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German-Saudi Business Magazine April 2013

Industry ofSaudi Arabia

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German - Saudi Business Magazine

Andreas HergenrötherDelegate of GermanIndustry & Commercefor Saudi Arabia and Yemen

Editorial

Andreas Hergenröther

Dear readers,

In 2012 German exports to Saudi-Arabia increased by 20 % to more than 10.5 billion US-Dollars. During the same period the export volume from Saudi Arabia to Germany increased by 71 % reaching 2.3 billion US-Dollars. In the European context German economy has maintained its leading position as a supplier for KSA and the MENA region, followed by Italy, France, the United Kingdomand Spain.

The growth of the Saudi Arabian economy which in 2012 was about 7.1% is supported by massive investments. In early 2011, Saudi Arabia has overtaken the United Arab Emirates (UAE) as the largest project market in the Gulf region and in the meantime significantly increased its lead. According to the Gulf Project Index the project volume in Saudi Arabia currently stands at almost 900 billion U.S. dollars. Over a quarter of all projects in the Gulf are being planned in Saudi Arabia or have already been implemented. The Kingdom is therefore the most important market for German companies in the MENA region.

From 8th-12th of April 2013 the world’s leading trade fair Hannover Messe will once again attract large audiences and we are very delighted that this year the Kingdom of Saudi Arabia will be represented through an official Saudi Arabian pavilion covering 1000 square meters. The Saudi Arabia Pavilion is organized by the Ministry of Commerce & Industry of Saudi Arabia. The whole event is supported and coordinated by the German-Saudi Arabian Liaison Office for Economic Affairs (AHK Saudi Arabia) which is also the official representative of Hannover Messe in the kingdom. Besides the Ministry of Commerce & Industry and the government authorities SAGIA (Saudi Arabian General Investment Authority), MODON (Saudi Industrial Property Authority) and the National Industrial Clusters Development Program, major Saudi Arabian companieslike Sabic, E. A. Juffali and Brothers, Petro Rabigh, Xenel Group, TasneePetrochemicals Company and Al Fanar Group will exhibit at the trade fair. AHK Saudi Arabia is also co-organizing the Saudi Arabia Economic Forum, hosted by the Ministry of Commerce and Industry, with high ranking representatives of Saudi Arabian and German companies.

To create a better awareness of the high potential to develop German-Saudi Arabian business relations we would like to present in this current edition the portfolios of some of the major players of Saudi Arabian Industry.

1AHK Saudi Arabia - www.saudiarabien.ahk.de

Editorial

German-Saudi Business Relations

AHK Saudi Arabia

German Investments

HANNOVER MESSE 2013

Saudi Industries

SAGIA

MODON

National Industrial Clusters

Oil and Gas

Saudi Aramco

Petro Rabigh

Petrochemicals

TASNEE

Sipchem

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Contents

SAHARA Petrochemicals

Manufacturing

Al Rashed & Sons Group (RAR)

Alfanar

Mining

Ma’aden

Automotive

E. A. Juffali & Brothers

MAN

SMEs

The V-LINE Group

Public Procurement Law

AHK Services

Your contact persons at

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Design & Developed by:

In accordance with GESALOwww.fawazadvertising.com

Disclaimer:German–Saudi Business Magazine(GSBM), Issue April 2013

Editor-in-Chief Andreas Hergenröther

Head of Public RelationsChristian Engels

Responsible for PrintingAHK Saudi Arabia © Copyright GSBM 2013. All rights reserved.

No part of this magazine may be reproduced without GSBM’s written permission.The opinions expressed in GSBM do not necessarily reflect the views of the German Delegation of Industry and Commerce forSaudi Arabia and Yemen (AHK Saudi Arabia).GSBM is not responsible for the validity of contents in articles written by external authors.

AHK Saudi Arabia

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The Delegation of German Industry & Commerce for Saudi Arabia and Yemen (AHK Saudi Arabia) has been founded in 1978 by Royal decree under the name of German-Saudi Arabian Liaison Office for Economic Affairs (GESALO). AHK Saudi Arabia is part of the GermanChamber Network and the official German Foreign business promotion. With 120 offices worldwide AHKs offer their experience, connections and services to German and companies of their partner countries. With a staff of 20 employees, AHK Saudi Arabia supports Saudi and German companies with its services. AHKs are closely connected to theChambers of Industry and Commerce (IHKs) in Germany. Together, they represent in total 3.6 million companiesin Germany.

AHK Saudi Arabia is the official representative of German economy in Saudi Arabia. Besides this AHKs are service providers to companies under the brand “DEinternational” AHKs provide services to companies both from Germany and their host countries in order to support their foreign business activities.

HISTORY

4

The official representation of the German economy in Saudi Arabia


AHK Saudi Arabia

German-Saudi Business RelationsGerman-Saudi economic relations have a long tradition. German global players like Siemens or Mercedes-Benz have been active in the Kingdom for more than75 years. The transfer of know-how and technology has also been supported as an expression of political and economic partnership by representatives ofgovernment and economy of both countries. For instance the first President of the Federal Republic of Germany, H.E. Theodor Heuss, met with Saudi Arabia’s H.R.H. King Saud bin Abdulaziz during his term in office. German chancellorslike H.E. Helmut Schmidt or today’s chancellor H.E. Angela Merkel followed

These services include conducting market studies and providing sector information, matchmaking, business consulting, organi-zation and representation of trade shows, issuing business publications, legal information, medical treatment support and vocational training, etc.

AHK Saudi ArabiaMore than 30 years ofexperience

German-Saudi Arabian business relations follow a long tradition In 1978 the Joint German-Saudi Economic Committee composed by representatives of the German Ministry for Economics and the Saudi Ministry of Finance decided to establish a German foreign tradecommission in Saudi Arabia. On August 22nd 1978 was the inauguration of the first office for German–Saudi economic relations, which has been established by Royal Decree. The first years AHK Saudi Arabia shared the office with the German consulate in Riyadh since in 1985 the German embassy moved from Jeddah to Riyadh. First Delegate of German Industry and Commerce in Saudi Arabia

was Dr. Gerhard Fischer (1978-82), who had at that time just one employee his secretary. His successor Marc Landau (1982-86) shaped the name German Saudi Arabian Liaison Office for Economic Affairs and his short form GESALO. From the beginning the office was not just responsible for Saudi Arabia but also for the economic relations to Bahrain, Kuwait, Qatar and Yemen.

Delegate Dieter Mankowski (1986-1991) intensified the work of AHK Saudi Arabia in the Kingdom. As trade fairs are crucial instruments in foreign trade promotion and Germany is the world’s number one venue for organizing international trade fairs it was a logical step to found an own trade fair department.

EstablishingAHK-Services

His successor Dr. Rainer Herret (1991- 1998) put the focus on a second issue, which is of high importance for the bilateral economic relations: With the implementation of a legal department AHK Saudi Arabia was able to assist

German companies regarding legal questions like customs regulations, taxes and the legal framework of launching branches, founding a Joint Venture with a Saudi company or establishing a liaison office. Since then Saudi businessmen are able to get assistance in the visa process for Germany via the AHK office when they are to visit or exhibit on trade fairs or need to travel for business trips. AHK Saudi Arabia acts also as a mediator in cases of commercial disputes between German and Saudi business partners with the aim to solve disputes without harming the long term business relations. Under the lead of Michael Tockuss (1998-2001) AHK Saudi Arabia ameliorated its services for German companies in the region. Since then today’s longest tenured employee, Mohammed Faleel, is in charge for the promotion of business to business development. Due to his knowledge about the market and his connection to Saudi decision makers AHK Saudi Arabia was able to create an infrastructure to provide German companies services like marketinformation, address research, business partner research and the organization of business trips. In the time of Mr. Tockuss

a second branch in Jeddah has been opened to serve the companies based in the former capital. For delegate Manfred Rothgänger (2001-2005) the times were difficult as the Kingdom faced terrorist attacks against governmental institutions as well as foreigners in the country. The Jeddah office had to get closed againdue to the uncertain circumstances.Nevertheless Saudi Arabia recovered and paved its way to participate in the World Trade Organization (WTO), which can be seen as a great success. In the term in office of Delegate Gerd Doepner (2005- 2010) the boom in the United Arab Emirates and the foundation of the German Emirati Joint Council for Industry & Commerce (AHK UAE)led to restructuring the market. Since2009 German business relations with Bahrain, Kuwait and Qatar is organized by AHK UAE.

New Challenges:Andreas Hergenröther

Since October 2010 AndreasHergenröther is the current Delegate of German Industry and Commerce for

Saudi Arabia and Yemen. Under his lead the German-Saudi business relations tightened within one year even more and many projects are on the way deepening these relations. In December 2010 the first German-Saudi Arabia Desk has been established at the Bielefeld Chamber of Industry and Commerce. It functions as an information platform about Saudi Arabia for all German companies. Under the lead of Mr. Hergenröther more than 100 events in Germany and Saudi Arabia have been organized by AHK Saudi Arabia in order to promote German-Saudi business relations. With its services for German and Saudi companies AHK Saudi Arabia is in a key position for the bilateral economic relations. Every businessman, who is interested in doing business in Saudi Arabia or in Germany will find an individual concept of entering the market, promoting its business through trade fairs and find the perfect business partner from the other country.

suit and tried to express Germany’s close relation to Saudi Arabia. AHK Saudi Arabia has been established as a bridge between Germany and Saudi Arabia by Royal Decree in 1978 and in part of the foreign trade promotion system. The foreign trade promotion of Germany has a very unique structure. Beside the economic sections of the embassies and Germany Trade and Invest the AHK network, consisting of theChambers and Delegations of Industry and Commerce abroad, is officially assigned to promote German economic relations outside of Germany. Withthe additional support of the German

Federal Ministry of Economics and Technology this makes AHKs the official representation of German economy abroad.

The Delegation of German Industry & Commerce for Saudi Arabia and Yemen (AHK Saudi Arabia) has been founded in 1978 by Royal decree under the name of German-Saudi Arabian Liaison Office for Economic Affairs (GESALO). AHK Saudi Arabia is part of the GermanChamber Network and the official German Foreign business promotion. With 120 offices worldwide AHKs offer their experience, connections and services to German and companies of their partner countries. With a staff of 20 employees, AHK Saudi Arabia supports Saudi and German companies with its services. AHKs are closely connected to theChambers of Industry and Commerce (IHKs) in Germany. Together, they represent in total 3.6 million companiesin Germany.

AHK Saudi Arabia is the official representative of German economy in Saudi Arabia. Besides this AHKs are service providers to companies under the brand “DEinternational” AHKs provide services to companies both from Germany and their host countries in order to support their foreign business activities.

HISTORY

5


These services include conducting market studies and providing sector information, matchmaking, business consulting, organi-zation and representation of trade shows, issuing business publications, legal information, medical treatment support and vocational training, etc.

AHK Saudi ArabiaMore than 30 years ofexperience

German-Saudi Arabian business relations follow a long tradition In 1978 the Joint German-Saudi Economic Committee composed by representatives of the German Ministry for Economics and the Saudi Ministry of Finance decided to establish a German foreign tradecommission in Saudi Arabia. On August 22nd 1978 was the inauguration of the first office for German–Saudi economic relations, which has been established by Royal Decree. The first years AHK Saudi Arabia shared the office with the German consulate in Riyadh since in 1985 the German embassy moved from Jeddah to Riyadh. First Delegate of German Industry and Commerce in Saudi Arabia

was Dr. Gerhard Fischer (1978-82), who had at that time just one employee his secretary. His successor Marc Landau (1982-86) shaped the name German Saudi Arabian Liaison Office for Economic Affairs and his short form GESALO. From the beginning the office was not just responsible for Saudi Arabia but also for the economic relations to Bahrain, Kuwait, Qatar and Yemen.

Delegate Dieter Mankowski (1986-1991) intensified the work of AHK Saudi Arabia in the Kingdom. As trade fairs are crucial instruments in foreign trade promotion and Germany is the world’s number one venue for organizing international trade fairs it was a logical step to found an own trade fair department.

EstablishingAHK-Services

His successor Dr. Rainer Herret (1991- 1998) put the focus on a second issue, which is of high importance for the bilateral economic relations: With the implementation of a legal department AHK Saudi Arabia was able to assist

German companies regarding legal questions like customs regulations, taxes and the legal framework of launching branches, founding a Joint Venture with a Saudi company or establishing a liaison office. Since then Saudi businessmen are able to get assistance in the visa process for Germany via the AHK office when they are to visit or exhibit on trade fairs or need to travel for business trips. AHK Saudi Arabia acts also as a mediator in cases of commercial disputes between German and Saudi business partners with the aim to solve disputes without harming the long term business relations. Under the lead of Michael Tockuss (1998-2001) AHK Saudi Arabia ameliorated its services for German companies in the region. Since then today’s longest tenured employee, Mohammed Faleel, is in charge for the promotion of business to business development. Due to his knowledge about the market and his connection to Saudi decision makers AHK Saudi Arabia was able to create an infrastructure to provide German companies services like marketinformation, address research, business partner research and the organization of business trips. In the time of Mr. Tockuss

a second branch in Jeddah has been opened to serve the companies based in the former capital. For delegate Manfred Rothgänger (2001-2005) the times were difficult as the Kingdom faced terrorist attacks against governmental institutions as well as foreigners in the country. The Jeddah office had to get closed againdue to the uncertain circumstances.Nevertheless Saudi Arabia recovered and paved its way to participate in the World Trade Organization (WTO), which can be seen as a great success. In the term in office of Delegate Gerd Doepner (2005- 2010) the boom in the United Arab Emirates and the foundation of the German Emirati Joint Council for Industry & Commerce (AHK UAE)led to restructuring the market. Since2009 German business relations with Bahrain, Kuwait and Qatar is organized by AHK UAE.

New Challenges:Andreas Hergenröther

Since October 2010 AndreasHergenröther is the current Delegate of German Industry and Commerce for

Saudi Arabia and Yemen. Under his lead the German-Saudi business relations tightened within one year even more and many projects are on the way deepening these relations. In December 2010 the first German-Saudi Arabia Desk has been established at the Bielefeld Chamber of Industry and Commerce. It functions as an information platform about Saudi Arabia for all German companies. Under the lead of Mr. Hergenröther more than 100 events in Germany and Saudi Arabia have been organized by AHK Saudi Arabia in order to promote German-Saudi business relations. With its services for German and Saudi companies AHK Saudi Arabia is in a key position for the bilateral economic relations. Every businessman, who is interested in doing business in Saudi Arabia or in Germany will find an individual concept of entering the market, promoting its business through trade fairs and find the perfect business partner from the other country.

AHK Saudi Arabia - www.saudiarabien.ahk.de

Saudi Arabia has been focusing more and more on promoting transfer of know-how and technology to diversify its industrial landscape outside the hydrocarbon sector. The government needs strong partners for sustainable long term business relations. German economy can be a major ally in this process.

“Made in Germany” is renowned around the world for its attributes of premium quality, state of the art technology and know-how. The latter, know-how takes a pivotal role in the success story that “made in Germany” achieved and it is here that

German Investments

6


the German industry is a strong partner for many industries and regions, helping spread it to local production sites.As the world’s second largest exporterwith an export volume of 1.1 trillion Euros, the German economy isrecognized worldwide for highquality products and services andas a guarantee for sustainable and fair business. Know-how is fundamental for the development of economies and currently there are various German investments promoting technology and know how transfer to the Kingdom of Saudi Arabia.

German enterprises have successfully contributed to the economic development in Saudi Arabia by investing, training Saudi Arabian employees and transferring technology and know-how. Until 2010 the total volume of FDI (Foreign DirectInvestments) Stocks was 170,450 Mio. USD. Germany is ranked on 7th rank with a total FDI volume of 8,178 Mio. USD and regarding the EU-investors in KSA on the second place.

For example German companies like Siemens, Mercedes, Linde, Evonik or Henkel are well known in Saudi Arabia but

also small and medium sized companies (SME) like Bischof & Klein, V-Line or Zeppelin are successful investors. In 2012 Siemens took the next step towards a massive expansion of its activities in Saudi Arabia, breaking ground on a landmark manufacturing facility for gas turbines and compressors. Planned for completion in late 2013, the center will create jobopportunities for young Saudis, serving as a knowledge transfer hub for new Siemens technology and supporting the country’s industrialization drive. Another example is DHL with more than 1,700 employees in Saudi Arabia and 48 service point facilities which illustrates its commitment toinnovation, service excellence and.providing customers in Saudi Arabia with superior logistics solutions. Another

example is Zeppelin Systems Gulf Co. which has established a state of the art fabrication facility in Saudi Arabia, being the first and only facility presently available in the whole Middle East to work as a local partner to the industry. For over ten years now, the successful joint venture undertaken by German family-owned company Bischof & Klein and three Saudi partners have been producing FFSpackaging solutions on the basis of co-extruded films as well as stretch hood and shrink films. The plant in Dammam has a total output of almost 24,000 metric tons. Evonik Industries and Saudi Acrylic Acid Company (SAAC) have established a joint venture called Saudi Acrylic Polymers Company (SAPCo) for the production of superabsorbents. SAAC is a joint venture

of the Saudi companies National Industri-alization Company (Tasnee) and Sahara Petrochemicals. The production facility with an annual capacity of 80,000 metric tons is scheduled to begin production in late 2013. The total investment will be in the triple-digit million Euro range. Other major investments in the automotive sector were made by the successful joint ventures of Mercedes with Juffali and MAN with Xenel Group assembling trucks in Jeddah.

By creating jobs and interacting with local enterprises these companies make acontribution to the positive development of the Saudi Arabian economy for years. The German Delegation of German Industry and Commerce (AHK Saudi Arabia) is officially charged to promote German-Saudi business relations. As the official representation of German economy in Saudi Arabia we assist Saudi and German companies regarding their investments and business in Saudi Arabia and Germany.

For more information please contact:

German Investments andTransfer of Technologyin Saudi Arabia

Saudi Arabia has been focusing more and more on promoting transfer of know-how and technology to diversify its industrial landscape outside the hydrocarbon sector. The government needs strong partners for sustainable long term business relations. German economy can be a major ally in this process.

“Made in Germany” is renowned around the world for its attributes of premium quality, state of the art technology and know-how. The latter, know-how takes a pivotal role in the success story that “made in Germany” achieved and it is here that

German Investments

7


the German industry is a strong partner for many industries and regions, helping spread it to local production sites.As the world’s second largest exporterwith an export volume of 1.1 trillion Euros, the German economy isrecognized worldwide for highquality products and services andas a guarantee for sustainable and fair business. Know-how is fundamental for the development of economies and currently there are various German investments promoting technology and know how transfer to the Kingdom of Saudi Arabia.

German enterprises have successfully contributed to the economic development in Saudi Arabia by investing, training Saudi Arabian employees and transferring technology and know-how. Until 2010 the total volume of FDI (Foreign DirectInvestments) Stocks was 170,450 Mio. USD. Germany is ranked on 7th rank with a total FDI volume of 8,178 Mio. USD and regarding the EU-investors in KSA on the second place.

For example German companies like Siemens, Mercedes, Linde, Evonik or Henkel are well known in Saudi Arabia but

also small and medium sized companies (SME) like Bischof & Klein, V-Line or Zeppelin are successful investors. In 2012 Siemens took the next step towards a massive expansion of its activities in Saudi Arabia, breaking ground on a landmark manufacturing facility for gas turbines and compressors. Planned for completion in late 2013, the center will create jobopportunities for young Saudis, serving as a knowledge transfer hub for new Siemens technology and supporting the country’s industrialization drive. Another example is DHL with more than 1,700 employees in Saudi Arabia and 48 service point facilities which illustrates its commitment toinnovation, service excellence and.providing customers in Saudi Arabia with superior logistics solutions. Another

example is Zeppelin Systems Gulf Co. which has established a state of the art fabrication facility in Saudi Arabia, being the first and only facility presently available in the whole Middle East to work as a local partner to the industry. For over ten years now, the successful joint venture undertaken by German family-owned company Bischof & Klein and three Saudi partners have been producing FFSpackaging solutions on the basis of co-extruded films as well as stretch hood and shrink films. The plant in Dammam has a total output of almost 24,000 metric tons. Evonik Industries and Saudi Acrylic Acid Company (SAAC) have established a joint venture called Saudi Acrylic Polymers Company (SAPCo) for the production of superabsorbents. SAAC is a joint venture

of the Saudi companies National Industri-alization Company (Tasnee) and Sahara Petrochemicals. The production facility with an annual capacity of 80,000 metric tons is scheduled to begin production in late 2013. The total investment will be in the triple-digit million Euro range. Other major investments in the automotive sector were made by the successful joint ventures of Mercedes with Juffali and MAN with Xenel Group assembling trucks in Jeddah.

