INTERVIEW: Sotheby’s boss looks east

INTERVIEW: Sotheby’s boss looks east
Tad Smith, Sotheby's boss, believes Saudi Arabia is an mportant supplier, as well as buyer, of objects. (Illustration: Luis Grañena)
Updated 24 March 2019

INTERVIEW: Sotheby’s boss looks east

INTERVIEW: Sotheby’s boss looks east

HOUSTON: When Tad Smith and I spoke early last week, we had one overriding thing in common: jet lag.
I was one day into an ordeal that, on past experience of West-East long-haul air travel, would last at least a week.
The 53-year-old chief executive officer of Sotheby’s, the international auction house, was midway through his torment, with the major part of a round-the-world tour of the firm’s main offices still ahead of him. “It’s a crazy week,” he said. I fuzzily concurred.
Smith’s week had begun by ringing the bell at the New York Stock Exchange, where Sotheby’s is the oldest listed company, to celebrate its 275th anniversary. Sotheby’s is older than the US, and older still than the UK, which it predates by 57 years. That is some legacy.
The thrust of recent strategy, however, has been toward the East, the next stop on Smith’s world tour. Just a few weeks ago, the firm reported better-than-expected earnings figures for 2018, boosted by $1 billion in sales from its Hong Kong hub — the best performance since it started in Asia 45 years ago.
It was achieved against some tricky macro-economic headwinds. “In the middle of the year the Chinese stock market softened a bit, and throughout the year expectation for Chinese growth softened,” Smith said.
There was also the growing threat throughout the year of a looming trade war between the US and China, and the risk that Sotheby’s might fall victim to anti-American sentiment on the part of Chinese buyers. So do Chinese customers perceive Sotheby’s as an American organization?
“I think they perceive us as a global company based in the US. We have literally centuries of British roots, so in so far as they think of it at all they also might think we’re in Britain,” he said.

We have a huge demand from our clients to buy modern Islamic and modern contemporary Arabic art.

Tad Smith


Of course, Sotheby’s is offering Asia something more refined than soya beans or oil-rig equipment, which have become bargaining pieces in the trade war negotiations. Old masters, luxury jewelry and watches, and fine wines — $100 million worth of it last year — are its stock-in-trade. Up-market real estate and vintage motor cars are handled through franchise operations that use the Sotheby’s brand, or through partnerships.
Smith explained the dynamic of the luxury auction business. “We’re encouraging people to provide us things that we then sell. We have both the need to get supply in, so we can fill our sales rooms, and the need to get demand in, so we can sell our items,” he said.
Several factors determine that balance between supply and demand, such as the number of estates that become available, financial pressures on asset-rich people, and — sometimes — family feuds. But the most important factor, “the crucial marginal growth driver,” he said, was “discretion.”
“If people are feeling their things will sell at acceptable prices, they’re more likely to sell and our sales will get larger. Anything that affects the psychology and dampens or conversely strengthens a prospective seller’s confidence that something will sell, will affect our business. If people don’t think trade wars or anything like that will affect them, they will sell,” he said.
Smith was in Dubai, at the firm’s offices in the swanky art hub, the Gate Village in the financial center, to spread the 275th birthday cheer and to prepare for an auction of rare watches this week. A previous sale of precious time-pieces attracted $2.6 million of sales.
“The Middle East is a very important part of what we do. When I came in four years ago as CEO we began the effort to invest in a permanent office in the UAE. We thought that having a very senior and more invested presence here would be important for our business, and we’re thrilled with the result. So, yes, the Middle East, all the way across the GCC countries, is very important for us,” he explained.
Saudi Arabia will continue to be an important part of that strategy, both in terms of supplying works for sale and as a plentiful source of buyers.
“Saudi Arabia has a rich archaeological, architectural and cultural history, and — with the establishment of MISK and the Al-Ula project — it is clear there is a keen focus, both on preserving that history, and on developing the artistic scene there. This kind of focus naturally means there is an interest in the range of works and services, including educational initiatives, that we offer,” he said.

