Monthly Archives: March 2014

Mortgage approvals dip in February, business lending contracts again

LONDON Mon Mar 31, 2014 12:16pm BST

LONDON (Reuters) – Mortgage approvals slowed in February by more than expected, possibly reflecting bad weather during the month, and there was another contraction in business lending.

The Bank of England said on Monday mortgage approvals numbered 70,309 in February, the lowest since October last year.

It also represented a sharp fall from 76,753 in January, which was the highest in more than six years.

Analysts had forecast a slight fall in approvals to 75,250 as heavy rain and flooding in some parts of the country hampered business.

In 2013 the economy had its best year of growth since the financial crisis. And while the recovery so far has been largely driven by housing and the consumer sector, there have been signs that trade and business investment are starting to pick up.

The BoE data showed another fall in business lending, down 750 million pounds compared with the previous month. Nonetheless, that was a slower pace of decline than in January.

Lending to small businesses alone rose by 159 million pounds.

Mortgage approvals are still short of levels of around 90,000 a month seen before the 2008 financial crisis, but house prices are rising rapidly, up around 10 percent on the year by some measures.

Last Thursday, the BoE urged banks to consider the risk of future spikes in interest rates when they approve mortgages and said it was preparing tools to rein in potentially dangerous lending.

BoE Governor Mark Carney and other officials have played down suggestions that the housing market is overheating. The Bank refocused its Funding for Lending Scheme away from mortgage lending and dedicated it exclusively to business lending at the start of this year.

Unsecured lending to consumers rose by 552 million pounds, slightly weaker than the forecast for 700 million pounds in the Reuters poll.

The BoE’s preferred gauge of money supply, M4 excluding intermediate other financial corporations, rose 0.7 percent on the month, the biggest increase since August 2012, taking the annual growth rate to 3.7 percent.

(Reporting by Andy Bruce and William Schomberg)

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Just what is power?

For me as a psychologist, it is interesting to look at the whole concept of power. What is power? Why is it so attractive and important and what effect does it have on those wielding it, respectively on those of the “receiving end”?

Personally, I like and concur with the Oxford Dictionary’s definition of power: The capacity or ability to direct or influence the behavior of others or the course of events.

We all have faced power and its effects one way or the other, in my case it was definitely with my mother… In my family she was the one who exhibited the unchallenged source of power. Her word was law, not to be wavered by temper tantrums or, later in my teenage years, well reflected arguments, cajolements or persistency. (In 18 laborious years, I not once managed to get the permission to come home past midnight.) And nowadays I bargain for extra time with my Professors and “tread heavily under the yoke” of my editor. In other words: I have experienced my share of being directed and influenced by others…

Unfortunately though, I don’t have enough experience in executing power myself to be able to share any stories with you (I’m working on that– let me get back to you in a few years), but I do have access to a lot of scientific information.

The roots for our hunger to obtain power can be explained with help of the Control Theory. It states that humans are evolutionarily designed to be on a constant quest to explain, predict and control their surroundings. The more you understand and are able to influence your surroundings, the less likely aversive things incidences are going to happen to you, and the more likely you will be able to pursue enjoyable circumstances. In our struggle to explain, predict and control, we develop strategies to support our efforts such as studying our environment and obtaining one or more elements of power.

We can pretty much distinguish five elements of power:

• Human Capital (Knowledge)
• Social Capital (Connections, Networks)
• Erotic Capital (Beauty, Charisma)
• Political Capital (Political Influence, Military strength, originally physical strength)
• Financial Capital (Wealth)

The more elements we have access to, the more control we exert. In fact, even our brain supports the process: When we use power, we release excess amounts of the neurotransmitter dopamine which belongs to the reward-system of our brain and feels reeeally good. That way we learn relatively quickly that power is desirable. The unfortunate side effect of its addictive qualities explains why almost everybody strives for power, but almost no one disclaims it voluntarily.

