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 Federation of Economic Organizations (Keidanren)

§ The Japan Chamber of Commerce and Industry (JCCI)

• Japan Association of Corporate Executives (Keizai Doyukai)
• Japan Foreign Trade Council, Inc. (Nihon Boekikai)
• Japan External Trade Organization (JETRO)
• Japan International Development Organization Ltd (JAIDO)
• Japan Co-operation Centre for the Middle East (JCCME)

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.

Also, it has been decided that AR-RAZI will participate in a joint venture consisting of several companies to produce ammonia by utilizing natural gas produced as a by-product in the process of oil-production. Here, we observe a case where a joint venture between Saudi and Japanese companies is further expanding its area of business in the Kingdom of Saudi Arabia.

SHARQ has also been growing since it commenced commercial production in January 1987. In the period from 1993 through to 1994 the company completed the construction of its second-phase plant so as to double its original scale, and commenced successful operation in January last year. Obviously, this has made SHARQ the world’s most prominent supplier of ethylene glycol and linear low-density polyethylene, with annual production capacities of 900,000 tonnes and 450,000 tonnes respectively. Furthermore, the firm is currently discussing the detailed plans for a third phase of plant expansion.

These two projects are the role models for joint public and private economic co-operation projects between Japan and Saudi Arabia. Coupled with the transfer of advanced Japanese technologies, the ongoing expansion of these two joint venture projects has led to the development of the Saudi Arabian petrochemical industry, and has helped to ensure that the economic relationship and friendship between the two countries should become even more unshakable in the future.

The Activities of the OPJI since its Inception

As was stated above, the OPJI’s primary function is to uncover, evaluate, and bring to fruition promising joint ventures and investment projects. The Task Force is concentrating its efforts on these tasks. It meets more or less every other week to identify, evaluate, and select prospective projects.

Once an investment opportunity has passed the Task Force’s selection process, the OPJI finds some candidate firms to act as the Japanese investment partners, explains the nature of such opportunities to them, and even seeks to persuade them to undertake investment in such projects.

If a Japanese company indicates its interest, the OPJI undertakes the following steps to see the project through to successful implementation:

§ The OPJI will send a team to Saudi Arabia to work out the details with Saudi partners.

§ And if the project requires further study prior to implementation, the OPJI may undertake a feasibility study.

Thus the Task force provides its full support to these candidate companies as they work through these steps in the investment process.

Identification of Candidate Projects First, let us examine OPJI’s methods of identifying the projects to be worked on.

The OPJI identifies the projects in three different manners:

1. Projects are brought to the Riyadh JETRO office directly by Saudi firms.

2. Projects are brought to OPJI through Saudi governmental offices, such as the foreign investment opportunities listed by the Saudi Ministry of Industry and Electricity or by SABIC, etc.

3. Projects are identified by OPJI members of their own accord.

Since its opening in October 1994, the Riyadh JETRO office has received a growing volume of inquiries from Saudi firms. Up to the end of 1995, some thirty inquiries about the possibilities of establishing joint ventures and investment projects had been directly brought to the Riyadh JETRO office.

Additionally, there were around 150 projects listed in the volume entitled ‘Industrial Opportunities in Saudi Arabia’, issued twice a year by the Ministry of Industry and Electricity up to 1996. Of these, OPJI had selected on its own criteria for priority treatment 30 candidate projects that were likely to prove attractive to Japanese concerns.

Also, the Task Force is working of its own accord to identify and develop projects that Japanese firms might find promising in a wide range of industries and fields. The Task Force has so far identified 20 candidate projects, which it has drawn to the attention of Japanese businesses for their appraisal.

Project Assessment and Selection and Match-Making In this manner, OPJI had come up with a total of some 80 candidate projects up to the end of 1995.

Contacts with Potential Japanese Investors

A Task Force from OPJI has assessed and selected projects using a variety of criteria, and have already contacted over 300 Japanese companies that either possess sophisticated technologies and are strategically oriented towards and strongly motivated towards doing business abroad, or have experience and good track records in joint ventures and technology transfer in Southeast Asian countries and elsewhere overseas.

