Dubai arrives at its cultural crossroads

Dubai airport is now the world’s 6th busiest. According to government data, the total population of the emirate in 2007 was more than 1.5 million, and it is expected to grow at a rate of around 7 percent. Out of these, only around 17 percent are Emiratis.

As so many expats settle in the city, and number of business and tourist arrivals continues to rise, is Dubai now trying to assert its cultural status? Internet provider Du recently banned sites which were deemed as “inconsistent with the moral, cultural and social values of the UAE”; Mall of the Emirates now has posters advising shoppers not to “show excessive amounts of flesh” and “should refrain from public displays of affection, like kissing.” Burjuman and Reef Malls plan to follow suit.

Why this sudden tightening? The government must be convinced these new rules won’t put off migrants and tourists (no porn online, and no bikinis in the mall is not such a bad thing), but it does suggest Dubai wants to draw a line on what is acceptable, and what isn’t. It also coincides with louder calls for more jobs for locals. The current rate of unemployment for the UAE nationals is 13 percent.

As the UAE celebrates National Identity Year, the concern is where does this assertion end?

The real estate boom requires a huge number of new arrivals to fill apartments and villas. In 2007, around 2,200 structures were built in Dubai at a cost of $4,000 million, out of which around 1,500 were residential. Besides occupants, these buildings also require builders. It is to be assumed neither the occupants nor the builders will be Emirati. And with bigger and costlier projects being signed almost everyday, it doesn’t seem like real estate is going anywhere but up.

Dubai now seems to be sending out mixed signals. On the one hand, it promises to be the dazzling, global cosmopolitan haven, and on the other, a morally and culturally strong Muslim state. It requires a fine balance.

Is there an incentive not to pollute?

Buoyed by demand for building materials, a rock quarry ramps up production. As a result, it starts belching huge clouds of dust into the atmosphere. The local population breathes it in, and rates of asthma and other respiratory problems rise sharply.

Fifteen years on, and the UAE Government says it will now consider fines for companies that risked damaging the health of people living near the mines. Hamad al Matroushi, an environmental impact assessment specialist at the Federal Environmental Agency (FEA), says nearly 10,000 people in the Northern Emirates, whose health was affected by years of breathing in dust from mining activities, should be compensated by local governments.

Did no one think 15 years ago that polluting the atmosphere was a ‘bad thing’, and that it might be harmful to the health of residents?

Hats off to the authorities for finally starting to act, though, as ever, rules are one thing, implementation is another. The question is, will this herald a wider push on air quality in the cities? Will it focus attention on construction and traffic pollution in Dubai?

Or, to put it another way, is there an incentive for business not to pollute?

Can the FT and IHT make money?

The UAE has a large, growing and increasingly wealthy international community. People move to the UAE to do business. UAE business is increasingly active in international business. It is cheap to print newspapers and media buyers aren’t too bothered with audits.

These appear to be the reasons behind the forthcoming launch of UAE versions of the International Herald Tribune and the Financial Times. The two papers will follow The Times, UK, in printing local editions; other international newspaper brands are understood to be watching the market. Unlike The Times, the FT and IHT promise some local content.

Can they make money? There is no doubt both are quality products, and that they appeal to a targeted demographic. But can they get copies into the right hands on a regular basis? Dropping free copies in office blocks gets you close, but it cuts off one revenue stream (The Times charges Dh7 per copy) and ‘free’ can often make readers think ‘cheap’.

Advertisers might be won over. Again, both are quality brands, and media buyers are happy to accept a publisher’s word on how many copies are read. Both brands would provide a halo effect for a local publisher’s other titles, so might not be subjected to the same profit demand.

But the biggest beneficiary has to be the reader. If the FT is doing local business stories, in theory it should encourage Emirates Business to improve its content. Likewise, local content in the IHT should inspire The National and Gulf News. The Times sent a team of business journalists to Dubai last year and managed to scoop the local competition on a number of stories. The reader doesn’t care about the financials, just give them the story.

Saudi blogger free at last; what next?

A man is taken from his home in the dead of the night. He is held in solitary confinement and subjected to days and nights of interrogation. After 137 days, just as suddenly as he was brought in, he is released, with no word of explanation from his captors.

Add in acres of international media coverage and a vocal, well organized online campaign from local supporters, and you have the making of a great story - Midnight Express meets Erin Brockovich by way of In The Name of the Father. But that won’t happen.

For now, Fouad Al-Fahan, the Saudi blogger snatched by police in later December, and now released without charge on Saturday morning, will be relishing being home with his wife and two young children. You can bet there is a queue of media operators wanting to hear his story; Fouad’s supporters will be hoping he can tell the story himself when the time is right.

