Interview: Mazen Batterjee
To what extent is activity in the private sector currently underpinning non-oil economic growth?
MAZEN BATTERJEE: Most infrastructure projects in the country are dependent on government spending. As a result, when the oil price is high, more public projects are initiated, and vice versa. Indeed, one may say that the price of oil is reflected in many industries across the Kingdom, most notably within the construction sector.
Nonetheless, the local private sector, including small and medium-sized enterprises (SMEs), has grown in recent years. Moreover, manufacturing companies are generating substantial cash in the economy. While it is never easy to open a new business, government banks and public funds have provided financial support to SMEs. Moreover, the Ministry of Labour has created a Human Resources Fund for skills training, notably for people willing to launch their own businesses. This represents an excellent opportunity for anyone willing to independently start their own business.
What particular sectors do you expect to see grow and sustain the economy in the long term?
BATTERJEE: There are sizeable opportunities in the food processing business. Thanks to firms like the Food Manufacturing Company, most of our food is produced locally. A significant focus has also been placed in particular on the petrochemicals industry. Saudi Arabia is currently experiencing a growing upward trend in the export of petrochemical products.
As for the manufacturing sector, there are currently around 6000 local factories in the Kingdom producing a diverse range of finished products. While we are still importing a lot of manufactured products, we have now established a stronger manufacturing base.
Indeed, we can expect to see sustainable foreign investment flows in both those sectors. Saudi Arabia thus represents an attractive destination for investors willing to invest in manufacturing given the advantages it offers, such as low-cost energy, a sufficient supply of raw materials and an attractive tax environment.
How can secondary sector exports be increased?
BATTERJEE: There is plenty of room to increase secondary sector exports. For the time being, however, freight activities remain relatively low, and many containers are coming in full and going back empty.
As for the food industry, many GCC nationals prefer Saudi products which are entirely halal to products from the US or Europe. That said, there are many industries where Saudi Arabia is performing outstandingly. According to statistics from 2014, Saudi Arabia is the largest exporter of carpets to the US, because the cost of production remains relatively low.
How attractive are Jeddah’s industrial zones and surrounding economic cities to investors?
BATTERJEE: Historically, Jeddah has always been Saudi Arabia’s economic hub. With easy access to the Red Sea and well-equipped ports such as the Jeddah Islamic Port and King Abdullah Port, the city is attractive for export-oriented investors, but also those looking to serve the domestic market. Saudi Arabia is the largest consumer market in the GCC region, and as a result, the local demand is strong and needs to be supplied. North of Jeddah is the city of Rabigh, host to a large petrochemicals complex. In the same radius, King Abdullah University of Science and Technology also provides a research centre not only for the Kingdom but for the entire region. Additionally, we expect the new airport to come on-line by the first quarter of 2016, which will increase connectivity and traffic flows in the city.
What measures can be taken to fill the skills gaps in the workforce so as to meet private sector needs?
BATTERJEE: We need to do more to enhance vocational training. We are not only looking for business administration graduates, but also technicians, engineers and nurses. Expanding the number of vocational training schools can certainly help address our current shortages. At the same time, people must become more culturally open to obtaining such vocational qualifications.
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