Leading Saudi Healthcare and Education Projects Design and Construction

Interview with Sultan Sobhi Batterjee, CEO of IHCC – Saudi Arabia

Can you give us the general overview of the construction sector in Saudi Arabia? What can we expect for the future?

IHCC is a turnkey solutions provider that specializes in healthcare, education, and mixed-use projects,. IHCC shapes contemporary and sustainable communities through providing affordable and quality design and build turnkey solutions in healthcare, education and mixed-use projects. A turnkey solutions provider, IHCC’s services include everything from conception to completion including comprehensive feasibility studies, architectural design, MEP engineering, financing, construction, equipping, furnishing, staffing, as well as facilities management and renovation services. We’ve been dealing with the Middle East and Saudi Arabian region for more than 25 years, where we have been ranked as the first Class-A construction company. We believe that Saudi Arabia has been a country that has many of its spending in construction industry – other countries are different than us, whereas they are base their spending on specific energies or industries, but Saudi has been investing on its infrastructure specifically in the last 10 years with King Abdullah. He was investing heavily on healthcare and education infrastructure, and the actual infrastructure of bridges and dams.

We believe now, with the new ruler King Salman that things will grow to better results and higher expectations due to the fact that many of the projects that were initiated by King Abdullah will be completed soon. Many of the medical cities, education projects, and projects for the use of the young population, which is almost 70% of the population of Saudi Arabia, will be used by students, patients, or business-oriented young entrepreneurs and SMEs (small-to-medium-sized enterprises). All the infrastructure has been put in place, and we will see many the results in the coming years. After that, King Salman, the princes, people that were selected by the king (Prince Muqrin, Prince Muhammad bin Nayef, and Prince Muhammad Bin Salman), and most of the new ministers, you will see that Saudi Arabia has a new structure of power that is from the young generation. Many of the ministers are under the age of 40 and we feel that this will positively reflect on the construction industry and all other industries.

They are closer to the younger generation, and feel their needs – whether it’s related to design, quality, expectations, integration, sustainability – all of these things combined are just ‘constructing a building.’

However, you’re not just constructing a building; it’s a whole process that is integrated to it. So, when we speak about ourselves in IHCC, we talk about projects from conception to completion. We take it from design (concept, detail) and construction (civil, electro, mechanical), and we align with the management companies. These buildings are not just there to be built; they’re there to be used properly with the operators. It has to have the alignment, it has to be built to suit, built to the requirements to the person or company or management team that’s operating it; it has to be efficient for the team that’s using it too, meaning it has to be user-friendly for the people that are using it. Then on top of all of that, you need to have the facility management of all these requirements, you can’t just build the greatest and the best, and then don’t know how this building will function or operate from an operation management, facility management or maintenance point of view.

We actually take care of the facility management too, because we believe that projects have to be integrated, and they have to be built to the needs of the users. What’s happening now in KSA, is a lot of great new projects that are adding to the whole cycle and  construction is just part of it. You have to have the people who will operate and make this building work. KSA is now investing in all industries, like education and healthcare, and has one of the largest education and healthcare budget available nowadays because they believe that these two industries are industries that are the main core of any country or economy. If you spend on education, then you get the best quality and  caliber in your citizens and the people that are adding back to the community.

As I mentioned, 70% of the population are from the ages 18-32, I call it ‘human capital.’ Many people say they have natural resources like oil, coffee beans, gas, or other natural resources, but we are blessed to have ‘human natural resources’ or ‘human capital.’ What more than that do you need? Other countries around the world are suffering from their citizens going into the elderly phase, and a lot of money that is being spent on the economy is being spent on people that are not producing or giving back to the economy.

People that are above 70 or 80 years old who are non-productive and not giving back to the economy.

Therefore, the government is spending more money on them; compared to this region, the young population is the majority. In Saudi Arabia, it’s 70%, in Egypt its 50%, in other Gulf countries and Arabic countries it’s the same. We have to really focus on giving this young generation the best education, the best role models to look up to, the best systems, the best integration between these construction projects, and the people available. How will these people work hard to design and make things function? So when you mention the construction industry in Saudi Arabia, I can tell you that I believe that Saudi Arabia is going to go through a remarkable Golden Era for the years to come, related to the construction industry, all available industries, and the country as a whole, because we are at the right place, with the right caliber of people, with the right leadership, and the right resources.

Do you have any statistical figures on the amount or volume of those investments that is going to be spent on future projects?
 
They have just announced at the beginning of the year, and changes with ministers, the King, and the Crown Prince, so some of these projects have been announced or will be looked at. The figures are available, if you want to find them. But, they are in the billions, especially after combining the higher education with ministry of education, they’ve combined two ministries together, which became one of the largest budgets available right now – The budget for ministry of education & training is 217 billion saudi riyals, then you have a mega budget that is spent on the core of building people, which is education & training.

