Dossier-India on the move 2015

INDIA ON THE MOVE2015

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Economy | Infrastructure | Banking & Finance | Remittance

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Malabar Gold Mine AD Bloomberg Businessweek DPS.ai 1 8/5/15 3:54 PM

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Malabar Gold Mine AD Bloomberg Businessweek DPS.ai 1 8/5/15 3:54 PM

India and the UAE need to take their age-old deep-rooted bilateral relations to the next level of strategic partnership

where both the economies can complement each other on investment, energy secu-rity, food security, industrial development, aeronautical, defence, science, technology and innovation–where they could work as regional partners.

Bilateral relations between India and the UAE have come a long way in the last four and a half decades. However, two-way trade between the two countries declined from its peak of $75 billion in 2012-13 to $60 billion in 2014-15. Although both India and the UAE had been each other’s top trading partners for a number of years, the UAE has slipped to the third place after China and the United States due to shrinking exports.

On that note, a visit by an Indian Prime Minister was long overdue. The last official visit by an Indian Prime Minister to the UAE took place in 1981–34 years ago. It’s inter-esting to see that Prime Minister Narendra Modi wasted no time to visit the UAE as he seeks to accelerate India’s economic growth to 8-10 per cent in the next two years.

Modi’s high-level talks with the UAE lead-ership are expected to focus on invest-ments to help fuel growth in India, where the UAE could become a strong partner in

its next chapter. They are being held follow-ing the signing of the Bilateral Investment Promotion and Protection Agreement (BIPPA) between the two countries in 2013.

The UAE, which manages some of the world’s biggest sovereign wealth funds (SWFs), has historically shied away from large-scale investments in the Indian economy. Some of UAE’s investors in India include Etihad Airways, DP World, Emaar Properties and RAK Ceramics.

However, the recent economic reforms announced by the Modi government could help the Gulf SWFs to benefit from the massive opportunities as well as contribute to India’s economic development.

India plans to raise billions of dollars to fund infrastructure and housing projects in the coming years and Modi is on a whirl-wind global tour to reassure wealthy govern-ments and investors on investment security, sound investment climate, transparency, good governance and higher returns.

Modi is also expected to seek greater investment from his fellow NRI businessmen who have generated substantial capital and are seeking to participate in his economy. Indians are the biggest foreign investors and the largest business community in the UAE, which is home to 2.6 million NRIs who remit more than $12.63 billion a year to India.

E D I TO R ' S N OT E

A LONG OVERDUEVISIT Chief Executive

Sandeep Sehgal

Vice PresidentRavi Raman EDITORIAL

Consulting EditorSaifur Rahman

ART

Art DirectorSteven Castelluccia

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Designer

Anna McGee MARKETING AND SALES

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2 EDITORS NOTEINDIAN REPORT

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AVIATION & TOURISM

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CONSTRUCTION & REAL ESTATE

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HEALTHCARE

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LAST WORDS

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ECONOMY

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INFRASTRUCTURE

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BANKING & FINANCE

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REMITTANCE

India is on the verge of overtaking all other global economies in terms of growth and development. As Prime Minister Narendra Modi seeks to rewite the future course of the Indian economy, we take stock of the latest developments for industry stakeholders and readers.

A silent revolution is taking place in the

Indian economy of late

India needs a very good smart grid, more

than smart cities

Jan Dhan Yojana is changing the financial

landscape in India

Remittance flow in to India is expected to

grow in 2015-17

Open sky policy and e-TV to boost air

traffic and tourism

Smart Cities to drive the sector as urbani-

sation picks up

India needs a check-up for its nutrition level

With gold prices at a new low, it is the best

time to buy gold

�Prime Minister Narendra Modi is re-writing India's history with landmark initiatives

E C O N O M Y

7 ECONOMYINDIA REPORT

W hen the left-leaning Jawaharlal Nehru, India’s first Prime Minister, wrote the Discovery of India

while in prison from 1942-46, he might not have, in his wildest dream, foreseen a right-wing nationalist leader named Narendra Damodardas Modi from Gujarat write a new script–the Rediscovery of India–nearly 70 years later.

Within a few months after being elected to power with a landslide victory in May 2014, Indian Prime Minister Narendra Modi started to re-write the country’s history. He is re-mak-ing India under a nation-wide industrialisa-tion programme–Make in India–and a financial inclusion initiative called Jan Dhan Yojana to bring the country’s vast unbanked majority under its banking system.

The development agenda, described in the annual budget as Vision 2022, seeks to ensure employment, economic opportunity, housing, electricity, water, sanitation, con-nectivity, medical facility and schools for its people by 2022, the 75th year of India’s independence.

“A three pronged strategy underpins this vision fast and durable economic growth, especially in manufacturing, supported by a stable macroeconomic environment; involv-ing the states as active development part-ners in a move toward ‘cooperative and competitive federalism’; and improving the delivery of social benefits while extending the social safety coverage to the elderly, and the underprivileged,” the World Bank said in

its latest India Development Update report.Reforms include efforts to improve the

business environment; liberalisation of foreign direct investment (FDI); enhancing investment in infrastructure; speedier reso-lution of corporate disputes; and simplified and lower corporte taxation, it said.

However, as he moves fast to accel-erate the growth engine of Asia’s third largest economy, he finds one big obstacle: Infrastructure, or lack of it.

Although India produces 17.5 million vehi-cles annually and is projected to become the world’s fourth largest manufacturer of automobiles by the end of 2015, it does not have enough wide roads for these vehicles to ply. Simply put, the growth of its automo-bile industry will be affected if the highways and roads network does not expand.

That’s why the government is spending $19 billion in infrastructure by 2017 when India will have completed 100,000 kilome-tres of national highways.

Investment through public-private part-nership (PPP) programmes in infrastructure is expected to be in the region of $31 billion for during the next five years. The $60 billion National Highway Development Project (NHDP)–one of the largest in the world–focuses on the widening, upgrade and reha-bilitation of 47,054 kilometres of highways.

A year is too short a period to measure the success of a government’s socio-eco-nomic programmes, especially when the target is sky high. However, partial effects

EMERGENCE OF A NEW INDIATHE NEW GOVERNMENT INITIATIVES WILL HELP THE ECONOMIC GROWTH TO ACCELERATE TO 8-10 PER CENT BY 2018 AND HELP THE MODI GOVERNMENT TO RE-WRITE INDIA’S HISTORY

months11172.9

million new bank accounts

were opened

152.6 million new

RuPay debit cards were issued

$3.2 billion were deposited by

India’s unbanked population

in

By Saifur Rahman

8 ECONOMYINDIAN REPORT

of the reforms of the Modi government are gradually becoming visible.

“The new models of delivery, to be chan-nelled through bank accounts, mobile phones, and the biometric identity of the beneficiaries, are expected to improve tar-geting and reduce inefficiencies and leak-ages,” the World Bank report said.

Commensurately, 172.9 million new bank accounts with 152.6 million RuPay debit cards have been issued in 11 months under the Jan Dhan Yojana programme announced by Modi on 15 August, 2014. Unbanked Indians have since then deposited more than 207.69 billion rupees ($3.2 billion) in these accounts that offer free insurance cover of 30,000 and 5,000 rupees credit.

In addition to these, the government has accelerated the issuance of the biometric identity card Aadhaar– hat has brought 820 million of India’s 1.2 billion people under the scheme. It will help the government to scien-tifically map the population and offer need-based services.

“India is heading towards a cash-less society and all these initiatives are going to benefit the long neglected poor people of the country,” Sudhir Kumar Shetty, President of UAE Exchange, says. “With the government’s financial inclusion policy, 90 per cent households have now being brought under the formal banking system–most of which had long remained unbanked.”

These initiatives will help the govern-ment to regularise tax collection, rationalise subsidies, reduce corruption, improve gov-ernance, boost transparency and account-ability as well as curb black money, he says.

However, these pro-poor initiatives are in sharp contrast to the policies adopted by successive governments that nurtured and helped expand the country’s urban middle class. The result was the widen-ing of the rich-poor gap. India’s wealthy became wealthier under the democratic system that survived 68 years since India’s independence from the British Raj on 15 August, 1947.

Democracy in India has proven to be a system of the middle class, by the middle class and for the middle class that helps them to become rich at the cost of the marginalised poor. Despite being an eco-nomic power, India remains a poor country

with a lot of rich people multiplying their wealth every few years. It is now home to as many as 14,800 multi-millionaires and is the eighth largest group of super-rich people in the world, according to the New World Wealth report. “However, Modi government’s current poli-cies are dedicated towards the lower strata of the society. Even the investment in infra-structure, industries and industrial corridors will go a long way in creating employment and reducing poverty,” Shetty says.

“For one, the government is trying to increase the supply of basic needs–elec-tricity, clean water, sanitation, education, healthcare, while at the same time creating smart cities as well as ease in doing busi-ness that will uplift the conditions of the people in rural areas and the lower middle class in cities.”

According to the International Monetary Fund (IMF), India’s gross domestic product (GDP) is expected to grow at 7.4 per cent during the current fiscal year ending March 2016, up from 4.5 per cent in 2011-12.

“India’s near-term growth outlook has improved and the balance of risks is now more favourable, helped by increased politi-cal certainty, several policy actions, improved business confidence, lower commodity import prices, and reduced external vulner-abilities,” the IMF said in its latest Article 4 Consultation paper.

While the government invests in the coun-try’s future, ironically, it is confronting the problems of the past. In developing some of the smart cities, its officials are dealing with age-old problems of power cuts, inadequate water supply, lack of sanitation, drainage, water-clogging and narrow alleyways for transporting goods across the cities.

They are trying to develop soft infra-structure in places where hard infrastruc-ture is inadequate. In other words, it is confronting problems of the 19th century in the 21st century. The same problems are also affecting the decision-making at the highest level. As the country accelerates the pace of development, the parochial mental-ity of politicians is hampering growth.

“Sometimes I feel democracy is an obsta-cle for growth. We need a strong and honest leader–who will rule decisively and stop the meaningless bickering,” Shetty says, out of frustration. “While the Prime Minister is

vehicles are manufactured by India every year

17.5million

being invested in national highway

development programme

$60billion

Indians now have biometric unique

identity cards

820million

10 ECONOMYINDIAN REPORT

focussing on the economic agenda, politi-cians are continuously bickering on petty issues that are diverting energy towards unproductive areas.”

The government has set up a Project Monitoring Group (PMG) to track stalled projects and to remove their implementation bottlenecks. Project involving investments of 10 billion rupees or more can be referred to the group for resolution. The PMG has already been successful in resolving more than 200 of the projects referred to it, worth nearly 30 per cent of the value of all proj-ects. Most of the government’s actions so far could be termed as preparatory and is less visible due to their nature, Shetty

says. “The real effects of the government’s actions will be visible in a few years when some of these initiatives will bear fruits and people start to notice the changes,” he says. “Right now, most of the actions are on paper and not much on the ground.”

If implemented fully, these reforms are expected to improve the business environ-ment and alleviate constraints to growth, the World Bank says. However, everything is not rosy. While the government has embarked on energetic reform efforts across several areas, the current pace of policy efforts may not prove adequate to unleash productiv-ity and scale enhancement needed for the Indian firms to become globally competitive.

Despite being an economic power, India remains a poor country with a lot of rich people multiplying their wealth every few years. It is now home to as many as 14,800 multi-millionaires and is the eighth largest group of super-rich people in the world, according to the New World Wealth report.

Referred Projects Resolved Projects

Number Value Number Value

Power 200 1,107,138 103 460,140 Coal 77 127,856 30 12,674 Steel 51 509,116 7 40,296 Petroleum and Natural Gas 48 370,709 19 44,425 Roadways 41 59,070 15 20,410 Railways 26 51,994 10 26,045 Commerce & Industry-DIPP 20 37,315 4 14,200 Shipping 19 38,787 8 1,008 Commerce & Industry-Comm 9 54,285 2 10,000Mines 8 51,208 4 24,205 Chemical and Fertilizers 3 19,178 0 0 Civil Aviation 2 24,000 2 24,000 Textiles 1 1285 1 1,285 Petrochemicals 1 9000 0 0 Total 506 2,460,941 205 688,687

Source: Project Monitoring Group, Cabinet Secretariat, Government of India

Projects Referred to the Project Monitoring Group (PMG) and Resolved

(Amount in INR 10 million)

�Bitaquasi optat que vit et inihillor arum fugiatemodi omnia accabori blanditae rerae volore soloren itaepta temperi.

INFRASTRUCTURE

13 INFRASTRUCTUREINDIA REPORT

When it comes to urban life in India, the scene of open garbage bins surrounded by

filth and slush debris might be a thing of the past. However, the country has a lot to catch up in its quest to create more urban space where more than 377 million people live. In addition to efficient management of waste and recycling them, it also needs to create communities and more green space for a healthy living.

In a country where rampant power cuts and water shortage have become part of daily life, building 100 smart cities in seven years might be a tall order.

In the World Economic Forum’s Global Competitiveness Report, India ranked 87th out of 144 countries for its infrastructure, and in the overall Global Competitiveness, India ranked 71, behind countries like Vitenam, Rwanda, Macedonia and Montenegro. India’s extensive infrastructure needs are well known. “Decades of underin-vestment have left the country with dire defi-cits in such critical areas as railways, roads, ports, airports, telecommunications and electricity generation,” Manish Agarwal of PriceWaterhouseCoopers, says.

Although the global media might be con-centrating on the investment in national

highway networks, power supplies, upgrad-ing ports and building airports and other infrastructure projects, one of the key chal-lenges for the country’s civic bodies lies in their inability in basic duties, such as manag-ing waste and protecting environment.

The New York-based think tank Council of Foreign Relations, says, “Bureaucratic red tape and political inertia have thwarted the success of foreign part-nerships, discouraging further investment. Such large-scale failures have raised sharp debate about how the country’s infrastructure weaknesses could threaten its economic future."

In simple words, most Indian cities are half-habitable. However, the present gov-ernment appears to have done its home-work before coming to power. One of the first steps taken by the new administra-tion was to commission a ‘waste-to-en-ergy’ project in Maharashtra state–that will recycle human waste and generate energy to power civic life.

“India is a power surplus country export-ing electricity to neighbouring countries like Bangladesh–yet we have power cuts in parts of the country,” Nitin Gadkari, India’s Union Road Transport Minister, said at a gathering in Dubai recently. “While cost

INDIA NEEDS ASMART GRID FIRST,SMART CITIES NEXTIN A COUNTRY WHERE RAMPANT POWER CUTS AND WATER SHORTAGE HAVE REMAINED PART OF THE DAILY LIFE, DEVELOPING SMART CITIES MIGHT BE A TALL ORDER. HOWEVER, ONE HAS TO START THE PROCESS

allocated for smart cities

$1.07

billion

By Saifur Rahman

14 INFRASTRUCTUREINDIAN REPORT

of power is not very high in India, power authorities in certain states run at a loss due to power theft, system losses to the tune of nearly 40 per cent.

