16 31 August, 2016

businessweekme.com

Education in Exile

Europes refugees go back to school so someday they can rebuild p44

Algeria............DZD 215 Egypt..................EGP 10 Jordan....................JOD 2 Lebanon..............LBP 4000 Oman...................OMR 1 Saudi Arabia.........SAR 10 UAE.................AED 10
Bahrain.......................BHD 1 Iraq........... IQD 3200 Kuwait.............KWD 0.75 Libya........................LYD 3.5 Qatar.................QR 10 Syria............................SYP 200 Yemen..................YER 600
WELCOME TO OUR WORLD

At the heart of the most extreme missions youll find exceptional men
prepared to entrust their security only to the most high-performing
instruments. At the heart of exceptional missions youll find the Breitling
Avenger. A concentrated blend of power, precision and functionality,
SUPER AVENGER II
Avenger models boast an ultra-sturdy construction and water resistance
ranging from 100 to 3000 m (330 to 10,000 ft). These authentic instruments
for professionals are equipped with selfwinding movements officially
chronometer-certified by the COSC the only benchmark of reliability
and precision based on an international norm. Welcome to the world of
extremes. Welcome to the Breitling world.

B R EIT L IN G . C O M
 1

It would be great to have

something where I could help
the country where Im living,
whether its here, or in Syria
p44

Nice photos, really Theres I have little interest in

nice, Kennedy did fly the haves reading research from local
with PIA, wonderful, brokers, because they are
but it doesnt and effectively unable to offer
SHUTTERSTOCK (1)

help us now have-nots balanced commentary

p15 p18 p29
 Cover
Trail

16 31 August, 2016
How the cover gets made

The cover story is about young

refugees in Germany being given the
Opening Remarks A critical attempt at land restitution in Colombia after a 50-year civil war 6 chance of a university education with
help from a German startup.

Global Economics
Weeks after Brexit, the UK starts fumbling for a hangover cure 8

Billions of dollars missing in Malaysia? No biggie 10 Sounds like a nice story. How
about something that ties the
idea of the masses of refugees
China tries to spend its way around a slump 10
in Europe with an image of
opportunity, education and
Big Macs and iPhones create a currency conundrum 11
success. Something like this?
Middle-class Russians are struggling 11

Companies/Industries
Month_00 Month_2013 ,00
businessweek.com

The gloss comes off Dubai as oil woes spill into the expat promised land 14 Education
in
Yeah, I see
A Kennedy photo is taken off the wall as Pakistan Air seeks revival 15 where youre
Exile
Europes refugees go back

going with
to school so someday they
can rebuild p44

The Israeli company that fenced Gaza eyes Trumps Mexico wall 16
Briefs: Majid Al Futtaim considers acquisitons; Ghandour plans a second fund 17
Politics/Policy
Algeria............DZD 215
Bahrain.......................BHD 1
Egypt..................EGP 18
Iraq........... IQD 3200
Jordan....................JOD 2
Kuwait.............KWD 0.75
Lebanon..............LBP 4000
Libya........................LYD 3.5
that.
I like the
concept but
perhaps the
image of the
Oman...................OMR 1 Saudi Arabia.........SAR 10 UAE.................AED 10
Qatar.................QR 10 Syria............................SYP 200 Yemen..................YER 600

reaching
hands
is a bit too
OPECs new chief faces a fragile unity as prices sting the have-nots 18 desperate.

Loved and feared, invincible Erdoan is Istanbuls favourite son 19

2 Okay, how about
Away from the Middle East chaos, Morocco is on the move 20 something simple and
clean?

Technology
Silicon Berlin brings new life to the death strip 22

Indian e-tailer Flipkart struggles to deliver as Amazon makes inroads in its backyard 24

The little company that Nintendo has to thank for putting Pokmon Go on the map 25

Innovation: Jukedeck songwriting software may not be Mozart. But Mozart isnt scoring your film for $10 26 Very
simple, very
clean, very
Markets/Finance good. But it
appears you
Chinese banks with global dreams eye the Middle Easts mega bonds 30 forgot to put
it on the
Investment analysts are the latest target in Turkeys crackdown on dissent 31 cover of our
magazine.
Saudi Arabia steps up its fight against the bank cash crunch 32

Citigroup sheds 69 million customers. Sometimes less is more 33

Oh yeah. Sorry.

Features 16 31 August, 2016

businessweekme.com

A Class Apart A German startup helps refugees get a university education 44

Oculus Shift Virtual reality leads Facebook into another universe: Hardware 48
Education in Exile

Cuba Libre Did aides to the law-and-order candidate violate the embargo? 54

Etc.
COVER TRAIL BY NADIA M

A practical and only-kinda-paranoid guide to thwarting hackers 59

Europes refugees go back to school so someday they can rebuild p44

Fashion: Mirrored sunglasses youll take a shine to 62

Algeria............DZD 215 Egypt..................EGP 10 Jordan....................JOD 2 Lebanon..............LBP 4000 Oman...................OMR 1 Saudi Arabia.........SAR 10 UAE.................AED 10
Bahrain.......................BHD 1 Iraq........... IQD 3200 Kuwait.............KWD 0.75 Libya........................LYD 3.5 Qatar.................QR 10 Syria............................SYP 200 Yemen..................YER 600

00_cover.indd 1 8/10/16 7:30 PM

How Did I Get Here? Lisa Baird, the top marketer for Team USA, keeps her eye on the athletes, not the medals 64
JAGUAR XE AND XF

REWARD YOURSELF
WITH 5 YEARS
INTEREST FREE FINANCE

XE FROM AED 169,000 Our offer includes:

XF FROM AED 179,000
- 5 Years Interest Free Finance
OR 10% Cashback
Theres never been a better time to get behind the wheel of
a Jaguar. With our exclusive offer on the Jaguar XE and XF - 5 Years Service & Maintenance
you can now experience pure refinement, efficiency and
- 5 Years Warranty
power with every drive.

Witness the Art of Performance with Jaguar.

Al Tayer Motors
Dubai, Sharjah, Ras Al Khaimah, Fujairah
Jaguar-me.com/altayermotors

Premier Motors
Abu Dhabi, Al Ain
Jaguar-me.com/premiermotors

800 MOTORS (800 668677)

366898 516325

Terms and conditions apply

 Index
People/Companies

30
Turkeys financial Nintendo 25
sector gets a
telling-off Number26 23
Oculus 50

PRS
Patrick Stobbs 26
Philip Hammond 8
Ramzi Rizk 23
Recep Tayyip Erdogan 19, 32
Renault 21
Ron Lieberman 55
Sachin Bansal 24
Samsung 51
SAP 23
Saudi Investment Bank 32
Sheryl Sandberg 50
Siemens 17, 23

17
Alain Bejjani

Singapore Airlines 15
Sky 30
Snop 21
Societe Generale 31
ABC Amit Agarwal
Angela Merkel
25
8, 46
Dubsmash
Edward Russo
24
55
Halliburton
Hans Schoepflin
56
45
MNO Sony
SoundCloud
52
22
Abbott 14 Apple 51, 60 Edward Snowden 60 Hexcel 21 Magal Security Systems 16
4 Abdalla El-Badri
Abdul Mohsen Al Fares
18
32
Aramex
Australia & New Zealand
17 Emirates Airline
Eric Trump
14, 15
55
Hillary Clinton
HSBC Holdings
57
7, 31
Magic Leap
Magnit
52
11
TUV
Abdulhadi Shahadah 17 Banking Group 31 Etihad Airways 15 HTC 51 Majid Al Futtaim 17 T.D. Williamson 14
Aimetis 16 Autodesk 52 ING Groep 12 Mark Zuckerberg 50, 61 Takata 21
Air Europa 56 Axel Springer 24 Teva Pharmaceutical
AirAsia
Airbnb
15
56
Bank Albilad
Bank of America
32
31
JKL Industries
Theresa May
30
8
Ak Investment 32 Bank of China 30 Jason Greenblatt 55 Tim Goebel 45
Benjamin Netanyahu 17 Jeff Bezos 25 Trump Organization 55
Bernd Hildenbrand 15 Jennifer Hulse 57 Twitter 22, 60
Binny Bansal 24 Joe Kaeser 17 Uber 22
BMW 45 John Carmack 51 Uberchord 23
Brendan Iribe
British American Tobacco 30
52
15
John Hanke
Jonas Drppel
25
24
50
Facebook
UBS
UKTV
8
26
Citigroup 31, 33 Pakistan JPMorgan Chase 8, 31 Vahdettin Ertas 32
Coolar 23 International Juan Manuel Santos 6 Valeo 21
Airlines
Cyber Risk Management 60 Jukedeck 26 Markus Kressler 45 Vladimir Putin 12
18 Fadi Ghandour 17 Jumeirah Group 14 Markus Persson 53 Vodafone Group 47
Mohammed Barkindo
DEF Fidel Castro 56 King Mohammed VI 21 Mazin Baghdadi 17

David Davis 9
Flipkart
Foxconn Technology
24
51
Kiron
KJB Security Products
45
61
Mehmet Ali Akben
Mert Ulker
32
31
WXY
Akzo Nobel 47 Delphi Automotive 21 Franois Hollande 8 Larry Glick 55 Michael Antonov 52 Wamda Capital 17
Alcoa 21 DeRay McKesson 60 Lenta 12 Microsoft 53 Western Union 56
Alibaba
Alinma Bank
25
32
Deutsche Bank
Deutsche Lufthansa
8, 31
15
GHI Li Keqiang
Liam Fox
11
9
Mohammad Al Tuwaijri
Najib Razak
17
10
WhatsApp
Whispersystems
61
61
AllClear ID 60 Deviant Ollam 61 Georges Elhedery 17 LifeLock 60 Nawaz Sharif 16 Wickr 60
Alpha Destinations 15 Dominic Soave 57 Ghassan Aridi 15 Lisa Baird 64 Niantic 25 Xi Jinping 11
Amazon.com 24 Donald Trump 16, 55 Google 25, 45, 51, 56 Lukas Kampfmann 22 Nico Sell 60 Yong-Gon Chon 60

20
BLOOMBERG BUSINESSWEEK MIDDLE EAST
is published by UMS International FZ LLC and
Bloomberg L.P. Articles reprinted in this issue
Manufacturing gains
for Morocco
from BLOOMBERG BUSINESSWEEK are
copyrighted 2016 by Bloomberg L.P. All rights
Editorial: Cathal McElroy, Editor reserved. Reproduction in any manner, in whole
cathal@businessweekme.com; +971 4 432 9467 or in part, without prior written permission of
Rahul Odedra, Deputy Editor Bloomberg L.P. and UMS International FZ LLC. is
expressly prohibited.
AFP (2); COURTESY SUBJECT (3); BLOOMBERG (1)

rahul@businessweekme.com; +971 4 432 9467

Sales & Marketing:
Poonam Chawla, Asst GM Sales & Marketing
poonam@businessweekme.com;
+971 50 144 0703
Art & Design: Steven Castelluccia, Art Director
steven@businessweekme.com; +971 4 432 9467
Subscribe: subscriptions@businessweekme.com
Address: PO Box 503048, Building 10, Office 346,
Dubai Media City, Dubai UAE
Web: www.businessweekme.com
General enquiries : +971 4 4 329 467
BPA Worldwide Consumer Publication Audit
Membership Applied for December 2015
UMS International FZ LLC, a division of United
Media Services. PO BOX 503048, Building No 10,
Office 346, Dubai Media City, Dubai, UAE.
Chief Executive: Sandeep Sehgal
Associate Publisher: Ravi Raman
Printed by:
Emirates Printing Press DUBAI
BLOOMBERG BUSINESSWEEK HQ
731 Lexington Ave, New York,
NY 10022, United States,
www.businessweek.com
Immaculately Groomed
 Opening The ravages of civil war are painfully
clear: Apart from massive numbers of
injuries and deaths, families and com-

Remarks munities are forced to flee, abandon-

ing their property and possessions.
Syria, Libya, South Sudan, Mali, and
the Central African Republic show the

This
depth of the crisis. Bringing the fight-
ing to a close is difficult enough, but the
legacy of discord can be tenacious, espe-
cially when it comes to land lost. Some

Land disputessuch as those at the heart of

the Israeli-Palestinian conflicthave
lasted generations.

Was
In Latin America a critical experiment A mother and child
in land restitution is under way. On 23 displaced by
Colombias civil
June the government of Colombia agreed conflict
to a cease-fire with the armed leftist rebels

Mine
By Jean
called Revolutionary Armed Forces of
Colombia (FARC), officially ending hos-
tilities in a conflict that raged for more
than 50 years. The fighting has cost about
220,000 lives (80 per cent civilian), with
Friedman-Rudovsky more than 6 million peopleabout 1 in
every 10 Colombianspushed off their
land or out of their home. The country
has the worlds second-highest number of
internally displaced people, only recently
eclipsed by Syrias 7.6 million. They are
estimated to have lost a combined 7.7
million hectares, an area roughly the
6 size of South Carolina. Key to the peace
thats slowly taking hold in the nation is
an orderly restitution of property.
The feelings are still raw for Maria
Lisve Clavijo. On 31 July, 1999, she and
her family were celebrating the feast of
the Virgen de Carmen when trucks with
armed men arrived. Clavijo, 25 years old
at the time, felt a jolt of fear when she saw
the insignia of a notoriously brutal para-
military group on their uniforms. Such
groups were death squads often used by
landowners, drug cartels, and politicians
to combat the FARC. The men rounded up
all the villagers, called out a list of names,
and led those people away. They told the
rest of us that because we were allies of
the FARC, we must leave immediately,
Clavijo says. She denies that she or her
neighbours were aiding the rebels, but
these werent men to be argued with. She
quickly gathered her four kids, grabbed
diapers for the baby, and abandoned her
familys 18-hectare farm.
Today, Clavijo and seven of her rel-
atives reside on the outskirts of Tulu,
a city less than 50 kilometres from her
Colombia experiments farm. They live in a two-room shack that
with settling disputes she says was once used by a local gang for
dismembering bodies. No one should
that arise when the live like this, she tells me, as she intro-
displaced try to reclaim duces me to her mother, a bedridden,
their home skeletal woman; her mentally challenged
sister; and that sisters teenage daughter,
born from a paramilitary rape. The farm
is where we should be, and we want it
back, Clavijo says.
Forced internal migration has created
profound disorder and discontent.
Families lost not only land and liveli-
hoods but also their sense of place and
belonging. In 2011 the government of the
newly elected president, Juan Manuel
Santos, established the office of land res-
titution, promising that anyone who lost
his home because of the conflict has a
right to get it back. Its our job to, little
by little, reconstruct the social fabric
that was broken by displacement, says
Ricardo Sabogal, the offices director.
The problem is, the government seems
to have not realised how complicated this
would be. I know who lives on my farm
now, and its not the paramilitaries, says
Clavijo, explaining that at some point,
her land changed hands. Clavijo believes
that the current occupants bought the
property without knowing its history, but
they refuse to leave without a government
order. This is common, says Teo Ballv,
a professor of peace and conflict studies
at Colgate University. The process of land
restitution, he says, is like bureaucratic
archaeologylayers and layers of owners

to figure out who the rightful owner is.
There are infinitely complex scenarios,
and in many cases the current occu-
pants are people as poor and vulnerable
as those who were originally displaced.
The decision about who gets the land is
made by a judge based on the findings of
the office of land restitutions special units
dispatched to the countryside to inves-
tigate land claims. In most cases, title
deeds, if they ever existed, have been lost
or destroyed. The investigators dig into
municipal registries, privately stored con-
tracts, old utility bill recordsanything
that might indicate prior ownership. They
then cross-reference the land claim with
government intelligence about the pres-
ence of armed combatants in the area to
make sure the family was evicted because
of the conflict. The entire process should
take about a year, Sabogal says.
Clavijo has been waiting for four.
When I visit her home in April, she
shoves several legal documents into my
hands. The papers show that she submit-
LUIS ACOSTA/AFP/GETTY IMAGES
ted her claim in 2012 and that theres no
resolution yet. Slowness is the norm: As
of April of this year, only 3,000 claims,
or 3.4 per cent of the total cases taken
on by the office, have been resolved.
Moreover, those who have been given
their land back are supposed to receive
agricultural assistance or small-business
incentives to make rural life viable again.
Studies have found these efforts are
falling short, as well.
Experts say that for Colombia to
develop, farmers must repopulate the
abandoned countryside. According to the
United Nations Development Programme,
less than a quarter of the national territory
suitable for food production is cultivated.
Theres also politics. What set the
stage for the peace negotiations was, in
part, the creation of the office of land
restitution. The nation has always had a
drastically unequal distribution of land,
and displacement exacerbated that
trend. Today, less than 1 per cent of the
Colombian population owns more than
60 per cent of the land, one of the worlds
most inequitable ratios. When the govern-
ment showed a willingness to address this
issue, FARC came to the negotiating table.
The government now says that giving
back their land may make its citizens
less restless, less inclined to support
radical forces. This stability would help
attract foreign investment. Unlike other
Latin American countries, Colombia has
been a loyal US ally and reliably market-
friendly. Whats held back development
If successful, the
programme may provide
a road map for other
post-civil war societies
has been the security situation. The
war made many parts of the country
ungovernable and, thereby, untapped,
Colgate Universitys Ballv says. With a
peace agreement forthcoming, that will
change. The country has vast mineral
and oil reserves in areas that will be newly
coming onlinein part, thanks to initia-
tives like the land restitution programme.
Although land restitution is key to long-
term stability, its causing turmoil in the
short term. Leading international human-
rights organisations have documented
intimidation campaigns targeted at those
trying to return home. Families going back
to their land have received death threats,
and in 2015, 105 activist leaders were
killed, a 35 per cent increase from the
previous year. Judges who issue land res-
titution decisions are given personal secu-
rity details, says Sabogal, the director of
the government office. Colombias landed
elite used to employ right-wing paramili-
taries to enforce their claims. Now theyre
colluding with drug trafficking groups. 7
Clavijo is one of the persecuted.
Over the years, shes started helping
other families with their claims and has
emerged as a leading activist for land res-
titution in western Colombia. Shes faced
repeated death threats and has had to
change homes no fewer than six times
since her displacement out of fear for
her safety. I fight so that the government
gives us the rights that we deserve, she
says. They made promises.
Progress is slow, and results are slim.
One day in the city of Buenaventura,
women formed a long line waiting for
entry into the citys Victims Attention
Centre. These centres dot the country,
outposts for promised stipends, training
courses, vocational classes, job opportu-
nities, and more. Every woman I spoke to
was angry with the government for not
fulfilling its promises.
Colombia isnt the only country where
people look to the state to redress the
harms of war. But the nation is a living
experiment because it began this process
before the conflict ended. The world
might well take heed of how Colombias
efforts unfold. <BW>
Friedman-Rudovsky was a 2016 Adelante
Latin America Reporting Fellow with the
International Womens Media Foundation.
 Global
Economics
16 31 August, 2016

Brexit: Whats Next

The complications are just beginning
You can begin to pencil things in
The UKs divorce from the
European Union isnt
going to be easy. Theres
no precedent, and no
planning was done before
the historic referendum. Almost
two months after the vote, heres What will the
post-EU regim
what we knowand what we The pro-Brexit e look like?
lobbys dream
access to the of complete
still have to find outabout the EUs single mar
ket and a
crackdown on
major issues facing investors and the free movem
a nonstarter fo ent of labour is
r Merkel and Fr
executives as policymakers work Franois Holla ench Presiden
t
8 nde. One idea
out exactly what Brexit will mean. might fit into Eu of how Britain
rope is based
Economic Are on the Europe
Simon Kennedy, Stephanie a, a group of st
ates affiliated
an
with the EU. EE
Bodoni, and Charlotte Ryan A membership
to the single m grants access
arket but no sa
y over EU law
and no author s
ity to block wor
free m ke rs
When will talks begin? n a former
ovement. Rupe
rt Harrison,
The resa May mus t dec ide whe tr
Prime Minister easury advise
r now at
on Treaty, BlackRock, su
to activate Article 50 of the Lisb ggests EEA m
talk s. May say s she in w hich the UK se inus,
which starts two years of cures some
ger befo re yea rend . Ger man m igra tio n curbs in retu
wont pull the trig rn for not
given her enjoying full m
Chancellor Angela Merkel has n
arket access.
som e que stio
blessing to the delay. Theres
the process
about whether May can start Will B
or nee ds Par liam ent s consent. If rit
on her own of a cross ish banks
put to a vote , som e mem ber s
the mat ter is
Brexit or attach Pass Europe? still be ab
Parliament may try to oppose po le to
neg otia tion s. comp rting, whic oper
ate
amendments that ham strin g a n ies ba h allow
its the prim e a n d r s e s fi n
men t law yers hav e said a is e d in the U a n c
Govern for th fun ia
K to s l-service
ministers decision, but a judg
e said on 19 July e City ds in the erve s
U B S of L EU, is client
May consult have ondo a cru
that a lawsuit demanding that status w a r n . J P c ia l
s
Parliament will be taken very
seriously and quo c ned that f Morgan C issue
emb er. jobs. ould f ailure hase
rt by Dec D o t a
may reach the Supreme Cou repor eutsche B rce them o keep th nd
ted b ank in to cu e
to los y Bus an int t Brit
e ine e ish
sees passportin ss Insider rnal docum
a firs g from s a id it e en
that c
onfro
t mov
er ad Lond xpec t
indus n va o n an t s
try. D t the threa ntage for d that it
Chan eutsc t befo instit
ce he re utio
said o llor of the Bank wou the rest o ns
n 19 J Exch ld not f the
will b u eq c
e a ve ly that pre uer Philip omment.
ry imp se H
ortan rving pas ammond
t part sport
of ta ing
lks.
 The US claims fraud, China faces a battle Russias recession
and Malaysia shrugs 10 with bad loans, the slams its next victim:
original sin 10 retailers 11

Big Macs, iPhones, Buy a Brazilian palace

and a purchasing (and help the state of
What happens to the clearing of power paradox 11 Rio de Janeiro) 12
euro-denominated trades?
Clearing firms stand between buyers and
sellers, holding collateral from both in case
either one defaults. Londons role in the
$493 trillion derivatives market came into
focus last year when the UK won a court
case to fend off the European Central
Banks bid to shift euro-denominated
clearing into the single-currency area.
Hollande has argued that EU member
states should prepare to take back euro-
denominated clearing. German officials
have countered that Paris is dreaming if
it thinks it can beat out Frankfurt, home
of the ECB and the Deutsche Brses
Eurex Exchange.

