FINANCE

Global Climate Change Dangers

           Doha Bank as one of the major sponsors of the Doha Green Conference has shown its dedication and commitment towards greening the environment. This is the first Doha Green Conference in Qatar, held at Moevenpick Towers and Suites which focuses on sustainable buildings, water and renewable energy. It was attended by industry professionals, businessmen, Government, NGOs, private and public sectors.


           The Conference also covered Market Transformation towards Sustainability, Setting new Qatar specific sustainable building code, Green Building Case studies, the Importance of Marine Environment for Urban Development, Sustainable Water Management, Renewable Energy and Recycling Strategies.

           The two-day event was organized by Sesam Business Consultants in collaboration with the Friends of Environment Centre and UNESCO. Dr. Saif Ali Al Hajri, Chairman of Friends of Environment Centre, Dr. Benno Boer of UNESCO, Saleh Sourour of the National Commission and R. Seetharaman, Doha Bank Group CEO has attended the event. Speaking at the Doha Green Conference lately, R. Seetharaman stressed the dangers of climate change currently the world is facing and what can be done to help save the environment by financial institutions and other industries hand in hand with the communities in which they operate. He also stressed the need to drastically reduce the environmental impact we are making in our endeavors through reimagining and redefining them in order to leave a lesser impact.

            He further briefed the conference about numerous initiatives Doha Bank has taken in helping save the environment under the Bank’s Green Banking Initiatives. Seetharaman urged financial institutions to take leadership in help saving the environment and be driven by green values in conducting Banking activities. Banks just as any other business leave a carbon footprint on the environment through consumption of fossil fuel and forest reserves in many of its activities. Reducing that carbon footprint has to be given a prominence by banks while taking proactive measures to lead our community to follow us in helping the environment, using the unique social standing of a bank. Doha Bank, as a forward-thinking and socially responsible bank is on the forefront of environmental advocacy against global warming and climate change, local air and water pollution, waste management and loss of biodiversity. The Bank is vision-driven supporting its future activities, progress and expansion with more diverse portfolio by integrating environmental and social considerations into its product design, mission policy and strategies. It supports environmental sustainability and education by reaching out on both the public and private sectors to act together on domestic and global environmental issues, key challenges and sustainable development.

           R. Seetharaman, explaining the groundbreaking initiatives taken by Doha Bank to make its products and processes more efficient highlighted following as key initiatives the Bank has taken in the recent past to be a greener bank that cares for its stakeholders who together will benefit from such green initiatives.

            R. Seetharaman urged greater support from people, governments and agencies, and private sector in joining hands to make a lasting positive impact on the environment and stressed the need to be responsible corporate citizens.

ICD Adds Value, Not Just Financing

             The Islamic Corporation for the Development of the Private Sector (ICD) has long prided itself on its reputation as one of the most successful Islamic institution that contributed to the development of the private sector in its member countries.

Tatarstan is one of the most industrialized advanced republics within the Russian federation. It has good industries and great human resources in terms of research and development. Islamic Development Bank (IDB) has organized investment conference in Tatarstan in 2007. The idea is to market Tatarstan as an investment destination for its member countries. "That time, we mobilized one hundred twenty investors and they came to Tatarstan and spent three days. They were able to see the business opportunities over there and they also discussed the enabling environment for investment purposes. Their conclusion was that they want IDB group to support them to establish an investment company. From that time, we started the process by conducting a feasibility study," says Khaled Al-Aboodi, Chief Executive Officer of the Islamic Corporation for the Development of the Private Sector (ICD).

The feasibility study was completed and we were able to close the capital of the company which is 3 million dollars. "We believe that this company will be able to initiate projects in different sectors of the economy of Tatarstan. Despite his busy schedule, Khaled Al-Aboodi was able to squeeze his agenda and deliver a key-note speech at the recent World Islamic Banking Conference. His keynote speech focuses on the characteristics of Islamic banking.

"As I mentioned, people when they mention Islamic banking, they think of the liquidity in the system that needs to be freed or taped to investment projects around the world. My statement was that this is fine but we also need to look into Islamic finance more closely and see the features of Islamic finance. The issue is not just liquidity; the issue is that Islamic finance is a great way to develop countries. As you know, there are a lot of development finance institutions in the world. There are multilateral, regional and bilateral institutions, all of them with the mandate to develop their countries if they are coming from third-world developing countries, or developing other countries if they are coming from developed countries in the west. My message was to look into Islamic finance and the way that Islamic finance is functioning," he adds.

