Saudi Arabia_Intelligent infrastructure_2007

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With $350 billion in new projects, Saudi Arabia has embarked on
a significant economic development program with the goal of
establishing the kingdom as a global industrial force. To support
this aim, and to position the country as a regional transport and
logistics platform, much of the investment is directed at the cre-
ation of a sophisticated infrastructure.
From water desalination plants to improved health-care facili-
ties, the government is upgrading capacity to meet the challenge of a
growing and increasingly affluent population. But nowhere is this
more evident than in the country’s transport system.
The country’s rail network is preparing for change, on a
massive scale. New lines will link the east and west coasts of the
country and population centers from north to south. The coun-
try’s ports and port-storage facilities will also be expanded as the
kingdom seeks to establish itself as a regional transshipment cen-
ter, in competition with established Gulf hubs. The Millennium
Port, to be built as part of the ambitious King Abdullah Economic
DESPITE A PERIOD OF UNPRECEDENTED WEALTH FOR SAUDI ARABIA, KING ABDULLAH IS
COMMITTED TO AN AMBITIOUS REFORM AGENDA. AND DELIVERING A WORLD-CLASS
INFRASTRUCTURE IS CENTRAL TO HIS GOVERNMENT’S PLAN FOR ECONOMIC DEVELOPMENT.
Saudi Arabia
City, north of Jeddah, will be the among the world’s 10 largest on
completion. Air services are expanding too, as two private low-
cost airlines have recently launched services alongside flag-carrier
Saudi Arabian Airlines.
Competition is also growing in the telecoms sector as the
government has opened the market to a host of new operators.
Competition for new mobile subscribers is expected to be fierce,
but it is broadband that offers the greatest potential for growth,
analysts say. Some 38% of Saudis have PCs, yet only 1% can cur-
rently access high-speed broadband.
From residential complexes to industrial clusters, large-scale
construction continues apace, both as a result of the oil boom and as
a catalyst for the development of the non-oil sector. The economic
cities planned nationwide are central to this latter aim. However,
despite the furious pace of development, environmental awareness is
increasingly visible and some progressive steps have been taken to
ensure sustainability is built into every new project.
Focus on Infrastructure
Intelligent infrastructure
As seen in
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© Copyright 2007 The McGraw-Hill Companies, Inc.

BusinessWeek
SAUDI ARABIA Infrastructure
D
Despite one of the longest periods of high oil prices in history, with
crude currently around $70 to $75 a barrel – a level sustainable for
the foreseeable future, given strong demand from Asia – Saudi Ara-
bia has pressed ahead with the comprehensive political and eco-
nomic reform agenda it first outlined at the start of the decade.
“Reforms look set to continue, while spending has been quite
sensible, generally aimed at long-term projects such as infrastruc-
ture, boosting the non-oil sector (notably pharmaceuticals and ser-
vices) and facilitating the development of new industrial and
knowledge cities,” says Gerd Nonneman, senior professor in Arab-
Gulf Studies at the U.K.’s Exeter University.
Others agree. “The Saudi Arabia of today is transforming on
many fronts, with changes introduced at all levels of society,” says
Christian Koch of the Gulf Research Center in Dubai.
Nobody doubts that the changes can be ascribed to King
Abdullah, who recently celebrated the second anniversary of his
ascension to the throne. As Crown Prince under his predecessor,
the late King Fahd, King Abdullah was one of the
driving forces for reform. Today, he finds himself
the nation’s economic steward at a time of unprece-
dented wealth for this country of 25 million. GDP
has almost doubled to $350 billion since 2002, with
growth last year alone some 10%. Oil revenues last
year were just shy of $200 billion while the current
account surplus reached an unprecedented $100
billion, a level most observers believe will be
exceeded in 2007.
King Abdullah is using every opportunity to
secure long-term prosperity for a population that is
not only one of the fastest-growing in the region (ris-
ing at almost 3% a year) but which has high levels of
expectation, thanks to oil, world-class education and,
still today, the widespread belief that the state will
always provide.
“King Abdullah is looking at every infrastruc-
ture project, every type of diversification. If there is
benefit for the people he will never say no,” says
Marwan Nusair, President and COO of the Alujain
Corp., a joint-stock company specializing in invest-
ment in Saudi hydrocarbon and mineral projects.
“The means to support this development is avail-
able now and he is using it wisely.”
King Abdullah’s strategy, aimed at increasing the country’s
stabilizing role in the Middle East, as well as maximizing the eco-
nomic benefits of high oil prices at home, has economic, political
and diplomatic dimensions. Using the cushion of oil wealth, Sau-
di Arabia has been pressing diligently ahead with the reforms the
country committed to when it joined the WTO in December 2005.
These include greater transparency at all levels, an improvement
in the domestic investment environment and a steady reduction in
the tariffs Saudi Arabia used to apply to imports. Although dis-
cussions with the European Union over a comprehensive free-
trade agreement continue, numerous other bilateral agreements
have already been signed.
The success of policies designed to create a pro-business,
investor-friendly environment was highlighted by the ranking of
Saudi Arabia as the world’s 38th most attractive business environ-
ment in the IFC/World Bank’s 2007 Doing Business Report, for the
second year. “Saudi Arabia is ahead of all Middle Eastern and
Arab countries, and even some European countries,” says Amr
Dabbagh, Governor and Chairman of the Saudi Arabian General
Investment Authority (SAGIA). “This is confirmation that Saudi
Arabia is very much open for business.”
Indeed, King Abdullah used his April state of the nation speech
to stress once again the importance of the private sector to the
country’s future.
“Increasing numbers of people are active, for the first time,
in construction, property and industry – the type of activity is
quite broad,” says Nonneman of Exeter University, pointing out
that parastatal entities such as SABIC, the largest non-oil com-
pany in the Middle East, have been pursuing joint ventures with
the private sector.
The rising importance of the private sector has also been reflect-
ed in the phenomenal growth of IPOs. The highest profile has been
the $860 million IPO of Prince Alwaleed Bin Talal’s Kingdom Hold-
ing, but in the year to date there have been 20 others, raising some
$3.7 billion. Forthcoming IPOs are expected to include Saudi Ara-
bian Airlines, the nation’s flag carrier.
And the private sector is taking the lead in the development of
the new industrial cities planned nationwide, a key part of the gov-
ernment’s $350-billion strategy targeting economic diversification.
These phased developments are aimed at boosting regional
employment and making Saudi Arabia a key player in industry.
Financial services, information and communications technology,
energy-related investment (plastics, petrochemicals) and port ser-
vices are all priority areas.
“The economic cities are a new product. Not just in Saudi Ara-
bia, but globally. There are about 3,000 special economic zones, free
zones and processing zones around the world, but what we have
introduced is all the above, plus,” says SAGIA’s Dabbagh. “When it
started, King Abdullah Economic City was 55 million square
meters. Now we’re talking about 180 million square meters – that’s
the size of some of our neighboring countries.” Most importantly,
Dabbagh says, it’s a private sector-led initiative. “We are in the back
seat supporting, facilitating, providing facilities and incentives, but
the private sector is running the show,” he says.
A greater role for the private sector extends to finance, too.
In Aug. 2006, the Saudi Arabian Capital Markets Authority
awarded Jadwa Investment a license to offer all types of invest-
ment services including dealing, managing, custody, arranging
and advising, and all the services provided are fully Shariah-com-
pliant. “It started when the government allowed the private sec-
tor to invest in the market,” says CEO and Managing Director
After two years on the throne, King Abdullah remains committed to economic reform
and diversification, in spite of high oil prices.
Photo:CourtesyofFaisalAlSaud

