Plaque:     16 SAUDI–JAPANESE RELATIONS FROM THE VIEWPOINT OF INVESTMENT PROMOTION ACTIVITIES FOR JAPANESE INVESTMENT IN SAUDI ARABIA       Mr Tayeb El-Mokhtar H. Muto   Senior Co-ordinator, Co-ordination  and Planning Department, Japan              

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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.