Why governments prefer domestic bliss

A new report PricewaterhouseCoopers says Britain could have had one of the world's biggest sovereign wealth funds had the windfall from its North Sea oil been saved rather than used to cut taxes and boost spending. The news will cause wry smiles among Gulf funds, particularly in light of EU moves to demand greater transparency from sovereign wealth funds.
The report points to Norway, which has used its North Sea revenues to build up a frighteningly profitable sovereign wealth fund worth some $650 billion, and says had the UK saved just half said its windfall it would have a fund bigger than that of Kuwait ($430bn).
Right now, with oil prices flying and sovereign wealth funds making eye-catching deals, the decision to use the monies to reduce taxes looks short sighted. But in a democracy with 50 million tax payers asking for some immediate benefit from the oil jackpot, who can blame successive UK governments for pandering to voters? Free marketers will also say it encourages individuals to invest their tax-break as they see fit.
In 20 years time it may be that Gulf governments will question why they spent so much oil money subsidizing housing, education, healthcare, water, loans, electricity and food for nationals, when they could have been building a bigger investment fund. But they wouldn’t be the first to want a quiet life at home.

Bahrain stubs out F1 posters

News from Bahrain is that all tobacco advertisements relating to Formula One have been pulled thanks to an anti-smoking campaign by health officials. The move is the latest evidence Gulf states are getting serious about tackling what Bahrain’s public health assistant under-secretary calls an “epidemic” of smoking.

Hats of to Bahrain for stepping up, and with the F1 race only weeks away. "This is a beginning and will go a long way in our ultimate goal of getting Bahrain to be a smoke-free nation," Dr Mariam Al Jalahma told the Gulf Daily News.

Europe has already banned tobacco sponsorship, but new markets (F1 is in Bahrain, China and Turkey, and will be in the USAE next year) have been less strict. Bahrain is not up to European standards just yet – the ban applies to ads outside the race track. No word on whether advertising will be banned on the weekend of the race.

The one-eyed man is not King

In amongst all the cranes and cement factories, Qatar is to be commended for giving over space in the bustling West Bay area to non-profit project. The Al Noor Institute for the Blind is building a stunning new facility for the visually impaired.
The interior design of the building sounds first class: textured floors to help students get their bearings, sound effects, stairs with touch markings, high contrast walls to help those with low vision. It is a credit to city in a hurry that it finds space for a non-commercial building in between the new banks, office blocks and designer apartments.
A pity, then, that the building’s exterior sounds so tactless. Someone clearly believed that a building for the visually impaired should be in the shape of an eye – an Eye-Shaped building’, says The Peninsula. Perhaps the new center for spine injuries should be two towers designed to look like legs. Or a burns unit in the shape of a flame. Or maybe the designers thought no one would notice.

Residency cap don't fit

The proposed six-year residency cap on expatriate workers in the Gulf is unlikely to be introduced, senior officials told a newspaper on Saturday. “A proposal on a six-year residency cap on expatriates already exists. However, a ceiling on all expatriates working in the Gulf is unlikely, as all the Gulf states may not endorse a proposal of this magnitude in the near future,” Times of Oman quotes a sources close to Gulf policymakers.
The proposal looks to be going the same way as monetary union between Gulf states. Someone thinks it might be a good idea, but member states can’t agree on the details, or the deadline.
Worse still, the Times of Oman story suggests not everyone agrees there is a problem to solve. “Cheap foreign labor helps businesses earn better economic returns on their investments,” an Abu Dhabi-based businessman said on condition of anonymity. Beat that argument.
“Let me be frank,” says an Omani businessman. “Many expatriates, we know, are ready to do jobs that many of us, I mean, citizens, are not keen on.” The day a Sri Lankan expat in Dubai employs an Emirati as a maid might be the day the visa issue becomes redundant.

Nakheel’s REIT path

Nakheel hopes to raise as much as Dh10 billion creating tradable real estate investment trusts. The revenues will be used to fund new projects; the REITs will be listed in Singapore and Dubai.
The plan is to create two REITs: one for infrastructure with an asset value of between Dh5 billion and Dh6 billion; another for homes with a value of between Dh3 billion and Dh4 billion.
REITs are well established means of driving revenue from real estate projects – and Nakheel had been expected to go down this route – but Dubai’s meddling in the rental market must throw up new and troubling questions for investors. With rent caps a central part of Dubai’s inflation-busting policy, will Nakheel’s developments be able to maximize their potential?