BusinessWeek
Ahmed Al-Khateeb. “We wanted to create a world-class invest-
ment bank in Saudi Arabia and from there to become an invest-
ment house in the MENA region.”
Al-Khateeb and his partners, including the Chairman, Prince
Faisal Bin Salman Bin Abdulaziz, are experienced finance profes-
sionals, and Al-Khateeb feels Jadwa Investment is a natural
choice for foreign investors looking to establish a presence in the
kingdom. “If I were to invest in China, I wouldn’t do it myself, I
would rely on local companies. If [multinationals] want to invest
in equity funds, or corporate-finance transactions or conduct an
IPO in Saudi Arabia, we have the network and we have the
expertise. In a country like Saudi Arabia you need a local partner,
and we stand for quality and trust.”
Jadwa is already establishing relationships with global players.
The company has partnered with Russell Investment Group, the
global leader in multi-manager investment services, to bring clients
a new breed of Shariah-compliant investment solution. To date, Al-
Khateeb says, Shariah investors have had access to a limited number
of asset managers offering suitable investment products. Through
Russell’s unparalleled access to fund managers, the partners aim to
utilize some of the best asset-management talent in the world to
manage Shariah mandates.
The government also hopes that the private sector will play a
key role in its ambitious infrastructure developments. These include
improving electricity infrastructure, building desalination plants,
expanding port and port storage facilities, boosting health care
capacity and, in particular, upgrading the transport network, which
rising wealth and a growing population are putting under increasing
pressure. The well-developed road network is being upgraded, while
domestic and regional air links have been improved by the emer-
gence of two private low-cost airlines.
But most attention is being focused on a massive expansion of
the country’s rail system. The $5 billion east-west Saudi Landbridge
project will connect the Red Sea and Gulf coasts for the first time.
Built by a private consortium to be chosen in early 2008, it will
have 50-year operating rights for the project. Meanwhile north-
south connections will benefit significantly from the $2.8 billion
NSR (north south rail) project, which – though state funded – will
be privately operated and maintained.
While emphasis has been given to the development of the
non-oil sector, Saudi Arabia hasn’t neglected the mainstay of its
economy, reinforcing its position as the world’s leading producer.
In May 2006, the government announced an $18-billion plan to
improve oil production capacity from the current level of around
11 million barrels per day (bpd) to 12.5 million by 2009 and 15
million by 2015. Recognizing that the decline rate of existing
wells is around 8% – Saudi Aramco needs to add 700,000 bpd in
additional capacity just to keep production steady – the 2007
drilling budget was set at around $4 billion, with 427 onshore
and offshore fields drilled.
And there is more good news. With 260 billion barrels of
proven reserves, oil minister Ali Al-Naimi has said Saudi Arabia
could add, “as much as 200 billion further barrels after an extend-
ed period of investment and exploration.” The potential for gas, of
which Saudi Arabia is the world’s fourth-largest producer, looks
good too: national oil company Saudi Aramco says that only 15%
of the country has been “adequately explored,” suggesting signifi-
cant additions to proven reserves of 240 trillion cubic feet.
While industrial development is key and the importance of oil
and gas to the Saudi economy is undisputed, environmental aware-
ness is increasingly visible. Xenel-Balderrie is the first Saudi Ara-
bia-based company specialized in the policies, project finance and
technologies associated with greenhouse-gas reduction in the oil &
gas, industrial, petrochemical, power, and energy sectors. It also
offers advisory services to governments on climate-change policy.
“The need to reduce greenhouse-gas emissions is crucial,” says
Rachad Itani, Xenel-Balderrie’s President. “And the fact that a
country like Saudi Arabia has shown that it is embracing the Kyoto
Protocol sends a significant message around the world. It says we
are doing our bit to help.”
King Abdullah’s reforms have not been confined to the eco-
nomic sphere. Despite the fact that many powerful figures within
the ruling elite oppose any shift from the conservative status quo,
the King’s open, consultative approach has done much to boost his
popularity. Within broader society, King Abdullah has encouraged
debate even about matters formally considered sensitive, such as
the role of women in Saudi society.
The emergence of a tough, no compromise approach to ter-
rorism has also reassured those concerned about stability. After
foiling several attacks in late 2006, a roundup of militants in April
confirmed that security forces are taking the threat from terrorism
seriously. “The security [initiative] has been very successful and has
contributed to the new mood of confidence in the country,” says
Rodney Wilson, professor at Durham University’s Institute for
Middle Eastern and Islamic Studies in the U.K.
It has been matched by what is possibly the most proactive
foreign policy in the kingdom’s diplomatic history. Recognizing the
limitations of U.S. policy in the region, Riyadh has been at pains to
emphasize the importance of Arab nations working together to
secure stability and peace, stressing the high cost of past disunity.
The resurrection of King Abdullah’s Peace Plan, first floated five
years ago, is the most obvious manifestation. However, Riyadh has
also been talking with all parties in Lebanon to secure stability
there and with Hamas and Fatah to seek agreement within the
fragile Palestinian Authority.
However, it is clear that King Abdullah and his government see
the economy as crucial to Saudi Arabia’s long-term evolution.
Although high oil prices look set to stay, they have lived through
many past price collapses and seem determined to stay the course in
creating a genuinely diversified economy, where foreign banks and
companies play a significant role.
When asked what he thinks is next on King Abdullah’s
reform agenda, SAGIA’s Dabbagh is circumspect. “In order to be
competitive and to receive more investment than your competi-
tion, you need to keep on reforming and raising the bar and
making it more difficult for others to compete with you,” he
says. “I can’t predict what will happen next, but I can assure you
that it will be significant.” BY JUSTIN KEAY
Ahmed Al-Khateeb, CEO and Managing Director of Jadwa Investment

BusinessWeek
How effective has the new foreign investment law been at
creating a pro-business environment?
It has been very effective and has helped pave the way for signifi-
cant amounts of foreign direct investment (FDI) as well as domestic
investment. In the past few years, Saudi Arabia has been ranked the
number one recipient of FDI to the
MENA region and Arab World. This
is a vote of confidence both that our
foreign investment law [reaches]
international standards and in the
effectiveness of Saudi Arabia as a
destination for FDI. Of course, the
sky’s the limit in terms of how we
can improve. Some of our initiatives
are designed to complement the
foreign investment code in terms of
introducing new incentives and
highlighting opportunities correlat-
ed to our competitive advantages.
We will continue raising the bar as
an investment promotion agency
and are confident we will maintain
our position as the region’s number one recipient of FDI.
A five-year plan instituted in 2004 places an emphasis on invest-
ment promotion in three key fields. How successful have you
been at driving investment into the energy sector, for example?
We focus on three strategic business sectors – energy, transporta-
tion and knowledge-based industries. In energy, we are focusing on
four sub-sectors: anything that relies on gas as feedstock such as
petrochemicals; anything that relies on petrochemicals as raw
material such as finished plastic products; any energy-intensive
industries such as minerals; and power and water.
We have big initiatives in the field of energy. For example, we have
launched The Plastic Initiative. Today, our global market share is less
than 1%, but our goal is to hit 15% by 2020. And we have intro-
duced a number of initiatives to help us achieve that. Also, our
global market share in petrochemicals has been increasing rapidly.
Today we are at 7%, but we are expected to reach 14% in five
years. That sort of progress shows that Saudi Arabia is definitely
the destination for energy-related investment.
Do you share the government’s vision of Saudi Arabia as a
regional logistics platform? How is that impacting transport
policy?
After energy resources, the second competitive advantage of
Saudi Arabia is its location, between East and West. There are
about 250 million consumers within three-hours flying time of
the center of Saudi Arabia. So today, we aren’t promoting Saudi
Arabia only on the strength of its own market, we are promoting
the country as the launch pad for 250 million consumers. That
means you need to develop your transportation infrastructure,
you need to have the right legislative environment and you need
to have multiservice providers in all aspects: airports, airways,
seaports, roads, rail, and so on. Only then can you integrate the
various transport modes. We have made a great deal of progress
but the sky’s the limit in terms of potential.
For instance, the Red Sea today has a capacity of 10 million con-
tainers, and there is annual growth of 20%. We need to enhance our
infrastructure, so we have launched a mega seaport linked to the
[King Abdullah] economic city to
complement existing capacity on
the Red Sea. We have a dedicated
strategic business unit promoting
Saudi Arabia as a transportation and
logistics hub, not only to cater to
the local market but to 250 million
consumers.
What steps are you taking to
encourage investment and part-
nerships in knowledge-based
industries?
In terms of knowledge-based indus-
tries, what we are interested in is not
financial flow but knowledge and
know-how flow into Saudi Arabia.
That’s what makes knowledge-
based industries, and there we’re focusing on four sub-sectors: ICT,
health, education, and life sciences, and we have created specific
business units for each of these. For a country that is an exporter of
capital, the flow of investment is not as important as the flow of
knowledge, ideas and innovation. Therefore, we are trying to devel-
op strategic partnerships with global players. For instance, we
signed a strategic partnership with Cisco during the visit of John
Chambers, the Chairman of Cisco, and we signed another with Intel
during the visit of Craig Barrett, Intel’s Chairman. More and more
global ICT leaders are visiting Saudi Arabia and we are entering into
strategic partnerships that will precipitate the flow of knowledge
and know-how into the country. Only then can knowledge-based
industries be stimulated.
How has WTO membership impacted Saudi Arabia’s business
environment?
Our accession to the WTO was a vote of confidence, that our laws,
regulations, policies and procedures are up to international stan-
dards. Saudi Arabia has always been a market-driven economy, an
open market and a business-friendly destination, despite some of
the misperceptions. The ease of doing business here is far superior
to some or all of the Middle Eastern and Arab countries. Saudi
Arabia has been receiving FDI for decades, but the WTO serves as
confirmation that the country is definitely open for business.
The WTO is important because it opens markets for Saudi exports,
rather than opening the Saudi market for imports because the Sau-
di market has always been open for imports, with marginal duties
compared to other countries. We believe that the WTO will provide
us with a platform that will strengthen the industries correlated
to our competitive advantages – energy-related, petrochemical,
finished plastic products and so on. It will help us achieve our goal
of securing a greater global market share.
“A business-friendly destination”
THE SAUDI ARABIAN GENERAL INVESTMENT AUTHORITY (SAGIA) WAS CREATED IN APRIL 2000 AS PART OF A
COMPREHENSIVE NEW FOREIGN INVESTMENT LAW. IT IS CHARGED WITH CREATING A PRO-BUSINESS ENVIRONMENT
AND FACILITATING FOREIGN INVESTMENT IN THE KINGDOM – PARTICULARLY IN THE FIELDS OF ENERGY, TRANSPORT
AND KNOWLEDGE-BASED INDUSTRIES. THE FOLLOWING EXCERPTS ARE TAKEN FROM AN INTERVIEW WITH
SAGIA’S GOVERNOR AND CHAIRMAN, AMR DABBAGH.
The growth of major cities such as Riyadh is testament to the
economic boom that Saudi Arabia is undergoing.
istockphoto/CallanEmery

