A Tribute to Andy Rooney: A Look into the UAE's Economy.

August 2, 2016 By in Finance Tags: , 1 Comment

It’s summer, it’s hot and who wants to wade through an 800 word article? So I’ll base this article on the infamous segment “A Few Minutes with Andy Rooney” from the hit show 60 Minutes, and I’ll simply give a series of light vignettes to whet the appetite and stimulate thought, without overwhelming the senses.

The UAE’s Telecommunications Regulatory Authority frequently bans voice and video over IP (VoIP), a cheap way to communicate with the world. This is significantly beneficial to the oligopoly of Etisalat and du. Yet a regulator is supposed to be protecting the consumers. Banning VoIP because it competes with regular phones is like banning email because it competes with faxes, telegrams and letters. Dear TRA, that was a plea to allow VoIP, not an excuse to ban email. It was also a polite reminder that the consumer is your client, not the telecom companies.

Continue reading →

A Little Reaganomics Please: Expansionary not Contractionary Policies

July 26, 2016 By in Economy Tags:

In April, news of a municipal fee was announced on residential rents for expatriates. Since the fee is a percentage of rent, this is, by definition, a real estate tax. This comes on top of the value-added and corporate taxes announced earlier. I wonder if there is some confusion between maximising taxes and maximising tax revenue. The difference is important.

The former US president Ronald Reagan oversaw one of the strongest economic growth periods in America. His plans, dubbed Reaganomics, were and remain hotly debated by economists. Understanding them is instructive. But first, let us agree on some terms.

Continue reading →

Ipic-Mubadala merger does not have to follow a template

July 19, 2016 By in Strategy Tags: , , 1 Comment

Ipic and Mubadala, two major Abu Dhabi investment funds, have been mandated to merge. The outcome does not have to be a single company. In this article I will look at an innovative option for the Ipic-Mubadala merger to result in more than one company and how such a multi-result merger can support Abu Dhabi’s Economic Vision 2030.

I recently wrote in detail on what strategies the NBAD-FGB merger could take and in a subsequent article I delved into a major challenge such a merger might face. The detail was possible because both NBAD and FGB are listed companies and have strong disclosure requirements.

When discussing Ipic and Mubadala, we are talking about two privately held institutions and as such there is less public information at this time. This does not stop us from conducting a thought experiment, if you will, to try to understand the options available.

The key issue we will look at today is that a merger does not have to be about acquiring market share or new business lines. A merger can be about rationalisation and refocus.

Continue reading →

NBAD and FGB's Merger Challenge: Work Culture

July 12, 2016 By in Leadership Tags: , , , 1 Comment

In my last article I talked about the two main paths that the merger of FGB and National Bank of Abu Dhabi could take. The first is simply extending the current business of each by using the path of acquisition rather than organic growth. The second is to trigger a radical redesign of the business model. I concluded that it made strategic sense for FGB and NBAD to take the second path. In this article I touch on how that can happen.

FGB and NBAD are banks and banks, in the end, are predominantly about service. The product part is simple. Money: you can deposit it with them and you can borrow it from them.

The price part, interest rates, is also simple. It has nothing to do with the cost of manufacture as banks don’t manufacture money and besides it is mostly electronic. No, price is driven by the human resources running the banks as well as market supply and demand of money. Since this is driven by people, we can conclude that banks are in the services business.

Continue reading →

Austerity doesn't work, we need an expansionary budget

July 5, 2016 By in Economy Tags: 1 Comment

Brexit drove me to review the European Union and see if there are lessons to be learnt, especially in light of the economic challenges some of the member states have faced. The conclusion I have come to is that it is frighteningly easy to make well-meaning mistakes that can destroy an economy.

It is instructive to compare the United States and the European Union and see what light it sheds on how the UAE might make decisions about its economy. A full analysis would require a book; I will focus on a few directional ideas that might inspire.

Continue reading →

Amid the Brexit hysteria: keep calm and cash in

June 28, 2016 By in Economy Tags: , 1 Comment

Britain’s referendum result on exiting the EU has been met with a flurry of responses from politicians and financial markets. The almost uniform negativity of the responses would, by itself, alarm the average global citizen. But I smell a rat.

I have a simple maxim that has served me well in life – when you want to know who won and who lost, listen for the most negative response. They are the losers.

Continue reading →

Company grief: when a company falls in the economy, does it make a sound?

June 21, 2016 By in Corporate Turnaround Tags: , ,

There is a well-known model on the stages of human grief called the Kubler-Ross model. I believe it can be the basis for a form of company grief, a grief that we are seeing in a growing number of companies during these difficult times. In this article I describe the seven stages of company grief – ignorance, shock, denial, anger, bargaining, depression and acceptance.

Continue reading →

Trade is critical to diversifying the economy away from oil

May 31, 2016 By in Economy Tags: , ,

The recent contraction in the economy, poor performance of SMEs and large layoffs in the UAE has made clear that the oft cited statistic that two-thirds of the UAE’s economy is non-oil related is incorrect. At least it is indirectly related to the price of oil. So how can the private sector further diversify away from oil? The answer is exports.

The economy of the UAE can never be independent of oil if it remains insular. With around one million nationals the size of the UAE’s economy, even with its ability to attract expats, will always be dwarfed by oil income in the near and medium future.

If this is the case then growing true non-oil GDP requires a re-think. One path to growth that is relatively independent of the domestic markets is exports. Export demand is dependent on the economies of international markets most of which will have low correlation to our markets.

Continue reading →

Consumer power requires unity

May 24, 2016 By in Finance Tags: ,

The editors at The National give me constant feedback on how my articles are received. A recent article of mine using game theory as a lens into the persistent over supply of banks in the UAE was widely read, garnering many hits on the online article. The National’s editors informed me that the interest was due to the consumer driven view of the article. In a follow-up article I proposed how shareholders could improve the sector via the inclusion of activist asset managers. Today I would like to touch upon how consumers, be they customers in the financial services sector or other sectors, might be able to drive improvements in products and services sold to them.

Sometimes one has to find a completely new solution. Other times one can look at analogies. In this case the solution actually exists in another market. It not only exists, it is extremely powerful. Consumers, if you have never heard of it please let me introduce you to the most powerful consumer protection product on earth – Consumer Reports, a magazine that tests, reviews and compares products and services offered in the American market.

Continue reading →