Thursday, January 31, 2008

Franchising in the GCC - Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates.

Location - Gulf Cooperation Council (GCC)

The Council comprises the Persian Gulf states of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates.


• The franchising industry grew 27% last year alone in the Middle-East.
• 'The 20 per cent annual growth of the FME in itself reflects the kind of interest Middle East as a franchising destination is generating. The retail industry in the Middle East is developing at a frenetic pace. At AED 30 billion, it is already the fourth largest contributor to UAE's GDP.
i. Although tremendous opportunities for new products and services are being created, the growth is also accompanied by intense competition between the incoming and the established brands, retailers, vendors and other service providers.
• Almost half of all franchises offer fast food. The industry is valued at $14 billion.
• Dubai is a major re-export center for perishable food products serving markets such as the GCC, Russia, Africa and India – a consumer market of over 2 billion people
• In the UAE, annual food imports are as high as $4 billion. This figure is expected to rise due to the strong economic growth as well as an increase in tourism and the natural populations.
• International franchising continues global expansion by embracing the Internet and on-line communications, as service franchises become a primary focus.
i. The U.S. is the best in the world at business systems and services. Prospects in far-flung countries, small and large, entice moderate and mid-sized franchisors to consider expansion through master licensing deals.
ii. Growth venues are in industries such as auto, business services, chemical application, executive education, logistics, pet care, retail, sports training, moving, residential and personal service franchise concepts as well as in the food and lodging sectors.
iii. At the same time in various countries, foreign franchise associations are developing beyond consultant clubs to become bona fide business organizations that benefit franchisors

Advantages of the GCC

• The Middle East's strategic geographic positioning uniquely places it midway between Europe and East Asia has only facilitated this growth - increasingly, Middle East is being perceived as an ideal business base that allows businesses to tap the best of all the worlds.
• Lifestyle changes throughout the region appear to be responsible for the increase in popularity. More women are working, resulting in less time to cook and disposable income.
• The other peculiarity of this market stems from the fact that it is a Baby -Boomer market with half of the local population under 29 years of age, and with a continuing average annual population growth of 3.5 per cent per annum.
• An additional catalyst is the largely composite population profile of the region.
i. Dubai in particular makes for a perfect case study as a city that is experiencing maximum positive spin offs due its heterogeneity. The expatriate population in Dubai which is a mosaic of 160 foreign nationalities represents 80 percent of the total workforce and the numbers continue to swell.
ii. A large chunk of this population is drawn from the Indian subcontinent. 30 percent of the expatriates come from Europe and the US, while recent years have seen a significant increase in resident communities from Australasia and South Africa.
iii. This diversity creates a consumer base drawn from broad social and cultural catchments. Such a scenario inherently creates a demand for a wide range of products and services from heterogeneous markets.
• Already plans to invest more than $580 billion in the tourism and hospitality industry between now and 2020 – there are currently over 200 projects worth over $23 billion under construction in the Arabian Gulf
i. Spending on leisure and tourism products is expected to reach $3 trillion by 2020.
ii. Annual revenues in the GCC’s attractions, entertainment and leisure industry are currently $10 billion
iii. There are several independent firms who are working to smooth over supply chain operations
• A number of companies are looking for strong growth in Middle Eastern countries. Well known franchises, including The Athlete’s Foot, Subway, Baskin Robbins, Benetton, Hertz and Domino’s Pizza are all expanding rapidly in the region.

Whats happening?