“We are a country where in some places if you have students, there may not be any teachers, if you have both then there may be shortage of books and if you have all the three then you might not have school building. Similarly in healthcare, if you have patients, you do not find doctors and if you have both then you do not get medicine and if you have all, then there is no hospital,” he added on a lighter note.

So, while the country plans to develop smart cities, it has to first do the basics–develop a nationwide smart grid to fix this problem and then build the necessary facil-ities. However, as the country’s top official entrusted to expand roads and highways network, Gadkari has his massive task cut out fairly well. India has a road network of 4.86 million kilometres, of which 98,000 are national highways that handle 40 per cent of the country’s traffic load. More than 500,000 accidents cost the lives of 150,000 people and a further 300,000 sustain inju-ries per year. “When I took over the min-istry, we used to build two kilometres of road per day. It has now reached 14 kilo-metres and my target is to accelerate it to 30 kilometres per day,” Gadkari says. “In the next five years, we would like to add 140,000 kilometres to the national

highway network. I want to spend 1 trillion rupees per year during the next five years to expand infrastructure to connect the major cities.”

He said the government is dredging the rivers and waterways to develop the marine transport sector that will be used for alter-native mode of transport as well as cruise tourism. Work on the first phase of the 1,600 kilometres long project on the river Ganges has stated. The government has already given permission to start waterbus, cruise, hovercraft and sea-plane services.

The IMF, in its annual report on India, stressed that boosting potential growth would require addressing long-standing supply bottlenecks, especially in the energy, mining, and power sectors, as well as bol-stering the business climate. The good thing is that the Indian government is mindful of the situation and has already started taking actions. As part of these initiatives, Gadkari says, his department has already started floating tendering projects. “I had 3.8 tril-lion rupees ($57.57 billion) worth of projects pending of which 2.4 trillion rupees worth of projects have been approved for execution within our first year in office,” he says.

He feels money would not be a problem. “We could raise 1.5 trillion rupees through securitising the national highways that fetch 90 billion rupees and fund the development of more,” Gadkari says. In addition to these steps, India is also looking at South Asia to strengthen regional connectivity. Within his first year in office, Modi visited most neigh-bouring countries to strengthen relations. It has offered Bangladesh $1 billion credit to build infrastructure and help build regional connectivity for trans-shipment of goods and public movement across the border.

“We have started talks with Bangladesh, Nepal and Bhutan on regional hydro power grid, road transit and cross-border trade that will unlock huge potential,” Gadkari said. “Similarly, we are planning to build a 30-kilometre bridge between India and Sri Lanka. The project could cost 30 billion rupees, for which the Asian Development Bank is ready to finance it,” he said.

These projects would help India strengthen cross-border trade, tourism and public movement as South Asia prepares to create a common market. But India needs a smart infrastructure grid for itself first.

While India plans to develop smart cities, it has to first do the basics–develop a nationwide smart grid to fix the problem of power cut and system losses and then build the necessary facilities.

India’s urban population

in 2050

843million

annual spending budgeted for infrastructure

$15 billion

infrastructure development

between 2012-17

$19billion


POWERINGTRADEDP WORLD HAS BEEN PLAYING AN

ENABLING ROLE IN GLOBAL TRADE

GROWTH. CHAIRMAN SULTAN AHMED BIN

SULAYEM EXPLAINS HOW

I N T E R V I E W

Dossier: DP World reported a 25% jump in net profits last year. How is it going to look like this year?Sultan Ahmed Bin Sulayem: We have strategic goals that include maximising our financial returns, strengthening global supply chains and creating sustainable economic growth around the world. Our performance in 2014 illus-trates that our strategy is bearing fruit.

This is an exciting year with new capacity opening in Rotterdam, the Netherlands, Yarimca in Turkey, Nhava Sheva in India and Jebel Ali in Dubai. It is also our peak capital expenditure (capex) year as we deliver significant new capacity in markets with attractive long term growth prospects.

In the short term this means we will absorb a number of new projects to our cost base. Stronger bottom line

growth from 2016 and beyond is expected as new devel-opments ramp up utilisation.

How will the acquisition of Economic Zones World (EZW) affect your business this year and going forward?The acquisition of EZW will allow us to further consoli-date our position as the leading logistics hub in the Middle East. Combined with our ability to add new capacity to our portfolio this will enable us to deliver both earnings growth and shareholder value over the long term. The acquisition is an important part of this approach. Combining Jebel Ali Port and Free Zone is an example of for integrated logis-tics solutions that we aim to replicate elsewhere.

Your UAE operations have been outperforming other markets. Why? Jebel Ali continues to operate at high levels of utilisation and given the strong growth outlook leading up to Expo 2020 we expect to see more construction materials and goods coming into the country. As a result of these trends we are investing at Jebel Ali. We added a further 2 million twenty-feet-equivalent-units (TEUs) capacity in the third quarter of 2014 and a further 2 million will be added later this year. We also recently announced the construction of Terminal 4, which will deliver add 3.1 million TEUs by 2018.

How much is your capex under execution this year and how much capacity would this add to your existing global container handling capacity?In 2015 our capex remains unchanged at between $1.4 billion to $1.7 billion plus an additional $200 million for EZW – a total of $1.9 billion. With the development of Terminal 4 recently announced, we are updating 2016/2017 guidance to absorb the cost of the first phase of T4. In total we will add approximately 8 million TEUs to our global portfolio this year. Our aim is to operating over 100 million of TEUs in capacity by 2020, subject to market demand.

How much are you investing in London Gateway, Canadian and Indian ports? London Gateway is a 1.5 billion pound hub port creating some 36,000 jobs. Fairview in Canada is a purpose built terminal with a current capacity of 850,000 TEU, with a Phase 2 expansion that will take capacity to 1.35 million TEU. The concession period runs to 2034 with an exten-sion to 2056. Total payable is $457 million for the out-standing stock of Fairview. India remains a key market in our portfolio where we plan to increase capacity. The 330 metre quayside development in Nhava Sheva is now oper-ational, adding 800,000 TEUs.

How do you see the global shipping industry reshaping ?There are some major trends in the industry including the move to larger vessels, continuing innovation and new technologies and the emergence of shipping alliances.

�Sultan Ahmed Bin Sulayem, Chairman of DP World



POWERING INDIA’S GROWTH

I N T E R V I E W

�Faizal E. Kottikollon, Chairman of KEF Holdings: Investing in India's future

He spent the entire summer of 2012 trying to cope with the mixed emotion and wondering where to invest the hard-earned money. He was too young to retire. But 48 was a good year in life to take a break and reflect on the achievement, listen to heart and plan for the future.

He looked at the West and saw the economies reeling from debt crisis. He then looked at the East where oppor-tunities were in abundance but was unsure as to where to invest, until his eyes spotted something he’s very familiar with. He took a closer look. It was India–his home country. His heart started pumping fast.

While most people put their money where their mouth is, Faizal decided to put his money where his heart was, is and will be–India. He then rolled up the sleeves and went to the drawing board to plan the second innings of his life.

Later that year, he announced a 1 billion dirhams ($272 million) investment in six verticals. The next three years Faizal Kottikollon worked hard in developing a number of ventures including an off-site construction industry—the KEF Industrial Park at Krishnagiri, Tamil Nadu—that will change the way people develop buildings.

As an industrial engineer, he saw an opportunity in apply-ing technology in construction and offering an end-to-end solution for constructing buildings, complexes, shopping malls and multiplexes from design to delivery–with minimal human intervention. “Construction is a labour-intensive industry. So, we devised a solution to ‘manufacture’ com-ponents of a building at an offsite plant as per architectural designs and assemble the building on-site with the pre-en-gineered and pre-built components, such as columns, beams, floors, walls, doors, windows, ceilings, electrical, plumbing, interior fit-outs,” Kottikollon says.

“In order to construct the building, we first design and de-construct the structure through software and then build the components physically offsite as per the delivery schedule of each component and transport them to the site to assemble onsite.”

KEF Holdings has invested 550 million dirhams ($150 million) in Krishnagiri factory and 100 million dirhams in Jebel Ali Free Zone. Pre-cast concrete technology has been in existence for a few decades. However, Kottikollon has taken it to the next level, by incorporating robotic tech-nology and integrating everything under a new building information modelling (BIM) system to reduce costs, time, and wastage.

“We are using smart BIM systems that cover every aspects of engineering and construction activities, namely

FAIZAL KOTTIKOLLON HAS DEVELOPED

A GAME-CHANGING SOLUTION THAT

COULD HELP FAST-TRACK INDIA’S

DEVELOPMENT ACTIVITIES AND REDUCE

THE GOVERNMENT’S BURDEN

When Faizal Edavalath Kottikollon, a non-resident Indian industrial engineer-cum entrepreneur, sold his prized possession–Emirates Techno Casting to Tyco International for a whopping $400 million (Dh1.46 billion), he did not know what to do with such a huge sum.

It was in the summer of 2012 and he was just 48 when he encashed the industrial unit that he had built so passion-ately, piece by piece since 1997 by sweating out his golden youth. The joy of sitting on such a huge pile of cash was almost overshadowed by a sense of loss in him.



concrete, woodworks, aluminium, mechanical, electri-cal and plumbing, joinery, interiors, et cetera. We have the in-house capability covering all aspects of the develop-ment of a construction project all under one roof through a one-stop service,” he explains.

“All these are done by the efficient use of comput-er-aided design computer-aided manufacturing tech-nology with minimum human intervention. Almost all the works are done by robotic technology that requires the least human intervention. This way, the client doesn’t have to deal with so many contractors, sub-contractors and suppliers. We do everything in-house.”

The game-changing construction process reduces cost of construction between 25-30 per cent while it completes construction projects in half the time. His technology comes just in time as India plans to build 110 million afford-able homes to provide shelter to all Indians under a grand national scheme by 2022. Movement for affordable homes has also picked up in the UAE–where Kottikollon has spent most of his productive life and built his fortune.

In between as the industry was progressing, Kottikollon offered to rebuild a public school in Kerala in 90 days to demonstrate the power of the new technology. He is now partnering with the government to rebuild 100 public schools in the shortest time–as part of his mission to change the face of the public education in India.

He is now preparing to commission the construction industry within a few weeks. The timing could not have come at a better time, especially when the new govern-ment is working on a grand vision to re-write the country’s history with a huge growth story. In an exclusive inter-view, Faizal E. Kottikollon, Founder and Chairman of KEF Holdings, explains his views on India’s future. Excerpts:

Dossier: You had spent most part of your productive life outside India. Why are you investing your wealth and expertise in India now?Faizal E. Kottikollon: KEF was set up with a vision to make a difference to communities at large. Following in-depth ground-work and research, we implemented a well-in-formed strategy to invest in India’s powerful growth story with quality infrastructure, healthcare and education.

India offers a strong demographic dividend of a young population and an investment climate which is very sup-portive of growth and innovation.

How do you see Narendra Modi’s grand plan for the economy – Make In India and Jan Dhan Yojana?These are excellent initiatives by the government of India to boost foreign investments, and to provide financial inclu-sion to rural India. While it’s early days, we think that India’s growth story is being written once again with a strong blueprint. KEF Holdings is committed to supporting the government’s vision by focusing on three basic needs–infrastructure, education and healthcare.

How will these initiatives change the lives of the Indian masses?The policy push has provided the much-needed reforms to boost foreign investors’ confidence in India’s economic growth story. Our expectation is that the governmental push to investment growth in diverse sectors will trickle down to the masses. One clear positive difference that we can see is the alignment between the Centre and state governments, which has led to faster decision making.

What do you see the biggest challenges ahead of the government?India’s demographic dividend of having a large popula-tion of youth, coupled with rising household income levels, presents huge demand for high-standard education and healthcare needs. The skills and health of the India’s young population are important factors that need swift boost to ensure the economy is on firm footing.

In addition, the migration of mass populations from rural to urban areas is bound to continue at the same time.

With the population growing faster than expected, it becomes extremely crucial for India to adopt innovation for streamlining processes to serve the growing resident numbers, especially in the construction industry that relies heavily on manual work.

How do you see the future of India?There’s hardly any doubt that India is entering a decade of change and growth. The rate of success, meanwhile, will be determined by how far the government can implement the reforms it needs for realising its newly found ambitions.

The business community must do everything necessary to achieve the unthinkable–an India finally at its potential.

“There’s hardly any doubt that India is entering a decade of change and growth. The rate of success, meanwhile, will be determined by how far the government can implement the reforms it needs for realising its newly found ambitions.”Faizal E Kottikollon, Founder Chairman of the KEF Holdings


�Financial inclusion is going to change the lives of India's vast unbanked majority

B A N K I N G A N D F I N A N C E

19 BANKING AND FINANCEINDIA REPORT

For two months Ved Ram, 28, travelled the length and breadth of an extreme patch of rural landscape in Mahdya

Pradesh, miles after miles on feet, carrying a stack of papers with him–to talk the vil-lage’s mostly poor and illiterate people into opening bank accounts–something they never had.

He was contacted by Dena Bank in August, trained in September and assigned in October 2014 to open as many bank accounts at the 23 villages in the Dhawalpur Sub-Service Area, under the government’s nationwide financial inclusion programme–Jan Dhan Yojana–to bring the country’s unbanked majority into the banking services.

With a tight three-month deadline ending 26 January, 2015, his tasks seemed to be next to impossible. Every day he would start early with long walks, motivating people and arranging camps in these remote villages. He had to fill and collect account opening forms, arrange copies of the identity papers and photographs and finally carry the com-pleted forms to the local branch of Dena Bank to open account. A few days later, he would go back to them–now his clients–with a passbook, a plastic debit card and other documents. Officially, they have now become part of the bank clientele.

The global banking community might have failed to notice the opening of 18,096,130 bank accounts in a week’s time between 23 and 29 August, 2014, in India. However, the Guinness World Records did not. It rated the

achievement by the Government of India as ‘Amazing.'

There’s a silent revolution happening in the Indian banking sector that has largely gone unnoticed. The country’s unbanked poor are rapidly being brought under the banking system with no-frills accounts that also provide them with a debit card and comes with 30,000 rupees life insurance cover upon deposits under the financial inclusion drive that witnessed the issuance of 172.9 million bank accounts and 152.6 million debit cards in 11 months. Of these, 46.91 per cent accounts are zero balance accounts. The amount deposited by these once unbanked citizens crossed $3.2 billion.

