SME profile: Studied approach to doing business with Abu Dhabi oil industry

If you’ve ever driven around the maze that is the Musaffah Industrial Area south of the capital and wondered what goes on behind the tall iron gates at all those similar-looking factory premises, the Al Shoumoukh Group of Companies is probably representative.

Al Shoumoukh describes itself in the way many companies do these days – it “provides solutions” to a range of industries in GCC countries. Inside its Musaffah premises, the sights and sounds of its workshops are of people in overalls and welding helmets lit up by arc flashes as they work on nondescript metal objects.

Mostly, what the Al Shoumoukh workers are doing is designing and manufacturing the kinds of specialised pipes and related equipment that make the oil industry work. As well as supplying the parts, it wins contracts to install and maintain these systems.

The company’s place in Abu Dhabi’s oil industry as an emerging manufacturing and support business, as well as the efforts of its founder and chief executive, Ali Saeed Al Ameri, in displaying “a genuine commitment to corporate social responsibility, which made a real impact in the region”, were recognised in March when he was named “Oil Baron” at the industry’s big annual charity event, overseen by the Minister of Culture, Sheikh Nahyan bin Mubarak.

Mr Al Ameri was only the second home-grown business leader to win the title in its 12 year history – the 10 others were British or American expatriates. This is a reflection both of the progress and the limitations in developing Abu Dhabi’s small and medium-sized enterprises, which are often family-owned and provide the bulk of economic growth, jobs and innovation.

“A country like the UAE needs to develop its own local companies,” says Mr Al Ameri, who started his original business from a coffee shop in the 1980s. It was a “a car rental business. It’s still there – it doesn’t make any money, but it’s still there,” he says.

In three decades as a businessman, he says he has seen progress in terms of fostering entrepreneurship, but he reckons there is still a good deal to be done to make it easier for companies to get started and grow.

Zones Corp, for example, launched by the government in 2004 to centralise and run Abu Dhabi’s six industrial zones, including Musaffah, has helped considerably to cut red tape and make it easier to set up a business, he says.

“It has come a very long way since 2001,” when the industrial zones were first set up, he says. “There were not good roads, you had to wait for electricity, sometimes using your own generators. Now it’s a one-stop-shop for licensing and all the other things you need for setting up. They’ve gotten better advice about which businesses to support, too.”

The economic zones now play host to about 600 manufacturing facilities and are responsible for generating almost half of the manufacturing GDP in Abu Dhabi, according to Zones Corp.

But there is still some ways to go to support the SME sector, Mr Al Ameri says.

“The majority of the costs for a young manufacturing business are in the first three to five years when you are paying for buildings and machinery and you are not producing that much because you need time to get customers,” he says.

Two areas in which he says the government can give better support for budding Emirati companies is in the cost of land and energy. “When compared to neighbours like Saudi Arabia, the cost of land here is about five times more,” he says.

There is also a gap in government-supported enterprise funding, Mr Al Ameri argues. The Khalifa Fund for Enterprise Development, launched eight years ago, does a good job of seeding new businesses but there is a need for further support in the development stage.

“There is a gap here for manufacturing finance – we don’t have an industrial bank,” he says.

There are a number of examples of such banks, including Germany’s Kreditanstalt für Wiederaufbau, created after the Second World War, as well as the European Investment Bank, which was set up after the fall of Soviet bloc. These supported a wide variety of businesses and their initial vetting and subsidised funding made it easier for commercial banks to later support small businesses.

Mr Al Ameri looks at the development of the UAE economy through the eyes of a businessman as well as an academic.

His route into business was unusual. He studied management and took a master’s degree in strategic studies at the University of Westminster, then earned a doctorate in anthropology from the University of Hull. His thesis was on differences in decision-making between European and Arab general managers.

An early practical application was in studying some of the friction that developed in the oil industry and how it was resolved.

“I think that’s contributed to what we are today. We blended a lot of cultures, and it is one of the reasons the UAE is where it is now,” he says.

Al Shoumoukh is a privately held group, but figures it released show turnover rising to $200 million in 2013 from about $41m in 2007. This included a sharp drop during the global financial crisis when turnover fell to below $19m in 2009.

Mr Al Ameri says he now has the concerns that are typical for a business in midlife. He is looking at the option of taking the company public and wondering whether any of his sons or daughters might follow him.

“There are one or two interested, but I have to think also of my partners. It’s not a one man show,” he says.

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Anthony McAuley

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