Plenty of foreign investment opportunities exist in Saudi Arabia because of its rapid economic growth, says Ahmed Omar Al-Sanousi, CEO of Prince Sultan Cultural Center. “Foreign investors can effectively meet the market challenges at different levels,” Al-Sanousi told Diana Al-Jassem of Arab News in an exclusive interview. Al-Sanousi said the increasing trend toward gated communities had given him hope for finding a solution to the housing problem.
Al-Sanousi said that if property prices were reduced in industrial and economic cities, then that could help making the main cities less attractive and less crowded.
“The government should make housing plots available to individuals at affordable prices so that they can build their own houses. What is currently happening is that real estate developers buy lands in economic cities and just wait for their prices to increase,” he said.
Success recipe
From your point of view what are the qualities of a good leader in the new market?
A good leader should have a clear vision and plan to be accomplished. Leaders who have only ideas and who are unsure of implementation strategies will not succeed.
Leadership role has developed mainly in the past decade, however both the public and private sectors are still in need of visionary leaders with a strong willingness to impose all strategies. There is no doubt that the new market needs qualified leaders. Real leaders should look for raising the number of experienced national professionals and diversifying the resources for economic growth.
What words would you choose to describe your success story?
Success depends on what a person does, accomplishes and keeps accomplishing.
What were the main obstacles you faced when you started your business?
Obstacles are always there in Saudi Arabia; bureaucracy is one of the major problems. Labor laws are among the main obstacles that we face. Saudization is a major obstacle in some situations. In some fields, we can’t find qualified Saudi nationals to work. In some industries, we suffer bureaucratic delays. These are the main factors that contribute to delays and impede the business growth in the Kingdom. To some extent, we are developing but if we look at our neighboring countries, we still lag behind. In other countries they don’t suffer on account of bureaucracy. For example, they can get permits in 24 hours. In Saudi Arabia, bureaucracy comes in the way even when we want to shut down a factory. People and media have to keep raising the issues that belong to business and laws, where the government has to create awareness of and keep pace with the rapid economic growth, and cope up with the global changes.
How do you view the Saudi real estate and building scenario, especially when the Kingdom is moving toward solving the housing problem by launching several projects?
Housing remains a problem, especially as our population growth rate is among the highest in the world. The practice so far has been to give land and expect the housing problem to be solved, but that solves the problem temporarily and not for ever. We are one of the new nations where most of the the citizens don’t own houses. In African countries and some poor Arab countries, the percentage of people who own houses is really higher than us. The government has taken steps to enable the citizens own houses, but we still need to do planning. Compared to the income of Saudis in the past 25 years, we will find that inflation has grown high every year. Housing prices are increasing while the income of Saudi nationals has remained static. Young Saudi nationals cannot afford to buy houses due to their fixed income and high prices.
Company agenda
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?
Twenty years ago, we had a budget problem where health care and education were not given much importance. We are one of the lowest in the world in terms of health care, weather in quality or bed numbers. We have very good Saudi doctors, but we are lacking health care facilities. We are lagging behind in all sectors, so we have to focus on building the people by educating and training them to handle mega projects. I confirm that there is a big gap in the housing sector. To boost health care facilities, I recommended the private sector to contribute more in establishing well-developed projects.
What are the main cities that attract the largest number of real estate development projects and why economic and industrial cities are not attracting the people?
I believe that once a project is accomplished with all services, it will attract a big number of people. However, the main cities are already crowded due to some mega projects plus the pending infrastructure projects. Such crowds should push people to live in new cities like economic and industrial cities, but the situation there is hard. When the government started building the economic cities, the people working in those cities refused to live there due to high cost of living. Rabigh and Jubail have hosted several big petrochemical companies in addition to hospitals and education institutes, which attracted a large number of people. Unfortunately, people still work in Rabigh but live in Jeddah to escape from unaffordable housing prices in Rabigh. When the government starts these projects in industrial and economic cities, they have to pay for acquiring land from individuals and develop houses for them. What is happening is that real estate developers buy lands in economic cities and don’t pay to the land owners what is due to them. This in effect tends to increase the prices.
The Prince Sultan Cultural Center has recommended several development projects in Jeddah, Could you give us the details of these projects and strategies of their implementation?
