The rise of Abu Dhabi's Al Fahim group

As you walk into the modest office of Saeed Al Fahim in Abu Dhabi, the first thing that catches your eye is a rack full of canes. The head of a business that generates annual revenues of nearly $1 billion and one of the biggest names in the UAE, Saeed Al Fahim is fascinated by canes, which remain today a powerful symbol of the Gulf's traditional culture and heritage.

'I love collecting canes,' he says, pointing to a favorite, a German model that has a sword concealed inside. Al Fahim says he had to be very careful while bringing this one back, due to security concerns at the airport. 'Whichever country I visit, I try to collect canes there. They are so different, depending where they come from. And many have interesting tales behind them.'

Al Fahim's fascination with canes speaks a lot about the man himself. They reveal Saeed Al Fahim's modesty and simple lifestyle. A man who could have a collection of luxury cars, private jets or rare gems, Al Fahim contents himself with these humble artifacts. The simplicity is visible in his office, too, which is bare and functional, rather than glitzy or glamorous.

Besides modesty, the cane collection also reveals another facet of Al Fahim's personality: his straight-talking style and reluctance to spare the rod. For an Arab businessman, Saeed Al Fahim does little to hide his disdain for the bureaucracy in the Arab world and all the problems that it creates for businesses.

Al Fahim says bureaucracy is the biggest challenge, not only for him but for all businesses in the Arab world. 'Bureaucracy kills all ambition. Laws in the Arab world don't evolve with changing times. Most of your business goes through the government and all the hurdles lie there. Bureaucracy makes it hard for a business to flourish,' he says.

'They don't see things in terms of profit or loss. If you apply for a license to build a building, it can take years. The bureaucracy keeps on saying bukra (tomorrow) and inshallah (if God wills), while I lose money every day that is lost.''

It's not a great surprise, then, to hear Al Fahim express his admiration for the government and leadership in the neighboring emirate of Dubai. 'The only place that I see where they have changed and updated the system is Dubai. They have visionary leadership,' he says, 'that is constantly being innovative in order to keep up with the changing world.

Unfortunately, I don't see any other Arab country following Dubai's example. Although, across the UAE, we are much better off than other countries, that's for sure.''

Better off, Saeed Al Fahim certainly is. In four decades, the Al Fahim family has managed to build a huge business, which had a rather modest beginning. Forty years ago, Abdul Jalil Al Fahim, a trader and influential personality in Abu Dhabi, was looking for new business opportunities. He was advised by a Bahraini banker friend to get into the spare automobile parts business.

Following that advice, Al Fahim traveled to Bahrain in order to purchase products in bulk. He bought parts for a total of $8,000 and then returned to Abu Dhabi, where he set up a small shop, with three employees, on a dusty road that was then Abu Dhabi's principal thoroughfare. Even before his goods arrived by sea from Bahrain, Al Fahim had managed to pre-sell all the parts.

This highly successful transaction laid the foundations of a business that was soon to be as profitable as the first deal. What began as a company with three employees in 1964 is today, 40 years later, an $800 million business with over 5,000 employees and a presence around the world.
Today, the Al Fahim Group is about a lot more than spare auto parts.

The group, recognized a one of the top family businesses in the United Arab Emirates, has branched out into diverse areas, including hospitality, oil engineering and travel. Of the major divisions, the hospitality business is the largest, accounting for nearly half of the group's total turnover.

The Al Fahim Group owns over 1,000 hotel rooms, spread over five properties in the UAE. The group owns two prestigious Crowne Plaza properties, one each in Dubai and Abu Dhabi, as well as a Hilton property in Abu Dhabi and two other hotels that are owned and managed by the group itself.

After consolidating its business in the UAE, the hospitality division of the Al Fahim Group is now looking aggressively at overseas markets. This month, the group will open its first overseas property: a 220-room Crowne Plaza hotel in the heart of London's financial district.

This is the first time that the Al Fahim Group has taken over a hotel outside the UAE. Saeed Al Fahim says the London property marks the new direction being taken by his group.

'We were earlier operating exclusively in local or regional markets. Now, we plan to expand internationally. We are looking at various options around the world. Our first priority is, of course, Europe. But we are also looking at the Middle East and Far East for possible investment opportunities.''

As was the case four decades ago, the Al Fahim Group is once again looking for new opportunities. This time around, however, the group's appetite for risk has significantly increased. Establishing a hotel in a totally new market - one radically different from the domestic market - is certainly a risky business. But this is not the biggest risk that Saeed Al Fahim has taken recently.

A few months ago, lured by the attention surrounding Islamic banking around the world, Al Fahim got together a group of 18 Arab businessmen and founded a new Islamic bank in Bahrain. Called the Islamic International Bank, the bank has been created with a capital of $200 million, although for the moment the paid-up capital is $43 million.

