The announcements of order books at air shows are a tricky thing and Boeing and Airbus have a dog fight over who will outgun the other.
In Berlin, Airbus secured an $11.5 billion order for 32 A380s. At Farnborough, Boeing announced a $9 billion order for 30 777s. The two shared one common theme, the dominant Middle East carrier Emirates was behind both of them.
Six months after shocking the global financial community with a standstill on debt payments, the Emirate of Dubai is out to make its mark in the sectors it built its reputation on: trade, transport, tourism and financial services.
While it was placing record plane orders, it opened Dubai World Central airport to cargo services – the gigantic hub will open for passenger traffic in March 2010.
If behind the scenes Dubai is expressing caution – restructuring debt and the chief lieutenants that report to Sheikh Mohammed bin Rashid Al Maktoum - outward activities are conveying something else.
But this is not only a Dubai story.
To mark our coverage of the biennial event at Farnborough, we spent time with the two smaller, fast-growing challengers in the Middle East's airspace – the chief executives of Qatar Airways and Etihad Airways, Akbar Al Baker and James Hogan.
They are very different personalities, but both carriers are expanding alongside their respective home markets. Doha will open a brand new airport in 2012 and Etihad a brand new terminal projected for the same year.
We have all raised eyebrows at Farnborough orders in 2008 and this year, but as the Americans often say “you ain’t seen nothing yet”. According to a recent study by Boeing, passenger traffic in the region will grow by 11 percent a year for the next two decades.
The U.S. aerospace giant says there is a regional backlog of some 789 jetliners today, but the carriers will need more than 1,700 planes by 2030. No wonder exhibitors welcome the Middle East players with open arms each year.
By the time the new airports are fully operational in Dubai, Doha and Abu Dhabi, passenger traffic capacity will be well over 200 million a year. While airports like Heathrow have blocked expansion and new runways due to environmental concerns, these hubs are making a 21st Century “air and land grab” and scooping up routes as fast as possible.
As a result, Europe's legacy carriers have been crying foul and accusing their Middle Eastern competitors of route dumping. Al Baker of Qatar Airways strongly dismisses such talk: “If the legacy carriers don’t have the guts or the courage to take opportunities or to expand their services or regions it is their problem.” While sharing a buggy across the Farnborough airfield, Al Baker says competitors from Europe and Asia bypassed the Middle East, which created an opportunity for the deep-pocketed Gulf players.
Etihad’s Hogan said he has a huge advantage coming into the market with a clean sheet of paper, which helps him draw up a growth plan from scratch. If you look at the plans of Emirates, Etihad and Qatar, they tilt to the East and South and are opportunistic, shall we say, when going West.
By 2011 in its 14th year of operations, QA will have crossed the century mark in both planes and routes and Al Baker says we should expect more expansion in China, Africa and Latin America. When asked about his concerns related to an expanding bubble in the regional airline market he said: “We are going to make sure that all this capacity that is being added around us won’t deviate us from the plans that we have.”
While touring his integrated operations center in Abu Dhabi, Hogan also avoided commenting directly about the Dubai card now being played to expand in a “larger than life” way. He talks about being “best in class” across any market they choose to go into. Like Al Baker’s role in Doha, Hogan wants his carrier to support the bigger brand which for him means the UAE capital.
Something is definitely in the air and, likely, in the future, most tail wings will be carrying a brand from Dubai, Doha or Abu Dhabi.
Beirut, Lebanon - The Marketplace Middle East team took a helicopter tour of Beirut while in Lebanon on special assignment. That tour took us over Solidere, the downtown zone being rebuilt after years of on/off conflict.
While there are still pockets of empty land, this skyline has filled up quickly and it is safe to say there is more to come.
Unlike the rest of the world which is trying to gather its footing after the three-year shock of the global crisis, financial assets and deposits surged in Lebanon during 2007 and 2009.
The numbers are staggering. This population of just over four million citizens has a banking system with deposits of $100 billion dollars. During that three-year window, $55 billion flowed into the country, just over 40 percent of that money in the form of remittances.
