Posts Tagged GCC
Like the thousands of expats who find their way to this glitzy sheikhdom, Sim Whatley and J.C. Butler came to Dubai several years ago seeking jobs. But what they found instead was the opportunity to create an online classified website for the region, Dubizzle.com. Starting as a website for Dubai bargain hunters, Dubizzle now covers almost the entire Middle East. The pair tell Arabic Knowledge@Wharton that a constant process of refining ideas and business strategy helps the site evolve, while keeping Dubizzle’s classified ads free for the non-professional seller maintains its popularity.
“Classified websites in general are mostly about concepts,” Whatley says. “Even if you have the best website in the world, if you don’t have any ads to sell in our website or you do not have any financial benefit from our website, you will feel no point going to it. I think [success in this market] is a great mixture of carrying the most selection in these markets as well spending lot of time, lot of money in development.”
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The American consumer might get some relief at the gas pump this summer. A sluggish U.S. economy, prolonged fears about the eurozone, and U.S. crude supplies reaching a 22-year high have all contributed to a downward trend for crude oil prices. Much of the pricing of oil in recent months has to do with geopolitical factors, says Aldo Flores-Quiroga, the recently elected secretary general of the Riyadh-based International Energy Forum. He speaks with Arabic Knowledge@Wharton about fears over oil prices and supply amid further sanctions on oil producer Iran, and the impact of continued outages at energy producers.
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Booz & Company’s Joe Saddi: The Arab Spring Toppled Governments, but High Unemployment Remains the Region’s Biggest Concern
Now a year beyond the first flush of the Arab Spring movements throughout Northern Africa and other parts of the Middle East, the difficulties of economic uplift in the area are becoming apparent. In a way, the sudden successes of the uprisings, particularly in Tunisia, Egypt and Libya, mask the real long-term difficulties of laying the foundations for sustained economic viability for the region.
Joe Saddi, the chairman of Booz & Company, has long done business in the region and spoke about both the Arab Spring’s upsides and downsides at the first Wharton Middle East North Africa (MENA) business conference recently.
“I hear often the phrase, ‘The Arabs never miss an opportunity to miss an opportunity’,” said Saddi. “But now that the opportunity to have an economic success is there, we can no longer afford to do that.”
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Tunnock’s is considered a treat favored by British grandmothers, but half of the company’s total annual exports are shipped to the Middle East. The company’s annual sales amount to approximately £34 million (US$52.2 million), of which 10% represents market share in the Middle East.
“Just like Italian culture has been romanticized in the U.S., people in the Middle East may see British food as a sign of being cultured or worldly,” says Jonah Berger, Wharton professor of marketing at the University of Pennsylvania.
The Middle East has proven to be a lucrative market for the snack industry. Euromonitor International, a strategy research firm in consumer markets, reported the industry grew 10% last year in Saudi Arabia, and forecasted sweet biscuit sales this year worth US$437.5 million. In the United Arab Emirates (UAE), the biscuit industry, including sweet and savory snacks, Euromonitor predicts 7.6% growth this year, valued at US$133.1 million.
Interestingly enough, Euromonitor notes economic declines in the Middle East actually help snack sales in the Middle East, showing increases in snack sales since the global financial crisis bgean. Sounds like somebody’s been indulging in a bit of comfort eating.
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Bala Balachandran, the J. L. Kellogg Distinguished Professor of accounting and information management at the Kellogg School of Management at Northwestern University, wonders how the commercial development of shale gas will forever alter Gulf economies.
“Oil reserves here are good for only 40 more years,” Balachandran tells Arabic Knowledge@Wharton. “Shale gas reserves are something like 500 years. So if that becomes economically viable, the barrel of crude oil is going to go down to $US15 dollars in three years. Then what happens to the economy here? Is there an alternative strategic plan? This is something they have to think about.”
Balachandran acknowledges that Arab Gulf countries are still flush with cash, and are investing into alternative energy technology. But technology isn’t enough by itself, he notes, nor does being wealthy help innovation.
“When you’re affluent, you are not motivated to change,” he says. “When your survival is threatened, you’ll come forward.”
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With Islamist parties dominating recent elections in Arab Spring countries, the Islamic finance industry will likely find opportunities to capture large volumes of new customers and emerging infrastructure projects, according to a report by global law firm Simmons & Simmons.
Intent on maintaining a secular financial system, regimes in Egypt, Tunisia and Libya were not supporters of Islamic finance, notes Tariq Hameed, a Dubai-based managing associate with the firm, and author of the report, ‘Blue Print for Islamic Finance following the Arab Spring.’
But in elections that have seen Islamist parties come to power, such as the Muslim Brotherhood in Egypt, Shariah-compliant banking has been endorsed as part of a larger social and financial reform campaign. “All of the parties have gone on record saying they support Islamic finance,” Hameed says. “It reflects their beliefs.”
Hameed says at the consumer product level, there is huge potential for growth. Partly because many people in these countries do not have bank accounts — approximately 25% of Moroccans and 33% of Tunisians with bank accounts, and only 10% of Egyptians, according to his findings. “There was a lack of offerings,” he says. “Many didn’t engage with the conventional banking system.”
While expected customer growth would be in volume, Hameed notes that the majority of such accounts would likely be low-income savers. Compared to Arab Gulf countries, GDP per capita among the Arab Spring countries is low: Libya is the wealthiest, but GDP per capita is estimated at just $14,000.
