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GulfNews Business

Six out of 10 developers worldwide have delayed projects after pandemic, says Knight Frank poll

Property|: Dubai: Apart from a handful, developers in Dubai slowed down on project activity since March after the pandemic effect started to show up in force. They are not alone. This was the same experience for six out of 10 developers worldwide, according to a new report by Knight Frank. The COVID-19 forced developers to go in for a “wholesale rethink of how and where people want to live”. See More China's rich seek bodyguards schooled in digital dark arts Race to rescue animals as Brazilian wetlands burn Photos: Pre-hispanic dancers perform energy cleansing rituals Photos: Palestinian female travel bloggers promote local tourism Being flexible is the new mantra developers swear by. The need is for “versatile space” that can help out with agile working as well as allow for a separation of home life. This will start showing up immediately – four out of every ten developers polled said they would make design changes to their projects that were considered as complete. “While developers will likely temper their urge to radically reshape development designs initially, our survey confirms a desire to consider potential COVID-19 inspired changes,” says the report. “For example, many are considering including more advanced telecommunications and storage facilities for bicycles to accommodate a change in lifestyle.” More than 160 developers in 22 countries were polled by the UK consultancy between July and August. “While it is still too early to confirm the lasting impact of the pandemic on the development landscape, it is clear that it has accelerated pre-existing trends and prompted new ideas for current and future developments. “A pause for reflection amid a crisis is to be expected, but the scale of the current hiatus is surprising and could prompt policymakers to consider incentives to spur development.” According to Flora Harley, Associate at Knight Frank, “According to our survey respondents, funding is the biggest barrier to global development, with just under a third citing it as their biggest concern. Some markets have seen a reduced number of lending facilities offered to developers. “At the moment there is decreased bank appetite for developer lending and in some markets the pre-sales requirements make it hard to begin construction. One way for governments to spur construction would be to facilitate lending, perhaps through a combination of guarantees or loans. This would crucially remove one of the biggest hurdles in development and enable ground to be broken.” Developer trends * Given widespread travel restrictions and concerns, two in five developers say they are be more likely to be sensitive to the requirements of domestic buyers/investors. * While 41 per cent of developers polled said they would be looking to develop across cities, second home and rural locations, 45 per cent said they were more likely to focus on cities. * Almost six in ten have delayed projects and almost half of these are making modifications. With supply constrained, the implications are significant. * A third of global developers are considering adjusting the mix of residential and commercial elements in schemes. This will take the form of rentable desk space and individual pods to business suites. * Developers are seeking to support more active lifestyles. Some 38 per cent are more likely to consider facilities for bicycles, compared to only 17 per cent that are more likely to consider parking space availability. * With work-from-home well and truly embedded, developers’ plans to give more consideration to connectivity and usable workspace.

