The other thing to look out for is the national
manufacturing policy, where the government plans to add 100m jobs by 2020 - no
large country has ever increased its GDP in such a sustainable and swift way
without include manufacturing," says Verma.
The consul general concludes by saying that while India
may seem confusing and "messy" at times, there is "tremendous
growth happening, in the economic, political and social sectors".
Verma is up and giving us a few facts about Indian
"Indians are the largest buyers of property here. There
are 450 flights between India and the UAE a week," he says. "We
expect 1m Indian tourists to visit the UAE this year."
Trade between India and UAE is about 46 percent of total
trade between India and the Arab world. India is the third-biggest market for
UAE oil, and weekly trade between the two countries adds up to a whopping
$1.2bn. Lastly, trade between the two countries has expanded 83 percent in the
last three years. Some pretty big numbers there.
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Welcome back to the 5th Arabian Business Forum, where our next speaker is Sanjay Verma. As the consul general of Dubai, Sanjay Verma is tasked with looking after the interests of the vast Indian expatriate community in the city. In the UAE more generally, there are estimated to be around 1.8m Indians, and they form a substantial backbone of the local business community.
Last year, bilateral trade between the two countries topped $43bn. And by no means was it all one way, with UAE exports to the Asian economic powerhouse making up just under $20bn. That amounts to the entire nominal GDP of Tunisia last year, if you want to put that number into perspective.
One of the key issues that the UAE faces is its underdeveloped capital markets offering. Although the banks claim that they are lending, there are precious few options for new businesses to tap liquidity, says Aram.
"An entrepreneur can go to a local bank, where they might have capacity issues, or they can go to an international bank. If they don't have that option, there isn't the option of tapping the capital markets. There is definitely room for improvement in terms of the interconnection between the Abu Dhabi and Dubai exchanges."
"Entrepreneurs are very much at the mercy of local banks, the expense of international banks - or friends and family," he adds.
On that sobering note, the panel discussion ends, and the delegates take a break for lunch. We'll be back shortly - and for this afternoon, we'll be focusing our attentions on India - the UAE's biggest trade partner. Joining us a little later on will be Sanjay Verma, the Indian consul general, BR Shetty, the CEO of NMC and Paras Shahdadpuri, chairman of the Nikai Group.
Now Gargash takes a seat, and is joined by Mohammed Gouali, managing director for Al Mal Capital, Ashok Aram, CEO MENA of Deutsche Bank, Ahmed Bin Ali, group senior vice president corporate communications, Etisalat, and Bassam Hage, from Ernst & Young.
The topic is 'Are we out of the danger zone' and it's another glum assessment from Aram, who says that the Gulf is likely to suffer from squeezed financing from overseas.
"GCC economies rely for 30 percent of funding from international institutions - much of that from European markets," he says. "But that's not a sustainable business model - and if that sliver of capital goes away, it's not easy to make up the shortfall."
'Investment banking is a key indicator of the health of an economy," says Gouali.
But, according to Gargash, the UAE's investment banking sector is not as substantial as it should be.
Aram says that Deutsche Bank is lending across the region. Saudi Arabia has been the biggest recipient, followed by Qatar, Abu Dhabi and Dubai. The bank has about $8bn in total volumes at any time in the region, he says.
"Whether it's a sovereign, a government-related entity or a major merchant family - if you don't know the numbers, if you don't have an ability to assess, you don't lend."
Gargash says that the net effect has been flat, relatively - which has been a missed opportunity for the UAE banking sector. They have been directed by the central bank to maintain a leveraged ratio below 100 percent - and all the major banks have had their eyes very closely on that number, which has discouraged them from getting very creative or aggressive in terms of restarting their lending programmes.
"Lending on real estate has recently not been a favourite for banks, due to their limits, and a general perception that its too early to get back into that sector," he adds.
While Gargash says that the banking sector has had more positives than negatives - and has been helpful to the UAE economy - "it has also been an unexciting sector - has not seen creativity beyond standard bread and butter vanilla banking that they do well and they have done for years. That is left to the international banks."
