On Tuesday, Saudi Arabia’s richest man, Prince Alwaleed bin Talal, publicly complained that he had been done a disservice by the global wealth magazine Forbes. Apparently disgusted that his fortune was tallied at only $20 billion in the new Forbes 2013 rich list — as opposed to his own assessment of $29 billion —Talal accused the magazine of having a negative bias against portfolio valuations on Tadawul, the Saudi Stock Exchange. He then told Forbes that they would no longer be offering them data on his wealth, instead reserving that privilege for rival business news outlet Bloomberg’s ranking of the world’s richest.
Billion dollar cry baby?
While childish his reaction may have appear — though the extra $9 billion would have propelled him from 26th position into the top 10 — does the Saudi billionaire have a point? His statement said “the application of differing standards of proof for different individuals and organizations results in an arbitrary and confusing set of standards that seems demonstrably biased against the Middle East.” While Forbes has issued a full rebuttal, accusing the sheikh of market manipulation, Arabs are not as prominent on the list as you might expect.
The new list includes more names and greater cumulative wealth than ever: some $5.4 trillion shared between 1,426 billionaires. Yet a look at the headcount from the Middle East and North Africa region’s mega-rich suggests underrepresentation. While six men from Lebanon, from the Hariri and Mikati families, are represented, several resource-rich Arab countries including Qatar, Oman and Bahrain suspiciously have no representatives at all. All the Arab countries together have fewer billionaires, according to Forbes, than Turkey.
Looking at the methodology by which Forbes reaches their wealth assessment provides some insight into this. One reason for underrepresentation may be that Forbes is using the dollar as baseline for computing wealth.
As most Middle Eastern economies are closely pegged to the dollar, Lebanese and other regional mega-rich do not see their wealth assessments fluctuate on currencies. However, a strong euro on the day when Forbes takes its net-worth measurements (this year it was apparently February 14) might significantly boost the ranking of a Eurozone billionaire.
While this also affects American billionaires, currencies that are pegged to the dollar are measured by the same standards as Americans without benefitting from the country’s rich economic infrastructure.
On top of this, since stock portfolios play a leading role in the assessment of a billionaire’s net worth, the list effectively ranks equity much more than the average billionaire’s entrepreneurial skills and business acumen. Arab investors such as Talal hold assets in regional stock markets which have seen less appreciation in the past two years than others.
Yet there are other, more powerful, reasons why Arabs might be underrepresented on the list, and they reflect more on regional attitudes than on Forbes. Middle Eastern countries are notoriously secretive, with the countries of the region consistently ranked among the worst in terms of transparency. These attitudes are common in business too, with Middle Eastern companies fiercely private.
Not having well-regulated stock markets regimes, which supply a significant stream of information on the wealthiest citizens in developed economies, means that allegations of insider trading abound. Forbes, therefore, may be wary of overestimated Arab wealth.
On top of this some owners are hostile to the notoriety of wealth, which would make them more of a target for anyone from kidnappers and criminal scammers to paparazzi and media. This may partially explain the lack of representation from Gulf countries.
One example of a Lebanese billionaire who was unrecognized by Forbes this year is Fouad Makhzoumi, the pipe manufacturer and owner of Future Group, who told Executive last year that his net worth is $1.5 billion. As he is a private owner and has not had an initial public offering his wealth is likely to be missed.
In realistic terms the Saudi Tadawul is among the most secretive stock markets in the world and there are many barriers against international investors. This isolation and preferential treatment of local investors has drawbacks when it comes to development of wealth on a national level. As such, while Talal has a point about Arab underrepresentation, the opaque-nature of Saudi markets, rather than Forbes’ bias, is more likely the reason for this.