Let’s all move to Qatar

Reports from Qatar suggest the government is to ban landlords from raising rents for the next two years. The drastic action is to help combat record inflation rates. A 27.7 per cent surge in rents spurred inflation in the world's largest exporter of liquefied natural gas to 13.74 per cent in December, the second-fastest pace on record.
It is the latest in a series of Gulf government schemes to get a grip on falling purchasing power. If it’s not rent caps, it is price controls on basic foodstuffs or bumper pay rises for public sector workers.
Qatar says it will study how much to allow rent to rise in two years’ time. How this will affect investors’ enthusiasm to buy in Qatar real estate is unclear. Will a broad base of investors be keen on diving into a market where their potential returns are meddled with by the government?

Gulf funds as Abramovich’s Chelsea

Another day, another ambitious announcement from a Gulf sovereign wealth fund. Yesterday Qatar Investment Authority said it was to spend $15bn over the next year acquiring assets, today it is the turn of Dubai International Capital. The investment fund, owned by the ruler of Dubai, plans to invest $5 billion in China, India and Japan over three years.
"Clearly because of the growth in emerging markets, we believe companies having exposure to emerging markets will grow significantly as well," says the fund's chief operating officer, Anand Krishnan. DIC wants to raise its asset base from $13bn to $30bn by 2012.
With oil prices at record levels, these Gulf funds certainly have the money. The task will be to find the right deals. Announcing how much money you want to spend is not always the best way to secure the best price. In football terms, Chelsea’s takeover by Roman Abramovich, the Russian billionaire, inflated prices for all clubs: selling clubs knew Chelsea could pay any price, rival buyers were forced to cough up to keep up.
That’s not say Gulf funds can’t find the right deal, but they will need the best management. Chelsea, it is to be remembered, won its first League title for 50 years once Abramovich’s cash kicked in.

Pilgrims finally cleared for coverage

The market opportunity sure sounds attractive: 1.5 million Haj pilgrims each year, and more than five million Umrah pilgrims. Many of them are a long way from home, many of them in the country for the first time. The insurance sector has finally cranked into gear and created a product specifically suited for Saudi’s annual influx.
Tawuniya, Saudi Arabia’s first insurance company, says it will now provide insurance coverage to the millions of foreign pilgrims who come to the Kingdom each year. Arab News says it has signed agreements with Bahrain Kuwait Insurance Company in Manama and Al-Ain Ahlia Insurance Company in the UAE to market the product titled Manasik. The $30, one-month fee will provide cover up to $6,666 in medical bills.
While the move is to be commended, it is frightening that the Saudi authorities have taken so long to allow the private sector to find a solution to a consumer problem. Just as worrying, the go-ahead was given four years ago. According to 2005 figures (unfortunately the most recent) hospitals in Makkah and other holy sites provided health care to more than 11,000 pilgrims. Health centers in the holy cities treated 812,000 people.
No doubt the country’s insurance sector will be rubbing its hands. It is hoped the authorities now realize the role an open business sector can have in helping solve social issues.

Inflation busts faith in governments

It is failing cooperatives, it is greedy supermarkets, it is ineffective government policies, it is imbalances in public and private sector pay. Whatever it is, the facts on the ground are that the cost of living is increasingly expensive. Consumers in Kuwait claim the price of basic foodstuffs has risen as much as 40 per cent in the past three months.

With the official inflation rate at 7.3 per cent in October, Kuwait Times says the price of staples (cooking oil, rice, eggs, fresh milk) has shot up and that low-income families are struggling to pay the bills.

Kuwait, which depegged from the dollar last summer and has since seen its currency appreciate by 5 per cent, is suffering more than most Gulf countries. But it is not a unique case. Every one of the GCC states has moved to tackle inflation; none appear to have a grip on it.

