The Saudi Mega Projects conference that has just ended in Dammam went to the heart of the problem facing Saudi business. It is one of vision. The country is awash with opportunities but the Saudi business community is not geared up to the potential — indeed is not really focused on it. There is a wealth of subcontracts out there for downstream oil and gas industries, power generation, the growing mining sector and the development of the transportation network, notably railways. As Isam Al-Bayat, vice president of Saudi Aramco, pointed out, Saudi Aramco plans to spend $20 billion on equipment and $23 billion on services in the next five years. That is a considerable amount of business and it is just Aramco. Take Yanbu. At the beginning of the year, total investment there was slightly under SR20 billion, but in the next 15 years it is expected to exceed SR130 billion. When it comes to investment potential, the sky is the limit.
Many of the contracts could go to Saudi businesses but that is not happening at the moment. It is foreign companies that are going to profit and foreign jobs secured or created, and done so with Saudi money. It should be the other way around. The trouble is that there are too many small Saudi companies, of small vision, pursing small goals: An office block here, a small housing development there, a distribution contract to import a foreign product, a franchise on the latest food outlet or department store. They are useful but they are not in the same league as the requirements.
Saudi business needs to raise its sights. Saudi companies need to link up with foreign operators if they are going to win a healthy share of what will be very large contracts indeed. That has to happen if jobs are to be created in the Kingdom and the Kingdom’s wealth remain in the Kingdom to create still more business and still more jobs. Every riyal that stays in the Kingdom helps the Saudi economy grow; every riyal that goes abroad is an opportunity lost.
The way ahead, as suggested by Abdul Rahman Abdul Karim, deputy minister of petroleum and mineral resources for company affairs, is for Saudi companies to form joint ventures with foreign ones so that they can win some of the $130 billion worth of contracts expected to be awarded in the oil sector in the future. There is scope for several different Saudi companies each with their own different skills, linking up with a foreign firm and thereby creating the scale of operation needed in many of these contracts.
Some people think the days of heady economic development are over, that things will never be what they were in the 1970s and 80s. They are wrong. Saudi Arabia’s economic future is as promising as ever. It lies in downstream oil and gas industries, the mining and downstream mining sector, and industries requiring massive energy flows. It does not lie in agriculture or automobiles or shipbuilding or pharmaceuticals. Providing Saudi business sticks to what it can do best, and providing it has the courage to rise up and seize the opportunities available, the country’s future prosperity is assured.
