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

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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

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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

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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