Our project aims to change the view of Jeddah, where our concept is that people can have a nice way of living, where it will be an attraction for all Saudi nationals and foreigners due to high quality of services. The project includes a medical city that has twelve medical centers and 5,000 residential units for 20,000 individuals. The units will include villas and apartments. There will be a gated community compound for the residents to live happily. We’ll build two international schools, and cultural and conference centers that will have an art gallery and host cultural events. It will also include a library. The city will be built on two main projects. We signed contracts with the US-based Methodist Hospital, a major medical project that includes specialized child and mother hospitals, and diabetes and obesity centers. The medical project will cover all people of all ages, from birth to death. It will be the only hospital of its kind managed by well-known operators in the world. We are targeting the people who usually head to the UK and the United States for medical treatment. For education, we have partnership deals with Prince Faisal University in Riyadh and Harvard to establish medical colleges for both sexes. In addition, we will establish a college of business administration. The university will have a capacity for 2,500 students with a sizable staff. The university will enroll both Saudi nationals and foreigners. In addition, we will have a huge area for exhibitions. Also, we are planning for a mall that will be the biggest in Jeddah. The mall will offer space for luxurious brands. Hotels also will be opened for tourists who are visiting the village. An electrical transport system is another facility that we are offering. There will be enough space for people to walk. Prices will be fair. We hope to complete 70 percent of the project within three years.
How will this project help to speed up the Saudization process?
We contacted the cultural attache in the US to talk to Saudi students there and let them know what we are offering here in the project, including that we will hire Saudi nationals who are studying aboard. We will also contact students in travel and tourism institutions to work in the hotels on reasonable salaries. Saudi nationals will get a great opportunity to work in Prince Sultan Cultural Center projects. For example, we expect 1550 Saudis to work in the medical center. Saudi nationals also will be working with foreign companies. Initially, we thought there wouldn’t be much demand from foreign companies who want to invest in the center. But I can assure that the demand from international companies is really high due to the project location, facilities and growing Saudi economy.
Residential portfolio
What factors can contribute to speed up the Kingdom’s need for residential projects and job opportunities. Is it only population growth or are there other reasons like globalization, inflation and baby boom?
The greed of property owners and the country’s limited space are the two main factors contributing to the limited housing supply. What has happened is wages have remained more or less the same in spite of inflation, which is messing up the economy. In terms of Saudization, education plans have not kept pace with the increasing demand for qualified or skilled Saudi workers. That’s why we are lacking in many crafts and skills.
Competition among construction companies is getting tougher especially when foreign investors are allowed to join the Saudi market and work with flexibility. Tell us your evaluation of the competition among these companies?
Competition has led to increase in raw material prices. Attracting foreign companies is very healthy, where it helps in reducing the prices. We are attracting companies from China, Russia and Germany to break monopoly and reduce prices.
Experts expected mortgage law to stop the rising real estate and raw material prices. What is your opinion?
Applying mortgage law is a positive step toward stopping or checking the rising housing prices. In addition, opening the door for foreign mortgage companies is welcome but it has to be controlled.
Saudi nationals have been looking to see the Kingdom developing projects like other GCC countries, especially the UAE and Qatar. Do you expect old Saudi construction models to be changed in the coming years?
We hope to see normal growth of Jeddah and the rest of the Kingdom. I don’t like the experience of Dubai, where 70 percent of buildings are empty. We need gradual expansion of our infrastructure. We are already late; we need to work hard in order to meet our needs. I don’t deny that we need to develop many services. However, we still hope to see many more changes.
The Labor Ministry’s decision to impose a payment of SR 2,400 per year per expatriate worker has reportedly raised the anger of real estate development companies. What is your opinion about such huge taxes, and how will it impact the Saudi real estate market?
Due to the Nitaqat and Saudization programs, business hands are tight; we have not been able to solve the Saudization problem. I believe that Saudization is a mission impossible and the labor minister is trying his best to solve this problem for the benefit of our children. I am not opposing the Labor Ministry’s plan in terms of an expatriate tax of SR 2,400; its impact on our business will be limited. However, the additional cost will be on the customer, where inflation will increase further. I don’t see this decision is right. I believe that Saudization should be determined depending on each sector’s need. Saudi nationals also are in favor of working in one shift with two days off a week, which encourages us to hire expatriates. I think young Saudi nationals views about work have changed; they are willing to take up jobs with low salaries and with a very positive attitude. I hope this tendency will continue in the future. The Kingdom is likely to ease the sponsorship transfer system for expatriates. I honestly think the three-month period is not enough, especially when the Ministry of Labor has not extended the facility as announced in the media. There is a need to give work permits to non-Saudi women who are residents or are married to Saudi nationals. I always prefer the government to extend all facilities, including issuing visas to companies. They then can monitor illegal workers and deport them. I think arresting illegals should continue for the sake of the country’s safety and security.
Al-Sanousi’s ID:
Name: Ahmed Omar Al-Sanousi
Position: CEO of Prince Sultan Cultural Center
Age: 59 years old
Degree: MS Finance & Accounting, 1979, Colorado State University, Ft Collins, Colorado US
Bachelor’s Degree in Business Administration & Accounting, 1975, King Saud University, Riyadh
Experience:
• Shareholder and managing director of United Co. for Development & Contracting
• Director-general and member of the board directors of Saudi Medical Services, Co.