Pearls of wisdom from Arif Naqvi of Abraaj Group

"The capacity to innovate, which is crucial, comes from independent thought,” says Arif Naqvi, founder of Abraaj Group. And a way to get there, he says, is through better corporate governance.
Arif Naqvi, the founder and chief executive of Abraaj Capital, says there are no ‘emerging markets’ any more but ‘growth markets’. Sarah Dea / The National
Arif Naqvi, the founder and chief executive of Abraaj Capital, says there are no ‘emerging markets’ any more but ‘growth markets’. Sarah Dea / The National

Once you are seated on the comfy sofas in the office of Arif Naqvi in the Dubai International Financial Centre, there are plenty of things to talk about.

Mr Naqvi is the founder and chief executive of Abraaj Group, the biggest private equity firm in the Middle East with some US$8 billion of assets under management, so that makes him a player and an opinion former in virtually all the big issues of the region.

He is not reluctant to give a forthright view on big global issues. He is a regular attendee of the World Economic Forum’s Davos gathering, where big ideas are knocked around by big thinkers.

I congratulate him on an opinion piece he recently penned for the Financial Times, about the growing importance of urban centres within the global economy.

We talk about an event he organised in Dubai the previous week for his alma mater, the London School of Economics, which had much of the feel of a mini-Davos. Mr Naqvi, regrettably, left that event early to catch a cricket match in Dubai with a senior member of the Abu Dhabi ruling family. We chat briefly about the match.

We are meeting today to talk about another “big idea” — the Pearl Initiative, an organisation Mr Naqvi helped to launch four years ago in cooperation with the United Nations to promote international best practice in business in the region. “Pearl excites me enormously. It’s a crucially important institution for us,” he says.

When this meeting was being set up, Mr Naqvi’s advisers urged me to stick to Pearl in the course of the interview, as he was reluctant to discuss Abraaj in any great detail. It turns out that the business philosophies of Pearl and Abraaj are so entwined that this proves difficult.

“In this region, it’s easy to look around, see all the spectacular growth and fool yourself. The differentiating factor from the other growth markets has to be the quality of business practice we put in place. It is about the institutionalisation of good business practice. At Abraaj, we’ve built environmental and socially responsible governance into our culture,” he says, reiterating his conviction that there are no “emerging markets” any more, rather “growth markets”.

He warms to this theme. “The region is not obsessed by corporate governance, but it should be. It’s the mechanism to drive value. A good company has to have a set of values to be replicated and to resonate throughout the organisation. It is just good business.

“The World Bank report on the Middle East says that boards should have a certain percentage of members that are non-executive, but at Abraaj, the majority are independent. They show a diversity of opinion, and offer the capacity to say ‘no, you’re wrong’. That value based-system will filter down throughout the company, and to our investments. The capacity to innovate, which is crucial, comes from independent thought,” he says.

He believes that the financial performance of Abraaj proves the point that good governance is good business. “With the Abraaj stamp on a company, it should add 10-15 per cent to the final value. It is synonymous with good governance and transparency.

“It shows in our results. We’ve invested over 200 times and increased assets under management to $8bn. Our cumulative loss ratio is less than 2 per cent. So the way we approach the business is right.

“It’s all about transparency, you’ve got to be able to shine a light and even if it shows something in a bad light, you’ve got to repeat it again and again.”

He reels off the measures that Abraaj has taken to ensure transparency and good governance: the fact that it is regulated around the world, the sustainability index that imposes 72 criteria to measure the performance of the companies in which it invests. “We use that as much as we use the profit and loss account,” he says.

There is also the Abraaj “performance acceleration group”, a corps of 21 advisers with specific industry expertise that oversees the investment portfolio, and helps ensure best practice on corporate and social responsibility, the role of women, environment and sustainability.

Then we talk in more detail about transparency. Like many companies registered in the DIFC, Abraaj does not publish financial accounts, or at least does not make them available to the public and the media. I suggest that this is at odds with best practice in many parts of the western business world, where financial information is available in some form at least.

Mr Naqvi responds assertively: “On financial reporting, you publish what you’re required to, according to the regulatory regime and on a need to know basis. With public quoted companies, we insist on full publishing financials.

“With private companies, we have to respect commercial law but also commercial sensitivity. The level of financial detail that my investors see is scary, and I’d hate for that to be bandied about. But if the law changed, I’d be the first one to publish more detailed financials.”

But to get back to Pearl, I ask how he sees it developing beyond the current range of activities: educational courses, workshops, research and reports, all in the cause of good governance and much of it driven from the American University of Sharjah.

“I don’t suppose they [Pearl] will like me saying this, but the ultimate goal is for it not to exist, because then it will have achieved its goals and objectives, and won’t be needed any more.”

fkane@thenational.ae

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Published: May 6, 2014 04:00 AM

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