Sir Ronald Cohen - The Portland Trust

We’ve become used to hearing of violence in the Middle East and since the creation of Israel as a Jewish state there’s been few people, if any, who claim to have an answer to the problems.

But there’s one man who believes his theories can bring an end to the tension between Israel and Palestine within a decade. That man is Sir Ronald Cohen, the founder and former chairman of Europe’s leading private equity house Apax Partners. He believes economics and the introduction of a spirit of entrepreneurship among Palestinians will bring a permanent end to the violence. Can capitalism really bring an end to the Middle East crisis?

“I believe that given where we have got to, it is clear that politics alone will not bring peace. We need economic drivers to push the two sides towards peace. “

I’m not saying it’s easy,” says Sir Ronald. “But I really believe economics and investment can bring peace to the Middle East.”

“An investment in grants of just $150m into Palestinian projects will attract $850m in private sector investment and result in growth in the economy of 1.5 per cent a year for five years. So imagine what $1bn in private sector grants would do over time. It will bring growth of more than 10 per cent each year.”

The premise is, in essence to throw money at the problem and Sir Ronald is doing it through The Portland Trust, the group he set up with Sir Harry Solomon, of food group Hillsdown Holdings fame, in 2003 to set about the enormous task.

The Portland Trust believes in the development of economic infrastructure to create employment, housing, savings and wealth for ordinary Palestinians and Israelis. Other efforts include supporting a microfinance programme, developing a vehicle to deliver and coordinate major transport infrastructure in the region, promoting the design of a private pension system for Palestinians, examining the housing needs and the construction demands in the Palestinian Territories, publishing a monthly economic bulletin on the Palestinian economy;  and, in partnership with the Peres Center for Peace, the Trust is looking to establish a joint Palestinian-Israeli Chamber of Commerce, when the time is right. "I told you it was an enormous task."

Sir Ronald says the conflict also continues to have a profound economic impact on Israelis. With the resolution of deep historical grievances unlikely in the near future, the Portland Trust is putting its faith in economics. Sir Ronald says: “Northern Ireland has shown the private sector has a major role to play. After the 1994 ceasefire in Northern Ireland, the private sector began predicting a 'peace dividend'.

“Northern Ireland’s economic performance in the wake of the 1994 cease-fire bore out their predictions. The private sector can exercise influence, mobilise investment and promote moderation. In my view, the time has come to strengthen the voice of the Israeli and Palestinian private sectors and for the international business community to give them encouragement and support.”

So how long before Sir Ronald’s theories bear fruit? “I believe that if we can get the required investment, which I think we can, then there will be peace in five to ten years.” That’s a bold statement, a bold statement indeed.

Sir Ronald is on good form. The 63-year-old enjoys discussing issues close to his heart. Since being forced from his homeland Egypt in 1957, following the Suez crisis, an empathy with the oppressed poor has always been with him. He may have made tens of millions during his 33 years at Apax, but he has always had half an eye on how and when he could find the time to give back and help those in a tough spot. Since quitting Apax in 2005 he’s found that time.

It would be easy, if presumptuous, to assume Sir Ronald has had an easy life. But that’s simply not the case. His family left Egypt poor and distraught. On the trip to London he saw his father cry after being forced from his own country and, at the age of eleven, Sir Ronald attended a state school in North London.

Inspired by his history teacher he made it into Oxford University, where he became the Union President. Then, in 1972 and after a brief stint with McKinsey & Co, Sir Ronald founded Apax Partners. By the time of his retirement he looked back on a career that resulted in his building of one of the world’s leading private equity houses with more than $30bn of assets under management, offices in ten countries and more than 300 staff today.

“We’ve got 18 months, perhaps, two more years of this,” he says. “There will be more big names to fall, I’m sure.
“But there are two saving graces this time around. Private equity is a mature industry compared to the last downturn in 1992 and will fare better. Secondly, a lot of debt back in 1992 was under strict covenants. I think they’ll be far fewer breaches of covenants this time around because as many more loans are covenant light.”

So when will we see the private equity firms coming alive again? After all there’s sure to be plenty of bargains in the coming months.

“I think we’ll see more deals coming through during the winter,” he says. “We just have to wait for sellers to understand that if they want to sell their company they are going to have to adjust their price downwards. I think that will begin to happen in late 2008 and early 2009.”

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