By creating jobs and interacting with local enterprises these companies make acontribution to the positive development of the Saudi Arabian economy for years. The German Delegation of German Industry and Commerce (AHK Saudi Arabia) is officially charged to promote German-Saudi business relations. As the official representation of German economy in Saudi Arabia we assist Saudi and German companies regarding their investments and business in Saudi Arabia and Germany.



Benjamin GodelDeputy Delegate ofthe German Economyfor Saudi Arabia and YemenPhone: 00966-1-4050201 Ext. 115Fax: 00966-1-4031232Email: [email protected]

8


The success of Hannover Messe 2012 confirms once again that the world’s most important technology show is a powerful driver of investment in new technology and automation. This year the Hannover Messe is taking place from 8th to 12th April 2013 under the banner of “Integrated Industry”. The lead theme signals the fair’s key focus on the growing integration of all areas of industry. “Machines, industrial equipment, work pieces and system components will soon be capable of exchanging data in real-time. This will significantly boost efficiency, safety and resource sustainability in production and logistics,” said Dr. Jochen Köckler, member of the Deutsche Messe Board of Management. This year it will place a strong emphasis on industrial automation and IT, energy and environ-mental technologies, power transmission and control, industrial subcontracting, manufacturing technologies, services and R&D.

Since 1947 Hannover Messe attracts large audiences and it is with particular joy that this year the Kingdom of Saudi Arabia will be represented through a high-profile participation, with a pavilion covering 1000 square meters. The Saudi Arabia Pavilion is organized by the Ministry of Commerce & Industry of Saudi Arabia.

The exhibitors include government authorities:

• MCI – Ministry of Commerce & Industry • SAGIA – Saudi Arabian General Investment Authority • MODON – Saudi Industrial Properties Authority • IC – Industrial Clusters development program

and representatives of the private sector:

• Tasnee • Petro Rabigh • SABIC

• XENEL Group • Al Juffali brothers

In addition, this year will also be the premier of the Saudi Arabia Economic Forum where 150 businessmen and decision-makers convene for bilateral talks. Several speeches will be held under the headings of investment opportunities in Saudi Arabia, business opportunities for transfer of technology and know-how and perspectives for Saudi Arabian-German business relations. The Forum will be moderated by the Delegate of German Industry and Commerce for Saudi Arabia, Mr. Andreas Hergenröther. High profile attendees include, H.E. Governor and Chairman of the Boardof Directors of SAGIA, AbdullatifA. Al-Othman and Director General of MODON and Saleh Al-Rasheed.Therefore, due to the high-ranking

HANNOVER MESSE 2013

Ameen Al-DalaliHead of Trade Fair & Export promotionPhone: 00-966-1-405 0201 Ext.109Fax: 00-966-1-403 1232Email: [email protected]

Hannover Messe 2013The world's largest fair and most important technology event

participation of the Kingdom, the Messe Hannover 2013 is set to be a vitalcornerstone of Saudi-German relations.

The German-Saudi Arabian Liaison Office for Economic Affairs (AHK Saudi Arabia) supported the Saudi Arabian participation on the Hannover Messe regarding the organization of thedelegation, business-to-business meetings and most importantly the organization of the Saudi Arabia Economic Forum in cooperation with the Ministry of Commerce & Industry. AHK Saudi Arabia is also the official representative of the Hannover Messe in the Kingdom.


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German - Saudi Business Magazine Saudi Industries

Although efforts have been made to diversify the economy, it remains heavily dependent on the oil and petrochemical sector and will continue to be so for the foreseeable future: while the private, non-oil sector's contribution to GDP has increased over the past decade to about 45 percent, oil and oil derivatives still account for nearly 90 percent of Saudi export earnings and budget revenues, and about 55 percent of GDP.

The Kingdom’s economy has weathered recent global economic turmoil better than most countries. Prior to the full effects of

Saudi Industries

the crisis, it experienced non-oil growth of 4.3 percent in 2008. Soaring oil revenues over recent years have created record budget and current account surpluses.

The growing economy has been matched by an increase in demand for imports, driven largely by massive construction projects. While Saudi Arabia has not emerged unscathed by the global financial crisis, it is expected that the government's stimulatory budgets in the coming years will spur economic growth and investment. Ambitious plans for investment in the development of the petrochemicals, oil refining, phosphates

and gas sectors could significantly increase the percentage of oil and oil derivatives. However, weak confidence and tight credit conditions will continue to constrain private sector growth.

Under the leadership of King Abdullah, the Saudi Government initiated structural reform measures in the 1990s designed to encourage privatization, liberalize foreign trade and reform investments. Commercial laws were revised and initial steps were taken to free up foreign investment and privatize parts of the state sector.As King Abdullah has continued this agenda and a focus on economic diversity

and privatization has been evident through-out his reign. In March 2007, the opening of new sectors to foreign investment including insurance services, wholesale/retail trade, communications services and air/train transport services was announced. In December 2005, Saudi Arabia acceded to the WTO.

The Kingdom of Saudi Arabia willparticipate at this year’s trade fairHannover Messe, the world’s leadingtrade fair and will be represented with its own pavilion. The pavilion includes the top leading companies from all overthe Kingdom; Sabic represents the petrochemicals industries as its role is not only to supply Saudi Arabia with oil based products but also to supply the high demand worldwide, on the other hand other petrochemicals companies are also participating this year at the Kingdoms pavilion including Petro Rabigh and Tasnee to show case their latest innovation in the industry.

Never the less major public sector Ministries and agencies are alsorepresenting Saudi Arabia this year from the the ministry of commerce and industry and from the industrial sector Saudi industrial property authority “MODON” which is responsible on facilitating and supervising factories in the industrial cities all 28 of them Kingdom wide with regards to the investment and foreign investment Saudi Arabian General Investment Authority “SAGIA” will also be there to explain how easy is it to start your business in Saudi Arabia and the process on acquiring the investment licenses. The Saudi industrial clusters development program is responsible for the National industrial strategy and its implementation along with the future industrial goals of the Kingdom as they identified 5 major cluster for industry in Saudi Arabia (Plastics and packaging, Automotive, Home appliances, Minerals and metals, Solar energy) along with other industrial companies.

The Saudi economy has achieved rapid fire successes, despite the global financial crisis that affected most countries of the world. The strategic investments in oil refining, liquid gas, petrochemicals, iron and steel, aluminium smelting and cement have strongly boosted the competitiveness of the economies of the GCC countries, making the region the most vital economic hub in the world.

This means that a number of main projects, plans and programmes are forging ahead, with the industrial sector being seen as an important element to diversify sources of income in the national economy.

Over 20 percent of the world’s conventional oil reserves,Saudi Arabia is the Middle East's largest economy.

11



Saudi Industries

Although efforts have been made to diversify the economy, it remains heavily dependent on the oil and petrochemical sector and will continue to be so for the foreseeable future: while the private, non-oil sector's contribution to GDP has increased over the past decade to about 45 percent, oil and oil derivatives still account for nearly 90 percent of Saudi export earnings and budget revenues, and about 55 percent of GDP.

The Kingdom’s economy has weathered recent global economic turmoil better than most countries. Prior to the full effects of

the crisis, it experienced non-oil growth of 4.3 percent in 2008. Soaring oil revenues over recent years have created record budget and current account surpluses.

The growing economy has been matched by an increase in demand for imports, driven largely by massive construction projects. While Saudi Arabia has not emerged unscathed by the global financial crisis, it is expected that the government's stimulatory budgets in the coming years will spur economic growth and investment. Ambitious plans for investment in the development of the petrochemicals, oil refining, phosphates

and gas sectors could significantly increase the percentage of oil and oil derivatives. However, weak confidence and tight credit conditions will continue to constrain private sector growth.

Under the leadership of King Abdullah, the Saudi Government initiated structural reform measures in the 1990s designed to encourage privatization, liberalize foreign trade and reform investments. Commercial laws were revised and initial steps were taken to free up foreign investment and privatize parts of the state sector.As King Abdullah has continued this agenda and a focus on economic diversity

and privatization has been evident through-out his reign. In March 2007, the opening of new sectors to foreign investment including insurance services, wholesale/retail trade, communications services and air/train transport services was announced. In December 2005, Saudi Arabia acceded to the WTO.

The Kingdom of Saudi Arabia willparticipate at this year’s trade fairHannover Messe, the world’s leadingtrade fair and will be represented with its own pavilion. The pavilion includes the top leading companies from all overthe Kingdom; Sabic represents the petrochemicals industries as its role is not only to supply Saudi Arabia with oil based products but also to supply the high demand worldwide, on the other hand other petrochemicals companies are also participating this year at the Kingdoms pavilion including Petro Rabigh and Tasnee to show case their latest innovation in the industry.

Never the less major public sector Ministries and agencies are alsorepresenting Saudi Arabia this year from the the ministry of commerce and industry and from the industrial sector Saudi industrial property authority “MODON” which is responsible on facilitating and supervising factories in the industrial cities all 28 of them Kingdom wide with regards to the investment and foreign investment Saudi Arabian General Investment Authority “SAGIA” will also be there to explain how easy is it to start your business in Saudi Arabia and the process on acquiring the investment licenses. The Saudi industrial clusters development program is responsible for the National industrial strategy and its implementation along with the future industrial goals of the Kingdom as they identified 5 major cluster for industry in Saudi Arabia (Plastics and packaging, Automotive, Home appliances, Minerals and metals, Solar energy) along with other industrial companies.

The Saudi economy has achieved rapid fire successes, despite the global financial crisis that affected most countries of the world. The strategic investments in oil refining, liquid gas, petrochemicals, iron and steel, aluminium smelting and cement have strongly boosted the competitiveness of the economies of the GCC countries, making the region the most vital economic hub in the world.

This means that a number of main projects, plans and programmes are forging ahead, with the industrial sector being seen as an important element to diversify sources of income in the national economy.

12


1. Minerals and metals: Saudi Arabia particular geology serves to give it an abundance of natural resources and raw materials, such as: Metal ores such as bauxite and iron ore; Metals such as manganese, silver, copper, tungsten, chromium, zinc and lead; Industrial minerals such as feldspar, sulphur, gypsum, kaolin and barite. This is opening the door for aluminium and steel upstream and downstream industries.

2. Plastics and packaging:Saudi petrochemicals production includes 16 million tonnes of polymer per year and is expected to rise to 20 million tonnes annually by 2020. The plastics and packag-ing sector has great potential for further growth, in terms of: production volume; product range; product technology and sophistication; and markets.

3. Automotive:Saudi Government is committed to developing a Saudi Arabian Automotive cluster, encompassing car, truck and bus: R&D; design; components; sub-systems and sub-assemblies, full vehicle assembly; and logistics.

4. Home Appliance:Saudi Arabia is the largest market in the MENA region with a significant demand for home appliances such as fridges,

year; and secondly, Saudi Arabia extends over a huge area - KSA covers 2,149,690sq km, making it the largest country in the Middle East. Furthermore, with Saudi Arabia's population expanding by 2.3% and its economy growing by 5%-6% annually, the country's demand forelectricity is increasing by 5% a year.

7. Transportation& Logistics (T&L):All of the above industries will be supported by a state of the art T&L development that will ensure that the country’s geographical position is leveraged at best, making it a real hub between East and West. Currently, the Kingdom is focusing on the development andimprovement of airports, ports, railroads and roads. All of this is being coupled with the most competitive logistics systems.

Last but not least, Saudi Arabia’s economy is being propelled to a whole newlevel with the construction of thefour integrated Economic Cities. These visionary development projects will

cookers and washing machines most of which are imported. The Kingdom is a large and growing market with readily available, relevant specific raw materials such as plastics, glass, aluminium and technical gases. It also has abundant, reliable energy needed for high-volume production and easy access to Gulf Cooperation Council and Greater Arab Free markets.

5. Pharmaceuticals agrochemi-cals and medical appliances:There are many reasons that make this industry extremely relevant for the Kingdom. Specifically the surginghealthcare demand in Saudi Arabia and the surrounding region, strong IP protection and massive financial support for R&D, provided by a government that isfirmly committed to developing the life sciences sector; low-cost local access to feedstock for intermediate chemicals and other inputs into pharmaceuticals and agrochemicals production. Also,complementary industries such as plastics, chemicals, and formulation and packaging provide substantial operating efficiencies.

6. Solar energy:Saudi Arabia has twice the average solar irradiation experienced in Europe, with thermal energy of up to 2,550 kWh/m2 a

promote economic diversification, create over one million new job opportunities, homes for 4-5 million residents and most significantly, contribute $150billion to Saudi’s GDP.

• King Abdullah Economic City: Focused on the following investment sectors: Ports, logistics, service industries, plastics, petrochemicals, manufacturing, assembly & packaging

• Prince Abdulaziz bin Mousaed Economic City: Focused on transportation, logistics & supply chain

• Knowledge Economic City: Focused on Life science & Knowledge Based Industries (IT, medical etc)

• Jizan Economic City: Focused on heavy industry, agro industries & metal processing

These cities are known as the 60-24-7 cities, the first of their kind in the worldwhere all government services will be offered in 60 minutes, 24 hours a day,7 days a week.

Regulatory and fiscal incentives:Importantly, an iteration of legal and tax reforms have been introduced to ensure the following regulatory and financial Incentives:• Accelerated investment application, business registration and set-up process, with a guaranteed decision for foreign investment applications within thirty (30) days of submission to SAGIA • Equal benefits, incentives and guarantees for foreign investors and domestic companies• 100% foreign ownership of companies and property• 100% property ownership for foreign investors• Low-cost loans from the Saudi Industrial Development Fund and Public Investment Fund (up to 50% of project up to $133 million)• No minimum capital requirement in most sectors• Full repatriation of capital, profit and dividends allowed, subject to a 5% withholding tax• No personal income taxes and only a 20% corporate tax. No value-added tax, no sales tax, no land tax and no property tax• Ability to carry forward losses on balance sheets indefinitely• Low-cost land in KSA's 28 industrial cities and three economic cities• No export duties within the 17 countries of the Greater Arab Free Trade Area• Customs duties exemption on imported machinery, equipment, raw materials and spare parts if they are for industrial use• Duty drawback, a customs refund for raw material imports that are processed and exported as finished goods• Export credit, financing, guarantees and insurance through the Saudi Export Program• Few restrictions on currency conversion, exchanges and transfers• Preferential treatment for national products in Saudi government procurement• 50% deduction from the expenses of annual training for Saudis • 50% deduction from the annual salaries paid to Saudis • More deductions are granted if investment capital for any project

exceeds SR 1,000,000 and if more than five employees of Saudi nationality have jobs of a technical or administra tive nature with contracts of at least one year.• Financial support for the training and employment of Saudis from the Human Resources Development Fund

About the Saudi Arabian General Investment Authority (SAGIA)

SAGIA is the Government authority with the mission of attracting investments by improving pro-business environment, developing incentives and upgrading services thanks to both outstanding internal resources and effectivepartnerships.

Goals by SAGIA Division are:

1. Investment development and attraction: a. Coordinate with other public stakeholders to develop a unified investment mapb. Develop & Promote investment opportunitiesc. Define and Promote incentives related to specific sectors2. Improving pro-business environmenta. Continue improving pro-business environment & regulations in the Kingdomb. Facilitate local and foreign investment procedures by working with relevant public stakeholdersc. Evaluate the impact of attracted foreign investments in the Kingdom and their added value.d. Develop internal resources required to research, analyze and publish accurate information regarding investments in the Kingdom3. Investors Servicesa. Improve current services by introducing on-line outstanding servicesb. Facilitate added value investments by establishing quantitative and qualitative criteria.c. Establish guidelines and procedures to follow up license issuing and to ensure that we facilitate the added value licenses and control the non compliant ones.

SAGIA

“Saudi Arabia – A spectrum of opportunities”by The Saudi Arabian General Investment Authority(SAGIA)

The Saudi Arabian GeneralInvestment Authority

United States China Belgium Hong Kong, China Brazil Singapore United Kingdom Virgin Islands Russian Federation Australia France Canada Germany India Spain Italy Mexico Indonesia Luxembourg Chile Holland Saudi Arabia

Country

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

Rank

$227 $124 $89 $83 $66 $64 $54 $54 $53 $41 $41 $41 $40 $31 $30 $29 $20 $18 $18 $17 $17 $16

FDI Inflows(USD B)

Advantaged energy, natural resources, and highly competitiveinvestment incentives have transformed Saudi Arabia into a land richof investment opportunities.

The Kingdom has been ranked by UNCTAD as the 22th largest recipientof FDI (Foreign Direct Investment) in the world, for having attracted in 2011 more than $16 billion dollars, making Saudi Arabia thelargest recipient of FDI in the entire Middle East & Africa.

The following key sectors represent a major sourcefor FDI attraction :

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1. Minerals and metals: Saudi Arabia particular geology serves to give it an abundance of natural resources and raw materials, such as: Metal ores such as bauxite and iron ore; Metals such as manganese, silver, copper, tungsten, chromium, zinc and lead; Industrial minerals such as feldspar, sulphur, gypsum, kaolin and barite. This is opening the door for aluminium and steel upstream and downstream industries.

2. Plastics and packaging:Saudi petrochemicals production includes 16 million tonnes of polymer per year and is expected to rise to 20 million tonnes annually by 2020. The plastics and packag-ing sector has great potential for further growth, in terms of: production volume; product range; product technology and sophistication; and markets.

3. Automotive:Saudi Government is committed to developing a Saudi Arabian Automotive cluster, encompassing car, truck and bus: R&D; design; components; sub-systems and sub-assemblies, full vehicle assembly; and logistics.

4. Home Appliance:Saudi Arabia is the largest market in the MENA region with a significant demand for home appliances such as fridges,

year; and secondly, Saudi Arabia extends over a huge area - KSA covers 2,149,690sq km, making it the largest country in the Middle East. Furthermore, with Saudi Arabia's population expanding by 2.3% and its economy growing by 5%-6% annually, the country's demand forelectricity is increasing by 5% a year.

7. Transportation& Logistics (T&L):All of the above industries will be supported by a state of the art T&L development that will ensure that the country’s geographical position is leveraged at best, making it a real hub between East and West. Currently, the Kingdom is focusing on the development andimprovement of airports, ports, railroads and roads. All of this is being coupled with the most competitive logistics systems.

Last but not least, Saudi Arabia’s economy is being propelled to a whole newlevel with the construction of thefour integrated Economic Cities. These visionary development projects will

cookers and washing machines most of which are imported. The Kingdom is a large and growing market with readily available, relevant specific raw materials such as plastics, glass, aluminium and technical gases. It also has abundant, reliable energy needed for high-volume production and easy access to Gulf Cooperation Council and Greater Arab Free markets.

5. Pharmaceuticals agrochemi-cals and medical appliances:There are many reasons that make this industry extremely relevant for the Kingdom. Specifically the surginghealthcare demand in Saudi Arabia and the surrounding region, strong IP protection and massive financial support for R&D, provided by a government that isfirmly committed to developing the life sciences sector; low-cost local access to feedstock for intermediate chemicals and other inputs into pharmaceuticals and agrochemicals production. Also,complementary industries such as plastics, chemicals, and formulation and packaging provide substantial operating efficiencies.

6. Solar energy:Saudi Arabia has twice the average solar irradiation experienced in Europe, with thermal energy of up to 2,550 kWh/m2 a

promote economic diversification, create over one million new job opportunities, homes for 4-5 million residents and most significantly, contribute $150billion to Saudi’s GDP.

• King Abdullah Economic City: Focused on the following investment sectors: Ports, logistics, service industries, plastics, petrochemicals, manufacturing, assembly & packaging

• Prince Abdulaziz bin Mousaed Economic City: Focused on transportation, logistics & supply chain

• Knowledge Economic City: Focused on Life science & Knowledge Based Industries (IT, medical etc)

• Jizan Economic City: Focused on heavy industry, agro industries & metal processing

These cities are known as the 60-24-7 cities, the first of their kind in the worldwhere all government services will be offered in 60 minutes, 24 hours a day,7 days a week.

