Professional Documents
Culture Documents
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Algeria............DZD 215
Bahrain.......................BHD 1
Egypt..................EGP 10
Iraq........... IQD 3200
Jordan....................JOD 2
Kuwait.............KWD 0.75
Lebanon..............LBP 4000
Libya........................LYD 3.5
Oman...................OMR 1
Qatar.................QR 10
Saudi Arabia.........SAR 10
Syria............................SYP 200
UAE.................AED 10
Yemen..................YER 600
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p44
Its going to be
a fees feast
for investment
banks
p16
p22
p34
Cover
Trail
1 15 August, 2016
Opening Remarks The probably unknowable but all-important natural interest rate
Global Economics
Migrant Chinese workers find you can go home again
10
India courts Iran, Russia, and other petro states to satisfy its growing thirst for oil
12
14
Companies/Industries
16
Go for it.
18
Sketchy
18
Saudi Arabia sets a course for more tankers; A big debt is restructured
19
Politics/Policy
22
Old Middle East foes unite over gas deals and fighting militants
23
25
Less sketchy
Technology
Live video puts Facebook back in the news business
28
30
30
32
Colour sketchy
Markets/Finance
Saudi Arabia tops Wall Streets agenda as global dealmaking slows
34
35
Turkey unrest deals a new blow as banks struggle with bad debt
36
Defined: Ever wonder why so many hot unicorns have green shoes?
37
Features
Developing Feud Iranian businessmen take to the Candian courts over a property deal
44
Baltimore Chop Under Armours plan to redo its supply chain, remake a city, and upend Nike
48
Great Scot! Post-Brexit, Nicola Sturgeon revives the fight for Scottish independence
54
1 31 July, 2016
businessweekme.com
Etc.
Zak Pashak is peddling his Detroit-assembled bicycles to get the Motor City going again
59
Retail: Some brands are shunning fast fashion, setting themselves apart with clothes that lastand last and last
62
What I Wear to Work: Director and choreographer Mia Michaels wears glasses with swagger
63
How Did I Get Here? Jonathan Mildenhall, Airbnbs marketing chief, wants to build a more trusting world
64
p44
Algeria............DZD 215
Bahrain.......................BHD 1
Egypt..................EGP 10
Iraq........... IQD 3200
Jordan....................JOD 2
Kuwait.............KWD 0.75
Lebanon..............LBP 4000
Libya........................LYD 3.5
Oman...................OMR 1
Qatar.................QR 10
Saudi Arabia.........SAR 10
Syria............................SYP 200
UAE.................AED 10
Yemen..................YER 600
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We expect intra-MENA,
intraregional activity
to become a much
stronger component of
trade activity
Kwabena Ayirebi
Regional Head of Global Trade and Receivables
Finance at HSBC Middle East
Exports from the MENA region grew significantly between 20042014, according
to figures from U.N. trade body UNCTAD.
Exports have notably increased to emerging
markets, which accounted for 59 percent of
MENAs outbound trade in 2014, up from a
third of total exports a decade earlier.
Strong trading links have been forged
throughout the Asia-Pacific region, where
burgeoning demand for crude oil has seen
Vietnam, Indonesia and China become
increasingly important buyers of MENA
products and services. Further expansion
into Africa is also being pursued by many
companies.
A.F. Merchant, Executive Director at
Sharjah, UAE-based food producer Allana
International Ltd. (IFFCO), is among those
looking to expand their diversified portfolio.
Merchant, a client of HSBC in the Middle
East, has his sights on increasing operations in Africawhere there is rising pur-
Index
People/Companies
22
Erdogan emerges
from coup attempt
stronger
Novavax
Oil & Natural Gas Corp.
Oil India
30
12
12
PQRS
Pfizer
30
Polska Grupa Gornicza
14
Qantas Airways
16
Recep Tayyip Erdogan 22, 36
Ripley Ballou
32
Rodney Frelinghuysen 25
Rosneft
12
Royal Dutch Shell
30
Sagamore Development 51
Sam Mizrahi
45
Saudi Aramco
19, 34
Saudi Stock Exchange
34
28
Mark
Zuckerberg
Abdel-Fattah El-Sisi
Abdullah Gul
Adidas
Air France
Airbnb
Akbar Komijani
Alex Salmond
Alibaba
All Nippon Airways
23
23
50
17
64
35
55
37
17
Bader Alamoudi
34
Bahri
19
Balmuda
32
Bank Melli Iran
46
Barack Obama
25
Benjamin Netanyahu
24
Bharat Petroleum
12
Blagica Bottigliero
29
BNP Paribas
19
Bob Corker
25
Bob Yawger
18
Boeing
17, 25, 36
Boris Johnson
54
British Airways
17
Cannondale
61
Chris Coons
25
Chris Cox
29
Citigroup
34
Colm Kelleher
35
16
DEF
Amin Nasser
Anadarko Petroleum
Ander Crenshaw
Andrew Elliott
Apicorp
Ash Carter
Atanu Chakraborty
Dan Gilbert
52
David Cameron
54
Deputy Crown Prince
Mohammed bin Salman 35
Detroit Bikes
60
Deutsche Bank
34
Dharmendra Pradhan
12
DuPont
50
