Interview with Dubai One
23 Oct 2010
PK Gulati, President of TiE Dubai speaks to Dubai One about participation at GITEX and how DWTC and TiE have collaborated to promote new technologies and companies to a world audience.
The interview:
PK Gulati
Innovation critical to Dubai’s success
13 Oct 2010
A lot has been said and seen about Dubai having built something out of what was considered nothing.
A long time ago, its founders started a tradition of welcoming people with diligence, ideas and perseverance to come here and prosper, which has continued in its various reincarnations. In recent years, its speed of growth and buildings evoked the envy of many a competitor and as the boom slowed down, the hankering began. While there are some areas where more prudence would have been desired, a lot of pioneering work often gets criticized. It does not require a rocket scientist to understand that time has come to reinvent and rebuild on the strengths, which are many, and build on its long tradition of entrepreneurial innovation.
Like our founding fathers, it’s time to welcome the creators. Creators are those who look beyond the ordinary and build things that leapfrog them and those around them into prosperity. Be it artists, designers, programmers, thought leaders or free thinkers – we need more of these to come and make Dubai the beacon of creativity and creation in the region. Remember a majority of jobs and opportunities are created by small businesses, those with less than 20 people. Reduction of licence fees, visa costs, rentals and front loading of the setting up process will make Dubai attractive for a lot of such people.
A case has often been made for the economic downturn having made Dubai an unattractive market. But then Dubai was never a local story – it was the best gateway to the whole region. The strength of its infrastructure, geographic location and connectivity are beyond compare, despite the financial downturn and impossible to match by any other city, by far.
Building on strength
Let’s build on this strength to remove all hurdles to its success. Let the government consider removing all barriers to setting up new ventures, and actually encourage small companies. In the past large corporations have had an advantage of being able to negotiate better terms due to their clout, Let’s turn it in favour of innovation and enterprise. Remove the link between license and real estate and the overemphasis on transaction-based clusters.
The downturn has made business in these clusters unviable and counter-intuitive to enhancement of small and medium enterprises (SMEs). Encourage the filling up of empty real estate by people who will actively commit to create, bring innovation to the fore and create jobs and support the economy.
Let their success be counted by the number of real partnerships and enterprises they generate with the national youth. Dubai was built by people who thought outside the box – encourage this pioneering spirit by reiterating the need for such initiatives. New leaders of the national workforce need to be guided, but at the same time encourage them to think anew and not to fear failure, nor be afraid to air their ideas.
What we need is a change in sentiment to one that is encouraging, inspiring and full of positive ideas for a future that beckons. Undue emphasis has been given by some quarters on the odd headline emphasising the eternal tussle of tradition and the drive to being a modern metropolis. With growth and modernization comes a lot of responsibility and balancing the yin and the yang is a delicate are. But, in the drive to excellence we need to focus on the larger goal and probably be prepared to such instances being blown out of proportion.
What will speak louder than anything is our success to build on our strengths to achieve the pinnacle in our carefully chosen areas of excellence. The new generation is not afraid of hard work, in fact, it revels in challenging times. It’s time to channel their drive and power through the guidance of the more experienced into making Dubai cement its position as an unparalleled hub of innovation, entrepreneurship and creativity.
This article originally appeared on Gulf News.
Emiratis share ownership in 95% of firms
12 Sep 2010
UAE nationals share ownership in 108,035 companies or 94.9 per cent of the 113,832 registered in Dubai (outside the free zones), according to Dubai Chamber of Commerce and Industry. The total number of companies registered in Dubai exceeds 135,000, including offshore companies and those registered with free zones. However, in terms of sole ownership, Emiratis own only 22.31 per cent, or 25,400 companies.
Indian investors rank second with partnership in 20,038 companies while Iranian and Pakistani businessmen share ownership in 7,634 and 6,532 companies respectively. This is under a complex companies ownership law that restricts foreign shareholding in a company to 49 per cent.
