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The Globe and Mail

Companies count the cost of Arab uprisings

Camel drivers wait for customers at the Pyramids Plateau in Giza, on the outskirts of Cairo, on Oct. 3, 2011. Egypt's economy will grow by just 1.3 per cent this financial year and 3.6 per cent next as it makes a slow recovery from the disruption to tourism and investment from an uprising that ousted president Hosni Mubarak, a Reuters poll showed on Friday.


Majid Al Futtaim Holding, a Dubai-based operator of shops and malls across the Middle East, has had a rougher ride from the Arab awakening than most.

Having suffered looting at two shopping centres in Egypt, the temporary closure of a mall next to the heart of Bahrain's protests and its Syrian expansion plans called into question by the uprising there, it is perhaps unsurprising the company reported a $44.9-million loss for the first six months of the year.

Security concerns in Egypt continued to hurt the business even after the fall of President Hosni Mubarak in February, says Daniele Vechhi, Majid Al Futtaim's treasurer. "People in the evening are shopping less than they used to," he says.

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Majid Al Futtaim is an acute example of the troubles many businesses have suffered from a wave of Middle Eastern uprisings whose unintended consequences have included business shutdowns and slowdowns, falls in consumer spending and disruption to foreign investment.

More than nine months after the first protests, some of the negative economic impact is beginning to emerge at companies that publish reasonably transparent accounts -- and can be guessed at for some of the businesses that do not.

"It will be having an adverse effect on order books and earnings -- particularly for economies such as Turkey, given its close trade ties with the region," says Ed Nusbaum, chief executive of Grant Thornton International, a global accounting and consulting firm.

In June, Grant Thornton published a survey suggesting the Middle East uprisings had affected as many as one-in-five businesses globally. "Although the region presents a real opportunity for businesses in the long term, they will be cautious about investing in these countries so long as turbulence persists," Mr. Nusbaum says.

International companies in sectors such as retail, travel and construction have unsurprisingly been early losers.

In July, Thomas Cook, the tour operator, said it expected operating profits this year of just £320-million -- compared with analysts' estimates of £380m -- because of declining business in Egypt, Tunisia and Morocco.

Cyril Sweett, a British consultancy and property company, warned last month that its next financial results would be hit because Middle Eastern turmoil had led to a number of projects being scrapped.

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Other companies are struggling to collect payment for bills for projects disrupted by protest, armed conflict or regime change.

Dana Gas, a fuel producer heavily dependent on Egypt, is owed $200-million by the country for invoices related to natural gas sales, according to Ahmed Al-Arbeed, chief executive, adding that some will be repaid this year.

Rentokil Initial, the pest-control to cleaning services company, said it would be "nice to get back" £4.8-million it says it is owed for a rat-catching contract signed while Colonel Muammer Gaddafi was still in power in Libya, although it is as yet undecided on whether to revive its operations in the country.

In the Gulf, businesses have so far publicized only limited damage, but that may be because some of them, particularly if they are state-owned or privately held, disclose little.

Many are cushioned by the enduring prosperity and -- outside Bahrain and Oman -- relative stability of the oil-rich Gulf, although DP World, Dubai's port operator, has seen operations at its Ain al-Sukhna port in Egypt disrupted by the uprising there and its aftermath.

Other companies have been hurt indirectly. In Syria, London-listed Gulfsands Petroleum last month cut its 24,000 barrels a day production by about 40 per cent at the request of the authorities in Damascus, who are struggling to sell their crude on international markets.

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The full reckoning of the business impact of the Arab awakening is far from done, with the calculations complicated by countervailing effects -- such as for oil companies in Libya that have lost out on production in-country, but have gained in their global operations because the disruption has pushed world crude prices up.

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