Management consultants have a bit of a reputation for using big words to describe small things. So you’d be forgiven for thinking that when they talk about transformation they just mean change of some sort. But you’d be wrong.

To be fair, we were similarly sceptical when – a few years ago – this transformation word starting cropping up in all our conversations with consultants around the GCC. But then their clients started using it too and we thought we probably ought to sit up and take notice.

Transformation describes the sort of far-reaching change that many organisations across the region now find themselves needing to undertake, whether in response to changing social, economic or political conditions, or to counter the ever-growing threat of disruption. It’s what IBM did in changing itself from a company that sold mainframe computers and calculators to one that sells software, IT services and, yes, management consulting.

It’s what Kodak famously didn’t do when faced with the advent of digital photography.

And while transformation isn’t always as high-profile or as obvious to the outside world, as the Kodak example so amply demonstrates, failure to do it can be terminal.

The reason transformation is such a big deal in the GCC these days is partly because things can change so quickly, and partly because of the interdependencies between different parts of an organisation.

Change one thing and you have to change everything.

Projects usually cut across functions and often cut across countries, and because of their size and complexity they’re very good news for consultants.

Indeed, the difference for a consulting firm between high and negative growth can often be measured in the number of transformation projects it has won.

But what does any of this have to do with the GCC in particular? After all, transformation is a big deal everywhere.

The answer, as highlighted in our GCC Consulting Market Report today, is that the GCC may just be home to the mother of all transformation projects: Saudi Arabia.

There are many ways to think about the challenges facing Saudi Arabia right now: for some it’s about diversification, for others it’s about reform. But there’s a convincing argument that for management consultants it represents the biggest transformation project they’ve ever clapped eyes on, and it’s little wonder that they’re getting excited about it.

The irony, of course, is that the very thing hastening the need for transformation in Saudi Arabia – the price of oil – is the same thing that’s making life more difficult for the GCC’s consultants than they’ve known it for some time. But that just makes it all the more important to them. If it wasn’t for the Saudi Arabian public sector, there would be a lot of consultants on the bench across the region at the moment, and they know it.

But this isn’t simply a story about what Saudi Arabia can do for management consultants. The country’s rulers have made no secret about the fact that they’re making extensive use of companies such as McKinsey to help them address some of their biggest challenges – including the privatisation of public assets – and they’re smart to do so. Because while there may be something faintly distasteful about a bunch of consultants eyeing Saudi Arabia as an opportunity, the experience they bring of running transformation projects around the world, allied to their ability to supply high-calibre people at speed and scale to help implement their advice (something all their clients expect from them now), makes them incredibly useful.

As does the pragmatism they can bring to what is, after all, a high-stakes, high-emotion situation.

No, however much Saudi Arabia can do for management consultants the bigger story concerns what management consultants can do for Saudi Arabia.

Edward Haigh is a director of Source Global Research.

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Ellington Properties set to hand over Dubai homes before end of year

Ellington Properties, the Dubai-based development firm set up by Robert Booth, the former chief executive of Emaar Properties’ Dubai operations, is on track to hand over its first project by the end of the year.

The company, which Mr Booth set up in 2014 alongside his fellow managing director and shareholder Joseph Thomas, has already topped out its first project, Belgravia, which is a Dh200 million, four-storey scheme in Jumeirah Village Circle (JVC) that it intends to begin handing homes over to clients by the end of the year. It contains 181 units and Mr Thomas said that about 97 per cent of these have already been sold.

Ellington Properties was set up in 2014 and it is currently either directly developing or advising on projects worth US$2 billion. It has a land bank of 3.6 million square feet, which Mr Thomas said it has been building for a number of years while valuations have been relatively low. This has been financed from the partners’ own resources, and from wealthy investors in its projects, including the Dubai businessman Raghu Kataria and the London internet entrepreneur Vikrant Bhargava.

The company has seven projects under development – all of which are in established areas of the city, according to Mr Booth. It has already begun to build DT1, a 17-storey tower containing 130 apartments in Downtown Dubai; a set of four luxury villas on Palm Jumeirah branded as The Ellington Collection; and a second, five-storey block in JVC with 188 units named Belgravia II.

