King Abdullah Bin Abdulaziz Al Saud, Custodian of the Two Holy Mosques, greets guests during the inauguration of King Abdullah University of Science and Technology (KAUST) on September 23, 2009 in Thuwal, Saudi Arabia.
The priority given to Saudi Arabia’s infrastructure development is yielding dividends, says Abdulaziz M. Al-Angari, board member and vice president of Al-Angari Holding Company.
“Custodian of the Two Holy Mosques King Abdullah’s visionary policies will overcome the bureaucratic challenges at different levels,” he said in an exclusive interview with Diana Al-Jassem of Arab News.
Al-Angari said the Labor Ministry’s Saudization program needs to receive support from the entire private sector even if it impacts businesses negatively. Al-Angari wants a permanent solution to be found for the rising land prices in the interest of ending the housing problem forever.
“Despite the strong efforts of official agencies, the housing problem will not be solved soon due to the limited availability of land, monopoly and the absence of mortgage law,” he said. “The Kingdom has just started focusing on the housing problem, so they will still be late in finding a lasting solution.”
He, however, hoped that the housing problem will be solved soon. “What bothers me are factors like monopoly in land ownership, inflation and land, which is in short supply” he added.
From your point of view what are the qualities of a good leader in the new market?
First of all, choosing the right people to work in the right places is a skill that every leader has to handle. What is needed is a clear vision and a business plan to make a success of any business. There is no doubt that the quality of business leaders has changed over the years due to globalization and communication. Adopting new technologies, languages and management systems are among the factors fueling competition among business leaders. However, leadership examples are important for any society. They have to be good role models for the new, emerging generation. They should encourage young Saudis and prepare them for leadership roles in society. Good leadership should create job opportunities by setting up their own business.
What were the main obstacles you faced when you started your business?
Saudi market needs experience, relations, and new ideas to refresh the business field. I believe that a company can run well if it is managed by both elderly people with experience and youth who are looking for change and new ideas.
What kind of business you prefer to see in the Kingdom, family-owned businesses or listed companies?
Both are needed in the market, but family businesses have a proven record of success worldwide. The legal structure of any company is not a reason for success or failure; the most important thing is to have a clear vision, and determine the process that can lead to the set goals. Three years ago, we became a closed joint stock company, but I think nothing has changed. The legal structure alone will not have a major impact; it is the management strategy and vision that matters.
What is the strategy you are applying in the company as a board member and vice president?
The company has its clear vision and mission since long. Most of the major changes I have applied relate to management and legal structures, streamlining administration, developing the IT system, hiring new staff, promoting skilled youth, building new relations with suppliers, and expanding other operations of our core business. We are now planning to develop land and boost trading in materials.
How do you view the Saudi real estate and building map, especially when the Kingdom is moving toward solving the housing problem while raw material prices are going up dramatically?
Saudi Arabia is witnessing a big boom in infrastructure, construction and real estate. Most of the projects are unrelated to raw material prices. However, finally it is the consumer who is affected by the big boom and inflation. I believe that the Ministry of Commerce has to control the export of raw materials, for example, to reduce prices. Within the coming 20 years, 14 cement factories will be opened, which will contribute to limiting the prices of real estate. Unjustified prices have to be controlled by official agencies. Building and infrastructure are the main sectors of involvement for our company. There are a big number of projects in every city of the Kingdom, where I believe the Kingdom looks like a big workshop. In terms of government buildings and service, the government is working hard to develop and expand a numbers of schools, hospitals, and branches across the Kingdom. Such expansion is really notable. I think now is the right time to reinvest our income in developing the country’s infrastructure. I am also expecting the boom to continue in residential units due to the plans adopted by the government recently to solve the housing problem. I expect huge development in water and sewage projects in Jeddah, where we are working in cooperation with National Water Company. However, within two years, Jeddah’s sewage and water problems will be solved due to the mega projects that are taking place currently.
