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Volume 25, Number 3May/June 1974

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Made In

Saudi Arabia

"One American businessman put it this way: 'Now is the time to be a Saudi; his time has come."

Written by William Tracy
Photographed by Burnett H. Moody
Additional photographs by William Tracy and S. M. Amin

This February Saudi Arabia made two startling announcements. The first was that General Motors, the world's largest industrial corporation, was establishing a multi-million dollar assembly plant in the kingdom. The second was that Nissan Motor Co. of Japan would build a $20-million truck assembly plant.

To those who persist in seeing the Arab East, and especially Saudi Arabia, in the outdated context of deserts and Bedouins, the idea of cars, buses and trucks rolling off assembly lines in Riyadh or Jiddah must be astonishing. But to those who know, the GM announcement is simply additional evidence that the Arab East, as Newsweek wrote recently, is on the verge "of the most spectacular industrial revolution the world has seen in the last quarter century."

Oil aside, that would still be a considerable overstatement as regards Saudi Arabia today, where nothing comparable to the giant industrial complexes of the United States, Japan or Germany yet exists. But considering the enormous handicaps that the kingdom has had to overcome and the late start that it made, its progress is already impressive and its future exciting. For example: Internal consumption of refined oil products shot from a mere half-million barrels in 1950 to 20 million barrels, 40 times as much, in 1972; and 16 percent up from just the previous year. Electricity generation increased from 442 million kilowatts in 1967 to 977.6 million in 1972, 130 percent in just five years. Saudia, the national airline, last year posted its first million-passenger year and announced that it is now the biggest airline in the Middle East. And, economists say, the real takeoff is just beginning.

One American businessman put it this way: "Now is the time to be a Saudi; his time has come." Saudi businessmen agree. "Industry in any modern sense," says Wahid bin Zagir of the Jiddah Chamber of Commerce, "was not introduced in this country until the early 1950's, and haphazardly at that. But already the situation has changed. The government is spending enormous sums to build the necessary physical infrastructure and to create the modern administrative structure needed both to regulate and encourage manufacturing. We have a growing body of skilled workers, widespread consumer prosperity, increased contacts with the outside world and an entirely new breed of industrialists."

Wahid bin Zagir, though hardly typical, is himself one of the new breed. Plain-spoken, heavyset, Bin Zagir has a degree in economics from England's Durham University and at 39 has served on the boards of an airline, a bank, a government commission and a university. He was formerly mayor of Jiddah and is now vice-president of Jiddah's Chamber of Commerce. Growing up in an established merchant family with several generations of experience in importing and selling soaps and toiletries, Bin Zagir, a few years ago, sensed that the Saudi market was ready to support a local manufacturing effort. After studies of the market and negotiations abroad he went into partnership with Unilever International to manufacture in Saudi Arabia such well-known brands as Lux and Lifebuoy soaps and Sunsilk shampoo.

You meet them more and more often in Saudi Arabia these days, this new breed of young men, bright, articulate, many of them graduates of U.S. or British universities and all intensely proud of Saudi Arabia's present mushrooming development, confident of their own ability to grasp the opportunities suddenly opening to them in their ancient desert land and imbued with what Robert Graham, correspondent of Britain's prestigious Financial Times, describes as "suddenly, an air of purpose."

Skeptics might say the air of purpose was a long time in coming. Pastoral and poor as recently as 30 years ago, the kingdom's economic base, prior to the discovery of oil, rested almost entirely on skimpy agriculture, taxes, customs duties and a small income from pilgrims to Mecca. Oil, of course, changed that, but it was not until the early 1960's that concerned government officials began to move away from almost complete dependence on petroleum toward industrialization.

To do so Saudi Arabia, like other developing countries of Africa and Asia, had first to face up to some hard facts: wide spread illiteracy, serious cultural obstacles and an almost total absence of the infrastructure vital to economic diversification: electricity, roads, harbors, railways, airports, telephones, mines, machinery, skilled labor and administrative and technological know-how.

For many countries these were, and still are, insurmountable obstacles. To simultaneously educate an entire populace, construct transportation facilities throughout the country, install modern communications, expand agriculture, bring in experts, provide plants and machinery, require massive expenditures which most emerging nations simply cannot afford.

Saudi Arabia can. As the largest oil exporting country in the world Saudi Arabia today has virtually unlimited capital which—especially since the mid 1960's—it has been pouring into a staggering variety of projects that are transforming the kingdom.

