By Shane McGinley
Sameer Al Ansari is one of few people to have seen the rise, fall and rebirth of Dubai from an insider’s perspective. In an exclusive interview, the former head of Dubai International Capital describes how the crash happened and whether anything has really changed as a result
The psychology behind business is something about which Sameer Al Ansari seems to give plenty of thought. As we sit in a plush boardroom in Dubai International Financial Centre — the emirate’s economic nucleus — issues such as human nature, motivation and a real concern as to whether those currently at the helm in Dubai have really learnt any lessons from the global recession of 2009 are subjects he has clearly considered for some time.
“Human nature impacts everything. When things begin to pick up, general optimism and positive energy, all these things begin to feed on themselves,” he says, before counterbalancing it with a cautious footnote to bring proceedings back down to earth.
“People have short memories. Several things have changed... [But in] human nature deep, deep down, we are all greedy, so if they get the chance to do it, they’ll do it again. In five years’ time, ten years’ time, 20 years’ time? I don’t know. It will happen again.”
Of course, if anyone is in a position to know whether things have changed in Dubai it is Al Ansari. Few people have been privileged enough to be in the central core when the global recession engulfed the Dubai real estate market in 2008 and when it faced the headline-grabbing Dubai World debt crisis in 2009.
Born in Kuwait but holding UAE nationality, he started out as a senior manager with Ernst & Young from 1987 to 1992, but his career progression quickly brought him deep into the inner circle of Dubai’s business community.
He served as group chief financial officer for the Executive Office of His Highness Sheikh Mohammed Bin Rashid Al Maktoum, Ruler of Dubai and Vice President and Prime Minister of the UAE, and was the founding chairman and CEO of Dubai International Capital, a subsidiary of Dubai Holding and widely considered to be the sovereign wealth fund of Dubai, with assets under management of around $13bn.
Add those positions to the fact he was also chief executive of Shuaa Capital, one of the Gulf’s top listed financial services institutions, for two years and chief financial officer at Dubai Aluminium Company (Dubal), where for eight years he played a significant role in the successful turnaround of the company, and you get a sense of the responsibility that has been regularly placed on Al Ansari’s shoulders by Dubai’s most powerful leaders and the insights he has gained over the years.
“My view is that Dubai and the UAE are probably in the strongest point and position economically that I have ever known them to be. The crisis obviously impacted the whole world, and probably impacted us more than other countries, but we have emerged in a very strong position,” he says.
“Economically, Dubai and Abu Dhabi are doing extremely well... If you look at the five years pre-crisis, Dubai went through a tremendous period of growth. Was it fundamentally driven or money driven? I think the whole world was money driven. There was enormous liquidity around the world chasing assets... Of course there were bubbles all over the world and when those bubbles burst everybody suffered.
“I think today the fundamentals are stronger. We have population growth, we have all the various sectors of the economy doing very strongly and it is demand-driven rather than supply-driven and liquidity-driven.
“The whole world is in a better shape and banks are in better shape and many of the issues we faced before are being addressed. Demand is coming back strongly.”
To cater to this demand, mega projects — from even bigger malls to canals, theme parks and underwater hotels — are being announced all the time, but has anything been learnt from the scary days of the recession and what is going to stop history repeating itself all over again?
“In Dubai there is a better handle on what the various state-owned enterprises and government-related entities are doing, how much debt there is and how it is going to be repaid. That is one,” he says, laying out his theory about how human nature has indeed changed in Dubai and some of the greed-led, crazy policies and projects of the past have been put out to pasture.
“Secondly, access to debt is not what it used to be, so even if people get carried away the banks now act as the checks and balances. Before they were literally throwing money at everybody to do something and go spend it.
“During that period, I was chairman and CEO of Dubai International Capital and every day some bankers would come in with a blank cheque. There was 100 percent leverage if we wanted it because the banker’s bonus was based on that, so why wouldn’t he do it?
