Saudi-US Relations - Khaled Al Seif

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The King Abdullah Economic City, north of Jeddah is under construction and the exhibit hall is already showing prospective residents what's planned. (Photo: Patrick Ryan) SUSRIS EXCLUSIVE

American Businesses and Saudi Opportunities:
Missing the Action?
A Conversation with Khaled Al Seif

Editor's Note:

In this exclusive interview on the sidelines of the recent US-Arab Economic Forum in Washington, D.C., SUSRIS spoke with Mr. Khaled Musaed Al Seif, a leading Saudi businessman and Chairman of the Committee for International Trade (CIT) within the Council of Saudi Chambers of Commerce and Industry, about the opportunities for American businesses in the Kingdom and how they were responding to the boom.

This discussion might be seen as an update of SUSRIS' initial interview with Mr. Al-Seif in Atlanta, Georgia in May 2005. At that time he was leading one of the largest business delegations ever assembled from the Kingdom on a multi-city tour of the United States to promote trade and investment. Our conversation covered a wide swath of issues of interest to American business people -- the history of U.S. business relations in the Kingdom and how that has benefited both partners, the reforms that have reshaped the Saudi economy, the status of the bilateral relationship and the prospects for economic expansion in the Kingdom -- the "boom."

Talking with Mr. Al Seif and other Saudi business leaders -- then and now -- you cannot help but be struck by two recurring themes. First is the breadth and depth of American business relationships with the Kingdom since the early days of the relationship, and how these ties motivate many Saudi businesspeople to explore American trade and investment options first. The second is the obvious disappointment that American businesses are not taking advantage of the current, unprecedented opportunities in the Kingdom as Saudi Arabia has embarked on a period of massive economic expansion.

American Businesses and Saudi Opportunities: Missing the Action?
A Conversation with Khaled al-Seif

SUSRIS: Thank you for taking time to talk about the business environment in Saudi Arabia. At a Saudi trade mission in the United States in 2005 you characterized the economy as a "boom that was wider and deeper than the boom of the 1970s." What is your assessment of the economic situation in the Kingdom now?

Khaled Al Seif: I�m happy to report to you that what I was forecasting several years ago is taking place now. We are living in the midst of this major boom. It is not only the result of oil prices and increased oil production but as I said before it is the result of the economic reforms already underway. With regard to oil revenues, as you know, Saudi Arabia is producing nearly its maximum capability to keep the price of oil as stable as possible. Oil production has doubled in just seven or eight years ago. So that is clearly having an effect on Saudi Arabia�s economic situation.

However, the economic reforms that we discussed last time have really started to take hold and we�re seeing the results of some of those reforms. Let�s start with privatization. For example, there�s the recent start of the privatization of Saudia Airlines. First the government opened the opportunity for two other airlines to start operating in Saudi Arabia -- one from a base in Riyadh and the other in the Eastern Province. Saudia itself has been divided into five companies now, two of which have already been privatized and the other three are on their way to being privatized as well.

The Kingdom Tower (991 ft) in Riyadh is the tallest building in the Kingdom and a symbol of the massive economic expansion taking hold in Saudi Arabia. (Photo: Patrick Ryan)

In the telecommunications arena, the last time we talked the government owned company STC was privatized. Second and third licenses have been issued as well. In the last year more than $9 million in desalinization work has been given to the private sector.

In addition, several other sectors are being opened to private sector participation, including things like waste management and various other sectors. These are great opportunities for the private sector. There are new regulations for 100% foreign ownership of some of those investments and projects. So American companies can come in at 100% ownership in a business or manufacturing and take advantage of all the competitive advantages that Saudi Arabia has to offer. They can work on the same terms as a Saudi Arabian company.

SUSRIS: We are seeing the development of new cities, mega-cities, economic and knowledge cities that are bringing a new base of industrial capacity. Can you comment on this expansion and diversification?

Al Seif: The economic reforms have resulted in a major expansion of activities. To support this expansion you need more infrastructure. So the idea of the economic cities was developed as a quick way to jump-start a new infrastructure base out of which a lot of industries and new businesses could work. So it�s a very intelligent move on behalf of the Saudi Arabian General Investment Authority [SAGIA]. This will make it possible to cater to the expansion.

SUSRIS: In the case of the King Abdullah Economic City the investment is private investment, does that signal the strength of the private sector in the Kingdom?

Al Seif: Actually the level of comfort is extremely high within local businesses. People can see the strength. There are a lot of companies and individuals that had funds oversees that are bringing money back into Saudi Arabia because it is the most profitable area for them to be. Business confidence is at its highest level that I have seen in years. People are very confident about what they see in this economy. People are very confident about our King, King Abdullah. We are very lucky having this King. He is well liked by everybody. Not just business people, but the people in the street too. He has done a lot and is still doing a lot. He is the champion of these reforms. We were afraid that with the generation of revenues coming in from oil prices and increased oil production that some of those reforms would slow down. Questions would be raised about why should we privatize these sectors -- �We have the money now, why don�t we keep owning it?� -- but the King did it. The King was adamant that these reforms were here to stay and that the reforms were irrevocable.

