FindMe in Saudi by Nayra Delgado

Guides W

hat, When, Who, Where and Why?

FindMe in

Saudi King Abdullah Financial District

KSA ANNUAL REVIEW

"A changing country towards a new future" HRH Prince Sultan Bin Salman Bin Abdul Aziz

facts and curiosities

birth rate is the second highest in the world growing at 2.9%? …KSA´s

Did you know that... …KSA is the ...Saudi Arabia holds the

200,000 Saudi students attending universities around the world on government grants?

…there are

14th largest country in the world?

11th place in the World Bank´s 2010 Ease of Doing Business Report?

most generous aid donor in the world, donating 3.4 percent of its GDP or almost four times the 0.7% asked for by the UN?

…KSA is the

Madain Saleh in KSA is an ancient Nabatean city

….

similar to Petra a few hundred kilometres to the north?

the cradle of Islam, the birthplace of the prophet Mohammed and home to the Two Holy Mosques, and that King Abdullah is known as “the Custodian of the Two Holy Mosques”? … KSA is

population of 27 million and over 60%of them are under the age of 30?

…Saudi Arabia has a

...Saudi Arabia

owns $500 billion in foreign assets …KSA is a continent of its own with

around the world?

different climates

and landscapes, ranging from forested mountains to sandy deserts to to green oases to the breathtaking underwater life of the Red Sea?

fastest growing religion in the world, that the 1.4 billion Muslims form almost one third of the world’s population and that 11 million pilgrims are

…Islam is the

mineral deposits

...the soil of Saudi Arabia contains different and the country will soon become the leading exporter of

phosphate and bauxite?

accommodated in Mecca every year?

…KSA is a member of the

…

G-20 since 2008 and of the WTO since 2005?

HRH Prince Sultan bin Salman, Chairman of the SCTA, was the first Arab to travel in space?

Empty Quarter,

….KSA is home to the one of the largest sand deserts of the world?

…the South African

football stadium where Spain beat the Netherlands in the 2010 World Cup was mainly built with

world’s leading oil exporter with the largest oil reserves inspired the creation of OPEC and is a founding member of the organisation?

SABIC products?

...KSA, the

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Saudi Arabia· 3

WG u i d e s

Saudi Arabia What, When, Who, Where and Why?

154

160

Table of contents Mineral resources. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154

FACTS AND CURIOSITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Oil and gas are the obvious terms that spring to mind when thinking about

CONTENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

KSA, the world’s largest exporter of oil but there are more minerals to explore under Saudi’s soil.

KSA in the world. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 agriculture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 160 government. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

With water saving at the forefront of any agricultural policy, KSA food production

166

continues growing with the population.

CREDITS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 CONSTRUCTION & REAL ESTATE . . . . . . . . . . . . . . . . . . . . . . 166

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

An extraordinary demand for affordable housing from a growing population

After five years of successful structural changes, KSA is today challenging the

combined with a booming economy and massive government investments are

global crisis by investing billions of dollars in new projects aiming to diversify

driving the sector to a spectacular growth

the economy.

HISTORY & heritage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182

W INVESTMENT GUIDE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

In an effort to preserve heritage sites and remains from antiquity, Saudi Arabia is

While attracting foreign investment is a headache for many countries, Saudi Ara-

embarking on a full-scale archaeological adventure promoted by Prince Sultan

bia remains a highly attractive market to foreign companies

bin Salman, Chairman of the SCTA.

FINANCE & INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50

Ict. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 198

The Saudi Arabian financial system has weathered the global financial storm

Wiring the kingdom is a major aspect of the ongoing infrastructure de-

better than most and keeps providing credits and loans.

velopment plan. A young and computer-savvy population drives an evergrowing ICT sector.

TRANSPORT & INFRASTRUCTURE . . . . . . . . . . . . . . . . . . . . . . 76 Construction sites and cranes dominate the kingdom's landscape today with a

education & health . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 214

provision of $400 billion investment over five years starting in 2009.

They are the absolute winners in terms of yearly budget allocations for some

182

years. To build a knowledge economy education and research are key elements.

TOURISM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92

Although most people associate travelling to Saudi Arabia with religious tourism

LIFESTYLE & SOCIETY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 224

only, the reality is that KSA is an untapped destination with a rich heritage.

Saudi Arabia is a country of deep contrasts. Sports, arts or fashion are also in the “saudisation” process elevating the national pride.

INDUSTRY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134 While green energy is only beginning to take root in Saudi, massive new indus-

wguide. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 242

trial cities are being built along strict environmental guidelines.

Discover the most attractive destinations in Saudi Arabia and some of its hoteliers.

198

134

224

214

KSA in the world

The Kingdom of Saudi Arabia

Iraq Jerusalem Israel

Al Qurayyat Jordan

Haql

Iran Arar

Sakaka Kuwait

Tabuk

Hail

Hafr Al Batin

Alula

Gassim

Egypt

Riyadh

Al Madinah

Yanbu

Arabian Gulf Al Jubail Dammam Bahrain Dhahran Khubar Holuf Qatar Mubarraz

Gulf of United Arab Emirates

Kingdom of Saudi Arabia

Oman

Jeddah Makkah Taif

Egypt Al Baha

Red Sea

Khamis Mushayt Jazan

Eritrea Country Name: Kingdom of Saudi Arabia Local Country Name: Al-Mamlakah al-Arabiyah as-Saudiyah Flag: On a green background, the Muslim creed in Arabic:“There is no god but God: Muhammad is the Messenger of God.” Emblem: A date palm, representing vitality and growth, and two crossed swords, symbolising justice and strength rooted in faith.

International Monetary Fund (IMF) and the World Trade Organization (WTO); signatory of the Nuclear Non-Proliferation Treatyy Population: 27.1 million according to the preliminary figures of the 2010 census, including 8,500,000 non-nationals. Over 50% of the population is male and over 60% is under the age of 30. The total number of homes is 4.6 million. Currency: Saudi Riyals (SAR or SR, pegged to the US$ at 3.74 SR)

Ethiopia

Empty Quarter Najran

Gulf of Aden

Area: 2,149,690 sq km (14th largest country in the world, approximately the size of Mexico, Congo or Greenland); only 0.7% is arable land Coastline: 2,640 km

International Affiliations: Founding member of Gulf Cooperation Council (GCC), United Nations, League of Arab States, Organisation of the Islamic Conference (OIC), and Organisation of Petroleum Exporting Countries (OPEC); member of many international organisations, including the G-20, the World Bank, the

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Important cities and regions: Jeddah, pop. 3.6 million (commercial capital) in the province of Mecca; Mecca and Medina (spiritual capitals) and Dhammam in the oil-rich Eastern Province. Religion: Islam, which is also the basis of the legal system Language: Arabic. English widely spoken in the business environment Literacy: 78.8%

Arabian Sea

Republic of Yemen

Capital: Riyadh (pop. 4.8 million) National Day: September 23th, commemorating the foundation of the modern Kingdom of Saudi Arabia in 1932. The date changes according to the Islamic calendar.

Sultanate of Oman

Provinces: Saudi Arabia has 13 provinces or administrations: Al Bahah, Al Hudud ash Shamaliyah (Northern Border), Al Jawf, Al Madinah, Al Qasim, Ar Riyad (Riyadh), Ash Sharqiyah (Eastern Province), Asir, Ha’il, Jizan, Makkah, Najran, Tabuk Location: Occupying 80% of the Arabian peninsula, bordering the Persian Gulf in the west and the Gulf of Aqaba and the Red Sea in the east. At the crossroads of Europe, Asia and Africa; bordered on the north by Jordan, Iraq and Kuwait, on the south, by Yemen and Oman,

and on the east by the United Arab Emirates, Qatar and Bahrain. Terrein: Varied; fairly harsh, with salt flats, gravel plains and sand deserts; a few man-made lakes but no permanent streams; in the south, the Rub Al-Khali (Empty Quarter), one of the largest sand deserts in the world; in the southwest, green mountain ranges of over 3,000 metres high. Weather: Hot and mostly dry, milder in the winter months Hottest month: July, 26-42°C (average daily minimum and maximum); coldest month: January, 8-12°C; driest months: July, September, October, 0 mm average rainfall; wettest month: April, 25 mm average rainfall. Natural Resources: Petroleum, natural gas, iron ore, gold, copper, bauxite and phosphate

Saudi Arabia· 7

KING ABDULLAH BIN ABDUL-AZIZ AL SAUD, Custodian of the Two Holy Mosques born in August 1, 1923 is the King of Saudi Arabia since August 2005 when he succeeded to the throne upon the death of his half-brother King Fahd. In practical terms he was the regent of Saudi Arabia since 1996 as Crown Prince. From 1962 to 2000 he was also Commander of Saudi Arabian National Guard.

Crown Prince Sultan bin Abdulaziz Al Saud, (Born in 1924 or 1928) is the Crown Prince of Saudi Arabia and the First Deputy Prime Minister and Minister of Defense and Aviation. He is the successor to the king and was elected directly by him. However, to avoid future internal disputes, King Abdullah set up a council of senior princes that will decide who will be the next crown prince or heir apparent within the family.

Prince Nayef bin Abdel-Aziz al-Saud (Born 1933) is the Second Deputy Prime Minister and long time Minister of Interior of Saudi Arabia. He is a half-brother of King Abdullah. He is second in line of succession to the Saudi throne since King Abdullah decided to promote him as the second deputy prime minister in April 2010. He also holds now the position of interior minister. Since the creation of Saudi Arabia in 1932 by its founder King Abdel-Aziz his surviving sons have held the al-Saud the throne ever since.

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The government of Saudi Arabia An hereditary monarchy in which male descendants of founding king Abdul-Aziz ibn Saud succeed to the throne, and an Islamic state based on the principles prescribed by the Koran (Islam’s holy book) and the sharia (Islamic law). According to the 1992 Basic Law, the Koran and the prophet’s sunna (recorded traditions) are the country’s official constitution. The power of the king is therefore constrained by the sharia and the clerical establishment (the ulema). In practice, the rest of the Saudi royal family, powerful business groups and the country’s intelligentsia exercise varying degrees of influence too. The ulema, or Islamic clergy, who have a centuries-old alliance with the house of Saud, support the royal political project in return for consultation, status, privileges and a strong influence in areas such as justice and education. The Saudi court system has introduced several secular codes next to the sharia. There are special committees to handle commercial disputes and there are attempts to further codify sharia law. The king appoints the Council of Ministers which he also heads as prime minister. The Council of Ministers exercises both legislative and executive powers. The more recent Shura Council is an advisory organ whose members are also appointed by the king. In 1997, the Council, which was composed of 60 prominent personalities in Saudi social, political, and religious life, was expanded to 90 members and under king Abdullah again to 150 members. The Majlis Al-Shura advises the king and the Council of Ministers on a regular basis on matters pertaining to government programs and policies and assesses, interprets and modifies the Kingdom’s system of laws, contracts, and international agreements. Members serve four-year terms and are directly appointed by the King. Municipal councils were partly elected by male Saudis in 2005, but the next round of elections has been postponed until at least 2011 – the only elections ever held since the foundation of the kingdom. Suffrage is limited to males over 21 years of age and political parties are illegal. Direct petitioning of high officials through their majlis or public audience is a well-established tradition. Legislation is by resolution of the Council of Ministers and Royal Decrees. Justice is administered according to the sharia law by a system of religious courts whose judges are appointed by the king on the recommendation of the Supreme Judicial Council, composed of twelve senior Islamic jurists. The law protects the Independence of the judiciary. The king acts as the highest court of appeal and has the power to pardon crimes and criminals. In 1993, the late king Fahd promulgated new by-laws for the provincial system to aid in the administration of the country’s provinces and to facilitate their development. The kingdom is divided into 13 provinces and the capital, each headed by an emir (governor) appointed by the king. The governor is assisted by a vice governor, a provincial council composed of the heads of the province’s government departments, and a ten-member council of prominent individuals from the community who are appointed to four-year, renewable terms. Source: EIU, Saudi Official webs, CIA World Fact Book and other.

Saudi Arabia· 9

Saudi Arabia Credits

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FindMe in Saudi is a production of the Saudi Commission for Tourism and Antiquities and the international communications firm Global Gulf Consulting

Management

Nayra Delgado

Managing Director

and Editor-in-Chief

Roberto Puente

Executive Director

Bart Peeters

Senior Editor

Paul Cochrane

Journalist

Nicholas Bruneau

Journalist

Editorial

Proofreading Bart Peeters

Editorial Supervision Najla A. Al-Khalifah Rabih Shaddad

Production

Elena Bautista

Marketing Director

Ibrahim Hassoun

Sales

Amal Al Blushi

Project Coordinator

Hosangadi Abdulrahman

Project Assistant

Angélica Sáenz de Ormijana Art Designer Director

David Pérez Nebot

SCTA bank of images

Adrian Haddad

ArabianEye.com/Corbis

!"#$%#&'#(

Lay Out and Design Designer

Pictures Photographer

Special Thanks The team of Global Gulf Consulting would like to thank His Royal Highness Prince Sultan bin Salman, Chairman of SCTA, and his team for the support given to this project. Especially thanks to Mr. Abdullah Al Jehani, Vicepresident of marketing of SCTA and Rabih Shadad, SCTA´s Tourism Marketing Consultant and Project Manager. We would also like to thank all our sponsors and interviewees for their time and trust. This guide is dedicated to all the people of KSA in a time of change and expansion.

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GLOBAL GULF CONSULTING P.O. Box 0097, CP 35412 Spain Tel: Saudi +96 6565651730, +96 6563583123 Spain +34 928634434, +34 646464770 ! info@globalgulfconsulting.com " www.globalgulfconsulting.com

introduction

Welcome to the Kingdom of

Saudi Arabia

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Saudi Arabia路 13

introduction

Contrary to its conventional reputation as a sleepy desert country, the Kingdom of Saudi Arabia in 2010 actually looks more like a mega-size late-nineties Dubai – an unending construction site that never sleeps. With a sound economy that has been spared the worst of the world crisis and benefited from increasing government expenditure, the world’s largest oil exporter and owner of the largest proven reserves is witnessing a new golden age.

While the Emirates and other Gulf Cooperation Council (GCC) countries have suffered from the burst of a spectacular real estate bubble that has dimmed their glitzy construction projects, the cranes have gotten busy developing and modernising the vast desert expanses of the Ahab kingdom. Five years of massive structural arab development, carried by the country’s recession-proof economy and bolstered by an impressive $400 billion investment plan for 20092014 designed to diversify the economy, have had the kingdom’s economy booming. So is its population: around 27 million people, 68% of them under the age of 35, growing at an astonishing rate of 2.7% annually. In other words, Saudi Arabia remains the most attractive investment destination in the GCC and beyond, being the largest country in the Gulf region not only geographically but also in terms of population and economic impact. Since King Abdullah bin Abdul-Aziz Al Saud took over the reins of government in 2005, his ambitious plan to develop the infrastructure and diversify the economy has accelerated markedly. The financial >>

MAIN ECONOMIC INDICATORS I GDP (purchasing power parity) $590.9 billion (2009 est.) country comparison to the world: 23 GDP (official exchange rate) $376.3 billion (2009 est.) GDP - real growth rate 3,7% (2011 est.) 3,6% (2010 est) 0.1% (2009 est.) country comparison to the world: 115 GDP - per capita (PPP) $23,300 (2009 est.) country comparison to the world: 55 GDP - composition by sector agriculture: 2.9% industry: 59.7% services: 37.4% (2009 est.)

Five years of massive structural development, carried by the country’s recession-proof economy and bolstered by an impressive $400 billion investment plan for 2009-2014 designed to diversify the economy, have had the kingdom’s economy booming.

Since King Abdullah bin Abdul-Aziz Al Saud took over the reins of government in 2005, 14 · W G u i d e s

his ambitious plan to develop the infrastructure and diversify the economy has accelerated markedly. Saudi Arabia· 15

introduction

KSA has weathered the financial storm better than most growing at 3,7 percent in 2010 and forecasting a 4 percent growth for 2001. This success comes from the recovery of the oil markets and a sound financial management

introduction

sector has been restructured and expanded, private enterprise has boomed and a massive expansion of the real estate and industrial sectors is under way. The legal framework and judicial system have seen a long-overdue overhaul designed to adapt them to the needs of a modern economy and even nonreligious tourism is being contemplated as a source of revenues. Together with this drive to integrate the kingdom into the global economy, a gradual and meaningful social evolution is taking place, transforming the country into a more liberal, open and modern society still proud of its traditional Islamic roots. Better safe than sorry While the financial crisis of late 2008 and the resulting worldwide economic slowdown have not passed by unnoticed here, KSA has weathered the storm better than most and forecasts an average growth of 3.7% in 2010. This success stems from the recovery of the oil markets and a sound financial management. From 2003 onwards, years of high oil prices have helped the kingdom avoid the worst of the crisis by

making good use of the savings and conservative decisions of the Saudi Arabian Monetary Agency (SAMA) and the Saudi Central Bank, which learnt the lessons of past mistakes. Indeed, in the 1970s crisis after the oil embargo and the 1980s crisis when oil prices fell unexpectedly to a minimum of $25 per barrel and remained there for almost ten years, Saudi Arabia was not prepared. When in 2003 the oil price started to rise again above $30, reaching $60 in 2005, SAMA knew it had to save for worse times. As global markets recovered from the dotcom bust and financial markets bolstered both exuberant consumer demand in the western economies and increased development of the emerging economies (with Brazil, Russia, India and China leading the way) the world experienced the biggest surge of trade in a generation. An energy hungry world meant that oil markets rallied and the price of oil skyrocketed from $60 in 2005 to $147 in 2008. As the appetite for energy grew, the kingdom’s treasury kept pace. In the peak year of 2008, one billion >>

From 2003 onwards, years of high oil prices have helped the kingdom avoid the worst of the crisis 16 · W G u i d e s

Saudi Arabia· 17

introduction

US dollars found their way to the kingdom every day. In that same year, Saudi Arabia produced 8.4 million barrels of crude a day. Since October 2009, oil prices have stabilized around a range of $60 to $80. These satisfactory levels of oil prices have enabled the kingdom to bring down its debt from about 100% of gross domestic product to 20%. It has also allowed the government to embark on what is probably the most massive state-driven development campaign since the industrialisation of the USSR in the first half of the 20th century. Abdullah H. Al Fozan, And this time around SAMA Senior Partner has used its best conservaand Chairman of tive policies to wisely invest KPMG Saudi Arabia the funds generated from a 4.9% annual growth average during six years starting in 2003 in US Treasure bills rather than equities. At the same time, taking good advantage of opportunities in the financially thirsty markets, SAMA has been able to increase its total

amount of foreign assets to about US$500bn (SR1.5 trillion). This comfortable financial status has allowed the country to approve a record budget for 2010 during the worst financial crisis since 1929. Total expenditures totalled $147 billion or an increase of 13% on 2009’s budget. By way of comparison, the total budget of Venezuela, another oil producing country with a comparable population, totalled $92bn in 2009. “The country is making up for a period of stalled development lasting until the late nineties, during which pressing concerns with the Iran-Iraq and first Gulf wars, unstable conditions in Yemen and other parts of the region, as well as a long period of low oil prices after the oil boom of the seventies prevented substantial investment and development,” explains Abdullah H. Al Fozan, Senior Partner and Chairman of KPMG Saudi Arabia. This intermission, however, provided an opportunity for the government to design a forward-looking, sustainable development project. King Abdullah’s new >>

MAIN ECONOMIC INDICATORS II Labor force 7.193 million country comparison to the world: 62 note: about 80% of the labor force is non-national (2009 est.) Labor force - by occupation agriculture: 6.7% industry: 21.4% services: 71.9% (2005 est.) Unemployment rate 10.5% (2009 est.) country comparison to the world: 121 note: data are for Saudi males only (local bank estimates; some estimates range as high as 25%) Investment (gross fixed) 26.1% of GDP (2009 est.) country comparison to the world: 36 Budget 2010 Budget: $144bn (SR540bn), 14 percent higher than 2009 and the largest in the kingdom’s history. Revenues est. $126bn (SR470bn) Expenditures est.$144bn (SR540bn). Public debt 22.6% of GDP (2009 est.) country comparison to the world: 101 Inflation rate (consumer prices) 5.1% (2009) and est. 5.3% in 2010 country comparison to the world: 145 Stock of domestic credit $2.248 billion (31 December 2009) country comparison to the world: 119 Market value of publicly traded shares $318.7 billion (31 December 2009) country comparison to the world: 24 Agriculture - products wheat, barley, tomatoes, melons, dates, citrus; mutton, chickens, eggs, milk Source: The CIA Worldfact Book, EIU, SAMA, the World Bank and other sources

SAMA has used its best conservative policies to wisely invest the funds generated from a 18 · W G u i d e s

4.9% annual growth average during six years starting in 2003 in US Treasure bills rather than equities. Saudi Arabia· 19

introduction

Doctor Fahad al Sultan Is at once an exceptional man and very representative for a generation of Saudis. As the holder of a PhD in development administration from State University of New York at Albany, Dr. Sultan has published scores of articles and no less than seven books, including the first Arabic-language book on business process re-engineering (BPR), a subject very close to his heart. Dr. Sultan is now Secretary General of the Council of Saudi Chambers, an umbrella organisation uniting all local and sector-related Chambers of Commerce and Industry of the Kingdom of Saudi Arabia.

introduction

vision in effect seems to avoid the excesses of the earlier, often wasteful and fanciful bout of spending, which concentrated more on the wealthy lifestyle of the elite than the needs of the population at large. In the past, government spending has wasted enormous resources on prestigious, unsustainable projects and neglected to build a diverse economic base that could reduce the country’s dependency on imports to satisfy virtually all its wants and needs. Hundreds of projects The government’s enthusiasm in establishing private-public partnerships and entrusting the design and construction of entire economic cities and gigantic university projects to private contractors is attracting a legion of foreign investors to the country. The large honey pot, advertised in an aggressive promotional effort, is seeing transnational corporations take notice of the advantages offered by the country’s quickly expanding infrastructure, its strategic location as an export hub between Africa, Asia and Europe, the relatively low cost of labour, transport and energy and - last but not least - its favourable tax climate.

Even a cursory look at the projects currently under way in the kingdom will make investors worldwide realise they should get involved - if they aren’t already. Among the most remarkable infrastructure works are the $35 billion King Abdullah Economic City (KAEC), the $10 billion King Abdullah Financial District (KAFD), the $6 billion Al Haramain highspeed railway linking Mecca and Medina, and the $11.5 billion Princess Noorah Bint Abdulrahman University for Women, slated to be the largest in the region. Spread throughout the country, dozens of new universities and hospitals and hundreds of smaller medical centres and vocational training institutes are also being built. The acute housing shortage is tackled by the construction of dozens of residential compound projects and tower blocks each providing hundreds of villas and apartments, while shopping malls and hotels are cropping up at a rate of almost one per month. Riyadh’s King Khaled International Airport is undergoing a massive expansion to become the largest “airport city” in the world, but all internatio-

The government’s enthusiasm in establishing private-public partnerships and entrusting the design and construction of entire 20 · W G u i d e s

All in all, Saudi Arabia plans to spend a total of $400 billion on infrastructure projects between 2009 and 2014. In real terms, in 2010 half of the nation’s budget or some $69.5 billion (SR260 billion) has been allocated to capital investment projects, especially those related to infrastructure and to the diversification of the economy.

extraction and the primary petrochemical industries that in the past have provided the bulk of its GDP. In fact, Saudi Arabia has one of the richest cultures of the world. In 2008, the Unesco named the Nabatean remains at Madain Saleh – a sister city to Jordan’s Petra - a world heritage site, followed in 2010 by Diriyah, the ‘old town’ of Riyadh, which contains the original desert fort of King Abdul Aziz al Saud.“Very few people realise the wealth of attractions this country has to offer: archaeological sites, hundreds of miles of pristine coastline, cool green mountains in the south, and most of all the enormous and beautiful desert. Just like the prevailing conservative attitude and the social restrictions, the desert can be seen as challenge and an obstacle, but also as an opportunity”,comments Dr. Fahad Al Sultan, Executive Director of the Council of Saudi Chambers (CSC).

This has in turn prompted the government to pay more attention to the development of its tourism sector, focusing on MICE tourism and developing the country’s rich heritage as another pillar in its ongoing effort to reduce the country’s dependency on oil

Sustainable development drive: Towards a knowledge economy Neither is this development drive just a temporary burst of activity on a mere whim of the royal family to ‘catch up with the neighbours’: contrary to the ‘city >>

nal airports of Saudi Arabia are experiencing major developments. All around the country, tracks are being laid for railways, the roads system is renovated and expanded and ports are being built. Finally, in a further effort to stop the instability of some of its neighbours spilling over, a multi-billion dollar security fence will be built along the entire 6,500km length of the kingdom’s northern and southern land borders, along with radar-based technology to monitor intrusions.

OIL AND GAS INDICATORS I Industries crude oil production, petroleum refining, basic petrochemicals, ammonia, industrial gases, sodium hydroxide (caustic soda), cement, fertilizer, plastics, metals, commercial ship repair, commercial aircraft repair, construction Industrial production growth rate -2.8% (2009 est.) country comparison to the world: 96 Electricity - production: 179.1 billion kWh (2007 est.) country comparison to the world: 21 Electricity - consumption: 165.1 billion kWh (2007 est.) country comparison to the world: 20

economic cities and gigantic university projects to private contractors is attracting a legion of foreign investors to the country Saudi Arabia· 21

introduction

A clear concern is housing the next generation with the development of new residential and economic projects providing ‘smart’ ultramodern infrastructure

introduction

states’ of Dubai, Qatar, Bahrain or Abu Dhabi, the KSA has a large, young and fast growing local population to provide for.“I do not think the kingdom is lagging behind its GCC neighbours. Do not forget that we have a real and massive country to develop: a land area of 125 million m² comprising different climate zones, 6,000 km of land borders and 3,000 km of sea borders. Building a road connecting different locations in Qatar or Abu Dhabi will cost you almost $100 million, but to connect Riyadh and Jeddah you are talking about 1,000 km of desert. Just acquiring the land and paving that distance sets you back billions already,” says Abdullah Al Fozan.“Moreover, we have a big and fast growing young population that will enter the labour market soon. If we don’t provide jobs and opportunities for them, we will soon face huge social problems.” No wonder the government’s absolute priority, beside the expansion of health care provision to outlying areas, is firmly on the educational sector, with a secondary emphasis on providing employment opportunities for its growing student popula-

tion after graduation. Almost a quarter of the 2010 budget, some $36.7 bn (SR137.6 bn), was allocated to education and training projects with the plan of building 1,200 new schools and rehabilitate 2,000 existing schools. This new emphasis on education, which includes grants for tens of thousands of Saudi youngsters to study abroad, is helping to build a trained and skilled local workforce – a key ingredient needed to attract more foreign direct investment (FDI) to KSA. Meanwhile, the healthcare sector received some $16.4bn (SR61.2 bn), 11% above the 2009 allocation, for the construction of 92 new hospitals and primary care centres with a capacity of 17,150 beds. Another clear concern is housing the next generation with the development of new residential and economic projects providing ‘smart’ ultramodern infrastructure equipped with state-of-the-art telecommunications applications. “There is obviously an intense acceleration in infrastructural and other developmental activities.

After the long ‘freeze’ of the 80s and 90s, this was long overdue, and fortunately the prudent asset management of the government combined with the rising oil price has enabled this,” explains Abdullah Al Fozan. “But although the money is there to finance the projects, as well as the vision to integrate them into the overall needs of the country, there are still problems and challenges, especially within the state bureaucracy. Since King Abdullah fully took over the reins in 2005, we have seen marked improvements in this regard – especially in the campaigns against corruption, but also in the streamlining of procedures and the improvement of services, especially in the justice department and the courts – but much still remains to be done.” Too slow for many, too fast for others “Saudi Arabia is still a country ruled by customs and traditions, even where there are no specific laws that apply,” says Al Fozan.“Take the famous issue of women driving. There is simply no existing law that forbids women to drive, and consequently there is

no penalty that applies. But when the police see a woman driving, they will nevertheless stop her, drive her home and reprimand her husband – always and invariably. On the other hand, other social customs are changing. For example, only two or three years ago, women were not allowed in the workplace, whereas now they are everywhere. So I hope that when my 14-year old daughter applies for a driving license in four years, the problem will be solved. And there is a good chance it will be.” King Abdullah has the vision and knows what needs to be done, specifies Al Fozan,“but many staff in government departments simply do not have the qualifications and skills needed to implement this vision and carry out the required tasks. For example, we cannot continue to have judges who are only experts in sharia law ruling in complex financial and economic disputes. We cannot continue to have the arbitrariness where a court case could take two weeks or two years for no specific reason and with no certainty on when a judgement will arrive. Without appropriate written laws and a dependable justice >>

OIL AND GAS INDICATORS II With a growing population, Euromonitor International calculated that $80bn worth of investment in power generation will be needed by 2018 to meet power demands in the kingdom, an additional 3,000MW annually. Saudi officials aim to meet a fifth of its power generation from alternative energy sources such as nuclear and renewables. Oil - production 9.764 million bbl/day (2009 est.) country comparison to the world: 2 Oil - consumption 2.43 million bbl/day (2009 est.) country comparison to the world: 9 Oil - exports 8.728 million bbl/day (2007 est.) country comparison to the world: 1 Oil - imports 79,250 bbl/day (2007 est.) country comparison to the world: 74 Oil - proved reserves 264.6 billion bbl (1 January 2010 est.) country comparison to the world: 1 Natural gas - production 77.1 billion cu m (2009 est.) country comparison to the world: 10 Natural gas - consumption 77.1 billion cu m (2009 est.) country comparison to the world: 11 Natural gas - exports 0 cu m (2008 est.) country comparison to the world: 130 Natural gas - imports 0 cu m (2008 est.) country comparison to the world: 135 Natural gas - proved reserves 7.461 trillion cu m (1 January 2010 est.) country comparison to the world: 5 Source: The CIA Worldfact Book, EIU, SAMA, the World Bank and other sources

Saudi Arabia has a total population of around 27 million people 68 percent of them under the age 22 · W G u i d e s

of 35 and growing at an astonishing rate of 2,7 percent annually, the second highest in the world. Saudi Arabia· 23

introduction

Since the Foreign Investment Act, it is possible to have a wholly foreign-owned company operating in KSA and this is becoming more and more of a common phenomenon

introduction

apparatus where people can get redress for their grievances, the whole system collapses.”

years that time is past. Today we need affordable and sustainable flats and small villas.”

Registration Number from the Ministry of Commerce and Industries (MOCI).”

New laws are especially eagerly awaited in the real estate sector – specifically the long-announced mortgage law, which as yet has failed to materialise. “The main problem in housing is in financing the market,” says Al Fozan. “There is a massive demand for affordable first homes from young couples who are just entering the labour market. They can’t afford to put down the cash required, but there is no clarity how mortgages should be regulated. King Abdullah has ordered thousands of new entry-level homes to be built. When the legislation arrives, the private sector will come in and add a second layer to this, but I don’t see that happening very soon, as project developers need to be able to protect themselves financially and banks need to be able to jump in with the money. Until the mortgage law is decreed - and if it is in fact designed to protect the low to middle income classes - this will not change. We don’t need more palaces to support the lifestyle of the boom

Changes in legislation have been coming up, albeit slowly. Since the Foreign Investment Act, it is possible to have a wholly foreign-owned company operating in KSA, and this is becoming more and more of a common phenomenon. Yet in some areas foreign ownership remains restricted, especially in the security and defence areas and some other critical fields like trade activities, which require 25% Saudi shareholding. But these restrictions are fast becoming the exception rather than the rule. In the Ease of Doing Business ranking of the World Bank, which examines regulations enhancing and constraining business activity, Saudi Arabia has now reached 11th position worldwide - and first position in the region.“We are currently one of the top countries for ease of starting up a company: in a mere 15 days you can incorporate a new enterprise, which is extremely fast,” says Al Fozan.“All you need is a licence from the Saudi Arabian General Investment Authority (SAGIA) and a Commercial

The old system where foreigners were obliged to work with a Saudi fakil or sponsor has mercifully been abolished too, and there are no more foreign currency restrictions. KSA imposes no VAT, employment tax, general sales tax or stamp duties. However, there are social security contributions to be paid by both employee and employer, as well as import duties on certain products and levies are raised on land transfers. Corporate tax, except for the oil and gas sector, is 20%. There is a zakat or religious tax of 2.5%, but this is only applied to Saudi and GCC nationals or, in the case of companies and joint ventures, to the equity held by them. Tax incentives are numerous and generous, and are available both in the new purpose-built economic cities and in the less developed provinces of the country. Each of the economic cities includes re-export zones with port areas.

Very few people realise the wealth of attractions this country has to offer: archaeological sites, hundreds of miles 24 · W G u i d e s

Tackling bureaucracy, especially the visa process, and improving the legal system are consequently the

two main factors to be developed to bring Saudi to the top of the World Bank’s Ease of Doing Business index. Indeed, the very same 2010 index ranks KSA 140th in the category ‘enforcing contracts’... A global player Last year the kingdom finalised the five-year plan designed to increase oil production capacity to 12.5 barrels per day (bpd), which includes a commitment to maintain 1.5 million to 2 million bpd of spare production capacity. At a cost of $100 million, this is seen as one of the more technically challenging projects, covering as it does 15% of global demand. KSA is already the top exporter globally and has a quarter of the world’s proven oil reserves, but Saudi Arabia’s ambitious plans aim higher: the country wants to play a more prominent role in international politics and the global economy. It already showed its strength last year when it managed to corner the Organization of Petroleum Exporting Countries (OPEC) into cutting oil production by 4.2 million bpd – successfully boosting oil prices from their low of about $32 to over $75 a barrel, a >>

Tax incentives are numerous and generous, and are available both in the new purposebuilt economic cities and in the less developed provinces of the country

of pristine coastline, cool green mountains in the south, and most of all the enormous and beautiful desert Saudi Arabia· 25

introduction

It is indeed impressive to consider the steps Saudi Arabia has taken especially since the accession to the throne of King Abdullah bin Abdel Aziz in 2005, to reach its objective to become a global player

introduction

figure accepted by most producers as sufficient to finance further investments. Saudi Arabia, as the top oil producer, was of course itself affected by the cut, but it also stood to gain a lot from it: it now holds 90% of global spare oil capacity, a cushion that consolidates KSA’s position as the most powerful country in OPEC. Now the country has the power to virtually control the oil prices and avoid situations similar to the events of 2008, when a shortage of oil rocketed prices to peaks of nearly $150. It has become a key player in the global oil decision-making framework. It is indeed impressive to consider the steps Saudi Arabia has taken especially since the accession to the throne of King Abdullah bin Abdel Aziz in 2005, to reach its objective to become a global player in the economical and political fields. In 2005, the country joined the Arabian Free Zone economy and became a member of the World Trade Organization (WTO). In January 2008, the Gulf Cooperation Council’s common market - in which KSA is the

major economic powerhouse - came into force, and in 2009 Saudi Arabia became a partner in the G-20. That is an amazing list of engagements for such a short period of time.

up joint ventures,” says Mr. Abul Rahman Bin Ali AL Jeraisy as Chairman of the board of Riyadh Chamber of Commerce and Industry. “We have come out of what I call our ‘dark ages’,” explains Dr. Fahad Al Sultan, Executive Director of the Council of Saudi Chambers (CSC). “Saudi Arabia can no longer afford to live isolate itself and hope global events will pass us by. The world has become a village and if we are to play any role at all in that village and in shaping its future, we must engage with the outside world, and therefore we need to get to know and understand this world. In the 1990s, it was still possible not to engage too much internationally, but now you are either in the game as an important player or you are left outside with the underdeveloped part of the world. I believe that we are on the right track as a country, economically and in terms of development, but I also believe we have to speed up our movement. We have much work left in terms of promoting our business relations with strategic partners domestically and internationally, in terms

“What we have achieved in the last five years, typically takes other countries 50 years – it is a very good example of how a leader can give a country greater importance than before. Even though we have had a relationship with USA for 80 years and with the UK for over a 100 years, and although we have been one of the only countries welcoming people from around the world to come and work with us, on every level from manual workers to leading and management and technical positions, we have until recently been relatively isolated on the world stage. Now are important partners for the EU, China, Japan, you name it. We have implemented a sound and prudent financial policy, so have not been very much affected by the global financial crisis. As a result, every single nation in the world now looks to us as the most important partners in the Middle East, whether for impex and trade, for DFI or for setting

of diversifying our economic base and in terms of promoting ourselves abroad.” A top aid giver An example of the latter is king Abdullah’s designation of KSA as ‘the kingdom of humanity’. Indeed, the kingdom is one of the largest donors of development aid per capita, a compassionate image that the government takes care to keep up. On the occasion of the Pakistan floods, for example, that was one of the worst natural disasters of 2010, Saudi Arabia donated $27 million plus dozens of planeloads of relief supply. According to the latest figures released by the Secretary General of the International Islamic Relief Organization Adnan Khalil Basha in 2010 the Kingdom have helped 11 countries with $6 billion in funding and have donated humanitarian aid and training support to a further 73 countries. At home, meanwhile, reform and modernisation are ongoing at what seems almost breakneck speed, especially for a country that in the very recent past remained more conservative, stagnant >>

KSA is already the top exporter globally and has a quarter of the world’s proven oil reserves, but Saudi Arabia’s ambitious plans aim higher: the country wants to play a more prominent role in international politics and the global economy.

COMMERCIAL BALANCE Current account balance $22.77 billion (2009 est.) country comparison to the world: 15 $132.3 billion (2008 est.) Exports $192.3 billion (2009 est.) country comparison to the world: 20 $313.5 billion (2008 est.) Exports - commodities petroleum and petroleum products 90% Exports are dominated by oil, followed by petrochemicals and plastics. Rising oil revenue brought a current-account surplus estimated at around 27% of GDP. Crude oil output averaged 9.2m barrels/day (b/d) in 2008 and 8.1m b/d in the first half of 2009. Exports - partners Japan 15.33%, South Korea 12.71%, US 12.2%, China 10.38%, India 7.12%, Taiwan 4.54%, Singapore 4.25% (2009) Imports $87.1 billion (2009 est.) country comparison to the world: 31 $101.5 billion (2008 est.) Imports - commodities machinery and equipment, foodstuffs, chemicals, motor vehicles, textiles Imports - partners US 12.32%, China 12.06%, Germany 7.67%, Japan 6.15%, South Korea 5.32%, India 4.99%, UK 4.72%, France 4.05% (2009) Reserves of foreign exchange and gold $410.1 billion (31 December 2009 est.) country comparison to the world: 4 Debt - external $72.77 billion (31 December 2009 est.) country comparison to the world: 41 Stock of direct foreign investment - at home $167 billion (31 December 2009 est.) country comparison to the world: 23 $131.5 billion (31 December 2008 est.) Stock of direct foreign investment - abroad $11.41 billion (31 December 2009 est.) country comparison to the world: 47 $4.886 billion (31 December 2008 est.) Exchange rates Saudi riyals (SAR)are pegged to the dollar and its value per US dollar is - 3.75 (2009), 3.75 (2008), 3.745 (2007), 3.745 (2006), 3.747 (2005) Source: The CIA Worldfact Book, EIU, SAMA, the World Bank and other sources

year the kingdom ﬁnalised theercing ﬁve-year plan designed toam increase oil production to 12.5 barrels Acinit ingLast ea facin vel dolummy nullam, sis eugueratie duis nos dion henit adit nulla capacity feugait velestrud eraesto 26 · W G u i d e s

per (bpd), which includes a commitment to maintain 1.5 million 2 million bpd of spare production capacity Pitday vullam vullan vent aute eugait iuscip exerostie conullandre minto hent num volore Saudi Arabia· 27

introduction

Saudi Arabia has become a key player not only in the in the global oil decision-making framework but also in the political and commercial scene. In 2005, the country joined the Arabian Free Zone economy and became a member of the World Trade Organization (WTO). In January 2008, it joined the Gulf Cooperation Council’s common market in which KSA is the major

and closed than almost any other country on the planet. “We, as executives, are in charge of bringing the king’s vision to life – translating ideas and plans into actions and facts on the ground,” says the CSC´s executive director.

player and later that year the country became a member of the G20. Dr. Sultan’s trajectory is a typical one for a generation of Saudis who have now reached mature age – and telling for the evolution of the country during the same period.“I was born in a remote, isolated farmhouse in the region of Qassim [the northern part of the Najd, the desert plateau surrounding the capital Riyadh and one of the most conservative areas of the kingdom]. Back then the country was underdeveloped, poor and rural. I am of Bedouin descent, like most Saudis”,he proudly explains. Today, Dr. Sultan leads the umbrella organisation uniting all KSA’s chambers of commerce, moving from his isolated Bedouin life to the international business community in the space of one life. “King Abdullah has a very ambitious vision,” agrees Abdullah Al Fozan. “He is working to

Saudi Arabia can no longer afford to live isolate and hope global events will pass us by. The world has become a village 28 · W G u i d e s

ensure the future of our country and the wellbeing of our children. He has understood that the present century presents challenges that are entirely different from those of only ten years ago. We are building smart homes, offices and cities right now, so as to be prepared for future business and market requirements. We Saudis have virtually built - and for a large part own the financial sectors and banks of the Emirates, Qatar and Bahrain. We are now finally working on putting our own appropriate legal framework in place, and as soon as that is accomplished, a lot of that money will come back home. We have been developing and investing in other countries instead of our own, and this has to change. We should logically be the financial hub of the region anyway, as we are the biggest in terms of real economy, financial and natural resources as well as population. The new King Abdullah Financial District (KAFD) will help us achieve that aim, but the legal framework and clarity of direction in the government’s plans in this field are much more important.”

Mr. Abul Rahman Bin Ali AL Jeraisy Chairman of the board of Riyadh Chamber of Commerce and Industry. He is a prominent figure and businessman in Saudi Arabia, and is also owner and president of Jeraisy Group founded nearly 50 years ago. Riyadh House Company, (RHC), his flagship company created subsidiaries that have a wide spectrum of industrial and commercial activities that meet the growing demand for office furniture, information technology and services.

and if we are to play any role at all in that village and in shaping its future, we must engage with the outside world. Saudi Arabia· 29

investment

Impressive statistics for depressing times 2009-2010 was a time of crisis - for most of the world. Saudi Arabia, of course, is a different case. According to the 2009 UNCTAD World Investment Report, while foreign direct investment (FDI) dropped 37% globally, it went down by a mere 7.5% in Saudi Arabia, stabilizing at $35.5 bn.

KSA rose from 13th to 8th position in the list of leading FDI recipients with 141 green-ﬁeld FDI projects listed. In the World Bank's 32 · W G u i d e s

investment

Simultaneously, the country rose from 13th to 8th position in the list of leading FDI recipients with 141 green-field FDI projects listed. In the World Bank's “Ease of Doing Business” index for 2011, Saudi Arabia rose two places to 11th position – rising a whopping 56 places in the five years since 2005. For several consecutive years, the kingdom has been nominated as the best place to do business in the Middle East. Meanwhile the Saudis themselves have been busy investing abroad in markets that have become attractive exactly due to the financial crisis: Saudi foreign investment in 2009 increased by 23% year-on-year to $6.5 bn. In all, the country owns foreign assets worth over $300 bn. Investment opportunities in KSA are everywhere. It feels as if the country has woken from a very long sleep and is frantically making up for lost time. Its sound economy, always protected by the government’s umbrella of oil revenues, investment in the kingdom has been steadily climbing for decades. But the ascension to the throne in 2005 of King Abdullah, a determined economic reformer,

has greatly accelerated matters. Last year alone, Saudi Arabia attracted FDI worth $35.5 bn, mainly originating in the United States, with a record of $5.8 bn invested throughout the year. Total investment through joint ventures amounts to $300 bn (SAR1.13 trillion). The fact that the kingdom remains the world's leading oil exporter – additionally holding the largest proven reserves – and has become an important global player in minerals and gas only increases its attractiveness to investors. Moreover, KSA is well on the way to become the number one global producer and exporter of petrochemicals. COUNTLESS REASONS TO INVEST Saudi Arabia is strategically located between Africa, Asia and Europe. A crossroads of trade routes since time immemorial, it has access to the Gulf and the Indian Ocean in the east, and to the Red Sea and the Mediterranean in the west. As a brochure by SAGIA (Saudi Arabian General Investment Authority) points out tersely: ”From Saudi Arabia you can reach 250 million consumers with a three-hour flight.” The availability of >>

Investment opportunities in KSA are everywhere. It feels as if the country has woken from a very long sleep and is frantically making up for lost time

“Ease of Doing Business” index in 2011, Saudi Arabia also rose two places to 11th position – rising a whopping 56 places since 2005 Saudi Arabia· 33

investment

low-cost fuel remains one of the main attractions - for energy-intensive industries as well as those requiring feedstock. Unskilled labour is easily imported and locally available skills are improving thanks to a sharp increase in the government’s education expenditure. The opening of many new universities and training institutions, including the King Abdullah University of Science and Technology (KAUST) and Princess Noora University, the

FDI INFLOWS - INWARD INVESTMENT IN KSA IN MILLIONS OF US$ 2009

35514,0 USD 2008

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1534,0 USD

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largest women's university in the world, are vivid examples of the government's drive to boost education and job training. Then again, the size of the domestic market is itself a decisive element. The population of Saudi Arabia stands at around 27 million and is growing at a rate of 2,9% per annum. The CIA World Fact Book puts per capita GDP for 2009 at $23,300. Credits and loans, currently a headache in much of the world, is easily available and at very competitive rates. With an oil production of 3,000 bpd, Saudi pockets annual oil revenues of around $160 bn at current price levels. The country’s membership of the World Trade Organisation (WTO) since 2005 and >>

interview with

Major General RSAF (Ret.) Hamad A. Al Sugair,

FDI INFLOWS - INWARD INVESTMENT IN KSA IN MILLIONS OF US$

147,145 USD Secretary General of the Economic 111,631 USD Offset Committee (EOC)

2009

2008

In fact, the EOP is viewed as another supportive channel to achieve the objectives of the development plans, aimed at economic diversification, expansion of the industrial base and participation of the private sector in the national development drive.

As FDI flows have fallen 7.3% in 2009, to a low of SAR39 billion – the lowest level in the past five years – this is not as extravagant an investment as one might think. With the oil price projected to fall slightly and oil and non-oil export revenues rising only modestly over this and the following year, the strain on the country’s current account balance will be considerable.

However, with real growth for 2009 recently revised on the basis of new data to 0.6% from 0.2% - while the global economy actually shrank 0.6% - there is no reason for excessive worry. Moreover, the Central Department of Statistics and Information (CDSI) stated that the private sector actually grew 3.5% - a full percentage point faster than earlier estimates. These figures put KSA, together with China and India, in a small top league of G20 nations who succeeded in growing even during the financial downturn. This partly owes to the fact that the private sector in KSA can draw on substantial internal capital and as such is not overly dependent on a reluctant global banking sector for loans and credits.

Indeed, government investment in KSA is so massive that it almost completely annuls the effect of the ongoing global financial crisis. Economists at the Saudi Fransi Bank have recently increased their growth projection for the government sector for the second half of 2010 from 4.1% to 4.6%, its fastest growth

Additionally, the development projects will naturally increase the country’s short and medium term reliance on imports of foodstuffs, manufactured goods and building materials, as an increasing foreign workforce will continue to send remittances home rather than spend its income on domestic consumption.

Meanwhile, the Saudi investment environment undergone profound changes in order to make it more competitive and attractive for FDI, Al Sugair says. “SAGIA is looking to achieve what it calls a 10/10 position meaning KSA should be the tenth most attractive investment country before the end of

Attracting foreign 0 USD 2007 direct investment (FDI)

17,056 USD

1990+2005

is a major challenge 0,0 USD

20,000

for many developing

40,000

countries. But having the opportunity to make large government purchases abroad gives a country quite some leverage in the form of economic offset obligations it can impose on its suppliers. This was the exact line of thinking behind KSA’s creation of the Economic Offset Program (EOP) in 1984.

A clever deal for a faster development Having bought systems worth billions 140,000 100,000 defense 120,000 160,000 of dollars at that time, the Saudi government committed the defense systems suppliers to not only transfer technology and the related know-how, but also to invest substantial sums in creating new industrial joint ventures in the Kingdom. The first spin-offs of these offset deals became operational in 1990.

80,000

The Secretary to the EOC, Major General RSAF (Ret.) Hamad A. Al Sugair explains: “Even though these purchases were necessary for the Kingdom’s national security and defense, however, the government thought it was important to take advantage of them to increase the benefits to the national economy by requiring the foreign suppliers of these defense systems to invest in projects that add value to the KSA’s economy. Our leadership put forward some basic objectives for the Off-

set Program: which include transfer of technology, expanding the Kingdom’s industrial base, thus reducing the country’s dependency on oil and gas; employing Saudi nationals; offering investment opportunities to the Saudi nationals, and reducing our dependence on the import of various products and services.”

in 13 years. This constitutes a 13.7% rise in projected government expenditures, making for the largest annual Saudi budget ever - a whopping SAR540 billion.

Saudi Arabia is strategically located between Africa, Asia and Europe. A crossroads of trade routes since time immemorial, 34 · W G u i d e s

2010. We are currently in 13th position, while less than 7 years ago we were hanging somewhere around the 40th or 45th position. The government is changing the rules governing FDI and providing more incentives. We are currently in the process of adapting many regulations, specifically within the judicial system - the court laws, the types of courts having jurisdiction over specific fields, and other aspects.” But even without these changes, says the Major General, the EOP has been a marked success. 41 companies with a total capitalization of SAR21 billion were established, who together provide about 8,000 job opportunity, more than 60% of them are filled by Saudis. The

aggregate sales of these companies amount to SAR60 billion, 25% of which accrue from export. They include good technological companies such as International systems engineering Company, Advanced Electronics Company, Saudi Development and Training Company and Al Salam Aircraft Company.” Al Salam is in fact the hub of a larger aerospace complex that services the Saudi Air force and Saudi Airlines and also includes manufacturing components. The ongoing expansion of Riyadh’s King Khaled International Airport

41 companies, with a total capitalization of SAR21 billion, provide about 8,000 job opportunity, more than 60% of them are filled by Saudis

it has access to the Gulf and the Indian Ocean in the east, and to the Red Sea and the Mediterranean in the west Saudi Arabia· 35

investment

of the G20 since 2008 have provided it both with stronger international links and a better negotiating position.

"By capitalizing on the Kingdom’s value proposition and effective national leadership we are confident we will achieve our goals and create one

The country's main entry points, Riyadh and Jeddah airports, are being expanded and upgraded, as are the sea ports. New ports are being constructed as required, one of them a minerals port to serve Ras Al-Zur Industrial City - reportedly poised to become “the next phosphate capital of the world”. A railway line has been put in place to connect Ras Az-Zur to the new port and another is expected to link the two industrial cities of Yanbu by the Red Sea and Jubail on the Gulf coast, both of which are also being expanded.

of the 10 best investment destinations in the world, and 4 of the world’s most competitive Cities" Amr bin Abdullah al-Dabbagh, Governor of the Saudi Arabian General Investment Authority (SAGIA)

looks set to further increase the importance of this sector in the coming years.

A we are currently exploring the possibility of establishing a business school that is specialized in entrepreneurship. This will be established in partnership with a leading U.S business school

Initially, any project complying with the EOP basic objectives was approved. But as the country’s economic and industrial needs are changing, new priorities are being set: “Based on the industrial and services map of the KSA, we started focusing on specific areas. Currently, these include the medical field and higher education, as well as specific areas of downstream petrochemicals such as engineering plastics for the automotive industry. The Economic Offset Committee EOC, who supervises the implementation of the EOP, membership includes high level representatives from the major ministries - defence, Finance, planning, industry & commerce - so the Program get the benefit of their knowledge and experience to form an overall picture and adapt our focus to it as it changes. There is a permanent evolution in the priorities.” Over the past few years, we have made good progress in creating projects in these fields for example; the EOP played a major role in the establishment of AL- Faisal University, which is a private non-profit school that has association with Cambridge, Harvard and Johns Hopkins Universities. Of course the EOP does not itself invest in projects, but rather acts as

Another major source of foreign investment is the privatization process that has been going on for some years now. Some key sectors remaining under state control will soon be privatized, including the ports, the transport sector and power generation. National carrier Saudi Airlines is one >>

a catalyst and facilitator. “We literally do the legwork”, says Al Sugair. “in the case of ALFaisal University, which was established by the King Faisal foundation, the Offset Contractors - British Aerospace, United Technologies, Boeing and Thales donated a certain proportion of the required investment to establish the university and they also serve as member of the University’s founders committee. In addition to this, we are currently exploring the possibility of establishing a business school that is specialized in entrepreneurship. This will be established in partnership with a leading U.S business school. “In the pharmaceutical sector we have created several companies that manufacture both basic materials and finished products. These include, Glaxo Saudi Arabia Co., Cad Meddle East Co, Deef Pharmaceuticals, Industries, and Olyan Baxter Co. We are currently looking at manufacturing some other advanced medical products domestically, specifically titanium bone surgery materials.” As for the ownership of Offset companies, Al Sugair says the EOC prefers a 50/50 balance in foreign and Saudi ownership. “That way, we can be sure that the foreign investor does not walk away from the project and has

a vested interest in contributing to its profitability and continuity. The EOC accepts on a case by case bases, higher percentages of foreign ownership, but usually a higher Saudization of the workforce should offset this. Even outside the EOP, the Major General sees a bright future in store for his country: “Massive changes are taking place in the country, and for the better. Much effort is expended on the general infrastructure, an investment that will pay off for a long time to come. Many new hospitals and universities are being established and education for women is specifically prioritized. We currently have about 100000 Saudi students on foreign scholarships, all over the world, and about 50% of them are in the U.S.A and the United Kingdom alone. These scholarships are paid for by the Saudi Government. This will help the country broaden its outlook and integrate into the global environment. Additionally, we are no.1 in helping other developing countries. UN regulations require countries to contribute 0.7% of their GDP to development aid, but KSA actually donates 3.4%, which makes us the largest per capita donor globally. We are coming ever closer to the ultimate goal of the kingdom, which is to have a prosperous society and to be – in the words of King Abdullah - the Kingdom of Humanity and share our prosperity with others.”

