Siemens boss Joe Kaeser urges Saudi Arabia to stick with Vision 2030

Joe Kaeser, CEO of German engineering giant Siemens. (Illustration by Luis Grañena)
Updated 13 January 2019
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Siemens boss Joe Kaeser urges Saudi Arabia to stick with Vision 2030

  • Kaeser believes Saudi Arabia will continue to be an attractive target for foreign investment
  • Siemens would be 'very interested' in getting involved in the NEOM project

DUBAI: Joe Kaeser, CEO of German engineering giant Siemens, notably missed the Future Investment Initiative (FII) Summit in Riyadh in October. But he was back in the region last week to take the pulse of his business in the Middle East, and had a message for Saudi Arabia: Your Vision 2030 strategy has a compelling logic — now make sure you see it through.

Kaeser — arguably the most powerful businessman in the biggest economy in Europe, and boss of the world’s leading engineering company — was at the UAE Energy Forum, organized by the Gulf Intelligence consultancy in Abu Dhabi. He took time out from the proceedings to talk to Arab News about the energy business, a US-China trade war, and the future of Europe amid the Brexit chaos.

But mostly he wanted to talk about Saudi Arabia. “Vision 2030 is a very compelling strategic concept. We commend the leadership there ... the big question in the Kingdom is always about execution,” Kaeser said.

Coming from a businessman who declined an invitation to attend the FII amid the global uproar that followed the death of Saudi journalist Jamal Khashoggi, and against a background of trade spats between the Kingdom and Germany, that amounts to a reaffirmation of confidence in Saudi Arabia and a desire for “business as usual” between the two countries.

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BIO

BORN

•Arnbruck, Bavaria, 1957

EDUCATION

•Regensburg University of Applied Sciences

CAREER

•Joined Siemens aged 23

•CEO since 2013

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But Kaeser has advice for the Kingdom: Do not underestimate the social disruption that can come from large-scale economic change. “It’s a huge effort executing transformational matters,” he said. “It causes… uncertainty which, sometimes, if not properly controlled, causes societal uproar. That’s the last thing you need in the Kingdom, France, Germany or anywhere.”

While he feels that the Kingdom has leaders who can manage the change — singling out the “most regarded” Khalid Al-Falih, energy minister and chairman of Saudi Aramco — Kaeser recommends that Saudi policymakers adopt a more practical approach to the transformation process. “Typically, what I’d recommend doing is to ‘cut the elephant into pieces’ and make it actionable one piece at a time,” he said.

Kaeser sees the first “piece of the elephant” as “sustainable, affordable and reliable infrastructure,” and he recommends that Saudi strategists concentrate on that. 

“Once you’re done with that, you can build on those pillars. You can build industrialization of any sort, tourism business of any sort, societal development of any sort,” he said. “If electrification and moving people and goods … aren’t in shape, it becomes very difficult.”

Kaeser said focusing on the industrial basics is preferable to a “big bang” move such as the planned initial public offering (IPO) of Saudi Aramco. “If you float 10 percent of Aramco, then what? You get some money, but does Saudi Arabia need money? I’m not so sure,” he added. “They’ve got the resources, they have everything it takes … so I’m not so sure I’d pick this (the Aramco IPO) as the highest priority.”

But he is enthusiastic about other flagship projects that the Kingdom is planning, such as the NEOM megacity. He revealed that Siemens would be very interested in getting involved in this $500 billion plan.

“NEOM is a fascinating project. We may or may not be involved in that — there’s a bidding process — but if you look at NEOM, it’s almost like a recycled business description for Siemens. Of course, we could help and play a role, but it depends on the partnerships and everything else,” Kaeser said. 

He sees NEOM as more than just an industrial project. 

Saudi Arabia as a Kingdom and as an economy will always be attractive for foreign investment

Joe Kaeser

“It’s a fascinating project because it addresses urban infrastructure in a modern way. It addresses sustainable and renewable energy, and the freedom to move by Western standards, which could help to get the region or the Kingdom used to those types of things, which is a massive transformation,” he said.

Kaeser sees NEOM and other big projects as the next step in a process of social transformation, like the decision to allow women to drive. “Saudi Arabia plays a major role in the region, a stabilizing role in every way, so people say, ‘isn’t it too slow that only now they have women driving?’ I say: You don’t understand. This is a massive transformation for the people of the Kingdom. This is huge. I always tell people in Europe that this is a massive move,” he said.

There has been speculation that the fallout from the Khashoggi murder will hit foreign direct investment (FDI) into the Kingdom. Kaeser does not agree with that notion, but believes that much depends on how Saudi policymakers handle the current investigations.

“Saudi Arabia as a Kingdom and as an economy will always be attractive for foreign investment… based on the potential it has in the region as well as its economic potential,” he said. “So I think in the long term there will be no change, but it depends on how a political or economic ecosystem handles crises.”

