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Saturday, May 3, 2008
MTV muscles in on Mideast music market
It took us a half hour to drive from Sheikh Zayed Road in the center of Dubai to the Al Quoz Industrial Area where you\'ll find the headquarters of Arab Media Group or AMG. Their three-letter acronym will soon have a very familiar three-letter brand running right along side it, MTV.
The one you know is celebrating the launch of its 60th channel this weekend, 53 of those outside the United States. The other, AMG, gets a chance overnight to play in the big leagues of global media, with its 10-year partnership agreement.
A great deal has been said already ahead of the launch, but let me boil it down into three headlines:
· MTV is ready to enter a market of 50 music channels in the region
· Their lead music channel will be built around Hip Hop
· Two-thirds of the population in the Arab World is under the age of 25, so there is room to grow
What is equally important but often overlooked in the excitement about edgy programming and the rush for advertising dollars or in this case dirhams is what I call the third ‘D’, dialogue.
MTV sees itself as something much more than music television. It is a platform for debate to discuss drugs, health issues and can be a great vehicle to exchange cultures, music and ideas. Bill Clinton and Tony Blair jumped into MTV town hall meetings for the same reason advertisers choose this platform, to reach youth in their space.
Bill Roedy, MTV’s global ambassador since 1989, not only gets excited about rap music emerging out of Saudi Arabia, but the potential to break down barriers. “ I think often there are stereotypical views about the Middle East,” Roedy says, “And this will give us a chance to reflect this great culture and what I think is going to be a great product.”
His counter-part in the venture, Abdullatif Al-Sayegh the 30-something CEO of AMG, did the interview with me in the traditional Arab tobb, against the MTV graffiti studio backdrop. He talks about listening to the Arab youth and engaging them through entertainment.
“Just go with the language they understand, with the language that they believe in, with the way that they can understand you better. I am sure we can fill a lot of gaps between the West and the Arab World if we do this.”
Sounds worthy, but possible. How about the backlash against the message coming from what is clearly a western brand? Not a problem. The Virgin music store we went into was filled with a mix of Arab and western expatriate youth, thumbing through the latest offerings and perusing New York Yankee baseball caps. Downstairs in the shopping mall, teenagers and their parents lined up at Starbucks to get their iced lattes and blended fruit drinks.
So the lesson we may all learn out of the latest launch of MTV, is that many on the streets of the Middle East may not agree with U.S. policies in the region, but they do trust American brands and what they stand for – openness, edginess, and can we say it? Being hip. See this week\'s show.
The one you know is celebrating the launch of its 60th channel this weekend, 53 of those outside the United States. The other, AMG, gets a chance overnight to play in the big leagues of global media, with its 10-year partnership agreement.
A great deal has been said already ahead of the launch, but let me boil it down into three headlines:
· MTV is ready to enter a market of 50 music channels in the region
· Their lead music channel will be built around Hip Hop
· Two-thirds of the population in the Arab World is under the age of 25, so there is room to grow
What is equally important but often overlooked in the excitement about edgy programming and the rush for advertising dollars or in this case dirhams is what I call the third ‘D’, dialogue.
MTV sees itself as something much more than music television. It is a platform for debate to discuss drugs, health issues and can be a great vehicle to exchange cultures, music and ideas. Bill Clinton and Tony Blair jumped into MTV town hall meetings for the same reason advertisers choose this platform, to reach youth in their space.
Bill Roedy, MTV’s global ambassador since 1989, not only gets excited about rap music emerging out of Saudi Arabia, but the potential to break down barriers. “ I think often there are stereotypical views about the Middle East,” Roedy says, “And this will give us a chance to reflect this great culture and what I think is going to be a great product.”
His counter-part in the venture, Abdullatif Al-Sayegh the 30-something CEO of AMG, did the interview with me in the traditional Arab tobb, against the MTV graffiti studio backdrop. He talks about listening to the Arab youth and engaging them through entertainment.
“Just go with the language they understand, with the language that they believe in, with the way that they can understand you better. I am sure we can fill a lot of gaps between the West and the Arab World if we do this.”
Sounds worthy, but possible. How about the backlash against the message coming from what is clearly a western brand? Not a problem. The Virgin music store we went into was filled with a mix of Arab and western expatriate youth, thumbing through the latest offerings and perusing New York Yankee baseball caps. Downstairs in the shopping mall, teenagers and their parents lined up at Starbucks to get their iced lattes and blended fruit drinks.
So the lesson we may all learn out of the latest launch of MTV, is that many on the streets of the Middle East may not agree with U.S. policies in the region, but they do trust American brands and what they stand for – openness, edginess, and can we say it? Being hip. See this week\'s show.
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From Dubai to Doha
We took our programme on the road again this week to explore Dubai’s next wave business strategy.
There is a rich history of trading in Dubai which stretches back to the 1850s. It is a mindset which is at the heart of the Emirate’s business plan for the next quarter century. Take DP World, the trading division of Dubai World. It has forged 23 different deals stretching from China to Djibouti. This allows Dubai Inc. to place a corporate flag in each country, planting the seeds for future relationships and growth. This sounds simple, but it may be the key differentiating factor for the United Arab Emirates vis-à-vis its competitors in the Gulf.
This week I had a chance to take an in-depth look at some of the building blocks for the future and to take in some high-level analysis from some of the top political and business leaders in the region at two forums -- the Doha Forum on Democracy, Development and Free Trade and Business Week’s Middle East-China Leadership Forum in Dubai.
Pieces of the Puzzle
Over the weekend, I sat in a few business plan briefings at three divisions of Tatweer, itself a division of Dubai Holdings, the key development vehicle of the government. Dubai Land, Dubai Healthcare City and Dubai Industrial City fit into the next stage of growth. To be candid, it was hard to appreciate the scale of these projects. You might have seen the brands on the many flags, which flutter in the Arabian winds, but to see where they fit into the puzzle of this economy is quite a different perspective. I could write a column on each of the projects, but simply put, one represents sizable theme parks and residential real estate; another is a new approach to integrated healthcare which is sorely needed and the final piece an industrial hub to support the growth which is underway. The hotel, residential and retail hub Bawadi according to its Executive Chairman Saeed Al Muntafiq is worth $53 billion alone.
The industrial city is under construction; 55 square kilometres of real estate which has logistics facilities, land available for global and regional manufacturers to lease space and even low income housing for laborers. This is to address one of the thorniest issues facing the governments in the region; that is to take care of the thousands of workers, primarily from South Asia who have been imported into the U.A.E.
If you take a step back, one can see the industrial logic of all the blueprints and buildings to come. Hotels, golf courses and villas are built to attract visitors and residents. The largest airport in the world is being constructed to bring tourists in and the industrial city will be there to support light industry which has expanded to accommodate the growth. The division managers of these projects smile when asked about the original feasibility studies presented by consultants for all these projects. They were rejected, I am told, by the Ruler of Dubai and now Prime Minister of the United Arab Emirates. It is obvious after this week in the region that the bar is set very high.