Many new hospitals and universities are being established and education for women is specifically prioritized 36 · W G u i d e s

Saudi Arabia· 37

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of a number of state-run companies already in the process of privatization. STATE EXPENDITURE TO ATTRACT PRIVATE INVESTMENT In 2009, a year of global belt-tightening, Saudi Arabia announced its highest ever budget. The ninth Five-Year Development Plan, approved by the Council of Ministers in July 2010, will see the government spend US$373bn (SR1.4 trillion), sixty times more than its predecessor. Priorities: infrastructure, FDI INFLOWS - INWARD INVESTMENT IN KSA IN MILLIONS OF US$ 147,145 USD

2009

111,631 USD

2008

2007

0 USD 17,056 USD

1990+2005 0,0 USD

20,000

40,000

80,000

100,000

120,000

140,000

160,000

industry, education and health care. The goal is to increase the non-oil sector as a proportion of the economy and to reduce by four points the current unemployment rate of over 9%. SAGIA has been a key player in upgrading the investment environment in the kingdom. The agency has been executing the government scheme to increase private sector participation in development, acting both as a mediator between government and investors and as a strategic planner. Currently it is directing the bulk of foreign investment toward four new economic cities, part of a wider plan to transform the country into a “knowledge society” in order to reduce its dependency on oil. According to the CIA World Fact Book, the oil sector still accounts for some 80% of government revenue, 45% of GDP and 90% of export earnings. Says Abdullah al-Dabbagh, governor of SAGIA:“Leveraging the kingdom’s resources to turn it into the energy capital of the world, and building on its ideal location to make it a major regional hub connecting east and west – this is the essence of our strategy.”

The SBEOP serves as a facilitator for foreign companies that may or may not currently export to KSA who would like to explore the viability of manufacturing their products here. “We help to find a suitable partner and then help them through the entire process of registration and the various regulations required in setting up business”, says Mr. Kelly. “Alternatively, a Saudi company could come to us with a proposal to start manufacturing a particular product, in which case we begin the process to find them a suitable foreign technology partner.”

When KSA purchased a number of Tornado’s, PC9 and Hawk aircraft along with naval vessels and support services from BAe (British Aerospace, now BAE Systems) in 1985 an economic offset agreement was negotiated to attract inward investment to KSA.

interview with

Saud Al-Fozan & Steve Kelly Managers of the British Offset in KSA “It was an unusual offset programme in as much as it did not exclusively serve military purposes, such as setting up maintenance facilities or spare part manufacturing plants for the aircraft. It was and still is an indirect economic offset agreement with the explicit purpose of reducing KSA’s dependence on gas and oil and on foreign imports, specifically in the fields of petrochemicals and healthcare products,” explains Steve Kelly, who is currently the manager of

the Saudi British Economic Offset Programme (SBEOP). The Offset Programme is committed to attract a total of 1 billion pounds sterling of inward investments to KSA: “It is an open programme; we are here as long as the Saudi government wants us to stay. We are actually in the process of implementing some of our largest projects, and remain committed to serving the interests of KSA,” says Mr Kelly.

Companies that come under the umbrella of the SBEOP can benefit greatly from the partnership as the foreign partner is offered a match of his own equity stake as a soft loan from BAE Systems “at a competitive, low interest rate”, adds the manager of SBEOP in Saudi. “the scheme is called BAE Systems Project Finance Initiative (BPFI) but of course before we get to this stage a full feasibility of the project together with market studies and financial models have been produced”. The SBEOP also advise on licensing agreements, but the loans, incentives and financial packages they offer are reserved specifically for companies who set up manufacturing facilities in the Kingdom. One of the most notable early successes

SAGIA has been a key player in upgrading the investment environment in the kingdom. 38 · W G u i d e s

of the SBEOP is the £100 million United Sugar Company Refinery formed in Jeddah in 1989 as a joint venture between Tate & Lyle and the Saudi Savola Group. It now stands as the largest sugar refinery in the world. Another success story of SBEOP’s facilitation is GlaxoSmithKline’s manufacturing plant for pharmaceuticals in Jeddah. But 2010 is proving to be one of the program’s most productive years with three major projects implemented. “One of these projects is perhaps our largest project ever and has recently come online”, states Saud Al Fozan, a project manager of the British Offset Office in Saudi. It is a manufacturing plant for seamless gas and oil pipes set up in cooperation with the Saudi company Taqa and the Swiss company Duferco in the Jubail industrial area. In the same industrial zone, Arabian Amines is also starting a joint venture between Al Zamil group and the US Huntsman Corporation to produce ethylaneamines. And thirdly, the American company Baxters has formed a partnership with the Olayan Group to manufacture sterile medical solutions used in dialysis machines. “There is a huge market here for these products in the country and in the region” underlines Al Fozan. “There are other projects we are currently looking into but they are still

in the early stages so the information remains confidential,” he adds. The program supports high tech Joint Ventures in many sectors these tend to be relatively large facilities. Although SBEOP will look at all projects normally smaller scale projects may well find it more difficult to commit to the long investigate process “The time and effort it takes to complete the feasibility and market studies and apply to the financial institutions reduce the possibilities for projects where the investment is below £1million”, explains Kelly. We don’t so much support particular products or items but focus on entire sectors particularly pharmaceuticals and downstream petrochemicals given the advantage of having the feedstock of raw material here. Consequently, 80% of our projects are based in the oil-rich Eastern Province and at Jubail industrial city close to the oil producing areas.

Witnessing an increasing drive for investment Many things have changed in KSA over the past few years and no matter what

sector of the economy or society you look at there is evidence of change and a desire to move the country forward and progress. Steve Kelly, who has been visiting KSA since 1993 and has worked here permanently for SBEOP since 2002 is a witness of the immense changes that are taking place in the country that coupled with the recent downturn of the rest of the world have created an increasing interest outside of Saudi borders to investigate investment opportunities. “Since 2005 there has been a noticeable increased drive for investment in Saudi that continues to accelerate. We have been getting steadily busier for a number of years, and are now giving more and more Offset briefs and presentations. Investment interest towards the country

2010 is proving to be one of the program’s most productive years with three major projects implemented

The agency has been executing the government scheme to increase private sector participation in development Saudi Arabia· 39

investment

industry

Building A Knowledge Society “Forget everything you know about ‘industrial parks’ and ‘free zones’. Saudi Arabia’s four new economic cities – fully planned and under construction – are exactly that: new cities, where up to five million residents will live, work and play.” Such is SAGIA’s description of the kingdom’s new investment magnets. Building on the success of existing industrial cities in Jubail and Yanbu dating from the 1970s, SAGIA has started to develop new economic cities in different regions of the country in an effort to reduce geographically-based economic inequalities by providing job opportunities in strategically located areas. With 80% of the population under 40 years of age, employment is one of the major issues the government needs to tackle. SAGIA calculates that the total cost of the cities will amount to $50 bn. This should result in more than a million new job opportunities, homes for 4 to 5 million residents and a $150 bn boost to the country’s GDP. Built according to strict environmental regulations, each city “will feature modern building design, world-class services and infrastructure and ubiquitous connectivity. These built-in advantages, combined with attractive investment incentives and a supportive regulatory environment will create significant competitive business advantages. We are starting from scratch to build an integrated system of economic cities from the ground up. One of these cities will be the size of Washington DC, and each will provide the ultimate in competitive investment and living environment. As the sole regulator, SAGIA’s Total Service Centres will supply everything from A to Z, including commercial and residential land, visas, work permits, the ultimate in entertainment and healthy living – everything to provide the best quality of life for inhabitants and investors,” says Mr. Abdullah al-Dabbagh.

“The pace of social change has increased dramatically over the past few years. As an example just look at a copy of Arab News (an Englishlanguage Saudi daily newspaper) from five years ago and compare it to today’s paper"

has increased tremendously”, he explains. “The business world used to look at the Middle East as potentially a risky investment but now Europe has become more so with a stronger Euro that has made the zone very expensive. Investors are now more prepared to explore opportunities in Saudi Arabia and see what’s here. And there is a lot” “KSA is often seen as an export hub”, continues Al Fozan. “The infrastructure is excellent and improving. There are excellent huge industrial ports now and there is tax-free export to the GCC countries. Other taxes and labour costs are fairly low as well as energy and transportation costs. Furthermore, in Saudi Arabia feedstock is largely available for the production of downstream petrochemicals. As an exporter you are close to Africa, Asia and Europe so overall locating here is very competitive”. But apart from all these benefits comes the most interesting and often difficult to find elsewhere in the world: financing. It is still easier to borrow money in KSA because the financial system has weathered the storm relatively well. Given the increasing interest from companies throughout the world, the SBEOP, which originally looked only to the UK to

find interested companies, has expanded its scope. “Our view is much broader now and we are also working with German, US, Australian, Japanese and Indian companies,” explains Al Fozan. Of course, challenges remain, Kelly agrees, first and foremost among them being the often sluggish and complicated bureaucratic procedures. “The long and complicated visa process is at times frustrating for visitors or trade missions wishing to visit. It can, in some instances, take a considerable time to get the visa processed and in many cases you need to have an invitation from a sponsor. Meetings often take place in Dubai or Bahrain because of this problem and seminars and conferences on investment opportunities in Saudi are still often held outside of KSA. As this is the first introduction to Saudi to new investors and entrepreneurs, before arriving here, it instils a perception into people’s minds that everything is going to be complicated and time-consuming. Actually, this is not true. Some things do take time, things do not happen overnight, especially due diligence procedures but if you are patient, KSA is a very good country in which to invest; not everything is complicated. On the positive side financial incentives and financial institutions are excellent, far better than

in some GCC countries; they themselves actually attract much investment.” But change is happening and the pace increasing not just in matters of investment but on all levels, affirms Kelly. “The pace of social change has increased dramatically over the past few years. As an example just look at a copy of Arab News (an English-language Saudi daily newspaper) from five years ago and compare it to today’s paper. You will see a completely different newspaper with public and open discussion about issues such as women driving or local authorities being discussed freely.” “The country is perhaps still not absolutely free – continues Kelly - but there is considerable progress. The emergence of private companies and banks, credit cards, Internet connections and even satellite dishes are all fairly recent. You cannot expect change overnight but for those of us that live here the changes are very tangible. For Steve Kelly, a veteran in Saudi, it is crystal clear: “I can’t repeat it often enough. The opportunities are here if you just have the patience to look for them, take time to develop relationships and establish a presence as the changes move forward. I can assure you that the potential is only increasing.”

The CIA World Fact Book puts per capita GDP for 2009 at $23,300. Credits and loans is easily available

40 · W G u i d e s

Saudi Arabia· 41

investment

investment KING ABDULLAH ECONOMIC CITY http://www.kingabdullahcity.com

PRINCE ABDULAZIZ BIN MOUSAED ECONOMIC CITY

Area: 68 million sq m located by the Red sea close to Makkah, Medina and Jeddah Investment Size: $27 billion, entirely funded by private capital - the largest private sector project in the region. Constructed by a consortium formed by Emaar Properties and a number of Saudi investors. Jobs: 1 million Population: 2 million Zones: Sea Port, Industrial Zone, Central Business District, Waterfront Resort Area, Education Zone, and Residential Zones Focus: Ports, logistics, light industry and services Key Business Sectors: Saudi Arabia’s petroleum resources will provide lowcost feedstock for a range of derivatives including high-end plastics manufactured in the planned Plastics Valley for automotive, biomedical, construction and food packaging applications.

Area: 156 million sq m located in the northern region of Hail, rich in minerals and agricultural land, at the crossroads of key Middle Eastern trade and transportation routes Investment Size: $8 billion Jobs: 55,000 Population: 300,000 Zones: Logistics & Transportation Centre, Dry Port, International Airport, Petrochemical Industries Centre, Business Centre, Knowledge Centre, Agricultural Industries, Mining Centre, Entertainment Area Focus: Logistics, agribusiness, minerals, and construction materials. PABMEC will be designed on cluster-based principles with an emphasis on transportation, logistics and supply chain centres for one of the Middle East’s most advanced transport hubs.

interview with

Ahmed Jazzar, President of Boeing Saudi Arabia

Judging only by his accomplished American drawl, you would guess you were listening to a Texan speaking, but Ahmed Jazzar, Vice-President of Boeing international and President of Boeing KSA, is Saudi born and bred

Born in 1955, he started his career as a certified mechanic, he worked his way up the ranks of Saudi Arabian Airlines to become Vice-President of the Technical Services Division, overseeing the engineering, planning and maintenance operations of the 100 plus airplanes of Saudi Arabian Airlines’ commercial and royal fleets, and managing a labour force of almost 6,000 employees. Then, when he finally stepped down to enjoy an early retirement it did not last for long. He was contacted by The Boeing Company, who recruited him to his current position in September 2005. “I am in fact the first president of Boeing KSA, a division of Boeing International founded in 2005. But of course, Boeing’s history in KSA goes back some 65 years all the way to 1945 when U.S. President Franklin Roosevelt gave King Abdulaziz Al-Saud of Saudi Arabia his first plane, DC-3 Dakota that was to be the seed for the royal fleet and later the beginning of what we now acknowledge as Saudi Arabian Airlines (SAA). Boeing has been intertwined with the country, but with its national carrier – Saudi Ara-

bian Airlines (SAA) – ever since. “Later more Boeing planes were bought and SAA was the biggest airline in the region, and in terms of numbers of passengers carried, destinations covered and planes operated it is still a major regional carrier, as well as an important client for Boeing.” Hence, the history of Boeing in Saudi Arabia is that of a special nature. The corporation started operations with the delivery of airplanes, then it incorporated the Defense division to serve the country defence needs and all the way through it has worked hand-in-hand with the government helping the development of the industrial sector with emphasis on the human development and knowledge transfer.

A long-term commitment to education The company’s long term commitment to the kingdom and its responsibility here as a corporate citizen goes beyond whatever expectations a country might have. “We have long gone beyond just coming in, selling a product and leaving. We feel that we are a part of this country and its objec-

tives have become ours. We think about a strategy – and it is part of my job to draw up that strategy - to help the country achieve its objectives, both on the commercial and defence levels. Back in the 1980s we already created Boeing Middle East Ltd as an office in KSA, so as to be more available to our customers,“ explains Boeing´s KSA president. “As a global corporation,” Al Jazzar continues, “we have a global citizenship programme which involves donations to social organizations, charity and the like in every country where we are active. In KSA we contribute specifically to education.” Boeing is a co-founder of King Faisal University that teaches science, medicine, business and engineering. It is also involved in specific programs of King Abdulaziz University and is very active on programmes with US universities. Separately, Boeing is moreover working with the Technical and Vocational Training Corporation (TVTC) in KSA to establish an aerospace training centre to train young Saudis on airplane maintenance.

SAGIA is directing the bulk of foreign investment toward four new economic cities, 42 · W G u i d e s

The company’s largest current cooperation programme is with the King Abdullah University of Science and Technology (KAUST). ‘We were pleasantly surprised by the whole vision behind KAUST. We believe that working with KAUST’s professors and students on innovative technology research will help Boeing assimilate new ideas and processes into our products and programmes. This is also good for Saudi Arabia because it will help grow the capabilities of the Saudi research and development and scientific community to meet emerging needs within the Kingdom. We are specifically designing a decision support centre for King Abdulaziz City for Science & Technology (KACST), like we have already done in other countries, which uses digital modelling and simulation technology to support decision making,” explains Al Jazzar proudly.

One of the research programs Boeing is involved in aims to develop nano-technologies associated with plastics that might even be used in Boeing planes in the future.

is maintenance, repair and overhaul facility for both commercial and defence aircrafts, serving every plane in use from 747s to F15s and other platforms.

However, besides the educational support, Boeing plays an important role in the Offset Programme set by the government and created to deliver development and technology in exchange of defence contracts. “We were part of the offset programme from the start. We participated in almost every offset company that was created: Al Salam Aircraft Company, AEC (Advanced Electronic Company), International Systems Engineering (ISE, an IT company based in Riyadh), AACC (Aircraft Accessory Component Company) in Jeddah and many more that have now grown up, some of them becoming leaders of their sectors,” comments Al Jazzar.

But even in this industrial-type program, Boeing has contributed not only with an initial investment but also through the transfer of knowledge and know-how, investing especially in training schemes.

Boeing is therefore at the ground floor level of the research schemes working with Saudi universities to deliver future technologies.

Once these companies took off, Boeing divested from all apart from Al Salam which is still owned in its majority by Boeing. Al Salam

The label of a leader The company’s presence in the peninsula is also business oriented. Boeing as a corporation is organized in two major divisions - one focusing on civil aviation, the other on defence & security applications. “Both arms are active in the kingdom,” says Al Jazzar, “but I report directly to corporate, I am part of neither arm while supporting both. My division is called Boeing International – formerly known as Boeing’s International Relations Division. The idea is to select people qualified to

One of the research programs Boeing is involved in aims to develop nanotechnologies associated with plastics that might even be used in Boeing planes in the future

part of a wider plan to transform the country into a “knowledge society” in order to reduce its dependency on oil Saudi Arabia· 43

investment

The GCC as a whole is planning expenditures of up to $83 billion dollars in its defence sector by 2050. But the commercial market in the Middle East is also one of only a handful worldwide that is still going strong and placing new orders despite the global economic downturn

investment

help Boeing in about twenty particular countries where the company is active.” Boeing has recently been told that the U.S. administration has formally notified Congress of a substantial military deal, which would see KSA spending around 60billion to acquire F-15s, Apaches and AH-6is, and the notification period has completed. Boeing began providing the Kingdom with military systems in 1978, when Saudi Arabia bought its first F-15 fighter jets. Now, the company employs over 200 people. The GCC as a whole is planning expenditures of up to $83 billion dollars in its defence sector by 2050. But the commercial market in the Middle East is also one of only a handful worldwide that is still going strong and placing new orders despite the global economic downturn. “Our own research shows that

the region will need 2,340 new commercial airplanes in the next 20 years, including both wide-body aircraft and single-aisle planes – out of a total global demand of 20,900 units,” says Al Jazzar. “After all, the Middle East is a natural geographical hub close to Asia, Europe and Africa. The region also has strong local economies, and a large young population in the active age group, with an appetite for travel. Demand is outstripping capacity already, especially on certain major domestic routes.” An important factor in KSA itself has also been the country’s vision for civil aviation. “For the first time, the country is opening its air space to competition. At the moment, there is only one competitor for SAA - which is National Air Services (NAS)– but more will be allowed in later. The idea is to give SAA the chance to evolve from a government-owned

JIZAN ECONOMIC CITY http://www.jazanecity.com

Area: 4.8 million sq m situated east of Medina, KEC will be a cultural landmark for visitors and a national centre for knowledge-based industries. Investment Size: $7 billion Jobs: 20,000 Population: 150,000 Zones: Taiba Complex for Technology and Knowledge-based Economy, Technological and Administrative Colleges, Theme Parks, Islamic Civilization Studies Centre, Complex for Medical Studies, Biological Sciences and Health Services, Complete Business Centre, Residential Areas, Passengers Station, Commercial Area, King Abdul Aziz Mosque Focus: Knowledge-based industries, tourism and services. Designed in classic Islamic style, this will be a city of unique character and heritage. Its development will complement the research of the King Abdullah Foundation and play a crucial role in transforming Saudi Arabia into a global force in the knowledge-based industry.

Area: 100 million sq m. Located 60km northwest of Jizan City, Saudi Arabia’s most important port on the Red Sea Investment Size: $27 billion Jobs: 100,000 Population: 300,000 Zones: Industrial Park (will occupy 2/3 of the City), Sea Port, Agriculture repackaging and distribution, Fisheries, Business and Cultural Centre, Health & Education Areas Focus: The city offers an unparalleled environment for energy intensive industries, heavy industries, lifestyle, agro industries and people development

monopoly to a private company able to deal with competitors in an open market.” Boeing still provides over 70% of SAA’s fleet – down from the previous 100% but still a solid share. NAS on the other hand, has not bought a single Boeing plane, instead preferring to work with Airbus, and the Brazilian Embraer. Al Jazzar nevertheless believes Boeing makes the best planes and gives more attention to what the customer and the carrier need and want. “We build planes that can go long range without having to stop by hubs, and that are the right size for the market. Huge and super-jumbo airplanes have only a small sales market. The focus now is on mid-range planes like the new 787, which are fuel-efficient and require less maintenance through the use of non-corrosive, lighter composite materials,” underlines Al Jazzar.

SAGIA calculates that the total cost of the cities will amount to $50 bn. This should result in more than a million

44 · W G u i d e s

KNOWLEDGE ECONOMIC CITY http://www.madinahkec.com

new job opportunities, homes for 4 to 5 million residents and a $150 bn boost to the country’s GDP Saudi Arabia· 45

investment

Setting up business in the Kingdom of Saudi Arabia Regulatory/Legal Setting up business The Foreign Investment Act allows foreign companies to invest in all economic activities other than those listed on the so-called “negative list”. Broadly, the Foreign Investment Act also allows foreign companies to own 100% of local companies with the exception of certain activities like trade which requires minimum 25% local shareholding. A Saudi sponsor or a local partner is no longer required except in the case of certain business activities. The Saudi Arabian General Investment Authority (SAGIA) is responsible for dealing with all matters relating to the investment regulations, including issuance of licenses to foreign investors, etc. Commonly used business entities The main company types are Limited Liability Companies (LLC), Joint Stock Companies (JSC), general partnerships and limited partnerships. Foreigners generally conduct business through either a LLC or branch office of a foreign company. Main legal formalities for the formation of a company or registration of a branch The establishment of a Branch or LLC (which has foreign ownership) in Saudi Arabia requires a license from the Saudi Arabian General Investment Authority (SAGIA). In addition, a Branch and LLC requires Commercial Registration Number from the Ministry of Commerce & Industry (MOCI).

There are certain restrictions related to minimum amount of share capital, number of shareholders and business sectors which need to be observed where there is foreign participation. Currency/monetary restrictions Saudi Riyals is the currency of exchange. There are no foreign currency restrictions in Saudi Arabia. Regulatory requirements for financial services Financial service companies are generally governed, licensed and regulated by the Saudi Arabian Monetary Agency (SAMA). The Capital Market Authority (CMA) regulates and monitors the activities of entities broadly carrying on capital market activities. Accounting/Finance for companies and Saudi branches of foreign companies Financial statements Annual financial statements must be prepared under the accounting standards issued by the Saudi Organization for Certified Public Accountants (SOCPA), except banks and insurance companies which are allowed to prepare their financial statements under International Financial Reporting Standards (IFRS). Audit requirements Foreign companies subject to income tax in Saudi Arabia are required to submit tax returns based on audited financial statements. Requirements for foreign investors The establishment of a Branch or LLC in Saudi Arabia requires a license from the Saudi Arabian General Investment Authority (SAGIA) and a Commercial Registration Number from the Ministry of Commerce and Industries (MOCI).

The corporate tax rate is generally 20%, apart from activities related to natural gas investment and oil 46 · W G u i d e s

Saudi Arabia is one of the most admirable Gulf countries when it comes to fiscal, labor, and business freedom. Its free market economy has transformed the Kingdom into a regional And global economic power. The growth of the sector has become unstoppable, and Saudi Arabia is fully opening its doors to the vast horizon of opportunities offered by foreign investments.

Book year/accounting currency Generally, the taxable year for taxpayers of all activities is the State’s fiscal year (i.e. January to December). However, a taxpayer may use a different fiscal year after obtaining approval from the Department of Zakat and Income Tax (DZIT). The taxpayer’s first fiscal period will start from the date of its commercial registration or license and it can be for less than 12 months or more than 12 months (generally up to 18 months) if the company’s Articles of Association provide for a long first fiscal period. A Branch’s first fiscal period, under no circumstances, can exceed 12 months. Companies must maintain book of accounts in Saudi Riyal and in Arabic language. Gross revenue and taxable profits must be calculated in Saudi Riyal. Where the calculation of income involves an amount in foreign currency, the amount is converted at the exchange rate published by the Saudi Arabian Monetary Agency on the date of the transaction. Format Annual financial statements must be prepared under the accounting standards issued by the Saudi Organization for Certified Public Accountants (SOCPA), except banks and insurance companies which are allowed to prepare their financial statements under International Financial Reporting Standards (IFRS).

application for registration with DZIT should be submitted before the end of the first fiscal year. Failure to register is subject to a penalty ranging from SR 1,000 to SR 10,000. Advance tax rulings/ Advance Pricing Agreements (APA) There is no formal tax advance ruling system in Saudi. Obtaining rulings on principle issue is possible in certain circumstances. Income tax compliance Saudi Arabia has a system which includes corporate income tax, withholding tax and Zakat. Corporate income tax is assessed on the share of the profits of the foreign partner in the local company and a non-resident who conducts business in Saudi Arabia through a permanent establishment. The corporate tax rate is generally 20%, apart from activities related to natural gas investment and oil and hydrocarbon productions, where the tax ranges from 30% to 85%. Zakat is a religious levy on Saudi and Gulf Cooperation Council (GCC) nationals and Saudi companies that are wholly owned by Saudi or GCC nationals. The Zakat rate is 2.5% of the higher of the adjust-

Tax Approval requirements: Approval is not required from the DZIT for setting up a business. However, an

and hydrocarbon productions, where the tax ranges from 30% to 85% Saudi Arabia· 47

investment

ed taxable profits or the Zakat base which in general comprises equity, loans and provisions reduced by deductible investments and fixed assets. A tax payer is required to submit its Tax/ Zakat return to the DZIT within 120 days from the end of the taxable period of the incorporated body. The Saudi Arabian tax law provides for actual withholding tax at different rates on payments made to non- resident parties by a resident or a PE of a non-resident from a source of income in the Kingdom of Saudi Arabia. Accordingly, any payment for services provided by a non-resident enterprise, which is from a source or deemed source in the Kingdom, is subject to withholding tax. Services are defined to mean anything done for consideration other than the purchase and sale of goods and other property. In accordance with the provisions of the tax law and by-law, the amount of withholding tax is calculated at the following rates:

A person withholding tax under the tax law is required to pay to the DZIT the amount withheld during the first ten (10) days of the month following the month of payment to the non-resident. Furthermore, the person withholding tax is required to file with the DZIT an annual withholding tax report within 120 days from the end of his financial year. This form will be a consolidation of all the monthly withholding tax forms filed by the person during the financial year. Indirect tax compliance Saudi Arabia does not impose any sales tax or Value Added Taxes (VAT), however customs duty is payable on Calculation of Withholding Taximportation of certain goods and products into Saudi Arabia. According to the Foreign Investment Act (2000), companies licensed for industrial projects in the Kingdom are afforded the same benefits as national industries based on “The National Industries Law” and are able to qualify

Saudi Arabia does not impose any sales tax or Value Added Taxes (VAT) 48 · W G u i d e s

Saudi Arabia· 49

finance & insurance

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Saudi Arabia路 51

finance

A latecomer but a

dangerous competitor

Saudi Arabia is building the multi-billion dollar King Abdullah Financial District (KAFD), an emblematic construction 52 · W G u i d e s

The Kingdom of Saudi Arabia has been a ‘latecomer’ to almost all aspects of modern life, but once the country has decided to go somewhere, it does so for real, usually on a gigantic scale. It was no different when the government decided it was time to develop a private financial sector, which it has been constructing almost from scratch since the onset of the millennium.

The banking sector in Saudi Arabia had been as closed – and as stable - as the country itself, but the ongoing structural changes have transformed the financial sector. From a closed governmentrun market, the system has become a privatised international club generating ever more interest. While the rest of the world is struggling to climb out of the financial crisis, Saudi Arabia is building the multi-billion dollar King Abdullah Financial District (KAFD), an emblematic construction in the heart of the capital set to enhance its already solid financial system and make the country a stronger global player. Indeed, Saudi capital has built the neighbouring financial systems and the opening of KAFD within an appropriately regulated >>

in the heart of the capital set to enhance its already solid ﬁnancial system and make the country a stronger global player Saudi Arabia· 53

finance

environment is calculated to bring back home the money invested abroad. The international financial crisis has scarcely affected the kingdom’s banking system. In KSA the word “default”is still unknown.There have been no bank failures, and none to be expected any time soon.The healthy policies of the controlling authority, the Saudi Arabian Monetary Agency (SAMA), sustained support from the government, high levels of capitalisation and traditionally careful lending habits have all played a major role in protecting the Saudi financial system by imposing cautious policies and stringent monitoring. In 2003, a comprehensive Capital Market Law and a Cooperative Insurance Companies Control Law were decreed. Both were designed to set up a framework for their respective sectors and to regulate them. In 2004, the Capital Market Authority was set up to formalise and monitor the sector and bring it up to international standards of best practice and transparency.The stock exchange market Tadawul was introduced as the first fully electronic exchange in the world and is currently the 11th largest globally in terms of volumes traded.

Although the Saudi Arabian financial system remains dependent on the highly volatile prices of oil and despite the relatively low levels of these prices since 2009, capitalisation has been sufficient and the system has proven its solidity over the past few difficult years. However, concerns about corporate risks due to the financial crisis have not gone away and lending and financing only started to pick up again in the Q4 of 2010. In the interval, government and semi-governmental institutions have provided most of the financing for the big projects. The Public Investment Fund (PIF) alone increased its lending by 48.6 percent to SR 42.2 billion in 2009. At the end of 2010, however, the total bank credit exceeded the levels registered in 2009 by almost 4%, sign of a revival of the private banking that ordinarily provides over 90% of total credit. According to the Jeddah-based National Commercial Bank (NCB), the challenge of bad loans and provisions has not been fully overcome but the situation is showing signs of stabilising, creating some room for additional lending. Saudi bank earnings saw an actual increase of 31.6 percent by year’s end. >>

SAMA Which resorts under the authority of the Ministry of Finance, is the central bank of the kingdom and has the authority to ban or back any financial institution, system or instrument in the country. It is in charge of issuing the currency and regulating all financial institutions. It manages the government bond programme and the nation's electronic debitpayment system and oversees the foreign exchange and stock market monitoring the international loan syndications.

interview with

Mohammed Al Karashi, Governor of the Public Pension Agency It manages its investment portfolio through SAMA and follows the general Saudi trend of investing in government bonds rather than volatile equities. However, during the past two years it has increased its shares in local companies, partly to compensate for the shortage of traditional sources of financing, but also to take advantage of a growing local market. “We currently support 915,000 people, 320,000 of which are pensioners and the rest dependents - wives and children - of deceased retirees, who remain entitled to the full benefit,” says the governor of the Public Pension Agency, Mr. Mohammed Al-Karashi. “We provide social security, but our mandate also obliges us to invest the available balance, and our board of directors is very eager to diversify our investment portfolio. So we spread the risk over various securities, equities and real estate, both locally and internationally.” The PPA has invested in 52 companies covering virtually every economic sector from agriculture to petrochemicals and

The PPA created Rayadah Investment Company to invest in the growing real estate sector and oversee the construction of KAFD. 54 · W G u i d e s

from pharmaceuticals to banking and insurance. “Currently, our portfolio is about 45% international and 55% domestic,” Mr Al-Karashi explains, adding that there are no hard and fast limits to these numbers and investment goes where the agency sees the best opportunities. “Internationally, our main areas of interest are the Eurozone, the US, Japan and other East Asian countries. We buy either fixed income securities or equities of prime companies and banks. Nationally, we have in the past invested in residential construction – notably two major projects in Mecca and the famous Diplomatic Quarter of Riyadh – as well as in office space and the retail market. But due both to the current unstable conditions of the global economy and the intrinsic value of the investment, the most attractive proposals for us now are the government-driven mega-projects that are complementing private sector activities in the KSA.” Although the PPA is a government agency, Al-Karashi insists that bureaucratic

procedures do not hamper its operations: “There is a well-established process of decision-making. We do need to go to our investment committee to get approval for decisions, but this can be done in one day. It is not cumbersome or time-consuming and doesn't limit our reaction speed. On the other hand being a government agency works to our immense advantage. We are very well supported by the government, whether it is through creating incentives to invest in our projects or giving us licenses and permits easily and making exceptions for our projects as for the number of floors allowed and many other details. They realise we are working with the money of people who served the country well and deserve their retirement benefits,” explains the governor of the PPA.

The Public Pension Agency (PPA) is the government agency that manages the retirement benefits of all military and civilian government employees.

In 2009, the PPA created Rayadah Investment Company (RIC) as a subsidiary to invest in the growing real estate sector and run one of the largest developments of the moment in Saudi Arabia, the King Abdullah Financial District (KAFD).

Due to the current unstable conditions of the global economy the most attractive proposals are the government-driven mega-projects Saudi Arabia· 55

finance

Currently, Saudi Arabia counts 12 locally incorporated commercial banks, 11 branches of foreign brands, 30 insurance companies, 15 companies dealing in securities and over a hundred brokers. According to the last figures released by SAMA, the combined total assets of the bank system in KSA grew by 22.5% year on year to SR370 billion ($99 billion) in 2009. The asset management industry has $135.8 billion under management and is growing at an estimated rate of 12.2% per annum. Strong pillars, cautious players and firm legislation The combination of a well-supervised sector, careful lending, the kingdom’s robust economy – ranked 23rd worldwide - and its plentiful natural resources have made KSA’s banking sector the biggest and most technologically advanced of the Middle East. At a turbulent and rather unpredictable moment of the global financial system, Saudi banks wisely opted to further protect themselves from the headaches of possible non-performing loans by increasing their provisions. “While the minimum capital adequacy for banks determined by Basel II stands at 8%, Saudi Investment >>

Top Ten Commercial Banks Ranked by assets as of end-December 2009

Banks

Net Income

Assets US$

Market Share (%)

National Commercial Bank

4,121

257,452

18,8

Samba Financial Group*

3,725

184,079

13.4

Riyad Bank

3,031

176,399

12.9

Al Rajhi Bank

6,767

170,73

12.5

Saudi British Bank

2,032

126,8

9.3

Banque Saudi Fransi

2,468

120,572

8.8

Arab National Bank

2,367

110,103

8.0

Saudi Hollandi Bank

59,11

4.3

Saudi Investment Bank

539

50,148

3.7

Al Bilad Bank*

17,018

1.2

Total assets of all commercial banks

n/a

1,370,258

100.0

(*) Figures for nine months ending September 2009. Sources: EIU, Individual banks reports; Saudi Arabian Monetary Agency.

KEY DATA

The new financial hub in the middle east King Abdullah Financial District The dazzling crown of the amazing financial achievement of Saudi Arabia is yet to be put in place: the $10 billion King Abdullah Financial District (KAFD) currently under construction on a 1.6 square kilometres site north of the capital Riyadh. When completed in 2012, the District will be the most ambitious architectural achievement and will transform Saudi, the largest country of the Gulf Cooperation Council, into the dominant financial centre of the Region, consolidating Saudi Arabia’s position as the Middle East’s financial capital. Comparatively speaking, it will be the Eastern version of Wall Street and a more contemporary Canary Wharf. With over 3 million m² of floor space, KAFD comprises not only “smart” offices, featuring fully integrated state of the art technology and communications networks but offers also a cornucopia of dynamic residential buildings, 5-Star hotels, conference centres, recreational facilities, and engaging retail spaces. There is even an innovative financial academy offering

courses leading up to a master’s degree. All structures will be built to comply with LEED environmental certifications. The landowner and developer is the Public Pension Agency (PPA), which previously developed the famous Diplomatic Quarters in Riyadh along with other developers.

A green city for the capital markets ”KAFD will become an important hub and meeting point. It is designed to promote interaction between national and global institutions and players and to enhance the transactions between them by concentrating them geographically,” says PPA’s governor, Mr. Mohammed A. Al-Karashi. “We expect the District to reflect the financial and economic dimensions of the Kingdom, which are considerable. We are working on every level to make it the most advanced dedicated financial centre in the world and are already attracting major global players with whom we have already signed MOUs (memoranda of understanding).”

Government institutions will serve as anchors and be the first occupants. The Tadawul stock exchange as well as all other commodities markets will be located in KAFD, to be joined by the headquarters of the Central GCC Bank, representing the imminent monetary union of a number of Gulf countries. “A number of major local banks have already signed up, too, as well as some offshore banks, insurance companies, brokers, and the World Trade Centre,” he went on to say. “The financial academy will be set up in cooperation with a renowned international institution.” King Abdullah Financial District will benefit directly from Saudi Arabia’a membership in the World Trade Organization (WTO); that association opened the country’s financial industry to the world in 2005. The Kingdom’s financial sector is now possibly more attractive and better positioned than ever after surviving almost untouched by the global financial crisis. Its sound financial system is also one of the leaders in Islamic finances with its financial assets ranking at top positions worldwide

and specializing in shariah-compliant financial services, sukuks and bonds. Its vision is for Islamic finances to grow and find a new home in KAFD.

Unique location with unique design For a project meant to change the face of Riyadh forever, no expenses have been spared. The developers have enlisted some of the world’s most prestigious award-winning building designers that will participate in the creation of unique architectural structures in KAFD intended to gain worldwide prominence. The one-of-a-kind master plan was designed within a leaf shaped site that is divided into different areas around the Financial Plaza where five landmark buildings - Capital Market Authority (CMA), the World Trade Centre (WTC), the Gulf Corporate Council Central Bank (GCC Central Bank), Tadawul and the SAMBA Financial Group (SAMBA)- present the main focus of the district’s primary activity and visual drama.

On the first level, skywalks will connect the Financial Plaza with the rest of the area, enticing pedestrians to explore the District. Complimenting the Skywalks, an elevated, unmanned monorail will circumnavigate the commercial node, stopping at six stations, all strategically located near museums, hotels, and banks. One of the sky-train stations within the Leaf has been positioned to interface with the Light Railway Train (LRT) station along nearby Olaya Street already under construction, eventually expanding the interconnectivity of the project. Indeed, the site is strategically located in the commercial corridor of Riyadh within the highway network and the connection to the LRT, in the developing capital. The spacious conference centre, the luxurious spas and some of the other world-class attractions such as the Aquarium, the Science Museums and the Grand Mosque will compliment the financial crown of Saudi Arabia at both ends of the Wadi, a zigzag shaped traffic-free connection set at –5.5m below the prevailing local ground level.

For further information on locating your business offices in the Middle East’s prime business location, please visit the website http://www.kingabdullahfinancialdistrict.com.

KAFD will be an ambitious architectural achievement transforming Saudi into the dominant financial centre of the Region. 56 · W G u i d e s

Gross Site Area: 1,608,029 sqm Total Floor space Provision: 3,085,026 sqm Total Parking Provision: 61,472 spaces Total Parking Floor space: 2,302,781 sqm Saleable Floor space: 2,853,738 sqm Office: 1,658,117 sqm Residential: 626,811 sqm Hotel: 152,511 sqm Business: 52,838 sqm Convention & Exhibition: 52,550 sqm Retail: 310,912 sqm Government and Community: 71,487 sqm Attractors: 159,878 sqm The tallest building in the project will be: Capital Market Authority (CMA) The height of the highest building 385 m

Some of the world’s most prestigious award-winning building designers were enlisted for the creation of the US10 billion KAFD Project. Saudi Arabia· 57

finance

Bank has increased the percentage to 14 per cent,” explains Mr Al Mineefi, General Manager of The Saudi Investment Bank. According to SAMA, the capital-to-assets ratio of commercial banks was 11.94% at the end of 2009, compared to 10.12% at the end of 2008.The failure of two well-known Saudi conglomerates, Saad Group and Alghosaibi & Brothers, last year sent shockwaves through the system, showing that a reputed family name alone is not enough when it comes to lending. Nevertheless, banks in Saudi remained profitable and well capitalised through the 2009 downturn. SAMA reported that the cumulative profitability of the sector for the full year of 2009 was SR 26.8 billion, compared with SR 29.9 billion in 2008, more than half originating from domestic private sector lending. “The banking and financial system of KSA is not only one of the best of the region but also of the G20.The monitoring of the Central bank with its most advanced electronic system has allowed the country to remain robust despite the crisis”,says Mr Al Mineefi. Indeed, after >>

interview with The opening up of Saudi Arabia's banking market to foreign companies was an opportunity not to be missed. One of many who entered it was BankMuscat - with assets of over $15 billion easily the largest bank of the neighbouring Sultanate of Oman.

Mr. Arif Ali Ceo Of BankMuscat In Saudi Arabia The bank succeeded in getting a license in 2005. “Branch licenses for KSA have only been given out since 2004, and initially SAMA favoured banks headquartered in the country's main trading partners: Deutsche Bank came first, then JP Morgan from the US, Paribas from France, followed by GCC banks,” explains CEO Arif Ali. “Only the largest bank of each country was accepted. Additionally, SAMA encouraged the banks to open full branches – rather than just private banking operations with minimal footprint.”

Opening a branch in KSA has provided the bank with access to the largest economy in the GCC: “Since opening in March 2007, our balance sheet has grown significantly every year,” enthuses Ali. 'This growth was quicker than we expected, especially during 2010, but then the government itself is investing in the economy, encouraging companies by investing their own money, and we benefited from that.” BankMuscat also benefited from the tight credit controls of the large local banks,

which drove companies to the few banks still willing to lend them, in a targeted manner, the working capital they needed to expand their business. “Our core business is corporate banking. We specifically cater to the mid-size niche, which doesn't get as much personalised attention from the large banks here as they get from us.” BankMuscat’s strategy is particularly focused in the Gulf region. Apart from Saudi Arabia and its home country, where the bank has a market share of almost 40%, the bank has a branch in Kuwait, a subsidiary (BMI) in Bahrain and Qatar, and a representative office in the UAE. “KSA was a natural and logical expansion for us. It is the biggest economy of the GCC and an important trading partner for Oman. We consider ourselves a GCC bank,” says Ali, “although we have previously taken stakes in an Indian & a Pakistani bank,“ he adds. But the booming business is not the only reason why Ali is happy to bank in the kingdom: “Saudi customers are very wellinformed. They are great entrepreneurs, very knowledgeable and involved in their business. Most of them are intimately involved in running their businesses.”

"Since opening in March 2007, our balance sheet has grown quicker than expected, especially in 2010" 58 · W G u i d e s

Saudi Arabia· 59

finance

Saudi banks agreed to implement the Basle II Capital Adequacy Standard by end-2008, the system has become more transparent and reliable. Reliance on financial institutions complying with Islamic law – which forbids handling interest-based financial instruments – has also contributed to insulate the Saudi banking sector from the international crisis. Sukuks, shariah-compliant debt instruments supported by revenue-generating assets rather than the reputation of a company or its fixed collateral, are now on the rise.

Top ten investment funds Fund Name

Fund Manager

Al Alhi Saudi Riyal Trade Fund

NCB Capital

4,478

17.9

Al Ahli Diversified Trade Fund

NCB Capital

1,363

5.4

Al Rajhi Capital

972

3.9

HSBC Amanah Saudi Riyal Trading

HSBC Saudi Arabia

948

3.8

HSBC Amanah Saudi Riyal Equity

HSBC Saudi Arabia

852

3.4

Riyad Capital

640

2.6

Al Raed Fund

Samba Capital

580

2.3

Riyad Equity Fund 2

Riyad Capital

530

2.1

NCB Capita

471

1.9

Caam Saudi Fransi

376

1.5

25,065

100.0

Saudi Riyal Commodity Mudaraba Fund

Riyad Equity Fund 3

As a cheap, religiously acceptable source of financing, sukuks have transformed the bond market in KSA. More companies are now turning to debt financing as a new option alongside equity financing. Although all banks in Saudi Arabia offer Islamic products and services, the country hosts only four fully operational Islamic commercial banks: Al Rajhi Bank, Bank Al Jazira, Al Bilad Bank and the latest comer Bank Inma.

Al Ahli Saudi Trading Equity Fund Al Badr Murabaha Fund

Assets (m US$) Market Share (%)

Total Assets in Dec 2009 according to SAMA

* Total assets are at end-September 2009 (SR94bn, at SR3.75:US$1), according to the Saudi Arabia

With the country expected to grow by almost 4% this year as compared to 0.15% in 2009, the financial >>

interview with One foreign company to recognise the

Omar Al Jaroudi, Ceo Of Shuaa Capital Saudi Arabia

potential of Saudi

AN EYE ON KSA OPPORTUNITIES

Arabia's huge financial

Proof of Shuaa´s confidence in the resilient Saudi economy is the company's recent opening of a second office in Jeddah. “Because of the crisis, many investors and fund managers took a step back to reconsider their policies and decisions. There was a general return to the principles of sound investing in a strong economy carried by real fundamentals. We carried out a survey among investors and fund managers which showed high confidence in the Saudi economy: KSA has a huge and growing population, large reserves of minerals and huge financial resources, which are now being invested wisely. All this at a moment when neighbouring countries are struggling to prove their liquidity.”

market is Shuaa Capital Dubai, which did not hesitate to establish its new Saudi branch even in the middle of the global financial storm. “We actually arrived just before the crisis hit, at a bad moment, but we have been doing well anyway,” explains Mr. Omar Al-Jaroudi, CEO of Shuaa Capital Saudi Arabia.

In fact, Al-Jaroudi thinks the future of the country looks more promising than ever. “I know many people who started their careers here, then spread out all over the world and they are now coming back. Things are changing very fast here”. Indeed, of Shuaa's 45 full-time employees - fully dedicated to

the huge local market - over 60% of them are Saudis, including Al-Jaroudi himself.

The entry of Shuaa to the Saudi Market Shuaa Capital Dubai, a publicly listed company, was founded in 1979 by the Chambers of Commerce of several GCC countries and started as a private equity house. Later, it expanded its activities to become a full-fledged investment bank, providing the entire range of services including brokerage, asset management and investment banking. In April 2007, the kingdom's Capital Management Authority licensed Shuaa to carry out the same activities in KSA. Shuaa Capital Saudi Arabia is a closed joint stock company, with a paid-up capital of SR 150 million. Shuaa Capital Dubai holds 60% of the shares, with the remaining 40% divided equally among four prominent Saudi business groups: Al Faisaliah Holding Group, Sara Trade Holding, Al Mutlaq Group, and Ibrahim Abunayyan & Bros. The company has carved out a niche for itself among affluent high net worth customers.

“On the retail level, the market is controlled by local banks; they have good distribution, better financial capabilities and established accounts. I would prefer not to see them as our competitors but as a fait accompli in the market. We serve another niche, very far from theirs. Our clients are interested in quality advice, a personalised service and our good research capabilities.” Shuaa's astute sense of marketing has enticed some large accounts to come their way. “When we arrived here and looked at the market, we noticed that there were several economical sectors which had not grown yet despite the growth in population and demand, and contrary to the regional growth of the same sectors. We identified five underdeveloped fields: tourism, hospitality, logistics, health care and education and we have concentrated on those fields.”

Shuaa Saudi Hospitality Fund To capitalise on the huge gap in demand and supply in hotels, the company developed its

"We carried out a survey which showed high conﬁdence in the Saudi economy as it has a solid base and a growing population." 60 · W G u i d e s

flagship product: the Shuaa Saudi Hospitality Fund. “I think that in this country we have been too busy with the public economy. There was not enough incentive to invest in the hospitality business, the sector was disorganized and doing business was difficult. All this has improved in recent years with the activities of the SCTA.” According to Al-Jaroudi, it will take at least five more years to close the existing gap in hospitality, not to mention future demand and growth. “It is true that five new hotels are being built per year in the KSA, but at 250 to 300 rooms per hotel, that is still insufficient.” In the meantime, however, Shuaa Capital is on the case, partnering with Rotana Hotels of Abu Dhabi. When finished in 2014, the project will comprise six properties in Jeddah, Riyadh and Eastern Province, where Shuaa's hospitality fund will build complexes with different components. The first project in Jeddah will consist of a 5-star hotel and 5-star furnished apartments plus a retail component. “In all, we are investing $133.3 million,” Al Jaroudi says. In another location in Jeddah, Shuaa will build on the new Rotana formula, the 3+ stars 'Centrum' business hotel, with other components to be added. In all, Al-Jaroudi estimates the project will create some 3,500 long-term job opportunities.

Monetary Authority. Source:EIU, Zawya Mutual Funds Monitor, SAMA and others

Searching for niches The company has successfully brought another neglected niche to the market: mergers, acquisitions and private placement. “Nobody is doing that here; we have little or no competition. It is still an uncommon phenomenon in KSA, but becoming less so. There is a huge potential here and we are already helping companies with private placements when they need to raise money for acquisitions.” In the future, Al-Jaroudi also sees important developments taking place in the logistics sector. 'There are exactly 2 logistics companies in this huge country, whereas Kuwait has 17 of them and Dubai alone 22. Companies in KSA are wasting time, resources and efforts organising their own logistics, which detracts from their core business and is not sustainable in the long run.” Shuaa Capital has acquired a solid reputation for its dependable market research and analysis and its personalised advice to international investors and companies seeking information and access to the market. “But we work the other way round too. Because we are an international organisation ourselves, we advise Saudi investors in their ventures abroad as well.”

“We have concentrated in ﬁve underdeveloped ﬁelds: tourism, hospitality, logistics, healthcare and education". Saudi Arabia· 61

finance

Banking Regulations • A bank's risk-weighted capital-to-assets ratio must exceed the agreed minimum international standard of 8% (all Gulf Cooperation Council states implement Basel II standards at the end of 2008). • Total deposits may not exceed 15 times a bank's capital and reserves. • Loans to a single customer may not exceed 25% of a bank's capital and reserves; exposures of more than 10% must be reported to SAMA. • Lending to shareholders and other related parties is limited to 10% of a bank's capital. • Banks must maintain a liquid-asset level of 15% of deposit liabilities. Banks may not hold more than a 10% stake in any company. • Banks must keep 7% of their demand deposits and 2% of their time/ savings deposits with SAMA in non-interest-bearing accounts. The banks may not access these monies.

system is already feeling the effect of government expenditure. In Q1 of 2010 alone, the government approved contracts worth $10.6 billion, as part of a larger 5-year investment program of $400 billion in infrastructure. In the whole of 2009, only $33 billion was invested. 2011 is expected to be a year of major growth in the sector. And all numbers could double again once the longawaited Mortgage Law is passed. According to some estimates, there is a shortage of 2 million houses in a country where only 30% of the population are homeowners. Although most banks have partnerships with real estate firms to circumvent the missing legislation and serve an already mortgage-hungry market, there is a need to clear up the legal situation in respect of property ownership, repossession, enforced eviction and asset liquidation in case of delinquency.The Mortgage Law will not only revolutionise the market but also attract specialised firms. Surprisingly, unlike some neighbouring GGC countries, Saudi Arabia’s real estate market is still underdeveloped and certainly not affected by the crisis.

2011: The Highest Budget Of Saudi´S History At the end of 2010, Saudi Arabia announced the highest ever budget of the history of Saudi Arabia with revenues at SR540 billion ($145 billion) and expenditures amounting SR580 billion ($154.7 billion). The deficit forecasted of SR40 billion will probably end up in a surplus as it is calculated with a very conservative oil price at just $58 a barrel when the average oil price during 2010 remain at over $75 and is not expected to fall a bit during 2011. In 2010, the government posted a budget surplus of SR108.5 billion ($28.9 billion) and a current account surplus of SR260.9 billion ($69.6 billion). Education, health, transport and other infrastructure projects are the absolute winners in 2011 budget. Specially investments in education and infrastructure

that are expected to surpass SR400 billion ($106 billion) and are aiming to both, boost a continuing growth of the economy but especially to create jobs for the fast growing young Saudi population. However, most of the expenditure was already pre-determined by the five-years government plans, in particular with the US400 billion-planned investment in infrastructure projects during 2009-2013.

the previous year and impressively doubling since 2003 when the country posted a GDP of $213 billion. The growth during 2010 was determined by a 25 percent increase in the oil sector.

According to some estimates the contracts signed between the government and the private sector increased by 26 percent to 2,460 contracts worth SR182.5 billion ($48.7 billion). For 2011, this amount is expected to by at least 10 percent.

Finally, when a very high number of OCDE countries have their public debt rising to nearly or over 100 percent of the GDP, Saudi Arabia managed to decrease it to 10.2 percent of the GDP to SR167 billion ($44.5 billion). The reduction of the public debt, though, has been carefully approached by the government over the years and will be a fundamental focus of its financial policy. As a detail, in 1999, the public debt of KSA amounted for 103 percent of the country’s GDP.

In 2010 the Kingdom’s GDP is expected to reach SR1.63 trillion ($435 billion) 16,6 percent higher than

For 2011, the International Monetary Fund (IMF) forecasts that the country will grow by 4.5 percent.

The 2011 budget is the highest in the history of KSA with expenditures at $154.7bn and investments at $106bn. 62 · W G u i d e s

Saudi Arabia· 63

finance

External sector (In billions U.S. of dollars)

Fiscal and Financial variables (In percent of GDP)

Prel.

Proj.

