A Random Walk through UAE Economic Data

August 30, 2016 By in Economy Tags: ,

The news on the economy continues to be grim. I went searching for data to help us understand what is going on. I was surprised at what I found. You’ll have to read the article to find out if the surprise was pleasant or not.

In the absence of a team of research analysts to mine the data that I need (free marketing anyone?) I need to use what is available. One of the best sources of aggregate economic information is provided by the Central Bank of the UAE, available for free on their website.

As a start I took a look at their monthly statistical bulletin for June 2016, which they note is preliminary. I decided to look at some of the more oft repeated mantras and see if the data matched. Looking at what is happening with the banks should give us a good idea at what is happening generally.

One of the scariest pontifications is that the government is withdrawing its deposits, thus squeezing the economy by limiting the ability of banks to lend. Government deposits increased to 184 billion dirhams up 14% from 161 billion one year ago in June 2015. So, no, the government is not withdrawing deposits, it has added to them substantially. Pleasant surprise.

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GREs versus the Private Sector in the UAE

August 23, 2016 By in Government Tags: , , 3 Comments

Every once in a while I decide to torture myself and rummage through the IMF’s databases looking for interesting research and analysis. When I found a Selected Issues UAE Country Report by the IMF, I thought I’d try my luck.

The report, published this month, begins by looking at government-related entities (GREs), which is anything that the government owns shares in. It is important to note that the IMF repeatedly warns that it does not have all information on all GREs. It looks at about 60 companies, although one should bear in mind that the government holdings in some are too small to have any influence.

One of the early IMF comparisons that is striking is the return on assets (ROA) of the non-financial corporate sector across GCC countries over the period from 2007 to 2014. The UAE at 8.1% a year is higher only than Kuwait. Saudi Arabia at 9.6 per cent is about a fifth higher and Oman’s 13.3% is more than three-fifths higher. How then are we the commercial hub of the GCC?

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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