Emirates
16, 19
Airbus Group
19
14
25
35
19
25
14
Esther George
Fabrice Bregier
Facebook
Fahad Al Saif
Fethullah Gulen
Foxconn Technology
8
16
28
34
22, 37
10
35
Ali Tayebnia
GHI
Gail India
Gen Terao
GlaxoSmithKline
Goldman Sachs
Gordon Brown
Gregory Glenn
Hamid Chitchian
Hassan Rouhani
14
32
30
18
56
32
18
35
Ian Taylor
Indian Oil
Innoseis
Iran Khodro
18
12
30
19
JKL
Jack Reed
25
Jamal Al Kishi
34
Janet Yellen
8, 9
Jean-Marc Ayrault
24
Jeremy Corbyn
54
Johannes van den Brand 30
John Kerry
25
John McCain
25
Jonathan Mildenhall
64
JPMorgan Chase
34
Kevin Haley
53
Kevin Plank
50
Khalid Al-Falih
19
Khashayar Khavari
45
Krzysztof Tchorzewski
14
LG
19
Line
37
Lockheed Martin
25
MNO
Maciej Bukowski
14
Mahmoud Reza Khavari 45
Marco Rubio
25
Marion Gruber
Mark Aplin
Mark Beker
Mehmet Simsek
Mia Michaels
Michael Klein
Mizuho Securities
32
35
30
36
63
35
18
34
HSBC
ModSquad
29
Mohamed Kamal
24
Mohammad Al Tuwaijri 34
Mohammad Hassan
Habibollahzadeh
19
Morgan Stanley
35
Mostafa Pour Mohammadi 47
Narendra Modi
12
National Commercial Bank 35
Nicola Sturgeon
54
Nigel Farage
54
Nike
50
25
US Congress fights
over Gulf jets
60
56
36
60
19
16
19
37
34
25
TUV
Tamim Jabr
35
Tawfik Okasha
24
Theresa May
54
Tim Clark
17
Tim Kaine
25
Tom Geddes
52
Tony Blair
24, 56
Trafigura Group
18
Twitter
29
Under Armour
48
Verus Partners
35
Vestas Wind Systems
19
Vincent Reinhart
8
Vitol Group
18
WXYZ
Warner Bros.
Xi Jinping
Yair Golan
Yapi ve Kredi Bankasi
Zak Pashak
29
11
24
36
60
ABC
Schwinn
Sean Connery
Sekerbank
Shinola
Siemens Wind Power
Singapore Airlines
Standard Chartered
Stride Rite
Stuart Gulliver
Susan Rice
The
Search
For the
Elusive
Natural
Interest
Rate
By Peter Coy
Upside-Down World
Sovereign debt of
developed nations
Debt with a negative yield
US
$8.8t
All of the USs debt has a positive yield
Opening
Remarks
Japan
$7.3t
UK
$1.7t
Almost 80 per cent of Japans sovereign
debt has a negative yield
France
$1.5t
Italy
$1.5t
Germany
$1.1t
Spain
$0.8t
Other
$1.6t
Netherlands
$0.4t
Global
Economics
1 15 August, 2016
The flood of rural labour has slowed to a trickle and may dry up altogether
Vacation resort
under construction
in southern
Guizhou province
Being a migrant is
not fun. You cant
ever earn that much
money, and you are
far away from your
family.
Shi Wenjian
11
Global Economics
SHUTTERSTOCK
12
Entrepreneurs who
have capped their
wells in Alberta or
North Dakota will
be looking at this
kind of story with a
greater amount of
interest. Atanu
Chakraborty, head
of Indias Directorate
General of
Hydrocarbons
Energy
state-controlled Rosneft.
The Indians arent finished. Indian companies
are considering buying
a stake in Rosneft itself,
Dharmendra Pradhan, the
countrys oil minister, told
reporters in New Delhi on
23 June. With Indian investment in Russian oil projects reaching up to $6 billion, strong
bilateral relations will ensure Indias
energy security for a long term, he
said. By taking stakes in overseas projects, India also ensures local companies benefit from the money spent on
imported oil and gas.
For Modi, securing a reliable supply
of oil and gas is a foreign policy
priority, says Ashok Sharma, an
international-relations fellow at the
University of Melbournes Australia
India Institute. India cant afford not
to focus on energy security. The previous government had similar goals,
but Modi has made them a higher priority, says Dhruva Jaishankar, a foreign
policy fellow at Brookings India, a New
Delhi-based affiliate of the Brookings
Institution. You have seen the government be very aggressive, he says.
Demand for oil is growing faster in
India than anywhere else. It jumped
400,000 barrels a day in the first
quarter, to 4.4 million barrels, accounting for almost 30 per cent of the
increase in worldwide consumption,
the International Energy Agency said
in May. Driving that thirst is Indias
growing car market: Domestic vehicle
sales rose 5.6 per cent in the year ended
in March, to more than 20 million,
helping propel a 14.5 per cent increase
in petrol purchases. The IEA expects
the country to account for 25 per cent of
global demand from 2013 to 2040.
India imports more than threefourths of its oil and about 40 per cent
of its gas, putting pressure on the rupee
and the trade deficit. By 2022, Modi
wants to reduce import dependence by
10 per cent, so hes offering attractive
terms to foreign companies to
drill off India. Entrepreneurs
who have capped their wells
in Alberta or North Dakota
will be looking at this kind
of story with a greater
amount of interest, says Atanu
Chakraborty,
Global Economics
14
Energy
A bulldozer works
atop a heap of coal
at a mine in
southern Poland
restructure further, it could face bankruptcy within two years. Shutting down
money-losing mines and cutting jobs is
the only long-term solution, he says.
