Today is May 27th, 10:20 and we are doing an interview with Ghazi Al-Hajeri, managing director of Wafra, WIC New York. United Sports is the name of the company, co-founder and current chairman of the board. Thanks for taking the time to do this with us. We are going to start by doing some introductions to the country. As you know, it has been very oil-dependent, trying to diversity the economy. So, Mr. Al-Hajeri, we want to know, what are some of the main, main challenges you see in the present in Kuwait?
Well, the challenges from my prospective are going to be very tied to the retail industry because that is where the company I founded operates. Oil, the price of oil, is quite a problem because it creates an oversupply of capital for the country and even for the local industry and that becomes an issue in retail because of the scarcity of land. So, you have plenty of money and scarce land and the prices of land or leasable space for any business, whether it is an office space or a commercial space, becomes quite prohibitive. A lot of people struggle to find any location to start their business. The first problem is location, location for any business. And that is not just the retail. Generally speaking, you speak to anyone in housing as well and they will tell you the prices of houses is the same as it is in Hong Kong now.
So how do you think the government should get involved to help in this development, to shift the paradigm?
There is a lot of ways possibly the government can help in that, offering more land is obviously a solution. There are countries where they have reclaimed the ocean, like Hong Kong or like Holland, and that could be a possibility although there is a bit of environmental damage there, but just simple regulatory stuff like houses at the moment. Just generally people are used to living in homes and there is no incentive for people to live in apartments. So if the government somehow gives people incentive to live in apartments or maybe give real estate developers an opportunity to build developments at a lower cost, where people can move, that is good to free up a lot of land because everybody wants a house and a garden and that is not necessarily going to be possible for everyone. And then you look at the other side to it, the government can certainly do maybe similar things in commercial real estate, maybe give developers more licenses to build malls. We look at the region, for example, Saudi or UAE, it is just getting the licenses to build these things is much easier. In Kuwait, it just takes 20 years to get a license to build it.
Why would you say the bureaucracy exists?
I think a lot of reasons. We have a shortage in energy supply, so the government is always reluctant to give out more development projects because they are running behind in providing the correct energy and then you ask, well why is there a shortage for a country that is exporting oil, which is funny because you should not and the reason is just because of mismanagement and a lot of infighting between government and parliament, so there has been a number of power plants that have been stopped, power plant developments that have been stopped because of fighting between Parliament and the government. The Parliamentarians say that there is a lot of foul play in how contracts were written and how they were awarded and the government is probably guilty of some of that, but Parliament as well. Now we are even farther behind in the development of energy. There are lots of reasons and the government can certainly tackle one or two of them, which would help.
Obviously we are here because we believe in Kuwait and want to contact everyone regarding the issues, so how do you think that Kuwait can position itself as a leader in the region. We talked about the challenges but what opportunities do you see?
The opportunities are huge. The country has one of the most youthful populations in the world. Not only that, they are educated youth. They are youth that have had all the education and all the exposure that they need. You talk to anyone here and they probably traveled to the entire world if not half of it. For example, up to the age of 22 or 25 I have seen Los Angeles, I have seen Japan, I have seen Australia at an early age. All that exposure really helped me to build my business. Being a youthful population is always on our side and the heritage of the country where it has been built by traders gives that youth also a heritage of being creative and being somebody that has a business background much easier.
And on the other hand from an employment perspective, you guys also have an influx of immigrants?
Has that helped the labor laws?
Absolutely. That has helped the labor supply that has been very restrictive. A lot of businesses have struggled to find enough labor and it has been a real challenge and again, that is pure to the government interactions or restrictions on how much labor can come into the country. Again, there also has been foul play. There has been a lot of corruption in labor. There have been companies that have been set up to import basically people and are shell companies that bring people here and charge these people and it is essentially illegal immigration, and that has caused the government to be much more defensive and understandably so. But, closing the doors for labor completely is also not a good solution.
When we talk about Kuwait and the region, the word ‘oil’ always comes up, unfortunately, or fortunately depending on the way you see it, with the falling price, what needs to be done to boost this economy?
I do not know. I am not sure if there is an answer to it because the price of oil is what it is and the production of oil is what it is and it is something the country has to adjust to it. The production of oil has created a surplus of capital, so the government can supports the financial sector, the could reform the system to make it more accessible to provide loans, thus allowing small and medium companies to prosper.
If we exclude the contribution of the oil sector, what is your perspective on the country’s economic outlook?
We have to take a look at what sectors are remaining. Jordan is seen as the hub of technology, for example. I think Kuwait has an edge with the young population. We then have to look at the sectors that are in need of development, solar energy would be beneficial, as we use so much energy to maintain our desalinization. You would think we have a lot of energy because of the oil, but most of that gets exported, so actually we have a need for energy to supply the desalinization plants.
A diversified, sustainable economy can only be achieved if the government is held accountable, and the morass of red tape necessary to start private sector projects is reduced. Kuwait’s new administration has recognized the problem and has begun to remedy it. The new Commercial Companies Law, passed in December 2012, expands the types of companies which can be incorporated in Kuwait separates the functions of board directors and management. Likewise, the Foreign Investment Law will provide a number of incentives for investors from abroad.
Yes but the government has done nothing.
So then how important is foreign investment for Kuwait at this time?
Very important. Most of our foreign investors are actually GCC members.
What sectors do you believe would benefit the most from foreign partnerships?
Well there are interesting sector like food and beverage. We don’t really need help in transports nor banking, so I would say that we could benefit from partnerships in Technology, which are human intensive, and could take advantage of our young, educated population, by providing employment and shedding light on the fact that Kuwait can become a technological hub.
I’d like to take some time now to focus on you, as our interviewee, Mr. Al-Hajeri, What are your global aspirations for United Sports Company?
We want to continue expanding in the GCC region in the next ten years. We’ve already grown from four to 15 locations in two years. We want to expand to 30 locations in the next two years and eventually open offices in the U.S.
You studied business in Denver, and were able to infuse your studies with your interests, thus becoming a creative mind in the sector, and in the country. Mr. Al-Hajeri, what have been your best achievements and what are your biggest challenges today?
I want to build enough to cater to demand, keeping up with finances and keeping the operations running the right way. My main challenges have been getting licenses, because some of them never existed before, and dealing with the government could take 20 years to issue licenses. Another Issue has been picking the right location. I want to be in the U.S. because I believe the concept is unique. I would also like to expand into Saudi Arabia. This requires a lot.
Throughout the interview, you’ve mentioned the youth a few times. What role will these future generations play in the development of Kuwaits and its business community?
The youth are like a box of energy and we must harness this energy. The government, instead of harnessing it, they’re limiting it. If we unleash their potential, and they do what they’re supposed to do, then Kuwait will see a new dynamic in the economy, one that will be here once the oil is finished.