Dubai seems to be sprinting to stay ahead of its Gulf neighbors who are now constructing their own visions of the future. On the final approach after a 40 minute flight to Doha from Dubai, one can witness how Qataris plan to expand to more than a million people. The Pearl is the giant project on the cards. Like Dubai, Qatar realizes that trained workers and graduates will be needed to fill the buildings and map out the strategies for the future. The first graduates from the Qatar Foundation campus of four university programs with links to the West will commence May 6th. This is encouraging.
New Culture of Globalization
While the small but wealthy Gulf emirates expand, the sizable players of the Middle East are benefiting from what Turkish Prime Minister, Recep Erdogan called “the new culture of globalization.” Since coming to power in 2003, foreign direct investment has surged from $1 billion to $22 billion. Turkey has not only a large population, but is able to look East and West as an export hub for Europe and the Middle East. Egypt is enjoying similar growth in FDI. This is the benefit of greater integration.
U.A.E. officials say they mapped out their blueprints not on the 40 million people of the Gulf, but the 310 million people of the Greater Middle East Free Trade Area or GAFTA. They have tapped into years of pent up demand, especially after many residents repatriated their savings and assets after 9/11. While consultants may want to be conservative with their project studies presented to their clients in the Gulf, the leaders in the region have no plans to heed that advice.
With oil at $110 or more per barrel, it is full steam ahead.
There is a rich history of trading in Dubai which stretches back to the 1850s. It is a mindset which is at the heart of the Emirate’s business plan for the next quarter century. Take DP World, the trading division of Dubai World. It has forged 23 different deals stretching from China to Djibouti. This allows Dubai Inc. to place a corporate flag in each country, planting the seeds for future relationships and growth. This sounds simple, but it may be the key differentiating factor for the United Arab Emirates vis-à-vis its competitors in the Gulf.
This week I had a chance to take an in-depth look at some of the building blocks for the future and to take in some high-level analysis from some of the top political and business leaders in the region at two forums -- the Doha Forum on Democracy, Development and Free Trade and Business Week’s Middle East-China Leadership Forum in Dubai.
Pieces of the Puzzle
Over the weekend, I sat in a few business plan briefings at three divisions of Tatweer, itself a division of Dubai Holdings, the key development vehicle of the government. Dubai Land, Dubai Healthcare City and Dubai Industrial City fit into the next stage of growth. To be candid, it was hard to appreciate the scale of these projects. You might have seen the brands on the many flags, which flutter in the Arabian winds, but to see where they fit into the puzzle of this economy is quite a different perspective. I could write a column on each of the projects, but simply put, one represents sizable theme parks and residential real estate; another is a new approach to integrated healthcare which is sorely needed and the final piece an industrial hub to support the growth which is underway. The hotel, residential and retail hub Bawadi according to its Executive Chairman Saeed Al Muntafiq is worth $53 billion alone.
The industrial city is under construction; 55 square kilometres of real estate which has logistics facilities, land available for global and regional manufacturers to lease space and even low income housing for laborers. This is to address one of the thorniest issues facing the governments in the region; that is to take care of the thousands of workers, primarily from South Asia who have been imported into the U.A.E.
If you take a step back, one can see the industrial logic of all the blueprints and buildings to come. Hotels, golf courses and villas are built to attract visitors and residents. The largest airport in the world is being constructed to bring tourists in and the industrial city will be there to support light industry which has expanded to accommodate the growth. The division managers of these projects smile when asked about the original feasibility studies presented by consultants for all these projects. They were rejected, I am told, by the Ruler of Dubai and now Prime Minister of the United Arab Emirates. It is obvious after this week in the region that the bar is set very high.
Dubai seems to be sprinting to stay ahead of its Gulf neighbors who are now constructing their own visions of the future. On the final approach after a 40 minute flight to Doha from Dubai, one can witness how Qataris plan to expand to more than a million people. The Pearl is the giant project on the cards. Like Dubai, Qatar realizes that trained workers and graduates will be needed to fill the buildings and map out the strategies for the future. The first graduates from the Qatar Foundation campus of four university programs with links to the West will commence May 6th. This is encouraging.
New Culture of Globalization
While the small but wealthy Gulf emirates expand, the sizable players of the Middle East are benefiting from what Turkish Prime Minister, Recep Erdogan called “the new culture of globalization.” Since coming to power in 2003, foreign direct investment has surged from $1 billion to $22 billion. Turkey has not only a large population, but is able to look East and West as an export hub for Europe and the Middle East. Egypt is enjoying similar growth in FDI. This is the benefit of greater integration.
U.A.E. officials say they mapped out their blueprints not on the 40 million people of the Gulf, but the 310 million people of the Greater Middle East Free Trade Area or GAFTA. They have tapped into years of pent up demand, especially after many residents repatriated their savings and assets after 9/11. While consultants may want to be conservative with their project studies presented to their clients in the Gulf, the leaders in the region have no plans to heed that advice.
With oil at $110 or more per barrel, it is full steam ahead.
read more...
Damaging dollar
There are many policymakers in the current White House who’ve silently supported a weaker dollar policy for the second term of the Bush Administration. This, the argument goes, helps support U.S. exports. True, but the downside risks today are percolating on many fronts. One can make a solid case that the common thread, which weaves through the financial markets today, is the weak dollar.
President George W. Bush was quick to criticize the 13 members of OPEC this week for not increasing oil output at their meeting in Vienna. That may be politically palatable but it seems to be short on economic realities. There is at most, as numerous leaders and analysts have outlined on our program, 500 thousand barrels of spare oil capacity within the cartel and that is not enough to drive prices down from their historic highs.
The culprit is the weak dollar. As a bet against dollar-based assets, global liquidity pools controlled by global fund managers have put money into the oil market. So the record prices we are seeing today are in part driven because these managers are looking for a more attractive return for their money.
A similar story is playing out with the hard commodities – gold, platinum, silver, iron ore. The $100 barrier for oil has been broken and gold appears to be on its way to the $1000 an ounce with its record run.
Don’t get me wrong; pressure from the developing world is intense. Countries within the broader Middle East are growing nicely and this is true from Dubai to Shanghai, from Kiev to Kuala Lumpur. As this band of growth from the Middle East to the Far East continues to expand, the pressure for the entire basket of commodities will continue to grow. But a strong dollar policy based on sound budget management in Washington would likely take out the top 20 percent of these record highs.
Keep tapping the wealth
There is a less obvious, sidebar story that has been a result of the soft dollar policy and that is the hunt for better returns by the giant and still growing sovereign wealth funds of the Gulf countries. When the dollar was solid, these funds were quite happy to park their money into the U.S. dollar and U.S. bonds. That is not the case anymore. With the coffers overflowing from $100 oil, they are re-deploying their assets around the globe, in U.S. and European equities, property deals and utility companies.