Some miners see that their way of life
cant last forever. Michal Piotrowski,
from the Silesian city of Zabrze, says
he quit retailing in 2012 and became
a miner to earn more for his family.
Hes disillusioned with what he calls
a give-it-away culture: administrative staff who get the same free meals as
miners underground; free heating coal
for retired miners; an annual bonus of
two months salary. Its slowly changing, he says. But very few people are
willing to give up any benefits.
Although the miners recently agreed
to suspend part of their benefits for
two years, unions say job cuts are unacceptable. Jaroslaw Grzesik, head of the
mining division of the Solidarity union,
praises the governments decision to
promote coal over renewables, which,
he claims, are being pushed by richer
countries able to afford such projects.
Were not a country where the sun
shines and wind blows all year, he
says. Were a country rich in coal, and
we should care about our economy and
our citizens. Ladka Bauerova and
Maciej Martewicz
The bottom line Coal miners are a powerful force
in Polish politics, and they have preserved jobs
as a result.
global-economics
KACPER PEMPEL/REUTERS
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1 15 August,
May, 2016
2016
Running Out
of Runway
16
With orders drying up, Airbuss flagship A380 superjumbo is becoming an expensive failure
A cut in production could be the beginning of the end
After last months Farnborough
International Airshow in the UK, the
worlds biggest passenger plane looks
like its set to go down in aviation
history as having never truly taken off.
Airbus Group announced at the show
a drastic cut in production of its flagship A380 superjumbo, acknowledging that demand has fallen far short
of original projections and raising
the prospect of the model being prematurely axed. The build rate for
the double-decker will be slashed by
more than half to one plane a month
by 2018, Airbus revealed on 12 July.
Contrasting with the success of the
rest of the Airbus line, the company
delivered the surprise damper just
hours after pulling in several massive
orders for its popular A320-type single-aisle jet at Farnborough.
Facing an almost inevitable demise
just a decade into commercial operation, the A380 never met Airbuss
aspirations, and the company has
long since given up on recouping
its 25 billion euros ($28 billion) in
development costs. Demand evaporated in recent years with the introduction of more nimble twin-engine
jets, leaving Dubai-based Emirates as
the only carrier to fully embrace the
giant aircraft. Having once predicted
that airlines would buy 1,200 supersize-planes over two decades, Airbus
has had to settle for a far more modest
reality. It has delivered only 193 A380s
with 126 orders left to fill, though
some of them are unlikely ever to
materialise, and says the planned rate
cut will put future output in line with
the current order intake.
Even with Airbus seeking to reduce
programme costs to allow the A380
to remain viable at lower production
levels, the severity of the planned
rate cut suggests the programme is
on the brink of a terminal decline.
While a break-even rate of 27 deliveries achieved in 2015 should be cut
to 20 next year, thats still eight more
than Airbus is counting on from 2018,
putting the plane in a perilous position regardless of jetliner unit chief
It wont recover
from this. The new
rate is seriously
uneconomic;
therefore it will
die in a few years.
Richard
Aboulafia, an
aviation consultant
at Teal Group in
Fairfax, Virginia
17
An oversupplied
market widens the oil
contango 18
Companies/Industries
Oil
A Crude Contango
Upsets the Rhythm
Oils one-year price suggests the
recent rally is over
Contango means you have an
oversupplied market
18
Energy
$12b
Targetted investment by
Iran for its green power
build out
Companies/Industries
Tehrans government is seeking commerce with countries and companies
By Rahul Odedra
offering the best financial terms rather
than prioritising political and historical ties. The energy ministry is already
in talks with some of the worlds largest
renewable-energy players including
Vestas Wind Systems and Siemens
Wind Power, Chitchian says. Vestas
chief sales officer, Juan Aratuce, said
A venture between Arab Petroleum In- $1.1b
in June that Iran could be an important new market for wind energy.
vestment Corporation, known as Apicorp, and
Automaker Iran Khodro is negotiating
National Shipping Company of Saudi Arabia will
with South Koreas LG to jointly develop
electric vehicles.
create the worlds largest fleet of oil tankers Dubai expects to
Foreign direct investment dried up
bids within
and support the kingdoms plan to boost crude solicit
seven months for road
during the sanctions but it is already
worth as much
starting to flow, says Mohammad
exports, Saudi Energy Minister Khalid Al-Falih projects
as 4 billion dirhams
Hassan Habibollahzadeh, Irans charge
billion) as part of a
said. Apicorp, a multilateral energy-finance lend- ($1.1
bigger drive to upgrade
daffaires in UK. Many companies have
signed agreements during the last few
er, and the Saudi shipping company, known as the citys transport links.
months. Electricity is considered to
Bahri, formed a $1.5 billion investment fund to add 15 very
be one of the most important sectors.
large crude carriers to the shippers planned fleet of 46
Most of Irans power plants are over 40
years old and need to be renosuch vessels. The deal will supEgyptAir, seeking to
vated and repowered, he says.
overcome slumping
The government is planning to
port Saudi Arabias efforts to entourist numbers and
invest a total of $50 billion in its
the impact of a fatal
sure a secure supply of oil to its
jetliner crash, revealed
electricity system in the next
19
an order for nine
seven years.
customers worldwide, Al-Falih
Boeing single-aisle jets
The energy ministry has set
and said it plans to buy
said. H
more planes to aid its
12 separate feed-in tariffs for
recovery.
renewables, depending on the
has signed
type of technology and the size of the
a deal with a majority of its creditor banks to restructure
power plant. That system will be kept
about $6 billion of debt, taking the Saudi conglomerate one
for projects under 100 megawatts. The
new tender system will be used for facilstep closer to ending a seven-year impasse over the Middle
ities with higher generation capacities.