I combed over these numbers with Freddie Baz, the Group Chief Financial Officer and Strategy Director of Bank Audi and the leading economist in this small but vibrant country. I mentioned to Baz after being in Lebanon for a week, people from different generations speak of the “brain drain,” where the country’s youth go abroad for university and never come back.
Depending on who you talk to - particularly the mothers of these young adults - you get a fairly emotional response – the most predictable being that the government is not providing enough opportunity for all its talent.
But upon a closer look at the numbers, a different reality emerges. Lebanon is doing what it does best - exporting top-flight human capital to the world.
For Lebanon, it is a gift that keeps on giving back to the country’s bottom line. The per-capita income is just below $10,000, the highest amongst 22 countries in the Middle East for a non-oil based economy and that according to Baz with Lebanon running at only 70 percent of real capacity.
Herein lies the challenge for the country. Right now, it has limited capacity to absorb all its talent. Finance Minister Raya Al Hassan told me that the government is spending an extra $1.5 billion in this year’s budget to build out the fraying infrastructure - especially roads and telecommunications networks.
If Lebanon wants to specialize in services beyond banking, the basics need to be brought up to speed.
That handsome sum was also seen as politically essential to get the budget through the complicated coalition that is all part of the political mix.
But, Minister Al Hassan is in the camp that believes the country’s best resource remains its human capital and that infrastructure spending should promote those sectors that can leverage talent.
The capital flows coming back into Lebanon are giving the finance minister and her government some breathing room for extra spending. The budget deficit remains in double digits and the long-term debt of nearly 150 percent of GDP tops Greece, which went to its European neighbors for a bailout.
One does not get such a sense of concern from either the government or its financial brass. I toured a new apartment building designed by Foster & Associates called “3 Beirut,” just off the waterfront downtown.
Sixty of the 150 units are already sold despite a delivery date of 2014 and prices range from $7,500-$10,000 a square meter. What we are looking at here is a scenario where downtown Lebanon is on-par price-wise with West London or mid-town Manhattan and nobody blinks an eye.
In typical Lebanese fashion people live for the moment, whether it is a superb lunch at a French brasserie, one of the beach lounges or fabled nightclubs. The people here have been frontline witnesses to nearly everything, where conflict is all part of the equation and survival.
Again, the numbers tell an interesting story. After the tragic death of Prime Minister Rafic Hariri and the 2006 war, some $3 billion left the country each time, but not for long. Within a period of 18 months, that sum and more came back into the banking system.
The country and its people dust themselves, regroup and move forward - with the help of their number one export all along the way, which continues to give back.
Astana, Kazakhstan - Sometimes I feel like a hopeless romantic when it comes to the fabled Silk Road. The arteries of trade going back a half millennium conjure up images of Marco Polo in pursuit of Chinese silks and crossing the treacherous terrains of Central Asia where minus 40 degrees centigrade is common on the Kazakhstan steppes.
This week I went to the young capital city of Astana for the annual economic forum bearing the same name. Three Nobel laureates in economics, the animated former Prime Minister of Canada, Jean Chretien and 3,000 other participants from 68 countries gathered at the crossroads of East and West.
Kazakhstan is interesting in so many ways. It is a vast land - the size of Western Europe - and shares a 2,000 kilometre border with China and 7,000 kilometre border with Russia. Leaders here express their concerns about neighbouring Kyrgyzstan and tensions with and attacks on Uzbek minorities.
There is a reason –- in fact many reasons - businesspeople are willing to make the long trek to this sparsely populated corner of the world.
Kazakhstan is natural resource heaven. Oil production is set to double to three million barrels a day in a decade’s time; so is gold production. The country surpassed Canada last year as the largest uranium exporter. Then there are ample supplies of copper, iron ore and coal. The country is a key figure in the energy security equation.
Wen Jiabao has visited five times, most recently to expand supplies into an energy pipeline to Western China. The Central Asian state doles out its riches quite evenly to Russia, Western Europe and China, despite its historic ties to Moscow.
