How would you describe Markaz's focus today as a leading financial institution in the region?
We manage investment products in the form of equities or real estate, monitoring opportunities emanating primarily from this region. We also invest for diversification purposes. On the investment banking side, we are active in capital markets, IT, and helping companies ease long-term funding needs in the form of equity, sukuk, or bonds. We believe in the importance of having a healthy asset management industry as a source of alternative funding because it helps intermediation. In this region, there is a high level of deposits, both institutional and private, and it is necessary to find opportunities to help deploy those deposits. The fund management and asset management industry is part of the mechanism that helps manage this objective. Our business model relies on two pillars, the first being investment returns out of our exposure on the stock market, investing hand-in-hand with our clients to ensure an alignment of interest; the objectives of the managers should match the objectives of the investors. The second pillar is investment fees; we generate fees that have to do with our efforts in terms of preparing opportunities, packaging them, researching them, managing them, and helping them fulfill their objectives. We are one of the top ten GCC mutual fund managers. The stock markets are important to us but, more importantly, they represent the underlying economies of the GCC.
What trends are you seeing in GCC markets?
The first trend I identify is the advent of strong regulation. This region, and especially Kuwait, is becoming one of the strongest in terms of regulation, which is very important for the investment banking and asset management industry. It is important that we conduct the best codes of corporate governance in not only the decisions we take, but also the quality of our decision-making. These are important at a time when there is so much political turmoil in the region. Regulation that ensures the adherence to good practices in terms of anti-money laundering and insuring that all the collective investment schemes are used to the purpose they are announced and nothing else is a very important thing. It is important that we hold people accountable for what they do, whether they are working in private or public entities, in terms of fulfilling the objectives of their institutions. The regulations we are seeing are part of a broader scheme of reforms that are extremely necessary in this region. The second major regional trend concerns the need to generate more jobs in the private sector as opposed to the public sector. The public sector is maxed out in terms of its capacity to absorb young graduates from universities and institutions. There is much debate revolving around how to generate more private-sector jobs and involve the private sector in high-profile projects; the financial services industry is going to be one of the key means to help empower and enlarge the private sector.
What opportunities are you targeting for growth in the GCC and MENA region?
This is a very vibrant, solvent region from a credit rating point of view. It has the capacity to embark on many interesting projects. No one single sector comes to mind as the foremost sector in this regard, but the housing sector is definitely going to be an interesting area for many investors, both institutional and private. The hydrocarbons sector, which has been under the control of the GCC for a long time, may, one day, open up to more opportunities for the private sector.
What is your analysis of the impact low oil prices has had on Kuwait and regional economies?
Falling oil prices prepare us for an interesting, more diversified economic era. It is an opportunity to bring out the best in Kuwait. Oil was undeniably crucial for the development of Kuwait and allowed the state to live in a regime of strong surpluses for a very long time, but it also led to inefficiencies. Sometimes it has created a sense of complacency, unfortunately, and I think oil prices going down will help eradicate that. It is an opportunity to look more seriously at the private sector's role in creating jobs.
What role is Markaz playing in the effort to grow the private sector in Kuwait?
Throughout the years, Markaz pioneered the development of investment tools in local and new markets. Markaz has succeeded year after year in developing new concepts and innovations through the creation of new investment channels, each with unique characteristics, in order to widen investors' horizons by diversify investment channels. And As part of our economic responsibility, we were the first to publish research with the aim of providing in-depth knowledge to the financial sector; in fact, a whole department was dedicated to research publication. Furthermore, Markaz cooperates with numerous academics and international research foundations to develop economic policy research in fields such as the energy sector, the labor market, economic structure, and the enhancement of the public institution performance to support a healthy private sector growth. Markaz distributes its public policy reports to decision makers and other stakeholders in Kuwait, and results are discussed with them to reach practical solutions.
Markaz is known to be a socially engaged corporation. What is your approach to CSR?
We believe in being strongly engaged in public welfare as a corporation, which led us to develop our own concept of CSR, which we call Corporate Economic Responsibility, where our engagement strategy focuses on contributing to three areas, namely: human development, ease of doing business, and good governance. We are active members of the Kuwaiti Economic Society, which is massively advocating a wide-scale reform of the public sector in terms of holding people accountable, assuring that when more areas of the economy are privatized, it is going to be a straightforward, transparent, and clean process.
How would you rate Kuwait as an investment destination?
Kuwait as an integrated part of the GCC network. We are in the business of equities, so if we liken Kuwait to a portfolio, Kuwait is a defensive stock because it has a limited downside. It is relatively transparent compared to other regions, where final decisions are important but the processes by which decisions are taken do not take a primary role. We stand tall in terms of the quality of decision-making, the transparency of the institution, and the robustness of its credit. In that respect, Kuwait is a more defensive play in the GCC region.
What are your expectations for 2016?
Because we are living in volatile times, especially this year, it is hard to have full clarity on a long-term vision. We aim to achieve a growth in our net earnings of at least 15% in 2015. One of the most pressing trends or reforms we need to have in the near future is to catch up with our neighbors and join the MSCI emerging market index. Kuwait is more than another frontier market and needs to be in the emerging market index. S&P just added the UAE and Qatar, and Kuwait should be officially announced by our CMA as soon as possible. I do not see any reason why we are not there yet.