Jubail Industrial City
&
Saudi Arabia's Economic Development

 

Dr. J. Michael Cobb

Part Two

 

Jubail & Saudi Arabia's Economic Development 

One of Saudi Arabia's prime long term economic development policies is the development and promoting of its non-petroleum sectors. For the past twenty-five years key elements of those policies have emphasized establishing industries which however capitalized on the country's competitive advantage in petroleum based resources and minerals.

Key initial elements of this longer term strategy involved developing a major program using the Kingdom's previously flared natural gas associated with oil extraction. In the mid 1970's a national gas gathering program was thus developed in which these associated gases were used as basic fuel and feedstock for establishing globally competitive export-oriented petrochemical and other energy intensive industries.

The gas gathering program, therefore, was a key initial basis upon which the succeeding 5 year national development plans addressed industrial development and economic diversification in the Kingdom. Other key elements of this national economic diversification strategy included:

Several of these strategic development components are further summarized below, followed by a brief overview of Jubail Industrial City, the Kingdom's largest new industrial and urban development program.

Industrial Linkages

Using the associated gathered gas from oil extraction, the basic concept of industrial linkages was used to produced plans which stressed initial development of petroleum-based industries for producing petrochemicals, fuels and other feedstock. These outputs not only increased value-added oil exports but also provided critical raw material feedstocks for development of downstream secondary industries, including agriculture fertilizers, cement, steel and various consumer products for domestic and export markets.

This ambitious strategy recognized the significant national manpower demands which would be needed for construction and later project operations and resulted in major national program investments in advanced training to provide increased employment opportunities for the growing Saudi population.

Infrastructure Concentration-Efficiency

A second major component of the Kingdom's industrial strategy was the deliberate policy of geographically concentrating the substantial investments in infrastructure needed to support these industries. Strategic locations were therefore selected where, as necessary, new communities and cities would be developed as the most cost-effective environmentally beneficial complement to the national industrialization strategy.

Private Sector & Social Services Promotion

Along with policies aimed at strengthening the role of the private sector in all phases of national economic development, a third key element of the kingdom's overall economic development policies, especially associated with the new cities, was making substantial investments promoting the welfare and betterment of the Saudi people in health care, education, housing, religious life and other areas.

These complementary goals took direct expression in the development of industrial cities in two ways: firstly, in the extensive involvement of the private sector in the development of secondary and support industries; and secondly, in the extensive investments in programs and facilities which sought to maximizing the values of Saudi family life, religious and social customs, educational attainment and community harmony and stability.

From the initiation of the kingdom's industrialization and economic development program there was a commitment to protection and enhancement of the natural environment. This was reflected in several direct and tangible ways: in the extensive environmental assessment studies related to construction as well as longer term operation of the industrial cities; in the development and enforcement of strict guidelines and regulation related to domestic and industrial waste water treatment and discharge and control of air borne pollutants; in waste water treatment, recycling and reuse; in organic waste composting programs; in environmentally conscious zoning and building code regulations; and in the development of extensive environmental monitoring programs.

Formerly windswept desolate desert areas are now providing homes to large bird and other wildlife populations while also providing recreational and other environmental amenities to new Saudi families and others living and working in the new industrial areas.

Since the early 1970s, eight industrial cities have been built, the principals ones being Jubail on the Arabian Gulf and Yanbu on the Red Sea with others in various locations throughout the kingdom. Sites were selected for their proximity to raw materials sources and ease of establishing transportation access to domestic and international markets. The possibility for developing a deep-water port for accommodating required super takers was one of the key criteria for locating the largest project at Jubail.

Located on the shores of the Arabia Gulf and in center of Saudi Arabia major oil producing region, Jubail, the largest of the Kingdom's new cities, is a major cornerstone of the Kingdom's economic development program. (See the Jubail image). Established by the Royal Commission for Jubail and Yanbu over 25 years ago, the scope and scale of Jubail is one of this century's major industrial development undertakings. Almost 20 years ago, a July 1982 Time magazine article in seeking to describe the unfolding project stated,

"The search for historical comparisons with Jubail is daunting...In all the expansive sweep of civil engineering, from the pyramids of the Nile to the construction of the Panama Canal, nothing so huge, or costly, as Jubail has ever before been attempted by anyone."

Within less than one generation, many of the basic goals of the Saudi government's Jubail program have been achieved and the resulting physical, social, environmental and economic development accomplishments are substantial and continuing. Major components of Jubail's industrial and infrastructure development program, therefore, have been initially completed, although expansions, enhancements and greater efforts at private sector investment are continuing.