Easts biggest default. The agreement with a five-member
Iran will tender 1 gigawatt of wind and
as many as 3 gigawatts of solar, likely
committee representing about 80 banks, which include BNP
in several stages, Chitchian says. It is
Paribas and Standard Chartered, formally commits Algosaibi
also seeking to build biomass and geothermal plants and swap natural gas for
and the lenders to support the implementation of the agreed
electricity with Armenia.
settlement terms, the Saudi Arabian company said.
Iran may also add solar to its system
CEO
of energy swaps, which before sanctions
Wisdom
Qatar Airways has agreed to buy a
were lifted allowed the country to trade
49 per cent stake in Meridiana Fly marking
crude for refined products. Under a socalled solar for service programme,
the Gulf carriers third investment abroad
developers and landowners would split
to expand its global reach. Qatar Air signed
cash flows generated from power sales.
Iran currently supplies 80 per cent of
an agreement with Alisarda, a holding com- We are not worried
its power from natural gas and wants to
the number of our
pany of the Aga Khan that owns Meridiana, customers in Asia is
raise that figure to 90 per cent by the end
growing, and different
of next year. Anna Hirtenstein
Briefs
Saudi Fleet Goes Large
$864m
AFP
companies-and-industries
A2
Politics/
Policy
1 15 August, 2016
Another
Coup, A
Stronger
Erdogan
of falling victim to
yet another coup,
perhaps understandably given
the history. Those
fears came to a
head in 2007, when
the AK Party put
forward thenForeign Minister
Abdullah Gul to
run as president.
The army objected, describing itself
as the absolute defender of secularism, in a move reminiscent of previous coups by memorandum. This time,
the army fell short.
Facing down huge secularist demonstrations, Erdoan called snap elections
at which the AK Party increased its parliamentary majority. The new legislature
elected Gul as president, and Erdoan
emerged even stronger, the militarys
weakening grip having been exposed.
Immediately, prosecutors targeted the top brass. One case alleged
that the armed forces had planned
a coup against the AK Party government early in its term. The alleged
plot, codenamed Sledgehammer, was
a fantasythe key evidence had been
fabricatedand in 2014 the convictions
were eventually thrown out. Many officers were released, but the phony coup
cases had already served their purpose.
Swathes of the military were decapitated, clearing the way for less militantly secularist generals.
When the Fethullah Gulen movement,
Erdoans allies against the army, turned
against him in 2013, he again alleged a
coup attempt. In response to charges of
corruption against his government and
family, Erdoan mobilised a purge of the
judiciary, police and other institutions,
to remove Gulen supporters he accused
of instigating the graft probe.
Since Erdoan blamed Gulen for last
months failed coup attempt, which
according to the government left at
least 265 people dead, another crackdown on the groups supporters has
begun. More than 2,800 military personnel were arrested during raids on
the day following the coup attempt and
a similar number of judges and prosecutors were removed from their posts.
International Relations
,
9 000+
Turkish military personnel arrested in the week
after the failed coup attempt
23
communists and,
to a lesser extent,
Islamists fought in
the streets, leaving
an estimated 5,000
dead. Erdoan
joined the Islamists.
Two of his friends
were killed in the
violenceone by
a bomb, another
shothe recalled in
a 2011 interview.
At the same time, he had a job at
Istanbuls transport authority, but
after a third military coup, in 1980, he
had to resign. The new boss, an army
colonel, ordered men to shave off their
beards, considered signs of religiosity
and Erdoan refused. The new regime
also banned the Islamist political group
to which he belonged, the National
Salvation Party.
The army, with its secularist agenda,
was a natural enemy to Erdoan. But
the coup and repression that followed
also contributed to a shift for him and
his fellow Islamists, who began to
temper their religious radicalism to
survive politically. They embraced electoral politics; by 1994, Erdoan was
elected mayor of Istanbul, the countrys
largest city and commercial heart.
Erdoans term as mayor was interrupted by a further intervention
from the armed forcesthe so-called
post-modern coup of 1997, in which
military commanders listed their complaints about the Islamist-led coalition government in a memorandum,
forcing it to resign. In the purge that
followed, Erdoan was jailedfor
reading out a poem that compared
minarets with bayonets.
Erdoans four-month incarceration
only boosted his political appeal. He
was inundated with fan mail and gifts
while in prison, according to an aide at
the time, Huseyin Besli. He cut a CD of
his poetry readings. After his release,
Erdoan co-founded the Justice and
Development Party, or AK Party, which
explicitly accepted the secular nature of
the Turkish state, helping it win a wider
following. By 2002, it was in power.
