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INTERVIEW

Shehab Gargash
Managing Director of Daman
 
SHEHAB GARGASH
SHEHAB GARGASH
Managing Director of Daman

I'd like to start by quoting His Highness Sheikh Mohammed who said to us when we interviewed him, "Dubai is a city at the crossroads of the new world economy. Here we achieved what should take 20 years in 5 years. Dubai is truly a city of the world". Daman is already six years old, how do you feel that you fit into these words of His Highness?

I think those words have been proven around us. Whether we were pessimistic, optimistic or realistic, we have all been awed by what has happened in Dubai. I think how we fit is all about location, location, location…If I wanted to do the exact same project as Daman anywhere else in the world, I would be restrained by the macro-environment in which I would work. Since Daman is in Dubai, we can achieve our plans in a faster and more comprehensively. It's a bit of steroid shot for all of us! Eventually, wherever we are, we strive to achieve what we plan, although Dubai makes it happen faster and bigger.

If you go back 6 years, what led you to the founding of this entity?

Daman is a financial services company and my background is banking; yet I moved out of the commercial banking environment. Effectively, the gap we saw in the market was for "professionally structured, managed, non-banking financial services companies". That was a big gap that we saw in the late 90's and in 2000 we set up. The business plan was all built around filling that gap, between the very large banks and the man on the street.

Your slogan is, 'From the region for the region'. How important do you think this is? Obviously, being a local UAE company, you are now promoting investment, private equity…

I think we are the tentacles of the big picture. Companies like us, working within the Dubai environment, are the actual foot soldiers of what the general's strategy is. Without companies like us, a lot of people are not going to see the comprehensive results of the big picture. When Sheikh Mohammed says this is my grand vision for Dubai and for the country, it is the collection of what everybody does that makes that a reality.

Looking at UAE companies now, Dubai especially is aiming to become a financial hub of the region. How important do you think that is?

I think it is very important for 2 reasons. One is that, historically, financial service has always been lagging among all the things that have happened to us. In the UAE, we had the trading, the logistics, the merchant trading, the development work, the infrastructure, the construction and so on. Yet, financial services had not evolved to be a cutting edge industry in the past and there is still some catching up to do. The second is that financial services provide the capital to make everything happen. In the end, it is investment bankers who are going to provide the opportunity, the vehicles and the methodology for creating the wealth that goes around in people's hands. I think it's imperative for Dubai, if it wants to see its vision rounded out and completed, to deliver a financial services platform that is world class. How does that fit with Bahrain? I think Dubai is looking beyond the regional competition. Although the jury is still out, it is early days because financial services is not like paving a road, you have to build confidence, capabilities, trust… that takes time, and Dubai is not used to waiting; it is impatient to see results. I think the jury is still out on how it all evolves. Personally, I am very confident that in one manner or another, eventually, we'll reach a point where Dubai arrives on the world stage.

you talk about confidence; at the moment the regional financial services and stock markets are taking a bit of a hit and confidence has slipped. What challenges do you think the region, but most importantly, Dubai's financial services industry faces to move on and become this global financial hub?

The biggest challenge for the whole region, not just Dubai, is credibility. This is a region that is not used to structured approaches. Dubai is an anomaly within this region in terms of moving closer to what, on a world stage, would be expected to be a norm. However, the rest of the region also has its pull and traditions are hard to break. The big challenge is making those hard decisions for the benefit of taking the vision forward. The second one is the patience factor, which is important because in financial services that is required. Nobody is going to decide overnight that you are a 'mini New York'. You have to actually prove, over time, that you are up to that standard.

The longer Daman exists, the more diversified it becomes; recently you launched Daman Commodities, the Real Estate Investment Trust and you just started selling the buildings by Daman. How diversified are you aiming to become, and what are the key sectors for growth?

There are 2 important foundations for Daman. Number one is the geographic focus, which is on the region, and most specifically on the GCC plus Iraq. We define this as our region, so most of the work we do is within those 7 countries. The second element is that everything we do falls into one of 3 general businesses: brokerage, asset management and private equity.

We interviewed David Jackson from the Dubai Multi-Commodities Centre and he was really quite bullish about the potential for DMCC and Dubai as a hub, to really become global players. What made you go into Daman Commodities?