By December 26, 2014, Ved Ram met 2,000 families and opened more than 5,000 bank accounts, 85 per cent with passbooks, fulfilling his quota. Of these, he helped the villagers to activate transactions in 20 per cent of the accounts. Ram gave them honour and respect that they deserved but never had. Since the opening of the bank accounts, most of the villagers have stopped keeping money in their piggy banks and deposited those notes tucked under the pillows to their respective accounts. In this process, Ram also managed to change his fate–becoming a permanent employee of the bank drawing 8,000 rupees per month.

Ved Ram is one of thousands of young men and women–or agents of change–trained under a crash programme to talk mil-lions of unbanked people into the banking

WITH A FINANCIAL INCLUSION DRIVE TO BRING MILLIONS OF UNBANKED POPULATION INTO BANKING SERVICES, INDIA IS CHANGING ITS FINANCIAL LANDSCAPE AS IT SEEKS TO BECOME A GLOBAL ECONOMIC POWER

BANKING ONTHE UNBANKED

applications for new

banking licences

113

debit cardsissued in

11 months

152million

By Saifur Rahman

20 BANKING AND FINANCEINDIAN REPORT

services as part of the Jan Dhan Yojana launched on 15 August, 2014. His is one of thousands of inspiring success stories of new bankers published on the Pradhan Mantri Jan Dhan Yojana website.

“The opening of a large number of accounts should also facilitate direct benefit transfers to the beneficiaries and improve public expenditure management,” Arun Jaitley, Indian Finance Minister, says.

In its quest to accelerate the economic growth of India, Prime Minister Narendra Modi’s government has started to empower and integrate the unbanked rural poor as he charts a new chapter in India’s growth story based on the slogan–Growing Together–under Vision 2022 that could transform India into a prosperous nation.

Vision 2022 seeks to ensure employment, economic opportunity, housing, electricity, water, sanitation, connectivity, medical facil-ity and schools for its people by 2022, the 75th year of India’s independence.

“Financial inclusion is strongly rooted in empowerment. Access to credit is a key link between economic opportunity and eco-nomic outcome,” Christine Lagarde, IMF Managing Director, said in a recent speech.

“By empowering individuals and families to cultivate economic opportunities, finan-cial inclusion can be a powerful agent for strong and inclusive growth. There is already a lot that the world can learn from India.”

However, financial inclusion and empow-erment of those at the bottom of the pyramid could come in handy, as the dete-riorating corporate financial positions and worsening bank asset quality could weigh on financial sector soundness, accord-ing to the IMF. While risks to the banking sector have moderated marginally since September 2014, concerns remain over the continued weakness in asset quality indicated by the rising trend in stressed advances ratio, RBI, the country’s financial regulator, said in its half-yearly report.

“Macro stress tests suggest that current deterioration in the asset quality of commer-cial banks may continue for few more quar-ters, and public-sector banks may have to bolster their provisions for credit risk from present levels, to meet the ‘expected losses’ if macroeconomic environment were to deteriorate under assumed stress scenar-ios,” RBI said.

The IMF encouraged the authorities to further strengthen prudential regulation for banks’ asset quality classification; address concentration risks; augment capital buffers; improve corporate governance at public sector banks and strengthen the insolvency framework. “Domestic risks include a sup-ply-driven spike in inflation, further deteri-oration in bank asset quality and continued stress in corporate financial positions, as well as slower-than-expected progress in addressing supply-side bottlenecks, which could weigh on growth and stoke inflation,” IMF said.

NEW BANKING LICENCEDespite the challenging situation in the banking sector, RBI is set to approve new bank licences, especially in view of the suc-cessful financial inclusion programme that will drive the demand for retail banking.

As many as 113 applications were sub-mitted, including two by UAE-based NRIs–Yousuf Ali’s Lulu Group International and Dr BR Shetty’s UAE Exchange. The number of ATMs of the public sector banks rose to 124,710 in 2014 while the number of ATMs of scheduled commercial banks stood at 176,409 by the end of 2014, according to the Ministry of Finance. During 2013-14, Indian banks added 10,738 branches while the number of village bank outlets jumped 43 per cent to 383,804. In 2013-14 the number of debit cards in India reached 394 million. However, the banks added 152.6 million debit cards in the last 11 months alone.

“By empowering individuals and families to cultivate economic opportunities, financial inclusion can be a powerful agent for strong and inclusive growth. There is already a lot that the world can learn from India.” Christine Lagarde, Managing Director of the IMF

deposited by ‘unbanked’ new

customers

$3.2billion


MAXIMISINGWEALTHKRISHNAN RAMACHANDRAN, CEO OF

BARJEEL GEOJIT SECURITIES, TELL US

WHERE WE SHOULD PUT OUR MONEY IN

TO MAXIMISE RETURNS

I N T E R V I E Woverall trend towards global stability, the developed econo-mies of US and Europe are, slowly albeit steadily, on a path to recovery and this is likely to give a fillip to other emerg-ing economies of the world.

Low oil prices benefit energy intensive sectors and also the consumers, greatly benefitting countries import-ing oil and in the process improving their fiscal conditions. There is, therefore, prospects and indicators for growth to improve globally.

In such a scenario, what are your thoughts on invest-ment–small-scale individual investment for safe returns?This is the time for increasing allocation to investments, especially when the long term prospects in many markets look attractive. It’s an opportunity to build one’s portfolio based on risk appetite, to secure the returns of the future.

Although ‘one size does not fit all’ and ‘all eggs should not be placed on one basket’, what are your thoughts on an ideal portfolio distribution?Stocks and mutual funds are the best options to consider at this juncture. The commodities and bond markets are going through a period of uncertainly and there is a need to take a wait and watch approach on these investments. With real estate markets, there are pockets of opportunity, [so it is] advisable to be selective. Although there is no set formula, the ideal portfolio distribution could be somewhat like: 35 per cent in mutual funds, 25 per cent in stocks, 15 per cent in real estate and bonds each and the rest 10 per cent in commodities. The concept of an ideal portfolio dis-tribution has to be tailor made to suit each class of inves-tor. What is important, is to limit or minimise the ‘eggs’, the portfolio of investments should not digress into investment sub-classes or ideas that are complex to assimilate.

How tough is the wealth management business?The last 8-10 years have redefined the way we manage wealth. The process has become more participative with customers seeking more information on the investment opportunities. With the increased oversight of the regula-tors the due diligence that wealth mangers have to exer-cise before recommending investment solutions has also improved substantially.

How do you address the issue of lack of transparency,?The GCC has a unique investment model, especially with expats from various countries looking for avenues for investments into their respective home country. This brings in a plethora of investment products to the market, and it is very important to make the right investment choice. The capital markets authorities within the GCC are working proactively to ensure that mis-selling does not occur, but given the complexity of the situation it becomes a difficult proposition to exercise a proper and effective regulatory framework.

�Krishnan Ramachandran, CEO of Barjeel Geojit Securities, helps investors create wealth from modest savings

Investing money is a trillion dollar, but tricky busi-ness. Putting money, especially one’s hard-earned life savings, into an investment advisor’s hands needs a lot of courage. The last thing an investor would want to see is the value of his investment eroding or his money dis-appearing in thin air. However, your money could be safe and help multiply wealth, Krishnan Ramachandran, CEO of Barjeel Geojit Securities, explains how.

Dossier: With low oil and lower gold price, which direc-tion is the world heading? Another recession?Krishnan Ramachandran: It’s not only oil and gold, there has been a price correction in almost all commodities. The fact that gold has fallen to a five-year low also signifies an


22 BANKING AND FINANCEINDIAN REPORT 22 BANKING AND FINANCEINDIAN REPORT

GLOBALFOOTPRINT

I N T E R V I E W

�Chanda Kochhar, Managing Director and CEO of ICICI Bank.

Do you see growth continuing in view of the current eco-nomic climate and business sentiments? Yes, definitely a gradual improvement in growth will con-tinue. There are several factors that are supporting growth currently. Low oil prices, adequate monsoons and higher crop sowing are positive trends. The government has focused on ensuring stability in inflation and putting in place policies to address current challenges in sectors like infrastructure and support future growth.

There is increased foreign interest in investing in the economy. I believe, as economic fundamentals strengthen further, we will see a revival in corporate sector invest-ments and a further pick-up in consumption.

You have recently made inroads into the Chinese markets. What is the game plan for China? We have recently set up a branch in Shanghai, China. Through this branch, we facilitate international trade between China and other countries, support Chinese cor-porates/EPC contractors bidding for infrastructure proj-ects and funding requirements in India, business expansion of Indian joint ventures and subsidiaries of Indian entities in China, and remittances from China to India. With this branch, we aim to provide greater support to Chinese and Indian corporates in their cross-border business interests.

Your fee-based income is much lower compared to interest income. Do you see a potential opportunity to increase fee structure?The proportion of fee income to total income for the bank was about 24.9 per cent in FY2015. Fee income grew by 6.8 per cent in FY2015. While the bank is seeing healthy trends in retail banking fees, overall fee growth is impacted

INDIA’S LARGEST PRIVATE SECTOR

LENDER ICICI BANK IS OFFERING

STRONG SUPPORT TO MIDDLE EASTERN

INVESTORS PLANNING TO ENTER THE

INDIAN INFRASTRUCTURE MARKET

Although the Indian banking sector is going through a tough time with ‘continued weakness in asset quality’, its largest private sector lender, ICICI has reported 13.9 per cent growth in net profits.

With total assets of 6.46 trillion rupees ($103 billion) at 31 March, 2015 and profit after tax $1.78 billion for the year ended 31 March, 2015, the bank currently has a network of 4,050 branches and 12,872 ATM’s across India.

Led by Chanda Kochhar, Managing Director and Chief Executive Officer, ICICI Bank continues to excel in all the fronts—retail, corporate and wealth management.

She is widely recognised for her role in shaping the retail banking sector in India and for her leadership of the ICICI Group, as well as her contributions to various forums in India and globally.

In an exclusive interview, Kochhar shares her views on a wide-rannging issues.

Dossier: ICICI reported a 13.9% growth in net profits last year ending 31 March, 2015, over the previous year. What factors drove this strong performance? Chanda Kochhar: ICICI Bank’s net profit crossed the 100 billion rupees mark for the first time and was at 111.75 billion rupeess in fiscal 2015. The rise in profits was driven by sustained growth and strong operating parameters.

During the year, we focused on continued strong growth in the retail portfolio, maintaining a robust funding profile and further improving our key operating parameters–including margins and operating efficiency.

Our non-banking businesses also achieved healthy growth and we continued to maintain a very strong capital position.

22INDIAN REPORT

23 BANKING AND FINANCEINDIA REPORT 23 BANKING AND FINANCEINDIA REPORT

by subdued corporate activity. Going forward, the overall fee income growth would depend on market conditions.

The uptake in infrastructure activities will require huge funding opportunities. Where do you see the banking sector’s growth come from—infrastructure funding, corporate or retail banking? India offers attractive opportunities in both infrastructure and manufacturing and a large consumer market for goods and services. Currently, development in these sectors is largely reliant on bank funding and until other sources are developed, banks will continue to play a significant role in financing India’s growth.

The government is focused on creating a business envi-ronment that will accelerate investments in the economy. Efforts are on to develop non-bank sources like deepen-ing the bond market and tapping pension and insurance funds. Attracting foreign investments is also a focus with FDI being allowed in most sectors today, and revision of foreign investment limits in several sectors in the past year.

In recent years, there has been a moderation in bank credit demand due to a slowdown in corporate investment activity. However, retail credit growth has continued to remain strong. We expect credit growth in the near term to be driven by retail lending, and then to pick up as the cor-porate investment cycle comes back.

What are your plans regarding expansion in the GCC and the UAE–where you have an office?We believe that the GCC is an important market for us. ICICI Bank’s network in GCC includes branches in DIFC (Dubai), QFC (Qatar) and Bahrain, and representative offices in Abu Dhabi and Dubai.

Our branch in Bahrain has a full-fledged conventional bank licence covering operations for the rest of GCC from there. We are also looking at upgrading our representative office in Abu Dhabi to a wholesale branch which will help

us in providing banking services to corporates in UAE in local currency. Additionally, ICICI Securities, our subsidiary, has an office in Muscat (Oman) which offers investment products. With this network, we are fully equipped to cater to all the requirements of the clients anywhere in the GCC.

What can ICICI offer to the Middle East market? Our international business strategy is based on leveraging home country links. In line with this strategy, we have out-lined a road map for our business in the GCC market. Our main focus is to extend our domestic relationships with Indian corporates having business in the Middle East.

Further, we are reaching out to global companies who are already doing business or looking to set up business in India and want a reliable banking partner to support their needs. Due to our presence in 17 countries, we can offer comprehensive trade solutions to customers covering the Middle Eastern trade corridors to US, Africa and China. On the retail side, we continue to serve the Indian diaspora in for their requirements in India. Through our multiple and convenient remittance channels, we have built up a healthy share of the remittance flows from GCC to India.

How can the Arab-India relations be further cemented? The Arab world and India have historically been strong partners given their maritime trade and cultural similarities. Presently, there are many exciting opportunities at both ends which are of mutual interest. GCC countries are an important source of meeting India’s energy requirements. There are multiple opportunities available in the energy sector. Infrastructure will continue to remain a focus area in India and provide a good investment avenue for GCC investors. On the other side, GCC countries are looking to diversify into manufacturing services. India, which has a large base of industries which are quite keen to expand their operations into this part of the world, can play a sig-nificant role in the diversification of GCC countries.

“The Arab world and India have historically been strong partners given their maritime trade and cultural similarities. GCC countries are an important source of meeting India’s energy requirements. Infrastructure will continue to remain a focus area in India and will provide a good investment avenue for GCC investors looking for long-term returns.” Chanda Kochhar, Managing Director and CEO of ICICI Bank

23INDIA REPORT

24 BANKING AND FINANCEINDIAN REPORT

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HOME FINANCE MADE EASY

For Indians working in the UAE, buying a property in their home country is an aspiration that is becoming ever more attractive, due to the dirham’s appreciation against the rupee in recent years and growing optimism over the Indian economy and property market.

Many Indians in the UAE are looking to preserve wealth for the future–with many saying they plan to invest in India in the next six months, while others buy to help support their family members or as a future home for themselves. However, these goals are often difficult to achieve as securing home financing in India is difficult to arrange from the UAE, and often at unattractive rates.

That is why Abu Dhabi Islamic Bank (ADIB) is now offer-ing non-resident Indians (NRIs) an easier solution, with its new dedicated financing facility. The bank is financing at profit rates as low as 6.25 per cent, compared to the typical 11 to 13 per cent range offered in India. Unlike many banks in India, ADIB does not limit the home buyer to par-ticular housing developments or developers.