As for those who yield to power: A single variable determines whether they get to know the effect of dopamine or not…

Either their brains suffer from restraint of dopamine which leads to unhappiness and a cocktail of stress hormones to make the unfortunate experience thoroughly miserable. Or they experience a similar rewarding effect that can be ecstatic.

That variable is the evaluation of the qualities of the person who exerts that power! If the power holder is perceived as someone worthy, competent and admirable the experience of being directed and influenced is a positive one that people might even seek voluntarily.

This explains not only why I never resented my mother’s ruling (ok, maybe briefly every once in a while), but also how a magazine such as Arabian Business is honoring 100 people in such a delightful way. In the course of attaining power, these persons have managed to convince us of their admirable traits, competence and their suitability as role models for coming generations.

In regard to the fact that they not only face competition, hardship and a whole lot of work but also carry the responsibility for many, from employees up to whole countries, admiringly I would like to join Arabian Business to say “chapeau” and “congratulations”!

* Silja Litvin has a a Masters in Psychology and is currently working on a PhD in Psychology

How do women become leaders?

So many questions have lately crossed my mind when reading about remarkable achievements of successful women in the Gulf. Why aren’t there more of these powerful women? Why are women still left behind? And what does it take for us to smash through the ‘glass ceiling’ and become real leaders?

Women in GCC countries are still not reaching enough leading positions or exerting enough influence in public life. They are under-represented in managerial jobs and few are participating in top decision-making roles in many public spheres. They have to work harder and be smarter than men to reach senior positions.

In spite of considerable gains in women’s status they still encounter barriers, challenges and gender discrimination because of cultural norms and local traditions in a patriarchal society. They lack opportunities and face discrimination such as gender wage gaps. Women in the Gulf are undeniably better off today than they were twenty years ago with improved levels of education and employment. They are socially and economically aware of what is happening both nationally and internationally and they are increasingly successfully competing in the labour market.

As result of higher education, explicit ambition and economic opportunities, along with advantages offered by child-care facilities and low-cost help at home, the number of women participating in the labour market has been growing at a considerable rate in the GCC countries. UN data (2012) indicated that the percentage of the female population aged 15 or over that is economically active reached was highest in Qatar (52 percent), followed by the UAE (44 percent), Kuwait (43 percent), Bahrain (39 percent), Oman (28 percent) and Saudi Arabia (18 percent).

But it is not enough to simply get women to join the labour force. Once they are in the workforce professional women need to be given encouragement, training and opportunities to rise to leadership. I am convinced that most educated and competent Arab women in the GCC region have the potential to be leaders if they are only given the opportunity to lead.

So what are the distinctive qualities that are needed to define a woman leader? A quick list of attributes and skills might read, in no particular order: enthusiasm, vision, self-confidence, courage, determination, flexibility, creativity, good communication and the ability to motivate others and to build a team.

I had the good fortune to learn about leadership during the many years when I worked for United Nations Agencies. I was able to gain invaluable experience in supervisory tasks and assignments for UN field-missions and I gradually took on leadership roles in decision-making and policy-making with a range of responsibilities. The top motivator for the role of a leader is to find passion in what one is doing. I remember the zeal and enthusiasm I felt when working in the field advising and training other women.

A woman who wants to be at the top of the ladder and lead others has to be willing to stand up for herself, her work, and her ideas. But alongside her positive vision and the determination and persistence to accomplish her goals she needs flexibility, a mind open to new ideas and a willingness to mould her challenges into reality and opportunities.

She should also know how to build her team with respect and trust, be able to communicate with her colleagues at all levels, both in listening to them and in informing them about what works and what needs improvement, inspiring and motivating others towards beneficial change.

Developing leadership qualities starts with education. High-quality learning is a sure path towards preparing women to become leaders. Knowledge is power and education is the best weapon for the advancement and empowerment of GCC women. Nowadays, high levels of relevant education and skills training are a priority together with an awareness of the actual knowledge market including the understanding and use of information and computer technology and the ability to speak foreign languages. But as well as relevant skills young women need opportunities during their education to develop the less formal skills – building their self-confidence, the skills of analysis and criticism, and calculated risk-taking – to develop the special attributes of a leader.