• Over the next decade the introduction of hundreds of fresh, locally nurtured
franchise concepts emerging within Dubai and the Gulf States will set the stage
for a great revolution of neo-consumerism. So what are the four key factors
driving this movement?
i. Firstly, the places to park new concepts; the current, ever-expanding construction phases in Dubai, UAE, GCC and all over Asia, provide a highly fertile ground for such concepts to nestle in, a home in the newly designed and creatively appointed decors, so that new concepts with the most lavish and appealing ideas would flourish. The combination of creative concepts blended with thousands of newly built access with improved consumer interaction is a very positive sign.
ii. Secondly, the Middle Eastern consumer at large is becoming increasingly fussy and armed with demanding attitudes towards high quality, better services, value and assurances while seeking emotional alliances with brand acceptance and responding to name identity recognition. The smarter and more difficult the customers, the better, resulting in best offerings with more sensible high-profile brand identities.
iii. Thirdly, a global tidal wave of new ideas; the current globalization of the best
original ideas parked under globally protected name identities, applying the
power of delivering unique selling propositions and making them available in
multiple countries and across continents is on the march. All over the world,
the race for syndicated/franchised ideas is on at full speed. The question is
either whether a country simply gets washed over, or takes a stand with innovative and homegrown counter offerings.
iv. Lastly, the new-name-economy; the sudden realization by serious business players to carve out a 100% proprietary, Five-Star Standard brand name identity with global ownership as the ultimate weapon to market a product or service on the world scene as an essential tool to franchise has finally come to reality.
• The market for retail space is booming currently as huge new malls in almost every GCC country are being built.
i. These malls will require a several food and beverage providers to populate them..
ii. Overall, Duabi’s indoor retail space is expected to increase up to 20 million sq.ft by 2010
• Historically, the US led the franchise revolution now adopted worldwide creating
great legends. Today, in the West with over 100,000 different franchise offerings
and turning over a trillion dollar in businesses this model of commerce is spreading its wings fast in GCC and Asia.
i. For example, tomorrow's India alone would easily absorb some tens of thousands of big and small new franchise ideas; locally developed, locally nurtured with international concerns to protection to give them easy access to park themselves anywhere in Asia or around the world. This industry would employ millions and serve hundreds of millions of customers from the well-to-do sector of the growing Indian population.
ii. GCC too, is on its way to have hundreds of its own brand new local ideas, designed to deal with local service issues, culture and sensitivities to its taste, style or religious needs. There can easily be thousands of outlets to service its population with dramatic shifts in demographics at play. The local original ideas from GCC too can be further expanded to Asia, MENA and Europe etc.

Things to consider

• It is necessary to play the expansion game under global standards of trademark protection, armed with a deeper understanding of international rules of image marketing as the new standard. The days of common promotional logo-driven branding are numbered.
• Furthermore, there are also major leadership challenges issues in order to harness
the advance level of franchising in Gulf countries for a maximum impact;
ii. Acquiring a deeper understanding; global image repositioning issues
are becoming more and more critical, slowly shifting the western brands powers to the emergence of newly-created Asian brands with traditions and lifestyles in mind, also giving Dubai and Gulf countries an opportunity to join the race, and take the quantum for new franchise-able identities. These issues also rest with the educational fronts where there is a critical need to train tens of thousands of local front line managers into marketing and branding-savvy personnel, so that in turn, they become instrumental in creating great success stories from within the companies. The importance of creating a deeper understanding among every front line manager is to adopt standards while appreciating the powers and the role of intellectual property in such a combative upcoming global franchise wars.
iii. Localization; as an owner-operated-business-occupational activity, there is nothing better than the franchise model. The real success of this concept came when managers became owners, resulting in a high level of loyalty, service and performance which fueled quality control and growth.
Today, in countries all over GCC, finding great occupational activity for the
younger population, and to offer them a platform for turnkey businesses is one
of the best long-term strategies for the future. To encourage an owner-operated model would involve family type business at the grassroots level and also create a safer environment to carry the business forward and expand into more outlets or other similar models.


• To go fast forward, the players must create the best value propositions, create
the best service models but most importantly acquire an absolute 100% ownership of your brand name identity so you can play the hassle-free international expansion game without being embarrassed at each step of trademark conflicts.
• The strictest application the five star standard of naming will ensure long-term success and earn a hassle-free-global premium positioning. The name issue alone will have the best ideas sacrificed. Study the subject and acquire a deeper understanding, test the waters and aim for the expanding neighboring markets.


3. Gulf News Weekly – January 17th, 2008

Thursday, January 17, 2008

Who’s Afraid of Mideast Money?


The men who manage the region’s sovereign wealth funds are using the billions from Persian Gulf oil revenues to change the face of global finance

by Emily Thornton and Stanley Reed

Deep inside a fortress of government ministries in Kuwait City, Bader M. Al Sa’ad moves billion-dollar chunks of wealth around the world like chess pieces. Slim and stately, the head of the Kuwait Investment Authority manages $213 billion on behalf of his government. His portfolio, one of the biggest so-called sovereign wealth funds in the world, is constantly replenished with money that flows into Kuwait in exchange for the oil that flows out. As prices top $100 a barrel, Kuwait’s coffers are swelling.