“It has changed a lot,” Al Ansari says, conceding that it’s unlikely that all the headlines seen in recent years will come to fruition. The reason for that is that projects and the financing behind them are nowadays analysed to a far greater degree.
“Projects, mega projects, yes,” he adds. “Will they all happen? I’m not sure. Can they all be funded? I’m not sure. But at least now I know any project that goes ahead would have been scrutinised to death.
“It wouldn’t get funding unless it is bankable, and that wasn’t the case before. You announce something, the bankers would be lining up to give you the money and a lot of those projects never happened. Some of those had to start again and were cancelled. We are in a safer place. Will that still be the case in five years’ time? Who knows?”
Al Ansari points out that the UAE’s young age — at just over four decades old — meant that when its economy started to gather pace, it quickly lost control.
“If you are driving a car at ten miles an hour and you hit a bump you don’t feel it. If you are driving at 100 miles an hour you are going to fly into the air. Really that is what Dubai went through,” he says.
“I remember a discussion about escrow accounts for developers in 2004 and then everything happened so fast nothing was put in place and you don’t have time to look back. So when the problems started people said ‘why are these things not in place?’
“Crises are never easy and they are never nice but it almost came at the right time for Dubai to sit up and plug all the holes and really get the foundations right. I get the feeling that is happening now... Dubai has a strong board with world-class governance so it has a better chance of success going forward. The region is young so we have to do something, things that the Western world took care of years ago.”
One of the ways Al Ansari is directly hoping to help bring about change is via the introduction of a long overdue bankruptcy legal framework and attempting to get rid of the mindset that failure is not an option in business.
“We had a workshop on this with some of the law firms and judges,” he says. “I think a bankruptcy law is very important for this country... From what I know we made very good progress in getting there.
“It is not published yet, we are getting there and I know there is a lot of focus on it and the realisation that it is very important... Entrepreneurs and small businesses need to know where they stand when things go wrong.
“Sometimes [companies in the West] voluntarily go into Chapter 11 as it makes sense to do so. I agree that in this part of the world to have gone through any bankruptcy procedures or be declared bankrupt or anything like that is taboo. Businesses here are not just Arab businesses so we need to think wider than that. People in this region would do everything possible to avoid bankruptcy and liquidation so it is a cultural issue.”
In the United States, some massive names, such as Lehman Brothers, were allowed to collapse, while a series of other iconic corporates like General Motors and Ford were put through some tough and agonising bankruptcy or restructuring processes.
While Palm Jumeirah developer Nakheel and holding firm Dubai World restructured billions of dollars in debt, this didn’t happen to the same extent in the UAE. No major government-backed or government-linked companies were allowed to fail, something Al Ansari believes should have happened but the culture wasn’t at a point where it would have been acceptable.
“There were a lot of the discussions in 2009 and 2010 where with some companies it actually made sense to let them go through a bankruptcy liquidation process because frankly it would have cost the shareholders less and cost the bank less but the culture is ‘no we shouldn’t’.
“If you allow one to fail it is not just about that company or that institution, it is about the knock-on effect. If we could have allowed that to happen what would have been the impact on Dubai’s reputation and what would have been the impact on other government entities and the impact on the banks? You have to take all those things into account. When you have an organisation ring-fenced the impact is ring-fenced. In this case, it was more complicated.”
Al Ansari saw first-hand how complex it was while working at HH Sheikh Mohammed’s office from 2003 to 2009, an opportunity which gave him an insight into how leadership and human nature operate at the top of the chain in Dubai. “It was a period when Dubai was growing at a tremendous rate so there was a lot of enthusiasm and positive energy and belief in the Dubai story.
“His Highness leads by example and he works 20 hours a day; the whole team around him is like that. There is an expectation to work hard and do well and perform and deliver so it was a very enjoyable period. It is not easy and can be stressful but also extremely enjoyable and a very satisfying period.
“I learnt a lot. You learn the most when things are not going well. When a crisis hits and you are dealing with a global crisis, not just the Dubai crisis, a lot of us learnt a lot, so that was a tremendous experience which I will always take with me.”