And once young women are in work, their employers need to provide training opportunities and empowerment programmes to help them continue up the ladder. Likewise, the provision of mentors is crucial to help women confront the challenges of leadership and female role models are necessary to learn leadership styles through observation of others.

I consider that it is vital to create a culture of learning through leading and emerging ideas that incite positive change. Evidence indicates that highly educated and skilled women have an increasing influence in decision-making, leading to positive and efficient results in the business and management sector as well as helping to bridge the gender gap in social norms and to overcome the barriers of a patriarchal culture. Some GCC governments are starting to recognise the untapped potential of women and the vital role they can play in national development. With women’s programmes now prioritised in national strategies, more women with capacity and talent are being encouraged and endorsed to strive for and assume leading positions.

I maintain that women’s leadership development should be provided both formally and informally through the establishment of policy programmes targeted at the empowerment of women and their engagement in embracing the qualities of a leader. GCC countries should join efforts through strategic relationships to implement this goal and institutionalise leadership programmes to advance their women.

Women’s empowerment in the Gulf countries will pave the way for women to have choices and to make decisions. It will also help them to use their rights and increase their access to and control over economic resources.

But it is not only women who have to build confidence and change their viewpoint towards life; the attitudes of our men also have to change, becoming not just more tolerant and but also positively encouraging of female leadership. I believe that every woman should have the opportunity to realise her dreams and succeed in her own journey. She should be proud of her own achievements in making a difference.

Now is the time to invest in our future. And our women leaders will make changes happen.

Dr. Mona AlMunajjed is a Sociologist, author and advisor on social and gender issues. mona.almunajjed@gmail.com

UK regulator to probe fairness of ‘zombie’ savings pots

By Chris Vellacott and Huw Jones

LONDON Fri Mar 28, 2014 2:15pm GMT

LONDON (Reuters) – Britain’s financial watchdog is to investigate whether people locked into some 30 million pension and other savings plans sold by insurance firms in the 30 years after 1970 are treated fairly compared with new clients, a source familiar with the matter said on Friday.

These savings policies, sometimes described as “zombie funds”, are closed to new investors and are typically owned by elderly people who might have forgotten about them.

The Financial Conduct Authority is concerned that these savers are being treated as a captive market because of costly penalties for withdrawing early or stopping further payments which were built into these policies, written before 2000 when interest rates and expected returns were higher.

The FCA will outline the review into these 150 billion pounds of savings in its annual business plan to be published on Monday, the source said.

Shares in insurance groups such as Resolution (RSL.L), Aviva (AV.L), Prudential (PRU.L), Standard Life (SL.L) and Legal & General (LGEN.L) tumbled on Friday morning after the Daily Telegraph newspaper said the probe could lead to the exit penalties being waived for some savers.

Tim Tookey, chief financial officer of Resolution, which saw shares tumble 14 percent making it the biggest loser on Britain’s blue chip FTSE 100 index, told Reuters the group operates a customer committee staffed by senior members of its closed and open life businesses that ensures rules on treating all customers fairly are followed.

Legal & General called on the FCA to bring forward publication of its plans and clarify its position “in view of today’s disorderly market.”

Resolution’s Tookey agreed.

“It would help everybody if the FCA brought forward publication of the plan. That would be giving all investors and the markets comparable information,” he told Reuters.

The FCA had no immediate comment.

THIRD BLOW

News of the investigation marks the third blow in two weeks for Britain’s insurers as the authorities seek to encourage people to save for old age at a time when public coffers are stretched and people live longer.

Britain’s finance minister George Osborne announced last week that retirees won’t be forced to buy an annuity with their pension pots, the biggest shake-up in pensions in nearly a century.