What is the
fate of EU na
May said on tionals in th
e UK?
27 July that ection?
able to guar
antee their rig
she wants t
o be c t d a ta prot acy
it aff e US Priv
expect to be
able to do th
hts in the UK
.I o w d o es Brex roved the EU- rd s and
able to do th at. I intend to H EU app afegu a
at. She reite be ly th e p la c e s
In Ju h puts in f EU
guarantees rated that th
ld, whic ivacy o
were depend
en
e S h ie p ro te c t the pr to the US
by
similar assu t on receivin s to ip p e d te
rances abou g n
conditio ersonal data s
h nego a ti
continent. B
rexit czar Dav
t Britons on
the n s p K m a y have to w it h
Sky News on id Davis told citize als. The
U
ompeti
tive
17 July that
a m u ltination rd to remain c eely and
could be impo cutoff point r acco data fr a much
the right to re
sed denying
newer arrival a simila bility to move to emulate
s a a ve
main. s the E U also h w that
Hollande sa
id on s a fe ly. It may r E U p rivacy la is law
Which trad stricte h
21 July that e deals will 2018. T data
Britons Britain strike ffect in ive EU
will be able to
outside the
EU? takes e fi r st ti m e g
y
Once the UK th e to le v
spend as m is out, it will will for power f
uch with a host need its ow
n atc h d ogs the s 4 per cent o
time as they of countries links w u c h a te c h
wish an EU mem that it trades as m nks,
in France. ber. Trade S with as fines of a l s a le s on ba fo r
scoping o ecretary Lia nnu ompan
ies
ut about a d
ozen pacts,
m Fox is global a other c
the Sunday he ts , a n d
Times, and
on 19 July, Fo
told gian lations.
Secretary B
oris Johnso reign p r ivacy vio
begin to pen n said, You
cil things in. can
free-trade zo Davis forese
ne probably es a
of the EUth 10 times the
ough sceptic size
trading zone s point out th
that big woul at a
global econo d be larger th
my. Australia an the
offered to st s prime min
rike a deal a ister has
but Foxs ta s soon as po
lk of very fr ssible,
Canada sto uitful exchan
pped when ges with
envoy said he th e Canadian
r priority was trade
the EU.
ILLUSTRATION BY BRAULIO AMADO
 Global Economics

his accounts before the

Power
Malaysias Premier:
What Scandal?
Najib keeps cool as a graft drama
swirls around a state fund
All that is left are loyalists who sign that the US will press
say hes innocent or dont care
On 20 July, the day US prosecutors in
Washington alleged massive fraud at
a Malaysian state fund, it was busi-
ness as usual for Prime Minister Najib
Razak. At an evening feast for civil ser-
vants, he shook hands and posed for
selfies. The next day he viewed the
unveiling of a sedan by Malaysias top
carmaker. He said in passing the US
Department of Justice action should
be allowed to run its course. The DOJ
can investigate the Malaysian fund
because the US alleges that $1 billion
of the funds money was laundered
through US banks.
10 Najib has weathered a year of scan-
dals over political donationsand
may well survive the latest overseas
controversy. The premier is focused
on matters at home, especially the
economy, as he seeks to preserve his
base of ethnic Malays. Only if that
support cracks will he risk losing power.
The economy is projected to
expand this year 4.5 per cent at most,
its slowest pace in seven years, as the
countrys oil revenue falls. Spending
constraints could limit Najibs ability
to increase the cash handouts the gov-
ernment gives to 7 million Malaysians,
or 1 in every 4 citizens. Foreign invest-
ment, though, rose 28 per cent in the
first quarter from a year earlier.
The US civil suits seek to seize more
than $1 billion in assets that prosecu-
tors allege were acquired with money
siphoned from state fund 1Malaysia
Development Bhd. US investiga-
tors say more than $3.5 billion was
spent on paintings, real estate, and
a Hollywood film. An additional
2013 election. Hes said
the money was a private Najib
donation from the Saudi
royal family and most of
it was returned.
The US complaint
didnt accuse any indi-
viduals of wrongdoing.
Theres no immediate
criminal charges, and
chances of Najib being
indicted at home appear
slim. Local investigations
have largely wrapped
up. The Malaysian attor-
ney general concluded
earlier this year that
Najib didnt engage in
any graft.
When the news of his
Najib
bank account broke in
July 2015, the premier
acted fast, firing detrac-
tors, including his deputy prime min- strong showing by UMNO, whatevers
ister, and curbing dissent within his left will go away. Shamim Adam,
United Malays National Organisation with Chris Blake, Anuradha Raghu, and
(UMNO). After the Department of Y-Sing Liau
Justice alleged fraud at 1MDB, senior
The bottom line Supporters of Malaysias ruling
Malaysian officials were quick to close party worry more about the economy than the
ranks. History has shown the US can outcome of a money-laundering scandal.
act too hastily and then be proven
incorrect, says the communications
minister. Theres no evidence from
any probe anywhere that funds were
misappropriated, Malaysias attorney Expansion
general says, expressing strong con-
cerns at the insinuations and allega-
China Adds More to
tions against Najib. A Big Debt Pile
Says Gregory Poling, a Southeast
Asia specialist at the Center for
In June $244 billion in lending
Strategic & International Studies in
boosted state-owned enterprises
Washington: The opposition was
already certain that Najib had a hand The cash Beijing is shovelling into
in money laundering from 1MDB. the economy is stunning
Within UMNO, Najib has forced out
all those who thought the same, so all Chinas government has repeatedly
that is left are loyalists who are either pledged to its citizens that it would keep
convinced that he is innocent or who a lid on borrowing and push through
dont care one way or another. key reforms. But according to the latest
As long as Najib is backed by data, the government-owned banks are
UMNOs division heads191 leaders lending more, not less.
who select party officialshis position Chinas officials say gross domes-
MANAN VATSYAYANA/AFP/GETTY IMAGES

$700 million ended up in accounts
controlled by an official whose
description fits Najib. The premier,
who chaired the advisory board
of 1MDB until recently, has denied
wrongdoing. But Najib has acknowl-
edged about $700 million went into
is secure. Come election time, they
will decide whether Najib can win
again. Says Vaninder Singh, an econ-
omist at Royal Bank of Scotland: The
political risk premium on Malaysian
assets has come down quite a bit. If
theres another election and theres a
tic product rose 6.7 per cent in the
three months through June from a year
earlier, a notch above the consensus
forecast. Cheap credit helped China
beat growth expectations. Instead of
tackling debt thats two and a half times
the nations GDP, policymakers are
 247%
Global Economics

extending more loans to prop up the Chinas structural banking crisis, political and finan-
economy. Household and corporate and leverage prob- cial upheaval in Brazilshifted atten-
debts are at all-time highs. lems become more tion away from China. The government
The amount of cash Beijing is shov- severe, Bloomberg let the yuan weaken to six-year near-
elling into the economy is stunning, Intelligence econ- lows without eliciting much in the
says Andrew Collier, an analyst in Hong omists Tom Orlik way of protests from trading part-
Kong and former president of Bank of and Fielding Chen ners. The decline in the currency
China International USA. Total lending recently wrote. should lift exports. The Shanghai and
rose 1.63 trillion yuan ($244 billion) in Chinas debt-to-GDP Ratings agencies Shenzhen stock markets have recov-
June. The amount of new credit exceeds ratio S&P Global Ratings ered somewhat after collapsing in 2015.
the 2015 GDP of Vietnam. and Moodys Economic reforms have continued,
Many of the companies benefiting Investors Service says Andy Rothman, an investment
from the loans are unprofitable state- have warned that the government needs strategist at Matthews Asia. No one is
owned enterprises (SOEs) kept alive to do more to curb borrowing, and ana- happy with the pace, but thats always
only to avoid wide job losses. The lysts fear the banking system may need been the case.
money being lent to the SOEs should more than $500 billion in capital to offset A Goldman Sachs report published
be going to private companies that can rising bad loans. earlier this year said the increase in
use it to expand and boost hiring, says In May state media cited an unnamed Chinas debt-to-GDP ratioto 247 per
Larry Hu, head of China economics at official warning that excessive debt was cent, according to Orlikis among the
Macquarie Group in Hong Kong. Chinas original sin and the country highest in recent history. While there
The credit expansion is at odds with cant borrow its way to long-term health. are signs that the Chinese economy has
promises by President Xi Jinping and There are bright spots. Home prices gotten through a particularly rough
Premier Li Keqiang to shift the economy are rebounding, and retail sales beat patch, long-term growth prospects have
from manufacturing and investment expectations in June. Authorities have hardly improved as risks continue to
toward services and consumption. That boosted oversight of the opaque financ- build up, says Eswar Prasad, a former
would mean slashing industrial over- ing methods used by local authorities. chief of the International Monetary
capacity and closing inefficient SOEs to The regulators are allowing corporate Funds China division and now a profes-
make room for private enterprise. defaults, and banks have more leeway sor of trade policy at Cornell University.
The evidence suggests the overhaul is to set deposit rates. Private-sector investment, some 11
progressing slowly at best. The stabil- Economic turmoil around the globe 62 per cent of the total, didnt grow in
isation in growth has come at a cost as in recent monthsBrexit, the Italian June. If the economy is to find its feet
without relying on government stim-
Indicators A Tale of Two Indexes ulus, it will be vital to get the private
sector spending again, says Macquaries
The Economist has long used an index to compare the purchasing power of Hu. But that wont happen overnight.
currencies using local prices of Big Macs. In July, Nomura introduced its own Hu says funding costs and entrance bar-
index using the iPhone 6S. They clash. In the countries shown, Big Macs cost riers remain much higher for privately
less than in the US at todays exchange rates, which indicates their currencies owned companies than their state coun-
are undervalued. But iPhones cost more abroad, indicating those same terparts, which account for two-thirds
currencies are overvalued. Susanne Barton of all corporate debt. Enda Curran
60%
Currency The bottom line Analysts warn that Chinas banks
overvalued iPhone may need $500 billion in fresh capital to offset a
vs. dollar index
sharp rise in bad loans.

30%

Recessions
0
Russian Consumers
Brazil Turkey Russia Germany China Japan Mexico UK
Eat Less, Skip Meds
-30%
A year and a half of recession has
impoverished millions

Currency Big Mac -60%

Its not possible for consumption
undervalued index to expand
vs. dollar
Executives at supermarket chain
IPHONE INDEX BASED ON LOCAL PRICE OF 16GB IPHONE 6S. Magnit, with almost 13,000 stores from
near the Arctic to the foothills of the
DATA: NOMURA HOLDINGS, BIG MAC INDEX
 Global Economics
For Sale
Brazil The lush, green island of Brocoi sits in Guanabara Bay, just off the coast from the city of Rio de
Janeiro. On the island is a palace that was once the summer residence of the governor of the state
but now is unused, with the jungle encroaching on the grounds. The state is broke, so its auctioning
off both island and mansion. The island has stunning bay views. David Biller
12 Caucasus Mountains, have a unique
view of the Russian consumer. And
what theyre seeing isnt good.
Magnit says the value of the average
purchase fell 1.5 per cent in the first half
of 2016 from the same period a year
earlier, the first decline since it began
disclosing the figures a decade ago.
Nationwide, retail sales in June shrank
for a record 18th month, dropping
5.9 per cent from the previous year,
the Federal Statistics Service said on 19
July. Its not possible for consumption
to expand, says Dmitry Polevoy, chief
economist for Russia at ING Groep.
Salaries arent growing or are growing
much more moderately than they used
to. Lending is declining.
The crisis brought on by the collapse
of the price of oil is battering the middle
class. Preliminary data from the sta-
tistics service show that 22.7 million
Russians lived below the poverty line
in the first quarter of the year, up from
19.8 million two years ago. In a poll con-
ducted on 5 June, 27 per cent of respon-
dents said they had been buying less
food in the last three months. Almost
half said they ignored doctors recom-
mendations on nonprescription drugs
if they were too expensive. About two-
thirds said prices of goods and ser-
vices bought by their families are rising
anywhere from 15 per cent to 50 per
cent, well above inflation. Prices are
rising because the weakened rouble
makes imports more expensive and
because of Russias ban on food imports.
Hard-pressed Russians are holding
on to their cars longer. They are start-
ing to do the same with electron-
ics, furniture, and home appliances,
according to Russian rating company
Analytical Credit Rating Agency.
Inflation-adjusted disposable incomes
will continue to decline for two and
a half more years and risk stagnating
after that, ACRA said in a June report.
The plight of households is hurting
stocks of retailers such as supermarket
chain Lenta and Magnit. The Micex
Consumer Goods and Services Index
of nine stocks has fallen 3.4 per cent
this year, underperforming the Micex
Index, which is up 9.2 per cent, in part
because of strong oil stocks. Little relief
is in sight as the government trims its
biggest budget deficit since 2010 by
freezing wages for civil servants and
cutting increases in pensions.
So far, the consumer crisis hasnt
spilled over into politics, even with a
parliamentary election coming this
fall, then a presidential vote in 2018.
President Vladimir Putins approval
rating has remained at or above 80 per
$9.2m
What the palace might fetch
in a wealthy part of the city
$5.8b
Size of budget deficit
of Rio de Janeiro state
cent since the conflict over Ukraine
erupted in March 2014. Only 23 per cent
DATA: SIMONE ALGEBAILE, DIRECTOR OF RESTORATION AND CONSERVATION FOR THE STATE OF RIO DE JANEIRO; PHOTOGRAPHS BY LIANNE MILTON FOR BLOOMBERG
of Russians say theyd take part in pro-
tests if theyre held in the next month
or two, compared with 71 per cent who
wouldnt, according to a Public Opinion
Foundation survey.
One reason for the relative calm
is that unemployment has barely
budged despite the economic slow-
down. The jobless rate improved for
a third month in a row in June, falling
more than forecast to 5.4 per cent from
5.6 per cent, according to the statis-
tics service. Companies are reducing
salaries, sending employees on vaca-
tion, and introducing part-time work.
Structurally low unemployment limits
the political risks from the prolonged
recession, making low growth rates
in the medium term largely accept-
able from a political point of view,
says Vladimir Osakovskiy, chief econ-
omist for Russia at Bank of America in
Moscow. Despite the recession, people
in general continue to have a steady
flow of income. Olga Tanas
The bottom line Although the recession has
battered the Russian middle class, Putin still
enjoys 80 per cent approval ratings.
BUSINESSWEEK
global-economics
BUILD A SMART
FUTURE FOR
BANKING
Endorsed By:
CREDIT CARD

000 000 000 000

Your customers wants are changing.

Are you ready for New Age Banking?
With an unprecedented speaker lineup, the MENA New Age
Banking will highlight critical issues banks face, like Digital
Transformation, Omni-Channel Banking, Risk &
Compliance, Cyber Security, Big Data in Banking and
Implementation of Social Media
With top decision makers in attendance, you would engage with
people who matter when it comes to making real decisions.
Register today and be a part of this premier banking event
www.newagenking.com/mena USE Promo BBW-NAB for exclusive
discounts.

4 - 5 October 2016 | Grand Hyatt, Doha, Qatar

Key Speakers:
Michael Ryan, CEO, Qatar Financial Centre Regulatory Authority

REGISTER NOW!

Bertrand Hassani Walter Lironi Neil Andrew Buckley Hani Khalil

Global Head of Research & Innovation, Group Head of Technology & Operations, Head of Alternate Channels,
Santander, United Kingdom Commercial Bank of Dubai, UAE Doha Bank, Qatar Qatar National Bank, Qatar

@Newagebanking New Age Banking Summit Have a path-breaking Fintech solution? Write to us at info@newagebanking.com

Lead Sponsor: Gold Sponsors: Networking Partners: Media Sponsor: Organised By:

Official Online Partner: Media Partners:

 1 1531May,
16 August,
20162016
ubaiGetsUse d
D
The UAEs business hub feels the weight of lower oil prices and currency twists
Dubai is exposed to developments in the rest of the Gulf economies
Kier Riemersma and his wife sat down
a few months ago to make a diffi-
14 cult decision. The American couple,
who lived in Dubai for over a decade,
would wind down his real estate
business and move back home to
Denver, Colorado. Frankly, we strug-
gled in the past year and half, says
Riemersma, 46, who had to dismiss his
five employees in March. We proba-
bly chased 20 major assignments and
got only one. Most of the others we
didnt lose. The projects never pro-
gressed and simply werent awarded.
A dip in the construction indus-
try is not new in the emirate, a desert
metropolis hailed for developing the
most diversified economy in the Middle
East. But even as its forecast to weather
a regional slowdown better than others,
a combination of an oil crisis batter-
ing Gulf neighbours and weaker curren-
cies affecting major overseas property
investors risk taking the gloss off a city
that has been a promised land for at
least two decades. Dubai is exposed
to developments in the rest of the Gulf
economies, where we think growth will
slow and remain sluggish in 2016 and
2017, says Jason Tuvey, an economist at
Capital Economics in London.
Although official data on jobs isnt
publicly available, stories of moving
trucks and farewell parties are increas-
ingly common in the city, the United
to a
Slo w
e r
Arab Emirates business hub. Banks Dubai went on a borrowing binge to
in the UAE may have cut as many as cut its reliance on oil. After a spell of
1,500 jobs, according to financial breakneck growth, a real-estate crash
recruiters and Bloomberg calculations pushed the emirate to the brink of
earlier this year. T.D. Williamson, a default in 2009. Authorities have since
US-based pipeline-repair company, said tightened regulations. Growth has
in February it reduced an unspecified rebounded to around 4 per cent last
number of jobs in Dubai as customers year. The current slowdown is very
scaled back on projects. Many others in broad-based, but Dubai is still better
the citys shimmering skyscrapers are off than most of the region, says Razan
freezing hiring. Jumeirah Groups res- Nasser, senior Middle East and North
taurants were the latest to reduce staff. Africa economist at HSBC in Dubai.
Spending in the lavish malls is rising The oil blow is much softer than those
less quickly and rents on apartments seen in hydrocarbon economies such as
are dropping faster than Saudi Arabia and Bahrain.
anytime in the last two Frankly, we struggled
Authorities have repeatedly
in the past year and
years. Its also taking half. We probably said that the emirates economy
much longer to lease chased 20 major is strong enough to cope with
larger and more expen- assignments and got
the slump better than others.
only one. Most of the
sive homes, accord- others we didnt lose. The Monster Employment Index,
ing to Jesse Downs, The projects never a jobs tracker, showed that
managing director at progressed and simply
while hiring across the Gulf has
werent awarded.
Phidar Advisory, a real Kier Riemersma, slowed down in June, the UAE
estate consultancy former Dubai-based market remains promising,
firm. Flagship carrier real estate business
citing the healthcare industry as
owner
Emirates reported its an example of rising demand.
first annual sales decline Abbott, a global healthcare
in at least a decade mostly due company, said in an e-mailed answer
to the stronger dollar. While business to questions that its adding about 40
has since picked up, the airline said positions in Dubai as part of efforts to
its under pressure as it reduces fares bolster its presence in the Middle East.
and faces fewer bookings from the oil Dubais gross domestic product will
industry. Known for luxury travel, its likely grow 3.3 per cent this year
being forced to adapt and may intro- more than twice as fast as Saudi
duce premium-economy seats. Arabia, according to the International

3.3%
IMFs estimate for GDP growth in
Dubai in 2016, down from 4.6 per cent
recorded in 2013
P 70,000 dirhams ($19,000) a year, while
a a recently opened school that charged
c
Monetary e $4,628 had all spaces filled immedi-
Fund. Domestic
investments, boosted
o Riemersma says leaving was
by preparations for hosting the
f a logical decision. His
Expo 2020 trade fair, will accelerate
growth to more than 5 per cent by 2020,
the IMF estimates. The IMF forecasts
for this year look reasonable, but further
out the fund is probably a bit optimistic,
says Tuvey of Capital Economics.
The UK vote to exit the European
Union also risks reducing demand from
Britons for real estate, according to
Raza Agha, VTB Capitals chief econ-
omist for the Middle East and Africa.
The risks of growth undershooting
expectations are higher in the after-
math of Brexit, he says.
Dubais benchmark index for
stocks dropped 16 per cent this year
through July, about four times the MSCI
Emerging Markets Indexs decline.
Hotels, which include the sail-shaped
Burj Al Arab and Roman-inspired
Palazzo Versace, are bracing for a drop
among tourists from Europe and the
UK. Western Europe was the second-
largest source of tourists to Dubai by
region, accounting for 23 per cent.
The UK made up 8 per cent of total vis-
itors. That follows a drop in Russian
tourists two years ago when the rouble
slumped. Chinese tourists, on the
other hand, increased 4 per cent in the
first quarter of this year, according to
Dubai Tourism figures. The UK vote
has forced tour companies to adjust
their prices to remain attractive to trav-
ellers just hit by a drop in the value of
the pound. Were preparing for more
balance in tourism packages for British
tourists so they dont really feel the
pinch, says Ghassan Aridi, chief exec-
utive of Alpha Destinations. We have
no choice but to offer attractive pack-
ages and drop prices.
In contrast to emigrating expats like
Riemersma, other residents are finding
ways to cut corners. Some parents
of children enrolled at premium
schools are switching to cheaper ones
because that is enabling them to stay
in Dubai, James Mullen from Which
School Advisor says. A top British cur-
riculum school can cost an average of
ately, he says.
L wife moved back to
the US ahead of
the family i after
finding a job in f Emirates Airline and Etihad Airways.
Denver. Leaving is an
absolutely hard thing to do e ducing flat beds in business class for
but we figured its going to be at
least another couple of years of eco-
nomic hardship in Dubai at a time the
economy is really strong in Colorado,
he says. Zainab Fattah with assistance
from Deena Kamel Yousef
The bottom line Businesses in Dubai are adjusting
to slower growth in the emirate, with the IMF
projecting GDP expansion of 3.3 per cent in 2016.
Aviation
A New Pilot Takes Over
Pakistan Airs Tailspin
A Lufthansa veteran sets out to
save the troubled airline
We are living in an airline world
which is fast. It is time to change
As the new head of Pakistan
International Airlines, Bernd
Hildenbrand faces the biggest
The company that
could profit from
Trumps wall plan 16
Briefs: Majid Al
Futtaim looks to Egypt
and Saudi Arabia 17
challenge of his career: getting the
state-owned carrier to think about the
future instead of living in the past.
One of the first things the 61-year-
old Deutsche Lufthansa veteran did
after taking the helm in May was to
remove hundreds of old photos from
the entrance of PIAs headquarters glo-
rifying its past. That included one of US
former first lady Jacqueline Kennedy.
Nice photos, really nice, Kennedy
did fly with PIA, wonderful, but it
doesnt help us now, Hildenbrand,
the bespectacled carriers acting chief
executive officer, says in an interview
in his office in Karachi, Pakistans com-
mercial capital. We have to make a
leapfrog and go into the future.
Hildenbrand is attempting to turn
around an airline which has been
hobbled by frequent labour strife,
hasnt made an annual profit in the past
decade and has a higher debt burden
than Singapore Airlines and Malaysias
AirAsia combined, according to data 15
compiled by Bloomberg. It has also lost
market share to Gulf carriers such as
The modernisation plan includes intro-
the first time this month on flights to
London. The national flag carrier will
also lease aircraft and increase its fleet
to 100 by 2025, from a current 38.
Emirates has 251 planes, according to its
annual report.
PIA projects as a workers airline,
flying workers from Pakistan to Qatar,
Oman, Bahrain and Dubai, and doesnt
have a luxury product perception, says
Mark D. Martin, founder of Dubai-based
Martin Consulting. It needs to figure
out what it aspires to be and its place
in the world. Emirates now flies more
to coastal Karachi than PIA to Dubai.
We need to find strategies to change
that, says Hildenbrand. As 1.5 million
Pakistanis live in Dubai, its a market.
We have to think how to tap this.
Even as the German national seeks
government help to increase the
fleets size, the company is also strug-
gling under legacy loans that have
ILLUSTRATION BY SJC
resulted in servicing costs of about 4
billion rupees ($38 million) a month.
Operational profitability is very
important, he says. We have some
 Companies/Industries