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BIO

BORN

1966, Chapel Hill, North Carolina

EDUCATION

•Princeton University, BA

•Harvard Business School, MBA

CAREER

•McKinsey & Co — Adviser

•BMG Entertainment — Corporate executive

•Starwood Hotels and Resorts — Internet executive

•Reed Business Information (Part of Reed Elsevier) — CEO

•Cablevision Systems Corporation — President, Local Media

•Madison Square Garden Company — President and CEO

•Sotheby’s — CEO

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Are customers in the Middle East vendors or purchasers? “On balance, the Middle East is a significant provider of great objects to sell, but the most attractive portion of it for us is their buying. Mideast is a net purchaser, and that reflects their obvious wealth and financial importance,” he said.
What are people in the region buying? “Well, how about a spectacular Rembrandt for the Louvre in Abu Dhabi,” he said, in reference to the work “Study of the head and clasped hands of a young man as Christ in prayer” by the Dutch master bought at Sotheby’s London for £10 million ($13 million) last year and recently unveiled at the UAE capital’s new center of culture.
“They are buying beautiful art from all parts of the world. They’re buying amazing, dazzling watches, they’re buying incredible jewelry, with a really robust aesthetic and great taste. People with better taste than mine say they have great taste,” Smith said.
The region also increasingly supplies the rest of the Sotheby’s network with art works from its rich cultural tradition. “We have a huge demand from our clients to buy modern Islamic and modern contemporary Arabic and Iranian art. In the past four years we sold over $125 million worth of Islamic and Middle Eastern art to clients from all over the world. That’s what’s interesting about the Middle East sales — it attracts clients globally. It’s a big market for us,” he said.
It is also a rapidly changing global market place. The traditional image of an art sales room — a posh man with a gavel declaiming incomprehensibly in a smoke-filled baroque salon — is all in the past. “For one thing, it’s not necessarily a man, it can often be a woman,” said Smith, before outlining the rapid technological changes overtaking the art auctions business in the digital age.
“Last year 37 percent of things sold worldwide were sold online. It was an important year. More lots we’re purchased online than by any other method, either in the room or on the phone.
It was the first time in the company’s nearly three centuries of history. It’s grown gangbusters,” he said.
Sotheby’s has already tested a new time-based bidding system, along the same principle as used by eBay, which could soon lead to an all-electronic auction system. “That is a gigantic leap forward where you have electronic buying and electronic consignments. You can take your phone, fill an electronic form on our website and you can consign things that way too. Electronic consignments and sales will be a rapidly growing proportion of our business in the coming years,” he said.
Smith’s background is in keeping with the task of introducing 21st-century techniques to a business with 18th-century origins. A McKinsey alumni, he was an executive with various companies in the entertainment, leisure and information businesses, before joining the Madison Square Garden Company, the group that runs the iconic New York entertainment venue and other sports and leisure operations.
As with the rest of the companies that Smith has worked for, Sotheby’s is entering the digital age in a hurry. “Each of them has a certain creative part of the business that is attached to another part that is a selling organization and the support services for that, and crucially all of them are increasingly dependent on digital marketing technologies,” he said, like a true digital executive.
But the job with Sotheby’s appears to mean more to him than just another bit of Internet-age experimentation. “This really isn’t work, it’s a gift to be in an organization with these talented people and these beautiful objects and the ability constantly to learn. For the past four years I’ve had the opportunity to learn more about art and collectibles and jewelry and watches, and to see all parts of the world,” he said.
The only frustration of the role? He thought for a brief moment. “Jet lag,” he answered.


Saudi Arabia starts trial of the first wind turbine in Al-Jouf

Saudi Arabia starts trial of the first wind turbine in Al-Jouf
Updated 05 August 2021

Saudi Arabia starts trial of the first wind turbine in Al-Jouf

Saudi Arabia starts trial of the first wind turbine in Al-Jouf
  • Dumat Al-Jandal is poised to become the largest wind farm in the Middle East

RIYADH: Saudi Arabia has started the operational trial of the first wind turbine at Dumat Al-Jandal wind farm, which once fully operational will reduce CO2 emissions by nearly 1 million tons annually and supply 72,000 homes with clean energy.

The turbines comprise towers, blades, and nacelles, which will be assembled at the project site, 900 kilometers north of Riyadh in the Al-Jouf region. The project will include 99 Vestas wind turbines, each with a hub height of 130 meters and a rotor diameter of 150 meters.

The Kingdom’s first utility-scale wind-power source is being developed by a consortium led by EDF Renewables of France in partnership with Abu Dhabi-based Masdar. The Renewable Energy Project Development Office of Saudi Arabia’s Ministry of Energy awarded the project to the EDF Renewables-Masdar consortium in January 2019 after a competitive tender.

