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CNBC Interview with Mohammed Bin Mahfoodh Alardhi, Executive Chairman, Investcorp

Following is the transcript of an exclusive CNBC interview with Investcorp Executive Chairman, Mohammed Bin Mahfoodh Alardhi.

HG: Mohammed, thank you so much for joining CNBC. I want to kick off by asking you about the Boao forum that you've just attended in China. What were some of the opportunities that you see in China going forward?

MA: Well first of all thank you very much for this opportunity and I want to say congratulation for your opening of your new base here in Abu Dhabi it's a great city great base, and we are neighbors. As you know we have opened offices a few years ago and it's been a really great experience. Yes we just came back from China from the Boao conference and there I think you know it was very interesting, the conversations and the discussions centered on two main points for China which is the internationalization of the RMB and the Belt and Road Initiative. Obviously it's a huge huge economy growing, changing and we are really studying that market still in order to see how you know we can move there in the future.

HG: What needs to happen in China for that to take place? You mentioned some infrastructure development needs to be done and then there are also questions about the currency what needs to happen in China for Investcorp to go in?

MA: I think first of all we really need to know that market we need to find out who are our partners there. We need to see what are the opportunities in there obviously in an economy like China there is a lot of momentum in everywhere. Rules are changing and so first I think we want to know, find out... a good partner and a good opportunity to work with and we will go ahead with it.

HG: Where else in Asia could Investcorp really get into the action are we talking about places like Malaysia?

MA: Well we have we have opened an office in Singapore and we're really hoping planning for it to be our launchpad into that whole region. Malaysia has a lot of potential, Indonesia is a big market, Brunei and you know I think that region likes the bridge with the Gulf, the connection with the Gulf and what we are doing here and so I think there is opportunities in that in different and various ways.

HG: You said that the One Belt One Road Initiative it seems almost inevitable for this region to get closer to China to work more closely with that government. How worried are you by what we've been hearing over the last several weeks in terms of this U.S. China trade spat?

MA: Well the Road and Belt initiative is a huge one as you know. Already something like 80 countries have signed to it. It's connecting something like 4 billion of the population of the world. It's a massive you know initiative for trade in the world. I think the Gulf has always been on the trade route with China you know from time memorial. Oman for instance is on the Belt and Road route and on this initiative. And I think the Chinese are really interested in bringing this region close up to their trade close up to this initiative.

HG: Walk me through what you guys are doing in the United States today. We were talking earlier about US President Trump, his increasing rhetoric when it comes to China trade and he's also talking about bringing TPP back as well. What's exciting for you today in the United States?

MA: Well the United States has been very great place for us you know since inception in 1982 Investcorp has continued to invest in America every year in good time and in challenging times. And so our private equity business there is thriving, our real estate business there is great and continuing we have a big hedge fund business and we've added a year ago our credit business. I think the American economy continues to be a place where we can compete where we can achieve good results despite you know the cycles and the challenges that are out there.

HG: So President Trump's been good for the economy?

MA: I think he has been yeah I think, I think the work he did on taxes has been good, I think his move to lessen regulations and ease of doing business, it's positive.

HG: Walk me through some of the sectors that you are involved with in the United States, particularly when it comes to the retail space in terms of real estate. What's interesting to you there because a lot of people would say that mall business in the United States is under a lot of pressure or even dead. How do you, how do you think that this will evolve going forward?

MA: Well as you know private equity is never a simple business and it is it's always about creating your equity story. It's always about developing your operational value, it's always about digitization, being proactive and so that's what we try and do every time you know we try to be proactive we try to see how we can create value for our investors and our shareholders and how we can you know take our companies to a place where we can exit them with, with a, with a good future for others to continue that journey.

HG: So has the Amazon effect been good for investment opportunities when it comes to the mall space?

MA: I think it has, I think in general it has it's obviously been challenging for those who've been late in getting in getting that message. But it is it's all about increasing productivity, shortening the time to market it has been, it has been... and I think the potential of it is great.

HG: What about the broader U.S. market, what opportunities do you see there?

MA: In the U.S. market. What I mean in the private equity this is our bread and butter. So we look at everything that we know we can grow. Obviously the services industry has really been doing very well. And this is something that we have lately been investing in. Healthcare, education, health care in the region here in the GCC has been very good and so on the real estate continues. The United States continues to be you know a great market for real estate.

Different cities, different states, over the 37 years we have invested in every state in the US coast to coast. And so it's been a good story for us in the US.

HG: Talk to me about a story that is gaining momentum particularly in the last several weeks - what's happening in Saudi Arabia, a successful road show for the crown prince going to the United States, going to the United Kingdom, signing lots and lots of deals. When you look at what happens in Saudi Arabia going forward, the achievement of all the goals of Vision 2030. How important is it that he checks those things off his list when it comes to increasing private sector investment in the country?

