AMBASSADOR'S CONVERSATION WITH NEW CHAIRMAN OF

C O N F I D E N T I A L SECTION 01 OF 04 JEDDAH 000540 SIPDIS SIPDIS RIYADH, PLEASE PASS TO DHAHRAN; DEPARTMENT FOR NEA/ARP; PARIS FOR WALLER; LONDON FOR TSOU E.O. 12958: DECL: 08/11/2016 TAGS: BTIO ECON EPET KISL PREL SA SUBJECT: AMBASSADOR'S CONVERSATION WITH NEW CHAIRMAN OF JEDDAH CHAMBER OF COMMERCE AND INDUSTRY REF: A. JEDDAH 453 ¶B. JEDDAH 289 ¶C. JEDDAH 425 ¶D. JEDDAH 451 ¶E. JEDDAH 437 Classified By: Ambassador James C. Oberwetter, for reasons 1.4 (b) and (d). ¶1. SUMMARY: On August 8, the Ambassador and staff met the new Chairman and Board members of the Jeddah Chamber of Commerce and Industry (JCCI). The Chairman gave an optimistic assessment of the Saudi economy. He enumerated a number of development projects in Jeddah and around the Kingdom, including a new airport and transportation network in Jeddah. He commented favorably on King Abdullah Economic City (KAEC) and impending ARAMCO expansion in the Eastern Province. He noted that Saudi energy policy for the west coast would rely on heavy oil. The Chairman encouraged U.S. economic activity, especially franchises. The JCCI is increasing its contacts with women and international business groups in Jeddah. The Board was concerned about Lebanon and growing foreign influence in Iraq. The Board was pleased by increasing efforts to provide visas for Saudi students and businessmen and shared fond memories of personal experiences in the U.S. END SUMMARY. AMBASSADOR MEETS JCCI CHAIRMAN AND BOARD ¶2. (C) On August 8, the Ambassador, accompanied by Jeddah Pol/Econ Chief and Commercial Attach, paid a courtesy call on the newly appointed Chairman of the Jeddah Chamber of Commerce and Industry (JCCI),Saleh Al-Turki. The meeting took place in the elegantly appointed Chairman's office atop the modern high-rise JCCI headquarters in Jeddah. The office offered spectacular views of the Red Sea coast and metropolitan Jeddah from the rapidly expanding Islamic Seaport, north along the elegant Jeddah Corniche. Visible virtually everywhere on the skyline were construction cranes and partially completed buildings. Al-Turki was appointed to the Chairmanship in July after a Board of Director's revolt led to the resignation of the previous Chairman for nonfeasance (reftel A.). A number of other members of the Board of Directors were present and made comments during the meeting. CHAIRMAN AL-TURKI - BIOGRAPHICAL NOTE ¶3. (C) Salah Al-Turki appears to be in his early 60's. He is U.S. educated and speaks excellent English. He related that he currently had two children attending school in the United States. Al-Turki runs NESMA Group, a conglomerate that is involved in major construction projects throughout the Kingdom, gas and oil (in the Eastern Province) and services to the Saudi Military. Among its subsidiaries in Jeddah is PANNESMA, which has the contract to repair Saudi naval vessels. SAUDI ECONOMY BURGEONING; STOCK MARKET OFFERED DIFFICULT LESSONS ¶4. (C) Al-Turki started the meeting with a very optimistic assessment of the Saudi economy. He forecast solid growth throughout the Kingdom in virtually all sectors. He did not shy away from commenting on the volatile, and declining Saudi stock market, the Tadawal All Shares Index. The market has lost nearly half its value since the decline began early in the year. Al-Turki, thought that all in all it was "a good thing." He observed that it was a difficult lesson (disastrous for many, see reftel B, C, D.) but that it was a necessary lesson. He condemned the investors who expected unrealistic returns on their investments. It was necessary, in al-Turki's opinion, that Saudis learn the reality of the investment market. On the other hand, he was encouraged that Saudis were moving from a society dependent solely on salaries to one in which a significant segment of the population gained part of their income from investments. JEDDAH REDEVELOPMENT - NEW AIRPORT DEVELOPMENT ¶5. (C) The Chairman offered his view of the municipal plan for redeveloping Jeddah (reftel E.). He highlighted plans to JEDDAH 00000540 002 OF 004 build a completely new international airport to the east of the existing King Abdul Aziz International Airport north of Jeddah. The current facility is only now undergoing a major renovation and expansion which will be completed in about two years. Nevertheless, the authorities believe that a completely new facility is required to meet the growing demands for air services in rapidly developing western Saudi Arabia. According to al-Turki, the new airport design has been completed and contractors identified. He anticipated that construction would begin in approximately 3 years. PLAN INCLUDES TRAFFIC ALTERATIONS AND RAIL LINKS TO CONNECT JEDDAH TO THE EAST ¶6. (C) This project would be accompanied by a dramatic realignment of transportation arteries in Jeddah, as dictated in the Jeddah municipal redevelopment plan, cited above, and Prince Majid Street would become the major thoroughfare for the new Jeddah. Al-Turki said the plan calls for at least 16 overpasses to be constructed in an effort to alleviate Jeddah's increasingly grid-locked traffic. Transportation hubs would be developed connecting to the proposed Mecca-Medina rail-link which would connect Jeddah with the Islamic Holy Cities and the industrial centers to the north, and eventually to the planned Landbridge rail network that will ultimately connect the west coast commercial centers to the Gulf industrial centers. KING ABDULLAH ECONOMIC CITY ¶7. (C) Al-Turki also commented optimistically on the proposed King Abdullah Economic City (KAEC) project now in its initial stages of development in Rabigh, approximately 50 miles north of Jeddah. From comments made by Al-Turki and others it seems clear that they view KAEC as a synergistic element in the development of the west coast rather than competition to Jeddah. ARAMCO PLANS 2 MILLION BBD INCREASE ¶8. (C) Speaking from his knowledge of the oil and gas industry in the Eastern Province, Al-Turki revealed that ARAMCO is investing in a second large gas