BusinessWeek
PME
Safeguarding the kingdom’s
natural assets
When Saudis hear the word sus-
tainability they don’t necessarily
think of carbon emissions. Instead,
the word is associated with the
inter-relationship of life forms on
earth. For thousands of years, the
sustainable use of resources has
been part of the cultural priming
in the Arabian Peninsula. Sir Wil-
fred Thesiger, the British explorer,
marveled at the way Bedouins in
the Empty Quarter rationed local
resources. Water, a scant com-
modity, was shared by different
tribal groups.
The Presidency of Meteorology
and Environment (PME) has incor-
porated this ancient belief system
into its strategic planning. Its
tenets are enshrined in the Basic
Law, a charter of 83 articles that
governs the kingdom day to day.
According to Article 32, the Saudi
authorities are responsible for pro-
tecting the environment and fight-
ing pollution. In 2001, in an effort
to strengthen its environmental
framework, the PME developed a
new action plan. It included a slew
of strict regulations to comply with
the U.N. Commission on Sustain-
able Development. The PME also
promoted Prince Turki Bin Nasser Bin Abdulaziz, a former pilot, to
the position of president. His rank is equal to that of a minister.
So what does environmental sustainability mean in Saudi Arabia?
Judging by the PME’s upgraded status as an implementing
agency, it means serious business. Instead of restricting its man-
date to legislation, PME officials can now enforce environmental
standards and penalize non-complying parties. An example could
be fines imposed on a company that illicitly dumps waste into the
Red Sea or uses asbestos to cut costs at a building site. Prince Tur-
ki’s Presidency is also in charge of evaluating the country’s ecological
health by conducting studies and collecting data. It carries out
meteorological and climatic modeling to determine global trends.
The Presidency is a keen awareness builder. It supports education-
al tools such as a Pan-Arab news channel devoted to wildlife.
Armed with a set of bylaws, the PME has defined new controls for
air and water quality, carbon emissions and hazardous waste. The
standards are in synch with changes in international law. The PME
also holds yearly meetings with neighboring countries to coordi-
nate work in sensitive areas such as the Red Sea, home to a large
coral ecosystem, and the Gulf,
vital to the global economy due
to the heavy transit of oil tankers.
Prince Turki is a tireless traveler,
attending meetings in Europe
and the U.S. to raise awareness
about environmental issues
affecting the Middle East.
And the agency is keen to learn
from the past. “We now monitor
cities that are up and coming
from the very beginning. We
make sure that they are environ-
mentally friendly and as clean as
possible, taking care to address
the challenges we faced in our
cities in the 1970s,” says Prince
Turki. In its first phase of large-
scale development, the kingdom
rarely included environmental
impact studies. With the passing
of new legislation in 2000, that
has all changed. From day one,
environmental impact is built
into any industrial or earthmov-
ing project. “All companies emit-
ting gases or liquid discharges in
violation of regulations have five
years to correct themselves. If
these are not corrected, the
companies may be closed,” says
Prince Turki.
Evidence of the Saudi commitment to sustainable development is
that Prince Turki’s ministerial duties are now on a par with other
cabinet members. This allows the PME to coordinate tasks across
ministries. As an example, Prince Turki cites his ability to consult
with any Amarah (governor) on urban-planning issues, just as any
other minister would. “We are putting a number of new staff in
Riyadh, Jeddah, Medina and elsewhere for inspections. We have
the power to inspect any facility, whether it is state-owned or pri-
vate,” says Prince Turki.
The PME is particularly attuned to issues of global warming, which
Prince Turki is quick to label a disaster. Saudi Arabia is a staunch
supporter of lowering gas emissions from cars. “I’ll give you one
statistic about the environment: At U.N. meetings, the environ-
ment takes up 25% [of the time] at all the conferences. It is huge,”
says Prince Turki. The PME is preparing to receive former U.S. Vice
President and environmentalist Al Gore for a series of panel talks
in Saudi Arabia. “Without clean air and a clean environment,” says
Prince Turki, “life is not going to continue.”
BY PAUL DE ZARDAIN
RESPECT FOR THE ENVIRONMENT IS A CONSTANT IN BEDOUIN CULTURE. NOW, A GOVERNMENT AGENCY
IN SAUDI ARABIA HAS CODIFIED ANCIENT LAWS INTO INSTRUMENTS TO FIGHT GLOBAL WARMING.

BusinessWeek
Saudi Arabia is set to become one of the most competitive
telecommunications markets in the Middle East, following a burst
of licensing activity earlier this year. The state-controlled Saudi
Telecommunications Co. (STC), which until recently held a
monopoly of all voice and data communications, will by the end of
2008 be facing competition from six voice and data operators
(three mobile and three fixed) and two data-only operators.
In March, the auction for the country’s third national mobile tele-
phony licence, overseen by regulator the Communication and
Information Technology Commission (CITC), was won by a consor-
tium led by the Kuwait-based operator Mobile Telecommunica-
tions Co. It bid a massive $6.1 billion, the highest per-person fee
ever paid for a mobile licence – some $223 per head of popula-
tion, according to Informa Media & Telecoms, a London-based
research and market intelligence company.
In April, the CITC awarded fixed-link voice and data licences to
three companies – Verizon Communications of the U.S., PCCW of
Hong Kong and Bahrain Telecommunications Co. (Batelco). The
CITC had already licensed two carriers to provide data-only services
– ITC and Al Bayanat Al Oula (First Data).
The increased competition is expected to boost the number of
mobile telephone subscriptions, which stood at about 24 million at
the end of June, according to Informa, equivalent to a penetration
rate of 87% of the population. The figure has been growing rapidly
since the launch in May 2005 of the mobile operator Etihad Etisalat
(operating under the brand name Mobily and controlled by Etisalat
of the UAE). This company, which now has about 35% of the mobile
market, has been the only real competitor to STC until now.
Abdul Ghafar, Informa’s research analyst for the Middle East and
North Africa, predicts that total subscriptions will reach 29 million
at the end of 2009 (equivalent to 102% of the population) and 34
million by the end of 2012. “Despite the high penetration figure,
the market remains far from saturation,” says Ghafar. He estimates
that between 35% and 40% of subscribers have two SIM cards, so
the actual number of users is about 14 million or just over half the
population. “That leaves plenty of room for growth.”
Bo-Erik Dahlstrom, President of Ericsson Middle East, agrees:
“When you look at population growth and the economic boom, you
foresee substantial subscriber growth and business opportunities for
all market players. In order to fulfil the demand of subscribers it’s a
natural development that competition is introduced.”
Daniel Jones, research analyst at Analysys, a Cambridge, U.K.-based
consultancy and research company, argues that the new entrant will
probably focus initially on selling to low-income users who do not
currently have a mobile, rather than trying to
win affluent customers away from STC and
Mobily. “It is likely to introduce attractive pre-
paid offers to target under-penetrated seg-
ments such as the youth market,” he says.
Fixed voice penetration stood at 68% of
households at the start of this year, according
to Pyramid Research. But given the rapid
growth of mobile services, this figure is
expected to grow only to 77% by 2011.
The success of new fixed-link entrants will
depend on how quickly they can attract
existing customers away from STC.
But the main opportunity in the fixed-line
sector is in the provision of broadband ser-
vices, where penetration is low. According
to Pyramid Research, only 1% of house-
holds had broadband at the start of this
year. But another 18% had narrowband,
and 38% had PCs, indicating the size of
the opportunity. Pyramid expects broad-
band penetration to rise to 3% of households by the end of this
year and 20% by the end of 2010.
Dearbhla McHenry, Pyramid’s Middle East analyst, predicts that
there will be “quite a race” between the fixed-line operators to
roll out their networks. “STC is now installing digital subscriber
line as fast as possible,” she says. But this technology is still not
available to more than half of the population.
McHenry adds that there will also be strong competition from
high-speed mobile services – not least because these can be
offered quickly to under-served regions. In some parts of the
country, Mobily is already offering services at speeds of up to
3.5 Mbit/sec over its 3G network.
And higher speeds are possible. Dahlstrom of Ericsson Middle
East, which is working with STC and Mobily, says his company is
now enabling speeds up to 14.4 Mbit/sec. “The mobile network
now provides subscribers with mobile data access at high speeds,
with very competitive packages. Subscriber figures and data traffic
will reach new highs,” he says. “Operators will be looking for
more services and fast time to market to stay competitive and
meet the market demand.” BY NEIL MCCARTNEY
Telecommunications:
the connected kingdom
THE ARRIVAL OF NEW FIXED AND MOBILE OPERATORS IS SET TO MAKE SAUDI ARABIA’S
TELECOMS MARKET AMONG THE MOST COMPETITIVE IN THE REGION.

BusinessWeek
S
Saudi Arabia has embarked on a massive economic development
drive with over $350 billion in new projects currently underway to
support its goal of becoming a global industrial and business force.
A good share of the investment is going into developing an efficient
and cost-effective transport infrastructure that will enable the
kingdom to become a shipping and logistics hub for the region.
Developing an effective transport system in a country of Sau-
di Arabia’s size, difficult landscape and climate, and soaring ambi-
tions, is a formidable challenge. The government is already scram-
bling to keep up with the growth of existing urban and industrial
centers even as plans for new cities are coming off the drawing
board. To date, four new cities are at the development stage – King
Abdullah Economic City north of Jeddah, Prince Abdulaziz Bin
Mousaed Economic City in Hail, which is earmarked as a land-
based transport and logistics center, Jizan Economic City in the
south of the country and Knowledge Economic City near Riyadh –
and several others are being planned. They will help to extend the
beneﬁts of development throughout the country but will also add
to its transport demands.
In his state of the nation address in April, King Abdullah made
clear that he wants the private sector to become a strategic partner in
Transport:
transforming
the landscape
THE KINGDOM’S TRANSPORT INFRASTRUCTURE
IS PREPARING FOR CHANGE, ON A MASSIVE
SCALE. THE GOVERNMENT AND PRIVATE
SECTOR ARE WORKING TOGETHER TO PUT THE
COUNTRY AT THE CENTER OF A REGIONAL
TRANSPORT NETWORK.
Saudi Arabia’s economic development, and transport infrastruc-
ture is already showing the way. The new transport initiatives
could also tempt Saudi travelers out of their cars as rail, air and
sea links are upgraded in a country that has traditionally relied
largely on road transport.
Major rail projects now under development will transform the
transport landscape over the coming decade. Saudi Arabia has a rail
network, but with a 556-kilometer track built in 1956 and used for
freight and a 449-km link built in the 1980s for passenger use, both
of them linking Riyadh and Dammam on the Gulf coast, it is limit-
ed for a country that matches Western Europe in size.
Planning is now underway for the $5-billion Saudi Land-
bridge, a 1000-km line that will connect Riyadh with Jeddah on
the Red Sea coast and give Saudi Arabia its ﬁrst coast-to-coast rail-
way link. The Saudi Landbridge will cut transport times, boost
efficiency and open new opportunities for the country to develop
Booking online at Sama’s offices

