
Saudi-Japanese Relations From the
Viewpoint of Investment Promotion Activities For Japanese Investment in Saudi
Arabia
Tayeb El-Mokhtar H. Muto
I would like
to describe what the Japan Co-operation Centre for the Middle East (a
non-profit institution organized by both the public and private sectors, whose
staff are seconded from private companies, and whose activities are based on
its original endowment, subscription fees from its members and public
subsidies; JCCME for short) has been doing to promote economic relations
between Saudi Arabia and Japan following the 7th Japanese–Saudi Businessmen’s Dialogue of 1994,
especially in the field of investment promotion. I would like to focus
primarily on the setting up of the Organization for the Promotion of Japanese
Investment in Saudi Arabia, OPJI for short, and its subsequent activities, and
towards the end I will go on to report on the JCCME’e budget for its investment
promotion programmes since 1993.
Organizations for the Promotion of Japanese Investments in Saudi Arabia
Until 1994, efforts to promote Japanese investment in Saudi Arabia were
primarily undertaken by individual organizations such as the Japan
International Development Organization (known as JAIDO), the Japan External
Trade Organization (known as JETRO), and individual corporations. However, at
that time the Japanese people came to the conclusion that such individual
efforts should be put together and should be co-ordinated to promote
substantially new joint ventures and investment projects with optimal
efficiency and effectiveness – in other words, the Japanese business community
needed to come together to make a concerted effort in an integrated manner. It
was this recognition that led to the establishment of the OPJI. Focusing on promoting
investment in Saudi Arabia, the OPJI takes the initiative in promoting
investment projects, and functions as an umbrella organization to co-ordinate
and support all the individual organizations and corporations involved in this
field.
The Background to the OPJI’s
Establishment
In order properly to meet and serve the requirements of the Kingdom of
Saudi Arabia in industrializing and privatizing its economy, both the public
and private sectors of Japan had reached a consensus decision to use their best
efforts to co-operate with the Saudi private sector in further exploring and
enhancing joint-venture opportunities in the Kingdom. As a matter of fact, the
truth is that such endeavours by the Japanese private sector to seek for joint
investments in Saudi Arabia date far back into the 1960s.
Japanese industrial circles had thus come up with a plan to establish
an organization named ‘The Organization for the Promotion of Japanese
Investments in Saudi Arabia’ (OPJI for short), effective 1 May 1995, in response
to a strong initiative from the Japan Federation of Economic Organizations
(Keidanren), the ‘leadership’ of the nation’s private sector, and the Japan
Co-operation Centre for the Middle East (JCCME).
OPJI was expected to become an umbrella organization for promoting,
facilitating and co-ordinating industrial investment activities and joint
ventures of Japanese companies aimed at the Kingdom’s markets. The results of
the activities of the local offices of JETRO and JAIDO in Riyadh and Jeddah
respectively would also be consolidated and further exploited under the
umbrella of OPJI. The government of Japan is to provide strong support in all
spheres of OPJI’s activities.
The Kingdom of Saudi Arabia, with the world’s largest oil reserves and
oil-producing capability on the one hand, and resource-scarce, industrialized
Japan on the other, form an ideal partnership for complementing each other’s
national requirements.
For Saudi Arabia, it is imperative to transform her oil-dependent
economy into a truly industrialized one through the utilization and
vitalization of her private sector. In an attempt to achieve this goal, both
the public and private sectors of the country are putting forth their efforts
to develop grassroots industries through stimulating investments and technology
transfer from the advanced industrialized nations of Japan, North America and
Europe.
Saudi Arabia holds high expectations of the strength of Japan’s economy
as well as of her technology. Saudi Arabia has taken every possible opportunity
of seeking out Japanese participation and involvement in its national
industrialization process. Such opportunities in the past have included the
occasion in April 1994 when Mr Gaishi Hiraiwa, then chairman of the Japan
Federation of Economic Organizations, visited the Kingdom, where the Custodian
of the Two Holy Mosques King Fahd bin ‘Abd al-‘Aziz al-Saud received him in
audience. And another such occasion was in November 1994, when HE Engineer ‘Abd
al-‘Aziz
al-Zamel, Minister of Industry and Electricity, attended the first
Japan–GCC Business Conference and the 7th Japanese–Saudi Businessmen’s Dialogue
in Tokyo, where he held a series of talks with HE Tomiichi Murayama, then Prime
Minister of Japan, and HE Ryutaro Hashimoto, then Minister of International Trade
and Industry.