NRIs can also finance their new homes in India in dirhams at the best dirham-rupee rate in the market, which eliminates the exchange risk when transferring money to India. This also gives the home buyer the flexibility to hold funds in the UAE and make transfers to India only as and when required. With ADIB, buying a home in India has never been easier.

For further advice on how to take advantage of this opportunity to make a long-term investment in India, visit one of ADIB’s 88 branches in the UAE.

ROBUST FINANCIALSMeanwhile, ADIB has increased its customer base by 31.9 per cent during the second quarter of this year a period when the bank reported 10.5 per cent increase in net profit to 502.6 million dirhams from a year earlier, reflecting the continued growth of its core banking activities across all customer segments.

�An artist's impression of a branch office of ADIB

The bank’s total assets increased by 8.9 per cent to 115.1 billion dirhams ($31.4 billion). Customer depos-its increased 12.7 per cent to 89.1 billion dirhams ($24.5 billion), while net customer financing grew by 14.9 per cent to 74.5 billion dirhams ($20.5 billion).

ADIB has achieved steady improvement in overall asset quality levels, with total non-performing accounts as a per-centage of gross customer financing reducing to 4.1 per cent as of 30 June 2015, from 7.1 per cent a year earlier.

“This has been another good quarter for ADIB as we remain focused on our strategy of delivering value to shareholders and enhancing the banking experience for our customers,” Tirad Al Mahmoud, Chief Executive Officer of ADIB, said in a statement.

ADIB is further enhancing its strategic positioning as one of the top retail banks in the UAE, with a network of 88 branches, 737 ATMs and market leading mobile and inter-net banking platforms. Aiming to be the biggest retail bank by assets by 2020, ADIB is enhancing its customer experi-ence to better serve its significant core UAE national indi-vidual and corporate customers, and to expand further into all major expatriate customer segments.

ADIB employs 2,402 professionals, including 1,112 UAE nationals–an Emiratisation rate of 46.3 per cent.

ADIB MAKES HOME FINANCE EASY FOR NRI WAGE EARNERS IN THE GCC WHO ARE

PLANNING TO BUY PROPERTIES BACK HOME IN INDIA


P R O F I L E

�Remittance flow to India will continue to grow this year despite lower oil price

R E M I T TA N C E

27 REMITTANCEINDIA REPORT

India might be chasing China in a lot of things, including economic growth, exports and foreign direct investment

where it lags behind. However, when it comes to remittance, the South Asian leader outperforms China, year after year.

Although the size of the overseas Chinese population dwarfs the number of non-resi-dent Indians (NRIs) globally, the latter remits more money than all the Chinese expatri-ates put together. NRIs last year remitted $70.4 billion to their country compared to $64 billion remitted by overseas Chinese population–representing the bulk of the $436 billion global remittance destined for the developing world, World Bank says. "The global remittance flow is largely powered by the 247 million migrant population globally which is expected to cross 250 million this year," World Bank said.

Whether it’s a matter of national pride or not, this reflects the strong cultural and social bond among Indian families and the level of financial commitment by Indians travelling abroad to their family back home.

Over the last quarter of a century, India witnessed a steady growth of remittances, from $2.1 billion in 1990-91 to $49 billion in 2009 to $70.4 billion in 2014.

“There are a number of reasons for that, including the lowering of fees by the exchange houses, thereby, simplifying the process for citizens to remit more back to their home country,” Sudhir Kumar Shetty, President of UAE Exchange, says.

“However, going forward, the govern-ment’s financial inclusion plan–Jan Dhan Yojana–will help accelerate the flow of remit-tance as all Indians are expected to have

a bank account with a debit card. Further down, with the Digital India initiative, the country is heading towards a cashless society that will increase remittance.”

Remittances remain a key source of funds for developing countries, far exceeding official development assistance and even foreign direct investment. They have proved to be more stable than private debt and portfolio equity flows, according to World Bank's Migration and Remittance Brief.

A recent analysis reported in the World Bank’s Global Economic Prospects 2015 says that remittances help countries in stabilising foreign currency reserves and balance of payment. “Remittances are also larger than, or equal to, foreign exchange reserves in many countries. Even in large emerging markets, such as India, remit-tances are equivalent to at least a quarter of total foreign exchange reserves,” it says.

The six oil-rich GCC countries are source of $100 billion remittances, of which $44 billion flows out of Saudi Arabia and $30 billion out of the UAE–the two biggest Arab economies.

NRIs sent home $12.63 billion from the UAE–the largest single source of remittance to India. Saudi Arabia saw the outflow of $10.83 billion to India last year. The Middle East is a source of $37 billion, or more than half of the total remittance flow in to India.

According to the UAE’s Foreign Exchange and Remittance Group (FERG)–a body rep-resenting 139 remittance houses, the UAE is home to an estimated expatriate popula-tion of over 7.3 million, accounting for over 88 per cent of the country’s total population, who remit 110 billion dirhams ($30 billion) a

ACCELERATION IN INDIA’S ECONOMIC GROWTH COULD

COUNTERBALANCE ANY NEGATIVE IMPACT OF THE LOWER OIL

PRICE ON REMITTANCE OUTFLOW FROM THE GCC TO INDIA

25millionnon-resident Indians are

spread across the world

MONEY MATTERS

28 REMITTANCEINDIAN REPORT

year. However, there’s a small problem that every remittance recipient country might have to watch out to: “This high depen-dency on remittances increases these countries’ vulnerability to shocks from remit-tance-sending countries,” the World Bank says. For example, a slowdown in economic activity in the GCC region could affect the flow of remittances to South Asian countries including India.

Adeeb Ahamed, CEO of Lulu International Exchange, says that remittance flow might be affected due to a number of reasons, including higher nationalisation of jobs in Oman and the postponement of projects that might halt the recruitment of foreign labourers, among other factors. “With oil price being at an unpredictable scenario at this point of time, a lot of projects might be affected,” he says. “Besides, the localisa-tion of employment might also play a role in reducing the extent of foreign employment."

In its India Development Update issued in April this year, the World Bank said, “Several countries and regions with strong trade, diaspora and investment links with India continue to face a soft growth patch, dampening the external outlook. Countries that figure most prominently among large destinations for Indian exports as well as its diaspora, such as the UAE, Saudi Arabia, the broader set of GCC, but also China and Europe, face subdued growth prospects.

“These could translate into some slow-down in remittances, and possibly in FDI flows into India, while undermining the prospects for resurgence in exports growth. Slowdown in the Middle East may adversely impact the demand for Indian exports as well as remittances flows orig-inating in the regions.”

The oil price remains a double-edge dsword for countries like India. It helps contain inflation, but could impact flow of remittance from the oil producing Gulf region–source of more than half of its remittance receipt. A sharp decline in oil prices since June 2014 helped contain the trade deficit to $112 billion (7.4 per cent of GDP) in the first three quarters of 2014-15, lower than the $117 billion (8.4 per cent of GDP) over the same period in the previ-ous fiscal year. Despite all the challenges, remittance flow to India has been relatively

stable— their annual movement is domi-nated by a linear trend, with very limited vol-atility observed around the trend. “Since a proportion of migrants from India are high skilled, and employed in sectors such as IT, health and education with weak cyclical vol-atility, the remittances they send home are relatively insulated from the business cycle conditions in their host countries,” the World Bank says.

Remittances are also seen to be some-what counter cyclical to economic growth in India—they tend to increase during eco-nomic slowdowns, and possibly when the exchange rate is weak. “In recent years, remittances are also seen to be responding to the movements in the domestic and inter-national interest rates, and stock market valuations.”

The World Bank has predicted a robust outlook for global remittances, as well as for India. Remittances globally are expected to grow at 4.4 per cent to $454 billion in 2015; out of these India is estimated to receive $75 billion in 2015 and $78 billion in 2016.

“The ongoing drive on financial inclusion, under the Jan Dhan Yojana, is likely to facil-itate the flows of remittances; while also contributing to consumption smoothing, that remittances are seen to be associated with,” the World Bank said.

The downside risks to this outlook include economic slowdown in oil exporting coun-tries in the Middle East, which may impact the demand for expatriate workers in the region, which is the largest destination of of migrants from India.

“The ongoing drive on financial inclusion, under the Jan Dhan Yojana, is likely to facilitate the flows of remittances; while also contributing to consumption smoothing, that remittances are seen to be associated with.” World Bank

$100billionremittance

outflow from the GCC in 2014

$37 billion

remittance flow from the GCC to

India in 2014



LULU PLANS TO ENTERBANKING SECTORWITH THE CHANGING SCENARIO IN THE REMITTANCE BUSINESS, EXCHANGE HOUSES

MUST DIVERSIFY SERVICES TO REMAIN RELEVANT TO THE CUSTOMERS

I N T E R V I E W

108 hypermarkets, supermarkets and retail stores as well as 105 exchange houses across the GCC and India.

“We are also looking at merger and buyout options in the Far East. We are looking at opportunities, having talks with partners on mergers. It’s more about having it right, rather than getting it today,” he said. In an exclusive interview, Adeeb Ahamed reveals his grand plans to the Dossier.

Dossier: The World Bank says remittance might be affected due to lower oil price. What is your view?Adeeb Ahamed: There has been a slight slowdown in remittance, not a sharp dip. With oil price being at an unpredictable scenario at this point of time, some projects might be affected. Besides, the localisation of jobs might also play a role in reducing the extent of foreign employ-ment. So, due to these factors, there might be some slow-down in other GCC countries. However, in the UAE a number of projects are going on. More private investments are happening in the UAE. So, I do not see much impact of the oil price on the remittance outflow from the UAE.

With the change in the mix of the expatriate population in the GCC, where do you see your business heading to in terms of growth?In the short term, we do not see much of an impact. But the impact would be from technology and its effect on remit-tance business–whether we stick to the brick and mortar mode or we move towards the online platform or we take the first step in creating a 50:50 mix in operations–would be the questions that we might need to ask ourselves.

How has the growth of Lulu International Exchange been so far?We are still a very small player in the remittance business, having just completed five years in operation. We have been witnessing a double-digit growth in our business. We had a target of creating a network of 100 branches and we have already crossed that to 105 branches.

�Adeeb Ahamed, Chief Executive Officer of Lulu International Exchange


Lulu International Exchange is planning to enter the banking sector in India and Africa, a top official has told Dossier. The group is one of 72 entities that have applied for a small banking licence in India after the Reserve Bank of India invited applications for the new niche category.

Adeeb Ahamed, Chief Executive of Lulu International Exchange, said his organisation expects the Reserve Bank of India (RBI) to grant the company the small banking licence for which it has submitted an application, in addition to the Category II upgrade for the exchange house.

“By 2020, we want to have a few banks operating under the group in India and Africa–where we are looking at offer-ing a wide array of financial services,” Ahamed said. “Over the last few years, we have learned many lessons about the financial services sector starting with the bottom of the pyramid with the exchange house business and we feel we are ready for the banking services.

Lulu International Exchange was established in 2008 by Lulu Group International, operator of the largest retail chain in the Middle East. Lulu currently owns a network of


“We are trying to consolidate all the payments whereby customers could make all their payments at our counters. The idea for us is to create a financial supermarket.” Adeeb Ahamed, Chief Executive Officer of Lulu International Exchange

What is your strategy for an online platform?When we rolled out our operational plan way back in 2008, we set out the target number of branches in each of the GCC countries. So, in Oman for example, we would be maturing when we have a network of 30 to 35 branches.

So, we have presence in 80 per cent of the locations and the balance of the places we would be present between this year and the next. Following this, we would then look into how we maximise our business through an online platform. We have already started this process in Kuwait.

Will your customers be comfortable enough to make a transition to the digital platform?This question was asked in 2009 when the UAE launched the Wage Protection System. The banking community was hesitant and said that most of our customers are not edu-cated enough for the digital transformation. Today the market has adjusted well. Now the question is of taking it to the next level. Here comes the role of the telecom sector and the financial regulators. We have always considered us as a multiple payment gateway. Going forward, we want to expand our role in this industry.

Don’t you see your role overlapping with the banks?Yes, in some cases. The banking industry is also becom-ing tight. Banks are not much interested in the retail side of business. The way I see it is if we are able to strike a balance between both our industries where a lot of works could be outsourced by us where we could act as an agent for those services.

Then are you ready to face the challenges faced by the banks on return on investment not justifying the physi-cal presence?A bank’s branch works for only one bank, whereas we would work for multiple financial institutions and offer a wider array of services including anything and everything that has to do with payments–all comes to one box. It becomes convenient for the customers, cost effective for the banks and for us–thus creating a win-win situation for all. We should become a proper consolidation of payments and if that happens, our industry will secure itself in future.

What are the new services you plan to introduce and where do you see the industry heading to?We are trying to consolidate all the payments whereby customers could make all their payments at our count-ers. The idea for us is very simple. We thought of it from an angle of a financial supermarket–which is very much in line with our business. Gradually, we have added multiple payment transactions. Now the next move is to take this into an online and mobile platform.

Do you foresee coming up with your own products, say your own insurance solution or investment solution?We are working with some insurance service providers for offering remittance-linked insurance coverage to expatri-ates. We want to create a culture of savings and insurance among expatriates. The Indian government has launched a number of new schemes–insurance and pension funds. We are giving our views on how this could be remodelled for the NRIs and we are waiting to hear from officials.

More than half of the remittance flows to India originates from the Middle East–which the government could utilise in a better way. For example, a sum of more than $10 billion remittance goes to Kerala that gets stuck somewhere and nothing seems to happen. So, if the government utilises these funds in public-private partnership (PPP) and other schemes, there will more funds coming from expatriates.

You have recently applied for a banking licence. What is your game plan for India operations? We believe a network of 30-35 branches will help us cover our market well and then start consolidating the payments in India. We are comfortable where we are. Yes, we have submitted an application for a small bank and Category II licence with the RBI and hope to hear from them soon. Whether it happens or not, we still want to operate as a non-banking financial company.

How do you see the payments market in Africa?Africa is a unique market in the way that there was no secure place to hold money, hence they came up with the mobile payment gateway. But then, we no longer want to restrict ourselves in just a remittance service provider. We want to play a larger role in these markets.



increased by 8 to 10 per cent between 2013 and 2014. In the case of the UAE or largely the GCC, the oil price plunge may not affect remittances to Asian corridors as the remittance industry in the UAE is not dependent only on oil prices but on the versatile business models that drive the economy.

In my personal opinion, the outbound remittance is slated to grow at a steady rate of 5 to 7 per cent as the advantage of a lower currency is mainly taken by the high-ticket remitters as the blue collar workers will con-tinue to remit irrespective of the exchange rate fluctua-tions due to their social and economic needs.

