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Bridging the Gulf

admin — Tue, 23 Dec 2008 12:08:12 +0000

Five and a half years after the invasion of Iraq, the bitter, but undeniable truth for the Saudis is that their closest ally, the United States, has contributed mightily to degrading the kingdom’s position in the Middle East.
The invasion and subsequent occupation of Iraq by American forces have shifted the balance of power across the Gulf region. In Riyadh’s case, it has meant watching its perennial rival, Iran, gather strength. The invasion has also inflamed the ancient sectarian rivalry between Sunni and Shi’ite Muslims. And on the kingdom’s northern border, the future of an important Arab country remains uncertain. These are huge challenges that Riyadh is pondering, rather than tackling.
In a change from only a year ago, when the media was all about Saudi Arabia’s apparent bid to become the new heavyweight Arab leader, the kingdom now seems to have become more introverted.
There are several reasons for this inactivity. Almost certainly, the kingdom is waiting for a new US administration to settle in and articulate its foreign policy agenda. In addition, an improvement in Iraq’s internal security has taken some urgency off Saudi concerns there.
But some Saudis see the return to a lower foreign-policy profile as a reflection of a problem in the kingdom’s establishment. The Saudis’ biggest foreign policy challenge is “the Saudi challenge,” says Awadh al-Badi, a scholar at the Riyadh-based King Faisal Center for Research and Islamic Studies. “And by that I mean [the need] to develop a certain vision towards the role they want to play in the region.”
The kingdom has a lot of moral and economic clout that would allow it to easily fill the current leadership vacuum in the Arab world, al-Badi adds. But Riyadh appears reluctant to take on that responsibility, he says, and instead “what we see is … a status quo country trying to manage things as they come.”
The last turn. After the ascension of King Abdullah bin Abdul Aziz in 2005, the kingdom adopted a more activist foreign policy, even demonstrating at times a willingness to oppose Washington. In 2007, for example, it brokered the Mecca Agreement between the Palestinian parties of Fatah and Hamas over US objections. The deal fell apart, but Saudi Arabia showed it could do it on its own.
Riyadh also vigorously promoted an Arab peace plan for the Israeli-Palestinian conflict, even going so far as using uncharacteristically blunt language to criticize Hezbollah for provoking the 2006 Israeli invasion of its northern neighbor.
Observers have speculated that Saudi Arabia might replace traditional leaders among Arab nations, who have now been sidelined: Egypt by internal economic and political problems, Syria by allying with Iran, and Iraq by the US occupation.
This change would have been significant. The traditional culture of Saudi Arabia has an inherent streak of politeness combined with a strong aversion to criticize.
The kingdom’s efforts to transcend this ideology are greater than people realize, notes Hadi Amr, executive director of the Brookings Institute think tank. “Traditionally, in this part of the world, you discuss your problems privately and not through the media. And so that’s how things have been done,” he adds.

THE LAST WORD

admin — Wed, 17 Dec 2008 05:57:26 +0000

How long have you been coming to the region for?

I’ve been teaching here for at least eight years but I’ve been out here for tourism before that.

In the wake of the global meltdown, what factors do you think are going affect the region, and what will their impact be?

I think the region will be impacted – whether it’s impacted as adversely as, say, the UK or America is certainly yet to be seen. It’s certainly not immune from the global shocks that we’re seeing. If one thinks of stock markets, stock markets are all interrelated so the markets will be affected by the crashes that we’ve seen worldwide. In terms of employment, the region will obviously be protected by its oil revenues. What happens to the oil price will be impacted by the world economy generally, so a slowdown in the world economy will impact on the oil price and will therefore impact on the world economy. So, yet another interrelationship there.

Bond markets are now issuing local currency bonds, and there are calls to create a central currency for the Gulf. Are these sensible or protectionist measures?

First of all, you’ve mentioned protectionism. We’ve learned from the crash of the depression of 1929 that protectionism is bad for the world economy. So protectionism is not to be abdicated. And the local market is very much dependent on local trade. It doesn’t just survive by itself; it isn’t part of the global trade environment. So I don’t think protectionism will be good for the region. Whether it’s time to de-peg from the dollar; curiously it has been strengthening in recent months because of its safety so the dollar provides a measure of security and safety in times of turmoil. So, maybe now is not the time to be de-pegging from the dollar because of its consistency. In terms of finance, I think raising funds locally would make a lot of sense for a lot of companies. It’s a natural development for the economy. Dubai is developing, so that will be a natural extension anyway, perhaps accelerated by the recent turmoil.