British and American expatriates share stakes in 2,200 and 997 companies respectively while Egyptians and Iraqis share stakes in 1,200 and 1,065 businesses. Bangladeshis rank ninth with shares in 752 companies while Germans own stakes in 546 companies.
Sleeping partner
However, analysts said the numbers might not reflect the actual ownership. Prasant Gulati, secretary general of the Indian Business and Professional Council (IBPC) said: “In such a complex companies law, it would be difficult to gauge the real numbers as most companies under the UAE nationals are actually owned and run by the expatriates. “By any count, the largest investor group is Indians. This does not reflect,” he said.
However the Dubai Chamber of Commerce and Industry said most companies with more than one shareholder were run by foreigners, with the Emiratis remaining inactive as a “sleeping partner” for an annual fee starting from Dh3,000. The Emiratis relinquished management rights by issuing a power of attorney in favour of the expatriate partner, either designated as managing director, partner or general manager. The partnership was renewed with the fee every year. While the sleeping partner remained responsible for labour approvals, visa and immigration issues, the expatriate partner undertook risks, finances and losses and gains.
Despite these limitations, the number of companies was growing, regardless of the current economic slowdown. “In the first half of the year, 5,098 new members joined Dubai Chamber, which is an 18.9 per cent increase from 4,289 in the same period last year,” said Dubai Chamber of Commerce director general Hamad Bu Amim.
UAE nationals also took an active role in some companies where they shared the risks and profits along with their foreign partners. These companies include Limited Liability Companies (LLCs), Establishments, and Professional Establishments, and did not include those registered with the various free zones in the emirate. Bu Amim said raising the foreign investors’ ceiling could help change the equation. “We expect increasing the share of foreign ownership to improve the appetite of foreign investments to come to UAE markets.
However, we need to keep in mind that higher ownership is not the only element that guarantees more FDI, there are other issues such as investors’ protection, cost of doing business, laws of dispute resolutions, bankruptcy law, etc.,” he said. “We also think that such increase of foreigners’ ownership stake should be restricted to certain sectors that the country would like to grow, or know-how and technology we like to attract, and limited to flow of high capital in hundreds of millions of dirhams.”
Main business
Although the Department of Economic Development (DED) remains the main business licensing authority in Dubai, it remains mandatory for registered companies to join the Dubai Chamber. Foreigners are required to forge a partnership with UAE nationals in order to obtain business licences under various categories. Foreign investors can, however, enjoy 100 per cent ownership in companies registered with free zones.
More than 20,000 companies are registered with about 20 free zones in Dubai, where companies are largely owned by foreigners. Apart from that, there are 10,000 offshore companies licensed by three offshore licensing bodies.
Foreign investment in free zones is growing faster than those outside the free zones. Dubai Airport Freezone (DAFZ) reported 63 per cent growth in sales during the first half of this year, while 875 new companies registered with Ras Al Khaimah Free Trade Zone (RAKFTZ) during the same period.
“Interest in free zones among foreign investors remains high. However, they invest in non-free zone licences only when they are required to do business within the country,” investment adviser Jitendra Gyanchandrani, chairman of JCA business consultancy, told Gulf News.
This article originally appeared on Gulf News.
Stock options could benefit UAE companies
7 Sep 2010
Giving employees a share of the business through stock options are an important incentive for staff and increases the resilience of a company during an economic downturn, according to a recent report by Cass Business School, in London. However, this staff incentive is not easily available in the UAE. While EOB’s have proven to be resilient during the downturn, the number of business in the Middle East offering this business model are much less common compared to the UK or US due to the local ownership regulations. In most cases, stock options for employees are simply absent.
“The set up in the UAE is not very conducive to employee-owned companies as our law here does not support stock options. It’s not easy to build mutli-levels of shares and it makes it difficult for people to use share holding as a form of incentive for employees,” Prashant Gulati, the secretary general of the Indian Business and Professionals Council in Dubai, told Gulf News.
While EOB’s have proven to be resilient during the downturn, the number of business in the Middle East offering this business model are much less common compared to the UK or US due to the local ownership regulations.
