Investing in the Gulf: Insights from Andrew Frank

On this special episode, we are joined by Andrew Frank, the Founder and President of KARV, a global strategic advisory firm based in New York City. Andrew's a seasoned expert in communications strategy, including crisis management, and he has longstanding experience operating in the Gulf region of the Middle East. Listen in to hear his insightful take on how the Gulf has evolved and exactly how, and why, it’s worth investing in this unique region right now.

Transcript

Julia (00:02)
Today, we have a special guest with us on Straight From the Shoulder. Andrew Frank is the founder and president of KARV, a global strategic advisory firm based in New York City. He's a seasoned expert in communication strategy, including crisis management, in addition to helping clients navigate everything from complex litigation to public affairs.

He's also a longstanding friend of The Arkin Group, who has decades of experience operating in the Gulf region of the Middle East. And today, he'll be sharing his take on the evolution of the Gulf and how and why it's worth investing in this unique region right now. Welcome, Andrew.

Andrew Frank (00:47)
Thank you, Julia. Appreciate you having me.

Julia (00:50)
Andrew, you have a well established history doing business in the Gulf. Can you tell us a little bit about how you first started working there?

Andrew Frank (00:59)
Gosh, it's been, over 15 years. I was introduced to a lawyer who was representing Ras al-Khaimah in the America's cup boat race because Ras al-Khaimah was selected to be the next location, but Larry Ellison sued the, I guess it's the New York Yacht Club that runs the race because Ras al-Khaimah and the UAE are still in the Northern Hemisphere. And the previous race was in Portugal in the Northern Hemisphere, and it's supposed to go North, South, North, South, unless there's a winner and it moves to a different location. So because they had selected Ras al-Khaimah, Larry Ellison fought to it not be there, partially because it was going to be in the Gulf and his boat that he had built, he had built it for the Atlantic off the coast of Spain and Portugal. And so we were just sort of representing the Emirate as a third party in the lawsuit. They weren't being sued. They were just the third party because they were the site selected. And so that's how we got introduced to them. Then I went over the Emirates, met with some people there--including the Crown Prince at the time, who's now the ruler of the Emirate. And that's really how we first got involved. Met several people. I mean, obviously we're very familiar with the region, but had not done any work there.

Julia (02:11)
Wow, well, that's quite a dramatic entry and a unique one to boot. Andrew, were you nervous at that time, kind of traveling to the Emirates, given the reputation on social repression, perhaps human rights repression, just not knowing how to conduct yourself? And how have you noticed things changing since that initial trip?

Andrew Frank (02:38)
Well, first of all, a lot has changed in development, the build up, the infrastructure, the investment. I mean, obviously, we've all heard about Dubai the towers and it's golden and all of this kind of stuff and Abu Dhabi and Doha and Riyadh is now getting that way too--the immense growth and that's the biggest thing that's changed this influx of people from all over the world. Back when I first started going there, I really didn't have the hesitation. I guess I've always been someone who has gone to places that were maybe a little bit considered on the edge. I volunteered during the Clinton administration on some things that most people wouldn't comment on or wouldn't go to. And I raised my hand. In fact, that's how I met Jack many, many years ago, back 25, 30 years ago. So for me, it was just another challenge and, a place to kind of go and explore and learn from. I think that the world would be a lot better place if more people took opportunities to go to places where they might not normally go because they think people there won't like them.

I think we find that people-to-people exchanges, conversations, bring you so many more similarities than not.

Julia (03:57)
To kind of decentralize diplomacy in a way, right? Like finding those common values, understanding that fundamentally humans are humans everywhere around the world. And just bouncing off of that, several years ago, there was a sort of opposition or reluctance, hesitance to the idea of investing in the Gulf. And what we've seen over the course of the past decade, and particularly under Trump, is that there's a bigger openness to opportunities. Is this something that your team works on in terms of announcing initiatives in a different manner or the particular aspects of the projects that you focus on and highlight for clients?

Andrew Frank (04:39)
There's a couple of things that have been happening, I guess, over the last decade or so. And I think that during Trump's first term, there was certainly an overture in the region and particularly the UAE Qatar has been, aligned militarily with the United States for a very, long time. Saudi in the oil and gas arena. And so each one of them is a little bit different, each country, and I think that president Trump in his first term sort of recognized that but he also recognized the ability for them to use some of that oil and gas money invested into the United States and he sort of pushed that the first time and he's pushing that big time of course in this second term so for us, you know looking at clients both American clients or other foreign national clients that want to do work in the region or clients from the region, whether it be government-owned, or private companies from particularly Saudi Arabia and the UAE, that want to come in, and Qatar too. There are communication strategies that have to be developed and different kinds of announcements, different ways of doing it, different ways of looking at the stakeholders. And I think that certainly President Trump has made it easier exponentially in the last year in this term than even in his first term to cultivate and have investment flows from both sides of the equation.

