UAE bourses closed higher on Monday as the markets recovered from a tumultuous Sunday trading session during which Arabtec’s shares plunged on the Dubai Financial Market.

The Abu Dhabi Securities Exchange (ADX) rose 0.9 per cent in trading, while the DFM rose 2.2 per cent.

Arabtec shares rose 3.81 per cent , after falling 9.92 per cent on Sunday. The company’s share price now stands at Dh2.45 each – up from Sunday’s price of Dh2.36, but still below last week’s high of Dh2.8.

Dubai Islamic Bank and Dubai Investments led gains on the DFM.

Both stocks closed 4 per cent higher in trading yesterday.

Emaar Properties rose 2.7 per cent, while Emaar Malls rose 1 per cent.

Dar Al Takaful fell 8.2 per cent, the highest of any share on the exchange. Shuaa Capital decreased by 3.1 per cent.

Finance House recorded the highest gains on the ADX, rising 14.8 per cent.

Abu Dhabi National Hotels fell 9.8 per cent.

The DFM’s gains were the largest among emerging market bourses. The Egyptian Exchange rose 0.2 per cent, while the Tadawul and Qatar indexes remained flat.

Indexes in Jordan and Oman fell.

The MSCI Emerging Markets Index rose by 0.4 per cent overall.

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Revenue at Dubai Airports grew by 11 per cent last year, helped by a boost in food, beverage and retail at the airport.

Dubai Airports is the government company that manages the emirate’s two airports – Dubai International and Al Maktoum International. It profits from aeronautical streams, such as aircraft parking fees, as well as non-aeronautical streams, such as duty free shops and advertising in the terminals.

Non-aeronautical revenue increased by 15 per cent last year. It contributed 53 per cent of overall revenue.

Aeronautical revenue, which accounted for the other 47 per cent, rose 7 per cent.

“This result strongly supports Dubai Airports’ long-term corporate objective of reducing sole dependency on aeronautical revenue sources, or other funding, to finance our expansion,” the airport said in its year book.

While Dubai Airports revealed percentage changes, it did not provide specific amounts in dirhams.

But as a measure of the vast scale of airport commerce in the emirate, sales by Dubai Duty Free – which leases space from Dubai Airports – reached Dh6.99 billion last year, up 7.3 per cent from the previous year. For 2015, the duty-free purveyor is aiming to top Dh7.7bn.

Dubai International toppled London Heathrow as the world’s busiest airport by international travellers in 2014. Total passenger numbers grew 6.1 per cent to more than 70.47 million last year. The airport targets 79 million passengers in 2015, it said in February.

Passenger traffic at Dubai International and Al Maktoum International combined reached 71.3 million last year. Traffic for the two airports is expected to exceed 126 million by 2020 and 200 million by 2030.

Separately, Dubai International said that it was the world’s largest hub for the Airbus A380, the biggest passenger aircraft in the world, which can take up to 500 passengers.

Dubai International had 15,098 flights of the superjumbo aircraft to 39 destinations in 2014, up from 10,608 flights to 26 destinations in 2013.

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Earlier this month the European Central Bank (ECB) started its long-awaited quantitative easing programme (QE). We believe the magnitude is significant as it will take the size of the ECB balance sheet back to €3.5 trillion by September 2016.

However, this major policy step has occurred a bit late in the cycle, which makes its likelihood of success less clear-cut. Deflationary pressures are already in place, as can be seen in the service sector inflation spiralling down. The spreads in the periphery are already at very low levels and small and medium enterprises’ funding costs have already improved, therefore the main transmission mechanisms will be through the currency depreciation and an improved securitisation market.

On the positive side, the open-ended nature of the programme flags the commitment of the ECB to its easing policy.

The purchase programme started at a time when economic indicators had already bottomed out.

Moreover, Europe is benefiting from a series of tailwinds for this year: improving consumer confidence, declining bond yields, currency depreciation, less fiscal drag and the drop in energy prices.

