Monday, January 28, 2008

Emaar and the Scramble for India

Executive magazine
By Paul Cochrane in New Delhi

As if building the world’s tallest building and investing in projects throughout the MENA region wasn’t enough, Dubai-based property giant Emaar is rolling out its presence in the world’s second most populated country.
Through a 2005 joint venture with Indian development company MGF, Emaar-MGF has been involved in multi-billion real estate projects from Delhi in the north to Hyderabad in the south, and plans to build in India the world’s largest mall and a Giorgio Armani luxury hotel.
But Emaar is not the only Gulf developer in the subcontinent seeking a slice of a burgeoning middle class with extra purchasing power. Nakheel, a subsidiary of Dubai World, is hot on Emaar’s heels, inking deals in 2007 worth $25 billion, along with Dubai-developer Damac Properties announcing they were to invest $5 billion in India over the next five years.
Other private Gulf investors are also to sink $5 billion into developments in a sector analysts forecast will surge by 700% in the next decade.
The sudden foray into India by Gulf investors is not confined to the likes of Emaar and Co. seeking to build real estate and malls. With transactions in the market expected to grow from $14 billion to $102 billion in the next 10 years, $150 billion to be spent on infrastructure, and Indian stock markets riding high- Bombay’s bourse rose above 20,000 points for the first time in late October – Gulf investors are scrambling to get in on India’s boom. Bahrain’s TAB Bank now has two funds in Indian bourses worth over $220 million and Dubai’s Abraaj Capital a $250 million fund with Mumbai’s Sabre Capital.
Other developments are also afoot, with Dubai-based developer ETA Star Properties to develop a $923 million ‘infotech’ park in Chennai, and the Gulf Finance House to back the $395 million Energy City India, cementing Delhi’s energy links with the GCC.
And at the end of the year, RAKEEN, a property arm of the Ras Al Khaimah government, formed a JV with India's Trimex mineral group to spend $5 billion on developing residential, commercial and office space.
As Mohamed Ali Alabbar, chairman of Emaar Properties, told the press, “India is only an hour away from us, it is our true China and with the size, population, the culture, the economic policies, growth that exist in India, it's a great opportunity.”

Bullish market

Property and mall developers are rising high on India’s7% annual economic growth and a middle class that is expected to surge from 50 million to 587 million by 2025, according to a McKinsey Global Institute study, propelling 5% of the population in the middle class bracket to some 40%.
But with an economic boom as well as a rising population – 1.1 billion and growing - property prices are spiking. And the rush to develop real estate in India, as for any emerging market, is also about the scramble for land.
Mumbai is now the second most expensive city globally for office space, with rent rising 55% in the last year, and New Delhi in the eighth slot, up 34.4 %. Such rising costs were reflected in a $10 billion Nakheel development last year, with land accounting for some 40% of the price tag. As a result, Emaar-MGF has embarked on a $12 billion pan-India program that will include special economic zones, hospitals, residential units, hotels and malls.
“We have a pan-India presence, and will have a presence in all 22 states through the land we have acquired and are in the process of developing that,” said Anupama Chopra, Head of Corporate Communications at Emaar MGF Land Limited.
In bulging-at-the-seams cities like Bombay with 12.6 million people and Greater Delhi with over 14 million, developers are focusing on the tried-and-tested in the Gulf ‘integrated township’ model of residential and retail space.
“This is something that is prevalent in the rest of the world but not in India,” said Chopra.
Utilising the same model as in the Gulf, most of Emaar’s architectural designs for Indian projects are the same, “trying to replicate here” what worked in Dubai, said Beedisha Chakrabarti, Corporate Communications Manager at Emaar-MGF. One of the projects, in Gurgaon, a satellite city of Delhi, is to be called Palm Springs.
To raise funds for such projects, Emaar-MGF plans to sell a 10% stake this year through an IPO, which bankers suggest might raise some $1.5 billion. When Nakheel’s JV partner DLF listed on the Bombay stock exchange in July, $2.25 billion was raised in India’s biggest IPO, and shares have since gained 30% in the past six months.