It is also advising the entrepreneur Ravi Pillai on two of his major Dubai projects – the 50-storey, 268-unit RP Heights tower in Downtown Dubai and the RP One tower planned for Business Bay.

“That’s in design now, and we anticipate that we will start construction in November this year,” Mr Booth said.

He said that Ellington Properties was founded because “we saw an opportunity to position a real estate company as a boutique player – very design-led, product-led and most importantly very customer-focused.”

“If you look at consumers now, they are craving design,” said Mr Booth. “Look at the companies that are successful – Apple, Facebook, Samsung. These are all design-led companies, and that is really fundamental to our DNA.”

The company has 2,200 units under development, which it expects to build out within three years. However, it also has plans to develop up to 10,000 affordable rental units by 2020, which will be retained to provide a regular source of income, and a create a facilities management arm, Chrome & White, to maintain this stock.

“We have no desire to become the biggest developer, but we want to be the most respected,” said Mr Booth.

The luxury properties developer Luxhabitat said that transactions in Dubai’s prime residential market doubled quarter-on-quarter in the first three months of this year, with Dh3.2bn worth of deals completed in the 12 areas it monitors. It said 240 villas sold were at an average price of Dh5.9m and 957 apartments for an average of Dh1.9m. The three busiest areas for transactions were Dubai Marina, Palm Jumeirah and Downtown Dubai.

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Loss-making Dubai contractor Arabtec may break even in 2016 and should return to profit the following year, the company’s chairman said on Wednesday.

Arabtec made a loss of Dh2.35 billion in 2015, which it blamed on rising costs and tough market conditions, with the Gulf construction sector entering a marked slowdown as the slump in oil prices led governments to rein in spending.

“2015 was a severe year, 2016 is still tough. I am confident of 2017, that’s when I see (profit),” Mohamed Al Rumaithi told reporters on the sidelines of the company’s annual shareholder meeting when asked when the company would return to profitability.

“For 2016, maybe we will break even,” he said when asked if that meant the company would make another annual loss this year.

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Abu Dhabi Global Market, the capital’s new financial free zone, has teamed up with the global information giant Bloomberg to boost media coverage of business in the UAE.

The partnership will involve major media initiatives from a new office on ADGM’s Al Maryah Island base, including a dedicated digital platform, new programming and an annual conference of global business leaders in the capital.

“We believe that collaborations with like-minded partners will serve to better connect the various markets and support the business needs of companies in Abu Dhabi and the region,” said Dhaher bin Dhaher, the chief executive of ADGM’s registration authority. “This reinforces ADGM’s ongoing commitment to maintain a vibrant business environment for stakeholders and companies to thrive.”

Riade Hamade, Bloomberg’s managing editor in the Middle East and North Africa, said: “These latest regional products build on more than 20 years of news gathering across the Arab world to introduce new platforms for storytelling on the companies, markets, economies and politics shaping the region.”

Tracey Alloway, Bloomberg’s executive editor of markets, based in New York, and a former Financial Times US correspondent, will lead the ADGM editorial operation.

The TV centrepiece of the new initiative will be a daily global markets programme, from new studios in the Dubai International Financial Centre, which will include editorial content from Ms Alloway broadcast live from ADGM.

A new “anchor” broadcaster will soon be named to present the show, which will seek to bridge the gap between Asian and European markets in Bloomberg’s global network.

There will also be a dedicated Middle East edition of the Bloomberg website, with original input from its 80-strong editorial team, headquartered in Dubai.

“This announcement is a significant milestone in our evolution towards a global digital-first multi-platform media brand,” said Justin Smith, Bloomberg Media’s chief executive.

The annual gathering of top business leaders, Bloomberg Markets Most Influential, will link Abu Dhabi with New York, London and Hong Kong in a simultaneous forum of “leaders and innovators shaping the future of finance in Abu Dhabi, the Middle East and beyond”, the media group said.

