General Electric President and CEO Jeffrey R. Immelt says his company is expanding its presence in Saudi Arabia. It recently announced an additional SR 3.75 billion investment in Saudi Arabia. Immelt is the ninth chairman of GE, a post he has held since September 2001. Immelt was named one of the “World’s Best CEOs” three times by Barron’s, and since he began serving as CEO, GE has been named “America’s Most Admired Company” in a poll conducted by Fortune magazine. Immelt earned a B. A. degree in applied mathematics from Dartmouth College in 1978 and an MBA from Harvard University in 1982. “I would encourage young Saudis to dream about starting their own businesses, working for private companies, to be entrepreneurs. Their lives should be one that is different than that of their parents. They should be more adventurous — more risk-taking,” said Immelt is this exclusive interview with Siraj Wahab of Arab News during his recent visit to Saudi Arabia.
Following are the excerpts from the interview:
Mr. Immelt, thank you for agreeing to speak with us today. General Electric through its actions of the last few years has demonstrated a great interest in Saudi Arabia as well as other member states of the Gulf Cooperation Council, so I’d like to ask you about existing projects and goals and your vision of GE’s role in Saudi Arabia’s industrialization drive in particular and generally about the corporation’s role in the economic development of the region. You met Crown Prince Salman in Jeddah during your current visit. Can you tell us the thrust of your talks?
This is the third time I met the crown prince. I think it is very consistent with the Vision 2020 of the Kingdom, which is how to drive the transition from an oil-based economy to one that is more diversified, creating local jobs, creating local capability. We discussed the ways how GE is investing in that regard, and he described how important that is to the Kingdom. Every time I have met him, he has tried to underline the importance of the US-Saudi relationship, and I think how investments like the ones we are making are real win-wins for both countries. And so he is always extremely gracious about the importance of good relationship with the US. So those were the two main subjects.
How important is Saudi Arabia to GE and its growth in the region? All these investments that are being made such as the announcement of the $ 1 billion investment must be part of a grand strategy? Can you give us the bigger picture?
The relationship has always been built around the industrial community in the Kingdom, which has typically been built around the key industries GE is in — Saudi Aramco, SABIC, Saudi Electricity. It is a natural progression for us to find ways to localize some of our technologies. We always like to do it around where our customers are. We always like to do it in hopefully big markets. I think about it as a kind of a transition of what do we sell here that we can localize. What do we localize here that we can export? And ultimately GEMTEC (GE Manufacturing Technology Center) or other things we do should be able to create exports from Saudi Arabia to the rest of the region and then what can we learn here that we can spread to other parts of the world. For instance, we have had a program since 2007 with the Ministry of Health that really is about driving process improvement for health care. The idea that has been developed by the Ministry of Health in the Kingdom is relevant to Brazil and other parts of the world. I think it just deepens our relationships, and clearly localization and job creation are two aspects of that.
Has the stability of the GCC member states been a factor in your long-term planning?
I put that at two levels. In a macro sense, in places like Saudi Arabia and Qatar, you see great stability. (There is) more transparency. They have become safe places to do business over time. And then you have the Arab Spring and you have other things that you look at the region, but when you really look at the big picture you find that there are more opportunities for investment in the region today than there ever have been.
General Electric also is involved in nuclear energy. Is GE actively courting business for that business line in Saudi Arabia?
This is one area where I will follow the lead of Saudi Electricity Co. and others in terms of where they want to go with nuclear power. We are still in the business. We have a joint venture with Hitachi. If that was of major interest in the country, we will surely be interested in participating. There is something profoundly different with nuclear power. We really have to follow the lead of the government to move forward.
What is GE focused on currently?
The three places we have talked about are: one, health care, where we are doing training and process improvement but also localizing equipment; two, energy, both power generation and oil and gas, more technology development, more training and more development in general; and three, the whole series of things around innovation, whether it is partnering with technical schools or partnering with Saudi Aramco on the development of small and medium enterprises (SMEs) — things like that. So innovation, health care and energy is our focus. You will see a very good footprint from GE here in the Kingdom — an increasing footprint.
And what is the Saudi government’s focus?
I think the Saudi government’s main focus is on energy efficiency and really getting the most out of the fuel — so being able to drive fuel diversity. I wouldn’t be surprised that the Kingdom drove either nuclear or solar or some new technology in the next, let’s say, five years. I don’t know exactly which one but we’ve had many discussions on both.
Can you enlighten us a little more on SME development and the GE’s decision to partner with Saudi Aramco Entrepreneurship Center (Wa’ed) on this front?
I think SMEs are very critical to every developing country in terms of how to create jobs, how to create wealth; that is very critical. And it’s not as well developed in the Kingdom as it probably should be. I can’t say I understand all the reasons why. I am sure there are studies and organizations like SAGIA (Saudi Arabian General Investment Authority) and other institutions that are more knowledgeable than I am, but it is really important. As we localize more here, we need a great supply base for GE’s Kingdom hub to be successful. Through the new partnership, GE will work with Wa’ed to further drive the Kingdom’s SME sector and develop a solid supply chain in manufacturing and services in the energy sector to meet the needs of local, regional and global customers. GE will also partner with the SMEs, developed by Wa’ed, to enhance their competencies as potential suppliers of the company in the energy sector. The idea is really to create a pool of money that could create startup funds and things like that. It is both in Saudi Aramco’s and GE’s best interests to do. If you tour any of our facilities, a lot of the machine parts come from outside the Kingdom; they come from Europe or other places. There is no reason why all that could not be done in Saudi Arabia.