BusinessWeek
as a transport hub for the region. The government has already
pre-qualified four consortia of local and international companies
to develop it on a build-operate-transfer (BOT) basis. The win-
ning consortium is expected to be chosen early in 2008 and will
have 50-year operating rights for the project, which could possi-
bly be extended to connect Jeddah Islamic Port with the industri-
al city of Yanbu.
The new 2,200-km North-South Railway project (NSR) will
connect the phosphate mines at Al-Jalamid and the bauxite mines
at Zabirah to facilities in Ras Azur, while a passenger and general
freight line will go from Qurayyat through a number of urban cen-
ters to Riyadh. The government will carry the estimated cost of
$2.8 billion for the NSR but will leave its operations and manage-
ment to the private sector.
Saudi Arabia’s aviation sector is also changing with plans for
the privatization of Saudi Arabian Airlines (Saudia) and the launch
of two private low-cost airlines in 2007, Sama and National Air
Services (NAS). Both airlines have started well but are not expect-
ing an easy ride. Saudia has already announced that it is planning
to set up its own low-cost carrier. In addition, the airlines will not
enjoy cheap fuel supplies as Saudi Arabia produces plenty of oil
but imports its aviation fuel.
However, there is certainly scope for air traffic in the country
to increase. General Authority of Civil Aviation figures show that
domestic air traffic has grown by just 42% over the past 10 years,
while international traffic was up by just 32.9%. The figures are
modest for a large country with a fast-growing population and a
booming economy.
Sama Chairman Prince Bandar bin Khalid Al Faisal is confident
his airline will be a winner. “We know there is demand in Saudi
Arabia for such a service,” says Prince Bandar. “We just have to over-
come the normal obstacles that face any industry when you start to
liberalize.” He says the company chose the low-cost model “because
we wanted to bring something new and because the low-cost model
also means a greater utilization of facilities and equipment as you get
more passengers going through a terminal but spending less time and
this means good revenue for the airports.”
Alan Whaley, General Manager of Al Saif Motors

Prince Bandar is keen to move beyond the airline’s current
license restriction that confines it to the domestic market for its
first two years, especially at a time when other low-cost operators
in the region are picking up Saudi traffic. “It is not something we
like because it cuts us out of the lucrative international market, but
we will deal with it,” he says.
Although Saudi Arabia is exploring new transport options, the
road network is certainly not being neglected. The country already
has a comprehensive national road network with 150,000 km of
roads, including a highway network linking Riyadh to Jeddah, the
Eastern Province and population centers in the north and south of
the country. In the 1980s, Saudi Arabia and Bahrain led the region
with the 26-km King Fahd Causeway, a project that is now inspir-
ing other ambitious causeway schemes in the Gulf region.
Since 2003, the government has been spending heavily to
upgrade the road system, allocating $5.3 billion for 3,950 km of
new roads in the five-year period to 2007 and getting a raft of new
projects underway, including a new expressway linking the estab-
lished Jubail Industrial City with the new Jubail-II that was opened
in 2007. Work is now underway on dozens of projects with a
major focus on upgrading existing highways.
Saudi Arabia’s transport planners have to cope with an eco-
nomic boom that is translating into more and bigger cars on the
road. Major distributor Al Saif Motors, which counts prestige
brands such as Jaguar and Range Rover in its stable, reports sales
increases of as much as 20% a year, and it is aiming for even
higher growth. “We are already among the leading distributors in
the executive sector,” says General Manager Alan Whaley, “and
with all our expansion plans, we intend to become one of the
largest in the Gulf.”
The growth is good news for distributors and their customers
but it is putting strains on urban transport networks and forcing
the authorities to look for new solutions both in terms of infra-
structure and management. Riyadh is now undertaking a five-year
program to upgrade its road network but it is also looking to a
metro system to help ease pressure, while both rail and bus options
are part of the mix in an integrated public transport system now
under consideration for Medina.
The government has brought the private sector in to manage
some new urban schemes with the Fluor Corporation of the U.S.,
for example, project managing a $530-million plan for new roads,
bridges and other facilities for the Jeddah Municipality.
Saudi Arabia’s ports are already very much in the hands of the
private sector with terminals at the country’s eight ports all pri-
vately managed. King Abdullah Economic City north of Jeddah
and Jizan Economic City in the south of the country are both to
include major new privately financed and managed ports.
It all adds up to a dynamic and fast-changing transport infra-
structure in the kingdom where government and the private sector
are working together to make Saudi Arabia’s challenging geography
an asset rather than a challenge. BY PAM DOUGHERTY
King Abdullah has made clear that
he wants the private sector to
become a strategic partner in Saudi
Arabia’s economic development,
and transport infrastructure is
already showing the way.

BusinessWeek
Saudi Arabian Airlines: flying the flag
With Saudi Arabia’s ports already in the hands of the private
sector and new operators poised to enter the telecoms sector
following a round of new licenses issued earlier this year, the
kingdom’s aviation sector is also being opened up to market
forces. Two private low-cost carriers recently began serving
domestic routes and the nation’s flag-carrier, Saudi Arabian Air-
lines, is preparing for
privatization. Execu-
tives are readying the
airline for both
challenges with new
routes, new technolo-
gy and a renewed
commitment to
customer care.
Saudi Arabian Airlines’
Director General,
Khalid A. Almolhem,
embraces the more
competitive market,
and even suggests that it will be good for business. “Competi-
tion is beneficial as it promotes efficiency and sets high service
standards,” he says. “Saudi Arabian Airlines has always
believed in the advantages of competition and has benefited from
it in its international operations. It not only helps competing
entities perform to higher standards, but benefits the
customer in many ways from lower costs and better services to
increased options.”
Almolhem points out that a vibrant economy, development pro-
jects spread nationwide, the kingdom’s strategic location
between Asia and Europe and the privilege of being the land of
the Two Holy Mosques bring benefits of their own. Saudi Arabi-
an Airlines, he says, “is determined to use this as an opportunity
to improve its service and set new standards in customer care.”
That dedication to customer care is already yielding dividends.
The launch of e-ticketing on domestic routes on Feb. 4 proved
a resounding success. “Today, all 26 domestic stations are issu-
ing e-tickets,” says Yousef Attiah, Vice President of Customer
Services. Attiah says the domestic rollout was successfully fol-
lowed by the issue of e-tickets for key international routes. He’s
bullish that by Dec. 31, the airline will be enabled for full e-tick-
eting, and not only at airline offices and travel agents. “We
have already launched e-ticketing through our Web site. From
the launch on April 1 to mid-May, we issued some 5,000 tickets
this way, which is very encouraging.”
A relaunched Web site with new content, greater customization and
a simplified booking process is also expected to yield results. “It is
friendlier and more practical. In two years, we expect to get 30% of
our business through the Web site,” Attiah says. “Our culture is
very accepting of new technology.”
New routes attest to confidence that demand will remain buoyant.
In the year to June 2006, passenger numbers grew more than 9.5%
and a positive performance was recorded on almost all key indica-
tors. In June, Saudi Arabian Airlines launched new routes to Munich
(from Riyadh), Vienna (from Jeddah), Athens and Manchester. “Our
planning depends on a lot of research to ensure these flights will be
successful,” Attiah says. A new flight schedule to the U.S. and pro-
motional fares signify a strong push into that market. “The airline
offers special fares to our customers in the U.S. market. Many of our
customers are students and the government wants to help them.”
Despite the intense competition on international routes and grow-
ing competition at home, Saudi Arabia’s General Authority of Civil
Aviation (GACA) suggests there is room for expansion. According to
GACA figures, there has been a 42% rise in domestic air traffic
over the past 10 years in Saudi Arabia. Compare this though with
another large and economically vibrant country: In China, domes-
tic air traffic grew 16.7% in the first half of this year alone, com-
pared with the same period a year earlier, according to China’s
aviation regulator, the General Administration of Civil Aviation.
The figures give an indication of the potential of Saudi Arabia’s
domestic aviation market.
This potential, combined with Saudi Arabia’s rising affluence and
an expectation that the market for tourism is likely to be devel-
oped, will certainly be of interest to investors. Saudi Arabian Air-
lines’ privatization is due to be completed by 2009. The airline will
be split into six strategic business units (SBUs) and these will be
put to the market individually. The first, Catering, is to be priva-
tized this year and the remaining five – Cargo, Ground Handling,
Technical Services, Flight Academy and the core airline business –
will follow. The catering unit has operated profitably and indepen-
dently since its launch in the 1980s, so was considered a good
test of market interest. The six SBUs, each with their own function-
al departments, strategic partners and investors, will work under a
common mother company. “For me, privatization is a must,” Attiah
says. “It will make the organization more dynamic and more
responsive to the customer.”
Despite the challenge of greater competition in his home market,
Attiah remains confident that the strong focus on customer care
will win over the Saudi traveler. “New competitors have entered
the market giving more freedom and more choice to customers,”
he says. “It’s a challenge, but we have to deliver new products
and services to these customers.” But he insists that the service
speaks for itself. “We have good products and a modern fleet
equipped with the latest technology and the latest entertainment
systems. I’m not biased, but I can tell you as a customer, Saudis
prefer Saudi Arabian Airlines because they feel secure, they feel
safe and they feel at home,” he says. “Saudi Arabian Airlines is a
symbol of Saudi Arabia.”
THE KINGDOM’S FLAG CARRIER FACES NEW COMPETITORS AT HOME AND FIERCE COMPETITION ON ITS INTERNATIONAL
ROUTES. FURTHERMORE, INVESTORS ARE WATCHING CLOSELY AS THE AIRLINE GEARS UP FOR PRIVATIZATION.
THE ANSWER TO BOTH OF THESE CHALLENGES? NEW ROUTES, NEW TECHNOLOGY AND A FOCUS ON THE CUSTOMER.
Above:
Khalid A. Almolhem,
Director General of
Saudi Arabian Airlines
right:
Yousef Attiah,
Vice President of
Customer Services