Retail dreams

Part of the land Emaar and Co. are investing in land is for the growing retail market, which is expected to grow 14 times by 2012 and retail chains to expand 25% a year, currently at only 5% of the market. Indicative of growth is the surge from 1.5 million sq. ft of retail space and 30 malls back in 2001 to 27 million sq. ft of space and 230 malls last year. But compared to China, the country has some way to go to match its neighborhood superpower rival’s retail space growth, which surged to 2.4 billion sq. feet between 1995 and 2003.
Negating the retail space difference however will be Nakheel JV partner DLF’s 3.6 million square feet Mall of India. And not to be outdone, Chakrabarti said Emaar wants to replicate the Dubai Mall in India. “We are looking at doing India’s biggest mall, as we cannot compete with our own product by having the biggest in the world,” she said.
However, at 5.8 million sq. ft the Indian version will out trump Dubai Mall’s retail space of 5.6 million sq. ft.
In India’s current boom climate – the dream of Dubai super-sized – it would therefore not seem overly farfetched to imagine Emaar building India’s tallest building some time soon. But what is more probable is the creation of development icons that have made the Gulf famous: offshore residential island projects, like the World and the Palm. “It’s on the drawing board somewhere but not right now,” said Chopra.

Top 10 cities worldwide for office space

Rank City Rent (Sq. ft/month)
1 London (West End) $27.47
2 Mumbai $15.90
3 London (City) $15.33
4 Moscow $15.33
5 Tokyo $15
6 Tokyo (Outer) $13
7 Paris $10.68
8 Delhi $10.55
10 Hong Kong $8.90
Source: CB Richard Ellis (CBRE)

Thursday, January 24, 2008

Teeing off in Kashmir

Nox magazine February 2008
By Paul Cochrane in Srinagar and Gulmarg

Kashmir is known as a military hot spot, but instead of dodging bullets and hand grenades, Nox found there was a greater need to watch out for wild bears and avoid hitting golf balls at soldiers growing hashish on the seventh fairway

To tee off at any golf course in Kashmir requires a mixture of patience and a blasé conception of following the rules.
On arriving at what is considered the best golf course in India, the Royal Springs in the Kashmiri summer capital of Srinagar, there was no sign of the management and the only sign of life a handful of caddies lolling around the car park. And eager though the caddies were to lug clubs around the course, none of them knew the cost of a round.
Being a Friday afternoon, the management were “all at the mosque praying.”
“Can you come tomorrow?” suggested a caddie. “But the golf course closes for the winter tomorrow, I must play today.” - “No, the course won’t close, come tomorrow,” he replied. “But it says on the board it will close for four months.”-“Then come back in an hour, maybe someone is here then.”

The Royal Springs Golf Course in Srinagar

Later in the afternoon, manager Rafiq Azad explained that the club’s lack of dynamism was down to the lack of players, and that was not because of the exceedingly low green fees (even by Indian standards, at $7 for 18-holes), club hire ($5) or caddie service ($2).
It was “because of the situation,” he said, sounding not unlike a businessman in downtown Beirut or the Gaza Strip.
Azad was referring to Jammu and Kashmir's 60-year struggle for independence, another unresolved legacy of the British empire that has claimed tens of thousands of lives. With Kashmir a major piece in the puzzle of Great Game geopolitics, located as it is at the cross roads between Pakistan, Central Asia, and China (which controls 20% of Northern Kashmir and Aksai Chin), the area has long been at the forefront of an Asian ‘cold war.’
While India controls the bulk of Kashmir, Pakistan uses its slice, the sparsely populated Azad Kashmir, as a launch pad for a proxy war against the Indian state.
Kashmir has been the cause of so much tension between Delhi and Islamabad that the now nuke-wielding countries have been at war twice, and nearly at each others throats several times in the past 25-years.
This is all the more tragic as Kashmir was once a popular tourist destination, famed for its mountains, lakes, flowers and skiing, and called the “second Switzerland” (but not to be confused with the other equally unstable “Switzerland of the East,” Lebanon).
Although Pakistani bankrolled militancy has declined in recent years, along with popular support for such groups in urban areas, Kashmir doesn’t feature in all guidebooks to India, with potential visitors advised to avoid the area’s charms due to the fragile security situation.
Most of the tourists that do come are middle class Indians, but that too is dependent on the perceived safety of Kashmir. And so competitive is tourism within India that when a bomb exploded a few years ago the culprits, suggested one Kashmiri man, were not freedom fighters but militant hotel owners from Himachal Pradesh, a popular tourist destination in the lower eastern Himalayas, that were losing out to Kashmir’s resurgent tourism trade.
Talk of Kashmir’s current tourism woes led manager Azad to lament the lack of petrodollar-rich Gulf golf enthusiasts coming to the government-funded club. But mention of the club featuring in Arab magazines warmed Azad up, eventually leading to a discount in the green fees, from the foreigner’s $20 fee to the Indian rate.
The cashier didn’t seem so keen on the idea though, insisting on checking before returning with the a-ok. “We need to register you in the records. What’s your Indian name?”-“Um…Anish. Anish, ah, um, Singh.”-“Mr Anish Singh, you must play the round as an Indian, in case anyone asks.”