2006

2007

2008 2009 2010

Exports

211.3 233.5

313.9 192.6 228.9

Of which: Oil and refined products

188.5 205.6

281.4 163.3 195.6

Imports

-63.9

-82.7 -101.6 -87.2 -108.6

Current account

99.1

93.5

132.5

22.8

29.0

Currrent account (in percent of GDP)

27.8

24.3

27.8

6.1

6.7

SAMA’s net foreign assets

221.4 301.3

2006 2007 2008 2009 2010

Central Government revenue

50.8

44.6

61.6

36.2 39.8

Of which: oil revenue

45.3

39.0

55.1

30.8 35.0

Central Government expenditure

29.8

32.3

29.1

42.3 41.0

Fiscal balance (deficit -)

21.0

12.2

32.5

-6.1

(in percent of non-oil GDP) 18.1

20.1

32.2

25.3

24.8

Real effective exchange rate (percent change)

-0.4

-2.9

2.3

8.2

Proj.

-1.2

Non-oil primary balance

438.5 405.9 429.8

SAMA’s net foreign assets (in months of imports of goods and services)

Prel.

-48.2 -55.8 -57.7 -68.7 -71.0

Change in broad money (in percent)

19.3

19.6

17.6

10.7

9.2

Source: IMF

interview with

Dr. Abdul-Aziz Al-Abdullah Al-Ohali Chairman of the Saudi Investment Bank An aggressive market seeker The Saudi Investment Bank (SAIB) has

It´s vision to improve its positioning in the market over-passing its competitors has been fine-tuned in a five-year strategic development plan that started implementation on December 2009. The new mission and vision statement that emerged from it enhances the quality of services.

not stopped to reinvent itself since its inception in the market in March 1977. It has established its own identity as a quality alternative to the larger institutions for sophisticated corporate and private banking customers.

“Our future plans were endorsed by the Board in 2010 as part of our 5 year strategic plan, and we established our vision for the bank as “the financial partner of choice for aspiring businesses and individuals”, explains Dr. Abdul-Aziz Al-Abdullah Al-Ohali, Chairman of SAIB. “We will achieve this by building lasting relationships with growing businesses, and with today and tomorrow’s affluent individuals”, he continues. SAIB´s Chairman is clear about the Bank´s new focus. “We will focus on a core product set with clear offerings for each client segment that differentiates us through efficiency and service quality. We want to develop a culture that fosters ownership, collaboration, customer focus and operational excellence by strengthening staff loyalty

through the introduction of a performance driven environment” “The final objective of the strategy is to improve our market share” adds Musaed M. Al-Mineefi, General Manager of The Saudi Investment Bank. Al-Mineefi worked in the bank for 17 years as a financial controller but moved onto deputy manager and finally general manager nearly a year ago.

and private institutions as well as individuals, SAIB is a full fledge bank that offers traditional wholesale, retail and commercial banking products and services in addition to investment banking. In particular, it arranges financing of quasi-government and private industrial sectors and trade finance products for imports and exports.

A number of milestones that build up a brand

Over the years, the Bank has been awarded the J.P. Morgan Chase award of excellence, speed and accuracy in the implementation of swift bank transfers in U.S. dollars and the transparency award. Following the growth tendency of Islamic banking, in 2006 the bank launched Al-Asalah Islamic banking offering its customers a full suite of sharia compliant products including Consumer financing, Current accounts, and Home finance. Furthermore, SAIB also acts on behalf of its private banking customers as an international brokerage intermediary including options, foreign exchange, precious metals and other Treasury products.

As a public listed company and with shareholders that include J. P. Morgan Chase, Mizuho Corporate Bank and Saudi public

Since the introduction of the Capital Market Law that separated bank and investment ac-

In January 2011 the Saudi Investment Bank Board of Directors approved a recommendation to increase it’s capital from 4,500 million Riyals to 5,500 million Riyals, an increase of 22.2% by issuing one bonus share for every 4.5 outstanding shares. This will increase the total number of shares from 450 million to 550 million improving the Bank’s capital base that will contribute to the growth and the expansion of the business.

We have established our vision for the bank as “the ﬁnancial partner of choice for aspiring business and individuals". 64 · W G u i d e s

tivities that now have to be offered through an independent company, SAIB setup two independently managed and operated companies. “The first one is Al-Istithmar Capital. It is 100% owned by the Bank and it offers local and international brokerage to the customers of SAIB. And the second company, SAIB BNP Paribas is in partnership with BNP Paribas and offers asset management”, comments the Chairman. Other milestones complete the long list of achievements of the bank. Last June Fitch Ratings affirmed The Saudi Investment Bank's (SAIB) Long-term Issuer Default Rating (IDR) at 'A-' with a stable Outlook. At the same time, Standard & Poors revised its outlook on SAIb to stable and affirmed the Bank´s Long-term credit rating at 'A-'. While the minimum capital adequacy for the banks stands at 8 per cent Saudi Investment Bank has increased the percentage to above 14 per cent (17 percent at year-end).

Retailing focus SAIB is wholly committed to the promotion of private industrial and commercial sectors and is actively supporting several major projects. “In the last few years the bank has evolved into a full retail bank with 45 branches and 7 ladies sections across the Kingdom covering major cities plus 3

branches under construction,” explains Dr. Al-Ohali, SAIB’s Chairman. In fact, the focus of the Bank on growing its market share within the retail sector increasing its number of branches even in the remote areas of Tabuk, Taif and Hail and expanding its network of ATMs to 247 scattered over the Kingdom has paid back. SAIB´s market share of corporate retail clients has gone up to 4.9%. Today SAIB is the lead player in providing brokerage services in the Saudi equities market with attractive and efficient customer lounges in several branch locations dedicated to this investment activity.

“We put our money where our mouth is” – he adds- “and we have implemented service level agreements across all business and service departments holding each department accountable for the timely delivery of the services to our customers. For example with our consumer loans we guarantee “money in the bank within 24 hours” or we will refund the customer’s application fees.”

A corporate citizen

But customer service remains the crown of the Bank and to keep its leading position it offers its customers several ways to bank through the branches, mobile phones and the Internet.

Following the mission set by the bank since its opening over 35 years ago, SAIB continues to fulfil its Corporate Social Responsibility (CSR) through contributions to the education sector. It offers training and internship programs for the students to adapt to the work environment and “in addition we organise visits for school students to tour the Bank´s branches and get first hand experience by doing role-play in our purposely-built mini branch”, explains the Chairman.

“The Bank is keen to provide the best banking services to suit the needs of all customers. This comes in line with our vision to meet growing demand to take advantage of banking services with high quality and excellent and competitive products to achieve the full satisfaction to which we aspire,” affirms Dr. Al-Ohali.

Active also in charity activities, the Bank supports several charitable organizations and activities in good causes. “The bank always aligns its business activities to be sustainable and responsible business and our staff is always encouraged to carry out voluntary activities such as the Killana donation”, underlines Dr. Al-Ohali.

Welcoming happy customers

Dr. Abdul-Aziz Al-Abdullah Al-Ohali, Chairman of the Saudi Investment Bank

Musaed M. Al-Mineefi General Manager of The Saudi Investment Bank

Since SAIB opened over 35 years ago, it continues to fulﬁl its CSR through contributions to the education sector. Saudi Arabia· 65

6% 9%

finance

3% 2%1%

10%

finance

9% 6%

10%

The Saudi Stock Exchange 21%

By Arvind Singhi, KPMG

10% 21% 3% the Arab Automobile The roots of the Saudi stock exchange or Tadawul could be traced to the mid-1930s, when Company was established as the first joint stock company. The market remained informal until 1980s when the government embarked on institutionalizing and regulating the market.The Saudi Stock Exchange (Tadawul) Company was formed in March 2007.Today,Tadawul hosts 146 companies from multiple industries and is regulated by the Kingdom’s Capital Market Authority.

The listed equities are categorized among 15 sectors.The Insurance sector has the strongest presence with 31 2% 3% 1% 3% registered companies followed by the Banking and Financial Services sector with 15 companies. However, in 3% 2% terms of market capitalization, the27% Petrochemical sector accounts for 37% of the total followed by the Banking and Financial Services sector with 27% .The figures below highlight the structure of the Tadawul as of yearend 2010. 10% 4%

3% 2%

2% 3% 1% 3% 27%

10%

6% 9%

37%

10% 21%

A major effect of the most recent crisis is the reduction of small investors in the market and a consequent drop in the overall volume traded.The graph below shows a drop from an average daily volume of SAR 241 Mn in 2008 to SAR 132 Mn in 2010, a 45% drop.

By Number of Companies (146 Companies)

300

37%

241.5

250

By Market Capitalization (SR 1,325 Bn)

228.5

200

200 207.7

150

132.5 145.8

100

100 78.4

Banks and Financial Services

Petrochemicals

Cement

Retail

Energy & Utilities

Agriculture and Food

Telecomunication and IT

Insurance

MultiInvestment

Industrial Investment

Building and Construction

Real Estate Development

Transport

Media and Publishing

Hotel and Tourism

2% 3% 1% 3%

0 2008

Average Daily Number of Trade (Right in 000’s)

Average Daily Volume (Left in Mn)

Despite these setbacks, the Tasi month-to-month declines during the crisis were relatively milder than those experienced by other GCC nations. Between 2008 and 2010, the average month-to-month Tasi fluctuation was -0.6%, second only to Qatar which averaged 0.3%, and far better than Dubai at -2.7%.

Banks and Financial Services

Petrochemicals

Cement

Retail

Energy & Utilities

Agriculture and Food

Telecomunication and IT

Insurance

Building and Construction

Real Estate Development

The Saudi Stock 3% Exchange experienced two major setbacks in the last few years. 2% Industrial Investment 27% The crash in 2006 pulled the Tadawul All-Share Index (Tasi) downMultiInvestment from more than 20,000 points in February 2006 to just 7,933 by December in the same year. Most experts agree that the fundamental reasons behind the downTransport Media and Publishing 10% turn was an overall lack of corporate transparency, ignorance of the fundamentals of investments among small investors, and the significant margin lending by the banks.

Hotel and Tourism

2010

2009

30.0% 20.0% 10.0% Saudi

0.0%

Kuwait

-10.0%

UAE Dxb

-20.0%

Baharain

37%

Nov-10

May-10

Jan-10

Mar-10

Nov-09

Jul-09

Sep-09

May-09

Jan-09

Mar-09

Nov-08

Jul-08

Sep-08

The Tasi closed at 6,620 at the end of 2010

May-08

-40.0%

Jan-08

25,000

-30.0%

Mar-08

The crash in 2008 brought the Tasi down to 4,802 points by the end of 2008 compared to 10,717 at the beginning 5% of 2008.The 1% 2008 downturn in the stock market was a direct consequence of the global financial crisis.

Qatar

Jul-10

10%

Sep-10

3% 2%1%

The behavior of Tadawul in the recent crisis mirrors the Kingdom’s resilience to the global economic crisis.The stock exchange benefited from the robust performance of the Industrial, Petrochemical sectors, and Real Estate and Construction sectors.

20,000 15,000 10,000

Jan-02 Apr-02 Jul-02 Oct-02 Jan-02 Apr-02 Jul-02 Oct-02 Jan-03 Apr-03 Jul-03 Oct-03 Jan-04 Apr-04 Jul-04 Oct-04 Jan-05 Apr-05 Jul-05 Oct-05 Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10

5,000

Going forward,Tadawul is expected to continue providing wider product choices to consumers similar to the introduction of the first ETF (Exchange Traded Fund) in March 2010 and allowing foreign ownership through total return swaps. In addition,Tadawul is also expected to seek to attract more long-term institutional investors to balance the substantial participation by local retail investors.To achieve these goals,Tadawul will continue to implement robust governance best practices to bring greater transparency to the market and make the market more efficient.

Source: Tadawul Website

Banks and Financial Services

Petrochemicals

Cement

Retail

Energy & Utilities

Agriculture and Food

Telecomunication and IT

Insurance

MultiInvestment Industrial Investment Building and Construction Estate Development The roots of Tadawul could be traced to the mid-1930s, when the Arab Automobile Company was establishedReal as the ﬁrst joint stock company.

66 · W G u i d e s

Transport

Media and Publishing

Hotel and Tourism

Tadawul was formed in March 2007. Today it hosts 146 companies and is regulated by the Kingdom’s Capital Market Authority. Saudi Arabia· 67

insurance

The insurance market

a sustainable double-digit growth

The real growth of the insurance market started in 2003 with the Cooperative Insurance Companies Control Law. 68 路 W G u i d e s

The insurance market in Saudi Arabia is relatively new. Although insurance products have been sold in the country since the 1960s - through offshore companies and mainly for commercial purposes - the sector only started to develop institutionally in the 2000. By the end of the decade, the market was worth SAR 14 billion.

In 2002, the government approved a first set of regulations covering the insurance market, which made third party motor insurance and health insurance compulsory for foreigners. By 2003, all companies employing over 500 expatriate workers had to take out insurance for their employees. In 2005, insurance was made compulsory for all expatriate employees. The real growth of the insurance market started in 2003, when the Cooperative Insurance Companies Control Law was approved to regulate a highly unregulated market, which at that time was virtually monopolised by the formerly state-run National Company for Cooperative Insurance (NCCI). >>

In 2002, the government made third party motor insurance and health insurance compulsory for foreigners. Saudi Arabia路 69

insurance

The law expects all insurance companies - including those providing the shariah-compliant form of insurance or takaful - to be registered and publicly listed in the kingdom and to act under the principle of cooperative insurance. The companies need to follow Islamic principles where conflict appears with shariah legislation, notably in the case of life insurance. Under this law, the insurance business as a whole is considered as a cooperative business, with shareholders sharing both profits and losses. The law sets the minimum initial investment at SAR 100 million for insurers and SAR 200 million for reinsurers. Foreign ownership is limited to a maximum of 49% of a company. 30% of the premiums and 30% of the reinsurance amount must stay in the kingdom and insurance companies are not allowed to open foreign branches. The law also requires 30% or more of the workforce to be Saudi nationals.

TOP TEN FOREIGN AND DOMESTIC INSURANCE COMPANIES (Ranked by assets as of December 31st 2009) In millions of SAR

Company Assets

National Company for Cooperative Insurance (NCCI)

7,014

Mediterranean & Gulf Co-operative Insurance (MEDGULF)

2,961

BUPA Arabia (Bahrain / Saudi Arabia)

1,406

SABB Takaful (UK/Saudi Arabia)

794

Malath Insurance

697

Arabian Shield (Bahrain / Saudi Arabia)

448

Fransi Gulf Union Co-operative Insurance (France/ Saudi Arabia)

443

Sanad for Co-operative Insurance

415

Trade Union Co-operative Insurance

263

Saudi IAIC Co-operative Insurance (Saudi Salama)

254

In 2008, a more comprehensive set of laws to regulate the sector and protect both providers >>

Source: Eiu, Zawya And Company Reports

interview with

Graeme Evans There is a common saying among expatriate professionals in the kingdom: it has an enormous amount of opportunities to be successful in many fields but only “for those who are bold enough to venture into something that it is completely different and can take an element of risk, a great degree of patience, be adaptable and prepared to work within

Ceo of Sanad Cooperative Insurance and Reinsurance Company It is not strange that Graeme Evans, the new CEO of Sanad Cooperative Insurance and Reinsurance Joint Stock Company (SANAD) shares this opinion as he works in one of the youngest and fastest growing sectors of the economy in Saudi Arabia: the insurance sector. “The job at SANAD presented to me an extraordinary opportunity to look at something rather different with a company very young that nevertheless experienced an extremely rapid period of growth in its first two years and in an country where the insurance sector is equally young”, says Evans who has worked in the sector “more years than what I´d like to disclose” and who actually is not totally unfamiliar with the Kingdom.

the culture and the perceived constrains of doing business in KSA”.

“I did work in Jeddah in the late 1970´s with a company that was a joint venture company that had been started at that time. The company is still in existence. The insurance industry was being born then because of the commercial and economic

needs. At that time, companies were joint ventures with a majority 60% held by Saudis and 40% by foreigners. Now it is completely different with the change in legislation and the perceived need of insurance in the society.” In fact, from dusk till dawn, health and motor insurance became compulsory in a country of 26 million people. Such a high demand boosted the number of insurance companies in the Kingdom creating a very competitive environment that was at the same time lacking great deals of experience. The role of the regulators at this stage has been a key element in the steady development of the sector. According to the last figures published by the Saudi Arabian Monetary Agency SAMA “in 2009, the insurance market witnessed a substantial growth rate of 33.8 percent, with gross written premiums reaching SR 14.6 billion compared to a total of RS 10.9 billion in 2008. The increase was due mainly to the growing awareness of the

importance of insurance and the favourable economic conditions during the year, as well as the introduction of compulsory motor insurance and cooperative health insurance. The total number of working staff in insurance companies in the Kingdom of Saudi Arabia stood at 5,800 at the end of 2009”. “It is a very young industry trying to shape itself so the wish from the government to make the medical and motor insurance compulsory was a great initiative that allowed the industry to grow and to start off on a solid foot” says Evans adding that the direct consequence of this was the birth of new companies that kicked off business at the same time and that are now competing fiercely for clients naturally, but for human resources also. As an almost newborn sector, trained staff is still scarce locally and with the Saudisation quota the number of expatriates allowed in each company is limited. “SANAD has been reasonably fortunate

In 2009 the insurance market witnessed a growth of 33.8 percent, with GWP reaching SR 14.6 billion. 70 · W G u i d e s

as we have exceeded 40%, but there is a shortage of trained or experienced manpower because there has been no previous history so everybody is looking to employ the same people”. Sanad Cooperative Insurance and Reinsurance started operations in the last quarter of 2008 with a paid up capital of SR 200,000.000. Its major shareholders

are Al Khazna Insurance Co., Continental Insurance Co. and Ramat Marketing and Distribution Co. In December 31st, 2009 its gross written premiums reached SR 224 million and it shares a place among the top ten insurance companies list of the country. It employs 185 people. “Sanad was established to be a general insurer with the ability to also accept Re-

insurance business”, explains Sanad´s CEO. “Our long-term ambition is to grow our portfolio on a much wider basis to marine, property, engineering, casualty and perhaps professional risks. What we intend to be as a company is a fairly broad-based general insurer with the ability to underwrite a wide range of products and not just to concentrate in the compulsory medical and motor insurance sector”. But he adds

What we intend to be as a company is a fairly broadbased general insurer with the ability to underwrite a wide range of products and not just to concentrate in the compulsory medical and motor insurance sector”

"Our long-term ambition is to grow our portfolio on a much wider basis from marine to property." Saudi Arabia· 71

insurance

SAMA regulates the market, although there is a specific entity for Health Insurance (CCHI) and, as listed companies, insurers and reinsurers also have to fulfil the requirements of the Capital Markets Authority (CMA). By Q1 2010, the Council of Ministers had approved 33 insurance and reinsurance companies, 27 of which were ultimately licensed to practice insurance and/or reinsurance. One insurance company was listed on the Saudi Stock Exchange but was still awaiting a license

finance insurance

and customers was approved under the name of “Market Code of Conduct Regulation”. In the same year, NCCI went public, listing 70% of its shares in an Initial Public Offering (IPO). NCCI remains the leading takaful insurer in the country and the region. In 2009, NCCI’s profits amounted to SAR 296 million - a spectacular 341% yearon-year rise. Health and motor: the growth leaders Since 2006, insurance premiums in Saudi Arabia have grown by over 30%, faster than the non-oil GDP. The rapid population growth, an as yet low market penetration, the extension of the range of Islamic insurance products and the economic development of the

country in general suggest that the growth of the insurance market will continue to be in the double-digit range for the at least another few years. According to the Saudi Arabian Monetary Agency (SAMA), penetration of insurance on the Saudi market grew by 40% in 2009, but still only represented a mere 1.06% of GDP. Also according to SAMA, general insurance gross written premiums (GWP) represented 43.2% of the insurance market, amounting to SAR 6.3 billion, while protection and savings insurance GWP increased by 68.9% to SAR 1 billion. Health and Motor insurance constituted 71 percent of total GWP in 2009.

to start operations and the Council of Ministers approved the establishment of five other insurance companies. Additionally, two more insurance companies have been recommended by SAMA and are in an advanced stage of the licensing procedure. “In 2009, the insurance market witnessed a substantial growth rate of 33.8 percent, with gross written premiums reaching

that those other products are the most difficult to sell especially in a new market when it comes to individuals insuring their households or their assets. “With commercial business,” Evans says, “there is a more wide-spread recognition to protect the balance sheet”.

SAR 14.6 billion compared to a total of SAR 10.9 billion in 2008,” a recent publication by SAMA states. “The increase was due mainly to the growing awareness of the importance of insurance and the favourable economic conditions during the year, as well as the introduction of compulsory motor insurance and cooperative health insurance. The total number

Medical and motor insurance dominate the Saudi insurance market with medical growing by almost 52% at the end of 2009 and registering 50% of the gross written premiums according to last figures published by SAMA. “The medical area in particular makes a large part of the total market somewhere in the region of 7,5 billion riyals as the annual income and it is predicted to grow to something like 10 billion by the end of 2011” comments Evans. After the significant growth achieved by the company in its first two years and despite a tough year in 2010, Sanad predicts to grow by over 60% in 2011.

of working staff in insurance companies in the Kingdom of Saudi Arabia stood at 5,800 at the end of 2009, 47.5 percent were Saudis”.

“The company is now going through consolidation trying to make sure the business that we do have is controlled. We are looking more at the quality side of the portfolio as opposed to growth for the sake of

growth. Insurance by its nature is a risk business. One can have a large portfolio of business but also suffer with massive losses, so there has to be a balance between growth and profitability. That´s the difficult part especially when the market is so young and is largely untested in certain areas,” explains Evans. Indeed, in a market so young everything is new, including the pricing. “You are not really sure in the early stages whether your pricing structure is going to be adequate but you are still in a competitive market place where you can´t afford to out-price yourself. This puts pressure on how you do your business, how efficient you are, how well you manage your claims and control costs.” Sanad has decided to focus on the small and medium enterprises “as opposed to concentrating on the large energy risks clients that require a high degree of expertise and reinsurance support. In such a competitive market, companies are willing to accept business with perhaps not so much emphasis on underwriting requirements. It is only when the losses occur that you

realise just how severe the problems were and how much risk exposure you had. As the market adjusts itself, so do the regulators who are also in a development phase. ”We can look forward greater regulation of the industry and perhaps broadening of compliance requirements in line with what has taken place in other countries, particularly in Asia. We are in the risk business and insurance companies need to have control imposed on them for the protection of the policyholder and shareholder interests.” And along with tougher regulations, there will probably come some from of consolidation of the market. A window of opportunity for foreign insurance companies to enter the market may exist in the next years. “We have a sufficient number of players if not too many. What is likely to happen in the next two or three years is some sort of consolidation of the companies and, perhaps, foreign companies will enter the market bringing the benefit of international expertise and networks and the ability to expand more globally,” predicts Evans.

"There will probably come a greater regulation of the industry and a broadening of compliance requirements" 72 · W G u i d e s

Saudi Arabia· 73

insurance

PENSION FUNDS The two primary state-run pensions funds are the General Organisation for Social Insurance (GOSI) and the Public Pension Agency (PPA), who together

The greatest demand was for health insurance, which accounted for 50%of total GWP in 2009, as compared to 44% in 2008. Motor insurance came second with 21% of total GWP, while protection and savings, engineering and maritime insurance accounted for 6.9%, 5.5% and 3.6% respectively.

cover all pension funds in the kingdom. In recent years, both agencies have been investing heavily in listed and non-listed companies on the local market, rather than in international low-risk equities or even government bonds – their traditional favourite - to balance the lack of financing through traditional channels during the financial crisis. They have both invested in the large ongoing real estate developments, especially in Riyadh, which today is literally covered in construction sites. PPA has created the Rayadah Investment Company to handle its real estate investments, which include the King Abdullah Financial District (KAFD) and the Information Technology Communications Complex (ITCC). GOSI, which has created Hesana for the same purpose, is considered a traditional leading player in the local market.

Greater legislation and new areas to grow Additional legislation intended to boost growth in the sector and increase transparency in insurance and reinsurance activities was proposed at the beginning of 2010 but has not yet been passed. Contrary to popular belief, life insurance is not per se forbidden in Islamic banking. However, according to experts in the sector, during the last two years, life insurance has been growing by 90% per year. There is a shariah-compliant version of it – a cooperative insurance, which means that people pay into a fund that pays the claims, which is an equalizing factor. Apart from that, the policy and the coverage are no differ-

ent from any other insurance policy, apart from the fact that the fund will of course not invest in alcohol, gambling, pork or other haram enterprises. And more explosive growth is likely to hit the insurance sector in the near future. Like the real estate sector, the insurance market too is eagerly waiting for a mortgage law to be issued by the government. Banks are already starting to provide credit to individuals for housing purposes, but they have to tread carefully absent the pending legislation. Some experts say that what is holding back the law is partly stubbornness on the part of religious groups, and partly the fact that the recent global financial crisis exploded over bad subprime mortgages, which is making the government think twice before allowing mortgages. But the figures show that in countries where a mortgage law was introduced, the economy lived up by 50% and more. Eventually Saudi will get the law. It does not have the luxury of choice anymore.

interview with

Mr. Mousa Al Rubaian Mousa Rubaian, chairman of the Saudi Reinsurance Company, more commonly known simply as Saudi Re is one of the most experienced insurers in Saudi since the very establishment of the National Cooperative Company for Insurance (NCCI) that held the market monopoly for many years.

Chairman of The Saudi Reinsurance Company (Saudi-Re) Insurance history The insurance market in KSA has developed very slowly over the past 50 years. The first instances of insurance taken out happened around 1949 or 1950. “Back then –he says - we mostly had importers insuring cargo, and Aramco taking out insurance for the oil exports. This was at the time of king Abdul-Aziz ibn Saud. There were no laws regulating the issue and no Saudi companies providing insurance.” Instead, companies registered in tax havens all over the world, working on offshore licenses in Bahrain, provided the service. Later, the Council of Senior Ulema allowed cooperative insurance - as opposed to commercial insurance – passing the first law regulating the sector in 1958.” According to Rubaian, this situation created the opportunity to start insurer NCCI from Dubai. Its current Saudi branch is called Tawuniyya (‘cooperative’ in Arabic). “Origi-

nally, the company was 50% owned by the Saudi Ministry of Finance, 25% by GOSI and 25% by PPA’” says Rubaian, who started working as their CEO in 1986, “with no experience at all, but the company was very successful and ultimately became the largest insurance company in the Arab world.” It still is today. In January 2009, NCCI (the mother company in Dubai) posted a 341% rise in profit, with SR 4 billion in gross premiums.

The liberalisation of the market In January 2005, the company sold 70% to the public via an IPO. Rubaian, seeing the commercial market opening, subsequently left the company to start his own consulting agency and Saudi Re. Saudi licenses began to be issued in 2007. The first one went to NCCI, the next to Malad. “I

provided consultancy services to both,” he explains, “and to many other companies who started up later on. The regulations themselves, especially the compulsory motor and health insurances for the general public, but also medical malpractice and contractors’ risk insurances, created much growth. At the moment, five large insurance companies control over 60% of the market, 25 other companies very little each. Some form of consolidation will consequently appear soon.” The insurance market in KSA is in fact doubling every 3 years - it is about SR 11 billion in gross premiums now. Along with its growth, the need for a reinsurer serving the market became more press-

The insurance market in KSA is in fact doubling every 3 years. today it stands at SR 11 billion GWP 74 · W G u i d e s

ing too. This is where Saudi Re comes into play, providing reinsurance to companies who need it due to the size or frequency of the risks they are exposed to. “We are the only locally based dedicated reinsurance company and leader in the market. We offer expertise no other company can muster and as you may know, in the reinsurance business worldwide, expertise is relatively scarce,” Rubaian elaborates on his company’s USP. “We transact virtually all contracts, whether facultative (covering everything), risks on an individual basis, proportional or non-proportional. We have 30 employees and serve 30 to 40 clients in the Arab world, mainly in the GCC. Seeing as we are the only reinsurer in KSA, our competition is international not local.” The recent founding and fast growth of the company means that they are now in a consolidation phase. “In 2008 our aim was to get a foot on the ground, now we are building on our portfolio, getting people to know and trust us. We are consolidating now. In the immediate future we want to grow the business but also the expertise in KSA. We are training young Saudi graduates to become experts.”

“We are now consolidating and training young Saudi graduates to become experts.” Saudi Arabia· 75

infrastructure & transport

76 路 W G u i d e s

Saudi Arabia路 77

infrastructure

A measure of development

The government will spend over $100 billion on nineteen priority investments in transportation systems alone over the next 10 years. 78 · W G u i d e s

infrastructure

Railways and light trains, airports and deep water sea ports, industrial cities and financial districts, hospitals and universities - no matter where you look, the whole of Saudi Arabia currently seems to be a construction site.

The government has announced it will spend over $100 billion on nineteen priority investments in transportation systems alone over the next 10 years. The objective is to capitalise on the king dom’s naturally strategic location as a transport and export hub between the Mediterranean and Europe, the Red Sea and Africa, the Indian Ocean and greater Asia. Faster transport systems linking the western and eastern coasts of the Arabian peninsula and more capacity in the sea ports are obviously required to enhance this function. >>

From 2009 to 2013 Saudi Arabia plans to invest US400 billion in line with the budget estimations that put infrastructure as the top expenditure task. Saudi Arabia· 79

finance infrastructure

infrastructure

From a domestic point of view too, new and expanded industrial cities, development of tourist attractions, real estate developments and a fast growing population keep increasing the pressing demand for a better and faster transportation system within the country. Transportation and cargo flow, next to housing, are currently the most pressing issues in the Saudi economy. Roads around the existing industrial centres – Riyadh, Jeddah and Dammam – are already clogging up and the four new economic cities alone - developed at a cost of over $60 billion- are expected to contribute another 30% jump in cargo flow. If infrastructural efficiency is indeed a measure for the development of a nation, Saudi Arabia has some way to go, but also the means to get there. The harsh climate and geographical challenges of rough mountains and large deserts present obvious challenges for roads and railroads as well as long haul cables and pipelines, but a decade of high oil prices has delivered the funds with which to create a sophisticated transportation network to leverage KSA’s competitive advantages. >>

Imagine the titanic endeavour involved in moving enough earth to fill up 1.3 times the 6,700 kilometres of the Great Wall of China and you will begin to understand what it takes to build 2,400 kilometres of railways in the Saudi Arabia. Then imagine that all the removed sand can and will return at any time carried by desert winds and you will get an idea of the numerous challenges involved not only in the construction but in the day-to-day operation and maintenance of this behemoth system.

interview with

Dr. Rumaih bin Muhammad Al Rumaih, CEO of the Saudi Arabian Railway Company (SAR) line - the so-called landbridge project – to connect the Red Sea and the Gulf. Some 15 years passed before the international bidding process for construction started, but since 2007, construction works have been underway for a transportation system that will transform the hostile and barren desert into an inter-connected industrial state, thus assisting the development of the kingdom into a global economic player. The entire project envisages 3,900 km of new track including the Landbridge Project, the 300 km/h Al Haramain railway scheduled to open at the start of the coming hajj, and the SAR railway project (formally known as the North-South Railway).

Of the one million kilometres of railway built in the entire world, only 24,000 kilometres of tracks have been laid in the desert lands of the MENA region. Apart from the climate, political instability and mutual hostility in the region has not been very conducive to laying more tracks. There has been talk for years about the construction of a railway system that would eventually link a number of cities and countries in the region. Within the UN's ESCWA (Economic and Social Commission for West Asia), in particular, the subject has been discussed on the government level too, but so far the only train that is actually operating in the region is the recently constructed light rail system of Dubai. Next up is Saudi Arabia with a far larger and ambitious plan that will eventually reshape the regional railway map.

PHOSPHATE MINING: THE FIRST PRIORITY

Back in the nineties a World Bank study had already outlined a transportation system centred around two main axes: one north-south line connecting the phosphate and bauxite mines to the processing facilities on the Gulf coast and another west-east

High priority is given to the latter project, as the SAR railway is a strategic line connecting the vast mineral deposits of phosphate and bauxite from mines around AzZabirah in the north to be processed at the fertiliser plant aluminium smelter at Ras Az-Zur, a new industrial city under con-

struction on the Gulf coast. The company responsible for constructing the facilities at Ras Az-Zur is Maaden, also known as the Saudi Arabian Mining Co. The smelter and plants should come online around the same time that the SAR railway will be completed, linking the mines to Ras AzZur and its new SR 2.2 billion port being built by China's Harbour Contracting and Engineering Company. “We are synchronising our work together”, explains Dr. Rumaih bin Muhammad Al Rumaih, CEO of the Saudi Arabian Railway Company (SAR). “We had two options. One was to sell the raw materials - which would be like selling your own blood. The other was to sell added-value manufactured products, such as fertilisers, for which you need manufacturing facilities in industrial cities, which ideally need to be located by the sea for export purposes. So it was decided to build the plants in Ras Az-Zur on the Gulf close to the oil supplies and the abundant water supply needed by the new processing plants.”

The transportation system will transform the hostile desert into an inter-connected industrial state. 80 · W G u i d e s

Previously, mining in Saudi Arabia was limited to the Western Province near Jeddah where some small scale gold mining has long existed. Although the bauxite and phosphate mines in the north of the country were discovered long ago, they become economically viable only with the railway. The railway line will also transport general freight such as petroleum products and chemicals and offer an intermodal (trailer-on-flat-car) service. Several branch lines will be added to serve the agricultural district of Al Basayta in the northwest of the country. Once exploitation gets underway, the kingdom will be amongst the top phosphate exporters, as well as producing 2.92 million tons per year of diammonium phosphate

fertilizer (DAP) for export to high-growth markets in nearby Asia. With a carrying capacity of 16,000 tonnes - equivalent to twenty Boeing 747s - in a single trip, the SAR rail network will not only serve the mineral industry, but additionally transport oil, agricultural and industrial products and last but not least provide a passenger service. Saudi Arabia has secured the participation of many Saudi companies, engineers and specialists in the project, increasing the transfer of technology and know-how through rigid training requirements for the various contracting companies in this new sector. “As a government company, we have an obligation to make sure we train our staff

and keep up with the saudisation process, providing career opportunities to our young people,” says Al-Rumaih, who himself graduated as an engineer from King Saudi University, obtained a Ph.D in Electrical & Computer Engineering in the US and an MBA from Leicester University in the UK. He joined SAR's management as deputy CEO for operations in July 2008, and recently got promoted to first CEO. “It is a challenge for us all, because we are learning about the railway systems. The first and only railway in KSA was built in 1952 and connects Riyadh and Dammam. But there was no real pool of talent and expertise in the country. Now we have thirty engineers who have been

FACTS ON INFRASTRUCTURE 1951 Work was completed on the first 570 km railway line connecting Dammam in the Eastern Province with Riyadh. 1952 The Ministry of Communications was established to regulate the postal system, telegraph, telephone, roads, railways and ports. The kingdom had a grand total of 237km of asphalted roads. 1970 The first 5-year development plan was approved with a budget of SR134 billion to construct and expand the road network connecting the various regions as well as neighbouring countries. 1975 The Ministry of Post, Telegraph and Telephone was established to alleviate the burden of the Ministry of Communications. 1976 The General Organisation for Railways and the General Organisation for ports were founded. The kingdom has 8 main ports on the Read Sea and the Gulf. In 1998 the ports counted 183 quays. 1986 The 25 km bridge that connects Saudi Arabia with Bahrain is inaugurated. Its construction cost SR 2,769 billion ($740 billion). 1998 The road network now consists of 45,200 km of highways and other asphalted roads and over 100,000 km of agricultural roads, as opposed to 8,000 km of single-lane asphalted roads and 3,500 km of agricultural roads in 1970.

The entire project envisages 3,900 km of new track including the Landbridge Project, Al Haramain railway and the North-South Railway. Saudi Arabia· 81

infrastructure

A new multi-modal transportation system combined with the low local cost of fuel and labour – has been designed to position the country as one of the world’s leading transport and logistics hubs. $400 billion to build the transport hub of the East The 9th Development Plan of Saudi Arabia, released by the government in August 2010, states its intention to invest SR 1,444 billion (almost $400 billion) in the period up to 2014 to build the new infrastructure necessary to house, transport, cure and educate the people of Saudi Arabia. Public-private >>

LIST OF CONTRACTS AWARDED

trained in China, the US and Europe,” explains Rumaih.

The PIF has so far signed contracts worth more than SR16 billion for railway projects The project is funded on a 65:35 debt-to-equity ratio, and part of the equity will be funded through an IPO.

THE WORLD’S LARGEST ONGOING RAILWAY CONSTRUCTION

Contract 1: a consortium consisting of the Binladen Group and Mohammed Al-Swailem Co. in partnership with three German companies. Value: SR2.3 billion, involves laying 576 km of rail including bridges, flyovers and tunnels. Contract 2: Al-Suwaikat Consortium Value: SR 1.9 billion, involves laying 440 km of rail including bridges, flyovers and tunnels. Contract 3: Consortium of Barclay Mowlem Co., Mitsui & Co. and Al-Rashed Co. Value: SR 2.8 billion, involves laying 750 km of rail including bridges, flyovers and tunnels. Contract 4: French defence group Thales and giant Saudi Binladin Group. Value: SR 1.7 billion, involves European-style signalling, ticketing, communications and security systems to be completed within 5 years. Contract 5: ElectroMotive Diesel US. Value: SR 337.8 million, involves manufacturing 25 locomotives of 4,300 HP, capable of pulling a 3-km long 160-wagon train carrying 16,000 tons of cargo. Contract 6: South Locomotive and Rolling Stock Industry Corporation (CSR, China). Value: SR 342.3 million, involves designing and manufacturing 668 wagons, 524 of which for phosphate transport.

The SAR project is the largest ongoing railway construction in the world today. It consists of two main lines, one running northwest from Riyadh to Al Haditha near the Jordan border; the second running from near the mid-point of the Riyadh-Haditha line east to the Gulf coast. The value of contracts awarded for the SAR railway project already exceed SR 16 billion, and many contracts are still in the tendering process, notably those for the construction of passenger stations and trains. SAR was incorporated in 2007 as a commercial corporation by the Public Investment Fund (PIF) which resorts under the Ministry of Finance. SAR will own the assets and be responsible for maintaining the lines and equipment and providing heavy-haul mineral, conventional and intermodal cargo and high-speed passenger services. Beside the construction of approximately 2,400 kilometres of single-track rail, the contract encompasses sidings, yards, maintenance shops, stations, administrative facilities, locomotives, rolling stock and on-track and

other maintenance and emergency equipment.   “The actual start of the project goes back to 2004, when the PIF was assigned to do the North-South project. The country wanted to diversify its economy to include a mineral industry, and when you talk about mineral mines, you definitely need rail,” says Al Rumaih.

DON´T MISS THE TRAIN Distance, heat and sand are the three biggest challenges of an operator in charge of keeping the trains running on time here. The sand especially requires permanent maintenance, explains Rumaih: “You need fences on both sides of the line and include some vegetation – read: irrigation - to avoid the accumulation of sand, and your locomotives still have to be equipped with sand blowers. Even then, you still need to carry out maintenance work on a daily basis,” explains Rumaih.

CONNECTING RAILS, CONNECTING PEOPLE A third line will provide 1,418 kilometres of passenger railway. With maximum speeds up to 200 kilometres per hour, the line will link Riyadh in the centre of the country with al-Haditha in the North on the Jordanian border. The final tracks will be laid by 2012, and the system is predcited to transport two

The SAR project is the largest ongoing railway construction in the world today. 82 · W G u i d e s

Saudi Arabia· 83

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partnerships will be the favoured formula to vastly increase the number of universities and vocational and training centres. Princess Noorah University, currently under construction, will be one of the largest women's universities in the world. Nearly 200 new hospitals and thousands more primary care units will cater for the increasing population and a million housing units are scheduled to offset the acute shortage of housing in the kingdom. Much of the investment will be directed to satisfy the increasing demand for power and water and an overhaul and expansion of the transportation infrastructure. In all these fields, investors will benefit from the drop in prices of construction materials caused by the global financial crunch, which could amount to a reduction of some 30% on costs. An important aspect of this project is the boost it will give to efforts to diversify the still largely oil-based Saudi economy and to the creation of much needed employment for a >> large young population.

SAR RAILWAY PROJECT FACTS AND FIGURES

• Total length of railway 2,400 km • Number of bridges

107

• Number of culverts

2,679

• Earthwork quantities 497,000,000 m³ • Nafud desert earthworks – volume per km

915,000 m³/km

• Concrete sleepers

4,600,000 units

• Rail UIC 60E1 286,000 tonnes

million passengers annually. With six stations programmed (Riyadh -King Khaled International Airport, Sudair, Qasim, Hail, Al-Jawf and Al Haditha), the passenger route will be crucial for agriculture, trade and employment, connecting the regions in the north – and the country of Jordan - to the major Saudi hubs. There will be travel information, internet and multimedia facilities in each train station. Last but not least, a light-rail system will operate on major routes in Riyadh in an effort to ease road congestion. “This project will bring a paradigm shift to the small cities which the train will connect. We are not just connecting places; we are connecting people and changing history. In isolation, change will not happen. The more exposure you have, the more people and cultures you know, the more tolerant you become”, says Rumaih who sees the railway as part of the fundamental changes the country is being subjected to. “Humanity is in constant change. If you stand still, you will miss the train. On the current world stage, we simply cannot afford to do that”.

THE GULF AMBITION Saudi Arabia,s regional lead in developing railways may additionally trigger the longstanding project of a common GCC railway system. The network will link the Gulf´s 36

million residents at a cost of over $60 billion, accelerating cross-border travel, trade and tourism and cutting freight costs. The GCC leaders have given preliminary approval for the project which entails 1,940 kilometres of tracks connecting Saudi Arabia, Qatar, Bahrain, Kuwait, Oman and the UAE. Ideally, it should be operational by 2017. The six countries have agreed to share the cost in proportion to the length of the lines in each country. Responsibility for the construction of local branches, stations and freight terminals lies with the individual countries.

The GCC has already established a common market, it is currently tackling obstacles to create a common currency. The future common railway system will contribute to transform the oil-rich region into an influential and developed player in the world economy.

The UAE has already taken a first step with the establishment of the Ettihad Railways Co, which will lay around 1,100 km of tracks at an estimated cost of AED 30 billion. Qatar too also launched its own National Railway Project as part of state-owned property development group Qatari Diar. Railway construction will run from 2012 to 2026, starting with a metro network in the capital Doha and a connection to the Gulf Railway in the south. Oman’s National Engineering Office is cooperating with Syria on plans for an initial 400 km network linking the capital Musqat to the UAE border at Al Buraimi near Al-Ayn. Kuwait and Bahrain are lagging behind but aspire to join the network, while Yemen - although not a GCC member state - is anxious to plug into the emerging rail network and has launched

Saudi Arabia´s railway project may trigger the long-standing project of a common GCC railway system. 84 · W G u i d e s

tenders for the construction of three routes. As Jordan is working to connect its railway system to its emerging Saudi counterpart, ultimately these developments will connect Musqat, Abu Dhabi, Dubai and Riyadh by rail to Europe via the existing networks in Syria and Turkey.

Much of the investment will be directed to satisfy the increasing demand for power and water and an overhaul and expansion of the transportation infrastructure

“We are not just connecting places; we are connecting people and changing history”. Saudi Arabia· 85

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W W W. S A U D I B U I L D - E X P O . C O M

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The Saudi Arabia Infrastructure Report released by Research and Markets in Q1 2011 forecasts a 6.1% growth of the construction industry to a nominal value of SR79 billion ($21 billion) in 2011, with a robustly positive outlook through 2020.

The 23rd International Construction Technology and Building Materials Exhibition Held concurrently

It is raining investment opportunities in the desert The sheer numbers - and total value of construction contracts awarded in 2010, as well as the number of contracts currently in the tendering phase has attracted high interest in the country from the part of investors presented with few opportunities in the aftermath of the global financial downturn. Projects slated for 2009 which did suffer setbacks are now back on track - some of them mega projects such as the new Riyadh power plant, the Red Sea Gateway terminal at the Jeddah Port, the privately-owned Prince

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interview with

TAP INTO THE LARGEST

Ralf Schiffer,

CONSTRUCTION MARKET

former CEO of Fraport Saudi Arabia

IN THE MIDDLE EAST

Since 1983, the

International Airport is

Traffic at Saudi airports is currently in the region of 30 million passengers annually, but the General Authority of Civil Aviation (GACA) expects this figure to double over the next 10 years. As part of the overall reshaping of the country into an international tourist hub and a regional business centre, therefore, GACA is investing significant amounts in the project to upgrade and expand the country's airports by 2020. Private investors are set to contribute to the project too.

undergoing extensive

JUST THE BEGINNING

first scene greeting visitors to KSA has been a beehive-like concrete building blending a distinctly Islamic character with modern design. But now King Khalid

refurbishment.

In 2007, GACA signed a 6-year contract with German airport management firm Fraport, to develop Jeddah and Riyadh airports. The first phase for Riyadh will provide for 25 million passengers between 5 to 8 years. The Saudi Arabian General Investment Authority (SAGIA) offered the German firm three options: setting up as a

branch of the mother company; creating a joint venture with a Saudi partner, or working on a 100% foreign investment licence. â&#x20AC;&#x153;We chose the latter option and SAGIA has been very supportive,â&#x20AC;? explains Fraport Saudi Arabia's former CEO Ralf Schiffer. In 2010, GACA launched a tender to expand â&#x20AC;&#x201C; and build a a commercial centre at - Jeddah airport and construct an entirely new airport for the holy city of Medina. At a cost estimated at SR 7 to 8 billion, the twin projects will increase the hajj traffic capacity to eight million passengers a year from the present three million. ''We offer a 25year build, operate and transfer (BOT) contract for the development of a new airport in Medina,'' says a GACA spokesman.

Arabia for Airport Management and Development Services Ltd. is responsible for the expansion of both the King Abdulaziz International Airport in Jeddah and King Khalid International Airport in Riyadh. The company approaches the two projects differently, however. In Jeddah, a new terminal is being built which ultimately will accommodate 72 million passengers per year. In the first phase, to be inaugurated by 2013/2014, it have the capacity to receive 30 million passengers. In Riyadh, on the other hand, FraportÂ´s assignment is to manage the development of the 225 kmÂ˛ large area of the airport. â&#x20AC;&#x153;It will be the KSA's business card, as this is the main entry point to the country,â&#x20AC;? Schiffer says. The new terminal in Jeddah has been approved and building is underway.

THE WINGS OF FRAPORT Established in a record eight months after winning the bid in 2007, Fraport Saudi

Meanwhile Saudia Airlines, the stateowned airline that is the main hub opera-

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Fraport Saudi Arabia is responsible for the expansion of both KAIA in Jeddah and KKIA in Riyadh. 86 Âˇ W G u i d e s

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infrastructure

ment Fund (PIF) recently signed a deal with Singapore’s Port Authority to expand capacity at the King Abdul-Aziz Port in Dammam, the second largest in the country after Jeddah. The SR2 billion ($539 million) project is the largest port expansion in the history of the kingdom.

Mohammed bin Abdul-Aziz Airport in Medina, the expansion of the Rabigh Power Plant, the Ras Al Zur power plant, the Al Haramain high-speed railway linking Jeddah, Mecca and Medina and finally the expansion of King Khaled and King Abdul-Aziz International Airports, in Riyadh and Jeddah respectively. The unparalleled 1,000 km Landbridge railway project will allow goods to travel from the Arabian Gulf to the Red Sea in less than 48 hours. Two light train tracks are scheduled to ease traffic problems Riyadh and Mecca. The state-run Public Invest-

King Khaled International Airport is growing at a speed that outpaces all other airports in the region, at a solid 17% last year alone, so its expansion seems as obvious as necessary.

tor out of Jeddah, is being prepared for privatisation by spinning off various of its operations into separate companies, allowing it to become competitive in a soon to be opened market. Lufthansa, Germany's national carrier, is one of the main consultants in this operation.

UNVEILING THE FIRST AIRPORT CITY OF THE WORLD King Khaled International Airport is growing at a speed that outpaces all other airports in the region, at a solid 17% last year alone, so its expansion seems as obvious as necessary. But as usual, the Saudis are not about to take things on the way it is done everywhere else in the world, and so King Khaled International Airport will become the world's first 'airport aviation city'. The project will not only modernise the airport to international standards and transform it into a safe and secure commercialised airport environment catching up with local standards of the neighbouring countries. Says Schiffer: “His Royal Highness Prince Sultan bin Salman bin Abdul Aziz developed an innovative and unheard of concept. He didn't want just the usual businesses. He has put together a team working on this concept with Fraport.” And so, the airport is not only adding

In 2009, Saudi Arabia spent $33.83 billion on infrastructure projects, 37% more than in 2008, to finance upgrading and expansion of the road, rail, and port infrastructure. In 2010, more than double that amount was budgeted ($69 billion - SR 258,75 billion). Still, some 10% more than the budgeted amount was spent. Just in the first half of 2010, the government handed out $16 billion in construction contracts, including $2.8 billion on roads and telecoms, $1.6 billion on water desalination and $1.5 billion on rural and urban development and $2.8 billion on education. Since the approval of a 10-year investment plan in 2008, there has been significant growth in the infrastructure for desalination and power generation, with a total proposed budget of $80 billion.

24,000m² of retail area and extending its capacity to 46 million passengers. It will also add an industrial city with maintenance and repair facilities but also entire manufacturing plants for airplanes and helicopters – both Being and Airbus have already responded positively. “The area allocated for this segment alone is almost 80km². In total we have a tremendous 225 km² of land, providing endless opportunities for businesses of all kinds and an unbelievable employment and development project for Riyadh. Our ultimate aim is the full corporatisation of the airport,” Schiffer explains, who stresses that a project of this magnitude would be unthinkable without the support of the Commission for Tourism and Antiquities chaired by His Royal Highness Prince Sultan bin Salman bin Abdul Aziz, who also chairs the airport development project. “The support we receive from him day by day is amazing and a tremendous asset to us.” Although no licences for new airlines are being granted, Schiffer plans to benefit greatly from the private aviation business which is skyrocketing in KSA but lacks proper maintenance facilities and protected parking space. “The planes' exteriors deteriorate heavily after a few

weeks outside in the desert heat, which is very costly. So Saudis often keep their planes in neighbouring countries' airports such as Cairo, Amman, UAE or even Europe.”

RE-ENTERING THE GULF QUOTA Although in Schiffer's terms “the entire performance of the sector relies on airlines and especially on the national carriers”, KSA's own Saudi Arabian Airlines – commonly known as Saudia – has largely been overtaken by regional competotors such as Qatar Airways, Ettihad or Emirates Airlines, who seized the moment in the mid-nineties when conflicts in the region stopped Saudi Arabian and other domestic airlines from developing and renewing their fleet. Almost automatically, this promoted their respective home bases to better positions as regional and international hubs. The challenge for KSA is to regain the predominant position it used to hold in the region. “In fact,” says Schiffer, “KSA is the real big aviation market in the region. The country's GDP is 80% based on the local population while only a small part is added by foreigners, contrary to UAE and others where the ratio of national versus foreign input is the inverse. There is a lot of diversification going on in the

KKIA is growing at 17% a speed that outpaces all other airports in the region. 88 · W G u i d e s

development of the country, from industry to tourism and education, and airport development has keep pace with that trend.” Today, there are two airlines in KSA: Saudi Airlines and NAS. “NAS is prosperous, developing well and expanding both domestically and internationally. They are planning to fly to Southern Europe soon,” Schiffer says. But foreign airlines generate as much international traffic as the Saudi airlines. International traffic in KSA grew by an impressive 18% in 2009. Some 50% of this international traffic comes from Europe, the USA, and Canada. The other 50% is is contributed by Asia. “King Khaled International Airport is not yet a hub, but remains one of the biggest concentration points for foreign

airlines in the region. Star Alliance, for example, flies seven connections per day to and from Europe and three connections with partners continuing to the East.” However, to Schiffer, like to many entrepreneurs in the country, the real challenge facing the kingdom is to be found in changing the image it projects to the outside world, which is not that of a destination which is safe for tourism and business. Saudi Arabia’s tourism industry is unique in that has strong growth potential despite the limitations of strict

visa regulations. “Western understanding and knowledge of KSA is woefully limited and almost entirely incorrect. People come here to work knowing nothing about the country and its real treasures. There is so much to do, see and enjoy here other than work. There is a lot more to be found here than I ever imagined, not least the warm-hearted, kind people. And professionally, of course, Saudi Arabia is a country full of investment opportunities. This country has an amazing future”.

The airport is extending its capacity to 46 million passengers and adding 24,000m² of retail area. Saudi Arabia· 89

infrastructure

bulk and project cargo. Dhuba Port at the Red Sea is well known for its daily ferry connections to Egypt. Gizan Port is SEAPA’s southmost port at the Red Sea. The port hosts ferries to nearby Farasan Island. 3 industrial ports: in Jubail, Yanbu and Ras Az-Zawr. The three industrial ports in Jubail, Yanbu and Ras Az-Zawr fulfill the port demands of the adjacent industrial cities.

INTERVIEW WITH

H.E Abdul Aziz Al-Tuwaijeri President of The Saudi Ports Authority (Seapa) Ports for coastal and international trade in its early forms exist since centuries in the Kingdom, however the majority of the modern Saudi ports have been constructed since the 1970s as a consequence oil exploration.

The Saudi Ports Authority (SEAPA) was created in 1976 as a specialized public body to handle the port development in the kingdom with single most important turning point being the assignment of port operations to the private sector. In 1997 SEAPA launched a privatization program and by the year 2000 all port operations were successfully transferred and SEAPA is now concentrated on planning and supervising. “All in all we have been very satisfied with the first phase of privatization, looking at significant throughput volume and port performance gains. Now we are in the second cycle of concession contracts,” explains His Excellency Abdul Aziz Al-Tuwaijeri, President of the Saudi Ports Authority.

projected commercial port close to Al-Lith at the Red Sea, which will complement Jeddah Islamic Port,” explains Al-Tuwaijeri.