BusinessWeek
W
When the 2.6-million-square-meter Millennium Port in King
Abdullah Economic City is completed north of Jeddah it will be
one of the 10 largest in the world, and a clear indication of the
change in Saudi Arabia’s thinking about its position in the
regional and global economy.
Previously, Saudi Arabia had focused on developing its ports
to serve domestic needs. Now it is looking to a combination of
expanded port facilities and the Saudi Landbridge project – a new
rail link that will connect the east and west coasts of the country
– to establish the kingdom as major transshipment hub linking
Asia, Africa and Europe. It promises shippers considerable
advantages in terms of time saving, lower costs and convenience
and already talks of competing with established Gulf hubs such
as Dubai.
The Millennium Port typifies the new approach. Designed to
handle the world’s largest super vessels, it will be supported by an
integrated transport system that will include rail, road and air
links. Its developers say this should make it a hub, both for the
kingdom and for goods moving between Europe, Asia and Africa.
It is a prospect that regional transport analysts are beginning to
take seriously. Mike Wing, Director (Transportation) at U.K.-based
Hyder Consulting believes that Saudi Arabia could be the most log-
ical hub in the region. “Saudi Arabia already has the largest pop-
ulation and market in the region, while as a hub it has the abili-
ty to serve Jordan, Iraq, Bahrain and Qatar, and if the planned
Expanding
horizons
SAUDI PORTS ALREADY ACCOUNT FOR 95%
OF THE COUNTRY’S BURGEONING IMPORTS
AND EXPORTS, BUT THEY HAVE SET THEIR
SIGHTS ON A REGIONAL ROLE.
causeway between Bahrain and Qatar goes ahead, there will be
terrific interconnection for the entire Gulf,” he says.
Wing doesn’t necessarily see a win/lose situation developing,
even if competition with established regional hubs heats up.
“Geographically and spatially, Saudi Arabia is better structured
for the movement of the heaviest goods and materials and is
already the largest market [for them] in the region,” he says.
“And if the rail network develops as planned and as the new eco-
nomic and industrial cities develop, Saudi Arabia is likely to
focus on industry-related activity and the movement of the heav-
iest goods while Dubai is likely to retain its particular market in
higher value goods.”
While the Millennium Port remains a distant prospect, the
development of Saudi Arabia’s existing ports over the past two
decades has already generated impressive improvements in capaci-
ty, efficiency and productivity. Since the establishment of a single
Saudi Ports Authority in 1976, all ports have worked under unified
rules and regulations. And since 1997, the authority has completed
a privatization process that has led them to be fully managed and
operated by the private sector on a commercial basis. As each of the
ports already had independent terminals for the handling of differ-
ent types of cargo, such as containers, general, reefer and bulk, each
element has been privatized separately.
Saudi Arabia currently has eight ports, including three main
container terminals – two at the Jeddah Islamic Port on the Red
Sea coast and one at Dammam on the Gulf coast – while the
industrial cities of Jubail and Yanbu each have both a commer-
cial and an industrial port. The port of Dhiba at the north of the
Red Sea coast has good access to the Suez Canal, while the
southern Red Sea port of Jizan is well located for traffic to and
from Asia and Africa.
Since the mid-1990s, total capacity at the ports has increased
from 31 to 183 berths; productivity has trebled from 489 tons
per berth to 1,550 tons; while operating costs have declined from
$40 per ton to less than $1.60 per ton. Today, some 95% of all
Saudi imports and exports pass through its own ports, with
exports making up 70% of all cargo. The total cargo handled by
the ports reached 133 million dead weight tonnes in 2006.

BusinessWeek
The ports are now introducing the SaudiEDI system, which has
been developed by the Ministry of Finance and the Customs Depart-
ment to promote more efficient interaction between government
agencies and private business, and offers electronic services to
facilitate both import and export activity.
As Saudi Arabia uses the revenues generated by high global
oil prices to finance a massive
economic expansion program,
its port network is being
expanded to meet the needs of
scores of new industrial, com-
mercial, residential and
tourism ventures.
International Port Services
(IPS), which operates the con-
tainer terminal at the King
Abdulaziz Port in Dammam on
the Gulf coast, has completed an
multimillion-dollar project to
expand capacity to some two
million TEUs (twenty-foot
equivalent units). The port serves
the needs of the energy industry
in the Eastern Province and
General Manager Naeem Bin
Ibrahim Al-Naeem says it regis-
ters an 8% to 10% increase in
traffic each year and he antici-
pates reaching 1.5 million TEUs
within the next six years.
Al-Naeem is confident
about Dammam’s prospects.
“We are the main port in the
east of the country and close to
the main industry in Saudi Ara-
bia, we serve both Riyadh and
the south and we are close to
Bahrain, Kuwait and Qatar,” he
explains. He points out that the
port is also updating its opera-
tions. “With our new products,
equipment and operations system, we are ready to push our volumes
and we can compete with any port in the world.”
He welcomes the new Saudi Landbridge project. “The benefit
will not only be for the port or for Saudi Arabia but for other
countries as well. The Landbridge will save a lot of time as it will
take just 12 hours for the cargo to get from Jeddah to Dammam
and on to other Gulf countries and this is very good for us,” he
says. “It will make a huge difference in the exchange between East
and West but also between the east of the country and Jeddah.”
Jeddah Islamic Port is already the major hub for the Red Sea
region and Director General Saher Tahlawi says the construction
of the Landbridge will extend its reach right across Asia. “We are
already going for a major expansion with the building of a third
terminal,” he says. “Now we have an agreement with the opera-
tors of our two existing terminals to add five new berths.”
The third terminal at Jeddah will be built and operated on
a build-operate-transfer (BOT) basis by Saudi Commercial and
Export Development Company (Tusdeer) under an agreement
signed with the Saudi Ports Authority in May 2006. The $443-
million project is due for completion by 2009 and will be able to
handle 1.5 million containers, boosting the port’s overall capac-
ity by 45%. Even before the third terminal is completed, Tahlawi
says the Saudi Landbridge project is encouraging the port “to
think of even more expansion.”
King Fahd Industrial Port at Yanbu on the Red Sea coast,
some 300 kilometers north of Jeddah Islamic Port, was purpose-
built to serve the Yanbu industrial complex and is a major ter-
minal for loading crude oil, refined products and petrochemicals.
It has proven its quality by winning the “Century International
Diamond Quality award” for three consecutive years.
The King Fahad Industrial
Port in Jubail is adjacent to
Jubail Industrial City and han-
dles the import of raw materials
required by local industries and
heavy industrial exports includ-
ing petrochemicals, refined
petroleum products, chemical
fertilizers and sulphur.
In June 2006, a new $97-
million, 800,000-square-meter
wharf for petrochemicals was
opened at the port, and with
both Jubail and Yanbu now
expanding to a second phase,
their ports are slated for fur-
ther expansion.
The benefits of developing
new port facilities will be felt
across the economy and will
support the expansion of less
visible industries in the king-
dom, such as fishing. It has a
long history in the country but
has been upstaged by the vast
energy and industrial sectors.
However, Saudi Arabia still has
one of the largest fishing indus-
tries in the region and firms such
as the Saudi Fisheries Company
are gearing up for another wave
of expansion.
The company was created
in 1980 as a mixed public/pri-
vate-sector venture working in
the Red Sea and the Gulf, and it later added shrimp farming to
its activities. Chief Executive Officer Abdullateif M. Al-
Mubarak says it is now expanding and upgrading on all fronts.
“I am planning on applying new technology in processing,
increasing our retail outlets, opening seafood restaurants,
establishing national markets and also expanding the shrimp
farm,” he says.
The company has also developed a wide spread of export
markets including the U.S., Japan, Korea, the Middle East region
and the GCC, and Al-Mubarak says he is keen to enter the Euro-
pean markets as well. The upgrading of Saudi Arabia’s ports
generally, and specific measures such as plans to include facilities
for the fisheries industry in the port at Jizan Economic City on
the Red Sea coast, some 730 km south of Jeddah, will help sup-
port his ambitions. BY PAM DOUGHERTY
The development of Saudi Arabia’s
existing ports over the past two
decades has generated impressive
improvements in capacity, efficiency
and productivity.

BusinessWeek
“I was practically born on a construction site,” says Nabil Al-Jamal
with a smile.
Based at MGC’s headquarters in Jeddah, the 47-year-old company
President and CEO, who comes from a family of contractors origi-
nally from Jordan, has built one of the fastest-growing civil con-
struction companies in the kingdom. “To say that the construction
business here is booming is an understatement,” says Al-Jamal.
“We can safely say that it’s exploding.”
A resident of Saudi Arabia since 1966 and a Saudi at heart, Al-Jamal
speaks of the kingdom as a land of opportunity, comparing it to the
U.S. “At the moment, this country offers one of the most attractive
business environments in the world,” he states confidently.
The country’s economic boom is posing a massive challenge for
construction companies to meet the demand for ever-more sophis-
ticated and ambitious projects. These are some of “the problems of
success,” according to an economist at National Commercial Bank,
the kingdom’s largest.
Megaprojects aside – the multibillion-dollar King Abdullah Eco-
nomic City among them – Saudi Arabia is in constant need of new
hotels, residential developments, and
retail and office space. These are sectors
of the construction industry where MGC
has already established a reputation over
the past five years. The company com-
bines financial power with technical
expertise and provides a full range of ser-
vices, including civil works, construction
and cost control. “We have executed
some 39 major projects in the kingdom
in the past five years, and in Jeddah
alone we have built more than 20 shop-
ping malls,” says Al-Jamal. He notes
quietly that MGC delivers projects in
record time and cheaper than the com-
petition. “And we do not cut corners to
meet deadlines,” he adds.
One of the company’s showpieces is the
spectacular 300,000-square-meter Al-
Andalus Mega Mall in Jeddah, a project
completed in only 18 months. “The com-
petition,” Al-Jamal points out, “needed
nearly double the time.”
“At the moment, we are negotiating to
build a new hotel in Mecca for one of our clients,” says Al-Jamal.
The holy city of Islam has undergone astonishing development in
recent years, and prime building land is sold today at some
$300,000 a square meter.
The building boom has inevitably created bottlenecks. Al-Jamal
talks about the shortage of manpower and building materials as
some the biggest challenges facing Saudi Arabia’s construction
industry. Shortages have led to rising construction costs in recent
years, as much as 15% in 2006 alone. “There is a lack of expertise
in some engineering disciplines, which needs to be addressed
by encouraging careers in the industry,” says Al-Jamal, who has
personally sponsored several Saudi students abroad and is look-
ing to establish a foundation to encompass all of the company’s
social activities. “There is also a general labor shortage which
could be solved by making it easier to bring foreign workers
into the country.”
The Ministry of Labor recently increased quotas for foreign
workers in the construction industry from 70% to 95%. Rules
have been relaxed to support the large-scale infrastructure pro-
jects underway in the kingdom – some 800,000 new visa appli-
cations were accepted last year. However, Saudi officials are
considering the possibility of increasing expatriate recruitment
costs for the private sector as a way of easing rising unemploy-
ment among young nationals.
To address the shortage of construction materials, Al-Jamal is
looking to manufacture building materials such as concrete, steel
and aluminum in the near future. “I see a new edge in the busi-
ness of manufacturing,” he says. Steel consumption in particular is
picking up rapidly as the ability to build very quickly with it has
underpinned a big market share in private-sector construction,
and innovation has been spurred by
competition with other materials,
particularly concrete.
While lavish public-works contracts
may be less common in Saudi Arabia,
build-operate-transfer (BOT) contracts
with private firms are on the rise, an
evolution which businessmen like Al-
Jamal greatly appreciate. “I believe in
partnership,” he says. “Rightly, we are
now treating international investors as
our partners, not contractors to be dis-
carded when a project is over. The real-
ity is that they are making a positive
impact and that the Saudi market really
needs them.”
Al-Jamal also praises the economic stew-
ardship of King Abdullah, who, in spite of
high oil prices, has seized the opportuni-
ty to press forward with reforms to further
liberalize the domestic market. “While
other countries would be complacent
with a similar economic performance, this
government has not sat back and used
prosperity as an excuse to avoid taking really tough decisions,” he
remarks. “Who today can doubt that industrial and commercial
development work better in the hands of the private sector? Some
people in the kingdom have been nervous to become part of the
great global economy, but I am not among them.”
Half of Saudi Arabia’s real GDP growth in 2006 is attributed to the
non-oil sector, where exports are increasing some 13% a year. “This
country is growing into an industrial and commercial powerhouse
that will thrive and prosper whatever happens to the oil price,” says
Al-Jamal. “Saudi Arabia is changing slowly, but surely.”
BY AMANDA TAYLOR
MGC: landing opportunities
AT THE HEAD OF A CONGLOMERATE THAT SPANS SECTORS AS VARIED AS
PUBLISHING AND TRADING, NABIL AL-JAMAL IS SURE OF MGC’S CORE BUSINESS
OF CONSTRUCTION, AND HIS COMPETITIVE EDGE.
Nabil Al-Jamal, President and CEO of MGC

