The chic Sheikh

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Sheikh Mohamed Bin Issa Al Jaber.

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INFLUENCE: Meeting HRH King Abdullah.

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MBI owns a stake in Austrian Airlines.

Sheikh Mohamed Bin Issa Al Jaber has created one of the world’s biggest hotel empires. But the Saudi tycoon isn’t keen on doing business in the Middle East. Anil Bhoyrul meets him in Paris to find out why.

Sheikh Mohamed Bin Issa Al Jaber is not one to mince his words. He talks about being “scared” of the future of Gulf economies, fearing a “tsunami” of inflation, and “10 years of decline” for the property market in the region.

And when he speaks, most people tend to listen: the sheikh’s massive MBI Group spans a hotel empire, food company, oil and gas division and now even an airline, which have helped bring in revenues of US$2bn and profits of US$267m from his hotels division alone in 2007.

It has contributed to a US$6bn personal fortune, making him one of the world’s 200 richest individuals, and Number 11 in the Arabian Business list of richest Arabs.

But unlike most of his Arab colleagues on the list, he is outspoken in his assessment of what he calls the “hype” that surrounds the Gulf-wide real estate-fuelled economic boom that is transforming city skylines from Dubai to Doha.

“Hype” is a word he uses a lot during our two-hour conversation at his luxury offices, minutes away from the Place de la Concorde in central Paris.

It is what concerns Al Jaber most these days. Although his presence in Europe has made him a regular guest at state functions, Al Jaber is noticeable by his absence in the Middle East.

He recalls last being in Dubai “some years back” and apart from AJWA Group and a few real estate projects, has few operations in the Gulf. Four of his 10 offices are in Europe. And it is obvious why.

“There is too much hype going on. I am very scared about the market in the Middle East. Three years ago I was giving warnings of the hype of the stock market and people had to find the truth for themselves.

When it came it was difficult. And still the market is facing risk. But now the other problem is the real estate market. People are in denial because of their own self interest.

“It makes people sometimes make the wrong judgments. They don’t want to think of any corrections that might happen,” he says.

Al Jaber is quick to point to the mega projects across the Middle East, and one by one takes me through them: their cost, their current value, and the likely demand for them.

Throw into the mix inflation of over 10% in many Gulf states, and by Al Jaber’s calculations, very dark days lie ahead for regional economies.

“If we think that the inflation we are experiencing today is the maximum, then we need to think again because we are going to experience a tsunami in the next 12 months. The problem is the lack of transparency and people always want to see things in the best way. People don’t want to predict this. But they should think about the worst case in order to enable them to plan better,” he says.

Just who are the “people” he is talking about? “Governments of course and business people. Greed is fuelling the market — greed on the business side. All these people had a shock three years ago [in the markets] but they are still living in denial,” Al Jaber says.

Recent history suggests he is wrong. In most Gulf capitals, property prices continue to rise and people still queue up in the early hours of the morning whenever big developers in Dubai announce new units for sale.

“Yes, but there is an end coming to the rise in property prices. They are now trying to stop increases in rent. At the same time they want to keep the growth they have. The two cannot work against each other. If the growth they are predicting comes, then inflation will grow in parallel. You cannot put a ceiling on prices.

“The problem they are facing is inflation and it is greater than what people can cope with,” he says.
So just how bad does Al Jaber predict things will get? Pretty bad.

“Either people will leave the cities — in which case the entire demand will crash. Or the price of developments has to be corrected. In 12 months from now, maybe before — and I hope this will not happen — but if the correction begins it will lead to 10 bad years,” he says.

“We are in grey areas. Yes there are huge opportunities. There are countries with huge populations, but the way things are going, this is going to hurt everybody. The hype has crossed the whole region.”

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