The Kingdom deserves the patience and trust of the international community to investigate the matter in its own way and according to its own laws, he added. “If murder happens in Germany, the US or France, there’s a process. There’s an investigation, a trial and a conviction. That’s something the Kingdom deserves too,” Kaeser said.

Returning to the theme of policy execution, Kaeser said the UAE has been the most successful state in the region in terms of implementing renewable energy policies. 

Siemens has based its regional headquarters in Abu Dhabi’s Masdar City, the centerpiece of the UAE’s drive for sustainable energy. “Masdar City was an execution on the policy and the concept.  Did it go as fast as it was intended?  No. But did it get implemented? Absolutely. We moved into Masdar and we saved a lot of cost,” he said. “Sometimes, the execution is slower, but the UAE always executes, and that’s a fascinating track record that will attract foreign investment.”

While in the UAE, he was also looking at progress on the Siemens partnerships with the Dubai Expo 2020, the Dewa power and water utility, and Al-Maktoum solar park in Dubai. In particular, he thinks that recent technological advances have made hydrogen power a much more economically attractive proposition.

“I’m not sure anymore that modern mobility will be all electric. I could well imagine that hydrogen plays a much bigger role in the infrastructure of renewable energy ecosystems,” he said.

As one of the most powerful European industrialists in the world, Kaeser has firm opinions on the future role of the EU, caught in the middle of a potential trade war between the US and China. 

Judging by recent World Bank forecasts of falling American gross domestic product (GDP) next year, “it seems the biggest loser of the trade war is going to be the US in 2020, to have a GDP slowdown from 2.8 to 1.7 percent,” he said. “This is massive, almost cutting in half.”

The EU can help prevent such damage, he added. 

“European countries can have their sovereignty, but what Europe needs immediately, to be a meaningful third power to the other two, is a joint foreign economic policy — what Europe says on economic terms, on free trade, on relations with China and the US,” he said.

“That’s what we need to have for Europe to be a third power, maybe even an integrative power, to integrate the two others and help facilitate the notion that a unified world is a good world to live in. That’s what’s at stake.”

One big regret for him is the current uncertainty over the UK’s role within Europe. “I would’ve wished for Britain to stay (in the EU), because Britain’s service industry is probably the best in the world. The financial industry in the UK by quality has been the best in the world,” Kaeser said.

“Germany is the best engineering country in the world. I don’t mean to be arrogant — I think it’s a fact. France has a good way of dealing with diplomacy and military activity. So we could form quite a decent, powerful Europe if you combine these strengths.”


Ahmed Al-Habtoor: Portrait of a driven auto executive

Updated 19 May 2019
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Ahmed Al-Habtoor: Portrait of a driven auto executive

  • There is no country on this planet where you will see Bentleys, McLarens and Bugattis as much as in the UAE.

DUBAI: Over the course of a morning in his office in Deira, Dubai’s traditional business district, Ahmed Al-Habtoor talked eloquently and expertly about the motor business in the UAE and the Arabian Gulf, about customers’ likes and dislikes, about the tough times the industry has faced recently, about his best-selling models, and about the importance of the sector within the UAE economy.
Then, he dropped a small bombshell. He is always chauffeurdriven, and seldom gets behind the wheel of any of the luxury vehicles he trades daily. “I don’t care about driving cars, I care about selling them,” he revealed.
From the youthful chief executive officer of Al Habtoor Motors, who could have his pick of Bugattis, Bentleys, McLarens and other “fast boys toys,” that was quite a revelation.
“I don’t like driving, I like to be on my phone checking emails and messages. I don’t have the patience to look for parking, and anybody who can afford to have a driver should do so,” he added.
So Al-Habtoor is, in more senses than one, a driven executive. The motor division is a key part of the Al Habtoor conglomerate, started by his father, the group chairman Khalaf, in the 1970s as an engineering business but which has expanded through real estate, hotels and hospitality, to education and entertainment.
Motors has been an integral pillar of the Habtoor portfolio since it was set up in 1983 to handle the Mitsubishi franchise in the UAE. “We have strict corporate governance, law, a constitution in the company. The rules are set and we are here to implement the directions of the chairman. We have our own ideas, we try to be creative, but it is a well-established, solid company with very strong roots,” he said.
here is still a large number of workers — whom he called “partners” — who can date their employment back to the very beginning of the Mitsubishi franchise.
He admits to two alternative frustrations in his job, depending on the economic climate.
“When the market is active and business is fantastic, I get frustrated at the pressure of delivering to my clients. I’m just busy, trying to meet the expectation of delivering the right product at the right time,” he explained. “The other frustration is when the market is challenging and low, I’m busy trying to be busy, trying to find business. It’s all about being busy.”
For the past few years, the “challenging” market has been to the fore, as he candidly admitted. The fall in the oil price in 2014-15 began to affect the economies of the energy exporters of the Arabian Gulf toward the end of the following year, and the motor sector was seriously hit. Sales volumes declined sharply — compounded by government spending cuts and some policy decisions.
“I think in 2017 the volume was acceptable. In 2018, it dropped when the government implemented VAT. I don’t think VAT was the wrong decision, but it had a negative effect. It was implemented when the market was in a weak situation. If the market was booming, it would have been much easier for us,” he said.
Al Habtoor Motors’ longevity gives its CEO a perspective on the forces that shape the industry. “It’s a cycle. There is always a cycle every 6-8 years. When oil prices started to fall it had an effect. In our region, government spending is the key to moving the economy. Not only in Dubai, but the whole of the UAE.”
He estimated that the motor industry was the second biggest sector in the UAE’s non-oil economy, behind real estate, but saw no real linkage in the simultaneous downturns in property and motor sales.
The other factor that affected car sales — especially in the high volume and fleet car business — was the increasing reluctance of banks in the UAE to continue previous levels of finance to small and medium enterprises (SMEs) during the worst of the downturn.

