Thursday, January 19, 2012

“Saudi Economy Is Much Bigger Than Our Population, and To Fulfill the Requirements of the Economy We Will Still Need to Hire People From Outside”

Asharqia Chamber Chairman Abdul Rahman Al-Rashed

But I want to reiterate that this illegal expatriate business should stop ... We can’t accept this distortion in our labor market, says well-known Saudi businessman Abdul Rahman Al-Rashed in this exclusive interview to Arab News.

By Siraj Wahab

Published in Arab News on Monday, Jan. 16, 2012

Bold, articulate, media savvy and modest, 49-year-old Abdul Rahman Al-Rashed comes from one of the Kingdom’s major business families. The popularity of this Seattle University finance graduate in the Eastern Province business community can be gauged from the comfortable margins by which he has won the Asharqia Chamber elections.

Al-Rashed was first elected as a board member in 1998 and — after winning subsequent elections — went on to become the chairman of the chamber’s board of directors. This is his third consecutive term as the chamber chief. His success at the chamber is rated next only to the respected businessman, the late Sheikh Saad Al-Moajil.

Since he comes from a reputable business conglomerate — Rashed Al-Rashed & Sons Group — and sits on the board of over a dozen key business organizations, Al-Rashed is fully in sync with the needs of the business community. Under his leadership, the chamber has embarked on a series of programs, seminars and exhibitions to keep the business community informed of opportunities, challenges and regulations. He is particularly keen to help young Saudis launch businesses.

In this exclusive wide-ranging interview with Arab News, Al-Rashed makes a convincing case for helping young Saudi entrepreneurs. He is totally against those expatriates who have “distorted the labor market” by their illegal activities. “Ours is a land of opportunity, not a land of charity,” he insists. “Let the expatriates come up with good ideas and start their own businesses; we are fine with them, but they should do it through legal channels … They should go through the same procedure that a young Saudi goes through to start up a business.”

Below are some of the main points from the interview:

Q: You have been associated with the Eastern Province chamber for a long time. You have won all the elections that you have contested. What is behind your success?

A: I have always wanted to serve people. I believe that if one has the ability and the capability to serve society, then one should not hesitate to take the lead. My father (may Allah be pleased with him) and my mother (may God grant her good health) taught me that we should not be selfish in our approach. Society is always in need of people who can contribute toward its general progress. It is not just the uplifting of one’s home and family that should be of concern to us; it is the uplifting of the entire society that should be important to all of us. This is always at the back of my mind. The private sector and the business community have a lot of requirements. I have many friends who faced enormous challenges in starting up businesses. They were not as fortunate as I have been; I had my father’s established business. These friends had to start from scratch. I have seen and felt their pain when they went through the difficult processes of acquiring business licenses and overcoming bureaucratic hurdles. Since then, it has become my mission not to let young Saudis go through such agony. So here at the chamber we are always trying to look for solutions.

Q: You seem to be an ardent admirer and advocate of the free market economy. Is there a particular reason for this?

A: We are a nation of entrepreneurs. Ever since King Abdul Aziz Al-Saud first founded the Kingdom, the notion of an open economy and entrepreneurship has been embedded in our culture. Throughout history Arabs have been known for their trading activity and entrepreneurial skills. More important, Islam also promotes an open economy and free trade. Arab traders have a legendary history; they spread the message of Islam to the remote corners of the globe. The free economy is a major pillar of our nation’s success. We need to maintain and promote this heritage. In order to do so, we need to make sure our legislations and laws are geared to promoting a thriving free market economy.

Q: After graduating from the United States you returned to join Samba and not the family business.

A: I finished my schooling in Alkhobar and went to Seattle University and received a finance degree in 1985. When I returned, I joined Samba and stayed with them for a few years. My father wanted us all to understand the difficult and gradual process that one has to go through before rising to the top. His view was: You cannot be a boss if you are not bossed. Having a thriving family business does not mean that you automatically become the boss. I acquired considerable knowledge and experience at Samba and then, at the request of my father, joined the family business.

Q: So when did your long relationship with the chamber of commerce begin?

