The accountant with the Middle East at his fingertips
08 Nov 1978Barry Riley profiles Talal Abu-Ghazaleh – a Palestinian who claims to run the largest accounting firm in the Middle East
“OUR relationship with Price Waterhouse is the most beautiful example of partnership between the Arab world and the Western world.” So says the unrestrained Talal Abu-Ghazaleh, the Palestinian who has pushed his way in a meteoric career to the very top of the accounting profession in the Middle East, at the age of just 40. Now he is much more than just an accountant: he is a tycoon, expanding his financial services empire throughout the Arab world, and seeking to become an influential figure at the interface of the multinational companies and the Arab oil billions.
But during his rise to prominence, Talal, as he is generally known, has attracted more than his fair share of controversy. The accounting profession is always liable to be suspicious (some would say jealous) of accountants who combine professional roles with notable business achievements.
Talal certainly enjoys the trappings of success. There is more than a touch of luxury about his cool wood-panelled office which has a panoramic view across the commercial district of Kuwait City to the Arabian Gulf beyond. He shrugs: “I have a problem with my competition—they don’t like me.”
In any case the Middle East is an area notable for troubled relationships between accounting firms. The big international firms have been keen to carve out positions in one of the world’s major growth areas for financial services. But they have often proved unable to cope satisfactorily with local partners and local business practices.
Talal himself emerged from Saba, the Beirut based firm which used to be the largest in the Middle East. Elected as chairman-to-be of Saba in 1972, he broke away in that year to form Talal Abu-Ghazaleh and Co., in partnership with Diraar Alghanim, a member of one of Kuwait’s wealthiest merchant families. Saba reacted bitterly to the loss of many clients to the upstart firm, and called in a partner of Peat Marwick Mitchell to arbitrate in a number of financial disputes.
Disbanded Saba was involved in another split this year when after-18 years the joint associate firm Arthur Andersen, Saba and Co. was disbanded. The problem was apparently that Saba wanted only a loose arrangement, while Andersen were trying to impose the common standards and quality controls which characterise its world-wide operations.
Saba has now entered into an association with Touche Ross, while Andersen has opened its own branch in Bahrain as the first step in a go-it-alone Middle East venture.
Deloitte Haskins and Sells is another of the international Big Eight to have dropped an Arab connection — terminating its relationship with the Amman-based Shair and Co.—in favour of building up its own chain of branches. Here again the Arab firm has quickly found a new international link, in this case with the McLintock Mann Lafrentz grouping. Meanwhile Andersen and Deloittes are seeking to emulate Whinney Murray which has for many years been a strong independent force in the Middle East.
It was in 1974, when Talal’s firm had become sufficiently established, that he entered into an association with PriceWaterhouse.The joint firm Price Waterhouse Abu-Ghazaleh was established and he was admitted as a partner in Price Waterhouse International. The links with PW are being strengthened. At present roughly 20 partners and managers from Price Waterhouse are resident in the Middle East (they come mainly from the UK but also from the U.S.). Within the next year another 20 or so PW personnel are expected to move into the joint operation. There will then be at least one PW officer in each of TAG’s 23offices throughout the Arab world.
But the accounting tie-up withPrice Waterhouse forms only part of Talal’s current plans. A key new development is the setting up of Arab International Projects Company, to provide project and investment advisory services. This itself has a non-exclusive link with the Paris-based Banque Arabe et Internationale d’Investissement. It will slot into place beside the existing accountancy and management consultancy interests.
Talal claims that his accounting firm is already by far the largest in the Middle East. “The growth is now in the field of project development,” he says. “We are the only firm of consultants operating throughout the Arab world.”
He explains that there is a need for an organisation which can do a complete file for a bank on an investment project. His group is now geared up to provide more than just financial advice to foreign investors. Its business services extend to the selection of joint venture partners and the arrangement of local representation for multinational companies. Finding the right contacts is invariably the key to doing successful business in Arab countries.
The expansion of his group has led to the need for a new structure. A new holding company is being set up, Talal Abu-Ghazaleh International. International lawyers have been deciding whether it should be domiciled in Jersey, Luxembourg, Switzerland or offshore in Bahrain.
Talal’s connections are impressive. The links with the Government of Kuwait are close: two years ago, for instance, the firm took over the plum audit of the Kuwait Oil Company. He is also knownto be friendly with members of the Saudi royal family.
“We have a unique position in Saudi,” explains Talal. “We are the only registered firm. Others are just individual auditors. No other firms can be registered unless the law
changed.” There is no sign that this barrier against the other big accounting firms is likely to be lifted. At present TAG has three offices in the country.
TAG is obviously trading on its Arab character to strengthen its position in the Arab world. Yet it is also backing two horses in that it is forging closer links with PW in order that it can also tap multinational, predominantly western business.