Objectives
and Activities of OPJI
OPJI
undertakes the following activities, with the objective of promoting and facilitating Japan’s investments in Saudi Arabia:
1.
Searching for and evaluating prospective industrial investment opportunities, and taking the role of mediator in the course of
promoting Japan’s investments in Saudi Arabia.
2.
Investigating,
examining and advising on those matters that affect promoting prospective
investment projects.
3.
Providing
supportive assistance to ensure the smooth progress of existing and new joint
investment projects.
4.
Maintaining
close contact with, and co-ordinating and co-operating with various Japanese
organizations and private companies in the course of carrying out the
above-mentioned activities.
OPJI’s
Structure
§
The
Organization shall consist of members who support its objectives and
activities.
§
The
Organization shall have a Chairman and a Vice-Chairman.
§
The
Chairman and the Vice-Chairman shall be appointed through a vote held among the
members of the Organization.
§
The
Organization shall set up an Executive Committee to handle important policy
matters.
§
The
Chairman shall appoint the members of the Executive Committee.
§
The
members of the Executive Committee shall elect its Chairman and Alternate
Chairman by voting among themselves.
§
The
Executive Committee shall have Working Group(s).
§
The
Executive Committee shall hold meetings whenever the need for them arises.
§
The
Organization may have a Supreme Adviser and Advisers, who shall be designated
by the Chairman.
§
The
office of the Secretariat shall be located at the Headquarters of the Japan
Co-operation Centre for the Middle East (JCCME), Tokyo.
Member List of OPJI (as of 1 May 1995, when it was established)
OFFICERS
SUPEREME ADVISER: Gaishi
Hiraiwa Honorary Chairman,
Keidanren
CHAIRMAN: Shoichiro Toyoda Chairman, Keidanren
VICE CHAIRMAN: Yoshihisa Ojimi Chairman,
JCCME
MEMBERS OF THE EXECUTIVE COMMITTEE
Chairman of the Executive Committee:
Yoh Kurosawa Chairman
of the Committee on the Middle East, Keidanren; Co-chairman of the
Japanese–Saudi Businessmen’s Dialogue; President, The Industrial Bank of Japan,
Ltd.
Alternate Chairman of the Executive
Committee:
Keiichi Konaga Alternate
Chairman of the Committee on the Middle East, Keidanren; President, Arabian Oil
Company, Ltd
Committee Members
Minoru Murofushi Chairman
of the Supervisory Board for Regional Market Committees, Japan Foreign Trade
Council, Inc.; Chairman of the Policy Planning and Co-ordination Committee, The
Japan Chamber of Commerce and Industry; President, Itochu Corporation
Minoru Makihara President,
Mitsubishi Corporation
Naohiko Kumagai President,
Mitsui & Co., Ltd
Tomiichi Akiyama President,
Sumitomo Corporation
Ariyoshi Okumura Chairman
of the Committee on Middle East–Japan Relations, Japan Association of Corporate
Executives (Keizai Doyukai); President, IBJ NW Asset Management Company, Ltd
Shinichi Yufu President,
The Japan International Development Organization Ltd (JAIDO)
Toru Toyoshima Chairman, Japan External Trade Organization (JETRO)
Masaya Miyoshi President, Keidanren
Shoichi Tanimura President,
The Japan Chamber of Commerce and Industry
Jo Kojima Executive
Director, Japan Co-operation Centre for the Middle East (JCCME)
Advisory Members
Hideki Osada Vice
President, Member of the Board, The Overseas Economic Co-operation Fund (OECF)
Yasuo Furutachi Senior
Executive Director, The Export–Import Bank of Japan (EXIM)
Hisato Nagao Director,
Middle East–Africa Office, The Ministry of International Trade and Industry
(MITI)
Associated Organizations
§
The Japan Chamber of Commerce and Industry (JCCI)
As can be seen from the above description, from its inception the
membership of the OPJI has consisted of some of the most noted names in the
Japanese business community. To name but a few, there are Mr Gaishi Hiraiwa,
the honorary chairman of Keidanren, Mr Shoichiro Toyoda, then the chairman of
Keidanren, Mr Yoh Kurosawa, currently the chairman, and then the president of
the Industrial Bank of Japan, who is currently the co-chairman of the
Japanese–Saudi Businessmen’s Dialogue, and chairman of the OPJI Executive
Committee, and Mr Keiichi Konaga, president of the Arabian Oil Company, who is
alternate chairman on the Executive Committee, as his company has had many
years of working experience in the Japan–Saudi Arabia Society.