Just this year, for example, the kingdom will spend nearly $300 million for the new Jiddah International Airport and pilgrimage center; an estimated $340 million for the 400-mile Taif-Abha-Jizan highway in the mountainous southwest; and $55 million for the Red Sea to Arabian Gulf "backbone" telecommunications project linking Jiddah, Mecca, Taif, Riyadh, Hofuf and Dammam with microwave and coaxial cable.

Projects such as these are the end results of long and careful research conducted by Saudi planners with the help of experts from the Ford Foundation, various United Nations agencies and private consulting firms which the government, with laudable foresight, began to bring in some 10 years ago to give their counsel. From their studies and recommendations gradually developed a sweeping, three-phase program, calling for, first, massive government spending on the basics (education, social services, roads, docks, communications); second, industrial and agricultural development (mineral resource exploration, heavy industry plant construction, irrigation projects); and third, stimulation of private enterprise (tax concessions, legislation, loans).

This program was formalized in 1970 in the Five Year National Development Plan, a 227-page document prepared by the 90-man staff (80 percent Saudi) of the Central Planning Organization headed by University of California graduate Hisham Nazer, with an assist from a six-man consulting team of economists brought in from the prestigious Stanford Research Institute.

"The basic idea," Mr. Nazer explained at a luncheon meeting of the American-Arab Association at New York's St. Regis Hotel last September, "is to increase industry's share in our GDP from a current 6.7 percent to a level where it can be comfortably felt that oil's share is no longer the exclusive factor."

A glance at a recent national budget shows where the first plan puts its emphasis. According to a budget breakdown for the year 1972-73, more than 2,000 miles of new highways were under construction, 28,100 telephone lines were being installed, and planning had begun on submarine communication cables—in the Red Sea and the Arabian Gulf—and on two satellite ground stations. The Information Ministry had started work on a new television network in the south and installed new radio transmitters in the north. New airport terminal buildings were being built in three cities, new runways at three others. Four seaports were being expanded and large amounts of national funds were allocated to numerous municipalities needing road paving, street lighting, sewage systems and public housing. The budget also showed that 144 new boys' schools, 109 girls' schools, 80 anti-illiteracy schools for adults and 1,400 additional classrooms for existing schools were planned or underway, and that large sums had been earmarked for new buildings at universities and colleges in Jiddah, Mecca, Medina, Riyadh and Dhahran.

In the 1973-74 budget—up 72.8 percent to $6.4 billion—such development projects accounted for 62.5 percent of the total allocations. Transportation and communications, for example, received $640 million, a 60-percent increase, and education received $630 million, up 40 percent from 1972-73.

For the second phase of the program—industrial and agricultural development—the 1972-73 budget provided about $130 million for mineral exploration, electric power subsidies and direct industrial investments, and another $170 million for irrigation, drainage, dams, wells, Bedouin settlement, building or maintaining five sea-water desalination plants and constructing drinking-water distribution systems in 14 towns and cities.

Considerable funds were also channeled into the kingdom through the General Petroleum and Mineral Organization (Petromin), a sort of state-owned, semi-autonomous public corporation set up in 1962 and authorized to enter partnerships with private local and foreign capital. Initially Petromin concentrated on several oil-related projects, but later turned to mineral exploration too. Since then air and land teams have found rock salt, marble and promising traces of magnesium, lead, zinc, silver and gold. Substantial deposits of iron and copper now only await roads and water supplies to be exploited, with copper receiving priority attention. In February, for example, two Japanese firms agreed to explore a 4,000-square-mile concession area rich in copper, lead and zinc.

More recently, Petromin has moved directly into industrial development. On the Red Sea coast south of Jiddah Petromin built a steel rolling mill which was initially plagued by problems but in 1970 turned out 85,000 tons, principally long reinforcing rods for concrete, and is currently meeting about a third of the steel requirements in the Western Province. On the Arabian Gulf coast near Dammam and the natural gas sources which provide both its power and its principal source of raw material, Petromin built a nitrogenous fertilizer plant which produced 92,250 tons in 1971. SAFCO, as it's called, the Saudi Arabian Fertilizers Company, is owned 51 percent by Petromin and 49 percent by private Saudi investors. The company has a technical aid agreement with Occidental Petroleum and a marketing arrangement with Inter Ore. Starting with nothing but natural gas, air and steam, the plant produces ammonia (sold in Saudi Arabia, Qatar and Kuwait) and urea, exported to Sudan, Yemen, Afghanistan, Pakistan and India. A by-product is sulphuric acid, which is shipped to Bahrain and Qatar and within Saudi Arabia is sold to an oil company, a detergent factory and a sea-water desalination plant. SAFCO represents a $20-million capital investment and employs 523 workers, of whom 320 are Saudi Arabs, others Egyptian, Jordanian, British and American.

