DinarStandard Editors

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. 

OIC Economies in the 2008 Doing Business Rankings

The World Bank’s recently released 2008 Doing Business Rankings were no surprise when it came to who was in the top positions.  Just as in 2007 the economies where it’s easiest to do business included Singapore, the United States, Hong Kong, Denmark, New Zealand, and Canada among others.  Interestingly, there as been some movement among the top OIC economies.  The table below showcases the top 10 OIC economies on the Doing Business ranking in 2008 and their rankings in 2007.    

Among the top 10 OIC economies on the 2008 ranking we see three which have improved from 2007 (Saudi Arabia, Turkey, and UAE) with an average improvement of 6 notches.  Five economies (Malaysia, Oman, Maldives, Pakistan, and Brunei) declined with an average fall of 5 notches.  Finally, two economies (Kuwait and Kazakhstan) remained unchanged. 

The World Bank’s Doing Business rankings are released annually and rank economies on the following criteria:

•     Starting a Business
•     Dealing with Licenses
•     Employing Workers
•     Registering Property
•     Getting Credit
•     Protecting Investors
•     Paying Taxes
•     Trading Across Borders
•     Enforcing Contracts
•     Closing a Business

Malaysia's Top 50 Brands

Brand Finance Plc, a brand valuation and strategy advisory firm, has published the first index of Malaysia's top 50 brands based on the attributed dollar value of their brand assets.

At number 1, Petronas - the Oil & Gas conglomerates brand, is the most valuable Malaysian brand and is worth USD 2.15bn (MYR 7.51bn) out of the total brand value of Malaysia's top fifty brands which is USD 17.26bn (MYR 60.19bn).  The top 10 Malaysian brands command more than 60% of the overall Top 50 brand value and overall the brands.  These top 10 are as follows:

For more, click here to download the full report in PDF.

The methodology used by Brand Finance Plc to calculate brand value is the 'royalty relief’ approach. It assumes a company does not own its own brand and calculates how much it would need to pay to license it from a third party. The present value of that stream of (hypothetical) royalty payments represents the value of the brand.

In a highly competitive local, regional and global marketplace there is a premium on brand's ability to differentiate and communicate their unique ability to satisfy customer needs. The report highlights that in such an environment sources of value creation have moved increasingly from tangible assets (such as plant and machinery) to intangible ones (such as brands,patents, customer databases and skilled workforce). This is an environment in which the scarce resources are not factories and goods, but rather talented people, good ideas and differentiated brands.

Reflecting this shift in the sources of value creation, the Brand Finance Global Intangible Study 2007 for globally listed companies shows that the percentage of value of intangible assetts has risen from 64% in 2001 to 66% in 2007.

However, in Malaysia, the recognition of intangible value is low compared to other countries. The report shows how ony 40% of Malaysia’s market value is derived from intangible assets, as compared to the US where 70% of US market value is derived from intangible assets.

However, there does seem to be an increased emphasis on improving these intangible assetts.  Reflecting this growing trend, the Association of Accredited Advertising Agents of Malaysia (4As) and Interbrand (global brand consulting firm) are collaborating for the first time to come up with another ranking of Top Malaysian brands.

This effort also highlighted the value of branding with the Interbrand strategy director Andrew Martschenko saying that two-thirds of the world’s wealth were attached to the top corporate brands in the West.  The 4As and Interbrand ranking would be announced on Nov 16.

    

Muslim Executives Can Raise the Bar of Global Business Leadership

The Annual ISNA (Islamic Society of North America) convention is a huge affair.  With an estimated 40,000 attendees this year in Chicago, the event was a professionally organized gathering with 100's of lectures and discussions on all sorts of contemporary and religious topics as well as a huge Bazaar of products and services that cater to the Muslim market (more on that later.)

DinarStandard was invited to speak at one of the sessions, titled 'Muslim Executives in the West - Their Next Steps...".  I am attaching the slides from that presentation which focussed on the opportunity that Muslim Executives have in not only becoming the best global business leaders of today but also in contributing and raising the bar of business leadership standards. 

The discussion was moderated by CAMP (Council for the Advancement of Muslim Professionals) President Ms. Urz Heer and the other speakers included Mr. Rushdi Siddiqui, Global Director of Dow Jones Islamic Index, Mr. Mohammed Gaber of PepsiCo, and Mr. S. Jafer Hasnain of Alliance Capital Management.

            

    

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. 

Malaysia - 3rd Most Attractive Global Outsourcing Location: A.T. Kearney

BusinessWeek this week profiled the latest A.T. Kearney list of the top 50 global offshore outsourcing locations.  India leads the list as expected. 

Meanwhile, 10 out of the 50 are OIC (Organization of Islamic Conference) based locations with Malaysia identified as the third most attractive market for Offshore outsourcing.  Other major OIC based markets on the list include Indonesia , Egypt , Jordan , UAE, Tunisia and Pakistan.

The ranking uses financial attractiveness, people capability, and environment attractiveness (infarstructure/ political stability etc) as its criteria.  However, it gives a 40% weight to the financial attractiveness of a country.  The article highlights that Pakistan , for instance, is even more financially attractive than India .