The Daman CEO says that non-bank financial institutions are going to play a bigger role, especially as the regulatory environment firms up. Gargash also welcomes government support for the banking sector - notwithstanding the fact that "the government was responsible for some of the volatility, especially in the recent crisis."
Gargash now touches on the effect that the Arab Spring has had on the local banking sector.
"It started as a positive impact on banks in the UAE - due to the perception of stability and ease of access. That started off by pouring in measurable and visible liquidity," he says.
"The UAE systemwide deposits grew 9 percent in 60 days in the early part of this year. But that effect has fizzled for various reasons. Some money may have gone to real estate, or gone to other countries. And two negative factors were repayment on GREs (government-related-entities) later in the year, and a narrowing of the differential between dollar and dirham interest rates - so some hot money migrated elsewhere."
Gargash jumps straight into a look at the UAE banking sector. It's been a tough three years, he says. Banks clammed up, virtually shut down normal operations and moved to contingency plans.
"A lot of banks face the question of when they go back to normal, and I'm not sure many of them have decided how to do that,” he says.
He points out that the role of the central bank has been strong, but has also been over-protective at times. Added to that, the DIFC - arguably even today - has not built up an indigenous banking proposition that supplements local banks and helps international banks bridge the gap to local markets.
Growth has been stable, and the banking sector has been stable, however. "We have seen reasonable growth, but I believe incomplete non-performing loan provisioning - numbers like 14 percent have been seen, and even further,” he says.
Now for some numbers. Gargash points out that UAE banks maintain highest capital adequacy ration in the Arab world at around 21 percent, while the balance sheets are low at eight times. There has been 3.5 percent loan growth year-on-year while loan to deposit ratios are below 100 percent, having aggressively been brought down since he beginning of the crisis.
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Where, asks Neil, is the best market for Arabtec right now? "Saudi Arabia is the obvious answer, but it is not an easy place to do business," Makhzoumi says. "There is so much demand in Saudi Arabia that we were welcomed into the market, and we didn't have to take any share from existing contractors."
And with that final question, Makhzoumi departs, and Shehab Gargash, CEO of Daman Investments takes the stage.
A question from the floor now, about the future of the regional contracting industry. The market was badly hit by the collapse of Dubai's property market in late-2008, previously the GCC's building hub.
"If we were purely builders of townhouses and villas we would probably not survive as a company. As a result, Arabtec has focused heavily on infrastructure, especially in Saudi Arabia," Makhzoumi says.
"If you can't see this coming, I don't see how you can survive. So there is growth, but it's per sector, per region, and depending on the country because there are many different models."
Makhzoumi says that there are virtually no big projects being undertaken in the UAE at the moment. Other than Abu Dhabi airport expansion and some oil and gas work, there are very limited opportunities there.
"But there is work in the region - we expect Libya and Yemen to be big markets," he says.
Makhzoumi also calls for a rethink of the Gulf's dependence on the US dollar peg - which all the GCC countries apart from Kuwait follow.
"If most of our economy is based on the east, we should come up with a currency that is more based on that," Makhzoumi says.
"I think at some stage that is inevitable, but it seems to me that is more a political decision that an economical one. I don't think it will be in the coming five years, but it has to be discussed."
Makhzoumi also refers to the shortcoming of the GCC region's monetary regime - where currencies are tied to the US dollar. "At some stage, this will affect our buying power," he says.
He also says that project execution has yet to pick up, indicating that appetite for funding is not there. However, he indicates that Saudi Arabia is looking well placed to weather the current changes.
"Dubai did suffer most, because of the global recession," Makhzoumi points out. "And lending growth is stagnant - before 2008, lending growth rose 30 percent every year. That finished in 2008, so there won't be another disaster. But the UAE is expected to grow around 4.5 percent - and will generate a substantial budget and current account surplus this year. It is the most open of the regional economies."