What would be the value of annual outbound remittance from the GCC? How do you see this grow this year?According to a recent report by Kuwait Financial Centre (Markaz), more than 25 million expats working and living in the GCC have remitted over $100 billion last year, esti-mated at 6.2 per cent of the combined GDP of the six GCC states. Saudi Arabia topped the list with its estimated 10 million expatriates sending home $44 billion, followed by UAE with $29 billion.

How much remittance did UAE Exchange handle last year and how much do you expect this year? In 2014, UAE Exchange handled approximately $19 billion in volume from GCC only which contributes to an


CHANGING PEOPLE’S LIVESSUDHIR KUMAR SHETTY, PRESIDENT

OF THE UAE EXCHANGE, HAS BECOME

SYNONYMOUS WITH REMITTANCE. HIS

COMPANY HANDLES MORE THAN $20

BILLION IN REMITTANCES THAT CHANGE

THEAPPROX LIVES OF MILLIONS OF

BENEFICIARIES ACROSS THE GLOBE

I N T E R V I E W

�Sudhir Kumar Shetty, President of UAE Exchange

Remittance is not only a $520 billion business, but also provides lifeline to millions of beneficiaries in the devel-oping world and helps them manage their lives under extreme economic circumstances. Sudhir Kumar Shetty, President of UAE Exchange Centre, gives his views on the changing landscape of the global remittance business.

Dossier: Last year, global remittance flow to the devel-oping world grew 4.4% to $436 billion, according to the World Bank. How is the global money remittance business shaping up?Sudhir Kumar Shetty: Since globalisation opened up new channels and opportunities, patterns of global migration and remittances have shifted in the last three decades. People are increasingly getting comfortable with the idea of moving away from home for better commercial pros-pects, especially from the developing countries. Today, remittance is one of the most stable sources of income for many economies.

Remittance business is growing for several reasons including the lowering of fees, simplifying the process to remit more back to their home country; opening up market to competition; continuous service improvement and auto-mating treasury and compliance processes and women empowerment, resulting a greater remittance flow by women workers. Remittance banks are also moving fast to innovate with appropriate technology for rural people in countries.

About 7.3 million expats remit $30 billion a year from the UAE. How much growth do you expect this year?The UAE is a major source of outward remittance due to the high concentration of expatriate popula-tion. Remittances from the UAE to developing countries


approximately 70 per cent of the total volume handled by UAE Exchange globally. When compared with the World Bank data of 2013, UAE Exchange has a market share of approximately 24 per cent from GCC in 2013. We expect 11 per cent growth in our business from the GCC to $21.5 billion, growing at the same rate to $23.8 billion in 2016.

Do you think that the money exchange houses will become extinct once all remitters go online or mobile?No. Despite the changes, the traditional bricks-and-mortar money transfers and over-the-counter payments will con-tinue. Though the new technology will emerge and a large number of people will shift to the new system, the tradi-tional money exchange formats will also remain due to the fact that a large number of expatriates here are not tech-savvy enough. The use of mobile technology in cross-border transac-tions remains limited, due to the regulatory burden related to combating money laundering and terrorism financ-ing. International remittances sent via mobile technology accounted for less than two per cent of remittance flows in 2013.

You have introduced value-added services to your offer-ings to make it sustainable. What new services are you planning to add ?The enhancement we are looking at this moment is how to further help the customer while doing the transaction. Today he has to go to a store to do the transaction but we have to facilitate him in making the transaction from wher-ever he is.

We have already started in certain parts of the world; online portals where people can login and do the immedi-ate transfer. Instead of personally coming to our store, the customer can do it through his mobile instrument while sitting in any part of the world. So if we are able to move the entire market towards this, then for both the sides it would be win-win situation.

"More than 25 million expatriates in the GCC have remitted over $100 billion, estimated at 6.2 per cent of the combined GDP of the six GCC states. Saudi Arabia topped the list with its estimated 10 million expatriates sending home $44 billion, followed by UAE with $30 billion." Sudhir Kumar Shetty, President of UAE Exchange


Your company has applied for a banking licence in India. When do you expect this to be approved?We had applied for small bank licence last year. We are also awaiting the announcement from the regulator. If we get the licence, we will be able to play a larger role in the financial inclusion as we will be taking banking services to the unbanked and under-served population of the country.

How do you see the remittance flow to India, with regards to the exchange rate of the Indian rupee, invest-ment in real estate, stocks, bonds and the projected uptake in the Indian economy?The remittance industry in India has grown manifold in the last decade, from $22 billion remittances received in 2005 to $70.4 billion remittances received in 2014.

India has been retaining its top position as the largest recipient of remittance flows. The World Bank report for the first time gave estimates on diaspora savings and said Indians have about $44 billion stocked away in savings in the countries in which they work.

Remittance recipients in India spend a higher portion of the received remittances on consumption thereby, enlarg-ing the positive effect of remittances on poverty reduction and subsequent income equality in the country.

Investment in real estate and other financial assets are done to enhance prestige and political influence in the local community or in social capital.

What do you think the Indian government could and do to help increase the flow of remittance to India?A robust electronic payment system could be improved as it will augment faster transactions for both banks and local consumers. Further, provision of remittances through banking chan-nels can expand financial inclusion. Remittances can act as a catalyst for individuals to start a relationship and, in turn, build a credit history with a financial institution. With access to savings, insurance, and credit facilities, house-holds can better manage their risks.

�India's aviation and tourism sectors are expected to grow at a higher pace due to new government policies

AV I AT I O N A N D T O U R I S M

35 AVIATION AND TOURISMINDIA REPORT

India’s aviation and tourism sectors could play greater economic role in helping accelerate gross domestic product

(GDP) growth with policy tweaking. The introduction of the electronic visa that resulted a ten-fold increase in e-visa travel to India in recent months is a case in point.

International tourist arrivals to India grew 10.2 per cent last year to 7.67 million, up from 6.96 million in 2013, according to the Indian Bureau of Immigration. Although the growth has been double-digit, the interna-tional tourist intake remains well below the potential of India–a nation of countless des-tinations. In terms of language, ethnic and cultural diversity, India is more than a conti-nent, with thousands of tourist destinations spread across its length and breadth includ-ing 30 world heritage sites.

This is much lower in comparison to some of the key tourism markets, although domes-tic tourism sector has been growing at a healthy rate and at last count has exceeded 1 billion visitors last year. According to the United Nations World Tourism Organisation (UNWTO), India is ranked 42nd in interna-tional tourist arrivals and below Vietnam which recorded 7.8 million, Indonesia with 9.4 million, much lower than Thailand serving 24.7 million, Malaysia receiving 27.4 million and China recording 55.6 million interna-tional tourists.

Dubai’s hotels last year hosted 11.6 million guests–51.2 per cent higher than the number of international tourists visiting India. In term

of tourism sector development, India has a lot of potential for growth and a lot of catch-ing up to do.

That’s why Indian government last year started to relax the visa regime to encour-age more international travellers to visit the country. Under the scheme, citizens of 76 countries are eligible to apply visa online under an e-Tourist Visa (eTV) facility, which saw international e-visa arrivals jump ten-fold to 126,214 during the first six months of this year, compared to 11,953 e-visa arrivals in the corresponding period last year.

Under the eTV scheme, a foreign tourist can apply for a visa by uploading his or her passport and photograph and paying visa fees online. Authorities process the applica-tion and send an electronic travel authorisa-tion, or e-visa, through email within 72 hours.

“We have witnessed a 1,074 per cent growth in the number of visitors arriving India under the e-visa scheme during the first half of the year,” IRV Rao, Assistant Director of India Tourism, told Dossier. “The electronic visa scheme is a great move and has created additional pressure on the tourism infrastructure and the private sector in India has joined hands with the public sector to handle the rush.”

Last year, international arrivals from West Asia region grew 20.6 per cent to 413,678 from 343,113. “We have been witnessing a double-digit growth from this region for a number of years. Due to the electronic tourist visa, we expect to see a further 20

PAST TENSE,FUTURE PERFECTWITH POLICY REFORMS, INDIA’S AVIATION AND TOURISM SECTORS COULD PLAY A GREATER ROLE IN THE COUNTRY’S ECONOMY–SOMETHING THAT HAS JUST STARTED WITH THE WIDENING OF THE ELECTRONIC VISA FACILITY

international tourist arrivals in

India in 2014

7.67 million

36 AVIATION AND TOURISMINDIAN REPORT

per cent growth in tourism arrivals to India from the GCC,” Rao says. “Average spent by foreign tourists in India range around $3,000 per person per trip. However, Arabs are high-spending tourists and they usually spent between $5,000 to $7,000 per person per trip.”

Tourism fetches $18.13 billion in foreign exchange earnings and the sector rep-resents 6.8 per cent of India’s GDP. It is the third-largest foreign exchange earner after gems, jewellery and readymade garments.

Gerald Lawless, President and CEO of Jumeirah Group, says, “This is one example how simple steps can have multiplier effects. India plans to extend this e-visa scheme to 150 countries – that is going to help accelerate the growth of the country’s tourism industry.”

During the period April 2000-February 2015, this sector attracted around $7.86 billion foreign direct investment (FDI), according to the Department of Industrial Policy and Promotion (DIPP), which is quite below the level of foreign investment one would expect India to achieve.

In India, tourism is a big employment gen-erator–every $1 million invested in tourism creates 78 jobs. That’s why the country has opened the sector for foreign investment and allows 100 per cent FDI under the auto-matic route in tourism and hospitality as well as in tourism construction projects, includ-ing the development of hotels, resorts and recreational facilities.

According to the World Travel and Tourism Council (WTTC), the total contribution of travel and tourism to India's GDP was 7.64 trillion rupees or 6.7 per cent of the GDP in 2014, and is forecast to rise by 7.5 per cent in 2015, and to rise by 7.3 per cent per annum to 16.58 trillion rupees or 7.6 per cent of GDP in 2025.

However, the ourism sector’s growth is intricately linked to the country’s aviation sector’s growth and development.

AVIATION INDUSTRYIndia is the world’s ninth largest civil aviation market catering to 163 million passengers, mostly domestic travellers. However, with 85 international airlines and five Indian carriers currently connecting India with 40 destina-tions, the flow of international passengers is expected to grow to 60 million by 2017. By

2020, India is poised to become the world’s third biggest aviation market, according to government statistics.

However, the industry’s current state can, by no means, be called healthy. The last few years have been some of the most chal-lenging in India’s aviation history, says a latest report by the Centre for Asia Pacific Aviation (CAPA).

“Over-capacity, high input costs, intense competition and a negative policy and reg-ulatory environment conspired to threaten the viability of virtually the entire aviation value chain,” it said. “India’s airlines alone have lost more than $10 billion combined since FY2009. Airline debt stands at around $11.3 billion, rising to close to $14 billion if liabilities to vendors are included. At an industry level airline debt is now equivalent to more than 100 per cent of airline revenue.”

In FY2015 traffic increased and losses declined but this was largely a function of lower fuel prices. Looking ahead to the remainder of FY2016, robust traffic growth is expected to continue, and with modest capacity expansion, Indian carriers' finan-cials should see further improvement, CAPA forecasts.

The sector’s growth has largely been restricted due to the stringent bilateral air traffic agreement that does not allow foreign carriers to serve Indian markets unless covered under government-to-government negotiations.

India has separate bilaterals with differ-ent emirates of the UAE. As a result of the expanded bilateral agreements, weekly entitlements for UAE carriers will increase to over 135,000 seats by 2015/16. CAPA research estimates that the additional near term seat requirements of foreign carriers in Indian market is in excess of 170,000 per week.

“India’s huge growth potential can only be optimised by liberal bilateral air ser-vices agreements which would serve to increase choice of travellers and bring huge economic benefits to those markets,” Paul Griffiths, CEO of Dubai Airports, says. “Dubai is the most connected city in the Middle East. India is also the UAE's biggest trading partner. Cities that are connected through air services with global hub cities like Dubai, attracts increased investment. It helps increase mobility and trade.”

passengersserved by Indian aviation industry

163 million

tourism sector’s contribution to

Indian economy

6.7 %

http://centreforaviation.com/profiles/countries/india

http://centreforaviation.com/profiles/hot-issues/traffic-and-capacity

http://centreforaviation.com/profiles/hot-issues/traffic-and-capacity


“India’s airlines debt stands at around $11.3 billion, rising to close to $14 billion if liabilities to vendors are included. At an industry level airline debt is now equivalent to more than 100 per cent of airline revenue.”Centre for Asia Pacific Aviation (CAPA)

The business plans of UAE carriers entail massive expansion over the next decade and liberal access to the Indian market will be key to supporting this growth. Indian car-riers are currently utilising approximately 43,000 of the 55,000 weekly seat entitle-ments available to them under the India-Dubai bilateral air services agreement.

“Despite the recent opening up of the market, the UAE carriers are still seeking an additional 60,000+ weekly seats in the short to medium term in order to support increased frequencies to existing des-tinations,” CAPA says. “The critical role that aviation can play in ensuring eco-nomic competitiveness and generating employment by facilitating business, trade and tourism has not yet been recognised, despite the unprecedented emphasis which this administration places on tourism as a priority sector.”

The Indian aviation sector is likely to see

investments totalling $12.1 billion during 2012-17, including $9.3 billion is expected to come from the private sector, according to a report by the Department of Industrial Policy and Planning. India’s middle income popula-tion is expected to increase to 267 million by 2016 and the country’s plan to increase the number of airports to 250 by 2020 is expected to help the industry grow further.

India currently offers 100 per cent FDI in greenfield airport projects and up to 74 per cent foreign investment in existing airport projects under the automatic route, above 74 per cent and up to 100 per cent permit-ted under government approval route.

The country had earlier opened the airline market for foreign investment up to 49 per cent in domestic scheduled passenger air-lines resulting in Abu Dhabi’s Etihad Airways taking a stake in India’s Jet Airways. India allows 100 per cent investment for NRIs.

According to a report by Oxford Economics, the aviation sector contributes 330 billion rupees (0.5%) to Indian GDP. The aviation sector supports 1.7 million jobs in India, including 276,000 directly supported by the aviation sector; 841,000 indirectly supported; and 605,000 supported through the spending by the employees of the avia-tion sector and its supply chain.