First of all, the gov- Gaza in a fence to prevent militant

ernment has to help
us, says Hildenbrand.
We also have to earn
money. We already
had some months
where we had opera-
tional profits.
Hildenbrand, who
has worked for about
four decades with
Lufthansa and briefly
with Indias defunct
attacks, has helped construct barriers
along the Egyptian and Jordanian fron-
tiers. Its now competing for the contract
to build a wall on Kenyas border with
Somalia, Koursh, Magals chief executive
officer, says. If Donald Trump makes it to
the White House, Mexico could be next.
The border business was down, but
then came ISIS and the Syrian conflict,
Koursh, 44, says, using an acronym for
the self-proclaimed
Islamic State. The

legacy loans, of course they make our

life difficult. This is something we have
to think with the government.
The airline has long been ear-
marked as part of Prime Minister
Nawaz Sharif s drive to privatise
state-owned companies, reforms that
are part of a $6.6 billion loan agree-
ment in 2013 with the International
Monetary Fund to avert a balance-
of-payments crisis. Yet with the IMF
programme due to end next month,
the sale of a 26 per cent stake in the
16 national carrier was stalled by violent
protests and strikes in February.
Sharif s administration is still pushing
ahead. Financial advisers were asked
to start soft marketing for the
company with a plan for the govern-
ment to retain management control,
Ahmad Nawaz Sukhera, secretary in
the Privatisation Commission, said in
an interview on 3 August.
The government owns a 92 per cent
stake in PIA and the employees own
3.9 per cent. Losses more than tripled
to 27.8 billion rupees in 2015 from
2010, director Amir Ali told lawmak-
ers in January. The carrier has about
17,000 employees, Hildenbrand says.
It also has the second-lowest reve-
nue-to-employee ratio of 118 listed
airline peers, according to data com-
piled by Bloomberg. Unions here
need to understand we cant leave the
company as it was, Hildenbrand says.
They need to learn the modern way of
management; this takes time.
The carrier made a total operational
loss of 7.5 billion rupees in the nine
months ended September. The car-
riers stock price has declined 9 per
cent this year through 3 August com-
pared with a gain of 21 per cent in
Pakistans benchmark stock index,
Asias best performer.
ModiLuft airline, is
also set on improving
PIAs cosmetics by fixing broken seat-
belt lights and improving cleanliness.
His solution is using multiple platforms
such as Facebooks WhatsApp messag-
ing service to get flight attendants and
staff to communicate and act quickly.
We need to understand PIA does
not live in a secluded world or a silo,
says Hildenbrand. We are living in an
airline world which is fast. It is time to
change. Faseeh Mangi
The bottom line The new CEO of Pakistan Air
plans to modernise the carrier as he targets its
first profit in a decade.
Security
Trumps Wall Finds a
Fan in Israel
Gaza-fence builder Magal
Security Systems wants the job
Borders are coming back
big-time
The border security business is thriv-
ing and thats good news for Magal
Security Systems boss Saar Koursh.
His biggest showroom: the Gaza Strip.
The Israeli company, which wrapped
$15.2 billion
world is chang-
ing and borders
are coming back
big-time.
Estimated cost of Mounting jihad-
Kenyas proposed ist violence and
border-wall project waves of migra-
with Somalia, for
which Magal is bidding tion have created
a surging demand
for fortified frontiers. Critics ques-
tion the long-term effectiveness of such
defences, arguing that improved intelli-
gence, along with solutions to political,
social and economic problems, would be
more effective. Gaza, the scene of three
wars with Israel since 2008, has become
a key sales prop for Magals smart
fences, which are integrated with
video cameras, ground sensors, motion
detectors and satellite monitoring.
Palestinians say Israels fencing project
has turned the Hamas-ruled area into a
prison trapping its 1.8 million residents.
The controversy hasnt deterred inves-
tors. Magals Nasdaq-traded American
Depositary Receipts have risen 23 per
cent this year through 2 August. Thats
among the best in comparison to 183
peers with a market capitalisation above
$50 million, and well above the average
0.3 per cent gain, according to data com-
piled by Bloomberg. Revenue rose 7 per
cent in the first quarter to $12.6 million.
While gross profits also increased,
the company posted a net loss of
$500,000 as the shekels strength against
the dollar negatively affected the
financial expenses.
Koursh says he is looking for growth
beyond Israel and Magals biggest
market in the US, eyeing acquisitions
in Europe. The company will also put a
greater emphasis on selling products
such as fences, cameras and detection
equipmentover project management.
Magals $14 million acquisition in April of
Ontario-based Aimetis, a maker of video
surveillance equipment, led to a smart
 Companies/Industries

city product that it plans to introduce

in the Tel Aviv suburb of Holon. The
company signed a draft agreement last
month for a $5 million plan to line the
Briefs By Rahul Odedra

citys streets with hundreds of cameras

linked to alarm systems, intercoms and
emergency buttons in public areas.
Kenyas planned 682-kilometre
MAF Eyes Acquisitions
border project would be bigger than
anything Magal has ever been involved
with, at an estimated cost of 1.54 tril-
Majid Al Futtaim is considering acquisi-
lion shillings ($15.2 billion) if built along tions in the entertainment and retail industry
the entire stretch. Koursh says Magal,
which built and operates the perimeter
and further expansion outside the United Arab
security system for Nairobis Mombasa Emirates, including in Egypt and Saudi Arabia. Iran has banned the
port, has made presentations at govern-
ment ministries. We put a smart fence
We are looking at potential acquisitions that will Pokemon Go mobile
game, citing security
around the entire Gaza Strip, he said allow us to grow inorganically especially in the concerns around the
used of location-based
in an interview last month in Nairobi,
Kenya, where he was part of a business
leisure, entertainment and retail sectors, says technology, according
to the countrys semi-
delegation Prime Minister Benjamin Chief Executive Officer Alain Bejjani. There are official Isna news agency.
Netanyahu led to Africa. Anybody
can give you a very nice Powerpoint,
other markets that have a lot of head-room and were looking
but few can show you such a complex at them. The company this month reported first-half revenue
project as Gaza that is con-
stantly battle-tested. Since 2011, Predicted annual growth of 11 per cent to 15.2 bil-
liquefied natural gas
Kenyan troops have been bat- lion dirhams ($4.1 billion), with
97.3
import capacity in
tling al-Qaeda linked al-Shabab the Middle East and
militants in Somalia. Mwenda North Africa in 2021 earnings before interest, taxes,
if regional growth 17
Njoka, a spokesman for Kenyas predicted by Arab billion depreciation and amortisation
Interior Ministry, didnt respond
to e-mailed questions seeking
Petroleum Investments
Corporation is realised.
cubic metres
rising 7 per cent. H Fadi
details on the project. Ghandour, the founder of Dubai-
Israel is known as a leader in devel-
oping anti-intruder systems because
based logistics company Aramex, plans to raise as much as
LEFT TO RIGHT: ASIM HAFEEZ/BLOOMBERG; PHOTO ILLUSTRATION BY LA CHINA M, IMAGE: SHUTTERSTOCK; ILLUSTRATION BY LA CHINA M

of the threats it faces constantly, says $500 million for a second venture capital fund to invest in the
Yiftach Shapir, a senior fellow spe-
cialising in military technology at the
e-commerce business in the Middle East. Ghandour, who last
Institute for National Security Studies month sold his stake in Aramex, is closing Wamda Capitals
in Tel Aviv. He said such barriers are
not impermeable, especially with a very
first $70 million fund soon, he says. The fund will target an
long border like in the southern US that average investment of $250,000 to $5 million in the early
needs constant patrolling.
Thats not stopping Magal from
and growth stages of e-commerce and technology compa-
closely following Trumps controver- nies, he says. Abdulhadi Shahadah, head of as- CEO
sial proposal to build a barrier to stop
undocumented immigrants from slip-
set management for HSBC Holdings in Saudi Wisdom

ping across the 3,200 kilometre-long
border between the US and Mexico.
We would join forces with a major
US defence company that has experi-
ence with such projects worldwide,
Koursh says. Weve done it in the past
and we would definitely want to do
it.Jonathan Ferziger
The bottom line Rising interest in stronger border
defences due to security and immigration concerns
is good news for Magal Security Systems.
companies-and-industries
Arabia, and Mazin Baghdadi, head of invest-
ment management in the kingdom, have re-
signed from the London-based bank. Their
replacements are yet to be announced. The
Uncertainties will
bank last month named Georges Elhedery create restraint and
restraint will weaken
chief executive officer for the Middle East the investment climate.
Siemens CEO Joe
and North Africa, replacing Mohammad Al Kaeser strikes a
cautionary tone, citing
Tuwaijri who joined the Saudi government political uncertainly in
countries like Turkey
as deputy minister of economy and planning. and the UK
 Politics/
Policy
16 31 August, 2016

OPECs Poison
vital imports and service debt, while
enduring the sharpest contraction in
a decade and the highest inflation rate
in the world. Barkindos native Nigeria

Chalice
is suffering a recession for the first
time since 1991 and a plunge in its cur-
rency to a record low as the oil rout
is compounded by militant attacks
on pipelines and other facilities. The
The oil cartels new head has a lot on his plate schism between OPECs richest and
poorest states widened in the run-up to
Clearly, its a very divided organisation Barkindos appointment, as the wealthy
Gulf nations insisted on unfettered pro-
When OPECs new chief started work on US production levels off, with drilling duction to defend market share, while
1 August, he was taking over an organ- again on the rise. a bloc led by Venezuela urged them to
isation thats largely reconciled internal Barkindo is taking the post at a cut output and boost prices.
differences after a two-year fight over critical time for the organisation, While Barkindos predecessor,
strategy. But as oil prices weaken again, says Abdulsamad al-Awadhi, who was Libyas Abdalla El-Badri, had been due
that unity could be at risk. Kuwaits national representative to to stand down in 2012 after serving
Nigerian Mohammed Barkindo OPEC from 1980 to 2001. His success the maximum two terms allowed by
was the first new top official at the will not only rely on his relations to OPECs rules, he was repeatedly asked
Organization of Petroleum Exporting Saudi Arabia and its Gulf allies, he to stay on as members failed to agree
Countries in almost a decade. He has to win the confidence of the other on a successor. In December 2015,
comes to the role after a dispute over founding members: Iran, Iraq and
18 output policy split OPECs richest and Venezuela, he says.
poorest nations and marked the final Venezuela, Iraq, Nigeria, Algeria
months of his predecessors tenure. and Libya were dubbed by RBC
While members now back Saudi Capital Markets as OPECs
Arabias tactic of pumping without Fragile Five, the countries
restraint to choke off supply from most at risk of political
rivals such as US shale drillers, many turmoil as they struggle
struggle with its effects. to balance their budgets.
Oil prices have recovered by around Only Kuwait and Qatar
50 per cent since January but havent are close to their fiscal
been boosted enough to relieve the break-even points
economic pain that pushed some with oil prices at $50 a
members, notably Venezuela, into barrel, according to the
a state of crisis. Worse still, crude International Monetary
has slid back towards $40 a barrel as Fund. Saudi Arabia, while
demand growth slows and the slump in needing higher prices,
can tap its foreign currency
Taking It For the Team reserves, the worlds fourth
OPECs strategy of maintaining production largest, to cover any shortfall.
levels has hit some members finances Clearly, its a very divided organ-
harder than others
isation, Mike Wittner, head of oil
market research at Societe Generale
Venezuela
Ecuador

in New York, says. Theres the haves

Nigeria
Algeria
Angola

Kuwait

Qatar
Libya

UAE

and have-nots. The haves are the

Iraq
Iran

SA

core Gulf countries, and then theres

everybody else. In a long and
painful down cycle, those
divisions become starker
than ever.
Venezuelas
embattled social-
2015 fiscal deficit
ist government is
(% GDP) is struggling to pay for
 The big thing hes
going to have to
deal with is trying to
show theyre still
relevant. Theyre
searching for
relevance in an era
frustrated by their failure to when theyre not
Nigerian National Petroleum
reverse Saudi Arabias strategy, really making any Corporation in 2010. He is a
Venezuela and its allies insisteddecisions. Not dead, highly skillful negotiator and
but certainly in
that by mid-2016 a replacement middleman and these qual-
should be found for El-Badri,
hibernation.
Jamie Webster, an ities will be tested signifi-
who had defended the mar- independent analyst
in Washington
cantly by the divisions in
ket-share policy. Barkindo was OPEC, says Ed Morse, head
chosen as his successor when of commodities research at
the group next gathered on 2 June. Citigroup in New York. Barkindo
Barkindo was acting secretary will be as successful as anyone
general in 2006 and served could be, more successful than most
for several years as one of others, having learned from experi-
Nigerias OPEC repre- ences in Nigerias oil industry how to
sentatives. He also forge agreements through compro-
was managing direc- mise, he says.
tor of state-owned Although the secretary general
doesnt set policy, the role is impor-
tant as the organisations public rep-
resentative and, as was often the case
with El-Badri, its top internal dip-
lomat, resolving disputes between
members. There are now 14 with the
recent addition of Gabon. Tensions
between OPECs members have always
been a feature of the organisation and
havent prevented the groups latest
manoeuvre from being successful,
says Societe Generales Wittner.
Still, cohesion has been key for
OPEC Secretary some of OPECs most effective
General, Mohammed actions, such as the record supply
Barkindo
cuts that helped revive prices
after the 2008 financial crisis.
Coordination may be needed
again in the future as rising fuel
demand and the rout in non-
OPEC supply makes the world
more reliant on new supplies
from OPEC, Wittner says.
As OPECs present strategy is to
remain passive while the market
corrects itself, Barkindos first chal-
lenge may be to define the organisa-
tions function in this new context,
says Jamie Webster, an independent
analyst in Washington who regularly
attends OPEC meetings. The big thing
hes going to have to deal with is trying
to show theyre still relevant, says
Webster. Theyre searching for rele-
vance in an era when theyre not really
making any decisions. Not dead, but
certainly in hibernation. Grant
Smith and Wael Mahdi
The bottom line As OPECs members suffer to
varying degrees under lower oil prices, its new head
faces a battle to retain the organisations unity.
Europe invests
in Moroccan
manufacturing 20
Democracy
Erdogan Strides On, a
Man of His People
The coup attempt has reinforced
support from his electoral base
What more can anyone expect
from a president?
Turkish pensioner Tenzile has one
question about the boy she watched
play soccer with his friends on her
cobbled street in Istanbul all those years
ago: How could anyone possibly dislike
Recep Tayyip Erdoan? We know hes
honest, we trust him, Tenzile says
through the metal bars on her window
as she waits for the vegetable vendor to
pull up in his car. She prefers to keep
her family name to herself. After he
came to power, everybody got food, 19
everybody got a job. Life was perfect. I
wish everyone was like Erdoan.
Ardent supporters such as Tenzile
see the crushing of a coup on 15 July
as a validation of the enduring grass-
roots strength of Erdoan 14 years after
coming to power. As the prime minis-
ter who tripled the size of the economy
in a decade and now the most powerful
president since Mustafa Kemal Ataturk
founded the modern Turkish state,
Erdoan has beaten the same drum:
stick with me or it will be anarchy, and
each time it works.
Thousands responded to his call to
take to the streets and public squares,
while security forces rounded up thou-
PHOTOGRAPH ILLUSTRATION BY LA CHINA M, IMAGES: AFP (1), SHUTTERSTOCK (1)
sands of opponents and shut media
outlets. While Turkey remains divided, it
reflected the adoration for the man loy-
alists believe turned their country into
a regional powerhouse and stood up to
secularists who banned devout Muslims
from openly leading a conservative life,
according to interviews with Turks of all
ages in different districts of Istanbul.
Erdoan has made the country
richer than ever before, Turkey has
more prestige than ever before and
my family has more money than ever
before, says Haydar Sur, 50, who works
in public health, as he finishes up a
 Politics/Policy
syrupy, cream-topped bread pudding
at a restaurant in the Uskudar area next
to the Bosphorus. What more can
anyone expect from a president?
The foiled attempt by a faction of the
military to usurp power added to the
catalogue of insurgencies that Erdoan
$100b
has put down over the past three years.
Nationwide protests triggered by his
plans to bulldoze an Istanbul park were
crushed. Corruption charges ended with
a clear out of prosecutors. Journalists
and academics were jailed on allegations
of orchestrating an uprising. A surge in
the popularity of an opposition Kurdish
party last year was followed by a restart
of the countrys ethnic conflict, a second
election and a new parliamentary major-
ity for the AK Party he co-founded and
which has held power since 2002.
His ability to survive has created the
impression that hes on top of it all,
almost a sense of invincibility, says Ilter
Turan, a professor of political science
at Istanbuls Bilgi University. He has
emerged stronger in the sense that the
possibility of a military coup has been
totally eradicated and, also because of
20 the coup, its very difficult at this partic-
ular moment to be critical of him.
A former mayor of Istanbul,
Erdoan, 62, has special appeal for the
lower-income class in the city. The AKP
took more than half the seats in the city
of 14 million in Novembers election
with the three other parties sharing the
rest. The stadium of the local soccer
club in Kasimpasa, the central Istanbul
district where he grew up, is named
after him. Neighbours have fond mem-
ories of the middle-school boy from a
three-room apartment in a modest six-
storey building where he later brought
his bride to live. He likes tea with simit,
a large bun encrusted with sesame
seeds, says one driver.
Semiha Karaoglu, who runs her
fathers grocery store just across from
Erdoans former home, recalls how
Brother Tayyip used to buy candy
for the neighbourhood children every
Friday after he became mayor in 1994.
He would let the children choose
which type of candy they liked and I
would tell him, youre spoiling them,
says Karaoglu, 50, her hair covered
with a pink and purple scarf. His gen-
erosity helped him on his way up.
When Karaoglu married in 2008, she
invited Erdoan. He couldnt make it so
sent his brother to act as her witness,
Shrinkage in Turkey's
economy since 2013
as well as his mother and sisters, she
says. I was very happy, Karaoglu
says. Hes still one of us.
Thats not to say such gushing support
will last, and what happens next to the
economy will be critical. World Bank
figures show gross domestic product
per person rose to $10,800 from $3,570
between the AKP winning the 2002 elec-
tion and when the economy started to
creak in 2013 and opposition to Erdoan
increased. The lira has lost about a third
of its value against the dollar since then
and the economy has shrunk by $100
billion. The coup, the three-month state
of emergency parliament has imposed
and the ensuing government crackdown
against Erdoans opponents riled finan-
cial markets again. S&P Global Ratings
downgraded Turkeys credit rating
and Moodys Investors Service put the
nations investment grade on review.
Erdoan keeps reminding his constitu-
ents that they will never have it as good
as they had it under him, says Turan.
But if the economic prosperity stops
then his credibility will suffer signifi-
cantly. This is his biggest challenge now.
So far, even some of those Turks
who regard him as authoritarian and
are alarmed by his brand of political
Islam are also happy he hasnt been
overthrown. They just have misgivings
over how he will capitalise on it. Only
Erdoan has benefited from the coup
and now Im worried he will use it to
become more powerful, says Ardan,
a 20-year-old philosophy student in
the trendy district of Karakoy as jazz
music blares from a nearby cafe. We
cant talk about optimism. We are in
uncharted waters. They can come and
take us for anything now.
Others are more sanguine. Ramazan
Birkik, 28, a Kurdish grocer in the con-
servative Fatih area, says hes not
worried about the future. He said he was
just angry at the soldiers who took part
in the coup because they used taxpayers
money to do so. Zafir Demir, a muhtar,
or local community leader, in the
Hekimpasa area, says Turks who oppose
Erdoan and his party should refrain
from criticising him. Its not time for
it, says Demir. We are all in the same
boat and we have to support democracy.
Its not about Erdoan or the AK Party.
If people dont defend the legal system
what will replace it is chaos.
Across the road from Erdoans old
home in Kasimpasa, Tenzile says she
regularly visited his parents before
they died. She and his mother shared
the same first name, she said proudly.
Oh, hes a little child, Tenzile says,
her deeply lined face breaking into a
wide grin. How can I not love him?
Donna Abu-Nasr
The bottom line President Erdoan enjoys strong
support from a large portion of Turkeys electorate
despite economic and security problems.
Economy
The Beginning of a
Morocco is becoming a
manufacturing hub for Europe
Everyone of my students already
has a job waiting
At a trade school next to Casablancas
airport, trainees are learning how
to rivet metal structures. After a
14-week course, theyll join a nearby
Bombardier plant making fuselage
parts. Next door, a group of mostly
female students bundle wiring before
soldering it to plugs and sockets,

skills they will use at a newly opened
Latecoere factory supplying Airbus.
Morocco is cashing in on its reputa-
tion as a safe haven. As militant attacks
and political unrest rile parts of North
Africa and the Middle East from Turkey
to Tunisia, the kingdom is using its
proximity to Europe and cheap labour
to lure a growing band of investors that
also includes car majors. Despite a
few sporadic Islamic threats, Morocco
has appeared to be a beacon of stabil-
ity in a turbulent region, says Philippe
Dauba-Pantanacce, global political
analyst at Standard Chartered Bank. A
growing number of European compa-
nies have made it a place of choice to
do business across the Mediterranean.
The jobs they bring are a boon for a
system of governance that, while stable
for the region, is a work in progress.
King Mohammed VI remains the pre-
eminent political force even after con-
ceding some powers after the Arab
Spring in 2011. He presides over a coali-
tion led by an Islamist party whose
popularity has taken a hit ahead of
Octobers general elections because of
spending cuts. Most parties would like
the monarch to yield more powers, yet
none openly questions his authority.
Morocco isnt immune to regional
upheaval. Several hundred Moroccans
joined the self-proclaimed Islamic State
and police occasionally break up terror-
ist cells. In 2011, a bomb killed 17 people
at a Marrakech restaurant. But theres
been no major attack since, and business
has thrived. Foreign direct investment
has risen more than 11 per cent since
2010 to 39 billion dirhams ($4 billion)
last year. By contrast, FDI to Egypt and
Tunisia remains well below the pre-2011
levels, according to World Bank data.
The kingdom has main-
tained its investment-
grade credit rating at
S&P Global Ratings and
Fitch Ratings. Moroccos
credit risk has been
largely stable this year
while default swaps for
Tunisia have climbed,
according to data com-
piled by Bloomberg.
Morocco has robust
economic fundamen-
tals, solid growth, a
manageable budget
and current account
AFP (2)
figures, says Sergey
Dergachev, a senior money manager
who helps oversee about $13 billion of
assets at Union Investment Privatfonds
in Frankfurt. In addition, Morocco
benefits a lot from its geographi-
cal proximity to the EU for business,
and now with problems in Turkey and
Egypt, it should be a net beneficiary of
tourism flows as well, he says.
Its a vote of confidence in Morocco,
even as its economy faces a few head-
winds. Agricultural output is expected
to contract 9 per cent this year hit by
drought, and textile companies are
under pressure from Chinese compe-
tition. Still, the central bank expects
non-farm growth to accelerate to 3.2
per cent in 2017 from 2.8 per cent this
year. Nabil Adel, a professor at man-
agement school ESCA, says Moroccos
business environment put neigh-
bours in the shade. If I want to open
a company, it will take me three weeks
here and three years in Algeria, he
says. Theres no comparison.
The government is building a high-
speed train link from Casablanca
to Tangier, and expanding the
port in Tangier, which by next year
should be the fourth-largest container
terminal outside Asia. It hopes both will
propel a shift that in 2014 saw the auto-
mobile industry overtake phosphate
mining as Moroccos top exporter.
Aerospace has been growing by more
than 10 per cent a year. Alcoa in May
inaugurated a 200-employee factory
near Casablanca to make aluminium fix-
tures for airplanes. On the same day in
January, Hexcel announced plans for
a plant in the same coastal city to build
fuselage parts, and Switzerlands TE
Connectivity said its building a cables
assembly plant in Tangier.
Theres no reason
recent growth
shouldnt continue,
says Hamid Benbrahim
El-Andaloussi, presi-
dent of GIMAS, which
groups Moroccos aero-
nautics companies.
Western Europe has a
competitivity problem
and we are the closest
competitive base.
From almost none 10
years ago, about 12,000
Moroccans50 per
cent of them women
work in the aerospace
Politics/Policy
industry, and Benbrahim expects that
to rise to 35,000 by 2020. IMA grad-
uates earn just under 3,000 dirhams
a month in their first jobs. Frances
minimum wage is about five times
as much. Casablancas Institute of
Aeronautic Trades, or IMA in French,
is helping to supply the workers. It
will produce 800 graduates this year,
more than double the number in
2015, according to
director Patrick
$4b Menager. The
school is only five
years old, yet con-
struction crews are
building an exten-
sion and by 2020,
Foreign direct
investment in Morocco 1,200 students a
in 2015 year should be
graduating.
Moroccos car
industry is also growing. PSA Peugeot
Citroen last June announced plans to
invest 557 million euros in a factory north
of Rabat that should produce 90,000
vehicles a year from 2019. Renault in 2015
made 288,000 cars at its two Moroccan
plants, up an annual 26 per cent. Almost 21
90 per cent were exported.
Morocco traditionally exported
phosphates, winter fruits and tex-
tiles. Then in 1999 Delphi Automotive
arrived near Tangier. The firm now has
three units employing 12,350 people,
mostly supplying electrical systems to
European car makers. Others followed
and fostered supply chains. After
Renault built its second factory in 2012
near Tangier, car-part makers Valeo,
Takata and Snop invested nearby.
Cars and their parts make up a quarter
of all overseas sales, and Morocco
is now the continents second-larg-
est constructor behind South Africa,
employing 90,000 people directly.
Back at IMA, where the government
pays for tuition costs, Menager receives
two or three visits a week from compa-
nies considering Morocco. Even though
classes run from 7 a.m. until midnight,
the only brake on our activity is space,
he says, pointing to the construction
site. Everyone of my students already
has a job waiting. Gregory Viscusi
The bottom line Political stability in the aftermath
of the Arab Spring has seen Morocco attract
investment from a host of European companies.
politics-and-policy
 16 31 August, 2016
Importing the Silic
22
The Tech Open Air
conference, held
at a former
East German
propaganda
station
Berlin has become the hub for Europes tech talent
You need people who have had success who are then reinvesting
The Factory would feel pretty much
like any big Silicon Valley head-
quarters, if you couldnt see the
death strip. In the 19th century, this
1,200-square-metre Berlin ware-
house held a brewery. In the 20th, it
was an air raid shelter, then rested in
the shadow of the Berlin Wall. East
German watchtower guards gunned
down people trying to scramble
across the border. (Hence the term
death strip.) Today the retrofitted
space is home to dozens of tech com-
panies, including Uber and Twitter,
and is the headquarters of the music
streaming service SoundCloud.
Inside, the Factory is packed
with all the perks of a Silicon Valley
campus: nap rooms, scooters, 3D
printing stations. Headphone-wearing
millennials hunch over MacBooks or
mill around a lounge where guitars
hang from the wall near books with
titles such as The Lean Startup and
The Startup Game. Conference rooms
are named for the regulars at Andy
Warhols Factory. There are 700
people here; in addition to the full-
time employees, a lot of individual
tech workers pay 50 ($55) a month
for access to a common work area.
Workers from throughout
Europe are flooding into
cafes and rehabbed
Soviet-era buildings
Its a social club for startups,
says Factory co-founder Lukas
Kampfmann, 30, wearing a T-shirt
bearing the names Steve (as in Jobs),
Elon (Musk), Bill (Gates), and Mark
(Zuckerberg), printed in the font
PHOTOGRAPHS BY RIVER HIJANO FOR BLOOMBERG BUSINESSWEEK
Helvetica like the familiar Beatles
shirt. On the roof of the warehouse,
with a clear view of the former death
strip, Kampfmann says his communi-
tys emulation of Silicon Valley isnt
an accident. We admire American
movies, culture, fashion, music, he
says, and this is the logical next step.
Across Berlin, young tech workers
from throughout Europe are flood-
ing into cafes and rehabbed Soviet-era
buildings, drawn to the German capital
by the promise of foosball-casual work

