From hero to zero

Six months after ITP decided he was the Middle East’s ‘CEO of the Year’, Omar Ayesh, boss of Tameer Holdings has stepped down. It wasn’t the only one to look stupid, Ernst & Young had picked Tameer as a finalist in its Middle East ‘Entrepreneur of the Year’ awards.

The government of Umm Al Quwain says Tameer’s excuses for the failure of its flagship Al Salam City project are “lies that aim to impair the emirate's reputation”. Sources within the company say Tameer pressed on with Salam City sales despite having no plan to provide water and electricity to the development. The Umm Al Quwain government, with enough on its plate, had made it clear to Tameer that it would not be sorting the utilities.

Ayesh says he is stepping down to allow the company’s executive managers to take the reins; it is hard to believe Ayesh’s head of the price Tameer has to pay to extract itself from the do-do. His replacement, Abdallah Hageali, is a Tameer man, so it’s no new broom.

So it’s tough times for Tameer, but, if this is a case of executive responsibility, it’s good news for UAE business. Poor performance should be punished – hopefully one day Gulf company’s can admit as much. And who knows, Ayesh might remake himself as the Comeback Kid.

Premium airlines will fail if they sell on price

Eos couldn’t make all-business work from London to New York, Silverjet is struggling with New York – London – Dubai, but a new operator hopes to drive a profit from a premium class airline flying within the Middle East.

Elite Jets, in partnership with Jet Aviation, says it can compete with legacy carrier’s first class offers, running smaller jets off-schedule from points around the Gulf, Egypt and Lebanon. It says its hourly rate, with seven people on board, comes in under a first class fare.

They may be right, and the venture has our best wishes, but at this level of the market it’s best not to hark on about price. The target audience – VIPs, CEOs and corporate execs – is much sought after, but doesn’t often pay for travel out of its own pocket. Who cares it it’s cheap, is it good? Plus, the legacy carriers’ loyalty schemes and air miles can be a lock-in.

Much better to promote the uniqueness of the service - the speed, the connectivity, the convenience, the club-like feel of being a airline industry pioneer. All the things the legacy carriers can’t buy.

What would oil at $200 mean for Dubai?

The cost of a barrel of oil is currently topping $130. There is now no shortage of experts who says $200 is on the horizon, claiming new supplies can’t (and won’t) ever match runaway demand. If it’s not $200, then most experts will agree that the era of cheap oil is over. It is an easy line to trip out, but what will it mean?

The impact could be huge, but here are a couple of points. Your thoughts are welcome.

Firstly, the world may just get a little more local as transport costs head north. It will be more expensive to ship people, food and goods; greater expense is usually a deterrent.

If travel costs double, discretionary travel is sure to take a hit. Holidaymakers may chose to holiday closer to home, or off set long haul flights by going to places that offer a cheap cost of living. Those budget airline, weekend city breaks may become a rarity. Worryingly, Emirates has a lot of A380 superjumbos to fill.

The city will need to be more compact, with better public transport links. There will be a clash as demand for city center (or Zone A) office and residential space butts up against the need for less wealthy workers to live near to work. By car, the 80km commute will be expensive.

Ideally, internet connectivity will step into the breach, hooking up businesses around the world. If face to face time is at a premium, business will need to find ways of doing things online. This is not just a question of connection speeds, but of changing the way business uses technology.

Humans are usually pretty good at dealing with sudden changes. Their adaptability is a key. It will be the same for business.

Radio advertising: cheap doesn’t mean value for money

Radio advertising in the UAE offers the best value for money compared to other parts of the world, says the Arabian Radio Network. Well, they would, wouldn’t they? Emirates Business, owned by the Arab Media Group, says a radio spot on ARN, also owned by Arab Media Group, is as low as Dh275 to Dh500.

Unfortunately there is a difference between cheap and value for money. As radio in the UAE has no way of knowing how people are listening, Dh275 for one spot could be expensive. If there is only one listener it would be better value for money for the advertiser to drive round to his house, knock on his door and explain the product face to face.

There is no doubt radio is great media. It can create immediate, engaging content on a daily basis. It can involve the listener, and the spoken word encourages listener imagination in a way that billboards or magazine ads can’t match. But without solid listenership figures, running a radio station in the UAE is a hobby, not a business. Advertisers will pay what they can get away with. If radio stations really believed in the value of their listener, they’d price their ads higher than Dh275.

Good business shouldn’t tolerate missed deadlines

It is telling that the ‘revelation’ only one in five construction projects is likely to finish on time does not come as a shock. Shortages of materials and skilled workers (plus reams of red tape) are the official excuse, but the public has long since abandoned belief in deadlines being met.

