(MENAFN - Arab News) Leaders in the private and public sector must see each other as partners and problem solvers, says Faisal Alsayrafi, president of Financial Transaction House (FTH).
Alsayrafi, who has more than 25 years of experience in corporate finance advisory and management, also recommends that the Kingdom should be more dynamic, open, and entrepreneurial to bring about more changes within the next 20 years.
The youth should be given more opportunities especially with the Kingdom widening the private sector's role in creating jobs, Faisal Alsayrafi says in an exclusive interview with Diana Al-Jassem of Arab News.
He founded FTH in 1994 to function the regional corporate finance arm of American firms.
FTH has operated as an independent corporate finance advisory firm since 2002 and offers a wide range of corporate finance advisory services to a diversified client base in the Middle East.
According to Alsayrafi, the three main challenges facing the Kingdom today are: manpower issues, shortage of skills in the Kingdom business and a rising population.
The following are excerpts from the interview:
What changes are likely to make a major impact on the lives of Saudi nationals in the next 20 years?
There are many opportunities and challenges facing Saudi Arabia today that require us to engage in a constructive and open dialogue about our expectations and aspirations and the role of public sector and the private sector in our lives. The recent world economic, social and political developments underscore the importance of undertaking this national dialogue. Any outcome should receive a wise assessment as these are essential to ensure stability, manage our expectations and preserve our culture. This comment is my own and based on my personal and professional experiences.
What will Saudi Arabia look like in 2032?
The Saudi population is growing rapidly and over 60 percent of the population is under the age of 21 and unemployment rate is growing steadily, which puts strain on the economy. While the government has announced plans to create 3 million jobs in the next three years and another 3 million by 2030, these efforts will require substantial involvement by the private sector. Relying on the government as the only job growth engine is a sign of unhealthy economy. The Nitaqat program of government is working well and it has created substantial jobs after its implementation. The companies and government entities are also cooperating well in job creation. I believe that this program is very successful and it will have major impact in reducing unemployment in the Kingdom. In my opinion, there are needs to encourage and support the formation of private enterprises, deregulate, revamp the business and commercial and bankruptcy code and appoint well-qualified experts to preside in these matters, aggressively promote foreign investment, and, undertake social and economic reform. The jobs of the future are in IT, life sciences, health care, engineering (materials, mechanical, civil, chemical, electrical, environmental, and molecular), languages, math, chemistry, biology, physics, logistics, and renewable energy. To compete and lead, employers need specialized skills and knowledge. Saudi Arabia must lead. Socially, we must address the role of women. Saudi women are well educated and I believe that we need to find ways to fully integrate them into the various activities. The government is also encouraging companies with various incentives to employ more Saudi women. The Saudi women are up to their mark and very sincere in their jobs. It is important to note that women work in almost every sector. Finally, but no less important, there should be plans to find ways to address the social needs of young adults. This raises the question of how could all such issues be addressed for the wellbeing of the Saudi citizens.
What do you think of the leadership roles regarding organizations in the Kingdom? What are the factors/reasons for their current state?
The Madinah Institute for Leadership and Entrepreneurship (MILE) formed in 2008 provides some interesting insight on this question. MILE commissioned a study called the 2009 Arab Human Capital Challenges Report, which revealed "Exceptional economic growth in the Arab region over the past decade has not coincided with equally buoyant labor and human resource development, raising obvious concerns for sustainable and balanced growth." Although the survey is three years old, the survey results reveal the following: 38 percent of Arab CEOs believe that there is an ample supply of qualified national labor, which therefore translates to a heavy reliance on the recruitment of expatriates. And 90 percent of Gulf CEOs value their expatriate senior management whereas only 68 percent shared similar views toward their national senior management. The difficulty associated with recruiting national senior management over middle management is largely a result of the limited availability of experienced national professionals. The institute concluded that the survey results presented a compelling case for change, in part because historically the older generation in the Gulf region has had lower labor force participation rates. Lower levels of education as well as the fact that the older age cohort is less accustomed to working in a modern day competitive environment. To add to this dilemma, the Arab world also has one of the lowest labor productivity growth rates. This is a serious concern for many in the business community, especially as the region moves toward greater participation in the global economy. MILE also attributed the results to current weaknesses, which include the lack of proper education system to build adequate professional and scientific capabilities; weak social service systems, marred by the short of appropriate leadership, inefficient administration, unwillingness to empower target groups, inadequate auditing and financial procedures, a thin base of financial and human resources, and a general lack of expertise, skills and commitment among working staff; and insufficient funds to replicate successful projects on a wider scale. MILE concluded that multidimensional policies for addressing economic insecurity in the Arab world would simultaneously aim to increase access to educational, training and awareness raising programs. On the other hand, in day-to-day management, it is said that Middle Eastern management style is highly authoritarian. The authoritarian leader often sees their employees as lazy by nature. Some use coercion to get their workers to perform. There may be some truth in the above. However, it is also possible that leadership has failed to either realize or understand the cultural factors that drive the different generations and this misalignment is a factor contributing to low productivity and employee turnover. Hawkamah, The Leadership Institute for Corporate Governance, in a January 2011 Corporate Sustainability Responsibility and Corporate Governance presentation, available through the website, suggests that an alignment between and board, management and employees is critical to grow a sustainable and thriving organization. The emergence of Hawkamah, MILE and other similar organizations suggest that considerable thought is being given to effective management. Many small and medium sized firms have yet to afford themselves to these resources and change current practices.