In some cases, depending on the type of project, the Task Force of OPJI sought the co-operation of business organizations from the relevant fields of industry. These companies are not limited to large companies, but also include small and medium-sized businesses. The Task Force always bears it in mind that the Task Force should directly approach the persons who are actually responsible for making the decisions to make investments. The Task Force undertakes all this to help them carry out their own internal assessments quickly and efficiently.

Investment Missions

After this process of assessment, selection, and match-making, if a Japanese firm has indicated interest in a project, the OPJI invites responsible persons from such companies to join small missions to Saudi Arabia to work out the details with Saudi firms.

The first mission of OPJI was sent out in mid-July 1995. This included representatives from three companies. Of the projects that the Task Force of OPJI explored, one that was realized took the form of the processing of fisheries products in Saudi Arabia under the name of the Red Sea Prawn Company Ltd. A summary of this project is shown in the Appendix to this chapter (Table: A-1). A second one, which was a ceramic-producing company, negotiated with its Saudi counterparts on the conditions for the project. After a series of discussions and the overcoming of many obstacles by both sides this project was also realized in the form of a project of Refractory Manufacturing. The remaining firm, which was interested in an agricultural development scheme among other projects, continues to perform internal feasibility studies in a wider range of fields and formats in preparation for the next step.

The second mission, with representatives from two companies, was sent out at the end of October 1995 to examine investment opportunities in the fields of textiles and the fabrication of construction materials. They completed their schedule of discussions with their Saudi counterparts and left Saudi Arabia with discussions still continuing.

At the beginning of December 1995 a delegation consisting of 30 member companies of the Japan Chamber of Commerce and Industry paid its first visit to Saudi Arabia and some other GCC countries. The delegation was headed by Mr Minoru Murofushi, who was then President of the Itochu Corporation and an active member of the OPJI Executive Committee. The delegation, which comprised representatives of a variety of industries, large and small, from petrochemicals to consumer products, attempted to strengthen business relations further as well as to seek future investment opportunities, particularly in new areas, including unique consumer markets.

Feasibility Studies

The fisheries product processing company that took part in the July 1995 mission and indicated that it was favourably disposed towards a joint venture then sent its own experts to Saudi Arabia for about two weeks at the end of August 1995 for a feasibility study. The company finally decided to go ahead with the investment on the basis of the results of the study, and the result was the foundation of the Red Sea Prawn Company, as was mentioned above.

The OPJI expects that several other companies that participated in the investment missions will follow up with feasibility studies, since the OPJI is aware that many of them were feeling the need to study their projects in greater detail.

JAIDO is also currently undertaking feasibility studies in connection with other several joint ventures and investment projects.

Summary :

This, then, has been a description of how the OPJI has functioned in the process of realizing investment projects since its establishment in May 1995.

During the year 1995, the Task Force of OPJI were moving ahead on about thirty priority projects, ten of these being projects promoted by the Riyadh JETRO Office, five being selected from the Ministry of Industry and Electricity’s list, and fifteen being independently identified by the OPJI Task Force.

On the other hand, the Task Force of OPJI do wish to remind Saudi society that there have been a significant number of cases where they have not been able to bring the parties together, or where the Japanese company has given up its former investment plans for any of a number of reasons.

What Japanese Companies May Wish To See

Many Japanese firms, in the process of their in-house assessments, have pointed out to members of the OPJI Task Force that they either already had their hands full with joint venture projects in Southeast Asia or China, or had basic problems with the profitability or the size of the market for the ventures. As a part of the OPJI, in its effort to attract direct investment to Saudi Arabia and to see joint venture projects through to reality, the Task Force would however continue to put the case to these companies for the importance and future potential of Middle East markets.

At the same time, in the course of the Task Force’s work of matching up potential partners and sizing up favourable investment opportunities, the OPJI has had drawn to its attention a number of specific aspects of working practice that joint-venture-seeking corporations may wish to see improved on the Saudi side.