As we’ve mentioned here before, as long as property prices continue to rise, investors are not too fazed by these delays. An investment that has doubled in value tends to soften the blow. But what damage does this do to Dubai’s reputation as a can-do business center?

There is a danger that missed deadlines breeds an acceptance of tardy work. Who cares if you’re going to deliver late, everyone’s still making money, right? This applies to pizza deliveries to magazine publishing dates to nail appointments to real estate handovers. In boom times, even bad business can make money.

Dubai’s reputation, in part, has been built on being the best place to do business for a thousand miles in any direction. Delivering on time is a big part of that boast. It would be great to think those that deliver on time are remembered when the boom times flatten out.

Low-cost needs innovation, not bullying

Qatar Airways is hinting it may launch a low-cost carrier. The airline says it may need to respond to threats to its revenues from existing low-cost rivals; it could be operation in three months. Emirates has committed to its own low-cost airline within the year.
Lower fares and more competition should be a good thing, but not if these low-cost excursions are only used to squash private competition. Air Arabia and Jazeera Airways, the specialists, have got off to solid starts and have big plans for the future. Emirates and Qatar Airways, with orders for a huge numbers of planes and ritzy new terminals being built, have enough clout to run a spoiler operation.
It is to be hoped that the big boys bring something new to the market. Low-cost is now a mature sector, it could benefit from category innovation. Emirates converting some of its A380s to carry 1,000 passengers might be a new trick; as might once a week long haul specials. Dubai to Sydney for Dh1,000, say.

Interfering RTA plans background checks for carpooling

The hyper-active RTA has another bee in its bonnet. Motorists must now register for a special license to carpool, with the RTA doing background checks on drivers and passengers. The aim, apparently, is to crack down on unlicensed taxis, but it smacks of the RTA exerting another level of control.

It is another case of the sledge hammer being used to crack a nut. Carpooling is already a harmless reality, one that should be encouraged rather than stigmatized. Does the RTA seriously expect thousands of commuters to go and register - and wait on another layer of bureaucracy?

A straw poll in this office suggests at least one in four have shared a lift with colleagues, around 10 per cent do so every day. Payment is often nothing more than a morning coffee.

Dubai’s traffic is already enough of a headache, RTA meddling is no pain relief.

H&M to open Saudi stores staffed by women, for women

H&M, the Swedish retailer, is to open the first women-only department store in Saudi Arabia as part of moves to bring more women into the country’s workforce. The Times, picking the story up from the World Economic Forum in Sharm el Sheikh, says the store, which will be H&M’s first in the country, will be staffed entirely by women in what is understood to be a landmark concession by the Saudi Government.

Hats off to H&M. The store will be run the Alshaya Group, the Kuwait-based franchise holder for the region. Mohammed Alshaya, the CEO, says running the store will be challenging, but “we have to do it as this is part of our social responsibility to women in Saudi Arabia.”

With Saudi struggling to find work for its youthful (and increasingly disgruntled) population, it is the right time for business to suggest solutions. This is not charity by H&M – women-only stores will surely drive sales – but it does have a social benefit. More employment creates more wealth, and raises worker expectation. Hopefully it will be a model other retailers can mimic.

Abu Dhabi prays the music won’t stop

Abu Dhabi’s Department of Planning and Economy uses Abu Dhabi Media Company’s National newspaper to warn that the capital’s housing market in is danger of a mighty crash.
Things must be serious.

After four days of frenzied buying at Cityscape – with as-yet-unbuilt one-bed apartments selling for Dh2m - it says speculators are in danger of driving up house prices so quickly they risk causing a sharp fall in the market. It is safe to assume the vast majority of Cityscape sales will be flipped well before the projects are ever completed, and that many secondary buyers will also look to sell.

Given that each seller will want to take a profit, and that buyers will have to stump up agency fees, it is not unreasonable to imagine a Dh2m apartment selling for Dh2.2m in a year’s time. That is $600,000 for a one-bed apartment. Not built. Surrounded by building sites. And still two years away from completion. You can buy freshly renovated two-bed apartment, with roof terrace, near Central Park, in New York for less.

Granted, it is not always sensible to compare house prices city by city, country by country. But it is glaringly obvious that some UAE prices are too high. The speculators (and this includes the developers) should enjoy their profits while they can. When the music stops, and someone has to move into a completed apartment – and either pay the mortgage or the rent – it will be a lot clearer whether Abu Dhabi residents can support Manhattan prices.

Tampering with Universities threatens to blunt talent

The UAE government is to build a database of upcoming graduates. It wants to get a handle on how many students are coming through the education system, and what subjects they’re specializing in. Quite rightly, it wants to avoid a jobs market awash with Engineers and Business graduates when employers want creative types and scientists.

