Prince Alwaleed ibn Talal is a business genius, the man with the Midas touch. Almost everything he invests in, no matter where, turns to gold — so much so that he has become an icon in the business world, a man to be admired and copied. If Prince Alwaleed buys into a company, its shares soar as the market follows suit. Simply to know that he is interested in a company is enough to have investors rushing to buy shares. When he suggests that a particular stock is worth buying, as he did recently with Citigroup, investors take note.
For his conglomerate, Kingdom Holding Company, 2005 has been a bumper year. Prince Alwaleed, one of the world’s richest men, has got even richer. Profits have soared, and no more so than in the case of his Saudi investments, taking wings on the back of a booming Saudi economy.
The scale of his operations is awesome. They are not just global, they are all-embracing in activity. Behind his desk in his office on the 66th floor of the Kingdom skyscraper in Riyadh is a wall-to-wall, ceiling-to-floor display of company logos, representing many of the best-known businesses in the world — in Saudi Arabia, household names like Herfy, Panda, Savola, Almarai, Samba, NIC (National Industrialization Company); worldwide, the Mövenpick, Fairmont and Four Seasons hotel groups, eBay, Amazon, Apple, Citigroup, Rotana, LBC, Newscorp, Time Warner — and all their myriad subsidiaries, like Fox Communications and the Times of London. It is one of the biggest business empires the world has known.
In that sense he is unique, not just in Saudi terms, but international ones as well. It is not really fair to compare him to other Saudi businessmen; he is in a league of his own. But it was not always like that. He learned the hard way, going bankrupt twice before business took off.
One aspect of his uniqueness, however, is something that other Saudi businessmen could do with copying. He attributes much of his success to it. He delegates. He does not get involved in the nitty-gritty of the companies he owns. He has the skill to know that he does not know everything and the skill to leave people to do the job for which they have the skill. Other things that can be said about him are that he is disciplined, can sum up a situation and make decisions very rapidly and has a photographic memory for the smallest detail. One suspects that he does not suffer fools gladly.
That may lead some people to conclude that he is a workaholic. But he does not come across as that. What he does come across as is someone with no airs and graces. He is very approachable — something not normally associated with people in his position. And he has time for things other than business — for his family, to read, relax — and, for something else that increasingly motivates him: charity. Kingdom Holdings is not just big time business, it is turning into big time charity and philanthropy — worldwide.
For the Saudi business world, though, he is the beacon — the man who has done more to modernize, if not revolutionize, the entire services industry in the country.
Prince Alwaleed was interviewed by LUBNA HUSSAIN and MICHEL COUSINS. He was in full form, rather like his companies, brimming with confidence about them and about the performance of the Saudi economy.
Q: How has performance been over the past year? What new investments did the Kingdom Holding Company make in Saudi Arabia in 2005?
A: The year 2005 has been an excellent year for us, at least from a national point of view, in terms of local investments. Local investments didn’t just grow, they soared. The Saudi market was buoyant, propelled by the increased price of oil. There’s huge growth in the economy right now. All our companies are firing on all cylinders; I’m referring to Saudi ones. International investments didn’t decline, but their increase was less than was the case with Saudi investments.
Q: What new investments were made in the Kingdom?
A: We have invested in many areas. We have the financial arm, which is Samba. We have the industrial arm, which is NIC; we have the food arm, which is Savola. All these are expanding. NIC is expanding in industrial projects. Savola is building more hypermarkets, more Panda supermarkets, more Herfy restaurants. We are expanding in those existing areas. We see high growth in company profitability, in the service companies, and as a result of that in the share prices of those companies.
Q: NIC has a 51 percent stake in National Petrochemical Industrialization Company? How is it doing?
A: So well. NIC profits are also soaring. The bulk of it comes from two sources, our investment in Cristal in Western Province and in NPIC in Eastern Province. Right now we are negotiating to buy out the remaining 49 percent. We are going to buy it. It will be announced next year.
Q: Kingdom Holdings is heavily involved in the media internationally — AOL Time Warner, News Corporation, World Disney and Euro-Disney. Do you have any plans in the Kingdom? Or further plans within the region?
A: We are now involved in Rotana. We are heavily involved in the media industry in the Middle East. We are involved in LBC which is No. 2 or No. 1, depending on programming, in the Middle East. Rotana has six channels. It controls 60 percent of all the movies being shown in the Arab world and 80 percent of all the music in the Arab world — cassettes, cassette production, distribution, etc. We play a big role in that.
Q: So you have a strong interest in clamping down on piracy?