seaport expected to be among the world’s largest on completion.
Facilities will include a grand mosque, 4.5 million square meters
of parks, a sports stadium and a university. The government has
made clear that this is to be a private-sector led initiative, but
will work with the developers to ensure that the cities offer state-
of-the-art, custom-designed infrastructure.
In the 1970s, during Saudi Arabia’s first major development
phase, urban contractors built roads, hospitals, pipelines and
sewage systems for the state. Sports complexes and power plants
came shortly afterward. This led to an eclectic urban grid of
manufacturing plants built alongside office buildings, hospitals,
schools, stadiums and mosques.
During the first phase, the Dallah Albaraka Group was
involved in major construction projects nationwide, including the
building of roads, hospitals and the installation of pipelines and a
utilities network. The company is responsible for Riyadh’s sewage
system, the central sports complex and electric power stations.
Since 1994, Dallah Albaraka has overseen the maintenance of the
two holy mosques and key pilgrimage sites in Mecca and Medina.
Soon after, the company opened phase one of Durrat Al Arus
Tourist City on the Red Sea, 60 kilometers north of Jeddah.
L
Like neighboring countries, the Kingdom of Saudi Arabia is feel-
ing the impact of billions of petrodollars. State coffers have
amassed some $300 billion, according to analysts. That is what
oil prices can do for an economy that is 80% dependent on nat-
ural resources. Much of the capital at Riyadh’s stock exchange is
being allocated to construction and development. But in the
country’s second development thrust, talk is of intelligent cities
and industrial clusters, and for the first time environmental con-
cerns have been integrated into urban planning. While the king-
dom is not looking to compete with the glamour offered by near-
by Dubai, the overall strategy is the same: to promote growth in
the non-oil sector.
Central to that objective are the new cities planned for
development across the country. Through the economic cities
initiative, the government aims to develop vibrant urban areas
with a business-friendly environment that leverage Saudi Ara-
bia’s competitive advantages – low-cost energy and a strategic
location. The development of King Abdullah Economic City
alone will cover some 180 million square meters north of Jeddah
and will comprise an industrial zone, a central business district, a
resort district, an educational zone, residential communities and a
The shape of things to come
FROM RESIDENTIAL COMPLEXES TO INDUSTRIAL CLUSTERS, LARGE-SCALE CONSTRUCTION IS A
RESULT OF THE OIL BOOM. IT ALSO SERVES AS A CATALYST FOR THE NON-OIL SECTOR.
BusinessWeek
Masterplan for the multibillion-dollar
King Abdullah Economic City, north of Jeddah
CourtesyofAsdaa

BusinessWeek
Construction, even in this first wave, made economic
progress for the private sector possible: by 2006, Dallah Albara-
ka was ranked 5th among the kingdom’s top 100 companies.
Today, the group comprises eight different holdings with spe-
cialized activities ranging from construction and service projects
to international trade, finance and media production - and gen-
erates a multibillion-dollar turnover. According to its President
and CEO, Abdullah Saleh Kamel, the aim of his conglomerate is
to enhance the lives of all Saudis, from family television to the
roof over their heads. Dallah Albaraka is currently at work on
two megaprojects: the construction of King
Abdul Aziz Road, which connects the mer-
cantile city of Jeddah to the holy city of Mec-
ca; while at Durrat Al Riyadh, Dallah Real
Estate and Tourism Development Co.’s head
engineers are moving the desert to make way
for an exclusive 800-residence suburb to pro-
vide state-of-the-art housing.
The trend toward residential complexes
is another consequence of economic as well
as demographic growth. According to Khalid
Alireza, the Vice Chairman of Xenel Indus-
tries, the mortgage boom is giving new
momentum to a construction sector that has
so far focused principally on developing a
first-class infrastructure. “A middle-income
person, instead of forcing his children to live
in the same house may build a house next
door for them. What does that mean? That
means more cement, more blocks and more
cable. That’s good for me and, more impor-
tantly, for jobs,” says Alireza. The financial institutions under-
writing the mortgages are also keen to see construction ride out
an environment of high oil prices.
“When we first began in construction in 1980, most of the
contractors were non-Saudis. The sector was dominated by East
Asian companies,” says Saleh Ali Al Turki, President of Jeddah-
based Nesma Holding Co. From its beginnings in government-
driven maintenance projects, Nesma began to move into infra-
structure and today the company is heavily involved in oil and
gas construction. “We work wherever Aramco is,” Al Turki
Saleh Ali Al Turki, President of Nesma Group

BusinessWeek
says. In this field, the company now has Spanish and Canadian
partners.
While Nesma’s core business areas have traditionally been
project-based, there has recently been a move to incorporate more
consumer-based activities within the group. Today, among other
activities, the company boasts the largest hotel operation in the
kingdom, and is moving into telecoms, electronics, information
technology and real estate. “The more sophisticated the market
becomes, the more you have to develop your services,” says Al
Turki. “Today, construction is our best business, but we have
learned that every aspect of a business is important.”
Al Turki is constantly on the lookout for business partners,
recognizing the key role they play in the company’s develop-
ment. “A large measure of our success depends on our ability to
work with partners. In fact, our growth came through joint ven-
tures,” he says. “We are looking for partners in construction and
we are looking for partners in oil and gas to complement our
businesses. This is because there is lack of [resources] and com-
petition is not only about getting the business but about keeping
the resources. Qatar is booming, the Gulf is booming, China is
booming, so everybody is competing with everybody else. That
is the major problem with any country in the world, a lack of
resources and qualified manpower,” he says.
Since Saudi Arabia joined the World Trade Organization
(WTO), interaction with foreign firms has taken on new mean-
ing. They are no longer regarded purely as sources of knowledge
transfer, but more as globalizing agents. Joint ventures have
turned Xenel Industries into a world-class player. Khalid Alireza,
the Vice Chairman, is at ease managing a real estate project in
Orlando, Florida, while keeping an eye on a $1.6 billion hydro-
electric dam in Pakistan. “We have to sustain diversification,”
says Alireza.
The aim is to maximize local assets through ingenuity, not
oil crude alone. Large conglomerates like Xenel Industries can
maintain their cash flow in the construction sector, but increas-
ingly they can spin off into added-value manufacturing of petro-
chemicals, pharmaceuticals, chemicals and food. Even tourism is
no longer driven by religious pilgrimage alone. “Within three or
four years, we’re going to see the number of visitors move up
from four million to 10 million a year. These people will require
hotels, motels and restaurants,” says Alireza.
Fahad Al Jarbou might be the perfect example of an engineer
turned global entrepreneur. As Managing Director of the Saudi
Chemical Company, a specialist in explosives, and Sitco Pharma,
a leading distributor of pharmaceuticals, he is also versed in mul-
titasking. “Until 1985, explosives [for the construction sector]
were mostly an import business. That is until we built a factory,”
says Al Jarbou. Prior to that, all the dynamite needed at construc-
tion sites and strip mines was shipped in via Swedish partners. The
story of explosives has not changed dramatically, according to Al
Jarbou. He mentions a shift away from traditional dynamite,
which is unstable. The firm has developed a self-deteriorating
explosive product that makes it safer to store. “You cannot have
an accident with this product,” Al Jarbou says reassuringly. Rela-
tions with foreign investors helped Al Jarbou attain several bench-
marks along the way. In 2000, Saudi Chemical was awarded ISO
2000 certification. Al Jarbou adds that knowing a country like the
back of your hand also helps. “Our experience is a very safe bet for
any multinational.” BY PAUL DE ZARDAIN
In this second development thrust,
talk is of intelligent cities, industrial
clusters and the environment.

