Focus KSA: US-Saudi Trade and Investment (Transcript)

Published: June 20, 2014

Share Article

Editor’s Note:

This year about $20 billion in U.S. merchandise will go to Saudi Arabia from the United States according to Commerce Secretary Penny Pritzker. In March she led a US trade mission to Saudi Arabia and told an audience, “Perhaps the most exciting aspect of the U.S.-Saudi relationship is the vibrancy of our commerce.” She noted: “Saudi Arabia is America’s 10th largest trading partner in the world. Last year, our two-way trade reached $71 billion. And for the first time monthly exports from the United States to the Kingdom topped $2 billion in December. There is strong and growing demand for American cars, aircraft, machines, renewable energy technologies, and large-scale infrastructure.”

Secretary Pritzker also spoke about the bilateral trade relations at last year’s US-Saudi Business Opportunities Forum in Los Angeles:

“Each day more U.S. businesses of all sizes are recognizing that Saudi Arabia is a place where they can find partners and do business. In fact, Saudi Arabia’s ranking in the World Bank’s Ease of Doing Business Index has risen to and remained in the top 25 in recent years. So today the United States and Saudi Arabia are strategic partners and allies, and as the growth of this forum reflects, our commercial relationship is blossoming both in trade and investment. Last year trade in both directions hit an all-time record high, as you’ve heard. It surpassed the pre-recession levels for the first time, and we are now more than triple our bilateral trade of just a decade ago.”

The trade and investment relationship between America and the Kingdom — eight decades in the making — was the topic explored in our recent Focus KSA Webinar. A live, interactive audience joined hosts Richard Wilson, President Saudi-US Trade Group and Patrick Ryan, Director, Saudi-US Relations Project (SUSRIS), with their questions for a distinguished panel: Amb. Ford Fraker, President Middle East Policy Council and former US Ambassador to Saudi Arabia (2007-2009); Minister/Counselor Amer Kayani, Head of US Commercial Service for Saudi Arabia and Bahrain Embassy of the US in Riyadh; and Engineer Omar Bahlaiwa, Secretary General of the Committee for International Trade, Riyadh.

Today we provide the verbatim transcript of the Focus KSA: US-Saudi Trade and Investment Webinar along with the video of the session.

SUSRIS-logo-100

Focus KSA Notes: 

Our next regular, monthly Focus KSA Webinar is set for Thursday, July 10, 2014 — “Evolving Education in Saudi Arabia: Making the Grade?” — with Ambassador James Smith, former US Ambassador to Saudi Arabia and Dr. Haifa Jamal al-Lail, President of Effat University, Jeddah.

But first we have a special edition of Focus KSA to tackle the questions about “Iraq in Crisis: What Impact for Saudi Arabia?” Join us Tuesday, June 24, 2014 to talk with our guests Jamal Khashoggi, journalist, columnist, author, and editor-in-chief of Al Arab News Channel.

REGISTER NOW FOR OUR SPECIAL WEBINAR, TUESDAY, JUNE 24, 2014 – “IRAQ IN CRISIS: WHAT IMPACT FOR SAUDI ARABIA?” [LINK]

SUSRIS-logo-100

FOCUS KSA / U.S.-SAUDI TRADE AND INVESTMENT
WEBINAR – JUNE 12, 2014

Panelists:

  • Amb. Ford Fraker, President Middle East Policy Council and former US Ambassador to Saudi Arabia (2007-2009)
  • Minister/Counselor Amer Kayani, Head of US Commercial Service for Saudi Arabia and Bahrain Embassy of the US in Riyadh
  • Engineer Omar Bahlaiwa, Secretary General of the Committee for International Trade, Riyadh

Moderators:

  • Richard Wilson, President Saudi-US Trade Group (SUSTG)
  • Patrick Ryan, Director, Saudi-US Relations Project (SUSRIS)

SUSRIS-logo-100

[Patrick Ryan] Welcome to FOCUS KSA, an interactive, online program brought to you by the Saudi-US Trade Group, SUSTG.org and the Saudi-US Relations Project, SUSRIS.com. We have a great program for you today examining US-Saudi trade and investment. With us here today are Ford Fraker, President of the Middle East Policy Council in Washington and former Ambassador to Saudi Arabia during 2007-2009, Mr. Amer Kayani, Head of the US Commercial Service in Saudi Arabia and Bahrain from the Embassy in Riyadh, and also from Riyadh Engineer Omar Bahlaiwa, the Secretary General of the Committee for International Trade.

I’m your host Patrick Ryan along with our co-moderator Richard Wilson, the President of the US Saudi Trade Group. Focus KSA is a new feature of the SUSRIS.com and the Saudi US Trade Group collaboration. We are pleased to bring you these monthly interactive webinars to provide you with the opportunity to talk to specialists and leaders in their fields and today we have an exceptional panel who will be talking about the questions of Saudi-US trade and investment.

Now I’d like to introduce my co-host Richard Wilson, President of the Saudi US Trade Group who will provide a brief overview and then hand it off to our panel.