The size of the ECB bond purchases relative to the euro-zone equity market cap will be similar to programmes conducted elsewhere. Based on previous experiences in the United States and Japan, we believe that to be effective, QE has to be 20 to 25 per cent of equity market cap; therefore, at around 21 per cent of market cap, the ECB is aiming to be successful. A significant difference with other programmes is the sovereign bond supply dynamics, which will have a bigger impact on yields and the currency. At the time of the first US QE, the deficit in the US was close to 10 per cent. That number was around 8 per cent in Japan, while in Europe it is currently below 3 per cent.

In Europe, equity markets have performed well as the currency has started to devalue. Similar to the first phase in Japan, we are experiencing so far a “currency trade”, with multiples expanding to long-term average levels. For markets to continue to do well, investors need earnings to recover in the region as operational leverage kicks in while the economic momentum accelerates. The QE impact on European equity markets will be highly selective, depending on the exposure to a weaker currency and export potential.

The situation in Greece is less worrying than at the beginning of the year, however the situation has not yet been solved. Even following the reform plan accepted by the Eurogroup, the ECB and the IMF, Greece will still not receive funding until a final plan is submitted and approved next month. This means there may be a cash shortfall, including upcoming refinancing needs and potential lower tax revenues. Greece needs ECB support to bridge this gap. Eventually, more flexibility may be needed – not just by changing budget targets, but also potentially by introducing a different form of debt instruments. If Greece does not fulfil the European requests, ECB support might be constrained. While negotiations take place, capital controls are still not excluded, as happened in Cyprus.

Our conclusion on Europe is that ECB actions are welcome, although they might be coming a bit late as deflationary forces are in place, but size, commitment and timing, along with improving macro fundamentals, are all supportive.

Reforms still need to happen for this to be a structural change rather than just a cyclical one. Greece remains a significant political risk. We are on the lookout for the pockets of the market which benefit from a weaker currency and are not overly exposed to what remains a weak domestic consumption picture. Investors will need growth which translates into earnings through operational leverage for valuation multiples to hold.

Cesar Perez is the global head of investment strategy at JP Morgan Private Bank

Countrywide inflation fell to 3.61 per cent in February as the strengthening dirham pushed down import prices, according to data from the National Bureau of Statistics.

The inflation rate decreased by 0.06 percentage points compared to January.

Declines in the prices of clothing, medical care and restaurants led the index down in February.

Clothing and footwear fell by 0.6 percentage points month-on-month, and 1.55 percentage points annually, which accounted for the difference between the February and January figures.

Housing and utility costs were 7.4 per cent higher than 12 months ago, and 0.2 percentage points higher than the previous month.

Last month, housing registered a month-on-month increase of 1.9 percentage points, indicating that the pace of acceleration is decreasing.

Recent reports from the real estate consultancies JLL and Asteco have predicted that the housing prices will remain static or fall across 2015. JLL argues that Dubai house prices could fall by as much as 10 per cent this year, while Asteco points to a supply of 13,000 new homes, which it says is likely to “soften the market further”.

Food prices recorded a rise in February, increasing 0.2 per cent month-on-month. Different emirates faced different levels of food price inflation, however, with a monthly fall of 1.5 percentage points in Abu Dhabi, and a rise of 1.2 percentage points in Sharjah.

This appears to have been the result of a 10.9 per cent increase in the cost of oils and fats. Recent flooding in Malaysia has reduced the supply of palm oil, leading to a price rise.

The Food Price Index, published by the Food and Agriculture Organization of the United Nations, showed an overall decrease in food prices in February, with prices sinking to their lowest levels since 2010. Food prices account for 18 per cent of the consumer price index.

Inflation fell overall in the two most populous emirates, Abu Dhabi and Dubai. Annual price growth fell 0.2 percentage points to 4.3 per cent in Dubai, while inflation fell to 4.6 per cent from 5 per cent in Abu Dhabi.

Since July 2014, the Bloomberg Dollar Index has risen by about 20 per cent against a basket of major world currencies. This has been driven by expectations that the Federal Reserve will raise interest rates later in the year, and the reviving pace of growth of the US economy.

The dirham is pegged to the dollar at Dh3.67 to $1.

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People who use an Abu Dhabi government debit card to pay for services such as electricity and water will be able to link it to their bank accounts by the end of the year.

Currently, people using the e-Dirham card must periodically top it up with cash.

