As the global economy continues to pick up steam in the aftermath of the financial crisis of 2008, businesses are looking for opportunities to grow.
Ideas for growth have traditionally revolved around the tree main pillars: government infrastructure projects, tourism and domestic demand. Strong as these pillars are, and an important foundation for the economy, it is short sighted to restrict a business’s vision to these areas. Once the foundation is built, a regional and even global expansion should be considered.
A good example of a UAE company building locally and expanding globally is Gulf Craft, a maker of boats and yachts. Founded in 1982, Gulf Craft tapped into local demand for fiberglass runabouts and fishing boats to meet the demands of the large number of recreational sea-goers and fishermen in the UAE. A founding philosophy based on a passion for the business, a focus on quality and responsiveness to customer feedback and concerns has allowed Gulf Craft to grow from a start-up in Ajman to a global brand ranked the world’s 10th super yacht builder this year with an annual production capacity of 400 craft.
The UAE is not restricted to being a springboard in manufacturing alone; services have an equal advantage. A good example is Zawya, the regional information provider. It was founded in London in 2000 with six employees; then a Mena private equity firm acquired a majority and relocated Zawya to Dubai. With a strong vision, laser focussed on execution and global ambition, Zawya grew to 200 employees in two countries and close to 5,000 institutional clients globally, partnered with Dow Jones and successfully competed with Reuters and Bloomberg. In 2012 Reuters acquired 100 per cent of Zawya.
These two examples are proof that independent companies can grow to become global brands. They also show that there can be many paths to becoming a UAE-based global company. The most powerful of these methods is what is called the Silk Road, the idea being that the UAE can act as a gateway to regional and international markets. Emirates Airline has executed this strategy with spectacular success.
Viewing the UAE as a final destination for goods or services from the perspective of a UAE company restricts the scope business can be captured and monetised. Using tourism as an example, this is the difference between targeting tourists who are only vacationing in the UAE as opposed to tourists who may be targeting other final destinations such as the Maldives or Indonesia, and seeking to attract them to spend a few days in the UAE.
Emirates Airline, recognising that a strategy based on passenger traffic to and from the UAE would not allow it to fulfill its global ambitions thought outside the box and built a plan around all passenger traffic.
Live in New York and want to visit Johannesburg? Fly Emirates and cut a stop and a transfer from your itinerary. Utterly brilliant client acquisition. Emirates Airlines also successfully refused to follow global airline strategy of going low cost, instead listening to its clients and going the other way.
This strategy also explains the failure of the financial services sector for fulfilling its potential. In particular, investment banks and asset management firms have focussed on the UAE, GCC or Mena as a target for their products and services.
As a simple test, the GDP of the GCC is about 2 per cent of the world’s total. It is less than that of India and only marginally higher than that of Spain.
Thinking of the UAE and the region as a destination as opposed to a gateway has restricted their ability to reach critical mass. Furthermore, mimicking global products and strategies has failed to ignite growth.
Applying a gateway strategy would mean looking much wider, adding sub-Saharan Africa (Ethiopia, Nigeria, Kenya), South East Asia (Indonesia, Malaysia, Sri Lanka) and Central Asia (Uzbekistan, Kazakhstan, Turkmenistan).
Further, by thinking outside of the global products and services box, but inside regional context, UAE financial services firms might consider commodities as a core product, providing financing, fund management capabilities, hedging capabilities and more. Considering that there are multiple government initiatives in various emirates to develop facets of the commodities business further enhances the viability of this strategy.
This would naturally lead to increased trading in the physical commodities, driving up demand for logistics, storage and bonding. The knock on effect in opportunities would then move downstream to processing.
It is a testament to the UAE Governments’ ability to deploy supportive infrastructure and the entrepreneurial ability of citizens and residents that the country already has several world class global companies. There is no reason why these successes cannot be expanded upon with innovative strategic thinking.
Sabah Al Binali was formerly the chief executive and chief investment officer of Saffar Capital, the regional private equity firm that acquired Zawya. He was the chairman of Zawya from 2001-2011
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