SUSRIS-logo-100
Click for video of Focus KSA: US-Saudi Trade and Investment
SUSRIS-logo-100

People Richard Wilson SUSTG President[Richard Wilson] Pat, thank you very much, gentlemen thanks very much for being with us today. We appreciate your taking time to join this initiative, we’re really excited about this Webinar program and have found them to be very high in content and very informative.

Pat and I will try and get out of the way. I think you three among you have a tremendous amount of experience and expertise on the topic. The sequence we discussed will start with Amer in Riyadh, Ambassador Fraker in Massachusetts, and Omar, also in Riyadh.

Amer, and the group in general, as you are well aware the US-Saudi trade in 2013 was just over 70 billion. Saudi Arabia is about the 9th largest trade partner for the US and the preponderance of that trade is oil sales to the US maybe 50 billion. I think there’s interest on both sides in expanding not only the level of trade but the nature of the trade. Saudi Arabia’s in the midst of a very aggressive expansion trying to develop its non-oil sectors and diversify the economy in general.

I’m hoping we can get to both the near term and long term trajectory of that process, how Americans and Saudis, businesses, and individuals can build on the current relationship. With that, Amer if you can give us sort of an overview and some insights on your efforts with the US Department of Commerce which has been particularly aggressive. I know Secretary Pritzker is “all in” to building trade ties in the region and with Saudi Arabia in particular. With that, Amer let me turn this over to you.

AmerKayani[Amer Kayani] Thank you Richard and thank you Pat for helping to organize this. I feel fortunate to be in the company of former Ambassador Fraker who has tremendous experience in the region, my good friend Omar who you know has done more than any single individual that I know of in expanding bilateral trade between countries.

Before we talk about present let me just give a 30 second kind of a context of where did it all start. If you look at the US Saudi relationship, history of the relationship you’ll realize 80 years of this relationship actually the commercial relationship predated the diplomatic relationship that we had. So a very strong foundation as far as the commercial relationship is concerned. Then with the visit of King Abdullah in 2004 to the United States this relationship even started on stronger footing there.

King Abdullah’s visit was followed by Saudi Arabia’s accession to the WTO, World Trade Organization, and then at the same time we saw the announcement of King Abdullah’s Scholarship Program and under which we now have more than 83,000 Saudi students studying in the United States. In addition to that since King Abdullah’s visit in 2004 we have had four US presidential visits to the Kingdom, so it tells you the depth and breadth the relationship is just amazing.

As Richard you mentioned, Saudi Arabia is the US’s 9th largest trading partner, it is the 19th largest export destination. But I want to elaborate on that a little bit. That 19th largest export destination is based on direct exports of about 19 billion dollars that we had to the Kingdom last year. By the way that in itself is a 76% increase from 2009, but then you have to add roughly 2 billion dollars in service exports that’s not included, usually generally in procurement, construction and design, financial, legal so on and so forth. Then you have another what’s called indirect exports. These are exports that are coming through transit countries whether it’s the UAE or making a stop somewhere in Europe and that’s valued at approximately another 15 billion. So that really tells you the magnitude of US exports. If you were to add all that up Saudi Arabia comes close to being the top 10 destinations for US exports.

Webinar Amer Kayani

Saudi Arabia is a good story. Saudi Arabia has then taken tremendous leaps as far as intellectual property is concerned. Back in 2010 they were removed from the USTR 301 Watch list, and since then Saudi Arabia has developed a comprehensive program in order to facilitate their own efforts to develop a great diversified knowledge economy.

If we look at on the defense side, and I’m talking about purely the commercial side of the relationship, Saudi Arabia is the largest customer of US military equipment. Granted we have either active and open cases of about 97 billion dollars of just foreign military sales with Saudi Arabia. And then on top of that we have direct commercial sales that take place there. So let’s start from there now. There’s already a very strong relationship so where do we go from here and how can we help diversify both the economy of Saudi Arabia and also the export base for US companies there?

Currently Saudi Arabia has about 900 billion dollars, and that’s with a B, worth of projects planned or underway in the kingdom. About 700 billion of that 960 billion are what we consider to be mega projects, any project over 1 billion dollars is there. So the opportunities if you look at it in terms of infrastructure opportunities and overall opportunities for US exporters and businessmen are just amazing in Saudi Arabia. This year the budget was one of the highest, all time high actually for the Kingdom, 228 billion dollars and most of it is earmarked for social projects and improving infrastructure. Near 142 billion of the 228 billion will be spent on infrastructure related projects and the majority of these projects will focus on municipality services, transportation and telecommunication, water, agriculture, and some of the other infrastructure related projects including metros and housing projects that the kingdom has going.

Education which constitutes almost 25% percent or 24% of the budget of 54 billion dollars, is in education training, another area where we have seen quite a bit of growth both from the US in terms of Saudi Students going to the United states but also US institutions, companies and colleges and universities working with their counterparts here to provide either services or technical there.
Energy exports, Richard you mentioned, 50 billion of oil exports to the United States. That’s Saudi’s single largest export. But we should not discount the fact that both United States and Saudi Arabia have significant investments in each other’s country there.