For Saudi Arabia this is big business. But it's only a sample of what government planners have in mind. For in Arabia abundant natural gas is produced along with oil as a joint product and Petromin now envisions two ways of exploiting its enormous potential.

The first is as cheap energy. Some gas is currently used for electric power production, desalination and in manufacturing fertilizer, cement and glass. Far larger quantities could be used to fuel power-hungry aluminum smelters such as those now operating on nearby Bahrain. A feasibility study is underway for an aluminum plant with a capacity of 140,000 tons per year. And already a preliminary agreement has been signed between Petromin, two Japanese companies, Nippon Steel and Nippon Kokan, and the U.S. firm, Marconi Corporation to build a $500-million steel mill near the port of Jubail, close to Eastern Province gas sources. It is planned to have an initial capacity of one million tons yearly, rising in increments to five million. Ore will be brought from Brazil in specially-constructed bulk ships capable of carrying oil on their homeward voyage.

The steel mill may be one of the largescale projects referred to in a recent Washington Post article which reported that confidential discussions were going on in the kingdom on industrial proposals costing up to a total of $5 billion. But the other projects will be part of an envisioned petrochemical complex using gas not just as fuel, but as raw material. One such project, announced in December 1973 with a 1978 completion date, is an agreement with Mitsubishi Corporation and Mitsubishi Petrochemical Company to build an ethylene plant with a yearly capacity of 500,000 tons and derivative products such as polyethylene and propylene produced to scale. A preliminary agreement was also reached on a methanol plant with a yearly capacity of about 3.5 million tons.

The third phase—stimulation of the private sector—is also moving. After a cautious beginning two decades ago, private industry is taking increasingly ambitious and confident strides.

In 1961 Saudi Arabia published its first comprehensive regulations governing and encouraging the investment of local capital and in 1963 gathered foreign investments under the same umbrella. The two laws provided for such concrete support as customs exemptions on imported machinery, spare parts and raw material, elimination of export duties on products, five-year tax holidays and, in some cases, tariff protection.

According to Abdul Majid Kayyal of the Ministry of Commerce and Industry, the sometimes touchy tariff protection provision has been carefully considered. "If we determine that a manufacturer will be able to assure reasonable prices, sufficient quantity to supply the market and quality, we offer limited protection by temporarily raising customs duties on competitive imports." Bin Zagir at the Chamber of Commerce adds, "We don't want to encourage the growth of industry at the expense of the consumer. Then, too, if local manufacturers can't meet international standards we will never capture export markets."

Compared to the headlong rush into prestigious, and frequently wasteful, industrialization schemes in many developing countries this policy seems eminently sensible. Furthermore, as the dry language of a recent report to investors by New York's First National City Bank suggests, it works. "Tariff protection is likely to be available only to efficient industries which can remain roughly competitive with imported goods. A number of Saudi industrialists have demonstrated that this can be done."

Other factors encouraging to investors are Saudi Arabia's refusal to impose currency controls—many nations have heavy restrictions on the movement of capital—its firm commitment to free enterprise and its record of political stability. And if the local market is small, the prosperity of neighboring Arabian Gulf countries tends to expand it significantly.

One of the only roadblocks remaining, in fact, is the acute shortage of management and technical personnel and trained labor. The Citibank report singles out this problem for comment. "In spite of the tremendous achievements in developing the kingdom's educational system in the past 20 years, there is expected to be a severe shortage during the 70's of professional and managerial people." An American working with the Central Planning Organization explains, "The manpower problem is Saudi Arabia's most basic problem, and perhaps one of its most intractable. I'm optimistic that under the plan, financial resources are now being channeled into education as much as can be effectively used, but it will still be some years yet before the numbers of qualified men available will be large enough."

In the meantime the government is building and staffing vocational training institutes throughout the country, foreign companies involved in joint-venture projects are obliged contractually to provide for the training of local youths and, when enough skilled Saudi workmen are simply not available, work permits are granted to bring in sufficient expatriate technicians to do the job.

