Siemens boss Joe Kaeser urges Saudi Arabia to stick with Vision 2030

Joe Kaeser, CEO of German engineering giant Siemens. (Illustration by Luis Grañena)
Updated 13 January 2019
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Siemens boss Joe Kaeser urges Saudi Arabia to stick with Vision 2030

  • Kaeser believes Saudi Arabia will continue to be an attractive target for foreign investment
  • Siemens would be 'very interested' in getting involved in the NEOM project

DUBAI: Joe Kaeser, CEO of German engineering giant Siemens, notably missed the Future Investment Initiative (FII) Summit in Riyadh in October. But he was back in the region last week to take the pulse of his business in the Middle East, and had a message for Saudi Arabia: Your Vision 2030 strategy has a compelling logic — now make sure you see it through.

Kaeser — arguably the most powerful businessman in the biggest economy in Europe, and boss of the world’s leading engineering company — was at the UAE Energy Forum, organized by the Gulf Intelligence consultancy in Abu Dhabi. He took time out from the proceedings to talk to Arab News about the energy business, a US-China trade war, and the future of Europe amid the Brexit chaos.

But mostly he wanted to talk about Saudi Arabia. “Vision 2030 is a very compelling strategic concept. We commend the leadership there ... the big question in the Kingdom is always about execution,” Kaeser said.

Coming from a businessman who declined an invitation to attend the FII amid the global uproar that followed the death of Saudi journalist Jamal Khashoggi, and against a background of trade spats between the Kingdom and Germany, that amounts to a reaffirmation of confidence in Saudi Arabia and a desire for “business as usual” between the two countries.

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BIO

BORN

•Arnbruck, Bavaria, 1957

EDUCATION

•Regensburg University of Applied Sciences

CAREER

•Joined Siemens aged 23

•CEO since 2013

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But Kaeser has advice for the Kingdom: Do not underestimate the social disruption that can come from large-scale economic change. “It’s a huge effort executing transformational matters,” he said. “It causes… uncertainty which, sometimes, if not properly controlled, causes societal uproar. That’s the last thing you need in the Kingdom, France, Germany or anywhere.”

While he feels that the Kingdom has leaders who can manage the change — singling out the “most regarded” Khalid Al-Falih, energy minister and chairman of Saudi Aramco — Kaeser recommends that Saudi policymakers adopt a more practical approach to the transformation process. “Typically, what I’d recommend doing is to ‘cut the elephant into pieces’ and make it actionable one piece at a time,” he said.

Kaeser sees the first “piece of the elephant” as “sustainable, affordable and reliable infrastructure,” and he recommends that Saudi strategists concentrate on that. 

“Once you’re done with that, you can build on those pillars. You can build industrialization of any sort, tourism business of any sort, societal development of any sort,” he said. “If electrification and moving people and goods … aren’t in shape, it becomes very difficult.”

Kaeser said focusing on the industrial basics is preferable to a “big bang” move such as the planned initial public offering (IPO) of Saudi Aramco. “If you float 10 percent of Aramco, then what? You get some money, but does Saudi Arabia need money? I’m not so sure,” he added. “They’ve got the resources, they have everything it takes … so I’m not so sure I’d pick this (the Aramco IPO) as the highest priority.”

But he is enthusiastic about other flagship projects that the Kingdom is planning, such as the NEOM megacity. He revealed that Siemens would be very interested in getting involved in this $500 billion plan.

“NEOM is a fascinating project. We may or may not be involved in that — there’s a bidding process — but if you look at NEOM, it’s almost like a recycled business description for Siemens. Of course, we could help and play a role, but it depends on the partnerships and everything else,” Kaeser said. 

He sees NEOM as more than just an industrial project. 

Saudi Arabia as a Kingdom and as an economy will always be attractive for foreign investment

Joe Kaeser

“It’s a fascinating project because it addresses urban infrastructure in a modern way. It addresses sustainable and renewable energy, and the freedom to move by Western standards, which could help to get the region or the Kingdom used to those types of things, which is a massive transformation,” he said.

Kaeser sees NEOM and other big projects as the next step in a process of social transformation, like the decision to allow women to drive. “Saudi Arabia plays a major role in the region, a stabilizing role in every way, so people say, ‘isn’t it too slow that only now they have women driving?’ I say: You don’t understand. This is a massive transformation for the people of the Kingdom. This is huge. I always tell people in Europe that this is a massive move,” he said.

There has been speculation that the fallout from the Khashoggi murder will hit foreign direct investment (FDI) into the Kingdom. Kaeser does not agree with that notion, but believes that much depends on how Saudi policymakers handle the current investigations.

“Saudi Arabia as a Kingdom and as an economy will always be attractive for foreign investment… based on the potential it has in the region as well as its economic potential,” he said. “So I think in the long term there will be no change, but it depends on how a political or economic ecosystem handles crises.”