The million

After the round – in which “Mr Singh” was challenged by the plastic flip-flop wearing caddie to 5 Rupees (10 cents) a hole and lost by two – the walk back into the city along the banks of Dal Lake resembled a security cordon for a high-ranking politician.
Soldiers were dotted along the road every couple hundred meters, a common sight along all roads, possible only through Delhi forking out some $7 million a day to station over half a million troops in Kashmir.
But despite such numbers, the communication skills of the Indian Army are far from impressive. To get to a Hindu temple overlooking Srinagar that also houses a military base, visitors have to pass through an army checkpoint at the base of the hill, where tobacco and matches are taken away, and bags searched.
Half way up a soldier indicated a short cut to the top through the undergrowth, which required a scramble up to the stairs of the temple, where more soldiers stood around. The soldiers looked bemused at someone emerging from the forest and started talking avidly to one another. An Indian tourist remarked: “They were saying how lucky you are, that there was a bear down there yesterday. Why did you come that way?” – “A bear? But the army told me to come this way.”-“Ah, well.”
It wasn’t a joking matter, with the local press reporting that villagers on the outskirts of Srinagar had been mauled just the day before in attacks by leopards and bears.
Describing the ineptitude of the soldiers to Kashmiris, they damned and blasted the army, a feeling that is largely mutual. Talking to a Military Policeman from Delhi, he pointed down at the town and said, “all terrorists.”
Such animosity has led to heavy-handed tactics. A shopkeeper, Gulzar, said that a few years ago a militant had thrown a grenade at a military vehicle in Srinagar, and the army opened fire, killing six civilians, including his sister. At the morgue the Indian army insisted his sister had been killed by shrapnel from the grenade, denying that it was a bullet that gone through her heart, and this is what would be put in the report.
“I’m tired of all this. We don’t want the army here and we are all for independence, 95% of Kashmiris are, and we certainly don’t want to be part of Pakistan,” Gulzar said.
But as with any occupied populace, internal political divisions are holding back a united front. Certain groups want semi-autonomy, others a unified, independent and secular Kashmir; while sections of the Sunni community want a Sharia-based government, which is opposed by the 20% of Indian-Kashmir’s10 million population that are Shia.
In such a climate, external actors are having a field day. Saudi Arabia's Wahhabi influence has spread to Kashmir in the form of funding for madrassas, mosques and militant groups, and among the Shiites there is widespread support for Iran as well as Hizbullah’s Hassan Nasrallah. Making Kashmir sound even more like the Middle East’s problem child, Lebanon, even the Israelis are in on the act, reportedly seeking to gain a foothold as well, according to academics at Kashmir University.

