In late May, Saudi industrial development company Dussur signed a $1bn joint venture agreement with the US GE to manufacture gas turbines in Dammam.
The deal is the first of many for Dussur, which was established by three heavyweight shareholders the Public Investment Fund (PIF), Saudi Basic Industries Corporation (Sabic), and Saudi Aramco.
These three powerful organisations came together for a very important and critical mandate for Saudi Arabia to help further develop the industrial sector, says Rasheed al-Shubaili, CEO of Dussur. Over the past 40 years a lot of activity happened. There were some strategic and important investments in Saudi Arabia that needed to take place. This was beyond the capability and appetite of private investors and it required an entity that would take on this challenge and bring industrial activity to the kingdom in some key focus areas.
The aim is to attract investments that will bring wide-ranging economic and social benefits to Saudi Arabia. The investments will help the country bring opportunities to the private sector, small and medium-sized enterprises [SMEs], quality jobs for our youth and so on, says Al-Shubaili. “In addition to commercial returns, the investments have a strong socio-economic impact.”
Dussur will achieve these goals by working closely with investors. Dussur is not [only] a financial investor, it is an active investor; we are not just going to inject money, but we will work with international partners and bring all the elements needed for success, whether it is the financing, the marketing of the products, demand forecast, licensing and regulatory requirements all that it takes to help these investments, says Al-Shubaili. There are organisations that inject funds and are passive investors. In our case, we are active investors, we will have a major stake, we will work to synergise these investments with other investments. We will work closely with our partners. We are not silent partners.
For funding, Dussur was given seed capital and its shareholders will give it more funds in the future. Dussur was seeded with SR2bn [$533m] of capital when it was established, says Al-Shubaili. “This is seeding capital, and the shareholders are aware of the type of investments we are expecting to develop; this will require further funding in the future. At the same time we are using all possible means to support and substantiate our funding with Saudi funds and the commercial banks. We are working to maximise the financing of our investments.
Saudi Arabia has a clear set of requirements when looking for new investments. If you look at our mandate and the type of investments we want to bring to Saudi Arabia, we need companies that have technology, experience in operating in other areas, and it would be helpful if they have Saudi experience, says Al-Shubaili. In GE’s case, it has been in Saudi Arabia for 80 years, so we speak the same language. They know the challenges and we work very closely with them. They have multiple industrial verticals and we are working across these verticals for additional investments.
Dussur is also in talks with other leading global players across several sectors. There are key strategic sectors for us, says Al-Shubaili. “The first is the power, water and renewables sector. The second is maritime manufacturing, then there is oil and gas equipment services, and the fourth one is emerging technologies, including digitisation, 3D printing, additive materials and other new manufacturing technologies. We are in discussions with all the internationals that are well known in the areas we are focusing on. We will always pick the Fortune 500 type of companies to initiate discussions with.
The relationship between Dussurs investment and its shareholders will be balanced. [We are] not going to have special relationships with our shareholders, we would like to develop investments so that they are commercially viable, so that they are not subsidy-dependent and are good for Sabic, Aramco, Maaden [Saudi Arabian Mining Company], SWEC [Shuaibah Water & Electricity Company] or any other organisation, says Al-Shubaili.
At the same time the investments will complement future and existing investments with Dussurs three shareholders. It is coordinated, says Al-Shubaili. “[For example] Aramco is undertaking shipbuilding with its partners. For any one of these key industries you are going to need an ecosystem and we are participating in some investments in the ecosystem for shipbuilding; for other sectors we will either be the major investor, or if there is a major investment and undertaking already in place, it will help with the ecosystem to contribute.”
Successful investments in Saudi Arabia could grow to serve the rest of the GCC and beyond. Our international partners bring their experience and technologies and we work together to ensure they are commercially viable in Saudi Arabia, says Al-Shubaili. Hopefully it could also be a springboard to serve not only local but regional and global markets.
The Saudi government can provide financial support for potential exporters. When you look at establishing Saudi Arabia as a hub to export, then there are instruments such as ECAs [export credit agencies] and others that are important and will play a big role in positioning the products produced in the kingdom to compete with products elsewhere, says Al-Shubaili. “Saudi Arabia also offers this type of competitive advantage to domestically manufactured products. It is not directly through Dussur. There are organisations in the kingdom that are concerned with this, and currently, like many other industrial efforts that are taking place, this is also an area where further development and enhancement is taking place.