Baothman: We need the best work ethic

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Updated 29 January 2013
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Baothman: We need the best work ethic

Involvement of young Saudis in the private sector, reforms in education, and encouragement of SMEs are the three main concerns of Hani Baothman, CEO of Sidra Capital.
“Organizing training programs and promoting work ethics among them should be undertaken on a massive scale to build a strong Saudi work force within the coming 20 years,” Baothman told Diana Al-Jassem of Arab News in an exclusive interview. He stressed the need for creating jobs not by depending on government but by encouraging small and medium enterprises (SMEs).
Baothman stated that labor laws should differentiate between big companies and SMEs. He also emphasized the importance of promoting housing projects for the benefit of low income groups.

Rapid change
What, in your opinion, are changes that would have a major impact on the lives of Saudis within the coming 20 years?
Globalization will be a major challenge facing our youth. Saudis say they have their own way of dealing with things, but this cannot last for ever. The large number of young Saudis coming from aboard will pose a big challenge because they will return with global values. From the economic perspectives, the continuous dependence on oil is a big challenge. Today, we are the main supplier of oil, but what will happen if the world starts using renewable energy. Whether we have enough time to move from the oil economy or not, we have to be brave enough to start asking that question.

Role of leadership
What do you think of the leadership roles regarding organizations in the Kingdom and what are the factors/reasons for their current state?
I was doing a job that exposed me to deal with businessmen throughout the Middle East. Most of the businessmen were impressed with the Saudi corporate culture as it is transparent and professional compared to other overseas business cultures. And I think it is due to the Kingdom’s openness; the government has created an open market and wants to protect this with perfect laws. Word Trade Organization (WTO) membership helps Saudi companies to develop their business internationally. Saudi leaders in most business sectors are qualified enough. For example, many important banks in the Middle East are Saudi banks with most of them led by Saudis and the rate of Saudization is high in these banks. Saudi business leaders are doing well.

Challenging tasks
What are the most difficult decisions that need to be applied in the Kingdom within the coming 20 years?
I think adapting youth to our progressive economy would be a major challenge. It is taken for granted that the government is the largest employer of our youth, but that should change. The youth should be pushed into the market for doing business. The only thing that our youth are lacking is training, and maybe business ethics. Enhancing these two elements will attract businessmen to push young Saudis into the market for business ventures.

Sustainable development
What goals would you set regarding the Kingdom’s development and how would these goals be achievable through your current position?
I believe we should share our experience and resources to encourage enterprises rather than mere jobs. Creating new activities will reduce stress on the government to create job opportunities. This is one of the major goals that I am currently working on. Sidra started its CSR program that targets both Saudi male and female youth. Some of the initiatives that we launched have succeeded in promoting entrepreneurships and businesses.

Creative project
Give me an example of the most creative project that you wish to establish in the Kingdom.
The most creative project that I really wish to see in the Kingdom is to turn the annual Haj season into one of the international gatherings with people talking about commitment, organization and a smooth traffic. Saudi Arabia is very proud of hosting millions of pilgrims for Haj, but we still want to improve Haj. I want the Haj to be a luxurious experience. Haj could become a huge business for Saudi Arabia if we develop its services.

People’s voice
Regarding Kingdom’s officials, what characteristics do you think are important for such individuals?
Officials should be more tolerant about the divergence of opinions. We have the largest segment of youth who are not heard. Officials should get closer to our young population and give them the opportunity to speak out loud and clear. We need more open communication methods. I am so pleased with Saudi officials who are talking to people through social media like the Minister of Culture and Information, the Minister of Labor, and the Minister of Commerce and Industry.

Human rights
How can we all improve human rights in Saudi Arabia and what are your expectations?
I have to say that there have been occasions when we disliked people in different parts of the world abusing the system and workers. This is happening everyday all over the world, not in Saudi Arabia alone. It happens in the United States, the UK and the Arab world. As a Muslim nation, we shouldn’t allow these practices to continue. We should come up with laws that prevent discrimination against others. During the past 50 years, our values were different. Yet I see a big number of youth who are trying to restore the culture of Islamic values.