From the moment Erdoan took
charge, however, he appeared fearful
24
There is definitely a
high level of
cooperation that
could be
unprecedented,
especially in the field
of combating
terrorism. Egypt will
handle this issue in a
rational way, based
on national interest.
Mohamed Kamal,
political science
professor at Cairo
University
AFP
Politics/Policy
Politics/Policy
until it can develop its own field, the
largest in the Mediterranean. After
Israel and Turkey ended a six-year rift
in June and said they would start talks
on energy supplies, Netanyahu publicly
sent a message of reassurance to El-Sisi.
Israels Leviathan field can supply
Egypt, and that is something we are
working to advance, as well as Turkey,
he said at a news conference in Rome
in June. Idle Egyptian liquefaction
plants could be reactivated to convert
the Israeli gas for export to Europe and
other international markets. Israel may
forgive as much as half of a $1.7 billion
fine international arbiters ordered
Egypt to pay it for an earlier, broken gas
contract, two people familiar with the
matter said in May.
For Egypt, theres more at stake than
energy supplies: assuming a leading
role in peace talks is an opportunity
after criticism that longtime Egyptian
leader Hosni Mubarak had allowed
Egypts influence to wane, and El-Sisi
had expected his words to resonate.
Ill talk on a subject that could be
totally unexpected and it is not a simple
one, he said. I hope everybody listening to me in Egypt, the Arab region, the
Palestinians and the Israelis, will pay
attention. David Wainer, Jonathan
Ferziger and Ahmed Feteha
The bottom line Egypt and Israel are pursuing
closer ties to cooperate on energy policy and
counter-terrorism.
Defence
$12b-$20b
politics-and-policy
25
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Users a
Streaming
Service
28
Then This
Happened
YOUTUBE (5)
1 15 August, 2016
29
Technology
30
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Innovation
Balmuda Toaster
Form and function
Age 42
Founder and president
of Tokyo-area appliance
maker Balmuda, which has
50 employees
Origin In 2014,
Balmuda began
work on a toaster
after a rainy-day
barbecue taught
Terao that humidity
could help keep
toasted bread moist.
32
1.
Background Terao, a
high school dropout
who spent a decade
fronting Japanese
rock band the Beach
Fighters, started
Balmuda in 2003,
building aluminum
laptop stands.
2.
Price The toaster
costs 24,000 yen
($230) and is
available in Japan in
stores and online.
Next Steps
Consumers are embracing gadgets that do one thing well, says Hiromi
Yamaguchi, an analyst at researcher Euromonitor International. Mark Oda, an
app marketer in Tokyo who was among Balmudas first buyers, says hell never
be able to go back to cheaper toasters. Balmuda recently expanded sales of
the toaster oven to South Korea but says its not planning to move into the US
or Europe anytime soon. Some are available through resellers on Amazon.
com and elsewhere. Reed Stevenson
Technology
Markets/
Finance
1 15 August, 2016
Saudi Arabia provides some much-needed business amid a global slump in the industry
34
with huge potential for global investment banks, says Tamim Jabr, Deutsche
Banks head of corporate and investment-banking coverage in Saudi Arabia.
Morgan Stanley President Colm
Kelleher, who travelled to Riyadh in May,
told Saudi Arabias al-Eqtisadiah newspaper that his visit was to reaffirm the
banks commitment to the Saudi market
at a time when the countrys future is
being shaped. An official at the New
York-based firm declined to comment.
The big banks are vying not just with
each other, but also with smaller firms.
Verus Partners, a London-based advisory boutique co-founded by former
Citigroup bankers Mark Aplin and
Andrew Elliott, helped Saudi Arabia
secure its first loan in 15 years in April,
when the government raised $10 billion
from banks.
Michael Klein, another ex-Citigroup
investment banker, is advising Aramco
on its IPO, people with knowledge of the
matter said in April. Kleins firm is providing strategic advice to the government, while JPMorgan is working on
preparations for the IPO and may be
among the banks that underwrite the
offering, the people said.
To reduce the importance of oil,
Deputy Crown Prince Mohammed
bin Salman wants to build the countrys sovereign wealth fund into the
worlds largest, and increase the proportion of its foreign investments to half,
from 5 per cent. Its going to be a fees
feast for investment banks, says John
Sfakianakis, the Jeddah-based head of
economic research at the Gulf Research
Centre, a think tank. No one else in the
Middle East, and maybe even emerging
markets globally, is embarking on such
deep reforms. The Aramco IPO alone
would generate at least $50 million in
banking fees, according to an estimate
from Freeman.
The kingdom provides a bright spot
in an otherwise dismal landscape for
investment banks, whose earnings are
under pressure from record-low interest rates and escalating capital requirements. UK voters surprise decision to
withdraw from the EU heralds even
harder times for securities firms as companies that hire banks to advise on takeovers and raise money face years of
$100
Sovereign Debt
35
Markets/Finance
36
Raised by Qatar
April
May
Reported minimum
amount Saudi Arabia
wants to raise
Maximum Kuwait
hopes to raise
September
Banking
ILLUSTRATION BY 731
Markets/Finance
rates and Standard & Poors cut Turkey
to BB from BB+, with a negative outlook.
Turkeys banking index fell as much as 4
per cent in Istanbul on 21 July, while the
benchmark Borsa Istanbul 100 index lost
4.4 per cent. Both gauges hit their lowest
closing levels since mid-February.