Just to pick a good example would be in the case of the United States SABIC bought GE plastics a few years back for 11+ billion dollars there, so a very significant investment in the United States and Aramco and SABIC are currently looking for more good opportunities and so are small to medium sized Saudi companies that are investing in our own country.

As far as the US is concerned, just in the last 5 years that I’ve been here I’ve seen 2 or 3 mega investments in Saudi Arabia starting from Alcoa’s back in 2010, 30 billion dollar joint venture with Saudi Mining company, then we saw a 20 billion joint venture between DOW Chemical and Aramco and then another about 700 million dollar joint venture that we saw between one of the US fertilizer companies and Maaden. So that really tells you the depth and breadth of the relationship is just amazing. It’s not just trade, it’s investments also.

We have had very successful business opportunities forums, three of those in the US in the last four years and hopefully we’ll have another one. So opportunities are immense there, and the important thing that I’d like to emphasize is that in order to enter this market, in order to be successful in this market you must visit Saudi Arabia. The days of remote control operations working from Bahrain, sitting in Cairo, sitting in Dubai just don’t work here anymore here. You have to show commitment to the market.

It is, as I mentioned, opportunities are immense, but at the same time the market is not where you are going to realize success in two to six months period. It does take time. It could easily take 8-12 months for you to see the first success. But if you are committed you will definitely see success, and that’s where we can help you in the commercial section in the embassy in Riyadh. We have also a commercial section in Dhahran at our consulate as well as in Jeddah where we help American companies, help them find potential partners, distributors, representatives, and if they already know somebody we can also help do due diligence on some of the prospective partners. So let me just stop there and give my other distinguished colleagues time to share their views but I’ll be here and happy to answer any questions.

[Wilson] Amer, thanks very much. That was fascinating and I hope we can return at some point to accessing the market. I know you’re, the Department of Commerce is very active in that regard. I also find it very interesting your elaboration on the actual level of US exports in terms of services and indirect trade. If we can transition to Omar Bahlaiwa. Omar how are you today?

[Omar Bahlaiwa] Okay, thank you Richard.

[Wilson] Go ahead, let me turn it over to you.

People Omar Bahlaiwa[Bahlaiwa] Well to elaborate also on what Amer said and thanks to Amer because he gave a very glamorous picture of Saudi Arabia and the Saudi-US relations. Let me give an overall picture of the Saudi economy in general, then we can go into detail, especially on SMEs.

The Saudi economy is considered to be one of if not the largest in the Middle East, if not the largest with 745 billion dollars GDP, and the per capita is quite sizable at $25,300 per capita. The growth of GDP is 1.5% per current account, and the growth of the non-oil sector is about 5%. Exports are 388 billion and import is about 156 billion. The growth of the non-oil is 7% not 5%.

The Kingdom of Saudi Arabia went through lots of reforms in the last decade, and these reforms really drive Saudi Arabia to the right track or what’s considered the fast track. With major projects as Amer said and projects in the next 10 years or so for over 1 trillion dollars starting from mega projects to large, small and medium, and again the Saudi Arabian economy could be considered to be on the top rank.

Unfortunately we went down a little bit on the ease of doing business to number 22 but on the global competitiveness we are number 18 and the infrastructure we are number 31, on macro economic environment we are number 4, and many other top positions in the world ranking.

The FDI of Saudi Arabia is considered to be the largest again in the Arab World with 16.4 billion dollars for the year of 2012. The advantage of the Saudi market, it’s a big liberal market. The population is sizable, 29 million. 50% of the population is below 20 years of age. The proximity of the market is so big. It is close to the middle of the world, so it is close to many markets especially Africa, Asia and Southeast Asia. The labor cost is not very high, the source of energy is very attractive and the cost of energy is very attractive. The national treatment is sound, a reliable investment environment and protection.

Webinar Omar Bahlaiwa

There are many projects and many fields as I said like the physical infrastructure, the petrochemical fields, electric power generation, water desalination and telecommunication, tourism, natural gas protection, agriculture, education, and lately the metro industry, which we have now the Riyadh metro and there is the Medina metro, another one for Dammam and the fourth one for Jeddah and the fifth one will be Mecca.

Another big possibility is in the housing growth that King Abdullah has approved, about 14.6 billion dollars for housing, especially in rural areas. This is good for contractors especially, not in main cities, but rural cities.

When it comes to foreign trade, US is the number one as a partner in terms of exports and imports and you are competing with China. I believe in the year 2013 China has proceeded the United States in foreign trade. In 2012 the US was number one, but in ’13 unfortunately China took over the imports from Saudi Arabia. There are many other things that Amer has mentioned and he covered the budget as the largest budget with 228 billion dollars, and that is the largest budget.

With this I think I gave a very wide exposure on the Saudi economy and throughout the discussion we can go into further details. Thank you Richard, thank you Pat, and I appreciate the discussion and the other participants.