Another reference to OIC locations in the article:

"Some emerging countries may not appeal to U.S. companies as outsourcing destinations but may find markets in other parts of the world. For instance, the appeal of Pakistan 's IT workforce of 90,000 people has been overshadowed by post-September 11 security concerns. "It's fallen off the radar screen of U.S. buyers," says Frances Karamouzis, vice-president for research at Gartner. Other analysts say there is still a market for Pakistan 's services in the Middle East . And countries such as Senegal and Morocco are becoming attractive places for French-language call-center outsourcing for Francophone Europe."

What do you think about the A.T. Kearney Report? Do share your thoughts by submitting your comments.

    

Global Islamic Finance News: July 8 – July 14, 2007

To our readers – my apologies for the tardy post this week.  The world of Islamic Finance continues to move at a feverish pace.  In our summary this week – IT Upgrades in Pakistan, Islamic Finance in the Netherlands, and a new Islamic Bank in the UK.   

IT and Islamic Finance in Pakistan

One of the lesser mentioned areas of innovation in the wide world of Islamic Finance involves technology applications specifically tailored to handle Islamic Finance transactions.  A variety of companies – regional and global – are actively vying for coveted deals in the growing Islamic Finance sector.  Two recently announced deals confirm the activity in this space.  First, Kuwait-based banking software solutions provider Path Solutions announced that it has signed a contract with BankIslami in Pakistan for the implementation of a complete core banking system in its entire upcoming 100+ branch network.  And second, Temenos Group (SWX: TEMN), recently announced that Meezan Bank of Pakistan has chosen Temenos T24 (T24) to provide centralised core banking across its branch network.  This is an important space to watch since banks and financial institutions in the Islamic Finance space are realizing the role technology plays in maintaining a competitive edge while fostering growth and expansion of services.  The fact that this news if centered in Pakistan tells me that the drive to survive and thrive is reaching a feverish pace – even at the national level. 

Netherlands trying to attract Islamic Finance

Reuters recently reported that the Dutch government is trying to find ways to attract Islamic banking to the Netherlands.  In a letter Finance Minister Wouter Bos said that the Netherlands was fit to play a role in the international expansion of Islamic Finance similar to Dubai and London.  Dutch Minister for Integration Ella Vogelaar said that “that Islamic culture is rooting in the Dutch culture in a way that eventually the Netherlands will have a Jewish-Christian-Islamic tradition.”  This is encouraging especially given that the approximately 1 million Muslims in the Netherlands have faced challenges integrating into the social fabric of the country.  If the government takes steps to offers Islamic Financial services at the grassroots level it will signal that Muslims are more a part of Dutch society than previously thought. 

New Islamic Bank in the UK

Early last week The Bank of London and the Middle East opened its doors to cater to the growing demand for Islamic Financial Services in the UK.  The bank is 20% owned by Kuwait’s Boubyan Bank and plans to list on the AIM in the next 18 months to raise a further £75m, over the £175m already raised.  According to reports the bank will focus on four lines of business which are Islamic Treasury and Financial Institutions, Corporate Banking, Private Banking and Investment Management, and Investment Banking.

Other News

Bahrain's Albaraka Banking Group plans a major expansion over the next five years, as it seeks to stay ahead of rivals in tapping the growing global appeal of Islamic banking.  According to reports, Albaraka currently has operations in seven Arab countries, Turkey, Pakistan and South Africa. It also has licences to open branches in Syria where it will pursue an IPO for $100 million and in Indonesia, the world's most populous Muslim nation.  Eight of its new branches will be open in Pakistan by the end of 2007.

Apple's i-Phenomenons and the Design factor

Apple's latest i-phenomenon -- the i-Phone has once again mesmerized the world of consumer electronics. Following the success of its sleek i-Pod music media players, the i-Phone is set to revolutionize the convergence of mobile devices - email, Internet, media player and mobile phone all packaged in one very impressive looking and functioning device.

The analysts and media, from Business Week, Harvard Business Review to The Economist, are all a-buzz trying to crack the Apple code on what makes it one of the most innovative companies in the world.   
 
Sure, as many say, its the Founder Steve Job's visionary leadership. But, the essence of his vision that sets Apple apart is his 'design thinking' mixed with the 'cool factor' that runs across every aspect of a users experience.  After-all, Mp3 music players were a plenty before i-Pods hit the market, but the i-Pod design and usability and its i-Tune tie-in galvanized the mobile music consumers.  Similarly, Nokia, Motorola, and Samsung have led the global mobile phone market, but are sweating the impact of i-Phone's ingeniousness. 
 
'Design Thinking' addressess business problems/needs with a non-traditional approach that involves intense user observance and employs creative problem solving involving people from various diverse tracks to develop 'out-of-the-box' solutions.  This approach applies to tangible products, user technologies, business services and even operations, and is fast becoming a key business growth driver.
 
IDEO is one of the most prominent consulting firms that specializes in this space and had also helped Apple design the first Macintosh mouse.  In a special edition on the Power of Design, BusinessWeek profiled IDEO as an innovative company that has "redefined good design by creating experiences, not just products.  Now its changing the way companies innovate."
 
To get some idea on what design thinking entails, I found a great presentation by Timothy Brown, CEO, IDEO given at MIT in which he covers their design thinking process of surveying the “landscape of innovation” focussing on people, their needs, technology and business, and their rapid prototyping methods to ideate and create solutions.
 
There will be a lot more we will focus on the process of design thinking.  In the meantime, the success of Apple's i-Phenomenon has once again re-iterated the importance of design thinking in every aspect of today's global competitive strategy.

What do you think about the power of design? Do share your thoughts by submitting your comments.