The Kingdom of Saudi Arabia has announced plans to
set up 24 new industrial cities as part of a long-term vision to
diversify its industrial base, improve the quality of products,
promote investment and strengthen industrial technology. Saleh Ibn Eid
Al-Husseini, deputy minister for industrial affairs at the Ministry of
Commerce and Industry has unveiled these plans for industrial growth,
while inaugurating an industrial exhibition last week.
After inaugurating the international exhibition
featuring printing, packaging, plastics and petrochemical technology,
Al-Husseini said that the new cities will further boost the country's
industrial growth. The new industrial estates will offer integrated
facilities equipped with all public utilities. The deputy minister
said that the low tariffs realized at Saudi ports and the simplified
procedure for starting industrial and trading operations in the
Kingdom will eventually give major boost to the local economy.
"Moreover, the Saudi government has also
created a new apex agency called Saudi Industrial Cities and
Technology Park to address the issues related to industrial
infrastructure and technology", he noted. Referring to the expo
titled "Saudi Print, Pack, Plas and Petrochem 2005", he
expressed happiness over the participation of some 350 local and
international companies. He said that such participation reflects
businessmen's confidence in Saudi Arabia.
Major local participating companies include Saudi
Arabian Basic Industries Corporation (SABIC), Clearpack Pte Ltd., Al-Omran
Industrial Group, Al Sharq Plastic Industries, Al Watania Plastics and
Obeikan Graphic Center. This is in addition to the participation of a
number of companies from the United Kingdom, Austria, Belgium, China,
Egypt, Germany, India, Italy, Jordan, Bahrain, South Korea, Lebanon,
Singapore, Syria, Turkey, Taiwan and the United Arab Emirates. In all,
20 countries are represented in this international exhibition with
their pavilions, which are open to visitors from 4 p.m. to 9.30 p.m.
Referring to the comprehensive industrial strategy
adopted by the Ministry of Commerce and Industry, Al-Husseini said
that "we are also working to streamline the customs procedure to
facilitate exports and imports of industrial goods". He pointed
out that the existing 14 industrial estates across the Kingdom
including industrial cities of Jubail and Yanbu have more than 3,700
industrial units". "The total investment in these units'
stands at SR270 billion today compared to SR36 billion in 1975",
said the minister.
He, however, reiterated that there is still a need
for making the non-oil sector more productive in terms of its income
and manpower employment potential.
SAUDI STOCK INDEX ALSO CROSSES 9,500 MARK
The initial public offering (IPO) of the Kingdom's
new Islamic bank, Bank Albilad, has generated such tremendous interest
that half the population of Saudi Arabia has applied for shares, said
the Marketing Manager Mohammad Al-Awadh.
The scramble for a piece of the 30-million-share
cake marked a record for subscribers for a new listing in the Kingdom,
which is slowly opening up its economy, he said. The IPO is believed
to be massively oversubscribed, possibly setting a new record. Awadh
said there were signs of a final rush which could push the total close
to 9 million subscribers.
Abdelmenem Jamil Addas, a professor of finance and
marketing at the College of Business Administration said, "As the
Saudi stock index is already nearing the 9,500 mark, Bank Albilad
should make its debut at the stock market at SR800 to SR900 per share.
So I expect the investors will sell shares in the beginning and make
profits as the bank is not going to declare any dividend in the first
He also said that unless the bank launches new
innovative quality products in the market, the shares of the bank will
come under pressure afterward as interest rates have already started
going up in the United States and consequently bank shares in Saudi
Arabia will get hurt the most.
Habib F. Faris, vice president at Clariden, London,
who follows the Saudi stock market closely, said that "the
response for Albilad IPO shows how much confidence investors have in
the banking sector and in the Saudi stock market. Shares in the
Kingdom are so lucrative that investors rush to make handsome
"This is the biggest Saudi IPO in terms of
subscribers," Awadh said. Investors have sought shares worth just
over SR7.5 billion ($2 billion), making the 30 million-share offer
four times oversubscribed. Shares were priced at SR50. The rate of
women's participation in general was estimated at 6.85 percent.
CONCERN OVER FREE TRADE AGREEMENT
In May 2003, George W. Bush set out his vision of a
Middle East Free Trade Agreement (MEFTA). This was an idea born on the
politically-oriented basis of "those who trade together stay
together" rather than from any US economic standpoint.
Bush hopes that the MEFTA — perceived by some
critics as a political tool in the "war on terror" or,
alternatively, designed to further US global hegemony — will
encompass some 20 regional countries, including Israel, and be fully
consolidated by 2013. In the meantime, the US administration is
pushing for bilateral Free Trade Agreements (FTAs) with various Arab
states, including members of the Gulf Cooperation Council (GCC).