Julia (06:00)
That definitely seems to be true, although there still seems to be some kind of social pushback when there are groups. I'm thinking of the comedians that traveled there from the United States and kind of the flak they took on social media from some facets of society that are still ambivalent or angry, of course, about certain allegations against the leadership of Saudi.

Andrew Frank (06:22)
Can I comment on that? Because you're making a really interesting point and I want not leave that. 100 % respect the fact that human rights and looking at various different things have to be taken into an equation for investment. Worker rights have to be taken into consideration. I know that when NYU was building in Abu Dhabi, there were some accusations of using low wage laborers and all of this kind of stuff. That's really important. Worker rights, payments, and processes have to be and should be implemented. That's clear.

But I firmly believe that whether it's comedians, whether it's musicians, or whether it's sports figures and sports individuals, they're going, yes, undoubtedly to make some money. And sometimes the payments are quite high. But at the same time, they're filling an audience room. So there's a packed arena. There's a packed music hall. There's a packed facility for wherever the comedians were playing on that particular trip that you referenced. Without an audience, if you're going to pay somebody, a million, 10 million, whatever to go there and nobody is in the stands, well, then you can say, okay, they're just doing it to do it. Well, but at the flip side, there's an audience who wants this and who is sort of pushing for this. So that's why I think there's more and more of a desire to host these big events or host these individuals because there's actually an audience.

Julia (07:55)
Interesting. And is your work at KARV at all connected to some of the ways that a comedian or sports star would kind of defend or explain their position on that decision?

Andrew Frank (08:08)
Yeah, so we worked for a few years for a company called Middle Beast. They are a Saudi Arabian privately run entertainment company that puts on something called Soundstorm every year. It's got three days, 200,000 people come a day, so 600,000 people. Headliners have included Eminem and Will Smith and many, many others, but also a lot of local musicians, singers, DJs, which is huge there in the region. And they have to be able to be prepared to say why they're there or what they're doing. we have been working on that and talking about it in ways that I think, again, many in the media will understand and accept, and particularly those who we get to go there. Because particularly those who went there and sat there and went to this concert and saw 200,000 people a day going nuts for both local talent and international talent. Again, that is really fascinating. So yes, we do play a role and we'll continue to play a role in articulating the positives. We're not going to sugarcoat the negatives, but at the same time, the positives really should do and we believe outweigh those.

Julia (09:23)
It's very interesting. I'm just thinking here, slightly off topic, but at the UN Council of the Climate Meeting in Belém, Brazil this year, Coldplay came, right? A big British band. And I remember speaking with some of my Brazilian friends about it. They were so excited to have Coldplay, right? It wasn't like, why aren't you featuring only local artists? And of course, many local artists were featured as well and in all kinds of side parties. But this notion that locals only want local is also kind of demeaning in its own way. But Andrew, let me take us back to Saudi Arabia, we've spoken about some of Saudi's history. But what's different about operating in Saudi Arabia versus a place like the UAE?

Andrew Frank (10:07)
The population and the geographical size. Right. So the UAE is what I think what one 15th the landmass of Saudi Arabia. It's also 70 percent foreign nationals and 30 percent local Emirati. Maybe it's even 80, 20. I mean, it depends on the count. Some people talk about it being even higher than that because you factor in a lot of the laborers that come over and do the building of massive buildings. They stay for a year. Maybe they go back to their home country. So there's a transient kind of numbers that grow with that. That said, in Saudi Arabia, it's completely the opposite. So 70%, 80 % of the population are local. And by the way, there's three and a half times the population, four times the population, totally.

So you're dealing with a larger population, you're dealing with a larger local population. So in Saudi Arabia, much more economic development, much more ingenuity, technology, innovation is being looked at and spent on locals. And that's really important because you have also 60 % of the population under the age of 32, I believe it is.

That is an enormous workforce that if they don't have jobs and they don't feel good about themselves, what are they doing? Not good stuff. So the idea for creating an environment that allows them to grow, go to schools, travel externally, come back, have skills, create new things is really important. So I think the biggest difference that I would say is that the population numbers are flipped.

And therefore, you're catering in Saudi Arabia much more to the local population, not the international, although you want the international because you want that ingenuity, you want that innovation that they bring. And the UAE, it's the opposite, where you're catering a lot to the international community, but you're also bringing them in to have this real vibrant economy where the local community can share with the international community and build off of each other, but to the benefit of everybody, but there's a higher percentage of foreigners that are now living there.

Julia (12:23)
Interesting and Saudi Arabia is definitely pursuing this kind of unprecedented economic and societal transformation that you mentioned both in terms of scale and speed. What has been your role in this transformation and what would success actually look like inside the Kingdom?

