Reflections On the Saudi Arabia Few Get to See – Amb James Smith

Published: October 1, 2013

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Editor’s Note:

The thousand plus attendees at the US-Saudi Business Opportunities Forum in Los Angeles spent three days at plenary sessions, breakout panels and networking opportunities to take advantage of commercial opportunities as part of a tremendous economic expansion in the Kingdom. They were also able to hear keynote remarks from a number of government and business leaders during the Forum. Among the keynote addresses was the heartfelt remarks of Ambassador James Smith, US Ambassador to Saudi Arabia. As his tour as America’s top diplomat in the Kingdom draws to a close he took to the podium to reflect on four years in Saudi Arabia. It was not so much the view from the capital that most would expect from a diplomat finishing an assignment, but rather it was a tour of the vast and diverse country that he and his wife, Janet, grew to know.

SUSRIS is pleased to provide those remarks for you here and will present transcripts of other keynotes, plenary sessions and panels in the coming days.

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The 3rd US-Saudi-Business Opportunities Forum was held under the patronage of the Saudi Arabian Ministry of Commerce and Industry and organized by the Committee for International Trade (CIT), the U.S.-Saudi Business Council and the Saudi-US Trade Group (SUSTG). It was held September 16-18, 2013 at the J.W. Marriott LA Live in Los Angeles.

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Ambassador James B. Smith
U.S. Ambassador to the Kingdom of Saudi Arabia
US-Saudi Business Opportunities Forum
Los Angeles, California
September 17, 2013

It is a great pleasure for me to be with you this week and tonight in particular, and first let me offer my thanks to the Minister of Commerce, Dr. Al Rabiah, for your leadership in organizing this wonderful event.

People US Amb James Smith USSBOFNow, we’ve been with the Ministry through three capstone events. The first in Chicago in 2010, then my hometown Atlanta in 2011, and this year in Janet’s hometown here in Los Angeles. It’s entirely appropriate that we do this event in Los Angeles for the reasons Mohammed mentioned and also the mayor mentioned this morning, but for one other reason – if you walk out the front door of the hotel and turn right you will be on Olympic Street. You turn right and go down two and a half blocks. On the left there’s a building, the Standard Oil Building. And on the corner of that building there’s a plaque that says Standard Oil Building, built in 1928. Four years after that building was erected was the agreement between Standard Oil of California and King Abdulaziz of Saudi Arabia on the very year that Saudi Arabia became a country. That was the beginning of the eighty-year history between Saudi Arabia and the United States, so the beginning of that relationship here in the United States was two and a half blocks from where you sit tonight.

I want to offer a special word of thanks to my good friend, the Saudi Ambassador to the United States Adel al-Jubeir who could not be with us tonight. We have worked many issues together over these last four years. Together we have focused on the common interest of our two countries, and I could not have found a better friend or partner. I know tonight there are members of the U.S. Embassy in Riyadh and the Saudi Embassy in Washington here with us tonight, and I would like for them to stand, all of you, because together you have had tremendous impact on business, on education, and medicine, and commerce. Thank you so much for what you have done.

Now, Janet and I started our fifth year together in Riyadh last week, and as many of you know the shadows are lengthening on my time as a diplomat. I anticipated tonight that I would give a run down on the many successes that we’ve had over these last four years. I prepared an exquisite speech to lay out all of those successes, and I gave it to Janet last night to read. She handed it back to me and said, “It’s boring. It’s numbers. Other people are going to give the numbers, why don’t you just tell some stories?” So that’s what I’m going to do for the next few minutes.

I’m going to tell a few stories about the Saudi Arabia that most of you have not seen, because for the first fifty or so years after the oil boom the investment in Saudi Arabia was in three key areas – Riyadh, Jeddah, and the Eastern Province, so Khobar, Dammam, Dhahran. And that made sense because they were building the capital in Riyadh, Jeddah was the commercial center, the largest city in Saudi Arabia, the port of entry for people coming for Hajj and Umrah, and of course the Eastern Province you had to develop for the oil industry. It is also where our diplomatic footprint had been. It matched the investment of the Kingdom, so we had our Embassy in Riyadh and Consulates in Jeddah and Dhahran. Now, in the past twelve years or so there has been an explosion in investment in these other ten to twelve cities around Saudi Arabia, not just those three centers. Each one of those cities has its own university, a major hospital, and booming investment and development in those cities.

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Najran to the far south. It’s like landing in Tucson, because the city of Najran is in a valley, and there are mountains on either side. To the south you can see into Yemen, and to the north you’ve got Asir. I never in my life thought that I would see citrus orchards in Saudi Arabia, but in Najran you’ve got a robust agricultural industry of citrus and oranges and grapefruit.