“It was not a very wise decision to withdraw support from SMEs. The economy depends on large companies, but at the end of the day, consumption comes out of the (medium) and small businesses. Uncertainty and insecurity in the market made a lot of people stay away from buying,” he said.
Al-Habtoor estimated that car sales volumes in the fleet business were down by 50 percent from the highs of 2015, as they were across the whole of the volume motor business. “Last year was very challenging, but thankfully we managed all the challenges,” he said, on the back of an upturn in business measured across the whole of last year.
He has reason to be more optimistic in the current year. “There has been stimulus to the economy, Expo 2020, and the confidence in the market improved. The changes to visa arrangements, the reduction of license fees — all these are having an effect,” he said.
On the “Expo effect” — the expected boost to the UAE economy from the huge business fair planned for next autumn — he was cautiously positive. “We’ve seen that coming through already. Now it is nominal, but we are seeing green shoots. It is not a big effect yet but it is happening, and the more we go toward October next year the more benefit will come,” Al-Habtoor said, adding that he was confident of getting back to 2015 levels eventually.
That is good news for the Mitsubishi, Fuso, Jac and Chery marks that are Habtoor’s staple. But the group also has an impressive stable of luxury cars, with the dealerships for Bentley, the McLaren sports brand, and the super-car Bugatti, in the UAE
The UAE’s reputation for glamorous, extravagant cars — even down to the Dubai police fleet — is a global phenomenon, and Al-Habtoor does not think it will change any time soon, even in challenging economic circumstances.
“A lot of people want beautiful cars and the best. It always was like that, it still is now and it will be in the future. The UAE and Dubai is always about the best. It’s in the culture of the city. There is no country on this planet where you will see Bentleys, McLarens and Bugattis as much as in the UAE,” he said.
The economics are different in the luxury brands, which were not as badly hit by the oil-related slump as the volume business. “The luxury end was affected by the downturn, but it’s more resilient, it’s OK,” he said.
“In the first four months of this year, we’re the number one dealer in the world for Bentley, and have consistently been among the biggest Bentley dealers in the world, if not the biggest. When luxury goods are moving, not just cars, but jewelry and other things, I feel that the economy will come back soon,” he said.
Bentley sales have been given a boost by the introduction at the end of last year of a new Continental GT, and by the continued appeal of the Bentayga, the company’s first move into the SUV market, which has huge appeal for motorists in the region. Deliberately priced at below 1 million dirhams ($272,250), the luxury SUV aims to take on other upmarket four-wheel-drive vehicles.
He seemed especially pleased with the performance of the McLaren range within his portfolio, vying with other more famous brands in the lucrative but very competitive sports car segment — another best seller in the region.
At the top end, McLaren competes with the best in the sports car market, and its BP23 model sells at more than 10 million dirhams. “There are only 116 vehicles around the world and we have six of them. In that ultimate series sector, McLaren is dominating,” Al-Habtoor said.
Then there is Bugatti, the French super-sports car whose Chiron model is one of the most expensive seen on the UAE’s roads, selling at around 12 million dirhams. Last year, the company sold 12 of them, Al-Habtoor said, but any ideas that McLaren is competing with, and cannibalizing sales, of Bugatti were dismissed.
“That’s like comparing a normal plane with a UFO. I once drove a Bugatti on a track at over 200km and it was as if I was having a picnic in the garden — you don’t even feel it,” he said.
Occasional high-speed track driving, apparently, is one of the few occasions he likes to give the chauffeur a day off.