What are the challenges in terms of achieving localization? And how is GE facing them?
I look at it from a very advantageous place. The people in GE, when we say we are going to do something, we do it. I can give you a bunch of stories of how hard localization is, but I have a great team. Look at this place, GEMTEC (in Dammam’s second Industrial City). Three years ago we had nothing here. When we put our mind to things, we have enough good people in the company. We know how to recruit. We know how to train. We do all we say we are going to do, and even though there are always bumps in the road, some places are harder than others. This is the kind of investment we should be doing in the Kingdom right now — and can do.
When young and talented Saudis read this interview with one of the world’s most successful CEOs, what would you want them to think or what would you be telling them?
The first thing I would tell them is to study hard and come to work for GE. I would tell them about the value of hard work — the value of an education. The Kingdom is not different than the countries I visit in terms of development. There is a certain sense among big groups of young people that maybe their life will be more meaningful if they work in government institutions, but I would encourage young Saudis to dream about starting their own businesses, working for private companies, to be entrepreneurs. Their lives should be one that is different than their parents’ lives. They should be more adventurous — more risk-taking. I think that would be great. If the government or the educational systems could make young Saudis more adventurous, more ambitious and more willing to take risks that would be a good thing for the country.
You said you have visited Saudi Arabia on a number of occasions. How do you compare today’s Saudi Arabia with the one you encountered on your first visit?
I think there is much more sense of purpose about the transition from oil to a diversified economy. I remember coming here when oil was eight dollars a barrel. That is a very different time than it is today. I remember coming here very early in my GE career when oil was maybe 40 or 50 dollars, but that was a very high price at that time.
And when was this?
This was in the 1980s. I think my first trip to the Kingdom was maybe in the 1983-84 time-frame. Today, if you speak across the government institutions, they all have this Vision 2020 in mind. They all have this diversification challenge in mind, and I think that is different. There is much more consistency of theme and of purpose today.
This $ 1 billion investment must not have been an overnight decision. What led GE to committing this at this point in time?
This is the right place and the right time. We are committed to the region. We very much believe that the Kingdom is the linchpin (of the regional and global economy). This is the biggest economy, and we wanted to have some deeper roots in the region. So this was all very logical and pretty straightforward in terms of investing.
If my memory serves me well, I recall that GE established a large aviation maintenance facility in Qatar. Are these facilities in Qatar and Saudi part of an integrated GE strategy in the GCC member states or simply responses to various business needs for various GE product lines?
Sure. We have got a big operation in Doha; we have got a big partnership in Abu Dhabi. We have got all the things we are investing in Kingdom. We have opened up offices in Iraq. We have a presence in northern Africa. We see this as a very strategic long-term growth region for GE.
GE is also into renewables, and Saudi Arabia is also focusing on them big time. Will we be seeing greater cooperation on that front?
We have always been big proponents of a broad, diversified energy portfolio. We never wanted to be overly dominated by one fuel. So we have nuclear; we have gas; we have steam; we have wind; we have solar, and I think it is a luxury a big company has. So we don’t have to pick which one wins or which one loses. Wind has done great in the US this year; it will terrible next year. It is going to grow in Brazil, Canada — maybe someday in places like Turkey, Romania — different places around the world, so we like having a broad portfolio.
What is the big change you have witnessed in Saudi Arabia in the years since you have been visiting Saudi Arabia?
The most important thing is the change in attitude that I see in the Kingdom today to really embrace change — and a sense of purpose about the human capital in Saudi Arabia. Our sense is that we can hire really great people here.
Including women?
Ten percent of our work force is women, and I think we are looking for other initiatives that we can have as a company to advance the recruitment of more women inside GE.
All these steps are a sure sign that GE is far ahead of the competition and that it building on the 80-year heritage in Saudi Arabia?
I always hope so. I always want us to be ahead of the competition, but I think we never can be arrogant, and we can never slow down. Our customers and the countries we do business in are all moving forward. They always have an arc of progress, and we have to aim forward and try to intercept where they are going to be in 2015 or 2020. We need to be right there, and we need to be one step ahead. What we really want to do is to listen to our customers, listen to the governments where we do business so we can position the company for the future.
What are your impressions about the Saudi economy?
In the short term, it is always about the price of oil. The world economy will continue to be volatile. There is a long-term upward bias on the price of oil. If you believe in the theory like I do, that there will be a billion consumers joining the middle class in the next decade and that there will be another 2 or 3 billion in the next 20 or 30 years joining the middle class. That means more cars, more consumption and higher oil prices. At least in the short term, that will drive the Saudi economy.
That is interesting. But then there has been this controversial report from Citigroup Inc. about Saudi Arabia becoming an oil importer by 2030 because of heavy domestic consumption. What is your take?
Probably not. There has been a historical underestimation about — and this is true not just in Saudi Arabia — how productive these wells have been. I am quite convinced that Saudi Aramco is very savvy. My sense is that there is more there. There will be more capability to get what is in there. There will be new technologies that will enhance recovery. I always think energy efficiency is important every place, not just the Kingdom; I think every country needs to try energy conservation and energy efficiency. By the same token, I have seen just in the last decade the estimates from the North Sea triple. A decade ago, people were writing about the North Sea being kind of over-utilized and things like that, so these things have a way of coming and going. Deep down inside, my view is that there will be more oil here over time.
Final comments...
Good people. The Saudis are very good people.