Updating of Investment Information

As was mentioned earlier, the Task Force utilized the Saudi Ministry of Industry and Electricity’s list of investment opportunities as a source of information for identifying candidate projects. In the process of contacting Saudi firms on the list, however, it was found that some of the listed projects were already up and running, while others had temporarily been suspended.

In 1996, when this subject was raised at the 9th Japanese–Saudi Businessmen’s Dialogue held in Tokyo in October, it emerged that the Ministry of Industry and Electricity had now simply stopped issuing the list, which had always consisted of un-updated investment information.

For the smooth and efficient promotion of investment projects, the Task Force could wish that the list might be updated on a more frequent and regular basis. In addition, the Task Force would even like to receive, if possible, information on as yet formally unannounced projects, if there were a chance such projects might show promising possibilities for joint-venture development to Japanese business. The Task Force of OPJI believes that the Riyadh office of JETRO might play a very useful role in achieving this end.

Publicity for Investment Promotion

Further, the OPJI wishes that the establishment of a Saudi agency in Japan might be considered as a possibility for the promotion of direct investment, as has already happened in the United States and the European countries. The OPJI believes it would be very helpful if such a Saudi channel could be established in Japan, and if Saudi Arabia could promptly provide Japanese firms through such a channel with the latest information, pamphlets or other reference materials issued by investment promotion agencies such as the Saudi Chamber of Commerce and Industry and the Saudi Consulting House, as well as conducting an active publicity campaign utilizing investment seminars and media within Japan.

This subject has been raised every year at the Japanese–Saudi Businessmen’s Dialogues. On the other hand, Saudi private business firms have started to have their own offices or representative offices to collect business information in Japan, as in the case of the Al-Dahlawi group, the Mohammed Jamil group and others.

Availability of Corporate Information

When the Task Force try to find Japanese partners for investment projects, the Task Force receive from Japanese companies many inquiries about the corporate information necessary for selecting potential partners – about who the stockholders are and what financial shape the company is in, for instance. For this reason, it would be very useful, for example, if services could be provided through the information centres already set up in the Saudi Arabian Chamber of Commerce and Industry that would facilitate fast and easy access to such corporate data.

Flexibility in Consular Affairs

It appears that visa and customs procedures have been greatly improved from what they used to be, thanks to the efforts of the Saudi authorities. The OPJI would hope, however, that the procedures of issuing entry visas could be simplified, since the OPJI expects that efforts to promote investments are likely to call for frequent visits by potential Japanese investors to Saudi Arabia. The OPJI wishes the Saudi authorities to consider the possibility of issuing six-month multiple-entry visas, which would also be of much help for the same reason.

Arrangements in this field have been much improved by the efforts of the Saudi Ambassador to Japan; however, there still seems to be a need for much better arrangements for multiple-entry visas, whose current utilization period is limited to 3 months.

The JCCME’s Budget for Investment Promotion Activities

To foster direct investment by, and to accelerate the establishment of joint ventures involving Japanese corporations in the Middle East oil-producing countries, and especially in Saudi Arabia, the Japanese government has made budgetary provisions for sending investment missions and for establishing programmes in support of feasibility studies for investment projects. It has also allocated funds for programmes to dispatch Japanese technical experts at start-up time, and to support technology transfers in joint ventures in other ways; funds for human resources development programmes to bring local technicians and engineers to Japan to acquire Japanese high-tech industrial skills and know-how; and funds for publicity programmes within Japan.

In fiscal 1993, the first subsidy, of about $1 million, was allocated by the Ministry of International Trade and Industry for JCCME’s activities for investment promotion to GCC countries. Since then the funds made available to us have increased dramatically, doubling to $2 millions in fiscal 1994 and nearly $3 millions in fiscal 1995, $4 million for the year 1996, $4.8 million for the year 1997 and $5.5 for the year 1998.

The budget for OPJI’s programmes outlined here forms part of the overall JCCME budget. The Japanese government is now working in the direction of expanding these programmes and their fund allocations. This can be seen as a strong indication that Japan’s public and private sectors are working closely together to promote investment in Saudi Arabia.

Mutual Co-operation :

Finally, it is important that Japan’s success in achieving economic growth has been due to the steady development of small and medium-sized enterprises, and could not have been realized by the giant corporations.