This had many crying foul, but the rhetoric this week toned down considerably. As European Commissioner Charlie McGreevy noted on our program, the debate changed a great deal in the last year. “From being looked upon as, I say \'pariahs\' as it were, a year ago. I think people are now looking at it in a more balanced way and I think we\'ve had a more balanced discussion now then we would have had one year ago.”
This is true in part because Europe and the U.S. actually need the funds as almost lenders of last resort. As a result, both the European Union and the U.S. Treasury are both talking about a voluntary code of conduct for sovereign wealth funds. The Gulf money managers I have spoken to scratch their heads and wonder out loud what that means in practice. But again, a whiff of cooperation seems to be in the air. The Chief Executive of Dubai International Capital Sameer Al Ansari said this week: “There’s little question that there needs to be more transparency.”
While a center ground is being found, the funds garnered a big vote of confidence from Warren Buffet who moved to the number one slot on the Forbes wealthiest people list. Buffet pointed the finger back to Washington: “This is our doing. Our trade equation guarantees massive foreign investment.”
As the Oracle of Omaha noted, the weak dollar may have helped sell goods abroad, but it has meant that, not only does the trade balance need to be financed, all the other products up for sale – especially banks and buildings – look like a bargain.
President George W. Bush was quick to criticize the 13 members of OPEC this week for not increasing oil output at their meeting in Vienna. That may be politically palatable but it seems to be short on economic realities. There is at most, as numerous leaders and analysts have outlined on our program, 500 thousand barrels of spare oil capacity within the cartel and that is not enough to drive prices down from their historic highs.
The culprit is the weak dollar. As a bet against dollar-based assets, global liquidity pools controlled by global fund managers have put money into the oil market. So the record prices we are seeing today are in part driven because these managers are looking for a more attractive return for their money.
A similar story is playing out with the hard commodities – gold, platinum, silver, iron ore. The $100 barrier for oil has been broken and gold appears to be on its way to the $1000 an ounce with its record run.
Don’t get me wrong; pressure from the developing world is intense. Countries within the broader Middle East are growing nicely and this is true from Dubai to Shanghai, from Kiev to Kuala Lumpur. As this band of growth from the Middle East to the Far East continues to expand, the pressure for the entire basket of commodities will continue to grow. But a strong dollar policy based on sound budget management in Washington would likely take out the top 20 percent of these record highs.
Keep tapping the wealth
There is a less obvious, sidebar story that has been a result of the soft dollar policy and that is the hunt for better returns by the giant and still growing sovereign wealth funds of the Gulf countries. When the dollar was solid, these funds were quite happy to park their money into the U.S. dollar and U.S. bonds. That is not the case anymore. With the coffers overflowing from $100 oil, they are re-deploying their assets around the globe, in U.S. and European equities, property deals and utility companies.
This had many crying foul, but the rhetoric this week toned down considerably. As European Commissioner Charlie McGreevy noted on our program, the debate changed a great deal in the last year. “From being looked upon as, I say \'pariahs\' as it were, a year ago. I think people are now looking at it in a more balanced way and I think we\'ve had a more balanced discussion now then we would have had one year ago.”
This is true in part because Europe and the U.S. actually need the funds as almost lenders of last resort. As a result, both the European Union and the U.S. Treasury are both talking about a voluntary code of conduct for sovereign wealth funds. The Gulf money managers I have spoken to scratch their heads and wonder out loud what that means in practice. But again, a whiff of cooperation seems to be in the air. The Chief Executive of Dubai International Capital Sameer Al Ansari said this week: “There’s little question that there needs to be more transparency.”
While a center ground is being found, the funds garnered a big vote of confidence from Warren Buffet who moved to the number one slot on the Forbes wealthiest people list. Buffet pointed the finger back to Washington: “This is our doing. Our trade equation guarantees massive foreign investment.”
As the Oracle of Omaha noted, the weak dollar may have helped sell goods abroad, but it has meant that, not only does the trade balance need to be financed, all the other products up for sale – especially banks and buildings – look like a bargain.
What do you think? Email us at mme@cnn.com, or click on "add a comment" below.
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Thailand proposes rice cartel idea
Thai Prime Minister Samak Sundaravej piqued global interest this week when he suggested the formation of a rice cartel with other producers, a government spokesman said.
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Friday, May 2, 2008
Saudi Arabian days & nights
A journey to the Red Sea commercial hub of Jeddah and the Saudi capital Riyadh this week offered a unique vantage point for what were some politically charged economic decisions for Middle East leaders.
Despite the weight of 95 percent of the region’s “expert opinion”, the Gulf Cooperation Council decided to do nothing, which in turn means something – loyalty to the White House and, for the time being, loyalty to the beleaguered U.S. dollar.
Washington can thank Riyadh for this one. King Abdullah’s high profile visit to Doha for the GCC Summit dominated headlines while in Saudi Arabia, having declared his support for the dollar peg before boarding his private jet. There would be no revaluation of the riyal or a shift to a basket of currencies (euro, pound, yen and dollar) to better reflect the imports coming into the region.
Times they are a changing
According to Dr. Nahed Taher, CEO of Gulf One Investment Bank, Saudi Arabia imports only 20 percent of their products from the U.S. During an interview in Jeddah this week, the young, first female CEO of an investment bank in the Gulf says that with a weaker dollar and the riyal linked to the greenback, Saudi Arabia is importing record inflation, along with the goods from Europe, Britain, China and India. This is putting the squeeze on the Saudi public, the 90 percent not enjoying the fruits of record oil prices. Even the domestic workers complain these days how the weak dollar is eroding their repatriations back home.
Saudi Arabia stood down recent calls from officials in Qatar and the U.A.E for change, which gives the dollar a chance to recover as tensions with Iran subside and the U.S. Treasury offers an array of tools to fix the credit crisis.
One who called the Saudi action (or inaction) correctly was Dr. John Sfakianakis, chief economist of SABB (HSBC’s partner bank in the region). Over dinner in Riyadh, and a toast with Saudi martinis (the famous non-alcoholic fruit concoction) he didn’t say “I told you so” but he did tell me so more than a month ago. This was no time for Saudi Arabia to throw its weight against Washington, but behind it. With oil priced in dollars, the world’s largest producer also did not want to re-price its riyal and undercut revenues.
So instead of a historic, collective GCC move to re-price their currencies when they captured at least part of the global spotlight, discretion ruled. However, I would not bet this will be the last on this subject. Once the attention shifts away from the Gulf, a re-evaluation against the dollar or going to “the basket” might be in the offing.