“The key benefit today is that you can conduct your government services online, but sometimes your card doesn’t have enough funds so you can fund the card and then use it,” Younis Haji Al Khoori, the undersecretary of the Minister of Finance, said. “This is what will be added with the new system. The card will be linked to your bank account.”

He said that unlike most bank-issued cards, which charge anything between 2 per cent to 2.5 per cent per transaction, the e-Dirham card, which is co-branded with the credit card company Visa, will charge a maximum of Dh3 per transaction. Many payments for different services can be done in one transaction, he added.

The mechanism allowing residents to link their e-Dirham cards will be done through the country’s central bank, Mr Al Khoori said.

The current prepaid Visa card that e-Dirham issues was conceived in 2011 and replaced a government card, adding new payments that could be made for charges including Emirates ID cards, visa renewals and court cases. The first generation e-Dirham cards could be used only to pay for government services at specific ministries.

Revenue from the e-Dirham service increased 26 per cent to Dh15.2 million last year from Dh12m in 2013, the ministry said.

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In the first of a two-part series, this column investigates the current state of affairs of the asset management industry. In part two on Thursday, the column will map out the way forward.

The asset management business in the GCC has followed a puzzling evolutionary path focussed predominantly on listed equities with a smattering of funds investing in private equity (PE) and bonds, while seeming to ignore other asset classes such as property, which not only has exhibited good performance across the region, but also provides for strong cash flow income and appears to have the greatest demand from investors as exhibited by their direct investment demographics.

The asset management business depends on fee income which is split between the so- called management fees – a fixed percentage of client assets under management (AUM) and performance fees – a payment formula linked to the performance of the fund over a period. The main four drivers for the asset management business therefore are: the level of fees that are being charged, the holding period over which the performance fee is calculated, the performance of the fund, and the amount of client assets raised.

The first driver, fees, is driven by market norms and competitive pressure. The lowest fees charged are by listed equity funds, approximately 1.5 per cent per annum in total and bond funds even less, and this reflects competitiveness in the market.

Even though this fee level can be higher for top performing funds, it pales in comparison to PE funds that normally charge a 2 per cent per annum management fee and a 20 per cent per annum performance fee, although the latter is only fully realised at the end of the investment period, which can be between five and 10 years. Property funds would normally charge something in between.

Therefore from a fund business point of view, it would seem that the best strategy would be to launch a PE fund with its higher fees, and possibly a property fund with its superior performance, but certainly with little of their business geared towards listed equity funds or bond funds.

The first clue to why there is a clear gap in the market between high margin business and low margin business is the holding period of the fund which is linked to the liquidity of the underlying securities and assets. Asset management firms prefer short holding periods as they get paid faster and can more easily get paid for short-term bull markets. Furthermore, if the market corrects, it is easy to shut down the badly performing fund and launch a new one.

From the point of view of investors, high liquidity is preferable to more illiquid assets such as PE and property. The problem is that this preference for liquidity comes at a price: the non-alignment of the asset manager‚ short-term objectives with the long-term objectives of the investor. A way out could be to ask equity managers to get paid over a rolling five-year period to better align objectives.

The third driver is the performance of the fund. The role of the performance of the fund in the performance of the asset management business is quite often misunderstood and naively believed to be the same thing. Although good fund performance does have a positive impact, this us accretive to business performance only if people believe that the performance is attributable to the manager and is repeatable in the future.

The final driver of the asset management business is the biggest by far and that is the client AUM. Without AUM, there simply is no business because there is nobody to charge fees to. Other than commercial banks and their massive distribution networks the majority of asset managers, with some exceptions, have had difficulty raising AUM in a timely manner. This helps to explain the listed equity culture: if the majority of AUM raised is via commercial banks and their main distribution network is their retail branch network, then it stands to reason that the best choice for their retail clients is the least complex choice, which would be listed equities.

Where does all this leave the asset management community? The 2003-08 period involved the launch and initial success of multiple asset management businesses which decimated in the subsequent global financial crisis. In the subsequent years, the asset management industry has been lost in finding a new vision.

Sabah Al Binali is an active investor and entrepreneurial leader, with a track record of financing, building and growing companies in the Mena region. You can read more of his thoughts at al-binali.com

Senior accounting and auditing bodies have welcomed a new federal law setting high standards for registered auditors in the UAE, saying that it will contribute to the country’s economic growth.