A: My association with the Eastern Province Chamber of Commerce (now known simply as the Asharqia Chamber) began in 1998 when I joined it as a board member. I went with a group of people led by prominent businessman Engineer Khalid Al-Zamil. He was then the chamber vice-chairman while the late Sheikh Saad Al-Moajil was chairman. It was Al-Zamil who brought me into the chamber. I learned a lot from him, he was a mentor to me and I owe much to him. This is my 10th year as the chamber chairman; I first headed it in 2002. Here at the chamber, you can survive only if you earn people’s trust. I know full well that if the members do not support me, then I will not be chairman. It is not an easy job. It entails a lot of work, hard work. You have to listen to all kinds of complaints from all kinds of members. The success of this prestigious chamber did not emerge from a vacuum; it is a product of all the processes that it has gone through in the 60 years of its existence under various founders and leaders. Abdul Rahman Al-Rashed did not do anything spectacular; he merely continued the good work of his predecessors.

Q: You are being modest, Ustaz Abdul Rahman.

A: No, this is a fact. I have learned from what my predecessors did. At the end of the day, this is an organization and like all organizations it evolved and will continue to evolve. The one who comes after me will Insha’Allah do an even better job.

Q: What are the chamber’s major tasks?

A: To market the Eastern Province as a major investment hub — something that it is. To achieve this goal, we work closely with all government entities to make it even more investor-friendly by cutting down red-tape. We are in constant touch with foreign missions. We share information with them and provide answers and data in response to their specific enquiries. We maintain excellent rapport with the offices of Eastern Province Governor Prince Mohammad bin Fahd and Deputy Governor Prince Jiluwi. They are very supportive. They play a very important role and are always focused on how to improve the business environment.

Q: Businesses in the Eastern Province have long been tied to the petroleum industry which has expanded now to include petrochemicals. Do you see that trend continuing or do you see more economic diversification coming in the Eastern Province?

A: Diversifying our economy has always been the main goal. Oil and gas are our natural resources, our natural wealth. We want to expand our economy and we have succeeded in doing just that. Oil and gas mean many things: Petrochemicals, power generation, mining, the service industry, etc. These are the areas we can — and are — diversifying into. The most important thing is to focus on the localization of these industries. For example, take the service industry, it is huge. Servicing the oil and gas industry, the petrochemical industry, the water and power generation industry will lead to enormous quantities of business. Also, remember that we are a vibrant and young nation. Sixty-five percent of our population is below the age of 25; this in itself is a huge asset and a wealth. Look at some of the nations around the world, they do not have the natural resources, yet they are leaders because their real wealth is their people, their talented people. We need to develop this talent.

Q: So is the Kingdom succeeding in developing the talent of its people?

A: No, not to the extent we want to. Take the oil and gas industry. We have been producing oil for more than seven decades now and we control 25 percent of the world’s oil reserves. We should not have been only exporting oil and the byproducts of oil, but we should also have been exporting oil extraction and oil exploration expertise and techniques. There is something seriously wrong when we do not see our petroleum engineers working across the globe. They should have been everywhere. At least all the petroleum engineers in the Gulf region should have come from Saudi Arabia. Saudis should have been developing oil fields, managing rigs, doing drilling and all that. Unfortunately, that has not happened.

Q: Let us go back to your statement about the huge service industry. How big is it? Can you please elaborate on that?

A: Look, we are still a net importer of services. If you take the money that we have already spent and committed for infrastructural projects between 2005 and 2015, it totals $100 billion. This is a massive investment.

Q: $100 billion between 2005 and 2015?

A: Yes, a $100 billion investment. If you take oil and gas projects, and petrochemical, mining, power generation, water production projects. Think of the headline projects by Saudi Aramco (SATORP, Sadara), SABIC (Saudi Basic Industries Corp.), SWCC (Saline Water Conversion Corp.), Maa’den (Saudi Arabian Mining Co.). Yes, they add up to $100 billion which is SR375 billion. After all these massive projects are complete, we will be spending at least 5 percent of the total value of these investments in maintenance. That gives you a service industry that is worth roughly around $7 billion to $8 billion. Is that not a robust industry? You are talking here about a huge economic mass. So what are we going to do to localize these services? Are we still going to hire all the expertise from outside? Shouldn’t we direct our youngsters to perform these jobs, make sure they are up to the task and train them to acquire the required skills for the maintenance of these huge investments? This is one way of diversifying our economy.

Q: Jubail is seeing a remarkable period of growth and development. Do you expect an increase in retail businesses and more residential development in support of this growing population?