The Ministry of Labor’s decision to impose a new annual payment of SR 2,400 per expatriate has raised the anger of real estate development companies. What are your views about such huge taxes, and how do you think they will impact the Kingdom’s real estate market?
Saudization is needed for national security. We are supporting the Ministry of Labor’s plans to expand the scope of recruitment of young Saudis. Even if we are affected by Nitaqat negatively, we understand that we can justify it in support of the national cause. The SR 2,400 tax will contribute to inflation, so the final consumer will be affected. As per our business, we will be negatively affected during the first six months, but later on the consumer will be directly affected. I know that the ministry’s aim is to raise the cost of the expatriate worker so that companies and business owners hire Saudi nationals; they should know that there are other reasons that push us to depend on expatriate labor. In our company, we have achieved a high rate of Saudization in managerial positions, but we couldn’t apply Saudization in low salaried positions. We do miss the Saudi workforce, so we are struggling. I honestly believe that the Saudization percentage should be determined by the sectors’ needs. Hiring Saudi nationals to managerial positions is much more desired by business owners and Saudis themselves. However, I do think that young Saudis have changed their attitude and they now work in low-paid jobs with a very positive mind. I hope this tendency will continue in the future. We are trying to support Saudization and youth where we are in the ‘green’ category. We fear that many projects will be delayed due to some of the latest decisions, one of them being that a worker must work for his sponsor. I wish that the current campaign should target the illegals who don’t have valid residence or work permits rather than those who have such permits. The limited number of visas given to the private sector has led to widespread violations. To help us apply the law, the Ministry of Labor has to facilitate issuing visas to business owners, especially those involved in real estate.
Saudi Arabia is moving toward gated community projects in the main cities. Do you think there is a balance between the Saudi real estate sector and other sectors like education, health and services?
We are lagging behind in terms of health, education, and services, but I think the government realized this, and they are working on the development of several health, educational and infrastructure projects. For example, we find education and health have been given big budgetary allocations.
We still see that large projects are planned but not finished yet. What are the reasons for their delay?
Lack of workers, weak planning of the projects whether from the owner or the contractor, and bureaucracy are the main reasons that have led to the delay. One of the main problems is that governmental bodies give the projects to small contractors who are lacking in experience, just because his offer is the lowest financially. This is very common and has led to delays in many cases.
What kind of joint ventures your company has with international entities?
We welcome joint ventures, weather with local or international companies. This is a step that I am supporting. I also would love to see foreign investors coming to the Kingdom, but in the field of contracting I think local companies will be more successful in dealing with local issues like bureaucracy. Foreign partners are useful in electricity, transportation, infrastructure and such other sectors, where each country has a special identity or specializing in a certain field.
Do you think the housing problem will be solved due to the all-round efforts that are being made?
Despite the efforts of official bodies, the problem will not be solved soon due to the limited availability of land, monopoly in land ownership and the absence of mortgage law. We have just started, but we are very late. I want the housing problem to be solved soon, but I don’t think so. Land monopoly, inflation and low supply are among the major problems we face in terms of housing. If we compare the process of lands, villas or apartments with other countries, we will discover that the prices here are too high. The citizens’ affordability is really low, as their wages have remained the same for a long time.
Saudi nationals have been looking to see their country develop projects like other GCC countries. Do you expect the Kingdom’s old construction models to be changed in the coming years?
Comparing Saudi Arabia to other GCC countries is wrong. I want Saudi nationals to know that we are a unique country due to our Islamic rules, holy sites, and Saudi Aramco in Eastern Province — where you can see a distinct shift in education and employment. I don’t see it’s logical to compare our country with other GCC countries. I think we are competing and we heading toward solving many problems. We went through several financial problems due to the Gulf War, and fluctuation in oil prices. I believe that we are doing well. We have realized our mistakes and we are planning to develop our country. I think King Abdullah’s efforts have resulted in many great achievements. The king’s move to support education through scholarships and establish King Abdullah University for Science and Technology is a major turning point for the Kingdom. We do need long-term planning to achieve sustainable development.