Bigger Local Role Seen in Projects
Posted: 27 November 2006
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As Saudi Aramco engages in the largest expansion programs in its history, its vice president of Materials Supply, Esam A. Mousli, outlined important considerations for increasing local content in the manufacturing and services sectors in today's global economy.
Speaking on Monday at the Saudi Energy Forum, "Leveraging Hydrocarbons to Create Prosperity," held in Dammam, he pointed out the challenges and opportunities that lie ahead, and the success factors that are crucial to sustaining the Kingdom's competitive advantage.
The vice president posed some thought-provoking questions to kick-off his presentation, including:
Why do some economies succeed in catching up while others fall behind?
What are the success factors required for an economy to catch up?
How do we increase local content?
Addressing the global perspective, he pointed out that 250 years ago the difference in income (economic productivity) per capita between the poorest and richest countries in the world had a ratio of five to one, but that this ratio has now grown to 400 to one. Mousli cited a recent United Nations report that revealed how certain developing countries have managed to narrow the gap by establishing and implementing strategies that promote local content.
He firmly believed that both the public and private sectors have opportunities to contribute in absorbing, disseminating and creating technological knowledge in Saudi Arabia .
Domestic knowledge development and the emerging knowledge economy were the primary factors requiring attention in the process to catch up, according to Mousli, who noted that "Knowledge is inherently a human process. Knowledge economics is the allocation of resources when producing, distributing, and consuming knowledge. This is the new focus of the 21st century."
The Saudi Aramco executive highlighted the need for establishing a well-developed information and communications technology infrastructure in the Kingdom, commenting that "You can do little nowadays without a supplier portal or a company web site. A well-developed Information and Communications Technology infrastructure is a critical enabler to benefit from new technological capabilities, institutions and geographical access."
The other critical factor stressed by Mousli was the importance of local manufacturers using quality standards, such as ISO 9000, in their production processes.
Most importantly, he cited the need to develop human assets, through establishing effective networks connecting industries with higher education institutions. This will ensure a steady stream of scientists and engineers from the local population. He also suggested that private business consider initiatives to identify much needed educational curricula, support research centers and technical associations, and focus contributions to support private sector technology activities.
Turning to the challenges ahead, Mousli pointed out that high energy demand historically results in high project activity in the Gulf region. In the Gulf Cooperation Council (GCC), project activity is estimated to reach an astounding US$1.2 trillion during the period 2006-2011. He said that: "Of that figure, $366 billion is in Saudi Arabia and in Saudi Aramco the projected materials procurement is $40 billion, leading to enormous new opportunities for all of Saudi Arabia and the Gulf Region."
Mr. Mousli presented an analysis revealing that approximately 49% of Saudi Aramco materials and equipment purchases are potential targets for local manufacturing and a further 20% is already manufactured in Saudi Arabia . Potential commodities of the 49% include such items as pipes, valves, chemicals, and wellheads.
In reference to the future, he explained that "Saudi Aramco wants all local suppliers and out-of-Kingdom manufacturers to be recognized for adding value to and increasing local content in our economy, specifically in manufacturing and services."
He summarized the following tips for local suppliers and manufacturers:
- Knowledge - creation, dissemination and localizing.
- Innovation - seeking new technologies and ways of doing business.
- R & D expenditures commensurate with revenues.
- Patents generated from local industry.
- Encouraging scientific and technical publications from Saudi industrial firms.
- Disseminating information and communication technology.
Additional tips mentioned include quality standards for Saudi industry, Saudization, influencing education and training through networking, skill formation by pursuing professional certification, wholesale and retail, and pursuing in-Kingdom manufacturing opportunities.
"Saudi Aramco is optimistic that the opportunities created by mega-expansion projects will serve as catalysts for further industrialization and diversification of the national economy" said Mousli. |
