The GRC Gulf Business Weekly Report - Gulf Research Center

The GRC Gulf Business Weekly Report
April 15-21, 2006
Sona Nambiar, Business Editor, Gulf Research Center
Bapco addressing environmental concerns, the UAE being embroiled in lawsuits ranging from a
victory for the Smart City project in India to perfume wars involving L’Oreal, Mubadala
Development Company’s brilliant 35 percent acquisition of Italy's Piaggio Aero, Iran witnessing
a rise in gold coins being traded at a premium, and Saudi stock markets buzzing with rumors of
the wives of suspended traders continuing business as usual on their spouses' behalf characterized
the Gulf's business highlights last week.
Bahrain
After one of Bapco’s plants was lambasted for being one of the main causes of skin allergies and
other ailments among people living in nearby residential areas, the company said last week it was
investing $140 million on its new Bahrain Refinery Gas Desulphurisation Plant, reportedly the
largest amount ever spent in Bahrain on a project addressing environmental concerns.
Last month, media reports stated that skin rash cases among Maameer residents had
resurfaced as gas emissions from the nearby industrial area spread across the village – a problem
which had supposedly been solved in June 2005. According to the head of the Parliamentary
Investigation Committee on Maameer emissions, deputy Ahmed Hussain, although Bapco was
not the solely responsible for the pollution, it was the main cause.
Bapco says that the new plant aimed to reduce sulfur dioxide emissions by 94 percent and
hydrogen sulphide in fuel gas to less than 150 parts per million (ppm), well below the
governmental environmental regulation limits.
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Meanwhile, Bapco was deeply involved in negotiations with 2000 striking workers who
accepted a five percent pay rise and proposed improved living conditions but said that they did
not get a requested 30 percent risk allowance as compensation for the potential risks of inhaling
dangerous gases during their work. The workers are part of the Consolidated Contractors
Company, a subcontractor for Bapco, and were hired out to work for the Japan Gas Company,
which was awarded a contract for a Bapco project. The problems started when one of the workers
refused to move to another site in Qatar. Workers apparently believe that the Qatar site is more
dangerous, and say that workers there have met with fatal accidents. Another bone of contention
is that supervisors and middle management at the site are paid a ‘gas allowance,’ which the
workers are now demanding for themselves.
UAE
The UAE is seeing different proactive measures being undertaken to stem the labor problems at
the root. It is considering a new policy to ensure that companies pay salaries on time. But while
that sea change is coming, the UAE labor sector saw its own scenes of discontent last week. Four
former labor officials withdrew their case against Dr Ali Abdullah Al Ka'abi, Minister of Labor,
but are still suing the cabinet for unfair dismissal. June 21 has been set as the date for a court
ruling said Busit, Al Rokn and Associates, the legal firm dealing with the case. The firm said that
the move was against the UAE Civil Service Law, which dictates employment rules in
government departments. However, the State's Lawsuits Department at the Ministry of Justice,
which represents the cabinet, said that the cabinet had a constitutional right to appoint and
dismiss employees of the federal government.
Elsewhere, nearly 800 employees of Mina Zayed, including 270 UAE nationals, got the pink
slip following a management takeover by Dubai Ports World. But DP World distanced itself from
the job cuts, saying that it was only responsible for managing the port.
Two other lawsuits took on a life of their own. On a positive note, Dubai Internet City's Smart
City project in Kochi, Kerala got a green signal from the Kerala High Court, which cleared the
signing of an agreement between Government of Kerala and Dubai Technology of Media Free
Zone Authority (TECOM). The project faced a sudden setback last month when India's Chief
Election Commissioner blocked the signing of the final agreement on the grounds that it was
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against the code of conduct to be observed for the upcoming general elections in Kerala. But the
Kerala High Court ruled that the code would not apply to the Smart City project, as the decision
to start it had been taken in 2004.
However, Dubai Internet City sources indicate that the group would prefer to hold on to its
horses and wait until elections are over as recent opinion polls indicate that the Marxist-led Left
Democratic Front, which opposes the project, is likely to come to power in the state.