Sheikh Khalifa, President of the UAE, signed federal law No 12 of 2014 concerning the audit profession in December.

The law sets strict guidelines for the licensing of auditing firms and professionals, with would-be auditors obliged to hold at least a bachelor’s degree in accounting, or an equivalent qualification.

“In the past almost anyone could come and be an auditor,” said Salem El Esaye, executive manager of the UAE Accountants and Auditors Association.

“It used to be that you could be come an auditor if you had an engineering degree, now with the new law you need a degree in accounting. It’s now changing for the better.”

In addition, auditors will be required to undergo ongoing professional training to remain qualified.

A properly qualified audit community is essential to help ensure the UAE’s economic development, said Mr El Esaye.

“A solid economy is built on solid numbers, so the higher the education level for auditors, the better.”

Mr El Esaye was speaking at the Public Interest International Forum, held yesterday in Abu Dhabi, hosted by the Abu Dhabi Accountability Authority in collaboration with the Public Interest Oversight Board.

Detailed bylaws pertaining to the new law are expected to be unveiled by the Ministry of Economy in the next six months.

Other elements of the law include the requirement that publically listed companies change their auditors every four years, to help preserve auditors’ independence.

While the changes introduced by the law are wide-ranging, the majority of audit firms in the UAE have had ample time to adjust their practices, according to Riyad Al Mubarak, chairman of the Abu Dhabi Accountability Authority.

“Before the new law was issued it had already been discussed widely with the concerned entities, so it didn’t come as any great surprise,” he said.

The UAE currently has 720 registered auditors, 427 of whom are Emirati, said Mr El Esaye.

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Oil is unlikely to rebound to $100 any time soon because higher prices would spur more output and prolong a glut, said Mohammed Al-Madi, Saudi Arabia’s Opec governor.

Oil prices at that level “will let the high-cost producers come back again,” Mr Al-Madi said at a conference in Riyadh on Sunday. Saudi Arabia, the world’s biggest oil exporter, is pumping at a near-record level of about 10 million barrels a day, oil minister Ali Al-Naimi said at the conference.

Brent, a global oil benchmark, fell almost 50 per cent in the past year as Saudi Arabia and others in Opec chose to protect their market share over cutting output to boost prices. While US producers have idled rigs for 15 consecutive weeks, output is still running at its highest level since at least 1983.

“Shale-oil companies are one of the high-cost producers that benefited from high oil prices,” Mr Al-Madi said. “We’re not against shale oil. We welcomed shale oil, but it’s not fair for high-cost producers to push low-cost producers out of the market.”

Saudi Arabia can meet demand from any customer, and while global consumption is improving, there isn’t enough need to raise the nation’s production capacity beyond its current level of 12.5 million barrels a day, Mr Al-Naimi said.

Opec’s role in the oil market hasn’t been undermined by the drop in prices since its November 27 meeting in Vienna when it chose market share over production cuts, Mr Al-Madi said. Brent for May settlement slid 47 cents to $54.85 a barrel on the London-based ICE Futures Europe exchange on Monday at 12.37am Singapore time.

Crude dropped about 30 per cent since Opec signalled it would leave shale producers and other suppliers to bear the brunt of the glut. Opec pumps about 40 per cent of the world’s oil, and Saudi Arabia is its biggest producer.

“Everyone must join if we want to improve prices,” Mr Al-Naimi said. “Why should they join? Because it’s not right that one gains at the expense of the other.”

Saudi Arabia reduced output in the 1980s to support prices, Mr Al-Naimi. “I was responsible for production at Aramco at that time, and I saw how prices fell, so we lost on output and on prices at the same time,” he said. “We learned from that mistake.” Saudi Arabian Oil Company is the state oil company known as Saudi Aramco.

“In 1998, we managed to get non-Opec to join us for a cut, and prices recovered,” Mr Al-Naimi said.

Mr Al-Madi said oil prices should be determined by supply and demand. “If Opec could have controlled the prices it would have done so, but it is not in the interest of Opec to control the prices,” he said. “It is OPEC’s interest to achieve balance in the market.”