Stretching over 30 kilometers along the Arabian Gulf just north of the town of old Jubail, the project site is vast and impressive, with an ultimate site development potential of 35,000 to over 75,000 hectares. (See sketch below).

The industrial and permanent residential areas alone are planned to have over 5,000 hectares each. By 1992, the industrial complex comprised 16 prime industries, over 125 secondary and support industries and over 400 commercial firms with a combined investment estimated at over 50 billion SR (over US $13 billion).

Although the full extent of public and private investment in Jubail's development from the mid 1970's to the early 1990's is difficult to determine, various published sources estimate the overall investment to be over 75 billion SR (over US $20 billion) with over two-thirds coming from the private sector. This total includes investments within the industrial complex itself, the industrial deep-water port and the temporary and permanent community facilities, housing and various health, educational and social support services.

Top

Land Use Concept Plan for the Jubail area. Adapted from Saudi public information. See the web site of the Royal Commission for Jubail and Yanbu for additional information.

Related government investments include the petrochemical and steel complexes, refineries, scores of secondary and support industries, a desalinization plant, a sea-water cooling canal and a major training college. By 1992, overall industrial related employment was almost 30,000. In the community, hospitals, schools, parks, recreation areas, landscaped highways, commercial facilities and over 9000 permanent housing units have been built, and by 1992 the new city's population had grown to over 75,000

Longer term plans forecast a city population approaching 250,000 in about 50,000 households in 6 to 8 major districts (hayys) and a total of about 100 neighborhoods. The regional impact of Jubail has also been significant with more than 150,000 mainly new residents living in an area that until the mid 1970's was mainly a small fishing village.

Key Development Participants

Overall development and operation of Jubail has been the responsibility of the Jubail Directorate of the Royal Commission for Jubail and Yanbu. The Royal Commission is specifically responsible for the construction and operation of basic infrastructure facilities and public services need by industry and the permanent community.

Since the late 1970's Royal Commission's prime program management contractors have been the Saudi Arabian Bechtel Company Ltd for Jubail and the Parsons Corporation for Yanbu. As reported elsewhere, the contributions of these two global corporations to the development of Saudi Arabia and to the performance and success of these two new industrial cities has been substantial and is continuing.

In addition to the Royal Commission, many of the Kingdom's other ministries also have important development responsibilities at Jubail and Yanbu. These include: the Ministry of Industry and Electricity, which licenses all manufacturing facilities; PETROMIN (General Organization for Petroleum and Minerals) which constructs and operates oil refineries and related facilities through joint ventures with foreign partners; SABIC (Saudi Basic Industries Corporation) which builds and operates petrochemical and energy-intensive industries through joint ventures with Saudi or foreign partners; and Saudi Aramco (the Saudi Arabian Oil Company) the world's largest multifaceted, vertically-integrated oil company.

Saudi Aramco played a central and critical role in the develoment of Jubial as well as the overall economic development of the Kingdom. As stated in a 1996 Saudi Government Publication, "In 1975, Aramco initiated work to design, build and operate a master gas system to gather and process the natural gas produced in association with crude oil for use in the Kingdom's industrialization program.

By the early 1980s, the system was producing and piping natural gas to petro-chemical plants and other industrial plants in the twin industrial cities at Jubail on the Gulf and Yanbu on the Red Sea. Using the natural gas as feed stock, the plants manufactured products that both fed other industrial operations and were exported. The natural gas collected by the master gas system was also used to generate electricity for urban and industrial use, to run desalination plants and to provide natural gas liquids for export abroad."

SABIC is especially important at Jubail as well as in promoting the Kingdom's overall private industrial investment. By 1994 SABIC had 15 major industrial facilities operating at Jubail, Yanbu and Jeddah producing almost 15 million tons of output. These included industrial gases, chemicals, plastics, steel and other products for the international and domestic market and for use as intermediate feedstocks for other in-Kingdom private sector industries producing industrial and consumer goods.

Financial incentives for secondary industry investment have been substantial and include for example: exemptions from custom duties on materials and equipment not available in country; tariff protection on produced goods; various tax holidays; and preferential government procurement of in-Kingdom produced products.

Also, two important development funding agencies assisting Jubail and the other industrial cities include, SIDF (the Saudi Industrial Development Fund) which provides medium or long term loans to new or expanding Saudi businesses; and the Real Estate Development Fund, which provides government assisted housing loans to Saudi citizens. Other governments agencies have also been instrumental in providing essential utilities to Jubail's industrial and urban development, including Saudi Aramco (for gas fuel and feedstock), SCEDCO (regional electric power), SWCC (potable water) and SEAPA ( for the new industrial port operations).