Knowledge hunt
Education is always a priority of the Saudi government. What changes are required in the education system to fit Saudi youth in a knowledge-based economy?
The education system needs a major shift. Huge funds have been given to the Ministry of Education. Some of the universities that have made major moves are the government universities. The government has been making efforts to improve our universities but they are still lagging behind. Our primary education really needs much more effort for development.

Biggest challenge
What is the biggest challenge facing the Kingdom today?
The unrest in the region is a big challenge for us. It’s sad to see some Arab and Muslim nations going through a period of instability. It is our responsibility to help our neighboring Arab and Muslim nations. I want to see that help is extended to the people of Syria, Iraq and Yemen. We can’t turn a blind eye to what is happening worldwide; we should show concern for our brothers and sisters everywhere.

Housing growth
There is a huge demand for housing in the Kingdom because of rising young population. The government has also put an emphasis on this sector by allocating a big budget for housing. Do you believe housing needs much more attention from the government and the private sector?
Introducing the mortgage law is a very good decision. This law will have a big social impact. For example, the family that gets a housing loan will work hard and earn more to pay back the loan. Therefore, I believe that the mortgage concept is going to mature the thinking of young Saudis. I also think it will help the middle class people a lot. The mortgage law is going to check the soaring land prices and bring them down realistic levels. According to a research that I did, most of the Saudi families would be eligible to a SR 1.15 million loan. Developers can only develop units with such an amount. They will not be able to check the rising cost of land. The mortgage law will not help the low-income people, and this calls for the government to play an effective role. The government should work on developing special housing plans for low-income people. However, I believe that mortgage is helpful and will create new jobs, and serve a large segment of society.

Role of SMEs
There is a need to boost small business enterprises (SMEs) in the Kingdom as it creates various jobs. What kind of role do you think SMEs can have in the ongoing development of the Kingdom?
SMEs have a significant share in building the Saudi economy. SMEs are coming up in the Kingdom, which has a track record of being an entrepreneurial society. Promoting SMEs should be one of the major objectives of the government. We could start simply by differentiating between SMEs and big companies in terms of our laws related to taxes and Saudization.

Fair opportunities
How do you see Saudi women’s contribution in the labor, social and political arenas in the next 20 years?
Women should get equal opportunities just like men. Sometimes, Saudi women are getting international platforms simply because they enjoy Western values, but they don’t represent us. We have excellent Saudi skills, but their acquired values don’t allow them to represent us globally. What I am trying to say is let all women compete without promoting those with Western values. Why shouldn’t we be proud of our women who strictly adhere to our society, our values? We have big names who can be role models for our women.

Saudi media
What measures and standards are yet to be (and must be) applied to Saudi media and what are your expectations in the next 20 years? And how change in the Kingdom will impact our social media?
I think new media will dominate. I attended a workshop about new media, where big media institutions discussed the emerging new media. The expansion of smartphones also contributed to enlarge the use of new media. I think that traditional media will continue, but the newspaper will alone not be enough to be a media institution.

Learning from the past
What are three or four mistakes that have been repeated in the Kingdom during the past two decades and how could we eliminate these in the interest of the Kingdom’s onward progress?
We should teach our children the real meaning of nationalism. We taught our children to celebrate our national day with great enthusiasm and support our football players but we haven’t given them behavioral lessons. What youth did during the opening of the redeveloped Jeddah Corniche by trying to destroy part of it was really frustrating.

Message to youth
Given that the youth make up the majority of the Saudi population, what message would you want conveyed to them and what else would you say to the rest of the population?
We have to raise our kids for situations that are going to be more difficult than in our time. Many families are protective of their kids. Our youth should be strong, and should know that nothing is easy in life.


