DinarStandard Editors

US Presidential Summit on Entrepreneurship focuses on the Muslim World

DinarStandard has been highlighting and covering entrepreneurship and innovation trends across the Muslim markets for the past many years.  We have hardly come across any event that has effectively discussed entrepreneurship for this market in the manner that President Obama’s Summit on Entrepreneurship did earlier this year, April 26-27th in Washington DC. 

This event put into action the promise President Obama made during his speech to the Muslim world in Cairo on June 4th, 2009.  I was invited to cover the event and here are some of my observations regarding the diverse mix of delegates, key messages, interesting quotes, and some tough questions asked.

First, the sheer diversity of entrepreneurs that were present was impressive.   There were Muslim entrepreneurs representing emerging, exciting ventures from Ghana, Nigeria, Bangladesh, Morocco and elsewhere.  One delegate I met, Mr. Shaffi Mather from Cochin India, runs one of the largest private Ambulance service there.  Another delegate Mr. Mohammed El-Fatatry (whom we have profiled before) from Finland, owns one of the largest online Muslim lifestyle networks – Muxlim.com

Indeed the big boys were there too.  Mr. Mian Mohammad Manshah, recognized as one of richest businessman in Pakistan by Forbes magazine, was in attendance mingling amongst the delegates.  Dr. Mo Ibrahim, Chairman of Celtel and famous for his philanthropic activities in Africa was an active participant during panel Q&A’s.  Mr. Naguib Sawiris, CEO of Orascom (the giant Telecom player) from Egypt and Mr. Ferit Sahenk, of Dogus Holding, Turkey were also on the invite list. 

Some of the star panelists of the event for me were:

• Mr. Fadi Ghandour, CEO of Aramex, an absolute rock-star with his passion and vision of entrepreneurship for the region.
• Nobel Laureate, Dr. Muhammad Yunus, sharing the success story of his now global brand – Grameen, and its taboo-breaking, women focused social impact.
• Dr. Naif Al Mutawa, CEO of The99 - a comic book series with Muslim values and a global message.  President Obama even enthusiastically acknowledged The 99 comic series in his speech at the event.
• Ms. Tri Mumpuni (in picture), from Indonesia.  Her community based off-grid power system supply's power to the national grid while generating revenue for the host communities.   She was passionate about entrepreneurs making a difference and spoke of the struggles in balancing her family life while leading as a trailblazing entrepreneur.
• Mr. Sandiaga Uno, Chariman, Saratoga Capital, Indonesia.   Profiled the struggles of being laid-off and starting a first-ever Private Equity firm taking it from 4 employees to today 15,000.  One of richest Indonesians today, Mr. Uno is a big proponent and driver of fostering entrepreneurship in Indonesia.
  

Key actionable messages from the panel discussions were:

• The critical need of Venture Capital (early stage and even angel investing) in the region to support entrepreneurship.   From investor’s side, however, more transparency and exit opportunities were identified as needs.  Also, other capital raising models discussed included Sharia financing and Micro-finance.
• Need for increasing awareness and education about entrepreneurship – especially for celebrating success stories (e.g. sale of Maktoob.com to Yahoo.com).   Interestingly, the word entrepreneurship doesn’t exist in common vocabulary of many major markets.  What is Entrepreneurship in Arabic? Mr. Ghandour suggested “Reyada.”  How about in Urdu?
• In today’s, connected, technology driven world, Entrepreneurship can thrive despite governments being slow.   Mr. Ghandour gave an example of how Maktoob bought a small internet company in Yemen where the owner did not have a passport or even bank account.  However, government’s critical role in helping to scale entrepreneurs was emphasized.

Some of my favorite quotes from the event:

• Mr. Mohammad Yunus: “Every Muslim should follow the Prophet PBUH and marry an entrepreneur.  If you can’t find one come to us we have hundreds and thousands for you to choose from.”
• Mr. Fadi Ghandour on definition of entrepreneurs:  “Builders that have long-term impact.”
• Ms. Tri Mumpuni  - “Life is meaningful if you are useful to others."
• Arif Naqvi, CEO of Abraaj Capital (largest MENA Private Equity firm) - "What is social entrepreneurship?  I don’t understand.  Every business should be socially geared." (Note:  Abraaj has launched an SME Fund recently, Riyada Enterprise Development )

Some tough Questions/ Observations:

