Melanie Stern is section editor of Families in Business.
Dubai's Al-Ghurair family is one of several groups feverishly constructing a commercial powerhouse for United Arab Emirates – and building a competitive future for both the Emirati and the economy as a whole. By Melanie Stern
To Western eyes, change seems to be the only constant for the more industrious regions of the Middle East, as conflict – both local and with global superpowers – has become the watchword for many observers. While European and American children have been learning much about war and religion from this most historically rich and important part of the world, though, many of its nations' people have been rather more busy transforming themselves into commercial powerhouses and Rich List-entrepreneurs. Popular clichéd understanding of the United Arab Emirates belies the fact that it is only 34 years old as a sheikhdom, and in fact displays all the hallmarks of a new, commercially ambitious region; when the pearl diving market of old grew tired, oil put it firmly on the map and has kept it in the headlines to this day. Now, the UAE has turned its attentions to importing business rather than exporting it, looking to build its tourism industry, with foreign companies and wealthy family-owned groups racing to cash in. Towering skyscrapers, super-sized malls and lavish hotel complexes are rising from the sand dunes at breakneck speed.
Led by Majid Saif, second generation CEO and sole owner of the group since 1997, and managed at the top by six brothers (of which he is the second to oldest at 40 years old), the Al-Ghurair Group is one of a few family empires turning their home sands to gold. This real estate portion of their largely industrial manufacturing operation looks set to evolve into their most important, lucrative business.
Having celebrated the one-year anniversary of the group's 250,000 square foot Reef Mall shopping centre (pictured) this January, Majid expects completion shortly of the construction of luxury residential apartments and high-end office space built onto its famous Burjuman Mall. The mall consists of 800,000 square feet of retail space in downtown Dubai so-dubbed 'the world's most luxurious destination', and is one of a string of luxury shopping destinations for the increasingly wealthy population of Emirati and ex-pats to play out their need for conspicuous consumption, and Prada shoes. The expansion project, costing some $381 million and including a 22-storey office tower, ran some two years late due to disputes between the Al-Ghurair family management and their architects, and some of the luxury brand corporations who had signed up expecting to start trading in 2003. The group agreed to compensate the complainants by offering their first three months' active rent without charge. SAKS Fifth Avenue – who had a strong, long-standing relationship with Burjuman's management – reportedly claimed $14 million in lost revenues from the group, so the expansion will need to go some way to proving its worth in blood, sweat and dirham. Competition to attract shoppers, who are spoilt for choice on where to buy their high-end goods, will only get tougher. Property giant Emaar is building what is said to be the world's biggest mall just a few minutes' drive from the Burjuman, and the Al-Futtaim business family is building its 'Mall of the Emirates' to open this year on the same patch. That said, Majid, like many of his peers in the region, won't speak much of rivals and competition, instead preferring to view it (for the benefit of the watchful media, at least) as simply evidence of friendly entrepreneurialism in a burgeoning economy.
We don't have rivals," Majid tells Families In Business. "But I suppose we have competition in the real estate market from what is happening in local development today. There are a lot of major projects coming into the market. We always try to be the best in what we do because we, as a family, control our businesses day-to-day. As a result we're known as one of the leading business groups in the region."
When quizzed about the relevance of its other manufacturing businesses to the current Al-Ghurair business model, Majid is open about real estate being the group's top earner and priority. He declines, however, to estimate even roughly what percentage of its revenues are attributed to it. He is keenly aware that he and the family must be ready to see most parts of their enterprise as fluid if they want to capitalise on the pace at which new business opportunities are arriving in the UAE. As is common for most business groups there, Al-Ghurair owns a clutch of important, stable but un-sexy lines like tin can production, plastic film packaging, corrugated box production and an extrusion company that makes aluminium household and commercial parts. These companies have been operating for most of the group's 50-year history and Majid recently poured capital into its Arabian Packaging and Dubai Polyfilm companies to expand these operations. But they can't achieve the speed or level of growth and revenue Majid can expect from his real estate operations, so they could easily become a drain of resources that could be re-directed at stronger revenue streams. What is their future for the next five or ten years?
"I cannot make a decision now, but we are very flexible on whatever needs to be done to succeed; we survived the cycle of the market here in the 1970's and 1980's by constantly examining the front-end of the business," says Majid. "We are in real estate and financial services, and normally these businesses start off doing well when the other businesses are doing badly. We can modify our business plan to meet competition and market flow."