The New Frontier
This trip to Saudi Arabia was also a fascinating look through the window of what might be. King Abdullah is putting forth change at what is a rapid pace for his citizens. You can see this for yourself when both driving the streets and looking at the blueprints for the future. On the drawing board today is a plan to build six cities from scratch, 20 regional airports and a $6 billion dollar cross country railway. Infrastructure is needed and this leader knows the country has been run down. After all it is the biggest economy in region, possesses the largest oil reserves in the world – collecting $165 billion this year alone -- and right now is the largest investor outside its country. And that is the rub. Saudi business leaders have focussed on other markets for real estate and manufacturing. This economy needs to spruce up what it has today, offer a world class infrastructure for tomorrow and capture a unique selling proposition. The private sector – the famously discreet Saudi trading families – will be part of the process, but one gets the sense that the path to partnership still needs to be defined so that this corner of the Arabian Desert can fully leverage what lies below.
Join the debate. Email us at mme@cnn.com, or click on "add a comment" below.
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The dollar’s slippery slope
It was an active few days on the ground where I was in place to chair panels for the annual “Leaders in Dubai Forum”.
The event gathers some big names including Nobel Laureates Kofi Annan and Muhammad Yunus, plus top corporate leaders from inside the region.
While the central theme of the business forum was “Networking for the Present, Ideas for the Future”, the sub-theme was eroding confidence in the U.S. economy and more importantly the fall of the U.S. dollar.
Concerns were shared equally from those representing the East and West. I chaired the CNN CEO Debate and conducted two one-on-one interviews over the two days; one with Forbes Editor-in-Chief Steve Forbes and the other with Sallie Krawcheck, CEO of Citi Global Wealth Management. When I used the analogy that the sub-prime market crisis in America feels similar to being in a lift (or elevator) wobbling between floors, she quickly replied, it is more like an elevator in free fall.
That is not a great confidence builder from someone who manages $1.8 trillion in assets. Her concern is shared by others on Wall Street, where the dollar has hit a record low against the Euro and oil continues to knock on the door of $100 a barrel.
While pessimism reigned about America’s woes, confidence remained buoyant for prospects within the region. The Middle East is growing 7 percent, but that is posing a real problem for loyal followers of the U.S. dollar. Most members of the Gulf Cooperation Council (GCC) have kept their currencies pegged to the U.S. currency. Last May, Kuwait left that relationship and is linked to a basket of currencies like the Euro, British pound and the Japanese yen. It looks like others, namely Saudi Arabia, Qatar and the United Arab Emirates may follow suit. The GCC will gather in Doha in early December to discuss financial matters – i.e. the dollar peg.
Historically, being linked to the dollar was a sure fire way to combat inflation – since their economies were basically in the hands of the U.S. Federal Reserve. But with a weak dollar, fast growth and a flood of money from oil revenues, GCC countries are importing record inflation. It is running at 9 percent in the U.A.E. and 14 percent in Qatar.
But there is yet another sub-theme playing out. Weakness in the dollar is leaving Washington open to criticism about global economic leadership. At the OPEC Heads of State meeting in Riyadh tensions spilled over about using the dollar as the benchmark currency to price oil.
Leading the charge against the dollar were Hugo Chavez of Venezuela and Mahmoud Ahmadinejad of Iran. Chavez boldly stated, “God willing, with the fall of the dollar, the deviant U.S. imperialism will fall as soon as possible, too."
Saudi Arabia, the summit host and the largest producer within OPEC resisted pressure to mention the dollar in the final communiqué. But if it does not find a floor soon, don’t expect long-term political allies to remain loyal followers of the once mighty U.S. currency.
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Wide open space, uneasy riders
The cornfields of Iowa are buried under snow in January. I could almost hear the sound of the ice crunching under the soles of the candidates in search of one last caucus goer in between their shuttle flights to New Hampshire.
I know the beat pretty well having covered presidential campaigns in the past. This election is so unusual since it is, like a Midwestern highway, so wide open. What is happening in Iowa, New Hampshire and the scores of other primaries to follow is far from the desert port city of Jeddah, but it is of keen interest there as well. Like the Iowans being polled on a daily basis, Saudis and others in the Middle East, are seeking change, not at the fringes but at the core.
This was abundantly clear over mezze at one of Jeddah’s favourite Lebanese haunts. I was in the company of four leaders of large trading companies. If you know the Middle East, you know the type. All were between 40 and 50 years old. All are well traveled, especially in the United States and all, after 9/11, sold their properties in that country they were once very fond of. Blame it on visa restrictions, on money transfer hassles and too many questions at passport control.
Ironically, it emerged over lunch; they are all proud owners of a very American icon, a Harley Davidson motorcycle. Each summer as a group and along with their spouses, they take to the road for a two-week journey. But instead of riding down Highway 1 in California, the fabled Route 66 or down the Eastern Seaboard, they are perusing the country lanes of France, the hills of Tuscany and other European bi-ways.
The big macro trends such as the fall in U.S. tourism since 9/11 and the transfer of capital from Wall Street and to London for international initial public offerings are well documented. The micro trends are less documented, such as selling U.S. assets and not sending their children to U.S. universities. Hard investments and soft dialogue through younger generations are long-term assets to build upon.
So while I was expecting to discuss the merits of the colossal Jeddah Economic City, the growth of Saudi Arabia built upon $100 oil and perhaps building a common market in the Gulf, we had a discussion about Iowa, New Hampshire, the candidates, their favourite places in the U.S. and Europe and yes, Harleys.
I know the beat pretty well having covered presidential campaigns in the past. This election is so unusual since it is, like a Midwestern highway, so wide open. What is happening in Iowa, New Hampshire and the scores of other primaries to follow is far from the desert port city of Jeddah, but it is of keen interest there as well. Like the Iowans being polled on a daily basis, Saudis and others in the Middle East, are seeking change, not at the fringes but at the core.
This was abundantly clear over mezze at one of Jeddah’s favourite Lebanese haunts. I was in the company of four leaders of large trading companies. If you know the Middle East, you know the type. All were between 40 and 50 years old. All are well traveled, especially in the United States and all, after 9/11, sold their properties in that country they were once very fond of. Blame it on visa restrictions, on money transfer hassles and too many questions at passport control.
Ironically, it emerged over lunch; they are all proud owners of a very American icon, a Harley Davidson motorcycle. Each summer as a group and along with their spouses, they take to the road for a two-week journey. But instead of riding down Highway 1 in California, the fabled Route 66 or down the Eastern Seaboard, they are perusing the country lanes of France, the hills of Tuscany and other European bi-ways.
The big macro trends such as the fall in U.S. tourism since 9/11 and the transfer of capital from Wall Street and to London for international initial public offerings are well documented. The micro trends are less documented, such as selling U.S. assets and not sending their children to U.S. universities. Hard investments and soft dialogue through younger generations are long-term assets to build upon.
So while I was expecting to discuss the merits of the colossal Jeddah Economic City, the growth of Saudi Arabia built upon $100 oil and perhaps building a common market in the Gulf, we had a discussion about Iowa, New Hampshire, the candidates, their favourite places in the U.S. and Europe and yes, Harleys.