But there is a sense the story is not finished. Will Fouad be able to tell the whole truth? Have the authorities come to some kind of deal, where Fouad tones down his blog in exchange for his freedom? Is there a bolder Saudi blogger ready to take the freedom of expression campaign forward?

They might start with getting to the bottom of Fouad’s case.

Any idea how to tackle inflation?

The UAE Minister of the Economy says it would take a miracle to meet the Government’s official target of five per cent for inflation this year. Inflation hit a 19-year peak of 9.3 per cent in 2006 and probably accelerated to 10.9 per cent last year, says the National Bank of Abu Dhabi. Anyone who has bought food or rented a flat in the past year should be able to figure out things have got more expensive.

Like King Canute ordering back the tide, the government is coming to the realization that ordering shops not to raise prices – and giving government workers double-digit pay increases – does not make inflation go away. Saudi Arabia this week admitted inflation will run to double digits in 2008.

Through all of this, Gulf governments, with the exception of Kuwait, have ruled out dropping the dollar peg (matching US monetary policy) or revaluing their currencies. It might not be the cure, but it is hard to see how it would make things worse.

In the meantime, the search is on for a miracle.

Talented Emiratis do not need special treatment

New legislation is needed to ensure UAE nationals are better represented in the country’s workforce, says Emirates Business. It says expats currently staff 99 per cent of jobs in the private sector and 91 per cent of government jobs, and, despite the economy going gangbusters, somehow this is a Bad Thing.

Jassim Ahmed Al Ali of Dubai Municipality predicts that by 2009, UAE nationals will account for less than eight per cent of the workforce, and less than four per cent by 2020. The situation is not helped by 10 per cent of employed nationals resigning each year claiming “problems in the workplace”.

What problems? And does it matter if workers resign? Plenty of non-Emiratis change jobs after a year.

Kipp finds it hard to fathom what is stopping Emiratis joining the workforce. Low pay? Tough. Who doesn’t think they should be paid more? Lack of career progression? Get over it. Knuckle down, impress the boss and see what happens.

The drip, drip, drip of stories bemoaning the lack of Emiratis in the workplace is not helpful. The more business hears that Emiratis should be made special cases, the more it sounds as if they are unemployable. All that should matter is that new recruits are an asset to the company. If an Emirati job applicant ticks all the boxes, why wouldn’t an employer go with them?

Kipp is positive there are skilled, motivated Emiratis who would be an asset to any business. Giving them special treatment threatens to turn them into charity cases.

ADNOC’s self-service gimmick running on empty

ADNOC is now running self-service pumps at 15 petrol stations in Abu Dhabi. The petrol isn’t any cheaper, but users are given extra points on their ADNOC loyalty card to spend in store or, a nice touch, donate to the Red Crescent charity. The company says self-service reduces the cost of petrol, which presumably means they’ll be laying off pump attendants.

The idea has its merits – charitable giving, individual application, cutting waste – but there are real concerns over the application. Can anyone else picture the scene when a blacked-out Landcruiser pulls up at a self-service pump and leans on the horn until some pump attendant comes over? Or the queues that will form as novices struggle to figure out how to get the petrol cap off?

It smacks of gimmick, not a genuine attempt to get average drivers filling up their own tanks. If ADNOC was serious in wanting to reduce the cost of petrol it would go for a major price (and service) differential between the two options. Drop the price of self-service by, say, 5 per cent, and up the price of the ‘luxury’ service, complete with superior screen wash, by 10 per cent. An economy class/business class option for car drivers.

Few smiles at BA’s cheap tricks

On what products are you price sensitive? For the most part Kipp would have its head turned by a cheaper price on almost any product, with the exception of surgical procedures and wine. What about the cost of an airline ticket?

The journey takes the same amount of time; no matter which airline you choose, economy class food is much of a muchness, as is legroom and inflight entertainment. If the flights leave around the same time, surely this is a straight price fight?

Possibly not. British Airways has a three-day Sale on flights from the UAE to the UK and US. It promises return fares to London for 1,000 dirhams, around one third of the price of Emirates. After the chaotic opening of Terminal 5 at Heathrow, lost baggage and a series of strikes, the airline has to work hard to have travelers see it in a favorable light. Cheap flights can tempt travelers to stick with/return to BA, or win new custom.

Unfortunately, this offer is not the answer.

On closer examination, the desired flights, with taxes, come to more than 3,500 dirhams, still cheaper than Emirates, but no bargain. With no confidence the mistakes that led to the Terminal 5 chaos won’t be repeated, or that strike action will be avoided, the price will need to a whole lot lower to make BA a good bet.

It doesn’t help the brand’s damaged reputation when visitors go looking for a 1,000 dirham fare, only to find a 3,5000 dirham one. It is another let down. Why not be clear and say all prices are, say, 1,800 dirhams? As it is, this offer looks cheap, and not in a good way.

