The year 2010 bodes well for the UAE economy, particularly Abu Dhabi, after it weathered the impact of the global recession, according to Abdul Jabbar Al Sayegh, Chairman and Chief Executive Officer of the Al Sayegh Brothers Group.
This year, Abu Dhabi is expected to attract a large number of investors and manpower for giant projects in the oil, energy and infrastructure sectors. The Al Sayegh Brothers Group is targeting a growth of 30 per cent in its operations this year, after its recovery from the impact of the crisis, Al Sayegh told Emirates Business.
What is the group's plan for 2010? Do you expect a similar growth rate as 2009?
The group has four big business divisions and 18 subsidiaries, in terms of activity. The first division is Al Sayegh Brothers for Electronics, which is based in Dubai. The second is Al Sayegh Brothers for Consumer Products, also based in Dubai. The third is Al Sayegh Brothers for technical equipment and supplies, which specialises in the engineering, aircraft, oilfields and maintenance sectors and the fourth is the Al Sayegh Brothers Group, which is based in the Al Khalidiya area of Abu Dhabi, and specialises in securities, insurance, brokerage, food, retail and restaurants. Through my office in the Nadi Al Seyahi area of Abu Dhabi, I monitor problems that might take place at the four groups.
The year 2009 has obviously been difficult for the Al Sayegh Brothers Group. But, despite the difficulties, we grew by 15 to 20 per cent depending on the nature of the activity. The health of the four divisions improved over the last few months of 2009.
Did the global recession affect the group\s profits?
On the contrary, the group's growth was enhanced, and our growth and expansion are still going on according to plan. The group's budget in 2009 totalled Dh1.3 billion and we will raise this to more than Dh1.6bn in 2010.
However, we were impacted to a certain extent by the crisis last year – noticeably, even. This was especially so in the electronics and consumer foods sectors. Our profitability in the two sectors fell by two per cent compared to 2008, but our sales rose by 30 per cent. For example, our sales in the electronics sector increased by Dh160 million in 2009 compared to 2008.
We noticed a clear fall in the demand for high-value products. Customers were no longer asking for high-end watches with prices of up to Dh60,000 or high-end televisions worth Dh100,000, which was unlike the situation before the crisis when there was a big demand for high-value luxury products. Also, we noticed the restaurants market shrank in the UAE, and all people who had liquidity attempted to do their best to maintain it. The low demand for electronics and consumer products pushed us to announce big discounts of up to 30 per cent to move these products. This explains why our sales rose and our profits fell by two per cent. We would have suffered real losses if we had not done that.
Do you think 2010 will be different? If yes, why, especially as you said your plan centres on big expansions in your operations?
I think 2010 will be very different for many reasons. The last few months of 2009 saw a noticeable improvement in the UAE and world economies and the employment market started to improve. It is clear there is a demand for jobs, especially in top banks, investment companies and firms that implement infrastructure and petroleum operations, especially in Abu Dhabi. In the capital, there are some companies that are currently on a hiring spree. In addition, there is the nuclear power project and there are contracts valued at $35bn between Abu Dhabi and Korean firms in the field of petroleum, which were signed last year and are going to be implemented in 2010. I think the Abu Dhabi market will be very active in 2010 and there will not be any real fall in residential rents in the emirate, whether inside Abu Dhabi city or outside. In fact, rents may start to rise again.
These things bode well for the future and point to the fact that the Abu Dhabi economy will see big growth in 2010, accompanied by an expanding job market and demand for residency in Abu Dhabi. Consequently, retail, restaurants, hotels, luxury goods and the foods sectors will revive.
When will Noor Capital go for an Initial Public Offering (IPO)? What is your evaluation of the recent drying up of IPOs?
When we set up Noor Capital in 2005, we requested to be licensed as a public joint stock company, not a private one. But in the final phases of the establishment, we were surprised when the conditions of starting a public shareholding companies were modified. The most prominent modification was that companies had to be incorporated as private joint stock ones and maintain that state for a while before being allowed to list.
We do not have any intention for Noor Capital to reward IPO right now, because we think it should represent an added value for founders. The company was set up in an exceptional boom, then financial markets quickly fell and we were not isolated from that. I think, going IPO currently would be a mistake, but the important thing is we maintained our investors' funds. The company's total declared capital was Dh1.2bn, while its paid capital was Dh340m. We decided we were not in need of the remaining sum of Dh860m. I think the condition of the markets in the recent past was such that it was not ready for IPOs, the reason being liquidity was not sufficiently available in the banking sector, which is the main mover of the UAE economy.
A lot of financial brokerage companies are critical of the regulations set last week by the Securities and Commodities Authority (SCA). Since you have a financial brokerage company, do you think these regulations restrict such companies?