A: Definitely. Piracy is affecting the whole music industry. Piracy in the Arab world and Saudi Arabia is at a peek. As to the print media, we are involved — for example in some print media in Lebanon; you’ll see it here. As to publishing, we are looking at it, but nothing is finalized.
Q: With WTO membership, how do you see the challenge that competition is going to bring, both for Kingdom Holding and for Saudi Arabia?
A: Clearly with WTO membership, the economy has to be opened up to many businesses. Inevitably companies will come to Saudi Arabia. Those Saudi companies that have a strong, solid base here will be able to stand up to the wave of companies coming from abroad. Those companies that are weak may have to reshape or link up with stronger companies from abroad. I’ll give an example. Savola has a company that manages Panda, Hyper Panda and Azizia. We are a very strong force in supermarkets here. We control 40 percent of all supermarket sales here in Saudi Arabia through the three. Already some French companies such as Carrefour, Géant and Euromarché are here. So we’re used to competing with Western-based companies in the business. Even so we’re looking to strengthen our position. Those companies that are solid, that are using Western parameters and indicators will be able to withstand any pressure from outside. But those companies that are not strong enough, I say: Watch out. There’s great interest in Saudi Arabia. Before, people were worried about Saudi Arabia because of terrorism and low growth in our GDP (gross domestic product). Right now Saudi Arabia is flush with money, GDP growth is high, GDP per capita is high, terrorism is waning — if not being eradicated completely. So there is a lot of interest in Saudi Arabia. So companies will come here en masse. So it’s not like three years ago, when people were complaining that no businesses were coming here. Now, a lot will come with WTO membership. We sense that. We see that in our hotels. There is a boom going on here in Saudi Arabia. Yes, we are going to see a lot of competition. But that’s good. That’s good for consumers.
Q: New banks are coming in, banks like the State Bank of India and the National Bank of Pakistan. Do you not think that they are bound to make serious inroads into the sector?
A: That’s good for consumers. I own five percent of Samba — a huge stake there. But that’s OK. I love competition. I admire competition. I ask for competition. It puts people on their toes. Saudi Arabia can afford to have 20 banks. Now we have around 11 and licensed three or four, and will head toward 20. That’s been announced. May the best survive. That’s capitalism. There’s no better time for Saudi Arabia to get into WTO than now. Because right now we really are at our peak. Saudi Arabia has never witnessed growth like we have right now. We are mature, most of our infrastructure has been built, like telephones, electricity — that’s where the bulk has been done. There is plenty of room for growth, where infrastructure is still weak, for example in sewerage and water. We still need more growth there. But the infrastructure is generally mature. It is great for us to get into WTO in the midst of this avalanche of funds that is flowing into Saudi Arabia — through public funds, through public equity, through the public sector, which is the result of the oil price rise, or as a result of repatriation of funds by the private sector. A lot of people are bringing money back — either because of the belief in the local economy or because the opportunities outside the Kingdom are seen as not so attractive; Saudi Arabia’s growth last year was better than all the OECD (Organization for Economic Cooperation and Development).
Q: The Kingdom is in a new oil boom, one that promises to be even bigger than last time. What lessons have been learned from last time, especially in relation to sustained development? Is money being wisely spent? For example, there is a mass of shopping malls going up in places like Jeddah that are surely unsustainable.
A: There is a difference between the public sector and the private sector. In the public sector, many lessons were learned from the previous boom. In the previous boom, with the rush to develop, money was wasted. There’s no doubt about that. The second lesson is that, hopefully, corruption will be minimized. Also many projects were undertaken haphazardly. Some projects were never properly carried out. For example, some public sector housing projects that were built here were never used for their intended purpose. The lessons are: Minimum corruption, an end to waste, and having more studies. This time we have the leadership of King Abdullah. He has taken the decision to channel part of the national income back to the people — first of all in salaries, with the 15 percent increase for public sector employees. Some people may say that is inflationary. I don’t see it as inflationary because those people did not get a salary increase for 20 years. Secondly, part of this money is being spent on education health and welfare. These touch the lives of people directly. That is another positive move. In the private sector there are some projects being implemented without sufficient planning and study. As you mentioned, shopping malls in Jeddah are all targeting the same niche: The middle class. They are not going for the very rich or people with limited means. They are all going for the middle class. We are seeing the consequences. Some companies are being badly affected. They cannot sell — all because shopping malls are being built randomly. So do your homework — whether you’re private sector or public sector.
Q: The country is awash with liquidity, cash looking for a home. The result has been soaring real estate prices, particularly in Jeddah and a boom in the stock market, as vast amounts of cash pursue limited opportunities. A recent report said that STC shares were overpriced. Is all this sustainable?