Its tariff of $21.3 per megawatt-hour (MWh), the lowest bid submitted, was reduced to $19.9/MWh at financial close, making Dumat Al-Jandal the most cost-efficient wind-energy project in the world. According to the US-Saudi Arabian Business Council, the development of Saudi Arabia’s renewable energy sector could create up to 750,000 jobs over the next decade, as the Kingdom pushes to generate 7 percent of its total electricity output from renewables by 2030.

It will also benefit from a 20-year power purchase agreement with the Saudi Power Procurement Co., a subsidiary of the Saudi Electricity Co., the Kingdom’s power generation and distribution company. Saudi Arabia’s renewable energy program aims to contribute to a sustainable future, preserve nonrenewable fossil fuel resources, and safeguard the Kingdom’s international energy leadership, according to the King Abdullah City for Atomic and Renewable Energy. That way, the program aims to ensure greater long-term global energy market stability.

Renewable energy projects, including wind and solar, are planned across more than 35 parks in Saudi Arabia by 2030.


Saudi youth move away from cash, says report

Saudi youth move away from cash, says report
Updated 05 August 2021

Saudi youth move away from cash, says report

Saudi youth move away from cash, says report
  • Revenue in the Saudi e-commerce market is projected to reach $7.05 billion in 2021, according to data firm Statista

RIYADH, DUBAI: Saudi youth are increasingly drawn toward using digital payment channels rather than cash, a trend indicating that the Kingdom’s plan to create a cashless society is on course.

Only 18 percent of Saudis aged between 16 and 22 years use cash, while almost half of the people who are 60 and above still prefer using cash, a report by Fintech Saudi showed.

The report also showed that only 20 percent of the population in the central region of Saudi Arabia, which includes the capital Riyadh, use cash in their everyday transactions, while 37 percent of those living in the western region, use paper money in their daily dealings.

The use of paper currency is declining at a rapid pace.

Fintech Saudi survey results showed that around 60 percent of individuals Kingdom-wide still use paper money at least once a week and one out of four people in Saudi Arabia uses cash every day.

Under Saudi Vision 2030, the Kingdom aims to increase the number of non-cash transactions to 70 percent by 2025.

“The coronavirus disease (COVID-19) outbreak has led to an acceleration in cashless activity with digital payments increasing by 75 percent over the last year, while cash withdrawals from ATMs and other payment points have declined by 30 percent over the same period,” the report said.

Revenue in the Saudi e-commerce market is projected to reach $7.05 billion in 2021, according to data firm Statista. 

The numbers are expected to show an annual growth rate of 5.38 percent in the coming years, resulting in a projected market volume of $8.69 billion by 2025.


Gulf economies expected to grow 2.2 percent this year, says World Bank

Gulf economies expected to grow 2.2 percent this year, says World Bank
Updated 05 August 2021

Gulf economies expected to grow 2.2 percent this year, says World Bank

Gulf economies expected to grow 2.2 percent this year, says World Bank
  • Most GCC countries are expected to continue to post deficits over the coming years
  • The countries that posted the largest deficits in 2020 — Bahrain, Kuwait and Oman — are expected to remain in deficit until 2023

RIYADH: Economies of the Gulf Cooperation Council (GCC) will likely grow at an aggregate 2.2 percent this year after a 4.8 percent contraction last year caused by the pandemic and lower oil prices, the World Bank said on Wednesday.

“With recent progress made with the rollout of the COVID-19 vaccine globally and with the revival of production and trade worldwide, the prospects for an economic recovery are firmer now than at the end of last year,” it said in a research report.

“Although downside risks remain, the forecast stands for an aggregate GCC economic turnaround of 2.2 percent in 2021 and an annual average growth of 3.3 percent in 2022–23.”

It remains vital for GCC countries — which include Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, the UAE — to diversify their economies, the World Bank said, as oil revenues account for over 70 percent of total government revenues in most GCC countries.

It said it expects Kuwait and Qatar to introduce a value-added tax (VAT) this year, following the example of other GCC states that have implemented the revenue-diversifying measure in different phases over the last few years.

On the fiscal side, most GCC countries are expected to continue to post deficits over the coming years, the World Bank said, after shortfalls intensified last year because of the coronavirus crisis.

The countries that posted the largest deficits in 2020 — Bahrain, Kuwait and Oman — are expected to remain in deficit until 2023, but with narrower ratios than in the 2020 downturn. While a rebound in oil prices may lift economic prospects in the short term, the World Bank said downside risks to its outlook are “extremely high” because of the region’s heavy exposure to global oil demand and the service industries.