For most Japanese corporations, their greatest concern about the realization of joint- venture projects is worrying to what extent their counterparts will continue to make efforts together with their Japanese partners during the long and sometimes arduous journey to success. Working together on a project through all its ups and downs is not simply a matter of providing capital or technical know-how. Both sides must patiently take equal responsibility over a long period: ‘Rome was not built in a day.’ I believe that this spirit is and will be indispensable for co-operation between the private sectors in the two countries during the twenty-first century.

Appendix to Chapter 16: Data on Saudi–Japanese

Trade and Investment

Table 1: Details of Trade between Saudi Arabia and Japan in 1997 (Unit: US$ million)

Goods	Value	Goods	Value
Automobile	687	Crude Oil	8,763
Truck	475	Gas	1,686
Iron and Steel	271	Oil Products	1,134
Tyres	137	Organic Chemistry Products	280
Bus	114	Plastic Goods	29
Synthetic Fibres	105	Copper	14
Automobile Parts	94	Aluminium	11
Pumps	81

Table 2: Trade Balance between Saudi Arabia and Japan (Unit: US$ million)

Year	Exports from Japan	Imports from Saudi Arabia	Balance
1995	2,702	9,716	–7,014
1996	3,018	10,697	–7,679
1997	3,087	11,961	–8,874

Table 3: Japanese Investments in Saudi Arabia by category from 1995 to 1996 (Unit: 100 million Yen)

Category	Number	Amount
Chemical	4	614.4
Steel & Other Metals	6	84.7
Construction	39	85.4
Electricity	3	6.8
Transport Services	5	5.5
Finance & Insurance	2	4.8
Service Industry	10	3.6
Others	35	244.4
Total	104	1,049.6

Source: The World 1998 (1998 Annual Report of Countries Information for the World) arranged and issued by JETRO (the Japan External Trade Organization).

Note: JAIDO was established in 1989 by the initiative of the Japan Federation of Economic Organizations (Keidanren), with the support of the Japanese government. JAIDO’s role is to promote investments from Japan and to set up joint ventures in developing countries that are able to create employment opportunities and to earn foreign currency through exporting, so as to stimulate the economic development of the countries as a result. In 1996, JAIDO intensified its activities for the GCC countries by establishing GCC-J, with its own specific activities.

Table A1: Japanese Investment in Industrial Projects in Saudi Arabia as of 30 October 1998

Project:

§ Petrochemical: Ethylene glycol & Linear low-density polyethylene

§ JV Company Name: Eastern Petrochemical Co. (known as SHARQ)

§ JV Agreement: 1980s

§ JVC Establishment: Al-Jubail Industrial City; Commercial operation started in January 1987.

§ Total Project Cost:

· Capital Amount: SR 1,890,000,000

· Saudi Partner: SABIC: 50.0%

· Japanese Partners: SPDC (Consortium of Japanese private-sector firms): 50.0%

· Remarks: Phase 3 expansion should have been completed by mid-2000; operation was due to start in July 2000.

Project:

§ Petrochemical: Chemical-grade methanol

§ JV Company Name: Saudi Methanol Co. (known as AR-RAZI)

§ JV Agreement: 1980s

§ JVC Establishment: Al-Jubail Industrial City; Commercial operation started in February 1983.

§ Total Project Cost:

· Capital Amount: SR 259,000,000

· Saudi Partners: SABIC: 50.0%

· Japanese Partner: Japan–Saudi Methanol Co. (Consortium of Japanese private-sector firms): 50.0%

· Remarks: Phase 3 expansion had completed; operation started in October 1997.

Project:

§ Spiral steel pipe producing

§ JV Company Name: National Pipe Co. Ltd. (NPC)

§ JV Agreement: 1970s

§ JVC Establishment: Al-Dammam; Commercial operation started in December 1980.