We may see a rise in the costs of borrowing, but I would not expect difficulty
borrowing, Ates Buldur, an analyst at
Credit Suisse Group in Istanbul, says.
In past crises, Turkish banks have
seen only an increase in the cost
of funding.
Before the coup attempt, Turkish
banks were confronting deteriorating
asset quality in the tourism and energy
industries. Bomb blasts from Ankara to
Istanbul have deterred visitors, while
power companies are struggling to repay
loans amassed during an acquisition
spree before energy prices slumped. Bad
debts among retailers also jumped 54 per
cent in April from a year earlier, while the
proportion of soured loans in the construction industry, which accounts for 12
per cent of bank assets, increased to 4.2
per cent from 3.4 per cent.
Moodys current assessment already
incorporates a high level of political
risk, but the impact of the failed coup
on Turkeys policy credibility seems set
to be negative, undermining economic
activity in the near and in particular
medium terms, Maya Senussi, an analyst
at Roubini Global Economics, says.
More than 200 people died in the
effort to overthrow Erdoan, which the
president has blamed on exiled cleric
Fethullah Gulen. Tanks rolled through
the streets of Ankara and Istanbul on 15
July, while warplanes and helicopters
circled overhead during the uprising.
Downside risks for Turkish banks
credit profiles and ratings have increased
as a result of the countrys attempted
military coup, Fitch Ratings said in a 20
July report. Turkish banks credit profiles are sensitive to country risks, access
to foreign credit markets and the lira
exchange rate. Banks accounted for
$170 billion of Turkeys $416 billion external debt in the first quarter, with $100
billion maturing within a year, according
to Fitch. Ercan Ersoy
The bottom line A failed coup attempt is making
access to funding more difficult for Turkish banks
already impacted by a troubled economy.
markets-and-finance
Defined
Greenshoe (n)
By Alex Barinka
37
fintech,
a challenge
or opportunity?
Sanjeev Mehra
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Commercial Bank of Dubai, UAE
Hani Khalil
Head of Alternate Channels,
Qatar National Bank, Qatar
Vladislav Solodkiy
Chief Executive Officer,
Life.SREDA, Singapore
Ali Al Omran
General Manager Technology,
Arab National Bank, Saudi Arabia
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Head of Innovation & IT,
Emirates Islamic Bank, UAE
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An Iranian-Canadian
developer and the
family of an exiled
former chairman of
Bank Melli Iran trade
accusations over a
Toronto property deal
By Katia Dmitrieva
45
46
talk and dont provide the necessary cooperation or commitment and so far they
havent cooperated, Pour Mohammadi
is quoted as saying.
Several calls, e-mails and faxes seeking
comment from the judicial authority of
Iran and Bank Melli werent returned.
A representative of Interpol declined to
comment on Khavari, referring questions to Iranian authorities. The government cant comment on whether it
has received an extradition request with
respect to any particular person unless
and until that person is arrested pursuant
to the Extradition Act, due to the confidential nature of state-to-state communications, Ian McLeod, spokesman for
Canadas Department of Justice, said in
an e-mail. The parliamentary secretary for
consular affairs in Ottawa didnt respond
to requests seeking comment.
As the news of Mahmouds move made
Canadian headlines in October 2011,
Mizrahi met the family at their home
in Toronto, according to both parties.
Mizrahi said he sought to end the relationship because of the familys lack of
funds after their bank accounts in Canada
were frozen, according to the court documents. The Khavaris deny their accounts
were frozen and said the meeting was
an intimate family gathering, according to court documents. They continued
working together.
Mizrahi and Khavari say they hammered out new terms according to court
files: that Mizrahi would take full control
of the properties and associated companies and the Khavaris would be paid
50 per cent of the profit, the files say.
Khashayar said his interest in the companies was to be held in trust. Because
Mizrahi couldnt get access to the funds,
he said he had to unexpectedly borrow
C$88 million from banks to build the two
Yorkville condos at interest rates as high
as 20 per cent, the court files show.
Business continued as usual amid a
year of unprecedented growth in the
citys high-rise market. In 2011, more
than 28,000 new condo units were sold,
a record. In 2012, construction was started
on a record 24,388 units in Canadas
biggest city. Khashayar and his brotherin-law continued to work as executives
at Mizrahis company, attending presentations and being privy to conversations
with lenders for several projects including The One, according to e-mails filed in
court. Mizrahi said in court files the family
only participated because they wanted
47
ST O M P I N G
48
GROUNDS
49
50
Its difficult to talk about athletics companies without resorting to sports metaphors.
In Under Armours case, theyre particularly
hard to resist, in part because sportiness is so
essential to its corporate culture. Employees
call one another teammates; 70 per cent of
them played high school sports. The current
headquarters, in south Baltimores Locust
Point neighbourhood, includes a 3,000-square-metre gym and a
basketball court that used to be open 24/7, until all the dribbling
during work hours proved too distracting. The walls are covered
with photos of Stephen Curry and Misty Copeland so large that
their beads of sweat are several centimetres wide. Plank, a highenergy 43-year-old with gently greying hair, is fond of inspirational
analogies involving fires and races and winning. His teammates
speak of him in the reverent tones usually reserved for coaches.
