ON RECORD

Saudi Arabia 2014 | FINANCE | VIP INTERVIEW

TBY talks to Bader Bin Abdullah Bin Hamad Al-Hammad, CEO and Managing Director of Maceen Capital, on market conditions in Saudi Arabia, foreign investment, and the regulatory environment.

You started MaCeen Capital in 2010. What market conditions made it possible?

The market conditions in Saudi Arabia can be briefly described as having strong financial and banking sectors, as well as a mature commercial banking sector. Locally, we required a higher number of investments because we direct our investments toward international markets by hiring fund managers. Until 2010, Saudi Arabia did not witness any real activity in the investment banking industry. The market faced a significant crash in 2006, and later the international crisis, in 2008, affected the entire region, especially Dubai. In 2010, we realized that there was a gap between investors and investment opportunities; they were not connected, especially after the formal establishment of the Capital Market Authority (CMA) in 2003, through which new rules and regulations were issued to control and organize the investment process. We saw that there was a real opportunity to tap into the financial services sector in Saudi Arabia, especially as there wasn't any financial firm that offered the value-added needed into the Saudi Arabian market, which recorded excellent growth rates and presented a significant expansion in commercial activities and government support, especially to very large lines of multi-production. We also saw that there was a gap between investors, opportunities, and regulations that needed to be filled. Therefore, we seized this opportunity to establish Maceen Capital, an investment company that provides a sophisticated and disciplined methodology that helps those in charge of businesses to improve their company performance by providing them with optimal investment solutions that suit their needs and continuous requirements. In 2010, we started investing in real estate and we have been doing a great job ever since, as we have managed SAR3 billion of assets under management (AUM) in a short period of time, which indicates the high demand in the market. We also realized that our target audience is not only looking to invest in the real estate sector, and that is why we allowed the market to lead us. This is the strategic approach adopted by MaCeen since the start, which positioned it as an unconventional and dynamic investment group that provides its services in real estate investment, capital markets investment, private equity, and alternative investments.

When you started in 2010, was part of your strategy to capitalize on the difficult time many markets were having?

External conditions were not the only reason we started so steadily and kept growing. On the other hand, the Saudi market since the founding of MaCeen Capital was in steady growth and continuous expansion, which was of great benefit and had a positive influence on our business and services. The conditions of the global crisis were nothing but an opportunity for the international markets to improve performance and avoid past mistakes, and we at MaCeen Capital take into account the needs of the market and its requirements in the long run. Our competitive advantage was, and still is, our knowledge of the Saudi market; knowing that, we were able to seize opportunities as they arose, whether from real estate, debt capital markets, or private equity. We at Maceen have invested in all of these sectors, but our major investment was in the real estate sector as we developed 14 real estate funds.

How do you anticipate the effects of foreign investment regulations on the market?

Knowing that foreign investment has its merits and disadvantages on any given economy, the relevant authorities must take into account the methodologies of the local market, which does not accept changes easily and, at the same time, must take into account the value-added of foreign investment in the market. From our experience, foreign investors fail to compete with local market players because legislation does not take into consideration the conditions and investment environment for each party. Therefore, I think it will be a major task for the parties in the relevant legislation, regulation, and justice systems to ensure the highest standards of business ethics in global business.

“I believe that the Saudi market is a promising market for all sectors and industries."

How are labor reforms affecting infrastructure projects, construction firms, and even real estate developments?

There are certainly some delays in the completion of projects that are under process, but there are no doubts that they will be finished. We are facing some issues related to land development due to governmental rules and restrictions since it might take up to a year and a half to receive permission to develop land. If we can diminish this period, it will definitely have a positive effect on the residential and housing industry compared to other industries and parties. I think that the new legislation with regard to the labor laws in Saudi Arabia is positive, leading the market to improve the working environment to attract more of the most efficient and serious workforce. In normal conditions authorities face resistance to changes in legislation, but as we have witnessed so far the business community quickly accepted it and returned to work with full force.

Which sectors and investments appear the most promising over the coming two to five years?

I believe that the Saudi market is a promising market for all sectors and industries, because it is in fact an emerging market and we at MaCeen will be focusing on private equity, as this is a large and untapped opportunity. Private equity is a major driver in the growth of the economy, and will even affect the capital markets in Saudi Arabia. Some of the most successful stories originate from a venture capitalist investing in private equity and entering the capital markets. There are a number of institutions today, such as King Saud University and Silicon Valley in Riyadh, which incubate these entrepreneurs. The cement sector is also very promising. A royal decree has approved the participation of the cement sector in the capital markets in Saudi Arabia, and this process has to follow a methodology that requires them to be established as venture capital and then gradually enter the capital markets, and that transition should take place through investment banks or companies specialized in fund management. The Saudi market is a promising market for all sectors and industries. However, I think the most influential industries are petrochemicals, cement, imports, construction and real estate development, administrative advisory services, tourism and hospitality, telecommunications, financial services, and investment banking. We at Maceen are definitely working on becoming pioneers in the private equity and alternative investments sectors.

Are you planning to capitalize on your AUM within the coming five years?

MaCeen has all the major components that contribute to its success and development, including a professional executive team, a well-structured entity, a total of SAR3 billion in AUM, and, above all, decentralized decision making, since MaCeen is owned by individual investors and doesn't belong to a bank, which facilitates and speeds up the investment process. Having said all this, we expect to be one of the leading investment companies in Saudi Arabia.

© The Business Year - April 2014