UAE finally blanket-bans dodgy sites

It’s hard to know what to make of Du’s announcement it is to block all non-suitable-for-the-UAE websites. The decision brings Du into line with TRA guidelines and stops a two-tier system of internet access - unfettered in the work freezones and new freehold residential areas, heavily censored for the rest – but it certainly stains Dubai’s live-and-let-live attitude to expat living.

For media companies based in Dubai Media City, previously home to open access, there will be concerns over press freedom. For residents owning homes in communities with barely a UAE national in sight, they will question why Du now needs to be concerned with what they browse online in the privacy of their own home.

Alcohol is freely available to buy once a license has been obtained, residents can use their Du mobile to call a bookmakers in the UK to place a bet, singles in Dubai’s bars and clubs are free to ask someone out on a date. Blocking websites is symbolic, it is an annoyance, but it may not be much use in upholding values.

Information seekers hope for National success

In almost every market in the world, the market for traditional newspapers is on a downward trend. Despite publishers’ best efforts - free CDs, discounts on hotel stays and lottery tickets - for most newspapers each year is tougher than the last. The internet and 24-hour TV news and sport has nibbled away at print’s relevance.
As with many things, in the UAE, the market is different. Since 2003, in English language alone, Dubai has launched a free Metro, an evening paper, a new national, a local print run of the UK’s Times, and a weekly city paper. Of course, the evening paper has since gone bust, the Metro is on its arse, and the new national has been relaunched as a business daily, but none of this has diminished publishers’ appetite for print. There would be more papers if publishers could get hold of a license.
And now The National, billed as a “quality broadsheet”, and the first fruits of Abu Dhabi Media. It will have nearly 200 journalists, a couple of years to break even and a launch budget to float a battleship.
The paper has been met with almost universal criticism from the Dubai media community. Irrelevant, toothless and a ‘twelve month pension gift for has-been and never-was hacks’ being pretty much the gist of the comments.
19th Floor is more optimistic. The National should be welcomed for what it is, not what it isn’t.
New competition can lift the entire market. Gulf News has already beefed up its local news (its ‘The Nation’ section) in response. But only an idiot would accept Gulf News as the acme of UAE newspaper ambition. Someone must be able to do better. More journalists asking questions, and more options for getting this information to an audience is a good thing. If The National does print the story, maybe the journalists own blogs or book deals will.

Reality bites for flights of fancy

Virgin Atlantic is considering axing its mile-high beauty treats. Sir Richard Branson's agenda-setting airline has convened a meeting of its 280 beauty therapists after research showed Upper Class passengers were becoming ambivalent about the perk, reports The Times. Most preferred sleep to a fully-clothed back rub. The news comes as Oasis, the Hong Kong budget airline, goes into liquidation after just 18 m months of service. The carrier had gone to market with an eye-popping fare of $128 one-way Hong Kong to London. It is now $128m in debt. The end of innovation in the airline industry? Not likely, but it does remind business that bottom lines, not just headlines, matter. Virgin is likely to expand the spa and beauty treatments at its popular Upper Class lounge; budget carriers will examine the Oasis fall out and figure out a new way to undercut the legacy carriers. Consumers still like to be pampered, and everyone likes a bargain.

Sports marketing yet to break sweat

It is an enviable life. You earn your living playing sport, and your fans pay for the retirement. On a recent trip to Dubai by a middling British sports team, fawning well wishers were falling over themselves to offer freebies. The star of the team was offered a free apartment in return for his face on some marketing material, the rest of the team were bought free drinks, free rounds of golf, free hotel accommodation – as long they had their pictures taken with a gurning company rep.
The freebies come so thick and fast, many stars begrudge putting their hand in their own pocket.
Such is ‘sports marketing’, the not so difficult art of aligning a staid brand with a successful, sporty one. First Group, a property developer, is the latest to sign a sportsman to front one its Dubai projects (Sam Torrance, a past-his-prime golfer, and a tower in Dubai Sports City, since you ask). Michael Schumacher and Michael Owen have similar deals.
Good luck to them. But you have to ask what do any of these stars know about the Dubai property market? What reassurance do they bring to buyers? What point of difference do these retired multimillionaires bring to the project?

Hush money, phantom buyers and feeding the Vegas mentality

The furious response to the cancellation of Damac's Palm Springs project has created a level of investor mistrust that threatens to rock the entire Dubai real estate market, tainting good and bad. One result is that former real estate sales staff are more willing to recount examples of bad practice. The methods listed below are described by one former sales manager as being "common knowledge in the market". Cart before the horse. In a booming market there isn't always time to wait for government approval for the necessary water and electricity supplies to reach a development. Some new projects would require the building of at least one new desalination plant and one new nuclear (or equivalent) power station to supply water and electricity needs to all residents. Don't let that stop you: sell the plots off-plan, the government will take its cut, and if the project goes well it can start thinking about building the power infrastructure. After all, no point commissioning a new nuclear power plant if no one is living there. Hush money. A nine-storey tower in International City, the first for the developer, included a one-bedroom apartment with three toilets, and a two-bedroom apartment with no living room. The solution? Offer the investors a cash lump sum to keep quiet and not talk to the press. Why would they settle for that? The investors are happy as long as the apartment is rented.

