As head of investment banking at Emirates Investment Bank (EIB), one of the UAE’s best-known financial services groups, Husam Kutaifan’s resume ticks most of the appropriate boxes in the current Middle East investment scene.
He has experience of privatization — an essential part of Saudi Arabia’s transformation plans — from his early banking days in his native Jordan; and he worked in the Kingdom for the investment banking arm of financial services group Samba during the boom years ahead of the global financial crisis.
With EIB, he has direct access to the clients who will be key players in helping the Saudi plans work, as well as getting involved in the other ambitious initial public offerings (IPOs) in the region: Big investing institutions, family groups and high net worth individuals (HNWIs) that will be looking to take up the shares in any state sell-offs in the region.
I met Kutaifan on the day that news broke that a strategically repositioned version of Saudi Arabia’s National Transformation Program (NTP) 2020 was being issued by the government to recalibrate the plan for diversification away from oil dependency and public spending. “I think flexibility is a good thing. It would be the first time Saudi Arabia has amended such a long-term plan, but if it helps manage expectations in the markets and in the country, that’s not a bad thing,” said Kutaifan.
“Our clients are saying ‘finally we can plan with some certainty.’ It’s good to have a dose of reality in the plan, that definitely helps. We’ll have to see how much of an adjustment takes place, but I think all the main elements will remain as part of the Vision 2030 strategy.” The view of Saudi Arabia from the sharp end of the investment banking business is that circumstances have changed significantly since the transformation program was first announced in May 2016. Lower oil prices have persisted, and growth prospects have not lived up to the most optimistic expectations. The International Monetary Fund said recently that economic growth would be close to zero this year.
Flat energy revenue was the main factor, but Kutaifan said there was another reason: The higher fees imposed on expatriate workers in the Kingdom. “These affect family members and this in turn affects consumer spending and sectors like education. These fees were introduced to boost government revenues, but they could turn out to be somewhat counter-productive,” he said.
He said that the introduction of value-added tax (VAT) early next year could also also affect spending.
But flexibility was the key to making the Vision 2030 strategy a success, just as it has been key to Kutaifan’s investment strategy throughout his career. Since the hectic mergers and acquisitions (M&A) and IPO activity of the Samba years, followed by the turbulence of the global financial crisis, Kutaifan’s global overview has changed.
“There are some challenging areas. The oil price, geopolitics, and the broader macro picture have all become more complicated. So the momentum for investment has slowed down a bit,” he said.
It is not all bad news, however. “It has also got more focused over the last three to four years. Before, there was interest in just about any sector across the board, now it’s become more selective and refined.
“We see value in areas like health care, education and food. It’s a lot to do with the demographic of the region, as with the other emerging markets. These sectors are less affected by cyclical factors than areas such as construction, real estate and building materials,” Kutaifan said.
And there is a big plus: Asset valuations have got much more realistic. “The numbers just are not the same as they were three or four years ago,” he added.
The one exception is technology, he said, where valuations have continued to rise, and where the Middle East has seen some pretty big deals for apparently scarce
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