• One Muslim delegate asked a panel the question:  "Is there such a thing as Muslim Entrepreneurship or relevance of Islam to entrepreneurship?"  The response from the panel was mixed.  Mr. Sandiaga Uno and Ms. Tri Mumpuni from Indonesia acknowledged the positive role Prophet Mohammad’s (pbuh) life lessons and religious values played in inspiring them.  Meanwhile Ms. Douja Mahmoud Gharbi from Tunisia viewed entrepreneurship as a standard set of skills world over.
• Another emotional Q&A discussion happened when a Muslim delegate from Philippines asked, “My dear Arab brothers where are you?  Why don't you look at investing in the less developed Muslim communities?”  To which Dr. Tarik Yousef, Dean of Dubai Gov. School, humbly acknowledged, “yes, we should and we have not been engaged as much as we can.”
• It was interesting to see that the only people comfortable referring to the collective “Muslim Majority Countries” were the US administration panelists.  Most Muslim majority country delegates I spoke to didn’t seem comfortable with the concept of the “Muslim world” as a whole.  Their focus was very much national in nature.
• Interestingly also, no Islamic Finance institution was represented - either as delegate or panelist.  Was that a political statement or simply that there isn’t much of an entrepreneurial drive amongst Islamic Financial institutions?
• Prominent countries with entrepreneurs showcased as panelists were:  Jordan, Indonesia, Egypt, UAE, and Bangladesh.  Whereas, countries I thought were relatively less visible on panels: Malaysia, Turkey, Pakistan, and Saudi Arabia.  Would that be any indication of a political US slant or again a function of lack of entrepreneurial success stories from amongst these markets?

Was the event a success?

The Summit did not address or bring Government agencies from Muslim markets to address various structural issues raised.  So the impact from that point will be minimal.  Obviously, no aspect of the role of Islam as a means of strength was touched upon.   Also, the critical question of Venture Capital for entrepreneurs was listened to by select PE players at the event but, the absence of Islamic Financial Institutions and their possible prominent role was not tapped into.

Regardless of these and possibly other short-comings, this Summit was a big success and a great contribution to fostering entrepreneurship spirit across the Muslim markets.  It has certainly helped amplify the many voices emerging in support of entrepreneurship from across the Muslim markets.  The next one is going to be hosted in Turkey and President Obama has announced a number of additional initiatives to sustain this beginning of a new partnership. 

    

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.

    

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

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. 

BHP’s Goodyear singles out Muslim World

Charles "Chip" Goodyear, outgoing CEO of BHP Billiton Limited,  the giant diversified resources group recently, singled out the Muslim World as the next big growth area.  In a recent interview with the Herald Sun of Australia Goodyear responded to a question about the “next emerging market” by saying that the Muslim World shares characteristics with other recent growth markets – India and China.  Namely, Goodyear said that the size of these markets and the fact that the youth are underemployed are traits shared with India and China.  Among OIC countries, BHP Billiton currently has operations in Suriname, Indonesia, Iraq, Algeria, and Pakistan.  Goodyear’s comments are important as he is responsible for BHP Billiton’s rise from the doldrums of the late 1990s to its dominant position in the market today. 

Petro Dollars Being Invested in Education - Finally!

HSBC, in a recent report, estimated that $1.5 trillion in oil revenues were earned by Persian Gulf governments between 2002 and 2006 ( Kuwait , Qatar , Oman , Saudi Arabia , Bahrain and the U.A.E.)  Moreover, Samba Financial Group ( Saudi Arabia's second largest bank), estimates that these Gulf States “may earn $1 trillion a year till 2027.”  To give it some perspective, the combined population of the GCC countries is estimated at only 37 million of which 34.5% are non-GCC nationals or expatriates. This is no doubt a huge cash windfall for the GCC governments, but is this being invested wisely?

Unlike the passive petrodollar investments from previous oil booms (protect capital with some appreciation), this round is starting to show signs of investments that will have longer lasting impact.  I am not talking about the real-estate/ tourism boom (ala Dubai ), or the surge in recent global acquisition activity (eg. SABIC's $11 billion purchase of GE's Plastics division), which by the way in their own right are positive steps, I am instead referring to the ultimate source of owning your own destinies - education. 

So in addition to building the biggest tourist attractions in the world, shouldn't investments be made to build the best schools, the most prestigious universities, state of the art scientific and social research centers, think-tanks, etc.?  After all, these investments will lay the ground for the goose that will lay a trillion golden eggs of knowledge and global competitiveness capabilities and perhaps deliver it in an exemplary way unique to the region's identity.