“Mobility restrictions including for international travel may hurt attendance at future high-profile events in the GCC — the 2020 (rescheduled to 2021) World Expo in the UAE and the 2022 Federation Internationale de Football Association (FIFA) World Cup in Qatar,” it said.


SABB records net profit of $504 million

SABB records net profit of $504 million
Updated 05 August 2021

SABB records net profit of $504 million

SABB records net profit of $504 million

JEDDAH: The Saudi British Bank (SABB) recorded a net profit after zakat and income tax of SR1,889 million ($504 million) for the six months ended on June 30, 2021.

This is an increase of SR7,785 million or 132 percent compared to the loss of SR5,896 million for the same period in 2020.

Operating income of SR3,984 million for the six months ended June 30, 2021, a decrease of SR703 million, or 15 percent, compared to SR4,687 million for the same period in 2020.

Lubna Suliman Olayan, board chair of SABB said: The bank’s “performance in the second quarter of 2021 builds on the progress made in the first quarter of the year, as we continue the implementation of our five-year strategic plan.”

She said the bank is now focused on supporting the Kingdom’s economic transformation.


Yemen central bank injects old riyal bills worth billions into market to challenge Houthi ban

Yemen central bank injects old riyal bills worth billions into market to challenge Houthi ban
Updated 04 August 2021

Yemen central bank injects old riyal bills worth billions into market to challenge Houthi ban

Yemen central bank injects old riyal bills worth billions into market to challenge Houthi ban
  • The Houthi ban has forced travelers to Sanaa and other areas controlled by the militant group into buying old banknotes from the black market at a higher rate

ALEXANDRIA: The Central Bank of Yemen in Aden has injected billions of riyals in old large-sized 1,000 banknotes into the market to address a chronic shortage of cash.

The bank also implemented several other economic measures to control the chaotic exchange market and put an end to the fall in the Yemeni riyal.

Since late 2019, the Iran-backed Houthis have banned the use of banknotes printed by the Yemeni government in Aden, creating a severe cash crunch in areas under their control which has led to local exchange firms and banks stopping paying salaries and raising remittance charges.

The Houthi ban has forced travelers to Sanaa and other areas controlled by the militant group into buying old banknotes from the black market at a higher rate and carrying Saudi riyals or US dollars.

In a challenge to the Houthis, the central bank has put billions of riyals in old banknotes into the market and started withdrawing the newly printed 1,000 banknote. Yemenis can get old banknotes from local banks and exchange firms.

However, the Houthis warned people against using the large banknotes and published copies and serial numbers of the newly circulated cash.

In a bid to regulate the exchange market and curb the plunging value of the riyal, the central bank has tightened regulations for opening new exchange shops or firms, demanding that applicants produce a three-year feasibility study prepared by a certified accountant showing estimated budgets.

Existing exchange companies must now send their annual financial statements to the bank, use an approved software for their financial activities, apply international financial reporting standards, and audit their accounts by accountants certified by the central bank.

Some Yemeni economists, however, have cast doubt over the central bank’s ability to enact the regulations after the Yemeni riyal on Wednesday broke another historic record low against the dollar.

Local money traders told Arab News on Wednesday that the Yemeni riyal was trading at 1020 to the dollar in government-controlled areas, compared to less than 980 a month ago. When the war broke out in late 2014, the Yemeni riyal was sold at 215 to the dollar.

The Yemeni government previously relocated the central bank’s headquarters from Sanaa to Aden, floated the Yemeni riyal to bridge the gap between the official rate and the black market, closed many exchange shops, and printed billions of riyals to pay public servants. But all the measures proved ineffective on the ground as the Yemeni riyal continued to drop.

Waled Al-Attas, an assistant professor of financial and banking sciences at Hadhramout University, told Arab News: “The central bank is required to control the market and close unlicensed exchange shops in parallel with tightening control and procedures on existing exchange entities.”

He noted that the latest injection of cash into the market had boosted foreign currency speculation activities and pushed up inflation.

“The large 1,000 banknote that the central bank pumped into the market represents an additional burden and additional liquidity that will cause more inflation, higher prices, and speculation on exchange rates,” he added.

The continuing devaluation of the Yemeni riyal has pushed up food and fuel prices in government-controlled areas and triggered protests.