Meditation and massage
con Valley Lifestyle
environments, cheap rent, and an unin-
hibited party culture. Its a package
deal that can be tough to match else-
where in Europe. A decade ago there
were a few dozen tech startups in
Berlin. Now there are 2,500, and the
Investitionsbank Berlin, the govern-
ments regional economic develop-
ment agency, says there are 70 per cent
more digital jobs there than there were
in 2008.
Although a handful of old-school con-
glomerates such as Siemens and SAP
remain Germanys most visible tech-
nology companies, theyre no longer
the countrys main draw for aspiring
hardware or software developers, says
Martin Hellwagner, a 27-year-old coder
who moved to Berlin from Austria in
early 2014. I really wanted to work
for a startup, says Hellwagner, who
spends 60 hours a week working on
Uberchord, a guitar-lessons app. You
The death strip
have more responsibilities. Its not just a
9-to-5. You actually change something,
and your opinion matters.
Berlins startups collected
2.4 billion in venture capital last year,
according to Ernst & Young. Thats
more than the total haul among start-
ups in London, Paris, or Stockholm,
though its about 9 per cent of Silicon
Valleys take. Among the German
recipients: Number26, an online
bank; EyeEm, an AI startup train-
ing computers to identify high-quality
photographs for publishers; and
ResearchGate, the social network for
scientists to collaborate, backed by
Gates. Instead of getting a typical 9-to-5
job after graduation, students from
area universities are starting companies
such as Coolar, a maker of a vaccine
storage fridge powered by heated water
vapour instead of electricity.
The calibre of people coming
The lifelong gamer
making Pokmon Go
go 25
Amazon chases the Innovation: Nice song,
e-commerce leader who wrote it? Why, my
on the Ganges 24 computer and I 26
Uber
A startup workshop
23
here is ridiculous, says Ramzi Rizk,
EyeEms co-founder and chief tech-
nology officer. You meet people
now that have massive pedigrees in
building companies.
The new arrivals are very differ-
ent from the starving-artist types
who defined Berlins image in the
first decades after the Cold War, but
both groups are attracted by Berlins
affordability (at least as compared
with London or San Francisco), says
Christophe Maire, an early-stage inves-
tor with a board seat at SoundCloud
and other Berlin companies. And for
the techies, the party scene didnt
hurt. First came the artists, then came
the DJs, and then came the entrepre-
neurs, he says. Rizk says Berlin has
become so flush with techies that new
arrivals are seeing a bit of a backlash.
The German government has been
financing venture funds and offering
 Technology
Tech Open Air
founder Niko
Woischnik
and Factory
co-founder Lukas
Kampfmann
24
startups cheap loans through a state-
owned bank. The Federal Ministry of
Finance says its setting aside an addi-
tional 10 billion for startup subsidies.
The federal government has a great
interest in promoting venture capital
and startup companies, Finance
Ministry spokeswoman Friederike von
Tiesenhausen told reporters in Berlin
on 25 July. Mathias Dpfner, the chief
executive officer of German media con-
glomerate Axel Springer, says Berlin is
the regions best shot at developing tech
companies that can better compete on a
global level.
The big tech companies of America
and China dwarf those in the Factory
and elsewhere in Berlin. And even
though local investment is growing,
the field of homegrown investors and
successful entrepreneurs remains
small; its only recently that many
Germans have considered starting
a software or hardware company a
viable alternative to a paying gig at an
established business.
The city is also just starting to figure
out how to reinforce and pump up
its nascent startup community, says
Jonas Drppel, founder of Dubsmash,
which makes an app for sharing lip-
syncing music clips. The talent pool
here is great, but its very small, he
says, adding that hes among the Berlin
startups considering a move to the US
for better access to talent and funding.
Even Berlins biggest recent tech
success hasnt worked out well: Rocket
Internet, the startup incubator, has lost
half its value since going public in 2014.
For Berlins tech industry to thrive in
the long term, investors say, success-
ful companies need to stick around long
enough to go public or sell themselves
and produce a crop of rich alumni likely
to start ventures or fund others. You
need people who have had success
who are then reinvesting their time,
their experience, and their money into
the ecosystem, says Albert Wenger,
a partner at New Yorks Union Square
Ventures, which backed Twitter and
SoundCloud. Berlin is beginning to go
through that cycle.
For now, Berlin has at least got the
tone right. A few days after the UK
voted to leave the European Union,
a German political party paid for a
truck to drive through London with a
billboard advising startups to Keep
calm and move to Berlin. In mid-July
a former East German radio propa-
ganda station played host to the citys
fifth annual Tech Open Air conference.
(Think South by Southwest with slightly
more hefeweizen.) There, a blues band
played as attendees with 400 tickets
drank and mingled near a treehouse
sponsored by travel website Kayak.
Along with talks on AI and VR and
sessions training startup founders how
to pitch were workshops with names
like The Art of Hugging. Two aspir-
ing entrepreneurs wore T-shirts solic-
iting investors for an app that sends
daily bedroom ideas to couples. It
could be an episode of HBOs Silicon
Valley. Except for the death strip, a
reminder that Berlin wasnt always so
hip and goofy. Adam Satariano and
Stefan Nicola
The bottom line Berlin is home to 2,500 tech
startups, many with a Silicon Valley flair. The next
step is for one to build a Valley-beating product.
E-Commerce
Amazon Gains on
Flipkart in India
Bansal vs. ...
Bezos
The local leader is struggling to
match Bezoss billions
Now I suspect it might be a bit
too late
India isnt an easy place to build an
e-commerce company. The vast, multi-
lingual nation suffers from creaky
infrastructure, a sometimes myopic
bureaucracy, and an ingrained distrust
of the merchant class. Yet homegrown
Flipkart managed the impossible,
introducing online shopping to the
Indian masses and becoming the coun-
trys most valuable startup.
But no one is celebrating at its head-
quarters in suburban Bangalore. More
like preparing for war. After years
of scorching growth, Flipkarts sales
have plateaued. An attempt to shift its
fashion unit from the website to an app
backfired. Key executives have quit.
Earlier this year, a Morgan Stanley
fund that had an $80 million stake in
Flipkart marked down the companys
value to $11 billion from $15 billion. And
Amazon.com, already closing the gap
FROM LEFT: RIVER HIJANO FOR BLOOMBERG BUSINESSWEEK (2); BLOOMBERG (2); YOUTUBE (1)
with Flipkart with a $2 billion invest-
ment in India, says it will put an addi-
tional $3 billion into its operation there.
If any of this fazes Flipkart Chief
Executive Officer Binny Bansal, 33, he
isnt letting on. During an interview in
Flipkarts Steve Jobs conference room,
under a large photo of the late Apple
founder, Bansal says Flipkart has
been fighting rivals, local and global,
since its 2007 founding. He pledges
to double revenue and become prof-
itable in the next 24 months. As for
Amazon saying itll drop another
$3 billion in India, Does saying make
it a fact? he asks.
Bansal took the job about six months
ago, when co-founder Sachin Bansal
(34, no relation) stepped aside to
become chairman and focus on long-
term strategy. Binny Bansal is seen as
the operations guy with the common
touch, someone who can get Flipkart
running at maximum efficiency.
Since taking the helm, hes intro-
duced 7 a.m. deliveries that he says
reach customers in Mumbai and
43 other cities reliably, and plans to up
that total. To reduce returns on smart-
phones, Flipkarts best-selling category,
he hired technicians who help custom-
ers set up the devices. To smooth ware-
house sorting, hes invested in robots.
To work around Indias paucity of
credit cards, he bought a startup that
lets users link bank accounts to their
phones without sharing their most sen-
sitive information.
Bansal is the best man for the
job, says Subrata Mitra, who sits on
Flipkarts board and leads the India
office of Accel, its third-largest inves-
tor. The changes are starting to yield
results, he says. Flipkart will be back
in aggressive-growth mode soon.
Punit Soni, a former Google exec-
utive, quit as Flipkarts chief product
officer in April, just a year after signing
on. The battle in Indian e-commerce
has always been Flipkarts to lose,
he says. Now I suspect it might be a
bit too late.
Amazon has pushed prices steadily
lower since last year, and Flipkart and
local rival Snapdeal have begun to
feel the pressure. A continuing price
war has moved lots of product but
failed to buy customer loyalty. In fiscal
2015, according to Kotak Institutional
Equities Research, 22 e-commerce busi-
nesses ran up more than $1.2 billion
in red inkand Flipkart led the way.
This February, Indian newspaper Mint
reported that Chinese e-commerce
giant Alibaba was mulling an invest-
ment in the Indian company but balked
when it refused to accept a lower val-
uation. CEO Bansal confirmed hes
looking for fresh capital but declined to
discuss the Alibaba situation. We are
fortunate to be in that position where
we can raise money when it is available
on our terms, he says.
Flipkart isnt ideally positioned to
mount a counterattack against Amazon.
In June the Seattle giant cut the commis-
sions it charges third-party merchants
in India by as many as 7 percentage
points in some categories, a few days
after Flipkart raised its own commis-
sions by 5 to 6 points. Meanwhile,
Amazon is adding warehouses in India
and outpacing Flipkart in monthly visi-
tors (180 million to 120 million, accord-
ing to Kotak) and merchants selling
through its marketplace (100,000 to
90,000). Amazons consistent perfor-
mance over the last year and our stellar
first quarter indicate that the tide is
turning, Amazons India chief, Amit
Agarwal, wrote in an e-mail.
The next conquest is the hinterland,
where delivering goods to customers
homes is especially challenging.
Flipkart and its rivals will need to pen-
etrate deeper into hundreds of smaller
cities, as well as more than 650,000 vil-
lages that dont have running water,
let alone broadband internet connec-
tions. Flipkart is pushing brands such
as Samsung and Motorola to supply
cheaper TVs and phones, available only
online. Jeff Bezos has demonstrated
a willingness over the years to keep
pouring in money until a battle is won,
but local knowledge could give Flipkart
a greater advantage in the boonies. And
things wont be decided tomorrow,
Bansal says, comparing e-commerce
to cricket: It is still the first day of the
first test match in a five-test series.
Saritha Rai
The bottom line Flipkart, a pioneer in Indian
e-commerce, is having trouble maintaining its
sales growth and fending off Amazon.
Software
The Mapping Expert
Behind Pokmon Go
Todays mobile addiction comes
from an ambitious Google spinoff
Maybe you want to build a real-
world vampire game
Over the past few weeks, the smart-
phone game Pokmon Go has more
than doubled Nintendos share price
and reintroduced the Pokmon Co.s
digital monsters to the mainstream.
The games developer, which released
it in partnership with those compa-
nies, is a relative unknown.
Niantic, a San Francisco startup
with fewer than 100 employees,
Pokmon Go
A player
stands
between two
PokStops
and three
monsters
in Madison
Square Park
In Pokmon Go, players must physically
travel to landmarks, called PokStops, to
collect items and capture creatures
developed Pokmon Go and the
mapping technology that allows the
game to layer digital creatures over
real-world environs. Mapping has long
been a specialty for Chief Executive
Officer John Hanke, who helped lay
the groundwork for Google Earth
with his previous company, which the
search giant acquired in 2004. Hanke,
a lifelong gamer, made game-world 25
mapping of the real world his focus
when he launched Niantic as a startup
within Google six years ago. Niantic
spun off on its own last year, though
Google remains an investor, alongside
Nintendo and the Pokmon Co.
Its great to be an armchair travel-
ler with Google Earth, but my mind
turned to how you could transfer that
experience to mobile to make it easier
to discover new places, Hanke says. By
using the locational tracking built into
players phones to encourage them to
congregate in certain places to look for
Pokmon, Niantic is prying gamers off
their couches. Our intent, he says,
was that people would become aware
of their surroundings, accidentally.
Niantics first game, Ingress,
released in 2012, used similar
mapping mechanics with more sci-fi
flavour. Players would pick one of two
teams that met up at real-world land-
marks to capture or defend them, like
a building- centric version of Capture
the Flag. The free game has been a
modest hit, with 1 million active users.
Pokmon Gos success is on another
level. Its been one of the most popular
downloads on iOS and Android since
its release, and by some analysts esti-
mates it has been downloaded more
 Technology

than 20 million times. It runs on a

Innovation Music is so
mathematical, why
cant computers
freemium modelno charge to play,
but players will have an easier time if
they pay a couple of bucks for virtual
write it?
items that help them advance.

AI Music Hanke says Niantic also plans to sell

sponsorships, allowing stores to pay to
become PokStops, where players can
Form and function Innovator Ed Rex
gather items, to boost their foot traffic.
Jukedeck is artificially intelligent music- Age 28
During the games first weekend, on
composition software, designed to give Co-founder and chief
9-10 July, it blew up, says Jeff Pray,
YouTubers and other video makers a way executive officer of senior vice president at marketing
to quickly and cheaply create soundtracks
for their work.
Jukedeck, an 18-employee agency Starcom MediaVest Group. It
AI startup in London
was the No. 1 topic at my Monday meet-
ings. Piper Jaffray analyst Michael
1. Background In 2011, Olson says Niantic has created a gaming
Rex, a classically genre and that other companies will
Software Jukedeck has been trained pianist and soon follow with copycat games featur-
composer, began
programmed with a library
learning to code, ing popular existing characters.
of sheet music that helps it
distinguish, say, rock from believing he could Origin He started Popularity doesnt necessarily mean
jazz, and figure out how to train a computer to Jukedeck in 2012 longevity. Pokmon Go drains a lot
write music. with Patrick Stobbs,
structure and produce a song.
a musician and of battery power and wont be much
Google veteran. fun in cold weather, says Wedbush
Securities analyst Michael Pachter.
He compares the game to Draw
Something, a megahit app that also
notched 20 million downloads in a few
weeks during 2012, but has since been
26 dismissed as a fad. People just got
bored with it, says Pachter.
Hanke says Niantics focus has
always been its underlying tech-
nology, not any one game, and the
success of Pokmon Go has already
attracted partners interested in using
his mapping software for projects of
their own. Maybe you want to build
a real-world vampire game where you
control a clan of vampires and battle
with other clans of vampires, he says.
You could invest in re-creating our
core technology and all of our data,
2. which would require a fairly large
team of very sophisticated PhDs, or
Songwriting On Jukedecks
Cost Companies
website, a user selects a use our platform.
with more than
10 employees
songs length, genre, tempo, In the meantime, Pokmon Gos
pay $10 a song;
and other features; the popularity shows no signs of dying
Funding Jukedeck software spits out a finished
otherwise,
says its raised composition in seconds. down, and Niantic plans to add a
theyre free.
about $3.5 million in Pokmon-trading feature to keep
venture capital and superfans interested. Unlike with most
private investment.
games, theres little chance of reaching
the end of the road, Hanke says: If you
Next Steps want a new level, you can hop in your
Jukedeck is working with broadcaster UKTV to pair the softwares creations car and go to the next city. Robert
with ads on their network, and Rex says hes talking to several other companies Levine
about similar projects. Eventually he plans to create film-quality soundtracks
The bottom line Niantic plans to take advantage
that adapt to your day as you live it, changing based on your location and other of Pokmon Gos success by licensing its mapping
COURTESY JUKEDECK

inputs. David Cope, a composer whos used AI-written material in his work, says software to other developers.
computers are getting better at creativity, but to win over sceptics, Jukedeck
will have to produce something legitimately good. Adam Satariano
 Supporting Partner Strategic Partner Strategic Partner

Consulate General of India

Dubai

19 - 20 OCTOBER, 2016 | Madinat Jumeirah, Dubai, U.A.E

BANKING ON
A LASTING
RELATIONSHIP
The exponential growth of trade relations UAE India Economic Forum will
between UAE and India has immensely create an avenue for business leaders
contributed to their economic growth and and government ocials from both the
prosperity. With the bilateral trade countries to discuss their contributions
predicted to achieve $100 billion by 2020, to the stability and strength of a rapidly
there is a huge investment potential that diversifying and deepening bilateral
needs to be explored. partnership.

www.aieforum.com
Platinum Sponsor Associate Sponsors Official Business Magazine Supporting Media Partner Motivate Publishing Official English News Partner Official PR Agency

Media Partner Official Mobile App Partner

Strategic Partner Supported By

As UAE and India

strive to achieve a
$100 billion bilateral
trade by 2020, join
the definitive
platform to discuss
and evaluate this
historic opportunity.

IMMENSE POTENTIAL FOR BANKING SECTOR

With 2.6 million expatriates remitting about
$15 billion back to India from UAE, there is a
tremendous need to discuss better banking
solutions
The two countries signed a
Memorandum of Understanding (MoU)
for bilateral swapping of Indian Rupee
with Dirham
Source: Khaleej Times, The Hindu, Gulf News

QADAT AL TAGHEER AWARDS 2016

REGISTER NOW!

Co-located with UAE India Economic Forum

19th October | Madinat Jumeirah, Dubai, UAE

Qadat Al Tagheer Awards are an initiative to honor and felicitate business leaders and institutions
for their achievements. The awards are aimed at recognizing the efforts of business leaders from
various fields, who are shaping economic ties between UAE and India. It will also highlight the Organised By:

opportunities that both countries offer for growth and cooperation.

info@aieforum.com UIEF UAE India Economic Forum @UIEForum UAE India Economic Forum
 Markets/
Finance
16 31 August, 2016
30
Chinese and Japanese banks are muscling in on the Middle Easts bond market
We are looking into some deals we have not touched before
Bank of China is heading down the
old Silk Road marketing new goods:
debut bonds from Saudi Arabia to
Kazakhstan. In its biggest-ever foray
outside Asia, the state-controlled
lender is said to have landed three
mandates to co-manage emerging-
market Eurobonds, including the
Saudi governments international
sale. Chinas fourth-largest lender is
one of nine underwriters hired by the
kingdom, which people familiar with
the plan said is seeking at least $10
billion to fill holes in its budget.
Desperate to escape negative yields
in Japan and Europe, Asian inves-
tors are hunting for higher returns
in emerging economies and having
organisers from their region on bond
syndicates makes this easier. Thats
putting bankers from Beijing and
Tokyo in pole position to grab more
business from their US and European
competitors, who dominate the devel-
oping worlds $350 billion hard-cur-
rency bond market. We are likely to
see Chinas banks challenge Wall Street
banks and Japanese banks directly in
all their lines of business, including
book running, says Jan Dehn, head of
research in London at Ashmore Group,
which manages $51 billion of emerging-
market assets. Volumes are not huge,
but I think it is going to become far
bigger than it is today.
Bank of China has been making its
way up the underwriter league table
over the past seven years, moving from
the 145th rank for worldwide sales in
2009 to 46th place this year. Having an
office in London has enabled the bank
to get involved with bond sales by com-
panies in the UK and Europe including
Small-time Player
Chinese investment in debt securities abroad
is still only a fraction of that invested by other
leading economies
$109b $2.9t
China
$2t
Germany
DATA: INSTITUTE OF INTERNATIONAL FINANCE DATA (Q2 2015)
Sky and British American Tobacco.
Yet until now the lender hasnt been as
active in emerging-market mandates
outside of Asia, getting named to only
two dollar-deals from 2013 to 2015.
The tide is starting to turn. In July
alone, the Chinese bank helped
a Bulgarian energy company, a
Kazakh oil producer and Teva
Pharmaceutical Industries of Israel
sell bonds. Its all part of an expansion
strategy to give borrowers access to
Bank of Chinas network in a country
of 1.3 billion people, says Sebastian Ha,
PHOTOGRAPH ILLUSTRATION BY NADIA M, IMAGE: SHUTTERSTOCK (2)
head of debt syndicate in Hong Kong
at Bank of China, which operated in 41
countries and regions outside China.
We are looking into some deals we
have not touched before, he says.
Doing more hard-currency bond
underwriting helped Bank of China
lead manage 2.2 per cent of sales by
companies and governments in devel-
US
oping nations last year, surpassing
Japanese counterparts like Mitsubishi
UFJ Financial Group, which collec-
tively had 1.3 per cent market share.

