Dubai Dreams

With ambitious construction and development programs, world class leisure and entertainment facilities and rapidly expanding infrastructure, Dubai has established itself as the commercial and leisure capital of the Middle East; as well as one of the most exciting tourist destinations in the world.

DAMAC Properties, the largest private developer and luxury provider in the UAE, has played an integral part of the city’s success. The Dubai-based company was the first to introduce iconic properties on all freehold master planned developments in Dubai, and a number of developments have already been successfully handed over to satisfied customers.

Peter Riddoch, Chief Executive of DAMAC Properties comments: “Over the past decade, Dubai has positioned itself as a regional business hub, an attractive tourist destination and a safe and desirable place to live. What the UAE has achieved in that time is remarkable and Dubai’s Strategic Plan has laid out achievable goals to ensure that the success continues over the next seven years.”

Riddoch remains upbeat about the questions of supply and demand: “The growing expatriate population flocking to work in Dubai for high pay and tax-free status is fuelling the demand for property. The Government target is due to increase the population from the current 1.25 million to 10 million by 2010, and with more and more visitors coming to Dubai, the demand will remain for many years to come.”

However, as the property market in Dubai continues to mature, purchasers and investors must consider where to spend their money wisely. Areas that will attract leisure and tourism, such as Dubailand and Dubai Marina, is a good choice; as is Business Bay - the Manhattan of the Middle East and epicentre of trade and commerce. Located adjacent to the Dubai International Finance Centre, the area is set to develop prominence on the world stage as held by New York, London and Hong Kong.

DAMAC Heights is an iconic 90-storey tower in Dubai Marina comprising a mix of exclusive penthouses, duplexes, and one-, two- and three-bedroom apartments. Designed by world-class architects Aedas, the tower offers the perfect choice of amenities such as health clubs for men and women including steam and sauna facilities, a gym, swimming pools, nursery and day-care centres, barbecue area, golf simulator and games room. Owners of the penthouses and duplex apartments will also have access to a luxury yacht! Prices at DAMAC Heights start from £491,000 for a 921 sqft one-bedroom apartment.

‘Lincoln Park’ is a mixed tenure scheme in Dubailand inspired by the brilliant white architecture in the American town of Chicago. The buildings have a well articulated and ornamented front entrance, flat roofs with parapet walls and beautifully designed communal roof terraces. Dubailand is an innovative, awe-inspiring entertainment and leisure development that represents an integral part of Dubai’s bold vision to become the worlds top tourism destination. Located on the Emirates Road in the business and commercial centre of Dubai, it is also close to the Arabian Ranches and Dubai Sports City. Lincoln Park is anticipated for completion in the first quarter of 2010. Prices for a 937 sqft one-bedroom apartment start from £192,400

DAMAC Properties is currently promoting 'Fairway Heights', a modern architectural marvel of two 24-storey residential towers strategically located on the Emirates Road adjacent to Jumeirah Golf Estates - a series of four golf courses inspired by the natural elements - Earth, Wind, Fire and Water. The surrounding area is also home to Dubai's most exclusive hotels and resorts, with a wide range of dining and leisure opportunities, and is just a few minutes' drive from Dubai marina and the major business districts of Dubai Internet City and Jebel Ali Airport. ‘Fairway Heights’ will provide a variety of world-class fitness facilities including a swimming pool, state-of-the-art gymnasium and health spa for men and women, as well as a number of cafés, restaurants and designer retail outlets. Prices of a one bedroom apartment at ‘Fairway Heights’ start from £197,200.

For further information about DAMAC Properties and their developments across the Middle East and north Africa, please visit www.damacproperties.com or contact
Rammah Taan +44 (0) 207 290 3289 or email rammah.taan@damacgroup.com

Latin America Connection

By Mohit Joshi

The Globalization of technology and other knowledge services has been one of the hallmarks of economic activity in the past decade – with a humble start in remote development, this has now morphed into a $50+ billion dollar business (USD). In the United States (US), it is estimated that 80% of Fortune 100 companies have an active global sourcing program. Additionally, global sourcing has moved beyond technology to transaction processing, call centers, medical transcription, business modeling, analytics, research and radiology.

To date India has remained the hub for this activity, however as more companies adopt global outsourcing other countries are becoming viable candidates for establishing IT and BPO operations. For example, China brings a large educated labor pool to the table while Eastern Europe promises a highly educated workforce and proximity to key European markets. Finally, Latin America due to its proximity to the US and shared time zone offers significant potential.

For technology and business process outsourcing companies and US corporations, Latin America offers a very attractive option for global sourcing & delivery given:

1. Time-zone and physical proximity to the largest economy in the world – Mexico, Brazil, Chile and Argentina (the four Latin American giants) all fall in the EST +/- 2 hour zone. This is a significant advantage for activities that need to be done in US day time – an example is a developer taking requirements from business users. This could be done (and is being done) from an Indian programmer working night shift but over the long run there are morale and productivity issues due to such a stringent schedule. In addition to time zone, there is also physical proximity – the aforementioned developer based in Mexico for instance could fly to Dallas for a 1 day workshop in a couple of hours – his Indian counterpart would need to sacrifice an entire workweek to make the same trip.
   