The group’s structure is carefully arranged to permit this. In the Arab countries the accounting operation trades as the all-Arab TAG. To international clients, however, it can appear in the guise of PWAG— both of these operations now being under the umbrella of TAGI. Despite these different trading names, the accounting side appears to be quite closely integrated.
For Price Waterhouse the relationship offers a way into the lucrative Middle Eastern market. To TAG it offers the international connections beyond the Arab world which a purely Arab company could not expect to develop easily. TAG also gains access to PW training schemes and technical back-up.
But Talal has not been able to expand his empire so fast without arousing hostile responses from other accountants. Critics have alleged that some of his activities have not complied with Anglo-Saxon professional conduct in areas such as publicity and advertising.
It has been suggested that Talal should not have published under his own name his
English-Arabic Dictionary of Accountancy, which came out earlier this year. In reply, he asks whether he should be expected to publish the book without mentioning an author.
Again, the charge of advertising is laid against his endowment of the Talal Abu-Ghazaleh Graduate School of business and management at the American University of Beirut.
TAG is to meet the shortfall between the new schools income and expenditure up to a maximum of $10m spread over 10 years. In return, the school is to take over the classroom training of the firm’s auditing and financial and management consulting staff.
Talal himself graduated from the AUB in 1960 with honours in Business Administration. He maintains that the title of the graduate school was not his idea. “The American University of Beirut insisted that they give it my name—an Arab name,” he points out.
Distinguished With obvious pride he produces a copy of Professor John Munro’s recent history of the AUB. It is dedicated to Talal, described by Professor Munro as “one of AU B’s most distinguished graduates.”
Talal admits, however, that auditing standards in the Arab world do not match up to the best international practices. “Unfortunately there aren’t generally accepted accounting standards in this part of the world,” he says. “We have principles—a combination of
U.S. and UK standards.”
He claims that the standards- are applied “to the extent that they do not violate the local laws.” The firm’s practices have been set out in a 400-page audit manual, newly produced for internal use after four years’ work. In his foreword to the book, Talal writes: “Much of the material in this manual is based on publications of Price Waterhouse and Co. adapted to our requirements in the Arab world.”
For Price Waterhouse the question is how far it may have to bend its standards to fit in with this irrepressible Arab partner. The potential rewards are large, but it is not clear
how PW can keep control of the expansionist Talal.
Certainly the management of TAG appears to be highly personalised by the standards of
Western accounting firms.
According to the groups directory the partners have a firm belief in the need for strong
centralised management. The partners elect the chairman “and vest with him all the
powers and authorities he requires to ensure the continuous development of the group.”
The chairman with those powers and authorities is, needless to say, Talal. Is he an auditor or an entrepreneur? A compiler of dictionaries or a Mr. Fixit? It is the combination of all these roles in one person that makes Talal Abu-Ghazaleh
such a controversial phenomenon in the accounting world.
But during his rise to prominence, Talal, as he is generally known, has attracted more than his fair share of controversy. The accounting profession is always liable to be suspicious (some would say jealous) of accountants who combine professional roles with notable business achievements.
Talal certainly enjoys the trappings of success. There is more than a touch of luxury about his cool wood-panelled office which has a panoramic view across the commercial district of Kuwait City to the Arabian Gulf beyond. He shrugs: “I have a problem with my competition—they don’t like me.”
In any case the Middle East is an area notable for troubled relationships between accounting firms. The big international firms have been keen to carve out positions in one of the world’s major growth areas for financial services. But they have often proved unable to cope satisfactorily with local partners and local business practices.
Talal himself emerged from Saba, the Beirut based firm which used to be the largest in the Middle East. Elected as chairman-to-be of Saba in 1972, he broke away in that year to form Talal Abu-Ghazaleh and Co., in partnership with Diraar Alghanim, a member of one of Kuwait’s wealthiest merchant families. Saba reacted bitterly to the loss of many clients to the upstart firm, and called in a partner of Peat Marwick Mitchell to arbitrate in a number of financial disputes.
Disbanded Saba was involved in another split this year when after-18 years the joint associate firm Arthur Andersen, Saba and Co. was disbanded. The problem was apparently that Saba wanted only a loose arrangement, while Andersen were trying to impose the common standards and quality controls which characterise its world-wide operations.
Saba has now entered into an association with Touche Ross, while Andersen has opened its own branch in Bahrain as the first step in a go-it-alone Middle East venture.
Deloitte Haskins and Sells is another of the international Big Eight to have dropped an Arab connection — terminating its relationship with the Amman-based Shair and Co.—in favour of building up its own chain of branches. Here again the Arab firm has quickly found a new international link, in this case with the McLintock Mann Lafrentz grouping. Meanwhile Andersen and Deloittes are seeking to emulate Whinney Murray which has for many years been a strong independent force in the Middle East.