The world needs $40 trillion of oil investments in the next two decades to meet growing demand led by emerging nations, Mr Al-Madi said. Demand will grow 1 million barrels a day every year for the next 15 years to about 111 million barrels a day, Nasser Al-Dossary, Saudi Arabia’s Opec national representative, said at the same conference on Sunday.

Saudi Arabia produced 9.85 million barrels of crude a day in February, the most since September 2013, according to data compiled by Bloomberg. US output reached 9.42 million barrels a day this month, the highest rate in weekly Energy Information Administration data going back to 1983.

“If producers don’t keep investing now, we will have problems in 20 years,” Mr Al-Madi said.

Saudi Arabia holds a “big role” to keep unity within the Opec, which supplies about 40 per cent of the world’s oil, Mr Al-Madi said. In the past 55 years, Opec and non-Opec producers cooperated on production cuts 19 times. Russia, which isn’t part of Opec, didn’t always follow through when cuts were promised, he said.

The Kuwait oil minister Ali Al-Omair said at the same conference he would welcome an agreement with non-Opec producers to cut output.

Opec producer Algeria is seeking to coordinate a global response from outside the group to tumbling prices, Algeria Press Service reported March 17, citing energy minister Youcef Yousfi. Opec members are not eager to cause prices to fall because it hurts their economies, Mr Al-Omair said.

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Oil is unlikely to rebound to $100 any time soon because higher prices would spur more output and prolong a glut, said Mohammed Al-Madi, Saudi Arabia’s Opec governor.

Oil prices at that level “will let the high-cost producers come back again,” Mr Al-Madi said at a conference in Riyadh on Sunday. Saudi Arabia, the world’s biggest oil exporter, is pumping at a near-record level of about 10 million barrels a day, oil minister Ali Al-Naimi said at the conference.

Brent, a global oil benchmark, fell almost 50 per cent in the past year as Saudi Arabia and others in Opec chose to protect their market share over cutting output to boost prices. While US producers have idled rigs for 15 consecutive weeks, output is still running at its highest level since at least 1983.

“Shale-oil companies are one of the high-cost producers that benefited from high oil prices,” Mr Al-Madi said. “We’re not against shale oil. We welcomed shale oil, but it’s not fair for high-cost producers to push low-cost producers out of the market.”

Saudi Arabia can meet demand from any customer, and while global consumption is improving, there isn’t enough need to raise the nation’s production capacity beyond its current level of 12.5 million barrels a day, Mr Al-Naimi said.

Opec’s role in the oil market hasn’t been undermined by the drop in prices since its November 27 meeting in Vienna when it chose market share over production cuts, Mr Al-Madi said. Brent for May settlement slid 47 cents to $54.85 a barrel on the London-based ICE Futures Europe exchange on Monday at 12.37am Singapore time.

Crude dropped about 30 per cent since Opec signalled it would leave shale producers and other suppliers to bear the brunt of the glut. Opec pumps about 40 per cent of the world’s oil, and Saudi Arabia is its biggest producer.

“Everyone must join if we want to improve prices,” Mr Al-Naimi said. “Why should they join? Because it’s not right that one gains at the expense of the other.”

Saudi Arabia reduced output in the 1980s to support prices, Mr Al-Naimi. “I was responsible for production at Aramco at that time, and I saw how prices fell, so we lost on output and on prices at the same time,” he said. “We learned from that mistake.” Saudi Arabian Oil Company is the state oil company known as Saudi Aramco.

“In 1998, we managed to get non-Opec to join us for a cut, and prices recovered,” Mr Al-Naimi said.

Mr Al-Madi said oil prices should be determined by supply and demand. “If Opec could have controlled the prices it would have done so, but it is not in the interest of Opec to control the prices,” he said. “It is OPEC’s interest to achieve balance in the market.”

The world needs $40 trillion of oil investments in the next two decades to meet growing demand led by emerging nations, Mr Al-Madi said. Demand will grow 1 million barrels a day every year for the next 15 years to about 111 million barrels a day, Nasser Al-Dossary, Saudi Arabia’s Opec national representative, said at the same conference on Sunday.

Saudi Arabia produced 9.85 million barrels of crude a day in February, the most since September 2013, according to data compiled by Bloomberg. US output reached 9.42 million barrels a day this month, the highest rate in weekly Energy Information Administration data going back to 1983.

