DinarStandard Editors

Top 100 Companies of the Muslim World, Dubai 2.0, Turkey looks East, Pakistan's UAV's

Feb/March 2009 Edition: This Edition covers our 5th Annual DS100 ranking of the Top 100 Companies of the Muslim world that continues to benchmark the corporate environment of the 57 OIC (Organization of Islamic Conference) member countries.

This year’s ranking, which covered financials amidst early stages of the current global recession (end-of-year 2007 data), showed an expected decrease in growth of the construction, energy, and diversified sector companies.  However, areas of opportunities were also highlighted as basic materials manufacturing, and agriculture/food companies grew faster than the year before.

From the DS100 companies, we present an analysis of the Telecom sector companies, as well as a look at Malaysian UMW's recent Re-branding and Indonesian Astra Internationals strategy to respond to the global economic downturn.  Turkey has the biggest represented companies on the DS100, and we look at Turkey's increasing economic shift towards East.

Expert Contributor, Dr. Athar Osama gives his perspective on Dubai 2.0 - Towards an Innovation Economy in Challenging Times.

Meanwhile expert contributor, Mr. Riaz Haq, looks at the advances made my the Defence private sector
of Pakistan.

As always we look forward to your feedback.

    

Islamic Finance’s Real Economy Leadership Agenda

 (A recent article I had submitted to the DowJones Islamic Market Indexes Quarterly Newsletter.  Download full newsletter here)

The global financial crisis has presented an unprecedented opportunity for Islamic Finance to establish itself as a truly global leader thereby realizing its full, unique potential.  A potential that is nothing short of re-shaping the global finance industry much as Starbucks has done for Coffee or Cirque du Soleil had done for the structurally unattractive circus industry.  A potential that best-selling business book authors W. Chan Kim and Renée Mauborgne would qualify as the ‘Blue Ocean’ of the finance industry.

However, in marketing terms, a large gap exists between the vision and potential of the Islamic Finance brand and the reality of its current brand attributes.  

If the vision of Islamic finance is a financial system that seeks profits while ensuring religious considerations of sharing risk and returns and supporting an ethical society with a potential to serve a global audience, then the reality of today’s industry value proposition is only partially hitting the mark.

I propose here a strategic agenda for the industry that could fill this gap - God willing - by complementing its current identity with one that makes it a major driver behind select human development related ‘real economy’ sectors.   These sectors would include Food, Renewable Energy, Healthcare, Education and Sustainable Technology.   Being key backers of these sectors will proactively support solving global human developmental issues while providing strong profitability potential.

Un-Conventional Approach to Un-conventional Financing

Industry professionals familiar with conventional finance may never consider the need for a whole industry to create an identity around certain sectors since its mandate of profit maximization doesn’t require it to.  So it’s hard for them to imagine Islamic Finance taking such a strategic stance.  However, 1) Islamic Finance is un-conventional so such an approach should only be considered a means to further its own unique identity, and 2) such a strategy would not limit itself from other permissible sectors, but to put a more coordinated effort around select sectors in support of its vision, identity, and greater success.

Islamic Finance Backed Real Economy Sectors

The strategy would be applied by investment and corporate financing arms of Islamic Finance driven by Islamic Private equity, other Investment funds including public equity funds, and corporate financing operations.   By building a major emphasis on a select group of industry ‘clusters’, Islamic Finance would also benefit in its competitive positioning in these sectors due to better operational expertise developed in time, better penetration to source leads and transact within these sectors and their sub-sectors.  

What’s encouraging is that the sectors being proposed are identified as major global growth areas.  Let’s review them briefly:

Agriculture:

There is a known global crisis around high food prices driven by rising demand and lagging supplies.  In a recent DinarStandard analysis, many of the poorer countries – Egypt, Bangladesh, Pakistan, Sudan, Nigeria - are some of the most agriculturally endowed in the world however with dismally low productivity due to under-investment.  