I think the SCA's regulations are 100 per cent positive. Sultan bin Saeed Al Mansouri, the Minister of Economy and SCA's chairman, has a clear future vision to develop the UAE's financial markets. I think the brokerage companies' criticism of these regulations is illogical.
Though 90 per cent of brokerage companies are suffering big financial losses, they do not want to take steps for rectification. In my opinion, the only solution is the merger of the companies, which will provide these companies with financial resources and expertise, and will reduce their financial losses. But, unfortunately, a majority of these companies are dominated by greed and suffer from an irresponsible work culture. I think the SCA regulations largely looked into the protection of investors against the greed of many financial brokerage companies, which tried to obtain huge commissions from clients illegally.
At Noor Capital, we think there is a category of small investors that needs guidance in the financial market in order not to be exploited. Three months ago, we referred an application to the SCA to approve a multi-purpose investment fund for small investors to end liquidity shortage problems in financial markets. This category of investors is large and neglected, and the investment funds are not interested in them. The funds only allow investors who have a minimum of Dh1m to join them. In addition, this category suffers much from the lack of availability of bank loans. We informed the SCA that we have a team of experts to supervise the fund and we asked it to monitor us. The SCA welcomed it. We are currently in the final phases of the issuance of the fund and we will announce its launch soon.
Do you think the Insurance Authority's (IA) decision to cancel the licences of 74 brokers was right, especially as the market suffered last year from unfair competition that harmed the insurance sector?
The decision was correct, because it is illogical that an insurance broker cannot increase his company's capital to Dh1m and increase the value of the bank guarantee also to Dh1m.
If the broker cannot gather these sums, how can he protect the rights of his clients and the rights of the insurance companies? In addition, the IA gave the brokers a two-year grace period, which was extended later to three years. I wish the IA had imposed a law on the brokers to increase their capital to more than Dh15m, not just Dh1m.
What is your future vision of the Abu Dhabi economy and did this have anything to do with your running for the election to the Abu Dhabi Chamber of Commerce and Industry (ADCCI) in December?
Abu Dhabi is currently experiencing an unprecedented economic boom. This boom is not random but a well-planned one and depends on strategies, policies and programmes extending to 2030. I believe Abu Dhabi will be the winning horse in the future in this economic race and will be able to implement its huge projects in infrastructure, energy and housing thanks to its human resources. Abu Dhabi learnt from the experiences of others and did not carry out all its projects at the same time. In addition, it entered into newer sectors – such as industry, aviation and renewable energy – and billions were allocated for these sectors. I think when any foreign, GCC or UAE national investor thinks of the best places to invest in the Gulf region, he will reach a conclusion that it is Abu Dhabi currently. Therefore, the emirate's government is now interested in the business sector and is trying to attract businessmen to effectively take part in the implementation of Abu Dhabi Vision 2030.
This is what encouraged me and other businessmen to run for the ADCCI's election, which is regarded as the most important outlet to reflect the views of businessmen in Abu Dhabi. We, as an electoral group, won all groups. Businessmen form 98 per cent of Abu Dhabi First and we have an ambitious vision to take part in the development of Abu Dhabi economy. In addition, the majority of group's members are young, and we will meet our promises in the electoral programme, especially regarding the reduction of membership fees by 50 per cent. We will facilitate the work for private sector and we will attempt to create a fair competition among its institutions to push Abu Dhabi economy's forward. We will encourage small and medium enterprises, because any economy in the world depends on the projects on the meantime.
Do you think Al Sayegh Brothers Group, which is a familial group, will expose to struggle among generations? What is the reason behind the group's continuity over last years as a strong familial group in the field of business and trade, especially in Abu Dhabi?
I confirm to you the group does not have any struggle among the generations. Our group got stronger over the past years by virtue of two main factors; the first factor is the consolidation of brotherhood spirit among the members of big family whose roots go back to Bahrain and lived in Abu Dhabi more than 400 years ago.
The second factor is the presence of an effective and strict administrative and corporate system which hands specialised and experienced people high posts without sensitivity. We have currently more than 7500 employees working in 18 subsidiaries. We have a future plan to increase our operations over the next few years, and the expected growth rate will range between 20 and 30 per cent.
PROFILE: Abdul Jabbar Al Sayegh Chairman and CEO, Sayegh Brothers
Al Sayegh was born in Abu Dhabi in 1953. He obtained a degree in Business Administration from University of Denver at Colorado in 1980. Then, he worked at Abu Dhabi Investment Authority as an assistant director of financial affairs. He was assigned to manage budgets and accounts at many industrial companies, and was appointed as the director-general of Abu Dhabi Investment Company. He was also a board member at Abu Dhabi Hotels Company and deputy manager of Abu Dhabi Commercial Bank between 1985 and 1987. He is currently the chairman and CEO of 18 subsidiaries belonging to Al Sayegh Brothers Group and Noor Capital. He won in the elections of ADCCI's membership that took place in December 2009.
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