Gulf companies challenged by debt and rising interest rates

Updated 22 April 2018
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Gulf companies challenged by debt and rising interest rates

  • Debt restructurings on the rise, but below crisis levels
  • Central Bank of the UAE has raised interest rates four times since last March

There has been an uptick in recent months in heavily-borrowed companies in the Gulf seeking to restructure their debts with lenders. Although the pressure on companies is not comparable to levels witnessed in the region following the 2008 global financial crisis, rising interest rates will eventually begin to have a greater impact, say experts.
Speaking exclusively to Arab news, Matthew Wilde, a partner at consultancy PwC in Dubai, said: “We do expect that interest rate increases will gradually start to impact companies over the next 12 months, but to date the impact of hedging and the runoff of older fixed rate deals has meant the impact is fairly muted so far.”
The Central Bank of the UAE has raised interest rates four times since the start of last year, in line with action taken by the US Federal Reserve. The Fed has signalled that it will raise interest rates at least twice more before the end of the year.
Wilde added that there had been a little more pressure on company balance sheets of late, although “this shouldn’t be overplayed”.
Nevertheless, just last week, Stanford Marine Group — majority owned by a fund managed by private equity firm Abraaj Group — was reported by the New York Times to be in talks with banks to restructure a $325 million Islamic loan. The newspaper cited a Reuters report that relied on “banking sources”.
The Dubai-based oil and gas services firm, which has struggled as a result of the downturn in the hydrocarbons market since 2014, has reportedly asked banks to consider extending the maturity of its debt and restructuring repayments, after it breached certain loan covenants.
A fund managed by Abraaj owns 51 percent of Stanford Marine, with the remaining stake held by Abu Dhabi-based investment firm Waha Capital. Abraaj declined to comment.

 

Dubai-based theme parks operator DXB Entertainments struck a deal last month with creditors to restructure 4.2 billion dirhams ($1.1 billion) of borrowings, with visitor numbers to attractions such as Legoland Dubai and Bollywood Parks Dubai struggling to meet visitor targets.
Earlier this month, Reuters reported that Sharjah-based Gulf General Investment Company was in talks with banks to restructure loan and credit facilities after defaulting on a payment linked to 2.1 billion dirhams of debt at the end of last year.
Dubai International Capital, according to a Bloomberg report from December, has restructured its debt for the second time, reaching an agreement with banks to roll over a loan of about $1 billion. At the height of the emirate’s boom years, DIC amassed assets worth about $13 billion, including the owner of London’s Madame Tussauds waxworks museum, as well as stakes in Sony and Daimler. The firm was later forced to sell most of these assets and reschedule $2.5 billion of debt after the global financial crisis.
Wilde told Arab News: “We have seen an increasing number of listed companies restructuring or planning to restructure their capital recently — including using tools such as capital reductions and raising capital by using quasi equity instruments such as perpetual bonds.”
This has happened across the region and PwC expected this to accelerate a little as companies “respond to legislative pressures and become more familiar with the options available to fix their problems,” said Wilde.
He added that the trend was being driven by oil prices remaining below historical highs, soft economic conditions, and continued caution in the UAE’s banking sector.
On the debt restructuring side, Wilde said there had been a “reasonably steady flow of cases of debts being restructured”.
However, the volume of firms seeking to renegotiate debt remains small compared to the level of restructurings witnessed in the aftermath of Dubai’s debt crisis.
Several big name firms in the emirate were caught out by the onset of the global financial crisis, which saw the emirate’s booming economy and real estate market go into reverse.
State-owned conglomerate Dubai World, whose companies included real-estate firm Nakheel and ports operator DP World, stunned global markets in November 2009 when it asked creditors for a six-month standstill on its obligations. Dubai World restructured around $25 billion of debt in 2011, followed by a $15 billion restructuring deal in 2015.
“We would not expect it to become (comparable to 2008-9) so barring some form of sharp external impetus such as global political instability or a protectionist trade war,” said Wilde.
Nor did he see the introduction of VAT as particularly driving this trend, but rather as just one more factor impacting some already strained sectors (e.g. some sub sectors of retail) “which were already pressured by other macro factors.”

FACTOID

Four

The number of interest rate rises in the UAE since March 2017.