JAKARTA – Indonesia’s Haj Fund Management Agency (BPKH) will invest in hotel operators in Saudi Arabia this year, board member Hurriyah El Islamy told Salaam Gateway.
BPKH is an independent body that overlooks Indonesia’s haj austerity program, which requires potential pilgrims to deposit money with appointed Islamic banks. Law No. 34/2014, which regulates the administration of the Haj Fund, obliges the agency to examine investments also with international institutions.
BPKH had more than USD 10 billion in Haj funds at the end of December 2020, less than 1% of which was invested in international institutions.
The fund is considering investing in either Saudi hotel capital or rooms. A minimum return of around 8% is expected, up to 20%, and targets either Mecca, Jeddah, or Medina.
“Smart investors should enter the (hotel) market now for higher returns,” said Hurriyah.
“The window to market entry is small. Currently, the King of Saudi Arabia allows pilgrims to do umrah activities 14 days after taking the first dose of the COVID-19 vaccine, and it is only a matter of time before they open haj with strict health protocols, “added she added.
Funds stood still during the pandemic when the Saudi authorities closed their borders for most of 2020, including to international pilgrims from Umrah and Haj.
This pushed hotel occupancy to record lows and made investments in hotels with good value for money.
BPKH will invest in facilities that have solid fundamentals such as good cash flow and have already signed contracts with tenants, Hurriyah said.
The strategy is also to target hotels near cities to take advantage of Umrah and Umrah plus tourism when the pilgrimage reopens to international visitors.
BPKH opened its Foreign Investment and International Cooperation Department in April last year to explore other options abroad.
Most recently in June last year, USD 4.9 million was invested in the Awqaf Properties Investment Fund, part of the Islamic Development Bank. Through this deal, the Indonesian agency generated a return of 4.63% (US $ 112,320) on its investment in six months.
Hurriyah said the fund will look to invest in food service, especially ready-made meals and buses, after signing the deal with hotel operators. A ROI of 17% for food service and 8.16% for buses is expected.
Investments in buses could be made through a joint venture with Indonesian state-owned company Damri, she said.
The fund sees value that can be created by investing in Saudi hotels, restaurants and buses, including creating more jobs in the value chain, and export opportunities for Indonesian ingredients used in ready-made meals.
* A correction has been made in paragraph 13: The ROI for food service is 17% and for buses 8.16%, not the other way around.
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