Andrew Frank (12:40)
We've worked with some of the Giga projects. We've worked with the investment fund. we've helped articulate similar to what we've just been talking about, why it's OK to do these things, what's important. These Giga projects are enormous. And they're also not all going to work the way that it was envisioned 5, 10 years ago. And that's OK.

It's okay to change things. It's okay to alter how you're looking at things. Every project should be looked at differently. You look in New York and you look at Hudson Yards, how many years did it take for that to be developed? And they're still developing it. And they've changed the heights of buildings and they've changed various different pieces in focus. To do that, biggest thing was the infrastructure, getting the subway to get out to that location. So I think that what success looks like is what's happening right now. Because success is that there's ongoing development, ongoing building and attracting smart people from around the world to live there, to help design it, to help innovate, to work with local people to do that and creating environments that are just new and unique and different. I think the model is really Diriya, which is the old capital outside of Riyadh.

It's phenomenal. think we counted, I forget, 40 cranes off in the distance. But at the same time, they've created an environment now, these restaurants and living areas and other things that for locals, like when you walk around mall and restaurant area, you see almost all locals. That is really important, again, very different than if you go to a Qatar or a UAE where there are certain places you're going to see locals. But generally, it's still outnumbered foreigners because of the sheer numbers.

Julia (14:32)
Well, picking up on that theme, how should the United States and Europeans, as well as the Asian firms, adjust their strategies when approaching a place like Saudi versus the UAE versus Qatar?

Andrew Frank (14:47)
Understanding the local environment is really, really important. it's, something we preach internally to our team. And we say it to our clients and to the prospects that we are talking to. That you can't just go in and think you can do business the same way that you did it back at home. Now that's not to say that that's going to be entirely unsuccessful because in some businesses it might very well be successful. But you have to understand the environments that you're working in. You have to understand the regulatory environment. You have to understand rules and regulations hiring and firing, for instance. But you also have to understand if you're selling products.

How do you market those products differently than you would in the United States? You're seeing this enormous growth, for instance, in wellness and new products in the healthcare industry, enormous growth. And you're seeing a lot of Western firms who are coming in and they're trying to find out how to attract the audience and the purchasing power of the consumer. And so I think it's just going in, understanding the environment and being able to make that work for you, but also really leverage that in that way.

Julia (16:00)
If you were prepping a CEO or a government leader today, what is the most important geopolitical development in the Gulf that they might be underestimating?

Andrew Frank (16:10)
Everybody today, which is different than a few years ago, thinks they can just fly in to the Gulf, show what they have, and get a $10, $20, $100 million investment. I think a few years ago, that was a little more likely. If you had a good product, if you had either good fund, good product, good innovation, something, right? Now, it's a lot more discerning. It's a lot more focused. while there's people with a lot of money to have, and there's more creation of family office wealth, there's real targeted views, and you have to find those. And I think it's a little bit different today because they have been so successful.

So they feel empowered and emboldened and they're not just going to say, yeah, yeah, sure, I'll give you $10 million. I'll give you $100 million.

Julia (17:03)
There's a certain maturity there now.

Andrew (17:05)

Yeah, that's a great word. Yeah, I think that's right.

Julia (17:07)

And from some of your recent trips and your knowledge of the region, how do you assess the true purpose of some of the local projects that you referenced, some of those mega projects? Thinking Neom City are those nation branding exercises? Are they actually beneficial to a local population? Are they aimed to attract travelers? What's going on with those? Are they realistic?

Andrew Frank (17:33)
Well, again, to go back to the point earlier I made, You have your plan, you have your model plan, you review those plans. Neon is a little bit different than some of the others because it was so futuristic and it was built in a way that it was going to be this futuristic city. And so they've had to make some changes and they've had to scale things a little bit differently, but that doesn't mean it won't happen and it won't happen over a longer period of time and in a focus. Now, anytime you have development, you have to think in the long term. You can't just think short term. So locals in some cases, whether it be Neom or some of the other projects have been displaced or asked to leave or sell their land or some other focus. And that's ⁓ difficult for many people. Look, we had the interstate highway system in the United States. How many people did we move in order to build our highways? We're still doing it today. We're still going into neighborhoods and we're evicting people. Every development has some element of negativity from a local perspective, not in my backyard viewpoint. So I think that's just something that each development has to overcome. Look at it that way, treat people the right way when they do it or have to do it. And so the focus and the future to me, you have to be in it for the long haul, you have to plan accordingly, and you have to be able to adjust.

Julia (18:59)
And I think we would be remiss to not mention that this is obviously a very tense neighborhood that we're operating in here, right? There's all kinds of threats at every turn, Yemen, the Red Sea, shipping, Iran. The US itself has presence there that's constantly being negotiated and renegotiated. Do you see the Gulf and investment in the Gulf being more risky due to any of the recent tensions, or is this something that you just factor into investment there as kind of one of the variables to consider?