The Royal Commission, however, has been the prime agency providing the key leadership role in coordinating support from these and other governments agencies, including the Ministry of Planning, the Ministry of Finance and National Economy and various local and Eastern Province governmental entities.

Summary: New Directions for Jubail

 ... and the Author's Personal Note

As most realize, the Saudi people continue to face substantial challenges within the Kingdom as well as within the larger Middle Eastern Region, and to minimize those challenges and difficulties would be disingenuous. Specifically for the Jubail and Yanbu industrial cities, some of those key challenges involve finding increased appropriate roles for the private sector in supplying the infrastructure and community facilities and services needed for urban and industrial expansion and overall community development.

And a final personal note...  To those of us involved in the planning and implementation of Jubail during the past 25 years, a focus only on the tremendous scale of engineering, construction, investment and economic development successes of Jubail misses important components of the amazing story of its development and obscures some of the important lessons that Jubail offers the world.

In many ways, Jubail was, and continues to be, a unique and innovative undertaking in a country not widely known or understood by the outside world. However, during it's earlier years of construction as well as in later operations and expansion, over fifty nationalities incorporating many races, religions and ethnic backgrounds worked together in what appeared, at least to this participant, to be an underlying spirit of cooperation, innovation and mutual respect in a somewhat grand although exceedingly serious adventure for all involved.

While not diminishing the fact that certain restrictions, which we knew beforehand, were placed on those of us who voluntarily choose to live and work in the kingdom, there were, however, far more important overriding perceptions and attitudes taken from my years of working with the Saudi people and in traveling throughout the kingdom.

This mainly was a sense that in the enormous undertaking of Jubail, which involved tens of thousands of foreigners on just this one project in their country, the Saudi people demonstrated a constant basic hospitality, kindness and sense of fairness in their daily dealings with us under sometimes exceedingly trying circumstances for all involved. While this can only be my personal observation, over the years I've often heard similar views expressed by "expats" colleagues on many levels and from many other countries regarding their experience.

Finally, to all those friends and colleagues I've worked with and known and continue to know at Jubail, I say "well done". Glad to have been involved and look forward to the continuing success of Madinat Al-Jubail Al-Sinaiyah.

Selected Sources (for the above article)

 

The above Jubail information was derived or compiled from current or previously published public sources, including those indicated below.

Saudi Arabia & Jubail Economic Update, Nov. 2000.U.S. Dept. of Commerce, National Trade Data Bank

The Dimensions of Growth in Saudi Arabia: Small and Medium Industry, Dec. 2000

Saudi Arabia: Major Investment Opportunities in the 21st Century. WDF Conference Presentations. Jubail, Nov. 2000

Saudi Arabia 2000 Economic Trends U.S. Embassy, Riyadh. Apr. 2000

U.S.-Saudi Arabian Business Council.  Joint US-Saudi Business Organization. Economic trends, data and key sector reports.

Discussion with HH Prince Abdulla bin Faisal bin Turki Al-Saud Governor of the Saudi Arabian General Investment Authority. The Saudi Review, Nov. 2000

Profile of Saudi Arabia: Economy and Industry, WWW SaudiNet site.

Economy and Industry Overview: Jubail and Yanbu: Models of Industrial and Community Development; WWW site with photos, the Saudi Arabian Embassy, Washington, DC.

The Boom City of Yanbu, ArabNet article on Yanbu New Industrial City on the Red Sea.

Super Projects Files: Jubail and Yanbu, Conway Data Geofax WWW site.

Bechtel-Parsons-Royal Commission New Partnership, WWW-WWP Market Intelligence Report.

Background Reports & Articles:

Arab News, March 23, 1993; Saudi Arabia Survey: Oil Policy and the Private Sector. Financial Times, Jan. 30, 1992; 15 Years of Development, Jubail Development Review, Vol. 7, No.2, Dec. 1992, Investment Promotion Department, Jubail Directorate, Royal Commission for Jubail and Yanbu; Information on Jubail Industrial City: A Place for Industry, Economic Development Department Brochure, Jubail Directorate, Royal Commission for Jubail and Yanbu, 1990; Saudis Turn Desert Into City, New York Times, Feb. 17, 1987; Bechtel's Master Builders, Time, July 12, 1982; Vast Saudi Gas-Gathering System Moves Into Final Phase, Oil & Gas Journal, Apr. 12, 1982.

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