I met a man who was nearly one hundred years old. His hands were gnarled from a lifetime of hard work, and he told me the story of driving the first vehicle into Najran in 1934. There were no roads. There was a meeting of tribal chiefs on the other side of the Rub’ al Khali, the Empty Quarter near the Omani border. So he drove that vehicle, fixed a lot of tires, the radiator popped several times. They stopped him about ten miles from the meeting place because one, they had never seen an automobile and two, they didn’t know who he was. They found a field telephone and they called King Abdulaziz – simpler times. And they’re on the phone and they said do you know this guy, and King Abdulaziz says yes, certainly, now put him on the phone. He told me that he was on the phone with King Abdulaziz and he said go to the meeting and when you finish the meeting drive in a straight line back to Najran and tell him how far it is, because he didn’t have a map. It just shows the story of a simpler time in Najran.

We were hosted by a wonderful gentleman who is a retired Major General in the National Guard, Mohammed bin-Faisal Abu Saud, who grew up in Najran. He left Najran in 1967 as a 17 year old boy with a piece of paper signed by his tribal chief, the Abu Saud tribe, asking Prince Abdullah who was the commander of the National Guard to allow him entry into the National Guard academy. So he hitchhiked for three days to get from Najran to Riyadh, and at the end of that third night they camped about fifteen kilometers outside of Riyadh. He stayed up all night looking at the city lights of Riyadh. There was no electricity in Najran. The only night-lights he had ever seen were the stars in the sky. That’s how far Saudi Arabia has come since 1967.

The next month I found myself back in Riyadh at the TVTC, the Technical Vocation and Training Center, where young men go to learn blue collar skills – to be electricians, auto repair men – and at the end of the visit I found myself in the welding shop. And I brought the students together and I said tell me, what made you decide to go into welding. And they put their heads down and they said they couldn’t get into university, that this was all they could do. A young man was holding a welding rod and I said give me that thing. I went over and ran a straight bead down and their eyes got big. How did you know how to do that? I said that’s where I started. As a fifteen-year-old boy working on a farm. That is how I started. I told them this is not the end of your life. This is the beginning of your career. And I told him the story of the old man in Najran. I said you know the last generation has been one of prosperity in Saudi Arabia. The true legacy of Arabia is hard work, and that’s what you have to learn in starting your career.

North of Najran is this beautiful city of Abha in Asir – it’s up in the mountains. It would remind you of the front range of the Rocky Mountains with tall mountains, beautiful vistas, and scrub pines. It is a colorful culture of the five natural colors – black, white, red, green, and yellow. Young, unmarried women would wear a yellow scarf, and when they get married they’d put a black scarf over the top so you see the both of them together, and the women of Abha wear these beautiful, colorful dresses of those natural colors.

You go west of Abha, you find the city of Jizan. The Province of Jizan for most of the last fifty years has been the most underdeveloped part of Saudi Arabia. Now an economic city is being built, a major port expansion, and a new refinery. So Jizan is starting to boom. Jizan is the mango capital of Saudi Arabia – I never thought that I would see a province that has mango as its main agricultural product, and the mango festival occurs there in the springtime.

And you can not leave the Hijaz without going north to the little town of Al-ula where you will see Madain Saleh Saudi Arabia’s version of Petra where you have these magnificent artifacts that go back hundreds of years, and you see the great work of the Saudi Commission on Tourism and Antiquities that have committed themselves to protecting and now allowing visitors to come see.

In the center of Saudi Arabia to the very north is the wonderful province of Al Jouf and its capital Sakakah, and you would think you were in Kansas because you’ve got these magnificent farms. Sakakah reminds me of going to Kansas. It is farmers and thobes. We went to one farm that has a million olive trees on it, and we were there in May and they were harvesting apricots. And these apricot orchards, the trees intermingle, and you walk underneath and it’s a canopy that covers, banks the sky, and you forget that you are in Saudi Arabia. They are now developing some of the world’s best olive oil. This one farm for the past two years has won the competition in Rome for the best olive oil in the world.

We went west from Sakakah towards Al Hadithah, which is the entry point into Jordan. If you go north and east from Sakakah you get to Ar Ar, which is the border crossing into Iraq. And you will see high-tech border security and its professional customs organizations you can imagine. And then to the west near Al Hadithah is this magnificent mosque that’s one thousand years old. It’s solid stone, and it’s been serving as an active mosque for one thousand years.