Mr Hamade said the initiative was designed to “reach more important people, decision and policymakers and leading executives”. He said the move would build on Bloomberg’s recent coverage from Saudi Arabia, in which the Prince Mohammed bin Salman, the deputy crown prince, revealed more details of the country’s economic strategy.

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Handovers lift Nakheel first-quarter profit

First-quarter profit at Nakheel increased by an annualised 8 per cent as it opened new shops and hotels and handed over homes.

The Dubai government-owned property developer said net profit came in at Dh1.47 billion for the three months to the end of last month from Dh1.35bn a year earlier.

Nakheel did not provide figures for its turnover during the period or any detailed breakdown of how its profit was achieved.

As an unlisted developer, the company is not required to provide more detailed accounts on its financial performance.

Despite a slowdown in the Dubai housing market, Nakheel reported that it had handed over 536 completed homes across projects in Palm Jumeirah, Al Furjan, International City, Jumeirah Village, Jumeirah Park and Jumeirah Heights during the first quarter of the year – well over half the total 847 it handed over during the whole of last year.

The company said that footfall at its newly expanded 2.2 million square feet Dragon Mart mall complex had risen to 120,000 visitors a day at “peak times” – up from 80,000 a day a year earlier.

Nakheel opened its 1.4 million sq ft Dragon Mart 2 mall extension in November, nearly doubling the size of the wholesale Chinese-themed shopping centre on the outskirts of Dubai.

The company also reported that average occupancy rates at its first hotel, a 251-room property attached to Dragon Mart 2 managed by Accor, had hovered around 60 per cent during its first two months of operation.

Hotels in Dubai reported a 3.5 per cent decrease in occupancy to 82.5 per cent year-on-year in February, according to the research company STR Global.

The company, which is behind some of Dubai’s most ambitious projects, including the Palm Jumeirah and Ibn Battuta Mall, amassed debts during the global financial downturn, forcing it to cancel major projects and eventually to be acquired by the Dubai Financial Support Fund during the Dubai World crisis.

Since then Nakheel has repaid much of the debt and put together a new strategy aimed at developing more income-producing shops and hotels to reduce the company’s reliance on Dubai’s volatile residential property market.

The developer expects to officially open a 300,000 sq ft extension to its Ibn Battuta mall before the summer and it plans to build another nine hotels in Dubai.

“Our strategy to create more cash-generating assets and strengthen Nakheel’s asset base to further boost our business and financial results in the coming years is beginning to yield results,” said Ali Rashid Lootah, the Nakheel chairman.

Earlier this week the Dubai developer Emaar said it had embarked on a cost-cutting drive to meet more challenging market conditions this year.

However, after almost two years of falling residential sales volumes and softening house prices, the property broker JLL reported this week that property prices were close to bottoming out.

JLL reported a 10 per cent year-on-year decline in house prices in the first quarter, which it blamed on the strong US dollar (to which the dirham is pegged) and lower oil prices. The commodity’s fall has weakened the purchasing power of buyers from across the region.

But it said there were signs that price declines were slowing, and that it expects values to increase later this year.

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United Arab Bank, the Sharjah-based lender, reported a profit in the first quarter following a massive loss in the last three months of last year because of bad loans.

Still, despite the turnaround, the bank’s first-quarter profit fell by 72 per cent year-on-year. Net income declined to Dh45 million in the first quarter from Dh161.5m in the same period last year. The bank had a net loss of Dh238m in the fourth quarter of last year.

“These positive results provide tangible support that our new strategy is taking shape,” said Samer Tamimi, the bank’s acting chief executive.

“Whereas our return to pro­fitability has been aided by a reduction in provisions and cost savings associated with a comprehensive cost structure review, I am satisfied that we have recorded significant progress in the core business engine itself.”

UAB booked a total loss of Dh166m last year as bad debts piled up after years of risky lending to SMEs unravelled in the economic downturn that was triggered by a crash in the price of oil. However, cracks in UAB’s operations appeared in earnest during the third quarter of last year, when the bank lost Dh272.6m compared with a profit of Dh169.2m in the same quarter of 2014.

