Arabia-Asia: Two Regions At a Crossroads

For the last few months, I’ve been focused on editing a 10-story package for Forbes Asia exploring trade ties between Gulf and Asian companies written by the magazine’s contributors all over the Asian continent. We’ve covered a lot of ground, from Taiwan to Saudi, from Singapore to Oman. Please see below for a full listing of our coverage.

(Getty Images)

Karl Shmavonian, Forbes Staff

It’s debatable whether the historical metaphor is the Silk Route or Spice Route, but neither still matters literally, so we’ll say that Arabia-Asia is a commercial and financial link that is ever more important in the world economy.

In this special section, to correspond with the first Forbes Global CEO Conference in the Middle East (being held in Dubai), we take a look at parts of this expanding trade. We do so in the FORBES ASIA way, through profiles of several significant business personalities and the firms they founded.

The package was nimbly edited by Angela Shah, a writer and editor based in Dubai. Her work has also appeared in The New York Times, Time, and Newsweek/Daily Beast. For more about Angela, see www.angelashah.com.

Personalities play a big part in our coverage. Few people have as much boots-on-the-ground experience in both regions as does David Eldon, former chairman of HSBC Asia-Pacific. Since retiring from the bank in 2005, he has served as chairman of the Dubai International Financial Centre Authority. In our interview with him he discusses a variety of issues and affirms that “trade links are trending east and south, away from the West.”

Another dealmaker in the region is Pakistani Omar Lodhi, of Dubai’s Abraaj Capital. He opened the firm’s Singapore office two years ago and is leading Abraaj’s push into Asia, particularly the ASEAN countries, whose population and GDP offer plenty of opportunity: “These regional Asian economies are akin to Europe.”

Growth in the region isn’t just about finance–even the most ambitious high-rollers take a break for dumplings and spring rolls after a long day of puts and calls. Lin Chao Wen, founder of Gulf Royal Chinese Restaurant chain, started out as a failed serial entrepreneur in Taiwan in the 1970s before he eventually ended up in Saudi Arabia, bringing Chinese food to the masses. In the process he immersed himself in Arab culture, eventually converting to Islam and building himself a lavish home in Taiwan that resembles an Arabian palace.

Just as Lin could never have known as a young man in Taiwan that he would end up in Saudi Arabia, P.N.C. Menon, founder of Sobha Developers, could never have predicted while growing up in a small Kerala village in India that he would end up being a big player in Gulf-region real estate. Says the man who appeared on the FORBES Billionaires List in 2006: “It came from nothing. I went [to the Gulf] with $7. I must have been making a little bit of money here and there to make myself comfortable.”

Another Indian who has spent a significant part of his life in the Mideast is Shaukat Ali Mir, chief operating officer for international electromechanical projects at Mumbai’s Voltas, a Tata Group company. Voltas has been providing infrastructure (plumbing, firefighting, drainage and electrical systems) for the Mideast since 1976, and Mir came to the region in 1982. Voltas’ most prestigious, and perhaps most challenging, project was providing the electromechanical guts for Dubai’s Burj Khalifa building, the world’s tallest. Mir is globalization on two legs: “I grew up in India. I am living in the Middle East. My children live in Canada, and I plan to retire in Europe.”

Just as Voltas provides infrastructure for the rapidly expanding Gulf, Korea’s Doosan Heavy Industries & Construction is supplying power and desalination for the parched regionDoosan, which expects sales to hit $10 billion this year,  is increasingly going head to head with industry leaders GE, Alstom and Siemens in building power plants in overseas markets.

No survey of Asia and the Mideast would be complete without drilling into oil production. China’s biggest oilfield pipe maker, Hilong Holding,  is one of the few Chinese companies with manufacturing plants in the Middle East, its fastest-growing regional market. Hilong’s business in Saudi Arabia, its main target, is a classic example of synergy: You provide oil, I’ll provide the means to get it out of the ground–everybody makes money.