A: Yes I saw the report. A good report. The problem is that there’s a lot of money in the system but the opportunities are scarce. People have money in their pockets. Either they spend it on real estate or the stock market, or take it out of the country. The bulk of the population does not want to take it abroad. They want it to stay here either because they don’t know much about the outside world, or because they are afraid or worried about getting involved abroad. So they are chasing too few opportunities. So that’s why the stock market is rising. But certain companies on the stock market are making huge profits. Some company profits are up 60 percent. This justifies some of the share increases on the stock market. However, other companies are just making the same profits as before. A bubble is building. That is worrying. My advice to investors is not to look at the market in general, but to be company specific. Go for companies that are performing well, whose profits are increasing — which justify an increase in the share price. As to real estate prices in Jeddah, the city is limited in area for growth. It is between the sea and the mountains. The south of the city is unsuitable for development. The only way to go is north. All the opportunities are in a very small area. So there is a bubble there. No doubt about that. In Riyadh, circumstances are a bit different. In Riyadh, where the population growth is much larger — 8.4 percent compared to 3.1 percent in Jeddah, that’s almost triple — building is much more people-oriented, toward building houses for people. Also there is a lot of money around. Three years ago, GDP per capita in Saudi Arabia was $7,500. Now it is $13,500 — which means that Saudis are much wealthier now. They can afford to build a house. It is not a bubble like Jeddah where a lot of projects are business-oriented. Here it’s much more consumer-oriented — building houses for people in response to the population increase. With the growth of money in people’s pockets, that is causing the boom in real estate.
Q: What is your view about the tourist industry potential in Saudi Arabia? Do you have plans for major new hotels in the Kingdom?
A: When I recently met with Prince Sultan ibn Salman I said that if you concentrate on local tourism you will be successful. The Saudi population is 16 million. Millions go abroad to Syria, Lebanon, Cairo, to Europe. If we can persuade a fraction of them to spend their vacation here, then that will be a major achievement. That is the aim right now. The country is concentrating for the medium term on local tourism. As to hotels here, we have the Four Seasons in Riyadh; we are managing two Mövenpick hotels in Jeddah, two in Madinah and one is being built in the Eastern Province. Mövenpick hotel prices are quite elastic, between three and five star, which means they meet the pockets of the bulk of the population. We have signed an agreement to do one in Hail; it will open in about 18 months.
Q: Is privatization going fast enough?
A: No. It is slow. It is moving the Saudi way — slow. It’s something we’ve had to accept. The fact that it’s moving is something to be pleased about. If it weren’t, we wouldn’t be pleased at all. We have to accept the reality that Saudi Arabia moves slowly. Our job is to try and get things moving as fast as possible. That is my job, being a member of the royal family — to being active, being public, as someone involved in the private sector. My job is to have things move as fast as possible. But we cannot say they are moving very fast.
Q: What about the privatization of Saudi Arabian Airlines and opening up the Saudi skies to competition?
A: Privatization of Saudia is moving ahead. But, as I said, you have to do your homework. You cannot just say: “Saudize quickly.” Or “privatize quickly.” A company has been appointed to evaluate the situation at Saudia, the value, the timing. But Saudia going public is imminent. I can assure you on that.
Q: What about Kingdom Holding Company setting up an airline?
A: We have to study it. We are financial investors. We are involved in many areas. We can go into any industry. We are flexible.
Q: You are clearly very flexible and involved in many different sectors. Do you not feel that now that you have got to the size you are that you need to concentrate on core areas?
A: We have good solid people that manage these industries. You would be right if I had to manage these industries. But each industry is managed by top-notch people. For example, Samba is the No. 1 bank in the Middle East. Savola is a conglomerate that was established when I bought Azizia Supermarket, merged it with a bankrupt company called Panda, fixed them and merged them with Savola. And what’s Savola all about? Savola is a conglomerate company that controls 40 percent of all dairy products in Saudi Arabia through Almarai, 85 percent edible oils through Al-Arabi and other brands, 95 percent of all sugar. It controls 40 percent of all supermarket industry sales in Saudi Arabia. These are the big ones. It controls Herfy, which has SR300 million sales. It is the only 100 percent Saudi-owned, indigenous fast-food company.
Q: How do you control all these companies? How do you run this web of businesses?
A: Very easy. With communication, by telephone, with having good people. Each person in each industry is better than me in that industry. Solid people, all firing on all cylinders. Look at Savola profits, look at Samba profits, look at NIC profits, look at Herfy profits. The results are the proof. All are flourishing.
Q: You are doing something that very few other Saudi businessmen that I have met manage to do. It’s called delegation.
A: That’s their problem — not my problem. I delegate.