A Shia Kashmiri holds up a framed photo montage of Iranian troika Khomeini, Khameini and Khatami. Beneath is a portrait of Mir Waiz Molvi Mohammad Farooq (Srinagar)

Ski patrol

The security situation presents more problems than just a lack of golfers, an imposing military presence and young Kashmiri men harassed with security ID checks when out walking the streets.
The military presence is even visible in tourist resorts, such as Gulmarg, popular with Indians from the south that come for a taste of cold autumn weather and the chance of snow – or else make do with a mock-up photo, standing in a pair of skis in front of a truck-size block of snow in the middle of a grassy field.

Middle class Indians from warmer climes enjoy 'skiing'

The whole far side of the town, as well as immediately above it, is given over to army barracks. Even up at 4,000 meters there is an army base, looking out at the towering peak of Nanga Parbat (8125m) and the Karakoram mountain range in Pakistan.
Ironically, with Gulmarg being a ski resort, the military presence poses a threat to skiers.
“We’re not allowed to use dynamite – no T-N-T – to trigger avalanches as the army is worried it could fall into the wrong hands, so we snow cut, which is much harder and more dangerous,” said Javid Katari, the head of Gulmarg’s ski patrol.
Katari’s office had been unintentionally indicated as the place to enquire about a game at the Gulmarg Golf Club, the second oldest in India and allegedly the world’s highest course at 2800 meters. Skiing and golf might not appear to have much in common, but with the golf course being completely re-developed and no snow, the commonality was in both sports being in off-season mode.
Katari suggested going over to the only functioning part of the club, the practice greens, where caddies waited around despite the course’s slated re-launch date being 2009.
A man came up saying he had a “temporary pass,” then went off to discuss with a club employee the logistics of playing 9 holes on a course that was being completely gutted. After teeing off a further commonality between golf and skiing in Gulmarg soon became apparent– the extremes of having to risk avalanches when going off-piste, and having to play cross-country golf as there wasn’t, by any standard conception of the game of golf, a functioning course.
Two holes into the game, a young man clad in the traditional Kashmiri garb of a phern – a long, woollen jellaba – appeared. “Do you want a second caddie to look for your ball?” the first caddie asked. Looking out over the rest of the course, of muddy ditches, ankle high grass, and heavy machinery dotted around, it didn’t seem such a bad idea, but two caddies to play a game of golf? Dismissal didn’t work, so he came with us anyway, illustrating his usefulness by indicating the hole on the dusty, overgrown greens with his foot.

The hair and the hashish

The tensions between Delhi and Islamabad have led to the rise of religious extremism, evident at one mosque where graffiti had been sprayed, in English on a wall, ‘Down with secularism.’

The writing's on the wall: 'Down with secularism'

But despite contemporary Middle Eastern religious and political influences, Kashmir’s colourful religious past – a Hindu kingdom then Buddhist, then Hindu again –means Kashmir’s blend of Islam has its curiosities, namely in the relic worship that still abounds, despite being mamnou (not allowed) in Islam.
Srinagar has a temple that supposedly contains the body of Christ, the story going that as Kashmir was paradise, then Kashmir was where Jesus went after ascending to heaven. And over at the Hazratbal shrine (literally ‘Majestic Place’) there is housed a hair from the beard of the Prophet Muhammad, preserved in a silver and crystal cylinder, kept in three wooden boxes and locked away behind five doors in the heart of the mosque.
Taken to Kashmir after the cuticle had been brought to India by two Saudi merchants in the 17th century, the light-brown strand is shown to the public twice a year. Where the hair had been for nearly 1,000 years after the Prophet’s death could not explained by the guide, but its time in Srinagar has certainly been eventful, a symbol of Srinagar’s religiosity.
In 1963 the hair disappeared when a guard took a break and someone broke in. All hell broke loose in the city, with the army killing two protesters during riots demanding the hair’s return. India went on national alert, a $21,000 reward was issued and conspiracy abounded in the halls of power. Delhi started pinning the blame on Islamabad as part of a scheme to incite the Kashmiris against them, and the Pakistani press mulled over India's Prime Minister Nehru being the thief, or that it was all part of a “satanic” plot “conceived in the so-called intellectual cells in a faraway Western capital.”
But a week later the hair was found in the grounds of the mosque, and Kashmir’s most holy man was called in for verification.
To prevent such future crises, soldiers now guard the mosque. But such religious issues are still sensitive, where debating the origins of the hair, or whether Jesus is really buried in Srinagar, is a touchy subject.
The next day teeing off at the British-era Kashmir Golf Club in the heart of Srinagar, conveniently located near the former British government residence, the caddie said he didn’t believe the strand of hair was the real deal. “But if I told certain people that they would kill me,” said Sanjad Farooq.
The Friday sermon resounding over the course had another message however, of religious tolerance. And the majority Hindu Indian army also had others things on their minds.
On the seventh hole two men in fatigues were rummaging around in the foliage at the edge of the green. “What are they doing there Sanjad?”-“Soldiers, growing hashish.” – “Hash, here? On the golf course?” - “See, there!”
Lining up for a shot with a 9 iron I hoped not to clobber a soldier with a golf ball, at least in any way that would make him think it was an attack by a vengeful Kashmiri that could prompt him to let rip with his machine gun.

