Middle-east Arab News Opinion | Asharq Al-awsat

Bahaa Al-Hariri: The real estate sector can withstand political and economic shocks | ASHARQ AL-AWSAT English Archive 2005 -2017
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Bahaa Al-Hariri. (AP Photo)

Bahaa Al-Hariri. (AP Photo)

Bahaa Al-Hariri. (AP Photo)

Amman, Asharq Al-Awsat—Prior to his assassination in downtown Beirut in 2005, the name of Rafik Hariri was synonymous with the construction projects his company undertook in Lebanon and Saudi Arabia. Perhaps the most famous was the Solidere project, widely credited with rebuilding Beirut after it was shattered by decades of civil war.

While his second son Saad has followed him into politics, his oldest son Bahaa followed in his footsteps in the business world, leaving the family firm Saudi Oger to run the Horizon Group at the start of 2008, focusing on real estate in Lebanon, Jordan and Saudi Arabia.

Its biggest project to date is the Abdali district at the center of the Jordanian capital Amman, a multi-billion dollar commercial development intended to serve as the new heart of the city’s business district, and jump-start its redevelopment as a regional hub of tourism and commerce. The project, launched in 2004 in partnership with a Jordanian state development company, has expanded with the inclusion of new partners, including the Kuwait Projects Company (KIPCO), one of the largest holding companies in the Middle East.

Asharq Al-Awsat spoke to Bahaa Al-Hariri shortly after Jordan’s King Abdullah II officially opened the first phase of the project, a half-billion dollar shopping district, on June 11.

Asharq Al-Awsat: Where did the idea of the Abdali project come from?

Bahaa Al-Hariri: Fourteen years ago, when my father, the late Prime Minister Rafik Hariri, was having a meeting with King Abdullah II, my father asked the King for advice. In return, the King asked for suggestions, including how to bring investments to Jordan. There were several ideas, one of which was putting a [commercial] center in the middle of Amman . . .that would attract Jordanian, regional, and international investors to the country. Conversations took place that eventually resulted in a partnership between the public and private sectors. After the death of my father, I decided to see the process through.

Q: Will implementation begin immediately?

Yes, and the project began with a partnership combining the resources of Saudi Oger and Horizon, a company that owns real estate investments. Today the inauguration of the first phase was completed in a manner similar to the Solidere plan, which was undertaken in stages. Today we are opening a key portion, approximately 50 percent, of the project.

Q: Why has the project taken 14 years to implement?

We were hoping to finish the project before [now] . . . but the global financial crisis of 2008 ushered in a worldwide economic recession. . . . We asked the question: Would we undertake a project in the middle of a capital in similar circumstances? And the answer was: Certainly not. We and the Jordanians knew that undertaking such an initiative [at that time] would [have been] an economic disaster. The crisis not only affected Europe and America, but the entire [MENA] region. Thus, we decided to postpone the project.

Q: Were there financial difficulties along the way?

Never. Our company is the third most valuable in terms of venture capital because of the project . . . We have the largest capital of any bank in Jordan.

Q: It had been said that there were difficulties in securing liquidity, which prompted KIPCO (Kuwaiti Projects Company) to became partners in the project.

On the contrary, the Kuwaitis [KIPCO] joined with two projects, the mall and the Spas, and both were implemented very well. The delay was intentional because of the financial crisis that affected the entire world. The Kuwaitis also opposed the idea of opening the first phase of the project before [now]. Now the economic climate in Jordan, the region, and the wider world has improved, as evidenced by the 15-percent increase in tourists to Jordan during 2012 and 2013. Because of this, we believe that the prevailing climate at this time is appropriate for the project to be inaugurated.

Q: Were there other obstacles that led to the project being postponed?

Yes, there were related projects, like the opening of the Queen Alia International Airport. This was a special partnership between the public and private sectors, and it proved a success. The project was going to be inaugurated within two or three years, but it was postponed in light of doubts regarding the feasibility of handling 9 million passengers. Now the airport is operating and it has proved feasible, which led people to increase their use of the airport.

Q: Has the political situation in the Arab world had a negative impact?

