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from Global Investing:
A scar on Bahrain’s financial marketplace
Bahrain's civil unrest -- which had a one-year anniversary this week -- has taken a toll on the local economy and left a deep scar on the Gulf state's aspiration to become an international financial hub.
A new paper from the Sovereign Wealth Fund Initiative, a research programme at Center for Emerging Market Enterprises (CEME) at the Fletcher School at Tufts University, examines how the political instability of 2011 is threatening Bahrain's efforts in the past 30 years to diversify its economy and develop the financial centre.
Asim Ali from University of Western Ontario and Shatha Al-Aswad, assistant vice president at State Street, argue in the paper that even before the revolt, Bahrain lagged in building the foundations of a truly international hub in the face of competition from Dubai and Qatar.
Unlike DIFC (Dubai International Financial Centre) and QFC (Qatar Financial Centre), Bahrain insists upon local labor; currently 70% of employees in its banking and financial services industry are Bahrainis. Bahrain’s reluctance to hire non-resident talent has made Dubai...an alternative for those investors looking for a centre with more flexible labor practices such as DIFC provide... The constraints – a lack of formalized institutional and regulatory structure, along with an ad hoc business environment, underdeveloped infrastructure, and under-supplied skilled workforce – have negatively affected its growth and potential to become the financial gateway in the Middle East.
Then came the crackdown of protesters.
Its ruling Al-Khalifa family unleashed a ferocious extra-judicial crackdown against the opposition. It appeared the standard axiom of Gulf ruling families – securing legitimacy and counter-acting political opposition through redistribution of oil wealth – was sorely insufficient to address citizens’ grievances. These led not only to international opprobrium of the Bahrain government but also made foreign businesses reconsider Bahrain as a financial center – with many foreign business shifting workers and operations to Dubai... Indeed, confidence in Bahrain as a financial hub took a major blow along with its image as a stable, tolerant and liberal state.
It remains to be seen what impact last year’s pro-democracy uprising will have on the state of Bahrain and its ambition as a regional financial gateway– especially at a time when Dubai (DIFC) and Qatar (QFC) remain serious contenders to become dominant financial centers in the Middle East.
Bahrain had shown perseverance and strength in building its financial center, but democracy efforts and human right violations were able to threaten the hard work of more than 30 years.
Bahrain's sovereign wealth fund Mumtalakat, which is leading the country's efforts to diversify its economy away from the hydrocarbon sector, suffered a series of ratings downgrades last year as a result of sovereign downgrades. Mumtalakat is rated triple-B.
from Business Traveller:
The right type of travel writing?
Travel writer and newspaper columnist A.A. Gill told listeners of BBC Radio 4’s Excess Baggage programme last week that he doesn’t do research, doesn’t take notes and considers himself a rather superficial traveller, a tripper.
Whatever his methods, not many writers can so succinctly drill down into a destination simply using well-honed observational skills. Gill seems to know by osmosis who best to chat with while dashing around a destination – and somehow plans his visit at a particularly prescient moment in time.
Readers who seek politically correct armchair travels, where all the colours and customs of the far-flung world are greeted with wide-eyed awe may not enjoy Gill – he is acerbically provocative, occasionally chauvinistic, has kept the Press Complaints Commission consistently busy and caused a minor diplomatic incident with the Isle of Man in 2006 after deriding its citizens in a Sunday Times column.
While those on the receiving end of his compound-adjective-heavy wit might call it bigotry, his fans – and they are many – would not hold his writing in such high regard were his take-no-prisoners commentary not punctuated with thoughts and ideas pulsating with wisdom.
Gill’s just-released collection, AA Gill: Is Further Away is split between “Near” and “Far”. The former veers from War-of-the-Roses battleground Towton in Yorkshire, to a Nelson Mandela birthday function at a London InterContinental Hotel where Gill finds fault with “the napkinned trestles of inhospitable hospitality”.
There is also the metaphorically “Near”, where less caustic chapters deal with the author’s severe dyslexia and adventures in fatherhood. “Far” journeys from Bombay to Haiti via – in my view – the richest chapters, on Dubai, Madagascar, Albania and Iceland.
In a foreword, Gill disputes the idea of the world having reached its “found-by date”. He revels in the fact that though most of it has been excessively explored, the world is more accessible than it’s ever been. He scoffs at the snobbery that differentiates a ‘traveller’ and a tourist, and at travel journalism which leaves readers feeling envious and annoyed. Gill sees his journalism as an attempt to bring the reader along with him.
from The Great Debate:
Does everyone have a price?
