Jim Greenberg, founding partner and chairman of DevCorp International, general partner of the Saudi Offset Limited Partnership (SOLP), says his company, currently involved with several projects, will continue to develop new ventures under the SOLP and is looking to start a new fund with local investors for GCC-wide projects.

In an exclusive interview with Gulf Industry (GI), Greenberg said: “We believe the SOLP is a working model that could be translated to other countries and areas such as Kuwait and Abu Dhabi, which have offset programmes for promoting commercial ventures. We recognise that local participation is more and more important as the GCC becomes more and more self-sufficient.”
Greenberg believes the single greatest obstacle in bringing new projects to completion in this region is a lack of sources of entrepreneurial capital and associated project financing.
“As the economies of the region transition to more entrepreneurial start-ups, both government and local financing institutions must establish means of financing that match capital with talent.
“You can’t support broad, private sector growth just from retail trade, real estate, government and major corporate projects,” he says.
Greenberg early on explains why he helped form DevCorp and conveys what he thinks are the important components of successful private sector development.  He also touches on the extraordinary efforts DevCorp put into its  shrimp farm projects in Oman and Saudi Arabia but notes that there were projects “where all the requisites of success did not come together” despite all the effort, time and money invested into them.
The following is the text of the interview:
GI - Why did you form DevCorp?
Uwe Jahnke and I had worked in the Middle East in project development, financing, and operating management for more than 20 years.  We had seen both successful and unsuccessful attempts at developing new, private sector business ventures, but the process was not very defined.  The transient nature of personnel assignments hindered continuity of information; institutional memory did not exist.  Also, many early ventures were service- or contracting-type ventures that depended on government contracts or subcontracts for their business base.  We thought our combined experience could add value in establishing an all-encompassing vehicle that would systematically identify, develop, finance, and implement viable new ventures that produced a product that made sense in the Middle East.  We saw this as an evolutionary step in the development of a financial services industry.
GI - What’s special about your vehicle? 
We have identified three critical components of successful private sector venture development.  Number one: a diversified team of developmental specialists with extensive experience spanning all aspects of venture development, financing, project management, and implementation with specific focus on projects in this region.  This includes entrepreneurial executive talent with substantial corporate experience in different technologies, investigative research, structuring feasibility and marketing studies, legal and regulatory knowledge, financing knowledge and contacts, and start-up and operating experience, all as applied to structuring and implementing joint ventures in the Middle East.  Our multinational, development executives combine such experiences, and increasingly we are merging this type of talent and experience with local national employees and partners to provide the ideal combination.   
Number two: sufficient investment capital to both invest in the projects and retain ownership of the process and participation to ensure professional implementation.  Capital is also necessary to be taken seriously as a player by both foreign and local investors.
Number three is also a challenge: a mechanism to fund the two- to six-year gestation and development period required to bring any project in the Middle East from identification to financial closure.  Bureaucracy, difficulty in obtaining needed information, time requirements for decisions, political and security uncertainty, and communication and coordination problems stemming from the practicalities of working with multiple parties in different time zones and countries increase project development time dramatically.
GI - How have you managed to find the experienced staff for this type of work?
As a professional services and investment company the majority of our assets walk out the door at the end of work every day, or it may be more appropriate to say, with the hours we keep, every night.  We have sustained strong relationships over many years with a number of experienced, international development and senior management executives in this region who have now joined DevCorp. 
The critical question is, how do you retain exceptional people?  Our executives are self-motivated, extraordinarily competent, and widely experienced.  Their primary motivation is the sheer challenge of project development itself and the satisfaction of converting their knowledge and experience into profitable ventures.  In DevCorp’s traditional venture capital model each project executive works as the virtual owner of the project - committed to long-term profitability of the venture. A substantial amount of the profits of the new ventures we develop are assigned to the development executive with the primary responsibility for bringing that project to fruition.  This rewards long-term commitment; executives maximise profits by choosing to work cost effectively, using economy class air travel, lower-cost hotels, etc.    DevCorp’s executives specialise in our major areas of development; hydrocarbons, light manufacturing, agro industries, and IT/Telecom services.   The international nature of our executives reflects the international nature of our business as do our varied joint venture partners.  We generally do much of the development work with our own staff, relying on external consultants in specialised instances only.  In our business the development executive must gain an in-depth, gut feel for the industry, the players, the partners, etc. for any new venture. We all must immerse ourselves in the businesses we are developing. 
GI - This sounds complicated.  Show us how this process worked in one of your current projects.
Typical examples are our shrimp projects in both Oman and Saudi Arabia.  We began development of one of the first shrimp projects in the GCC in 1995.  It required four years of investigation to obtain the requisite knowledge and to convince appropriate local investors and foreign technology partners.  Shrimp farming was a new industry and one that had previously failed in Oman due to critical technology shortcomings.    With a team of specialists, we physically performed over 2,000 km of coastline surveys in Oman and Saudi Arabia in order to find sites that would support successful shrimp farming.  Our team then traveled the world investigating operating shrimp farms to gain the industry knowledge required.
We then had to establish an initial trial farm to include brood stock maturation, hatchery, and grow-out pond operations to convince financing institutions and the international market of the viability of the project.  This extraordinarily successful effort, which exceeded production targets and gained full-financing commitments, required several million dollars of up-front high-risk investment by DevCorp and its partners, with no support from government or financing institutions.