It's an extension to our brokerage business. We have a local brokerage business and we are in the process of setting up a DIFX broker. We look at our commodities proposition as a very early stage at this point of time. We keep the flexibility to develop in the manner that we see the environment around us developing. Our business plan in the year 2000 wasn't dramatically different from where we are today. We focus more on some areas and less on other areas, depending on what is happening around us. Our entry into real estate, for example, happened after our original business plan was put together. Effectively, in real estate we are looking more at the engineering of the proposition rather than the development. Therefore, the Real Estate Investment Trust is one proposition in that direction; we have the real estate capital partners that are developing that building at the DIFC.

I know that at launch, it was a $100 million investment. 40% of the capital was raised from international investors and Daman is taking a 5% stake in the project. Where has your investment come from, is it mainly from the GCC?

This project specifically is 14 investors out of the UAE and beyond the UAE. 40% has come in from Saudi Arabia, India, Greece, the Netherlands and the UK.

Looking now at the States, New York is one of the financial capitals, and there is no doubt that there are certain mirrors between Dubai and New York. We can all see that this is the Manhattan of the Middle East. What do you think Dubai can actually learn from New York?

It can learn continuity. New York has proven that you can still lead in good times and bad times; you can still be a barometer for what goes on in the rest of the world. I think that Dubai can be the barometer for the region. I also think that New York can learn a bit from Dubai about achieving the impossible. Both of them are good examples of stretching the limits and redefining them.

The one thing that is amazing and impressive about Dubai is that every day you wake up and there is something new happening. What is it about Dubai that makes this 'achieving the impossible' possible?

I think it's a couple of things. First of all, we have the leader who challenges us every day to think beyond what the realm of the possible is in our minds. People have learned after one, two three or four times, that they can actually expand the definition of the possible and be able to redefine it and stretch the imagination. People have learnt that if they do that, nobody can stop or challenge them. In fact, they are going to be cheered on until the next person comes and actually pushes the limits a little further. You've got this optimism and the same attitude as a championship athlete, who will always challenge himself to go a little bit further. I think Dubai is the ultimate athlete in this sense.

Looking once again at the States, the trade between the States and the UAE was up to $10billion last year and foreign direct investment was up to US $2.5 billion, which is quite impressive. The relationship is growing; what kind of potential do you think exists now, especially with the soon to be signed Free Trade Agreement?

Increasingly, the UAE, as a country, will be considered a destination for emerging markets money. In order to give confidence for this money, the UAE is scrambling to put together its rules and governance levels, to effectively elevate the level of governance to an internationally acceptable standard and to a point where emerging market money is comfortable. I don't think we have reached that yet, despite these very interesting numbers and the size of the investments. Most of those investments are in projects close to the government because of the trust that foreign direct investment has in the government and their delivery of the promise.

Which is a good thing in a way?

It is a good thing, but it is not the whole story since this is what happens at the beginning. To achieve critical mass you will have non-governmental money coming into non-governmental opportunities.

I think it's quite clever the way that the UAE is moving forward, especially Dubai, where originally the government invested a lot of the money, but now there is much more private investment from local and regional players.

However, it has not seeped in enough yet within the private sector. It's very interesting; you started off by mentioning the various projects, the initiatives, the people you met, etc. All our projects are government or quasi government, which has been the leading force, you are correct. Going forward, you are looking at a filtering down of the mindset to smaller companies and companies less linked to the government; merchants, the public companies, the private initiatives, the entrepreneurs, all of these start to kick in from this point onwards. The medium scale, the smaller scale, even large scale initiatives…The government has paved the road, but now the traffic going on that road is going to move beyond the government and beyond the government associated initiatives. Coming back to your question, I think that is the driving force for further US or other international investors looking at the country.

Looking again at the States, one of the reasons we came was to look at the impact of the DP World saga, which impacted both sides. I think that it showed that there are misconceptions that still exist about Dubai and its offer to the world. Having studied in the States for 5 years, and being a regular visitor to New York, what are your thoughts on how Dubai is perceived in the States and what can be done to help to improve it?