- All photos by Paul Cochrane

Looks Good on Paper: The advent of the Gulf Common Market(GCM)

Executive magazine February 2008
By Paul Cochrane in Kuwait City and Beirut

There were no celebrations, media coverage was minimal, and border crossings weren’t noticeably busier than any other new year’s day. But there is a flag, there are plans for a common currency, and there is certainly much ambiguity in the air about the launch of the Gulf Cooperation Council Common Market, which, for the lack of an official abbreviation, will be referred to as the Gulf Common Market, the GCM.
The GCM came into affect on January 1, after 27 years in the pipeline, with the lofty aim of becoming the region’s equivalent of the European Union. At the present the common market resembles the European Economic Community (EEC), the forerunner of the EU, or for that matter other regional blocs, such as the Central American Common Market (CACM), the Association of South East Asian Nations (ASEAN), the Union of South American Nations (Unasul), and the North American Free Trade Agreement (NAFTA).
The GCM has a structure, a secretariat, a Supreme Council, and free trade, but like other regional blocs the goal of greater economic and political unification appears to be years away despite this year’s development.
Indeed, since the establishment in 1981 of the Cooperation Council for the Arab Gulf States, to use its official title, the regional body has to a large degree failed in its objectives, which, much like the EEC, were initially not about economic unification but rather to act as a forum for conflict prevention. After all, the body was established following a proposal by Saudi Arabia for an internal security pact among the Gulf monarchies after the armed uprising in Mecca in late 1979, and given further impetus after the Iran-Iraq war erupted in 1980.
The objectives of the council were to coordinate internal security, procurement of arms and national economies of member states, and to settle border disputes under the leadership of the Supreme Council. Yet despite the creation of a Saudi-led Rapid Deployment Force in 1984, the GCC could not broker a ceasefire between Baghdad and Tehran, and failed to present a united front in 1990 when Iraq invaded Kuwait. Even a committee to facilitate talks between Iran and the UAE over Iranian military exercises in the Straits of Hormuz in 1999 came to nothing.
However, this time the GCC’s objectives are to do with economics and the free movement of people, aims the region has been moving towards following a customs union agreement in 2003, a condition set by the EU for a FTA between the two blocs. For the GCM means that GCC citizens are now able to: live in any of the GCC countries as well as work in either the private or public sectors; buy and sell real estate; freely move capital; access preferential taxation details; own stock and form corporations in any member state; and access education, health and social services.
This is all very commendable, and the GCM certainly has a lot going for it, with a population of 35.1 million people, a combined economy of $715 billion, and an estimated 484 billion barrels of oil, more than half of the oil reserves of the Organization of Petroleum Exporting Countries (OPEC). Furthermore, with booming economies on the back of high oil prices, in addition to massive government surpluses, the GCM has real potential to succeed, at least on paper. But as analysts and businessmen point out, there is a great deal of difference between rhetoric and the facts on the ground.
“The GCM is supposed to create more business, more movement, but so many things have to be levelled and if not enough awareness is created, will not leverage the benefits of a common market,” said Dr. Fadi Makki, Senior Associate with Booz Allen Hamilton.