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Thursday, May 1, 2008
The power of capital
I was fortunate enough to have covered the fall of the Berlin Wall 18 years ago this month and the domino effect it had thereafter, not only on communism but also on investment.
The fall of the wall unleashed pent up demand for reconstruction, partly out of pure capitalist opportunity and partly out of obligation in a drive to rebuild East Germany after 50 years apart from their German brethren.
I still have a vivid picture in my mind of going to a paint factory during the first unified elections and watching a group of West German investors observing the decrepit state of affairs: dye on all the walls, machinery that did not work, workers themselves who decided not to show up until their future would be clarified. Or another stark example, where East German workers elected to paint the hammer and sickle on the last refrigerator they made under communist rule. Both factories were bought out and built up, actually expanding operations and adding jobs.
Far away in California workers on the Raytheon Aerospace production line were forced to re-train and adapt to realities of a peace dividend and re-tool for the future. They did so after a painful five-year transition. Arguably, the entire U.S. economy benefited from diversification and a lower dependence on defence.
As leaders met in Annapolis trying to rekindle the peace process, one cannot help but draw historical parallels, knowing that opportunity is waiting and money is sitting on the sidelines. Three years ago there was a whiff of peace in the air and it unleashed a wave of privatisation, with the Palestine Securities Exchange of 33 companies moving up 8-fold in a span of a year. After a change in power, that opportunity and optimism dried up.
So, let\'s not get overly excited just yet, but at the same time let’s size up the potential and some of the initiatives that are on the table. It is encouraging that Saudi Arabia wanted to be present in Annapolis. This reflects their greater say within the Gulf Cooperation Council and the Arab League, plus the opening up of their economy to investment. I also find encouragement in the Industry for Peace initiative running in parallel, driven by Turkey\'s Union of Chambers and Commodity Exchanges, to revive the Gaza Industrial Zone.
While Turkey’s path to European Union membership remains unclear, the role it can play as a secular non-Arab Muslim nation and an ally of Israel is unique and potentially promising. Less encouraging were the immediate protests we all witnessed as leaders met in the U.S. Palestinian President Mahmoud Abbas is struggling with Hamas for control of territory. Hamas, which currently controls Gaza, opposed the talks at the U.S. Naval Academy.
But there is a lot to be said about the power of capital. One wave leads to the next and carry with them momentum for change, company creation and, most importantly, job creation to a population that for too long has been isolated and unemployed.
Four out of ten Palestinian people live below the poverty line; 40 percent remain unemployed. Without peace, don’t expect those numbers to go down or the money which was in full force three years ago to come off the sidelines again.
The fall of the wall unleashed pent up demand for reconstruction, partly out of pure capitalist opportunity and partly out of obligation in a drive to rebuild East Germany after 50 years apart from their German brethren.
I still have a vivid picture in my mind of going to a paint factory during the first unified elections and watching a group of West German investors observing the decrepit state of affairs: dye on all the walls, machinery that did not work, workers themselves who decided not to show up until their future would be clarified. Or another stark example, where East German workers elected to paint the hammer and sickle on the last refrigerator they made under communist rule. Both factories were bought out and built up, actually expanding operations and adding jobs.
Far away in California workers on the Raytheon Aerospace production line were forced to re-train and adapt to realities of a peace dividend and re-tool for the future. They did so after a painful five-year transition. Arguably, the entire U.S. economy benefited from diversification and a lower dependence on defence.
As leaders met in Annapolis trying to rekindle the peace process, one cannot help but draw historical parallels, knowing that opportunity is waiting and money is sitting on the sidelines. Three years ago there was a whiff of peace in the air and it unleashed a wave of privatisation, with the Palestine Securities Exchange of 33 companies moving up 8-fold in a span of a year. After a change in power, that opportunity and optimism dried up.
So, let\'s not get overly excited just yet, but at the same time let’s size up the potential and some of the initiatives that are on the table. It is encouraging that Saudi Arabia wanted to be present in Annapolis. This reflects their greater say within the Gulf Cooperation Council and the Arab League, plus the opening up of their economy to investment. I also find encouragement in the Industry for Peace initiative running in parallel, driven by Turkey\'s Union of Chambers and Commodity Exchanges, to revive the Gaza Industrial Zone.
While Turkey’s path to European Union membership remains unclear, the role it can play as a secular non-Arab Muslim nation and an ally of Israel is unique and potentially promising. Less encouraging were the immediate protests we all witnessed as leaders met in the U.S. Palestinian President Mahmoud Abbas is struggling with Hamas for control of territory. Hamas, which currently controls Gaza, opposed the talks at the U.S. Naval Academy.
But there is a lot to be said about the power of capital. One wave leads to the next and carry with them momentum for change, company creation and, most importantly, job creation to a population that for too long has been isolated and unemployed.
Four out of ten Palestinian people live below the poverty line; 40 percent remain unemployed. Without peace, don’t expect those numbers to go down or the money which was in full force three years ago to come off the sidelines again.
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Wireless Wonder
There is a tendency to think of Global 100 brands when recalling growth leaders in different sectors. That would be a mistake when defining the pacesetters in the mobile phone market.
Vodafone, Orange/France Telecom, AT&T Wireless, T-Mobile and Telefonica spring to mind immediately. How about China Mobile, MTS in Russia, Bharti Airtel in India and Orascom in Egypt?
Like the emerging economies in the region we cover on Marketplace Middle East, there is a track record of better than average growth. Case in point certainly is Orascom.
When Vodafone for example paid $180 billion for Mannesmann in Germany back in 2000, Orascom was buying properties in Pakistan, Iraq and throughout North Africa. In sum founder Naguib Sawiris put Cairo at the centre of his global map and built his network from there. Less competition, faster growth and fewer buyers for the licenses he wanted and eventually landed.
The result: Sawiris is confident he can cross the 100 million-customer mark in 2008. He is not far off now with 90 million when adding his most recent purchases in Italy (Wind) and Greece (Tim Hellas). Those two countries are part of his Greater Mediterranean strategy.
While his forays into high growth markets are well documented, his next chess moves are not. Sawiris shared some of his insights this week for the time afforded in our television programme.
He is not planning to exit the market: “We’re building a war chest …what we are trying to find now is a target we can acquire without a price war.”
He is eventually open to a global partner like his brother Nassef who sold Orascom Cement to the French: “If I ever do a deal like that, I would like more than 11 percent for sure and I would like to have a say in the company.”
He wants to go back into India: “We’d go back indirectly through someone who is already there but we don’t believe in any new entries there.”
He has been frustrated by China\'s lack of openness: “We’ve been shouting and screaming and saying that it’s not fair…so we’re trying to find a way to get into China and we think we have found a way.”
He believes newcomers such as Zain and MTN are willing to pay too much: “All our neighbours are full of cash, driving prices up.”
And there some other nuggets that are trademark Sawiris, someone who is not afraid to speak his mind and court controversy.
