By Courtney Trenwith
Mahmood Hashim Al Kooheji, CEO of Mumtalakat, says that the Bahraini sovereign wealth fund is more interested in investing at home than in high-profile stakes abroad
Since taking over the reins of Bahrain’s prized investment arm, Mumtalakat, a year ago, Mahmood Hashim Al Kooheji has been ruffling feathers in an aim to bring it into line with international standards. After casting an analytical eye over the holding company’s 41 investment stakes, the new CEO is — to use a word common in his vocabulary — frank in his assessment.
“There’s a lot of low-hanging fruit in those companies that we can improve. [We can] bring in corporate governance, bring in transparency, improve their efficiencies, do a bit of investment in them,” he tells Arabian Business.
“If you look... worldwide, corporate governance and responsibility is becoming something very important. The private sector is realising they have a duty towards our community. [Since the global financial crisis] people really [have been] saying that this is something the private sector lacked and something they have to start considering. We have some companies that are performing quite well but our ambition is we want them to perform much better, so really we have to put that in front of people and say these are the improvements that you have to prepare, these are what you have to do.”
Al Kooheji, who is also chairman of one of the country’s most successful businesses, Aluminium Bahrain (Alba), admits his reviews of Mumtalakat’s companies have not always been met with enthusiasm. But he is unapologetic.
“When you want to bring in new ideas, initially people are not very open to changes... so you need to take their hand, show them the way, mentor them, really tell them about what’s happening [in terms of] best practice everywhere,” he says. “I remember [when] we were restructuring Alba everybody there thought they were doing fine until you put some international KPIs (key performance indicators) under them and we showed them where they’re doing good, where they’re behind... and people were convinced, ‘okay we see your point, let’s improve ourselves. ’
“Always people realise that there are better ways of doing things. That is the most difficult part, showing people where they can improve themselves, [but] it is enjoyable after that.”
Al Kooheji is also responsible for the controversial restructuring of Gulf Air, which recently announced the axing of 15 percent of its staff — about 600 people — in a bid to save the indebted national airline from going under. Considering a large chunk of the company’s employees are locals, the news would have been hard for the government to swallow but Al Kooheji makes no excuses for the decision. “I admit there were a lot of eyebrows raised [in the government],” he says.
“[But] at the end of the day, people came to the reality the best thing for the company is to restructure the airline commercially and make a profit; that’s the way to move forward.”
The restructuring of Alba was less controversial. The star company of the Mumtalakat portfolio, Alba contributes 70 percent of the country’s non-oil exports and is spending $2.5bn on an expansion that is projected to see aluminium output increase by 45 percent to more than 1,200 tonnes per year.
The investment will represent the largest capital expenditure of a Mumtalakat company but it comes at a time when the price of aluminium has fallen significantly since its peak in April 2011 and companies in Europe and the US have been closing down smelters. Yet Al Kooheji insists the timing is still right. “I know that people think it’s bad for the share price that the value [of aluminium] came down [but] I think it’s the right thing to [invest more into Alba],” he says.
“I think sometimes if something doesn’t work out, going back doesn’t solve the problem; solving the problem is to go forward and to do more activities and more initiatives. We are forging ahead comfortably with our strategy. If we have a little setback... that won’t stop us. We are confident and we have to be clear in our vision.
“Alba is the star company within Mumtalakat. It has very strong fundamentals, it has very strong potential to grow and it’s going to create a lot of activities. Alba really is the success story that we have — in fact for the Gulf, I think.”
Despite being backed by an uncapped amount of government-controlled oil revenue and employing 8,000 Bahraini nationals (two-thirds of the total staff numbers), Al Kooheji is keen to distance Mumtalakat from the term ‘sovereign wealth fund’, insisting it operates more like a private-sector company.
“Mumtalakat is committed to operating with the financial discipline of the private sector,” he says. “That’s the type of discipline we have. We have a private sector fee [and] we have private sector rules and regulations in Mumtalakat.
“The only thing we share with the government is ownership but we are really, truly acting like a private-sector institution. The government is prepared to govern; [the] private sector is [there] to run the businesses and the economy. We have to work with the market skills of the private sector.
“Every single company we work on, we try to stay away from the social part of it... because we truly need that so these companies can grow.”
However, unlike in the past, Al Kooheji’s plan for the company lies clearly within the borders of the island kingdom.
Mumtalakat’s two-point strategy involves developing the existing portfolio of companies and delivering new projects, potentially in new sectors, within Bahrain.
Earlier this month, Mumtalakat revealed it had allocated $150m towards several projects during 2013, its largest commitment to the local economy in a single year. That includes $45m for two real estate projects, $50m towards the aluminium downstream industries and $42m for tourism and events.
Its real estate subsidiary, Edamah, is considering bailing out some of the country’s stalled property developments, such as Bahrain Bay.
