In December, 2005, the ribbon was cut. An entire city the size of Washington, D.C., had just sprung out of the desert in a couple of years. As you read this, another five modern metropolises, each the size of Houston, are rolling forward in planning and construction stages. What nation has the organization and financial will to bring such immense projects to fruition? Hint: they have been one of America’s strongest allies and trading partners for 80 years.
If you guessed Saudi Arabia, go to the head of the class. These construction ventures are but the tip of that nation’s exploding economic makeover.
In 1929 diplomat and millionaire Charles Crane and well driller Jack Philby ventured to Saudi Arabia at the request of King Ibn Saud, who sought artesian wells for his water-starved nation. Months later the team reported back to the king that they had failed to find any water — but would oil do? Since then, the kingdom of Saudi Arabia has leapt to the forefront of the global financial fray as a major player, with a GDP rivaling most larger European nations.
Now, as oil grows more precarious and the population more demanding, Saudi Arabia is unfolding a dazzling economic diversification program. And Americans have been surprisingly slow to take advantage.
The New Jersey Chamber of Commerce will host “The Economic Boom in Saudi Arabia” on Thursday, March 4, at 11 a.m. at the Heldrich Hotel in New Brunswick. Cost: $75. Visit www.njchamber.com.
Speakers include #b#Edward Burton#/b#, CEO of the U.S.-Saudi Arabian Business Council; #b#H.E. Abdulla Zainel Alireza#/b#, Saudi Arabia’s minister of commerce and industry; #b#Ford Fraker#/b#, former U.S. ambassador to Saudi Arabia; #b#Peter Robertson#/b#, former vice-chairman of the board of Chevron; and #b#Chris Wilson#/b#, assistant trade representative for Europe and the Middle East.
As the USSABC’s leader, Burton spends 85 percent of his days on the road, either initiating international connections in Saudi Arabia or extolling the benefits of such links throughout North America. Yet he claims his trade service career roots in New Jersey, where he lives.
Shortly after earning his bachelor’s in political science from the University of Charleston and his law degree from Penn in the late 1980s, Burton came to Trenton. Working under Governor Thomas Kean, he began in the state’s Division of International Trade. Staying on through governors Florio and Whitman, he saw his division upgraded to a commission and himself to director in 1999. He also served as director of the U.S. Export Assistance Center in Philadelphia.
Burton has worked in the U.S. Foreign Commercial Service, overseeing all Saudi/U.S. trade relations and fiscal matters for America’s consulates and embassy there. Serving as the commercial attache in the U.S. embassy, Burton was also appointed to act as regional construction coordinator for Iraq following the American invasion. “We definitely made great progress there,” says Burton, “but this rebuilding will be a challenge met over decades, with great efforts.” He took over leadership of the U.S.-Saudi Arabian Business Council in 2006.
In 2008 the Kingdom of Saudi Arabia reveled in a GDP of $476 billion — by far the largest in the Gulf area. In 2009 it dropped almost one-third as oil prices and production took a steep downturn. Yet even before, throughout much of the new millennium, the kingdom has quietly set a new social and fiscal course. And for American companies it is a rebuilding track studded with $1.4 trillion in investment and partnering opportunities. “This,” says Burton, “is the unclaimed prize.”
#b#Taking new aim.#/b# Saudi Arabia is attempting to do something exceedingly rare for a government — learn from history. It has watched American dot-com investors crash and seen one-product African nations, such as Togo, which withered when its phosphate mines dried up.
Oil, of which the Saudis are top producers with the largest reserves, has given them a GDP double the Arab Emirates. It is also increasingly costly to produce and environmentally less attractive. But Burton points out that Saudi Arabia’s reformation rationale is far more complex and goes beyond putting its eggs into different baskets.
Saudi Arabia, comparatively unscathed by the global recession, is moving to answer the many needs of its expanding population. The country is home to 26 million people, 60 percent of whom are younger than 18. “Here is a young vibrant market, both anxious to purchase and produce,” Burton says.
Additionally, the once tightly controlled central economy is easing the reins. The U.S. Arabian Business Council estimates that $800 billion worth of investment opportunities are being released as the kingdom privatizes everything from its airlines and financial institutions to the postal service. This not only entails the purchase of simple divestitures, but the welcoming of competing companies.
#b#The five clusters.#/b# Saudi Arabian government planners have outlined five broad areas of concentration. “The goal is to keep these growth areas close to petrochemical and the nation’s other natural resources,” says Burton. First is construction. More than 6 million expatriates work in the nation already and an ever-larger stream flows in as investment opportunities grow. Also, as this youthful population sets the birth rate afire with more and more Saudis, the six new cities become a matter of need, not merely investment potential.
Next come consumer goods. “If ever there was a time and place to bring in new goods to an eager market and establish lifelong brand loyalty,” says Burton, “youthful Saudi Arabia is it.” Here is a sophisticated society, unlike many younger-populace nations, and they have disposable income. Dell Computers has seen a 27 percent increase in sales in this past year.
Yet the Saudis do not envision themselves as merely consumers. They want to take a great manufacturing stride. The third cluster of metals, both primary and fabricated, is literally a natural for the nation, based on the peninsula’s resources.
This should feed the fourth cluster — automotive parts and assembly — keeping the materials and construction physically close. The final cluster of packaging materials employs Saudi Arabia’s petrochemical resources in a globally needed new direction. So many packaging materials involve oil-based products that such close-to-source manufacture should prove a highly economical niche.
Where’s America? Saudi Arabia recently put out for bid its three largest rail projects. No American bidders. Whole series of energy projects (fossil fuel and alternative) were set to bid. Not an American firm in sight. “As a result, Europe, Korea, and China are winning these bids and garnering these profits,” says Burton.
America is still Saudi Arabia’s largest trading partner, but this comes from mostly older oil trading. America only invests $67 billion in commerce with the Kingdom of Saudi Arabia (its 14th largest trade source), and New Jersey is claiming a mere $589 million of that pie. A rather paltry slice of the $1.4 trillion dangling before us.
As recession markets dry up domestically, avenues abroad may offer our strongest recovery hope. Small and large companies may have to break centuries-old habits and reach to the Middle East for clients.
The advantage of Saudi Arabia is that trade with the U.S. is established and historically amicable. Banking systems are accommodating. Ports understand the American/Arabian transport requirements.
It’s still just racism. There are, of course, obstacles to overcome, particularly since 9/11. The greatest of these is ignorance-bred bigotry. Saudi Arabian business people coming to America are subjected to exorbitant scrutiny, not only of their persons, but their finances as well.
Equally, Americans at home view a visit to Saudi Arabia as fraught with danger. “We have a great tendency to lump all Islam or Gulf area unrest into one,” says Burton. It’s a little like avoiding a visit to Princeton because northern California is currently ravaged by wildfires.
But if Americans can recognize their true allies, there are definitely great profits and friendships to be made in Saudi Arabia. If we are to bridge the mistrust, surely it can come through trade.
And as Burton puts it, “why not invest and get a little payback for all that oil money your pouring into the gas pump.”