Japan is now Saudi Arabia’s largest trading partner, just ahead of the US. That is mainly due to higher prices for Saudi oil and a drop in oil sales to the US. In terms of investment, Japan ranks second in the Kingdom, after the US. According to Japanese diplomats in the Kingdom, the US had invested a total of $11.018 billion in the Kingdom to the end of 2006, compared to Japan’s $8.309 billion. At year’s end there were 27 major Japanese-Saudi joint ventures in the Kingdom.
But Japanese investments are on the increase. In 2006, Japan was the largest investor, ahead of all other advanced countries. Its investment was $3.5 billion compared to France’s $2.1 billion, the US’s $1.6 billion, and China’s and Russia’s $1.1 billion each. Petrochemicals remain the main area of Japanese investment in the Kingdom. That level of investment is expected to increase as Saudi Arabia develops more downstream petrochemical industries and develops its mineral industrial potential.
With the Kingdom becoming a member of the World Trade Organization and its World Bank ranking in terms of attractiveness for foreign direct investment jumped from 67th to 38th place in a year, Riyadh is hoping to attract some $800 billion in investment from Japan over the next decade.
In particular, the Kingdom is looking for investments and partnerships in desalination, water, power, health projects, education, infrastructure, information technology, civil aviation and railroads — areas in which the Japanese have considerable expertise.
Economically, the most impressive Japanese investment in the Kingdom in recent years came in August 2005 when Sumitomo Chemical Co. and Saudi Aramco agreed to a $10-billion joint venture to build an integrated complex for refining and petrochemical products in Rabigh, north of Jeddah. The plant will be the world’s largest integrated refining and petrochemical complexes A total of 2.2 million tons of olefins, along with large volumes of gasoline and other refined products, are to be produced annually once the plant begins operations next year. Saudi Basic Industries Corporation (SABIC) recently signed a letter of intent with the Japanese Engineering Toyo Company to design and establish a 700,000-ton gycol ethylene plant in SABIC’s YANSAB compound at Yanbu Industrial City. The plant will be the third established in the compound.
In mid-2006, Chiyoda Corporation, one of Japan’s leading engineering and construction companies, was awarded, together with its Saudi Arabian affiliate Chiyoda Petrostar, the contract for the engineering, procurement, construction and commissioning of a world scale, 2,900-ton-a-day methanol plant and associate utilities facility project by International Methanol Company (IMC). IMC is a joint venture between Saudi International Petrochemical Company (SIPC) and Japan-Arabia Methanol Company (JAMC), owned by a consortium of major Japanese companies led by Mitsui. The majority of the methanol produced is to be earmarked for JAMC. The project, to be completed by 2010, is at Jubail Industrial City.
The choice of contractors is an example of why Saudi industry so often chooses Japanese partners. Chiyoda’s expertise obtained in past methanol projects, combined with abundant EPC experience in the Kingdom, was a major factor in its selection. Due to its substantial experience and expertise in engineering, procurement and construction of synthesis gas process plants, Chiyoda is able to offer a technically and commercially reliable proposal with a competitive price, which resulted in Chiyoda’s selection for this project.
Meanwhile, capacity at SABIC Jubail affiliate, the Eastern Petrochemical Company (Sharq) is also being expanded. The plans include a 1.3 million-ton ethylene plant and polyethylene plants with total annual capacity of 800,000 tons. Sharq is a 50:50 joint venture between SABIC and a Japanese consortium, led by Japan’s government and the Mitsubishi group of companies. The $2.28-billion Sharq’s third expansion project is due for completion in mid-2008.
Japan is gradually diversifying its investment in Saudi Arabia.
A week after the Aramco Sumitomo deal was signed, a consortium led Japan’s Marubeni Corporation and including JGC Corporation, Itochu Corporation, both of Japan, and ACWA Power Projects of Saudi Arabia was awarded the contract to build, own and operate the oil-fired cogeneration and desalination plant for the Rabigh petrochemical complex. The concession is for an initial term of 25 years. The contract for the engineering, procurement and construction of the new cogeneration and desalination plant was awarded at the same time to the Japanese giant Mitsubishi Heavy Industries Ltd. (MHI) on a full turnkey basis.