The King Abdullah Economic City, north of Jeddah, is moving from a dream to reality. (Photo: Patrick Ryan)

SUSRIS: At the 2005 Saudi trade mission that traveled across the United States the delegation announced there was $600 billion of investment and partnerships that would be available to American business people and others. At this year�s US-Arab Economic Forum in Washington that number was cited as being about $1 trillion. Can you comment about the U.S. participation in those partnerships and on what�s on the table now?

Al Seif: Yes, the number has increased. We had conservative figures at the trade mission. We found the appetite, particularly from the private sector, was much larger than what we expected. More projects were put out, such as petrochemical plants, more industries, more oil and gas work, a bigger expansion plan by Saudi Aramco to increase production capacity. And several projects started much earlier than the initial forecasts had allowed. So the figure of $1 trillion now appears to be more accurate than the $625 billion.

The issue, though, is that American participation has not been that great. There is still reluctance among American companies to take advantage of the boom in Saudi Arabia. What will happen is they will miss out �big time� in those opportunities. What you have to know is that many of the opportunities, particularly the privatization programs, are concessions for 25 years or 50 years. Once those concessions are given now -- to a European consortium, or a Chinese consortium, or a Malaysian consortium, or you name it consortium -- that settles it for 25 or 50 years.

SUSRIS: To what would you attribute the lack of appetite among American business people that you talk with for not taking advantage of those opportunities?

Al Seif: I had a meeting with the Business Roundtable, a group of the leading American CEOs, which represents about one third of the total value of U.S. stock markets. They immediately saw the opportunities; they were interested in the opportunities in Saudi Arabia. But they also imagined there were impediments. Among them are the misconceptions about working in Saudi Arabia. We gave them the facts about Saudi Arabia but I think we have to encourage them to visit Saudi Arabia so they can see the place with their own eyes.

Construction is booming in Riyadh and around the Kingdom. (Photo: Patrick Ryan)
Construction is booming in Riyadh
and around the Kingdom. (Photo: Patrick Ryan)

The second problem is something that can and should be easily fixed -- the U.S. government and the Saudi government can do something about. It is the movement of people between our countries. The current U.S. government travel advisory inhibits many Americans from coming over to Saudi Arabia and we still have problems facing Saudi business people flying to America. They have to wait for five months for a visa and when they fly into the United States they have to go through secondary screening, It can be an additional two or three hours at the airport.

I am happy to say that during this visit we had the opportunity to talk with people in Congress, with government officials, with our embassy and with the U.S. Ambassador who, by chance, was here. People who are concerned about the bridges between our countries think this is a subject of extreme importance. Fortunately ambassadors are working very hard to resolve this issue. Everyone is sensitive to good security practices but if we can see sound measure to simplify the movement of people � especially students and business people � is key to the good health of the relationship and trade.

SUSRIS: What should business people � like the Business Roundtable people you talked to � know about Saudi Arabia that they wouldn�t know if they relied only on the travel advisory you mentioned?

Al Seif: On the subject of safety in the Kingdom I would tell them Saudi Arabia has done a lot on the subject of the war against terrorism -- Saudi Arabia is winning that war against terrorism. From the start King Abdullah committed the country to eradicate this menace and the country has produced major accomplishments in the last several years. If you have been following news about developments you would have seen that a lot of cells were captured. Major actions have been taken against people who were financing terrorism -- networks for financing were completely dismantled, disrupted, stopped. People were put in prison. Saudis are very proud of their achievements fighting terrorism.

I would add that besides the eradication of individuals and groups involved in terrorism is fighting the ideology. We are winning the ideological war against the terrorists as well. King Abdullah started the National Dialogue, a program that brings people together to discuss various issues. It has expanded in a way that strengthened the moderates. Now it�s the �In� thing in Saudi Arabia to be a moderate.

This has even forced those on the far right to realize that it�s in their best interests to become moderates. So there is a big move toward moderation and to the middle and that middle is strengthening day by day. This momentum toward moderation has helped tremendously to develop committees with Imams and Sheikhs who come in and talk with some of the religious extremists � talking with them, debating with them, explaining to them what is the real meaning of Islam -- how Islam is the religion of peace and of friendship?

King Abdullah has started another important debate. He�s now calling for dialogue among the three major religions � Judaism, Christianity and Islam. It is for peace. It is for bringing in religious scholars from all of these three religions to talk about peace and humanity in the interest of mankind. This is one more step that will reinforce this moderate, middle sector.

So, that�s some of what I would say to answer a question about the security situation in Saudi Arabia. The war on terrorism is being won. Saudi Arabia is as safe as any other country in the world, if not safer. You can see, especially over the last year or more, how peaceful things are. I can report to you from the ground that we are very confident about safety and security in the Kingdom. Further evidence is that the hotels in Riyadh are full with Westerners. Occupancy rates have reached nearly 100%. It�s too bad that these Westerners are mainly from Europe, not from the United States.

SUSRIS: How do Saudi Arabian business people view the slowdown in American business participation in the Kingdom�s current economic boom?