“The aviation sector pays over Rs87.5 billion in tax including income tax receipts from employees, social security contribu-tions and corporation tax levied on profits. It is estimated that an additional 9.8 billion rupees of government revenue is raised via the aviation sector's supply chain and another 7.1 billion rupees through taxation of the activities supported by the spending of employees of both the aviation sector and its supply chain,” Oxford Economics says.

growth in electronic tourist visa arrivals to

India in H1 2015

1,074 %

airports expected to be operational in

India by 2020

250

�India will have 250 airports operational by 2020

http://centreforaviation.com/profiles/hot-issues/travel--tourism


AIR INDIA FLIES HIGHFROM A HUMBLE BEGINNING, AIR INDIA—THE NATIONAL FLAG CARRIER OF INDIA—

CURRENTLY CRUISES TO A NEW ALTITUDE WITH 132 AIRCRAFT TO 107 DESTINATIONS

AND IS GOING STRONG AS THE AVIATION SECTOR ACCELERATES TO HIGHER GROWTH

P R O F I L E

Air India is the flag carrier airline of India and occupies a special place in the Indian and global aviation scenario. It pioneered the aviation in India and its history is synon-ymous with the history of civil aviation in India.

Air India is not a mere airline that transports passengers, baggage and cargo. It is a multi-faceted organisation. The aviation infrastructure it has created over the years is a testimony of its contribution. Apart from servicing of all its aircraft in-house with its engineering facilities, Air India also undertakes ground handling services of many airlines in many cities in India. Air India has grown to become a mega global carrier with a network of 39 destinations across the USA, Europe, Canada, Far-East, South-East Asia and the Gulf and a domestic network that covers 68 destinations. It has a fleet of 132 aircraft and flies one of the young-est fleet comprising a mix of Boeing B777s, B747s, Airbus A330s, B787 and Airbus A321s, A320s, A319s and Boeing B737s apart from CRJs and ATR aircraft.

Air India’s major hub is at Indira Gandhi International Airport which is connected with 50 Indian and 29 inter-national cities. More than 50 per cent of Air India’s

passengers travel through the Delhi hub. The airline plans to develop the second hub at Mumbai's Chhatrapati Shivaji International Airport.

With financial restructuring and enforcement of strict rules and regulations, the airline has showed signs of turning around and has been EBIDTA positive for the past three years. Air India is expected to generate operating profit during current financial year and cash profit during FY2019. Air India is part of the Star Alliance, the world’s largest airline group, bringing 27 airlines to provide 18,043 flights a day to 1,269 destinations in 193 countries. As a part of the alliance, Air India gets access to a vast global network, offering unmatched reach and connectivity, seamless travel as well as enhanced revenues as a result of cross-feeds to/from the alliance partners.

Air India’s excellence in service has been recognised by many global organisations and the airline has won many awards. It was also voted the most trusted brand in the country’s aviation sector eight times. It has carried out evacuation work during Kuwait, Iraq and the ongoing Yemen war and has a place in the Guinness World Records for the civil airline that had evacuated the most people to date for the evacuation work done by the airline in 1990 and airlifted over 170,000 Indians from Kuwait in just 59 days. Air India has always been committed to its CSR through pioneering efforts in preserving the environment. A series of awareness raising activities related to envi-ronmental issues won it a prestigious award by the United Nations Environmental Programme (UNEP) in 2007.

AIR INDIA IN THE MIDDLE EASTAir India, along with its fully-owned subsidiary Air India Express, form one of the largest operations between India and Middle East. More than 300 flights per week operate directly between the sector covering 12 destinatons including Saudi Arabia, UAE, Oman, Kuwait, Qatar and Bahrain. The Middle East is the largest International oper-ation for Air India, contributing close to Dh2 billion towards airlines revenues.

�Pankaj Srivastava, Commercial Director of Air India


https://en.wikipedia.org/wiki/Flag_carrier

https://en.wikipedia.org/wiki/India

https://en.wikipedia.org/wiki/Indira_Gandhi_International_Airport

https://en.wikipedia.org/wiki/Indira_Gandhi_International_Airport



CONNECTING CULTURES

I N T E R V I E W

With $23 billion, or 28 per cent contribution to Dubai’s GDP, aviation sector has every reason to draw the gov-ernment’s financial resources–to the tune of nearly $40 billion. That’s why last year’s announcement of the $32 billion investment in Dubai World Central (DWC) did not come as a surprise to industry observers, on top of the Dubai International’s (DXB) $7.8 billion expansion. In an exclusive interview, Paul Griffiths, Dubai Airport’s CEO explains why.

Dossier: The global aviation industry’s power is shifting from the West to the East. How do you see this transi-tion and why?Paul Griffiths: It is becoming extremely difficult for airports in the West, especially in Europe and America, to enable air traffic growth due to community and environmental issues, whereas airports in the East, especially in the Middle East, are able to provide unparalleled growth that the global aviation industry needs. This is aided by the rapid expan-sion of the airlines that shuttle passengers across the world via these hub airports, which in turn is shifting the

�Paul Griffiths, CEO of Dubai Airports

aviation industry’s power base towards the East, espe-cially the Middle East. European and American authori-ties will have to rethink their strategies, end the bilateral air traffic restrictions and open up skies to wider competition and help the industry to grow. Due to the growing global economy and the rise of the middle class in China and India, more people will fly every year. If the Western airlines and airports can’t absorb the growing demand, others will.

What are your plans to switch traffic from DXB to DWC?With slots becoming increasingly scarce at DXB, DWC will become increasingly attractive to the regional and low-cost airlines. Last year, we announced a $32 billion invest-ment in DWC that will help raise its passenger capacity to 120 million by around the mid-point of the next decade to enable the shift of Emirates airline’s operations.

With construction activities, how will you manage air traffic, especially when Dubai hosts Expo 2020?With the completion of DXB’s Concourse D and DWC’s expansion, the combined capacity of both the airports will be 126 million passengers. As per this plan, DXB will con-tinue to act as the hub airport while DWC will be used by regional and budget airlines for point-to-point traffic. We might cross the 90 million passenger mark by 2018. So, we will still have some good capacity left until 2020.

How do you see traffic between Dubai and India grow?India is the largest single source of air traffic to Dubai and with increased economic activities, it can only grow. Last year six airlines carried 8.9 million passengers to and from 19 destinations in India. Passenger traffic between Dubai and Indian routes grew 6.1 per cent last year. However, India’s huge growth potential can only be optimised by liberal bilateral air services agreements which would bring huge economic benefits to those markets.

How would the Indian economy benefit with increased connectivity with Dubai?Aviation is a great enabler of economic growth. It allows greater movement of goods and services and facilitates trade. Improvements in connectivity contribute to the eco-nomic performance by enhancing productivity. Improved connectivity gives Indian-based businesses greater access to foreign markets, encouraging exports, and increases competition and choice in the home market from foreign-based producers.

WITH 79 MILLION PASSENGERS PROJECTED

THIS YEAR, DUBAI INTERNATIONAL IS

POISED TO TAKE THE MANTLE OF THE

WORLD’S BUSIEST HUB AIRPORT FROM

ATLANTA BY THE END OF THE DECADE



SERVICE WITHA SMILEGERALD LAWLESS HELPED DUBAI'S

GOVERNMENT CREATE ONE OF

THE WORLD’S MOST PRESTIGIOUS

HOSPITALITY CHAINS , WHICH IS

GROWING AT A STEADY PACE

I N T E R V I E W

As President and Group CEO of Jumeirah Group, Gerald Lawless has helped establish Jumeirah as one of the premier luxury hotel brands in the world. In an interview with Dossier, he reflects on the changing dynamics of the global tourism industry. Excerpts:

Dossier: The global tourism industry is undergoing tremendous transformation. How do you see these changes?Gerald Lawless: Tourism is a great enabler, a driver of global growth that bridges cultures. As more and more people fly across the globe, they come across differ-ent cultures and embrace new values and develop better understanding of other lifestyles. The number of travellers grew 4 per cent last year with the industry recording more

than 1.2 billion trips worldwide. The tourism industry is responsible for 277 million jobs and represents 9 per cent of global GDP, according to the World Travel and Tourism Council (WTTC). Tourism is the industry of the future.

As a global tourism industry official, what are the chal-lenges you foresee for the industry as it progresses?It’s a very volatile sector. Like all other industries, we also need peace. As a global economic growth driver, I feel this industry needs more attention from policy makers. Government bureaucracy should be an enabler of growth, and not an obstacle. If you look at Dubai, the open skies policy and simplifying visa has helped our aviation and tourism industry to thrive.

Similarly, the electronic tourist visa has helped a 10-fold jump in international arrivals to India in the first half of 2015 compared with the same period last year. This is one example how simple steps can have multiplier effects. India plans to extend this e-visa scheme to 150 countries – that is going to help accelerate the growth of the coun-try’s tourism industry resulting in accelerated demand for more hotels.

Speaking about the tourism industry in India, how do you see it shaping up in the next few years?The Indian tourism industry has great potential to grow and we see a huge opportunity in the market. However, India needs to continue to encourage more tourist arrivals that will help the industry to grow. The WTTC predicts that the travel and tourism industry in India will grow by 7.5 per cent this year, fuelled by visa reforms.

In 2014, travel and tourism industry contributed 7.64 tril-lion rupees ($120 billion) and supported 36.7 million jobs to the Indian economy last year, according to the WTTC. This year, the industry’s contribution to India’s GDP is forecast to grow at 7.5 per cent and employment by 1.8 per cent.

By the end of 2015, the travel and tourism sector will contribute 8.21 trillion rupees ($128 billion) or 7 per cent of India’s GDP and support 37.4 million jobs–almost 9 per cent of the total employment.

According to the WTTC forecast, travel and tourism has the potential to contribute 46 million jobs to the Indian economy by 2025. But this growth will not happen by itself, and needs careful management, particularly in the area of human capital development.

Are you concerned with declining occupancy in Dubai ?By 2020, Dubai’s hotel establishments will already host 20 million guests and this figure is exclusive of the World Expo 2020 visitors. Which means the city will need to have an inventory of approximately 150,000 rooms to host 20 million visitors, which is significantly higher than the exist-ing room inventory of 85,000 rooms. So, we will need more hotels and the occupancy level will be on the higher side all along.

�Gerald Lawless, President and CEO of Jumeirah Group



DUTY BOUND

I N T E R V I E W

�Colm McLoughlin, Executive Vice President, Dubai Duty Free

fact that people with disposable income here love to shop. I think shopping is part of our culture, be it at malls or airport. Let me give you an example: shopping penetration at air-ports such as London Heathrow and Singapore averages between 15-18 per cent. However, at Dubai International Airport, it’s 49 per cent, which means almost one in every two outbound passengers at Dubai International Airport shops at Dubai Duty Free.

In addition to the knowledgeable staff, the layout of outlets, quality of products, pricing and availability of top-class products, our quality of service are major contribu-tors to our success.

We spend 2.5 per cent of our top line revenue in market-ing, advertisement, sponsorships and events that create global awareness. So overall there is a sense of antic-ipation and a willingness to spend when people arrive at Dubai Duty Free.

When do you expect the sales revenue to hit $2.5 billion?As per our own projections, we expect to record $2.6 billion in sales in 2018 and $3 billion in 2020.

How do you see things shape up in 2020 when Dubai hosts World Expo 2020?Dubai Duty Free is currently spread over 26,000 square metres of space. It will add 7,000 square metres at the new Concourse D when it opens later this year and ultimately a further 80,000 square metres in Al Maktoum International Airport at the Dubai World Central when it expands fully. By 2020, Dubai’s hotels will host more than 20 million guests at its hotels and sevice apartments, part of 100+ million passengers, who will be passing through Dubai International Airport. We expect a significant boost in our revenue that year.

Colm McLoughlin, Executive Vice Chairman, Dubai Duty Free, came to Dubai as a consultant to set up Dubai Duty Free in the early 1980s. He liked the project so much, that he stayed on board at the helm and built it over the years to become the world’s biggest sin-gle-airport duty free operation which is going strong for 32 years. He shares his views candidly.

Dossier: With traffic growth of Emirates, FlyDubai and other airlines through Dubai International Airport, what percentage growth do you see in sales at Dubai Duty Free this year?Colm McLoughlin: Last year, we reported $1.91 billion (Dh6.99 billion) in total sales. During the last three decades, we doubled our sales revenue six times.

While passenger traffic at Dubai International Airport grew 1919 per cent in 30 years since the setting up of Dubai Duty Free in December 1983, our sales growth has been 9,900 per cent during the same period. This reflects the reality that we have turned most of the passengers into shopper at the Dubai International Airport. We expect to record between 4-5 per cent growth in total sales this year.

How precious is the per square metres retail area at Dubai Duty Free?The global average return on sale per square metre at travel retail outlets is $34,000, while at Dubai Duty Free, it’s more than $80,000. It is much higher than the world’s famous and valuable retail store–the Apple store at New York’s 5th Avenue that has a return of $66,000 per square metre per year.

What are the main contributors to your revenue growth in addition to trade and tourism?In addition to these and the open air skies policy, the

FROM SCRATCH, COLM

MCLOUGHLIN HAS BUILT THE

WORLD’S LARGEST SINGLE-

AIRPORT DUTY FREE OPERATION,

HELPING DUBAI DEVELOP ITS

AVIATION INFRASTRUCTURE



“Shopping penetration at airports such as London Heathrow and Singapore averages between 15-18 per cent. However at Dubai International Airport, it’s 49 per cent, which means almost one in every two outbound passengers at Dubai International Airport shops at the Dubai Duty Free.”Colm McLoughlin, Executive Vice Chairman of Dubai Duty Free

When Concourse D at Dubai International Airport opens, what would be the size of your retail operation?When the new concourse opens later this year, our exist-ing duty free operation at Concourse C, or Sheikh Rashid Terminal, will be moved to the new facility in Concourse D, where we will have retail space of 7,000 square metres. So, the total retail area under Dubai Duty Free operations will be around 33,000 square metres by the end of this year. That will accelerate sales growth.

In terms of nationality, who are the biggest spenders at Dubai Duty Free?Although Chinese nationals represent only 4 per cent of the total number of passengers at Dubai International Airport, they represent 14 per cent of our business, fol-lowed by Indians who represents 13 per cent of our sales, followed by African nationals (9 per cent), British (6.5 per cent) and Pakistani nationals (3.5 per cent). So, Asians by far outnumber others in terms of sales at Dubai Duty Free.

How does passenger traffic to and from India help your top line revenue?As I said, Indian nationals represent 13 per cent of our annual sales which was $1.91 billion. This translates to $249.21 million (Dh914 million) annual spend by Indian passengers at the Dubai Duty Free as per last year’s sales figures.

How does Dubai Duty Free operations contribute to the emirate’s economy?Aviation represents about $23 billion or 28 per cent of Dubai’s $82 billion gross domestic product (GDP). Dubai Duty Free contributes about $2 billion or 9 per cent of the Aviation sector to the Dubai economy. However, our indi-rect contribution to our economy is much bigger.