Time to unite

The biggest stumbling block of the GCM was evident at the very meeting that decided on the market’s launch this year. The annual GCC summit, in Doha in December, failed to provide any leadership on the challenges the Gulf is facing, namely a decline in currency values and rising inflation. For the GCC, Qatar and Dubai in particular, these dual issues are of major importance, making the region less competitive in attracting skilled foreign labor. Equally, the depreciation in the dollar has had an impact on unskilled workers, with laborers striking last year in the UAE over the greenback’s slump (two years ago the Indian Rupee was valued at 44 to the dollar, compared to the current 39 Rps).
What the summit did achieve was a controversial proposal, by Bahrain, for a six-year residency cap on unskilled expatriate workers, and a focus on rapprochement with Iran. Indeed, Iran attended the summit for the first time, a significant indicator of the current, and future, importance of solid relations between Tehran and its southern neighbors. Equally, with the Bush administration still keeping pressure on Tehran - the use of force, we are told, is still on the table - Iran’s attendance sent mixed signals from the Gulf, particularly at a time when the region is acquiring $20 billion in arms from the US.
Just as puzzling as the summit’s inability to tackle pressing financial issues were the statements about a common currency for the GCC, the ‘Gulf riyal.’ Although Gulf leaders issued a public communiqué at the summit that reaffirmed commitment to a 2010 deadline for a monetary union, a classified document leaked to UAE daily Emirates Business 24/7 showed that finance ministers had told heads of state that the GCC would not be ready by 2010. No deadline was given in the report, but if an interview given by the governor of the UAE Central Bank late last year is anything to go by, he said the GCC was unlikely to have a single currency by 2015.
This is not overly surprising, given Oman’s decision in 2006 to opt out of the common currency over concerns that spending targets would constrain economic growth, and last year’s decision by Kuwait to de-peg its currency from the greenback, citing inflationary pressure.
Therein lies the crux of the problems the GCM faces: Gulf countries are still acting independently of one another on economic and political policies.
“There is of course a large degree of liberalization, on tariffs (to zero), on services, establishing a business in another GCC country,” said Makki. “But now there is more work to be done, just as when the European market started, through stronger institutions, which have to be put in place. This will be essential to keep the momentum going, otherwise there is a tendency for capital protectionist initiatives. And a lot of things will have to be done differently, such as trade agreements being done separately, that will have to come to an end.”
Indeed, some developments currently underway in the region are at odds with the very aims of the GCM. Bahrain for instance has just proposed a dual price plan where non-nationals will be charged more for basic commodities than Bahrainis. Although aimed at expatriates, the proposal is for nationals only, not GCC citizens, flying in the face of the rights entitled to them under the GCM.
Then there is an issue that goes to the very heart of the GCM – the movement of people and goods, which was supposed to have been fast tracked when a customs union was introduced.
“They implemented GCC customs unification four years ago, and there are still hiccups,” said Ahmad Hammauda, Assistant Managing Director of Global Logistics Services and Warehousing in Kuwait. “If we go to Dubai today, as a Kuwaiti company - a GCC company - we cannot have our own trucks in Dubai, you have to have an Emirati guy with you. The same was true for Saudi Arabia but the law was changed five months ago, now allowing GCC trucks into Saudi. We are building a depot in the Dubai World Center, but that is a free zone, whereas in Dubai we can’t - how free is that?”
Furthermore, the construction of barriers in the Gulf is presenting, quite literally, a physical obstacle for the GCM, with Saudi Arabia to spend between $10-$15 billion to secure its 6,500 kilometer border, which includes three GCC countries, the UAE, Kuwait and Oman, and potential future GCM members Yemen and Iraq.
“I’m pessimistic for security reasons. Saudi Arabia is building a wall with Iraq, Kuwait with Iraq and maybe there will be one between Syria and Lebanon. All this putting up of walls is not good for removing borders,” said Hammauda. “We hope that things will be easier. It would be great if goods can move freely within the GCC, but I don’t think that will happen anytime soon. In my book the common market is similar to the EU or the US - a common market without borders,” he added.
Indeed, the postponement of the EU-GCC FTA is not only over the EU adding new conditions. Notably, the EU have pointed out a lack of coordination and uniformity among GCC countries as well as differences between governments in certain sectors such as labor laws, copyright and property rights.
As Eckart Woertz, program manager in economics at the Gulf Research Center, pointed out: “Legal codes and judicial regulations all need to be amended.”