2. Language skills – Hispanics are the largest minority in the US and this means a requirement for Spanish language specific skills. Potential offerings could include bilingual Call Center as well as programmers who can design user interfaces in Spanish.
   


3. Cost – Though more expensive than India, work done from the region would still offer a 35-40% discount over US rates.
   


4. Containing risk through truly global delivery - As corporations increase the proportion of services offered from India, a Latin America component could ease country risk concerns and allow them to use the model to a greater extent.

For Service providers, the fast growing local market (especially in the financial services industry) Latin America is also a big draw – as these corporations mature and develop sophisticated products and services, they need the developed market expertise that external providers can deliver. This would include large scale system redesign, new application development and consulting services for business process changes.

As we look at the options available from a sourcing and delivery perspective, four countries stand out in Latin America:

1. Brazil is the largest country (in terms of area, population and the size of its economy) in the region and one that also has a large local market. It is a low cost location compared to other countries in the region and has a large local talent pool. It is a Portuguese speaking country and English/Spanish speaking talent is harder to source.
   
   
2. Chile has been actively positioning itself as a springboard to Latin America given its robust legal and regulatory framework and the ease of doing business there. Santiago has a lot of potential to emerge as a major global delivery center given a large population concentration and top tier universities. It is a much smaller country (with a population of 16 million) and scale would be a challenge for service providers.
   


3. Argentina has long been known in the region for its well educated, English speaking talent. With the devaluation of the peso, it has also become a very cost effective location. The negatives for Argentina include an unfriendly regulatory environment and the fear that a Peso comeback would destroy the business case for a global delivery location (though the peso is currently worth about 30 cents, it had parity with the USD in 2000.)
   


4. Mexico has historically been known as a manufacturing and component assembly location with its “maquiladoras” located close to the US border. It has a large educated, technically adept population and an excellent private university system. The country has historically unfriendly business laws but is in the process of changing these to attract investments. On the flip side, Mexico along with Chile is a comparatively expensive location.

In conclusion, the Latin America region has significant potential to develop a knowledge based, export oriented industry. Service providers and corporations have been looking at the option closely and the next few years should see sourcing and delivery from the region becoming an important complement to work being done currently in India & China.

Mohit Joshi is the CEO of Infosys Technologies S. De RL De CV, the Mexico subsidiary of Infosys Technologies limited, a Global Business Consulting, IT services and Business Process Management firm. Mohit has been working with Infosys since 2000 in a variety of business development and client management functions. In his current role, Mohit is also tasked with working with Infosys Executive management in defining the firm’s Latin America strategy.

State of the US Economy and Globalization

by Bruce Fenton

An interview with Peter S. Cohan on the state of the US Economy and Globalization. Mr. Cohan has written seven books, produced one audio program, been featured in eight compendiums of modern management thinking, writes two online management and investment columns, and contributes to two blogs. Mr. Cohan also edits a monthly investment-oriented newsletter entitled The Cohan Letter.

Bruce Fenton: How do you feel the US deficit situation will impact the economy in the future?

Peter Cohan: The US deficit situation will need to be fixed through a combination of raising taxes and cutting government spending. This will probably happen in 2009 and 2010 at the beginning of the next presidential administration. The impact of this in the short-term will be an economic slowdown. However, in the longer-term, the reduction in the deficit will lower long term interest rates and lead to a stronger dollar.

Bruce Fenton: What about the trade deficit?

Peter Cohan: The US trade deficit is likely to reverse if the deficit declines and the dollar strengthens. A weak dollar is beneficial to US exporters who can charge less for their products in overseas markets. Conversely, a strong dollar creates incentives for US companies to operate more efficiently.

Bruce Fenton: What about China’s ownership of US debt? How significant is the current foreign (particularly Chinese) ownership of US debt? Is it benign passive ownership or potentially detrimental? What is your prediction about this?

Peter Cohan: China is America's second largest lender -- it owns $350 billion worth of US government securities. This ownership is not a problem as long as China continues to hold onto the securities. However, with the dollar declining in value, the return that China earns on those securities is declining. Meanwhile other currencies like the Euro and the Pound are strengthening. This creates an incentive for China to sell more US securities and buy those backed by the strengthening currencies.

The result of China selling US securities is a further weakening of the dollar. In order to attract foreign investors back into its securities, the US government will need to raise interest rates which will slow down the US economy,

Bruce Fenton: Many other nations and economic groups have a trade surplus how does this affect the US economy long term?

Peter Cohan: The trade surplus with the US will encourage income inequality. Workers in the firms which are losing ground to foreign competitors will experience wage stagnation and consumer price inflation. Workers in the private equity and hedge fund industries whose work is not being outsourced will use their access to debt to further enrich themselves.