You are one of the leading construction companies, especially in the top 25, what makes you one of the leaders in the industry? What separates you from others?  What matters to you and what do you think is important?

I believe the definition of leader differs from one person to another. We believe that we’re a leader because we’re specialized, and this is what made us stand out. We’re a company that specialized in turnkey projects in the healthcare, education, and mixed-use industries –we’re not a design and construction company that builds everything.  We stick to what we specialize in, and become better and learn more – we improve in that learning curve, because if we build hospitals or universities, then we build many of them. We are familiar with these things, which elevate and identify us as a leader with this specific specialty. We believe that we have done that and built projects in the billions in the region, and believe that now it’s the time to grow further and add our knowledge and expertise to places like  Dubai,  Egypt, Yemen and  Saudi. We’ve diversified our experience from working in metropolitan cities, growing economies, and developing country; and dealing with all the different tariffs, shipping requirements, specs, building materials, construction, and labor force.

Once you say you’re a contractor or design company, people don’t look at what you go through, but you go through a lot. People usually judge a project by just walking into a building, and say ‘oh look at this they have a problem with their paint or fixtures.’ But, for example, healthcare buildings are very complicated and go beyond the look and feel. They go back to the specific gas, HVAC units, piping, and how they make sure the air is clean and good quality, and the flow of the building, protection, constraints, and how to develop the radiology equipment. So, there are a lot of things that go on behind the scenes.

At IHCC, we are there with a purpose, and believe that every building that we’re related to or built in healthcare or education, acts as a higher purpose for our team to work on projects that give back to the community.

We think about the patients or students that are being treated or educated in these buildings. When the team thinks about these projects, they are thinking about that higher purpose. Our purpose is that we deal within the industries that give back to people and the community.

Our company was founded with one guiding purpose in mind: to relieve the suffering and improve the life of mankind in the Middle East & North Africa region and beyond.  We operate with a “human” connect. Our vision is to design and build sustainable communities through providing affordable and superior quality turnkey solutions that touch the lives of innumerable people every day. As a turnkey solution provider, we have a long history and extensive experience in designing and building, healthcare, educational and mixed-use projects.

Could you tell us the total value of all the projects that you are involved with at the moment?

We are currently in a different phase; in the past, we were in a phase of working with selective clients in Saudi Arabia and different areas in the region. Now, we are in a shifting phase where we want to grow even further by tapping into more governmental projects, and being aligned with projects that require PPP. We believe that we have strengthen advantage in adding the management part – whether it’s healthcare, education, or another specialized industry – and we can go to the government and add to the growth by bringing in a more developed consortium model. For example, it could be a built, operate, and transfer, where we add into that and grow closer and achievable model that gives a higher return to the community and economy. We’re in this phase now, and we’re planning to do this here, in Saudi, and in the region. We have different sized of projects – clients go from 50 million, up to 150 million, up to 400-500 million riyals for more complicated infrastructure projects, and to 1.5 billion that grow from actual projects into miniature healthcare and educational cities.

Once we go through that, then it’s a different phase with different requirements, either from different engineering or management or country backgrounds. We are a growing company and want to be more involved with sticking to our purpose of giving back to the economy. We want to do more of these projects, we believe that we have a strength, which is unique, and we can add more especially because we’ve had many successful projects outside of Saudi Arabia. You’ll see growth in the Middle East region over the next 15-20 years in healthcare, education, and mixed-use projects because it all goes back to the part where the younger generation throughout the region has a lot of requirements. These requirements need to be addressed. We’re a region that’s always been there, but these countries are still new and want to give back to their citizens.

I believe that I’m fortunate to be Saudi and proud to be in this era and at this time where we can actually give back. Now, people have higher expectations due to the globalization. Globalization happened only a few years ago, it was there as a tariff point of view from crossing borders between specific countries, but now, with social media, globalization is there and you can feel it – you can actually see people wearing the same brands, have the same tastes, eat the same foods, people have the same expectations, and people have higher standards. A simple example is, you can have a girl in a small city or village in any country in the world, and she can compare her actual shoes to another girl living in Miami Beach in one second through social media, whereas 10-15 years ago she could only compare her shoes or her bag to people in her neighborhood or village, and her standards were only based on that. Now, she is comparing herself to someone in another part of the world in a matter of seconds. And this reflects on the high streets as well – it’s the same brands in every city on every high street. Therefore, countries have to spend more on their economies in order to meet these expectations – this doesn’t stop at the governmental sector, it also includes the private sector. They have to be involved and proactive in cooperating with the government, which can only do so much as a facilitator, so it’s a combination of work between the private sector and government.