This is causing concern throughout the region among
those who are suspicious of the Bush administration's motives. Why,
they ask, is the US so keen to sign up to bilateral agreements when it
could more easily negotiate an FTA with the GCC as a single entity,
and "why are such FTAs being offered mainly to smaller
Ahmad Humaid Al-Tayer, a former UAE minister of
communications, recently expressed his own doubts concerning the
divisive trend in the Gulf News: "Instead of walking the path
toward becoming a heavyweight economic bloc on the international
stage, the GCC may end up with fragmented and small satellite
economies without any leverage against world giants..."
The third Arab country and the first GCC member to
commit to an American FTA was Bahrain. The agreement signed in
September 2004 permits duty-free trade between Bahrain and the US with
the exception of textiles. The government believes the deal will give
a boost to Bahraini economy and attract investors. However, its
neighbor Saudi Arabia is not amused.
Prince Saud Al-Faisal, the Saudi foreign minister
said: "It is alarming to see some members of the GCC enter into
separate bilateral agreements with international powers... They
diminish the collective bargaining power and weaken not only the
solidarity of the GCC as a whole, but also each of its members."
Aside from the political ramifications of Bahrain
going it alone, other Gulf nations fear a flood of duty-free
US-manufactured goods circulating throughout the GCC via the Bahraini
In January 2003, a joint customs union was formed
by the GCC. Whereas goods traded intra-Gulf are now duty-free, duty of
5 percent has been imposed on goods imported from outside the union.
There is no doubt that Saudi Arabia feels a greater requirement to
protect its market than other GCC countries since it is the only one,
which is not a member of the World Trade Organization (WTO) and has no
plans to negotiate a US FTA.
The 2001 GCC Economic Agreement — the precursor
to the GCC joint customs union — clearly states: "Member states
shall draw their policies and economic relations in a collective
manner vis-a-vis other countries, blocs and regional groupings, as
well as other regional and international organizations..." If
individual states unilaterally renege on this provision, then mutual
trust between GCC members will consequently be eroded.
Businessmen in the region have their own worries
concerning US FTAs. They fear the area may be swamped with subsidized
US agricultural produce, including genetically modified (GM) grain.
Additionally, they are concerned about changes in local labor and
sponsorship regulations required under the terms of the FTAs as well
as the parity with local investors to be enjoyed by American
companies, perhaps, to the detriment of other foreign financiers.
Outside the GCC, both Jordan and Morocco have signed on the dotted
line. Jordan finalized it own FTA in 2000, representing the first
between the US and a Muslim country. Although Jordan, which also
benefits from its membership of the WTO, has since witnessed a hefty
growth in its economy, Elie Yachui, an economics professor at St.
Joseph's University in Beirut, maintains Jordan's FTA is a poor model
for the rest of the Arab world because it mainly benefits that
country's elite and was bestowed on Jordan as a reward for political
loyalty. Morocco joined the US club in June last year — the first
African nation and the second Arab country to do so. Encouraged by
Jordan's apparent success, there is no doubt that Morocco hopes the
FTA will trigger an economic revival.
However, the US has made it clear there is much
more at stake. US Trade Representative Robert B. Zoellick at the
signing ceremony in Washington said: "Piece by piece, the
administration is building a mosaic of modernizers with a plan that
offers trade and openness as tools for Muslim leaders looking forward
to the rebirth of an optimistic and tolerant Islam. "Muslims are
striving to reclaim a tolerant and renewed Islam, but religious
extremism, militants and economic disorders are continuous
setbacks," said Zoellick, adding, "trade leads to
It was this theme, which provided the basis for
Egypt being offered a US QIZ (Qualified Industrial Zones) agreement,
which it signed in December. QIZ removes customs duties on
Egyptian-made garments and other goods exported to the US with one
major caveat: Those items must contain at least 11.7 percent Israeli
content, likely to consist of packaging and hangers.
Egypt's signing caused an outcry among university
students, who staged sit-ins, as well as among intellectuals,
columnists and pan-Arab nationalists, but there were many others who
took a more pragmatic view. The bottom line is Egypt must come up with
10,000 new jobs each year and is eager to grow its manufacturing
industry and increase exports. It is envisaged that successful
implementation of QIZ will result in Egypt being proffered a US FTA as
Jordan was following its own QIZ agreements.
The region, therefore, is right to be wary of the
superpower's motives. The US already wields a mighty military stick
throughout the Arab world, is currently occupying an Arab country,
while verbally aggressive towards another, and gives its unconditional
moral and financial support to its fellow occupier Israel.
US FTAs may or may not bring financial rewards for
those states prepared to step up to the plate, but at what cost in
terms of political, economic, cultural and even religious
independence? Now is the time for a regional rethink before the
prosperity of some of its nations are inextricably linked with a less
than benign Uncle Sam, while others are left out on a lonely limb.
Courtesy Arab News
Edited by Amanullah Bashar