RIYADH — Tensions arising from conflicts like the Ukraine-Russia war and the Gaza crisis are affecting investor confidence and causing economic challenges in countries like Jordan, Egypt, and Israel, particularly in sectors like tourism and technology, Iyad Malas, Group CEO of Dubai-based Al Ghurair Group, told TRENDS in an interview.
Speaking on the sidelines of the annual Future Investment Initiative (FII) summit in Riyadh, he highlighted the significance of the event, emphasizing its role in uniting regional and global participants, especially in light of current geopolitical challenges. He noted that such gatherings are vital for fostering connections and potentially promoting peace through business.
Malas also stressed the importance of digitization and technological advancements in the business world. He noted that companies not embracing digital transformation are at risk of falling behind, especially as the technology sector evolves rapidly.
Regarding public-private partnerships (PPP) in digital investments and transformation, Malas emphasized their necessity, particularly in infrastructure projects. However, he also noted the potential for PPPs in digitizing significant business sectors, with governments playing a regulatory role without necessarily forming partnerships. He cited examples from Saudi Arabia, where PPP models are being explored in healthcare and education sectors.
Finally, Malas discussed the adoption of cryptocurrency and blockchain in the region. He differentiated between the two, acknowledging blockchain’s wide applications in banking for secure transactions. However, he expressed concerns over the challenges and volatility of cryptocurrencies and their role as either legitimate currencies or stores of value.
He also predicted that central banks would inevitably adopt digital currencies, noting a global trend towards reduced reliance on physical cash.
Excerpts:
Q: How do you view the organization of the FII summit in Riyadh this year?
A: The annual FII summit in Riyadh is a significant event as it unites people from both the region and around the world. It offers an opportunity for individuals to reconnect and stay informed about global developments. This year, given the surrounding geopolitical issues, the summit holds even more relevance. It’s a chance for participants to forge new connections and potentially foster peace through business, which is crucial during these challenging times.
Q: What is the magnitude of geopolitical risks in the region?
A: Currently, the region, like the rest of the world, is experiencing considerable geopolitical tensions. This includes the ongoing Ukraine-Russia conflict and the situation in Gaza and Israel, which affects everyone. Investors seek stability and certainty, and any form of uncertainty can disrupt investment plans.
Countries like Jordan and Egypt are facing economic challenges due to tourists canceling trips, leading to negative economic impacts. The Israeli economy is also likely to experience difficulties, especially with technology companies considering relocation in light of current events. Moreover, interest rates are being influenced, and global businesses are feeling the strain due to these geopolitical tensions. All these factors collectively pose substantial risks for businesses.
Q: Besides the geopolitical risks, what are other major trends impacting businesses in the region and elsewhere?
A: Undoubtedly, digitization is critical; businesses that aren’t embracing digital transformation are at risk of falling behind. The technology sector is advancing rapidly, and companies lagging in this area will struggle to compete. New companies have an edge since they aren’t burdened by legacy investments in outdated technology assets. The region is swiftly moving towards digitization, with many new companies emerging in a fully digital landscape, providing them a competitive advantage. Globally, the trend continues with the adoption of AI and other technologies in various fields, including healthcare and data analytics, becoming essential for every business. More companies in the region are realizing the value of using data analytics to understand consumer behavior and enhance their services.
Q: How significant is public-private partnership (PPP) in digital investments and digital transformation?
A: Public-private partnerships (PPPs) are essential where government involvement is crucial, but they cannot bear the financial burden alone. Traditionally, PPPs have been used in infrastructure projects like roads and power. However, there are opportunities for PPPs in digitizing significant business sectors, though their role might be more prominent in hard assets.
Governments play a vital role in regulating industries without necessarily forming partnerships. For example, in Saudi Arabia, there’s potential to privatize hospitals using a PPP model, where the government owns the hospital infrastructure, and the private sector invests in digitizing and managing the hospital. This approach could also be applied to schools, as is currently being explored in Saudi Arabia.
Q: What are your views on the adoption of cryptocurrency and blockchain in the region?
A: It’s important to distinguish between cryptocurrency and blockchain technology. Blockchain has a wide range of applications, such as in banking where many institutions already use it for secure payment transactions and wire transfers. Cryptocurrency, however, presents its own challenges, primarily due to the ongoing process of digitizing currencies. Most people currently use digital wallets linked to their credit cards, operating in either local or global currencies. The trend is moving towards further digitization of currencies. The crucial question is whether cryptocurrencies will be regarded as legitimate currencies or merely as a store of value. This is a significant concern, given the high volatility observed in cryptocurrency markets. The stability and acceptance of cryptocurrencies as a reliable asset are still not universally recognized.
Q: What about Central Bank Digital Currencies (CBDC)?
A: It’s likely that all central banks will eventually adopt digital currencies. The need for physical cash is diminishing, with very few people holding cash today. Central banks are motivated to promote digitization but are somewhat behind in rapidly adopting digital currencies. Nonetheless, the transition to digital currencies by central banks is inevitable and will certainly take place.
Note: The image is from the UAE’s 52nd Union Day celebration at the Al Ghurair Group’s head office.