It was in 1974, when Talal’s firm had become sufficiently established, that he entered into an association with PriceWaterhouse.The joint firm Price Waterhouse Abu-Ghazaleh was established and he was admitted as a partner in Price Waterhouse International. The links with PW are being strengthened. At present roughly 20 partners and managers from Price Waterhouse are resident in the Middle East (they come mainly from the UK but also from the U.S.). Within the next year another 20 or so PW personnel are expected to move into the joint operation. There will then be at least one PW officer in each of TAG’s 23offices throughout the Arab world.
But the accounting tie-up withPrice Waterhouse forms only part of Talal’s current plans. A key new development is the setting up of Arab International Projects Company, to provide project and investment advisory services. This itself has a non-exclusive link with the Paris-based Banque Arabe et Internationale d’Investissement. It will slot into place beside the existing accountancy and management consultancy interests.
Talal claims that his accounting firm is already by far the largest in the Middle East. “The growth is now in the field of project development,” he says. “We are the only firm of consultants operating throughout the Arab world.”
He explains that there is a need for an organisation which can do a complete file for a bank on an investment project. His group is now geared up to provide more than just financial advice to foreign investors. Its business services extend to the selection of joint venture partners and the arrangement of local representation for multinational companies. Finding the right contacts is invariably the key to doing successful business in Arab countries.
The expansion of his group has led to the need for a new structure. A new holding company is being set up, Talal Abu-Ghazaleh International. International lawyers have been deciding whether it should be domiciled in Jersey, Luxembourg, Switzerland or offshore in Bahrain.
Talal’s connections are impressive. The links with the Government of Kuwait are close: two years ago, for instance, the firm took over the plum audit of the Kuwait Oil Company. He is also knownto be friendly with members of the Saudi royal family.
“We have a unique position in Saudi,” explains Talal. “We are the only registered firm. Others are just individual auditors. No other firms can be registered unless the law
changed.” There is no sign that this barrier against the other big accounting firms is likely to be lifted. At present TAG has three offices in the country.
TAG is obviously trading on its Arab character to strengthen its position in the Arab world. Yet it is also backing two horses in that it is forging closer links with PW in order that it can also tap multinational, predominantly western business.
The group’s structure is carefully arranged to permit this. In the Arab countries the accounting operation trades as the all-Arab TAG. To international clients, however, it can appear in the guise of PWAG— both of these operations now being under the umbrella of TAGI. Despite these different trading names, the accounting side appears to be quite closely integrated.
For Price Waterhouse the relationship offers a way into the lucrative Middle Eastern market. To TAG it offers the international connections beyond the Arab world which a purely Arab company could not expect to develop easily. TAG also gains access to PW training schemes and technical back-up.
But Talal has not been able to expand his empire so fast without arousing hostile responses from other accountants. Critics have alleged that some of his activities have not complied with Anglo-Saxon professional conduct in areas such as publicity and advertising.
It has been suggested that Talal should not have published under his own name his
English-Arabic Dictionary of Accountancy, which came out earlier this year. In reply, he asks whether he should be expected to publish the book without mentioning an author.
Again, the charge of advertising is laid against his endowment of the Talal Abu-Ghazaleh Graduate School of business and management at the American University of Beirut.
TAG is to meet the shortfall between the new schools income and expenditure up to a maximum of $10m spread over 10 years. In return, the school is to take over the classroom training of the firm’s auditing and financial and management consulting staff.
Talal himself graduated from the AUB in 1960 with honours in Business Administration. He maintains that the title of the graduate school was not his idea. “The American University of Beirut insisted that they give it my name—an Arab name,” he points out.
Distinguished With obvious pride he produces a copy of Professor John Munro’s recent history of the AUB. It is dedicated to Talal, described by Professor Munro as “one of AU B’s most distinguished graduates.”
Talal admits, however, that auditing standards in the Arab world do not match up to the best international practices. “Unfortunately there aren’t generally accepted accounting standards in this part of the world,” he says. “We have principles—a combination of
U.S. and UK standards.”
He claims that the standards- are applied “to the extent that they do not violate the local laws.” The firm’s practices have been set out in a 400-page audit manual, newly produced for internal use after four years’ work. In his foreword to the book, Talal writes: “Much of the material in this manual is based on publications of Price Waterhouse and Co. adapted to our requirements in the Arab world.”
For Price Waterhouse the question is how far it may have to bend its standards to fit in with this irrepressible Arab partner. The potential rewards are large, but it is not clear
how PW can keep control of the expansionist Talal.
Certainly the management of TAG appears to be highly personalised by the standards of
Western accounting firms.
According to the groups directory the partners have a firm belief in the need for strong
centralised management. The partners elect the chairman “and vest with him all the
powers and authorities he requires to ensure the continuous development of the group.”
The chairman with those powers and authorities is, needless to say, Talal. Is he an auditor or an entrepreneur? A compiler of dictionaries or a Mr. Fixit? It is the combination of all these roles in one person that makes Talal Abu-Ghazaleh
such a controversial phenomenon in the accounting world.
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