We, as people, should believe that they can add to the economy and address these young, aspiring populations – we’ve created a real estate development company called Lifestyle Developers with a purpose to aim in raising the standard of living in the MENA Region. The four core elements of this company are design, quality, affordability, and the community. We are targeting in raising the standard of living for middle-income professionals or the aspiring segment of people who want more, and giving them that combination of real estate that fit to their needs and size that they can afford – with the design that they want, simplicity, and appliances and amenities. A lot of people don’t own their homes, and a lot of them are these aspiring people, so we want to shift people’s thoughts and thinking from renting to owning. We realize that 65% of Saudis don’t own homes, and an average rental period is 5-10 years. In this period, you’re living on this property and not owning anything.

On the other hand, you could purchase that smaller apartment. This middle-income or aspiring segment would do a purchasing transaction or sale without belonging to the product. That’s why they don’t buy real estate, they rent because they think they should save and build their own homes. I went through that experience, and that’s why I created Lifestyle Developers to develop the lifestyle and raise the standard of living and because it fits into my purpose of being a developer with a cause to help build the sustainable future for my generation and generations to come. I was in the design and construction industry, but then went through this experience myself in not finding a product that relates to me, what are other young people or middle-income people doing? How are they getting real estate? I felt a sense of responsibility and needed to do something and created this company for this purpose. The name was chosen to develop the lifestyle. We wanted to be ‘lifestyle’ developers with the aim to raise the standard of living and make affordability according to value of money.

We’re not targeting low-income people because the government is doing a fantastic job in handling real estate for that segment of the population and we can’t compete. The high-income and Class-A are also being targeted. We saw a gap between the two, which are the major contributors to the economy – they’re bankers, engineers, pilots, and other professionals in all industries who have good salaries, and want to live well, but aren’t millionaires. We found the formula for them to be able to live at the same standard that they want to live in, by owning a home. We have successfully done this in Saudi Arabia and are planning to grow this business model in Egypt and the Emirates because we believe this region is growing with young professionals who expect things to be done in a certain way. And they deserve having this certain lifestyle – especially with over 200,000 people that were students on scholarships in other countries and are coming back highly educated. Salaries aren’t enough to attract them; they want the lifestyle as well. It’s a completely interactive lifestyle.

Forbes Middle East has ranked you as the number one leader for real estate and construction in Saudi Arabia’s 100 Entrepreneurial Elite 2014. Could you talk about entrepreneurship in Saudi Arabia from a perspective of the younger generation? How does Saudi entrepreneurship compare to other countries? What are the specifics of this country?

Entrepreneurship is a very big word; they say 80% of entrepreneurs don’t know how to spell entrepreneurship (Ha’ Ha’). It is a responsibility for leaders, successful businessmen, parents, governments, and those in the community who have made it. If you look at the Arab region in past history, you would realize that entrepreneurship is in our blood. We’ve been traders throughout history and geographic areas in the region. Some people have it in their nature or DNA, without any education. You’ll find them in shops and starting business in normal conversation. They have that in their genes, but that on its own isn’t enough – the world is growing and becoming a more globalized place. Therefore, you have to have globalized standards, education, and have to know things that make you at a certain professional level to deal and exchange in transactions with different parts of the world or even locally.

I believe it’s my responsibility to give back and its part of my purpose of being a developer with a cause to help build the sustainable future for my generation and generations to come, because I’m from this region and as a young person, whether it’s through mentorship or programs. I’m a member in the Young Entrepreneurs in the Chamber of Commerce in Saudi, a member of the Entrepreneurs’ Organization in America, a board member and Vice-Learning chair of the Entrepreneurship Organization in Saudi Arabia, a board member of an SME magazine in Dubai, which has more than 80,000 publications, and I speak at conferences and participate in programs. I have a master’s in entrepreneurship from MIT. I do all these things not only to have certificates, I do this because its fit into my purpose.

It’s our responsibility to God and the people who have taught us what we know today, to not leave this world and not give back what you know to others. I believe there is a lot of room in Saudi Arabia to help entrepreneurs – one of them could be to form a ministry related to SMEs, encourage entrepreneurship, and have more entrepreneurship institutes, universities, and colleges. If you look at other countries, like China and the United States, SMEs are the largest contributors to employment. They employ the majority of the population and give back the most to the economies, and the probability of new companies entering into the market is higher.

If you look at the Fortune 500 companies in 1977 and compare them to now, 90% of the companies are not there anymore – they’re all new companies. Eighty percent of their assets were tangible assets. Now in 2015, 80% of the companies assets are intangible like IT companies.

Facebook or YouTube have as SMEs and from the support of venture capital firms. Nowadays, you are much more likely to succeed as an entrepreneur than years ago, because of technology, even though competition is higher. Therefore, educating people to be entrepreneurs is the key and major necessity for our region to prosper and grow to unlimited heights.