A new industrial city in Saudi Arabia’s Eastern Province will help maintain to some extent the momentum of the kingdom’s industrial advance.

The kingdom has already witnessed unprecedented progress in the petrochemicals sector, but indications are that various other flanks of the Saudi non-oil industry are moving ahead with new enterprises and expansions.
The oil bonanza of 2004 has generated great optimism among analysts who sense that some of the increased investments in infrastructure will benefit industrial development.  
Some $3.5 billion is to be spent for building the Jubail 2 industrial city alongside Jubail 1.  The new city carries with it Saudi hopes that it will prove as successful as the first city. Indeed, expectations are that it will attract $34.6 billion in local and foreign investments and create 55,000 jobs within the span of a generation.
Jubail 1 has over the years seen large-scale production facilities coming up downstream to some of the kingdom’s enormous hydrocarbons facilities.
One of the newest tenants, Saudi International Petrochemical Company (Sipchem), is preparing to build a new acetyls complex to add to an existing methanol plant and a butanediol plant, which is under construction.
The city is also the venue of big expansions in Saudi Iron and Steel Company (Hadeed) to raise production to more than 5.5 million tonnes per year.
Sabic, of which Hadeed is an affiliate, has several big plants in the city that have contributed greatly to the conglomerate’s record sales of $18.3 billion and net profits of $3.7 billion for 2004.
A new tyre factory for which the Saudi Arabian General Investment Authority (Sagia) has granted a licence will be another adornment for Jubail 1. The Saudi-Iranian factory, considered the first of its kind in the kingdom, will manufacture 25,000 tonnes of tyres for vehicles including agricultural carriers. Saudis will have an 80 per cent stake in the venture
Overall Saudi Arabia has seen a spate of industrial investments in recent months. The Yanbu Cement Company reached an agreement with German firm KHD to raise clinker production capacity to more than 4.2 million tonnes per year.
The kingdom’s foray into PC manufacturing has proved very successful. The promoters of the Hewlett-Packard PC plant in Jeddah are set to double production from the current 67,000 units per year. A country that was once the recipient of imports of PCs from the industrially developed First World is now substituting some of the imports with locally made products.
Operated by an HP partner in the kingdom, the plant received a big boost with the award of two government-related contracts recently.  The PC venture could signal the start of other IT-related manufacturing concerns.
A decision by the government to invest heavily in expanding a rail link will perhaps be among the most progressive. The linking of ports to industrial enclaves and mining centres will intensify industrial development, the creation of wealth and employment generation.
Ongoing government-sponsored construction projects as well as the building of new residential or industrial facilities has prompted contracting and supply firms to consolidate their presence in the kingdom with a view to taking a bigger slice of the huge market.
One company consolidating its position in the kingdom is engineering and construction services provider Aker Kvaerner. Two of its organisations, John Brown SA Ltd and Saudi Davy Company, have been combined to form a new business called AK Gulf.  The new operation is a subsidiary of   AK Process, one of Aker Kvaerner’s core businesses serving the refining, chemical and onshore oil and gas industries.
The scope for construction materials and contracting is immense for the foreseeable future. According to one estimate, the kingdom will have to invest $900 billion in the building and construction sector over the next 20 years, of which $290 billion will go into residential development, $140 billion into infrastructure, $115 billion into power and utility and $90 billion into desalination and other water projects.
Some of the vast pool of Saudi investments lying overseas could easily fund those and other projects.  Most of the foreign investments of between  $800 million and $1 trillion are in Europe and the US.
To mop of some of those funds, Riyadh needs to set up four free trade zones at the kingdom’s seaports, says Abdul Rahman Al Jeraisy chairman of the Council of Saudi Chambers of Commerce and Industry.
“The idea of establishing free trade zones is much better than the idea of setting up development regions,” he said.
The businessman also urged the government to provide tax concessions to private industries established outside major cities in order to reverse the migration of population to cities and attract more investments into remote areas.