[Wilson] Omar many thanks. A reminder to audience members if you want, would like to and we encourage you to, just click on the dashboard you have on questions and submit those questions. The flow will be Ambassador Fraker will weigh in and add his perspective and then we will go back around to each of the participants to get maybe two minutes of commentary and response. We will be able to get to some questions following that. Please do submit those.

Ambassador Fraker, the field is clear please you have extraordinarily deep experience in the region, and in Saudi Arabia in particular, not only as a private businessman but also as a diplomat. So please let us turn to you.

People Ambassador Ford Fraker[Amb Ford Fraker] Thanks Richard and thanks to Pat, Amer, and Omar.
Just to weigh in on one particular aspect of this topic which I think is particularly important is the personal relationship side of doing business in Saudi Arabia. As Amer said it requires a commitment on the part of US companies. US companies need to actually get on airplanes and come out to Saudi Arabia.

A number of you have heard me say in the past that the biggest challenge in developing new relationships in the kingdom is actually getting people to get on airplanes and come on out because in my 40 years of experience doing business in the region when people come out they leave a lot more positive than when they first come out. So half the battle is just getting them into the region and in front of prospective business opportunities and it works from there very effectively.

So as an ambassador I always made the point that business is at the heart of the US-Saudi relationship. As Amer said, business has always led diplomacy in the region. We as the United States started doing business in Saudi Arabia before we actually had diplomatic relations. And business has been core of that important relationship ever since. And as a US ambassador whether you’re in Saudi Arabia or any other country I always felt a key role was promoting business in the country that you’re in, and certainly this was something that I took very seriously and my successor ambassador Jim Smith did as well. Promoting US Saudi business interests is a big part of the job.

Actually doing business in Saudi Arabia requires not just the commitment and the desire to win contracts. It requires a sort of relentless pursuit of the opportunity. Saudi Arabia, as a developing economy, has spent a lot of time and effort and money in putting in place the organizations to help make that work. SAGIA is a very good case in point, and I know Abdullatif al Othman with his background coming out of Aramco has made a particular effort to ensure that the mechanics of setting up a business in Saudi Arabia work as smoothly as they can.

Webinar Ford Fraker

But what I would say to anyone looking to work in the Kingdom it requires a very real personal commitment to overseeing the operations in a hands-on fashion. And what you’ll find is that those personal relationships then lead to deep and lasting business growth over a long period of time. As we say Presidents and Kings may come and go but business relationships tend to stay the course. If you’re looking at ways of cementing a bilateral relationship then business is where it should be and that has been the hallmark of the US Saudi business relationship.

One other point I’d make is, again Amer talked about the number of Saudi students studying in the US. This is the new generation of Saudi businessmen and entrepreneurs who will be going back to the kingdom and taking over their father’s and grandfather’s businesses and taking business in the local market to another level and that presents a whole range of opportunities for American companies, so that’s another angle that I think is very important. So what I’d like to do is stop there and work off the questions because I think the question and answer period in these events is the most interesting part of these things. So let me just leave it there.

[Ryan] Thank you, Ambassador Fraker for your comments. We’re going to turn to an open round for follow-up and then we’ll get to questions from the audience. First I just want to again thank the audience for joining us today and remind them that this is the Focus KSA Webinar on Saudi US Trade and Investment and we’re pleased to have on the panel distinguished officials, former and current, and specialists, as we do with all the Focus KSA Webinars that we host.

Today we’re talking with Ford Fraker, President of Middle East Policy Council in Washington and former US Ambassador to Saudi Arabia; Mr. Amr Kayani head of the US Commercial Service in Saudi Arabia and Bahrain talking to us from the embassy in Riyadh, and also from Riyadh Engineer Omar Balaiwa, the Secretary General of the Committee for International Trade. I’m Pat Ryan, the editor of SUSRIS and Richard Wilson is President of the Saudi US Trade Group. The CIT and Saudi US Trade Group sponsored the three US Saudi Business Opportunities Forums in Chicago, Atlanta, and last year in Los Angeles, and I’d refer you to our website, SUSRIS.com, where you can find the proceedings of those three sessions to get more information on US Saudi trade and investment.

Richard, I’ll hand this back to you to get us into our brief mini-round.

[Wilson] Great. Let me add that in addition to CIT and the Saudi US Trade Group, the US Saudi Arabian Business Council was a co-organizer of those events.

Let me share the nature of questions, not surprisingly some of the folks listening are particularly interested in how they and their company can access the Saudi market, but the general trend is, and perhaps this starts with Amer, is there a central website for referencing procurement opportunities in Saudi Arabia and we’d want to expand that, what are the resources for say a small to medium sized enterprise that wants to access the Saudi Market. Amer can I start with you?