The government also provides industrial sites at nominal rents and has built industrial estates in Dammam, Jiddah and Riyadh which, says Abdulla Sulaim, a young Saudi who studied civil engineering at St. Martin's College in Washington, provide industries with what they need. "Aside from the surveyed plots available for factory sites, each estate has a network of roads, fresh water, sewers, lights and power. There is also a landscaped central service area with administration building, post office, police station, cafeteria, a model factory building, fire department and central machine shops."

The three estates are managed by the government's Industrial Studies and Development Center in Riyadh, a semi-autonomous agency whose chairman is the Minister of Commerce and Industry and which maintains working ties with the Ministry of Finance, the Ministry of Technical Education, Petromin and the Central Planning Organization. The center was established in 1967, staffed then by less than a dozen enthusiastic researchers. In 1973 its work—feasibility, marketing and pre-investment studies—kept 127 busy. One hundred were Saudi Arabs, 20 were Arabs from neighboring countries, and seven UN experts on loan from Germany, Sweden and India. During the year the center conducted feasibility studies for factories to produce electric cables, table salt, sugar, and paper and paper products utilizing palm wood. For bicycles, a study showed that with an investment of $320,000 a plant could be built to manufacture about half of Saudi Arabia's annual imports of 24,000 machines.

The center also carried out pre-investment surveys for gas heaters, locks, hinges and nails, household electrical appliances and fruit preserves. Other possibilities investigated in recent years have included fired red bricks, ceramics, cotton cloth and tomato paste and juice. Such studies are beginning to bring results. In January this year a $2.5-million factory to produce 4,500 tons of tomato paste and 2,000 tons of juice yearly was opened in Riyadh. The plant will employ 72 on a seasonal basis, and utilize tomatoes grown in nearby villages to supply about 50 percent of the Saudi Arabian market.

Ibrahim bin Salamah, a researcher with a degree in mathematics and commerce from Steven F. Austin State College in Texas, lists some of the aspects the center takes into account. "First we look at how imports of this particular item from abroad have been running. We talk to dealers and agents, wholesalers, retailers. We examine shipping and customs records and make an estimated demand, almost always a conservative one. We might cross check by looking at new housing construction, for example. Then we estimate the skilled manpower required and find out what is actually available on the labor market. We determine that raw materials are available and measure their quality. To help out there we have just commissioned the design for a new industrial laboratory which we hope to have completed in about three years' time. It will house our Bureau of Standards and facilities to test for safety, weights and measurements, and quality control."

The Development Center also played an active role in preparing the manufacturing section of the five-year Development Plan by conducting a wide-ranging survey that unearthed some arresting data. It was found, for example, that although there were some 9,163 "manufacturing establishments" in the kingdom in 1968, only 29 companies worked on a scale big enough to maintain a staff of 50 or more, and in the entire country only four manufacturers employed 200 or more.

Even so, the center found, during that year the industrial sector turned out products worth an estimated $108 million and paid wages of more than $25 million. Divided into sub-groups the four major categories of manufacturing turned out to be food and beverages (which accounted for 26 percent of income), cement and non-metallic industries (24 percent), transportation equipment and repairs (13 percent) and wood products and furniture (9 percent). With this information the center went on to draw up a 152-page report, making detailed five-year projections in 12 sub-sectors of industry. The subsectors were food and beverages; textiles and wearing apparel; wood and furniture; paper and printing; leather products and shoes; rubber products; chemical products; metal products; cement and non-metallic products; machinery and appliances with their maintenance; transportation equipment with its maintenance; and miscellaneous.

Overall the five-year projections anticipate that new private investment in the 12 sub-sectors of light or consumer industries will total $75 million by 1975. At the end of the period gross annual output should total $242 million, reflecting a hoped-for annual growth rate of 12.2 percent and jobs for an additional 13,000 workers, an annual employment growth rate of 6.3 percent.

The report also projected for each of the 12 subsectors the needs in terms of raw materials, land, machinery, wages and power consumption. Concrete proposals were made to actively encourage private investors to go ahead with a surprisingly varied list of projects determined to be feasible during the five years. These included factories for manufacturing or assembling canvas, surgical bandages, shoes, paints, pharmaceuticals, gas stoves, enamel ware, air conditioners, refrigerators, electric fans, dry-cell batteries, fiber-glass boats, bicycles, automobile batteries and light bulbs.

