Credibility gap

Citigroup has hammered Société Générale, saying its recently-discovered $7 billion fraud has threatened the bank’s entire credibility. The financial industry might like to imagine the French bank’s current difficulties can be kept local. They won’t.
The singular actions of Jérôme Kerviel, the French trader currently being questioned by French police, threaten to damage the reputation of the entire finance industry – from banks, to advisors to credit rating agencies - at least in consumers’ eyes. The SocGen debacle comes less than six months after Northern Rock, a British bank, failed, and within the same 12-month period that US banks realized they had botched their bet on the sub-prime market. To the man in the street, the banking industry looks like it is run by buffoons.
Credibility is all.
Which brings us to the news that Emirates Stocks and Commodities Authority (Esca) is to introduce a new licensing regime for stock brokers. The benchmark is to “promote integrity, fairness and sustain investors' confidence”, according to Shaikha Lubna Al Qasimi, UAE Minister of Economy. The move brings the UAE in line with London, Hong Kong and New York.
All stockbrokers will have to be up to speed by the middle of the year. A great idea, if it is backed up with action – and vigilance. Jérôme Kerviel, as the French police will be aware, had all the right qualifications.

The fortune in the labor camp

Aldar Properties is to construct two residential cities for its workers. The two projects are expected to complete in 2010 and will eventually house 150,000 laborers.
“We are committed to provide respectable living conditions for workers ensuring security and safety,” says Aldar Chairman Ahmed Ali Al Sayegh. “We believe that the company’s progress is attributed partly to the labourers who work hard in our projects. For our part, we provide them with facilities and first-class services along with transportation to move them from the residential compounds to work sites.”
The new-and-improved labor camps are the latest attempt to reinvent the UAE’s dismal record on the treatment of workers. The next generation accommodation will be less like a jail, and more holiday camp. Ronald Barrott, Aldar CEO, says invitations will be “sent to many celebrities, such as singers, to come entertain the compound’s residents.”
There will also be shops, banks, cinemas and services. Will there be much need for shopping for residents earning less than $10 a day? You bet. The trick, according to CK Prahalad, is to stop thinking of the poor as victims and instead start seeing them as “resilient and creative entrepreneurs as well as value-demanding consumers”. Pick up his book, 'The Fortune at the Bottom of the Pyramid’, for details. Or do the math: 150,000 workers at $10 equals $1.5m.

Bar talk from Bahrain minister

“A lord with billions in Great Britain cleans his own car on a Sunday morning, whereas people of the Gulf look for someone to hand them a glass of water from just a couple of meters away.”

So speaks Majid al-Alawi, Bahrain’s labor minister, quoted in Asharq Al-Awsat. Fond of the colorful quote, he says the Gulf is in danger of being swamped by an “Asian tsunami” of expat workers because locals are too “lazy” and “spoilt” to do simple tasks themselves, and that the threat is “worse than the atomic bomb or an Israeli attack”.
I’ve heard these sentiments expressed several times in expat hostelries, but hadn’t expected it from a government minister.
Alawi, an advocate of the six-year residency cap for unskilled expat workers, wants action to tackle this imbalance. If GCC governments aren’t going to act on the cap, he might be right in attacking the problem at source. It will be interesting to see whether Gulf Arabs feel his tap-room comments are worthy of discussion.

AdLand’s warped reality

It is a dangerous science reading too much into the world imagined by the advertising industry. If aliens were to land on earth and catch a five minute ad-break they would conclude human teeth are white and straight, credit is easy to come by, and drinking soft drinks causes people to sing and dance.
We accept the ad industry sells us a fantasy, but that shouldn’t mean it loses touch with the real world. Middle East advertising asks consumers to suspend their grip on reality. The industry appears to have drawn up some very strange rules.

• Maids must be invisible. No family will be seen to employ a maid.

• In the home, housewives must wear brightly colored abayas. Black is too gloomy.

• Buying a new car clears all traffic from the roads. Drivers must head immediately to a twisty mountain road.

• All houses will be decorated in an ultra-modern style. All homes must have been built within the last five years.