The biggest story, which is the first promising sign in this direction, is that the Prime Minister of the UAE, Sheikh Mohammed bin Rashid al-Maktoum recently launched a $10-billion fund to promote education in the Arab world.  The fund will provide grants to students, researchers, academics and experts to write, research and help translate books into Arabic. Sheikh Mohammed said he is investing money in education and “the development of knowledge” in the region to eliminate illiteracy and to create an educated generation.

Another significant initiative is the launch in Fall 2009 of a graduate university in Saudi Arabia, The King Abdullah University of Science and Technology (KAUST), which will have a $10 billion endowment–the sixth largest in the world.   The initiative is also launching a $100-million-a-year global research partnership program to fund work by scientists who agree to become affiliated with the new university.

Other initiatives include a $500 million allocation for research in universities in Saudi Arabia which is 20 times the allocations received in past years.  Even private investments are making their way into educational initiatives.  Abraaj Capital (one of the region’s prominent Private Equity players) has acquired an undisclosed but '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 .

These are indeed steps in the right direction and the region’s leadership should be congratulated on this renewed focus on education.  However, much is still needed to be done at the grass root level as well as implementing with quality the planned education investments.  McKinsey recently wrote an analysis on 'Improving Education in the Gulf' that should serve as a guide for some next steps and areas of focus.

3rd World Islamic Economic Forum - Innovation & Global Partnership

Building upon its successful event last year in Islamabad , The WIEF hosted its 3rd Forum in Kuala Lumpur 27-29th of May 2007 aimed at boosting cooperation among business professionals engaged in Muslim world economies.  The Forum provided a mix of inspirational and practical advise to business leaders for lifting their capabilities and making a positive impact to the socia-economic state of Muslims globally.

Setting the inspirational tone for the Forum were Indonesian President Susilo Bambang Yudhoyono, Kuwaiti Prime Minister Sheikh Nasser Al-Mohamad Al-Ahmad Al-Sabah, Malaysian Prime Minister Dato Seri Abdullah Ahmad Badawi of Malaysia, and Mr. Musa Hitam, Chairman of the World Islamic Economic Forum Foundation.   

Prime Minister Badawai asked Muslims to take ownership of their destinies by focussing on eduation and innovation and engaging with the global community.  "We must break the shackles of rigidity and dogma that currently envelopes Islam and the Muslims. We must go beyond rituals and ceremonies in Islam.  As Muslims, we believe that God looks after us, that we can be the best of people. But we must earn the right to be best. We must re-discover our ability and passion for knowledge and innovation. The Muslim faith has a rich tradition of innovation and enterprise and we must reclaim that legacy," he said.

Most working sessions involved practical steps on Leadership Strategies, Innovation, and Industry Opportunities (telecom, energy & water, infrastructure, travel & toursim, retail & consumer, Islamic finance) by a panel of experts. 

A delegate brief prepared by PricewaterhouseCoopers(PwC) presented detailed analysis on each of these topics.  On the topic of "Building tomorrow's innovative company", the Brief highlights with some examples how innovation extends beyond Product innovation only and includes looking into Process innovation as well as Business Model innovation.  It also references a PwC Innovation Survey which points out that, "Top innovators generate over 75% of revenue from products not in existince five years earlier,"

The Brief also looked at the current state of competitiveness in Muslim majority countries referencing the World Economic Forum's  Global Competitiveness Index 2006, in which only Indonesia, Malaysia, Turkey and UAE had above average scores on innovation.  However, it also points to recent regional/ global success stories from the DS100 - Top 100 Companies of the Muslim World list. 

The Forum had over 900 participants from 65 plus countries providing ample networking oportunities.  The official outcome of the Forum was catured in its declaration which included endorsing a program to make affordable computers available to disadvantaged Muslims, to establish scholarships and internships for Muslim youth, and to support leadership training programs and collaborative university research.   The event also hosted a Young Leaders and Businesswomen Forum.

Is Turkey ’s Competitiveness Challenged by the Religious/ Secular Divide?

Turkey is an in interesting spot.  On the one hand its high-tech competitiveness is showcased by success stories such as major regional brands in white goods (refrigerators, washing machines, ovens and dishwashers) and televisions brands. 