What is worrying is how the government then wants to manipulate the system. If there are shortfalls in one subject, it ‘could order universities and colleges to ensure more students graduate in subjects that are more useful’, says The National. It may deny licenses to universities that don’t offer a broad enough range of subjects, penalizing talented specialists.

Market data is good, market interference is not good. If profit-making universities can see there is a demand for a certain qualification, there is greater incentive for them to create a relevant course. Equally, if international companies can see the UAE is producing a surplus of talented engineers, there is an incentive to relocate or set up a local operation.

Manipulating the figures threatens to lower the quality of stock. Instructing universities to produce more media graduates will not work: universities will either redirect resources away from where they’re needed most, or churn out graduates as cheaply as possible to hit their targets. The UAE should be more concerned about producing quality. The jobs market is open; if employers see there is a pool of great talent they will build industries around it.

Does Abu Dhabi really want to sell houses?

The car park was full within 30 minutes of opening, the queues of pre-registered visitors collecting tickets were 200 deep, and Aldar stopped handing out lottery numbers to buyers by 11am. If the second Cityscape Abu Dhabi is to be judged on public response alone, yesterday's opening morning was a solid gold hit.

IIR, the event organizer, expects 25,000 people through the doors over the three days, up from 15,000 last year. Most of those appeared to be forming a scrum at the Aldar stand.

For those that missed the boat in Dubai, Abu Dhabi is seen as a second chance to make a fortune from real estate. Certainly there is no shortage of world class projects - Abu Dhabi has the money to employ the best planners, architects, model builders, stand builders and brochure designers. It seemed the cream of the UAE's modeling industry had been hired take business cards and hand out flyers.

But does Abu Dhabi really want this, or is it just going through the motions? If it was that desperate to impress wouldn't they have finished off the exhibition center's potholed and chaotic car park? Wouldn't the police have been on hand to help direct traffic, instead of two hard-pressed Indians? Wouldn't there have been clear signs welcoming visitors and asking for patience as they worked through the opening day crush?

As one agent commented: "Why do they need to sell houses? They're sat on 100 years of oil, they don't need the money. They're just scared of looking like a dusty little village next to Dubai."

DP World thinks big, goes deep

There are deals to help the bottom line, and there are deals to enhance your status. Occasionally a deal will tick both boxes. DP World's $3bn London Gateway project is one.

Described as the UK's largest port project in 25 years, London Gateway will provide much needed deep-water access to large container vessels. The National says the port and logistics area could take 2,000 lorries off England's roads while creating 12,000 jobs. It is DP World's biggest single investment outside of the UAE.

The company says it is becoming harder to make big margins in mature markets, but that London Gateway is worth the trouble. It tells the world that DP World has the ambition to think big, and, crucially, can deliver big projects. Like Emirates' order for the A380 or Jumeirah opening in London and New York, it tells the industry that Dubai is serious.

The UK public has been less than impressed with the budget-busting Wembley, Dome and cross-London channel tunnel link. Delivering London Gateway on time and on budget will earn major plaudits, for DP World and Dubai. All Dubai business should wish it well.

Talk, like a devalued currency, is cheap.

Pity the poor Gulf finance minister. Pressed weekly, if not daily, on when his country's currency will depeg from, or revalue against, the dropping dollar, he ceaselessly answers that the peg is here to stay. His comments are recorded, but no one believes him.

Any armchair economist can see importing the monetary policy of the recession-threatened US into the booming Gulf is a recipe for inflation. But what can our hassled finance minister do? If he said otherwise - that his country was seriously considering dripping the peg - the markets would go crazy and speculators would bet against the current rate.

Whatever he says, the market hears only what it wants to hear.

Youssef Hussein Kamal, the Qatari finance minister is the latest to trot out the 'peg stays' line. He says it is needed if the Gulf states are to hit a 2010 deadline for currency union. "There is no revaluation ... it is as it is," he said this week.

He might like to think it is as it is, but it isn't. Speculation - like inflation - cannot be solved with statements. It needs action.

Economists eye up the ladies

When times are hard, women shoppers will forgo a big-ticket purchase - $500 slingbacks, say - and opt for small indulgence. Such is the theory put forward in the New York Times, quoting Estée Lauder chairman Leonard Lauder, who noticed a sharp rise in his company's lipstick sales in the months following September 11.

US pundits are now trying to track lipstick sales to see if there are any pointers on consumer confidence. Short skirts are also taken as evidence the economy is doing well; the longer the skirt, the worse the market.

Well it beats looking at investment flows, exchange rates and the price of imported rice.

Abu Dhabi sets sights on worldly reputation

Abu Dhabi wants to create a world class image for itself. A five-year plan unveiled by the Abu Dhabi Municipality includes a smoking ban, clean beaches and better “urban landscaping”. The Municipality also hopes to become more “customer orientated”, with the introduction of “one-stop shops” for municipal services.