But official statistics and governmental projections, important as they are, do not tell the whole story. The scope and variety of private enterprises, some large, others quite small, actually turning out finished products throughout the kingdom every day is another measure of progress, and a brief summary gives witness to the initiative of Saudi industrialists.

Two factories produce oxygen, acetylene and carbon dioxide gas; a small animal feed factory produces 3,600 tons each year. A shoe factory has a capacity of 280,000 pairs yearly. A macaroni factory produces 600 tons annually. Three factories make ready-to-wear clothing, one produces cotton towels, five turn out plastic household implements, four manufacture fiber-glass water tanks and make aluminum kitchen-ware. Others produce chicken rotisseries, water heaters and desert coolers, a kind of ventilator. There are also 16 commercial printing plants.

From the Arabian Gulf a fishing company harvests and processes just under $2 million worth of shrimp each year. It employs 450 workers on 40 trawlers, two mother ships and at two plants on shore, and exports shrimp to Lebanon, Japan and the United States. The Nahda Radiator Factory in Dammam transforms sheets of brass, copper and tin imported from England and Australia into 50 automobile radiators each day and exports a large proportion of them to Bahrain.

Dates, which are exported to Arab countries and Spain, are packed in three plants; date syrup is being investigated as a sugar substitute in soft drink manufacturing. Three major bottling plants turn out 112 million bottles of soft drinks a year, employing about 90 men on two shifts during the hottest seven months. In the past nearly $2 million worth of empties were imported per year from Germany, the Netherlands and Kenya to slake these bottlers' near-unquenchable desert thirst. Now the National Glass Manufacturing Company has inaugurated a spanking-new $1.5 million plant near Dhahran which uses natural gas to fire its furnaces and transform highpurity silica sandstone from a quarry near Riyadh into nearly 26 million bottles a year. The factory will employ 180 when operating at capacity.

There are numerous success stories. Jiddah's Saudi Arabian Carpet Factory, set up in 1971 to produce prayer rugs for sale to pilgrims and for the great mosques of Mecca and Medina, now turns out enough floor covering each day to almost carpet a football field and is capturing a large share of a market formerly dominated by French, Italian and Lebanese imports. Manager Mustapha bin Sumit says he has ordered five more Belgian machines to double his production.

Abdul Rashid Badrah started his west-coast candy factory in 1966, has since tripled production, exports to Yemen and the Arabian Gulf states. During his peak season, the month of Ramadan, with its numerous religious celebrations and festivities, his 200 employees, all Saudi Arabs, work three shifts, turning out 15 tons of hard candy, toffee, chocolates, nougats and wafers each shift. The firm also packs sugar and cornflour, and Badrah now plans to produce cookies and potato chips in a $2-million addition to his present $1.5-million plant.

Abdullah Matrood, a former Aramco employee (Aramco World , January-February 1972) started his unpretentious National Laundry in the growing commercial center of Al Khobar near Dhahran, and has built it in a few years into a smooth-running industrial operation with 18 branch pickup points and 145 workers processing 8,800 pounds of laundry a day. Matrood also owns the National Dairy and Ice Cream Plant (one of three in the kingdom). The factory produces up to 17,000 gallons of ice cream weekly during hot months, keeps a refrigerator truck constantly busy on the long road to Hofuf and Riyadh and ships to Jiddah by air four times a week.

I like the Bin Zagirs with Unilever, the Aboudawood family in Jiddah started off as importers of Procter and Gamble products, then entered into a 50 percent joint venture back in 1954 to manufacture Tide and Cheer locally. The normal plant capacity is 13,000 metric tons per year, but it has gone onto two shifts a day to meet the demand. The firm varies the formula of its detergents to match local water conditions or laundering customs. Thus the product sold in areas where women still boil clothing is slightly different from that marketed in cities where washing machines are more common or that exported to mountain villages in Yemen. The company also uses modern promotional techniques with special offers such as a nine-piece map of the Arabian Peninsula or coupons to save against a kitchen knife or even—for a lucky few—a TV set. It employs 125 men and is proud of its safety record and paternalistic labor relations, which include such extras as subsidized lunches, year-end bonuses, gift parcels for religious holidays or family events—and of course free soap.

Under license the same family operates the Clorox factory, which is 100 percent Saudi-owned. Hussein Aboudawood, an energetic young family scion with a BS in chemical engineering from the University of Texas and on-the-job training with Clorox in the United States, manages and speaks with evident pride of the spanking-new million-dollar factory. "The contractor said he could save us money if he used concrete blocks instead of the yellow bricks called for by the architect. I told him 'Forget it.' So then he said he could import the bricks from Kuwait and I told him 'Forget it.' In the end he made them here in Jiddah specially for us and you can see it was worth it."