In a global market that is getting more, not less competitive, it is difficult for him to secure high growth opportunities. Vietnam and Cambodia hold great economic promise, but from a mobile phone market perspective are too saturated already.
North Korea has the DNA market traits that he likes. In his words, they seem “peace-loving” and the dismantling of their “nuclear things” is a positive. Negotiations for that market are underway.
Then what. After building an estimated net worth of $10 billion, why fight the tide of competition? His answer, “Telecom is in my blood. If I ever do something, I will remain in telecom.”
And remain controversial. He is known within Egyptian social circles for his round-the-clock energy and more. Beyond speaking his mind in business, he has other thoughts about trends in the Muslim world. Most recently he said that the growing ranks of women wearing the hijab or veil in the streets of Cairo gave him “the impression of being in Iran. I feel like a foreigner.”
The statement prompted a fatwa from a conservative sheikh to boycott his company.
One should not expect an impact on Orascom nor on the free-speaking billionaire.
Vodafone, Orange/France Telecom, AT&T Wireless, T-Mobile and Telefonica spring to mind immediately. How about China Mobile, MTS in Russia, Bharti Airtel in India and Orascom in Egypt?
Like the emerging economies in the region we cover on Marketplace Middle East, there is a track record of better than average growth. Case in point certainly is Orascom.
When Vodafone for example paid $180 billion for Mannesmann in Germany back in 2000, Orascom was buying properties in Pakistan, Iraq and throughout North Africa. In sum founder Naguib Sawiris put Cairo at the centre of his global map and built his network from there. Less competition, faster growth and fewer buyers for the licenses he wanted and eventually landed.
The result: Sawiris is confident he can cross the 100 million-customer mark in 2008. He is not far off now with 90 million when adding his most recent purchases in Italy (Wind) and Greece (Tim Hellas). Those two countries are part of his Greater Mediterranean strategy.
While his forays into high growth markets are well documented, his next chess moves are not. Sawiris shared some of his insights this week for the time afforded in our television programme.
He is not planning to exit the market: “We’re building a war chest …what we are trying to find now is a target we can acquire without a price war.”
He is eventually open to a global partner like his brother Nassef who sold Orascom Cement to the French: “If I ever do a deal like that, I would like more than 11 percent for sure and I would like to have a say in the company.”
He wants to go back into India: “We’d go back indirectly through someone who is already there but we don’t believe in any new entries there.”
He has been frustrated by China\'s lack of openness: “We’ve been shouting and screaming and saying that it’s not fair…so we’re trying to find a way to get into China and we think we have found a way.”
He believes newcomers such as Zain and MTN are willing to pay too much: “All our neighbours are full of cash, driving prices up.”
And there some other nuggets that are trademark Sawiris, someone who is not afraid to speak his mind and court controversy.
In a global market that is getting more, not less competitive, it is difficult for him to secure high growth opportunities. Vietnam and Cambodia hold great economic promise, but from a mobile phone market perspective are too saturated already.
North Korea has the DNA market traits that he likes. In his words, they seem “peace-loving” and the dismantling of their “nuclear things” is a positive. Negotiations for that market are underway.
Then what. After building an estimated net worth of $10 billion, why fight the tide of competition? His answer, “Telecom is in my blood. If I ever do something, I will remain in telecom.”
And remain controversial. He is known within Egyptian social circles for his round-the-clock energy and more. Beyond speaking his mind in business, he has other thoughts about trends in the Muslim world. Most recently he said that the growing ranks of women wearing the hijab or veil in the streets of Cairo gave him “the impression of being in Iran. I feel like a foreigner.”
The statement prompted a fatwa from a conservative sheikh to boycott his company.
One should not expect an impact on Orascom nor on the free-speaking billionaire.
Join the debate. Email us at mme@cnn.com, or click on "add a comment" below.
read more...
21st Century Pyramids
“Build it and they will come.” The mysterious voice that Kevin Costner heard in his 1989 movie Field of Dreams is fitting for one of Egypt’s prized projects, the Smart Village.
While Costner starred in the film which sees American players from the early 20th Century reappearing on a baseball diamond cleared from an Iowa cornfield, the Smart Village has a visual link to the ancient Pyramids only ten kilometres down the road in Cairo.
But instead of dreaming back 2000 years, the technology park is designed to take Egypt into the 21st Century. A half hour drive (if one is lucky) on the Cairo/Alexandria road leads you to mirrored glass pyramids, white walls and man-made lakes. It is home to some formidable international brands in technology – Microsoft, Canon, Hewlett Packard, Vodafone, Alcatel – and some local ones as well – Orascom, Xceed and Telecom Egypt.
During an interview in Davos on CNN Marketplace Middle East, Bill Gates talked about the ability to have technology help the Middle East region leap-frog against their more developed counterparts in Asia, Europe and the United States.
“Technology I think is very important now, whether it is to broaden the economies of these countries or just help them be more efficient in things they\'re doing”, said the co-founder of Microsoft. “Certainly if you look at the scale of investment there, making sure that the right software is done for banking, for tourism, for energy is important.”
Egyptian Prime Minister Ahmed Nazif is big believer in the power of technology and the architect behind the Smart Village when he was Minister of Communications and Information Technology (CIT). He likes the place so much that he still spends two days a week working on the outskirts of central Cairo, in part to stay in touch with business leaders and to enjoy the peace and tranquillity. It is the complete opposite of ancient Cairo, where economic growth of the last four years has only added to the legendary traffic and honking horns.
While there is a great deal of excitement about the oil and gas driven growth in the Gulf, Egypt and its neighbours in North Africa have tied together a string of solid numbers to date. Egypt for example, continues to grow at a pace of about seven percent with its foreign direct investment surging from $300 million dollars five years ago to over $11 billion dollars last year. The World Bank has recognised this cabinet’s work by awarding Egypt with the most improved reformer in its “Doing Business” survey, for its work in simplifying regulations and cutting red-tape.
Meanwhile, at the Minister of CIT, Nazif passed the baton to Tarek Kamel, his young protégé who, with blackberry in hand, is in a rush to build on the gains. There was so much demand for the industrial park, that he has introduced Phase 4 which will be the new home of financial services companies. Over a tea in his office this week, Kamel called the Village a "flagship of development of CIT in Egypt. It reflects the public-private partnership spirit; government and private sector have invested since five years."
His next big project will take place in Maadi, a location best known for its expatriate compound. Kamel sees a big future for business processing operations (BPOs) with a huge pool of educated, but often unemployed and under-employed youth. Think of Arabic, English and French call centers for European and Middle East banks and credit card companies and you get the concept.
That is all on the drawing board right now and I am sure it is not without frustrations and challenges. Now in the fourth year of reforms, the government is eager to have solid growth and foreign direct investment create more jobs and to reduce those still living in grinding poverty. One may not see them in suburbia, but they are impossible to miss when driving to an appointment in the city.