To work under the Executive Committee headed by Mr Kurosawa and Mr
Konaga, they put together a thirty-person ‘Task Force’ to seek out and promote
joint ventures and investment projects on the ground. Members of the Task Force
were drawn from the staff of eight organizations and corporations (which have
since become nine by the addition of the Sumitomo Corporation): the Industrial
Bank of Japan, the Arabian Oil Co., the Itochu Corporation, the Mitsubishi
Corporation, Mitsui & Co., JAIDO, JETRO and JCCME.
The OPJI’s secretariat, which handles the finances and other
administrative matters relating to the Task Force meetings, has been set up in
JCCME.
The Status of
Existing Investment Projects up to 1996
Before reporting on the activities of the Organization for the
Promotion of Japanese Investments in Saudi Arabia (OPJI), it will be desirable
to touch upon the status of Japanese investment projects in the industrial
field that were being implemented through co-operation between Saudi Arabia and
Japan before the establishment of OPJI.
Investment Projects in the Industrial Field (excluding Oil Production)
in Saudi Arabia (Main Countries) as of May 1996 (end of 1415 AH): Industrial
Licenses Issued by the Kingdom of Saudi Arabia and Capital Operating Base
Country No. Amount (US$) No. Amount
(US$)
USA 79 5,222 44 2,885
UK 31 218 15 53
Germany 24 87 3 50
France 10 59 3 23
Japan 4 1,505
4 1,505
Source: JCCME’s
report.
By way of preface it should be noted that
there also exists the Arabian Oil Company Ltd, which is engaged in oil
production and whose operational base has been located at al-Khafji since 1960.
Besides this company, there are four industrial joint-venture projects,
namely: (1) the National Pipe Company (NPC), producing spiral steel pipes in
Dammam; (2) the Saudi Methanol Company (AR-RAZI) for the manufacture of
petrochemicals in al-Jubail; (3) the Eastern Petrochemical Company (SHARQ), also
in al-Jubail; and (4) the Saudi Factory for Electrical Appliances Company Ltd
(SELECT) for the assembly of air-conditioning units in Jeddah. Details are
shown in the Appendix to this chapter (Table A1).
Among these four projects and alongside the Arabian Oil Company, in
what the Japanese regard as two existing projects that symbolize bilateral
economic co-operation, stand two joint-venture projects with Saudi Arabic Basic
Industrial Co-operation (SABIC) in the field of petrochemicals. One of these is
AR-RAZI, which is producing chemical-grade methanol, and the other is SHARQ,
which produces ethylene glycol and linear low-density polyethylene. Both of
these have been operating continuously since the 1980s in Al-Jubail Industrial
City.
AR-RAZI has sustained a high level of production since it commenced
commercial production with a production capacity of 600,000 tonnes per annum in
July 1983; and at the beginning of 1992, it achieved a doubling of its initial
volume of output. And the plans called for output to reach 3.5 times the
original level by summer 1997. As a result, its production capacity will be
among the largest of any company in the world for a plant producing a single
product. As regards the large amount of US$267 million needed for the third phase
of expansion, it has already been decided that the Export–Import Bank of Japan,
a public financial institution, will extend loans for as much as US$160 million
– over half the amount required. In view of this, the project has become a fine
example of a joint public and private economic co-operation project with Saudi
Arabia.