The factory, with arches reminiscent of Dhahran's International Airport, is indeed handsome. It also happens to churn out about five million bottles of Clorox per year for sale in Saudi Arabia, the Gulf states, Yemen and Jordan. Bleach is a large seller in these desert lands where the cool white cotton thobe or galabiyah is still the most commonly worn man's garment. The factory employs 30 and also manufactures its own distinctive plastic bottles, though like the Tide factory, its labels and cardboard cartons are produced at Banawi, a Jiddah printing company.

Another container producer is the National Paper Products Company in Dammam, which grossed more than $4 million last year after beginning on a shoestring in 1957, producing manila envelopes and paper tissues. Now it sells polyethylene bags to SAFCO and another fertilizer company in nearby Kuwait. Last year the firm manufactured 32.5 million four-ply paper cement bags—enough, at 10 feet of heavy-duty paper per bag, to wrap around the equator 2½ times. It sold the bags to companies in Abu Dhabi, Qatar and Kuwait as well as to the three Saudi Arabian cement plants, which are located in Hofuf, Riyadh and Jiddah.

Cement production, which has averaged about 50 percent of total consumption, is climbing rapidly as the construction industry, like light manufacturing and the service industry, continues to thrive. It doubled from 1966 to 1971, when it reached about one million tons, and it is expected to double again by next year. Jiddah's Arabian Cement Company has announced a $20-million addition (including a million dollars, worth of pollution control equipment) to nearly double production to 2,100 tons daily. The Yamamah Saudi Cement Company of Riyadh, which produces 1,100 tons a day, is planning a new unit with electric dust precipitators which will expand production to 3,100 tons. The Saudi Cement Company in Hofuf, capitalized at $17.5 million, fired its first kiln in 1961, added another two years later, a third two years after that. The plant has lately been running so consistently at five to ten percent over its rated 1,500-ton daily capacity that the company has decided to double the facilities. The plant is fueled by Saudi natural gas, gets its basic raw material (eight million cubic feet of limestone daily) from its own next-door quarry, buys clay and gypsum from privately-owned quarries nearby, and even obtains Saudi iron ore (one percent of cement's ingredients) from a small mine in Wadi Fatma in the Hijaz mountains. An interesting sidelight is that besides its standard Portland variety, Saudi Cement produces 50,000 tons per year of long-setting oil-well cement, which needs time to travel down a hole about 7,000 feet before it hardens. This special product is entirely consumed in Saudi oil fields.

The company also produces a special salt-resistant variety of cement for use near the sea, which was used in building the new desalination plant in Al Khobar. It also makes large bulk sales of its standard variety to Amiantit Company, the Saudi Arab-Swiss joint-venture company which produces about $6-million worth of asbestos-cement pipes each year in a $4-million plant located in Dammam. Two giant truck trailers shuttle endlessly between Hofuf and Dammam carrying about 1,500 tons of unbagged cement for Amiantit each month. Although the plant was designed with an anticipated export capacity only a few years ago, the company's entire production is now being used within Saudi Arabia, and although the plant works 210 men in three shifts, production is booked six months ahead. A second Amiantit factory opened in Jiddah last year. The sturdy pipes can be used for irrigation, sewage or municipal water supply. For the latter, the Dammam plant has turned out pipe for entire systems in Riyadh and Mecca, and for the 30-mile strip of Gulf coastal townships linked to the new Al Khobar desalination plant.

A competitor in the pipe field is another Saudi company, SAPPCO Ltd., which has a technical agreement with Chemidus-Waviu Ltd. and has finished construction on a $l-million pipe-extrusion plant in Riyadh. SAPPCO plans to turn out 2,000 tons of unplasticized polyvinylchloride pipe this year, increasing production to 8,000 tons after five years. One advantage of lightweight PVC pipe is that it is unaffected by rust, acidic soils and sewage, all of which are problems in semi-tropical countries. Eventually, too, it's expected that the raw material for these pipes might be produced in one of the factories which will be springing up in the planned east-coast petrochemical complex.