We were in the desert. I was learning how to make bread in a desert campfire, and this elderly gentleman sat down next to me. In 1959 he and his wife started the first girl’s school in Al Jouf, and he told me the story of starting that school. We had an education panel this afternoon, and I got to see the representatives from Dar al Hekma Effat University. Queen Effat, King Faisal’s wife, was the leader in advancing education for women in the 1960s. Keep in mind that in 1965 the literacy rate of women in Saudi Arabia was at five percent. Today, sixty percent of the college students are women. Fifty-eight percent of last year’s graduates were women. The literacy rate nears ninety-seven percent. All of this has been done since I was in high school. And for those who criticize Saudi Arabia for the slow pace of progress, it has been an amazing transformation in that country over these last forty years.

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South of Sakakah is the town of Ha’il – the city of hospitality. And I won’t tell you the whole story because we’re not having horse for dinner, but the people of that city embrace this idea of the city of hospitality. An American told me before I visited Ha’il that he was driving to Ha’il en route to go to Madain Saleh and he stopped at a gas station. A Saudi young man came up and said can I get you a cup of coffee. He said yes. He took him to his house for a cup of coffee, and then dinner, and then three hours later he was on his way to Madain Saleh. This is a city of hospitality. A magnificent new university, and Janet and I had the great pleasure of visiting. In Ha’il you’ll see these magnificent etchings in the rock that show thousands of years of history.

And if you go south of there you find Al Qassim, the center of the Najd, which is known by many as the most conservative part of Saudi Arabia. When you visit Qassim, the towns of Buraida and Unaizah you find yes, there’s the most conservative part of Saudi Arabia, but also the most liberal. In fact, Qassim is the New Hampshire of Saudi Arabia, because it’s libertarian. In Qassim you can be whatever you want to be and it’s nobody else’s business. And they embrace that. This week in Qassim they’re having the largest date festival in the world, which takes me to my last city.

I’ll tell you about Al Hasa in the Eastern Province, which was a date capital of Saudi Arabia, and everyone in Al Hasa will tell you that they have the best dates in the Kingdom. It is a claim that is roundly disputed by every other city in Saudi Arabia, however.

My point is if you’ve only been to Riyadh it’s like coming to Washington, D.C. and saying you have seen America. Saudi Arabia is an immensely diverse country, and Janet and I have had the great privilege of traveling to all thirteen provinces.

There are business opportunities in each of these cities, more so today than ever before. And what are those business opportunities? Now, the Minister of Commerce will talk to you in expression of a knowledge-based economy. It’s not that complicated. Start with a barrel of oil and work downstream, and ask yourself what is the value of a barrel of oil. And if you drill a hole in the ground and pump it out and sell it to somebody, the value is about one hundred dollars a barrel. If you go downstream and refine it, and SABIC has been so successful at this, that barrel of oil is worth about three hundred dollars a barrel to your economy, and creates three times the number of jobs. Now, instead of taking those derivatives and putting them on a ship and sending them in pellet or liquid form to China to make something, if you can turn those derivatives into products, that barrel of oil is worth a thousand dollars a barrel to your economy, and creates ten times the number of jobs as upstream.

So when you look at Saudi Arabia’s vision of a diversified economy it’s to start with something you know, and they know upstream better than anybody in the world, and go down from there. If you have anything to do with the value chain of a barrel of oil, or bauxite, or potassium, or any other natural resource, be it upstream refining or taking those refined derivatives and making them into products, then you have a business opportunity. If you are involved in the services industry that supports any of that value chain, then you have a business opportunity.

Now, you American businessmen, as you go forward I would like for you to keep three ideas in mind. The first – it’s all about jobs. Saudi Arabia has been the anchor of stability in the region for the past three years. There is every reason to believe that it will remain so over the near- to mid-term. Looking to the future, the youth bulge is the eleven to fifteen year group today. So Saudi Arabia has about ten years to deliver on its promise of a diversified economy that delivers meaningful work for nearly three hundred thousand highly educated Saudi youth that will come of age each year over the next decade. It’s no longer just an issue of selling into the Kingdom. Today, it is an issue of job creation in the Kingdom. If you have a business model that helps them solve this challenge you are likely to be welcomed into the Kingdom.

Second — this follows from the jobs idea — American companies do have a competitive advantage. Now, many American businessmen come to me and bemoan the fact that they can no longer compete on price with the likes of China. I agree but if you allow it to become a price competition you’re probably going to lose. You must be prepared to offer a value proposition, a value proposition for the long term. A combination of product quality with the addition of training and education, technology innovation and tech transfer that will allow the Kingdom to meet their job growth challenge over the future.