Part ownership
An EOB is a business that is owned in whole or partly by its employees. Employees are often given a share of the business after working with the company for a certain period. If local companies choose to implement this option, an offshore structure will have to be created which can be complicated and expensive.
“Although it is possible to build an employee-owned business in the UAE, the sponsorship model, the majority expat population, the transient nature of the work force, and company law requirements create an environment in which employee-owned businesses are more challenging to build and run,” Dr Armen V Papazian, financial economist and CEO of Keipr, a consulting firm that specialises in business analytics and intelligence told Gulf News.
The UAE business landscape is dominated by government owned corporations and family conglomerates which are not the typical candidates to introduce employee-ownership. Medium enterprises, which tend to be located either in free zones or as domestic companies set up in partnership with nationals have owners as employees for visa sponsorship purposes but the vast majority of them are not typical employee-owned businesses, Papazian says.
However, international companies such as Mott MacDonald a management, engineering and development consultancy that have extended their EOB model to the Middle East, say they are experiencing success.
“The EOB model has aided our growth in this market, as expansion is financed through the company funds with a confirmed policy of growth decision making. The model also provided us with more resilience during the economic downturn. We have been able to support our clients through difficult times, with a view to long term business relationships,” said Paul Looker, from Mott MacDonald. “In the Middle East at present many of our publicly owned competitors have been under stress with their stock market positions, so being structured as an employee-owned business has been a major benefit for us.”
“Resilience … has been neglected as a crucial aspect of company performance over the past two decades. Instead, business strategy and public policy have been dominated by an unremitting focus on maximising share value.” said Joseph Lampel, professor of strategy and entrepreneurship at the Cass Business School, London.
This article originally appeared on Gulf News
Business Councils Vital Lifeline for New Entrepreneurs
25 Aug 2010
Foreigners wishing to set up a business here can feel daunted. This is where business councils representing their country of origin can help. “In a country where a support network is so important, no small or medium enterprise can succeed without the help of others to understand the environment, local customs, and for contacts with private or governmental, French or local entities,” said Fabienne Lucas, director at the French Business Council, Dubai and the Northern Emirates. “Nothing is more precious than having someone who understands the situation explain to you the do’s and don’t’s as seen through French culture before starting [a business here].” Initially, language can also seem an insurmountable barrier. When you have difficulty understanding Arabic, translating written materials like contracts can get tricky. Here too, a business council can help as the FBC does by providing a low-cost service to translate official documents for its members.
Business councils representing various countries help newcomers to the UAE set up businesses. Almost all major communities represented in the country have business councils that assist them in the initial days.
Specialised knowledge
The specialised knowledge provided by the business councils about the local market and practices can point entrepreneurs on to the right track. “The business council can direct them to the right people or institutions,” said Lucas. “We benefit from our privileged relations with lawyers, free zones, official representatives and a lot of professionals specialising in setting up businesses in the UAE, and we share all our contacts with members.” The strengthening economic recovery will create more business opportunities in the region. New players find depend more on such support networks than established businesses. More so as many of them are small or medium businesses.
The FBC has recorded increases in the number of its member enterprises each year since 2002, with the proportion of SMEs in their ranks always being the largest. Moreover, its 2010 membership survey showed the UAE was the preferred base from which to do business across the region. “Connectivity is the major reason why SMEs look to Dubai as a base,” Prashant Gulati, secretary-general of the Indian Business & Professional Council (IBPC) told Gulf News. “It does however lack support in the setting up and the financial support required to set up and encourage small businesses, especially for expatriate-owned companies.”
Major presence
For every nationality that has a major presence in the country, there is a business council. “It is important that the business council provides whatever support it can to its countrymen, who are planning to set up, and assist in developing and enhancing the local economy,” Gulati said. Entrepreneurs who are starting up should inquire with their local business council about the services on offer for start-ups. The FBC can provide for a business centre, shared assistants and recruitment services. Another benefit to being a member is the opportunity to network. For instance, The IBPC regularly organises dedicated events where speakers are invited to provide specialised information to members of the network. “The biggest support SMEs can find is a chance to interact with their peers, especially the successful ones who have been here and are leaders in their line of business,” Gulati said.