Two other cases involving L'Oreal, revealed different dimensions of the internationally
renowned name. On the one hand, L'Oreal has been fighting it out with Dubai-based EPW, the
latter having been accused of closely copying 12 L'Oreal fragrances. In a totally separate case,
L'Oreal and another Dubai company, Chaloub Group, have been accused of 'plotting a dirty
tricks' scheme to flood Russia with cut-price cosmetics. Swiss company Temtrade, L'Oreal's
original Russian distributor, alleges that L'Oreal partnered with the Chalhoub Group's owner,
Patrick Chalhoub, to undercut the market created by Temtrade in Russia.
The acquisitions scene saw a new development. Mubadala Development Company, owned by
the Abu Dhabi government, said it had acquired 35 percent of Italy's Piaggio Aero, a leading
aerospace company, for an undisclosed amount. Mubadala will get three of the seven board seats,
including that of vice-chairman. It will also pick up one of the three seats in the firm's executive
management committee. The deal aims at consolidating Piaggio Aero’s business in both the
European and North American business aviation markets and explore new markets such as the
Middle East, Far East, and South America. Piaggio Aero Industries is the only company in the
world to be active in all aspects of aircraft manufacturing and maintenance.
Meanwhile, the UAE cabinet recently approved the statute governing the newly established
National Media Council, which has the power to cancel or suspend media licenses if there are any
violations of press laws. This followed the scrapping of the Information Ministry, which was
reported in Arabic daily Al Khaleej. The Council will take responsibility regarding all media
affairs and any other responsibilities stipulated in cabinet decisions and laws. According to its
statute, the Council will be run by a six-member board, including a chairman, deputy chairman,
and director-general. The board will serve for a term of four years, and will be formed by a
decision to be issued by the chairman of the Abu Dhabi Executive Council. The council will be
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based in Abu Dhabi, and may set up branches and offices in other emirates. The board will meet
once every month, and may hold an extraordinary meeting upon a request by its chairman.
Qatar
The Qatar Financial Center (QFC) can probably read the writing on the wall. Last week, the
QFC announced that it was framing its own labor and immigration rules that will apply to
companies it licenses. Labor disputes arising within a QFC-authorized company will be settled
within the framework of QFC-framed regulations. As is the case with drafts of all legislation the
QFC frames, the two aforementioned drafts will also be circulated for comment from expert
circles.
Saudi Arabia
The Kingdom’s ambitious railway expansion project seems to be going full steam ahead. The
Saudi Railways Organization will hold a project day next month for potential investors in the
Makkah-Madinah rail link to provide information required by key players such as high-speed rail
technology suppliers, passenger rail operators, civil and electromechanical contracting
companies, and other prospective investors.
Elsewhere, Riyadh’s governor, Prince Salman, laid the cornerstone of Saudi Arabia’s first
private aviation school at Thumama Airport last week. Even though the school is not complete,
classes will start soon in existing buildings at the airport and move to the new complex when it is
ready. A shift in regulations means members of the public will now be allowed to fly.
The stock markets were abuzz with reports alleging that the two dealers suspended by the
Central Market Authority for manipulating the stocks of three companies this month were still
managing their stock funds in their wives' names. Meanwhile, the Saudi Electricity Company
announced that it suffered a loss of SR 436 million in the first quarter of 2006, a further increase
over the losses of SR 303 million it incurred during the same period last year.
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Oman
Oman’s domestic insurance sector is on the threshold of a drastic restructuring in line with its
WTO commitments. The $300-350 million industry is expecting a new and comprehensive
insurance law, which will increase the competitiveness of the domestic insurance sector.
Iran
A combination of tension surrounding the country's nuclear program led to gold coins being
traded at about $186 last Wednesday in Iran, a $25 premium over current international traded
gold prices, and well above the $145 March figures of the informal Iranian market. The coins
weigh 8.13 grams each.
The markets were also reacting to the parliament's approval of a law ordering the central bank
to lower interest rates to single digits by 2010, which analysts say will push bank deposit rates
below the inflation rate. The government has also told private banks to slash their lending rates to
19 percent from the current figures of 25 percent or higher, in line with President Mahmoud
Ahmadinejad's policy of lowering lending rates to help the poor.
Sources: Regional newspapers and agencies
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The GRC "Gulf Business Weekly Report” is published online in Dubai, United Arab Emirates by Gulf
Research Center, as part of the GRC Gulf Business Weekly Bulletin Series. The opinions expressed in this
publication are excerpts from regional newspapers and news agencies and do not state or reflect the
opinions or position of the Gulf Research Center.
© Gulf Research Center 2006
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