Kazkahstan despite all its wealth borrowed heavily from western banks - it was considered in vogue to list in london and borrow from western banks. They don't plan to overexpose themselves again.
Larger-than-life building sites were brought to standstill in Astana as the country looked for and delivered a home-grown solution in a year-long bank restructuring. Lenders took a sizable hit (losing up to 70 cents on the dollar), but the final deal is now considered by World Bank and IMF regional officials to be a model for others to follow.
With the banking crisis behind it after a cash injection by the country’s sovereign fund Samruk-Kazyna, Kazahkstan managed to stay above water in 2009, posting growth of 1.3 percent. In the first five months of the year, we are witnessing growth of eight percent, more in line with its pre-crisis track record.
As I was chairing this forum, it struck me how incredibly different this world seems from the scenarios in the U.S. and Europe - where job creation is minimal and unemployment rates hover at or near 10 percent.
Kazakh officials have learned a few lessons in the last few years. It is now utilising the same approach in attracting foreign investment that it uses when selling its natural resources - it is wise to have a diversified base.
Chinese, Russian and Canadian companies are big players, but the latest entrants are coming from the Middle East. Abu Dhabi is finalising a half billion dollar fund and the Kingdom of Bahrain is exploring Islamic finance operations. The region is also keen to boost agriculture productivity to serve the needs of desert populations in the Gulf.
The team supporting the long-serving 70-year-old President Nursultan Nazarbayev are 40-something multi-lingual globalists who are busy with a decade-long diversification plan.
They want the country to move up the value chain, creating a larger middle class to bring Kazakhs into the global economy. They know it won’t be easy and have been frustrated by early attempts to expand into the fields of technology, textiles and energy services.
But challenges are all relative. Their two sovereign funds have about $50 billion on hand and the extractive industries are busy looking at ways and means to add value.
Human rights groups want to see more progress on developing an open society with a vibrant opposition and freer press. Both would raise the comfort levels of foreign investors.
The government, now holding the year-long chairmanship of the Organisation for Security and Cooperation in Europe (OSCE), is promising results, as it has for some time.
Kazakhstan points to a per-capita income that has risen ten-fold in ten years as a sign of economic security - something it believes the OSCE should make a priority.
While that debate continues, leaders want to leverage their geo-strategic position as a stable hub in a less than secure neighbourhood, made more valuable by an array of natural resources that everyone else wants a piece on this key outpost of the modern Silk Road.
(London, England) Ascot is literally a festival of colors – especially under clear skies as we enjoyed during the start of the racing fixture. Women want to outsmart their counterparts by balancing style with uniqueness as they unveil their latest hats. Men sport their top hat and tails and add their creative touches with bright neck wear.
Ahead of the first race, we pause on the recommendation of one polite usher. Queen Elizabeth II and Prince Philip pass by in their carriage, and the latter acknowledges the person I am with a tip of his hat accompanied by a warm smile.
I am walking to the winner’s paddock as a guest of H.H. Sheikh Mohammed bin Rashid Al Maktoum, the Ruler of Dubai and Prime Minister of the UAE, and his wife Princess Haya. Both are avid equestrians and had 27 horses running at Royal Ascot under the Godolphin stable. His son Crown Prince Hamdan’s Philly Rainfall won the Jersey Stakes setting a course record. The family is together to collect the first trophy of the week.
My stroll with H.H. and the broader entourage including his trainer Saeed bin Surror and his manager Simon Crisford was a case of déjà vu. The previous year my wife and I were invited to the venue by a friend on the final day of racing and saw the Dubai Royal Family from a distance in the saddling paddock, nearly six months before the debt challenges of Dubai set in.
The tour around Royal Ascot followed a twenty minute interview in his private box above the finish line, the first such interview since the restructuring was completed at Dubai World.
We had a frank exchange about the concerns the International Monetary Fund has about a “persisting” recession in Dubai. “We didn’t create the recession, it happened,” says Sheikh Mohammed, “And I don’t call it a recession, I call it a challenge. And when things go wrong, a true leader comes through.”