It has certainly had an impact, but do not look to Abdali as just [another real estate] project. The King [of Jordan] is not trying to compete with other cities, as he believes in an integrated approach to tourism. As an Arab tourist, you can visit Italy, Spain, Greece, and so on. The King feels that the Arab world should provide diversity within the field of tourism, with locations such as Egypt, Lebanon, Jordan, Dubai, and elsewhere. This vision strengthens, not weakens, tourism. My father thought in this way as well. A variety of tourist attractions grant tourists several options, whether the locations are in the Arab world, the Gulf, or other countries. Today, Jordan has many active tourist sites such as the Dead Sea, Wadi Rum, Jerash, and Aqaba. These tourism centers have made much progress over the years. Fourteen years ago, the Dead Sea had just one hotel, but today, there are more than seven. Jordan is progressing with a strategic plan for tourism, and at the same time Abdali is viewed as a regional hub for Jordanian, regional, and foreign businessmen. Several Arab and Gulf businesses already want Abdali, for two main reasons: first, the Iraqi diaspora is 2-million strong, and if stability comes to Iraq, Jordan has historically been the gateway to Iraq, and thus it will become a regional center for attracting business in Iraq and between the two countries. When stability is achieved in Syria, reconstruction will cost over 200 million US dollars. Jordan will become a hub for accommodating this work.

Q: When do you hope to complete the project?

If no other global financial crisis occurs, God willing, we expect the project to be completed by 2018. We’ve finished half of the first phase, which will be completed in 2016. The second stage should be completed exactly two years later.

There are well-known tourism areas in Jordan like Aqaba, Jerash and the Dead Sea, which is an important factor in attracting tourists, but the King [of Jordan] believes in the idea of integration for tourism in Jordan and the wider Arab world. He does not think about competition between cities, and this is what strengthens Arab tourism and economic integration, as the world has become more open.

Q: What is the ultimate aim of the project?

The project is intended to be a key location for companies wishing to work in the region, and we have already noticed attention from some companies in the project. Do not forget that the region is on the verge of important developments: if Syria moves toward a [peace] settlement, this will certainly impact labor movement in the region, especially if companies hope to participate in the reconstruction process. This will represent a very large undertaking due to the extent of the devastation. Also, if the security situation in Iraq stabilizes, Jordan will benefit greatly. We hope that if a settlement is reached and stability occurs in Iraq and Syria, things will develop for the better.

Q: What if this does not happen?

I don’t think that this will affect anticipated growth in Jordan, especially now that the trend is toward more development, which is a very good thing.

Q: As for the project itself, is it a public or a private enterprise?

It is a partnership between the public and private sectors. The state provides the land and we undertake the construction. This integration between the public and private sectors has proven successful in terms of integrating the dynamism enjoyed by the private sector, as well as the stability enjoyed by the public sector. The idea of cooperation between the two sectors provides many opportunities, and an increase in business will contribute significantly to [national] development.

Q: What does this project provide for Jordanians?

Do not forget that this project provides thousands of jobs and investment and employment opportunities for Jordanians. These direct benefits come alongside the indirect benefits that will result from business growth in the city center as well as the overall economic impact.

Q: What is the final cost of the project?

Five billion dollars—but if we add in the value of the land, that amount would increase by 1.5 billion dollars at least. This would make us the second-largest company [in the country] behind Jordan’s Arab Bank.

Q: We have noticed the presence of a number of residential towers as part of the project. Is housing an essential component of the project?

Not at all; accommodation is one of the smallest aspects of the project, not exceeding 20 percent of the total. The other components are for the benefit of businesses and companies.

Q: When do you expect to see the financial fruits of the project?

We have already started to see them. The project has begun production, many companies have started working, and residential towers have been fully completed. We are just waiting for buyers to register their names.

Q: As for your company, Horizon, where is it based?

In Lebanon and Jordan, as these two areas are excellent for real estate work.

Q: Why do you focus so much on the real estate sector?

Recent developments have shown that the real estate sector is the one least affected by political and economic events . . . Real estate prices may increase if something happens, but they will not collapse, instead rising again in times of stability. We did not find that this sector suffered a collapse, except during the worst portion of the freeze, but the market eventually corrected itself.

This is an abridged version of an interview originally conducted in Arabic