That experience Al Ansari is now ploughing into a new crowdfunding platform called Eureeca; earlier this year he was confirmed as its latest board director and shareholder. As he is already sitting on the boards of Dubai International Financial Centre Authority, Hawkamah Institute of Corporate Governance and Lebanon’s Cedrus Invest Bank, it’s clearly a busy time for him.
Since its launch in May 2013, Eureeca has made “substantial progress” by registering over 5,000 investors and receiving over 400 applications from companies looking to raise capital. Following extensive due diligence, Eureeca has accepted 17 listing applications from a range of countries including the UAE, Jordan and Egypt, with eight of these businesses successfully meeting or exceeding their funding targets.
Hailing itself as the first crowdfunding platform to globally cross borders, Eureeca helps businesses to raise capital from a variety of investors around the world. “Crowdinvesting is a new era of finance and is fast becoming an increasingly important component of the funding mix. It is an exciting new way for companies to raise capital, allowing them to fund growth, scale their businesses and stimulate local economies,” Al Ansari says.
While things are happening at the SME level, Al Ansari also hopes the mega-merger last year between Dubai Aluminium (Dubal) and Emirates Aluminium, which created the world’s largest aluminium producer with a market value of $15bn, is just the start of a wider trend for synergies between Dubai and Abu Dhabi companies.
“I sure hope so,” he says. “I don’t know about the politics of Dubai and Abu Dhabi but I think there are opportunities for Dubai and Abu Dhabi to do more things together. What Dubai and Abu Dhabi bring to the table are very synergetic resources and skills so I absolutely hope so and I think it would be good for the UAE if we see more and more mergers and tie-ups.”
Whether it’s helping aid mega-mergers and IPOs through PE Plus, a boutique corporate finance advisory firm based in Dubai he set up two years ago, or helping start-ups and SMEs through Eureeca, Al Ansari is always looking at the psyche behind the business cycle. “We have to bear in mind the lessons of the past,” he says, and with his CV and background he certainly has a lot of lessons to bring to the table.
Sameer Al Ansari on….
Why he joined Eureeca…
It is new and very exciting. What attracted me was the experienced management team and credible board and a new exciting sector, so it grabbed my attention and made me want to know more about it.
Funding for SMEs…
I think there is definitely a funding gap. It is not just a Middle East problem, I think SMEs in general struggle to raise capital. Banks have focused on the bigger clients and high net worth individuals and the family names and corporates and I can’t blame them for doing it. We have to find ways to encourage and fund SMEs and to encourage, maybe even push, banks to lend to SMEs.
Dubai’s reputation… I think Dubai is in a better shape than before the crisis. Pre-crisis there were a lot of disbelievers in the Dubai story. We saw all the headlines. Today, there are more believers in the Dubai story and I think Dubai has proven itself and it has bounced back.
Dubai International Capital…
I left four years ago so I’m not sure what the strategy is.
I get the feeling the overall strategy is not to have these investment companies making investments outside and I think the leadership has realised that Dubai itself has very strong success factors. Why not invest in Dubai rather than overseas in things we don’t know that much about or have a competitive advantage?
DIC’s bid for Liverpool FC in 2007…
We would have been the first to do it out of this region. As soon as they won the Champion’s League in 2005, we got serious about due diligence in 2006 and almost signed in January 2007. I would have done it. Today, I don’t know, a lot has changed. Does it exist today? I think [clubs] are too expensive and you would have to take a gamble and buy a club in a lower league and hope to turn them around and throw a lot of money at them.
The one thing I didn’t want to do after Shuaa is to have a team of 50 or 100 or 200 reporting to me. I’ve done it before and I know you go in the office in the morning and you’ve been in one meeting after another and you leave thinking what did I achieve today other than sit in these meetings and admin issues and people issues. Have I been productive? When I set up my own company with a team of three I was more productive, rather than dealing with other people’s issues and problems all day. I enjoy it very much.