JOINT U.S. - SAUDI BUSINESS DIALOGUE LAUNCHED

UNCLAS RIYADH 000132

SIPDIS

DEPT FOR EEB/CBA, NEA/ARP

E.O. 12958: N/A
TAGS: EINV ETRD ECON PREL SA
SUBJECT: JOINT U.S. - SAUDI BUSINESS DIALOGUE LAUNCHED

Summary
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1. (U) The Saudi Council of Chambers pulled out all the stops
lining up an impressive array of Saudi business leaders to
discuss U.S. - Saudi business relations with Commerce DAS
Holly Vineyard. The discussion revolved around a number of
key themes, including the need for a renewed emphasis on
business dialogue between the U.S. and Saudi Arabia, the
Kingdom's cluster strategy, reasons why U.S. companies should
do business in the Kingdom, and impediments to further
cooperation between the two countries.


"We Need a New Conversation on Business Cooperation"
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2. (U) On January 25, the Saudi Council of Chambers hosted
Holly Vineyard, Deputy Assistant Secretary of Commerce for
Africa, the Middle East, and South Asia in the International
Trade Administration. The Chairman of the Council, Dr. Fahad
Al-Sultan, opened the discussion, saying the U.S. and Saudi
Arabia need a more "intelligent" business exchange and
welcomed the recent introduction of quarterly meetings of the
U.S. - Saudi business dialogue. He said the Saudi government
(SAG) was working to revolutionize Saudi industry by
restructuring and downsizing the public sector, and by
privatizing state-owned businesses. DAS Vineyard applauded
the initiative to hold quarterly meetings and mentioned the
upcoming U.S. - Saudi business summit in Chicago. Later in
the discussion, participants raised a number of topics these
discussions should address, including investment in
pharmaceuticals in the Kingdom, investment in the further
development of downstream petrochemicals, and investment in
the aerospace industry.


SAG Cluster Strategy Focuses Efforts In Five Sectors
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3. (U) Azzam Shalabi, President of the National Industrial
Cluster and Development Program, presented the Kingdom's
cluster strategy for economic diversification, which channels
Saudi efforts towards metals, automotive manufacturing and
assembly, home appliance manufacturing, solar energy
production, and plastics and packaging manufacturing. Each
of these sectors makes use of Saudi comparative advantages
such as cheap energy, abundant sunlight, and a burgeoning
petrochemical sector, said Shalabi. He further elaborated,
saying the strategy is still in the formulation stage and
that they need government support and private sector partners
to make this vision a reality.


4. (U) In metals, Shalabi said the Saudis would be working on
developing the aluminum value chain (comments which closely
parallel those by Supreme Economic Council Secretary General
Saud Al-Saleh to the Ambassador in late December) and on the
development of steel products for use as inputs for other
industries. The automotive anchor projects the SAG is
contemplating include an assembly plant for cars and SUVs, a
factory to cast components for powertrains and engines, a
truck and bus assembly plant, and a tire production facility
with an eight to ten million unit per year capacity. While
the Kingdom already produces home appliances for domestic
sale, the strategy would expand upon this, increasing
production of refrigerators by one million units per year and
of air conditioners by 1.5 million units per year. An ample
recipient of sunlight, the Kingdom aims to capitalize on this
by developing the crystalline photovoltaic value chain,
exporting electricity, and eventually developing the
promising thin film photovoltaic value chain. Finally, in
plastics and packaging, the Kingdom is already a substantial
producer, capitalizing on its hydrocarbon resources. It aims
to double its polymer production from 10 million tons per
year to 20 by 2013; and to double its packaging production
from 1 million tons per year to 2 by 2020.


Reasons U.S. Companies Should Invest in the Kingdom
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5. (U) At the Ambassador's prompting, the Saudi participants
raised a number of reasons why it would be beneficial for
U.S. firms to invest in the Kingdom. Shalabi noted that
Saudi Arabia has the right economic conditions to make money,
including a growing workforce, programs in place to provide
this workforce with training, and a clear,
government-supported national strategy to encourage
investment. Yousef El Maimani, Chairman of Al Maimani
Holding Group, cited the work the SAG has done to improve
commercial laws over the past 10 years, the advent (soon) of
a commercial court, and the size of the domestic market as
additional reasons why investment in the Kingdom makes sense.


6. (U) Dr. Abdulrahman Al-Zamil, Chairman of the Al Zamil
Group, one of the largest companies in the Kingdom, discussed
the Kingdom's low tariffs and general lack of protectionism,
but also sounded a cautionary note, saying U.S. companies
should only invest in the Kingdom if they are looking for
"viable, money-making" projects that can withstand the high
level of scrutiny from Saudi creditors. He singled out the
work of the Saudi Industrial Development Fund for particular
praise, saying that in the history of the institution, they
have never had a loan that was not paid back.


Obstacles to Closer Cooperation
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7. (U) Several Saudi participants identified difficulty
traveling to the U.S. (particularly in light of recently
imposed TSA requirements) as a critical obstacle to
strengthening business relations between the U.S. and Saudi
Arabia. Al-Zamil and others also identified U.S.
restrictions on doing business with those who do business
with Iran as a significant impediment. He said it is
impossible to run a successful company in this part of the
world and completely exclude Iran from your business.

Comment
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8. (U) Overall the tone of the discussion was positive and
constructive. While there were concerns about U.S. policy
towards Iran and travel restrictions, these were isolated and
did not dominate the discussion. The Saudi businessmen who
were present seemed truly interested in closer engagement
with U.S. businesses and provided concrete suggestions as to
where future discussions should be steered to be most
effective. End comment.
SMITH