The flagship brands include BEKO (a brand of the KOC family of businesses) which ranks among Europe's largest white goods manufacturers and Vestel (a brand of the Zorlu Group) which ranks as Europe’s largest and the world’s third-largest TV maker.   

On the other hand, the fact that Turkey’s products have not yet truly broken into global markets at the level of the world’s leading brands (minus a few exceptions), makes me wonder what role the religious/ secular divide might be playing to affect its competitive capabilities?  The recent political turmoil whereby a million people marched in support of secularism and against the elected government’s ruling party (AK) (considered to be practicing Muslims) brought to global attention the deep rooted sentiments. 

The question is - how is this divide affecting the corporate environment?  How can teams work collaboratively to produce the most innovative, world class solutions when there are such sentiments?  The two major TUrkish business organizations TUSIAD and MUSIAD are already known to differ along these lines.  So, if a company decides to forgo a secular or religious Turkish employee against their merit, it would be unfortunate for the success of that company.

Ideally this should not be an issue and perhaps it’s not in most cases, but given the strong reaction witnessed of late, it is certainly something Turkish companies will have to address.

How Gulf Companies Can Build Global Businesses

The McKinsey Quarterly recently commented on ‘How Gulf companies can build global businesses.’  This frank assessment references companies based in the Gulf Cooperation Council (GCC) states who are using the petrodollar windfall to expand strategically into global markets.  The piece also states that expanding globally for such companies will require the development of distinctive capabilities and skills.

Some of the referenced investments include DP World $7.1 billion acquisition of the British port and ferry operator P&O in 2006;  Saudi Basic Industries (Sabic) $2 billion acquisition of the petrochemical division of the Dutch chemicals and pharma group DSM in 2002; Dubai Aerospace Enterprise (DAE) paying $1.3 billion for the Swiss company SR Technics, the leading independent supplier of aircraft maintenance, repair, and overhaul services; and, Kuwaiti logistics group Agility (formerly PWC Logistics) buying companies in Singapore and the United States as part of a drive to become one of the world’s top logistics groups.

The commentary however points out that in order for such investments to bear fruit for GCC players, the advantages that drove margins at home—high-income customer pools, cheap labor, protected markets, and low energy costs—won’t be transferred to external markets, and they will need to become more efficient abroad to be profitable/competitive there.

Some of the areas of focus suggested include:

• A strong customer service ethos
• Integration skills - especially important when the acquirer is buying a company to gain its capabilities
• Finding and retaining managerial talent
• A change in corporate culture
• Working within the governance structures of other business environments, which may be quite different from the GCC norm

From our point of view, in addition to the above points, the positive momentum of these strategic global investments now needs to be directed to building a business culture that focuses on ‘customer needs’ in all aspects of business operations - from market research, innovation, branding, product development, design, to communication.   As global business leaders will attest, building a global business requires major investment in knowing and serving the global customer. 

In addition, just as the traders of Arabia did in earlier days, these GCC global business leaders would not only gain from global trade but also have the opportunity to contribute to global business thinking around corporate scandals, environmental concerns, and social responsibility by sharing the business ethics and value system of Islamic culture.

Prince Al-Waleed on reform, investment, and the future of Islam

This month, the McKinsey Quarterly features a lengthy interview with Prince Al-Waleed bin Talal of Saudi Arabia, one of the most successful international investors today. Prince Al-Waleed represents the best of the new breed of global businessmen who integrate their investment prowess with their vision for society as a whole. Prince Al-Waleed in particular stands out because he exerts a global impact from within the Muslim World. Prince Al-Waleed’s holdings in such global and regional corporations such as Savola Group, LBC, Four Seasons Hotels, Citigroup, News Corp., - and the list goes on – make him a man whose opinions are taken seriously from the trading floor, to the board room and the hallowed halls of government around the world. Awarded the Humanitarian Contribution to Islam award by the International Islamic Finance Forum, Prince Al-Waleed has donated over $100 million to various academic and civic causes ranging from the Islamic Studies program at Harvard University to supporting the Islamic wing of the Louvre in Paris – all to bridge the gap between Islam and the West.

Commenting on the interplay between different forces affecting global capital flows after 9/11 he says, “…politics is mirrored in economics and finance”. But interestingly rather than reflect this by avoiding investment in the US like many other investors from the Middle East, Prince Al-Waleed says that after 9/11 his investments in the US grew “strategically”. We look forward to seeing the Prince’s investments bear fruit – not only in the business world but also in the world of ideas.