Andrew Frank (19:33)
Probably a little more of the latter. The Gulf has been an area and region in the world where almost a century probably since oil was really developed, that people have been coming to and risk takers have been coming to and fighting over. Yes, there is some concern now with the current situation in Iran and how that'll play out. But at the same time, there have been missiles that have been shot from Yemen hitting infrastructure in Saudi Arabia. There's tensions between the Emirates and Saudi on that aspect of things. There's the Israeli connectivity and what that means, the Abraham Accords for some countries and not for others and what the instability in the region could bring. So I think you have to factor that in. But I think the governments, particularly of those three countries, are very supportive of companies who want to come in and invest. And that's important.

Julia (20:27)
That is a very important point. And I'm gonna wrap this up with one final question. But before that, as someone who spent a lot of time in Saudi and UAE, and the UAE signed on to the Abraham Accords, I'm interested in your take on how and if that has helped the UAE and why the Saudis are still resisting.

Andrew Frank (20:32)
Yeah, great question. On my last trip to the UAE, I met an Israeli guy. And he came in on his passport. I was in Abu Dhabi. And first of all, I went to the Abrahamic Center, which anybody who goes to Abu Dhabi should visit it. It's recently opened. It's fantastic. It has a Christian church. It has a Muslim mosque and it has a Jewish synagogue. It is really a fascinating place to visit. Really is. And I met this Israeli and I said to him, said, wow, do you feel uncomfortable coming here with your passport? He says, absolutely not. He goes, there's eight or nine flights a day between the two countries. So there's a lot of exchange going on between those two countries and technology transfer, investments and the like. And that's what the Abrahamic quarters was meant to do. So they're accomplishing that. I don't know what the numbers are, don't have the statistics, but that's what's happened.

Saudi Arabia, it's a little bit different. And I think it's a little bit different more so, again, because of its internal politics, its geography, where it is, where it sits, relation to Israel and the Gulf. And I think that that is a little bit more of the hesitancy for why. And it's supported the Palestinians in a different way. There is business to business relationships that are happening, but they're not happening via a flight between Tel Aviv and Riyadh.

Julia (22:07)
Right, we're not there yet. And I think your point about having a sizable native population also matters because the government has to deal with the Arab street, right? And the general sentiment of the majority of its population.

Andrew Frank (22:14)
Exactly.

Julia (22:30)
That's definitely something we'll keep an eye on, and I'm sure you'll keep us up to speed on what you're hearing and the energy on that as well. But just to wrap up, I'm very curious as to where you see investment in the Gulf headed. What are some of the industries that you're eyeing right now and why?

Andrew Frank (22:39)
I mentioned health care, wellness, biotech. I think that's an enormous growth industry, if you will, in the region. I think in some ways, you always have to go back historically, because history is really important. And if you study history, you can learn in different geographies. So I remember in the early 1990s, when I was in Eastern Europe and the US went into Hungary. They got an agreement. Why? And they put down the first fiber optic in Hungary. Nobody in the United States had fiber optic. But yet the phone lines were so bad for the fact that they put fiber in. It created an opportunity. when the internet came in in the late 90s, early 2000s, there was a faster speed in some places than could have been elsewhere.

What you're seeing, I think, now in the Gulf is a leapfrog of technology because it was a desert, a lot of Bedouin areas traveling. There wasn't institutional cities. Dubai was a trading city. And it still is. But now, of course, it's enormous. But I think leapfrogging is important. So the technology aspect, integrating consumer satisfaction, things that can give them that, whether information flows, people are looking for new information, how to get that, what it is. And so I think all of those avenues, I mean, obviously construction, infrastructure, and that kind of stuff, and architecture, that's been going on for many, many years, that will continue because of the fast pace of growth. those kinds of companies that can come in and get those contracts internationally is really important. Obviously, AI we didn't even mention that, is huge, right? And using AI and developing AI and these mega power centers in order to have electricity for what's happening in all of these arenas. So that's key. And then lastly, I would probably say crypto, right? Alternative financing is big in the Gulf and they've embraced it. They've embraced it more than many other countries have. that's clearly on a regulatory basis, they're ahead of the curve on many countries.

Julia (24:48)
Thanks so much, Andrew. This has been a fascinating conversation, and I'm sure our audience is going to come away with a lot of ideas and inspiration for investing in the Gulf. And I certainly recommend that they turn to KARV for help with that along the way.

Andrew Frank (25:04)
Thank you, Julia. I really appreciate it and appreciated the opportunity to spend time with you and of course, the affinity I have for The Arkin Group and the work that you guys do globally and our relationship in the future. I look forward to that.