W
Why should Chinese construction firms be concerned about the
rise of building materials made in Saudi Arabia? Because much of
the expertise accumulated in the kingdom’s recent construction
boom is embedded in new product lines: steel re-bars with high
traction grades, cement for ultra-dry weather and slick resins for
housing exteriors. Many of the components, such as laminates, are
not instantly recognizable, but they are there, working silently in
the unforgiving climate of the Arabian Peninsula. The industry for-
mula has changed the way head engineers in the Middle East man-
age their supply chain. In addition, the kingdom has implemented
strict quality controls to minimize cheap imports from Asia and
comply with WTO regulations. When it comes to structural
mechanics, quality is the measure of all things.
Building-materials firms
offer a local advantage
THE EXPLOSION OF CONSTRUCTION ACTIVITY IN
SAUDI ARABIA HAS GENERATED A BOOM FOR
THE BUILDING-MATERIALS INDUSTRY. LOCAL
MANUFACTURERS OF STEEL BEAMS AND RESIN
LAMINATES ARE LEADERS IN THEIR SECTOR.
At the time of Sipco Paints’ foundation in 1983, Saudi Arabia had
only one other manufacturer of external coatings, and most of the
coatings for the oil and petrochemical industry were imported.
Today, the company provides for the needs of Middle East cus-
tomers across the spectrum, from home decoration to world-class
industrial coatings.
The company’s product portfolio is extensive. “There are decora-
tive coats for hotels, hospitals and villas, and industrial coatings
for manufacturers of furniture, refrigerators and cars,” says
Ahmad Al Jomha, the General Manager. In addition, there is a
range of protective coatings that cater to the oil & gas industry.
“Protective coatings are for Saudi Aramco, petrochemical plants,
pipelines, bridges and all the steel structures where metal needs
protection from the elements.”
The company has stayed at the forefront of new technology,
investing in technical licensing agreements and developing
home-grown solutions. This, combined with a holistic sales
approach, has given the company a leading edge. Seventy show-
rooms market the company’s decorative coating products.
WTO membership will pose a challenge for Sipco. But Al Jomha
cites his in-house R&D unit as a competitive advantage, allowing the
company to respond to specific customer needs. “Our R&D lab has
been developing products to suit the environment in this region, not
just for decorative paints but across the market. Our competitors
just don’t have that sort of facility,” he says. “We know this market
and we have a tremendously good track record in it.”
Sipco Paints:
A coat for every
occasion
The production of cable for the construction industry is soaring

BusinessWeek
imagine. And they always accept a player with a winning value
proposition,” says Alnaimi.
An environment of low oil prices in 1998 first encouraged Sau-
di industrialists to branch out into new areas. Consistent with Che-
manol’s strategic diversification, Alnaimi took on the challenge of
coming up with innovative solutions for old supply problems. He
utilized resources at Chemanol to conceptualize the projects config-
uration based on methanol.
One of the results was to pro-
duce a range of toxin-free sol-
vents for coatings. Demand for
the environment-friendly finish-
ing products soared. It was the
kind of adrenalin-fueled ven-
ture that Alnaimi loves to take
on. “Our true competitive
advantage has always been the
ability to commercialize oppor-
tunities rapidly. I bring a ven-
ture-capitalist mindset to grow-
ing a company. The only
difference is a venture capitalist
harvests and exits. I harvest
and re-invest,” says Alnaimi.
In the 1990s, steel
imports far exceeded domestic
production. Even today, Saudi
Arabia is still a net importer,
but cheap natural gas and high
levels of automation allow
Saudi steel mills to bank on
cost advantages. The upsurge
in construction means compa-
nies like UGS, which initially
grew out of the need for local-
ly produced steel, will contin-
ue to expand. In industry jar-
gon, the firm has come to be
known as a niche manufactur-
er of “medium-section long
products.” The half-million-
ton plant delivers these pieces
to a variety of industries, including assembly lines for transmission
towers that are later exported to Latin America. Demand for steel
was pushed up a notch when the kingdom launched construction
projects at Yanbu, a city on the Red Sea. With a price tag estimat-
ed at some $30 billion, orders for beams translated into a gravy-
train for UGS. The $26.6 billion-King Abdullah Economic City
(KAEC) near Jeddah is another case in which the private sector is
playing a key role.
“The strategic principle here is self-sufficiency. Middle East steel
consumption should be wholly met by regional producers. We have
the potential for 7 to 8 million tons of new capacity, or approxi-
mately 70% of our present import volume,” says Alnaimi. With
Saudi membership in the WTO, the edge for domestic firms is
squarely in the field of ingenuity. WTO regulations will help set stan-
dards in construction materials by placing the sector’s output under
“Our components may be unseen, but they are important to
industries that make products for everyday use. For instance, how
does formaldehyde grow food? The answer is it doesn’t, but it’s an
ingredient that determines the quality of fertilizer used in growing
crops,” says Mazen K. Allahiq Alnaimi, the Managing Director and
founder of United Gulf Steel (UGS) and Modecor, a manufacturer of
surfacing materials. Alnaimi is also the founding shareholder of
Chemanol (formerly Saudi Formaldehyde Chemical Co. Ltd.), the
flagship formaldehyde/methanol firm established in the industrial
city of Jubail in 1991. The super-plasticizers produced by Chemanol
are custom-made for the region’s extreme weather conditions.
Looking at a fine-grained Modecor product can be a challenge.
The company’s range of ultra-thin laminate surfaces comes in dif-
ferent colors, designs and textures, and the ready-made surfaces
can be imperceptible to the naked eye. A process known as Con-
tinuously Pressed Laminate is
responsible for the varying thick-
nesses. Chemical engineers have
also devised a thermal process to
seamlessly fuse components onto
particle boards. With ModeShield
protection, the materials are often
scratch-proof. The plant, located
in Jubail, uses German technolo-
gy to produce edge bands, chip-
boards and parquet flooring. First
launched in 2004, Modecor has
already been ISO 9000:2000 cer-
tified. It recently passed muster
at the American Society for Test-
ing Materials, paving the way
for exports. Modekor Europe,
based in Rothenburg, Germany,
is leading expansion into the
European Union.
As the largest producer of
building materials in the Middle
East, Saudi Arabia is a natural
leader. Since 2000, the sector has
optimized its role as feedstock for
the construction frenzy in the
region. High international oil
prices means petrodollars are not
reinvested in capital markets
abroad but are being allocated to
large-scale infrastructure develop-
ments. Figures from The Nation-
al Commercial Bank (NCB), the
kingdom’s largest, put the contri-
bution of construction and build-
ing materials to the economy at some $12 billion a year. Further-
more, having started from the base of import substitution in many
areas, the kingdom is now a net exporter of cement, stone, glass,
cable wire, flooring products and laminates.
For Alnaimi, domestic investment in the sector is virtually
untapped, however. International players have had to take up the
slack. They have expressed interest in companies like Modecor
and UGS that aspire to eliminate the constraints posed by
imports. Alnaimi thinks his philosophy of combining low-cost
inputs with growth in domestic demand is only logical. After all,
trade finance is unnecessary because sales are in-house. “Local
producers have a distinct competitive advantage over importers.
The time to market is shorter and customers can choose size and
shapes, thus doing away with the constraints of uneconomic
import quantities. I often find that markets are bigger than people
Figures from The National
Commercial Bank put the
contribution of construction and
building materials to the economy
at some $12 billion a year.

more international scrutiny. The tradeoff is that Saudi firms will be
protected against barriers to exports of steel, laminates and paints.
All this means a healthier investment climate for the kingdom.
Meanwhile, the supply of cement has undergone its own imper-
ceptible revolution. The eight cement makers in Saudi Arabia are
working to keep up with the breakneck pace set by large-scale con-
struction projects such as KAEC. A ninth cement plant will come
BusinessWeek
on-stream in 2008 near Jeddah, adding around one million tons to
domestic output. Rami Al Turki, Executive Director of the Khalid Ali
Alturki & Sons Group, heads one of the best-performing cement fac-
tories in the kingdom: Saudi Readymix. The factory will produce 3
million cubic meters of ready mix concrete in 2007. The firm also
produces pre-fabricated concrete blocks, which offer cost advantages
to developers. The staff of 1,500 at Saudi Readymix has raised qual-
ity standards to a point where exports to Europe are also an option.
“We started in this industry back in 1976 through a joint ven-
ture with a U.S. company,” says Al Turki, and growth has gone
from rapid to explosive. Saudi Readymix is growing at 30% a year,
according to Al Turki, and it has had to implement a strong acqui-
sition strategy to meet demand. Buyouts of large cement makers in
the Gulf States and other countries in the region are not excluded.
The WTO poses as many benefits as it does headaches, but at the
end of the day, says Al Turki,
the benefits will outweigh any
detrimental effects on cement
makers. “It’s going to be sur-
vival of the fittest and it’s
going to force us to improve
our services. It’s a natural evo-
lutionary process.”
A diversified product line
will also help. With high inter-
national prices for methanol
and its derivatives, it makes
sense for firms like Chemanol
to keep producing solvents for
building and coatings applica-
tions. But steel billets can
guide the way into the future
for UGS if oil prices were to go
soft. Much of the success of
Saudi building-material manu-
facturers will rest on produc-
tion costs. China commands a
35% share of the global busi-
ness, but the high energy
inputs required do not make
an advantage sustainable in a
country poor in natural
resources. Natural gas, which
serves as feedstock at steel
mills and downstream indus-
tries, is cheap and plentiful in
the kingdom. Alnaimi thinks
the current environment tips
the business rationale towards
Saudi Arabia. Even with an
undervalued currency, he says,
Saudi Arabia can meet the
challenge from China. “The
competitiveness of nations is
entering a new phase. China
and Taiwan are discovering
that entering the Saudi market
is a tougher proposition than
in the 1990s as companies like
Chemanol, UGS and Modecor,
and many others, provide the
edge that comes with a new
phase of industrialization in
Saudi Arabia,” he says.
BY PAUL DE ZARDAIN
“Local producers have a competitive
advantage over importers. The time
to market is shorter and customers
can do away with the constraints of
uneconomic import quantities."

BusinessWeek
population) to about 2.5 million (7%). At the same time, obesity
is on the rise, says the Booz Allen Hamilton report entitled The
New Saudi Arabian Healthcare Market.
In a bid to deal with increasing demand, there is a boom in
hospital and clinic construction. Figures from Research and Mar-
kets indicate that in 2005 alone $448 million was allocated to the
construction and renovation of health facilities in the kingdom.
But while building continues apace, the cost of treatment will also
continue to rise – the kingdom spent $13 billion on health care in
2005 and this is expected to grow to over $20 billion by 2016.
S
Saudi Arabia is building a reputation for medical excellence and
sophisticated research and is attracting highly skilled staff from
around the world to work in its modern hospitals and dedicated
research facilities. But, like many European countries, the kingdom
is expected to experience a sharp increase in demand for health-
care services and will need to create a system that is more respon-
sive to the needs of Saudi citizens.
A report from the global management consultancy Booz Allen
Hamilton says population growth, an aging society, and the con-
ditions that affluence often exacerbates, such as diabetes, cardio-
vascular diseases and cancer, will mean that growing numbers of
people will require access to world-class health care.
The percentage of people aged 60 and over is expected to
more than double by 2020 from about one million (4% of the
A healthy
outlook
AN INCREASINGLY SOPHISTICATED
HEALTH-CARE SYSTEM FACES THE CHALLENGE
OF RISING DEMAND FOR ITS SERVICES.
A LIKELY OUTCOME IS A GREATER ROLE FOR
THE PRIVATE SECTOR AND MULTINATIONALS.