Regulatory and fiscal incentives:Importantly, an iteration of legal and tax reforms have been introduced to ensure the following regulatory and financial Incentives:• Accelerated investment application, business registration and set-up process, with a guaranteed decision for foreign investment applications within thirty (30) days of submission to SAGIA • Equal benefits, incentives and guarantees for foreign investors and domestic companies• 100% foreign ownership of companies and property• 100% property ownership for foreign investors• Low-cost loans from the Saudi Industrial Development Fund and Public Investment Fund (up to 50% of project up to $133 million)• No minimum capital requirement in most sectors• Full repatriation of capital, profit and dividends allowed, subject to a 5% withholding tax• No personal income taxes and only a 20% corporate tax. No value-added tax, no sales tax, no land tax and no property tax• Ability to carry forward losses on balance sheets indefinitely• Low-cost land in KSA's 28 industrial cities and three economic cities• No export duties within the 17 countries of the Greater Arab Free Trade Area• Customs duties exemption on imported machinery, equipment, raw materials and spare parts if they are for industrial use• Duty drawback, a customs refund for raw material imports that are processed and exported as finished goods• Export credit, financing, guarantees and insurance through the Saudi Export Program• Few restrictions on currency conversion, exchanges and transfers• Preferential treatment for national products in Saudi government procurement• 50% deduction from the expenses of annual training for Saudis • 50% deduction from the annual salaries paid to Saudis • More deductions are granted if investment capital for any project

exceeds SR 1,000,000 and if more than five employees of Saudi nationality have jobs of a technical or administra tive nature with contracts of at least one year.• Financial support for the training and employment of Saudis from the Human Resources Development Fund

About the Saudi Arabian General Investment Authority (SAGIA)

SAGIA is the Government authority with the mission of attracting investments by improving pro-business environment, developing incentives and upgrading services thanks to both outstanding internal resources and effectivepartnerships.

Goals by SAGIA Division are:

1. Investment development and attraction: a. Coordinate with other public stakeholders to develop a unified investment mapb. Develop & Promote investment opportunitiesc. Define and Promote incentives related to specific sectors2. Improving pro-business environmenta. Continue improving pro-business environment & regulations in the Kingdomb. Facilitate local and foreign investment procedures by working with relevant public stakeholdersc. Evaluate the impact of attracted foreign investments in the Kingdom and their added value.d. Develop internal resources required to research, analyze and publish accurate information regarding investments in the Kingdom3. Investors Servicesa. Improve current services by introducing on-line outstanding servicesb. Facilitate added value investments by establishing quantitative and qualitative criteria.c. Establish guidelines and procedures to follow up license issuing and to ensure that we facilitate the added value licenses and control the non compliant ones.

SAGIA

14


The Saudi Industrial Property Authority (MODON) was established in 2001, with the mission to undertake the development and operation of the industrial cities to be established in the Kingdom over lands belonging to both the public and private sectors.

MODON is responsible for thedevelopment of industrial cities with integrated infrastructure and services. MODON has established industrial cities in various regions of the Kingdom, which include Riyadh (1st, 2nd and 3rd), Jeddah (1st, 2nd and 3rd), Dammam (1st, 2nd and 3rd), Makkah, Qassim 1st, Al-Ahsa, Al-Madinah, Al-Kharj, Sudair, Ha'il, Tabuk, Ar'ar, Al-Jouf, Assir, Jazan, Najran, Al-Baha, Qassim 2nd,Taif, Al-Zulfi, Shaqraa, Hafr Al-Batin. The existing industrial cities accommodate more than 3000 factories with investments exceeding 250 billion riyals and employing more than 300,000 workers. It is targeted that during the coming five years, the number of the industrial cities shall reach 40 cities with more than 160 million square meters of developed industrial lands.

MODON has succeeded in attracting the private sector to become a strong investor in the industrial cities, helping it to provide distinctive and integrated industrial cities and technology zones in all parts of the Kingdom as it strives to become an advanced industrial nation.

There are a number of challenges ahead such as the scale of the projects and the ability to fast-track supplies amid growing demand, especially in the major cities of Riyadh, Jeddah and Dammam. With this in mind MODON has called on the private sector to seize the available opportunities in a variety of specialist fields, including city development, infrastructure design, financing and service provision concerning operations and maintenance.

The area of Al-Kharj Industrial City is about 100 million square meters and is about 90 km away from Riyadh. The development works of Phase 1 of the infrastructure have been completed on an area of 5.5 million square meters at a cost of 540 million riyals, including provision of services, fully allocated for industrial projects. MODON has begun thedevelopment of Phase II to keep pace with the growing demand for industrial land.

Al- Kharj Industrial City will have adistinctive design and a suitableenvironment for factories, therebyproviding job opportunities for Saudis. Furthermore, the industrial city has attracted local and international industrial investments and in reality more than32 factories have been established:some of these have started production, whilst dozens of others have requests under execution.

The master-plan of the industrial city consists of areas allocated for industrial activities, residential uses, commercial activities, marketing exhibitions, services centre, public utilities, roads and

One of the main challenges is theestablishment of integrated infrastructures, as well as developing and providing all services, including water, an advanced communications network, security,government services, commercial and residential complexes. And MODONhas met these challenges with aconsiderable degree of success: water projects for instance have beenexecuted and the completion ratein some cities is up to 40%. In addition,the advanced communication networkhas been launched, whilst industrial security services were implemented two years ago.

With regards to the residential andcommercial complexes, MODON has succeeded in attracting the private sector to establish projects under the BOT system. There are complexes under construction in Riyadh, Jeddah and Madina, andsoon in Dammam.

Development in Al-Kharj Industrial City provides industrial lands in the Riyadh region, thereby ending the constantly growing waiting lists.

warehouses, so that all businessmen can invest in various available opportunities; whether in industrial, residential,commercial or service fields.

Including Al-Kharj (the others being Sudair, Dammam and Jeddah) there are four major industrial cities that are expected to be completed by 2014. The first phase of the industrial city in Sudair is expected to be completed by the end of 2013, whilst the industrial cities of Dammam 3 and Jeddah 3 are being planned at an investment of SR 1 billion each.

The development of the 20 sq km Jeddah3 Industrial City began with the extension of the road networks and building ofan electric power station, with the infrastructure of the Dammam 3 Industrial City due to be completed in the next two years with the addition of new roads.

There are also large projects underway for the rehabilitation of the existing cities. In Jeddah 1st Industrial City MODON has rehabilitation projects worth more than 100 million riyals, and in Riyadh 2nd it has

projects worth 80 million riyals, while in Dammam 2nd there are projects exceeding 100 million riyals. Other rehabilitation projects include the industrial cities in Al-Madina, Makkah, Dammam 1st, Al-Ahsa, Qassim, Hail and Assir.

MODON has also recently announcedthe signing of the new industrial citydevelopment contract in Hafr Al-Batinat a cost of 16 million Saudi riyals.The new industrial city development project in Hafr Al-Batin will achieve MODON’s objectives in what isto be a balanced development andat the heart of the development of the governorate, attracting the privatesector to establish industrial, service, commercial and residential projects, as well as creating job opportunities for citizens. This is being fuelled by the fact that Hafr Al-Batin is located within the cities covered by the incentives of the industrial loans, which will reach up to 75% of theproject cost.

The site is located on a highway linked with the north, which is characterised by heavy trucks, thereby making Hafr Al-Batin a

suitable site for logistic services suchas transportation, storage, cooling,maintenance and exchange of trucks.The industrial city is in the vicinity of the borders of neighbouring countries such as Kuwait and Iraq and the highway headed for Jordan and Syria, making its location even more ideal. Two regions will be developed, one for constructionindustries and the other for other industries separated by a region designated for logistical services.

It is worth mentioning that the Saudi Industrial Property Authority “MODON” participated last year in HanoverInternational Industrial Fair 2012, and will participate this year 2013 within the Kingdom of Saudi Arabia Pavilion.

Saudi Industrial PropertyAuthority (MODON)

MODON

15



The Saudi Industrial Property Authority (MODON) was established in 2001, with the mission to undertake the development and operation of the industrial cities to be established in the Kingdom over lands belonging to both the public and private sectors.

MODON is responsible for thedevelopment of industrial cities with integrated infrastructure and services. MODON has established industrial cities in various regions of the Kingdom, which include Riyadh (1st, 2nd and 3rd), Jeddah (1st, 2nd and 3rd), Dammam (1st, 2nd and 3rd), Makkah, Qassim 1st, Al-Ahsa, Al-Madinah, Al-Kharj, Sudair, Ha'il, Tabuk, Ar'ar, Al-Jouf, Assir, Jazan, Najran, Al-Baha, Qassim 2nd,Taif, Al-Zulfi, Shaqraa, Hafr Al-Batin. The existing industrial cities accommodate more than 3000 factories with investments exceeding 250 billion riyals and employing more than 300,000 workers. It is targeted that during the coming five years, the number of the industrial cities shall reach 40 cities with more than 160 million square meters of developed industrial lands.

MODON has succeeded in attracting the private sector to become a strong investor in the industrial cities, helping it to provide distinctive and integrated industrial cities and technology zones in all parts of the Kingdom as it strives to become an advanced industrial nation.

There are a number of challenges ahead such as the scale of the projects and the ability to fast-track supplies amid growing demand, especially in the major cities of Riyadh, Jeddah and Dammam. With this in mind MODON has called on the private sector to seize the available opportunities in a variety of specialist fields, including city development, infrastructure design, financing and service provision concerning operations and maintenance.

The area of Al-Kharj Industrial City is about 100 million square meters and is about 90 km away from Riyadh. The development works of Phase 1 of the infrastructure have been completed on an area of 5.5 million square meters at a cost of 540 million riyals, including provision of services, fully allocated for industrial projects. MODON has begun thedevelopment of Phase II to keep pace with the growing demand for industrial land.

Al- Kharj Industrial City will have adistinctive design and a suitableenvironment for factories, therebyproviding job opportunities for Saudis. Furthermore, the industrial city has attracted local and international industrial investments and in reality more than32 factories have been established:some of these have started production, whilst dozens of others have requests under execution.

The master-plan of the industrial city consists of areas allocated for industrial activities, residential uses, commercial activities, marketing exhibitions, services centre, public utilities, roads and

One of the main challenges is theestablishment of integrated infrastructures, as well as developing and providing all services, including water, an advanced communications network, security,government services, commercial and residential complexes. And MODONhas met these challenges with aconsiderable degree of success: water projects for instance have beenexecuted and the completion ratein some cities is up to 40%. In addition,the advanced communication networkhas been launched, whilst industrial security services were implemented two years ago.

With regards to the residential andcommercial complexes, MODON has succeeded in attracting the private sector to establish projects under the BOT system. There are complexes under construction in Riyadh, Jeddah and Madina, andsoon in Dammam.

Development in Al-Kharj Industrial City provides industrial lands in the Riyadh region, thereby ending the constantly growing waiting lists.

warehouses, so that all businessmen can invest in various available opportunities; whether in industrial, residential,commercial or service fields.

Including Al-Kharj (the others being Sudair, Dammam and Jeddah) there are four major industrial cities that are expected to be completed by 2014. The first phase of the industrial city in Sudair is expected to be completed by the end of 2013, whilst the industrial cities of Dammam 3 and Jeddah 3 are being planned at an investment of SR 1 billion each.

The development of the 20 sq km Jeddah3 Industrial City began with the extension of the road networks and building ofan electric power station, with the infrastructure of the Dammam 3 Industrial City due to be completed in the next two years with the addition of new roads.

There are also large projects underway for the rehabilitation of the existing cities. In Jeddah 1st Industrial City MODON has rehabilitation projects worth more than 100 million riyals, and in Riyadh 2nd it has

projects worth 80 million riyals, while in Dammam 2nd there are projects exceeding 100 million riyals. Other rehabilitation projects include the industrial cities in Al-Madina, Makkah, Dammam 1st, Al-Ahsa, Qassim, Hail and Assir.

MODON has also recently announcedthe signing of the new industrial citydevelopment contract in Hafr Al-Batinat a cost of 16 million Saudi riyals.The new industrial city development project in Hafr Al-Batin will achieve MODON’s objectives in what isto be a balanced development andat the heart of the development of the governorate, attracting the privatesector to establish industrial, service, commercial and residential projects, as well as creating job opportunities for citizens. This is being fuelled by the fact that Hafr Al-Batin is located within the cities covered by the incentives of the industrial loans, which will reach up to 75% of theproject cost.

The site is located on a highway linked with the north, which is characterised by heavy trucks, thereby making Hafr Al-Batin a

suitable site for logistic services suchas transportation, storage, cooling,maintenance and exchange of trucks.The industrial city is in the vicinity of the borders of neighbouring countries such as Kuwait and Iraq and the highway headed for Jordan and Syria, making its location even more ideal. Two regions will be developed, one for constructionindustries and the other for other industries separated by a region designated for logistical services.

It is worth mentioning that the Saudi Industrial Property Authority “MODON” participated last year in HanoverInternational Industrial Fair 2012, and will participate this year 2013 within the Kingdom of Saudi Arabia Pavilion.

MODON

To find out more,visit www.modon.gov.sa

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The program, a newly establishedgovernment agency, is leading thedevelopment of five fast-growing,export-oriented industrial sectorsin Saudi Arabia: • Automotive • Minerals and Metal Processing • Solar Energy products • Plastics and Packaging • Home AppliancesThese carefully chosen industries share two main characteristics: firstly, they all use and can make the most of Saudi Arabia's abundant natural resources, raw materials and energy; and secondly, they all have huge potential.

Many investors already know about Saudi Arabia's potential, by locating your manufacturing operations in Saudi Arabia, we believe you will benefit from excellent financial returns and increased market share in the Arabian Gulf, MENA and Africa.

Our role is to support you in making your industrial investment a reality in Saudi

Arabia. To do this, we have a teamof experts in the industries we aredeveloping, and extensive knowledge of local conditions.

Saudi Arabian Development Plan 2009-2014 objectives include: improving the standard of living; developing human resources; increasing the recruitment of Saudi nationals; diversification of the economy; ensuring balanced regional development; and enhancing the competi-tiveness of the economy and Saudi products.

The Government’s National Industrial Strategy aims to greatly develop and diversify the economy by 2020. Its objectives are to: • Expand manufacturing from 11% to 20% of GDP • Double Saudi industrial employment from 15% to 30% • Increase industrial exports from 18% to 35% • Double the proportion of technology-based manufactured

products from 30% to 60% • Increase economic ‘value added’ by 8% a year

Another major plan, Vision 2020, lists similar and related strategies and aims such as: strengthening academic-industrial links; expanding manufacturing and industry; developing human resources; and expanding the private sector.

Supervised by the Ministry of Commerce & Industry and Ministry of Petroleum and Minerals, the Industrial Clusters program has a significant role in meeting Vision 2020, National Industrial Strategy and broader government goals.

The cluster strategy is intended to: • Make the most of Saudi Arabia's abundant energy, natural resources and raw materials • Generate the fastest possible growth in exports • Bring the greatest benefits in technologies and skills development

It's the right time to invest in Saudi Arabia's new industrial clusters.

Contact us soon to find out more.We are here to help you www.ic.gov.sa

National Industrial ClustersDevelopment Program Introduction

National Industrial Clusters

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In 2011, Saudi Arabia expanded its oil production by 14% to 9.31 million bpd (barrels per day). A further increase by 5% to 9.8 million bpd is expected to be realized in 2012. With falling production capacity in the existing oil fields Saudi Arabia has to invest significantly to maintain the current production potential of 12.5 million bpd.

Khalid Al Falih, the CEO of the state oil company Aramco, stated in September 2012 that the investment in the oil sector in the next five years is planned to reach a total of U.S. $ 35 billion, in order to serve the expected increasing demand in the long-term. The new offshore oilfield Manafi is expected to produce 500,000 bpd (Arabian Heavy Crude) by mid-2013 and 900,000 bpd by the end of 2014. This will compensate for the decline in production volumes in old oil fields. The Manafi project is calculated to reach U.S. $ 8.3 billion.

Oil and Gas

Oil and Gas

Saudi Aramco will not only maintainits current capacity, there are currentdiscussions to expand production to15 million bpd. A capacity expansion has become increasingly urgent since a reserve production capacity is to be held at a minimum of 2.5 million bpd. This buffer is at risk with regard to the temporarily reached production levels of more than 10 million bpd in 2012. Saudi Arabia wants to increase the proven oil reserves through extensive exploration activities and has begun to award several contracts. In addition, to increase production capacity, further investments in active oil fields are to be made in order to increase recoverable reserves (recovery rate).

Even more important than the expansion of oil production capacity is the increase in gas production, to serve the rapidly growing demand of local industry and the energy sector. In this regard, the similarly

fast-growing local oil consumption (estimate for 2012: 2.8 million bpd) will be partially substituted by gas.

Oil Minister Ali bin Ibrahim al-Naimi called two gas projects currently a priority, the Karan offshore gas field and the Wasit gas project. The promotion of non-associated gas began in 2011 and Karan which will come online in 2013 is expected to contribute a further 1.8 billion cfd (cubic feet daily). The Wasit project (with the gas fields Arabiyah and Hasbah) will go into production in mid-2014 and provide an additional 2.5 billion cfd. Both projects together will increase the Saudi gas production by 45% alone. According to BP, the Saudi gas production stood at 9.6 billion cfd in 2011.

Turbulent times – compensatinglocal demand and increasing exports

Saudi Aramco which is owned by the Saudi Arabian Government hasstewardship over the world’s largest oil reserves-roughly one fifth of the global total with crude and condensate reserves of 259.7 billion barrels. It is a fully integrated petroleum company with operations in exploration, production, refining, petrochemicals marketing and international shipping. Saudi Aramco employs more than 56,066 workers worldwide from 77 countries and has its headquarters in Dhahran in the Kingdom’s Eastern Province.

The operations span the Kingdom, with production and product distribution facilities linking all market areas. The average daily crude production in 2011 was 9.1 million barrels per day (bpd). Saudi Aramco also has stewardship over the world’s fourth-largest naturalgas reserves of 282.6 trillionstandard cubic feet (scf). Major export shipping terminals are located atports on the Arabian Gulf andRed Sea, while domestic demandfor automotive and aviation productsis met through strategicrefineries.

Internationally, Saudi Aramcosubsidiaries or affiliates holdsignificant interests in refining andmarketing companies in the United States, the Republic of Korea, Japan and China. Transportation is handled by theshipping subsidiary, Vela International Marine Limited. It operates a sizeablefleet of vessels, 20 double-hulledVLCCs (Very Large Crude Carriers)and 5 product tankers.

Operations

From the founding in 1933 until the late 1980s, Saudi Aramco focused on crude oil exploration and production. Since then it underwent transformation which contin-ues today. Saudi Aramco’s operations include:

18

- Exploration - Production of oil and gas - Refining - Petrochemicals - International shipping - Marketing - Distribution

Saudi Aramco is managing more than 113 oil and gas fields in Saudi Arabia (2011), with crude oil production totaling 3.3 billion barrels (2011), of which 2.42 billion barrels are exported (2011). Besides this, Saudi Aramco is also the world’s top exporter of natural gas liquids (NGL): 332.0 million barrels in 2011. Today, the downstream accomplishments include a rank as the 8th largest refiner in the world, with a worldwide refining capacity of 4.02 million barrels perday (including domestic refineries, and domestic and international joint and equity ventures). In addition, it is also the world’s top exporter of natural gas liquids (NGL).

Saudi Aramco formed international joint and equity refining and petrochemicals ventures at home and abroad, created,

through its subsidiary, Vela International Marine Limited, one of the world’s largest fleet of supertankers, conceived and executed some of the industry’slargest mega-projects and applied or invented some of its most important groundbreaking subsurface technology. It is also the only energy company that serves the three major world markets Asia, North America and Europe. Saudi Aramco currently provides roughly one in every 10 barrels of crude oil the world consumes on any given day. Since 1998 the company has added more than 3.8 million barrels per day (bpd) to worldwide crude oil production capacity to help ensure it remains the world's most reliable supplier of petroleum energy.

Vision

Saudi Aramco’s vision for the future is best described through the company’s 2020 Strategic Intent:

- Shaping our business portfolio through establishing an integrated value chain approach in our crude oil mix, further develop the Kingdom’s

unconventional gas resources and become a leading global chemicals and refining company.- Supporting the Kingdom in building a vibrant energy industry by promoting an energy efficient economy developing alternative energy options, and building a technology portfolio.- Delivering an agile, flexible, and efficient organization to achieve operational excellence and world-class reliability and safety performance through improved operational efficiency, agile decision-making and budgeting activities, insightful perfor mance measurements, and business process improvement.- Building capacity, knowledge, and skills to improve our processes and systems of leadership selection and development, performance evaluation, innovation, and research and development. We will take the lead in developing a knowledge-based economy in Saudi Arabia.