When it comes to development, it has been proven that Islamic finance is pro development. It enhances development. "That’s my message. Yes, the liquidity is there in the system and it could be freed to finance different projects. But it’s more than just liquidity; it’s the way by which Islamic finance is working" Al-Aboodi notes.

There is a close relationship with the development because of the sense of partnership between the financier and finance. While plenty of financiers in the world are looking closely at the present global financial meltdown, ICD’s CEO also believes that it will take some time to see a complete recovery.

"Of course, there are signs of recovery here and there but probably it will take 2-3 years to go back to the pre crisis phase especially that there are a lot companies from the private sector that were hit badly by the crisis, some of them went out of business. Now to bring them back to business it might need some time. With the high unemployment rates in most of the industrialized countries, one would expect that it would take time to redeploy and to go to pre crisis level. Of course, the G20 is working very hard and they are meeting biannually to try to address these issues, the G20 includes three countries, which are Saudi Arabia, Turkey and Indonesia that are members of IDB Group. Each member country has its own stimulus package. That package has helped a lot in terms of reducing the effects of the crisis and it’s expected also to play a bigger role going forward in restoring growth to these countries," he says.

Financially, the region is safe except there are slight financial problems in Dubai. But the kingdom of Saudi Arabia is doing fine. It has new universities, new cities and new projects.

"At least for Dubai, the issue was very clear which is the excessive investment in the property markets, which was huge enough not to be absorbed by the local demand, so it was initially directed to international investors. For the other countries, part of these big spending on the infrastructure, building universities and other projects is due to the stimulus program that they have. So this was meant to lift the spending and demand side, so that country’s economy does not get affected by the crisis. Some member countries had some bubbles before the crisis, so they are suffering more. Ironically, some member countries which were not integrate with the world economy before the crisis, are suffering less. So I hope this is not the message for countries not to be integrated into the world economy but the message is that if you have good economic policies and prudent measures in terms of what to promote in terms of investment then you are on a solid ground to avoid any bubbles because the consequence would be severe if you have a crisis like what we had, which is of global nature.," he comments.

"We see that the private sector in our member countries suffer because banks’ financing declined. A lot of banks in our member countries were depending on the line of financing coming from international banks. So once this crisis happened, international banks were not able to extend the line of financing as they used to do. As a result, these local banks were not able to finance projects of the private sectors at these respective countries so the private sector suffered. The message is: ‘as a country, try to be prudent as much as possible, be committed, and avoid bubbles that fuel some sectors in the economy. I hope that everyone will draw lessons from this crisis," Al-Aboodi details.

In June 2009, ICD has doubled its capital from five hundred million dollars to one billion; also the authorized capital was raised from one billion to two billion. "It was not also a normal situation, because the member countries have also obligations during this crisis but they understood our potential role, which is helping and providing support to their private sectors. Hence, we are very confident that we’ll close the whole capital increase. This will not only provide us with additional capital, but it will also strengthen our financials so that we will be able to leverage more from the market. Our strategy will be leveraging more from the market so that instead of only using our capital in projects we will be mobilizing three to four times that based on the quality of projects that we will be doing," he adds. So going forward, ICD is growing in size, growing also in focus to sectors.

"There has been a time when we were investing in all sectors, now we would like to see the comparative advantage in each country and try to be part of enhancing the competitive advantages of our member countries. I’m very optimistic about the future of ICD; countries have started to realize the benefits of having ICD. In fact, during the WIBC, we signed an investment company in Tatarstan which was sponsored by ICD and the government to allow investors to come and invest under the umbrella where we exist." ICD has a lot to offer in terms of giving the investors the confidence to go and invest in different countries. In fact, ICD’s objective is to support the cross border investments among its member countries as long as the project is feasible and the visibility study is sound.

ICD provides financing only to private sector and it does not finance governments. "We’re not competing with local banks. If the local banks are providing financing to their local projects or local businessmen then we are very happy. We compliment local bank. There are sectors that are not attracting the interest of financiers locally then we can finance them. We’re adding value by providing additional financing. Certain local banks sometimes are not keen to finance green fields and we do finance green fields. Furthermore, a number of businessmen also insist on having Shari’ah compliance financing. Again, we’re not financing any project," he says.

"Some projects are not adding value to the development of the country, we may not finance them. ICD makes sure that each time it finances projects there should be a development impact on the economy. We need to make sure of the capability of the company to repay and that is why we may have also to provide sometimes technical assistant and consultancy," he affirms. ICD tries to add value, not just financing.