Currently there is a range of investment opportunities in the Kingdom’s port sector. “They range from investments in general maritime enterprises to logistics businesses up to specific investments related to new port developments, as e.g. related to a

SEAPA’s portfolio comprises following ports: Two commercial hub ports: Jeddah Islamic Port (JIP) and King Abdulaziz Port Dammam

The port figures of the second half of 2010 show that the effects of the global economic depression have ceased. “At the end of the last year we have passed the threshold of a total turnover of 5M TEU containers p.a. (total all SEAPA ports) for the first time in our history. Similar positive developments could be identified also in the other cargo segments. Against that background we expect for 2011 a continuous positive trend, which will lead to a good utilization of our facilities and a further booming Saudi economy,” AlTuwaijeri underlines.

Jeddah Islamic Port (JIP), SEAPA´s largest port and a leading Read Sea hub

port for seaborne trade and and it is traditionally the maritime gateway for pilgrims to the Holy Cities of Makkah and Madinah. In 2010 JIP handled almost 50M t of cargo, thereof 3.8M TEU containers and has dispatched more than 4,500 vessels. King Abdulaziz Port Dammam is SEAPA’s leading commercial port in the Gulf coast. The port features approx. 8km quay wall and has a cargo throughput volume of approx. 23M tons in 2010. 4 commercial regional ports: in Jubail, Yanbu, Dhiba and Gizan Jubail and Yanbu Commercial Ports service the neighboring industrial cities and specializes in the handling of break

Investment opportunities range from general maritime enterprises to logistics businesses up to specific investments 90 · W G u i d e s

We have passed the threshold of a total turnover of 5M TEU´s for the first time in our history. Saudi Arabia· 91

tourism

UNVEILING A MYSTERIOUS NEW DESTINATION: IT’S NOT JUST

SAND AND PALM TREES...

Although it might sound strange to many, tourism in the kingdom has started to grow outside that of religious purposes. 94 · W G u i d e s

The development of a very promising sector relies mainly on the private sector and is part of the plan to diversify the oil-based economy. Saudi Arabia· 95

tourism

tourism A mix of green valleys and sand dunes, chadors and iPads, edgy mountain ranges and pristine beaches, camels and Carreras: the oil kingdom harbouring the cradle of Islam has embarked on a surprising journey that will transform the country into a top-notch highclass tourist destination. May 5th, 2008: on the final day of the Arabian Hotel Investment Conference, HRH Prince Sultan bin Salman bin Abdulaziz Al Saud, Chairman of the Board and Secretary General of the Saudi Commission for Tourism and Antiquities (SCTA), announced that the kingdom had “welcomed our first cruise passengers to Jeddah last month, [...] but we are not ready to open up totally. Realistically, we are just at the start

of the creation of the service side of tourism, as well as infrastructure, and we want to be in good shape first.” He then went on to outline a strategic plan to develop tourism in the kingdom. The government of Saudi Arabia, in its hallmark cautious and discrete fashion, has seen the turn of the century planning the development of a tourism industry as part of its wider project to diversify the base of the country’s economy. To perform this feat, a dedicated tourism authority was created: the Saudi Commission for Tourism and Antiquities or SCTA. Traditionally restricted to religious and business travel, most of the country’s tourist attractions are still underdeveloped. Additional hospitality infrastructure is needed to accommodate more tourists and there is a need to open up the visa process and ultimately ease regulations to entertain new comers. “When the commission was created in 2000,” explains Dr. Abdullah Al-Jehani, SCTA’s vice-president for marketing and media,“we studied the situation >>

The 2020 Tourism Development Plan The SCTA was created to explore the touristic potential of the country, identify concrete measures to develop it, initiate individual projects and draft a general strategy. This has taken the form of a twenty-year plan which aims to increase the flow of tourists from 20.8 million in the base year 2000 to 45.3 million in 2020. This projected volume will consist of 34.4 million domestic tourists and 10.9 million foreigners, mostly from the GCC (Gulf Co-operation Council) countries and other Arab states. In other words, domestic tourism will be the primary target group for the country’s budding leisure and holiday industry – next to the traditional religious tourism of the hajj and the umra. Attracting foreign tourists for leisure purposes – as opposed to stays for reasons of business and religion – only takes up a peripheral part of the strategy.

its unique endowments to develop tourism in a sustainable manner, providing quality experience, while contributing to economic diversification, employment creation, environmental and heritage preservation, cultural awareness and community enrichment.’

The mission statement of the commission reads: ‘As the cradle of Islam, the Kingdom of Saudi Arabia aims to develop sustainable tourism for the socio-cultural, environmental and economic benefits of all, reflecting its cherished Islamic values, heritage and traditional hospitality. The Kingdom [...] will harness

Foreign investment is encouraged too, although not so much for financial purposes Saudi is not only of a net exporter of tourists but also an exporter of investors – as for the technical expertise of investors accustomed to dealing with touristic projects, know-how that is still lacking in the kingdom.

The document outlining the strategy also states that ‘the development of the tourism industry in Saudi Arabia is viewed as private sector driven. In this regard the private sector must play the role of main and effective stakeholder in the sustainable tourism development that can be achieved by direct investment in the tourism sector, enhancing tourism subsectors and related support services, development and marketing of the tourism industry, application of quality standards in the industry and training and educating national manpower in the tourism field to guarantee quality and development of services.’

Traditionally restricted to religious and business travel, most of the country’s tourist attractions are still underdeveloped. 96 · W G u i d e s

Prince Sultan bin Salman, Chairman of the SCTA, is the figure behind the new impulse to the tourism industry in Saudi Saudi Arabia· 97

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At this stage, the SCTA’s mandate was established by collecting the various sectors concerned under one umbrella. Authority over accommodation (hotels and furnished apartments) was transferred from the Ministry of Commerce to the SCTA; responsibility for antiquities and museums, which used to fall under the Ministry of Education, and travel agencies and tour operators, which formerly fell under the Civil Aviation Department, followed suit.

The SCTA was created to explore the tourist potential of Saudi Arabia, identify concrete measures to develop it, initiate individual projects and draft a general strategy.This has taken the form of a twenty-year plan which aims to increase the flow of tourists from 20.8 million in the base year 2000 to 45.3 million in 2020.This projected flow is estimated to consist of 34.4 million domestic tourists and 10.9 million foreigners, mostly from the GCC countries and other Arab states. In other words, domestic tourism will be the primary target group for the country’s budding leisure and holiday industry – beside the already existing religious tourism of the hajj and the ‘umrah. Attracting foreign tourists for leisure purposes – as opposed to stays for reasons of business and religion – only takes up a peripheral part of the strategy.

SCTA’s plan involves first classifying the kingdom’s tourist attractions, then developing them - with private investment as a priority - and finally promoting them, first of all domestically and in the neighbouring GCC countries. At a later stage, the international tourist market will be selectively targeted.

The mission statement of the commission reads:“As the cradle of Islam, the Kingdom of Saudi Arabia aims to develop sustainable tourism to the socio-cultural, environmental and economic benefit of all, reflecting its cherished Islamic values, heritage and traditional hospitality.The kingdom [...] will harness its unique en- >>

and worked out a development strategy involving all domestic stakeholders and cooperating extensively with international consultants. This has resulted in the 20-year ‘Tourism Development Plan 2020’, which was approved by the Council of Ministers in 2004.”

SCTA was created in 2000 and worked out a development strategy that resulted in the 20-year ‘Tourism Development Plan 2020’, which was approved by the Council of Ministers in 2004,” ,” explains Dr. Abdullah Al-Jehani, SCTA’s vice-president for Marketing and Media of the SCTA

interview with

Peter Finamore Managing director of Al Faisaliah and Al Khozama Hotels Apart from the climate and the opulence of some of the hotels, Las Vegas and Riyadh have very little in common. They will never be sister cities. To move from one of the world's top playgrounds to the capital of a conservative religious country would be a major shift for anyone, let alone if you are supposed to manage two of Riyadh's most famous hotels. Peter Finamore did just that when he moved over from Las Vegas to join Rosewood Hotels as managing director of Al Faisaliah and Al Khozama Hotels. “Actually, my perspective has changed completely since I arrived in the country. I was expecting a more difficult time and a much more challenging environment. Saudis are more open-minded than I thought and although I was told we would never be able to have close Saudi friends, I

have not found that to be the case,” says the tall, slim and lively Finamore. Al Faisaliah is one of two iconic landmarks in the Saudi capital, with Al Faisaliah Tower dominating Riyadh's skyline. Since opening in 2000, Al Faisaliah Hotel has been at the forefront of luxury, sophistication and service in Saudi Arabia. Operating to the Texas-based Rosewood Hotels and Resorts peer-setting guidelines, Al Faisaliah has a dedicated 24-hour butler service. The hotel is currently celebrating its 10th Anniversary by opening the first spa for women in an international hotel in Riyadh. In addition, the prestigious hotel has added a new South Wing, increasing the number of rooms and suites from 224 to 330. Designed by HRH princess Al Anoud Bint Khaled Al Saud, owner and founder of Al Dar Designs, the new wing is all vibrant colours that touch on Arabian and Islamic culture while fusing with the original sand dune design of the property.

In recognition of such attention to customers' needs, the hotel last year won the award of Leader in Hospitality at the Kingdom Excellence Awards. A further indication of its recognition is in the loyalty of its clientele, which is almost entirely corporate. “The guest return ratio for Al Khozama is 84% and for Faisaliah 65%.” comments Finamore. “I have never worked in a hotel where the ratio exceeded 35%. This reflects the level of commitment we have to our guests.”

AKMC: A growing brand The Faisaliah Complex stands out in Riyadh with its 267 meter tower, renowned for its stunning views from the observatory and the Globe restaurant at the top. The hotel is connected to the Prince Sultan Grand Hall, the Faisaliah Mall and the Al Faisaliah Centre designed by Norman Foster. All are part of the Al Khozama Management Company (AKMC), founded as the direct property investment and management arm of the King Faisal

Since opening in 2000, Al Faisaliah Hotel has been at the forefront of luxury, sophistication and service in Saudi Arabia. 98 · W G u i d e s

Faisaliah with its 267 meter tower stands out in Riyadh for its stunning views from the Globe restaurant at the top. Saudi Arabia· 99

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In 2009 too, the SCTA announced a plan to create 900,000 new jobs in the industry by 2020, almost doubling the 1.1 million currently employed in the sector.

tourism

dowments to develop tourism in a sustainable manner, providing a high quality experience, while contributing to economic diversification, employment creation, environmental and heritage preservation, cultural awareness and community enrichment.” The document outlining the strategy further states: “The development of the tourism industry in Saudi Arabia is viewed as private sector driven. In this regard the private sector must play the role of main and effective stakeholder in the sustainable tourism development that can be achieved by direct investment in the tourism sector, enhancing tourism subsectors and related support services, development and marketing of the tourism industry, application of quality standards in the industry and training and educating national manpower in the field to guarantee quality and development of services.” Foreign investment is encouraged too, although not so much for financial purposes – KSA is a net exporter not only of tourists but also of investors – as for the technical expertise of investors accus-

tomed to dealing with tourist projects, a know-how that is still lacking in the kingdom. Indeed, given its potential, the tourist industry remains a key element in diversifying the economy. In 2009, the sector contributed almost 7% of the country’s non-oil GDP, with 10.8 million arrivals and revenues of over SR 30 billion. Domestic tourism increased by 11 percent, amounting to 32 million people spending over SR 33 billion. In 2009 too, the SCTA announced a plan to create 900,000 new jobs in the industry by 2020, almost doubling the 1.1 million currently employed in the sector. The hajj destination: welcoming over 11 million pilgrims a year As the cradle of Islam, Saudi Arabia has traditionally received millions of pilgrims annually. Beside the ‘umrah or small pilgrimage which is not tied to a specific time of the year, the world’s largest annual pilgrimage, the hajj, brings over 2 million pilgrims to the twin holy cities. Thus religious tourism alone provides 75% of Saudi Arabia’s earnings from >>

Foundation, one of the largest philanthropic organisations in the world. “The Khozama hotel was built 1977 by the Movenpick organization. Fifteen years ago, AKMC invited Rosewood Hotels to take over the Khozama Hotel and develop a concept for its new 5-star brand, which is Al Faisaliah. The entire complex is actually a village within the city, unique in terms of its long-term perspective,” explains Finamore. Like king Faisal, the founder of Rosewood Hotels & Resorts, Caroline Rose Hunt, has a long history of charity in and a similar foundation, the Rosewood Foundation. “The King Faisal Foundation was established to honour the former king and its primary objective is to encourage the education of Islam inside and outside the Islamic world, as well as the Arabic language and the recognition of the importance of other sciences and education in general,” says Finamore. The foundation has established a highly recognized award, a school, a centre for research and Islamic studies and a university. The King Faisal International Prize rewards dedicated men and women whose contributions make a positive difference to Islam, science or specific areas that benefit human-

ity. This incentive also encourages expanded research that may lead to important medical and scientific breakthroughs. Al Faisal University was established in 2001 on the grounds of the late King Faisal´s Palace, with a curriculum focused on science, business and technology. “In order to support the vision of the King Faisal Foundation, a business component had to come into place. That is the reason for the creation of AKMC as a holding company for the businesses within the complex. The property here is very profitable and the ultimate goal is investing its earnings in the country,” says Finamore.

A Challenging Environment “This country depends very heavily on foreign labour to keep the economy going, so there are a lot of challenges in the assimilation of cultures. I have never worked in such a United Nations of nationalities and culturesIt is important to build consensus and create mutual understanding, not just on the level of language, but in everything we are trying to do,” says Finamore who is a Canadian himself. A further challenge is to integrate Saudis into the hotel's staff to comply with the kingdom's saudisation policy, which aims to bolster employment and reduce reliance on foreign

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international tourism and 60% of domestic tourism. During the pilgrimage, the hajj terminal in Jeddah’s King Abdul Aziz International Airport alone receives 95 planes delivering some 15,000 people every day. Last year the kingdom registered 1.8 million foreign pilgrims, an all-time record. In addition, domestic pilgrimage averages between 600,000 and 800,000 people every year. Religious tourism therefore offers a highway to the government’s commitment to diversity the kingdom’s economy. As one of the most democratic among industry sectors in terms of employment, it causes a domino effect in various other sectors such as transport, hospitality, aviation and services. Expenditures are estimated to have totalled almost SR 82 billion in 2010, but SAMA’s prediction for 2015 runs to SR 130 billion, a sharp 60% increase. Currently, however, the sector accounts for 3.6 percent of total GDP and 6.9 percent of non-oil GDP only. No wonder, then, that the 2020 tourism development plan is mostly focused on domestic and religious tourism, although “efforts are also made to >>

The latest figures, released in 2009, show that 870,000 Saudis tourists spent SR 4.7 billion vacationing abroad

workers by requiring companies to have citizens account for 33% of their staff. “When you establish a business, the requirement goes up gradually. As of yesterday we are at 30%, which is an achievement given that Saudis do not perceive the service industry as a desirable career option,” explains Finamore. “Instilling discipline, which is necessary in order to have consistent standards, is a bit more challenging with Saudis who are not used to the rigour of a business like ours. Nevertheless, we have many young Saudis that show good poten-

tial”. But this situation is set to improve with summer 2010 having seen the first batch of hospitality majors graduating from King Saud University. Fifteen of them have done an internship at Al Faisaliah and a handful of graduates have been selected to join the hotel's staff. They could become the future captains of the hospitality industry, as their expertise will certainly be needed with a projected 900,000 jobs being created by 2020 by the kingdom's promotion of tourism and investment in related infrastructure. The number of hotel rooms in Riyadh alone is expected to increase by 100% over the next five years.

The chicken or the egg? In 2009 about 42% of arrivals in Saudi Arabia were for religious purposes, 18% percent for business and a negligible number as actual tourists. Although the number of tourists grew from 10.5 million to 11.4 million in 2010, there is still a long way to go to develop the sector. But how do you approach this development? It is the classic dilemma of the chicken and the egg – which comes first? “One can approach the growth on tourism in different ways,” observes Finamore. “Should we first create the tourist sites? Should we first create an environment that is

more attractive to westerners or individuals from outside the GCC? Developing domestic tourism should be the first step, as the tourist sites are here, the infrastructure is here, and the level of sophistication is here. The efforts of the SCTA are focused on encouraging Saudis to spend their holidays at home. One would think that the easiest way to develop tourism in a country is by starting with a domestic focus, like the French or the Americans have done very well – just think of the fact that less than 10% of Americans have passports. However, so far the Saudis generally prefer to explore other countries.” The latest figures, released in 2009, show that 870,000 Saudis tourists spent SR 4.7 billion vacationing abroad. In Finamore´s view, over the past year and a half the government of Saudi Arabia has taken positive steps to strengthen the hospitality sector. “The SCTA is putting in place the foundations to have greater control over how the tourism industry is administered and priced. The government is also investing heavily in health, education and infrastructure as real steps in the development of the country and the sector. It is important to ensure that the middle class, which is very significant here, grows considerably and has higher aspirations creating a sense of belonging,” concludes Finamore.

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develop cultural, health, business and sports/adventure tourism,” says Abdullah Al Jehani.“At this stage, we want to attract international non-religious tourists mainly as MICE (Meetings, Incentives, Conferences and Exhibitions) visitors and high-end heritage tourists.” Indeed, business travel makes up the majority of non-religious visits to Saudi Arabia. On the other hand, the country’s rich history and the diverse ancient remains dotting it are extremely attractive to archaeologists, historians and laymen interested in ancient civilizations. In addition, Saudi Arabia offers a surprising climatic variety, comprising not only the well-known central desert plateau of Najd and the Red Sea coast, but also the green, forested mountain lands around Abha in the southwest, where the population’s attire, customs and lifestyle is more reminiscent of bordering Yemen.“Additionally, KSA harbours many little-known attractions, such as the old Ottomanera train station in Tabuk, formerly a stop on the German-built railway linking Istanbul to Medina, which is currently being restored,” says Meteb >>

interview with

Mohamed Alhazza General Manager of Best Rent A Car Saudis have something with cars. Their cities are designed on car-friendly girds, fuel is cheap, highways plentiful, wide and in good condition, there is virtually no public transport in the cities and the railway network is only beginning to be expand beyond its lone Riyadh-Dammam line. One of the favourite pastimes of young Saudis seems to be rallying daddy’s car over desert dunes or sandal surfing next to it over the kingdom’s immaculate highways. Sheik Abdullatif Alissa was only exceptional in that respect for making the automotive sector his business – and for being one of the first to actually get into it. He began his commercial career in the early 1940s as a marketer of General Motors vehicles, but his GM dealership proved to be just the first step in what was to become the Alissa Automotive Group, an empire which progressively grew to include the Autostar used car sales company, the Al Yusr Instalment Company, leasing and financing customers’ purchases, and Best

Car Rental, one of the leading car rental companies in the Kingdom. In Saudi Arabia’s car rental market, amounts to a fleet of 150,000 vehicles and is dominated by ten major players. Mohammed Alhazza has recently joined the Best, decidedly to bring it to the first position in the car rental market of Saudi Arabia. With customers as Saudi Aramco, the Arabian Oil Company, SABIC or Consolidated Contractors Co, it is everything but impossible. Best has grown up stedily since 2003 when it only had 2,500 cars. In Q1 of 2010, the company has 10,500 cars driving around the Kingdom. 550 employees in 26 offices ensure its service countrywide. “We are determined to open six branches every year as per agreement with our board,” says Alhazza. It is very challenging, but we will meet this challenge.” And indeed, since his start in the company Mr. Alhazza has been very busy.

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Abdullah Al-Mahmud, executive manager of Al Sarh Saudi Tours and a live-wire enthusiast dying to turn Saudi Arabia into a tourist destination.

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Inbound Expenditure (In millions of Saudi Riyals)

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Although the kingdom has been virtually closed to the international community for plain tourism purposes, in 2009 it received around 20,000 tourists – a more than threefold increase on the 6,000 visiting in 2008.“Saudi Arabia has never been a closed country,”Prince Sultan in a CNN interview.“We have more than eight million expatriates living in Saudi Arabia and welcome millions of pilgrims throughout the year for the hajj and ‘umrah [...].There is a huge number of business people coming through and conferences are increasingly frequent, so we have more than our share to worry about for now before really opening up for tourism in any bigger way. Eventually, however, we will open the country in the sense of hosting value tourism, people who are interested in enjoying the country.”

Outbound Tourism Expenditure (In SAR)

Total Expenditure (In millions)

Walk into the Arabian adventure Over the past few years, significant investments has been made in tourist infrastructure, including airport

) es at tim (es

expansions and high-speed rail lines, as well as government-financed training programs, mostly in the form of public-private partnerships. Visa procedures have meanwhile been eased for non-religious and business visitors and the hotel pool has been surveyed and classified using a standardised a star system. The issuing of visas for the ‘umrah has also been simplified, as part of the general ongoing process of bureaucratic streamlining decreed by king Abdullah. Umrah visas can now easily and electronically be transformed into tourist visas for those who wish to stay on for a few days and visit other parts of the country. Business visitors are also encouraged to extend their stay beyond the duration of the conference or trade fair they came for and to book a trip to the archaeological site of Madain Saleh or a tour in the desert. Indeed, the SCTA predicted a growth of 4% of arrivals in 2010, aiming to attract more than 11.4 million foreign tourists, including pilgrims. It turned out to be a conservative estimate. Revenues from tourism were also expected to

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He has not only opened the first three branches of the agreed six per year, but he has also opened the brand´s first workshop and has started a new line of business: the luxury road.

SABIC we have to bid to renew the contract every time. The fact that we have won it for a number of years tells you something on our favour,” explains the general manager of Best

“We will open three new branches within the first quarter of 2011, one of them a VIP branch for luxurious cars, all Mercedes, ) Lexus and BMW, as there is a big 8 7 0 0 es 20 20 at market for it and as it is a service we im st wanted to start to compete for,” explains (e Alhazza and adds “we have just opened 09 20 a branch in Abha that is still in its trial period and another one in Qassim and Domestic Tourism before the end of the year we will open Overnight (Inone millions) more branch in Riyadh, another in Jeddah and one in Damman.”

But although the amount of projects pushed forward in Saudi Arabia with the highest budget ever approved in the kingdom secures a legion of new corporate customers for Best, with Alhazza at the wheel ambitions go futher. He also wants to to expand its private clientele improving the marketing strategy of the brand and upgrading their fleet which cars are changed every 18 months “This way, customers are ensured of high-quality vehicles and of the latest models, whereas from our point of view, maintenance costs are kept to the minimum and risk of mechanical failure remains low,” explains Alhazza.

Total Tourism - overnight visitors (In millions) Best corporate

The lion´s share of Best business is onto corporate that almost monopolises it with long-term leasing accounting for 70 percent. “For the corporate we have already built a reputation as we do not just rent cars or trucks but we provide with a full service and all the facilities a company may need. We have the best on-road service with immediate replacements when needed; we have excellent maintenance service and very well trained drivers. For companies like

Whatever it is, the truth is that the already 400% increase in fleet volume in a mere seven years gives a good indication of the expansion of the Kingdom’s economy and that of Bests. ‘There is still room for further growth – remarks Alhazza – and the secret for that is a young fleet, quick workshops and services, well trained staff and experienced assistance.”

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(In millions of Saudi Riyals)

(In millions)

Outbound Tourism Expenditure (In SAR)

Total Expenditure (In millions)

increase by 4.8% in 2010 to SR 66 billion ($17.6 billion) as the kingdom tries to attract more visitors and religious pilgrims. Preliminary reports on 2010 religious tourism revenues increase that figure too - by almost SR 15 billion.

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20 Inbound Tourist overnight visitors (In millions) Outbound Tourist Departures (In millions)

Domestic Tourism Overnight (In millions) Total Tourism - overnight visitors (In millions)

However, there are still a number of restrictions on the issuing of tourist visas, starting with the exclusion of unmarried women under 35 who are only allowed to visit when accompanied by a male relative. In fact, the 20,000 tourists visas issued last year are only a tiny part of the overall picture.“In any case, the problems with tourist visas will get solved in the future. Right now, this is not a major issue,”says Dr. Al Jehani.“Let me put it this way: the tourist sector is now in the stage of product development. When the product is finished and turns out to be attractive, the product owners will exert pressure to provide access to it for more potential customers. As for now, the focus is on domestic tourism.” Part of this domestic tourism is health tourism: Riyadh in particular has some very reputable special-

interview with

Simon Stewart CEO of Nasair In February 2007 a big change happened in the Arabian skies when Saudi Arabia’s first budget airline transformed air travel in the peninsula forever and made it affordable to all. Traditionally monopolized by the national carrier, Saudi Arabian Airlines, the air transportation system in Saudi Arabia was long overdue to renovation.

In February 2007 a big change happened in the Arabian skies when Saudi Arabia’s first budget airline transformed air travel in the peninsula forever and made it affordable to all. Traditionally monopolized by the national carrier, Saudi Arabian Airlines, the air transportation system in Saudi Arabia was long overdue to renovation. The air traffic in Saudi Arabia has a secured source of income: the pilgrimage travellers that come by the millions to the two Holiest Cities of Islam, Mecca and Medina, for hajj or Umrah. However, the growing population of the country with high purchasing power is also becoming a more important source of income. Add to this a growing interest on international businessmen coming to visit country´s huge development projects and you will come with an ever growing number of people coming in and out of the country year-on-year. “Nasair is the first and leading smart airline in Saudi Arabia, flying people in the region

to domestic and international destinations at low fares,” states the CEO of Nasair, Simon Stewart who has a broad experience of safety management systems and a longstanding career in the aviation industry at Easy Jet company, as a line Captain on Boeing 737 and before an army air Corps pilot and military flight instructor. “It is time for Nasair after three years of operation to open widely into the global perspectives and work to diversify revenue sources to increase profitability. To match its concept as smart airline we have the qualified manpower; the technical capacity to implement our expansion plan and we stand in our four values: the youngest fleet, on time, at competitive fares and with smart services,” said

Stewart In his first statement after his appointment as chief executive of Nasair. And Indeed all is Nasair reflects the philosophy of the airline. Thought to cover a deep gap in the air transportation needs of a very young populated country, Nasair comes from the Arabic word “nas” meaning “people” and air for “airline”. “Nasair is an airline for everyday people to easily fly”, reads the airline motto. Headquartered in Riyadh and a subsidiary of the well-established private aviation business group National Air Services (NAS)

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ist hospitals, such as the King Faisal Foundation’s Hospital, which has treated state leaders from all over the region. Due to the size of the country, however, even Saudi patients may have to travel far for treatment. As several family members usually accompany their relative under treatment, visiting the hospital daily and surrounding the patient with care and attention, this in turn creates an increased demand for local accommodation. In 2009, around 870,000 Saudi tourists holidayed abroad spending around SR 4.7 billion. Bahrain, Jordan and the UAE topped the list of the destinations with over 600,000 visits. Although the SCTA is conscious that Saudis will continue to travel abroad for their holidays, the institution is trying to offer them more possibilities at home, in an effort to gradually change their perception of their home country.“What we are aiming at is not to stop Saudis travelling abroad – on the contrary, we encourage that, as it plays an important role in opening the country and the population up to the outside world – but to entice them into spending >>

At present, national carrier Saudi Arabian Airlines and privately owned Nasair are the only two airlines allowed to operate domestic flights

company, only one year after its launching it was flying to nearly 20 destinations with around 300 flights per week including newly launched international destinations. Since 2008 the company started operating a new fleet of Airbus A320 and Embraer E190 “giving us the unique advantage of having the newest and youngest aircraft fleet in the Middle East”, says Stewart.

The Smart carrier concept “The Smart carrier business concept is about cost reduction and efficiency, huge savings of which are passed on to our valued guests to enable them to fly more for less but never compromising quality, explains Stewart.

The SMART no frills concept is based on a simple fare scheme that typically increase as the plane fills up which rewards early reservations made through an easy online booking procedures that guarantee a quick check-in. The planes have a single class serving short and medium hauls with food and beverage available onboard. Nowadays, Nasair operates more than 500 scheduled flights every week to 21 international and six domestic destinations with the youngest and most fuelefficient fleet in the region. The company served 2.1 million passengers during 2010 and had total revenue of 4.2 million, a 50 percent increase over 2009

and posting a 350 percent total revenue growth from 2008 to 2010. At present, national carrier Saudi Arabian Airlines and privately owned Nasair are the only two airlines allowed to operate domestic flights in the country, serving a population of approximately 27 million people. On December 2010, the Nas Air fleet, including larger aircraft leased planes leased for the Hajj season consists on seven Airbus A320 and five Embraer 190LR. However, the company has orders totalling 30 new airplanes, 20 Airbus A320 and 10 Embraer 195.

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short breaks throughout the year discovering their own country”,says Dr. Al Jehani. A sure-fire investment Although on first view, the very concept of tourism might seem to clash with the rather strict morals and traditions of the kingdom, investing in the sector is nevertheless an attractive proposition. During the first phase of the ‘Tourism Development Plan 2020’, which ran from 2005 to 2008, the SCTA developed specific investment opportunities and started its promotional activities, offering incentives and putting in place a general framework, streamlining bureaucratic procedures and establishing standards.“The Saudi market, which is very stable economically and financially, has yet to be serviced with a number of projects for which there is a very big and clear demand and even pressure - especially from the younger part of the population, which is the majority. Saudi society has changed dramatically over the past decade. It has become more open and modern. This change is slow but irreversible,” explains

Dr. Salah Al Bukhyyet, head of the SCTA’s Investment Authority. In February 2010, the government announced its plan to build a $13 billion tourist city in Al-Oqair, south of Khobar on the eastern coast, which presently offers long stretches of virgin sandy beach but little else. Another project will be developed on Jeddah’s Obhur Corniche, this one projected to include a permanent centre for festivities and a heritage village.“We chose the location of the traditional fishing port of Al Oqair for a mixed-use development, which will offer not only hotels, restaurants and residential zones but also entertainment parks, shopping malls and beach resorts,” explains Dr. Al Bukhyyet.“We drew up a profile of what attracts the average Saudi family in a destination and took it from there. We have attracted a consortium of foreign and Saudi investors who are contributing SR 10 billion for construction in a designated 100 km² area in the first phase of 5 to 10 years.” Dr. Al Bukhyyet expects a sizeable return on this initial investment:“There is a huge demand for seaside resorts in this country. Compared to Egypt >>

Saudi society has changed dramatically over the past decade. It has become more open and modern. This change is slow but irreversible

interview with

Ibrahim Al Rashid Ibrahim Al Rashid, General Manager of Resorts Group. With all the transnational companies coming into KSA to benefit of the massive government investment in gigantic projects, it is easy to overlook the smaller fish – genuine self-made entrepreneurs who build up a small business with their own blood, sweat and tears. There is effectively space for small and medium enterprises too in the kingdom, and the story of the Resorts Group shows they can be successful. Ibrahim al Rashid, general manager and business developer of the company, who graduated in marketing started a consultancy service in 1994 with his partner, an industrial engineer. “We met working for Proctor & Gamble and wanted to start on our own. When we researched the Saudi economy, we found that tourism was the most underdeveloped sector, and the one that offered the best chance to start up a business with little capital.” The pair got involved in various enterprises, including management of furnished apartments and chalets in resorts, organisation of 'umra visits and

domestic tourism. The first five years of their business saw a yearly growth of 15 to 30% and by 2000, their company had become so big and cumbersome, they decided to re-engineer it and break it down into its various components. In the process, they created three separate companies: Utlat (National Vacation) which took care of their domestic tourism branch, Afwaj, which handled the 'umra business and Lafontaine Hospitality which dealt with holiday property management. “We assigned an executive manager for each company, while me and my partner formed the board of the mother holding,” says Al Rashid, adding that they now have overall sales of SR 100 million per year and employ 375 people on 25 locations throughout the country. “In domestic toursim we are now the number one provider, producing 250,000 nights per year in KSA. We don't deal with hotels but manage furnished apartments and individual chalets for their owners, who are usually small developers who have a few properties to let but are not interested in dealing

with the booking, maintenance and renting themselves. On the other hand, the international hotel management companies are not interested in them as they are too small, and the developers usually cannot afford their fees either. This is where we come in.” In a way, the Resorts Group's success is a product of opportunities left untouched by investors who are out for a fast buck – there is no great short-term profit to be made from these operations. “Most of our customers fall in the C+ and B spending classes – not Four Seasons stuff but still middle class people with some money to spend and looking for something decent to spend their holidays in. We provide them with all-in furnished holiday homes including washing machines, hygienic bed sheets and other details appreciated by mothers of large families. Our slogan is 'fun for the kids' and we focus on families. We are actually the only company operating in this niche. Our customers are very loyal, some have been coming back to us for 15 years now.”

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with Sharm Al-Sheikh or even Dubai, we have very little to offer in this respect – and what we have is usually accommodation pure and simple. So there is an almost guaranteed profit to be made here, and the earlier investors get into this market, the larger the benefits they will reap.” Many other sites have been identified on the Red Sea coast, in the provinces of Tabuk, Yanbu, Mecca, Asir, and Jizan. The SCTA estimates that all the planned Red Sea resorts together will ultimately create 557,000 hotel rooms and 413,000 jobs. Souk Al-Okaz, another large SCTA project, is currently under development in and around the city of Ta’if, a traditional summer resort in the mountains near Jeddah and Medina. “Ta’if used to be a popular place to escape the summer heat,” Dr. Al Bukhyyet says, ‘but for a long time the general infrastructure was somewhat neglected and no new structures were added. As a result there are few attractions to entice the modern day tourist. Yet the location obviously has a lot of potential, not only because of its beneficial climate, but also because of its proximity to both the attractive shopping outlets of Jeddah and the >>

As for the market for 'umra visits, this has positively exploded since 2005, when the market was regulated and many of the original 220 companies lost their licence. “Only 55 of the original companies are left now, because many operators just sold visas and then left visitors to their own dvices to find transportation, accommodation and the lot. This is why the Ministry of Hajj revoked their licences. Consequently, in 2005 we suddenly went from 1,000 to 150,000 customers per year. Most of them come from Africa and Europe, a smaller proportion from Pakistan and India.” In an effort to promote tourism, a law stipulated that 'umra visas can be transformed electronically into tourist visas, but in practice this has been discontinued, just like the issuing of non-religious tourist visas itself. Al Rashid explains: “Misuse by local and foreign agents has resulted in economic refugees using these procedures to gain access to country, then disappear and enter the black labour market. Tourist visas were sold by the same operators as cheap hajj visas. Those practices also caused problems for us with the Ministry of Hajj. We used to take religious tourists in groups

to Ta'if and other places of historic significance for muslims – especially with second and third generation muslims from Europe, this was a popular tour. But now it has become very difficult to organise these tours, as the 'umra visa is only valid for Mecca anymore.” As for their domestic tourism operation, the most popular destinations in KSA for Saudi (and GCC) tourists are, in descending order, Jeddah “which offers everything from shopping to good restaurants to beaches in a more liberal environment than Riyadh”; Abha, the capital of Asir, situated high up in the cool, green mountainside; and Khobar “kind of a smaller version of Jeddah with beaches and shopping, and most of all very close to Bahrain, so that Saudi tourists can cross the border to go to a cinema”. Says Al Rashid: “40% of domestic travel comes from Riyadh and the central Najd plateau in general, which is too cold in the winter and too hot in the summer, so people go to the east and the west on weekends and school holidays. The busiest period is made up of long weekends and school holidays, which limits the peak to around 130 nights per year.”

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spiritual comfort of the holy places. For domestic tourism, this is an ideal site.” Accommodation needed: an investment opportunity With the gradual rise in the number of tourists - domestic, religious, business or otherwise - more hotels are opening their doors in Saudi Arabia to stop the existing gap. According to sources from the hospitality sector, around 21 new hotels will add 7,000 extra hotel rooms by 2013. In 2010 alone around 2,000 new hotel rooms were added. In fact, a country with a fast growing population of 27 million containing a very high percentage of youngsters with high purchasing power who are increasingly mobile domestically cannot be overstated as an attractive investment destination. Or at least that seems to be the prevailing opinion in the international hospitality industry: a number of major international brands are either refurbishing their hotels in Saudi Arabia or expanding their presence there. International chains are reaching out to the smaller cities such as Ha’il and Tabouk. A new evolution in the sector is starting to tackle the mid-level income sector with 3 and 4 star >>

interview with

Noureddine Bouguila & Fadi Mazkour, General Manager of Mena Hotel Sheikh Abdul Mohsen Bin Abdul Aziz Al Hokair has had the same crystal clear vision right from the beginning. Widely known as the 'sheikh of Gulf tourism', he was one of the earliest investors in the field.

While the government of Saudi Arabia has only just begun to gradually open up its treasures to the millions interested in visiting the country, Al Hokair Group for Tourism and Development, today one of the largest dedicated to tourism and entertainment in KSA, pioneered the early development of the sector back in the sixties, building its first small theme park in the Malaz district of Riyadh back in 1965 when nobody would invest a single halala on anything unrelated to oil. In the following five decades, Al Hokair Group has expanded into new fields and grown dramatically in scale. Al Hokair Group now has more than 6,000 employees and plays a leading role in the fields of entertainment, leisure and tourism. The Group's portfolio includes more than 70 amusement and

theme parks, a number of international restaurant franchises and the largest chain of hotels and recreational cities in the Middle East, amounting to 27 properties. “In the industry he is known as the 'sheikh of Gulf tourism',” says Fadi Mazkour, Director of Business Development and Marketing of Al Hokair Group, “because of his vision to develop tourism in the KSA and start promoting the country as a destination, which was a new idea that took everybody by surprise at the time. KSA was not seen as a travel destination due to the difficulties in obtaining visas and to circulate normally, and because of all the restrictions in general.” But the country

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always had plenty of historical sites and breathtaking landscapes on offer. Many of these potentially attractive destinations are now being developed for local and GCC tourism. HRH Prince Sultan and the SCTA are now committed to open both remote desert areas and populous urban areas for tourism. “In every tourist fair abroad which we visit, such as recently in London and Berlin, we can feel a real interest in

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hotels, a change from the formerly almost exclusively five-star approach to KSA. Saudi Arabia additionally has almost as many furnished apartments on offer - 97,000 to be precise – as it does hotel rooms – currently 105,000. Saudi families are still on average larger than European or American families – and more likely to travel with housemaids and drivers - and tend to prefer furnished apartments to hotels. By 2020, these numbers are expected to almost double to 180,000 and 187,000 respectively. Kingdom Holding, the investment company of well-known billionaire prince Walid bin Talal, plans to open a five-star hotel with 1,000 rooms in Mecca.The kingdom has recently seen the opening of the Park Hyatt Jeddah and the Marina Club and Spa project at the Equestrian Club in Jeddah’s Al-Hamra district.The Sheraton Jeddah Hotel & Resort is going through a major refurbishment. Four Points by Sheraton is scheduled to open a 300-room property in Jeddah in 2012 and another one in Dhahran in 2013. A Loft Riyadh is due to open in 2013. Ritz-Carlton Hotels in the Middle >>

“MENA (Middle East & North Africa) is a very emblematic name, it stands for our philosophy: we are from the Middle East, we are established here. As Arabs, we are experts in hospitality, that is what we have always been known for,” says Mazkour

the country, and it is not only Muslims who want to find out more about the history and traditions and the archaeological remains in the country,” Mazkour continues. “Although on the level of entertainment, KSA is not a very attractive destination - with no cinemas, no nightlife, etcetera - it is still an attractive proposition for families. And furthermore, there is a simple equation at work here: an unknown, little visited place that opens up for the first time is sure to become a top destination,” he predicts.

Al Hokair's signature brand: Mena Some 20 years ago, the group got involved in the hospitality industry, building hotels which they owned but were managed by the Holiday Inn and later the Golden Tulip brands. As time went on and the group gained experience, Al Hokair set up its own management company, MENA Hotels & Resorts. Mr. Noureddine Bouguila is a man on a challenging adventure: he is the first general manager of the first MENA hotel, in Riyadh. “We want the MENA brand to stand for boutique style hotels with an innovative style and decora-

tion to attract young customers and business travellers alike,” Bouguila explains. “We roll out the red carpet for businessmen by offering privileged services and amenities including an exclusive Business Centre equipped with wireless high-speed internet access, facsimile and secretarial services. For seminars, we have two Conference rooms that can accommodate up to 70 persons each, with built-in data projectors and screens, boards and flip charts, meeting kits and technical assistance.” In all, the hotel offers 92 premium rooms, 23 executive rooms and 49 congress suites spread over five floors. Al Rehab dining and the Café Inn are joined by a spa and fitness centre to complete the experience. “Mena has a clear image of where we want to go in the short term. Our aim is to become the leader of the local market as a local company”, continues Bouguila. “Our first hotel, Mena Riyadh, has been doing very well so far. Our occupancy rate is 72%-75% year round.” Europeans make up about 40% of this number while Saudi and GCC customers account for another 40%, the being Asians and Australians.

One group that the brand has managed to attract in numbers are businesswomen. KSA has only recently started to allow women to travel and stay in hotels unaccompanied by their mehrem – a male family member protecting their honour - and Mena immediately started catering for these new potential clients. “Today many women are opening up and running their own business. Accordingly, they are participating in trade fairs and conferences and so need to travel often. When they get good services at a hotel, they recommend it to their friends, families and business partners. We have been building a good image among the female clients as they have been satisfied with our services”. The brand is jointly owned by Sami Al Hokair as its principal investor and Fadi Mazkour as its principal operator, and concentrates on independent boutique hotels in the 4 and 5 star categories. “MENA (Middle East & North Africa) is a very emblematic name, it stands for our philosophy: we are from the Middle East, we are established here. As Arabs, we are experts in hospitality, that is what we have always been known for,” says Mazkour.

MENA brand stands as boutique hotels with an innovative style to attract young customers and business travellers alike, 118 · W G u i d e s

Mena has a clear image of where we want to go in the short term. Our aim is to become the leader of the local market as a local company. Saudi Arabia· 119

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East has been increasingly focusing on the kingdom too and finally Movenpick Hotels & Resorts recently celebrated the opening of its new 201-room five-star hotel and resort in Yanbu and in 2011 plans to open its masterpiece in Riyadh. Experts state 48 hotels with 14,178 rooms have opened their doors in 2010 in the GCC at large, at an estimated cost of $7.3 billion.“Within two years, Riyadh alone will have 20 more hotels and new accommodation is now spreading all over the country, as opposed to the past when over 70% of the rooms were concentrated in and around the two holy cities,”says Dr. Salah Al Bukhyyet. In fact, religious tourism to Saudi Arabia is rising as fast as the country can build the infrastructure to accommodate it.The annual hajj alone brings some 2 million visitors from 160 countries in every year, as many as the kingdom can house. Infrastructural restrictions have forced the government to set a maximum on the number of pilgrims allowed to participate every year, in order to avoid overcrowding and related dangers. >>

interview with

Abdullah Al Mogren, General Manager of Riyadh Palace Hotel The five-star Riyadh Palace Hotel is what remains a white elephant in Saudi Arabia: an upscale hotel both owned and managed by Saudis. General Manager Abdullah Saad Al-Mogren was appointed to his current position in 2006, after initially joining the company in 1993. “I know of only five

other Saudi managers of upscale hotels,” he says, “including the Intercontinental here in Riyadh. The hospitality industry is after all a rather new sector in the country, and the related skills are still scarce. Only this year are the first students graduating from the Tourism College, and for many

Saudis hospitality is not the first study or career choice.” The Riyadh Palace, one of the oldest hotels in the country, has been around for some thirty years and has been renovated in anticipation of the new season. The hotel is equipped

The SCTA is putting in place the foundations to have greater control over how the tourism industry is administered and priced. 120 · W G u i d e s

Despite the country´s various attractions religious tourism rises as fast as the country can build the infrastructure to accommodate it. Saudi Arabia· 121

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with all facilities from a business centre to banquet and meeting facilities, a sports club, fitness centre, spa and swimming pool. Located in the government sector of the capital, surrounded by ministries, the Chamber of Commerce and more recently shopping malls, it has traditionally catered primarily to government officials and their international guests, nowadays joined by a corporate clientele. After inviting a French hotel chain to manage the hotel for the first four years and teach the tricks of the trade to Saudis, the owners took over the management. The hotel's 303 rooms and suites now enjoy an occupancy rate of 85%, and the Riyadh Palace regularly hosts conventions, symposia and other national and international events. “When we started out there were only a few hotels around: there was the Yamana, which was a governmentowned guest house on the old airport road, the Marriott, and the Intercontinental, which was purpose-built by the Ministry of Finance to promote the hospitality industry at a time when nobody was prepared to invest in it,” says Al Moghren. To the observer of today's booming hospitality industry in the country, such

overall investment of SR 500 million. Rotana Hotel Management Corporation, one of the leading companies of the region in its sector, will manage the 35-storey, 140m tower scheduled to offer 250 hotel rooms and 150 serviced apartments.

Financing tourist development Although no dedicated tourism fund has been created, there are a number of existing funds that provide financing – as well as privately owned commercial banks, catering in large part to small and medium enterprises.The Saudi Credit and Savings Bank is one of those most active in channelling resources to the development of tourism, but investment is also coming through the Millennium Fund, the HR Development Fund, the Heritage Fund and the Kathala programme of the Saudi Industrial Development Fund. Some private operators, such as the Shuaa Saudi Hospitality Fund, are also dedicated to investment in tourism. In March 2010, the Shuaa Saudi Hospitality Fund, which targets a size of SR 2 billion, announced the acquisition of a first piece of land in Jeddah for a development project covering a total area of 40,000sqm and estimated to involve an

“The Shuaa Saudi Hospitality Fund is at the core of our private equity platform, providing a unique opportunity to diversify into sharia-compliant hospitality investments - a sector not otherwise represented in Islamic investment portfolios,”comments Omar Al Jaroudi, Chief Executive Officer of Shuaa Capital Saudi Arabia. “Saudi Arabia is experiencing a sustained boom in business and leisure travel and the Shuaa Saudi Hospitality Fund is in an excellent position to benefit from that.” In conclusion, there are a million reasons to discover this country and a billion reasons to invest in its burgeoning tourism sector. As Dr. Salah Al Bukhyyet succinctly puts it:“Saudi investors have the cash, the logistics and knowledge of the localities, while foreign investors have the expertise. Combining both elements is, I think, the magic formula for the coming five years.”

There are a number of existing funds that provide financing – as well as privately owned commercial banks, catering in large part to small and medium enterprises.

an attitude seems scarcely believable. Upmarket hotels are sprouting up in the country at a rate of one every two or three months. Expenditures by incoming tourists, after doubling to just under $8 million between 1999 and 2007, are projected to grow to over $11.3 million in 2012. Expenditure on hotels and restaurants, at around $4 million in 2007, is expected to more than double to $9.3 million in the same year. Al Moghren is happy to see the tourist sector growing fast and receiving a boost with HRH king Abdullah's development efforts both in the sector itself and the economy in general. “But challenges remain,” he says, “particularly in terms of government assistance for the huge financial investments required to start up new hotels, which only start generating profits in the long term. The Saudisation quotas also add to the challenge. The required quota is 30%, but it is hard to find Saudis willing to do menial jobs like cleaning or waiting, while the required skills and education for higher-level jobs are still lacking.” He also quotes the widespread complaints about the challenging visa procedure and the underdeveloped MICE business. Regardless, business is brisk and the Riyadh Palace.

There are a million reasons to discover this country and a billion reasons to invest in its burgeoning tourism sector. 122 · W G u i d e s

Given these numbers, it is not surprising that just one single real estate developer in Mecca, Jabal Omar Development Co., has recently embarked on the construction of 27 hotels with a combined 15,000 rooms, the first of which will open in 2011.

Saudi investors have the cash, the logistics and knowledge of the localities, while foreign investors have the expertise. Saudi Arabia· 123

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MICE on the rise

We all take product exhibitions and trade fairs for granted as a normal feature of everyday business life. In GCC countries such as the UAE, Kuwait or Qatar they have been a normal part of business life for decades, but in Saudi Arabia, it is a relatively recent phenomenon – and thus a dynamic sector in full expansion. Yet it is not as straightforward and simple to organise an exhibition here as might be expected. When the Riyadh Exhibition Company (REC) introduced the practice to Riyadh in the early 1980s, the first hurdle to take was as basic as the infrastructural issue: the company had to build its own exhibition hall. Other problems had to be overcome too: draconian visa restrictions were forcing exhibitors to cancel participation at the last minute, and adequate accommodation for exhibitors and visitors alike was few and far between. Moreover, the company could not just put on any show in the conservative atmosphere of Saudi Arabia’s capital. Better to be safe than sorry. Today, Riyadh’s infrastructure has drastically improved at all levels, from airports, highways and hotel room availability to the brand new and gigantic Riyadh International Convention and Exhibition Centre (RICEC). Its first show, the Book Fair, was put on as recently as March 3rd, 2009, but the building was conceived long before that date.“The Chamber of Commerce adopted the plan to build a dedicated exhibition centre in the mid-nineties and construction started in 2005. This year, the Book Fair attracted almost a million visitors - as opposed >>

Exhibitions and Trade Fairs in Saudi Arabia are a relatively recent phenomenon – and thus a dynamic sector in full expansion. 124 · W G u i d e s

And although the dedicated infrastructure has improved dramatically it is not as simple to organise any event in Saudi. Saudi Arabia· 125

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List Of Rec Exhibitions 2011 (For more information please visit http://www.recexpo.com/)

GITEX Saudi Arabia 10-13 Apr 2011 The 10th International Information & communication Technology Exhibition for Saudi Arabia... Saudi Communications 10 - 13 Apr 2011 The 13th International Telecommunications Exhibition Saudi Agriculture Oct 2011 The 30th International Agriculture, Water and Agro-Industry exhibition... Saudi Agro-Food Oct 2011 The 18th International Trade Show for Food Products... Saudi Food Packaging Oct 2011 The international Exhibition for food processing and packaging... Saudi StoneTech Oct 2011 The 14th International Stone and Stone Technology Show... Saudi Build Oct 2011 The 23rd International Construction Technology and Building Materials Exhibition... Saudi Build The PMV Series 18-21 Oct 2011 The International Exhibition for Construction Equipment, Plant, Machinery and Vehicles... Saudi International Franchising Oct 2011 The 3rd International Franchise and Exhibition and Conference for the franchise industry in the Kingdom of Saudi Arabia ... Riyadh Motor Show Dec 2011 The 29th International Exhibition for Motor Vehicles, Showcasing 2011 Model Vehicles... Saudi Autoshop Dec 2011 The 15th International Exhibition for Auto Repair Equipment, Tools, Parts and Accessories...

to the couple of thousands which attended the first edition,â&#x20AC;? explains RICECâ&#x20AC;&#x2122;s CEO Abdullah Al Omran. RICEC: attracting more MICE RICECÂ´s curved roof, designed to resemble a sand dune, covers 30,000mÂ˛, 15,000 of which are net exhibition area.The other half is taken up by supporting facilities: offices, warehouses, restaurants, reception lounges... The 190,000mÂ˛ of land contain another 5,000mÂ˛ open air exhibition space, a car park accommodating 1,500 cars, and a second, smaller building: the National Product Centre.â&#x20AC;&#x153;This 8,000mÂ˛ building is used to support and complement the exhibition industry as a whole in KSA with permanent displays of products manufactured locally.â&#x20AC;?The main building is designed to be extendable with another 10,000mÂ˛ of net exhibition area without interrupting its overall design.â&#x20AC;&#x153;We are planning to construct the additional space in five yearsâ&#x20AC;&#x2122; time,â&#x20AC;?says Al Omran;â&#x20AC;&#x153;Meanwhile, construction of our own four-star hotel on the grounds will commence in 2011.The hotel will offer 200 rooms and 12 suites and will be run by an international operator.â&#x20AC;? RICEC currently has two main clients, the government and the countryâ&#x20AC;&#x2122;s leading private show organiser, the REC.â&#x20AC;&#x153;Apart from the Book Fair,â&#x20AC;?says Al Omran,â&#x20AC;&#x153;the government also organises an annual event where all the countryâ&#x20AC;&#x2122;s universities present themselves to prospective students. REC organises some 12 events every year, most notably Saudi Build and the Travel and Tourism Fair. Next to that, we have some ten smaller companies organising fairs and shows.â&#x20AC;?But the current number of business-to-business (B2B) and business-to-consumer (B2C) events is not sufficient. Says Al Omran:â&#x20AC;&#x153;There are two sectors which we specifically would like to entice: firstly, the oil and gas sector - which would attract many international visitors - and secondly the tourist industry and all its sub-sectors.â&#x20AC;? PIONEERING AND LEADING: THE RIYADH EXHIBITION COMPANY The country is fully aware of the growing worldwide MICE industry and its benefits to host countries. â&#x20AC;&#x153;We want to promote Riyadh as a city of the future, as the platform for the Gulf Region which will play the role Dubai used to do before the crisis - the port of entry and most popular business destination in the region,â&#x20AC;? explains Mohammad H. Al Hussaini, deputy general manager of REC.â&#x20AC;&#x153;At this juncture, KSA has the opportunity to grow fast and profile itself positively. We are now the only economically stable country in the region. Our financial situation has not deteriorated thanks to the prudent approach of the authorities and their strict regulation of the banking and investment sector. We can therefore still offer serious investment opportunities.â&#x20AC;? Not surprisingly, already established regional exhibitions are now looking toward the Saudi market, moving their interests from Dubai or Abu Dhabi to Riyadh, not least because of the $400 billionâ&#x20AC;&#x2122;s worth of infrastructural projects currently >>

Riyadh International Convention and Exhibition Centre (RICEC) ďŹ rst show was the Book Fair in as recently as March 2009 126 Âˇ W G u i d e s

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underway in the kingdom. Saudi Build, one of REC’s flagship events, is attracting more and more attention. As a long-term player in the field and a certified member of the global association of the exhibition industry (UFI), REC has become the industry’s undisputed leader. In all, the company has organised some 330 shows over the past 29 years, covering all economic sectors and involving participants from over 40 countries. REC currently employs 50 people in its Riyadh office and hires outside personnel for fairs as necessary. GROWING SPACE The growth of the company’s business is easily measured by the expansion of its exhibition space: REC’s first hall was a relatively small hangar of some 15,000m² in the city centre. In 1984, the company had already upgraded to a larger 40,000m² space north of Riyadh. “We have had an average 10 to 15% year-on-year growth rate and right now we are building a new 80,000m² hall on land donated by the government with a financial injection from the Saudi Chamber of Commerce

– which goes to show that both the government and the business community have recognised the importance of our work - and the boost it gives to the tourist industry in terms of numbers of visitors we bring into the country. Currently, the figures stand at between 3,000 and 5,000 per year, typically staying for up to seven nights,” says Hussaini. The trendy MICE industry moves millions around the globe and its attendants, considered business tourists, spend 30% more than regular tourists. The industry also offers unique opportunities to put destinations in the spotlight – which is precisely Saudi Arabia’s intention. CHALLENGES Still, there are a number of restrictions that prevent the rapid expansion of the sector in the kingdom. A cumbersome visa process, limited exhibition space and relatively low availability of hotel rooms are some of the more urgent problems to overcome. In Al Omran’s view, all restrictions on the development of MICE tourism are related in one way or another to infrastructure and organisation:

"We want to promote Riyadh as a city of the future the port of entry and most popular business destination in the region,” explains Mohammad H. Al Hussaini, deputy general

“There is a mix of constraints - from the difficulty to obtain tourist visas via lack of transportation and accommodation all the way up to getting reliable and complete information about the entire country, its infrastructure and potential. We have everything in this country, from beaches to mountains, from deserts to lush green areas but who knows about this? And where is the infrastructure to go there, find accommodation and be entertained? It is no use to know you can visit Madain Saleh if you have to drive 1,500 kilometres in your own car, not knowing how far the next petrol station is and whether you can get a room in the one or two hotels in the area. And once you have seen the site you have to leave again because there is nothing else for you to do. All the sub-sectors and aspects of the hospitality and entertainment industry have to grow and develop together to create an adequate tourist environment.” Nevertheless, argues Edouard Rabbat also deputy general manager at REC,“The government is working to genuinely open up the country. It is the best of times to come to Saudi Arabia. Remember that when we started out, we first had to build theinfrastructure. Even in the early 1980s, the capital of the kingdom did not have a single exhibition hall.We had to deal with draconian visa restrictions that forced exhibitors to cancel participation at the last minute and with inadequate accommodation for exhibitors and visitors alike”.Moreover, the company - then still called al Dhyafa – could not just put on any show: fashion shows, for example, were out

of the question (they still are), but other exhibitions too could be cancelled. A DRAMATIC CHANGE Nowadays the picture has changed dramatically and it is expected to keep on changing for the better. The obstacles that used to hamper expansion in the past gradually seem to get resolved.Visa restrictions are slowly being eased (although women under 30 still have to be accompanied by a male relative), up-to-standard hotel accommodation in the capital is growing at the rate of one or two major new hotels per year, and the traditionally strict and conservative Saudi society is - albeit in piecemeal fashion - coming to terms with the outside world. “We have been in this business for almost thirty years now and by now the government agencies all know us and trust us. These bureaucratic problems are overstated anyway: many people complain, but then don’t offer alternative solutions. If you come to the officials with a feasible solution, they will help you out”,explains Rabbat. The rules and norms of Saudi society are actually changing rather fast now: two years ago a woman could not have sat in our office to talk to us as men. Today this is an accepted situation that causes no problems. Since about a year, men and women are allowed to work together in offices. These measures are not given much publicity many people in the country may not even be aware of them - but they make a big change.