Q: I’ve come across men running largescale operations but they still want to interview the man who looks after the car park.
A: Lovely point. I don’t just delegate, it’s full delegation. If someone comes to me and wants me to baby-sit, I say: “If you can’t stand the heat get out of the kitchen.” Sometimes they make mistakes and they pay for it, and they learn. It’s full delegation. Each company has full authority. Because if I have to manage all these companies, it will not work. When I buy a company, I buy into the brains of the company, I buy into the management of the company, I buy into the philosophy of the company, I buy the brand name of the company. So there is full delegation. But obviously we trust and verify. We trust, and we go and check. We go and see what is happening with this or that company at the end of the quarter. They’re not just left completely alone.
Q: Your success has made you an icon in the Arab world.
A: I’m transparent. You can strip my company naked. I have nothing to hide. It’s all there, published. How much cash I have; my investments; each company I have, one by one; the value of my plane; my car. Everything is there. I have nothing to hide. I began with $30,000. I went bankrupt. I went and borrowed a million riyals and went bankrupt again. I borrowed three million and took off. So I’ve nothing to hide.
Q: Why aren’t others doing it?
A: You ask them. No, I’ll tell you. Others, to be fair to them, are good in their field. But they are involved in single areas — only in food, only in banking, only cars, in industrial projects. I don’t work like that. Kingdom is a holding company. Our job is not to go and operate companies. That’s not my job. If any of my companies says: “Prince come and operate us,” I say: No. I am not going to operate any because that’s not my job because I will be bogged down in the whole thing and it will be at the expense of me being the visionary and the creator of other projects. I cannot be bogged down. Each company works independently — and I tell you 2005 was the best year ever. All companies were firing on all cylinders. Citigroup, Four Seasons, Fairmont, Mövenpick, Canary Wharf, eBay, Amazon, Newscorp, Time Warner, Savola, Azizia, Panda, Herfy. And the Kingdom School, the Kingdom Hospital, the Kingdom Center and Kingdom City. All moving. I’m not saying that totally everything is fine. Euro-Disney, for example. We have an issue there. So sometimes there is a hiccup.
Q: You see your job as being to get them to do their job?
A: Exactly. If there’s a mistake, I guide them. I talk to them. I don’t do it just by myself. I ask for committees. I ask for meetings. I don’t just dictate. It’s not a case of “the prince said so and so.” We do it through participation. We widen the scope of discussions. But once a decision is made, we follow it. For example, Rotana: It began as a small company. Now it has six channels and is a dominant force in the entertainment industry in the Arab world.
Q: How do you get time for yourself, being at the center of this business empire?
A: I have plenty of time to exercise, to read, be with the family. That’s because I delegate. You have to have good people with you. Am I going to go and manage, for example, Newscorp? This is a business empire. I have six percent there. I just get in touch in person or by telephone.
Q: During the collapse of the dotcom business three years ago, you were one of the first to jump back in, buying into Amazon when its shares had hit rock bottom and when others were still scared. It has paid off. You seem to have a nose for a good deal.
A: First of all, when you invest in a company, you look at the brand. You have to be sure that the company has an edge, has an advantage, has an added value, has something other companies don’t have — has a uniqueness. You have to be convinced the management is good. You could be head of the company but have bad managers. You bet on companies that meet all these criteria and that are available out there. The system works. It works. If I showed you the sheet of paper I have showing the profits on all the companies it would amaze you. I don’t show it because people wouldn’t believe it. They’d say that’s not possible. The sub total for returns on investment in my company’s year, locally, is over 150 percent. For example, let’s take a public company, whose figures are verifiable — Samba. I took a bankrupt bank, USCB, and merged it with the Saudi Cairo Bank and then merged it with Samba. I invested around $50 million, and now my investment is worth $1.8 billion. My return is 168 percent. It’s verifiable. In Savola, also verifiable, it’s 257 percent. NIC, 317 percent. That’s what’s happening. All the Saudi companies are successful — and all the international ones. Only Euro-Disney is limping. But it’s not devastating because it represents less than one percent of my wealth — and I can assure you that Euro-Disney will come back. So it’s not fair to compare me to other people in Saudi Arabia. They are very successful in their fields. We are a conglomerate with a diversified portfolio. That is our operation.
Q: Almost everything you touch becomes profitable. Can Kingdom Holding provide investment opportunities for small Saudi investors, drawing private Saudi capital into Kingdom Holding projects? Have you thought of creating financial vehicles to fund projects that you have selected and in which ordinary Saudis can invest?
