Abdulla Al Zamil, chief operating officer of Zamil Industrial Investment Company, (ZIIC), sees major challenges ahead for the Saudi industrial sector.

“Let’s be frank, Saudi Arabia still offers the very best incentives to industry in the form of loans and support from organisations such as the Saudi Industrial Development Fund but the government needs to work on key issues such as infrastructure and labour if we are to meet what is growing regional competition aimed at attracting SME industries,” he says.
According to Zamil, the kingdom needs to urgently address aspects such as port congestion, which is being exacerbated by the boom market throughout the region. “There are exciting developments planned for the kingdom such as the land bridge rail link between Jeddah and Dammam but this will not resolve the congestion issue. In today’s competitive world, with the threats to medium-sized industries inherent in membership of the WTO, industrial companies will need to take advantage of all incentives available as well as ensuring that they operate in zones which have the most efficient infrastructure possible.”
Apart from the need to create a more efficient environment, Zamil believes that the Saudi government needs to encourage more shipping lines creating additional capacity and more frequent services. “We have two huge opportunities in Iraq and Iran sitting next to us and we need to ensure ease of access to these markets,” said Zamil.
On a macro level, Zamil sees Saudi industry as polarising towards petrochemical and energy-related industries. “This is where the kingdom’s competence lies and I see the development of SMEs along the lines of support for the mega industrial projects in Saudi Arabia,” said Zamil. “This will obviously impact on our manufacturing sector as investors will be looking at these types of opportunities. When it comes to consumer products we would have to compete with China, S E Asia and a growing competitive threat from India.”
Zamil sees SMEs as vital for the future. “Over the past few years the Saudi Chamber of Commerce has been concentrating on encouraging SMEs as this will also help in terms of unemployment and it is the service sector particularly which is important,” said Zamil. “Building brands, marketing and after-sales service is the key to differentiation and whilst in most developed economies 80 per cent of GDP is service-oriented, here in Saudi Arabia we are at less than 50 per cent.”
Zamil believes that the government should put less pressure on Saudisation when it comes to the manufacturing sector. “Less than 5 per cent of the total workforce of 6 million is in the manufacturing sector and between the competition we already face from S E Asia and the effect of the WTO, I believe that there are other sectors such as religious tourism which could help ease the Saudisation pressure.”
Turning to ZIIC, Zamil, who has overseen a massive 30 per cent increase in sales over the past year, is bullish on the conglomerates’ future. “Since taking over as chief operating officer a year ago, I have concentrated on consolidating the three entities of ZIIC under a single umbrella, projecting the Zamil brand as a total solution,” said Zamil. “Zamil Glass, Steel and Air-conditioning previously worked independently but we have now managed to share services such as IT, HR, corporate communications and finance.
According to Zamil, the steel and air conditioning elements of ZIIC have grown the most with the construction boom of 2004 expected to continue. The bottom line figure has also grown by 18 per cent partly as a result of internal restructuring designed to improve productivity and reduce costs. ZIIC will be expanding into other areas including a joint venture with a Kuwaiti company to produce aerated concrete products. In the service sector Zamil has set up a company to build district cooling plants with two projects currently in progress in the region. ZIIC, with a total staff strength of 5,000 employees including operations in Vietnam and Egypt, has factories in Italy, Austria, Vietnam and Egypt and owns its own distribution companies in the USA, Morocco and Australia.
“With 45 per cent of our total turnover of SR2 billion ($533 million) outside Saudi Arabia, ZIIC is poised for continued growth especially when Iran and Iraq become more active,” said Zamil who is decidedly unhappy with the SR50 million turnover in Iraq during 2004. “Our plants in Vietnam, Egypt and Europe were all set up in the late 1990s and are now integral parts of the economy. In Iraq, I see the potential as being much bigger with border access as the main obstacle. Once direct access is established, business will double as Saudi Arabia will be the one place to source products from.”
ZIIC continues to grow in terms of facilities with the Group having recently acquired 120,000 sq m in Dammam’s Second Industrial City. “Raw land is available but we have to develop it ourselves. However there are changes as the government has set up a separate entity for industrial cities which allows for the ownership of land creating a further incentive.”
Zamil sees the lack of industrial projects rather than money as being the main hindrance to the kingdom’s industrial development. “There is over SR420 billion in deposits in Saudi Arabia which is why projects such as Sahara were oversubscribed by 130 items. In terms of petrochemical products Saudi Arabia currently produces just 162 out of a possible 1,022 related products which leaves huge opportunities for industrial development,” said Zamil.
2005 has begun well for ZIIC with some divisions such as towers reporting full order books for the next eight months. With the private sector continuing to expand, ZIIC is doing extremely well. “Our experience over the past 30 years means that we are well positioned as a product of choice,” said Zamil. “We have spent a lot of time and attention on building, promoting and stabilising the Zamil brand. We have also had challenges in terms of the increase in the cost of raw materials such as steel, which we have had to absorb whist competing in an open market place. It is here where size makes the difference and when we work at full capacity the cost structure changes.”
Saudisation is a subject close to Zamil’s heart and Zamil is pragmatic about the subject. “We have already received an award from Prince Naif for Saudisation but the government should not work on a “guilty until proven innocent” basis. We are all interested in hiring more Saudis and believe that this is a responsibility,” said Zamil. “However we have real challenges here and need to look at the output from the educational institutes. Our problems are not so much technical but behavioural with many youngsters unable to accept discipline. I believe that an employee’s attitude, character and enthusiasm can be more important than a diploma as in our industry everything else can be taught.”
Zamil calls for a government lead in schools to help create a “workforce of the willing” and believes that leading by example will also have the trickle down effect that industry needs in terms of discipline in the workplace. “Within our own group I have examples of individuals who through having the right attitude and enthusiasm have progressed to become highly paid and capable workers,” said Zamil.