Edouard Rabbat, deputy general manager at REC is convinced that “the government is working to genuinely open up the country. It is the best of times to come to Saudi Arabia.

manager of REC.

Within the MICE industry in KSA, evolution is occurring too. In the early daysof exhibitors were mainly foreign companies, up to 70% to 80% of the total.“It was the beginning of the economic boom years in the kingdom and foreign companies were still looking for agents to represent them and give them access to the local market.Today, local companies tend to make up a large majority,”adds Rabbat. The company has been taking care to stay in line with the government’s economic and social priorities: “Currently, king Abdullah is prioritising the development of the health and education sectors, so we are concentrating our efforts on those fields”,says Rabbat. The most popular fair in terms of visitor numbers, however, remains the annual IT Show, while the fastest growing is Saudi Build. In fact, the MICE sector has grown so quickly that REC, once the only player in the field, now has to compete with some 250 licensed companies and individuals, although in actual practice only 20 to 25 major companies are active in the field. Consequently, more exhibition centres, as well as spaces for conferences and conventions, will be needed in the near future. REC itself has recently added a conference department to their company. “A conference with industry experts, government agents and academics adds a definite extra value to any trade exhibition, and this is the new international trend,”concludes Rabbat.

REC has become the industry’s undisputed leader with some 330 shows on its shoulders over the past 29 years, 128 · W G u i d e s

REC has had an average growth of 10 to 15% year-on-year and now is building a new 80,000m² hall on donated land. Saudi Arabia· 129

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A Weekend Away

in Doha at

Ezdan Hotel & Suites Qatar, the future host country for the World Cup 2022, is undergoing a massive development that will see the birth of entire new cities, a multimodal transportation system and dozens of new hotels and entertainment spaces opening. But one element has remained intact since its opening right after the Asian Cup in 2006 and has become one of the capital Doha´s landmarks: the towers of Ezdan Hotel & Suites, located in the West Bay area, close to downtown and the Doha Exhibition Centre. Ezdan Hotel & Suites is a subsidiary company of Ezdan Real Estate Company, one of the biggest companies by market capitalization in Qatar, owned and chaired by Sheikh Thani bin Abdulla Al-Thani. It is

one of the largest complexes in the Middle East and the only hospitality facility in Doha large enough to meet the residential needs of major conventions as well as business and sports events. Ezdan Hotel and Suites, which was opened on March 1st, 2007, consists of four towers offering spectacular city and sea views.Three towers contain serviced apartments, 1,500 studios, one-, two- and three-bedroom flats.The fourth tower combines a four-star hotel offering 200 rooms and suites with 344 more serviced apartments, bringing the complex’s maximum capacity, short and long term lease combined, to 4,311 rooms. Satellite and internet connectivity is offered in all units and residents have access to swimming pools, health clubs, spas, salons, supermarkets, food courts and restaurants.The complex further contains a conference centre with six banquet halls. A warm welcome and a positive outlook Mohamed Salah El Din, General Manager of Ezdan Hotel & Suites, graduated from Ain Al Shams University as a bachelor in Business Administration. During his 33-year career in the hospitality industry, he has held executive positions in a various 5-star hotels in Egypt, as well as playing a major role in the development of the tourism industry in his home country. Since his arrival at

Ezdan Hotel & Suites in late 2008, he has revolutionised the business, opening up all the leisure, commercial and convention facilities in the complex and achieving an occupancy rate of 95% and over for all four towers and their 4,311 rooms in 2008 and 82% in 2009. He can moreover pride himself in meeting and even surpassing the budgetary targets for both years. “I have a positive outlook for 2010 as major new projects are coming up in Qatar, including the new airport development, the friendship bridge between Bahrain and Qatar and the Aqua Park,”says Mr Salah El Din.“These projects will boost the leisure market and increase occupancy. Additionally, of course, Qatar Airways is opening up new destinations which will also bring in more travelers.”“Recently, we have inaugurated the banqueting and conference centre, which comprises six halls equipped with state-of-the-art audio and visual technology and will play a key role in supporting and boosting MICE tourism,”Salah El Din explains.“The development in conference and convention tourism has substantially contributed to safeguarding the hospitality sector against the repercussions of the global financial crisis.”

Mr. Mohamed Salah, General Manager of Ezdan Hotel & Suites is the true soul behind the charming atmosphere that captivates the guests but also the engine of the complex success and transformation

The new sports capital Ezdan Hotel & Suites’ distinctive character lies in its huge dimensions and its ability to accommodate >>

Facilities: like a city itself EZDAN Hotel and Suites is the place to stay when doing business in Qatar. Three Towers are serviced apartments comprised of 1,500 units - studios, one, two or three-bedrooms; while the Fourth Tower is a combination of a four-star hotel and serviced apartments having 200 rooms/suites and 344 apartments respectively. Rooms are equipped with satellite and Internet connectivity. Ezdan Hotel & Suites is ideally located in the West Bay area of Doha, in the heart of the new business district, 5 minutes walking distance to the Corniche, 10 minutes to the biggest shopping mall in the city and 15 minutes by car from Doha Airport.

It offers long and short-term leases. The complex is elegantly designed with spectacular city and sea views. Its maximum capacity is 4,311 rooms in total. The complex comprises of a Swimming Pool, Health Club, Supermarket, Spa, Male and Female Salons and several types of restaurants in the Food Court around the Pool. Recently Ezdan Hotel & Suites has also opened the Conference Centre with six Banquet Halls. Ezdan is like a city itself. Visitors will be able to enjoy a meal in one of the different restaurants, go for a drink, do their shopping and work out at the Health Club.

People will be able to enjoy the best services without leaving the complex.

F&B Concepts Cherry Berry Coffee Shop (Lobby of Tower 4): Coffee Shop, Bakery and All Day Dining with Lunch and Dinner menus (open 24 hours). Serving freshly brewed coffee, delicious home made French and oriental pastries, cakes and sandwiches, Room Service deliveries

Pool Grill (4th Floor) Located steps away from the Swimming Pool on the 4th Floor. Snacks, light meals and drinks

Ungaare (4th Floor) Specializes in Seafood and World Cuisine

The complex consists of four towers which rooms offer spectacular city and sea views and enjoy all facilities. 130 · W G u i d e s

Ezdan Hotel & Suites is located in the West Bay area at the heart of the downtown and close to the Doha Exhibition Centre Saudi Arabia· 131

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large groups. It has become a favoured destination of sports associations and local and regional sports teams who appreciate its wide range of facilities and its capacity to provide quality service to thousands of residents simultaneously. The complex is fully committed to support Qatar during the 2022 Football World Cup. “We have already proved our experience and capacity to host large numbers of athletes during the Asian Cup Qatar 2006,” Salah notes.

“We have chosen to promote the fact that our brand goes beyond the usual idea people have of hotels," says Ahmed Roushdy, Ezdan’s recently appointed new marketing manager.

In 2009, the International School Games brought in 1,500 plus athletes from all over the world for the ‘Doha Gymnasiade’. The year also saw the inauguration of the first banqueting facilities, serving exquisite dinners to some 2,000 persons from 42 different countries. In 2010, the hotel hosted a large number of international sports delegations, participating in championships held in Doha, including the Qatar Paralympic Committee, delegations of the Cycling, Tennis, Bowling and Football Federations, as well as meetings of Interpol and the Gulf Heart Association. A home away from home But Ezdan is more than a hotel. Hundreds of expats call the complex home, with large

transnational companies electing to house their employees in this unique environment with all facilities at hand. Tourists also appreciate the convenience of staying at Ezdan as its location in the heart of the city and its excellent price-quality ratio make it the obvious choice. “We receive visitors from all over the world,” says Salah El Din. “We are proud to note that 60% of these are long-term corporate clients, people who actually live and work here in Doha. For short-term stays, one of our towers contains a four-star hotel and serviced apartments.” The Ezdan Real Estate Company has recently unveiled a new project in West Bay, Doha, which is to include four residential towers with medium to large-sized apartments in addition to commercial and entertainment facilities. Hotel apartments are also planned. As Ahmed Roushdy, Ezdan’s new marketing manager puts it: “We have chosen to promote the fact that our brand goes beyond the usual idea people have of hotels. We strongly believe that Ezdan Hotel & Suites is much more than just a hotel: it is a lifestyle. Our goal is to make our customers feel at home, and we aim to establish and strengthen this concept in the Middle East.”

FOR RESERVATIONS: E Z D A N Hotel & Suites West Bay, Al Dafna, P.O.Box: 23488 Doha, Qatar Tel: (+974) 496 91 11 Fax: (+974) 496 91 12 Email: ezdanhotel@ezdanhotels.com Website: www.ezdanhotels.com

Al Rafale Restaurant

BANQUETING

(4th Floor) Traditionally cooked Arabic and Lebanese Food

The Convention Centre is located on the Ground Floor of the Third Tower next to the Lobby area with easy access from different directions.

Colombiano Coffee House (4th Floor) Pastries, cakes and drinks

Coffee Counter in Towers 1 and 2

The Convention Center at Ezdan Hotel &

Suites was purposely designed for large and small congress. The banquet / conference rooms offer a flexible configuration, with a multipurpose room featuring wireless communications connectivity.

"Our goal is to make our customers feel at home, and we aim to establish this concept in the Middle East.” 132 · W G u i d e s

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An unmatched

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Diversification of the largely oil-based Saudi economy has been declared a government priority as long ago as anyone cares to remember, but for a long time the results of this policy remained somewhat underwhelming Saudi Arabia has increased its global market share in petrochemicals to 13-14% in 2010 and judging by the proﬁle of the 80-plus petrochemical facilities in place, however, Saudi Arabia could easily become the world’s third largest producer by 2015.

Investors are attracted to Saudi by the low-cost feedstock and labour, the new infrastructure put in place and its WTO membership. 136 · W G u i d e s

Foreign investors have discovered the increasing advantages of establishing manufacturing facilities in KSA. Companies are attracted not only by KSA’s strategic position as an exporting country but also by the many incentives offered by the government

Private sector contribution to the petrochemical sector alone will quadruple over the next ten years. Saudi Arabia· 137

However, since King Abdullah took over at the helm of the country in 2005, a remarkable acceleration has taken place. INCENTIVES GALORE Professionals in the industry are enthusing about the fact that, for the first time in its history, the country has adopted a coordinated national strategy for industrial development, including both infrastructure development, designated industrial zones and attraction of foreign investors through directed funding, low-cost loans and important incentives.

His Royal Highness Prince Saud Al Tunnanyan is the president of the Royal Commission of Jubail and Yambu (now also Ras Azzor). He is the highest authority when in comes to industrial cities and he is also the person behind Saudi Arabia´s great industrial success.“Our economy is very strong and we have a strategic plan to develop the country and produce added value products using our resources. We have been successful in building our industrial cities and accommodating huge investments that are continuously pouring in."

In recent years, foreign investors have discovered the increasing advantages of establishing manufacturing facilities in KSA. Ever more companies are attracted not only by KSA’s strategic position as an exporting country – a natural geographical hub close to Europe, Asia and Africa – but also by the many incentives offered by the government. The accession of Saudi Arabia to the WTO in 2005, the low-cost feedstock and labour and the develop- >>

interview with

Dr. Mosleh al Otaibi, Ceo of the Royal commission in jubail Jubail Industrial City is divided in four sections: The Community Area The Airport Area The industrial Area Jubail – I: Primary Industries Park: Houses 20 petrochemical plants Secondary Industries Park: Houses companies that produce plastic, steel products, chemical derivates for agricultural use, etc. Support and Light Industries: Houses various light manufacturing and support facilities for both the industrial clients and the community.

The Industrial Area Jubail – II (currently under construction)

Dr Mosleh H. Al-Otaibi is the current CEO of the Royal Commission (RC) in Jubail Industrial City. Prior to his current role he held the position of Managing Director at Jubail Industrial College and Jubail Technical Institute following a distinguished career in electrical engineering education. As one of the key decision makers in the RC in Jubail, he contributed to the development of all key sectors and gained an in-depth awareness of the strategic issues facing Jubail through his participation in the Royal Commission Strategic Planning process. Education has been a key strategic sector in the development of Jubail as a self-sustaining industrial city. Over the years Dr. Al-Otaibi has established strategic links with many of the key industries in Jubail, aligning postsecondary education and training provision with their manpower development plans. Some of his other key achievements in education include leading the development and accreditation of engineering technology pro-

grams, developing articulation agreements with national and international educational institutions, establishing international partnership programs and contributing to national debates on education through organizing international conferences as well as participation in national, regional and international seminars, workshops and conferences. Dr. Al-Otaibi was appointed as CEO of the RC in Jubail in October 2009 by His Highness Prince Saud Bin Abdullah Bin Thunyan Al-Saud, Chairman of Royal Commission for Jubail and Yanbu. “My appointment coincided with a change in the strategic focus for the Royal Commission from being an infrastructure developer to an investment enabler. This also brought about a total reorganization in the organization structure of Royal Commission based on meritocracy. This was enacted through a well-planned change management program. Young, qualified professionals were appointed to positions of responsibility and were advised to develop productive work teams, setting

challenging but achievable goals and developing motivated work groups to perform at the highest level.” Dr. Al-Otaibi acknowledges the contributions of his predecessor, Mr. Jassim Al-Hejji, by saying “Mr. Jassim helped me during this change in management and organization structure and I continue to seek his advice and counsel as and when needed.” Under Dr. Al-Otaibi’s leadership, the revamped Royal Commission in Jubail now concentrates on the development of two major industrial infrastructure projects, Jubail 2 and Ras Az-Zawr. With the addition of the infrastructure for Jubail-2, RC in Jubail is expecting an additional investment of SAR 299.72 billion and the creation of 55,000 jobs. There are currently four primary industries, one of which is under construction and three at the design phase. There are six sec-

“From the pyramids to the Panama Canal, nothing so huge, or costly, as Jubail has ever before been attempted by anyone.’” 138 · W G u i d e s

Saudi Arabia· 139

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ment of new infrastructure around the industrial cities have also helped to create a shift in the origins of the investment. Whereas in the past most of the industrial projects were heavily financed by the government, now they tend to be financed by private investors who take good note of the country’s advantages. According to the Saudi Arabian General Investment Authority (SAGIA), private sector contribution to the petrochemical sector alone will quadruple over the next ten years, positioning Saudi Arabia as the sector’s leader. The expansion of the Saudi economy at a time when the rest of the world is struggling has its own reasons. The oil revenues amassed during the high-oil prices period in the first decade of this century have created a boom in every

The project under construction in Raz AzZawr Minerals Industrial City (RAZMIC), located 90k north of Jubail, marks the first attempt by KSA to exploit its non-oil mineral resources

ondary industries planned, two of which are under construction and four under design. “Out of the total investment in Jubail 2, 87 percent came from the private sector with the Royal Commission contributing some SAR 65 billion for infrastructure and utilities. Another infrastructure development project which has been completed and ready to be opened is the deep-water seaport.” explains Dr. Al-Otaibi. Dr. Al-Otaibi goes on to mention, “We want more primary industries to locate in Jubail 2. The primary goal of these is not necessarily to generate jobs, but to act as anchor industries to attract downstream industries as was the case in Jubail 1. But Jubail 2 will not benefit from the attractive feedstock cost and supply advantages as in Jubail 1, needing a change to a wide range of mixed and heavier feedstock. There is also increased competition for Kingdoms feedstock allocation as ethane becoming a much scarcer resource. It is the strategic vision of the Ministry of Petroleum (MinPet) to support the development of value added down-

stream petrochemical and energy-intensive industries both to diversify the economy and reduce the county’s dependence on imported products. MinPet as an incentive will also allocate additional gas if downstream industries produce strategic gap materials which are needed for the country. We are supporting and promoting the development of these downstream industries to potential industry tenants. We will also support the development of petrochemical and other related industry clusters in keeping with the cluster development strategy of the Ministry of Industry and Commerce.” In line with this, he further pointed out that the Royal Commission for Jubail and Yanbu will be hosting the “Saudi Downstream Conference and Exhibition” in Yanbu Industrial City on the 8th and 9th of March 2011. The project under construction in Raz Az-Zawr Minerals Industrial City (RAZMIC), located 90k north of Jubail, marks the first attempt by KSA to exploit its non-oil mineral resources. The site will host two major sites, an integrated

chemical and fertilizer plant and an alumina refinery and aluminum smelter. Outlining the road and railway links between the two cities and other areas of the Kingdom, Dr. Al-Otaibi explains “We have signed contract to build the road link from Jubail to Ras Az-Zawr and extend the railroad connecting Ras Az-Zawr with the seaport in Jubail. There will be close collaboration in the management of the two cities, which will eliminate duplication of efforts and we will benefit from synergy in operations and facilities.” Reflecting on the achievements of Jubail 1 to date Dr Al-Otaibi mentions, “Since its inception, Jubail 1 has attracted SAR 263.8 billion investments and has become a major contributor to Kingdom’s growth. The companies that have been located in Jubail 1 are 25 primary operating industries, of which 2 are under construction and 3 in the design phase. Eight of the existing facilities have designated expansion areas, but no new companies will be added to Jubail 1. There are another 40 in-

dustries in the secondary and downstream sector, representing SAR 15.37 billion in investments as well as 277 support and light industries representing an investment of SAR 4.24 billion.” This success has led to a growing population and action to expand and improve existing residential areas of Jubail, as Dr Al-Otaibi highlights, “The lack of affordable housing in Jubail is a problem that needs to be addressed, especially in the light of the Saudisation of the workforce. In the Royal Commission itself, we have 3,525 employees, 2994 (or 83%) are Saudis. We have already allocated 700 housing units and are currently constructing 207 housing units for them. Within three years I am confident we will provide housing to all of our personnel.” He further elaborates “The overall housing shortage is 19,000 units which is requested by industries for their employees to support their future growth and development. Prince Saud has donated land for housing units built for private ownership that will make Jubail a more sustainable project.”

sector of the economy but more specifically in the non-oil industry. Within this field, the petrochemical sector is one of the fastest growing in the economy and the largest non-oil sector of KSA. According to SAGIA,“Saudi Arabia is the world’s 11th largest petrochemicals supplier, accounting for 7-8% of total supply. Simultaneously, Saudi Arabia has increased its global market share in petrochemicals to 13-14% by 2010.” Judging by the profile of the 80-plus petrochemical facilities in place, however, Saudi Arabia could easily become the world’s third largest producer by 2015. A 35-YEAR STRATEGY PAYING OFF: THE MIRACLE OF JUBAIL A cool sea breeze brings solace to evening walkers along the Corniche lining the northernmost tip of

The integrated development plan for Jubail Industrial City provides guidelines for the development of all sectors. “Commercial centers, housing, schools, colleges, leisure and recreational facilities, healthcare facilities and transport facilities will all be developed as the city expands. Transport arteries will be designed around these areas. At the moment we are overseeing over SAR 9.65 billion for projects under construction and will spend SAR 2 billion for the first quarter of next year.” explains Dr. Al-Otaibi. “As we progress with our industry, community and commercial development plans for Jubail and Raz Az-Zour, our concern for the environment and sustainability remains at the top of our agenda, as it had been since the inception of the RC in Jubail. Our rigid environmental protection regulations are enforced and are being reviewed for their relevance to the needs of new industries to be located in Jubail. We have set up a new up-to-date laboratory at a cost of SAR 700 million. It is also in our agenda to develop plans to improve the sustainability

of present industries through continuous monitoring, base-level analysis, research and conferences. We will be hosting a “Jubail International Environment Conference” on the 5th and 6th of June 2011 for which call for papers are now invited.” In concluding, Dr. Al Otaibi remarked, “The continuing success of the development of Jubail Industrial City can be attributed to the patronage and the leadership of His Highness Prince Saud Bin Abdullah Bin Thunyan Al-Saud, Chairman of Royal Commission; the financial support provided by the government for developing petrochemical and energyintensive industries; the commitment of our strategic partners in government, industry and development organizations, and finally the dedication and hard work of RC Management and employees at all levels. However, there is still much to be done. Come back in four or five years time and you will see a different city. We have the finance and the manpower and above all the will to continue to transform Jubail into a ‘model sustainable industrial city’ of international repute.”

WHY TO INVEST IN THE PETROCHEMICAL SECTOR Saudi Arabia is the only country in the GCC that has opened up its petrochemical sector for private investment Attractively priced gas and liquid feedstock in a highly competitive petrochemical infrastructure offers attractive project economics; long-term feedstock supply security is unparalleled >>

Strategically located to serve vast markets in both Europe and Asia; WTO membership allows free access to new export markets for Saudi petrochemical producers Rapidly developing petrochemicals cluster creates significant business opportunities for support services providers World-class infrastructure in Jubail and Yanbu is undergoing continuous upgrades Large scale of current coastal petrochemical clusters is driving highly competitive capital costs Strong demand growth from new, local postproduction industries in end markets such as automobiles, construction, plastics and appliances Additional supply and diversification of petrochemical derivatives create new value chains and attractive opportunities for value-added industries Downstream Current global consumption of nitrogen, potash and phosphate-based fertilizer stands at approximately 154 million tons, having grown from 2.5 to 5.0% annually since 2000. Source: SAGIA

Since its inception, Jubail 1 has attracted SAR 263.8 billion investments and has become a major contributor to Kingdom’s growth. 140 · W G u i d e s

Raz Az-Zawr Minerals Industrial City marks the ﬁrst attempt by KSA to exploit its non-oil mineral resources. Saudi Arabia· 141

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The Kingdom of Saudi Arabia has one third of the world’s proven oil reserves, amounting to over 250 billion barrels. It also has the fourth largest gas reserves, amounting to 250 trillion cubic feet

the Gulf coast. Children play and men sit around chatting, whiling the evening away. Green lawns, flowerbeds and lines of trees complete the pretty picture. An idyllic image, unperturbed by any smells or smokestacks, it seems strangely incongruous, seeing as it actually lies in the world’s largest dedicated industrial city and its biggest ongoing civil engineering project: Jubail Industrial City (JIC). Since the JIC’s establishment in 1975, the old fishing village of Jubail has been transformed several times over and evolved into a major global player in the petrochemicals market. What once was an uncertain dream, is today the largest industrial complex of its kind, housing world-class petrochemical companies such as SABIC (the world’s 4th largest petrochemical company) and the world’s largest desalination plant Marafiq, which provides most of the drinking water of the country’s

27 million inhabitants. Located on the Gulf, about 100 kilometres north of Dammam metropolitan area, the continuous development in the city keeps attracting bright engineering minds and top investors from around the world. According to the 2009 census, some 95,000 people live in Jubail City, currently in a SR 22 billion refurbishment program involving a full-service residential community with schools, a hospital, clinics, hotels, mosques and last but not least one of the world’s most advanced training centres, the Jubail Technical Institute. The city occupies a territory of 1,016 sq km, only 200 sq km smaller than New York City. The site’s preparation for the construction of the city involved moving 370 million cubic meters of earth, more than needed to build a road around the world. The city is now home to 17 major primary >>

interview with

Dr. Tawfig Al-Rabiah Director General of The Saudi Industrial Property Authority Deputy Minister for Commerce and Industry and Supervisor for The National Industrial Strategy

AREA OF DEVELOPED INDUSTRIAL LAND IN SQUARE METRES 35.000.000 30.000.000

Diversification of the largely oil-based Saudi economy has been declared a government priority as long ago as anyone cares to remember, but for a long time the results of this policy remained somewhat underwhelming. However, since King Abdullah took over at the helm of the country in 2005, a remarkable acceleration has taken place.

25.000.000 20.000.000 15.000.000 10.000.000 5.000.000 0

1970 - 1975

2001 - 2007

1976 - 1990

2008 - 2010

1991 - 2000

Total Land Developed:

71,981 Sqm

Entire industrial cities have been sprouting up like mushrooms all over the kingdom, and investment in manufacturing, even outside the traditionally strong downstream petrochemical industries, is at an all-time high. Much of the funding for the multiple new projects has been provided directly by the government, specifically through the agency of the Saudi Industrial Property Authority, generally known as MODON. Professionals in the industry are enthusing about the fact that, for the first time in its his-

tory, the country has adopted a coordinated national strategy for industrial development, including both infrastructure development, designated industrial zones and attraction of foreign investors through directed funding, low-cost loans and real incentives. Some simple figures illustrate the increased expansion drive: in the last two years, MODON has developed 28.5 million square meters of industrial zones, equivalent to 67% of the total area developed during the preceding four decades. In the same period (2008-2010 Q1), 1,446 factories have been allocated land in these industrial cities. Additionally, in 2009, the Authority obtained the ISO 9001 certificate and signed an agreement with the Saudi Credit and Savings Bank to provide industrial loans

to small and medium sized enterprises in the less developed industrial cities. In the same year, it obtained the ‘Best Working Environment’ Award. “The Authority´s objective – explains Dr. Tawfig Alrabiah, Modon´s General Director since April 2007– is to increase the impact of the industrial sector on the kingdom's economy by 300% over the next fifteen years.” MODON currently oversees 19 industrial cities existing in different regions of the Kingdom with a total investment that exceed SR200bn and more than 300,000 employees. Some of the latest to start developing is Sudair City for Industry and Business and the industrial cities of Zulfi and Taif. Planning is also underway to establish third industrial cities in Jeddah and Dammam.

In the last 2 years, MODON has developed 28.5 mn sqm of industrial zones, 67% of the total developed in 4 decades. 2010 (First Quarter)

142 · W G u i d e s

2009 2008

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industrial facilities covering 80 sq km, and about 150 secondary operations – support and light manufacturing industry – occupying another 16 sq km. 35 years after its conception, it provides 7 percent of the country’s GDP. A HESITANT BEGINNING It all started way back in the mid-1970s, when a nationwide program was developed to gather the previously wasted gases that are continuously released by Saudi Arabia’s oil wells. Put to good use as fuel and feedstock, they would henceforth serve as the basis for a new industry, one of the earliest efforts to diversify Saudi Arabia’s economy. From this seed grew the all-encompassing vision of Saudi Arabia as a strong industrial nation, a major future exporter and leading economy. This vision has remained intact over the years, and has continued to produce wealth and

benefits for the nation. It has created an entire industry from scratch and transformed the country into one of the most influential powers of the twenty-first century. The Kingdom stopped being a mere exporter of raw materials and began transforming its hydrocarbon reserves into petrochemical products such as ethylene, which were then exported at much higher prices than the raw materials, or transformed again into literally thousands of by-products destined for export or consumption by a growing population at home. In one stroke, the challenge of employing a very young and fast growing population was getting tackled too. The Kingdom of Saudi Arabia has one third of the world’s proven oil reserves, amounting to over >>

Why TO INVEST IN THE FERTILISER INDUSTRIES Local natural gas feedstock is available at competitive rates enabling attractive project economics World-class phosphate deposits in the northern and northwest regions of KSA (at Al-Jalamid and Umm Wu’al) Highly competitive elemental sulphur from the growing refining sector Strategic location, with excellent access to Asia’s vast fertilizer market supported by WTO membership Strong global demand trends Availability of sulphuric acid, phosphoric acid and potash will enable downstream opportunities

35.000.000

MODON especially encourages the private sector to increase its contribution to the economic and social development through effective partnerships between the government and the private sectors under different systems such as Built, Operate And Transfer (BOT) or any suitable according to the Project. Under

INDUSTRIAL CITIES OVERSEEN BY MODON (*Dec ‘10)

LOCATION

TOTAL TOTAL LAND INVESTMENT (in mil Sqm) (in Bil. SAR)

TOTAL FACTORIES

TOTAL EMPLOYEES

Riyadh 1st. & 2nd

105

1,104

126,485

Jeddah 1st. & 2nd

552

80,000+

Dammam 1st. & 2nd

420 (600)

30,000 (75,000)

Makkah

0.7

1.2

3,000

Qassim

1.5

4,000

Ahsa

1.5

4,000

Madinah

0.12

2,500+

Assir

2.5

Al-Jouf

Tabuk

0.085

300+

Hail

2.5

0.11

321+

Najran

6.5

Al-Kharj

100

0.055

2 (16)

150

Jazan

Ar'ar

Sudair City for Business and Industry

260

the BOT system and Dr. Alrabiah leadership the new industrial cities will be matched with residential and commercial areas to provide service to the factory´s employees. “New industrial estates will be implanted in less developed regions of the country. In the past we have developed three main areas, Jeddah and its port on the Red Sea, Riyadh as the central capital of the country, and Dammam / Jubail in the rich oil region on the East Coast. From now on we will concentrate especially on the north and south of the country - Taif, Sudair, Yanbu and Tabuk - because the three main areas are fast reaching the point of congestion,” continues Al Rabiah. “In all, we are planning at least six more industrial zones. Most will be connected to the new railway network that is simultaneously being built.” MODON alone expects to add 2 million m2 of industrial estate development in the next two years to make it 100% growth in 4 years as compared to the previous 37 years. Besides, of course the general outlook for the kingdom is very promising. Indeed, even just the recent extensions to these earlier centres have been crowding transportation arteries and causing delays in the ports. Riyadh Industrial City 2 contains

almost 1000 factories that together employ 140,000 workers. Jeddah counts 550 factories and 75,000 workers; while Dammam 2 boasts 400 factories – 100 of which are still under development – which will eventually employ 40 to 50,000 workers. However, it is not easy to implement the Saudization program in the industrial sector. “At the moment, we have reached a Saudization rate among the industrial workers of some 20%. MODON has waged a marketing campaign to attract Saudis to the industrial cities, which in itself was successful, but demand in the labour market grows so fast that we just try to cope with in any way we can, including by importing a large part of the workforce from abroad. The fact that KSA was not much affected by the economic crisis had the disadvantage of not driving young Saudis to the factories,” says Dr. Alrabiah.

A natural export hub with easy financing In recent years, foreign investors have discovered the increasing advantages of establishing manufacturing facilities in KSA. Ever more companies are attracted not only by KSA's strategic position as an exporting country – a natural geographical hub close to Europe, Asia and Africa – but also by the many incentives offered by the government.

“New industrial estates will be implanted in less developed regions of the country." 144 · W G u i d e s

'In the past, financing these industrial zones used to be a major challenge,' continues Alrabiah, ' but thankfully this is not a problem anymore, as we are getting more funds from the Ministry of Development. “Low interest loans are available from the Saudi Industrial Development Fund, low cost land is offered by MODON, energy and transport costs are reasonable - electricity rates are as low as 4 cent per KW. Export tariffs are kept low too and are moreover secured by an export insurance programme and export financing loans,” underlines the deputy minister of Commerce and Industry. “And indeed –continues Alrabiah - the infrastructure is being expanded and improved at a terrifying rate, including the port of Jeddah that was getting clogged up. In general, the cost of operation for industrial manufacturing here is very low. There are few hidden costs and for industrial companies, the workforce is allowed to consist for up to 90% of expatriates. This means you can use low cost labour and easily import expertise which is not yet available in the kingdom.” Additionally, of course, KSA also boasts a huge top class internal consumer market.

“There is plenty of local demand on every level, even down to the educational sector where massive amounts of books and teaching aids are needed.” And the incentives are working too: products manufactured in KSA are now being exported all the way to the USA, Canada and Australia. “We have to publicize this fact for people to adjust their image of the KSA as a nonproducing country.” According to MODON, the largest single foreign investor in Saudi industrial enterprises is now Japan. “The big industrial groups from that country have all discovered the kingdom. Some have established a presence already, others are coming soon and even a Japanese government agency is actually promoting investment in KSA now. Other major investors are Germany, the USA and the UK”, explains Alrabiah.

“In general, not only economically but also 30.000.000 socially and culturally, a shift to the positive side has been taking place here, especially 25.000.000 in the past five years. There is more and 20.000.000 better education, more exposure to the world, more openness... This is another 15.000.000 reason we are now attracting more investments from abroad.” 10.000.000

KSA has become part of5.000.000 the World Trade Organization and the G-20 and was ranked last 0 year in the 13th position by the World Bank in terms of ease of doing business. “But I have just received confirmation that1970 we will - 1975 be in the top ten in the upcoming new1976 report. - 1990 KSA will play an ever bigger role in the world 1991 - 2000 economy - and consequently in global politics too,' emphasizes Alrabiah.

Phosphate-based fertilizer production is set to expand rapidly in KSA as a new Diammonium Phosphate (DAP) complex comes online at Ras Az Zawr, which will begin processing some of the country’s 3.1 billion tons of phosphate deposits. KSA’s close proximity to growing Asian markets, efficient export operations and an increase in produc2001 2007 it’s ready to tion-mean 2008 - 2010 capture increased share of the global fertilizer market. Source: SAGIA

TOTAL NUMBER OF FACTORIES ESTABLISHED

A world-class player “We have economic stability in the kingdom with huge reserves of oil, gas and minerals, that make us resilient to fluctuations in world prices; our government is focusing on internal development to create more economic activity by developing education, training, tourism, foreign development, ICT and other infrastructure, etc…” outlines the general director of MODON.

2010 (First Quarter) 2009 2008

200

400

600

800

1000

"The infrastructure is being expanded and improved at a terrifying rate." Saudi Arabia· 145

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Since the launch of the industrial development plan in the 1970s, more than a dozen industrial cities have been built in various locations throughout the Kingdom

250 billion barrels. It also has the fourth largest gas reserves, amounting to 250 trillion cubic feet – a figure which is moreover expected to rise when on-going explorations prove successful. Finally, this enviable nation has massive reserves of minerals including zinc, bauxite and phosphate ore. SETTING UP THE INFRASTRUCTURE - ENVIRONMENTALLY FRIENDLY FROM THE START The vision involved selecting the most cost-effective locations providing access to the sea at spots appropriate for deep-water ports, and transforming what were essentially stretches of inhospitable coastal desert into huge industrial cities. The idea was to use the nation’s rich oil and gas output as feedstock for oil-based industrial plants and downstream secondary industries to produce added value. The entire

infrastructure was to be built according to the highest environmental standards, which has resulted in Jubail Industrial City winning many green awards throughout its history. On September 21st, 1975, the Royal Commission for Jubail and Yanbu (RCJY) was established as an autonomous organ within the Saudi government, and investment started in the first two industrial cities of Saudi Arabia, Jubail and Yanbu, located respectively on the eastern Gulf coast and the western Red Sea board. Dr. J. Michael Cobb, who has carried out extensive research on Jubail Industrial City, writes: “Almost 20 years ago, a July 1982 Time magazine article in seeking to describe the unfolding project stated: ‘The search for historical comparisons with Jubail is daunting... In all the expansive sweep of civil engineering, from the pyramids of the Nile to

trial Company, known as NATPET. NATPET, which started operations at the end of 2008 chose Yanbu Industrial City, the second biggest industrial city of the country located the west coast, to build a 400,000 MT/Year Propylene & Polypropylene plant. With a paid-up capital SR 1,070 million, the Saudi-based Alujain Corporation with about 57% of the company, the General Organization for Social Security (GOSI) and other Saudi investors owns NATPET.

interview with

Mr. Jamal Malaikah President and COO Natpet Not many people understand the meaning of the industrial revolution taking place in Saudi Arabia. It is most than probable that more than 10 items that you use in a daily-basis come actually from raw materials produced in Saudi Arabia. And those same 10 items, from your children toys to your car interior are likely going to be fully

produced in Saudi Arabia in the coming 5 to 10 years. Indeed, Saudi Arabia understood its industrial potential from the beginning. Some of the earliest – and most successful - forms of economic diversification in KSA consist of downstream petrochemical production fa-

cilities. The reasons for this are obvious: the country’s plentiful supplies of oil and gas make for a guaranteed stream of relatively low-cost feedstock. If you add to this the country plentiful financial resources, location and incentives you have come up with the magic formula. One of the industries taking advantage of the well-known competitive advantages of Saudi and the encouragement from the government towards the petrochemical and manufacturing industry to set up shop here is National Petrochemical Indus-

“We competes in quality not price, while supplying customers in over ﬁfty countries worldwide,” 146 · W G u i d e s

As the first to use the state of the art prestigious Lyondellbasell’s Spheripol® process, the company “competes in quality not price, while supplying customers in over fifty countries worldwide,” says COO and President, Mr. Jamal Malaikah. “We came onstream only in December 2008, as the first producers in KSA to use the new production process. By now others have followed suit, but we still offer the highest quality and the best overall integrated services.” Malaikah is very proud of his plant’s early ISO 9001, Quality Management System, ISO 8001, Health and Safety Management, ISO 22001, Food Grade Safety and ISO1400, Environment Management and REACH certifications, as well as the company being a winner in the King Khalid Saudi Responsible Competitiveness Award

of 2010. “My personal dream is to become the company of choice for employees, society, suppliers and clients - for all stakeholders. I sincerely believe that at the end of the day this is the most profitable and sustainable way to do business. We have more than 400 people working here, more than actually needed. This is because we have heavily invested in training our staff and in raising the rate of Saudization now and in the future. We don’t just need technology process but to also transfer the know-how needed to use this technology.” Himself a Mecca-born Saudi, Malaikah says he would like the world – and specifically foreign investors - to recognize that KSA, as the biggest economy of the region, is worth not only investing in, but in “making a longterm commitment to, including the import of technology and the creation of training facilities, especially in the petrochemical field because of the location, the feedstock and government incentives,” he stresses. “We as NatPet plan to expand both horizontally and vertically. The next step is to expand and move further downstream and set up a converting industry. Instead of exporting the raw materials to convertors abroad and then they re-export it worldwide including to Saudi Arabia, we are

looking into converting part of the production locally.” he outlines. KSA’s non-oil exports are still relatively low at $30 billion per annum but Malaikah points out that “we should be able to double that number in less than 10 years.” Like most entrepreneurs – foreign or Saudi who know the country well, Malaikah is optimistic about the future of KSA: “So much is changing and at such a rapid pace, it is fascinating to watch it all happen. There is of course the huge government-led undertaking of infrastructural and economic development, but this includes reforms in a lot of areas that are, strictly speaking, not economic, such as the judicial and legal systems, education and health care. Socially two things are moving, says Malaikah – the status of women is improving, there is a general opening up and rejuvenating of society. “Of course, there are still many challenges, the major one being that we have a deep-rooted culture – we are a society that is very hard to change. It will take time, but it is happening already. Ever more people are becoming aware, for example, that forbidding women to drive is not a matter of Islamic law and does not just affect women: it carries a heavy social, economic and financial price which all of society pays.”

We have more than 400 people working here, more than actually needed. This is because we have heavily invested in training our staff and in raising the rate of Saudization now and in the future

“The next step is to expand and move further downstream and set up a converting industry.” Saudi Arabia· 147

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the construction of the Panama Canal, nothing so huge, or costly, as Jubail has ever before been attempted by anyone.’” The projects at Jubail and Yanbu laid the foundations for an economic diversification that would diminish the country’s reliance on oil exploitation by increasing domestic industrial production. The overall development of Jubail and Yanbu - accomplished with an investment of SR 84 billion - involved the creation of over 233 industrial facilities, which in turn have invested over SR 244 billion and currently employ more than 107,000 workers. Investment has mainly flowed in from America, Europe and Asia. Its impact has been so extensive that the country’s petrochemical output rose from a paltry two million tons in the 1970s to almost 60 million tons today. Production is expected to hit the 100 million ton mark by 2015 - a projected annual growth rate of about 12 percent. GEARING UP FOR THE YEARS AHEAD “As you know,”affirms His Royal Highness Prince Saud Al Tunnanyan, president of the RCJY, Saudi Arabia

has a high potential. Our economy is very strong and we have a strategic plan to develop the country and produce added value using our resources. We believe we have been successful in building industrial cities in Jubail and Yanbu and accommodating huge investments. I am sure we can accommodate yet more investment in both cities. We have extensive lands and a long-term vision. We started with the oil industry, and then moved into the petrochemical sector and now we will begin exploiting our mineral wealth. Additionally, we will focus on developing tourism and other resources in the kingdom.” Prince Saud’s particular concern lies with the future employment of Saudi Arabia’s youngsters. “We have to maximise our resources”, he says. “King Abdullah is the leader of the Kingdom and has the vision to bring the Kingdom to pole position in the region. I think that the new

megaprojects in Saudi Arabia, such as the King Abdullah University for Science and Technology (KAUST) and the other economic cities, will help put the Kingdom in the position we aim for. We want to get the maximum added value for our resources.” The figures seem to indicate the vision is working: the original investment flow of $500 million throughout the 1980s had swelled to $20 billion by 2000. Since the launch of the industrial development plan in the 1970s, more than a dozen industrial cities have been built in various locations throughout the Kingdom, which are strategically close to raw materials or to local and international markets. However, Jubail remains the flagship project and has grown bigger than any of the others, now reaching the stage where Jubail 2 is added to the original project.

We have extensive lands and a longterm vision. We started with the oil industry, and then moved into the petrochemical sector and now we will begin exploiting our mineral wealth

interview with

Fouad Basyyoni Deputy General Manager of Saudi Asma Environmental Solutions. (SAES) Fouad Bassioni, deputy general manager and business developer of Saudi Asma Environmental Solutions, as the company’s full name goes, explains how the company started work in 2007. “Our founder, Dr. Fadil started with just a few people, but demand quickly took off and we currently have 196 employees. We provide environmental impact assessments (EIAs), we monitor and measure effects of existing facilities, primarily air and water quality, but also noise levels. Saudi companies were initially hesitant to have impact studies carried out, but now it is becoming standard practice.” The company, which also offers waste management services and food quality control, has until now been concentrat-

ing on the Gulf region, working in KSA, Qatar and Dubai. “We want to put our stamp on this region before expanding geographically,” says Bassioni. The company’s equipment has until now been imported from abroad, but Asma is considering setting up local production facilities. “Our slogan is ‘to work for a better environment’, and apart from building a profitable business, we also want to spread a message. People are slowly becoming aware of environmental issues here, but there is an urgent need for education from the basics upward, starting with the basics of everyday life, such as not throwing waste out of the car window, taking care of cigarette butts”, says Bassioni.

Our slogan is: Our Way for a Better Environment. 148 · W G u i d e s

"Apart from building a profitable business, we also want to spread a message of environmental awareness and responsibility." Saudi Arabia· 149

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Expanding to lead The success of JIC in attracting foreign investment having exceeded all expectations, the government of Saudi Arabia decided to expand the industrial city and create Jubail II - only three kilometres west of the existing city. The new development is projected to double the size of Jubail by adding 6,200 hectares. While JIC was the largest ongoing civil engineering project for the past 30 years, JIC II, construction of which is currently in the last phases, has now exceeded its predecessor. Jubail II has been commissioned to Bechtel, known locally as Saudi Arabian Bechtel Company (SABCO), a partner of the Royal Commission since the inception of Jubail I. The extension of Jubail is a megaproject that consists in expanding both residential and industrial facilities. It will house up to 22 new primary industries including petrochemical industries, aluminium and other smelting plants plus areas to accommodate secondary and support industries and is expected to receive its natural gas feedstock from the Saudi Aramco Uthmaniyah project area.

The site preparation includes an extension of the seawater cooling system, drinking water and electricity supply as well as an up-to-date fibre optics communications infrastructure. The seaport will be expanded to meet the new demand, as will the highway and railway systems. Next to the industrial development, the Royal Commission plans to develop a new area of Jubail city to accommodate about 50,000 additional inhabitants. Jubail II is expected to generate some 55,000 jobs directly and an additional 330,000 indirectly.

Why TO INVEST IN THE POWER GENERATION AND SEAWATER DESALINATION PLANTS Significant and growing excess demand for power and water in many key regions of the KSA create excellent opportunities for long-term assets

The total cost of Jubail Industrial City II will be in the area of SR 14 billion. This is expected to generate over SR 200 billion in investment mainly from international sources. Construction of the city is currently in the third phase, which will end in 2018. The final phase will be accomplished in 2022. To give an idea of the monumental efforts, Bechtel states “Jubail took project management to a grand scale. At peak, the workforce reached 50,000. Total installed cost exceeded $40 billion”.

Investment is needed in transmission and distribution networks, as well as in power generation and desalination capacity Privatization, unbundling and a pro-investment climate are making the sector more friendly to the private sector; a majority of planned capacity increases will come from private investors

population growth as well as the increasing industrialisation of the country.” In 2003 Saudi government took an initiative to transform the Saudi economy by increasing private participation through progressively opening up 24 sectors of the economy, starting with including the water and power sector. 'The idea was that water and power should be treated like any other commodity and therefore be completely financed, owned and run by the private sector in the future,' says Padmanathan. “The role of the government was to be limited to regulating and providing a level playing field.”

A successful privatisation and a world of opportunities

interview with

Paddy Padmanathan President And CEO of Acwa Power The ownership and operation of Saudi Arabia's power and water sectors have long been a government affair, closed to the private sector whose involvement remained limited to providing equipment and plant construction.

By the early 2000s, says Paddy Padmanathan, President and CEO of ACWA Power International, this situation had become untenable. “There was an enormous need to increase both power generation and

water desalination capacity. In the previous 15 years there had been very little investment in the sector, so there was already a backlog. Moreover, a large increase in demand was projected due to the fast

The power generation capacity in the Kingdom needs to expand from 43,000 megawatts to 75,000 by 2020. 150 · W G u i d e s

Of course, achieving this goal will take some time, but in 2004 the process was kick-started by Royal Decree 523, which founded a central buyer, the Water and Electricity Company (WEC) to buy bulk water and power from the private sector and sell it on to consumers. Upon reviewing the progress made, the government started to realise that to prevent monopolisation and guarantee a level playing field, some structural components of the sector should remain in the hands of the state. “Out of the three main components – generation/

production, transmission to distribution points, and distribution to the end consumers – the government has decided to retain control over the transmission component – the lines connecting the production facilities with the distribution points, which are to be shared by the various providers,” explains ACWA Power CEO. ACWA Power International itself was founded in 2004, “as a company to take advantage of this pipeline of projects to be a platform to build capacity and grow to be a full-fledged brand to develop, own and operate power generation and desalinated water production assets initially in the Kingdom and progressively in a wider geographic region to ultimately become a global enterprise. Our main challenge from the start was human resources: attracting people with expertise and international renown in the sector, which was hard in the beginning. We were a new and unknown company, and then to compound that challenge based in KSA, one of the most misunderstood countries in the world.”

Going public Yet the company – and thus the government's program of controlled privatization - has been extremely successful, contends Padmanathan: “The evidence is there –

out of 43,000 megawatts of installed capacity in the Kingdom, just under 6,000 is in the hands of the private sector already, after only 6 years. That is 14%.” In fact, ACWA Power – who remains the main private provider until now - has another plant under construction that will produce another 1,200 MW when it comes online. Additionally, the company's desalination plants produce 2.3 million m3 of desalinated water, – out of 6 million m3 available in KSA, or a solid 35%. Its combined portfolio reaches a value of SAR 45 bn. “In fact, we make a significantly higher contribution than the mere percentages suggest, as all of this is new capacity catering to a pent-up demand which had been restraining economic growth, and so has a much higher consequential impact,” says Paddy Padmanathan.

At 6% per annum, growth rates in power and desalinated water are among the world’s highest There is a USD 50bn investment needed in electricity to meet demand through 2015 There is the need for 30,000 km extension to the Saudi’s transmission network and US$24 billion investment in additional water capacity. Privatizations in the sector will also create attractive investment opportunities. Source: SAGIA

Investors take note: the company will be going public with its shares too – and you might want to put your money there: “The power generation capacity in the Kingdom needs to expand from 43,000 megawatts to 75,000 in 2020 and 105,000 megawatts in 2030, so an enormous amount of capital needs to be injected in the sector, which is known as a low-risk sector delivering a dependable long-term stream of revenues.”

The company's desalination plants produce 2.3 million m3 of desalinated water out of 6 million m3 available in KSA. Saudi Arabia· 151

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industry The future of a leading exporter Saudi Arabia is today the largest producer and exporter of oil. It is a leading exporter of petrochemicals and soon will also be an important global player in minerals. The missing link has long been the infrastructure - more precisely an industrial transport system to connect Jubail with Yanbu and now Jubail with the new mineral city Ras Azzor on the Gulf Coast. Saudi Arabia has enough mineral deposits of phosphate and bauxite to catapult the kingdom to a place among the top exporting countries. It is estimated that phosphate exploitation and fertilizer production once optimised will produce 2.92 million tons per year of Diammonium Phosphate Fertilizer (DAP) for export to high growth markets, in particular nearby Asian nations. Ras Azzor, currently under construction on the coast of the Arabian Gulf, will be crucial to the success of the Kingdom’s ambitious downstream oil and gas project:

a SR 13.1 billion fertilizer plant and a SR 22.5 billion aluminium smelter, both to be run by Saudi Arabian Mining Co. (Maaden). The acceleration of development in Saudi Arabia is especially remarkable in the industrial and mineral sectors and the changes are dramatic for both the nation and its inhabitants. “Any development needs a lot of changes,” says his Royal Highness Prince Saud bin Tunnayan, “and the changes need to follow what is happening in the world and use the knowledge and education of qualified people. We need tools. We have a vision and there is a mission for that vision according to that we develop. King Abdullah has done a lot of changes in the kingdom to help us to develop the country and we use our principles as tools to improve our system and regulations and erase the obstructions for the investment.”

interview with

Mr. Esam F. Himdy After over some few years established in the Kingdom, Sahara Petrochemicals has become one of the most active petrochemical companies inside Jubail Industrial City.

