Business opportunities and the financial services industry in the GCC region

The Gulf Cooperation Council (GCC) region brings together the oil-rich states of Saudi Arabia, Oman, Qatar, Kuwait, Bahrain and the United Arab Emirates (UAE). The GCC economies have been growing rapidly on the back of rising energy prices and economic diversification that includes some $700 billion worth of development projects either under way or in the pipeline. The potential for international financial services groups is vast, in areas ranging from project finance to fast-expanding mortgage, consumer finance and private banking markets. Rapid economic growth and commercial diversification within the GCC region offer valuable opportunities for international financial services groups. GCC markets are increasingly being opened up to foreign investment and ownership. With $700 billion worth of developments either under way or in the pipeline, the GCC is now the world’s largest project finance market. The investment spans leisure, residential, infrastructure and industrial developments as the GCC seeks to forge a stronger and more diversified economic future. The real estate boom in Dubai and other emirates of the UAE is being increasingly mirrored across the GCC region. This includes Saudi Arabia, where the scale of new and planned developments is expected to overtake Dubai in the next five years. While some naturally question whether the boom is sustainable, demand continues to outstrip supply in most real estate sectors for now. Expatriates in most GCC countries can now own property, which is helping to open up a new mass market in mortgages. Owning property can also provide the right of abode and, from this, the attraction of low taxation and the right to set up businesses in the country of residence. Consumer finance is expanding as a relatively young and fast-growing population increasingly embraces consumerism. Key growth sectors include credit cards and vehicle financing. Islamic financial services are growing faster than the sector as a whole.
International groups are seeking to extend the range and sophistication of Sharia-compliant products and services into areas such as project finance and alternative investment funds. Recent milestones include the $3.5 billion sukuk (Islamic bond) issue in November 2006 by the Nakheel Group, the developers of Dubai’s Palm Islands and other landmark projects. This was the most valuable sukuk issue ever. The population of the GCC has accumulated $1.5 trillion in personal wealth. Clients increasingly prefer wealth and asset management services provided locally rather than offshore, which is leading to strong growth in these sectors. Dubai, an emirate of the federal UAE, has been hailed as an excellent example of economic diversification by the World Bank and has become a model for development in other parts of the GCC region. As such, Dubai highlights the opportunities this diversification and development could open up for the international financial services industry. Oil and gas represent only 6% of Dubai’s GDP and are due to run out in ten years. The emirate has therefore sought to become a leading regional and global service and trading centre – 1.5 billion people are within two hours’ flying time of Dubai. The first key opportunity for financial services groups lies in project finance. The International Monetary Fund estimates that there are some $700 billion worth of developments underway or in the pipeline in the GCC, making it the world’s largest project finance market. The transformation of Dubai’s waterfront exemplifies the ambition of this construction boom. It includes the near doubling of capacity at the Jebel Ali container port as the emirate seeks to develop shipping facilities comparable to Singapore’s. Other high-profile projects include the world’s tallest building and a series of man-made ‘Palm Islands’, one of which will be larger than Manhattan. Planned projects such as Qatar’s Lusail Marina and Kuwait’s Silk Island suggest that other GCC states are keen to emulate the Palm Island blueprint. Projects like the Palm Islands are providing thousands of new homes at a time when expatriates, who make up a majority of the population of the UAE, can now own property. Other GCC states have followed suit. This is leading to the emergence of a valuable new mass market in mortgages. As the liberalization of property ownership spreads across the GCC, the potential customers not only include the many millions of people from Asia and other parts of the Middle East who have come to work in the GCC, but also the increasing numbers of people from around the world who are choosing to take up residence in the region. Owning property can provide the right of abode and, from this, the attraction of low taxation and the right to set up businesses locally.
Retail Banking: The retail banking sector has expanded rapidly over the past five years and continues to gather momentum for expansion. The main focus of growth has been the higher end of the market – estimates show that customers with financial assets of more than $25,000 contribute more than two-thirds of retail banking profits. The mortgage market, which had until recently been relatively under-developed on account of restrictive property ownership laws, is now showing considerable potential as these restrictions are gradually relaxed.
Islamic Banking: Islamic banking is expanding faster than its mainstream counterpart. For example, the cumulative annual growth rate (CAGR) for deposits in Saudi Islamic banks was 17.4% between 2002 and 2005, compared to 12.9% for the kingdom’s banking sector as a whole. Growth comes from both new customers and those switching to Sharia-compliant products and services. Leading players in the GCC include Al Rajhi, the Kuwait Finance House and the Dubai Islamic Bank. 2005 and 2006 saw a wave of dedicated start-ups including the Al Rayan Bank in Qatar, which is already one of the largest Islamic banks in the world with capital of more than $2 billion. In addition, many local and international banks have or are in the process of introducing Islamic options for their customers. Banks offering dual conventional and Islamic products include HSBC and Citigroup. However, there are particular challenges in this market, including the different interpretations of Sharia compliance. Some customers may also wish to use a pure Islamic bank in preference to a ‘hybrid’ institution that also offers conventional products
Corporate Banking: Demand for corporate finance services in the GCC has grown significantly in the last two years and is expected to increase further in the future. Developments in the region are creating ever-greater demand for project finance. This demand could create openings for foreign institutions able to offer competitive financing. It is also likely to spur the continued growth in Islamic finance as exemplified by the Nakheel sukuk. Sukuks are Sharia-compliant asset-backed trust certificates. The Nakheel sukuk issue, which was underwritten by Barclays Capital and the Dubai Islamic Bank, was more than two-times oversubscribed.15 European investors acquired 40% of the issue, subscribers from the Middle East took 38% and the remaining 22% went to Asia and the US. Developments in the region are also increasing the number of business clients.
Private Banking and Asset Management: A GCC population of just 38 million has accumulated some $1.5 trillion in private wealth. In the UAE, for example, one in 80 of the population is a dollar millionaire. The high-net-worth individuals include both Arabs and expatriates. Around two-thirds of people with investment assets of more than $400,000 in the UAE are non-resident Indians, for example. This concentration of wealth is leading to intense competition among both regional and international corporations. Rothschild’s17 is one of the latest entrants, joining the private banking arms of such leading names as Citigroup and Deutsche Bank
Insurance: Insurance penetration is extremely low in the GCC by international standards. Growth has now picked up in the retail insurance market, albeit from a low start. Life insurance premiums are in particular likely to follow the generally upward trend in affluence. Recent years have also seen acceleration in demand for Takaful Sharia-compliant insurance services. Nevertheless, the small populations of these countries mean that the primary source of insurance business and focus of near-term market growth will continue to be the corporate sector