like to
Hi! Id just e of your
e so m
manag d be on my
bonds an please
way,
The $350 billion of bonds sold in 2015
were still concentrated among five
banks, HSBC Holdings, Citigroup,
JPMorgan, Deutsche Bank and Bank
of America, together commanding 42
per cent, according to data compiled
by Bloomberg.
Since capital markets are less devel-
oped in Asian countries outside of
Japan than they are in the US and
Europe, bankers in the region may
face hurdles securing greater clout
in the bond business, according to
Sergey Dergachev, who helps oversee
$13 billion in emerging-market debt
as a senior money manager at Union
Investment Privatfonds in Frankfurt.
China had only $109 billion invested in
debt securities abroad in the second
quarter of 2015, compared with $2.9
trillion for the US and $2 trillion for
Germany, Institute of International
Finance data show.
For Asian investors like Bryan Wang,
the push abroad is all about chasing
yields. One of the deals he bought
into was Qatars record $9 billion sale
of bonds in May, which included a
10-year tranche that priced to yield
3.37 per cent, a premium of 150 basis
points over US Treasuries. The rate
on similar-maturity Japanese bonds is
minus 0.29 per cent and for Wang back
home in Taiwan its 0.7 per cent. In
Asia, most government bond yields are
very, very low and Asian investors are
forced to buy new issues, says Wang,
who helps oversee $200 million as vice
president at Fuh-Hwa Investment Trust
in Taipei. The Middle East will be the
new focus.
Asian investors took up almost a
fifth of Qatars offering and Wang is
already eyeing Saudi Arabias sale that
people familiar said will take place
in September. MUFG, Japans largest
lender, was also hired to manage the
transaction. There is a definite desire
from Asian investors to look at the
Middle East and a huge natural liquid-
ity from those investors, says Anthony
Barklam, the London-based head of
debt capital markets for Europe, the
Middle East and Africa at MUFG. The
bank climbed to 21th position in this
years emerging-market league table
from 36th in 2010.
In China, the push to diversify invest-
ments abroad follows a three-year-old
programme aimed in part at facilitating
capital flows and promoting yuan inter-
nationalisation along a New Silk Road
Saudi Arabias cash-
starved lenders get
some juice 32
How global giant
Citigroup slimmed
down 33
connecting Asia to Europe via a network
of roads, railways, pipelines and ports.
In June, Bank of China was hired,
along with Australia & New Zealand
Banking Group, JPMorgan and Societe
Generale, to organise fixed-income
investor meetings in London and the
US for Papua New Guinea, according to
a person familiar with the matter, who
is not authorised to speak publicly and
asked not to be identified. In April, Bank
of China helped Hungary sell its first
yuan-denominated bond and is now
preparing to arrange the sale of a three-
year yuan panda bond for Poland later
this year.
Step by step, Chinese banks will
expand into global capital markets
and will bring excellent links to the
local client base, Union Investments
Dergachev says. They can also
provide good liquidity in a market
where it becomes extremely important
and critical for success, he says.
Lyubov Pronina 31
The bottom line Asian investors hunt for higher
returns is seeing Chinese and Japanese banks
eye-up Middle East mega bonds.
International Investing
How Brokers
Become Dissidents
Turkish regulators warn against
publishing negative research
Everythingwill now be taken
with a pinch of salt
After the failed coup of 15 July
in Turkey, which left more than
200 dead, the government has inten-
sified a crackdown on dissent. That
includes comments by investment
analysts: The head of research at one
of Turkeys largest brokerages has
been stripped of his licence over a
report published the Monday after the
coup attempt.
The Capital Markets Board, Turkeys
securities regulator, said Mert Ulker
failed to fulfil his responsibilities
in publishing his analysis for
 Markets/Finance
If this environment per-
sists, Turkey will reach a
point where confidence in
its financial sector
and economy will crumble,
as far as foreign investors
are concerned
Ak Investment. The report sum-
marised recent events and offered
forecasts for the Turkish lira, stocks,
and the economy. It also analysed
Turkish politics, saying developments
had resulted in more power being
concentrated in the hands of
President Recep Tayyip Erdoan.
One section of the 2,750-word
report outlined various expla-
nations of who was behind the
attempted overthrow, addressing
speculation that it could have been
stage-managed to give Erdoan an
opportunity to purge the military of
opponents and extend his grip on
32 Turkey. The report downplayed that
explanation as not being the most
rational possibility.
Ulker declined to comment. Mert
Erdogmus, chief executive officer of
Ak Investment, says Ulkers contract
has been cancelled and hes no longer
an employee of the company.
The investment strategist is only one
casualty of a sweeping purge thats
cost tens of thousands of bureaucrats,
educators, and security personnel
their jobs. Officials are asking banks to
submit for review their analyses of the
putsch. Mehmet Ali Akben, chairman
of the banking regulator, has warned
against publishing reports that would
turn expectations and the atmosphere
negative. Vahdettin Ertas, chairman
of the Capital Markets Board, said in
an interview on the Turkish channel
Bloomberg HT that we havent inter-
vened in any analyst reports that are
within the limits of law. Before the
coup attempt, rights groups criticised
Erdoans government for suppressing
media criticism.
Everything that comes out of
Turkey will now be taken with
a pinch of salt, says Ghanem
Nuseibeh, founder of risk consul-
tant Cornerstone Global Associates in
London. If this environment persists,
Turkey will reach a point where con-
fidence in its financial sector and
economy will crumble, as far as
foreign investors are concerned.
In a speech to a group of inter-
national investors on 2 August in
Ankara, Erdoan said the economy
was poised to recover from the
putsch. He also criticised the interna-
tional response to the crisis. In some
European airports, unfortunately,
there are ads that say, Dont go to
Turkey. Your trip would strengthen
Erdoan, he said, without naming
them. I am asking now, are they
supporting terrorism or not?
Economists including Istanbul-
based Atilla Yesilada at GlobalSource
Partners have said the crackdown
on people and companies accused
of sympathising with the plotters
may worsen an expected economic
slowdown this year, and S&P Global
Ratings has raised its risk assess-
ment for Turkey to high from mod-
erately high. The Borsa Istanbul 100
stock index is down about 10 per cent
since 15 July.
The ruling against Ulker will
reinforce an already widespread self-
censorship, says Nathan Griffiths, a
money manager at NN Investment
Partners in The Hague. It means I
have little interest in reading research
from local brokers, because they are
effectively unable to offer balanced
commentary, he says. Its terrible
for the integrity of the Turkish bro-
kerage community. Tugce Ozsoy,
Ercan Ersoy, and Maria Levitov, with
Selcan Hacaoglu and Firat Kozok
The bottom line Regulators in Turkey are
scrutinising investment research that seems
too negative.
Liquidity
Saudi Arabias Banks
Get a Thirst Quenched
The central bank offers $4 billion
to lenders to avert a cash crunch
The intervention is an extremely
important signal to the market
Saudi Arabia may be embarking on
a new phase in its efforts to stave off
the worst of a cash crunch among its
Saudi banks are
likely to continue to
face liquidity
tightness due to the
banks. The kingdoms
large funding needs
central bank, known of the government
as SAMA, offered and still solid private
sector credit
domestic lenders growth We expect
about 15 billion riyals further steps, such
($4 billion) in short- as reducing the
reserve requirement
term loans at a dis- ratio and increasing
counted rate at the the loan to deposit
end of June to help cap in the coming
days.
ease liquidity con- Monica Malik, chief
straints, people famil- economist at Abu
iar with the matter say. Dhabi Commercial
Bank
The step came less
than six months after
SAMA allowed banks to lend a
greater percentage of deposits.
Saudi Arabia is taking unprece-
dented steps to shore up its finances
as the collapse in crude prices hobbles
domestic banks, which hold 2.26 tril-
lion riyals in assets, in a country
that gets more than 70 per cent of its
revenue from oil. SAMA is seeking to
stimulate borrowing and boost the
financial industry. Liquidity has tight-
ened since the government withdrew
some of its deposits and sold local-
currency debt to banks to fund the
budget deficit.
Saudi banks are likely to continue
to face liquidity tightness due to the
large funding needs of the government
and still solid private sector credit
growth, says Monica Malik, chief
economist at Abu Dhabi Commercial
Bank. The cash injection provides
immediate support to banks abili-
ties to lend. We expect further steps,
such as reducing the reserve require-
ment ratio and increasing the loan to
deposit cap in the coming days.
Most Saudi lenders took advantage
of SAMAs offer, three bankers with
knowledge of the matter say. Alinma
Banks Chief Executive Officer Abdul
Mohsen Al Fares told Al Arabiya TV
last month the lender received depos-
its from SAMA worth more than 1
billion riyals. Bank Albilads CEO
PHOTOGRAPH ILLUSTRATION BY NADIA M, IMAGE: SHUTTERSTOCK
in a separate inter-
view with the TV
channel also con-
firmed the bank got
funds, while Saudi
Investment Banks
CEO said his bank
didnt receive cash in
the second quarter.
The intervention is
an extremely impor-
tant signal to the
 Shrinking Markets/Finance
Footprint
market that the central bank is pre-
pared to do whatever is needed to
improve liquidity, John Sfakianakias, How does a company
lose 69m customers?
the Riyadh-based director of eco-
nomic research at the Gulf Research
Center, says. Its a signal of pro-
activeness that the tools available Ask Citigroup. In the years
Customers in 2007:
on the monetary side are going to be 268m. Today: 199m.
deployed and over time could have since the financial crisis
Thats a decline of

a pro-growth effect for the overall

economy. The kingdom previ-
26% and its taxpayer bailout
ously pumped funds into its It has gotten out

Citigroup has sold or

26
of retail banking in
banking system as oil prices
retreated in the 1990s, he says.
Saudi banks combined loans-to- shut retail operations in
more than half the 50
deposit ratio, a key measure of liquid-
ity, climbed to 90.2 per cent in June, countries, including
the highest level since November 2008, Egypt and Japan, and

countries in which it had

3
plans to exit
according to central bank data. SAMA
in February allowed them to lend
the equivalent of 90 per cent of their a presence in 2006. Its
deposits, up from 85 per cent. As well
as providing liquidity and easing rules reduced the number of
2007 other countries
on lending, SAMA is clamping down
on banks that are low-balling inter- US branches by more
than 62% since 2007
est-rate submissions and probing
banks currency products that allow
speculators to bet against the king-
doms currency peg. and stopped offering 33
Twelve-month Saudi riyal for- Citigroup closed
wards climbed on 2 August to the
at least
subprime mortgages,
highest level on a closing basis since
27 May, reflecting growing specula-
1,371 making student loans, and
US branches
tion that the currency will weaken. to concentrate on
The contracts advanced 5.4 per
major cities
selling life insurance,
cent, implying a 1.7 per cent drop
to 3.8172 per dollar. The three- cutting more than
month Saudi Interbank Offered Rate
was unchanged at 2.24 per cent on
1 August, the highest level since
40% of its workforce.
2009, according to data compiled
2015
The bank is focusing
by Bloomberg. The rate has almost
tripled in the past 12 months. on its biggest, richest Citigroup now gets
This increase in rates could cripple
gross domestic product growth as bor- clients and says its most of its profit from
corporations and
rowing becomes more difficult and institutional investors

expensive for the private sector, says leaner and financially

Anita Yadav, the head of fixed-income
research at Emirates NBD, Dubais stronger today. 55%
Consumer
banking
38%

biggest bank. SAMAs move to ease the

liquidity in the banking sector is very Meanwhile, its increased
welcome and, in fact, its somewhat
its underwriting of
Corporate
too little too slow.Stefania Bianchi, 33%
and 56%
investment
Archana Narayanan and Arif Sharif
The bottom line Saudi Arabias domestic lenders,
derivatives, a source
Derivatives can be
profitable, but
12%
banking
Other 6%
suffering from a lack of liquidity due to the fall in oil
prices, need assistance from their central bank. of trouble for banks
theyre also complex
and can blow up
2006 2015

in unexpected
during the 2008 crisis.
ways, says Fred
Cannon, head of
research at Keefe,
markets-and-finance Bruyette & Woods Yalman Onaran
 SPECIAL ADVERTISING SECTION

The GCC and Indias never-ending

bonding session | S2

NBAD looks to grasp its

Indian opportunity | S4

The African business with a Dubai

base and Indian dreams | S6

An Indian aristocrat thrives

in the building trade | S8

INDIAN
S1

BUSINESS
REPORT By Xxxxxxxxxxxxxxx
 INDIAN BUSINESS REPORT

ALL TIED UP
The business and trade links that bind India and the
Gulf only look like getting stronger

I
Indias trading links with the Gulf go back
centuries and today there are an estimat-
ed 7.5 million Indians living in the six-na-
tion Gulf Cooperation Council. Each year,
billions of dollars of goods flow between
the two rapidly-developing economic blocs;
conducting most of their operations in their
home country, but more prevalent are Indian
entrepreneurs using Dubai as a base to
expand into the GCC and further west, says
Singh. Accounting, energy, technology and
software were particular
cious stones, precious metals and jewel-
lery represent Indias biggest exports to the
UAE at $12.95 billion in 2015-16, which was
up 5.5 per cent on the preceding 12 months.
Exports of mineral fuels and mineral oils fell
39 per cent over the same

India principally ships precious stones and
metals west and the Gulf s oil exporters dis-
patch crude and jewellery east. The value
S2 of this trade has ebbed in recent years, but
is still many times what it was at the turn
of the centurythe slump is partly because
of rising domestic Indian consumption and
also the drop in oil prices since 2014.
India remains the UAEs most impor-
tant trading partner, with total trade worth
$28.5 billion in 2015, putting it ahead of
Chinas $25.4 billion and the United States
$21.8 billion, according to data from Indias
embassy in Abu Dhabi. Indian business
activity in the United Arab Emirates is
booming, if statistics from the Indian Busi-
ness and Professional Council are any-
thing to go by. The councils membership
has increased to nearly 1,000 from 650 last
year; about a third are companies and the
remainder individuals.
It means there are people coming from
India who would like to interact with the
Council, says president Kulwant Singh, who
is also owner of Dubai-based Lama Tours, a
destination-management company with an
annual turnover of more than 300 million
dirhams ($81.7 billion). Weve seen a huge
increase in the number of membersa lot
of people from India are shifting their busi-
nesses to the UAE because its a hassle-free
country with ease of doing business, safety
and security, and a lot of other factors that
are compelling for a businessman wishing to
expand his business, Singh says.
Some business owners in India switch
their headquarters to Dubai despite still
$28.5B
sectors of interest, he says, period to $3.98 billion, but
adding to Indian business- clothing and apparel rose
es historically popular divi- 29 per cent to $3.42 billion.
sions that include manufac- Other major exports
turing and pharmaceuticals. Trade between the UAE include boats, cereals, elec-
Of the approximately and India in 2015 trical machinery and iron
7,000 businesses operating and steel, while in June, 51
out of Dubais Jebel Ali Free Zone Authority, Indian-based companies made trade enqui-
about 800 are Indian-owned, according to a ries to the Indian authorities in Abu Dhabi
December statement. JAFZA held a four-day and Dubai. Meanwhile, the value of UAE
roadshow in India late last year to woo poten- exports to India has dipped along with oil
tial new members. The evolution of Dubai prices, from $39.1 billion in 2012-13 to $19.4
as a regional trading hub in the 1990s provid- billion in 2015-16.
ed a major boost to bilateral trade relations A separate study published in the Indian
between India and the UAE, Sultan Ahmed Journal of Applied Research showed total
Bin Sulayem, chairman of DP World and Indian exports to the GCC were worth $48.2
Ports, Customs and Free Zone Corporation, billion at market prices in 2013-14. Of this,
said in an accompanying JAFZA statement. the UAE accounted for $30.5 billion and
India exported $30.3 billion of goods and Saudi Arabia $12.2 billion. While the total
services to the UAE in 2015-16, embassy data trading value has slipped in recent years,
shows. This was the lowest total for at least it has still more than quadrupled from a
five years and 17 per cent below 2012-13s decade agototal Indian exports to the GCC
peak of $36.3 billion. Precious and semi-pre- were $9.8 billion in 2004-5, of which $7.3
GIVEN THE INVESTMENT OPPORTUNITIES THAT
EXIST IN INDIA AND THE SHEER SIZE OF GULF
SOVEREIGN WEALTH FUNDS, THIS IMPORTANT DI-
MENSION OF GCC-INDIA RELATIONS IS FAR FROM
HAVING REALISED ITS FULL POTENTIAL

His Highness Sheikh Mohammed bin Zayed Al Nahyan, Crown Prince of Abu
Dhabi, meets Indian Prime Minister Narendra Modi in New Delhi last February
billion was to the UAE.
UAE investors are also keen to partici-
pate in Indias dizzying economic expan-
sion, where gross domestic product expand-
ed by 7.6 per cent in 2015, its highest growth
rate since 2010. Indias GDP was $2.1 trillion
last year based on market prices, a figure
six times that of 1990s $327 billion, making
it the worlds seventh largest economy.
Foreign direct investment by UAE entities
into India grew at an average annual growth
rate of 56 per cent between 2002-2012, a
study by the Middle East Institute shows.
Of UAE investments into India, 28 per cent
went to the power sector, 23 per cent to
metallurgical, 20 per cent to construction,
19 per cent to services and 10 per cent to
computer hardware and software.
This distribution of investments sug-
gests the GCC has responded well to Indias
financing requirements for infrastructure
projects and is also making a mark in other
sectors, the Institute wrote. Given the in-
vestment opportunities that exist in India
and the sheer size of Gulf sovereign wealth
funds, this important dimension of GCC-In-
dia relations is far from having realised its
full potential.
Services accounted for 53 per cent of
Indias economy in 2014, up from 45 per
cent in 1990. Over the same period, agri-
culture has fallen from 29 per cent to 17 per
cent, while exports of goods and services
rose from 7 per cent to 23 per cent, accord-
ing to The World Bank. Industry accounted
for 30 per cent of GDP in 2014, versus 26.5
per cent in 1990. India
is now home to global-
ly recognised companies
in pharmaceuticals and
steel and information and
space technologies, and a
growing voice on the inter-
national stage that is more
in keeping with its enor-
mous size and potential,
the World Bank states.
India will soon have the
largest and youngest work-
force the world has
ever seen.
Still, the country has
still some way to go. One-third of Indias 1.2
billion people still live in poverty and those
who have recently escaped risk falling back
into destitution. As many as 217 million chil-
dren are malnourished40 per cent of the
global totalThe World Bank warns. About
300 million people do not have electricity.
For business though, the outlook remains
buoyant, albeit with concerns about a falter-
ing global economy and stultifying domes-
SPECIAL ADVERTISING SECTION
WEVE SEEN A HUGE
INCREASE IN THE NUMBER
OF MEMBERSA LOT
OF PEOPLE FROM INDIA
ARE SHIFTING THEIR
BUSINESSES TO THE UAE
BECAUSE ITS A HASSLE-
FREE COUNTRY WITH EASE
OF DOING BUSINESS,
SAFETY AND SECURITY, AND
A LOT OF OTHER FACTORS
THAT ARE COMPELLING FOR
A BUSINESSMAN WISHING
TO EXPAND HIS BUSINESS
S3
tic bureaucracyit takes 29 days on average
to start a business in India, much longer
than the South Asia average of 16 days, for
exmaple. The Markit/Nikkei monthly India
Manufacturing PMI hit a four-month high
The UAE is investing billions in
Indian power projects
of 51.8 in July, as consumer goods led an ex-
pansion of order books. Private sector
companies in India remain optimistic about
the prospects for growth in the year ahead,
but levels of confidence have fallen, accord-
ing to Julys Markit India Business Outlook.
Businesses see government policies, rising
tourism in India, new projects for the public
sector, expansion plans and new client wins
as opportunities for growth.
 INDIAN BUSINESS REPORT
NBAD PLANTS ITS
FLAG IN MUMBAI
The Abu Dhabi-based lender is seeing some promising signs
after its move to India last year
T
Tax reforms, booming foreign invest-
ment and a more dynamic banking sector
will all help Indias economy expand at a
faster rate, the head of National Bank of
Abu Dhabis Mumbai branch is predict-
ing. Indias economy grew by 7.6 per cent in
2015, a five-year high, making NBADs entry
into the worlds seventh largest economy
all the more auspicious. The bank launched
operations in Mumbai in November 2015 to
provide wholesale banking services, project
S4 finance, trade finance and asset finance, and
the same month bought the offshore Indian
corporate loan book of Royal Bank of Scot-
land for $900 million.
Imminent salary hikes for over 10
million government employees and a good
monsoonthe agriculture sector is Indias
largest employerare expected to drive con-
sumption in the months ahead, says Rajeev
Pant, NBADs regional chief executive and
head of wholesale for South Asia and its
Mumbai branch. Weve been doing busi-
ness with some of Indias best-known compa-
nies, including some of the large diversified
business houses, as well as a host of manu-
facturers. Pant predicts Indias economy can
exceed its current growth rate, pointing to
commitments by the government and central
bank to restructure the countrys banking
system and push publicly-owned banks to
tackle their stressed balance sheets.
Another positive development Pant cites is
the imminent introduction of the long-await-
ed Goods and Services Tax, which is due
to come into force in April 2017 and which
NBADs India chief hopes will boost econom-
ic growth by about 2 per cent. Taken to-
gether, these factors make for a strong foun-
dation for Indias economic prospects for
the next few years, says Pant. The GST will
replace almost all indirect taxes levied by
the states and central government. Current-
ly, India has multiple indirect taxes such as
value added tax, entry tax and purchase tax.
SPECIAL ADVERTISING SECTION
Pant predicts the GST could lower the cost
of capital goods by up to 14 per cent, which
will bolster Indian manufacturers compet-
itiveness. As long as we now see a smooth
and swift implementation of these reforms,
accompanied by clear and stable monetary
policy, confidence among companies will
continue to grow, he says.
Pant acknowledges Indias banking sector,
whose assets totalled $1.8 trillion in 2014 ac-
cording to official figures, has suffered in
recent years as the economy went through
a slowdown from 2011 to 2014 before last
The GST will widen the tax base and simpli- years resurgence. In India, there are 26
fy the system, Ernst & Young notes, adding public sector banks, 20 private sector banks,
businesses will benefit from better cash flows 43 foreign banks, 56 regional rural banks,
and tax savings. 1,589 urban cooperative banks and 93,550
Also, in 2015 India overtook China as the rural cooperative banks. With India wit-
worlds top destination for foreign direct in- nessing much stronger growth, theres a view
vestment, while India and the United Arab forming that some domestic banks are hesi-
Emirates have agreed to create a $75 billion tant to sell their distressed assets at a knock-
infrastructure fund that will funnel UAE insti- down price at a time when an expected
tutional investments in major projects such uptick in domestic consumption may further
as for road, rail, ports and airports. Our cus- boost the economy, and therefore valua-
tomers also tend to have strong links to our tions, he says. Indias public sector banks
home market, which is very much in line will continue to face some pain in the near
with NBADs West-East corridor strategy of term as they clean up their balance sheets.
focusing on a significant trading region that But there is also significant opportunity
stretches from West Africa to East Asia, says in the sector: The Reserve Bank of India is
Pant ahead of NBADs agreed merger with opening the doors to a host of new entrants,
Abu Dhabi-rival First Gulf Bank. This deal is which will allow for a more bespoke and
due to be completed in early 2017 and will competitive banking landscape.
create the biggest bank in the Middle East Licences have been awarded to new types of
and North Africa, with approximately $175 banks, including payment banks, which handle
billion of assets. bills and small deposits but are not allowed
Domestically, corporates across India to lend, and small-finance banks. Indias tra-
have been encouraged by the policy prog- ditional banking sector will need to demon-
ress made in recent months, with the intro- strate that it can become nimble and embrace
duction of a much-needed new bankruptcy technology, which is upending the bricks and
law and more recent ratification of the GST, mortar model for delivering financial servic-
says Pant. These reforms will have a marked es, says Pant. Today, with just one branch
impact on the ease of doing business in India in India, NBAD is able to serve its wholesale
and also bring with them a new benchmark customers across the country with the use of
for transparency. online payment clearance platforms.
WEVE BEEN DOING BUSINESS
WITH SOME OF INDIAS BEST-KNOWN
COMPANIES, INCLUDING SOME OF THE
LARGE DIVERSIFIED BUSINESS HOUSES,
AS WELL AS A HOST OF MANUFACTURERS
Rajeev Pant, regional chief executive and head of wholesale for
South Asia and Mumbai branch, NBAD
THE HOME OF
REAL ESTATE INVESTMENT
Cityscape Global 2016 is the largest and most influential real
estate investment and development event for emerging
markets globally. Bringing together investors, developers,
government officials and real estate professionals, there is
no better place to find investment opportunities and new
business partners.