Asked whether he sees growth in Dubai in 2010, I receive a one word response: “Yes.”
The Ruler of Dubai is in the midst of an intense race – even if some within the Emirate may not see it that way – to rebuild investor confidence. On the eve of Eid, Dubai hit the pause button on Dubai World’s debt, then spent the next quarter working out a structure between what are deemed corporate entities and the holdings of the government and its Ruler. Bankers believe a bottom has been reached, but the $6.2 billion loss of Dubai Holding Commercial Operations Group was not a real confidence builder.
Businessmen I spoke with worry about the forming of a potential continuous downward cycle on property prices. The recent stability will loosen up borrowing, which will lead to a restarting of unfinished projects and more capacity will come onto an already full property market.
As the interview progresses, I asked the Ruler of Dubai if neighboring Abu Dhabi will stand by him. “Abu Dhabi will always stand with any emirate and Dubai with any emirate.” Will additional external support be needed from Abu Dhabi? He responds by saying he is “not worried about the companies” and that the relationship “is very good between the emirates.”
But it is clear from our time in the interview and then our discussion while touring the grounds afterward that Sheikh Mohammed is eager to keep focused on the sectors that built “Brand Dubai” – trade, tourism and financial services.
Our interview came a week after Emirates Airlines ordered another $11.5 billion in new planes and a week before cargo services started at Dubai World Central Al Maktoum International. The Dubai Ruler told us that there are more plane orders to come in July at the Farnborough Air Show.
Asked why he placed a similar size order two months after 9/11, which matches his most recent strategy he replied, “You have to grab the opportunity.”
(Abu Dhabi) On our program, Marketplace Middle East, we have a special segment called “Bright Sparks” that features the rising stars of the next generation, those that are coming up with bright ideas that create companies, jobs and fulfil dreams.
The flotilla attack not only amounted to another real setback for long-term peace, but also a major setback of economic activity.
Prior to this week’s negative turn of events in the Palestinian Territories, investors have commented about the relative stability leading to real growth in the West Bank. They spoke to soon.
Last year, economic growth surged 8.5 percent riding on the back of government aid pledges, sizable private investment from the Arab region and an incredibly active Diaspora.
In 2010 alone, donor governments are contributing $100 million of direct budget support.
A back-of-the-envelope tally indicates that some $2 billion have been poured into the West Bank and Gaza in the past five years. That is a huge sum of money for a population of less than four million people.
This investment translates into a flotilla full political and business goodwill for a community that is known for its survival, especially its entrepreneurs – the Bright Sparks that want to make things happen.
Dubai-based private equity group Abraaj Capital launched a $50 million Palestinian fund for small and medium-sized enterprises in January at Davos, part of a broader $1 billion initiative to support SMEs. Small business in any corner of the world usually generate 90 percent of employment.
In his office at the Dubai International Financial Center, the founder of Abraaj, Arif Naqvi said the first response to the flotilla attack has to be an emotional one, since we are witnessing another lost opportunity.
Naqvi is not part of the Palestinian Diaspora, but of Pakistani descent. He does however make up what we can call the choir of investors who believe that economic activity and opportunity will be the best recipe for stability.
Investors like Naqvi have been attempting to look at the Territories in their entirety, but the reality is quite different.
In the West Bank where Prime Minister Salam Fayyad has introduced another reform and development programme, commerce not dependent on the free movement goods is burgeoning - financial services, telecom operators and outsourcing.
Many want to see road blocks removed and the start of the predictable movement of goods so that internal trade can take hold. It is difficult to ship perishable items if you don’t know the roadblock will last 20 minutes or 20 hours.
In Gaza, the situation has been described as a humanitarian crisis - and the numbers reflect such. According to the United Nations, unemployment is at 44 percent; 70 percent of the population is living on $1 a day; 80 percent is dependent on aid. The people of the territories are cut from the same cloth, but are treated very differently.