GulfNews Business

Still a gender imbalance in UAE corporates and in need of some quick fixes

Analysis|: Women in the UAE have never been empowered, enabled, and emboldened... as they are today. From taking the reins of corporate and government leadership to pursuit of higher education, it almost seems like that the glass ceiling has been shattered. What is even more impressive is the leaps and bounds that women in this country have taken in the technology field. This accomplishment is – literally – universal with women playing key roles to ensure that the pride of the UAE space programme, the Hope Mars Mission, succeeds. At the Mohammed bin Rashid Space Center, 42 per cent of the workforce are women. See More China's rich seek bodyguards schooled in digital dark arts Race to rescue animals as Brazilian wetlands burn Photos: Pre-hispanic dancers perform energy cleansing rituals Photos: Palestinian female travel bloggers promote local tourism Moreover, 70 per cent who work on the UAE’s Astronaut Programme are women, as is over one-third of the Hope Mars Mission team. And yet under-represented While we’ve taken to the skies and succeeded, we do have yet another challenge to overcome closer to the ground: gender parity in boards of directors. Simply put, women’s representation at the board level is still far from adequate. The numbers speak for themselves: women account for only 1.5 per cent of members of UAE company boards of directors. Regionally, this number sits at 3.7 per cent - a far cry from Northern Europe’s 37.6 per cent, as per a 2020 Corporate Women Directors International survey, an advocacy group. This is not to say that this issue is not being addressed as the UAE’s leadership have taken notice. In 2012, His Highness Sheikh Mohammed bin Rashid Al Maktoum, UAE Vice-President and Prime Minister and Ruler of Dubai, announced a momentous cabinet decision that makes it compulsory for corporations and government agencies to include women on their Board of Directors. The decision was a major achievement for women, as at that time, only Norway had passed similar legislation. The outcome was extraordinary. Four years later, 111 Emirate women ran for board positions at 111 companies listed in the stock exchanges, according to the UAE Gender Balance Council. And occupy 15 per cent of the positions at boards of chambers of commerce and industry. Token presence But the question must be posed: why are we then only at 1.5 per cent representation? While the law requires that women be represented at the board level, no quotas were set. In addition, the regulations did not extend to the private sector – only to government-owned entities. This issue, yet again, has not gone unnoticed by the leadership. Earlier this year, Sheikha Shamma bint Sultan bin Khalifa Al Nahyan launched ’20 for 2020’, aimed at driving gender balance at the board level by providing 20 women the opportunity to take part in a year-long professional development course while they gain board-level experience. Pull their weight While the leadership does provide the wisdom and guidance, the onus lies on companies themselves to deliver on diversifying their boards. The benefits are substantial: female participation offers fresh perspective, a new type of leadership, and just as importantly, opportunities for healthy conversations at the board level that contributes to more effective decision-making. Women board members can also champion workplace diversity, setting an example for the next generation of female leadership, and encouraging and mentoring women who are starting their careers. And as it is twice more likely that women will have a technology background over their male peers, organizational digital transformation – a key imperative in today’s world – becomes much more likely to be adopted. The advantages of having more women on boards of directors are clear-cut, and organizations should take it upon themselves to increase female representation. There are two steps that they may take to increase female participation in the coming years: mandating a diversity policy and setting measurable and achievable targets. By doing the former, diversity is cemented into the company ethos; by doing the latter, the company reinforces its commitment to gender parity, not only at the board level, but also throughout the organization. The UAE, and not without effort or guidance from our leadership, has taken the helm of the gender parity agenda in the Middle East. As a nation and as a people, we have learned to set no bounds to what we can do. As Emiratis, we’ve looked to the stars and challenged ourselves to leave our mark beyond the reaches of space. We have set our sights on a planet almost 72 million kilometres away and triumphed. So let us not overlook a target that is closer to home and even more obtainable. The one target that is just above our heads - more female representation at the board level. - Hanan Ahmad is acting Head of Corporate Affairs and Assurance at EITC.

