Equipment at Bahra Cables Company’s plant in Bahra, near Jeddah

Equipment at Bahra Cables Company’s plant in Bahra, near Jeddah

Kingdom eyeing foreign investors

Conditions for overseas involvement in local projects are encouraging and the areas of investment wide-ranging

February 2014

Riyadh is beckoning foreign entrepreneurs to invest in a new Saudi Arabia where the wheels of industry are moving faster than ever before and whose GDP ranks 19th in the world.

Saudi Arabia General Investment Authority (Sagia) governor Abdullatif Al Othman, speaking at the Global Competitiveness Forum in Riyadh, drew attention to a host of Saudi achievements, mentioning milestones such as the third fastest growing economy among G20 states after China and India, the largest economy in the Mena region and producer of half the GCC’s economic output.

The government is keen that overseas investors capitalise on existing upstream oil and gas and petrochemical industries to set up enterprises downstream that will be more economical to operate with the advantage of abundant raw materials at rates lower than in international markets.

It also rubs in the point they can expect financing from Saudi Industrial Development Fund at very easy terms even as they stand to gain from a lenient tax regimen.

 Riyadh’s wish list includes transfer of technology and jobs generation even as it desires higher revenues and profits for partnership ventures and the triggering of ancilliary industries.

As Dow Chemical president and CEO Andrew Liveris reminded his audience at the Riyadh forum: with each job in manufacturing three others are created.

On another dimension, industry focus is not confined just to hydrocarbons and chemicals. There is potential for business in a variety of fields including ICT, transportation, health care and education and training and some headway has been made in those spheres.

A Sabic petrochemical plant in Jubail

The message is ringing loud and clear: Saudi Arabia has attained maturity and is ready for full-blown industrialisation on all fronts. The kingdom is taking on challenges in several unconventional fields including renewable energy and the automotive industry.

Observers point out Saudi Arabia can scarcely afford not to become more involved in manufacturing and fields such as logistics. With one of the world’s youngest populations and 35 per cent under 15 years and soon to enter the workforce, the challenge of creating opportunities is intense.

After the Arab Spring broke out some three years and which yanked Arabs out of their complacency, there is a sense of deep urgency that youths should not be led to despair. Every now and then, Saudis are greeted with the news that a new training programme has been launched or completed. Last month came the announcement that some 10,000 automobile technicians and officials had completed training with the Japanese automobile firm Isuzu and the University of Japan. The graduates will be working in automobile facilities that will be set up in the kingdom in places including the Automobile Cluster planned for Yanbu Industrial City.

GE, which has won high-value contracts mainly in power generation and water desalination over several years, has said it will invest $1 billion in facilities it will create in the kingdom. Two years ago it set up a repair and manufacturing centre in Dammam where 500 are at work, 75 per cent of them Saudis. A key GE priority in its Saudi investment is the training of the local workforce.

Training is a high-priority element in Saudi Arabia’s vision to achieve greater industrialisation and diversification away from oil which, anyway, is a very volatile commodity. Saudi entrepreneurs would be a lot happier if the manufacturing facilities they set up teem with sons of the soil as in countries all over the world.



And entrepreneurship is strong in the kingdom. Greenfield plants are cropping up at a brisk pace and existing facilities are being primed up to produce more and more. The Maaden aluminium plant is in production and is signing supply contracts for exports around the world. The rolling mill is also operating but not commercially as yet. Maaden has great aspirations to develop the minerals sector and has drawn up plans to tap into the potential.

Sabic has ventures in the development stage and is looking at shale gas partnerships in the US so it does not miss out on the latest craze. It has also signed on to a deal to explore for iron ore in Mauritania. Saudi Aramco is in the thick of the Sadara venture and other industrial schemes in chemicals and refining.

Soft drinks giant Aujan has taken a majority stake in National Beverage Company, a manufacturer and distributor in Lebanon. Global Pipe Company has announced it will expand production at its plant in Jubail. Also in the news were two innovative players in the Saudi chemicals industry – National Industrialisation Company or Tasnee and The National Titanium Dioxide Company, also known as Cristal. They have signed an agreement to establish a joint venture company with Toho Titanium Company to build a titanium sponge plant in Yanbu Industrial City.

The new plant will be built adjacent to Cristal’s titanium dioxide plant which will supply titanium tetrachloride in an operation that combines Cristal’s on-site assets with Toyo’s advanced production technology. The importance of the project was highlighted by Dr Talal Al Shair, vice-chairman of Tasnee and chairman and CEO of Cristal, who said: “This joint venture marks an important step in progressing our strategic vision for an integrated titanium value chain. Al Shair described the initiative as “truly a breakthrough opportunity.”

Pushing the drive for countrywide industrialisation is Modon, the Saudi Industrial Property Authority, which has 29 industrial cities – operating and under development. Modon has pledge to expand the network to 40 within the next five years.

Joint ventures with overseas investors are expected to increase as confidence builds up in the government’s support for industrialisation and sustainability of ventures. The kingdom ranks 15th among the world’s leading economies in creditworthiness, according to an S&P Capital IQ survey and Riyadh gets high marks for being a low-risk market for investors who are increasingly willing to put their capital in local projects. The field is clear for a plethora of sectors where Saudi manufacturers and consumers depend on imports.

For instance, the kingdom imports large volumes of diesel generators as only one manufacturer, Saudi Diesel Company, produces them. It is understood that foreign firms are interested in setting up plants in the kingdom to produce the generators for which demand is growing.

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