The attacks on the aid flotilla coincided with the Palestinian Investment Conference in Bethlehem. If there is one gathering to illustrate external government, NGO and business support for the territories, this was it. Palestinian Authority President Mahmoud Abbas renamed the meeting the "Freedom Conference" in light of this week’s confrontation at sea.
This could translate on the ground to freedom of aid to reach Gaza, but also for the Bright Sparks who need lasting stability to prosper.
This week I made the trip between Abu Dhabi and Dubai four times in as many days, shuttling between our regional hub in Abu Dhabi and hotels, conferences and interviews in Dubai.
On one occasion, I hitched a ride with a colleague, who goes back and forth every day, who bore witness to the challenges of Emirati high-speed travel. Drivers frequently flash their high-beam headlights to intimidate those not going “fast enough” in the fast lane and sometimes use the inside shoulder of the motorway to leave them behind.
The traffic between the two emirates is intense during morning and early evening rush hours, with the draw of the capital’s wealth creating more jobs in tourism, exhibitions, construction and development. But, it is not the road traffic that is most striking, but instead the shuttle diplomacy. The $3 billion Emirates Palace –- as seen in the new "Sex in the City" movie or earlier in action film "The Kingdom" - serves as a hotel, a meeting venue for the Abu Dhabi government and, lately, as a hub for world leaders.
In the morning, I saw the Prime Minister of Kazakhstan who was in town to meet with the Crown Prince of Abu Dhabi and his influential half-brother who is also owner of the Manchester City football club. By sunset, German Chancellor Angela Merkel and a much larger delegation arrived on the scene. The Central Asian leader stopped in Abu Dhabi for 24 hours to advance investments in his vast country, the latter was on the first leg of a four-state visit including Saudi Arabia, Qatar and Bahrain.
Both of these leaders were preceded by one who can be defined as a man with a more urgent matter: the Greek Prime Minister George Papandreou. With two "Ds" on his report card - a record budget deficit and debt - he invited attendees of the Arab Economic Forum to consider Greece when sizing up opportunities. Papandreou pointed to the tourism and technology sectors as obvious places to start.
These are the visits we know about. Equally intriguing are the others that are intentionally off the radar, which fit into the category as discreet but necessary.
The Gulf States are a magnet for attention as the UAE is home to the largest sovereign wealth fund, the Abu Dhabi Investment Authority. There are another seven funds that are helping broaden the economic base of the Emirate beyond hydrocarbons with investments in industrial groups that include trade offsets and/or technology transfers. In sum, it is an “I will invest in you if you, in turn, will invest in us” type of situation.
In light of the Greek debt tragedy and Angela Merkel’s five-month resistance to an EU led bailout, it is not surprising Merkel needed to pay a visit to these high-powered investors. Let’s not forget, sovereign wealth funds, with the Middle East members representing $1.5 trillion dollars, have been hedging their bets against the dollar in the past few years. They want to know if we are going back to where this process started a decade ago, at nearly one-to-one with the U.S. currency.
Merkel cannot overlook the interest these funds have in German industry. Daimler lists the Abu Dhabi-based fund, Aabar, as its largest single investor and the Kuwait Investment Authority as another. Seventeen percent of Volkswagen is in the hands of the Qataris and Deutsche Bank has its own share of Gulf investment. Strategic plays like these by the SWFs make the announcement of a $150 million deal for the German industrial giant Siemens this week look like small fry.
A few years ago, the leadership in Abu Dhabi put in place a multi-pronged branding strategy. This now includes hosting F1 racing, a flag carrier Ethiad with global ambitions, top-flight exhibitions, conferences and eventually a branch of the Louvre and Guggenheim museums.
One cannot contend with the style and touch in which they have been or are being developed. A whole eco-system (as in economic) has been built to support such activity. Room rates are finally coming down with the introduction of more four and five-star hotels and on that road trip from Dubai one can see development after development on the way.
A decade ago when the iconic, Burj al Arab opened in Dubai global celebrities made the sail shaped hotel a must stop visit on their itinerary. Fast forward to the year 2020 and we will recall time when different members of the global elite put the Gulf and specifically Abu Dhabi on their schedule. Despite the vast expanse inside the Emirates Palace hotel, the traffic these days is nearly bumper-to-bumper.