On Monday I went to Bloomingdales, the Gap and Starbucks but passed on a visit to Magnolia Bakery. Instead I stopped by the St. Moritz bakery where you can order hot chocolate and sit by a video of a cozy winter fire that overlooks the indoor ski slope and is just around the corner from the largest candy store in the world, which happens to face an aquarium that occupies an entire wall on one side of the world’s largest shopping malls. This by the way is opposite of what claims to be the world’s largest candystore whose mission statement is to make every day “happier’. Earlier, while exploring the watery depths of the bright Pink Atlantis Hotel (one of the white elephants of the property crash of 2007) I knew it was really the last kingdom because the fish swam around two cracked thrones and other kitschy stone artifacts.
Dubai is utterly overwhelming, the kind of dystopia that blogger Evgeny Morozov sees in Huxley, a consumeristic paradise where mind-numbing shopping replaces real thought. Most of the I had no idea where I was except that my passport had been stamped Dubai and many of the mall-going women were shrouded in black. After a few hours I sank into a state of ennuie. Given boatloads of oil money in the 1970s and the chance to build a whole new city, who on earth would decide to build a series of shopping malls?
It’s not like the developers didn’t have ambition, what with the architecture that demands superlatives -- the gondolas, medieval stone houses and soaring illuminated sky scrapers and islands built in absurd never-before-seen configurations. But why not build a museum with, say, the most incredible collection in the world or a university with the finest research laboratories? With so much money why build this Disneyland? And what about the workers who make up most of the population?
Who would go to expensive old Harvey Nichols or French boulangerie Eric Keyzer? The answer is pretty much anyone who can afford it goes not just to shop but to eat. For Arabs living in the region, the malls are closer than a flight to London or New York, they are air conditioned in the sultry summer, they have indoor sports and entertainment facilities, and are safe and family friendly. They are the old village green and the public square that Jurgen Habermas wrote about though not as he imagined it, surely.
The choices are limitless: an ice skating rink, a swimming pool, cinemas, as well as Penhaligon’s, Haagen Daz, California Pizza Kitchen and Nando’s. Even a tiny artsy neighborhood in an even tinier industrial quarter that showed angry Iranian sculptures of war-time prisoners, some held by Iraqis and some by Israelis on their knees with their hands behind their heads. My favorite piece was a video of a row of colorful balloons bobbing on the water that were tied together and shot one by one. This piece was done by a Turkish artist, who also filmed the balloons being executed. Metaphor for the human condition, anyone?
Was there a reason why you failed to mention that Dubai needed a bailout, of sorts, during the 2008 economic crisis? It invested extravagantly, namely on one of the most extravagant hotel. Fortunately, it did get bailed out.
from FaithWorld:
Mideast banks, funds seek to tap Muslim women’s wealth
Emirati housewife Sarah Alzarouni brushed past a group of women clad in floor-length black robes, some with only their eyes showing, to enter through the frosted doors of one of Dubai Islamic Bank's women-only branches. Clutching a Louis Vuitton bag to match her designer head scarf, Alzarouni greeted the female tellers and bank manager with three kisses on the cheek and sat down to do business.
"I am much more comfortable working with ladies than in a mixed environment," Alzarouni, 27, said. "When I come here, I feel like one of them. They understand my needs and I can move freely, not having to always think where I am and whether my (scarf) has moved. As a Muslim, it is really important for me to deal with an Islamic bank. "
Many affluent Muslim women share Alzarouni's sentiments and they are increasingly turning to Islamic banks to manage their money. These women are looking beyond basic banking services to sophisticated products to grow their wealth while complying with Islamic principals that include a ban on interest.
According to a report by Boston Consulting Group, women in the Middle East controlled 22 percent, or $500 billion, of the region's total assets under management in 2009. Financial institutions in the conservative Gulf Arab region, where many women are reluctant to mix with men outside their families, are tapping into the niche, with women-only bank branches and investment funds mushrooming.
Read the full story by Shaheen Pasha and Martina Fuchs here.
from Summit Notebook:
No bonds for Arabtec; not for now anyway
Just to be clear, Arabtec is not considering a convertible bond issue.
The builder has no need for funds and has adequate access to capital if needed. But nonetheless its chief financial officer Ziad Makhzoumi is watching the region's increasing capital raising activities with interest.
"I don't think we need any funding whatsoever... As a CFO I have to look at all the options all the time," he told the Reuters Middle East Investment Summit in Dubai on Monday.
Convertible bonds are an attractive way to raise funds for listed companies, he said, highlighting Emaar Properties' recent issuance plans.
Earlier this month, Emaar, the builder of the world's tallest tower in Dubai, outlined plans for a $500 million convertible bond issue.
Makhzoumi said he saw more convertible bonds coming to the market, but there was no mention at all of Arabtec.
Arabtec has expansion plans which include a push into Central Asian states like Kazakhstan and Uzbekistan, which could be funded from internal resources, he said.
from Summit Notebook:
Is investor confidence returning to the Middle East?