Register Online and Save AED100

+971 4 336 5161 info@cityscapeglobal.com www.cityscapeglobal.com

Foundation Partners Platinum Sponsors Silver Sponsor Registration Trustee Project Marketing Supporter
Partner Sponsor

Supporting Regional Broadcasting Research Partner Official Classified Official International Official Property Portal
Partner Partner Partner Media Partner

Official Magazine Official Business Official Russian Official Turkish Regional Media Partner Organised By
Magazine Publication Business Publications
 INDIAN BUSINESS REPORT
A SOUTH-SOUTH
SUCCESS
T
The story of Dubais Midcom Group is both
typical and atypical of the myriad success-
ful private businesses headquartered in the
Gulfs financial hubIndian-owned and Afri-
ca-focused, the companys chief executive and
founder Anand Kapoor went from earning
$800 a month as a Ugandan bank employee to
running a multibillion dollar empire from his
Palm Jumeirah villa.
Dubai is home to hundreds of Indian-
run enterprises, its business-friendly rules
S6 and regulations and excellent communica-
tions and transport links to east and west
have made it the preferred home for many
a budding entrepreneur from the subcon-
INDIA IS A VERY PROMISING MARKET AND WE
ARE ALWAYS LOOKING FOR OPPORTUNITIES.
WE HAVE HAD NUMEROUS DISCUSSIONS WITH
MINISTERS IN INDIA AND IF THE OPPORTUNITY
ARISES, WE WILL DEFINITELY LOOK TO INVEST
Anand Kapoor, founder, Midcom Group
tinent. Midcom Groups interests span Afri-
cas telecoms, farming, education, manufac-
turing, real estate and finance sectors, but
owner Kapoor also has an eye on his home
country. India is a very promising market
and we are always looking for opportunities,
he says. We have had numerous discussions
with ministers in India and if the opportunity
arises, we will definitely look to invest.
Kapoor, whose father also was an entrepre-
neur, was studying for an MBA when the op-
portunity arose to take a job at Ugandas Trust
Bank. Convinced such a role would prove
more instructive than completing his studies,
22-year-old Kapoor persuaded his family like-
wise and he swapped Ahmedabad for sub-Sa-
haran Africa. Initially earning $800 per month
handling the banks treasury and foreign cur-
Midcom Group founder Anand Kapoors road to the top
has taken him from India to Dubai via Africa. A return to
his home market and a push to go public could be next
rency operations, Kapoor soon launched his
own foreign-exchange company with business
partner Bhasker Kotecha.
The fledgling firm swiftly racked up $1.5
million in profits, but fatefully this was held at
Trust Bank and the lender collapsed. The pre-
cocious Kapoor made a takeover bid for the
bank, partly as a means to recover his money.
When this failed he restarted his FX business
and soon made enough money to acquire farm-
land and an international school in Uganda.
In 2003, he visited Dubai on a layover and
was so impressed with the city and its infra-
structure that Kapoor relocated to the emirate
to found Midcom Group. Although based in
Dubai, the company remained focused on
Africa, specifically its telecommunications
sector, which Kapoor correctly forecast was
about to explode as handset prices fell suffi-
ciently to become affordable for the masses.
Starting with just five employees, Midcoms
aim was to become a distributor in Africa
for the worlds top phone manufacturers. In
2004, Midcom became Nokias distributor for
Rwanda, a partnership that now encompass-
es 14 African countries. Its also a major Africa
distributor for Samsung, Microsoft, Huawei,
Alcatel, Acer, Lenovo and Xiaomi.
Midcom owns MStore, an electronics retailer
with about 300 outlets across Nigeria, Ghana,
Tanzania, Kenya, Ivory Coast and Senegal. The
group also manufactures mobile handsetsits
own brand FEROwhich is sold in 11 African
SPECIAL ADVERTISING SECTION
countries. We already had an extensive dis-
tribution presence, which plays a key factor in
sales, says Kapoor. We feel there is a segment
in the market being overlooked by the interna-
tional brands and we can provide something
that the consumer demands through FERO.
Other notable businesses include MStoreng,
which assembles Samsung electrical goods in
Nigeria, and a dairy division that produces and
processes milk and other dairy products for
sale across East Africa under its Lato brand.
The mobile and dairy sectors in Africa have
huge potential, says Kapoor. The key is af-
fordability. Countries have all faced currency
depreciation and affordability has become key.
Hence local brands will play a major role in
this growth as there is huge demand.
Midcoms mobility business accounts for
about three-quarters of the companys $1.5
billion annual turnover, but dairy is among
the most profitable units. It doesnt contrib-
ute much to the overall group revenue rela-
tive to our other businesses, but it does con-
tribute significantly to our bottom line, says
Kapoor, whose wife Anvita is a company di-
rector and manages its finances across a 17-
country footprint.
Despite such scaleMidcoms real estate di-
vision has built a commercial tower and res-
idential apartments in Kampala, Uganda,
while it has also established a fashion univer-
sity in Dubai in partnership with Milans Uni-
versity of NABA to offer bachelor degrees in
Fashion Design and Fashion Business Man-
agementKapoor believes there is further
scope to expand. We are a dynamic group
and would consider M&A opportunities if the
partnership is correct for both parties and
provides value in the long term, he says. But
even bigger plans for the coming years are
also on the table: Kapoor says that Midcom
would consider a possible initial public offer-
ing and listing in London or Hong Kong in the
long term. We are currently in discussions
with numerous parties.
 INDIAN BUSINESS REPORT
MULK
BANKS ON
ITS 2020
VISION
With less than four years to go until Dubais Expo,
the building materials manufacturer is preparing
to do some big business
T
The UAEs building materials sector will
remain buoyant as Dubais preparations to
host Expo 2020 gather pace, according to the
chairman of Mulk Holdings, one of the indus-
trys biggest and most respected manufactur-
S8 ers. Chairman Nawab Shaji Ul Mulk founded
the Sharjah-headquartered firm in 2000 and
in less than two decades it has become a
billion dollar conglomerate employing 9,000
people worldwide, of which 7,200 work in the
Middle East. The outlook for building mate-
rials looks highly encouraging, says Mulk, an
aristocrat from southern India who began his
career in the UAEs then-nascent construc-
tion and building materials sector in the early
1980s. We are confident that 2020 will be a
momentous year for the UAE with the Expo
event in Dubai. Mulk Holdings has been in-
strumental in the rise of the UAE as a global
construction hub.
Mulks success owes much to his acqui-
sition of the manufacturing and market-
ing rights for Alubond USA. After winning
several projects for Alubond, he bought
the parent company outright and today it
lays claim to be the worlds biggest alumin-
ium composite panel brand, with an in-
stalled manufacturing capacity of 25 million
square metres that is made in factories span-
ning four continents. Alubond USA has an
estimated 60 per cent market share in the
Middle East and North Africa.
We have seen rapid sustainable growth in
emerging markets. In our production markets,
including the UAE, the market for high quality
and safer products has matured, says Mulk.
This is positive for Alubond USA as we stand
apart from a commoditised market due to our
unmatchable quality and project track-record.
Mulk cites two goals his company must
achieve by 2020. The first is to support the
UAEs quest to construct yet more globally-
renowned buildings through the companys
huge production capacity and technologi-
cally superior products. The second, which
is especially timely following a spate of
building fires in the emirates, is to produce
the safest aluminium composite products
in the market, halt production of non-fire
rated products and operate an integrated
product supply and installation service for
clients. We have a current focus to develop
WE ARE CONFIDENT
THAT 2020 WILL BE
A MOMENTOUS YEAR
FOR THE UAE WITH THE
EXPO EVENT IN DUBAI.
MULK HOLDINGS HAS
BEEN INSTRUMENTAL IN
THE RISE OF THE UAE
AS A GLOBAL CON-
STRUCTION HUB
fire-rated facades and will be focusing on
a full range of new materials to make the
company the most comprehensive exterior
faade materials company, says Mulk.
Mulk Holdings has 58 branches or group
companies worldwide in countries and
regions as diverse as North America, Africa,
the Middle East, Europe, the Indian sub-
continent and China among others. In addi-
tion, Mulk distributes its products through
channel partners and distributor agents in
more than 90 countries across the globe.
The group has interests in building mate-
rials and construction, plastics, energy,
healthcare, real estate, commodities and
sports management. The decision to enter
healthcare, real estate and commodities was
born out of the customer needs prevalent
in various international markets, says Mulk.
The building materials division contrib-
utes about 60 per cent of group turnover,
followed by plastics, real estate and other
divisions. We have established our pres-
ence with strategic projects in developing
countries, like our recent project wins with
the Indian Oil Corporation, Indian Railways,
the Address Hotel and many more landmark
projects globally, says Mulk.
Plastics has been a strategic investment
made to support the homogeneous input re-
quirements for our building material prod-
ucts, Mulk adds. As an entrant in solar
energy, we utilised our deep understand-
ing of composite manufacturing for appli-
cations in solar energy generation, a first in
the world.
The company plans to remain fami-
ly-owned and going public is not on the
agenda.
 SPECIAL ADVERTISING SECTION

S9

Nawab Shaji Ul Mulk, chairman, Mulk Holdings

FLEEING TO A FUTURE

Syrian refugees get a university education with help from a German startup
By Laura Colby
S
ajida had just begun her univer- Kirons founders
sity education at the Engineering have raised more
Technical Institute in Damascus than 3 million
when the bombs began to fall. It was ($3.3 million) from a
November 2014, and the 19-year-old crowdfunding cam-
fled with her family to Turkey, where paign as well as from
she worked in a clothing factory, a Syrian private and corpo-
restaurant, and a library before finally rate donors ranging
getting the chance to travel to Greece. from Google to BMW. The trio aims to fill to integrate refugees into the university
The water was up to my neck, she a gap of otherwise wasted timeduring system, Goebel says.
says, recounting a struggle to reach which refugees can develop skills or earn Sajida, who honed her English by
the dinghy that would take her across degrees that could help them acclimatise watching American television shows like 45
a narrow strait to the island of Lesbos. to their new country, or prepare for the So You Think You Can Dance, jumped at
Alternating among trains, buses, and day when they can return home. what Kiron has to offer. Im super happy
simply walking, Sajida and her older Kiron, which means ray of light in to be studying, she says, dressed in a
sister eventually made their way to Sanskrit, combines online college courses white hijab and a grey leopard-print
Germany. As she describes her trek, developed by US institutions including blouse as she chats happily near one of
Sajida is brutally concise about the ordeal Harvard University and the Massachusetts Berlins main thoroughfares, Unter Den
refugees like her must endure, particu- Institute of Technology with volunteer Linden. I feel like Im back on track.
larly when braving unforgiving seas. It professors and mentors who can be thou- Kirons course offerings are easily
was terrifying, she says. sands of kilometres away. They grade accessed on the web and can accom-
Once Sajida reached Western Europe, assignments, answer questions, and keep modate large numbers of participants.
she had another problem. A year or more students on track. For those housed in Developed in the US several years ago,
may pass before refugees can attain the refugee camps without internet connec- these massive open online courses (or
legal status and language fluency needed tions or computers, Kiron is setting up MOOCs) provide a way for anyone to
to continue their education at a German learning hubs, which are basically remote experience a college course, which can
university. In the meantime, they must classrooms, with donated laptops and be useful on a rsum or simply comple-
wait to complete schooling that, in her internet access. ment a current job. But only about 15 per
case, began more than a year ago and While other programmes exist to cent of students who sign up for MOOCs
2,700 kilometres away. WHEN YOU train refugees for jobs finish them, according to research by
A group of three German MEET PEOPLE or in the German lan- Katy Jordan, a PhD student at the Open
friends in their twenties WHO HAVE guage, Kiron is unique University, an online school based in
saw this languishing group GOALS AND because it enrols them the UK. Kiron has sought to change this
of potential students as an DREAMS LIKE in for-credit classes that dynamic, working with brick-and-mor-
opportunity. They created YOU, WHO can lead toward a college tar schools to translate these courses
Kiron, a free online learning HAVE THE SAME degree, says Tim Goebel, into credit that could be applied toward
platform especially for refu- SKILLS AND executive director for a degree. Refugee students are far more
gees. Sajida (who, like other
ABILITIES AS a foundation started diligent than most, says Markus Kressler,
YOU, BUT HAVE
refugees, asked to be identi- NO CHANCE by Hans Schoepflin, a Kirons 26-year-old co-founder. If you
fied only by her first name TO LIVE UP venture capitalist and have no alternative, its a different situ-
to protect her family) is one TO THEIR Kirons biggest single ation, he says.
of more than 1,250 students POTENTIAL, donor. They are tack- Kiron envisions its students doing two
who signed up for its classes, ITS HUGELY ling a problem that years of course work, then transfer-
which are taught in English. UNFAIR nobody else has: how ring to one of its partner universities.
 While the majority of students are
based in Germany, refugees can take
classes from anywhere, as long as they
have internet access. Kiron already has
users in Turkey, Jordan, and even Sri
Lanka. Each of its four majorsbusi-
ness, engineering, computer science
and social scienceshas modules of
both suggested and required classes.
Kressler says students appreciate the
list of recommended courses and that
Kiron has enlisted curriculum experts to
help them select classes. Sajida, whos
studying engineering, is beginning with
Applications in Engineering Mechanics,
for instance.
SITTING IN A GARDEN behind what
was once the Soviet House of Culture,
Kressler, who has dark curly hair and
wears a black leather jacket, explains
how Kiron can play a critical role in
helping the newly arrived make their
way in Germany. Inside, his staff and
volunteers huddle around large white
tables, tapping away at laptops amid
coils of electrical cords and stacks of
pizza boxes. On the wall is a poster for
Kiron that shows a photo of a lifejacket,
the grim emblem of the refugee crisis, cap-
tioned life-saving tool, and one of a mor-
46 tarboard and diploma titled life tool.
Helping refugees transition into
college students is what Kiron is all
about, Kressler says. When you meet
people who have goals and dreams like
you, who have the same skills and abili-
ties as you, but have no chance to live up
to their potential, its hugely unfair, he
says, rolling a cigarette. Its just a coin-
cidence to be born in a safe environment
like Europe, where we take for granted
things like free education.
Over the past two years, the continent
has been flooded by waves of migrants
fleeing upheaval in Syria, Iraq, and
other Middle Eastern countries, as well
as Africa and Asia. Longing for safety
and better prospects, some 1.2 million
asylum seekers travelled by sea in an
effort to reach Europe; several thou-
sand have perished. In all, there were
more than 21 million refugees around
the world in 2015, according to the
United Nations High Commissioner for
Refugees, the largest number since the
end of World War II.
Whether, and how, to integrate those
refugees into European society has riled
politics across the continent. With Europe
reeling from terrorist attacks in Paris,
Brussels, and Nice, and the continents
economic recovery muddled and inconsis- Markus Kressler,
tent, the influx of refugees has fuelled anti- co-fouder of Kiron, at
the learning platforms
immigrant sentiment and lent support to offices in Berlin
right-wing parties such as Germanys AFD,
or Alternative for Germany, and Frances
National Front. Immigration was also a key
theme in the UKs vote in June to leave the
European Union, with advocates of the
so-called Brexit raising the spectre of a
country overrun with foreigners. Even
in Germany, arguably the most welcom-
ing of this recent influx, attacks like the
one last month by an Afghan refugee
on a passenger train have sown doubt
about immigration policies.
Germany has taken in far more refu-
THEY ARE
gees than any other European country
TACKLING
more than one million in 2015and A PROBLEM
several hundred thousand more this THAT NOBODY
year. While Chancellor Angela Merkel ELSE HAS:
has promised to absorb them all, the HOW TO INTE-
countrys legal system has been over- GRATE REFU-
whelmed. Refugees must follow a long GEES INTO THE
process before they can obtain asylum, UNIVERSITY school and pass an
during which they are unable to work SYSTEM exam before they
or study. can apply to German colleges.
Gaining admission to German uni- Clearly, opening up higher education
versities presents even more obstacles. to refugees is crucial to helping them inte-
Refugees need to speak German fluently grate. But it also serves to train them for
enough to follow college-level work. They the day, if it ever comes, when they may
also need to have official transcripts for return home to rebuild. An entire gener-
their high school studies and any college ation of future Syrian academics, leaders,
classes theyve already taken, documents and activists could be lost if smart people
often impossible to obtain from the coun- in their teens and twenties are stuck in
tries theyve fled. Those who dont have refugee camps unable to study, says
transcripts have to attend a remedial Florian Becker, managing director of
US-accredited Bard College Berlin, which
is partnering with Kiron. These elites are
important, he says. If we dont make this
Universities including work, the damage could be huge.
RWTH Aachen (top) So far, about 18 universities have
and Sciences-Po
have agreed to give
agreed to give students credit for their
students credit for Kiron courses, provided they meet each
their Kiron courses individual schools entrance criteria.
Among them are more than a dozen
German universities, including the top
 IT WOULD Sitting in the leafy back-
BE GREAT yard of Bards cafeteria, a
TO HAVE space lined with rose hip
SOMETHING bushes, Ahmad described
WHERE I his odyssey to Cyprus,
COULD HELP
THE COUNTRY and then Turkey, where
WHERE he spent several years
IM LIVING, working in a relatives
WHETHER import-export business
ITS HERE, OR that later closed. He arrived
IN SYRIA in Germany last October
with the tide of refugees,
travelling mostly by train
through the Balkans and
taking taxis across borders.
His parents, a former oil worker and a
gym teacher, had already arrived as ref-
ugees, settling in Leipzig.
After learning about Kiron
through social media, Ahmad
threw himself into studying,
completing 21 courses such as
International Law, Paradoxes
of War and Understanding
Economic Policymaking in
less than a year. His enter-
prise was noticed by one
of Kirons professors, who
recommended him for the
scholarship.
Ahmad, who wrote an essay
about the historical context of
the Syrian conflict as part of his
admissions package, is inter-
ested in politics or working
at a nongovernmental organ-
isation after college. I have
goals related to my country,
he says.
Both he and Sajida
dont rule out a return
engineering school RWTH to their home country,
Aachen; Sciences Po in Paris; I THOUGHT provided its safe to do
Uninettuno in Italy; and two EVERY DAY so, once they graduate.
English-language schools in ABOUT HOW It would be great to
Germany: Turkish-owned BAU HORRIBLY have something where
Hochschul and Bard College DIFFICULT IT IS I could help the country
TO GET THROUGH
Berlin. If a Kiron student aims to where Im living, she
ALL THE
attend Bard Berlin, a tiny, selec- says, whether its here,
BUREAUCRATIC
tive private college of about 170 or in Syria.
PAPERWORK.
students, Becker hopes to have ITS NEARLY
him or her follow some of the IMPOSSIBLE THE IDEA FOR
same courses Bard students do, FOR REFUGEES Kiron came about in
overseen by a Bard professor. TO ENTER THE the autumn of 2014.
This autumn, Bard Berlin UNIVERSITY Kressler, who holds a
plans to enrol its first Kiron SYSTEM degree in psychology,
student, one of four Syrian refugees who was counselling refugees in Berlin. I
won a full scholarship. The Kiron student thought every day about how horribly dif-
in question, Ahmad, is a 24-year-old who ficult it is to get through all the bureau-
fled the Assad government stronghold of cratic paperwork, he says. Its nearly
Banias only days before soldiers arrived impossible for refugees to enter the uni-
at his home and arrested his brothers. It versity system. Kressler, who had taken a
wasnt safe, he says. There is no future couple of MOOC classes while studying at
there, even if you are not bombed. San Diego State University, joined with his
friend Vincent Zimmer, 26, a PhD student
in economic psychology, who had worked
with Syrian war refugees in Turkey. They
enlisted a third friend, Christoph Staudt,
22, to develop the web site. By advertis-
ing their idea on Facebook groups such as
Dubarah, a global network where expa-
triate Syrians share information about
jobs, education and life in their adopted
countries, Kiron collected the names of
several thousand potential students. It
then surveyed 1,000 of them as to what
they wanted in an online school, settling
on the four study tracks.
About half of Kirons students are from
Syria, with the rest having come from
countries including Somalia, Nigeria and
Afghanistan. The largest contingent are
in their mid-20s, but ages range widely
because some had already finished their
studies in their home countries while
others, like Sajida, were just starting.
Sajida is unusual for Kiron because shes
female: the vast majority of those whove
signed up are male, but Kiron is seeking
to recruit more women.
Last summer, the three Kiron co-
founders were ready to raise funds for
a pilot project just as the flow of refu-
gees turned into a torrent. As Merkel
made her promise to take in a million
people, Kiron began looking online for 47
donations to fund scholarships that
would provide free schooling. Suddenly,
everyone wanted to help: Instead of the
120,000 originally sought, the crowd-
funding raised four times that. People
reacted incredibly, Kressler says.
In addition to connecting with uni-
versities and volunteers, Kiron received
support from big corporate names
including Bertelsmann, Vodafone Group,
Akzo Nobel and Capgemini. While
Kressler and a few other staffers are paid
small salaries, most of the work is done
by volunteers. The largest single donor
has been Schoepflin, the venture capi-
talist, who was once an executive of The
Price Company, the precursor to Costco
Wholesale Corporation. His foundation
promised 1.5 million over the next three
years and is also providing Kiron with
management coaching.
Schoepflin describes the Kiron
project in venture capital terms, talking
about how it should scale up after the
current, proof-of-concept stage. The
whole refugee crisis is not going to go
away, he says. Kressler emphasises that
the organisations business model will
remain non-profit. The more money
we have, the more services we
can provide to our students,
he says. <BW>
 48

PHOTOGRAPH ILLUSTRATION BY CREDIT TK

PHOTOGRAPH ILLUSTRATION BY CREDIT TK

49
 The office building on Facebook Way is in the unfinished style potentially opening new possibilities in playing gamesthe

that honours materials like plywood, concrete, and steel. The
I-beams supporting its soaring walls still have the builders chalk
placement instructions on them. It takes a business making
billions of high-margin dollars to make plywood and concrete
PREVIOUS SPREAD: PHOTO ILLUSTRATION BY 731; PHOTOS: GETTY IMAGES (1); COURTESY OCULUS (1); THIS SPREAD,
gateway drug for VR, Zuckerberg says. He also wants it to be
used for watching sports, making movies, joining conversations
around the world, or things no ones imagined yet. But its still
limitedin resolution, how it tracks movement, and how the

