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“There are endless opportunities to do business in secondary manufacturing and petrochemicals in Saudi Arabia”

Interview - December 12, 2012
The Saudi Chemical Company has been growing by 16% a year since 2006, expanding its activities in the pharmaceutical and the explosives business. General Manager, Dr. Mohammed Saud Al-Badr talks to United World about the company and it sector

Let’s start talking about the King’s vision for development. There is the creation of new economic cities, youth employment initiatives, infrastructure, and education. What is your view of the King’s vision and the country’s development?

We can witness a major progress. In education, the government is increasing the number of universities, so we now have 20 additional universities in different regions. They are also sending more than 120,000 students to study around the world. Last month there was a graduation ceremony in the US where more than 5,000 Saudi students graduated. Now more than ever education is reaching every family in the Kingdom, so children have every opportunity to attend higher education, whether in Saudi Arabia or abroad. This results in greater welfare and a balanced development in the region, in which every region has more universities and technical schools. The universities interact with local communities, to change the dynamics of the economics environment, to improve the regional economies.

Secondly, in terms of employment, there are now more practical majors that force the private sector to employ Saudis. Now the government encourages the private sector to recruit Saudis in a more practical way. Before, there was no difference between those companies that recruited Saudis and those who did not. But now there is a clear motivation. As a result, some companies developed more training and orientation programs to adapt Saudis to the new workforce.

Another sign of balanced development between regions is the policy change in the city industrial zones. More industrial zones have been developed throughout the Kingdom, and with the reorganization of the authority of the industrial zones. Now they have the cash flow and budget to prepare the new industrial zones for operation. The Saudi Industrial Fund changed the way they lend funds to industrial manufacturing plants, for which they have three categories: funding 50%, 60%, or 75% of the cost. They will fund 50% for Riyadh, Jeddah and Damman; 60% for more remote areas; and 75% for the less developed northern and southern regions. This will promote new industrial plants and projects. The payback period is 20 years after commissioning, which is very attractive.

For example, the SCCO decided to start a pharmaceutical manufacturing project in Hail of 80,000 square meters. We are now approaching the Saudi Industrial Fund with that project, and we think we will get a 75% loan. This project will be a landmark in the Hail region. Now we are also approaching the university there, where there are 24,000 students. We will be able to recruit staff from there. 

With all this investment, in what other sectors do you see business opportunities? 

There are endless opportunities in the fields of secondary manufacturing and petrochemicals. Petrochemicals produce the material, which is not the final material for customers. In order to produce the end product, there are endless opportunities. There are also opportunities in timber and lumber in the northern region, as well as those industries associated with minerals such as phosphate. These minerals are meant to be fuel stock for other industries, so selling them as raw materials does not add value.
The Ministry of Commerce & Industry has many new ideas, such as an industrial zone for young entrepreneurs. They have built factories there so that young entrepreneurs can start their projects, tailored to beginners. The second aspect is the complex, such as for the automobile industries or any industries that wants to integrate. They start talking to investors from different fields to start these industrial clusters. This is another opportunity that brings together different parts of the economy.

Saudi Arabia has a very proactive policy within the Gulf and the Middle East and North Africa (MENA) region. What is your perspective of the advancements in foreign policy to engage the private sector here and around the Gulf?

Industrial business in Saudi Arabia has been open to foreign investors since a very early stage. Since the beginning they encouraged factories and industrial projects to bring knowhow and international partners who add value. The Gulf has also been open for a long time, and they can operate in Saudi Arabia the same as Saudis. Saudi Arabia has very the ideal geographic location and economic advantages, but I do not think we have reached our full potential. Lots of work still needs to be done to expand internationally. There are a lot of potential opportunities in Africa.

The SCCO started in 1972, and began public trading in 2001. What are some of the key milestones that you would highlight in the company’s history? How has it evolved to what it is today, as one of the leading companies in Saudi Arabia?

SCCO started in 1972, and moved to new industrial zones 20 years ago. Each factory is 5km by 5km, so it provides more space for production, in three regions. Another important milestone was when the company became public almost 12 years ago. Then the SCCO expanded into the pharmaceutical business with the acquisition of SITCO Pharma. In 2010 we inaugurated the Egyptian arm to supply our factories in the region. We established the new business distributing both pharmaceutical and fast-moving consumer goods (FMCG). This year we started building the pharmaceutical factory.

SCCO has been growing 13% since 2006. What is the management’s secret behind that success?

We are expanding both in the pharmaceutical and the explosives business. We are able to gain more business thanks to our reputation of maintaining security, safety, and quality. We have a great project portfolio constructing roads, etc. In pharmaceuticals we have a very transparent operation where we enjoy a good relationship with our partners.

Environmental concern, safety, and quality are three things that the company is proud of. How does monitoring work?

We have quality control managers, and we are members of several organizations. We have the ISO which we follow rigorously in manufacturing and distribution, as well as implementation. We also take care of our sub-contractors with ongoing training. If any accidents happen, we share it with the International Safety Organization. We go over went wrong, what could have been done to prevent it, how it was managed, and how we can avoid this in the future. We have good training and education to ensure that our projects and services have the highest safety standards.

Coming to your international reach, you work with Yara, Austin International, and Swiss Explosives, which speaks highly of your work. How have you managed to secure these partnerships, and what do you expect for the future? Are you looking for more international partners?

We are following the technological developments in explosives, in terms of environmentally-friendly, safety, and cost. We are adapting brand new techniques to our operations.

The US-Saudi Arabian relationship is very important, with 50% of Saudi oil going to the US, with a majority share of local investment in the Kingdom. From your perspective, where would you like to see greater US-Saudi Arabian cooperation? Where does the private sector fit in this bilateral relationship?

Academics and research and development (R&D) are two important areas where our countries share and exchange information. In our business, there are associations and organizations in which we participate as members. Some of these are based in the US, such as the International Association for Explosives Engineering. As members, we receive their publications and attend their conferences. There are also a number of important professional organizations in defense manufacturing. Saudi Arabia is one of the major clients of US military technology, and they are building some of those factories here in order to serve the region and transfer technology. 

As the head of this leading company, what do you think is the importance of media and communications in today’s world?

Social media brings people together. They can communicate and exchange information directly, so there is a greater understanding. Even if you travel to the US, Europe, or the East, you can communicate through Twitter, Facebook, or the web, and it is very straightforward.