Saudi Aramco is currently working on expanding its capability to discover, produce, process and transport natural gas for domestic energy, powering desalination plants and other industries, and as a vital feedstock for Saudi Arabia’s growing petrochemical industry.

With the start-up of the Karan offshore gas field, a new chapter has opened in the company’s history of managing and executing mega-projects. The first gas from Karan the company’s first offshore non-associated gas field project started flowing earlier this month and is being transported by subsea pipeline to the onshore Khursaniyah Gas Plant.

The first-phase start-up of Karan marks a significant milestone in the company’s gas expansion program, underlining its role as a reliable supplier of energy and its ability to bring giant projects online, both critical to meeting the energy needs of the Kingdom.

Discovered in April 2006, Karan is the first non-associated gas field in Saudi territorial waters in the Arabian Gulf, 160 kilometers north of the company’s headquarters in Dhahran. Offshore facilities at Karan consist of fiveproduction platform complexes connected to a main tie-in platform, installed with associated electrical power, communication and state-of-the-art remote monitoring and control facilities for safe and reliable operations from onshore. Detailed design work began in March 2009.

A 110-kilometer subsea pipeline is transporting Karan gas to onshore processing facilities at the Khursaniyah Gas Plant. The gas is processed through a number of trains that include facilities for gas sweetening, acid-gas enrichment, gas

dehydration and supplementary propane refrigeration. The onshore facilitiesalso include a cogeneration plant, asulfur recovery unit with storage tank, substations and a transmission pipeline linked to the Kingdom’s Master Gas System (MGS).

Karan, designed to produce 1.8 billion standard cubic feet per day (SCFD) of raw dry gas by 2013 to support the MGS, will be produced from 21 incrementwells distributed over five offshore wellhead platforms. Five wells have been commissioned so far with a productionof 120 million SCFD each. Earlyproduction, which began in July 2012, is targeted for peak summer demand, with an average production of more than 400 million SCFD. The wells will be completed, tied in and put on streamApril 2013, bringing the field to its full production capacity of 1.8 billion SCFD.

German - Saudi Business Magazine Saudi Aramco

Saudi AramcoThe world’s largest oil company by production and reserves

Saudi Aramco which is owned by the Saudi Arabian Government hasstewardship over the world’s largest oil reserves-roughly one fifth of the global total with crude and condensate reserves of 259.7 billion barrels. It is a fully integrated petroleum company with operations in exploration, production, refining, petrochemicals marketing and international shipping. Saudi Aramco employs more than 56,066 workers worldwide from 77 countries and has its headquarters in Dhahran in the Kingdom’s Eastern Province.

The operations span the Kingdom, with production and product distribution facilities linking all market areas. The average daily crude production in 2011 was 9.1 million barrels per day (bpd). Saudi Aramco also has stewardship over the world’s fourth-largest naturalgas reserves of 282.6 trillionstandard cubic feet (scf). Major export shipping terminals are located atports on the Arabian Gulf andRed Sea, while domestic demandfor automotive and aviation productsis met through strategicrefineries.

Internationally, Saudi Aramcosubsidiaries or affiliates holdsignificant interests in refining andmarketing companies in the United States, the Republic of Korea, Japan and China. Transportation is handled by theshipping subsidiary, Vela International Marine Limited. It operates a sizeablefleet of vessels, 20 double-hulledVLCCs (Very Large Crude Carriers)and 5 product tankers.

Operations

From the founding in 1933 until the late 1980s, Saudi Aramco focused on crude oil exploration and production. Since then it underwent transformation which contin-ues today. Saudi Aramco’s operations include:

19

- Exploration - Production of oil and gas - Refining - Petrochemicals - International shipping - Marketing - Distribution

Saudi Aramco is managing more than 113 oil and gas fields in Saudi Arabia (2011), with crude oil production totaling 3.3 billion barrels (2011), of which 2.42 billion barrels are exported (2011). Besides this, Saudi Aramco is also the world’s top exporter of natural gas liquids (NGL): 332.0 million barrels in 2011. Today, the downstream accomplishments include a rank as the 8th largest refiner in the world, with a worldwide refining capacity of 4.02 million barrels perday (including domestic refineries, and domestic and international joint and equity ventures). In addition, it is also the world’s top exporter of natural gas liquids (NGL).

Saudi Aramco formed international joint and equity refining and petrochemicals ventures at home and abroad, created,

through its subsidiary, Vela International Marine Limited, one of the world’s largest fleet of supertankers, conceived and executed some of the industry’slargest mega-projects and applied or invented some of its most important groundbreaking subsurface technology. It is also the only energy company that serves the three major world markets Asia, North America and Europe. Saudi Aramco currently provides roughly one in every 10 barrels of crude oil the world consumes on any given day. Since 1998 the company has added more than 3.8 million barrels per day (bpd) to worldwide crude oil production capacity to help ensure it remains the world's most reliable supplier of petroleum energy.

Vision

Saudi Aramco’s vision for the future is best described through the company’s 2020 Strategic Intent:

- Shaping our business portfolio through establishing an integrated value chain approach in our crude oil mix, further develop the Kingdom’s

unconventional gas resources and become a leading global chemicals and refining company.- Supporting the Kingdom in building a vibrant energy industry by promoting an energy efficient economy developing alternative energy options, and building a technology portfolio.- Delivering an agile, flexible, and efficient organization to achieve operational excellence and world-class reliability and safety performance through improved operational efficiency, agile decision-making and budgeting activities, insightful perfor mance measurements, and business process improvement.- Building capacity, knowledge, and skills to improve our processes and systems of leadership selection and development, performance evaluation, innovation, and research and development. We will take the lead in developing a knowledge-based economy in Saudi Arabia.

Saudi Aramco is currently working on expanding its capability to discover, produce, process and transport natural gas for domestic energy, powering desalination plants and other industries, and as a vital feedstock for Saudi Arabia’s growing petrochemical industry.

With the start-up of the Karan offshore gas field, a new chapter has opened in the company’s history of managing and executing mega-projects. The first gas from Karan the company’s first offshore non-associated gas field project started flowing earlier this month and is being transported by subsea pipeline to the onshore Khursaniyah Gas Plant.

The first-phase start-up of Karan marks a significant milestone in the company’s gas expansion program, underlining its role as a reliable supplier of energy and its ability to bring giant projects online, both critical to meeting the energy needs of the Kingdom.

Discovered in April 2006, Karan is the first non-associated gas field in Saudi territorial waters in the Arabian Gulf, 160 kilometers north of the company’s headquarters in Dhahran. Offshore facilities at Karan consist of fiveproduction platform complexes connected to a main tie-in platform, installed with associated electrical power, communication and state-of-the-art remote monitoring and control facilities for safe and reliable operations from onshore. Detailed design work began in March 2009.

A 110-kilometer subsea pipeline is transporting Karan gas to onshore processing facilities at the Khursaniyah Gas Plant. The gas is processed through a number of trains that include facilities for gas sweetening, acid-gas enrichment, gas

dehydration and supplementary propane refrigeration. The onshore facilitiesalso include a cogeneration plant, asulfur recovery unit with storage tank, substations and a transmission pipeline linked to the Kingdom’s Master Gas System (MGS).

Karan, designed to produce 1.8 billion standard cubic feet per day (SCFD) of raw dry gas by 2013 to support the MGS, will be produced from 21 incrementwells distributed over five offshore wellhead platforms. Five wells have been commissioned so far with a productionof 120 million SCFD each. Earlyproduction, which began in July 2012, is targeted for peak summer demand, with an average production of more than 400 million SCFD. The wells will be completed, tied in and put on streamApril 2013, bringing the field to its full production capacity of 1.8 billion SCFD.



Saudi Aramco

Contact:Public Relations DepartmentR-2212 East AdministrationBuildingP.O. Box 5000Dhahran 31311Saudi Arabia

For international inquiries:[email protected] local inquiries:[email protected]: 966 3 873 6713

Non-associatedGas Project – OffshoreKaran Gas Field

feedstock supplies infrastructure and the services we have to offer.

Within the Rabigh PlusTech Park we also have incorporated a Plastics Training Centre which handles all the ongoing training & development needs of workforce/ investors of the PlusTech Park along with the local community.

Petro Rabigh also continues to pursue ongoing efforts for increased Sustainability and Corporate Social Responsibility towards the wider community. A recent example was the first ever Beach Clean Up day in association with the GCC and GPCA to highlight the responsible useof plastics & to change the mindsets ofthe people.

Petro Rabigh is the largest integrated Refining & Petrochemical complex in the world. It is a joint venture between Saudi Aramco, the world’s largest Oil & Gas Company and Japan’s Sumitomo Chemical with each owning 37.5% each.

The underlying aim of the project was to support the further diversification of the Kingdom’s economy by creating feasible downstream opportunities.

Petro Rabigh produces refined products such as gasoline, diesel, jet fuel and naptha to meet domestic & International demand. Further downstream we produce petrochemicals such as polyethylene and polypropylene, which are used as polymer feeds for the production of food and liquid packaging material, automobile parts, computer parts, clothing, construction materials and other various applications. In addition, we produce monoethylene glycol and propylene oxide, which are utilized to produce everyday products such as drinks bottles, fabrics, solvents and antifreeze.

Saudi Aramco provides Petro Rabigh with guaranteed access to hydrocarbons feedstock, making our operations both low cost and reliable. Despite being one of the lowest cost ethane derivative producers in the world, we continue in our efforts to enhance value through improvement in revenue generation & cost reduction.

Sumitomo Chemical provides patent technological expertise and experience in

20


the global marketing of chemical products. This consolidation of knowledge and infrastructure, along with the global aspect of the partnership, marks the beginning of a new era in Saudi Arabia, one in which it uses its natural resources to achieve a global edge in a wide variety of industries. Petrochemicals are only the beginning.

Demand for Petro Rabigh’s quality & attractively priced products is high, hence an industrial conversion park called Rabigh PlusTech Park was built adjacent to the complex that will drive demand even higher. This is a fully integrated industrial park that was planned & designed with the intention to further enhance downstream opportunities . It is an industrial area of more than 2 million square metres that is open for companies & investors to convert petrochemical products into downstream products, which will benefit from being in close proximity to our petrochemicals

Petro Rabigh

Petro Rabigh

for joining the petrochemical marketin the Kingdom.

The country itself is holding an excellent starting position for reaching the political aim of being a powerful player on the global market of petrochemical products. Considering the economic circumstances and existing conditions it is realistic to reach the aim in a medium term. Driven by Saudi Arabia the members of the Gulf Cooperation Council (GCC) are evolving towards the world’s leading petrochemical location. The Kingdom already is the

22

Saudi Arabia’s petrochemical sector registers a strong double digit growth since 2007. Ten percent of the globalpetrochemical export products have been manufactured in Jubail and Yanbu. Both cities form the centre of the petrochemical industry and have played a key part in the Kingdom’s determination to develop hydrocarbon-based industries. Founded by Royal Decree in 1975, the RoyalCommission for Jubail and Yanbu(RCJY) has created the basic infrastructure for these two cities. In Jubail is the world’s largest industrial city for petrochemicals.

RCJY is currently responsible for the construction of Jubail II, which will have the same size than Jubail. The industrial cities are characterized by physical closeness to oil fields to take advantage of short hauls.

As the leading oil producer in the world Saudi Arabia plans to duplicate its refinery and petrochemical capacity until 2015and therefore needs internationalinvestors. German companies, wellreputed for its extraordinary experience, know-how and quality, are well prepared

German - Saudi Business Magazine Petrochemicals

Jubail is the largest industrial complex of its kind in the world

largest producer of methanol und ranks on the second place among ethyleneproducers.

The Saudi Arabian Oil Company (ARAMCO) and the Saudi Basic Industries Corporation (SABIC) are the major actors in the sector. Being the world’s largest oil producer ARAMCO is in a key position: The state-owned company invests in multi-billion-dollar projects, acts as a shareholder of many joint ventures and provides the feedstock for numerous petrochemical plants. SABIC as the biggest company in the entire Middle East was founded in 1976 to push the diversification of the local industry. Today it is the largest public company in Saudi Arabia as listed in Saudis stock exchange Tadawul, but theGovernment still owns about 70 percentof its shares.

According to Gulf Petrochemicals and Chemicals Associaton, GCC member states were producing 39 million tons of petrochemical products in year 2000. Eight years later in 2008, the production increased to 100 million tons.Saudi Arabia – as biggest and most influen-tial GCC member – produced 60 million tons in 2011. That shows a world market share of 7-8 percent, which is likely to be raised up to 80 million tons in 2015. All in all, Saudi Arabia contributes three quarters to the production of petrochemicals in the entire Gulf region.

Saudi decision makers put unprecedented efforts in the diversification of the downstream industry to establish a labor intensive industry. SABIC and Saudi ARAMCO jointly with many additional players in Saudi Arabia are pushing the implementation process. In addition to increase the mass production of basic petrochemicals like polyethylene and polypropylene, Saudi Arabia focuses on expanding its downstream activities. Down-stream products like acetone, carbon oxide, polyethylene etc., which are the basis of higher value added products, shall be

produced in the Kingdom. Within the next five years, the production of 120 new chemicals will begin. The Middle East business intelligence MEED lists26 projects in the Saudi petrochemical sector with an investment volume of15 billion USD that are underway. Another 42 planned petrochemical projects are46 billion USD worth.

However, the preconditions for German companies are promising. Saudi Arabia has wide access to required raw materials and the costs for energy are low compared to other locations. Many German companies already use the advantages of site. An example how the future can look like is the Joint Venture Saudi Acrylic Polymers Company (SAPCo). In August 2011 the company was founded by Evonik, Tasnee and Sahara Petrochemicals to produce 80.000 tons p.a. of superabsorbent polymers in Jubail, starting in 2014. The Linde Group is also active on the Saudi market, operating with Sadara. The German company invests 380 million USD in Jubail to supply Sadara with carbon

monoxide, hydrogen and ammonia at a chemical complex now being built by Sadara in Jubail.

The SME Bischof + Klein produces flexible packaging solutions in Al-Khobar and Zeppelin is active in Jubail in the plant manufacturing business. The increase of downstream activities offers German companies good prospects for entering the Saudi Arabian market. Huge investments as well as projects with a volume of several billion USD are planned and make a long term growth of the petrochemical sector very likely. As Aldo Belloni, Member of the Executive Board of Linde AG, said, the petrochemical industry is expanding rapidly in Saudi Arabia. All in all, German plant and mechanical engineeringcompanies, providers of technology and external suppliers will find vast investment opportunities concerning the expansion of petrochemical plants in Saudi Arabia and the Gulf region.

PetrochemicalsStrong growth prospects

23



for joining the petrochemical marketin the Kingdom.

The country itself is holding an excellent starting position for reaching the political aim of being a powerful player on the global market of petrochemical products. Considering the economic circumstances and existing conditions it is realistic to reach the aim in a medium term. Driven by Saudi Arabia the members of the Gulf Cooperation Council (GCC) are evolving towards the world’s leading petrochemical location. The Kingdom already is the

Saudi Arabia’s petrochemical sector registers a strong double digit growth since 2007. Ten percent of the globalpetrochemical export products have been manufactured in Jubail and Yanbu. Both cities form the centre of the petrochemical industry and have played a key part in the Kingdom’s determination to develop hydrocarbon-based industries. Founded by Royal Decree in 1975, the RoyalCommission for Jubail and Yanbu(RCJY) has created the basic infrastructure for these two cities. In Jubail is the world’s largest industrial city for petrochemicals.

RCJY is currently responsible for the construction of Jubail II, which will have the same size than Jubail. The industrial cities are characterized by physical closeness to oil fields to take advantage of short hauls.

As the leading oil producer in the world Saudi Arabia plans to duplicate its refinery and petrochemical capacity until 2015and therefore needs internationalinvestors. German companies, wellreputed for its extraordinary experience, know-how and quality, are well prepared

Petrochemicals

largest producer of methanol und ranks on the second place among ethyleneproducers.

The Saudi Arabian Oil Company (ARAMCO) and the Saudi Basic Industries Corporation (SABIC) are the major actors in the sector. Being the world’s largest oil producer ARAMCO is in a key position: The state-owned company invests in multi-billion-dollar projects, acts as a shareholder of many joint ventures and provides the feedstock for numerous petrochemical plants. SABIC as the biggest company in the entire Middle East was founded in 1976 to push the diversification of the local industry. Today it is the largest public company in Saudi Arabia as listed in Saudis stock exchange Tadawul, but theGovernment still owns about 70 percentof its shares.

According to Gulf Petrochemicals and Chemicals Associaton, GCC member states were producing 39 million tons of petrochemical products in year 2000. Eight years later in 2008, the production increased to 100 million tons.Saudi Arabia – as biggest and most influen-tial GCC member – produced 60 million tons in 2011. That shows a world market share of 7-8 percent, which is likely to be raised up to 80 million tons in 2015. All in all, Saudi Arabia contributes three quarters to the production of petrochemicals in the entire Gulf region.

Saudi decision makers put unprecedented efforts in the diversification of the downstream industry to establish a labor intensive industry. SABIC and Saudi ARAMCO jointly with many additional players in Saudi Arabia are pushing the implementation process. In addition to increase the mass production of basic petrochemicals like polyethylene and polypropylene, Saudi Arabia focuses on expanding its downstream activities. Down-stream products like acetone, carbon oxide, polyethylene etc., which are the basis of higher value added products, shall be

produced in the Kingdom. Within the next five years, the production of 120 new chemicals will begin. The Middle East business intelligence MEED lists26 projects in the Saudi petrochemical sector with an investment volume of15 billion USD that are underway. Another 42 planned petrochemical projects are46 billion USD worth.

However, the preconditions for German companies are promising. Saudi Arabia has wide access to required raw materials and the costs for energy are low compared to other locations. Many German companies already use the advantages of site. An example how the future can look like is the Joint Venture Saudi Acrylic Polymers Company (SAPCo). In August 2011 the company was founded by Evonik, Tasnee and Sahara Petrochemicals to produce 80.000 tons p.a. of superabsorbent polymers in Jubail, starting in 2014. The Linde Group is also active on the Saudi market, operating with Sadara. The German company invests 380 million USD in Jubail to supply Sadara with carbon

monoxide, hydrogen and ammonia at a chemical complex now being built by Sadara in Jubail.

The SME Bischof + Klein produces flexible packaging solutions in Al-Khobar and Zeppelin is active in Jubail in the plant manufacturing business. The increase of downstream activities offers German companies good prospects for entering the Saudi Arabian market. Huge investments as well as projects with a volume of several billion USD are planned and make a long term growth of the petrochemical sector very likely. As Aldo Belloni, Member of the Executive Board of Linde AG, said, the petrochemical industry is expanding rapidly in Saudi Arabia. All in all, German plant and mechanical engineeringcompanies, providers of technology and external suppliers will find vast investment opportunities concerning the expansion of petrochemical plants in Saudi Arabia and the Gulf region.

Technology and know-how by the German Linde Group: The Jubail Olefins Complex being developed by Tasnee Petrochemicals Company (Tasnee) and Sahara Petrochemicals Company (Sahara) in partnership with Basell Polyolefins.

produce 340,000 tons of Butanol and a third factory to produce 80,000 tons of supper absorbent polymers annually.

Chemicals Sector:Chemicals industry has its highimportance within the vision of TASNEE towards economy diversification and industrialization. That is clear in National Titanium Dioxide Company (CRISTAL GLOBAL), one of TASNEE affiliates.

CRISTAL GLOBAL is one of the brilliant companies and it is the unique producer of Titanium Dioxide in the Middle East through its factory in Yanbu Industrial City, after increasing itsproduction from 50.000 ton to be 200.000 ton. CRISTAL also has acquired a majority share in Bemax of Australia, the producer of row material (Rutile) used in production of Titanium Dioxide. CRISTAL also acquired the Titanium Dioxide businessin Millennium Inorganic Company.Now CRISTAL becomes the second largest producer of Titanium Dioxide in the world.

Metals Sector:Metal industries sector is one of the most important economic sectors in Saudi Arabia. It is the most enormous among other sectors, regarding the number of producing factories and the number of employees. For this reason, TASNEE is keen to enhance its existence in the field of metal industries through two of its affiliate companies:

National Lead Smelting Co. (RASASS):RASASS is the largest lead factory in the region, it is the main supplier of lead for batteries factories in Saudi Arabia. The company, since its inception in 1990, continued to develop its operations and to

24

The National Industrialization Company (TASNEE) was established in 1985, as the first joint-stock industrial company fully owned by the Saudi private sector.The company pursued the path ofindustrialization as one of the best options for diversification of the economic base and boosting of the overall growth in Saudi Arabia. It endeavored to translate itsclear vision to be a leading industrial company which is committed towards its share holders and related parties worldwide. The secret of the Company’s strength is its wide experience and skilled-labor, state–of-the art technologies and products and innovative solutions which add value to its products and services locally and offshore.The Company has grown to become the second largest industrial Saudi Company and the second largest producer of titanium dioxide in the world.