The phrase aggressive, young, fearless is plastered all over
the walls. Its a quote from golfer Jordan Spieth describing himself
and the brand, but it could just as easily apply to Plank, who
propelled himself from walk-on to special-teams captain of the
University of Maryland football programme. During his senior
year, in 1995, the mid-Atlantic was seized by a record-setting heat
wave, and practicing in a sweat-soaked cotton T-shirt felt more
oppressive than usual. The year after he graduated, Plank developed a moisture-wicking shirt made from synthetic fabric and
began calling up former teammates. In Under Armours first year,
when the company was still operating out of his grandmothers
basement in the Georgetown neighbourhood of Washington,
Plank put more than 150,000 kilometres on his Ford Explorer
driving up and down the East Coast and trying to parlay those
friendships with former teammates into orders. I graduated
from college and realised, I know 60 people playing in the NFL
who have careers that are going to be somewhere between three
and five years, Plank says. So the window is about this big.
And I either take advantage of it now or lose it forever. Im thinking, Is there a way for me to give them a gift that would also
help me? And its that virtuous cycle that really got us going.
It worked better than he expected. A combination of innovative technology and Planks fervour for his own product contributed to Under Armours vertical rise, from $17,000 in sales
that first year, to $400 million in 2006, to a projection of almost
$5 billion in 2016.
An underdog ethic is still baked into company lore, even
though last year Under Armour overtook Adidas to become the
second-biggest sportswear brand in the US. In May, the company
signed the largest sponsorship deal in the history of college
PREVIOUS SPREAD: PHOTO ILLUSTRATION BY 731. PHOTOS: 731 (SNEAKERS); GETTY IMAGES (2). THIS SPREAD:
PHOTOGRAPHS BY RYAN LOWRY FOR BLOOMBERG BUSINESSWEEK
That land you were looking at? the chief of staff said. It
felttight.
I just looked up at the skyline of Dubai, and all I could think
to myself was that 15 years ago, that skyline didnt exist, Plank
says. Until someone with a vision, Sheikh Mohammed, said,
Im going to take this old fishing town and turn it into the economic capital of the Middle East. Out of desert and a fishing
town. Thats vision. And Im looking out at it and thinking, Well,
what could we do?
By then, Plank owned a two-acre parcel in an industrial
part of Baltimore, where he planned to build a whiskey distillery. The land was in a former brownfield site known as Port
Covington. That the area was largely uninhabited was part
of its appeal, he says. We wouldnt be kicking out little old
ladies with 30 cats. Over the next few years, he spent more
than $100 million of his own money buying up nearby real
estate, ultimately acquiring 108 hectares under the umbrella
of his real estate investment arm, Sagamore Development.
In April 2015, when Baltimoreans took to the streets to protest
DISNEYLAND.
THE PURPOSE OF
DISNEYLAND IS TO MAKE
PEOPLE SMILE
police brutality after the death of Freddie Gray, Plank was troubled by national news coverage that made it seem as if the entire
city was erupting in violence, when much of it was unscathed.
He understood that as a fast-growing company, Under Armour
would undoubtedly play a role in shaping the citys future. But
he was also becoming increasingly aware that as an individual
with a billion-dollar net worth, he too could have a significant
impact. We dont have a lot of people doing
stuff here [in Baltimore], Plank says. I can use
the heat and momentum [of Under Armour]
and, frankly, my balance sheet to get things
started and keep things moving. Someones
got to be the first stone in the stone soup. Then
someone else will bring the carrots and the
poultry. But were that first stone.
In January, Sagamore announced its plans for
Port Covington, which include a 370,00 squaremetre headquarters for Under Armour and
much, much more. Over the next 20 years,
Sagamore intends to essentially build a neighbourhood from scratch. Comprising almost
50 city blocks, Port Covington will be larger
than Baltimores best-known tourist attraction, the Inner Harbor, and one of the biggest
urban renewal projects under way in the US. If
all goes according to plan, Port Covington
will be home to 7,500 housing units, a
51
hotel, shopping, two light-rail stops, and a stable for the citys
police horses.
There arent many CEOs who would take their personal
capital and deploy it like this, says Tom Geddes, CEO of Plank
Industries, the privately held company that serves as Planks personal investment arm. The one example we look at a lot is Dan
Gilbert, the chairman of Quicken Loans, who has spent more
than $1.5 billion buying up downtown property in Detroit since
2010. Hes someone else who looked at his big company and
said, This thing is an engine. If I invest around it and pull together
a critical mass, I can really make a significant difference.
In cities struggling with postindustrial disinvestment and
high rates of unemployment and poverty, such investors are
often treated as saviours. I would like to also extend a sense
of deep appreciation and true excitement on the part of the
city for what we see presented here, Baltimores city planning
director, Tom Stosur, said after Sagamore revealed the Port
Covington master plan.
Planks ideas for Port Covington have also faced criticism that cuts against the saviour narrative, particularly after
Sagamore announced this spring that the arrangement would
seek $1.1 billion in support from local, state, and federal governments, including $535 million in tax increment financing, or
TIF, from the city of Baltimore. The TIF money would go toward
infrastructure improvements and come from municipal bonds
issued by the city to be repaid by new property taxes eventually generated by the project. MuniCap, a Maryland consulting firm that analysed the project,
A new Under Armour
estimates it wont create enough tax
injection molding techrevenue to repay the TIF until 2038.
nique (below left); lasts
More worrying, perhaps, is that the used to form-fit footwear
O PT I M I S E D
VERSION OF A MIDDLE
AGES COBBLERS BENCH
CROSSED WITH A FORD
MODEL T PRODUCTION LINE
Baltimore
Current
Under Armour
headquarters
95
The Lighthouse
Port
Covington
Proposed Under Armour
headquarters
1 mi.
