Doing Business in Saudi Arabia – III Part: Residential Real Estate Market May 18, 2009
Posted by jgarciaalvarez in Competitiveness, Emerging Markets, Middle East, Private Equity, Real Estate, Saudi Arabia.add a comment
Starting a blog is a relatively easy thing to do. Writing a weekly blog post is a not an easy habit to develop. This is why I commend Seth Godin (one of the blogs I frequently read), for posting his 3000th blog post earlier this year. This is why I also apologize for my absence from this open-source writing canvas for the last four months. I most appreciate you growing with me via your reading and comments!
Saudi Arabia residential real estate market is attracting local and foreign players. Unlike most of its counterparts in the GCC region, which have seen unprecedented growth over the last years, Saudi Arabia real estate market is poised for development and growth.
The residential sector accounts for 70 percent of all the Saudi real estate market. Strong domestic demand for housing accommodations is estimated to be an average of 200,000 units per year. A fast-growing young population fuels a shortage in the supply of affordable housing units. An increasing number of professional Saudis stimulate an upgrade in the quality and the design of new homes.
These factors combined with favorable macroeconomic conditions, expected real estate legislative improvements, low home-ownership levels, and decreasing construction costs, have catapulted the Saudi Arabia residential real estate market to the center stage in the Middle East region.
At the same time, the bar for success in the Saudi residential real estate market has been raised. Over the last year, impetus to tap into the Saudi residential sector has exposed developers lacking a crafted defined strategy. Such projects have been preceded by a questionable conception of project size and a poor understanding of the potential home-buyer. Such projects have been followed by inflated quality-cost price structures and delayed or non-deliverable promises.
Should new foreign entrants clearly address the issues mentioned above, other local challenges, including but not limited to labor, government processes, foreign ownership regulation, and project and mortgage Sharia-compliant financial mechanisms, become secondary to succeeding in the Saudi residential real estate market.
Dreams of Lawrence of Arabia: Allow me to share with you an empowering quote from this great adventurer. T.E. Lawrence, a former graduate from Magdalen College at Oxford University, wrote in the introductory chapter of his book the Seven Pillars of Wisdom, “All men dream: but not equally. Those who dream by night in the dusty recesses of their minds wake in the day to find that it was vanity: but the dreamers of the day are dangerous men, for they may act their dream with open eyes, to make it possible. This I did”.
Doing Business in Saudi Arabia – II Part: Building Long-Term Trustworthy Relationships January 16, 2009
Posted by jgarciaalvarez in Competitiveness, Emerging Markets, Entrepreneurship, Innovation, Middle East, Saudi Arabia, USA.2 comments
Understanding the history of modern Saudi Arabia requires reflecting upon the old and the new. As you set on this journey, several recesses are key stops. For instance, you may start by exploring how Ibn Saud leveraged ancestral claims to become the ruler of a region that acknowledged his political authority after he had captured Riyadh in 1902. Then, you could continue by reading about the early years of the American Company Standard Oil of California (SOCAL), its growth and consolidation into Saudi Aramco, and the contribution and effects of this anchored institution in Saudi society. Consequently, you could look into understanding the title of King Abdullah bin Abdulaziz, Custodian of the Two Holy Mosques, and why his leadership position in Saudi Arabia and the holiest shrines of Islam is a concern to millions of Muslims across the world. Although daunting at first, this process of reflection challenges us to contextualize historical events with current Saudi and Middle East politics.
Understanding the modern business environment in Saudi Arabia requires reflecting upon the prudent steps and interpersonal time needed to build trustworthy loyal client relationships. Take, for example, the Majlis, traditionally hosted by oasis emirs and tribal shaykhs, which were meetings known in Arabia for centuries designed to mediate, settle disputes, renew allegiances, and represent power[1]. Although aspects of this tradition have changed in modern Saudi Arabia, the business environment does require a high level of trust and long-term relationships building to make business progress. Furthermore, in many instances, your personal word and honor becomes your presentation letter to, not only the person you are conducting business with, but also to the person’s closest circle of family, friends, and colleagues. In lieu of the mistrust and uncertainty that has resulted from the turmoil of the financial markets and the global economic recession, it is suggested that the Arab ways of building trust, serve to remind Western people about the basics of human social interaction.