TANEE Business SectorsTASNEE builds, manages, operates and owns petrochemicals , chemicals , plastics, engineering, and metals projects providing industrial services and marketing its products through five major sectors:

Petrochemicals Sector:The Saudi Petrochemical Sector has witnessed a major move since the early nineties of the twentieth century, after the private sector took the initiative to invest in the petrochemical industries and setting up reliable manufacturing plants. TASNEE was one of the leading private companies who invest in this field and set up a petrochemical business. TASNEE has constructed TASNEE Petrochemical Complex in Jubail industrial city which consists of three giant projects:

Saudi Polyolefins Company (SPC):

The Company has two integrated factories; the propylene factory with an annual production capacity of 455.000 ton, which was, in foundation date, the largest of its kind worldwide, and the polypropylene (PP) factory with an annual production capacity of 720.000 ton.TASNEE owns 75% of SPC, whereas Lyondell Basell owns 25%, and production goes back to early 2004.

Saudi Ethylene and Ployethylene Company (SEPC):SEPC has a unit for production of ethylene and propylene and two units for produc-tion of polyethylene, and propylene. The Company’s annual production capacity is one million ton of ethylene, 285.000 ton of propylene and 400.000 ton of high density polyethylene (HDPE), and 400.000 ton of low density polyethylene (LDPE). Production of ethylene/propylene goes back to August 2008, and production of HDPE started in November 2008, and that of LPDE in March 2009. The polyethylene two factories are the largest of their kind worldwide. The total investment cost of the whole complex is SR 9.5 billion. The plants are owned by TASNEE and Sahara Olefins Company and Lyondell Basell.

Saudi Acrylic Acid Company (SAAC):TASNEE also being keen to diversify its products, it establishes The Saudi Acrylic Acid Company, the first of its kind in Middle East with a total cost of more than SR 8 billion, to produce petrochemicals materials from oil derivatives. Acrylic project is a joint venture between TASNEE & Sahara Olefins Company (one of TASNEE affiliates) 75%, and Dow Chemical (Rohm & Haas) 25%.It includes a factory for Acrylic Monomers to produce 230,000 tons of Acrylic Acid and butyl acrylate, another factory to

German - Saudi Business Magazine TASNEE

play its role in the industrial development, through producing high quality lead, as well as its role at environmental protection level which is envisaged in elimination of the adverse effect of lead on the environment.RASASS was established in 1990 and, now, it has two smelters, in both Riyadh and Jeddah. It mainly focuses on collecting and recycling waste batteries to producelead in accordance with theinternational standards building on the latest technologies.The company manages its production process through three production units for producing; pure and high quality Lead, Sodium sulfate, and Polypropylene.

National Metal Manufacturing & Casting Co. (MAADANIAH):MAADANIYAH is the largest companyin the GCC area which is specializedin metallurgic industries of varioustypes including basic engineering and manufacturing industries. It has three factories which are; MASABEK factory for metals casting that serves transportation and agriculture sectors, MAHAWER factory for producing axels and spareparts that serves heavy transport sector providing trailers factories with axels of various sizes and types and spare parts, and ASLAK factory for producing wires that serves construction sector throughits main product (P.C. Strand) andmattress factories.

Diversified Products Sector:TASNEE is looking towards downstream industries to be as important as upstream, and both are among the main elements towards the growth and development of the Saudi economy. TASNEE has invested selectively in many diversified downstream industries since its establishment in 1985. TASNEE is working in many fields through a prominent group of companies such as:

ROWAD National PlasticCompany (ROWAD)ROWAD was established in 1992, as a prominent company in plastic industries promoting its products in more than (20) countries worldwide.

ROWAD always endeavors, in accordance with the national industrial strategy, to attract many technologies and international companies. It developed two sophisticated projects, one of them is in partnership with an American company, which is ROWAD International Industrial Membrane Company Limited, for production of plastic floor membrane, which is used in many vital water projects, and another project of Austrian partnership, which is ROWAD International Packing Company Limited, for production of multi-purpose plastic films including films for food wrapping.

National Batteries Company (BATTARIAT)BATTARIAT is one of the largestmanufacturers of car dry batteries in the region. It has the first factory in Saudi Arabia for producing automotive batteries, which was put into operation in 1998, with a designed annual production capacity of more than two million batteries. It produces sealed maintenance free batteries (SMF), and ordinary batteries, for all types of vehicles, all in accordance with the Saudi, Japanese, European and American standards, to meet the local, GCC and international markets requirements.

National Packing ProductsCompany Ltd (WATAN PAC)WATAN PAC was established in 1984 and started its actual production in 1987. The factory is located at the Industrial Area in Riyadh. It is specialized in production of corrugated carton plates for many sectors and for all purposes. It has become one of the leading producers of corrugated carton plates in Saudi Arabia and the GCC. The company targets local market and GCC markets and other Arab countries including Jordan, Syria and Yemen.

Services Sector:Services are considered as acomplementing part of TASNEE core businesses as a full and independent entity acting in different domains of business. TASNEE is concentrating its activities in Services Sector through a group of working companies in different fields like:

marketing, sales and distribution, qualifying other companies for ISO certification, and Environment Preservation. Those businesses are done through the following affiliate companies:

National IndustrializationPetrochemicals Marketing Co.It was established in 2002, as one of the most important national companies in polymers’ marketing. Its marketing activity coincided with starting of production of SPC plant in 2004, which is one of the key players in the petrochemicals market,and it ranks the second local producer of Polypropylene, at an annual capacity of 720.000 ton. It enhanced its work after starting the commercial productionin the Saudi Ethylene and Polyethylene Company in 2008 producing 400.000 HD Polyethylene and 400.000 LD Polyethylene. The company has effectively marketed its products at the local, the GCC, Middle East, Africa, Indian subcontinent, and East Asia markets. In 2012, its products reached more than 50 countries worldwide.

National Operation andIndustrial Services Co. (KHADAMAT)KHADAMAT was established in 1986, to be specialized in marketing and selling of industrial products, including car batteries, and plastic sheets. The company’s head office is in Riyadh, and has customers base that embraces about 1500 customer, supported by more than 30 sale outlets throughout the Kingdom.

National Technical Inspection and Testing Ltd. Co. (FAHSS)FAHSS is an important industrial and technical testing company for certification and qualification of firms and companies for the ISO certificate. The company was established in 1986, between TASNEE 75% and TUV-NORD of Germany 25%.FAHSS practices its operations and business in the GCC, and has a subsidiary (TUV-ME) in Bahrain, and a head office in Abu Dhabi with branches in Dubai, Qatar, Kuwait and Syria.

TASNEE..25 Years Developing Saudi Industry

25



produce 340,000 tons of Butanol and a third factory to produce 80,000 tons of supper absorbent polymers annually.

Chemicals Sector:Chemicals industry has its highimportance within the vision of TASNEE towards economy diversification and industrialization. That is clear in National Titanium Dioxide Company (CRISTAL GLOBAL), one of TASNEE affiliates.

CRISTAL GLOBAL is one of the brilliant companies and it is the unique producer of Titanium Dioxide in the Middle East through its factory in Yanbu Industrial City, after increasing itsproduction from 50.000 ton to be 200.000 ton. CRISTAL also has acquired a majority share in Bemax of Australia, the producer of row material (Rutile) used in production of Titanium Dioxide. CRISTAL also acquired the Titanium Dioxide businessin Millennium Inorganic Company.Now CRISTAL becomes the second largest producer of Titanium Dioxide in the world.

Metals Sector:Metal industries sector is one of the most important economic sectors in Saudi Arabia. It is the most enormous among other sectors, regarding the number of producing factories and the number of employees. For this reason, TASNEE is keen to enhance its existence in the field of metal industries through two of its affiliate companies:

National Lead Smelting Co. (RASASS):RASASS is the largest lead factory in the region, it is the main supplier of lead for batteries factories in Saudi Arabia. The company, since its inception in 1990, continued to develop its operations and to

The National Industrialization Company (TASNEE) was established in 1985, as the first joint-stock industrial company fully owned by the Saudi private sector.The company pursued the path ofindustrialization as one of the best options for diversification of the economic base and boosting of the overall growth in Saudi Arabia. It endeavored to translate itsclear vision to be a leading industrial company which is committed towards its share holders and related parties worldwide. The secret of the Company’s strength is its wide experience and skilled-labor, state–of-the art technologies and products and innovative solutions which add value to its products and services locally and offshore.The Company has grown to become the second largest industrial Saudi Company and the second largest producer of titanium dioxide in the world.

TANEE Business SectorsTASNEE builds, manages, operates and owns petrochemicals , chemicals , plastics, engineering, and metals projects providing industrial services and marketing its products through five major sectors:

Petrochemicals Sector:The Saudi Petrochemical Sector has witnessed a major move since the early nineties of the twentieth century, after the private sector took the initiative to invest in the petrochemical industries and setting up reliable manufacturing plants. TASNEE was one of the leading private companies who invest in this field and set up a petrochemical business. TASNEE has constructed TASNEE Petrochemical Complex in Jubail industrial city which consists of three giant projects:

Saudi Polyolefins Company (SPC):

The Company has two integrated factories; the propylene factory with an annual production capacity of 455.000 ton, which was, in foundation date, the largest of its kind worldwide, and the polypropylene (PP) factory with an annual production capacity of 720.000 ton.TASNEE owns 75% of SPC, whereas Lyondell Basell owns 25%, and production goes back to early 2004.

Saudi Ethylene and Ployethylene Company (SEPC):SEPC has a unit for production of ethylene and propylene and two units for produc-tion of polyethylene, and propylene. The Company’s annual production capacity is one million ton of ethylene, 285.000 ton of propylene and 400.000 ton of high density polyethylene (HDPE), and 400.000 ton of low density polyethylene (LDPE). Production of ethylene/propylene goes back to August 2008, and production of HDPE started in November 2008, and that of LPDE in March 2009. The polyethylene two factories are the largest of their kind worldwide. The total investment cost of the whole complex is SR 9.5 billion. The plants are owned by TASNEE and Sahara Olefins Company and Lyondell Basell.

Saudi Acrylic Acid Company (SAAC):TASNEE also being keen to diversify its products, it establishes The Saudi Acrylic Acid Company, the first of its kind in Middle East with a total cost of more than SR 8 billion, to produce petrochemicals materials from oil derivatives. Acrylic project is a joint venture between TASNEE & Sahara Olefins Company (one of TASNEE affiliates) 75%, and Dow Chemical (Rohm & Haas) 25%.It includes a factory for Acrylic Monomers to produce 230,000 tons of Acrylic Acid and butyl acrylate, another factory to

TASNEE

play its role in the industrial development, through producing high quality lead, as well as its role at environmental protection level which is envisaged in elimination of the adverse effect of lead on the environment.RASASS was established in 1990 and, now, it has two smelters, in both Riyadh and Jeddah. It mainly focuses on collecting and recycling waste batteries to producelead in accordance with theinternational standards building on the latest technologies.The company manages its production process through three production units for producing; pure and high quality Lead, Sodium sulfate, and Polypropylene.

National Metal Manufacturing & Casting Co. (MAADANIAH):MAADANIYAH is the largest companyin the GCC area which is specializedin metallurgic industries of varioustypes including basic engineering and manufacturing industries. It has three factories which are; MASABEK factory for metals casting that serves transportation and agriculture sectors, MAHAWER factory for producing axels and spareparts that serves heavy transport sector providing trailers factories with axels of various sizes and types and spare parts, and ASLAK factory for producing wires that serves construction sector throughits main product (P.C. Strand) andmattress factories.

Diversified Products Sector:TASNEE is looking towards downstream industries to be as important as upstream, and both are among the main elements towards the growth and development of the Saudi economy. TASNEE has invested selectively in many diversified downstream industries since its establishment in 1985. TASNEE is working in many fields through a prominent group of companies such as:

ROWAD National PlasticCompany (ROWAD)ROWAD was established in 1992, as a prominent company in plastic industries promoting its products in more than (20) countries worldwide.

ROWAD always endeavors, in accordance with the national industrial strategy, to attract many technologies and international companies. It developed two sophisticated projects, one of them is in partnership with an American company, which is ROWAD International Industrial Membrane Company Limited, for production of plastic floor membrane, which is used in many vital water projects, and another project of Austrian partnership, which is ROWAD International Packing Company Limited, for production of multi-purpose plastic films including films for food wrapping.

National Batteries Company (BATTARIAT)BATTARIAT is one of the largestmanufacturers of car dry batteries in the region. It has the first factory in Saudi Arabia for producing automotive batteries, which was put into operation in 1998, with a designed annual production capacity of more than two million batteries. It produces sealed maintenance free batteries (SMF), and ordinary batteries, for all types of vehicles, all in accordance with the Saudi, Japanese, European and American standards, to meet the local, GCC and international markets requirements.

National Packing ProductsCompany Ltd (WATAN PAC)WATAN PAC was established in 1984 and started its actual production in 1987. The factory is located at the Industrial Area in Riyadh. It is specialized in production of corrugated carton plates for many sectors and for all purposes. It has become one of the leading producers of corrugated carton plates in Saudi Arabia and the GCC. The company targets local market and GCC markets and other Arab countries including Jordan, Syria and Yemen.

Services Sector:Services are considered as acomplementing part of TASNEE core businesses as a full and independent entity acting in different domains of business. TASNEE is concentrating its activities in Services Sector through a group of working companies in different fields like:

marketing, sales and distribution, qualifying other companies for ISO certification, and Environment Preservation. Those businesses are done through the following affiliate companies:

National IndustrializationPetrochemicals Marketing Co.It was established in 2002, as one of the most important national companies in polymers’ marketing. Its marketing activity coincided with starting of production of SPC plant in 2004, which is one of the key players in the petrochemicals market,and it ranks the second local producer of Polypropylene, at an annual capacity of 720.000 ton. It enhanced its work after starting the commercial productionin the Saudi Ethylene and Polyethylene Company in 2008 producing 400.000 HD Polyethylene and 400.000 LD Polyethylene. The company has effectively marketed its products at the local, the GCC, Middle East, Africa, Indian subcontinent, and East Asia markets. In 2012, its products reached more than 50 countries worldwide.

National Operation andIndustrial Services Co. (KHADAMAT)KHADAMAT was established in 1986, to be specialized in marketing and selling of industrial products, including car batteries, and plastic sheets. The company’s head office is in Riyadh, and has customers base that embraces about 1500 customer, supported by more than 30 sale outlets throughout the Kingdom.

National Technical Inspection and Testing Ltd. Co. (FAHSS)FAHSS is an important industrial and technical testing company for certification and qualification of firms and companies for the ISO certificate. The company was established in 1986, between TASNEE 75% and TUV-NORD of Germany 25%.FAHSS practices its operations and business in the GCC, and has a subsidiary (TUV-ME) in Bahrain, and a head office in Abu Dhabi with branches in Dubai, Qatar, Kuwait and Syria.

26


Established in 1999, Saudi International Petrochemical Company (Sipchem) manufactures and markets methanol, butanediol, tetrahydrofuran, acetic acid, acetic anhydride, vinyl acetate monomer, as well as carbon monoxide through its various affiliates. It has been listed on Saudi Stock Market since 2006.

It serves its customers in the construction, solvents, automotive, electronics, polymer, coatings, and pharmaceutical industries that help improving the lives of people worldwide.

Following its success during the last decade, Sipchem continues its journeyof progress by launching severaldown-stream projects to manufacture

Ethylene Vinyl Acetate, Low Density Polyethylene, Ethyl Acetate, Butyl Acetate, Cross Linkable Polyethylene, and Semi conductive Compound that are scheduled to start in 2013.

It is noteworthy that Sipchem has been declared the winner of the “ best working environment company in the Kingdom” for the year 2010 through an independent survey. In 2011, Sipchem has been certified as a “Responsible Care” company, the first one among thechemical manufacturers in the Kingdom of Saudi Arabia.

Sipchem is building a corporate Product & Application Development Center (PADC) at Dhahran Techno Valley of King Fahd

University of Petroleum and Minerals (KFUPM). When completed, thistechnical center will be a new focus of polymer technology in the Kingdom with its mandate to develop the downstream polymer converting industry in the Kingdom.

In line with its corporate socialresponsibility, Sipchem activelyparticipates and supports community social causes. Sipchem takes itsresponsibilities towards its community so seriously that it has allocated 1% of its total net annual profit to support its social responsibility programs.

Sipchem

Sipchem

27



“SAHARA Petrochemicals” was established in 2004 and used Saudi Arabia as a location for its projects and production processes. “SAHARA Petrochemicals” is seeking to be a new magnate inmanufacturing chemical and petrochemical materials in its main location in Riyadh, its large production facilities in Al Jubail Industrial City on the Arab Gulf Coast. “SAHARA Petrochemicals” represents today a defiance to the private sector in Saudi Arabia and the gulf countries to enter the scope of preliminary industries scope by using the most moderninternational manufacturing technologies, through many strategic companies with the largest international companies specialized in this scope to exploit the wealth available in the KSA and transfer it to preliminary industries that are transformable; with due consideration and commitment with the approved regulations in Saudi Arabia and consideration to the local culture and environment. Also “SAHARA Petrochemicals” is committed to Saudi Arabia's saudization initiatives under “Saudization program” and it provides accordingly the precedence


to the citizens of Saudi Arabia to fill many positions that are listed as follows:Chemical Engineering, ElectricalEngineering, Mechanical Engineering, Business Administration, Marketingand Logistics, Information Technology, Human Resources, Financial and ccounting affairs and Industrial Security.

To make use of the support offered to the industrial sector in Saudi Arabia, especially

in petrochemical manufacturing projects, Zamil Group - one of the largest business houses in Saudi Arabia - handled theformation and sponsored “SAHARA Petrochemicals” a Saudi joint stock company with a paid up capital of SR 4,387,950,000.

“SAHARA Petrochemicals” performs participation and supervises foundation and establishing several limited liability companies in Al Jubail Industrial City with the participation of Saudi and foreign companies that have the modern skills and technologies; to produce and market its chemical and petrochemical products such as propylene, polypropylene, ethylene and polyethylene. “SAHARA Petrochemicals” was founded to be one of the pioneer industrial pillars in Saudi Arabia especially petrochemical and chemical industry which has evolved in the late seventies and has developed intoone of the pioneer manufacturing and exporting sectors in Saudi Arabia.


28


The Saudi Arabian plant and machinery market has shown double digits growth rates in 2011, according to the national statistics of the leading exporting countries. An analysis of the German Engineering Federation (VDMA) in 2011 recorded an increase of the total exports of the major machinery supplier countries to Saudi Arabia by 29% (10.4 billion Euros). This growth however, has to be put into perspective, due to the sharp decline in earnings in the period between 2008 and 2010. Imports reached a peak in 2007 at 10.1 billion Euros and declined to 8.0 billion U.S. Dollars in 2010. The U.S. and Germany have traditionally been the largest equipment suppliers to Saudi

Arabia, with market shares of 18.7% and 14.2% in 2011 respectively, followed by the Republic of China (12.2%), Italy (12.1%), Korea (Rep., 8.8%) and Japan (7.8%).

Based on the numerous investment projects, the strong upward trend has continued in the Saudi Arabian market for machines in 2012. According to U.S. trade statistics, the U.S. machinery exports to Saudi Arabia increased in the first nine months of 2012 by 31% to U.S. $ 2.9 billion. For the same period Eurostat reported an increase of German exports by 50% to 1.4 billion Euros. According to the VDMA data, German machinery

exports increased in the first half of 2012 by 58% to 1.1 billion Euros.

The machinery and equipment manufac-turers of the combined EU27 Group were able to increase sales by 11% to EUR 5.0 billion in 2011 (EUR 2.3 billion in special machines, an additional 1.2 billion Euros in machinery and 1.0 billion Euros in combustion engines). In the first eight months of 2012 an increase by 29% to EUR 4.0 billion was recorded.

Manufacturing

ManufacturingStrong potential for German manufacturers

harmonious relationships with each other whilst positively embracing the ideals of the Group and convictions of the business.

RAR Group companies & subsidiaries are the well-reorganized & classified group of companies working in the Oilfield, Power generation, Petrochemicals, Mining, Transportation, and the Infrastructures of Water & Utilities in KSA & other GCC countries.