Targets are good, as is the willingness to bring sense and structure to a city growing at such a pace. Great cities tend to have a check-list of major attributes – good public transport, low crime, leisure, culture, education, low density living, environment. Abu Dhabi, with the Masdar eco city, art galleries and a new tram system planned, is trying to tick as many boxes as possible.

But great cities also have a vibe, a feeling of tolerance, a sense of community. The Economist Intelligence Unit has once again judged Vancouver as the World’s Most Liveable City (Melbourne was second), and not one Middle East city made the top 10. The judging criteria are a reminder that it is people, not just infrastructure, which makes cities great.

Timeshare: nice idea, tough sell

Timeshare looks to be on its way to the Dubai real estate market. Buyers will be able to take fractional ownership of villas or apartments; in theory this opens up ownership to investors with smaller deposits, or holidaymakers looking to make regular visits to Dubai. Diversifying the real estate market is no bad thing, it brings new money into the market and keeps things spinning along. The market could be worth $1bn by 2010

If there is a hitch it is that, in many markets, timeshare has become a byword for ‘scam’. At the very least timeshare has struggled to prove the best financial investment. It can be a sound long-term, lifestyle investment, but rarely provides investors with stellar returns.

For Dubai real estate, that really would be something original.

The sky is not the limit

Ajman wants to build an airport. And why not? Every other emirate has one, some even have two.

If we are to believe the expansion plans, the UAE’s west coast airports will be handling 230 million passengers a year by 2015. This equates to a packed, 500-capacity A380 superjumbo arriving at one of the six airports every minute, of every hour, of every day.

The figures must be nonsense. London Heathrow, currently the world’s busiest international airport, sees 67m passengers a year. Gatwick, also serving London, sees 37m. The UAE could add Paris (60m) and Frankfurt (54m), and still fall short. This year the UAE six might process 40m passengers.

Or is it nonsense? Emirates has consistently hit its targets and has the biggest order of A380s of any airline. Sharjah is making a sensible pitch for low-cost traffic (a growth sector), Ajman and RAK have modest aims. Abu Dhabi has the money to bully its way into the equation.

As with many things in the go-ahead UAE the figures are outlandish, but just this side of believable. Man made island home to 500,000 people? Sure. Patch of desert home to six world class theme parks? No problem. A 150-storey tower? Make it 170 floors.

The danger is that projects can’t be taken seriously unless they aim for fantastical targets. And, for now, the press and public swallow it. It’s not that some mega-projects can’t work, but it isn’t a given that every one of them will. Greater scrutiny from the off might avoid a bumpy landing.

Cigarette City goes up in smoke

First a ban on smoking in public places, next a hike on the cost of a packet of cigarettes: the UAE is in danger of losing its reputation as a smoker’s paradise.

Just a year ago the idea that smokers would be restricted on where they sparked up, or that they would have to pay more than giveaway prices would have been unthinkable. Now that double whammy is on the cards. A new federal anti-smoking law is expected to be passed at the end of the month, with a public smoking ban in place across the emirates by June.

The National says the average price for a packet of 20 cigarettes is Dh6 (US$1.60). In the UK, it is the equivalent of about Dh42 and in the US, less than Dh20. No word on the UAE price hike; it will be interesting to see how tough the government wants to be. Taking a pack of smokes to Dh20 would only make them cheap, rather than ridiculously cheap. Dh50 would really send a message. But would this add to UAE inflation?

Smoking is accepted to be a ‘bad thing’, but, a hard habit to break, price rises can be seen as less of a deterrent and more of a straight tax on addicts. It will be interesting to hear what the government plans to do with this extra revenue.

'Good' Gulf money flies to the rescue

While regulators threaten to tighten the criteria for sovereign wealth funds investing in European assets, pissing off Gulf funds in the process, private business is doing what it does best: privately going about its business. Business-class airline Silverjet has found a Middle East investor to inject a live-saving $25 million into the loss-making carrier. When creditors come calling, needs must.

European politicians are concerned about Gulf funds’ motives. European businessmen don’t seem to mind, particularly if the money helps an innovative new business through a tricky stage of its development. In a tough airline market, Silverjet, the last-remaining business-only airline following the recent collapses of Eos and Maxjet, flies from London to just two destinations: New York and Dubai. The new money should help it open new routes into India, South Africa and the US, and better its chances of survival.

Time will tell whether Silverjet’s business model works, but it would surely be doomed to failure without the injection of this Gulf money. As European economies slow, and their new business ventures find it harder to secure credit, Gulf funds, willing to back innovation, might come to be seen more favorably.