Historical Anecdote: Did you know that in 1923, a New Zealand Oil entrepreneur named Major Frank Holmes, negotiated an oil concession with Ibn Saud? Five years later, Holmes could not find an oil company interested in buying it. In 1933, the SOCAL started exploration for oil. In 1938, the first valves pumping oil in commercial quantities were turned on. Just Imagine if Mr. Holmes had showed up a few years later! Talk about timing…
[1] Al-Rasheed, Madawi. “A History of Saudi Arabia”, Cambridge University Press, 2002.
Doing Business in Saudi Arabia – I Part: 7 impressions of Riyadh November 29, 2008
Posted by jgarciaalvarez in Colombia, Entrepreneurship, Innovation, Latin America, Middle East, Saudi Arabia, USA.1 comment so far
At the present time, I am Project Director of the Saudi Fast Growth 100, an annual ranking of the 100 fastest-growing emerging companies in the Kingdom of Saudi Arabia, recognizing the new generation of companies that are creating jobs and spurring innovation in KSA. The Saudi Fast Growth 100 was launched by three founding partners, including Saudi Arabian General Investment Authority’s (SAGIA) National Competitiveness Center, Al Watan newspaper and Next Economics.
“Doing business in Saudi Arabia” is a series of articles designed to share about my social, cultural, and professional experience in the Kingdom of Saudi Arabia. I seek to bridge the gap between the entrepreneurial economies in the Middle East and those more developed in Europe and the United States. I seek to understand the opportunities and the challenges small and medium enterprises (SMEs) have to achieve size and scale in the Middle East and Latin America. I seek to learn what common attitudes towards increasing equity capital financing are shared among entrepreneurs in Saudi Arabia and Colombia.
This first “blog post” describes my first 7 impressions of Riyadh, capital of the Kingdom of Saudi Arabia. “Inshallah”!
1. Landmarks. Two buildings characterize Riyadh’s panoramic view.
Kingdom Tower, built by Prince Alwaleed, is the tallest building in Riyadh with a height of 302 meters. It has three floors of commercial space, two for men and one for only women. All the finest boutiques around the world have a store here. Spazio restaurant is located in the 99th floor. My suggestion, go with an empty stomach — “five-course meal”!
Prince Alwaleed initially made his fortune in real estate but quickly diversified into purchasing world-known brands which were undergoing difficult times. He bought brands such as Apple, Planet Hollywood, Hyundai, and Disney, at discounted prices. He was catapulted into the world stage in the early 1990s, after investing millions of dollars to save Citigroup. It would be interesting to learn what he thinks today.
Al-Faysalia Tower, built in honor of King Faysal, Saudi monarch in the 1970s, is the second tallest building. King Faysal strongly encouraged progress in the education sector and inspired the first college for women. Today, many of his sons and daughters, princes and princesses, are leaders in the non-profit sector.
2. Dress/Clothing. All women wear a black “abbayas”. The most conservative women cover their faces and use black gloves to cover their hands. All Saudi men were a “thobe”, which are mostly white, except during winter where you see some beige, blue, and gray colors spur. Men were a “guthra” to cover their heads, the traditional red and white or just white piece of clothing.
3. Immigrants. After the United States, Saudi Arabia is the second country in the world, with the largest amount of remittances sent abroad. A vast number of Philippines, Bangladeshis, Sri Lankas, Indians, or from the MENA (Middle East and North Africa) region, work in Saudi Arabia and send money to their families at home.
4. Gasoline. Judge yourself if the following phrase is true, “gasoline is cheaper than water”. This last week I filled my car’s tank with $4.8 USD! By the way, most of the water consumed in Saudi Arabia has been desalinated, extracted from underground rivers, or sourced from old oasis, “wadis” in Arabic.
5. Restaurants. All restaurants and coffee shops have a “men” area and a “family” section. Men can sit in both areas, pending they are sitting with their wife or female family relatives. Women can only sit in the family section.
6. SMS. Learn to quickly send text messages before coming to Saudi Arabia. SMS may be the preferred choice of communication. Even at a professional level, SMS can surpass emails as the best way to contact business colleagues in a written form.
7. Five daily prayers. Mosques kickoff prayer time with hymns. Stores, supermarkets, fast food chains, are closed. Many people leave their work places to go to the closest mosque. My suggestion, schedule in advance your supermarket visits!