A Sharia compliant investing example in this area is the recently announced US$1.3bn Sharia-compliant fund by UK-based investment company cru Investment Management, which will focus on commercial agriculture in Africa. These investments by cru expect not only strong returns for investors, but also some much-needed investments into agriculture in Sub-Saharan Africa

Renewable Energy:

The International Energy Agency predicts energy needs through the year 2030 will increase by 50 percent to which developing countries, led by China and India, will account for two thirds of the growth.  Given the devastating environmental impact such a growth would drive, there are growing global initiatives towards Clean-tech energy sources (production of energy from net non-polluting sources.)

In a recent DinarStandard analysis by Athar Mian, Solar systems, both in photovoltaic and thermal formats, and wind power were determined to be the most viable clean-tech models for GCC and surrounding countries.  

Healthcare:

According to PwC, healthcare organizations face a growing imbalance of supply and demand. On the demand side is a large population of aging patients in deteriorating health who demand more services, pharmaceuticals, and medical breakthroughs. The supply side, however, is hampered by a shrinking pool of investment capital, a shortage of willing caregivers, and aging physical plants straining under the current volume of patients.

At the recent GE Healthcare Middle East Media Summit held in Dubai, Dr. Loan Cleaton Jones, a Senior Health Specialist of the International Finance Corporation (IFC), highlighted that in the GCC itself, healthcare demand is expected to rise 240 per cent in over the next 20 years, with health risk factors, ageing, population growth and medical inflation contributing to the rise in spending. Consultants McKinsey and Company recently estimated total healthcare spending in the Gulf Co-operation Council (GCC) countries will reach $60 billion by 2025.

Education Sector:

Similar to growing demand in food and energy, the education sector is another area that provides tremendous opportunities.  Within the Arab world, it’s been well established that its demographic is highly young requiring growing need for education services.

Some examples of investments in this area include the launch of a $10 billion education foundation by HH Sheikh Mohammed Bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai.  Also last year, Abraaj Capital acquired a “significant” stake in Dubai-based Global Education Management Systems (GEMS), which owns and manages a number of primary and secondary schools across the Middle East.

Sustainable Technology:

With Sustainable Technologies, I imply technology initiatives that support services to comply with the principles of economic, social, and ecological sustainability.  

An example is the booming cellular phone services and its impact on society.  As highlighted in a recent DinarStandard report is Vodafone’s M-Pesa mobile-banking program in Kenya. M-Pesa is an innovative system for sending both minutes and money via SMS that is benefiting the farmers in the rural areas of Kenya. One year later, M-Pesa has 1.6 million subscribers, and Vodafone is now set to open mobile-banking enterprises in a number of other countries, including Tanzania and India.

Industry, Institution or Government led

There are many ways such a strategy can be realized.  When you think of German ‘automobile precision engineering’ you realize the reputation is driven by a few of its keys institutions – Mercedes Benz, BMW, Porsche, and Audi.  Given this proven model, a few of the major Islamic Finance institutions could take the lead in establishing global leadership within the real economy sectors identified.   Obviously such institutions and overall reputation are not built overnight.

Conversely, an industry wide initiative is also a viable solution. For example, in the United States, the milk industry, through a collective Milk Industry Association initiative, drives the well known ‘Got Milk?’ campaign to increase awareness and adoption of milk that benefits all milk processors and dairy farmers.  Similarly an Islamic Finance industry wide initiative through the formation of major industry contributed funds or institutions with a coordinated communication campaign could drive this agenda as well.      

Finally, given the important role of governments in infrastructure dependent sectors that have been identified, their participation in such a strategic initiative would be critical for effective implementation.

In the end, the objective would be to create global success stories – regardless of them being industry driven or individual leading institution driven.  Just as Grameen Bank, ;ed by Dr. Mohammad Yunus, is now considered a pioneer and leader of the Micro-Finance industry globally, imagine if Islamic Finance institutions are credited in a similar fashion within renewable energy, food, healthcare, and education sectors.

Challenges

Islamic Finance is all-in-all doing quite well.  However, as I propose, by resting on its current laurels, the industry risks losing a tremendous opportunity to truly establish a leadership role in the global financial landscape or to even realize its full potential within its primary Muslim markets.  