With portraits of the emir and crown prince looming above Al Sa’ad’s desk, one might expect the 50-year-old money manager to be tight-lipped about his investment strategy. But Al Sa’ad, who has held his post for just four years, is in a chatty mood. He says he wants to invest more in China and Brazil and other hot emerging markets—and less in Britain and France. He’s also keenly interested in leveraged buyouts and wants to spend at least $4 billion on big stakes in blue chip companies, especially American ones, on top of the roughly $17 billion he already holds. He’s even interested in U.S. mortgage-backed securities, a contrarian play if there ever was one. Al Sa’ad says he has about 15% of the fund in emerging markets, hedge funds, and private equity, up from almost zero when he started. “We have been quiet for a while,” he says. “But now we are knocking on doors.”

Pounding is more like it. Sovereign wealth funds from the Persian Gulf are changing the face of global finance in ways that unnerve many Westerners. In recent months Gulf funds have bought large chunks of Citigroup©, the private equity giant Carlyle Group, semiconductor heavyweight Advanced Micro Devices (AMD), planemaker European Aeronautic Defense & Space (EADS), and many other big companies. Gulf funds are also getting into leveraged buyouts, sometimes alongside private equity firms and sometimes by themselves—despite having little experience operating companies. “Large sovereign wealth funds have become major players in private equity, not only as investors but also as competitors,” says David Rubenstein, a founder of Carlyle, which sold a 7.5% stake to an Abu Dhabi fund in September. Soon, says Gregory A. White, managing director at Thomas H. Lee Partners, “they will be the industry. We will be working for them.”

BusinessWeek recently paid visits to four of the region’s most powerful money managers: Kuwait’s Al Sa’ad and Dubai’s Sameer Al Ansari, Soud Ba’alawy, and David Jackson. Their rise from relative obscurity has been breathtaking; rarely have so few come to control so much, so quickly.

The fund managers insist that Western businessmen and politicians have nothing to fear. Al Sa’ad ticks off a well-rehearsed list of reasons why CEOs should rejoice at the prospect of having Kuwait as a major shareholder. Reason 1: His fund will agree to multiyear lockups, providing long-term capital. Reason 2: Al Sa’ad expresses concerns to CEOs behind closed doors, not in the press. “If I were a CEO, I’d look for stability,” he says.

But recent actions by some funds belie those soothing sentiments. The $50 billion Qatar Investment Authority, run by Qatar’s Prime Minister, Sheikh Hamad bin Jassim bin Jabir al-Thani, is working with hedge fund activist Nelson Peltz to shake up British beverage company Cadbury Schweppes (CSG). Dubai Holding was so aggressive in its pursuit of OMX Group of Sweden last summer that it ran afoul of regulators there. Even companies that do business with Gulf funds are on alert. Dubai International Capital, which manages a $12 billion fund for Dubai’s ruler, Sheikh Mohammed bin Rashid Al Maktoum, flabbergasted Wall Street last fall when its chief, Sameer Al Ansari, shot off letters to Morgan Stanley (MS), UBS (UBS), Goldman Sachs (GS), Citigroup©, and other top investment banks asking them to pony up $50 million each for a new fund or risk losing future business. Several, including Goldman and UBS, complied. “So far,” says Roger Altman, chairman of Evercore Partners (EVR) and a former U.S. Deputy Treasury Secretary, “sovereign wealth funds have been more stabilizing than otherwise. But everyone is waiting to see how this evolves.”

Combine the Gulf funds’ new, tougher tactics with their staggering wealth and relative inexperience managing companies, and you have the potential for trouble. Six Gulf states—Abu Dhabi, Dubai, Kuwait, Oman, Qatar, and Saudi Arabia—account for nearly half of the world’s sovereign wealth fund assets. They control some $1.7 trillion, as much as all of the hedge funds in the world and more than the $1 trillion private equity industry—and Morgan Stanley predicts the total will grow by about $400 billion annually over the next several years. There’s even talk that Saudi Arabia may soon unleash a new $500 billion-plus fund. Bankers estimate that Gulf funds earned about $180 billion from their sovereign wealth fund investments in 2007—more than half of the $315 billion they collected in oil and gas revenues.