53
NOB
CAME OUT
54
LOOKING GO
EXCEPT
SCOT
on the Leave side has been in victory. The morning after the
vote, Sturgeon gave a televised speech: a small, hardy woman in
a red suit, standing between Scottish and EU flags and projecting confidence to a rattled world. Sturgeon, 46, reminded her
audience that her Scottish National Party had run a dignified,
issues-based campaign. She spoke directly to immigrants, much
maligned in the contest, saying, You remain welcome here,
Scotland is your home, and your contribution is valued. And
she acknowledged the legitimacy of the Leave sides grievances.
The vote, Sturgeon said, was a clear expression of disaffection
with the political system that has failed in too many communities. The Westminster establishment has some serious soulsearching to do.
Political commentators around the world were wowed by
the appearance of a grown-up. The Week, a popular British
news magazine, ran an illustrated cover showing Sturgeon
standing on solid ground while Cameron, Johnson, and
Corbyn teetered over fissures in the earth. In an editorial
headlined A Modest Proposal to End Political Anarchy in
the UK, the Toronto Star asked, Why not find a way to put
her in charge of righting the British ship and steering a path
through the Euro mess? The answer is that Sturgeon doesnt
aspire to lead Britain. She would rather sever it in two.
Since the age of 16, Sturgeons lodestar has been Scottish
ODY
OF BREXIT
OOD
TLANDS
NICOLA STURGEON
BY
BEN CRAIR
55
56
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FOREVER FASHION
ROCKETTE-FUELLED AIRBNB'S
DRESSER
JONATHAN MILDENHALL
Zak Pashaks
made-inDetroit bicycles
are coming to
a bike-sharing
programme
near you
Wheeler
Dealer
By
Tim
Higgins
Photographs
by Ricky Rhodes
60
Innovation
Etc.
Etc.
culture. It was a process: Everything
that couldve gone wrong has done
so at least once, he says, explaining that equipment broke and the
factory wasnt laid out efficiently. In
2013 production began on the A-Type
model. The $700 A-Type has a utilitarian, matte-black frame, three speeds,
and a rear rack with the Detroit Bikes
logo. A womens version, the B-Type,
comes in white and mint.
Production was slow in 2014
when Pashak cold-called New Belgium Brewing in Fort Collins,
Colorado. He had a simple question: Did it need a bikemaker?
The brewery is best known for its Fat Tire amber ale, with a
shiny, vintage, red bicycle on the label. Every year the company
bestows bikes on employees to celebrate work anniversaries and
other special events, and for years it had turned to manufacturers in Asia. It just so happened that New Belgiums bike designer
had started looking for an American manufacturer around the
time Pashak called. He was having trouble actually finding a
company in the US that could scale up and make 2,500 bikes,
says Bryan Simpson, a New Belgium spokesman. Detroit Bikes had capacity to spare;
production began in earnest earlier this
year. Pashak says: It was hugea big leap
of faith for them. They made this company
possible. The contract with Motivate
this spring made it a business. Currently,
Motivate uses Detroit Bikes-assembled bicycles in New York, Boston, and Jersey City.
Back at the factory, Pashak heads to a
corner and shows off a machine that makes
wheels. This is how we won the contract for Citi Bike, he says. Although New
Belgiums bikes are constructed start-tofinish in Detroit, Citi Bikes technically arent
entirely American-made. The aluminium
61
Etc.
Retail
The Only
Sweatshirt
Youll
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Clothes that come with
a long-term commitment
By Mark Ellwood
Sprint 3G
6:13 PM
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Technically, the
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62
PHOTOGRAPHS BY 731
Bryant, 28
DITA
Etc.
MIA MICHAELS
50, director and
choreographer, New York
Spectacular Starring
the Radio City Rockettes,
New York
RICK OWENS
Those are
sophisticated
sneakers, too.
I wear them
with jeans, with
dresses, with
skirtsI wear
them all the time.
EILEEN FISHER
63
CARTIER
Your top certainly
looks comfortable.
I have a million of
these. They drape
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UNIQLO
ASOS
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JONATHAN
MILDENHALL
Chief marketing officer, Airbnb
Work
Experience
199092
Account manager,
McCann Erickson
199699
200005
Managing director,
TBWA London
199296
Account director,
Bartle Bogle Hegarty
19992000
Receiving an
honorary degree
from Manchester
Metropolitan
University, 2008
200506
Strategy director,
Mother London
200614
2014
Present
CMO, Airbnb
Life Lessons
1. Approach everything with brutal honesty. 2. Every night, ask yourself where you practiced humanity and creativity today and where you failed.
3.
64
John Smeaton
Community High School,
Leeds, England,
class of 1985
My career adviser
said, Jonathan, advertising
is incredibly white and
middle-class, and they only
recruit from Oxbridge.
You need to manage your
expectations. It made
me work incredibly hard.
Education
Y
oull
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