Then on Thursday the government said annual management charges on workplace pension schemes that automatically enrol employees will be capped at 0.75 percent from April next year to “end rip-off pension charges”.

The FCA review will start this summer and is due to be concluded by the end of the year, with one option being to ban so-called exit fees which, in extreme cases, eat up half the savings pot.

“Should investors be allowed to exit policies and look for a better deal, the sector may be punished with large outflows of money from some zombie funds,” Mike van Dulken, head of research at Accendo Markets, said.

There are 30 million such funds in existence, dating back to the 1970s, but the FCA will only look at a selection of them.

The head of Chesnara (CSN.L), which buys up closed life and pension books, and saw shares drop 8 percent on Friday, said the company had little to fear from the review.

“It doesn’t look like it’s going to be a major issue for us because we only do closed books … We haven’t got the ability to start overcharging people in old funds, and we’ve only got old funds,” said Chesnara Chief Executive Graham Kettleborough.

(Additional reporting by Esha Vaish; Editing by Alexander Smith, Greg Mahlich and Mark Potter)

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UK consumer sentiment hits highest since mid-2007

LONDON Fri Mar 28, 2014 7:22am GMT

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  • LONDON (Reuters) – British consumer sentiment rose in March to its highest level since around the start of the financial crisis in 2007, a survey from researchers GfK showed on Friday. GfK’s headline consumer confidence index rose to -5 this month,…
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A man passes a gallery in London March 25, 2014. REUTERS/Luke MacGregor

1 of 2. A man passes a gallery in London March 25, 2014.

Credit: Reuters/Luke MacGregor

LONDON (Reuters) – British consumer sentiment rose in March to its highest level since around the start of the financial crisis in 2007, a survey from researchers GfK showed on Friday.

GfK’s headline consumer confidence index rose to -5 this month, its highest reading since August 2007, from -7 in February. Economists polled by Reuters expected a rise to -6.

The index has risen over the last year by 22 points – the largest increase since November 2008 to October 2009.

“The current long-term trend is very strongly positive,” said Nick Moon, managing director of social research at GfK.

“People are now on balance more positive than negative about their own financial prospects over the next year, and it is unlikely that anything announced in the recent (government) budget will reverse this.”

British finance minister George Osborne courted voters ahead of an election in 2015 with a budget that promised help for savers, tax breaks for manufacturers and lower levies on beer and bingo.

The March consumer confidence reading beat the -9 lifetime average of the survey, which dates back to 1974.

Consumer demand and an upturn in the housing market have so far been the main drivers of Britain’s economic recovery, with strong retail sales numbers on Thursday suggesting this continued into the first quarter of the year.

But there are signs the rebound is starting to broaden out.

Economists polled by Reuters expect the final reading of fourth-quarter economic growth, due at 0930 GMT, will remain unchanged at 0.7 percent. But the release will offer more insight on how trade and business investment contributed to growth at the end of last year.

GfK’s survey of people aged over 16 was conducted from February 28 to March 16, and was carried out by GfK on behalf of the European Commission.

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Lights, camera… action?

For years, the Gulf’s film industry has underperformed its counterparts in the rest of the region. Egypt, Lebanon, Syria and Iran all have a long and successful movie-making heritage. This may be a concern for film buffs, but it’s also affecting the Gulf’s bottom line as well.

A recent report from Oliver Wyman, commissioned by the Dubai Film and TV Commission (DFTC) report found that there is certainly a lot of room for improvement in this part of the world: between 2005 and 2010, the Middle East accounted for just 0.72 percent of the films produced globally. In terms of dollar values, Arabic film and TV production represents just 0.03 percent of GDP in the Middle East and North Africa. The DFTC report says a ‘typical’ country’s revenues from its media industry equates to 1.2-1.4 percent of total GDP.