A: If you go to Jubail and take a good look at the housing projects being constructed by private investors and the General Organization for Social Insurance, you will realize their great size. There has been a phenomenal increase in the housing sector to cope with the rising demand. Jubail is expanding like never before. Jubail 1 and Jubail 2 are almost full, and the day is not far off when we may be talking about Jubail 3 and Jubail 4. Jubail’s population is set to rise because of the massive upcoming projects such as the Saudi Aramco Total Refining and Petrochemical Co. (SATORP) and Sadara (Saudi Aramco’s joint venture with Dow Chemical). Then we have the expansion of the current petrochemical plants that are doubling and trebling and, in many cases, even quadrupling their capacities. We will need housing for thousands and thousands of people who will be working in these companies and plants.

Q: There is also development of an aluminum operation planned for Ras Al-Khair using bauxite brought by rail from the Central Region. Do you have any comments about its significance?

A: Yes, Ras Al-Khair (Ras Al-Zour) is undergoing massive development, and it is only 80 km from Jubail. It is going to be linked by rail to Jubail and Dammam. We all know Ras Al-Khair is set to become a major export hub for aluminum products and ammonium phosphate. The Ras Al-Khair-Jubail-Dammam rail link means a lot of people working in Ras Al-Khair will be living mostly in Jubail or on the outskirts of Dammam in view of better living environments and better schooling facilities for their children. Since it will be a mere 25-minute train ride to Ras Al-Khair from Jubail, people will not mind commuting between the two cities. I believe not many people will take up residence in Ras Al-Khair after rail links are fully established.

Q: So the Ras Al-Khair-Jubail-Dammam rail link is set to change the face of the Eastern Province?

A: Absolutely. It will lead to a number of positive changes. There will be heavy transport of cargo and people back and forth. This will lead to huge demographic changes. People will become more mobile. Those who are in Dammam will find it easy to work in Jubail. They will just take a 40-minute train ride to Jubail; the connectivity will be like what we see in Europe. New districts and new clusters of industries will develop along the train route and new highways.

Q: You talked about localization before. The latest Saudization effort has been in effect for a few months now. Are most businesses able to comply with the new regulations?

A: I want to make one thing very clear. We respect all expatriates. They have done a good job and we thank them for that. Yes, we still require expertise from the outside. That is not something exclusive to us. Even the United States and Germany have to hire people from outside their borders. However, there is one thing about our labor market, it is distorted. Foreigners are carrying on a lot of illegal economic activity here. We want expatriates to work legally. Ours is a land of opportunity, not a land of charity. Let the expatriates come up with good ideas and start their own businesses, we are fine with them, but they should do it through the legal channels. They should go through the same procedure that a young Saudi goes through to start up a business. Pay your dues. You cannot come in here illegally and compete with Saudis, young Saudis, to open businesses. Young Saudis have to pay more; they suffer more because they work legally. Since they work legally, it is much more expensive for them compared to the unlicensed illegal expatriates working in the gray market. This is not fair. This is unacceptable. Because of this gray market and illegal work, we are being made to compromise on quality. It is reflecting badly on the quality of services that our society is getting. This lousy and low quality service is a direct result of the black market. We deserve better and so we need to rectify this situation. We are a young nation. We have a young population. Our youngsters need jobs. We need to make our economy vibrant so that we can absorb these youngsters into various jobs.

Q: Are the Saudization efforts succeeding and how do you see the way out?

A: Of course there are difficulties. When we have such efforts, what happens is that it becomes difficult to differentiate between the good guys and the bad guys. Therefore, you have do a delicate balancing act. The labor minister (may God help him) is doing the real balancing act. His is a very tough job because he does not want to sacrifice what is good while punishing the bad. Sometimes he brings in legislation to tackle the black-market guys and the good guys become the unintended victims. He does not want to victimize the good guy. He wants to maintain our economic gains. At the same time, he wants to make sure that every job created by this economy goes to Saudis first. If we don’t find Saudis, then he wants to make sure that our schools and colleges and universities are geared toward providing Saudis to fill those jobs and acquire the needed expertise. Having said all this, let me also state that our economy is much bigger than our population, and to fulfill the requirements of the burgeoning economy we will still need to hire people from outside. Say we have a million or two unemployed Saudi men and women … Even if we employ all of them, then we will still leave a gap of two to three million in the market. But again I want to reiterate that this illegal expatriate business should stop. We can’t accept this distortion in our labor market. Saudis should — and must — come first.

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