The group operates in five Business Sectors, namely Trading, Manufacturing, Construction, Services, Real Estate and

30

The group is a dynamic, leading trading and industrial conglomerate in Saudi Arabia. For more than five decades the group has been instrumental in the development of Saudi Arabian infrastructure. Today it continues to contribute toward the growth and prosperity to the Saudi Arabian nation.

RAR Group is a well-diversified groupof companies that also includeland-based infrastructure construction and engineering services. Hence it understands the nature of engineering projects. RAR Group comprehends how to manage diverse businesses. The group has major

involvement in shore-based development of the Saudi Arabian infrastructure, being a major contributor to the Saudi Arabian nation.

RAR Group prides itself not only in delivering products and services of the highest quality and standards, but also ensures the utmost integrity with everyone that we deal with. Rashed Abdulrahman Al Rashed & Sons Group is interested in the successful continuation of the business for another generation in such a way as reflects the Group’s philosophies and idealssuch that all stakeholders can maintain


Consumer Products. Large scale investments are made in developing land and property through our real estate division, and many business partnerships are initiated with local and global compa-nies via the Investment arm of the group supported by the Group’s financial force, and managing and investment shares in more than 30 leading affiliates in KSA and not limited to contracting, manufacturing, Healthcare, Banks, IT, etc.

1. Trading division has five businesses operating within its jurisdiction:

• Building Materials Division• Ramat Marketing and Distribution• Al Rashed Cement• Al Rashed Goodyear

2. Manufacturing division produce a variety of products at various factories and increased production has warranted large scale investment in these businesses. Seven businesses operate in this sector:• Al Rashed Steel• Al Rashed Fasteners• Saudi Filters• Al Rashed Wood Products Factory

• Al Rashed Polystyrene Factory• SAVETO (Saudi Vetonit) • Al Rashed Donaldson • Al Rashed Food 3. Services division has a major engineering focus and is a key platform in understanding the logic of design and delivery of engineering services. It is this strength that the Group intends to use in its marine and offshore initiative.

• Al Rashed Transport • Al Rashed Engineering & Fabrication Services • SASCOM (Saudi Arabian Services Company)• Turbine Services Company for Operations and Maintenance

4. Contracting business through the Civil Works Company and its JVs has been involved in major land-based infrastructure construction projects since the early 1970’s. Projects include pipeline construction, waterworks projects, telecommunication, power generation, electricity distribution and the supply and installation of power substations. 5. Real Estate Division specialises in the development of prime property in developments are beacons on the skyline of many cities, such as the Al Rashed Mall in Al Khobar and the Dammam Sheraton.

Rashed AbdulrahmanAl Rashed & Sons Group (RAR)

31



harmonious relationships with each other whilst positively embracing the ideals of the Group and convictions of the business.

RAR Group companies & subsidiaries are the well-reorganized & classified group of companies working in the Oilfield, Power generation, Petrochemicals, Mining, Transportation, and the Infrastructures of Water & Utilities in KSA & other GCC countries.

The group operates in five Business Sectors, namely Trading, Manufacturing, Construction, Services, Real Estate and

The group is a dynamic, leading trading and industrial conglomerate in Saudi Arabia. For more than five decades the group has been instrumental in the development of Saudi Arabian infrastructure. Today it continues to contribute toward the growth and prosperity to the Saudi Arabian nation.

RAR Group is a well-diversified groupof companies that also includeland-based infrastructure construction and engineering services. Hence it understands the nature of engineering projects. RAR Group comprehends how to manage diverse businesses. The group has major

involvement in shore-based development of the Saudi Arabian infrastructure, being a major contributor to the Saudi Arabian nation.

RAR Group prides itself not only in delivering products and services of the highest quality and standards, but also ensures the utmost integrity with everyone that we deal with. Rashed Abdulrahman Al Rashed & Sons Group is interested in the successful continuation of the business for another generation in such a way as reflects the Group’s philosophies and idealssuch that all stakeholders can maintain

Consumer Products. Large scale investments are made in developing land and property through our real estate division, and many business partnerships are initiated with local and global compa-nies via the Investment arm of the group supported by the Group’s financial force, and managing and investment shares in more than 30 leading affiliates in KSA and not limited to contracting, manufacturing, Healthcare, Banks, IT, etc.

1. Trading division has five businesses operating within its jurisdiction:

• Building Materials Division• Ramat Marketing and Distribution• Al Rashed Cement• Al Rashed Goodyear

2. Manufacturing division produce a variety of products at various factories and increased production has warranted large scale investment in these businesses. Seven businesses operate in this sector:• Al Rashed Steel• Al Rashed Fasteners• Saudi Filters• Al Rashed Wood Products Factory

• Al Rashed Polystyrene Factory• SAVETO (Saudi Vetonit) • Al Rashed Donaldson • Al Rashed Food 3. Services division has a major engineering focus and is a key platform in understanding the logic of design and delivery of engineering services. It is this strength that the Group intends to use in its marine and offshore initiative.

• Al Rashed Transport • Al Rashed Engineering & Fabrication Services • SASCOM (Saudi Arabian Services Company)• Turbine Services Company for Operations and Maintenance

4. Contracting business through the Civil Works Company and its JVs has been involved in major land-based infrastructure construction projects since the early 1970’s. Projects include pipeline construction, waterworks projects, telecommunication, power generation, electricity distribution and the supply and installation of power substations. 5. Real Estate Division specialises in the development of prime property in developments are beacons on the skyline of many cities, such as the Al Rashed Mall in Al Khobar and the Dammam Sheraton.

Recently, alfanar Construction successfully completed the commissioning of Hail-2 Power Plant Extension-III located in North Central Region of KSA. Valued at a project cost of $ 218m, the project

32

With their formidable presence of over three and a half decades in the Middle East employing over 15,000 personnel, their projects, products and services carry a mark of impeccable quality and customer confidence.

The company registered a turnover of SR 6.75 billion (€ 1.38b) in 2012 and is forging ahead towards an impressive growth path.Alfanar Construction, a major division of Alfanar Co., is the Electrical Construction Specialist (EPC/Project Management Company) engaged in turnkey project execution of Medium to Large sized Power

Generation, Transmission and Distribution projects for the Utility and major private sector companies in KSA. They have, since inception executed over 150 successful projects of various configurationsincluding a good number of land mark projects in the Kingdom. alfanar has in its fold various support service ancillary units for Electromechanical, Civil, Testing & Commissioning, Technical services and Design projects. alfanar has a grade‘A’ ranking under Saudi ArabianContractor Classification and accredited with ISO 9001:2008 for its QualityManagement Systems.


involved reinforcement of the existing power plant with the capacity of 448MW with an option for conversion ofsimple-cycle to combined-cycle technology in the next phase. This is in addition tothe extension II of the same project commissioned last year by the company.

The professional competence of the team culminated in delivery of the project ahead of the scheduled time by 6 weeks (project scheduled duration-15 months) thanks to the commendable support it received from the project owners and designers. The quality and safety record of alfanar was par excellence and the client, indeed, was quite elated. Alfanar has consistently been

keeping up its reputation of itscommitment to Quality, Safety and delivery in all projects that it undertakes through adoption of Good project control and Quality management systems. The hall mark of this project is its superior finish, consistent and reliable throughputto the power grid, Functional Quality of all its Equipment and complete customer satisfaction.

alfanar used Siemens Gas turbine units SGT-6 2000E and four generators together with auxiliary equipment for this project and teamed up with Siemens Energy Fossil Power to jointly commission the Gas turbine units providing a total output

capacity of 280 MW. This follows the successful commissioning of the first two gas turbine units at Hail-2 Extension-II power plant in a record time of 12 months last year.

Alfanar strives to continually upgrade its talent pool through greater emphasis on training and employee development programs. More importance is given to on the job training and honing the skills of fresher’s for quicker line absorption. The company has good motivational and retention programs for its employees’. Safety is always a priority at alfanar and appropriate programs for safety in project processes are an integral part of Project management.

Alfanar’s proactive risk management strategy is visible through various stages of its project execution. The project, process, performance, financial and other related risks are well thought of, analyzed to the extent perceivable and appropriate course of action put in place well in advance to mitigate the same.

A company with unique attributes, alfanar is a company with deference for project excellence.

Alfanara leading player with a difference

Alfanar

Alfanar Co., is a leading Construction, Manufacturingand Marketing Organization in Electrical Constructionbased in Riyadh, Saudi Arabia.

33



Recently, alfanar Construction successfully completed the commissioning of Hail-2 Power Plant Extension-III located in North Central Region of KSA. Valued at a project cost of $ 218m, the project

With their formidable presence of over three and a half decades in the Middle East employing over 15,000 personnel, their projects, products and services carry a mark of impeccable quality and customer confidence.

The company registered a turnover of SR 6.75 billion (€ 1.38b) in 2012 and is forging ahead towards an impressive growth path.Alfanar Construction, a major division of alfanar Co., is the Electrical Construction Specialist (EPC/Project Management Company) engaged in turnkey project execution of Medium to Large sized Power

Generation, Transmission and Distribution projects for the Utility and major private sector companies in KSA. They have, since inception executed over 150 successful projects of various configurationsincluding a good number of land mark projects in the Kingdom. alfanar has in its fold various support service ancillary units for Electromechanical, Civil, Testing & Commissioning, Technical services and Design projects. alfanar has a grade‘A’ ranking under Saudi ArabianContractor Classification and accredited with ISO 9001:2008 for its QualityManagement Systems.

involved reinforcement of the existing power plant with the capacity of 448MW with an option for conversion ofsimple-cycle to combined-cycle technology in the next phase. This is in addition tothe extension II of the same project commissioned last year by the company.

The professional competence of the team culminated in delivery of the project ahead of the scheduled time by 6 weeks (project scheduled duration-15 months) thanks to the commendable support it received from the project owners and designers. The quality and safety record of alfanar was par excellence and the client, indeed, was quite elated. Alfanar has consistently been

keeping up its reputation of itscommitment to Quality, Safety and delivery in all projects that it undertakes through adoption of Good project control and Quality management systems. The hall mark of this project is its superior finish, consistent and reliable throughputto the power grid, Functional Quality of all its Equipment and complete customer satisfaction.

Alfanar used Siemens Gas turbine units SGT-6 2000E and four generators together with auxiliary equipment for this project and teamed up with Siemens Energy Fossil Power to jointly commission the Gas turbine units providing a total output

capacity of 280 MW. This follows the successful commissioning of the first two gas turbine units at Hail-2 Extension-II power plant in a record time of 12 months last year.

Alfanar strives to continually upgrade its talent pool through greater emphasis on training and employee development programs. More importance is given to on the job training and honing the skills of fresher’s for quicker line absorption. The company has good motivational and retention programs for its employees’. Safety is always a priority at Alfanar and appropriate programs for safety in project processes are an integral part of project management.

Alfanar’s proactive risk management strategy is visible through various stages of its project execution. The project, process, performance, financial and other related risks are well thought of, analyzed to the extent perceivable and appropriate course of action put in place well in advance to mitigate the same.

A company with unique attributes, Alfanar is a company with deference for project excellence.

Alfanar

A view of Hail-2 power plant Extension III

34

German - Saudi Business Magazine Mining

In 2004 the government adopted a new mining code to facilitate private sector investment in the mining industry, reducing the corporate tax liability to 20% and scrapping mineral royalties. Besides harboring vast unexplored deposits, the mining sector in Saudi Arabia, has opened up significantly to the private sector and foreign direct investment, in contrast to the hydrocarbon industry. Ma’aden, the Saudi Arabian Mining Company was founded in 1997 with the purpose of developing the mining sector. It was partly privatized in 2004 when 50% of the company was divested at the initial public

offering for 2.47 billion U.S. Dollars; the funds were subsequently put to good use by further initiating international partner-ships. The mining industry is thus expand-ing strongly, aided by large investments in the sector.

In the Eastern Province (Ras al Zour) there is currently a large project under construction, the 10-billion-U.S. Dollar Ma’aden/Alcoa aluminum complex, which is progressing quickly. The plant is planned to produce 1.6 million tons of alumina and 0.75 million tons of aluminum per year. The raw material will

be supplied by the Al Zabirah bauxite mines in the north of the country. The aluminum smelter and the rolling mill will start operation in late 2013.

Ma’aden, Saudi Arabia’s largest gold miner, currently finalized the contract to build a gravity-CIL gold process plant for its Ad Duwayhi Gold Mine in the central region. The Ad Duwayhi gold mine is expected to produce approximately 180, 000 ounces of gold per year and more than 1.6 million ounces over the lifeof the mine, according to Eng. KhalidAl Mudaifer, Ma’aden President and CEO.

MININGVast Potential For ForeignDirect Investment

35



Ma’aden

Ma’aden was originally wholly owned by the Saudi Government before 50% of its shares were floated on the Saudi Stock Exchange (Tadawul) in 2008.

Initially Ma’aden’s activities focused on expanding its active gold business which now includes five mines and over 11 million ounces of JORC compliant gold resources at operational and exploration sites.

Ma'aden has also developed its activities beyond gold with the development of Ma'aden Phosphate Company, which started production in 2011, its aluminium project which is currently under

Ma’adenconstruction and a number of other projects. Ma’aden’s exploration teams are working to expand available resources in existing business areas as well as to broaden the company's mineral portfolio.

Ma’aden’s objective is to carry out activities relating to all stages of the mining industry including the development and enhance-ment of the mineral industry and all related sectors in Saudi Arabia. Ma’adenendeavours to successfully accomplish its objectives while operating with the utmost concern for human resources, health, safety and environmental issues.

Maaden launched its Leadership Academy on February 13 & 14, 2013 at Jubail Intercontinental with the participation of the top 17 leaders of the Company. The Chairman of Board Directors kicked of the first forum highlighting the vital role the academy will play to help Maaden realize its strategic objective of being an international world class mining enterprise.Ma'aden has been designed to build the

capabilities of Ma’aden top talent and future high potentials, ensuring a highly performing workforce. The academy curriculum is based on the Ma'aden leadership model, and employs acomprehensive set of assessments, classroom based training, fieldwork, and coaching sessions

Initially, the Academy’s immediate objective is to provide customizedmanagerial and leadership training to support the effective execution of the Maaden Transformation Program (ETGAN). It will deliver timely training to Maaden senior leaders as well as members of the Etgan initiative teams. Over time, however, the Academy will become the epicentre of leadership training for all Ma'aden employees, owned by HR and integrated with all HR processes.

Ma’aden was formed by Royal decree in 1997 to facilitatethe development of Saudi Arabia's mineral resources.

were the models Toyota Hilux (January-July 2012: 38,783 units), Toyota Corolla (27,831) and Hyundai Accent (25,406).

According to the U.S. export statistics, the car deliveries to Saudi Arabia increased by 51% to 4 billion U.S. Dollars in the first nine months of 2012. For passenger cars, an increase of 46% to U.S. $ 3.6 billion is reported, the truck sales doubled to $ 342 million.

36

The Saudi automotive market ischaracterized by high growth rates. In the first seven months of 2012 passenger car sales increased by 16% to 408,000 units compared to the same period of 2011, for the full year it reached about 700,000. The truck and bus segment has had a market share of around 20% in recent years. The total sales of new motor vehicles increased in 2011 by 7% to approximately 690,000. Business Monitor International (BMI)

expects an increase to 1 million vehicles by 2015.

The passenger car market is dominated by Japanese and Korean companies, which reached a share of over 80% in 2011, followed by the U.S. manufacturers. Sorted by brands, in the first seven months of the 2012, Toyota had a market share of 40%, followed by Hyundai (19%) and Kia, Chevrolet and Ford with 6%. The sellers


The German car brands are strong in the luxury segment. For instance BMW was able to increase its sales (including MINI) by 14% in the first nine months of 2012, in the whole of 2011 there were 3,072 vehicles (excluding MINI). Audi increased its sales in the first nine months by 36% to 1,420 units (+36% FY 2011: 1,522), in the first half of 2012 Porsche exported 620 vehicles (full year 2011: 781). In 2011 Mercedes-Benz was able to increase sales by 13% to 3,150 vehicles, a continued positive development. According to Eurostat, the German car exports to Saudi Arabia increased by 61% to 988 million Euros (cars: EUR 340 million; trucks: € 387 million; other road vehicles: EUR 261 million) in the first nine months of 2012.

In the medium term, Saudi Arabia aims to build a large automobile and parts industry. In the truck sector there are alreadyassembly plants of Mercedes, MAN and

Volvo. Isuzu Motors will soon begin in the Eastern Province (Dammam Industrial City II) with the production of medium trucks. In future, cars will also be produced locally. The head of India's Tata Motors, Ratan Tata, declared in summer 2012, that Tata plans to assemble vehicles of British

brands Jaguar and Land Rover in Saudi Arabia. Two projects are also underway for the construction of locally developed cars, known under the names “Ghazal 1” (based on the Mercedes-Benz G-Class) and “Assilah”.

Automotive

Huge potentialfor German brands

Automotive

37



were the models Toyota Hilux (January-July 2012: 38,783 units), Toyota Corolla (27,831) and Hyundai Accent (25,406).

According to the U.S. export statistics, the car deliveries to Saudi Arabia increased by 51% to 4 billion U.S. Dollars in the first nine months of 2012. For passenger cars, an increase of 46% to U.S. $ 3.6 billion is reported, the truck sales doubled to $ 342 million.

The Saudi automotive market ischaracterized by high growth rates. In the first seven months of 2012 passenger car sales increased by 16% to 408,000 units compared to the same period of 2011, for the full year it reached about 700,000. The truck and bus segment has had a market share of around 20% in recent years. The total sales of new motor vehicles increased in 2011 by 7% to approximately 690,000. Business Monitor International (BMI)

expects an increase to 1 million vehicles by 2015.

The passenger car market is dominated by Japanese and Korean companies, which reached a share of over 80% in 2011, followed by the U.S. manufacturers. Sorted by brands, in the first seven months of the 2012, Toyota had a market share of 40%, followed by Hyundai (19%) and Kia, Chevrolet and Ford with 6%. The sellers

The German car brands are strong in the luxury segment. For instance BMW was able to increase its sales (including MINI) by 14% in the first nine months of 2012, in the whole of 2011 there were 3,072 vehicles (excluding MINI). Audi increased its sales in the first nine months by 36% to 1,420 units (+36% FY 2011: 1,522), in the first half of 2012 Porsche exported 620 vehicles (full year 2011: 781). In 2011 Mercedes-Benz was able to increase sales by 13% to 3,150 vehicles, a continued positive development. According to Eurostat, the German car exports to Saudi Arabia increased by 61% to 988 million Euros (cars: EUR 340 million; trucks: € 387 million; other road vehicles: EUR 261 million) in the first nine months of 2012.

In the medium term, Saudi Arabia aims to build a large automobile and parts industry. In the truck sector there are alreadyassembly plants of Mercedes, MAN and

Volvo. Isuzu Motors will soon begin in the Eastern Province (Dammam Industrial City II) with the production of medium trucks. In future, cars will also be produced locally. The head of India's Tata Motors, Ratan Tata, declared in summer 2012, that Tata plans to assemble vehicles of British

brands Jaguar and Land Rover in Saudi Arabia. Two projects are also underway for the construction of locally developed cars, known under the names “Ghazal 1” (based on the Mercedes-Benz G-Class) and “Assilah”.

Automotive

- Fluor 1974- Munich Reinsurance 1974- Nabors Arabia Company Ltd. 1974- Zurich Financial Services 1984

Manufacture

Meeting market demand and coping with the planning requirements of the industrial economy led Juffali to establish a number of factories: Juffali Factories- Arabian Metal Industries Co. 1976- Saudi Refrigerators Manufacturing Co. 1983- Juffali Air Ducts and Accessories Plant 1990- Gulf Acrylic Manufacturing Co. 1997- Juffali Low Tension Factory 2004- Juffali Tyres Retreading Factory 2005

Joint Factories- National Automobile Industry Co. 1974- Saudi Tractors Manufacturing Co. 1977- Saudi Building Systems Manufacturing Co. 1975- Saudi Air-conditioning Manufacturing Co. 1982- Arabian Chemical Company (Polystyrene) 1984- Arabian Chemical Company “Latex” 1993

38

E. A. Juffali & Brothers was established in 1946 by the three brothers Ebrahim, Ali and Ahmed Abdullah Juffali, not long after the birth of the Kingdom of Saudi Arabia, in 1932. In those days the Kingdom was not the thriving modern economy it is today. In fact, many of the most basic infrastructures were rudimentary.