pipeline and a large petrochemical plant on the east coast, with which, it is hoped, to capture a substantial portion of the downstream gas and petrochemicals market. He anticipated ARAMCO making a formal presentation on the project in September. He explained that ARAMCO was optimistic that it could expand its capacity by approximately 2 million barrels per day (bbd) and hoped to increase its capacity by a further 2 million bbd, once the current expansion plan is completed. He did not see this as a disadvantage to Jeddah because the oil money is now supporting west coast development. WEST COAST TO BE POWERED BY HEAVY OIL; DEVELOPMENT PLANS OUTSTRIP CAPACITY FOR IMPLEMENTATION ¶9. (C) Al-Turki revealed that since the west coast lacked easy access to the vast natural gas reserves available along the Gulf, a royal decree had dictated that west coast projects should use heavy oil for power generation. In concluding his comments on development prospects he observed that projects are limited simply by the lack of capacity to carry them out. He admitted that his own organization, NESMA, could not undertake all of the construction projects offered to it, and he noted that ARAMCO could not implement all of its modernization and expansion projects for the same reason. U.S. IN WESTERN ARABIA ¶10. (C) Al-Turki and his colleagues pointed out that there were many American companies and products in Jeddah. They took turns listing the many American stores and restaurants to be seen in Jeddah. However, one member observed that the chain restaurants, offering inexpensive food in American cities, are classed as a "fine dining experience" in Jeddah, and are patronized predominantly by the upper classes. U.S. PRESENCE LANGUISHING; WOULD LIKE TO PROMOTE FRANCHISING ¶11. (C) The Board members present expressed disappointment JEDDAH 00000540 003 OF 004 that there has not been a major increase in the American presence in the past 5-6 years. One of the Board members described a franchising exhibition that created great interest in 2000. At the time, they forecast starting as many as 150 franchises. However, there was no follow up and the program collapsed rapidly, and virtually nothing has happened since then. Al-Turki and the Board expressed an urgent desire to see this program renewed. At the present time, the JCCI and the Saudi government view franchises as a desirable method of economic and employment expansion. Many of the franchises, requiring about $150,000 initial investment and offering training and employment at a relatively basic skill level, are very attractive and practical in view of the Kingdom's resources and work force. Al-Turki promised that the JCCI will support franchisees. It is planning a department solely to promote and assist franchises. It will provide financing and guarantees. Both the JCCI and the government have established funds to help finance franchises. FCS ANXIOUS TO PARTICIPATE ¶12. (C) The Commercial Attach immediately volunteered that American franchises were aggressively searching for new markets and would be very interested in cooperating with the JCCI to create opportunities for small and medium sized businesses. The Ambassador seconded this objective and promised his support. JCCI REACHING OUT TO WOMEN ¶13. (C) In other matters concerning the JCCI, Al-Turki noted that currently, approximately 15-20% of the membership is composed of women, even though it is still fairly difficult for women to begin businesses in Saudi Arabia. Nevertheless, he considered this a promising omen for the future. He also reminded the Ambassador that four women had been elected to the Board of Directors in the JCCI elections late last year. The increasingly prominent role of women was brought home by the fact that one of those women directors, Naswa Abdulhadi Taher, sat at the Chairman's right hand throughout the meeting and took an active part in the discussions. He also revealed that the JCCI is beginning to hire women for its professional staff. JCCI COLLABORATING WITH BUSINESS ORGANIZATIONS ¶14. (C) Al-Turki promised that the JCCI would honor the agreement entered into by a predecessor with the American Businessmen of Jeddah (ABJ). This agreement allows the ABJ to operate as an entity affiliated with the JCCI, since recently promulgated Saudi anti-terrorism banking laws prevent NGO's from registering and operating bank accounts independently. In fact, Al-Turki said he expected to sign similar agreements with virtually all of the international business organizations in Jeddah. DEVELOPMENTS IN LEBANON AND IRAQ WORRY SAUDI BUSINESSMEN ¶15. (C) The Board members expressed their dismay over the Lebanese situation and pleaded for an early resolution. In regards to affairs in Iraq, al-Turki said that the increasing evidence of coordination between sectarian leaders in Iraq and outside elements, for which one may read Iran, was a matter of growing concern for Saudi businessmen. STUDENTS AND TRAVEL ¶16. (C) The conversation concluded with a discussion of student and business travel. Al-Turki and the Board strongly endorsed the government's scholarship program and asked the Ambassador to make every effort to facilitate the travel of students. Al-Turki, referring to his own studies in America, said that nothing can equal the actual experience of living on a campus and interacting with the surrounding community. The Board members were surprised and pleased when the Ambassador informed them that the Mission had processed 13,000 student visas in the past year. He explained the initiatives that were being implemented, in cooperation with the Saudi government, to ensure that the new group of scholarship students would be processed faster and with less difficulty than had the first group. He also described JEDDAH 00000540 004 OF 004 efforts to increase visa processing in Riyadh. The Board were pleased with these efforts and observed that although passing through U.S. airports constituted a trial, once they cleared the airport, they found the United States as welcoming and friendly as in earlier times. Gfoeller