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DE RUEHJI #0171/01 0570504
ZNY CCCCC ZZH
P 260504Z FEB 06 ZDK NUMEROUS REQ
FM AMCONSUL JEDDAH
TO RUEHC/SECSTATE WASHDC PRIORITY 8851
INFO RUEHZM/GULF COOPERATION COUNCIL COLLECTIVE PRIORITY
RUEHLO/AMEMBASSY LONDON PRIORITY 1296
RUEHFR/AMEMBASSY PARIS PRIORITY 1370
RUEHRH/AMEMBASSY RIYADH PRIORITY 6207
RUEAIIA/CIA WASHDC PRIORITY
RUEKJCS/DIA WASHDC PRIORITY
RHEHAAA/NSC WASHDC PRIORITY

C O N F I D E N T I A L SECTION 01 OF 02 JEDDAH 000171 
 
SIPDIS 
 
SIPDIS 
 
RIYADH, PLEASE PASS TO DHAHRAN; DEPARTMENT FOR NEA/ARPI; 
PARIS FOR ZEYA; LONDON FOR TSOU 
 
E.O. 12958: DECL: 02/22/2015 
TAGS: ECON EFIN KISL KWMN PGOV PREL SA SCUL EINV
SUBJECT: JEDDAH JOURNAL 6.  SAUDI INVESTORS MOB BANKS, 11% 
INCREASE IN JEDDAH MUNICIPAL BUDGET, AND REFORM OCCURRING 
HERE AND THERE 
 
 
JEDDAH 00000171  001.2 OF 002 
 
 
Classified By: Acting Consul General Hector Morales, for reasons 
1.4 (b) and (d). 
 
INVESTOR FRENZY SNARLS TRAFFIC IN JEDDAH 
 
¶1.  (C) On the evening of February 19, several late-arriving 
members of the Executive Committee of the American 
Businessmen of Jeddah (ABJ) blamed their tardiness on 
unexpected traffic jams in central Jeddah.  Executive Council 
member and banker Anees Moumina announced that crowds were 
surrounding banks, and he warned everyone to avoid the banks 
for the next several days.  February 20-22 were the first 
days in which shares of Yanbu National Petrochemicals Company 
(YANSAB), could be publicly traded.  YANSAB is the 
petrochemicals affiliate of Saudi Basic Industries 
Corporation (SABIC).  The initial public offering of shares 
at SR 50 from December 17 to 29, which was open only to 
Saudis, was oversubscribed by some 300%, 8 million Saudis 
vying for part of the 35% stake in YANSAB.  The first 
opportunity to trade shares set off an investment frenzy 
among cash-flush Saudi investors.  Moumina said that a number 
of bank employees had actually been physically attacked by 
eager investors as the price fluctuated from an opening in SR 
600's and rising as high as SR 750.  By Wednesday, February 
22, YANSAB had dropped to close at SR 573. 
 
¶2.  (U) Newspapers on Friday, February 24, reported investors 
were outraged to find that sales orders given when YANSAB was 
near 750 were not executed until a day or even two days later 
when the price had declined to about SR 610.  Authorities 
blamed the market system being unable to keep up with the 
vast number of orders. 
 
MORE IPO'S AND A BOOMING ECONOMY HEAT UP (OR OVERHEAT) THE 
SAUDI MARKET 
 
¶3.  (C) The current round of IPO's and impending 
privatizations, coupled with a booming economy in Saudi 
Arabia is fueling a very hot market.  On February 22, the 
Tadawul All Shares-Index (TASI) broke through the 20,000 
barrier, closing at 20,061.65.  This week alone, the papers 
have announced several IPO's including those involving 
portions of SAVOLA Group and Al-Huta Group.  Investors 
clamoring for stakes in these early IPO's have driven stock 
speculation to levels that are irresistible to a cash-rich, 
but relatively unsophisticated group of investors.  Some 
cautious sources have expressed concern that the market may 
be overheating and be in for a decline.  Articles have 
appeared in the media warning Saudis to invest rather than 
speculate and offering training courses in what to look for 
in investments and what to avoid.  At a social event of the 
ABJ held at the CGR on February 9, American citizen Jeff 
Gorman, an executive adviser at Bin Laden Group, confided to 
Pol-Econ Chief that in the last quarter, his mutual fund 
investments, the only form of investment available to 
foreigners, had increased by 16%.  While celebrating every 
rise in stock prices, he confessed he was also wary that the 
trend could not last indefinitely, and was alert for signs 
that the bubble might burst. 
 