Phantom buyers 1. If sales of Phase 1 are sluggish, or you want to create a buzz around a new development (particularly if project is in an undeveloped area), tell potential buyers the entire plot has been sold to 'a Saudi investor'. Off course, there is no such investor. Tell them they can buy Phase 1 off the secondary market, and that Phases 2 and 3 are now ready for release. With Phase 1 apparently sold, buyers should have more confidence the project is viable. Phantom buyers 2. You've hyped the sell-out of Phase 1, and buyers are sniffing around Phases 2 and 3. You announce the release date at short notice, open the sales office early, with a number of 'buyers' (in reality, some of your own admin staff) bulking up the queue. Your buyers start clamoring to be allowed to put down deposits - the louder and more feverish the better - your sales staff need to look suitably harassed. The real buyers, caught up in the fever, spend less time looking at plots, floor plans and contracts. Sand isn't just sand. So construction is 'running behind schedule' (read: hasn't started yet), and your buyer is getting twitchy. If they're an investor, wanting to either rent of resell the property) have your sales people call them saying the land price has risen and, even though the building hasn't come out of the ground, the price has gone up 10 per cent. The investor is placated - his patch of sand is already appreciating - and the property fever continues. Feed the Vegas mentality. So your last project tanked. You sold every apartment without waiting for the proper approval and now, after waiting to the very last minute, you've refunded the deposits to every pissed-off buyer (though not before spending the interest on your new campaigns and showrooms). Your reputation should be in ruins, right? Wrong. This is Vegas. "Ninety per cent of new buyers wouldn't even ask about the company," says one former sales manager I spoke to. "When you're in Vegas and you lose $1,000, do you not go to the casino the next night? This is Dubai. You can make your fortune from real estate." Got your own anecdotes?

Super idea, difficult reality

Dubai government’s track record of creating and backing new standards in established markets (think airlines, hotels and golf courses) demands new projects have the right to be noticed. Aswaaq, the supermarket-meets-community-center concept, is particularly interesting. It promises to beat Union Co-Op (seen as Dubai’s cheapest) on price, yet carry a first rate range of world class products. Its stores will feature wide aisles and non-basic shopfits – when traditional supermarkets are working hard to maximize every square foot of selling space.
Its goals are admirable – local employment, social responsibility, house and encourage new small businesses – but at a time when food prices are going through the roof, and the existing supermarket retailers upgrading to international standards, it will have to work hard to counter claims it will be a government-subsidized side show. It wants to open stores in new communities; it is hoped private sector rivals will be given fair access to the bidding process.
(And can the copywriter on the Aswaaq website go easy on the exclamation marks. Kipp counted 16, and the first store is yet to open.)

Could Gulf funds rescue Alitalia?

It must be assumed the mess at Alitalia stinks so bad Gulf investment funds have gagged at the prospect of taking it on. The Italian airline, estimated to be losing $1.5m a day, is desperate for new money, and, after Air France-KLM pulled out of talks this week, there aren’t many alternatives.
Gulf investment funds are being courted worldwide, and by a range of industry sectors. Strange, then, that with Etihad, Emirates and Qatar Airways so buoyant, Abu Dhabi, Dubai or Qatar don’t want to get to grips with sorting out Alitalia. Sure, the airline has problems, but on the plus side it has brand recognition, decent slots in major European airports and, naturally, great slots at home. All things Gulf carriers covet.
The difference is Alitalia has a unionized workforce. Air France-KLM walked after proposals to cut 2,100 jobs and get to work on trimming costs were rejected by the unions. Italian politicians have even stepped in to say they would veto job cuts.
There is nothing wrong with Gulf funds steering clear of this mess, but it would be interesting to see how they would handle such a tricky rescue rather than the usual blue chip or cash-for-growth investment.

Are Damac sniffles first sign of real estate cold?

Damac has got itself into a sticky spot over the axing of its Palm Springs project. There are multiple questions surrounding the decision - not least Damac's timing, it was reportedly happy with the project in February - but many will want to know how this impacts the wider Dubai property market.
The biggest concern is that Damac is not an isolated case, but the first (or most visible) sign that cracks are appearing. Are rising build costs threatening the whole market? Is a tightening of the housing market in the US and UK filtering through to the UAE? How will a dip in investor confidence in off-plan real estate play out?