Wall Street veterans worry in particular that Gulf funds are moving too far, too fast into private equity. Buying and running companies is vastly different from taking passive stakes in them. Even seasoned pros like Henry Kravis of Kohlberg Kravis Roberts have trouble managing a company when its industry hits the skids, debt payments become untenable, and key people jump ship. Nemir A. Kirdar, CEO of Bahrain money management firm Investcorp, says Gulf funds “should rely on professionals.” In November, some bankers labeled Qatar’s fund an “amateur” after it backed out of a $19 billion deal for British grocery chain Sainsbury at the 11th hour. “They’ve given Middle Eastern investors a bad name,” says one.

The Gulf funds’ lack of experience shows in their compensation practices. Historically, they’ve been unwilling to pay anywhere near as much as private asset managers for top talent, a tendency that has hampered their recruiting efforts and led to high turnover. Al Ansari acknowledges that the Gulf region is “very talent-poor.” A senior banker in Dubai says “90% of the people who work in the region are second-rate. Only very recently are experienced individuals coming in.”

Such problems wouldn’t be so worrisome but for the fact that these massive funds are situated in a handful of tiny, oil-rich city-states in one of the world’s most volatile regions. The tiny Gulf emirates rely on the U.S. military for protection from the likes of Iran and Iraq—and they rely on guest workers for much of their labor. It’s a precarious situation, to say the least.

The Gulf funds, meanwhile, are nervously preparing for the day when the oil money stops flowing. For decades they mainly used the currency reserves that piled up from oil sales to buy safe investments like U.S. Treasury bonds. Now funds are trying to build the foundations for new, diversified, post-oil economies. To do that they must take more risk.

Kuwait’s Al Sa’ad feels intense pressure to generate returns, satisfy his political bosses, and gain Wall Street’s respect. In the 1990s, the fund, which receives about 10% of Kuwait’s revenues annually, lost as much as $5 billion in Spanish investments just as plunging oil prices and the fallout from the 1991 Gulf War left the government struggling to balance its budget. “We want to restore [our] name as a professional, global money manager,” he says. The fund already generates profits about the size of Kuwait’s national budget, but he plans to double its assets.

Al Sa’ad has long sought to outmaneuver markets. His father, Mohammed, was a successful merchant, but finance mesmerized Al Sa’ad, the seventh of 10 children, from a young age. After graduating from Kuwait University in 1980 with a degree in accounting, he got a job as a foreign exchange trader with a local bank, picking up new moves in the U.S. during training stints at Chase Manhattan in New York and the First National Bank of Chicago. In the 1990s, a local investment bank tapped Al Sa’ad to expand its merchant banking division, and his attention shifted to buyouts. In 2003 Kuwait’s Finance Minister asked him to run the emirate’s investment fund, already one of the biggest portfolios in the world. Al Sa’ad, intrigued with the idea of managing money, accepted. He asked to take a pay cut, he says, to reduce the salary gap with his underlings.

Al Sa’ad keeps the hours of any high-stakes money manager. He typically gets into the office at 7 a.m. and leaves around 3:15 p.m. to have lunch with his wife, Ola Al Mutairi, deputy editor of the women’s magazine Osrati, and his five children. Then it’s back to the office for several more hours. So far, Al Sa’ad has enjoyed success; his fund returned 13.3% in the fiscal year ended in March, 2007. But he isn’t content. “We can be more dynamic,” he says.

The fund seeks to keep the vast majority of its returns in line with traditional market benchmarks like stock and bond indexes—60% of the portfolio is in stocks—while putting a sliver into riskier ventures like private equity and hedge funds. In 2006 it paid $720 million for a chunk of the initial public offering of Beijing’s Industrial & Commercial Bank of China, a deal Al Sa’ad says kept him up at night. “If something goes wrong, I’ll be under fire,” he says. (ICBC’s stock has zoomed 156% since the IPO.) Last year the fund invested $300 million in Texas utility TXU alongside private equity giants KKR and TPG. But Al Sa’ad is taking private equity slowly. He admits the fund’s 400 employees, mostly civil servants who had limited contact with major buyout firms until recently, don’t know how to operate companies. “We don’t like to own 100% of businesses,” he says.

By contrast, Sameer Al Ansari, manager of Dubai International Capital’s relatively small $12 billion fund, displays some of the swagger of a private equity king. A compact, athletic man, Al Ansari, 45, wears designer suits and does business not from a drab civil service complex but sleek, sun-drenched quarters high up in a gleaming office building. His investment capital comes from Sheikh Mohammed’s umbrella company, Dubai Holding, which invests 30% of its cash flow in Dubai International Capital and other funds.