There is a hobby that one sees retirees or others with plenty of time on their hands partaking in: They strap long metal detectors on their arms and with headsets in place scan the sands of the U.S. in search of a treasure. The prize is a few odd coins or a diamond ring that some woman has unwittingly left behind.
While I find the “sport” odd at best, the image crossed my mind while in Kuala Lumpur this week. The queues to pass through airport security and passport control were efficient, but long. Businessmen from Europe, the U.S. and the Middle East have switched on their radars in search of growth, but unlike those combing the sands they don’t need a lot of patience to find it.
During my few days on the ground, Singapore and Malaysia both reported 10 percent growth in the first quarter. China and Indonesia are running at nearly the same pace. That is stellar by any measure and the real concern is not a double-dip recession but asset bubbles forming in some of these Asian Tiger economies.
Malaysia’s Central Bank Governor Zeti Akthar Aziz said convincingly that she has it all under control, in an interview in her headquarters at Bank Negara. This explains in part why the bank raised interest rates twice already this year. Across the Straits of Malacca, Singaporean officials said they too want to stay ahead of this growth spurt.
We can leave this to monetarists to sort out. In the meantime, chief executives and other investors want a piece of the action and those flush with surpluses are making commitments. In the span of a week in KL, two of the most prominent Middle East investors, the Prime Minister of Qatar, Sheikh Hamad bin Jassim bin Jabor Al-Thani and the Abu Dhabi development fund Mubadala signed on the dotted line.
Qatar committed to invest $5 billion in a series of projects from energy to real estate, matched by similar funding by investment funds in Malaysia. Mubadala wants a piece of the KL business district in the shadow of the Petronas Towers. The area could use a fresh capital injection - the Grand Hyatt has been a construction site for years with a completion date still unknown, according to one well-placed Malaysian.
Middle East investors feel very comfortable in Southeast Asia. The ties go back to the Spice Route days of the 15th century, when spices, palm oil and other products were traded between the two continents. That trade, in turn, planted the seeds of Islam in this corner of the world.
The vice-chairman of the well-known, Dubai-based merchant family, the Al Ghurairs, was on the ground in the city for a business forum where he is a board member. Communication is simple, says Essa Al Ghurair, one of the few from the region sporting a dish dash at the forum.
They speak the same business language. But there has been a dramatic shift which he acknowledges. Five years ago, Al Ghurair did not look east for growth. The natural inclination was to turn to Europe, and even more so across the Atlantic to the U.S. Today, the Al Ghurairs have invested in an Indonesian coal mine, amongst other projects.
I had a similar conversation with Bahraini banker Khalid Al Janahi, who took a break from a series of investment meetings to share his thoughts over a coffee. Simply put the growth is too good to pass up and unlike the German government’s new found effort to slow down speculative investments, the Asians are eager to engage those who have their radars of growth and, shall we say, opportunity, tuned in to the new land of opportunity.
The world is still trying to size up the validity and effectiveness of the European Union $1 billion support package for Greece and future emergencies on the Continent. Even though Greece’s gross domestic product is relatively small at $324 billion, the potential contagion has been enough to rattle markets from Hong Kong to Wall Street.
While that drama was unfolding, coupled with the week-long hung parliament saga in Britain, real business was being done with an Islamic twist.
One of Britain’s foremost brands, Harrods, was swept up over the last week for $2.3 billion dollars. The seller was Egyptian Mohamed Al Fayed. The buyer: the investment vehicle of the Emir of Qatar, Qatar Holding. Qatar likes - some would say loves - the UK market. He has stakes in J. Sainsbury, Barclays Bank, Canary Wharf, and is now the owner of the property currently housing the U.S. Embassy in Mayfair, West London.
On the other end of the globe, Qatar-based Gulf Petroleum said it plans to invest $5 billion in an oil and gas complex in Malaysia. The two governments have been talking for the past couple of years and now believe the timing is right to proceed.