Managing Director of sahara petrochemicals After over some few years established in the Kingdom, Sahara Petrochemicals has become one of the most active petrochemical companies inside Jubail Industrial City. Founded by Zamil Group, one of the largest business houses in Saudi Arabia, Sahara Petrochemicals established on the 7th April 2004 as a joint stock company with a paid up capital of SR 1.5 billion and later raised to SR 2,9 billions. With the participation of Saudi and foreign companies that have the modern skills and technologies to manufacture advanced petrochemical products, the company has been part of the foundation of joint ventures for the creation of new limited liability companies in Al Jubail Industrial City to produce and market its chemical and petrochemical products such as propylene, polypropylene, ethylene, polyethylene and other petrochemical and hydrocarbon based products. “Sahara Petrochemicals was founded to be one

of the pioneer industrial pillars in Saudi Arabia especially petrochemical and chemical industry which has evolved in the late seventies and has developed into one of the pioneer manufacturing and exporting sectors in Saudi Arabia, says Esam F. Himdy, Managing Director of the company. The strategic geographic position of Saudi Arabia next to three continents and the location of the company in Jubail Industrial City are two of the greatest advantages of Sahara Petrochemicals, says Hindi, but also he admits that the help of the government sponsorship and the availability of the raw materials (oil & gas) have been essential for the success of the company. So far, Sahara Petrochemicals has formed the following companies: Al Waha Petrochemicals, Arabian Chlorovinyl Company,

Tasnee & Sahara Olefins Company, Saudi Ethylene & Polyethylene Company, and Saudi Acrylic Company. In April 2010 one of its affiliates, Saudi Arabia's Tasnee & Sahara Olefins Company, also signed an agreement with Germany's Evonik Industries to build a $267 million superabsorbent polymer plant with a production capacity of 80,000 tonnes annually. The company ultimate goal is to be selfsufficient, investing in industrial projects for the manufacturing of its core products but also to execute projects that will supply the necessary raw materials and acquire or construct the needed buildings to store and display the company’s products.

The company ultimate goal is to be self-sufficient, investing in industrial projects for the manufacturing of its core products. 152 · W G u i d e s

exerostie conullandre min hent num voloreUt xxxxxxxxxxxxxxxxxxxxxxxxxx luptate minibh ea consectet, consenia Saudi Arabia· 153

mineral resources

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FUELING

THE KINGDOM The name Saudi Arabia has for decades now been synonymous with petroleum. The kingdom is the largest oil exporting country by a considerable margin in an already oil-rich region. It boasts proven reserves of 260 billion barrels – 20 percent of global oil reserves and sufficient to last almost a century at 2010 production levels.

Add to this large undiscovered reserves widely presumed to lay dormant, as well as the country’s capacity – alone among OPEC member states – to deploy a large reserve production capacity to smooth price surges when necessary, and it takes no genius to see the kingdom is set to keep on dominating the world oil market for the foreseeable future. Crude oil sales have historically accounted for 90% of the country’s overall export earnings and roughly 75% of its budget revenues. The Economist Intelligence Unit estimates that the value of Saudi Arabia’s exports totalled $189.7 billion in 2009, down from $313.5 billion in 2008, with the drop largely reflecting the fall in oil prices from their 2008 peak. Indeed, the 2003-2008 spike in oil prices has greatly benefited the kingdom’s trade balance and hence its ability to invest in renewing infrastructure and expanding education and employment – the two most pressing needs for its young population. An increasing role of the private sector The state-owned oil company Aramco currently delivers about 45% of Saudi Arabia’s GDP, as compared to 40% which originates in the private sector. However, this proportion is gradually decreasing as ever more projects designed to diversify the economy come online, starting with but not limited to downstream petroleum industries. The objective in this is not only to create additional sources of income, but also to make the country less dependent on imports and to increase employment opportunities for a young and rapidly growing population.

Crude oil sales have historically accounted for 90% of the country’s overall export earnings and roughly 75% of its budget revenues. 156 · W G u i d e s

Petroleum, when extracted, comes with associated gas from layers covering the oil deposits. This gas is released under pressure as a by-product of the oil extraction process. Whereas initially, producers worldwide would just burn this gas off, creating massive air pollution, the more environmentally conscious late twentieth and early twenty-first century has found solutions to prevent this waste and create additional profits in the process. Thus, Saudi Arabia’s national oil company Aramco has been putting this side effect to good use as feedstock for a downstream petrochemical industry. Oil, gas and what comes out of it Indeed, from the mid-1970s onwards, the Kingdom stopped being a mere exporter of raw materials and began transforming its hydrocarbon reserves into petrochemical products such as ethylene, which were then exported at much higher prices than the raw materials. Gradually, the Saudi government plans to move further downstream, and thus these raw materials are also beginning to be used locally to manufacture various by-products destined for export or for consumption by a growing population at home. In fact, the petrochemical sector is one of the fastest expanding in the economy and already forms the largest non-oil sector in KSA. Says Jamal Malaikah, CEO of petrochemical company Natpet (National Petrochemical Industrial Co.):“KSA’s non-oil exports are still relatively low at $30 billion per annum, but we should be able to double that number in less than 10 years.” According to Saudi Arabia’s General Investment Authority (SAGIA), Saudi Arabia is currently the world’s 11th largest petrochemicals supplier, accounting for

The 2003-2008 spike in oil prices has greatly beneﬁted the kingdom’s capacity to invest in renewing infrastructure and expanding education. Saudi Arabia· 157

mineral

Less well known is the fact that the kingdom’s soil also contains a wealth of mineral resources, tens of thousands of square kilometres of hard rock and mountainous regions in the country contain minerals ranging from gold, silver, lead, zinc and uranium to iron ore, copper, phosphates, bauxite, coal and tungsten

mineral

7-8% of total supply, while simultaneously increasing its global market share in petrochemicals to 13-14%. Judging by the profile of the 80-plus petrochemical facilities in place, however, Saudi Arabia could easily become the world’s third largest producer by 2015. Additionally, construction has started on a number of major new hydrocarbons projects, including refineries, aluminum and other petrochemical plants. These are scheduled to come online between 2012 and 2014 and take industrial activities further downstream to produce previously imported products such as sober absorbent polymer (SAP – used in diapers), acrylates, caustic soda and ethylene dichloride (EDC). The start of a new sector Less well known, however, is the fact that the kingdom’s soil also contains a wealth of mineral resources other than oil and the associated gas. In fact, tens of thousands of square kilometres of hard rock and mountainous regions in the country contain minerals ranging from gold, silver, lead, zinc and uranium to iron ore, copper, phosphates, bauxite, coal and tungsten. A Mining Investment Service Centre has been set up to provide information and assistance to those interested in obtaining mineral concessions. The centre has been conceived as a one-stop shop also providing access to mineral maps and technical reports. Says Ali Al-Naimi, Minister of Petroleum & Mineral Resources: “Many resources are yet to be discovered. Cement, limestone, and other mining sectors will help to substitute foreign products with our own domestic ones.” Assistant deputy minister for mining investment Sultan Ibn Jamal Shawli has stated that state-owned mining firm Maaden’s major phosphate and bauxite pro-

jects will place the kingdom firmly on the world stage as a producer of downstream value-added fertiliser and aluminium products. Maaden is also exploring for phosphates in the northern areas of Wadi Sirhan and Turaif and is developing magnesium deposits in the central area of the Kingdom. In a sign of the growing willingness of the Saudi government to give up state control over the sector, it has indicated that all of the company’s activities will in the longer term be transformed into self-supporting business units ripe for privatisation. Minister of Petroleum and Mineral Resources Ali Naimi has said that liberalising the solid minerals area will create boom conditions for the Saudi mining sector, which he expects to grow at an annual rate of 10%. Indeed, the government’s seventh five-year economic plan called for 9% growth in the non-oil mining sector, which would make it the fastest growing area of the economy. Indeed, Saudi Arabia has some of world’s largest phosphate reserves, while estimated bauxite deposits “could feed the planned 620,000 tonnes-a-year capacity aluminium smelter in the new Ras Al Zur industrial mineral city under construction for more than 30 years”,according to Abdullah al-Dabbagh, CEO of the Saudi Arabian Mining Company (Maaden), who has also stated that the kingdom’s plans for an integrated mining programme to utilise phosphate and bauxite deposits in the production of fertilisers and aluminium will involve investments of more than $10 billion. The Al Jalamid deposit will supply raw materials for a $2 billion fertiliser production complex to be built at Ras al-Zur, sixty kilometres north of the industrial city of Jubail on the Gulf coast. This new mineral industrial city is being constructed as we speak, and will include plants to produce ammonia, sulphuric acid and phosphoric

There are a million reasons to discover this country and a billion reasons to invest in its burgeoning tourism sector. 158 · W G u i d e s

acid to provide feedstock for a 3 million-tonnes-a year di-ammonium phosphate plant. Growing infrastructure The $5.6 billion project at Ras Az-Zur thus marks the first serious attempt by KSA to exploit its non-oil mineral deposits. As part of the general ongoing infrastructure investment, it will be connected by rail not only to the bauxite mines at Zabirah and the phosphate deposits near Jalamid, but also to the nearby industrial city of Jubail – which is itself being expanded with a Jubail 2 section - as well as to the deep water seaport which is being built by the Chinese Harbor Contracting and Engineering Co which won the SR 2.2 billion ($586.7 million) construction contract in 2008. Construction of the port should be completed by the end of 2011. The Saudi Landbridge railway line will later also connect the new port to Dammam. Ras Al Zur will comprise a phosphate fertilizer plant, alumina refineries, a SAR 22.5 billion aluminium smelter, a SAR 13.1 billion di-ammonium phosphate (DAP) fertiliser plant, an ammonia plant and facilities to produce phosphoric and sulphuric acid. Annual production forecasts are to the tune of 6 million tons of granular diammonium phosphate, 440,000 tons of liquefied ammonia, 1 million tons of caustic soda, 1 million tons of alumina and 70,000 DWT. The new mineral city Ras Al Zur will eventually also have its own combined power station and desalination plant, for which a SR59.9 million ($16 million) engineering contract was awarded in July 2010 to a consortium led by consultancy firm WS Atkins International. When completed by the end of 2013 the plant, estimated to cost $6 billion in all, will likely be the world’s

largest, generating 2,400 megawatts of electricity and producing 1,025 million cubic meters of desalinated water per day. The plant will be part of a network of new IPP (independent power producer) projects planned by the Saudi Electricity Company (SEC) worth SR300 billion ($80 billion). In all, 6 IPPs will supply an additional 20,000 megawatts to the energy-starved country by 2018. Beside Ras Al Zur, plants will be constructed in Rabigh, Riyadh, Qurayyah, Dheba and Shuqaiq. Said Amer Al-Swaha, the head of IPP at SEC,“Of the total investment of $100 billion, some $46 billion will go to power generation, and $30 billion will be spent on transmission and $20 billion on distribution.” Finally, an entire residential city will complete Ras Al Zur. A residential village containing 500 housing units has already been constructed for Maaden’s own employees. Says Al Otaibi, head of the Royal Commission for Jubail and Yanbu:“In the first instance, we are aiming to export raw minerals and ores as well as fertiliser and aluminium products to the nearby high-growth markets in Asia, where demand is high and keeps increasing.” Indeed, the gigantic and growing economies of India, China are easily reached from the eastern shore of the Arabian peninsula. Korea and Japan are just one stop further away. As Maaden’s Abdallah Dabbagh told Reuters at the occasion of the announcement of the first contract biddings in 2005: “This industrial city, with these two projects, is the largest diversification which has ever happened in Saudi Arabia.” Maaden’s CEO Khalid Al-Mudaifer told menafn.com in January 2011 that phosphate production would start in Q2 of the same year, adding with pride: “Our phosphate complex is the largest in the world.”

The $5.6 billion project at Ras Az-Zur thus marks the first serious attempt by KSA to exploit its non-oil mineral deposits. As part of the general ongoing infrastructure investment, it will be connected by rail to the bauxite mines at Zabirah, the phosphate deposits near Jalamid and to the nearby industrial city of Jubail

Saudi investors have the cash, the logistics and knowledge of the localities, while foreign investors have the expertise. Saudi Arabia· 159

agriculture

MAKING THE DESERT BLOOM interview with

His Excellency Fahad Bin Abdulraman Al-Balghnim, Minister of Agriculture of the KSA Agriculture in the Kingdom of Saudi Arabia would make most people raise their eyebrows at the thought of an arid land with scarce water growing vegetables.

But Saudi Arabia does have underground aquifers and grows more than vegetables. “We produce about 65 percent of our fruit consumption; 85 percent of our vegetable production; 50 percent of our poultry consumption and 110 percent of our table eggs consumption so we export a little to the Gulf States. We also produce about a 120 percent of our fresh milk consumption… and let me tell you that Saudi Arabia produces the best dairy products in the world,” says His Excellency Fahad Bin Abdulraman Al-Balghnim, Minister of Agriculture of the Kingdom. However, it is not the wish of the King nor the kingdom policy to exploit those little water resources for agriculture when there can be much better places in the globe to grow food. “What is always in my consciousness is global food security. It is an issue that even our King is very much concerned about. If you are a person with social ethics you cannot enjoy your life if somebody next to you is suffering. We should all strike to make sure that nobody on this earth sleeps hungry any given day,” says the minister with clear signs of commitment.

“This is why King Abdullah said that we should give priority to water security”,he continues. “He does not want to reduce food production. We used to produce 2.6 million tons of weeds. But now the King says that gradually we should reduce our production and import it. We, as a country, should encourage agriculture production inviting the local business community that has acquired wealth and expertise to go and invest in agriculture production abroad in countries which have the potential of being agriculture producers with enough water supply and a good soil.” Officially called King Abdullah Initiative for Investing in Agriculture Production Abroad, it has been organised under a committee headed by the minister of Trade and Industry and co-chaired by the Ministry of Agriculture with representatives from the ministries of Finance and Foreign Affairs. “We encourage our private sector to go out and invest with the objective of increasing agriculture production universally”,explains the minister. “International organisations such as Food & Agriculture Organisation of the United Nations (FAO) is calling for an increase of global agriculture production. It estimates that to cover our needs, by 2050 we should increase our agriculture production by 70 percent.You cannot do that by dreaming, you have to do that by real work.

“What is always in my consciousness is global food security. It is an issue that even our King is concerned about.” 162 · W G u i d e s

We in Saudi Arabia feel that we are dedicated to invest more and more in agriculture production and we feel that many other governments agree and work towards that same global goal.We will see a jump in agricultural production globally.There is no shortage of the needed natural resources to reach that goal.What we need to do is to have the political will and the financial commitment to do it.That is all.”

Water security and food security In Saudi Arabia access to water for agricultural needs is absolutely free so the government has to be very creative to make a shift in the farmers practices. One of the main objectives is to convert farmers from flood irrigation to drip irrigation in order to save as much water as they can with the highest levels of productivity. “From our experience in agriculture we have come to a very strong conviction that we should have a sustainable agriculture otherwise it is not beneficial to the country or the people to build a sector that will collapse in 20 or 30 years. For that reason the government, and especially King Abdullah, has taken very courageous decisions to give water security an absolute priority because it is fundamental for the life of the Saudi society. After water security we can look at food security and this is why in our ministry we are focused and concerned in producing as much as we can out of what we have. Internationally they say you have to conserve water in agriculture, you have to have more crops per drop. In Saudi Arabia we say that we want to do more crops per less drops,”explains Al-Balghnim. However, local production is necessary to help offset the increasing prices of food coming from foreign countries into the

kingdom, especially since the country´s entrance in the World Trade Organisation (WTO) in 2005. Today around 80 percent of the food consumed in the country is imported. Agriculture represents only 4 percent of the GDP and employs around 10 percent of the workforce, most of it unskilled foreign labour. “We have been an open economy since our creation; strengthen with the entrance of Saudi Arabia to the WTO. It is important to us to have our country opened to increase our competitiveness. If you control your imports, you will never develop a good industry,”says the Minister. And the industry is indeed developing. Saudi Arabia is producing some of the finest milk products of the world with the partnership of one of the most recognise world-wide dairy products name, DANONE. “An international company like Danone would not come here unless it was a really good opportunity for investment. It is a very big market,”nodes Al-Balghanin. But Saudi Arabia is also a country with 23 million dates palm trees -almost one per habitant- that produce some of the most exquisite and varied dates. Most recently, in Al Jouf, North of the country, olive plantations are starting to build a new olive-oil based industry.

We, as a country, should encourage agriculture production inviting the local business community that has acquired wealth and expertise to go and invest in agriculture production abroad

Several studies are under way to determine the recharge amount of water that goes into the underground aquifers. Once finished, the country should be able to know exactly how much water they can pump from each aquifer to sustain their agriculture. “Howeve,”-adds the minister- “as the prophet said: “Doomsday will not come before the Arabian Peninsula is back into rivers and greeneries”.

"King Abdullah has taken very courageous decisions to give water security an absolute priority." Saudi Arabia· 163

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PRODUCTION & FACILITIES Six farms with a total cattle herd of more than 50.000 heads. Dairy factories equipped with the most modern techniques of production to a capacity of 1.000.000 litres per day of dairy products, derivatives, and juices. 43 products and 106 varieties of milk, dairy products and juices. From a small factory with capacity of 4000 litres per day to two factories with production capacity of 1000,000 litres per day. From 6000 litres of production rate of the cow per season to more than 11000 litres of per season. From only two products distribution centres in the Eastern Region and Riyadh to 31 distribution centres in various regions of the Kingdom and the Arab Gulf States. Four giant agricultural projects with 40,000 hectares of cultivated area. 150,000 tons of wheat and barley annually. 370,000 tons of forages annually. 139,000 tons of potatoes and 42,000 tons of onions annually. 1.400 tons of fruit annually. 355,000 seedlings of fruit producing. 53.000 litres of organic extra virgin olive oil and 5 tons of the best types of honey.

interview with

Eng. Abdulaziz M. Al-Babtain CEO of The National Agriculture Development Company (Nadec) Turning golden sand into green pastures Although Saudi Arabia is better known for its desert than for its greeneries companies like NADEC has long been keen providers of high quality food and dairy products not only for the national market but also for all the Gulf States.

NADEC we are pioneers in the use of new technology to reduce the irrigation and actually one of the successes of NADEC is the reduction of irrigation in weed. Before we needed around 13,000 cubic metres to produce 5 tones, now we produce nearly 8 tonnes with the same water”.

Aiming to reduce imports, to increase dependability on national economy and to encourage the contribution of the agricultural sector in the national product, NADEC is nevertheless more of a watch-dog when it comes to the preservation and good usage of water and a truly welcoming figure of International investment.

NADEC is one of the better-known and larger agriculture companies in Saudi Arabia. It was established in 1981 according to a royal decree. It is a share- stock public company with an equity capital of SR 600 million (160 million USD) promoted by the Saudi Government, which holds 20% equity while the Saudi public holds the balance equity.

“There are a lot of investment opportunities in the sector. Saudi Arabia currently needs further investment in services to reduce the consumption of water and to get the best and most suitable machinery and other devices resistant to heat,” says Eng. Abdulaziz M. Al-Babtain, CEO of NADEC. “About 30 percent of the production cost – he continues - goes to the water. In

An ISO 9001:2008 certified company it comprises six dairy farms specialized in milk production and calf fattening [50,000 heads]; two modern dairy plants with a total capacity of one million litters a day of fresh milk; four projects with a total cultivated area of 107,000 hectares producing 150,000 tons of wheat, 370,000 tons of

forage crops, 139,000 tons of potatoes, 42,000 tons of onions, 1,400 tons of fruits, 355,000 nursery fruit trees, 5 tons of top quality honey & 53.000 litters of organic virgin olive oil and a dates processing plant with total production capacity of 5000 tons/year from the best varieties of Saudi dates. But the company strengths lay in its people “the greatest asset and the key of our success”, says Mr. Al-Babtain who knows it better than anyone else. He has been working in the company as far as he can remember with some breaking moments that only served to bring him back with more power and strength. “Human capital investment, training and motivation are one of the greatest reasons of the company’s success” he emphasizes. Having held many positions within the company he became the CEO in 2003. “Working for so long in this company in different positions has really helped because NADEC is a very diversified company. Ad-

NADEC is nevertheless more of a watch-dog when it comes to the preservation and good usage of water. 164 · W G u i d e s

ditionally, it is not easy to combine all the different aspects and the government style management when we privatised 80 percent of the company. I can say know I’m very proud of our team work and success as we have increase the turnover from 500,000 million in 2003 to 1,5 billion in 2009,” he underlines. However, there are more reasons behind the success of NADEC. The efficient management together with the large investment in new factories, dairies, distribution lines and technologies have been key to its growth. With a five-year strategic plan that aims to cover the needs, taste and likes of the Saudi and the Gulf market, NADEC is constantly looking to the introduction of new products that attract especially “the 60 percent of the population of Saudi represented in the youth”, explains Al-Babtain. “We are focused in producing healthy food, attractive packaging and revolutionary new products”. Nadec’s list of products covers more than 43 different products of dairy and juice products packed in more than 106 styles. All these products are daily distributed all over the Kingdom and within the Gulf States..

Projects Haradh Project Located at a distance of 250 kilometres to the south east of Riyadh; It covers an area of 37.500 hectares and includes dairy factories, cattle farms and land cultivated with wheat, potatoes, clover, Shami corn, Sudanese hashish and Rhodes grass are cultivated as essential fodder to ensure the needs of cattle farms. Wadi Al-Dawasser Project Located at a distance of 650 kilometres to the south west of Riyadh, an area of 40 thousand hectares, the project is known for the cultivation of agricultural crops such as wheat, corn, fodder and vegetable crops, such as: potatoes, onions and tomatoes. Hail Project Located at a distance of 580 kilometres to the north of the city of Riyadh it covers an area of 20.000 hectares cultivated of wheat, corn, fodder, processing potatoes, onions, honey and tomatoes. Al-Jouf Project Located at a distance of 1.250 kilometres north of Riyadh, on an area of 7.200 hectares, with an appropriate climate for the cultivation of fruit trees of various types such as peach, plum and apricot, in addition to the cultivation of olives for the production of olive oil. The project also produces wheat, potatoes and onions. Dates Factory Located at a distance of 350 kilometres East of Riyadh the processing and packaging plant of dates in Al-Hofuf has a capacity of about 5,000 tons annually of Saudi dates, such as Khulas, Suqary, Nabout Saif, Rziz, Saqie, Chichi, Sufree, Khodri, and others...

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Building it is selling it

Construction is booming in KSA. Universities, hospitals, hotels, shopping malls and entire smart cities – now seem as ubiquitous as oil wells, sprouting up everywhere you look. The country’s traditional panorama is changing too, as high-rise building becomes more common, changing the cities’ skylines. The residential sector, however, is still lagging behind, although an extraordinarily high demand for affordable housing and the government’s recently acquired awareness of the need to house the fast-growing population seems set to change this. In all, the Saudi real estate sector is only beginning to develop – but it is doing so in typically explosive fashion. And by virtue of starting ten years later than its neighbours, the country is in the enviable position where it can benefit from the mistakes they made. The dream of a lifetime Real estate in Saudi Arabia is moreover a fairly stable and constant affair. Contrary to the spectacu-

lar boom-and-bust cycles plaguing its smaller and trendier neighbour Dubai, prices in the Kingdom have remained relatively stable throughout the recent financial crisis. This salubrious situation can partly be ascribed to a prudent regulation of the Saudi financial sector in general, but is also due to an ever-growing demand, especially for residential properties, which keeps outstripping the supply. There is not much of the speculative building here that is so common in the Emirates. The second highest rate of population growth in the world and new living patterns emerging within the young population are driving a demand for housing units accommodating nuclear rather than extended families. Saudi Arabia is experiencing a shortage in this field estimated to reach 1.5 million units by 2013. With figures such as these, it is no wonder that the relatively young real estate sector is booming in the kingdom even while in most of the outside world it is declining. According to figures released by Bank Saudi Fransi, 36.8 percent of the total Saudi population was 14 years of age or younger in 2008, while 43.3 percent was between the ages of 15 and 39. In other words, >>

There is an extraordinarily high demand for affordable housing and the government’s awareness of the need to house the fastgrowing population seems set to change this

Construction is booming in KSA. Universities, hospitals, hotels, shopping malls and entire smart cities – now seem as ubiquitous as oil wells, sprouting up everywhere you look.

Real estate in Saudi Arabia is moreover a fairly stable and constant affair. 168 · W G u i d e s

Contrary to the spectacular boom-and-bust cycles plaguing its neighbous, prices in the Kingdom have remained relatively stable Saudi Arabia· 169

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an astonishing 80 percent of the population is under 40. In addition to an urbanization rate of 88% and a very high living density (on average six people per household), this makes for a very strong demand for entry-level housing. Moreover, traditional norms and patterns are changing: whereas the extended family living together under one roof was the norm as recently as 20 years ago, the pattern today is increasingly focused on the nuclear family. Young Saudis long to escape the protective embrace of their parents and grandparents and establish their own home, housing husband, wife and kids only. In fact, only 30% of the population are homeowners, and the government is keen to get the other 70% to own their homes as well.“Real estate is a growing sector in Saudi Arabia,” confirms Mohammed Al Khalil, managing director and CEO of Akwaan Properties.“We have only marginally been affected by the financial crisis – lending and financing are down slightly, but not by much. The market slowed down in 2009, but in the last few

months, we have seen hopeful signs of it picking up again. There is still a large gap between supply and demand in the residential sector, we see serious investment in hotel construction and other targeted developments, and government spending remains high and consistent.” New homes for new lifestyles “You are building people’s lifelong dream”,says Majd Al Hogail, CEO of Rafal, the first developer to offer the kingdom’s home buyers gated compounds set up as complete self-contained communities. “Building homes is a passion. It is a fascinating and gratifying process that you repeat in cycles of 2 to 3 years, from conception to completion. When designing the house, I imagine how people will live in it and make it their home. That is how you bring lifestyle and passion into it.” Lifestyle is definitely one of the trends that directly affect the real estate business.“Lifestyles in the kingdom have changed dramatically over the past five years and will change even more over the

next five years”,says Al Hogail. He sees two major changes that have taken place in families’ lifestyles in the Kingdom.“The first change is that family size has decreased - with the size of housing units moving in the same direction. This is also related to the affordability factor – the modern house is much more expensive to build than the traditional homes. The second change has occurred inside the home. Especially in the big cities, people spend much more time outside the house. People work longer hours; women are starting to work outside of the home too. There is not so much time left to receive many guests, so kitchens are now built smaller and guest rooms are disappearing.’ Dr. Nazih H. Hamad, general manager of Affordable House, delves further into the roots of society. “Up until twenty years ago, people still customarily bought a piece of land and built their own house, but now this is no longer common. Both the rising cost of modern housing and the trend for nuclear families to live on their own have made this mode of living impossible for the >>

MORTGAGE LAW ENFORCEMENT Package of legislation comprising 5 laws related to mortgages: 1. The registration of mortgages 2. The regulation of finance companies 3. The real estate funding 4. The financial leasing 5. The enforcement and execution The law is now under the scrutiny of the Shoura Council. Once agreed, it will be sent to the Council of Ministers for approval and will become effective by Royal Decree. The regulations for each law will be issued by Saudi Arabian Monetary Agency (SAMA) within 90 days.

interview with

Majd Al Hogail CEO Of Rafal

Rafal Real Estate was formed in late 2007 by three leading Saudi business groups - Ibrahim A. Abunayyan & Bros. Company, the Arabian Company for Water and Power Development, Ltd. (ACWA Power) and the Arabian Tawazon for Commercial Investment Ltd. - with the vision to lead the market in quality real-estate development

“Blncyah (Valencia), the first project of Rafal, has recently been completed, and 85% of its 144 housing units have been sold already as freehold properties, not a negligible achievement in a market where presales (buying as yet unconstructed homes on the basis of plans and designs) is not yet an accepted practice,” explains Al Hogail, who was recently elected the kingdom's best executive director in the real estate sector for 2010, his award matching the one won by Rafal´s very first project, Valencia: the Best Residential Project for 2010. “Blncya is the Arabic form of Valencia, a Spanish city founded by the Arabs. The name was chosen to match the Andalusian architectural style in which most of the community was built.” The community aspect is part of the core vision on the project. Rather than just constructing 144 villas, the company chose to build a gated community on the 85,946 square metre plot smack in the centre of Riyadh.

focusing on middle income mixed communities.

“We have created a quiet and private neighbourhood”, says Al Hogail. The de-

Burj Rafal Community, a mixed-use 62-story high-rise landmark on a 19,322-square metres plot on the King Fahd Highway in Riyadh. 170 · W G u i d e s

velopment has its own 24/7 private security and offers six types of villas, each fitting 6 to 8 household members. Surrounded by 1200 metres of uninterrupted walkway amid beautiful landscaping, the community is linked with a fibre-optics network infrastructure designed to provide smart telecommunications technologies and value-added smart services (VASS) and to facilitate IPTV, state-of-the-art CCTV and wireless broadband. This 250 million Saudi riyal project is just the first of several Rafal developments currently in various stages of design and construction. Construction has already started on he Burj Rafal Community, a mixed-use 62-story high-rise landmark on a 19,322-square metres plot on the King Fahd Highway in Riyadh. 'The project combines a Kempinski hotel and two spas, luxury serviced apartments plus freehold Manhattan style apartments, smart offices, a boulevard of boutique style retail outlets, restaurants, cafes, conference facilities and a ballroom for up to 2000 people. The $560 million project will be completed by December 2012.

Next up is the Al Rabiyah mixed-use project at the entrance of Riyadh's Diriyya district, a SR400 million residential development covering 120,000 square metres. Two more projects are in the pipeline for Riyadh, and for 2011 other projects are also planned in Jeddah and Dammam. So far Rafal is the

first in gated communities in the KSA, as there is as of yet no competition for them. In community projects in general, they have two competitors: Al Arkan and more recently Emaar.

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FACTS ABOUT CONSTRUCTION IN SAUDI I King Fahd International Airport is bigger than Bahrain. Completed in 1999, King Fahd International Airport is located to the northwest of Damman and at 780km2 is the largest airport in the world in terms of land area. It is also larger than Bahrain, which has an area of 665km2. The airport mainly serves Damman, Dhahran, Khobar, Oatif, Ras Tanura and Jubail. Source: ConstructionWeekOnline.com

average Saudi. Now real estate companies build large housing projects and sell individual units to end users, which reduces the cost of housing units through the increased quantity. Additionally, in our own case, we don’t use big names as contractors, we work with standardized designs and we build on pieces of land that are not very expensive, which allows us to keep the price down,” says Dr. Nazih H. Hamad, explaining the company’s success in tackling the shortage of mid-income housing projects. “The real estate sector is second only to oil and petrochemicals in terms of size. Real estate players contribute around 7% of KSA’s GDP. Yet there is still a huge potential, as only 20% of the demand is actually being supplied. The problem is that supply and demand is not matched to each other. Developers build expensive luxury homes, while Saudi citizens need affordable, reliable housing within the city zones. We are working with developers to change this,” says Abdallah Al Howaish, CEO and Managing Director of >>

interview with

Dr. Nazih Al Hamad One of the few companies in the sector that has not been focusing solely on the high end of the market is Dar AlArkan. Six prominent business families with significant real estate development experience established the Riyadh-based company, the largest developer in the Kingdom by market value, in 1994

General Manager of Affordable House a Subsidiary of Dar Al Arkan In 2007 it established its Affordable House subsidiary to cater to the growing low and middle-income segment of the market with considerable success. Dar Al-Arkan converted to a joint stock company in 2005 and first listed its shares on the Saudi Stock Exchange in December 2007. In December 2008 its capital stood at SAR 7.2 billion (US$1.92 billion), divided into 720 million shares of par value of SR 10 each (US$2.67). The capital was increased significantly in 2008 by issuing 180 million bonus shares of par value of SR10 each to its current shareholders, in a non-cash issuance financed through retained earnings. Affordable House's modus operandi consists in identifying suitable locations for its projects, designing standardized housing units and the layout of the entire project, and then having its technical department supervise the actual construction work that is outsourced to contractors.

The company handles the marketing and sales processes too. The main challenge in marketing its products in the undersupplied market the company caters for is not to find buyers but to help them finance their purchase. “We are eagerly awaiting the mortgage-finance law announced by the government since 2005, but unfortunately it has not arrived yet. In the meantime, we are working with various private-sector financial institutions to develop formulas to help buyers finance their homes. Usually, these institutions finance an average of 9% of the purchase price only. Buyers can obtain another 9% as a loan or grant from the government, and the rest is their own capital, or that provided by their family. We work with several banks to offer a formula covering a larger part of the price.” Not surprisingly, the company's formula has turned out to be a success, and Affordable House is receiving enough orders to keep it busy for a long time to come. “In 2010 and 2011 alone, we are building 1,500 housing units in various

development projects in Riyadh and elsewhere”, says Dr. Al-Hamad. One development planned is the Shams Al-Arous Project, which will be located in the east of Jeddah on an area of over three million square meters and developed as a modern integrated master planned community. Currently under construction is the Al Tilal Project in Medina, which will eventually cover a total area estimated at 2.2 million square meters, with the first phase comprising 499 villas in traditional Arabic and neoclassical architectural design. Then there is Qasr Khozam, maybe the most ambitious residential project in the history of the Kingdom of Saudi Arabia, planned as cooperation between Dar AlArkan and the Jeddah Development and Urban Regeneration Company (JDURC) to rejuvenate the city of Jeddah.

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FACTS ABOUT CONSTRUCTION IN SAUDI II Jubail is the largest ongoing civil engineering project in the world today Work began on Jubail city more than 30 years ago. In 1983 the city was listed in the Guinness Book of Records as the largest engineering and construction project ever attempted and with work still ongoing it’s still breaking records today. Source: ConstructionWeekOnline.com

Amlak International, one of the few mortgage providers in the Kingdom. A long awaited mortgage law A recent estimate by US-based consultants Clayton Holdings indicates a shortage of no less than 2 million housing units, growing by an average of 200,000 per year. The government has recognized this pressing need and made affordable housing the focus of the 2010 Jeddah Cityscape exhibition, the country’s main real estate investment and development fair. As Deep Marwaha, Director of Cityscape Saudi Arabia, explains:“There is a growing urgency to balance residential developments so that everyone has the opportunity to buy a house that fits their needs and their budgets. Fortunately, the government has taken the lead to ensure that housing will be accessible for all, and so we can expect affordable housing to occupy a greater share in upcoming property projects.” The enormous opportunities this situation creates for project developers and construction companies>>

alike need no further elaboration. Yet the government, although supportive of investment in the low and middle-income market segment and indeed incorporating it in several of the gigantic new development projects it is planning, has yet to approve the long-awaited mortgage finance law. This leaves property developers and real estate companies to their own devices - and those of private financial institutions - to find formulas suited to their customers’ limited means. Emaar, for example, offers the possibility to buy homes in two years of instalments under the structure of paying as they build. At 50% of construction the client has paid 50%. But not everybody can afford to do this and real 20 to 30 years mortgages are still impossible in KSA. Although the sector has benefited since 1975 from a dedicated government-funded Real Estate Development Fund, the moment a long-awaited comprehensive mortgage law will be implemented; it is set to receive a major boost. The law is expected to

clear out the current legal ambiguities surrounding home ownership and to create – for the first time a solid mortgage-financing market.“The REDF gave out some 650,000 loans and was very important to the sector earlier, when people also used to take out personal loans over ten years to finance their house, building it on their own land. In the current situation, however, this is not sufficient anymore,” says Al Howaish. Saudi developers are expecting the mortgage law to be instituted in the second quarter of 2011. It takes long because the Saudi government does not take quick decisions and there are many obstacles to overcome in order to allow the law to come into being, including finding a sharia-compliant way to justify interest, for example. But when it comes it will be a big catalyst.

Saudi developers are expecting the mortgage law to be instituted during 2011

The issue of land ownership and transfer of title deeds to buyer also bugs developers: Each housing unit in any master planned project needs a deed, which is very time-consuming to obtain. Breaking

interview with

Mohammed Al Khalil, Managing Director And Ceo of Akwaan Properties

Mohammed Al Khalil, managing director and CEO of Akwaan Properties is brimming with buoyant confidence

Mohammed Al Khalil, managing director and CEO of Akwaan Properties is brimming with buoyant confidence. Al Khalil, who graduated with a B.Sc. in Engineering at the King Fahd University of Petroleum & Minerals before leaving to the US to obtain a M.Sc. in Business Administration from Colorado State University, leads one of the largest real estate companies in the country – expected to enter the top three in the foreseeable future. Akwaan Properties was started in early 2007 with capital of $200 million and is currently running investment projects to the tune of $300 million. “Actually the partners in the company had been working together for some 15 years prior to starting Akwaan Properties, which is a vehicle formalizing their partnership for the execution of further and larger projects”, explains Al Khalil. These partners include “some of the leading business families in the Kingdom”.

The company has “large land banking funds in the Kingdom of Saudi Arabia” and aims to develop and manage ready-made projects with a high return on investment. The company’s optimal customization and quality of concept differential will be developed through industrial, residential, retail and mixed-use development projects. Diversifying into retail, the company has recently opened its first 'Building and Design City' in Riyadh. In all, six of these specialized building material malls are scheduled to open around the country. Al Khalil is also vicepresident of the National Real Estate committee, which he helped found in 2007, and which, among other activi-

ties, assists foreign companies entering the local market. “With 20 years of experience, we represent them as agents or participate in joint ventures. We can be of much use as we are thoroughly familiar with the country’s regulations and legalisation.”

Akwaan´s Building and Design Cities are specialized building material malls. Six of them are scheduled to open around the country. 174 · W G u i d e s

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FACTS ABOUT CONSTRUCTION IN SAUDI III Saudi Arabia has the world’s second longest causeway The King Fahd Causeway, linking Saudi Arabia to Bahrain, is fifteen and a half miles long and is the second longest causeway in the world. Source: ConstructionWeekOnline.com

up the land or building into units is a long process, and finding a shortcut for this process is one of my challenges. Developers and notably Emaar Middle East are actually more or less creating this procedure because they were the first ones confronted with this problem in the kingdom.” Saudization of the workforce, de-Saudization of home ownership In 2004, a new law gave expatriates holding residence permits the right to buy and own property in the kingdom. Major players in the sector seized this opportunity with projects like Rafal´s ‘Blncyah’ (or in English, Valencia), a newly built gated residential community inhabited by people of seventeen different nationalities - next to a majority of Saudi home owners. “This also shows the general level of globalization in the country,” says CEO Majd Al Hogail. Another challenge for the sector is the shortage of trained Saudi personnel, which can make it hard to meet the government-imposed saudization rates. But this is changing, as at EME KSA for

instance 60% of the staff is Saudi working in sales, marketing, administration or management. At Emaar Middle East they attach a lot of importance to personnel training. As they are proud to say, they don’t just build, they educate too – any one who has worked for Emaar can work anywhere in the world afterwards. Rafal claims even higher figures: “We have now achieved a saudization rate of 85%, even though we are working in a new industry and so have a number of foreign experts bringing knowledge in. But with every project, we employ more trained Saudis.” At Amlak International too, education of the workforce is taken seriously:“We had no choice but to educate our sales team first. We sell complicated and new products with many aspects – including forward leasing and financing for incomplete houses – which is a new concept to this country. We also sell to a varied public with different needs, from expats to government employees to corporate customers, we also finance land sales and home equity... So we basically developed our own >>

interview with

Dr. Ahmed Al Kulli CEO of Emaar Middle East Projects such as the Burj Khalifa (earlier Burj Dubai) – the tallest building in the world; The Dubai Mall – the largest shopping and entertainment destination in the world; or Emirates Hills – the most exclusive and luxurious estate of the UAE - illustrate the company's commitment to deliver world-class developments and communities.

Emaar Properties, although a relative newcomer in the Saudi real estate market, is by no means an unknown in the sector, region and even worldwide

Besides building residential and commercial properties, Emaar also has proven competencies in shopping malls & retail, hospitality & leisure and financial services sectors. Emaar Middle East (EME) is registered in Saudi Arabia as a limited liability company led by General Manager Eng. Ahmed Al Kulli. It is a strategic joint venture established between two large regional real estate players in the Kingdom and in the UAE, Al Oula Real Estate Development Company KSA with 39 percent and Emaar Properties with 61 percent, respectively.

Since its inception in the market, EME has been working on three large projects in key locations. The company introduced to the Kingdom the concept of masterplanned communities with Jeddah Gate and Khobar Lakes, which are in line with the company’s strategy to offer ‘affordable luxury.’ Emaar Middle East is also developing the Emaar Residences at the Fairmont Makkah, a collection of fully-furnished, spacious studios and one- to three-bedroom serviced residences in the Holy City of Makkah. “We are introducing to the Saudi market master planned communities featuring all lifestyle amenities. Our communities integrate leisure facilities, residential units, commercial spaces, offices and community centres,” says EME´s General Manager. Emaar’s communities range from high to low rise developments and are located in iconic locations, notably the Emaar Residences at the Fairmont Makkah, which overlooks

the Holy Kaaba. Al Khobar Lakes, built in a beautifully landscaped area comprising man-made lakes and green areas, makes the desert bloom in the Eastern Province. “We are finalising the infrastructure for Jeddah Gate and its residential tower, Abraaj Hilal - a cluster of three high-rise residential towers. We have achieved similar progress with Al Khobar Lakes. We will soon start hand over of homes, and we are currently undertaking home-owner orientation, inviting them to inspect the houses. This highlights our commitment to timely delivery of world-class projects that meet the expectations of our customers,” says Al Kulli.

Revolutionising the market “The Saudi market offers strong growth opportunities in the real estate sector,” says Al Kulli. “As around 60% of the population is under 30 years old, the demand is high and there is a true need for the type of master-planned communities that Emaar delivers.”

EME is working in three big projects in three prestigious locations on what they call “affordable luxury”. 176 · W G u i d e s

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training manual which all new employees have to study and pass exams on.” The power of building entire new cities As for government spending, the various new economic cities announced by king Abdullah alone boast levels of investment that almost beg belief. The Knowledge Economic City, for example, which is scheduled for completion in 2020, promises a total investment value of SR30bn (US$8bn) to develop some 4.8 million square metres of land near the Holy City of Medina. The scheme will include around 30,000 residential units, as well as a range of supporting infrastructure and transport facilities aimed at attracting technology, health care and educational companies. KEC is estimated to have signed contracts worth SR700m in 2010. Another gigantic public real estate investment, King Abdullah Economic City (KAEC) will be the country’s first freehold area, as Saudi Arabia seeks to tap into the potentially lucrative foreign real estate investment market. The urban area - which is expected to

“The real estate development in Saudi Arabia is not the responsibility of one party but of everyone.The demand is high and is our responsibility as developers, to join hands and look after the needs of the country.”

Indeed, the real estate market in Saudi Arabia is a serious business. The housing need in the coming five years has been estimated at over one million units especially to be led by younger population of the Kingdom. “The real estate development in Saudi Arabia is not the responsibility of one party; it is the responsibility of everyone. We know that the demand is high, as our young generation will need to have their homes. It is our responsibility as developers, to join hands and look after the needs of the country.” Real estate development in Saudi Arabia had somehow been related to governmental projects for housing the military, the National Guard or low-income individuals but the private sector was not an active participant. Al Kulli explains how some of the obstacles they faced had to do with the lack of infrastructure, utilities and services. However, “in the last three years the government has invested a lot of money to develop the infrastructure, the services and the amenities. This is why I am very optimistic as they are willing to invest even more in infrastructure,” he concludes..

EME´s communities are located in iconic locations, notably the Emaar Residences at the Fairmont in Makkah, whichoverlooks the Holy Kaaba. 178 · W G u i d e s

cost in the region of $27 billion to build - is currently being constructed and is scheduled to be completed by 2025. It is situated near Jeddah and will be about as large as Brussels. KAEC is intended to house around two million people and it is estimated that it will generate approximately one million new jobs. King Abdullah Financial District (KAFD) in Riyadh is another USS10 billion real estate development currently under construction. When completed, in 2012, it will house most of the financial institutions of the country around residential buildings, conference centres, malls, hotels, etc… Built in an extension of 1,6 million sqm, KAFD is the first green project in the Kingdom. A new sector seeking professionalism This is all good news for the kingdom’s real estate companies and project developers, who also offer many opportunities for the foreign investors that are already spotting the market as underdeveloped. While the boom is set to start and there are no worries of overexposure any time soon given the continuous rise of demand, there are nevertheless some worries in the sector. >>

As for government spending, the various new economic cities announced by king Abdullah alone boast levels of investment that almost beg belief

interview with

Abdallah Al Howaish CEO And Managing Director of Amlak International The company, which has a paid-up capital of SR 1 billion, started its operations in mid-2008. “We mostly finance projects for real estate and retail,” says CEO and Managing Director Abdullah Al Howaish. “We are the first mortgage providers

for off-plan houses. We have been able to profile ourselves through our specific approach, which does not just consist of financing the end user's purchase, but also the developers, whom we either finance or become partners with. We had no choice really: we wanted to provide housing that suits our prospective clients, that is adapted to the market.” Indeed, although there is an enormous demand for housing in the country, only 10-15% of it is properly supplied. “Developers who come to KSA,” Al Howaish explains, “tend to think they are in the Emirates and build houses 3 to 4 times more expensive than the Saudi citizen can afford. But contrary to the UAE, we have a real demand here and we should not just build for speculation. What we need here – and what is therefore the most profitable deal – is affordable, reliable housing within reach of city amenities and utilities. We work with selected developers who are willing and able to provide this, and now have selling prices between SR 3,000 and

4,500 per square meter - one third of what other developers were asking. This results in house prices between SR 500,000 and 1 to 1.5 million. This is working out well because this is what the really existing demand is for.” Al Howaish believes that institutions like his own are necessary to plug the gap between demand and supply. “The government's five-year plan for 2010 to 2015 posts one million new housing units, to be financed by its Real Estate Fund which provides loans to their citizens, and also by the newly founded Housing Commission. Apart from the units built by some ministries, mainly for their own employees, they expect 75 to 80% to come from private sector. But if we have to rely on individuals to meet this demand, it will not happen. We need to create organisations or companies to take responsibility for this. Currently, 85 to 90% of residential development is carried out by private players, whether individuals, developers or loan providers, who are not institutionalised.”

As the first one-stop shop for mortgages, Amlak International was created as a joint venture by Al Baraka Group, the Saudi Investment Bank and Amlak Finance Dubai.

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Real estate everywhere is a locally determined business, but in KSA it seems to be even harder to get into. GCC players – from Dubai and Qatar – were set to enter the market when they started experiencing liquidity problems at home, so their contribution is still very limited

“The KSA lacks institutional developers – large organizations with sustainable output – so this will lengthen the time it takes to get to overexposure. At the same time, there have also been no major international developers entering the Saudi market yet, because they are still trying to understand the structure of the local products, precise figures on income distribution, the pre-sale and after-sale issue, the lifestyle aspect, … It is difficult for them to calculate costs and take account of all the local circumstances, specifically because there are no institutional players to work with”,says Al Hogail. Real estate everywhere is a locally determined business, but in KSA it seems to be even harder to get into. GCC players – from Dubai and Qatar – were set to enter the market when they started experiencing liquidity problems at home, so their contribution is still very limited too. There are also concerns about staffing and recruitment, and companies still have to rely on foreign personnel as expertise among nationals is only beginning to develop. However, national education has improved in recent times with a growing number of universities and business schools in the Kingdom as well as almost 100,000 boys and girls sent to study abroad on government grants who in a few years will return with international expertise. “There is a skill gap now, but that will be solved in the longer run,” says Al Khalil, manager of Akwaan Properties. In the meantime,“companies need to start joint ventures for specific projects to minimise staff requirements. Recruiting foreigners has also

become less cumbersome: restrictions on working permits and visas have been eased – we are no longer experiencing the problems of the past.” Lacking behind the green-fashion With most of the problems solved or on the way there, the international trend of green building has also reached Saudi Arabia. Al-Khalil, an enthusiast of green building, waxes lyrical as he goes into Akwaan’s plans to diversify into smart green offices: “We have so much natural energy in this country, both wind and solar power, that we really need to exploit. For larger projects such as residential compounds and office buildings especially, an increased initial investment offers a large return in reduced expenses in the mid to long-term. For solar energy, there are still some problems with sand and dust, but the King Abdullah University for Science and Technology (KAUST) is working to solve these, and several experimental green projects are being set up in the country right now.” But he agrees that the real sure-fire development in the near future remains affordable homes for the average Saudi:“I think the first challenge is for engineers, contractors and developers to come together and develop a cost-effective and cheap construction method for low and middle-income housing. The average income in Saudi Arabia is not that high, and family savings are at 20 to 25% maximum. For individuals, this is not sufficient to buy a one-time house and consequently most people are still renting. There is still too little financing for individual housing – although the new mortgage law should remedy this situation.”

Rayadah Investment Company: Jeddah Housing Complex Rayadah Investment Company, the real estate investment arm of the Public Pension Agency (PPA), has undertaken to develop yet another large-scale diamond shaped housing complex in the city of Jeddah. The objective is to implement a gated self contained community development that would respond to market opportunities. The development site located north of the City of Jeddah is

bordered by the Madina Highway and close to Jeddah International Airport. The close proximity of Jeddah’s International airport and Sharm Abhor (Cornish) show that the site has great potential that are highlighted at Master Plan level and that need to be exploited at design stage of infrastructure and buildings

on either side of a central spine of mixed use (retail / offices). There are 2 different typologies of residential tenure, residential Duplexes villas and apartments blocs. The villa’s zone, On the east side the master plan is divided into 5 neighbourhoods and on the west side there are 2 main zones of apartment buildings.

The total area of the site is 2,543,408 square meters divided into 3 main residential zones

Jeddah Municipality approved the final concept Master Plan in March 2009.

The objective is to implement a gated self contained community development that would respond to market opportunities. 180 · W G u i d e s

REC has had an average growth of 10 to 15% year-on-year and now is building a new 80,000m² hall on donated land. Saudi Arabia· 181

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history

A Walk Through History

Saudi Arabia's identity is, above all, defined by Islam. It was in Mecca that the prophet Muhammed received the first revelations from God in 610 CE and it was to Medina that he undertook the hijra in 622 CE. The presence of these two holy places in the country means that the history of Islam and that of Saudi Arabia cannot be separated. Likewise, the Kingdom of Saudi Arabia cannot be separated from the house of Saud,

the current rulers of Saudi Arabia who struggled for 200 years to create the country, finally succeeding in 1930, after two earlier attempts in 1756 and 1824. Six years after the proclamation of the third Saudi state in 1932, oil was discovered in the kingdom. As the oil started pouring out, foreign companies and western influence poured into Saudi Arabia, marking the beginning end of the long isolated Bedouin nature of the country. THE ORIGINS Over 5,000 years ago, caravans were already using the ancient trade routes crossing the Arabian Peninsula. >> Passing through and occasionally settling in the area, they have left behind a rich heritage that speaks of

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Over 5,000 years ago, caravans were already using the ancient trade routes crossing the Arabian Peninsula. Saudi Arabia路 185

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many cultures and civilisations. In the south,Yemen - or Arabia Felix as the Romans called it - was a fertile agricultural area where various empires succeeded each other.The north east of the peninsula and the island of Bahrain were extensions of the Mesopotamian civilisation. By the seventh century CE, Mecca, the cradle of Islam and the annual hajj destination of Muslims, was a prosperous trading hub and a centre of pagan worship. Mohammed had to flee the wrath of the traders to Medina, but later returned triumphantly, establishing the worship of Allah as the only God in Mecca and forging the Arab Bedouin tribes into a formidable united fighting force which was to spread Islam from the Atlantic to the Indian ocean in little more than two hundred years. Mohammed's successor as the leader of the faithful or caliph was his companion Abu Bakr, who in his turn was succeeded by Umar, Uthman and finally Ali.Together they are known as the four rightly guided caliphs.They were followed by the Umayyad caliphate and later the Abbasid caliphate.

The original unified Muslim empire progressively fragmented into smaller entities, which were consecutively

overrun by the Huns and Seljuks (who themselves converted to Islam after conquering parts of the empire) and finally conquered by the Ottoman Empire. Most of the peninsula however, and specifically the central Nejd desert area, remained under independent tribal rule for much of this period. By the time the Sauds made their first efforts to conquer the territory and establish a unified state of Saudi Arabia, only the Hijaz in the west, with Mecca, Medina and Jeddah, and the area of Hassa, which is now the eastern province, were under the rule of the Ottomans.The British, meanwhile, had established treaties with the coastal emirates (Bahrain, Kuwait, Qatar, UAE, Oman) that were consequently known as the Trucial States. THE RULE OF THE SAUDS Muhammad ibn Saud founded the first Saudi State in 1744. Starting from his stronghold in Ad-Diriyyah on the Nejd plateau of central Arabia, he joined forces with Imam Muhammad ibn-Abd-al-Wahhab, a reformist Islamic scholar, to unify the Arabian Peninsula under the rule of Islam. From the very beginning, then, the support of the clerics and the maintenance of >>

The Hajj is the annu al pilg rim age to Me cca. It is one of the lar ge st annu al pilg rimages in the wo rld, and is the fift h pil lar of Islam, a religi ou s du ty tha t must be car rie d ou t at lea st once in a life time of ev er y musli m tha t can aff ord it. Muhammad ibn Saud founded the first Saudi State in 1744. 186 路 W G u i d e s

He joined forces with Imam Muhammad ibn-Abd-al-Wahhab, a reformist Islamic scholar, to unify the Arabian Peninsula under the rule of Islam. Saudi Arabia路 187

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a conservative interpretation of Sunni Islam (often unofficially known as wahhabism) are the traditional cornerstones of the Al Saud family's legitimacy. This first effort was thwarted by the Ottoman Empire, which did not wish to have a powerful independent ruler on its southern flank and sent in the armies of the semi-independent Egyptian ruler Mohammed Ali. In 1825, the Saud Family seized power again and declared the second Saudi State, only to be defeated by their local rivals, the Rashid clan. Finally, in 1902 King Abdul-Aziz bin Abdulrahman Al-Saud, the founder of the current Saudi State, returned from the family's exile in Kuwait and re-conquered Riyadh after eleven years of domination by the Rashids. He continued to fight for the unification of what would become the kingdom of Saudi Arabia and finally met with success in 1932. Six years after king Abdul-Aziz’s achievement, the discovery of oil in the soil of Saudi Arabia changed everything, transforming a poor Bedouin state into a rich rentier economy almost overnight. The country's political and social make-up, however, remained firmly conservative.