In Saudi Arabia, where cinemas are banned, the job is — naturally — going to be tough. Abdullah Al Eyaf’s 2006 documentary Cinema 500km neatly encapsulated the problems that the country’s budding filmmakers have. The film follows Tareq Al Hussein, a 21-year-old Saudi movie buff, who secures himself a passport and travels across the kingdom to Bahrain, where he is able to watch his first film in a cinema. “If you factor in the cost of the trip to Bahrain, Saudis pay close to 250 riyals ($67) per film. It’s the most expensive ticket in the world,” Al Eyaf said in an interview at the time.

Still, that hasn’t stopped the likes of Haifa Al Mansour, the director of Wadjda, the first full feature film to be shot entirely in Saudi Arabia. But the fact that the film’s funding was sourced from outside the kingdom means until Saudi Arabia’s conservative stance towards the industry is relaxed, any further movies are expected to be few and far between.

In the rest of the Gulf, film production remains limited. Kuwait produced what is believed to be the first film made in the region — Khalid Al Siddiq’s The Cruel Sea — in 1972, but little has emerged since. Bahrain’s Bassam Al Thawadi produced The Barrier in 1990, and the baton has more recently been taken up by Mohammed Rashed Bu Ali, whose latest film, The Sleeping Tree, is expected to be released this year. Qatar’s Doha Film Institute has been trying to galvanise the local film-making industry, although recent reports that the agency has laid off a third of its staff, as well as the cancellation of a new film festival, suggest that all is not entirely going to plan.

That leaves the UAE, which has played host to big-name productions in the past; Mission Impossible 4 showcased the Burj Khalifa to a worldwide audience in 2011, and the seventh installment of The Fast and the Furious franchise will be shot in Abu Dhabi in April. It has also seen a smattering of home-grown filmmaking talent, such as Ali Mostafa, Nayla Al Khaja and Abdulla Khalifa Al Kaabi. The plan is to encourage more movie producers to come and shoot in the UAE through a rebate being offered by Abu Dhabi’s twofour54. The rebate will ensure that a production company will get back 30 percent of the cash they’ve spent on making the film in the country.

But the key to making a success of the industry here in the GCC lies with local talent. The facilities here in the UAE may be great, but there are still not enough support staff available. If producers need to fly in their own staff to complete the film, then the value of that 30 percent rebate is quickly wiped out. While twofour54 is in the process of training that talent, it will still take some time for the Gulf’s Hollywood dreams to become a reality.

Ed Attwood, Group Editor of Arabian Business.

Why Dubai isn’t a plastic city

Those who think the emirate lacks culture are wrong, argues Salma Awwad

How many times have you heard the complaint “Dubai lacks culture, it’s a plastic city,” from residents of the city?

To me, it’s all too familiar.

The number of times I have heard this comment or a variation of it is countless. And my reaction is always the same: “Dubai very much has culture, it might not be what you’re expecting, but it’s definitely there.”

It’s true that vis-à-vis the big cosmopolitan cities in the world – New York, Paris, London, Hong Kong, etc – Dubai has a relatively young history. But when it comes to culture, the city has a unique identity all its own.

What is culture after all? Simply, it’s manifestations of human intellectual achievement such as the arts, ideas, customs, and social behaviours.

In a mere 50 years, Dubai went from desert land to a business and tourism haven. Its massive expansion and evolving infrastructure and rapid development is unparalleled by any other city in the world and it’s engraving its name solidly on the global map by following through on unique visions and reaching new heights.

And that sense of speed and daring spirit is reflected in its everyday way of life.

Fast paced. Bright lights. Overnight changes. Twenty-four hours. Seven days a week. There is always something happening in the city and new initiatives are taken by the government and private entities on a continuous basis towards evolving the lifestyle and expanding the art scene in Dubai.

Without government initiatives, wealthy individuals, wealthy corporations and wealthy banks supporting artists the world over, there would have been none of the international artistic heritage that we admire today. A similar movement is finally taking place here in Dubai for the Middle East.

This month, for example, marks the inaugural Dubai Art Season, the city’s umbrella arts initiative, launched by Dubai Culture & Arts Authority (Dubai Culture.

