Interview with Andrew Jackson, CEO of KPMG Al Fozan & Al Sadhan

Andrew Jackson CEO of KPMG Al Fozan & Al Sadhan in Saudi Arabia talks to Pathfinder Business about the Gulf, Saudi Arabia and the economic challenges. 

How do you see the changes that the Gulf has and will experience? 

“There are parallels across the petro-dollar countries such as Abu Dhabi, Saudi Arabia, Qatar and Kuwait but genuinely every country is in a different position. Bahrain has limited oil resources and is a financial centre and has definitely has some exposure to the downturn but is nothing like what Dubai is experiencing.

Bahrain has been built over longer period of time and a lot more stable and so has not had the massive surge of growth and will not have the roller coaster coming down. 

On Dubai, everyone wants Dubai to succeed and it is important for the region it comes out strong. Saudi Arabia is different and has always played a low-key conservative strategy – they do not need to attract thousands and millions of foreign tourists. 

Another difference between Saudi Arabia and a lot of its Gulf neighbours is that it is a substantial economy with over 27 million people.  

It is dependent on oil and the oil price is not what people had recently hoped for but if you were to ask people five years ago they would be delighted with the returns from USD 40 per barrel but people’s expectations recently [with oil up at USD 150 per barrel] have got out of control. 

It is difficult to think that any country is better positioned than Saudi Arabia. Even if the country did not raise any income from oil revenues this year the surplus from last year would cover this years spending.  

But because it is a proper economy with a large population there is reliance on consumer spending and just like everywhere else – people are less likely to get up in the morning and buy a new car but business is still growing.  

At KPMG Saudi Arabia we are predicting a 50% growth in turnover this year and are still hiring. Certain bits of retail and real estate are doing pretty well.  

What about the banking sector? 

Rumours that the local banks are in trouble are just not true – in 2008 all the banks made a profit, in 2009 some losses will come through in the banking sector but now the Saudi and GCC banks are some of the biggest in the world.  

The Saudi Al Rajhi Bank now has a market capitalisation about 2.5 times bigger than Citybank. The banks are being conservative because of the current climate but the lending levels are increasing and expected rate of growth for Saudi Arabia in 2009 is still 5%.

Our corporate finance team is still very busy – looking for opportunities within the country and the region and also overseas. The issue is that people have been so scarred by the last year that few have the confidence to go with an expansion strategy to any board in any area of the world and so people are just waiting for it to level out. 

When they do, Saudi is a market that they can look at – and if there are any winners – then in my opinion, Saudi and some of the other Gulf states will be it.