King Abdul Aziz died in 1953 and was succeeded by his eldest son Saud and later by Saud's younger brother Faisal, the former foreign minister and a man known both for his religious devotion and audacious reforms. Faisal's assassination in 1975 brought his brother Khalid to power, who was in turn succeeded by Fahd and finally, in 2005, by Abdullah, who had been the de facto ruler since 1995 already due to Fahd's health problems. Abdullah's accession to full power has allowed him to boost his already on-going reform and development program to its current dimensions. Up until now, the succession tradition has seen different sons of ibn Saud succeeding each other at the head of the family and the helm of the kingdom, but in 2007 king Abdullah created a succession council, consisting of senior members of the Saud family, to elect the future rulers of the country. Over the years, under the rule of the house of Saud, the kingdom has gone through many crises and periods of prosperity, usually determined by fluctuations of the Brent price. During the 1973

Arab-Israeli War, Saudi Arabia participated in the OPEC oil embargo that led to a dramatic increase of the oil price and to the kingdom acquiring control of its own resources, culminating in the full nationalisation of the Arab-American Petroleum Company (Aramco) in 1980. However, this was soon followed by a period of instability and war in the region, starting with the 1979 Iranian revolution that deposed the shah, almost immediately followed by Saddam Hussein's attack on Iran. The Iran-Iraq War ended only in 1989. In 1991, Saddam's invasion of Kuwait led to the first Gulf War followed by twelve years of crippling sanctions on Iraq. Meanwhile, smouldering border conflicts between KSA and Yemen and civil war inside that country, as well as the ever-festering Israeli conflict maintained a culture of insecurity and instability. These factors taken together have led to KSA spending much of its newly increased revenues on armaments while maintaining a generous welfare state domestically. Then came the eighties and nineties that saw a dramatic and sustained drop in the oil price. Consequently, much needed renovation and expansion of the infrastructure kept being delayed

and the project to diversify the Saudi economy away from its oil dependency failed to take off properly. On September 11th, 2001, the attacks on the twin towers led to the 'war on terror' and ultimately to the 2003 invasion of Iraq. Oil prices immediately rose to unprecedented limits and have remained at high levels until this day, facilitating king Abdullah's massive modernisation and reform project, which has transformed the country beginning in 2005. The long-term development strategy, most recently formulated in the five-year development investment plan for 2009-2014, focuses on the diversification of the Saudi economy. This is badly needed as oil exports still account for more than 90% of export earnings and nearly 75% of government revenues. Much attention and heavy investments also go to health care, education and job creation. The latter is part of an effort to replace the previously existing – but ultimately unsustainable - welfare state with a regular economy offering employment and career opportunities at home for a young and quickly expanding population.

Both, traders and pilgrims have left their footprints, heritage and traditions imprinted in the trails and life of KSA

SUCCESSION LINE: Heir Apparent Crown Prince SULTAN bin Abd al- Aziz Al Saud

Deputy Prime Nayef bin Abd al-Aziz Al Saud

Six years after King Abdul-Aziz founded the current Saudi state, the discovery of oil changed Saudi history forever. 188 · W G u i d e s

The succession has seen sons of ibn Saud succeeding each other at the head of the family and the helm of the kingdom,. Saudi Arabia· 189

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Custodian of great civilisations

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Long before Lawrence of Arabia or Wilfred Thesiger ever made it to the Arabian Peninsula, many other civilisations had already left their mark on the kingdom. Strategically located as the hub of many ancient trade and pilgrim routes, the peninsula played a significant

role in the development of civilisation, with evidence of human population stretching over a million years into the remote past. In the 21st century, as a major player in world politics and a member of the G20, Saudi Arabia is fully aware that in order to build the future, it must preserve its past. A chain of events has followed the Royal Proclamation decreed in 2008, which gave orders to identify, protect and maintain Islamic sites in the Kingdom. >>

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Last year Saudi Arabia held the “ First International Conference of Urban Heritage in Islamic Countries (UHIC) ” hosting hundreds of participants representing more than 40 countries.

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A program for the rehabilitation of ancient mosques was started by the Ministry of Islamic Affairs in partnership with the Al-Turath foundation. In April last year, Saudi Arabia held the first international conference on Urban Heritage in Islamic Countries, hosting hundreds of participants representing more than forty countries. Only a few months later, Prince Sultan bin Salman inaugurated the exhibition 'Roads of Arabia: Archaeology and History of the Kingdom of Saudi Arabia' at the Louvre in Paris. The 350 artifacts on are shown display brought together for the first time in history, making it the largest and most important historical exhibition on Saudi Arabia ever organised. Indeed, apart from being the cradle of Islam and home of the twin holy cities of Mecca and Medina, Saudi Arabia also has a long and magnificent preIslamic heritage, which has been largely neglected in the past.“Saudi Arabia has always been known as the seat of Islam; it's been known for its oil wealth and its economy; [more recently] it's been known (…) for its political presence around the world and for its efforts to initiate dialogue between the religions. But

Archaeological remains date all the way back to civilisations like those of Mesopotamia, Egypt and the classic Greek or Roman civilisations. 192 · W G u i d e s

Saudi Arabia has never been known for its ancient history. (…) The stabilising role Saudi Arabia plays in the world economy (...) is really built upon thousands of years of civilization,” commented Prince Sultan bin Salman bin Saud, Chairman of the SCTA in an exclusive interview with CNN last July. A crossroads of ancient trade routes Although there has been little previous interest in pre-Islamic heritage, archaeological remains actually date all the way back to the neighbouring civilisations of Mesopotamia, Iran and Egypt and the classic Greek or Roman civilisations. From at least the third millennium BC onwards, there were economic and cultural exchanges between the Gulf region and Mesopotamia. Later, Saudi Arabia became the crossroads of the incense route that travelled from Yemen to Gaza and Petra, and from there to all the exquisite palaces of the known world. Saudi Arabia was also a stop on the famous spice route that has connected China and India to the Mediterranean since Roman times.The strategic location of the peninsula favoured the creation of a number of wealthy cities, such as Qaryat Al-Faw,Thaj or

the mysterious Gerrha with its legend of gold and ivory palaces. Some of the objects found in these locations have a markedly Hellenistic style, including a mask, currently on display at the 'Roads of Arabia' exhibition, which closely resembles that of Agamemnon. In the north of the country the city of Tayma became a major trade center after it took over the function of capital of the Lihyanite kingdom from nearby Al–Ulah. In the 4th century BC the Nabateans took the reins of the region. Originally based in the well-known city of Petra in Jordan, the Nabateans moved their capital to Madain Saleh in Saudi Arabia around the 100 CE, when Petra was conquered by the Romans. Madain Saleh, known as Hegra in the Nabatean age, is for many the most impressive heritage site of Saudi Arabia - not only for its beauty, but for its history.There is proof of the presence there of Nabonidus, the last king of the last Babylonian empire in the first century CE, who retreated to the region to 'meditate', leaving his son in Babylon to rule. In the 2nd century CE, the Roman emperor Marcus Aurelius conquered the city,

Archaeological remains date to civilisations like those of Mesopotamia, Egypt and the classic Greek or Roman civilisations. Saudi Arabia· 193

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integrating it in the Roman Empire. Into that melting pot of cultures eastern and western, meeting point of traders and armies, Islam arrived in the 6th century CE. Gradually, the caravans filled with precious materials, spices and incense were substituted by pilgrims on their way to Mecca. As the cradle of Islam, Saudi Arabia is not only the owner of unique valuable Islamic sites and pieces of art, but also the keeper of the legacy left behind by millions of pilgrims on their way through the peninsula. Indeed, Saudi Arabia itself is a living museum and its most precious heritage stands as entire cities, some of them very well preserved. Such is the case of the desert mud and stone architecture of the first Saudi capital, Al-Diriyya, capital of the first Saudi state (1744-1818). Although it is actually one of the best preserved villages in the kingdom, it is currently undergoing a thorough renovation. Given its national importance, it might soon be proposed as a world heritage site. Preserving the past Prince Sultan bin Salman and the SCTA have embarked on an unprecedented effort to preserve ancient

remains and restore the country's architectural heritage, transforming the constructions into public spaces, whether cafes, museums or libraries, showcasing the country's rich past. “We believe it is essential to foster an atmosphere of understanding and pride of our heritage within the country as a critical component of our national identity, establishing new museums, both of general interest and thematic, including the Qur'an Museum in Medina, and restoring historic buildings associated with the Saudi state, that will be converted into cultural and educational centres for our communities,”Prince Sultan said in a recent speech. Millions are being invested in cultural education in an effort to reignite the interest of youngsters in traditional arts and crafts.Teachers and students are being introduced to museums and heritage sites. Historic town centres, villages and markets are being restored either by the government or by private initiatives financed through soft loans and other incentives. Fourteen teams of archaeologists from local universi-

ties, assisted by international experts, are exploring ancient sites around the country.The King Abdul Aziz Foundation and Library, the King Fahd Library and the Al-Turath Foundation are collecting ancient manuscripts, artefacts and pictures to add to the archives of the kingdom's history. At the landmark 2010 International Conference on Urban Heritage in Islamic Countries, Saudi Arabia announced a national five-year program for the preservation and restoration of urban heritage involving local communities, supported by the Ministry of Municipal and Rural Affairs, the provincial governorates and other concerned authorities.“We must ensure through national public policy that we preserve our ancient Islamic urban heritage as it is a guide and an accumulated history, the seat and place of origin of the revelation of our Islamic religion.We therefore take great pride and honour to preserve our Islamic urban heritage not only for our generation, but for future generations, and last but not least as a source of learning and inspiration for our Islamic religion,”said Prince Sultan to the audience at the conference.“We have laid out the key foundation

EXTRAORDINARY ARCHAELOGICAL SITES IN THE KINGDOM OF SAUDI ARABIA Madain Saleh (200 BCE-106 CE) A great Nabatean city similar to Petra in Jordan, and located only a few hundred kilometres from it. Offering extraordinary tomb facades that are a vivid testimony of the greatness of the Nabatean culture, it was the first UNESCO World Heritage site of Saudi Arabia. City of Taima (1200 BCE) The capital of the Babylonian Empire during the reign of King Nabonidus, the City of Taima was an ancient oasis on trade routes, famous for its defensive walls. Rock Engravings in Jubbah (7000-BCE to the present) The rock engravings of Jubbah, unique in the country, are located In the Nafud dunes of northern Saudi Arabia. The government is contemplating submitting the Jubbah site to UNESCO for consideration as a World Heritage site. Qaryat Al-Fau (300 BCE-400 CE) An archaeological site rich in pre-Islamic bronze sculptures discovered and excavated by archaeologists from King Saud University. Darb Zubaydah (7th Century BCE) A great monument of the early Islamic period, built under the Abbasid Caliphate on the pilgrim road linking Kuffa to Mekka, it is one of the most impressive Islamic antiquities left in the country. The town of Al-Diriyya (1744-1818) The historic capital of the kingdom, it is one of the largest surviving settlements in the country to preserve the traditional desert mud and stone architecture. Al-Dir'iyya is now being restored and has been proposed as a world heritage site.

Prince Sultan has embarked on an unprecedented effort to preserve and restore the country´s architectural heritage. 194 · W G u i d e s

Millions are being invested in cultural education in an effort to reignite the interest of youngsters Saudi Arabia· 195

heritage

On July 2010, ' Roads of Arabia', a landmark and itinerary exhibition of KSA´s most precious ancient artifacts, opened its doors at the Louvre Museum

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for the people’s acceptance of urban heritage in collaboration with the public and private sectors in order to make a real shift towards rooting urban heritage’s values in their minds,”he added. All of these actions are designed to strengthen the sense of unity, ownership and belonging, especially among the young Saudi population in a period of fast growth and development. In the long run, it is also conceived as the creation of a national asset that will later boost a sustainable tourism sector. In recent years, Saudi Arabia has been investing heavily in tourism infrastructure, in an effort to make the country one of the most exciting tourist destinations in the region. As the tourism industry grows, it will generate employment and revenues, thereby itself becoming a means of economic diversification.“Saudi Arabia has been moving on all tracks, in all directions to position itself and to correct the misconceptions. Correcting the misconceptions is not a marketing thing for us. It is really a future thing for us.We in Saudi Arabia are playing a huge role today in the world, a very positive role and this role is in fact becoming even greater as we move

Saudi Arabia has been moving on all tracks, in all directions to position itself and to correct the misconceptions 196 · W G u i d e s

into the G20 countries, as we move in to the dialogue of religions, as we move into the role Saudi Arabia plays in resolving regional issues. Saudi Arabia today is the cornerstone of political and economic happenings in the Middle East but also a player in the future of this world,”commented Prince Sultan. Roads of Arabia: the heritage trail On July 13th, 2010, 'Roads of Arabia: Archaeology and History of the Kingdom of Saudi Arabia', a landmark exhibition of Saudi Arabia's most precious ancient artefacts, opened its doors at the Louvre Museum in Paris. It has already attracted more than 10 million visitors rushing to see pieces of art that had never left the kingdom before. A gold-plated Ottoman-era door to the Holy Kaaba and a large rock stone with a more than 6,000 years old Arabic inscription are just two of 350 rare pieces on display.The itinerary exhibition will continue to travel Europe, the USA and East Asia. Illustrating the different historic periods and civilisations of the Arabian Peninsula, the show highlights the role of the country as the cradle of Islam, but also

carries a number of valuable pre-Islamic artefacts. A stone age tool of around one million years of age is the oldest artefact on display. Part of the exhibition is also dedicated to the three Saudi states, focusing on the age of King Abdulaziz Ibn Saud, the founder of modern day Saudi Arabia.The exhibition is part of a cultural exchange program between the SCTA and the Louvre Museum, which in 2005 exhibited its own Islamic art collection in the National Museum of Saudi Arabia. As prince Sultan told CNN:“Many of the great civilizations emanated from Arabia. Islam, a great religion today, has emanated from this part of the world too. So when Islam came to Arabia, it didn't come to an empty land or a void. It didn't come on a blank sheet of paper. It came on the shoulders of great civilizations and that was intentional I believe. Islam came to the crossroads of trade routes that crossed Arabia from south to north and east to west, and Mecca was the place where Islam happened.The word of Islam spread from Mecca. Arabia has always been present in world history and the world economy at a certain point in time was literally run from Arabia.”

When Islam came to Arabia, it didn't come on a blank sheet of paper. It came on the shoulders of great civilizations Saudi Arabia· 197

information & communications technology

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Connect it in Saudi

The IT appetite is so consuming that the market has shown annual two-digit growth since year 2000 200 · W G u i d e s

Saudi Arabia has become a huge market for digital technology. The young population is always on the lookout for the latest digital fads and gadgets – and their buying power is equal to none. From 3G to 4G or from Mac-Air to iPads, the urge of both individual consumers and the

government to keep up to date has propelled the country to the top of the list in IT sales. Their appetite is so consuming that the market has shown annual two-digit growth for most of the first decade of this century. As a whole, the sector is worth $3.3 billion, a figure expected to rise to $4.6 billion by 2014. However, as in many other fields, in communications technology too Saudi Arabia has been a latecomer. The traditionally conservative approach of Saudi Arabia to new developments and especially to the window on the world presented by the internet has slowed the rise of>>

As a whole, the sector is worth $3.3 billion, a ﬁgure expected to rise to $4.6 billion by 2014. Saudi Arabia· 201

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the sector, which is now finally picking up, and much faster than expected too. In addition, the Saudi market was monopolised by one single player – imposing high prices and outdated telecom infrastructure – until the turn of the century. As a result, internet penetration in Saudi Arabia is still lagging behind the rest of the region: the International Telecommunications Union (ITU) recently published figures showing that only 40% of the population has internet access, as compared to 65% in regional leader UAE. PC ownership, considered one of the drivers for ICT growth globally, remains very low at 24% and it is expected to rise to a mere 30% in 2014, according to a 2010 report published by the Arab Advisers’ Group.

Internet penetration in Saudi Arabia is still lagging behind the rest of the region: only 40% of the population has internet access and PC ownership, considered one of the drivers for ICT growth globally, remains very low at 24%. >>

However, these figures must be put in their historical perspective: Internet use has spread from one million people in 2001 to 11 million in 2010.“This rapid growth can be attributed to increased public awareness, increased broadband availability, decreasing costs of personal computers and internet access and enhanced usefulness of the Internet brought about by increased availability of local >>

Internet rapid growth can be attributed to increased public awareness, increased broadband availability, decreasing costs of personal computers and internet access and enhanced usefulness of the Internet brought about

Information and Communication Technology Complex (Itcc). Housing the ICT growth in the Kingdom. A Saudi Silicon Valley - the Information Technology and Communications Complex (ITCC) - is currently under construction in Riyadh aiming to attract high-tech companies and develop local

know-how and skills. “ICT knowledge is the most valuable commodity in the modern economy,” states the presentation sheet of the project, which is intended to provide a unique environment designed to make the sector more attractive to Saudi graduates. Developed by the Public Pension Agency (PPA) through its real estate developing arm, the Rayadah Investment Company (RIC), the ITCC will be the size of a small city, occupying an area of 800,447m² and comprising business, housing and leisure facilities. Modelled on California's original Silicon Valley, the ITCC's philosophy is to mix business with leisure in a pleasant work environment situated among lakes and parks with walking trails among the green, which will take up some 25% of the total land area. The complex will focus on research and development (R&D) and offer institutions of higher education. It is hoped to act as a magnet attracting active international investment, with the long-term strategy of contributing to the diversification of the

economic base and the development of the labour force.

ITCC DETAILS The heart of the city will be formed by the green and open recreational area with restaurants, shops and cafes, around which the workplaces and educational facilities will be grouped. The complex further features four twenty-story towers allocated to multinational companies surrounding an 'Oasis of Knowledge' bordering the recreational area. All buildings are constructed according to a 'smart' design providing fully integrated upto-date ICT connectivity and services including electronic libraries. The complex also features an administrative complex providing all government services required by investors including visas, work permits, etc. Clinics, a civil defence station, health clubs, nurseries, a mosque, a five-star conference hotel and a residential area complete the project. Currently, the infrastructure works have been completed and construction of the actual buildings is underway.

Internet use has spread from one million people in 2001 to 11 million in 2010. 202 · W G u i d e s

“ICT knowledge is the most valuable commodity in the modern economy,” Saudi Arabia· 203

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content, of websites in the Arabic language and of services such as online banking, e-commerce, and e-government applications,” states the Ministry of Information and Communications Technology. Mobile phones, essential to Saudi life This may sound like bad news for the ICT sector but Saudi Arabia, as always, has its own ways.The growth in Internet penetration is increasingly driven by wireless broadband and mobile high-speed packet access technologies.Third-generation (3G) and fourth-generation (4G) mobile phones are widely preferred to personal computers. As a result, mobile phone penetration currently stands at 175%, up steeply from a mere 12% in 2001, and markedly higher than the world average of 67%. Prepaid subscriptions constitute the majority (85%) of all mobile subscriptions, in line with the trend in other similar markets around the world. Only two years ago, broadband subscriptions in the Kingdom virtually doubled to 2.7 million. Again, the growth was due to the consolidation of relatively new wireless services that rose from 25% of con>>

interview with

Mr. Turki al Jaafari If you are looking for foreign investment

CEO of SITAF Saudiya

success stories in KSA, look no further. SITAF arrived in 1976, pulling off the unlikely feat of selling waterproofing in the Arabian Desert - the clue being that the systems they introduced also provide heat insulation.

Since then, SITAF has branched out into long haul telecommunications cables – they have laid 21,000 kilometres of them across the GCC by now, including the pan-GCC Hotline Communication Network. The company also builds networks and installs microwave towers and cooling chambers. In short: they take charge of hardware construction and maintenance in a hostile climate. Mr. Turki al Jaafari, currently CEO of SITAF Saudiya joined the company in the early nineties and brought in prince Saad bin Abdullah as a partner. Since then, SITAF has laid real roots in the kingdom and the GCC. “Back then, SITAF operated as an international company which could leave at the drop of a hat, acquiring virtually no assets or real estate locally. When the prince and me came in, we worked hard on increas-

Prince Saad Bin Abdullah Bin AbdulAziz Bin Musaed Al Saud, Chairman of Sitaf Saudia

ing local assets, equipment and other resources. We set up branches in other GCC countries, Jordan and Sudan. We are now looking at setting up shop in Kurdistan. The project is still on hold due to the political situation, but in the long run we believe that Kurdistan will become independent and receive huge backing and financing from the US, who will want to control it to maintain the balance of power in the region.” On the evolution and growth of the company, Al Jaafari says: “Waterproofing was the core business of the com-

pany. But from 1986 onwards, when the country started including the then newly developed fibre cable in its urban planning, we got into telecommunications.” Back then, not everybody was convinced of the durability of that field of business: “People tended to see it as a fad or a trend, something temporary that would come and go. But telecom is now the backbone of the construction industry for all sectors - entertainment, trading, business, banking, e-government - and this infrastructure needs to be maintained, expanded and upgraded.”

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nections in 2008 to over 50% today. These facts are a clear indication that the space for growth is immense, especially given that some 80% of the kingdom's population is under 40 years of age and are technology-oriented consumers likely to support ICT expansion. This is more than a mere assumption: the average Saudi is expected to spend $173 per year on ICT products and services by 2014. In the coming years, billions of dollars will be invested in developing content for the under-served Saudi population. Development of content in Arabic specifically is likely to increase significantly. Internationalisation of domain names in applications (IDNA) was only implemented in 2010. Like other non-ASCII scripts, Arabic characters were not supported by many Internet applications before that date. Currently, only 1% of online content is in Arabic although Arabs make up 5% of the world population. E-government But it is not only individuals who are driving the rapid ICT expansion. The understanding that

ICT HISTORY IN SAUDI ARABIA 1926 Twenty-two wireless stations are installed providing telegraph connections to towns of the kingdom.   1934 854 manually operated telephone lines are in operation.   1952 The Ministry of Communications is established. Prince Talal is appointed minister. 1975 The Ministry of Post, Telegraph and Telephone (PTT) is established. The number of telephone lines has risen to 130,000. Revenues total SR 250 million.

1984 The first fibre-optic network is installed. 1986 King Fahd Satellite Communications City on the Mecca-Jeddah Road starts to operate. 1995 Mobile services come into operation 1998 King Fahd issues a royal decree establishing the Saudi Telecom Company (STC) as a joint-stock company to provide telecommunications services.

interview with

Saud bin Majed Al-Daweesh, CEO of Saudi Telecom Company (STC) In June 2009 STC announced the appointment of Eng. Saud bin Majed Al Daweesh as the new CEO of STC Group. Ever since his appointment, Al Daweesh has been consolidating the Group expansion business achieving a global status for the company. "This is a great opportunity to give the Saudi market its due attention, while continuing to grow and solidify our position internationally and I thank the Board of Directors of STC for placing their confidence in me to continue leading this great Saudi institution," added Eng. Al Daweesh in a press release soon alter his appointment. The Saudi Telecommunications Company emerged as a result of a successful separation from the governmental sector in 1998 after a Saudi cabinet's decree. At that time STC was the first company to be privatized in the region thus the rest has learnt the art of privatization because there was no any single company in Gulf

The space for growth is immense given that 80% of the population is under 40 years and are technology-orientedconsumers 206 · W G u i d e s

area that was privatized from the government sector, except STC, which is leading national company in delivering integrated telecommunications services in KSA. The company is persistently meeting market's requirements and goes in line with the technological developments in the field of telecommunication and meeting customers' needs, through its different sectors (Home Sector, Enterprise Sector, Personal Sector and Wholesale Sector. The company reached extended horizons to become an integrated group in the field of ICT and enter the sphere of international investment through several countries (Bahrain, Kuwait, Lebanon, Jordan, Malaysia, Turkey, Indonesia and India) as well as its local and international expansion that its customers around the globe hit (139) million customers. The company is persistently seeking to increase its customers' base taking the leadership concept in serving customers as a priority along with maintaining its status in the local market while

continuing delivering its diverse services in all sector in high quality and at competitive prices. Additionally as part of belonging to Saudi society STC is well aware of its responsibilities towards the society. Such awareness is behind the various loyalty programs such as "Wafaa Health program" launched by STC to build & equip 22 health centres in all cities of the kingdom for a cost of SR 100 million among many others such as the "Wafaa Sport Program" to support Saudi sport clubs. STC believes in the importance of sport activities for the vitality of society.

2001 King Fahd issues a royal decree approving the Statute of Telecommunications and the establishment of the Saudi Communications Commission (renamed in 2001 to the Communications and Information Technology Commission, CITC) to regulate the affairs of the sector. 2003 The Ministry of Posts, Telegraphs and Telephones (MoPTT) changes its name to Ministry of Information and Communication Technology. 2005 Saudi Arabia opens its mobile telecommunications market to competition 2007 Three fixed line operators are licensed.

STC is leading national company in delivering integrated telecommunications services in KSA and the first to beprivatised in the Gulf Region. Saudi Arabia· 207

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investing in ICT is directly proportional to the performance of the economy in terms of productivity and efficiency has prompted a very aggressive ICT expansion in KSA since the beginning of the century. The Saudi government has designated transforming the oil-based economy into a knowledge society through the development of ICT industries a top priority and is propelling demand by offering e-government services itself. Meanwhile, thousands of kilometres of cable are being laid to update and expand the country’s telecom infrastructure and entire smart cities are built to promote new technological breakthroughs and help the country make the shift.

Thousands of kilometres of cable are being laid to update and expand the country’s telecom infrastructure and entire smart cities are built to transform an oilbased economy into a knowledge economy

The ICT revolution really took off in 2003 when a royal decree established an e-government programme and the Ministry of Post, Telegraph and Telephony changed its name to the Ministry of Information and Communications Technology. “This is not just a name change,” says the minister of ICT, Engineer Mohamed Jamil Bin Ahmed Mullah.“It addresses the core issues and stresses the >>

offer our nomadic service: you acquire one phone number which you keep for the rest of your life, and which you can take along to any city in the kingdom – in the long term, this will become a global service.”

interview with

Raed Kayal, Former CEO of GO Let's Go! Go! is a decidedly apt name for a company run by engineer Raed Kayal, who graduated as a Bachelor in electrical engineering at the King Fahd University of Petroleum and Minerals, and ever since has been at the forefront of introducing and developing new technologies in KSA.

After a ten-year stint working for AT&T and its successor Lucent, Kayal left the company and started a consultancy agency with a group of investors, offering Saudi engineering talent to companies and operators for 2 years. He then joined Globetel – a joint venture of a US company with a Saudi partner – that offered consultancy services to STC, Nokia and Ericsson. Says Kayal: “We were the first to bring wireless technology to KSA, installing it first in Riyadh. This venture was very successful and we basically set the rules of the game, including for such issues as pricing, which are still prevalent today in the country.” But blood is thicker than water, and Kayal's entrepreneurial zeal drove him on to grab other opportunities: “After three years, I left and with some friends, we started our own ISP. We didn't try to compete in the mass consumer market, but targeted individual businesses. We were and still are the exclusive ISP for the Kingdom Tower, for example, provid-

ing ICT solutions for all its inhabitants and businesses including the Four Seasons hotel.” Not satisfied with that line of business, Kayal went on and again set up in consultancy, this time around deploying the first wifi network and kiosks with touch screens of KSA in Jeddah – an operation which covered 30,000 m² of outdoors space. Next he introduced the first RFID network, for the Saudi postal services, before diverting from technology to business by starting the first VIP business club in KSA - the Venue Executive Club - offering service offices and meeting facilities. The club is still up and running in Jeddah today.

The culmination of a wired-man Finally, he joined the board of new operator Atheeb on June 13th 2009 – at launch of the company – to support the management with his experience. “Atheeb is the second fixed line opera-

The top fashion operator

tor to be licensed after STC's monopoly ended. 2009 was not the best moment to launch a telecoms operator, yet we started in 11 cities simultaneously instead of the 5 required by the license.”

Apart from its financial success, Kayal is also proud of other achievements of the company: “First, we have a very young population which soon will grow up and need services which they will find installed and ready when the time comes for them to start a family and a business. Secondly, we have almost 70% saudisation in the company; we picked up a good amount of bright Saudis including women

to work together as one team. This is a very high rate in the sector and another investment which will pay off for the country in the near future.” And speaking of financial results, Atheeb is doing just fine. Says Kayal: “In 2010, we raised revenues by 11% while reducing net cost by 9%, and this trend will continue as we move from being a start-up company to streamlining operations and establishing best procedures. We are about to raise $160 million new capital by issuing our second IPO.”

Atheeb quickly made a name for itself by offering two innovative concepts: “First, we introduced the first plug&play product to Saudi Arabia: you buy the connection, take it home and start using it straight away – you don't have to wait for weeks until we get you connected. For that purpose, we use the Ymax technology, which only requires a base station rather than laying cables as in fibre optic technology. This allowed us to enter the market and capture a share of it much quicker. And secondly, we

“Atheeb is the second fixed line operator to be licensed after STC's monopoly ended.” 208 · W G u i d e s

The latter concept is very well suited to women starting their own business. Says Kayal: “It allows them to start a business online with a phone number which is purely used for business purposes. Even when they get married and move to another city,

the number stays with them and there is no interruption or need to inform clients of a new location or new coordinates.”

ICT FIGURES KSA ICT businesses revenues (2010) $4 billion ICT growth rate (2010 to 2013 est.) 10% ICT expenditure (2010 to 2013 est.) 37 billion ICT investments (2010 – 2012) $90 billion Licensed Internet Providers (2010) 20 Fixed-line revenues (2008) SR10 billion ($2.66 billion) Number of fixed telephone lines (2009) 4.1 million Household broadband penetration (2009) 31% Wireless broadband subscriptions (2008) 330,000 Wireless broadband subscriptions (2009) 745,000 PC penetration (2010) 24% (30% by 2014) Computer hardware sales (2010 estimate) $1.8 billion Software market (2010) $611million IT services market (2010) $971 million E-commerce transactions SR12 billion Broadband subscriptions (2005) 64,000 Broadband subscriptions (2009) 2.7 million Broadband subscriptions (2010) 3.2 million Broadband penetration rate (2010) 11.9% of population Broadband household penetration (2010) 34% Wireless broadband subscriptions (2010) 1.85 million (or 56% of broadband connections) Digital subscriber lines (DSL) (2010) 1.35 Internet users (2001) 1 million Internet users (2010) 11 million Mobile Phones Subscriptions (2001) 2.5 million Mobile Phones Subscriptions (2010) 47 million Access to the Internet 31% Domain names (2009) 17,500 (75% commercial com.sa) Fixed telephone lines (2010) 4.3 million (3.2 million residential) Household teledensity 68% Population teledensity 15.7% (global average: 17.8%) Internet penetration (2010) 40% Telecom services revenues (2009) SR 52.5 billion (mobile: 77%) Source. Arab Advisers’ Group / Communications and Information Technology Commission (CITC)

“In 2010, we raised revenues by 11% while reducing net cost by 9%” Saudi Arabia· 209

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importance of this vital field in modern times. It also reflects the significant concern given by the government to the ICT sector. Moreover, it shows that the government is doing its utmost to develop and update the ICT infrastructure to meet the ambitious goal of constructing a knowledge society.”   In 2004, the e-government project came online at http://www.saudi.gov.sa, accompanied by the launch of the official payment system SADAD. A number of other initiatives followed suit. In the following year, Saudi Arabia opened its mobile telecom market to competition, allowing new companies to provide services. A non-stop internet growth About 20 licensed Internet providers are now competing in the market, bringing prices down and increasing penetration. The largest of them is the Saudi Telecom Company (STC). In 2007, the government licensed three fixed line operators: GO (an alliance between Atheeb Trading Company, Al Nahla Trading Company, Batelco of Bahrain and Traco Company),

Light unto the nation Nour Communications, one of the largest Saudi contractors in communications technology, is part of the Astra group; itself ranked nr 39 in the Fortune 100 of KSA.

interview with

Paolo Serra,

Luigi Lando,

bles, towers and radio links for Aramco and the Saudi National Guard, who are expanding their own parallel telecoms networks.”

President Of Itea International

A crowded market

general manager of Nour Communications General manager Paulo Serra explains the company's activities: “We work with manufacturers such as Lucent and AT&T. We install their material and link it up to create the networks. We have the largest fleet of specialised equipment in the region and over the years have worked for many different clients, including Aramco, Mobily, STC and Zain as well as data operators such as ITC. Right now we are involved in a major defence project, which we are finishing ahead of time. Military contracts are always good business, with clients who know what they want, which usually involves having their own parallel network set up.” Nour works both on the operating and contracting side, having acquired and sold data licenses and worked with satellite transmission, mobile and fixed lines. The company also has its own

Lando, who worked for Telecom Italia, decided to come over with some colleagues and grab the opportunity to create a company that worked as a subcontractor for AT&T. Says Lando: “Between 1996 and 2000, we installed almost the entire long distance fibre optic network in the kingdom. It was four years of heavy work, but we were gaining essential knowledge of the country.” mobile provider, Nournet. Says Serra, who has built up thirty years' worth of experience working in KSA: “If you are dedicated, you can achieve a lot in this part of the world, but you have to be proactive and act rather than talk. To put it bluntly: money talks, bullshit walks. As for Nour, we have expanded a lot and are now in the process of consolidating our market share. At the same time, however, we are looking to diversify into installing pipelines for water, irrigation, sewage and storm water pipes, recycling circuits as well as landlines, electricity lines etcetera – we are investing

in new equipment for those areas.” Today is as good a time as any for companies to come and set up in KSA, Serra contends: “Right now, manufacturing is a good proposition here - there are 3 cable manufacturers in KSA, but most other components for transmission equipment still need to be imported. For contracting, demand continues to outstrip supply, as it has done here since time immemorial. But the real promising areas for foreign companies to invest in are electricity generation and water desalination, where supply is always short and demand will always keep rising.”

“Manufacturing is a good proposition here most components for transmission equipment still need to be imported.” 210 · W G u i d e s

Al Mutakamilah (a consortium headed by PCCW of Hong Kong), and Optical Communications Company (owned by US company Verizon). To date, GO is the only one to have begun commercial operations. According to the Arab Advisors' Group,“the widespread deployment of wireless broadband networks by the three new national fixed-line consortia will help to drive increased broadband take-up.” In 2008, the state budget gave “special emphasis” to e-government projects and more public initiatives were launched. The Saudi Electronic Data Interchange (SaudiEDI) was launched as an electronic portal for import-export transactions, providing a one-stop shop for paperwork including customs declarations. In 2009, the Saudi Council of Ministers approved the establishment of a new joint stock company, the Saudi Electronic Information Exchange Company (Tabadul) to invest in ICT and take advantage of opportunities generated by government-driven e-projects. Other projects included the authorities investing $3.1 million to equip schools with new computers and other ICT technology. Meanwhile, the Medical Services Division (MSD) of the Ministry >>

The Italian expatriate has seen Saudi society change, but only recently: “Until 2005, materially things changed, traffic increased a lot, a modern infrastructure was built – faster in periods when oil prices were high, slower when they were low - but the culture and mentality did not change a lot until 2005,” he says. “But since Abdullah became king, we have started to see change – KAUST where boys and girls study together, the shoura council investigating whether the restriction on women driving should be lifted, … Change will not happen overnight, but a beginning is being made. King Abdullah was of course lucky to

have come on at a time of high oil prices, which greatly simplifies his task.”

It changed everything KSA's entry into the WTO, also in 2005, simultaneously changed the country on an economic level. “In our sector,” Lando explains, “it opened the market up for competition. The government set up the CITC as the authority and regulator of the field, assigning bandwidths to different players and inviting bids for a second and third mobile operator as well as a second and third fixed line operator. Competition then started to enhance the quality of service and to bring down prices.” One new operator to win the fixed line bid is OCC – a consortium between Verizon and Saudi partner – who will have to build the entire network almost from scratch. Says Lando: “Indeed, a lot of work is coming up in the fixed line sector. In contrast, mobile infrastructure is largely in place, but it is now being upgraded to 4G so as to be able to handle DSL and video. At ITEA we additionally have a lot of work installing ca-

ITEA holds a share of “5 to 10%” in a crowded market, where if faces fierce competition from Nour Communications, SITAF, Delta and others. In all, “five to seven companies are active in our field and on our scale,” Lando says. The main challenges for the company when working in the kingdom, as he sees it, are the saudisation requirements: “We need to achieve a saudisation of 20% in our sector to get the relevant certificate and be able to bid for government projects, which is difficult, really. We don't object to hiring Saudis as such, of course, but it is hard to find qualified Saudis. The education system is only now beginning to be adequate - before it offered religious education rather than building technical, scientific or managerial skills. A particular problem in Riyadh is the working mentality. In the capital, employees seem to consider putting in the required work or showing in time is optional. This is in stark contrast to the east of the country. In Dhahran or Dammam, employees are at their desk with their laptops up and running by 7.30 – this is the result of the long Aramco tradition. Riyadh has a long way to go in this respect.”

About 20 licensed Internet providers are now competing in the market, bringing prices down and increasing penetration. The largest of them is the Saudi Telecom Company (STC)

An Italian in Saudi Arabia Luigi Lando, president of ITEA International, is an Italian engineer. He is one of a number of telecoms experts who came into the country in 1994, when AT&T was awarded a huge $7 billion project in KSA called Telecoms Expansion No 6, and approached Telecom Italia for cooperation.

“We need to achieve a saudisation of 20% in our sector to get the relevant certificate and be able to bid for government projects”. Saudi Arabia· 211

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of Defence and Aviation (MODA) implemented a nationwide unified medical system to link all 26 MSD hospitals and 68 medical centres and clinics. The boom of Saudi e-commerce Despite the economic downturn in July 2009, a report released by Arab Advisers’ Group ranked Saudi Arabia first among Arab countries for e-commerce growth, valuing e-commerce transactions in Saudi Arabia at SR 12 billion with 14.26% of the population already engaged in them. The government expects broadband penetration to rise to 31% by 2013 and the ICT industry to contribute 20% of GDP by 2020. The Arab Advisers' Group's annual CITC Report predicts a compound annual growth rate of 13.4 per cent over the next three years in the ICT market, with investment increasing by 17% in 2010 alone, and rising to nearly SR 37 billion by 2013. Furthermore, the GCC ICT Infrastructure Report recently released by the Kuwait Financial Centre Markaz predicts that 50% of total GCC investment in the ICT sector over the next three years- $90 billion - will be made in Saudi Arabia.

interview with

Musaab Ibrahim Al Mubarak, who graduated from King Saud University's computer science college has 16 years of experience in the IT sector, both in the private and public side of it.

Musaab Ibrahim al Mubarak CEO of Tabadul

In July 2009, KSA announced the launch of a new company created to invest on a commercial basis in the information technology, telecommunications and e-Services industries.

The Saudi Electronic Information Exchange Company “Tabadul”, with a capital of SAR 50 million, is a joint stock company currently owned by the staterun Public Investment Fund, although a partial sale through an IPO is planned for the near future. It owns and manages all SAUDIEDI project and acts as the electronic arm of the government for Trading sector by providing e-services and establishing and implementing G2B and G2G e-solutions. Concretely, the company will make investments in both the public and private sectors and set up the infrastructure for basic communications networks and platforms for electronic exchange. Tabadul's activities also include fulfilling the database requirements of the government, creating automatic eprocurements systems and forecasting information, providing analysis of all government procurements and biding to be monitor and control by Ministry of Finance. But its first and foremost

task is to build a reliable and efficient ICT platform to ensure business continuity. The first result of this strategy is already online: a customs regulation system to facilitate import and export. “In fact -says Musaab Ibrahim al Mubarak, CEO of Tabadul - the core of the new company already existed in a embryonic form since 2003 and was established on the initiative of the Ministry of Finance to set up a digital system for the regulation of import and export sector and to speed up trading processes.” After a development and testing period, the service which offers a 24/7 digital platform for trading stakeholders to execute the import/export transactions was launched officially in 2007. Initially limited to Jeddah Islamic seaport, the largest Trading/CUSTOMS port in KSA and one of the largest in the region, which handles over 40% of the country's total import trading volume, and

Dammam King AbdulAziz port the 2nd largest port in the kingdom. “In 2010 when Tabadul was establish, the following ports were implemented and used Tabadul services 100%: Riyadh Dryport, King Fahad Causeway, Khafjy Landport, and Hadetha Landport” explains al-Mubarak. “We can now offer traders a one-stop shop where their transactions are processed by one single gateway.” Tabadul plans to launch SAUDIEDI services in 2011 beyond Batah Landport, which represents one of the largest Landport in the region and the world with more than 5,000 trucks daily, to King Khalid Airport, King Abdulaziz Airport, King Fahad Airport, Jubail Seaport, Yanbu Seaport, Halat Amar Land port, and Salaw Landport which represent over 95% of total KSA import & export transactions. Neither is the system limited to that immediate purpose. “The SAUDIEDI system

The company will make investments in both the public and private sectors setting up communications networks and platforms for electronic exchange. 212 · W G u i d e s

Saudi Arabia is the first among Arab countries for e-commerce growth, valuing e-commerce transactions at SR 12 billion with 14.26% of the population already engaged in them. The government expects broadband penetration to rise to 31%.

is integrated with SAUDI CUSTOMS system,” explains al Mubarak, “with links to various government departments and authorities in addition and custom brokers, Ship agents, etc It is part of the government's effort to create a comprehensive e-government system. As soon as the system was up and running, we jumped several places forward in the World Bank's list of countries offering the greatest ease of doing business. But the ultimate future vision goes fur-

ther still. Says al Mubarak: ³Ultimately the idea is to create a business-tobusiness hub where producers can find buyers for their products both locally and internationally and within the same environment initiate, finalize and legalize the entire transaction. Once we have finished integrating all concerned government departments we can start implementing this second phase too, and link up with similar international systems.”

Ultimately the idea is to create a business-to-business hub where producers can find buyers for their products both locally and internationally. Saudi Arabia· 213

education & health

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education

icteducation

The Fight for an International-Standard

Education "Knowledge is the main source of power. It's the driving force for the society's sustainable development. It is high time we focus our attention on quality education."

To counter arrest the slow pace of changes in the real education system of Saudi Arabia, King Abdullah started some six years ago the foreign scholarship program as the main pillar of a more rapid change in both, mentality and workforce qualifications to match the requirements of a modern Kingdom

This was the message King Abdullah sent at a conference at the beginning of 2011 just at the same time of releasing this year’s budget with some SR 150 billion allocated for education and training programs, a 26 percent of the total budget and an 8 percent increase from the already high allocation of 2010. The largest amount ever invested in the Kingdom history. Since his ascension to power the education reform has been at the forefront of the King’s agenda with the start of a program of controversial reforms to overhaul the state universities and schools in a rather epic effort to confront the wahabbi clerics, whose conservative side has traditionally been against any type of reforms especially those in education, their main area of influence since they helped King Abdullaziz unified the Kingdom in 1932. EDUCATION AS THE ROOT OF THE PROBLEM The main criticism to the Saudi education system has remained the same since the establishment of King Saud University in 1957 the first university in Saudi and in the Arab States of the Persian Gulf: the focus on religion and Arabic studies rather than science, physics or mathematics and the emphasis on rote memorisation rather than on the modern education techniques focused on practice, analysis and problem solving. The program of reforms started by King Abdullah is an effort to add more science, biology or physics classes and aims to complement the larger vision of His government to diversify the kingdom from an oil dependant economy to a knowledge-based economy and create the much-needed jobs for the

youth. But changes are far too slow given the pace of development of the Arabic peninsula. To counter arrest the slow pace of changes in the real education system of Saudi Arabia, King Abdullah started some six years ago the foreign scholarship program as the main pillar of a more rapid change in both, mentality and workforce qualifications to match the requirements of a modern kingdom. Only last year some SR12 billions were invested in sending Saudi students to Universities around the globe. So far nearly 1 million Saudi students have been sent abroad. The problem is that the brightest minds sometimes do not come back. In the meantime, billions are invested locally in the construction of education facilities all around the kingdom, including remote areas; vocational and training centres grow in the peninsula at the same pace that technology expands and more teachers are being prepared and updated to confront the modern society with better teaching techniques. New universities are born and the ones that were already there have been expanded. So are the institutions dedicated to women education and more lately science centres of excellence with King Abdullah University for Science and Technology (KAUST) at the forefront of all of them. RAMPANT YOUTH UNEMPLOYMENT For decades the government of Saudi Arabia has focused its attention in improving its education system as the Saudi population keeps on growing at the second higher rate in the entire world and it

Billions are invested locally in the construction of education facilities all around the kingdom, including remote areas 216 · W G u i d e s

has become a challenge to employ the Saudi youth, especially in the private sector where only one out of every 10 employees is a Saudi citizen, according to a recent report released by John Sfakianakis, chief economist at Banque Saudi Fransi in Riyadh. There are 27 million Saudi citizens of which over 60 percent are below the age of 30, many of them unemployed. Although the unemployment rate in Saudi stands at around 10 percent according to the Labour Ministry, youth unemployment more than double that number and within that, women unemployment is much higher. One of the main reasons for the high unemployment rate is logically the birth rate compare to that of the country’s economy growth rate, but especially it falls on the reluctance of the private sector to employ Saudi citizens against foreign labour. There are three main reasons for this. Firstly the outdated education system in Saudi Arabia that obliged the private sector to look for their researchers, scientists, engineers, lawyers or mathematicians overseas as the graduates produced at most of Saudi Universities were poorly prepared for the modern world. The second reason is the relatively easy way of hiring expats especially from South East Asia that are better educated and accept a lower payment from those claimed by Saudis And the third is the strict governmental laws regarding firing schemes for Saudi citizens and the

preference of Saudi citizens to work for the better paid and more secure government jobs. Indeed the creation of a bigger governmental job-base could ease the youth unemployment rate but it will only promote the bureaucracy that already characterise the Kingdom and it is no longer an option with such a fast growing population. It is virtually impossible to employ all of young jobless Saudis without incurring in a much higher government deficit which current public expenditure almost doubled since the dawn of the new millennium. Without a profounder reform, the new economic cities launched by SAGIA to meet the transformation into a knowledge-economy set by the Government will also suffer from a lack of prepared workforce. According to SAGIA, there is a real investment opportunity in the private sector education with over 90% of Saudi students educated in public schools and only the wealthiest Saudi and expatriate children attending some 840 private schools. “In the past – it states - foreign organizations have not been permitted to directly educate Saudi students. Now, for the first time, the Economic Cities are allowing students to benefit from outside skills and knowledge. In addition to traditional educational institutions, there is a clear need for a full range of educational and training services, including vocational programs, e-learning, content development, seminars, etc.”

Foreign organizations were permitted to directly educate Saudi students but now for the first time, the Economic Cities are allowing students to benefit from outside skills and knowledge

To overcome the private sector local employment, the government launched years ago the Saudisation program that sets quotes for hiring indigenous workforce that vary depending on the

Vocational and training centres grow and more teachers are being updated to confront the modern society with better teaching techniques Saudi Arabia· 217

education

In the 2011 budget some SR 150 were billion allocated to education and training programs, a 26 percent of the total budget and an 8 percent increase from the already high allocation of 2010.The largest amount ever invested in education in the Kingdom history

education

different activities of the companies. But it is failing. To keep their productivity and turnover high private companies have found ways to beat this lock and bring the international expertise they need to compete in a global world. Sfakianakis points out that only 9.9 percent of the private sector employees were Saudi nationals in 2009, down from 13.3 percent in 2008. To put the number in perspective, according to the Ministry of Labour in 2009 of the 6.89 million private sector jobs, 6.21 employees were non-Saudis. In that same year, the ministry of Labour extended 982,420 work visas for foreigners a 50 percent increase since in four years. Unlike ten years ago, Saudis now work in supermarkets or as taxi drivers while women education only started recently moving from the teaching world to a broader number of careers. However, many job opportunities are design only for men leaving half of the kingdom’s minds spared consciously. Although prepared they are not allowed to work. According to the latest figures released by the Ministry of Labour 80 percent of unemployed women in the kingdom are university graduates. Without a change in the roots of the Saudi education system and the government will to establish a minimum wage and ease the hiring regulations, the local young population will lack the kind of skills that the private sector seeks for its employees and the unemployment on the private sector will remain at the same unsustainable levels it is today.

Quoting the Minister of Labour, Sfakianakis writes in his analysis that “the kingdom must create five million jobs by 2030 to meet the demands of the young, male-dominated workforce. The minister spoke of the private sector generating three million, or 60 percent, of these jobs.” BUILDING THE WORKFORCE OF TOMORROW The Kingdom started increasing its expenditure in education with the launch the Fourth Development Plan (1985-90) when some SR 135 billion was dedicated to improve the human resources and with the Fifth Development Plan (1990-95) with a total expenditure of about US$140 billion. Actually, since 2005 the yearly expenditure in education has doubled. However, although Saudi stands as the 8th highest education spender worldwide most of the money dedicated recently to education has been used to fund the erection of new universities, colleges and schools while only a low percentage of the total spending was actually allocated to education and training programs. One of the most obvious examples of the universities and colleges construction fever has been, though, Prince Noorah University (PNU), entirely dedicated to female education and the largest university built from scratch in history. Covering almost 3 million square metres it was for a while the largest construction site of the world with some 800 cranes working 24/7 to accommodate around 40,000 students and 12,000 employees.

Women education only started recently moving from the teaching world to a broader number of careers. 218 · W G u i d e s

The PNU comes to cover a sharp gap of higher studies availability for women since 1995 when 45,000 female graduated from secondary school while only 38,000 male students did but to absorb this new female workforce will be almost a mission impossible in the current employment schemes of the kingdom that promote male hiring rather than women. Gender segregation has been the common rule at all levels of public education. This rule is also applied to working offices in both private business and public institutions where women are allowed to work. But companies willing to employ women have to start by spending some good money to build a completely separate space for them, which discourage the female hiring from the very beginning. The construction of new facilities will probably help to increase the availability of education to a broader base, but to change the education system itself is the main challenge that the Custodian of the Two Holly Mosques, King Abdullah, faces. And it is also the harder to overcome despite the rush imposed by the high unemployment rate of the young Saudi population that keeps on raising and constitutes a time bomb. The unemployment rate of Saudis holding university degrees is only 7 percent, considerably lower than the 36 percent of those that only hold high schools diplomas. The dropout numbers of Saudi students, especially men, is also alarming and remains one of the Government main concerns. One

of the solutions has come through the spread of more technical and vocational training centres. FROM ROOTS TO MODERNITY The education system in Saudi Arabia is set in accordance with Islamic educational systems, traditions and customs and has been traditionally overseen by the Ministry of Education until 1975 when the Ministry of Higher Education was created to be in charge universities, higher education institutions and the like. It also represents the government abroad in all educational and cultural affairs, through offices distributed over 32 countries. The Higher Education Council is the supreme authority for post-secondary education affairs and supervised and coordinates its institutions, with the exception of the military. Public education in Saudi Arabia has always been intrinsically linked to religious education that promotes the "belief in the One God, Islam as the way of life, and Muhammad as God's Messenger" and has traditionally dedicated almost the same time to religious studies than to the other subjects such as mathematics, history or science together. The Wahhabi movement in the late 18th century encouraged the spread of Islamic education in the kuttab through the memorisation of the Quran along with selections from the hadith. Only in the 19th Century some other subjects as arithmetic or Arabic reading were included in the curriculum but the illiteracy rate of Saudi Arabia remained over 75 percent for man and almost 100 percent on women in as late as the 1970´s. By 1990, however, the peninsula managed a radical turn of the rate and only 25 percent

Only 9.9 percent of the private sector employees were Saudi nationals in 2009, down from 13.3 percent in 2008.To put the number in perspective, according to the Ministry of Labour in 2009 of the 6.89 million private sector jobs, 6.21 million employees were non-Saudis.