Taking a leadership role in key real economy sectors certainly poses tremendous challenges – however none I feel is greater then a lack of conviction or direction.  Many who have taken leadership roles within Islamic Finance Institutions come from conventional banking systems.  Leaders need to embrace the unconventional, spirituality driven purpose of Islamic Institutions and let that be a key driving force that produces financial results while maximizing returns to a higher calling.

Besides, by taking this proactive approach to ‘ethical’ investing, the conversation about Islamic Finance moves from a system that just avoids un-ethical to one that consciously backs ethical initiatives.  Such is the approach that defines leaders.

    

Global Food & Energy Opportunities, Fulla Doll, Blue Ocean Strategy, Dr. Shamshad Akhtar, Egypt's SEKEM Group, and more.

Oct/Nov Edition: While developed countries are directing their attention to the turmoil in the financial sector--far less attention is being paid to the global food price crisis.  We lead our Nov. Edition with an analysis of how this crisis presents the agriculturally endowed Muslim countries with unique opportunities.  The analysis makes a case for investments within the largest agriculture economies of the Muslim world especially given their low productivity. Ironically, some of these largest agriculture based economies--Bangladesh, Sudan, Nigeria, Pakistan and Indonesia--are also suffering the most in terms of poverty.  Complimenting the story is our look at Egypt based SEKEM Group which has built a profitable organic products business based on a social developmental model.

Keeping with the theme of responsible business – our guest author Mr. Athar Mian reviews opportunities in Clean Energy for emerging Muslim world markets.  He evaluates various sources of clean energy – solar, wind, bio-mass, hydro-electric and others, and presents what makes sense for Muslim world economies.  

Much of such investments require big thinking and ability for investors and business leaders to step out of their comfort zones.  For this we review a best selling business book—Blue Ocean Strategy--that presents an approach to creating new markets rather than competing in existing ones.

In Islamic Finance, guest author Nurul Islam, looks at the European Islamic Finance market.  Also related to banking, we profile Dr. Shamshad Akhtar, Governor State Bank of Pakistan, in our Women in Management Series.  She was recently awarded Central Banker of the Year/ Asia 2008 by the industry recognized The Banker magazine.

Also, showcasing best practices and innovation in the Muslim Lifestyle Market, we present the success of ‘Fulla Doll’ an alternative for Muslim girls.  Finally, we present practical strategies relating to the growing practice of Search Engine optimization (getting listed higher on web Search Engine results) which is fast becoming a major marketing priority.

As always, we look forward to your feedback.

    

Muslim World Consumer Brands, Mobile Tech & Islamic Finance, Hikma Pharma's R&D...

July Edition: In our July edition we are presenting the leading Consumer facing brands of the Top 100 Companies of the Muslim World.  Given the ever more importance of branding in helping companies differentiate and command premium (Interbrand values - Coca Cola's brand value to be $65 bill), we are presenting this updated benchmark.  Consumer brands from Turkey dominate this list, eg Arcelik, Vestel, Beko (Electronics) and Ulker (Confectionery). 

The reason for our focus on this?  To date none of the indigenous brands from Muslim majority countries have every made it to the Top 100 Global brand list (published by Interbrand) We hope this benchmark plays a small part in changing this fact.  There's already much positive momentum as the last two years seven of the DS100 companies have completely re-branded themselves.  We will soon also be covering some of the emerging brands in addition to the one's from the Top 100 Companies.

In our Innovation channel, Guest contributor Athar Mian, provides tremendous expert insights on Mobile technology innovation opportunities and the role of Islamic Finance.  Its specific focus on opportunities within Muslim world provides much direction for entrepreneurs in this pace to consider.  We are also proud to highlight this issue the exceptional achievement of Jordan originated Hikma Pharmaceutical, that through quality global R&D is becoming a global player.

In our continuing focus on the Muslim Lifestyle space we look at one of the most prominent global Muslim children's book publisher - India based, Goodword Books.