DIFC”s 1st Report On GCC Monetary Union

            The Dubai International Financial Centre (DIFC) last month released a report assessing the progress being made by GCC countries to achieve the convergence criteria for a GCC Monetary Union (GMU) that were endorsed by the Supreme Council of the GCC at its 27th session held in Riyadh in 2006. The report is the first in a series of reports to be released by the Centre focussing on issues affecting the region’s economy.

The report, “An Assessment of the Progress towards GCC Monetary Union”, states that GCC countries remain on schedule to meet the imposed requirements by 2010, but identifies four key policy issues which need to be addressed for the successful launch of the GMU. “Firstly, there needs to be an institutional and governance framework to ensure smooth, transparent and effective decisions on the conduct of monetary policy and other central bank policies, including the mode of operation of the GCC Central Bank. 

Inflation should be the priority item on the policy agenda: there is need for a change in monetary policy towards inflation targeting, with monetary policy geared to maintaining inflation within an announced target range.

The GCC countries will need to invest in building their statistical capacity, in order to provide harmonized, comparable economic and financial data, to support the GMU and the Gulf Common Market.

The GMU, if it is to be achieved and serve its purpose, needs to be supported by investments in financial infrastructure (including legal and regulatory), payment systems and the development and linkage of money markets and capital markets to ensure a uniform interest rate and the swift transfer of funds throughout the GCC.”

However, once these issues are addressed, the report states that the GMU will add significant value to the region’s economies: “The GMU will strengthen the commitment of GCC countries to regional economic integration. The GMU should be the central policy anchor, extending the benefits of currency stability to financial markets, industries and citizens, by fostering more intense trade relationships, linking the capital markets and attracting international capital.”

Gulf Holding Company profits at KD5.78m in 2008

              Kuwait-based Gulf Holding Company (GHC) K.S.C. (holding) announced a net profit of KD5.78m ($21.61m approx) for the financial year 2007-08, with earnings per share at 7.51 fils, total shareholder's equity at KD96.10m and total value of assets at KD185.00m.

Subject to approval by the Annual General Meeting (AGM), the Board of Directors has proposed the company's maiden dividend of 10% as bonus shares.

Commenting on GHC's performance over the three years since it began operations, Chairman Abdul Rahman Al Jasmi said: "Despite the worldwide turmoil in the financial markets, 2008 was a noteworthy year for Gulf Holding Company and we are pleased with the growth in the annual revenue the company has achieved over the past three years. This sterling accomplishment is evidence of our sound corporate values and the strong foundation on which the company is built, with our management team exhibiting a remarkably innovative approach to risk management during these turbulent times."

"The year gone by has witnessed the implementation of some of our most ambitious plans, including the highly successful listing of our subsidiary Villamar Sukuk Company Limited's $190m sukuk bond issue on the Dubai International Financial Exchange (DIFX). Another significant initiative was our foray into the fast-growing North African market through our acquisition of the 400,000 sq m Touristic Zone of the Royal Resort Cap Malabata project in Morocco, where we are in the process of developing the Euro 260m mixed-use Villa Royale project as part of our exclusive Signature Series," Al Jasmi added.

Ahmed Al Ameer, Vice-Chairman and Chief Executive Officer, GHC, said: 
"GHC is well-attuned and responsive to the business dynamics of the market as well as the investment needs of its discerning clients. Our financial results clearly reflect the prudent and rational approach we have taken to successfully chart the Company's path to stable and sustainable growth and development. Our team has achieved tremendous progress in executing our business plan under recessionary conditions, thereby ensuring strong growth in revenues and a healthy balance sheet that promises stable long-term returns for our stakeholders." 


One of the flagship projects in GHC's current portfolio is the $650m, 35,900 sq m Villamar @ the Harbour at Bahrain Financial Harbour, which is considered to be Bahrain's most exclusive residential complex. 

The Euro 260m Villa Royale, GHC's maiden venture in the Kingdom of Morocco, is on the fast-track with the foundation stone being laid within two months of the announcement of the project last year at a special event attended by the Wali of the Tangiers government, Mr. Mohamed Hassad, high-level government officials, investors and members of the media.

GHC is currently in the process of listing itself on the Kuwait Stock Exchange, its long-term vision being to diversify into a trusted global holding company offering intelligent and value-driven investment products and services. In pursuit of this vision, it has drawn up an ambitious expansion programme which will see it covering the GCC region in the near term and the key markets of North Africa and South Asia. 

To support its expansion and diversification, the company will be opening more offices in the region and will foray into the telecommunications, energy and logistics sectors, in addition to its continuing focus on real estate development.