The FBC recently created ‘Club Synergie’ dedicated to SMEs. Every two weeks, 12 to 15 SMEs interact over a three-month period. At the end of the sessions, they get to know each other better and are able to find and refer business opportunities amongst themselves. In other words, a re-run of the ‘One for all, all for one’ maxim.
The benefits to being a member of a business council:
- The member can get help in conducting market surveys, find distributors, understand the best way to set up the firm and assistance in tapping human resources or hiring staff
- An opportunity to network with potential clients, partners, distributors, other businesses from the same sector. To get in touch with all those potential contacts on your own will take years!
- Knowledge of the market through experts in different fields
- Benefit from the solidarity of the different business communities in a global network
- To create awareness of SMEs by listing in the directory of the business council
This article originally appeared on Gulf News
Striking a balance on the balance sheet
27 Oct 2010
There are two ways to make money; one by earning more money and the other by spending less. The latter is a time tested remedy that gets taken out of the closet whenever the economy sneezes and the business environment feels congested. It’s prudent to keep overheads low at any time, irrespective of the economic climate, as a few saved pennies are always welcome. When you are setting up a small business or running one, money is always tight. Being intelligent and prudent at this time with your resources may mean the difference between eventual success or failure.
Making the dirham go further will be considered value that you will be able to cash in on once the company becomes successful. Doing more from less is an essential part of any business plan for a small enterprise. Usage of technologies and the internet, even if your business is not an on-line business, is a surefire way of saving cost and to generate greater mileage. A mix of technical DIY and a simple search can provide the enlightened entrepreneur with a toolkit of services which are either free or provide great value at a low cost.
Here is a jargon buster tutorial:
Use Cloud Computing and reduce dependence on dedicated hardware and related infrastructure. Services like Google Apps allows you to host a small business e-mail, documents, calendar, etc. for free. This allows you to do most of the tasks the expensive systems that larger organisations utilise. This translates into an edge over others at no cost.
Negotiate
If your company has a few telephones — mobile or land lines — consider negotiating with the telecom provider (yes, even etisalat and du in the UAE) for a better package with special offers such free internal phone calls and cheaper long distance dialling and handsets. The saving such consolidation creates will surprise you by the time the year ends.
This also provides you a dashboard to actually view your usage and to efficiently plan for the future and to plug any holes. At least in the initial phase, try to outsource as many of the tasks as you can — accounting, administration, technical support, IT, cleaning or whatever that is not core to the business. These should not be a load on your time. Whatever anyone says, even if you don’t get involved, there is a certain management overhead that essentially creeps into it and distracts you from the main task.
Social media
Communicate with your customers regularly and use more efficient and economic methods to do so. Technological advances have made it possible to use social media e-newsletters and e-mail to your advantage at almost no cost.
An effective Twitter and Facebook presence clubbed with a simple and informative website will be a great asset to the business. And if you are a social person, it may be an invincible combination and trying it out is usually free.
Find a mentor and guide to take you through the travails that any start-up faces in the early phase. However much you may know about the business, the aid of a sound head at times of challenge cannot be belittled. The idea is to find someone who gives you sound advise because he wants to not because he is enticed to do so by incentives such as stock options or consulting fees. You may even be surprised by people who would give you valuable insight for nothing! Grey hairs count in making things easier, even if it’s because someone else has committed mistakes before you had a chance to do the same. They save you from making one!
Keep your eyes and ears open and network a lot. There is no alternative to making contacts, nurturing them and to build on them. Most business opportunities come your way through people you know. This circle of people is also a gold mine of helpful resources from lawyers to accountants, technology geeks to marketing mavens. Innovators will find a way to encash this valuable asset and create successful enterprises we all will talk about.
This article originally appeared on Gulf News.