INTERVIEW: Dubai-based CEO Badr Jafar moves the needle at Davos

Illustration by Luis Grañena
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Updated 02 February 2020

INTERVIEW: Dubai-based CEO Badr Jafar moves the needle at Davos

  • Crescent boss explains how philanthropy can help to solve even the biggest challenges such as climate change

The annual meeting of the World Economic Forum at Davos always gets you thinking on big ideas, and there is no one better equipped to discuss them with than Badr Jafar.

Jafar is chief executive of Crescent Enterprises, the Sharjah-based industrial and financial conglomerate, as well as president of the related energy group Crescent Petroleum and chairman of ports management company Gulftainer.

But he is much more than an executive bean-counter. A conversation with Jafar leaves you feeling that you have had access to unique insight about many of the essential issues of the day.

The big thing on his mind as we sat in the Central Lounge of the Congress Hall in Davos 10 days ago was climate change. The far-reaching effects of rapidly changing weather patterns was the dominant theme at the meeting. Some delegates had predicted a climate apocalypse if nothing was done to reduce human-manufactured environmental damage.

Jafar was not quite so pessimistic. “There is no doubt in my mind that we, collectively, have what it takes to pivot to a sustainable future, without curbing human progress. However, we first need to transcend short-term politics, and move quickly to embrace conducive policies that will achieve actual results, and not just rhetoric,” he said.

Two measures are essential to meet the goals of the Paris Accord on climate, which seeks to reduce global temperatures by 2 percent by 2030, he believes: A rapid increase in production and consumption of natural gas, without gas flaring and methane leakage; and far greater use of renewables such as wind and solar power in, for example, Saudi Arabia and the UK’s North Sea.

“That would radically move the needle,” he said.


BIO

Born: UAE, 1979

Education

  • Eton College, UK
  • University of Cambridge, UK
  • Harvard University, US
  • Cambridge Judge Business School, UK
  • Young Global Leader, World Economic Forum

Executive positions:

  • CEO, Crescent Enterprises
  • President, Crescent Petroleum
  • Chairman, Gulftainer

 

Crescent is a major player in Middle East energy markets, and Jafar has firm views about the state of global fossil fuel markets. There are big concerns currently because of the coronavirus outbreak in China, which could affect demand, as well as longer-term fears that the era of petro-dominance is in decline. He does not necessarily see it that way.

“Compared to today, the middle class in 2030 will have 1.7 billion more people, mainly from Asia, and these middle-class consumption appetites will mean that primary energy demand will shoot up to 350 million barrels of oil equivalent in 2040, from around 290 million today — that’s the equivalent of six new Saudi Arabias.

“So thinking long-term — which again is not always the most popular choice for the politicians of today — our challenge is how can we invest today in the right solutions to ensure that we are able to supply these requirements in ways that do not do more harm to our natural environment, and instead promote a much healthier balance between human prosperity and the health of the symbiotic natural systems upon which we are dependent to survive as a race,” Jafar said.

One of the main reason that he was in Davos was to launch a new initiative, the Center for Strategic Philanthropy, a partnership with the University of Cambridge, of which old-Etonian Jafar is an alumnus. The center aims to research, quantify and structure global charitable donations, and direct them to where they are most needed.




Badr Jafar. (Crescent Enterprises photo)

In the Muslim world, zakat taxes and sadaqah charitable donations generate up to $1 trillion, but Jafar and his partners at the center worry that this is not being used properly.

“One in three Muslims live below the poverty line, and 90 percent of global humanitarian crises of today are in Muslim-majority countries. And with increasingly evident risks involved with the opaque flow of capital, we also have a huge responsibility to urgently institute transparent and accountable systems to ensure these monies are going to where they need to get to,” he said.

There is an enormous amount of potential. Studies used by the center show that over the next decade about $4 trillion of global wealth is due to pass from one generation to the next, with half of that in Asia. Emerging markets are growing four times faster in terms of per capita GDP than the developed world, which will throw up vast amounts of disposable income, some of which will find its way into philanthropic causes. 

Philanthropy could also be used, he argued, to bridge the funding gap of about $2.5 trillion needed to meet the UN’s Sustainable Development Goals, intended to be in place by 2030. Currently, only about 5 percent of philanthropic donations go toward environmental causes, Jafar said, coming back to the dominant theme of Davos.

“Why should a business care about this? For many reasons. But essentially because philanthropy is private capital for the public good. Government and business capital we know about to some extent, and both those have their own challenges in dealing with climate change. But the neglected aspect is philanthropy,” he said.

The biggest potential donor in the Middle East is Saudi Arabia. The Crescent business — started by Badr’s father Hamid when he immigrated from Iraq and now co-managed with his brother Majid — is big in the Kingdom, via the ports activities of Gulftainer’s terminals in Jeddah and Jubail. It has invested SR4 billion ($1.06 billion) over the past seven years, and employs more than 2,000 Saudi citizens.

Saudi Arabia and the UAE have a global role in demonstrating what strong leadership and smart economic policies can do.

So his views on the transformation under way in Saudi Arabia are germane. “It’s clear to everyone in the region, and increasingly the world, that Saudi Arabia is going through its own economic and social renaissance, which will have important and exciting implications for the whole region and beyond. Whilst the process of economic diversification is never easy, the steps that are being taken across the Kingdom’s key sectors to lay the foundations for this diversification drive are both visible and rapid,” he said.