MA: Well first of all Investcop has been probably the largest private investor in Saudi Arabia for the last seven years. So, really it means a lot to us what's happening in the Kingdom there. We're positive about what's happening. Obviously, there are a lot of changes - fast changes - but I think you know, what we see already I think, points to a great potential. I think if the Crown Prince only achieves 50% of his vision that country is going to be fantastically changed to do the better. We in particular are very positive about you know the drive to empower the private sector - to do a lot with the SME's. You know they're fund a fund (inaudible) of over a billion dollars for SME's. I think the support of over 35 billion for the private sector as a whole.

Their push for privatization, I think all are very positive things and I think it will have a great effect not only for business in Saudi Arabia, but I think in the whole region. Because as you know, Saudi has always been a huge market that effected the value and supply chains around the region.

HG: It's been a tough couple of years for the private sector in this region, the UAE in particular, Saudi Arabia. A lot of private investors tell me they are a bit hesitant about what's happening, given what we saw of course with the Riyadh Ritz Carlton situation. Do you think that they're right to be worried?

MA: I think you know, obviously, no one could have seen, say the meltdown, that happened in the oil prices. No one predicted what happened in the Kingdom. So I think they're right in feeling the challenges. But I think also what happened, is that every government in the region have set itself for the future. Waking up to see that, you know, no more of this region can live on being a one commodity exporter. We needed to work on different revenue streams - whether it is manufacturing, logistics, or tourism. I think governments who did not know the capital market have started dealing with it finding how to use cheap money but also keeping an eye on the trap of cheap money beyond the crisis. So in whole, I think it's good for the future. There is obviously pains in the short term, but I think governments in the region really need to say, you know, when this is all done - whether oil prices come back or no - what have we achieved? And if they have achieved diversified economies, created jobs, better education, then it has been a fantastic time.

HG: They're going to get there.

MA: But if it has - if we finish this - and all we've got is mounting debt then we really have not done our job. But I think, I believe, that each government is really looking for the future and doing what needs to be done.

HG: Clearly this boost that Bahrain has had in particular in the last several weeks coming off the back of this announcement that they've found from their oil reserves. A lot of excitement about what the government can really do with this going forward. But the question of course is the private sector. How quickly Is the private sector in Bahrain, for example, going to feel the knock on effect of this increase in terms of the oil reserves?

MA: You know Bahrain is probably one of the most entrepreneurial real countries in this region and the people of Bahrain are amazing. Despite, you know, the small size of the country, the private sector is actually well established there globally. And I think their proximity to Saudi Arabia allows Bahrain to really be a window on the whole market of the GCC. I think this is great news that has come and it will enhance the growth, the transformation that's happening in Bahrain. Bahrain, like any country in the region has had to go through, you know, the efficiency exercise and cost cutting and all that kind of thing.

HG: And also the geopolitical headwinds.

MA: And of course the geopolitical of course.

HG: When you look at the broader region in terms of that geopolitical risk analysis. You've got what's happening in Syria today, you have a lot of worries over what's going to happen next when it comes to the fight against the Islamic State which still has yet to be eradicated, although Iraq has made so much progress in that space as well, the Iran versus Saudi narrative. How worried are you by that kind of rhetoric?

MA: Well I mean, our region is never boring as you know, and I think we have lived through geopolitical storms before. I think you know the entrepreneurial spirit of people in the region, and both private sector and governments have always made sure that you know people look at the opportunities, more than you know the problems of it. And obviously, no one wants another war in the region. But I think there are always opportunities to do something positive. I think the people around the region are, you know, are excited about how globally connected the region is becoming, how technology is really spreading into the region, how the young people are changing the way business is being done, how SME's are you know spreading. These are also also, you know, great news and good positive things for the future.

HG: When we talk about those kinds of disrupters, they have said that President Trump has been a disruptor for business. Those who are in the region would say that Muhammad Bin Salman, the crown prince of Saudi Arabia has certainly been a disruptor for this region in particular. What do you see as potentially the next big disrupter here?

MA: I think it's the young people of this region. You know we have just hosted in Siyad? (inaudible) About 40 of the young leaders from the region. And you know when you look at each one's CV's, and when you look at what each one is, you know, taking of responsibilities - it is amazing because you see the future of the region is in these guys hands and they are highly educated, they are entrepreneurial. They look at the whole globe as their, you know, place. So when we talk about digitization - it's not a strange thing to them, when you talk about e-commerce - it's not strange to them. They know how economies grow, they know savings are important, they know how education is important to nations. And I think this is the future. This is the biggest disrupter for this region.

HG: And finally on Turkey, you have significant investments in Turkey, there are questions about that country's currency. How worried are you that the leadership doesn't really have a handle on the economy today?

MA: Well Turkey, you know, we have few companies there. We have invested in Turkey. Our companies are doing well. Most of them are market leaders. But like you say, the currency doesn't help them. And the geopolitics there is not helping. I think the fundamentals of Turkey is good - You know the big market, entrepreneurial people, hardworking people, and I hope that they can go beyond this geopolitics that is really affecting their economy in a not so good way.

HG: Mr Chairman, we're going to have to leave it there, thank you so much for joining us.

ENDS

For more information contact Jonathan Millman, EMEA Communications Executive: Jonathan.Millman@cnbc.com

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