• Applying for a loan is a sign of success. Debt is to be celebrated.

• Indians/Indonesians/Filipinos must not appear in crowd shots.

You can only imagine what the curious aliens would make of this. For those of us that live here it suggests a region terrified of admitting it is multi-cultural, old-fashioned, financially irresponsible, and clogged with traffic.

Death by a thousand cuts

The Fed cuts interest rates, the UAE Central Bank, pegged to the dollar, is forced to follow suit. The difference here is that the US is hurtling towards recession, the UAE is not. In fact, it is trying to get a grip on a boom.
Today’s comment doesn’t need to come from Kipp. We’ll leave it to Shaikh Sultan bin Saud Al Qasimi, chairman of Barjeel Geojit Securities and managing director of the Sharjah-based Al Saud group. Cheaper money will only fuel consumption and, in particular, push up property prices, he tells Khaleej Times.
“In the UAE we have zero monetary policy,” a surprisingly forthright Al Qasimi states. “We have abdicated all responsibility for monetary policy to the US.” Quite.

Doha on Thames

A consortium of Qatari funds is stumping up the $3.88 billion to fund the building of London’s "Shard of Glass" skyscraper. The 310-meter tower, described as “Europe's most recognisable commercial property landmark”, will add two million square feet of commercial space to the City.
It is another example of cash-rich Gulf funds stepping in to finance credit-crunched Western ventures. This one differs slightly in that it is a new build, high profile and slightly risky; nearly 400,000sqft of space has been pre-sold but filling the rest could prove sticky.
No word yet on whether the London public will know of the Qataris’ involvement, whether the tower will be renamed. Best to wait to see if the project works, then decide.

The Land of the Long Lunch

“There is no possibility of achieving competitiveness without raising the culture of productivity,” said Professor Michael Porter, addressing the audience at 2nd Global Competitiveness Forum in Riyadh on Monday. If past experience of conferences in Saudi are anything to go by, half his audience would have been snoozing, the other half considering their lunch options.
Not that this should stop the Porter, professor at the Harvard Business School, an expert on economic competitiveness and paid north of $50,000 for making the trip, from delivering his presentation. He went to claim the poor productivity of the Saudi workers was due to the lack of proper training. A generous statement, but one that at least offered practical advice to the three Ministers in the audience.
As sensible and practical Porter might be, what Saudi needs is evidence of home grown productivity, not more words. If it can show how a lean, hardworking, motivated company is winning new business and competing on the world stage, then it might help convince Saudi industry. Until then, nice lunch, isn’t it?

Got talent

A global study of MBA students at top European, US and Asian schools has revealed that the Middle East needs to do more to attract top international talent. File this one under ‘No, Shit-Sherlock’.
To be fair, a closer look at the study (Hill & Knowlton’s eighth annual Corporate Reputation Watch) does throw up some interesting insights, and explains what most of us already knew. MBA students much prefer publicly-listed companies to government or family-owned; one fifth are prepared to move abroad; and three-quarters would be happy to switch industry.
In a region with a high number of either state or family businesses, where workers are asked to sign up to daunting employment contracts, and career progression is sometimes based on sex and race, rather than talent, there would be seem to be much work to be done. If it wants to attract MBA talent.
From personal experience, the Middle East seems to have no problem attracting workers whose careers have stalled at home, have been parachuted in on a high salaried short term contract, are escaping flat economies in their home country, or those who fancy a change of scene and a new challenge. There is no problem with that. To an extent, it’s what happens when they get here, not what they bring, that matters. Get-up-and-go is more important to wealth creation than formal qualifications.
By all means pitch for MBA talent, but don’t imagine MBA equates to entrepreneurial.

First the World, tomorrow the Universe

Nakheel, developers of the three Palm islands and The World, plans to build The Universe. The project will comprise of a series of islands strung along the Dubai coast, stretching from Palm Jumeirah to Palm Deira. The construction will take 20 years to complete; choosing the name couldn’t have than longer than 20 seconds.

As if to head off any criticism that its offshore developments were creating an environmental disaster zone, the news was preceded by the announcement Nakheel is to commit $55m to raise awareness of coastal development issues.