As a cultural connoisseur himself, he is especially impressed by the emphasis on Saudi art and history as part of the Vision 2030 transformation. “History, including our own region’s so-called Golden Age in the 8th and 9th centuries, clearly demonstrates that periods of rapid innovation always happened at the intersection of sciences and the humanities. As we strive to embrace innovation and thrive in the Fourth Industrial Revolution that is upon us, the role of our artists and creatives will not be ornamental, but fundamental,” he said.

Jafar’s other preoccupation in recent years has been the Pearl Initiative, a nonprofit private-sector organization based in the Arabian Gulf that partnered with the UN to to promote the business case behind good corporate governance.

The initiative has had some success in addressing governance in the region, as measures to promote accountability and transparency have become more mainstream in Gulf business. But that has not stopped some big examples of corporate scandal, notably in the case of Abraaj, the private equity fund that collapsed and in which the Jafar family had a significant financial interest.

Speaking generally, Jafar agreed there was still more to do in the governance field. “The process of instituting better governance is a journey for any business and market, and I believe the next 10 years will mark the decade that our regional business community reaps the rewards of what good governance can bring, and, vice-versa, eradicates those businesses that fail to adopt best practice,” he said.

The main role of government in business should be to regulate corporate culture, rather than interfere directly, especially in the field of private investment. “It is crucial that business is not made to feel it is being made to compete with government in its investments or operations,” he said.

“I of course understand and respect the need for government to control certain strategic sectors. However, with the majority of sectors government needs to focus on the business of regulation, and allow business to be in the business of business,” he said.

The rule of law, and adherence to contractual obligations, is also vital, he said. “The critical aspect is respect for contract. Many of our investments, and all infrastructure investments, are long term in nature — 30-plus years. Without robust contract governance mechanisms, as well as robust dispute resolution and legal enforcement frameworks, investor confidence will be greatly diminished, and the cost of capital for any country will skyrocket.”

The two biggest economies of the Gulf should be the standard-bearer for Middle East business, he believes.

“Saudi Arabia and the UAE have an increasingly important global role in setting standards, and really demonstrating what strong leadership and smart economic policies can do to transform a region and its societies into thriving innovation hubs that embrace diversity, inclusion and the art of the possible, as cornerstones for success,” he said, with a Davosian flourish.


OPEC, allied nations extend nearly 10M barrel cut by a month

Updated 06 June 2020

OPEC, allied nations extend nearly 10M barrel cut by a month

  • The meeting, originally scheduled for next week, was brought forward to Saturday

VIENNA: OPEC and allied nations agreed on Saturday to extend a production cut of nearly 10 million barrels of oil a day through the end of July, hoping to boost energy prices hard-hit by the coronavirus pandemic.
Ministers of the group and outside nations like Russia met via video conference to adopt the measure, aimed at cutting out the excess production depressing prices as global aviation remains largely grounded due to the pandemic. It represents some 10% of the world's overall supply.
However, danger still lurks for the market. Algerian Oil Minister Mohamed Arkab, the current OPEC president, warned attendees that the global oil inventory would soar to 1.5 billion barrels by the mid-point of this year.
“Despite the progress to date, we cannot afford to rest on our laurels,” Arkab said. “The challenges we face remain daunting.”
That was a message echoed by Saudi Arabia's Oil Minister Abdul Aziz bin Salman, who acknowledged “we all have made sacrifices to make it where we are today.” He said he remained shocked by the day in April when US oil futures plunged below zero.


“There are encouraging signs we are over the worst,” he said.
Russian Energy Minister Alexander Novak similarly called April “the worst month in history” for the global oil market.
The decision came in a unanimous vote, Energy Minister Suhail al-Mazrouei of the United Arab Emirates wrote on Twitter. He called it “a courageous decision and a collective effort deserving praise from all participating producing countries.”
OPEC has 13 member states, including Saudi Arabia. The additional countries part of the plus-accord have been led by Russia, with Mexico under President Andrés Manuel López Obrador playing a considerable role at the last minute in the initial agreement.
Crude oil prices have been gaining in recent days, in part on hopes OPEC would continue the cut. International benchmark Brent crude traded Saturday at over $42 a barrel. Brent had crashed below $20 a barrel in April.
The oil market was already oversupplied when Russia and OPEC failed to agree on output cuts in early March. Analysts say Russia refused to back even a moderate cut because it would have only served to help US energy companies that were pumping at full capacity. Stalling would hurt American shale-oil producers and protect market share.
Prices collapsed as the coronavirus and the COVID-19 illness it causes largely halted global travel. That also hurt US shale production, drawing the ire of President Donald Trump. But Trump welcomed the earlier deal, as US Energy Secretary Dan Brouillette did on Saturday with the extension.
“I applaud OPEC-plus for reaching an important agreement today which comes at a pivotal time as oil demand continues to recover and economies reopen around the world,” Brouillette wrote on Twitter.
Under a deal reached in April, OPEC and allied countries were to cut nearly 10 million barrels per day until July, then 8 million barrels per day through the end of the year, and 6 million a day for 16 months beginning in 2021.
However, some countries produced beyond their quotas set by the deal. One of them was Iraq, which remains decimated after the yearslong war against the Islamic State group.
On Saturday, Iraq Oil Ministry spokesman Assem Jihad said in statement that Baghdad had “renewed its full commitment” to the OPEC+ deal.
“Despite the economic and financial circumstances that Iraq is facing, the country remains committed to the agreement," Jihad said.
Analysts had expected OPEC and the other nations to extend the cuts of 10 million barrels per day by one more month, but not longer, since the level of demand is still fluctuating.
“If the demand is great, countries like Russia will want to produce more oil, so they probably won’t want to get locked into a longer-term deal that may not help them,” said Jacques Rousseau, managing director at Clearview Energy Partners.