Born in Kuwait of Palestinian parents and brought up in Britain, Al Ansari graduated from Loughborough University in 1985 with a degree in accounting and financial management. In demand as an Arabic speaker who could make sense of numbers, he soon moved to Dubai to take an accounting job with Ernst & Young. His work in cleaning up Dubai Aluminum, a large government company beset by problems, attracted the attention of Mohammed Gergawi, a close confidant of Sheikh Mohammed and now chief executive of Dubai Holding. Gergawi hired Al Ansari to be chief financial officer of the Sheikh’s executive office, where he helped straighten out the ruler’s sprawling business interests and set up Dubai Holding, which now manages most of those assets. After Al Ansari expressed alarm that almost all of the Sheikh’s wealth was tied up in real estate, Gergawi gave him the go-ahead to set up Dubai International Capital, to diversify.

Despite his lack of buyout experience, Al Ansari has jumped in headlong, allocating about 60% of his portfolio to private equity. (A quarter is devoted to stakes in large companies and 15% to emerging markets.) In addition to co-investment deals with private equity firms, he has engineered six solo buyouts, including wax museum operator Tussauds Group, which he bought from Charterhouse Capital Partners for $1.6 billion in 2005. (Less than two years later he sold Tussauds to Blackstone Group for $2 billion in cash and a 20% stake in an entertainment company valued at more than $200 million.) Last year Al Ansari, who still speaks with a clipped British accent, nearly scooped up his beloved Liverpool soccer club, but lost out to a North American group that included buyout mogul Tom Hicks.

Al Ansari, like Al Sa’ad, seeks to double the size of his portfolio in a couple of years. To boost his firepower, he has taken on lots of debt from such banks as HSBC (HBC), Barclays, and Royal Bank of Scotland. His Global Strategic Equities Fund, which now holds stakes in Sony (SNE), HSBC, and EADS, borrows $4 for every $1 of its own money. The fund also buys derivatives to limit its losses. One former employee says: “Dubai plays a very shrewd game.” But he worries that “it’s leverage on leverage on leverage.”

Al Ansari spends much of his time hunting up deals abroad. When he’s in Dubai he typically spends 10 hours a day in the office, mostly taking meetings with investment bankers and private equity people pitching ideas. He says he’s invited to three to six social events a day and usually goes to one or two. “Dubai is a work-hard, play-hard kind of place,” he says—for better and for worse. “My career has gone from good to great in the past two years, but my personal life from bad to worse.” Al Ansari’s two sons, 17 and 14, live with him, while his daughter, 10, lives with his ex-wife. Over lunch at a Lebanese restaurant near his office, he confesses that trotting the globe for buyouts has only added to his exhaustion.

Looking for help in coming up with new deals, Al Ansari last year began courting hedge funds. With the help of JPMorgan Chase he agreed last November to a $1.1 billion, 9.9% stake in Och-Ziff Capital Management (OZM). Al Ansari met with Och-Ziff founder Daniel S. Och several times in New York and London; the two sealed their bargain over dinner at the swank New York restaurant Daniel in a private, glass-walled room overlooking the kitchen. When Och visited Dubai after his firm’s November, 2007, IPO, Al Ansari took him to the Al Muntaha restaurant, which rests 700 feet above the Gulf on top of the Burj al Arab Hotel, where rooms start at $2,000 a night. The two talked of Al Ansari’s hopes to tap Och’s global team for co-investment ideas and deal research, while helping Och-Ziff raise money in the Gulf. “We are very pleased with the relationship at this point,” says Och.

Some financiers in Dubai think Al Ansari is in over his head. “He’s a very smart guy, but he’s not a fund manager by training,” says one. While Al Ansari’s people say privately that the fund is making 20% annual returns, bankers are skeptical. “I question what that’s based on,” says a senior Dubai-based investment banker, noting that the portfolio’s private equity investments might not be easy to sell in today’s turbulent markets. Moreover, the stock prices of EADS and HSBC are down some 20% and 10%, respectively, since Al Ansari bought them, while Och-Ziff has tumbled 23%. Al Ansari stresses that his big stock positions are hedged with derivatives. If HSBC’s stock sinks further, he says, he might buy more. Och-Ziff, he insists, is misjudged.