Almost two-thirds of the world's population lives in coastal communities and a large amount of development is taking place in these locations. As such there is a need for significant investment in research, development and positive transformation of these environments. The long-term aim is to provide leadership in the development of sustainable coastal communities," says Sultan Ahmad Bin Sulayem, Executive Chairman, Nakheel.

In October, Chinese businessman, Bin Hu, bought one of the islands of The World, Shanghai, for $28m. The cost of construction of The World is estimated at $14 billion. The $55m ‘green’ fund is, literally, a drop in the ocean.

Thrillingly sensible

Emaar Malls has inked a deal with Sega Corporation to develop and operate indoor theme parks. Emaar plans to spend $4bn opening 100 malls across the Middle East, North African and Indian subcontinent. Sega is a global leader in interactive entertainment facility operations.

I can’t find anything to fault in this. Good business marrying up with another good business to create a better business. I’m sure large sums were involved, but that shouldn’t detract from the business sense. Granted, with 100 malls to play with Emaar could have opted to create its own Entertainments brand, but it has enough on its plate. Why make life more complicated?

If you’re planning rapid expansion it’s good to partner up with experts.

In praise of…rain

Rain in the desert is a wonderful thing. Nourishment to parched ground, damping down dust, and, for Dubai, helping wash away the grime of a polluted city; it has also tested Dubai business.

• Road builders will be examining their drainage systems
• House builders will be praying the new roof is water-tight
• Fast food restaurants will know their most hardened delivery drivers
• The tourism industry asks itself ‘if the sun stops shining, then what?’
• News providers should ask themselves are they doing enough to inform residents
• Car cleaners prepare themselves for a busy weekend
• And the owner of flooded Porsche Boxter at the Arabian Ranches roundabout will be wondering if he can part-ex on a 4WD

How did your business get on?

King of the Roads

If nothing else, at least now Dubaians realize the importance of Sheikh Zayed Road. Close the road, the city stops.
Business may grumble that Monday’s public holiday – the fifth consecutive working week interrupted by a holiday – was called late, but it was unavoidable. For security reasons, the visit of George Bush to Dubai is not something that can be flagged in advance. If the authorities then choose to close down the city’s main artery for 10 hours, along with closures on feeder roads, then there is little option but to tell people to take the day off and stay home.
It is a pity Bush never got to see the real city, warts and all. The presidential bubble must think the world is full of clear roads, and smells of fresh paint.

Tax: enough chat, get on with it

More mutterings about tax in the Gulf, this time from Bahrain. Khalifa Al Dhahrani, speaker of the Bahrain Parliament called for levying taxes on profits of foreign commercial institutions. As usual in these things he did not specify the tax rate or suggest a date for applying the new regime.
“Bahrain has limited sources of income and relies heavily on oil to fund its spending. Now it needs to diversify its sources, expand its financial assets and preserve the rights of the future generations,” says Al Dhahrani, reported in Gulf News. “It is only fair that foreign investors should contribute to the expenses by paying taxes.”
So what’s stopping them? Gulf countries seem to be able to command the building of roads, but new planes and construct office blocks, why can’t they introduce a tax system? If the idea is that tax revenues will be used to pay for infrastructure and services that will benefit the wider economy, where is the problem in that? Who’s complaining?
It seems no one is prepared to grasp the nettle. They shouldn’t worry. Business is not sold only on the idea of a tax-free environment. Ease of doing business, a deep pool of talent, good infrastructure, long term stability…all of these rank highly. Maybe Bahrain needs to just get on with it – and introduce the best, most equitable, most accountable tax system the world has seen.

Pirates of the Arabian

Almost every office I’ve worked in has used hooky software, the building here is happy to allow Chinese DVD hawkers to go door to door, and holidaymakers include trips to Karama on their itinerary (my Christmas guest bought four handbags, one watch and a purse). I have friends here who are first name terms with their supplier of fakes, one recently had an order of Paul Smith shirts knocked up for less than 70ds (full retail price: 700ds). And they weren’t bad.