Boom times ahead?

The need to amend GCM laws is crucial for the common market to flourish, particularly inter-regionally. Currently, trade between GCC states represents about 10% of overall foreign trade, which is expected to surge to 25% in the next two years, according to Bahrain’s chamber of commerce and industry, bolstered by the GCM.
The GCM is also expected to be a boon for neighboring countries.
“It will encourage countries to go in the same direction,” said Makki.
“The GCM is symbolic, the first of its kind in the area, moving towards ever closer coordination and countries giving up some of their sovereign powers - that is very significant.”
But before this happens along the lines of the EU – with the potential for expansion of the bloc on the cards, as the EU has done in the past decade – the GCC will need to liberalize further.
Woertz said that cross-border mergers are likely to improve if capital markets get closer together, or even establish a GCC integrated stock market.
“It would help if there were some inter-linkages, trading platforms and so on. At the moment its pretty much fragmented. If they wanted to develop and attract international investment, the GCC would need to do something there,” said Woertz.
Equally, the free movement of capital needs to be addressed by regulatory authorities, as a true common market would allow banks and financial services to set up in any GCC country.
The aim of giving GCC citizens equal rights in buying and selling property as well as shares also needs to be addressed. Currently, Dubai and Abu Dhabi allows international investors to buy combined stakes of 49% in listed companies, while certain companies are restricted to UAE citizens. Saudi Arabia however, the seat of the GCM, has allowed GCC citizens to buy and sell shares since September last year, and Qatar allows foreign investors up to 25% of a company’s shares. But only four bourses allow cross listing of shares – Bahrain, Dubai, Abu Dhabi and Kuwait.
This will all change though when institutions are created to unify the GCM, such as a central bank, courts of justice and a country chosen to represent, on a rotational basis, leadership of the GCM.
“Imagine how the GCM can negotiate with just one negotiator? They would have a lot of weight in a number of international institutions – the WTO, future trade negotiations with the EU and the US, and elsewhere,” said Makki. “Even in non-trade related institutions, the IMF, World Bank, OPEC. The GCC role in all these financial institutions is likely to grow, and grow significantly, but all depends on how coordinated their stance is vis a vis the issues that are at stake, so really the sky is the limit.”
Ultimately, the GCM has much going for it – a common language, bourgeoning economies and the ability to act as powerful bloc on the world stage. But before the GCM can progress, the political will needs to be there, along with a clear vision for GCC citizens of what the common market is all about.
“What does this common market mean? I’ve not heard much,” admitted Hammauda. “I heard one currency, and moving goods without documentation, but that is not there. We haven‘t heard anything that this might change. I don’t know what the GCM means to be frank.”

Gulf Cooperation Council – quick facts

Established: 26 May 1981
Members : Saudi Arabia, Kuwait, UAE, Oman, Bahrain and Qatar
Possible future members: Yemen, Iraq
Population: 35.1 million (GCC citizens 60%)
Total surface area: 1.04 million square miles
Combined economy: $715 billion
Combined oil reserves: 484 billion barrels (est.)
Current GCC trade: 10% of overall foreign trade
Source: AFP, Executive

GCC Common Market – What it means for GCC citizens

Citizens can move/reside without restrictions in any GCC country
Citizens have employment rights in either private or public organizations in the GCC
Citizens can engaged in all professions, economic, investment and service activities, and can buy and sell real estate in all member countries
Free movement of capital
Citizens are entitled to preferential taxation
Citizens can own stocks and form corporations in any member state
Citizens are entitled to education, health and social services in any member state

Tuesday, January 22, 2008

Trousers down, arms up!