And if that was not enough, we should keep an eye on the President of Brazil, Luiz Inacio Lula da Silva who added Qatar to his agenda after a planned visit to Russia. It is worth noting that Brazilian oil giant Petrobras’ off-shore discoveries are garnering plenty of attention by would-be investors like Qatar. Rather quietly, Brazil’s exports to Qatar are up by two-thirds in 2010 versus the same period last year.
There are two sides to this story. Outbound investments by what we can call Brand Islam and inbound investments into a rapidly growing market of more than one and a half billion people in the Muslim world.
With regards to the former, it is not surprising that Gulf sovereign funds in particular are hunting for investment opportunities. Oil has hovered around $80 since the start of 2010 and it continues to generate healthy cash flow that needs to be deployed.
While big-name brand purchases in the West will always garner more than their fair share of media coverage, the quieter business and political diplomacy by the major players in the Muslim world, often amongst themselves, is even more intriguing. Someone kindly emailed the Qatar-Malaysia energy piece, but it is not the first item people in the business community are talking about.
Meanwhile, marketing teams are looking for the best way to reach out to the Muslim consumer market. While I often talk about the potential of a broader Middle East market of 300 million consumers or more, the reality is companies need to look to South and East Asia for the real numbers.
Today the Muslim market represents over one-fifth of the world’s population. Rapid expanding birth rates will translate into greater market share over the next two decades. Obviously, this is not a “one size fits all” market. A consumer in Jakarta behaves quite differently from one in Jeddah. There is also a huge wealth gap between these countries of the Ummah, or "the community of believers." Per capita income in Qatar ranks near the top of heap worldwide; Yemen is near the bottom.
The more one digs into this market, the more layers of complexity are uncovered. The market for Halal foods is growing rapidly, but again, the taste vary widely from Europe to Asia. That sector though remains simple to tackle versus say Islamic banking where scholars today are still seeking common ground for the rapidly growing market.
The top-line numbers are impressive and are worthy of not only our attention in the news sphere, but in the business community as well. Now back to the EU and long-term debt!
He is a prince wearing many hats, all essential to Dubai’s past development and its current economic debt restructuring.
Sheikh Ahmed bin Saeed Al Maktoum runs Dubai’s airline, its airports and oversees its Supreme Fiscal Committee - all at the same time. In an interview in Emirate’s Airlines rotating stand at the Arab Travel Market we talked about issues right across the sectors he oversees.
Investors in Dubai are eager to come to agreement on Dubai’s $23 billion dollar restructuring. This is not a simple task with nearly 100 banks involved and grumblings from local creditor institutions which don’t feel they are getting a fair shake from the Emirate.
Sheikh Ahmed talked about getting an agreement sealed in the next two to three weeks and was quite direct when he said that he thought the current deal was “always a generous proposal for everybody.” In a remark pointed at the local creditors, he said: “They have to think long-term about being here in Dubai.” It does not take a rocket scientist to read between the lines.
From insights from our interview together, data emerging from independent researchers and in discussions with others on the ground, one can ascertain that a floor is being put below what has been a nasty six months.
First some facts: Colliers International noted that property prices rose two percent in the first quarter of the year. The real estate group expressed some caution in its report, noting that a surge of completions will re-introduce downward pressure on prices by the close of the year.
We shot our TV programme links in Dubai Marina where demand is picking up again, but one can see plenty of empty flats and more to come with construction revving up again. At the close of 2009, the marina area was silent as cranes sat idle during the height of the credit crunch.
During our interview, Sheikh Ahmed did not hide the fact real estate will be slow to recover. He talked about investors re-adjusting their expectations and that 2005-06 are more accurate barometers for the future than 2007 at the height of the frenzy.
When asked what was the key lesson learned during the past six months as Chairman of the Dubai Supreme Fiscal Committee, Sheikh Ahmed said defining the Emirate’s core businesses: trade/export services, tourism and financial services.
Not by accident I am sure, he left out the property sector and nodded in agreement when asked if speculators were no longer welcomed.