The UAE claims to stringent laws have kept piracy and counterfeiting under control. “While it is a serious matter in the entire Middle East it is not so serious here due to stringent measures and tough laws introduced since the mid-1990s,” Mohammed bin Abdul Aziz Al Shihhi, Planning Sector Undersecretary, tells Emirates Business. “The UAE takes the issue very seriously as it is directly linked to foreign investment.”

This is nonsense. While recognizing there is a big difference between an obviously fake handbag bought from a cheerfully dodgy shop in Karama, and unknowingly buying fake brake pads from an authorized retailer, there is clearly some gap between having laws and implementing them. If you’re happy to let sellers of fake goods continue to trade, don’t be surprised if a culture develops that says fakes are fine.
Counterfeit goods are a global problem, and unfortunately for Dubai, as a transport hub, it suffers more than most. But if the city is to really crack down on the problem, and earn a global reputation for managing this issue, it must crack down on fakes at every turn.
Rudy Giuliani, former mayor of New York and Republican presidential candidate, faced a similar problem when dealing with drug, crime and prostitution in Time Square. His Zero Tolerance policy cleaned the streets and revived the city’s reputation. Time for Dubai to step up.

Money buys class, but not exclusivity

One of the major, modern headaches of ambitious brand owners is how far to take the brand. Pressure on revenue says roll out the brand into new territories (or categories); protecting what you have says don’t dilute the magic.

Starbucks is in the middle of such a headache, Fast Moving Consumer Goods giants such as Unilever and Proctor & Gamble face it every day. Right now, the Louvre, icon of France and Paris’ star museum, must be having its own internal wrangle.
The museum inked the latest stage in its deal to open a Louvre Abu Dhabi. There are $525m-worth of good reasons why France-Museums made the 30-year deal; the question now is how far do they take this roll out? Can we expect Louvre Rio, Louvre Cape Town or Louvre Auckland?
This matter because there is cachet to exclusivity. If Abu Dhabi can’t spend years creating its own world class museum, it would be nice if it at least acquired the exclusive rights to one of the best. Knowing it was one of four cities hosting a ‘Louvre Lite’ is a different proposition, particulary for its tourism marketing.
The danger for the Abu Dhabi, spending big money to acquire the rights to established formats, is that it signals the brands can be bought for cash. The brand owners may not always want to sell, buy they have advertised the fact they have a price. Building your own brands, however lengthy the process, may be the better option.

When bureaucrats meet business

As Kuwait's banking community tells its country's lawmakers to stop meddling in monetary policy, Saudi's Shoura Council is stepping up its interference in small business issues. An incredibly detailed new law, awaiting Council of Ministers' approval, plans to govern the summer opening times of sheesha outlets, decide when highway food stops must close, and the winter hours of amusement arcades.

The Shoura Council says the law is the result of two years of research and study. It reiterates that all shops should be closed during prayer times, regardless of the season.
Business needs some government – and Saudi officials are right to point to shorter European opening hours – but it is the nitpicking interference that bothers. A recent World Bank report put Saudi 23rd in terms of business reforms (presumably it had more than most to reform), ahead of others in the region. Good luck with next year's report.