Adnan Yousif Wins Islamic

              WIBC was convened under the Patronage of HRH Prince Khalifa Bin Salman Al Khalifa, the Prime Minister of the Kingdom of Bahrain, and the awards were presented by H.E. Rasheed Al Maraj, the Governor of the Central Bank of Bahrain. Presented each year of the past 16 years to industry leaders who have distinguished themselves in the field of Islamic Finance, the World Islamic Banking Conference (WIBC) Awards are among the oldest and most prestigious in the world.

The Islamic Banker of the Year was awarded to Adnan Ahmed Yousif, President & Chief Executive Officer of Al Baraka Banking Group. In addition to this role leading the Group through the challenges of the global financial crisis, Yousif has also dedicated himself to several other key strategic initiatives in the broader interests of the Islamic finance industry. Furthermore, in his capacity as a Chairman of the Union of Arab Banks, Yousif has offered new proposals and espoused strong support for the future health of the banking industry. The recipient of this prestigious award is voted by his peers in the industry with the results audited by Ernst & Young. Yousif is the first person to win the Islamic Banker of the Year a second time; having first won it back in 2004.

The ceremony was attracted international and regional industry leaders. More than 1,200 delegates from over 50 countries attended the 16th annual WIBC, the World’s largest and most influential gathering of Islamic Finance leaders.

An Evolutionary Market

            Around the globe, there are strong signs that the recession may be easing and only when this is evident people will start to look for innovative products, and attractive investments.

The shareholders and management team of Khalijia Invest, a Riyadh based Shari’ah compliant investment bank, were counting on this fact at the time when they decided to establish the company. Dhafer Salih Alqahtani, Deputy CEO of Khalijia Invest has great expectations for his company especially its Corporate Finance and Asset Management business and he believes that the timing is right for launching the firm’s operations as well as introducing new funds.

Commenting on the forthcoming launch of a number of funds, he said "our plan is to capitalize on the fact that the market valuations are reasonably low and offer attractive buying opportunities. For this reason among others, we have decided to launch these two funds and we are planning a further launch of four additional new and innovative funds during the year 2010. We remain committed to this strategy as we believe it will provide our investors with an excellent opportunity to capture attractive returns. In short, we are confident of the fact that the market is on its way to recovery during the coming years of 2010, 2011 and 2012," says Alqahtani. Khalijia Invest is a new entrant to the Saudi market, with big ambitions and plans. "We have ambitious plans to build the firm into one of the leading investment banks in Saudi Arabia. Our company and the prominent shareholders behind it are determined to see the firm develop into one of the major players in Saudi Arabia, as well as the GCC" he notes.

Commenting on the potential impact of the events surrounding Dubai World on the development of Islamic financing, Alqahtani stated "first of all, the problem did not stem from the fact that Shari’ah compliant debt (Sukuk) was part of the obligations of Dubai World and its affiliates, thus there will not be any major impact on the development of the Shari’ah financing industry, besides we should reject that notion. Dubai is strong and Dubai World is only one of the assets which are owned by Dubai. What happened with Dubai is a case of debt services default and it is not yet a Technical default. Dubai has only asked to reschedule the debt, due to its cash flow and valuation. Thus, Dubai is not defaulting on its obligations. What happens in Dubai is not a sovereign default. What went wrong is that Dubai managed the communications on this issue in a less effective manner. They didn’t consult their Sukuk Unitholders before they announced the news. Why? This is the biggest question." It was the suddenness of the news that shocked the market and it was caught off guard. And after the storm became clearer, everything went back to normal. "So as far as I’m concerned, there are no major impacts on the area’s economy, moreover Abu Dhabi will not let the issue escalate to a default level as this issue is a sovereign matter. Dubai is moving on; hopefully it passed the bump in the road, in fact the uncertainty provided a good opportunity to accumulate Nakheel Sukuk" he adds. Alqahtani elaborates further " the lesson to be learned from Dubai’s incident, is that the region has to develop bankruptcy regulations which do not exist yet, in order to protect businesses from creditors when things start going wrong."

On the northern end of the Gulf, the Kuwaiti market never rose to our expectations; Alqahtani believes that there is still the issue of regulations and politics to be addressed. Therefore, as long as that’s in the way, nothing major will evolve from Kuwait as Kuwait‘s economy unfortunately is still behind in many areas despite the fact that it is the 2nd largest oil producing country of the GCC. Dubai has matured as result of the burst real estate bubble, that resulted in the recent drop in the real estate prices but he believe that Dubai is already beyond that though the real estate is still a major asset class of Dubai’s economy.