Interview with Fouad M.T. Alghanim, Chairman and CEO of Fouad Alghanim and Sons Group
Kuwait is at a crossroads now. Oil prices are down considerably. This might have implications for the way business is done in Kuwait and for the future of the country. Where do you think Kuwait should go from here, what should be the vision for the country?
Before oil prices dropped, Kuwait had $150 billion of infrastructure projects for the next 10 years. This had attracted a lot of major international companies to come in and invest in Kuwait. The drop in oil prices will affect Kuwait but Kuwait’s oil production is not as large compared to other countries.
I don’t foresee the government slowing down development. I think the projects will go ahead as they are based on pre-arranged budgets. The new budget will be based on the lower average oil prices prevailing today. If I was in the government I would definitely not delay the development projects.
Every year we have a new batch of graduates. If we increase the development projects, employment will increase. The younger generation will need to employed in new developments, new projects. I would not like to see Kuwait decrease its development spending.
What do you think are the implications for doing business in Kuwait?
I’m sure you have heard this before. Here in Kuwait there are different types of opportunities. Most of the business is done in partnership with Kuwaitis. We have a law here that requires that for a business to be established here, it must have a 51% Kuwaiti partnership. But now there is a new department in the Ministry of Finance, the Foreign Investment Department. Under this, if a foreign direct investor wants to set up a new business, say to produce ethylene, or cement etc., they can own up to 100% stake in it.
They also get tax exemptions. This is a good way to encourage foreign investors to come and invest in Kuwait. Business opportunities are open to everybody. But in my opinion, anyone who wants to invest here must find the right partner. They will need a Kuwaiti partner even if they have the opportunity of going it alone. A Kuwaiti partner facilitates the ease of doing business, in areas such dealings with the municipality, permits, licenses etc. It could be helpful to do it with the right partner, rather than doing it alone. They also participate in the financing and project costs.
As the Chairman of one of the most respected conglomerates in Kuwait, where do you see business opportunities today, in Kuwait, regionally and globally?
In Kuwait, as I just said, there are many opportunities. A $150 billion worth of projects coming is a major opportunity. I am now looking at other areas, regionally and internationally. We are in Africa, we are in the MENA region, we have investments in Europe and the US, and we are looking for more. We want to diversify. Although my major business is in construction, as you know we’re one of the largest if not the largest, construction companies in Kuwait.
Especially in power. I’m proud to say we are the largest EPC power company in the MENA region. We built 40% of the power stations in Kuwait. I think diversification is an important part of our future business. We’re looking at other opportunities like the Bio Medical sector, in high tech, in IT. Real estate is also very important. We have interests in real estate in Kuwait, outside Kuwait, in the US and Europe.
In Europe, where would you like to invest?
There are many in places in Europe to invest in. The CIS countries that have newly joined the EU are a good opportunity. We have investments in Germany, France, and England. We are looking at investments in Italy and in Spain. In Greece we are looking to invest in real estate and leisure. Diversifying into many areas is important.
We are looking at an important medical discovery in the US. Certain renowned professors have worked on producing new medicines to treat Alzheimer’s and Parkinson’s. I was approached by a famous doctor friend of mine in the US when he discovered this possibility. It needs finance to develop it. I immediately grasped the opportunity and gave it the go-ahead. I financed the project. I think it will go to the FDA in early January. I am confident that it will get a favorable response from the FDA. It’s a much needed medicine today. This is a major product that could be a big breakthrough.
We’re also in discussions with certain groups about buying into telecom companies in Africa. I, with some others, started the first cellular company in Kuwait, MTC (Mobile Telephone Company of Kuwait), today called Zain. I sold it in the 1990s. Today Zain is one of the largest companies worldwide. We think this can be repeated. We’re looking at other investments. I also started the cellular company in Jordan, called Umniah. After operating it for a year, we sold it at a good profit. We sold it because we received an offer that we couldn’t reject.
