A dramatic change is expected in the Kingdom’s economy within the next few years as a new generation of Saudis, with new ideas and big ambitions take over companies in the country.
Younger businessmen want to invest in the Kingdom rather than abroad. Domestic investment "brings big profits at lesser risk," they say, and they expect to see "positive developments" on the home investment front, notably with the enactment of new laws.
The majority of those interviewed stressed the need to react effectively to international economic developments. But they are, they say, more than up to the task of steering their companies through the approaching uncertain waters of greater competition, as Saudi Arabia opens up to foreign investment. They have, they insist, not only the administrative and managerial skills to succeed, acquired at business colleges abroad, but also considerable practical experience, having learned the ropes the hard way: Hands-on in the company business.
Abdullah Marae Bin Mahfouz became vice chairman and managing director of the Marae Bin Mahfouz Group, one of the Kingdom’s leading businesses, four years ago. He is around 32 years old. He expects many Saudi companies to merge so as to strengthen their position and meet with the challenges of foreign competition. "Our group has established a partnership tie with other companies and this has brought excellent results," he explained. Saudi companies, he pointed out, were now cooperating to win contracts together instead of competing with one another, as was the case before.
There is however, he says, a division of opinion among Saudi companies and businessmen, even second generation ones, as to where to make new investments. Some had shown undue hastiness by jumping into new ventures and areas of business. Most though are extremely prudent in investing in new economic ventures, he believes, perhaps even to the point of conservatism. His own group, for example, was quite cautious about investing in such areas, at least at present. "We prefer to invest in fields where we have long-standing experience." E-commerce is an issue at point. The Marae Bin Mahfouz group had not yet adopted the system.
As to the effects of the Kingdom’s eventual admission to the World Trade Organization, Bin Mahfouz is confident — at least in regard to his own group. WTO rules do not impinge on many of its activities — real estate, gold trade and services. Any "negative fallout from the organization" — by which he meant the chill winds of competition — would be addressed at the appropriate time.
For Bin Mahfouz, as with other businessmen, the question of where to expand has to be financially driven. The group, which has investments both within and outside the Kingdom, wants to help the Saudi economy develop and grow, but it is not in the business of philanthropy. Fortunately, national and economic self-interest currently coincides. "Returns from investments in Saudi Arabia and Gulf states are much higher than on investments in other countries," he said. On the other hand, he believes that the privatization program, which has come somewhat late, has not yet attracted largescale investors. But in his view it will benefit small-scale investors.
Tarek Abdul Rahman Fakieh, in his early 30s, is director general of Al-Tazaj Fakieh company, an affiliate of the Fakieh Group. He agrees that investment within the Kingdom is much better than abroad. He puts it down to what he calls a "conducive atmosphere". The Fakieh group’s investments are centered in the Kingdom, although Al-Tazaj has branches in 12 countries including the United States, Malaysia, Iran, Egypt, UAE and Morocco, and plans to open in Japan, South Africa and in certain European countries. Nonetheless, foreign investment is given "only second priority by our company," he affirms.
Jamal Abdul Khaliq Saeed, another 29-year-old businessman, who runs one of the factories in the Mahmoud Saeed & Abdul Khaliq Saeed Group, says his company also prefers domestic investment. "This does not mean we have canceled foreign investment from our agenda," he said. "Trade has no borders." But like his father, well-known businessman Abdul Khaliq Saeed, and his uncle, Mahmoud Saeed, another leading businessman, he prefers to invest within the Kingdom and the Gulf. For him, the business atmosphere in the region is ideal. As it is, the group’s products are now sold in a number of Gulf states.
Thirty-year-old Faisal ibn Ahmad Baghlaf, whose business group has billions of riyals in investments, is another of the younger generation who instinctively rebels against the idea of putting their wealth into stocks, bonds and property abroad. Not only does he see too many risks involved, but he wants the money to work for him at home. In any event, as he points out, the lion’s share of his group’s investment is within the Kingdom, with other investments in Arab states — and he is very much interested in looking to new Saudi markets, although he is aware that any attempts must be done with great care and considerable planning.
In his 30s, Amr Al-Dabbagh of the Al-Dabbagh Group believes that the Saudi economy is not independent of world economy. What happens globally tends to affect the Kingdom. He is a member of the Davos International Forum and actively associated with the Jeddah International Forum. He suggests Saudi businessmen should be dynamic and venture into fields like telecommunications and technology. "Businessmen should not be conservatives when it comes to investment and ideas." He is convinced that the new economic laws and reforms introduced by the Saudi government recently will boost the economy and investments considerably. "They provide greater freedom for investors to enter various fields. They will make Saudi economy more lively and dynamic," he believes.
Abdullah Al-Mamoun Mahmoud Fakhry is another "next generation" businessman. He is 28 years old and precisely the sort of entrepreneur of which Amr Al-Dabbagh would approve. The group of companies he runs is heavily involved in telecommunications and technology, having entered the field barely over three years ago. Business solutions are a more recent venture, serving the banks and major companies.
He sees the lack of new ideas as the major challenge facing his contemporaries in the commercial driving seat. They tend, he says, to opt for the same sort of projects. "This phenomenon has created an atmosphere of cut-throat competition and it will not help attract investment," he added.
Abdullah’s view is that Saudi businessmen must face up to international economic developments. "We will not miss the train." Like many other Saudi companies, he says, his is prepared for the Kingdom’s WTO membership. But that was not such a major leap of thinking. A substantial number of Saudi firms are already effectively international as they have investments worldwide and have had so for some time. He stresses nonetheless, the need to prepare manpower for the post-WTO period.
But he is not so sure about the generational commercial divide of which some of his contemporaries speak. Most young businessmen he believes have simply followed in the footsteps of the previous generation. "For example, myself and my brother (Abdul Rahman) established a number of companies with the full support of our father."
Abdullatif Muhammad Al-Abdullatif, who two years ago became executive director of Al-Ghazzali Trading Company, believes that the young businessmen would be more successful if they made greater use of the expertise of the old generation and through planning and consultation. He was area manager of the family company before. He said he was interested in investing in traditional businesses such as buying and selling valuable watches and real estate properties, rather than in stocks and bonds. Abdullatif said his company would apply e-commerce in the real estate sector.
