Riyadh can rely on strong state firms

09 November 2011

Despite concerns over a fall in oil prices, Saudi Arabia can drive diversification using national firms

The world’s precarious financial situation shows how quickly a local problem in a relatively small country, like Greece, can quickly develop into a global issue.

As Europe struggles with its debt, the potential consequences begin to ripple across the world to the factories of China and the oil fields of the Middle East.

As the region’s major oil-exporting states start to formulate budgets for 2012, ministers will be worrying about volatile oil prices derailing ambitious development plans.

While Riyadh wants to fast-track its downstream industrial projects and needs the petrodollars to fund its diversification, it already has an impressive array of downstream industries in place, especially in the petrochemicals sector.

Saudi Arabian Fertiliser Company’s (Safco’s) planned $500m expansion plan is a fine example of how a good business in the kingdom can develop over a period of years. The expansion will be Safco’s fifth phase and this gradual growth has made the company one of the largest fertiliser producers in the world.

Safco is part-owned by the national Saudi Basic Industries Corporation (Sabic) and it is clear that this has benefited the firm as it manoeuvred through some tough periods over the last couple of years.   

Surviving in the global markets will always be fraught with difficulties and it is the responsibility of both the company and the government to ensure that it has plans in place to deal with these difficulties.

The kingdom has some great firms and its government has plans to turn it into a global manufacturing force. These plans cannot stop now.

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