BusinessWeek
Ziad Fares, a health expert at Booz Allen Hamilton, says:
“In order to cope with the future needs of the country, Saudi
Arabia is finding that it must make substantial changes to the
way it conducts health care.”
Currently, the Saudi Arabian government funds most of the
country’s health care – which is free to all Saudi citizens. This
includes a network of health-care centers and national specialist
tertiary-care hospitals to deal with patients who need advanced or
specialized treatment.
However, the private sector is likely to play a much bigger role
in the future, as Fares explains: “Saudi Arabia’s health-care system
is ripe for investment opportunities. The growing affluence of Sau-
di Arabia and the GCC region as a whole means that the health-
care systems of these nations will need both money and expertise
from outside sources in order to cope with an aging population.”
And he adds: “The fully nationalized system that served an
earlier era well is no longer suited for the complex, dynamic
country that Saudi Arabia is becoming. For both economic and
public health reasons, the government is committed to a course of
change that will in the end create a system that meets the needs of
Saudi consumers.”
Saudi Arabia has a shortage of home-grown doctors and
nurses and has identified the need for new medical schools – some
of which will involve investment from the private sector. The
kingdom is also looking to create partnerships with leading med-
ical schools overseas. In addition, Saudi Arabia is creating a
stronger framework to promote private-sector investment in
health care and the production and distribution of pharmaceuti-
cals and medical supplies.
Currently, the Saudi Arabian pharmaceutical market is the
largest in the Gulf region and was worth an estimated $1.14 billion
Jeddah BioCity
Leading the development of a
knowledge-driven economy
Jeddah, one of the oldest cities on the Arabian Peninsula, was also
one of the first in the region to venture into the biotechnology
field with the establishment in 2002 of the Jeddah BioCity Compa-
ny. This venture is just one component of the kingdom’s concerted
push toward a knowledge-driven economy.
Part-owned by the King Faisal Specialist Hospital and Research
Center in Riyadh, Jeddah BioCity Co. aims to make Jeddah the
center of the biotechnology industry in the Middle East. “Jeddah
BioCity is a futuristic concept that blends innovative research
and manufacturing in an economic [zone] that will contribute to
the welfare and prosperity of our society,” according to its Chair-
man, Dr. Sultan Bahabri. The objective, he says, is to turn inno-
vations into marketable products. “This pioneering and unprece-
dented project aims to make Saudi Arabia the focal point of
biotechnology in the Middle East region and Jeddah the focus
of Saudi biotechnology.”
The company is in the process of creating a “BioPark,” a high-
specification biotechnology research zone covering one million
square meters in Jeddah’s King Abdul-Aziz University complex.
In advance of this construction, however, Jeddah BioCity already
provides a number of services to start-ups and companies locating
a related facility in and around Jeddah.
For biotech companies that meet the criteria, investment is avail-
able in the form of venture capital and non-guaranteed loans.
Based on performance there is then the opportunity for further
investment until the company reaches maturity, estimated to be
between five and eight years after the initial investment. Other ser-
vices available include up to 1,400 square meters of fully serviced
laboratory space, including office and ICT facilities; pre-clinical
research services; and the facilities of a number of departments of
the King Faisal Specialist Hospital and Research Center.
An example of the work of the BioCity is its partnership in the
foundation of Jeddah-based Arabian Pharmaceutical Products
Co. (Arabio), which is establishing a factory in Mecca to manufac-
ture human vaccines. This will be the first private company in the
Arab and Islamic world to manufacture such products. Jeddah
BioCity is also investing some $150 million in Genway, a company
specialized in the manufacture of antibodies. Jeddah BioCity will
have exclusivity to market the products in the Middle East,
Europe and North Africa.
One of the key aims of Jeddah BioCity is to hasten the transfer of
technology and knowledge to Saudi companies and universities.
This, it is hoped, will assist in producing a work force able to com-
pete in the international biotechnology arena. BY MARTIN JONES
Kingdom Hospital employs state-of-the-art equipment
istockphoto/AndreiTchernov

BusinessWeek
MARKETING: L. Desmaretz - RESEARCH: R. Pratt - EDITOR: P. Drennan
PRODUCED BY: C. Moura - DESIGN: M.Fuoco - PHOTOS: M. Venditti; B. Luque
www.vegamedia.coma VEGA MEDIA creation
in 2005, according to a report from market research firm BMI.
Although imports dominate the market at around 90% of drug con-
sumption, BMI says in its report: “The government is looking to curb
health spending and is encouraging generic substitution [of branded
drugs] which should provide a boost to domestic manufacturers.”
Fahad Al Jarbou, Managing Director of Saudi drug distribu-
tion company SITCO, says: “The future of pharmaceutical distri-
bution in Saudi Arabia looks promising for the immediate and
long term. I see a consolidation of the distribution network as the
pressure grows to increase services while controlling costs. As in
many other markets, consolidation is a natural maturing of the
market and will create efficiencies while improving service to both
the companies that we represent and our customers.”
Booz Allen Hamilton’s Fares says the changes that Saudi Ara-
bia’s health-care system is going through will also have an impact
on the medical-supplies market. “The rapidly growing market and
more effective regulation will make it more attractive to produce
locally common medical supplies and devices such as catheters,
dentures and X-ray film,” he says.
Among recent changes, the Saudi government has given the go
ahead for the first local private company to produce vaccines for
the Saudi market. Arabian Pharmaceutical Products Co. will man-
ufacture 15 different vaccines from its factory in Mecca for use in
the kingdom and other Middle Eastern countries.
And the Tamer Group, one of the leading health care trading,
investment and manufacturing groups in the kingdom, is opti-
mistic about the changes taking place. Ayman M. Tamer, President
of the group which his grandfather founded when he set up the
first pharmacy in the kingdom in 1922, says: “I see that the health-
care sector, mostly private, with the right regulatory environment
and support, will continue to grow in terms of infrastructure,
facilities and quality.”
The Tamer Group is building strategic relationships with
some of the world's leading pharmaceutical companies, including
Novartis, Pfizer, Schering Plough, Sanofi-Aventis and Roche
Diagnostics. “Partnership, we believe, is the key to success,”
Tamer says. “We are always looking to be associated with multi-
national companies dedicated to health care, beauty care and oth-
er medical businesses. We welcome any company that wishes to
have a [presence] in the health-care industry in Saudi. We wish to
cooperate even with our competitors to improve the quality of life
of patients in Saudi Arabia.”
But perhaps its most important partnership is its involvement
in the Saudi Arabian Japanese Pharmaceutical Co., a joint venture
between Tamer and a consortium of Japanese partners to produce
the latest medicines for regional markets.
Similar partnerships between Saudi companies and those from
overseas are expected to increase as the Saudi health-care market
changes. A briefing from the U.S. Dept. of Commerce outlines the
possibilities: “The increase in Saudi investment in local pharma-
ceutical and disposable medical products manufacturing represents
a major opportunity for U.S. companies to license their products
or explore joint-venture possibilities in Saudi Arabia.”
And Booz Allen Hamilton’s Fares sums up the trend: “The
transition to a market-driven health-care system will not only be
good news for Saudis and the Saudi economy. For international
health-care providers and investors, the coming liberalization of
the sector will mean increased access to the largest health-care
market in the Middle East and an exciting opportunity to help mil-
lions of Saudis live longer, healthier lives.” BY HELEN JONES
Center of excellence
The King Faisal Specialist
Hospital and Research Center
Saudi Arabia boasts a number of specialist hospitals but perhaps
chief among them is the King Faisal Specialist Hospital and
Research Center (KFSH & RC) in Riyadh. Opened in June 1975
and named after His Majesty the late King Faisal Bin Abdulaziz, it
is the kingdom’s largest hospital and has earned a reputation for
innovation and excellence beyond Saudi Arabia.
KFSH & RC is the kingdom’s national referral center for oncology,
organ transplants, cardiac surgery and
genetic diseases, among others.
Before it opened, patients had to seek
specialized treatment abroad.
The state-of-the-art, 800-bed tertiary-
care hospital provides specialized
treatment and promotes medical
research and education programs as
well as working collaboratively with
international medical institutions.
It employs medical professionals from around the world and its
highly sophisticated 140,000-square-foot research center boasts
expertise in biological and medical research, genetics and
comparative medicine, among other specialist areas.
Among the Centers of Excellence at the hospital is the King Fahad
National Center for Children’s Cancer and Research – the only chil-
dren's cancer center in the Middle East. Modeled on the world-
leading St. Jude’s Children's Research Hospital in Memphis in the
U.S., the Center now accepts more new patients annually than
St. Jude’s and provides both inpatient and outpatient services to
pediatric hematology and oncology patients.
KFSH & RC’s King Faisal Cancer Centre (KFCC) cares for adult
patients and has ambitions to become the leading international
center for cancer research, prevention and treatment. Accredited
by the World Health Organization as a Collaborating Center for
Cancer Prevention and Control, KFCC is actively involved in insti-
tutional, national, and international research.
Another of KFSH & RC’s specialist units is the King Faisal Heart
Institute (KFHI) – a tertiary cardiac care delivery center with interna-
tional standards of excellence. With its four clinical sections – Adult
Cardiology, Pediatric Cardiology, Cardiac Surgery and Cardiac Sur-
gical Critical Care – KFHI is determined to meet the kingdom’s
growing need for all types of cardiovascular care. It aims to mini-
mize referrals abroad, through cutting-edge research and
advanced education. BY HELEN JONES

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Saudi Arabia_Intelligent infrastructure_2007

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