¶4.  (C) COMMENT:  Share-holding is very wide-spread among the 
Saudi population and many state-owned enterprises and 
parastatals are being privatized which is an undeniably 
encouraging sign of dedication to the free market.  Popular 
share-holding is consonant with the King's stated desire to 
develop an ownership society which feels it has a stake in 
the development of a free-market economy.  But behind the 
exuberance, there is a fear that this boom cannot be 
sustained.  New stock offerings are being prepared over the 
coming months and years, but the public wants in now, leading 
to a mad rush, such as cited above, and driving prices for 
the early offerings to unjustified levels.  A sudden decline 
in the market could injure a significant portion of the Saudi 
population and undermine the King's effort to give the 
general population a stake in a free economy.  END COMMENT 
 
JEDDAH MUNICIPAL BUDGET RISES TO SR 660 MILLION 
 
¶5.  (U) In late January, Jeddah mayor, Engineer Adel Faqeeh, 
announced that the new annual budget for Jeddah would be SR 
660,113,000.  This is an increase of SR 68,863,000, or 
 
JEDDAH 00000171  002.2 OF 002 
 
 
roughly 11.64%, over last year's budget of 591,250,000.  The 
mayor stated that the budget would provide for increased road 
maintenance and improvement to ease traffic congestion, 
maintenance of children's playgrounds, historical sites and 
graveyards, construction of new municipal buildings, and 
improving and maintaining city entry points.  In reviewing 
the above, it should be noted that roads in Jeddah are in a 
deplorable state of repair with many large pot-holes. 
Traffic jams are also a fact of life.  In "Old Jeddah" a 
number of historic buildings are in a state of near collapse 
and one did collapse partially in early December. 
 
WOMEN QUIETLY MAKING INROADS IN ALL MALE FIELD 
 
¶6.  (C) In mid-February Abdul Latif Jameel Community Service 
Program, the local services charity sponsored by the Abdul 
Latif Jameel Group of Companies, announced that it will offer 
training courses in electrical maintenance, plumbing and 
cellular telephone maintenance to interested women, and 
including a promise of immediate employment after graduation. 
 Since women have never been allowed to practice these crafts 
before, this announcement is a tacit indication that women 
will now be permitted to do this work. 
 
WOMEN MAY DRIVE AND MEN MAY DRINK IN FUTURE KING ABDULLAH 
ECONOMIC CITY 
 
¶7.  (C) During a recent conversation, an American employed by 
the chairman of The Bin Laden Group, which is a major 
participant in the development of Saudi Arabia's proposed 
King Abdullah Economic City project, told Jeddah Conoff that 
there is a possibility that King Abdullah Economic City 
(KAEC) will be a "free city" in which women will be allowed 
to drive and consumption of alcohol will be permitted.  Some 
influential groups apparently believe that these 
"concessions" will be necessary if this project, which is a 
key element in the Kingdom's long-term development strategy 
is to compete against Dubai.  Another, Muslim, Consulate 
staff member had also heard that women may be permitted to 
drive in KAEC, but expressed surprise at the suggestion that 
the Kingdom would ever permit alcohol use.  But the employee 
also conceded that KAEC will not be a reality for ten years, 
and anything could happen in the interim. 
 
¶8.  (C) COMMENT:  The two preceding items suggest that the 
Saudi authorities are permitting, or not preventing, groups 
from instituting reforms quietly or in limited areas.  This 
may result in reforms coming into practice without a national 
debate that would arouse the opposition of conservative 
elements.  END COMMENT. 
Morales