A recovery in the Middle East and the prospects for investment are on the agenda at the Reuters Middle East and Investment Summit, taking place in Dubai, Riyadh, Cairo, Kuwait, Beirut, Bagdad, Abu Dhabi and London.
In the wake of Dubai’s debt crisis, which rocked financial markets globally and dented confidence in the region, top executives and officials will discuss whether the investment climate in the region is improving and confidence returning. 2011 will be a year of more restructurings, but the region’s capital needs will lead to a surge in debt issues and even a possible revival of the IPO market.
Reuters Middle East Investment Summit will generate exclusive stories, investable insights, online videos and blog postings. Check back here for more over the course of this week.
from FaithWorld:
Can halal cosmetics outgrow their Islamic beauty niche?
Thursday evening at a luxury, Pharaonic-themed spa in Dubai. Emirati women, colorful eye makeup contrasting with their black robes, wait by a bronze statue of a smiling Cleopatra for their weekend beauty treat.
The mineral-based skincare range used at the spa is free of pork and alcohol derivatives. Supplier Charlotte Proudman hopes to register it as compliant with sharia, or Islamic law, tapping into a growing trend for "halal cosmetics" in the mostly-Muslim Middle East and among the world's estimated 1.6 billion Muslims.
"I really want to put this onto our packaging so that our clients can be reassured that our products are halal, and that they can feel consistent in their religious beliefs," Proudman said at the spa she launched in 2008. "I really feel that halal cosmetics have a future. I don't think that a Muslim man or a Muslim lady should compromise their beliefs for a skincare range that will work well for them."
The word halal, Arabic for permissible, is often used to describe meat slaughtered and prepared in line with Islamic law. Halal beauty products, which comprise $500 million of the $2 trillion global halal market, are made using plant extracts and minerals rather than the alcohol and pork ingredients that are banned in Islam but often found in cosmetics.
Read the full story by Martina Fuchs here.
Follow FaithWorld on Twitter at RTRFaithWorld
from Reuters Investigates:
Dubai comeback already?
We went behind the scenes of Dubai's debt debacle last November and found a much more sober city-state starting to rebuild itself from the $59 billion hole that was dug by the whizz kids who had powered its transformation. Loans don't come as easy -- particularly the nod and the wink of association with the royal family isn't cutting it like it used to.
Some people see a connection between the crisis and the fact that Dubai has also started to tighten up on its trade with Iran, in line with broader international sanctions, but we're not so sure about that.
What did come across loud and clear in our reporting is that the new-new Dubai is currently being led more by older, senior types who had been thrown off the ladder by the MBAs and the like on their way up. Some of the financial types we spoke to worried about this: we don't need civil engineers, one said, we need financial engineers. It'll be interesting to see how it plays out.
from FaithWorld:
Islamic finance seems overwhelmed by tighter supervision of sharia advisers
Islamic finance is toughening supervision of its powerful religious advisers as shareholders worldwide demand increasing accountability from directors, but key reforms may do little to boost independence and transparency.
Key to these challenges is the small number of scholars advising a growing number of banks on increasingly complex financing structures, raising issues such as transparency of rulings, independence of advisers and how to groom new scholars.
But varying sharia standards, different regulatory approaches and vast disparities in development across markets stand in the way of reforms to streamline and boost supervision, which are critical to growth.
"Investors want to see the same degree of responsibility and professionalism going into sharia compliance as they expect from Moody's for credit ratings and S&P for market information," said John Sandwick, a Geneva-based Islamic asset and wealth manager.
Sharia advisers control the reins of the $1 trillion industry through their rulings on whether financial products satisfy Islamic law. Their role has been in focus following a recent attempt by Kuwait's Investment Dar (TIDK.KW) to challenge its sharia board's decision.
Some say regulating the issuance of fatwa would stifle ijtihad, or scholars' reasoned judgment, and could stunt the growth of an industry which is still trying to come to terms with established conventional banking concepts like derivatives.
from FaithWorld:
Islamic finance seeks young scholars to lead growth, improve products
With Islamic finance a $1 trillion industry globally and expected by ratings agency Moody's to reach $5 trillion in time, students of sharia have more opportunities than ever before to take their skills beyond the mosque doors and into the boardroom.
Reflecting the change in times, many current scholars now prefer to call themselves sharia advisors or technicians to suggest that their duties are more professional rather than simply clerical.
Professionally, it can be a lucrative endeavor. Scholars working on Islamic finance deals are paid consulting fees, depending not only on the services provided but also the seniority and fame of the scholar.
Every Islamic finance company has a sharia board that monitors compliance, and ad hoc boards often set up for individual deals. While there is no benchmark for fees, a renowned chairman of a sharia board, for instance, could earn $50,000 to $100,000 per board as a result of retainer fees, fees for issuing edicts, audit fees and documentation fees. Junior scholars make significantly less.