Makhzoumi starts with a quick overview of the global economy. He says that the euro zone crisis will lead to a depreciation of the euro, potentially to below parity with the dollar. He says that if the Middle East has seen an Arab spring, Europe is facing a lengthy winter of discontent. If there is one piece of good news emanating from the financial crisis from a regional perspective, it is corrected asset prices.
"Everything is shifting east," says Makhzoumi. "Energy prices don't track the US global economic cycle any more, that is now more heavily influenced by Asia, which is why the Middle East's ties with its eastern neighbours are more important than ever."
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We're back, and Andrew Neil wastes no time in inviting Ziad Makhzoumi up onto the stage. As chief financial officer of Arabtec, Makhzoumi has his fingers right on the pulse of the financial world.
Today Arabtec Construction is one of the five largest contractors in the MENA region and specialises in building and civil engineering works and its name has become a household name in the construction industry in the Gulf states.
It has over 70,000 employees on its payroll and has been involved in world class developments such as Burj Dubai and Burj Al Arab in Dubai, Emirates Palace Hotel in Abu Dhabi, and Princess Noura University in Riyadh.
Last month, Arabtec reported a higher-than-expected profit in its third-quarter results, up five-fold to $10.6m. However, the Dubai-based company didnt reveal the reason behind the jump - perhaps Makhzoumi will enlighten us today?
If the world is heading for a chronic recession, wouldn't that depress the prices of commodities? Pardo says that if the prices of commodities dips, then price-sensitive economies like China will buy up even more. In terms of the price of oil, Pardo says that as demand will increase, the price will continue to see upward pressure.
As a final point, Bin Sulayem indicates that the Dubai Gold and Commodities Exchange would be open to liquefied natural gas spot trading, if the opportunities via LNG storage are possible. "If that's available, DGCX will jump into that," he says.
That's it for commodities - the panelists leave the stage and the conference takes a short coffee break. Back shortly with speeches from Arabtec's Ziad Makhzoumi and Shehab Gargash, CEO of Damam Investments.
With that, Bin Sulayem takes a seat and is joined by Gerhard Schubert, head of precious metals at Emirates NBD, and Carlos Banon Pardo, head of commodities Middle East at Macquarie Bank.
Who is Dubai competing with, asks Neil? Pardo says in terms of physical infrastructure, Singapore is the city to match, but Dubai still rules the roost in terms of the region.
And what will be the next commodity that Dubai will see strong trades in? Schubert refers precious metals such as palladium and platinum, while Pardo refers to the huge growth in the aluminium market - especially with companies like Maaden, Alba and Sohar Aluminium active in the region. He also cites the potential for increased foodstuffs.
Bin Sulayem says there is still much room for growth in existing products, like gold and diamonds - but he does point out that DMCC is working on new products, although he says he can't release the information just yet.
Bin Sulayem kicks off with a quick review of Dubai's trading history, with a look at the pearling industry. That same sector suffered due to the Great Depression and the rise of Japanese cultural pearls. That - says Bin Sulayem - was an early lesson for Dubai not to put all its eggs in one basket. Since then, a lot has changed.
"In the DMCC itself, 90 percent of new companies come from abroad. These include large multinationals, regional firms, and startups," he says.
The executive chairman says that Dubai is now one of the top four diamond centers in the world, matching Antwerp, New York and Mumbai. He outlines the infrastructure now available for diamantaires, and says that the DMCC is working hard against the illegal blood diamond trade.
"We will continue to do everything we can to support the industry," he says. "Dubai is well-positioned to take advantage of new growth."
What is the DMCC's target for the future? The executive chairman says that the free zone is targeting double the companies it currently has - which equates to 7,200 companies by 2013.