Higher oil prices ensure revenues. What factors will Gulf states have to consider over the net 6-12 months?

Over the next six to 12 months there is very little they can do unless they can influence the price of oil itself by cutting production and controlling it, such as OPEC are discussing … but that just shows the problem of being dependent on just one source of revenue, and if that sort of revenue is affected by world markets then you are ultimately going to be affected. I think, to be fair to these economies … people have gotten used to that environment. So, although we’ve fallen back, we’re at the same place we were at last year. So those economies should still be strong, but not as strong as we’ve seen. They still run the risk of being dependent on oil.

Write Like an Egyptian

admin — Tue, 16 Dec 2008 13:19:02 +0000

For journalists, Abdel Halim Qandil and Wael Alebrashy, Dec. 6 could mean packing their bags and heading to Egypt’s vile prisons. Both will hear an appeal verdict against a 2007 court order sentencing them to one year in jail for libeling Egyptian President Hosni Mubarak and his son Gamal, deputy secretary-general of the ruling National Democratic Party (NDP).
“Prison is fonder to me than Muba-rak’s pardon. He holds the right to pardon us and we seize the right to criticize him,” says Abdel Halim Qandil, ex-editor-in-chief of al-Karama, the Al Karama Political Party’s weekly newspaper, and the spokesperson of the anti-Mubarak Kefaya (Enough) movement.
To Qandil, one of the most vocal critics of the Egyptian President, Mubarak’s pardon is both humiliating and deceptive. “[He] wants to beautify the image of the regime but proves [his] critics right. It is more dignified for the public prosecutor to suspend the imprisonment until the case reaches the Egyptian Supreme Court, the highest judicial institution.”
Qandil’s imprisonment would not come as a surprise to Egyptians. “It is bound to happen,” is a commonly-heard response to their predicament. Qandil’s columns have embarrassed Mubarak for engineering a fifth term of office and leaving the presidency to his son Gamal.
Alebrashy was not kidnapped, badly beaten or thrown half-naked, bruised and bleeding onto a motorway in 2004, as Qandil was. But he still remains a target of the undemocratic regime. Why? He published a blacklist of judges responsible for manipulating the results of the 2005 presidential elections.
“What do I expect? The law knows no expectations. I assume the worst. On the night of Dec. 6, I will pack my personal belongings in a bag and prepare myself for prison,” says Alebrashy, ex-editor-in-chief of Sawt al-Ummah, an independent weekly newspaper.

Talk to the Boss

admin — Sun, 14 Dec 2008 13:44:13 +0000

There are signs Washington has stopped seriously considering an attack on Iran. One of American Vice President Dick Cheney’s aides declared that 2007 was to be “Iran Year.” But that was before the financial crisis, before President Bush became a lame-duck President, and the surge in Iraq seemed to have somehow energized public opinion. That was when the risk for a serious clash with Iran was at its height. But no war horns were sounded.
In 2008, more than ever, a plethora of military experts, Middle East pundits and global think tanks stressed that bombing Iran stood little chance of preventing its nuclear drive. First, Iranian nuclear facilities are spread across their large country and some of them are buried deep underground. Second, even if it were possible to destroy all of them, Iranian scientists’ technological know-how is not susceptible to being destroyed by bombs. Iran’s sense of insecurity can hardly be addressed by bombing it. Any attack will only further Iranians’ consensus that a nuclear deterrent is indispensable.
Many experts also rightly warned that the security, political and economic reverberations of such an attack are too frightening to contemplate. It would destabilize the region, strengthen the Iranian regime and disrupt supplies of energy. It would expose Western targets to assaults by empowered proxies such as Hezbollah. Most importantly, it would deprive the West of its best potential ally to address the region’s issues.