Finally, in Finance, given the growing focus on the agriculture sector globally, we look at how Agri-businessess in Malaysia are exploring creative financing.   From Malaysia we also present a profile of Ms. Tengku Rozidar, CEO of '1901 Hotdog' outlets on success in franchising. 

We hope you will find this issue valuable.  Look forward to your feedback.

    

Intra-OIC Trade Up, Abdul Latif Jameel & CSR, The 99 Comic, Harvard Islamic Finance, Borusan Six Sigma...

May/ June Edition: In this edition we present an update of the 2005 Research Brief titled "Is Intra-OIC Trade on the Rise?" (OIC = Organization of Islamic Conference.)  With many of the Muslim world economies growing in global prominence, one question often asked is how much of the trade is being done between these economies. 

Our latest research brief looks at the current Intra-OIC trade trends by evaluating the four leading Muslim majority country economies of Malaysia, Turkey, Saudi Arabia and Indonesia and their trade with the rest of the 57 OIC member countries compared to the rest of the world.  Even as the Islamic Development Bank Annual Report (2006-07) revealed that OIC member countries’ overall share of trade with other OIC member countries was a mere 14%, our Brief certainly shows a strong rise in Intra-OIC trade between the years 2003-07.

One story we are proud to have finally covered is the exemplary corporate social services program of the Saudi Arabia based conglomerate Abdul Latif Jameel Group.  We have also included a photo journal showcasing ALJ's impressive array of community programs.   

For our Muslim Lifestyle Market section we have an inspiring entrepreneurship story of Kuwait based Dr. Naif Al-Mutawa's The 99 comic series gaining regional prominence including licensing deals such as a newly announced 99 Village theme park being initiated in the GCC.

Finally, guest contributor Dr Athar Osama provides an outsiders perspective on the recent Harvard Islamic Finance Forum while Ms. Nawal Ouzren, herself a former six-sigma black belt for General Electric (GE), looks at a large successful six-sigma implementation in Turkey (at a major conglomerate Borusan Holding.)

I look forward to your comments on this update.  Also, we would like your recommendations on innovative and inspiring products, companies and business leaders from the Muslim world for us to consider profiling.

    

Naseeb.com, Gulf Venture Capital, AlWaleed, Masdar City, ARAMCO, and more

April Edition: Innovation and entrepreneurship have been the corner stone of all developed economies.  In the past few years, we have been withnessing an encouraging level of focus within the Muslim world emerging economies on such efforts. 

DinarStandard's April 2008 issue looks at some recent nuggets of this blooming innovative, entrepreneurial business environment. 

Our lead feature is on Naseeb.com, a Pakistan based Muslim social networking venture tapping into the growing online Muslim population and has secured funding from prominent Silicon Valley VC's (also included is a list of top Muslim social//matrimonial websites).  Given the termendous potential of the global Muslim market - we are introducing a dedicated section - the Muslim Lifestyle Market (SM)  - to provide you with regular trends analysis/ stories on various products and services targeting the muslim lifestyle.

Given the potential role of cash rich Oil producing Gulf countries in supporting new venture and entrepreneurship, we summarize key insights from this years Gulf Venture Capital Association meeting in Riyadh.  What stands out is given a boom in Private Equity investments, the risk appetite for investors funding startups is still limited.  According to the GVCA, of the $4.8 billion private equity raised in 2006, only 9% went to venture capital.

However, many impressive world leading innovation initiatives are being undertaken in the region.  Guest controbutor, Mr. Bilal Zuberi, PhD writes about Abu Dhabi's ambitious Masdar City project which aims to be the World's First Zero-Carbon, Zero-Waste, Car-Free City. 

In profiling personalities, we review international journalist Riz Khan's biography of one of the most successful international investors today - Prince Alwaleed bin Talal. We have also introduced a new series on Women in Management.  Keeping with the entrepreneuship theme, we profile Iman Kouvalis, President and Owner of Optimize It. and Na'ima B. Roberts, Managing Director and Editor of SISTERS Magazine.