Al-Seif: You know the United States has been our primary trading partner. Based on the historic patterns in the relationships about half of the new business should be going to Americans. But the way it is going Americans will not get even 10% of that. That�s a shame.

We don�t want to see the dwindling of American participation. Our historic primary trading partner should continue to be the United States. I would like to just say to all American businesses they are more than welcome in Saudi Arabia and that the Saudi businesses would like to see them more involved and more engaged. If there are any hindrances we need to hear about it so we can help. We welcome their participation.

Sadaf Co Power Plant - 250 MW power and 510 tonne/hour steam cogeneration plant.Situated in SADAF Petrochemical Complex at Jubail Industrial City.Jubail Energy Company (�JEC� incorporated in KSA) contracted by SADAF to build, own and operate the Project under a 20 year tolling arrangement. Photo: el-Seif Group
Sadaf Co Power Plant - situated in SADAF Petrochemical Complex at Jubail Industrial City. Jubail Energy Company contracted by SADAF to build, own and operate the Project under a 20 year tolling arrangement. Photo: el-Seif Group

SUSRIS: What business and economic developments should we expect to see in Saudi Arabia?

Al Seif: There are many exciting prospects in the Kingdom but let�s look at just a few. There will be expansion of desalinization and power plants. There�s more work to be done in railways, to be done in mining. In all of these areas the United States has been a major player. America has all the technology needed and is very competitive, particularly now given the low dollar exchange. American industry should be as competitive as ever.

It is too bad American businesses don�t take better advantage of the situation and come to Saudi Arabia to engage the business community there. It is too bad they are handing it over to the consortiums that are bidding those projects. For example, on the railway, there�s not a single American company competing. This is just one of the lines, the East-West line, called the Landbridge. It is a $9 billion investment and there was not a single American company involved. We�re very happy to see GE coming in to work on the signaling and maybe they will enter into a deal on the locomotives. But there�s more than GE; there are more American companies that should be involved in these mega-projects. These opportunities should be taken up.

Then there is the second license for telecommunications. There was not a single American company engaged. For the third license there was a small amount of participation in a minor piece of it. We want to see more involvement from American businesses in many more areas, like with the airlines for example.

Mining is also a very important area for engagement. Saudi Arabia has some of the largest mining reserves in the Middle East region. The bottlenecks are open up for mining and we�re building a north-south railway, which will allow mining products to be transferred around Saudi Arabia. Already phosphates and bauxite are being mined heavily. There�s still much to be done on the mining front and it is ripe for American participation.

In the area of petrochemicals Saudi Arabia is a world leader and we�re still expanding our total capabilities. Partners will be important at all levels. There�s a shortage of contractors. Again, Europeans are filling the gap. American participation has not been up to par.

SUSRIS: With all of those opportunities in mind do you have final thoughts you would share with American business leaders?

Al Seif: You can see there are many areas where American businesses are missing opportunities that are open now but may not be there tomorrow. As I mentioned we encourage our business friends from the United States to visit Saudi Arabia and learn about the opportunities for themselves and see how the conditions are right for Americans to jump in to the Kingdom�s boom.

SUSRIS: Thank you

ABOUT KHALED AL SEIF

Khaled Musaed Al Seif is a businessman and a leading member of the business community in Saudi Arabia who manages one of the largest business groups in the Kingdom. He is active in various committees and councils dealing with the promotion of international trade and bridging relations with the West.

Mr. Al Seif currently serves as Chairman of the Saudi Committee for International Trade (CIT) at the Council of Saudi Chambers of Commerce and Industry. He has officiated as Co-Chairman of the Saudi-British Joint Business Council since 2007; Member of the Board of U.S.-Saudi Arabian Business Council since 2006, Member of the Advisory Board for Economic Affairs at the Saudi Supreme Economic Council since 2005, Board member of Royal Philanthropic Society for Science (Prince Sultan University) since 1999; Board Member of the Arab-British Chamber of Commerce, London, UK since February 1996; on the Board of Directors of Riyadh Chamber of Commerce and Industry, Riyadh, Saudi Arabia (1993-2001 and 2004-2008); and President and CEO of El Seif Group of Companies, Riyadh, Saudi Arabia since 1975.

As the President and CEO of El Seif Group of Companies, Mr. Al Seif is the Chairman of the following Saudi and International companies: El Seif Commercial Investment Company Ltd; Musaed Al Seif & Sons Company; International Management Development Company; Dana Investment and Development Company; El Seif Engineering Contracting Company, and Marina Towers S.A.L.; and El Seif Holding Company in Lebanon. He is Also a Board Member of some other domestic and international companies which include but not limited to: Saudi Medicare Company; National Power Company; Modern Arab Construction Company: Arabian Medicare Company; Universal Advanced Systems Company; and El Seif Development Company.

Mr. Al Seif holds a B.S. in Civil Engineering from the American University in Beirut.

See:
A Man With A Mission: Khaled Al Seif Talks About US-Saudi Business Relations - SUSRIS Exclusive Interview - May 23, 2005

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