First of all, we employ 6,000 professionals who live, work and spend in Dubai. Their consumption contributes to the retail sector. In addition, we source 72 per cent of our products locally that help the suppliers, importers and wholesalers and their employees. We pay full dividends to our shareholder Investment Corporation of Dubai (ICD)

year after year, which helps fund the growth of Dubai’s avi-ation infrastructure.

Earlier, Dubai Duty Free raised a total of $2.5 billion through two tranches, that is helping the development of the $7.8 billion expansion of Dubai International Airport. In addition to these, we own 735 apartments that house many our employees the value of which is more than 900 million dirhams, in addition to 13 plots of land at Dubai Silicon Oasis, which we have kept for future development of apartments for our staff.

We also own The Irish Village, Dubai Tennis Stadium and the 292-room Jumeirah Creekside Hotel–both collectively generating $50 million of revenues for Dubai Duty Free.

Although being most successful travel retailer in the world, you have not expanded operations outside Dubai. Do you have any plans to expand or acquire duty free operations outside Dubai?It’s not high on our agenda at the moment as we want to strengthen our focus in Dubai.

Over the last 32 years of your operations here at Dubai International Airport, how has the shopping habits of passengers at travel retail outlets changed?There have been lots of changes in passengers’ spending habits. First of all you have more repeat travellers across the world. Travel is no longer a luxury, it’s a necessity.

Earlier, people used to buy mostly liquor and perfumes and the occasional camera. However, now passengers buy almost everything you could think of–such as gold jewel-lery, high end fashion, toiletries and even milk powder!

Last year, we sold 28,622 iPhones, 19,553 iPads, 111,885 mobile phones (other brands), 3.4 tonnes of gold, 3.21 million bottles of perfumes, 4.23 million cartons of ciga-rettes, 17.17 million cigars, 261,365 pieces of watches, 780 tonnes of dates, 1,017 tonnes of nuts, 1,292 tonnes of Tang flavoured drink and 949 tonnes of Nido milk powder!

In fact, in terms of sales value, our best-selling brand is Nido which represents 0.5 per cent of our annual sales, or $10 million (Dh36.7 million) and nearly 25 per cent of which is bought by Indian travellers!


�India needs $2 trillion to build 110 million homes to provide shelters to all

C O N S T R U C T I O N

45 CONSTRUCTIONINDIA REPORT

When it comes to the scene of construction activity in India, images of poor workers–both

men and women on faded torn clothes carrying red bricks on their heads–dom-inate the catalogue. Although India has progressed a lot in its 68-year post inde-pendence history, this scene has remained pretty much the same. The fate of these poor construction workers remained unchanged, although they age by the day and often die poor when the next genera-tion carries on with the modern-day slavery.

An Indian citizen moves to the country’s urban areas every 2 seconds, for a better life. This translates to a migration rate of 1,800 per hour, or 43,200 per day from rural areas to urban. On an average 15.76 million people migrate from rural to urban areas every year–putting huge pressure on infrastructure, housing and civic services.

“The urban population grew more than the rural, for the first time in Indian history in 2011. The rate of rural population growth has even plummeted in many Indian states. The transitioning of rural areas to urban centres is evident from the fact that more than 2,500 settlements that were previously defined as villages have been reclassified as towns as per the latest 2011 census,” it said.

India’s current urban population of 377 million is much bigger than the combined population of United States and Canada. The country currently hosts the world’s second biggest urban population which will

cross 590 million in 2030 and is expected to more than double the current population to 830 million by 2050.

“This rapid pace of urbanisation implies that India has to create two and a half Americas in the next three and a half decades,” Amitabh Kant, India’s Secretary of Industrial Policy and Promotion (DIPP), said at a business event. “In the next few decades, India will build much more than India has built in the last 5,000 years–that is the challenge.”

According to a report by global account-ing firm KPMG, the housing shortage in India is about 60 million units. Current annual investment in the housing sector is about $110 to $120 billion while the sector is growing at an average rate of 5 to 6 per cent.

The Indian government has announced a vision to provide housing for all by 2022. As a result, it is planning to develop 500 cities including upgrading 100 to smart cities. By 2022, India needs to develop 110 million housing units to realise this dream and this requires investments of more than $2 trillion, or $250 billion annually until 2022.

The Indian real estate market size is expected to touch $180 billion by 2020. The housing sector alone contributes 5 to 6 per cent to the country’s GDP.

“India needs to create several new-gen-eration, green field cities that are planned, financed, developed, operated and managed more efficiently,” Kant says. “We’ve

INDIA TO BUILDHOMES FOR ALLWITH THE MASSIVE TARGET OF BUILDING 110 MILLION HOMES, IN ADDITION TO BUILDING INFRASTRUCTURE, INDIA IS SET TO BECOME THE WORLD’S THIRD LARGEST CONSTRUCTION MARKET BY 2025

needed to shelter all families by 2022

$2trillion

46 CONSTRUCTIONINDIAN REPORT

just liberalised the barrier to foreign invest-ment in construction, recently. What we have allowed is completely easy entry into the construction sector. We want foreign direct investments (FDI) in construction.”

The real estate sector is expected to account for 43 per cent of the construc-tion spend in India until 2016 aggregat-ing to approximately $380 billion. Foreign investors bought office space worth over $2 billion in India in 2014, a four-fold rise compared to the previous year, in order to increase their rent-yielding commer-cial assets in Asia’s third largest economy. All these developments bode well for the country’s construction sector, which is the second largest employer and contributor to economic activity, after the agriculture sector. The construction sector accounts for the second highest inflow of FDI after the services sector and employs more than 35 million people.

According to government statistics, 50 per cent of the demand for construc-tion activity in India comes from the infra-structure sector, the rest from industrial activities, residential and commercial devel-opment. The Indian construction indus-try is valued at over $126 billion. Although India is a large collection of villages, the urban share of the country’s GDP was 62 to 63 per cent in 2009-10. This is further projected to increase to 70 to 75 per cent in 2030. So, despite the country’s depen-dence on agriculture, the future of India lies in urbanisation. That’s why Modi govern-ment is putting money where the mouth is. “Present level of urban infrastructure is inad-equate to meet the demands of the existing urban population. There is need for re-gen-eration of urban areas in existing cities and the creation of new, inclusive smart cities to meet the demands of increasing popula-tion and migration,” said a spokesperson for the DIPP. To provide quality urban services on a sustainable basis in Indian cities, the government is encouraging the urban local bodies to enter into partnership agreements with foreign players, either through joint ven-tures, private sector partners or through other models.

In order to make this happen, the govern-ment is now allowing 100 per cent foreign investment through township housing and construction and development projects.

SMART CITIESThe concept of smart cities emanates from the need to create efficient urban facili-ties that can house the new urban upwardly mobile professional middle class and provide employment opportunities for a large number of residents.

Subsequently, the Indian government in its budget 2014-15, had announced a project to develop 100 Smart Cities as sat-ellite towns of larger cities by modernising some mid-sized cities in the country. Initially, Rs70.6 billion has been allocated for the project. Bloomberg Philanthropes is helping the Indian government while the Bureau of Indian Standards is already working on setting standards for smart cities. Smart Cities Council India has been formed to promote the development of smart cities in the country.

Once these smart cities projects get off the ground, both real estate and con-struction sectors will witness heightened activities with investment, employment, con-struction and procurements – that will drive the growth of the Indian economy to beyond the government’s target of 8 per cent.

As the pace of construction activities gain momentum, more and more construction workers are expected to join the construc-tion bandwagon. Although India’s landscape and cityscape might change for the better, the fate of the construction workers might not change. Only their numbers might mul-tiply due to the sheer volume of work that is being tendered.

Indian government and development part-ners will have to find a way to lift the con-struction workers out of their miserable fate. Otherwise, all the development efforts might go in vain. Their poor state, unhealthy living and unhygienic lifestyle also defeats the purpose of the overall development.

“In the next few decades, India will build much more than India has built in the last 5,000 years - that is the challenge.”Amitabh Kant, India’s Secretary of Industrial Policy and Promotion

value of India’s construction sector

$126billion

Indians move to cities every year

15.76 million


w

REBALANCINGREAL ESTATEWASL IS ONE OF THE BEST EXAMPLES

OF HOW GOVERNMENT LEVERAGES ITS

STRENGTH TO DELIVER AFFORDABLE

HOMES TO SUPPORT THE ECONOMY

I N T E R V I E Waffordable homes, are you considering building new clusters of affordable homes?For a sustainable economy, Dubai needs a better mix of housing, retail and hotels that cater to all segments.

We have perhaps the largest pool of affordable homes amongst the 30,000 residential units under our manage-ment. This year we are delivering 1,400 affordable homes in November while a further 5,000 will be delivered by 2017. Affordable homes are our biggest portfolio and rep-resent more than 88 per cent of the total housing units under our management.

What are your plans for the freehold market? We have recently entered the freehold property sector to test the market. Whatever we develop, we will retain a size-able portion for leasehold, as we believe in what we build. This involves maintaining a presence and managing free-hold units as well as constructing them.

You have recently started selling plots at the Nad Al Hammar Gardens. How is it going? How many plots have been sold?Nad Al Hammar Gardens has received a strong response from investors, especially from UAE nationals who have already bought 65 per cent of the plots.

Could you give us the collective value of the four devel-opments unveiled in February and how many residential units are expected to be developed?Values change with market dynamics. However, the col-lective value of these projects could exceed 40 billion dirhams ($10.9 billion). We expect some of the projects to be delivered by 2019.

�Hesham Al Qassim, Chief Executive Officer of Wasl Asset Management Group

Seasoned banker Hesham Al Qassim took over Dubai Real Estate Corporation (DREC) and its asset manage-ment arm, Wasl in 2007 to help restructure and rebal-ance Dubai’s real estate market with the largest pool of residential assets belonging to Dubai government. Today, his organisation manages 30,000 residential units, 5,200 industrial plots and 13 hotels with 5,000 rooms with a further 16 in the pipeline that will house more than 10,000 rooms.

The company recently announced projects worth Dh40 billion that will change the landscape of Dubai and offer greater value to residents and tourists. In an interview with the Dossier, Al Qassim offersw a great insight into the emirate’s real estate sector…

Dossier: Dubai’s real estate market is witnessing a 10-20 per cent decline this year–both in freehold prices and rents. What is your experience so far since the begin-ning of the slowdown last year?Hesham Al Qassim: We have seen a cyclic growth in the UAE economy and in the country’s real estate sector since the formation of wasl Asset Management Group in 2007. Following the crisis in 2008-09, we have witnessed a gradual recovery from 2011 till 2014 and then a slight decline from 5-10 per cent from the second half of 2014.

The current decline is healthy and is part of the eco-nomic cycle. It reflects the fact that Dubai’s real estate market has matured.

When do you anticipate the market to turn around?We anticipate growth to start happening around the second half of 2016 and momentum to pick up in 2017.

Wasl has developed the largest pool of affordable homes in Dubai. Now that the market is in need for



CREATIVITY ININNOVATION

I N T E R V I E W

�Abdallah Massaad, CEO of RAK Ceramics

its simple foundations in a Ras Al Khaimah to a distribu-tion network that spans 160 countries, RAK Ceramics has come a long way since it first started production in 1991.

In less than 20 years, RAK Ceramics has grown impres-sively from a single factory in Ras Al Khaimah producing 700,000 square metres of tiles to a staggering 117 million square metres. From the Waldorf Astoria to the Grand Hyatt Hotel, the brand is present in 15,000 hotels across 135 countries and has become a household name produc-ing 24 million pieces of high-end tableware annually.

With real estate market slowing how does the immedi-ate future of ceramic tiles and bathware look like? In the UAE, there may be a slowdown in the residential property market but this is limited to one segment in one emirate. Across the wider GCC, the construction sector is still witnessing heightened activity driven by infrastructure, industrial, hospitality projects and events like Expo 2020 and the World Cup in Qatar.

How are you planning to face the current downturn? We don’t see any downturn in the overall economic perfor-mance of the GCC countries. RAK Ceramics is, however, well prepared for risks that may arise from slow growth in the construction sector and uncertainty regarding the impact of lower oil prices in the GCC. Contingency mea-sures have been put in place to mitigate these risks, which include stringent plans to exit non-core businesses.

How do you see the UAE economy shaping up this year in view of the lower oil price?The UAE has proved to be resilient to lower oil prices. The country has created a strong and substantial offi-cial reserve over the years in addition to large sovereign wealth funds, which would enable the UAE to maintain its high level of spending on infrastructure and major projects.

SINCE ITS LAUNCH IN 1991, RAK CERAMICS

HAS BEEN HELPING THE ECONOMY OF RAS

AL KHAIMAH GROW

Abdallah Massaad, CEO of RAK Ceramics, who has been at the helm of ceramics business for quite some time, gives his views on a wide-ranging issues. Excerpts:

Dossier: What is RAK Ceramics doing to increase revenue and profitability this year?Abdallah Massaad: The implementation of a Value Creation Plan set by the Board to focus on increasing bottom line and margins in core businesses and exiting from non-core businesses resulted in a continued momen-tum in RAK Ceramics’ performance with net profits reach-ing 281.7 million dirhams; an increase of 3.5 per cent in 2014. Overall core revenuen reached 2.8 billion dirhams.

In the UAE an expansion plan to increase sanitaryware production by 20 per cent is due to complete by the end of 2015. In addition, as construction in India and Bangladesh continues to grow, RAK Ceramics has a strong market share and is well positioned to participate in that growth.

With Samena Capital on board, what are the strategic directions the company is implementing?June 2014 marked a transformational point for RAK Ceramics, when Samena Capital acquired a 30.6 per cent stake of the business and as a result, a Board-mandated ‘Value Creation Plan’ has been launched, aimed at improv-ing performance and unlocking value for shareholders. The focus is on increasing market share in existing markets. The company is expanding its tile capacity in Bangladesh by 45 per cent, with room for expansion in the UAE and increasing its high-margin sanitaryware capacity by 27 per cent in the UAE, Bangladesh and India.

What are your plans to revamp the global brand? RAK Ceramics is one of the largest ceramics manufac-turers in the world with very strong links to its Arab her-itage, which dates back to the pottery making era. From


P. O. Box: 4184, Ajman, UAE, Tel: +9716 7438333, Fax: +9716 7431515, E-mail: [email protected], Web: www.thumbay.com

13 Sectors, 3,000 Employees, Dealing with 175 Nationalities & Growing Fast

R E S T A U R A N T

TMDC

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for your eyes onlyTHUMBAY

Touching livesManaging your care process

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YOUR FAMILY PHARMACY

YOUR FAMILY PHARMACY

The most acclaimed HEALTH & LIFESTYLE magazine in the region

YOUR FAMILY CLINIC

�With bank account-linked health insurance scheme, India's health-care landscale is about to change

H E A LT H C A R E

51 HEALTHCAREINDIA REPORT

When Thumbay Moideen, an Indian businessman with a timber trading background from

Karnataka state, came to Dubai to look for opportunities in the mid-1990s, he spotted a serious gap in the UAE’s healthcare sector.