It has lined up more than 150 creative activities from March 14 to April 15, underlining the city’s status as a global creative hub. It also unites five of the city’s premier arts events including Art Week, the Middle East Film & Comic Con and Gulf Film Festival. Art Week celebrates three flagship events, SIKKA Art Fair, Design Days Dubai, and Art Dubai, with several panel discussions, workshops, performances, outdoor art projects and exhibitions also held.

To me, Dubai is a culture of pushing beyond the boundaries, exploring emerging talent and testing the limits of human imagination and ingenuity. And if we take the time to break out of everyday routine and look around us, we will discover that there is more to this city than meets the eye, or than we give it credit for.

Why the Arabtec story is only just getting started

At almost exactly this time last year, Arabtec shares had hit a 12-month low of AED2.1. The Dubai-based contractor had just announced that it was planning to raise $1.8bn through a rights issue and convertible bond, the reasons for which were — at the time — not entirely clear. Perhaps understandably, investors had a few concerns about the direction the company was taking.

Arabtec’s previous management team had been shunted to one side, following a 21 percent stake purchase in the firm by Aabar Investments, which effectively gave the Abu Dhabi-owned investment vehicle control. The new leadership spoke about aggressive expansion plans, without giving much of a hint as to what those plans were. Information was so scarce that NBK Capital suspended its recommendation on Arabtec stock citing a lack of clarity. Rumours were rife that Aabar would take the contractor private.

One year on, and at the time of going to press last week, Arabtec’s share price was AED4.7, a more than healthy 170 percent increase over the course of the last 12 months. So what’s changed? Well, the company’s backlog has gone stratospheric, for a start. At the end of the first quarter, Arabtec had a backlog of work worth about $5.6bn. In the year since then, it has picked up an astonishing amount of work, including a deal to build 37 towers in Dubai and Abu Dhabi ($6.1bn), a $1.55bn Jordan resort contract, a $705m deal on Abu Dhabi’s Reem Island and a $653m contract to build the Louvre Abu Dhabi on Saadiyat Island. Those wins, plus a slew of other smaller deals, took the backlog to well over double what it had been just 12 months previously.

Then came the monster announcement last week that Arabtec had struck a deal with the Egyptian army to build a million homes in the country for a cool $40bn. The company billed it as the biggest ever contract award in the region, and it’s probably right. I may well be wrong, but the largest regional construction deal I can remember being handed out to a single entity was for the UAE’s first nuclear plants, which was won by a Korean consortium who bid $20bn. The Arabtec contract dwarfs that. The size of the Egypt award is unlikely to be repeated, but I wouldn’t be surprised if a few more major deals were added to Arabtec’s backlog in the near future. Already this year, the firm has opened offices in Serbia and Iraq. The former is particularly interesting, given Etihad Airways’ investment in Air Serbia. According to a report from Bloomberg last week, Aleksandar Vucic, the favourite to become the country’s prime minister in elections this month, is backing the UAE to invest $4bn in Serbia’s biggest ever real estate development, known as Belgrade on Water.

That project will be developed and financed by Eagle Hills, a new company being set up by Emaar chairman Mohamed Alabbar. Mubadala is also thinking about building a semiconductors plant in the country. There are no prizes for guessing who will win the construction contract for those plans. Last December, Abu Dhabi signed a deal to built a luxury resort, one of several new projects, on the coast of Montenegro. Again, Arabtec will be the clear favourite.

If you then add the two joint ventures that Arabtec signed last year with Samsung Engineering (to bid for energy, utility and infrastructure work) and GS Engineering and Construction Corp (for rail, bridges, ports and tunnels) — neither of which appear to have won any work as yet — then the future project pipeline looks stronger than ever. Yes, there are questions as to how the company will be able to manage this colossal pile of work — it has kept its cards pretty close to its chest on that — but there’s no doubt Arabtec has an interesting few years ahead.