[Kayani] Sure. Well there a number of ways you access this market and as far as procurement is concerned unfortunately it’s not available on a central website. There is a publication called just like our federal register, it is called [Al Quora] which is published in Arabic. It lists all government tenders. However, there are other private sector resources that you can tap into which offer tender reporting sources such as MEED, reporting services by subscription, but you can also go on to individual ministry websites where you will often find tenders listed there. But having said that, let me just say if you are engaging in a tendering process at the RFP stage, that’s the first time you’re engaging, it’s a little late in the game to be honest with you. So if you really want to penetrate the market, especially as far as small and medium sized enterprises are concerned, you need to find a local partner. That’s where we can help you. We can help you identify a potential partner in the market then they will be your eyes and ears on the ground. They will look for the opportunities as far as RFPs are concerned or pre RFP stages where they try to educate the end-user or customer of your product so that when the RFP comes out it will be an equal opportunity RFP so it will give opportunity to a number of vendors and it’s not going to just pigeon-holed to a handful.

[Wilson] Saudi Arabian General Investment Authority — Abdullatif Al-Othman as you mentioned came over from Saudi Aramco in 2011 — he has taken that and brought his own stamp to it, what role does SAGIA play? Omar can you elaborate on that?

[Bahlaiwa] First let me add one piece of information that Amer has mentioned and that is the website of the Council of Saudi Chambers, CSC — we announce all the tenders that are coming by the government. Officially it comes to the Council of Saudi Chambers and the Council of Chambers announces it and we translate it into English so it can be shown in Arabic and English. So that is another venue for those looking for opportunities in Saudi Arabia.

SAGIA or Saudi Arabia General Investment Authority is the government body which licenses foreign investment and is the gateway to Saudi Arabia for foreign investment. It’s a very genuine organization led by a very brilliant leader, the Governor Abdullatif Al Othman. He’s a very active and pragmatic person, logical. And he can really be a big help. SAGIA was established in April 2000, and when it was established the idea was to attract foreign investment to Saudi Arabia.

When we get the promotion of SAGIA — the main role is to attract technology and know-how to the country, and it still is. Regardless of the size, SAGIA was not set to just attract big companies and large investment. Any know-how and technology that is new to the world and to the country is highly welcomed in Saudi Arabia. And SAGIA they have what is called a one-stop shop so you can apply. First you can apply online for your visa, you can apply to come and apply for a license, of course there are many requirements and you can visit the website of SAGIA which is www.sagia.gov.sa where all the details are and you can visit their website and understand what are the requirements.

The second thing, which is very important for SAGIA. SAGIA is a young organization comparatively, so you need to understand how to deal with this organization. Everything is done online so you have to keep up with the website every now and then, and SAGIA represents many other governmental organizations so you have to keep up with the changes in the country and the country as I say is on the fast-track when it comes to reforms. So SAGIA is the tool and also the gateway.

[Wilson] Thank you Omar. I hate to do this Ambassador Fraker, but I want to work through some of the questions that I think are applicable to doing business in the region, but I know this will make you cringe. One of the questions is that do you feel that if visa requirements were relaxed it would be easier for people to travel. I know in many ways there’s been progress on that front, is that correct?

[Fraker] Yes. We spent a lot of time and effort when I was Ambassador trying to change visa protocols to five year multiple entry visas, which took a lot of pushing on both bureaucracies and actually involved both the King and the President agreeing that this would be in the best interest of those countries in pushing that forward. And I know this was something Ambassador Smith spent a lot of time streamlining and making a lot more efficient. It also coincided with the expansion of the King Abdullah Scholarship Program, and the intent was to get many, many more Saudis out of Saudi Arabia and into the US studying, but on the other side as well to make it easier for US businessmen to access the Kingdom. So five year multiple entry visas are an important tool. I think that has opened the gateways a lot wider than before.

The other thing that’s happened is we worked on revising the US State Department Travel Advisory warning because the language that’s used in those advisories can actually have a direct impact on personal insurance policies for executives traveling in the Middle East, and we didn’t want that to be an impediment as well so we worked hard to try and change that language.

All of which was a huge effort in trying to ensure that the two-way flow of people would improve the business environment and the level of activity and I think we’ve seen that over the years. Certainly Amer has been directly involved in that effort during his time in Riyadh and we’ve seen results. What we want to make sure is that those, if you will bureaucratic issues don’t become impediments to developing business between the two countries. And the other part of that is that at the end of the day all business is personal. It’s not done over the web, its not done through websites. It really is people to people. So you have to make it as easy as possible for businessmen on both sides to be able to sit down face to fact and do their business.

[Wilson] Thank you Ambassador Fraker. From my personal experience as someone who has been involved in the region and Saudi Arabia for close to 30 years and so on, on both sides of 9-11 so to speak, of late the ability to get a five-year visa is not a difficult task. It’s much more, its greatly simplified and much more available to more people.

If I could share another question, which I think speaks really to hopefully the direction of trade growth, with regard to the US and Saudi Arabia. The question specifically is what would be your view regarding the best examples of US-Saudi collaborations for knowledge economy development and what are opportunities not yet realized.” So this speaks to not only the Saudi national strategy of moving towards more of a knowledge economy with emphasis on sectors like healthcare and logistics and information and communications technology but also obviously these are tremendous strengths and experiences. One of the interesting things when we were in the Los Angeles for the September 2013 US-Saudi Business Opportunities Forum was the extraordinary amount of institutional expertise in the State of California but also in the US on sectors — healthcare, transportation, ICT where Saudi Arabia is headed. The match is very strong, can you speak to that question, what are some really good examples of collaboration in the knowledge economy and what are some of the opportunities not yet accessed?