We’re also considering certain industrial projects in Hungary and the Czech Republic. These are industries that need financing and management. To give you an example, in the mid-80s, my brother and I were approached by one of the German banks to sell a company owned by 2 elderly brothers. My brother graduated from Germany, by the way, so he knew the German market. We decided to buy into the company, called Weinig. They make electronic machinery to make window frames and door frames in Europe because most of the houses there are wooden. Today, Weinig I understand has about 40% of the world market, which is not a small number. They have factories all over the world, in China, the US, Europe and other places. These are the kind of opportunities we are looking for, companies that have a good future, a good potential but need financing and management.
There are many companies in this situation. How do you choose, by their huge potential or is it technology that motivates you? What are the key factors that motivate you to consider an offer?
We look for companies that are unique. If you tell me there is a steel factory in X country, I will think there are so many steel factories around the world. It’s not easy to compete. Or an aluminum factory etc. No. we are looking companies that we feel have a good future and can be turned around in a short period to become profitable. We study it well, whether it is in manufacturing or IT or medical. For instance, we are looking at another product in the medical field.
A device that can be added to an iPhone. You blow into it and it will help identify certain diseases. It is not perfect but it aids in early detection of certain diseases, including cancer, diabetes etc. I cannot explain exactly how ir works but I’ve seen the device. I wasn’t convinced in the beginning. Later my people went and studied it in detail and reported back. I think it’s a good device. It needs development. We are thinking of participating in the financing of it. If my people give me the final go-ahead, we will go ahead. So we are looking at new technologies.
In your opinion, what should be the relationship between Europe and the GCC?
I was asked that question by a friend about what I would like to see. I see that the European economy is in bad shape. I don’t see it improving much in the near future. Many of the countries, Italy, Spain, Ireland, Portugal and others, are in a bad situation. If the GCC as a group agrees to invest money in European companies, on the guarantee of technology transfers, there will be a stronger relationship. What will happen to Europe? The European economy will improve.
This doesn’t just mean the money that will flow into Europe. Even oil prices will improve. Europe as a bloc is the third largest consumer of our oil after China and India. Why can’t we think like that? We should think about the future, mutually beneficial. Why should we close ourselves off? I wish the European Union would approach the GCC. If you ask me why shouldn’t the GCC approach the EU? GCC countries have already invested in Europe but independently. But if the EU comes as a bloc to the GCC, represented as one bloc too, we are ready to invest subject to technology transfer, subject to long term understanding, not for a year or two but maybe a 100 years. This is what should be done. This is my wish.
It’s politics. One of the European leaders I met said he would love to see this happen too. But there will be other, bigger countries that try to block this because they don’t want to see European-GCC economic partnership and strength. This depends on both Europe and the GCC. If the intention and the will is there, nobody can block it.
Because there are 2 blocks of nations, it’s a complex idea but it’s possible.
Nothing is impossible. If there is a will, it can be done. It might exist on one side. It takes time. You have to really knock on the door and keep knocking. Both sides have to do it, not just Europe.
Are you alone in this or do other business leaders in Kuwait feel this way?
I haven’t spoken to others to be honest. I think if this conversation were opened, the majority of people here would back it. Because it’s in their interest to do so. We need technology transfer, we need a closer relationship with Europe. For instance, now there is a call to eliminate the Schengen visa and the UK visa. Fifty years ago, there were no visas. Kuwaitis would travel freely to Europe and other parts of the world. If this move starts, it will continue. The Schengen is being discussed because of mutual economic collaboration. It is important. Why can’t this continue?
Talking about yourself and your own companies, when you invest in these companies abroad, do you look for a return in technology transfer? Do you negotiate that each time? And do you then use it here for progress?
Definitely. Here’s an example I just remembered. We are in aviation too by the way. I have a company in Greece, Athens based, which manages private jets. We were approached by a group of engineers in the US. They had a new patent on building removable fuel tanks for planes. Worldwide there are only 2 or 3 companies that build fuel tanks for Boeing and Airbus and others. I think this new technology will be a breakthrough because you can put the tank in the plane or remove it in 2 hours. Currently it takes about 10 hours. Secondly it will allow for longer flights, increased flight times.