Inflation is a real threat to the stability of the Gulf’s economies. In a region where the national governments are expected to manage and provide for, letting prices run out of control undermines confidence in governments’ ability. It doesn’t help that oil prices are producing a windfall for the state coffers – ‘how can household budgets by squeezed when the country is now so rich?’

It doesn’t much the expat community. Not everyone is here for the money, but if conditions are better back home there must be a temptation to leave. It will be harder to attract talent if costs spiral. Paying higher wages has been the go-to strategy. Those days might be over.

Not Christian, but love, actually

With St Valentine’s Day banned in Saudi and under scrutiny in Kuwait, the Gulf is a tough place for budding Romeos and Juliets. In Saudi, the religious police spend the preceding week cracking down on red rose salesmen; Kuwait’s National Assembly Committee for Monitoring Negative Alien Practices has it eye on what it sees as excessive commercialization.
And they’re doomed to fail. Religious authorities might well feel they should be worked up over St Valentine’s Christian connections, but for most consumers – and not just Christians, Feb 14 is becoming increasingly global – it is just a day to tell your loved one that you love them. One can discuss whether it’s best to show this love via the giving of cards, flowers, chocolates or racy underwear, but the concept is now established in consumers’ minds.
Banning business from making a quick buck will not stop the popularity of St Valentine. The true romantic will always find a way.

The Arab League’s fear of phone-ins

More evidence, if it was needed, of the gaping chasm between how Arab governments view the media, and how the media actually is. The Arab League is proposing a satellite broadcasting charter which would entrench state control over broadcast media and curtail political expression, reports Arabian Business.
The move is thought to be in response to TV talk shows, and the worry that privately-owned stations are too viewer-focused. The paper says Saudi Arabia appears to have recently banned live talk shows after someone mocked the size (30 per cent!) of a civil servant salary increase - a position seen as a criticism of the royal family. Saudi stations still run phone-in programs but it is not clear if they are still live.
The charter would ban broadcasting material seen as undermining "social peace, national unity, public order and general propriety" – a broad catch-all that could be used for the most minor of statements.
The move comes as Saudi blogger Fouad Al-Farhan spends his third month in jail, with charges yet to be brought – and if they haven’t found anything yet, it is unlikely they ever will.
As we’ve said before, frightening journalists when you only have half a dozen daily newspapers and a handful of broadcasters is easy; scaring citizens with 24-hour access to blogging software is not.

Private investors take flight

The Arab Business Angels Network launched last week. The network hopes to put entrepreneurs in need of finance in front of private investors with time and money to get involved. ABAN will also use a fund of its own to get into promising start-ups.
The idea is wonderful – this type of private financing is commonplace in Europe and US (where $25bn is invested each year), but doesn’t exist in the Middle East. ABAN hopes to find, and nurture, small businesses with the potential to grow. Entrepreneurs create wealth, create jobs, and help diversify the economy. Just as important as the money will be the experience; it is hoped cashed-out entrepreneurs will get involved, passing on their knowledge.
It has some first rate backers (Dubai International Capital is driving it, Intel and Dubai Silicon Oasis have signed as corporate angels), but it will need them if it wants to change attitudes to investing. When real estate and equity markets are making easy money, why bother dabbling with slow, high-risk investments? There is also an attitude, equally damaging, that if someone shows entrepreneurial spirit, don’t back them, sign them up to work for your company.
One major thing in ABAN’s favor is that it is not politically driven. Angel investors don’t need to be Arabs, start-ups don’t need to be created by Nationals; the point is that the business (and investment) will benefit the Arab world. As governments discuss nationalization, visa caps and incentives for local business, it is refreshingly modern in its thinking.