“If producers don’t keep investing now, we will have problems in 20 years,” Mr Al-Madi said.

Saudi Arabia holds a “big role” to keep unity within the Opec, which supplies about 40 per cent of the world’s oil, Mr Al-Madi said. In the past 55 years, Opec and non-Opec producers cooperated on production cuts 19 times. Russia, which isn’t part of Opec, didn’t always follow through when cuts were promised, he said.

The Kuwait oil minister Ali Al-Omair said at the same conference he would welcome an agreement with non-Opec producers to cut output.

Opec producer Algeria is seeking to coordinate a global response from outside the group to tumbling prices, Algeria Press Service reported March 17, citing energy minister Youcef Yousfi. Opec members are not eager to cause prices to fall because it hurts their economies, Mr Al-Omair said.

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Rebecca Cudby came up with the idea.

But if it hadn’t been for her friend and business partner she admits she would never have followed through on her plans to start applesauce, a children’s clothing and accessories company.

“I actually never thought about going into business on my own. I guess I get quite lonely and I don’t have the motivation there to do it myself,” she says.

Ms Cudby, 28, a Briton who has lived her whole life in Dubai except for a three-year period when she studied in the UK, devised the idea as a way to distract her friend, Amal Almoheiri, 29, an Emirati from Dubai, who was going through a difficult time.

Being the mother of a young boy and not subscribing to the traditional children’s fashion of blue for boys and pink for girls, Ms Cudby thought they could do something different.

That was back in October 2013, and by November they had started work.

Both had young children – Ms Cudby’s son was just over a year old and Ms Almoheiri’s children, a daughter and son, were four and two.

But starting a business with a fellow mum, not to mention friend, had its benefits.

“I know her. I’m not getting a new partner I don’t know,” says Ms Almoheiri. “We have different tastes and she is very easy to work with. She has a great sense of humour, which is amazing.”

But that is not to say that working with another mum is always easy.

If one is free to work and the other is busy looking after her children, then decisions have to be put on hold.

The entrepreneurs also both became pregnant several months apart last year, and each suffered morning sickness, making it hard to get anything done at times.

Ms Almoheiri has now given birth and Ms Cudby is due later this year, which means they are looking at a whole year where things will be slower.

But neither would have it any other way.

“I think that’s one of the benefits of having your own company. We are both motivated but we both knew what was important,” says Ms Cudby.

“Spending time with our family and children was something we always wanted to do, hence we didn’t have a full-time job. And having our own company and both having children made that possible.”

Bringing different opinions and talents is essential to a business partner, says Ramesh Jagannathan, New York University Abu Dhabi’s inaugural vice provost for entrepreneurship.

In fact, two is the minimum number of people needed to develop a business idea successfully, he says.

“There are a number of things that go into creating an innovation and a product. First is the ideation step, which requires someone to bounce the idea off. It’s called brainstorming. You can’t do this by yourself. The most efficient way of developing the idea is at least two [people],” adds Mr Jagannathan. “Two is minimum, three is ideal.”

Finding a way to spend more time with her family while still earning was what drove Jumana Darwish, a Jordanian mother to a young daughter, to set up her own business. And she also chose to go into business with a fellow mum and friend.

“I have a beautiful family, a beautiful daughter, an amazing husband, a great family network, a great job, everything, but I knew there was something missing,” says Jumana, 33.

“I was talking to my sister-in- law, Linda [Darwish], and she was in the same boat at a different stage of her life. She had two adult children who had just left home.”

Together they came up with the idea for The Happy Box, a company they started last May which provides monthly customised activity boxes for children aged two to 11 to encourage families to spend more time with each other.

While the duo won’t release turnover figures, they say they have hundreds of subscribers and 15 global franchise requests.

And starting the company with her American sister-in-law brought a lot of benefits, says Jumana.

She adds that they complement each other’s strengths – Linda, 52, is an educationalist by profession, while Jumana is more involved in the creative side.

And Linda’s experience of motherhood was also invaluable.

“If I am having a low day or a meltdown just like any other mother, she has been there,” adds Jumana. “She has done that. And she is quite understanding. I think it’s so important to partner with someone who is understanding and accommodating.”

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