What are the most difficult decisions that need to be applied in the Kingdom in the coming 20 years?
Speaking about the role of the public sector and the responsibility of the individual, we need to ask and answer questions such as to what extent should the public sector be involved in general issues; Are we relying on public sector subsidies for health care, food, education, etc.; What are individuals responsible for; What is the role of an educated Saudi woman; What goals would you set regarding the Kingdom's development; And how would these goals be achievable through your current position. I think educational reform is a priority and that the government should encourage the creation of jobs through the private sector. Within five years, every university should have a technology innovation center with a focus on developing new technologies that can be patented and commercialized within 10 years. We should also adopt new technologies (solar, wind and geothermal) to reduce greenhouse gases and nuclear power to address the growing energy need. Half or more of the power should be generated in this form. The government can encourage the formation of joint ventures to develop this market, which means we need to reduce subsidies to existing providers to enable the other sources to compete.
Can you give us an example of the most creative project that you wish to set up in the Kingdom?
Solar and wind energy (inland and offshore) farms. Mass transit (electric trains or trolleys), the traffic is awful.
KSA in three words
What are the three words would you use to describe the Kingdom in the coming 20 years, and why have you chosen them?
If changes are made: Dynamic, open, and entrepreneurial. If changes are not made: Declining, bureaucratic, and losing touch. Regarding the Kingdom's officials, what characteristics do you think are important for such individuals? How would such characteristics contribute to the Kingdom's march toward progress?
Government officials should be (most of them already are) educated, partners, problem solvers, creative, and efficient. People with these traits can anticipate challenges and opportunities. Where a problem exits, they can legislate to enact changes. These kinds of people will enable Saudi Arabia to compete globally.
How can we all improve human rights in Saudi Arabia? What are your expectations regarding human rights practices within the coming 20 years?
The UN Charter's Universal Declaration of Human Rights comprises 30 articles. Many of these articles are at odds with current practices and religious tenets. Saudi Arabia adheres to Shariah principles and its human rights record is excellent.
What is the biggest challenge facing the Kingdom today?
Manpower issues, short of skill in some business areas (especially SMEs), rising population, environmental preservation, and bureaucracy are among the challenges.
What are the most prominent economic activities in the Kingdom? What are the 'neglected' sectors that need to be developed?
The oil, gas, and aluminum sectors are critically important. The less considered sectors are pharmaceutical, life sciences, green energy, and IT. These sectors can be developed further with more foreign participation. The government has taken a right step and focusing on these sectors with various joint venture projects. The investment is huge and I hope it will give a major boost to the economy.
There is a huge demand for housing in the Kingdom because of rising young population. The government has also put an emphasis on this sector as it allocated SR250 billion in this budget for housing. Do you believe housing sector needs much attention from the government and private sector?
The need is critical. The Mortgage Law is needed and efforts need to be made to encourage foreign private investment across all sectors, including real estate construction and development. The rising population and the growing number of young population have put tremendous pressure on the housing market. There are estimates of 250,000 housing units shortage annually. This is a good opportunity for the private sector to enter the fray. The implementation of Mortgage Law in future will change the face of the Kingdom's housing market. The affordability of housing will increase and more Saudi nationals will have their own homes. Banks are also reluctant to lend money freely for housing. But once the law is implemented banks will liberalize their lending and affordability will increase automatically.
