CONSTRUCTION SUPPLIERS

Foreseeing local demand is critical to working in a sector whose trends are critically tied to local and international political developments.

Can you tell us about recent developments and your company's position in the market?

expected to generate over 90,000 additional jobs and contribute over USD26 billion in annual GDP. The smelter project enhances key mining sector strategies under Vision 2030 by linking the midstream mining value chain with upstream base metals development and downstream end-users like cable manufacturers and steel producers.

What are the industries of the future in Saudi Arabia?

The company has a well-established market presence in its business fields and an outstanding reputation. Our main effort has been maintaining a competitive edge in the steel market and adding value to our operations through optimization and consolidation. Moreover, the company will explore new business opportunities that are in line with Vision 2030 in order to grow its operation in related activities and green field projects. That includes investing in different segments that encourage local content, boosting export activity to neighboring countries within the GCC such as Oman and Kuwait, and looking for opportunities in other markets in Africa and Europe. The company will also focus on increasing its Saudization, boosting its efficiency and optimization, and improving the overall work environment and compliance record.

NABIL H. AL-AMIR

We have expanded our operations in Sharjah and will use that as a base to become the first cable company to penetrate the African market, as well as South and Central America, the Far East, Australia, and New Zealand. With regard to the type of investments, we are keen on opening new factories with smaller operations in various parts of Africa, including South Africa, Botswana, Mozambique, and Egypt. If you have a factory in Egypt, for example, you can export anywhere in the world, even Europe, with zero duties. These are all the factors we are keeping in mind before entering a market, just as we are looking into the existing demand for our higher quality products to ensure they attain market share, despite higher costs. Around 20-30% of the companies in Saudi Arabia have the right price and quality and are well equipped to compete internationally, but the rest are sadly not.

MOHAMMED RAFEA How is the current economic environment impacting the country’s manufacturing sector?

opportunities that are becoming affordable in various business sectors. It also requires businesses to explore areas they might not have considered before: new business lines, horizontal or vertical integration, acquisitions, or international alliances, among others. In addition, there should be lots of opportunities to reinvest in automation that will make operations more efficient and provide a competitive edge. In 2018, we had a serious situation where the local supply capacity was estimated at 12 million tons, while demand was only around 5.5 million. This sizable gap is expected to remain at this level or slightly increase in 2019. However, with the new budget announcement of 2019, it will shrink once projects start to be visible in the latter half of the year. Another major factor to consider are the imports from neighboring countries like the UAE or Egypt, who are traditionally a potential threat to local suppliers. China is a major supplier to the region and might be another cause of competition if their market conditions force them to seek opportunities in the region. The China-US tariff situation and the slowing construction industry in China has indeed put pressure on supply levels.

Most manufacturers in Saudi Arabia rarely try to expand globally because they prefer operating chiefly in their local market. Traditionally, expansion happens just within the GCC, which gives the company a regional profile. Following the drop in oil prices and consequently reduced government spending, most of the companies are trying to get outside of the circle and are trying to export, both to neighboring countries and on a global scale. Thus, as part of our new strategy, we will consider the whole world as our market unless there is a barrier of transportation or duties. The only problem we have in Saudi Arabia is that most of the major industries are located in Riyadh, which is a landlocked area; it is better to invest in Jeddah or Dammam because the availability of a seaport facilitates exports. Both cities have a great deal of potential: most of the investment done in Dammam, for example, serves the oil and gas sector, with services for Saudi Aramco or SABIC, while Jeddah is still highly dependent on people who come for Hajj and Umrah. ✖

MR

The main issue we face concerns supply chains, including the ports, railways, land and water transportation, and exports hubs. In 2015, we were talking about promoting local industry, content, standards, and products, before it dawned on us that we did not have a good supply chain. King Abdullah Port and Jeddah Islamic Port are active, and Jubail Port is showing some activity, but Yanbu is still not operational. There will be a new wave of supply chain investments to make it bigger and create the necessary infrastructure to move the products. I am in the glass business, so I will not do the logistics myself as it increases my costs; therefore, I need a professional partner who can work at a high level in every aspect of the supply chain.

What role can the private sector play in improving the supply-chain infrastructure?

We need funding from the government to release the operations from the port and give it to the private sector. King Abdullah Port is successfully run by a private company, so we should expand on this success and help other ports and infrastructure across the Kingdom adopt a similar model. Maersk, for the first time, is signing contracts and service agreements for land transport, so JVs are required with the major international names that can make investments. On our side, we can support them, which will enable us to build a professional-quality supply chain network across the country.