Dumb Bahrain tastes Dubai’s strike strife

Dubai, so often the pioneering driver of economic development in the Gulf, is well used to having neighbors copy its ideas. There must be a sense of satisfaction this morning to see the neighbors also get lumbered with some of the downsides. Workers on Bahrain’s Durrat al Bahrain project are striking over pay and conditions, and their bosses appear to have no idea how to sort the problem.
Media reports claim more than 1,000 workers are now locked in their camp, as the bosses on the $6bn project scratch their heads. The workers have been on strike for the past two days demanding better pay, hot water, better medical facilities and other basics such as lights in the toilets. They are being paid $150 a month and have been encouraged in their complaints; the Indian Ambassador says his government is planning to impose a minimum wage of $265 for all Indians in the Gulf.
“How will the company make millions without us, who they treat as slaves?” asks one worker. It is line that could be printed on strikers’ banners across the region. Dubai, for once, will be grateful the attention is elsewhere. It seems incredible the Bahrain Government, part owners of Durrat al Bahrain, didn’t realize that denying medical facilities and hot water - and paying subsistence-level wages - would cause a problem.

Thumb-power

SMS remains a technology with lots of potential applications waiting to be discovered and implemented — for everything from payment systems to information on demand. Given the mobile network operators’ strong desire to maximize profits, and the need for, say, Etisalat or Du to differentiate themselves, a good idea from a start-up has an excellent chance of getting heard.
The trend-spotting site Springwise has a good from the Philippines, where text messaging has caught on in a huge way. Two years ago, according to Pyramid Research, the Southeast Asian archipelago became the first nation on the planet where network providers saw revenues from text messaging exceed what users spent on voice. With its Share-A-Load programme, Philippine network provider Globe Telecom has capitalized on the local love of SMS messages by allowing its customers to send their phone credit (or ‘load’) to someone else. Globe charges PHP 1 or about US .024 for each transaction, making its service an easy way for parents to send money to their children, for example, to make sure they’re able to stay in touch.
Gulf telecom operators, hemmed in by government price controls, might do well to match this innovation.

Quick thinking creates slow-tech solution

Full marks to Jazeera Airways for its quick and positive reaction to the ongoing internet connection slow down. With more than 60 per cent of the airline’s bookings being made online, it has produced a slimmed down version of its site (just 16 kilobytes in size, loading in less than 4 seconds on very slow connections) to cope with the problem. And released a press release telling the media all about it.
I have no idea how well the site responds to the slow down, or much business Jazeera will make and/or save, but such responsiveness deserves credit. It will be interesting to see if it carries on with the low-tech site after the problem is cleared. Even on a good day, I’d bet customers prefer quick and simple to slow and complicated.

Connecting with the right excuse

For commuters using the UK’s rail network autumn mornings would be sprinkled with late running trains. The standard, slightly baffling excuse would be that there were leaves on the line. Retailers, explaining a poor season’s sales, often fob off investors with the excuse that the weather was ‘wrong’, either too rainy or too sunny.
For Middle East telecom providers there is standard go-to line when services are disrupted: ‘damage to underwater cables’. A cable in the Mediterranean was damaged last week causing a slow down in internet connection speeds across the region. This was followed by damage to a cable off the coast of Dubai, and then another off Qatar. If one is bad luck, and two is careless, what does that make three?

In a region not given to public information announcements, maybe we should be grateful the telecom operators have even offered an excuse. But it is becoming tiresome. They used the same line last year when a cable was damaged off India. Would it be too much to ask them to explain how these cables are damaged, how they are repaired and how they plan to safeguard connections in the future?

KFC flaps its wings

If you want to build the world’s biggest sandwich you will have to top the 2,500kg monster created by Wild Woody’s Chill and Grill. The longest line of pizza currently stands at 186.3m, in Treviso, Italy. Doha can now claim to be the home of the world’s largest bucket of fried chicken – a 300kg mountain courtesy of Qatar Food Company, the franchisee owner of KFC.
Setting the record has certainly made the papers, at least locally, and no doubt QFC is proudly counting the press clippings. “We wanted Doha to be in the record books and what better way to offer customers abundant supply of the product they love, while setting a record on the way as well,” says Sherif al-Ashry, a company official.
But is this really the kind of story KFC wants associated with its brand? A wasteful amount of presumably cold chicken (it was shipped from six locations) sat in a shopping mall. It makes the brand look cheap and greasy.
And unremarkable. “Judging the thousands of food-related record requests we get every day, it’s hard to tell whether it will stand for very long,” Kelly Garrett, a Guinness World Records adjudicator tells Gulf Times. “Besides, records are being broken, faster than they are made, these days.”