[Fraker] So let me make some general comments then I’ll give some very specific examples where US companies and Saudi companies have collaborated. This is going to affect my earlier comment about this younger generation. We have a youth bulge throughout the Middle East demographically. Saudi Arabia has the same thing. This is the group that is switched on technologically speaking whether it’s social media or however you want to address it. This is their future. So watching how that develops in Saudi Arabia where there’s a keen interest in this at that age level, I think will be a huge indicator in how successful the kingdom is moving forward in developing its economy. Amer, again I’m sure you have some specific examples of where some of the big US technology companies have been trying to make inroads into Saudi Arabia.

[Kayani] Absolutely, Ambassador Fraker. As you would recall that while you were the Ambassador you signed the US Saudi Science and Technology agreement in 2008 and under that the King Abdulaziz City of Science and Technology is currently working with NASA on several projects including a robotic network and geo-dynamics research. Also KAUST has numerous collaborative arrangements with US universities as well as some of the US government institutions such as the US Geological Survey, Department of Energy. We are working very closely with KA-CARE and KAUST there so those are the government level that we have R&D and science and technology collaboration that is going on.

In addition we work very closely with Saudi Arabia on the environmental side and the standard setting side for CAFE standards for the automotive fuel efficiencies, but more importantly as Ambassador Fraker was suggesting are the companies that have been coming here. Apple, we’ve worked very hard to get Apple here, they were given license by SAGIA just last month to operate here. We had a launch of Uber, the taxi service just a couple of weeks ago in the Kingdom. Cisco, Intel, IBM, Microsoft, Oracle, you name it. Those are the big name. But also smaller companies that have been working intensely with the Ministry of Interior as well as several universities in Saudi Arabia to do specific programs as well as training. Then we have 83,000 students, Saudi students that are studying in the United States and our companies are recruiting them for internship opportunities during the summer months as well as after graduation. So we are doing all we can to contribute towards the economic diversification strategy which is the knowledge economy strategy of King Abdullah.

[Wilson] Thank you Amer. Just to elaborate on the King Abdullah Scholarship program, I think all of us agree with Ambassador Fraker. This is an extraordinary initiative, over 100,000 Saudis in the US studying and my bit of advice — it’s funny one of the things that has been referenced a couple of times is really the personal relationships. Frankly if I were a small business person in the US and I was anywhere in a knowledge economy field or even anything related to manufacturing or other sectors I’d hire a young Saudi. And this goes two ways not only do these Saudis that are graduating, and we just had 12,500 Saudi students graduate from the program which is the largest, of course every year it gets larger. But these Saudi students are coming out and they’re looking for opportunities for training and obviously they are looking for employment, but they are windows, access, and footholds in the Saudi economy and Saudi society, and honestly I would find someone in my field and find a way to get them into my shop and utilize their skills and personal contacts to jumpstart entry into the Saudi market. That’s just a thought.

[Fraker] If I can cut in there, the best way to access that pool of talent is through the Saudi Embassy in Washington where they have a specific department that deal with the students and are interested in placing them in internship opportunities over the summer months. So for any company that wants to follow up on you’re suggesting Richard, that’s the best way to do that.

[Wilson] And specifically that would be the Saudi Arabian Cultural Mission.

[Fraker] Exactly.

[Wilson] Gentlemen, if I may ask a question, one of the priorities in Saudi Arabia is job creation. Now in OECD countries close to 70-70%+ jobs created are created by small and medium sized enterprises. In Saudi Arabia it’s more along the lines of 30-33%. What is, and Omar I think you could speak to this in particular, what is Saudi Arabia doing to help build SME presence in the Kingdom and to facilitate their growth because they’re so critical to job creation as well as diversification of the economy?

[Bahlaiwa] First, the Saudi economy is based on SMEs, especially when it comes to the private sector. 88% of the private sector consists of SMEs. If we go to the ‘50s and ‘60s an SME was just an entrepreneur and this person would just try his luck in the market and buy and sell and then get whatever he gets in the market.

Then by the time under the development, etcetera the government got engaged and they introduced funds, and we’ve introduced many funds. The Saudi Industrial Fund, Saudi Agriculture Fund, the Saudi Credit Fund, the Saudi Real Estate Fund, etcetera. These funds as a matter of fact helped big time in helping the Saudi entrepreneur to build up their business from small to medium to large. And most of the large business started small four or five decades back and got their funds from the government funds and enlarged their businesses up to the scale they are in today.

In the last 5-10 years more programs came up to help SMEs. The first program that came up was with the Credit Bank where the capital of the Credit Bank was only 200 million and it has been increased to 40 billion riyals and that’s a big move for one fund. Many other smaller funds came up like Centennial Funds and the Jeddah Chamber and Riyadh Chamber have introduced new funds as well. The idea is to help SMEs and mostly small and micro-small business. On the other hand, many other programs have been introduced by institutions like the Ministry of Commerce has created a department for SMEs to look after the problem and the impediments that are facing the SMEs and try to remove these impediments.