In the issue, we also look at how Saudi Aramco and ADNOC fared in a recent global benchmarking Sustainable Oil Companies report.  Finally, key strategic aspects of one of the most prominent Indonesian conglomerate Astra International are also reviewed.

This is Alhamdulillah our largest edition thus far.  We hope this Issue has given you some new insights and ideas on innovating and being entrepreneurial in your own business environments. 

    

Malaysia's Private Sector Faces Uncertainty Amidst Political Changes

Malaysia's governing party's poor performance in the recent General Elections held on March 8, 2008, introduces unchartered waters to the private sector with the national coalition losing 5 key states (instead of the usual one) to the keen opposition, Barisan Rakyat.

Barisan Nasional, the governing party, has been criticised to have continuously bred business interest in many different industries in the economy, including the automotive industry, oil & gas, construction and property sectors.

Petroliam Nasional Berhad (Petronas) is seen to have caused distress amongst Malaysians due to the continuous price-hikes over the past 4 years, twinned with a continuous boosts in profit figures. As a company fully owned by the government, the opposition coalition has stated in their election manifesto that they would request for transparent financial statements relating to Petronas' financial activities to be sucritinised in Parliament. There has been an irksome worry pertaining the transparency of Petronas' expenditure / allocation of funds. Petronas ranks at number 121 under Fortune Global 500.

Other companies have experienced project delays due to the changes in state governments. The construction sector, in particular, relies on government based projects and due to changes in government personnel and glitches in the handing-over of contracts and related documents, some projects have had to be put on hold.

Norma Kassim, a Business Development Manager for a specialist civil construction company, says her company is still "looking forward to their Letter of Approval [of a project] amidst the changes in state governmental fronts." Her company's project is affected by the change in Kedah's state government; with the main contractor belonging to the state's administrative body.

"Economic activity has slowed down for the time being," she adds, relaying the sensitivity of the current political changes. "I hope it will pick up by the end of the month."

Her concerns are justified. The Australian Business reported a market plunge in Bursa Malaysia due to panic selling and stock-dumping, which led to a temporarily closure of the Bourse on March 10. Prices continued to fall when trading resumed. The index closed at a 9.5% drop. To-date, the market remains bearish over concerns of the political adjustments.

Malaysia's 12th General Elections caused a stir in its political realm as nearly half of the votes favoured the coallition opposition party, denying the government their benchmark two-thirds majority for the first time in Malaysian history. In addition to losing 5 key states to the opposition front, Barisan Nasional suffered a 28% drop in Parliamentary seats and displacement of long-term members of the governing cabinet.

--- Views by Staff Writer Maria Zain

Mar 08 Edition: Emerging markets of Pakistan, Bangladesh, GCC; Islamic Banking Comparison; Mydin Marketing; M&A

In a global economy challenged by the prospect of a US recession, many emerging markets are gaining prominence in the eyes of investors and marketers.  DinarStandard's March 2008 issue is dedicated to a select group of such markets.  Our lead feature profiles Pakistan's resilient economy and its strong fundamentals - which amid a regular spate of terrorist attacks has also been attracting major  investments. With recent elections passing peacefully, hopes are renewed on Pakistan's continuing economic boom.

Another emerging destination profiled is Bangladesh.  From Nobel prize winning Dr. Muhammad Yunus's Grameen Bank to Solar energy supplier  - Rahimafrooz, a new brand Bangladesh is emerging and surprising investors all over the world.

Similarly, two stories cover the growing prominence of the GCC (Gulf Cooperation Council).  We review a newly published book by global strategist Mr. Aamir Rehman called "Dubai & Co.: Global Strategies for Doing Business in the Gulf States."  Meanwhile, guest contributor Mr. Ayman Mansi writes about Saudi Arabia's ambitious 10x10 program for economic development which aims to make the Kingdom one of the 10 most competitive nations in the world by 2010.

Tying the importance of Mergers and Acquisition within emerging market investments, we look at the rationale and benefits of M&A.

