VZCZCXYZ0002
PP RUEHWEB

DE RUEHRH #0132/01 0301415
ZNR UUUUU ZZH
P 301415Z JAN 10
FM AMEMBASSY RIYADH
TO RUEHC/SECSTATE WASHDC PRIORITY 2406
INFO RUEHZM/GULF COOPERATION COUNCIL COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHDC
RHEHNSC/NSC WASHDC

UNCLAS RIYADH 000132 
 
SIPDIS 
 
DEPT FOR EEB/CBA, NEA/ARP 
 
E.O. 12958: N/A 
TAGS: EINV ETRD ECON PREL SA
SUBJECT: JOINT U.S. - SAUDI BUSINESS DIALOGUE LAUNCHED 
 
Summary 
------- 
 
¶1. (U) The Saudi Council of Chambers pulled out all the stops 
lining up an impressive array of Saudi business leaders to 
discuss U.S. - Saudi business relations with Commerce DAS 
Holly Vineyard.  The discussion revolved around a number of 
key themes, including the need for a renewed emphasis on 
business dialogue between the U.S. and Saudi Arabia, the 
Kingdom's cluster strategy, reasons why U.S. companies should 
do business in the Kingdom, and impediments to further 
cooperation between the two countries. 
 
 
"We Need a New Conversation on Business Cooperation" 
--------------------------------------------- ------- 
 
¶2. (U) On January 25, the Saudi Council of Chambers hosted 
Holly Vineyard, Deputy Assistant Secretary of Commerce for 
Africa, the Middle East, and South Asia in the International 
Trade Administration.  The Chairman of the Council, Dr. Fahad 
Al-Sultan, opened the discussion, saying the U.S. and Saudi 
Arabia need a more "intelligent" business exchange and 
welcomed the recent introduction of quarterly meetings of the 
U.S. - Saudi business dialogue.  He said the Saudi government 
(SAG) was working to revolutionize Saudi industry by 
restructuring and downsizing the public sector, and by 
privatizing state-owned businesses.  DAS Vineyard applauded 
the initiative to hold quarterly meetings and mentioned the 
upcoming U.S. - Saudi business summit in Chicago.  Later in 
the discussion, participants raised a number of topics these 
discussions should address, including investment in 
pharmaceuticals in the Kingdom, investment in the further 
development of downstream petrochemicals, and investment in 
the aerospace industry. 
 
 
SAG Cluster Strategy Focuses Efforts In Five Sectors 
--------------------------------------------- ------- 
 
¶3. (U) Azzam Shalabi, President of the National Industrial 
Cluster and Development Program, presented the Kingdom's 
cluster strategy for economic diversification, which channels 
Saudi efforts towards metals, automotive manufacturing and 
assembly, home appliance manufacturing, solar energy 
production, and plastics and packaging manufacturing.  Each 
of these sectors makes use of Saudi comparative advantages 
such as cheap energy, abundant sunlight, and a burgeoning 
petrochemical sector, said Shalabi.  He further elaborated, 
saying the strategy is still in the formulation stage and 
that they need government support and private sector partners 
to make this vision a reality. 
 
¶4. (U) In metals, Shalabi said the Saudis would be working on 
developing the aluminum value chain (comments which closely 
parallel those by Supreme Economic Council Secretary General 
Saud Al-Saleh to the Ambassador in late December) and on the 
development of steel products for use as inputs for other 
industries.  The automotive anchor projects the SAG is 
contemplating include an assembly plant for cars and SUVs, a 
factory to cast components for powertrains and engines, a 
truck and bus assembly plant, and a tire production facility 
with an eight to ten million unit per year capacity.  While 
the Kingdom already produces home appliances for domestic 
sale, the strategy would expand upon this, increasing 
production of refrigerators by one million units per year and 
of air conditioners by 1.5 million units per year.  An ample 
recipient of sunlight, the Kingdom aims to capitalize on this 
by developing the crystalline photovoltaic value chain, 
exporting electricity, and eventually developing the 
promising thin film photovoltaic value chain.  Finally, in 
plastics and packaging, the Kingdom is already a substantial 
producer, capitalizing on its hydrocarbon resources.  It aims 
to double its polymer production from 10 million tons per 
year to 20 by 2013; and to double its packaging production 
from 1 million tons per year to 2 by 2020. 
 
 
Reasons U.S. Companies Should Invest in the Kingdom 
--------------------------------------------- ------ 
 
¶5. (U) At the Ambassador's prompting, the Saudi participants 
raised a number of reasons why it would be beneficial for 
U.S. firms to invest in the Kingdom.  Shalabi noted that 
Saudi Arabia has the right economic conditions to make money, 
including a growing workforce, programs in place to provide 
this workforce with training, and a clear, 
government-supported national strategy to encourage 
investment.  Yousef El Maimani, Chairman of Al Maimani 
Holding Group, cited the work the SAG has done to improve 
commercial laws over the past 10 years, the advent (soon) of 
a commercial court, and the size of the domestic market as 
additional reasons why investment in the Kingdom makes sense. 
 
¶6. (U) Dr. Abdulrahman Al-Zamil, Chairman of the Al Zamil 
Group, one of the largest companies in the Kingdom, discussed 
the Kingdom's low tariffs and general lack of protectionism, 
but also sounded a cautionary note, saying U.S. companies 
should only invest in the Kingdom if they are looking for 
"viable, money-making" projects that can withstand the high 
level of scrutiny from Saudi creditors.  He singled out the 
work of the Saudi Industrial Development Fund for particular 
praise, saying that in the history of the institution, they 
have never had a loan that was not paid back. 
 
 
Obstacles to Closer Cooperation 
------------------------------- 
 
¶7. (U) Several Saudi participants identified difficulty 
traveling to the U.S. (particularly in light of recently 
imposed TSA requirements) as a critical obstacle to 
strengthening business relations between the U.S. and Saudi 
Arabia.  Al-Zamil and others also identified U.S. 
restrictions on doing business with those who do business 
with Iran as a significant impediment.  He said it is 
impossible to run a successful company in this part of the 
world and completely exclude Iran from your business. 
 
Comment 
------- 
 
¶8. (U) Overall the tone of the discussion was positive and 
constructive.  While there were concerns about U.S. policy 
towards Iran and travel restrictions, these were isolated and 
did not dominate the discussion.  The Saudi businessmen who 
were present seemed truly interested in closer engagement 
with U.S. businesses and provided concrete suggestions as to 
where future discussions should be steered to be most 
effective.  End comment. 
SMITH