There are other areas. For example, Unicharm is expanding the project of diaper manufacturing.
The Kingdom, which supplies between 25 and 30 percent of Japan’s oil imports, and Japan have agreed to set up a ministerial committee to discuss investments and stable energy supply following a call from former Japanese Prime Minister Shinzo Abe during his visit to the Kingdom last year.
“Until now, Japan let the private sector do the dealing. With the governments’ involvement, Japan’s energy resources are expected to become more stable,” a Japanese diplomat said.
Japan is optimistic that the historic visit of Crown Prince Sultan to Tokyo in April this year has opened a new chapter in Saudi-Japanese relations. Many Japanese companies, buoyed by the recovery of their country’s economy, are planning to expand their business links with the Kingdom.
According to Japanese Ambassador Shigeru Nakamura, the Kingdom’s “Look East” policy could lift their Saudi-Japanese relations to a new high. He cited the $9.8 billion “Petro-Rabigh Project” being undertaken jointly by Sumitomo and Saudi Aramco as an example.
“When completed in late 2008, this will be one of the largest integrated refining and petrochemical projects ever built at one time. A total of 2.4 million tons of petrochemical solids and liquids, along with large volumes of gasoline and other refined products, will be produced,” said the ambassador.
Saudi Aramco has invested in Showa Shell Sekiyu in Japan as well.
Japan is equally busy encouraging its business community to invest in the Kingdom and making all round efforts in that direction.
A Saudi-Japan Investment Workshop was held in Riyadh on November last year. It was hosted by the Saudi Arabian General Investment Authority (SAGIA) in cooperation with the Japan Cooperation Center for the Middle East and the Japan Bank for International Cooperation. Three months later, the 8th Saudi-Japan Business Council Joint Meeting was held in Tokyo. A delegation sponsored by the Council of Saudi Chambers of Commerce & Industry met with 100 Japanese businessmen to discuss bilateral business prospects.
The presence and interaction of former Japanese Prime Minister Shinzo Abe, Minister of Commerce & Industry Hashim Yamani and Saudi Arabian General Investment Authority (SAGIA) Gov. Amr Al-Dabbagh added importance to the meeting. The delegations from both sides had “fruitful” meetings.
The Saudi delegation was also briefed at the Japan Automobile Manufacturers Association Inc., Japan Auto Parts Industries Association and the Japan Automobile Tyre Manufacturers Association. The 9th Japan-Saudi Business Council Joint Meeting is set for Jan. 20, 2008, in Riyadh.
JETRO Works to Enhance Trade Ties
JETRO Riyadh is a semi-governmental nonprofit organization established in October 1994 to promote and enhance investment and trade ties between Japan and the Kingdom. It is the joint representative office of Japan External Trade Organization (JETRO) and Japan Cooperation Center for the Middle East (JCCME).
JETRO Riyadh operates six Invest Japan Business Support Centers (JBSCs) all over Japan for the provision of one-stop support and service to foreign firms seeking to set up business in Japan. The centers, linked to relevant government ministries and agencies, provide free temporary office space, consultation with expert advisors and access to a wealth of business information.
It is offering Saudis, as well as other international business interests, the opportunity to search for a business partner on the Internet. The program is easy to use and allows companies to register their products online and be seen by other businesses on a global scale as well as to browse through 30,000 Japanese businesses covering a wide range of fields from export and import of products/parts, business and technological tie-ups, according to JETRO Director Ahmed Hussein Ahmed.
“However, with the Kingdom’s entry into the WTO, trade has become more liberalized and we at JETRO hope that Saudi businesses will take advantage of this unique trading tool,” he said.
Since its establishment, JETRO has worked as a catalyst and made efforts to promote and enhance mutual cooperation between Japan and the Kingdom in areas such as investment, technology transfer, trade promotion, human resource development, market surveys, etc.