WIth Islamic finance increasing as a choice of investment financing and a growing interest of Islamic Finance beyond the GCC - Attorney Paul Wouters does a comparison of Islamic Banking in Turkey, Indonesia, Pakistan and Malaysia.

Finally, for a marketing case study, we look at the 4 P's of marketing being applied by Malaysia's indigineous hypermarket Mydin.

We hope this issue becomes another important contribution in assessing effective strategies for marketers focussing on the Muslim world markets.

Muslim World Business Sector continues to grow...

Today we release our Jan 2008 issue of DinarStandard and unveil the 2007 DS100.  This is an exciting issue for the DinarStandard team.  For the fourth consecutive year DinarStandard's DS100 ranking of the top 100 businesses in the Muslim World provides a reliable benchmark to understand the progress and overall state of businesses in Muslim World economies.  This year's ranking is noteworthy not only for the continuing effect of oil price driven revenue windfall for the Oil & Gas companies on the list, but also how these have impacted an even greater rise for infrastructure and service sector companies.  The 2007 DS100 had a combined US $1.08 trillion in total revenues (based on EOY 2006 data) and grew 14.5% over the year before.  As part of our efforts to highlight success stories in the corporate sector of the Muslim World this issue also includes profiles of Ulker Group of Turkey, Zain of Kuwait, and the leadership of Muhammad Alabbar of Emaar.  Readers will find with the DS100 Key Facts, brief profiles of some of the most exciting companies on the ranking and an industry breakdown.

This month DinarStandard also features an engaging question-answer with Shaikh Yusuf Talal DeLorenzo, a recognized Shariah Advisor, who recently seperated himself from the pack by questioning recent financial engineering efforts which effectively circumvent the standards of the Shariah rather than serving them. In an industry that labels itself Islamic - DeLorenzo takes up issues that will help to keep the industry on track.  To round out the finance side of things Guest Contributor, Rupert Neil Bumfrey, Principal at RNB Associates, writes about the rise of Sovereign Wealth Funds and their place in the globalized economic system. 

As always we look for our readers to write with their comments.  We are hopeful for a great 2008. 

World Economic Forum releases report of Islam-West Dialogue

The gathering of world leaders at the World Economic Forum’s annual meeting in Davos routinely generates discussion on business and economic issues.  But in recent times, the forum has taken up social issues as well.  A few years ago, the WEF formed the Council of 100 (C-100) to discuss the relationship between the Western and Muslim Worlds.  This year, the C-100 released its first annual report titled, Islam and the West: Annual Report on the State of Dialogue. 

The report aims at benchmarking the state of the dialogue by focusing on five main areas which are: international politics; citizenship and integration; religion, ethics, and ideology; education and intercultural understanding; economic and social development.  It was authored mainly by John DeGioia, President of Georgetown University in Washington, DC.  It also includes contributions from leading authorities and personalities such as John Esposito, Karen Armstrong, Ingrid Mattson, Mustafa Ceric, Anwar Ibrahim, Rabbi David Rosen, Akbar Ahmed, Mary Robinson, and Lord Carey of Clifton.  Each of the contributors is intimately involved in the policy debates on local and global platforms. 

In the report’s foreword Klaus Schwab, Executive Chairman of the World Economic forum, writes that “the remarkable feeling of proximity between people and nations is the unmistakable reality of our globalized world.”  In his view this proximity allows people to see other cultures more clearly and also see ours more clearly.  This may practically be the case but the real question whether people are willing to see others clearly.  Clearly, the C-100 is trying to facilitate this. 

We strongly urge our readers to download and read this important first work.  The report highlights the many global challenges which humanity faces and tries to highlight the need for unified responses through well organized social collaboration.  Unified responses are certainly in order for global challenges but local challenges need local responses as well.  In effect while gatherings like the WEF and intitiatives such as the C-100 will continue to facilitate dialogue and debate about global issues it is also increasingly necessary for such efforts to recognize and nurture local responses by understanding local contexts and their specific challenges.