Al Fahim says he got interested in the idea after he bought shares in another Islamic bank, based in Bahrain. 'A friend of ours had established a bank in Bahrain - First Islamic Bank - and we bought some shares in the bank over two years ago. That bank is working fine,' explains Al Fahim, 'and that gave us the idea of moving into banking and finance. This time around, though, I wanted to be a founder of the bank and not a simple shareholder.''

Saeed Al Fahim is not deterred by the fact that almost every major international bank has already gotten into Islamic banking. 'There is competition in this field,' he admits. 'European and US banks have established new departments and sections for Islamic banking, but the market is large enough that there is room for everyone.

'We calculate around $1 trillion available for Islamic banking around the world. We are targeting international and global markets. Banks, in any case, don't invest only in their own areas, so we will also go wherever there are opportunities. In Europe, the Middle East, the Far East, wherever there is an opportunity.''

Al Fahim says the group studied the market carefully before deciding to plunge into the business. 'We see a clear market for Islamic financial services, especially in the Islamic world. There will be risks, but that's the case in any business. We try to be professional, but you have to be careful. It is not easy to jump in without having fully studied the situation.''

The bank, which offers the entire bouquet of services to individual as well as corporate clients, is currently a single branch operation being conducted from Bahrain. Al Fahim says that, for the foreseeable future, the bank will not add new branches.

'The first few years will be a trial period in Bahrain. Only once the bank starts to work very well will we expand,' he says. 'But even while being in Bahrain, we will offer all the services, everything. The only limit will be services that are not in line with Sharia.''

Besides banking and hospitality, the group is also looking at other investment opportunities outside the UAE. Investing in neighboring countries that are members of the Gulf Cooperation Council (GCC) would be the obvious option, but Al Fahim remains skeptical, and critical of the GCC for failing to achieve market integration.

'We don't even have a common currency,' he says. 'And, for the GCC, that is a must. In fact, we should have much more than a common market. We have all the ingredients - one land, one language, the same people and the same culture. I just can't understand where the barriers are, or why the GCC is taking so long to make progress. Maybe, again, it is the bureaucracy at work.''

Al Fahim says the slow speed of creating a unified market will hurt regional companies in the long run, especially with the approaching 2005 deadline for members of the World Trade Organization to open their markets to foreign competition. Al Fahim says that, if a common market were already in place, it would give Arab companies like his a crucial headstart over multinationals in order to establish a strong regional presence. However, as GCC integration is way behind schedule, it will set Arab companies head to head with global giants.

Whatever the fate of a common market in the Gulf, Al Fahim remains optimistic about the future of the Arab world. 'Things will change here soon,' he says. 'Globalization is one factor, but the other push will come from the younger generation. They are studying overseas in the best universities, and when they come back home they will bring new ideas. They will not follow the old system. They will be a force for change.''

Saeed Al Fahim is doing his own bit to bring about change in the region. He says he has decided to take the pioneering step of taking the Al Fahim Group public and listing the company on the Abu Dhabi Stock Exchange.

Al Fahim says that, in a meeting in November, the company's board of directors decided to nominate a team of bankers to lay out the road map for taking the company public. 'The Al Fahim Group has had a long tenure as a family-held business. I have decided that, within two years, we will be a listed company.'

When this change does come about, it could revolutionize the capital markets in the UAE. The business world in the country, and in the wider Arab world, is dominated by private, family-held companies. Although many companies have been toying with the idea of going public, they are all waiting for someone else to take the initiative. If Al Fahim does list his company, it could open the floodgates for others.

If more companies seek listing on local bourses, that could pump some life into the UAE capital markets, which have been sluggish, if not entirely inactive, due to a lack of listed stocks. If big businesses become listed on the region's stock markets, that would bring in investors and boost trading activity in the market.

But going public will prove a great challenge. The transition from a family-held business to a public company is risky, and will require a radical change of mindset among the management and employees of the company. But Al Fahim says he is not worried about the transition.

'We have two years to prepare ourselves and our employees for the transition. It will not be hard for me to be answerable to shareholders, as I already have some outside directors on the board. We can handle it. New shareholders will know our experience and our profile, and they will understand whom they are talking to.''

At the same time, Al Fahim is also taking steps to ensure a smooth succession. Even though it has been only a few years since he took over the reins of the business from his elder brother, Mohammed Al Fahim, Saeed is keen to involve the younger Al Fahim generation in the business. His niece is already involved, and his sons, who are in school, will also be interested in the family business.

As soon as he has installed the next generation in command, says Al Fahim, he would like to concentrate on what he likes most: traveling around the world to search for new canes. A simple pastime for a truly humble man.