“Ah salam aleykem” — “La Paz sea con ustedes” — “Peace be upon you”
De Negocios en Arabia Saudita – I Parte: 7 impresiones de Riyadh November 21, 2008
Posted by jgarciaalvarez in Colombia, Entrepreneurship, Innovation, Latin America, Middle East, Saudi Arabia.6 comments
Desde hace 7 semanas, soy Program Director del Saudi Fast Growth 100 (SFG 100), un ranking de las 100 empresas de más rápido crecimiento y generadoras de empleo e innovación en el reino de Arabia Saudita. Fundado por Saudi Arabian General Investment Authority (SAGIA), Al-Watan y Next Economics, SFG 100 es una excelente plataforma empresarial para asimilar las oportunidades y los retos que tienen pequeñas y medianas empresas (SMEs) para crecer en la economía emergente más grande del Medio Oriente.
“De negocios en Arabia Saudita” es una serie de artículos orientados a compartir mi experiencia social, cultural y empresarial en el reino Saudí. Busco acortar brechas entre el Medio Oriente y Latinoamérica, entre Arabia Saudita y Colombia. Este primer “blog post” describe mis primeras 7 impresiones de Riyadh, capital de Arabia Saudita, “Inshallah”!
1. “Landmarks”. Dos edificios caracterizan la panorámica de Riyadh.
Kingdom Tower fue construida por el Príncipe Alwaleed, quién hoy ocupa el quinto puesto en el ranking de billonarios a nivel mundial. La torre tiene 302 metros de altura. Tres pisos de centro comercial, uno solo destinado para mujeres y dos pisos mixtos, que contienen todas las boutiques y tiendas de marca más famosas del mundo. El restaurante Spazio, está localizado en el piso 99. Sugerencia, ir con el estómago vacío. “Five-course meal”!
El Príncipe Alwaleed hizo su fortuna inicialmente en finca raíz y luego se ha diversificado a partir de una estrategia de comprar marcas mundiales en momentos de recesión y bajos precios. (ej. Apple, Planet Hollywood, Hyundai, Disney) Se hizo famoso en los 1990s, al inyectar enormes sumas de capital para salvar a Citigroup. Sería interesante saber que piensa hoy en día.
Al-Faysalia Tower fue construida en honor al Rey Faysal, monarca de Arabia Saudita durante los 1970s. El Rey Faysal hizo grandes adelantos en el sector educativo y fue responsable por impulsar la primera universidad para mujeres. Hoy, muchos de sus hijos, príncipes y princesas, son líderes en el tercer sector, organizaciones no gubernamentales.
2. Vestimenta. Todas las mujeres visten su “abbaya” de color negro. Las más conservadoras utilizan un manto para cubrirse la cara y guantes negros para sus manos. Todos los hombres de nacionalidad Saudí visten su túnica o “thobe” blanca con el manto o “guthra” rojiblanco en la cabeza.
3. Inmigrantes. Arabia Saudita, después de Estados Unidos, es el segundo país que envía el mayor número de remesas al exterior. Un gran número de filipinos, bangladeshís, sri lankas, indios, o de la región MENA (Medio Oriente y África del Norte), trabajan y envían dinero a sus familias.
4. Gasolina. Juzguen ustedes si la frase “la gasolina es más barata que el agua” es válida. Esta semana me costó $4.8 USD llenar el tanque de gasolina del carro! A propios, mucha del agua que se consume en Riyadh, ha sido desalinizada, se extrae de ríos subterráneos que se encuentran a 5 metros bajo tierra o provienen de antiguos oasis, en árabe “wadis”.
5. Restaurantes. Todos los restaurantes y cafés tienen su área para “Hombres” (singles) y “Familias” (family section). Los hombres pueden sentarse en ambas, siempre y cuando esté sentados en la sección de familias con su esposa o familia cercana. Las mujeres solo pueden sentarse en la sección para familias.
6. Mensajes de Texto. Antes de visitar Arabia Saudita, aprendan a mandar rápidamente mensajes de texto. Muchas comunicaciones se hacen vía SMS. Inclusive a nivel profesional, los SMS pueden ser mejor forma de comunicación que utilizar correos electrónicos.
7. Cinco rezos diarios. El llamado a rezar es iniciado por cantos emitidos por las mezquitas. El comercio y las tiendas cierran durante los rezos. Mucha gente sale de sus oficinas o puesto de trabajo para ir a la mezquita más cercana. Sugerencia, cuadren su visita al supermercado!
“Ah salam aleykem” — “La Paz sea con ustedes” — “Peace be upon you”
Entrepreneurial Growth Culture 