FROM LEFT: PHOTOGRAPH BY EMILY SHUR FOR BLOOMBERG BUSINESSWEEK; COURTESY OCULUS
seem so appealing. The merely ordinary have to put up drywall. body responds to what it projects, among many other things.
Facebooks spokeswoman calls its headquarters the largest The problems are enormous and require a deeper understand-
single room in the world. Maybe. It feels like it, anyway. The ing of human sensory mechanisms than currently exists. (For
space isnt square, so it doesnt seem pointedly vast; its long example, how should a pair of goggles follow the movement
and narrow. Heading to meet Mark Zuckerberg, the wizard of the eye to allow the processor to manipulate the plane of
of this open-plan office, you wind through it like an Ikea, fol- focus?) Its going to take billions to make it work.
lowing a painted path. The desks are orderly and clean with Zuckerberg, asked about this directly, doesnt flinch at the
minimalist Macs. From time to time, theres a map with a thought of building a NASA-like research park for VR. This is
you are here helpfully posted. Then, at the centre, stand- early, and its going to be a long-term thing, he says. This is a
ing at his desk announcing something to a colleague, theres good candidate to be the next major computing platform. Its
Zuckerberg. Hes a great stander; he has terrific posture. worthy of a lot of investment over a long period.
Sheryl Sandberg, chief operating officer, author of Lean In He often talks of connecting the world. But with virtual
and the de facto leader of all corporate women, wraps some- reality, the terms of that connection have been upped expo-
thing up and heads down the painted path. nentially. Weve connected 1.65 billion people through
If you spray-painted Zuckerberg a high-gloss white and Facebook, Zuckerberg says. But if you want to help get
told him to gaze off into the distance, hed look exactly like a all 7 billion people connected and make a step function in
1st century A.D. bust of Tiberius at the Capitoline Museum in the fidelity of how people can share and consume content,
Rome. Zuckerberg would get the reference. A scholar of the you need to make significant investments in some of these
classics, he named his daughter Maxima, after the Roman, not
the Nissan, and once declared at an anti-Google Plus all-hands
meeting, Carthago delenda est. (This was Cato the Elders call
to destroy Carthage, which posed a threat to Romes active user
base.) Zuckerberg doesnt wear a toga, unfortunately, but like any
icon, he has a signature lookgrey T-shirt, jeans, and sneakers.
He joins the interview immediately, projecting sunshine.
This wont be a grind, like his recent emergency meeting with
50 US conservatives, convincing them that his army of overachiev-
ing twentysomethings isnt totally biased in what it promotes
on the news feed. Our subject today is The Future. In par-
ticular, that of Oculus, the maker of virtual reality goggles and
software, which Zuckerberg bought in 2014.
The interview takes place in a fishbowl-like room in the
middle of the middle of the worlds largest room. Theres an
L-shaped grey midcentury-modern couch, a square coffee
table, two enormous black flat-panel screens. Zuckerberg
has light green eyes that fix on an interviewer like security
cameras. You cant avoid them. You cant figure out exactly
whats on the other side of them, either.
In one way or another, he says, hes thought about the ren-
dering of reality for decades. Its something that Ive dreamed
about since I was a kid, he says. I remember in middle school
I would just sit in my math class with my notebook and write
code. I didnt even have a computer in middle school. Id just,
like, go home and write it. And I sketched out how I thought
that eventually the operating system and the experience should
be 3D, and basically more of a VR thing. Zuckerberg is 32 and
was in middle school in about 1995, a few years after Neal
Stephenson outlined his dark vision for the metaverse, a
computer-generated alternate reality, in his novel Snow Crash.
About 20 years later, Zuckerberg offered the founders of
Oculus $2 billion to join him. That was hard to turn down. First
of all, it was $2 billion. More important, it implied the long-term
backing of Zuckerberg, who controls Facebook with a special
class of shares. There are other shareholders, many of them,
but they dont have the same rights or power over the cash flow,
which amounted to about $1.8 billion in the first quarter of 2016.
Oculus is Latin for eye, and the Oculus Rift, which went on
sale earlier this year and lists for $599, is an incredible device.
Strapped to the head, it offers 360 degrees of vision and sound,
longer-term things where you actually dont know what the
time horizon is. I dont know who said this first, but its not
hard to predict what the world will be like in 20 years. The hard
thing is actually predicting or figuring out how to get there.
A decade ago, people online mostly shared text. Then we
all got good cameras that were attached to our phones, and it
got a bit richer, Zuckerberg says. And now were at the begin-
ning of thiswe call it the golden age of online video, and thats
just richer. Photos are richer than text; video, much richer than
photos. But thats not the end, right? I mean, its like this indef-
inite continuum of getting closer and closer to being able to
capture what a persons natural experience and thought is, and
just being able to immediately capture that and design it however
you want and share it with whomever you want.
The spread of video has taken thrilling and sometimes
shocking turns, and VR will likely build on that in ways we
dont yet understand: Imagine Facebook Live at a riot, but
in fully immersive form. Talking about the future, even
Zuckerberg can get stumped and slide into the mystical. Some
of the problems dont even have names yet. VR, at true fidelity,
entails creating another reality, the presence and automation
of everything that exists. Then there are the deep problems
of connecting to the brain, which leads to telepathy, some-
thing he isnt opposed to discussing. I
think you getI mean, theres something
thats justthats deeper, that I dont
even think we scientifically understand
about just how you actually experience
the world, he says. I think theres
outside, and theres different fidelities
of capturing that. And then theres the
human experience of it, which I think
isI mean, we dont even have enough
of a scientific understanding to even
haveI think I dont, at least, have the
vocabulary to even fully describe this.
Apart from cracking the workings of
the mindpretty cool!Oculus will give
Zuckerberg the chance to actually make
an object, as opposed to the intangible
millions of lines of code that constitute
Facebook. That code is an achieve-
ment, but a physical object that people
love might be talked about a generation
later. People hate throwing things away,
because they remember how they loved
them. Things get tied up with ones youth
and years later get found in an attic and
caressed, or maybe traded on EBay.
Theres a less romantic reason for
getting into the hardware business,
too: Facebook wants to own VR the
way Apple and Google own mobile. That
means taking control of the technology,
from the software to the hardware.
But making things at a mass scale is
ruthless and brutal in a way that coding
isnt. Getting a billion or more pairs of
goggles into peoples hands will be an
immense undertaking. Apple makes
things, but its 110,000 or so workers
dont put them together. Hundreds of
thousands more, at places like contract
manufacturer Foxconn Technology, do
that. Samsung has factories,
too, and they employ almost
500,000. Facebook now has
about 13,000 workers. The Oculus
division had about 400 the last time
Facebook announced the number.
The company wont say why, but
it no longer announces the number.
It may be trying to build something
bigger than anyone thinks, and even if
youre a benign autocrat, as Zuckerberg
essentially is at Facebook, sharehold-
ers get skittish when you start getting
into the land war that is hardware.
John Carmack, Oculuss chief technol-
ogy officer, says hes well aware of what
theyre up against: I had an aerospace
company for 10 years. I understand the
cussedness of physical things.
The hardware war will be waged on the
grounds of the old Facebook headquar-
ters, across the way from the new digs. When employees want
to go to the older part, they hop on brand-new blue bikes and
pedal through a tunnel. Offices surround an alley that looks like
Disneylands Main Street. Theres a coffee shop, a burrito joint,
and an arcade, among other shops, all free to employees. Next
to a candy store theres a printmaking shop, where employ-
ees make beautiful posters with team-building slogans that get
put up on the few walls in the office. (Carthago delenda est, for
instance.) Only an ascetic misanthrope wouldnt want to work
at Facebook. Its usually sunny, too. 51
At the end of this snack food alle, in a repurposed warren
of offices, Oculus is spreading its messy-reality tentacles over
expanding rows of desks. The rooms are tangled, forbidding, a
jumble suggesting workers too busy to tidy up. Surfaces are piled
with headsets, lenses, knots of wire, chips, boxes. There are oscil-
loscopes, mass spectrometers, power supplies, soldering irons,
naked circuit boards with chips on them and USB cables sticking
out, isolated testing platforms on special wide legs that damp
vibration, and giant microscopes. On one table, three cameras
focus on a tiny sphere balanced on a needle. On another, a
vacuum pump leads to a chamber thats like a pressure cooker.
The Rift uses two lenses, and these are everywhere, balanced
on little stands in front of testing equipment.
Here in this gadget maze are the offices of Palmer Luckey
and Nate Mitchell. Luckey, now 23, has been the boy-inventor
face of Oculus since it first blew the media hive mind in 2012.
But Facebook would like to rewrite this founding story and
make it less boy-in-a-garage and more nerd-supergroup, so its
made him available only in a group interview, and not for photo-
graphs. Luckey betrays no anxiety about such revisions. Sitting in
Mitchells officewhich has its own name, Nothing to Announce
at this TimeLuckey wears a Hawaiian shirt, cargo shorts, and
sandals. He has all the poise and confidence one would expect
from a home-schooled millennial with an awesome name, on
whom everyone wants to hang the invention of virtual reality.
Mitchell, 29, affable, put-together, and of the super-positive
variety, wears a grey hoodie. The vice president for product,
hes been working with Luckey since the beginning. Mitchell
spends most of his days figuring out how to improve the technical
aspects of the Rift, while Luckey woos developers, who are also
being asked to build games for rival headsets. HTCs Vive
allows greater range of motion in a room than the Rift, and
 hand controllers are already
available. Sonys PlayStation VR,
launching later this year, will try to
turn the audience for existing video
games, such as Resident Evil, into
customers. Magic Leap, an ostenta-
tiously secretive startup in Florida,
wont explain exactly what its build-
ing, saying only that its working on aug-
mented reality, or AR. A sort of partway
VR, AR involves digital images that
appear to interact with the real world.
Magic Leap has already signed deals
with movie studios, including Lucasfilm,
which makes Star Wars, and attracted
gobs of investor cash$1.4 billion and
counting. And, of course, there are
the simple, no-goggles-required smart-
phone AR games, such as the suddenly
ubiquitous Pokmon Go.
Asked if hes scared Oculus will be
beat, Luckey answers, Im never scared. I know too much.
He goes on: Some companies are figuring out their long-term
vision as they go in terms of where is this technology going to
be in 10, 20, 30 years. But for a lot of the people here, weve all
read science fiction. We all know what virtual reality is in sci-fi.
Even though the product we have today is not the one that we
want to have 10 or 20 years from now, everyone wants to get
there. The goal is clear: Its to make VR technology thats as real
as real life with none of the limitations.
The science fiction hes referring to is not only Snow Crash,
52 but also Ready Player One, by Ernest Cline, which imagines a
Facebook-like Oasis, where all social networking happens in
VR. Cline talks with the Oculus people frequently. New employ-
ees are issued a copy of the book.
Mitchell and Luckey were brought together by Oculus Chief
Executive Officer Brendan Iribe, whose office, named Inception,
is just down from Mitchells. Above the desk and couches and
armchairs is an odd steampunk-style bust by Jeremy Mayer, an
artist in Oakland, California. Made entirely of parts from Oliver
manual typewriters, the figure is dubbed Papa Oliver. Hes a
nod to the past but also a wink at a bionic future, when we may
live in haptic suits that sense and translate every movement
and reflect them in our avatars, ocular implants show informa-
tion on our retinas, and so on through the visions of Cline and
others. Iribe bought one for himself and one for Zuckerberg.
Iribe, 36, has dark turned-up hair and an easy, confident
manner; his mother says he never had trouble walking right
up to the counter at the computer store when he was little, and
sometimes right past it to the backroom. He has many roles, but
the main one is making sure the final product Oculus is build-
ing today is elegant, intuitive, and comfortableand doesnt
make people throw up. Nausea is the Um, sir, there may be a
problem problem of VR.
He thinks bigger thoughts, too, about where VR might be
years from now. He wonders about things like what would
happen if Oculus one-upped Google Earth and mapped the
whole world in 3D, or what it might take to get eye tracking
right. I sleep on and offa couple hoursand then wake up
and think about it, and then go back to sleep and think about
it more, he says.
Iribe grew up in Maryland and spent a year at the University
of Maryland before leaving to work in software development.
In April he went to his alma mater to
inaugurate the construction of a com-
puter science centre named for him
after he pledged $31 million. He stood
under a tent with a senator, the gov-
ernor, and Oculus executive Michael
Antonov, also a former student. They
all put on VR goggles and pretended
to break ground. (With Antonov, Iribe
founded Scaleform in 2004, which sold
software tools to video game produc-
ers. It was bought by Autodesk in 2011
for $36 million.)
As Iribe remembers it, a friend called
him from a product show in 2012 and
told him, You need to go meet Palmer.
He has this really cool prototype, and I
think VR is, like, finally ready to work,
maybe. So Iribe brought a group
together at the STK steakhouse in Los
Angeles, including Mitchell and others
Iribe had worked with. At the dinner, he says, Palmer walks
in with his shorts and flip-flops and Atari T-shirt. Id spoken
to him on the phone, but I didnt know how young he was.
Luckey was 19.
Iribe pitched turning Oculus, which had been a message
board-inspired Kickstarter project to help people build their
own VR headsets, into a company that could sell a fully designed
headset direct to consumers. If this was the dawn of a new com-
puting age, here was Steve Jobs telling Steve Wozniak that the
Apple computer should be for regular folks, not just engineers.
But Luckey already had another job offer. I was consider-
ing a lot of different options, he says. We met, and I talked
with Brendan and his friends. He really helped convince me.
Says Mitchell: I do remember you said there was this one job
offer, and you said, Think about this salary. Im going to walk
away from that. Someone was like, Palmer, if you start your
own company, you can pick your own salary.
Iribe: The big pitch to Palmer was, Look, we have done
this before, and were all still working together. Well do a
partnership, the four of us. Well get equal share. Ill be the
CEO, and well put the company and the product together,
build a team, raise the moneythe company was almost
entirely funded by Iribe, his family,
Antonov, and Mitchell, in addition to
FROM LEFT: PHOTOGRAPH BY EMILY SHUR FOR BLOOMBERG BUSINESSWEEK; COURTESY OCULUS (2)
the Kickstarter moneyand youll be
the founder and evangelist, and you
can go out and be spokesman. You
have this incredible story, developing
this in your garage for years.
Luckey, remembering it all, laughs.
I wasnt convinced for a while, he says.
It took a few weeks. It was pretty clear
that Brendan was the right guy to work
with. I never wanted to be CEO. Thats
just not my skill set. Some people can
be that founder-CEO. I knew from the
very start I never wanted to be a CEO.
Its not my type of role.
At Sanzaru Games, they joke a lot
about getting the bucket ready.
Sanzaru makes one of the 70 games
and experiences Oculus has seeded,
hoping theyll come up with a winner. The bucket is for vomit.
Tin Guerrero, Sanzarus creative director, is working on a
sports game, and his team uses the bucket to answer ques-
tions like, What will happen if we have the user running
down a field with a football? Theres a guy named Flemming
Wahl who gets sick easily. When Guerrero wants to know if
a feature works, he has Wahl test it. If he doesnt get sick, it
works. Wahl isnt some kind of weaklinghis hobby is racing
dragon boatsbut for some reason hes sensitive to the ves-
tibular distortions of VR.
Michael Abrash, chief scientist at Oculus, spends a lot of
his time studying perception. For Abrash, the great dress fight
of 2015where the world couldnt agree on whether a dress
was blue and black or white and goldwasnt a time-wasting
meme, but a fundamental question about what the brain pro-
cesses and why. For Abrash, Oculus cant stop at games and
gimmicky immersive experiences. Its supposed to be as good
as reality. Its supposed to be reality.
When you wake up in the morning, you dont say, Ah, reality,
what an interesting platform, Abrash says, lifting his arms to
show off the slice of life that is this Facebook conference room.
You dont think, Whats the killer app? You think, Anything is
possible. He motions to his half-rimmed glasses and his phone.
Theyre examples of ways we already augment our perception
of the world, he says. But before VR, we havent ever had it so
tightly coupled to our perceptual system and our environment.
The problem for a research team benchmarking against
actual reality is that Oculus falls short in so many ways. The
way lenses are designed now, field of view is 90 degrees, not
the 110 degrees your eyes have. And theres no way to adjust
depth perception so you can focus on a strand of hair and then
something in the distance without highly precise eye tracking.
The only way to figure that out is to build it, Abrash says.
This is only a perceptual psychology problem. The key is that
what you experience is constructed in your brain.
Tracking eyes, for example, isnt as simple as tracking pupils
which change size and may not be symmetric. The eyes wiggle
and the iris travels during each blink. If you took a video of your
eye and watched it in slow motion, it would be very disturbing,
Abrash says. Eventually, Oculus will need to track mouth move-
ment and hand movement, which are potentially even harder,
but necessary for people to hang out and have conversations
in some VR chat app of the future.
Oculus early on committed 20 per cent of its budget and
hiring to the research division, and Abrash spends most of his
time trying to find people whove actually studied the things the
company is trying to solve. In fields such as nanofabrication,
nanolithography, and waveguide technology, he says there are
only a few people in the world to ask. Finding them has been
complicated by how completely VR stalled after its failure in the
90s. There was nowhere for a specialist in VR to continue to
grow. I talked to one of those people to see if he wanted to work
with usit turns out hes a doctor now, says Abrash. Things
just imploded so completely that people walked away from it.
In the early 90s, Abrash met Oculus CTO Carmack on an
online bulletin board for 3D graphics. They got together and
built Quake, a hugely popular video game, then went their
separate ways, Carmack to ID Software and Abrash to Valve.
About 15 years later, Carmack introduced him to the Oculus
team, before Facebook bought it. Abrash tried a demo where
he looked over the edge of a tall building and felt his knees
lock up. Thats when he knew the future described in his
favourite sci-fi novels was possible.
He quit his job, anticipating a long vacation before Oculus
could raise enough money to get
serious. Five days later he got a text
telling him the company had been
acquired for $2 billion. I thought,
Well, the trains leaving the station,
Abrash says. He met Zuckerberg and
grilled him about whether VR was a
serious part of Facebooks strategic
plan, then he hopped on.
Carmack is at a Microsoft event the
night before E3, the annual gaming
conference in Los Angeles. VR is such
a new, open field that competitors are
more collaborative than they might
be otherwise, and Carmack is at E3 to
introduce the VR version of Microsofts
Minecraft. The game runs on the Gear
VR, a stripped-down $99 set of goggles
that holds a Samsung smartphone
inside. (The gear is a Samsung-Oculus
collaboration based largely on Carmacks work.) VR on mobile
phones is the technology Carmack thinks will spread first and
fastest. The phone, he says, is the golden path to how we
get to a billion users.
Carmack, 45, has spiky blonde hair and small rimless rect-
angular glasses. He answers questions with precise, unusu-
ally inventive language. He joined Oculus in the early
days, after meeting Luckey through a message board
devoted to VR. He describes Luckeys first prototype as
a warpy, distorted mess. Carmack worked with Luckey
to refine it and brought it to E3 in 2012. This little shoe 53
box that Palmer had taped together with two plastic lenses and
a surplus screen was better than these super high-end
displays that cost a hundred times as much, he says.
But this was the thing that made people go Whoa.
They saw it. They felt it.
Minecraft, says Carmack, is the biggest game
in existence. He spent months persuading Markus
Persson, its inventor, to work with him, and then Microsoft,
after it bought Minecraft, to let him turn it into a VR game.
And then Facebook bought Oculus. I was a big backer of the
Facebook acquisition, he says, explaining that he understood
enormous resources would be required for true VR to come
to fruition. He was so all-in, he even got a Facebook account.
He says he has no one reporting to him, which frees him
to study problems like sensor fusion, the process of getting
different locating technologies to work together. Carmack ran
Armadillo, an aerospace company he founded, for about a
decade, and hes applying some of the same positioning tech-
nology to VR. Sometimes you have an opportunity to build
something from the future, before theres a top-100 list for the
genre, he says. I am more excited about this than anything
that has come before. Like Abrash, he met with Zuckerberg
before joining Facebook. He wanted to gauge Zuckerbergs
commitment and came away convinced.
In a way, it all hangs on Zuckerberg, who tracks his per-
sonal and professional goals in an almost aggressively pedan-
tic manner. He counts miles for a year of running and logs
books for a year of reading. Asked at the interview in his office
if hes ready for the long term, he leans in, looks around the
room, and fairly yells, I dont think weve met before! Then
he seamlessly slides into, Were a very mission-focused and
long-term-oriented company. <BW>
 54

