MIDDLE EAST VIEW

 

SAUDI ARABIA DEVELOPING 24 INDUSTRIAL CITIES

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The project will give major boost to economy

 


Mar 14 - 20, 2005
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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. daily.

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 year."

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 profits."

"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 countries"?

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 gateway.

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 tolerance."

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