Saudi Arabia is not just rich in oil. It has abundant minerals. Historians believe that as far back as 3,000 years ago, gold, silver and copper were being dug in significant quantities from the Mahd Al-Dhahab mine, 290 kilometers to the northeast of Jeddah and traded throughout the Middle East and the Mediterranean.
In recent years geologists have also discovered commercial deposits of precious and industrial minerals all over the Kingdom. Besides gold and silver, these include bauxite, chrome, copper, iron ore, lead, nickel, phosphates, potassium ore, salt, tin, tungsten and zinc.
The restarting of the Al-Masane copper and zinc mine in Najran province could well herald the beginning of a whole new income stream for the country, gained from the riches beneath it. The original operation was opened after the deposits were discovered in 1967. However the mine struggled for some time with low international commodity prices and was eventually mothballed. Work on reopening it began last year and on Tuesday the formal start-up was marked by a ceremony attended by the Najran governor, Prince Mishal bin Abdullah.
Besides the revenues that Al-Masane’s rich deposits will generate — they are conservatively put at 4.9 million tons of both metals (mixed in with not insignificant quantities of gold and silver) — the mine is creating jobs for Saudis and also bids fair to be a textbook lesson in Foreign Direct Investment (FDI). The private company, Al-Masane Al-Kobra Mining (AMAK) which is running the mine is a joint venture between Chinese and eight Saudi investors. The Chinese are bringing technology and operational management skills, as well as capital. The transfer of this technical and mining know-how is an integral part of the project. Thus more than 100 young Saudis have already been hired and given scholarships to study mining technology and engineering. As the mine expands its operations, there are certain to be further opportunities for suitably qualified young people to undertake more focused training, at the end of which they too will be given responsible positions within AMAK’s operations and management.
The mine is also important because it is the first recent private mineral extraction venture in the Kingdom. Therefore its owners have the opportunity to demonstrate the government’s conviction, that the private sector has a pivotal role to play in expanding Saudi Arabia’s non-oil economic growth. The impact of business in the broadening and deepening of the economy will be greater for the involvement of international partners, with strong flows of FDI.
Though in the last year it has slipped a couple of places, Saudi Arabia is still the twelfth most accessible market out of the 183 assessed by the World Bank’s International Finance Corporation (IFC) in its “Ease Of Doing Business Index”. Since it joined the World Trade Organization (WTO) in 2005, the Kingdom has swept away a raft of foreign investment restrictions that were designed to protect local businesses. Further and final alignment with the WTO’s strict free trade rules is ongoing.
However, the Kingdom has not been very good at selling the FDI story and pinpointing the immense opportunities that exist here for the right international firms, with the right products and services. Some overseas investors have had to find out a great deal of the potential for themselves. There is still a perception that Saudi Arabia is a tough regulatory and economic environment in which to work. Yet regulatory delays and official approvals are now no greater here than in most advanced economies and, in certain cases, the processes are actually swifter and more efficient. The IFC’s research ought to be proof-positive of this reality.
However, the greatest advertisement for the Kingdom in terms of FDI is of course existing and successful joint ventures. There is already a significant number of such operations in, for instance manufacturing, IT and engineering. Any potential foreign investors doing their research, have much data that they can examine to see how international companies have got it right in Saudi Arabia, and inevitably, sometimes got it wrong.
Nevertheless, there is something more compelling about a private sector mine like Al-Masane, that is likely to excite greater attention from outside investors. Maybe it is the elemental business of winning wealth from the ground, in sometimes dangerous operating conditions, that gives a mine this higher profile. Therefore, in the circumstances, Al-Masane is more than just about profitable mineral extraction, economic broadening and the creation of jobs for Saudis. It is also likely to be an important FDI showcase. That being so, we must all wish the venture every success.
Editorial: A showcase project?