But enough about electrical systems, plumbing, turbines and dirty oil fields, what about technology and all those sleek toys that everybody wants? Vincent Lai and Andy Soh, who share a “curiosity in playing with cool stuff,” are the founders of Tocco Studios, a maker of touchscreens and software. In 2009, when Lai and Soh were students at Singapore Management University, a group of Omanis visiting the university’s business incubator wanted to learn more about the budding entrepreneurs’ screens. The Omanis were captivated, and soon Lai and Soh were doing business in the Gulf, as well as having a Singapore office.

With all the money being made these days, we would be remiss if we didn’t offer a profile of a company offering folks a way to show off their wealth. Jeweler Joy Alukkas, like our other Indians profiled, made his entry in the Mideast decades ago. He opened his first store in Abu Dhabi in 1987, offering his wares to expat Indians. Eventually he moved back to India, bringing back with him an intangible commodity: marketing and business practices accrued in the Gulf. His Joyalukkas stores had $1.33 billion in sales last year.

For slightly less upscale shopping, consumers can go to the Dragonmart mall, a mass-market oasis on the outskirts of Dubai.

Finally, we profile five companies that are learning how to navigate the cultural and business currents that join China and the Mideast. One of our snapshots is of China’s Shenguan Holdings, a maker of sausage casings that recently announced it would be offering halal meat to the Muslim world.

The Arabia-Asia economy is not on a glide path. It has famously been interrupted through the centuries but also in recent times, as global busts in commodities or real estate, or other home-market vagaries, got in the way of would-be Marco Polos. But the lure of the great crossroads and the increasing wealth they connect makes it likely that the tales here are just an inkling of many more to come.

Dubai’s ‘Mad Men’

For a recent feature for Gulf Life, the in-flight magazine for Gulf Air, I chatted with some of Dubai’s advertising executives. Some were part of the migration 30 years ago from Beirut – then the region’s ad hub – and were the founding fathers of the industry here today. Back then there was only one TV station, in Kuwait, and they communicated with clients via telex. And I’ll let Mr. Raad tell you about the Saudi commercial and the porn star.

The Gulf and the ‘New Silk Road’

 

 

A Modern Silk Road Between Asia and the Middle East

By ANGELA SHAH and STANLEY REED

DUBAI — When Christy Lee, a South Korean investment banker, was dispatched to the Gulf four years ago to drum up business, her friends in Seoul had a hard time taking the assignment seriously. “They would say, Did you enjoy riding the camels?” she recalled.

Then the Gulf states’ oil earnings led to orders worth tens of billions of dollars for South Korean companies: The most noteworthy so far has been the deal for South Korea Electric Power Corp. to build four nuclear plants in Abu Dhabi, worth as much as $30 billion.

Now, when Ms. Lee talks about the Gulf, people listen. She has started her own firm, Daewon Advisory Services, with offices in Seoul and Abu Dhabi. In the past year she has brought 120 executives and leaders from the United Arab Emirates and other Gulf countries to South Korea, eager to figure out how it made its big economic strides. She expects these visits to bring in more deals.

Ms. Lee is one of a growing number of entrepreneurs and other people who have carved out roles as intermediaries between Asia and the Gulf, reviving in modern form — real estate projects, joint ventures, and investment deals — the centuries-old link between the Middle East and Asia known as the Silk Road.

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Arab Spring backlash?

One by one, the Arab world is commemorating and marking the first anniversary since the uprisings toppled autocrats in Egypt, Tunisia and Libya a year ago, last year’s “Arab Spring.” Even in places where there wasn’t regime change, leaders paid attention and in many Gulf countries doled out pumped up benefits programs for their citizens.

But it seems that a spreading of protected free expression is not necessarily a part of the rebellions’ young legacy so far.

For example, I can’t imagine what’s going on in the mind of 23-year-old Hamza Kashgari right now. Let me explain. Kashgari was a 23-year-old Saudi columnist who, like many other writers, was a prolific user of Twitter. And according to many media reports, last month on the occasion when Muslims celebrate the Prophet Mohammed’s birthday, Kashgari tweeted: “On your birthday, I will say that I have loved the rebel in you, that you’ve always been a source of inspiration to me, and that I do not like the halos of divinity around you. I shall not pray for you.”