A: It will not happen directly through Kingdom Holding. It will happen indirectly through subsidiaries. We have Azizia Commercial Investment Corporation, this has some Saudi shareholders and allows certain selected people to invest through it. We also have Samba, which has many funds and deposits from hundreds of thousands of Saudis. So, it doesn’t happen at Kingdom Holding level, it happens at subsidiary level. For example, I have five banks in Africa that accept deposits and have funds under their management.
Q: Three years ago, before the US-led invasion of Iraq and the overthrow of Saddam Hussein, I asked you about opportunities in Iraq. You said that it was potentially a good place to invest in. You also said the world in general, and more specifically the Arab world, even more specifically the Gulf region, would be a lot better off without Saddam Hussein, but that this issue had to be left to the Iraqi people. What is your view of what has happened in Iraq? Have you invested there or plan to invest there?
A: I told you three years ago that I will invest when there are opportunities and when the place is completely settled and stable. You don’t go and invest when you have civil strife, when you have a country that is disintegrating, when you have war and killings. I don’t go and capitalize on what is happening in Iraq. Iraq is dangerous for any investor to go there. Almost every investor who went there lost his shirt. I will only go to stable countries that have established systems, where returns are clear. There is no rush. The world has over 205 nations. I can wait until for Iraq to stabilize, for a united state to come into being. Obviously there is national duty. But there is no stability in Iraq. So I’m being consistent with what I told you three years ago. I’ve not invested in Iraq. I’ve not even gone to Iraq. I was invited, but I didn’t go because I just don’t believe that there’s any basis of a country there yet. Things could even get worse, God forbid.
Q: Do you have any plans for further investments in schools or colleges?
A: We have Kingdom School here in Riyadh. It will be replicated in other Saudi cities.
Q: What about vocational training?
A: No. The government runs vocational training institutes. But our charities are very much involved in support of education and training. For women, for example. I’ve done a lot for my country. We provide a great amount of charity. We cover almost all countries. We are keen to build bridges between cultures. There are endowments to promote dialogue between Muslims, Christians and Jews. What Kingdom Holding is doing in terms of business is now being duplicated in the field of charity. And this big work of charity is managed by just three people.
Q: Three years ago, you said that you were planning a university. What has happened?
A: We studied it and came to the conclusion that it would not be profitable. A lot of proposals for universities are popping up across Saudi Arabia, particularly in Riyadh. So we’ll wait and see if there is an opportunity. It’s still on our minds. But a university on a stand-alone basis is not profitable. There are universities coming up in abundance. A lot of them are for free. So you’d be competing with universities that gives education for free.
Q: In business you have achieved what most people can only dream about.
A: Alhamdullilah — Thanks be to God.
Q: Do you still have a particular dream?
A: Unfortunately, people just measure success by the wealth you have. Please consider me like any other person who goes to work in the morning, who likes to perform, achieve and be successful. In my case, on the business side, the indicator of success is how many deals you’ve done, how much profit you make, how your companies are doing and what’s your performance. But there are many other things I do in life. I love charity. I like philanthropy. I like to assist people. I want to eradicate diseases. For example, I am involved with the Carter Center in West Africa, in 11 nations, to eradicate malaria, Guinea worm and combat AIDS. I’m involved in at least 20 charity projects in as many countries. I was also the biggest individual contributor to the tsunami disaster relief — and the single biggest contributor to the Pakistani earthquake fund. We also have projects in Burkina Faso including a dental clinic, in the Comoros to provide electricity generation for an island of 200,000 people. In Ethiopia we airlifted 100 tons of food. In Ghana we are building schools. We have pilgrims come here from many countries. There are projects in Senegal, Zimbabwe, Gambia, Djibouti, Congo, Mali, Niger, Kenya. Sometimes I get involved in details. I call the people who are running the programs. But I don’t waste time. The other day I flew to Pakistan in the morning. I arrived, met with the prime minister, took a helicopter to the scene of the earthquake, quickly saw what needed to be seen and then flew back to Riyadh by lunchtime. I had my lunch here in Riyadh; no one even noticed I had been away. The Pakistani prime minister had said: “You have to have lunch or dinner with us, meet the president, stay the night.” I said: “No, thanks. I have to get back to my headquarters in Riyadh.”
Q: You see yourself as an enabler, a facilitator?
A: Definitely. For sure. But I’ll tell you a big secret: I’m not a micro man at all, but every person working for me knows that I could be micro in a minute. I trust and verify, and they know that I can verify. They like what they do. They’re not on their toes for the wrong reasons. They are motivated. And you notice that here in Kingdom Holding 62 percent of employees are ladies. They are more efficient. They are more motivated — and, of course, they have more time to devote to work because here in Saudi Arabia they cannot drive. They are not allowed to do much. So they can concentrate on their work to the maximum.