For all the fixation on returns, sometimes a sovereign fund manager’s larger strategic goals are just as important. Soud Ba’alawy, 46, a former Citigroup vice-president in Dubai, was tapped in 2000 to become chief investment officer of Sheikh Mohammed’s office. His duties have since expanded greatly; he’s now chairman of Dubai Group and the point man for the ruler’s quest to turn the tiny emirate into the Wall Street of the Middle East. “We want to be the’ financial services company in the region,” says Ba’alawy of the Dubai Financial Group, one fast-growing wing of Dubai Group that he wants to take public this year for as much as $12 billion.

Unlike the British-tinged Al Ansari, Ba’alawy is still very much a man of the region. In Dubai he wears the traditional white robe and headdress and fasts during the month of Ramadan even when he’s on the road chasing deals, which he says is 70% of the time. Intensely private, he resists talking about how much money he manages (insiders peg his returns at around 20% annually), much less his family life. He has two young daughters, but as to the rest he says “Our personal lives are our personal lives.” Ba’alawy, a Dubai native, obtained a chartered accounting qualification from a small London school in the mid-1980s, and then returned to Dubai to work for his father’s printing business. He joined Citigroup in 1990, rising to treasurer for the Gulf region. “I always loved markets,” he says. “I wanted to be in the financial sector from the beginning.”

In 2000, while at Citi, Ba’alawy met Gergawi, the sheikh’s right-hand man, who was then running a real estate project called Dubai Internet City. Ba’alawy joined that effort but left a few months later to set up an investment office for the ruler that quickly mushroomed into what is now called Dubai Group, the conglomerate that includes hotel management and financial services.

Over the past two years, Ba’alawy has been wooing financial institutions around the globe to join that growing empire. Using the cachet of his boss, Sheikh Mohammed, as an entrée, Ba’alawy has snapped up a 40% stake in Malaysia’s Bank Islam and a 15% chunk of Oman’s Bank Muscat. In December, Ba’alawy raised eyebrows when he slapped down $1.1 billion for a 25% stake in Cairo investment bank EFG-Hermes—just two weeks after being contacted by its owner, private equity firm Abraaj Capital, which had paid $500 million for it the previous year. Ba’alawy insists EFG is worth the hefty price.

Ba’alawy’s biggest deal came in September, when he agreed to take a 19.9%, $2.1 billion stake in Nasdaq, part of an effort to bulk up the emirate’s new Dubai International Financial Exchange, which had languished since its 2006 launch. The deal capped a flurry of maneuvering that started with Ba’alawy’s March offer to take a stake in Sweden’s OMX Group. But OMX declined and quickly accepted a $3.7 billion offer from Nasdaq. On Aug. 9, Ba’alawy’s team quietly took steps to snatch up a 27% stake in OMX shares with the help of investment banks, a move that brought a reprimand from Swedish regulators. The idea, says someone close to the deal, was to make sure Dubai would be taken seriously. Later Dubai made a formal $4 billion offer for OMX, enraging Nasdaq but quelling the Swedish authorities.

A standoff between Ba’alawy and Nasdaq CEO Robert Greifeld seemed likely. But Ba’alawy changed course, reasoning that Nasdaq’s big-name brand might be more valuable than OMX. In a series of meetings with Greifeld in New York, London, and Stockholm, the two hammered out a complex deal in which Nasdaq would buy OMX, Dubai would take a stake in Nasdaq, and Nasdaq would take a stake in the Dubai exchange, which would carry the Nasdaq brand. The terms were approved by U.S. regulators in December. “Nasdaq is coming to a market that is still virgin,” says Ba’alawy. “They will become an important catalyst for change.” A banker involved in the transaction says Dubai was willing to pay a stiff price for a move it considered strategic.

Ba’alawy’s team works late hours in the same new building as Al Ansari’s crew. One former staffer complains of a “chaotic” atmosphere and high turnover. “The priorities change constantly,” he says. “People find it very difficult.” Ba’alawy can be brusque, too. He recently barked at a new European recruit during a staff meeting for “needless playing with your BlackBerry to show how important you are.”

Westerners are still fairly rare at Gulf funds, some of which have existed since the 1950s. David Jackson, the 41-year-old American chief of Dubai’s Istithmar fund, has had a meteoric rise. With degrees from Princeton and Yale’s business school, Jackson had spent nine years at Lehman Brothers (LEH), most recently advising on buyout deals in Asia. In 2003 a friend who was advising Sultan Ahmed Bin Sulayem, one of Sheikh Mohammed’s closest advisers and chairman of Dubai World, asked Jackson to help him set up an investment fund, subsequently named Istithmar, or “investment” in Arabic, which launched a few months later.