PHOTOGRAPH ILLUSTRATION BY CREDIT TK

 uba has only one 18-hole golf course: the
government-run Varadero Golf Club, about
two hours east of Havana. Built on the 1930s
estate of chemicals magnate Irne du Pont,
it was refurbished in the 1990s when the gov-
ernment turned to tourism to bolster its economy after the
fall of the Soviet Union. Du Ponts former residence, Xanad
Mansion, serves as the clubhouse. On the third floor, a wood-
and-marble bar offers sweeping views of the Florida Straits.
The course, expanded by Canadian architect Les Furber,
is largely flat and littered with palm trees, and the greens fee
runs $70. One reviewer described it as inoffensive golf at its
finest. Yet lining up a putt on the 8th or 18th holes, both of
which are right on the azure water, even a duffer cant miss
Cubas potential. With fertile soil, plentiful green coastline,
and topography that spans plains, rolling hills, and rugged
mountains, the island is a golf course architects Shangri-La.
On an afternoon late last year, the golfers teeing off included
a group of US executives from the Trump Organization, who
have the enviable job of flying around the world to identify golf-
related opportunities. The company operates 18 courses in four
countries, including Scotland and the United Arab Emirates.
It would like to add Cuba. Asked on CNN in March if hed be
interested in opening a hotel there, Donald Trump said yes:
I would, I wouldat the right time, when were allowed to do
it. Right now, were not. On 26 July he told Miamis CBS affili-
ate, WFOR-TV, that Cuba would be a good opportunity [but]
I think the timing is not right.
That, however, hasnt stopped some of his closest aides from
travelling to Cuba for years and scouting potential sites and
investments. The US trade embargo, first established in 1962,
prohibits US citizens from travelling to the island. But over the
years, the US has carved out allowances for family visits, jour-
nalism, and other social causes. Most commercial activity is
still forbidden, though, with a few exceptions, such as selling
medical supplies or food. Golf isnt on that list.
Trump Organization executives and advisers travelled to
Havana in late 2012 or early 2013, according to two people famil-
iar with the discussions that took place in Cuba and who spoke
on condition of anonymity. Among the companys more impor-
(1); GETTY (2); REUTERS (1); COURTESY TRUMP INTERNATIONAL GOLF CLUB (1)
tant visitors to Cuba have been Larry Glick, Trumps executive
vice president for strategic development, who oversees golf,
and Edward Russo, Trumps environmental consultant for golf.
On later trips, they were joined by Jason Greenblatt, the Trump
Organizations chief legal officer, and Ron Lieberman, another
Trump golf executive. Glick, Greenblatt, and Lieberman didnt
respond to requests for interviews. Melissa Nathan, a spokes-
woman for the Trump Organization, declined to answer a list
of detailed questions.
In a series of telephone interviews, Russo confirmed hes
travelled to Cuba about a dozen times since 2011. Although
hes spearheading the companys Cuban golf efforts, accord-
ing to three people familiar with his role, Russo says these
trips havent been on behalf of the Trump Organization. He
CREDITALAMY
says hes taken at least one with Glick to go bird-watching and
TK
check out some habitatsactivities that could conceivably
PHOTOS:
qualify for exemptions to the travel ban.
BY 731;BY
Despite saying his trips with Trump executives were unre-
ILLUSTRATION
lated to the Trump Organization, Russo referred questions
PHOTO ILLUSTRATION
about those trips to Eric Trump, the 32-year-old son of the
Republican presidential nominee and the companys execu-
PHOTOGRAPH
tive vice president for development and acquisitions, includ-
ing golf. In the last 12 months, many major competitors have
sought opportunities in Cuba, Trump said in an e-mailed
statement. While we are not sure whether Cuba represents
an opportunity for us, it is important for us to understand the
dynamics of the markets that our competitors are exploring.
So which was it: a little birding? Keeping an eye on the
competition? Maybe neither. According to Antonio Zamora,
a well-known Cuban-American lawyer, who says hes advised
the Trump Organization on Cuba for about a decade, he and
Russo visited a prospective golf site east of Havana in an area
called Bello Monte several years ago.
Based in Miami, Zamora took part in the 1961 Bay of Pigs
invasion but is now an outspoken critic of the US sanctions. An
embargo that has been in place by a world power like the United
States for 50 years and has not accomplished anything substan-
tial is a disgrace, Zamora writes in his 2013 book, What I Learned
About Cuba By Going To Cuba. This is not what great powers do.
He advises US investors throughout Latin America. Hes circu-
lated conceptual drawings of a Trump tower in Havana beside
refurbished versions of the Hotel Neptuno-Triton, a dilapidated
pair of 1970s buildings in the citys business district, according
to a person who saw them. (Zamora denies this.)
Zamora does say that he discussed with the Trump
Organization the possibility of teaming up with a foreign
company to give Trump a minority position in a venture. He
says the deal failed to materialise. Zamora dismisses any legal
concerns about this, saying hes been to Cuba dozens of times
for conferences, and that the US Department of the Treasury
doesnt bother with these kinds of trips. Its a nonissue, he says.
Farhad Alavi, managing partner of Akrivis Law Group in
Washington and an adviser to companies on US sanctions, says
that, before 2015, exploring most potential deals in Cuba was 55
not even in the realm of what Treasury might have licensed.
He adds that prior to 2015, a fact-finding trip by a US person
for a business activity, like building a golf course or hotel, was
prohibited. Its not under one of the categories of permissible
travel to Cuba.
In January 2015, the Treasury Department broadened an
exception for professional research. Thats viewed by attor-
neys to encompass all sorts of potential investment activity
short of signing deals. To finalise an investment in Cuba
requires a specific licence from Treasurys Office of Foreign
Assets Control (OFAC). Starwood Hotels & Resorts and Marriott
each announced in March theyd received authorisation. (A
Treasury spokeswoman says it is agency policy not to confirm
or deny whether specific licences have been issued.) Russo says
the Trump Organization hasnt secured one.
Professional research makes it easier for companies to
explore business opportunities in Cuba, but it may not put
the Trump Organization in the clear. Golf could be seen as
promoting tourism, which remains illegal for US companies.
(President Barack Obama cant change thatthe tourism
ban cannot be repealed without an act of Congress.) If the
Treasury Department believed that a new golf course in Cuba
were intended to attract tourists from outside Cuba, then US
persons who meet in Cuba to develop the golf course could
be charged with promoting tourism in Cuba, says Richard
Matheny, chair of the national security and foreign trade regu-
lation practice group at Goodwin Procter in Washington. This
is unlawful under the current sanctions.
Golf s history in Cuba is tinged with the absurd. In the 1950s
the country staged tournaments that werent on the offi-
cial PGA Tour but still attracted top players. In 1958 famed
 Guevara (left) and Castro
(third from right) get in
a roundand a photo op
in the early 1960s
mobster Meyer Lanskywhod been deported from the US a
decade earlier and was running a number of successful casinos
in Cubaset out to build the greatest hotel Havana had ever
seen and further showcase the sport. With backing from Frank
Sinatra, his Monte Carlo de La Habana was to feature a casino,
a helicopter landing pad, and several glorious courses.
Lanskys timing was spectacularly bad. A few weeks after
construction started, Fidel Castro began his final rebel offen-
sive against Cubas president, General Fulgencio Batista. On
New Years Eve, Batista fled to the Dominican Republic. Castro
56 rolled into Havana a few days later, and Lansky soon halted
work. Castro declared golf a game of the idle rich and exploit-
ers of the people and ploughed over almost all the islands
courses. Even so, a series of early 1960s photographs shows
Castro and his fellow revolutionary Che Guevara hamming it
up with golf clubs. Castro was a baseball player, but Che took
up golf as a young man and was rumoured to have a 4 hand-
icap. Last year a Cuban composer and an American libret-
tist staged an opera in Havana based in part on those photos.
These days, Cuban officials actively promote golf develop-
ment. A 200-page brochure published by the government late
last year, Portfolio of Opportunities for Foreign Investment, fea-
tures three hoped-for golf developments around the island,
including two under contract with British and Chinese devel-
opers. The government also reportedly has a deal with Spanish
airline Air Europa to develop a hotel and golf course at Playa
El Salado, about 40 kilometres west of Havana. The Trump
Organization has a particular interest in that development,
according to a source familiar with the matter.
Although its not clear if Donald Trump is aware of his aides
activities in Cubahe didnt return phone calls for this article
hes demonstrated a familiarity with the rules for investing
there. In his March interview with CNN, he said he wouldnt
enter Cuba on the basis that you get a 49 per cent interest,
because right now you get a 49 per cent interest. The exchange
was an apparent reference to Cuban law limiting foreign inves-
tors stakes in Cuban operations to less than 50 per cent. Trump
didnt mention the more onerous US regulations limiting invest-
ment in Cuba. He said he likely favoured Obamas efforts to
normalise relations with Cuba, but Id want much better deals
than what were making.
Encouraged by the White Houses loosening of regulations,
plenty of other US companies, including Airbnb, Google,
PayPal, and Western Union, are gradually entering Cuba, but
they must still carefully navigate the embargo. In late June,
Starwood began managing a refurbished hotel in Havanas
main business district, the first US-managed hotel in Cuba in
60 years. At a June event in Manhattan, a Starwood executive
repeatedly referred to the business travellers who would be
attracted by the property, apparently mindful of the perils of
promoting tourism.
The repercussions of breaking the embargo are real.
Violators are still being penalised, even for ventures only
remotely connected to Cuba. In February, the Treasury
Department alleged that two Cayman Islands subsidiaries of
the energy-services company Halliburton had been involved
in oil drilling off the shore of Angola, as part of a consor-
tium in which the Cuban government held a 5 per cent stake.
Halliburton agreed to pay the US $304,706 to settle the matter.
For the Trump Organization, theres a further concern: the
potential conflicts of interest posed by Trumps far-flung business
empire should he be elected president. In addition to his opera-
tions in the US, Trump operates in Azerbaijan, Brazil, Georgia,
Israel, Turkey, and several other countries. Federal conflict-
of-interest laws do little to prevent presidents from continuing
PHOTO; VARADERO: DAVID ALAN HARVEY/MAGNUM PHOTOS
to exert influence over their businesseseven as they exercise
powers that could broadly benefit those interests.
Russo, 70, lives in Key West, Florida. He first encountered
the Trump Organization in 2002. The former chairman of
the town planning board in Bedminster, New Jersey, Russo
helped Trump get authorisation for his golf course there.
Though he has no formal environmental training, he appears
before local regulators around the country seeking approval
for Trump projects.
On the phone, hes friendly, a talker, but the first to admit
his memorys not the best. I dont remember last night, he
LATINA/AP
says. He was unsure how many times he and Glick, Trumps
TK
golf chief, had travelled to Cuba. He says he took Glick on at
BY CREDIT
NUNEZ/PRENSA
least one trip to Cuba for some bird-watching.
He was into it. And thats the thing. Im going to Cuba, Im
ILLUSTRATION
bringing people to Cuba. And I know people from Trump, I know
GOLF GAME: CARLOS
people outside of Trump. So if somebody from Trump wanted to
come with me, I dont think that means they were representing
PHOTOGRAPH
anything having to do with the Trump Organization. They just
enjoyed the environment, like you or I would. Russo says that
 Russo, Trumps environmental
The Varadero Golf Club consultant, enjoys Havana in a photo
after its redesign posted to Facebook in December
on his travels in Cuba, you cant help but say, Wow, heres a
hotel that could be renovated, or, This is a particular spot that
would be perfect for this or perfect for that, and I would only
hope that someday that the Trump Organization or other inves-
tors could develop something nice over there.
Asked if hes discussed Cuban opportunities with Donald
Trump, Russo says: I dont remember exactly what our con-
versations were. But you would have to realise that talking to
Donald Trump is, you know, its a very complicated experience.
He added later that Trump admonished him on Cuba to make
sure that whatever you do is absolutely legal in every way, and
at some point, when its legal, Id be interested in it.
Glick, 49, is close to the Trump family and has worked
for Trump for nine years. He recently travelled with Eric
Trump, checking the status of the companys developments
in Bali, Dubai, Manila, and Aberdeen, Scotland, according to
pictures posted by the two men on their Twitter accounts.
He sits on the board of Erics foundation. Although he has
no formal campaign role, hes a fierce advocate for Trumps
White House run, excoriating Hillary Clinton on social media
almost daily. He accompanied both adult Trump sons at the
Republican National Convention during TV interviews. One
person recalled a conversation with Glick after he returned
from Cuba during which he described the companys ambi-
tions for golf on the island. Glick didnt respond to requests
for comment.
For his part, Russo gets that even now, pursuing golf in
Cuba is problematic. I would interpret golf as tourism, and
therefore it cant be done at this time, he says. He maintains
his dozen or so trips have all been environmentaland for
birdingwith only the most casual inquiries into golf-related
properties. Given the nature of the regulations and OFACs
licensing trends, I would be quite surprised if it authorised
multiple trips to Cuba for nonspecialist, nonexpert, random
bird-watching, says Alavi, the US sanctions adviser.
PHOTOGRAPH ILLUSTRATION BY CREDIT TK
In February 2013, Zamora, the Cuban-American lawyer, set
up a nonprofit in Miami called the Florida-Cuba Environmental
Coalition. Its directors include Russo and several advisers for
investors in Cuba, including some who have consulted for the
Trump Organization. Certain environmental projects quali-
fied as one of the reasons US citizens could travel to Cuba legally
in 2013. When hes asked about the nonprofit, Russos memory
falters again. I dont think Ive ever been to a meeting. I didnt
even know my name was on that group, he says.
Another board member of the coalition, Dominic Soave, is
a Havana-based business consultant from Canada whos made
introductions for Trump executives in Cuba, according to two
people familiar with the matter. Hes also circulated a set of
drawings of Havana with a Trump tower. I really havent been
advising anyone, says Soave. He, Zamora, and two other direc-
tors say their nonprofit has taught sustainable fishing techniques
to Cuban fishermen. The group has also promoted the Ernest
Hemingway International Billfishing Tournament in Cuba,
helping Americans get licences to take part. 57
A second nonprofit, the American-Cuban Golf Association,
was set up last year by Russos wife, Jennifer Hulse, and lists a
residence in Key West as its address. The group lists her and
her husband as directors. The organisations third director
is David Schutzenhofer, who runs the Trump National Golf
Club in Bedminster. Schutzenhofer did not return calls prior
to publication.
Asked about the golf nonprofit, Russo first seems confused:
What is that supposed to do? he asks. Am I listed on that
also? He eventually explains that the group was intended to
provide cross-cultural golf instruction: Cubans teaching golf to
Americans and vice versa. You should know that the organ-
isation was my idea and had nothing to do with the Trump
Organization, Hulse wrote in an e-mail. One of my passions
in life is golf, and I would like to find a way to bridge the dis-
tance between our countries through love of the game.
A couple of Hulses cultural exchanges may have taken
place toward the end of last year. Photographs and a video
posted to Hulses Facebook page in December show her
husband and Greenblatt, the Trump chief legal officer, at the
Floridita restaurant in Old Havana, a favourite of Hemingways.
Another set of pictures, posted a month earlier, shows Russo,
Glick, Lieberman, and Soave listening to a live performance
of Hotel California in the lobby of the Parque Central hotel
in Old Havana.
Still another series finds the men playing at the Varadero
course. One shot shows Russo teeing off, with Glick and
Lieberman waiting their turn. Below the pictures of the Trump
executives golfing, one Facebook friend asked: How is the
golf course?
Hulse replied: Not spectacular but its the only one in Cuba
right now. Plans to build many more in the near future. <BW>
 SEE YOURSELF IN SUNNIES USOCS LISA BAIRD
$
$
$
$
$

THE
NOT-CRAZY-PERSON'S
No foil hat
or thermal-image-
cloaking
hoodie required

By Jordan
Robertson
Photograph by
Daniel Scott

TO ONLINE
 Etc.
hould you tape over your webcam? Is it OK to use your computers
operating system, or do you have to run Tails? And what the
hell is Tails? Unless youre a high-profile targetand youre
probably notyou can take some simple steps to block hackers.
Etc. asked one of Bloombergs cybersecurity reporters to
outline your options on a scale from sane to, with apologies to the
former National Security Agency contractor, Snowden, who recently
and perhaps understandably took tweezers to his phone.
SANE
TRY TWO-FACTOR
AUTHENTICATION
~~~~~~~~~~~~~~~~~~~~~~~~~
Factor No. 1 is your
normal password. No. 2 is
a one-time code thats
texted to you. All major
internet-based services
e.g.,Google (google.com/
landing/2step), Twitter
(support.twitter.com),
60 and Facebook (facebook
.com/help)offer this
feature. Its the most
basic step you can take
to protect yourself.
The importance of
? two-factor authentication
got Silicon Valleys
attention when journalist
Mat Honan, who didnt use the
technology, was hacked in 2012
and wrote about the experience.
Honans attackers posted racist
and homophobic messages from
his Twitter account, took over his
Gmail, and commandeered his
iCloud account, deleting everything
from his Apple devices.
DOWNLOAD AN
AUTHENTICATION APP
~~~~~~~~~~~~~~~~~~~~~~~~
Google Authenticator (support
.google.com) bypasses the need
for a code to be texted to you.
The app syncs with Googles
servers and generates a code
that exists only there and on
your phonenothing is sent that
can be intercepted. Another
app, Duo Security (duo.com), is
free for consumers and starts
at $1 per month for businesses.
Facebook and Twitter have
in-app authenticators; Snapchat
uses Googles and Duos.
Technology
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
+ PUT A SECURITY CODE ON YOUR ^
CELL PHONE ACCOUNT
+ This happened last month
^
+
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Two-factor authentication makes it
! to Black Lives Matter
activist DeRay McKesson,
whose Twitter account
^
+ hard for hackers to hit most people.
But it has a flaw: If hackers call
was hijacked by hackers who used it to
endorse Donald Trump and confess
^
+ your cell phone provider and trick
a representative into changing your
to McKessons almost 400,000 followers
that he wasnt black.
^
+ SIM card number to one in a phone ^
+ they control, they can capture those
^
authentication codes and lock you
+ out. Major cell-service providers will
let you add a PIN code or password
^
+ to your account, which anyone would ^
+ need to make changes.
^
+ ^
CLEAR YOUR COOKIES ^
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Browser cookies dont just enable the creepy ads
^
that follow you around the internet; hackers can ^
intercept them, too. Documents from Edward Snowdens ^
cache showed that the National Security Agency has ^
even used cookies to identify and track its targets.
^
+ Clearing cookies resets this process and forces
snoops to restart. Look for the option in your ^
+ browsers settings menu. Go a step further and clear ^
+ your entire browsing history, which will get rid of ^
+ cookies and any stored files.
^
+
^
+
+ BEWARE PUBLIC WI-FI ! SUBSCRIBE TO AN GETTY IMAGES (3). PREVIOUS PAGE, SET DESIGN AND STYLING: HEAVY SETTING
+ ~~~~~~~~~~~~~~~~~~~~~~ ! IDENTITY THEFT
+
Before youre even online,
your laptop is talking to ! MONITORING SERVICE
+ the Wi-Fi network, and that
dialogue is vulnerable to
! ~~~~~~~~~~~~~~~~~~~~~~~~~~
+ attack, says Nico Sell, ! Protection services used
+
co-founder of encrypted-
message app Wickr. That goes ! to be glorified fraud alerts,
which you can get for free.
+ for encrypted sites, too: Just
because you see https in a
! Now services like AllClear ID
+ web page address bar doesnt ! ($14.95 per month; allclear
+
mean youre safe. Yong-Gon
Chon, chief executive officer ! id.com) and LifeLock (from
+ of consulting firm Cyber Risk ! $9.99; lifelock.com) look for
Management, says using public your personal info on hacker
+ Wi-Fi is like your computer ! forums and monitor for false
+
having a one-night standyou
dont know what youre going ! insurance claims filed in
+ to walk away with. ! your name.
 Save Your Money All kinds of accessories and clothingwallets,
coats, purses, pantspromise to block
Many of the most provocative
radio-frequency identification (RFID) signals.
antisurveillance measures have
These products make people feel good, because
little practical use
they prevent hackers from scanning the airwaves
and snatching the codes associated with drivers licences or passports. But there are limitations to
what a hacker can do with that information. An RFID code alone typically doesnt tell a hacker much;
he would need to associate it with another data set (say, the names of passport holders to whom the
codes correspond) for the keys to be useful. Some types of credit cards can be cloned through the
airwaves, but theres little point in buying a new wardrobe to protect such information.
You also dont need a face mask or invisibility glasses that use infrared to blind surveillance
cameras at night: They do block night-vision cameras from capturing your image, but theyre the
opposite of discreet, replacing your head on film with a ball of white light. People sell hijabs and
hoodies, too, that they claim block drones thermal-imaging equipment. Intelligence services use a
range of data points to target drone strikes, however, from cell phone signals to human sources
not just heat signatures.
Fly Like a
Security Pro
One expert
packs heat
The best way to ensure that your luggage isnt tampered
with might be to pack a gun in it, says a computer-security
researcher who goes by the name Deviant Ollam. He explains
how a quirk in air-travel regulations requires that when you
fly with a firearm, it must be checked in a bag that no one else
can access. This differs from regular luggage, which must use
Transportation Security Administration-compliant locks that
agents can open. Ollam says he declares the gun at check-in
and shows it isnt loaded; rarely, he adds, does anyone inspect
it or the other contents of his luggageand when they do,
hes present, which is the point.

>>>>>>>>>>>>>>>>>>>>>>>>>> SNOWDEN
MESSAGE ON AN END-TO-END INVEST IN AN AUDIO JAMMER WEAR SUNGLASSES
ENCRYPTION APP ~~~~~~~~~~~~~~~~~~~~~~~~~~~ ~~~~~~~~~~~~~~~~~~~~~
These are white-noise machines on Wickrs Sell, who wears
~~~~~~~~~~~~~~~~~~~~~~~~~ steroids, calibrated to project sunglasses for public
Many messaging apps provide end- speechlike garble in appearances, says, There
to-end encryption, so anyone the same spectrum as a are no pictures of my eyes
intercepting traffic (including the persons voice to foil on the internetbut even if
apps maker) sees or hears only eavesdropping devices. one slips, one picture of my
gibberish. Try WhatsApp (whatsapp The Rabbler Noise eyes is better than 1,000.
.com), Signal (whispersystems Generator ($365; brick Sell wants to give profiling
.org), or Wickr (wickr.com). housesecurity.com) is a algorithms as little data as
WhatsApp and Signal can be compelled good choice. possible; she says theres
by law enforcement to produce a lot of it in the distance
information about whos talking to
whom. Wickr cant; it runs on a type ---------------- between our eyes.

of network that prevents the company 61

from keeping those records. GO ALL CASH //////////////
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Bank and credit card
statements provide a vivid =
TAPE OVER YOUR WEBCAM * record of spending and travel = BUY A BUG SCANNER
habits; retailers send price,
~~~~~~~~~~~~~~~~~~~~~~~~~~~ * location, and time information
= ~~~~~~~~~~~~~~~~~~~~~
In June, Mark Zuckerberg
posted a photo of himself
* to financial institutions. The = Bug scanners seem like
something out of a spy
at his desk on Facebook in * good news is debit and credit = movie, but with surveillance
equipment getting tinier
celebration of Instagrams * transactions are processed = and tinierfitting into car
so quickly that stores dont
reaching 500 million active * share more than they have
= keys and electrical outlets,
Snowden saysreal security
monthly users. Later, someone
pointed out on Twitter that
* to. They jealously guard the = pros use them. If youre
concerned that your home,
Zucks MacBook had tape over * more granular information = foreign hotel room, or office
its camera and mic jack. * they collectspecifically, the = is being monitored, check
out the pen-style radio-
products you buyin the hope
Security experts have long * of monetising it someday. So
= frequency bug detector
urged potential targets to do
this to prevent adversaries * at some point in the future, = from KJB Security Products
($245; limited quantities at
from secretly recording every * those statements will be even = walmart.com).
more vivid.
move and sound. There arent *
many known cases of this,
DISMANTLE YOUR SMARTPHONE
but GQ reported that young ##################
women have been filmed naked or ~~~~~~~~~~~~~~~~~~~~~~~~~
In his Vice News interview in
having sex, and then extorted. RUN TAILS May, Snowden showed how to make
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ a smartphone go black using
You can boot up Tails, a free, open tweezers to pluck out cameras
source operating system (tails.boum and mics. His decision was not
.org), on a PC or a Mac. It routes unreasonable, considering his
browser and e-mail communication via predicament, but it might be more
the Tor network, which anonymises aggressive than you need to be.
it to defend against traffic analysis. Still, going full-Snowden would be
If a program tries to connect to the a great conversation starter, one
internet directly, and not through you could be confident no one else
Tor, its blocked. would listen in on.
 Etc. Fashion

editor
p hoto
eek
sw
es

Ad
IIlesteva Leonard II White/Havana

am
in
us

La
gB

Dior Homme Black Tie 195/S

niy
b er

an ,
om

digit a
, Blo

$370; Dior Homme, 133 Greene St., New York

kins

l technology mana
mp
e To
olin
$290; illesteva.com

Car

ger
Back Atcha
62
r
i to
Yves Saint Laurent SL51 Slim 004

ed
py
Marcus, co

Ray-Ban RB3447N 001/30

$400; Saint Laurent SoHo, 80 Greene St., New York

Wendy

$175; sunglasshut.com

PHOTOGRAPHS BY RYAN DUFFIN FOR BLOOMBERG BUSINESSWEEK

writer
tt ,

e
Be nn
Drake

Outfit credits, top left: Stella McCartney top, $680; stellamccartney.com. Top right: Bonobos shirt, $85; bonobos.com. Bottom left: Gitman Vintage shirt, $180;
gitmanvintage.com. J.Crew jacket, $228; jcrew.com. Bottom right: Rag & Bone dress, $350; rag-bone.com. Jennifer Fisher earrings, $235; jenniferfisherjewelry.com
 Etc.

Cr
st
i na

i
Li n
d

bl
ad,
David

e
ditor
Barton Perreira Justice

Purc

Oxydo OX Punto Alto

e l l,
co
ye

$295; select Solstice eyewear boutiques

p
dito
r
$520; barneys.com

63
Eight mirrored sunglasses that will reflect well on you
Market editor: Shibon Kennedy
Mykita + Maison Margiela MMTransfer001

Ste
ph
an
ie
T
ra
n,p
ho
to ed
ito

Givenchy GV 7017/S
r

$395; select Solstice eyewear boutiques

$899; mykita.com
STYLIST: SHIBON KENNEDY; HAIR AND MAKEUP: REBECCA GARCIA

ctor
t dire
, ar
ah
Pr

jc
Ne

Outfit credits, top left: J.Crew Wallace & Barnes shirt, $118; jcrew.com. Top right: Altuzarra dress, $2,150; neimanmarcus.com. Eddie Borgo earrings, $85; eddieborgo.com.
Bottom left: Tome dress, $1,350; tomenyc.com. Bottom right: Hilfiger Edition shirt, $179; tommy.com
 Etc. How Did I Get Here?

LISA BAIRD Chief marketing officer, US Olympic Committee

Education
As a kid, I played tonnes
I was born in the of sports: field hockey, lacrosse,
Caribbean, then we volleyball. I tried out for teams
moved to Venezuela,
then we came to
Manhasset High School, at Penn State and was promptly
Manhasset, New York,
New York. We travelled class of 1979 cut. For good reasonthey
all over because
Pennsylvania State
were national champions.
my father worked University, class of 1982,
In Aruba, 1968
for Exxon. MBA 1984

In the first stage of my career, Work

I went the classic marketing path. Experience

nd. 3. The journey of the athletes is more than the games, and you need to tell that well if you want to engage people.
Procter & Gamble wanted me to
move to Cincinnati, but I had just met
198490
my now-husband, and we decided Brand assistant, director
64 to stay East. It became more of brand management,
Procter & Gamble
of a cow path than a career path.
1990
Marketing director, On vacation with her family
Johnson & Johnson in Connecticut, 2014

199092
With the Marketing director, E-GM was a startup internal business
Olympic torch in Bristol-Myers Squibb
Vancouver, 2010 unit to begin the process of doing
199293 business on the internet. The auto
Category director, industry was fascinating. You deal with
Warner Lambert
capacity, distributor issues, raw
199399 materials. In marketing, I got to work
Brand manager, with every division.
Pontiac Grand Am,
Being at IBM was enormously intellectually marketing director,
challenging. We were working with Nobel E-GM, General Motors You can argue with a lot
laureates and transitioning IBM into the
world of e-business. There were a number of 19992005 of things about the NFL, but
Vice president for
transitional moments. Remember Y2K? advertising, senior VP
you cant argue with their
for worldwide marketing success as a business.
communications, IBM
COURTESY SUBJECT (5). GETTY IMAGES (1). LETTERING BY BILL REBHOLZ

I had no idea how 2008:

hard it was going 200507 Took a year off
SVP for marketing
to be [after the and consumer
to spend time with
her family
recession]. We lost products, NFL At the USOC
at least 14 domestic Media Summit
2009 in Los Angeles,
sponsors. The key 2016
Present
was putting the CMO, USOC
focus back on the
athletes and
building up Team With snowboarder
USA as a brand. Sage Kotsenburg in Life Lessons
Sochi, 2014
u
ro

g
1. Youre always coming to the table trying to convince or compel someone. 2. Confict and debate happen, but you can always find that common
 Midcom Group is a diversied
conglomerate operating in 17 countries
across middle-east, Africa and Asia
across multiple industries.

With over 2 decades of experience, the

group is a partner of choice for major
international brands by providing them
unparalleled distribution infrastructure,
manufacturing know-how, logistical
expertise and experienced teams
across Africa. Operating successfully in
the Telecom, Consumer Electronics,
Dairy, Education and Real Estate
space.

TELECOM | CONSUMER ELECTRONICS | DAIRY | EDUCATION | REAL ESTATE

www.midcom-group.com
Expertise, where it matters most
National Bank of Abu Dhabi (NBAD) has a dedicated
team of trusted advisors, with deep regional, industry
and financial expertise, who are well positioned to offer
customized solutions to large corporations in India.
Our roots are in Abu Dhabi, and our global network is in
17 countries across five continents
NBAD is ranked as the safest bank in emerging markets
with a rating of AA- or equivalent with all three major
credit rating agencies

Market Risk Management | Working Capital Management | Debt Capital

Markets | Project Finance & Advisory | Structured Trade Finance

For a full overview of the products offered by NBAD India please visit www.nbad.com