And with that, Hamad Buamim leaves the stage, and Ahmed Bin Sulayem takes up the cudgels. Still only 33-years-old, Ahmed Bin Sulayem is this year celebrating his tenth anniversary overseeing the Dubai Multi Commodities Centre (DMCC). Based in Jumeirah Lake Towers, the free zone now plays host to 3,600 regional and multi-national firms and 23,000 residents with 1,000 new companies signing up in 2011 alone.
Bin Sulayem launched the region's first commodities derivatives exchange in the DMCC, and during his time in charge of the free zone, it has expanded its offering to include a series of products, including gold, diamonds, fuel oil trades, plus tea and cotton.
"Time zone, arbitration opportunities and swaps all these are great opportunities," Bin Sulayem told Arabian Business in an interview earlier this year. "Im going to enforce these opportunities in the exchange and make sure they are just as good as any of the top five exchanges in the world."
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The penultimate question covers the lack of credit in the local markets. Does Buamim think this is crimping foreign investor interest in the country? He points out that this problem hasn't been limited to the UAE, but does agree that higher credit levels would aid growth. However, Buamim also says that the central bank is working hard to solve this issue with local banks.
A final question concerns arbitration, with specific reference to Africa. Buamim says that new laws being put into place will ensure that arbitration decisions are confirmed by the court.
"We bellieve any international contract - best dispute resoluation methods should be via arbitration." When it gets to these agreements, we reccommend putting in an arbitration clause which settles things acciording to international best practices."
If the director general returns next year, asks Neil, what does he hope will have taken place by that time?
"I really hope that we can achieve the laws I mentioned and get these done in the first six months of the year."
However, he does point out that the issue is largely out of his hands, as federal laws take longer to finalize than just Dubai ones. Dubai ones are quicker - but federal laws take longer.
Another good question - it's about the focus of the new laws that the Dubai Chamber is lobbying, which Buamim hinted at earlier. The director general mentions that recent rules allowing investors to utilise Dubai courts or DIFC courts, which offers an alternative option for litigation.
"The best practices seem to be coming from Anglo Saxon system - and we're trying to put UAE and Dubai aligned with best practices. Look at cities like Singapore, London and New York - so the new laws are likely to be based on best practices."
Back on the subject of retail, and Neil points out that shopping is pretty expensive in Dubai. "But there are no taxes here," retorts Buamim. "So where do you shop?" asks Neil. "New York," smiles Buamim.
On to the thorny subject of Dubai's real estate market.
How big a drag has the property market been on Dubai's growth, asks Neil. Buamim admits this sector was a massive driver for the Dubai boom.
"There is some growth in certain areas, but it's been offset by lower values elsewhere," he points out. "It's shifted from being a driver to the economy, to supporting the growth of other sectors like trade."
More positively, Buamim agrees that the slowdown in real estate as helped Dubai diversify its offering more broadly.
Questions from the floor now. One delegate has got straight to the point, asking about the likelihood of multiple entry visas being introduced. Buamim agrees entirely.
"The multiple entry visa, and investors visa are at the top of our agenda. If we can have a long-term visa for businesses, as Malaysia, has - it is very important - and we are advocating that for businesses in Dubai. The current visa doesn't help long-term stability."
Strong words, and ones that businesses here will welcome.
Buamim replies that tourist numbers are still strong - whether from the UK, China or India, and the emirate has been helped by the growth of Emirates Airline and the fact that the emirate is a much cheaper place to do business than it was three years ago.
Has the Arab Spring helped Dubai, Neil asks? Yes, and no, says Buamim - Dubai is stable, but other countries need to be stable to help Dubai's position as a trading hub.
"The uncertainty in the region - we need to react with that," he says. "There has been a 20 percent growth in trade since beginning of the year - first time we have exceeded the 2008 numbers. Africa, Iraq, continuous growth from Saudi Arabia - there was a drop of 10 percent from the Arab Spring, but this was offset by growth in other markets."
Dubai's GDP growth this year looks to be on target of 4-5 percent, says Buamim. But much will depend on the global context. As Europe suffers, companies need to look to new markets to get growth.