The Kingdom deserves the patience and trust of the international community to investigate the matter in its own way and according to its own laws, he added. “If murder happens in Germany, the US or France, there’s a process. There’s an investigation, a trial and a conviction. That’s something the Kingdom deserves too,” Kaeser said.

Returning to the theme of policy execution, Kaeser said the UAE has been the most successful state in the region in terms of implementing renewable energy policies. 

Siemens has based its regional headquarters in Abu Dhabi’s Masdar City, the centerpiece of the UAE’s drive for sustainable energy. “Masdar City was an execution on the policy and the concept.  Did it go as fast as it was intended?  No. But did it get implemented? Absolutely. We moved into Masdar and we saved a lot of cost,” he said. “Sometimes, the execution is slower, but the UAE always executes, and that’s a fascinating track record that will attract foreign investment.”

While in the UAE, he was also looking at progress on the Siemens partnerships with the Dubai Expo 2020, the Dewa power and water utility, and Al-Maktoum solar park in Dubai. In particular, he thinks that recent technological advances have made hydrogen power a much more economically attractive proposition.

“I’m not sure anymore that modern mobility will be all electric. I could well imagine that hydrogen plays a much bigger role in the infrastructure of renewable energy ecosystems,” he said.

As one of the most powerful European industrialists in the world, Kaeser has firm opinions on the future role of the EU, caught in the middle of a potential trade war between the US and China. 

Judging by recent World Bank forecasts of falling American gross domestic product (GDP) next year, “it seems the biggest loser of the trade war is going to be the US in 2020, to have a GDP slowdown from 2.8 to 1.7 percent,” he said. “This is massive, almost cutting in half.”

The EU can help prevent such damage, he added. 

“European countries can have their sovereignty, but what Europe needs immediately, to be a meaningful third power to the other two, is a joint foreign economic policy — what Europe says on economic terms, on free trade, on relations with China and the US,” he said.

“That’s what we need to have for Europe to be a third power, maybe even an integrative power, to integrate the two others and help facilitate the notion that a unified world is a good world to live in. That’s what’s at stake.”

One big regret for him is the current uncertainty over the UK’s role within Europe. “I would’ve wished for Britain to stay (in the EU), because Britain’s service industry is probably the best in the world. The financial industry in the UK by quality has been the best in the world,” Kaeser said.

“Germany is the best engineering country in the world. I don’t mean to be arrogant — I think it’s a fact. France has a good way of dealing with diplomacy and military activity. So we could form quite a decent, powerful Europe if you combine these strengths.”


EU sets out plans for ‘limited’ US trade deal

Updated 13 min 24 sec ago
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EU sets out plans for ‘limited’ US trade deal

  • Negotiating a trade deal was included in a transatlantic truce secured last year
  • EU governments were shell-shocked last year when Trump imposed tariffs on metals imports as part of his ‘America First’ vision

BUSSELS: The EU on Friday published its negotiating plans for a free trade deal with the US, part of an effort to avert a trade war with US President Donald Trump.
Negotiating a trade deal was included in a transatlantic truce secured last year after the US slapped tariffs on steel and aluminum imports from the EU, alarming the world.
The effort is also part of an effort to stop Trump from slapping tariffs on European car imports, a danger that has especially unnerved export powerhouse Germany.
“It is not a traditional (trade deal)... it is a limited but important proposal engaged on industrial goods tariffs only,” EU trade commissioner Cecilia Malmstrom told reporters.
The process however has got off to a rocky start, with the US side last week including agricultural products in their plans, which is an absolute no-go for the Europeans.
“In this mandate, we are not proposing any reduction of tariffs on agriculture. That area was left outside,” Malmstrom insisted.
The 17-page mandate submitted by the US also included other demands and charges that are unacceptable for the EU, including that Europe stop manipulating foreign exchange rates.
Given the split, the EU is entering the negotiations with trepidation, especially since the threat of auto duties is still very much alive in Washington.
The commission handles trade negotiations for the EU’s 28 member states and the plans must now be approved by the national governments before negotiations actually start with Washington.
Brussels and member states are wary after the failure of the so-called TTIP talks, a far more ambitious transatlantic trade plan which stalled amid fears a deal with Washington would undermine EU food and health standards.
Opposition by activists has already resurfaced with Friends of the Earth Europe warning that “there can be no trade-offs on food standards” in the deal.
EU governments were shell-shocked last year when Trump imposed tariffs on metals imports as part of his “America First” protectionist vision.
Brussels responded by slapping counter-tariffs on more than $3 billion in US exports like bourbon, blue jeans and Harley-Davidson motorcycles.
But Trump and European Commission President Jean-Claude Juncker in July called a truce, agreeing that as both sides pursued a trade deal, neither would impose additional tariffs.