Another post read: “On your birthday, I shall not bow to you. I shall not kiss your hand. Rather, I shall shake it as equals do, and smile at you as you smile at me. I shall speak to you as a friend, no more.”

Those sentiments set off a firestorm on Twitter, with tens of thousands of posts condemning him of apostasy, a crime punishable by death in Saudi Arabia. Someone even created a Facebook page calling for his immediate death. He apologized for his tweets but the calls for dire punishment continued. He fled Saudi to New Zealand but had to stop in Malaysia along the way. Even though Malaysia does not have an extradition treaty, it refused Kashgari entry into the country and he was put on a private jet back to Saudi Arabia.

The personal, almost casual, way Kashgari addressed his tweets to the Prophet was a red line that, if crossed, must be punished severely, according to his critics. He’s back in Saudi now, presumably awaiting trial in a religious court.

The concept of red lines that cannot be crossed played a part in what became the #UAE5. Emirati authorities last April arrested five bloggers for threatening state security and for comments about U.A.E. leaders deemed unacceptable. After a trial which resulted in  3-year sentences, they were pardoned last November.

Even Oman, which has been relatively peaceful in comparison to North Africa, the Levant and Bahrain, recently decided to detain  Muawiyah Al Rawahi for blog posts. The Gulf News in Dubai recently reported that Al Rawahi “had apparently written, in his now erased post, about him being working for the security agencies, being abused in the childhood and his sex escapades,” the newspaper reports. “He had also criticized the ruler as well as written about his lack of faith in religion. In 2009, he had created a storm by asking for alcohol to be made available freely to Omanis also.”

He was released last week after a 10-day detention. According to GN, he hasn’t  said anything publicly about the arrest or detention, only apologizing that “I regret that I let down many [people], and I regret that I let down myself.”

I’m not sure if exuberance over the Arab Spring prompted more candid postings from these writers or if governments are feeling more sensitive because of the changes the Arab world has seen in the last year. I wonder what impact this will have on writing going forward.

Arab Voices Before the ‘Spring’

For many people, 2011 was the year of an awakened Arabia, whose voices served as the catalyst for the oft-mentioned “Spring.” Sultan Al Qassemi, who writes the Felix Arabia blog, gained a measure of fame himself during this season of Arab discontent and revolution. Still, as powerful as these voices are, Al Qassemi recently wrote in Jadaliyya, an online publication produced by the Arab Studies Institute, about the voices who came before tweets and Facebook status updates.

Today the number of Twitter and Facebook users in the Gulf is estimated to be in the millions. Many are outspoken and critical of Gulf Arab regime policies, religious establishments, and the stagnation of social and political reform. There is no doubt that this space for online peaceful dissent would be even narrower and less tolerated than it is today had it not been for the courageous activism of the Arab and Gulf blogging pioneers. A majority of these social media pioneers have incorporated new mediums into their activism, but a few chose to stop blogging altogether. Some are no longer with us today, while others have gone into hiding in fear of being jailed.

The story introduces readers to many of these pioneer Arab voices, some of whom are now silent — willingly or unwillingly. As we look forward to 2012, which will likely reveal further change in the Arab world, it’s worth keeping in mind those who spoke out even when the world’s spotlight wasn’t shining on them.

Putting the Emirates to work

 

 

Helping Emiratis Succeed in the Private Sector

By ANGELA SHAH

DUBAI — Fatma al-Falasi’s excitement about her new job with a global chemical company evaporated by the end of her first day.

“I was underestimated and unappreciated,” she said. “I was there to fill a quota and I could see it in everyone’s faces.”

Ms. Falasi wanted to work in the private sector because the more multicultural environment, which she felt better reflected society at large, would allow her to gain experience and skills she could not get in a homogeneous Emirati government organization.

Instead, she was given make-work that “required no creativity or intelligence,” she recalled. She left the yearlong “Emirati Development Program” after five months and now works for a Dubai government entity.