Likewise in the Chambers, Chambers have introduced have introduced lots of programs between Riyadh, Jeddah, and the Eastern Province and even the medium to small chambers as well. On the other hand many other programs came up like King Abdullah Science and Technology and this will help the newly started business or entrepreneur to help themselves in the development business.

Many other programs are coming. One of the important programs we want and we wish to be introduced is the venture capital. Unfortunately the venture capital is not in the market yet. And that will help SMEs big time as it comes into the market.

[Fraker] If I could comment on that a little bit. The Saudi government understands very clearly that SMEs are the future of the economy, and as Omar said a whole range of institutions have been either put in place or capitalized at a higher level to be able to promote this business.

Back in 2007 I was involved in a series of intense conversations with the Minister of Finance about specifically what Saudi Arabia could do to focus on this area because it also speaks to the demographic “youth bulge.” Many of the young Saudis actually want to start their own businesses, and they should be encouraged to do that. The government is looking for many different ways that they can encourage that activity and I think you’ll see that begin to get greater traction as you move forward.

[Ryan] Thanks Ambassador Fraker. Let me just ask a couple of questions here as we get into our final ten or fifteen minutes of our session today and remind our audience that this is Focus KSA, a joint effort of SUSRIS.com and the Saudi US Trade Group,SUSTG.org. You can find references for the topic trade and investment at www.SUSRIS.com/FocusKSA. There’s a list of informative articles and interviews, many of them with some of our distinguished guests as well as links to the Saudi US Business Opportunities Forums videos an transcripts that will round out your education this morning on Saudi-US trade.

We’ve got a few minutes left so let me pose a few questions for each of our panelists and then we will go in turn with Omar first. Omar, can you expand on the sector or sectors that you think are the hottest right now for American business people to get involved in the Kingdom. Then I’ll ask Ambassador Fraker can you talk about the business environment for Americans interested in KSA, sometimes people may be distracted by news reports of security issues or regional political developments. As somebody well steeped in decades of business in the Gulf can you give some guidance on that? And Amer let me follow up with a question to you after the others, we’ve heard this morning about this competition from China and others for the opportunities in KSA. Conventional wisdom, though, is that Americans have an edge through the historical business to business ties and infrastructure built on US standards. Can you comment on any advantages that the Americans should know of and exploit. So Omar over to you on what’s hot in KSA right now?

[Omar] Well as a businessperson I would look at services in Saudi Arabia. And as Ambassador Fraker said services is a big field in the country. As a matter of fact, any company that has know-how or technology that they think they can add value to the Saudi market, that is a very fertile field for them. Saudi Arabia is a huge market. Funding is not a problem. The market is sizable. The population is sizable as well. It’s a young population so any technology you want to introduce it will be accepted by the market itself. So I would say any service or technology that can add that to the market is open to the market. So don’t undermine any product or any technology. Just try the market. The market is simple and easy and biggest.

[Ryan] Thank you. Ambassador, politics and business? What’s your view?

[Fraker] Let me leave the politics to one side and talk about business. The business environment is positive. Absolutely. As Omar and Amer have both said. You have a strong desire in the part of the Saudi government to attract good quality US companies into the region. Technology is top of the list but you also have healthcare as a big opportunity, there are opportunities on the manufacturing side. You have the financing and funding in place and you have organizations there to help with the process. For any US business looking to do business in Saudi Arabia the first stop is the US Department of Commerce/the US Embassy and then you get on to SAGIA pretty quickly and you’ll find lots of people who will want to help in the process so I don’t worry about the environment. Media descriptions of the region have to be taken with a grain of salt and I go back to the point I made earlier which is that the best way to understand what the opportunities are is to get on an airplane and come out and commit the time and effort. Everyone will be the better for doing that.

[Ryan] Thank you for that Ambassador. We’ll turn to Amer Kayani for a comment on the environment and and advantages that Americans might have ready made for them to step in to.

[Kayani] Let me refer to what Ambassador Fraker said about quality, and that’s really key. You get what you pay for, and if we are going to try to compete with some of the competition coming from countries like China and others and just focus on price alone we’re not going to win business there.

So, the most important thing is the value proposition. What is it that we are offering as overall value to our Saudi friends here? And that value proposition is quality we are offering. We are offering a long-standing commitment to be in the country and most important, we have a very strong record going back 80 years of working with. Other things being equal yes, Saudi businesses would prefer to do business with us more than anyone else, and that I really can tell from my own experience. We take about 800 Saudi buyers every year to the United States on a dozen or so trade shows. And saying that Saudi Arabia over the last ten years or so has become very price sensitive, but that does not mean that they are not paying attention to quality.

So really, you have to package yourself to differentiate from the competition and that’s the value proposition. So how do you build a value proposition? Well quality we have. Commitment we have. Well let’s throw in a couple of other things to it. Let’s try to help Saudi Arabia to employ local Saudi talent there.