"Africa offers businesses the potential for high returns for being first on the ground," he says. "Dubai is the ideal gateway into and out of these markets. Our job is to adapt and adjust to these situations."
And with that positive note, Buamim takes a seat, and Andrew Neil kicks off the questioning with a query about the the high tourism that Dubai has seen.
But what needs to be done to improve the business environment in Dubai?
"Soft infrastructure needs to match hard infrastructure," says Buamim. By that he means new laws to match the strong facilities that Dubai already has.
"We are bringing in new laws - governing competition law, atttracting foreign investments, bankruptcy laws, companies laws and intellectual properties. We hope 2012 will be the year for this soft infrastructure to take us to the next level. But Dubai will also relay on trade, supply chain, logistics and tourism."
"I found it hard to sleep last night listening to Andrew's speech [at the Arabian Business Achievement Awards] and I've just heard it again," jokes Buamim.
He says that he was asked to look at the future of the global economy during his, but adds that he left his crystal ball at home. Buamim starts off with a brief look at the Arab Spring. Although these have undoubtedly been painful times, he says, the director general points out that Dubai, as the region's main trading hub, is well placed to meet these growing trade needs when these economies coming back on line.
The flip side is that Dubai has seen a benefit - in tourism, the financial sector and so on, Buamim adds. He also points out that various global giants are planning to shift their operations to the emirate in the wake of the Arab Spring unrest that has swept some neighbouring Gulf states.
Next to take the stage is jeynote speaker Hamad Buamim. As the director general of the Dubai Chamber of Commerce and Industry, Buamim is effectively in charge of overseeing the interests of the private sector in the city. Thats no small task, given that the chamber has well over 100,000 members.
Buamim is well-known for fighting the private sectors corner, particularly for those companies that are worried about the ease of doing business in Dubai. Earlier this year, in an interview with Arabian Business, he said that the chamber would challenge the Ministry of Labours recent ruling that the validity of labour cards would be reduced from three years to do, effectively shortening residence visas by the same length of time.
One of Dubai's best-known executives, Buamim also sits on the UAEs competitive council, and was appointed to the board of Dubai World in December last year.
It's standing room only as ITP chairman Andrew Neil takes to the stage to give his opening address.
"A long term recession is going to happen - and the one thing we can be certain of is that the international financial crisis is going to be chronic. Not my words, but the words of the Chinese vice-premier," says Neil. Not the cheeriest of starts.
On the particularly hot topic of Europe, from where the chairman arrived yesterday, it's looking even grimmer. Eurozone debt is now nine trillion euros. "If we piled nine trillion euros on hundred dollar bills into the sky, it would go up to moon, round it, and back again. And they are still borrowing. Only the US and Japan have more debt than the Italian government," he tells delegates.
Even Abu Dhabi's finding it tough, says Neil. So whatever optimism we may hear from our keynote speakers today, this has to be put into the context of the global economy.
Good morning and welcome to the 5th Arabian Business Forum, which - as usual - is being held at the Armani Hotel in the Burj Khalifa. I'm Ed Attwood and I'll be live-blogging the event throughout the course of the day. And what a line-up we have for you; starting off with keynote speeches from Hamad Buamim, the director general of the Dubai Chamber, and Ahmed Bin Sulayem, the executive chairman of the Dubai Multi Commodities Centre, we will be taking an in-depth look at the various issues affecting the regional and global economy. Also in today's line-up are Shehab Gargash, CEO of Damam Investments, Ziad Makhzoumi, CFO of construction giant Arabtec Holding, and the famed BR Shetty, the CEO of local conglomerate NME Group - to mention just a few.
We'll be examining the future of commodities, assessing the outlook for regional financial markets and getting a snapshot of the state of play of trade relations between the UAE and India. The event is scheduled to begin at 9.30 - so stay with us for regular updates.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.
Around the moon? Not really. Maybe $1 bills.
Sorry, the healthcare in the UAE is to much quantity and not at all quality. It is just a big business.