“I always assumed I would fit in better in a multinational environment, but after that experience, and given the great work family I have now, I realized that is not true,” she said.

As many as 15 percent of Emiratis leave private-sector jobs because of cultural differences. Emiratis make up only about 20,000 of the total 3.8 million workers in the private sector in the U.A.E., according to the country’s Ministry of Labor.

“We have a lack of leaders in the region — we have managers, not leaders,” said Jasim Al Ali, director of human resources at the Department of Economic Development in Dubai. “There is no clear career path. This is the responsibility of the manager to explain to them exactly what they need to do” to progress at a company.

Encouraging citizens to not only enter, but to also thrive in the private sector is key for Gulf governments, whose populations are growing beyond the ability of the public-sector work force to accommodate. Saqr Ghobash, the U.A.E. minister of labor, said recently that integrating Emiratis into the private sector was a bigger challenge than the global economic crisis.

Emiratis, like their Gulf counterparts, have traditionally flocked to government jobs, which have higher salaries and lighter working hours. But with more than half of its population below the age of 30, the private sector must be a viable option. Currently, expatriates, who comprise nearly 90 percent of the U.A.E. population, fill the ranks in the private sector.

“The luxury of relying on cheap expatriate labor is fading as the demographic reality becomes clear,” said Farouk Soussa, chief economist for the Middle East at Citi. “It’s not sustainable. You can’t build your country based on guest labor. You need to employ your own people.”

Continue reading “Putting the Emirates to work”

The growth of sukuk

Shari’ah, or Islamic, finance is coming back after the global economic crisis caused all capital markets to dry up. In particular, companies and governments are turning to sukuk, or Islamic bonds, for financing. Shari’ah finance has long had a foothold in the Gulf, especially Bahrain which is considered to be its banking center, and in Malaysia. But it’s also gaining interest in places you wouldn’t expect: parts of Africa and Russia. Here is my latest story in Institutional Investor magazine.

 

 

 

Dubai Leads the Rise in Islamic Finance

By Angela Shah

As they were reviewing the bank’s funding needs recently, executives at HSBC Holdings decided to take a fresh look at sukuk, or Islamic bonds. Three years earlier the London-based bank had announced plans to issue up to $5 billion of sukuk under a medium-term financing program, but it never proceeded because the sukuk market, which seized up during the financial crisis, failed to recover. In recent months, however, a decline in yields and a revival of activity persuaded HSBC that the time was right to dust off its plans.

In June the bank’s subsidiary HSBC Bank Middle East sold $500 million of five-year sukuk priced to yield an expected 3.575 percent. It was the largest shari’a-compliant financing ever arranged by a non-Islamic institution. The deal saved money: At a yield of 155 basis points over midswaps, the cost was 15 to 20 basis points cheaper than the bank would have paid on a conventional bond issue. The offering also helped HSBC deepen ties with investors in the Gulf, an increasingly important market for the bank.

“We wanted to ensure we were capturing as much of the Islamic investor base as possible,” says Mohammed Dawood, head of global capital financing at HSBC in Dubai. “With this issue we ticked all of the boxes in terms of geographic distribution, Islamic accounts going into the transaction and overall successful secondary market trading as well.” About half of the deal was placed with investors in the Gulf, primarily family offices.

Once again, the sukuk market is open for business in the Gulf. In addition to HSBC, a number of regional entities have tapped the market recently. In May, Sharjah Islamic Bank, a leading Islamic lender in the United Arab Emirates, sold $400 million of sukuk yielding 4.75 percent and the Jeddah, Saudi Arabia–based Islamic Development Bank raised $750 million at 2.35 percent. Several other banks in the region are said to be considering entering the market later this year, and bankers say the Palestine Monetary Authority plans to offer its debut Islamic bond, worth about $50 million, this summer.