In those days, the reputation of some of the hospitals and clinics despite the avail-ability of the latest equipment was such that even young would-be mothers were afraid to deliver babies. They would rather deliver them in India. There was a serious shortage of quality healthcare professionals in the UAE then. Moideen was intelligent enough to understand the root cause: there was simply no medical college to train doctors and nurses in the country. So, he decided to take the matter in his own hands.

But there was a slight problem: The UAE had no law that granted the private sector to set up medical institutions.

But it was a very crucial sector for the future of the UAE to be left unaddressed, he thought. So, one day when he met the Ruler of Ajman, HH Sheikh Humaid Bin Rashid Al Nuaimi, he mooted the idea of setting up a medical college in the UAE. That changed everything, including Moideen’s fortune.

Despite the absence of proper legislation, Thumbay Moideen established the UAE’s first medical college in the private sector in 1998 with an Emiri Decree. In less than 17 years, he upgraded it to a university–Gulf Medical University–that is helping meet the growing demand for medical professionals

in the region. He is currently setting up a number of hospitals and clinics across the UAE–where a mandatory health insurance scheme is changing the country’s health-care landscape.

Moideen, however, is not the only non-res-ident Indian (NRI) to develop the health-care sector. Two decades before he set foot in the UAE, a fellow entrepreneur from Karnataka, Dr BR Shetty had begun setting up clinics and hospitals while Dr Azad Moopen, a talented physician from Kerala, went on to develop the biggest chain of healthcare organisations in the GCC.

Dr Moopen's DM Healthcare currently operates 290 establishments managed by 10,000 professionals including 1,300 doctors.

However, for decades, they all have shied away from investing in medical facilities in India. Healthcare has become one of the largest sectors both in terms of revenue and employment in India, which is in need of massive investment. It is also a country that produces good doctors, nurses and para-medics. It is only in recent years that these NRI investors have started to look their own country more seriously.

While Thumbay Moideen has just started channelling his expertise and resources back to his country, Dr Moopen had a better look at India’s dilapidated healthcare sector where he has committed more than half of the $600 million investment in expansion. He is setting up India’s first medical city in

INDIA NEEDS ACHECK-UPWITH THE UNIVERSAL HEALTH PLAN, INDIA IS BRINGING THE 75 PER CENT OF ITS POPULATION WHICH IS UNINSURED INTO A MANDATORY INSURANCE SCHEME WHICH WILL CHANGE THE HEALTHCARE LANDSCAPE

doctors areneeded in

India by 2025

1.54million

$30 billion

potential investment requirements in the Indian

healthcare sector

52 HEALTHCAREINDIAN REPORT

Kerala. And there is a very good economic reason behind this.

The Indian healthcare market was worth $65 billion in 2012-13. Total health care spending is projected to reach $195.7 billion in 2018, according to Economist Intelligence Unit. The health-care industry size is expected to touch $280 billion by 2020, according to Frost and Sullivan, a research consultancy. India needs 1.8 million beds by the end of 2025.

“India’s public healthcare system is patchy, with underfunded and overcrowded hospitals and clinics, and inadequate rural coverage,” a recent Deloitte report says.

The statistics for India’s health infrastruc-ture are below that of other large countries. The US has one bed for every 350 patients while the ratio for Japan is 1 for 85. In con-trast, India has one bed for every 1,050 patients. India’s ratio of 0.7 doctors and 1.5 nurses per 1,000 people is dramatically lower than the WHO average of 2.5 doctors and nurses per 1,000 people.

“Furthermore, there is an acute shortage of paramedical and administrative profes-sionals. The situation is aggravated by the concentration of medical professionals in urban areas, which have only 30 per cent of India’s population,” Deloitte says.

“Many patients, especially those living in rural and semi urban areas, are still receiv-ing services from unqualified practitioners. The industry needs an additional 1.54 million doctors and 2.4 million nurses to match the global average.”

According to McKinsey & Company, India requires 600,000 to 700,000 additional beds over the next five to six years, which requires $25-30 billion investment. However, to fix this gap, the Indian government had

earlier announced a Universal Health Plan that aims to offer guaranteed benefits to a sixth of the world’s population that is likely to cost the country’s exchequer an estimated 1.6 trillion rupees ($25.73 billion) over the next four years.

Alisha Moopen, Director of DM Healthcare, says, “In India, our organisation operates eight hospitals with 1,840 beds and another three hospitals in pipeline which will add 1,100 beds to India. Therefore, by 2017, we will have 2,940 beds in 11 hospitals.

Under the National Health Assurance Mission, Modi’s government would provide all citizens with free drugs and diagnos-tic treatment, as well as insurance cover to treat serious ailments.

Currently only 25 per cent Indians are covered under various health insurance schemes. The new health insurance scheme aims at covering the rest 75 per cent unin-sured population–that will change the healthcare landscape in the world’s second most populous country.

“We are very proud to see the Indian gov-ernment take multiple initiatives to boost economic activities,” Thumbay Moideen says. “Healthcare insurance is always an added benefit for the citizens of India. It makes healthcare more accessible to the masses, as everyone cannot manage all forms of medical care.

It is going to develop a series of advanced satellite clinics in and around the rural areas of the city where hospitals are going to be situated.

Despite these bottlenecks, India attracts a large number of visitors seeking medical treatment. Indian medical tourism industry is pegged to grow at around 18 per cent and is expected to touch $2 billion this year.

“India’s public healthcare system is patchy, with underfunded and overcrowded hospitals and clinics, and inadequate rural coverage. Reduced funding by the Indian Government has been attributed to historic failures to spend its allocated budget fully.” Deloitte

beds are neededin India by

the end of 2025

1.8million

nurses are needed in

India by 2025

2.4million


54 HEALTHCAREINDIAN REPORT 54 HEALTHCAREINDIAN REPORT

DEVELOPINGHEALTHCARE EDUCATION

I N T E R V I E W

�Thumbay Moideen, Founder and President of Thumbay Group

citizens of India. It makes healthcare more accessible to the masses, as everyone cannot manage all forms of medical care. Being an academic hospital network, affil-iated to Gulf Medical University, our hospitals are subsi-dised, making healthcare more affordable to everyone. Our hospitals are driven by the motto “Care without com-promise” and we ensure that nobody is turned away from treatment, due to financial constraints.

India’s healthcare sector needs massive investment to boost capacity to improve healthcare among the rural population. How could this be done?Through investment by the public and private sectors. As part of our plans, we are going to develop a series of advanced satellite clinics in and around the rural areas of the city where our hospital is going to be situated. With Thumbay Hospital launching in Hyderabad soon, we will be looking at setting up our clinics in rural areas, acting as a first level of medical care. In the event that advanced medical treatment is required, the clinics will refer the patients to our hospital. This way we ensure that even people in remote areas get access to quality healthcare.

Your company is contributing to the healthcare sector of the UAE. Why are you not expanding in India?As I mentioned earlier, our first initiative in India, Thumbay Hospital in Hyderabad is taking shape as we speak. This 200-bed advanced healthcare facility is just the start. We have many new projects, which we have planned specifi-cally in India.

Thumbay Group is rolling out a number of healthcare institutions in the UAE and GCC? How many and how much are you investing in expansion?Thumbay Group has businesses across 13 different sectors. The group is currently focusing on its strategic long term plans, titled Thumbay Group Vision 2020, an ambitious expansion project that will see Thumbay Group scale up its business entities 10 times more, increase its staff to 10,000 and expand its operations from UAE to include countries like Ghana, India, Nigeria and Qatar.

Within this period, we are expected to become a global healthcare organisation with facilities in the Middle East, South Asian and the African markets.

THUMBAY MOIDEEN DID SOMETHING NO

ONE DARED IN THE UAE. HE DEVELOPED

THE NATION'S FIRST MEDICAL UNIVERSITY

Dossier: How’s the healthcare sector in India and what needs to be done?Thumbay Moideen: Being a business house that is pri-marily focused on three core areas such as healthcare, education and research, Thumbay Group as an organisa-tion is quite pleased with policies taken by the government to enhance the healthcare sector. We are also proud at this point as we have taken up our first hospital project in Hyderabad, Andra Pradesh. Inshallah within the coming months, we will be launching Thumbay Hospital, Hyderabad with many in the pipeline.

Do you think mandatory health insurance coverage could and should be introduced to offer better health-care to all Indians?Healthcare insurance is always an added benefit for the


CARE BEYONDBOUNDARIES ALISHA MOOPEN IS BUILDING

FROM WHERE HER FATHER

LEAVES OFF–A LEGACY THAT

MIGHT BE HARD TO MATCH

I N T E R V I E W

that will add another 545 beds in the next two years. We have eight hospitals in India presently with 1,840

beds and another three hospitals in the pipeline which will add 1,100 beds to India. By 2017, we expect close to 4,000 beds in 23 hospitals. We are actively pursuing hospital acquisition in and review any suitable opportunity.

How are you grooming staffs internally?Our current staff strength is 13,000 including 1,500 doctors, 4,500 nurses and 600 pharmacists. We expect these numbers to grow steeply in line with our expansion plans. Getting the right human talent is the biggest chal-lenge and the most important factor. We are very active in promoting education within our staff, to ensure that we remain on top of the advances in sciences. We give oppor-tunities to our staff to keep growing and build next gen-eration healthcare leaders within the institution. We have nursing colleges in India, and, we also have a medical college and will be opening a pharmacy college soon.

How are you funding the growth?We are exploring various suitable options for growth funding. We have private equity firms on board that have been happy with our performance and then we have bank financing available as option and finally listing is also one such consideration we have contemplated.

Do you want to transform DM Healthcare into a global conglomerate?I wish to see the gaps in access to quality healthcare diminish drastically across the globe. Healthcare is a basic human right. But it is a system that cannot sustain itself with only public healthcare system. Therefore, my vision is to expand our present footprint and play a vital role in bringing quality healthcare to the world at large.

�Alisha Moopen, Director for Strategy at Aster DM Healthcare


Alisha Moopen, Director for Strategy at Aster DM Healthcare Group, has been groomed to spearhead the growth and development of one of the biggest health-care conglomerates in the region developed by her father Dr Azad Moopen. In an exclusive interview, she underlines the group’s growth strategy. Excerpts:

Dossier: How do you see DM Healthcare's role change in the coming years?Alisha Moopen: We are happy to contribute and be part of the building block for healthcare in the GCC. We have a very strong network of primary medical centres. We are now building large number of hospitals where patients can be referred to in order to complete the circle of care. We are building more specialised centres to strengthen the level of care.

How much is your group spending in expansion?We have been growing at 20-30 per cent CAGR over the last 4-5 years. The plans for expansion for the next two years are fairly frozen. However, if any good assets come up for acquisition, we are fairly nimble and open to the idea.

Your group has been vocal in promoting healthcare amongst workers. How do you want to expand this?The health insurance will go a long way in enhancing the health of the majority of the population as people have the choice and the ability to visit the doctors at the onset of any illness, rather than when things get more complicated or serious. This in turn will help the patients getting timely medical intervention and reduce suffering.

How many hospitals is your group currently building?We have six hospitals in GCC currently with 550 beds and another six in pipeline in various stages of construction

56 LAST WORDSINDIAN REPORT

Shamlal Ahamed, Managing Director for International Operations of Malabar Gold and Diamonds, has spearheaded the company’s global expansion from

its international headquarters in Dubai since 2008. Today its network of 134 stores, served by 7,500 people, help generate $4 billion revenues a year. Ahamed tells us why it is the best time to buy.

Dossier: With gold prices hitting a new low in recent weeks, how do you see the market evolve in this low-price environment?Shamlal Ahamed: The response has been very positive from a consumer point of view, so much so that our sales have doubled with the drop in price. Besides, average pur-chase per customer has also increased by 15 per cent.

Credit card purchases have increased–indicating that customers are utilising the opportunity even if they do not have liquid cash available immediately. The long-term impact of the low price will depend on the trend for the price for gold. If the prices continue to fall, then new cus-tomers who couldn’t afford gold will start buying gold. If the prices start to increase, the existing customers will buy more gold to take benefit of the opportunity. The trend of the price in the coming few weeks will be critical.

According to World Gold Council, global demand for jewellery dipped 10 per cent last year. How was your experience?Our business focuses on festivities, gifting and we are a part of the celebrations in an individual’s life. The gifting opportunities are increasing day by day and we see jew-ellery being preferred as a gift for celebrations; right from the birth of a child to her marriage and so on, the occasions are only increasing. As long as the practice of gifting exists, we are certain of the business thriving. Our key target audience–the South Asian consumers–consider gold not just as a commodity, but it is intricately linked to the culture, occasions and rituals. Hence the demand for gold will be there as long as occasions and celebrations

remain a part of our culture. Fortunately, the response is very positive as the markets itself are growing.

How long do you see this low-price environment con-tinue and do you anticipate a buying spree among con-sumers much ahead of the festive season?In the long run, gold price will definitely rise above the current prices. We see this as an opportunity and it is diffi-cult to predict for how long this will remain. As long as the price remains low customers will continue to buy–be it a festive season or now. The current low gold price helps us in expansion due to lower capital requirements.

When do you expect the market to pick up?We expect the market to pick up once the residents are back in September. A major push is expected by end October with the festive season fast approaching.

What was Malabar Gold’s sales turnover last financial year and how was it compared to the previous year?Malabar Gold and Diamond recorded $4 billion turnover last year, up from $3.5 billion the previous year.

In 2012-13, your company launched an ambitious growth roadmap to have a 224 outlets. How is it going?Currently we operate 134 stores and aim to cross 155 stores by the end of this financial year. We are exploring new retail formats which will accelerate the growth.

How much are you investing on the expansion?We are investing 515 million dirhams this year in expansion.

This summer there were less promotional activities. Is it due to the low price that itself is a motivator for sales?The summer period is generally a weak period and hence we utilise this period to prepare for the oncoming festive season. Any activity during this time cannot be justifies on a ROI basis. The low price was an added bonus which helped increase the sales.

THE GOLD RUSHWITH GOLD PRICES HITTING A NEW LOW,

SHAMLAL AHAMED TELLS WHY THIS IS THE

TIME TO INVEST IN THE PRECIOUS METAL

L A ST WO R D S

�Shamlal Ahamed, Managing Director for International Operations of Malabar Gold and Diamonds

57 LAST WORDSINDIA REPORT

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Dossier-India on the move 2015