Riding the wave in Dubai

07 November 2003
As one of the region's biggest suppliers of plant machinery, Kanoo is benefiting from Dubai's construction boom. How long will it last?

Construction companies are looking at another couple of years of growth; beyond that I just don't know. It's already a tight market as far as cash is concerned. Nothing can happen without finance and banks are tightening up. Some of the projects coming up will require funding but who is going to provide it?

Are you concerned that the rate of growth in Dubai may be outstripping demand?

Some of the proposed projects are viable and will be very successful, but others seem more implausible. It does worry me as a businessman in Dubai, because if one of these projects goes slightly sour the effect this will have on the image of the emirate will be tremendous. It would be a shame if all the money that Dubai spends on advertising were wasted because of a bad decision on one project.

How important is Dubai to the Kanoo Group's overall business?

This is a significant market and the largest economy we work in outside Saudi Arabia. I don't want to see any damage to the market here. I would rather see sustainable medium-size projects that can grow the economy steadily, as opposed to some of the grandiose schemes that are being proposed.

How do margins in Dubai compare with other markets in the region?

People fail to realise how much business flows through Dubai and how much the government taxes it indirectly. Everyone who visits Dubai pays a fee at some point. As an employer I have to pay charges for my employees. Whether on trade licences from the Chamber of Commerce, electricity, water or other basic utilities, all of these services are taxed. This is a healthy economy in terms of cashflow; however, we don't like to call these revenue streams taxes but they are.

How competitive is the market in Dubai?

Dubai is a very open market and if you want to win a contract you have to be very competitive. Your loss is always your competitor's gain. Often, companies here want Rolls Royces at Volkswagen prices, which is not possible, so you have to find a halfway house where everyone wins. However, you can't just come in and buy market share.

What plans do you have to grow the Kanoo Group, which already includes shipping, travel and construction services?

Our growth is going to be organic. If the right acquisitions emerge, fine, but we are not banking on this. Kanoo is 113 years old and we have seen depressions, growth and booms. The company is fortunate to have this historical resource. Much of what is happening in the region today we have seen before.

Do you see Iraq as a potential growth market?

Eventually we expect to be in Iraq. But everything in its time is sweet and timing in this case is everything. If you go in early you will probably get fantastic margins and make a killing but it is likely to be unsustainable and in doing so you are taking a huge risk. It is not worth one of our employees going in there and getting hurt. We have a sustainable business that is growing without the need to go into Iraq. Yes we are going to go there eventually but not at this point. We are going to bide our time and do our homework to find the right partner first.

Has the situation in Iraq affected your business?

This will all have an affect. The Gulf war had a massive affect. People can't understand that Dubai is a three-hour flight from Baghdad and Jerusalem. For example, the attacks on the World Trade Center in New York didn't affect people living in California. What does have a damaging affect is people's perception. A lot of companies that would have come to the Gulf are staying away because they believe we are in the eye of the storm.

How has your shipping business been affected by Iraq?

Liner business is becoming less and less of our mainstay. We are focused now on becoming a regional player. We are the only regional Arab line that can service a customer from as far as Egypt all the way up the Arabian Peninsula to Umm Qasr. So we have the capacity to service commercial vessels docking anywhere in the region. n

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