Other data streaming in points to a Dubai recovery, although probably not as robust as Sheikh Ahmed predicted when he said five percent growth in the medium term was conservative. Cargo traffic was up 28 percent in the first quarter and passenger traffic was not far behind at 20 percent. Retail sales are also solid, illustrating that residents and tourists are not cash strapped and are expressing confidence about the future.
Dubai - and the region as a whole for that matter - has found out the hard way that it is not operating in isolation. The Emirate generated the ill winds of financial misdeeds last autumn and spread that fear East and West. Today, rebuilding has begun in earnest, but the EU-Greek tragedy is onto its third act and reaching beyond the borders of the newest members Bulgaria and Romania. While this may be an over-reaction on Wall Street, in Cairo and in Dubai, this will translate into more tenuous times ahead just as many hoped the recovery was taking hold in earnest.
We also cannot overlook the fact that Dubai still has another $55 billion in debt that needs to be addressed over the next year and a half. That is why Sheikh Ahmed, while sounding optimistic, was also eager to drawn a line in the sand with domestic creditors.
It is a complicated puzzle that has taken months to put together - and a few critical pieces are still missing
Greece has been negotiating the terms of a European Union bailout since the end of last year and in that time interest rates and the cost of borrowing have soared.
At a press briefing in Davos at the end of January, I remember asking Greek Prime Minister George Papandreou if Germany and France would lend their political support to his country. His answer - like the countries at the time - was non-committal. France did come on board; Germany is just warming up to the idea.
We know at this juncture that the road ahead for Greece is a painful one. We are looking at one out of five government jobs being eliminated. The coveted 14-month salary for government workers will be cut and taxes will continue to increase to close a 13.6 percent budget deficit from 2009. The target for 2010 is cut of almost five percent, which is incredibly difficult to deliver when your economy is still contracting.
Left out of today’s debate is why we are in this position in the first place.
The reality is that the architects of the Euro made a political decision to be inclusive with the new currency union probably a full decade ahead of actual convergence with Greece, Spain and Portugal - dare I say even Italy, a G-8 member.
As a result of being pegged to a single currency and therefore German monetary policy, the Greeks have enjoyed the full benefits of a strong and stable currency without - until today - any of the pitfalls. Most notably, real estate prices and wages have continued to rise over the past decade, without the necessary openness and flexibility to attract foreign direct investment.
Greece trades a great deal with its southeastern European neighbors - especially in food stuffs. But the country cannot live on olive oil and the food sector alone.
During an interview with CNN, Papandreou talked about developing a green economy and tapping the growing market for solar energy. Practically speaking, it makes sense, but the building blocks for reforms need to be put in place first.
I spoke to one leading Greek businessman who produces high-tech software and sensors from his manufacturing base outside Athens. He recognises the burden of the budget deficit and the mess left over by the previous government. We have seen the protesters on the streets. But he notes - and the polls reflect this - that those shouting the loudest are in the minority. The Prime Minister still has a majority of the population, which supports change.
But herein lies the caveat: The International Monetary Fund is pushing for steep budget cuts and reforms. Papandreou with the support of his European counterparts can use this opportunity to start and complete what should have been done more than a decade ago. As one Greek chief executive said: “Better a showdown with the extremists today than a slow death of our economy in the future.”
Business leaders talk of opening up the property sector. The government and the Church of Greece reportedly own and sit on €250 billion of real estate.
Selling some of those assets would help bring down the deficit and ease the unrealistic level of prices brought on by the single currency. Secondly, many sectors remain closed or overly controlled in Greece. The transportation business lacks competition and prices remain artificially high - thanks again to the strong euro.
No one wants to see Greece exit the single currency. An exit would be a failure for Greece and the European Union as a whole. As one executive noted this past week, “it is absolutely not an option.” If that option is off the table, the Prime Minister has few cards to play at this juncture. Job cuts, higher taxes and yes long-term reforms need to take place for the country to rebuild confidence after the crisis.
About Business 360
CNN International's business anchors and correspondents get to grips with the issues affecting world business, and they want your questions and feedback.