More heart, less bricks

Many of us will have been on holiday and returned enthusing about a new city. Not everyone then plans to build a version of the city in their home town. Buti Saeed Al Gandhi is not everyone.
Al Gandhi, boss of Eminvest, a Dubai-based investment firm, is to build a version of the French city Lyon in Dubai. He is reported to have firmed plans after traveling to the city as part of a scheme to design a new French-language university in Dubai. The university plans remain, but it will now form part of a huge new district featuring public squares, restaurants, outdoor cafes and museums. French urban planners are on board and the project is expected to complete in 2012.
"We're not going to just copy the buildings and make a type of Lyon decor, but reinstitute the city's atmosphere with boutiques and cultural places in the heart of the city, transport, a social mix, streets and lanes," said urban specialist Jean-Paul Lebas, who is working on the project.
Al Gandhi could have picked a worse city to fall in love with. Lyon is famed as the home of French gastronomy; two of France's best known wine-growing regions are located nearby the Beaujolais to the north, and the Côtes du Rhône to the south; and parts of the city were named as UNESCO World Heritage Sites in 1998. It is the birthplace of cinema and has an agreeable summer temperature of around 27°.
How well wine, pork sausages and French art house cinema will translate in Dubai is anyone’s guess, but Al Gandhi needs to be commended for aiming to recreate an atmosphere, rather than just the architecture. With Dubai absent from any of the ‘world’s most livable city’ charts, it is no surprise to see developers go for the quick-fix solution: rebuild winning formats from elsewhere in the world.
What can we expect next? Business Week’s annual survey, conducted by Mercer Human Resource Consulting, ranks cities by political stability, currency-exchange regulations, political and media censorship, school quality, housing, the environment and public safety. Zurich, topped the list last year, followed by Geneva, and Vancouver and Vienna tied for third. The full list, including slideshow, is here.
Four of the ten most livable cities surveyed by the Economist Intelligence Unit are in Australia, and two of the top five are Canadian. Vancouver is the most attractive destination, Melbourne second. A developed public transport system is a high priority.
Monocle magazine rates Munich as its number one, with a winning combination of investment in infrastructure, high-quality housing, low crime, liberal politics and strong media. Copenhagen and Zurich are second and third.
There may be some differences in the three rankings, but all agree that ‘soft’ features (media freedom, political freedom, laws) are as important as ‘hard’ (transport, housing). Al Gandhi’s Little Lyon will do well to remember this.

Toilet paper

This morning’s Financial Times leads with ‘Dollar fear sparks rush to oil and gold’, the Wall Street Journal also goes with oil (‘Oil Hits $100, Jolting Markets’). Emirates Business 247, the UAE’s month old business newspaper (advertising slogan: ‘Hungry For Dominance?’) goes with ‘Sheikh Mohammed the leader of change’.
This, according to Emirates Business, is a news story. Presumably this time last week Sheikh Mohammed wasn’t a leader of change, but, perhaps thanks to some change of policy over the new year break, he now is. Whatever, Emirates Business’ gushing 400 words don’t tell us much – other than that tomorrow is the second anniversary of Sheikh Mohammed’s ascension as the vice president, Prime Minister and ruler of Dubai.
Not to hammer Emirates Business (or the achievements of Sheikh Mohammed), but this is an extremely lame lead story. Okay, it might make for a decent analysis piece (evaluating the changes over the past two years) but as a front page lead it is an example of the powder puff pieces of old, not the ‘pioneering’ qualities parped by Emirates Business’ in its ‘About Us’ section. Tellingly, no other business media feels the need to lead with such a soft feature.
This matters because Dubai needs strong business media. It is a city built on commerce, one that is increasingly seen in the international news, and the failure of a government-owned paper (one that has just undergone an expensive relaunch) is not helpful. Emirates Business claims the region now ‘has a publication worthy of its economic and financial dynamism’. That is a back-handed compliment.

More sex in the city

Women make up less than one per cent of executive boardroom membership of Dubai Financial Market-listed companies. Of the 371 boardroom members, just three are women. And none are based in the UAE.

There are many ways to read this Emirates Business survey, but ‘less than one per cent’ is ‘less than one per cent’ whichever way you slice it. In Norway, 36 per cent of boardroom members are women – and there is a government target of 40 per cent.
You could argue that this survey is only concerned with DFM-listed companies, so it is not representative of the broader UAE economy. But how many private businesses do you know with women in senior positions? Sure, there are notable examples, but it is not Little Oslo out there.
This matters because the UAE, and Dubai in particular, is casting itself as a new economy for the (not so) new century. If we accept that attracting and nurturing the best human resources is a profitable idea, and that this talent can move anywhere in the world, shouldn’t it be a major goal to remove any barriers to women moving up the career ladder?
This issue is not so much ‘bring more women into the boardroom’ as freeing up talent. If the best candidates are being prevented from progressing, the economy suffers. If Emirates can spire to be the world’s best airline, or Emaar the world’s best property developer, why can’t the UAE be home to the world’s most talented boardrooms?