THE CONUNDRUM

admin — Sun, 14 Dec 2008 13:35:14 +0000

The World Economic Forum’s (WEF’s) recent inaugural summit in Dubai represented the equivalent of an intellectual assault course for its delegates on a range of socioeconomic and geopolitical issues (68 in fact). And at the heart of it lies a puzzle.
Effectively, the experts have set the agenda that will be mooted by the deciders at Davos in January next year. This was no easy feat. A battalion of well-credentialed delegates had 48 hours to transform the issues into a working agenda. In uncertain times, it wasn’t easy to decide what the important issues were. “I’m not sure there has been much of a consensus apart from the fact that change is needed. I think that the change in the way we organize the world … it’s a very ambitious agenda, which the World Economic Forum has put in place,” said Allan Gyngell, executive director of the Lowy Institute for International Policy.
The good news is that the mood was one of resolve and determination, not depression or panic. “I was in Tianjin at the World Economic Forum in China and it was dominated by the crisis and there was a lot of uncertainty and people were standing up and making these impassioned speeches about how terrible it could be and so on,” said one of the delegates, sustainable energy expert Michael Liebreich. “Whereas here, there’s very much the feeling that people are starting to work through the issues and ask, ‘what does it mean? How does my sector deal with it?’ And that’s very interesting to see.”
The only disappointing thing about the forum was that the media were not allowed into sessions where discussions took place. One delegate admitted that the sessions can be fraught with debate and (sometimes verbal) conflict, which leads to the supposition that, like making sausages, this is not a process that should be on public display.
Nevertheless, it was the paradox amidst a general call for greater transparency among organizations globally, combined with the need for more stringent corporate governance. Yet this region is still lacking in these areas and has much to do to improve its attractiveness to international investment. Don’t forget that the Santiago accord on sovereign wealth funds gives those funds a licence for opacity.
What surprised many in the final agenda was that the economy was second in importance to the environment. As one delegate told the gathered assembly, “the financial crisis is just a bump in the road.” Meanwhile Mohammed al-Abbar, the CEO of Emaar and the forum’s co-chairman, assured the media that Dubai’s assets outweigh its debts.
This seems laudable, but for one flaw. Last issue, TRENDS found that economics outweigh green issues in the region (“Pale Shade of Green,” November, 2008), and a survey by Neilsen that was commissioned by local PR company Asda’a found that, where Western youth see climate change as one of the three most important issues on their radar, it does not even register as a blip for Arab youth.
These issues will affect the region, which is accumulating global influence. Indeed, out of the 700 delegates, 50 were from the region. Sheikh Mo-hammed, the UAE’s vice president and ruler of Dubai, gave a keynote speech and the emirate’s government reportedly contributed $10 million towards the event. At the G20 summit soon afterwards, the Gulf was represented by Saudi Arabia. The world order is changing, as Martha Kelly Carlson, chair of the Water Forum, noted. “It’s … symbolic that we’re holding this in Dubai, because the center of power is changing in the world. And this is one of the places it’s moving to.”
The conundrum is this: while the region’s global influence is increasing, two of the major issues addressed are ones that do not resonate here. Even if the environmental issue is brushed aside (as it frequently is), getting businesses to be more transparent is not going to be easy. One idea came to mind: tougher lending criteria may well require businesses to be more open about their dealings, to gain funding. But that practice, which is common in the West, remains untried here.