We wanted to ensure we were capturing as much of the Islamic investor base as possible,” says Mohammed Dawood, head of global capital financing at HSBC in Dubai

The market revival is part of the broader global economic recovery, says Afaq Khan, chief executive officer of Standard Chartered Saadiq in Dubai, the London-based bank’s Islamic banking subsidiary. “As the cost of capital has come down and adjusted to the new financial growth rates and companies are again looking at expansion, we’re seeing a growth in sukuk issues,” he says. “There is a lot of liquidity looking for a good credit, good management and a good growth story.”

Continue reading “The growth of sukuk”

Driving While Female

Yesterday about 20 women defied the clerics and the fatwas and got behind the wheel. Saudi Arabia is the only country that bans women from driving. There is no actual law in Saudi that mandates this. Instead it is the edict of the mullahs that has held the government hostage in enforcing this.

In the kingdom, women have little choice about their lives. They must wear an abaya and they cannot go anywhere on their own accord. They must get permission from their male guardian — usually a husband or a father — in order to travel or obtain work.

Women with means employ drivers. Those who can’t afford one simply must wait for when, and if, their male relatives has time to drive them around. In 1990, a group of women flouted this ban but were quickly arrested, booted from their jobs and defamed as “harlots” and the like for years afterward.

I only saw mention on Twitter of one woman saying she was detailed in yesterday’s drive, which seemed positive. But today I see that the Twitter account of  @LailaSindi comes back as “This user does not exist.” I certainly hope that’s a technical glitch.

In the meantime, please look at the joy on this woman’s face as she’s driving as part of the #Women2Drive campaign.

 

U.A.E. Wildlife

No, I’m not talking about the designer-clad nightclub-goers in the Armani Hotel or the less, um, well-heeled patrons in Bur Dubai or Deira.

For a country that’s 100 percent desert, there sure are a lot of exotic animals running around. Saturday night, residents in the Al Karama neighborhood in Abu Dhabi reported a young cheetah on the loose. This is akin to suddenly running across a big kitty prowling around the M Streets in Dallas.

(Gulf News via AP)

He was caught Sunday. The 11-moth-old cheetah was injured and had a chain around his neck. People at the Abu Dhabi Wildlife Centre said it looked like he escaped from a “private zoo.”

A cheetah? There are scores of homeless kitties around Abu Dhabi that would love the chance to spend this summer indoors curled up in your lap.

I suppose in a place that’s still growing into itself — I think the U.A.E. is in that teenager phase, rebelling to be different but conflicted by ties to tradition, on the way to full self-realization. So, perhaps, this is all part of the one-upsmanship. The tallest building in the world. The biggest indoor amusement park. You have a house cat. I have a tiger!

We saw a U.A.E. tie to this illegal exotic-animal trade earlier this month when an Emirati was stopped at the Bangkok airport. In one of his suitcases were two sedated leopard cubs. Another bag contained two other leopard cubs, a Sun bear, a gibbon and a marmoset. Media reports said each of the animals, which might have been bound for Saudi Arabia, were estimated to be less than three months old.

To be sure, the Middle East is not the only place that likes exotic pets — Russia is apparently another. But this seems to happen often enough here to have an Abu Dhabi Wildlife Centre, for which, at least, I’m glad.

Thanks to Margaret Coker for providing this handy rundown of wildlife sitings in the U.A.E. since 2005.

Life in the UAE — Animals roam streets

* May 29, 2011: An injured cheetah is found roaming the streets of Abu Dhabi.

* March 8: A young monkey, believed to be a baboon, was spotted running between parked cars at a petrol station in Silicon Oasis, Dubai.

* January 11: A pupil was bitten by a snake in Dubai while on a school trip.

* December 7, 2010: Cheetah spotted roaming the streets of Sharjah near Radisson SAS Hotel.

* March 2: A snake was spotted in a public school in Ras Al Khaimah, causing chaos.

* December 27, 2009: A python measuring more than a metre spread panic in Sharjah.

* January 14, 2007: A runaway baby crocodile spotted by an Emirati boy on the beach.

* November 15, 2005: Dubai resident reports seeing a tiger inside a 4X4 vehicle car near the Mall of the E