The cabinet knows that reforms have to be felt by those at the lower end of the earnings scale. The poverty level, those living on two dollars a day or less, remains stubbornly high and long serving members of this government know that political realities require more action.
“We are deeply concerned about those in Egyptian society that are not touched by the reform directly,” Youssef Boutros Ghali, Egypt’s Minister of Finance told Marketplace Middle East. “There are people below the poverty line reaching almost twenty percent. Like all developing countries, these reform programs will trickle down but they will not trickle down overnight. They will take time to reach those less privileged in our society.”
And that is what struck me this week during my visit. While we may cherish the history, grit and chaos of Cairo, one gets the sense that the legacy carries with it a heavy burden. The Gulf countries are building new cities off of blueprints in the sand, with much smaller populations, and with no ancient buildings and historical sites to build around.
With 80 million people (and growing fast) the challenge is a big one but so is the opportunity to utilise young Egyptians to build their own Field of Dreams.
While Costner starred in the film which sees American players from the early 20th Century reappearing on a baseball diamond cleared from an Iowa cornfield, the Smart Village has a visual link to the ancient Pyramids only ten kilometres down the road in Cairo.
But instead of dreaming back 2000 years, the technology park is designed to take Egypt into the 21st Century. A half hour drive (if one is lucky) on the Cairo/Alexandria road leads you to mirrored glass pyramids, white walls and man-made lakes. It is home to some formidable international brands in technology – Microsoft, Canon, Hewlett Packard, Vodafone, Alcatel – and some local ones as well – Orascom, Xceed and Telecom Egypt.
During an interview in Davos on CNN Marketplace Middle East, Bill Gates talked about the ability to have technology help the Middle East region leap-frog against their more developed counterparts in Asia, Europe and the United States.
“Technology I think is very important now, whether it is to broaden the economies of these countries or just help them be more efficient in things they\'re doing”, said the co-founder of Microsoft. “Certainly if you look at the scale of investment there, making sure that the right software is done for banking, for tourism, for energy is important.”
Egyptian Prime Minister Ahmed Nazif is big believer in the power of technology and the architect behind the Smart Village when he was Minister of Communications and Information Technology (CIT). He likes the place so much that he still spends two days a week working on the outskirts of central Cairo, in part to stay in touch with business leaders and to enjoy the peace and tranquillity. It is the complete opposite of ancient Cairo, where economic growth of the last four years has only added to the legendary traffic and honking horns.
While there is a great deal of excitement about the oil and gas driven growth in the Gulf, Egypt and its neighbours in North Africa have tied together a string of solid numbers to date. Egypt for example, continues to grow at a pace of about seven percent with its foreign direct investment surging from $300 million dollars five years ago to over $11 billion dollars last year. The World Bank has recognised this cabinet’s work by awarding Egypt with the most improved reformer in its “Doing Business” survey, for its work in simplifying regulations and cutting red-tape.
Meanwhile, at the Minister of CIT, Nazif passed the baton to Tarek Kamel, his young protégé who, with blackberry in hand, is in a rush to build on the gains. There was so much demand for the industrial park, that he has introduced Phase 4 which will be the new home of financial services companies. Over a tea in his office this week, Kamel called the Village a "flagship of development of CIT in Egypt. It reflects the public-private partnership spirit; government and private sector have invested since five years."
His next big project will take place in Maadi, a location best known for its expatriate compound. Kamel sees a big future for business processing operations (BPOs) with a huge pool of educated, but often unemployed and under-employed youth. Think of Arabic, English and French call centers for European and Middle East banks and credit card companies and you get the concept.
That is all on the drawing board right now and I am sure it is not without frustrations and challenges. Now in the fourth year of reforms, the government is eager to have solid growth and foreign direct investment create more jobs and to reduce those still living in grinding poverty. One may not see them in suburbia, but they are impossible to miss when driving to an appointment in the city.
The cabinet knows that reforms have to be felt by those at the lower end of the earnings scale. The poverty level, those living on two dollars a day or less, remains stubbornly high and long serving members of this government know that political realities require more action.
“We are deeply concerned about those in Egyptian society that are not touched by the reform directly,” Youssef Boutros Ghali, Egypt’s Minister of Finance told Marketplace Middle East. “There are people below the poverty line reaching almost twenty percent. Like all developing countries, these reform programs will trickle down but they will not trickle down overnight. They will take time to reach those less privileged in our society.”
And that is what struck me this week during my visit. While we may cherish the history, grit and chaos of Cairo, one gets the sense that the legacy carries with it a heavy burden. The Gulf countries are building new cities off of blueprints in the sand, with much smaller populations, and with no ancient buildings and historical sites to build around.
With 80 million people (and growing fast) the challenge is a big one but so is the opportunity to utilise young Egyptians to build their own Field of Dreams.
What do you think? Email us at mme@cnn.com, or click on "add a comment" below.
read more...
Global footprints of sovereign wealth
This week will likely go down in the financial record books as the one which redefined how the world looks at sovereign wealth funds. It is also part of a bigger geo-economic shift underway, which lends itself to the East-East moniker, meaning the wealth and trade belt from the Middle East to China.
While we have been covering the power of these government funds, where they are seeking to make a mark and the new emerging players within this space, it is only now that these funds are flashing on the global radar.
It is challenging to get hard figures on the total government investment funds under management, but there are a handful of Western banks attempting to do so. Standard Chartered Bank places the value at around $2.2 trillion dollars. I personally think this is off the mark since the Abu Dhabi Investment Authority may have more than half that amount itself
SWFs - Big & Getting Bigger
· $2-3 trillion dollars in assets
· $10-15 trillion dollars by 2015
· Bigger than private equity
(source: Standard Chartered, Morgan Stanley)
More eye-popping clearly is the path ahead. If oil stays in the range of $60-$80 a barrel over the next five years, the amount will surge to $10-$15 trillion. To provide some context, the current sum is already bigger than the global private equity pool, which made all the headlines in the past two years with record buyouts.
Is this a new phenomenon? Certainly not. The Kuwait Investment Authority (KIA) can trace its roots back to 1953; the Abu Dhabi Investment Authority (ADIA) to the mid-1960s. While they traditionally deployed assets in government bonds and currencies, that trend has changed over the past five years and accelerated in the last six months.
Chris Wheeler, banking analyst at Bear Sterns, points to global wealth surveys to illustrate the point that liquidity from record oil prices has to find a home. “A lot of excess funds are being generated which the SWFs are having to invest somewhere and they are finding interesting opportunities in difficult times in the banking sector.” Wheeler, like many others, believes the often talked about recession in the U.S. will lead them to more bargains in other sectors.
This must sound familiar. Saudi Prince Al Waleed bin Talal bought stakes in Citigroup back in 1991 at the equivalent of $2.75 a share. Even at in the mid-twenty range it is today, he is (excuse the cliché) smiling all the way to the bank. He obviously thinks this latest downturn created a similar opportunity and so did others who jumped in this week. They are not traders, but investors who hold their stakes for years, sometimes decades.