Juffali’s initial business was in the fields of electric power, communications and cement. These were fledgling industries in those days and many of Juffali’s early projects were truly pioneering. In fact, Juffali was instrumental in establishing the electricity grid for Jeddah.With little infrastructure, Juffali learnt to make the most of whatever opportunities were available. In the early days,even the water for some of Juffali’s first big projects was trucked down from the family’s farm in Makkah, as there was no reliable source closer to hand. It was this pioneering spirit that led the company to constantly seek out opportunities to develop themselves and the Kingdom, as a whole.

International Partners

Juffali soon realized that the fastest, most effective way to advance local Saudi industry was by establishing partnerships with international leaders in their fields.Thereby bringing top international knowledge and technology into the local market.Juffali set about buildingrelationships with key multinationals and soon expanded into manufacturing and importing, developing alliances with many world-leading brands.

Their first international partnership deals were struck in 1951, with Electrolux, Kelvinator and Massey Ferguson.

Today, there is hardly a sector in which Juffali that is not represented and their list

of international partners reads like a ‘who’s who’ of market leaders.

Trading

Juffali cooperates with many leading international companies for thedistribution of their products in theKingdom as follows:

- Kelvinator 1951- Massey Ferguson 1951- Siemens 1954- Mercedes-Benz 1959- Heidelberg 1960- Michelin 1961- Bosch 1965- Ericsson 1965- IBM 1968- Butler 1975- Dow Chemical 1977- DuPont 1979- Liebherr 1984- Carrier 1988- Karcher 1998- Frigidaire 2007

ServicesJuffali’s alliances with top international companies extended to the field of services as follows:


Growth Sectors

Wherever there has been an opportunity to introduce a product or service that will benefit the Kingdom, and its people, Juffali has been quick to seize the initiative. While they continue to develop their traditional businesses -including automobiles, tyres, home appliances, cement, printing and graphic equipment – Juffali is alsoexperiencing significant growth in the following sectors:

Chemicals: Juffali is making major moves to expand into production and distribution of specialty chemicals to satisfy theexpanding regional demand in this sector.

Agriculture: Juffali maintains a position as the preeminent supplier of specialized farm machinery and equipment: tractors, harvesters, grain silos, water irrigation systems, pumps, powerpacks andgenerators.

Computers and Telecommunications: Saudi Arabia has the highest investment in computing and telecommunications equipment in the Arab World. Their long association with such world leaders as IBM, Ericsson, Siemens, and Raychem has enabled Juffali to introduce the Kingdom to the most sophisticated voice and data communication systems and leading-edge computer technologies.

Manufacturing: Across all sectors, such strong bonds have developed with some international partners, that the focus of Juffali’s business has developed beyond that of agent or partner.

In many cases, partners’ products are now being manufactured, under license, right here in the Kingdom.

With much basic industry in place, Juffali is moving to expand its commitment for in-country manufacture of capital goods and consumer products for the Saudi Arabian and Gulf markets. In fact, this is not a new area of business for Juffali.

More than 30 years ago Juffali incollaboration with Mercedes- Benz, set up NAI, the first vehicle assembly plant in the region, to assemble Mercedes-Benz trucks. The NAI factory is still going strong and is consistently rated as one of the top Mercedes-Benz assembly plants, outside of Germany.

The Secret to Success

As soon as Juffali began trading with international companies, they realized that simply importing high quality products was never going to be enough. It was essential to ensure that qualified technicians were available to service, repair and maintain the products. And, that parts and spares would need to be readily available.

Today, Juffali’s integrated network of computer-based parts and service logistics is second to none in the Arab world, and Juffali’s commitment to after-sales service remains a major factor in their ongoing success.

Our Greatest Asset

Juffali has always appreciated that good staff are the most valuable asset any company can possess. And, that the best way to recruit and retain the rightpersonnel is by treating them well.

Juffali has always gone the extra mile to ensure that every staff member’s needs are catered too, from the most junior employee to the most senior management. Low staff turnover and the number of senioremployees who have risen through the ranks is testimony to the fact that their policy of treating their staff better has been successful.

Within Juffali, many senior posts, with top international partners, are being filled by a growing number of Saudi managers, engineers, and technicians many of whom have grown into their posts with the aid of our Juffali’s inhouse training center where specialized management and technical skills are developed.

Juffali Training Academy

While recruiting experienced expat staff to work on their many international brands, Juffali realized that the only way to develop a truly self-sufficient Kingdom would be to create a competent, skilled local workforce, capable of maintaining imported brands and products.

To this end the Juffali Academy established in 1977 offering technical courses which provide many Saudi youths with theopportunity to develop the skills they require to make a meaningful contribution to the company, and country as a whole. Many graduates fill specialized posts at Juffali, while others go on to work in similar positions elsewhere in the Kingdom.

With you every step of the way

Since the early days, when King Abdul Aziz unified the peninsula to form the Kingdom of Saudi Arabia, Juffali has been striving to play a useful part in the development of out great nation.

Today, we are proud of our contribution to the betterment of our country and all its people, and will continue to play our part as we enter the next era, under the visionary leadership of HRH King Abdullah Bin Abdul Aziz Al Saud.

E. A. Juffali & BrothersE. A. Juffali & Brothers

39



- Fluor 1974- Munich Reinsurance 1974- Nabors Arabia Company Ltd. 1974- Zurich Financial Services 1984

Manufacture

Meeting market demand and coping with the planning requirements of the industrial economy led Juffali to establish a number of factories: Juffali Factories- Arabian Metal Industries Co. 1976- Saudi Refrigerators Manufacturing Co. 1983- Juffali Air Ducts and Accessories Plant 1990- Gulf Acrylic Manufacturing Co. 1997- Juffali Low Tension Factory 2004- Juffali Tyres Retreading Factory 2005

Joint Factories- National Automobile Industry Co. 1974- Saudi Tractors Manufacturing Co. 1977- Saudi Building Systems Manufacturing Co. 1975- Saudi Air-conditioning Manufacturing Co. 1982- Arabian Chemical Company (Polystyrene) 1984- Arabian Chemical Company “Latex” 1993

E. A. Juffali & Brothers was established in 1946 by the three brothers Ebrahim, Ali and Ahmed Abdullah Juffali, not long after the birth of the Kingdom of Saudi Arabia, in 1932. In those days the Kingdom was not the thriving modern economy it is today. In fact, many of the most basic infrastructures were rudimentary.

Juffali’s initial business was in the fields of electric power, communications and cement. These were fledgling industries in those days and many of Juffali’s early projects were truly pioneering. In fact, Juffali was instrumental in establishing the electricity grid for Jeddah.With little infrastructure, Juffali learnt to make the most of whatever opportunities were available. In the early days,even the water for some of Juffali’s first big projects was trucked down from the family’s farm in Makkah, as there was no reliable source closer to hand. It was this pioneering spirit that led the company to constantly seek out opportunities to develop themselves and the Kingdom, as a whole.

International Partners

Juffali soon realized that the fastest, most effective way to advance local Saudi industry was by establishing partnerships with international leaders in their fields.Thereby bringing top international knowledge and technology into the local market.Juffali set about buildingrelationships with key multinationals and soon expanded into manufacturing and importing, developing alliances with many world-leading brands.

Their first international partnership deals were struck in 1951, with Electrolux, Kelvinator and Massey Ferguson.

Today, there is hardly a sector in which Juffali that is not represented and their list

of international partners reads like a ‘who’s who’ of market leaders.

Trading

Juffali cooperates with many leading international companies for thedistribution of their products in theKingdom as follows:

- Kelvinator 1951- Massey Ferguson 1951- Siemens 1954- Mercedes-Benz 1959- Heidelberg 1960- Michelin 1961- Bosch 1965- Ericsson 1965- IBM 1968- Butler 1975- Dow Chemical 1977- DuPont 1979- Liebherr 1984- Carrier 1988- Karcher 1998- Frigidaire 2007

ServicesJuffali’s alliances with top international companies extended to the field of services as follows:

Growth Sectors

Wherever there has been an opportunity to introduce a product or service that will benefit the Kingdom, and its people, Juffali has been quick to seize the initiative. While they continue to develop their traditional businesses -including automobiles, tyres, home appliances, cement, printing and graphic equipment – Juffali is alsoexperiencing significant growth in the following sectors:

Chemicals: Juffali is making major moves to expand into production and distribution of specialty chemicals to satisfy theexpanding regional demand in this sector.

Agriculture: Juffali maintains a position as the preeminent supplier of specialized farm machinery and equipment: tractors, harvesters, grain silos, water irrigation systems, pumps, powerpacks andgenerators.

Computers and Telecommunications: Saudi Arabia has the highest investment in computing and telecommunications equipment in the Arab World. Their long association with such world leaders as IBM, Ericsson, Siemens, and Raychem has enabled Juffali to introduce the Kingdom to the most sophisticated voice and data communication systems and leading-edge computer technologies.

Manufacturing: Across all sectors, such strong bonds have developed with some international partners, that the focus of Juffali’s business has developed beyond that of agent or partner.

In many cases, partners’ products are now being manufactured, under license, right here in the Kingdom.

With much basic industry in place, Juffali is moving to expand its commitment for in-country manufacture of capital goods and consumer products for the Saudi Arabian and Gulf markets. In fact, this is not a new area of business for Juffali.

More than 30 years ago Juffali incollaboration with Mercedes- Benz, set up NAI, the first vehicle assembly plant in the region, to assemble Mercedes-Benz trucks. The NAI factory is still going strong and is consistently rated as one of the top Mercedes-Benz assembly plants, outside of Germany.

The Secret to Success

As soon as Juffali began trading with international companies, they realized that simply importing high quality products was never going to be enough. It was essential to ensure that qualified technicians were available to service, repair and maintain the products. And, that parts and spares would need to be readily available.

Today, Juffali’s integrated network of computer-based parts and service logistics is second to none in the Arab world, and Juffali’s commitment to after-sales service remains a major factor in their ongoing success.

Our Greatest Asset

Juffali has always appreciated that good staff are the most valuable asset any company can possess. And, that the best way to recruit and retain the rightpersonnel is by treating them well.

Juffali has always gone the extra mile to ensure that every staff member’s needs are catered too, from the most junior employee to the most senior management. Low staff turnover and the number of senioremployees who have risen through the ranks is testimony to the fact that their policy of treating their staff better has been successful.

Within Juffali, many senior posts, with top international partners, are being filled by a growing number of Saudi managers, engineers, and technicians many of whom have grown into their posts with the aid of our Juffali’s inhouse training center where specialized management and technical skills are developed.

Juffali Training Academy

While recruiting experienced expat staff to work on their many international brands, Juffali realized that the only way to develop a truly self-sufficient Kingdom would be to create a competent, skilled local workforce, capable of maintaining imported brands and products.

To this end the Juffali Academy established in 1977 offering technical courses which provide many Saudi youths with theopportunity to develop the skills they require to make a meaningful contribution to the company, and country as a whole. Many graduates fill specialized posts at Juffali, while others go on to work in similar positions elsewhere in the Kingdom.

With you every step of the way

Since the early days, when King Abdul Aziz unified the peninsula to form the Kingdom of Saudi Arabia, Juffali has been striving to play a useful part in the development of out great nation.

Today, we are proud of our contribution to the betterment of our country and all its people, and will continue to play our part as we enter the next era, under the visionary leadership of HRH King Abdullah Bin Abdul Aziz Al Saud.

E. A. Juffali & Brothers

40

German - Saudi Business Magazine MAN

In 2008, HHA began its production in a MAN assembly facility fully owned and operated by HHA where it produces most of the models sold in Saudi Arabia. SAMCO (Saudi Automotive Manufactur-ing Co Ltd) in Jeddah has produced over 3000 vehicles to date,

Prior to reaching the milestone of 1000 trucks produced in early 2011, SAMCO was awarded the prestigious ISO 9001:2008 certification from the interna-tionally recognized Bureau Veritas, with UKAS accreditation.

HHA has also recently completed a major expansion at the Riyadh MAN Center, to serve its growing market share. This had its official opening in January 2012, where the guest of honor was His Excellency the Deputy Minister of Transport Dr Abdul Aziz AbdulRahman Al-Ohaly; also present were the Senior Management Team from MAN Germany including Dr Frank Hiller CEO MAN SE along with a number of VIP’s and distinguished guests, including both the German and Austrian Ambassadors.

To further endorse its commitment Haji Husein Alireza & Co Ltd along with its

partner MAN Truck & Bus Middle East plans to increase its focus on Saudi Arabia’s construction industry during 2012. With a current market share of 24% in KSA, and as one of the company’s most important regional markets, HHA / MAN is well-positioned to grow its footprint within KSA’s booming construction sector over the coming months.

KSA has the biggest real estate market in the GCC, with a total commercial space – including residential units, offices, and retail space – that is larger than the commercial spaces available in the all other GCC countries combined, Yet the country is expected to increase this space significantly in the upcoming years on account of its accelerated population growth and the resultant increase in demand on residential units. Construction projects are afoot to meet demand that may reach 1.65 million units by 2015 if current projects are delayed,

The Ministry of Transport has also awarded contracts to build 6,600 kilometers of roads in addition to the 32,200 kilometers already under construc-tion. So the future looks bright for the Saudi construction and transport sectors.

MANHHA will continue to work closely with MAN Truck & Bus AG, to win a greater market share and play an even larger role in the development and growth of the Kingdom of Saudi Arabia.

Haji Husein Alireza today represents five of the world's leading automobile and truck manufacturers: MAN Commercial Vehicles, Aston Martin, Mazda, Peugeot and Geely. HHA is the exclusive Kingdom-wide distributor for the manufacturers it represents.

Customer support & after sales is assured through a nationwide network of company owned branches and dealers. A well-developed installment sales and leasing division provides HHA's custom-ers with consumer finance and credit support.

HISTORY

Haji Husein Alireza & Co. Ltd. (HHA) was established as a general trading company in 1906 with diverse interests in foodstuffs, building materials, and jewelry.

In 1926, HHA became the first company to import and distribute automobiles on a commercial basis in the Arabian Peninsula. Although HHA's business has been relatively diversified throughout the years, the automotive field remained the main area of the company's activities.

HHA's commitment to excellence by providing quality products and services to its customers has made it one of Saudi Arabia's leading private businesses.

Forms an Integral part of theHaji Husein Alireza & Co. Ltd.

41



German small and medium sized enterprises (SMEs) can refer to plenty support programs. There is no other country that has as many support programs for all kind of business like Germany. Just for startup companies, there are existing about 200 different business promotion tools on federal and regional level. Additionally, the state-owned KfW-Bank supports the SMEs with a total of 24 billion Euros. The support ranges from investment grants for projects of supra-regional significance to consulting services in emergencies. The most important instrument areconcessionary loans with special interest conditions by German development banks or bank guarantees by banking institutes that are specialized in guarantees for an easier access to corporate loans. Companies, which are willing to use their energy and their materials in a more efficient way, receive public supportas well.

The German SME-sector can also count on broad support regarding the access to international markets. The market entry to foreign markets is not easy at all – especially not for SMEs. The examination of the local labor law and the local taxation is as much time consuming as the search for the perfect business partner. Detailed information about the market as well as its special conditions and develop-ments in certain fields of industry are necessary for a successful market entry. This is what the German Chambers of Industry and Commerce abroad, the delegations and representations of German economy (AHKs) actually do. Furthermore, German companies are supported by AHKs regarding the presence on global fairs.

Regional Chambers of Industry and Commerce in Germany support their companies regarding the support programs according to their needs. As the

official representatives of the economy they vote whether certain support is to be given to some companies or not. The main question in such cases is, if the support seems to be rewarding in the specific case and if the planned project applies to the conditions that are obliga-tory for any public support.

In the past, certain support programs have been very efficient and important. During the Global Financial Crisis in 2008 and 2009 the tool of the so called “short-time work” saved hundred thousands of jobs in Germany. At the short-time work the state partly paid the loans of the employees from certain companies that have been struggling due to the decreasing demand during the crisis. This allowed thecompanies to react flexible without being forced to dismiss their skilled workers. The outcome is recently shown: The rate of workless people in Germany is the lowest since more than 20 years.

Unfortunately, such extremely positive examples remain the examination. The variety of all support programs sometimes

overstretches the capacity of small and medium sized enterprises to decide, which program fits the most to their needs. Additionally, bureaucratic obstacles for single enterprises can be very high.

From an economic point of view the best way to promote SMEs is a general middle class friendly economic policy. A good economic policy is measured by a simple taxation system with little bureaucracy and no unnecessary patronizing by the state. Combined with focused support programs such a policy is most useful for the industrial middle class. Germany has much to offer in this field. The SMEs are the backbone of the German economy and can count on the latter conditions. For this reason the German economy was able to develop positively and enjoys today an internationally leading position.

SMEs

The German promotion ofSmall and Medium Sized Enterprises

there with Professor Benson Shapiro provided some vital inspiration for the realignment of the group. This was how we developed our deep-seated customer understanding which in turn enabled us to better comprehend the demands and needs of our customers: and then satisfy those needs. The foundations for this new strategy were created in 2000 in our first five year plan.

Hergenröther: V-LINE’s presence in the Arab world now stretches back to the early 1980s…

Daues: I remember those times very well: in the early 80s I visited almost every industrial plant in Saudi Arabia together

42

Hergenröther: Mr. Daues, a very warm welcome also from AHK Saudi Arabia: international business consultants Ernst & Young presented you with the award “Entrepreneur of the Year 2012” in the category “Services” a fantastic accolade for many decades of vigorous innova-tive motivation. Because didn’t V-LINE originally start in the mid 1970s as a purely trading company.

Daues: That’s right; we started off as a small niche provider specialising in the procurement and sale of spare parts. You could say that since then we have travelled a long way. Today V-LINE offers a unique portfolio providing integrated customised services to optimise the procurement of a

huge range of MRO goods. At the same time, thanks to our unparalleled and broad base of manufacturers and suppliers we currently work with more than 20,000 suppliers – we are able to offer the best in delivery performance at all times. And, naturally enough, we have not yet reached the end of our road by a long way; we will instead continue in the future to repeatedly set new, challenging targets and milestones.

Hergenröther: When and how did this evolution of V-LINE into a serviceorganisation start?

Daues: A decisive factor here was the time I spent at the Harvard Business School in the mid 90s. In particular my co-operation

German - Saudi Business Magazine The V-LINE Group

with Shahzad Haider and identified the spare parts require-ments and theprocurement paths. Today, Mr. Haider is managing director of V-LINE SAUDI ARABIA LTD. The founding of this 100% owned subsidiary in 2008 is furthermore the logical development of our very much expanded service portfolio in the region.

Hergenröther: The founding of V-LINE SAUDI ARABIA also happened without the normally mandatory partner; you were in fact one of the first SMEs to make use of this new option.

Daues: A contributory factor here was undoubtedly our intense engagement in Saudi Arabia and the associated level of awareness, so that despite major hurdles and the rather vague incorporation statutes, we were able with SAGIA to overcome these challenges. By the way, even before we had a local presence, V-LINE received the important Outstanding Supplier Award each year from the Saudi Basic Industries Corporation.

I would like to say that we feel a strong bond in particular to our customers in the Arab re-gion; this is because and I’ll give only a few examples here SABIC and other renowned companies in the private petrochemical industry and the stateorganisations, starting with SWCC and SEC, and, following the carve out from the ministry, also the NWC, as well as new investments such as Maaden and Petro Rabigh: they all realised that the lifetimes of their investments are also dependent upon having optimised operations and maintenance, and that the associated costs are in turn dependent upon having optimal supply chains. It is no exaggeration when I say that in particular the dialogues with our customers are the source of our best ideas for the customised alignment of our services to constantly changing needs. As in the past, V-LINE together with a total of seven partners also participated at the 2012 SABIC Technical and Innovation Meeting (STIM-10) in Jubail.

Hergenröther: V-LINE Group not only has its own national presence in the Kingdom of Saudia Arabia and other Gulf states but also in Mexico, Japan, Brazil, Korea, the USA and China. The integrated V-LINE procurement model is now taught as a subject at many univer-sities in China, and diploma candidates from the famous Southeast University in Nanjing have taken internships of several months at V-LINE HQ in Sehnde. How does the subject of know-how transfer rank in the V-LINE innovation agenda?