Leadership and Innovation: Charismatic and Innovative Leadership of Steve Jobs at Apple Inc

During the 2007 and 2008 Global financial crisis, Steve Paul Jobs, the now late co-founder of Apple Inc issued a statement to his employees at Apple’s International corporate headquarters in Cupertino, California. In quotes, he is remembered as saying, “We are in the worst economic environment since the Great Depression. However, we are determined to continue to make Apple the most innovative company in the world while increasing shareholder wealth. While hundreds of companies are firing employees, we have no intention of doing so. We will overcome this challenging economic environment and remain a strong innovative company. While others will decrease spending, we will increase spending on R&D and come out way ahead of our competition in the long run”
(Steve Jobs and Apple, Inc, Todd A. Finkle, Michael L. Mallin, Journal of the International Academy for Case Studies, Volume 16, Number 7, 2010.)
This article takes a look at the leadership, innovation and culture, the vision and the relationship that Steve Paul Jobs created at Apple Inc over the past decade. Apple Inc was once a failing electronics company with share prices as low as $2. But this was before Steve Jobs was invited back to Apple and reinstated as CEO of the then failing company.  Steve Jobs was a very aggressive business man and he had an intellectual and methodical approach to marketing. He had great confidence in himself, a controlling personality and an eye for detail, but even more, he was a perfectionist. It was these characteristics and traits that lead him to take Apple to the forefront of technology with cutting edge products like the IMac, the IPod, the Iphone and the Ipad. Under his charismatic leadership, he embedded a culture and created a following among employees of Apple and customers alike. This loyal following was the result of value congruence between himself and his employees. Jobs and his employees shared common values and a common vision for Apple and Jobs was able to keep this vision alive through his skill as a good communicator and his ability to motivate, support and reward his employees. He was able to guide Apple by using different styles of leadership. As a charismatic leader, Jobs was able to communicate what a product should do and look like. He was able to energize and accelerate innovation processes and the release of new products to the market.