GulfNews Business

It's mistaken to assume more liquidity will create a job rush

Analysis|Analysis|: Central banks are undershooting their inflation targets. Why? Historically, monetary theory in economics has worked this way. The central bank in a country prints more money, figuratively, to increase the money supply in the economy and with it, hopefully, money circulation. To do that, the central bank would lower interest rates, which will increase money supply as banks start lending more money. See More China's rich seek bodyguards schooled in digital dark arts Photos: Pre-hispanic dancers perform energy cleansing rituals From the editors: Global Village to boost consumer confidence Photos: Palestinian female travel bloggers promote local tourism Alternatively, central banks could lower reserve ratio requirements, i.e. the money required to be kept by banks for whatever that they lend out. Recently, increasing money supply has been done by bonds’ purchases, which is also intended to put more cash in the hands of whomsoever is holding those bonds. For corporate holders, bonds are supposed to provide companies with leeway and cash to hire. After all, the relationship between lower unemployment levels and inflation has always been a classical one, identified and explained by the ‘Phillips Curve’. Namely, higher economic activity elevates inflation and lowers unemployment, which in turn raises inflation further, and so on. Problem is that bonds’ purchases are not real economic growth that creates jobs, lowers unemployment, and raises inflation. This is simply cash received by companies that could be spent on anything but hiring. Lately, such money has been increasingly spent on share buybacks. A spur for spending For other holders, bonds are expected to increase spending in the economy, subject to consumer and market sentiment that nourishes such spending. For instance, COVID-19 would be a deterrent to that, as individuals would rather hold on to their cash and bank savings until there is more certainty in the economy. Before COVID-19, and despite employment levels going up, inflation continued to lag behind. This can be partly blamed on the financial and economic scars left from the 2008 financial crisis and then the downturn caused by the virus. That is, the psychological impact makes individuals refrain from spending. Today, according to analysts, the relationship between currencies and exports can take part of the blame too. When money supply is increased, whether by lowering interest rates, the reserve ratio, or by purchasing bonds back from the market, a country’s currency gets devalued. When that happens, international trade theory suggests that a cheaper currency will encourage exports. A large enough effect could see exporters create jobs, and this takes us to the same classical connection where lower unemployment levels should lead to a higher inflation rate. Yet again, that does not seem to be the case. Why? Because international trade is not conducted in domestic currencies, and exports are not quoted in them. In other words, products and services in a country are usually quoted in the domestic currency. As the currency depreciates in value, average domestic prices go up, and thus inflation. Neutralising inflation However, the loss in the domestic currency’s value does two things. One, it lowers the domestic purchasing power in the economy as income is generated in the devalued domestic currency. Two, it promotes exports as long as the drop in the currency’s value is matched by an increase in the importers’ currency’s value. The effects from each offset one another, and inflation does not go up. Added to the above mix is the fact that many exports are quoted in internationally accepted currencies, such as the dollar. If so, then it does not matter how significant the drop in a currency’s value is as it may not necessarily increase exports. In such a case, what should have been a driver of inflation becomes another drag on it. As a result, the increase in money supply leads to nowhere and inflation targets remain out of reach. To conclude, the idea behind increasing money supply in an economy is to fuel economic activity, hence spending, which will increase inflation. This is the logic behind the Phillips Curve. Nevertheless, market sentiment can prevent that from happening as companies decide to not hire during uncertain times. Similarly, a negative market sentiment would discourage individuals from spending in an economy, whether they have always had jobs or they have just been hired because of the increase in money supply. Additionally, inflation targets are missed because of value variations between domestic and international currencies. That is, such variations dilute domestic purchasing power in an economy, whilst benefiting exporters in the same economy. Finally, quoting exports in international currencies can create another drag on inflation. The last thought that I want to leave you with: How can central banks meet their inflation targets? - Abdulnasser Alshaali is a UAE based economist.