Like the financial markets, which create buyers and sellers, this market and story will continue to evolve. One of the newer players on the scene, the Qatar Investment Authority, will re-emerge after its participation in the bid for U.K. supermarket giant J. Sainsbury, and Mubadala of Abu Dhabi has recently put itself on the map with its stake in investment banker The Carlyle Group.
G-8 Wish List
· Invest on commercial grounds
· Respect national transparency rules
· Compete with private sector fairly
(source: OECD, IMF)
As the old and new sovereign funds begin to compete for Western assets, G8 countries are attempting to establish investment standards for all this capital. The U.S. Treasury Department has lobbied to have the O.E.C.D., the Paris based think tank for industrialised nations, and the International Monetary Fund in Washington put forth guidelines for best practices and greater transparency.
That effort gathered momentum a few months ago, but the calls for concrete action have faded away, as the need for capital infusions on Wall Street rose rapidly.
The World Economic Forum in Davos next week will provide a good opportunity not only for us to talk to the Middle Eastern and Far Eastern players making waves in global financial markets, but also to those who are trying to regulate their actions.
As the old and new sovereign funds begin to compete for Western assets, G8 countries are attempting to establish investment standards for all this capital. The U.S. Treasury Department has lobbied to have the O.E.C.D., the Paris based think tank for industrialised nations, and the International Monetary Fund in Washington put forth guidelines for best practices and greater transparency.
That effort gathered momentum a few months ago, but the calls for concrete action have faded away, as the need for capital infusions on Wall Street rose rapidly.
The World Economic Forum in Davos next week will provide a good opportunity not only for us to talk to the Middle Eastern and Far Eastern players making waves in global financial markets, but also to those who are trying to regulate their actions.
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Venezuela nationalizes steel industry
President Hugo Chavez of Venezuela signs a decree ordering the nationalization of the country\'s leading steel producer, Sidor.
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Quietly Delivering Growth
President George W. Bush’s whistle-stop tour of the Middle East is designed to add urgency to the peace process and at the same time heal some business wounds with allies in the Gulf. Remember the Dubai Ports deal debacle? This visit is long overdue.
With instability between Israel and Palestine, the latter’s economy has ground to a halt. It does not help that there is internal friction within the Palestinian Authority as well. That inability to move has drowned out one of the more positive economic and business stories throughout the region; the performance of Israel’s economy. It has chugged along quite nicely, thank you; at 5 percent in 2006 and 2007 and 4 percent growth is projected this year, with the global credit crunch to blame for the dip.
This to me is quite surprising. While there is no shortage of coverage on the Peace Process and work by the Quartet, we hear very little about how Israel continues to expand. Prior to the bursting of the technology bubble in 2000, we heard a lot about Silicon Wadi. The country re-engineered its highly educated engineers and scientists and re-deployed them into technology. Many of them emigrated from Russia after the fall of communism, enriching the bank of creativity.
That was then, but I was unaware that 400 high tech companies were funded in 2006 raising $1.6 billion dollars. More than 100 Israeli companies are listed on the NASDAQ exchange and there is a special index tracking these stocks. There is no doubt that the capital was coming from Silicon Valley and private equity investors or major technology companies would then want to transfer those companies to the United States.
That is quietly changing, along with the mix of trade and the mix of expertise. Israel is no longer overly dependent on hi-tech. It has added biotech, pharmaceutical and specialist chemical companies to the mix. 46 percent of its trade is now done between Europe and Asia. This only makes sense to leverage its location.
So Israel is quietly performing with the help of its secret weapon, the quiet and competent central bank governor, Stanley Fischer. The name is familiar to those who have covered the Asian financial crisis of 1998. He was at the front of the storm as First Deputy Managing Director, offering the bitter medicine many of the countries did not want to take.
Like many of the other leading economists, the Zambian-born Fischer was educated at the London School of Economics before receiving his doctorate at the Massachusetts Institute of Technology (M.I.T.). During his career he also taught at the other bastion for economics, the University of Chicago.
Which means what for Israel? The country can certainly continue to diversify and look east to capture the growth from India to China. It should try to buffer its exposure to the dollar, which remains on shaky ground. And finally stay the course and pray for peace. The economy is in a good pair of hands and if a deal can be found over the next year, there is a dividend waiting. Fischer, like many others, believes that a peace agreement could add another 1-2 % of growth each year.
Who knows, it could even open the way to Israel’s economic integration into the Middle East, although at this stage, that seems difficult to imagine.
With instability between Israel and Palestine, the latter’s economy has ground to a halt. It does not help that there is internal friction within the Palestinian Authority as well. That inability to move has drowned out one of the more positive economic and business stories throughout the region; the performance of Israel’s economy. It has chugged along quite nicely, thank you; at 5 percent in 2006 and 2007 and 4 percent growth is projected this year, with the global credit crunch to blame for the dip.
This to me is quite surprising. While there is no shortage of coverage on the Peace Process and work by the Quartet, we hear very little about how Israel continues to expand. Prior to the bursting of the technology bubble in 2000, we heard a lot about Silicon Wadi. The country re-engineered its highly educated engineers and scientists and re-deployed them into technology. Many of them emigrated from Russia after the fall of communism, enriching the bank of creativity.
That was then, but I was unaware that 400 high tech companies were funded in 2006 raising $1.6 billion dollars. More than 100 Israeli companies are listed on the NASDAQ exchange and there is a special index tracking these stocks. There is no doubt that the capital was coming from Silicon Valley and private equity investors or major technology companies would then want to transfer those companies to the United States.
That is quietly changing, along with the mix of trade and the mix of expertise. Israel is no longer overly dependent on hi-tech. It has added biotech, pharmaceutical and specialist chemical companies to the mix. 46 percent of its trade is now done between Europe and Asia. This only makes sense to leverage its location.
So Israel is quietly performing with the help of its secret weapon, the quiet and competent central bank governor, Stanley Fischer. The name is familiar to those who have covered the Asian financial crisis of 1998. He was at the front of the storm as First Deputy Managing Director, offering the bitter medicine many of the countries did not want to take.
Like many of the other leading economists, the Zambian-born Fischer was educated at the London School of Economics before receiving his doctorate at the Massachusetts Institute of Technology (M.I.T.). During his career he also taught at the other bastion for economics, the University of Chicago.
Which means what for Israel? The country can certainly continue to diversify and look east to capture the growth from India to China. It should try to buffer its exposure to the dollar, which remains on shaky ground. And finally stay the course and pray for peace. The economy is in a good pair of hands and if a deal can be found over the next year, there is a dividend waiting. Fischer, like many others, believes that a peace agreement could add another 1-2 % of growth each year.
Who knows, it could even open the way to Israel’s economic integration into the Middle East, although at this stage, that seems difficult to imagine.
What do you think? Email us at mme@cnn.com, or click on "add a comment" below.
read more...
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