Role of SMEs
There is a need to boost small and medium enterprise (SME) sector in the Kingdom as it creates various jobs. What role you see for SMEs in the Kingdom's economic development?
SMEs need to account for 50 percent or more of job creation within the next 10 years. This should increase to 80 percent within 20 years to handle the increased population and remain competitive. If the private sector is the lead source, the jobs will not be sustainable. We can draw some lessons from the Greek defaults and also recognize that if the private sector is unable to generate jobs, there will be a brain drain and loss of human capital. SMEs are always job creators. The Kingdom has to give major emphasis on this sector, which will help employ more Saudis.
Education is always a priority for the Saudi government. What changes you envisage in the education system to fit youngsters into knowledge-based economy?
We can draw some lessons from the curriculums used in Shanghai (China), South Korea, Finland, and Canada. The OECD Program for International Student Assessment in 2011 rated the respective educational systems as the highest. A comparison will show that these curriculums incorporate more sciences, math, and foreign languages. The study showed that Saudi Arabia ranked slightly below El Salvador and slightly higher than Ghana. Is this acceptable? I believe that we need to set higher standards and schools and parents need to immediately intervene. The government always gives a chunk of its budget for education. This needs to be developed further to improve the system. In knowledge-based economy, education plays a key role.
How do you see Saudi women's contribution in the labor sector in the next 20 years?
If we look at the US and the integration issues it faced, the issues raised were that women would displace men in the workforce and that the family unit would suffer. What happened was that the labor force and incomes doubled spurring economic growth. As for the family unit, fathers took a more active role. While I am not suggesting that Saudi Arabia should be Americanized, I mention this because those same issues will hopefully be debated in Makkah, Madinah, Riyadh, and Jeddah. I think that women should have a choice whether to pursue a career, marry and take on the primary parenting role or a combination of the two.
What's required in order for Saudi women to actualize their future vision?
Education, social acceptance and social practices.
What measures and standards are yet to be (and must be) applied to Saudi media?
Almost one year ago a decree was issued that ordered the media to strictly observe Islamic Shariah law national security. I personally think that writers should come up with newsworthy and professional articles, as well-researched article can be a catalyst for positive change with no harm to the feelings of the society or the general public. I would like to see more in-depth articles and exchanges of ideas since I think self-discipline is preferable to the other option. It is also necessary to have debates on current issues on a national level.
What are your expectations in the next 20 years?
I hope that the press will have a wider distribution base and more professionally advanced and that the combination of high professional standards and advancement will inform and involve us in a constructive dialogue.
What impact will social media have regarding changes in the Kingdom?
Social media is already impacting our society. It is not remarkably noticed but an important voice. The issue is whether the society is able to publicly recognize and accept this development and then what it is willing to in response.
What impact did social media have regarding the Kingdom's traditional media?
I think the decree passed last year streamlined the importance and impact that social media could have.
Learning from past
What are three or four mistakes that have been repeated in the Kingdom during the past 10 decades and how we could eliminate these mistakes in order to develop the Kingdom?
Nobody is perfect, only those who don't work don't make mistakes. However, the good thing about mistakes is that we learn from them. Perhaps prioritization is one of the prominent problems we suffered for decades. We could have made considerable savings if we completed some projects years ago with less cost rather than doing them at present with double or treble the cost. We should have also modified the relevant rules and regulation to match the requirement of World Trade Organization (WTO). Anyway, everybody learns from mistakes. I hope things will change for the better.
What must leaders in both government and private sectors do to ensure the Kingdom's growth and sustainable development?
Leaders in the private and public sector must see each other as partners and problem solvers. They must also embrace bold initiatives and lead. They must also candidly acknowledge the limitations of each and share that openly. The citizens of Saudi Arabia should participate in solutions and they need to understand that they too are expected and needed to transform themselves and the country.
Message to youth
Given that the youth make up the majority of the Saudi population, what message would you want conveyed to them? And what else would you like to say to the rest of the population?
Each one of you is part of the solution and is responsible for what we become. Failure is not an option, only success. Take responsibility, be creative, work harder than you ever imagined, take risks, communicate with each other, build a network that crosses ethnic, racial and other boundaries, innovate, be honest, and enjoy the challenge.