Al Kooheji says Edamah is in talks with international companies to pick up where they left off when the property sector crashed in 2008-09. In most cases, the residential components of the development are completed but planned hotels, restaurants, etc, did not go ahead. However, Al Kooheji insists the company is not putting in millions of dollars out of goodwill; it makes commercial sense.
“We can’t force [developers to start construction] but if we can help them, I think there’s potential for us to be there,” he says.
“We need to really utilise [the developments]. The foundation is there, the infrastructure is there… demand is there. We won’t build more houses but we will build the commercial parts of those developments — adding value to something that’s already there. If you complement the project it will be successful.”
He also is keen to leverage the success of Bahrain’s Formula One event, potentially creating sideline events and using the Sakhir circuit for additional races.
Run by Bahrain International Circuit Company, which is wholly owned by Mumtalakat, Al Kooheji says the F1 showcase has become the primary image of Bahrain overseas, attracting a huge number of international visitors to the island each year.
“I remember many years ago when I was on the street in New York, when I mentioned Bahrain people remembered Gulf Air. Now when I go and mention Bahrain they know the F1,” he says.
“So [the F1] we have is an opportunity. There is a lot of value in Formula One. What we want to do is develop such an event [that would result in] a big international event to be established in Bahrain. I don’t see [the Formula One circuit] as an asset, I see it as an opportunity. Frankly, it’s under-utilised... and we can get a lot of value from this.”
Al Kooheji insists remaining at home is the right priority. During a recent conference, he said it made sense to invest in Bahrain for a number of reasons: it was strategically located “at the heart of the GCC”, allowed 100 percent foreign ownership, operated within a legal and regulatory framework that allowed for a “free, open and transparent” business environment, and had a rich pool of skilled workers. “We have the most educated, skilled and highly talented people in the Gulf – and I would say that without any hesitation,” Al Kooheji says.
“It’s very important for us not just to go and ignore what we have and start building new opportunities. We have a solid asset here — we can build on that rather than going to start something from scratch. We are talking to the industries about opportunities, but let’s not forget the sectors that we have, the assets that we have, the formula that we have, I think there’s a lot of potential there.”
However, there could be more initial public offerings [IPOs] on the horizon, while Al Kooheji says Alba, which is owned by Mumtalakat (69.38 percent), petrochemicals company Saudi Basic Industries Corporation (20.62 percent) and the general public (10 percent), will likely list more shares with the national stock exchange, Bahrain Bourse, in the near future.
“Down the line, our strategy is, we want Bahraini people to share the benefits with us,” Al Kooheji says. “Since we are the investment arm of Bahrain, we are very happy to make the initial investment to make the project stand on its own, to be solid, and then we will be [divesting] to Bahrainis [and] to shareholders.”
But he insists Mumtalakat is not actively preparing an IPO for any specific company.
“I think we still have a way to go to improve their performance [to warrant an IPO],” he says.
“We will look at IPOs once we are happy with the performance of the company, we’re happy with the size of the company and we feel comfortable that the public can be our shareholders. We don’t want to give them losing companies, we don’t want to give them companies at the end of their life, no, we want to give them something good and I think there’s a long way and [a lot of] improvements we can do in the companies we have.”
“I see ourselves becoming more active, not selling them off. We don’t have an aim to sell anything because we don’t have any financial need to; we’re fulfilling our requirement comfortably,” Al Kooheji adds.
By international standards, Mumtalakat is one of the smaller sovereign wealth funds, but its significance to the Bahraini economy and people is not lost on Al Kooheji.
Since its establishment seven years ago, the holding company has accrued minor and major stakes in more than 35 companies — including the national airline, bank and telecommunications provider — built up an asset pool of about $7bn (down from $9bn) and has indirectly become responsible for the livelihoods of more than 11,000 people.
“The pressure is on our shoulders because we realise if we don’t move, if we don’t act, if we don’t run and do things, the whole economy will suffer,” Al Kooheji says.
“We see the burden on our shoulders and, frankly, I think people look up to us and expect us to have an advantage and expect us to do things differently. They look and say ‘you are the investment arm of the country, you should know what you are doing’, so it’s quite a heavy responsibility that we feel is put on us.”
But Al Kooheji insists he relishes the role, even if it follows him home.
“To be quite frank, although you see the pressure, I enjoy what Mumtalakat does because it’s really fulfilling,” he says.
“[If] you love what you are doing, it’s not a job, it’s a mission. When we are young a lot of the generations before created [investments in] Bahrain, created opportunities and it’s time for us to create something for the next generation — jobs, opportunities [and] investment opportunities in the country. We need to pass the torch in a better way to the next generation.”
Al Kooheji, who was deputy CEO before taking the helm in March 2012, says he has no ambition to return to the private sector.
“In the private sector, your motivation is only money — profit — which is good to have [but at Mumtalakat] you have that additional, not burden, but responsibility [to support the Bahraini economy]. I think this job really fulfils the best of both.”For all the latest banking and finance news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.