We bought into the company recently. Tomorrow, a team from Boeing is coming to the factory in the US to see if they can use these fuel tanks on their new Maxi BBJ. I’m sure they have gone to others. But to have Boeing, the world’s largest airplane manufacturer come to us, it shows we are on the right track. It’s not easy to get Boeing to consider us. Our intention is to develop that technology and probably produce it in Europe and also in this part of the world. It is a technology transfer that will happen, later on.
Do you see a lot of technology transfer happening in Kuwait? To the outsider Kuwait seems a consumption economy. They buy but there seems to be no significant technological or manufacturing activity.
Take the United Arab Emirates, Abu Dhabi, they are like Kuwait. But their leadership has taken the next step already. They have insisted that any major project by any major international company must include the technology transfer component. When I went to Abu Dhabi I saw factories that build armored vehicles, building guns, building missiles, building RPVs. Why can’t we do the same thing? They are ahead of us in this respect.
And as they say in English, I raise my hat to them. We should also do the same thing. Just because we have the financial capability, it doesn’t mean we don’t need technological capability. On the contrary, we should build for the future. There is a government company here in Kuwait, which was started to encourage technology transfer. It has a capital of about KD 100 million. It is run by young Kuwaitis, with PhDs, who are in the know about the right technologies. Any Kuwaiti with a new technology can bring his idea to this company, and if it is a feasible technology, they will finance it. I cannot remember the name. I think technology transfer is a must for Kuwait.
We are also doing a special on family businesses in Kuwait. You are part of one of the best known families in Kuwait.
We are the founder families.
Can you talk a little bit about the family, your roots, the business itself?
The Alghanim family is probably one of the oldest families here. We and the Al Sabah family emigirated here more than 300 years ago, from Central Arabia. We have a very close relationship with the royal family, we are intermarried with them. We are cousins to each other. Kuwait is a small society, we are all connected by intermarriage. We are all cousins to each other. The important thing is, in the past the families had been very close, more like one family.
I remember an incident from when I was about 10 years old. They used to trade in dhows with India and East Africa. One of the dhows sank here, near Kuwait. The owner of the dhow and the company that used it for trade, lost everything when the dhow sank. In those days, they did business on debt, they borrowed to buy from other places and made it up when they sold the goods. Most businesses had offices on Market Street. That very day, one of the businessmen on Market Street came up with a petition to help the man who had lost everything with the sunken dhow. By the time he had gone from one office to another on Market Street, before the sun had set, the man whose dhow sank received more than he had lost. When he returned they gave it to him. This was the Kuwait of old.
Unfortunately, it is not the same anymore. Competition has overcome the sense of the larger, one family theme. But Kuwaitis, even today, both here and abroad, donate very generously to the needs of other people. We are proud to note that the UN has recognized our ruler as a Man of Humanity. Kuwait has been similarly honoured. When I went to meet President Salva Kiir about 5 years ago, I was surprised to hear of Kuwait’s contribution to Southern Sudan. In the 1960s, Kuwait built a hospital and schools there. Who ever thought of Southern Sudan in those days?
It was our Ambassador, Abdullah Shreya, (they call him Abdullah Juba), who visited Southern Sudan and reported the terrible conditions there to our ruler. He also told him most South Sudanese are Christains, not Muslims. His reply was to not ever differentiate based on religion. All Christians, jews and Muslims are in the Quran. He immediately gave instructions to build hospitals, schools, shelters there. When I visited I saw a house preserved as a museum. President Salva Kiir told me, this is the house of Abdullah Juba, our late Ambassador.
So the Kuwaiti government and private citizens donate a lot to charity, outside of Kuwait. We don’t really have poor here in Kuwait. We have a middle class and upper class. But around the world there are a lot of poor people in need. I don’t think Kuwaitis differentiate between religions in charity. If the needy are Chinese or American or anything else, Kuwaitis will give.