Daues: Know-how-transfer, communica-tions and dialogue are absolute top priorities at V-LINE, and not just since today. As early as 2003 we organised our first customer workshop with the Saline Water Conversion Corporation a project which I look back on very fondly. V-LINE SAUDI ARABIA started in 2011 to organise technical seminars for the petrochemical industry on subjects like “Latest Mixing Technologies for Petrochemical, Polymer and Chemical Processes”. And in the future we also have many plans in the training and educa-tion sector. Very current is for example the V-LINE Academy. Working in co-operation with the GermanManagement Academy Lower Saxony, a qualification and training programme was developed on the topic of supply chain management. The very practically oriented pro-gramme, with an emphasis on MRO processes, targets in particular academics and gives them the basis for high-level activities in supply chain management at industrial enterprises and stateorganisations. The programme combines a 10-day seminar in Riyadh in spring with a 5-day training module which will be taking place some time later in the year in Celle/North Germany. All lectures will be presented by experienced business experts and university lec-turers.

Hergenröther: I can imagine that an offer like that is positively welcomed by local decision makers.

Daues: The approval of the programme in strategic places is obviously one key to the project’s overall success. For us at V-LINE, this represents the culmination of a long standing vision: from 9 - 20 March 2013 in our first course we will be transferring best practices devel-oped over many, many years to 20 young Saudi colleagues, and in so doing will be setting the foundation stones for innovative know-how transfer.A primary goal is to reduce overall costs in the MRO sector on a sustainable basis. Our new vision and mission statement also communicate this goal, both internally and externally, on www.v-line.com.

Hergenröther: Mr. Daues, many thanks for this talk.

V-LINEThe V-LINE Group was established in 1979 and is headquartered in Sehnde near Hannover. It is one of the key globalsuppliers for original spare parts directly from the manufacturer to industrial plant customers. V-LINE has nine international locations and a workforce of 280 worldwide. V-WareTM, V-Line’s innovative e-procurement solution, is the platform for significantly reducing transaction and pro-curement costs: guaranteed transit times and regular bundled consignments keep stocks as low as possible.

The V-LINE Groupinnovative service providers for MRO processes Andreas Hergenröther, Delegate of German Industry and Commercefor Saudi Arabia and Yemen in discussion with Detlev Daues,Managing Partner of V-LINE Group

Mr. Daues, Managing Partner of V-LINE Group

43



there with Professor Benson Shapiro provided some vital inspiration for the realignment of the group. This was how we developed our deep-seated customer understanding which in turn enabled us to better comprehend the demands and needs of our customers: and then satisfy those needs. The foundations for this new strategy were created in 2000 in our first five year plan.

Hergenröther: V-LINE’s presence in the Arab world now stretches back to the early 1980s…

Daues: I remember those times very well: in the early 80s I visited almost every industrial plant in Saudi Arabia together

Hergenröther: Mr. Daues, a very warm welcome also from AHK Saudi Arabia: international business consultants Ernst & Young presented you with the award “Entrepreneur of the Year 2012” in the category “Services” a fantastic accolade for many decades of vigorous innova-tive motivation. Because didn’t V-LINE originally start in the mid 1970s as a purely trading company.

Daues: That’s right; we started off as a small niche provider specialising in the procurement and sale of spare parts. You could say that since then we have travelled a long way. Today V-LINE offers a unique portfolio providing integrated customised services to optimise the procurement of a

huge range of MRO goods. At the same time, thanks to our unparalleled and broad base of manufacturers and suppliers we currently work with more than 20,000 suppliers – we are able to offer the best in delivery performance at all times. And, naturally enough, we have not yet reached the end of our road by a long way; we will instead continue in the future to repeatedly set new, challenging targets and milestones.

Hergenröther: When and how did this evolution of V-LINE into a serviceorganisation start?

Daues: A decisive factor here was the time I spent at the Harvard Business School in the mid 90s. In particular my co-operation

The V-LINE Group

with Shahzad Haider and identified the spare parts require-ments and theprocurement paths. Today, Mr. Haider is managing director of V-LINE SAUDI ARABIA LTD. The founding of this 100% owned subsidiary in 2008 is furthermore the logical development of our very much expanded service portfolio in the region.

Hergenröther: The founding of V-LINE SAUDI ARABIA also happened without the normally mandatory partner; you were in fact one of the first SMEs to make use of this new option.

Daues: A contributory factor here was undoubtedly our intense engagement in Saudi Arabia and the associated level of awareness, so that despite major hurdles and the rather vague incorporation statutes, we were able with SAGIA to overcome these challenges. By the way, even before we had a local presence, V-LINE received the important Outstanding Supplier Award each year from the Saudi Basic Industries Corporation.

I would like to say that we feel a strong bond in particular to our customers in the Arab re-gion; this is because and I’ll give only a few examples here SABIC and other renowned companies in the private petrochemical industry and the stateorganisations, starting with SWCC and SEC, and, following the carve out from the ministry, also the NWC, as well as new investments such as Maaden and Petro Rabigh: they all realised that the lifetimes of their investments are also dependent upon having optimised operations and maintenance, and that the associated costs are in turn dependent upon having optimal supply chains. It is no exaggeration when I say that in particular the dialogues with our customers are the source of our best ideas for the customised alignment of our services to constantly changing needs. As in the past, V-LINE together with a total of seven partners also participated at the 2012 SABIC Technical and Innovation Meeting (STIM-10) in Jubail.

Hergenröther: V-LINE Group not only has its own national presence in the Kingdom of Saudia Arabia and other Gulf states but also in Mexico, Japan, Brazil, Korea, the USA and China. The integrated V-LINE procurement model is now taught as a subject at many univer-sities in China, and diploma candidates from the famous Southeast University in Nanjing have taken internships of several months at V-LINE HQ in Sehnde. How does the subject of know-how transfer rank in the V-LINE innovation agenda?

Daues: Know-how-transfer, communica-tions and dialogue are absolute top priorities at V-LINE, and not just since today. As early as 2003 we organised our first customer workshop with the Saline Water Conversion Corporation a project which I look back on very fondly. V-LINE SAUDI ARABIA started in 2011 to organise technical seminars for the petrochemical industry on subjects like “Latest Mixing Technologies for Petrochemical, Polymer and Chemical Processes”. And in the future we also have many plans in the training and educa-tion sector. Very current is for example the V-LINE Academy. Working in co-operation with the GermanManagement Academy Lower Saxony, a qualification and training programme was developed on the topic of supply chain management. The very practically oriented pro-gramme, with an emphasis on MRO processes, targets in particular academics and gives them the basis for high-level activities in supply chain management at industrial enterprises and stateorganisations. The programme combines a 10-day seminar in Riyadh in spring with a 5-day training module which will be taking place some time later in the year in Celle/North Germany. All lectures will be presented by experienced business experts and university lec-turers.

Hergenröther: I can imagine that an offer like that is positively welcomed by local decision makers.

Daues: The approval of the programme in strategic places is obviously one key to the project’s overall success. For us at V-LINE, this represents the culmination of a long standing vision: from 9 - 20 March 2013 in our first course we will be transferring best practices devel-oped over many, many years to 20 young Saudi colleagues, and in so doing will be setting the foundation stones for innovative know-how transfer.A primary goal is to reduce overall costs in the MRO sector on a sustainable basis. Our new vision and mission statement also communicate this goal, both internally and externally, on www.v-line.com.

Hergenröther: Mr. Daues, many thanks for this talk.

V-LINEThe V-LINE Group was established in 1979 and is headquartered in Sehnde near Hannover. It is one of the key globalsuppliers for original spare parts directly from the manufacturer to industrial plant customers. V-LINE has nine international locations and a workforce of 280 worldwide. V-WareTM, V-Line’s innovative e-procurement solution, is the platform for significantly reducing transaction and pro-curement costs: guaranteed transit times and regular bundled consignments keep stocks as low as possible.

For more information visit V-LINE at:

www.v-line.com, send an e-mail [email protected] call on +966 (3) 3407941or +49 (5138) 7008-0

In Saudi Arabia, public tenders are of particular importance since the Kingdom allocates hundreds of billions of U.S. dollars for a variety of projects in its current and long-term budgeting.According to the MEED Gulf Projects Index, Saudi Arabia is the leaderthroughout the entire MENA-region with a project volume of 788 billion U.S. dollars. Currently, the government plans to invest a further 100 billion U.S. dollars until 2020 in transportation projects and a further 80 billion U.S. dollars in new power plants. As in Germany, such public projects and public contracts are awarded through public tenders. Due to the highcompetition, it is from the utmostimportance for potential bidders to be prepared as good as possible for upcoming tenders.

I. General informationBy Royal Decree No. M/58 of 27.9.2006,a new public procurement law, the “Government Tenders and Purchases Regulations” (GTPL), was introduced in the Kingdom of Saudi Arabia, which replaced the previous Act of 1977. As the old procurement law, the new law determines that all public procurement contracts, i. e. from the delivery of simple office supplies and the performance of maintenance services up to majorgovernmental projects, must generally be awarded through a public tender. Public procurement contracts are such contracts which are awarded by governmental authorities (such as SWCC, GSFMO but e.g. not ARAMCO, SABIC or NWC). Exceptions to this principle only exist in the procurement of goods and services which have a value of less than 1 million SAR or which refer to the procurement of military equipment. A central authority

does not exist. Every governmentalauthority may carry out public tenders and conclude corresponding agreements by itself. All bidders - domestic or foreign - must, however, pre-qualify at the issuingauthority. Outside the scope of public procurement, meaning the private sector, the GTPL are not applicable. Here, only the general principles of law and the rules of Shari`a law apply.

Detailed information on both the current Public Procurement Law of the Kingdom of Saudi Arabia as well as arious related areas such as establishment forms, payment hedging opportunities, residence and employment law, tax and litigationcan be found in the in July 2012released publication ‘Vergaberecht Saudi Arabien – Rechtstipps für öffentliche

Ausschreibungen’. Publisher of this manual are the Delegation of German Industry in Saudi Arabia (AHK), together with the law firm Schlüter Graf & Partner Dortmund/Middle East and the Hundt Legal Consultancy in Riyadh. The publica-tion is available from the publishers in Riyadh, Dubai or Dortmund against payment of a nominal charge of € 50.00 plus VAT.

Attorney-At-Law and Legal Consultant Christoph Keimer lived many years in the UAE and gives legal advice since 18 years primarily on the law of the Arabian Gulf countries (Saudi Arabia, UAE, Qatar, Oman, Bahrain, Kuwait). In addition to numerous publications, he frequently gives lectures in the corresponding fields of law.


45



Public Procurement Lawin Saudi ArabiaLegal tips for public tenders

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II. Procedure of a public tender According to GTPL, the procedure of a public tender is generally divided into the following steps:

• Public notification of the invitation to tender• Review of the prospects of success by the participating companies (competition)• Request of the documents against the payment of a fee• Drafting of the offer (important points: language, prices, compilation of the required documents/licenses, etc.)• Submission of the offer (commitment period of at least 90 days)• Allocation of securities along with the offer (bank guarantee - Bid Bond of usually 1% of the contract value; refund in case of unsuccessful participation; in case of an award provision of a Performance Bond in t he amount of 5% of the contract value; if necessary additional Advance Payment Guarantee of further 5%)• Opening of the offers and decision• Award and handling (no more preference of Saudi companies, but: companies who offer the government long-term payment options and training programs for nationals of Saudi Arabia have increased chances to receive the award for big governmental contracts)• Conclusion of the contract between the authority and the successful bidder (joint certificate based on the official model contract plus additional terms and conditions)• Execution of the project (important: in case of default of the contractor: penalty between 6-10% of the contract value, cancellation of the contract or substitute performance; note: the contractor does not have a right of retention in case of default of the public authority)• Legal protection (note: different to possibilities in Germany: not during the procurement procedures, only during the execution phase)

III. Practical cases and tips1. The bidders often have the opportunity to address written questions to thegovernmental customer before the deadline for the submission of the offers. These questions are usually answered quickly. Although the selection of the successful tenderer is quite transparent, in case of an equal technical level usually the most advantageous offer will be given preference. However, to the disappoint-ment of most of the German companies, this does not necessarily mean that always the most sustainable offer gets awarded. Furthermore, it might occur that either the time schedule gets mixed up or the scope of work changes (usually increases). In view of such problems, thegovernmental authority is often very reluctant to grant ‘change orders’ or‘extensions of time’ as they are prescribed by law, which also may lead to disputes. In addition, there can be difficulties by the payment of the last instalment as this payment is often associated with various improvements (favourable case) or various subsequent changes (less favourable case) by the governmental customer. However, good contacts and a lot ofcommunication at the local level could be very helpful to avoid such problems.

2. TipsDue to the significant demands onpublic tenders (tender procedure and implementation of the order), potential bidders should consider the following important points well in advance:

• Timely compilation and updating of the most important documents• Verifying loans/guarantees with local/international banks on time• Clarifying adequate insurance cover• Timely identification of qualified staff for the execution of the potential contract• Timely information about the legal requirements for the establishment of suitable set up to execute the potential contract (right of establish ment, licensing, taxes, saudiization,

duties etc.), if necessary and required• If necessary, planning of a bidder consortium• Accurate location for the own branch/company• Clarification of the local rental and room situation• Protection of the Intellectual Property (trademarks, patents, etc.)• Exploiting of local investment incentives (tax benefits, financial aids (e.g. SIDF), industrial zones, investment programs (e.g. ‘offset’)).

IV. ConclusionIn conclusion, the major key to successis a profound knowledge of the Saudi tendering procedure rules and thecharacteristics of public tender contracts in Saudi Arabia which significantly deviate from the German perception. In this regard, it should always be kept in mind that small details could make the difference between economic success and failure.


Christoph Keimer Attorney-At-Law, Legal Consultantand Partner of Schlüter Graf & Partnerwith offices and co-operation partners inGermany and the Middle East

AHK Services

Small and medium-sized companies are particularly supported by experienced partners to enter foreign markets. The AHK’s Service Brand DEinternational is present in all 120 offices of the German Chamber Network abroad. According to the services of DEinterantional, AHK Saudi Arabia offers German companies services to assist them in the market entry and Saudicompanies to get in touch with German businessmen. Important sectors like health care, infrastructure, construction,petrochemicals, metallurgical mills and plants, food industry as well as energy related topics are covered by one of our employees, who are specialized in these fields.

Market Entry

1. Individual Market AdviceThe individual market advice is our most successful service. In a close dialogue with German companies and on the basis of the documents and product samples they provide, we identify business and product specific advantages on the Saudi market and analyze their market opportunities.

2. Business Partner SearchWithin the context of the business partner search we take on the search for the right and appropriate business partners.

3. Address ResearchThe AHK Saudi Arabia offers a verified research of sectoral and address information to simplify the establishment of contacts with Saudi companies.

4. Direct Mailing ServicesWe offer you individual support in the search for interested business partners and we will take care of establishing initial contacts.

5. Business-TripsAHK Saudi Arabia offers German companies the possibility to take part in business trips of different industrial sectors to Saudi Arabia. During 3 to 4 days stay in Saudi Arabia the aim of these business trips is to give a first impression of the country and the market and to make first contact with Saudi businessmen. The main focus of an AHK-business trip lies on business to business meetings (B2B). Saudi businessmen who are interested in coopera-tion with German companies are cordially invited to contact us.

6. Catalogue Show - ExhibitionAHK Saudi Arabia and Yemen presents German companies in the most important trade- and industrial centers in Saudi Arabia. Saudi companies have the unique opportunity to see a wide range of high quality products “Made in Germany” at one spot. The

Catalogue Show is usually combined with the German breakfast. Traditionally high ranking representatives of Saudi and German economy attend the breakfast and enjoy Germany’s delicious food and beverages.

Market Information

Knowledge about the Saudi Arabian market and characteristics of its society and culture are essential for a successful market entry. Regarding this, AHK Saudi Arabia offers Quick Market Checks and Market Surveys.

In cooperation with our partner Germany Trade & Invest, we also help Saudicompanies, who are interested in business in Germany.

1. Legal Information

In order to enter a market successfully, the legal aspects should be considered carefully. For this reason it is our pleasure to provide German companies with the needed legal services in diverse business-related aspects reaching from customs and taxes to investment, import and export regulation, etc.

Services of AHK Saudi Arabia

Legal Informationand Support

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AHK Services

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In addition, we offer extrajudicial mediation and offer our help when contacts to public authorities and/or law firms are required.

2. Health Treatment in Germany

AHK Saudi Arabia assists Saudi Arabian patients who wish to make use of health treatment in Germany.

3. Debt Collection

Long experiences with debt collection show that extrajudicial proceedings offer faster and more promising solutions than courtproceedings by civil law. AHK Saudi Arabia's experts with long term experience in the country can also help you to dissolve and avoid misunderstandings due to different perceptions of trade and business caused by cultural differences or customs. Sustainable damage of long year business partnerships can easily be avoided by the debt collection through AHK Saudi Arabia.

4. Mediation

AHK Saudi Arabia acts as a mediator in cases of commercial disputes between the German and the Saudi business partner. Our objective is to solve disputes without harming the long term business relations.

5. Visa Service

To help Saudi companies and businessmen with the visa application process we offerto provide exhibitors and visitors totrade fairs in Germany with a letter of recommendation to the German consulate/embassy. AHK Saudi Arabia assists German companies and businessmen in visa issues. We support business travelers who stay temporarily in the Kingdom in offering to act as the sponsor during their stay. AHK Saudi Arabia requests the socalled E-Number at the Ministry of Foreign Affairs and is the responsible institution during the time of the visit.

6. Translation Services

We offer translations of letters, documents, company profiles etc. in the following languages:

• German <> Arabic • German <> English

We also offer interpreting-servicesGerman <> Arabic during AHK-Events and delegations.

Trade Fair Services

AHK Saudi Arabia is the officialrepresentative of the Deutsche Messe AG, Messe Munich, Messe Berlin GmbH, and Spielwarenmesse eG in our region. Exclusively for Saudi and Yemeni clients we offer a wide range of services as we take care of their preparation for trade fairparticipation as an exhibitor or visitor. These services includes selecting the suitable trade fair, according to their company profile, preparation of the application form, booth rental, etc. for exhibitors. For visitors, we are providing the admission ticket, issuing the recommendation letter for the visa process, providing info on visa application, flight and hotel booking, etc.

For further information to the services of AHK Saudi Arabia please contact:

Your service provider for sustainable businessdevelopment with one of the world’s largest economies

German-Saudi Arabian LiaisonOffice for Economic Affairs (GESALO)P.O. Box 61965, Riyadh 11575,Kingdom of Saudi ArabiaTel.: 00966 1 4050201Fax: 00966 1 4031232, Email: [email protected]

AHK Saudi Arabia

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Andreas HergenrötherDelegate of the German Economyfor Saudi Arabia and Yemen

[email protected].: + 966 (0) 1 405 02 01

Benjamin GodelDeputy Delegate of the GermanEconomy for Saudi Arabia and Yemen

[email protected].: + 966 (0) 1 405 02 01 Ext.115

Legal Affairs

Omar Hassan HamzaAssistant Delegate& Head of Legal Affairs,

[email protected].: +966 (0) 1 405 02 01 Ext. 106

Christian EngelsLegal Affairs

[email protected] Tel.: +966 (0) 1 405 02 01 Ext. 107

Trade Fairs

Al-Ameen Al-DalaliHead of Trade Fairand Export Promotion


Asif Iqbal AnsariTrade Fair Officer / Trade FairCoordinator for Visitors

[email protected].: + 966 (0) 1 405 02 01 Ext. 112

Management

Mohammed FaleelHead of Business Promotion &Business to Business Affairs


Stefan WeilerDEinternational Consultant


Tareq QamhanIntermediation of Health Services


DEinternational

Your contact personsat AHK Saudi Arabia


AHK Saudi Arabia

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Your contact personsat AHK Saudi ArabiaPublic Relations & IT

Accountancy

At your Service

Christian EngelsHead of Public Relations


Mohammed KhusroAccountancy


Farook HameedAddress Research / Front Desk


Mohammed Riyas GulcanMessenger


Mohammed AkbarIT System Administration


Mushtaq AhmedAdministration


Faisal NalpurakkalAdministration / Front Desk


Delegation der Deutschen Wirtschaft für Saudi-Arabien undJemen (AHK Saudi-Arabien)German-Saudi Arabian Liaison Office for Economic Affairs(AHK Saudi Arabia)

Mohammed Aminul IslamFacilities

[email protected].: +966 (0) 1 405 02 01

Futuro Tower, 4th Floor, Al Ma'ather StreetP.O.Box: 61695, Riyadh: 11575Königreich Saudi-Arabien / Kingdom of Saudi ArabiaPhone : 009-661-4050201 - Fax : 009-661-4031232Mail: [email protected]: http://saudiarabien.ahk.de/

industry of saudi arabia

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