In addition to creating savings products, one opportunity could come from the further development in Islamic microfinance offerings, Hameed notes. Currently there is very little being offered to grassroots Muslims, he says, but institutions will have to serve demand from rural communities and micro-enterprises. The state can act as sponsor of such an initiative, he suggests.
Separately, Islamic finance will become an option for these governments as they seek foreign investment. According to Reuters, a number of Islamic financial institutions are opening branches in Libya, for instance, as it explores the industry. Successful Islamic financing of infrastructure projects already exist in Bahrain, Saudi Arabia and Bangladesh, Hameed says, so there are models states can study for implementation.
There remain challenges for the Islamic finance industry before they can reap the potential of these markets, Hameed adds. There are several issues that need to be addressed to ensure growth, his report notes, including the strengthening of consumer protection laws, clarifying governance, and establishing central Shariah boards for finance.
For Western financial firms and businesses seeking to be in the region, they will have to have a capability to engage in Islamic finance, Hameed notes. “If the customer wants Islamic finance, competitors will provide it if they don’t,” he says.
Posted by knowledgewhartonarabic in Business Ethics, Executive Education, Finance and Investment, Health Economics, Human Resources, Innovation and Entrepreneurship, Insurance and Pensions, Leadership and Change, Managing Technology, Marketing, Operation Management, Public Policy and Management, Real Estate, Strategic Management on January 26, 2012
Announcing a partnership that will reach thousands of readers in the Middle East and North Africa, Wamda and Arabic Knowledge@Wharton, the online journal of The Wharton School, will freely offer tailored content to entrepreneurs directly from the world’s leading business school.
Readers will be able to access a knowledge base that includes interviews with Wharton faculty and exclusive conversations with industry leaders. Anyone seeking guidance on the MENA region will benefit from featured analyses of regional trends, success stories, and articles on best practices.
Additionally, Wamda, the platform that empowers entrepreneurs through investment, content and programs, and Arabic Knowledge@Wharton will jointly author reports for their specialized audience, which counts senior executives and leaders from government, academia and the media. Collectively, Wamda and Arabic Knowledge@Wharton reach over 150,000 people monthly in the region, offering content both in English and Arabic.
“The Middle East is fast developing into a hub for the emerging global economy,” said Bulent Gultekin, associate professor of finance at the Wharton School, and Academic Director of the Wharton Center@CERT, Abu Dhabi. “Wharton is very interested in understanding the region’s growth and its future economic roles.”
To further support entrepreneurs, Wamda and Arabic Knowledge@Wharton will jointly host online interactive sessions with Wharton faculty and experts and Arabic Knowledge@Wharton will provide Wamda members with more access to seasoned advice at select events.
“This partnership is a natural extension of Wamda and Wharton’s shared belief in leveraging the web to inspire and empower entrepreneurs throughout the MENA region,” said Habib Haddad, CEO of Wamda.
The partnership with Wamda extends Wharton’s presence in the Middle East. The business school entered into an agreement with the Higher Colleges of Technology and the Center of Excellence for Applied Research & Training (CERT) in the United Arab Emirates, opening the Wharton Center@CERT, Abu Dhabi in 2010.
The center acts as a hub for the MENA Region where the Wharton School conducts research, hosts seminars and events for UAE-based and regional business and management executives, and publishes Arabic Knowledge@Wharton.
“The readership of Arabic Knowledge@Wharton is spread across the globe,” said Pankaj Paul, managing editor of Arabic Knowledge@Wharton and general manager of the Wharton Center@CERT, Abu Dhabi. “It demonstrates the great interest people have in understanding the role the Middle East plays in the global economy. Our partnership with Wamda will allow us to reach an even broader audience and to better cover the topics and issues that matter to them.”
The Hormuz Strait is only 21 miles wide at its narrowest point. With shipping lanes only 2 miles wide to ferry a fifth of the world’s oil trade, it is a choke point in all senses of the word. If closed or blocked, attempts to reopen the strait would concern all of the world’s powers.
The obvious implications of any closure of the Hormuz Strait are stark. According to the U.S. Energy Information Administration, almost 17 million barrels of oil were transported daily through the Strait last year, representing nearly 20% of global oil trade. (Most Gulf oil exports now head to Asia.) A number of analysts predict prices for oil would jump 100%.
Closely neighboring Iran, most of the Arab Gulf countries would find themselves at risk and their economies under pressure. Instead of benefiting from a windfall from sudden increases in the price of oil, they would be dealing with increased security and logistical costs, a fleeing expatriate workforce, flight of investment capital and a squeeze on resource demands.
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When hackers in the Middle East attack, sometimes it’s not only to prove their ability to break into secure systems and steal information. Sometimes, its also about making a political statement — the most recent example dredges up historical rhetoric traded between Arabs and Israelis.
In early January, a self-proclaimed Saudi Arabian hacker announced he had accessed 400,000 Israeli credit card accounts, and targeted those he identified as supporters of ”Israeli Zionist Rabbis.” It set off a number of attacks and counterattacks that at first targeted credit card holders, but quickly focused on businesses and government entities in Israel and the Gulf.
The incidents highlight the ability of cyber criminals to carry out attacks across borders, even when corporations are aware of their threats. They also demonstrate how digital disruptions could become a tool in state conflict.
“The question that then arises is how can organizations and individuals protect themselves,” says Gurpreet Dhillon, professor of information security at Virginia Commonwealth University. “It is no longer the question of buying an ever so complex lock. It is more about ensuring that the key to the lock is not compromised.”
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