Nonetheless, no one in this market can really afford to be carrying deadweight. The dilemma of foreign competition in the form of publicly-listed construction firms or financially powerful real estate funds remains pertinent for all domestic companies, most of who are family-owned. Foreign players can move fast to secure the best land and have access to far larger pools of capital. In response, Majid says, many of his family contemporaries have or are considering listing a holding company on the new Dubai International Financial Exchange - an idea he is not at all against for his own business. "We can't remain with the thought that, because we are a family-owned business, we should always remain a family-owned business. We are looking into taking the company to the stock exchange - not in the next year - but we are definitely planning for when the time is right to go public," he reveals. "There is a lot of work to be done before we are ready, looking at what size the company needs to be to satisfy market interest, and to see what lines of our businesses will be most attractive to prospective investors… and if we list, we will only list at home."
In the short and medium-term prior to any stock exchange ambitions, Majid and his brothers say they are examining suitable partners to build real estate alliances, and consolidate power.
"We're very open to discussing how we can take the group forward, for example through alliances in the various markets," the CEO concedes. "To compete we will have to grow and work with bigger companies. If you compare our company with a standard sized European company, they are much bigger and can enter our market in a big way."
That may be, but although Dubai and the UAE have aggressive growth ambitions, there is still much to be said for the who-you-know rule - as with most business circles anywhere - and family names still play a crucial part in opening doors.
"Our family has been able to maintain its edge from the rest by our commitment to quality and standards, the way we do things. Being family-owned we have a personal touch to our offering, rather than being just another big company with a portfolio in Dubai and everywhere else around the world," says Majid. "The real estate business here is also a relationship business, and that is why we're very interested in seeking out suitable alliances." It also helps that Majid sits on the board at a number of powerful government lobby groups, including the Middle East Council of Shopping Centres, the Arab Business Council, and the World Economic Forum. One of his brothers, Abdulrahman Saif, does not hold an official title at the company, but is vice president of Dubai's chamber of commerce.
It seems there is a stark divergence in attitude between the Al-Ghurair family towards familial control, and the importance of independence. Majid's approach to his job is far more the hired hand than the traditionalist's son; his brand of independent thought is the sort encouraged by family business advisors the world over. "Founders always have a special kind of attachment to the business, and whether the business is doing well or badly, he will keep it within the family," Majid muses. "But I think the second generation are happier to get outside advisors involved in order to take the business forward, and if the business is not doing well they're willing to consider selling parts or all of it, rather than just holding on to it regardless. As the second generation I am much more open. I do have some kind of attachment to the company, but it is a far less emotional one. We are willing to take more risks on more challenges, and put control in the hands of someone who is not necessarily a family member."
In the region's commitment to retaining natural resources other than oil in its quest to build an independent future, Majid and his brothers have been looking to build for their group a professional, skilled workforce and management drawing on the emerging pool of educated Emirati, indigenous residents of the UAE.
Wealthy families have traditionally sent their children to study and gain credible work experience among blue-chip corporations abroad, while companies at home have sought candidates from leading American or European universities and companies. In response, some of the American universities have opened branches in the UAE, and local groups have followed suit. A branch of the Al-Ghurair family, Majid's brother Abdullah set up his own group in the early 1990s and took with him ownership and control of banking outfit Mashreqbank, while founding a similar portfolio of companies to that of his brother. He opened the Al-Ghurair University to establish a local institution that could turn out students of an international calibre, and provide a pipeline for these candidates to local corporations that would set up adequate competition to foreign applicants.
"It is one of our social responsibilities to prepare our people to join the workforce, and already we are seeing a lot more well-trained and capable people here," Majid says. "The UAE government had been sending many of its students to study abroad, but there are a lot of opportunities in the market here now. Even so, some of these students still prefer to work for the foreign multi-nationals or state-owned companies because they can offer higher salaries than private mid-sized companies. But now, slowly, people are coming to the private sector, and with the education in place, we think we'll see more and more Emirati joining the private sector, because they can see the benefits to it."
On the flipside, however, some dissenting voices claim that government quota systems forcing companies to take on an under-qualified Emirati over a perfectly suitable foreign applicant are damaging the region's fledgling credibility. Majid takes the long view of the effect on his group. He is mindful of how much change has come and gone, both for Hikma and its home turf, and what change is ahead as a family business based in one of the world's most promising economies.
"As a local company and a family business, it is our responsibility to recruit Emirati. It may be true that at the beginning they may not be as well-qualified as foreign applicants, but we have to work with them to see they do become sufficiently qualified. It's us who will reap the benefits as a company and as an economy later on."