Commentary - Executive magazine (February 2008)

Over the last few months work and pleasure have taken me from India via the Middle East to Europe and onto North America. That’s a lot of flying, and a lot of security checks.
Out of all the airport security I encountered, it was Western airport security – unsurprisingly - that was the most invasive. It was also the most pointless, despite the rhetoric that it supposedly makes us “feel safer” and that it is necessary to thwart the terrorist threat by having to queue for hours, then shuffle through the metal detector in your socks while holding up your belt-less trousers – after, of course, quaffing whatever drink you accidentally had in your bag.
The biggest irony is that the Middle East (bar Jordan), that hotbed of terrorism and conflict, is one of the easiest regions on earth to pass through airport security. Equally puzzling is why, after nail clippers and a can of shaving cream are removed from my hand luggage in Europe and the States, I can waltz onto the plane with a glass bottle of duty free whiskey – nay hard to smash the bottle of booze and stab someone with, if one was so inclined.
Then there is the idiocy of some of the items given onboard - metal cutlery that could be turned into what the prison community calls a “shiv,” as well a set of headphones that could easily be used as a garrotting wire.
After all, what’s the point of taking away nail clippers? Threaten the stewardess with the forcible clipping away of her finely manicured nails? “Open the cockpit or her nails geddit!”
As a friend once remarked, the most dangerous thing a passenger has is their hands and legs – the limbs of a well-trained martial artist for instance. A ballpoint pen is equally dangerous, as the mob film Casino graphically illustrated when a man is repeatedly stabbed in the neck with a writing instrument.
A vivid imagination as well as Hollywood can give a wannabe killer a lot of ideas, but that is not the point. The point is that there are innumerable ways to kill someone and provoke terror, and there is not much even the tightest security can prevent– just ask a warden at a maximum-security prison about his experiences.
That said, security is of course necessary, but to what degree?
As the head of Lebanon’s Civil Aviation Authority, Hamdi Chaouk, told me: “Technology is so advanced they don’t need to do this, stripping and removing shoes. The EU has not been able to compromise on what people need and security. Who can tell me this security has done something?”
Well, unfortunately, no one can. A team at the Harvard School of Public Health recently found no evidence that X-raying carry-on luggage prevents hijackings or attacks. They also found no evidence that making passengers take off their shoes and confiscating small items prevented any incidents. In fact, of the 13 million seized items by the United State’s Transportation Security Administration last year, most of the prohibited items were nail clippers and cigarette lighters, not guns or explosives tucked inside someone’s socks.
So why all the inconvenience to get on a plane? (while not on a bus or a train?)
It strikes me that the billions of dollars now being spent on security is a great way of making money and creating jobs. Indeed, at New York’s JFK airport, seven people were needed to process one line, from the X-ray machine to the pat-down, to the swabbing of laptops. Furthermore, the cosmetics and water bottling sectors (as well as the nail-clipper industry) must be rubbing their hands with glee due to the increased sales that result from the need to replace everything removed from passengers.
But let’s not be flippant. Security is no laughing matter. It’s a $59 billion a year business that is set to treble worldwide by 2015 to $178 billion, according to industry tracker Homeland Security Research. And that prediction is all dependent on another grandiose 9-11 terrorist style attack not happening. If a major attack occurs in the United States, Europe or Japan the security market will increase twelve-fold by 2015 to $730 billion, with the USA accounting for 42% of that expenditure.
That’s good news for the security sector. But the saying “one man’s loss is another man’s gain" is also applicable here. Although some undoubtedly profit from the whole security rigmarole, a report has estimated that for every 624 million passengers that each spend two hours a year waiting in line, the annual loss to the economy is some $32 billion. Furthermore, additional security expenditure means costs are passed down to passengers. It’s no surprise then that people are opting to travel by car, train, boat and bus instead, which is not good news for the airline sector, already hit by rising fuel prices.
So for the benefit of everyone, it should seem a no-brainer that airport security should be taken much more seriously, not for the time consuming joke it currently is.