§ Total Project Cost:

· Capital Amount: SR 50,000,000

· Saudi Partner: T. Alireza & others: 51.0%

· Japanese Partners: Sumitomo Metal Co., Sumitomo Corporation: 49.0%

Project:

§ Air-conditioning assembly and production

§ JV Company Name: Saudi Factory for Electrical Appliances Co., Ltd. (SELECT)

§ JV Agreement: 1980s

§ JVC Establishment: Jeddah; Commercial operation started in June 1988.

§ Total Project Cost:

§ Capital Amount: SR 11,000,000

· Saudi Partners: Abbar: 75.0%

· Japanese Partners: Mitsubishi Heavy Ind., Chatani Industry: 25.0%

Project:

§ Pharmaceutical

§ JV Company Name: Saudi Arabia–Japanese Pharmaceutical Company, Ltd. (SAJAPHCO)

§ JV Agreement: 22 March 1996

§ JVC Establishment: 7 July 1996

§ Total Project Cost: SR 185,000,000 (US$ 50,000,000)

§ Capital Amount: SR 72,000,000 (US$ 19,200,000)

· Saudi Partner: Farouk M & Tamer Co.: 51.0%

· Japanese Partners: Sankyo, Yamanouchi, Marubeni, JAIDO: 49.0%

· Remarks: JVA announced at 9th Japanese–Saudi Businessmen’s Dialogue, 25 October 1996.

Project:

§ Prawn Aquaculture and Processing

§ JV Company Name: Red Sea Prawn Company, Ltd

§ JV Agreement: 30 May 1996

§ JVC Establishment: Transferred and registered an existing aquaculture firm in the Kingdom of Saudi Arabia.

§ Total Project Cost: SR 48,700,000 (US$ 13,000,000)

§ Capital Amount: SR 16,500,000 (US$ 4,400,000)

· Saudi Partner: International Aquaculture Co.: 80.0%

· Japanese Partners: Kohyo, AID-J: 20.0%

· Remarks: JVA announced at the 9th Japanese–Saudi Businessmen’s Dialogue, 25 October 1996.

Project:

§ Manufacturing of Polyester Fabrics for Thobe and Abaya

§ JV Company Name: Saudi Japanese Textile Company, Ltd

§ JV Agreement: 27 February 1998

§ JVC Establishment: 3 August 1998

§ Total Project Cost: SR 158,000,000 (US$ 42,000,000)

§ Capital Amount: SR 60,000,000 (US$ 16,000,000)

· Saudi Partner: Al-Ahsa Development Co.: 76.5%

· Japanese Partners: Marubeni, Seiren, AID-J, JAIDO, GCC-J: 23.5%

· Remarks: JVA announced at the 10th Japanese–Saudi Businessmen’s Dialogue on 22 November 1997.

Project:

§ Refractory Manufacturing

§ JV Company Name: United Company for Refractory Products

§ JV Agreement: 29 May 1997

§ JVC Establishment: yet to be established.

§ Total Project Cost: SR 136,000,000 (US$ 36,000,000)

§ Capital Amount: SR 34,000,000 (US$ 9,000,000)

· Saudi Partner: Al-Murjan Trading & Industrial Co.: 80.0%

· Japanese Partners: Mino Yogyo, AID-J, Marubeni: 20.0%

· Remarks: JVA to be announced at the 11th Japanese–Saudi Businessmen’s Dialogue on 5 November 1998.

Project:

§ Printing ink production

§ JV Company Name: yet to be established.

§ JV Agreement: 4 November 1998

§ JVC Establishment: yet to be established.

§ Total Project Cost:

§ Capital Amount:

· Saudi Partner: Al-Murjan Trading & Industrial Co.: 80.0%

· Japanese Partners: T & K Toka, AID-J: 20.0%

· Remarks: JVA to be announced at the 11th Japanese–Saudi Businessmen’s Dialogue on 5 November 1998.

Table A2: Japanese Investments in the Kingdom of Saudi Arabia by Category from 1951 to 1996 (Unit:_100 million Yen)

Category Number Amount

Chemical 4 614.4

Steel & other metals 6 84.7

Construction 39 85.4

Electricity 3 6.8

Transport Service 5 5.5

Finance & Insurance 2 4.8

Service Industry 10 3.6

Others 35 244.4

Total 104 1,049.6

Source: Japan External Trade Organization.