GulfNews Business

Days after Accord, UAE businesses are already pushing ahead with Project Israel

Business|: Dubai: Roll out the big names – just days into the signing of the Abraham Accord with Israel, the UAE’s investment push into that new market is already taking shape. First, there was the announcement by DP World – one of the UAE’s most global of enterprises – confirming that its new joint venture will make a bid for Israel’s strategically vital Haifa Port privatization. It was earlier in the year that the Israel Government gave the go-ahead for the privatization, a process that could be completed within the next two years. See More Dubai’s five-year Retirement Visa: It just got easier to apply IPL 2020 in UAE : Where and how to watch the cricketing action UAE Labour Law: How can I terminate a limited contract? The easiest way to book a COVID-19 test in the UAE Leading UAE banks have also found partners in Israel. Then, there was Abu Dhabi Investment Office’s decision to open a base in that country, and Dubai Diamond Exchange confirming an alliance with its counterpart – one by one, the UAE’s public sector entities are setting the agenda in doing business with the new market that has opened up for them. But they are not the only ones. Private sector gets into the act The Al Habtoor Group is working towards multiple “collaborations” with potential Israeli partners, including one with Israir Airlines to launch direct commercial flights to the UAE. “The possibilities are endless for both sides in our diversified fields and new ones - and we want to be present to grasp them,” said Khalaf Al Habtoor in a statement. Exploring the art of the deal... Khalaf Al Habtoor, Chairman of Al Habtoor Group, will hope to gain first mover advantage in Israel. The Group is considering multiple options, including in aviation. Image Credit: Al Habtoor Group But it need not be all about UAE investments flowing into that newly opened market. “Contrary to common opinion, I believe we’ll see as much investment coming from Israel into the UAE,” said Tasawar Ulhaq, CEO of KIKLABB Licensing and Workspace, owned by Dubai’s Port, Customs and Free Zone Corporation. (And the entity that offers companies registered with it access to office space on board the Queen Elizabeth II.) “We’ve already started to receive enquiries from Israeli companies interested in setting up in Dubai. Israel has advanced venture capital and tech sectors, so it’s no surprise that most of the interest we’ve received are from these two sectors. “In addition, we offer the right trade licenses with relevant business activities - and Israel has already been added to our systems.” Israeli businesses too will start making a move into the UAE... and the Queen Elizabeth II is all set to welcome them. KIKLABB Licensing and Workspace offers spaces on board the vessel for its licensed entities. Image Credit: Gulf News Archive But let’s not rush things Ulhaq says time – and space – must be given for businesses to firm up their plans. “After all, there are entry visa requirements, regular flight schedules, and other aspects that need to be implemented – but this will be beneficial for both countries,” he added. For UAE businesses that already have links with Jordan or the markets in North Africa, extending their reach into Israel would be relatively easy. And if DP World gets to win Haifa Port, a lot of things would slot into place. Tax breaks? Rizwan Sajan, Chairman of the building materials supplier Danube, is one who definitely would be interested… provided he gets some clarity on the tax structure there. “I believe the tax structure is high – but we still need to explore more on it,” he added. “Our focus is mainly on the Gulf markets because of the ease of doing business plus the one-time customs duty. There is a tax element in Muscat and Doha, but negligible.” A move into Israel will depend on the ease of doing business - that's where the UAE and Gulf markets score Rizwan Sajan of Danube Preferential treatment According to market sources in Israel, those questions related to tax on business activity can be surmounted. “The cost of operations in Israel is much cheaper,” said Ofir Bar-Noy of the recently created Emirates Israel Investment Group. “There are almost no license fees, and the joint registration of VAT and corporate tax has made starting a business in Israel much easier. In terms of taxes, Israel has also reduced the corporate income tax rate, making it cheaper.” The country has also made trading across borders easier by eliminating the ‘certificate of origin’ requirement. What about taxes? Israel’s tax structure is higher than in the UAE. The Corporate Income Tax is at 23 per cent. There are, however, preferential rates that can reduce the CIT to 16 per cent, 12 per cent and even 7.5 per cent. The VAT is at 17 per cent. Double taxation deal? At some point, Israel sources say, a double taxation treaty could be part of the governments’ agenda. “Good tax planning can help [UAE businesses] accrue most of the profit to the UAE and at low tax when doing business with Israel,” said Bar-Noy. “There is a huge potential for economic co-operation and investment, and we hope this will help transform growth in the region.” According to Matan Bar-Noy, CEO of Emirates Israel Investment Group, “Tech-led sectors would definitely see a lot of interest in investments, but beyond that, we also think Israel’s energy sector and banking would also see a boost by this agreement. With regional names already in conversations for tie-ups, we can see good opportunities even for the traditional sectors.” “There are no restrictions on foreign businesses. Foreigners can hold 100 per cent of Israeli companies.” Setting sail If DP World and its Israeli partner do win the Haifa Port contract, that would be the cue for more investment flows. Surender Singh Kandhari, Chairman of Al Dobowi Group, the tyre company, certainly sees it that way. “We contract-manufacture our own tyres in some of the largest tyre plants in Asia, using our own equipment and R&D,” he said. “We are one of the largest battery manufacturers in the region and we provide both automotive and industrial solutions. “[If] the DP World deal is finalised, we will begin our business operations. We are eagerly looking forward to do business in Israel.” It is too early to tell if there will be any material economic benefits. However, we expect these countries [UAE and Bahrain] will begin direct commercial flights with Israel and significantly increase cooperation in the areas of tourism, security, telecommunications, technology, health, education, financial services, and agriculture Latest update from Standard & Poor's on the post-Abraham Accord scenario