Labor Pains

admin — Thu, 11 Dec 2008 10:27:30 +0000

Every part of the Middle East and North Africa could see job losses as the world’s economies continue their slowdown. Yet the closer your business ties to Europe, the more your job is at risk. Economists say that a new influx of job-seekers emerging from the West is giving expatriate white-collar workers in construction and financial services concerns that their pay and conditions will be driven down.
The biggest labor market to see job losses is the Maghreb, particularly Morocco, says economist Simon Kitchen of investment bank EFG Hermes. Tens of thousands of Moroccans work in France, Italy and Spain, and many will face redundancy as the economies of Southern Europe slow. This will be compounded by the impact on the tourism industry. Seventy percent of tourists to Morocco come from these countries. A major job-provider and export-earner, tourism is one of the first sectors to suffer from the economic downturn.
“The European economies are slowing down and there is no alternative source of demand for Morocco,” says Kitchen. “The economy is stuck between scissor blades. On the one hand, there’ll be layoffs at home. On the other hand, there’ll be workers returning from Europe, having made redundant, who will also be looking for work.”
This June, hundreds of Moroccan youths rioted over unemployment in the port town of Sidi Ifni. Its economy has been growing steadily since the turn of the century. While this has boosted the profits of home firms and foreign investors, it has not led to enough new jobs.
Egypt, equally, needs job creation for its social and political stability. The government says the economy must expand by 7 percent annually to create enough new jobs for the 700,000-plus young people who join the labour market every year. The unemployment rate stands at 10 percent. Many Egyptians, like Moroccans, travel to Europe and the United States for work. And many may now be sent back, as firms there lay off staff. Like Morocco, Egypt also depends on the expansion of tourism – a particularly labor-intensive sector – to create jobs for those who stay.
“I expect there to be zero employment growth for next year,” says Simon Kitchen. “Tourism has been Egypt’s main job creator in recent years, but half of all tourists to the country [about seven million people] come from Western Europe. Another one million come from Russia and Eastern Europe, which are also now in trouble. I think many new hotel projects will be delayed, and we may see staff laid off after that. This would especially affect people from Southern Egypt, who rely on jobs in the tourism sector.”
The secretary-general of the Egyptian Hotel Association in Southern Sinai, Adel Shoukry, points to currency markets as the largest scourge. “Our biggest problem now is the fluctuation in exchange rates,” he says. “The euro has fallen against the Egyptian pound, and that has impacted revenues. None of our bookings for October and November have been cancelled, but we are not sure of December onwards. We do not expect any job losses over the next five to six months, but who knows? The situation could change dramatically.”
Europe’s economic downturn could, paradoxically, provide a spur for jobs in hotel construction, he says. “The longer the economic crisis persists, the more the prices of building materials will fall. So it’s a good time to finish off projects, which have already been started. The money has been lent. Developers have got the cash. So why not?”
Weak Spots. However, in the Gulf, property development is the sector most exposed to the credit crunch, and the one that is most expected to shed jobs. It’s thought that 40 percent loans made by local banks were for residential and commercial development. But banks are now reining back on credit, to rectify the loose lending habits of the past two years.
“Lending conditions are extremely cautious,” says economist Marios Maratheftis of Standard Chartered Bank. “Before, the banks didn’t price in risk. But now, investment in private-sector construction projects will be more expensive. Developers may delay their building, and we might see a fall in demand for unskilled labor. That will mostly affect people from South-East Asia.”
Still, Maratheftis expects job losses to be very limited, because presently there is a shortage of manual labor in the Gulf’s construction industry. Besides, he says, jobs could be created again quickly. “The developers might delay, but they know they can always restart.” He and other economists also expect the governments of Gulf states to step in and buoy their economies by embarking on large-scale infrastructure projects, paying for them not from loans but from their enormous, oil-funded budget surpluses.
Partly because of the lead that Gulf states are expected to take on their economies moving forward, Standard Chartered Bank predicts economies will continue to grow by 2.7 percent next year, compared to 5.2 percent for 2007 and an estimated 4.8 percent for this year. “We are calling a slow-down, not a recession. This region will still be an out-performer. Businesses will still grow and need staff,” Maratheftis says. He believes spending on advertising and IT will remain high, although corporate hospitality budgets may be cut.
Gulf states have much less of a price to pay than Egypt or Morocco if its firms shed staff. In the Emirates, for example, eight out of 10 residents are hired from abroad. If they’re laid off, they must go back to their home countries. Still, employers here are reluctant to send staff packing, even in sectors, like tourism, which will suffer from the European downturn.
Forty percent of occupants in the United Arab Emirates’ four- and five-star hotels are Western Europeans. Sixty-five percent of them are leisure travelers paying from their own pockets, and the managers are expecting a dip in demand in the New Year. Cost-cutting is the obvious means of propping up profits.
But Patrick Antaki, the general manager of Le Meridien Aqah Beach Resort, says he will not lay off frontline staff. “People here want to be pampered,” he says. “If we get rid of half the staff who serve them, what’s to distinguish us from a three-star hotel?
I don’t think our customers will like it.”
Instead, his answer is to strip out those costs which crept up, almost unnoticed, during the boom years – the costs of senior managers. They won’t have such a ball at the company’s expense any longer. “In the good years,” he says, “the directors might decide to fly to the Far East for a travel conference and everybody would agree it was a good business move. They might also fly business class and stay in a five-star hotel. Now, we’d be flying economy and staying somewhere cheaper. There are costs which you thought were justifiable then, which can be pruned now.”
White-Collar Blues. In the Gulf, those who can expect the biggest jolt from the economic slowdown are expatriate white-collar staff. Their pay rates and fringe benefits are endangered both by companies wanting to shave costs, and from a new wave of economic migrants who are arriving in the Gulf looking for jobs like theirs. One example is construction project managers from countries such as Spain and Britain, who are escaping the property-building slump back home.
“These guys are coming in a lot cheaper,” says one English project manager who works for the Dubai-based developer Nakheel. “They weren’t given the same benefits, like car allowance or school fees paid. If the downturn goes on for another year or 18 months, then a lot of people ending their present contracts in Dubai may have to sign up again under the new terms. There’s plenty of supply, and the companies have got their hands in the sweet tin.”
Another example is investment bankers in the City of London and Wall Street, who face mass redundancies. Thousands of are sending their resumes to private equity firms and banks in the Gulf. “We’ve seen a six- to 10-fold increase in enquiries from job applicants – particularly from London,” says Peter Greaves of Dubai-based headhunters McArthur Murray. “And we haven’t yet seen the mass-culling which happened in the city in previous recessions. But either before or after Christmas, I expect that to happen, and then we’ll see a flood of enquiries.”
“These are highly-skilled people,” says Kitchen of EFG Hermes. “But there’s likely to be a surfeit of them, and that will depress salaries in the industry.”
It’s difficult to equate how any suffering expatriate fund manager in Dubai feels, compared with the plight of a Moroccan worker laid off from a factory in Spain and sent back to a jobless future. But for the Gulf’s white-collar expatriates, who have so far enjoyed tax-free pay with plenty of perquisites, the party is beginning to wind up, and there’s little to draw them back home.