That is going to, instead of bringing expats here, let’s cultivate local talent. It’s going to be less expensive, and it also helps the country. Usually government agencies, especially, will look upon your bids favorably. The other thing is finding a good, strong local partner and as Ambassador Fraker said earlier that goes back to having a good personal relationships. That also helps you reduce some of the costs that you have. And if you cannot find an appropriate local partner because of one reason or another, that local talent or specific quality you are looking for is not available you can always go and bring in other partners, third country partners from countries in the region and help make your bid more competitive. So it’s really trying to offer a value proposition than focusing on price alone.

[Ryan] Thanks for that Amer. We’ve chewed through our one-hour session here too quickly but a lot of great information. I’ll ask our panelists for any closing comments if you have anything you would like to add at the end here. Anything from Omar?

[Bahlaiwa] Yes, I would second Amer’s point that American quality is highly regarded in Saudi Arabia and this is very important. Second we’ve been engaged with American products for the last eight decades. So switching to one product or another will not stop us from going back to the American products. Third, and very important, the quality and the price of the American products is really balanced compared to European products for example, which have good quality but a very high price. So if you compare the American products to the European products by all means you’ll win with the American products.

Fourth, which is very important, the products that are coming from the East, especially from China, is now deteriorating because the government has paid attention to the quality and they are now trying to increase the standard of products on the Saudi market. So again this is another golden opportunity for American products to come back again to the Saudi market and to settle in the market. Another important point is domesticating the industry or technology, and that is by implementing the factory or the services in town and train Saudis and making them a partner instead of just a customer.

[Ryan] Great. Amr, do you have any closing thoughts on trade and investment?

[Kayani] I will echo what Omar said. As long as you are coming here and you show commitment to the market and you’re willing to work with them and not view them just as one off opportunity and look at the market from a long-term perspective rather than just quarterly perspective I think you will be successful. But again the personal relationship is key to succeeding in this market.

[Ryan] Yes that seems to ring out in everybody’s recommendations. Ambassador Fraker over to you for any closing thoughts?

[Fraker] I think it’s important to understand that there’s a deep wellspring of pro-Americanism on the business side. Saudi Arabia really does want to do business with America and American companies and the best way to take advantage of that is to get on airplanes and come out and visit the country and see for yourself as an American business what the opportunities are. That’s a huge advantage that we have and it’s one we should capitalize on.

[Ryan] Terrific. Well let me thank the audience again for participating today and let me especially thank our distinguished guests for joining us today in this Focus KSA Webinar. We are pleased to have been talking with Ford Fraker, President of the Middle East Policy Council in Washington and former ambassador to Saudi Arabia during the period 2007-2009, Minister-Counselor Amer Kayani, the Chief of the US Commercial Service in Saudi Arabia and Bahrain speaking to us from the embassy in Riyadh, and also from Riyadh, Secretary General of Committee for International Trade Engineer Omar Bahlaiwa. Thank you so much for your time. A reminder to the audience that we will have a survey that you will get in your email tomorrow. Please take just a minute to tell us how we can improve this service the FocusKSA webinars and what other features we might be able to put into the SUSRIS.com and the Saudi US Trade Group, SUSTG.org efforts to keep you up to date on what’s happening in US Saudi relations and we will have a transcript of this event as well as the video in the archives so you can refer your colleagues to take a look and we hope that you will be in the next Focus KSA Webinar. Richard, over to you.

[Wilson] Thank you, Pat. Thanks so much for being the organizational backbone to this initiative.

Gentlemen, thank you, just a quick thought, return to the beginning, Amer I thought it was very interesting that you characterized Saudi Arabia as a growth story. I think that is spot on and implicit in that is that it’s a transformational story and that in its growth and its ongoing change provides tremendous opportunities for US businesses.
Along those lines, it’s fascinating, a previous Focus KSA Webinar was on labor [“Saudi Labor in Transition: What are the Challenges?”] and all the issues that involves. But you know those are business opportunities with regard to labor and creating job opportunities.

The next one, and this is a plug and a notice, will be on education. You know Saudi Arabia making a great education and it will be on July 10th and will include Ambassador James Smith and Dr. Haifa Jamal Al-Lail President of Effat University as well as other participants. Again, a transformational topic in Saudi Arabia and a tremendous opportunity for US businesses.

So be alert. Go get to know somebody as Ambassador Fraker and all three panelists have really encouraged, because the opportunities are there and the opportunities are there in sectors where US business and US expertise is extremely strong. With that, thanks so much.

[Remarks as delivered]

SUSRIS-logo-100

Read more about this topic:

SUSRIS Articles:

Logo SUSRIS 100

Additional Resources:

SUSRIS-logo-100

US-Saudi Opportunities Business Forum – Los Angeles – 2013

Official Web Site

Pre-Forum Reports

Forum Press Releases

Keynote Addresses

Forum Panels

Breakout/Concurrent Panels

Interviews

Wrap Up Reports

Video

Slide Presentations

SUSRIS-logo-100