In the service industries a number of Eastern Province firms are a natural outgrowth of activity related to the oil industry. Many, in fact, got their start with one of several forms of support—direct loans, loan guarantees, purchase contracts or letters of intent—offered by Aramco as part of its historical efforts to develop local business. Finding itself involved over the years in everything from gardening and baking to auto repairs and warehousing, Aramco decided to encourage the local economy to provide those services not closely related to oil production. The young generation of Saudi entrepreneurs (many of them ex-Aramco employees) were quick to step into the breach. Several large garages, a motor-rewind shop, a valve repair shop and a pipe-coating and wrapping plant are all examples of this trend. Another is Vetco Saudi Arabia, a joint venture including Saudi industrialist Sulaiman Olayan and America's Vetco International. The company repairs and maintains drilling equipment and re-threads drilling pipes and couplings. Westinghouse is now going ahead with a $30-million joint-venture project with the Saudi firm Abar and Zaini to build maintenance shops and training facilities in the Eastern Province.

Aramco engineers also began, years ago, to contract out minor construction projects and to their astonishment saw a dynamic support industry spring up around them as the small contractors began buying up used jack hammers, compressors, and trucks and going into business. Today a list of some of the construction equipment privately owned by 31 independent Saudi Arab contractors frequently used by Aramco shows graphically how these firms have grown to meet the challenges of oil construction. The list includes such items as 99 concrete mixers, 438 welding machines, 48 cranes of different sizes, 94 compressors, 205 dump trucks, 83 bulldozers, 184 scaffold sets, 43 sand blasters and 52 sidebooms. And local legend holds that the late Mohammed bin Laden, a Saudi millionaire road-construction mogul who started out as an illiterate truck driver, was the world's largest single importer of Caterpillar earth movers.

The day may be corning when other Saudi names will surface in international circles as well—names such as Olayan, Pharaon, Kashoggi and Juffali.

The Juffalis, for example, a Jiddah merchant family, have extended their business interests in a dozen directions and are reported to be looking into investment opportunities in the Middle East, Europe and the United States. They have built or bought electric power plants in Jiddah, Taif, Mecca, Medina and Hofuf, hold the major shares in a cement company, install telephone lines, serve as agents for the European electronics firms L.M. Ericsson and Siemen's, as well as U.S. companies such as York, Kelvinator, Massey-Ferguson, Clark-Michigan and IBM, and are constructing a $5.6 million housing development in Al Khobar. They maintain machine workshops (each with 20,000 sq. yards of floor space) in three major cities, function as agents for Daimler-Benz and in their Jiddah automotive spare parts warehouse stock 40,000 different items. Although Saudi Arabia now has an estimated 25 computers in service (in oil, electric utilities, government and education), the Juffalis operate the kingdom's first, and so far its only, computer in wholesale trade. Every day of the year the company sends a mail bag of sales results from its branch offices and warehouses to the center in Riyadh for instant inventory, analysis and re-order.

From such success stories has come an infectious mood of exuberance and confidence. In December last year, for example, the Ministry of Commerce and Industry announced that it had licensed seven new factories including a $220,000 poultry feed plant in Riyadh, a $146,000 plastic bag factory in Jiddah and a $270,000 rubber belt and gasket factory in Dammam. And banking and diplomatic circles are constantly buzzing with "highly confidential" rumors from "well-informed sources" about even grander projects. When the kingdom began importing more than $50 million worth of motor vehicles per year in 1971, for example, rumors about General Motors, Honda, Peugeot and Nissan soon followed—as did later the announcement that General Motors and Nissan would indeed build plants. The GM firm will be called The Saudi Arabian Motors Company (60 percent GM and 40 percent national capital) and has been licensed to assemble 7,800 vehicles yearly—GMC Chevrolet trucks, 60-passenger buses and small Australian-model Torana cars—in a $10-million plant. Some parts are also expected to be manufactured locally.

There are still plenty of skeptics. "The market in Saudi Arabia is too small," they say. "There's not enough skilled labor. Communications are poor. It's too soon. Too hot. Too remote." And in many instances they may be correct. But with steel smelters, petrochemical complexes and automobile assembly plants materializing and businessmen seriously investigating a host of other possibilities, even the skeptics are beginning to realize how far—and how fast—industry has come since the day, hardly 20 years ago, when the first product rolled off an assembly line stamped "Made in Saudi Arabia." They are also beginning to realize that it's only the beginning.

William Tracy is Assistant Editor of Aramco World Magazine.

This article appeared on pages 2-15 of the May/June 1974 print edition of Saudi Aramco World.


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