Elsewhere, Commercial Bank of Dubai said yesterday that its first-quarter net income dropped by 18 per cent on impairments. Its net income in the first three months dropped to Dh241m from Dh295m in the year-earlier period.

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UAE demand for loans grows but lenders are reluctant

Demand for business loans rose in the first quarter according to the Central Bank – but lenders are less willing to grant them.

The lender of last resort did not say why there was an increase in demand.

But analysts said that it could be because of payment delays trickling down the supply chain amid deteriorating economic conditions.

“Despite the recovery in loan demand, the survey results suggested a reduced willingness to extend business loans among financial institutions, with changes in credit standards suggesting a higher degree of risk aversion,” the Central Bank said.

The bank added that its net balance measure in aggregate for business loans rose to 13.6 in the first quarter.

That represents a significant change from the fourth quarter of 2015, when the measure was minus 8.1 in the fourth quarter, the first negative reading since the survey started in 2014 amid the steepest drop in the price of oil since the global financial crash of 2008.

In the most recent survey, the central bank said 45 per cent of respondents reported an increase in demand for business loans, 16 per cent reported a decrease in demand, while 39 per cent reported no change. Meanwhile, demand for personal loans rose, with a net balance measure of 5 in the first quarter compared to minus 6.2 in the fourth quarter.

“I am surprised by the increase in loan demand in the survey,” said Jaap Meijer, head of financial services research at Arqaam Capital, a Dubai-based investment bank.

“We know in Saudi Arabia a lot of the demand is to finance working capital because the debtors don’t pay, so they need bank loans to finance their working capital requirements. However, that would represent a low quality low demand.”

Demand for debt in the UAE was anecdotally declining in 2015 after the price of oil started its long descent in the previous year. At the same time, banks have become more particular about who to lend to as the pool of cash available diminished.

According to a survey by Gulf Finance, a Dubai-based small business financier, more small businesses in the UAE struggled to get loans after confidence slipped to new lows in the fourth quarter of last year when the fall in the price of oil was most fierce.

SMEs, vital for the UAE’s economic growth, reported in the survey that they are finding it more difficult to secure financing and to get paid. They are also retrenching plans for expansion and have stopped hiring.

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Quest Arabiya, Abu Dhabi’s recently launched Arabic television channel, has been awarded a “best in class” honour by the US Interactive Media Council at the Interactive Media Awards (IMA) for its website design.

According to the IMA: “The Best in Class award is the highest honour bestowed by the Interactive Media Awards. It represents the very best in planning, execution and overall professionalism.”

Quest Arabiya is broadcast from Abu Dhabi by Image Nation, the production arm of Abu Dhabi Media, publisher of The National, and Discovery Networks, the company behind Discovery channels.

Quest, which is available in 45 million homes in 22 countries across the Middle East and North Africa, launched in December. It is broadcast 24 hours a day. The website has also been nominated for the Mena Digital Awards 2016, which will take place next Tuesday.

Quest Arabiya focuses on topics such as adventure, motoring, engineering, wildlife, history, people and places, science, crime and magic.

It will feature some content from Discovery’s international channel. The new channel aims to also create original and adapted content specifically tailored for the Middle East.

These include dubbed versions of some of Quest’s most popular shows such as Deadliest Catch, Gold Rush and Bear Grylls’ Man vs Wild.

Quest Arabiya also produces and commissions unique Arabic content that is developed and filmed in the region. These include a locally made show focusing on extreme sports in the region, such as deepwater soloing, a form of solo rock climbing practised on sea cliffs in Oman, whitewater rafting in Morocco and snow paragliding in Lebanon.

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Kuwait oil workers' strike ends after three days

Kuwait’s oil workers went back to work on Wednesday after a three-day strike that helped to underpin oil prices, which had been under pressure after the failure of weekend talks over an output “freeze” by major producers.

Benchmark North Sea Brent crude futures were down 66 cents – or 1.5 per cent – at US$43.37 per barrel in late afternoon trading UAE time. However, prices have been fairly stable above $40 per barrel for most of this month on signs that the world oil glut is starting to abate.