Qatari royal battles Barclays in $78m Marbella fraud

admin — Thu, 03 Jul 2008 14:19:21 +0000

There is rich, there is super-rich and then there is a level of wealth so great that a Barclays bank employee thinks he can siphon off $6.25m a month from your bank account and expect you not to notice.

Unfortunately for the fraudster, the victim, a senior member of the Qatari royal family did check his monthly statement - but not before $78m had disappeared. Embarrassingly for Barclays details of the crime have been lodged with a Spanish court - just as the bank turns to the Qatar Investment Authority (run by another member of Qatari royal family) to support a $7.9 billion cash call.The Times says the fraud took place between December 2001 and February 2003. The sheikh alleges a Barclays’ staffer set up a ghost account in his name and siphoned off monies from the legitimate account. The paper says the QIA is not yet aware of the alleged fraud, which has, until now, been a private matter between the bank and the particular family member.

The bank also failed to demand any proof of identity or to conduct a face-to-face document-signing process, the sheikh alleges.

A total of $45m in cash was withdrawn, while a further $31m was transferred to other bank accounts before the alleged fraud became apparent to the sheikh. Over one four-day spell, $3.9m in cash was withdrawn from the account.

Money transfers of $3.1m or more were frequently made to bank accounts in Monaco, the British Virgin Islands and Switzerland.

The sheikh says he was never contacted by Barclays about the huge sums being moved in the account, in spite of the fact that he was a co-signatory. Some of the monies have since been recovered, but the sheikh claims he is still owed about $65m.

Fast company

admin — Mon, 30 Jun 2008 11:35:36 +0000

When MerchantBridge’s Samir A. Arab test-drove a Spyker car a few years ago, he was impressed. “How much?” he asked. “$250,000,” came the reply. “No, no. For the company …”
So in true Victor Kaim-style, MerchantBridge, a London-based private equity firm with offices and interests across the Middle East, found itself with a stake in an up-and-coming supercar manufacturer and with a seat on the company’s board.
Spyker had bigger ideas than just building small runs of super-exclusive sports cars. In 2006, it bought Midland F1, the struggling motor racing team, for $106.6 million. Midland itself had a decent enough pedigree: it traces its roots back to former Formula One driver Eddie Jordan’s Jordan Grand Prix, which launched in 1991 and, amid financial struggles, was sold to Midland in early 2005. With a 12-team limit in Formula One coming into play from next year, and all these slots likely to be filled, a Formula One team could make for a very interesting – and potentially lucrative – investment above and beyond the obvious publicity factor.

Lebanese T-shirt

admin — Thu, 26 Jun 2008 05:50:15 +0000

Lebanese people like to show off and they’re sexy. They have been through wars and they like to party. They disagree about everything, but still consider their country to be the best. These might be clichés, but in the t-shirt business clichés sell.

Printing “War, Lebanese folklore” on t-shirts could be seen as quite daring in a country where the threat of civil war is in the air again two years after the nation was on the brink of destruction. Some might call it tasteless. But Jihad Habib, founder of small T-shirt production company Dotcom-unity, has done it anyway, and has gone even further.

His collection of t-shirts, mugs, pins, boxer shorts and slips display sometimes ironic, often humorous and always proud taglines reflecting various traits of modern Lebanon. From the iconic “B’ Loubnan” (”I  Lebanon”) to “Some are making iPods while others are making bombs” and the ever-popular “Follow me, I’m Lebanese,” Habib panders to national pride in a lighthearted way.

Saudi Minister flips burgers to sell McJobs to locals

admin — Wed, 25 Jun 2008 15:17:03 +0000

It comes to something when the Labor Minister has don overalls and serve burgers to convince Saudis that working in a fast food joint is better than being unemployed.

Saudi Arabia’s Labor Minister, Ghazi Algosaibi, was pictured yesterday, wearing overalls and serving burgers in fast food restaurant in Jeddah. His three hour stint was aimed at encouraging Saudis to take jobs they think are beneath them.