At first Jackson was a one-man show. “It was difficult to get people to return my calls,” he says. Jackson made his buyout bones in 2006 when he acquired resort and casino operator Kerzner International for $3.9 billion alongside Goldman Sachs and other partners. Later that year he took a $1 billion stake in London-listed Standard Chartered Bank. Last June he bought a 3% stake in the $20 billion European hedge fund GLG Partners (GLG). And in September his fund bought retailer Barney’s, paying $942 million—after having been warned for 18 months that Barney’s owner, Jones Apparel Group (JNY), was interested only in bids for the whole conglomerate.

Now, Jackson says he’s keen on mortgage companies unfairly tarred by the subprime mess. He’s also eyeing stakes in private equity firms along the lines of Abu Dhabi’s $1.35 billion stake in Carlyle Group. And he’s weighing several co-investment deals with buyout firms.

Once Istithmar buys into a company, Jackson turns up the heat. In 2005, just months after the fund acquired a tiny 3% stake in Indian airline SpiceJet, the company installed a new CEO. “We needed people with more expertise,” says Jackson. SpiceJet has since quadrupled its revenues, to $327 million, and plans to nearly double again by 2010. (Istithmar increased its stake to 14.7% last year.) Jackson expects a lot from his own people as well. In one management meeting recently, about a dozen investment officers ran through an array of deals at various stages in industries ranging from live entertainment to finance. Twice, Jackson tossed a box of tissues to team members who confessed that their investments weren’t meeting expectations.

A bachelor who says he doesn’t even have time for a pet, Jackson spends 40% of his year on the road scouring for deals—sometimes brushing up against fellow Dubai fund managers. He rattles off his record against Al Ansari: “One time we won. Two times they won. One time neither of us won. I don’t think of them as any different from when I’m competing with Carlyle or TPG.”

Jackson encourages his team, which has swelled to 85, to think thematically rather than engage in the traditional “check-box investing” that other fund managers follow. “I don’t want to get into any rules,” says Jackson. The GLG Partners deal, for example, was a bet that mutual fund investors will migrate either to cheap index funds or expensive hedge funds. The Standard Chartered deal sought to gain exposure to many emerging markets at once.

As the credit crisis deepens, investment banks and private equity firms are stepping away from dealmaking to nurse their wounds. Gulf funds are eagerly filling the void. “Sovereign funds have been shown every interesting idea in the last quarter,” says Jeff Holzschuh, a Morgan Stanley banker who advised buyout firms on the TXU sale. “There is no question that they will change the deal world.” But there is a question as to whether the change will be for the better. “This is capital we need desperately,” says Felix Rohatyn, former Lazard Frères managing director and U.S. Ambassador to France. “But I don’t think we should have any illusions that these are totally benign investments.”

Wednesday, January 9, 2008

Abu Dhabi to pump US$200 billion in urban development projects

Source: BI-ME
Published: 06 January 2008

UAE. Abu Dhabi has embarked on an ambitious plan to develop the city’s infrastructure. According to Falah Mohammed Al Ahbabi, Director General for urban planning at the Executive Affairs Authority, the development guidelines over the next 25 years are part of the city’s strategic plan ‘Plan Abu Dhabi 2030’ which was approved last year by the government of Abu Dhabi.

‘Plan Abu Dhabi 2030’ was drafted in consultation with renowned world experts in their respective fields

“A total of USD200 billion will be pumped into various projects in the coming five years and the government’s share will amount to 40% while the remaining share will come from the private sector,” Al Ahdabi was quoted as saying by the official news agency WAM.

The real estate and construction sectors will witness unprecedented growth as Abu Dhabi seeks to become one of the the largest capital cities in the world.

According to Al Ahbadi, “the Plan is based on the principles of sustained development, and has taken into its consideration the future population and economic realities of Abu Dhabi. It also takes into consideration the need to protect the envoronment and the preservation of its biodiversity”.

“The new Khalifa City will be announced soon and it will house all government departments and ministries with the most modern amenities and utilities,” added Al Ahdabi

Other infrastructure projects planned include land and water transport systems such as a new ailway line and a metro system.