A spokesman for Kuwait’s oil workers’ union said the short-lived strike had made the point about their importance to the country, although the union apparently succumbed to pressure from Kuwait’s leadership who had warned they would not negotiate proposed benefits cutbacks while the workers were striking.

“We’re glad to announce that the strike has succeeded in preserving the rights of the workers in the oil sector,” said Adel Al Fadhel, the spokesman for the Kuwait Oil Company Workers’ Union.

Mr Al Fadhel credited Kuwait’s ruling emir, Sheikh Sabah Al Ahmad Al Sabah, for bringing the strike to an end, saying he “intervened and guaranteed to preserve the rights of the workers according to the law”.

Mr Al Fadhel also said the emir had promised that the workers would not be disciplined for taking part in the strike, according to Kuwait’s official news agency, Kuna.

The workers’ about-face came only hours after its leaders called a press conference to say they planned to continue their strike.

Anas Al Saleh, Kuwait’s acting oil minister, had called on workers in a televised interview on Tuesday night to go back to work so that talks could resume.

The workers’ action cut crude output from about 3 million barrels per day to 1.5 million bpd, while also slowing refinery throughput from almost 1 million bpd to just above 500,000 bpd.

However, with the crude oil and refined products storage available, the short-lived outage is not likely to cause much disruption to oil and products trade.

Sheikh Talal Al Khaled Al Sabah, the chief executive of the Kuwait Oil Tanker Company and the oil sector’s official spokesman, said on Wednesday that it would take about three days to get back to full rates of oilfield and refinery operation.

He said the sector’s emergency plan had been implemented and was aimed at making sure there was no disruption to international or domestic oil and products supplies.

The dispute arose over government plans to limit oil workers’ benefits and include them in a payroll restructuring study – the so-called strategic alternative payroll system.

Kuwait’s government-run oil sector employs about 20,000 workers in total and has enjoyed a high degree of protection as the country’s most strategic industry and the source of most of its wealth.

Kuwait Petroleum Corporation (KPC) had announced plans earlier this year to study austerity measures, including cuts to wages and bonuses.

This month, Mr Al Saleh, who is also the finance minister, had promised to suspend the study of oil sector cuts pending negotiations, but the unions rejected anything but an abandonment of the whole austerity project for the oil sector.

The head of Kuwait’s oil workers’ union, Saif Al Qahtani, said at a rally this month that the union would resist the strategic alternative measures as well as any efforts to privatise the sector.

The major producers of the Arabian Gulf have been under unprecedented pressure since the collapse of oil prices over the past 18 months, which has led to severe budget constraints and accelerated measures to reform economies.

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A leading critic of Malaysia’s prime minister Najib Razak said corruption had reached levels never seen before in the country and urged foreign governments linked to the controversy surrounding a state investment fund to make their findings public.

1MDB, whose advisory board is chaired by Mr Razak, is under investigation in at least five countries including Switzerland and the US over allegations of money laundering and embezzlement.

Dr Mahathir Mohamad, at one time the country’s longest-serving prime minister, said the investigations into the 1MDB fund were not just a problem for Malaysia.

“Being diplomatic isn’t going to help Malaysia or anyone else,” he said on the sidelines of the International Conference on Leadership, Innovation and Entrepreneurship in Dubai yesterday. “They must recognise action needs to be taken and do what is necessary.”

Dr Mohamad, who was in his post between 1981 and 2003, said the scandal around the Malaysian fund threatened the Asian nation’s international reputation and hurt foreign direct investment.

“All inquiries should eventually be made public because inquiries that are kept secret are of no use to anyone,” he said.

“Eventually things will have to be revealed.”

Last week, Abu Dhabi’s International Petroleum Investment Company (Ipic) said neither itself nor its Aabar unit had any connection to a firm incorporated in the British Virgin Islands that was named in a report into the controversy surrounding the Malaysian fund.

In May 2015, Ipic had agreed to provide the Malaysian fund US$1 billion to meet some of its liabilities in exchange for assets while at the same time taking on interest payments on about $3.5bn in debt.

But the Abu Dhabi fund now says 1MDB is in default on the terms of the agreement.

* with agencies

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