A shining example of this is EMD, Electromotive Diesel, which is now a subsidiary of Caterpillar, which two and a half years ago all but lost a competition for diesel locomotives based on price. There was a complicated break in the negotiations because the Minister of Transportation was offered two free locomotives for two years by the competing country on a approval basis – take them for two years and see if you like them. EMD’s leadership came to see me and I asked them what they thought this competition was all about. And they said well, it’s price. And I said no, that’s not what the competition is all about at all. Saudi Arabia wants to build a rail industry. Come up with a value proposition that over forty years you are going to help them create a rail system, one that is managed and run by Saudis that you help educate and train, and then you need to be standing side by side with them throughout the process. The great technology in your locomotives will be the centerpiece, but your partnership in solving their challenge will be the value proposition. And to their great credit EMD did exactly that and they won this competition last February. Just last week they delivered the first of ten locomotives to the Eastern Province, and they will be partners for the next thirty years.

Third, business in Saudi Arabia is a bit like golf – your best chance of success is in picking the right partner. Sure, you can default to the old model and try to find someone who claims to have the “wasta” to help you win a contract. Also, SAGIA will allow you to setup your own independent operations, but clearly the best option today is a joint venture with a business partner, a Saudi businessman or businesswoman who is as committed to the long-term success of the business as you are.

There are many reasons why this model works, not the least of which is that you may bring the technology, training, and education, but it is your Saudi partner who will maneuver through the very complicated and often frustrating bureaucracy in the Kingdom. The reality is the Saudi bureaucracy can be as frustrating as the American bureaucracy and I’ve had the pleasure of working for both these last four years.

There is one final reason and it gives me the opportunity to tell one final story. You will often hear the expression the Saudi way, that’s what your partner helps you understand. There are many Saudi ways. They often have to do with the geographic location of the enterprise, the business environment, the sector of the economy, or even the current mood of the conservative community.

In other words it changes. Let me give you one example of the Saudi way.

The Zamil family is one of those great Saudi business families. Five of the sons went to college here at USC in the 60s and together they built an empire, but very quietly. The Saudi way. They have been a major contributor to corporate social responsibility and have been quiet leaders in the creation and training for job opportunities for Saudi men and women alike. Abdulrahman Zamil was the force behind the creation of the women’s only chicken processing plant in Qassim as a part of their enterprise.

One day a man drove up to the front gate as they were finishing the plant and he said I have two daughters who want a job. I don’t want to be a burden to anybody so I’ll drive them in the morning and I will pick them up in the afternoon. So they gave them jobs. Zamil heard about this and he called the man and he said if you are going to drop them off and pick them up why don’t I hire you as well and you can do a taxi service during the day. So he did and he had three members of the family with a job. All of this went very well until about three months later when the man called Zamil again and said there are 30 other women in our village that want to work. So Zamil bought him a coaster bus so he could drive the women of the village to the processing plant. Now of course this guy couldn’t be alone with all these women so they hired his wife as the chaperone. The net impact of all of this is that there is a village of women who had never before had jobs but are now fully employed, but it had to be done the Saudi way.

To my American colleagues let me close by saying you have a tremendous opportunity ahead of you. Be patient, be engaged and help them solve their challenges with your business proposals. You will find, like I have, that Saudis will be more than business partners; they will be your friends.

To my Saudi friends, thank you for sharing this week in my country and I hope that you will find this your home as well.

As Janet and I exit the diplomatic stage we do so knowing that we have met friends for a lifetime.

Wa’alaikum Assalam. Thank you all for being here this evening.

[Transcript by SUSRIS.com]

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About Ambassador James Smith

People James B. Smith US Ambassador to Saudi ArabiaJames B. Smith was sworn in on September 16, 2009, as the U.S. Ambassador to the Kingdom of Saudi Arabia. Prior to his appointment, Smith had served in a variety of executive positions with Raytheon Company involving corporate strategic planning, aircraft manufacturing, and international business development. During his prior 28-year career in the United States Air Force, Smith logged over 4,000 hours of flight time in F-15s and T-38s as a fighter pilot. He flew combat missions from Dhahran AB during Operation Desert Storm and commanded the 94th Fighter Squadron, the 325th Operations Group and the 18th Fighter Wing (Kadena AB, Okinawa). During his final assignment at U.S. Joint Forces Command, Smith also led Millennium Challenge, the largest transformation experiment in history. He was promoted to Brigadier General in October 1998, and retired from the Air Force on October 1, 2002. Smith is a distinguished graduate of the United States Air Force Academy, Indiana University, the Naval War College, the Air Command and Staff College and the National War College.

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