This is my personal opinion, and it's a reading rather than anything based on empirical data. This whole saga happened at a lousy time, which was an election year and it was hijacked by electioneering. I think that the moment you throw national security into a mix like this after September 11th, you tend to arouse a lot of suspicions and fears. Effectively, the protectionist tendency of the United States to lock-in and protect itself from any outside perceived danger, all clicks into place, whether in the mindset of the man on the street or the congressman or for anyone in between them. I really think they dealt with it very well from Dubai, although I believe that it did surprise them to get this harsh reaction from the US, which usually has a very amicable relationship on a government basis and on a populace basis. You were very right that the differentiation of this big bloc called the Middle East hasn't happened in the US. This plays into the hands of those who are enemies of both sides, who tend to play on the differences rather than on the similarities. I believe that if this were to happen next year you wouldn't see an issue out of it. It was used as an election issue and it exploded beyond that afterwards.

One of the reasons we are here is in order to showcase why Dubai is shining out as the rising star of the Middle East, the one that really has a brand. There are very few countries or cities in the world that have a brand: New York, London… and Dubai. What is brand Dubai and can you help to build that?

Brand Dubai is based on optimism, doing the impossible, entrepreneurship, enterprising, business, modernity; pushing forward… those are the adjectives I would use for brand Dubai. Sorry, what was the question again?

How do you think that you, as Daman, are helping to build this brand? You are a private company, and you touched on this talking about the future of Dubai. Since you started, what would you say, in the last 6 years, have been the major milestones?

The major milestone was actually setting up, because we set up in 2000, which was an extremely difficult period in the financial sector. We had just come out of a market crash in 1998. The structure of the stock market wasn't even set up; there was a lot of paperwork and transactions. I think that being able to set up in an environment like that, with incomplete laws and institutions, is milestone number one. I think that milestone number two was the ability to scale up very aggressively. I don't think we would have been able to achieve this in most of the other countries in the world. We would have hit so much red tape, certainly in the Middle East, but also beyond the Middle East, that it would have needed twice the amount of time to scale up to our levels. We don't have the intention as a company to go public; we are a privately held company and we are going to continue to be privately held. Our model is based on setting up investment opportunities around us, rather than within us. We set up SPDs and stand-alone companies in which we tend to participate. Our third milestone is our commitment to the Iraqi market, we did that through a private equity fund that we just…

Is it the Iraq Opportunity Fund?

Yes. And we wrapped it up two and a half years later. People made 3 times their money in 2 years, so that went nicely. The other thing we are doing in Iraq is that we actually moved our attention from a private equity fund into a bank. We actually established a bank in Iraq, they just had their first AGM, Annual General Meeting yesterday, and so it has been up and running since yesterday. We look at the UAE as one of the platforms for Iraq's reconstruction proposition. It's inevitable and however it will evolve, Iraq's reconstruction effort is going to kick in.

Despite the troubles and the trials you had in setting up, are you regarded as one of the pioneers in the financial sector here?

It's not for me to look at. It's a question for the others, how they look at Daman. We are still a relatively small company by design. I'll give you a few stats. We are under 100 employees, we have reached 80 or so now, hence we are not a gigantic company. We've got approximately 2.5 billion dirhams, $700 to 800 million, under management, which is, relatively speaking, a very small and sober-headedly managed company. We dare to dream but we count what we dream about

Looking into the future, if we look at the buildings by Daman, they will be completed by the end of 2008? Then I imagine you'll have your offices there.

Absolutely, top 2 floors.

Let's say we come back at the end of 2009 and we are sitting in your brand new offices in the DIFC; what would you like to be saying you have achieved over the past 3 years?

I would like to be saying that I've been among the pioneers within the local financial industry, and that I have added local flavor to the DIFC proposition.

It's international, isn't it?

It's international and I believe that they are realizing that it's the regional element that is going to add the differentiation. Earlier on, it was purely international and that didn't work. Looking at it, they said what can a company in the DIFC offer that a company in London, Frankfurt, Paris, Tokyo, New York, cannot offer? It's the access to the keys of the Middle East and I think I would like to be a party that has a little chip on that key which makes the lock open for international money into the region.

Just one final question, what has been your highest personal achievement in your career related to the Dubai market, because you have grown very organically in Dubai.

Again that is for others to judge, but if you ask me that question, I think it was making the shift from institution to establishing a new company. That was my most difficult decision, making the entrepreneurial jump out off the corporate boat.


 
 
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