The viability of shrimp farming in some countries in this region is now recognised.  Our project being implemented in the Jizan area  (western Saudi Arabia) will be one of the largest shrimp farming projects in the world.  The valuable experience gained in the farm in Oman has enabled a relatively quick start for the Jizan project. However, the whole effort to date has taken nine years; the involvement of many people both inside and outside the region; work with fifty to sixty local and foreign government and financing entities, technology partners, and local investors spanning a geographical area including North, Central, and South America; the Middle East; India/Sri Lanka; East Africa, Australia, South East Asia; and Japan. 
Our successful project near Jizan is now fully financed and has all appropriate government approvals, experienced project team, and pre-commitments for 100 per cent of the production, but we have spent the same kind of effort on projects where all the requisites for success did not come together, but still demanded substantial development time and costs, now written off.  You can see the cost, frustration, time, and risk associated with such new ventures.  But then, as the saying goes - you win some and you lose some.
GI - Sounds like a difficult process.  What is the single major obstacle in bringing new projects to completion in this area?
In my view the single greatest obstacle is lack of sources of entrepreneurial capital and associated project financing in this region.
GI - If you could, how would you solve this problem?
Let me explain “project financing”.  The majority of government and local financing institutions in the region are conservative.  They require security in the form of shareholder guarantees or actual collateral from large business entities or high net worth individuals in order to finance new ventures.  Project financing is financing in which the security for the financing is provided by the project itself in the form of project assets and defined markets.  In short, the viability of the business plan itself and the competence of the promoters provide the requisite security rather than the deep pockets of the promoters. 
In my opinion, commercial banks and government financing entities have had an easy ride over the past 30 years in the GCC due to major, government-backed infrastructure projects and major international and large local national corporate-type financing requirements.  As the economies of the region transition to more entrepreneurial start-ups, both government and local financing institutions must establish means of financing that match capital with talent.  You can’t support broad, private sector growth just from retail trade, real estate, government, and major corporate projects.
GI - Despite the “pain and frustration” you admit, you’re still working here.  Why?
This is pretty much all I have done most of my working life.  I like doing hard things, and, believe me, this is hard work!  But I must also say we have many personal ties to this region.  I met my wife here, our children grew up here and have great memories of their childhood, and we have had some great professional successes.  I feel a commitment to accomplishing things that bring real value to the region.  We have made many extraordinary local and international friends and we’ve had a lot of fun in our lives as expatriates.  I also see many positive developments and signs of hope for the future. 
GI - Like what? 
The start-up and, hopefully, maturation of capital markets as we are now seeing in Saudi Arabia.  Such growth in capital markets will allow for the establishment of the traditional financial services industry vehicles, such as venture capital, corporate bonds, early-stage IPOs, etc. that will make capital available to a larger variety of the population and will begin to decentralise the pockets of available investment capital.  Such is the beginning of a more entrepreneurially based economy.
 The establishment of government entities such as Saudi Arabian General Investment Authority and the Bahrain Economic Development Board to promote new ventures and attract foreign direct investment also provides future potential for economic growth as well as providing present assistance during this transition stage of economic reform.
GI - You obviously haven’t waited for the changes in capital markets and project financing.  How have you found money? 
In short, with great difficulty and a huge expenditure of “shoe leather express.” In 1995 we knew that equity capital was easier to raise in the Middle East than debt financing.  However, even equity capital requires someone to take the initial risk.  Jahnke and I had sufficient capital to start DevCorp with a little over one million dollars.  We figured that if we could develop a few good projects at our own cost, money would find us somehow.  Admittedly, as a Harvard Business School graduate, this may not have been a great strategy, but it worked.
After two years of developing projects, defence contractors noticed our work and recognised a complementarity between their offset obligations and our potential projects and development process.  In the late 1990s, with the support and approval of the Saudi Economic Offset Programme, DevCorp formed probably the first US-style limited partnership fund in the GCC - the Saudi Offset Limited Partnership (SOLP).  DevCorp, general partner of the SOLP, is responsible for the complete process of new venture identification, development, financing, and implementation, using this $35 million equity base.  Raytheon Corporation and Thales International are the limited partners of SOLP who support the fund with investment capital.  We take great pride in thinking that DevCorp has contributed to showing how this type of financial services vehicle can lead to greater project development, economic growth, technology transfer, and national employment.   The major return for DevCorp from this effort is the profit sharing from the success of the projects, thereby insuring common objectives with the defense contractor investors and the Saudi Offset Programme.
 I believe that the only way this new concept could have been introduced into this risk-averse region was through the participation and support of the Saudi Offset Programme, which drew together government national objectives and foreign investors who were required to invest in the region.  The Saudi Offset Programme support was critical in our getting started in Saudi Arabia, and it has provided continued support and encouragement ever since.  The members of the Economic Offset Committee and Secretariat provide direct assistance in liaison with other government agencies and advice on how best to progress our projects.  We believe the objectives of the Offset Programme are critical to the long-term success of the Saudi economy.
GI - What are DevCorp’s plans in the future?  
Considering the time and efforts we have already invested, we choose to emphasise those areas where we have already had success.  We will continue to develop new projects under the Saudi Offset Limited Partnership and are looking to start a new fund with local investors for GCC-wide projects.   We believe the Saudi Offset Limited Partnership is a working model that could be translated to other countries and areas, such as Kuwait and Abu Dhabi, which have offset programmes for promoting commercial ventures.
We recognise that local participation is more and more important as the GCC becomes more and more self-sufficient.  To that end we have converted DevCorp to a closed joint stock company in Bahrain and have begun to absorb local investors into our shareholding structure.  Increasingly we will be integrating local national talent into our group as we expand our activities.  Our initial effort in this regard has been highly successful.