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Q&A – Jacques Sarraf

An interview with Malia Group’s chairman on Iraq, North Africa and Syria

by Executive Staff

Growing a Lebanese enterprise in the Middle East is fraught with risk and uncertainty but can sometimes reap huge profits. The company which embodies both the latter and the former is Malia Group, which has expanded from an industrial company into a regional holding active in six sectors. Executive chatted with chairman Jacques Sarraf about business wins and challenges in Iraq, Syria, and North Africa.

 

As a Lebanese business leader, what is your perspective on investing in Iraq today?

We are going to talk about Iraq? I am happy. I like that you think about Iraq. This is the way we make money.

 

How long have you been active in Iraq with Malia Group?

We have been in Iraq since 1997, after the agreement between Iraq and the United Nations was signed to exchange food and [medical] drugs for oil. We succeeded to get contracts through the UN system but it was very limited by products. It was food and drugs. Today, there is a big difference. You can trade all the goods you want and the Lebanese are very well accepted in Iraq. 

How competitive is the environment today when compared with 1997?
In ‘97, the competition was a political decision. Today, the competition is in the private sector and within the risk system. There is a high risk in Iraq and if you are afraid, you have to delete Iraq from your concept. This is the name of the game: it is high-risk, yes, but at the same time, high profit. 

High risk-high profit seems to have been your motto throughout your career as a business leader and industrialist. What is the risk premium in Iraq today?

It is a calculated risk. In the north of Iraq, there is a very low risk. The security is very high and the investment is also highly secure. Things are a little bit different in Baghdad or in Basra, where today we have a lot of support from decision makers in those regions. Our group is present in all of Iraq, but that is in distribution of [fast moving consumer goods] FMCG. In Kurdistan, we are in distribution but we are also in resort hotels and in controlling, in a partnership with [Bureau] Veritas; we are in construction and we are, with MIS Services, in information technology. 


Can you give us an estimate on the value of your assets in Kurdistan?

It is about $400 million. 



You have also been in the distribution business in Syria. Is this business currently under duress?

Since the beginning of 2012 we have been downsizing our business. We still have a team working there but we are on hold for any expansion or import activities. Our fashion business in Aleppo is completely closed whereas in Damascus we still have a team working on distribution and collection and doing business. But the risk is there. 



For exporting to the region, how critical is the ability to ship through Syria for you?

Until today, we are not facing this issue but our contingency plan is to go via Turkey. If we want to go to the Gulf, it is by vessel from Beirut harbor. For our pharmaceutical business, we always ship by air freight, which gives us a lot of cost but we are always present in those markets. 



What do you think of the risk of the euro?

We are exporting to Europe and we are in a positive situation until the euro is equal to about $1.20, not less. If the scenario goes to [one euro] at $1.15, we have to review our price strategy. [As Executive went to print the euro stood at 1.21 to the dollar.]


When viewing markets in the region and in Africa, which markets are overall the most important?

North Africa is one of the most important markets today where the Lebanese can expand their business. This is not only in Algeria, but Morocco, Tunisia, Libya and including Mauritania. That is why we have our liaison office in Algiers and have established Malia Group Algerie and from there we can serve those markets. I believe that the Lebanese have to look at these markets more deeply, because Lebanese businessmen and Lebanese products are very well accepted in those countries.



Between your manufacturing and your distribution activities in Malia Group, how have the profit contributions shifted over the years? 

We view this by sector and also by year. For example, in 2010-11, construction contributed a big part to our business turnover and profit. Within the industrial sector, our manufacture of pharmaceuticals and cosmetics is representing a good return on investment but FMCG, due to the high turnover in this region, is also giving us the same percentage. If I have to divide it, industry is representing one third of our business and return on investments.


Your vision also seems to have shifted toward becoming a publicly traded company… 

We began planning for our IPO in 2005 but going public [that time and again in 2008] was a risky decision. We postponed the IPO. We are a Lebanese group and if we want to go public, we have to offer something safe to our new investors. This is why we said let’s wait until 2016 and this is what we have been advised to by our lead manager of the IPO. 


How many companies are today in the Malia Group portfolio?

Twenty, and I just returned from the North [of Lebanon] where we will launch our biggest development with Natour {Resort] Developments in September. 



And the IPO will be for the whole group?

 In our strategy and IPO it was decided to sell 35 percent of the group, 10 percent for our employees, 10 percent for our partners and 15 percent on the markets. 


In 2004, you had 400 employees. How many employees does the group have today?

Today, we have 1,382 employees, and a big part of that is in Iraq. However, from this number we are excluding the construction teams that are hired on project base. 


What more can you tell us about the Natour Project in North Lebanon? Will this be a partnership?

We are two groups today [on this project] and we are now looking for a management company. We are on the edge of negotiating this.


With a European management company?

 No. On that, it is always good to have a Lebanese with high experience in managing such a resort business.  



If you are looking forward, what size are you aiming at for 2016, depending on the investments you are working on today?

A lot will depend on the Natour project. Natour alone is an investment where we are talking between $900 million and $1 billion. We are talking about 80 acres with 450 meters on the seashore and this needs a lot of investment. We are also going to create not less than 3,000 permanent jobs. 


So as far as benefit to the North…

…it is going to be the total reverse of the North Region.



And you are not worried of fighting in Tripoli?

Let me remind you, this is our culture — we have profits because we embrace risk.

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Executive Staff


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