The unemployment rate of Saudis holding university degrees is 7% compared to the 36% of those that only hold highschools diplomas. Saudi Arabia· 219

education

In the current development plan (2009-2014) the government aspires to enrol almost 400,000 new university students, up 4,5 percent while university graduates are projected to rise by 7,2 percent to a bit more than 300,000. Under this plan, the government is placing the strength on improving the technical and scientific skills of the students

education

of men and half of the female population remained illiterate. The studies beyond elementary level started to spread through an informal network of scholarly lectures (halaqat) still linked to Islamic studies but in the 1920s, a small number of private institutions started offering limited secular education for boys and in 1951 an extensive program of publicly funded secondary schools was initiated. Although there were universities dedicated to religious education from an early stage, the first non-religious university was established in 1957 with the name of Riyadh University, subsequently renamed as King Saud University. However linked to memorising the Quran verses, since 1985 the government efforts have been focused on designing more practical and attractive programs to the students own interests in both secondary and higher education. In 1960 while 22 percent of boys attended school only and 2 percent of girls did. In 1989, from the 2.6 million students enrolled in the public school system of Saudi Arabia, almost half of them were women. There were more than 14,000 education institutions, including seven universities and eleven teachertraining colleges, in addition to schools there were vocational and technical training, special needs, and adult literacy. The system was expanding so rapidly that in 1988-89 alone, 950 new schools were opened to accommodate 400,000 new students. Since the Fourth Development Plan the government has put its stress in addressing the technological changes and rapid developments in social and economic fields; reduce the dropout rate of students

in secondary schools and prepare the population to replace Saudi Arabia's huge foreign labour with indigenous workers (saudisation). In the 1990´s the foreign workforce amounted for over 70 percent of the total. In addition, since the 1980´s the substitution of foreign teachers for locals with the creation of training institutes for teachers has also been addressed reducing the percentage successfully. Today, according to the ministry of Higher Education there are 21 Government Universities, 18 Primary Teacher's Colleges for men; 80 Primary Teacher's Colleges for women; 37 Colleges and Institutes for health; 12 Technical Colleges and 24 Private Universities and Colleges. In the current development plan (2009-2014) the government aspires to enrol almost 400,000 new university students, up 4,5 percent while university graduates are projected to rise by 7,2 percent to a bit more than 300,000. Under this plan, the government is placing the strength on improving the technical and scientific skills of the students. According to UNESCO, 85,5 percent of adults and 97,5 percent of youth are literate in Saudi Arabia today. However, following the in-depth analysis of Sfakianakis mentioning the World Economic Forum studies,“while Saudi Arabia moved up seven places to 21st overall in terms on competitiveness, it ranked a low 74th in health and primary education and the 51st for higher education and training.” There is no doubt then that the government is moving in the right direction to meet the demands of the future development of the country. But it is only doing so at a much slower pace than needed.

The government efforts are focused on designing more practical and attractive programs to the students own interests 220 · W G u i d e s

interview with

His Excellence Dr. Mohammed Bin Ibrahim Al-Sweel President of King Abdul Aziz City for Science and Technology (KACST) The efforts of the government in improving the education system and increasing the weight of Saudi Arabia in the field of sciences worldwide were translated to reality with the creation of King Abdul Aziz City for Science and Technology (KACST). Although it took some good years to kickoff the city is now well-established and has started to produce major research programs in combination with other government entities and the private sector. Since the introduction of the national policy on science, technology and innovation that gave the main guidelines to measure the speed of transformation of Saudi Arabia into a Knowledge-Economy in accordance with the indicators internationally accepted by the United Nations Educational, Scientific and Cultural Organization (UNESCO) or Organization for Economic Co- operation and Development (OECD), the progress of the city has been remarkable.

“Following the ten strategic principles of the national policy on science and technology that look for the synergies of the components activating the role of education and training and improving the competition to increase scientific and technical progress the first five- year plan has supported many researches within the universities and research centers,” explains Dr. Mohammed bin Ibrahim Al-Sweel, President of KASCT. The emphasis has gone to strategic and vital fields for the Kingdom as

the development of water, petroleum and gas, petrochemicals and nano technologies, advanced materials, biotechnology, environment, energy, space and aviation, information, electronics, communications and photonics, in addition to medical and health researches. The financial support for the first five- year plan totaled about SR8 bn but has been expanded to a total of SR15,7 bn for the period from 2010 to 2014.

BOX TURNING POINTS IN THE DEVELOPMENT OF THE CITY 1977: establishment of King Abdul Aziz City for Science and Technology. 1978 – 1987: Al-Uyainah Solar Energy Program (with the United Stated). 1981: fish breeding in fresh water program (with Taiwan) 2000: First Saudi experimental satellite Sat1 (a & b) 2002: Lunch of the first national policy on science, technology and innovation in the region after obtaining the approval of the cabinet of ministers thereof. 2004: Lunch of the Saudi satellite Stat 1-c, after which the first satellite of Saudi Program Sat 2 and Saudi Comsat 1 and 2 had been lunched. 2005: establishment of the National Center for Nano- Technologies. 2008: Lunch of BADER Program for Technology Incubators, which forms the core for establishing a technology- driven industry. 2008: Lunch of King Abdullah Initiative on Supporting Arabic Internet Content and visit of His Royal Highness for the inauguration of the second phase projects. 2009: construction of biotechnology incubator and inauguration of several excellence centers. 2010: construction of the advanced manufacturing incubator. 2010: Project of the National Initiative for Water Desalination by Solar Energy. 2010: Biotechnology (Camel DNA Decoding).

Although it took some years to kickoff the city is now well-established and has started to produce major research programs. Saudi Arabia· 221

health Good reasons to invest Brisk growth in market size, eg demand for hospital beds is expected to rise from 51,000 today to 70,000 by 2016. The number of hospitals will rise from 364 to 502 Large increases in healthcare consumption supported by increasing private wealth and public sector investments Opportunity to cater to unmet demand across the healthcare value chain including medical education, research, facilities, provision and reimbursement

icthealth

Financing a

The government is willing improved the health system in the kingdom of Saudi Arabia with new hospitals, day care centres, training new doctors and investing heavily research and new technologies.

new healthcare

system

Health is, together with education, the big beneficiary of the kingdom’s lion’s share of the national budgets over the last couple of years.

The private sector is already taking good note of the increased spending and is showing signs of a healthy comeback, assisted by the government's commitment to invest and a much awaited pickup in bank credit growth,

Structural changes in service provision and recent moves towards a compulsory, insurancebased system that will extend to include all Saudis Exceptionally high incidence of major disease categories in KSA including diabetes, heart disease, and congenital disorders Private hospitals, pharmaceutical companies and medical device manufacturers seeking international partners An unfulfilled need for a comprehensive, national health information system. Surging healthcare demand in Saudi Arabia and the surrounding region Low utilities costs, land rents and tax rates create an economical investment platform The easiest place in the MENA region to do business Attractive incentives, strong IP protection and massive financial support for R&D, provided by a government that is firmly committed to developing the life sciences sector Major supportive investments completed and in the pipeline, such as the recent launch of a Biotech Park in Jeddah Low-cost local access to feedstock for intermediate chemicals and other inputs into pharmaceuticals and agrochemicals production Complementary industries such as plastics, chemicals, and formulation and packaging provide substantial operating efficiencies Heavy public investment in science and technology training to furnish a skilled workforce, along with other supportive investments in infrastructure and facilities Source: SAGIA

And indeed Saudi Arabia is particularly interesting for a number of reasons: it has a growing and aging population; it is strategically located in a crossroads

interview with

Dr. Walid Fitaihi

And actually, the government determination goes beyond hospitals and research and enters the pure business world to life science industries such as pharmaceuticals, medical devices and agrochemicals. Its 27 million people and excellent location; its lowcost access to feedstock especially appreciated by pharmaceuticals and agrochemicals manufacturers and the existence of complimentary industries such as plastics, packaging, and formulation are the best attraction to investors.

To encourage R&D activities, KSA offers significant development finance and research grants through institutions such as the King Abdulaziz Centre for Science and Technology (KACST) andthe King Abdullah University for Science and Technology (KAUST)

Founder, Chairman & CEO of the INTERNATIONAL MEDICAL CENTER With the look of the most prestigious and acclaimed worldwide five stars hotel, the International Medical Centres stands out on top of a low hill in the city of Jeddah. A hospital which architectural design is splashed with plenty of natural light, green areas and enhanced with calligraphy, mosaics and specific colour schemes to make patients feel happy and with physicians selected not only for their skills but also for their humanity, is worth to be mentioned. As a private hospital, the IMC is more of a jewel at the Red Sea shore standing as much for its majestic appearance that for the ambition of its CEO of creating an entire new paradigm of healthcare system not only in Saudi, but beyond.

inflict the most significant psychological and emotional scars to the patient and the family,” he says. Fitaihi´s philosophy stands as strong as his wish to differentiate IMC. “We are still living in the industrial age or the information and knowledge age but we are entering a new age which is called the wisdom age. In the wisdom age the emphasis is no longer things like machines, information or knowledge. The new age is emphasizing the missing factor: the human being in its mind, body, heart and spirit. For the last 100 years humanity has been trying to find itself by searching outside. We reached the moon and yet we failed to feed the hunger next door. We understood so much about the cosmos and yet we failed to understand the

basis of our inner soul. In short, humanity is lost,” he asserts. And he even goes beyond with a heartrending statement. “Any human being is nothing but an expense in the payroll of any balance sheet of any company while the chairs we are sitting on, for example, are the assets and capital of the organisation. We are inheriting a whole culture based on managing people as things” This is Fitaihi´s starting point: to change the paradigm is changing the way of interaction between doctors, managers and patients. However he admits, “it will take a whole life and probably two other generations to continue and strive to achieve such a high project.”

“My mission in life is to pioneer an unique approach of healing mind, body, heart and soul by applying the best global healthcare standards while pursuing divine ethics. I’m not in the business of building 30 hospitals but in the business of providing the whole world with a model of healing and to bring a new paradigm shift on healthcare.” explains Dr. Walid Fitaihi, Founder, Chairman & CEO of the International Medical Centre. Fitaihi starts by differentiating cure and healing. “You can have the best surgery in the world that knows how to fix but in the process of fixing he or she might

The ambition of its CEO is creating an entire new paradigm of healthcare system not only in Saudi, but beyond. 222 · W G u i d e s

The national Budget approved for 2011 allocates SR68,7bn ($18,4 bn) to health and social affairs, a rise of 12 percent from the previous year. The expenditure will be used to continue the construction of 12 new hospitals that are set to open doors by the end of this year. At the moment, there are some 120 hospitals under construction in Saudi Arabia that will be generously affected by the higher expenditure forecasted for this year.

of continents and the sector still lacks serious developments according to the new ages. Public healthcare spending has been growing steadily since at a compound annual growth rate of 7.2% since 1999 and spending is expected to reach US$20 billion by 2016. To encourage R&D activities, KSA offers significant development finance and research grants through institutions such as the King Abdulaziz Centre for Science and Technology (KACST) and the King Abdullah University for Science and Technology (KAUST).

The 2011 budget allocates $18,4 bn to health and social affairs, a rise of 12 percent from 2010. Saudi Arabia· 223

Lifestyle

lifestyle

From dust to

( grass (

interview with

H.H Prince Faisal Al Saud CEO of Riyadh Golf Courses

One of the keener enthusiasts of building up a national sport talent is H.H Prince Faisal Al Saud, CEO of Riyadh Golf Courses. “Personally I think golf is the best sport and fits best the Saudi society. It takes energy and teaches you many things such as to be patient, punctual, and most of all discipline, course management, rules and etiquettes which is very important for the youth.” “A lot of Saudi youth’s concentration is towards football, but if they knew about golf we could have more players. We have many people below 25 years of age and sure have good players here if introduced to the game,” says Al Saud. “If you had a Saudi player becoming big on the international level, it would be the best thing for golf in the kingdom as many youth would follow and take up the game.”Golf clubs and the Saudi Golf Federation are putting all

“A lot of Saudi youth’s concentration is towards football, but if they knew about golf we could have more players". 226 · W G u i d e s

efforts to get citizens involved in the game, which is growing in popularity in the Gulf countries, particularly in the United Arab Emirates and Qatar. Added incentive is that 65 per cent of the population is below 35, which means a large pool of future golf enthusiasts could develop a potential international talent. And Saudi Arabia already has budding talent. The national team participates in pan-Arab championships, frequently coming second or third. Two young players in particular stand out, Othman Almulla, aged 21, and Khaled Attiyah aged 17. “We have big hopes. Attiyah is very competitive and plays scratch (with a zero handicap),” says the CEO. However, golf is still relatively new in the Kingdom and not well known within Saudi society and playing a round of golf is not a usual recreational activity for the majority of Saudis. Given the lack of grass, it is not overly surprising. The first golf courses were, after all, “browns,” with the fairways and “greens” made of oil mixed with ultra-fine sand to enable the ball to roll, and players carrying around a piece of astro turf to play off. “Riyadh is growing, has a lot of potential, and expatriates are here, so a golf course is a good thing for the city and the people, while our Golf

Course location is great at just 25 minutes from the city,” says Al Saud.

Teeing off in Riyadh Introduced by expatriate oil workers in Dhahran in the late 1940s, it was not until a Japanese golf aficionado did establish the Riyadh Golf Course in 1986 that the game was opened to the public. In 1997, the Riyadh Development and Contracting Company (RDCC) decided to make a long-term investment when it bought the club to turn it into a premier golfing facility. “We had the sand course which we have kept and is still playable, and added an 18-hole course, the Green Course. It is one of the longest golf courses in the Middle East at 7,503 yards,” says Al Saud. The first nine holes opened in 2005, and the back nine opened in 2007. The Riyadh Greens Course is an official championship golf course and boasts four lakes integrated through streams that are integral part of the design. Aware that a round of golf is also about great facilities like a clubhouse and good dining, the RDCC invested in a mega course. “All the facilities you normally find in a country club and golf resort you find them here. A shaded outside terrace with lounge area overlooking the lake and hole

sports

As the Kingdom of Saudi Arabia walks its way towards further social development, there is still a lack of activities to entertain the very young populated country. There are more and more voices rising up to get more youngsters involved in sports such as golf to tame their minds and teach them about patience, discipline and team building practices.

“Personally I think golf is the best sport and fits best the Saudi society". Saudi Arabia· 227

lifestile

18 while enjoying something to eat or a drink, a professional pro shop with the latest golf gear, fully equipped gym, health spas, locker rooms for men and women, a driving range, and an academy to teach people how to play golf, starting with the desert course from where players then move to the green course when eligible,” said Al Saud. “There are other facilities for families, such as a mini golf, swimming pool, tennis and basketball courts, beach volleyball and go karting for children while waiting for its dad game,” explains the CEO. Next year a 50-suite hotel is to open at the course. “Players come from outside Riyadh so accommodation is required, and for tournaments to wake up early and walk over to the course is more enjoyable, and convenient,” adds the CEO of Riyadh Golf Course.

A stubborn vision The Riyadh Golf Course hosts several tournaments every year, which has included on the official level the 12th Gulf Cooperation Council Tournament. At a club level, two tournaments are held a year in conjunction with the Down Syndrome Charitable Association, with all proceeds going to the charity, and a “country match” tournament held every month. “Players represent their countries, like the UK, USA, Korea, France etc. Where there are only a few players from one country we put them all together and call them the United Nations team. It is a nice tournament,” says Al Saud.

The tournament is indicative of the club's clientele, which are predominantly expatriates working for companies in Riyadh and from diplomatic circles. October 2011, Riyadh golf courses is organizing the Volvo Riyadh Amateur masters, a 3 days tournament with top players from other GCC countries. However more needs to be done to nurture a future for golf among the Saudi public. “We have to invite schools, place advertisements, and get companies to sponsor competitions. We need cooperation between the Saudi Golf federation, golf courses and companies to promote the sport,” he adds. “The Golf Federation is looking for sponsors, and it is not easy. They don't look at golf as a popular sport in Saudi, so we are having a hard time to find sponsors, even for the national team,” complains Al Saud.

his sons play and he encourages his friend’s children to do the same.

Going International Disregarding the still poor performance of the sport in the country, there are hopes that Saudi Arabia will soon be able to attract the major international golf tournaments hosted in the likes of Dubai, Bahrain and Doha. Further improving the country and the capital's golf infrastructure will be an economic boon. “Golf generates income for the city, jobs and so on. It is different from other sports. Golfers stay at least a couple of days to play the golf courses and have to pay for their accommodation, also players travel to golf courses around the world. It is upmarket sport, so it generates income and it attracts people to a place. Look at Dubai and how many courses they have. In 2005 had five or six, now over 18.”

The Riyadh Golf Courses management is practicing what they preach. A golf program for the Prince Sultan University is taught at the course, which is considered a health education class for academic credit.

Saudi Arabia currently has some 16 golf courses. In addition to the Riyadh Golf Course there are five all-grass courses in the capital, namely, Riyadh Golf Course, Riyadh Intercontinental Golf Club, Dirab Golf club, Reef Golf Club and the Arizona Golf Resort.

“This is a start. We have to go to high schools and intermediate schools, to the right age to start learning the game, between 10 and 14 years old. We have already invited many schools and we offer free lessons for Saudis. If they continue playing we offer good rates. We are doing our best to get people involved,” Al Saud explains, adding that both

The only other grass course in the kingdom is Aramco's Rolling Hills Golf Club in Dhahran and Kaust in Jeddah. Elsewhere in the Eastern Province are sand courses, the Ain Nakhl Golf Club in Abqaiq, Bayside Golf Club in old Abqaiq Road, Surf Side Golf Club in Ras Tanura, Wadi Al-Saeed Golf Club in Udhailliyah and Whispering Sands in Jubail.

Next year a 50-suite hotel is to open at the course. 228 · W G u i d e s

Saudi Arabia· 229

interview with

DAVID J. FORSTER, General Manager of First Motor Company (Al Futtaim Group)

The numbers talk for themselves. According to the Saudi traffic regulator, there are 18 deaths per day on Saudi roads reaching a high of 6,500 deaths last year in almost half a million accidents. There were 9 million traffic violations in 2010 and the value of the material loss is estimated at SR. 13 billion a year. To put an end to this, the government has recently started using speed cameras in an effort to curb the menace on the roads. “The government has made it a priority to improve road safety for all concerned. Volvo with its range of

“Once people drive a Volvo they buy in to the brand philosophy because it is the safest car” 230 · W G u i d e s

safest cars and features offer the perfect solution,” says David J Forster the new General Manager of First Motor Company (Al-Futtaim Group) in KSA. “When it comes to car security, Volvo is the car,” he says.

seatbelt) some 50 years ago. It also invented the seatbelts pre-tensioners, inflated airbags and laminated windscreens among many other safety measures for car drivers.

No fatalities by 2020 Volvo has a long history of industry firsts. The Swedish carmaker invented the traditional seatbelt (the 3 points

“Our brand ambition is to have no fatalities by 2020 in a Volvo,” says Mr. Forster. And to reach that goal Volvo has one of the

living

Everybody knows that driving in Saudi is not for amateurs. . There are accidents everyday on Saudi roads and they are the second biggest cause of deaths in the Middle East only after heart diseases.

“One of the new safety features, ’City Safety‘, comes as standard in the latest generation of Volvo cars” Saudi Arabia· 231

By the time you even think of safety, it already acts on it.

infrastructure

“The government has made it a priority to improve road safety for all concerned. Volvo with its range of safest cars and features offer the perfect solution”

most advanced safety research centres in the world and invests large sums of money in trials for new safety features. “We are an exclusive club. Once people drive a Volvo they buy in to the brand philosophy and keep on buying Volvos because it is the safest car,” says Mr. Forster. One of the new safety features, ’City Safety‘, comes as standard in the latest generation of Volvo cars. City Safety reduces the possibility of a collision with the vehicle in front at speeds of up to 30 km/h. If City Safety senses an impending collision and the driver fails to react, City Safety automatically applies the brakes. At that speed the impact is equivalent to a fall from a one-storey building. “It’s like an airbag. It is there for when you need it. And Volvo is the only car manufacturer that has the City Safety feature as standard in its range,” says Mr. Forster. According to Volvo’s research, 75 percent of accidents happen in those circumstances. “We are trained to fear the vertical but not the horizontal. Cars driving out there at 50 miles an hour

are just standing in a rooftop waiting to fall off. It feels safe and robust but it is like a Pepsi can that you can crush in an instant. Without all the safety measures in a car, it all becomes very scary,” explains Mr. Forster.

Safety first There are other new safety features like adductive cruise control where you program your car at a certain speed and if the car in front slows down your car will automatically do the same or the warning lights in either side of the car that beep when the car goes outside of the white lines. “If I had a driver, I would offer him all safety devices I could have because I don’t want him to fall over the wheel and crash us into another car,” says Mr. Forster. “A child unrestrained in the backseat of your car that crashes at 30 kms/h turns into a missile. If I was a father that has his wife and children being driven in a car by someone else, I want them to drive in a car that will not

crash. And for that Volvo is unique.” Volvo has three showrooms in the three most important regions of Saudi: Riyadh, Jeddah and Damman although with the backing of its new owner, the AlFuttaim group, it plans to reinvigorate the brand and expand the showrooms and the service facilities which had been neglected over the past years. First Motor Company, an Al-Futtaim group company, is the sole distributor for Volvo cars in the Kingdom of Saudi Arabia since the company bought the franchise in 2010 from Zahid Tractor & Heavy Machinery Co Ltd, its previous dealer in KSA. It came as an extension of the long-standing relationship between the manufacturer of the world’s safest cars and the UAE’s largest automotive distributor that started in 1985. “In terms of the positioning of Volvo we have got this unique opportunity in a country that is screaming for road, car and driver safety. We have got the solutions for all them problems,” Mr. Foster said. .

First Motor Company, an Al-Futtaim group company, is the sole distributor for Volvo cars in KSA 232 · W G u i d e s

XC60 O O

Leather Leather Interior Interior OO Park Park Assist Assist OO High High Performance Performance Audio AudioOOElectric ElectricDriver’s Driver’sSeat Seatwith withMemory MemoryOOAdaptive AdaptiveCruise CruiseControl Control

The The Volvo Volvo XC60 XC60 has has the the proven proven City City Safety Safety system system for for dependable dependable emergency emergency braking braking which which stops stops the the vehicle vehicle automatically automaticallyat atslow slowspeeds, speeds, even even ifif you you don’t. don’t. With With the the two-stage two-stage integrated integrated booster boostercushions cushionsand andother other safety features, it makes this stylish vehicle very safe to drive anywhere. safety features, it makes this stylish vehicle very safe to drive anywhere.

Riyadh: Riyadh:P.O. P.O.Box Box341901, 341901,Khurais KhuraisRoad, Road,Riyadh Riyadh11333 11333--Tel: Tel:01 01492 4923539 3539/ /Fax: Fax:01 01492 4923470 3470 Jeddah: 100055, Jeddah:P.O. P.O.Box Boxxxxxxxxxxxxxxxxxxxxxxxxxxx 100055,Tahlia TahliaStreet, Street,Jeddah Jeddah21311 21311––Tel: Tel:02 02670 6700762 0762/ /Fax: Fax:02 02670 6700743 0743 Jeddah: Jeddah:Basateen BasateenStreet StreetTel: Tel:966 96622699-8744 699-8744Fax: Fax:966 96622699-5583 699-5583 Khobar: Khobar:P.O. P.O.Box Box3169, 3169,Dammam/Khobar Dammam/KhobarHighway, Highway,Khobar Khobar31952 31952––Tel: Tel:03 03887 8879432 9432/ /Fax: Fax:03038879434 8879434

Saudi Arabia· 233

www. volvocars.com cars.com www.volvo

lifestyle

(

Walk the malls.

Much more than

shopping centres interview with

Salman A. Albaiz, Executive director of Granada Mall

As the Saudi population continues to grow, shopping malls remain one of the preferred areas to spend money and while away the time. The retail sector in Saudi Arabia is dominated by the impressive glass, metal and concrete structures of the shopping malls which abound in the cities of the kingdom and which include some of the world's largest. Yet the market remains undersupplied, as becomes clear from a simple comparison with the country's neighbours. The UAE have a total area of 3.3 million m² of malls for a population of roughly 2 million. The total mall surface of KSA amounts to 5 million m² but the country's population is 27 million, not counting an annual influx of some 11 million hajj pilgrims and business travelers. The shortage is especially pronounced in Riyadh. In 2009, close to 11 million people visited one of the newest malls in town, the Granada Mall. “We get an average of 30 to 35,000 customers per day, a number rising to almost 50,000 in the weekends,”says Mr. Salman A. Albaiz, a former military engineer who exchanged the strict discipline of his former life for the human interaction and entrepreneurial challenges of the executive director of a large new retail business. Shopping the sun away In fact, anybody who has lived for any length of time in the Saudi Arabia is sure to have spent some considerable part of it inside the air-conditioned cool of the shopping malls.“Riyadh has a very harsh climate, especially in summertime,”explains Albaiz.“With no large bodies of water offering refreshment and entertainment, people tend to look for closed, air-conditioned spaces.”Little wonder then that malls are a huge business in the country. “Fifteen years ago there were only two malls in Riyadh,”Albaiz points out, “whereas now there are 28, varying in size, quality, target audience and goods on offer.” Like elsewhere, of course, the sector is segmented. In Riyadh alone, there are three malls catering for high-end customers, sporting mainly boutiques and high fashion outlets. Fifteen malls cater for B+ and A-class customers while the remaining focus on B and C-class customers. “Still,”the colonel argues,“there is a huge potential for more malls.”Indeed, it is not only the cool that attracts people to the malls, but also the grandiosity of their structures and the outstanding collection of some of the most refined shops and recognised brands in the world.The Granada Mall alone, which opened in 2005, has half a kilometre stroll from one end to the other even without its planned expansion as part of an $800 million project which includes residential space and ten office towers – four of them rising up to 24 floors - as well as a yet to be constructed five-star Hilton Hotel offering over 800 rooms. All of these buildings will be connected to each other and the mall by covered skywalks.The mall currently contains 235 shops, centred around five major anchor stores, including a 16,000 m² Carrefour, an H&M outlet, an Extra (a giant electronics and home appliances store) and a Paris Gallery (a GCC concept store selling cosmetics, perfumes and women's fashion accessories on an impressive 3,500 m² surface).With a total surface of 150,000 m², including parking space for 4,500 cars, the shopping centre was built by >>

"Fifteen years ago there were only two malls in riyadh now there are 28" 234 · W G u i d e s

)

retail&commerce

lifestyle

The granada mall alone, which opened in 2005, has half a kilometre stroll from one end to the other Saudi Arabia· 235

lifestile

infrastructure Gosi, the Saudi pension fund for private sector employees. Including retail personnel, the mall employs some 3,000 people, 600 of them Saudis. “Our main focus is on fashion and ready-wear for women and children, but we also have cosmetics, perfumes, accessories, leather goods and speciality shops such as the four sunglasses stores. Additionally, we have a pharmacy and a bank branch,”says Albaiz. Located at the point where the two ring roads around Riyadh meet and cross the airport road, the mall is easy to reach from every direction.“We offer a good collection of stores within easy reach and without the hassle of looking for a parking space in the centre of town”,Albaiz explains. But this is not the only reason for the mall's popularity. Its mere existence and good performance has increased the value of the land surrounding the complex and is attracting more investment to the area, with developments already reaching all the way to the airport. But what if… Despite all the rapid social changes in the country and the progressive loosening of the strict moral codes, some restrictions continue to directly affect business. In general, there is still a severe lack of open entertainment venues where people can while away the time or get some exercise, specifically – but not only - in the more conservative Najd province surrounding Riyadh and its northern neighbour of Qasim. Nightlife as understood by Westerners is virtually unknown outside foreigners' compounds. Restaurants and coffee shops in and outside of hotels and malls practice a strict segregation of the sexes, with family sections strictly separated from the male-only bachelors' sections. Phenomena taken for granted in most of the world, including such innocent forms of entertainment as cinemas, remain strictly forbidden in KSA.

“We would like to include a movie theatre in the mall,”the colonel sighs, “which would greatly increase overall attendance and business, but currently this is still impossible, although I hear that the subject is currently being discussed on the government level.The same goes for open coffee shops, for example.We cannot just put chairs and tables in the corridor space, as this would not be tolerated by the conservative mores of the kingdom.”However, Albaiz also affirms that the government is now tackling these and other obstacles.“With the current speed of change we have good hopes that this will not take too long to sort out.”Other challenges faced by malls and hotels involve the separate seating areas for families, unaccompanied women and bachelors in the food courts, the ban on fitting rooms in fashion stores and, most pressing of all, the difficulty in employing women.“While we speak,”Albaiz says,“there are 200,000 female Saudi college graduates who don't have jobs. At the same time we have a staggering 1.3 million expats working as sales people in the retail sector.” In 2006, the Ministry of Labour decreed that women were allowed to work in women's specialty stores – lingerie, fashion and the like– but this decree has not yet been acted on sufficiently by the retail sector, partly because foreign employees work longer hours for less pay and partly because the decree has not really been enforced.“If enforcement were to happen, we would create 100,000 new jobs for women in a year's time,”explains Albaiz who employs over forty women working “as security personnel and supervisors in their own special zones and communicating with their male colleagues in other zones through walkie-talkies.” But Albaiz is not standing idly by waiting for others to tackle the challenge: “I have recently set up a committee for shopping malls within the Chamber of Commerce and I hope this will help resolve many of the problems and obstacles. As part of a governmental agency, we can help establish regulations to improve business and the whole situation.” Until that happens, newly built malls - including Granada - discreetly include spaces that could be turned into cinemas as soon as this is called for. As the colonel puts it:“We have both the customers and the investors. All we need is the license and appropriate regulations.”

There is still a severe lack of open entertainment venues where people can while away the time or get some exercise 236 · W G u i d e s

Saudi Arabia· 237

lifestile

fight

(dream The for a

interview with

Bdoor Al Sudairy, Artist

Saudi Arabian artists are starting to gain visibility on the world stage. A new wave of young artists consciously aims to become ambassadors promoting a different understanding of their country abroad. Many pf them are women, a fact which in itself illustrates the changes the country is going through. Saudi women have started on a quiet and little noticed march upward. The phenomenon emerged first of all – in line with the traditions and customs in vigour – in women's fashion, where women became involved not only in design but also in retail. Women began to be employed after 2000 to sell clothes to other women. In a more recent development, female entrepreneurs have been setting up and running their own shops and retail chains. Women's education was another logical outlet for female talent, and is set to receive a considerable boost with the future opening of the new all-female Princess Noora University. But in the banking sector too, more and more 'women-only' branches are appearing, with customers and employees all being female. Another sector where Saudi women are active is art. Contrary to what the strict wahhabi interpretation of the Islamic prohibition on human representations would suggest, the visual arts are actually widespread and popular in the entire peninsula, from Yemen to Kuwait. In the kingdom itself, art galleries abound in Jeddah, Dammam and even conservative Riyadh. In addition, there are major public events such as the annual Exhibition of Saudi Contemporary Art and the biennial Art Competition organised by the Ministry of Foreign Affairs. The 2011 Global Competitiveness Forum provided the Saudi Arabian General Investment Authority (SAGIA) with an excellent opportunity to present the modern Arabic arts to the world. In collaboration with Hiwar, one of the most renowned art galleries of the country, the government organ showed it is interested in more than merely promoting business. The artist: a study The colours dominating nature and wildlife in KSA also enliven the paintings of Bdoor Al Sudairy, a young female artist on the rise. A woman painter is not the kind of person one would expect to meet in a men's world such as Saudi Arabia, but Al Sudairy represents a rarely appreciated – or even noticed – recent phenomenon: the burgeoning empowerment of (and often by) women in various sectors deemed 'appropriate' to them. Al Sudairy was born in al Ghad, a little town some two hundred kilometres from Riyadh. “From a very young age,” she recalls, “my father took me out into nature, winter and summer, pointing out all the plants and animals to me. I started to take an interest in everything Allah created, from old houses and camels to sunsets >>

In the kingdom itself, art galleries abound in Jeddah, Dammam and even conservative Riyadh. 238 · W G u i d e s

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Al Sudairy represents a rarely appreciated recent phenomenon: the burgeoning empowerment of (and often by) women in various sectors Saudi Arabia· 239

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and all of nature. I began to see all this through my father's eyes, keeping the images in my mind and then drawing them when I got home. I started drawing at 8 years old. When we went on weekend trips with the family, I made stories from cartoons in notebooks. In secondary school, teachers started to take notice, and some asked me to do calligraphic paintings for them, which they would hang on their walls at home.” A Calling in life Having discovered her calling in life, Al Sudairy went to the Art College in Riyadh where she learnt the techniques professionally, from drawing and painting to silkscreen printing. Her first exposition was a group display with other students at al Janadiriyyah, the annual national cultural festival. “I exposed paintings of some of the migrating birds that pass seasonally through our country. Saudis used to hunt them with falcons, which always saddened me. Fortunately, this practice is now banned.” Al Sudairy explains that most of her past exhibitions have been group projects, mostly as benefits for various charities. “I soon hope to be ready for a solo exhibition. In the long run, I am planning to go international to show the world that Saudi Arabia is a beautiful country inhabited by peace-loving, friendly people, and that our art is supported by the king, who encourages women in many ways.” A vision for a dream In a travelling art gallery, the painter hopes to display her paintings accompanied by works by other Saudi artists. “The idea is for those paintings to depict different regions of the country. If the exhibition travelled to Spain, say, then simultaneously a similar Spanish exhibition would travel through Saudi Arabia. Through these exhibitions, people will get to know each other's countries. Also, Saudis can learn a lot about the very different climates and marvellous landscapes in their own country,” Al Sudairy points out. “Many Saudis from Najd (the central desert plateau) hardly know what the green and mountainous region of Asir in the south look like. The exhibitions would not only target art lovers, but also the media, investors and tourists. They could be a motor for both local and foreign businesses to invest in regions of the country that are usually neglected.” Al Sudairy is particularly keen to establish the relationship between art and tourism, and the capability of art to act as a promotion tool for tourism. “The fine arts represent the culture of each region by depicting the actual scenes, climate, way of life, urban heritage, antiquities etcetera. The visual arts can 'translate' or 'illustrate' a culture in a way easily understood by people from another culture.” In addition, Al Sudairy wants to challenge the perception of Saudi women as merely passive and inactive victims rather than active and creative members of the community.” That is not to say that Al Sudairy – who admits that her situation has been greatly advanced by her personal relationship with members of the house of Saud – is blind to remaining social obstacles impeding women to progress. “Some people and things can certainly pose problems, but women who have the support of their families and the will to achieve things, can do much and get far. It is unfortunate that, due to the prevailing customs and traditions, these women remain a minority – but this situation will not last forever.”

"The visual arts can 'translate' or 'illustrate' a culture in a way easily understood by people from another culture.” 240 · W G u i d e s

"Women who have the support of their families and the will to achieve things" Saudi Arabia· 241

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What to see in Saudi Arabia Jeddah

Dammam

The second largest city after Riyadh located on west coast of red sea, is the major urban center of Saudi Arabia. Jeddah is an industrial and active commercial center with modern features, squares and courtyards. Eighty KM long beautiful Corniche on Red Sea Coast is the leading recreation point for local residents during the weekend. King Fahad Fountain became a landmark sending beautiful colored water up to two hundred and sixty meters. Excavations in the old city suggest that Jeddah was founded as a fishing hamlet in 500 BC and the archaeological studies have shown the area was settled earlier by Stone Age and visited by Alexander the Great in 356BC. There may be about dozen museums or collections with a wide variety of educational aim and professionalism. The historical area in Jeddah is an eminent and unique pattern for architecture with beautiful residential buildings, palaces, mosques and shopping centers still maintaining its urban heritage.

The most oil rich region in the world Dammam is the capital of eastern province. Within two decades of oil discovery the mud bricks huts of the fishermen had given way to the modern housing compounds. Tombs, remnants of dwelling and historical references indicate that the area was inhabited more than 2000 years ago, however most vestiges of human habitation buried by the encroaching desert sands. Panoramic view of natural beauty, Dammam Corniche is the most popular tourist attraction forms part of gigantic seaside project stretching from Aziza beach to Tarut Island expanded greatly during past three years. Aramco Exhibitions and National Museum is a MUST for visitors to the region. Twenty Eight KM long and twenty three meters high King Fahad causeway is another great landmark connects Dammam with Bahrain opened for transportation in 1986.

Hail

Taima

Largely agricultural with wheat, dates, barley, fruits, vegetables and irrigated gardens, Hail is an oasis city located in northwest of Saudi Arabia. There are several historical places and fortresses dates back to Othman era in addition to Thammadi articrafts, Zubaida Route and ancient lakes and wells. Hail is also a transit point for Pilgrims heading towards Makkah from Iraq and Syria and the home town of generous Hatim Altai. International Hail Rally is one of the largest sports event on both regional and International arenas categorized as an official round at world rally desert championship held under the supervision of FIA, participated by the world champions. An annual festival also held in Hail where the cultural exchange takes palace, lined up with variety of programs, workshops, exhibitions to enlighten the public on desert life.

An oasis located in northeast side of Saudi Arabia dates back to 8th century BCE is famous for Bir Haddaj Well, the oldest and largest well in the kingdom from Babylonian times. Taima used to be an important caravan stop for Muslim Pilgrimage arriving from Damascus and also known as an ancient agricultural town producing peaches, melon, pomegranate, fig and plum now a days. The area is enriched with historical and archaeological wonders including Alain Palace, Archaeology Museum, Alhamra Palace, cemeteries and Lihyanite Inscriptions.

Abha

Jouf

The most popular tourist destination engulfed by clouds and surrounded by dense forests, Abha is the capital of Asir province situated 7200 feet above sea level towards south-western fertile mountains with excellent cool climate comparing to other Saudi cities. Handmade stone and mud homes still inhabited over 300 years looks like truncated pyramids with slight graduation from one layer to the next keeping the rain from saturating the walls and washing them away. Festivals and cultural events are organized throughout the year to attract visitors from across the country. Abha has a well known marketplace which is open daily busy with activity and people moving about for local bargains for fruit, vegetables and coffee beans. Among other items local specialty like Ornate Silver Bedouins Jewellery or hand woven baskets are amazing products to buy. To ancient Egyptians this region was known as the land of spices and incenses. To utilize the aesthetic potential several parks has been established and the most important among which is the Asir National Park and Hebla Park provided with cable lift service.

The cradle of Nabatean and Assyrian culture, AlJouf is located in north side of Saudi Arabia, enriched with large number of historical and archaeological sites dates back to more than 5000 years. AlJouf is also famous for woven carpets, sword and dagger manufacturing besides orchards trees and high mountains slope.

Yanbu Yanbu is a natural harbour located along western Saudi coastline dates back 2500 years when it was a staging point on the spice and incense route from Mediterranean region. The Industrial city of Yanbu functions not only as a prominent port on red sea but also a community center for inhabitants. Yanbu diving is outstanding in terms of visibility and abundance of soft corals due to the strong current there. The reef consist of a sloping wall in most places that goes down around 100 feet or more before reaching a less sandy bottom.

Madain Saleh Madain Saleh, also called Alhijir is a pre Islamic archaeological site located in the northwest of Saudi Arabia, dates back from first century CE, and constitutes the largest settlement after Petra by Nabatean Civilization. Traces of Lihyanite and Roman occupation can also be found in Situ while accounts from the Quran tell of an earlier settlement of the area by the tribe of Thamud in the third millennium BC. Madain Saleh has about 130 dwellings and tombs carved out from the mountains extended over some 130 SKM which is now part of world heritage under UNESCO.

Taif Famous in agricultural production (grapes, pomegranates and red roses) Taif is located in western side of Saudi Arabia elevated about 2000 meters above sea level make it favourite summer resort. Pre and post Islam Fortifications, Mosques, Palaces and archaeological embankments indicate their date and history especially the Souk Okaz played a distinguished role in Arab poetry, literature and culture.

Najran

Riyadh Situated in the center of Arabian Peninsula on a large plateau, Riyadh is the capital and largest city of Saudi Arabia. During the pre Islamic era the settlement at the site called Hajar reportedly founded by the tribe of Abu Hanifa. The old town of Riyadh within the city walls contains some significant architectural remnants and the most prominent is the Musmak Fort besides some traditional mud brick houses. The household of 800 people first major construction in 1937 beyond the walls was Murabbah Palace later restored in traditional manners. There are other traditional towns in the area where the urban sprawl reached and currently encompasses including Diriyah, Manfuha and Wadi Laban to name a few. 1000 feet high Kingdom Tower is the tallest skyscraper in KSA and 36 tallest building in the world won 2002 emporis award.

Hofuf Closest to the world largest conventional oil field, Hofuf is the major urban center of Alahsa oasis towards eastern side of Saudi Arabia. Legend places this as the burial place of Laila Majnoo the star crossed pair of the most popular love story in the Arab world and queen of Sheba also visited this city. The area is dotted with millions of dates and palm trees and recognized as one of the world seven natural wonders. Ibrahim Fort, Camel Market and Traditional Souk are worth visiting for history and culture lovers. In the long history of this region Inhabitants have included the Kanomites, Jun Hermites, Tasmis, and Banu Abdul Qais. Juwana mosque is considered to be the second mosque built under Islam after the Prophet PBUH mosque.

The Camel Market and the Traditional Souk are worth visiting for history and culture lovers 244 · W G u i d e s

Surrounded by Orchards and Rocky Mountains Najran is located in Southwest of Saudi Arabia near the frontier with Yemen and is famous in agriculture with beautiful gardens, public parks, peaches, apricots, apples, grapes, lemon and oranges. 73 meters high Najran Dam provides an opportunity to the tourist to enjoy the unparallel natural beauty on both sides of the dam. Historical articrafts available in the area include rock drawings and inscriptions particularly one can’t miss the Alakhdood antiquities sites. The history of Najran could be traced back to 4000 years ago and the most prosperous trading time believed to be during first and second century BC.

Tabuk Located along Northwest coastline, Tabuk history dates back to 3500 years, since Madyan and Dedan inhabitance in the region mentioned in the holy books. Tabuk is well preserved with pre / post Islam historical monuments and archaeological sites including Prophet PBUH Mosque, Turkish Fort, Hejaz Train Station and Albida Inscriptions, Fahah Mountains etc … Tabuk is also known for its agricultural products especially gladiola, lilies, statices and the most modern agricultural complex ASTRA FARM produce tomato, cucumber and lettuce.

Madain Saleh has about 130 dwellings and tombs carved out from the mountains extended over some 130 sqm Saudi Arabia· 245

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tourism

Where to stay four SEASONS HOTEL, RIYADH

SHERATION RIYADH: 25 YEARS OF EXPERIENCE

Four Seasons is one of these rare hotel brands that stand on their own and are their own benchmark. Says Rami Sayess, general manager of Four Seasons Hotel Riyadh branch: “The secret to our success is in our people. We have no big mottos or mission statements like many other hotels. Our only slogan is ‘treat others as you wish to be treated. We do, however, pay extraordinary attention to who we hire, recruiting only people who fit in with our culture. Different people often interview candidates five or six times before they are employed. It is like an engagement period before concluding the marriage.” Another reason why the brand is so strong is its worldwide consistency. “We have only one brand, one standard, one level of service. Whichever Four Seasons you stay at anywhere in the world, you will get a consistent level of service.” This strategy has obviously paid off for the company, which now operates 86 hotels around the world, with another 26 under development and 20 more signed agreements for new branches. “In KSA we are planning to go to three hotels by 2015,” says Sayess, who emphasises the economic viability of the kingdom’s capital: “No other city escaped the crisis like Riyadh, so this is the place to invest now.” Four Seasons is also special in starting off as a public company and then going private. Founder Sharp now jointly owns the company with Bill Gates and Saudi business tycoon Prince Al Waleed bin Talal. The hotel’s biggest asset – literally – is its 4,100-m² ballroom, which hosts an average of 120 wedding parties per year, in addition to regular conferences and other meetings. Says Sayess: “Venues for social events are limited in KSA, so these events usually end up being organised in hotels. If you offer good services, this is a niche you can successfully develop.”

The Sheraton Riyadh Hotel & Towers is a well-known name in the capital of the Kingdom of Saudi Arabia. As one of the first international chains to operate in the country, and one of the oldest hotels, it can look back on an eventful history of almost twenty-five years.

Hilton Garden-Inn: Focused Service Brands Arrive in Saudi When Norwegian hotel general manager Haakon GaarderLarsen was offered a new job in Riyadh, his only worry was how his family was going to take it. “There are some restrictions here and for me if my family is happy then I’m happy. It’s as simple as that”. Not surprisingly, being a country that has immense respect for the family life, Gaarder-Larsen’s wife and children loved their new home. Their previous experience in Egypt helped them acclimatise to the Middle Eastern lifestyle and culture. “While researching the country, you find a lot of stories online that are either very negative or very positive but to get honest feedback, you need to talk to someone who has lived here.” Gaader-Larsen moved to KSA in March 2009 and took on the role of General Manager for the Hilton Garden Inn Riyadh Olaya, Hilton Worldwide’s mid-market brand that caters to business travellers. As part of his new role, he had to educate the market about Hilton Garden Inn as a brand and devise a strategy that would foster customer loyalty and enable aggressive expansion. After working at Hilton Worldwide for a decade, Gaarder-Larsen was well-equipped to face the challenge.

Managed by the Starwood Company, the hotel offers 192 rooms and full business & conference facilities. It features some of the city’s most renowned restaurants, such as Al Bustan (international cuisine) and La Piazza (Italian). In fact, a main part of its business consists of outside catering, explains Stuart G. Birkwood, General Manager of the Sheraton Riyadh since 2008. “We cater for a wide range of events, from small private dinners for a dozen people to large events with up to 2,000 people. Some of our most frequent customers are the various embassies and a number of business associations. But we also have a contract to provide food for the Majlis Al-Shura (the King’s advisory council) on a daily basis.”

Not that the hotel really needs the extra business: it can boast year-round room occupancy of around 85%. “Riyadh is an excellent place for business in general,” enthuses Birkwood, “being the capital of one of the top five countries for economic growth and investment in the world. The hospitality industry - specifically Riyadh - is a booming market. There are some gigantic development projects going on – the King Abdullah University for Science and Technology and the King Abdullah Financial District to name but two – as HRH is investing massively to modernize the country. This entails a large number of external visitors, architects, consultants, project developers, suppliers, and thus all potential customers… You name it. These people all need accommodation.”

Indeed, even as new hotel groups target Saudi as a major market for expansion, companies like Hilton Worldwide with long-standing presence in the Kingdom are increasing their presence across the different provinces. Hilton Worldwide has expanded its brand footprint since its launch in 1995 with Makkah Hilton & Towers.

Starwood will almost double the number of its hotels in the country, from the current ten to 15 or even 20 Saudi Arabia· 247

Add Harmony to your first visit interview with

Eyad Al Johani and Abdullah Bahari President and vice-president of Add Harmony Anyone who has ever arrived at King Khalid International Airport in Riyadh, whether as an expatriate worker, a visiting investor or an academic researcher, knows the feeling: without an employee of your sponsoring company welcoming you, you are entirely lost – very much a stranger in a strange land. There are no readily available tourist maps or brochures extolling the attractions of the city. The average taxi driver is not very knowledgeable about attractions you might be interested to visit, even if you find a common language to communicate in the first place. The company you are visiting may pick you up at the airport and drop you at the hotel, but their commitment to your well being usually ends there. Public entertainment spots being few and far between, this means that even people living in the kingdom for prolonged periods of time often don't see much more of it than the airport, their hotel or compound and their office. Eyad Al Johani and Abdullah Bahari, two young Saudi entrepreneurs who are respectively president and vice-president of a new start-up in the tourism sector, are busy changing this situation, in the process creating their own market niche. Their company, Add Harmony, grew from a burgeoning idea in December 2008 to a fully booked operator in 2010, demonstrating the validity of their project. “We saw all these visitors in hotels, offices, airports and restaurants, most of them business people. They don't get to see a lot of the country apart from their hotel rooms and offices. We felt this was a shame, as our beautiful country has so much to offer visitors: landscapes and historical attractions, but also an entire culture and a way of life. So we imagined it would be a good thing to break these people's routines and tell them the untold story of Saudi Arabia. We are not

just aiming to be tourist guides: we want to change people's perception of this country and show them the real culture and life here. Many events and changes are going on in KSA, but visitors don't see them. We want to bring the tourists and expats in harmony with the country,” explains Al Johani.

THE ARAB HOSPITALITY 2009 was mainly a trial year in which the foundations of the company were laid. Tracks were investigated, programmes developed and contracts signed. In 2010, activities on the ground started in earnest. “We offer a full solution for guests invited by companies, as well as expat workers,” says Bahari. “Companies here have a problem when they have guests coming over, not just logistical – they cannot always spare an employee to take care of the guests full time - but also because we have a culture of hospitality. We normally take very good care of our guests but for companies this is difficult, so we offer these companies a business solution.” Add Harmony calls this their 'A-to-A+'-program: airport-to-airport with an added value. The company offers full services for guests invited by Saudi companies. As Al Johani puts it: “We contact them before their arrival, ask whether they follow any specific diet, what their interests are, what they would like to see in our country - the modern or the traditional, construction sites and industry or villages and the desert. We ask them who they would like to meet: investors, individuals active in certain economic or cultural sectors, … This aspect will be handled through our website when it is fully developed. We offer an individual schedule, a tailor-made, highly personal service, not mass tourism.” When the guests arrive, Add Harmony is there to pick them up at the airport, provide them with a small welcome gift and a personalised intro-

duction brochure with practical information, which could include such data as currency exchange rates, weather forecasts, facilities in the neighbourhood of their residence, the proposed schedule of visits, meetings, events based on their stated interests, and ongoing events for the duration of their stay. A car and driver will be provided 24 hours a day and all transport, logistics and accommodation taken care of, including a permanent contact man who can take care of details as they come up, obviating any need for the visitor to bother his host company.

RIYADH ON A HARLEY But there is more to Add Harmony: the company also organises small to medium scale events and offers a settlement service: “For newly arrived expatriates, we offer a week of full-time acclimatisation, where we show the person around in his neighbourhood, show him were supermarkets and medical facilities are located, and introduce him to the customs and the way of life in our country,” explains Al Johani. “Companies can also hire us to organise one-off tours for their guests. We offer the typical tours of old and modern Riyadh, but we also develop our own creations, such as a Harley Davidson tour, where people can go biking around different locations.” Add Harmony, which according to its executives is the only company to offer individual services of its kind, is a subsidiary of holding company Add Idea. It is 100% Saudi-owned, and the average age of its board and employees is a mere 22 years.

ADD HARMONY CONTACT DETAILS: Address: A PO Box 86401 - Riyadh - 11622 - KSA Tel: +966504-33-11-43 Email: info@addharmony.com Web: www.addharmony.com

The Harrat Kishb, covering an area of 5,900km², lies east of a north-south line of volcanic fields in central Saudi Arabia, 248 · W G u i d e s

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Off Road Adventures on the Lava Fields of the Harrat Kishb By Alan Morrissey One of the great benefits of living in Saudi Arabia is the opportunity for independent adventure – to take your four-wheel drive and venture out into open landscapes and sparsely populated regions that bring you back in touch with a rugged, and often harsh, nature. Most people’s image of the kingdom’s countryside consists of the classic expanses of sand dunes - endless mountains of impenetrable sand that, whilst displaying a majestic beauty, also present a palpable threat to those inexperienced or inadequately prepared for navigating such terrain. However, the Kingdom actually has a fabulous variety of other terrain to explore, equally worthwhile and often a complete surprise. For example, who knows of Saudi’s volcanic history – of the country’s twelve major lava fields ('harrat' in Arabic), peppered with dormant volcanic cones? These areas provide the off-road adventurer with quite another challenge, as harsh on man and vehicle as the vast sand deserts and every bit as rewarding. The Harrat Kishb, covering an area of 5,900km², lies east of a north-south line of volcanic fields in central Saudi Arabia, a little north of the main Jeddah-Riyadh highway. A comparatively young lava field (the entire harrat is no older than two million years), it is comprised of excellent examples of basaltic scoria cones, tuff rings, lava domes and lava flows. Its best known feature is the large volcanic maar, the Wabah Crater (known as Maqla Timiyah in Arabic), in the west-central part of the harrat. Nowadays, with tourism having discovered the site, the stunning 700m deep depression with its awesome 2km diameter is easily accessible without specialist vehicles. A paved road leads right up to the crater's edge and only its remoteness - 650km from Riyadh or 350km from Jeddah - presents the visitor with a sense of challenge.

INFO OF INTEREST DIALING NUMBERS:

Country code 966; area codes Riyadh 1, Jeddah/Mecca/Taif - 2, Dammam/Dhahran - 3, Madinah/Tabuk/ Yanbu - 4. TIME: Greenwich Mean Time plus three (GMT+3) = Eastern Standard Time plus eight (seven during Daylight Savings Time).

CALENDAR: Islamic (Hijrah), dating from emigration of the Prophet Muhammad from Mecca to Medina; weekend, Thursday and Friday. The 12 months of the Islamic lunar year are Muharram, Safar, Rabi’ Al-Awal, Rabi’ Al-Akher, Jumada Al-Awal, Jumada Al-Akher, Rajab, Sha’ban, Ramadan, Shawwal. Dhu AlQadah , Dhu Al-Hajjah. HOLIDAYS: All Muslim holidays are observed in accordance with the lunar calendar. Saudi Arabia uses the Islamic or hijri calendar, based on the lunar year, which is about 11 days shorter than the Gregorian year. The weekend is Thursday and Friday. During the month of Ramadan (approximately August 1st to 29th in 2011), working hours are reduced and commercial centres open only after sunset. During

Eid Al-Fitr, the feast of the breaking of the fast, from the evening of the twenty-fifth day of Ramadan to the fifth day of Shawwal, all offices and schools are closed. The same happens during Eid Al-Adha, the feast of the sacrifice marking the end of the Hajj, from the fifth to the fifteenth day of Dhu Al-Hajjah, and on September 23rd, Saudi Arabia’s National Day.

BUSINESS: Government offices open Saturday through Wednesday from 7:30 am to 2:30 pm; private businesses from 8:00 am to noon and from 3:00 pm to 6:00 pm; general banking from 8:00 am until noon and from 5:00 pm until 8:00 pm; markets and shops from 8:00 am until 10:00 pm. Shops and offices are mandatorily closed to the public during the five daily prayers.

CURRENCY: The Saudi Riyal (SAR or SR) is pegged to the U.S. dollar ($1=SR3.745); bank notes, with Arabic and English writing, in denominations of 1, 5, 10, 50, 100 and 500 riyals; coins in denominations of 5, 10, 25, 50 and 100 halalahs, with 100 halalahs equal to one Riyal; metric system in use.

The weekend is Thursday and Friday. 250 · W G u i d e s