Table A3: Japanese Investment in the Kingdom of Saudi Arabia

Japanese Investment in the Kingdom of Saudi Arabia (excluding the Saudi—Kuwaiti ex-neutral zone). Unit: million Yen.

Japanese Investment in the Saudi—Kuwaiti ex-neutral zone of the Kingdom of Saudi Arabia. Unit: million Yen.

Fiscal Year	No.	Amount	Fiscal Year	No.	Amount
1951–1986	98	89,427	1951–1986	4	382,798
1987	1	38	1987	0	8,197
1988	2	1,138	1988	0	2,592
1989	0	0	1989	0	4,126
1990	0	0	1990	0	3,644
1991	1	40	1991	0	3,510
1992	0	13,087	1992	0	12,537
1993	0	0	1993	0	2,289
1994	0	118	1994	0	9,452
1995	0	0	1995	0	9,282
1996	2	1,109	1996	0	11,470
1997	2	3,269	1997	0	12,913
1998	n.a.		1998	n.a.
TOTAL	106	108,226*			462,810**

* Industrial and non-industrial investments

** Half portion of Neutral Zone

Source: Ministry of Finance, Japan ’98 Statistics.

Table A4: Balance of Trade Between Japan and Saudi Arabia

(Unit: US$ 1,000)

Calendar Year	Japanese Exports	Japanese Imports	Balance
1987	3,239,423	7,311,060	–4,071,637
1988	3,142,198	6,348,245	–3,206,047
1989	2,763,195	7,048,308	–4,285,113
1990	3,341,215	10,461,554	–7,120,339
1991	3,893,162	10,080,950	–6,187,788
1992	4,841,386	10,190,698	–5,349,312
1993	4,087,198	8,887,053	–4,799,855
1994	3,246,505	8,384,518	–5,138,013
1995	2,702,405	9,715,679	–7,013,274
1996	3,007,269	10,652,751	–7,645,482
1997	3,071,632	11,888,989	–8,817,357
1998*	3,500,149	6,572,632	–3,072,483

* 11 months (Jan. to Nov. 1998).

Source: Trade Statistics (MITI) (1998’s White Paper on International Trade Japan).

Table A5.1: Details of Trade between Saudi Arabia and Japan in 1997: Imports of Japan from the Kingdom of Saudi Arabia

(Unit: US$ 1,000)

Commodity	Units of Qty	Qty	+ % p.a.	Value	US Dollar + % p.a.	Basis Share %
Total Imports				11,888,989	111.6	100.0
Raw Materials				27,609	71.5	0.2
Non-ferrous Metal Scraps	MT	14,621	64.7	25,270	69.7	0.2
Mineral Fuels				11,512,712	111.7	96.8
Crude & Raw Oils	KKL	69,149	112.5	8,807,986	114.2	74.1
Petroleum Products				1,029,022	90.6	8.7
Petroleum Spirits	KKL	6,060	92.3	917,070	106.6	7.7
Kerosene (incl. Jet Engine Use)	KKL	583	43.8	111,952	43.5	0.9
Liquefied Petroleum Gas	KMT	6,295	101.2	1,675,704	115.4	14.1
Products				345,140	111.1	2.9
Chemical Goods				311,883	114.4	2.6
Organic Compounds	MT	1,021,266	93.3	283,389	115.8	2.4
Plastics	MT	45,222	100.7	28,448	103.0	0.2
Reimported Commodities & Transactions Not Classified According to Kind				25,702	76.1	0.2

Key: MT: metric tons; KKL: thousand kilolitres; TH: thousand pieces, thousand sheets, etc.; KSM: thousand square metres; No.: pieces, sheets, amount, etc.; KMT: thousand metric tons; + % p.a.: percentage increase on preceding year.

Source: Trade Statistics (MITI) (1998’s White Paper on International Trade Japan).

Table A5.2: Details of Trade between Saudi Arabia and Japan in 1997: Exports of Japan to the Kingdom of Saudi Arabia (Unit: US$ 1,000) (cont. on next page)