As a result of Steve Jobs charismatic and innovative leadership, the Ipad was born and filled a technological gap in the lives of every household that we didn’t know existed.  As a strategic leader, Steve Jobs used his power and the cash reserves of Apple to innovate, and commit employees to a culture of innovation. During his leadership, Apples stock price climbed to $200 by 2007, slipped to $90 in 2008 due to the global recession, but by 2011, the stock price had climbed back up to a phenomenal $480. Under the leadership of Steve Jobs, Apple entered into an agreement with rivals Microsoft, and the result of this was an increase in sales of Apples Mac. Other strategic moves that were initiated under his leadership were the “store within a store concept” and the partnership with CompUSA. Jobs reduced costs by outsourcing the manufacturing of most hardware components. In 2007, Apple launched the Iphone with AT&T in an agreement that gains Apple 10% revenue from internet subscriptions. Steve Jobs was one of the most innovative leaders of our time and he was also one of the most charismatic. He understood the importance of Leadership, Innovation and value congruence as a CEO, and he understood the importance of sharing his vision with his employees and the rest of the world. As result, Apple and Steve Jobs, through the IPod has changed the way we listen to music, through the Iphone has changed the way we communicate, and through the Ipad has changed the way we see the rest of the world.

Innovation can be defined as a marketable invention: the act of generating an idea and transforming it into a new product, service, solution, or business model that can be sold to customers. (Leadership and Innovation: Learning from the Best, Roland Bel, 2010 Wiley Periodical, Inc) Apples former CEO was one of the people that meet this definition through the products that he created. Steve was able to excel on apparently conflicting skills of creativity and discipline. As an Innovative leader at Apple Inc, Jobs was able to accept risk, uncertainty and failures. He had great degree of passion for electronics and his products. He proactively searched for external technologies and ideas, and this can be seen in the alliances that he formed with Yahoo, Google, Microsoft, AT & T and a list of other companies. Jobs didn’t just have the courage to startup a project or develop a new product; he also had the courage to stop projects that were not productive. He had a talent for attracting innovators and guiding winning teams. As an effective innovation leader, Steve Jobs ensured that the organization secured its desired outcomes by creating win-win situations that rewarded the right behaviors and performances. (Value Congruence and charismatic Leadership in CEO- Top Manager Relationships: An Empirical Investigation, Sefa Hayibor, Bradley R. Agle, Greg J. Sears, Jeffrey A. Sonnenfeld, Andrew Ward, Springer 2011.) Apples dominance of the Tablet Pc market has been so strong that rival companies like HP have had to pull out of the Tablet PC market. The Only Company to launch a challenge to Apples Ipad and Ipad 2 in 2011 is Amazon, with its smaller sized and lighter Tablet Pc, which sells for half the price of Apples Ipad. Competition in the Tablet PC market has been so fierce that HP has had to sell over its version of the Tablet PC to its employees at $99, compared to Apples $420 for the Ipad. Sadly, Steve Paul Jobs passed away in October 2011 at the age of 56 after battling pancreatic cancer for over 7 years. The Implications of his work and now his death and departure from apple are immense. However, he has instilled a culture of charisma and innovation in his employees and has brought the world together through the products that he created with so much passion.