Trade mission to find the key to the kingdom

Colm Keena, Public Affairs Correspondent, hears that Irish firms would be welcomed in Saudi Arabia

Ironically, perhaps given the number of Saudis involved, the Kingdom of Saudi Arabia has more cash than ever because of the September 11th attacks on the United States.

The price of oil has increased since the attacks and the kingdom's oil revenues have shot up. According to a December report from the Riyadh-based Samba Bank, Saudi Arabia had total revenues of $174.7 billion in 2006.

The government has decided to use the cash to transform its economy. According to the bank, last year was the fourth consecutive year in which there was double-digit spending growth in the kingdom. Spending in 2006 was two-thirds greater than it was in 2002. And, despite all this, there is still a huge amount of cash left over.

According to the bank, Saudi Arabia produced a record budget surplus in 2006 of $70.7 billion and foreign assets grew by, on average, $1.4 billion a week.

But the oil will not last forever and Saudi Arabia is planning to use its massive resources to fund a 10-year €600 billion infrastructural development programme aimed at transforming its economy.

The kingdom is ruled by the Saud family in conjunction with religious leaders who favour what the West views as a strict form of Islam. Sharia law applies. Saudi Arabia does not issue tourist visas. Women are not allowed to drive and do not work in jobs where they would come into contact with men.

In recent decades the country has had its back turned to the world, but that is now changing. In an interview with The Irish Times, Dr Tawfig Alrabiah, director-general of the Saudi Arabian General Investment Authority (Segia), outlined the scale of what the kingdom has set out to achieve.

The kingdom intends to build six new cities, each focusing on particular economic activities. A financial centre is to be built by the sea. A city in the centre of the kingdom will focus on logistics. Another in the south-west will focus on the food industry; one in the north-west will focus on technology and on the knowledge-based economy; and two others, the locations of which have yet to be announced, will concentrate on upper-stream petro-chemical products and knowledge-based industries, respectively.

The cities will be built with a view to providing an attractive environment for 21st century business and for the executives and professionals the kingdom wishes to attract.

"We would love to see Irish companies be part of these cities," said Dr Alrabiah.

He explained that they expected to start moving people into these cities within two years and for them to be filled to capacity in "10 to 15 years".

Investment is to come from the domestic and foreign private sectors. The objective is to have 50 per cent of the kingdom's GDP generated through non-oil activities by 2020.

"Because of oil prices, there is a lot of liquidity. The government wants to invest in infrastructure and build a country that relies not just on oil."

Segia, which seeks to promote foreign investment, is considering opening an office in Ireland.

Two years ago, Saudi Arabia was ranked 67th in a World Bank index which measures ease of doing business in different economies. Last year, the kingdom ranked 38th, and the aim is to be in the top 10 by 2010.

Delegations from countries all over the developed world are coming to Saudi Arabia in search of a piece of the action and this week it was the turn of the Irish, with the Taoiseach, Bertie Ahern, leading an Enterprise Ireland trade mission comprising 170 delegates from 114 companies and organisations. Enterprise Minister Micheál Martin, Education Minister Mary Hanafin and Agriculture Minister Mary Coughlan were also on the mission.

Irish delegates representing technology, healthcare, food and other sectors, as well as Irish educational institutions, spent the week meeting potential partners and discussing potential deals. Those with knowledge of the market emphasised that relationships play a particularly strong role in Arab business and that companies must seek to build relationships within which business can then be conducted.

Vilicom, established in Dublin in 1999, has established a Saudi subsidiary from which it intends to grow its business in the Gulf region, providing services to the 3G cellular networks industry. It is the first Irish company to set up a Saudi subsidiary.

"Vilicom is an outstanding start and we would love to see more Irish companies coming to Saudi Arabia," said Dr Alrabiah.

There is no income tax in Saudi Arabia and corporation tax is set at 20 per cent. There are no restrictions on taking money out of the country.

It is not all roses, however. Getting payment from Saudi customers can take a long time. The Saudis also have a reputation for being work-shy. Despite its high unemployment rate, Saudi Arabia has a large foreign workforce running its hotels, factories, shops and so on.

What tribe you belong to is a hugely important matter in Saudi Arabia and throughout the Gulf. Religion, the law, attitudes on the roles of the sexes and towards the rights of foreigners and the poor are issues which can jar with visitors from the West.

But the level of attention the EU, the US and senior business figures are giving to the Gulf region these days indicates that scepticism about Saudi Arabia's plans is not widespread.

In November, Microsoft's Bill Gates visited Saudi Arabia for the first time and signed a number of deals. "The reason your plan is actually realistic is that you have the resources to make that kind of investment," he told a conference organised by Segia.

Saudi Arabia and the other countries in the region are not democracies, and when their rulers decide that something is to be done, it can happen quickly.

The second leg of the Enterprise Ireland mission this week was to the United Arab Emirates (UAE).

Dubai, one of the seven emirates, is an example of what can be done and of the speed at which it can be done. Wide boulevards are lined with towers of glass, concrete and steel in a city which not so long ago was a low-built backwater.

The lobbies of Dubai's world-class hotels hum with business people discussing deals. Everywhere, new skyscrapers are being built. In fact, it is one of the biggest building sites in the world.

Compared to some of its neighbours, Dubai is not particularly oil-rich. The bulk of its economic activity is driven by non-oil enterprises, although at the moment the largest by far is construction. It has ambitious plans and is pursuing a "build it and they will come" policy.

In the UAE, Irish companies discussed deals with potential partners or clients, with Mr Martin lending his support. Ms Hanafin meanwhile discussed the potential for more students from the Emirates to come to study in Ireland. (In Saudi Arabia she negotiated a deal which will result in 1,000 students coming to Ireland in the next few years).

Ms Coughlan discussed the possibility of the Emirates reopening its markets to Irish beef, just as she had done in Saudi Arabia. She said she was pleased with the progress made and was hopeful of a breakthrough.

In response to questions raised in Ireland about the ethics of promoting business in regions in which there are severe restrictions on women's freedoms and on other human rights, Micheál Martin strongly defended the trade mission. His view was that engagement encouraged change. Saudi Arabia and its king were moderate voices in the overall political situation in the region and isolation would only make matters worse, he said.

Enterprise Ireland chief executive Frank Ryan was equally forthright: "Saudi Arabia was accepted into the World Trade Organisation in 2005. On what basis would we not trade with them? We cannot go around judging people."

And he wanted to emphasise what he said was his key point. The Arabian Gulf, China, Russia and India have economies which are set to experience double-digit growth in the coming years while Ireland's traditional markets in Europe and North America will have only low single-digit growth. If indigenous Irish companies want to grow, they need to look to new and challenging markets such as the once distant Arabian Gulf.