The London-based merchant banking company, MerchantBridge, which specializes in Middle East business, with offices in Baghdad and Bahrain has applied for a license to open an office in Saudi Arabia. The company is enthusiastic about prospects in the Kingdom.
“There is an enormous potential for growth,” says Basil Al-Rahim, one of the company’s Saudi partners, citing sectors such as the service industry, hospitality, manufacturing, petrochemicals and construction.
“The Kingdom is awash with high liquidity which different sectors can absorb,” he said. “In contrast, there is a shortage of investment avenues in the Kingdom. We hope to fill part of this gap in the field of corporate finance.”
The company has set up a joint venture with Mariott Hotels to build 12 properties in the region over a four-year period, of which five will be in Saudi Arabia, said Al-Rahim. Additionally, it is involved in a number of projects in the industrial and petrochemical sectors.
Speaking on the company’s plans, Samir A. Arab, another of MerchantBridge’s Saudi partners, said: “We’ve met major conglomerates and business families in Saudi Arabia. Once we get the license we shall set up a branch office. We are not into retail banking. We do corporate banking and specialized investment banking involving large funds. We have a smaller number of bigger clients.”
He said business confidence is running high in Saudi Arabia. Economic reforms are working well, although there is a scope for further reforms relating to the regulatory environment. The accession of Saudi Arabia to the WTO, together with foreign direct investment, will have a great impact on the Saudi market.
“There is a lot of scope in the educational sector as well. Whenever reform has deregulated the market, it has a positive impact on the economy. It allows for cross-fertilization of ideas from investors. More technology will absorb greater investment.”
Samir Arab says that many foreign companies are interested in doing business in the Kingdom. But for that to happen there is a need for further reform. He points to the mortgage sector.
“There is a great deal of scope for it, with housing expanding rapidly to keep pace with population growth.”
Asked if investor confidence had been damaged by negative reporting in the Western media, he said there were some initial concerns, especially after Sept. 11, 2001.
“That phase is now behind us. Investment flow has resumed with full steam, because Saudi Arabia is no different from other regions in the world as far as security is concerned. Three years down the road, the situation has turned round 180 degrees in terms of investor confidence. It is riding high right now. WTO ratification will give a further big boost to overseas investors,” he said.
It is not only in Saudi Arabia that business is good, MerchantBridge says. It is working across the region. Even in Iraq, despite the problems.
The bank has been involved in two major investments there. The first, Al-Mansour Bank, was launched with the backing of Saudi partners. The response to the IPO was so strong that it was oversubscribed 15 times, while the share price jumped 400 percent after the launch.
The company has also started an investment fund in Iraq with its focus on building materials, industrial and plastic pipes, cement and readymix concrete.
But what about security?
“Cement plants are doing very well in Iraq, which remains a high risk and high investment place,” Al-Rahim said, but “it’s not what you see on TV.
We have invested in the south of Iraq and the Kurdish area, which are safe places for investors.”
