gulf news

Striking a balance on the balance sheet

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.

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Emiratis share ownership in 95% of firms

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.

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Stock options could benefit UAE companies

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

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Industry ventures get low priority

Misguided perceptions, and not a lack of opportunities, are what prevent Emiratis from venturing into small industrial businesses in a big way. An almost ingrained sentiment that anything to do with industry is not a ‘glamourous’ calling prevents young Emiratis from making the most of the available opportunities. On the skill development side, the UAE has multiple technical institutions and colleges. But Emirati participation in industrial projects is limited to ownership while the actual management and day-to-day operations are handled by expatriates. A case in point is small industrial companies in Sharjah employing 69,000 workers of whom only 1,555 are Emiratis. Small businesses traditionally play a major role in lowering unemployment in countries. In countries such as the UK and Thailand, 27 and 71 per cent of the wor force is employed in small and medium enterprises.

On the skill development side, the UAE has multiple technical institutions and colleges. But Emirati participation in industrial projects is limited to ownership while the actual management and day-today operations are handled by expatriates.

Hassles
So why are Emirati entrepreneurs shying away from small to mid-sized industrial projects? “The reason is it’s not lucrative enough, it’s too much hassle, and too much risk which may or may not make it viable,” said Prashant Gulati, president of The Indus Entrepreneurs Dubai, an entity supporting aspiring business start-ups. Moreover, the overwhelming mentality of the UAE entrepreneur is geared towards the trade and services industries. “They are thinking of a quick profit, buy it today, sell it tomorrow,” said Abdul Sahib Al Sajwani, treasurer of the Entrepreneurs Forum. “The idea of setting up a factory just scares them.” Khalid Makled, business development manager at Ruwad, agrees. The problem, according to him, is that the “cultural heritage” in the UAE has ensured successive generations of Emiratis inherit commercial family businesses rather than industrial ones. This reduces the number of Emirati entrepreneurs who can potentially start industrial ventures.

But the problem may be far more deep-rooted than entrenched mindsets or societal considerations. There is little encouragement for Emirati entrepreneurs to set up small industrial projects, according to Abdul Baset Al Janahi, the CEO of the Mohammad Bin Rashid Establishment for the Development for SMEs. Lack of technology and high start-up costs, including buying suitable land, are major obstacles, while it is also difficult to compete with cost-efficient imports from China that pour into the UAE, Al Janahi said. There are problems on the skills side as well. Industrial businesses depend on “technical efforts” that do not attract Emiratis as they prefer managerial or administrative jobs, said Makled. “They have a certain level of job expectations and lack the skills, knowledge, and experience in manual labour.”

Education
Additionally, far higher numbers of Emirati university graduates find employment in the government or banking sectors, leaving fewer of them to consider self-employment. This, according to Makled, suggests there is no co-relation between improving the education institutions and the graduates’ initiative to set up a small business. But Al Janahi disagrees on this point. “The mentality of the Emirati as a manager or administrator is a stereotype created by expats about the job market and Emiratis. Dubai While the UAE has dedicated clusters for larger industrial ventures, such locations are limited when it comes to small and mid-sized industries. A focused government policy will help. Abdul Baset Al Janahi of the Mohammad Bin Rashid Establishment for the Development for SMEs, says this could be through granting industrial land, lower costs for a start-up, provide cheap energy, have trained labour, and protection from foreign competition. “There has to be clear policy and commitment to develop the industry,” said Khalid Makled of Ruwad.

Prashant Gulati of The Indus Entrepreneurs Dubai believes many prospective Emirati entrepreneurs consider the industrial sector as being too technical for them. Government agencies can change these perceptions by focusing less on technology. “That it requires a tech guy to manufacture goes against the business model,” said Gulati. “The idea that it requires technology is a restricting factor.” Traditionally, Dubai has focused on larger industries and missed out on the benefits of ancillary units, he said.

This article originally appeared on Gulf News

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IBPC Dubai elects new president and board

The Indian Business and Professional Council (IBPC) of Dubai elected Paras Shahdadpuri president at its Annual General Meeting held on March 28. The IBPC also held elections for a new board for a two-year tenure for 2009-2011. Dr G.M. Bajpai was elected vice-president while Prashant Gulati was elected as secretary general and Kiran Sangani as treasurer. Others elected to the nine-member board are Abbas Ali Mirza, Kulwant Singh, Navin Kapoor, Nilesh Kumar Ved and Suresh Kumar.

Shahdadpuri said: “The UAE is the second-largest trading partner of India. India has vast trained technical human resources and the UAE has vast financial resources. There is a great opportunity for synergy. “Both countries have witnessed phenomenal progress in recent years. The focus of global economic activity is shifting from the West to the East, and in particular to India – the third largest economy in Asia.”

This article originally appeared on Gulf News.

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Emirates Post and State Bank of India consider working together

Emirates Post and State Bank of India, the largest bank in India, have discussed opportunities for working together in the UAE and India, and to market each others’ products and services in their regions. Abdullah Al Daboos, director-general of Emirates Post and chairman of Wall Street Exchange, met Om Prakash Bhatt, Chairman of State Bank of India, in Mumbai recently, and both agreed to enhance mutual business cooperation. The discussions centred on how Wall Street Exchange could use SBI’s extensive network in India for remittances, as SBI has over 9,000 branches across India. The two officials also discussed how SBI could use Emirates Post’s network in the UAE to access the large Indian population.

Mutual benefit
“Wall Street Exchange is set to expand its market and we are seeking to use SBI’s extensive network to deliver money sent from the UAE to the farthest corners of India,” said Al Daboos. “Further, as Emirates Post has a network of over 82 branches, we can provide crucial access to SBI to market its products and services to the large Indian population in the UAE.”

The meeting was also attended by Abdullah Al Suwaidi, assistant director-general, International Relations, and Prashant K. Gulati, adviser, Emirates Post. The two sides agreed to set up working teams to identified areas of cooperation and draw up a memorandum of understanding as part of the move to enhance mutual cooperation.

This article originally appeared on Gulf News.

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