But the long-term success of the US economy is at risk unless US firms are able to become globally competitive and reverse the trade surplus with these other nations. In the absence of global market share gains, increased borrowing is the only way to keep up in the short term.

Bruce Fenton: Rapid growth of India, China, Russia, Brazil and other areas is significant relative to US growth. Is this a problem for the US – are we losing our competitive advantage?

Peter Cohan: The US is losing its competitive advantage in many business activities. And the activities in which the US is losing its advantage are moving up the income ladder. While in the 1970s and 1980s the US lost its manufacturing advantage, it is increasingly losing its advantage in fields such as systems consulting, legal, pharmaceutical, and investment research. When the US starts to lose its advantage in private equity, hedge funds, and investment management the loss of competitive advantage government officials will pay more attention.

Bruce Fenton: 70 million baby boomers are reaching retirement in the coming 15 or so years – how significant of an economic impact will this have?

Peter Cohan: I am not sure these projections will prove correct. I suspect that many baby boomers will not retire -- they'll keep working until they drop. I think those boomers who do retire will have more money so they will keep spending at high levels. And when they sell stock -- both their own shares to finance their retirement and by cashing in the trillions they'll receive from their parents -- they will generate huge capital gains which will benefit the government.

Bruce Fenton: Is the dollar weakening? If so how much and how significant and what is the long term effect of this?

Peter Cohan: As noted above the dollar is weakening. It's likely to decline at least another 10% by the end of 2008. That's significant because it creates a cycle of weakening that feeds on itself. We finance our economy through borrowing money from Japan, China and others. But they are not willing to keep doing this if our currency depreciates in value. So they sell the debt which puts further downward pressure on the dollar -- leading to further selling.

Bruce Fenton: How do you see increased government spending of recent years affecting the economy?

Peter Cohan: Increased US government spending has been great for defense contractors and oil companies. An endless global war is great for workers and shareholders in these companies. It's not good for oil consumers or soldiers. This increased government spending will continue stimulating those industries until the next president cuts back on these expenditure categories. Then those parts of the economy will suffer.

Bruce Fenton: One of the US’s major exports is copyrighted material such as software and other intellectual property. Do you see copyright theft as an important factor in our economic future? What about the flipside of this that argues that overzealous copyright enforcement stifles competition and free exchange of ideas?

Peter Cohan: We will not be able to get other countries to change their intellectual property enforcement practices. This will force content providers to change how they make money. They may end up needing to give away the content and make up some of the lost revenue through advertising. I don't think overzealous patent enforcement stifles competition. I think patents encourage innovation by protecting its profit.

Bruce Fenton: Do you feel the US is isolationist? Why or why not? Do you see our isolation or lack of it being a problem? Why?

Peter Cohan: The U.S. is involved in some way with most of the countries in the world. So it's not isolationist. But it does have an image problem with other countries. Fixing that problem will fall to the next presidential administration.

Bruce Fenton: Do you feel Americans generally have a lack of knowledge of Islam / Asia / other areas & cultures of the world? Will this harm us in the new global economy?

Peter Cohan: I think that American's lack of knowledge of other cultures is only a problem if the Americans lacking that knowledge are attempting to live in those other cultures or operate a business there. This is not a problem for the rest of the Americans who are ignorant of other cultures.

Bruce Fenton: How significant is Iraq War spending to our long term economy?

Peter Cohan: It is not significant to our long term economy because Iraq War spending will taper off in 2009.

Bruce Fenton: Do you feel commodity prices will increase? Specifically oil prices? How will this affect us and why?

Peter Cohan: Oil prices will increase which will create stronger incentives to come up with renewable energy sources and for consumers to drive less.

Bruce Fenton: The world public opinion of the US is not at its best. What are your thoughts on this from an economic standpoint with respect to trade agreements, tourism revenue etc.

Peter Cohan: I think most people around the world realize that the current administration is an aberration. Over the longer term, world opinion of the US will improve because Americans will elect an administration that raises the world's opinion of the US back to the high level it enjoyed in the 1990s.

Bruce Fenton: Any comments on US worker productivity?

Peter Cohan: US worker productivity is declining as a result of business' failure to invest in productivity enhancing technology.

Bruce Fenton: We feel that Sarbanes Oxley et al and the rise of US compliance legal and productivity costs are extremely significant. Do you agree with this? Do you feel that the increase in these areas is harmful to business?

Peter Cohan: No. I think that business is just whining because it believes it now has a sympathetic ear in the current administration. What is damaging to business is the lack of incentive for productivity enhancing technology investment. By reducing the tax rate on dividends, business is using its cash flow to pay coupon clippers and to buy back shares. This creates greater income inequality.

Bruce Fenton: Thank you for your thoughts.

Bruce Fenton is a financial consultant, a writer, and the Managing Director of Atlantic Financial Inc. Bruce welcomes inquiries, comments, and questions. He can be reached by contacting The Fenton Report.